UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | | | | | | | |
(Mark One) | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended September 26, 2021March 27, 2022 |
| 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: 001-35625
BLOOMIN’ BRANDS, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Delaware | | 20-8023465 |
(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) |
2202 North West Shore Boulevard, Suite 500, Tampa, FL 33607
(Address of principal executive offices) (Zip Code)
(813) 282-1225
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock | $0.01 par value | | BLMN | | The Nasdaq Stock Market LLC (Nasdaq Global Select Market) |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐
Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 1, 2021, 89,249,167April 28, 2022, 88,702,869 shares of common stock of the registrant were outstanding.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended September 26, 2021March 27, 2022
(Unaudited)
TABLE OF CONTENTS
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Item 1. | | |
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Item 2. | | |
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Item 3. | | |
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Item 4. | | |
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Item 1. | | |
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Item 1A. | | |
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Item 2. | | |
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Item 6. | | |
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA, UNAUDITED)
| | | | | | | | | | | |
| SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 |
ASSETS | | | |
Current assets | | | |
Cash and cash equivalents | $ | 76,337 | | | $ | 109,980 | |
Restricted cash and cash equivalents | 4,247 | | | 428 | |
Inventories | 72,433 | | | 61,928 | |
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Other current assets, net | 87,642 | | | 151,518 | |
Total current assets | 240,659 | | | 323,854 | |
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Property, fixtures and equipment, net | 852,105 | | | 887,687 | |
Operating lease right-of-use assets | 1,152,268 | | | 1,172,910 | |
Goodwill | 273,490 | | | 271,164 | |
Intangible assets, net | 456,058 | | | 459,983 | |
Deferred income tax assets, net | 161,903 | | | 153,883 | |
Other assets, net | 82,119 | | | 92,626 | |
Total assets | $ | 3,218,602 | | | $ | 3,362,107 | |
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| | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities | | | |
Accounts payable | $ | 157,410 | | | $ | 141,457 | |
Accrued and other current liabilities | 444,591 | | | 388,321 | |
Unearned revenue | 284,128 | | | 381,616 | |
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Current portion of long-term debt | 11,086 | | | 38,710 | |
Total current liabilities | 897,215 | | | 950,104 | |
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Non-current operating lease liabilities | 1,196,604 | | | 1,217,921 | |
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Long-term debt, net | 828,065 | | | 997,770 | |
Other long-term liabilities, net | 130,382 | | | 185,355 | |
Total liabilities | 3,052,266 | | | 3,351,150 | |
Commitments and contingencies (Note 19) | 0 | | 0 |
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Stockholders’ equity | | | |
Bloomin’ Brands stockholders’ equity | | | |
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of September 26, 2021 and December 27, 2020 | — | | | — | |
Common stock, $0.01 par value, 475,000,000 shares authorized; 89,248,056 and 87,855,571 shares issued and outstanding as of September 26, 2021 and December 27, 2020, respectively | 892 | | | 879 | |
Additional paid-in capital | 1,115,464 | | | 1,132,808 | |
Accumulated deficit | (758,870) | | | (918,096) | |
Accumulated other comprehensive loss | (197,670) | | | (211,446) | |
Total Bloomin’ Brands stockholders’ equity | 159,816 | | | 4,145 | |
Noncontrolling interests | 6,520 | | | 6,812 | |
Total stockholders’ equity | 166,336 | | | 10,957 | |
Total liabilities and stockholders’ equity | $ | 3,218,602 | | | $ | 3,362,107 | |
|
The accompanying notes are an integral part of these consolidated financial statements. |
| | | | | | | | | | | |
| MARCH 27, 2022 | | DECEMBER 26, 2021 |
ASSETS | | | |
Current assets | | | |
Cash and cash equivalents | $ | 97,795 | | | $ | 87,585 | |
Restricted cash and cash equivalents | 101 | | | 1,472 | |
Inventories | 68,803 | | | 79,112 | |
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Other current assets, net | 104,588 | | | 184,623 | |
Total current assets | 271,287 | | | 352,792 | |
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Property, fixtures and equipment, net | 841,120 | | | 842,012 | |
Operating lease right-of-use assets | 1,124,517 | | | 1,130,873 | |
Goodwill | 273,474 | | | 268,444 | |
Intangible assets, net | 453,048 | | | 453,412 | |
Deferred income tax assets, net | 162,743 | | | 168,068 | |
Other assets, net | 77,167 | | | 78,670 | |
Total assets | $ | 3,203,356 | | | $ | 3,294,271 | |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities | | | |
Accounts payable | $ | 172,709 | | | $ | 167,978 | |
Accrued and other current liabilities | 426,415 | | | 406,894 | |
Unearned revenue | 325,304 | | | 398,795 | |
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Current portion of long-term debt | 11,220 | | | 10,958 | |
Total current liabilities | 935,648 | | | 984,625 | |
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Non-current operating lease liabilities | 1,172,923 | | | 1,179,447 | |
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Long-term debt, net | 711,025 | | | 782,107 | |
Other long-term liabilities, net | 90,503 | | | 125,242 | |
Total liabilities | 2,910,099 | | | 3,071,421 | |
Commitments and contingencies (Note 14) | 0 | | 0 |
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Stockholders’ equity | | | |
Bloomin’ Brands stockholders’ equity | | | |
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of March 27, 2022 and December 26, 2021 | — | | | — | |
Common stock, $0.01 par value, 475,000,000 shares authorized; 89,185,040 and 89,252,823 shares issued and outstanding as of March 27, 2022 and December 26, 2021, respectively | 892 | | | 893 | |
Additional paid-in capital | 1,115,458 | | | 1,119,728 | |
Accumulated deficit | (634,356) | | | (698,171) | |
Accumulated other comprehensive loss | (190,431) | | | (205,989) | |
Total Bloomin’ Brands stockholders’ equity | 291,563 | | | 216,461 | |
Noncontrolling interests | 1,694 | | | 6,389 | |
Total stockholders’ equity | 293,257 | | | 222,850 | |
Total liabilities and stockholders’ equity | $ | 3,203,356 | | | $ | 3,294,271 | |
|
The accompanying notes are an integral part of these consolidated financial statements. |
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
| SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Revenues | | | | | | | |
Restaurant sales | $ | 996,718 | | | $ | 766,487 | | | $ | 3,031,396 | | | $ | 2,338,985 | |
Franchise and other revenues | 13,745 | | | 4,773 | | | 43,906 | | | 19,071 | |
Total revenues | 1,010,463 | | | 771,260 | | | 3,075,302 | | | 2,358,056 | |
Costs and expenses | | | | | | | |
Food and beverage costs | 304,300 | | | 230,547 | | | 908,272 | | | 730,998 | |
Labor and other related | 290,246 | | | 246,861 | | | 859,883 | | | 761,667 | |
Other restaurant operating | 299,788 | | | 207,301 | | | 762,531 | | | 631,702 | |
Depreciation and amortization | 40,827 | | | 43,417 | | | 122,592 | | | 137,469 | |
General and administrative | 58,880 | | | 57,443 | | | 182,590 | | | 197,732 | |
Provision for impaired assets and restaurant closings | 1,585 | | | (54) | | | 8,962 | | | 66,223 | |
Total costs and expenses | 995,626 | | | 785,515 | | | 2,844,830 | | | 2,525,791 | |
Income (loss) from operations | 14,837 | | | (14,255) | | | 230,472 | | | (167,735) | |
Loss on extinguishment and modification of debt | — | | | — | | | (2,073) | | | (237) | |
Other income (expense), net | 5 | | | 1 | | | 26 | | | (211) | |
Interest expense, net | (14,245) | | | (18,300) | | | (43,863) | | | (46,647) | |
Income (loss) before (benefit) provision for income taxes | 597 | | | (32,554) | | | 184,562 | | | (214,830) | |
(Benefit) provision for income taxes | (4,454) | | | (14,776) | | | 24,827 | | | (70,210) | |
Net income (loss) | 5,051 | | | (17,778) | | | 159,735 | | | (144,620) | |
Less: net income (loss) attributable to noncontrolling interests | 1,602 | | | (141) | | | 4,879 | | | (116) | |
Net income (loss) attributable to Bloomin’ Brands | 3,449 | | | (17,637) | | | 154,856 | | | (144,504) | |
Redemption of preferred stock in excess of carrying value | — | | | — | | | — | | | (3,496) | |
Net income (loss) attributable to common stockholders | $ | 3,449 | | | $ | (17,637) | | | $ | 154,856 | | | $ | (148,000) | |
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Net income (loss) | $ | 5,051 | | | $ | (17,778) | | | $ | 159,735 | | | $ | (144,620) | |
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustment | 1,673 | | | (4,095) | | | 5,113 | | | (41,202) | |
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Unrealized (loss) gain on derivatives, net of tax | (153) | | | 261 | | | (323) | | | (14,631) | |
Reclassification of adjustments for loss on derivatives included in Net income (loss), net of tax | 1,519 | | | 2,962 | | | 6,036 | | | 6,943 | |
Amortization of terminated interest rate swaps, net of tax | 1,479 | | | — | | | 2,950 | | | — | |
Comprehensive income (loss) | 9,569 | | | (18,650) | | | 173,511 | | | (193,510) | |
Less: comprehensive income (loss) attributable to noncontrolling interests | 1,602 | | | (141) | | | 4,879 | | | (780) | |
Comprehensive income (loss) attributable to Bloomin’ Brands | $ | 7,967 | | | $ | (18,509) | | | $ | 168,632 | | | $ | (192,730) | |
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Earnings (loss) per share attributable to common stockholders: | | | | | | | |
Basic | $ | 0.04 | | | $ | (0.20) | | | $ | 1.74 | | | $ | (1.69) | |
Diluted | $ | 0.03 | | | $ | (0.20) | | | $ | 1.42 | | | $ | (1.69) | |
Weighted average common shares outstanding: | | | | | | | |
Basic | 89,229 | | | 87,558 | | | 88,890 | | | 87,394 | |
Diluted | 107,783 | | | 87,558 | | | 109,410 | | | 87,394 | |
| | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED |
| | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Revenues | | | | | | | |
Restaurant sales | | | | | $ | 1,123,575 | | | $ | 979,451 | |
Franchise and other revenues | | | | | 16,960 | | | 8,022 | |
Total revenues | | | | | 1,140,535 | | | 987,473 | |
Costs and expenses | | | | | | | |
Food and beverage costs | | | | | 359,370 | | | 291,870 | |
Labor and other related | | | | | 312,511 | | | 274,638 | |
Other restaurant operating | | | | | 259,110 | | | 229,293 | |
Depreciation and amortization | | | | | 41,775 | | | 41,226 | |
General and administrative | | | | | 58,674 | | | 57,248 | |
Provision for impaired assets and restaurant closings | | | | | 1,839 | | | 2,200 | |
Total costs and expenses | | | | | 1,033,279 | | | 896,475 | |
Income from operations | | | | | 107,256 | | | 90,998 | |
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Other income, net | | | | | — | | | 21 | |
Interest expense, net | | | | | (13,633) | | | (14,628) | |
Income before provision for income taxes | | | | | 93,623 | | | 76,391 | |
Provision for income taxes | | | | | 15,929 | | | 6,593 | |
Net income | | | | | 77,694 | | | 69,798 | |
Less: net income attributable to noncontrolling interests | | | | | 2,183 | | | 936 | |
Net income attributable to Bloomin’ Brands | | | | | $ | 75,511 | | | $ | 68,862 | |
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Net income | | | | | $ | 77,694 | | | $ | 69,798 | |
Other comprehensive income: | | | | | | | |
Foreign currency translation adjustment | | | | | 11,283 | | | (6,575) | |
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Unrealized gain (loss) on derivatives, net of tax | | | | | 573 | | | (42) | |
Reclassification of adjustments for loss on derivatives included in Net income, net of tax | | | | | 681 | | | 3,003 | |
Impact of terminated interest rate swaps included in Net income, net of tax | | | | | 3,021 | | | — | |
Comprehensive income | | | | | 93,252 | | | 66,184 | |
Less: comprehensive income attributable to noncontrolling interests | | | | | 2,183 | | | 936 | |
Comprehensive income attributable to Bloomin’ Brands | | | | | $ | 91,069 | | | $ | 65,248 | |
| | | | | | | |
Earnings per share: | | | | | | | |
Basic | | | | | $ | 0.85 | | | $ | 0.78 | |
Diluted | | | | | $ | 0.73 | | | $ | 0.63 | |
Weighted average common shares outstanding: | | | | | | | |
Basic | | | | | 89,355 | | | 88,367 | |
Diluted | | | | | 103,454 | | | 110,641 | |
The accompanying notes are an integral part of these consolidated financial statements.
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
| | BLOOMIN’ BRANDS, INC. | | |
| COMMON STOCK | | ADDITIONAL PAID-IN CAPITAL | | ACCUM- ULATED DEFICIT | | ACCUMULATED OTHER COMPREHENSIVE LOSS | | NON-CONTROLLING INTERESTS | | TOTAL | |
| SHARES | | AMOUNT | | |
Balance, June 27, 2021 | 89,211 | | | $ | 892 | | | $ | 1,109,904 | | | $ | (762,319) | | | $ | (202,188) | | | $ | 6,618 | | | $ | 152,907 | | |
| Net income | — | | | — | | | — | | | 3,449 | | | — | | | 1,602 | | | 5,051 | | |
Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 4,518 | | | — | | | 4,518 | | |
| Stock-based compensation | — | | | — | | | 5,593 | | | — | | | — | | | — | | | 5,593 | | |
| Common stock issued under stock plans (1) | 37 | | | — | | | (42) | | | — | | | — | | | — | | | (42) | | |
Purchase of noncontrolling interests | — | | | — | | | 9 | | | — | | | — | | | (12) | | | (3) | | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (2,062) | | | (2,062) | | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 374 | | | 374 | | |
| Balance, September 26, 2021 | 89,248 | | | $ | 892 | | | $ | 1,115,464 | | | $ | (758,870) | | | $ | (197,670) | | | $ | 6,520 | | | $ | 166,336 | | |
| Balance, December 27, 2020 | 87,856 | | | $ | 879 | | | $ | 1,132,808 | | | $ | (918,096) | | | $ | (211,446) | | | $ | 6,812 | | | $ | 10,957 | | |
Cumulative-effect from a change in accounting principle, net of tax | — | | | — | | | (47,323) | | | 4,370 | | | — | | | — | | | (42,953) | | |
Net income | — | | | — | | | — | | | 154,856 | | | — | | | 4,879 | | | 159,735 | | |
Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 13,776 | | | — | | | 13,776 | | |
| Stock-based compensation | — | | | — | | | 20,100 | | | — | | | — | | | — | | | 20,100 | | |
| Common stock issued under stock plans (1) | 1,392 | | | 13 | | | 9,870 | | | — | | | — | | | — | | | 9,883 | | |
Purchase of noncontrolling interests | — | | | — | | | 9 | | | — | | | — | | | (12) | | | (3) | | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (6,203) | | | (6,203) | | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 1,044 | | | 1,044 | | |
| Balance, September 26, 2021 | 89,248 | | | $ | 892 | | | $ | 1,115,464 | | | $ | (758,870) | | | $ | (197,670) | | | $ | 6,520 | | | $ | 166,336 | | |
| | | (CONTINUED...) | | BLOOMIN’ BRANDS, INC. | |
| | | COMMON STOCK | | ADDITIONAL PAID-IN CAPITAL | | ACCUM- ULATED DEFICIT | | ACCUMULATED OTHER COMPREHENSIVE LOSS | | NON-CONTROLLING INTERESTS | | TOTAL |
| | | SHARES | | AMOUNT | |
| | Balance, December 26, 2021 | | Balance, December 26, 2021 | 89,253 | | | $ | 893 | | | $ | 1,119,728 | | | $ | (698,171) | | | $ | (205,989) | | | $ | 6,389 | | | $ | 222,850 | |
| Net income | | Net income | — | | | — | | | — | | | 75,511 | | | — | | | 2,183 | | | 77,694 | |
Other comprehensive income, net of tax | | Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 15,558 | | | — | | | 15,558 | |
Cash dividends declared, $0.14 per common share | | Cash dividends declared, $0.14 per common share | — | | | — | | | (12,559) | | | — | | | — | | | — | | | (12,559) | |
Repurchase and retirement of common stock | | Repurchase and retirement of common stock | (551) | | | (6) | | | — | | | (11,696) | | | — | | | — | | | (11,702) | |
Stock-based compensation | | Stock-based compensation | — | | | — | | | 4,843 | | | — | | | — | | | — | | | 4,843 | |
| Common stock issued under stock plans (1) | | Common stock issued under stock plans (1) | 483 | | | 5 | | | 880 | | | — | | | — | | | — | | | 885 | |
Purchase of noncontrolling interests, net of tax of $888 | | Purchase of noncontrolling interests, net of tax of $888 | — | | | — | | | 2,566 | | | — | | | — | | | (4,454) | | | (1,888) | |
Distributions to noncontrolling interests | | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (2,641) | | | (2,641) | |
Contributions from noncontrolling interests | | Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 217 | | | 217 | |
| Balance, March 27, 2022 | | Balance, March 27, 2022 | 89,185 | | | $ | 892 | | | $ | 1,115,458 | | | $ | (634,356) | | | $ | (190,431) | | | $ | 1,694 | | | $ | 293,257 | |
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BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BLOOMIN’ BRANDS, INC. | | | | |
| COMMON STOCK | | ADDITIONAL PAID-IN CAPITAL | | ACCUM- ULATED DEFICIT | | ACCUMULATED OTHER COMPREHENSIVE LOSS | | NON-CONTROLLING INTERESTS | | TOTAL |
| SHARES | | AMOUNT | | | | | |
Balance, June 28, 2020 | 87,534 | | | $ | 875 | | | $ | 1,123,613 | | | $ | (886,248) | | | $ | (217,130) | | | $ | 8,088 | | | $ | 29,198 | |
Net loss | — | | | — | | | — | | | (17,637) | | | — | | | (141) | | | (17,778) | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (872) | | | — | | | (872) | |
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Stock-based compensation | — | | | — | | | 2,712 | | | — | | | — | | | — | | | 2,712 | |
| | | | | | | | | | | | | |
Common stock issued under stock plans (1) | 39 | | | — | | | (179) | | | — | | | — | | | — | | | (179) | |
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Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (745) | | | (745) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 219 | | | 219 | |
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| | | | | | | | | | | | | |
Balance, September 27, 2020 | 87,573 | | | $ | 875 | | | $ | 1,126,146 | | | $ | (903,885) | | | $ | (218,002) | | | $ | 7,421 | | | $ | 12,555 | |
| | | | | | | | | | | | | |
Balance, December 29, 2019 | 86,946 | | | $ | 869 | | | $ | 1,094,338 | | | $ | (755,089) | | | $ | (169,776) | | | $ | 7,139 | | | $ | 177,481 | |
Cumulative-effect from a change in accounting principle, net of tax | — | | | — | | | — | | | (4,292) | | | — | | | — | | | (4,292) | |
Net loss | — | | | — | | | — | | | (144,504) | | | — | | | (116) | | | (144,620) | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (48,743) | | | (147) | | | (48,890) | |
Cash dividends declared, $0.20 per common share | — | | | — | | | (17,480) | | | — | | | — | | | — | | | (17,480) | |
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Stock-based compensation | — | | | | | 11,072 | | | — | | | — | | | — | | | 11,072 | |
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Consideration for preferred stock in excess of carrying value, net of tax | — | | | — | | | (3,496) | | | — | | | 517 | | | 1,261 | | | (1,718) | |
Common stock issued under stock plans (1) | 627 | | | 6 | | | (3,047) | | | — | | | — | | | — | | | (3,041) | |
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Purchase of noncontrolling interests | — | | | — | | | (58) | | | — | | | — | | | 1 | | | (57) | |
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Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (1,083) | | | (1,083) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 366 | | | 366 | |
Equity component value of convertible note issuance, net of tax of $650 | — | | | — | | | 64,367 | | | — | | | — | | | — | | | 64,367 | |
Sale of common stock warrant | — | | | — | | | 46,690 | | | — | | | — | | | — | | | 46,690 | |
Purchase of convertible note hedge | — | | | — | | | (66,240) | | | — | | | — | | | — | | | (66,240) | |
Balance, September 27, 2020 | 87,573 | | | $ | 875 | | | $ | 1,126,146 | | | $ | (903,885) | | | $ | (218,002) | | | $ | 7,421 | | | $ | 12,555 | |
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| BLOOMIN’ BRANDS, INC. | | | | |
| COMMON STOCK | | ADDITIONAL PAID-IN CAPITAL | | ACCUM- ULATED DEFICIT | | ACCUMULATED OTHER COMPREHENSIVE LOSS | | NON-CONTROLLING INTERESTS | | TOTAL |
| SHARES | | AMOUNT | | | | | |
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Balance, December 27, 2020 | 87,856 | | | $ | 879 | | | $ | 1,132,808 | | | $ | (918,096) | | | $ | (211,446) | | | $ | 6,812 | | | $ | 10,957 | |
Cumulative-effect from a change in accounting principle, net of tax | — | | | — | | | (47,323) | | | 4,370 | | | — | | | — | | | (42,953) | |
Net income | — | | | — | | | — | | | 68,862 | | | — | | | 936 | | | 69,798 | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (3,614) | | | — | | | (3,614) | |
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Stock-based compensation | — | | | | | 4,726 | | | — | | | — | | | — | | | 4,726 | |
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Common stock issued under stock plans (1) | 999 | | | 10 | | | 7,428 | | | — | | | — | | | — | | | 7,438 | |
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Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (1,458) | | | (1,458) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 511 | | | 511 | |
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Balance, March 28, 2021 | 88,855 | | | $ | 889 | | | $ | 1,097,639 | | | $ | (844,864) | | | $ | (215,060) | | | $ | 6,801 | | | $ | 45,405 | |
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________________
(1)Net of forfeitures and shares withheld for employee taxes.
The accompanying notes are an integral part of these consolidated financial statements.
BLOOMIN’ BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, UNAUDITED)
| | | | | | | | | | | |
| THIRTY-NINE WEEKS ENDED |
| SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
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Cash flows provided by operating activities: | | | |
Net income (loss) | $ | 159,735 | | | $ | (144,620) | |
Adjustments to reconcile Net income (loss) to cash provided by operating activities: | | | |
Depreciation and amortization | 122,592 | | | 137,469 | |
Amortization of debt discounts and issuance costs | 3,441 | | | 6,504 | |
Amortization of deferred gift card sales commissions | 19,277 | | | 15,553 | |
Provision for impaired assets and restaurant closings | 8,962 | | | 66,223 | |
Amortization of unrealized loss on terminated interest rate swaps | 3,973 | | | — | |
Non-cash operating lease costs | 57,791 | | | 55,401 | |
Provision for expected credit losses and contingent lease liabilities | 937 | | | 7,420 | |
Inventory obsolescence and spoilage | — | | | 6,835 | |
Stock-based and other non-cash compensation expense | 20,100 | | | 11,072 | |
Deferred income tax expense (benefit) | 3,842 | | | (80,201) | |
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(Gain) loss on disposal of property, fixtures and equipment | (1,218) | | | 1,055 | |
Other, net | 1,408 | | | (2,223) | |
Change in assets and liabilities | (96,594) | | | (25,517) | |
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Net cash provided by operating activities | 304,246 | | | 54,971 | |
Cash flows used in investing activities: | | | |
Proceeds from disposal of property, fixtures and equipment | 7,052 | | | 2,088 | |
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Capital expenditures | (85,339) | | | (66,956) | |
Other investments, net | 9,202 | | | 8,706 | |
Net cash used in investing activities | $ | (69,085) | | | $ | (56,162) | |
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| (CONTINUED...) |
BLOOMIN’ BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, UNAUDITED)
| | | THIRTY-NINE WEEKS ENDED | | THIRTEEN WEEKS ENDED |
| | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | MARCH 27, 2022 | | MARCH 28, 2021 |
| Cash flows (used in) provided by financing activities: | | |
Proceeds from issuance of long-term debt | $ | 200,000 | | | $ | — | | |
Cash flows provided by operating activities: | | Cash flows provided by operating activities: | | | |
Net income | | Net income | $ | 77,694 | | | $ | 69,798 | |
Adjustments to reconcile Net income to cash provided by operating activities: | | Adjustments to reconcile Net income to cash provided by operating activities: | | | |
Depreciation and amortization | | Depreciation and amortization | 41,775 | | | 41,226 | |
Amortization of debt discounts and issuance costs | | Amortization of debt discounts and issuance costs | 1,065 | | | 1,308 | |
Amortization of deferred gift card sales commissions | | Amortization of deferred gift card sales commissions | 8,017 | | | 8,725 | |
Provision for impaired assets and restaurant closings | | Provision for impaired assets and restaurant closings | 1,839 | | | 2,200 | |
Non-cash interest expense from terminated interest rate swaps | | Non-cash interest expense from terminated interest rate swaps | 4,067 | | | — | |
Non-cash operating lease costs | | Non-cash operating lease costs | 20,477 | | | 19,502 | |
| Stock-based and other non-cash compensation expense | | Stock-based and other non-cash compensation expense | 4,843 | | | 4,726 | |
Deferred income tax expense | | Deferred income tax expense | 3,209 | | | 1,571 | |
| Other, net | | Other, net | 2,229 | | | (829) | |
Change in assets and liabilities | | Change in assets and liabilities | (18,080) | | | (7,201) | |
| Net cash provided by operating activities | | Net cash provided by operating activities | 147,135 | | | 141,026 | |
Cash flows used in investing activities: | | Cash flows used in investing activities: | | | |
| Capital expenditures | | Capital expenditures | (40,180) | | | (17,411) | |
Other investments, net | | Other investments, net | 1,030 | | | 793 | |
Net cash used in investing activities | | Net cash used in investing activities | (39,150) | | | (16,618) | |
| | Cash flows used in financing activities: | | Cash flows used in financing activities: | | | |
| | Repayments of long-term debt and finance lease obligations | Repayments of long-term debt and finance lease obligations | (428,364) | | | (19,798) | | Repayments of long-term debt and finance lease obligations | (2,863) | | | (9,656) | |
Proceeds from borrowings on revolving credit facilities | Proceeds from borrowings on revolving credit facilities | 378,000 | | | 505,000 | | Proceeds from borrowings on revolving credit facilities | 90,000 | | | 15,000 | |
Repayments of borrowings on revolving credit facilities | Repayments of borrowings on revolving credit facilities | (701,000) | | | (549,000) | | Repayments of borrowings on revolving credit facilities | (160,000) | | | (107,000) | |
| Financing fees | (5,868) | | | (3,096) | | |
Proceeds from issuance of senior notes | 300,000 | | | — | | |
Proceeds from issuance of convertible senior notes | — | | | 230,000 | | |
Proceeds from issuance of warrants | — | | | 46,690 | | |
Purchase of convertible note hedge | — | | | (66,240) | | |
| Issuance costs related to senior notes | (5,546) | | | (8,416) | | |
Proceeds (payments of taxes) from share-based compensation, net | 9,883 | | | (3,041) | | |
Distributions to noncontrolling interests | (6,203) | | | (1,083) | | |
Contributions from noncontrolling interests | 1,044 | | | 366 | | |
Purchase of limited partnership and noncontrolling interests | (3) | | | (57) | | |
Payments for partner equity plan | (7,135) | | | (12,517) | | |
| | Proceeds from share-based compensation, net | | Proceeds from share-based compensation, net | 885 | | | 7,438 | |
Distributions to noncontrolling interests | | Distributions to noncontrolling interests | (2,641) | | | (1,458) | |
Contributions from noncontrolling interests | | Contributions from noncontrolling interests | 217 | | | 511 | |
Purchase of noncontrolling interests | | Purchase of noncontrolling interests | (1,000) | | | — | |
Payments for partner equity plan | | Payments for partner equity plan | (2,748) | | | (1,747) | |
Repurchase of common stock | | Repurchase of common stock | (10,402) | | | — | |
| Cash dividends paid on common stock | Cash dividends paid on common stock | — | | | (17,480) | | Cash dividends paid on common stock | (12,559) | | | — | |
Redemption of subsidiary preferred stock | — | | | (1,475) | | |
Net cash (used in) provided by financing activities | (265,192) | | | 99,853 | | |
| Net cash used in financing activities | | Net cash used in financing activities | (101,111) | | | (96,912) | |
Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | 207 | | | (3,293) | | Effect of exchange rate changes on cash and cash equivalents | 1,965 | | | (1,246) | |
| Net (decrease) increase in cash, cash equivalents and restricted cash | (29,824) | | | 95,369 | | |
Net increase in cash, cash equivalents and restricted cash | | Net increase in cash, cash equivalents and restricted cash | 8,839 | | | 26,250 | |
Cash, cash equivalents and restricted cash as of the beginning of the period | Cash, cash equivalents and restricted cash as of the beginning of the period | 110,408 | | | 67,145 | | Cash, cash equivalents and restricted cash as of the beginning of the period | 89,057 | | | 110,408 | |
Cash, cash equivalents and restricted cash as of the end of the period | Cash, cash equivalents and restricted cash as of the end of the period | $ | 80,584 | | | $ | 162,514 | | Cash, cash equivalents and restricted cash as of the end of the period | $ | 97,896 | | | $ | 136,658 | |
Supplemental disclosures of cash flow information: | Supplemental disclosures of cash flow information: | | | | Supplemental disclosures of cash flow information: | | | |
Cash paid for interest | Cash paid for interest | $ | 28,787 | | | $ | 35,425 | | Cash paid for interest | $ | 2,444 | | | $ | 10,230 | |
Cash paid for income taxes, net of refunds | Cash paid for income taxes, net of refunds | $ | 23,449 | | | $ | 4,198 | | Cash paid for income taxes, net of refunds | $ | 2,257 | | | $ | 2,150 | |
Supplemental disclosures of non-cash investing and financing activities: | Supplemental disclosures of non-cash investing and financing activities: | | | | Supplemental disclosures of non-cash investing and financing activities: | | | |
| Leased assets obtained in exchange for new operating lease liabilities | Leased assets obtained in exchange for new operating lease liabilities | $ | 38,154 | | | $ | 12,971 | | Leased assets obtained in exchange for new operating lease liabilities | $ | 11,515 | | | $ | 14,819 | |
Leased assets obtained in exchange for new finance lease liabilities | Leased assets obtained in exchange for new finance lease liabilities | $ | 1,229 | | | $ | 1,263 | | Leased assets obtained in exchange for new finance lease liabilities | $ | 1,313 | | | $ | 15 | |
Increase (decrease) in liabilities from the acquisition of property, fixtures and equipment | $ | 3,006 | | | $ | (7,174) | | |
(Decrease) increase in liabilities from the acquisition of property, fixtures and equipment | | (Decrease) increase in liabilities from the acquisition of property, fixtures and equipment | $ | (6,178) | | | $ | 2,005 | |
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The accompanying notes are an integral part of these consolidated financial statements.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
1. Description of the Business and Basis of Presentation
Description of the Business - Bloomin’ Brands (“Bloomin’ Brands” or the “Company”) owns and operates casual, upscale casual and fine dining restaurants. The Company’s restaurant portfolio has 4 concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Additional Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchise agreements.
