**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q/A**


**(Amendment
      No. 1)**





**(Mark
                One)**[X]
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**For
                the quarterly period ended**March
                31, 2006**or[
                ]
            **Transition
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**For
                the transition period from ______ to
                ______





Commission
      File Number: 1-15935




**OSI
      RESTAURANT PARTNERS, INC.**


(Exact
      name of registrant as specified in its charter)




**DELAWARE**
            **59-3061413**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                No.)


**2202
      North West Shore Boulevard, Suite 500, Tampa, Florida
      33607**


(Address
      of principal executive offices) (Zip Code)





**(813)
      282-1225**


(Registrant's
      telephone number, including area code)





**Outback
      Steakhouse, Inc.**


(Former
      name, former address and former fiscal year, if changed since last
      report)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.




YES x NO o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      accelerated filer x  Accelerated
      filer o  Non-accelerated
      filer o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).





YES o NO x





As
      of May
      8, 2006, the registrant had outstanding 74,906,513 shares of Common Stock,
      $.01
      par value.  Table
            of Contents




**EXPLANATORY
      NOTE**





We
      are
      filing this Amendment No. 1 on Form 10-Q/A to restate the unaudited consolidated
      financial statements of OSI Restaurant Partners, Inc., (“the Company,”) for the
      quarters ended March 31, 2006 and 2005 and to revise certain disclosures. We
      also filed an Amendment No. 1 to Annual Report on Form 10-K/A to
      restate the audited consolidated financial statements of the Company for the
      fiscal year ended December 31, 2005.





The
      Items
      of the Company’s Quarterly Report on Form 10-Q/A as of and for the quarters
      ended March 31, 2006 and 2005 that are amended and restated are as follows:
      Part I, Item 1 - Consolidated Financial Statements; Part I, Item 2 -
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations; Part I, Item 4 - Controls and Procedures; and Part II, Item 2 -
      Unregistered Sales of Equity Securities and Use of Proceeds.





**Restatement
      of Previously Issued Consolidated Financial Statements**





In
      October 2006, we identified errors in our accounting for unearned revenue for
      unredeemed gift cards and certificates.  Upon completion of the review of
      accounting policies for gift cards and certificates as well as a review of
      certain other balance sheet accounts, we have restated our consolidated
      financial statements for certain prior periods to correct these and other
      errors, as described in this section.





*Unearned
      revenue and revenue recognition*


Unearned
      revenue represents our liability for gift cards and certificates that have
      been
      sold but not yet redeemed.  Historically, we recognized revenue for
      estimates of gift cards and certificates that will not be redeemed (“breakage”)
      at the time of the sale of the gift cards and certificates.  We have
      determined that the methodology we used to arrive at breakage was inappropriate
      and resulted in understatement of the liability for gift cards and certificates.
      We have also determined that revenue should not be recognized at the time of
      sale of the gift cards and certificates. Accordingly, we have adopted a policy
      to recognize breakage for those gift cards and certificates that will never
      be
      redeemed at the time at which their redemption becomes remote. Furthermore,
      certain expenses associated with gift card and certificate promotions were
      incorrectly netted against breakage income rather than reflected as expenses
      in
      our financial statements. Correction of these errors in our consolidated
      financial statements resulted in an increase in unearned revenue of $65,202,000
      and $60,337,000 as of March 31, 2006 and December 31, 2005, respectively, an
      increase in net income of $75,000 for the three months ended March 31, 2006
      and
      a decrease in net income of $323,000 for the three months ended March 31, 2005.
      It also resulted in a $37,548,000 decrease in retained earnings as of December
      31, 2004.





*Minority
      interests in consolidated entities*


We
      have
      identified errors in the recorded amount of our minority interests in certain
      of
      our Carrabba’s Italian Grill subsidiaries, which were understated as a result of
      our incorrectly recording the entries relating to the correction in accounting
      for managing partners' interests in their stores from investment accounting
      to
      compensation accounting in 2003.  Additionally, we determined that in
      connection with our 2002 purchase of the 20% interest in Outback Steakhouse
      International, LP, the value of 28,570 shares that were payable upon meeting
      certain conditions should have been recorded at the acquisition date in 2002
      rather than upon their issuance in 2006.  Correction of these errors in our
      consolidated financial statements resulted in an increase in goodwill of
      $1,309,000 as of March 31, 2006 and December 31, 2005, decreases in minority
      interests in consolidated entities of $3,225,000 and $1,314,000 as of March
      31,
      2006 and December 31, 2005, respectively, and decreases in elimination of
      minority interest of $11,000 and $30,000 for the three months ended March 31,
      2006 and 2005, respectively. It also resulted in an $119,000 increase in
      retained earnings as of December 31, 2004.


2
 Table
          of Contents


*Deferred
      rent and property, fixtures and equipment*


We
      identified errors in our straight-line lease calculations for certain properties
      where we received tenant improvement contributions from a landlord or where
      we
      determined that we were depreciating certain assets over lives different than
      the associated lease term.  Correction of these errors in our consolidated
      financial statements resulted in increases to deferred rent of $6,615,000 and
      $6,303,000 and decreases to property, fixtures and equipment of $2,055,000
      and
      $1,905,000 as of March 31, 2006 and December 31, 2005, respectively, and
      decreases to net income of $260,000 and $284,000 for the three months ended
      March 31, 2006 and 2005, respectively. It
      also
      resulted in a $3,862,000 decrease in retained earnings as of December 31,
      2004.





*Other
      adjustments*


We
      have
      increased additional paid-in capital and decreased retained earnings as of
      December 31, 2002 by $2,333,000 to correct an error in equity classification
      that arose prior to 2000, relating to acquisitions recorded as
      pooling-of-interest transactions.





We
      have
      decreased treasury stock and decreased additional paid-in capital as of March
      31, 2006 by $40,858,000 to correct an error in the elimination of the unearned
      compensation balance related to unvested restricted stock awards required by
      the
      adoption of SFAS No. 123R. Under previous guidance, this was accounted for
      as
      unearned compensation and, under SFAS No. 123R, should be treated as a reduction
      of additional paid-in capital.





Our
      Korean subsidiary receives payments from certain consumer product and service
      companies in connection with promotions under which we have agreed to provide
      discounts to their customers.  We have historically netted such monies
      received against cost of sales and other restaurant operating expenses.  We
      have determined that these amounts should be recorded as revenue with an equal
      offsetting amount in cost of sales and other restaurant operating
      expenses.  Correction of these errors in our consolidated financial
      statements increased restaurant sales by $2,105,000 and $3,752,000 for the
      three
      months ended March 31, 2006 and 2005, respectively, and were offset by changes
      in cost of sales and other restaurant operating expense with no effect on income
      from operations or net income.




As
        described in Note 1 to the Unaudited Notes to Consolidated Financial Statements
        in Item 1 of this Form 10-Q/A, the adjustments noted above impacted various
        items in our Unaudited Consolidated Statements of Cash Flows for the three
        months ended March 31, 2006 by increasing net cash provided by operating
        activities by $1,900,000 and decreasing net cash used in financing activities
        by
        $1,900,000 and for the three months ended March 31, 2005 by increasing net
        cash
        provided by operating activities by $447,000, increasing net cash used in
        investing activities by $492,000 and decreasing net cash used in financing
        activities by $45,000.




Please
      refer to Note 1 to the Unaudited Notes to Consolidated Financial Statements
      in
      Item 1 of this Form 10-Q/A and to “Controls and Procedures” in Item 4 of this
      Form 10-Q/A for more information related to the restatement.





The
      remaining Items contained within this Amendment No. 1 to Quarterly Report on
      Form 10-Q/A consist of all other Items originally contained in our Quarterly
      Report on Form 10-Q for the quarterly period ended March 31, 2006 in the form
      filed on May 10, 2006. This Form 10-Q/A does not reflect events occurring after
      the filing of the original Form 10-Q, nor modify or update those disclosures
      in
      any way other than as required to reflect the effects of the
      restatement.





New
      certifications of the principal executive officer and principal financial
      officer are included as exhibits to this Amendment.




3
 Table
          of Contents




**OSI
      RESTAURANT PARTNERS, INC.**





**INDEX
      TO QUARTERLY REPORT ON FORM 10-Q/A**


**For
      the Quarterly Period Ended March 31, 2006**


**(Unaudited)**





**TABLE
      OF CONTENTS**





**PART
                I — FINANCIAL INFORMATION****Page
                No****.**Item 1.
            Consolidated
                Financial Statements (Unaudited):Consolidated
                Balance Sheets — March 31, 2006 and
                December 31, 2005, as restated
            5Consolidated
                Statements of Income — For the Three Months
                Ended
              March
                31, 2006 and 2005, as restated
            7Consolidated
                Statements of Cash Flows — For the Three Months
                Ended March 31, 2006 and 2005, as restated
            8Notes
                to Consolidated Financial Statements
            10Item 2.
            Management's
                Discussion and Analysis of Financial Condition
                and Results of Operations
            31Item 3.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            47Item 4.
            Controls
                and Procedures
            48**PART
                II****—****OTHER INFORMATION**Item 1.
            Legal
                Proceedings
            52Item
                1A.
            Risk
                Factors
            53Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            53Item 6.
            Exhibits
            55Signature
            56





4
 Table
            of Contents




**P** **ART
      I: FINANCIAL INFORMATION**





**Item
      1. CONSOLIDATED FINANCIAL STATEMENTS**





**OSI
      Restaurant Partners, Inc.** ****


**CONSOLIDATED
      BALANCE SHEETS** **(IN THOUSANDS, UNAUDITED)**





**MARCH
                31,**
            
            **DECEMBER
                31,****2006**
            
            **2005****(restated)**
            
            **(restated)**ASSETSCurrent
                AssetsCash
                and cash equivalents
            
            $
            61,368
            
            $
            84,876Short-term
                investments
            
            
            1,832
            
            
            1,828Inventories
            
            
            68,721
            
            
            68,468Deferred
                income tax assets
            
            
            43,131
            
            
            43,697Other
                current assets
            
            
            70,108
            
            
            50,823Total
                current assets
            
            
            245,160
            
            
            249,692Property,
                fixtures and equipment, net
            
            
            1,441,189
            
            
            1,387,700Investments
                in and advances to unconsolidated affiliates, net
            
            
            22,774
            
            
            21,397Deferred
                income tax asset
            
            
            49,499
            
            
            36,180Goodwill
            
            
            116,136
            
            
            112,627Intangible
                assets
            
            
            11,415
            
            
            11,562Other
                assets
            
            
            137,201
            
            
            142,114Notes
                receivable collateral for franchisee guarantee
            
            
            31,150
            
            
            31,150$
            2,054,524
            
            $
            1,992,422




(CONTINUED...)




5
 Table
            of Contents





**OSI
      Restaurant Partners, Inc.** ****


**CONSOLIDATED
      BALANCE SHEETS** **(IN THOUSANDS, UNAUDITED)**





**MARCH
                31,**
            
            **DECEMBER
                31,****2006**
            
            **2005****(restated)**
            
            **(restated)**LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                LiabilitiesAccounts
                payable
            
            $
            85,398
            
            $
            98,020Sales
                taxes payable
            
            
            18,772
            
            
            17,761Accrued
                expenses
            
            
            143,633
            
            
            135,660Current
                portion of partner deposit and accrued buyout liability
            
            
            23,988
            
            
            15,175Unearned
                revenue
            
            
            114,460
            
            
            170,785Income
                taxes payable
            
            
            19,948
            
            
            695Current
                portion of long-term debt
            
            
            71,444
            
            
            63,442Total
                current liabilities
            
            
            477,643
            
            
            501,538Partner
                deposit and accrued buyout liability
            
            
            78,149
            
            
            72,900Deferred
                rent
            
            
            63,994
            
            
            61,509Long-term
                debt
            
            
            129,200
            
            
            90,623Guaranteed
                debt of franchisee
            
            
            31,283
            
            
            31,283Other
                long-term liabilities
            
            
            45,133
            
            
            45,890Total
                liabilities
            
            
            825,402
            
            
            803,743Commitments
                and contingenciesMinority
                interests in consolidated entities
            
            
            41,247
            
            
            44,259Stockholders'
                EquityCommon
                stock, $0.01 par value, 200,000 shares authorized; 78,750
                and78,750
                shares issued; 75,483 and 74,854 shares outstanding asof
                March 31, 2006 and December 31, 2005, respectively
            
            
            788
            
            
            788Additional
                paid-in capital
            
            
            258,301
            
            
            293,368Retained
                earnings
            
            
            1,064,840
            
            
            1,057,944Accumulated
                other comprehensive income
            
            
            2,054
            
            
            384Unearned
                compensation related to outstanding restricted stock
            
            
            -
            
            
            (40,858
            )1,325,983
            
            
            1,311,626Less
                treasury stock, 3,267 and 3,896 shares at March 31, 2006and
                December 31, 2005, respectively, at cost
            
            
            (138,108
            )
            
            (167,206
            )Total
                stockholders’ equity
            
            
            1,187,875
            
            
            1,144,420$
            2,054,524
            
            $
            1,992,422





See
      notes
      to unaudited consolidated financial statements.


6
 Table
          of Contents


**OSI
      RestaurantPartners, Inc.**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**(IN
      THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)**





**THREE
                MONTHS ENDED****MARCH
                31,****2006**
            
            **2005****(restated)**
            
            **(restated)**RevenuesRestaurant
                sales
            
            $
            986,734
            
            $
            893,362Other
                revenues
            
            
            5,626
            
            
            5,081Total
                revenues
            
            
            992,360
            
            
            898,443Costs
                and expensesCost
                of sales
            
            
            359,700
            
            
            327,985Labor
                and other related
            
            
            269,975
            
            
            227,237Other
                restaurant operating
            
            
            216,429
            
            
            180,110Depreciation
                and amortization
            
            
            35,505
            
            
            29,589General
                and administrative
            
            
            54,122
            
            
            49,841Provision
                for impaired assets and restaurant closings
            
            
            2,532
            
            
            951Income
                from operations of unconsolidated affiliates
            
            
            (628
            )
            
            97Total
                costs and expenses
            
            
            937,635
            
            
            815,810Income
                from operations
            
            
            54,725
            
            
            82,633Other
                income (expense), net
            
            
            (328
            )
            
            (934
            )Interest
                income
            
            
            557
            
            
            368Interest
                expense
            
            
            (2,371
            )
            
            (1,158
            )Income
                before provision for income taxes andelimination
                of minority interest
            
            
            52,583
            
            
            80,909Provision
                for income taxes
            
            
            16,724
            
            
            27,160Income
                before elimination of minority interest
            
            
            35,859
            
            
            53,749Elimination
                of minority interest
            
            
            3,628
            
            
            3,398Net
                income
            
            $
            32,231
            
            $
            50,351Basic
                earnings per common shareNet
                income
            
            $
            0.44
            
            $
            0.68Basic
                weighted average number of shares outstanding
            
            
            74,083
            
            
            73,800Diluted
                earnings per common shareNet
                income
            
            $
            0.42
            
            $
            0.65Diluted
                weighted average number of shares outstanding
            
            
            77,111
            
            
            77,267Cash
                dividends per common share
            
            $
            0.13
            
            $
            0.13





See
      notes
      to unaudited consolidated financial statements.


7
 Table
            of Contents




**OSI
      RestaurantPartners, Inc.** ****


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(IN
      THOUSANDS, UNAUDITED)**


**THREE
                    MONTHS ENDED****MARCH
                    31,****2006**
                
                **2005****(restated)**
                
                **(restated)**Cash
                    flows from operating activities:Net
                    income
                
                $
                32,231
                
                $
                50,351Adjustments
                    to reconcile net income to cash provided by operating
                    activities:Depreciation
                    and amortization
                
                
                35,505
                
                
                29,589Provision
                    for impaired assets and restaurant closings
                
                
                2,532
                
                
                951Stock-based
                    compensation expense
                
                
                19,969
                
                
                2,277Income
                    tax benefit credited to equity
                
                
                5,239
                
                
                3,686Excess
                    income tax benefits from stock-based compensation
                
                
                (3,047
                )
                
                -Minority
                    interest in consolidated entities’ income
                
                
                3,628
                
                
                3,398(Income)
                    loss from operations of unconsolidated affiliates
                
                
                (628
                )
                
                97Change
                    in deferred income taxes
                
                
                (12,753
                )
                
                (9,805
                )Increase
                    in deferred rent
                
                
                2,485
                
                
                3,254Loss
                    on disposal of property, fixtures and equipment
                
                
                284
                
                
                1,783Change
                    in assets and liabilities, net of effects of acquisitions:(Increase)
                    decrease in inventories
                
                
                (42
                )
                
                6,210Increase
                    in other current assets
                
                
                (19,175
                )
                
                (1,065
                )Increase
                    in other assets
                
                
                (634
                )
                
                (2,548
                )(Decrease)
                    increase in accounts payable, sales taxes payable and accrued
                    expenses
                
                
                (3,762
                )
                
                18,500Increase
                    in partner deposit and accrued buyout liability
                
                
                789
                
                
                2,534Decrease
                    in unearned revenue
                
                
                (56,325
                )
                
                (52,670
                )Increase
                    in income taxes payable
                
                
                19,253
                
                
                28,868Decrease
                    in other long-term liabilities
                
                
                (757
                )
                
                -Net
                    cash provided by operating activities
                
                
                24,792
                
                
                85,410Cash
                    flows used in investing activities:Purchase
                    of investment securities
                
                
                (1,934
                )
                
                -Maturities
                    of investment securities
                
                
                1,930
                
                
                350Cash
                    paid for acquisitions of businesses, net of cash acquired
                
                
                (7,456
                )
                
                (5,200
                )Capital
                    expenditures
                
                
                (85,769
                )
                
                (64,796
                )Proceeds
                    from the sale of property, fixtures and equipment
                
                
                4,940
                
                
                2,638Payments
                    from unconsolidated affiliates
                
                
                141
                
                
                71Investments
                    in, advances to and distributions to unconsolidated affiliates
                
                
                -
                
                
                (679
                )Net
                    cash used in investing activities
                
                $
                (88,148
                )
                $
                (67,616
                )
 
 (CONTINUED...)


