Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Bloomin’ Brands, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Bloomin’ Brands, Inc. and its subsidiaries (the “Company”) as of December 27, 2020 and December 29, 2019, and the related consolidated statements of operations and comprehensive (loss) income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 27, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 27, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 27, 2020 and December 29, 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 27, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 27, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of Insurance Reserves
As described in Notes 2 and 22 to the consolidated financial statements, the Company’s consolidated discounted insurance reserves balance was $52.8 million as of December 27, 2020. The Company carries insurance programs with specific retention levels or high per-claim deductibles for a significant portion of expected losses under its workers’ compensation, general or liquor liability, health, property and management liability insurance programs. The Company records a liability for all unresolved claims and for an estimate of incurred but not reported claims at the anticipated cost that falls below its specified retention levels or per-claim deductible amounts. In establishing reserves, management considers certain actuarial assumptions and judgments regarding economic conditions and the frequency and severity of claims. Reserves recorded for workers’ compensation and general liability claims are discounted using the average of the one-year and five-year risk-free rate of monetary assets that have comparable maturities.
The principal considerations for our determination that performing procedures relating to the valuation of insurance reserves is a critical audit matter are (i) the significant judgment by management when developing the estimated reserves, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the actuarial assumptions related to economic conditions and the frequency and severity of claims, and (iii) the audit effort included the involvement of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of insurance reserves. These procedures also included, among others (i) evaluating management’s process for developing the insurance reserves, (ii) evaluating the appropriateness of management’s actuarial methods used, (iii) evaluating the reasonableness of the actuarial assumptions related to economic conditions and the frequency and severity of claims, and (iv) testing the completeness and accuracy of underlying
data used in the valuation. Evaluating the actuarial assumptions related to economic conditions and the frequency and severity of claims involved evaluating whether the assumptions were reasonable considering inflation and the environment and whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of management’s actuarial methods used in determining the insurance reserves and evaluating the reasonableness of assumptions related to economic conditions.
Goodwill Interim Impairment Assessment of One International Reporting Unit
As described in Notes 2 and 10 to the consolidated financial statements, the Company’s consolidated goodwill balance was $271.2 million as of December 27, 2020 and $282.6 million as of March 29, 2020, and the goodwill associated with one international reporting unit was $69.3 million as of March 29, 2020. The Company conducts an impairment test annually, in the second fiscal quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The COVID-19 outbreak was considered a triggering event during the first quarter of 2020, and management performed a quantitative assessment for four U.S. and three international reporting units as of March 29, 2020. As a result of this test, management determined the fair value of each reporting unit was more than 100% in excess of its carrying value with the exception of (i) one international reporting unit, which had a goodwill carrying value of $69.3 million and a reporting unit fair value approximately 39% in excess of its reporting unit carrying value; and (ii) the Hong Kong reporting unit, for which management recorded a full impairment. Management utilized a discounted cash flow model to estimate fair value of the reporting units. Determining the fair value of the one international reporting unit involved the use of significant assumptions with respect to the calculation of projected future cash flows, including operating margins.
The principal considerations for our determination that performing procedures relating to the goodwill interim impairment assessment of one international reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value measurement of the reporting unit, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to operating margins, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of one of the Company’s international reporting units. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting unit, (ii) evaluating the appropriateness of the discounted cash flow model, (iii) testing the completeness and accuracy of underlying data used in the model, and (iv) evaluating the significant assumptions used by management related to operating margins. Evaluating management’s assumptions related to operating margins involved evaluating whether the assumptions were reasonable considering the current and past performance of the reporting unit, the consistency with external market and industry data, and whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the Company’s discounted cash flow model.
/s/ PricewaterhouseCoopers LLP
Tampa, Florida
February 24, 2021
We have served as the Company’s auditor since 1998.
BLOOMIN’ BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
|
|
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
ASSETS
|
|
|
|
Current assets
|
|
|
|
Cash and cash equivalents
|
$
|
109,980
|
|
|
$
|
67,145
|
|
Restricted cash and cash equivalents
|
428
|
|
|
—
|
|
Inventories
|
61,928
|
|
|
86,861
|
|
|
|
|
|
Other current assets, net
|
151,518
|
|
|
186,462
|
|
Total current assets
|
323,854
|
|
|
340,468
|
|
|
|
|
|
Property, fixtures and equipment, net
|
887,687
|
|
|
1,036,077
|
|
Operating lease right-of-use assets
|
1,172,910
|
|
|
1,266,548
|
|
Goodwill
|
271,164
|
|
|
288,439
|
|
Intangible assets, net
|
459,983
|
|
|
470,615
|
|
Deferred income tax assets, net
|
153,883
|
|
|
73,426
|
|
Other assets, net
|
92,626
|
|
|
117,110
|
|
Total assets
|
$
|
3,362,107
|
|
|
$
|
3,592,683
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
Current liabilities
|
|
|
|
Accounts payable
|
$
|
141,457
|
|
|
$
|
174,877
|
|
Accrued and other current liabilities
|
388,321
|
|
|
391,451
|
|
Unearned revenue
|
381,616
|
|
|
369,282
|
|
Current portion of long-term debt
|
38,710
|
|
|
26,411
|
|
Total current liabilities
|
950,104
|
|
|
962,021
|
|
Non-current operating lease liabilities
|
1,217,921
|
|
|
1,279,051
|
|
Deferred income tax liabilities, net
|
—
|
|
|
13,777
|
|
Long-term debt, net
|
997,770
|
|
|
1,022,293
|
|
Other long-term liabilities, net
|
185,355
|
|
|
138,060
|
|
Total liabilities
|
3,351,150
|
|
|
3,415,202
|
|
Commitments and contingencies (Note 22)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
Bloomin’ Brands stockholders’ equity
|
|
|
|
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of December 27, 2020 and December 29, 2019
|
—
|
|
|
—
|
|
Common stock, $0.01 par value, 475,000,000 shares authorized; 87,855,571 and 86,945,869 shares issued and outstanding as of December 27, 2020 and December 29, 2019, respectively
|
879
|
|
|
869
|
|
Additional paid-in capital
|
1,132,808
|
|
|
1,094,338
|
|
Accumulated deficit
|
(918,096)
|
|
|
(755,089)
|
|
Accumulated other comprehensive loss
|
(211,446)
|
|
|
(169,776)
|
|
Total Bloomin’ Brands stockholders’ equity
|
4,145
|
|
|
170,342
|
|
Noncontrolling interests
|
6,812
|
|
|
7,139
|
|
Total stockholders’ equity
|
10,957
|
|
|
177,481
|
|
Total liabilities and stockholders’ equity
|
$
|
3,362,107
|
|
|
$
|
3,592,683
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
|
2020
|
|
2019
|
|
2018
|
Revenues
|
|
|
|
|
|
Restaurant sales
|
$
|
3,144,636
|
|
|
$
|
4,075,014
|
|
|
$
|
4,060,871
|
|
Franchise and other revenues
|
25,925
|
|
|
64,375
|
|
|
65,542
|
|
Total revenues
|
3,170,561
|
|
|
4,139,389
|
|
|
4,126,413
|
|
Costs and expenses
|
|
|
|
|
|
Food and beverage costs
|
982,702
|
|
|
1,277,824
|
|
|
1,295,588
|
|
Labor and other related
|
1,005,295
|
|
|
1,207,289
|
|
|
1,197,297
|
|
Other restaurant operating
|
846,566
|
|
|
982,051
|
|
|
967,099
|
|
Depreciation and amortization
|
180,261
|
|
|
196,811
|
|
|
201,593
|
|
General and administrative
|
254,356
|
|
|
275,239
|
|
|
282,720
|
|
|
|
|
|
|
|
Provision for impaired assets and restaurant closings
|
76,354
|
|
|
9,085
|
|
|
36,863
|
|
Total costs and expenses
|
3,345,534
|
|
|
3,948,299
|
|
|
3,981,160
|
|
(Loss) income from operations
|
(174,973)
|
|
|
191,090
|
|
|
145,253
|
|
Loss on modification of debt
|
(237)
|
|
|
—
|
|
|
—
|
|
Other income (expense), net
|
131
|
|
|
(143)
|
|
|
(11)
|
|
Interest expense, net
|
(64,442)
|
|
|
(49,257)
|
|
|
(44,937)
|
|
(Loss) income before (benefit) provision for income taxes
|
(239,521)
|
|
|
141,690
|
|
|
100,305
|
|
(Benefit) provision for income taxes
|
(80,726)
|
|
|
7,573
|
|
|
(9,233)
|
|
Net (loss) income
|
(158,795)
|
|
|
134,117
|
|
|
109,538
|
|
Less: net (loss) income attributable to noncontrolling interests
|
(80)
|
|
|
3,544
|
|
|
2,440
|
|
Net (loss) income attributable to Bloomin’ Brands
|
(158,715)
|
|
|
130,573
|
|
|
107,098
|
|
Redemption of preferred stock in excess of carrying value
|
(3,496)
|
|
|
—
|
|
|
—
|
|
Net (loss) income attributable to common stockholders
|
$
|
(162,211)
|
|
|
$
|
130,573
|
|
|
$
|
107,098
|
|
|
|
|
|
|
|
Net (loss) income
|
$
|
(158,795)
|
|
|
$
|
134,117
|
|
|
$
|
109,538
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
Foreign currency translation adjustment
|
(37,516)
|
|
|
(16,625)
|
|
|
(36,132)
|
|
Unrealized loss on derivatives, net of tax
|
(14,741)
|
|
|
(11,944)
|
|
|
(7,100)
|
|
Reclassification of adjustment for loss on derivatives included in Net (loss) income, net of tax
|
9,923
|
|
|
1,805
|
|
|
120
|
|
Comprehensive (loss) income
|
(201,129)
|
|
|
107,353
|
|
|
66,426
|
|
Less: comprehensive (loss) income attributable to noncontrolling interests
|
(744)
|
|
|
3,801
|
|
|
2,884
|
|
Comprehensive (loss) income attributable to Bloomin’ Brands
|
$
|
(200,385)
|
|
|
$
|
103,552
|
|
|
$
|
63,542
|
|
|
|
|
|
|
|
(Loss) earnings per share attributable to common stockholders:
|
|
|
|
|
|
Basic
|
$
|
(1.85)
|
|
|
$
|
1.47
|
|
|
$
|
1.16
|
|
Diluted
|
$
|
(1.85)
|
|
|
$
|
1.45
|
|
|
$
|
1.14
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
Basic
|
87,468
|
|
|
88,839
|
|
|
92,042
|
|
Diluted
|
87,468
|
|
|
89,777
|
|
|
94,075
|
|
|
|
|
|
|
|
Cash dividends declared per common share
|
$
|
0.20
|
|
|
$
|
0.40
|
|
|
$
|
0.36
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS
|
|
|
|
|
|
COMMON STOCK
|
|
ADDITIONAL PAID-IN CAPITAL
|
|
ACCUM-
ULATED DEFICIT
|
|
ACCUMULATED OTHER
COMPREHENSIVE LOSS
|
|
NON-CONTROLLING INTERESTS
|
|
TOTAL
|
|
SHARES
|
|
AMOUNT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017
|
91,913
|
|
|
$
|
919
|
|
|
$
|
1,081,813
|
|
|
$
|
(913,191)
|
|
|
$
|
(99,199)
|
|
|
$
|
10,889
|
|
|
$
|
81,231
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
107,098
|
|
|
—
|
|
|
2,770
|
|
|
109,868
|
|
Other comprehensive (loss) income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(43,556)
|
|
|
444
|
|
|
(43,112)
|
|
Cash dividends declared, $0.36 per common share
|
—
|
|
|
—
|
|
|
(33,312)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,312)
|
|
Repurchase and retirement of common stock
|
(5,062)
|
|
|
(50)
|
|
|
—
|
|
|
(113,917)
|
|
|
—
|
|
|
—
|
|
|
(113,967)
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
23,059
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued under stock plans (1)
|
4,421
|
|
|
44
|
|
|
36,568
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36,612
|
|
Purchase of noncontrolling interests, net of tax of $75
|
—
|
|
|
—
|
|
|
(216)
|
|
|
—
|
|
|
—
|
|
|
(110)
|
|
|
(326)
|
|
Change in the redemption value of redeemable interests
|
—
|
|
|
—
|
|
|
(330)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(330)
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,943)
|
|
|
(6,943)
|
|
Contributions from noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,037
|
|
|
2,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
—
|
|
|
—
|
|
|
—
|
|
|
130,573
|
|
|
—
|
|
|
3,544
|
|
|
134,117
|
|
Other comprehensive (loss) income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,055)
|
|
|
291
|
|
|
(26,764)
|
|
Cash dividends declared, $0.40 per common share
|
—
|
|
|
—
|
|
|
(35,734)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(35,734)
|
|
Repurchase and retirement of common stock
|
(5,469)
|
|
|
(55)
|
|
|
—
|
|
|
(106,937)
|
|
|
—
|
|
|
—
|
|
|
(106,992)
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
19,951
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued under stock plans (1)
|
1,143
|
|
|
11
|
|
|
2,696
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,707
|
|
Purchase of noncontrolling interests
|
—
|
|
|
—
|
|
|
(157)
|
|
|
—
|
|
|
34
|
|
|
82
|
|
|
(41)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,214)
|
|
|
(7,214)
|
|
Contributions from noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,349
|
|
|
1,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 29, 2019
|
86,946
|
|
|
$
|
869
|
|
|
$
|
1,094,338
|
|
|
$
|
(755,089)
|
|
|
$
|
(169,776)
|
|
|
$
|
7,139
|
|
|
$
|
177,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(CONTINUED...)
