Bloomin' Brands, Inc. - Quarter Report: 2022 March (Form 10-Q)
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 March 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 April 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 March 27, 2022
(Unaudited)
TABLE OF CONTENTS
| Page No. | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 6. | ||||||||
2
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA, UNAUDITED)
| 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 | |||||||||
| Other current assets, net | 104,588 | 184,623 | |||||||||
| Total current assets | 271,287 | 352,792 | |||||||||
| 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 | |||||||
| 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 | |||||||||
| Current portion of long-term debt | 11,220 | 10,958 | |||||||||
| Total current liabilities | 935,648 | 984,625 | |||||||||
| Non-current operating lease liabilities | 1,172,923 | 1,179,447 | |||||||||
| 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) | |||||||||||
| 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. | |||||||||||
3
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
| 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 | |||||||||
| 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 | |||||||
| Net income | $ | 77,694 | $ | 69,798 | |||||||
| Other comprehensive income: | |||||||||||
| Foreign currency translation adjustment | 11,283 | (6,575) | |||||||||
| 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.
4
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, December 26, 2021 | 89,253 | $ | 893 | $ | 1,119,728 | $ | (698,171) | $ | (205,989) | $ | 6,389 | $ | 222,850 | ||||||||||||||||||||||||||||
| Net income | — | — | — | 75,511 | — | 2,183 | 77,694 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | 15,558 | — | 15,558 | ||||||||||||||||||||||||||||||||||
Cash dividends declared, $0.14 per common share | — | — | (12,559) | — | — | — | (12,559) | ||||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | (551) | (6) | — | (11,696) | — | — | (11,702) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 4,843 | — | — | — | 4,843 | ||||||||||||||||||||||||||||||||||
| Common stock issued under stock plans (1) | 483 | 5 | 880 | — | — | — | 885 | ||||||||||||||||||||||||||||||||||
Purchase of noncontrolling interests, net of tax of $888 | — | — | 2,566 | — | — | (4,454) | (1,888) | ||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | (2,641) | (2,641) | ||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | 217 | 217 | ||||||||||||||||||||||||||||||||||
| Balance, March 27, 2022 | 89,185 | $ | 892 | $ | 1,115,458 | $ | (634,356) | $ | (190,431) | $ | 1,694 | $ | 293,257 | ||||||||||||||||||||||||||||
| BLOOMIN’ BRANDS, INC. | |||||||||||||||||||||||||||||||||||||||||
| COMMON STOCK | ADDITIONAL PAID-IN CAPITAL | ACCUM- ULATED DEFICIT | ACCUMULATED OTHER COMPREHENSIVE LOSS | NON-CONTROLLING INTERESTS | TOTAL | ||||||||||||||||||||||||||||||||||||
| SHARES | AMOUNT | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 27, 2020 | 87,856 | $ | 879 | $ | 1,132,808 | $ | (918,096) | $ | (211,446) | $ | 6,812 | $ | 10,957 | ||||||||||||||||||||||||||||
| — | — | (47,323) | 4,370 | — | — | (42,953) | |||||||||||||||||||||||||||||||||||
| Net income | — | — | — | 68,862 | — | 936 | 69,798 | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | (3,614) | — | (3,614) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 4,726 | — | — | — | 4,726 | |||||||||||||||||||||||||||||||||||
| Common stock issued under stock plans (1) | 999 | 10 | 7,428 | — | — | — | 7,438 | ||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | (1,458) | (1,458) | ||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | 511 | 511 | ||||||||||||||||||||||||||||||||||
| Balance, March 28, 2021 | 88,855 | $ | 889 | $ | 1,097,639 | $ | (844,864) | $ | (215,060) | $ | 6,801 | $ | 45,405 | ||||||||||||||||||||||||||||
________________
(1)Net of forfeitures and shares withheld for employee taxes.
The accompanying notes are an integral part of these consolidated financial statements.
