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Form 8-K Bloomin' Brands, Inc. For: Feb 11

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February 17, 2016 7:03 AM EST


 
 
 
 
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)    February 11, 2016


BLOOMIN’ BRANDS, INC.
(Exact name of registrant as specified in its charter)

Delaware
001-35625
20-8023465
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)

2202 North West Shore Boulevard, Suite 500, Tampa, Florida 33607
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code  (813) 282-1225

 N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 



Item 1.01
Entry Into a Material Definitive Agreement

On February 11, 2016, New Private Restaurant Partners, LLC (“PRP”), a wholly-owned subsidiary of Bloomin’ Brands, Inc. (the “Company”), as borrower, and Wells Fargo Bank, National Association, as lender (the “Lender”), entered into a loan agreement (the “Loan Agreement”), pursuant to which PRP borrowed $300.0 million (the “Loan”). The Loan bears interest, payable monthly, at a variable rate equal to 250 basis points above the seven-day U.S. dollar LIBOR, subject to adjustment in certain circumstances.
The Loan has an initial maturity date of February 11, 2018 (the “Initial Maturity Date”). PRP will have the option to extend the Initial Maturity Date for one twelve-month extension period provided that certain conditions are satisfied, including that, at the Initial Maturity Date, (i) the outstanding Loan balance does not exceed $110.0 million, (ii) OSI Restaurant Partners, LLC, a wholly-owned subsidiary of the Company, does not exceed a specified maximum leverage ratio and has not experienced a credit rating downgrade below specified levels, and (iii) no default exists under the Loan Agreement.
The Loan is secured by mortgages granted in favor of the Lender on 148 properties owned by PRP (the “Properties”), and PRP has made negative pledges with respect to 98 additional unencumbered properties (the “Unencumbered Properties”). The Properties and the Unencumbered Properties are leased by PRP to another wholly-owned subsidiary of the Company pursuant to the Amended and Restated Master Lease Agreement, dated March 27, 2012 and amended on February 11, 2016 (the “Master Lease”).
The Loan Agreement includes provisions that allow the Company to refinance or sell the Properties and the Unencumbered Properties, subject to compliance with certain terms and conditions, including that specified release proceeds are applied against the outstanding Loan balance.
Upon the occurrence and continuation of certain conditions under the Loan Agreement, including if the outstanding Loan balance exceeds $210.0 million on or after March 1, 2017 or $160.0 million on or after September 1, 2017, the Lender will have the right to apply rental income received by PRP under the Master Lease against the outstanding Loan balance.
The Loan Agreement also includes customary representations and warranties, restrictions, covenants and events of default (including a default under the Master Lease).
The proceeds of the Loan were used, together with borrowings under the Company’s revolving credit facility, to prepay a portion, and fully defease the remainder, of the Company’s 2012 commercial mortgage-backed securities loan (the “2012 CMBS Loan”). The total amount of funds necessary to prepay and defease the 2012 CMBS Loan was approximately $479.0 million. Upon prepayment and full defeasance, the Properties and Unencumbered Properties were released as security for the 2012 CMBS Loan.
The Lender and certain of its affiliates have performed investment banking, commercial lending and advisory services for the Company and its subsidiaries from time to time, for which they have received customary fees and expenses, including in connection with the Company’s initial public offering and credit facilities. These parties may, from time to time, engage in transactions with, and perform services for the Company and its subsidiaries in the ordinary course of their business.
Item 2.02
Results of Operations and Financial Condition

On February 17, 2016, the Company issued a press release reporting its financial results for the thirteen weeks ended December 27, 2015. A copy of the release is attached as Exhibit 99.1.

The information contained in Item 2.02 of this report, and the exhibit attached hereto, is being furnished and shall not be deemed “filed” for any purpose, and shall not be deemed incorporated by reference in any document whether or not filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, regardless of any general incorporation language in any such document.

2



Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information set forth in Item 1.01 is incorporated herein by reference.

Item 2.05
Costs Associated with Exit or Disposal Activities

On February 12, 2016, the Company decided to close 14 Bonefish restaurants (“Bonefish Restructuring”). The Company expects to substantially complete these restaurant closings through the first quarter of 2019. In connection with the Bonefish Restructuring, the Company reassessed the future undiscounted cash flows of the impacted restaurants, and as a result, the Company recognized pre-tax asset impairments of approximately $24.2 million during the thirteen weeks and fiscal year ended December 27, 2015.

The Company currently expects to incur additional charges of approximately $4.5 million to $7.5 million over the next five years related to the closures. Such costs include lease obligations, employee terminations and other closure related obligations. Total future cash expenditures of $11.0 million to $13.5 million, primarily related to lease liabilities, are expected to occur through October 2024.

The amounts and timing of all estimates are subject to a number of assumptions and actual results may differ.

Item 9.01
Financial Statements and Exhibits

(d) Exhibits.

 
Exhibit
Number
 
 
Description
 
 
 
 
 
99.1
 
Press Release of Bloomin’ Brands, Inc. dated February 17, 2016


3


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



 
 
 
BLOOMIN’ BRANDS, INC.
 