|
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS
|
|
|
|
|
|
COMMON STOCK
|
|
ADDITIONAL PAID-IN CAPITAL
|
|
ACCUM-
ULATED DEFICIT
|
|
ACCUMULATED OTHER
COMPREHENSIVE LOSS
|
|
NON-CONTROLLING INTERESTS
|
|
TOTAL
|
|
SHARES
|
|
AMOUNT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
—
|
|
|
—
|
|
|
—
|
|
|
(158,715)
|
|
|
—
|
|
|
(80)
|
|
|
(158,795)
|
|
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42,187)
|
|
|
(147)
|
|
|
(42,334)
|
|
Cash dividends declared, $0.20 per common share
|
—
|
|
|
—
|
|
|
(17,480)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,480)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
14,802
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,802
|
|
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)
|
910
|
|
|
10
|
|
|
(17)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7)
|
|
Purchase of noncontrolling interests
|
—
|
|
|
—
|
|
|
(156)
|
|
|
—
|
|
|
—
|
|
|
96
|
|
|
(60)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,908)
|
|
|
(1,908)
|
|
Contributions from noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
451
|
|
|
451
|
|
Equity component value of convertible senior 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, December 27, 2020
|
87,856
|
|
|
$
|
879
|
|
|
$
|
1,132,808
|
|
|
$
|
(918,096)
|
|
|
$
|
(211,446)
|
|
|
$
|
6,812
|
|
|
$
|
10,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(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.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Cash flows provided by operating activities:
|
|
|
|
|
|
Net (loss) income
|
$
|
(158,795)
|
|
|
$
|
134,117
|
|
|
$
|
109,538
|
|
Adjustments to reconcile Net (loss) income to cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
180,261
|
|
|
196,811
|
|
|
201,593
|
|
Amortization of debt discounts and issuance costs
|
10,142
|
|
|
2,517
|
|
|
2,561
|
|
Amortization of deferred gift card sales commissions
|
20,927
|
|
|
26,094
|
|
|
27,227
|
|
|
|
|
|
|
|
Provision for impaired assets and restaurant closings
|
76,354
|
|
|
9,085
|
|
|
36,863
|
|
Non-cash operating lease costs
|
74,436
|
|
|
73,357
|
|
|
—
|
|
Provision for expected credit losses and contingent lease liabilities
|
7,225
|
|
|
—
|
|
|
—
|
|
Inventory obsolescence and spoilage
|
10,169
|
|
|
—
|
|
|
—
|
|
Stock-based and other non-cash compensation expense
|
14,802
|
|
|
24,651
|
|
|
27,433
|
|
Deferred income tax benefit
|
(88,256)
|
|
|
(25,890)
|
|
|
(29,490)
|
|
Loss on sale of a business or subsidiary
|
—
|
|
|
206
|
|
|
—
|
|
|
|
|
|
|
|
Loss on modification of debt
|
237
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Recognition of deferred gain on sale-leaseback transactions
|
—
|
|
|
—
|
|
|
(12,336)
|
|
|
|
|
|
|
|
Loss (gain) on disposal of property, fixtures and equipment
|
1,261
|
|
|
(2,984)
|
|
|
(585)
|
|
Other, net
|
(5,193)
|
|
|
(10,471)
|
|
|
4,943
|
|
Change in assets and liabilities:
|
|
|
|
|
|
Decrease (increase) in inventories
|
19,857
|
|
|
(15,388)
|
|
|
(24,707)
|
|
Decrease (increase) in other current assets
|
14,392
|
|
|
(40,519)
|
|
|
(25,405)
|
|
Decrease (increase) in other assets
|
3,688
|
|
|
(890)
|
|
|
(3,190)
|
|
Decrease in operating right-of-use assets, net
|
412
|
|
|
391
|
|
|
—
|
|
Decrease in accounts payable and accrued and other current liabilities
|
(61,638)
|
|
|
(23,497)
|
|
|
(39,871)
|
|
Increase in deferred rent
|
—
|
|
|
—
|
|
|
8,737
|
|
Increase in unearned revenue
|
10,569
|
|
|
26,676
|
|
|
12,199
|
|
Decrease in operating lease liabilities
|
(50,626)
|
|
|
(69,886)
|
|
|
—
|
|
Increase (decrease) in other long-term liabilities
|
58,625
|
|
|
13,223
|
|
|
(7,436)
|
|
Net cash provided by operating activities
|
138,849
|
|
|
317,603
|
|
|
288,074
|
|
Cash flows used in investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from disposal of property, fixtures and equipment
|
2,178
|
|
|
18,291
|
|
|
14,041
|
|
Proceeds from sale-leaseback transactions, net
|
—
|
|
|
7,085
|
|
|
16,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(87,842)
|
|
|
(161,926)
|
|
|
(208,224)
|
|
Other investments, net
|
9,025
|
|
|
5,259
|
|
|
727
|
|
Net cash used in investing activities
|
$
|
(76,639)
|
|
|
$
|
(131,291)
|
|
|
$
|
(177,296)
|
|
|
|
|
|
|
|
|
|
|
(CONTINUED...)
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Cash flows used in financing activities:
|
|
|
|
|
|
Proceeds from issuance of long-term debt, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,637
|
|
|
|
|
|
|
|
Repayments of long-term debt and finance lease obligations
|
(26,326)
|
|
|
(27,259)
|
|
|
(26,686)
|
|
Proceeds from borrowings on revolving credit facilities, net
|
505,000
|
|
|
670,800
|
|
|
476,829
|
|
Repayments of borrowings on revolving credit facilities
|
(657,000)
|
|
|
(671,300)
|
|
|
(478,500)
|
|
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
|
(7)
|
|
|
2,707
|
|
|
36,612
|
|
Distributions to noncontrolling interests
|
(1,908)
|
|
|
(7,214)
|
|
|
(6,943)
|
|
Contributions from noncontrolling interests
|
451
|
|
|
1,349
|
|
|
2,037
|
|
Purchase of limited partnership and noncontrolling interests
|
(60)
|
|
|
(41)
|
|
|
(2,112)
|
|
Payments for partner equity plan
|
(16,906)
|
|
|
(15,675)
|
|
|
(19,947)
|
|
Repurchase of common stock
|
—
|
|
|
(106,992)
|
|
|
(113,967)
|
|
|
|
|
|
|
|
Cash dividends paid on common stock
|
(17,480)
|
|
|
(35,734)
|
|
|
(33,312)
|
|
Redemption of subsidiary preferred stock
|
(1,475)
|
|
|
—
|
|
|
—
|
|
Net cash used in financing activities
|
(16,773)
|
|
|
(189,359)
|
|
|
(164,352)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(2,174)
|
|
|
(1,631)
|
|
|
(4,146)
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
43,263
|
|
|
(4,678)
|
|
|
(57,720)
|
|
Cash, cash equivalents and restricted cash as of the beginning of the period
|
67,145
|
|
|
71,823
|
|
|
129,543
|
|
Cash, cash equivalents and restricted cash as of the end of the period
|
$
|
110,408
|
|
|
$
|
67,145
|
|
|
$
|
71,823
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
Cash paid for interest
|
$
|
52,630
|
|
|
$
|
47,893
|
|
|
$
|
41,681
|
|
Cash paid for income taxes, net of refunds
|
8,415
|
|
|
23,995
|
|
|
15,839
|
|
Supplemental disclosures of non-cash investing and financing activities:
|
|
|
|
|
|
Leased assets obtained in exchange for new operating lease liabilities
|
$
|
19,451
|
|
|
$
|
67,955
|
|
|
$
|
—
|
|
Leased assets obtained in exchange for new finance lease liabilities
|
1,367
|
|
|
208
|
|
|
—
|
|
|
|
|
|
|
|
Increase (decrease) in liabilities from the acquisition of property, fixtures and equipment
|
1,152
|
|
|
(2,899)
|
|
|
2,699
|
|
|
|
|
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The accompanying notes are an integral part of these consolidated financial statements.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Bloomin’ Brands, Inc. (“Bloomin’ Brands” or the “Company”), a holding company that conducts its operations through its subsidiaries, is one of the largest casual dining restaurant companies in the world, with a portfolio of leading, differentiated restaurant concepts. OSI Restaurant Partners, LLC (“OSI”) is the Company’s primary operating entity.
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.
2. Summary of Significant Accounting Policies
Basis of Presentation - The Company’s consolidated financial statements include the accounts and operations of Bloomin’ Brands and its subsidiaries.
To ensure timely reporting, the Company consolidates the results of its Brazil operations on a one month calendar lag. There were no intervening events that would materially affect the Company’s consolidated financial position, results of operations or cash flows as of and for the year ended December 27, 2020.
COVID-19 Pandemic - 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. As of December 27, 2020, 85% of the Company’s restaurant dining rooms were open with many still subject to seating capacity restrictions. 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 2020. See Note 3 - COVID-19 Charges for details regarding certain charges resulting from the COVID-19 pandemic.
Principles of Consolidation - All intercompany accounts and transactions have been eliminated in consolidation.
The Company consolidates variable interest entities where it has been determined that the Company is the primary beneficiary of those entities’ operations. The Company is a franchisor of 317 restaurants as of December 27, 2020, but does not possess any ownership interests in its franchisees and does not provide material direct financial support to its franchisees. These franchise relationships are not deemed variable interest entities and are not consolidated.
Investments in entities the Company does not control, but where the Company’s interest is generally between 20% and 50% and the Company has the ability to exercise significant influence over the entity, are accounted for under the equity method.
Fiscal Year - The Company utilizes a 52-53 week year ending on the last Sunday in December. In a 52 week fiscal year, each quarterly period is comprised of 13 weeks. The additional week in a 53 week fiscal year is added to the fourth quarter. Fiscal years 2020, 2019 and 2018 consisted of 52 weeks.
Use of Estimates - The preparation of the accompanying consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated.
Cash and Cash Equivalents - Cash equivalents consist of investments that are readily convertible to cash with an original maturity date of three months or less. Cash and cash equivalents include $37.1 million and $44.8 million, as of December 27, 2020 and December 29, 2019, respectively, for amounts in transit from credit card companies since settlement is reasonably assured.
Concentrations of Credit and Counterparty Risk - Financial instruments that potentially subject the Company to a concentration of credit risk and credit losses are through credit card receivables and trade accounts receivable consisting primarily of amounts due for gift card, vendor, franchise and other receivables. Gift card, vendor and other receivables consist primarily of amounts due from gift card resellers and vendor rebates. The Company considers the concentration of credit risk for gift card, vendor and other receivables to be minimal due to the payment histories and general financial condition of its gift card resellers and vendors. Amounts due from franchisees consist of initial franchise fees, royalty income and advertising fees. See Note 8 - Other Current Assets, Net for disclosure of trade receivables by category as of December 27, 2020 and December 29, 2019.
Financial instruments that potentially subject the Company to concentrations of counterparty risk are cash and cash equivalents, restricted cash and derivatives. The Company attempts to limit its counterparty risk by investing in certificates of deposit, money market funds, noninterest-bearing accounts and other highly rated investments. Whenever possible, the Company selects investment grade counterparties and rated money market funds in order to mitigate its counterparty risk. At times, cash balances may be in excess of FDIC insurance limits. See Note 17 - Derivative Instruments and Hedging Activities for a discussion of the Company’s use of derivative instruments and management of credit risk inherent in derivative instruments.
Allowance for Expected Credit Losses - The Company evaluates the collectability of credit card and trade receivables based on historical loss experience by 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. Losses are charged off in the period in which they are determined to be uncollectible. See Note 20 - Allowance for Expected Credit Losses for a discussion of the Company’s allowance for expected credit losses.
The Company assigned its interest, and is contingently liable, under certain real estate leases, primarily related to divested restaurant properties. Contingent lease liabilities related to these guarantees are calculated based on management’s estimate of exposure to losses which includes historical analysis of credit losses, including known instances of default, and existing economic conditions. See Note 22 - Commitments and Contingencies for a discussion of the Company’s contingent lease liabilities.
In instances where there was no established loss history, S&P speculative-grade default rates are utilized as an estimated expected credit loss rate.
Fair Value - Fair value is the price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date. Fair value is categorized into one of the following three levels based on the lowest level of significant input:
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Level 1
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Unadjusted quoted market prices in active markets for identical assets or liabilities
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Level 2
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Observable inputs available at measurement date other than quoted prices included in Level 1
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Level 3
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Unobservable inputs that cannot be corroborated by observable market data
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Inventories - Inventories consist of food and beverages and are stated at the lower of cost (first-in, first-out) or net realizable value.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Restricted Cash - From time to time, the Company may have short-term restricted cash balances consisting of amounts pledged for settlement of deferred compensation plan obligations.
Property, Fixtures and Equipment - Property, fixtures and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful life of the assets. Estimated useful lives by major asset category are generally as follows:
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Buildings (1)
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5 to 30 years
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Furniture and fixtures
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5 to 7 years
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Equipment
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2 to 7 years
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Computer equipment and software
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3 to 7 years
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____________________
(1)Includes improvements to leased properties which are depreciated over the shorter of their useful life or the reasonably certain lease term, including renewal periods that are reasonably certain.
Repair and maintenance costs that maintain the appearance and functionality of the restaurant, but do not extend the useful life of any restaurant asset are expensed as incurred. The Company suspends depreciation and amortization for assets held for sale. The cost and related accumulated depreciation of assets sold or disposed of are removed from the Company’s Consolidated Balance Sheets, and any resulting gain or loss is generally recognized in Other restaurant operating expense in its Consolidated Statements of Operations and Comprehensive (Loss) Income.
The Company capitalizes direct and indirect internal costs associated with the acquisition, development, design and construction of Company-owned restaurant locations as these costs have a future benefit to the Company. Upon restaurant opening, these costs are depreciated and charged to depreciation and amortization expense. Internal costs of $2.7 million, $6.4 million and $6.9 million were capitalized during 2020, 2019 and 2018, respectively.
For 2020 and 2019, computer equipment and software costs of $1.4 million and $7.4 million, respectively, were capitalized. As of December 27, 2020 and December 29, 2019, there was $8.8 million and $25.7 million, respectively, of unamortized computer equipment and software included in Property, fixtures and equipment, net on the Company’s Consolidated Balance Sheets.
Goodwill and Intangible Assets - Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations and is assigned to the reporting unit in which the acquired business will operate. The Company’s indefinite-lived intangible assets consist of trade names and are recorded at fair value as of the date of acquisition. Goodwill and indefinite-lived intangible assets are tested for impairment annually, as of the first day of the second fiscal quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The Company may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If the qualitative assessment is not performed or if the Company determines that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the fair value of the reporting unit is calculated. The carrying value of the reporting unit is compared to its estimated fair value, with any excess of carrying value over fair value deemed to be an indicator of impairment.
Definite-lived intangible assets, which consist primarily of trademarks and reacquired franchise rights, are recorded at fair value as of the date of acquisition, amortized over their estimated useful lives and tested for impairment, using the relief from royalty method, whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Derivatives - The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.
Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. If the derivative qualifies for hedge accounting treatment, any gain or loss on the derivative instrument is recognized in equity as a change to Accumulated other comprehensive loss and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.
The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements, foreign currency exchange rate movements, changes in energy prices and other identified risks. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. The Company has elected not to offset derivative positions in the balance sheet with the same counterparty under the same agreement.
Deferred Financing Fees - For its revolving credit facility, the Company records deferred financing fees related to the issuance of debt obligations in Other assets, net on its Consolidated Balance Sheets. For fees associated with all other debt obligations, the Company records deferred financing fees as a reduction of Long-term debt, net.
The Company amortizes deferred financing fees to interest expense over the term of the respective financing arrangement, primarily using the effective interest method. The Company amortized deferred financing fees of $3.9 million, $2.5 million and $2.6 million to interest expense for 2020, 2019 and 2018, respectively.
Liquor Licenses - The fees from obtaining non-transferable liquor licenses directly issued by local government agencies for nominal fees are expensed as incurred. The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are capitalized as indefinite-lived intangible assets and included in Other assets, net on the Company’s Consolidated Balance Sheets.
Insurance Reserves - The Company carries insurance programs with specific retention levels or high per-claim deductibles for a significant portion of expected losses under its workers’ compensation, general or liquor liability, health, property and management liability insurance programs. The Company records a liability for all unresolved claims and for an estimate of incurred but not reported claims at the anticipated cost that falls below its specified retention levels or per-claim deductible amounts. In establishing reserves, the Company considers actuarial assumptions and judgments regarding economic conditions, and the frequency and severity of claims. Reserves recorded for workers’ compensation and general liability claims are discounted using the average of the one-year and five-year risk-free rate of monetary assets that have comparable maturities.
Share Repurchase - Shares repurchased are retired. The par value of the repurchased shares is deducted from common stock and the excess of the purchase price over the par value of the shares is recorded to Accumulated deficit.
Revenue Recognition - The Company records food and beverage revenues, net of discounts and taxes, upon delivery to the customer. Franchise-related revenues are included in Franchise and other revenues in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income. Royalties, which are a percentage of net sales of the franchisee, are recognized as revenue in the period which the sales are reported to have occurred provided collectability is reasonably assured.
Proceeds from the sale of gift cards, which do not have expiration dates, are recorded as deferred revenue and recognized as revenue upon redemption by the customer. The Company applies the portfolio approach practical expedient to account for gift card contracts and performance obligations. Gift card breakage, the amount of gift
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
cards which will not be redeemed, is recognized using estimates based on historical redemption patterns. If actual redemptions vary from assumptions used to estimate breakage, gift card breakage income may differ from the amount recorded. The Company periodically updates its estimates used for breakage. Breakage revenue is recorded as a component of Restaurant sales in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income. Approximately 84% of deferred gift card revenue is expected to be recognized within 12 months of inception. Gift card sales that are accompanied by a bonus gift card to be used by the customer at a future visit result in a separate deferral of a portion of the original gift card sale. Revenue is recorded when the bonus card is redeemed or expires at the estimated fair market value of the bonus card.
