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 | |||||||||||
| 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
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |||||||
(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 | |||||||||||||||
$ | The (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.
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 May 3, 2024, 86,476,371 shares of common stock of the registrant were outstanding.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended March 31, 2024
(Unaudited)
TABLE OF CONTENTS
| Page No. | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
2
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
| MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||
| (UNAUDITED) | |||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash and cash equivalents | |||||||||||
| Inventories | |||||||||||
| Other current assets, net | |||||||||||
| Total current assets | |||||||||||
| Property, fixtures and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Deferred income tax assets, net | |||||||||||
| Other assets, net | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Current operating lease liabilities | |||||||||||
| Accrued and other current liabilities | |||||||||||
| Unearned revenue | |||||||||||
| Total current liabilities | |||||||||||
| Non-current operating lease liabilities | |||||||||||
| Long-term debt, net | |||||||||||
| Other long-term liabilities, net | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 15) | |||||||||||
| Stockholders’ equity | |||||||||||
| Bloomin’ Brands stockholders’ equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total Bloomin’ Brands stockholders’ equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
| The accompanying notes are an integral part of these unaudited consolidated financial statements. | |||||||||||
3
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
| THIRTEEN WEEKS ENDED | |||||||||||
| MARCH 31, 2024 | MARCH 26, 2023 | ||||||||||
| Revenues | |||||||||||
| Restaurant sales | $ | $ | |||||||||
| Franchise and other revenues | |||||||||||
| Total revenues | |||||||||||
| Costs and expenses | |||||||||||
| Food and beverage | |||||||||||
| Labor and other related | |||||||||||
| Other restaurant operating | |||||||||||
| Depreciation and amortization | |||||||||||
| General and administrative | |||||||||||
| Provision for impaired assets and restaurant closings | |||||||||||
| Total costs and expenses | |||||||||||
| Income from operations | |||||||||||
| Loss on extinguishment of debt | ( | ||||||||||
| Interest expense, net | ( | ( | |||||||||
| (Loss) income before provision for income taxes | ( | ||||||||||
| Provision for income taxes | |||||||||||
| Net (loss) income | ( | ||||||||||
| Less: net income attributable to noncontrolling interests | |||||||||||
Net (loss) income attributable to Bloomin’ Brands | $ | ( | $ | ||||||||
| Net (loss) income | $ | ( | $ | ||||||||
| Other comprehensive (loss) income: | |||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||
| Net gain on derivatives, net of tax | |||||||||||
| Comprehensive (loss) income | ( | ||||||||||
| Less: comprehensive income attributable to noncontrolling interests | |||||||||||
| Comprehensive (loss) income attributable to Bloomin’ Brands | $ | ( | $ | ||||||||
| (Loss) earnings per share: | |||||||||||
| Basic | $ | ( | $ | ||||||||
| Diluted | $ | ( | $ | ||||||||
| Weighted average common shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
The accompanying notes are an integral part of these unaudited 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 31, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Cash dividends declared, $ | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | ( | ( | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Common stock issued under stock plans (1) | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock from repurchase of convertible senior notes | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Retirement of convertible senior note hedges | ( | ( | ( | — | — | ||||||||||||||||||||||||||||||||||||
| Retirement of warrants | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| BLOOMIN’ BRANDS, INC. | |||||||||||||||||||||||||||||||||||||||||
| COMMON STOCK | ADDITIONAL PAID-IN CAPITAL | ACCUM- ULATED DEFICIT | ACCUMULATED OTHER COMPREHENSIVE LOSS | NON-CONTROLLING INTERESTS | TOTAL | ||||||||||||||||||||||||||||||||||||
| SHARES | AMOUNT | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 25, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Cash dividends declared, $ | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Repurchase and retirement of common stock, including excise tax of $ | ( | ( | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Common stock issued under stock plans (1) | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance, March 26, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
________________
(1)Net of shares withheld for employee taxes.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
BLOOMIN’ BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, UNAUDITED)
| THIRTEEN WEEKS ENDED | |||||||||||
| MARCH 31, 2024 | MARCH 26, 2023 | ||||||||||
| Cash flows provided by operating activities: | |||||||||||
| Net (loss) income | $ | ( | $ | ||||||||
| Adjustments to reconcile Net (loss) income to cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of debt discounts and issuance costs | |||||||||||
| Amortization of deferred gift card sales commissions | |||||||||||
| Provision for impaired assets and restaurant closings | |||||||||||
| Non-cash operating lease costs | |||||||||||
| Stock-based compensation expense | |||||||||||
| Deferred income tax expense | |||||||||||
| Loss on extinguishment of debt | |||||||||||
| Other, net | ( | ( | |||||||||
| Change in assets and liabilities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows used in investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Other investments, net | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows provided by (used in) financing activities: | |||||||||||
| Proceeds from borrowings on revolving credit facilities | |||||||||||
| Repayments of borrowings on revolving credit facilities | ( | ( | |||||||||
| Repayments of finance lease obligations | ( | ( | |||||||||
| Principal settlements and repurchase of convertible senior notes | ( | ||||||||||
| Proceeds from retirement of convertible senior note hedges | |||||||||||
| Payments for retirement of warrants | ( | ||||||||||
| Payment of taxes from share-based compensation, net | ( | ( | |||||||||
| Distributions to noncontrolling interests | ( | ( | |||||||||
| Contributions from noncontrolling interests | |||||||||||
| Purchase of noncontrolling interests | ( | ( | |||||||||
| Repurchase of common stock | ( | ( | |||||||||
| Cash dividends paid on common stock | ( | ( | |||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
| Net increase in cash, cash equivalents and restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash as of the beginning of the period | |||||||||||
| Cash, cash equivalents and restricted cash as of the end of the period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes, net of refunds | $ | $ | |||||||||
| Supplemental disclosures of non-cash investing and financing activities: | |||||||||||
| Leased assets obtained in exchange for new operating lease liabilities | $ | $ | |||||||||
| Leased assets obtained in exchange for new finance lease liabilities | $ | $ | |||||||||
| (Decrease) increase in liabilities from the acquisition of property, fixtures and equipment | $ | ( | $ | ||||||||
| Shares issued on settlement of convertible senior notes | $ | $ | |||||||||
| Shares received and retired on exercise of call option under bond hedge upon settlement of convertible senior notes | $ | ( | $ | ||||||||
The accompanying notes are an integral part of these unaudited 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. OSI Restaurant Partners, LLC (“OSI”) is the Company’s primary operating entity. 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 (“SEC”). 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 31, 2023.
Recently Issued Financial Accounting Standards Not Yet Adopted - In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” (“ASU No. 2023-07”) which requires disclosure of significant segment expenses regularly provided to the Company’s chief operating decision-maker (“CODM”). ASU No. 2023-07 also allows for multiple measures of segment profit (loss) if the CODM utilizes such measures to allocate resources or assess performance. ASU No. 2023-07 is effective for the Company beginning with the 2024 Form 10-K, with early adoption permitted. The Company is currently evaluating the impact ASU No. 2023-07 will have on its disclosures.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” (“ASU No. 2023-09”) which expands existing income tax disclosures, including disaggregation of the Company’s effective income tax rate reconciliation table and income taxes paid disclosures. ASU No. 2023-09 is effective for the Company beginning with the 2025 Form 10-K, with early adoption permitted. The Company is currently evaluating the impact ASU No. 2023-09 will have on its disclosures.
In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275, “The Enhancement and Standardization of Climate-Related Disclosures for Investors,” which requires registrants to include climate-related disclosures in their annual reports, including, but not limited to, material Scope 1 and Scope 2 greenhouse gas emissions, climate-related financial metrics, and governance, oversight and risk management processes for material climate-related risks in their audited financial statements. The final rule also requires certain disclosures regarding expenses incurred in relation to severe weather events and other natural conditions. The disclosure requirements are first effective for the Company beginning with the 2026 Form 10-K. The Company is currently evaluating the impact this rule will have on its 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.
7
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
2. Revenue Recognition
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 31, 2024 | MARCH 26, 2023 | ||||||||||||||||||||||
| (dollars in thousands) | RESTAURANT SALES | FRANCHISE REVENUES | RESTAURANT SALES | FRANCHISE REVENUES | |||||||||||||||||||
| U.S. | |||||||||||||||||||||||
| Outback Steakhouse | $ | $ | $ | $ | |||||||||||||||||||
| Carrabba’s Italian Grill | |||||||||||||||||||||||
| Bonefish Grill | |||||||||||||||||||||||
| Fleming’s Prime Steakhouse & Wine Bar | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| U.S. total | |||||||||||||||||||||||
| International | |||||||||||||||||||||||
| Outback Steakhouse - Brazil (1) | |||||||||||||||||||||||
| Other (1)(2) | |||||||||||||||||||||||
| International total | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
________________
(1)Includes $9.6 million of Restaurant sales during the thirteen weeks ended March 26, 2023 in connection with value added tax exemptions resulting from Brazil tax legislation. See Note 14 - Income Taxes for details regarding the Brazil tax legislation.