Basis of Presentation - The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of the Company, all adjustments necessary for fair financial statement presentation for the periods presented have been included and are of a normal, recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 27, 2020.26, 2021.
Recently Adopted Financial Accounting Standards - On December 28, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity,” (“ASU No. 2020-06”) which removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. ASU No. 2020-06 also requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method is no longer permitted for convertible instruments. The Company adopted ASU No. 2020-06 using the modified retrospective approach which resulted in a cumulative-effect adjustment that increased (decreased) the following Consolidated Balance Sheet accounts during the first quarter of 2021:
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ADJUSTMENT | | CONSOLIDATED BALANCE SHEET CLASSIFICATION | | AMOUNT (in millions) |
Deferred tax impact of cumulative-effect adjustment | | Deferred income tax assets, net | | $ | 14.9 | |
Debt discount reclassification | | Long-term debt, net | | $ | 59.9 | |
Equity issuance costs reclassification | | Long-term debt, net | | $ | (2.1) | |
Debt discount amortization reclassification, net of tax | | Accumulated deficit | | $ | 4.4 | |
Reversal of separated equity component, net of tax | | Additional paid-in capital | | $ | (47.3) | |
After adopting ASU No. 2020-06, the Company’s convertible senior notes due 2025 (the “2025 Notes”) are reflected entirely as a liability since the embedded conversion feature is no longer separately presented within stockholders’ equity. During 2020, the Company recognized debt discount amortization of $6.3 million within Interest expense, net related to its 2025 Notes.
In February 2021, the Company made an irrevocable election under the indenture to require the principal portion of its 2025 Notes to be settled in cash and any excess in shares. Following the irrevocable notice, only the amounts expected to be settled in excess of the principal are considered in diluted earnings per share under the if-converted method.
Recently Issued Financial Accounting Standards Not Yet Adopted - In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (“ASU No. 2021-10”), which requires financial statement footnote disclosure regarding government assistance accounted for by applying a grant or contribution accounting model by analogy. ASU No. 2021-10 is effective for the Company for the fiscal year ending December 25, 2022, with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU No. 2021-10 will have on its financial statement disclosures.
Recent accounting guidance not discussed herein is not applicable, did not have, or is not expected to have a material impact to the Company.
Reclassifications - The Company reclassified certain items in the accompanying consolidated financial statements for prior periods to be comparable with the classification for the current period.period, including, but not limited to, presentation of certain items within the condensed consolidated statements of cash flows and certain notes to the consolidated financial statements. These reclassifications had no effect on previously reported net income.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
2. COVID-19 Charges
In March 2020, the Company temporarily closed all restaurant dining rooms in the U.S. to comply with state and local regulations in response to the COVID-19 pandemic (“COVID-19”). Following is a summary of charges recorded in connection with the COVID-19 pandemic for the period indicated (dollars in thousands):
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CHARGES | | CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) CLASSIFICATION | | | | THIRTY-NINE WEEKS ENDED |
| | | | SEPTEMBER 27, 2020 |
Inventory obsolescence and spoilage | | Food and beverage costs | | | | $ | 6,748 | |
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Compensation for idle employees (1) | | Labor and other related | | | | 28,243 | |
Other operating charges | | Other restaurant operating | | | | 2,467 | |
Lease guarantee contingent liabilities (2) | | General and administrative | | | | 4,188 | |
Allowance for expected credit losses (3) | | General and administrative | | | | 3,334 | |
Other charges | | General and administrative | | | | 2,624 | |
Right-of-use asset impairment (4) | | Provision for impaired assets and restaurant closings | | | | 25,740 | |
Fixed asset impairment (4) | | Provision for impaired assets and restaurant closings | | | | 31,727 | |
Goodwill and other impairment (5) | | Provision for impaired assets and restaurant closings | | | | 3,096 | |
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| | | | | | $ | 108,167 | |
________________
(1)Represents relief pay for hourly employees impacted by the closure of dining rooms, net of $14.4 million of employee retention tax credits earned.
(2)Represents additional contingent liabilities recorded for lease guarantees related to certain former restaurant locations now operated by franchisees or other third parties.
(3)Includes additional reserves to reflect an increase in expected credit losses, primarily related to franchise receivables.
(4)Includes impairments resulting from the remeasurement of assets utilizing projected future cash flows revised for then current economic conditions, restructuring charges and the closure of certain restaurants.
(5)Includes impairment of goodwill for the Company’s Hong Kong subsidiary.
3.2. Revenue Recognition
The following table includes the categories of revenue included in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods indicated:
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| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | | | | |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | | | | | |
Revenues | | | | | | | | | | | | | |
Restaurant sales | $ | 996,718 | | | $ | 766,487 | | | $ | 3,031,396 | | | $ | 2,338,985 | | | | | | | |
Franchise and other revenues | | | | | | | | | | | | | |
Franchise revenues | 12,908 | | | 4,216 | | | 31,918 | | | 15,716 | | | | | | | |
Other revenues (1) | 837 | | | 557 | | | 11,988 | | | 3,355 | | | | | | | |
Total Franchise and other revenues | 13,745 | | | 4,773 | | | 43,906 | | | 19,071 | | | | | | | |
Total revenues | $ | 1,010,463 | | | $ | 771,260 | | | $ | 3,075,302 | | | $ | 2,358,056 | | | | | | | |
________________(1)The thirteen and thirty-nine weeks ended September 26, 2021 include an adjustment of $(3.2) million to reduce the Company’s initial recorded estimate and net $3.1 million benefit from the recognition of recoverable Program of Social Integration (“PIS”) and Contribution for the Financing of Social Security (“COFINS”) taxes, respectively, within other revenues in connection with favorable court rulings in Brazil regarding the calculation methodology and taxable base. The net amount recognized as a result of the favorable court rulings primarily represents refundable PIS and COFINS taxes for prior years, including accrued interest, and will be recovered by offsetting future PIS and COFINS taxes due. | | | | | | | | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED | | | | | | |
(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 | | | | | | |
Revenues | | | | | | | | | | | | | |
Restaurant sales | | | | | $ | 1,123,575 | | | $ | 979,451 | | | | | | | |
Franchise and other revenues | | | | | | | | | | | | | |
Franchise revenues | | | | | 13,406 | | | 6,789 | | | | | | | |
Other revenues | | | | | 3,554 | | | 1,233 | | | | | | | |
Total Franchise and other revenues | | | | | 16,960 | | | 8,022 | | | | | | | |
Total revenues | | | | | $ | 1,140,535 | | | $ | 987,473 | | | | | | | |
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following tables include disaggregation of Restaurant sales and franchise revenues, by restaurant concept and major international market, for the periods indicated:
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| THIRTEEN WEEKS ENDED |
| SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
(dollars in thousands) | RESTAURANT SALES | | FRANCHISE REVENUES | | RESTAURANT SALES | | FRANCHISE REVENUES |
U.S. | | | | | | | |
Outback Steakhouse | $ | 523,142 | | | $ | 9,335 | | | $ | 443,286 | | | $ | 1,422 | |
Carrabba’s Italian Grill | 159,147 | | | 482 | | | 124,019 | | | 359 | |
Bonefish Grill | 134,603 | | | 169 | | | 100,410 | | | 44 | |
Fleming’s Prime Steakhouse & Wine Bar | 79,687 | | | — | | | 49,846 | | | — | |
Other | 2,211 | | | 3 | | | 1,845 | | | — | |
U.S. total | 898,790 | | | 9,989 | | | 719,406 | | | 1,825 | |
International | | | | | | | |
Outback Steakhouse Brazil | 74,020 | | | — | | | 32,485 | | | — | |
Other (1) | 23,908 | | | 2,919 | | | 14,596 | | | 2,391 | |
International total | 97,928 | | | 2,919 | | | 47,081 | | | 2,391 | |
Total | $ | 996,718 | | | $ | 12,908 | | | $ | 766,487 | | | $ | 4,216 | |
| | | | | | | |
| THIRTY-NINE WEEKS ENDED |
| SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
(dollars in thousands) | RESTAURANT SALES | | FRANCHISE REVENUES | | RESTAURANT SALES | | FRANCHISE REVENUES |
U.S. | | | | | | | |
Outback Steakhouse | $ | 1,649,433 | | | $ | 20,709 | | | $ | 1,320,524 | | | $ | 8,099 | |
Carrabba’s Italian Grill | 488,241 | | | 1,764 | | | 364,632 | | | 827 | |
Bonefish Grill | 410,613 | | | 473 | | | 299,226 | | | 184 | |
Fleming’s Prime Steakhouse & Wine Bar | 234,099 | | | — | | | 151,962 | | | — | |
Other | 6,756 | | | 3 | | | 4,718 | | | — | |
U.S. total | 2,789,142 | | | 22,949 | | | 2,141,062 | | | 9,110 | |
International | | | | | | | |
Outback Steakhouse Brazil | 178,178 | | | — | | | 148,078 | | | — | |
Other (1) | 64,076 | | | 8,969 | | | 49,845 | | | 6,606 | |
International total | 242,254 | | | 8,969 | | | 197,923 | | | 6,606 | |
Total | $ | 3,031,396 | | | $ | 31,918 | | | $ | 2,338,985 | | | $ | 15,716 | |
________________
(1)Includes Restaurant sales for the Company’s Abbraccio concept in Brazil.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table includes the disaggregation of Restaurant sales and franchise revenues, by restaurant concept and major international market, for the periods indicated:
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| THIRTEEN WEEKS ENDED |
| MARCH 27, 2022 | | MARCH 28, 2021 |
(dollars in thousands) | RESTAURANT SALES | | FRANCHISE REVENUES | | RESTAURANT SALES | | FRANCHISE REVENUES |
U.S. | | | | | | | |
Outback Steakhouse | $ | 595,393 | | | $ | 8,459 | | | $ | 547,195 | | | $ | 2,956 | |
Carrabba’s Italian Grill | 175,628 | | | 661 | | | 157,686 | | | 617 | |
Bonefish Grill | 151,416 | | | 177 | | | 126,974 | | | 130 | |
Fleming’s Prime Steakhouse & Wine Bar | 97,662 | | | — | | | 66,311 | | | — | |
Other | 3,536 | | | 5 | | | 1,893 | | | — | |
U.S. total | 1,023,635 | | | 9,302 | | | 900,059 | | | 3,703 | |
International | | | | | | | |
Outback Steakhouse Brazil | 85,301 | | | — | | | 60,848 | | | — | |
Other (1) | 14,639 | | | 4,104 | | | 18,544 | | | 3,086 | |
International total | 99,940 | | | 4,104 | | | 79,392 | | | 3,086 | |
Total | $ | 1,123,575 | | | $ | 13,406 | | | $ | 979,451 | | | $ | 6,789 | |
________________
(1)Includes Restaurant sales for Company-owned Outback Steakhouse restaurants outside of Brazil and Abbraccio restaurants in Brazil. Franchise revenues primarily includes revenues from franchised Outback Steakhouse restaurants.
The following table includes a detail of assets and liabilities from contracts with customers included on the Company’s Consolidated Balance Sheets as of the periods indicated:
| (dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 | | (dollars in thousands) | MARCH 27, 2022 | | DECEMBER 26, 2021 | |
Other current assets, net | Other current assets, net | | | | | Other current assets, net | | | | |
Deferred gift card sales commissions | Deferred gift card sales commissions | $ | 10,832 | | | $ | 19,300 | | | Deferred gift card sales commissions | $ | 13,033 | | | $ | 17,793 | | |
| Unearned revenue | Unearned revenue | | | Unearned revenue | | |
Deferred gift card revenue | Deferred gift card revenue | $ | 274,204 | | | $ | 373,048 | | | Deferred gift card revenue | $ | 314,974 | | | $ | 387,945 | | |
Deferred loyalty revenue | Deferred loyalty revenue | 9,478 | | | 8,099 | | | Deferred loyalty revenue | 8,217 | | | 9,386 | | |
Deferred franchise fees - current | Deferred franchise fees - current | 446 | | | 469 | | | Deferred franchise fees - current | 439 | | | 443 | | |
| Other | | Other | 1,674 | | | 1,021 | | |
Total Unearned revenue | Total Unearned revenue | $ | 284,128 | | | $ | 381,616 | | | Total Unearned revenue | $ | 325,304 | | | $ | 398,795 | | |
| Other long-term liabilities, net | Other long-term liabilities, net | | | Other long-term liabilities, net | | |
Deferred franchise fees - non-current | Deferred franchise fees - non-current | $ | 4,332 | | | $ | 4,301 | | | Deferred franchise fees - non-current | $ | 4,284 | | | $ | 4,280 | | |
The following table is a rollforward of deferred gift card sales commissions for the periods indicated:
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| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Balance, beginning of period | $ | 12,548 | | | $ | 13,624 | | | $ | 19,300 | | | $ | 18,554 | |
Deferred gift card sales commissions amortization | (4,841) | | | (3,961) | | | (19,277) | | | (15,553) | |
Deferred gift card sales commissions capitalization | 3,698 | | | 3,068 | | | 12,494 | | | 10,534 | |
Other | (573) | | | (146) | | | (1,685) | | | (950) | |
Balance, end of period | $ | 10,832 | | | $ | 12,585 | | | $ | 10,832 | | | $ | 12,585 | |
The following table is a rollforward of unearned gift card revenue for the periods indicated:
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| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Balance, beginning of period | $ | 293,955 | | | $ | 279,973 | | | $ | 373,048 | | | $ | 358,757 | |
Gift card sales | 45,036 | | | 42,531 | | | 153,126 | | | 142,619 | |
Gift card redemptions | (61,189) | | | (49,964) | | | (237,988) | | | (220,549) | |
Gift card breakage | (3,598) | | | (2,599) | | | (13,982) | | | (10,886) | |
Balance, end of period | $ | 274,204 | | | $ | 269,941 | | | $ | 274,204 | | | $ | 269,941 | |
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| | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Balance, beginning of period | | | | | $ | 17,793 | | | $ | 19,300 | |
Deferred gift card sales commissions amortization | | | | | (8,017) | | | (8,725) | |
Deferred gift card sales commissions capitalization | | | | | 4,169 | | | 3,499 | |
Other | | | | | (912) | | | (572) | |
Balance, end of period | | | | | $ | 13,033 | | | $ | 13,502 | |
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
4. Impairments and Exit Costs
The components of Provision for impaired assets and restaurant closings are as follows for the periods indicated:
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| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Impairment losses | | | | | | | |
U.S. (1) | $ | 1,115 | | | $ | 332 | | | $ | 8,289 | | | $ | 55,045 | |
International (1)(2) | 28 | | | — | | | 180 | | | 3,468 | |
Corporate (3) | 19 | | | 32 | | | 257 | | | 6,193 | |
Total impairment losses | 1,162 | | | 364 | | | 8,726 | | | 64,706 | |
Restaurant closure charges (benefits) | | | | | | | |
U.S. (1) | 423 | | | (418) | | | 389 | | | 1,344 | |
International (1) | — | | | — | | | (153) | | | 173 | |
Total restaurant closure charges (benefits) | 423 | | | (418) | | | 236 | | | 1,517 | |
Provision for impaired assets and restaurant closings | $ | 1,585 | | | $ | (54) | | | $ | 8,962 | | | $ | 66,223 | |
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________________
(1)U.S. and international impairment and closure charges for the thirteen and thirty-nine weeks ended September 27, 2020 primarily relate to the COVID-19 pandemic, including charges related to the COVID-19 Restructuring discussed below. See Note 2 - COVID-19 Charges for details regarding the impact of the COVID-19 pandemic on the Company’s financial results.
(2)Includes goodwill impairment charges of $2.0 million during the thirty-nine weeks ended September 27, 2020.
(3)Corporate impairment charges for the thirty-nine weeks ended September 27, 2020 primarily relate to transformational initiatives.
COVID-19 Restructuring - During the thirty-nine weeks ended September 27, 2020, the Company recognized pre-tax asset impairments and closure charges in connection with the closure of 22 restaurants and from the update of certain cash flow assumptions, including lease renewal considerations (the “COVID-19 Restructuring”). Following is a summary of the COVID-19 Restructuring charges recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the period indicated (dollars in thousands):
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| | CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) CLASSIFICATION | | THIRTY-NINE WEEKS ENDED |
DESCRIPTION | | | SEPTEMBER 27, 2020 |
Property, fixtures and equipment impairments | | Provision for impaired assets and restaurant closings | | $ | 16,932 | |
Lease right-of-use asset impairments and closing costs | | Provision for impaired assets and restaurant closings | | 4,008 | |
Severance and other expenses | | General and administrative | | 1,021 | |
| | | | $ | 21,961 | |
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The remaining impairment and closure charges during the periods presented resulted primarily from locations identified for closure.
Annual Goodwill and Intangible Asset Impairment Assessment - The Company performs its annual assessment for impairment of goodwill and other indefinite-lived intangible assets during its second fiscal quarter. The Company’s 2021 assessment was qualitative and its 2020 assessment was quantitative. In connection with these assessments, the Company did 0t record any impairment charges.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Accrued Facility Closure and Other Costs Rollforward - The following table is a rollforward of the Company’s closed facility lease liabilities and other accrued costs associated with closure and restructuring initiatives,unearned gift card revenue for the periodperiods indicated:
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| THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 |
Balance, beginning of the period | $ | 12,879 | |
| |
Cash payments | (3,861) | |
Accretion | 702 | |
Adjustments | (484) | |
Balance, end of the period (1) | $ | 9,236 | |
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________________
(1)As of September 26, 2021, the Company had exit-related accruals associated with closure and restructuring initiatives of $3.1 million recorded in Accrued and other current liabilities and $6.1 million recorded in Non-current operating lease liabilities on its Consolidated Balance Sheet. | | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Balance, beginning of period | | | | | $ | 387,945 | | | $ | 373,048 | |
Gift card sales | | | | | 50,280 | | | 44,169 | |
Gift card redemptions | | | | | (116,622) | | | (104,940) | |
Gift card breakage | | | | | (6,629) | | | (6,202) | |
Balance, end of period | | | | | $ | 314,974 | | | $ | 306,075 | |
5.3. Earnings (Loss) Per Share
The dilutive effect of the 2025 Notes is calculated using the if-converted method which was required upon the Company’s adoption of ASU No. 2020-06. To the extent the Company has ability to settle its 2025 Notes in shares of its common stock, the principal and conversion spread on the 2025 Notes will have a dilutive impact on diluted earnings per share when the average market price of the Company’s common stock for a given period exceeds the conversion price of $11.89 per share of common stock. In February 2021, the Company provided the trustee of its convertible senior notes due in 2025 Notes(the “2025 Notes”) notice of the Company’s irrevocable election to settle the principal portion of the 2025 Notes in cash and any excess in shares. As a result, subsequent to the election, only the amounts in excess of the principal amount are considered in diluted earnings per share. The amount of the 2025 Notes settled in shares of common stock will have a dilutive impact on diluted earnings per share underwhen the if-converted method.average market price of the Company’s common stock for a given period exceeds the conversion price, which was initially $11.89 per share of common stock.
In connection with the offering of the 2025 Notes, the Company entered into the Convertible Note Hedge Transactions and Warrant Transactions described in Note 11 - Convertible Senior Notes. However, the Convertible Note Hedge Transactions are not considered when calculating dilutive shares given their anti-dilutive impact as an offset to dilution of shares underlying the 2025 Notes. The Warrant Transactionswarrant transactions (the “Warrant Transactions”), which have a dilutive effect on the Company’s common stock to the extent the price of its common stock exceeds the $16.64 strike price of the Warrant Transactions. See Note 11 - Convertible Senior Notes for additional information regarding the 2025 Notes, Convertible Note Hedge Transactions, and Warrant Transactions. which was initially $16.64.
BLOOMIN’ BRANDS, INC.the 2025 Notes decreased to $11.82 per share of common stock and the strike price of the related warrants decreased to $16.55 per share of common stock.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table presents the computation of basic and diluted earnings (loss) per share attributable to common stockholders for the periods indicated:
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | THIRTEEN WEEKS ENDED |
(in thousands, except per share data) | (in thousands, except per share data) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | (in thousands, except per share data) | | MARCH 27, 2022 | | MARCH 28, 2021 |
Net income (loss) attributable to Bloomin’ Brands | $ | 3,449 | | | $ | (17,637) | | | $ | 154,856 | | | $ | (144,504) | | |
Redemption of preferred stock in excess of carrying value (1) | — | | | — | | | — | | | (3,496) | | |
Net income (loss) attributable to common stockholders | 3,449 | | | (17,637) | | | 154,856 | | | (148,000) | | |
Net income attributable to Bloomin’ Brands | | Net income attributable to Bloomin’ Brands | | $ | 75,511 | | | $ | 68,862 | |
| Convertible senior notes if-converted method interest adjustment, net of tax (2)(1) | Convertible senior notes if-converted method interest adjustment, net of tax (2)(1) | — | | | — | | | 460 | | | — | | Convertible senior notes if-converted method interest adjustment, net of tax (2)(1) | | — | | | 1,381 | |
Diluted net income (loss) attributable to common stockholders | $ | 3,449 | | | $ | (17,637) | | | $ | 155,316 | | | $ | (148,000) | | |
Diluted net income attributable to Bloomin’ Brands | | Diluted net income attributable to Bloomin’ Brands | | $ | 75,511 | | | $ | 70,243 | |
| Basic weighted average common shares outstanding | Basic weighted average common shares outstanding | 89,229 | | | 87,558 | | | 88,890 | | | 87,394 | | Basic weighted average common shares outstanding | | 89,355 | | | 88,367 | |
| Effect of dilutive securities: | Effect of dilutive securities: | | Effect of dilutive securities: | | |
Stock options | Stock options | 864 | | | — | | | 913 | | | — | | Stock options | | 370 | | | 709 | |
Nonvested restricted stock units | Nonvested restricted stock units | 286 | | | — | | | 380 | | | — | | Nonvested restricted stock units | | 279 | | | 503 | |
Nonvested performance-based share units | Nonvested performance-based share units | — | | | — | | | 31 | | | — | | Nonvested performance-based share units | | 276 | | | 94 | |
Convertible senior notes (3)(1) | Convertible senior notes (3)(1) | 10,476 | | | — | | | 12,300 | | | — | | Convertible senior notes (3)(1) | | 8,732 | | | 15,193 | |
Warrants (3) | Warrants (3) | 6,928 | | | — | | | 6,896 | | | — | | Warrants (3) | | 4,442 | | | 5,775 | |
Diluted weighted average common shares outstanding | Diluted weighted average common shares outstanding | 107,783 | | | 87,558 | | | 109,410 | | | 87,394 | | Diluted weighted average common shares outstanding | | 103,454 | | | 110,641 | |
| Basic earnings (loss) per share attributable to common stockholders | $ | 0.04 | | | $ | (0.20) | | | $ | 1.74 | | | $ | (1.69) | | |
Diluted earnings (loss) per share attributable to common stockholders | $ | 0.03 | | | $ | (0.20) | | | $ | 1.42 | | | $ | (1.69) | | |
Basic earnings per share | | Basic earnings per share | | $ | 0.85 | | | $ | 0.78 | |
Diluted earnings per share | | Diluted earnings per share | | $ | 0.73 | | | $ | 0.63 | |
|
________________
(1)Consideration paid in excess of carrying value for the redemption of its Abbraccio preferred stock is considered a deemed dividend and, for purposes of calculating earnings per share, reduces net income attributable to common stockholders for the thirty-nine weeks ended September 27, 2020. See Note 13 - Stockholders’ Equity for additional details.
