Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA, UNAUDITED)
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JUNE 28, 2020
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DECEMBER 29, 2019
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ASSETS
|
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Current assets
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Cash and cash equivalents
|
$
|
181,432
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|
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$
|
67,145
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|
|
Restricted cash and cash equivalents
|
1,099
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|
|
—
|
|
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Inventories
|
63,563
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|
|
86,861
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|
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|
|
|
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Other current assets, net
|
81,489
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|
|
186,462
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|
Total current assets
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327,583
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|
|
340,468
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|
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|
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|
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Property, fixtures and equipment, net
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930,032
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|
1,036,077
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Operating lease right-of-use assets
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1,212,916
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1,266,548
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Goodwill
|
271,395
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288,439
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Intangible assets, net
|
463,036
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470,615
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Deferred income tax assets, net
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129,507
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73,426
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Other assets, net
|
99,106
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|
117,110
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Total assets
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$
|
3,433,575
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$
|
3,592,683
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities
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Accounts payable
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$
|
104,808
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$
|
174,877
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Accrued and other current liabilities
|
380,049
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|
391,451
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Unearned revenue
|
293,627
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|
369,282
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Current portion of long-term debt
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32,354
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26,411
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Total current liabilities
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810,838
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|
962,021
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Non-current operating lease liabilities
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1,248,941
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1,279,051
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Deferred income tax liabilities
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3,262
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|
13,777
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Long-term debt, net
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1,178,438
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|
1,022,293
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Other long-term liabilities, net
|
162,898
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|
138,060
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Total liabilities
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3,404,377
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|
3,415,202
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Commitments and contingencies (Note 20)
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Stockholders’ equity
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Bloomin’ Brands stockholders’ equity
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Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of June 28, 2020 and December 29, 2019
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—
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—
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Common stock, $0.01 par value, 475,000,000 shares authorized; 87,533,599 and 86,945,869 shares issued and outstanding as of June 28, 2020 and December 29, 2019, respectively
|
875
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|
869
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Additional paid-in capital
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1,123,613
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1,094,338
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Accumulated deficit
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(886,248)
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(755,089)
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Accumulated other comprehensive loss
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(217,130)
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(169,776)
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Total Bloomin’ Brands stockholders’ equity
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21,110
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|
170,342
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Noncontrolling interests
|
8,088
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|
7,139
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Total stockholders’ equity
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29,198
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|
177,481
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Total liabilities and stockholders’ equity
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$
|
3,433,575
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$
|
3,592,683
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The accompanying notes are an integral part of these consolidated financial statements.
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BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
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THIRTEEN WEEKS ENDED
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TWENTY-SIX WEEKS ENDED
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JUNE 28, 2020
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JUNE 30, 2019
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JUNE 28, 2020
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JUNE 30, 2019
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Revenues
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Restaurant sales
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$
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576,261
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$
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1,005,687
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$
|
1,572,498
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$
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2,117,329
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Franchise and other revenues
|
2,198
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|
16,243
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|
14,298
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32,732
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Total revenues
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578,459
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|
1,021,930
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|
1,586,796
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2,150,061
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Costs and expenses
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Cost of sales
|
180,758
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312,679
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500,451
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664,790
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Labor and other related
|
205,537
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301,213
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514,806
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620,228
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Other restaurant operating
|
177,846
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240,895
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424,401
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491,749
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Depreciation and amortization
|
45,784
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49,788
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|
94,052
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|
99,270
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General and administrative
|
55,487
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71,955
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140,289
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142,544
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Provision for impaired assets and restaurant closings
|
24,959
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|
1,940
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|
66,277
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|
5,526
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Total costs and expenses
|
690,371
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|
978,470
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|
1,740,276
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|
2,024,107
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(Loss) income from operations
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(111,912)
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|
43,460
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(153,480)
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|
125,954
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Loss on modification of debt
|
(237)
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—
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(237)
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—
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Other income (expense), net
|
581
|
|
|
12
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(212)
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|
(156)
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Interest expense, net
|
(16,639)
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|
(12,448)
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(28,347)
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(23,629)
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(Loss) income before (benefit) provision for income taxes
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(128,207)
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|
31,024
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(182,276)
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|
102,169
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(Benefit) provision for income taxes
|
(35,779)
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|
1,215
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|
(55,434)
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|
6,711
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|
Net (loss) income
|
(92,428)
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|
29,809
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|
(126,842)
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|
|
95,458
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Less: net (loss) income attributable to noncontrolling interests
|
(172)
|
|
|
788
|
|
|
25
|
|
|
2,137
|
|
|
Net (loss) income attributable to Bloomin’ Brands
|
(92,256)
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|
29,021
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|
(126,867)
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|
93,321
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Redemption of preferred stock in excess of carrying value
|
—
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|
—
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|
(3,496)
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|
|
—
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|
Net (loss) income attributable to common stockholders
|
$
|
(92,256)
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|
$
|
29,021
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|
$
|
(130,363)
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|
|
$
|
93,321
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|
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|
|
|
|
|
|
|
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|
Net (loss) income
|
$
|
(92,428)
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|
|
$
|
29,809
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|
|
$
|
(126,842)
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|
$
|
95,458
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Other comprehensive (loss) income:
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Foreign currency translation adjustment
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(29,146)
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(8,476)
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(37,107)
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(2,721)
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Unrealized loss on derivatives, net of tax
|
(1,556)
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|
(7,239)
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(14,892)
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|
(11,620)
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Reclassification of adjustment for loss (gain) on derivatives included in Net (loss) income, net of tax
|
2,585
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|
|
130
|
|
|
3,981
|
|
|
(234)
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|
Comprehensive (loss) income
|
(120,545)
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|
|
14,224
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|
(174,860)
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|
80,883
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|
|
Less: comprehensive (loss) income attributable to noncontrolling interests
|
(172)
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|
|
896
|
|
|
(639)
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|
|
2,153
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|
|
Comprehensive (loss) income attributable to Bloomin’ Brands
|
$
|
(120,373)
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|
|
$
|
13,328
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|
|
$
|
(174,221)
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|
|
$
|
78,730
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|
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|
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|
(Loss) earnings per share attributable to common stockholders:
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|
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Basic
|
$
|
(1.05)
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|
$
|
0.32
|
|
|
$
|
(1.49)
|
|
|
$
|
1.03
|
|
|
Diluted
|
$
|
(1.05)
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|
$
|
0.32
|
|
|
$
|
(1.49)
|
|
|
$
|
1.02
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
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Basic
|
87,496
|
|
|
90,194
|
|
|
87,312
|
|
|
90,805
|
|
|
Diluted
|
87,496
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|
|
90,953
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|
|
87,312
|
|
|
91,807
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|
The accompanying notes are an integral part of these consolidated financial statements.
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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BLOOMIN’ BRANDS, INC.
|
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COMMON STOCK
|
|
|
|
ADDITIONAL PAID-IN CAPITAL
|
|
ACCUM-
ULATED DEFICIT
|
|
ACCUMULATED OTHER
COMPREHENSIVE LOSS
|
|
NON-CONTROLLING INTERESTS
|
|
TOTAL
|
|
|
SHARES
|
|
AMOUNT
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 29, 2020
|
87,417
|
|
|
$
|
874
|
|
|
$
|
1,074,081
|
|
|
$
|
(793,992)
|
|
|
$
|
(189,013)
|
|
|
$
|
8,193
|
|
|
$
|
100,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(92,256)
|
|
|
—
|
|
|
(172)
|
|
|
(92,428)
|
|
|
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28,117)
|
|
|
—
|
|
|
(28,117)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
5,071
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued under stock plans (1)
|
117
|
|
|
1
|
|
|
(356)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(355)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27)
|
|
|
(27)
|
|
|
Contributions from noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
94
|
|
|
94
|
|
|
Equity component value of convertible note issuance, net of tax of $650
|
—
|
|
|
—
|
|
|
64,367
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64,367
|
|
|
Sale of common stock warrant
|
—
|
|
|
—
|
|
|
46,690
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,690
|
|
|
Purchase of convertible note hedge
|
—
|
|
|
—
|
|
|
(66,240)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(66,240)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 28, 2020
|
87,534
|
|
|
$
|
875
|
|
|
$
|
1,123,613
|
|
|
$
|
(886,248)
|
|
|
$
|
(217,130)
|
|
|
$
|
8,088
|
|
|
$
|
29,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 29, 2019
|
86,946
|
|
|
$
|
869
|
|
|
$
|
1,094,338
|
|
|
$
|
(755,089)
|
|
|
$
|
(169,776)
|
|
|
$
|
7,139
|
|
|
$
|
177,481
|
|
|
Cumulative-effect from a change in accounting principle, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,292)
|
|
|
—
|
|
|
—
|
|
|
(4,292)
|
|
|
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
(126,867)
|
|
|
—
|
|
|
25
|
|
|
(126,842)
|
|
|
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47,871)
|
|
|
(147)
|
|
|
(48,018)
|
|
|
Cash dividends declared, $0.20 per common share
|
—
|
|
|
—
|
|
|
(17,480)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,480)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
8,360
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,360
|
|
|
Consideration for preferred stock in excess of carrying value, net of tax
|
—
|
|
|
—
|
|
|
(3,496)
|
|
|
—
|
|
|
517
|
|
|
1,261
|
|
|
(1,718)
|
|
|
Common stock issued under stock plans (1)
|
588
|
|
|
6
|
|
|
(2,868)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,862)
|
|
|
Purchase of noncontrolling interests
|
—
|
|
|
—
|
|
|
(58)
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(57)
|
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(338)
|
|
|
(338)
|
|
|
Contributions from noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
147
|
|
|
147
|
|
|
Equity component value of convertible note issuance, net of tax of $650
|
—
|
|
|
—
|
|
|
64,367
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64,367
|
|
|
Sale of common stock warrant
|
—
|
|
|
—
|
|
|
46,690
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,690
|
|
|
Purchase of convertible note hedge
|
—
|
|
|
—
|
|
|
(66,240)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(66,240)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 28, 2020
|
87,534
|
|
|
$
|
875
|
|
|
$
|
1,123,613
|
|
|
$
|
(886,248)
|
|
|
$
|
(217,130)
|
|
|
$
|
8,088
|
|
|
$
|
29,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, March 31, 2019
|
91,647
|
|
|
$
|
916
|
|
|
$
|
1,099,346
|
|
|
$
|
(714,425)
|
|
|
$
|
(141,653)
|
|
|
$
|
8,179
|
|
|
$
|
252,363
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
29,021
|
|
|
—
|
|
|
788
|
|
|
29,809
|
|
|
Other comprehensive (loss) income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,727)
|
|
|
142
|
|
|
(15,585)
|
|
|
Cash dividends declared, $0.10 per common share
|
—
|
|
|
—
|
|
|
(9,227)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,227)
|
|
|
Repurchase and retirement of common stock
|
(5,469)
|
|
|
(55)
|
|
|
—
|
|
|
(106,937)
|
|
|
—
|
|
|
—
|
|
|
(106,992)
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
5,137
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued under stock plans (1)
|
649
|
|
|
7
|
|
|
4,499
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of noncontrolling interests
|
—
|
|
|
—
|
|
|
(157)
|
|
|
—
|
|
|
34
|
|
|
82
|
|
|
(41)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,578)
|
|
|
(1,578)
|
|
|
Contributions from noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
201
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
86,827
|
|
|
$
|
868
|
|
|
$
|
1,099,598
|
|
|
$
|
(792,341)
|
|
|
$
|
(157,346)
|
|
|
$
|
7,814
|
|
|
$
|
158,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 30, 2018
|
91,272
|
|
|
$
|
913
|
|
|
$
|
1,107,582
|
|
|
$
|
(920,010)
|
|
|
$
|
(142,755)
|
|
|
$
|
9,087
|
|
|
$
|
54,817
|
|
|
Cumulative-effect from a change in accounting principle, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
141,285
|
|
|
—
|
|
|
—
|
|
|
141,285
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
93,321
|
|
|
—
|
|
|
2,137
|
|
|
95,458
|
|
|
Other comprehensive (loss) income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,625)
|
|
|
50
|
|
|
(14,575)
|
|
|
Cash dividends declared, $0.20 per common share
|
—
|
|
|
—
|
|
|
(18,367)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,367)
|
|
|
Repurchase and retirement of common stock
|
(5,469)
|
|
|
(55)
|
|
|
—
|
|
|
(106,937)
|
|
|
—
|
|
|
—
|
|
|
(106,992)
|
|
|
Stock-based compensation
|
—
|
|
|
|
|
9,130
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued under stock plans (1)
|
1,024
|
|
|
10
|
|
|
1,410
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of noncontrolling interests
|
—
|
|
|
—
|
|
|
(157)
|
|
|
—
|
|
|
34
|
|
|
82
|
|
|
(41)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,007)
|
|
|
(4,007)
|
|
|
Contributions from noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
465
|
|
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
86,827
|
|
|
$
|
868
|
|
|
$
|
1,099,598
|
|
|
$
|
(792,341)
|
|
|
$
|
(157,346)
|
|
|
$
|
7,814
|
|
|
$
|
158,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)Net of forfeitures and shares withheld for employee taxes.
The accompanying notes are an integral part of these consolidated financial statements.
BLOOMIN’ BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
|
|
|
|
|
Cash flows (used in) provided by operating activities:
|
|
|
|
|
Net (loss) income
|
$
|
(126,842)
|
|
|
$
|
95,458
|
|
|
Adjustments to reconcile Net (loss) income to cash (used in) provided by operating activities:
|
|
|
|
|
Depreciation and amortization
|
94,052
|
|
|
99,270
|
|
|
Amortization of debt discounts and issuance costs
|
2,966
|
|
|
1,255
|
|
|
Amortization of deferred gift card sales commissions
|
11,592
|
|
|
14,089
|
|
|
Provision for impaired assets and restaurant closings
|
66,277
|
|
|
5,526
|
|
|
Non-cash operating lease costs
|
36,230
|
|
|
36,096
|
|
|
Provision for expected credit losses and contingent lease liabilities
|
7,447
|
|
|
—
|
|
|
Inventory obsolescence and spoilage
|
6,413
|
|
|
—
|
|
|
Stock-based and other non-cash compensation expense
|
8,360
|
|
|
12,854
|
|
|
Deferred income tax benefit
|
(58,578)
|
|
|
(945)
|
|
|
|
|
|
|
|
Loss on sale of a business or subsidiary
|
—
|
|
|
214
|
|
|
Loss on modification of debt
|
237
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposal of property, fixtures and equipment
|
1,014
|
|
|
328
|
|
|
Other, net
|
(1,228)
|
|
|
(4,627)
|
|
|
Change in assets and liabilities
|
(51,253)
|
|
|
(127,075)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
(3,313)
|
|
|
132,443
|
|
|
Cash flows used in investing activities:
|
|
|
|
|
Proceeds from disposal of property, fixtures and equipment
|
422
|
|
|
1,717
|
|
|
Proceeds from sale-leaseback transactions, net
|
—
|
|
|
3,052
|
|
|
|
|
|
|
|
Capital expenditures
|
(53,205)
|
|
|
(80,773)
|
|
|
Other investments, net
|
4,782
|
|
|
2,150
|
|
|
Net cash used in investing activities
|
$
|
(48,001)
|
|
|
$
|
(73,854)
|
|
|
|
|
|
|
|
|
(CONTINUED...)
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
|
|
|
|
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt and finance lease obligations
|
$
|
(13,242)
|
|
|
$
|
(14,031)
|
|
|
Proceeds from borrowings on revolving credit facilities, net
|
505,000
|
|
|
408,000
|
|
|
Repayments of borrowings on revolving credit facilities
|
(489,000)
|
|
|
(321,200)
|
|
|
|
|
|
|
|
Financing fees
|
(3,096)
|
|
|
—
|
|
|
Proceeds from issuance of convertible senior notes
|
230,000
|
|
|
—
|
|
|
Proceeds from issuance of warrants
|
46,690
|
|
|
—
|
|
|
Purchase of convertible note hedge
|
(66,240)
|
|
|
—
|
|
|
Issuance costs related to convertible senior notes
|
(8,416)
|
|
|
—
|
|
|
(Payments of taxes) proceeds from share-based compensation, net
|
(2,862)
|
|
|
1,420
|
|
|
Distributions to noncontrolling interests
|
(338)
|
|
|
(4,007)
|
|
|
Contributions from noncontrolling interests
|
147
|
|
|
465
|
|
|
Purchase of limited partnership and noncontrolling interests
|
(57)
|
|
|
(41)
|
|
|
Payments for partner equity plan
|
(9,976)
|
|
|
(8,662)
|
|
|
Repurchase of common stock
|
—
|
|
|
(106,992)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid on common stock
|
(17,480)
|
|
|
(18,367)
|
|
|
Redemption of subsidiary preferred stock
|
(1,475)
|
|
|
—
|
|
|
Net cash provided by (used in) financing activities
|
169,655
|
|
|
(63,415)
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(2,955)
|
|
|
(157)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
115,386
|
|
|
(4,983)
|
|
|
Cash, cash equivalents and restricted cash as of the beginning of the period
|
67,145
|
|
|
71,823
|
|
|
Cash, cash equivalents and restricted cash as of the end of the period
|
$
|
182,531
|
|
|
$
|
66,840
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
Cash paid for interest
|
$
|
23,595
|
|
|
$
|
25,263
|
|
|
Cash paid for income taxes, net of refunds
|
5,287
|
|
|
11,309
|
|
|
Supplemental disclosures of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Leased assets obtained in exchange for new operating lease liabilities
|
$
|
13,549
|
|
|
$
|
33,679
|
|
|
Leased assets obtained in exchange for new finance lease liabilities
|
538
|
|
|
194
|
|
|
Decrease in liabilities from the acquisition of property, fixtures and equipment
|
(9,666)
|
|
|
(5,494)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of the Business and Basis of Presentation
Description of the Business - Bloomin’ Brands (“Bloomin’ Brands” or the “Company”) owns and operates casual, upscale casual and fine dining restaurants. The Company’s restaurant portfolio has four concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Additional Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchise agreements.
Basis of Presentation - The accompanying interim unaudited 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 29, 2019.
