Document
 
 
 
 
 

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

FORM 10-Q
(Mark One)
 
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 25, 2017
 
or
[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ______ to ______
Commission File Number: 001-35625

https://cdn.kscope.io/a09a4c71e6a4b13d71433dc36d66e5dc-blmnlogov3.jpg

BLOOMIN’ BRANDS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
20-8023465
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
2202 North West Shore Boulevard, Suite 500, Tampa, Florida 33607
(Address of principal executive offices) (Zip Code)

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

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x  NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES x  NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer  o Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES  o  NO  x

As of July 27, 2017, 93,406,463 shares of common stock of the registrant were outstanding.
 
 
 
 
 


Table of Contents
BLOOMIN’ BRANDS, INC.



INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended June 25, 2017
(Unaudited)

TABLE OF CONTENTS

 
Page No.
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 

2

Table of Contents
BLOOMIN’ BRANDS, INC.


PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA, UNAUDITED)
 
JUNE 25, 2017
 
DECEMBER 25, 2016
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
103,474

 
$
127,176

Current portion of restricted cash and cash equivalents

 
7,886

Inventories
52,633

 
65,231

Other current assets, net
97,047

 
190,226

Total current assets
253,154

 
390,519

Restricted cash

 
1,124

Property, fixtures and equipment, net
1,194,467

 
1,237,148

Goodwill
312,890

 
310,055

Intangible assets, net
529,677

 
535,523

Deferred income tax assets
56,552

 
38,764

Other assets, net
134,181

 
129,146

Total assets
$
2,480,921

 
$
2,642,279

 
 
 
 
 
(CONTINUED...)
 
 
 
 
 

3

Table of Contents
BLOOMIN’ BRANDS, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA, UNAUDITED) 


 
JUNE 25, 2017
 
DECEMBER 25, 2016
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
 

 
 

Current Liabilities
 

 
 

Accounts payable
$
187,839

 
$
195,371

Accrued and other current liabilities
222,041

 
204,415

Unearned revenue
269,854

 
388,543

Current portion of long-term debt
44,497

 
35,079

Total current liabilities
724,231

 
823,408

Deferred rent
150,761

 
151,130

Deferred income tax liabilities
16,568

 
16,709

Long-term debt, net
1,082,041

 
1,054,406

Deferred gain on sale-leaseback transactions, net
186,383

 
181,696

Other long-term liabilities, net
219,153

 
219,030

Total liabilities
2,379,137

 
2,446,379

Commitments and contingencies (Note 15)


 


Mezzanine Equity
 
 
 
Redeemable noncontrolling interests
556

 
547

Stockholders’ Equity
 
 
 
Bloomin’ Brands Stockholders’ Equity
 
 
 
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of June 25, 2017 and December 25, 2016

 

Common stock, $0.01 par value, 475,000,000 shares authorized; 95,008,173 and 103,922,110 shares issued and outstanding as of June 25, 2017 and December 25, 2016, respectively
950

 
1,039

Additional paid-in capital
1,079,749

 
1,079,583

Accumulated deficit
(891,648
)
 
(786,780
)
Accumulated other comprehensive loss
(98,824
)
 
(111,143
)
Total Bloomin’ Brands stockholders’ equity
90,227

 
182,699

Noncontrolling interests
11,001

 
12,654

Total stockholders’ equity
101,228

 
195,353

Total liabilities, mezzanine equity and stockholders’ equity
$
2,480,921

 
$
2,642,279

 
The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Contents
BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)


 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
 
JUNE 25, 2017

JUNE 26, 2016

JUNE 25, 2017

JUNE 26, 2016
Revenues
 
 
 
 
 
 
 
Restaurant sales
$
1,019,957

 
$
1,072,519

 
$
2,155,445

 
$
2,230,571

Franchise and other revenues
13,025

 
6,069

 
21,360

 
12,205

Total revenues
1,032,982

 
1,078,588

 
2,176,805

 
2,242,776

Costs and expenses
 

 
 

 
 

 
 
Cost of sales
323,130

 
346,811

 
687,878

 
722,099

Labor and other related
297,857

 
309,155

 
622,255

 
631,960

Other restaurant operating
244,124

 
250,443

 
492,064

 
504,014

Depreciation and amortization
48,063

 
49,004

 
94,653

 
96,655

General and administrative
77,056

 
68,566

 
148,997

 
143,591

Provision for impaired assets and restaurant closings
598

 
41,276

 
19,674

 
44,440

Total costs and expenses
990,828

 
1,065,255

 
2,065,521

 
2,142,759

Income from operations
42,154

 
13,333

 
111,284

 
100,017

Loss on defeasance, extinguishment and modification of debt
(260
)
 

 
(260
)
 
(26,580
)
Other income (expense), net
7,281

 
(1
)
 
7,230

 
(20
)
Interest expense, net
(9,543
)
 
(10,302
)
 
(18,684
)
 
(23,177
)
Income before provision for income taxes
39,632

 
3,030

 
99,570

 
50,240

Provision for income taxes
3,303

 
11,095

 
18,318

 
22,422

Net income (loss)
36,329

 
(8,065
)
 
81,252

 
27,818

Less: net income attributable to noncontrolling interests
699

 
1,112

 
1,712

 
2,520

Net income (loss) attributable to Bloomin’ Brands
$
35,630

 
$
(9,177
)
 
$
79,540

 
$
25,298

 
 
 
 
 
 
 
 
Net income (loss)
$
36,329

 
$
(8,065
)
 
$
81,252

 
$
27,818

Other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation adjustment
(9,118
)
 
19,965

 
11,371

 
12,680

Unrealized loss on derivatives, net of tax
(610
)
 
(2,187
)
 
(509
)
 
(4,922
)
Reclassification of adjustment for loss on derivatives included in Net income (loss), net of tax
643

 
967

 
1,427

 
1,955

Comprehensive income
27,244

 
10,680

 
93,541

 
37,531

Less: comprehensive income attributable to noncontrolling interests
757

 
2,820

 
1,682

 
4,926

Comprehensive income attributable to Bloomin’ Brands
$
26,487

 
$
7,860

 
$
91,859

 
$
32,605

 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.36

 
$
(0.08
)
 
$
0.79

 
$
0.22

Diluted
$
0.35

 
$
(0.08
)
 
$
0.76

 
$
0.21

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
98,852

 
113,330

 
100,963

 
115,630

Diluted
102,421

 
113,330

 
104,417

 
118,560

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.08

 
$
0.07

 
$
0.16

 
$
0.14

 
The accompanying notes are an integral part of these consolidated financial statements.