(2)Adjustment for interest related to the 2025 Notes weighted for the portion of the period prior to the Company’s election under the 2025 Notes indenture to settle the principal portion of its 2025 Notes in cash. Effective with the Company’s election, there will be no further numerator adjustments for interest or denominator adjustments for shares required to settle the principal portion.
(3)Due to the Company’s net loss during the thirteen and thirty-nine weeks ended September 27, 2020, dilutive excess shares, if applicable, and warrants were excluded from the computation of diluted earnings per share as their effect would be antidilutive.
Share-based compensation-related weighted-average securities outstanding not included in the computation of net earnings (loss) per share attributable to common stockholders because their effect was antidilutive were as follows, for the periods indicated:
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| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(shares in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Stock options | — | | | 5,381 | | | 455 | | | 5,133 | |
Nonvested restricted stock units | 77 | | | 797 | | | 53 | | | 813 | |
Nonvested performance-based share units | 376 | | | 628 | | | 424 | | | 595 | |
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BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
6.Share-based compensation-related weighted average securities outstanding not included in the computation of earnings per share because their effect was antidilutive were as follows, for the periods indicated:
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| | | THIRTEEN WEEKS ENDED |
(shares in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Stock options | | | | | 1,417 | | | 1,364 | |
Nonvested restricted stock units | | | | | 217 | | | 73 | |
Nonvested performance-based share units | | | | | 365 | | | 431 | |
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4. Stock-based Compensation Plans
The Company recognized stock-based compensation expense as follows for the periods indicated:
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| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Stock options | $ | 495 | | | $ | 992 | | | $ | 1,829 | | | $ | 2,862 | |
Restricted stock units | 2,043 | | | 2,303 | | | 6,373 | | | 6,326 | |
Performance-based share units (1) | 3,026 | | | (588) | | | 11,813 | | | 1,804 | |
| | | | | | | |
| $ | 5,564 | | | $ | 2,707 | | | $ | 20,015 | | | $ | 10,992 | |
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________________
(1)The thirty-nine weeks ended September 26, 2021 includes a cumulative life-to-date adjustment for PSUs granted in fiscal years 2019, 2020 and 2021 based on revised Company performance projections of performance criteria set forth in the award agreements. | | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Performance-based share units | | | | | $ | 2,619 | | | $ | 1,469 | |
Restricted stock units | | | | | 1,810 | | | 2,366 | |
Stock options | | | | | 377 | | | 865 | |
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| | | | | $ | 4,806 | | | $ | 4,700 | |
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In February 2021,2022, the Company granted 0.30.5 million performance-based share units (“PSUs”). These PSUs maintain a three-year cliff vesting period and the underlying adjusted diluted earnings per share performance metric can range from zero subject to 200% of the annual target grant. The grants additionally includefinal payout modification by a Relative Total Shareholder Return (“Relative TSR”) modifier. This Relative TSR modifier tocan adjust the final payout outcome which can adjust the payout by 75%, 100% or 125% of the achieved performance metric, with the overall payout capped at 200% of the annual target grant. The Relative TSR is measured by comparing the Company’s Relative TSR to that of the constituents of the S&P 1500 Restaurants index. TheThese PSUs have a three-year cliff vesting period and their fair value of PSUs granted was estimated using the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that the market conditions will be achieved and was applied to the trading price of the Company’s common stock on the date of the grant.
Assumptions used in the Monte Carlo simulation model and the grant date fair value of PSUs granted were as follows for the periodperiods indicated:
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| THIRTY-NINE WEEKS ENDED |
| SEPTEMBER 26, 2021 | | |
Assumptions: | | | |
Risk-free interest rate (1) | 0.20 | % | | |
| | | |
| | | |
Volatility (2) | 48.45 | % | | |
| | | |
Grant date fair value per unit (3) | $ | 29.73 | | | |
| | | | | | | | | | | |
| THIRTEEN WEEKS ENDED |
| MARCH 27, 2022 | | MARCH 28, 2021 |
Assumptions: | | | |
Risk-free interest rate (1) | 1.64 | % | | 0.20 | % |
Dividend yield (2) | 2.31 | % | | — | % |
| | | |
Volatility (3) | 49.11 | % | | 48.45 | % |
| | | |
Grant date fair value per unit (4) | $ | 26.10 | | | $ | 29.73 | |
________________
(1)Risk-free interest rate is the U.S. Treasury yield curve in effect as of the grant date for the performance period of the unit.
(2)Dividend yield is the level of dividends expected to be paid on the Company’s common stock over the expected term.
(3)Based on the historical volatility of the Company’s stock over the last seven years.
(3)(4)Represents a 14.3% premium above the per share value of the Company’s common stock for the Relative TSR modifier as of the grant date.date of 7.9% and 14.3% as of March 27, 2022 and March 28, 2021, respectively.
The following represents unrecognized stock-based compensation expense and the remaining weighted-averageweighted average vesting period as of September 26, 2021:March 27, 2022:
| | | UNRECOGNIZED COMPENSATION EXPENSE (dollars in thousands) | | REMAINING WEIGHTED-AVERAGE VESTING PERIOD (in years) | | UNRECOGNIZED COMPENSATION EXPENSE (dollars in thousands) | | REMAINING WEIGHTED AVERAGE VESTING PERIOD (in years) |
Stock options | $ | 1,061 | | | 0.7 | |
Performance-based share units | | Performance-based share units | $ | 21,163 | | | 1.6 |
Restricted stock units | Restricted stock units | $ | 11,663 | | | 1.9 | Restricted stock units | $ | 12,002 | | | 2.2 |
Performance-based share units | $ | 20,862 | | | 1.5 | |
| |
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
7.5. Other Current Assets, Net
Other current assets, net, consisted of the following as of the periods indicated:
| | | | | | | | | | | |
(dollars in thousands) | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 |
Prepaid expenses | $ | 22,944 | | | $ | 12,148 | |
Accounts receivable - gift cards, net (1) | 8,491 | | | 76,808 | |
Accounts receivable - vendors, net (1) | 8,568 | | | 8,886 | |
Accounts receivable - franchisees, net (1) | 1,658 | | | 1,007 | |
Accounts receivable - other, net (1) | 15,775 | | | 16,782 | |
Deferred gift card sales commissions | 10,832 | | | 19,300 | |
Assets held for sale | 1,374 | | | 3,831 | |
Other current assets, net | 18,000 | | | 12,756 | |
| $ | 87,642 | | | $ | 151,518 | |
________________
(1)See Note 17 - Allowance for Expected Credit Losses for a rollforward of the related allowance for expected credit losses. | | | | | | | | | | | |
(dollars in thousands) | MARCH 27, 2022 | | DECEMBER 26, 2021 |
Prepaid expenses | $ | 21,431 | | | $ | 21,194 | |
Accounts receivable - gift cards, net | 8,660 | | | 91,248 | |
Accounts receivable - vendors, net | 14,297 | | | 11,793 | |
Accounts receivable - franchisees, net | 1,345 | | | 1,701 | |
Accounts receivable - other, net | 21,665 | | | 18,353 | |
Deferred gift card sales commissions | 13,033 | | | 17,793 | |
| | | |
Company-owned life insurance policies | 18,023 | | | 17,244 | |
Other current assets, net | 6,134 | | | 5,297 | |
| $ | 104,588 | | | $ | 184,623 | |
8. Other Assets, Net
Other assets, net, consisted of the following as of the periods indicated:
| | | | | | | | | | | |
(dollars in thousands) | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 |
Company-owned life insurance (1) | $ | 33,799 | | | $ | 44,814 | |
Deferred debt issuance costs (2) | 6,200 | | | 4,694 | |
Liquor licenses | 23,296 | | | 24,250 | |
Other assets | 18,824 | | | 18,868 | |
| $ | 82,119 | | | $ | 92,626 | |
________________
(1)During the thirty-nine weeks ended September 26, 2021, the Company withdrew $9.1 million from its Company-owned life insurance policies to pay deferred compensation obligations.
(2)Net of accumulated amortization of $8.2 million and $9.0 million as of September 26, 2021 and December 27, 2020, respectively.
9. Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following as of the periods indicated:
| | | | | | | | | | | |
(dollars in thousands) | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 |
Accrued rent and current operating lease liabilities | $ | 184,240 | | | $ | 192,369 | |
Accrued payroll and other compensation (1) | 126,306 | | | 79,291 | |
Accrued insurance | 21,412 | | | 20,648 | |
Other current liabilities (2) | 112,633 | | | 96,013 | |
| $ | 444,591 | | | $ | 388,321 | |
________________
(1)During the thirty-nine weeks ended September 26, 2021, the Company reclassified $27.3 million of payroll taxes deferred under the Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”) to current.
(2)During the thirty-nine weeks ended September 26, 2021, other current liabilities increased primarily due to an $8.7 million increase in accrued interest related to the 2029 Notes. See Note 10 - Long-term Debt, Net for details regarding the 2029 Notes.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
10.6. Long-term Debt, Net
Following is a summary of outstanding long-termLong-term debt, net as of the periods indicated:
| | | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 | | MARCH 27, 2022 | | DECEMBER 26, 2021 |
(dollars in thousands) | (dollars in thousands) | OUTSTANDING BALANCE | | INTEREST RATE | | OUTSTANDING BALANCE | | INTEREST RATE | (dollars in thousands) | OUTSTANDING BALANCE | | INTEREST RATE | | OUTSTANDING BALANCE | | INTEREST RATE |
Senior Secured Credit Facility: | Senior Secured Credit Facility: | | | | | | | | Senior Secured Credit Facility: | | | | | | | |
Term loan A (1) | Term loan A (1) | $ | 197,500 | | | 2.58 | % | | $ | — | | | Term loan A (1) | $ | 192,500 | | | 1.76 | % | | $ | 195,000 | | | 1.60 | % |
Revolving credit facility (1) | 124,000 | | | 2.69 | % | | — | | | |
Revolving credit facility (2) | | Revolving credit facility (2) | 10,000 | | | 4.00 | % | | 80,000 | | | 3.75 | % |
Total Senior Secured Credit Facility | Total Senior Secured Credit Facility | 321,500 | | | — | | | Total Senior Secured Credit Facility | 202,500 | | | 275,000 | | |
Former Credit Facility: | | | | | |
Term loan A (1) | — | | | 425,000 | | | 2.88 | % | |
Revolving credit facility (1) | — | | | 447,000 | | | 2.88 | % | |
Total Former Credit Facility | — | | | 872,000 | | | |
| 2025 Notes (2) | 2025 Notes (2) | 230,000 | | | 5.00 | % | | 230,000 | | | 5.00 | % | 2025 Notes (2) | 230,000 | | | 5.00 | % | | 230,000 | | | 5.00 | % |
2029 Notes | 2029 Notes | 300,000 | | | 5.13 | % | | — | | | 2029 Notes | 300,000 | | | 5.13 | % | | 300,000 | | | 5.13 | % |
Finance lease liabilities | Finance lease liabilities | 2,704 | | | 2,405 | | | Finance lease liabilities | 3,380 | | | 2,376 | | |
| Less: unamortized debt discount and issuance costs (3) | Less: unamortized debt discount and issuance costs (3) | (14,871) | | | (67,704) | | | Less: unamortized debt discount and issuance costs (3) | (13,433) | | | (14,157) | | |
Less: finance lease interest | Less: finance lease interest | (182) | | | (221) | | | Less: finance lease interest | (202) | | | (154) | | |
Total debt, net | Total debt, net | 839,151 | | | 1,036,480 | | | Total debt, net | 722,245 | | | 793,065 | | |
Less: current portion of long-term debt | Less: current portion of long-term debt | (11,086) | | | (38,710) | | | Less: current portion of long-term debt | (11,220) | | | (10,958) | | |
Long-term debt, net | Long-term debt, net | $ | 828,065 | | | $ | 997,770 | | | Long-term debt, net | $ | 711,025 | | | $ | 782,107 | | |
|
________________
(1)Interest rate represents the weighted-averageweighted average interest rate as of the respective periods.
(2)See Note 11 - Convertible Senior Notes for details regardingInterest rate represents the 2025 Notes and related hedge and warrant transactions.
(3)In connection with the adoptionbase rate option elected in anticipation of ASU No. 2020-06, debt discount of $59.9 million related to the 2025 Notes was de-recognized and $2.1 million of equity issuance costs were reclassified as debt issuance costs during the thirty-nine weeks ended September 26, 2021.impending repayment.
2029 NotesDebt Covenants - As of March 27, 2022 and December 26, 2021, the Company was in compliance with its debt covenants.
Credit Agreement Amendment - On April 16, 2021, the Company and its wholly-owned subsidiary OSI Restaurant Partners, LLC (“OSI”), as co-issuers, issued $300.0 million aggregate principal amount of senior unsecured notes due 2029 (the “2029 Notes”).
The 2029 Notes were issued pursuant to an Indenture, dated April 16, 2021 (the “Indenture”), by and among the Company, the guarantors named therein, and Wells Fargo Bank, National Association, as trustee. The 2029 Notes are guaranteed by each of the Company’s existing and future domestic restricted subsidiaries (other than OSI) that are guarantors or borrowers under its Senior Secured Credit Facility (as defined below) or certain other indebtedness. The 2029 Notes mature on April 15, 2029, unless earlier redeemed or purchased by the Company. The 2029 Notes bear cash interest at an annual rate of 5.125% payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021.
The Company may redeem some or all of the 2029 Notes at any time on or after April 15, 2024, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest. The Company may also redeem up to 40% of the 2029 Notes in an amount not greater than the proceeds of certain equity offerings completed before April 15, 2024, at a redemption price equal to 105.125% of the principal amount thereof, plus accrued and unpaid interest. In addition, at any time prior to April 15, 2024, the Company may redeem some or all of the 2029 Notes at a price equal to 100% of the principal amount, plus a make-whole premium, plus accrued and unpaid interest.
The Indenture contains restrictive covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness or issue certain preferred stock; pay dividends, redeem stock or
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
make other distributions; make certain investments; create restrictions on the ability of the Company’s restricted subsidiaries to pay dividends or make other payments to the Company; create certain liens; transfer or sell certain assets; merge or consolidate; enter into certain transactions with the Company’s affiliates; and designate subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of exceptions and qualifications as set forth in the Indenture.
The Indenture contains customary events of default, including, without limitation, failure to make required payments, failure to comply with certain agreements or covenants, cross-acceleration to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, and failure to pay certain judgments.
The net proceeds from the 2029 Notes offering were approximately $294.5 million, after deducting the initial purchaser’s discount and the Company’s offering expenses. The net proceeds were used to repay a portion of the Company’s outstanding Term loan A and revolving credit facility in conjunction with the refinancing of its Former Credit Facility.
Second Amended and Restated Credit Agreement - On April 16, 2021, the Company and OSI, as co-borrowers, entered into the Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit“Credit Agreement”), which provides for senior secured financing of up to $1.0 billion consisting of a $200.0 million Term loan A and an $800.0 million revolving credit facility (the “Senior Secured Credit Facility”). The Senior Secured Credit Facility matures on April 16, 2026 and replaced the Company’s prior senior secured financing of up to $1.5 billion (the “Former Credit Facility”).
The commitments underOn April 26, 2022, the Senior Secured Credit Facility may be increased in an aggregate principal amount of up to: (i) $425.0 million or (ii) atCompany and OSI entered into the Company’s option, upFirst Amendment to an unlimited amount of incremental facilities, so long as the Consolidated Senior Secured Net Leverage Ratio (“CSSNLR”), as defined in the Second Amended and Restated Credit Agreement is no more than 3.00 to 1.00 asand Incremental Amendment (the “Amended Credit Agreement”), which included an increase of the last dayCompany’s existing revolving credit facility from $800.0 million to $1.0 billion and a transition from London Inter-Bank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”) as the benchmark rate for
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
purposes of calculating interest under the Senior Secured Credit Facility. At closing, an incremental $192.5 million was drawn on the revolving credit facility to fully repay the outstanding balance of Term loan A. The total indebtedness of the Company remained unchanged as a result of the Amended Credit Agreement.
Under the Amended Credit Agreement, the Company may elect an interest rate at each reset period based on the Base Rate or the Eurocurrency Rate,Adjusted Term SOFR, plus an applicable spread. The Base Rate option is the highest of: (i) the prime rate of Wells Fargo Bank, National Association, (ii) the federal funds effective rate plus 0.5 of 1.0% or (iii) the Eurocurrency rateAdjusted Term SOFR with a one-month interest period plus 1.0% (the “Base Rate”). The Eurocurrency RateAdjusted Term SOFR option is the seven, 30, 60, 90 or 180-day Eurocurrency rate,SOFR, plus a term SOFR adjustment of 0.10%, subject to a 0% floor (the “Eurocurrency Rate”“Adjusted Term SOFR”). The interest rates are as follows:
| | | | | | | | | | | |
| BASE RATE ELECTION | | EUROCURRENCY RATEADJUSTED TERM SOFR ELECTION |
Term loan A and revolvingRevolving credit facility | 50 to 150 basis points over the Base Rate | | 150 to 250 basis points over the Eurocurrency RateAdjusted Term SOFR |
| | | |
Fees on letters of credit and daily unused availability underThe transition to SOFR did not materially impact the revolving credit facility are 150interest rate applied to 250 basis points and 25 to 40 basis points, respectively.
The following is a summary of required quarterly amortization payments for the Term loan A (dollars in thousands):
| | | | | | | | |
SCHEDULED QUARTERLY PAYMENT DATES | | TERM LOAN A |
December 26, 2021 through June 30, 2024 | | $ | 2,500 | |
September 29, 2024 through June 29, 2025 | | $ | 3,750 | |
September 28, 2025 and December 28, 2025 | | $ | 5,000 | |
The Senior Secured Credit Facility contains mandatory prepayment requirements for the Term loan A, including the requirement that the Company prepay outstanding amounts under these loans with 50% of its annual excess cash flow, as defined in the Second Amended and Restated Credit Agreement, commencing with the fiscal year ending
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
December 25, 2022. The amount of outstanding loans required to be prepaid in accordance with the debt covenants may vary based on the Company’s CSSNLR and year end results.
Total Net Leverage Ratio (“TNLR”) isborrowings. No other material changes were made to the ratio of Consolidated Total Debt (Current portion of long-term debt and Long-term debt, net of cash, excluding the 2025 Notes) to Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization and certain other adjustments as defined in the Second Amended and Restated Credit Agreement). The Second Amended and Restated Credit Agreement requires a TNLR not to exceed 4.50 to 1.00. Seasonally annualized Consolidated EBITDA for the quarterly period ended September 26, 2021 was calculated as Consolidated EBITDA for the three consecutive quarters ending September 26, 2021 divided by 77.0%.
The Second Amended and Restated Credit Agreement limits, subject to certain exceptions, the Company’s ability and the ability of its subsidiaries to: incur additional indebtedness; make significant payments; sell assets; pay dividends and other restricted payments; make certain investments; acquire certain assets; effect mergers and similar transactions; and effect certain other transactions with affiliates. The Company is also limited to $200.0 million of aggregate capital expenditures during the year ended December 26, 2021. The Second Amended and Restated Credit Agreement also prohibited the Company from paying certain dividends and making certain restricted payments and acquisitions until the Company was in compliance with its TNLR covenant for the period ended September 26, 2021.
As of September 26, 2021 and December 27, 2020, the Company was in compliance with its debt covenants.
Following is a summary of principal paymentsterms of the Company’s total consolidated debt outstandingCredit Agreement as a result of the period indicated:
| | | | | |
(dollars in thousands) | SEPTEMBER 26, 2021 |
Year 1 | $ | 11,110 | |
Year 2 | 10,757 | |
Year 3 | 11,826 | |
Year 4 | 246,424 | |
Year 5 | 274,087 | |
Thereafter | 300,000 | |
Total payments | 854,204 | |
Less: unamortized debt discount and issuance costs | (14,871) | |
Less: finance lease interest | (182) | |
Total principal payments | $ | 839,151 | |
| |
| |
Deferred Financing Fees - During the thirty-nine weeks ended September 26, 2021, the Company deferred $5.5 million and $5.9 million of financing costs incurred in connection with the 2029 Notes and Second Amended Credit Agreement, respectively. Deferred financing fees of $3.7 million associated with the revolving credit facility portion of the Second Amended Credit Agreement were recorded in Other assets, net and all other deferred financing fees were recorded in Long-term debt, net.Agreement.
11.7. Convertible Senior Notes
2025 Notes - In May 2020, the Company completed a $230.0 million principal amount private offering of 5.00% convertible senior notes due in 2025. The 2025 Notes are governed by the terms of an indenture between the Company and Wells Fargo Bank, National Association, as the Trustee. The 2025 Notes mature on May 1, 2025, unless earlier converted, redeemed or purchased by the Company. The 2025 Notes bear cash interest at an annual rate of 5.00%, payable semi-annually in arrears on May 1 and November 1 of each year. Net proceeds from the
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
2025 Notes offering were approximately $221.6 million, after deducting the initial purchaser’s discounts and commissions and the Company’s offering expenses.
The initial conversion rate applicable to the 2025 Notes iswas 84.122 shares of common stock per $1,000 principal amount of 2025 Notes, or a total of approximately 19.348 million shares for the total $230.0 million principal amount. This initial conversion rate iswas equivalent to an initial conversion price of approximately $11.89 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events.
Prior to the close of business on the business day immediately preceding November 1, 2024, holders may convert all or a portion of their 2025 Notes under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading daysIn connection with dividends paid during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (ii) during the 5 consecutive business days immediately after any 5 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2025 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock andthirteen weeks ended March 27, 2022, the conversion rate on each such trading day; (iii) upon the occurrence of specified corporate events or distributions on the Company’s common stock; (iv) if the Company callsfor the 2025 Notes for redemption, and (v) at any time from, and including November 1, 2024 until the closedecreased to approximately $11.82 per share, which represents 84.603 shares of business on the second scheduled trading day immediately before the maturity date.
The 2025 Notes will be redeemable by the Company, in whole or in part, at the Company’s option at any time, and from time to time, on or after May 1, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to thecommon stock per $1,000 principal amount of the 2025 Notes, to be redeemed, plus accrued and unpaid interest, but only if the last reported sale price per shareor a total of the Company’s common stock exceeds 130% of the conversion price on: (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any of the 2025 Notes for redemption will constitute a make-whole fundamental change with respect to that note, in which case the conversion rate applicable to the conversion of the 2025 Notes will be increased in certain circumstances if it is converted after it is called for redemption.approximately 19.459 million shares.
If a fundamental change occurs prior to the maturity date, holders may require the Company to repurchase all or a portion of their 2025 Notes for cash at a price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest. Holders of 2025 Notes who convert their 2025 Notes in connection with a notice of a redemption or a make-whole fundamental change may be entitled to a premium in the form of an increase in the conversion rate of the 2025 Notes.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table includes the outstanding principal amount and carrying value of the 2025 Notes as of the periods indicated:
| (dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 | (dollars in thousands) | MARCH 27, 2022 | | DECEMBER 26, 2021 |
Long-term debt, net | Long-term debt, net | | | | Long-term debt, net | | | |
Principal | Principal | $ | 230,000 | | | $ | 230,000 | | Principal | $ | 230,000 | | | $ | 230,000 | |
Less: debt discount (1) | — | | | (59,862) | | |
Less: debt issuance costs (1)(2) | (6,296) | | | (5,427) | | |
Less: debt issuance costs (1) | | Less: debt issuance costs (1) | (5,495) | | | (5,898) | |
Net carrying amount | Net carrying amount | $ | 223,704 | | | $ | 164,711 | | Net carrying amount | $ | 224,505 | | | $ | 224,102 | |
Equity component (1) | $ | — | | | $ | 64,367 | | |
________________
(1)In connection with the adoption of ASU No. 2020-06, debt discount and the equity component of the 2025 Notes were de-recognized and $2.1 million of issuance costs that were previously allocated to the equity component were reclassified as debt issuance costs during the thirty-nine weeks ended September 26, 2021.
(2)Debt issuance costs are amortized to Interest expense, net using the effective interest method over the 2025 Notes’ expected life.
Following is a summary of interest expense for the 2025 Notes, by component, for the periods indicated:
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | (dollars in thousands) | | MARCH 27, 2022 | | MARCH 28, 2021 |
Coupon interest | Coupon interest | $ | 2,875 | | | $ | 2,875 | | | $ | 8,625 | | | $ | 4,568 | | Coupon interest | | $ | 2,875 | | | $ | 2,875 | |
Deferred discount amortization | — | | | 2,407 | | | — | | | 3,786 | | |
Deferred issuance cost amortization | Deferred issuance cost amortization | 392 | | | 215 | | | 1,159 | | | 343 | | Deferred issuance cost amortization | | 404 | | | 381 | |
Total interest expense (1) | Total interest expense (1) | $ | 3,267 | | | $ | 5,497 | | | $ | 9,784 | | | $ | 8,697 | | Total interest expense (1) | | $ | 3,279 | | | $ | 3,256 | |
________________
(1)The effective rate of the 2025 Notes over their expected life wasis 5.85% for the thirteen and thirty-nine weeks ended September 26, 2021 and 13.73% for the thirteen and thirty-nine weeks ended September 27, 2020..
Based on the daily closing prices of the Company’s stock during the quarter ended September 26, 2021,March 27, 2022, holders of the 2025 Notes are eligible to convert their 2025 Notes during the fourthsecond quarter of 2021. In February 2021, the Company provided the trustee of the 2025 Notes notice of its irrevocable election under the 2025 Notes indenture to settle the principal portion of the 2025 Notes upon conversion in cash and any excess in shares.2022.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Convertible Note Hedge and Warrant Transactions - In connection with the offering of the 2025 Notes, the Company entered into convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with certain of the initial purchasers of the 2025 Notes and/or their respective affiliates and other financial institutions (in this capacity, the “Hedge Counterparties”). Concurrently with the Company’s entry into the Convertible Note Hedge Transactions, the Company also entered into separate, warrant transactions with the Hedge Counterparties collectively relating to the same number of shares of the Company’s common stock, subject to customary anti-dilution adjustments, and for which the Company received proceeds that partially offset the cost of entering into the Convertible Note Hedge Transactions (the “Warrant Transactions”).
The Convertible Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock that initially underlie the 2025 Notes, and are expected generally to reduce the potential equity dilution in excess of the principal amount due upon conversion of the 2025 Notes. The Warrant Transactions have a dilutive effect on the Company’s common stock to the extent that the price of its common stock exceeds the strike price of the Warrant Transactions. The strike price iswas initially $16.64 per share and is subject to certain adjustments under the terms of the Warrant Transactions. In connection with dividends paid during the thirteen weeks ended March 27, 2022, the strike price for the Warrant Transactions decreased to $16.55.