Risks and Uncertainties - In March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. In response to COVID-19, the Company temporarily closed all restaurant dining rooms in the U.S. as of March 20, 2020 and shifted operations to provide only take-out and delivery service, resulting in significantly reduced traffic in its restaurants. In early May 2020, the Company began to reopen its restaurant dining rooms with limited seating capacity in compliance with state and local regulations and as of June 28, 2020 had reopened substantially all of its restaurant dining rooms with limited seating capacity. The temporary closure of the Company’s dining rooms and the limitations on seating capacity in its reopened dining rooms have resulted in significantly reduced traffic in the Company’s restaurants. The negative effect of COVID-19 on the Company’s business was significant during the thirteen and twenty-six weeks ended June 28, 2020. See Note 2 - COVID-19 Charges for details regarding the financial impact of the COVID-19 pandemic on the Company’s financial results.
The duration and severity of the COVID-19 pandemic and its long-term impact on the Company’s business are uncertain at this time. Given the daily evolution of the pandemic and the global responses to curb its spread, the Company may be unable to accurately estimate the effects of the pandemic on its results of operations, financial condition, or liquidity for the foreseeable future.
Recently Adopted Financial Accounting Standards - On December 30, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” (“ASU No. 2016-13”), which requires measurement and recognition of losses for financial instruments under the current expected credit loss model versus incurred losses under previous guidance. The Company’s adoption of ASU No. 2016-13 and its related amendments (“the new credit loss standard”) resulted in a cumulative-effect debit adjustment to the beginning balance of Accumulated deficit of $4.3 million, including $4.8 million of contingent lease liabilities related to lease guarantees and $1.0 million of incremental reserve for credit losses, net of the $1.5 million net increase in related deferred tax assets. Measurement processes and related controls have been implemented by the Company to ensure compliance with the new credit loss standard. See Note 18 - Allowance for Expected Credit Losses for additional details regarding the Company’s allowance for expected credit losses.
On December 30, 2019, the Company adopted ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Arrangement That Is a Service Contract,” (“ASU No. 2018-15”), which clarifies the accounting for implementation costs in cloud computing arrangements. Under ASU No. 2018-15, implementation costs incurred by customers in cloud computing arrangements are deferred and recognized over the term of the arrangement similar to internal-use software guidance. The Company contracts with 3rd party information technology providers for various service arrangements including software, platform and information technology infrastructure. The capitalized implementation costs are recorded within Other assets, net on the Company’s Consolidated Balance Sheets and are amortized on a straight-line basis over the term of the hosting arrangements, including reasonably certain renewal periods, within the same financial statement line as the related hosting fees. The amortization of the Company’s current arrangements is recorded in General and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income. The Company’s prospective adoption of ASU No. 2018-15 did not have a material effect on its consolidated financial statements.
In March 2020, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” (“ASU No. 2020-04”). The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. ASU No. 2020-04 was effective beginning March 12, 2020 and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company has elected to apply the hedge accounting expedients related to hedge effectiveness for future LIBOR-indexed cash flows, which enables the Company to continue to apply hedge accounting to hedging relationships impacted by reference rate reform. Application of these expedients allows for presentation of derivatives consistent with the Company’s historical presentation. The Company continues to evaluate the impact of the guidance and may apply other elections, as applicable.
Recently Issued Financial Accounting Standards Not Yet Adopted - Recent accounting guidance not discussed herein is not applicable, did not have, or is not expected to have a material impact to the Company.
Reclassifications - The Company reclassified certain items in the accompanying consolidated financial statements for prior periods to be comparable with the classification for the current period. These reclassifications had no effect on previously reported net income.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
2. COVID-19 Charges
Following is a summary of the charges recorded in connection with the COVID-19 pandemic for the periods indicated below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHARGES
|
|
CONSOLIDATED INCOME STATEMENT CLASSIFICATION
|
|
THIRTEEN WEEKS ENDED
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
JUNE 28, 2020
|
|
JUNE 28, 2020
|
|
Inventory obsolescence and spoilage (1)
|
|
Cost of sales
|
|
$
|
1,163
|
|
|
$
|
7,345
|
|
|
|
|
|
|
|
|
|
|
Compensation for idle employees (2)
|
|
Labor and other related
|
|
11,388
|
|
|
27,574
|
|
|
Other operating charges
|
|
Other restaurant operating
|
|
2,467
|
|
|
2,467
|
|
|
Lease guarantee contingent liabilities (3)
|
|
General and administrative
|
|
—
|
|
|
4,188
|
|
|
Allowance for expected credit losses (4)
|
|
General and administrative
|
|
—
|
|
|
3,334
|
|
|
Other charges
|
|
General and administrative
|
|
1,216
|
|
|
1,789
|
|
|
Right-of-use asset impairment (5)
|
|
Provision for impaired assets and restaurant closings
|
|
5,273
|
|
|
25,757
|
|
|
Fixed asset impairment (5)
|
|
Provision for impaired assets and restaurant closings
|
|
19,611
|
|
|
31,339
|
|
|
Goodwill and other impairment (6)
|
|
Provision for impaired assets and restaurant closings
|
|
611
|
|
|
2,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
41,729
|
|
|
$
|
106,792
|
|
________________
(1)Includes the write-off of value added tax credits in the twenty-six weeks ended June 28, 2020 related to the purchase of inventory by the Company’s Brazil subsidiary.
(2)Represents relief pay for hourly employees impacted by the closure of dining rooms, net of $13.7 million of employee retention tax credits earned during the thirteen and twenty-six weeks ended June 28, 2020.
(3)Represents additional contingent liabilities recorded for lease guarantees related to certain former restaurant locations now operated by franchisees or other third parties.
(4)Includes additional reserves based on the Company’s increase in expected credit losses, primarily related to franchise receivables.
(5)Includes impairments resulting from the remeasurement of assets utilizing projected future cash flows revised for current economic conditions, restructuring charges and the closure of certain restaurants. See Note 4 - Impairments, Exit Costs and Disposals for details regarding COVID-19 Restructuring costs.
(6)Includes impairment of goodwill for the Company’s Hong Kong subsidiary during the twenty-six weeks ended June 28, 2020. See Note 9 - Goodwill and Intangible Assets, Net for details regarding impairment of goodwill.
3. Revenue Recognition
The following table includes the categories of revenue included in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income for the periods indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant sales
|
$
|
576,261
|
|
|
$
|
1,005,687
|
|
|
$
|
1,572,498
|
|
|
$
|
2,117,329
|
|
|
|
|
|
|
|
|
Franchise and other revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise revenue
|
$
|
1,951
|
|
|
$
|
12,792
|
|
|
$
|
11,500
|
|
|
$
|
26,554
|
|
|
|
|
|
|
|
|
Other revenue
|
247
|
|
|
3,451
|
|
|
2,798
|
|
|
6,178
|
|
|
|
|
|
|
|
|
Total Franchise and other revenues
|
$
|
2,198
|
|
|
$
|
16,243
|
|
|
$
|
14,298
|
|
|
$
|
32,732
|
|
|
|
|
|
|
|
|
Total revenues
|
$
|
578,459
|
|
|
$
|
1,021,930
|
|
|
$
|
1,586,796
|
|
|
$
|
2,150,061
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following tables include the disaggregation of Restaurant sales and Franchise revenue, by restaurant concept and major international market, for the periods indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
|
|
|
JUNE 28, 2020
|
|
|
|
JUNE 30, 2019
|
|
|
|
(dollars in thousands)
|
RESTAURANT SALES
|
|
FRANCHISE REVENUE
|
|
RESTAURANT SALES
|
|
FRANCHISE REVENUE
|
|
U.S.
|
|
|
|
|
|
|
|
|
Outback Steakhouse
|
$
|
346,553
|
|
|
$
|
136
|
|
|
$
|
527,049
|
|
|
$
|
9,586
|
|
|
Carrabba’s Italian Grill
|
93,738
|
|
|
7
|
|
|
150,000
|
|
|
626
|
|
|
Bonefish Grill
|
63,744
|
|
|
4
|
|
|
148,065
|
|
|
200
|
|
|
Fleming’s Prime Steakhouse & Wine Bar
|
31,156
|
|
|
—
|
|
|
74,397
|
|
|
—
|
|
|
Other
|
1,576
|
|
|
—
|
|
|
1,105
|
|
|
—
|
|
|
U.S. total
|
$
|
536,767
|
|
|
$
|
147
|
|
|
$
|
900,616
|
|
|
$
|
10,412
|
|
|
International
|
|
|
|
|
|
|
|
|
Outback Steakhouse Brazil
|
$
|
24,003
|
|
|
$
|
—
|
|
|
$
|
83,985
|
|
|
$
|
—
|
|
|
Other (1)
|
15,491
|
|
|
1,804
|
|
|
21,086
|
|
|
2,380
|
|
|
International total
|
$
|
39,494
|
|
|
$
|
1,804
|
|
|
$
|
105,071
|
|
|
$
|
2,380
|
|
|
Total
|
$
|
576,261
|
|
|
$
|
1,951
|
|
|
$
|
1,005,687
|
|
|
$
|
12,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)Includes Restaurant sales for the Company’s Abbraccio concept in Brazil.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
|
|
|
JUNE 28, 2020
|
|
|
|
JUNE 30, 2019
|
|
|
|
(dollars in thousands)
|
RESTAURANT SALES
|
|
FRANCHISE REVENUE
|
|
RESTAURANT SALES
|
|
FRANCHISE REVENUE
|
|
U.S.
|
|
|
|
|
|
|
|
|
Outback Steakhouse
|
$
|
877,238
|
|
|
$
|
6,677
|
|
|
$
|
1,113,820
|
|
|
$
|
20,187
|
|
|
Carrabba’s Italian Grill
|
240,613
|
|
|
468
|
|
|
323,475
|
|
|
797
|
|
|
Bonefish Grill
|
198,816
|
|
|
140
|
|
|
304,499
|
|
|
410
|
|
|
Fleming’s Prime Steakhouse & Wine Bar
|
102,116
|
|
|
—
|
|
|
157,423
|
|
|
—
|
|
|
Other
|
2,873
|
|
|
—
|
|
|
2,212
|
|
|
—
|
|
|
U.S. total
|
$
|
1,421,656
|
|
|
$
|
7,285
|
|
|
$
|
1,901,429
|
|
|
$
|
21,394
|
|
|
International
|
|
|
|
|
|
|
|
|
Outback Steakhouse Brazil
|
$
|
115,593
|
|
|
$
|
—
|
|
|
$
|
173,550
|
|
|
$
|
—
|
|
|
Other (1)
|
35,249
|
|
|
4,215
|
|
|
42,350
|
|
|
5,160
|
|
|
International total
|
$
|
150,842
|
|
|
$
|
4,215
|
|
|
$
|
215,900
|
|
|
$
|
5,160
|
|
|
Total
|
$
|
1,572,498
|
|
|
$
|
11,500
|
|
|
$
|
2,117,329
|
|
|
$
|
26,554
|
|
________________
(1)Includes Restaurant sales for the Company’s Abbraccio concept in Brazil.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table includes 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)
|
JUNE 28, 2020
|
|
DECEMBER 29, 2019
|
|
|
|
|
|
|
|
Other current assets, net
|
|
|
|
|
|
|
|
|
|
|
Deferred gift card sales commissions
|
$
|
13,624
|
|
|
$
|
18,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned revenue
|
|
|
|
|
|
|
|
|
|
|
Deferred gift card revenue
|
$
|
279,973
|
|
|
$
|
358,757
|
|
|
|
|
|
|
|
|
Deferred loyalty revenue (1)
|
13,177
|
|
|
10,034
|
|
|
|
|
|
|
|
|
Deferred franchise fees - current
|
477
|
|
|
491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Unearned revenue
|
$
|
293,627
|
|
|
$
|
369,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities, net
|
|
|
|
|
|
|
|
|
|
|
Deferred franchise fees - non-current
|
$
|
4,278
|
|
|
$
|
4,599
|
|
|
|
|
|
|
|
________________
(1)During the twenty-six weeks ended June 28, 2020, the Company extended the expiration dates of certain awards under its Dine Rewards program to June 30, 2020 in response to the interruption COVID-19 had to the Company’s business.
The following table is a rollforward of deferred gift card sales commissions for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Balance, beginning of period
|
$
|
13,049
|
|
|
$
|
11,195
|
|
|
$
|
18,554
|
|
|
$
|
16,431
|
|
|
Deferred gift card sales commissions amortization
|
(2,502)
|
|
|
(5,682)
|
|
|
(11,592)
|
|
|
(14,089)
|
|
|
Deferred gift card sales commissions capitalization
|
3,142
|
|
|
5,399
|
|
|
7,466
|
|
|
9,232
|
|
|
Other
|
(65)
|
|
|
(424)
|
|
|
(804)
|
|
|
(1,086)
|
|
|
Balance, end of period
|
$
|
13,624
|
|
|
$
|
10,488
|
|
|
$
|
13,624
|
|
|
$
|
10,488
|
|
The following table is a rollforward of unearned gift card revenue for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Balance, beginning of period
|
$
|
277,518
|
|
|
$
|
240,923
|
|
|
$
|
358,757
|
|
|
$
|
333,794
|
|
|
Gift card sales
|
41,649
|
|
|
75,658
|
|
|
100,088
|
|
|
131,130
|
|
|
Gift card redemptions
|
(37,404)
|
|
|
(84,942)
|
|
|
(170,585)
|
|
|
(226,401)
|
|
|
Gift card breakage
|
(1,790)
|
|
|
(4,267)
|
|
|
(8,287)
|
|
|
(11,151)
|
|
|
Balance, end of period
|
$
|
279,973
|
|
|
$
|
227,372
|
|
|
$
|
279,973
|
|
|
$
|
227,372
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
4. Impairments, Exit Costs and Disposals
The components of Provision for impaired assets and restaurant closings are as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Impairment losses
|
|
|
|
|
|
|
|
|
U.S.
|
$
|
23,741
|
|
|
$
|
165
|
|
|
$
|
54,713
|
|
|
$
|
3,629
|
|
|
International (1)
|
296
|
|
|
1,767
|
|
|
3,468
|
|
|
1,785
|
|
|
Corporate
|
(119)
|
|
|
—
|
|
|
6,161
|
|
|
—
|
|
|
Total impairment losses
|
$
|
23,918
|
|
|
$
|
1,932
|
|
|
$
|
64,342
|
|
|
$
|
5,414
|
|
|
Restaurant closure expenses
|
|
|
|
|
|
|
|
|
U.S.
|
$
|
1,041
|
|
|
$
|
8
|
|
|
$
|
1,762
|
|
|
$
|
95
|
|
|
International
|
—
|
|
|
—
|
|
|
173
|
|
|
17
|
|
|
Total restaurant closure expenses
|
$
|
1,041
|
|
|
$
|
8
|
|
|
$
|
1,935
|
|
|
$
|
112
|
|
|
Provision for impaired assets and restaurant closings
|
$
|
24,959
|
|
|
$
|
1,940
|
|
|
$
|
66,277
|
|
|
$
|
5,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)Includes goodwill impairment charges of $2.0 million during the twenty-six weeks ended June 28, 2020. See Note 9 - Goodwill and Intangible Assets, Net for details regarding impairment of goodwill.
During the thirteen and twenty-six weeks ended June 28, 2020, the Company recognized asset impairment and closure charges related to the COVID-19 pandemic of $25.0 million and $56.3 million, respectively, in the U.S. segment (including charges related to the COVID-19 Restructuring discussed below) and $0.3 million and $3.6 million, respectively, in the international segment. The Company also recognized asset impairment charges related to transformational initiatives of $6.3 million during the twenty-six weeks ended June 28, 2020, which were not allocated to its operating segments.
COVID-19 Restructuring - During the thirteen and twenty-six weeks ended June 28, 2020, the Company recognized pre-tax asset impairments and closure costs in connection with the closure of 22 restaurants and from the update of certain cash flow assumptions, including lease renewal considerations (the “COVID-19 Restructuring”). Following is a summary of the COVID-19 Restructuring charges recognized in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the period indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOCATION OF CHARGE IN THE CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
|
|
THIRTEEN AND TWENTY-SIX WEEKS ENDED
|
|
DESCRIPTION
|
|
|
|
JUNE 28, 2020
|
|
Property, fixtures and equipment impairments
|
|
Provision for impaired assets and restaurant closings
|
|
$
|
16,932
|
|
|
Lease right-of-use asset impairments and closing costs
|
|
Provision for impaired assets and restaurant closings
|
|
3,920
|
|
|
Severance and other expenses
|
|
General and administrative
|
|
1,160
|
|
|
|
|
|
|
$
|
22,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The remaining impairment and closing charges during the periods presented resulted primarily from locations identified for remodel, relocation or closure and certain other assets.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Accrued Facility Closure and Other Costs Rollforward - The following table summarizes the Company’s accrual activity related to certain closure and restructuring initiatives, for the period indicated:
|
|
|
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
Balance, beginning of the period
|
$
|
14,542
|
|
|
Additions
|
2,103
|
|
|
Cash payments
|
(1,994)
|
|
|
Accretion
|
566
|
|
|
Adjustments
|
723
|
|
|
Balance, end of the period (1)
|
$
|
15,940
|
|
|
|
|
|
|
|
________________
(1)As of June 28, 2020, the Company had exit-related accruals related to certain closure and restructuring initiatives of $4.8 million recorded in Accrued and other current liabilities and $11.1 million recorded in Non-current operating lease liabilities on its Consolidated Balance Sheet.
Refranchising - During the thirteen weeks ended March 31, 2019, the Company completed the sale of 18 of its existing U.S. Company-owned Carrabba’s Italian Grill locations to an existing franchisee for cash proceeds of $3.6 million, net of certain purchase price adjustments. The Company remains contingently liable on certain real estate lease agreements assigned to the buyer. See Note 20 - Commitments and Contingencies for additional details regarding lease guarantees.