5

Table of Contents
BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)

 
BLOOMIN’ BRANDS, INC.
 
 
 
 

COMMON STOCK

ADDITIONAL
PAID-IN
CAPITAL
 
ACCUM-ULATED
DEFICIT

ACCUMULATED
OTHER
COMPREHENSIVE
LOSS

NON-
CONTROLLING
INTERESTS

TOTAL
 
SHARES
 
AMOUNT
 
 
 
 
 
Balance, December 25, 2016
103,922

 
$
1,039

 
$
1,079,583

 
$
(786,780
)
 
$
(111,143
)
 
$
12,654

 
$
195,353

Net income

 

 

 
79,540

 

 
1,837

 
81,377

Other comprehensive income (loss), net of tax

 

 

 

 
12,319

 
(38
)
 
12,281

Cash dividends declared, $0.16 per common share

 

 
(16,308
)
 

 

 

 
(16,308
)
Repurchase and retirement of common stock
(9,917
)
 
(99
)
 

 
(198,629
)
 

 

 
(198,728
)
Stock-based compensation

 

 
12,716

 

 

 

 
12,716

Common stock issued under stock plans (1)
1,003

 
10

 
4,597

 
(143
)
 

 

 
4,464

Change in the redemption value of redeemable interests

 

 
(126
)
 

 

 

 
(126
)
Purchase of noncontrolling interests, net of tax of $45

 

 
(713
)
 

 

 
(179
)
 
(892
)
Distributions to noncontrolling interests

 

 

 

 

 
(3,754
)
 
(3,754
)
Contributions from noncontrolling interests

 

 

 

 

 
481

 
481

Cumulative-effect from a change in accounting principle

 

 

 
14,364

 

 

 
14,364

Balance, June 25, 2017
95,008

 
$
950

 
$
1,079,749

 
$
(891,648
)
 
$
(98,824
)
 
$
11,001

 
$
101,228

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(CONTINUED...)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


6

Table of Contents
BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)

 
BLOOMIN’ BRANDS, INC.
 
 
 
 
 
COMMON STOCK
 
ADDITIONAL
PAID-IN
CAPITAL
 
ACCUM-ULATED
DEFICIT
 
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
 
NON-
CONTROLLING
INTERESTS
 
TOTAL
 
SHARES
 
AMOUNT
 
 
 
 
 
Balance, December 27, 2015
119,215

 
$
1,192

 
$
1,072,861

 
$
(518,360
)
 
$
(147,367
)
 
$
13,574

 
$
421,900

Net income

 

 

 
25,298

 

 
2,139

 
27,437

Other comprehensive income (loss), net of tax

 

 

 

 
7,307

 
(24
)
 
7,283

Cash dividends declared, $0.14 per common share

 

 
(16,216
)
 

 

 

 
(16,216
)
Repurchase and retirement of common stock
(7,775
)
 
(78
)
 

 
(139,814
)
 

 

 
(139,892
)
Stock-based compensation

 


 
12,854

 

 

 

 
12,854

Tax shortfall from stock-based compensation

 

 
(594
)
 

 

 

 
(594
)
Common stock issued under stock plans (1)
425

 
5

 
632

 
(329
)
 

 

 
308

Change in the redemption value of redeemable interests

 

 
(1,349
)
 

 

 

 
(1,349
)
Purchase of noncontrolling interests, net of tax of $522

 

 
569

 

 

 
164

 
733

Distributions to noncontrolling interests

 

 

 

 

 
(3,652
)
 
(3,652
)
Contributions from noncontrolling interests

 

 

 

 

 
453

 
453

Balance, June 26, 2016
111,865

 
$
1,119

 
$
1,068,757

 
$
(633,205
)
 
$
(140,060
)
 
$
12,654

 
$
309,265

________________
(1)
Net of forfeitures and shares withheld for employee taxes.

The accompanying notes are an integral part of these consolidated financial statements.

7

Table of Contents
BLOOMIN’ BRANDS, INC.

CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, UNAUDITED)


 
TWENTY-SIX WEEKS ENDED
 
JUNE 25, 2017
 
JUNE 26, 2016
Cash flows provided by operating activities:
 
 
 
Net income
$
81,252

 
$
27,818

Adjustments to reconcile net income to cash provided by operating activities:
 

 
 

Depreciation and amortization
94,653

 
96,655

Amortization of deferred discounts and issuance costs
1,637

 
2,542

Amortization of deferred gift card sales commissions
13,756

 
15,832

Provision for impaired assets and restaurant closings
19,674

 
44,440

Stock-based and other non-cash compensation expense
13,901

 
11,454

Deferred income tax (benefit) expense
(989
)
 
3,187

Gain on sale of a business
(7,284
)
 

Loss on defeasance, extinguishment and modification of debt
260

 
26,580

Recognition of deferred gain on sale-leaseback transactions
(5,816
)
 
(1,739
)
Excess tax benefit from stock-based compensation

 
(378
)
Other non-cash items, net
1,799

 
(669
)
Change in assets and liabilities
(29,708
)
 
(20,306
)
Net cash provided by operating activities
183,135

 
205,416

Cash flows (used in) provided by investing activities:
 

 
 

Proceeds from sale-leaseback transactions, net
49,780

 
160,597

Proceeds from sale of a business
33,994

 

Capital expenditures
(116,256
)
 
(109,319
)
Decrease in restricted cash
14,969

 
35,238

Increase in restricted cash
(5,957
)
 
(12,999
)
Other investments, net
(1,119
)
 
(3,383
)
Net cash (used in) provided by investing activities
$
(24,589
)
 
$
70,134

 
 
 
 
 
(CONTINUED...)
 

8

Table of Contents
BLOOMIN’ BRANDS, INC.

CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, UNAUDITED)


 
TWENTY-SIX WEEKS ENDED
 
JUNE 25, 2017
 
JUNE 26, 2016
Cash flows used in financing activities:
 
 
 
Proceeds from issuance of long-term debt, net
$
124,438

 
$
294,699

Defeasance, extinguishment and modification of debt

 
(478,906
)
Repayments of long-term debt
(64,399
)
 
(103,728
)
Proceeds from borrowings on revolving credit facilities, net
341,000

 
414,000

Repayments of borrowings on revolving credit facilities
(364,500
)
 
(233,000
)
Proceeds from failed sale-leaseback transactions, net
5,942

 

Proceeds from the exercise of share-based compensation
4,607

 
637

Distributions to noncontrolling interests
(3,754
)
 
(3,652
)
Contributions from noncontrolling interests
481

 
539

Purchase of limited partnership and noncontrolling interests
(4,024
)
 
(8,983
)
Repayments of partner deposits and accrued partner obligations
(7,862
)
 
(10,018
)
Repurchase of common stock
(198,871
)
 
(140,221
)
Excess tax benefit from stock-based compensation

 
378

Cash dividends paid on common stock
(16,308
)
 
(16,216
)
Net cash used in financing activities
(183,250
)
 
(284,471
)
Effect of exchange rate changes on cash and cash equivalents
1,002

 
853

Transfer of cash and cash equivalents to assets held for sale

 
(22,195
)
Net decrease in cash and cash equivalents
(23,702
)
 
(30,263
)
Cash and cash equivalents as of the beginning of the period
127,176

 
132,337

Cash and cash equivalents as of the end of the period
$
103,474

 
$
102,074

Supplemental disclosures of cash flow information:
 

 
 

Cash paid for interest
$
17,393

 
$
23,031

Cash paid for income taxes, net of refunds
22,695

 
15,087

Supplemental disclosures of non-cash investing and financing activities:
 

 
 

Change in acquisition of property, fixtures and equipment included in accounts payable or capital lease liabilities
$
(2,564
)
 
$
15,721

Purchase of noncontrolling interest included in accrued and other current liabilities
898

 


 The accompanying notes are an integral part of these consolidated financial statements.

9

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


1.    Description of the Business and Basis of Presentation

Description of the Business - Bloomin’ Brands, Inc., through its subsidiaries (“Bloomin’ Brands” or the “Company”), owns and operates casual, upscale casual and fine dining restaurants. The Company’s restaurant portfolio has four concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Each of the Company’s concepts has additional restaurants in which it has no direct investment and are operated under franchise agreements.

Basis of Presentation - The accompanying interim unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of the Company, all adjustments necessary for fair financial statement presentation for the periods presented have been included and are of a normal, recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 25, 2016.

Recently Adopted Financial Accounting Standards - Effective December 26, 2016, the Company adopted Accounting Standards Update (“ASU”) 2016-09: “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU No. 2016-09”). ASU No. 2016-09 simplifies several aspects related to the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. Upon adoption, the Company made an accounting policy election to recognize forfeitures as they occur. Using the modified retrospective transition method required under the standard, the Company recorded a cumulative-effect adjustment for the adoption of ASU No. 2016-09 of $14.4 million for previously unrecognized excess tax benefits, which increased Deferred tax assets and reduced Accumulated deficit. The recognition of excess tax benefits and tax shortfalls in the income statement and presentation of excess tax benefits on the statement of cash flows were adopted prospectively, with no adjustments made to prior periods. The remaining provisions of ASU No. 2016-09 did not have a material impact on the Company’s Consolidated Financial Statements.

Recently Issued Financial Accounting Standards Not Yet Adopted - In January 2017, the Financial Accounting Standards Board (“the FASB”) issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” (“ASU No. 2017-04”). ASU No. 2017-04 eliminates the second step of goodwill impairment, which requires a hypothetical purchase price allocation. Under ASU No. 2017-04, goodwill impairment will be calculated as the amount a reporting unit’s carrying value exceeds its calculated fair value. ASU No. 2017-04 will be applied prospectively and is effective for the Company in fiscal year 2020, with early adoption permitted. The Company does not expect the adoption of ASU No. 2017-04 to have a material impact on its Consolidated Financial Statements.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230), Restricted Cash” (“ASU No. 2016-18”). ASU No. 2016-18 provides guidance on the presentation of restricted cash and restricted cash equivalents, which should now be included with cash and cash equivalents when reconciling the beginning and ending cash amounts shown on the statements of cash flows. ASU No. 2016-18 will be effective for the Company in fiscal year 2018, with early adoption permitted. Other than the change in presentation of restricted cash within the statement of cash flows, the adoption of ASU No. 2016-18 is not expected to have an impact on the Company’s Consolidated Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU No. 2016-15”) which provides guidance on the statement of cash flows presentation of certain transactions where diversity in practice exists. ASU No. 2016-15 will be effective for the

10

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Company in fiscal year 2018, and early adoption is permitted. The Company does not expect ASU No. 2016-15 to have a material impact on its Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02: “Leases (Topic 842)” (“ASU No. 2016-02”). 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. 2016-02 is effective for the Company in fiscal year 2019 and must be adopted using a modified retrospective approach. The Company is currently evaluating the impact the adoption of ASU No. 2016-02 will have on its Consolidated Financial Statements.

In May 2014, the FASB issued ASU No. 2014-09 “Revenue Recognition (Topic 606), Revenue from Contracts with Customers” (“ASU No. 2014-09”). ASU No. 2014-09 provides a single source of guidance for revenue arising from contracts with customers and supersedes current revenue recognition standards. Under ASU No. 2014-09, revenue is recognized in an amount that reflects the consideration an entity expects to receive for the transfer of goods and services. The standard also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09, as amended, will be effective for the Company in fiscal year 2018 and the transition method is applied retrospectively to each period presented or as a cumulative-effect adjustment at the date of adoption.

While the Company continues to assess all potential impacts of the standard, it currently believes the most significant impact relates to accounting for gift card breakage and advertising fees charged to franchisees. Under the new standard, the Company expects to recognize gift card breakage proportional to actual gift card redemptions. Advertising fees charged to franchisees, which are currently recorded as a reduction to Other restaurant operating expenses, will be recognized as revenue. In addition, initial franchise fees will be recognized over the term of the franchise agreement, which is not expected to have a material impact on the Consolidated Financial Statements. Additionally, the Company is assessing the impacts of the disclosures required by ASU No. 2014-09. The Company has not yet determined transition methodology as it continues to evaluate materiality and industry best practice.

Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material impact to the Company.

Reclassifications - The Company reclassified certain items in the accompanying Consolidated Financial Statements for prior periods to be comparable with the classification for the current period. These reclassifications had no effect on previously reported net income.