 
 
(Registrant)
 
 
 
 
Date:
February 17, 2016
By:
/s/ David J. Deno
 
 
 
David J. Deno
 
 
 
Executive Vice President and Chief Financial and Administrative Officer
(Principal Financial and Accounting Officer)


4



 
NEWS
 
Exhibit 99.1
 
 
 
 
 
Chris Meyer
 
 
 
Group Vice President, IR & Finance
 
 
 
(813) 830-5311
 
 

Bloomin’ Brands Announces 2015 Fourth Quarter Adjusted Diluted EPS of $0.30 and Diluted EPS of $0.14;
Approves $250 Million Share Repurchase Program;
Provides 2016 Guidance Including Adjusted Diluted EPS Growth of At Least 10% (13% Constant Currency)

TAMPA, Fla., February 17, 2016 - Bloomin’ Brands, Inc. (Nasdaq: BLMN) today reported results for the fourth quarter (“Q4 2015”) and fiscal year ended December 27, 2015 (“Fiscal Year 2015”) compared to the fourth quarter (“Q4 2014”) and fiscal year ended December 28, 2014 (“Fiscal Year 2014”).

Key highlights for Q4 2015 include the following:

•
Adjusted restaurant margin was 16.5% versus 15.7% in Q4 2014 and U.S. GAAP restaurant margin was 16.1% versus 16.3% in Q4 2014
•
Added 11 new restaurants, including eight in international markets
•
Comparable sales for Outback Steakhouse in Brazil increased 7.3%

Key highlights for Fiscal Year 2015 include the following:

•
Adjusted restaurant margin was 16.5% versus 15.9% in Fiscal Year 2014 and U.S. GAAP restaurant margin was 16.5% versus 16.1% in Fiscal Year 2014
•
Added 49 new restaurants, including 29 in international markets
•
The Company repurchased approximately 7.6 million shares of common stock for a total of $170 million

Subsequent to Q4 2015:

•
Extinguished the 2012 CMBS Loan using proceeds from a new $300.0 million bridge loan and borrowings from our revolving credit facility. We anticipate interest savings of approximately $12.0 million in 2016.
•
The Company’s Board of Directors authorized a new $250.0 million share repurchase program.

Adjusted Diluted EPS and Diluted EPS
The following table reconciles Adjusted diluted earnings per share to Diluted earnings per share for the periods as indicated below.
 
Q4
 
 
 
FISCAL YEAR
 
 
 
2015
 
2014
 
CHANGE
 
2015
 
2014
 
CHANGE
Adjusted diluted earnings per share
$
0.30

 
$
0.28

 
$
0.02

 
$
1.27

 
$
1.10

 
$
0.17

Adjustments
(0.16
)
 
(0.11
)
 
(0.05
)
 
(0.26
)
 
(0.39
)
 
0.13

Diluted earnings (loss) per share
$
0.14

 
$
0.17

 
$
(0.03
)
 
$
1.01

 
$
0.71

 
$
0.30

 
 
 
 
 
 
 
 
 
 
 
 
____________________
See Non-GAAP Measures later in this release.

1


CEO Comments

“Our fourth quarter earnings were in line with expectations and we achieved our earnings objectives for the year,” said Liz Smith, CEO. “2015 was highlighted by the strength of our International business and ongoing productivity efforts, which led to 60 basis points of adjusted restaurant margin expansion. We delivered this result in the face of elevated commodities, wage inflation and foreign currency headwinds.”

Smith continued, “As we enter 2016, the underlying health of our portfolio remains strong. We are making the necessary investments to enhance our domestic sales performance while executing against our broader portfolio strategies.”


Fourth Quarter Financial Results

(dollars in millions)
Q4 2015
 
Q4 2014
 
% Change
Total revenues
$
1,049.3

 
$
1,108.5

 
(5.3
)%
 
 
 
 
 
 
Adjusted restaurant-level operating margin
16.5
%
 
15.7
%
 
0.8
 %
U.S. GAAP restaurant-level operating margin
16.1
%
 
16.3
%
 
(0.2
)%
 
 
 
 
 
 
Adjusted operating income margin
6.0
%
 
5.2
%
 
0.8
 %
U.S. GAAP operating income margin
3.0
%
 
3.7
%
 
(0.7
)%

•
The decrease in Total revenues was primarily due to the effect of foreign currency translation, lower comparable restaurant sales and lower revenue due to the sale of Roy’s, partially offset by the net benefit of new restaurant openings and closings.

•
The increases in Adjusted restaurant-level operating margin and Adjusted operating income margin were primarily due to productivity savings, lower advertising expense and menu pricing. These increases were partially offset by commodity and wage inflation.

•
The difference between Adjusted and U.S. GAAP restaurant-level operating margins was due to legal settlement expenses in Q4 2015 and a legal settlement gain in Q4 2014.

•
The decrease in U.S. GAAP operating income margin in Q4 2015 was due to lower U.S. GAAP restaurant-level operating margin as described above and costs related to the Bonefish Restructuring, partially offset by the lapping of costs related to the International Restaurant Closure Initiative and impairment costs related to the sale of Roy’s.

















2



Fourth Quarter Comparable Restaurant Sales

THIRTEEN WEEKS ENDED DECEMBER 27, 2015
 
COMPANY- OWNED
Comparable restaurant sales (stores open 18 months or more) (1) (2):
 
 
U.S.
 
 
Outback Steakhouse
 
(2.2
)%
Carrabba’s Italian Grill
 
(4.0
)%
Bonefish Grill
 
(5.4
)%
Fleming’s Prime Steakhouse & Wine Bar
 
(0.3
)%
Combined U.S. (3)
 
(2.8
)%
 
 
 
International
 
 
Outback Steakhouse - Brazil
 
7.3
 %
Outback Steakhouse - South Korea
 
0.0
 %
_________________
(1)
Comparable restaurant sales exclude the effect of fluctuations in foreign currency rates.
(2)
Relocated international restaurants closed more than 30 days and relocated U.S. restaurants closed more than 60 days are excluded from comparable restaurant sales until at least 18 months after reopening.
(3)
U.S. Comparable restaurant sales were negatively impacted by approximately 90 basis points as a result of the holiday shift due to the timing of Halloween and Christmas.