5. (Loss) Earnings Per Share
The following table presents the computation of basic and diluted (loss) earnings per share attributable to common stockholders for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(in thousands, except per share data)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Net (loss) income attributable to Bloomin’ Brands
|
$
|
(92,256)
|
|
|
$
|
29,021
|
|
|
$
|
(126,867)
|
|
|
$
|
93,321
|
|
|
Redemption of preferred stock in excess of carrying value (1)
|
—
|
|
|
—
|
|
|
(3,496)
|
|
|
—
|
|
|
Net (loss) income attributable to common stockholders
|
$
|
(92,256)
|
|
|
$
|
29,021
|
|
|
$
|
(130,363)
|
|
|
$
|
93,321
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
87,496
|
|
|
90,194
|
|
|
87,312
|
|
|
90,805
|
|
|
|
|
|
|
|
|
|
|
|
Effect of diluted securities:
|
|
|
|
|
|
|
|
|
Stock options
|
—
|
|
|
561
|
|
|
—
|
|
|
676
|
|
|
Nonvested restricted stock units
|
—
|
|
|
198
|
|
|
—
|
|
|
278
|
|
|
Nonvested performance-based share units
|
—
|
|
|
—
|
|
|
—
|
|
|
48
|
|
|
Diluted weighted average common shares outstanding
|
87,496
|
|
|
90,953
|
|
|
87,312
|
|
|
91,807
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share attributable to common stockholders
|
$
|
(1.05)
|
|
|
$
|
0.32
|
|
|
$
|
(1.49)
|
|
|
$
|
1.03
|
|
|
Diluted (loss) earnings per share attributable to common stockholders
|
$
|
(1.05)
|
|
|
$
|
0.32
|
|
|
$
|
(1.49)
|
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)Consideration paid in excess of carrying value for the redemption of preferred stock is considered a deemed dividend and, for purposes of calculating earnings per share, reduces net income attributable to common stockholders for the twenty-six weeks ended June 28, 2020. See Note 14 - Stockholders’ Equity for additional details.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Weighted-average securities outstanding not included in the computation of (loss) earnings per share attributable to common stock holders because their effect was antidilutive were as follows, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(shares in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Stock options
|
5,352
|
|
|
4,214
|
|
|
5,009
|
|
|
3,799
|
|
|
Nonvested restricted stock units
|
990
|
|
|
200
|
|
|
821
|
|
|
211
|
|
|
Nonvested performance-based share units
|
624
|
|
|
330
|
|
|
578
|
|
|
295
|
|
|
Convertible senior notes and warrants
|
23,388
|
|
|
—
|
|
|
11,694
|
|
|
—
|
|
There are approximately 19.348 million shares of the Company’s common stock that underlie its senior convertible notes based on the initial conversion rate and full principal amount. The conversion spread on the Company’s convertible senior notes will have a dilutive impact on diluted earnings per share when the average market price of the Company’s common stock for a given period exceeds the conversion price of $11.89 per share of common stock. The Company expects to settle the principal amount of its outstanding convertible senior notes in cash and any excess in shares. As a result, upon conversion of the convertible senior notes, only the amounts in excess of the principal amount are considered in diluted earnings per share under the treasury stock method, if applicable. For the thirteen and twenty-six weeks ended June 28, 2020, the convertible senior notes have been excluded from the computation of diluted earnings per share as the effect would be antidilutive given the Company’s net loss, and also since the conversion price of the convertible senior notes exceeded the average market price of the Company’s common stock. Warrants to purchase approximately 19.348 million shares of the Company’s common shares at $16.64 per share were outstanding as of June 28, 2020 but were excluded from the computation of diluted earnings per share since the warrants’ strike price was greater than the average market price of the Company’s common stock during the period. See Note 12 - Convertible Senior Notes for additional information regarding the Company’s convertible senior notes.
6. Stock-based Compensation Plans
The Company recognized stock-based compensation expense as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Stock options
|
$
|
1,038
|
|
|
$
|
1,413
|
|
|
$
|
1,870
|
|
|
$
|
2,572
|
|
|
Restricted stock units
|
2,340
|
|
|
2,410
|
|
|
4,023
|
|
|
4,159
|
|
|
Performance-based share units
|
1,693
|
|
|
1,254
|
|
|
2,392
|
|
|
2,257
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,071
|
|
|
$
|
5,077
|
|
|
$
|
8,285
|
|
|
$
|
8,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the twenty-six weeks ended June 28, 2020, the Company made grants of 0.1 million stock options, 0.4 million time-based restricted stock units and 0.5 million performance-based share units.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Assumptions used in the Black-Scholes option pricing model and the weighted-average fair value of option awards granted were as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Assumptions:
|
|
|
|
|
Weighted-average risk-free interest rate (1)
|
0.90
|
%
|
|
2.39
|
%
|
|
Dividend yield (2)
|
4.34
|
%
|
|
1.92
|
%
|
|
Expected term (3)
|
5.5 years
|
|
4.7 years
|
|
Weighted-average volatility (4)
|
30.43
|
%
|
|
30.96
|
%
|
|
|
|
|
|
|
Weighted-average grant date fair value per option
|
$
|
3.12
|
|
|
$
|
5.11
|
|
________________
(1)Risk-free interest rate is the U.S. Treasury yield curve in effect as of the grant date for periods within the expected term of the option.
(2)Dividend yield is the level of dividends expected to be paid on the Company’s common stock over the expected term of the option.
(3)Expected term represents the period of time that the options are expected to be outstanding. The Company estimates the expected term based on historical exercise experience for its stock options.
(4)Based on the historical volatility of the Company’s stock.
The following represents unrecognized stock compensation expense and the remaining weighted-average vesting period as of June 28, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNRECOGNIZED COMPENSATION EXPENSE
(dollars in thousands)
|
|
REMAINING WEIGHTED-AVERAGE VESTING PERIOD (in years)
|
|
Stock options
|
$
|
5,085
|
|
|
1.6
|
|
Restricted stock units
|
$
|
15,568
|
|
|
2.1
|
|
Performance-based share units
|
$
|
12,316
|
|
|
2.1
|
|
|
|
|
|
7. Other Current Assets, Net
Other current assets, net, consisted of the following as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
DECEMBER 29, 2019
|
|
Prepaid expenses
|
$
|
21,729
|
|
|
$
|
20,218
|
|
|
Accounts receivable - gift cards, net
|
13,100
|
|
|
104,591
|
|
|
Accounts receivable - vendors, net
|
6,550
|
|
|
13,465
|
|
|
Accounts receivable - franchisees, net
|
545
|
|
|
1,322
|
|
|
Accounts receivable - other, net
|
13,699
|
|
|
21,734
|
|
|
Deferred gift card sales commissions
|
13,624
|
|
|
18,554
|
|
|
Assets held for sale
|
3,786
|
|
|
3,317
|
|
|
Other current assets, net (1)
|
8,456
|
|
|
3,261
|
|
|
|
$
|
81,489
|
|
|
$
|
186,462
|
|
________________
(1)Includes $3.7 million of Company-owned life insurance policies as of June 28, 2020 transferred to Other current assets, net during the twenty-six weeks ended June 28, 2020 for planned payment of deferred compensation obligations.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
8. Property, Fixtures and Equipment, Net
Property, fixtures and equipment, net, consisted of the following as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
DECEMBER 29, 2019
|
|
Land
|
$
|
41,298
|
|
|
$
|
42,570
|
|
|
Buildings
|
1,153,329
|
|
|
1,202,434
|
|
|
Furniture and fixtures
|
447,195
|
|
|
458,169
|
|
|
Equipment
|
617,961
|
|
|
665,815
|
|
|
Construction in progress
|
21,543
|
|
|
24,477
|
|
|
Less: accumulated depreciation
|
(1,351,294)
|
|
|
(1,357,388)
|
|
|
|
$
|
930,032
|
|
|
$
|
1,036,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9. Goodwill and Intangible Assets, Net
Goodwill - The following table is a rollforward of goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
U.S.
|
|
INTERNATIONAL
|
|
CONSOLIDATED
|
|
Balance as of December 29, 2019
|
$
|
170,657
|
|
|
$
|
117,782
|
|
|
$
|
288,439
|
|
|
|
|
|
|
|
|
|
Translation adjustments
|
—
|
|
|
(15,071)
|
|
|
(15,071)
|
|
|
Impairment charges
|
—
|
|
|
(1,973)
|
|
|
(1,973)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 28, 2020
|
$
|
170,657
|
|
|
$
|
100,738
|
|
|
$
|
271,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The COVID-19 outbreak was considered a triggering event in the thirteen weeks ended March 29, 2020, indicating that the carrying amount of goodwill may not be recoverable. As a result, the Company performed a quantitative assessment for all reporting units to determine whether a reporting unit was impaired. Based on this assessment, which utilized a discounted cash flow analysis, the Company recorded full impairment of goodwill related to its Hong Kong reporting unit of $2.0 million, within the international segment, during the thirteen weeks ended March 29, 2020. Impairment was not recorded for any of the Company’s other reporting units as a result the quantitative assessment.
Annual Goodwill and Intangible Asset Impairment Assessment - The Company performs its annual assessment for impairment of goodwill and other indefinite-lived intangible assets as of the first day of its second fiscal quarter. Since the Company performed a quantitative assessment on the last day of the first fiscal quarter in 2020, as described above, the Company utilized the same assumptions and analysis in performing a quantitative annual assessment in its second fiscal quarter and concluded that no additional impairment was required. In 2019, the Company performed a qualitative assessment and did not record any impairment charges.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
10. Other Assets, Net
Other assets, net, consisted of the following as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
DECEMBER 29, 2019
|
|
Company-owned life insurance (1)
|
$
|
49,908
|
|
|
$
|
60,126
|
|
|
Deferred financing fees (2)
|
5,909
|
|
|
4,893
|
|
|
Liquor licenses
|
24,250
|
|
|
24,289
|
|
|
Other assets
|
19,039
|
|
|
27,802
|
|
|
|
$
|
99,106
|
|
|
$
|
117,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)During the twenty-six weeks ended June 28, 2020, the Company reclassified $9.1 million of Company-owned life insurance policies to current assets in anticipation of settlement of such policies to pay deferred compensation obligations.
(2)Net of accumulated amortization of $7.7 million and $6.8 million as of June 28, 2020 and December 29, 2019, respectively.
11. Long-term Debt, Net
Following is a summary of outstanding long-term debt, as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JUNE 28, 2020
|
|
|
|
DECEMBER 29, 2019
|
|
|
|
(dollars in thousands)
|
OUTSTANDING BALANCE
|
|
INTEREST RATE
|
|
OUTSTANDING BALANCE
|
|
INTEREST RATE
|
|
Senior Secured Credit Facility:
|
|
|
|
|
|
|
|
|
Term loan A (1)
|
$
|
437,500
|
|
|
2.90
|
%
|
|
$
|
450,000
|
|
|
3.40
|
%
|
|
Revolving credit facility (1)
|
615,000
|
|
|
2.89
|
%
|
|
599,000
|
|
|
3.44
|
%
|
|
Total Senior Secured Credit Facility
|
$
|
1,052,500
|
|
|
|
|
$
|
1,049,000
|
|
|
|
|
Convertible Senior Notes (2)
|
230,000
|
|
|
5.00
|
%
|
|
—
|
|
|
|
|
Finance lease liabilities
|
1,957
|
|
|
|
|
2,308
|
|
|
|
|
Other
|
—
|
|
|
|
|
50
|
|
|
2.18
|
%
|
|
Less: unamortized debt discount and issuance costs
|
(73,665)
|
|
|
|
|
(2,654)
|
|
|
|
|
Total debt, net
|
$
|
1,210,792
|
|
|
|
|
$
|
1,048,704
|
|
|
|
|
Less: current portion of long-term debt
|
(32,354)
|
|
|
|
|
(26,411)
|
|
|
|
|
Long-term debt, net
|
$
|
1,178,438
|
|
|
|
|
$
|
1,022,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)Interest rate represents the weighted-average interest rate for the respective periods.
(2)See Note 12 - Convertible Senior Notes for details regarding the convertible senior notes and related hedge and warrant transactions.
Amended Credit Agreement - On May 4, 2020, the Company and its wholly-owned subsidiary OSI Restaurant Partners, LLC (“OSI”), as co-borrowers, entered into an amendment to the existing credit agreement, dated November 30, 2017 (the “Amended Credit Agreement”), which provides relief for the financial covenant to maintain a specified quarterly Total Net Leverage Ratio (“TNLR”). Without such amendment, violation of financial covenants under the original credit agreement could have resulted in default. TNLR is the ratio of Consolidated Total Debt (Current portion of long-term debt and Long-term debt, net of cash, excluding the convertible senior notes) to Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization and certain other adjustments as defined in the Amended Credit Agreement).
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The Amended Credit Agreement waives the TNLR requirement for the remainder of fiscal year 2020 and requires a TNLR based on a seasonally annualized calculation of Consolidated EBITDA not to exceed the following thresholds for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUARTERLY PERIOD ENDED
|
|
MAXIMUM RATIO
|
|
|
|
March 28, 2021 (1)
|
|
5.50
|
|
to
|
1.00
|
|
June 27, 2021 (2)
|
|
5.00
|
|
to
|
1.00
|
|
September 26, 2021 and thereafter (3)
|
|
4.50
|
|
to
|
1.00
|
________________
(1)Seasonally annualized Consolidated EBITDA calculated as Consolidated EBITDA for the fiscal quarter ending March 28, 2021 divided by 34.1%.
(2)Seasonally annualized Consolidated EBITDA calculated as Consolidated EBITDA for the two consecutive quarters ending June 27, 2021 divided by 58.5%.
(3)Seasonally annualized Consolidated EBITDA calculated as Consolidated EBITDA for the three consecutive quarters ending September 26, 2021 divided by 77.0%.
The Company is also required to meet a minimum monthly liquidity threshold of $125.0 million through March 28, 2021, calculated as the sum of available capacity under the Company’s revolving credit facility, unrestricted domestic cash on hand and up to $25.0 million of unrestricted cash held by foreign subsidiaries.
Under the Amended Credit Agreement, the Company is limited to $100.0 million of aggregate capital expenditures for the four fiscal quarters through March 28, 2021. The Company is also prohibited from making certain restricted payments, investments or acquisitions until after September 26, 2021, with an exception for investments in the Company’s foreign subsidiaries which are capped at $27.5 million. Repurchasing shares of the Company’s outstanding common stock and paying dividends are also restricted until after September 26, 2021 and the Company is compliant with its financial covenants under the terms of the Amended Credit Agreement.
Interest rates under the Amended Credit Agreement are 275 and 175 basis points above the Eurocurrency Rate and Base Rate, respectively, and letter of credit fees and fees for the daily unused availability under the revolving credit facility are 2.75% and 0.40%, respectively, subject to reversion to rates under the original credit agreement when the Company is in compliance with the TNLR covenant for the test period ending September 26, 2021. The Company is also subject to a 0% Eurocurrency floor under the Amended Credit Agreement.
Deferred Financing Fees - The Company deferred $2.9 million of financing costs incurred in connection with the Amended Credit Agreement. Deferred financing fees of $2.0 million associated with the revolving credit facility portion of the Amended Credit Agreement were recorded in Other assets, net and all other deferred financing fees were recorded in Long-term debt, net.
As of June 28, 2020 and December 29, 2019, the Company was in compliance with its debt covenants.
12. Convertible Senior Notes
Convertible Senior Notes - On May 8, 2020, the Company completed a $200.0 million principal amount private offering of 5.00% convertible senior notes due 2025 and on May 12, 2020, issued an additional $30.0 million principal amount in connection with the option granted to the initial purchasers as part of the offering (collectively, the “2025 Notes”). The 2025 Notes are governed by the terms of an indenture between the Company and Wells Fargo Bank, National Association, as the Trustee. The 2025 Notes will mature on May 1, 2025, unless earlier converted, redeemed or purchased by the Company. The 2025 Notes bear cash interest at an annual rate of 5.00%, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2020.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The 2025 Notes are unsecured obligations and do not contain any financial covenants or restrictions on incurring additional indebtedness, paying dividends or issuing or repurchasing any securities. Events of default under the indenture for the 2025 Notes include, among other things, a default in the payment when due of the principal of, or the redemption price for, any note and a default for 30 days in the payment when due of interest on any note. If an event of default, the principal amount of, and all accrued and unpaid interest on, all of the notes then outstanding will immediately become due and payable.
The initial conversion rate applicable to the 2025 Notes is 84.122 shares of common stock per $1,000 principal amount of 2025 Notes, or a total of approximately 19.348 million shares for the total $230.0 million principal amount. This initial conversion rate is equivalent to an initial conversion price of approximately $11.89 per share. The conversion rate will be subject to adjustment upon the occurrence of certain specified events. Noteholders may convert their notes at their option only in the circumstances described in the indenture.
The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election, based on the applicable conversion rate.
Net proceeds from the 2025 Notes offering were approximately $221.6 million, after deducting the initial purchaser’s discounts and commissions and the Company’s offering expenses. Upon issuance, the principal amount was separated into a liability and an equity component, such that interest expense reflects the Company’s nonconvertible debt interest rate.
The initial carrying value of the 2025 Notes, excluding the discounts upon original issuance and third party offering costs allocated to the liability, and recorded during the thirteen weeks ended June 28, 2020, is as follows (in thousands):
|
|
|
|
|
|
|
|
Liability component
|
|
|
Principal
|
$
|
230,000
|
|
|
Less: Debt discount (1)
|
(66,137)
|
|
|
Less: Debt issuance costs (1)
|
(5,996)
|
|
|
Net carrying amount
|
$
|
157,867
|
|
|
Equity component (2)
|
$
|
64,367
|
|
________________
(1)Debt discount and issuance costs are amortized to interest expense using the effective interest method over the expected life of the 2025 Notes.
(2)Recorded in Additional paid-in capital on the Consolidated Balance Sheet. Includes $2.4 million of equity issuance costs and net deferred tax assets of $0.6 million.
Convertible Note Hedge and Warrant Transactions - In connection with the offering of the 2025 Notes, the Company entered into convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with certain of the initial purchasers of the 2025 Notes and/or their respective affiliates and other financial institutions (in this capacity, the “Hedge Counterparties”). Concurrently with the Company’s entry into the Convertible Note Hedge Transactions, the Company also entered into separate, warrant transactions with the Hedge Counterparties collectively relating to the same number of shares of the Company’s common stock, subject to customary anti-dilution adjustments, and for which the Company received proceeds that partially offset the cost of entering into the Convertible Note Hedge Transactions (the “Warrant Transactions”).
