|
Document And Entity Information (USD $)
|
9 Months Ended | ||
|---|---|---|---|
|
Sep. 30, 2011
|
Nov. 09, 2011
|
Jun. 30, 2010
|
|
| Entity Registrant Name | OSI Restaurant Partners, LLC | ||
| Entity Central Index Key | 0000874691 | ||
| Current Fiscal Year End Date | --12-31 | ||
| Entity Well-known Seasoned Issuer | No | ||
| Entity Voluntary Filers | No | ||
| Entity Current Reporting Status | Yes | ||
| Entity Filer Category | Non-accelerated Filer | ||
| Entity Common Stock, Shares Outstanding | 100 | ||
| Entity Public Float | $ 0 | ||
| Document Fiscal Year Focus | 2011 | ||
| Document Fiscal Period Focus | Q3 | ||
| Document Type | 10-Q | ||
| Amendment Flag | false | ||
| Document Period End Date | Sep. 30, 2011 |
|
CONSOLIDATED BALANCE SHEETS Parenthetical (USD $)
|
Sep. 30, 2011
|
Dec. 31, 2010
|
|---|---|---|
| OSI Restaurant Partners, LLC Unitholder's Deficit | ||
| Common units, no par value (in dollars per unit) | $ 0 | $ 0 |
| Common units, authorized (in units) | 100 | 100 |
| Common units, issued (in units) | 100 | 100 |
| Common units, outstanding (in units) | 100 | 100 |
|
CONSOLIDATED STATEMENTS OF OPERATION (USD $)
In Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2011
|
Sep. 30, 2010
|
|
| Revenues | ||||
| Restaurant sales | $ 919,093 | $ 844,388 | $ 2,858,235 | $ 2,693,291 |
| Other revenues | 9,227 | 8,249 | 27,525 | 23,796 |
| Total revenues | 928,320 | 852,637 | 2,885,760 | 2,717,087 |
| Costs and expenses | ||||
| Cost of sales | 300,280 | 269,997 | 923,025 | 862,447 |
| Labor and other related | 262,345 | 252,912 | 820,466 | 773,858 |
| Other restaurant operating | 249,870 | 235,508 | 725,485 | 711,471 |
| Depreciation and amortization | 32,806 | 32,091 | 99,465 | 102,945 |
| General and administrative | 76,316 | 60,372 | 207,423 | 190,413 |
| Provision for impaired assets and restaurant closings | 2,075 | 503 | 7,041 | 4,517 |
| Income from operations of unconsolidated affiliates | (1,416) | (2,342) | (7,057) | (4,313) |
| Total costs and expenses | 922,276 | 849,041 | 2,775,848 | 2,641,338 |
| Income from operations | 6,044 | 3,596 | 109,912 | 75,749 |
| Other income, net | 1,234 | 1,394 | 1,490 | 2,387 |
| Interest expense, net | (15,504) | (17,756) | (46,936) | (53,091) |
| (Loss) income before (benefit) provision for income taxes | (8,226) | (12,766) | 64,466 | 25,045 |
| (Benefit) provision for income taxes | (505) | (5,440) | 13,986 | 11,867 |
| Net (loss) income | (7,721) | (7,326) | 50,480 | 13,178 |
| Less: net income attributable to noncontrolling interests | 789 | 382 | 6,452 | 4,231 |
| Net (loss) income attributable to OSI Restaurant Partners, LLC | $ (8,510) | $ (7,708) | $ 44,028 | $ 8,947 |
|
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (USD $)
In Thousands, except Share data |
Total
|
Common Units Amount [Member]
|
Additional Paid-In Capital [Member]
|
Accumulated Deficit [Member]
|
Accumulated Other Comprehensive Loss [Member]
|
Non-Controlling Interest [Member]
|
|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2009 | $ (126,824) | $ 0 | $ 713,969 | $ (842,966) | $ (16,799) | $ 18,972 |
| Balance (in shares) at Dec. 31, 2009 | 100 | |||||
| Cumulative effect from adoption of variable interest entity guidance | 5,692 | 6,078 | (386) | |||
| Stock-based compensation | 5,260 | 5,260 | ||||
| Net income | 13,178 | 8,947 | 4,231 | |||
| Foreign currency translation adjustment | 2,346 | 2,346 | ||||
| Total comprehensive income | 15,524 | |||||
| Distributions to noncontrolling interests | (8,414) | (8,414) | ||||
| Contributions from noncontrolling interests | 103 | 103 | ||||
| Balance at Sep. 30, 2010 | (108,659) | 0 | 719,229 | (827,941) | (14,453) | 14,506 |
| Balance (in shares) at Sep. 30, 2010 | 100 | |||||
| Balance at Dec. 31, 2010 | (77,926) | 0 | 735,760 | (815,252) | (11,757) | 13,323 |
| Balance (in shares) at Dec. 31, 2010 | 100 | 100 | ||||
| Stock-based compensation | 4,740 | 4,740 | ||||
| Net income | 50,480 | 44,028 | 6,452 | |||
| Foreign currency translation adjustment | (7,977) | (7,977) | ||||
| Total comprehensive income | 42,503 | |||||
| Distributions to noncontrolling interests | (9,797) | (38) | (9,759) | |||
| Contributions from noncontrolling interests | 177 | 177 | ||||
| Balance at Sep. 30, 2011 | $ (40,303) | $ 0 | $ 740,462 | $ (771,224) | $ (19,734) | $ 10,193 |
| Balance (in shares) at Sep. 30, 2011 | 100 | 100 |
|
Basis of Presentation
|
9 Months Ended |
|---|---|
|
Sep. 30, 2011
|
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis of Presentation | Basis of Presentation OSI Restaurant Partners, LLC (formerly known as OSI Restaurant Partners, Inc.) and its wholly-owned subsidiaries (collectively, the “Company”) own and operate casual and upscale casual dining restaurants primarily in the United States. The Company’s restaurant portfolio consists of five individually branded restaurant concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar and Roy’s. Additional Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchise agreements. The accompanying interim unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of the Company, all adjustments (consisting only of normal recurring entries) necessary for the fair presentation of the Company’s results of operations, financial position and cash flows for the periods presented have been included. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”). |
|
Recently Issued Financial Accounting Standards
|
9 Months Ended |
|---|---|
|
Sep. 30, 2011
|
|
| New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