5
BLOOMIN’ BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, UNAUDITED)
| THIRTEEN WEEKS ENDED | |||||||||||
| MARCH 27, 2022 | MARCH 28, 2021 | ||||||||||
| Cash flows provided by operating activities: | |||||||||||
| Net income | $ | 77,694 | $ | 69,798 | |||||||
| Adjustments to reconcile Net income to cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 41,775 | 41,226 | |||||||||
| Amortization of debt discounts and issuance costs | 1,065 | 1,308 | |||||||||
| Amortization of deferred gift card sales commissions | 8,017 | 8,725 | |||||||||
| Provision for impaired assets and restaurant closings | 1,839 | 2,200 | |||||||||
| Non-cash interest expense from terminated interest rate swaps | 4,067 | — | |||||||||
| Non-cash operating lease costs | 20,477 | 19,502 | |||||||||
| Stock-based and other non-cash compensation expense | 4,843 | 4,726 | |||||||||
| Deferred income tax expense | 3,209 | 1,571 | |||||||||
| Other, net | 2,229 | (829) | |||||||||
| Change in assets and liabilities | (18,080) | (7,201) | |||||||||
| Net cash provided by operating activities | 147,135 | 141,026 | |||||||||
| Cash flows used in investing activities: | |||||||||||
| Capital expenditures | (40,180) | (17,411) | |||||||||
| Other investments, net | 1,030 | 793 | |||||||||
| Net cash used in investing activities | (39,150) | (16,618) | |||||||||
| Cash flows used in financing activities: | |||||||||||
| Repayments of long-term debt and finance lease obligations | (2,863) | (9,656) | |||||||||
| Proceeds from borrowings on revolving credit facilities | 90,000 | 15,000 | |||||||||
| Repayments of borrowings on revolving credit facilities | (160,000) | (107,000) | |||||||||
| Proceeds from share-based compensation, net | 885 | 7,438 | |||||||||
| Distributions to noncontrolling interests | (2,641) | (1,458) | |||||||||
| Contributions from noncontrolling interests | 217 | 511 | |||||||||
| Purchase of noncontrolling interests | (1,000) | — | |||||||||
| Payments for partner equity plan | (2,748) | (1,747) | |||||||||
| Repurchase of common stock | (10,402) | — | |||||||||
| Cash dividends paid on common stock | (12,559) | — | |||||||||
| Net cash used in financing activities | (101,111) | (96,912) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 1,965 | (1,246) | |||||||||
| 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 | 89,057 | 110,408 | |||||||||
| Cash, cash equivalents and restricted cash as of the end of the period | $ | 97,896 | $ | 136,658 | |||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for interest | $ | 2,444 | $ | 10,230 | |||||||
| Cash paid for income taxes, net of refunds | $ | 2,257 | $ | 2,150 | |||||||
| Supplemental disclosures of non-cash investing and financing activities: | |||||||||||
| Leased assets obtained in exchange for new operating lease liabilities | $ | 11,515 | $ | 14,819 | |||||||
| Leased assets obtained in exchange for new finance lease liabilities | $ | 1,313 | $ | 15 | |||||||
| (Decrease) increase in liabilities from the acquisition of property, fixtures and equipment | $ | (6,178) | $ | 2,005 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
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 four 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 26, 2021.
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, 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.
2. Revenue Recognition
The following table includes the categories of revenue included in the Company’s Consolidated Statements of Operations and Comprehensive Income for the periods indicated:
| 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 | |||||||
7
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:
| 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) | MARCH 27, 2022 | DECEMBER 26, 2021 | |||||||||
| Other current assets, net | |||||||||||
| Deferred gift card sales commissions | $ | 13,033 | $ | 17,793 | |||||||
| Unearned revenue | |||||||||||
| Deferred gift card revenue | $ | 314,974 | $ | 387,945 | |||||||
| Deferred loyalty revenue | 8,217 | 9,386 | |||||||||
| Deferred franchise fees - current | 439 | 443 | |||||||||
| Other | 1,674 | 1,021 | |||||||||
| Total Unearned revenue | $ | 325,304 | $ | 398,795 | |||||||
| Other long-term liabilities, net | |||||||||||
| 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:
| 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 | |||||||
8
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table is a rollforward of unearned gift card revenue for the periods indicated:
| 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 | |||||||
3. Earnings Per Share
In February 2021, the Company provided the trustee of its convertible senior notes due in 2025 (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 when the 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 warrant 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 strike price of the Warrant Transactions, which was initially $16.64.
In connection with dividends paid during the thirteen weeks ended March 27, 2022, the conversion price of 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.
The following table presents the computation of basic and diluted earnings per share for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (in thousands, except per share data) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
Net income attributable to Bloomin’ Brands | $ | 75,511 | $ | 68,862 | |||||||
| Convertible senior notes if-converted method interest adjustment, net of tax (1) | — | 1,381 | |||||||||
| Diluted net income attributable to Bloomin’ Brands | $ | 75,511 | $ | 70,243 | |||||||
| Basic weighted average common shares outstanding | 89,355 | 88,367 | |||||||||
| Effect of dilutive securities: | |||||||||||
| Stock options | 370 | 709 | |||||||||
| Nonvested restricted stock units | 279 | 503 | |||||||||
| Nonvested performance-based share units | 276 | 94 | |||||||||
| Convertible senior notes (1) | 8,732 | 15,193 | |||||||||
| Warrants | 4,442 | 5,775 | |||||||||
| Diluted weighted average common shares outstanding | 103,454 | 110,641 | |||||||||
| Basic earnings per share | $ | 0.85 | $ | 0.78 | |||||||
| Diluted earnings per share | $ | 0.73 | $ | 0.63 | |||||||
________________
(1)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.
9
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
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:
| 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 | |||||||||
4. Stock-based Compensation Plans
The Company recognized stock-based compensation expense as follows for the periods indicated:
| 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 | |||||||||
| $ | 4,806 | $ | 4,700 | ||||||||
In February 2022, the Company granted 0.5 million performance-based share units (“PSUs”) subject to final payout modification by a Relative Total Shareholder Return (“Relative TSR”) modifier. This Relative TSR modifier can adjust the final payout outcome by 75%, 100% or 125% of the achieved performance metric, with the overall payout capped at 200% of the annual target grant. These PSUs have a three-year cliff vesting period and their fair value was estimated using the Monte Carlo simulation model.
Assumptions used in the Monte Carlo simulation model and the grant date fair value of PSUs granted were as follows for the periods indicated:
| 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.