The Convertible Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock that initially underlie the 2025 Notes, and are expected generally to reduce the potential equity dilution, and/or offset any cash payments in excess of the principal amount due, as the case may be, upon conversion of the 2025 Notes. The Warrant Transactions could have a dilutive effect on the Company’s
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
common stock to the extent that the price of its common stock exceeds the strike price of the Warrant Transactions. The strike price will initially be $16.64 per share and is subject to certain adjustments under the terms of the Warrant Transactions.
The portion of the net proceeds to the Company from the offering of the 2025 Notes that was used to pay the premium on the Convertible Note Hedge Transactions, net of the proceeds to the Company from the Warrant Transactions, was approximately $19.6 million. The net costs incurred in connection with the Convertible Note Hedge Transactions and Warrant Transactions were recorded as a reduction to Additional paid-in capital on the Company’s Consolidated Balance Sheet during the thirteen weeks ended June 28, 2020.
As these transactions meet certain accounting criteria, the Convertible Note Hedge Transactions and Warrant Transactions were recorded in stockholders’ equity, not accounted for as derivatives and are not remeasured each reporting period.
13. Other Long-term Liabilities, Net
Other long-term liabilities, net, consisted of the following, as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
DECEMBER 29, 2019
|
|
Accrued insurance liability
|
$
|
32,740
|
|
|
$
|
33,818
|
|
|
Chef and Restaurant Managing Partner deferred compensation obligations
|
38,187
|
|
|
47,831
|
|
|
|
|
|
|
|
Other long-term liabilities (1)
|
91,971
|
|
|
56,411
|
|
|
|
$
|
162,898
|
|
|
$
|
138,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)The increase in Other long-term liabilities during the twenty-six weeks ended June 28, 2020, primarily relates to $16.9 million related to deferred payroll tax liabilities (as allowed for in the Coronavirus, Aid, Relief and Economic Security Act), $8.6 million of additional contingent lease liabilities subsequent to the adoption of ASU No. 2016-13 and $7.3 million of additional interest rate swap liabilities. See Note 19 - Income Taxes, Note 20 - Commitments and Contingencies and Note 15 - Derivative Instruments and Hedging Activities, respectively, for details regarding these increases.
14. Stockholders’ Equity
Dividends - The Company declared and paid dividends per share during fiscal year 2020 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share data)
|
DIVIDENDS PER SHARE
|
|
AMOUNT
|
|
First fiscal quarter
|
$
|
0.20
|
|
|
$
|
17,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Preferred Stock - In connection with the development of its Abbraccio Cucina Italiana (“Abbraccio”) concept in 2015, the Company entered into an investment agreement (the “Abbraccio Investment Agreement”) to sell preferred shares of its Abbraccio subsidiary (“Abbraccio Shares”) to certain investors. The Abbraccio Investment Agreement included a call option for the purchase of the Abbraccio Shares (the “Abbraccio Call Option”).
During the thirteen weeks ended March 29, 2020, the Company exercised the Abbraccio Call Option to purchase all outstanding Abbraccio Shares for $1.0 million and recorded a reduction to Accumulated deficit and an increase in Net loss applicable to common stockholders of $3.5 million for the consideration paid in excess of the Abbraccio Shares’ carrying value.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Accumulated Other Comprehensive Loss (“AOCL”) - Following are the components of AOCL as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
DECEMBER 29, 2019
|
|
Foreign currency translation adjustment
|
$
|
(188,474)
|
|
|
$
|
(152,031)
|
|
|
Unrealized loss on derivatives, net of tax
|
(28,656)
|
|
|
(17,745)
|
|
|
Accumulated other comprehensive loss
|
$
|
(217,130)
|
|
|
$
|
(169,776)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following are the components of Other comprehensive loss attributable to Bloomin’ Brands for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Foreign currency translation adjustment
|
$
|
(29,146)
|
|
|
$
|
(8,584)
|
|
|
$
|
(36,443)
|
|
|
$
|
(2,737)
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on derivatives, net of tax (1)
|
$
|
(1,556)
|
|
|
$
|
(7,239)
|
|
|
$
|
(14,892)
|
|
|
$
|
(11,620)
|
|
|
Reclassification of adjustments for loss (gain) on derivatives included in Net (loss) income, net of tax (2)
|
2,585
|
|
|
130
|
|
|
3,981
|
|
|
(234)
|
|
|
Total unrealized gain (loss) on derivatives, net of tax
|
$
|
1,029
|
|
|
$
|
(7,109)
|
|
|
$
|
(10,911)
|
|
|
$
|
(11,854)
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss attributable to Bloomin’ Brands
|
$
|
(28,117)
|
|
|
$
|
(15,693)
|
|
|
$
|
(47,354)
|
|
|
$
|
(14,591)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)Unrealized loss on derivatives is net of tax of $0.5 million and $2.5 million for the thirteen weeks ended June 28, 2020 and June 30, 2019 and $5.2 million and $4.0 million for the twenty-six weeks ended June 28, 2020 and June 30, 2019, respectively.
(2)Reclassifications of adjustments for loss (gain) on derivatives are net of tax. See Note 15 - Derivative Instruments and Hedging Activities for the tax impact of reclassifications.
15. Derivative Instruments and Hedging Activities
Cash Flow Hedges of Interest Rate Risk - On October 24, 2018 and October 25, 2018, the Company entered into variable-to-fixed interest rate swap agreements with 12 counterparties to hedge a portion of the cash flows of the Company’s variable rate debt. The swap agreements have an aggregate notional amount of $550.0 million and mature on November 30, 2022. Under the terms of the swap agreements, the Company pays a weighted-average fixed rate of 3.04% on the notional amount and receives payments from the counterparty based on the one-month LIBOR rate.
The Company’s swap agreements have been designated and qualify as cash flow hedges, are recognized on its Consolidated Balance Sheets at fair value and are classified based on the instruments’ maturity dates. The Company estimates $16.0 million will be reclassified to interest expense over the next 12 fiscal months. The following table presents the fair value and classification of the Company’s swap agreements, as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
DECEMBER 29, 2019
|
|
CONSOLIDATED BALANCE SHEET CLASSIFICATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps - liability
|
$
|
14,555
|
|
|
$
|
7,174
|
|
|
Accrued and other current liabilities
|
|
Interest rate swaps - liability
|
24,152
|
|
|
16,835
|
|
|
Other long-term liabilities, net
|
|
Total fair value of derivative instruments - liabilities (1)
|
$
|
38,707
|
|
|
$
|
24,009
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
$
|
1,356
|
|
|
$
|
632
|
|
|
Accrued and other current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1)See Note 17 - Fair Value Measurements for fair value discussion of the interest rate swaps.
On May 4, 2020, concurrent with entering into the Amended Credit Agreement, the Company de-designated its interest rate swap hedge relationship and modified its hedge documentation to more closely align with certain terms
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
of the Amended Credit Agreement. On May 6, 2020, the Company re-designated the cash flow hedge relationship for the original $550.0 million notional amount, resulting in no impact to the Company’s consolidated financial statements as a result of the hedge activity.
The following table summarizes the effects of the swap agreements on Net (loss) income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Interest rate swap (expense) income recognized in Interest expense, net
|
$
|
(3,482)
|
|
|
$
|
(175)
|
|
|
$
|
(5,362)
|
|
|
$
|
316
|
|
|
Income tax benefit (expense) recognized in (Benefit) provision for income taxes
|
897
|
|
|
45
|
|
|
1,381
|
|
|
(82)
|
|
|
Total effects of the interest rate swaps on Net (loss) income
|
$
|
(2,585)
|
|
|
$
|
(130)
|
|
|
$
|
(3,981)
|
|
|
$
|
234
|
|
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 June 28, 2020, all counterparties to the interest rate swaps had performed in accordance with their contractual obligations.
The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if the repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on indebtedness.
As of June 28, 2020 and December 29, 2019, 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 $40.5 million and $24.8 million, respectively. As of June 28, 2020 and December 29, 2019, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions as of June 28, 2020 and December 29, 2019, it could have been required to settle its obligations under the agreements at their termination value of $40.5 million and $24.8 million, respectively.
16. Leases
In April 2020, the FASB issued a question and answer document focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19 (the “Lease Modification Q&A”). The Lease Modification Q&A provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease when the total cash flows resulting from the modified lease are substantially similar to the cash flows in the original lease. The Company elected this practical expedient for COVID-19-related rent concessions, primarily rent deferrals or rent abatements, and has elected not to remeasure the related lease liability and right-of-use asset for those leases. Rent deferrals are accrued with no impact to straight-line rent expense. Rent abatements are recognized as a reduction of variable rent expense in the month they occur. This election will continue while these concessions are in effect.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
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
|
|
JUNE 28, 2020
|
|
DECEMBER 29, 2019
|
|
Operating lease right-of-use assets
|
Operating lease right-of-use assets
|
|
$
|
1,212,916
|
|
|
$
|
1,266,548
|
|
|
Finance lease right-of-use assets (1)
|
Property, fixtures and equipment, net
|
|
1,729
|
|
|
2,036
|
|
|
Total lease assets, net
|
|
|
$
|
1,214,645
|
|
|
$
|
1,268,584
|
|
|
|
|
|
|
|
|
|
Current operating lease liabilities (2)
|
Accrued and other current liabilities
|
|
$
|
177,236
|
|
|
$
|
171,866
|
|
|
Current finance lease liabilities
|
Current portion of long-term debt
|
|
1,104
|
|
|
1,361
|
|
|
Non-current operating lease liabilities
|
Non-current operating lease liabilities
|
|
1,248,941
|
|
|
1,279,051
|
|
|
Non-current finance lease liabilities
|
Long-term debt, net
|
|
853
|
|
|
947
|
|
|
Total lease liabilities
|
|
|
$
|
1,428,134
|
|
|
$
|
1,453,225
|
|
________________
(1)Net of accumulated amortization of $1.8 million and $1.3 million as of June 28, 2020 and December 29, 2019, respectively.
(2)Excludes COVID-19-related deferred rent accruals of $18.3 million as of June 28, 2020 and accrued contingent percentage rent of $2.7 million and $2.4 million, as of June 28, 2020 and December 29, 2019, 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 INCOME STATEMENT CLASSIFICATION
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Operating leases (1)
|
Other restaurant operating
|
|
$
|
42,776
|
|
|
$
|
45,079
|
|
|
$
|
88,658
|
|
|
$
|
90,312
|
|
|
Variable lease cost
|
Other restaurant operating
|
|
(1,046)
|
|
|
746
|
|
|
74
|
|
|
1,565
|
|
|
Finance leases
|
|
|
|
|
|
|
|
|
|
|
Amortization of leased assets
|
Depreciation and amortization
|
|
315
|
|
|
360
|
|
|
657
|
|
|
684
|
|
|
Interest on lease liabilities
|
Interest expense, net
|
|
37
|
|
|
72
|
|
|
83
|
|
|
145
|
|
|
Sublease revenue (2)
|
Franchise and other revenues
|
|
(109)
|
|
|
(1,792)
|
|
|
(1,786)
|
|
|
(3,106)
|
|
|
Lease costs, net
|
|
|
$
|
41,973
|
|
|
$
|
44,465
|
|
|
$
|
87,686
|
|
|
$
|
89,600
|
|
________________
(1)Excludes rent expense for office facilities and Company-owned closed or subleased properties of $3.3 million and $3.7 million for the thirteen weeks ended June 28, 2020 and June 30, 2019, respectively, and $6.9 million and $7.2 million for the twenty-six weeks ended June 28, 2020 and June 30, 2019, respectively, which is included in General and administrative expense. Also excludes certain supply chain related rent expense of $0.3 million for the thirteen weeks ended June 28, 2020 and June 30, 2019 and $0.6 million for the twenty-six weeks ended June 28, 2020 and June 30, 2019, which is included in Cost of sales.
(2)Excludes rental income from Company-owned properties of $0.1 million and $0.7 million for the thirteen weeks ended June 28, 2020 and June 30, 2019, respectively, and $0.3 million and $1.4 million for the twenty-six weeks ended June 28, 2020 and June 30, 2019, respectively.
The following table is a summary of other impacts to the Company’s Consolidated Financial Statements related to its leases for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
75,688
|
|
|
$
|
95,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
17. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JUNE 28, 2020
|
|
|
|
|
|
|
|
DECEMBER 29, 2019
|
|
|
|
|
|
|
|
(dollars in thousands)
|
TOTAL
|
|
LEVEL 1
|
|
LEVEL 2
|
|
|
|
TOTAL
|
|
LEVEL 1
|
|
LEVEL 2
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income funds
|
$
|
6,567
|
|
|
$
|
6,567
|
|
|
$
|
—
|
|
|
|
|
$
|
1,037
|
|
|
$
|
1,037
|
|
|
$
|
—
|
|
|
|
|
Money market funds
|
9,595
|
|
|
9,595
|
|
|
—
|
|
|
|
|
12,752
|
|
|
12,752
|
|
|
—
|
|
|
|
|
Restricted cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
1,099
|
|
|
1,099
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset recurring fair value measurements
|
$
|
17,261
|
|
|
$
|
17,261
|
|
|
$
|
—
|
|
|
|
|
$
|
13,789
|
|
|
$
|
13,789
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued and other current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments - interest rate swaps
|
$
|
14,555
|
|
|
$
|
—
|
|
|
$
|
14,555
|
|
|
|
|
$
|
7,174
|
|
|
$
|
—
|
|
|
$
|
7,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments - interest rate swaps
|
24,152
|
|
|
—
|
|
|
24,152
|
|
|
|
|
16,835
|
|
|
—
|
|
|
16,835
|
|
|
|
|
Total liability recurring fair value measurements
|
$
|
38,707
|
|
|
$
|
—
|
|
|
$
|
38,707
|
|
|
|
|
$
|
24,009
|
|
|
$
|
—
|
|
|
$
|
24,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of each class of financial instrument is determined based on the following:
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL INSTRUMENT
|
|
METHODS AND ASSUMPTIONS
|
|
Fixed income funds and Money market funds
|
|
Carrying value approximates fair value because maturities are less than three months.
|
|
Derivative instruments
|
|
The Company’s derivative instruments include interest rate swaps. Fair value measurements are based on the contractual terms of the derivatives and use observable market-based inputs. The interest rate swaps are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest rate curves and credit spreads. The Company also considers its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. As of June 28, 2020 and December 29, 2019, the Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Fair Value Measurements on a Nonrecurring Basis - Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to property, fixtures and equipment, operating lease right-of-use assets, goodwill and other intangible assets, which are remeasured when carrying value exceeds fair value. Carrying value after impairment approximates fair value. The following table summarizes the Company’s assets measured at fair value by hierarchy level on a nonrecurring basis, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
|
|
|
JUNE 28, 2020
|
|
|
|
JUNE 30, 2019
|
|
|
|
(dollars in thousands)
|
CARRYING VALUE
|
|
TOTAL IMPAIRMENT
|
|
CARRYING VALUE
|
|
TOTAL IMPAIRMENT
|
|
|
|
|
|
|
|
|
|
|
Operating lease right-of-use assets (1)
|
$
|
32,404
|
|
|
$
|
4,028
|
|
|
$
|
114
|
|
|
$
|
1,770
|
|
|
Property, fixtures and equipment (2)
|
9,992
|
|
|
19,595
|
|
|
466
|
|
|
162
|
|
|
Goodwill and other assets (3)
|
748
|
|
|
295
|
|
|
—
|
|
|
—
|
|
|
|
$
|
43,144
|
|
|
$
|
23,918
|
|
|
$
|
580
|
|
|
$
|
1,932
|
|
|
|
|
|
|
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
|
|
|
JUNE 28, 2020
|
|
|
|
JUNE 30, 2019
|
|
|
|
(dollars in thousands)
|
CARRYING VALUE
|
|
TOTAL IMPAIRMENT
|
|
CARRYING VALUE
|
|
TOTAL IMPAIRMENT
|
|
Assets held for sale (4)
|
$
|
1,182
|
|
|
$
|
75
|
|
|
$
|
2,149
|
|
|
$
|
215
|
|
|
Operating lease right-of-use assets (1)
|
85,537
|
|
|
23,591
|
|
|
2,356
|
|
|
2,366
|
|
|
Property, fixtures and equipment (2)
|
28,390
|
|
|
37,993
|
|
|
956
|
|
|
2,833
|
|
|
Goodwill and other assets (3)
|
748
|
|
|
2,683
|
|
|
—
|
|
|
—
|
|
|
|
$
|
115,857
|
|
|
$
|
64,342
|
|
|
$
|
5,461
|
|
|
$
|
5,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1)Carrying values measured using Level 2 inputs to estimate fair value totaled $0.2 million during the twenty-six weeks ended June 30, 2019. All other assets were valued using Level 3 inputs. Third-party market appraisals (Level 2) and discounted cash flow models (Level 3) were used to estimate fair value.
(2)Carrying values measured using Level 2 inputs to estimate fair value totaled $0.5 million and $2.2 million during the thirteen and twenty-six weeks ended June 28, 2020, respectively. All other assets were valued using Level 3 inputs. Third-party market appraisals (Level 2) and discounted cash flow models (Level 3) were used to estimate fair value.
(3)All assets measured using the quoted market value of comparable assets (Level 2).
(4)Assets generally measured using third-party market appraisals or executed sales contracts (Level 2).
See Note 4 - Impairments, Exit Costs and Disposals for information regarding impairment charges resulting from the fair value measurement performed on a nonrecurring basis during the thirteen and twenty-six weeks ended June 28, 2020. Projected future cash flows, including discount rate and growth rate assumptions, are derived from current economic conditions, expectations of management and projected trends of current operating results. As a result, the Company has determined that the majority of the inputs used to value its long-lived assets held and used are unobservable inputs that fall within Level 3 of the fair value hierarchy.