| Recently Issued Financial Accounting Standards | Recently Issued Financial Accounting Standards In October 2009, the Financial Accounting Standards Board (the “FASB”) provided accounting and reporting guidance for arrangements consisting of multiple revenue-generating activities. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable. The amendments modify the criteria for separating deliverables, measuring, and allocating arrangement consideration to one or more units of accounting. Enhanced disclosures are also required to provide information about a vendor’s multiple-deliverable revenue arrangements, including information about the nature and terms, significant deliverables and its performance within arrangements. The amendments also require providing information about the significant judgments made and changes to those judgments and about how the application of the relative selling-price method affects the timing or amount of revenue recognition. The adoption of this guidance on January 1, 2011 did not have a material impact on the Company’s consolidated financial statements. In January 2010, the FASB amended the guidance related to fair value measurements and disclosures. Effective for fiscal years beginning after December 15, 2010, a reporting entity should separately present information about purchases, sales, issuances and settlements on a gross basis in its reconciliation of Level 3 recurring fair value measurements. The adoption of this accounting guidance on January 1, 2011 did not have an effect on the Company’s consolidated financial statements since the Company does not have any Level 3 recurring fair value measurements. In December 2010, the FASB amended the disclosure requirements for supplementary pro forma information related to business combinations. The provisions of this guidance require, if comparative financial statements are presented, the pro forma revenue and earnings be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. The amendments also require enhanced disclosures including the description of the nature and amount of material, nonrecurring pro forma adjustments that are directly attributable to the business combination. This guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, although early application was permitted. The adoption of this guidance on January 1, 2011 did not have an effect on the Company’s consolidated financial statements, as the Company did not engage in any business combinations during the nine months ended September 30, 2011. These provisions will only impact the disclosures within the Company’s consolidated financial statements should it acquire any businesses in the future. In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” (“ASU No. 2011-04”) that establishes a number of new requirements for fair value measurements. These include: (i) a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entity’s net exposure to the group; (ii) an extension of the prohibition against the use of a blockage factor to all fair value measurements (that prohibition currently applies only to financial instruments with quoted prices in active markets); and (iii) a requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements. Additionally, for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed. ASU No. 2011-04 will be effective for interim and annual periods beginning after December 15, 2011. While the provisions of ASU No. 2011-04 will increase the Company’s fair value disclosures, this guidance will not have an impact on the Company’s financial position, results of operations or cash flows. In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income,” (“ASU No. 2011-05”) that eliminates the option to report other comprehensive income and its components in the statement of changes in equity. Instead, the new guidance requires the Company to present the components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. ASU No. 2011-05 must be applied retrospectively and will be effective for public companies during the interim and annual periods beginning after December 15, 2011, with early adoption permitted. This guidance will not have an impact on the Company’s financial position, results of operations or cash flows as it only requires a presentation change to comprehensive income. In September 2011, the FASB issued Accounting Standards Update No. 2011-08, “Intangibles - Goodwill and Other (Topic 350) - Testing Goodwill for Impairment,” (“ASU No. 2011-08”) which permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying the two-step quantitative goodwill impairment test. If it is determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing entities to go directly to the quantitative assessment. ASU No. 2011-08 is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2011, with early adoption permitted. This guidance will not have a material impact on the Company’s financial position, results of operations or cash flows. |
|
Stock-based and Deferred Compensation Plans
|
9 Months Ended |
|---|---|
|
Sep. 30, 2011
|
|
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
| Stock-based and Deferred Compensation Plans | Stock-based and Deferred Compensation Plans On July 1, 2011, the Company’s chief executive officer was granted an option to purchase 550,000 shares of KHI common stock under the KHI Equity Plan in accordance with the terms of her employment agreement. Her stock options have an exercise price of $10.03 per share. These shares will vest, and the Company will record compensation expense ratably over a five-year period on each anniversary of the grant date, contingent upon her continued employment with the Company. Historically, the managing partner of each Company-owned domestic restaurant and the chef partner of each Fleming’s and Roy’s restaurant was required, as a condition of employment, to sign a five-year employment agreement and to purchase a non-transferable ownership interest in a partnership (“Management Partnership”) that provided management and supervisory services to his or her restaurant. The purchase price for a managing partner’s ownership interest was fixed at $25,000, and the purchase price for a chef partner’s ownership interest ranged from $10,000 to $15,000. Managing and chef partners had the right to receive distributions from the Management Partnership based on a percentage of their restaurant’s monthly cash flows for the duration of the agreement, which varied