First Quarter 2013 Financial Results
The following summarizes the Company's results for the first quarter ended March 31, 2013 compared to the same quarter in the prior year:
- Total revenues increased 3.5% to $1.1 billion versus the same quarter in 2012. This increase was primarily due to additional revenues from the opening of 44 new restaurants not included in the Company's comparable restaurant sales base and an increase in comparable restaurant sales at existing restaurants. The comparable restaurant sales increase was driven by increases in customer traffic and modest menu price increases which were partially offset by unfavorable winter weather conditions and loss of the additional day in February due to Leap Year in 2012. The increases in customer traffic resulted from selective daypart expansion across certain concepts, innovations in menu, service, promotions and operations across the portfolio and renovations at additional Outback Steakhouse locations. In addition, Total revenues were impacted by the closing of eight restaurants since March 31, 2012.
- Blended domestic comparable restaurant sales for Company-owned restaurants grew 1.6% for the Company's four core concepts. Results for Company-owned restaurants, by concept, were as follows:
|THREE MONTHS ENDED MARCH 31, 2013||COMPANY- OWNED|
|Domestic comparable restaurant sales (stores open 18 months or more)|
|Carrabba's Italian Grill||(1.7)%|
|Fleming's Prime Steakhouse and Wine Bar||5.0%|
- The number of weekdays and weekend days in a given reporting period can impact the Company's reported comparable restaurant sales. During the first quarter of 2013, the trading day impact on blended domestic comparable restaurant sales for Company-owned restaurants was (0.8)%, mainly attributable to Leap Day in February of 2012. Exclusive of the trading day impact, the first quarter blended domestic comparable restaurant sales for Company-owned restaurants would have been approximately 2.4%.
- Restaurant level operating margins were 18.4% in the current quarter as compared to 18.9% in the first quarter of 2012, or a 50 basis point decrease. This decrease was primarily attributable to increased food inflation, additional labor expense associated with increased employee wage rates and training for new restaurant openings, higher occupancy costs due to the sale-leaseback transaction in March 2012 and increased advertising expense. The decrease was partially offset by leveraging of average unit volumes, modest menu price increases, productivity initiative savings and lower costs associated with deferred compensation plans.
- Adjusted operating income as a percentage of Total revenues for the first quarter decreased 50 basis points to 8.9% as compared to 9.4% in the first quarter of 2012. The decrease was driven primarily by lower restaurant level operating margins and an increase in general and administrative expenses (on an adjusted basis). The increase in general and administrative expenses was mainly attributable to approximately $4.0 million of costs associated with the Company's annual managing partner conference which shifted from the second quarter in 2012 to the first quarter in 2013 and additional stock-based compensation. The decrease in Adjusted operating income was partially offset by reduced impairment expense.
Recent Events and Other Information
On April 10, 2013, the Company's wholly-owned subsidiary, OSI Restaurant Partners, LLC ("OSI"), completed the repricing of its existing $1.0 billion senior secured term loan B facility. The repricing represents an interest rate reduction of 125 basis points and, based on current market interest rate conditions, is expected to reduce annual cash interest expense by approximately $12.0 million, before considering future principal payments. The pre-tax cash interest expense impact in 2013 is expected to be approximately $9.0 million. The maturity date for the term loan B remains October 26, 2019, and no changes were made to the financial covenants or scheduled amortization. Pursuant to the terms of the existing credit agreement, the Company was required to pay a one-time 1.0% prepayment penalty of approximately $10.0 million.