(2)Includes Restaurant sales for Company-owned Outback Steakhouse restaurants outside of Brazil and Abbraccio restaurants in Brazil. Franchise revenues primarily include 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 31, 2024 | DECEMBER 31, 2023 | |||||||||
| Other current assets, net | |||||||||||
| Deferred gift card sales commissions | $ | $ | |||||||||
| Unearned revenue | |||||||||||
| Deferred gift card revenue | $ | $ | |||||||||
| Deferred loyalty revenue | |||||||||||
| Deferred franchise fees - current | |||||||||||
| Other | |||||||||||
| Total Unearned revenue | $ | $ | |||||||||
| Other long-term liabilities, net | |||||||||||
| Deferred franchise fees - non-current | $ | $ | |||||||||
8
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table is a rollforward of deferred gift card sales commissions for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Balance, beginning of the period | $ | $ | |||||||||
| Deferred gift card sales commissions amortization | ( | ( | |||||||||
| Deferred gift card sales commissions capitalization | |||||||||||
| Other | ( | ( | |||||||||
| Balance, end of the period | $ | $ | |||||||||
The following table is a rollforward of unearned gift card revenue for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Balance, beginning of the period | $ | $ | |||||||||
| Gift card sales | |||||||||||
| Gift card redemptions | ( | ( | |||||||||
| Gift card breakage | ( | ( | |||||||||
| Balance, end of the period | $ | $ | |||||||||
3. Impairments and Exit Costs
The components of Provision for impaired assets and restaurant closings are as follows for the period indicated:
| THIRTEEN WEEKS ENDED | |||||
| (dollars in thousands) | MARCH 31, 2024 | ||||
| Impairment losses | |||||
| U.S. | $ | ||||
| Restaurant closure charges (benefits) | |||||
| U.S. | |||||
| International | ( | ||||
| Total restaurant closure charges | |||||
| Provision for impaired assets and restaurant closings | $ | ||||
2023 Closure Initiative - During 2023, the Company closed three U.S. and two international Aussie Grill restaurants and made the decision to close 36 predominantly older, underperforming U.S. restaurants (the “2023 Closure Initiative”). The Company has completed all restaurant closures under the 2023 Closure Initiative. Following is a summary of expenses related to the 2023 Closure Initiative charges recognized in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the period indicated (dollars in thousands):
| DESCRIPTION | CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME CLASSIFICATION | THIRTEEN WEEKS ENDED | ||||||||||||
| MARCH 31, 2024 | ||||||||||||||
| Asset impairments and closure charges | Provision for impaired assets and restaurant closings | $ | ||||||||||||
| Severance and other expenses | General and administrative | |||||||||||||
| Closure-related labor costs | Labor and other related | |||||||||||||
| $ | ||||||||||||||
The remaining impairment and closure charges during the period presented resulted primarily from locations identified for closure.
9
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
4. (Loss) Earnings Per Share
The following table presents the computation of basic and diluted (loss) earnings per share for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (in thousands, except per share data) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
Net (loss) income attributable to Bloomin’ Brands | $ | ( | $ | ||||||||
| Basic weighted average common shares outstanding | |||||||||||
| Effect of dilutive securities: | |||||||||||
| Stock options | |||||||||||
| Nonvested restricted stock units | |||||||||||
| Nonvested performance-based share units | |||||||||||
| Convertible senior notes | |||||||||||
| Warrants | |||||||||||
| Diluted weighted average common shares outstanding | |||||||||||
| Basic (loss) earnings per share | $ | ( | $ | ||||||||
| Diluted (loss) earnings per share | $ | ( | $ | ||||||||
Share-based compensation-related weighted average securities outstanding not included in the computation of (loss) earnings per share because their effect was antidilutive were as follows for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (shares in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Stock options | |||||||||||
| Nonvested restricted stock units | |||||||||||
| Nonvested performance-based share units | |||||||||||
5. Stock-based Compensation Plans
The Company recognized stock-based compensation expense as follows for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Performance-based share units | $ | $ | |||||||||
| Restricted stock units | |||||||||||
| Total stock-based compensation expense, net of capitalized expense | $ | $ | |||||||||
10
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table presents a summary of the Company’s performance-based share units (“PSUs”) activity:
| (in thousands, except per unit data) | PERFORMANCE-BASED SHARE UNITS | WEIGHTED AVERAGE GRANT DATE FAIR VALUE PER UNIT | AGGREGATE INTRINSIC VALUE (1) | ||||||||||||||
| Outstanding as of December 31, 2023 | $ | $ | |||||||||||||||
| Granted | $ | ||||||||||||||||
| Performance adjustment (2) | $ | ||||||||||||||||
| Vested | ( | $ | |||||||||||||||
| Forfeited | ( | $ | |||||||||||||||
| Outstanding as of March 31, 2024 | $ | $ | |||||||||||||||
| Expected to vest as of March 31, 2024 (3) | $ | ||||||||||||||||
________________
(1)Based on the $28.15 and $28.68 share price of the Company’s common stock on December 29, 2023 and March 28, 2024, the last trading day of the year ended December 31, 2023 and thirteen weeks ended March 31, 2024, respectively.
(2)Represents adjustment to 200 % payout for PSUs granted during 2021.
(3)Estimated number of units to be issued upon the vesting of outstanding PSUs based on Company performance projections of performance criteria set forth in the 2022, 2023 and 2024 PSU award agreements.
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 31, 2024 | MARCH 26, 2023 | ||||||||||
| Assumptions: | |||||||||||
| Risk-free interest rate (1) | % | % | |||||||||
| Dividend yield (2) | % | % | |||||||||
| Volatility (3) | % | % | |||||||||
| Grant date fair value per unit (4) | $ | $ | |||||||||
________________
(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.
The following represents unrecognized stock-based compensation expense and the remaining weighted average vesting period as of March 31, 2024:
| UNRECOGNIZED COMPENSATION EXPENSE (dollars in thousands) | REMAINING WEIGHTED AVERAGE VESTING PERIOD (in years) | ||||||||||
| Performance-based share units | $ | ||||||||||
| Restricted stock units | $ | ||||||||||
11
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
6. Other Current Assets, Net
Other current assets, net, consisted of the following as of the periods indicated:
| (dollars in thousands) | MARCH 31, 2024 | DECEMBER 31, 2023 | |||||||||
| Prepaid expenses | $ | $ | |||||||||
| Accounts receivable - gift cards, net | |||||||||||
| Accounts receivable - vendors, net | |||||||||||
| Accounts receivable - franchisees, net | |||||||||||
| Accounts receivable - other, net | |||||||||||
| Deferred gift card sales commissions | |||||||||||
| Other current assets, net | |||||||||||
| $ | $ | ||||||||||
7. Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following as of the periods indicated:
| (dollars in thousands) | MARCH 31, 2024 | DECEMBER 31, 2023 | |||||||||
| Accrued payroll and other compensation (1) | $ | $ | |||||||||
| Accrued insurance | |||||||||||
| Other current liabilities | |||||||||||
| $ | $ | ||||||||||
________________
(1)During the thirteen weeks ended March 31, 2024, accrued payroll and other compensation decreased primarily due to timing of bonus payments and salary accruals.
8. Long-term Debt, Net
Following is a summary of outstanding Long-term debt, net, as of the periods indicated:
| MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||||||||||||||
| (dollars in thousands) | OUTSTANDING BALANCE | INTEREST RATE | OUTSTANDING BALANCE | INTEREST RATE | |||||||||||||||||||
| Senior secured credit facility - revolving credit facility (1) | $ | % | $ | % | |||||||||||||||||||
| 2025 Notes (2) | % | % | |||||||||||||||||||||
| 2029 Notes | % | % | |||||||||||||||||||||
| Less: unamortized debt discount and issuance costs (2) | ( | ( | |||||||||||||||||||||
| Long-term debt, net | $ | $ | |||||||||||||||||||||
(1)Interest rate represents the weighted average interest rate as of the respective periods.
(2)During the thirteen weeks ended March 31, 2024, the Company repurchased $83.6 million of the 2025 Notes and as a result, wrote off $0.8 million of debt issuance costs. See Note 9 - Convertible Senior Notes for additional details.
Debt Covenants - As of March 31, 2024 and December 31, 2023, the Company was in compliance with its debt covenants.
9. Convertible Senior Notes
2025 Notes - On February 29, 2024, the Company entered into exchange agreements (the “Exchange Agreements”) with certain holders (the “Noteholders”) of its 5.00 % Convertible Senior Notes due 2025 (the “2025 Notes”). The Exchange Agreements provided for the Company to deliver and pay at the closing of the transactions on March 5, 2024, an aggregate of approximately 7.5 million shares of Common Stock and $3.3 million in cash, including
12
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
accrued interest, in exchange for $83.6 million in aggregate principal amount of the Company’s outstanding 2025 Notes (the “2025 Notes Partial Repurchase”). In connection with the 2025 Notes Partial Repurchase, the Company recognized a loss on extinguishment of debt of $135.8 million and recorded a $216.1 million increase to Additional paid-in capital during the thirteen weeks ended March 31, 2024.