In assessment of impairment for operating locations, the Company determined the fair values of individual operating locations using an income approach, which required discounting projected future cash flows. When determining the stream of projected future cash flows associated with an individual operating location, management made assumptions, including highest and best use and inputs from restaurant operations, where necessary, and about key variables including the following unobservable inputs: revenue growth rates, controllable and uncontrollable expenses, and asset residual values. In order to calculate the present value of those future cash flows, the Company discounted cash flow estimates at its weighted-average cost of capital applicable to the country in which the measured assets reside.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table presents quantitative information related to certain unobservable inputs used in the Company’s Level 3 fair value measurements of Operating lease right-of-use assets and Property, fixtures and equipment for the impairment losses incurred during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
UNOBSERVABLE INPUTS
|
|
JUNE 28, 2020
|
|
|
|
JUNE 28, 2020
|
|
|
|
Weighted-average cost of capital
|
|
10.9%
|
|
|
|
10.4%
|
to
|
10.9%
|
|
Long-term growth rate
|
|
1.5%
|
to
|
2.0%
|
|
1.5%
|
to
|
2.0%
|
|
|
|
|
|
|
|
|
|
|
Interim Disclosures about Fair Value of Financial Instruments - The Company’s non-derivative financial instruments consist of cash equivalents, accounts receivable, accounts payable and current and long-term debt. The fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts reported on its Consolidated Balance Sheets due to their short duration.
Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The following table includes the carrying value and fair value of the Company’s debt by hierarchy level as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JUNE 28, 2020
|
|
|
|
|
|
DECEMBER 29, 2019
|
|
|
|
|
|
|
CARRYING VALUE
|
|
FAIR VALUE LEVEL 2
|
|
|
|
CARRYING VALUE
|
|
FAIR VALUE LEVEL 2
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured Credit Facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loan A
|
$
|
437,500
|
|
|
$
|
424,375
|
|
|
|
|
$
|
450,000
|
|
|
$
|
450,563
|
|
|
|
|
Revolving credit facility
|
$
|
615,000
|
|
|
$
|
577,319
|
|
|
|
|
$
|
599,000
|
|
|
$
|
599,000
|
|
|
|
|
Convertible Senior Notes
|
$
|
230,000
|
|
|
$
|
246,100
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18. Allowance for Expected Credit Losses
The following is a rollforward of the allowance for trade receivable expected credit losses for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
TWENTY-SIX WEEKS ENDED
|
|
(dollars in thousands)
|
|
JUNE 28, 2020
|
|
JUNE 28, 2020
|
|
Allowance for credit losses, beginning of period
|
|
$
|
4,551
|
|
|
$
|
199
|
|
|
Adjustment for adoption of ASU No. 2016-13
|
|
—
|
|
|
1,018
|
|
|
Provision for expected credit losses
|
|
15
|
|
|
3,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses, end of period
|
|
$
|
4,566
|
|
|
$
|
4,566
|
|
The Company is exposed to credit losses through its trade accounts receivable consisting primarily of amounts due for gift card, credit card, vendor, franchise and other receivables. Gift card, vendor and other receivables consist primarily of amounts due from gift card resellers and vendor rebates. Amounts due from franchisees consist of initial franchise fees, royalty income, and advertising fees. See Note 7 - Other Current Assets, Net for disclosure of trades receivables by category as of June 28, 2020 and December 29, 2019. Domestic credit card receivables are recorded within Cash and cash equivalents based on their short duration and reasonably assured settlement.
The Company evaluates the collectability of trade receivables based on historical loss experience and risk pool and records periodic adjustments for factors such as deterioration of economic conditions, specific customer circumstances and changes in the aging of accounts receivable balances. For risk pools where there was no established loss history, S&P speculative-grade default rates are utilized to calculate an estimated loss rate. Losses are charged off in the period in which they are determined to be uncollectable.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The financial condition of the Company’s franchisees is largely dependent on the underlying business trends of its brands and market conditions within the casual dining restaurant industry. In March 2020, the Company fully reserved substantially all of its outstanding franchise receivables in response to the economic impact of the COVID-19 pandemic. See Note 2 - COVID-19 Charges for details regarding the impact of the COVID-19 pandemic on the Company’s financial results.
The Company is also exposed to credit losses from off-balance sheet lease guarantees primarily related to the divestiture of certain formerly Company-owned restaurant sites. See Note 20 - Commitments and Contingencies for details regarding these lease guarantees.
19. Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
(Loss) income before (benefit) provision for income taxes
|
$
|
(128,207)
|
|
|
$
|
31,024
|
|
|
$
|
(182,276)
|
|
|
$
|
102,169
|
|
|
(Benefit) provision for income taxes
|
$
|
(35,779)
|
|
|
$
|
1,215
|
|
|
$
|
(55,434)
|
|
|
$
|
6,711
|
|
|
Effective income tax rate
|
27.9
|
%
|
|
3.9
|
%
|
|
30.4
|
%
|
|
6.6
|
%
|
On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). Accordingly, the applicable provisions of the CARES Act have been reflected in the Company’s tax provision for the thirteen and twenty-six weeks ended June 28, 2020. The CARES Act, among other items, includes U.S. corporate tax provisions related to the deferment of employer social security payments, employee retention credits, net operating loss (“NOL”) carryback periods, alternative minimum tax credits, modifications to interest deduction limitations and technical corrections on tax depreciation methods for qualified improvement property (“QIP”).
The effective income tax rate for the thirteen and twenty-six weeks ended June 28, 2020 increased by 24.0 and 23.8 percentage points as compared to the thirteen and twenty-six weeks ended June 30, 2019. These increases were primarily due to the benefit of the tax credits for FICA taxes on certain employees’ tips and the forecasted 2020 pre-tax book loss.
As of December 29, 2019, the Company had $128.6 million in general business tax credits carryforwards, which have a 20-year carryforward period and are utilized on a first-in, first-out basis. The Company expects to increase its general business credit carryforwards in 2020 by approximately $30 million to $40 million as a result of additional credits generated in 2020 and the application of the QIP technical correction enacted as part of the CARES Act. The Company currently expects to utilize these tax credit carryforwards within a 10 year period. However, the Company’s ability to utilize these tax credits could be adversely impacted by, among other items, a future “ownership change” as defined under Section 382 of the Internal Revenue Code.
The Company has a blended federal and state statutory rate of approximately 26%. The effective income tax rate for the thirteen and twenty-six weeks ended June 28, 2020 was higher than the statutory rate primarily due to the benefit of tax credits for FICA taxes on certain employees’ tips.
Deferred Taxes - During the twenty-six weeks ended June 28, 2020, Deferred income tax assets, net increased by $56.1 million primarily as a result of losses incurred during the period and tax credits for FICA taxes on certain employees’ tips.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
20. Commitments and Contingencies
Litigation and Other Matters - The Company had $4.2 million and $3.0 million of liabilities recorded for various legal matters as of June 28, 2020 and December 29, 2019, respectively.
The Company is subject to legal proceedings, claims and liabilities, such as liquor liability, slip and fall cases, wage-and-hour and other employment-related litigation, which arise in the ordinary course of business and are generally covered by insurance if they exceed specified retention or deductible amounts. In the opinion of management, the amount of ultimate liability with respect to those actions will not have a material adverse impact on the Company’s financial position or results of operations and cash flows.
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 June 28, 2020, the undiscounted payments that the Company could be required to make in the event of non-payment by the primary lessees was approximately $32.6 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of June 28, 2020 was approximately $20.5 million. In the event of default, the indemnity clauses in the Company’s purchase and sale agreements govern its ability to pursue and recover damages incurred.
In March 2020, the Company recorded $4.2 million of additional contingent lease liability in response to the economic impact of the COVID-19 pandemic. As of June 28, 2020, the Company’s recorded contingent lease liability was $9.6 million. See Note 2 - COVID-19 Charges for details regarding the impact of the COVID-19 pandemic on the Company’s financial results.
21. Segment Reporting
The Company considers its restaurant concepts and international markets as operating segments, which reflects how the Company manages its business, reviews operating performance and allocates resources. Resources are allocated and performance is assessed by the Company’s Chief Executive Officer (“CEO”), whom the Company has determined to be its Chief Operating Decision Maker (“CODM”). The Company aggregates its operating segments into two reportable segments, U.S. and international. The U.S. segment includes all restaurants operating in the U.S. while restaurants operating outside the U.S. are included in the international segment. The following is a summary of reporting segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REPORTABLE SEGMENT (1)
|
|
CONCEPT
|
|
GEOGRAPHIC LOCATION
|
|
U.S.
|
|
Outback Steakhouse
|
|
United States of America
|
|
|
|
Carrabba’s Italian Grill
|
|
|
|
|
|
Bonefish Grill
|
|
|
|
|
|
Fleming’s Prime Steakhouse & Wine Bar
|
|
|
|
International
|
|
Outback Steakhouse
|
|
Brazil, Hong Kong/China
|
|
|
|
Carrabba’s Italian Grill (Abbraccio)
|
|
Brazil
|
_________________
(1)Includes franchise locations.
Segment accounting policies are the same as those described in Note 2 - Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 29, 2019. Revenues for all segments include only transactions with customers and exclude intersegment revenues. Excluded from Income from operations for U.S. and international are certain legal and corporate costs not directly related to the performance of the segments, most stock-based compensation expenses and certain bonus expenses.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
During the thirteen and twenty-six weeks ended June 28, 2020, the Company recorded $2.4 million and $24.6 million, respectively, of pre-tax charges as a part of transformational initiatives implemented in connection with its previously announced review of strategic alternatives. These costs were primarily recorded within General and administrative expense and Provision for impaired assets and restaurant closings and were not allocated to the Company’s segments since the Company’s CODM does not consider the impact of transformational initiatives when assessing segment performance.
The following table is a summary of Total revenue by segment, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Total revenues
|
|
|
|
|
|
|
|
|
U.S.
|
$
|
537,080
|
|
|
$
|
914,219
|
|
|
$
|
1,431,577
|
|
|
$
|
1,928,726
|
|
|
International
|
41,379
|
|
|
107,711
|
|
|
155,219
|
|
|
221,335
|
|
|
Total revenues
|
$
|
578,459
|
|
|
$
|
1,021,930
|
|
|
$
|
1,586,796
|
|
|
$
|
2,150,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table is a reconciliation of Segment (loss) income from operations to (Loss) income before (benefit) provision for income taxes, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Segment (loss) income from operations
|
|
|
|
|
|
|
|
|
U.S.
|
$
|
(62,921)
|
|
|
$
|
78,814
|
|
|
$
|
(51,542)
|
|
|
$
|
191,849
|
|
|
International
|
(17,070)
|
|
|
6,909
|
|
|
(10,283)
|
|
|
20,629
|
|
|
Total segment (loss) income from operations
|
(79,991)
|
|
|
85,723
|
|
|
(61,825)
|
|
|
212,478
|
|
|
Unallocated corporate operating expense
|
(31,921)
|
|
|
(42,263)
|
|
|
(91,655)
|
|
|
(86,524)
|
|
|
Total (loss) income from operations
|
(111,912)
|
|
|
43,460
|
|
|
(153,480)
|
|
|
125,954
|
|
|
Loss on modification of debt
|
(237)
|
|
|
—
|
|
|
(237)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
581
|
|
|
12
|
|
|
(212)
|
|
|
(156)
|
|
|
Interest expense, net
|
(16,639)
|
|
|
(12,448)
|
|
|
(28,347)
|
|
|
(23,629)
|
|
|
(Loss) income before (benefit) provision for income taxes
|
$
|
(128,207)
|
|
|
$
|
31,024
|
|
|
$
|
(182,276)
|
|
|
$
|
102,169
|
|
The following table is a summary of Depreciation and amortization expense by segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
U.S.
|
$
|
37,308
|
|
|
$
|
38,916
|
|
|
$
|
74,948
|
|
|
$
|
77,702
|
|
|
International
|
5,884
|
|
|
6,749
|
|
|
12,642
|
|
|
13,205
|
|
|
Corporate
|
2,592
|
|
|
4,123
|
|
|
6,462
|
|
|
8,363
|
|
|
Total depreciation and amortization
|
$
|
45,784
|
|
|
$
|
49,788
|
|
|
$
|
94,052
|
|
|
$
|
99,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes. Unless the context otherwise indicates, as used in this report, the term the “Company,” “we,” “us,” “our” and other similar terms mean Bloomin’ Brands, Inc. and its subsidiaries.
Cautionary Statement
This Quarterly Report on Form 10-Q (the “Report”) includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “feels,” “seeks,” “forecasts,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could” or “would” or, in each case, their negative or other variations or comparable terminology, although not all forward-looking statements are accompanied by such terms. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially from statements made or suggested by forward-looking statements include, but are not limited to, the following:
(i)The severity, extent and duration of the COVID-19 pandemic, its impacts on our business and results of operations, financial condition and liquidity, including any adverse impact on our stock price and on the other factors listed below, and the responses of domestic and foreign federal, state and local governments to the pandemic;
(ii)Consumer reactions to public health and food safety issues;
(iii)Our ability to compete in the highly competitive restaurant industry with many well-established competitors and new market entrants;
(iv)Minimum wage increases and additional mandated employee benefits;
(v)Economic conditions and their effects on consumer confidence and discretionary spending, consumer traffic, the cost and availability of credit and interest rates;
(vi)Our ability to protect our information technology systems from interruption or security breach, including cyber security threats, and to protect consumer data and personal employee information;
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;
(viii)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;
(ix)Our ability to effectively respond to changes in patterns of consumer traffic, consumer tastes and dietary habits;
(x)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;
(xi)The effects of international economic, political and social conditions and legal systems on our foreign operations and on foreign currency exchange rates;
(xii)Our ability to preserve and grow the reputation and value of our brands, particularly in light of changes in consumer engagement with social media platforms;
(xiii)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;
(xiv)Seasonal and periodic fluctuations in our results and the effects of significant adverse weather conditions and other disasters or unforeseen events;
(xv)The effects of our substantial leverage and restrictive covenants in our various credit facilities on our ability to raise additional capital to fund our operations, to make capital expenditures to invest in new or renovate restaurants and to react to changes in the economy or our industry, and our exposure to interest rate risk in connection with our variable-rate debt; and
(xvi)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 29, 2019.
In light of these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Overview
We are one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. As of June 28, 2020, we owned and operated 1,151 restaurants and franchised 309 restaurants across 47 states, Puerto Rico, Guam and 20 countries. We have four founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar.
Executive Summary
Our financial results for the thirteen weeks ended June 28, 2020 (“second quarter of 2020”) include the following:
•A decrease in Total revenues of 43.4% in the second quarter of 2020, as compared to the second quarter of 2019, primarily due to: (i) significantly lower comparable restaurant sales principally attributable to the COVID-19 pandemic, (ii) the net impact of restaurant closures and openings, (iii) lower franchise revenue and (iv) the effect of foreign currency translation of the Brazil Real relative to the U.S. dollar.
•Loss from operations of $(111.9) million in the second quarter of 2020, as compared to income from operations of $43.5 million in the second quarter of 2019, was primarily due to: (i) significantly lower comparable restaurant sales and costs incurred in connection with the COVID-19 pandemic, including asset impairment charges, incremental delivery related costs and relief pay (net of tax credits) and (ii) higher labor costs and commodity inflation. These decreases are partially offset by: (i) reduced operating, advertising and utilities expense, (ii) cost savings from our restructuring and transformation initiatives and (iii) cost savings from waste reduction initiatives.
Recent Developments - COVID-19
In response to the COVID-19 pandemic, governmental authorities took dramatic action in an effort to slow the spread of the disease. Along with many other restaurant businesses across the country, we temporarily limited our services in the U.S. to carry-out and delivery only beginning March 20, 2020. In early May 2020, we began to reopen our restaurant dining rooms with limited seating capacity in compliance with state and local regulations and as of June 28, 2020 we had reopened substantially all of our restaurant dining rooms with limited seating capacity. The temporary closure of our dining rooms and the limitations on seating capacity in our reopened dining rooms has resulted in significantly reduced traffic in our restaurants.
Recently, there has been a significant increase in reported COVID-19 cases in certain states, including Florida and Texas. This has resulted in some local governments responding by taking additional measures, including implementing a further reduction of in-restaurant capacity in certain locations. Although this is a developing situation, to this point these capacity reductions have had a minimal impact on overall sales trends.
When we are able to increase the capacity of our reopened dining rooms, it is uncertain whether customer traffic will return to levels prior to the outbreak of COVID-19. Even if consumer demand recovers, governmental restrictions may again limit the capacity of our dining rooms or services we may provide in the future. As a result, we expect our results for the foreseeable future will be significantly adversely impacted.
In response to the pandemic, we have tightly managed expenses while taking steps to secure our liquidity position. See the subsection below entitled “Liquidity and Capital Resources” for further details.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Key Performance Indicators
Key measures that we use in evaluating our restaurants and assessing our business include the following:
•Average restaurant unit volumes—average sales (excluding gift card breakage) per restaurant to measure changes in customer traffic, pricing and development of the brand;
•Comparable restaurant sales—year-over-year comparison of sales volumes (excluding gift card breakage) for Company-owned restaurants that are open 18 months or more in order to remove the impact of new restaurant openings in comparing the operations of existing restaurants;
•System-wide sales—total restaurant sales volume for all Company-owned and franchise restaurants, regardless of ownership, to interpret the overall health of our brands;
•Restaurant-level operating margin, (Loss) 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 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 Cost of sales, Labor and other related and Other restaurant operating (including advertising expenses) represent, in each case as such items are reflected in our Consolidated Statements of Operations. The following categories of our revenue and operating expenses are not included in restaurant-level operating margin because we do not consider them reflective of operating performance at the restaurant-level within a period:
(i)Franchise and other revenues which are earned primarily from franchise royalties and other non-food and beverage revenue streams, such as rental and sublease income.
(ii)Depreciation and amortization which, although substantially all of which is related to restaurant-level assets, represent historical sunk costs rather than cash outlays for the restaurants.
(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.
(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 Statement of Operations. 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 (Loss) 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 (loss) income from operations, Adjusted net (loss) income and Adjusted diluted (loss) earnings per share—non-GAAP financial measures utilized to evaluate our operating performance.
We believe that our use of non-GAAP financial measures permits investors to assess the operating performance of our business relative to our performance based on U.S. GAAP results and relative to other companies within the restaurant industry by isolating the effects of certain items that may vary from period to period without correlation to core operating performance or that vary widely among similar companies.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. We believe that the disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and Board of Directors evaluate our operating performance, allocate resources and administer employee incentive plans; and
•Customer satisfaction scores—measurement of our customers’ experiences in a variety of key areas.