U.S. Segment Operating Results

(dollars in millions)
Q4 2015
 
Q4 2014
 
% Change
U.S.
 
 
 
 
 
Total revenues
$
932.3

 
$
961.2

 
(3.0
)%
 
 
 
 
 
 
Adjusted restaurant-level operating margin
15.8
%
 
15.3
%
 
0.5
 %
U.S. GAAP restaurant-level operating margin
15.8
%
 
15.3
%
 
0.5
 %
 
 
 
 
 
 
Adjusted operating income margin
9.2
%
 
8.9
%
 
0.3
 %
U.S. GAAP operating income margin
6.5
%
 
8.1
%
 
(1.6
)%

•
The decrease in Total revenues was primarily due to lower comparable restaurant sales and lower revenue due to the sale of Roy’s, partially offset by the net benefit of new restaurant openings and closings.

•
The increases in Adjusted restaurant-level operating margin, U.S. GAAP restaurant-level operating margin, and Adjusted operating income margin were primarily due to productivity savings, lower advertising expense and menu pricing. These increases were partially offset by commodity and wage inflation.

•
The decrease in U.S. GAAP operating income margin in Q4 2015 was primarily due to costs related to our Bonefish Restructuring. These decreases were partially offset by the lapping of impairment costs related to Roy’s.


3


International Segment Operating Results

(dollars in millions)
Q4 2015
 
Q4 2014
 
% Change
International
 
 
 
 
 
Total revenues
$
117.0

 
$
147.3

 
(20.6
)%
 
 
 
 
 
 
Adjusted restaurant-level operating margin
20.0
%
 
19.5
%
 
0.5
 %
U.S. GAAP restaurant-level operating margin
20.0
%
 
20.0
%
 
—
 %
 
 
 
 
 
 
Adjusted operating income margin
9.4
%
 
10.3
%
 
(0.9
)%
U.S. GAAP operating income margin
8.7
%
 
2.4
%
 
6.3
 %

•
The decrease in Total revenues is primarily due to foreign currency translation and the impact of the International Restaurant Closure Initiative, partially offset by new restaurant openings and higher comparable restaurant sales.

•
The increase in Adjusted restaurant-level operating margin was primarily due to higher average unit volumes, menu pricing and productivity savings, partially offset by higher commodity and wage inflation and product mix.

•
The decrease in Adjusted operating income margin was primarily due to higher depreciation and amortization and higher investment spending for Abbraccio and China in Q4 2015.

•
The increase in U.S. GAAP operating income margin was driven by the lapping of expenses related to our International Restaurant Closure Initiative.

•
Foreign currency translation negatively impacted adjusted operating income by $4.0 million.


Unallocated Corporate Operating Expense

Certain expenses are managed centrally and are not allocated to the U.S. or International segment. In Q4 2015, unallocated expenses at the restaurant operating level were $6.7 million lower than Q4 2014 primarily due to lower incentive compensation expense.


System-wide Development

The following summarizes the Company’s system-wide development for the thirteen weeks ended December 27, 2015:
 
SEPTEMBER 27, 2015
 
OPENINGS
 
CLOSURES
 
DECEMBER 27, 2015
U.S.:
 
 
 
 
 
 
 
Outback Steakhouse—Company-owned
649

 
1

 
—

 
650

Bonefish Grill—Company-owned
208

 
2

 
—

 
210

 
 
 
 
 
 
 
 
International:
 
 
 
 
 
 
 
Company-owned
 
 
 
 
 
 
 
Outback Steakhouse—South Korea
75

 
1

 
(1
)
 
75

Outback Steakhouse—Brazil
71

 
4

 
—

 
75

Other
14

 
2

 
—

 
16

Franchised
57

 
1

 
—

 
58

System-wide development
 
 
11

 
(1
)
 
 

4


Dividend Declaration and Share Repurchases

The Company’s Board of Directors declared a quarterly cash dividend of $0.07 per share to be paid on March 10, 2016 to all stockholders of record as of the close of business on February 29, 2016.

During Q4 2015, the Company repurchased $10.0 million of outstanding stock under our share repurchase program, which left $30.0 million remaining under our 2015 authorization. On February 12, 2016, the Company’s Board of Directors canceled the remaining 2015 authorization and approved a new $250.0 million authorization. The authorization will expire on August 12, 2017.


Bonefish Restructuring

The Company is announcing today its intention to close 14 locations as part of the Bonefish Restructuring. We expect the majority of these restaurants to close in 2016. In connection with these closures, the Company incurred pre-tax asset impairments of approximately $24.2 million during the thirteen weeks ended December 27, 2015. These charges are excluded from our adjusted results.


CMBS Refinancing

•
On February 11, 2016, the Company closed a $300.0 million bridge loan. We used the proceeds from the bridge loan and cash drawdowns from our revolving credit facility to facilitate an extinguishment of the 2012 CMBS Loan. In connection with the extinguishment, the Company anticipates recognizing a loss of $26.0 million to $29.0 million during the first quarter of 2016. These charges will be excluded from our adjusted results.