8. Other Long-term Liabilities, Net
Other long-term liabilities, net, consisted of the following as of the periods indicated:
| | | | | | | | | | | |
(dollars in thousands) | MARCH 27, 2022 | | DECEMBER 26, 2021 |
Accrued insurance liability | $ | 30,779 | | | $ | 31,517 | |
| | | |
Deferred payroll tax liabilities (1) | — | | | 27,302 | |
Executive management deferred compensation obligations | 21,032 | | | 23,543 | |
Other long-term liabilities | 38,692 | | | 42,880 | |
| $ | 90,503 | | | $ | 125,242 | |
_______________
(1)During the thirteen weeks ended March 27, 2022, the Company reclassified $27.3 million of payroll taxes deferred under the Coronavirus, Aid, Relief and Economic Security Act to current.
9. Stockholders’ Equity
Share Repurchases - On February 8, 2022, the Company’s Board of Directors (the “Board”) approved a share repurchase program (the “2022 Share Repurchase Program”) under which the Company was authorized to repurchase up to $125.0 million of its outstanding common stock. The 2022 Share Repurchase Program will expire on August 9, 2023. As of March 27, 2022, $113.3 million remained available for repurchase under the 2022 Share Repurchase Program. Following is a summary of the shares repurchased under the Company’s share repurchase program during fiscal year 2022:
| | | | | | | | | | | | | | | | | |
(in thousands, except per share data) | NUMBER OF SHARES | | AVERAGE REPURCHASE PRICE PER SHARE | | AMOUNT |
| | | | | |
First fiscal quarter (1) | 551 | | | $ | 21.26 | | | $ | 11,702 | |
________________
(1)Subsequent to March 27, 2022, the Company repurchased 723 thousand shares of its common stock for $15.6 million under a Rule 10b5-1 plan.
Dividends - The Convertible Note Hedge Transactions are exercisable upon conversionCompany declared and paid dividends per share during fiscal year 2022 as follows:
| | | | | | | | | | | | | | | |
| | | |
| | | |
(dollars in thousands, except per share data) | | | DIVIDENDS PER SHARE | | | | AMOUNT |
First fiscal quarter | | | $ | 0.14 | | | | | $ | 12,559 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
In April 2022, the Board declared a quarterly cash dividend of $0.14 per share, payable on May 25, 2022 to shareholders of record at the 2025 Notes. The Convertible Note Hedge Transactions expire upon maturityclose of the 2025 Notes. The Warrant Transactions are exercisablebusiness on the expiration dates included in the related forms of confirmation.May 11, 2022.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
12. Other Long-term Liabilities, Net
Other long-term liabilities, net, consisted of the following as of the periods indicated:
| | | | | | | | | | | |
(dollars in thousands) | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 |
Accrued insurance liability | $ | 31,422 | | | $ | 32,128 | |
Chef and Restaurant Managing Partner deferred compensation obligations | 18,413 | | | 32,306 | |
Deferred payroll tax liabilities (1) | 27,302 | | | 55,204 | |
Other long-term liabilities (2) | 53,245 | | | 65,717 | |
| $ | 130,382 | | | $ | 185,355 | |
_______________
(1)During the thirty-nine weeks ended September 26, 2021, the Company reclassified $27.3 million of payroll taxes deferred under the CARES Act to current.
(2)The Company’s hedge liability decreased by $13.7 million during the thirty-nine weeks ended September 26, 2021 primarily from the termination of certain interest rate swaps. See Note 14 - Derivative Instruments and Hedging Activities for additional details.
13. Stockholders’ Equity
Redeemable Preferred Stock - In connection with the development of its Abbraccio Cucina Italiana (“Abbraccio”) concept in 2015, the Company sold preferred shares of its Abbraccio concept (“Abbraccio Shares”) to certain investors. During the thirteen weeks ended March 29, 2020, the Company exercised a call option to purchase all outstanding Abbraccio Shares for $1.0 million and recorded a reduction to Accumulated deficit and an increase in Net loss applicable to common stockholders of $3.5 million for the consideration paid in excess of the Abbraccio Shares’ carrying value.
Accumulated Other Comprehensive Loss (“AOCL”) - Following are the components of AOCL as of the periods indicated:
| (dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 | (dollars in thousands) | MARCH 27, 2022 | | DECEMBER 26, 2021 |
Foreign currency translation adjustment | Foreign currency translation adjustment | $ | (183,770) | | | $ | (188,883) | | Foreign currency translation adjustment | $ | (184,197) | | | $ | (195,480) | |
Unrealized loss on derivatives, net of tax | Unrealized loss on derivatives, net of tax | (13,900) | | | (22,563) | | Unrealized loss on derivatives, net of tax | (6,234) | | | (10,509) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | $ | (197,670) | | | $ | (211,446) | | Accumulated other comprehensive loss | $ | (190,431) | | | $ | (205,989) | |
|
Following are the components of Other comprehensive income (loss) attributable to Bloomin’ Brands for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Foreign currency translation adjustment | $ | 1,673 | | | $ | (4,095) | | | $ | 5,113 | | | $ | (40,538) | |
| | | | | | | |
Unrealized (loss) gain on derivatives, net of tax (1) | (153) | | | 261 | | | (323) | | | (14,631) | |
Reclassification of adjustments for loss on derivatives included in Net income (loss), net of tax (2) | 1,519 | | | 2,962 | | | 6,036 | | | 6,943 | |
Amortization of terminated interest rate swaps, net of tax | 1,479 | | | — | | | 2,950 | | | — | |
Total unrealized gain (loss) on derivatives, net of tax | 2,845 | | | 3,223 | | | 8,663 | | | (7,688) | |
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Other comprehensive income (loss) attributable to Bloomin’ Brands | $ | 4,518 | | | $ | (872) | | | $ | 13,776 | | | $ | (48,226) | |
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(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Foreign currency translation adjustment | | | | | $ | 11,283 | | | $ | (6,575) | |
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Unrealized gain (loss) on derivatives, net of tax | | | | | 573 | | | (42) | |
Reclassification of adjustments for loss on derivatives included in Net income, net of tax (1) | | | | | 681 | | | 3,003 | |
Impact of terminated interest rate swaps included in Net income, net of tax | | | | | 3,021 | | | — | |
Total unrealized gain on derivatives, net of tax | | | | | 4,275 | | | 2,961 | |
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Other comprehensive income (loss) attributable to Bloomin’ Brands | | | | | $ | 15,558 | | | $ | (3,614) | |
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________________
(1)Unrealized loss on derivatives is net of tax of $5.1 million for the thirty-nine weeks ended September 27, 2020.
(2)Reclassifications of adjustments for loss on derivatives are net of tax. See Note 1410 - Derivative Instruments and Hedging Activities for the tax impact of reclassifications.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
14.10. Derivative Instruments and Hedging Activities
Cash Flow Hedges of Interest Rate Risk - In October 2018, the Company entered into variable-to-fixed interest rate swap agreements with 12 counterparties to hedge a portion of the cash flows of the Company’s variable rate debt. The swap agreements had an aggregate notional amount of $550.0 million and mature on November 30, 2022. Under the terms of the swap agreements, the Company pays a weighted-averageweighted average fixed rate of 3.04% on the notional amount and receives payments from the counterparty based on the one-month LIBOR rate.
In connection with the refinancing of its Former Credit Facility, on April 16,LIBOR. During 2021, the Company terminated its variable-to-fixed interest rate swap agreements with 7certain counterparties havingand as a result, as of March 27, 2022 had interest rate swap agreements remaining with 2counterparties for an aggregate notional amount of $275.0 million for a payment of approximately $13.3 million, including accrued interest. Following these terminations, $13.4 million of unrealized losses related to the terminated swap agreements included in AOCL will be amortized on a straight-line basis to Interest expense, net over the remaining original term of the terminated swaps.$125.0 million.
The Company’s swap agreements have been designated and qualify as cash flow hedges, are recognized on its Consolidated Balance Sheets at fair value and are classified based on the instruments’ maturity dates. As of September 26, 2021,March 27, 2022, the Company estimated $16.1$8.5 million will be reclassified to Interest expense, net overthrough the next 12 fiscal months,November 2022 maturity date of the swaps, including interest expense related to the terminated swap agreements discussed above.agreements.
The following table presents the fair value and classification of the Company’s swap agreements, as of the periods indicated:
| (dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 | | CONSOLIDATED BALANCE SHEET CLASSIFICATION | (dollars in thousands) | MARCH 27, 2022 | | DECEMBER 26, 2021 | | CONSOLIDATED BALANCE SHEET CLASSIFICATION |
| Interest rate swaps - liability(1) | Interest rate swaps - liability(1) | $ | 7,502 | | | $ | 14,855 | | | Accrued and other current liabilities | Interest rate swaps - liability(1) | $ | 1,368 | | | $ | 3,056 | | | Accrued and other current liabilities |
Interest rate swaps - liability | 1,917 | | | 15,640 | | | Other long-term liabilities, net | |
Total fair value of derivative instruments - liabilities (1) | $ | 9,419 | | | $ | 30,495 | | | |
| | Accrued interest | Accrued interest | $ | 609 | | | $ | 1,237 | | | Accrued and other current liabilities | Accrued interest | $ | 275 | | | $ | 276 | | | Accrued and other current liabilities |
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____________________
(1)See Note 1612 - Fair Value Measurements for fair value discussion of the interest rate swaps.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table summarizes the effects of the swap agreements on Net income (loss) for the periods indicated:
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | (dollars in thousands) | | MARCH 27, 2022 | | MARCH 28, 2021 |
Interest rate swap expense recognized in Interest expense, net | Interest rate swap expense recognized in Interest expense, net | $ | (2,045) | | | $ | (3,991) | | | $ | (8,127) | | | $ | (9,353) | | Interest rate swap expense recognized in Interest expense, net | | $ | (917) | | | $ | (4,044) | |
Income tax benefit recognized in (Benefit) provision for income taxes | 526 | | | 1,029 | | | 2,091 | | | 2,410 | | |
Total effects on Net income (loss) | $ | (1,519) | | | $ | (2,962) | | | $ | (6,036) | | | $ | (6,943) | | |
Income tax benefit recognized in Provision for income taxes | | Income tax benefit recognized in Provision for income taxes | | 236 | | | 1,041 | |
Total effects on Net income (1) | | Total effects on Net income (1) | | $ | (681) | | | $ | (3,003) | |
____________________
(1)Excludes the effects on Net income of terminated interest rate swaps.
By utilizing the interest rate swaps, the Company is exposed to credit-related losses in the event that the counterparty fails to perform under the terms of the derivative contract. To mitigate this risk, the Company enters into derivative contracts with major financial institutions based upon credit ratings and other factors. The Company continually assesses the creditworthiness of its counterparties. As of September 26, 2021,March 27, 2022, all counterparties to the interest rate swaps had performed in accordance with their contractual obligations.
The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if the repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on indebtedness.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
As of SeptemberIn connection with the Amended Credit Agreement, on April 26, 2021 and December 27, 2020,2022 the fair value of the Company’sCompany terminated its remaining variable-to-fixed interest rate swaps was in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk, of $10.1 million and $32.2 million, respectively. As of September 26, 2021 and December 27, 2020,swap agreements. Following these terminations, the Company has not posted any collateralunrealized losses related to these agreements. If the Company had breached any of these provisions as of September 26, 2021 and December 27, 2020, it could have been requiredterminated swap agreements included in Accumulated other comprehensive loss will be amortized to settle its obligations under the agreements at their termination value of $10.1 million and $32.2 million, respectively.Interest expense, net during 2022.
15.11. Leases
The following table includes a detail of lease assets and liabilities included on the Company’s Consolidated Balance Sheets as of the periods indicated:
| (dollars in thousands) | (dollars in thousands) | CONSOLIDATED BALANCE SHEET CLASSIFICATION | | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 | (dollars in thousands) | CONSOLIDATED BALANCE SHEET CLASSIFICATION | | MARCH 27, 2022 | | DECEMBER 26, 2021 |
Operating lease right-of-use assets | Operating lease right-of-use assets | Operating lease right-of-use assets | | $ | 1,152,268 | | | $ | 1,172,910 | | Operating lease right-of-use assets | Operating lease right-of-use assets | | $ | 1,124,517 | | | $ | 1,130,873 | |
Finance lease right-of-use assets (1) | Finance lease right-of-use assets (1) | Property, fixtures and equipment, net | | 2,349 | | | 1,947 | | Finance lease right-of-use assets (1) | Property, fixtures and equipment, net | | 3,055 | | | 2,074 | |
Total lease assets, net | Total lease assets, net | | $ | 1,154,617 | | | $ | 1,174,857 | | Total lease assets, net | | $ | 1,127,572 | | | $ | 1,132,947 | |
| Current operating lease liabilities (2) | Current operating lease liabilities (2) | Accrued and other current liabilities | | $ | 178,563 | | | $ | 176,791 | | Current operating lease liabilities (2) | Accrued and other current liabilities | | $ | 177,633 | | | $ | 177,028 | |
Current finance lease liabilities | Current finance lease liabilities | Current portion of long-term debt | | 1,087 | | | 1,210 | | Current finance lease liabilities | Current portion of long-term debt | | 1,220 | | | 958 | |
Non-current operating lease liabilities (3)(2) | Non-current operating lease liabilities (3)(2) | Non-current operating lease liabilities | | 1,195,996 | | | 1,216,666 | | Non-current operating lease liabilities (3)(2) | Non-current operating lease liabilities | | 1,172,564 | | | 1,178,998 | |
Non-current finance lease liabilities | Non-current finance lease liabilities | Long-term debt, net | | 1,435 | | | 974 | | Non-current finance lease liabilities | Long-term debt, net | | 1,958 | | | 1,264 | |
Total lease liabilities | Total lease liabilities | | $ | 1,377,081 | | | $ | 1,395,641 | | Total lease liabilities | | $ | 1,353,375 | | | $ | 1,358,248 | |
________________
(1)Net of accumulated amortization of $3.1$3.7 million and $2.3$3.3 million as of SeptemberMarch 27, 2022 and December 26, 2021, and December 27, 2020, respectively.
(2)Excludes COVID-19-related deferred rent accruals of $2.1 million and $12.8 million as of September 26, 2021 and December 27, 2020, respectively, andcurrent accrued contingent percentage rent of $3.6$4.0 million and $2.7$3.5 million, as of SeptemberMarch 27, 2022 and December 26, 2021, respectively, and December 27, 2020, respectively.
(3)Excludesimmaterial current and non-current COVID-19-related non-current deferred rent accruals of $0.6 million and $1.2 million as of September 26, 2021 and December 27, 2020, respectively.
Following is a summary of expenses and income related to leases recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods indicated:
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| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) CLASSIFICATION | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Operating leases (1) | Other restaurant operating | | $ | 44,807 | | | $ | 45,341 | | | $ | 133,362 | | | $ | 133,999 | |
Variable lease cost (2) | Other restaurant operating | | 1,574 | | | (1,677) | | | 3,082 | | | (1,603) | |
Finance leases: | | | | | | | | | |
Amortization of leased assets | Depreciation and amortization | | 280 | | | 328 | | | 800 | | | 985 | |
Interest on lease liabilities | Interest expense, net | | 34 | | | 37 | | | 101 | | | 120 | |
Sublease revenue | Franchise and other revenues | | (3,276) | | | (409) | | | (6,936) | | | (2,195) | |
Lease costs, net | | | $ | 43,419 | | | $ | 43,620 | | | $ | 130,409 | | | $ | 131,306 | |
________________
(1)Excludes rent expense for office facilities and Company-owned closed or subleased properties of $3.2 million and $3.6 million for the thirteen weeks ended September 26, 2021 and September 27, 2020, respectively, and $9.9 million and $10.4 million for the thirty-nine weeks ended September 26, 2021 and September 27, 2020, respectively, which is included in General and administrative expense. Also excludes certain immaterial supply chain related rent expense included in Food and beverage costs.
(2)Includes COVID-19-related rent abatement for all periods presented.accruals.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Following is a summary of expenses and income related to leases recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income for the periods indicated:
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| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME CLASSIFICATION | | | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Operating leases (1) | Other restaurant operating | | | | | | $ | 45,361 | | | $ | 44,792 | |
Variable lease cost (2) | Other restaurant operating | | | | | | 1,883 | | | 777 | |
Finance leases: | | | | | | | | | |
Amortization of leased assets | Depreciation and amortization | | | | | | 337 | | | 262 | |
Interest on lease liabilities | Interest expense, net | | | | | | 32 | | | 36 | |
Sublease revenue | Franchise and other revenues | | | | | | (2,558) | | | (835) | |
Lease costs, net | | | | | | | $ | 45,055 | | | $ | 45,032 | |
________________
(1)Excludes rent expense for office facilities and Company-owned closed or subleased properties of $3.0 million and $3.5 million for the thirteen weeks ended March 27, 2022 and March 28, 2021, respectively, which is included in General and administrative expense.
(2)Includes COVID-19-related rent abatements for the thirteen weeks ended March 28, 2021.
The following table is a summary of othercash flow impacts to the Company’s Consolidated Financial Statements related to its leases for the periods indicated:
| | | THIRTY-NINE WEEKS ENDED | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | (dollars in thousands) | MARCH 27, 2022 | | MARCH 28, 2021 |
| Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
Cash paid for amounts included in the measurement of operating lease liabilities | Cash paid for amounts included in the measurement of operating lease liabilities | $ | 155,661 | | | $ | 127,642 | | Cash paid for amounts included in the measurement of operating lease liabilities | $ | 48,560 | | | $ | 52,717 | |
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16.12. Fair Value Measurements
Fair value is the price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date. Fair value is categorized into one of the following three levels based on the lowest level of significant input:
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Level 1 | | Unadjusted quoted market prices in active markets for identical assets or liabilities |
Level 2 | | Observable inputs available at measurement date other than quoted prices included in Level 1 |
Level 3 | | Unobservable inputs that cannot be corroborated by observable market data |
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Fair Value Measurements on a Recurring Basis - The following table summarizes the Company’s financial assets and liabilities measured at fair value by hierarchy level on a recurring basis as of the periods indicated:
| | | SEPTEMBER 26, 2021 | | | DECEMBER 27, 2020 | | | MARCH 27, 2022 | | | DECEMBER 26, 2021 | |
(dollars in thousands) | (dollars in thousands) | TOTAL | | LEVEL 1 | | LEVEL 2 | | | TOTAL | | LEVEL 1 | | LEVEL 2 | | (dollars in thousands) | TOTAL | | LEVEL 1 | | LEVEL 2 | | | TOTAL | | LEVEL 1 | | LEVEL 2 | |
Assets: | Assets: | | | | | | | | | | | | | | Assets: | | | | | | | | | | | | | |
Cash equivalents: | Cash equivalents: | | | | | Cash equivalents: | | | | |
Fixed income funds | Fixed income funds | $ | 7,973 | | | $ | 7,973 | | | $ | — | | | | $ | 15,404 | | | $ | 15,404 | | | $ | — | | | Fixed income funds | $ | 4,552 | | | $ | 4,552 | | | $ | — | | | | $ | 6,714 | | | $ | 6,714 | | | $ | — | | |
Money market funds | Money market funds | 10,308 | | | 10,308 | | | — | | | | 16,494 | | | 16,494 | | | — | | | Money market funds | 9,828 | | | 9,828 | | | — | | | | 9,039 | | | 9,039 | | | — | | |
Restricted cash equivalents: | Restricted cash equivalents: | | | | | Restricted cash equivalents: | | | | |
| Money market funds | Money market funds | 4,247 | | | 4,247 | | | — | | | | 428 | | | 428 | | | — | | | Money market funds | 101 | | | 101 | | | — | | | | 1,472 | | | 1,472 | | | — | | |
| Total asset recurring fair value measurements | Total asset recurring fair value measurements | $ | 22,528 | | | $ | 22,528 | | | $ | — | | | | $ | 32,326 | | | $ | 32,326 | | | $ | — | | | Total asset recurring fair value measurements | $ | 14,481 | | | $ | 14,481 | | | $ | — | | | | $ | 17,225 | | | $ | 17,225 | | | $ | — | | |
| Liabilities: | Liabilities: | | | | | Liabilities: | | | | |
Accrued and other current liabilities: | Accrued and other current liabilities: | | | | | Accrued and other current liabilities: | | | | |
Derivative instruments - interest rate swaps | Derivative instruments - interest rate swaps | $ | 7,502 | | | $ | — | | | $ | 7,502 | | | | $ | 14,855 | | | $ | — | | | $ | 14,855 | | | Derivative instruments - interest rate swaps | $ | 1,368 | | | $ | — | | | $ | 1,368 | | | | $ | 3,056 | | | $ | — | | | $ | 3,056 | | |
| Other long-term liabilities: | | | | | |
Derivative instruments - interest rate swaps | 1,917 | | | — | | | 1,917 | | | | 15,640 | | | — | | | 15,640 | | | |
| Total liability recurring fair value measurements | Total liability recurring fair value measurements | $ | 9,419 | | | $ | — | | | $ | 9,419 | | | | $ | 30,495 | | | $ | — | | | $ | 30,495 | | | Total liability recurring fair value measurements | $ | 1,368 | | | $ | — | | | $ | 1,368 | | | | $ | 3,056 | | | $ | — | | | $ | 3,056 | | |
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Fair value of each class of financial instrument is determined based on the following:
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FINANCIAL INSTRUMENT | | METHODS AND ASSUMPTIONS |
Fixed income funds and Money market funds | | Carrying value approximates fair value because maturities are less than three months. |
Derivative instruments | | The Company’s derivative instruments include interest rate swaps. Fair value measurements are based on the contractual terms of the derivatives and use observable market-based inputs. The interest rate swaps are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest rate curves and credit spreads. The Company also considers its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. As of SeptemberMarch 27, 2022 and December 26, 2021, and December 27, 2020, the Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. |
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BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Fair Value Measurements on a Nonrecurring Basis - Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to property, fixtures and equipment, operating lease right-of-use assets, goodwill and other intangible assets, which are remeasured when carrying value exceeds fair value. Carrying value after impairment approximates fair value. The following table summarizes the Company’s assets measured at fair value by hierarchy level on a nonrecurring basis, for the periods indicated:
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| SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
(dollars in thousands) | REMAINING CARRYING VALUE | | TOTAL IMPAIRMENT | | REMAINING CARRYING VALUE | | TOTAL IMPAIRMENT |
Assets held for sale (1) | $ | — | | | $ | — | | | $ | 1,182 | | | $ | 75 | |
Operating lease right-of-use assets (1) | 7,651 | | | 1,466 | | | 70,841 | | | 23,567 | |
Property, fixtures and equipment (2) | 8,928 | | | 7,260 | | | 27,978 | | | 38,381 | |
Goodwill and other assets (3) | — | | | — | | | 748 | | | 2,683 | |
| $ | 16,579 | | | $ | 8,726 | | | $ | 100,749 | | | $ | 64,706 | |
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____________________
(1)Asset carrying values measured using discounted cash flow models (Level 3).
(2)Carrying values measured using Level 2 inputs to estimate fair value totaled $2.2 million for the thirty-nine weeks ended September 27, 2020. All other assets were valued using Level 3 inputs. Third-party market appraisals (Level 2) and discounted cash flow models (Level 3) were used to estimate fair value.
(3)Other assets generally measured using the quoted market value of comparable assets (Level 2).
See Note 4 - Impairments and Exit Costs for information regarding impairment charges resulting from the fair value measurement performed on a nonrecurring basis during the thirty-nine weeks ended September 27, 2020. Projected future cash flows, including discount rate and growth rate assumptions, are derived from then current economic conditions, expectations of management and projected trends of current operating results. As a result, the Company has determined that the majority of the inputs used to value its long-lived assets held and used are unobservable inputs that fall within Level 3 of the fair value hierarchy.
In assessment of impairment for operating locations, the Company determined the fair values of individual operating locations using an income approach, which required discounting projected future cash flows. When determining the stream of projected future cash flows associated with an individual operating location, management made assumptions, including highest and best use and inputs from restaurant operations, where necessary, and about key variables including the following unobservable inputs: revenue growth rates, controllable and uncontrollable expenses, and asset residual values. In order to calculate the present value of those future cash flows, the Company discounted cash flow estimates at its weighted-average cost of capital applicable to the country in which the measured assets reside.
The following table presents quantitative information related to certain unobservable inputs used in the Company’s Level 3 fair value measurements of Operating lease right-of-use assets and Property, fixtures and equipment for the impairment losses incurred during the period indicated:
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| | | | THIRTY-NINE WEEKS ENDED |
UNOBSERVABLE INPUTS | | | | SEPTEMBER 27, 2020 |
Weighted-average cost of capital | | | | 10.4% | to | 11.3% |
Long-term growth rate | | | | | | 1.5% | to | 2.0% |
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Interim Disclosures about Fair Value of Financial Instruments - The Company’s non-derivative financial instruments consist of cash equivalents, accounts receivable, accounts payable and current and long-term debt. The fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts reported on its Consolidated Balance Sheets due to their short duration.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The following table includes the carrying value and fair value of the Company’s debt by hierarchy level as of the periods indicated:
| | | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 | | MARCH 27, 2022 | | DECEMBER 26, 2021 |
| | CARRYING VALUE | | FAIR VALUE LEVEL 2 | | CARRYING VALUE | | FAIR VALUE LEVEL 2 | | CARRYING VALUE | | FAIR VALUE LEVEL 2 | | CARRYING VALUE | | FAIR VALUE LEVEL 2 |
(dollars in thousands) | (dollars in thousands) | | (dollars in thousands) | |
Senior Secured Credit Facility: | Senior Secured Credit Facility: | | | | | | | | | | Senior Secured Credit Facility: | | | | | | | | | |
Term loan A | Term loan A | $ | 197,500 | | | $ | 192,809 | | | | $ | — | | | $ | — | | | Term loan A | $ | 192,500 | | | $ | 188,169 | | | | $ | 195,000 | | | $ | 190,125 | | |
Revolving credit facility | Revolving credit facility | $ | 124,000 | | | $ | 119,390 | | | | $ | — | | | $ | — | | | Revolving credit facility | $ | 10,000 | | | $ | 9,750 | | | | $ | 80,000 | | | $ | 76,926 | | |
Former Credit Facility: | | | | | |
Term loan A | $ | — | | | $ | — | | | | $ | 425,000 | | | $ | 412,250 | | | |
Revolving credit facility | $ | — | | | $ | — | | | | $ | 447,000 | | | $ | 419,612 | | | |
| 2025 Notes | 2025 Notes | $ | 230,000 | | | $ | 541,719 | | | | $ | 230,000 | | | $ | 413,818 | | | 2025 Notes | $ | 230,000 | | | $ | 441,515 | | | | $ | 230,000 | | | $ | 447,615 | | |
2029 Notes | 2029 Notes | $ | 300,000 | | | $ | 314,001 | | | | $ | — | | | $ | — | | | 2029 Notes | $ | 300,000 | | | $ | 286,647 | | | | $ | 300,000 | | | $ | 304,395 | | |
17. Allowance for Expected Credit Losses
The following table is a rollforward of the Company’s trade receivables allowance for expected credit losses for the periods indicated:
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| | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Allowance for expected credit losses, beginning of period | | $ | 3,989 | | | $ | 4,566 | | | $ | 4,095 | | | $ | 199 | |
Adjustment for adoption of ASU No. 2016-13 | | — | | | — | | | — | | | 1,018 | |
Provision for expected credit losses (1) | | — | | | 2 | | | — | | | 3,351 | |
Charge-off of accounts | | (2) | | | (29) | | | (108) | | | (29) | |
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Allowance for expected credit losses, end of period | | $ | 3,987 | | | $ | 4,539 | | | $ | 3,987 | | | $ | 4,539 | |
________________(1)In March 2020, the Company fully reserved substantially all of its outstanding franchise receivables in response to the economic impact of the COVID-19 pandemic. See Note 2 - COVID-19 Charges for details regarding the impact of the COVID-19 pandemic on the Company’s financial results.