Gift card sales commissions paid to third-party providers are capitalized and subsequently amortized to Other restaurant operating expense based on historical gift card redemption patterns. See Note 4 - Revenue Recognition for rollforwards of deferred gift card sales commissions and unearned gift card revenue.
Advertising fees charged to franchisees are recognized in Franchise and other revenues in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income provided collectability is reasonably assured. Initial franchise and renewal fees are recognized over the term of the franchise agreement and renewal period, respectively. The weighted average remaining term of franchise agreements and renewal periods was approximately 13 years as of December 27, 2020.
The Company maintains a customer loyalty program, Dine Rewards, in the U.S., where customers have the ability to earn a reward after a number of qualified visits. The Company has developed an estimated value of the partial reward earned from each qualified visit, which is recorded as deferred revenue. Each reward has a maximum value and must be redeemed within three months of earning such reward. The revenue associated with the fair value of the qualified visit is recognized upon the earlier of redemption or expiration of the reward. The Company applies the practical expedient to exclude disclosures regarding loyalty program remaining performance obligations, which have original expected durations of less than one year.
The Company collects and remits sales, food and beverage, alcoholic beverage and hospitality taxes on transactions with customers and reports revenue net of taxes in its Consolidated Statements of Operations and Comprehensive (Loss) Income.
Leases - The Company’s determination of whether an arrangement contains a lease is based on an evaluation of whether the arrangement conveys the right to use and control specific property or equipment. The Company leases restaurant and office facilities and certain equipment under operating leases primarily having initial terms between one and 20 years. Restaurant facility leases generally have renewal periods totaling five to 30 years, exercisable at the option of the Company. Contingent rentals represent payment of variable lease obligations based on a percentage of gross revenues, as defined by the terms of the applicable lease agreement for certain restaurant facility leases. The Company also has certain leases, which reset periodically based on a specified index. Such leases are recorded using the index that existed at lease commencement. Subsequent changes in the index are recorded as variable rental payments. Variable rental payments are expensed as incurred in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income and future variable rent obligations are not included within the lease liabilities on the Consolidated Balance Sheets. The depreciable life of lease assets and leasehold improvements are limited by the expected lease term. None of the Company’s leases contain any material residual value guarantees or material restrictive covenants.
The Company accounts for fixed lease and non-lease components of a restaurant facility lease as a single lease component. Additionally, for certain equipment leases, the Company applies a portfolio approach to account for the lease assets and liabilities. Leases with an initial term of 12 months or less are not recorded on its Consolidated Balance Sheets, and are recognized on a straight-line basis over the lease term within Other restaurant operating expense in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Rent expense for the Company’s operating leases, which generally have escalating rentals over the term of the lease and may include rent holidays, is recorded on a straight-line basis over the initial lease term and those renewal periods that are reasonably certain. Rent expense is recorded in Other restaurant operating in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income. Payments received from landlords as incentives for leasehold improvements are recorded as a reduction of the right-of-use asset and amortized on a straight-line basis over the term of the lease as a reduction of rent expense.
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.
Pre-Opening Expenses - Non-capital expenditures associated with opening new restaurants are expensed as incurred and are included in Other restaurant operating expense in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.
Consideration Received from Vendors - The Company receives consideration for a variety of vendor-sponsored programs, such as volume rebates, promotions and advertising allowances. Advertising allowances are intended to offset the Company’s costs of promoting and selling menu items in its restaurants. Vendor consideration is recorded as a reduction of Food and beverage costs or Other restaurant operating expense when recognized in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.
Impairment of Long-Lived Assets and Costs Associated with Exit Activities - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows independent of other assets. For long-lived assets deployed at its restaurants, the Company reviews for impairment at the individual restaurant level. When evaluating for impairment, the total future undiscounted cash flows expected to be generated by the asset are compared to the carrying amount. If the total future undiscounted cash flows of the asset are less than its carrying amount, recoverability is measured by comparing the fair value of the assets to the carrying amount. An impairment loss is recognized in earnings when the asset’s carrying value exceeds its estimated fair value. Fair value is generally estimated using a discounted cash flow model.
Restaurant closure costs, including lease termination fees, are expensed as incurred. When the Company ceases using the property rights under a non-cancelable operating lease, it records a liability for the net present value of any remaining non-rent lease-related obligations as a result of lease termination, less the estimated subtenant cost recovery that can reasonably be obtained for the property. Any subsequent adjustment to that liability as a result of lease termination or changes in estimates of cost recovery is recorded in the period incurred. The associated expense is recorded in Provision for impaired assets and restaurant closings in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.
Restaurant sites and certain other assets to be sold are included in assets held for sale when certain criteria are met, including the requirement that the likelihood of selling the assets within one year is probable.
Advertising Costs - Advertising production costs are expensed in the period when the advertising first occurs. All other advertising costs are expensed in the period in which the costs are incurred. Advertising expense of $67.3 million, $146.1 million and $147.8 million for 2020, 2019 and 2018, respectively, was recorded in Other restaurant operating expense in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Legal Costs - Settlement costs are accrued when they are deemed probable and reasonably estimable. Legal fees are recognized as incurred and are reported in General and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.
Research and Development Expenses (“R&D”) - R&D is expensed as incurred in General and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income. R&D primarily consists of payroll and benefit costs. R&D was $2.4 million, $3.4 million and $3.8 million for 2020, 2019 and 2018, respectively.
Partner Compensation - In addition to base salary, Area Operating Partners, Restaurant Managing Partners and Chef Partners generally receive performance-based bonuses for providing management and supervisory services to their restaurants, certain of which may be based on a percentage of their restaurants’ monthly operating results or cash flows and/or total controllable income (“Monthly Payments”).
Certain Restaurant Managing Partners and Chef Partners in the U.S. (“U.S. Partners”) may also participate in deferred compensation programs and other performance-based compensation programs. The Company may invest in corporate-owned life insurance policies, which are held within an irrevocable grantor or “rabbi” trust account for settlement of certain of the Company’s obligations under the deferred compensation plans.
Many of the Company’s international Restaurant Managing Partners are given the option to purchase participation interests in the cash distributions of the restaurants they manage. The amount, terms and availability vary by country.
The Company estimates future bonuses and deferred compensation obligations to U.S. Partners and Area Operating Partners, using current and historical information on restaurant performance and records the long-term portion of partner obligations in Other long-term liabilities, net on its Consolidated Balance Sheets. Monthly Payments and deferred compensation expenses for U.S. Partners are included in Labor and other related expenses and Monthly Payments and bonus expense for Area Operating Partners are included in General and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.
Stock-based Compensation - Stock-based compensation awards are measured at fair value at the date of grant and expensed over their vesting or service periods. Stock-based compensation expense is recognized only for those awards expected to vest. The expense, net of forfeitures, is recognized using the straight-line method. Forfeitures of share-based compensation awards are recognized as they occur.
Basic and Diluted (Loss) Earnings per Share - The Company computes basic earnings per share based on the weighted average number of common shares that were outstanding during the period. Except where the result would be antidilutive, diluted earnings per share includes the dilutive effect of common stock equivalents, consisting of restricted stock units, performance-based share units and stock options, and the Company’s convertible senior notes and related warrants, using the treasury stock method. Performance-based share units are considered dilutive when the related performance criterion has been met.
As of December 27, 2020, the Company expected to settle the principal amount of its outstanding convertible senior notes in cash and any excess in shares. As a result, only the amounts in excess of the principal amount, if applicable, were considered in diluted earnings per share under the treasury stock method.
On December 28, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” (“ASU No. 2020-06”) and transitioned to the “if-converted” method for calculating diluted earnings per share required under the new standard beginning in 2021. The “if-converted” method requires inclusion in diluted earnings per share the full number of common shares issuable upon conversion, unless settlement is required to be
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
paid in cash upon conversion. See Recently Adopted Financial Accounting Standards below for additional details regarding the impact of adopting ASU No. 2020-06.
Foreign Currency Translation and Transactions - For non-U.S. operations, the functional currency is the local currency. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the balance sheet date with the translation adjustments recorded in Accumulated other comprehensive loss in the Company’s Consolidated Statements of Changes in Stockholders’ Equity. Results of operations are translated using the average exchange rates for the reporting period. Foreign currency exchange transaction losses are recorded in General and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.
Income Taxes - Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in the tax rate is recognized in income in the period that includes the enactment date of the rate change. A valuation allowance may reduce deferred income tax assets to the amount that is more likely than not to be realized.
The Company records a tax benefit for an uncertain tax position using the highest cumulative tax benefit that is more likely than not to be realized. The Company adjusts its liability for unrecognized tax benefits in the period in which it determines the issue is effectively settled, the statute of limitations expires or when more information becomes available. Liabilities for unrecognized tax benefits, including penalties and interest, are recorded in Accrued and other current liabilities and Other long-term liabilities, net on the Company’s Consolidated Balance Sheets.
Recently Adopted Financial Accounting Standards - On December 28, 2020, the Company adopted ASU No. 2020-06, which removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. ASU No. 2020-06 also requires the application of the “if-converted” method for calculating diluted earnings per share and the treasury stock method is no longer available. The Company adopted ASU No. 2020-06 using the modified retrospective approach which resulted in a cumulative-effect adjustment that increased (decreased) the following Consolidated Balance Sheet accounts during the first quarter of 2021:
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ADJUSTMENT
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CONSOLIDATED BALANCE SHEET CLASSIFICATION
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AMOUNT
(in millions)
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Deferred tax impact of cumulative-effect adjustment
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Deferred income tax assets, net
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$
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14.9
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Debt discount reclassification
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Long-term debt, net
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$
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59.9
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Equity issuance costs reclassification
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Long-term debt, net
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$
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(2.1)
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Debt discount amortization reclassification, net of tax
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Accumulated deficit
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$
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4.4
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Net impact of cumulative-effect adjustment
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Additional paid-in capital
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$
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(47.3)
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After adopting ASU No. 2020-06, the Company’s convertible senior notes will be reflected entirely as a liability since the embedded conversion feature is no longer separately presented within stockholders’ equity. During 2020, the Company recognized debt discount amortization of $6.3 million within Interest expense, net related to its convertible senior notes. In February 2021, the Company made an irrevocable election under the indenture to require the principal portion of its convertible senior notes to be settled in cash and any excess in shares. Following the irrevocable notice, only the amounts settled in excess of the principal will be considered in diluted earnings per share under the “if-converted” method.
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.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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 application of expedients allowable under ASU No. 2020-04 did not have a material effect on the Company’s financial statements. The Company continues to evaluate the impact of the guidance and may apply other elections, as applicable.
On December 30, 2019, the Company adopted 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 expected credit losses, net of a $1.5 million increase in 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 20 - Allowance for Expected Credit Losses for additional details regarding the Company’s allowance for expected credit losses.
On December 31, 2018, the Company adopted ASU No. 2016-02: Leases (Topic 842) (“ASU No. 2016-02”), ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transitioning to Topic 842,” (“ASU No. 2018-01”) and ASU No. 2018-11: Leases (Topic 842): Targeted Improvements (“ASU No. 2018-11”). ASU No. 2016-02 requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. ASU No. 2018-01 allows an entity to elect an optional transition practical expedient to not evaluate land easements that exist or expired before the Company’s adoption of ASU No. 2016-02. ASU No. 2018-11 allows for an additional transition method, which permits use of the effective date of adoption as the date of initial application of ASU No. 2016-02 without restating comparative period financial statements and provides entities with a practical expedient that allows entities to elect not to separate lease and non-lease components when certain conditions are met.
The Company adopted ASU No. 2016-02 using December 31, 2018 as the date of initial application. Consequently, financial information and the disclosures required under the new standard were not provided for dates and periods before December 31, 2018. The Company also elected a transition package including practical expedients that permitted it not to reassess the classification and initial direct costs of expired or existing contracts and leases, to not separate lease and non-lease components of restaurant facility leases executed subsequent to adoption, and to not evaluate land easements that exist or expired before the adoption. In preparation for adoption, the Company implemented a new lease accounting system.
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 - Continued
3. COVID-19 Charges
Following is a summary of the charges recorded in connection with the COVID-19 pandemic for the period indicated (dollars in thousands):
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|
|
|
|
|
|
|
CHARGES
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME CLASSIFICATION
|
|
|
|
FISCAL YEAR
|
|
|
|
|
2020
|
Inventory obsolescence and spoilage
|
|
Food and beverage costs
|
|
|
|
$
|
10,450
|
|
|
|
|
|
|
|
|
Compensation for idle employees (1)
|
|
Labor and other related
|
|
|
|
29,993
|
|
Other operating charges
|
|
Other restaurant operating
|
|
|
|
3,219
|
|
Lease guarantee contingent liabilities (2)
|
|
General and administrative
|
|
|
|
4,188
|
|
Allowance for expected credit losses (3)
|
|
General and administrative
|
|
|
|
3,334
|
|
Other charges
|
|
General and administrative
|
|
|
|
2,719
|
|
Right-of-use asset impairment (4)
|
|
Provision for impaired assets and restaurant closings
|
|
|
|
32,992
|
|
Fixed asset impairment (4)
|
|
Provision for impaired assets and restaurant closings
|
|
|
|
34,423
|
|
Goodwill and other impairment (5)
|
|
Provision for impaired assets and restaurant closings
|
|
|
|
3,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
124,508
|
|
________________
(1)Represents relief pay for hourly employees impacted by the closure of dining rooms, net of $14.9 million of employee retention tax credits.
(2)Represents additional contingent liabilities recorded for lease guarantees related to certain former restaurant locations now operated by franchisees or other third parties.
(3)Includes additional reserves to reflect an increase in expected credit losses, primarily related to franchise receivables.
(4)Includes impairments resulting from the remeasurement of assets utilizing projected future cash flows revised for current economic conditions, restructuring charges, the closure of certain restaurants and in connection with the Out West Resolution Agreement. See Note 5 - Impairments, Exit Costs and Disposals and Note 4 - Revenue Recognition, for details regarding COVID-19 Restructuring costs and the Out West Resolution Agreement, respectively.
(5)Includes impairment of goodwill for the Company’s Hong Kong subsidiary. See Note 10 - Goodwill and Intangible Assets, Net for details regarding impairment of goodwill.
4. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
|
|
|
|
|
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant sales
|
$
|
3,144,636
|
|
|
$
|
4,075,014
|
|
|
$
|
4,060,871
|
|
|
|
|
|
|
|
|
|
Franchise and other revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise revenue
|
$
|
21,195
|
|
|
$
|
52,147
|
|
|
$
|
52,906
|
|
|
|
|
|
|
|
|
|
Other revenue
|
4,730
|
|
|
12,228
|
|
|
12,636
|
|
|
|
|
|
|
|
|
|
Total Franchise and other revenues
|
$
|
25,925
|
|
|
$
|
64,375
|
|
|
$
|
65,542
|
|
|
|
|
|
|
|
|
|
Total revenues
|
$
|
3,170,561
|
|
|
$
|
4,139,389
|
|
|
$
|
4,126,413
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
The following table includes the disaggregation of Restaurant sales and Franchise revenue, by restaurant concept and major international market, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
|
2020
|
|
2019
|
|
2018
|
(dollars in thousands)
|
RESTAURANT SALES
|
|
FRANCHISE REVENUE
|
|
RESTAURANT SALES
|
|
FRANCHISE REVENUE
|
|
RESTAURANT SALES
|
|
FRANCHISE REVENUE
|
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
Outback Steakhouse
|
$
|
1,760,071
|
|
|
$
|
9,898
|
|
|
$
|
2,135,776
|
|
|
$
|
38,614
|
|
|
$
|
2,098,696
|
|
|
$
|
40,422
|
|
Carrabba’s Italian Grill (1)
|
497,212
|
|
|
1,309
|
|
|
613,031
|
|
|
2,112
|
|
|
647,454
|
|
|
601
|
|
Bonefish Grill
|
396,193
|
|
|
346
|
|
|
574,004
|
|
|
787
|
|
|
578,139
|
|
|
833
|
|
Fleming’s Prime Steakhouse & Wine Bar
|
209,564
|
|
|
—
|
|
|
307,199
|
|
|
—
|
|
|
304,064
|
|
|
—
|
|
Other
|
6,507
|
|
|
—
|
|
|
4,658
|
|
|
—
|
|
|
5,845
|
|
|
—
|
|
U.S. total
|
$
|
2,869,547
|
|
|
$
|
11,553
|
|
|
$
|
3,634,668
|
|
|
$
|
41,513
|
|
|
$
|
3,634,198
|
|
|
$
|
41,856
|
|
International
|
|
|
|
|
|
|
|
|
|
|
|
Outback Steakhouse Brazil
|
$
|
206,280
|
|
|
$
|
—
|
|
|
$
|
355,837
|
|
|
$
|
—
|
|
|
$
|
348,394
|
|
|
$
|
—
|
|
Other (2)
|
68,809
|
|
|
9,642
|
|
|
84,509
|
|
|
10,634
|
|
|
78,279
|
|
|
11,050
|
|
International total
|
$
|
275,089
|
|
|
$
|
9,642
|
|
|
$
|
440,346
|
|
|
$
|
10,634
|
|
|
$
|
426,673
|
|
|
$
|
11,050
|
|
Total
|
$
|
3,144,636
|
|
|
$
|
21,195
|
|
|
$
|
4,075,014
|
|
|
$
|
52,147
|
|
|
$
|
4,060,871
|
|
|
$
|
52,906
|
|
____________________
(1)In 2019, the Company sold 18 Carrabba’s Italian Grill restaurants. These restaurants are now operated as franchises.
(2)Includes Restaurant sales for the Company’s Abbraccio concept in Brazil.
The following table includes assets and liabilities from contracts with customers included on the Company’s Consolidated Balance Sheets as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
|
|
|
|
|
|
Other current assets, net
|
|
|
|
|
|
|
|
|
|
Deferred gift card sales commissions
|
$
|
19,300
|
|
|
$
|
18,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned revenue
|
|
|
|
|
|
|
|
|
|
Deferred gift card revenue
|
$
|
373,048
|
|
|
$
|
358,757
|
|
|
|
|
|
|
|
Deferred loyalty revenue
|
8,099
|
|
|
10,034
|
|
|
|
|
|
|
|
Deferred franchise fees - current
|
469
|
|
|
491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Unearned revenue
|
$
|
381,616
|
|
|
$
|
369,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities, net
|
|
|
|
|
|
|
|
|
|
Deferred franchise fees - non-current
|
$
|
4,301
|
|
|
$
|
4,599
|
|
|
|
|
|
|
|
The following table is a rollforward of deferred gift card sales commissions for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
|
|
Balance, beginning of period
|
$
|
18,554
|
|
|
$
|
16,431
|
|
|
$
|
16,231
|
|
|
|
Deferred gift card sales commissions amortization
|
(20,927)
|
|
|
(26,094)
|
|
|
(27,227)
|
|
|
|
Deferred gift card sales commissions capitalization
|
22,923
|
|
|
29,894
|
|
|
28,980
|
|
|
|
Other
|
(1,250)
|
|
|
(1,677)
|
|
|
(1,553)
|
|
|
|
Balance, end of period
|
$
|
19,300
|
|
|
$
|
18,554
|
|
|
$
|
16,431
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
The following table is a rollforward of unearned gift card revenue for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
|
|
Balance, beginning of period
|
$
|
358,757
|
|
|
$
|
333,794
|
|
|
$
|
323,628
|
|
|
|
Gift card sales
|
306,016
|
|
|
420,229
|
|
|
419,172
|
|
|
|
Gift card redemptions
|
(277,675)
|
|
|
(376,477)
|
|
|
(388,954)
|
|
|
|
Gift card breakage
|
(14,050)
|
|
|
(18,789)
|
|
|
(20,052)
|
|
|
|
Balance, end of period
|
$
|
373,048
|
|
|
$
|
358,757
|
|
|
$
|
333,794
|
|
|
|
Franchisee Deferred Payment Agreement - On December 27, 2020, the Company entered into an agreement (the “Resolution Agreement”) with Cerca Trova Southwest Restaurant Group, LLC (d/b/a Out West Restaurant Group) and certain of its affiliates (collectively, “Out West”), a franchisee of approximately 90 Outback Steakhouse restaurants in the western United States, primarily in California. The Resolution Agreement ends on December 31, 2023 or upon the earlier occurrence of certain specified events, including the sale of all or substantially all of the assets or equity of Out West, bankruptcy or a liquidation event (“Qualifying Event”) (the “Forbearance Period”). Prior to the Resolution Agreement, Out West was in default of its franchise agreements for nonpayment of certain amounts due, and simultaneously in default of its credit agreement with its lenders primarily due to the significant impact of the COVID-19 pandemic. Under the terms of the Resolution Agreement, the Company agreed to:
•not call upon any previous default under the existing franchise agreements during the Forbearance Period;
•reduce future advertising fees to 2.25% of gross sales during the Forbearance Period;
•permanently waive unpaid royalty and advertising fees for the period of February 24, 2020 to July 26, 2020;
•allow for closure of four restaurants and certain sublease modifications (the “Property Concessions”);
•allow for closure of up to ten additional restaurants during the first 12 months of the Resolution Agreement, without imposition of any penalties or accelerated royalties;
•defer all non-waived past due royalties and advertising fees through November 22, 2020, and for certain permitted restaurant closings in connection with the Property Concessions, defer accelerated rent and royalties that otherwise would have been due under the terms and conditions of the respective franchise agreements and leases or subleases (the “Initial Deferred Balance”), and
•defer all past due rents through December 27, 2020 on subleased properties totaling $3.6 million until April 2021 when the balance will be repaid over an 18-month period.
In connection with the Property Concessions, the Company recognized $4.7 million of lease right-of-use asset impairment during the thirteen weeks ended December 27, 2020, within the U.S. segment.
No deferred or previously waived amounts have been recorded as revenue, with the exception of a $3.1 million receivable balance that had been previously fully reserved. Collections of deferred amounts, and any future amounts due under the Resolution Agreement or the Company’s franchise agreements after November 22, 2020, will be recognized when collectability is reasonably assured.
Out West also entered into a Forbearance Agreement and Second Amendment to Credit and Guaranty Agreement (“Forbearance Agreement”) with its lenders that, in conjunction with the Resolution Agreement, provides, among other things, for a pre-determined calculation of available monthly cash (“Available Cash”) that Out West may use to settle its obligations due to the Company and its lenders. Available Cash is calculated net of operating expenses, including local marketing expenditures required under the Resolution Agreement. Under the Resolution Agreement, if Out West is unable to satisfy monthly royalty or advertising fees with Available Cash, such amounts will automatically increase the Initial Deferred Balance. The entire deferred balance will become collectible upon any Qualifying Event. If the Qualifying Event is the sale of all or substantially all of the assets or equity of Out West, the sale proceeds will be applied, between the Company and Out West’s lenders, in accordance with the payment priority established in the Resolution Agreement and Forbearance Agreement; if the sales proceeds are insufficient to satisfy the deferred balance due to the Company, then the Company agreed to permanently waive any remaining deferred balance due to the Company.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
5. Impairments, Exit Costs and Disposals
The components of Provision for impaired assets and restaurant closings are as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Impairment losses
|
|
|
|
|
|
U.S. (1)
|
$
|
65,129
|
|
|
$
|
6,381
|
|
|
$
|
15,342
|
|
International (1) (2)
|
3,468
|
|
|
2,026
|
|
|
11,457
|
|
Corporate (3)
|
6,226
|
|
|
727
|
|
|
—
|
|
Total impairment losses
|
$
|
74,823
|
|
|
$
|
9,134
|
|
|
$
|
26,799
|
|
Restaurant closure expenses (benefits)
|
|
|
|
|
|
U.S. (1)
|
$
|
1,358
|
|
|
$
|
(105)
|
|
|
$
|
6,536
|
|
International (1)
|
173
|
|
|
56
|
|
|
3,528
|
|
Total restaurant closure expenses (benefits)
|
$
|
1,531
|
|
|
$
|
(49)
|
|
|
$
|
10,064
|
|
Provision for impaired assets and restaurant closings
|
$
|
76,354
|
|
|
$
|
9,085
|
|
|
$
|
36,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1)U.S. and international impairment and closure charges during 2020 primarily relate to the COVID-19 pandemic, including charges related to the COVID-19 Restructuring discussed below and the Out West Resolution Agreement. See Note 3 - COVID-19 Charges for details regarding the impact of the COVID-19 pandemic on the Company’s financial results.
(2)Includes goodwill impairment charges of $2.0 million during 2020. See Note 10 - Goodwill and Intangible Assets, Net for details regarding impairment of goodwill.
(3)Corporate impairment charges during 2020 primarily relate to transformational initiatives.
COVID-19 Restructuring - During 2020, the Company recognized pre-tax asset impairments and closure charges in connection with the closure of 22 U.S. 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 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME CLASSIFICATION
|
|
|
|
FISCAL YEAR
|
|
|
|
|
DESCRIPTION
|
|
|
|
|
2020
|
|
|
|
|
Property, fixtures and equipment impairments
|
|
Provision for impaired assets and restaurant closings
|
|
|
|
$
|
18,766
|
|
|
|
|
|
Lease right-of-use asset impairments and closure charges
|
|
Provision for impaired assets and restaurant closings
|
|
|
|
5,003
|
|
|
|
|
|
Severance and other expenses
|
|
General and administrative
|
|
|
|
1,097
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Restructuring - The Company recognized asset impairment and closure charges of $2.0 million and $13.9 million during 2019 and 2018, respectively, related to restructuring of certain international markets, including Puerto Rico and China, within the international segment.
Express Concept Restructuring - In 2018, the Company recognized asset impairment charges of $7.4 million related to the restructuring of its Express concept, within the U.S. segment. As a part of the restructuring, three Express locations closed during 2019.
Refranchising - During 2019, the Company completed the sale of 18 of its existing U.S. Company-owned Carrabba’s Italian Grill restaurants to an existing franchisee for cash proceeds of $3.6 million, net of certain purchase price adjustments. In connection with this, sale the Company recognized asset impairment charges of $5.5 million in 2018, within the U.S. segment. The Company remains contingently liable on certain real estate lease agreements assigned to the buyer.
The remaining impairment and closing charges for the periods presented primarily resulted from locations identified for remodel, relocation or closure and certain other assets.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Accrued Facility Closure and Other Cost Rollforward - The following table is a rollforward of the Company’s closed facility lease liabilities and other accrued costs associated with the closure and restructuring initiatives for the period indicated:
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
|
Beginning of the year
|
$
|
14,542
|
|
|
|
Additions
|
2,458
|
|
|
|
Cash payments
|
(4,572)
|
|
|
|
Accretion
|
1,129
|
|
|
|
Adjustments
|
(678)
|
|
|
|
End of the year (1)
|
$
|
12,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)As of December 27, 2020, the Company had exit-related accruals of $4.3 million recorded in Accrued and other current liabilities and $8.6 million recorded in Non-current operating lease liabilities on its Consolidated Balance Sheet.
Surplus Property Disposals - During 2019, the Company completed the sale of five of its U.S. surplus properties to a franchisee for cash proceeds of $12.7 million, net of certain purchase price adjustments. The transaction resulted in a net gain of $3.6 million, recorded within Other restaurant operating expense in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.
6. (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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(in thousands, except per share data)
|
2020
|
|
2019
|
|
2018
|
Net (loss) income attributable to Bloomin’ Brands
|
$
|
(158,715)
|
|
|
$
|
130,573
|
|
|
$
|
107,098
|
|
Redemption of preferred stock in excess of carrying value (1)
|
(3,496)
|
|
|
—
|
|
|
—
|
|
Net (loss) income attributable to common stockholders
|
$
|
(162,211)
|
|
|
$
|
130,573
|
|
|
$
|
107,098
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
87,468
|
|
|
88,839
|
|
|
92,042
|
|
|
|
|
|
|
|
Effect of diluted securities:
|
|
|
|
|
|
Stock options
|
—
|
|
|
571
|
|
|
1,595
|
|
Nonvested restricted stock units
|
—
|
|
|
295
|
|
|
397
|
|
Nonvested performance-based share units
|
—
|
|
|
72
|
|
|
41
|
|
Diluted weighted average common shares outstanding
|
87,468
|
|
|
89,777
|
|
|
94,075
|
|
|
|
|
|
|
|
Basic (loss) earnings per share attributable to common stockholders
|
$
|
(1.85)
|
|
|
$
|
1.47
|
|
|
$
|
1.16
|
|
Diluted (loss) earnings per share attributable to common stockholders
|
$
|
(1.85)
|
|
|
$
|
1.45
|
|
|
$
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(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 during 2020. See Note 16 - Stockholders’ Equity for additional details.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Share-based compensation-related weighted-average securities outstanding not included in the computation of net (loss) earnings per share attributable to common stockholders because their effect was antidilutive were as follows, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
|
|
(shares in thousands)
|
2020
|
|
2019
|
|
2018
|
|
|
Stock options
|
5,155
|
|
|
4,003
|
|
|
2,879
|
|
|
|
Nonvested restricted stock units
|
682
|
|
|
158
|
|
|
99
|
|
|
|
Nonvested performance-based share units
|
514
|
|
|
277
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
There are approximately 19.348 million shares of the Company’s common stock that underlie its convertible senior notes based on the initial conversion rate and full principal amount. The convertible senior notes will have a dilutive impact on diluted earnings per share beginning 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. For 2020, dilutive excess shares, if applicable, have been excluded from the computation of diluted earnings per share as the effect would be antidilutive given the Company’s net loss. Warrants to purchase approximately 19.348 million shares of the Company’s common shares at $16.64 per share were outstanding as of December 27, 2020 but were also excluded from the computation of diluted earnings per share given the Company’s net loss. Had the Company been in a net income position, the dilutive effect of its convertible senior notes and related warrants on 2020 earnings per share would have been approximately 1.8 million shares, assuming settlement of the principal in cash. See Note 14 - Convertible Senior Notes for additional information regarding the Company’s convertible senior notes.
7. Stock-based and Deferred Compensation Plans
Stock-based Compensation Plans
The Company recognized stock-based compensation expense as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Stock options
|
$
|
3,743
|
|
|
$
|
5,270
|
|
|
$
|
6,378
|
|
Restricted stock units
|
8,559
|
|
|
8,949
|
|
|
9,143
|
|
Performance-based share units
|
2,414
|
|
|
5,471
|
|
|
6,911
|
|
|
$
|
14,716
|
|
|
$
|
19,690
|
|
|
$
|
22,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options - Stock options generally vest and become exercisable over a period of four years in an equal number of shares each year. Stock options have an exercisable life of no more than ten years from the date of grant. The Company settles stock option exercises with authorized but unissued shares of the Company’s common stock.