In connection with dividends paid during the thirteen weeks ended March 31, 2024, the conversion rate for the Company’s remaining 2025 Notes decreased to approximately $11.05 per share, which represents 90.494 shares of common stock per $1,000 principal amount of the 2025 Notes, or a total of approximately 1.875 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 31, 2024 | DECEMBER 31, 2023 | |||||||||
| Principal | $ | $ | |||||||||
| Less: unamortized debt issuance costs (1) | ( | ( | |||||||||
| Net carrying amount | $ | $ | |||||||||
________________
(1)During the thirteen weeks ended March 31, 2024, the Company wrote off $0.8 million of debt issuance costs as a result of the 2025 Notes Partial Repurchase.
Following is a summary of interest expense for the 2025 Notes by component for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Coupon interest | $ | $ | |||||||||
| Debt issuance cost amortization | |||||||||||
| Total interest expense (1) | $ | $ | |||||||||
________________
(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 31, 2024, the remaining holders of the 2025 Notes are eligible to convert their notes during the second quarter of 2024.
Convertible Note Hedge and Warrant Transactions - In connection with the 2025 Notes Partial Repurchase, on February 29, 2024, the Company entered into partial unwind agreements with certain financial institutions (the “Derivative Counterparties”) relating to a portion of the convertible note hedge transactions (the “Note Hedge Early Termination Agreements”) and a portion of the warrant transactions (the “Warrant Early Termination Agreements” and together with the Note Hedge Early Termination Agreements, the “Early Termination Agreements”) that were previously entered into by the Company in connection with the issuance of the 2025 Notes. Pursuant to the Early Termination Agreements, the Derivative Counterparties made a termination payment to the Company which consisted of approximately $118.2 million in cash and 0.3 million shares of common stock and the Company made a termination payment to the Derivative Counterparties in an aggregate amount of approximately $102.2 million in cash. In connection with the Note Hedge Early Termination Agreements and the Warrant Early Termination Agreements, the Company recorded a $126.5 million increase and a $102.2 million decrease, respectively, to Additional paid-in capital during the thirteen weeks ended March 31, 2024. The Company also recorded a $8.3 million increase to Accumulated deficit in connection with the Note Hedge Early Termination Agreements.
The remaining warrants 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 warrants. In connection with dividends paid during thirteen weeks ended March 31, 2024, the strike price for the remaining warrants decreased to $15.47 .
13
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
10. Stockholders’ Equity
Share Repurchases - In February 2024, the Company’s Board of Directors (the “Board”) canceled the remaining $57.5 million under the Company’s former share repurchase authorization and approved a new $350.0 million share repurchase authorization (the “2024 Share Repurchase Program”). The 2024 Share Repurchase Program includes capacity above the Company’s normal repurchase activity to provide flexibility in retiring the 2025 Notes at or prior to their May 2025 maturity. The 2024 Share Repurchase Program will expire on August 13, 2025.
On March 1, 2024, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”), in connection with the 2024 Share Repurchase Program, with Wells Fargo Bank, National Association (“Wells Fargo”) to repurchase $220.0 million of the Company’s common stock.
Under the ASR Agreement, the Company made an aggregate payment of $220.0 million to Wells Fargo and received an aggregate initial delivery of approximately 6.5 million shares of common stock on March 4, 2024, representing approximately 80 % of the total shares that were estimated to be repurchased under the ASR Agreement based on the price per share of common stock as of that date. The exact number of shares the Company repurchased under the ASR Agreement was based generally on the average of the daily volume-weighted average price per share of common stock during the repurchase period, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement. On April 23, 2024, the Company received 1.4 million additional shares of common stock from Wells Fargo in connection with the final settlement of the ASR Agreement.
The Company funded the payment under the ASR Agreement, together with the cash portion of the amounts payable under the Exchange Agreements, primarily with borrowings under the revolving credit facility and net proceeds from the Early Termination Agreements.
As of March 31, 2024, $130.0 million remained available for repurchase under the 2024 Share Repurchase Program. Following is a summary of the shares repurchased during fiscal year 2024:
| (in thousands, except per share data) | NUMBER OF SHARES | AVERAGE REPURCHASE PRICE PER SHARE | AMOUNT | ||||||||||||||
| First fiscal quarter (1) | $ | $ | |||||||||||||||
________________
Dividends - The Company declared and paid dividends per share during fiscal year 2024 as follows:
| (dollars in thousands, except per share data) | DIVIDENDS PER SHARE | AMOUNT | |||||||||
| First fiscal quarter | $ | $ | |||||||||
In April 2024, the Board declared a quarterly cash dividend of $0.24 per share, payable on May 31, 2024 to shareholders of record at the close of business on May 20, 2024 .
Accumulated Other Comprehensive Loss (“AOCL”) - Following are the components of AOCL as of the periods indicated:
| (dollars in thousands) | MARCH 31, 2024 | DECEMBER 31, 2023 | |||||||||
| Foreign currency translation adjustment | $ | ( | $ | ( | |||||||
| Unrealized gain (loss) on derivatives, net of tax | ( | ||||||||||
| Accumulated other comprehensive loss | $ | ( | $ | ( | |||||||
14
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Following are the components of Other comprehensive loss attributable to Bloomin’ Brands for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Foreign currency translation adjustment | $ | ( | $ | ( | |||||||
| Change in fair value of derivatives, net of tax | |||||||||||
| Reclassification realized in Net (loss) income, net of tax | ( | ||||||||||
| Gain on derivatives, net of tax | |||||||||||
| Other comprehensive loss attributable to Bloomin’ Brands | $ | ( | $ | ( | |||||||
11. Derivative Instruments and Hedging Activities
Cash Flow Hedges of Interest Rate Risk - In March 2024 and December 2023, OSI entered into 11 interest rate swap agreements with ten counterparties (the “Swap Transactions”) to manage its exposure to fluctuations in variable interest rates. The Swap Transactions have an aggregate notional amount of $375.0 million and include and two-year tenors with the following terms:
| NOTIONAL AMOUNT | WEIGHTED AVERAGE FIXED INTEREST RATE (1) | EFFECTIVE DATE | TERMINATION DATE | |||||||||||||||||
| $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||
____________________
(1)The weighted average fixed interest rate excludes the term SOFR adjustment and interest rate spread described below.
In connection with the Swap Transactions, the Company effectively converted $375.0 million of its outstanding indebtedness from the Secured Overnight Financing Rate (“SOFR”), plus a term SOFR adjustment of 0.10 % and a spread of 150 to 250 basis points to the weighted average fixed interest rates within the table above, plus a term SOFR adjustment of 0.10 % and a spread of 150 to 250 basis points. The Swap Transactions have an embedded floor of minus 0.10 %.
The Swap Transactions have been designated and qualify as cash flow hedges, are recognized on the Company’s Consolidated Balance Sheets at fair value and are classified based on the instruments’ maturity dates. The Company estimated $1.6 million of interest income will be reclassified to Interest expense, net over the next 12 months related to the Company’s Swap Transactions.
The following table presents the fair value and classification of the Company’s swap agreements as of the periods indicated:
| (dollars in thousands) | MARCH 31, 2024 | DECEMBER 31, 2023 | CONSOLIDATED BALANCE SHEET CLASSIFICATION | ||||||||||||||
| Interest rate swaps - asset (1) | $ | $ | Other current assets, net | ||||||||||||||
| Interest rate swaps - liability | $ | $ | Accrued and other current liabilities | ||||||||||||||
| Interest rate swaps - liability | Other long-term liabilities, net | ||||||||||||||||
| Total fair value of derivative instruments - liabilities (1) | $ | $ | |||||||||||||||
____________________
(1) See Note 13 - Fair Value Measurements for fair value discussion of the interest rate swaps.
15
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
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 31, 2024, all counterparties to the interest rate swaps performed in accordance with their contractual obligations.
The Company has agreements with each of its derivative counterparties that contain a provision whereby 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.
As of December 31, 2023, the fair value of the Company’s interest rate swaps was in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk, of $0.8 million. As of December 31, 2023, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions as of December 31, 2023, it could have been required to settle its obligations under the agreements at their termination value of $0.8 million.
12. 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 31, 2024 | DECEMBER 31, 2023 | ||||||||||||||
| Operating lease right-of-use assets | Operating lease right-of-use assets | $ | $ | ||||||||||||||
| Property, fixtures and equipment, net | |||||||||||||||||
| Total lease assets, net | $ | $ | |||||||||||||||
| Current operating lease liabilities | Current operating lease liabilities | $ | $ | ||||||||||||||
| Accrued and other current liabilities | |||||||||||||||||
| Non-current operating lease liabilities | Non-current operating lease liabilities | ||||||||||||||||
| Other long-term liabilities, net | |||||||||||||||||
| Total lease liabilities | $ | $ | |||||||||||||||
________________
(1)Net of accumulated amortization of $5.4 million and $4.7 million as of March 31, 2024 and December 31, 2023, respectively.