The Company is also exposed to credit losses from off-balance sheet lease guarantees primarily related to the divestiture of certain formerly Company-owned restaurant sites. See Note 19 - Commitments and Contingencies for details regarding these lease guarantees.
18. Income Taxes
| | | | | | | | | | | | | | | | | | | | | | | |
| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Income (loss) before (benefit) provision for income taxes | $ | 597 | | | $ | (32,554) | | | $ | 184,562 | | | $ | (214,830) | |
(Benefit) provision for income taxes | $ | (4,454) | | | $ | (14,776) | | | $ | 24,827 | | | $ | (70,210) | |
Effective income tax rate | (NM) | | 45.4 | % | | 13.5 | % | | 32.7 | % |
________________
NM Not meaningful.
For the thirteen weeks ended September 26, 2021, the benefit for income taxes includes the impact of changes to the estimate of the forecasted full-year effective tax rate relative to prior quarters in 2021. The benefit of FICA tax credits on certain employees’ tips reduced the effective tax rate as a result of forecasted pre-tax income. For the
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
thirteen weeks ended September 27, 2020, the benefit of FICA tax credits on certain employees’ tips increased the effective tax rate as a result of forecasted pre-tax book loss.13. Income Taxes
| | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Income before provision for income taxes | | | | | $ | 93,623 | | | $ | 76,391 | |
Provision for income taxes | | | | | $ | 15,929 | | | $ | 6,593 | |
Effective income tax rate | | | | | 17.0 | % | | 8.6 | % |
The effective income tax rate for the thirty-ninethirteen weeks ended September 26, 2021 decreasedMarch 27, 2022 increased by 19.28.4 percentage points as compared to the thirty-ninethirteen weeks ended September 27, 2020.March 28, 2021. The decreaseincrease was primarily due to the benefit of FICA tax credits on certain employees’ tips reducingchange in the effective tax rate in 2021 as a resultamount and mix of forecasted pre-tax book income as compared to increasingacross the effective tax rate in 2020 as a result of forecasted pre-tax book loss.Company’s U.S. and international subsidiaries.
On December 28, 2021, the U.S. Treasury and the Internal Revenue Service released final regulations that, among other things, provide guidance on several aspects of the foreign tax credit rules. As part of December 27, 2020,the guidance issued, these regulations change longstanding foreign tax credit regulations that now make foreign taxes paid to certain countries no longer creditable in the United States. The Company expects that a portion of post-2021 foreign taxes paid will not be creditable in the United States. Furthermore, the impact of these regulations will result in the utilization of a portion of existing prior year foreign tax credit carryforwards for which the Company had $155.3 million in general business tax credit carryforwards, which havepreviously recorded a 20-year carryforward periodvaluation allowance. The valuation allowance related to the credits expected to be utilized will be released during 2022. The impact of non-creditable foreign taxes and are utilized on a first-in, first-out basis. The Company expects to increase its general business credit carryforwards in 2021 by approximately $5 million to $10 million. The Company currently expects to utilize these tax credit carryforwards within a 10-year period. However, the Company’s ability to utilize these tax credits could be adversely impacted by, among other items, a future ownership change as defined under Section 382release of the Internal Revenue Code.valuation allowance has been considered as part of the effective income tax rate for the thirteen weeks ended March 27, 2022.
The Company has a blended federal and state statutory rate of approximately 26%. The effective income tax raterates for the thirty-ninethirteen weeks ended September 26,March 27, 2022 and March 28, 2021 waswere lower than the statutory rate primarily due to the benefit of FICA tax credits on certain employees’ tips.
19.14. Commitments and Contingencies
Litigation and Other Matters - The Company is subject to legal proceedings, claims and liabilities, such as liquor liability, slip and fall cases, wage-and-hour and other employment-related litigation, which arise in the ordinary course of business. A reserve is recorded when it is both: (i) probable that a loss has occurred and (ii) the amount of loss can be reasonably estimated. There may be instances in which an exposure to loss exceeds the recorded reserve. The Company evaluates, on a quarterly basis, developments in legal proceedings that could cause an increase or decrease in the amount of the reserve that has been previously recorded, or a revision to the disclosed estimated range of possible losses, as applicable.
The Company’s legal proceedings range from cases brought by a single plaintiff to threatened class actions with many putative class members. While some matters pending against the Company specify the damages claimed by the plaintiff or class, many seek unspecified amounts or are at very early stages of the legal process. Even when the amount of damages claimed against the Company are stated, the claimed amount may be exaggerated, unsupported or unrelated to possible outcomes, and as such, are not meaningful indicators of the Company’s potential liability or financial exposure. As a result, some matters have not yet progressed sufficiently through discovery or development of important factual information and legal issues to enable the Company to estimate an amount of loss or a range of possible loss.
The Company recorded reserves of $6.3$7.5 million and $4.6$7.1 million for certain of its outstanding legal proceedings as of SeptemberMarch 27, 2022 and December 26, 2021, and December 27, 2020, respectively, within Accrued and other current liabilities and Other long-term liabilities on its Consolidated Balance Sheets. While the Company believes that additional losses beyond these accruals are reasonably possible, it cannot estimate a possible loss contingency or range of reasonably possible loss contingencies beyond these accruals.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The Company intends to defend itself in legal matters. Some of these matters may be covered, at least in part, by insurance if they exceed specified retention or deductible amounts. However, it is possible that claims may be denied by the Company’s insurance carriers, the Company may be required by its insurance carriers to contribute to the payment of claims, or the Company’s insurance coverage may not continue to be available on acceptable terms or in sufficient amounts. The Company records receivables from third party insurers when recovery has been determined to be probable. The Company believes that the ultimate determination of liability in connection with
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
legal claims pending against the Company, if any, in excess of amounts already provided for such matters in the consolidated financial statements, will not have a material adverse effect on its business, annual results of operations, liquidity or financial position. However, it is possible that the Company’s business, results of operations, liquidity, or financial condition could be materially affected in a particular future reporting period by the unfavorable resolution of one or more matters or contingencies during such period.
Lease Guarantees - The Company assigned its interest, and is contingently liable, under certain real estate leases. These leases have varying terms, the latest of which expires in 2032. As of September 26, 2021,March 27, 2022, the undiscounted payments that the Company could be required to make in the event of non-payment by the primary lessees was approximately $25.9$24.2 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of September 26, 2021March 27, 2022 was approximately $21.2$20.0 million. In the event of default, the indemnity clauses in the Company’s purchase and sale agreements govern its ability to pursue and recover damages incurred. As of SeptemberMarch 27, 2022 and December 26, 2021, the Company’s recorded contingent lease liability was $8.8 million.
Royalty Termination - On August 2, 2021, wholly-owned subsidiaries of the Company entered into the Purchase$9.0 million and Sale of Royalty Payment Stream and Termination of Royalty Agreement (the “Royalty Termination Agreement”) with the Carrabba’s Italian Grill founders (the “Carrabba’s Founders”), pursuant to which the Company’s obligation to pay future royalties on U.S. Carrabba’s Italian Grill restaurant sales and lump sum royalty fees on Carrabba’s Italian Grill (and Abbraccio) restaurants opened outside the U.S. was terminated. Upon execution of the Royalty Termination Agreement, the Company made a cash payment of $61.9$8.7 million, to the Carrabba’s Founders, which was recorded in Other restaurant operating expense in its Consolidated Statements of Operations and Comprehensive Income (Loss) during the thirteen weeks ended September 26, 2021.respectively.
20.15. Segment Reporting
The Company considers its restaurant concepts and international markets as operating segments, which reflects how the Company manages its business, reviews operating performance and allocates resources. Resources are allocated and performance is assessed by the Company’s Chief Executive Officer (“CEO”), whom the Company has determined to be its Chief Operating Decision Maker (“CODM”). The Company aggregates its operating segments into 2 reportable segments, U.S. and international. The U.S. segment includes all restaurants operating in the U.S. while restaurants operating outside the U.S. are included in the international segment.
The following is a summary of reporting segments:
| | | | | | | | | | | | | | |
REPORTABLE SEGMENT (1) | | CONCEPT | | GEOGRAPHIC LOCATION |
U.S. | | Outback Steakhouse | | United States of America |
| Carrabba’s Italian Grill | |
| Bonefish Grill | |
| Fleming’s Prime Steakhouse & Wine Bar | |
International | | Outback Steakhouse | | Brazil, Hong Kong/China |
| Carrabba’s Italian Grill (Abbraccio) | | Brazil |
_________________
(1)Includes franchise locations.
Segment accounting policies are the same as those described in Note 2 - Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 27, 2020.26, 2021. Revenues for all segments include only transactions with customers and exclude intersegment revenues. Excluded from Income (loss) from operations for U.S. and international are certain legal and corporate costs not directly related to the performance of the segments, most stock-based compensation expenses and certain bonus expenses.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table is a summary of Total revenues by segment, for the periods indicated:
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | (dollars in thousands) | | MARCH 27, 2022 | | MARCH 28, 2021 |
Total revenues | Total revenues | | | | | | | | Total revenues | | | | |
U.S. | U.S. | $ | 912,733 | | | $ | 721,738 | | | $ | 2,820,709 | | | $ | 2,153,315 | | U.S. | | $ | 1,036,407 | | | $ | 904,918 | |
International | International | 97,730 | | | 49,522 | | | 254,593 | | | 204,741 | | International | | 104,128 | | | 82,555 | |
Total revenues | Total revenues | $ | 1,010,463 | | | $ | 771,260 | | | $ | 3,075,302 | | | $ | 2,358,056 | | Total revenues | | $ | 1,140,535 | | | $ | 987,473 | |
|
The following table is a reconciliation of Segmentsegment income (loss) from operations to Income (loss) before (benefit) provision for income taxes, for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Segment income (loss) from operations | | | | | | | |
U.S. | $ | 47,294 | | | $ | 29,574 | | | $ | 334,326 | | | $ | (21,968) | |
International | 1,412 | | | (7,926) | | | 7,419 | | | (18,209) | |
Total segment income (loss) from operations | 48,706 | | | 21,648 | | | 341,745 | | | (40,177) | |
Unallocated corporate operating expense (1) | (33,869) | | | (35,903) | | | (111,273) | | | (127,558) | |
Total income (loss) from operations | 14,837 | | | (14,255) | | | 230,472 | | | (167,735) | |
Loss on extinguishment and modification of debt | — | | | — | | | (2,073) | | | (237) | |
| | | | | | | |
Other income (expense), net | 5 | | | 1 | | | 26 | | | (211) | |
Interest expense, net | (14,245) | | | (18,300) | | | (43,863) | | | (46,647) | |
Income (loss) before (benefit) provision for income taxes | $ | 597 | | | $ | (32,554) | | | $ | 184,562 | | | $ | (214,830) | |
____________________
(1)The thirteen and thirty-nine weeks ended September 27, 2020 include $4.2 million and $28.8 million, respectively, of charges that were not allocated to the Company’s segments related to its transformational initiatives, primarily recorded within General and administrative expense and Provision for impaired assets and restaurant closings. | | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Segment income from operations | | | | | | | |
U.S. | | | | | $ | 132,226 | | | $ | 121,735 | |
International | | | | | 8,884 | | | 3,537 | |
Total segment income from operations | | | | | 141,110 | | | 125,272 | |
Unallocated corporate operating expense | | | | | (33,854) | | | (34,274) | |
Total income from operations | | | | | 107,256 | | | 90,998 | |
| | | | | | | |
| | | | | | | |
Other income, net | | | | | — | | | 21 | |
Interest expense, net | | | | | (13,633) | | | (14,628) | |
Income before provision for income taxes | | | | | $ | 93,623 | | | $ | 76,391 | |
The following table is a summary of Depreciation and amortization expense by segment for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Depreciation and amortization | | | | | | | |
U.S. | $ | 33,422 | | | $ | 35,056 | | | $ | 100,645 | | | $ | 110,004 | |
International | 5,842 | | | 5,672 | | | 17,128 | | | 18,314 | |
Corporate | 1,563 | | | 2,689 | | | 4,819 | | | 9,151 | |
Total depreciation and amortization | $ | 40,827 | | | $ | 43,417 | | | $ | 122,592 | | | $ | 137,469 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The following table is a summary of capital expenditures by segment for the periods indicated:
| | | THIRTY-NINE WEEKS ENDED | | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | (dollars in thousands) | | MARCH 27, 2022 | | MARCH 28, 2021 |
Capital expenditures | | | | |
Depreciation and amortization | | Depreciation and amortization | | | | |
U.S. | U.S. | $ | 74,076 | | | $ | 45,094 | | U.S. | | $ | 34,759 | | | $ | 33,645 | |
International | International | 8,985 | | | 12,567 | | International | | 5,537 | | | 5,720 | |
Corporate | Corporate | 6,513 | | | 3,384 | | Corporate | | 1,479 | | | 1,861 | |
Total capital expenditures | $ | 89,574 | | | $ | 61,045 | | |
Total depreciation and amortization | | Total depreciation and amortization | | $ | 41,775 | | | $ | 41,226 | |
|
BLOOMIN’ BRANDS, INC.
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 our unaudited consolidated financial statements and the related notes. Unless the context otherwise indicates, as used in this report, the term the “Company,” “we,” “us,” “our” and other similar terms mean Bloomin’ Brands, Inc. and its subsidiaries.
Cautionary Statement
This Quarterly Report on Form 10-Q (the “Report”) includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “feels,” “seeks,” “forecasts,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could” or “would” or, in each case, their negative or other variations or comparable terminology, although not all forward-looking statements are accompanied by such terms. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially from statements made or suggested by forward-looking statements include, but are not limited to, the following:
(i)Consumer reactions to public health and food safety issues;
(ii)The severity, extent and duration of the COVID-19 pandemic, its impacts on our business and results of operations, financial condition and liquidity, including any adverse impact on our stock price and on the other factors listed below, and the responses of domestic and foreign federal, state and local governments to the pandemic;
(iii)Minimum wage increases, additional mandated employee benefits and fluctuations in the cost and availability of employees;
(iv)Fluctuations in the price and availability of commodities;commodities, including supplier freight charges and restaurant distribution expenses;
(v)Our ability to compete in the highly competitive restaurant industry with many well-established competitors and new market entrants;
(vi)Economic conditions and their effects on consumer confidence and discretionary spending, consumer traffic, the cost and availability of credit and interest rates;
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
(vi)Economic conditions and their effects on consumer confidence and discretionary spending, consumer traffic, the cost and availability of credit and interest rates;
(vii)Our ability to recruit and retain high-quality leadership, restaurant-level management and team members;
(viii)Our ability to preserve and grow the reputation and value of our brands, particularly in light of changes in consumer engagement with social media platforms and limited control with respect to the operations of our franchisees;
(ix)Our ability to protect our information technology systems from interruption or security breach, including cyber security threats, and to protect consumer data and personal employee information;
(x)Dependence on a limited number of suppliers and distributors to meet our beef, chicken and other major product supply needs;
(xi)The effects of international economic, political and social conditions and legal systems on our foreign operations and on foreign currency exchange rates;
(xii)Our ability to comply with governmental laws and regulations, the costs of compliance with such laws and regulations and the effects of changes to applicable laws and regulations, including tax laws and unanticipated liabilities, and the impact of any litigation;
(xiii)Our ability to effectively respond to changes in patterns of consumer traffic, consumer tastes and dietary habits, including by maintaining relationships with third party delivery apps and services;
(xiv)Our ability to implement our remodeling, relocation and expansion plans due to uncertainty in locating and acquiring attractive sites on acceptable terms, obtaining required permits and approvals, recruiting and training necessary personnel, obtaining adequate financing and estimating the performance of newly opened, remodeled or relocated restaurants;
(xv)Seasonal and periodic fluctuations in our results and the effects of significant adverse weather conditions and other disasters or unforeseen events;
(xvi)The effects of our substantial leverage and restrictive covenants in our various credit facilities on our ability to raise additional capital to fund our operations, to make capital expenditures to invest in new or renovate restaurants and to react to changes in the economy or our industry, and our exposure to interest rate risk in connection with our variable-rate debt;industry;
(xvii)Any impairment in the carrying value of our goodwill or other intangible or long-lived assets and its effect on our financial condition and results of operations; and
(xviii)Such other factors as discussed in Part I, Item IA. Risk Factors of our Annual Report on Form 10-K for the year ended December 27, 2020.26, 2021.
In light ofGiven these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Overview
We are one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. As of September 26, 2021,March 27, 2022, we owned and operated 1,1591,166 full-service restaurants and off-premises only kitchens and franchised 325333 full-service restaurants and off-premises only kitchens across 47 states, Guam and 1915 countries. We have four founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar.
Financial Highlights
Our financial highlights for the thirteen weeks ended September 26, 2021March 27, 2022 (“thirdfirst quarter of 2021”2022”) include the following:
•U.S. combined and Outback Steakhouse comparable restaurant sales of 25.5%14.0% and 18.3%9.2%, respectively, relative to the third quarter of 2020, and 9.5% and 6.0%, respectively, relative to the third quarter of 2019;respectively;
•Increase in Total revenues of 31.0%15.5%, as compared to the thirdfirst quarter of 2020, and 4.5%, as compared to the third quarter of 2019;
•A $61.9 million charge to Other restaurant operating expense in connection with the Carrabba’s Italian Grill Royalty Termination Agreement, an impact of 6.2% on restaurant-level operating margin;2021;
•Restaurant-level operating marginand operating income margins of 10.3%17.1% and 9.4%, respectively, as compared to 10.7%18.8% and 12.9%9.2%, respectively, for the third quartersfirst quarter of 2020 and 2019, respectively;2021;
•Income (loss) from operations of $14.8$107.3 million, as compared to $(14.3) million and $22.0$91.0 million in the third quartersfirst quarter of 2020 and 2019, respectively;2021; and
•Diluted earnings (loss) per share attributable to common stockholders of $0.03,$0.73, as compared to $(0.20) and $0.11 in$0.63 for the third quartersfirst quarter of 2020 and 2019, respectively.2021.
Key Financial Performance Indicators
Key measures that we use in evaluating our restaurants and assessing our business include the following:
•Average restaurant unit volumes — average sales (excluding gift card breakage) per restaurant to measure changes in customer traffic, pricing and development of the brand;
•Comparable restaurant sales — year-over-year comparison of the change in sales volumes (excluding gift card breakage) for Company-owned restaurants that are open 18 months or more in order to remove the impact of new restaurant openings in comparing the operations of existing restaurants;
•System-wide sales — total restaurant sales volume for all Company-owned and franchise restaurants, regardless of ownership, to interpret the overall health of our brands;
•Restaurant-level operating margin, Income (loss) from operations, Net income (loss) and Diluted earnings (loss) per share — financial measures utilized to evaluate our operating performance.
Restaurant-level operating margin is widely regarded in the industry as a useful metric to evaluate restaurant-level operating efficiency and performance of ongoing restaurant-level operations, and we use it for these purposes, overall and particularly within our two segments. Our restaurant-level operating margin is expressed as the percentage of our Restaurant sales that Food and beverage costs, Labor and other related expenses and Other restaurant operating expenses (including advertising expenses) represent, in each case as such items are reflected in our Consolidated Statements of Operations and Comprehensive Income (Loss).Income. The following categories of our revenue and operating expenses are not included in restaurant-level
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
operating margin because we do not consider them reflective of operating performance at the restaurant-level within a period:
(i)Franchise and other revenues which are earned primarily from franchise royalties and other non-food and beverage revenue streams, such as rental and sublease income.income;
(ii)Depreciation and amortization which, although substantially all of which is related to restaurant-level assets, represent historical sunk costs rather than cash outlays for the restaurants.restaurants;
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
(iii)General and administrative expense which includes primarily non-restaurant-level costs associated with support of the restaurants and other activities at our corporate offices.offices; and
(iv)Asset impairment charges and restaurant closing costs which are not reflective of ongoing restaurant performance in a period.
Restaurant-level operating margin excludes various expenses, as discussed above, that are essential to support the operations of our restaurants and may materially impact our Consolidated Statements of Operations.Operations and Comprehensive Income. As a result, restaurant-level operating margin is not indicative of our consolidated results of operations and is presented exclusively as a supplement to, and not a substitute for, Net income (loss) or Income (loss) from operations. In addition, our presentation of restaurant-level operating margin may not be comparable to similarly titled measures used by other companies in our industry;
•Adjusted restaurant-level operating margin, Adjusted income (loss) from operations, Adjusted net income (loss) and Adjusted diluted earnings (loss) per share — non-GAAP financial measures utilized to evaluate our operating performance.
We believe that our use of non-GAAP financial measures permits investors to assess the operating performance of our business relative to our performance based on U.S. GAAP results and relative to other companies within the restaurant industry by isolating the effects of certain items that may vary from period to period without correlation to core operating performance or that vary widely among similar companies. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. We believe that the disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and Board of Directors evaluate our operating performance, allocate resources and administer employee incentive plans; and
•Customer satisfaction scores — measurement of our customers’ experiences in a variety of key areas.plans.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Selected Operating Data
The table below presents the number of our full-service restaurants in operation as of the periods indicated:
| Number of restaurants (at end of the period): | Number of restaurants (at end of the period): | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | Number of restaurants (at end of the period): | MARCH 27, 2022 | | MARCH 28, 2021 |
U.S.: | U.S.: | | | | U.S.: | | | |
Outback Steakhouse | Outback Steakhouse | | | | Outback Steakhouse | | | |
Company-owned | Company-owned | 564 | | | 567 | | Company-owned | 562 | | | 567 | |
Franchised | Franchised | 130 | | | 140 | | Franchised | 130 | | | 131 | |
Total | Total | 694 | | | 707 | | Total | 692 | | | 698 | |
Carrabba’s Italian Grill | Carrabba’s Italian Grill | | | | Carrabba’s Italian Grill | | | |
Company-owned | Company-owned | 199 | | | 199 | | Company-owned | 199 | | | 199 | |
Franchised | Franchised | 20 | | | 21 | | Franchised | 20 | | | 21 | |
Total | Total | 219 | | | 220 | | Total | 219 | | | 220 | |
Bonefish Grill | Bonefish Grill | | | | Bonefish Grill | | | |
Company-owned | Company-owned | 178 | | | 181 | | Company-owned | 175 | | | 180 | |
Franchised | Franchised | 7 | | | 7 | | Franchised | 7 | | | 7 | |
Total | Total | 185 | | | 188 | | Total | 182 | | | 187 | |
Fleming’s Prime Steakhouse & Wine Bar | Fleming’s Prime Steakhouse & Wine Bar | | | | Fleming’s Prime Steakhouse & Wine Bar | | | |
Company-owned | Company-owned | 64 | | | 65 | | Company-owned | 64 | | | 64 | |
Other | | | | |
Aussie Grill | | Aussie Grill | | | |
Company-owned (1) | Company-owned (1) | 7 | | | 5 | | Company-owned (1) | 7 | | | 3 | |
U.S. total | U.S. total | 1,169 | | | 1,185 | | U.S. total | 1,164 | | | 1,172 | |
International: | International: | | | | International: | | | |
Company-owned | Company-owned | | Company-owned | |
Outback Steakhouse—Brazil (2) | 113 | | | 104 | | |
Outback Steakhouse - Brazil (2) | | Outback Steakhouse - Brazil (2) | 123 | | | 110 | |
| Other (1)(3) | Other (1)(3) | 34 | | | 31 | | Other (1)(3) | 33 | | | 33 | |
Franchised | Franchised | | Franchised | |
Outback Steakhouse—South Korea (3) | 114 | | | 88 | | |
Outback Steakhouse - South Korea (1) | | Outback Steakhouse - South Korea (1) | 78 | | | 75 | |
Other (1)(3) | Other (1)(3) | 54 | | | 56 | | Other (1)(3) | 52 | | | 57 | |
International total | International total | 315 | | | 279 | | International total | 286 | | | 275 | |
System-wide total | System-wide total | 1,484 | | | 1,464 | | System-wide total | 1,450 | | | 1,447 | |
System-wide total - Company-owned | | System-wide total - Company-owned | 1,163 | | | 1,156 | |
System-wide total - Franchised | | System-wide total - Franchised | 287 | | | 291 | |
|
____________________
(1)U.S. Other Company-owned included four and three fast-casual Aussie Grill locationsRestaurant counts as of September 26,March 28, 2021 and September 27, 2020, respectively. International Franchised Otherhave been adjusted to exclude off-premises only locations included three Aussie Grill locations as of September 26, 2021 and September 27, 2020. International Company-owned Other included two and one Aussie Grill locations as of September 26, 2021 and September 27, 2020, respectively.in the table below.
(2)The restaurant counts for Brazil are reported as of August 31,February 28, 2022 and 2021, and 2020, respectively, to correspond with the balance sheet dates of this subsidiary.
(3)Franchised Outback Steakhouse - South KoreaInternational Company-owned Other included 37 and 13 international dark kitchens that offer delivery onlytwo Aussie Grill locations as of September 26, 2021March 27, 2022 and September 27, 2020, respectively. In addition, we had one international dark kitchenMarch 28, 2021. International Franchised Other included within Company-owned Otherthree Aussie Grill locations as of both periods presented.March 27, 2022 and March 28, 2021.