•
The Company expects to generate annual interest savings of approximately $12.0 million from this transaction. These savings are included in our 2016 adjusted diluted earnings per share growth guidance presented below.


Fiscal 2016 Financial Outlook

The table below presents our current expectations for selected 2016 financial and operating results.
Other Selected Financial Data (in millions, or as otherwise indicated):
 
Current Outlook
Comparable sales for Company-owned core domestic concepts
 
Positive
 
 
 
Commodity inflation
 
Approximately 0.5%
 
 
 
U.S. GAAP and Adjusted Operating Income Margin
 
Increase
 
 
 
Effective income tax rate*
 
26% - 28%
 
 
 
U.S. GAAP and Adjusted diluted earnings per share growth
 
At Least 10%
 
 
 
U.S. GAAP and Adjusted diluted earnings per share growth in Constant Currency
 
At Least 13%
 
 
 
Number of new system-wide restaurants
 
40 - 50
 
 
 
Capital expenditures
 
$235 - $255
 
 
 
Unfavorable Foreign Currency Translation Impact on Adjusted Operating Income
 
$10
_________________
* Denoted item is expressed on an adjusted basis


5


Non-GAAP Measures

In addition to the results provided in accordance with U.S. GAAP, this press release and related tables include certain non-GAAP measures, which present operating results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with U.S. GAAP and include the following: (i) Adjusted restaurant-level operating margin, (ii) Adjusted income from operations and the corresponding margin, (iii) Adjusted net income, (iv) Adjusted diluted earnings per share, (v) Adjusted segment restaurant-level operating margin, (vi) Adjusted segment income from operations and the corresponding margin and (vii) constant currency.

Although we believe these non-GAAP measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures are not intended to replace U.S. GAAP financial measures. These metrics are not necessarily comparable to similarly titled measures used by other companies. The use of non-GAAP financial measures permits investors to assess the operating performance of our business relative to our performance based on U.S. GAAP results and relative to other companies within the restaurant industry by isolating the effects of certain items that vary from period to period without correlation to core operating performance or that vary widely among similar companies. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent. We believe that the disclosure of these non-GAAP measures is useful to investors as they form the basis for how our management team and Board of Directors evaluate our operating performance, allocate resources and establish employee incentive plans.

For reconciliations of the non-GAAP measures used in this release, refer to tables four, five, six, seven and eight included later in this release.

6


Conference Call
The Company will host a conference call today, February 17, 2016 at 9:00 AM EST. The conference call can be accessed live over the telephone by dialing (877) 407-9039, or (201) 689-8470 for international participants. A replay will be available beginning two hours after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 13628336. The replay will be available through Wednesday, February 24, 2016. The call will also be webcast live from the Company’s website at http://www.bloominbrands.com under the Investors section. A replay of this webcast will be available on the Company’s website after the call.

About Bloomin’ Brands, Inc.
Bloomin’ Brands, Inc. is one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. The Company has four founder-inspired brands: Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. The Company operates approximately 1,500 restaurants in 48 states, Puerto Rico, Guam and 22 countries, some of which are franchise locations. For more information, please visit bloominbrands.com.

Forward-Looking Statements
Certain statements contained herein, including statements under the headings “CEO Comments,” and “Fiscal 2016 Financial Outlook,” are not based on historical fact and are “forward-looking statements” within the meaning of applicable securities laws. Generally, these statements can be identified by the use of words such as “guidance,” “believes,” “estimates,” “anticipates,” “expects,” “on track,” “feels,” “forecasts,” “seeks,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could,” “would” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the Company’s forward-looking statements. These risks and uncertainties include, but are not limited to: local, regional, national and international economic conditions; consumer confidence and spending patterns; the cost and availability of credit; interest rate changes; competition; consumer reaction to public health and food safety issues; government actions and policies; increases in unemployment rates and taxes; increases in labor costs; price and availability of commodities; challenges associated with our expansion, remodeling and relocation plans; interruption or breach of our systems or loss of consumer or employee information; foreign currency exchange rates; our ability to preserve the value of and grow our brands; the seasonality of the Company’s business; weather, acts of God and other disasters; changes in patterns of consumer traffic, consumer tastes and dietary habits; the effectiveness of our strategic actions, including acquisitions and dispositions; compliance with debt covenants and the Company’s ability to make debt payments and planned investments; and our ability to continue to pay dividends and repurchase shares of our common stock. Further information on potential factors that could affect the financial results of the Company and its forward-looking statements is included in its most recent Form 10-K filed with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statement, except as may be required by law. These forward-looking statements speak only as of the date of this release. All forward-looking statements are qualified in their entirety by this cautionary statement.
Note: Numerical figures included in this release have been subject to rounding adjustments.



7

TABLE ONE
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
 
THIRTEEN WEEKS ENDED
 
FISCAL YEAR ENDED
(dollars in thousands, except per share data)
DECEMBER 27, 2015
 
DECEMBER 28, 2014
 
DECEMBER 27, 2015
 
DECEMBER 28, 2014
Revenues
 
 
 
 
 
 
 
Restaurant sales
$
1,042,221

 
$
1,101,604

 
$
4,349,921

 
$
4,415,783

Other revenues
7,078

 
6,882

 
27,755

 
26,928

Total revenues
1,049,299

 
1,108,486

 
4,377,676

 
4,442,711

Costs and expenses
 

 
 

 
 

 
 
