OSI Restaurant Partners said it may restate its results for certain periods because it understated its liability for unearned revenue for unredeemed gift cards and certificates. The company, which operates Outback Steakhouses, estimates the potential liability at between $20 million and $40 million.
As a result, it said it is delaying its third quarter earnings release. The restaurant company said the problem dates back to when it began selling gift cards in the early 1990’s. OSI added that it is determining which specific accounting periods have been affected and whether it will be required to restate prior results.
In late 2003, the company revised its financial results for 2000 through 2002 to properly account for its employee-partners program as a compensation expense. It also restated its financial results for 1998 and 1999, although it wasn’t clear from the filing at the time why these results were restated.
In the spring of 2005, Outback Steakhouse chief financial officer Robert Merritt announced his retirement during an earnings call, blaming his departure on “recent lunacy over lease accounting,” according to reports at the time. He had reportedly pointed out that more than 150 companies had restated their results after the Securities and Exchange Commission revised its opinion on how companies should account for leases.
Calling the situation a “fiasco,” Merritt reportedly added, “Reaction from the media that these companies are run by crooks who were cooking the books is disturbing.” Currently, Merritt currently serves on the board of directors of Cosi, the sandwich chain.