(4)Represents a premium above the per share value of the Company’s common stock for the Relative TSR modifier as of the grant 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 average vesting period as of March 27, 2022:
| UNRECOGNIZED COMPENSATION EXPENSE (dollars in thousands) | REMAINING WEIGHTED AVERAGE VESTING PERIOD (in years) | ||||||||||
| Performance-based share units | $ | 21,163 | 1.6 | ||||||||
| Restricted stock units | $ | 12,002 | 2.2 | ||||||||
10
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
5. Other Current Assets, Net
Other current assets, net, consisted of the following as of the periods indicated:
| (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 | ||||||||
6. Long-term Debt, Net
Following is a summary of outstanding Long-term debt, net as of the periods indicated:
| MARCH 27, 2022 | DECEMBER 26, 2021 | ||||||||||||||||||||||
| (dollars in thousands) | OUTSTANDING BALANCE | INTEREST RATE | OUTSTANDING BALANCE | INTEREST RATE | |||||||||||||||||||
| Senior Secured Credit Facility: | |||||||||||||||||||||||
| Term loan A (1) | $ | 192,500 | 1.76 | % | $ | 195,000 | 1.60 | % | |||||||||||||||
| Revolving credit facility (2) | 10,000 | 4.00 | % | 80,000 | 3.75 | % | |||||||||||||||||
| Total Senior Secured Credit Facility | 202,500 | 275,000 | |||||||||||||||||||||
| 2025 Notes | 230,000 | 5.00 | % | 230,000 | 5.00 | % | |||||||||||||||||
| 2029 Notes | 300,000 | 5.13 | % | 300,000 | 5.13 | % | |||||||||||||||||
| Finance lease liabilities | 3,380 | 2,376 | |||||||||||||||||||||
| Less: unamortized debt discount and issuance costs | (13,433) | (14,157) | |||||||||||||||||||||
| Less: finance lease interest | (202) | (154) | |||||||||||||||||||||
| Total debt, net | 722,245 | 793,065 | |||||||||||||||||||||
| Less: current portion of long-term debt | (11,220) | (10,958) | |||||||||||||||||||||
| Long-term debt, net | $ | 711,025 | $ | 782,107 | |||||||||||||||||||
________________
(1)Interest rate represents the weighted average interest rate as of the respective periods.
(2)Interest rate represents the base rate option elected in anticipation of impending repayment.
Debt 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-borrowers, entered into the Second Amended and Restated Credit Agreement (the “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”).
On April 26, 2022, the Company and OSI entered into the First Amendment to the Second Amended and Restated Credit Agreement and Incremental Amendment (the “Amended Credit Agreement”), which included an increase of the Company’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
11
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 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 Adjusted Term SOFR with a one-month interest period plus 1.0% (the “Base Rate”). The Adjusted Term SOFR option is the 30, 90 or 180-day SOFR, plus a term SOFR adjustment of 0.10%, subject to a 0% floor (the “Adjusted Term SOFR”). The interest rates are as follows:
| BASE RATE ELECTION | ADJUSTED TERM SOFR ELECTION | ||||||||||
| Revolving credit facility | 50 to 150 basis points over the Base Rate | 150 to 250 basis points over the Adjusted Term SOFR | |||||||||
The transition to SOFR did not materially impact the interest rate applied to the Company’s borrowings. No other material changes were made to the terms of the Company’s Credit Agreement as a result of the Amended Credit Agreement.
7. Convertible Senior Notes
2025 Notes - The initial conversion rate applicable to the 2025 Notes was 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 was equivalent to an initial conversion price of approximately $11.89 per share. In connection with dividends paid during the thirteen weeks ended March 27, 2022, the conversion rate for the 2025 Notes decreased to approximately $11.82 per share, which represents 84.603 shares of common stock per $1,000 principal amount of the 2025 Notes, or a total of approximately 19.459 million shares.
The following table includes the outstanding principal amount and carrying value of the 2025 Notes as of the periods indicated:
| (dollars in thousands) | MARCH 27, 2022 | DECEMBER 26, 2021 | |||||||||
| Long-term debt, net | |||||||||||
| Principal | $ | 230,000 | $ | 230,000 | |||||||
| Less: debt issuance costs (1) | (5,495) | (5,898) | |||||||||
| Net carrying amount | $ | 224,505 | $ | 224,102 | |||||||
________________
(1)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 | |||||||||||
| (dollars in thousands) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| Coupon interest | $ | 2,875 | $ | 2,875 | |||||||
| Deferred issuance cost amortization | 404 | 381 | |||||||||
| Total interest expense (1) | $ | 3,279 | $ | 3,256 | |||||||
________________
(1)The effective rate of the 2025 Notes over their expected life is 5.85%.
Based on the daily closing prices of the Company’s stock during the quarter ended March 27, 2022, holders of the 2025 Notes are eligible to convert their 2025 Notes during the second quarter of 2022.
12
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Convertible Note Warrant Transactions - 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 was 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 Company 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 close of business on May 11, 2022.