by concept from 6% to 10% for managing partners and 2% to 5% for chef partners. Further, managing and chef partners were eligible to participate in the Partner Equity Plan (“PEP”), a deferred compensation program, upon completion of their five-year employment agreement. In April 2011, the Company began implementing modifications to its managing and chef partner compensation structure. Under the revised program, managing and chef partners are eligible to receive deferred compensation payments under a new Partner Ownership Account Plan (the “POA”). Managing and chef partners participating in the POA are required to make an initial deposit of up to $10,000 into their “Partner Investment Account,” and the Company will make a bookkeeping contribution to each partner’s “Company Contributions Account” no later than the end of February of each year following the completion of each year (or partial year where applicable) under the partner’s employment agreement. The value of each Company contribution will be equal to a percentage of the partner’s restaurant’s positive distributable cash flow plus, if the restaurant has been open at least 18 calendar months, a percentage of the year-over-year increase in the restaurant’s positive distributable cash flow in accordance with the terms described in the partner’s employment agreement. Amounts credited to each partner’s account under the POA may be allocated by the partners amongst benchmark funds offered under the POA, and the account balances of the partner will increase or decrease based on the performance of the benchmark funds. Unless previously forfeited under the terms of the POA, 50% of the partner’s total account balances generally will be distributed in the March following the completion of the initial five-year contract term with subsequent distributions varying based on the length of continued employment as a partner. The deferred compensation obligations under the POA are unsecured obligations of the Company. All managing and chef partners who execute new employment agreements after May 1, 2011 are required to participate in the new partner program, including the POA. Managing and chef partners with a current employment agreement scheduled to expire December 1, 2011 or later had the opportunity (from April 27, 2011 through July 27, 2011) to amend their employment agreements to convert their existing partner program to participation in the new partner program, including the POA, effective June 1, 2011. As a result of this conversion, $2,743,000 of the Company’s total partner deposit liability was accelerated for the return of partners’ capital that was required under the old program. As of September 30, 2011, the Company’s POA liability was $3,448,000 which was recorded in the line item “Partner deposits and accrued partner obligations” in its Consolidated Balance Sheet. |
|
Fair Value Measurements
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | Fair Value Measurements Fair Value Measurements on a Recurring Basis The Company invested $11,234,000 of its excess cash in money market funds classified as Cash and cash equivalents or restricted cash in its Consolidated Balance Sheet at December 31, 2010 at a net value of 1:1 for each dollar invested. The fair value of the investment in the money market fund is determined by using quoted prices for identical assets in an active market. As a result, the Company has determined that the inputs used to value this investment fall within Level 1 of the fair value hierarchy. The amount of excess cash invested in money market funds at September 30, 2011 was immaterial to the Company’s consolidated financial statements. The following table presents the Company’s money market funds measured at fair value on a recurring basis as of December 31, 2010, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):
Fair Value Measurements on a Nonrecurring Basis The Company performed its annual goodwill and other indefinite-lived intangible assets impairment test during the second quarter of 2011 and did not have any impairment charges. Additionally, the Company did not have any other material impairment charges as a result of fair value measurements on a nonrecurring basis during the three and nine months ended September 30, 2011 and 2010. Interim Disclosures about Fair Value of Financial Instruments The Company’s non-derivative financial instruments at September 30, 2011 and December 31, 2010 consist of cash equivalents, accounts receivable, accounts payable and current and long-term debt. The fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts reported in the Consolidated Balance Sheets due to their short duration. The carrying amount of the Company’s other notes payable, sale-leaseback obligations and guaranteed debt approximates fair value. The fair value of its senior secured credit facilities and senior notes is determined based on quoted market prices. The following table includes the carrying value and fair value of the Company’s senior secured credit facilities and senior notes at September 30, 2011 and December 31, 2010 (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Derivative Instruments and Hedging Activities