2.    Disposals

Refranchising - During the thirteen weeks ended June 25, 2017, the Company completed the sale of 54 of its existing U.S. Company-owned Outback Steakhouse and Carrabba’s Italian Grill locations to two of its existing franchisees (the “Buyers”) for aggregate cash proceeds of $36.2 million, net of certain closing adjustments. The transactions resulted in aggregate net gain of $7.4 million, recorded within Other income (expense), net, in the Consolidated Statements of Operations and Other Comprehensive Income, and is net of an impairment of $1.7 million related to certain Company-owned assets leased to the Buyers. Included in the cash proceeds are initial franchise fees of $2.2 million that are recorded within Franchise and other revenues in the Consolidated Statements of Operations and Other Comprehensive Income.

These restaurants are now operated as franchises by the Buyers and the Company remains contingently liable on certain of the real estate lease agreements assigned to the Buyers. See Note 15 - Commitments and Contingencies for additional details regarding lease guarantees.


11

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Outback Steakhouse South Korea - In 2016, the Company completed the sale of its Outback Steakhouse subsidiary in South Korea (“Outback Steakhouse South Korea”). Following is the Loss before income taxes of Outback Steakhouse South Korea included in the Consolidated Statements of Operations and Comprehensive Income for the periods indicated:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 26, 2016
 
JUNE 26, 2016
Loss before income taxes (1)
$
(38,601
)
 
$
(34,594
)
________________
(1)
Includes impairment charges of $39.6 million for Assets held for sale during the thirteen and twenty-six weeks ended June 26, 2016.

3.    Impairments and Exit Costs

The components of Provision for impaired assets and restaurant closings are as follows:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Impairment losses
 
 
 
 
 
 
 
U.S.
$
12

 
$
81

 
$
932

 
$
81

International

 
39,636

 

 
39,636

Total impairment losses
$
12

 
$
39,717

 
$
932

 
$
39,717

Restaurant closure expenses
 
 
 
 
 
 
 
U.S.
$
586

 
$
1,221

 
$
18,742

 
$
4,849

International

 
338

 

 
(126
)
Total restaurant closure expenses
$
586

 
$
1,559

 
$
18,742

 
$
4,723

Provision for impaired assets and restaurant closings
$
598

 
$
41,276

 
$
19,674

 
$
44,440



12

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Closure Initiative and Restructuring Costs - Following is a summary of expenses related to the 2017 Closure Initiative and Bonefish Restructuring (the “Closure Initiatives”) recognized in Provision for impaired assets and restaurant closings in the Company’s Consolidated Statements of Operations and Comprehensive Income for the periods indicated:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Impairment, facility closure and other expenses
 
 
 
 
 
 
 
2017 Closure Initiative (1)
$
(244
)
 
$

 
$
17,203

 
$

Bonefish Restructuring (2)

 
807

 
809

 
4,380

Provision for impaired assets and restaurant closings
$
(244
)
 
$
807

 
$
18,012

 
$
4,380

Severance and other expenses
 
 
 
 
 
 
 
2017 Closure Initiative (1)
$
766

 
$

 
$
2,948

 
$

Bonefish Restructuring (2)

 
26

 

 
601

General and administrative
$
766

 
$
26

 
$
2,948

 
$
601

Reversal of deferred rent liability
 
 
 
 
 
 
 
2017 Closure Initiative (1)
$
180

 
$

 
$
(4,761
)
 
$

Bonefish Restructuring (2)

 
(876
)
 

 
(2,801
)
Other restaurant operating
$
180

 
$
(876
)
 
$
(4,761
)
 
$
(2,801
)
 
$
702

 
$
(43
)
 
$
16,199

 
$
2,180

________________
(1)
On February 15, 2017, the Company decided to close 43 underperforming restaurants (the “2017 Closure Initiative”). Most of these restaurants were closed in 2017 to date, with the balance closing as leases and certain operating covenants expire or are amended or waived. Expenses related to the 2017 Closure Initiative for the thirteen and twenty-six weeks ended June 25, 2017 are recognized within the U.S. segment.
(2)
On February 12, 2016, the Company decided to close 14 Bonefish Grill restaurants (“Bonefish Restructuring”). The Company expects to substantially complete these restaurant closings through the first quarter of 2019. Expenses related to the Bonefish Restructuring are recognized within the U.S. segment.

The remaining restaurant impairment and closing charges resulted primarily from the carrying value of a restaurant’s assets exceeding its estimated fair market value, primarily due to locations identified for relocation.

Projected Future Expenses and Cash Expenditures - The Company currently expects to incur additional charges for the Closure Initiatives over the next two to three years, including costs associated with lease obligations, employee terminations and other closure-related obligations. Following is a summary of estimated pre-tax expense by type:
Estimated future expense (dollars in millions)
2017 CLOSURE INITIATIVE
 
BONEFISH RESTRUCTURING
Lease related liabilities, net of subleases
$
3.2

to
$
4.1

 
$
2.2

to
$
5.1

Employee severance and other obligations
0.4

to
0.7

 
0.3

to
0.6

Total estimated future expense
$
3.6

to
$
4.8

 
$
2.5

to
$
5.7

 
 
 
 
 
 
 
 
Total estimated future cash expenditures (dollars in millions)
$
25.3

 
$
29.5

 
$
10.1

to
$
12.3


Total future undiscounted cash expenditures for the 2017 Closure Initiative and Bonefish Restructuring, primarily related to lease liabilities, are expected to occur over the remaining lease terms with the final term ending in January 2029 and October 2024, respectively.


13

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Accrued Facility Closure and Other Costs Rollforward - The following table summarizes the Company’s accrual activity related to facility closure and other costs, primarily associated with the Closure Initiatives, during the twenty-six weeks ended June 25, 2017:
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
Beginning of the period
$
6,557

Charges
19,759

Cash payments
(4,850
)
Adjustments
(1,017
)
End of the period (1)
$
20,449

________________
(1)
As of June 25, 2017, the Company had exit-related accruals of $6.5 million recorded in Accrued and other current liabilities and $13.9 million recorded in Other long-term liabilities, net in the Consolidated Balance Sheet.