13
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Accumulated Other Comprehensive Loss (“AOCL”) - Following are the components of AOCL as of the periods indicated:
| (dollars in thousands) | MARCH 27, 2022 | DECEMBER 26, 2021 | |||||||||
| Foreign currency translation adjustment | $ | (184,197) | $ | (195,480) | |||||||
| Unrealized loss on derivatives, net of tax | (6,234) | (10,509) | |||||||||
| 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 | |||||||||||
| (dollars in thousands) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| Foreign currency translation adjustment | $ | 11,283 | $ | (6,575) | |||||||
| 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 | |||||||||
| Other comprehensive income (loss) attributable to Bloomin’ Brands | $ | 15,558 | $ | (3,614) | |||||||
________________
(1)See Note 10 - Derivative Instruments and Hedging Activities for the tax impact of reclassifications.
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 average fixed rate of 3.04% on the notional amount and receives payments from the counterparty based on one-month LIBOR. During 2021, the Company terminated variable-to-fixed interest rate swap agreements with certain counterparties and as a result, as of March 27, 2022 had interest rate swap agreements remaining with two counterparties for an aggregate notional amount of $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 March 27, 2022, the Company estimated $8.5 million will be reclassified to Interest expense, net through the November 2022 maturity date of the swaps, including interest expense related to the terminated swap agreements.
The following table presents the fair value and classification of the Company’s swap agreements, as of the periods indicated:
| (dollars in thousands) | MARCH 27, 2022 | DECEMBER 26, 2021 | CONSOLIDATED BALANCE SHEET CLASSIFICATION | ||||||||||||||
| Interest rate swaps - liability (1) | $ | 1,368 | $ | 3,056 | Accrued and other current liabilities | ||||||||||||
| Accrued interest | $ | 275 | $ | 276 | Accrued and other current liabilities | ||||||||||||
____________________
(1)See Note 12 - Fair Value Measurements for fair value discussion of the interest rate swaps.
14
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table summarizes the effects of the swap agreements on Net income for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| Interest rate swap expense recognized in Interest expense, net | $ | (917) | $ | (4,044) | |||||||
| Income tax benefit recognized in Provision for income taxes | 236 | 1,041 | |||||||||
| 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 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.
In connection with the Amended Credit Agreement, on April 26, 2022 the Company terminated its remaining variable-to-fixed interest rate swap agreements. Following these terminations, the unrealized losses related to the terminated swap agreements included in Accumulated other comprehensive loss will be amortized to Interest expense, net during 2022.
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) | CONSOLIDATED BALANCE SHEET CLASSIFICATION | MARCH 27, 2022 | DECEMBER 26, 2021 | ||||||||||||||
| Operating lease right-of-use assets | Operating lease right-of-use assets | $ | 1,124,517 | $ | 1,130,873 | ||||||||||||
| Property, fixtures and equipment, net | 3,055 | 2,074 | |||||||||||||||
| Total lease assets, net | $ | 1,127,572 | $ | 1,132,947 | |||||||||||||
| Accrued and other current liabilities | $ | 177,633 | $ | 177,028 | |||||||||||||
| Current portion of long-term debt | 1,220 | 958 | |||||||||||||||
| Non-current operating lease liabilities (2) | Non-current operating lease liabilities | 1,172,564 | 1,178,998 | ||||||||||||||
| Long-term debt, net | 1,958 | 1,264 | |||||||||||||||
| Total lease liabilities | $ | 1,353,375 | $ | 1,358,248 | |||||||||||||
________________
(1)Net of accumulated amortization of $3.7 million and $3.3 million as of March 27, 2022 and December 26, 2021, respectively.
(2)Excludes current accrued contingent percentage rent of $4.0 million and $3.5 million, as of March 27, 2022 and December 26, 2021, respectively, and immaterial current and non-current COVID-19-related deferred rent accruals.
15
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:
| 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 cash flow impacts to the Company’s Consolidated Financial Statements related to its leases for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 48,560 | $ | 52,717 | |||||||
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:
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 | |||||||
16
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:
| MARCH 27, 2022 | DECEMBER 26, 2021 | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) | TOTAL | LEVEL 1 | LEVEL 2 | TOTAL | LEVEL 1 | LEVEL 2 | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||||||||||||||
| Fixed income funds | $ | 4,552 | $ | 4,552 | $ | — | $ | 6,714 | $ | 6,714 | $ | — | |||||||||||||||||||||||
| Money market funds | 9,828 | 9,828 | — | 9,039 | 9,039 | — | |||||||||||||||||||||||||||||
| Restricted cash equivalents: | |||||||||||||||||||||||||||||||||||
| Money market funds | 101 | 101 | — | 1,472 | 1,472 | — | |||||||||||||||||||||||||||||
| Total asset recurring fair value measurements | $ | 14,481 | $ | 14,481 | $ | — | $ | 17,225 | $ | 17,225 | $ | — | |||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Accrued and other current liabilities: | |||||||||||||||||||||||||||||||||||
| Derivative instruments - interest rate swaps | $ | 1,368 | $ | — | $ | 1,368 | $ | 3,056 | $ | — | $ | 3,056 | |||||||||||||||||||||||
| Total liability recurring fair value measurements | $ | 1,368 | $ | — | $ | 1,368 | $ | 3,056 | $ | — | $ | 3,056 | |||||||||||||||||||||||
Fair value of each class of financial instrument is determined based on the following:
| 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 March 27, 2022 and December 26, 2021, the Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. | |||||||
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.