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Company is exposed to market risk from changes in interest rates on debt, changes in commodity prices and changes in foreign currency exchange rates. Interest rate changes associated with the Company’s variable-rate debt generally impact its earnings and cash flows, assuming other factors are held constant. The Company’s exposure to interest rate fluctuations includes its borrowings under its senior secured credit facilities that bear interest at floating rates based on the Eurocurrency Rate or the Base Rate, in each case plus an applicable borrowing margin (see Note 8). The Company manages its interest rate risk by offsetting some of its variable-rate debt with fixed-rate debt, through normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. From September 2007 to September 2010, the Company used an interest rate collar as part of its interest rate risk management strategy to manage its exposure to interest rate movements. Given the interest rate environment, the Company did not enter into another derivative financial instrument upon the maturity of its interest rate collar on September 30, 2010. The Company does not enter into financial instruments for trading or speculative purposes. Many of the ingredients used in the products sold in the Company’s restaurants are commodities that are subject to unpredictable price volatility. Although the Company attempts to minimize the effect of price volatility by negotiating fixed price contracts for the supply of key ingredients, there are no established fixed price markets for certain commodities such as produce and wild fish, and the Company is subject to prevailing market conditions when purchasing those types of commodities. Other commodities are purchased based upon negotiated price ranges established with vendors with reference to the fluctuating market prices. The Company attempts to offset the impact of fluctuating commodity prices with other strategic purchasing initiatives. The Company does not use derivative financial instruments to manage its commodity price risk, except for natural gas as described below. The Company’s restaurants are dependent upon energy to operate and are impacted by changes in energy prices, including natural gas. The Company utilizes derivative instruments to mitigate some of its overall exposure to material increases in natural gas prices. The Company records mark-to-market changes in the fair value of these derivative instruments in earnings in the period of change. The effects of these natural gas swaps were immaterial to the Company’s consolidated financial statements for all periods presented and have been excluded from any tables within this footnote. The Company’s exposure to foreign currency exchange fluctuations relates primarily to its direct investment in restaurants in South Korea, Japan, Hong Kong and Brazil and to its royalties from international franchisees. The Company has not used financial instruments to hedge foreign currency exchange rate changes. In addition to the market risks identified above, the Company is subject to business risk as its beef supply is highly dependent upon a limited number of vendors. In 2010, the Company purchased approximately 90% of its domestic beef raw materials from four beef suppliers who represented approximately 76% of the total beef marketplace in the United States. In 2011, the Company expects to purchase approximately 80% of its domestic beef raw materials from four of the largest beef suppliers who represent approximately 79% of the total beef marketplace in the United States. Non-designated Hedges of Interest Rate Risk In September 2007, the Company entered into an interest rate collar with a notional amount of $1,000,000,000 as a method to limit the variability of its senior secured credit facilities. The collar consisted of a London Interbank Offered Rate (“LIBOR”) cap of 5.75% and a LIBOR floor of 2.99%. The collar’s first variable-rate set date was December 31, 2007, and the option pairs expired at the end of each calendar quarter beginning March 31, 2008 and ending September 30, 2010, which was the maturity date of the collar. The quarterly expiration dates corresponded to the scheduled amortization payments of the Company’s term loan. The Company’s interest rate collar was a non-designated hedge of the Company’s exposure to interest rate risk. The Company recorded mark-to-market changes in the fair value of the derivative instrument in earnings in the period of change. The following table presents the location and effect of the Company’s interest rate collar on its Consolidated Statement of Operations for the three and nine months ended September 30, 2010 (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Variable Interest Entities
|
9 Months Ended |
|---|---|
|
Sep. 30, 2011
|
|
| Variable Interest Entities [Abstract] | |
| Variable Interest Entities | Variable Interest Entities The Company consolidates variable interest entities in which the Company is deemed to have a controlling financial interest as a result of the Company having (1) the power to direct the activities that most significantly impact the entity’s economic performance and (2) the obligation to absorb the losses or the right to receive the benefits that could potentially be significant to the variable interest entity. If the Company has a controlling financial interest in a variable interest entity, the assets, liabilities, and results of the operations of the variable interest entity are included in the consolidated financial statements. Roy’s and RY-8, Inc. The Company’s consolidated financial statements include the accounts and operations of its Roy’s joint venture although it has less than majority ownership. The Company determined it is the primary beneficiary of the joint venture since the Company has the power to direct or cause the direction of the activities that most significantly impact the entity on a day-to-day basis such as decisions regarding menu development, purchasing, restaurant expansion and closings and the management of employee-related processes. Additionally, the Company has the obligation to absorb losses or the right to receive benefits of the Roy’s joint venture that could potentially be significant to the Roy’s joint venture. The majority of capital contributions made by the Company’s partner in the Roy’s joint venture, RY-8, Inc. (“RY-8”), have been funded by loans to RY-8 from a third party where the Company provides a guarantee. The guarantee is secured by a collateral interest in RY-8’s membership interest in the joint venture. The carrying amounts of consolidated assets and liabilities included within the Company’s Consolidated Balance Sheets for the Roy’s joint venture were $28,139,000 and $8,651,000, respectively, at