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):
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
U.S.:
|
|
|
|
|
Outback Steakhouse
|
|
|
|
|
Company-owned
|
567
|
|
|
579
|
|
|
Franchised
|
141
|
|
|
148
|
|
|
Total
|
708
|
|
|
727
|
|
|
Carrabba’s Italian Grill
|
|
|
|
|
Company-owned
|
199
|
|
|
205
|
|
|
Franchised
|
21
|
|
|
21
|
|
|
Total
|
220
|
|
|
226
|
|
|
Bonefish Grill
|
|
|
|
|
Company-owned
|
182
|
|
|
190
|
|
|
Franchised
|
7
|
|
|
7
|
|
|
Total
|
189
|
|
|
197
|
|
|
Fleming’s Prime Steakhouse and Wine Bar
|
|
|
|
|
Company-owned
|
65
|
|
|
69
|
|
|
Other
|
|
|
|
|
Company-owned
|
5
|
|
|
3
|
|
|
U.S. total
|
1,187
|
|
|
1,222
|
|
|
International:
|
|
|
|
|
Company-owned
|
|
|
|
|
Outback Steakhouse—Brazil (1)
|
103
|
|
|
97
|
|
|
|
|
|
|
|
Other (2)
|
30
|
|
|
27
|
|
|
Franchised
|
|
|
|
|
Outback Steakhouse—South Korea (2)
|
85
|
|
|
70
|
|
|
Other (3)
|
55
|
|
|
51
|
|
|
International total
|
273
|
|
|
245
|
|
|
System-wide total
|
1,460
|
|
|
1,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1)The restaurant counts for Brazil are reported as of May 31, 2020 and 2019, respectively, to correspond with the balance sheet dates of this subsidiary.
(2)As of June 30, 2019, we had 11 international “dark kitchen” locations that offer delivery and carryout only. One of these locations was included within Company-owned Other and 10 were included in Franchised Outback Steakhouse - South Korea.
(3)Includes two and one fast-casual Aussie Grill locations as of June 28, 2020 and June 30, 2019, respectively.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Results of Operations
The following table sets forth, for the periods indicated, the percentages of certain items in our Consolidated Statements of Operations in relation to Total revenues or Restaurant sales, as indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Revenues
|
|
|
|
|
|
|
|
|
Restaurant sales
|
99.6
|
%
|
|
98.4
|
%
|
|
99.1
|
%
|
|
98.5
|
%
|
|
Franchise and other revenues
|
0.4
|
|
|
1.6
|
|
|
0.9
|
|
|
1.5
|
|
|
Total revenues
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
Cost of sales (1)
|
31.4
|
|
|
31.1
|
|
|
31.8
|
|
|
31.4
|
|
|
Labor and other related (1)
|
35.7
|
|
|
30.0
|
|
|
32.7
|
|
|
29.3
|
|
|
Other restaurant operating (1)
|
30.9
|
|
|
24.0
|
|
|
27.0
|
|
|
23.2
|
|
|
Depreciation and amortization
|
7.9
|
|
|
4.9
|
|
|
5.9
|
|
|
4.6
|
|
|
General and administrative
|
9.6
|
|
|
7.0
|
|
|
8.8
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for impaired assets and restaurant closings
|
4.3
|
|
|
0.2
|
|
|
4.2
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
119.3
|
|
|
95.7
|
|
|
109.7
|
|
|
94.1
|
|
|
(Loss) income from operations
|
(19.3)
|
|
|
4.3
|
|
|
(9.7)
|
|
|
5.9
|
|
|
Loss on modification of debt
|
(*)
|
|
—
|
|
|
(*)
|
|
—
|
|
|
Other income (expense), net
|
0.1
|
|
|
*
|
|
(*)
|
|
(*)
|
|
Interest expense, net
|
(3.0)
|
|
|
(1.3)
|
|
|
(1.8)
|
|
|
(1.1)
|
|
|
(Loss) income before (benefit) provision for income taxes
|
(22.2)
|
|
|
3.0
|
|
|
(11.5)
|
|
|
4.8
|
|
|
(Benefit) provision for income taxes
|
(6.2)
|
|
|
0.1
|
|
|
(3.5)
|
|
|
0.4
|
|
|
Net (loss) income
|
(16.0)
|
|
|
2.9
|
|
|
(8.0)
|
|
|
4.4
|
|
|
Less: net (loss) income attributable to noncontrolling interests
|
(0.1)
|
|
|
0.1
|
|
|
*
|
|
0.1
|
|
|
Net (loss) income attributable to Bloomin’ Brands
|
(15.9)
|
%
|
|
2.8
|
%
|
|
(8.0)
|
%
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)As a percentage of Restaurant sales.
* Less than 1/10th of one percent of Total revenues.
RESTAURANT SALES
Following is a summary of the change in Restaurant sales for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions)
|
THIRTEEN WEEKS ENDED
|
|
TWENTY-SIX WEEKS ENDED
|
|
For the periods ended June 30, 2019
|
$
|
1,005.7
|
|
|
$
|
2,117.3
|
|
|
Change from:
|
|
|
|
|
Comparable restaurant sales
|
(408.1)
|
|
|
(505.3)
|
|
|
Restaurant closures
|
(15.2)
|
|
|
(23.8)
|
|
|
Effect of foreign currency translation
|
(8.3)
|
|
|
(18.7)
|
|
|
Divestiture of restaurants through refranchising transactions
|
—
|
|
|
(11.2)
|
|
|
Restaurant openings
|
2.2
|
|
|
14.2
|
|
|
For the periods ended June 28, 2020
|
$
|
576.3
|
|
|
$
|
1,572.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in Restaurant sales during the thirteen weeks ended June 28, 2020 was primarily due to: (i) significantly lower comparable restaurant sales principally attributable to the COVID-19 pandemic, (ii) the closure of 43 restaurants since March 31, 2019 and (iii) the effect of foreign currency translation of the Brazilian Real
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
relative to the U.S. dollar. The decrease in Restaurant sales was partially offset by the opening of 26 new restaurants not included in our comparable restaurant sales base.
The decrease in Restaurant sales during the twenty-six weeks ended June 28, 2020 was primarily due to: (i) significantly lower comparable restaurant sales principally attributable to the COVID-19 pandemic, (ii) the closure of 49 restaurants since December 30, 2018, (iii) the effect of foreign currency translation of the Brazilian Real relative to the U.S. dollar and (iv) domestic refranchising. The decrease in restaurant sales was partially offset by the opening of 28 new restaurants not included in our comparable restaurant sales base.
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
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Average restaurant unit volumes (weekly):
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
Outback Steakhouse
|
$
|
46,278
|
|
|
$
|
69,497
|
|
|
$
|
58,201
|
|
|
$
|
73,344
|
|
|
Carrabba’s Italian Grill
|
$
|
35,394
|
|
|
$
|
56,285
|
|
|
$
|
45,395
|
|
|
$
|
58,188
|
|
|
Bonefish Grill
|
$
|
25,866
|
|
|
$
|
60,018
|
|
|
$
|
40,292
|
|
|
$
|
61,833
|
|
|
Fleming’s Prime Steakhouse & Wine Bar
|
$
|
36,649
|
|
|
$
|
81,754
|
|
|
$
|
59,027
|
|
|
$
|
86,496
|
|
|
International
|
|
|
|
|
|
|
|
|
Outback Steakhouse - Brazil (1)
|
$
|
17,731
|
|
|
$
|
66,829
|
|
|
$
|
43,512
|
|
|
$
|
70,754
|
|
|
|
|
|
|
|
|
|
|
|
Operating weeks:
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
Outback Steakhouse
|
7,466
|
|
|
7,538
|
|
|
14,965
|
|
|
15,065
|
|
|
Carrabba’s Italian Grill
|
2,648
|
|
|
2,665
|
|
|
5,300
|
|
|
5,559
|
|
|
Bonefish Grill
|
2,464
|
|
|
2,467
|
|
|
4,934
|
|
|
4,925
|
|
|
Fleming’s Prime Steakhouse & Wine Bar
|
850
|
|
|
910
|
|
|
1,730
|
|
|
1,820
|
|
|
International
|
|
|
|
|
|
|
|
|
Outback Steakhouse - Brazil
|
1,354
|
|
|
1,257
|
|
|
2,657
|
|
|
2,453
|
|
|
|
|
|
|
|
|
|
|
____________________
(1)Translated at average exchange rates of 5.15 and 3.91 for the thirteen weeks ended June 28, 2020 and June 30, 2019, respectively, and 4.39 and 3.85 for the twenty-six weeks ended June 28, 2020 and June 30, 2019, respectively.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Comparable Restaurant Sales, Traffic and Average Check Per Person Increases (Decreases)
Following is a summary of comparable restaurant sales, traffic and average check per person increases (decreases), for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Year over year percentage change:
|
|
|
|
|
|
|
|
|
Comparable restaurant sales (stores open 18 months or more):
|
|
|
|
|
|
|
|
|
U.S. (1)
|
|
|
|
|
|
|
|
|
Outback Steakhouse
|
(32.9)
|
%
|
|
1.3
|
%
|
|
(20.6)
|
%
|
|
2.4
|
%
|
|
Carrabba’s Italian Grill
|
(36.7)
|
%
|
|
(1.6)
|
%
|
|
(22.2)
|
%
|
|
(0.6)
|
%
|
|
Bonefish Grill
|
(56.8)
|
%
|
|
0.1
|
%
|
|
(34.7)
|
%
|
|
1.0
|
%
|
|
Fleming’s Prime Steakhouse & Wine Bar
|
(56.3)
|
%
|
|
1.6
|
%
|
|
(33.6)
|
%
|
|
1.1
|
%
|
|
Combined U.S.
|
(39.4)
|
%
|
|
0.6
|
%
|
|
(24.2)
|
%
|
|
1.6
|
%
|
|
International
|
|
|
|
|
|
|
|
|
Outback Steakhouse - Brazil (2)
|
(63.9)
|
%
|
|
3.5
|
%
|
|
(27.4)
|
%
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traffic:
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
Outback Steakhouse
|
(31.0)
|
%
|
|
(1.6)
|
%
|
|
(20.2)
|
%
|
|
(1.0)
|
%
|
|
Carrabba’s Italian Grill
|
(28.1)
|
%
|
|
(1.4)
|
%
|
|
(16.7)
|
%
|
|
(1.4)
|
%
|
|
Bonefish Grill (3)
|
(29.8)
|
%
|
|
(1.5)
|
%
|
|
(20.6)
|
%
|
|
(1.7)
|
%
|
|
Fleming’s Prime Steakhouse & Wine Bar
|
(43.5)
|
%
|
|
3.6
|
%
|
|
(28.0)
|
%
|
|
0.8
|
%
|
|
Combined U.S. (3)
|
(30.6)
|
%
|
|
(1.4)
|
%
|
|
(19.8)
|
%
|
|
(1.2)
|
%
|
|
International
|
|
|
|
|
|
|
|
|
Outback Steakhouse - Brazil
|
(48.5)
|
%
|
|
1.2
|
%
|
|
(19.0)
|
%
|
|
(0.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average check per person (4):
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
Outback Steakhouse
|
(1.9)
|
%
|
|
2.9
|
%
|
|
(0.4)
|
%
|
|
3.4
|
%
|
|
Carrabba’s Italian Grill
|
(8.6)
|
%
|
|
(0.2)
|
%
|
|
(5.5)
|
%
|
|
0.8
|
%
|
|
Bonefish Grill
|
(27.0)
|
%
|
|
1.6
|
%
|
|
(14.1)
|
%
|
|
2.7
|
%
|
|
Fleming’s Prime Steakhouse & Wine Bar
|
(12.8)
|
%
|
|
(2.0)
|
%
|
|
(5.6)
|
%
|
|
0.3
|
%
|
|
Combined U.S.
|
(8.8)
|
%
|
|
2.0
|
%
|
|
(4.4)
|
%
|
|
2.8
|
%
|
|
International
|
|
|
|
|
|
|
|
|
Outback Steakhouse - Brazil
|
(15.2)
|
%
|
|
2.1
|
%
|
|
(8.4)
|
%
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
____________________
(1)Relocated restaurants closed more than 60 days are excluded from comparable restaurant sales until at least 18 months after reopening.
(2)Excludes the effect of fluctuations in foreign currency rates. Includes trading day impact from calendar period reporting.
(3)In Q2 2020, Bonefish Grill replaced guest count with entrée count to measure restaurant traffic. Bonefish Grill and Combined U.S. traffic for the twenty-six weeks ended June 28, 2020 were calculated using the entrée count methodology for Bonefish Grill as if the new methodology was in effect at the start of the fiscal year, which would have increased traffic for Bonefish Grill and Combined U.S. for the thirteen weekend ended March 29, 2020 by 3.1% and 0.5%, respectively.
(4)Average check per person includes the impact of menu pricing changes, product mix and discounts.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Franchise and other revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
(dollars in millions)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
|
|
Franchise revenues (1)
|
$
|
2.0
|
|
|
$
|
12.8
|
|
|
$
|
11.5
|
|
|
$
|
26.6
|
|
|
|
|
Other revenues
|
0.2
|
|
|
3.4
|
|
|
2.8
|
|
|
6.1
|
|
|
|
|
Franchise and other revenues
|
$
|
2.2
|
|
|
$
|
16.2
|
|
|
$
|
14.3
|
|
|
$
|
32.7
|
|
|
|
____________________
(1)Represents franchise royalties, advertising fees and initial franchise fees.
COSTS AND EXPENSES
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
(dollars in millions)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
Cost of sales
|
$
|
180.8
|
|
|
$
|
312.7
|
|
|
|
|
$
|
500.5
|
|
|
$
|
664.8
|
|
|
|
|
% of Restaurant sales
|
31.4
|
%
|
|
31.1
|
%
|
|
0.3
|
%
|
|
31.8
|
%
|
|
31.4
|
%
|
|
0.4
|
%
|
Cost of sales increased as a percentage of Restaurant sales during the thirteen weeks ended June 28, 2020 as compared to the thirteen weeks ended June 30, 2019 primarily due to 0.7% from commodity cost inflation and 0.5% related to a reduction in rebates from our vendors, partially offset by a decrease as a percentage of Restaurant sales of 0.7% from cost savings attributable to waste reduction initiatives and 0.2% from increases in average check per person.
Cost of sales increased as a percentage of Restaurant sales during the twenty-six weeks ended June 28, 2020 as compared to the twenty-six weeks ended June 30, 2019 primarily due to 0.4% from commodity cost inflation and 0.2% related to a reduction in rebates from our vendors, partially offset by a decrease as a percentage of Restaurant sales of 0.4% from increases in average check per person.
Labor and other related expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
(dollars in millions)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
Labor and other related
|
$
|
205.5
|
|
|
$
|
301.2
|
|
|
|
|
$
|
514.8
|
|
|
$
|
620.2
|
|
|
|
|
% of Restaurant sales
|
35.7
|
%
|
|
30.0
|
%
|
|
5.7
|
%
|
|
32.7
|
%
|
|
29.3
|
%
|
|
3.4
|
%
|
Labor and other related expenses increased as a percentage of Restaurant sales during the thirteen weeks ended June 28, 2020 as compared to the thirteen weeks ended June 30, 2019 primarily due to: (i) 3.5% from decreased restaurant sales, (ii) 1.9% from relief pay primarily for hourly employees impacted by the closure of dining rooms due to COVID-19, offset by employee retention tax credits and (iii) 0.9% from higher labor costs. These increases were partially offset by a decrease as a percentage of Restaurant sales of 0.4% due to reduced workers’ compensation expense.
Labor and other related expenses increased as a percentage of Restaurant sales during the twenty-six weeks ended June 28, 2020 as compared to the twenty-six weeks ended June 30, 2019 primarily due to: (i) 1.7% from relief pay primarily for hourly employees impacted by the closure of dining rooms due to COVID-19, offset by employee retention tax credits, (ii) 1.6% from decreased restaurant sales and (iii) 0.4% from higher labor costs.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Other restaurant operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
(dollars in millions)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
Other restaurant operating
|
$
|
177.8
|
|
|
$
|
240.9
|
|
|
|
|
$
|
424.4
|
|
|
$
|
491.7
|
|
|
|
|
% of Restaurant sales
|
30.9
|
%
|
|
24.0
|
%
|
|
6.9
|
%
|
|
27.0
|
%
|
|
23.2
|
%
|
|
3.8
|
%
|
Other restaurant operating expenses increased as a percentage of Restaurant sales during the thirteen weeks ended June 28, 2020 as compared to the thirteen weeks ended June 30, 2019 primarily due to the impact of shifting to an off-premise only operational model in March 2020 including, 7.2% from decreased restaurant sales and 3.8% from incremental delivery related costs. These increases were partially offset by a decrease as a percentage of Restaurant sales of 3.8% from reduced operating, advertising and utilities expense and 0.3% from the write-off of straight-line rent in connection with the COVID-19 Restructuring.
Other restaurant operating expenses increased as a percentage of Restaurant sales during the twenty-six weeks ended June 28, 2020 as compared to the twenty-six weeks ended June 30, 2019 primarily due to the impact of shifting to an off-premise only operational model in March 2020 including, 3.2% from decreased restaurant sales and 1.9% from incremental delivery related costs. These increases were partially offset by a decrease as a percentage of Restaurant sales of 1.1% from reduced utilities, advertising and operating expense.
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
(dollars in millions)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
Depreciation and amortization
|
$
|
45.8
|
|
|
$
|
49.8
|
|
|
$
|
(4.0)
|
|
|
$
|
94.1
|
|
|
$
|
99.3
|
|
|
$
|
(5.2)
|
|
Depreciation and amortization expense decreased during the thirteen and twenty-six weeks ended June 28, 2020 as compared to the thirteen and twenty-six weeks ended June 30, 2019 primarily due to impairment related to COVID-19 and transformational initiatives and the effect of foreign currency translation.