Following is a summary of expenses and income related to leases recognized in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income for the periods indicated:
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME CLASSIFICATION | THIRTEEN WEEKS ENDED | ||||||||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||||||||
| Operating lease cost (1) | Other restaurant operating | $ | $ | ||||||||||||||
| Variable lease cost | Other restaurant operating | ||||||||||||||||
| Finance lease costs: | |||||||||||||||||
| Amortization of leased assets | Depreciation and amortization | ||||||||||||||||
| Interest on lease liabilities | Interest expense, net | ||||||||||||||||
| Sublease revenue | Franchise and other revenues | ( | ( | ||||||||||||||
| Lease costs, net | $ | $ | |||||||||||||||
________________
(1)Excludes rent expense for office facilities and Company-owned closed or subleased properties of $3.5 million and $3.0 million for the thirteen weeks ended March 31, 2024 and March 26, 2023, respectively, which is included in General and administrative expense.
16
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
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 31, 2024 | MARCH 26, 2023 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | |||||||||
13. 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 | |||||||
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 31, 2024 | DECEMBER 31, 2023 | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) | TOTAL | LEVEL 1 | LEVEL 2 | TOTAL | LEVEL 1 | LEVEL 2 | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||||||||||||||
| Fixed income funds | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Money market funds | |||||||||||||||||||||||||||||||||||
| Restricted cash equivalents: | |||||||||||||||||||||||||||||||||||
| Money market funds | |||||||||||||||||||||||||||||||||||
| Derivative instruments - interest rate swaps | |||||||||||||||||||||||||||||||||||
| Total asset recurring fair value measurements | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||
| Derivative instruments - interest rate swaps | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Derivative instruments - interest rate swaps | |||||||||||||||||||||||||||||||||||
| Total liability recurring fair value measurements | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Fair value of each class of financial instruments 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 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 31, 2024 and December 31, 2023, the Company determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. | |||||||
17
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Interim Disclosures about Fair Value of Financial Instruments - The Company’s non-derivative financial instruments consist of cash equivalents, accounts receivable, accounts payable 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 31, 2024 | DECEMBER 31, 2023 | ||||||||||||||||||||||
| (dollars in thousands) | CARRYING VALUE | FAIR VALUE LEVEL 2 | CARRYING VALUE | FAIR VALUE LEVEL 2 | |||||||||||||||||||
| Senior secured credit facility - revolving credit facility | $ | $ | $ | $ | |||||||||||||||||||
| 2025 Notes | $ | $ | $ | $ | |||||||||||||||||||
| 2029 Notes | $ | $ | $ | $ | |||||||||||||||||||
14. Income Taxes
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| (Loss) income before provision for income taxes | $ | ( | $ | ||||||||
| Provision for income taxes | $ | $ | |||||||||
| Effective income tax rate | ( | % | % | ||||||||
The effective income tax rate for the thirteen weeks ended March 31, 2024 includes the impact of nondeductible losses associated with the 2025 Notes Partial Repurchase which, relative to a pre-tax book loss during the quarter, resulted in a negative effective income tax rate.
On January 24, 2024, the Company’s Brazilian subsidiary received an unfavorable second level court ruling related to its ongoing litigation regarding its eligibility for tax exemptions under the Brazil tax legislation, that temporarily granted certain industries a 100 % exemption from income tax (IRPJ and CSLL) and federal value added taxes (PIS and COFINS) for a five-year period. The Company will appeal this ruling, and believes that it will more likely than not prevail in this appeal and accordingly has not recorded any expense or liability for the disputed amounts.
In the U.S., a restaurant company employer may claim a credit against its federal income taxes for FICA taxes paid on certain tipped wages (the “FICA tax credit”). The level of FICA tax credits is primarily driven by U.S. Restaurant sales and is not impacted by costs incurred that may reduce (Loss) income before provision for income taxes.
The effective income tax rate for the thirteen weeks ended March 31, 2024 was lower than the Company’s blended federal and state statutory rate of approximately 26 % primarily due to the benefit of FICA tax credits on certain tipped wages and the impact of nondeductible losses associated with the 2025 Notes Partial Repurchase which, relative to a pre-tax book loss during the quarter, resulted in a negative effective income tax rate.
The effective income tax rate for the thirteen weeks ended March 26, 2023 was lower than the Company’s blended federal and state statutory rate of approximately 26 % primarily due to the benefit of FICA tax credits on certain tipped wages and benefits of Brazil tax legislation that include a temporary reduction in the Brazilian income tax rate from 34 % to 0 %.
18
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
15. Commitments and Contingencies
Litigation and Other Matters - The Company recorded reserves of $9.5 million and $13.3 million for certain of its outstanding legal proceedings as of March 31, 2024 and December 31, 2023, respectively, within Accrued and other current 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.
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 31, 2024, the undiscounted payments that the Company could be required to make in the event of non-payment by the primary lessees was $18.9 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of March 31, 2024 was $15.1 million. In the event of default, the indemnity clauses in the Company’s purchase and sale agreements generally govern its ability to pursue and recover damages incurred. As of March 31, 2024 and December 31, 2023, the Company’s recorded contingent lease liability was $4.8 million and $5.3 million, respectively.
16. Segment Reporting
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 31, 2023. 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, a portion of insurance expenses and certain bonus expenses.
19
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following tables summarize Total revenues, Depreciation and amortization, and Income from operations by segment for the periods indicated:
| THIRTEEN WEEKS ENDED MARCH 31, 2024 | |||||||||||||||||||||||
| (dollars in thousands) | U.S. | INTERNATIONAL | CORPORATE | CONSOLIDATED | |||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | |||||||||||||||||||
| Income from operations | $ | $ | $ | ( | $ | ||||||||||||||||||
| THIRTEEN WEEKS ENDED MARCH 26, 2023 | |||||||||||||||||||||||
| (dollars in thousands) | U.S. | INTERNATIONAL | CORPORATE | CONSOLIDATED | |||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | |||||||||||||||||||
| Income from operations | $ | $ | $ | ( | $ | ||||||||||||||||||
The following table is a reconciliation of segment income from operations to (Loss) income before provision for income taxes for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Income from operations | $ | $ | |||||||||
| Loss on extinguishment of debt | ( | ||||||||||
| Interest expense, net | ( | ( | |||||||||
| (Loss) income before provision for income taxes | $ | ( | $ | ||||||||
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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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)Minimum wage increases, additional mandated employee benefits and fluctuations in the cost and availability of employees;
(iii)Our ability to recruit and retain high-quality leadership, restaurant-level management and team members;
(iv)Economic and geopolitical conditions and their effects on consumer confidence and discretionary spending, consumer traffic, the cost and availability of credit and interest rates;
(v)Our ability to compete in the highly competitive restaurant industry with many well-established competitors and new market entrants;
(vi)Our ability to protect our information technology systems from interruption or security breach, including cybersecurity threats, and to protect consumer data and personal employee information;
21
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
(vii)Fluctuations in the price and availability of commodities, including supplier freight charges and restaurant distribution expenses, and other impacts of inflation and our dependence on a limited number of suppliers and distributors to meet our beef, pork, chicken and other major product supply needs;
(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)The effects of international economic, political and social conditions and legal systems on our foreign operations and on foreign currency exchange rates;
(x)The impact of the strategic review process for our Brazil operations or any resulting action or inaction;
(xi)Our ability to comply with new corporate citizenship and sustainability reporting requirements and investor expectations or our failure to achieve any goals, targets or objectives that we establish with respect to corporate citizenship and sustainability matters;
(xii)Our ability to effectively respond to changes in patterns of consumer traffic, including by maintaining relationships with third party delivery apps and services, consumer tastes and dietary habits;
(xiii)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;
(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, and our cost savings plans to enable reinvestment in our business, due to uncertainty with respect to macroeconomic conditions and the efficiency that may be added by the actions we take;
(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 31, 2023.
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 31, 2024, we owned and operated 1,162 restaurants and franchised 289 restaurants across 46 states, Guam and 13 countries. We have four founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar.
Financial Overview - Our financial overview for the thirteen weeks ended March 31, 2024 includes the following:
•U.S. combined and Outback Steakhouse comparable restaurant sales of (1.6)% and (1.2)%, respectively;
•Decrease in Total revenues of (4.0)% as compared to the first quarter of 2023;
•Operating income and restaurant-level operating margins of 6.4% and 16.0%, respectively, as compared to 9.7% and 17.9%, respectively, for the first quarter of 2023;
•Operating income of $77.1 million as compared to $120.6 million in the first quarter of 2023; and
•Diluted loss per share of $(0.96) as compared to diluted earnings per share of $0.93 for the first quarter of 2023.
Reviewing Strategic Alternatives for Brazil Operations - On May 7, 2024, we announced that we are exploring and evaluating strategic alternatives for our Brazil operations that have the potential to maximize value for our shareholders, including but not limited to, a possible sale of the operations. The Board has retained BofA Securities, Inc. as its financial advisor.