September 30, 2011 and $28,677,000 and $10,468,000, respectively, at December 31, 2010. The Company is also the primary beneficiary of RY-8 because its implicit variable interest in that entity, which is considered a de facto related party, indirectly receives the variability of the entity through absorption of RY-8’s expected losses, and therefore the Company also consolidates RY-8. Since RY-8’s $24,500,000 line of credit became fully extended in 2007, the Company made interest payments, paid line of credit renewal fees and made capital expenditures for additional restaurant development on behalf of RY-8. The Company is obligated to provide financing, either through a guarantee with a third-party institution or Company loans, for all required capital contributions and interest payments. Therefore, any additional RY-8 capital requirements in connection with the joint venture likely will be the Company’s responsibility. The Company classifies its $24,500,000 contingent obligation as guaranteed debt and the portion of income or loss attributable to RY-8 is eliminated in the line item in the Consolidated Statement of Operations entitled “Net income attributable to noncontrolling interests.” All material intercompany balances and transactions have been eliminated. Paradise Restaurant Group, LLC In September 2009, the Company sold its Cheeseburger in Paradise concept, which included 34 restaurants, for $2,000,000 to Paradise Restaurant Group, LLC (“PRG”), an entity formed and controlled by the president of the concept. Based on the terms of the purchase and sale agreement, the Company determined at that time that it was the primary beneficiary and continued to consolidate PRG after the sale transaction. Upon adoption of new accounting guidance for variable interest entities on January 1, 2010, the Company determined that it is no longer the primary beneficiary of PRG. As a result, the Company deconsolidated PRG on January 1, 2010. The Company determined that certain rights pursuant to a $2,000,000 promissory note, which is fully reserved, owed to the Company by PRG are non-substantive participating rights, and as a result, the Company does not have the power to direct the activities that most significantly impact the entity. At September 30, 2011, the maximum undiscounted exposure to loss as a result of the Company’s involvement with PRG is $26,259,000 related to lease payments over a period of 11 years in the event that PRG defaults on certain third-party leases, of which $24,128,000 relates to lease payments to the Company’s sister company, Private Restaurant Properties, LLC (“PRP”). The Company has recorded an immaterial liability for three of the third-party leases, as the amount charged to PRG is less than the amount the Company owes PRP. |
|
Investment in Equity Method Investee
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment in Equity Method Investee | Investment in Equity Method Investee Through a joint venture arrangement with PGS Participacoes Ltda., the Company holds a 50% ownership interest in PGS Consultoria e Serviços Ltda. (the “Brazilian Joint Venture”), which operates Outback Steakhouse restaurants in Brazil. The Company accounts for the Brazilian Joint Venture under the equity method of accounting. At September 30, 2011 and December 31, 2010, the Company’s net investment of $33,483,000 and $31,035,000, respectively, was recorded in “Investments in and advances to unconsolidated affiliates, net,” a foreign currency translation adjustment of ($3,274,000) and $3,467,000, respectively, was recorded in “Accumulated other comprehensive loss” in the Company’s Consolidated Balance Sheets and the Company’s share of earnings of $1,431,000 and $1,910,000 for the three months ended September 30, 2011 and 2010, respectively, and $5,722,000 and $4,254,000 for the nine months ended September 30, 2011 and 2010, respectively, was recorded in “Income from operations of unconsolidated affiliates” in the Company’s Consolidated Statements of Operations. The following tables present summarized financial information for 100% of the Brazilian Joint Venture for the periods ending as indicated (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Long-Term Debt
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-Term Debt | Long-term Debt Long-term debt consisted of the following (in thousands):
The senior secured term loan facility matures June 14, 2014. At each rate adjustment, the Company has the option to select a Base Rate plus 125 basis points or a Eurocurrency Rate plus 225 basis points for the borrowings under this facility. The Base Rate option is the higher of the prime rate of Deutsche Bank AG New York Branch and the federal funds effective rate plus 0.5 of 1% (“Base Rate”) (3.25% at September 30, 2011 and December 31, 2010). The Eurocurrency Rate option is the 30, 60, 90 or 180-day Eurocurrency Rate (“Eurocurrency Rate”) (ranging from 0.31% to 0.56% and from 0.31% to 0.50% at September 30, 2011 and December 31, 2010, respectively). The Eurocurrency Rate may have a nine- or twelve-month interest period if agreed upon by the applicable lenders. With either the Base Rate or the Eurocurrency Rate, the interest rate is reduced by 25 basis points if the Company’s Moody’s Applicable Corporate Rating then most recently published is B1 or higher (the rating was Caa1 at September 30, 2011 and December 31, 2010). The Company is required to prepay outstanding term loans, subject to certain exceptions, with:
Additionally, the Company is required, on an annual basis, to (1) first, repay outstanding loans under the pre-funded revolving credit facility and (2) second, fund a capital expenditure account to the extent amounts on deposit are less than $100,000,000, in both cases with 100% of the Company’s “annual true cash flow,” as defined in the credit agreement. In accordance with these requirements, in April 2011, the Company repaid its pre-funded revolving credit facility outstanding loan balance of $78,072,000 and funded $60,523,000 to its capital expenditure account. The Company’s senior secured credit facilities require scheduled quarterly payments on the term loans equal to 0.25% of the original principal amount of the term loans for the first six years and three quarters following June 14, 2007. These payments are reduced by the application of any prepayments, and any remaining balance will be paid at maturity. The outstanding balance on the term loans was $1,025,175,000 and $1,035,000,000 at September 30, 2011 and December 31, 2010, respectively. The Company has classified $13,100,000 of its term loans as current at September 30, 2011 and December 31, 2010 due to its required quarterly payments and projected covenant calculations, which indicate the additional term loan prepayments, as described above, will not be required. The amount of outstanding term loans required to be prepaid in accordance with the Company’s debt covenants may vary based on year-end results. Proceeds of loans and letters of credit under the $150,000,000 working capital revolving credit facility, which matures June 14, 2013, provide financing for working capital and general corporate purposes and, subject to a rent-adjusted leverage condition, for capital expenditures for new restaurant growth. There were no loans outstanding under the revolving credit facility at September 30, 2011 and December 31, 2010; however, $68,686,000 and $70,272,000, respectively, of the credit facility was committed for the issuance of letters of credit and not available for borrowing. The Company’s total outstanding letters of credit issued under its working capital revolving credit facility may not exceed $75,000,000. Proceeds of loans under the $100,000,000 pre-funded revolving credit facility, which expires June 14, 2013, are available to provide financing for capital expenditures, if the capital expenditure account described above has a zero balance. As of September 30, 2011 and December 31, 2010, the Company had $7,000,000 and $78,072,000, respectively, outstanding on its pre-funded revolving credit facility. These borrowings were recorded in “Current portion of long-term debt” in the Company’s Consolidated Balance Sheets, as the Company is required to repay any outstanding borrowings in April following each fiscal year using its “annual true cash flow,” as defined in the credit agreement. Subsequent to the end of the third quarter of 2011, the Company borrowed $15,000,000 from its pre-funded revolving credit facility. At September 30, 2011 and December 31, 2010, the Company was in compliance with its debt covenants. See the 2010 Form 10-K for further information about the Company’s debt covenant requirements. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Income Taxes
|
9 Months Ended |
|---|---|
|
Sep. 30, 2011
|
|
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes The effective income tax rates for the three and nine months ended September 30, 2011 were 6.1% and 21.7%, respectively, compared to 42.6% and 47.4% for the same periods in 2010, respectively. The net decreases in the effective income tax rate in these periods were primarily due to the increase in the projected and actual domestic pretax book income in the jurisdictions in which the deferred tax assets are subject to a valuation allowance and the projected foreign income tax provision being a lower percentage of projected consolidated pretax income as compared to the prior year. The effective income tax rates for the three and nine months ended September 30, 2011 were lower than the combined federal and state statutory rate of 38.9% due to the benefit of the expected tax credit for excess FICA tax on employee-reported tips and the foreign rate differential together being such a large percentage of projected annual pretax income. This was partially offset by the increase in the valuation allowance. The effective income tax rates for the three and nine months ended September 30, 2010 were higher than the combined federal and state statutory rate of 38.9% due to an increase in the valuation allowance on deferred income tax assets for excess tax credits expected for the year and income taxes expected in states that only have limited deductions in computing taxable income being a larger percentage of projected annual pretax income. As of September 30, 2011 and December 31, 2010, the Company had $13,350,000 and $16,387,000, respectively, of unrecognized tax benefits ($1,851,000 and $1,327,000, respectively, in “Other long-term liabilities,” $2,971,000 and $6,299,000, respectively, in “Accrued and other current liabilities” and $8,528,000 and $8,761,000, respectively, in “Deferred income tax liabilities”). Additionally, the Company accrued $4,268,000 and $6,086,000 of interest and penalties related to uncertain tax positions as of September 30, 2011 and December 31, 2010, respectively. Of the total amount of unrecognized tax benefits, including accrued interest and penalties, $14,505,000 and $17,974,000, respectively, if recognized, would impact the Company’s effective tax rate. The difference between the total amount of unrecognized tax benefits and the amount that would impact the effective tax rate consists of items that are offset by deferred income tax assets and the federal tax benefit of state income tax items. In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant taxable authorities. Based on the outcome of these examinations, or as a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related recorded unrecognized tax benefits for tax positions taken on previously filed tax returns will decrease by approximately $6,000,000 to $8,000,000 within the next twelve months after September 30, 2011. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2007 through 2010. The Company and its subsidiaries’ state and foreign income tax returns are also open to audit under the statute of limitations for the years ended December 31, 2000 through 2010. |
|