4.    Earnings (Loss) Per Share

The following table presents the computation of basic and diluted earnings (loss) per share:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(in thousands, except per share data)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Net income (loss) attributable to Bloomin’ Brands
$
35,630

 
$
(9,177
)
 
$
79,540

 
$
25,298

 
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
98,852

 
113,330

 
100,963

 
115,630

 
 
 
 
 
 
 
 
Effect of diluted securities:
 
 
 
 
 
 
 
Stock options
3,128

 

 
3,030

 
2,719

Nonvested restricted stock and restricted stock units
433

 

 
394

 
208

Nonvested performance-based share units
8

 

 
30

 
3

Diluted weighted average common shares outstanding
102,421

 
113,330

 
104,417

 
118,560

 
 
 
 
 
 
 
 
Basic earnings (loss) per share
$
0.36

 
$
(0.08
)
 
$
0.79

 
$
0.22

Diluted earnings (loss) per share
$
0.35

 
$
(0.08
)
 
$
0.76

 
$
0.21


Dilutive securities outstanding not included in the computation of earnings (loss) per share because their effect was antidilutive were as follows:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(shares in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Stock options
5,359

 
8,269

 
5,462

 
4,854

Nonvested restricted stock and restricted stock units
153

 
587

 
172

 
376

Nonvested performance-based share units
262

 
77

 
317

 
83



14

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

5.    Stock-based Compensation Plans

The Company recognized stock-based compensation expense as follows:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Stock options
$
2,944

 
$
3,301

 
$
5,699

 
$
6,019

Restricted stock and restricted stock units
2,689

 
2,518

 
5,242

 
4,562

Performance-based share units
820

 
867

 
1,236

 
1,752

 
$
6,453

 
$
6,686

 
$
12,177

 
$
12,333


During the twenty-six weeks ended June 25, 2017, the Company made grants to its employees of 1.2 million stock options, 0.6 million time-based restricted stock units and 0.4 million performance-based share units.

Assumptions used in the Black-Scholes option pricing model and the weighted-average fair value of option awards granted were as follows:
 
TWENTY-SIX WEEKS ENDED
 
JUNE 25, 2017
 
JUNE 26, 2016
Assumptions:
 
 
 
Weighted-average risk-free interest rate (1)
1.93
%
 
1.33
%
Dividend yield (2)
1.84
%
 
1.60
%
Expected term (3)
6.3 years

 
6.1 years

Weighted-average volatility (4)
33.73
%
 
35.20
%
 
 
 
 
Weighted-average grant date fair value per option
$
5.09

 
$
5.27

________________
(1)
Risk-free interest rate is the U.S. Treasury yield curve in effect as of the grant date for periods within the expected term of the option.
(2)
Dividend yield is the level of dividends expected to be paid on the Company’s common stock over the expected term of the option.
(3)
Expected term represents the period of time that the options are expected to be outstanding. The simplified method of estimating the expected term is used since the Company does not have significant historical exercise experience for its stock options.
(4)
Volatility is based on the historical volatilities of the Company’s stock and the stock of comparable peer companies.

The following represents unrecognized stock compensation expense and the remaining weighted-average vesting period as of June 25, 2017:
 
UNRECOGNIZED COMPENSATION EXPENSE
(dollars in thousands)
 
REMAINING WEIGHTED-AVERAGE VESTING PERIOD
(in years)
Stock options
$
20,204

 
2.5
Restricted stock and restricted stock units
$
25,436

 
2.8
Performance-based share units
$
6,017

 
2.1

As of June 25, 2017, the maximum number of shares of common stock available for issuance pursuant to the Bloomin’ Brands, Inc. 2016 Omnibus Incentive Compensation Plan was 3,827,305.


15

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

6.    Other Current Assets, Net

Other current assets, net, consisted of the following:
(dollars in thousands)
JUNE 25, 2017
 
DECEMBER 25, 2016
Prepaid expenses
$
26,539

 
$
35,298

Accounts receivable - gift cards, net
18,355

 
102,664

Accounts receivable - vendors, net
7,093

 
10,107

Accounts receivable - franchisees, net
2,739

 
1,677

Accounts receivable - other, net
20,682

 
20,497

Assets held for sale
4,118

 
1,331

Other current assets, net
17,521

 
18,652

 
$
97,047

 
$
190,226


7.     Property, Fixtures and Equipment, Net

During the twenty-six weeks ended June 25, 2017, the Company entered into sale-leaseback transactions with third-parties in which it sold 14 restaurant properties at fair market value for gross proceeds of $51.5 million. In connection with the sale-leaseback transactions, the Company recorded deferred gains of $14.1 million, which are amortized to Other restaurant operating expense in the Consolidated Statements of Operations and Comprehensive Income over the initial term of each lease, ranging from 10 to 20 years. In addition, during the first quarter of 2017, the Company sold one property to a third party for gross proceeds of $6.0 million that did not qualify for sale-leaseback accounting. During the second quarter of 2017, the restaurant was sold and the associated assets and financing obligation were derecognized.

Subsequent to June 25, 2017, the Company entered into sale-leaseback transactions with third-parties in which it sold ten restaurant properties at fair market value for gross proceeds of $32.3 million.

8.     Goodwill and Intangible Assets, Net

The following table is a rollforward of goodwill:
(dollars in thousands)
U.S.
 
INTERNATIONAL
 
CONSOLIDATED
Balance as of December 25, 2016
$
172,424

 
$
137,631

 
$
310,055

Translation adjustments

 
4,492

 
4,492

Divestitures (1)
(1,657
)
 

 
(1,657
)
Balance as of June 25, 2017
$
170,767

 
$
142,123

 
$
312,890

________________
(1)
During the twenty-six weeks ended June 25, 2017, the Company disposed of Goodwill in connection with the sale of 54 of its U.S. Company-owned Outback Steakhouse and Carrabba’s Italian Grill locations to existing franchisees.

The Company performed its annual assessment for impairment of goodwill and other indefinite-lived intangible assets during the fiscal second quarters of 2017 and 2016. In connection with these assessments, the Company did not record any goodwill or indefinite-lived intangible impairment charges.


16

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

9.    Long-term Debt, Net

Following is a summary of outstanding long-term debt:
 
JUNE 25, 2017
 
DECEMBER 25, 2016
(dollars in thousands)
OUTSTANDING BALANCE
 
INTEREST RATE
 
OUTSTANDING BALANCE
 
INTEREST RATE
Senior Secured Credit Facility:
 
 
 
 
 
 
 
Term loan A (1)
$
247,500

 
3.07
%
 
$
258,750

 
2.63
%
Term loan A-1
135,000

 
3.19
%
 
140,625

 
2.70
%
Term loan A-2
125,000

 
3.19
%
 

 
%
Revolving credit facility (1)
598,500

 
3.14
%
 
622,000

 
2.67
%
Total Senior Secured Credit Facility
$
1,106,000

 
 
 
$
1,021,375

 
 
PRP Mortgage Loan

 
%
 
47,202

 
3.21
%
Financing obligations
19,587

 
7.45% to 7.60%

 
19,595

 
7.45% to 7.60%

Capital lease obligations
2,253

 
 