8
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(IN
      THOUSANDS, UNAUDITED)**


**THREE
                  MONTHS ENDED****MARCH
                  31,****2006**
              
              **2005****(restated)**
              
              **(restated)**Cash
                  flows provided by (used in) financing activities:Proceeds
                  from issuance of long-term debt
              
              $
              67,367
              
              $
              29,869Proceeds
                  from minority interest contributions
              
              
              881
              
              
              1,130Distributions
                  to minority interest
              
              
              (7,521
              )
              
              (3,962
              )Repayments
                  of long-term debt
              
              
              (20,788
              )
              
              (11,785
              )Dividends
                  paid
              
              
              (9,779
              )
              
              (9,601
              )Excess
                  income tax benefits from stock-based compensation
              
              
              3,047
              
              
              -Payments
                  for purchase of treasury stock
              
              
              (11,576
              )
              
              (17,868
              )Proceeds
                  from reissuance of treasury stock
              
              
              18,217
              
              
              9,807Net
                  cash provided by (used in) financing activities
              
              
              39,848
              
              
              (2,410
              )Net
                  (decrease) increase in cash and cash equivalents
              
              
              (23,508
              )
              
              15,384Cash
                  and cash equivalents at the beginning of the period
              
              
              84,876
              
              
              87,977Cash
                  and cash equivalents at the end of the period
              
              $
              61,368
              
              $
              103,361Supplemental
                  disclosures of cash flow information:Cash
                  paid for interest
              
              $
              2,384
              
              $
              1,071Cash
                  paid for income taxes, net of refunds
              
              
              5,267
              
              
              2,833Supplemental
                  disclosures of non-cash items:Purchase
                  of employee partners' interests in cash flows of their
                  restaurants
              
              $
              2,751
              
              $
              636







See
      notes
      to unaudited consolidated financial statements.


9
 Table
          of Contents


**OSI
      RestaurantPartners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





1.  Basis
      of
      Presentation and Restatement of Previously Issued Consolidated Financial
      Statements





On
      April
      25, 2006, the shareholders of Outback Steakhouse, Inc. approved changing the
      name of the corporation to OSI Restaurant Partners, Inc. (the “Company”). This
      Note should be read in conjunction with Note 1, “Summary of Significant
      Accounting Policies” under Notes to Consolidated Financial Statements included
      in Item 8, “Financial Statements and Supplementary Data” of the Company’s
      Amendment No. 1 to Annual Report on Form 10-K/A for the year ended December
      31,
      2005 (“2005 10-K/A”).





**Basis
      of Presentation**





The
      accompanying 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 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. These financial statements should be
      read
      in conjunction with the financial statements and financial notes thereto
      included in the Company's 2005 10-K/A.





The
      results of operations for interim periods are not necessarily indicative of
      the
      results to be expected for the full year.





**Restatement
      of Previously Issued Consolidated Financial Statements**





In
      October 2006, the Company identified errors in its accounting for unearned
      revenue for unredeemed gift cards and certificates. Upon completion of the
      review of accounting policies for gift cards and certificates as well as a
      review of certain other balance sheet accounts, the Company has restated its
      consolidated financial statements for certain prior periods to correct these
      and
      other errors, as described in this note.




*Unearned
      revenue and revenue recognition*


Unearned
      revenue represents the Company’s liability for gift cards and certificates that
      have been sold but not yet redeemed. Historically, the Company recognized
      revenue for estimates of gift cards and certificates that will not be redeemed
      (“breakage”) at the time of the sale of the gift cards and certificates. The
      Company has determined that the methodology used to arrive at breakage was
      inappropriate and resulted in understatement of the liability for gift cards
      and
      certificates. The Company has also determined that revenue should not be
      recognized at the time of sale of the gift cards and certificates. Accordingly,
      the Company has adopted a policy to recognize breakage for those gift cards
      and
      certificates that will never be redeemed at the time at which their redemption
      becomes remote. Furthermore, certain expenses associated with gift card and
      certificate promotions were incorrectly netted against breakage income rather
      than reflected as expenses in the Company’s financial statements. Correction of
      these errors in the consolidated financial statements resulted in an increase
      in
      unearned revenue of $65,202,000 and $60,337,000 as of March 31, 2006 and
      December 31, 2005, respectively, an increase in net income of $75,000 for the
      three months ended March 31, 2006 and a decrease in net income of $323,000
      for
      the three months ended March 31, 2005. It also resulted in a $37,548,000
      decrease in retained earnings as of December 31, 2004.


10
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





1.  Basis
      of
      Presentation and Restatement of Previously Issued Consolidated Financial
      Statements (continued)





**Restatement
      of Previously Issued Consolidated Financial Statements
      (continued)**





*Minority
      interests in consolidated entities*


The
      Company has identified errors in the recorded amount of minority interests
      in
      certain of its Carrabba’s Italian Grill subsidiaries, which were understated as
      a result of the Company incorrectly recording the entries relating to the
      correction in accounting for managing partners’ interests in their stores from
      investment accounting to compensation accounting in 2003. Additionally, the
      Company determined that in connection with the Company’s 2002 purchase of the
      20% interest in Outback Steakhouse International, LP, the value of 28,570 shares
      that were payable upon meeting certain conditions should have been recorded
      at
      the acquisition date in 2002 rather than upon their issuance in 2006. Correction
      of these errors in the consolidated financial statements resulted in an increase
      in goodwill of $1,309,000 as of March 31, 2006 and December 31, 2005, decreases
      in minority interests in consolidated entities of $3,225,000 and $1,314,000
      as
      of March 31, 2006 and December 31, 2005, respectively, and decreases in
      elimination of minority interest of $11,000 and $30,000 for the three months
      ended March 31, 2006 and 2005, respectively. It also resulted in an $119,000
      increase in retained earnings as of December 31, 2004.





*Deferred
      rent and property, fixtures and equipment*


The
      Company identified errors in its straight-line lease calculations for certain properties
      where the
      Company received
      tenant improvement contributions from a landlord or where it determined that
      it
      was depreciating certain assets over lives different than the associated lease
      term. Correction of these errors in the consolidated financial statements
      resulted in increases to deferred rent of $6,615,000 and $6,303,000 and
      decreases to property, fixtures and equipment of $2,055,000 and $1,905,000
      as of
      March 31, 2006 and December 31, 2005, respectively, and decreases to net income
      of $260,000 and $284,000 for the three months ended March 31, 2006 and 2005,
      respectively. It
      also
      resulted in a $3,862,000 decrease in retained earnings as of December 31,
      2004.





*Other
      adjustments*


The
      Company has
      increased additional paid-in capital and decreased retained earnings as of
      December 31, 2002 by $2,333,000 to correct an error in equity classification
      that arose prior to 2000, relating to acquisitions recorded as
      pooling-of-interest transactions.





The
      Company has decreased treasury stock and decreased additional paid-in capital
      as
      of March 31, 2006 by $40,858,000 to correct an error in the elimination of
      the
      unearned compensation balance related to unvested restricted stock awards
      required by the adoption of SFAS No. 123R. Under previous guidance, this was
      accounted for as unearned compensation and, under SFAS No. 123R, should be
      treated as a reduction of additional paid-in capital.





The
      Company’s Korean subsidiary receives payments from certain consumer product and
      service companies in connection with promotions under which the Company has
      agreed to provide discounts to their customers. The Company has historically
      netted such monies received against cost of sales and other restaurant operating
      expenses. The Company has determined that these amounts should be recorded
      as
      revenue with an equal offsetting amount in cost of sales and other restaurant
      operating expenses. Correction of these errors in the consolidated financial
      statements increased restaurant sales by $2,105,000 and $3,752,000 for the
      three
      months ended March 31, 2006 and 2005, respectively, and were offset by changes
      in cost of sales and other restaurant operating expense with no effect on income
      from operations or net income.





The
      Company restated its Consolidated Balance Sheets as of December 31, 2005 and
      2004, and the Consolidated Statements of Income, Stockholders’ Equity and Cash
      Flows for the years ended December 31, 2005, 2004 and 2003, all quarters in
      2005
      and 2004 and the first and second quarters of 2006 to correct errors related
      to
      the matters discussed above. The impact of the restatement on periods prior
      to
      2003 has been reflected as an adjustment to retained earnings of $36,128,000
      as
      of December 31, 2002 in the Consolidated Statements of Stockholders’ Equity
      included in the Company’s 2005 10-K/A.


11
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





1.  Basis
      of
      Presentation and Restatement of Previously Issued Consolidated Financial
      Statements (continued)





**Restatement
      of Previously Issued Consolidated Financial Statements
      (continued)**





The
      Consolidated Financial Statements for the three months ended March 31, 2006
      and
      2005 included in this Form 10-Q/A have been restated to reflect the adjustments
      described above. The effects of the Company’s restatement on previously reported
      Consolidated Financial Statements as of and for the three months ended March
      31,
      2006 and 2005 and as of December 31, 2005 are summarized below:





The
      following table reflects the effect of the restatement on the Consolidated
      Balance Sheet (in thousands):





**MARCH
                31,**
            
            **DECEMBER
                31,****2006**
            
            **2006**
            
            **2005**
            
            **2005****As
                previously reported**
            
            **As
                restated**
            
            **As
                previously reported**
            
            **As
                restated**Selected
                Balance Sheet Data:Deferred
                income tax asset
            
            $
            17,201
            
            $
            43,131
            
            $
            17,719
            
            $
            43,697Other
                current assets
            
            
            71,068
            
            
            70,108
            
            
            51,746
            
            
            50,823Total
                current assets
            
            
            220,190
            
            
            245,160
            
            
            224,637
            
            
            249,692Property,
                fixtures and equipment, net
            
            
            1,443,244
            
            
            1,441,189
            
            
            1,389,605
            
            
            1,387,700Deferred
                income tax asset
            
            
            46,201
            
            
            49,499
            
            
            33,073
            
            
            36,180Goodwill
            
            
            114,827
            
            
            116,136
            
            
            111,318
            
            
            112,627Total
                assets
            
            
            2,027,002
            
            
            2,054,524
            
            
            1,964,856
            
            
            1,992,422Accrued
                expenses
            
            
            142,407
            
            
            143,633
            
            
            130,583
            
            
            135,660Unearned
                revenue
            
            
            49,258
            
            
            114,460
            
            
            110,448
            
            
            170,785Total
                current liabilities
            
            
            411,215
            
            
            477,643
            
            
            436,124
            
            
            501,538Partner
                deposit and accrued buyout liability
            
            
            78,149
            
            
            78,149
            
            
            71,591
            
            
            72,900Deferred
                rent
            
            
            57,379
            
            
            63,994
            
            
            55,206
            
            
            61,509Total
                liabilities
            
            
            752,359
            
            
            825,402
            
            
            730,717
            
            
            803,743Minority
                interests in consolidated entities
            
            
            44,472
            
            
            41,247
            
            
            45,573
            
            
            44,259Additional
                paid-in capital
            
            
            296,274
            
            
            258,301
            
            
            291,035
            
            
            293,368Retained
                earnings
            
            
            1,112,012
            
            
            1,064,840
            
            
            1,104,423
            
            
            1,057,944Treasury
                stock
            
            
            (180,957
            )
            
            (138,108
            )
            
            (167,206
            )
            
            (167,206
            )Total
                stockholders' equity
            
            
            1,230,171
            
            
            1,187,875
            
            
            1,188,566
            
            
            1,144,420Total
                liabilities and stockholders' equity
            
            
            2,027,002
            
            
            2,054,524
            
            
            1,964,856
            
            
            1,992,422


12
 Table
            of Contents




**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





1.  Basis
      of
      Presentation and Restatement of Previously Issued Consolidated Financial
      Statements (continued)





**Restatement
      of Previously Issued Consolidated Financial Statements
      (continued)**





The
      following table reflects the effect of the restatement on the Consolidated
      Statements of Income (in thousands, except per share data):





**THREE
                MONTHS ENDED****MARCH
                31,****2006**
            
            **2006**
            
            **2005**
            
            **2005****As
                previously reported**
            
            **As
                restated**
            
            **As
                previously reported**
            
            **As
                restated**Selected
                Statement of Income Data:Restaurant
                sales
            
            $
            984,399
            
            $
            986,734
            
            $
            890,041
            
            $
            893,362Total
                revenues
            
            
            990,025
            
            
            992,360
            
            
            895,122
            
            
            898,443Cost
                of sales
            
            
            358,245
            
            
            359,700
            
            
            325,170
            
            
            327,985Labor
                and other related
            
            
            269,352
            
            
            269,975
            
            
            227,237
            
            
            227,237Other
                restaurant operating
            
            
            215,360
            
            
            216,429
            
            
            178,882
            
            
            180,110Depreciation
                and amortization
            
            
            35,356
            
            
            35,505
            
            
            29,450
            
            
            29,589Provision
                for impaired assets and restaurant closings
            
            
            2,532
            
            
            2,532
            
            
            776
            
            
            951Total
                costs and expenses
            
            
            934,339
            
            
            937,635
            
            
            811,453
            
            
            815,810Income
                from operations
            
            
            55,686
            
            
            54,725
            
            
            83,669
            
            
            82,633Income
                before provision for income taxes and elimination ofminority
                interest
            
            
            53,544
            
            
            52,583
            
            
            81,945
            
            
            80,909Provision
                for income taxes
            
            
            16,866
            
            
            16,724
            
            
            27,559
            
            
            27,160Income
                before elimination of minority interest
            
            
            36,678
            
            
            35,859
            
            
            54,386
            
            
            53,749Elimination
                of minority interest
            
            
            3,639
            
            
            3,628
            
            
            3,428
            
            
            3,398Net
                income
            
            
            33,039
            
            
            32,231
            
            
            50,958
            
            
            50,351Basic
                earnings per common share
            
            $
            0.45
            
            $
            0.44
            
            $
            0.69
            
            $
            0.68Diluted
                earnings per common share
            
            $
            0.43
            
            $
            0.42
            
            $
            0.66
            
            $
            0.65


13
 Table
            of Contents




**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





1.  Basis
      of
      Presentation and Restatement of Previously Issued Consolidated Financial
      Statements (continued)





**Restatement
      of Previously Issued Consolidated Financial Statements
      (continued)**





The
      following table reflects the effect of the restatement on the Consolidated
      Statement of Cash Flows (in thousands):




**THREE
                  MONTHS ENDED****MARCH
                  31,****2006**
              
              **2006**
              
              **2005**
              
              **2005****As
                  previously reported**
              
              **As
                  restated**
              
              **As
                  previously reported**
              
              **As
                  restated**Selected
                  Cash Flow Data:Net
                  income
              
              $
              33,039
              
              $
              32,231
              
              $
              50,958
              
              $
              50,351Depreciation
                  and amortization
              
              
              35,356
              
              
              35,505
              
              
              29,450
              
              
              29,589Provision
                  for impaired assets and restaurant closings
              
              
              2,532
              
              
              2,532
              
              
              776
              
              
              951Stock-based
                  compensation expense
              
              
              18,792
              
              
              19,969
              
              
              2,277
              
              
              2,277Minority
                  interest in consolidated entities’ income
              
              
              3,639
              
              
              3,628
              
              
              3,428
              
              
              3,398Change
                  in deferred income taxes
              
              
              (12,610
              )
              
              (12,753
              )
              
              (9,406
              )
              
              (9,805
              )Increase
                  in deferred rent
              
              
              2,173
              
              
              2,485
              
              
              2,568
              
              
              3,254Increase
                  in other current assets
              
              
              (19,212
              )
              
              (19,175
              )
              
              (1,246
              )
              
              (1,065
              )Increase
                  in other assets
              
              
              (634
              )
              
              (634
              )
              
              (1,695
              )
              
              (2,548
              )Increase
                  (decrease) in accounts payable, sales taxes payableand
                  accrued expenses
              
              
              89
              
              
              (3,762
              )
              
              22,807
              
              
              18,500Increase
                  in partner deposit and accrued buyout liability
              
              
              616
              
              
              789
              
              
              2,631
              
              
              2,534Decrease
                  in unearned revenue
              
              
              (61,190
              )
              
              (56,325
              )
              
              (58,229
              )
              
              (52,670
              )Net
                  cash provided by operating activities
              
              
              22,892
              
              
              24,792
              
              
              84,963
              
              
              85,410Investments
                  in, advances to and distributions tounconsolidated
                  affiliates
              
              
              -
              
              
              -
              
              
              (72
              )
              
              (679
              )Net
                  cash used in investing activities
              
              
              (88,148
              )
              
              (88,148
              )
              
              (67,124
              )
              
              (67,616
              )Distributions
                  to minority interest
              
              
              (5,621
              )
              
              (7,521
              )
              
              (4,007
              )
              
              (3,962
              )Net
                  cash provided by (used in) financing activities
              
              
              41,748
              
              
              39,848
              
              
              (2,455
              )
              
              (2,410
              )
 **Reclassification**





Certain
      prior year amounts shown in the accompanying unaudited consolidated financial
      statements have been reclassified to conform to the 2006 presentation.
      Distribution expense to employee partners has been included in the line item
      “Labor and other related” expenses for managing partner distributions and in
“General and administrative” expenses for area operating partner distributions
      in the Unaudited Consolidated Statements of Income. Employee partner stock
      buyout expense has been included in “General and administrative” expenses in the
      Unaudited Consolidated Statements of Income. These reclassifications had no
      effect on total assets, total liabilities, stockholders’ equity or net
      income.


14
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





2.  Stock-Based
      Compensation





**Adoption
      of New Accounting Pronouncement**





Effective
      January 1, 2006, the Company adopted the fair value based method of accounting
      for stock-based employee compensation as required by SFAS No. 123R, “Share-Based
      Payment,” a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.”
The fair value based method requires the company to expense all stock-based
      employee compensation. SFAS No. 123R also requires the benefits of tax
      deductions in excess of recognized compensation
      cost to be reported as a financing cash flow, rather than as an operating cash
      flow as previously required. The Company has adopted SFAS No. 123R using the
      modified prospective method. Accordingly, the Company has expensed all unvested
      and newly granted stock-based employee compensation beginning January 1, 2006,
      but prior period amounts have not been restated.





The
      incremental pre-tax stock-based compensation expense recognized for stock
      options due to the adoption of SFAS 123R for the three months ended March 31,
      2006 was approximately $2,564,000. Total stock-based compensation expense,
      including the incremental pre-tax stock-based compensation expense above and
      employee partner stock buyout expense, was approximately $18,792,000, with
      an
      associated tax benefit of approximately $6,938,000 for the three months ended
      March 31, 2006. The Company did not capitalize any stock-based compensation
      costs during the three months ended March 31, 2006.