General and administrative
General and administrative expense includes salaries and benefits, management incentive programs, related payroll tax and benefits, other employee-related costs and professional services. Following is a summary of the change in General and administrative expense for the periods indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions)
|
THIRTEEN WEEKS ENDED
|
|
TWENTY-SIX WEEKS ENDED
|
|
For the periods ended June 30, 2019
|
$
|
72.0
|
|
|
$
|
142.5
|
|
|
Change from:
|
|
|
|
|
Travel and entertainment (1)
|
(7.9)
|
|
|
(7.5)
|
|
|
Compensation, benefits and payroll tax
|
(4.5)
|
|
|
(6.0)
|
|
|
Legal and professional fees
|
(2.5)
|
|
|
(4.0)
|
|
|
Deferred compensation
|
(2.4)
|
|
|
(3.5)
|
|
|
Expected credit losses and contingent lease liabilities
|
(0.1)
|
|
|
7.4
|
|
|
Transformational costs (2)
|
2.1
|
|
|
7.5
|
|
|
Severance
|
0.5
|
|
|
5.3
|
|
|
Other
|
(1.7)
|
|
|
(1.4)
|
|
|
For the periods ended June 28, 2020
|
$
|
55.5
|
|
|
$
|
140.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_________________
(1)Includes decreases of $5.4 million and $3.7 million for managing partner conference costs, net of cancellation fees during the thirteen and twenty-six weeks ended June 28, 2020, respectively.
(2)Primarily consist of consulting fees incurred in connection with our transformation initiative.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Provision for impaired assets and restaurant closings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
(dollars in millions)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
Provision for impaired assets and restaurant closings
|
$
|
25.0
|
|
|
$
|
1.9
|
|
|
$
|
23.1
|
|
|
$
|
66.3
|
|
|
$
|
5.5
|
|
|
$
|
60.8
|
|
During the thirteen and twenty-six weeks ended June 28, 2020, we recognized asset impairment and closure charges related to the COVID-19 pandemic of $25.0 million and $56.3 million, respectively, in the U.S. segment (including the COVID-19 Restructuring) and $0.3 million and $3.6 million, respectively, in the international segment. We also recognized asset impairment charges related to transformational initiatives of $6.3 million during the twenty-six weeks ended June 28, 2020, which were not allocated to our operating segments.
COVID-19 Restructuring - During the thirteen and twenty-six weeks ended June 28, 2020, we recognized pre-tax asset impairments and closure costs of $20.9 million in connection with the closure of 22 restaurants and from the update of certain cash flow assumptions, including lease renewal considerations.
The remaining impairment and closing charges during the periods presented resulted primarily from locations identified for remodel, relocation or closure and certain other assets.
See Note 4 - Impairments, Exit Costs and Disposals of the Notes to Consolidated Financial Statements for further information.
(Loss) income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
(dollars in millions)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
(Loss) income from operations
|
$
|
(111.9)
|
|
|
$
|
43.5
|
|
|
$
|
(155.4)
|
|
|
$
|
(153.5)
|
|
|
$
|
126.0
|
|
|
$
|
(279.5)
|
|
|
% of Total revenues
|
(19.3)
|
%
|
|
4.3
|
%
|
|
(23.6)
|
%
|
|
(9.7)
|
%
|
|
5.9
|
%
|
|
(15.6)
|
%
|
Loss from operations generated during the thirteen weeks ended June 28, 2020, as compared to income from operations during the thirteen weeks ended June 30, 2019 was primarily due to: (i) significantly lower comparable restaurant sales and costs incurred in connection with the COVID-19 pandemic, including asset impairment charges, incremental delivery related costs and relief pay (net of tax credits) and (ii) higher labor costs and commodity inflation. These losses were partially offset by: (i) reduced operating, advertising and utilities expense, (ii) cost savings from our restructuring and transformation initiatives and (iii) cost savings from waste reduction initiatives.
Loss from operations generated during the twenty-six weeks ended June 28, 2020, as compared to income from operations during the twenty-six weeks ended June 30, 2019 was primarily due to: (i) significantly lower comparable restaurant sales and costs incurred in connection with the COVID-19 pandemic, including asset impairment charges, incremental delivery related costs and relief pay (net of tax credits) and (ii) higher labor costs and commodity inflation. These losses were partially offset by reduced utilities, advertising and operating expense.
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
(dollars in millions)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
Interest expense, net
|
$
|
16.6
|
|
|
$
|
12.4
|
|
|
$
|
4.2
|
|
|
$
|
28.3
|
|
|
$
|
23.6
|
|
|
$
|
4.7
|
|
The increase in Interest expense, net for the thirteen and twenty-six weeks ended June 28, 2020 as compared to the thirteen and twenty-six weeks ended June 30, 2019 was primarily due to higher interest expense from issuance of
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
our convertible senior notes and additional draws on our revolving credit facility, partially offset by lower interest rates on our unhedged variable rate debt balances.
(Benefit) provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
27.9
|
%
|
|
3.9
|
%
|
|
24.0
|
%
|
|
30.4
|
%
|
|
6.6
|
%
|
|
23.8
|
%
|
The effective income tax rate for the thirteen and twenty-six weeks ended June 28, 2020 increased by 24.0 and 23.8 percentage points as compared to the thirteen and twenty-six weeks ended June 30, 2019. These increases were primarily due to the benefit of the tax credits for FICA taxes on certain employees’ tips and the forecasted 2020 pre-tax book loss.
SEGMENT PERFORMANCE
We consider our restaurant concepts and international markets as operating segments, which reflects how we manage our business, review operating performance and allocate resources. Resources are allocated and performance is assessed by our CEO, whom we have determined to be our CODM. We aggregate our operating segments into two reportable segments, U.S. and international. The U.S. segment includes all restaurants operating in the U.S. while restaurants operating outside the U.S. are included in the international segment. The following is a summary of reporting segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REPORTABLE SEGMENT (1)
|
|
CONCEPT
|
|
GEOGRAPHIC LOCATION
|
|
U.S.
|
|
Outback Steakhouse
|
|
United States of America
|
|
|
|
Carrabba’s Italian Grill
|
|
|
|
|
|
Bonefish Grill
|
|
|
|
|
|
Fleming’s Prime Steakhouse & Wine Bar
|
|
|
|
International
|
|
Outback Steakhouse
|
|
Brazil, Hong Kong/China
|
|
|
|
Carrabba’s Italian Grill (Abbraccio)
|
|
Brazil
|
_________________
(1)Includes franchise locations.
Revenues for both segments include only transactions with customers and exclude intersegment revenues. Excluded from (Loss) income from operations for U.S. and international are certain legal and corporate costs not directly related to the performance of the segments, most stock-based compensation expenses and certain bonus expenses.
During the thirteen and twenty-six weeks ended June 28, 2020, we recorded $2.4 million and $24.6 million, respectively, of pre-tax charges as a part of transformational initiatives implemented in connection with our previously announced review of strategic alternatives. These costs were primarily recorded within General and administrative expense and Provision for impaired assets and restaurant closings and were not allocated to our segments since our CODM does not consider the impact of transformational initiatives when assessing segment performance.
Refer to Note 21 - Segment Reporting of the Notes to Consolidated Financial Statements for a reconciliation of segment (loss) income from operations to the consolidated operating results.
Restaurant-level operating margin is widely regarded in the industry as a useful metric to evaluate restaurant-level operating efficiency and performance of ongoing restaurant-level operations, and we use it for these purposes, overall and particularly within our two segments. See the Overview-Key Performance Indicators section of
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Management’s Discussion and Analysis for additional details regarding the calculation of restaurant-level operating margin.
U.S. Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Revenues
|
|
|
|
|
|
|
|
|
Restaurant sales
|
$
|
536,767
|
|
|
$
|
900,616
|
|
|
$
|
1,421,656
|
|
|
$
|
1,901,429
|
|
|
Franchise and other revenues
|
313
|
|
|
13,603
|
|
|
9,921
|
|
|
27,297
|
|
|
Total revenues
|
$
|
537,080
|
|
|
$
|
914,219
|
|
|
$
|
1,431,577
|
|
|
$
|
1,928,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant-level operating margin
|
3.2
|
%
|
|
14.5
|
%
|
|
8.4
|
%
|
|
15.6
|
%
|
|
(Loss) income from operations
|
$
|
(62,921)
|
|
|
$
|
78,814
|
|
|
$
|
(51,542)
|
|
|
$
|
191,849
|
|
|
Operating (loss) income margin
|
(11.7)
|
%
|
|
8.6
|
%
|
|
(3.6)
|
%
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant sales
Following is a summary of the change in U.S. segment Restaurant sales for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions)
|
THIRTEEN WEEKS ENDED
|
|
TWENTY-SIX WEEKS ENDED
|
|
For the periods ended June 30, 2019
|
$
|
900.6
|
|
|
$
|
1,901.4
|
|
|
Change from:
|
|
|
|
|
Comparable restaurant sales
|
(348.7)
|
|
|
(449.7)
|
|
|
Restaurant closures
|
(14.7)
|
|
|
(22.2)
|
|
|
Restaurant openings
|
(0.4)
|
|
|
3.4
|
|
|
Divestiture of restaurants through refranchising transactions
|
—
|
|
|
(11.2)
|
|
|
For the periods ended June 28, 2020
|
$
|
536.8
|
|
|
$
|
1,421.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in U.S. Restaurant sales during the thirteen weeks ended June 28, 2020 was primarily due to significantly lower comparable restaurant sales principally attributable to the COVID-19 pandemic and the closure of 34 restaurants since March 31, 2019.
The decrease in U.S. Restaurant sales during the twenty-six weeks ended June 28, 2020 was primarily due to: (i) significantly lower comparable restaurant sales principally attributable to the COVID-19 pandemic, (ii) the closure of 40 restaurants since December 30, 2018 and (iii) refranchising of certain Company-owned restaurants. The decrease in Restaurant sales was partially offset by the opening of eight new restaurants not included in our comparable restaurant sales base.
Income from operations
The decrease in U.S. income from operations generated during the thirteen weeks ended June 28, 2020 as compared to the thirteen weeks ended June 30, 2019, was primarily due to: (i) significantly lower comparable restaurant sales and costs incurred in connection with the COVID-19 pandemic, including asset impairment charges, incremental delivery related costs and relief pay (net of tax credits) and (ii) higher labor costs and commodity inflation. These losses were partially offset by: (i) reduced operating, advertising and utilities expense and (ii) cost savings from waste reduction initiatives.
The decrease in U.S. income from operations generated during the twenty-six weeks ended June 28, 2020, as compared to income from operations during the twenty-six weeks ended June 30, 2019 was primarily due to: (i) significantly lower comparable restaurant sales and costs incurred in connection with the COVID-19 pandemic,
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
including asset impairment charges, incremental delivery related costs and relief pay (net of tax credits) and (ii) higher labor costs and commodity inflation. These losses were partially offset by reduced operating, utilities and advertising expense.
International Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Revenues
|
|
|
|
|
|
|
|
|
Restaurant sales
|
$
|
39,494
|
|
|
$
|
105,071
|
|
|
$
|
150,842
|
|
|
$
|
215,900
|
|
|
Franchise and other revenues
|
1,885
|
|
|
2,640
|
|
|
4,377
|
|
|
5,435
|
|
|
Total revenues
|
$
|
41,379
|
|
|
$
|
107,711
|
|
|
$
|
155,219
|
|
|
$
|
221,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant-level operating margin
|
(21.8)
|
%
|
|
18.4
|
%
|
|
8.0
|
%
|
|
20.4
|
%
|
|
(Loss) income from operations
|
$
|
(17,070)
|
|
|
$
|
6,909
|
|
|
$
|
(10,283)
|
|
|
$
|
20,629
|
|
|
Operating (loss) income margin
|
(41.3)
|
%
|
|
6.4
|
%
|
|
(6.6)
|
%
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant sales
Following is a summary of the change in international segment Restaurant sales for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions)
|
THIRTEEN WEEKS ENDED
|
|
TWENTY-SIX WEEKS ENDED
|
|
For the periods ended June 30, 2019
|
$
|
105.1
|
|
|
$
|
215.9
|
|
|
Change from:
|
|
|
|
|
Comparable restaurant sales
|
(59.4)
|
|
|
(55.6)
|
|
|
Effect of foreign currency translation
|
(8.3)
|
|
|
(18.7)
|
|
|
Restaurant closures
|
(0.5)
|
|
|
(1.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant openings
|
2.6
|
|
|
10.8
|
|
|
For the periods ended June 28, 2020
|
$
|
39.5
|
|
|
$
|
150.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in international Restaurant sales during the thirteen weeks ended June 28, 2020 was primarily due to significantly lower comparable restaurant sales principally attributable to the COVID-19 pandemic and the effect of foreign currency translation of the Brazilian Real relative to the U.S. dollar. The decrease in Restaurant sales was partially offset by the opening of 18 new restaurants not included in our comparable restaurant sales base.
The decrease in international Restaurant sales during the twenty-six weeks ended June 28, 2020 was primarily due to significantly lower comparable restaurant sales principally attributable to the COVID-19 pandemic and the effect of foreign currency translation of the Brazilian Real relative to the U.S. dollar. The decrease in Restaurant sales was partially offset by the opening of 20 new restaurants not included in our comparable restaurant sales base.
Income from operations
The decrease in international income from operations during the thirteen weeks ended June 28, 2020 as compared to the thirteen weeks ended June 30, 2019 was primarily due to: (i) significantly lower comparable restaurant sales and costs incurred in connection with the COVID-19 pandemic, including incremental delivery related costs and inventory obsolescence and (ii) commodity inflation. These decreases were partially offset by reduced utility, operating, rent and advertising expense and lower labor costs.
The decrease in international income from operations during the twenty-six weeks ended June 28, 2020 as compared to the twenty-six weeks ended June 30, 2019 was primarily due to: (i) significantly lower comparable restaurant sales and costs incurred in connection with the COVID-19 pandemic, including inventory obsolescence
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
and incremental delivery related costs and (ii) commodity inflation. These decreases were partially offset by reduced advertising, utility and rent expense and lower labor costs.
Non-GAAP Financial Measures
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 3 - Revenue Recognition of the Notes to Consolidated Financial Statements.
The following table provides a summary of sales of franchised restaurants, 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
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
(dollars in millions)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
Outback Steakhouse
|
$
|
58
|
|
|
$
|
125
|
|
|
$
|
174
|
|
|
$
|
263
|
|
|
|
|
Carrabba’s Italian Grill (1)
|
6
|
|
|
14
|
|
|
17
|
|
|
17
|
|
|
|
|
Bonefish Grill
|
1
|
|
|
3
|
|
|
4
|
|
|
7
|
|
|
|
|
U.S. total
|
$
|
65
|
|
|
$
|
142
|
|
|
$
|
195
|
|
|
$
|
287
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
|
Outback Steakhouse-South Korea
|
$
|
56
|
|
|
$
|
47
|
|
|
$
|
110
|
|
|
$
|
104
|
|
|
|
|
Other
|
4
|
|
|
26
|
|
|
26
|
|
|
53
|
|
|
|
|
International total
|
$
|
60
|
|
|
$
|
73
|
|
|
$
|
136
|
|
|
$
|
157
|
|
|
|
|
Total franchise sales (2)
|
$
|
125
|
|
|
$
|
215
|
|
|
$
|
331
|
|
|
$
|
444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________________
(1)In March 2019, we sold 18 Carrabba’s Italian Grill locations, which are now operated as franchises.
(2)Franchise sales are not included in Total revenues in the Consolidated Statements of Operations and Comprehensive (Loss) Income.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Adjusted restaurant-level operating margin - The following table shows the percentages of certain operating cost financial statement line items in relation to Restaurant sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
|
|
|
|
|
JUNE 28, 2020
|
|
|
|
JUNE 30, 2019
|
|
|
|
|
U.S. GAAP
|
|
ADJUSTED (1)
|
|
U.S. GAAP
|
|
ADJUSTED
|
|
Restaurant sales
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
31.4
|
%
|
|
31.2
|
%
|
|
31.1
|
%
|
|
31.1
|
%
|
|
Labor and other related
|
35.7
|
%
|
|
35.7
|
%
|
|
30.0
|
%
|
|
30.0
|
%
|
|
Other restaurant operating
|
30.9
|
%
|
|
30.4
|
%
|
|
24.0
|
%
|
|
23.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Restaurant-level operating margin
|
2.1
|
%
|
|
2.7
|
%
|
|
15.0
|
%
|
|
15.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
|
|
|
|
|
JUNE 28, 2020
|
|
|
|
JUNE 30, 2019
|
|
|
|
|
U.S. GAAP
|
|
ADJUSTED (1)
|
|
U.S. GAAP
|
|
ADJUSTED
|
|
Restaurant sales
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
31.8
|
%
|
|
31.4
|
%
|
|
31.4
|
%
|
|
31.4
|
%
|
|
Labor and other related
|
32.7
|
%
|
|
32.7
|
%
|
|
29.3
|
%
|
|
29.3
|
%
|
|
Other restaurant operating
|
27.0
|
%
|
|
27.0
|
%
|
|
23.2
|
%
|
|
23.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Restaurant-level operating margin
|
8.4
|
%
|
|
8.9
|
%
|
|
16.1
|
%
|
|
16.1
|
%
|
_________________
(1)Includes unfavorable (favorable) adjustments recorded in Other restaurant operating expense (unless otherwise noted below) for the following activities, as described in the Adjusted (loss) income from operations, Adjusted net (loss) income and Adjusted diluted (loss) earnings per share table below for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in millions)
|
JUNE 28, 2020
|
|
|
|
JUNE 28, 2020
|
|
|
|
Restaurant and asset impairments and closing costs
|
$
|
—
|
|
|
|
|
$
|
2.8
|
|
|
|
|
Restaurant relocations and related costs
|
—
|
|
|
|
|
(0.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COVID-19 related costs (1)
|
(3.7)
|
|
|
|
|
(9.9)
|
|
|
|
|
|
$
|
(3.7)
|
|
|
|
|
$
|
(7.2)
|
|
|
|
_________________
(1)Includes $1.2 million and $7.3 million of adjustments for the thirteen and twenty-six weeks ended June 28, 2020, respectively, recorded in Cost of sales.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Adjusted (loss) income from operations, Adjusted net (loss) income and Adjusted diluted (loss) earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(in thousands, except per share data)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
(Loss) income from operations
|
$
|
(111,912)
|
|
|
$
|
43,460
|
|
|
$
|
(153,480)
|
|
|
$
|
125,954
|
|
|
Operating (loss) income margin
|
(19.3)
|
%
|
|
4.3
|
%
|
|
(9.7)
|
%
|
|
5.9
|
%
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
COVID-19 related costs (1)
|
30,342
|
|
|
—
|
|
|
79,218
|
|
|
—
|
|
|
Severance and other transformational costs (2)
|
2,415
|
|
|
748
|
|
|
24,647
|
|
|
3,603
|
|
|
Restaurant relocations and related costs (3)
|
—
|
|
|
952
|
|
|
592
|
|
|
1,984
|
|
|
|
|
|
|
|
|
|
|
|
Legal and contingent matters
|
—
|
|
|
—
|
|
|
178
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant and asset impairments and closing costs (4)
|
—
|
|
|
2,039
|
|
|
(2,797)
|
|
|
4,170
|
|
|
Total income from operations adjustments
|
$
|
32,757
|
|
|
$
|
3,739
|
|
|
$
|
101,838
|
|
|
$
|
9,757
|
|
|
Adjusted (loss) income from operations
|
$
|
(79,155)
|
|
|
$
|
47,199
|
|
|
$
|
(51,642)
|
|
|
$
|
135,711
|
|
|
Adjusted operating (loss) income margin
|
(13.7)
|
%
|
|
4.6
|
%
|
|
(3.3)
|
%
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to common stockholders
|
$
|
(92,256)
|
|
|
$
|
29,021
|
|
|
$
|
(130,363)
|
|
|
$
|
93,321
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
(Loss) income from operations adjustments
|
32,757
|
|
|
3,739
|
|
|
101,838
|
|
|
9,757
|
|
|
Amortization of debt discount (5)
|
1,379
|
|
|
—
|
|
|
1,379
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments, before income taxes
|
34,136
|
|
|
3,739
|
|
|
103,217
|
|
|
9,757
|
|
|
Adjustment to provision for income taxes (6)
|
(6,474)
|
|
|
(413)
|
|
|
(28,469)
|
|
|
(1,232)
|
|
|
Redemption of preferred stock in excess of carrying value (7)
|
—
|
|
|
—
|
|
|
3,496
|
|
|
—
|
|
|
Net adjustments
|
27,662
|
|
|
3,326
|
|
|
78,244
|
|
|
8,525
|
|
|
Adjusted net (loss) income
|
$
|
(64,594)
|
|
|
$
|
32,347
|
|
|
$
|
(52,119)
|
|
|
$
|
101,846
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share attributable to common stockholders (8)
|
$
|
(1.05)
|
|
|
$
|
0.32
|
|
|
$
|
(1.49)
|
|
|
$
|
1.02
|
|
|
Adjusted diluted (loss) earnings per share (8)
|
$
|
(0.74)
|
|
|
$
|
0.36
|
|
|
$
|
(0.60)
|
|
|
$
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding (8)
|
87,496
|
|
|
90,953
|
|
|
87,312
|
|
|
91,807
|
|
_________________
(1)Represents costs incurred in connection with the economic impact of the COVID-19 pandemic, primarily consisting of fixed asset and right-of-use asset impairments, restructuring charges, inventory obsolescence and spoilage, contingent lease liabilities and current expected credit losses. See Note 2 - COVID-19 Charges of the Notes to Consolidated Financial Statements for additional details regarding the impact of the COVID-19 pandemic on our financial results.