We plan to proceed in a timely manner, but have not set a definitive timetable for completion of this process. There can be no assurance that this review will result in a transaction or other strategic alternative of any kind. We do not intend to make any further public comment regarding the review unless it determines that disclosure is appropriate or necessary.
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 and the benefit of value added tax exemptions in Brazil) 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 and the benefit of value added tax exemptions in Brazil) 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 (loss) income and Diluted (loss) earnings per share—financial measures utilized to evaluate our operating performance.
Restaurant-level operating margin is a non-GAAP financial measure 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 expense and Other restaurant operating expense (including
23
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
advertising expenses) represent, in each case as such items are reflected in our Consolidated Statements of Operations and Comprehensive (Loss) Income. The following categories of revenue and operating expenses are not included in restaurant-level operating income and corresponding 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;
(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 (Loss) 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 (loss) 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 these 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 restaurants in operation as of the periods indicated:
| Number of restaurants (at end of the period): | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| U.S. | |||||||||||
| Outback Steakhouse | |||||||||||
| Company-owned | 544 | 564 | |||||||||
| Franchised | 125 | 127 | |||||||||
| Total | 669 | 691 | |||||||||
| Carrabba’s Italian Grill | |||||||||||
| Company-owned | 192 | 199 | |||||||||
| Franchised | 18 | 19 | |||||||||
| Total | 210 | 218 | |||||||||
| Bonefish Grill | |||||||||||
| Company-owned | 162 | 172 | |||||||||
| Franchised | 4 | 5 | |||||||||
| Total | 166 | 177 | |||||||||
| Fleming’s Prime Steakhouse & Wine Bar | |||||||||||
| Company-owned | 64 | 65 | |||||||||
| Aussie Grill | |||||||||||
| Company-owned | 4 | 7 | |||||||||
| Franchised | 2 | — | |||||||||
| Total | 6 | 7 | |||||||||
| U.S. total (1) | 1,115 | 1,158 | |||||||||
| International | |||||||||||
| Company-owned | |||||||||||
| Outback Steakhouse - Brazil (2) | 159 | 140 | |||||||||
| Other (2)(3) | 37 | 36 | |||||||||
| Franchised | |||||||||||
| Outback Steakhouse - South Korea (1) | 92 | 90 | |||||||||
| Other (3) | 48 | 47 | |||||||||
| International total | 336 | 313 | |||||||||
| System-wide total | 1,451 | 1,471 | |||||||||
| System-wide total - Company-owned | 1,162 | 1,183 | |||||||||
| System-wide total - Franchised | 289 | 288 | |||||||||
____________________
(1)Excludes four and 26 off-premises only kitchens as of March 31, 2024 and March 26, 2023, respectively. One location was Company-owned in the U.S. and all others were franchised in South Korea as of March 31, 2024 and March 26, 2023.
(2)The restaurant counts for Brazil, including Abbraccio and Aussie Grill restaurants within International Company-owned Other, are reported as of February 29, 2024 and February 28, 2023, respectively, to correspond with the balance sheet dates of this subsidiary.
(3)International Company-owned Other included two and four Aussie Grill locations as of March 31, 2024 and March 26, 2023, respectively. International Franchised Other included five and four Aussie Grill locations as of March 31, 2024 and March 26, 2023, respectively.
25
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Results of Operations
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 26, 2023 | $ | 1,228.2 | |||
| Change from: | |||||
| Comparable restaurant sales (1) | (35.7) | ||||
| Restaurant closures | (25.1) | ||||
| Brazil value added tax exemptions (2) | (9.6) | ||||
| Restaurant openings | 14.3 | ||||
| Effect of foreign currency translation | 7.4 | ||||
| For the period ended March 31, 2024 | $ | 1,179.5 | |||
(1)The thirteen weeks ended March 26, 2023 included high-volume days between December 26th and December 31st and the thirteen weeks ended March 31, 2024 excluded these days. This shift had an estimated $16.5 million negative impact on comparable restaurant sales.
(2)Beginning in the fourth quarter of 2023, we are once again subject to the value added taxes for which we were previously exempt under the Brazil tax legislation. See Note 14 - Income Taxes of the Notes to Consolidated Financial Statements for details regarding value added tax exemptions in connection with Brazil tax legislation.
The decrease in Restaurant sales during the thirteen weeks ended March 31, 2024 was primarily due to: (i) lower comparable restaurant sales including the impact of the one-week shift in the fiscal calendar, (ii) the closure of 57 restaurants since December 25, 2022 and (iii) value added tax exemptions in Brazil during 2023. The decrease in Restaurant sales was partially offset by the opening of 53 new restaurants not included in our comparable restaurant sales base and the effect of foreign currency translation of the Brazilian Real relative to the U.S. dollar.
Average Restaurant Unit Volumes and Operating Weeks - Following is a summary of the average restaurant unit volumes and operating weeks for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| MARCH 31, 2024 | MARCH 26, 2023 | ||||||||||
| Average restaurant unit volumes (weekly): | |||||||||||
| U.S. | |||||||||||
| Outback Steakhouse | $ | 83,012 | $ | 84,506 | |||||||
| Carrabba’s Italian Grill | $ | 72,325 | $ | 72,687 | |||||||
| Bonefish Grill | $ | 66,661 | $ | 70,146 | |||||||
| Fleming’s Prime Steakhouse & Wine Bar | $ | 115,580 | $ | 121,625 | |||||||
| International | |||||||||||
| Outback Steakhouse - Brazil (1) | $ | 61,578 | $ | 63,170 | |||||||
| Operating weeks: | |||||||||||
| U.S. | |||||||||||
| Outback Steakhouse | 7,205 | 7,358 | |||||||||
| Carrabba’s Italian Grill | 2,550 | 2,587 | |||||||||
| Bonefish Grill | 2,168 | 2,248 | |||||||||
| Fleming’s Prime Steakhouse & Wine Bar | 832 | 845 | |||||||||
| International | |||||||||||
| Outback Steakhouse - Brazil | 2,027 | 1,788 | |||||||||
____________________
(1)Translated at average exchange rates of 4.92 and 5.21 for the thirteen weeks ended March 31, 2024 and March 26, 2023, respectively. Excludes the benefit of the Brazil value added tax exemptions discussed in Note 14 - Income Taxes of the Notes to Consolidated Financial Statements.
26
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 (Decreases) Increases - Following is a summary of comparable restaurant sales, traffic and average check per person (decreases) increases for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| MARCH 31, 2024 (1) | MARCH 26, 2023 | ||||||||||
| Year over year percentage change: | |||||||||||
| Comparable restaurant sales (restaurants open 18 months or more): | |||||||||||
| U.S. (2) | |||||||||||
| Outback Steakhouse | (1.2) | % | 4.9 | % | |||||||
| Carrabba’s Italian Grill | 0.4 | % | 6.7 | % | |||||||
| Bonefish Grill | (4.9) | % | 5.2 | % | |||||||
| Fleming’s Prime Steakhouse & Wine Bar | (2.0) | % | 3.6 | % | |||||||
| Combined U.S. | (1.6) | % | 5.1 | % | |||||||
| International | |||||||||||
| Outback Steakhouse - Brazil (3)(4) | (0.7) | % | 14.3 | % | |||||||
| Traffic: | |||||||||||
| U.S. | |||||||||||
| Outback Steakhouse | (4.2) | % | (1.5) | % | |||||||
| Carrabba’s Italian Grill | (2.9) | % | 1.7 | % | |||||||
| Bonefish Grill | (7.1) | % | (0.5) | % | |||||||
| Fleming’s Prime Steakhouse & Wine Bar | (5.0) | % | 0.2 | % | |||||||
| Combined U.S. | (4.3) | % | (0.7) | % | |||||||
| International | |||||||||||
| Outback Steakhouse - Brazil (3) | (3.7) | % | 2.2 | % | |||||||
| Average check per person (5): | |||||||||||
| U.S. | |||||||||||
| Outback Steakhouse | 3.0 | % | 6.4 | % | |||||||
| Carrabba’s Italian Grill | 3.3 | % | 5.0 | % | |||||||
| Bonefish Grill | 2.2 | % | 5.7 | % | |||||||
| Fleming’s Prime Steakhouse & Wine Bar | 3.0 | % | 3.4 | % | |||||||
| Combined U.S. | 2.7 | % | 5.8 | % | |||||||
| International | |||||||||||
| Outback Steakhouse - Brazil (3) | 2.7 | % | 11.6 | % | |||||||
____________________
(1)For Q1 2024, comparable restaurant sales, traffic and average check per person compare the thirteen weeks from January 1, 2024 through March 31, 2024 to the thirteen weeks from January 2, 2023 through April 2, 2023.
(2)Relocated restaurants closed more than 60 days are excluded from comparable restaurant sales until at least 18 months after reopening.
(3)Excludes the effect of fluctuations in foreign currency rates and the benefit of the Brazil value added tax exemptions discussed in Note 14 - Income Taxes of the Notes to Consolidated Financial Statements.