15
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





2.  Stock-Based
      Compensation (continued)





**Adoption
      of New Accounting Pronouncement (continued)**





Prior
      to
      January 1, 2006, the Company accounted for its
      stock-based employee compensation under the intrinsic value method. No
      stock-based employee compensation cost was reflected in net income to the extent
      options granted had an exercise price equal to or exceeding the fair market
      value of the underlying common stock on the date of grant. The following table
      provides pro forma net income and earnings per share amounts using the fair
      value based method of SFAS No. 123, “Accounting for Stock-Based Compensation”
(in thousands, except per share data):


**THREE
                MONTHS ENDED****MARCH
                31,****2005****(restated)**Net
                income
            
            $
            50,351Stock-based
                employee compensation expense included in net income, net of related
                taxes
            
            
            1,380Total
                stock-based employee compensation expense determinedunder
                fair value based method, net of related taxes
            
            
            (4,662
            )Pro
                forma net income
            
            $
            47,069Earnings
                per common share:Basic
            
            $
            0.68Basic
                - pro forma
            
            $
            0.64Diluted
            
            $
            0.65Diluted
                - pro forma
            
            $
            0.61





The
      preceding pro forma results were calculated with the use of the Black-Scholes
      option pricing model. The following assumptions were used for the three months
      ended March 31, 2005: (1) risk-free interest rates of 4.29%; (2) dividend yield
      of 1.24%; (3) expected lives of 6.3 years; and (4) volatility of 29.1%. Expected
      volatilities are based on historical volatility of the Company’s stock. The
      Company uses historical data to estimate option exercise and employee
      termination within the valuation model; separate groups of employees that have
      similar historical exercise behavior are considered separately for valuation
      purposes under SFAS No. 123R. The expected term of options granted represents
      the period of time that options granted are expected to be outstanding. The
      risk-free rate for periods within the contractual life of the option is based
      on
      the U.S. Treasury yield curve in effect at the time of grant. There were no
      grants of stock options in the three months ended March 31, 2006. Results may
      vary depending on the assumptions applied within the model. In 2005, the Company
      identified certain assumptions surrounding the forfeiture of stock options
      used
      in the Black-Scholes model calculation and attribution of expense that were
      not
      correctly reflected in its pro forma expense. For the three months ended March
      31, 2005, the Company presents pro forma compensation expense amounts that
      reflect actual attribution and forfeitures that occurred in that
      period.




**Stock-Based
      Compensation Plans**





The
      Company’s Amended and Restated Stock Option Plan (the “Stock Option Plan”) was
      approved by the shareholders of the Company in April 1999, and has subsequently
      been amended as deemed appropriate by the Company’s Board of Directors or
      shareholders. There are currently 23,500,000 shares of the Company’s common
      stock which may be issued and sold upon exercise of options or grants of
      restricted common stock under the Stock Option Plan. The term of options and
      restricted stock granted is determined by the Board of Directors and grantees
      generally vest in the options or shares over a one to ten year
      period.  16
 Table
            of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





2.  Stock-Based
      Compensation (continued)





**Stock-Based
      Compensation Plans (continued)**





The
      purpose of the Stock Option Plan is to attract competent personnel, to provide
      long-term incentives to Directors and key employees, and to discourage employees
      from competing with the Company.





In
      2002,
      the Company adopted the 2002 Managing Partner Stock Option Plan to provide
      for
      the issuance of options to managing partners and other key employees of the
      Company upon commencement of employment and to managing partners upon completion
      of the term of their employment agreements. In 2005, this plan was amended
      to
      allow the issuance of restricted stock and was renamed the 2005 Amended and
      Restated Managing Partner Stock Plan (the “MP Stock Plan”). No options or
      restricted stock may be granted under the MP Stock Plan to Directors or Officers
      of the Company or any of its subsidiaries or affiliated partnerships. The MP
      Stock Plan is administrated by the Board of Directors. There are currently
      7,500,000 shares of the Company’s common stock which may be issued or sold
      upon exercise of options under the MP Stock Plan. The term of options and
      restricted stock granted under the MP Stock Plan is determined by the Board
      of
      Directors and generally ranges from ten to fifteen years.





Options
      under the Stock Option Plan and the MP Stock Plan may be options which qualify
      under Section 422 of the Internal Revenue Code (“Incentive Stock Options”) or
      options that do not qualify under Section 422 (“Nonqualified Options”). To date,
      the Company has only issued Nonqualified Options.





The
      exercise price for options granted under the Stock Option Plan and the MP Stock
      Plan generally cannot be less than fair market value at the date of grant of
      the
      shares covered by the option. The exercise price of options granted under the
      MP
      Stock Plan was historically determined by using a three-month weighted average
      stock price to eliminate the daily trading increases and decreases in the stock
      price. This averaging method resulted in certain option grants under the MP
      Stock Plan that were above or below the closing price as of the exact grant
      date. Compensation expense resulted if the exercise price of these options
      was
      less than the market price on the date of grant. The Company discontinued use
      of
      the average stock price in November 2005.





In
      2006,
      the Company adopted the OSI Restaurant Partners, Inc. Partner Equity Plan (the
      “PEP”) for managing partners and chef partners in domestic restaurants. The PEP,
      as approved by the Board and the shareholders, includes the Partner Equity
      Deferred Compensation Diversified Plan (the “Diversified Plan”) and the
      Partner Equity Deferred Compensation Stock Plan (the “Stock Plan”).





When
      a
      managing partner or chef partner of a domestic restaurant executes a five-year
      employment agreement, he or she makes a capital contribution in exchange for
      a
      partnership interest in the restaurant. Upon completion of each five-year term
      of employment, the participating partners will receive a deferred compensation
      benefit. The Diversified Plan will permit partners to direct the investment
      of
      their deferred compensation accounts into a variety of benchmark investment
      funds. Specified portions of partners’ accounts will be required to be invested
      in the Stock Plan (a minimum of 75%, 50% and 25% based on completion of the
      first, second and third or subsequent employment terms, respectively). 
Only shares of the Company’s common stock purchased on the open market will be
      utilized in the Stock Plan.





The
      PEP
      is effective for all new partner employment agreements signed after
      March 1, 2006 and will replace the issuance of stock options to partners
      upon completion of their terms of employment. In addition, during the first
      quarter of 2006, all partners with existing employment agreements were given
      an
      opportunity to elect to participate in the PEP in lieu of the receipt of stock
      options upon completion of their terms of employment. As a result, the only
      partners who will receive stock option grants under the MP Stock Plan in the
      future are those partners who executed an employment agreement prior to March
      1,
      2006 and who did not elect to participate in the PEP.


17
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





2.  Stock-Based
      Compensation (continued)





**Stock-Based
      Compensation Plans (continued)**





The
      Stock Plan is intended to be an unfunded, unsecured promise to
      pay the participant the Common Stock, subject to the terms and
      conditions of the Stock Plan. The Diversified Plan also is intended to be an
      unfunded, unsecured promise to pay the participant in cash, subject to the
      terms
      and conditions of the Diversified Plan.





The
      Company currently intends to fund its PEP obligation by making a cash
      contribution to an irrevocable grantor or “rabbi” trust upon each partner’s
      completion of a term of employment (the Company is the sole owner of any assets
      in the trust and participants are general creditors of the Company with respect
      to their benefits under the PEP). A specified percentage of these funds will
      be
      required to be used by the trustee to purchase shares of the Company’s common
      stock on the open market. No shares will be issued by the Company to the PEP.





All
      distributions from Stock Plan accounts will be made in whole shares of Common
      Stock. Distributions from Diversified Plan accounts will be made in cash.
      Amounts credited
      to a partner’s accounts are fully vested at all times. The maximum number of
      shares that may be distributed pursuant to the Stock Plan is 5,000,000, subject
      to adjustment for stock dividends, stock splits and certain other changes in
      the
      Company's capitalization.





Participants’
      Stock Plan accounts will be credited with phantom shares of the Company’s common
      stock at the time of a contribution based on the amount of the cash contribution
      to the Stock Plan and the closing trading price of the Company’s common stock on
      the NYSE on the day of the contribution (or, if there is no trading of the
      shares on that day, on the next date on which trading occurs). Accounts will
      be
      credited with notional gains or losses from the date the contribution is
      credited based on actual increases and decreases in the value of the Company’s
      common stock. A participant will have no voting rights or other rights as a
      shareholder based on phantom shares of the Company’s common stock credited to
      his or her account, and the Company will have no obligation to set aside or
      reserve the Company’s common stock for the purpose of meeting its obligations
      under the Stock Plan. Notwithstanding the foregoing, a participant will be
      entitled to receive credits to his or her account under the Diversified Plan
      equal to the amount of any dividends that are payable on the Company’s common
      stock based on the number of phantom shares of the Company’s common stock
      credited to the participant’s account at the time such dividend is declared.
      Although participants’ accounts in the Stock Plan will not actually hold the
      Company’s common stock, the Company expects to cause the trust to purchase the
      Company’s common stock in the open market in amounts equal to the number of
      phantom shares credited to the Stock Plan accounts. The Company will not issue
      shares of its common stock to the trust for PEP from its treasury or from
      authorized and unissued shares without shareholder approval.





A
      participant will have no discretion with respect to the time and form of benefit
      payments under the PEP. Except in the event of the death or disability of the
      participant, each account will be distributed to the participant in three
      payments:





·
            25%
                of the then total account balance will be distributed five years
                after the
                Company contribution is made (which generally occurs at the end of
                the
                five-year employment term);





·
            an
                additional 25% of the account (i.e., one-third of the remaining account
                balance) will be distributed seven years after the Company contribution
                is
                made; and





·
            the
                remaining account balance will be distributed 10 years after the
                Company
                contribution is made.


18
 Table
            of Contents




**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





2.  Stock-Based
      Compensation (continued)





**Stock-Based
      Compensation Plans (continued)**





The
      Company currently administers the Stock Plan. The administrator may, at any
      time, amend or terminate the Stock Plan, except that no amendment or termination
      may reduce a participant’s account balance or accelerate benefits under the
      Stock Plan in violation of Section 409A of the IRC. If the Company terminates
      the Stock Plan, the Company must pay to each participant the balance of the
      participant’s accounts at the time and in the form such amounts would have been
      paid absent termination of the Stock Plan. Notwithstanding the foregoing, to
      the
      extent permitted under Section 409A of the IRC, the Company may, in its complete
      and sole discretion, accelerate distributions under the Stock Plan in the event
      of (i) change in the ownership or effective control of the Company, (ii) change
      in the ownership of a substantial portion of the assets of the Company, (iii)
      liquidation or bankruptcy of the Company, or (iv) any other circumstances
      permitted under Section 409A of the IRC.





**Stock
      Options**





The
      following table presents a summary of the Company’s stock options as of March
      31, 2006 and activity in the Company’s stock option plans for the three months
      ended March 31, 2006 (in thousands, except option prices):




**WEIGHTED-****WEIGHTED-**
            
            **AVERAGE****AVERAGE**
            
            **REMAINING**
            
            **AGGREGATE****EXERCISE**
            
            **CONTRACTUAL**
            
            **INTRINSIC****OPTIONS**
            
            **PRICE**
            
            **LIFE
                (YEARS)**
            
            **VALUE**Outstanding
                at December 31, 2005
            
            
            16,643
            
            $
            32.25Granted
            
            
            -
            
            
            -Exercised
            
            
            (723
            )
            
            25.08Forfeited
            
            
            (136
            )
            
            38.68Outstanding
                at March 31, 2006
            
            
            15,784
            
            $
            32.52
            
            
            8.9
            
            $
            182,590Exercisable
                at March 31, 2006
            
            
            2,242
            
            $
            25.56
            
            
            4.9
            
            $
            41,343Fully
                vested, non-exercisable at March 31, 2006
            
            
            8,790
            
            $
            32.40
            
            
            10.8
            
            $
            102,971





The
      total
      intrinsic value (market value on date of exercise less exercise price) of
      options exercised during the three months ended March 31, 2006 was approximately
      $13,503,000. The aggregate intrinsic value of options outstanding as of March
      31, 2006, disclosed in the table above, represents the closing stock price
      on
      the last trading day of the quarter less the exercise price, multiplied by
      the
      number of in-the-money stock options outstanding. The excess cash tax benefit
      classified as a financing cash inflow for the three months ended March 31,
      2006
      was approximately $3,047,000.





At
      March
      31, 2006, there was approximately $32,026,000 of unrecognized, pre-tax
      compensation expense related to non-vested stock options. This cost is expected
      to be recognized over a weighted-average period of approximately 4.6
      years.





The
      Company has a policy of repurchasing shares on the open market to satisfy stock
      option exercises and the dilutive effect of restricted stock and expects to
      repurchase approximately 2,000,000 to 3,000,000 shares during 2006, based on
      estimates of stock option exercises for the year. The Company typically issues
      treasury shares upon exercise of stock options.


19
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





2.  Stock-Based
      Compensation (continued)





**Restricted
      Stock**





The
      following table presents restricted stock activity in the Company’s plans for
      the three months ended March 31, 2006 (in thousands, except average fair
      value):





**NUMBER
                OF RESTRICTED SHARE AWARDS**
            
            **WEIGHTED
                AVERAGE FAIR VALUE PER AWARD**Restricted
                share awards outstanding at December 31, 2005
            
            
            1,044
            
            $
            41.54Granted
            
            
            101
            
            
            44.38Vested
            
            
            -
            
            
            -Forfeited
            
            
            (7
            )
            
            40.67Restricted
                share awards outstanding at March 31, 2006
            
            
            1,138
            
            $
            41.79





Compensation
      expense recognized in net income for awards granted during the three months
      ended March 31, 2006 was approximately $2,221,000. At March 31, 2006,
      unrecognized, pre-tax compensation expense related to restricted stock awards
      total approximately $43,013,000 and will be recognized over a weighted-average
      period of 5.1 years.





On
      April
      27, 2005, the Company’s Board of Directors approved a grant of restricted common
      stock to the Company’s Chief Executive Officer under the Amended and Restated
      Managing Partner Stock Plan. Under the terms of the grant, 300,000 shares of
      restricted common stock were issued and will vest as follows: on December 31,
      2009, 90,000 shares, plus an additional 30,000 shares if the market
      capitalization of the Company exceeds $6,060,000,000; on December 31, 2011,
      90,000 shares, plus an additional 30,000 shares if the market capitalization
      of
      the Company exceeds $8,060,000,000; and on December 31, 2014, the balance of
      all
      remaining unvested shares. On December 8, 2005, the Company’s Board of Directors
      approved an additional grant of restricted stock to the Company’s Chief
      Executive Officer under the Amended and Restated Managing Partner Stock Plan.
      Under the terms of the grant, 150,000 shares of restricted stock were issued
      effective December 31, 2005 and will vest as follows: on December 31, 2009,
      75,000 shares and on December 31, 2011, the remaining 75,000
      shares.





On
      Ju ly
      27,
      2005, the Company’s Board of Directors approved a grant of 50,000 shares of its
      restricted common stock to the Senior Vice President of Real Estate and
      Development as an inducement grant in connection with his hiring. These shares
      were not issued under any existing stock plan of the Company. Under the terms
      of
      the grant, the 50,000 shares of restricted stock will vest as follows: on June
      13, 2008, 10,000 shares; on June 13, 2010, 10,000 shares; on June 13, 2012,
      15,000 shares; and on June 13, 2015, the balance of all remaining unvested
      shares.





On
      October 26, 2005, the Company’s Board of Directors approved a grant of 100,000
      shares of its restricted common stock to the Senior Vice President and Chief
      Financial Officer as an inducement grant in connection with his hiring,
      effective November 1, 2005. These shares were not issued under any existing
      stock plan. Under the terms of the grant, the 100,000 shares of restricted
      stock
      will vest as follows: on November 1, 2010, 50,000 shares, plus an additional
      10,000 shares if the market capitalization of the Company exceeds
      $6,000,000,000; and on November 1, 2012, the balance of all remaining unvested
      shares.


20
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





3.  Other
      Current Assets





Other
      current assets consisted of the following (in thousands):




**MARCH
                31,**
            
            **DECEMBER
                31,****2006**
            
            **2005****(restated)**
            
            **(restated)**Prepaid
                expenses
            
            $
            25,336
            
            $
            16,625Accounts
                receivable
            
            
            28,337
            
            
            19,396Accounts
                receivable - vendors
            
            
            12,932
            
            
            9,874Accounts
                receivable - franchisees
            
            
            456
            
            
            1,777Deposits
            
            
            2,547
            
            
            2,651Other
                current assets
            
            
            500
            
            
            500$
            70,108
            
            $
            50,823





4.  Property,
      Fixtures and Equipment, Net





Property,
      fixtures and equipment, net, consisted of the following (in
      thousands):





**MARCH
                31,**
            
            **DECEMBER
                31,****2006**
            
            **2005****(restated)**
            
            **(restated)**Land
            
            $
            204,130
            
            $
            200,394Buildings
                and building improvements
            
            
            705,783
            
            
            689,056Furniture
                and fixtures
            
            
            247,103
            
            
            231,608Equipment
            
            
            519,035
            
            
            498,018Leasehold
                improvements
            
            
            359,826
            
            
            345,640Construction
                in progress
            
            
            82,332
            
            
            68,878Accumulated
                depreciation
            
            
            (677,020
            )
            
            (645,894
            )$
            1,441,189
            
            $
            1,387,700





During
      the three months ended March 31, 2005, the Company recorded a provision for
      impaired assets and restaurant closings of approximately $951,000 for the
      closing of one domestic Outback Steakhouse.





During
      the three months ended March 31, 2006, the Company recorded a provision for
      impaired assets and restaurant closings of approximately $2,532,000, which
      included approximately $914,000 for an impairment charge for intangible and
      other asset impairments related to the pending sale of Paul Lee’s Chinese
      Kitchen and approximately $1,618,000 for the
      impairment of one Carrabba’s Italian Grill.


21
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.** ****


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





5.  Goodwill
      and Intangible Assets, Net





The
      change in the carrying amount
      of goodwill for the three months ended March
      31,
      200 6
      is as
      follows (in thousands):





December
                31, 2005, as restated
            
            $
            112,627Acquisitions
                (see Note 11 of Notes to Unaudited Consolidated Financial Statements)
            
            
            3,509March
                31, 2006, as restated
            
            $
            116,136





Intangible
      assets, net, consisted of the following (in thousands):




**WEIGHTED
                  AVERAGE****AMORTIZATION**
              
              **MARCH
                  31,**
              
              **DECEMBER
                  31,****PERIOD
                  (YEARS)**
              
              **2006**
              
              **2005**Trademarks
                  (gross)
              
              
              24
              
              $
              8,344
              
              $
              8,344Less:
                  accumulated amortization
              
              
              
              
              
              (599
              )
              
              (511
              )Net
                  trademarks
              
              
              
              
              
              7,745
              
              
              7,833Trade
                  dress (gross)
              
              
              15
              
              
              777
              
              
              777Less:
                  accumulated amortization
              
              
              
              
              
              (84
              )
              
              (72
              )Net
                  trade dress
              
              
              
              
              
              693
              
              
              705Favorable
                  leases (gross, lives ranging from 2 to 24 years)
              
              
              20
              
              
              3,224
              
              
              3,224Less:
                  accumulated amortization
              
              
              
              
              
              (247
              )
              
              (200
              )Net
                  favorable leases
              
              
              
              
              
              2,977
              
              
              3,024Intangible
                  assets, less total accumulated amortization of $930and
                  $783 at March 31, 2006 and December 31, 2005, respectively
              
              
              22
              
              $
              11,415
              
              $
              11,562


The
      aggregate amortization expense related to thes e
      intangible assets was $220,000 for the three months ended March 31, 2006. Annual
      amortization expense related to these intangible assets for each of the next
      five years is anticipated to be approximately $650,000.