The table below presents the number of our off-premises only kitchens in operation as of the periods indicated:
| | | | | | | | | | | |
Number of kitchens (at end of the period) (1): | MARCH 27, 2022 | | MARCH 28, 2021 |
U.S.: | | | |
Company-owned | 2 | | | 3 | |
| | | |
| | | |
International: | | | |
Company-owned | 1 | | | 1 | |
Franchised - South Korea | 46 | | | 25 | |
| | | |
| | | |
System-wide total | 49 | | | 29 | |
____________________
(1)Excludes virtual concepts that operate out of existing restaurants and sports venue locations.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Results of Operations
The following table sets forth the percentages of certain items in our Consolidated Statements of Operations in relation to Total revenues or Restaurant sales, for the periods indicated:
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | THIRTEEN WEEKS ENDED |
| | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Revenues | Revenues | | | | | | | | Revenues | | | | |
Restaurant sales | Restaurant sales | 98.6 | % | | 99.4 | % | | 98.6 | % | | 99.2 | % | Restaurant sales | | 98.5 | % | | 99.2 | % |
Franchise and other revenues | Franchise and other revenues | 1.4 | | | 0.6 | | | 1.4 | | | 0.8 | | Franchise and other revenues | | 1.5 | | | 0.8 | |
Total revenues | Total revenues | 100.0 | | | 100.0 | | | 100.0 | | | 100.0 | | Total revenues | | 100.0 | | | 100.0 | |
Costs and expenses | Costs and expenses | | | | | | | Costs and expenses | | | |
Food and beverage costs (1) | Food and beverage costs (1) | 30.5 | | | 30.1 | | | 30.0 | | | 31.3 | | Food and beverage costs (1) | | 32.0 | | | 29.8 | |
Labor and other related (1) | Labor and other related (1) | 29.1 | | | 32.2 | | | 28.4 | | | 32.6 | | Labor and other related (1) | | 27.8 | | | 28.0 | |
Other restaurant operating (1) | Other restaurant operating (1) | 30.1 | | | 27.0 | | | 25.2 | | | 27.0 | | Other restaurant operating (1) | | 23.1 | | | 23.4 | |
Depreciation and amortization | Depreciation and amortization | 4.0 | | | 5.6 | | | 4.0 | | | 5.8 | | Depreciation and amortization | | 3.7 | | | 4.2 | |
General and administrative | General and administrative | 5.8 | | | 7.4 | | | 5.9 | | | 8.4 | | General and administrative | | 5.1 | | | 5.8 | |
| Provision for impaired assets and restaurant closings | Provision for impaired assets and restaurant closings | 0.2 | | | (*) | | 0.3 | | | 2.8 | | Provision for impaired assets and restaurant closings | | 0.2 | | | 0.2 | |
| Total costs and expenses | Total costs and expenses | 98.5 | | | 101.8 | | | 92.5 | | | 107.1 | | Total costs and expenses | | 90.6 | | | 90.8 | |
Income (loss) from operations | 1.5 | | | (1.8) | | | 7.5 | | | (7.1) | | |
Loss on extinguishment and modification of debt | — | | | — | | | (0.1) | | | (*) | |
Other income (expense), net | * | | * | | * | | (*) | |
Income from operations | | Income from operations | | 9.4 | | | 9.2 | |
| Other income, net | | Other income, net | | — | | | * |
Interest expense, net | Interest expense, net | (1.4) | | | (2.4) | | | (1.4) | | | (2.0) | | Interest expense, net | | (1.2) | | | (1.5) | |
Income (loss) before (benefit) provision for income taxes | 0.1 | | | (4.2) | | | 6.0 | | | (9.1) | | |
(Benefit) provision for income taxes | (0.4) | | | (1.9) | | | 0.8 | | | (3.0) | | |
Net income (loss) | 0.5 | | | (2.3) | | | 5.2 | | | (6.1) | | |
Less: net income (loss) attributable to noncontrolling interests | 0.2 | | | (*) | | 0.2 | | | (*) | |
Net income (loss) attributable to Bloomin’ Brands | 0.3 | % | | (2.3) | % | | 5.0 | % | | (6.1) | % | |
Income before provision for income taxes | | Income before provision for income taxes | | 8.2 | | | 7.7 | |
Provision for income taxes | | Provision for income taxes | | 1.4 | | | 0.6 | |
Net income | | Net income | | 6.8 | | | 7.1 | |
Less: net income attributable to noncontrolling interests | | Less: net income attributable to noncontrolling interests | | 0.2 | | | 0.1 | |
Net income attributable to Bloomin’ Brands | | Net income attributable to Bloomin’ Brands | | 6.6 | % | | 7.0 | % |
|
________________
(1)As a percentage of Restaurant sales.
*Less than 1/10th of one percent of Total revenues.
RESTAURANT SALES
REVENUES
Restaurant sales
Following is a summary of the change in Restaurant sales for the periodsperiod indicated:
| | | | | | | | | | | |
(dollars in millions) | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
For the periods ended September 27, 2020 | $ | 766.5 | | | $ | 2,339.0 | |
Change from: | | | |
Comparable restaurant sales | 218.4 | | | 696.1 | |
Restaurant openings | 14.0 | | | 41.3 | |
Effect of foreign currency translation | 2.3 | | | (15.6) | |
Restaurant closures | (4.5) | | | (29.4) | |
| | | |
For the periods ended September 26, 2021 | $ | 996.7 | | | $ | 3,031.4 | |
| | | |
| | | |
| | | |
| | | | | | | |
(dollars in millions) | | | THIRTEEN WEEKS ENDED |
For the period ended March 28, 2021 | | | $ | 979.5 | |
Change from: | | | |
Comparable restaurant sales | | | 142.0 | |
Restaurant openings | | | 12.4 | |
Restaurant closures | | | (7.2) | |
Effect of foreign currency translation | | | (3.1) | |
| | | |
For the period ended March 27, 2022 | | | $ | 1,123.6 | |
| | | |
| | | |
| | | |
The increase in Restaurant sales during the thirteen weeks ended September 26, 2021March 27, 2022 was primarily due to: (i) higher comparable restaurant sales from in-restaurant dining and strong retention of off-premises salesprimarily attributable to increases in average check per person and (ii) the opening of 37
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
opening of 31 new restaurants not included in our comparable restaurant sales base. The increase in Restaurant sales was partially offset by the closure of 1517 restaurants since June 26,December 27, 2020.
The increase in Restaurant sales during the thirty-nine weeks ended September 26, 2021 was primarily due to: (i) higher comparable restaurant sales from in-restaurant dining and strong retention of off-premises sales and (ii) the opening of 37 new restaurants not included in our comparable restaurant sales base. The increase in Restaurant sales was partially offset by the closure of 45 restaurants since December 29, 2019 and the effect of foreign currency translation of the Brazilian Real relative to the U.S. dollar.
Average Restaurant Unit Volumes and Operating Weeks
Following is a summary of the average restaurant unit volumes and operating weeks, for the periods indicated:
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | THIRTEEN WEEKS ENDED |
| | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Average restaurant unit volumes (weekly): | Average restaurant unit volumes (weekly): | | | | | | | | Average restaurant unit volumes (weekly): | | | | |
U.S. | U.S. | | U.S. | | |
Outback Steakhouse | Outback Steakhouse | $ | 70,849 | | | $ | 59,929 | | | $ | 74,163 | | | $ | 58,771 | | Outback Steakhouse | | $ | 80,552 | | | $ | 73,433 | |
Carrabba’s Italian Grill | Carrabba’s Italian Grill | $ | 61,518 | | | $ | 47,940 | | | $ | 62,910 | | | $ | 46,230 | | Carrabba’s Italian Grill | | $ | 67,889 | | | $ | 60,953 | |
Bonefish Grill | Bonefish Grill | $ | 57,844 | | | $ | 42,439 | | | $ | 58,626 | | | $ | 40,988 | | Bonefish Grill | | $ | 66,265 | | | $ | 54,263 | |
Fleming’s Prime Steakhouse & Wine Bar | Fleming’s Prime Steakhouse & Wine Bar | $ | 95,777 | | | $ | 58,989 | | | $ | 94,064 | | | $ | 59,014 | | Fleming’s Prime Steakhouse & Wine Bar | | $ | 117,382 | | | $ | 80,404 | |
International | International | | International | | |
Outback Steakhouse - Brazil (1) | Outback Steakhouse - Brazil (1) | $ | 49,841 | | | $ | 23,919 | | | $ | 40,848 | | | $ | 36,884 | | Outback Steakhouse - Brazil (1) | | $ | 53,939 | | | $ | 43,089 | |
| Operating weeks: | Operating weeks: | | | | Operating weeks: | | | |
U.S. | U.S. | | U.S. | | |
Outback Steakhouse | Outback Steakhouse | 7,344 | | | 7,365 | | | 22,089 | | | 22,330 | | Outback Steakhouse | | 7,320 | | | 7,383 | |
Carrabba’s Italian Grill | Carrabba’s Italian Grill | 2,587 | | | 2,587 | | | 7,761 | | | 7,887 | | Carrabba’s Italian Grill | | 2,587 | | | 2,587 | |
Bonefish Grill | Bonefish Grill | 2,327 | | | 2,366 | | | 7,004 | | | 7,300 | | Bonefish Grill | | 2,285 | | | 2,340 | |
Fleming’s Prime Steakhouse & Wine Bar | Fleming’s Prime Steakhouse & Wine Bar | 832 | | | 845 | | | 2,489 | | | 2,575 | | Fleming’s Prime Steakhouse & Wine Bar | | 832 | | | 825 | |
International | International | | International | | |
Outback Steakhouse - Brazil | Outback Steakhouse - Brazil | 1,485 | | | 1,358 | | | 4,362 | | | 4,015 | | Outback Steakhouse - Brazil | | 1,581 | | | 1,412 | |
| |
____________________
(1)Translated at average exchange rates of 5.155.47 and 5.345.30 for the thirteen weeks ended September 26,March 27, 2022 and March 28, 2021, and September 27, 2020, respectively, and 5.27 and 4.60 for the thirty-nine weeks ended September 26, 2021 and September 27, 2020, respectively.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Comparable Restaurant Sales, Traffic and Average Check Per Person Increases (Decreases)
Following is a summary of comparable restaurant sales, traffic and average check per person increases (decreases), for the periods indicated:
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | THIRTEEN WEEKS ENDED |
| | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | | MARCH 27, 2022 | | | MARCH 28, 2021 |
| | COMPARABLE TO 2019 (1) | | COMPARABLE TO 2020 | | COMPARABLE TO 2019 | | COMPARABLE TO 2019 (1) | | COMPARABLE TO 2020 | | COMPARABLE TO 2019 | |
Year over year percentage change: | Year over year percentage change: | | | | | | | | | | | | Year over year percentage change: | | | | | |
Comparable restaurant sales (stores open 18 months or more): | Comparable restaurant sales (stores open 18 months or more): | | | | Comparable restaurant sales (stores open 18 months or more): | | | | | |
U.S. (2)(1) | U.S. (2)(1) | | U.S. (2)(1) | | | | |
Outback Steakhouse | Outback Steakhouse | 6.0 | % | | 18.3 | % | | (10.4) | % | | 3.5 | % | | 25.3 | % | | (17.4) | % | Outback Steakhouse | | 9.2 | % | | | 4.1 | % |
Carrabba’s Italian Grill | Carrabba’s Italian Grill | 17.1 | % | | 28.8 | % | | (9.0) | % | | 10.6 | % | | 35.1 | % | | (18.1) | % | Carrabba’s Italian Grill | | 11.5 | % | | | 8.9 | % |
Bonefish Grill | Bonefish Grill | 5.7 | % | | 36.6 | % | | (22.5) | % | | (2.7) | % | | 41.2 | % | | (31.0) | % | Bonefish Grill | | 21.3 | % | | | (2.9) | % |
Fleming’s Prime Steakhouse & Wine Bar | Fleming’s Prime Steakhouse & Wine Bar | 28.0 | % | | 59.6 | % | | (20.3) | % | | 10.8 | % | | 56.9 | % | | (29.7) | % | Fleming’s Prime Steakhouse & Wine Bar | | 45.7 | % | | | (2.3) | % |
Combined U.S. | Combined U.S. | 9.5 | % | | 25.5 | % | | (12.8) | % | | 4.3 | % | | 31.4 | % | | (20.7) | % | Combined U.S. | | 14.0 | % | | | 3.3 | % |
International | International | | International | | | | |
Outback Steakhouse - Brazil (3)(2) | Outback Steakhouse - Brazil (3)(2) | (5.1) | % | | 109.8 | % | | (54.8) | % | | (18.9) | % | | 29.4 | % | | (36.9) | % | Outback Steakhouse - Brazil (3)(2) | | 35.9 | % | | | (21.4) | % |
| | Traffic: | Traffic: | | | | Traffic: | | | | | |
U.S. | U.S. | | U.S. | | | | |
Outback Steakhouse | Outback Steakhouse | (0.8) | % | | 14.8 | % | | (13.6) | % | | (2.1) | % | | 19.6 | % | | (18.1) | % | Outback Steakhouse | | (1.0) | % | | | 0.9 | % |
Carrabba’s Italian Grill | Carrabba’s Italian Grill | 12.2 | % | | 27.1 | % | | (11.7) | % | | 7.8 | % | | 27.0 | % | | (15.1) | % | Carrabba’s Italian Grill | | 3.0 | % | | | 5.2 | % |
Bonefish Grill | Bonefish Grill | 5.2 | % | | 25.6 | % | | (14.7) | % | | (1.7) | % | | 23.4 | % | | (19.4) | % | Bonefish Grill | | 7.8 | % | | | 2.1 | % |
Fleming’s Prime Steakhouse & Wine Bar | Fleming’s Prime Steakhouse & Wine Bar | 14.4 | % | | 48.4 | % | | (23.3) | % | | 1.8 | % | | 38.1 | % | | (26.6) | % | Fleming’s Prime Steakhouse & Wine Bar | | 28.8 | % | | | (5.3) | % |
Combined U.S. | Combined U.S. | 2.9 | % | | 19.3 | % | | (13.6) | % | | (0.1) | % | | 21.9 | % | | (17.9) | % | Combined U.S. | | 1.5 | % | | | 1.7 | % |
International | International | | International | | | | |
Outback Steakhouse - Brazil | Outback Steakhouse - Brazil | 1.9 | % | | 62.5 | % | | (37.6) | % | | (8.2) | % | | 25.2 | % | | (25.9) | % | Outback Steakhouse - Brazil | | 28.7 | % | | | (14.2) | % |
| | Average check per person (4): | | |
Average check per person (3): | | Average check per person (3): | | | | |
U.S. | U.S. | | U.S. | | | | |
Outback Steakhouse | Outback Steakhouse | 6.8 | % | | 3.5 | % | | 3.2 | % | | 5.6 | % | | 5.7 | % | | 0.7 | % | Outback Steakhouse | | 10.2 | % | | | 3.2 | % |
Carrabba’s Italian Grill | Carrabba’s Italian Grill | 4.9 | % | | 1.7 | % | | 2.7 | % | | 2.8 | % | | 8.1 | % | | (3.0) | % | Carrabba’s Italian Grill | | 8.5 | % | | | 3.7 | % |
Bonefish Grill | Bonefish Grill | 0.5 | % | | 11.0 | % | | (7.8) | % | | (1.0) | % | | 17.8 | % | | (11.6) | % | Bonefish Grill | | 13.5 | % | | | (5.0) | % |
Fleming’s Prime Steakhouse & Wine Bar | Fleming’s Prime Steakhouse & Wine Bar | 13.6 | % | | 11.2 | % | | 3.0 | % | | 9.0 | % | | 18.8 | % | | (3.1) | % | Fleming’s Prime Steakhouse & Wine Bar | | 16.9 | % | | | 3.0 | % |
Combined U.S. | Combined U.S. | 6.6 | % | | 6.2 | % | | 0.8 | % | | 4.4 | % | | 9.5 | % | | (2.8) | % | Combined U.S. | | 12.5 | % | | | 1.6 | % |
International | International | | International | | | | |
Outback Steakhouse - Brazil | Outback Steakhouse - Brazil | (6.0) | % | | 45.5 | % | | (16.2) | % | | (10.3) | % | | 5.5 | % | | (11.0) | % | Outback Steakhouse - Brazil | | 7.6 | % | | | (6.4) | % |
|
____________________
(1)Represents comparable restaurant sales, traffic and average check per person increases (decreases) relative to fiscal year 2019 for improved comparability due to the impact of COVID-19 on fiscal year 2020 restaurant sales.
(2)Relocated restaurants closed more than 60 days are excluded from comparable restaurant sales until at least 18 months after reopening.
(3)(2)Excludes the effect of fluctuations in foreign currency rates. Includes trading day impact from calendar period reporting.
(4)(3)Average check per person includes the impact of menu pricing changes, product mix and discounts.
Franchise and other revenues
| | | | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED |
(dollars in millions) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 | | |
Franchise revenues (1) | | | | | $ | 13.4 | | | $ | 6.8 | | | |
Other revenues | | | | | 3.6 | | | 1.2 | | | |
Franchise and other revenues | | | | | $ | 17.0 | | | $ | 8.0 | | | |
____________________
(1)Franchise revenues increased during the thirteen weeks ended March 27, 2022 as compared to the thirteen weeks ended March 28, 2021 primarily due to the impact of COVID-19-related capacity restrictions on 2021 franchise sales.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Franchise and other revenues
| | | | | | | | | | | | | | | | | | | | | | | | | |
| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in millions) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | |
Franchise revenues (1) | $ | 12.9 | | | $ | 4.2 | | | $ | 31.9 | | | $ | 15.7 | | | |
Other revenues (2) | 0.8 | | | 0.6 | | | 12.0 | | | 3.4 | | | |
Franchise and other revenues | $ | 13.7 | | | $ | 4.8 | | | $ | 43.9 | | | $ | 19.1 | | | |
____________________
(1)Represents franchise royalties, advertising fees and initial franchise fees. Franchise revenues increased during the thirteen and thirty-nine weeks ended September 26, 2021 primarily due to higher franchise sales as a result of the impact of COVID-19 on 2020 franchise sales.
(2)The thirteen and thirty-nine weeks ended September 26, 2021 include an adjustment of $(3.2) million to reduce our initial recorded estimate and net $3.1 million benefit from the recognition of recoverable PIS and COFINS taxes, respectively, within other revenues in connection with favorable court rulings in Brazil regarding the calculation methodology and taxable base for prior years.
COSTS AND EXPENSES
Food and beverage costs
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | | THIRTEEN WEEKS ENDED | |
(dollars in millions) | (dollars in millions) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE | (dollars in millions) | | MARCH 27, 2022 | | MARCH 28, 2021 | | CHANGE |
Food and beverage costs | Food and beverage costs | $ | 304.3 | | | $ | 230.5 | | | | | $ | 908.3 | | | $ | 731.0 | | | | Food and beverage costs | | $ | 359.4 | | | $ | 291.9 | | | |
% of Restaurant sales | % of Restaurant sales | 30.5 | % | | 30.1 | % | | 0.4 | % | | 30.0 | % | | 31.3 | % | | (1.3) | % | % of Restaurant sales | | 32.0 | % | | 29.8 | % | | 2.2 | % |
Food and beverage costs increased as a percentage of Restaurant sales during the thirteen weeks ended September 26, 2021March 27, 2022 as compared to the thirteen weeks ended September 27, 2020March 28, 2021 primarily due to 1.0%3.6% from commodity inflation, partially offset by a decrease as a percentage of Restaurant sales of 0.5% from increases in average check per person including changes in product mix.
Food and beverage costs decreased as a percentage of Restaurant sales during the thirty-nine weeks ended September 26, 2021as compared to the thirty-nine weeks ended September 27, 2020 primarily due to: (i) 0.8%1.4% from increases in average check per person, primarily driven by reduced discounting, (ii) 0.4% from the impact of certain cost savings initiatives and (iii) 0.3% from inventory obsolescence and spoilage costs during 2020 associated with the COVID-19 pandemic. These decreases were partially offset by an increase as a percentage of Restaurant sales of 0.2% from commodity inflation.in menu pricing.
In 2022, we anticipate approximately 10% commodity inflation.
Labor and other related expenses
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | | THIRTEEN WEEKS ENDED | |
(dollars in millions) | (dollars in millions) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE | (dollars in millions) | | MARCH 27, 2022 | | MARCH 28, 2021 | | CHANGE |
Labor and other related | Labor and other related | $ | 290.2 | | | $ | 246.9 | | | | | $ | 859.9 | | | $ | 761.7 | | | | Labor and other related | | $ | 312.5 | | | $ | 274.6 | | | |
% of Restaurant sales | % of Restaurant sales | 29.1 | % | | 32.2 | % | | (3.1) | % | | 28.4 | % | | 32.6 | % | | (4.2) | % | % of Restaurant sales | | 27.8 | % | | 28.0 | % | | (0.2) | % |
Labor and other related expenses decreased as a percentage of Restaurant sales during the thirteen weeks ended September 26, 2021March 27, 2022 as compared to the thirteen weeks ended September 27, 2020March 28, 2021 primarily due to 4.3%1.3% from leveraging increased restaurant sales,increases in average check per person and the net benefit of lapping the impact of COVID-19. This decrease was partially offset by an increase as a percentage of Restaurant sales of 1.1%1.2% from wage rate increases.inflation.
Other restaurant operating expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | THIRTEEN WEEKS ENDED | | |
(dollars in millions) | | | | | | | MARCH 27, 2022 | | MARCH 28, 2021 | | CHANGE |
Other restaurant operating | | | | | | | $ | 259.1 | | | $ | 229.3 | | | |
% of Restaurant sales | | | | | | | 23.1 | % | | 23.4 | % | | (0.3) | % |
Other restaurant operating expenses decreased as a percentage of Restaurant sales during the thirteen weeks ended March 27, 2022 as compared to the thirteen weeks ended March 28, 2021 primarily due to 2.3% from leveraging increased restaurant sales, partially offset by increases as a percentage of Restaurant sales of 1.3% from higher operating expenses including utilities and 0.5% from higher advertising expense.
Income from operations
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | THIRTEEN WEEKS ENDED | | |
(dollars in millions) | | | | | | | MARCH 27, 2022 | | MARCH 28, 2021 | | CHANGE |
Income from operations | | | | | | | $ | 107.3 | | | $ | 91.0 | | | $ | 16.3 | |
% of Total revenues | | | | | | | 9.4 | % | | 9.2 | % | | 0.2 | % |
The increase in Income from operations generated during the thirteen weeks ended March 27, 2022 as compared to the thirteen weeks ended March 28, 2021 was primarily due to increases in average check per person and the net benefit of lapping the impact of COVID-19, as well as higher franchise revenues. These increases were partially offset by: (i) commodity and wage rate inflation, (ii) higher operating expenses including utilities and (iii) higher advertising expense.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Labor and other related expenses decreased as a percentage of Restaurant sales during the thirty-nine weeks ended September 26, 2021 as compared to the thirty-nine weeks ended September 27, 2020 primarily due to 4.4% from leveraging increased restaurant sales and 1.1% from the 2020 impact of net relief pay. These decreases were partially offset by increases as a percentage of Restaurant sales of 0.6% from wage rate increases and 0.5% from higher management bonus.
In 2022, we anticipate mid-single digit labor cost inflation.
Other restaurant operating expenses
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| THIRTEEN WEEKS ENDED | | | | THIRTY-NINE WEEKS ENDED | | |
(dollars in millions) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE |
Other restaurant operating | $ | 299.8 | | | $ | 207.3 | | | | | $ | 762.5 | | | $ | 631.7 | | | |
% of Restaurant sales | 30.1 | % | | 27.0 | % | | 3.1 | % | | 25.2 | % | | 27.0 | % | | (1.8) | % |
During the thirteen weeks ended September 26, 2021, we entered into the Royalty Termination Agreement with the Carrabba’s Founders for $61.9 million in cash. See Note 19 - Commitments and Contingencies for additional details. We recorded Carrabba’s Italian Grill royalty expense of $3.0 million during the thirty-nine weeks ended September 26, 2021, and $3.8 million and $6.6 million during fiscal years 2020 and 2019, respectively.
Other restaurant operating expenses increased as a percentage of Restaurant sales during the thirteen weeks ended September 26, 2021 as compared to the thirteen weeks ended September 27, 2020 primarily due to 6.2% from the Carrabba’s Italian Grill royalty termination and 1.2% from higher utilities, rent and operating expense. These increases were partially offset by decreases as a percentage of Restaurant sales of: (i) 3.5% from leveraging increased restaurant sales, (ii) 0.6% from lower advertising expense and (iii) 0.4% from a decrease in off-premises related costs.
Other restaurant operating expenses decreased as a percentage of Restaurant sales during the thirty-nine weeks ended September 26, 2021 as compared to the thirty-nine weeks ended September 27, 2020 primarily due to: (i) 3.0% from leveraging increased restaurant sales, (ii) 1.3% from lower advertising expense and (iii) 0.3% from a decrease in off-premises related costs. These decreases were partially offset by increases as a percentage of Restaurant sales of 2.0% from the Carrabba’s Italian Grill royalty termination and 0.6% from higher operating and utilities expense.
Depreciation and amortization
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THIRTEEN WEEKS ENDED | | | | THIRTY-NINE WEEKS ENDED | | |
(dollars in millions) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE |
Depreciation and amortization | $ | 40.8 | | | $ | 43.4 | | | $ | (2.6) | | | $ | 122.6 | | | $ | 137.5 | | | $ | (14.9) | |
Depreciation and amortization expense decreased during the thirteen weeks ended September 26, 2021 as compared to the thirteen weeks ended September 27, 2020 primarily due to decreased capital expenditures.
Depreciation and amortization expense decreased during the thirty-nine weeks ended September 26, 2021 as compared to the thirty-nine weeks ended September 27, 2020 primarily due to decreased capital expenditures, impairment and the effect of foreign currency translation.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
General and administrative
General and administrative expense includes salaries and benefits, management incentive programs, related payroll tax and benefits, other employee-related costs and professional services. Following is a summary of the change in General and administrative expense for the periods indicated:
| | | | | | | | | | | |
(dollars in millions) | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
For the periods ended September 27, 2020 | $ | 57.4 | | | $ | 197.7 | |
Change from: | | | |
| | | |
Employee stock-based compensation | 2.9 | | | 9.1 | |
Incentive compensation | 1.8 | | | 5.7 | |
Transformational costs | (1.8) | | | (9.4) | |
Travel and entertainment | (1.1) | | | (3.5) | |
| | | |
Severance | (1.0) | | | (10.5) | |
| | | |
| | | |
Expected credit losses and contingent lease liabilities | (0.1) | | | (6.6) | |
Other | 0.8 | | | 0.1 | |
For the periods ended September 26, 2021 | $ | 58.9 | | | $ | 182.6 | |
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Provision for impaired assets and restaurant closings
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THIRTEEN WEEKS ENDED | | | | THIRTY-NINE WEEKS ENDED | | |
(dollars in millions) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE |
Provision for impaired assets and restaurant closings | $ | 1.6 | | | $ | (0.1) | | | $ | 1.7 | | | $ | 9.0 | | | $ | 66.2 | | | $ | (57.2) | |
During the thirty-nine weeks ended September 27, 2020, we recognized asset impairment and closure charges of $56.4 million and $3.6 million within the U.S. and international segments, respectively, primarily related to the COVID-19 pandemic. Included in the amount for the thirty-nine weeks ended September 27, 2020 were pre-tax asset impairments and closure costs of $20.9 million in connection with the closure of 22 restaurants and from the update of certain cash flow assumptions, including lease renewal considerations. We also recognized asset impairment charges related to transformational initiatives of $6.3 million during the thirty-nine weeks ended September 27, 2020, which were not allocated to our operating segments.
The remaining impairment and closure charges during the periods presented resulted primarily from locations identified for closure.
See Note 4 - Impairments and Exit Costs of the Notes to Consolidated Financial Statements for further information.