(4)Includes trading day impact from calendar period reporting.
(5)Includes the impact of menu pricing changes, product mix and discounts.
27
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
COSTS AND EXPENSES
The following table sets forth the percentages of certain items in our Consolidated Statements of Operations in relation to Restaurant sales or Total revenues for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| MARCH 31, 2024 | MARCH 26, 2023 | ||||||||||
| Revenues | |||||||||||
| Restaurant sales | 98.7 | % | 98.7 | % | |||||||
| Franchise and other revenues | 1.3 | 1.3 | |||||||||
| Total revenues | 100.0 | 100.0 | |||||||||
| Costs and expenses | |||||||||||
| Food and beverage (1) | 30.3 | 31.3 | |||||||||
| Labor and other related (1) | 29.1 | 27.8 | |||||||||
| Other restaurant operating (1) | 24.6 | 23.0 | |||||||||
| Depreciation and amortization | 4.1 | 3.7 | |||||||||
| General and administrative | 5.6 | 5.3 | |||||||||
| Provision for impaired assets and restaurant closings | 0.9 | 0.3 | |||||||||
| Total costs and expenses | 93.6 | 90.3 | |||||||||
| Income from operations | 6.4 | 9.7 | |||||||||
| Loss on extinguishment of debt | (11.4) | — | |||||||||
| Interest expense, net | (1.1) | (1.0) | |||||||||
| (Loss) income before provision for income taxes | (6.1) | 8.7 | |||||||||
| Provision for income taxes | 0.8 | 1.2 | |||||||||
| Net (loss) income | (6.9) | 7.5 | |||||||||
| Less: net income attributable to noncontrolling interests | 0.1 | 0.2 | |||||||||
Net (loss) income attributable to Bloomin’ Brands | (7.0) | % | 7.3 | % | |||||||
____________________
(1)As a percentage of Restaurant sales.
Thirteen weeks ended March 31, 2024 as compared to thirteen weeks ended March 26, 2023
Food and beverage cost decreased as a percentage of Restaurant sales primarily due to 1.3% from increases in average check per person driven by an increase in menu pricing and 0.7% from cost saving and productivity initiatives. These decreases were partially offset by increases as a percentage of Restaurant sales of 0.6% from commodity inflation and 0.4% from unfavorable product mix.
Labor and other related expense increased as a percentage of Restaurant sales primarily due to 2.0% from higher hourly and field management labor costs, primarily due to wage rate inflation, partially offset by a decrease of 0.5% from an increase in average check per person.
Other restaurant operating expense increased as a percentage of Restaurant sales primarily due to 0.9% from higher restaurant-level operating and supply expenses, primarily due to inflation, and 0.7% from higher advertising expense, partially offset by a decrease of 0.2% from certain cost saving and productivity initiatives.
Depreciation and amortization expense increased primarily due to restaurant development and technology projects, partially offset by a decrease due to restaurant closures under the 2023 Closure Initiative.
General and administrative expense increased primarily due to higher severance partially offset by a decrease in employee stock-based compensation.
28
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Provision for impaired assets and restaurant closings increased primarily due to charges in connection with the 2023 Closure Initiative within the U.S. segment.
Income from operations during the thirteen weeks ended March 31, 2024 includes a net operating margin decrease of approximately 0.3% attributable to the lapping of the 2023 Brazil value added tax exemptions (PIS and COFINS). See Note 14 - Income Taxes of the Notes to Consolidated Financial Statements for further discussion regarding Brazil tax legislation.
Loss on extinguishment of debt during the thirteen weeks ended March 31, 2024 was in connection with the 2025 Notes Partial Repurchase, which is described in further detail within Note 9 - Convertible Senior Notes of the Notes to Consolidated Financial Statements.
Provision for income taxes for the thirteen weeks ended March 31, 2024 includes the impact of nondeductible losses associated with the 2025 Notes Partial Repurchase which, relative to a pre-tax book loss during the quarter, resulted in a negative effective income tax rate.
SEGMENT PERFORMANCE
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, a portion of insurance expenses and certain bonus expenses.
Refer to Note 16 - 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 non-GAAP measure 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 Financial Performance Indicators and Non-GAAP Financial Measures sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional details regarding the calculation of restaurant-level operating margin.
29
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Summary financial data - Following is a summary of financial data by segment for the periods indicated:
| U.S. | INTERNATIONAL | ||||||||||||||||||||||
| THIRTEEN WEEKS ENDED | THIRTEEN WEEKS ENDED | ||||||||||||||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Restaurant sales | $ | 1,030,896 | $ | 1,080,569 | $ | 148,591 | $ | 147,665 | |||||||||||||||
| Franchise and other revenues | 12,208 | 12,427 | 3,632 | 4,085 | |||||||||||||||||||
| Total revenues | $ | 1,043,104 | $ | 1,092,996 | $ | 152,223 | $ | 151,750 | |||||||||||||||
| Income from operations | $ | 97,484 | $ | 133,243 | $ | 15,762 | $ | 24,508 | |||||||||||||||
| Operating income margin | 9.3 | % | 12.2 | % | 10.4 | % | 16.2 | % | |||||||||||||||
| Restaurant-level operating income | $ | 161,976 | $ | 187,808 | $ | 27,157 | $ | 34,015 | |||||||||||||||
| Restaurant-level operating margin | 15.7 | % | 17.4 | % | 18.3 | % | 23.0 | % | |||||||||||||||
Restaurant sales - Following is a summary of the change in segment Restaurant sales for the period indicated:
| U.S. | INTERNATIONAL | |||||||||||||
| THIRTEEN WEEKS ENDED | THIRTEEN WEEKS ENDED | |||||||||||||
| (dollars in millions) | (dollars in millions) | |||||||||||||
| For the period ended March 26, 2023 | $ | 1,080.6 | For the period ended March 26, 2023 | $ | 147.6 | |||||||||
| Change from: | Change from: | |||||||||||||
| Comparable restaurant sales (1) | (32.8) | Effect of foreign currency translation | 7.4 | |||||||||||
| Restaurant closures (2) | (24.5) | Restaurant openings (3) | 6.7 | |||||||||||
| Restaurant openings (3) | 7.6 | Brazil value added tax exemptions (4) | (9.6) | |||||||||||
| For the period ended March 31, 2024 | $ | 1,030.9 | Comparable restaurant sales | (2.9) | ||||||||||
| Restaurant closures (2) | (0.6) | |||||||||||||
| For the period ended March 31, 2024 | $ | 148.6 | ||||||||||||
(1)Includes an estimated $16.5 million negative impact on comparable restaurant sales from a one-week shift in the fiscal calendar.
(2)Includes the restaurant sales impact from the closure of 55 U.S. and two international restaurants since December 25, 2022.
(3)Includes restaurant sales from 17 U.S. and 36 international new restaurants not included in our comparable restaurant sales base.
(4)Beginning in the fourth quarter of 2023, we are once again subject to the value added taxes for which we were previously exempt under the Brazil tax legislation. See Note 14 - Income Taxes of the Notes to Consolidated Financial Statements for details regarding value added tax exemptions in connection with Brazil tax legislation.
Income from operations
U.S. - The decrease in U.S. Income from operations generated during the thirteen weeks ended March 31, 2024 as compared to the thirteen weeks ended March 26, 2023 was primarily due to: (i) lower restaurant sales, as discussed above, (ii) higher labor, operating and commodity costs, primarily due to inflation, (iii) impairment and closure costs in connection with the 2023 Closure Initiative, (iv) higher advertising expense and (v) unfavorable product mix. These decreases were offset by an increase in average check per person and the impact of certain cost saving and productivity initiatives.
International - The decrease in international Income from operations generated during the thirteen weeks ended March 31, 2024 as compared to the thirteen weeks ended March 26, 2023 was primarily due to: (i) higher operating and labor costs, primarily due to inflation, (ii) lapping value added tax exemptions in Brazil during 2023, (iii) a decline in customer traffic and (iv) commodity inflation. These decreases were partially offset by an increase in average check per person.
30
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Non-GAAP Financial Measures
Consolidated Restaurant-level Operating Income and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations - The following table reconciles consolidated Income from operations and the corresponding margin to restaurant-level operating income and adjusted restaurant-level operating income and the corresponding margins for the periods indicated:
| Consolidated | THIRTEEN WEEKS ENDED | ||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Income from operations | $ | 77,093 | $ | 120,633 | |||||||
| Operating income margin | 6.4 | % | 9.7 | % | |||||||
| Less: | |||||||||||
| Franchise and other revenues | 15,840 | 16,512 | |||||||||
| Plus: | |||||||||||
| Depreciation and amortization | 49,282 | 46,302 | |||||||||
| General and administrative | 66,776 | 65,804 | |||||||||
| Provision for impaired assets and restaurant closings | 10,873 | 3,324 | |||||||||
| Restaurant-level operating income | $ | 188,184 | $ | 219,551 | |||||||
| Restaurant-level operating margin | 16.0 | % | 17.9 | % | |||||||
| Adjustments: | |||||||||||
| Asset impairments and closure-related costs (1) | 434 | — | |||||||||
| Total restaurant-level operating income adjustments | 434 | — | |||||||||
| Adjusted restaurant-level operating income | $ | 188,618 | $ | 219,551 | |||||||
| Adjusted restaurant-level operating margin | 16.0 | % | 17.9 | % | |||||||
_________________
(1)Represents costs in connection with the 2023 Closure Initiative.