 
2,364

 
 
Other notes payable
1,000

 
0.00% to 2.18%

 
1,776

 
0.00% to 7.00%

Less: unamortized debt discount and issuance costs
(2,302
)
 
 
 
(2,827
)
 
 
 
$
1,126,538

 
 
 
$
1,089,485

 
 
Less: current portion of long-term debt
(44,497
)
 
 
 
(35,079
)
 
 
Long-term debt, net
$
1,082,041

 
 
 
$
1,054,406

 
 
________________
(1)
Represents the weighted-average interest rate for the respective period.

Credit Agreement Amendment - On May 22, 2017, OSI Restaurant Partners, LLC (“OSI”), a wholly-owned subsidiary of the Company, entered into an amendment (the “Amendment”) to its existing credit agreement, dated October 26, 2012 (as previously amended, the “Credit Agreement”). The Amendment provided an incremental Term loan A-2 in an aggregate principal amount of $125.0 million. No other material changes were made to the terms of OSI’s Credit Agreement as a result of the Amendment.

The following is a summary of required principal payments for the Amendment (dollars in thousands):
SCHEDULED QUARTERLY PAYMENT DATES
 
TERM LOAN A-2
September 30, 2017 through June 30, 2018
 
$
2,344

September 30, 2018 through March 31, 2019
 
$
3,125


Maturities - Following is a summary of principal payments of the Company’s total consolidated debt outstanding as of June 25, 2017:
(dollars in thousands)
JUNE 25, 2017
Year 1
$
44,497

Year 2
1,061,176

Year 3
519

Year 4
444

Year 5
416

Thereafter
19,486

Total
$
1,126,538


Debt Covenants - As of June 25, 2017 and December 25, 2016, the Company was in compliance with its debt covenants.

17

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

10.    Redeemable Noncontrolling Interests

The Company consolidates subsidiaries in which it has noncontrolling interests that are permitted to deliver subsidiary shares in exchange for cash at a future date. The following table presents a rollforward of Redeemable noncontrolling interests during the twenty-six weeks ended June 25, 2017 and June 26, 2016:
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
Balance, beginning of period
$
547

 
$
23,526

Change in redemption value of Redeemable noncontrolling interests
126

 
1,349

Foreign currency translation attributable to Redeemable noncontrolling interests
8

 
2,430

Net (loss) income attributable to Redeemable noncontrolling interests
(125
)
 
381

Purchase of Redeemable noncontrolling interests

 
(3,552
)
Balance, end of period
$
556

 
$
24,134


11.
Stockholders’ Equity

Share Repurchases - On July 26, 2016, the Board of Directors (“the Board”) approved a $300.0 million authorization (the “July 2016 Share Repurchase Program”). On April 21, 2017, the Board canceled the remaining $52.3 million of authorization under the July 2016 Share Repurchase Program and approved a new $250.0 million authorization (the “2017 Share Repurchase Program”). The 2017 Share Repurchase Program will expire on October 21, 2018. As of June 25, 2017, $129.0 million remained available for repurchase under the 2017 Share Repurchase Program. Following is a summary of the shares repurchased under the Company’s share repurchase programs during fiscal year 2017:

NUMBER OF SHARES
(in thousands)
 
AVERAGE REPURCHASE PRICE PER SHARE
 
AMOUNT
(dollars in thousands)
First fiscal quarter
2,887

 
$
18.37

 
$
53,053

Second fiscal quarter (1)
7,030

 
$
20.72

 
145,675

Total common stock repurchases
9,917

 
$
20.04

 
$
198,728

________________
(1)
Subsequent to June 25, 2017, the Company repurchased 1.6 million shares of its common stock for $34.0 million under a Rule 10b5-1 plan.

Dividends - The Company declared and paid dividends per share during fiscal year 2017 as follows:
 
DIVIDENDS PER SHARE
 
AMOUNT
(dollars in thousands)
First fiscal quarter
$
0.08

 
$
8,254

Second fiscal quarter
0.08

 
8,054

Total cash dividends declared and paid
$
0.16

 
$
16,308


In July 2017, the Board declared a quarterly cash dividend of $0.08 per share, payable on August 23, 2017, to shareholders of record at the close of business on August 9, 2017.


18

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Accumulated Other Comprehensive Loss - Following are the components of Accumulated other comprehensive loss (“AOCL”):
(dollars in thousands)
JUNE 25, 2017
 
DECEMBER 25, 2016
Foreign currency translation adjustment
$
(96,108
)
 
$
(107,509
)
Unrealized losses on derivatives, net of tax
(2,716
)
 
(3,634
)
Accumulated other comprehensive loss
$
(98,824
)
 
$
(111,143
)
 
Following are the components of Other comprehensive income (loss) during the periods presented:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Bloomin’ Brands:
 
 
 
 
 
 
 
Foreign currency translation adjustment
$
(9,176
)
 
$
18,257

 
$
11,401

 
$
10,274

 
 
 
 
 
 
 
 
Unrealized loss on derivatives, net of tax (1)
$
(610
)
 
$
(2,187
)
 
$
(509
)
 
$
(4,922
)
Reclassification of adjustment for loss on derivatives included in Net income (loss), net of tax (2)
643

 
967

 
1,427

 
1,955

Total unrealized gain (loss) on derivatives, net of tax
$
33

 
$
(1,220
)
 
$
918

 
$
(2,967
)
Other comprehensive (loss) income attributable to Bloomin’ Brands
$
(9,143
)
 
$
17,037

 
$
12,319

 
$
7,307

 
 
 
 
 
 
 
 
Non-controlling interests:
 
 
 
 
 
 
 
Foreign currency translation adjustment
$
55

 
$
(30
)
 
$
(38
)
 
$
(24
)
Other comprehensive income (loss) attributable to Non-controlling interests
$
55

 
$
(30
)
 
$
(38
)
 
$
(24
)
 
 
 
 
 
 
 
 
Redeemable non-controlling interests:
 
 
 
 
 
 
 
Foreign currency translation adjustment
$
3

 
$
1,738

 
$
8

 
$
2,430

Other comprehensive income attributable to Redeemable non-controlling interests
$
3

 
$
1,738

 
$
8

 
$
2,430

________________
(1)
Unrealized loss on derivatives is net of tax of $0.4 million and $1.4 million for the thirteen weeks ended June 25, 2017 and June 26, 2016, respectively, and $0.3 million and $3.2 million for the twenty-six weeks ended June 25, 2017 and June 26, 2016, respectively.
(2)
Reclassifications of adjustments for losses on derivatives are net of tax of $0.4 million and $0.6 million for the thirteen weeks ended June 25, 2017 and June 26, 2016, respectively, and $0.9 million and $1.3 million for the twenty-six weeks ended June 25, 2017 and June 26, 2016, respectively.