Cost of sales
335,766

 
354,574

 
1,419,689

 
1,435,359

Labor and other related
293,957

 
309,539

 
1,205,610

 
1,218,961

Other restaurant operating
244,844

 
257,776

 
1,006,772

 
1,049,053

Depreciation and amortization
49,083

 
47,369

 
190,399

 
190,911

General and administrative
68,782

 
82,649

 
287,614

 
304,382

Provision for impaired assets and restaurant closings
24,952

 
15,911

 
36,667

 
52,081

Total costs and expenses
1,017,384

 
1,067,818

 
4,146,751

 
4,250,747

Income from operations
31,915

 
40,668

 
230,925

 
191,964

Loss on extinguishment and modification of debt
(318
)
 
—

 
(2,956
)
 
(11,092
)
Other income (expense), net
417

 
(1,415
)
 
(939
)
 
(1,244
)
Interest expense, net
(15,260
)
 
(14,114
)
 
(56,176
)
 
(59,658
)
Income before provision for income taxes
16,754

 
25,139

 
170,854

 
119,970

(Benefit) provision for income taxes
(2,263
)
 
1,205

 
39,294

 
24,044

Net income
19,017

 
23,934

 
131,560

 
95,926

Less: net income attributable to noncontrolling interests
1,315

 
1,525

 
4,233

 
4,836

Net income attributable to Bloomin’ Brands
$
17,702

 
$
22,409

 
$
127,327

 
$
91,090

 
 
 
 
 
 
 
 
Net income
$
19,017

 
$
23,934

 
$
131,560

 
$
95,926

Other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation adjustment
(10,393
)
 
(42,700
)
 
(96,194
)
 
(31,731
)
Unrealized losses on derivatives, net of tax
1,019

 
(1,907
)
 
(6,033
)
 
(2,393
)
Reclassification of adjustment for loss on derivatives included in net income, net of tax
1,120

 
—

 
2,235

 
—

Comprehensive income (loss)
10,763

 
(20,673
)
 
31,568

 
61,802

Less: comprehensive income (loss) attributable to noncontrolling interests
122

 
1,525

 
(8,934
)
 
4,836

Comprehensive income (loss) attributable to Bloomin’ Brands
$
10,641

 
$
(22,198
)
 
$
40,502

 
$
56,966

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.15

 
$
0.18

 
$
1.04

 
$
0.73

Diluted
$
0.14

 
$
0.17

 
$
1.01

 
$
0.71

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
119,398

 
125,484

 
122,352

 
125,139

Diluted
122,273

 
128,822

 
125,585

 
128,317

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.06

 
$
—

 
$
0.24

 
$
—



8

TABLE TWO
BLOOMIN’ BRANDS, INC.
SEGMENT RESULTS
(UNAUDITED)
(dollars in thousands)
THIRTEEN WEEKS ENDED
 
FISCAL YEAR ENDED
U.S. Segment
DECEMBER 27, 2015
 
DECEMBER 28, 2014
 
DECEMBER 27, 2015
 
DECEMBER 28, 2014
Revenues
 
 
 
 
 
 
 
Restaurant sales
$
926,518

 
$
955,408

 
$
3,857,162

 
$
3,832,373

Other revenues
5,780

 
5,767

 
22,581

 
21,906

Total revenues
$
932,298

 
$
961,175

 
$
3,879,743

 
$
3,854,279

Restaurant-level operating margin
15.8
%
 
15.3
%
 
15.8
%
 
15.4
%
Income from operations
$
60,660

 
$
77,658

 
$
342,224

 
$
320,561

Operating income margin
6.5
%
 
8.1
%
 
8.8
%
 
8.3
%
International Segment
 
Revenues
 
 
 
 
 
 
 
Restaurant sales
$
115,703

 
$
146,196

 
$
492,759

 
$
583,410

Other revenues
1,298

 
1,115

 
5,174

 
5,022

Total revenues
$
117,001

 
$
147,311

 
$
497,933

 
$
588,432

Restaurant-level operating margin
20.0
%
 
20.0
%
 
19.3
%
 
18.4
%
Income from operations
$
10,221

 
$
3,481

 
$
34,597

 
$
25,020

Operating income margin
8.7
%
 
2.4
%
 
6.9
%
 
4.3
%
Reconciliation of Segment Income from Operations to Consolidated Income from Operations
 
 
 
 
 
 
 
Segment income from operations
 
 
 
 
 
 
 
U.S.
$
60,660

 
$
77,658

 
$
342,224

 
$
320,561

International
10,221

 
3,481

 
34,597

 
25,020

Total segment income from operations
70,881

 
81,139

 
376,821

 
345,581

Unallocated corporate operating expense - Cost of sales, Labor and other related and Other restaurant operating
(1,928
)
 
4,770

 
13,067

 
14,452

Unallocated corporate operating expense - Depreciation and amortization and General and administrative
(37,038
)
 
(45,241
)
 
(158,963
)
 
(168,069
)
Unallocated corporate operating expense
(38,966
)
 
(40,471
)
 
(145,896
)
 
(153,617
)
Total income from operations
$
31,915

 
$
40,668

 
$
230,925

 
$
191,964


TABLE THREE
BLOOMIN’ BRANDS, INC.
SUPPLEMENTAL BALANCE SHEET INFORMATION
(UNAUDITED)
(dollars in thousands)
DECEMBER 27, 2015
 
DECEMBER 28, 2014
Cash and cash equivalents (1)
$
132,337

 
$
165,744

Net working capital (deficit) (2) (3)
$
(395,522
)
 
$
(239,559
)
Total assets
$
3,032,569

 
$
3,338,240

Total debt, net
$
1,316,864

 
$
1,309,797

Total stockholders’ equity
$
421,900

 
$
556,449

_________________
(1)
Excludes restricted cash.
(2)
The Company has, and in the future may continue to have, negative working capital balances (as is common for many restaurant companies). The Company operates successfully with negative working capital because cash collected on Restaurant sales is typically received before payment is due on its current liabilities and its inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flows from restaurant operations and gift card sales are used to service debt obligations and to make capital expenditures.