22
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





6.  Other
      Assets





Other
      assets consisted of the following (in thousands):





**MARCH
                31,**
            
            **DECEMBER
                31,****2006**
            
            **2005**Other
                assets
            
            $
            61,461
            
            $
            59,921Insurance
                receivable (see Notes 9 and 13)
            
            
            40,713
            
            
            41,696Liquor
                licenses, net of accumulated amortization of $5,238 and $5,037 at
                March
                31, 2006and
                December 31, 2005, respectively
            
            
            15,691
            
            
            15,728Deferred
                license fee
            
            
            2,136
            
            
            2,136Assets
                held for sale
            
            
            17,200
            
            
            22,633$
            137,201
            
            $
            142,114





In
      accordance with SFAS
      No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”
the Company has classified certain land and building assets as “held for sale”
in its Unaudited Consolidated Balance Sheets. Assets held for sale as of March
      31, 2006 consisted of $16,006,000 of land and $1,194,000 of buildings. Assets
      held for sale as of December 31, 2005 consisted of $21,439,000 of land and
      $1,194,000 of buildings. No gain or loss has been recorded as it is anticipated
      that proceeds from the sale will exceed the net book value of the
      assets.





7.  Accrued
      Expenses





Accrued
      expenses consisted of the following (in thousands):





**MARCH
                31,**
            
            **DECEMBER
                31,****2006**
            
            **2005****(restated)**
            
            **(restated)**Accrued
                payroll and other compensation
            
            $
            50,377
            
            $
            53,709Accrued
                insurance
            
            
            33,781
            
            
            29,801Other
                accrued expenses
            
            
            59,475
            
            
            52,150$
            143,633
            
            $
            135,660





Remaining
      accrued restaurant closing expenses o f
      less
      than $100,000 were
      included in other accrued expenses as of March 31, 2006 and December 31, 2005,
      related to restaurant closing provisions.


23
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





8.  Long-term
      Debt





Long-term
      debt consisted of the following (in thousands):





**MARCH
                31,**
            
            **DECEMBER
                31,****2006**
            
            **2005**Revolving
                lines of credit, uncollateralized, interest rates ranging from 5.13%
                to
                7.75% atMarch
                31, 2006 and 5.00% to 5.21% at December 31, 2005
            
            $
            118,000
            
            $
            73,000Outback
                Korea notes payable, interest rates ranging from 4.95% to 6.12%
                atMarch
                31, 2006 and 4.95% to 6.06% at December 31, 2005
            
            
            48,937
            
            
            46,670Outback
                Japan notes payable, uncollateralized, interest rates ranging from
                0.80%to
                0.86% at March 31, 2006 and 0.86% at December 31, 2005
            
            
            5,512
            
            
            5,085Outback
                Japan revolving lines of credit, interest rates ranging
                from0.69%
                to 0.77% at March 31, 2006 and December 31, 2005
            
            
            14,206
            
            
            14,636Other
                notes payable, uncollateralized, interest rates ranging
                from2.07%
                to 7.00% at March 31, 2006 and December 31, 2005
            
            
            7,739
            
            
            8,424Sale-leaseback
                obligation
            
            
            6,250
            
            
            6,250Guaranteed
                debt of franchisee
            
            
            31,283
            
            
            31,283231,927
            
            
            185,348Less
                current portion
            
            
            (71,444
            )
            
            (63,442
            )Less
                guaranteed debt of franchisee
            
            
            (31,283
            )
            
            (31,283
            )Long-term
                debtof
                OSI Restaurant Partners, Inc.
            
            $
            129,200
            
            $
            90,623





Effective
      March 10, 2006, the Company amended an uncollateralized $150,000,000 revolving
      credit facility that was scheduled to mature in June 2007 with a new
      $225,000,000 maximum borrowing amount and maturity date of June 2011. The
      amended line of credit permits borrowing at interest rates ranging from 45
      to 65
      basis points over the 30, 60, 90 or 180-day London Interbank Offered Rate
      (LIBOR) (ranging from 4.83% to 5.11% at March 31, 2006 and ranging from 4.39%
      to
      4.69% at December 31, 2005). At March 31, 2006, the unused portion of the
      revolving line of credit was $121,000,000.





The
      credit agreement contains certain restrictions and conditions as defined in
      the
      agreement that require the Company to maintain consolidated net worth equal
      to
      or greater than consolidated total debt and to maintain a ratio of total
      consolidated debt to EBITDAR (earnings before interest, taxes, depreciation,
      amortization and rent) equal to or less than 3.0 to 1.0. At March 31, 2006,
      the
      Company was in compliance with these debt covenants.





Effective
      March 10, 2006, the Company also amended a $30,000,000 line of credit that
      was
      scheduled to mature in June 2007 with a new $40,000,000 maximum borrowing amount
      and maturity date of June 2011. The amended line permits
      borrowing at interest rates ranging from 45 to 65 basis points over LIBOR for
      loan draws and 55 to 80 basis points over LIBOR for letter of credit advances.
      The credit agreement contains certain restrictions and conditions as defined
      in
      the agreement. At March 31, 2006, the outstanding balance on the line of credit
      was $14,000,000. There were no draws outstanding on this line of credit as
      of
      December 31, 2005. At March 31, 2006 and December 31, 2005, $25,072,000 and
      $20,072,000, respectively, of the line of credit was committed for the issuance
      of letters of credit as required by insurance companies that underwrite the
      Company’s workers’ compensation insurance and also, where required, for
      construction of new restaurants.


24
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





8.  Long-term
      Debt (continued)





As
      of
      March 31, 2006, the Company had approximately $7,739,000 of notes payable at
      interest rates ranging from 2.07% to 7.00%. These notes have been primarily
      issued for buyouts of general manager interests in the cash flows of their
      restaurants and generally are payable over five years.





The
      Company has notes payable with banks bearing interest at rates ranging from
      4.95% to 6.12% and from 4.95% to 6.06% at March 31, 2006 and December 31, 2005,
      respectively, to finance development of the Company’s restaurants in South
      Korea. The notes are denominated and payable in Korean won, with outstanding
      balances as of March 31, 2006 maturing at dates ranging from May 2006 to
      February 2007. As of March 31, 2006 and December 31, 2005, the outstanding
      balance was approximately $48,937,000 and $46,670,000, respectively. Certain
      of
      the notes payable are collateralized by lease and other deposits. At March
      31,
      2006 and December 31, 2005, collateralized notes totaled approximately
      $38,433,000 and $34,326,000, respectively. The Company has been pre-approved
      by
      these banks for additional borrowings of approximately $5,061,000 and $4,826,000
      at March 31, 2006 and December 31, 2005, respectively.





The
      Company has notes payable with banks to finance the development of the Company’s
      restaurants in Japan (“Outback Japan”). The notes are payable to banks,
      collateralized by letters of credit and lease deposits of approximately
      $3,100,000 at March 31, 2006 and December 31, 2005, and bear interest at rates
      ranging from 0.80% to 0.86% and at 0.86% at March 31, 2006 and December 31,
      2005, respectively. The notes are denominated and payable in Japanese yen,
      with
      outstanding balances as of March 31, 2006 maturing in September 2006. As of
      March 31, 2006 and December 31, 2005, outstanding balances totaled approximately
      $5,512,000 and $5,085,000, respectively.





In
      October 2003, Outback Japan established a revolving line of credit to finance
      the development of new restaurants in Japan and refinance certain notes payable.
      The line permits borrowing up to a maximum of $10,000,000.
      Effective March 10, 2006, this revolving credit facility that was scheduled
      to
      mature in June 2007 was amended with a new maturity date in June 2011. The
      amended line of credit permits borrowing at interest rates ranging from 45
      to 65
      basis points over LIBOR. As of March 31, 2006 and December 31, 2005, the Company
      had borrowed approximately $9,121,000 and $9,043,000, respectively, on the
      line of
      credit
      at an average interest rate of 0.71%, with draws as of March 31, 2006 maturing
      from June 2006 to August 2006. The revolving line of credit contains certain
      restrictions and conditions as defined in the agreement. As of March 31, 2006,
      the Company was in compliance with all of the debt covenants.





In
      February 2004, Outback Japan established an additional revolving line of credit
      to finance the development of new restaurants in Japan and to refinance certain
      notes payable. The line permits borrowing up to a maximum of $10,000,000 with
      interest of LIBOR divided by a percentage equal to 1.00 minus the Eurocurrency
      Reserve Percentage. The line matures i n
      December 2006. As of March 31, 2006 and December 31, 2005, the Company had
      borrowed approximately $5,085,000 and $5,593,000, respectively, on the line
      of
      credit at an average interest rate of 0.77%, with draws as of March 31, 2006
      maturing in May 2006. The revolving line of credit contains certain restrictions
      and conditions as defined in the agreement. As of March 31, 2006, the Company
      was in compliance with all of the debt covenants.





In
      August
      2005, the Company entered into a sale- leaseback
      arrangement for five of its properties. Pursuant to this arrangement, the
      Company sold these properties for a total of $6,250,000, including $1,250,000
      for tenant improvements. The Company then leased the sites back for a 30-year
      term and will make lease payments on the first day of each calendar month.
      Since
      this transaction does not qualify for sale-leaseback accounting treatment,
      the
      Company has included the proceeds in the Company’s Unaudited Consolidated
      Balance Sheets as long-term debt.


25
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





8.  Long-term
      Debt (continued)





The
      Company is the guarantor of an uncollateralized line of credit that permits
      borrowing of up to $35,000,000 for a limited liability company, T-Bird Nevada,
      LLC (T-Bird”), owned by its California franchisee. This line of credit was
      scheduled to mature in December 2004 but was replaced in January 2005 by an
      amended agreement with a new maturity date in December 2008. The line of
      credit bears interest at rates ranging from 50 to 90 basis points over LIBOR.
      The Company was required to consolidate T-Bird effective January 1, 2004 upon
      adoption of FIN 46R (see Note 1 of Notes to Unaudited Consolidated
      Financial Statements). At March 31, 2006 and December 31, 2005, the outstanding
      balance on the line of credit was approximately $31,283,000 and is included
      in
      the Company’s Unaudited Consolidated Balance Sheets as long-term debt. T-Bird
      uses proceeds from the line of credit for the purchase of real estate and
      construction of buildings to be opened as Outback Steakhouse restaurants and
      leased to the Company’s franchisees. According to the terms of the line of
      credit, T-Bird may borrow, repay, re-borrow or prepay advances at any time
      before the termination date of the agreement.





If
      a
      default under the line of credit were to occur requiring the Company to perform
      under the guarantee obligation, the Company has the right to call into default
      all of its franchise agreements in California and exercise any rights and
      remedies under those agreements as well as the right to recourse under loans
      T-Bird has made to individual corporations in California which own the land
      and/or building which is leased to those franchise locations. Events of default
      are defined in the line of credit agreement and include the Company’s covenant
      commitments under existing lines of credit.  The Company is not the primary
      obligor on the line of credit, and it is not aware of any non-compliance with
      the underlying terms of the line of credit agreement that would result in it
      having to perform in accordance with the terms of the guarantee.




DEBT
      GUARANTEES





The
      Company is the guarantor of an uncollateralized line of credit that permits
      borrowing of up to a maximum of $24,500,000 for its joint venture partner,
      RY-8,
      Inc. (“RY-8”), in the development of Roy's restaurants. The line of credit
      originally expired in December 2004 and was renewed twice with a new termination
      date in June 2011. According to the terms of the credit agreement, RY-8 may
      borrow, repay, re-borrow or prepay advances at any time before the termination
      date of the agreement. On the termination date of the agreement, the entire
      outstanding principal amount of the loan then outstanding and any accrued
      interest is due. At March 31, 2006 and December 31, 2005, the outstanding
      balance on the line of credit was approximately $23,233,000 and $22,926,000,
      respectively.





RY-8’s
      obligations under the line of credit are unconditionally guaranteed by the
      Company and Roy’s Holdings, Inc, (“RHI”). If an event of default occurs (as
      defined in the agreement, and including the Company’s covenant commitments under
      existing lines of credit), then the total outstanding balance, including any
      accrued interest, is immediately due from the guarantors.





If
      an
      event of default occurs and RY-8 is unable to pay the outstanding balance owed,
      the Company would, as guarantor, be liable for this balance. However, in
      conjunction with the credit agreement, RY-8 and RHI have entered into an
      Indemnity Agreement and a Pledge of Interest and Security Agreement in favor
      of
      the Company. These agreements provide that if the Company is required to perform
      its obligation as guarantor pursuant to the credit agreement, then RY-8 and
      RHI
      will indemnify the Company against all losses, claims, damages or liabilities
      which arise out of or are based upon its guarantee of the credit agreement.
      RY-8’s and RHI’s obligations under these agreements are collateralized by a
      first priority lien upon and a continuing security interest in any and all
      of
      RY-8’s interests in the joint venture.





As
      a
      result of the Company’s recourse provisions and collateral, the estimated fair
      value of the guarantee to be recorded is immaterial to its financial condition
      and financial statements.


26
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





8.  Long-term
      Debt (continued)





DEBT
      GUARANTEES (continued)





The
      Company is the guarantor of up to $9,445,000 of a $68,000,000 note for an
      unconsolidated affiliate, Kentucky Speedway, in which the Company has a 22.5%
      equity interest and for which the Company operates catering and concession
      facilities. Payments on this note began in December 2003 with final maturity
      in
      December 2022. At March 31, 2006 and December 31, 2005, the outstanding balance
      and its guarantee on the note were approximately $63,300,000 and
      $9,445,000, respectively. This guarantee has not been modified since the
      effective date of FIN 45 and is thus not subject to the recognition or
      measurement requirements of FIN 45.





The
      Company’s contractual unconsolidated debt guarantees as of March 31, 2006 are
      summarized in the table below (in thousands):





**CURRENT**
            
            **LONG-TERM****TOTAL**
            
            **PORTION**
            
            **PORTION**Debtguarantees
            
            $
            33,945
            
            $
            9,445
            
            $
            24,500Amount
                outstanding under debt guarantees
            
            $
            32,678
            
            $
            9,445
            
            $
            23,233





9.  Other
      Long-term Liabilities





Other
      long-term liabilities consisted of the following (in thousands):




**MARCH
                31,**
            
            **DECEMBER
                31,****2006**
            
            **2005**Litigation
                (See Notes 6 and 13)
            
            $
            39,000
            
            $
            39,000Accrued
                insuranceliability
            
            
            5,713
            
            
            6,696Other
                deferred liability
            
            
            420
            
            
            194$
            45,133
            
            $
            45,890





10.  Foreign
      Currency Translation and Comprehensive Income





For
      all
      significant non-U.S. operations, the functional currency is the local currency.
      Assets and liabilities of those operations are translated into U.S. dollars
      using the exchange rates in effect at the balance sheet date. Results of
      operations are translated using the average exchange rates for the reporting
      period. Translation gains and losses are reported as a separate component of
      accumulated other comprehensive income (loss) in stockholders’ equity.





Comprehensive
      income includes net income and foreign currency translation adjustments. Total
      comprehensive income for the three months ended March 31, 2006 and 2005 was
      $33,901,000 and $49,628,000, respectively, which included the effect of gains
      and (losses) from translation adjustments of approximately $1,670,000 and
      ($723,000), respectively.


27
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





11.  Business
      Combinations





On
      January 1, 2005, the Company acquired the 50% minority ownership interests
      of
      its partner in four Carrabba's restaurants in Ohio for approximately $5,200,000
      in cash and the assumption of the employee partner buyout liability for these
      stores of approximately $590,000. The Company completed this acquisition because
      it believes the additional cash flows provided from 100% ownership of these
      restaurants will meet its internally required rate of return and provide
      additional shareholder value. No minority interest for these stores has been
      reflected in the Consolidated Financial Statements since that date. The Company
      recorded goodwill of approximately $4,100,000 associated with this transaction,
      all of which is expected to be deductible for income tax purposes.





On
      February 6, 2006, the Company purchased ten Outback Steakhouses from its
      franchisee in Eastern Canada for approximately $7,456,000 in cash and the
      assumption of the employee partner buyout liability for these locations of
      approximately $748,000 and other liabilities of approximately $134,000. 
The Company completed this acquisition because it believes the additional cash
      flows provided from ownership of these restaurants will meet its internally
      required rate of return and provide additional shareholder value.  The
      Company recorded goodwill of approximately $3,509,000 associated with this
      transaction, subject to the finalization of the purchase price allocation,
      $2,631,000 of which is expected to be deductible for income tax purposes (see
      Note 5).





On
      an
      unaudited pro forma basis, the effects of the acquisitions were not significant
      to the Company’s results of operations.





12.  Earnings
      Per Share





The
      following table represents the computation of basic and diluted earnings per
      common share (in thousands, except per share data):





**THREE
                MONTHS ENDED****MARCH
                31,****2006**
            
            **2005****(restated)**
            
            **(restated)**Net
                income
            
            $
            32,231
            
            $
            50,351Basic
                weighted average number of common shares outstanding
            
            
            74,083
            
            
            73,800Basic
                earnings per common share
            
            $
            0.44
            
            $
            0.68Effect
                of dilutive stock options and contingently issuable shares
            
            
            3,028
            
            
            3,467Diluted
                weighted average number of common shares outstanding
            
            
            77,111
            
            
            77,267Diluted
                earnings per common share
            
            $
            0.42
            
            $
            0.65





Basic
      earnings per common share is computed using net income and the basic weighted
      average number of common shares outstanding during the period. Diluted earnings
      per common share is computed using net income and the diluted weighted average
      number of common shares outstanding. Diluted weighted average common shares
      outstanding includes potentially dilutive common shares and restricted share
      awards outstanding during the period. Potentially dilutive common shares include
      the assumed exercise of stock options and issuance of restricted share awards
      using the treasury stock method.