12.    Derivative Instruments and Hedging Activities

Interest Rate Risk - The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages economic risks, including interest rate risk, 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, primarily interest rate swaps, are to add stability to interest expense and to manage its exposure to interest rate movements.
Currency Exchange Rate Risk - The Company is exposed to foreign currency exchange rate risk arising from transactions and balances denominated in currencies other than the U.S. dollar. The Company may use foreign currency forward contracts to manage certain foreign currency exposures.

19

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

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 swap agreements have an aggregate notional amount of $400.0 million, a start date of June 30, 2015, and mature on May 16, 2019. Under the terms of the swap agreements, the Company pays a weighted-average fixed rate of 2.02% on the $400.0 million notional amount and receives payments from the counterparty based on the 30-day LIBOR rate.

The interest rate swaps, which have been designated and qualify as a cash flow hedge, are recognized on the Company’s Consolidated Balance Sheets at fair value and are classified based on the instruments’ maturity dates. Fair value changes in the interest rate swaps are recognized in AOCL for all effective portions. Balances in AOCL are subsequently reclassified to earnings in the same period that the hedged interest payments affect earnings. The Company estimates $2.8 million will be reclassified to interest expense over the next twelve months.

The following table presents the fair value, accrued interest and classification of the Company’s interest rate swaps:
(dollars in thousands)
JUNE 25, 2017
 
DECEMBER 25, 2016
 
CONSOLIDATED BALANCE SHEET CLASSIFICATION
Interest rate swaps - liability
$
2,641

 
$
3,968

 
Accrued and other current liabilities
Interest rate swaps - liability
1,845

 
1,999

 
Other long-term liabilities, net
Total fair value of derivative instruments (1)
$
4,486

 
$
5,967

 
 
 
 
 
 
 
 
Accrued interest
$
282

 
$
408

 
Accrued and other current liabilities
____________________
(1)
See Note 13 - Fair Value Measurements for fair value discussion of the interest rate swaps.

The following table summarizes the effects of the interest rate swaps on Net income (loss) for the periods indicated:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Interest rate swap expense recognized in Interest expense, net (1)
$
(1,036
)
 
$
(1,597
)
 
$
(2,301
)
 
$
(3,211
)
Income tax benefit recognized in Provision for income taxes
393

 
630

 
874

 
1,256

Total effects of the interest rate swaps on Net income (loss)
$
(643
)
 
$
(967
)
 
$
(1,427
)
 
$
(1,955
)
____________________
(1)
During the thirteen and twenty-six weeks ended June 25, 2017 and June 26, 2016, the Company did not recognize any gain or loss as a result of hedge ineffectiveness.

The Company records its derivatives on the Consolidated Balance Sheets on a gross balance basis. The Company’s derivatives are subject to master netting arrangements. As of June 25, 2017, 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 June 25, 2017, 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.


20

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

As of June 25, 2017 and December 25, 2016, the fair value of the Company’s interest rate swaps in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk, was $4.8 million and $6.4 million, respectively. As of June 25, 2017 and December 25, 2016, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions as of June 25, 2017 and December 25, 2016, it could have been required to settle its obligations under the agreements at their termination value of $4.8 million and $6.4 million, respectively.

13.    Fair Value Measurements

Fair value is the price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date. Fair value is categorized into one of the following three levels based on the lowest level of significant input:
Level 1
 
Unadjusted quoted market prices in active markets for identical assets or liabilities
Level 2
 
Observable inputs available at measurement date other than quoted prices included in Level 1
Level 3
 
Unobservable inputs that cannot be corroborated by observable market data

Fair Value Measurements on a Recurring Basis - The following table summarizes the Company’s financial assets and liabilities measured at fair value by hierarchy level on a recurring basis as of June 25, 2017 and December 25, 2016:
 
JUNE 25, 2017
 
DECEMBER 25, 2016
(dollars in thousands)
TOTAL
 
LEVEL 1
 
LEVEL 2
 
TOTAL
 
LEVEL 1
 
LEVEL 2
Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
Fixed income funds
$
86

 
$
86

 
$

 
$
90

 
$
90

 
$

Money market funds
23,396

 
23,396

 

 
18,607

 
18,607

 

Restricted cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
Fixed income funds

 

 

 
552

 
552

 

Money market funds

 

 

 
2,518

 
2,518

 

Total asset recurring fair value measurements
$
23,482

 
$
23,482

 
$

 
$
21,767

 
$
21,767

 
$

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Accrued and other current liabilities:
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments - interest rate swaps
$
2,641

 
$

 
$
2,641

 
$
3,968

 
$

 
$
3,968

Derivative instruments - commodities
105

 

 
105

 
157

 

 
157

Other long-term liabilities:
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments - interest rate swaps
1,845

 

 
1,845

 
1,999

 

 
1,999

Total liability recurring fair value measurements
$
4,591

 
$

 
$
4,591

 
$
6,124

 
$

 
$
6,124


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 and commodities. 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 incorporates credit valuation adjustments to reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. As of June 25, 2017 and December 25, 2016, the Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.


21

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Fair Value Measurements on a Nonrecurring Basis - Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to property, fixtures and equipment, goodwill and other intangible assets, which are remeasured when carrying value exceeds fair value. The following table summarizes the Company’s assets measured at fair value by hierarchy level on a nonrecurring basis:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
 
JUNE 25, 2017
 
JUNE 25, 2017
(dollars in thousands)
CARRYING VALUE
 
TOTAL IMPAIRMENT
 
CARRYING VALUE (1)
 
TOTAL IMPAIRMENT
Assets held for sale
$

 
$

 
$
400

 
$
70

Property, fixtures and equipment

 
12

 
1,067

 
862

 
$

 
$
12

 
$
1,467

 
$
932

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
 
JUNE 26, 2016
 
JUNE 26, 2016
(dollars in thousands)
CARRYING VALUE (2)
 
TOTAL IMPAIRMENT
 
CARRYING VALUE (2)
 
TOTAL IMPAIRMENT
Assets held for sale
$
43,995

 
$
39,717

 
$
43,995

 
$
39,717

 
$
43,995

 
$
39,717

 
$
43,995

 
$
39,717

________________
(1)
Carrying value approximates fair value with all assets measured using third-party market appraisals (Level 2).
(2)
Carrying value approximates fair value with all assets measured using executed sales contracts (Level 2).