(2)Relates to severance and other costs incurred as a result of transformational and restructuring activities.
(3)Represents asset impairment charges and accelerated depreciation incurred in connection with our relocation program.
(4)Includes a lease termination gain of $2.8 million during the twenty-six weeks ended June 28, 2020 and asset impairment charges and related costs primarily related to approved closure and restructuring initiatives in 2019.
(5)Represents the amortization of the debt discount related to the issuance of the 2025 Notes. See Note 12 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for details.
(6)Represents income tax effect of the adjustments for the periods presented.
(7)Represents consideration paid in excess of the carrying value for the redemption of preferred stock of our Abbraccio subsidiary.
(8)Due to the net loss, the effect of dilutive securities was excluded from the calculation of diluted (loss) earnings per share for the thirteen and twenty-six weeks ended June 28, 2020.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources
LIQUIDITY
Typically, 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, payments on our debt, remodeling or relocating older restaurants, obligations related to our deferred compensation plans and investment in technology. Substantially all of our restaurants are currently operating at reduced capacities or, in some cases, off-premises only due to the COVID-19 pandemic which has negatively impacted our operating cashflows.
In response to the COVID-19 pandemic, we have tightly managed expenses while prioritizing supporting our workforce and our off-premises business. In addition, we have taken several precautionary measures to preserve liquidity, including the following:
•we suspended our quarterly cash dividend and stock repurchases;
•we significantly reduced marketing and tightly managed other expenses;
•we substantially limited capital expenditures to facility maintenance in support of our off-premises business; and
•we engaged in constructive dialogue with our landlords regarding rent abatements and deferrals.
The above actions are in addition to the significant cost cutting measures for fiscal 2020 that we announced and implemented earlier in the year.
In addition, on March 16, 2020, in order to increase our cash position and preserve financial flexibility, we drew down substantially all remaining availability under our revolving credit facility.
In May 2020, we issued $230.0 million aggregate principal amount of 5.00% convertible senior notes due 2025. Net proceeds from the 2025 Notes were approximately $221.6 million, after deducting the initial purchaser’s discounts and commissions and our offering expenses. See “2025 Notes” below for additional details regarding the convertible senior notes.
In June 2020, we repaid $360.0 million on our revolving credit facility with cash on hand, a portion of which was proceeds from the 2025 Notes.
Cash and Cash Equivalents - As of June 28, 2020, we had $181.4 million in cash and cash equivalents, of which $26.7 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 June 28, 2020, we had aggregate accumulated foreign earnings of approximately $54.8 million. This amount consisted primarily of historical earnings from 2017 and prior that were previously taxed in the U.S. under the 2017 Tax Cuts and Jobs Act and post-2017 foreign earnings, which we may repatriate to the U.S. without additional U.S. federal income tax. These amounts are no longer considered indefinitely reinvested in our foreign subsidiaries.
Closure and Restructuring Initiatives - Total aggregate future undiscounted cash expenditures of $12.1 million to $14.8 million related to lease liabilities for certain closure and restructuring initiatives are expected to occur over the remaining lease terms through January 2029.
Capital Expenditures - We estimate that our capital expenditures will total approximately $100.0 million to $110.0 million in 2020. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things, including restrictions imposed by our borrowing
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
arrangements. Under the Amended Credit Agreement, we are limited to $100.0 million of aggregate capital expenditures for the four fiscal quarters through March 28, 2021.
Credit Facilities - As of June 28, 2020, we had $1.3 billion of outstanding borrowings under our Senior Secured Credit Facility and 2025 Notes. Following is a summary of our outstanding credit facilities as of the dates indicated and principal payments and debt issuance during the period indicated:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
SENIOR SECURED CREDIT FACILITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CREDIT FACILITIES
|
|
(dollars in thousands)
|
TERM LOAN A
|
|
REVOLVING FACILITY
|
|
2025 NOTES
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 29, 2019
|
$
|
450,000
|
|
|
$
|
599,000
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
1,049,000
|
|
|
2020 new debt
|
—
|
|
|
505,000
|
|
|
230,000
|
|
|
|
|
|
|
|
|
|
|
735,000
|
|
|
2020 payments
|
(12,500)
|
|
|
(489,000)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
(501,500)
|
|
|
Balance as of June 28, 2020
|
$
|
437,500
|
|
|
$
|
615,000
|
|
|
$
|
230,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1,282,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average interest rate, as of June 28, 2020
|
2.90
|
%
|
|
2.89
|
%
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Principal maturity date
|
November 2022
|
|
November 2022
|
|
May 2025
|
|
|
|
|
|
|
|
|
|
|
As of June 28, 2020, we had $364.8 million in available unused borrowing capacity under our revolving credit facility, net of letters of credit of $20.2 million.
Amended Credit Agreement - On May 4, 2020, we and OSI, as co-borrowers, entered into the Amended Credit Agreement which provides relief for the financial covenant to maintain a specified quarterly TNLR. Without such amendment, violation of financial covenants under the original credit agreement could have resulted in default. The Amended Credit Agreement waives the TNLR requirement for the remainder of fiscal year 2020 and requires a TNLR based on a seasonally annualized calculation of Consolidated EBITDA not to exceed the following thresholds for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUARTERLY PERIOD ENDED
|
|
MAXIMUM RATIO
|
|
|
|
March 28, 2021 (1)
|
|
5.50
|
|
to
|
1.00
|
|
June 27, 2021 (2)
|
|
5.00
|
|
to
|
1.00
|
|
September 26, 2021 and thereafter (3)
|
|
4.50
|
|
to
|
1.00
|
________________
(1)Seasonally annualized Consolidated EBITDA calculated as Consolidated EBITDA for the fiscal quarter ending March 28, 2021 divided by 34.1%.
(2)Seasonally annualized Consolidated EBITDA calculated as Consolidated EBITDA for the two consecutive quarters ending June 27, 2021 divided by 58.5%.
(3)Seasonally annualized Consolidated EBITDA calculated as Consolidated EBITDA for the three consecutive quarters ending September 26, 2021 divided by 77.0%.
Under the terms of the Amended Credit Agreement, we are required to meet minimum monthly liquidity threshold of $125.0 million through March 28, 2021, calculated as the sum of available capacity under our revolving credit facility, unrestricted domestic cash on hand and up to $25.0 million of unrestricted cash held by foreign subsidiaries. We are also prohibited from making certain restricted payments, investments or acquisitions until after September 26, 2021, with an exception for investments in our foreign subsidiaries which are capped at $27.5 million. Repurchasing shares of our outstanding common stock and paying dividends are also restricted until after September 26, 2021 under the terms of the Amended Credit Agreement.
Interest rates under the Amended Credit Agreement are 275 and 175 basis points above the Eurocurrency Rate and Base Rate, respectively, and letter of credit fees and fees for the daily unused availability under the revolving credit facility are 2.75% and 0.40%, respectively, subject to reversion to rates under the original credit agreement when we
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
are in compliance with the TNLR covenant for the test period ending September 26, 2021. We are also subject to a 0% Eurocurrency floor under the Amended Credit Agreement.
The Amended Credit Agreement contains term loan mandatory prepayment requirements of 50% of our annual excess cash flow (as defined in the Amended Credit Agreement) after December 27, 2020. The amount outstanding required to be prepaid may vary based on our leverage ratio and year end results. Other than the annual required minimum amortization premiums of $31.3 million, we do not anticipate any other payments will be required through June 27, 2021.
As of June 28, 2020 and December 29, 2019, 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.
2025 Notes - On May 8, 2020, we completed a $200.0 million principal amount private offering of 5.00% convertible senior notes due 2025 and on May 12, 2020, issued an additional $30.0 million principal amount in connection with the option granted to the initial purchasers as part of the offering. The 2025 Notes will mature on May 1, 2025, unless earlier converted, redeemed or purchased by us. The 2025 Notes bear cash interest at an annual rate of 5.00%, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2020.
The initial conversion rate applicable to the 2025 Notes is 84.122 shares of common stock per $1,000 principal amount of 2025 Notes, or a total of approximately 19.348 million shares for the total $230.0 million principal amount. This initial conversion rate is equivalent to an initial conversion price of approximately $11.89 per share. We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, based on the applicable conversion rate. We expect to settle the principal amount of our outstanding convertible senior notes in cash and any excess in shares.
Net proceeds from this offering were approximately $221.6 million, after deducting the initial purchaser’s discounts and commissions and our offering expenses.
Convertible Note Hedge and Warrant Transactions - In connection with the offering of the 2025 Notes, we entered into Convertible Note Hedge Transactions with the Hedge Counterparties. Concurrently with our entry into the Convertible Note Hedge Transactions, we also entered into separate Warrant Transactions with the Hedge Counterparties collectively relating to the same number of shares of our common stock.
The portion of the net proceeds from our offering of the 2025 Notes that was used to pay the premium on the Convertible Note Hedge Transactions (calculated after taking into account our proceeds from the Warrant Transactions) was approximately $19.6 million.
See Note 12 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for additional details regarding the convertible senior notes and related hedge and warrant transactions.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
SUMMARY OF CASH FLOWS
The following table presents a summary of our cash flows (used in) provided by operating, investing and financing activities for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWENTY-SIX WEEKS ENDED
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
JUNE 30, 2019
|
|
Net cash (used in) provided by operating activities
|
$
|
(3,313)
|
|
|
$
|
132,443
|
|
|
Net cash used in investing activities
|
(48,001)
|
|
|
(73,854)
|
|
|
Net cash provided by (used in) financing activities
|
169,655
|
|
|
(63,415)
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(2,955)
|
|
|
(157)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
$
|
115,386
|
|
|
$
|
(4,983)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities - Net cash (used in) provided by operating activities decreased during the twenty-six weeks ended June 28, 2020, as compared to the twenty-six weeks ended June 30, 2019 primarily due to a decrease in net restaurant sales and relief payments made to employees, net of employee retention tax credits as a result of the COVID-19 pandemic. These decreases were partially offset by: (i) decreased variable operating costs as a result of lower net restaurant sales, (ii) decreased rent payments, (iii) the timing of collections of receivables, (iv) deferral of payroll tax payments as a result of the CARES Act, (v) lower inventory purchases and (vi) lower income tax and interest payments.
Investing activities - Net cash used in investing activities during the twenty-six weeks ended June 28, 2020 primarily consisted of capital expenditures, partially offset by withdrawals from company-owned life insurance policies.
Net cash used in investing activities during the twenty-six weeks ended June 30, 2019 primarily consisted of capital expenditures, partially offset by proceeds from sale-leaseback transactions.
Financing activities - Net cash provided by financing activities during the twenty-six weeks ended June 28, 2020 primarily consisted of proceeds from issuance of convertible senior notes and related warrants transactions and drawdowns on our revolving credit facility, net of repayments, partially offset by: (i) premium payments for Convertible Note Hedge Transactions, (ii) payment of cash dividends on our common stock, (iii) the repayment of long-term debt, (iv) issuance costs and financing fees in connection with our 2025 Notes and Amended Credit Agreement and (v) partner equity plan payments.
Net cash used in financing activities during the twenty-six weeks ended June 30, 2019 primarily consisted of: (i) the repurchase of common stock, (ii) payment of cash dividends on our common stock, (iii) the repayment of long-term debt and (iv) partner equity plan payments. Net cash used in financing activities was partially offset by drawdowns on our revolving credit facility, net of repayments.
FINANCIAL CONDITION
Following is a summary of our current assets, current liabilities and working capital (deficit) as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
JUNE 28, 2020
|
|
DECEMBER 29, 2019
|
|
Current assets
|
$
|
327,583
|
|
|
$
|
340,468
|
|
|
Current liabilities
|
810,838
|
|
|
962,021
|
|
|
Working capital (deficit)
|
$
|
(483,255)
|
|
|
$
|
(621,553)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
The change in net working capital (deficit) during the twenty-six weeks ended June 28, 2020 is primarily due to: (i) cash proceeds from the issuance of the 2025 Notes, (ii) a decrease in Accounts payable due to lower vendor activity and capital expenditures in connection with COVID-19 and (iii) a decrease in Unearned revenue related to the seasonal fluctuation of the sale and redemption of gift cards. Working capital (deficit) includes: (i) Unearned revenue primarily from unredeemed gift cards of $293.6 million and $369.3 million as of June 28, 2020 and December 29, 2019, respectively, and (ii) current operating lease liabilities of $177.2 million and $171.9 million as of June 28, 2020 and December 29, 2019, respectively, with the corresponding operating right-of-use assets recorded as non-current on our Consolidated Balance Sheets. We have, and in the future may continue to have, negative working capital balances (as is common for many restaurant companies). We operate successfully with negative working capital because cash collected on restaurant sales are typically received before payment is due on our current liabilities, and our inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flows from restaurant operations and gift card sales are typically used to service debt obligations and to make capital expenditures.
Deferred Compensation Programs - The deferred compensation obligation due to managing and chef partners was $35.5 million and $49.0 million as of June 28, 2020 and December 29, 2019, respectively. We invest in various corporate-owned life insurance policies (“COLI assets”), which are held within an irrevocable grantor or “rabbi” trust account for settlement of our obligations under the deferred compensation plans. The rabbi trust is funded through our voluntary contributions. The unfunded obligation for managing and chef partners’ deferred compensation was $0.1 million as of June 28, 2020.
We use capital to fund the deferred compensation plans and currently expect cash funding of $9.0 million to $11.0 million for 2020. We will also fund a portion of our 2020 obligation with $9.1 million expected to be withdrawn from our COLI assets in 2020. Through June 28, 2020 we have withdrawn $5.4 million of COLI assets to fund deferred compensation plan obligations. Actual funding of the deferred compensation obligations and future funding requirements may vary significantly depending on the actual performance compared to targets, timing of deferred payments of partner contracts, forfeiture rates, number of partner participants, growth of partner investments and our funding strategy.
Other Compensation Programs - Certain U.S. partners participate in a non-qualified long-term compensation program that we fund as the obligation for each participant becomes due.
DIVIDENDS AND SHARE REPURCHASES
We did not pay dividends or repurchase any shares of our outstanding common stock during the thirteen weeks ended June 28, 2020. The terms of our Amended Credit Agreement contain certain restrictions on cash dividends and share repurchases until after September 26, 2021 and we are compliant with our financial covenants.
BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Following is a summary of our dividends and share repurchases from fiscal year 2015 through June 28, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DIVIDENDS PAID
|
|
SHARE REPURCHASES (1)
|
|
TOTAL
|
|
Fiscal year 2015
|
$
|
29,332
|
|
|
$
|
169,999
|
|
|
$
|
199,331
|
|
|
Fiscal year 2016
|
31,379
|
|
|
309,887
|
|
|
341,266
|
|
|
Fiscal year 2017
|
30,988
|
|
|
272,736
|
|
|
303,724
|
|
|
Fiscal year 2018
|
33,312
|
|
|
113,967
|
|
|
147,279
|
|
|
Fiscal year 2019
|
35,734
|
|
|
106,992
|
|
|
142,726
|
|
|
First fiscal quarter 2020
|
17,480
|
|
|
—
|
|
|
17,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
178,225
|
|
|
$
|
973,581
|
|
|
$
|
1,151,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)Excludes share repurchases for the settlement of taxes related to equity awards of $180, $447, and $770 for fiscal years 2017, 2016 and 2015, respectively.
Recently Issued Financial Accounting Standards
For a description of recently issued Financial Accounting Standards that we adopted during the twenty-six weeks ended June 28, 2020 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.