Income (loss) from operations
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THIRTEEN WEEKS ENDED | | | | THIRTY-NINE WEEKS ENDED | | |
(dollars in millions) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE |
Income (loss) from operations | $ | 14.8 | | | $ | (14.3) | | | $ | 29.1 | | | $ | 230.5 | | | $ | (167.7) | | | $ | 398.2 | |
% of Total revenues | 1.5 | % | | (1.8) | % | | 3.3 | % | | 7.5 | % | | (7.1) | % | | 14.6 | % |
Income from operations generated during the thirteen weeks ended September 26, 2021 as compared to Loss from operations during the thirteen weeks ended September 27, 2020 was primarily due to higher comparable restaurant sales and lower advertising expense. These increases were partially offset by: (i) the Carrabba’s Italian Grill royalty termination, (ii) higher labor costs and commodity inflation and (iii) higher utilities, rent and operating expense.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Income from operations generated during the thirty-nine weeks ended September 26, 2021 as compared to Loss from operations during the thirty-nine weeks ended September 27, 2020 was primarily due to: (i) higher comparable restaurant sales, (ii) COVID-19 pandemic related charges during 2020, (iii) lower advertising expense, (iv) the impact of restructuring and transformational initiatives during 2020, (v) the 2020 impact of net relief pay and (vi) the impact of certain cost savings initiatives. These increases were partially offset by: (i) the Carrabba’s Italian Grill royalty termination, (ii) higher labor costs and commodity inflation, (iii) an increase in incentive compensation, (iv) higher operating and utilities expense and (v) higher management bonus.
Interest expense, net
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| THIRTEEN WEEKS ENDED | | | | THIRTY-NINE WEEKS ENDED | | |
(dollars in millions) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE |
Interest expense, net | $ | 14.2 | | | $ | 18.3 | | | $ | (4.1) | | | $ | 43.9 | | | $ | 46.6 | | | $ | (2.7) | |
The decrease in Interest expense, net for the thirteen weeks ended September 26, 2021 as compared to the thirteen weeks ended September 27, 2020 was primarily due to lower revolver and term loan borrowings and the discontinuance of debt discount amortization related to our 2025 Notes resulting from the adoption of ASU No. 2020-06. These decreases were partially offset by an increase in interest expense from our 2029 Notes issued in April 2021.
The decrease in Interest expense, net for the thirty-nine weeks ended September 26, 2021 as compared to the thirty-nine weeks ended September 27, 2020 was primarily due to: (i) lower revolver and term loan borrowings, (ii) the discontinuance of debt discount amortization related to our 2025 Notes resulting from the adoption of ASU No. 2020-06 and (iii) lower interest rates on our unhedged variable rate debt. These decreases were partially offset by increases in interest expense from our 2025 Notes issued in May 2020 and our 2029 Notes issued in April 2021.
(Benefit) provision for income taxes
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| THIRTEEN WEEKS ENDED | | | | THIRTY-NINE WEEKS ENDED | | |
| SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | CHANGE |
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Effective income tax rate | (NM) | | 45.4 | % | | (NM) | | 13.5 | % | | 32.7 | % | | (19.2) | % |
________________
NM Not meaningful.
For the thirteen weeks ended September 26, 2021, the benefit for income taxes includes the impact of changes to the estimate of the forecasted full-year effective tax rate relative to prior quarters in 2021. The benefit of FICA tax credits on certain employees’ tips reduced the effective tax rate as a result of forecasted pre-tax income. For the thirteen weeks ended September 27, 2020, the benefit of FICA tax credits on certain employees’ tips increased the effective tax rate as a result of forecasted pre-tax book loss. | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | THIRTEEN WEEKS ENDED | | |
| | | | | | | MARCH 27, 2022 | | MARCH 28, 2021 | | CHANGE |
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Effective income tax rate | | | | | | | 17.0 | % | | 8.6 | % | | 8.4 | % |
The effective income tax rate for the thirty-ninethirteen weeks ended September 26, 2021 decreasedMarch 27, 2022 increased by 19.28.4 percentage points as compared to the thirty-ninethirteen weeks ended September 27, 2020.March 28, 2021. The decreaseincrease was primarily due to the benefit of FICA tax credits on certain employees’ tips reducingchange in the effective tax rate in 2021 as a resultamount and mix of forecasted pre-tax book income as compared to increasing the effective tax rate in 2020 as a result of forecasted pre-tax book loss.across our U.S. and international subsidiaries.
SEGMENT PERFORMANCE
We consider our restaurant concepts and international markets as operating segments, which reflects how we manage our business, review operating performance and allocate resources. Resources are allocated and
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
performance is assessed by our CEO, whom we have determined to be our CODM. We aggregate our operating segments into two reportable segments, U.S. and international. The U.S. segment includes all restaurants operating in the U.S. while restaurants operating outside the U.S. are included in the international segment. The following is a summary of reporting segments:
| | | | | | | | | | | | | | |
REPORTABLE SEGMENT (1) | | CONCEPT | | GEOGRAPHIC LOCATION |
U.S. | | Outback Steakhouse | | United States of America |
| Carrabba’s Italian Grill | |
| Bonefish Grill | |
| Fleming’s Prime Steakhouse & Wine Bar | |
International | | Outback Steakhouse | | Brazil, Hong Kong/China |
| Carrabba’s Italian Grill (Abbraccio) | | Brazil |
_________________
(1)Includes franchise locations.
Revenues for both segments include only transactions with customers and exclude intersegment revenues. Excluded from Income (loss) from operations for U.S. and international are certain legal and corporate costs not directly related to the performance of the segments, most stock-based compensation expenses and certain bonus expenses.
During the thirteen and thirty-nine weeks ended September 27, 2020, we recorded $4.2 million and $28.8 million, respectively, of pre-tax charges as a part of transformational initiatives. These costs were primarily recorded within General and administrative expense and Provision for impaired assets and restaurant closings and were not allocated to our segments since our CODM does not consider the impact of transformational initiatives when assessing segment performance.
Refer to Note 2015 - Segment Reporting of the Notes to Consolidated Financial Statements for reconciliations of segment income (loss) from operations to the consolidated operating results.
Restaurant-level operating margin is widely regarded in the industry as a useful metric to evaluate restaurant-level operating efficiency and performance of ongoing restaurant-level operations, and we use it for these purposes, overall and particularly within our two segments. See the Overview-Key Performance Indicators and Non-GAAP Financial Measures sections of Management’s Discussion and Analysis for additional details regarding the calculation of restaurant-level operating margin.
U.S. Segment
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| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Revenues | | | | | | | |
Restaurant sales | $ | 898,790 | | | $ | 719,406 | | | $ | 2,789,142 | | | $ | 2,141,062 | |
Franchise and other revenues | 13,943 | | | 2,332 | | | 31,567 | | | 12,253 | |
Total revenues | $ | 912,733 | | | $ | 721,738 | | | $ | 2,820,709 | | | $ | 2,153,315 | |
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Restaurant-level operating margin | 10.0 | % | | 11.4 | % | | 17.1 | % | | 9.4 | % |
Income (loss) from operations | $ | 47,294 | | | $ | 29,574 | | | $ | 334,326 | | | $ | (21,968) | |
Operating income (loss) margin | 5.2 | % | | 4.1 | % | | 11.9 | % | | (1.0) | % |
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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
U.S. Segment
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| | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Revenues | | | | | | | |
Restaurant sales | | | | | $ | 1,023,635 | | | $ | 900,059 | |
Franchise and other revenues | | | | | 12,772 | | | 4,859 | |
Total revenues | | | | | $ | 1,036,407 | | | $ | 904,918 | |
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Restaurant-level operating margin | | | | | 17.4 | % | | 19.2 | % |
Income from operations | | | | | $ | 132,226 | | | $ | 121,735 | |
Operating income margin | | | | | 12.8 | % | | 13.5 | % |
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Restaurant sales
Following is a summary of the change in U.S. segment Restaurant sales for the periodsperiod indicated:
| | | | | | | | | | | |
(dollars in millions) | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
For the periods ended September 27, 2020 | $ | 719.4 | | | $ | 2,141.1 | |
Change from: | | | |
Comparable restaurant sales | 177.7 | | | 657.8 | |
Restaurant openings | 6.2 | | | 19.0 | |
| | | |
Restaurant closures | (4.5) | | | (28.8) | |
For the periods ended September 26, 2021 | $ | 898.8 | | | $ | 2,789.1 | |
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(dollars in millions) | | | THIRTEEN WEEKS ENDED |
For the period ended March 28, 2021 | | | $ | 900.1 | |
Change from: | | | |
Comparable restaurant sales | | | 123.8 | |
Restaurant openings | | | 7.0 | |
| | | |
Restaurant closures | | | (7.2) | |
For the period ended March 27, 2022 | | | $ | 1,023.7 | |
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The increase in U.S. Restaurant sales during the thirteen weeks ended September 26, 2021March 27, 2022 was primarily due to: (i) higher comparable restaurant sales from in-restaurant dining and strong retention of off-premises sales and (ii) the opening of 11 new restaurants not includedprimarily attributable to increases in our comparable restaurant sales base. The increase in U.S. Restaurant sales was partially offset by the closure of 15 restaurants since June 26, 2020.
The increase in U.S. Restaurant sales during the thirty-nine weeks ended September 26, 2021 was primarily due to: (i) higher comparable restaurant sales from in-restaurant dining and strong retention of off-premises salesaverage check per person and (ii) the opening of 13 new restaurants not included in our comparable restaurant sales base. The increase in U.S. Restaurant sales was partially offset by the closure of 4417 restaurants since December 29, 2019.27, 2020.
Income (loss) from operations
The increase in U.S. Income from operations generated during the thirteen weeks ended September 26, 2021March 27, 2022 as compared to the thirteen weeks ended September 27, 2020March 28, 2021 was primarily due to an increaseincreases in comparable restaurant salesaverage check per person and lower advertising expense.the net benefit of lapping the impact of COVID-19, as well as higher franchise revenues. These increases were partially offset by: (i) the Carrabba’s Italian Grill royalty termination,commodity and wage rate inflation, (ii) higher labor costs and commodity inflationoperating expenses including utilities and (iii) higher operating and utilities expense.
U.S. Income from operations generated during the thirty-nine weeks ended September 26, 2021 as compared to Loss from operations during the thirty-nine weeks ended September 27, 2020 was primarily due to: (i) an increase in comparable restaurant sales, (ii) COVID-19 pandemic related charges during 2020, (iii) lower advertising expense, (iv) the 2020 impact of net relief pay and (v) the impact of certain cost savings initiatives. These increases were partially offset by: (i) the Carrabba’s Italian Grill royalty termination, (ii) higher labor costs and commodity inflation, (iii) higher management bonus and (iv) higher operating and utilities expense.
International Segment
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | (dollars in thousands) | | MARCH 27, 2022 | | MARCH 28, 2021 |
Revenues | Revenues | | | | | | | | Revenues | | | | |
Restaurant sales | Restaurant sales | $ | 97,928 | | | $ | 47,081 | | | $ | 242,254 | | | $ | 197,923 | | Restaurant sales | | $ | 99,940 | | | $ | 79,392 | |
Franchise and other revenues | Franchise and other revenues | (198) | | | 2,441 | | | 12,339 | | | 6,818 | | Franchise and other revenues | | 4,188 | | | 3,163 | |
Total revenues | Total revenues | $ | 97,730 | | | $ | 49,522 | | | $ | 254,593 | | | $ | 204,741 | | Total revenues | | $ | 104,128 | | | $ | 82,555 | |
| Restaurant-level operating margin | Restaurant-level operating margin | 12.8 | % | | (1.5) | % | | 10.7 | % | | 5.7 | % | Restaurant-level operating margin | | 16.9 | % | | 14.4 | % |
Income (loss) from operations | $ | 1,412 | | | $ | (7,926) | | | $ | 7,419 | | | $ | (18,209) | | |
Operating income (loss) margin | 1.4 | % | | (16.0) | % | | 2.9 | % | | (8.9) | % | |
Income from operations | | Income from operations | | $ | 8,884 | | | $ | 3,537 | |
Operating income margin | | Operating income margin | | 8.5 | % | | 4.3 | % |
|
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Restaurant sales
Following is a summary of the change in international segment Restaurant sales for the periodsperiod indicated:
| | | | | | | | | | | |
(dollars in millions) | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
For the periods ended September 27, 2020 | $ | 47.1 | | | $ | 197.9 | |
Change from: | | | |
Comparable restaurant sales | 40.7 | | | 38.3 | |
Restaurant openings | 7.8 | | | 22.3 | |
Effect of foreign currency translation | 2.3 | | | (15.6) | |
Restaurant closures | — | | | (0.6) | |
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For the periods ended September 26, 2021 | $ | 97.9 | | | $ | 242.3 | |
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(dollars in millions) | | | THIRTEEN WEEKS ENDED |
For the period ended March 28, 2021 | | | $ | 79.4 | |
Change from: | | | |
Comparable restaurant sales | | | 18.2 | |
Restaurant openings | | | 5.4 | |
Effect of foreign currency translation | | | (3.1) | |
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For the period ended March 27, 2022 | | | $ | 99.9 | |
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The increase in international Restaurant sales during the thirteen weeks ended September 26, 2021March 27, 2022 was primarily due to higher comparable restaurant sales principally attributable to the impact of the COVID-19 pandemic on fiscal year 2020 international Restaurant sales and the opening of 20 new restaurants not included in our comparable restaurant sales base.
The increase in international Restaurant sales during the thirty-nine weeks ended September 26, 2021 was primarily due to higher comparable restaurant sales principally attributable to the impact of the COVID-19 pandemic on fiscal year 2020 international Restaurant sales and the opening of 24 new restaurants not included in our comparable restaurant sales base, partially offset by the effect of foreign currency translation of the Brazilian Real relative to the U.S. dollar.base.
Income (loss) from operations
InternationalThe increase in international Income from operations generated during the thirteen weeks ended September 26, 2021March 27, 2022 as compared to Loss from operations during the thirteen weeks ended September 27, 2020March 28, 2021 was primarily due to: (i) higherto an increase in restaurant sales due tooperating margin, which includes the reopeningrecovery of restaurantin-restaurant dining roomsfrom the impact of the COVID-19 pandemic during 2021 and increases in average check per person, and (ii) a decrease in off-premises related costs. These increases were partially offset by: (i) higher labor costs, (ii) additional rent, utilities and operating expense, and (iii)by commodity inflation.
International Income from operations generated during the thirty-nine weeks ended September 26, 2021 as compared to Loss from operations during the thirty-nine weeks ended September 27, 2020 was primarily due to: (i) higher restaurant sales due to the reopening of restaurant dining rooms and increases in average check per person and (ii) lower labor costs. These increases were partially offset by: (i) commodity inflation, (ii) additional utilities, operating and rent expense and (iii) incremental off-premises related costs.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Non-GAAP Financial Measures
Restaurant-level operating margin - The following tables reconcile consolidated and segment Income from operations and the corresponding margins to Restaurant-level operating income and the corresponding margins for the periods indicated:
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Consolidated | | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
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Income from operations | | | | | $ | 107,256 | | | $ | 90,998 | |
Operating income margin | | | | | 9.4 | % | | 9.2 | % |
Less: | | | | | | | |
Franchise and other revenues | | | | | 16,960 | | | 8,022 | |
Plus: | | | | | | | |
Depreciation and amortization | | | | | 41,775 | | | 41,226 | |
General and administrative | | | | | 58,674 | | | 57,248 | |
Provision for impaired assets and restaurant closings | | | | | 1,839 | | | 2,200 | |
Restaurant-level operating income | | | | | $ | 192,584 | | | $ | 183,650 | |
Restaurant-level operating margin | | | | | 17.1 | % | | 18.8 | % |
| | | | | | | |
U.S. | | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
| | | | | | | |
Income from operations | | | | | $ | 132,226 | | | $ | 121,735 | |
Operating income margin | | | | | 12.8 | % | | 13.5 | % |
Less: | | | | | | | |
Franchise and other revenues | | | | | 12,772 | | | 4,859 | |
Plus: | | | | | | | |
Depreciation and amortization | | | | | 34,758 | | | 33,645 | |
General and administrative | | | | | 23,445 | | | 21,092 | |
Provision for impaired assets and restaurant closings | | | | | 58 | | | 1,463 | |
Restaurant-level operating income | | | | | $ | 177,715 | | | $ | 173,076 | |
Restaurant-level operating margin | | | | | 17.4 | % | | 19.2 | % |
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International | | | THIRTEEN WEEKS ENDED |
(dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
| | | | | | | |
Income from operations | | | | | $ | 8,884 | | | $ | 3,537 | |
Operating income margin | | | | | 8.5 | % | | 4.3 | % |
Less: | | | | | | | |
Franchise and other revenues | | | | | 4,188 | | | 3,163 | |
Plus: | | | | | | | |
Depreciation and amortization | | | | | 5,536 | | | 5,720 | |
General and administrative | | | | | 4,928 | | | 4,605 | |
Provision for impaired assets and restaurant closings | | | | | 1,775 | | | 707 | |
Restaurant-level operating income | | | | | $ | 16,935 | | | $ | 11,406 | |
Restaurant-level operating margin | | | | | 16.9 | % | | 14.4 | % |
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
The following table presents the percentages of certain operating cost financial statement line items in relation to Restaurant sales for the periods indicated:
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| THIRTEEN WEEKS ENDED |
| MARCH 27, 2022 | | | | MARCH 28, 2021 |
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Restaurant sales | 100.0 | % | | | | 100.0 | % | | |
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Food and beverage costs | 32.0 | % | | | | 29.8 | % | | |
Labor and other related | 27.8 | % | | | | 28.0 | % | | |
Other restaurant operating | 23.1 | % | | | | 23.4 | % | | |
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Restaurant-level operating margin | 17.1 | % | | | | 18.8 | % | | |
Adjusted net income and Adjusted diluted earnings per share
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| | | THIRTEEN WEEKS ENDED |
(in thousands, except per share data) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
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Diluted net income attributable to Bloomin’ Brands | | | | | $ | 75,511 | | | $ | 70,243 | |
Convertible senior notes if-converted method interest adjustment, net of tax (1) | | | | | — | | | 1,381 | |
Net income attributable to Bloomin’ Brands | | | | | $ | 75,511 | | | $ | 68,862 | |
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Diluted earnings per share | | | | | $ | 0.73 | | | $ | 0.63 | |
Adjusted diluted earnings per share (2) | | | | | $ | 0.80 | | | $ | 0.72 | |
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Diluted weighted average common shares outstanding | | | | | 103,454 | | | 110,641 | |
Adjusted diluted weighted average common shares outstanding (2) | | | | | 94,722 | | | 95,448 | |
_________________
(1)Adjustment for interest expense related to the 2025 Notes weighted for the portion of the period prior to our election under the 2025 Notes indenture to settle the principal portion of the 2025 Notes in cash.
(2)For the thirteen weeks ended March 27, 2022 and March 28, 2021, adjusted diluted weighted average common shares outstanding was calculated excluding the dilutive effect of 8,732 and 9,653 shares, respectively, to be issued upon conversion of the 2025 Notes to satisfy the amount in excess of the principal since our convertible note hedge offsets the dilutive impact of the shares underlying the 2025 Notes. For the thirteen weeks ended March 28, 2021, adjusted diluted weighted average common shares outstanding was also calculated assuming our February 2021 election to settle the principal portion of the 2025 Notes in cash was in effect for the entire period.
System-Wide Sales - 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. Management 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. System-wide sales comprise sales of Company-owned and franchised restaurants. For a summary of sales of Company-owned restaurants, refer to Note 32 - Revenue Recognition of the Notes to Consolidated Financial Statements.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
The following table provides a summary of sales of franchised restaurants for the periods indicated, which are not included in our consolidated financial results. Franchise sales within this table do not represent our sales 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 concepts and in determining our royalties and/or service fees.
| | | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED | | | | THIRTEEN WEEKS ENDED | |
(dollars in millions) | (dollars in millions) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | (dollars in millions) | | MARCH 27, 2022 | | MARCH 28, 2021 | |
U.S. | U.S. | | | | | | | | | U.S. | | | | | |
Outback Steakhouse | Outback Steakhouse | $ | 118 | | | $ | 76 | | | $ | 329 | | | $ | 250 | | | Outback Steakhouse | | $ | 129 | | | $ | 92 | | |
Carrabba’s Italian Grill | Carrabba’s Italian Grill | 10 | | | 8 | | | 32 | | | 25 | | | Carrabba’s Italian Grill | | 12 | | | 10 | | |
Bonefish Grill | Bonefish Grill | 3 | | | 2 | | | 8 | | | 6 | | | Bonefish Grill | | 3 | | | 2 | | |
U.S. total | U.S. total | 131 | | | 86 | | | 369 | | | 281 | | | U.S. total | | 144 | | | 104 | | |
International | International | | | International | | | |
Outback Steakhouse-South Korea | 73 | | | 64 | | | 219 | | | 174 | | | |
Outback Steakhouse - South Korea | | Outback Steakhouse - South Korea | | 78 | | | 74 | | |
Other | Other | 26 | | | 19 | | | 77 | | | 45 | | | Other | | 34 | | | 24 | | |
International total | International total | 99 | | | 83 | | | 296 | | | 219 | | | International total | | 112 | | | 98 | | |
Total franchise sales (1) | Total franchise sales (1) | $ | 230 | | | $ | 169 | | | $ | 665 | | | $ | 500 | | | Total franchise sales (1) | | $ | 256 | | | $ | 202 | | |
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(1)Franchise sales are not included in Total revenues in the Consolidated Statements of Operations and Comprehensive Income (Loss).Income.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Restaurant-level operating margin - The following tables reconcile consolidated and segment Income (loss) from operations and the corresponding margins to Restaurant-level operating income (loss) and the corresponding margins for the periods indicated:
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Consolidated | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
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Income (loss) from operations | $ | 14,837 | | | $ | (14,255) | | | $ | 230,472 | | | $ | (167,735) | |
Operating income (loss) margin | 1.5 | % | | (1.8) | % | | 7.5 | % | | (7.1) | % |
Less: | | | | | | | |
Franchise and other revenues | 13,745 | | | 4,773 | | | 43,906 | | | 19,071 | |
Plus: | | | | | | | |
Depreciation and amortization | 40,827 | | | 43,417 | | | 122,592 | | | 137,469 | |
General and administrative | 58,880 | | | 57,443 | | | 182,590 | | | 197,732 | |
Provision for impaired assets and restaurant closings | 1,585 | | | (54) | | | 8,962 | | | 66,223 | |
Restaurant-level operating income | $ | 102,384 | | | $ | 81,778 | | | $ | 500,710 | | | $ | 214,618 | |
Restaurant-level operating margin | 10.3 | % | | 10.7 | % | | 16.5 | % | | 9.2 | % |
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U.S. | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
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Income (loss) from operations | $ | 47,294 | | | $ | 29,574 | | | $ | 334,326 | | | $ | (21,968) | |
Operating income (loss) margin | 5.2 | % | | 4.1 | % | | 11.9 | % | | (1.0) | % |
Less: | | | | | | | |
Franchise and other revenues | 13,943 | | | 2,332 | | | 31,567 | | | 12,253 | |
Plus: | | | | | | | |
Depreciation and amortization | 33,421 | | | 35,057 | | | 100,645 | | | 110,005 | |
General and administrative | 21,998 | | | 19,732 | | | 66,043 | | | 68,955 | |
Provision for impaired assets and restaurant closings | 1,539 | | | (86) | | | 8,678 | | | 56,389 | |
Restaurant-level operating income | $ | 90,309 | | | $ | 81,945 | | | $ | 478,125 | | | $ | 201,128 | |
Restaurant-level operating margin | 10.0 | % | | 11.4 | % | | 17.1 | % | | 9.4 | % |
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International | THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
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Income (loss) from operations | $ | 1,412 | | | $ | (7,926) | | | $ | 7,419 | | | $ | (18,209) | |
Operating income (loss) margin | 1.4 | % | | (16.0) | % | | 2.9 | % | | (8.9) | % |
Less: | | | | | | | |
Franchise and other revenues | (198) | | | 2,441 | | | 12,339 | | | 6,818 | |
Plus: | | | | | | | |
Depreciation and amortization | 5,843 | | | 5,672 | | | 17,128 | | | 18,314 | |
General and administrative | 5,060 | | | 4,011 | | | 13,781 | | | 14,413 | |
Provision for impaired assets and restaurant closings | 28 | | | — | | | 27 | | | 3,640 | |
Restaurant-level operating income (loss) | $ | 12,541 | | | $ | (684) | | | $ | 26,016 | | | $ | 11,340 | |
Restaurant-level operating margin | 12.8 | % | | (1.5) | % | | 10.7 | % | | 5.7 | % |
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Adjusted restaurant-level operating margin - The following tables present the percentages of certain operating cost financial statement line items in relation to Restaurant sales for the periods indicated:
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| THIRTEEN WEEKS ENDED |
| SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
| REPORTED | | ADJUSTED (1) | | REPORTED | | ADJUSTED |
Restaurant sales | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
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Food and beverage costs | 30.5 | % | | 30.5 | % | | 30.1 | % | | 30.1 | % |
Labor and other related | 29.1 | % | | 29.1 | % | | 32.2 | % | | 32.2 | % |
Other restaurant operating | 30.1 | % | | 23.6 | % | | 27.0 | % | | 27.0 | % |
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Restaurant-level operating margin | 10.3 | % | | 16.8 | % | | 10.7 | % | | 10.7 | % |
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| THIRTY-NINE WEEKS ENDED |
| SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
| REPORTED | | ADJUSTED (1) | | REPORTED | | ADJUSTED (1) |
Restaurant sales | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
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Food and beverage costs | 30.0 | % | | 30.0 | % | | 31.3 | % | | 30.9 | % |
Labor and other related | 28.4 | % | | 28.4 | % | | 32.6 | % | | 32.6 | % |
Other restaurant operating | 25.2 | % | | 23.0 | % | | 27.0 | % | | 27.0 | % |
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Restaurant-level operating margin | 16.5 | % | | 18.6 | % | | 9.2 | % | | 9.5 | % |
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(1)Includes (favorable) unfavorable adjustments recorded in Other restaurant operating expense (unless otherwise noted below) for the following activities, as described in the Adjusted income (loss) from operations, Adjusted net income (loss) and Adjusted diluted earnings (loss) per share table below for the periods indicated:
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| THIRTEEN WEEKS ENDED | | | | THIRTY-NINE WEEKS ENDED |
(dollars in millions) | SEPTEMBER 26, 2021 | | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Royalty termination expense | $ | (61.9) | | | | | $ | (61.9) | | | $ | — | |
Legal and other matters | (2.7) | | | | | (2.7) | | | — | |
COVID-19 related costs (i) | — | | | | | — | | | (9.9) | |
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Asset impairments and closing costs | — | | | | | — | | | 2.7 | |
| $ | (64.6) | | | | | $ | (64.6) | | | $ | (7.2) | |
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(i)Includes $7.3 million of adjustments recorded in Food and beverage costs.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Adjusted income (loss) from operations, Adjusted net income (loss) and Adjusted diluted earnings (loss) per share
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| THIRTEEN WEEKS ENDED | | THIRTY-NINE WEEKS ENDED |
(in thousands, except per share data) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 | | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Income (loss) from operations | $ | 14,837 | | | $ | (14,255) | | | $ | 230,472 | | | $ | (167,735) | |
Operating income (loss) margin | 1.5 | % | | (1.8) | % | | 7.5 | % | | (7.1) | % |
Adjustments: | | | | | | | |
Royalty termination expense (1) | 61,880 | | | — | | | 61,880 | | | — | |
Legal and other matters (2) | 5,965 | | | — | | | (372) | | | 178 | |
COVID-19-related costs (3) | — | | | — | | | — | | | 79,218 | |
Severance and other transformational costs (4) | — | | | 4,200 | | | — | | | 28,847 | |
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Asset impairments and closure costs (5) | — | | | — | | | — | | | (2,205) | |
Total income (loss) from operations adjustments | 67,845 | | | 4,200 | | | 61,508 | | | 106,038 | |
Adjusted income (loss) from operations | $ | 82,682 | | | $ | (10,055) | | | $ | 291,980 | | | $ | (61,697) | |
Adjusted operating income (loss) margin | 8.2 | % | | (1.3) | % | | 9.5 | % | | (2.6) | % |
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Diluted net income (loss) attributable to common stockholders | $ | 3,449 | | | $ | (17,637) | | | $ | 155,316 | | | $ | (148,000) | |
Convertible senior notes if-converted method interest adjustment, net of tax (6) | — | | | — | | | 460 | | | — | |
Net income (loss) attributable to common stockholders | 3,449 | | | (17,637) | | | 154,856 | | | (148,000) | |
Adjustments: | | | | | | | |
Income (loss) from operations adjustments | 67,845 | | | 4,200 | | | 61,508 | | | 106,038 | |
Loss on extinguishment and modification of debt | — | | | — | | | 2,073 | | | — | |
Amortization of debt discount (7) | — | | | 2,407 | | | — | | | 3,786 | |
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Total adjustments, before income taxes | 67,845 | | | 6,607 | | | 63,581 | | | 109,824 | |
Adjustment to provision for income taxes (8) | (15,878) | | | 440 | | | (14,635) | | | (28,029) | |
Redemption of preferred stock in excess of carrying value (9) | — | | | — | | | — | | | 3,496 | |
Net adjustments | 51,967 | | | 7,047 | | | 48,946 | | | 85,291 | |
Adjusted net income (loss) | $ | 55,416 | | | $ | (10,590) | | | $ | 203,802 | | | $ | (62,709) | |
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Diluted earnings (loss) per share attributable to common stockholders (10) | $ | 0.03 | | | $ | (0.20) | | | $ | 1.42 | | | $ | (1.69) | |
Adjusted diluted earnings (loss) per share (11) | $ | 0.57 | | | $ | (0.12) | | | $ | 2.10 | | | $ | (0.72) | |
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Diluted weighted average common shares outstanding (10) | 107,783 | | | 87,558 | | | 109,410 | | | 87,394 | |
Adjusted diluted weighted average common shares outstanding (11) | 97,307 | | | 87,558 | | | 97,110 | | | 87,394 | |
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(1)Payment made to the Carrabba’s Founders in connection with the Royalty Termination Agreement. See Note 19 - Commitments and Contingencies of the Notes to Consolidated Financial Statements for additional details regarding the Royalty Termination Agreement.
