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Outback Parent Company Socked With $177 Million Loss

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By MICHAEL SASSO

The Tampa Tribune

Published: August 15, 2008

TAMPA - Outback Steakhouse's parent company, OSI Restaurant Partners, posted a huge loss of nearly $177 million in its second quarter, much of it related to a reduction in the company's value, but also triggered by a steep drop in restaurant sales.

To turn things around, the company is offering more low-price menu items and offering temporary promotions at its restaurants, including a $9.99 special on sirloin steaks at Outback. It also is aggressively trying to trim costs, OSI Chief Financial Officer Dirk Montgomery said Friday.

According to its earnings report, filed late Thursday with the Securities and Exchange Commission, OSI lost $176.7 million in the quarter ended June 30, compared to a loss of about $10 million during the same quarter of 2007.

Revenues during its second quarter were about $1.02 billion, down 4.1 percent from revenues of $1.06 billion in the same quarter a year ago.

Much of the loss OSI booked wasn't related to its operations, but from a write-down in the value of its "goodwill," or the value of its name, reputation and position in the marketplace.

A continued drop in sales and the weak state of the overall restaurant industry caused OSI to reduce the value of its goodwill by about $162 million, the company said in the filing.

Sales at OSI's higher-end restaurants have been hit hardest by the brutal period in the casual and fine dining industries.

Sales at restaurants open for at least 18 months – termed same store sales – fell by 8.4 percent at Fleming's Prime Steakhouse & Wine Bar during the second quarter, when compared to the same quarter a year ago. Same store sales at Bonefish Grill fell 8 percent.

At its more mid-tier restaurants, Outback Steakhouse and Carrabba's Italian Grill, same store sales fell by 5.6 percent and 5 percent, respectively.

During a conference call Friday with analysts, one bond analyst inquired whether OSI could have trouble meeting an upcoming debt payment.

Montgomery, the OSI's chief financial officer, assured analysts that the company has enough cash and credit available and doesn't expect any problems meeting its debt payments or the cash-flow requirements of its debt agreements. Also, the company's efficiency efforts have saved it about $25 million in the first half of this year, he said.

Reporter Michael Sasso can be reached at (813) 259-7865 or msasso@tampatrib.com.

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