The following table presents a summary of the Company’s stock option activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except exercise price and contractual life)
|
OPTIONS
|
|
WEIGHTED-
AVERAGE
EXERCISE
PRICE
|
|
WEIGHTED-
AVERAGE
REMAINING
CONTRACTUAL
LIFE (YEARS)
|
|
AGGREGATE
INTRINSIC
VALUE
|
Outstanding as of December 29, 2019
|
6,099
|
|
|
$
|
19.40
|
|
|
6.0
|
|
$
|
18,961
|
|
Granted
|
100
|
|
|
$
|
18.45
|
|
|
|
|
|
Exercised
|
(374)
|
|
|
$
|
12.38
|
|
|
|
|
|
Forfeited or expired
|
(403)
|
|
|
$
|
20.82
|
|
|
|
|
|
Outstanding as of December 27, 2020
|
5,422
|
|
|
$
|
19.76
|
|
|
5.1
|
|
$
|
6,575
|
|
Exercisable as of December 27, 2020
|
4,287
|
|
|
$
|
19.61
|
|
|
4.4
|
|
$
|
6,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
|
2020
|
|
2019
|
|
2018
|
Assumptions:
|
|
|
|
|
|
Weighted-average risk-free interest rate (1)
|
0.90
|
%
|
|
2.34
|
%
|
|
2.66
|
%
|
Dividend yield (2)
|
4.34
|
%
|
|
1.94
|
%
|
|
1.50
|
%
|
Expected term (3)
|
5.5 years
|
|
4.8 years
|
|
5.8 years
|
Weighted-average volatility (4)
|
30.43
|
%
|
|
31.05
|
%
|
|
32.76
|
%
|
|
|
|
|
|
|
Weighted-average grant date fair value per option
|
$
|
3.12
|
|
|
$
|
5.07
|
|
|
$
|
7.23
|
|
________________
(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. The dividend yield during 2020 relates to options granted prior the Company’s Amended Credit Agreement which restricts the payment of dividends. See Note 13 - Long-term Debt, Net for dividend restriction details.
(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 stock option compensation information for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Intrinsic value of options exercised
|
$
|
2,201
|
|
|
$
|
7,929
|
|
|
$
|
52,247
|
|
|
|
|
|
|
|
Cash received from option exercises, net of tax withholding
|
$
|
4,609
|
|
|
$
|
6,501
|
|
|
$
|
40,501
|
|
Fair value of stock options vested
|
$
|
16,468
|
|
|
$
|
18,136
|
|
|
$
|
34,316
|
|
Tax benefits for stock option compensation expense (1)
|
$
|
535
|
|
|
$
|
1,932
|
|
|
$
|
13,085
|
|
|
|
|
|
|
|
Unrecognized stock option expense
|
$
|
3,014
|
|
|
|
|
|
Remaining weighted-average vesting period
|
1.3 years
|
|
|
|
|
________________
(1)Includes excess tax benefits for tax deductions related to the exercise of stock options of $0.3 million, $0.2 million and $8.0 million during 2020, 2019 and 2018, respectively.
Restricted Stock Units - Beginning in 2019, restricted stock units granted generally vest over a period of three years and restricted stock units granted prior to 2019 generally vest over a period of four years, in an equal number of shares each year. Following is a summary of the Company’s restricted stock unit activity:
|
|
|
|
|
|
|
|
|
|
|
|
(shares in thousands)
|
NUMBER OF RESTRICTED STOCK UNIT AWARDS
|
|
WEIGHTED-AVERAGE
GRANT DATE
FAIR VALUE PER AWARD
|
Outstanding as of December 29, 2019
|
1,188
|
|
|
$
|
18.91
|
|
Granted
|
484
|
|
|
$
|
16.66
|
|
Vested
|
(492)
|
|
|
$
|
18.25
|
|
Forfeited
|
(146)
|
|
|
$
|
19.27
|
|
Outstanding as of December 27, 2020
|
1,034
|
|
|
$
|
18.12
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
The following represents restricted stock unit compensation information for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Fair value of restricted stock vested
|
$
|
8,973
|
|
|
$
|
8,200
|
|
|
$
|
9,705
|
|
Tax benefits for restricted stock compensation expense
|
$
|
1,614
|
|
|
$
|
1,672
|
|
|
$
|
2,938
|
|
|
|
|
|
|
|
Unrecognized restricted stock expense
|
$
|
11,437
|
|
|
|
|
|
Remaining weighted-average vesting period
|
1.8 years
|
|
|
|
|
Performance-based Share Units (“PSUs”) - The number of PSUs that vest is determined for each year based on the achievement of certain performance criteria as set forth in the award agreement and may range from zero to 200% of the annual target grant. The PSUs are settled in shares of common stock, with holders receiving one share of common stock for each performance-based share unit that vests. The fair value of PSUs is based on the closing price of the Company’s common stock on the grant date. Compensation expense for PSUs is recognized over the vesting period when it is probable the performance criteria will be achieved.
The following table presents a summary of the Company’s PSU activity:
|
|
|
|
|
|
|
|
|
|
|
|
(shares in thousands)
|
PERFORMANCE-BASED SHARE UNITS
|
|
WEIGHTED-AVERAGE
GRANT DATE
FAIR VALUE PER AWARD
|
Outstanding as of December 29, 2019
|
532
|
|
|
$
|
19.42
|
|
Granted
|
522
|
|
|
$
|
19.14
|
|
Vested
|
(291)
|
|
|
$
|
16.51
|
|
Forfeited
|
(90)
|
|
|
$
|
20.13
|
|
Outstanding as of December 27, 2020
|
673
|
|
|
$
|
20.37
|
|
|
|
|
|
|
|
|
|
The following represents PSU compensation information for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Tax benefits for PSU compensation expense
|
$
|
1,570
|
|
|
$
|
857
|
|
|
$
|
406
|
|
|
|
|
|
|
|
Unrecognized PSU expense
|
$
|
7,601
|
|
|
|
|
|
Remaining weighted-average vesting period (1)
|
1.6 years
|
|
|
|
|
________________
(1)PSUs typically vest after three years.
As of December 27, 2020, the maximum number of shares of common stock available for issuance pursuant to the 2020 Omnibus Incentive Compensation Plan was 9,464,074.
Deferred Compensation Plans
U.S. Partner Deferred Compensations Plans - Certain U.S. Partners may participate in deferred compensation programs that are subject to the rules of Section 409A of the Internal Revenue Code. The Company may invest in corporate-owned life insurance policies, which are held within an irrevocable grantor or “rabbi” trust account for settlement of certain of the obligations under the deferred compensation plans. The deferred compensation obligation due to U.S. Partners under these plans was $28.1 million and $49.0 million as of December 27, 2020 and December 29, 2019, respectively. The rabbi trust is funded through the Company’s voluntary contributions and was fully funded as of December 27, 2020.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Other Compensation Programs - Certain U.S. Partners participate in a non-qualified long-term compensation program that the Company funds as the obligation for each participant becomes due.
401(k) Plan - The Company has a qualified defined contribution plan that qualifies under Section 401(k) of the Internal Revenue Code of 1986, as amended. The Company incurred contribution costs of $5.5 million, $5.4 million and $5.3 million for the 401(k) Plan for 2020, 2019 and 2018, respectively.
Highly Compensated Employee Plan - The Company provides a deferred compensation plan for its highly compensated employees who are not eligible to participate in the 401(k) Plan. The deferred compensation plan allows these employees to contribute a percentage of their base salary and cash bonus on a pre-tax basis. The deferred compensation plan is unsecured and funded through the Company’s voluntary contributions.
8. Other Current Assets, Net
Other current assets, net, consisted of the following as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Prepaid expenses
|
$
|
12,148
|
|
|
$
|
20,218
|
|
Accounts receivable - gift cards, net (1)
|
76,808
|
|
|
104,591
|
|
Accounts receivable - vendors, net (1)
|
8,886
|
|
|
13,465
|
|
Accounts receivable - franchisees, net (1)
|
1,007
|
|
|
1,322
|
|
Accounts receivable - other, net (1)
|
16,782
|
|
|
21,734
|
|
Deferred gift card sales commissions
|
19,300
|
|
|
18,554
|
|
Assets held for sale
|
3,831
|
|
|
3,317
|
|
Other current assets, net
|
12,756
|
|
|
3,261
|
|
|
$
|
151,518
|
|
|
$
|
186,462
|
|
________________
(1)See Note 20 - Allowance for Expected Credit Losses for a rollforward of the related allowance for expected credit losses.
9. Property, Fixtures and Equipment, Net
Property, fixtures and equipment, net, consisted of the following as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Land
|
$
|
40,498
|
|
|
$
|
42,570
|
|
Buildings
|
1,158,257
|
|
|
1,202,434
|
|
Furniture and fixtures
|
450,508
|
|
|
458,169
|
|
Equipment
|
623,982
|
|
|
665,815
|
|
Construction in progress
|
27,102
|
|
|
24,477
|
|
Less: accumulated depreciation
|
(1,412,660)
|
|
|
(1,357,388)
|
|
|
$
|
887,687
|
|
|
$
|
1,036,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surplus Properties - The Company owns certain U.S. restaurant properties and assets that are no longer utilized to operate its restaurants (“surplus properties”). Surplus properties primarily consist of closed properties, which include land and a building, and liquor licenses no longer needed for operations. Surplus properties may be classified on the Consolidated Balance Sheets as assets held for sale or as assets held and used when the Company
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
does not expect to sell these assets within the next 12 months. Following is a summary of the carrying value and number of surplus properties as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
CONSOLIDATED BALANCE SHEET CLASSIFICATION
|
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Surplus properties - assets held for sale
|
Other current assets, net
|
|
$
|
3,831
|
|
|
$
|
3,317
|
|
Surplus properties - assets held and used
|
Property, fixtures and equipment, net
|
|
7,955
|
|
|
18,188
|
|
Total surplus properties
|
|
|
$
|
11,786
|
|
|
$
|
21,505
|
|
|
|
|
|
|
|
Number of surplus properties owned
|
|
|
12
|
|
|
20
|
|
Depreciation and repair and maintenance expense are as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Depreciation expense
|
$
|
173,342
|
|
|
$
|
188,190
|
|
|
$
|
192,099
|
|
Repair and maintenance expense
|
88,829
|
|
|
106,943
|
|
|
102,409
|
|
10. 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 30, 2018
|
$
|
170,657
|
|
|
$
|
124,770
|
|
|
$
|
295,427
|
|
|
|
|
|
|
|
Translation adjustments
|
—
|
|
|
(6,988)
|
|
|
(6,988)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 29, 2019
|
$
|
170,657
|
|
|
$
|
117,782
|
|
|
$
|
288,439
|
|
|
|
|
|
|
|
Translation adjustments
|
—
|
|
|
(15,302)
|
|
|
(15,302)
|
|
Impairment charges
|
—
|
|
|
(1,973)
|
|
|
(1,973)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 27, 2020
|
$
|
170,657
|
|
|
$
|
100,507
|
|
|
$
|
271,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table is a summary of the Company’s gross goodwill balances and accumulated impairments as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
|
DECEMBER 30, 2018
|
(dollars in thousands)
|
GROSS CARRYING AMOUNT
|
|
ACCUMULATED IMPAIRMENTS
|
|
GROSS CARRYING AMOUNT
|
|
ACCUMULATED IMPAIRMENTS
|
|
GROSS CARRYING AMOUNT
|
|
ACCUMULATED IMPAIRMENTS
|
U.S.
|
$
|
838,827
|
|
|
$
|
(668,170)
|
|
|
$
|
838,827
|
|
|
$
|
(668,170)
|
|
|
$
|
838,827
|
|
|
$
|
(668,170)
|
|
International
|
220,390
|
|
|
(119,883)
|
|
|
235,692
|
|
|
(117,910)
|
|
|
242,680
|
|
|
(117,910)
|
|
Total goodwill
|
$
|
1,059,217
|
|
|
$
|
(788,053)
|
|
|
$
|
1,074,519
|
|
|
$
|
(786,080)
|
|
|
$
|
1,081,507
|
|
|
$
|
(786,080)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The COVID-19 outbreak was considered a triggering event during the first quarter of 2020, indicating that the carrying amount of goodwill may not be recoverable. As a result, the Company performed a quantitative assessment for its four U.S. and three international 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 first quarter of 2020. Impairment was not recorded for any of the Company’s other reporting units as a result of the quantitative assessment.
The Company performs its annual assessment for impairment of goodwill and other indefinite-lived intangible assets each year during the second quarter. Since the Company performed a quantitative assessment on the last day of the first quarter of 2020, as described above, the Company utilized the same assumptions and analysis in
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
performing a quantitative annual assessment in its second quarter and concluded that no additional impairment was required. The Company’s 2019 assessment utilized a qualitative assessment and its 2018 assessment utilized a quantitative approach. As a result of these assessments, the Company did not record any goodwill asset impairment charges during 2019 or 2018.
Intangible Assets, net - Intangible assets, net, consisted of the following as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE REMAINING AMORTIZATION PERIOD
(IN YEARS)
|
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
(dollars in thousands)
|
|
GROSS CARRYING VALUE
|
|
ACCUMULATED AMORTIZATION
|
|
NET CARRYING VALUE
|
|
GROSS CARRYING VALUE
|
|
ACCUMULATED AMORTIZATION
|
|
NET CARRYING VALUE
|
Trade names
|
Indefinite
|
|
$
|
414,716
|
|
|
|
|
$
|
414,716
|
|
|
$
|
414,616
|
|
|
|
|
$
|
414,616
|
|
Trademarks
|
8
|
|
81,951
|
|
|
$
|
(51,797)
|
|
|
30,154
|
|
|
81,381
|
|
|
$
|
(47,882)
|
|
|
33,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise agreements
|
0
|
|
14,881
|
|
|
(14,881)
|
|
|
—
|
|
|
14,881
|
|
|
(14,356)
|
|
|
525
|
|
Reacquired franchise rights
|
10
|
|
33,520
|
|
|
(18,407)
|
|
|
15,113
|
|
|
42,390
|
|
|
(20,415)
|
|
|
21,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
9
|
|
$
|
545,068
|
|
|
$
|
(85,085)
|
|
|
$
|
459,983
|
|
|
$
|
553,268
|
|
|
$
|
(82,653)
|
|
|
$
|
470,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company did not record any indefinite-lived intangible asset impairment charges during the periods presented.
Definite-lived intangible assets are amortized on a straight-line basis. The following table presents the aggregate expense related to the amortization of the Company’s trademarks, favorable leases, franchise agreements and reacquired franchise rights for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Amortization expense (1)
|
$
|
6,919
|
|
|
$
|
8,621
|
|
|
$
|
13,377
|
|
________________
(1)Amortization expense is recorded in Depreciation and amortization for fiscal years 2020 and 2019 and Depreciation and amortization and Other restaurant operating expense for fiscal year 2018 in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income.
The following table presents expected annual amortization of intangible assets as of December 27, 2020:
|
|
|
|
|
|
(dollars in thousands)
|
|
2021
|
$
|
5,955
|
|
2022
|
$
|
5,900
|
|
2023
|
$
|
5,830
|
|
2024
|
$
|
5,695
|
|
2025
|
$
|
5,449
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
11. Other Assets, Net
Other assets, net, consisted of the following as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Company-owned life insurance (1)
|
$
|
44,814
|
|
|
$
|
60,126
|
|
Deferred debt issuance costs (2)
|
4,694
|
|
|
4,893
|
|
Liquor licenses
|
24,250
|
|
|
24,289
|
|
Other assets
|
18,868
|
|
|
27,802
|
|
|
$
|
92,626
|
|
|
$
|
117,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)During 2020, the Company withdrew $9.7 million from its Company-owned life insurance policies to pay deferred compensation obligations.
(2)Net of accumulated amortization of $9.0 million and $6.8 million as of December 27, 2020 and December 29, 2019, respectively.
12. Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Accrued rent and current operating lease liabilities (1)
|
$
|
192,369
|
|
|
$
|
174,287
|
|
Accrued payroll and other compensation
|
79,291
|
|
|
101,090
|
|
Accrued insurance
|
20,648
|
|
|
20,500
|
|
Other current liabilities
|
96,013
|
|
|
95,574
|
|
|
$
|
388,321
|
|
|
$
|
391,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)Includes COVID-19-related deferred rent accruals of $12.8 million as of December 27, 2020.