(2)The thirteen and thirty-nine weeks ended September 26, 2021 includes: (i) an adjustment of $(3.2) million to reduce our initial recorded estimate and net $3.1 million benefit from the recognition of recoverable PIS and COFINS taxes, including accrued interest, respectively, within other revenues as a result of favorable court rulings and (ii) an accrual of $2.7 million for Imposto sobre Serviços (“ISS”), a Brazilian municipal service tax, in connection with royalties from our Brazilian subsidiary over the past five years, including related penalties and interest, recorded within Other restaurant operating expense as a result of an unfavorable Brazilian Supreme Court ruling.
(3)Costs incurred in connection with the COVID-19 pandemic, primarily consisting of fixed asset and right-of-use asset impairments, restructuring charges, inventory obsolescence and spoilage, contingent lease liabilities and current expected credit losses. See Note 2 - COVID-19 Charges of the Notes to Consolidated Financial Statements for additional details regarding the impact of certain COVID-19 pandemic related charges on our financial results.
(4)Severance, professional fees and other costs incurred as a result of transformational and restructuring activities.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
(5)Primarily includes a lease termination gain of $2.8 million.
(6)Adjustment for interest expense related to the 2025 Notes weighted for the portion of the period prior to our election under the 2025 Notes indenture to settle the principal portion of our 2025 Notes in cash. The calculation of adjusted diluted earnings per share excludes 2025 Notes interest adjustment.
(7)Amortization of debt discount related to the issuance of the 2025 Notes. See Note 11 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for details.
(8)Income tax effect of the adjustments for the periods presented.
(9)Consideration paid in excess of the carrying value for the redemption of preferred stock of our Abbraccio concept.
(10)Due to the GAAP net loss, the effect of dilutive securities was excluded from the calculation of GAAP diluted loss per share for the thirteen and thirty-nine weeks ended September 27, 2020.
(11)For the thirty-nine weeks ended September 26, 2021, adjusted diluted weighted average common shares outstanding was calculated assuming our February 2021 election to settle the principal portion of the 2025 Notes in cash was in effect for the entire period. For the thirteen and thirty-nine weeks ended September 26, 2021, adjusted diluted weighted average common shares outstanding was calculated excluding the dilutive effect of 10,476 and 10,453 shares, respectively, to be issued upon conversion of the 2025 Notes to satisfy the amount in excess of the principal since the Convertible Note Hedge Transactions offset the dilutive impact of the shares underlying the 2025 Notes.
Liquidity and Capital Resources
LIQUIDITY
Cash and Cash Equivalents
Cash flows generated from operating activities and availability under our revolving credit facility are our principal sources of liquidity, which we use for operating expenses, debt payments, development of new restaurants, remodeling or relocating older restaurants and investment in technology.
Cash and Cash Equivalents - As of September 26, 2021,March 27, 2022, we had $76.3$97.8 million in cash and cash equivalents, of which $28.8$30.1 million was held by foreign affiliates. The international jurisdictions in which we have significant cash do not have any known restrictions that would prohibit repatriation.
As of September 26, 2021,March 27, 2022, we had aggregate accumulated foreign earnings of approximately $34.7$30.5 million. This amount consisted primarily of historical earnings from 2017 and prior that were previously taxed in the U.S. under the 2017 Tax Cuts and Jobs Act and post-2017 foreign earnings, which we may repatriate to the U.S. without additional U.S. federal income tax. These amounts are no longernot considered indefinitely reinvested in our foreign subsidiaries.
Capital Expenditures - We estimate that our capital expenditures will total approximately $140 million to $150 million in 2021. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative
Borrowing Capacity and regulatory factors, among other things, including raw material constraints and restrictions imposed by our borrowing arrangements. Under the Second Amended and Restated Credit Agreement, we are limited to $200.0 million of aggregate capital expenditures during the year ended December 26, 2021.Debt Service
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Credit Facilities - Following is a summary of our outstanding credit facilities as of the dates indicated and principal payments and debt issuance during the period indicated:
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| SENIOR SECURED CREDIT FACILITY | | FORMER CREDIT FACILITY | | | | | | TOTAL CREDIT FACILITIES |
(dollars in thousands) | TERM LOAN A | | REVOLVING FACILITY | | TERM LOAN A | | REVOLVING FACILITY | | 2025 NOTES | | 2029 NOTES | |
Balance as of December 27, 2020 | $ | — | | | $ | — | | | $ | 425,000 | | | $ | 447,000 | | | $ | 230,000 | | | $ | — | | | $ | 1,102,000 | |
2021 new debt | 200,000 | | | 363,000 | | | — | | | 15,000 | | | — | | | 300,000 | | | 878,000 | |
2021 payments | (2,500) | | | (239,000) | | | (425,000) | | | (462,000) | | | — | | | — | | | (1,128,500) | |
Balance as of September 26, 2021 | $ | 197,500 | | | $ | 124,000 | | | $ | — | | | $ | — | | | $ | 230,000 | | | $ | 300,000 | | | $ | 851,500 | |
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Weighted-average interest rate, as of September 26, 2021 | 2.58 | % | | 2.69 | % | | | | | | 5.00 | % | | 5.13 | % | | |
Principal maturity date | April 2026 | | April 2026 | | | | | | May 2025 | | April 2029 | | |
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| SENIOR SECURED CREDIT FACILITY | | | | | | | | TOTAL CREDIT FACILITIES |
(dollars in thousands) | TERM LOAN A | | REVOLVING FACILITY | | | | | | 2025 NOTES | | 2029 NOTES | |
Balance as of December 26, 2021 | $ | 195,000 | | | $ | 80,000 | | | | | | | $ | 230,000 | | | $ | 300,000 | | | $ | 805,000 | |
2022 new debt | — | | | 90,000 | | | | | | | — | | | — | | | 90,000 | |
2022 payments | (2,500) | | | (160,000) | | | | | | | — | | | — | | | (162,500) | |
Balance as of March 27, 2022 | $ | 192,500 | | | $ | 10,000 | | | | | | | $ | 230,000 | | | $ | 300,000 | | | $ | 732,500 | |
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Interest rates, as of March 27, 2022 (1) | 1.76 | % | | 4.00 | % | | | | | | 5.00 | % | | 5.13 | % | | |
Principal maturity date | April 2026 | | April 2026 | | | | | | May 2025 | | April 2029 | | |
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(1)Interest rate for Term loan A represents the weighted average interest rate. Interest rate for the revolving credit facility represents the base rate option elected in anticipation of impending repayment.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
As of September 26, 2021,March 27, 2022, we had $655.3$769.3 million in available unused borrowing capacity under our revolving credit facility, net of letters of credit of $20.7 million.
DuringOur Credit Agreement contains various financial and non-financial covenants. A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the revolving credit facility and cause an acceleration of the amounts due under the credit facilities. See Note 13 - Long-term Debt, Net in our Annual Report on Form 10-K for the year ended December 26, 2021 for further information.
As of March 27, 2022 and December 26, 2021, we were in compliance with our debt covenants. We believe that we will remain in compliance with our debt covenants during the next 12 months.
Credit Agreement Amendment - On April 26, 2022, we and OSI entered into the Amended Credit Agreement, which included an increase of our existing revolving credit facility from $800.0 million to $1.0 billion and a transition from LIBOR to SOFR as the benchmark rate for purposes of calculating interest under the Senior Secured Credit Facility. At closing, an incremental $192.5 million was drawn on the revolving credit facility to fully repay the outstanding balance of Term loan A. Our total indebtedness remained unchanged as a result of the Amended Credit Agreement. The transition to SOFR did not materially impact the interest rate applied to our borrowings.
See Note 6 - Long-term Debt, Net for additional details regarding the Amended Credit Agreement.
Use of Cash
Cash flows generated from operating activities and availability under our revolving credit facility are our principal sources of liquidity, which we use for operating expenses, debt payments, share repurchases and dividend payments, development of new restaurants, remodeling or relocating older restaurants and investment in technology.
We believe that our expected liquidity sources are adequate to fund debt service requirements, lease obligations, capital expenditures and working capital obligations during the 12 months following this filing. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow and our ability to manage costs and working capital successfully.
Capital Expenditures - We estimate that our capital expenditures will total approximately $225 million to $240 million in 2022. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things, including raw material constraints.
Dividends and Share Repurchases - In April 2022, our Board declared a quarterly cash dividend of $0.14 per share, payable on May 25, 2022. Future dividend payments are dependent on our earnings, financial condition, capital expenditure requirements, surplus and other factors that our Board considers relevant, as well as continued compliance with the financial covenants in our debt agreements.
On February 8, 2022, our Board approved the 2022 Share Repurchase Program under which we are authorized to repurchase up to $125.0 million of our outstanding common stock. The 2022 Share Repurchase Program will expire on August 9, 2023. As of March 27, 2022, we had $113.3 million remaining available for repurchase under the 2022 Share Repurchase Program.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Following is a summary of dividends and share repurchases from fiscal year 2015 through March 27, 2022:
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(dollars in thousands) | DIVIDENDS PAID | | SHARE REPURCHASES | | TOTAL |
Fiscal year 2015 | $ | 29,332 | | | $ | 169,999 | | | $ | 199,331 | |
Fiscal year 2016 | 31,379 | | | 309,887 | | | 341,266 | |
Fiscal year 2017 | 30,988 | | | 272,736 | | | 303,724 | |
Fiscal year 2018 | 33,312 | | | 113,967 | | | 147,279 | |
Fiscal year 2019 | 35,734 | | | 106,992 | | | 142,726 | |
Fiscal year 2020 | 17,480 | | | — | | | 17,480 | |
Fiscal year 2021 | — | | | — | | | — | |
First fiscal quarter 2022 | 12,559 | | | 11,702 | | | 24,261 | |
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Total (1) | $ | 190,784 | | | $ | 985,283 | | | $ | 1,176,067 | |
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________________
(1)Subsequent to March 27, 2022, we repurchased $15.6 million of our common stock under a Rule 10b5-1 plan.
Deferred Compensation Programs - The deferred compensation obligation due to managing and chef partners was $11.0 million and $15.5 million as of March 27, 2022 and December 26, 2021, respectively. We invest in various corporate-owned life insurance policies, which are held within an irrevocable grantor or rabbi trust account for settlement of our obligations under the deferred compensation plans. The obligation for managing and chef partners’ deferred compensation was fully funded as of March 27, 2022.
Summary of Cash Flows and Financial Condition
Cash Flows - The following table presents a summary of our cash flows provided by (used in) operating, investing and financing activities for the periods indicated:
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| THIRTEEN WEEKS ENDED |
(dollars in thousands) | MARCH 27, 2022 | | MARCH 28, 2021 |
Net cash provided by operating activities | $ | 147,135 | | | $ | 141,026 | |
Net cash used in investing activities | (39,150) | | | (16,618) | |
Net cash used in financing activities | (101,111) | | | (96,912) | |
Effect of exchange rate changes on cash and cash equivalents | 1,965 | | | (1,246) | |
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Net increase in cash, cash equivalents and restricted cash | $ | 8,839 | | | $ | 26,250 | |
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Operating activities - The increase in net cash provided by operating activities during the thirteen weeks ended September 26,March 27, 2022 as compared to the thirteen weeks ended March 28, 2021 we madewas primarily due to the timing of collections of gift card receivables and a decrease in cash paid for interest, partially offset by increased employee compensation payments.
Investing activities - The increase in net cash used in investing activities during the thirteen weeks ended March 27, 2022 as compared to the thirteen weeks ended March 28, 2021 was primarily due to higher capital expenditures.
Financing activities - The increase in net cash used in financing activities during the thirteen weeks ended March 27, 2022 as compared to the thirteen weeks ended March 28, 2021 was primarily due to payment of $61.9 million tocash dividends on our common stock and the Carrabba’s Founders in connection with the Royalty Termination Agreement detailed in Note 19 - Commitments and Contingencies. This cash payment was primarily fundedrepurchase of common stock during 2022. These increases were partially offset by borrowingslower net repayments on our revolving credit facility.
2029 Notes - On April 16, 2021, we issued $300.0 million aggregate principal amount of senior unsecured notes due 2029. The 2029 Notes mature on April 15, 2029, unless earlier redeemed or purchased by us. The 2029 Notes bear cash interest at an annual rate of 5.125% payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021.
The net proceeds from the 2029 Notes were approximately $294.5 million, after deducting the initial purchaser’s discount and our offering expenses. The net proceeds were used to repay a portion of our outstanding Term loan A and revolving credit facility in conjunction with the refinancing of our Former Credit Facility.
Second Amended and Restated Credit Agreement - On April 16, 2021, we and OSI, as co-borrowers, entered into the Second Amended and Restated Credit Agreement which provides for senior secured financing of up to $1.0 billion consisting of a $200.0 million Term loan A and an $800.0 million revolving credit facility. The Senior Secured Credit Facility matures on April 16, 2026 and replaced our Former Credit Facility financing of up to $1.5 billion.
The Second Amended and Restated Credit Agreement limits, subject to certain exceptions, our ability and the ability of our subsidiaries to: incur additional indebtedness; make significant payments; sell assets; pay dividends and other restricted payments; make certain investments; acquire certain assets; effect mergers and similar transactions; and effect certain other transactions with affiliates. The Second Amended and Restated Credit Agreement also prohibited us from paying certain dividends and making certain restricted payments and acquisitions until we were in compliance with our TNLR covenant for the period ended September 26, 2021.
Our Senior Secured Credit Facility contains mandatory prepayment requirements for Term loan A, including the requirement that we prepay outstanding amounts under these loans with 50% of our annual excess cash flow, as defined in the Second Amended and Restated Credit Agreement, commencing with the fiscal year ending December 25, 2022. The amount of outstanding loans required to be prepaid in accordance with the debt covenants may vary based on our CSSNLR and year end results. Other than the annual required minimum amortization premiums of $10.0 million, we do not anticipate any other payments will be required through September 25, 2022.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
See Note 10 - Long-term Debt, Net for additional details regarding the 2029 Notes and Second Amended and Restated Credit Agreement.
As of September 26, 2021 and December 27, 2020, we were in compliance with our debt covenants. We believe that we will remain in compliance with our debt covenants during the next 12 months.
SUMMARY OF CASH FLOWS
The following table presents a summary of our cash flows provided by (used in) operating, investing and financing activities for the periods indicated:
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| THIRTY-NINE WEEKS ENDED |
(dollars in thousands) | SEPTEMBER 26, 2021 | | SEPTEMBER 27, 2020 |
Net cash provided by operating activities | $ | 304,246 | | | $ | 54,971 | |
Net cash used in investing activities | (69,085) | | | (56,162) | |
Net cash (used in) provided by financing activities | (265,192) | | | 99,853 | |
Effect of exchange rate changes on cash and cash equivalents | 207 | | | (3,293) | |
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Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (29,824) | | | $ | 95,369 | |
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Operating activitiesFinancial Condition - The increase in net cash provided by operating activities during the thirty-nine weeks ended September 26, 2021 as compared to the thirty-nine weeks ended September 27, 2020 was primarily due to an increase in restaurant-level operating margin. This increase was partially offset by: (i) cash paid in connection with the Carrabba’s Italian Grill royalty termination, (ii) deferral of payroll tax payments in 2020 as a result of the CARES Act, (iii) higher inventory purchases, (iv) timing of collections of gift card receivables, (v) cash paid to terminate interest rate swap agreements and (vi) timing of operational payments and receipts.
Investing activities - The increase in net cash used in investing activities during the thirty-nine weeks ended September 26, 2021 as compared to the thirty-nine weeks ended September 27, 2020 was primarily due to higher capital expenditures, partially offset by higher proceeds from the disposal of property, fixtures and equipment.
Financing activities - Net cash used in financing activities during the thirty-nine weeks ended September 26, 2021 as compared to net cash provided by financing activities during the thirty-nine weeks ended September 27, 2020 was primarily due to: (i) higher net repayments on our revolving credit facility, (ii) proceeds from the issuance of the 2025 Notes and related warrants during 2020 and (iii) net repayment of our Term loan A in conjunction with the refinance of our Former Credit Facility. These decreases were partially offset by: (i) proceeds from the issuance of the 2029 Notes, (ii) premium payments for Convertible Note Hedge Transactions during 2020, (iii) payment of cash dividends on our common stock during 2020 and (iv) proceeds from the exercise of stock-based compensation during 2021 as compared to payment of taxes from the exercise of stock-based compensation during 2020.
FINANCIAL CONDITION
Following is a summary of our current assets, current liabilities and working capital (deficit) as of the periods indicated:
| (dollars in thousands) | (dollars in thousands) | SEPTEMBER 26, 2021 | | DECEMBER 27, 2020 | (dollars in thousands) | MARCH 27, 2022 | | DECEMBER 26, 2021 |
Current assets | Current assets | $ | 240,659 | | | $ | 323,854 | | Current assets | $ | 271,287 | | | $ | 352,792 | |
Current liabilities | Current liabilities | 897,215 | | | 950,104 | | Current liabilities | 935,648 | | | 984,625 | |
Working capital (deficit) | Working capital (deficit) | $ | (656,556) | | | $ | (626,250) | | Working capital (deficit) | $ | (664,361) | | | $ | (631,833) | |
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Working capital (deficit) includes: (i) Unearned revenue primarily from unredeemed gift cards of $284.1$325.3 million and $381.6$398.8 million as of SeptemberMarch 27, 2022 and December 26, 2021, and December 27, 2020, respectively, and (ii) current operating lease
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
liabilities of $178.6$177.6 million and $176.8$177.0 million as of SeptemberMarch 27, 2022 and December 26, 2021, and December 27, 2020, respectively, with the corresponding operating right-of-use assets recorded as non-current on our Consolidated Balance Sheets. We have, and in the future may continue to have, negative working capital balances (as is common for many restaurant companies). We operate successfully with negative working capital because cash collected on restaurant sales are typically received before payment is due on our current liabilities, and our inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flows from restaurant operations and gift card sales are typically used to service debt obligations and to make capital expenditures.
Deferred Compensation Programs - The deferred compensation obligation due to managing and chef partners was $18.4 million and $28.1 million as of September 26, 2021 and December 27, 2020, respectively. We invest in various corporate-owned life insurance policies, which are held within an irrevocable grantor or rabbi trust account for settlement of our obligations under the deferred compensation plans. The obligation for managing and chef partners’ deferred compensation was fully funded as of September 26, 2021.
DIVIDENDS AND SHARE REPURCHASES
We did not pay dividends or repurchase shares of our outstanding common stock during the thirteen weeks ended September 26, 2021. The terms of our Second Amended and Restated Credit Agreement contained certain restrictions on cash dividends and share repurchases until after TNLR covenant compliance was met for the period ending September 26, 2021.
Following is a summary of dividends and share repurchases from fiscal year 2015 through September 26, 2021:
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(dollars in thousands) | DIVIDENDS PAID | | SHARE REPURCHASES | | TOTAL |
Fiscal year 2015 | $ | 29,332 | | | $ | 169,999 | | | $ | 199,331 | |
Fiscal year 2016 | 31,379 | | | 309,887 | | | 341,266 | |
Fiscal year 2017 | 30,988 | | | 272,736 | | | 303,724 | |
Fiscal year 2018 | 33,312 | | | 113,967 | | | 147,279 | |
Fiscal year 2019 | 35,734 | | | 106,992 | | | 142,726 | |
Fiscal year 2020 | 17,480 | | | — | | | 17,480 | |
Fiscal year 2021 | — | | | — | | | — | |
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Total | $ | 178,225 | | | $ | 973,581 | | | $ | 1,151,806 | |
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Recently Issued Financial Accounting Standards
For a description of recently issued Financial Accounting Standards that we adopted during the thirty-ninethirteen weeks ended September 26, 2021March 27, 2022 and, that are applicable to us and likely to have material effect on our consolidated financial statements, but have not yet been adopted, see Note 1 - Description of the Business and Basis of Presentation of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from changes in interest rates, changes in foreign currency exchange rates and changes in commodity prices. We believe that there have been no material changes in our market risk since December 27, 2020, except as set forth below.26, 2021. See Part II, Item 7A., “Quantitative and Qualitative Disclosures about Market Risk,” in our Annual Report on Form 10-K for the year ended December 27, 202026, 2021 for further information regarding market risk.
Foreign Currency Exchange Rate Risk - We are subject to foreign currency exchange risk for our restaurants operating in foreign countries. Our exposure to foreign currency exchange risk is primarily related to fluctuations in the Brazilian Real relative to the U.S. dollar. If foreign currency exchange rates depreciate in the countries in which we operate, we may experience declines in our operating results. For the thirty-nine weeks ended September 26, 2021, a 10% change in average foreign currency rates against the U.S. dollar would have increased or decreased our Total revenues for our consolidated foreign entities by $27.3 million. The 10% change would not have had a material effect on Net income. Currently, we do not enter into currency forward exchange or option contracts to hedge foreign currency exposures.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We have established and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 26, 2021.March 27, 2022.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the thirteen weeks ended September 26, 2021March 27, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
For a description of our legal proceedings, see Note 1914 - Commitments and Contingencies of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
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 20202021 Form 10-K which could materially affect our business, financial condition or future results. There have not been any material changes to the risk factors described in our 20202021 Form 10-K, 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. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of equity securities during the thirteen weeks ended September 26, 2021March 27, 2022 that were not registered under the Securities Act of 1933.
We did not repurchase any sharesThe following table provides information regarding our purchases of our outstanding common stock during the thirteen weeks ended September 26, 2021.March 27, 2022:
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REPORTING PERIOD | | TOTAL NUMBER OF SHARES PURCHASED | | AVERAGE PRICE PAID PER SHARE | | TOTAL NUMBER OF SHARES PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS | | | APPROXIMATE DOLLAR VALUE OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS (1) |
December 27, 2021 through January 23, 2022 | | — | | | $ | — | | | — | | | | $ | — | |
January 24, 2022 through February 20, 2022 | | — | | | $ | — | | | — | | | | $ | 125,000,000 | |
February 21, 2022 through March 27, 2022 | | 550,517 | | | $ | 21.26 | | | 550,517 | | | | $ | 113,298,678 | |
Total | | 550,517 | | | | | 550,517 | | | | |
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____________________(1)On February 8, 2022, our Board of Directors authorized the repurchase of $125.0 million of our outstanding common stock as announced in our press release issued on February 18, 2022 (the “2022 Share Repurchase Program”). The 2022 Share Repurchase Program will expire on August 9, 2023.
Item 6. Exhibits
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EXHIBIT NUMBER | | DESCRIPTION OF EXHIBITS | | FILINGS REFERENCED FOR INCORPORATION BY REFERENCE |
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10.13.1 | | PurchaseFourth Amended and SaleRestated Certificate of Royalty Payment Stream and Termination of Royalty Agreement dated August 2, 2021 by and among Carrabba’s Italian Grill, LLC, OSI Restaurant Partners, LLC Mangia Beve, Inc., Mangia Beve II, Inc., Original, Inc., Voss, Inc., John C. Carrabba, III, Damian C. Mandola and John C. Carrabba, Jr.Incorporation | | August 5,April 20, 2022, Form 8-K, Exhibit 3.1 |
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10.1* | | | | December 26, 2021 Form 10-Q,10-K, Exhibit 10.48 |
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10.2 | | First Amendment to the Second Amended and Restated Credit Agreementand Incremental Amendment, dated April 26, 2022, by and among Bloomin’ Brands, Inc., OSI Restaurant Partners, LLC, the guarantors party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative Agent | | April 29, 2022, Form 8-K, Exhibit 10.1 |
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31.1 | | | | Filed herewith |
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31.2 | | | | Filed herewith |
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32.1 | | | | Furnished herewith |
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32.2 | | | | Furnished herewith |
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101.INS | | Inline XBRL Instance Document | | Filed herewith |
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101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | Filed herewith |
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101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | Filed herewith |
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101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | Filed herewith |
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101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | | Filed herewith |
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101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | Filed herewith |
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104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | | Filed herewith |
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* Management contract or compensatory plan or arrangement required to be filed as an exhibit. |
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(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. |
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 by the undersigned, thereunto duly authorized.
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Date: | NovemberMay 3, 20212022 | | BLOOMIN’ BRANDS, INC. |
| | | (Registrant) |
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| | | By: /s/ Christopher Meyer |
| | | Christopher Meyer Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
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