9

(3)
The Company adopted ASU No. 2015-17, with prospective application, resulting in the classification of deferred tax assets and liabilities as noncurrent in the Consolidated Balance Sheet as of December 27, 2015.

TABLE FOUR
BLOOMIN’ BRANDS, INC.
RESTAURANT-LEVEL OPERATING MARGIN NON-GAAP RECONCILIATION
(UNAUDITED)
 
THIRTEEN WEEKS ENDED
 
(UNFAVORABLE) FAVORABLE CHANGE IN ADJUSTED
 
DECEMBER 27, 2015
 
DECEMBER 28, 2014
 
 
U.S. GAAP
 
ADJUSTED (1)
 
U.S. GAAP
 
ADJUSTED (2)
 
QUARTER
Restaurant sales
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
32.2
%
 
32.2
%
 
32.2
%
 
32.2
%
 
—
 %
Labor and other related
28.2
%
 
28.2
%
 
28.1
%
 
28.1
%
 
(0.1
)%
Other restaurant operating
23.5
%
 
23.1
%
 
23.4
%
 
24.0
%
 
0.9
 %
 
 
 
 
 
 
 
 
 
 
Restaurant-level operating margin
16.1
%
 
16.5
%
 
16.3
%
 
15.7
%
 
0.8
 %
 
 
 
 
 
 
 
 
 
 
 
FISCAL YEAR ENDED
 
(UNFAVORABLE) FAVORABLE CHANGE IN ADJUSTED
 
DECEMBER 27, 2015
 
DECEMBER 28, 2014
 
 
U.S. GAAP
 
ADJUSTED (3)
 
U.S. GAAP
 
ADJUSTED (2)
 
YEAR
Restaurant sales
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
32.6
%
 
32.6
%
 
32.5
%
 
32.5
%
 
(0.1
)%
Labor and other related
27.7
%
 
27.8
%
 
27.6
%
 
27.6
%
 
(0.2
)%
Other restaurant operating
23.1
%
 
23.1
%
 
23.8
%
 
24.0
%
 
0.9
 %
 
 
 
 
 
 
 
 
 
 
Restaurant-level operating margin
16.5
%
 
16.5
%
 
16.1
%
 
15.9
%
 
0.6
 %
_________________
(1)
Includes legal settlement costs of $4.0 million, primarily related to the Cardoza litigation. The legal settlement was recorded in Other restaurant operating.
(2)
Includes adjustments primarily related to a $6.1 million legal settlement gain and the reversal of $0.8 million and $2.9 million of deferred rent liabilities associated with the International and Domestic Restaurant Closure Initiatives for the thirteen weeks and fiscal year ended December 28, 2014, respectively, which were recorded in Other restaurant operating.
(3)
Includes adjustments for the favorable resolution of payroll tax audit contingencies of $5.6 million, offset by legal settlement costs of $4.0 million, primarily related to the Cardoza litigation. The payroll audit adjustment was recorded in Labor and other related.


10

TABLE FIVE
BLOOMIN’ BRANDS, INC.
SEGMENT RESTAURANT-LEVEL OPERATING MARGIN NON-GAAP RECONCILIATION
(UNAUDITED)
 
THIRTEEN WEEKS ENDED
 
(UNFAVORABLE) FAVORABLE CHANGE IN ADJUSTED
 
DECEMBER 27, 2015
 
DECEMBER 28, 2014
 
Restaurant-level operating margin:
U.S. GAAP
 
ADJUSTED
 
U.S. GAAP
 
ADJUSTED
 
QUARTER
U.S.
15.8
%
 
15.8
%
 
15.3
%
 
15.3
%
 
0.5
%
International (1)
20.0
%
 
20.0
%
 
20.0
%
 
19.5
%
 
0.5
%
 
 
 
 
 
 
 
 
 
 
 
FISCAL YEAR ENDED
 
(UNFAVORABLE) FAVORABLE CHANGE IN ADJUSTED
 
DECEMBER 27, 2015
 
DECEMBER 28, 2014
 
Restaurant-level operating margin:
U.S. GAAP
 
ADJUSTED
 
U.S. GAAP
 
ADJUSTED
 
YEAR
U.S. (2)
15.8
%
 
15.8
%
 
15.4
%
 
15.4
%
 
0.4
%
International (1)
19.3
%
 
19.3
%
 
18.4
%
 
18.4
%
 
0.9
%
_________________
(1)
Includes an adjustment for the write-off of $0.8 million of deferred rent liabilities associated with the International Restaurant Closure Initiative for the thirteen weeks and fiscal year ended December 28, 2014. Also includes adjustments of $0.1 million of Brazil non-cash intangible amortization for the thirteen weeks ended December 27, 2015 and December 28, 2014 and $0.3 million and $0.4 million for the fiscal year ended December 27, 2015 and December 28, 2014, respectively.
(2)
Includes an adjustment for the write-off of $2.1 million of deferred rent liabilities associated with the Domestic Restaurant Closure Initiative for the fiscal year ended December 28, 2014.