Segment Restaurant-level and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations - The following tables reconcile segment Income from operations and the corresponding margin to segment restaurant-level operating income and adjusted restaurant-level operating income and the corresponding margins for the periods indicated:
| U.S. | THIRTEEN WEEKS ENDED | ||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Income from operations | $ | 97,484 | $ | 133,243 | |||||||
| Operating income margin | 9.3 | % | 12.2 | % | |||||||
| Less: | |||||||||||
| Franchise and other revenues | 12,208 | 12,427 | |||||||||
| Plus: | |||||||||||
| Depreciation and amortization | 39,968 | 38,163 | |||||||||
| General and administrative | 25,796 | 25,505 | |||||||||
| Provision for impaired assets and restaurant closings | 10,936 | 3,324 | |||||||||
| Restaurant-level operating income | $ | 161,976 | $ | 187,808 | |||||||
| Restaurant-level operating margin | 15.7 | % | 17.4 | % | |||||||
| Adjustments: | |||||||||||
| Asset impairments and closure-related costs (1) | 434 | — | |||||||||
| Total restaurant-level operating income adjustments | 434 | — | |||||||||
| Adjusted restaurant-level operating income | $ | 162,410 | $ | 187,808 | |||||||
| Adjusted restaurant-level operating margin | 15.8 | % | 17.4 | % | |||||||
(1)Represents costs in connection with the 2023 Closure Initiative.
31
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
| International | THIRTEEN WEEKS ENDED | ||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Income from operations | $ | 15,762 | $ | 24,508 | |||||||
| Operating income margin | 10.4 | % | 16.2 | % | |||||||
| Less: | |||||||||||
| Franchise and other revenues | 3,632 | 4,085 | |||||||||
| Plus: | |||||||||||
| Depreciation and amortization | 7,261 | 5,919 | |||||||||
| General and administrative | 7,829 | 7,673 | |||||||||
| Provision for impaired assets and restaurant closings | (63) | — | |||||||||
| Restaurant-level operating income | $ | 27,157 | $ | 34,015 | |||||||
| Restaurant-level operating margin | 18.3 | % | 23.0 | % | |||||||
Adjusted Restaurant-level Operating Margin Non-GAAP Reconciliations (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 31, 2024 | MARCH 26, 2023 | ||||||||||||||||||||||
| REPORTED | ADJUSTED (1) | REPORTED | ADJUSTED | ||||||||||||||||||||
| Restaurant sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Food and beverage | 30.3 | % | 30.3 | % | 31.3 | % | 31.3 | % | |||||||||||||||
| Labor and other related | 29.1 | % | 29.1 | % | 27.8 | % | 27.8 | % | |||||||||||||||
| Other restaurant operating | 24.6 | % | 24.6 | % | 23.0 | % | 23.0 | % | |||||||||||||||
| Restaurant-level operating margin | 16.0 | % | 16.0 | % | 17.9 | % | 17.9 | % | |||||||||||||||
(1)See the Consolidated Restaurant-level Operating Income and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations table above for details regarding the restaurant-level operating margin adjustments. All restaurant-level operating margin adjustments for the periods presented were recorded within Labor and other related expense.
Adjusted Income from Operations Non-GAAP Reconciliations - The following table reconciles Income from operations and the corresponding margin to adjusted income from operations and the corresponding margin for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (dollars in thousands) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
| Income from operations | $ | 77,093 | $ | 120,633 | |||||||
| Operating income margin | 6.4 | % | 9.7 | % | |||||||
| Adjustments: | |||||||||||
| Total restaurant-level operating income adjustments (1) | 434 | — | |||||||||
| Asset impairments and closure-related charges (2) | 12,521 | — | |||||||||
| Total income from operations adjustments | 12,955 | — | |||||||||
| Adjusted income from operations | $ | 90,048 | $ | 120,633 | |||||||
| Adjusted operating income margin | 7.5 | % | 9.7 | % | |||||||
_________________
(1)See the Consolidated Restaurant-level Operating Income and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations table above for details regarding the restaurant-level operating income adjustments.
(2)Includes asset impairment, closure costs and severance in connection with the 2023 Closure Initiative.
32
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Adjusted Net Income and Adjusted Diluted Earnings Per Share Non-GAAP Reconciliations - The following table reconciles Net (loss) income attributable to Bloomin’ Brands to adjusted net income and adjusted diluted earnings per share for the periods indicated:
| THIRTEEN WEEKS ENDED | |||||||||||
| (in thousands, except per share data) | MARCH 31, 2024 | MARCH 26, 2023 | |||||||||
Net (loss) income attributable to Bloomin’ Brands | $ | (83,872) | $ | 91,311 | |||||||
| Adjustments: | |||||||||||
| Income from operations adjustments (1) | 12,955 | — | |||||||||
| Loss on extinguishment of debt (2) | 135,797 | — | |||||||||
| Total adjustments, before income taxes | 148,752 | — | |||||||||
| Adjustment to provision for income taxes (3) | (1,366) | — | |||||||||
| Net adjustments | 147,386 | — | |||||||||
| Adjusted net income | $ | 63,514 | $ | 91,311 | |||||||
| Diluted (loss) earnings per share | $ | (0.96) | $ | 0.93 | |||||||
| Adjusted diluted earnings per share | $ | 0.70 | $ | 0.98 | |||||||
| Diluted weighted average common shares outstanding (4) | 87,024 | 98,011 | |||||||||
| Adjusted diluted weighted average common shares outstanding (4) | 91,055 | 93,180 | |||||||||
_________________
(1)See the Adjusted Income from Operations Non-GAAP Reconciliations table above for details regarding Income from operations adjustments.
(2)Includes losses in connection with the 2025 Notes Partial Repurchase. See Note 9 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for additional details.
(3)Includes the tax effects of non-GAAP adjustments determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates for all periods presented. The primary difference between GAAP and adjusted effective income tax rates relates to certain non-deductible losses and other tax costs associated with the 2025 Notes Partial Repurchase.
(4)Due to a GAAP net loss, antidilutive securities are excluded from diluted weighted average common shares outstanding for the thirteen weeks ended March 31, 2024. However, considering the adjusted net income position, adjusted diluted weighted average common shares outstanding incorporates 4,031 dilutive securities, including 3,132 for outstanding warrants. Adjusted diluted weighted average common shares outstanding was calculated including the benefit of our convertible notes hedge.
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.
33
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 31, 2024 | MARCH 26, 2023 | |||||||||
| U.S. | |||||||||||
| Outback Steakhouse | $ | 133 | $ | 136 | |||||||
| Carrabba’s Italian Grill | 12 | 13 | |||||||||
| Bonefish Grill | 3 | 3 | |||||||||
| U.S. total | 148 | 152 | |||||||||
| International | |||||||||||
| Outback Steakhouse - South Korea | 82 | 94 | |||||||||
| Other (1) | 24 | 27 | |||||||||
| International total | 106 | 121 | |||||||||
| Total franchise sales | $ | 254 | $ | 273 | |||||||
_________________
(1)Includes franchise sales for off-premises only kitchens in South Korea.
Liquidity and Capital Resources
Cash and Cash Equivalents
As of March 31, 2024, we had $131.7 million in cash and cash equivalents, of which $57.5 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 31, 2024, we had aggregate undistributed foreign earnings of approximately $46.7 million that may be repatriated to the U.S. without additional material 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) | REVOLVING CREDIT FACILITY | 2025 NOTES | 2029 NOTES | ||||||||||||||||||||
| Balance as of December 31, 2023 | $ | 381,000 | $ | 104,786 | $ | 300,000 | $ | 785,786 | |||||||||||||||
| 2024 new debt | 550,000 | — | — | 550,000 | |||||||||||||||||||
| 2024 payments | (296,000) | — | — | (296,000) | |||||||||||||||||||
| 2024 conversions | — | (84,062) | — | (84,062) | |||||||||||||||||||
| Balance as of March 31, 2024 | $ | 635,000 | $ | 20,724 | $ | 300,000 | $ | 955,724 | |||||||||||||||
| Interest rates, as of March 31, 2024 (1) | 6.94 | % | 5.00 | % | 5.13 | % | |||||||||||||||||
| Principal maturity date | April 2026 | May 2025 | April 2029 | ||||||||||||||||||||
____________________
(1)Interest rate for revolving credit facility represents the weighted average interest rate as of March 31, 2024.
34
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
As of March 31, 2024, we had $346.7 million in available unused borrowing capacity under our revolving credit facility, net of letters of credit of $18.3 million.