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:
| MARCH 27, 2022 | DECEMBER 26, 2021 | ||||||||||||||||||||||
| CARRYING VALUE | FAIR VALUE LEVEL 2 | CARRYING VALUE | FAIR VALUE LEVEL 2 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Senior Secured Credit Facility: | |||||||||||||||||||||||
| Term loan A | $ | 192,500 | $ | 188,169 | $ | 195,000 | $ | 190,125 | |||||||||||||||
| Revolving credit facility | $ | 10,000 | $ | 9,750 | $ | 80,000 | $ | 76,926 | |||||||||||||||
| 2025 Notes | $ | 230,000 | $ | 441,515 | $ | 230,000 | $ | 447,615 | |||||||||||||||
| 2029 Notes | $ | 300,000 | $ | 286,647 | $ | 300,000 | $ | 304,395 | |||||||||||||||
17
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
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 thirteen weeks ended March 27, 2022 increased by 8.4 percentage points as compared to the thirteen weeks ended March 28, 2021. The increase was primarily due to the change in the amount and mix of forecasted pre-tax book income across the 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 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 previously recorded a valuation 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 the release of the 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 rates for the thirteen weeks ended March 27, 2022 and March 28, 2021 were lower than the statutory rate primarily due to the benefit of FICA tax credits on certain employees’ tips.
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 $7.5 million and $7.1 million for certain of its outstanding legal proceedings as of March 27, 2022 and December 26, 2021, 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.
18
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 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 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 $24.2 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of March 27, 2022 was approximately $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 March 27, 2022 and December 26, 2021, the Company’s recorded contingent lease liability was $9.0 million and $8.7 million, respectively.
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 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.
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 26, 2021. Revenues for all segments include only transactions with customers and exclude intersegment revenues. Excluded from Income 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.
19
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 | |||||||||||
| (dollars in thousands) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| Total revenues | |||||||||||
| U.S. | $ | 1,036,407 | $ | 904,918 | |||||||
| International | 104,128 | 82,555 | |||||||||
| Total revenues | $ | 1,140,535 | $ | 987,473 | |||||||
The following table is a reconciliation of segment income from operations to Income before provision for income taxes, for the periods indicated:
| 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 | |||||||||||
| (dollars in thousands) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| Depreciation and amortization | |||||||||||
| U.S. | $ | 34,759 | $ | 33,645 | |||||||
| International | 5,537 | 5,720 | |||||||||
| Corporate | 1,479 | 1,861 | |||||||||
| Total depreciation and amortization | $ | 41,775 | $ | 41,226 | |||||||
20
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, 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;
21
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 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;
(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 26, 2021.
Given 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.
22
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 March 27, 2022, we owned and operated 1,166 full-service restaurants and off-premises only kitchens and franchised 333 full-service restaurants and off-premises only kitchens across 47 states, Guam and 15 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 March 27, 2022 (“first quarter of 2022”) include the following:
•U.S. combined and Outback Steakhouse comparable restaurant sales of 14.0% and 9.2%, respectively;
•Increase in Total revenues of 15.5%, as compared to the first quarter of 2021;
•Restaurant-level operating and operating income margins of 17.1% and 9.4%, respectively, as compared to 18.8% and 9.2%, respectively, for the first quarter of 2021;
•Income from operations of $107.3 million, as compared to $91.0 million in the first quarter of 2021; and
•Diluted earnings per share of $0.73, as compared to $0.63 for the first quarter of 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 from operations, Net income and Diluted earnings 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. The following categories of our revenue and operating expenses are not included in restaurant-level 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;
(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;
23
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; 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 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 or Income 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 from operations, Adjusted net income and Adjusted diluted earnings 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 evaluate our operating performance, allocate resources and administer employee incentive plans.
24
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): | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| U.S.: | |||||||||||
| Outback Steakhouse | |||||||||||
| Company-owned | 562 | 567 | |||||||||
| Franchised | 130 | 131 | |||||||||
| Total | 692 | 698 | |||||||||
| Carrabba’s Italian Grill | |||||||||||
| Company-owned | 199 | 199 | |||||||||
| Franchised | 20 | 21 | |||||||||
| Total | 219 | 220 | |||||||||
| Bonefish Grill | |||||||||||
| Company-owned | 175 | 180 | |||||||||
| Franchised | 7 | 7 | |||||||||
| Total | 182 | 187 | |||||||||
| Fleming’s Prime Steakhouse & Wine Bar | |||||||||||
| Company-owned | 64 | 64 | |||||||||
| Aussie Grill | |||||||||||
| Company-owned (1) | 7 | 3 | |||||||||
| U.S. total | 1,164 | 1,172 | |||||||||
| International: | |||||||||||
| Company-owned | |||||||||||
| Outback Steakhouse - Brazil (2) | 123 | 110 | |||||||||
| Other (1)(3) | 33 | 33 | |||||||||
| Franchised | |||||||||||
| Outback Steakhouse - South Korea (1) | 78 | 75 | |||||||||
| Other (3) | 52 | 57 | |||||||||
| International total | 286 | 275 | |||||||||
| System-wide total | 1,450 | 1,447 | |||||||||
| System-wide total - Company-owned | 1,163 | 1,156 | |||||||||
| System-wide total - Franchised | 287 | 291 | |||||||||
____________________
(1)Restaurant counts as of March 28, 2021 have been adjusted to exclude off-premises only locations included in the table below.