11

TABLE SIX
BLOOMIN’ BRANDS, INC.
INCOME FROM OPERATIONS, NET INCOME AND DILUTED EARNINGS PER SHARE NON-GAAP RECONCILIATION
(UNAUDITED)
 
THIRTEEN WEEKS ENDED
 
FISCAL YEAR ENDED
(in thousands, except per share data)
DECEMBER 27, 2015
 
DECEMBER 28, 2014
 
DECEMBER 27, 2015
 
DECEMBER 28, 2014
Income from operations
$
31,915

 
$
40,668

 
$
230,925

 
$
191,964

Operating income margin
3.0
%
 
3.7
%
 
5.3
%
 
4.3
%
Adjustments:
 
 
 
 
 
 
 
Restaurant impairments and closing costs (1)
24,515

 
10,339

 
33,507

 
26,841

Payroll tax audit contingency (2)
—

 
—

 
(5,587
)
 
—

Purchased intangibles amortization (3)
881

 
1,417

 
4,334

 
5,952

Restaurant relocations, remodels and related costs (4)
462

 
249

 
3,625

 
249

Asset impairments and related costs (5)
—

 
7,538

 
746

 
24,490

Transaction-related expenses (6)
229

 
229

 
1,294

 
1,347

Legal and contingent matters (7)
4,604

 
(6,070
)
 
5,843

 
(6,070
)
Severance (8)
—

 
3,683

 
—

 
9,045

Total income from operations adjustments
30,691

 
17,385

 
43,762

 
61,854

Adjusted income from operations
$
62,606

 
$
58,053

 
$
274,687

 
$
253,818

Adjusted operating income margin
6.0
%
 
5.2
%
 
6.3
%
 
5.7
%
 
 
 
 
 
 
 
 
Net income attributable to Bloomin’ Brands
$
17,702

 
$
22,409

 
$
127,327

 
$
91,090

Adjustments:
 
 
 
 
 
 
 
Income from operations adjustments
30,691

 
17,385

 
43,762

 
61,854

Loss on disposal of business and disposal of assets (9)
—

 
770

 
1,328

 
770

Loss on extinguishment and modification of debt (10)
318

 
—

 
2,956

 
11,092

Total adjustments, before income taxes
31,009

 
18,155

 
48,046

 
73,716

Adjustment to provision for income taxes (11)
(12,069
)
 
(5,094
)
 
(15,314
)
 
(23,996
)
Net adjustments
18,940

 
13,061

 
32,732

 
49,720

Adjusted net income
$
36,642

 
$
35,470

 
$
160,059

 
$
140,810

 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.14

 
$
0.17

 
$
1.01

 
$
0.71

Adjusted diluted earnings per share
$
0.30

 
$
0.28

 
$
1.27

 
$
1.10

 
 
 
 
 
 
 
 
Diluted weighted average common shares outstanding
122,273

 
128,822

 
125,585

 
128,317

_________________
(1)
Represents expenses incurred for the Bonefish Restructuring and the International and Domestic Restaurant Closure Initiatives.
(2)
Relates to a payroll tax audit contingency adjustment, for the employer’s share of FICA taxes related to cash tips allegedly received and unreported by our employees during calendar years 2011 and 2012, which is recorded in Labor and other related expenses. In addition, a deferred income tax adjustment has been recorded for the allowable income tax credits for the employer’s share of FICA taxes expected to be paid, which is included in Provision (benefit) for income taxes and offsets the adjustment to Labor and other related expenses. As a result, there is no impact to Net income from this adjustment. See footnote 11 to this table.
(3)
Represents non-cash intangible amortization recorded as a result of the acquisition of our Brazil operations.
(4)
Represents asset impairment charges and accelerated depreciation incurred in connection with our relocation and remodel programs.
(5)
Represents asset impairment charges and related costs associated with our decision to sell the Roy’s concept and corporate aircraft.
(6)
Relates primarily to the following: (i) costs incurred with the secondary offerings of our common stock in March 2015, November 2014 and March 2014 and (ii) costs incurred in 2015 with our sale-leaseback initiative.
(7)
Fees and expenses related to certain legal and contingent matters, including the Cardoza litigation, in fiscal year 2015. During fiscal year 2014, we recognized a gain on a legal settlement.
(8)
Relates to severance expense incurred as a result of our organizational realignment.
(9)
Primarily represents loss on the sale of: (i) our Roy’s business in fiscal 2015 and (ii) one Company-owned Outback Steakhouse location in Mexico in fiscal 2014.
(10)
Relates to the refinancing of our Senior Secured Credit Facility in December 2015, March 2015 and May 2014.

12

(11)
Income tax effect of adjustments for fiscal year 2015 and 2014, respectively, are calculated based on the statutory rate applicable to jurisdictions in which the above non-GAAP adjustments relate. Additionally, for fiscal year 2015, a deferred income tax adjustment has been recorded for the allowable income tax credits for the employer’s share of FICA taxes expected to be paid. See footnote 2 to this table.