13. Long-term Debt, Net
Following is a summary of outstanding long-term debt, as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
(dollars in thousands)
|
OUTSTANDING BALANCE
|
|
INTEREST RATE
|
|
OUTSTANDING BALANCE
|
|
INTEREST RATE
|
Senior Secured Credit Facility:
|
|
|
|
|
|
|
|
Term loan A (1)
|
$
|
425,000
|
|
|
2.88
|
%
|
|
$
|
450,000
|
|
|
3.40
|
%
|
Revolving credit facility (1)(2)
|
447,000
|
|
|
2.88
|
%
|
|
599,000
|
|
|
3.44
|
%
|
Total Senior Secured Credit Facility
|
872,000
|
|
|
|
|
1,049,000
|
|
|
|
Convertible Senior Notes (3)
|
230,000
|
|
|
5.00
|
%
|
|
—
|
|
|
|
Finance lease liabilities
|
2,405
|
|
|
|
|
2,495
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
—
|
|
|
|
|
50
|
|
|
2.18
|
%
|
Less: unamortized debt discount and issuance costs
|
(67,704)
|
|
|
|
|
(2,654)
|
|
|
|
Less: finance lease interest
|
(221)
|
|
|
|
|
(187)
|
|
|
|
Total debt, net
|
1,036,480
|
|
|
|
|
1,048,704
|
|
|
|
Less: current portion of long-term debt
|
(38,710)
|
|
|
|
|
(26,411)
|
|
|
|
Long-term debt, net
|
$
|
997,770
|
|
|
|
|
$
|
1,022,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)Interest rate represents the weighted-average interest rate as of respective periods.
(2)Subsequent to December 27, 2020, the Company made payments of $92.0 million on its revolving credit facility.
(3)See Note 14 - Convertible Senior Notes for details regarding the convertible senior notes.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Bloomin’ Brands, Inc. is a holding company and conducts its operations through its subsidiaries, certain of which have incurred indebtedness as described below.
Amended Credit Agreement - On November 30, 2017, the Company and OSI, as co-borrowers, entered into a credit agreement (the “Credit Agreement”) with a syndicate of institutional lenders, providing for senior secured financing of up to $1.5 billion consisting of a $500.0 million Term loan A and a $1.0 billion revolving credit facility, including a letter of credit and swing line loan sub-facilities (the “Senior Secured Credit Facility”). The Senior Secured Credit Facility matures on November 30, 2022.
Borrowings under the Company’s Senior Secured Credit Facility are subject to various covenants that limit its ability to: incur additional indebtedness; make significant payments; sell assets; pay dividends and other restricted payments; acquire certain assets; effect mergers and similar transactions; and effect certain other transactions with affiliates.
On May 4, 2020, the Company and its wholly-owned subsidiary OSI, as co-borrowers, entered into an amendment to the Credit Agreement (the “Amended Credit Agreement”), which provides relief for the Senior Secured Credit Facility 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).
The Amended Credit Agreement waived 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. The Company is also subject to a 0% Eurocurrency floor under the Amended Credit Agreement.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Once in compliance with the TNLR covenant for the test period ending September 26, 2021, the Company may elect an interest rate at each reset period based on the Alternate Base Rate or the Eurocurrency Rate. The Alternate Base Rate option is the highest of: (i) the prime rate of Wells Fargo Bank, National Association, (ii) the federal funds effective rate plus 0.5 of 1.0% or (iii) the Eurocurrency rate with a one-month interest period plus 1.0% (the “Base Rate”). The Eurocurrency Rate option is the seven, 30, 60, 90 or 180-day Eurocurrency rate (the “Eurocurrency Rate”). The interest rates are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
BASE RATE ELECTION
|
|
EUROCURRENCY RATE ELECTION
|
Term loan A and revolving credit facility
|
50 to 100 basis points over the Base Rate
|
|
150 to 200 basis points over the Eurocurrency Rate
|
|
|
|
|
Interest rates under the Senior Secured Credit Facility are indexed to the London Inter-Bank Offered Rate (“LIBOR”). During 2017, regulatory authorities that oversee financial markets announced that after 2021 they would no longer compel banks currently reporting information used to set LIBOR. As a result, beginning in 2022, LIBOR will no longer be available as a reference rate. Under the terms of the Amended Credit Agreement, in the event of the discontinuance of LIBOR, a mutually agreed-upon alternative benchmark rate will be established to replace LIBOR, which may include the Secured Overnight Financing Rate. The Company does not anticipate the discontinuance of the LIBOR will materially impact its liquidity or financial position.
As of December 27, 2020, $19.3 million of the revolving credit facility was committed for the issuance of letters of credit and not available for borrowing.
The Senior Secured Credit Facility is guaranteed by each of the Company’s current and future domestic subsidiaries and is secured by substantially all now owned or later acquired assets of the Company and OSI, including the Company’s domestic subsidiaries.
As of December 27, 2020 and December 29, 2019, the Company was in compliance with its debt covenants.
Deferred Debt Issuance Costs - The Company deferred $2.9 million of debt issuance costs incurred in connection with the Amended Credit Agreement. Deferred debt issuance costs 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 debt issuance costs were recorded in Long-term debt, net during 2020.
Maturities - Following is a summary of principal payments of the Company’s total consolidated debt outstanding as of the period indicated:
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
2021
|
$
|
38,750
|
|
2022
|
835,053
|
|
2023
|
207
|
|
2024
|
178
|
|
2025
|
230,217
|
|
Thereafter
|
—
|
|
Total payments
|
$
|
1,104,405
|
|
Less: unamortized debt discount and issuance costs
|
(67,704)
|
|
Less: finance lease interest
|
(221)
|
|
Total principal payments
|
$
|
1,036,480
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
The following is a summary of required amortization payments for the Term loan A (dollars in thousands):
|
|
|
|
|
|
|
|
|
SCHEDULED QUARTERLY PAYMENT DATES
|
|
TERM LOAN A
|
|
|
|
March 28, 2021 through December 26, 2021
|
|
$
|
9,375
|
|
March 27, 2022 through September 25, 2022
|
|
$
|
12,500
|
|
The Amended Credit Agreement contains mandatory prepayment requirements for Term loan A. The Company is required to prepay outstanding amounts under these loans with 50% of its annual excess cash flow, as defined in the Amended Credit Agreement. The amount of outstanding loans required to be prepaid in accordance with the debt covenants may vary based on the Company’s leverage ratio and year end results.
14. 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 in 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.
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 is 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.
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.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
The following table includes the outstanding principal amount and carrying value of the 2025 Notes as of the period indicated:
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
Liability component
|
|
Principal
|
$
|
230,000
|
|
Less: Debt discount (1)
|
(59,862)
|
|
Less: Debt issuance costs (1)
|
(5,427)
|
|
Net carrying amount
|
$
|
164,711
|
|
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.
The effective rate of the 2025 Notes over their expected life is 13.73%. Following is a summary of interest expense for the 2025 Notes, by component, for the period indicated:
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
Coupon interest
|
$
|
7,443
|
|
Deferred discount amortization
|
6,275
|
|
Deferred issuance cost amortization
|
569
|
|
Total interest expense
|
$
|
14,287
|
|
During any calendar quarter preceding November 1, 2024 in which the closing price of the Company’s common stock exceeds 130% of the applicable conversion price of the 2025 Notes on at least 20 of the last 30 consecutive trading days of the quarter, holders may in the immediate quarter following, convert all or a portion of their 2025 Notes. Based on the daily closing prices of the Company’s stock during the quarter ended December 27, 2020, holders of the 2025 Notes are eligible to convert their 2025 Notes during the first quarter of 2021. When a conversion notice is received, the Company has the option to pay or deliver cash, shares of the Company’s common stock, or a combination thereof. Accordingly, as of December 27, 2020 the Company could not be required to settle the 2025 Notes in cash and, therefore, the 2025 Notes are classified as long-term debt. As of December 27, 2020, the if-converted value of the 2025 Notes was approximately $366.6 million, which is $136.6 million higher than the initial principal amount.
In February 2021, the Company provided the trustee of the 2025 Notes notice of its irrevocable election under the indenture to settle the principal portion of the 2025 Notes in cash and any excess in shares.
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
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
be, upon conversion of the 2025 Notes. The Warrant Transactions could have a dilutive effect on the Company’s common stock to the extent that the price of its common stock exceeds the strike price of the Warrant Transactions. The strike price 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 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.
15. Other Long-term Liabilities, Net
Other long-term liabilities, net, consisted of the following as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Accrued insurance liability
|
$
|
32,128
|
|
|
$
|
33,818
|
|
Chef and Restaurant Managing Partner deferred compensation obligations
|
32,306
|
|
|
47,831
|
|
Deferred payroll tax liabilities (1)
|
55,204
|
|
|
—
|
|
|
|
|
|
Other long-term liabilities (2)
|
65,717
|
|
|
56,411
|
|
|
$
|
185,355
|
|
|
$
|
138,060
|
|
_______________
(1)Deferred payroll tax liabilities as allowed for in the Coronavirus, Aid, Relief and Economic Security Act. See Note 21 - Income Taxes for details.
(2)The increase in Other long-term liabilities during 2020 primarily relates to $8.9 million of additional contingent lease liabilities subsequent to the adoption of ASU No. 2016-13. See Note 22 - Commitments and Contingencies for details regarding this increase.
16. Stockholders’ Equity
Share Repurchases - Following is a summary of the shares repurchased under the Company’s share repurchase program for the period presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
(dollars in thousands, except per share data)
|
|
|
NUMBER OF SHARES
|
|
|
|
AVERAGE REPURCHASE PRICE PER SHARE
|
|
|
|
AMOUNT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second fiscal quarter
|
|
|
5,469
|
|
|
|
|
$
|
19.56
|
|
|
|
|
$
|
106,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends - The Company declared and paid dividends per share during the periods presented as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS PER SHARE
|
|
AMOUNT
|
(dollars in thousands, except per share data)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
First fiscal quarter
|
$
|
0.20
|
|
|
$
|
0.10
|
|
|
$
|
17,480
|
|
|
$
|
9,140
|
|
Second fiscal quarter
|
—
|
|
|
0.10
|
|
|
—
|
|
|
9,227
|
|
Third fiscal quarter
|
—
|
|
|
0.10
|
|
|
—
|
|
|
8,674
|
|
Fourth fiscal quarter
|
—
|
|
|
0.10
|
|
|
—
|
|
|
8,693
|
|
Total cash dividends declared and paid
|
$
|
0.20
|
|
|
$
|
0.40
|
|
|
$
|
17,480
|
|
|
$
|
35,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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 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.
Accumulated Other Comprehensive Loss (“AOCL”) - Following are the components of AOCL as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Foreign currency translation adjustment
|
$
|
(188,883)
|
|
|
$
|
(152,031)
|
|
Unrealized loss on derivatives, net of tax
|
(22,563)
|
|
|
(17,745)
|
|
Accumulated other comprehensive loss
|
$
|
(211,446)
|
|
|
$
|
(169,776)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following are the components of Other comprehensive loss for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Bloomin’ Brands:
|
|
|
|
|
|
Foreign currency translation adjustment
|
$
|
(36,852)
|
|
|
$
|
(16,882)
|
|
|
$
|
(36,576)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on derivatives, net of tax (1)
|
$
|
(14,741)
|
|
|
$
|
(11,944)
|
|
|
$
|
(7,100)
|
|
Reclassification of adjustments for loss on derivatives included in Net (loss) income, net of tax (2)
|
9,923
|
|
|
1,805
|
|
|
120
|
|
Total unrealized loss on derivatives, net of tax
|
$
|
(4,818)
|
|
|
$
|
(10,139)
|
|
|
$
|
(6,980)
|
|
Other comprehensive loss attributable to Bloomin’ Brands
|
$
|
(41,670)
|
|
|
$
|
(27,021)
|
|
|
$
|
(43,556)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________
(1)Unrealized loss on derivatives is net of tax of $5.1 million, $4.1 million and $2.5 million for 2020, 2019 and 2018, respectively.
(2)Reclassifications of adjustments for loss on derivatives are net of tax. See Note 17 - Derivative Instruments and Hedging Activities for discussion of the tax impact of reclassifications.
17. Derivative Instruments and Hedging Activities
Interest Rate Risk - The Company manages economic risks, including interest rate variability, primarily by managing the amount, sources and duration of its debt funding and through the use of derivative financial instruments. The Company’s objectives in using interest rate derivatives are to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps.
DESIGNATED HEDGES
Cash Flow Hedges of Interest Rate Risk - On September 9, 2014, the Company entered into variable-to-fixed interest rate swap agreements with eight counterparties to hedge a portion of the cash flows of the Company’s variable rate debt (the “2014 Swap Agreements”). The 2014 Swap Agreements had an aggregate notional amount of $400.0 million and matured on May 16, 2019. Under the terms of the 2014 Swap Agreements, the Company paid a weighted-average fixed rate of 2.02% on the notional amount and received payments from the counterparties based on the 30-day LIBOR rate.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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 “2018 Swap Agreements”). The 2018 Swap Agreements have an aggregate notional amount of $550.0 million, a start date of May 16, 2019 (the maturity date of the 2014 Swap Agreements), and mature on November 30, 2022. Under the terms of the 2018 Swap Agreements, the Company pays a weighted-average fixed rate of 3.04% on the notional amount and receives payments from the counterparties 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 $16.1 million will be reclassified to interest expense over the next 12 months related to the 2018 Swap Agreements.
The following table presents the fair value of the Company’s interest rate swaps as well as their classification on the Company’s Consolidated Balance Sheets as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
|
CONSOLIDATED BALANCE SHEET CLASSIFICATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps - liability
|
$
|
14,855
|
|
|
$
|
7,174
|
|
|
Accrued and other current liabilities
|
Interest rate swaps - liability
|
15,640
|
|
|
16,835
|
|
|
Other long-term liabilities, net
|
Total fair value of derivative instruments - liabilities (1)
|
$
|
30,495
|
|
|
$
|
24,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
$
|
1,237
|
|
|
$
|
632
|
|
|
Accrued and other current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1) See Note 19 - 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 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Interest rate swap expense recognized in Interest expense, net
|
$
|
(13,370)
|
|
|
$
|
(2,436)
|
|
|
$
|
(161)
|
|
Income tax benefit recognized in (Benefit) provision for income taxes
|
3,447
|
|
|
631
|
|
|
41
|
|
Total effects of the interest rate swaps on Net (loss) income
|
$
|
(9,923)
|
|
|
$
|
(1,805)
|
|
|
$
|
(120)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company records its derivatives on its Consolidated Balance Sheets on a gross balance basis. The Company’s interest rate swaps are subject to master netting arrangements. As of December 27, 2020, the Company did not have more than one derivative between the same counterparties and as such, there was no netting.
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 December 27, 2020 and December 29, 2019, all counterparties to the interest rate swaps had performed in accordance with their contractual obligations.
The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if the repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on indebtedness.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
As of December 27, 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 $32.2 million and $24.8 million, respectively. As of December 27, 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 December 27, 2020 and December 29, 2019, it could have been required to settle its obligations under the agreements at their termination value of $32.2 million and $24.8 million, respectively.