Diluted
      earnings per common share excludes antidilutive stock options of approximately
      2,226,000 and 480,000 for the three months ended March 31, 2006 and 2005,
      respectively.


28
 Table
            of Contents




**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





13.  Commitments
      and Contingencies





In
      June
      2003, in a civil case against the Company in Indiana state court alleging
      liability under the “dramshop” liquor liability
      statute, a jury returned a verdict in favor of the two plaintiffs who were
      injured by a drunk driver. The portion of the verdict against the Company was
      $39,000,000. The Company appealed the verdict to the Indiana Court of Appeals.
      On July 25, 2005, the Court of Appeals affirmed the verdict of the trial courts.
      The Company petitioned the Court of Appeals for rehearing and rehearing was
      denied. The Company filed a petition for
      transfer with the Indiana Supreme Court. On February 21, 2006, the Indiana
      Supreme Court granted transfer. That ruling means the Supreme Court has vacated
      the Court of Appeals’ decision and has accepted the case for review. As of the
      date of this filing, the Indiana Supreme Court has
      heard
      oral argument on the case, but has not ren dered
      any
      decision on the merits of the case nor indicated when or how it might
      rule.





The
      Company has insurance coverage related to this case provided by its primary
      carrier for $21,000,000 and by an excess insurance carrier for the balance
      of
      the verdict of approximately $19,000,000. The excess insurance carrier has
      filed
      a declaratory judgment suit claiming it was not notified of the case and is
      therefore not liable for its portion of the verdict. The Company does not
      believe the excess carrier’s case has any merit and is vigorously defending this
      case. Activity in this case has been held in abeyance pending resolution of
      appeals in the “dramshop” case. The Company has filed counter-claims against the
      excess carrier and cross-claims against the primary carrier and its third-party
      administrator. The Company’s third-party administrator has executed an
      indemnification agreement indemnifying the Company against any liability
      resulting from the alleged failure to give notice to the excess insurance
      carrier.





As
      a
      result of the affirmation ve rdict
      by
      the Court of Appeals, the Company has recorded the $39,000,000 verdict as a
      non-current liability in its Unaudited Consolidated Balance Sheets as well
      as a
      non-current receivable in other assets for the same amount which would be due
      from insurance carriers should this verdict prevail upon appeal.





As
      discussed in the Company’s 2005 10-K/A, in connection with the Company’s
      customary review of the results of international operations, it discovered
      that
      employees of Aussie Chung Ltd., the Company’s 82% owned subsidiary in South
      Korea, may have made improper payments to government officials. Following that
      discovery, the Company’s Audit Committee engaged outside counsel to investigate
      the matter, and that investigation is substantially complete. Based on the
      results of the investigation to date, the payments, which were less than
      $75,000, may have violated the U.S. Foreign Corrupt Practices Act as well as
      South Korean law. The chief executive officer, chief operating officer and
      director of treasury of Aussie Chung have resigned as employees and from all
      offices they hold with that company and, in the case of the chief executive
      officer and chief operating officer, from its board of directors. The chief
      executive officer and the chief operating officer are minority owners of Aussie
      Chung. No other employees of Aussie Chung and no members of the Company’s
      management outside South Korea were implicated in the improper payments.




The
      Company has voluntarily reported this matter to the staff of the Securities
      and
      Exchange Commission and the U.S. Department of Justice. If the U.S. authorities
      determine that there has been a violation of the Foreign Corrupt Practices
      Act,
      they may seek to impose sanctions on the Company that may include injunctive
      relief, fines, penalties and modifications to the Company’s business practices.
      The Company could also face sanctions from South Korean authorities.




It
      is not
      possible at this time to predict whether the authorities will seek to impose
      sanctions on the Company, and if they do, what those sanctions might be. It
      is
      also not possible to predict how any U.S. or South Korean governmental
      investigation or resulting sanctions may impact the Company’s business in South
      Korea. Depending upon how these matters are resolved, the Company’s results of
      operations and prospects for growth in South Korea could be significantly
      impacted. In 2005, Aussie Chung had revenues and net income of $220,291,000
      and
      $11,458,000, respectively, representing approximately 5.8% and 7.8% of the
      Company’s consolidated revenues and net income.


29
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





13.  Commitments
      and Contingencies (continued)





On
      January 24, 2006, the Company entered into an agreement in principle to sell
      its
      50% interest in the Paul Lee’s Chinese Kitchen (“PLCK”) joint venture to its
      partner. Upon closing the sale, the Company will receive a promissory note
      with
      a principal amount of $2,000,000 due and payable February 1, 2011, with interest
      payable annually to the extent that cash flows from PLCK can fund those payments
      (any unpaid interest will increase the principal balance of the note). If PLCK
      is sold or liquidated prior to full payment of the note, the Company will
      receive, in full satisfaction of the note, 50% of the proceeds of sale or
      liquidation up to the outstanding principal and accrued and unpaid interest
      amounts under the note. Additionally, the Company will have a “reinvestment
      option” whereby at any time the note remains outstanding, the Company may
      acquire a 50% ownership interest in PLCK upon payment of 50% of all capital
      contributions made to PLCK by the other partner subsequent to the sale and
      an
      additional amount equal to the greater of $1,000,000 and 10% of the additional
      capital invested after the sale. The Company does not expect to incur material
      costs or future cash expenditures as a result of the sale.





In
      February 2006, the Company entered into a verbal agreement to sell two of its
      Company-owned Bonefish Grills to a franchisee.





14.  Subsequent
      Events





On
      April
      25, 2006, the Company’s shareholders approved a change in the Company’s name
      from Outback Steakhouse, Inc. to OSI Restaurant Partners, Inc.





On
      April
      25, 2006, the Company’s Board of Directors declared a quarterly dividend of
      $0.13 per share of the Company’s common stock. The dividend will be paid June 2,
      2006 to shareholders of record as of May 19, 2006.





On
      May 9,
      2006, the Company received $6,000,000 in escrow related to an Outback Steakhouse
      lease termination agreement, which was entered into in January 2005. In
      accordance with the terms of this agreement, the Company will vacate
      the premises currently occupied by a Company-owned Outback
      Steakhouse by June
      8, 2006. The Company will record a gain upon disposal of this restaurant, which
      will be recorded when the cash is received by the Company, and it has
      fu lfilled
      its obligations under the agreement.


30
 Table
          of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Item
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS**





Management’s
      discussion and analysis of financial condition and results of operations should
      be read in conjunction with the Unaudited Consolidated Financial Statements
      and
      the related Notes.





**Overview**





We
      are
      one of the largest casual dining restaurant companies in the world, with seven
      restaurant concepts, ove r
      1,300 system-wide
      restaurants and 2005 annual revenues for Company-owned stores exceeding $3.6
      billion. We operate in all 50 states and in 21 countries internationally,
      predominantly through Company-owned stores, but we also operate under a variety
      of partnerships and franchises. Our primary focus as a company of restaurants
      is
      to provide a quality product together with quality service across all of our
      brands. This goal entails offering consumers of different demographic
      backgrounds an array of dining alternatives suited for differing needs. Our
      sales are primarily generated through a diverse customer base, which includes
      people eating in our restaurants as regular users who return for meals several
      times a week or on special occasions such as birthday parties, private events
      and for business entertainment. Secondarily, we generate revenues through sales
      of franchises and ongoing royalties as well as the sale and redemption of gift
      certificates.





The
      restaurant industry is a highly competitive and fragmented business, which
      is
      subject to sensitivity from changes in the economy, trends in lifestyles,
      seasonality (customer spending patterns at restaurants are generally highest
      in
      the first quarter of the year and lowest in the third quarter of the year)
      and
      fluctuating costs. Operating margins for restaurants are susceptible to
      fluctuations in prices of commodities, which include among other things, beef,
      chicken, seafood, butter, cheese, produce and other necessities to operate
      a
      store such as natural gas or other energy supplies. Additionally, the restaurant
      industry is characterized by a high initial capital investment, coupled with
      high labor costs. The combination of these factors underscores our initiatives
      to drive increased sales at existing stores in order to raise margins and
      profits, because the incremental sales contribution to profits from every
      additional dollar of sales above the minimum costs required to open, staff
      and
      operate a store is very high. We are not a company focused on growth in the
      number of restaurants just to generate additional sales. Our expansion and
      operation strategies are to balance investment costs and the economic factors
      of
      operation, in order to generate reasonable, sustainable margins and achieve
      acceptable returns on investment from our restaurant concepts.





Promotion
      of our Outback Steakhouse and Carrabba's Italian Grill restaurants is assisted
      by the use of national and spot television and radio media, which we have also
      begun to use in certain markets for our Bonefish Grill brand. We advertise
      on
      television in spot markets when our brands achieve sufficient penetration to
      make a meaningful broadcast schedule affordable. We rely on word-of-mouth
      customer experience, grassroots marketing in local venues, direct mail and
      national print media to support broadcast media and as the primary campaigns
      for
      our upscale casual and newer brands. We generally do not attempt to lure
      customers with discounts, as is common to many restaurants in the casual dining
      industry. Our advertising dollars are targeted to promote and maintain brand
      image and develop consumer awareness. We strive to drive sales through
      excellence in execution rather than through discounting and other short-lived
      marketing efforts. Our marketing strategy of encouraging customers to visit
      frequently and also recommending our restaurants to others complements what
      we
      believe are the fundamental elements of success: convenient sites,
      service-oriented employees and flawless execution in a well-managed
      restaurant.


31
 Table
          of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Overview
      (continued)**





Key
      factors that can be used in evaluating and understanding our restaurants and
      assessing our business include the following:





-
            Average
                unit volumes - a per store average sales amount, which helps us gauge
                the
                changes in consumer traffic, pricing and development of the
                brand;


-
            Operating
                margins - store revenues after deduction of the main store-level
                operating
                costs (including cost of sales, restaurant operating expenses and
                labor
                and related costs);


-
            System-wide
                sales - a total sales volume for all Company-owned, franchise and
                unconsolidated joint venture stores, regardless of ownership to interpret
                the health of our brands; and


-
            Same-store
                or comparable sales - a year-over-year comparison of sales volumes
                for
                stores that are open in both years in order to remove the impact
                of new
                openings in comparing the operations of existing
                stores.





Our
      consolidated operating results are affected by the growth of our newer brands.
      As we continue to develop and expand new restaurant concepts at different rates,
      our cost of sales, labor costs, restaurant operating expenses and income from
      operations change from the mix of brands in our portfolio with slightly
      different operating characteristics. Labor and related expenses are higher
      at
      our new format stores than have typically been experienced at Outback
      Steakhouses. However, cost of sales at those stores is lower than those at
      Outback. These trends are expected to continue with our planned development
      of
      stores.





Our
      industry’s challenges and risks include, but are not limited to, the impact of
      government regulation, the availability of qualified employees, consumer
      perceptions regarding food safety and/or the health benefits of certain types
      of
      food, including attitudes about alcohol consumption, economic conditions and
      commodity pricing. Additionally, our planned development schedule is subject
      to
      risk because of rising real estate and construction costs, and our results
      are
      affected by consumer tolerance of price increases. Changes in our operations
      in
      the remainder of this year and in future periods may also result from changes
      in
      beef prices and other commodity costs and continued pre-opening expenses from
      the development of new restaurants and our expansion strategy.





**Restatement
      of Previously Issued Consolidated Financial Statements**





In
      October 2006, we identified errors in our accounting for unearned revenue for
      unredeemed gift cards and certificates. Upon completion of the review of
      accounting policies for gift cards and certificates as well as a review of
      certain other balance sheet accounts, we have restated the consolidated
      financial statements as
      of
      March 31, 2006 and December 31, 2005 and for the
      three
      month periods ended March 31, 2006 and 2005, to correct these and other errors,
      as more fully described in Note 1 to the Notes to Unaudited Consolidated
      Financial Statements of Item 1: Consolidated Financial Statements, which is
      included in this Form 10-Q/A. All applicable amounts related to this restatement
      have been reflected herein and in our consolidated financial statements included
      in this Form 10-Q/A.


32
 Table
            of Contents




**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Results
      of Operations**





The
      following tables set forth, for the periods indicated, (i) percentages that
      items in our Unaudited Consolidated Statements of Income bear to total revenues
      or restaurant sales, as indicated, and (ii) selected operating data:





**THREE
                MONTHS ENDED****MARCH
                31,****2006**
            
            **2005****(restated)**
            
            **(restated)**RevenuesRestaurant
                sales
            
            
            99.4
            %
            
            99.4
            %Other
                revenues
            
            
            0.6
            
            
            0.6Total
                revenues
            
            
            100.0
            
            
            100.0Costs
                and expensesCost
                of sales (1)
            
            
            36.5
            
            
            36.7Labor
                and other related (1)
            
            
            27.4
            
            
            25.4Other
                restaurant operating (1)
            
            
            21.9
            
            
            20.2Depreciation
                and amortization
            
            
            3.6
            
            
            3.3General
                and administrative
            
            
            5.5
            
            
            5.5Provision
                for impaired assets and restaurant closings
            
            
            0.3
            
            
            0.1Income
                from operations of unconsolidated affiliates
            
            
            (0.1
            )
            
            *Total
                costs and expenses
            
            
            94.5
            
            
            90.8Income
                from operations
            
            
            5.5
            
            
            9.2Other
                income (expense), net
            
            
            (*
            )
            
            (0.1
            )Interest
                income
            
            
            *
            
            
            *Interest
                expense
            
            
            (0.2
            )
            
            (0.1
            )Income
                before provision for income taxes andelimination
                of minority interest
            
            
            5.3
            
            
            9.0Provision
                for income taxes
            
            
            1.7
            
            
            3.0Income
                before elimination of minority interest
            
            
            3.6
            
            
            6.0Elimination
                of minority interest
            
            
            0.4
            
            
            0.4Net
                income
            
            
            3.2
            %
            
            5.6
            %


__________________


(1)
            As
                a percentage of restaurant sales.


*
            Less
                than 1/10 of one percent of total
                revenues.


33
 Table
            of Contents




**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Results
      of Operations (continued)**





System-wide
      sales grew by 9.5% for the quarter ended March 31, 2006 compared with the
      respective period in 2005. System-wide sales is a non-GAAP financial measure
      that includes sales of all restaurants operating under our brand names, whether
      we own them or not. The two components of system-wide sales, including those
      of
      OSI Restaurant Partners, Inc. and those of franchisees and unconsolidated
      development joint ventures, are provided in the following tables:





**THREE
                MONTHS ENDED****MARCH
                31,****2006**
            
            **2005****(restated)**
            
            **(restated)**OSI
                RESTAURANT PARTNERS, INC. RESTAURANT SALES (in millions):Outback
                SteakhousesDomestic
            
            $
            583
            
            $
            574International
            
            
            76
            
            
            61Total
            
            
            659
            
            
            635Carrabba's
                Italian Grills
            
            
            162
            
            
            138Bonefish
                Grills
            
            
            73
            
            
            51Fleming's
                Prime Steakhouse and Wine Bars
            
            
            48
            
            
            38Other
                restaurants
            
            
            45
            
            
            31Total
                Company-owned restaurant sales
            
            $
            987
            
            $
            893




34
 Table
          of Contents




**MANAGEMENT'S
        DISCUSSION AND ANALYSIS OF**
 **FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS**
 
 **Results
        of Operations (continued)**




The
      following information presents sales for franchised and unconsolidated
      development joint venture restaurants. These are restaurants that are not owned
      by us and from which we only receive a franchise royalty or a portion of their
      total income. Management believes that franchise and unconsolidated development
      joint venture sales information is useful in analyzing our revenues because
      franchisees and affiliates pay service fees and/or royalties that generally
      are
      based on a percentage of sales. Management also uses this information to make
      decisions about future plans for the development of additional restaurants
      and
      new concepts as well as evaluation of current operations.





These
      sales do not represent sales of OSI Restaurant Partners, Inc., and are presented
      only as an indicator of changes in the restaurant system, which management
      believes is important information regarding the health of our restaurant
      brands.





**THREE
                MONTHS ENDED****MARCH
                31,****2006**
            
            **2005**FRANCHISE
                AND DEVELOPMENT JOINT VENTURE SALES (in millions) (1):Outback
                SteakhousesDomestic
            
            $
            93
            
            $
            89International
            
            
            27
            
            
            29Total
            
            
            120
            
            
            118Bonefish
                Grills
            
            
            3
            
            
            3Total
                franchise and development joint venture sales (1)
            
            $
            123
            
            $
            121Income
                from franchise and development joint ventures (2)
            
            $
            5
            
            $
            4


__________________


(1)
            Franchise
                and development joint venture sales are not included in revenues
                as
                reported in the Unaudited Consolidated Statements of
                Income.


(2)
            Represents
                the franchise royalty and portion of total income included in the
                Unaudited Consolidated Statements of Income in the line items Other
                revenues or Income from operations of unconsolidated
                affiliates.