(2)The restaurant counts for Brazil are reported as of February 28, 2022 and 2021, respectively, to correspond with the balance sheet dates of this subsidiary.
(3)International Company-owned Other included two Aussie Grill locations as of March 27, 2022 and March 28, 2021. International Franchised Other included three Aussie Grill locations as of 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.
25
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 | |||||||||||
| MARCH 27, 2022 | MARCH 28, 2021 | ||||||||||
| Revenues | |||||||||||
| Restaurant sales | 98.5 | % | 99.2 | % | |||||||
| Franchise and other revenues | 1.5 | 0.8 | |||||||||
| Total revenues | 100.0 | 100.0 | |||||||||
| Costs and expenses | |||||||||||
| Food and beverage costs (1) | 32.0 | 29.8 | |||||||||
| Labor and other related (1) | 27.8 | 28.0 | |||||||||
| Other restaurant operating (1) | 23.1 | 23.4 | |||||||||
| Depreciation and amortization | 3.7 | 4.2 | |||||||||
| General and administrative | 5.1 | 5.8 | |||||||||
| Provision for impaired assets and restaurant closings | 0.2 | 0.2 | |||||||||
| Total costs and expenses | 90.6 | 90.8 | |||||||||
| Income from operations | 9.4 | 9.2 | |||||||||
| Other income, net | — | * | |||||||||
| Interest expense, net | (1.2) | (1.5) | |||||||||
| Income before provision for income taxes | 8.2 | 7.7 | |||||||||
| Provision for income taxes | 1.4 | 0.6 | |||||||||
| Net income | 6.8 | 7.1 | |||||||||
| Less: net income attributable to noncontrolling interests | 0.2 | 0.1 | |||||||||
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.
REVENUES
Restaurant sales
Following is a summary of the change in Restaurant sales for the period indicated:
| (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 March 27, 2022 was primarily due to: (i) higher comparable restaurant sales primarily attributable to increases in average check per person and (ii) the opening of 37
26
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
new restaurants not included in our comparable restaurant sales base. The increase in Restaurant sales was partially offset by the closure of 17 restaurants since December 27, 2020.
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 | |||||||||||
| MARCH 27, 2022 | MARCH 28, 2021 | ||||||||||
| Average restaurant unit volumes (weekly): | |||||||||||
| U.S. | |||||||||||
| Outback Steakhouse | $ | 80,552 | $ | 73,433 | |||||||
| Carrabba’s Italian Grill | $ | 67,889 | $ | 60,953 | |||||||
| Bonefish Grill | $ | 66,265 | $ | 54,263 | |||||||
| Fleming’s Prime Steakhouse & Wine Bar | $ | 117,382 | $ | 80,404 | |||||||
| International | |||||||||||
| Outback Steakhouse - Brazil (1) | $ | 53,939 | $ | 43,089 | |||||||
| Operating weeks: | |||||||||||
| U.S. | |||||||||||
| Outback Steakhouse | 7,320 | 7,383 | |||||||||
| Carrabba’s Italian Grill | 2,587 | 2,587 | |||||||||
| Bonefish Grill | 2,285 | 2,340 | |||||||||
| Fleming’s Prime Steakhouse & Wine Bar | 832 | 825 | |||||||||
| International | |||||||||||
| Outback Steakhouse - Brazil | 1,581 | 1,412 | |||||||||
____________________
(1)Translated at average exchange rates of 5.47 and 5.30 for the thirteen weeks ended March 27, 2022 and March 28, 2021, respectively.
27
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 | |||||||||||
| MARCH 27, 2022 | MARCH 28, 2021 | ||||||||||
| Year over year percentage change: | |||||||||||
| Comparable restaurant sales (stores open 18 months or more): | |||||||||||
| U.S. (1) | |||||||||||
| Outback Steakhouse | 9.2 | % | 4.1 | % | |||||||
| Carrabba’s Italian Grill | 11.5 | % | 8.9 | % | |||||||
| Bonefish Grill | 21.3 | % | (2.9) | % | |||||||
| Fleming’s Prime Steakhouse & Wine Bar | 45.7 | % | (2.3) | % | |||||||
| Combined U.S. | 14.0 | % | 3.3 | % | |||||||
| International | |||||||||||
| Outback Steakhouse - Brazil (2) | 35.9 | % | (21.4) | % | |||||||
| Traffic: | |||||||||||
| U.S. | |||||||||||
| Outback Steakhouse | (1.0) | % | 0.9 | % | |||||||
| Carrabba’s Italian Grill | 3.0 | % | 5.2 | % | |||||||
| Bonefish Grill | 7.8 | % | 2.1 | % | |||||||
| Fleming’s Prime Steakhouse & Wine Bar | 28.8 | % | (5.3) | % | |||||||
| Combined U.S. | 1.5 | % | 1.7 | % | |||||||
| International | |||||||||||
| Outback Steakhouse - Brazil | 28.7 | % | (14.2) | % | |||||||
| Average check per person (3): | |||||||||||
| U.S. | |||||||||||
| Outback Steakhouse | 10.2 | % | 3.2 | % | |||||||
| Carrabba’s Italian Grill | 8.5 | % | 3.7 | % | |||||||
| Bonefish Grill | 13.5 | % | (5.0) | % | |||||||
| Fleming’s Prime Steakhouse & Wine Bar | 16.9 | % | 3.0 | % | |||||||
| Combined U.S. | 12.5 | % | 1.6 | % | |||||||
| International | |||||||||||
| Outback Steakhouse - Brazil | 7.6 | % | (6.4) | % | |||||||
____________________
(1)Relocated restaurants closed more than 60 days are excluded from comparable restaurant sales until at least 18 months after reopening.