18. Leases
The following table includes a detail of lease assets and liabilities included on the Company’s Consolidated Balance Sheets as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
CONSOLIDATED BALANCE SHEET CLASSIFICATION
|
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
|
|
Operating lease right-of-use assets
|
Operating lease right-of-use assets
|
|
$
|
1,172,910
|
|
|
$
|
1,266,548
|
|
|
|
Finance lease right-of-use assets (1)
|
Property, fixtures and equipment, net
|
|
1,947
|
|
|
2,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease assets, net
|
|
|
$
|
1,174,857
|
|
|
$
|
1,268,584
|
|
|
|
|
|
|
|
|
|
|
|
Current operating lease liabilities (2)
|
Accrued and other current liabilities
|
|
$
|
176,791
|
|
|
$
|
171,866
|
|
|
|
Current finance lease liabilities
|
Current portion of long-term debt
|
|
1,210
|
|
|
1,361
|
|
|
|
Non-current operating lease liabilities (3)
|
Non-current operating lease liabilities
|
|
1,216,666
|
|
|
1,279,051
|
|
|
|
Non-current finance lease liabilities
|
Long-term debt, net
|
|
974
|
|
|
947
|
|
|
|
Total lease liabilities
|
|
|
$
|
1,395,641
|
|
|
$
|
1,453,225
|
|
|
|
________________
(1)Net of accumulated amortization of $2.3 million and $1.3 million as December 27, 2020 and December 29, 2019, respectively.
(2)Excludes COVID-19-related current deferred rent accruals of $12.8 million as of December 27, 2020 and accrued contingent percentage rent of $2.7 million and $2.4 million, as of December 27, 2020 and December 29, 2019, respectively.
(3)Excludes COVID-19-related non-current deferred rent accruals of $1.2 million as of December 27, 2020.
Following is a summary of expenses and income related to leases recognized in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME CLASSIFICATION
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Operating leases (1)
|
Other restaurant operating
|
|
|
|
|
|
$
|
178,740
|
|
|
$
|
181,397
|
|
|
|
Variable lease cost (2)
|
Other restaurant operating
|
|
|
|
|
|
(2,326)
|
|
|
3,504
|
|
|
|
Finance leases
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of leased assets
|
Depreciation and amortization
|
|
|
|
|
|
1,248
|
|
|
1,400
|
|
|
|
Interest on lease liabilities
|
Interest expense, net
|
|
|
|
|
|
160
|
|
|
264
|
|
|
|
Sublease revenue (3)
|
Franchise and other revenues
|
|
|
|
|
|
(3,121)
|
|
|
(6,542)
|
|
|
|
Lease costs, net (4)
|
|
|
|
|
|
|
$
|
174,701
|
|
|
$
|
180,023
|
|
|
|
________________
(1)Excludes rent expense for office facilities and Company-owned closed or subleased properties of $13.8 million and $14.6 million for 2020 and 2019, respectively, which is included in General and administrative expense and certain supply chain-related rent expenses of $1.3 million for 2020 and 2019, which is included in Food and beverage costs.
(2)Includes COVID-19-related rent abatements for 2020, which are recognized as a reduction to variable rent expense in the month they occur.
(3)Excludes rental income from Company-owned properties of $0.5 million and $2.2 million for 2020 and 2019, respectively.
(4)During 2018, the Company recorded rent expense of $185.4 million, including variable rent expense of $4.5 million, and sublease revenue of $5.6 million.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
As of December 27, 2020, future minimum lease payments and sublease revenues under non-cancelable leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
OPERATING LEASES (1)
|
|
FINANCE LEASES
|
|
SUBLEASE REVENUES
|
2021 (2)
|
$
|
196,616
|
|
|
$
|
1,202
|
|
|
$
|
(5,832)
|
|
2022
|
190,072
|
|
|
517
|
|
|
(5,714)
|
|
2023
|
185,500
|
|
|
209
|
|
|
(5,576)
|
|
2024
|
180,459
|
|
|
184
|
|
|
(5,351)
|
|
2025
|
168,937
|
|
|
184
|
|
|
(5,055)
|
|
Thereafter
|
1,588,417
|
|
|
109
|
|
|
(48,724)
|
|
Total minimum lease payments (receipts) (3)
|
$
|
2,510,001
|
|
|
$
|
2,405
|
|
|
$
|
(76,252)
|
|
Less: Interest
|
(1,102,560)
|
|
|
(221)
|
|
|
|
Present value of future lease payments
|
$
|
1,407,441
|
|
|
$
|
2,184
|
|
|
|
____________________
(1)Includes COVID-19-related current and non-current deferred rent accruals of $12.8 million and $1.2 million, respectively, as of December 27, 2020
(2)Net of operating lease prepaid rent of $6.4 million.
(3)Includes $1.0 billion related to lease renewal options that are reasonably certain of exercise and excludes $74.7 million of signed operating leases that have not yet commenced.
The following table is a summary of the weighted-average remaining lease terms and weighted-average discount rates of the Company’s leases as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
|
|
Weighted-average remaining lease term (1):
|
|
|
|
|
|
Operating leases
|
14.0 years
|
|
14.5 years
|
|
|
Finance leases
|
2.7 years
|
|
1.8 years
|
|
|
Weighted-average discount rate (2):
|
|
|
|
|
|
Operating leases
|
8.54
|
%
|
|
8.52
|
%
|
|
|
Finance leases
|
7.21
|
%
|
|
9.01
|
%
|
|
|
____________________
(1)Includes lease renewal options that are reasonably certain of exercise.
(2)Based on the Company’s incremental borrowing rate at lease commencement.
The following table is a summary of other impacts to the Company’s consolidated financial statements related to its leases for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
177,961
|
|
|
$
|
191,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties Leased to Third Parties - The Company leases certain owned land and buildings to third parties, generally related to closed or refranchised restaurants. The following table is a summary of assets leased to third parties as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Land
|
$
|
9,341
|
|
|
$
|
9,885
|
|
|
|
|
|
Buildings
|
$
|
10,172
|
|
|
$
|
12,823
|
|
Less: accumulated depreciation
|
(6,181)
|
|
|
(6,400)
|
|
Buildings, net
|
$
|
3,991
|
|
|
$
|
6,423
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Sale-leaseback Transactions - The following is a summary of sale-leaseback transactions with third-parties for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
|
|
2019
|
|
2018
|
Gross proceeds from sale-leaseback transactions
|
|
|
$
|
7,337
|
|
|
$
|
17,294
|
|
|
|
|
|
|
|
Number of restaurant properties sold and leased back
|
|
|
2
|
|
|
6
|
|
19. Fair Value Measurements
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
(dollars in thousands)
|
TOTAL
|
|
LEVEL 1
|
|
LEVEL 2
|
|
TOTAL
|
|
LEVEL 1
|
|
LEVEL 2
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income funds
|
$
|
15,404
|
|
|
$
|
15,404
|
|
|
$
|
—
|
|
|
$
|
1,037
|
|
|
$
|
1,037
|
|
|
$
|
—
|
|
Money market funds
|
16,494
|
|
|
16,494
|
|
|
—
|
|
|
12,752
|
|
|
12,752
|
|
|
—
|
|
Restricted cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
428
|
|
|
428
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset recurring fair value measurements
|
$
|
32,326
|
|
|
$
|
32,326
|
|
|
$
|
—
|
|
|
$
|
13,789
|
|
|
$
|
13,789
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accrued and other current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments - interest rate swaps
|
$
|
14,855
|
|
|
$
|
—
|
|
|
$
|
14,855
|
|
|
$
|
7,174
|
|
|
$
|
—
|
|
|
$
|
7,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments - interest rate swaps
|
15,640
|
|
|
—
|
|
|
15,640
|
|
|
16,835
|
|
|
—
|
|
|
16,835
|
|
Total liability recurring fair value measurements
|
$
|
30,495
|
|
|
$
|
—
|
|
|
$
|
30,495
|
|
|
$
|
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 December 27, 2020 and December 29, 2019, the Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.
|
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
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
(dollars in thousands)
|
REMAINING CARRYING VALUE
|
|
TOTAL IMPAIRMENT
|
|
REMAINING CARRYING VALUE
|
|
TOTAL IMPAIRMENT
|
|
REMAINING CARRYING VALUE
|
|
TOTAL IMPAIRMENT
|
Assets held for sale (1)
|
$
|
1,934
|
|
|
$
|
123
|
|
|
$
|
2,049
|
|
|
$
|
315
|
|
|
$
|
8,590
|
|
|
$
|
5,276
|
|
Operating lease right-of-use assets (2)
|
72,615
|
|
|
30,940
|
|
|
6,597
|
|
|
4,284
|
|
|
—
|
|
|
—
|
|
Property, fixtures and equipment (3)
|
26,311
|
|
|
41,077
|
|
|
3,915
|
|
|
4,535
|
|
|
6,464
|
|
|
21,523
|
|
Goodwill and other assets (4)
|
748
|
|
|
2,683
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
101,608
|
|
|
$
|
74,823
|
|
|
$
|
12,561
|
|
|
$
|
9,134
|
|
|
$
|
15,054
|
|
|
$
|
26,799
|
|
________________
(1)Carrying values measured using Level 3 inputs to estimate fair value totaled $1.2 million during 2020. All other assets were valued using Level 2 inputs. Third-party market appraisals or executed sales contracts (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 $0.2 million during 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. Refer to Note 5 - Impairments, Exit Costs and Disposals for a more detailed discussion of impairments.
(3)Carrying values measured using Level 2 inputs to estimate fair value totaled $2.2 million, $2.3 million and $4.6 million for 2020 2019 and 2018, 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 the fair value. Refer to Note 5 - Impairments, Exit Costs and Disposals for a more detailed discussion of impairments.
(4)Other assets generally measured using the quoted market value of comparable assets (Level 2).
See Note 5 - Impairments, Exit Costs and Disposals for information regarding impairment charges resulting from the fair value measurement performed on a nonrecurring basis during 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.
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 for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
UNOBSERVABLE INPUTS
|
|
|
|
2020
|
Weighted-average cost of capital
|
|
|
|
10.4%
|
to
|
11.3%
|
Long-term growth rate
|
|
|
|
|
|
1.5%
|
to
|
2.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Financial Instruments - The Company’s non-derivative financial instruments as of December 27, 2020 and December 29, 2019 consist of cash equivalents, accounts receivable, accounts payable and current and long-term debt. The fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts reported on its Consolidated Balance Sheets due to their short duration.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The following table includes the carrying value and fair value of the Company’s debt by hierarchy level as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 27, 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
|
$
|
425,000
|
|
|
$
|
412,250
|
|
|
|
|
$
|
450,000
|
|
|
$
|
450,563
|
|
|
|
Revolving credit facility
|
$
|
447,000
|
|
|
$
|
419,612
|
|
|
|
|
$
|
599,000
|
|
|
$
|
599,000
|
|
|
|
Convertible Senior Notes
|
$
|
230,000
|
|
|
$
|
413,818
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20. Allowance for Expected Credit Losses
The following table is a rollforward of the Company’s trade receivables allowance for expected credit losses for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
|
|
(dollars in thousands)
|
|
2020
|
|
|
Allowance for expected credit losses, beginning of period
|
|
$
|
199
|
|
|
|
Adjustment for adoption of ASU No. 2016-13
|
|
1,018
|
|
|
|
Provision for expected credit losses
|
|
3,472
|
|
|
|
Charge-off of accounts
|
|
(594)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for expected credit losses, end of period
|
|
$
|
4,095
|
|
|
|
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. During 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 3 - COVID-19 Charges for details regarding the impact of the COVID-19 pandemic on the Company’s financial results and Note 4 - Revenue Recognition for details regarding the Company’s reserved franchise receivables.
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 22 - Commitments and Contingencies for details regarding these lease guarantees.
21. Income Taxes
The following table presents the domestic and foreign components of (Loss) income before (benefit) provision for income taxes for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Domestic
|
$
|
(206,941)
|
|
|
$
|
129,826
|
|
|
$
|
109,965
|
|
Foreign
|
(32,580)
|
|
|
11,864
|
|
|
(9,660)
|
|
|
$
|
(239,521)
|
|
|
$
|
141,690
|
|
|
$
|
100,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Benefit) provision for income taxes consisted of the following for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Current provision:
|
|
|
|
|
|
Federal
|
$
|
2,606
|
|
|
$
|
13,265
|
|
|
$
|
11,089
|
|
State
|
2,301
|
|
|
9,696
|
|
|
6,763
|
|
Foreign
|
2,623
|
|
|
10,502
|
|
|
2,405
|
|
|
$
|
7,530
|
|
|
$
|
33,463
|
|
|
$
|
20,257
|
|
Deferred (benefit) provision:
|
|
|
|
|
|
Federal
|
$
|
(66,498)
|
|
|
$
|
(21,407)
|
|
|
$
|
(28,772)
|
|
State
|
(12,527)
|
|
|
(1,986)
|
|
|
(1,335)
|
|
Foreign
|
(9,231)
|
|
|
(2,497)
|
|
|
617
|
|
|
$
|
(88,256)
|
|
|
$
|
(25,890)
|
|
|
$
|
(29,490)
|
|
(Benefit) provision for income taxes
|
$
|
(80,726)
|
|
|
$
|
7,573
|
|
|
$
|
(9,233)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Income Tax Rate - The reconciliation of income taxes calculated at the United States federal tax statutory rate to the Company’s effective income tax rate is as follows for the periods indicated. Due to the pre-tax book loss for the year ended December 27, 2020, a positive percentage change for such year in the effective tax rate table reflects a favorable income tax benefit, whereas a negative percentage change in the effective tax rate table reflects an unfavorable income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
|
2020
|
|
2019
|
|
2018
|
Income taxes at federal statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
State and local income taxes, net of federal benefit
|
3.3
|
|
|
4.4
|
|
|
5.5
|
|
|
|
|
|
|
|
Employment-related credits, net
|
9.9
|
|
|
(24.7)
|
|
|
(34.6)
|
|
Foreign tax rate differential
|
1.1
|
|
|
3.2
|
|
|
(0.7)
|
|
Net life insurance expense (benefit)
|
0.3
|
|
|
(0.7)
|
|
|
0.6
|
|
Enhanced charitable contributions deduction
|
0.1
|
|
|
(0.6)
|
|
|
(1.3)
|
|
Nondeductible expenses
|
(1.4)
|
|
|
3.9
|
|
|
5.0
|
|
Net changes in deferred tax valuation allowances
|
(0.6)
|
|
|
(1.6)
|
|
|
3.9
|
|
Domestic manufacturing deduction
|
—
|
|
|
—
|
|
|
(0.3)
|
|
Cumulative effect of the Tax Cuts and Jobs Act
|
—
|
|
|
—
|
|
|
0.2
|
|
Noncontrolling interests
|
—
|
|
|
(0.6)
|
|
|
(0.9)
|
|
Excess tax benefits from stock-based compensation arrangements
|
—
|
|
|
(0.3)
|
|
|
(7.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
—
|
|
|
1.3
|
|
|
(0.5)
|
|
Total
|
33.7
|
%
|
|
5.3
|
%
|
|
(9.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 fiscal year 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, modifications to interest deduction limitations and technical corrections on tax depreciation methods for qualified improvement property.
The net increase in the effective income tax rate in 2020 as compared to 2019 was primarily due to the benefit of the tax credits for FICA taxes on certain employees’ tips in 2020 and the 2020 pre-tax book loss.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
The net increase in the effective income tax rate in 2019 as compared to 2018 was primarily due to employment-related credits being a lower percentage of net income in 2019, excess tax benefits from equity-based compensation arrangements recorded in 2018 and an increase in the foreign tax rate differential in 2019. These increases were partially offset by a decrease in valuation allowances recorded against deferred income tax assets in 2019.
The Company has a blended federal and state statutory rate of approximately 26%. The effective income tax rate for 2020 was higher than the blended federal and state statutory rate primarily due to the benefit of tax credits for FICA taxes on certain employees’ tips. The effective income tax rate for fiscal year 2019 was lower than the blended federal and state statutory rate primarily due to the benefit of tax credits for FICA taxes on certain employees’ tips.