35
 Table
          of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Results
      of Operations (continued)**





**MARCH
                31,****2006**
            
            **2005**Number
                of restaurants (at end of the period):Outback
                SteakhousesCompany-owned
                - domestic
            
            
            672
            
            
            654Company-owned
                - international
            
            
            106
            
            
            75Franchised
                and development joint venture-
                domestic
            
            
            106
            
            
            104Franchised
                and development joint venture-
                international
            
            
            42
            
            
            55Total
            
            
            926
            
            
            888Carrabba's
                Italian GrillsCompany-owned
            
            
            205
            
            
            176Bonefish
                GrillsCompany-owned
            
            
            97
            
            
            68Franchised
                and development joint venture
            
            
            6
            
            
            4Total
            
            
            103
            
            
            72Fleming’s
                Prime Steakhouse and Wine BarsCompany-owned
            
            
            40
            
            
            32Roy’sCompany-owned
            
            
            21
            
            
            19Cheeseburger
                in ParadiseCompany-owned
            
            
            32
            
            
            14Paul
                Lee's Chinese KitchensCompany-owned
            
            
            -
            
            
            3Lee
                Roy Selmon’sCompany-owned
            
            
            4
            
            
            2System-wide
                total
            
            
            1,331
            
            
            1,206


36
 Table
            of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Three
      months ended March 31, 2006 and 2005**





REVENUES





*Restaurant
      sales.* Restaurant sales increased by 10.5% to $986,734,000 during the first quarter
      of
      2006 compared with $893,362,000 in the same period in 2005. The increase in
      restaurant sales was primarily attributable to additional revenues of
      approximately $87,351,000 from the opening of new restaurants after March 31,
      2005, as well as increases in sales at existing restaurants. The following
      table
      includes additional information about changes in restaurant sales at domestic
      Company-owned restaurants for the three months ended March 31, 2006 and
      2005:


**THREE
                  MONTHS ENDED****MARCH
                  31,****2006**
              
              **2005**Average
                  restaurant unit volumes (weekly):Outback
                  Steakhouses(1)
              
              $
              67,584
              
              $
              68,391Carrabba's
                  Italian Grills(1)
              
              
              62,222
              
              
              62,489Bonefish
                  Grills (1)
              
              
              62,722
              
              
              62,985Fleming's
                  Prime Steakhouse and Wine Bars
              
              
              93,239
              
              
              92,534Roy's
              
              
              82,478
              
              
              77,282Operating
                  weeks:Outback
                  Steakhouses
              
              
              8,615
              
              
              8,381Carrabba's
                  Italian Grills
              
              
              2,601
              
              
              2,204Bonefish
                  Grills
              
              
              1,170
              
              
              805Fleming's
                  Prime Steakhouse and Wine Bars
              
              
              510
              
              
              406Roy's
              
              
              261
              
              
              240Year
                  to year percentage change:Menu
                  price increases (2):Outback
                  Steakhouses
              
              
              0.6
              %
              
              4.1
              %Carrabba's
                  Italian Grills
              
              
              1.2
              %
              
              2.3
              %Bonefish
                  Grills
              
              
              2.2
              %
              
              2.3
              %Same-store
                  sales (stores open 18 months or more):Outback
                  Steakhouses
              
              
              -1.1
              %
              
              -0.5
              %Carrabba's
                  Italian Grills
              
              
              2.7
              %
              
              4.3
              %Bonefish
                  Grills
              
              
              2.1
              %
              
              0.3
              %Fleming's
                  Prime Steakhouse and Wine Bars
              
              
              7.0
              %
              
              10.7
              %Roy's
              
              
              4.6
              %
              
              3.4
              %
 __________________


(1)
            We
                have restated our previously reported consolidated financial statements
                to
                reflect certain adjustments as discussed in Note 1 of
                Unaudited Consolidated Financial Statements of Item 1: Consolidated
                Financial Statements, which is included in this Form
                10-Q/A.


(2)
            Reflects
                nominal amounts of menu price changes, prior to any change in product
                mix
                because of price increases, and may not reflect amounts effectively
                paid
                by the customer. Menu price increases are not provided for Fleming's
                and
                Roy's as a significant portion of their sales come from specials,
                which
                fluctuate daily.





*Other
      revenues.* Other
      revenues, consisting primarily of initial franchise fees and royalties,
      increased by $545,000 to $5,626,000 in the first quarter of 2006 as compared
      with $5,081,000 in 2005. This
      increase primarily resulted from higher initial franchise fees and royalties
      from additional stores opened and operated as franchises during the first
      quarter of 2006 compared with the same period in 2005 and increased
      international royalties.  37
 Table
            of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Three
      months ended March 31, 2006 and 2005 (continued)**





COSTS
      AND EXPENSES





*Cost
      of sales.* Cost of
      sales, consisting of food and beverage costs, decreased 0.2% to 36.5% as a
      percentage of restaurant sales in the first quarter of 2006 compared with the
      same period in 2005. This decrease in cost of sales was attributable to an
      increase in the proportion of consolidated sales associated with our non-Outback
      Steakhouse restaurants that have lower cost of goods sold ratios than Outback
      Steakhouses. This decrease was partially offset by higher produce costs,
      particularly for onions, potatoes and tomatoes.





*Labor
      and other related expenses* .
      Labor
      and other related expenses include all direct and indirect labor costs incurred
      in operations, including distribution expense to managing partners. Labor and
      other related expenses increased 2.0% as a percentage of restaurant sales to
      27.4% in the first quarter of 2006 compared with the same period in 2005. Of
      the
      increase, approximately 1.0% was attributable to conversion costs related to
      the
      implementation of the new Partner Equity Program and 0.4% resulted from ongoing
      costs from the Partner Equity Program, stock-based compensation expenses
      resulting from the implementation of a new accounting standard and restricted
      stock grants to managing partners. The total costs associated with
      implementation of the Partner Equity Program caused a corresponding $12,300,000
      increase in the “Partner deposit and accrued buyout liability” balance as of
      March 31, 2006 in our Unaudited Consolidated Balance Sheet. Additionally,
      declines in average unit volumes at Outback Steakhouse and increases in the
      proportion of new restaurant formats, which have higher average labor costs
      than
      domestic Outback Steakhouses and Carrabba's Italian Grills, increased labor
      and
      other related expenses as a percentage of restaurant sales compared to
      2005.





*Other
      restaurant operating expenses* .
      Other
      restaurant operating expenses include certain unit-level operating costs such
      as
      operating supplies, rent, repair and maintenance, advertising expenses,
      utilities, pre-opening costs and other occupancy costs. Substantial portions
      of
      these expenses are fixed or indirectly variable. These costs increased 1.7%
      to
      21.9% as a percentage of restaurant sales in the first quarter of 2006 compared
      with the same period in 2005. This
      increase resulted from higher utility costs, higher advertising costs at
      Carrabba’s Italian Grills and an increase in the proportion of new format
      restaurants and international Outback Steakhouses in operation, which have
      higher average restaurant operating expenses as a percentage of restaurant
      sales
      than domestic Outback Steakhouses and Carrabba's Italian Grills.





*Depreciation
      and amortization* .
      Depreciation and amortization costs increased 0.3% as a percentage of total
      revenues to 3.6% in the first quarter of 2006 compared to the same period in
      2005. Increased depreciation expense as a percentage of total revenues resulted
      from lower average unit volumes at domestic Outback Steakhouses during the
      quarter, the continued rollout of a new point of sale system to our Outback
      Steakhouse restaurants, remodeling of restaurants and higher depreciation costs
      for certain of our new restaurant formats, which have higher average
      construction costs than an Outback Steakhouse.





*General
      and administrative* .
      General
      and administrative costs increased by $4,281,000 to $54,122,000 in the first
      quarter of 2006 compared with $49,841,000 during the same period in
      2005. This
      increase resulted from an increase in overall administrative costs associated
      with operating additional domestic and international Outback Steakhouses,
      Carrabba’s Italian Grills, Fleming’s Prime Steakhouses, Roy’s, Bonefish Grills
      and Cheeseburger in Paradise restaurants. Additionally, the increase resulted
      from $1,400,000 of compensation expense recognized for restricted stock benefits
      for certain members of senior management that was not recognized in the same
      period last year and $1,554,000 of stock options expensed as a result of the
      implementation of a new accounting standard. These ongoing costs were partially
      offset by a $1,800,000 decrease in costs resulting from a change in the timing
      of our annual managing partner conference. Also, during the three months ended
      March 31, 2006, we incurred $1,000,000 of expense from writing off investments
      in new Cheeseburger in Paradise restaurant development that was discontinued
      due
      to the anticipation that there would not be a favorable return on the investment
      and $885,000 of investigation costs for the possible violation of the Foreign
      Corrupt Practices Act in South Korea. These increases were offset by the
      reduction of $890,000 of carrying costs recognized in 2005 associated with
      the
      acquisition of designation rights from Chi-Chi’s in 2004 and $2,100,000 in
      compensation expense associated with our Chief Executive Officer recognized
      during the first quarter of 2005.


38
 Table
          of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Three
      months ended March 31, 2006 and 2005 (continued)**





*Provision
      for impaired assets and restaurant closing.* A
      provision of approximately $2,532,000 was recorded during the first quarter
      of
      2006 which included approximately $914,000 for an impairment charge for
      intangible and other asset impairments related to the pending sale of Paul
      Lee’s
      Chinese Kitchen and approximately $1,618,000 for the
      impairment of one Carrabba’s Italian Grill. A
      provision of approximately $951,000 was recorded during the first quarter of
      2005 for the closing of one domestic Outback Steakhouse.





*Income
      from operations of unconsolidated affiliates* .
      Income
      from operations of unconsolidated affiliates represents our portion of net
      income from restaurants operated as development joint ventures. Income from
      development joint ventures increased by $725,000 to income of $628,000 during
      the first quarter of 2006 compared with a loss of $97,000 during the same period
      in 2005. This increase was attributable to expenses resulting from the adoption
      of a buyout program for managing and area operating partners in certain Outback
      Steakhouses in our joint venture in Brazil during the first quarter of 2005,
      which did not recur in 2006.





*Income
      from operations* . Income
      from operations decreased by $27,908,000 to $54,725,000 in the first quarter
      of
      2006 compared with $82,633,000 in the same period in 2005 as a result of
      increases in revenues which were offset by the opening of new restaurants,
      conversion costs related to the implementation of the Partner Equity Program,
      stock-based compensation expenses resulting from the implementation of a new
      accounting standard and the changes in the relationships between revenues and
      expenses discussed above.





*Interest
      income* .
      Interest income was $557,000 during the first quarter of 2006 compared with
      $368,000 in the same period in 2005. Interest
      income increased due to higher interest rates on short-term investment balances
      during the first quarter of 2006 compared with the same period in 2005. Interest
      income for the quarters ended March 31, 2006 and 2005 included interest of
      approximately $386,000 and $245,000, respectively, from notes receivable held
      by
      a limited liability company owned by our California franchisee.





*Interest
      expense* .
      Interest expense was $2,371,000 during the first quarter of 2006 compared with
      $1,158,000 in the same period in 2005. The
      increase in interest expense was due to higher average debt balances and higher
      interest rates during the first quarter of 2006 compared with the first quarter
      of 2005. Interest
      expense for the quarters ended March 31, 2006 and 2005 included approximately
      $386,000 and $245,000, respectively, of expense from outstanding borrowings
      on
      the line of credit held by a limited liability company owned by our California
      franchisee.





*Provision
      for income taxes* .
      The
      provision for income taxes in the first quarter of both 2006 and 2005 reflects
      expected income taxes due at federal statutory rates and state income tax rates,
      net of the federal benefit. The effective income tax rate was 31.8% during
      the
      first quarter of 2006 and 33.6% during the first quarter of 2005. The decline
      in
      tax rate reflects an increase in earnings taxed at lower rates in
      foreign jurisdictions.





*Net
      income and earnings per share* .
      Net
      income for the first quarter of 2006 was $32,231,000 compared with $50,351,000
      in the same period in 2005. Basic earnings per share decreased to $0.44 during
      the first quarter of 2006 compared with $0.68 for the same period in 2005 as
      a
      result of the decreas e
      in net
      income and an increase in basic weighted average shares outstanding of
      approximately 283,000 shares. Th e
      increase in basic weighted average shares outstanding for the quarter ended
      March 31, 2006 compared with March 31, 2005 was primarily due to the
      issuance of shares under stock option plans, partially offset by common stock
      repurchases.  Diluted
      earnings per share decreased to $0.42 during the first quarter of 2006 compared
      with $0.65 for the same period in 2005 as a resu lt
      of the
      decrease in net income and partially offset by the decrease in diluted weighted
      average shares outstanding of approximately 156,000 shares. The decrease
      in diluted weighted average shares outstanding was primarily due to the reduced
      number of dilutive options outstanding, partially offset by the increased number
      of basic shares outstanding for the quarter ended March 31, 2006 compared with
      March 31, 2005 .


39
 Table
          of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Liquidity
      and Capital Resources**





The
      following table presents a summary of our cash flows from operating, investing
      and financing activities for the periods indicated (in thousands):




**THREE
                  MONTHS ENDED****MARCH
                  31,****2006**
              
              **2005****(restated)**
              
              **(restated)**Net
                  cash provided by operating activities
              
              $
              24,792
              
              $
              85,410Net
                  cash used in investing activities
              
              
              (88,148
              )
              
              (67,616
              )Net
                  cash provided by (used in) financing activities
              
              
              39,848
              
              
              (2,410
              )Net
                  (decrease) increase in cash and cash equivalents
              
              $
              (23,508
              )
              $
              15,384





We
      require capital principally for the development of new restaurants, remodeling
      older restaurants and investments in technology, and on occasion also use
      capital for acquisitions of franchisees and joint venture partners. We also
      require capital to pay dividends to common stockholders (refer to additional
      discussion in the Dividends section of Management’s Discussion and Analysis of
      Financial Condition and Results of Operations). We also utilize capital to
      repurchase our common stock as part of an ongoing share repurchase program.
      Capital expenditures totaled approximately $327,862,000 for the year ended
      December 31, 2005 and approximately $85,769,000 and $64,796,000 during the
      first
      three months of 2006 and 2005, respectively. We either lease our restaurants
      under operating leases for periods ranging from five to 30 years (including
      renewal periods) or build free-standing restaurants where it is cost
      effective.





If
      demand
      for our products and services were to decrease as a result of increased
      competition, changing consumer tastes, changes in local, regional, national
      and
      international economic conditions or changes in the level of consumer acceptance
      of our restaurant brands, our restaurant sales could decline significantly.
      The
      following table sets forth approximate amounts by which cash provided by
      operating activities may decline in the event of a decline in restaurant sales
      of 5%, 10% and 15% compared with total revenues for the year ended December
      31,
      2005 (in thousands, as restated):





**5%**
            
            **10%**
            
            **15%**Decrease
                in restaurant sales
            
            $
            (179,543
            )
            $
            (359,087
            )
            $
            (538,630
            )Decrease
                in cash provided by operating activities
            
            
            (33,844
            )
            
            (67,688
            )
            
            (101,532
            )





The
      estimates above are based on the assumption that cash provided by operating
      activities decreases approximately $0.19 for every $1.00 decrease in restaurant
      sales. These numbers are estimates only and do not consider other measures
      we
      could implement were such decreases in revenue to occur.


40
 Table
          of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Liquidity
      and Capital Resources (continued)**





On
      October 11, 2005 we executed a sale agreement for certain land in Las Vegas,
      Nevada where a Company-owned Outback Steakhouse is currently operated. Pursuant
      to the agreement if the sale proceeds after the inspection and title and survey
      contingency periods, we will receive $8,800,000 on the closing date of the
      sale,
      which will be on or before March 31, 2008, and will be provided space in a
      new
      development to operate an Outback Steakhouse. The purchaser will pay us an
      additional $5,000,000 if plans for the new restaurant are not agreed upon prior
      to the closing date.





On
      October 26, 2005, our Board of Directors approved up to $24,000,000 to be used
      for the purchase and development of 46 acres in Tampa, Florida. This purchase
      closed in December 2005. We
      intend to sell approximately 42 acres of this property and keep three sites
      for
      restaurant development.





In
      the
      first quarter of 2006, we implemented changes to our general manager partner
      program that are effective for all new general manager partner employment
      agreements signed after March 1, 2006. Additionally, all managing partners
      currently under contract were given an opportunity to elect participation in
      the
      new plan. Upon completion of each five-year term of employment, the managing
      partner will participate in a deferred compensation program in lieu of receiving
      stock options under the historical plan. We will require the use of capital
      to
      fund this new Partner Equity Plan as each general managing partner earns a
      contribution and currently estimate funding requirements ranging from
      $20,000,000 to $25,000,000 in each of the first two years of the plan. Future
      funding requirements could vary significantly depending on timing of managing
      partner contracts, forfeiture rates and numbers of partner participants and
      may
      differ materially from estimates.





On
      May 9,
      2006, we received $6,000,000 in escrow related to an Outback Steakhouse lease
      termination agreement, which was entered into in January 2005. In accordance
      with the terms of this agreement, we will vacate the premises currently occupied
      by a Company-owned Outback Steakhouse by June 8, 2006. We will record a gain
      upon disposal of this restaurant, which will be recorded when the cash is
      received by us, and we have fulfilled our obligations under the
      agreement.





CREDIT
      FACILITIES





Effective
      March 10, 2006, we amended an uncollateralized $150,000,000 revolving credit
      facility that was scheduled to mature in June 2007 with a new $225,000,000
      maximum borrowing amount and maturity date of June 2011. The amended line of
      credit permits borrowing at interest rates ranging from 45 to 65 basis points
      over the 30, 60, 90 or 180-day LIBOR (ranging from 4.83% to 5.11% at March
      31,
      2006). At March 31, 2006, the unused portion of the line of credit was
      $121,000,000.





The
      credit agreement contains certain restrictions and conditions as defined in
      the
      agreement that require us to maintain consolidated net worth equal to or greater
      than consolidated total debt and to maintain a ratio of total consolidated
      debt
      to EBITDAR (earnings before interest, taxes, depreciation, amortization and
      rent) equal to or less than 3.0 to 1.0. At March 31, 2006, we were in compliance
      with these debt covenants.





Effective
      March 10, 2006, we also amended a $30,000,000 line of
      credit that was scheduled to mature in June 2007 with a new $40,000,000 maximum
      borrowing amount and maturity date of June 2011. The amended line permits
      borrowing at interest rates ranging from 45 to 65 basis points over LIBOR for
      loan draws and 55 to 80 basis points over LIBOR for letter of credit advances.
      The credit agreement contains certain restrictions and conditions as defined
      in
      the agreement. At March 31, 2006, the outstanding balance on the line of credit
      was $14,000,000. There were no draws outstanding on this line of credit as
      of
      December 31, 2005. At March 31, 2006 and December 31, 2005, $25,072,000 and
      $20,072,000, respectively, of the line of credit was committed for the issuance
      of letters of credit as required by insurance companies that underwrite our
      workers’ compensation insurance and also, where required, for construction of
      new restaurants.


41
 Table
          of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Liquidity
      and Capital Resources (continued)**





CREDIT
      FACILITIES (continued)





As
      of
      March 31, 2006, we had approximately $7,739,000 of notes payable at interest
      rates ranging from 2.07% to 7.00%. These notes have been primarily issued for
      buyouts of general manager interests in the cash flows of their restaurants
      and
      generally are payable over five years.





We
      have
      notes payable with banks bearing interest at rates ranging from 4.95% to 6.12%
      and from 4.95% to 6.06% at March 31, 2006 and December 31, 2005, respectively,
      to finance development of our restaurants in South Korea. The notes are
      denominated and payable in Korean won, with outstanding balances as of March
      31,
      2006 maturing at dates ranging from May 2006 to February 2007. As of March
      31,
      2006 and December 31, 2005, the outstanding balance was approximately
      $48,937,000 and $46,670,000, respectively. Certain of the notes payable are
      collateralized by lease and other deposits. At March 31, 2006 and December
      31,
      2005, collateralized notes totaled approximately $38,433,000 and $34,326,000,
      respectively. We have been pre-approved by these banks for additional borrowings
      of approximately $5,061,000 and $4,826,000 at March 31, 2006 and December 31,
      2005, respectively.