Our credit agreement, as amended, 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 12 - Long-term Debt, Net in our Annual Report on Form 10-K for the year ended December 31, 2023 for further information.
As of March 31, 2024 and December 31, 2023, 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 and beyond.
2025 Notes Partial Repurchase - On February 29, 2024, we and the Noteholders entered into the Exchange Agreements in which the Noteholders agreed to exchange $83.6 million in aggregate principal amount of our outstanding 2025 Notes for approximately 7.5 million shares of our common stock and $3.3 million in cash, including accrued interest.
Convertible Note Hedge and Warrant Transactions - In connection with the 2025 Notes Partial Repurchase, we entered into the Early Termination Agreements with the Derivative Counterparties. Upon settlement, we received approximately $118.2 million in cash and 0.3 million shares of common stock from the Derivative Counterparties and paid $102.2 million in cash to the Derivative Counterparties during the thirteen weeks ended March 31, 2024.
See Note 9 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for additional details regarding the 2025 Notes Partial Repurchase and related Early Termination Agreements.
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, development of new restaurants, remodeling or relocating older restaurants, investments in technology, dividend payments and share repurchases.
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 $270 million to $290 million in 2024. 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 2024, our Board declared a quarterly cash dividend of $0.24 per share, payable on May 31, 2024. 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.
In February 2024, our Board canceled the remaining $57.5 million under our former share repurchase authorization and approved a new $350.0 million share repurchase authorization. The 2024 Share Repurchase Program includes capacity above our normal share repurchases activity to provide flexibility in retiring our 2025 Notes at or prior to their May 2025 maturity. The 2024 Share Repurchase Program will expire on August 13, 2025.
35
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
On March 1, 2024, we entered into the ASR Agreement, in connection with our previously announced 2024 Share Repurchase Program, with Wells Fargo to repurchase $220.0 million of our common stock. Under the ASR Agreement, we made an aggregate payment of $220.0 million to Wells Fargo and received an aggregate initial delivery of approximately 6.5 million shares of common stock on March 4, 2024, representing approximately 80% of the total shares that are estimated to be repurchased under the ASR Agreement based on the price per share of common stock on that date. On April 23, 2024, we received 1.4 million additional shares of common stock from Wells Fargo in connection with the final settlement of the ASR Agreement.
See Note 10 - Stockholders’ Equity of the Notes to Consolidated Financial Statements for additional details regarding the ASR Agreement.
As of March 31, 2024, $130.0 million remained available for repurchase under the 2024 Share Repurchase Program.
Following is a summary of dividends and share repurchases from fiscal year 2023 through March 31, 2024:
| (dollars in thousands) | DIVIDENDS PAID | SHARE REPURCHASES | TOTAL | ||||||||||||||
| Fiscal year 2023 | $ | 83,742 | $ | 70,000 | $ | 153,742 | |||||||||||
| First fiscal quarter 2024 | 21,075 | 188,500 | 209,575 | ||||||||||||||
| Total (1) | $ | 104,817 | $ | 258,500 | $ | 363,317 | |||||||||||
________________
(1)Excludes $44.0 million paid in March 2024 for the repurchase of 1.4 million shares that settled on April 23, 2024 in connection with the ASR Agreement. Also excludes $0.4 million of fees recorded in Additional paid-in capital related to repurchases under the ASR Agreement.
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 31, 2024 | MARCH 26, 2023 | |||||||||
| Net cash provided by operating activities | $ | 73,786 | $ | 189,668 | |||||||
| Net cash used in investing activities | (64,585) | (62,945) | |||||||||
| Net cash provided by (used in) financing activities | 8,758 | (116,987) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (668) | (30) | |||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 17,291 | $ | 9,706 | |||||||
Operating Activities - The decrease in net cash provided by operating activities during the thirteen weeks ended March 31, 2024 as compared to the thirteen weeks ended March 26, 2023 was primarily due to changes in working capital and lower net earnings.
Financing Activities - The net cash provided by financing activities during the thirteen weeks ended March 31, 2024 was due to net draws on the revolving credit facility exceeding cash used to repurchase common stock and net cash received from the Early Termination Agreements. Net cash used in financing activities during thirteen weeks ended March 26, 2023 was primarily due to net repayments on our revolving credit facility.
36
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 31, 2024 | DECEMBER 31, 2023 | |||||||||
| Current assets | $ | 298,172 | $ | 343,314 | |||||||
| Current liabilities | 894,057 | 1,002,335 | |||||||||
| Working capital (deficit) | $ | (595,885) | $ | (659,021) | |||||||
Working capital (deficit) includes: (i) Unearned revenue primarily from unredeemed gift cards of $320.0 million and $381.9 million as of March 31, 2024 and December 31, 2023, respectively, and (ii) current operating lease liabilities of $171.2 million and $175.4 million as of March 31, 2024 and December 31, 2023, 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 is 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 31, 2024 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.
37
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from changes in commodity prices, labor inflation and foreign currency exchange rates and interest rates. We believe that there have been no material changes in our market risk since December 31, 2023. 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 31, 2023 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 Exchange Act, 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 defined in Rule 13a-15(e) under the Exchange Act) 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 31, 2024.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the thirteen weeks ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
38
BLOOMIN’ BRANDS, INC.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
For a description of our legal proceedings, see Note 15 - 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 2023 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 2023 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
In connection with the 2025 Notes Partial Repurchase, which is described in further detail within Note 9 - Convertible Senior Notes of the Notes to the Consolidated Financial Statements, the Company delivered to the Noteholders an aggregate amount of 7,489,712 shares of common stock and $3.3 million in cash, including accrued interest, in exchange for $83.6 million in aggregate principal amount of the Company’s outstanding 2025 Notes. The 2025 Notes Partial Repurchase transaction closed on March 5, 2024.
During the thirteen weeks ended March 31, 2024, certain holders of our 2025 Notes elected to convert $0.5 million in aggregate principal amount of 2025 Notes for a combination of $0.5 million in cash and 26,031 shares of common stock. In connection with this conversion, we exercised our rights under certain convertible note hedge transactions and received a proportionate amount of our common stock during the thirteen weeks ended March 31, 2024.
The Company’s shares of common stock issued in connection with the 2025 Notes Partial Repurchase were not registered under the Securities Act, and were issued in reliance on exemptions from the registration requirements thereof provided by Section 4(a)(2) of the Securities Act in transactions by an issuer not involving a public offering. The Company’s shares of common stock issued in connection with the 2025 Notes conversion were not registered under the Securities Act, and were issued in reliance on exemptions from the registration requirements thereof provided by Sections 4(a)(2) and 3(a)(9) of the Securities Act.
There were no other sales of equity securities during the thirteen weeks ended March 31, 2024 that were not registered under the Securities Act.
Share Repurchases - The following table provides information regarding our purchases of common stock during the thirteen weeks ended March 31, 2024:
| 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) | ||||||||||||||||||||||
| January 1, 2024 through January 28, 2024 | 272,594 | $ | 26.08 | 272,594 | $ | 62,890,980 | ||||||||||||||||||||
| January 29, 2024 through February 25, 2024 | 199,967 | $ | 26.96 | 199,967 | $ | 57,500,724 | ||||||||||||||||||||
| February 26, 2024 through March 31, 2024 | 6,475,350 | $ | 27.18 | 6,475,350 | $ | 130,000,000 | ||||||||||||||||||||
| Total | 6,947,911 | 6,947,911 | ||||||||||||||||||||||||
(1)In February 2024, our Board cancelled the remaining $57.5 million under the former share repurchase authorization and approved a new share repurchase authorization of up to $350.0 million of our outstanding common stock as announced in our press release issued February 23, 2024 (the “2024 Share Repurchase Program”). The 2024 Share Repurchase Program will expire on August 13,
39
2025. The remaining share repurchase authorization under the 2024 Share Repurchase Program as of March 31, 2024 gives effect to the full $220.0 million amount of our March 2024 accelerated share repurchase agreement, notwithstanding that final settlement occurred on April 23, 2024.
Item 5. Other Information
Rule 10b5-1 Trading Plans - During the thirteen weeks ended March 31, 2024, none of the Company’s directors or executive officers adopted terminated
Item 6. Exhibits
| EXHIBIT NUMBER | DESCRIPTION OF EXHIBITS | FILINGS REFERENCED FOR INCORPORATION BY REFERENCE | ||||||||||||
| 10.1 | January 2, 2024, Form 8-K, Exhibit 10.1 | |||||||||||||
| 10.2 | Filed herewith | |||||||||||||
| 10.3 | Filed herewith | |||||||||||||
10.4* | Filed herewith | |||||||||||||
| 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. | ||||||||||||||
40
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 8, 2024 | BLOOMIN’ BRANDS, INC. | |||||||||
| (Registrant) | |||||||||||
| By: /s/ Philip Pace | |||||||||||
| Philip Pace Senior Vice President, Chief Accounting Officer (Principal Accounting Officer) | |||||||||||
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