Supplemental Guarantor Condensed Consolidating Financial Statements
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Guarantor Condensed Consolidating Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Guarantor Condensed Consolidating Financial Statements | Supplemental Guarantor Condensed Consolidating Financial Statements The Company’s senior notes are jointly and severally, fully and unconditionally guaranteed on a senior unsecured basis by each of its current and future domestic 100% owned restricted subsidiaries in its Outback Steakhouse and Carrabba's Italian Grill concepts and certain non-restaurant subsidiaries (the “Guarantors”) and by OSI HoldCo, Inc. (“OSI HoldCo”), the Company’s direct owner and an indirect, wholly-owned subsidiary of Kangaroo Holdings, Inc., the Company’s ultimate parent. All other concepts and certain non-restaurant subsidiaries of the Company do not guarantee the senior notes (“Non-Guarantors”). The following condensed consolidating financial statements present the financial position, results of operations and cash flows for the periods indicated (in thousands) of OSI Restaurant Partners, LLC - Parent only (“OSI Parent”), OSI Co-Issuer, which is a wholly-owned subsidiary and exists solely for the purpose of serving as a co-issuer of the senior notes, the Guarantors, the Non-Guarantors and the elimination entries necessary to consolidate the Company. Investments in subsidiaries are accounted for using the equity method for purposes of the consolidated presentation. The principal elimination entries relate to senior notes presented as an obligation of both OSI Parent and OSI Co-Issuer, investments in subsidiaries, and intercompany balances and transactions.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Commitments and Contingencies
|
9 Months Ended |
|---|---|
|
Sep. 30, 2011
|
|
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | Commitments and Contingencies Litigation and Other Matters The Company is subject to legal proceedings, claims and liabilities, such as liquor liability, sexual harassment and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance. In the opinion of management, the amount of ultimate liability with respect to those actions will not have a material adverse impact on the Company’s financial position or results of operations and cash flows. The Company accrues for loss contingencies that are probable and reasonably estimable. The Company generally does not accrue for legal costs expected to be incurred with a loss contingency until those services are provided. The Company is subject to the following legal proceedings and actions, which depending on the outcomes that are uncertain at this time, could have a material adverse effect on the Company’s financial condition: In March 2008, one of the Company’s subsidiaries received a notice of proposed assessment of employment taxes from the Internal Revenue Service (“IRS”) for calendar years 2004 through 2006 in the amount of $68,396,000. The IRS asserted that certain cash distributions paid to the Company’s managing, chef and area operating partners who hold partnership interests in limited partnerships with the Company’s affiliates should have been treated as wages and subjected to employment taxes. The Company appealed the proposed assessment to the IRS Office of Appeals. In July 2011, the Company settled this assessment with the IRS Office of Appeals for $5,765,000. On February 19, 2009, the Company filed an action in Florida against T-Bird Nevada, LLC (“T-Bird”) and certain of its affiliates (collectively, the “T-Bird Parties”). T-Bird is a limited liability company affiliated with the Company’s California franchisees of Outback Steakhouse restaurants. The action sought payment on a promissory note made by T-Bird that the Company purchased from T-Bird’s former lender, among other remedies. The principal balance on the promissory note, plus accrued and unpaid interest, was approximately $33,300,000 at the time it was purchased. On September 11, 2009, the T-Bird Parties filed an answer and counterclaims against the Company and certain of its officers and affiliates. The answer generally denied T-Bird’s liability on the loan, and the counterclaims restated the same claims made by the T-Bird Parties in their California action (as described below). On February 20, 2009, the T-Bird Parties filed suit against the Company and certain of its officers and affiliates in the Superior Court of the State of California, County of Los Angeles. After certain legal proceedings, the T-Bird Parties filed an amended complaint on November 29, 2010. Like the original complaint, the T-Bird Parties’ amended complaint claimed, among other things, that the Company made various misrepresentations and breached certain oral promises allegedly made by the Company and certain of its officers to the T-Bird Parties that the Company would acquire the restaurants owned by the T-Bird Parties and until that time the Company would maintain financing for the restaurants that would be nonrecourse to the T-Bird Parties. The amended complaint sought damages in excess of $100,000,000, exemplary or punitive damages, and other remedies. On September 26, 2011, the Company entered into a settlement agreement (the “Settlement Agreement”) with the T-Bird Parties to settle all outstanding litigation with T-Bird. In accordance with the terms of the Settlement Agreement, T-Bird agreed to pay $33,300,000 to the Company to satisfy the T-Bird promissory note that the Company purchased from T-Bird’s former lender. This settlement payment is due within 60 days of the effective date of the Settlement Agreement, subject to T-Bird’s right to extend the payment date up to 60 days in certain circumstances. Based on these terms, the Company will record the settlement payment upon receipt of cash. Subject to the receipt of the settlement payment, the Company has agreed to grant to a T-Bird affiliate, for a period of 20 years, the right to develop and operate Outback