We
      have
      notes payable with banks to finance the development of our restaurants in Japan
      (“Outback Japan”). The notes are payable to banks, collateralized by letters of
      credit and lease deposits of approximately $3,100,000 at March 31, 2006 and
      December 31, 2005, and bear interest at rates ranging from 0.80% to 0.86% and
      at
      0.86% at March 31, 2006 and December 31, 2005, respectively. The notes are
      denominated and payable in Japanese yen, with outstanding balances as of March
      31, 2006 maturing in September 2006. As of March 31, 2006 and December 31,
      2005,
      outstanding balances totaled approximately $5,512,000 and $5,085,000,
      respectively.





In
      October 2003, Outback Japan established a revolving line of credit to finance
      the development of new restaurants in Japan and refinance certain notes payable.
      The line permits borrowing up to a maximu m
      of
      $10,000,000. Effective March 10, 2006, this revolving credit facility that
      was
      scheduled to mature in June 2007 was amended with a new maturity date in June
      2011. The amended line of credit permits borrowing at interest rates ranging
      from 45 to 65 basis points over LIBOR. As of March 31, 2006 and December 31,
      2005, Outback Japan had borrowed approximately $9,121,000 and $9,043,000,
      respectively, on th e
      line of
      credit at an average interest rate of 0.71%, with draws as of March 31, 2006
      maturing from June 2006 to August 2006. The revolving line of credit contains
      certain restrictions and conditions as defined in the agreement. As of March
      31,
      2006, we were in compliance with all of the debt covenants.





In
      February 2004, Outback Japan established an additional revolving line of credit
      to finance the development of new restaurants in Japan and to refinance certain
      notes payable. The line permits borrowing up to a maximum of $10,000,000 with
      interest of LIBOR divided by a percentage equal to 1.00 minus the Eurocurrency
      Reserve Percentage. The line matures in December 2006. As of March 31, 2006
      and
      December 31, 2005, Outback Japan had borrowed approximately $5,085,000 and
      $5,593,000, respectively, on the line of credit at an average interest rate
      of
      0.77%, with draws as of March 31, 2006 maturing in May 2006. The revolving
      line
      of credit contains certain restrictions and conditions as defined in the
      agreement. As of March 31, 2006, we were in compliance with all of the debt
      covenants.





In
      August
      2005, we entered into a sale-leaseback arrangement for five of our properties.
      Pursuant to this arrangement, we sold these properties for a total of
      $6,250,000, including $1,250,000 for tenant improvements. We then leased the
      sites back for a 30-year term and will make lease payments on the first day
      of
      each calendar month. Since this transaction does not qualify for sale-leaseback
      accounting treatment, we have recorded the proceeds in our Unaudited
      Consolidated Balance Sheets as long-term debt.


42
 Table
          of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Liquidity
      and Capital Resources (continued)**





CREDIT
      FACILITIES (continued)





We
      are
      the guarantor of an uncollateralized line of credit that permits borrowing
      of up
      to $35,000,000 for a limited liability company, T-Bird Nevada, LLC (“T-Bird”),
      owned by a California franchisee. This line of credit bears interest at rates
      ranging from 50 to 90 basis points over LIBOR and matures in December 2008.
      We
      were required to consolidate T-Bird effective January 1, 2004 upon adoption
      of
      FIN 46R. At March 31, 2006 and December 31, 2005, the outstanding balance on
      the
      line of credit was approximately $31,283,000, and is included in our Unaudited
      Consolidated Balance Sheets as long-term debt.  T-Bird
      uses proceeds from the line of credit for the purchase of real estate and
      construction of buildings to be operated as Outback Steakhouse restaurants
      and
      leased to our franchisees. According to the terms of the line of credit, T-Bird
      may borrow, repay, re-borrow or prepay advances at any time before the
      termination date of the agreement.




If
      a
      default under the line of credit were to occur requiring us to perform under
      the
      guarantee obligation, we have the right to call into default all of our
      franchise agreements in California and exercise any rights and remedies under
      those agreements as well as the right to recourse under loans T-Bird has made
      to
      individual corporations in California which own the land and/or building that
      is
      leased to those franchise locations. Events of default are defined in the line
      of credit agreement and include our covenant commitments under existing lines
      of
      credit. We are not the primary obligor on the line of credit and we are not
      aware of any non-compliance with the underlying terms of the line of credit
      agreement that would result in us having to perform in accordance with the
      terms
      of the guarantee.





We
      expect
      that our capital requirements through the end of 2006 will be met by cash flows
      from operations and, to the extent needed, advances on our lines of
      credit.





Our
      primary source of credit is our uncollateralized revolving line of credit that
      permits borrowing up to $225,000,000. Based upon provisions of the line of
      credit agreement and operating data and outstanding borrowings as of and through
      March 31, 2006, the margin over LIBOR rates charged to us on future amounts
      drawn under the line will increase by 0.125% unless: (i) outstanding debt
      balances decrease by more than $26,600,000; or (ii) earnings before interest,
      taxes, depreciation, amortization and rent increase more than 3.0%. Furthermore,
      the margin over LIBOR rates charged to us on future amounts drawn under the
      line
      would increase by an additional 0.125% if: (i) outstanding debt balances
      increased by more than $198,700,000; or (ii) earnings before interest, taxes,
      depreciation, amortization and rent decreased more than 17.6%. In addition,
      based upon provisions of the line of credit agreement, availability of funds
      under the uncollateralized revolving line of credit would not be affected
      unless: (i) outstanding debt balances increased by more than $260,100,000;
      (ii)
      earnings before interest, taxes, depreciation, amortization and rent decreased
      more than 31.4%; or (iii) our net worth decreased approximately
      21.9%.


43
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          of Contents


**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Liquidity
      and Capital Resources (continued)**





DEBT
      GUARANTEES





We
      are
      the guarantor of an uncollateralized line of credit that permits borrowing
      of up
      to a maximum of $24,500,000 for our joint venture partner, RY-8, Inc. (“RY-8”),
      in the development of Roy's restaurants. The line of credit originally expired
      in December 2004 and was renewed twice with a new termination date in June
      2011.
      According to the terms of the credit agreement, RY-8 may borrow, repay,
      re-borrow or prepay advances at any time before the termination date of the
      agreement. On the termination date of the agreement, the entire outstanding
      principal amount of the loan then outstanding and any accrued interest is due.
      At March 31, 2006, the outstanding balance on the line of credit was
      approximately $23,233,000.





RY-8’s
      obligations under the line of credit are unconditionally guaranteed by us and
      Roy’s Holdings, Inc. (“RHI”). If an event of default occurs (as defined in the
      agreement, and including our covenant commitments under existing lines of
      credit), then the total outstanding balance, including any accrued interest,
      is
      immediately due from the guarantors.





If
      an
      event of default occurs and RY-8 is unable to pay the outstanding balance owed,
      we would, as guarantor, be liable for this balance. However, in conjunction
      with
      the credit agreement, RY-8 and RHI have entered into an Indemnity Agreement
      and
      a Pledge of Interest and Security Agreement in favor of OSI Restaurant Partners,
      Inc. These agreements provide that if we are required to perform our obligation
      as guarantor pursuant to the credit agreement, then RY-8 and RHI will indemnify
      us against all losses, claims, damages or liabilities which arise out of or
      are
      based upon our guarantee of the credit agreement. RY-8’s and RHI’s obligations
      under these agreements are collateralized by a first priority lien upon and
      a
      continuing security interest in any and all of RY-8’s interests in the joint
      venture.





We
      are
      the guarantor of up to $9,445,000 of a $68,000,000 note for an unconsolidated
      affiliate, Kentucky Speedway, in which we have a 22.5% equity interest and
      for
      which we operate catering and concession facilities. Our investment is included
      in the line item entitled “Investments In and Advances to Unconsolidated
      Affiliates, Net” in our Unaudited Consolidated Balance Sheets.  At
      March
      31, 2006, the outstanding balance on the note and our guarantee on the note
      were
      approximately $63,300,000 and $9,445,000, respectively. Since the
      existing note has a put feature that allows the lender to require full payment
      of the note as of or after December 31, 2005, we could be responsible for our
      guarantee at any time if Kentucky speedway is unable to make its payment on
      the
      note.  This
      affiliate has not yet reached its operating break-even point. Accordingly,
      we
      have made five
      a dditional
      working capital contributions and a loan to this affiliate, in payments totaling $3,636,000 since
      2001. Of this amount, nothing was loaned or contributed during the first quarter
      of 2006 and $1,392,000 was loaned in 2005. In addition, based on current
      operating performance, we anticipate making additional contributions in 2006
      of
      approximately $1,500,000 to $2,000,000. This affiliate is expected to incur
      further operating losses at least through 2006.





We
      are
      not aware of any non-compliance with the underlying terms of the borrowing
      agreements for which we provide a guarantee that would result in us having
      to
      perform in accordance with the terms of the guarantee.


44
 Table
            of Contents




**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**





**Liquidity
      and Capital Resources (continued)**





SHARE
      REPURCHASE





On
      July
      26, 2000, our Board of Directors authorized the repurchase of up to 4,000,000
      shares of our common stock, with the timing, price, quantity and manner of
      the
      purchases to be made at the discretion of management, depending upon market
      conditions. In addition, the Board of Directors authorized the repurchase of
      shares on a regular basis to offset shares issued as a result of stock option
      exercises. On July 23, 2003, our Board of Directors extended both the repurchase
      authorization for an additional 2,500,000 shares of our common stock, and the
      authorization to offset shares issued as a result of stock option exercises.
      We
      will fund the repurchase program with available cash and bank credit facilities.
      On February 13, 2006, our Board of Directors authorized the repurchase of an
      additional 1,500,000 shares and authorized the continued repurchase of shares
      on
      a regular basis to offset shares issued as a result of stock option exercises
      and as restricted shares vest and become dilutive. During the period from the
      authorization date through March 31, 2006, approximately 9,384,000 shares of
      our
      common stock have been issued as the result of stock option exercises. As of
      March 31, 2006, under these authorizations we have repurchased approximately
      14,260,000 shares of our common stock for approximately $504,197,000.





DIVIDENDS





Our
      Board
      of Directors authorized the following dividends during 2005 and
      2006:




Declaration
              
              Record
              
              Payable
              
              
              Amount
                  per ShareDate
              
              Date
              
              Date
              
              
              of
                  Common StockJanuary
                  26, 2005
              
              February
                  18, 2005
              
              March
                  4, 2005
              
              
              $
              0.13April
                  27, 2005
              
              May
                  20, 2005
              
              June
                  3, 2005
              
              
              
              0.13July
                  27, 2005
              
              August
                  19, 2005
              
              September
                  2, 2005
              
              
              
              0.13October
                  26, 2005
              
              November
                  18, 2005
              
              December
                  2, 2005
              
              
              
              0.13January
                  24, 2006
              
              February
                  17, 2006
              
              March
                  3, 2006
              
              
              
              0.13April
                  25, 2006
              
              May
                  19, 2006
              
              June
                  2, 2006
              
              
              
              0.13
 
 At
      the
      current dividend rate, the annual dividend payment is expected to be
      between $38,000,000 and $42,000,000 depending
      on the shares outstanding during the respective quarters. We intend to pay
      dividends with cash flow from operations.


45
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          of Contents




**MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF**


**FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS**




**Cautionary
      Statement**





As
      noted
      above, our actual results could differ materially from those stated or implied
      in the forward-looking statements included in the discussion of future operating
      results and expansion strategy and elsewhere in this report as a result, among
      other things, of the following:





(i)
            
            The
                restaurant industry is a highly competitive industry with many
                well-established competitors;(ii)
            
            Our
                results can be impacted by changes in consumer tastes and the level
                of
                consumer acceptance of our restaurant concepts (including consumer
                tolerance of price increases); local, regional, national and international
                economic conditions; the seasonality of our business; demographic
                trends;
                traffic patterns; change in consumer dietary habits; employee
                availability; the cost of advertising and media; government actions
                and
                policies; inflation; and increases in various costs, including
                construction and real estate costs;(iii)
            
            Our
                results can be affected by consumer perception of food
                safety;(iv)
            
            Our
                ability to expand is dependent upon various factors such as the
                availability of attractive sites for new restaurants; ability to
                obtain
                appropriate real estate sites at acceptable prices; ability to obtain
                all
                required governmental permits including zoning approvals and liquor
                licenses on a timely basis; impact of government moratoriums or approval
                processes, which could result in significant delays; ability to obtain
                all
                necessary contractors and subcontractors; union activities such as
                picketing and hand billing that could delay construction; the ability
                to
                generate or borrow funds; the ability to negotiate suitable lease
                terms;
                the ability to recruit and train skilled management and restaurant
                employees; and the ability to receive the premises from the landlord’s
                developer without any delays;(v)
            
            Price
                and availability of commodities, including but not limited to, such
                items
                as beef, chicken, shrimp, pork, seafood, dairy, potatoes, onions
                and
                energy supplies, which are subject to fluctuation and could increase
                or
                decrease more than we expect; and/or(vi)
            
            Weather
                and acts of God could result in construction delays and also adversely
                affect the results of one or more restaurants for an indeterminate
                amount
                of time.


46
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            of Contents
  **OSI
      RestaurantPartners, Inc.**


**QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





**Item
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





We
      are
      exposed to market risk from changes in interest rates on debt, changes in
      foreign currency exchange rates and changes in commodity prices.





Our
      exposure to interest rate fluctuations is limited to our outstanding bank debt.
      At March 31, 2006, outstanding borrowings under our revolving lines of credit
      bear interest at 45 to 65 basis points over the 30, 60, 90 or 180-day London
      Interbank Offered Rate. The weighted average effective interest rate on the
      $118,000,000 outstanding balance under these lines at March 31, 2006 was 5.44%.
      At March 31, 2006, outstanding borrowings under our Japanese lines of credit
      bear interest at either 45 to 65 basis points over LIBOR or LIBOR divided by
      a
      percentage equal to 1.00 minus the Eurocurrency Reserve Percentage. The weighted
      average effective interest rate on the approximately $14,206,000 outstanding
      balance at March 31, 2006 was 0.73%. Notes payable of approximately $5,512,000
      to Japanese banks bear interest at rates ranging from 0.80% to 0.86%. Notes
      payable of approximately $48,937,000 to South Korean banks bear interest at
      rates ranging from 4.95% to 6.12% at March 31, 2006.





At
      March
      31, 2006 and December 31, 2005, our total debt, including consolidated
      guaranteed debt, was approximately $231,927,000 and $185,348,000, respectively.
      Should interest rates based on our average borrowings of approximately
      $208,600,000 through March 31, 2006 increase by one percentage point, our
      estimated annual interest expense would increase by approximately $2,086,000
      over amounts reported for the year ended December 31, 2005.





Our
      exposure to foreign currency exchange fluctuations relates primarily to our
      direct investment in restaurants in South Korea, Hong Kong, Japan, the
      Philippines and Brazil, our outstanding debt to Japanese and South Korean banks
      of approximately $19,718,000 and $48,937,000, respectively, at March 31, 2006
      and to our royalties from international franchisees. We do not use financial
      instruments to hedge foreign currency exchange rate changes. Our investments
      in
      these countries totaled approximately $35,877,000 and $24,802,000 as of March
      31, 2006 and December 31, 2005, respectively.





Many
      of
      the ingredients used in the products sold in our restaurants are commodities
      that are subject to unpredictable price volatility.  Although we attempt 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 we are 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 related agreements
      may contain contractual features that limit the price paid by establishing
      certain price floors and caps. We do not use financial instruments to hedge
      commodity prices because these purchase arrangements help control the ultimate
      cost paid.  Extreme changes in commodity prices and/or long-term changes
      could affect our financial results adversely, although any changes in commodity
      prices would affect our competitors at about the same time as us.  We
      expect that in most cases increased commodity prices could be passed through
      to
      our consumers via increases in menu prices.  However, if there is a time
      lag between the increasing commodity prices and our ability to increase menu
      prices or, if we believe the commodity price increase to be short in duration
      and we choose not to pass on the cost increases, our short-term financial
      results could be negatively affected. Additionally, from time to time,
      competitive circumstances could limit menu price flexibility, and in those
      cases
      margins would be negatively impacted by increased commodity prices.





In
      addition to the market risks identified above and to the risks discussed in
      “Management’s Discussion and Analysis of Financial Condition and Results of
      Operations,” we are subject to business risk as our beef supply is highly
      dependent upon five vendors. We currently purchase approximately 65% of our
      beef
      from two beef suppliers. If these vendors were unable to fulfill their
      obligations under their contracts, we would encounter supply shortages and
      incur
      higher costs to secure adequate supplies.





This
      market risk discussion contains forward-looking statements. Actual results
      may
      differ materially from the discussion based upon general market conditions
      and
      changes in domestic and global financial markets.


47
 Table
          of Contents


**OSI
      RestaurantPartners, Inc.**


**CONTROLS
      AND PROCEDURES**





**Item
      4. CONTROLS AND PROCEDURES**





In
      October 2006, we identified errors in our accounting for unearned revenue for
      unredeemed gift cards and certificates. Upon completion of the review of
      accounting policies for gift cards and certificates as well as a review of
      certain other balance sheet accounts, we have restated our consolidated
      financial statements for certain prior periods to correct these and other
      errors, as described in this section.





*Unearned
      revenue and revenue recognition*


Unearned
      revenue represents our liability for gift cards and certificates that have
      been
      sold but not yet redeemed.  Historically, we recognized revenue for
      estimates of gift cards and certificates that will not be redeemed (“breakage”)
      at the time of the sale of the gift cards and certificates.  We have
      determined that the methodology we used to arrive at breakage was inappropriate
      and resulted in understatement of the liability for gift cards and certificates.
      We have also determined that revenue should not be recognized at the time of
      sale of the gift cards and certificates. Accordingly, we have revised our policy
      to recognize breakage for those gift cards and certificates that will never
      be
      redeemed at the time at which their redemption becomes remote. Furthermore,
      certain expenses associated with gift card and certificate promotions were
      incorrectly netted against breakage income rather than reflected as expenses
      in
      our financial statements. Correction of these errors in our consolidated
      financial statements resulted in an increase in unearned revenue of $65,202,000
      and $60,337,000 as of March 31, 2006 and December 31, 2005, respectively, an
      increase in net income of $75,000 for the three months ended March 31, 2006
      and
      a decrease in net income of $323,000 for the three months ended March 31, 2005.
      It also resulted in a $37,548,000 decrease in retained earnings as of December
      31, 2004.