Deferred Tax Assets and Liabilities - The income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Deferred income tax assets:
|
|
|
|
Operating lease liabilities
|
$
|
360,690
|
|
|
$
|
378,518
|
|
|
|
|
|
Insurance reserves
|
13,695
|
|
|
13,722
|
|
Unearned revenue
|
44,039
|
|
|
22,230
|
|
Deferred compensation
|
32,779
|
|
|
27,222
|
|
|
|
|
|
Net operating loss carryforwards
|
19,285
|
|
|
9,876
|
|
Federal tax credit carryforwards
|
142,055
|
|
|
115,273
|
|
Partner deposits and accrued partner obligations
|
3,403
|
|
|
4,449
|
|
Other, net
|
24,838
|
|
|
13,706
|
|
Gross deferred income tax assets
|
640,784
|
|
|
584,996
|
|
Less: valuation allowance
|
(18,509)
|
|
|
(14,922)
|
|
Deferred income tax assets, net of valuation allowance
|
622,275
|
|
|
570,074
|
|
Deferred income tax liabilities:
|
|
|
|
Less: operating lease right-of-use asset basis differences
|
(300,387)
|
|
|
(326,166)
|
|
Less: property, fixtures and equipment basis differences
|
(54,725)
|
|
|
(65,404)
|
|
Less: intangible asset basis differences
|
(113,280)
|
|
|
(118,855)
|
|
|
|
|
|
Deferred income tax assets, net
|
$
|
153,883
|
|
|
$
|
59,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net change in deferred tax valuation allowance in 2020 was primarily attributable to net operating losses in certain foreign jurisdictions with full valuation allowances recorded and a full valuation allowance recorded against deferred tax assets recognized in the acquisition of the remaining equity interests of a foreign subsidiary during 2020 that are not more likely than not to be realized. These increases were partially offset by the expiration of net operating loss carryforwards in certain foreign jurisdictions with full valuation allowances recorded.
Undistributed Earnings - As of December 27, 2020, the Company had aggregate accumulated foreign earnings of approximately $40.2 million. This amount consisted primarily of historical earnings from 2017 and prior that were previously taxed in the U.S. under the Tax Cuts and Jobs Act and post-2017 foreign earnings, which the Company may repatriate to the U.S. without additional material U.S. federal income taxes. These amounts are no longer considered indefinitely reinvested in the Company’s foreign subsidiaries.
As of December 27, 2020, the Company maintained a deferred tax liability for state income taxes on historical earnings of $0.2 million. The Company has not recorded a deferred tax liability on the financial statement carrying amount over the tax basis of its investments in foreign subsidiaries because the Company continues to assert that it is indefinitely reinvested in its underlying investments in foreign subsidiaries. The determination of any unrecorded deferred tax liability on this amount is not practicable due to the uncertainty of how these investments would be recovered.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Tax Carryforwards - The amount and expiration dates of tax loss carryforwards and credit carryforwards as of December 27, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
EXPIRATION DATE
|
|
AMOUNT
|
Federal tax credit carryforwards
|
2026
|
-
|
2040
|
|
$
|
158,279
|
|
Foreign loss carryforwards (1)
|
2021
|
-
|
Indefinite
|
|
$
|
73,082
|
|
Foreign tax credit carryforwards
|
Indefinite
|
|
$
|
864
|
|
________________
(1)The Company has a valuation allowance against the foreign loss carryforwards for which it has determined it is more likely than not that some portion or all may not be realized.
As of December 27, 2020, the Company had $155.3 million in general business tax credit carryforwards, which have a 20-year carryforward period and are utilized on a first-in, first-out basis. 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 anticipates generating additional business tax credits in the future years. The amount of business tax credits expected to be generated in 2021 is approximately $30 million to $40 million.
Unrecognized Tax Benefits - As of December 27, 2020 and December 29, 2019, the liability for unrecognized tax benefits was $25.5 million and $27.2 million, respectively. Of the total amount of unrecognized tax benefits, including accrued interest and penalties, $25.5 million and $27.0 million, respectively, if recognized, would impact the Company’s effective tax rate.
The following table summarizes the activity related to the Company’s unrecognized tax benefits for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Balance as of beginning of year
|
$
|
27,201
|
|
|
$
|
25,190
|
|
|
$
|
23,663
|
|
Additions for tax positions taken during a prior period
|
1,061
|
|
|
869
|
|
|
2,461
|
|
Reductions for tax positions taken during a prior period
|
(324)
|
|
|
(255)
|
|
|
(826)
|
|
Additions for tax positions taken during the current period
|
762
|
|
|
2,237
|
|
|
2,017
|
|
|
|
|
|
|
|
Settlements with taxing authorities
|
(1,290)
|
|
|
(44)
|
|
|
(682)
|
|
Lapses in the applicable statutes of limitations
|
(1,857)
|
|
|
(749)
|
|
|
(1,390)
|
|
Translation adjustments
|
(29)
|
|
|
(47)
|
|
|
(53)
|
|
Balance as of end of year
|
$
|
25,524
|
|
|
$
|
27,201
|
|
|
$
|
25,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had approximately $1.9 million accrued for the payment of interest and penalties as of December 27, 2020 and December 29, 2019. The Company recognized immaterial interest and penalties related to uncertain tax positions in the (Benefit) provision for income taxes, for all periods presented.
In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant taxable authorities. Based on the outcome of these examinations, or a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related recorded unrecognized tax benefits for tax positions taken on previously filed tax returns will change by approximately $1.0 million to $2.0 million within the next twelve months.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Open Tax Years - Following is a summary of the open audit years by jurisdiction as of December 27, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
OPEN AUDIT YEARS
|
United States - federal
|
2007
|
-
|
2019
|
United States - state
|
2001
|
-
|
2019
|
Foreign
|
2013
|
-
|
2019
|
22. Commitments and Contingencies
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 December 27, 2020, the undiscounted payments the Company could be required to make in the event of non-payment by the primary lessees was approximately $26.7 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of December 27, 2020 was approximately $20.7 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.
During 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 December 27, 2020, the Company’s recorded contingent lease liability was $9.6 million. See Note 3 - COVID-19 Charges for details regarding the impact of the COVID-19 pandemic on the Company’s financial results.
During the third quarter of 2020, the Company received notices of default pertaining to three leases of divested restaurant properties in circumstances where the Company is contingently liable for the unpaid rent of the current operators. The Company is in active discussions with the respective landlords and believes its recorded reserve is reasonable.
Purchase Obligations - Purchase obligations were $230.6 million and $312.0 million as of December 27, 2020 and December 29, 2019, respectively. These purchase obligations are primarily due within five years, however, commitments with various vendors extend through January 2028. Outstanding commitments consist primarily of food and beverage products related to normal business operations, technology, advertising and restaurant-level service contracts. In 2020, the Company purchased approximately 97% of its U.S. beef raw materials from four beef suppliers that represent more than 80% of the total beef marketplace in the U.S.
Litigation and Other Matters - In relation to various legal matters, the Company had $4.6 million and $3.0 million of liability recorded as of December 27, 2020 and December 29, 2019, respectively. During 2020, 2019 and 2018, the Company recognized $2.3 million, $1.3 million and $1.6 million, respectively, in Other restaurant operating expense in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income for certain legal settlements.
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.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Insurance - As of December 27, 2020, the future undiscounted payments the Company expects for workers’ compensation, general liability and health insurance claims are:
|
|
|
|
|
|
(dollars in thousands)
|
|
2021
|
$
|
20,669
|
|
2022
|
10,537
|
|
2023
|
6,354
|
|
2024
|
3,440
|
|
2025
|
1,962
|
|
Thereafter
|
10,255
|
|
|
$
|
53,217
|
|
|
|
|
|
The following is a reconciliation of the expected aggregate undiscounted reserves to the discounted reserves for insurance claims recognized on the Company’s Consolidated Balance Sheets as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Undiscounted reserves
|
$
|
53,217
|
|
|
$
|
56,953
|
|
Discount (1)
|
(441)
|
|
|
(2,635)
|
|
Discounted reserves
|
$
|
52,776
|
|
|
$
|
54,318
|
|
|
|
|
|
Discounted reserves recognized on the Company’s Consolidated Balance Sheets:
|
|
|
|
Accrued and other current liabilities
|
$
|
20,648
|
|
|
$
|
20,500
|
|
Other long-term liabilities, net
|
32,128
|
|
|
33,818
|
|
|
$
|
52,776
|
|
|
$
|
54,318
|
|
____________________
(1) Discount rates of 0.26% and 1.61% were used for December 27, 2020 and December 29, 2019, respectively.
23. 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, 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 as of December 27, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Revenues for all 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
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
directly related to the performance of the segments, most stock-based compensation expenses and certain bonus expenses.
During 2020, the Company recorded $32.4 million 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 revenues by segment, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Total revenues
|
|
|
|
|
|
U.S.
|
$
|
2,885,542
|
|
|
$
|
3,687,918
|
|
|
$
|
3,687,239
|
|
International
|
285,019
|
|
|
451,471
|
|
|
439,174
|
|
Total revenues
|
$
|
3,170,561
|
|
|
$
|
4,139,389
|
|
|
$
|
4,126,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Segment (loss) income from operations
|
|
|
|
|
|
U.S.
|
$
|
(1,630)
|
|
|
$
|
311,666
|
|
|
$
|
288,959
|
|
International
|
(13,479)
|
|
|
44,428
|
|
|
22,001
|
|
Total segment (loss) income from operations
|
(15,109)
|
|
|
356,094
|
|
|
310,960
|
|
Unallocated corporate operating expense
|
(159,864)
|
|
|
(165,004)
|
|
|
(165,707)
|
|
Total (loss) income from operations
|
(174,973)
|
|
|
191,090
|
|
|
145,253
|
|
Loss on modification of debt
|
(237)
|
|
|
—
|
|
|
—
|
|
Other income (expense), net
|
131
|
|
|
(143)
|
|
|
(11)
|
|
Interest expense, net
|
(64,442)
|
|
|
(49,257)
|
|
|
(44,937)
|
|
(Loss) income before (benefit) provision for income taxes
|
$
|
(239,521)
|
|
|
$
|
141,690
|
|
|
$
|
100,305
|
|
The following table is a summary of Depreciation and amortization expense by segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Depreciation and amortization
|
|
|
|
|
|
U.S.
|
$
|
144,298
|
|
|
$
|
152,881
|
|
|
$
|
158,307
|
|
International
|
23,723
|
|
|
27,491
|
|
|
26,304
|
|
Corporate
|
12,240
|
|
|
16,439
|
|
|
16,982
|
|
Total depreciation and amortization
|
$
|
180,261
|
|
|
$
|
196,811
|
|
|
$
|
201,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
The following table is a summary of capital expenditures by segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
Capital expenditures
|
|
|
|
|
|
U.S.
|
$
|
64,516
|
|
|
$
|
121,646
|
|
|
$
|
162,207
|
|
International
|
18,542
|
|
|
28,496
|
|
|
36,962
|
|
Corporate
|
5,936
|
|
|
8,885
|
|
|
11,754
|
|
Total capital expenditures
|
$
|
88,994
|
|
|
$
|
159,027
|
|
|
$
|
210,923
|
|
The following table sets forth Total assets by segment as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
Assets
|
|
|
|
U.S.
|
$
|
2,672,778
|
|
|
$
|
2,941,831
|
|
International
|
410,322
|
|
|
462,308
|
|
Corporate
|
279,007
|
|
|
188,544
|
|
Total assets
|
$
|
3,362,107
|
|
|
$
|
3,592,683
|
|
Geographic areas — International assets are defined as assets residing in a country other than the U.S. The following table details long-lived assets, excluding goodwill, operating lease right-of-use assets, intangible assets and deferred tax assets, by major geographic area as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
DECEMBER 27, 2020
|
|
DECEMBER 29, 2019
|
U.S.
|
$
|
879,392
|
|
|
$
|
1,023,146
|
|
International
|
|
|
|
Brazil
|
83,041
|
|
|
113,795
|
|
Other
|
17,880
|
|
|
16,246
|
|
Total assets
|
$
|
980,313
|
|
|
$
|
1,153,187
|
|
International revenues are defined as revenues generated from restaurant sales originating in a country other than the U.S. The following table details Total revenues by major geographic area for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
(dollars in thousands)
|
2020
|
|
2019
|
|
2018
|
U.S.
|
$
|
2,885,542
|
|
|
$
|
3,687,918
|
|
|
$
|
3,687,239
|
|
International
|
|
|
|
|
|
Brazil
|
222,283
|
|
|
393,700
|
|
|
376,317
|
|
Other
|
62,736
|
|
|
57,771
|
|
|
62,857
|
|
Total revenues
|
$
|
3,170,561
|
|
|
$
|
4,139,389
|
|
|
$
|
4,126,413
|
|
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
24. Selected Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 FISCAL QUARTERS
(dollars in thousands, except per share data)
|
FIRST (1)
|
|
SECOND (1)
|
|
THIRD (1)
|
|
FOURTH (1)
|
Total revenues
|
$
|
1,008,337
|
|
|
$
|
578,459
|
|
|
$
|
771,260
|
|
|
$
|
812,505
|
|
Loss from operations
|
(41,568)
|
|
|
(111,912)
|
|
|
(14,255)
|
|
|
(7,238)
|
|
Net loss
|
(34,414)
|
|
|
(92,428)
|
|
|
(17,778)
|
|
|
(14,175)
|
|
Net loss attributable to common stockholders
|
(38,107)
|
|
|
(92,256)
|
|
|
(17,637)
|
|
|
(14,211)
|
|
Loss per share attributable to common stockholders:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.44)
|
|
|
$
|
(1.05)
|
|
|
$
|
(0.20)
|
|
|
$
|
(0.16)
|
|
Diluted
|
$
|
(0.44)
|
|
|
$
|
(1.05)
|
|
|
$
|
(0.20)
|
|
|
$
|
(0.16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 FISCAL QUARTERS
(dollars in thousands, except per share data)
|
FIRST (2)
|
|
SECOND (2)
|
|
THIRD (2)
|
|
FOURTH (2)
|
Total revenues
|
$
|
1,128,131
|
|
|
$
|
1,021,930
|
|
|
$
|
967,144
|
|
|
$
|
1,022,184
|
|
Income from operations
|
82,494
|
|
|
43,460
|
|
|
21,958
|
|
|
43,178
|
|
Net income
|
65,649
|
|
|
29,809
|
|
|
9,373
|
|
|
29,286
|
|
Net income attributable to Bloomin’ Brands
|
64,300
|
|
|
29,021
|
|
|
9,248
|
|
|
28,004
|
|
Earnings per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.70
|
|
|
$
|
0.32
|
|
|
$
|
0.11
|
|
|
$
|
0.32
|
|
Diluted
|
$
|
0.69
|
|
|
$
|
0.32
|
|
|
$
|
0.11
|
|
|
$
|
0.32
|
|
____________________
(1)Loss from operations in the first, second, third and fourth quarters include expense of $69.1 million, $32.8 million, $4.2 million and $18.2 million, respectively, for impairments and closure charges, primarily in connection with the COVID-19 pandemic, and severance and other costs related to transformational and restructuring activities. Net loss in the second, third and fourth quarters include expense of $1.4 million, $2.4 million and $2.5 million, respectively, for amortization of the debt discount related to the issuance of the 2025 Notes.
(2)Income from operations in the first, second, third and fourth quarters include expense of $6.0 million, $3.7 million, $3.9 million and $4.0 million, respectively, for impairments, closure charges and severance related to certain restructuring activities and the relocation of certain restaurants. Income from operations in the third and fourth quarters also include $3.8 million of gains related to the sale of certain surplus properties and $6.0 million of benefit from the recognition of certain value-added tax credits in Brazil, respectively.