Steakhouse restaurants as a franchisee in the State of California as set forth in a development agreement to be entered into between the Company and such T-Bird affiliate (the “Development Agreement”). Additionally, the Company has granted certain T-Bird affiliates (the “T-Bird Entities”) the non-transferable right (the “Put Right”) to require the Company to acquire all of the equity interests in the T-Bird Entities that own Outback Steakhouse restaurants and the rights under the Development Agreement for cash. The closing of the Put Right is subject to certain conditions including the negotiation of a transaction agreement reasonably acceptable to the parties, the absence of dissenters rights being exercised by the equity owners above a specified level and compliance with the Company’s debt agreements. The Put Right is exercisable for a one-year period beginning on the date of closing of an initial public offering (an “IPO”) of at least $100 million worth of shares of the Company’s common stock or if the Company has not completed an IPO, for a period of 60 days after execution by the Company of a definitive agreement to sell only the Outback Steakhouse brand and all of its Company-owned Outback Steakhouse restaurants. If the Put Right is exercised, the Company will pay a purchase price equal to a multiple of the T-Bird Entities’ earnings before interest, taxes, depreciation and amortization, subject to certain adjustments (“Adjusted EBITDA”), for the trailing 12 months, net of liabilities of the T-Bird Entities. The multiple is equal to 75% of the multiple of the Company’s Adjusted EBITDA reflected in its stock price or, in a sale of the Outback Steakhouse brand, 75% of the multiple of the Company’s Adjusted EBITDA that the Company is receiving in the sale. The Company has a one-time right to reject the exercise of the Put Right if the transaction would be dilutive to its consolidated earnings per share. In such event, the Put Right is extended until the first anniversary of the Company’s notice to the T-Bird Entities of such rejection. The Company has agreed to waive all rights of first refusal in its franchise arrangements with the T-Bird Entities in connection with a sale of all, and not less than all, of the assets, or at least 75% of the ownership of the T-Bird Entities. RY-8, Inc. Pursuant to the Company’s joint venture agreement for the development of Roy’s restaurants, RY-8, its joint venture partner, has the right to require the Company to purchase up to 50% of RY-8’s interest in the joint venture at any time after June 17, 2009. The purchase price would be equal to the fair market value of the joint venture as of the date that RY-8 exercised its put option multiplied by the percentage purchased. As of September 30, 2011, the Company is due $3,029,000 from RY-8 for interest and line of credit renewal fees and capital expenditures for additional restaurant development made on behalf of RY-8 because the joint venture partner’s $24,500,000 line of credit was fully extended. This amount is eliminated in consolidation (see Note 6). Additional payments on behalf of RY-8 may be required in the future. |
|
Related Parties
|
9 Months Ended |
|---|---|
|
Sep. 30, 2011
|
|
| Related Party Transactions [Abstract] | |
| Related Parties | Related Parties Kangaroo Holdings, Inc. and Management Shares of KHI restricted stock issued to certain of the Company’s current and former executive officers and other members of management vest each June 14 through 2012. In accordance with the terms of their applicable agreements, KHI loaned an aggregate of $902,000 and $727,000 to these individuals in June and July of 2011 and 2010, respectively, for their personal income tax obligations that resulted from vesting. As of September 30, 2011, a total of $7,763,000 of loans and associated interest obligations to current and former executive officers and other members of management was outstanding. The loans are full recourse and are collateralized by the vested shares of KHI restricted stock. Although these loans are permitted in accordance with the terms of the agreements, KHI is not required to issue them in the future. T-Bird Nevada, LLC On September 26, 2011, the Company entered into a Settlement Agreement with the T-Bird Parties to settle the litigation matters among the Company and the T-Bird Parties (see Note 11). |
|
Subsequent Events
|
9 Months Ended |
|---|---|
|
Sep. 30, 2011
|
|
| Subsequent Events [Abstract] | |
| Subsequent Events | Subsequent Events In accordance with the terms of an asset purchase agreement that was amended in December 2004, the Company was obligated to pay a royalty to its Bonefish Grill founder and joint venture partner during his employment term with the Company. The Company had the option to terminate this royalty within 45 days of his termination of employment by making an aggregate payment equal to five times the amount of the royalty payable during the twelve full calendar months immediately preceding the month of his termination. As his employment terminated on October 1, 2011, the Company paid the approximately $8,500,000 royalty termination fee in October 2011 and recorded this payment as an intangible asset in its Consolidated Balance Sheet in the fourth quarter of 2011. The intangible asset will be amortized over a five-year useful life. In October 2011, the Company entered into a definitive agreement to sell its nine Company-owned Outback Steakhouse restaurants in Japan to a subsidiary of S Foods, Inc. for $9,375,000. The buyer will have the right for future development of Outback Steakhouse franchise restaurants in Japan and will pay the Company a royalty of 2.75% to 4.0% based on sales volumes. The Company will use at least 75% of the net cash proceeds from this sale to pay down its outstanding term loans in accordance with the terms of the credit agreement amended in January 2010. This sale did not meet the criteria for held for sale accounting treatment at September 30, 2011. |