(2)Excludes the effect of fluctuations in foreign currency rates. Includes trading day impact from calendar period reporting.
(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.
28
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
COSTS AND EXPENSES
Food and beverage costs
| THIRTEEN WEEKS ENDED | |||||||||||||||||
| (dollars in millions) | MARCH 27, 2022 | MARCH 28, 2021 | CHANGE | ||||||||||||||
| Food and beverage costs | $ | 359.4 | $ | 291.9 | |||||||||||||
| % 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 March 27, 2022 as compared to the thirteen weeks ended March 28, 2021 primarily due to 3.6% from commodity inflation, partially offset by a decrease as a percentage of Restaurant sales of 1.4% from increases in average check per person, primarily driven by an increase in menu pricing.
Labor and other related expenses
| THIRTEEN WEEKS ENDED | |||||||||||||||||
| (dollars in millions) | MARCH 27, 2022 | MARCH 28, 2021 | CHANGE | ||||||||||||||
| Labor and other related | $ | 312.5 | $ | 274.6 | |||||||||||||
| % 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 March 27, 2022 as compared to the thirteen weeks ended March 28, 2021 primarily due to 1.3% from 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 1.2% from wage rate 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.
29
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Provision for income taxes
| THIRTEEN WEEKS ENDED | |||||||||||||||||
| MARCH 27, 2022 | MARCH 28, 2021 | CHANGE | |||||||||||||||
| Effective income tax rate | 17.0 | % | 8.6 | % | 8.4 | % | |||||||||||
The effective income tax rate for the thirteen weeks ended March 27, 2022 increased by 8.4 percentage points as compared to the thirteen weeks ended March 28, 2021. The increase was primarily due to the change in the amount and mix of forecasted pre-tax book income 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 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 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.
Refer to Note 15 - Segment Reporting of the Notes to Consolidated Financial Statements for reconciliations of segment income 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.
30
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
U.S. Segment
| 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 | |||||||
| Restaurant-level operating margin | 17.4 | % | 19.2 | % | |||||||
| Income from operations | $ | 132,226 | $ | 121,735 | |||||||
| Operating income margin | 12.8 | % | 13.5 | % | |||||||
Restaurant sales
Following is a summary of the change in U.S. segment Restaurant sales for the period indicated:
| (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 | |||
The increase in U.S. Restaurant sales during the thirteen weeks ended March 27, 2022 was primarily due to: (i) higher comparable restaurant sales primarily attributable to increases in average 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 17 restaurants since December 27, 2020.
Income from operations
The increase in U.S. 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.
International Segment
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| Revenues | |||||||||||
| Restaurant sales | $ | 99,940 | $ | 79,392 | |||||||
| Franchise and other revenues | 4,188 | 3,163 | |||||||||
| Total revenues | $ | 104,128 | $ | 82,555 | |||||||
| Restaurant-level operating margin | 16.9 | % | 14.4 | % | |||||||
| Income from operations | $ | 8,884 | $ | 3,537 | |||||||
| Operating income margin | 8.5 | % | 4.3 | % | |||||||
31
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 period indicated:
| (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) | ||||
| For the period ended March 27, 2022 | $ | 99.9 | |||
The increase in international Restaurant sales during the thirteen weeks ended March 27, 2022 was primarily due to higher comparable restaurant sales and the opening of 24 new restaurants not included in our comparable restaurant sales base.
Income from operations
The increase in international 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 an increase in restaurant operating margin, which includes the recovery of in-restaurant dining from the impact of the COVID-19 pandemic during 2021 and increases in average check per person, partially offset by commodity inflation.
32
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:
| Consolidated | THIRTEEN WEEKS ENDED | ||||||||||
| (dollars in thousands) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| 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 | % | |||||||
| 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 | % | |||||||
33
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:
| THIRTEEN WEEKS ENDED | |||||||||||
| MARCH 27, 2022 | MARCH 28, 2021 | ||||||||||
| Restaurant sales | 100.0 | % | 100.0 | % | |||||||
| Food and beverage costs | 32.0 | % | 29.8 | % | |||||||
| Labor and other related | 27.8 | % | 28.0 | % | |||||||
| Other restaurant operating | 23.1 | % | 23.4 | % | |||||||
| Restaurant-level operating margin | 17.1 | % | 18.8 | % | |||||||
Adjusted net income and Adjusted diluted earnings per share
| THIRTEEN WEEKS ENDED | |||||||||||
| (in thousands, except per share data) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| 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 | |||||||
| Diluted earnings per share | $ | 0.73 | $ | 0.63 | |||||||
| Adjusted diluted earnings per share (2) | $ | 0.80 | $ | 0.72 | |||||||
| 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 2 - Revenue Recognition of the Notes to Consolidated Financial Statements.