Following is a summary of the financial statement line item classification of the net income adjustments:
 
THIRTEEN WEEKS ENDED
 
FISCAL YEAR ENDED
(dollars in thousands)
DECEMBER 27, 2015
 
DECEMBER 28, 2014
 
DECEMBER 27, 2015
 
DECEMBER 28, 2014
Labor and other related
$
—

 
$
—

 
$
(5,587
)
 
$
—

Other restaurant operating expense
3,991

 
(6,811
)
 
3,891

 
(8,593
)
Depreciation and amortization
1,309

 
1,573

 
5,111

 
5,812

General and administrative
998

 
7,071

 
5,015

 
14,620

Provision for impaired assets and restaurant closings
24,393

 
15,552

 
35,332

 
50,015

Other expense, net
—

 
770

 
1,328

 
770

Provision for income taxes
(12,069
)
 
(5,094
)
 
(15,314
)
 
(23,996
)
Loss on extinguishment and modification of debt
318

 
—

 
2,956

 
11,092

Net adjustments
$
18,940

 
$
13,061

 
$
32,732

 
$
49,720


TABLE SEVEN
BLOOMIN’ BRANDS, INC.
SEGMENT INCOME FROM OPERATIONS NON-GAAP RECONCILIATION
(UNAUDITED)
U.S. Segment
THIRTEEN WEEKS ENDED
 
FISCAL YEAR ENDED
(dollars in thousands)
DECEMBER 27, 2015
 
DECEMBER 28, 2014
 
DECEMBER 27, 2015
 
DECEMBER 28, 2014
Income from operations
$
60,660

 
$
77,658

 
$
342,224

 
$
320,561

Operating income margin
6.5
%
 
8.1
%
 
8.8
%
 
8.3
%
Adjustments:
 
 
 
 
 
 
 
Restaurant impairments and closing costs (1)
24,632

 
—

 
25,948

 
4,929

Restaurant relocations, remodels and related costs (2)
462

 
249

 
3,625

 
249

Asset impairments and related costs (3)
—

 
7,396

 
—

 
13,508

Adjusted income from operations
$
85,754

 
$
85,303

 
$
371,797

 
$
339,247

Adjusted operating income margin
9.2
%
 
8.9
%
 
9.6
%
 
8.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International Segment
 
 
 
 
 
 
 
(dollars in thousands)
 
 
 
 
 
 
 
Income from operations
$
10,221

 
$
3,481

 
$
34,597

 
$
25,020

Operating income margin
8.7
%
 
2.4
%
 
6.9
%
 
4.3
%
Adjustments:
 
 
 
 
 
 
 
Restaurant impairments and closing costs (4)
(118
)
 
10,339

 
7,558

 
21,912

Purchased intangibles amortization (5)
882

 
1,417

 
4,335

 
5,952

Adjusted income from operations
$
10,985

 
$
15,237

 
$
46,490

 
$
52,884

Adjusted operating income margin
9.4
%
 
10.3
%
 
9.3
%
 
9.0
%
_________________
(1)
Represents expenses incurred for the Bonefish Restructuring and the Domestic Restaurant Closure Initiative.
(2)
Represents asset impairment charges and accelerated depreciation incurred in connection with our relocation and remodel programs.
(3)
Represents asset impairment charges and related costs associated with our decision to sell the Roy’s concept.
(4)
Represents expenses incurred for the International Restaurant Closure Initiative.
(5)
Represents non-cash intangible amortization recorded as a result of the acquisition of our Brazil operations.


13

TABLE EIGHT
BLOOMIN’ BRANDS, INC.
IMPACT OF FOREIGN CURRENCY
(UNAUDITED)
 
FISCAL YEAR 2015
 
ADJUSTED (1)
 
CONSTANT CURRENCY (2)
Adjusted income from operations growth
8.2
%
 
13.3
%
Adjusted net income growth
13.7
%
 
19.5
%
Adjusted Diluted earnings per share growth (3)
15.5
%
 
21.8
%
_________________
(1)
See reconciliation to U.S. GAAP results in Table Six of this release.
(2)
Results excluding the effect of foreign currency translation, also referred to as constant currency, are calculated by translating current year results at prior year average exchange rates. The Company is primarily exposed to foreign currency fluctuations for the Brazil Real and South Korea Won.
(3)
Adjusted Diluted earnings per share and constant currency growth includes 3.6% from two additional operating days due to the change in the Company’s year-end.

TABLE NINE
BLOOMIN’ BRANDS, INC.
COMPARATIVE STORE INFORMATION
(UNAUDITED)
Number of restaurants (at end of the period):
DECEMBER 27,
2015
 
DECEMBER 28,
2014
U.S.
 
 
 
Outback Steakhouse
 
 
 
Company-owned
650

 
648

Franchised
105

 
105

Total
755

 
753

Carrabba’s Italian Grill
 
 
 
Company-owned
244

 
242

Franchised
3

 
1

Total
247

 
243

Bonefish Grill
 
 
 
Company-owned
210

 
201

Franchised
5

 
5

Total
215

 
206

Fleming’s Prime Steakhouse & Wine Bar
 
 
 
Company-owned
66

 
66

Roy’s (1)
 
 
 
Company-owned
—

 
20

International
 
 
 
Company-owned
 
 
 
Outback Steakhouse - Brazil (2)
75

 
63

Outback Steakhouse - South Korea (3)
75

 
91

Other
16

 
11

Franchised
58

 
55

Total
224

 
220

System-wide total
1,507

 
1,508

____________________
(1)
On January 26, 2015, we sold our Roy’s concept.
(2)
The restaurant counts for Brazil are reported as of November 30, 2015 and 2014, respectively, to correspond with the balance sheet dates of this subsidiary.

14

(3)
In the first quarter of 2015, we adopted a policy that relocated international restaurants closed more than 30 days and relocated U.S. restaurants closed more than 60 days are considered a closure. Prior periods for South Korea have been revised to conform to the current year presentation.

SOURCE: Bloomin’ Brands, Inc.


15

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