*Minority
      interests in consolidated entities*


We
      have
      identified errors in the recorded amount of our minority interests in certain
      of
      our Carrabba’s Italian Grill subsidiaries, which were understated as a result of
      our incorrectly recording the entries relating to the correction in accounting
      for managing partners' interests in their stores from investment accounting
      to
      compensation accounting in 2003.  Additionally, we determined that in
      connection with our 2002 purchase of the 20% interest in Outback Steakhouse
      International, LP, the value of 28,570 shares that were payable upon meeting
      certain conditions should have been recorded at the acquisition date in 2002
      rather than upon their issuance in 2006.  Correction of these errors in our
      consolidated financial statements resulted in an increase in goodwill of
      $1,309,000 as of March 31, 2006 and December 31, 2005, decreases in minority
      interests in consolidated entities of $3,225,000 and $1,314,000 as of March
      31,
      2006 and December 31, 2005, respectively, and decreases in elimination of
      minority interest of $11,000 and $30,000 for the three months ended March 31,
      2006 and 2005, respectively. It also resulted in an $119,000 increase in
      retained earnings as of December 31, 2004.





*Deferred
      rent and property, fixtures and equipment*


We
      identified errors in our straight-line lease calculations for certain properties
      where we received tenant improvement contributions from a landlord or where
      we
      determined that we were depreciating certain assets over lives different than
      the associated lease term.  Correction of these errors in our consolidated
      financial statements resulted in increases to deferred rent of $6,615,000 and
      $6,303,000 and decreases to property, fixtures and equipment of $2,055,000
      and
      $1,905,000 as of March 31, 2006 and December 31, 2005, respectively, and
      decreases to net income of $260,000 and $284,000 for the three months ended
      March 31, 2006 and 2005, respectively. It
      also
      resulted in a $3,862,000 decrease in retained earnings as of December 31,
      2004.





*Other
      adjustments*


We have
      increased additional paid-in capital and decreased retained earnings as of
      December 31, 2002 by $2,333,000 to correct an error in equity classification
      that arose prior to 2000, relating to acquisitions recorded as
      pooling-of-interest transactions.





We
      have
      decreased treasury stock and decreased additional paid-in capital as of March
      31, 2006 by $40,858,000 to correct an error in the elimination of the unearned
      compensation balance related to unvested restricted stock awards required by
      the
      adoption of SFAS No. 123R. Under previous guidance, this was accounted for
      as
      unearned compensation and, under SFAS No. 123R, should be treated as a reduction
      of additional paid-in capital.


48
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**CONTROLS
      AND PROCEDURES**





**Item
      4. CONTROLS AND PROCEDURES (continued)**





Our
      Korean subsidiary receives payments from certain consumer product and service
      companies in connection with promotions under which we have agreed to provide
      discounts to their customers.  We have historically netted such monies
      received against cost of sales and other restaurant operating expenses.  We
      have determined that these amounts should be recorded as revenue with an equal
      offsetting amount in cost of sales and other restaurant operating
      expenses.  Correction of these errors in our consolidated financial
      statements increased restaurant sales by $2,105,000 and $3,752,000 for the
      three
      months ended March 31, 2006 and 2005, respectively, and were offset by changes
      in cost of sales and other restaurant operating expense with no effect on income
      from operations or net income.


As
      described in Note 1 to the Unaudited Notes to Consolidated Financial Statements
      in Item 1 of this Form 10-Q/A, the adjustments noted above impacted various
      items in our Unaudited Consolidated Statements of Cash Flows for the three
      months ended March 31, 2006 by increasing net cash provided by operating
      activities by $1,900,000 and decreasing net cash used in financing activities
      by
      $1,900,000 and for the three months ended March 31, 2005 by increasing net
      cash
      provided by operating activities by $447,000, increasing net cash used in
      investing activities by $492,000 and decreasing net cash used in financing
      activities by $45,000.


**Evaluation
      of Disclosure Controls and Procedures**





Under
      the
      supervision and with the participation of the Company’s management, including our
      Chief
      Executive Officer (“CEO”) and Chief
      Financial Officer (“CFO”), the Company conducted an evaluation of the
      effectiveness of its disclosure controls and procedures (as such term is defined
      in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934,
      as
      amended (the “Exchange Act”), as of March 31, 2006. At the time that our
      Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2006
      was
      filed on May 10, 2006, our CEO and CFO concluded that our disclosure controls
      and procedures were effective as of March 31, 2006. Subsequent to that
      evaluation, our CEO and CFO, concluded that, as a result of the material
      weakness discussed below, the Company’s disclosure controls and procedures were
      not effective as of March 31, 2006. The Company’s disclosure controls and
      procedures are designed to ensure that information required to be disclosed
      by
      us in the reports we file under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the SEC’s rules and
      forms and that such information is accumulated and communicated to management,
      including the CEO and CFO, to allow timely decisions regarding required
      disclosure.  Notwithstanding
      the existence of the material weakness, management has concluded that the
      financial statements included in this quarterly report fairly present in all
      material respects our financial condition, results of operations and cash flows
      for the periods presented.





In
      connection with the issuance of our 2005 Form 10-K/A for the year ended December
      31, 2005, management assessed the effectiveness of our disclosure controls
      and
      procedures and internal control over financial reporting as of December 31,
      2005
      as more fully described in Item 9A of our Form 10-K/A. Based on that assessment,
      management identified a material weakness in our internal controls. The
      Company did not maintain effective controls over the completeness and accuracy
      of unearned revenue. Specifically, the Company did not have controls designed
      and in place to ensure that the Company's obligations related to gift cards
      and
      certificates as presented in the financial statements were reconciled to the
      underlying detail of gift cards and certificates outstanding and that revenue
      was recognized in accordance with generally accepted accounting principles.
      This
      control deficiency resulted in the restatement of the Company's consolidated
      financial statements as of December 31, 2005 and 2004 and for the years ended
      December 31, 2005, 2004 and 2003, all quarters in 2005 and 2004 and the first
      and second quarters of 2006. In
      addition, this control deficiency could result in a material misstatement to
      unearned revenue for gift cards and certificates, revenue and related
      expenses  that
      would result in a material misstatement to the Company's annual or interim
      consolidated financial statements that would not be prevented or detected.
      Accordingly, management determined that this control deficiency constitutes
      a
      material weakness. As
      described in our 2005 Form 10-K/A, we made significant changes in our internal
      control over financial reporting, and we continue to spend a significant amount
      of time and effort to improve our control environment. Although the actions
      described below that we have taken significantly improved our internal control
      environment, we are currently assessing and testing the internal control
      initiatives implemented to determine whether they are operating as intended.
      As
      a result, they were not considered fully effective in remediating the material
      weakness as of March 31, 2006.  49
 Table
            of Contents


**OSI
      Restaurant Partners, Inc.**


**CONTROLS
      AND PROCEDURES**





**Item
      4. CONTROLS AND PROCEDURES (continued)**





**Management
      Consideration of Restatement**





As
      discussed in Note 1 of the Notes to the Unaudited Consolidated Financial
      Statements included in this Report on Form 10-Q/A, we restated our consolidated
      financial statements as of December 31, 2005 and 2004 and for the years ended
      December 31, 2005, 2004 and 2003, all quarters in 2005 and 2004
      and the
      first and second quarters of 2006 for
      matters other than the unearned revenue described above. The other restatement
      items are, in part, the result of a number of control deficiencies relating
      to
      accounting for minority interest in consolidated entities, additional
      paid-in-capital, deferred rent, lease expense, fixed assets and depreciation
      expense.





Management
      has concluded that the other control deficiencies included in the restatement
      of
      the previously issued financial statements relating to the accounts referenced
      in the previous paragraph, either individually or in the aggregate, did not
      rise
      to the level of a material weakness as of March 31, 2006. Management's
      evaluation of these control deficiencies was based on a thorough assessment
      of
      the related quantitative impact of these deficiencies on these restated
      financial statements and an appropriate consideration of qualitative factors,
      including appropriate consideration of controls designed and in place to prevent
      or detect a material misstatement.





**Changes
      in Internal Control over Financial Reporting and Remediation of Material
      Weakness in Internal Control over Financial Reporting**





At
      the
      direction of our board of directors and audit committee, management has
      commenced a plan to remediate the material weakness described above. The
      remediation initiatives developed by management were both organizational and
      process focused.





During
      the fourth quarter of 2006 and in connection with preparing our quarterly report
      on Form 10-Q for the quarter ended September 30, 2006, the Company implemented
      the following measures to address the material weakness described
      above:





**·**
            Created
                a new position of Vice President, Corporate Controller, to lead process
                and organizational change required to improve substantiation of more
                complex and/or estimate-based accounting, including accounting for
                gift
                cards and certificates and related
                revenue.





·
            Developed
                and implemented a consistent accounting policy for gift card and
                certificate accounting across all Company concepts in accordance
                with
                generally accepted accounting
                principles.





·
            Implemented
                procedures to perform monthly reconciliations of the Company’s unearned
                revenue balance to detailed support for gift cards and certificates
                outstanding, and gift card and certificate sales and redemptions.





·
            Established
                a process for expensing gift card incentive programs as
                incurred.


50
 Table
          of Contents


**OSI
      Restaurant Partners, Inc.**


**CONTROLS
      AND PROCEDURES**





**Item
      4. CONTROLS AND PROCEDURES (continued)**





**Changes
      in Internal Control over Financial Reporting and Remediation of Material
      Weakness in Internal Control over Financial Reporting
      (continued)**





The
      Company is in the process of implementing the following additional measures
      to
      address the material weakness described above:





·
            Acquiring
                additional resources to create a centralized accounting team that
                will be
                responsible for gift card and certificate
                accounting.





·
            Establishing
                policies to ensure appropriate communication regarding operating
                changes
                affecting accounting and control
                design.





·
            Developing
                a process for tracking and recording gift card discounts or expense
                as
                issued.





Except
      as
      described above, there were no changes in our internal control over financial
      reporting that occurred during the most recent fiscal quarter that have
      materially affected, or are reasonably likely to materially affect, our internal
      control over financial reporting.


51
 Table
            of Contents




**OSI
      RestaurantPartners, Inc.**


**PART
      II: OTHER INFORMATION**





**Item
      1. Legal Proceedings**





We
      are
      subject to legal proceedings, claims and liabilities, such as liquor liability,
      sexual harassment and slip and fall cases, etc., which arise in the ordinary
      course of business and are generally covered by insurance. In the opinion of
      management, the amount of the ultimate liability with respect to those actions
      will not have a materially adverse impact on our financial position or results
      of operations and cash flows.





We
      filed
      a report on Form 8-K with the Securities and Exchange Commission dated June
      27,
      2003 regarding the jury verdict in a civil suit against us. On June 26, 2003,
      in
      a civil case against us in the Delaware Circuit Court, County of Delaware,
      State
      of Indiana, titled *David
      D. Markley and Lisa K. Markley, Plaintiffs, vs. Outback Steakhouse of Florida,
      Inc., et. al, Defendants* ,
      alleging liability under the “dramshop” liquor liability statute, a jury
      returned a verdict in favor of the two plaintiffs who were injured by a drunk
      driver. The portion of the verdict against us was $39,000,000. We appealed
      the
      verdict to the Indiana Court of Appeals.  On July 25, 2005, the Court of
      Appeals affirmed the verdict of the trial courts.  We petitioned the Court
      of Appeals for rehearing and rehearing was denied. We filed a petition for
      transfer with the Indiana Supreme Court. On February 21, 2006, the Indiana
      Supreme Court granted transfer. That ruling means the Supreme Court has vacated
      the Court of Appeals’ decision and has accepted the case for review. As of the
      date of this filing, the Indiana Supreme Court has
      heard
      oral argument on the case, but has not ren dered
      any
      decision on the merits of the case nor indicated when or how it might
      rule.





We
      have
      insurance coverage related to this case provided by our primary carrier for
      $21,000,000 and by an excess in surance
      carrier for the balance of the verdict of approximately $19,000,000. The excess
      insurance carrier, Fireman’s Fund Insurance Company, has filed a declaratory
      judgment suit in the U.S. District Court, Southern District of Indiana claiming
      it was not notified of the case and is therefore not liable for its portion
      of
      the verdict. We do not believe the excess carrier’s case has any merit and we
      are vigorously defending this case. Activity in this case has been held in
      abeyance pending resolution of appeals in the Markley case. We have filed
      counter-claims against the excess carrier and cross-claims against the primary
      carrier and our third-party administrator. Our third-party administrator,
      Wachovia Insurance Services, Inc., has executed an indemnification agreement
      indemnifying us against any liability resulting from the alleged failure to
      give
      notice to Fireman’s Fund Insurance Company.


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**OSI
      RestaurantPartners, Inc.**


**PART
      II: OTHER INFORMATION**





**Item
      1A. Risk Factors**





In
      addition to the other information discussed in this report, please consider
      the
      factors described in Part I, Item 1A., “Risk Factors” in our 2005 10-K/A which
      could materially affect our business, financial condition or future results.
      There have not been any significant changes with respect to the risks described
      in our 2005 10-K/A, but these are not the only risks facing our Company.
      Additional risks and uncertainties not currently known to us or that we
      currently deem to be immaterial also may adversely affect our business,
      financial condition or operating results.





**Item
      2. UnregisteredSales of Equity Securities and Use of
      Proceeds**





(a)
      Following is information relating to the shares of common stock issued by us
      in
      transactions not registered under the Securities Act of 1933:





During
      the quarter ended March 31, 2006, we issued approximately 28,570 shares of
      our
      common stock at $37.26 per share to a 20% minority partner in our Outback
      Steakhouse International subsidiary in resolution of a contingent buyout from
      2002. The aggregate value of shares issued was approximately
      $1,065,000.





During
      the quarter ended March 31, 2006, we issued approximately 67,400 shares of
      our
      common stock at $40.82 per share to ten of our area operating partners for
      their
      interests in nine Outback Steakhouses, one Carrabba’s Italian Grill, two
      Fleming’s Prime Steakhouse and Wine Bars and two Roy’s. The aggregate value of
      shares issued was approximately $2,751,000.





These
      issuances of securities were exempt from the registration requirements of
      the Securities Act of 1933 in reliance on Section 4(2) of the Securities Act
      as
      transactions by an issuer not involving a public offering.




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**OSI
        Restaurant Partners, Inc.** ****
 **PART
        II: OTHER INFORMATION**
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of Proceeds
        (continued)**




(c)
      Issuer Purchases of Equity Securities





The
      following table includes information with respect to purchases of our common
      stock made by us during the quarter ended March 31, 2006:




**Period**
            
            **(a)
                Total number of shares purchased (1)**
            
            **(b)
                Average price paid per share**
            
            **(c)
                Total number of shares purchased as part of publicly announced programs
                (1)**
            
            **(d)
                Maximum number of shares that may yet be purchased under the programs
                (2)**January
                1, 2006 - January 31, 2006
            
            
            64,000
            
            $
            43.58
            
            
            64,000
            
            
            1,319,000February
                1, 2006 - February 28, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            2,966,000March
                1, 2006 - March 31, 2006
            
            
            200,000
            
            
            43.93
            
            
            200,000
            
            
            3,124,000Total
            
            
            264,000
            
            
            
            
            
            264,000
            
            
            3,124,000





____________


(1)
            No
                shares were repurchased other than through our publicly announced
                repurchase programs and authorizations during the first quarter ended
                March 31, 2006.


(2)
            On
                July 26, 2000, our Board of Directors authorized the repurchase of
                up to
                4,000,000 shares of our common stock, with the timing, price, quantity
                and
                manner of the purchases to be made at the discretion of management,
                depending upon market conditions. In addition, the Board of Directors
                authorized the repurchase of shares on a regular basis to offset
                shares
                issued as a result of stock option exercises. On July 23, 2003, our
                Board
                of Directors extended both the repurchase authorization for an additional
                2,500,000 shares of our common stock, and the authorization to offset
                shares issued as a result of stock option exercises. On February
                13, 2006,
                our Board of Directors authorized the repurchase of an additional
                1,500,000 shares and authorized the continued repurchase of shares
                on a
                regular basis to offset shares issued as a result of stock option
                exercises and as restricted shares vest and become dilutive. During
                the
                period from the authorization date through March 31, 2006, approximately
                9,384,000 shares of our common stock have been issued as the result
                of
                stock option exercises. As of March 31, 2006, under these authorizations
                we have repurchased approximately 14,260,000 shares of our common
                stock
                for approximately $504,197,000.


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**OSI
      RestaurantPartners, Inc.**


**PART
      II: OTHER INFORMATION**





**Item
      6. Exhibits**





**Number**
            
            **Description**3.01
            
            Certificate
                of Amendment of Certificate of Incorporation of Outback Steakhouse,
                Inc.,
                April 25, 2006 (included as an exhibit to Registrant’s Quarterly Report on
                Form 10-Q for the quarter ended March 31, 2006 and incorporated herein
                by
                reference)10.01*
            
            Outback
                Steakhouse, Inc. Partner Equity Plan, Partner Equity Deferred Compensation
                Diversified Plan Document (included as an exhibit to Registrant’s
                Registration Statement on Form S-8, No. 333-132514, and incorporated
                herein by reference)10.02*
            
            Outback
                Steakhouse, Inc. Partner Equity Plan, Partner Equity Deferred Compensation
                Stock Plan Document (included as an exhibit to Registrant’s Registration
                Statement on Form S-8, No. 333-132514, and incorporated herein by
                reference)31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002132.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 20021





*
      Management contract or compensatory plan or arrangement required to be filed
      as
      an exhibit.





1 These
      certifications are not deemed to be “filed” for purposes of Section 18 of the
      Exchange Act, or otherwise subject to the liability of that section. These
      certifications will not be deemed to be incorporated by reference into any
      filing under the Securities Act or the Exchange Act, except to the extent that
      the registrant specifically incorporates them by reference.





The
      registrant hereby undertakes to furnish supplementally a copy of any omitted
      schedule or other attachment to the Securities and Exchange Commission upon
      request.


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  **SIGNATURE**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf of the undersigned thereunto
      duly authorized.











Date:
                January 17, 2007
            
            OSI
                RESTAURANT PARTNERS, INC.By:/s/
                Dirk A.
                MontgomeryDirk
                A. Montgomery
              Senior
                Vice President and Chief Financial Officer
              (Principal
                Financial and Accounting Officer)










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