34
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 | |||||||||||
| (dollars in millions) | MARCH 27, 2022 | MARCH 28, 2021 | |||||||||
| U.S. | |||||||||||
| Outback Steakhouse | $ | 129 | $ | 92 | |||||||
| Carrabba’s Italian Grill | 12 | 10 | |||||||||
| Bonefish Grill | 3 | 2 | |||||||||
| U.S. total | 144 | 104 | |||||||||
| International | |||||||||||
| Outback Steakhouse - South Korea | 78 | 74 | |||||||||
| Other | 34 | 24 | |||||||||
| International total | 112 | 98 | |||||||||
| Total franchise sales (1) | $ | 256 | $ | 202 | |||||||
_____________________
(1)Franchise sales are not included in Total revenues in the Consolidated Statements of Operations and Comprehensive Income.
Liquidity and Capital Resources
Cash and Cash Equivalents
As of March 27, 2022, we had $97.8 million in cash and cash equivalents, of which $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 March 27, 2022, we had aggregate accumulated foreign earnings of approximately $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 not considered indefinitely reinvested in our foreign subsidiaries.
Borrowing Capacity and Debt Service
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:
| 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 | |||||||||||||||||||
| 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 | |||||||||||||||||||||||||
____________________
(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.
35
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
As of March 27, 2022, we had $769.3 million in available unused borrowing capacity under our revolving credit facility, net of letters of credit of $20.7 million.
Our 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.
36
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:
| (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 | ||||||||||||||
| Total (1) | $ | 190,784 | $ | 985,283 | $ | 1,176,067 | |||||||||||
________________
(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:
| 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) | |||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 8,839 | $ | 26,250 | |||||||
Operating activities - The increase in net cash provided by operating activities during the thirteen weeks ended March 27, 2022 as compared to the thirteen weeks ended March 28, 2021 was 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 cash dividends on our common stock and the repurchase of common stock during 2022. These increases were partially offset by lower net repayments on our revolving credit facility.
37
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Financial Condition - Following is a summary of our current assets, current liabilities and working capital (deficit) as of the periods indicated:
| (dollars in thousands) | MARCH 27, 2022 | DECEMBER 26, 2021 | |||||||||
| Current assets | $ | 271,287 | $ | 352,792 | |||||||
| Current liabilities | 935,648 | 984,625 | |||||||||
| Working capital (deficit) | $ | (664,361) | $ | (631,833) | |||||||
Working capital (deficit) includes: (i) Unearned revenue primarily from unredeemed gift cards of $325.3 million and $398.8 million as of March 27, 2022 and December 26, 2021, respectively, and (ii) current operating lease liabilities of $177.6 million and $177.0 million as of March 27, 2022 and December 26, 2021, 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.
Recently Issued Financial Accounting Standards
For a description of recently issued Financial Accounting Standards that we adopted during the thirteen weeks ended March 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.
38
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 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 26, 2021 for further information regarding market risk.
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 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 March 27, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
39
BLOOMIN’ BRANDS, INC.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
For a description of our legal proceedings, see Note 14 - 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 2021 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 2021 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 March 27, 2022 that were not registered under the Securities Act of 1933.
The following table provides information regarding our purchases of common stock during the thirteen weeks ended March 27, 2022:
| 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 | ||||||||||||||||||||||||
(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.
40
Item 6. Exhibits
| EXHIBIT NUMBER | DESCRIPTION OF EXHIBITS | FILINGS REFERENCED FOR INCORPORATION BY REFERENCE | ||||||||||||
| 3.1 | April 20, 2022, Form 8-K, Exhibit 3.1 | |||||||||||||
| 10.1* | December 26, 2021 Form 10-K, Exhibit 10.48 | |||||||||||||
| 10.2 | First Amendment to the Second Amended and Restated Credit Agreement and 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 | ||||||||||||
| 31.1 | Filed herewith | |||||||||||||
| 31.2 | Filed herewith | |||||||||||||
| 32.1 | Furnished herewith | |||||||||||||
| 32.2 | Furnished herewith | |||||||||||||
| 101.INS | Inline XBRL Instance Document | Filed herewith | ||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed herewith | ||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith | ||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith | ||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed herewith | ||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith | ||||||||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | Filed herewith | ||||||||||||
| * Management contract or compensatory plan or arrangement required to be filed as an exhibit. | ||||||||||||||
| (1) These certifications are not deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. These certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates them by reference. | ||||||||||||||
41
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.
| Date: | May 3, 2022 | BLOOMIN’ BRANDS, INC. | |||||||||
| (Registrant) | |||||||||||
| By: /s/ Christopher Meyer | |||||||||||
Christopher Meyer Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | |||||||||||
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