Interim Disclosures about Fair Value of Financial Instruments - The Company’s non-derivative financial instruments as of June 25, 2017 and December 25, 2016 consist of cash equivalents, restricted cash, accounts receivable, accounts payable and current and long-term debt. The fair values of cash equivalents, restricted cash, accounts receivable and accounts payable approximate their carrying amounts reported in the Consolidated Balance Sheets due to their short duration.

Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The following table includes the carrying value and fair value of the Company’s debt by hierarchy level as of June 25, 2017 and December 25, 2016:
 
JUNE 25, 2017
 
DECEMBER 25, 2016
 
CARRYING VALUE
 
FAIR VALUE
 
CARRYING VALUE
 
FAIR VALUE
(dollars in thousands)
 
LEVEL 2
 
LEVEL 3
 
 
LEVEL 2
 
LEVEL 3
Senior Secured Credit Facility:
 
 
 
 
 
 
 
 
 
 
 
Term loan A
$
247,500

 
$
246,572

 
$

 
$
258,750

 
$
257,780

 
$

Term loan A-1
135,000

 
134,494

 

 
140,625

 
140,098

 

Term loan A-2
125,000

 
124,531

 

 

 

 

Revolving credit facility
598,500

 
594,011

 

 
622,000

 
617,335

 

PRP Mortgage Loan

 

 

 
47,202

 

 
47,202

Other notes payable
1,000

 

 
983

 
1,776

 

 
1,659



22

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Fair value of debt is determined based on the following:
DEBT FACILITY
 
METHODS AND ASSUMPTIONS
Senior Secured Credit Facility
 
Quoted market prices in inactive markets.
PRP Mortgage Loan
 
Assumptions derived from current conditions in the real estate and credit markets, changes in the underlying collateral and expectations of management.
Other notes payable
 
Discounted cash flow approach. Discounted cash flow inputs primarily include cost of debt rates, which are used to derive the present value factors for the determination of fair value.

14.    Income Taxes

 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
 
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Effective income tax rate
8.3
%
 
366.2
%
 
18.4
%
 
44.6
%

The effective income tax rate for the thirteen weeks ended June 25, 2017 decreased 357.9% as compared to the thirteen weeks ended June 26, 2016. Approximately 348% of this net decrease was due to the impairment and additional tax liabilities recorded in connection with the sale of Outback Steakhouse South Korea in 2016. The remaining decrease was primarily due to the impact of certain favorable discrete tax items recorded in 2017 and the change in the blend of taxable income across the Company’s U.S. and international subsidiaries.

The effective income tax rate for the twenty-six weeks ended June 25, 2017 decreased 26.2% as compared to the twenty-six weeks ended June 26, 2016. Approximately 23% of this net decrease was due to the impairment and additional tax liabilities recorded in connection with the sale of Outback Steakhouse South Korea in 2016. The remaining decrease was primarily due to the impact of certain favorable discrete tax items recorded in 2017 and the change in the blend of taxable income across the Company’s U.S. and international subsidiaries.

The effective income tax rate for the thirteen and twenty-six weeks ended June 25, 2017 was lower than the blended federal and state statutory rate of approximately 39%, primarily due to the benefit of employment-related tax credits and certain favorable discrete tax items recorded in 2017.

15.    Commitments and Contingencies

Litigation and Other Matters - The Company had $3.6 million and $3.5 million of liabilities recorded for various legal matters as of June 25, 2017 and December 25, 2016, respectively.

In November 2015, David Sears and Elizabeth Thomas, two former Outback Steakhouse managers (“Manager Plaintiffs”), sent a demand letter seeking unpaid overtime compensation on behalf of all managers and kitchen managers employed at Outback Steakhouse restaurants from November 2012 to present. The Manager Plaintiffs claim that managers were not assigned sufficient management duties to qualify as exempt from overtime. In December 2016, the Company agreed to a tentative class settlement for eligible kitchen managers and accrued a settlement, inclusive of legal fees, of $2.4 million. During the second quarter of 2017, the class period closed and the Company made final payment to the class of $2.3 million.

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, with the exception of wage-and-hour cases which are not covered by insurance. 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.

23

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Lease Guarantees - As a result of the Company assigning its interest in obligations under real estate leases in connection with the sale of certain restaurants, the Company is contingently liable on certain lease agreements. These leases have varying terms, the latest of which expires in 2032. As of June 25, 2017, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessees was approximately $28.6 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of June 25, 2017 was approximately $17.8 million. The Company believes the financial strength and operating history of the buyers significantly reduces the risk that the Company will be required to make payments under these leases. Accordingly, no liability has been recorded.

16.    Segment Reporting

The Company has two reportable segments, U.S. and International, which reflects how the Company manages its business, reviews operating performance and allocates resources. The U.S. segment includes all brands operating in the U.S. while brands operating outside the U.S. are included in the International segment. Resources are allocated and performance is assessed by the Company’s Chief Executive Officer (“CEO”), whom the Company has determined to be its Chief Operating Decision Maker (“CODM”). Following is a summary of reporting segments:
SEGMENT
 
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

Segment accounting policies are the same as those described in Note 2 - Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 25, 2016. Revenues for all segments include only transactions with customers and include no intersegment revenues. Excluded from net income from operations for U.S. and International are certain legal and corporate costs not directly related to the performance of the segments, stock-based compensation expenses and certain bonus expenses.

The following table is a summary of Total revenue by segment:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Total revenues
 
 
 
 
 
 
 
U.S.
$
917,369

 
$
958,981

 
$
1,949,987

 
$
2,002,760

International
115,613

 
119,607

 
226,818

 
240,016

Total revenues
$
1,032,982

 
$
1,078,588

 
$
2,176,805

 
$
2,242,776



24

Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

The following table is a reconciliation of Segment income (loss) from operations to Income before provision for income taxes:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Segment income (loss) from operations
 
 
 
 
 
 
 
U.S.
$
75,068

 
$
89,010

 
$
176,014

 
$
206,849

International
9,679

 
(34,573
)
 
18,481

 
(23,224
)
Total segment income from operations
84,747

 
54,437

 
194,495

 
183,625

Unallocated corporate operating expense
(42,593
)
 
(41,104
)
 
(83,211
)
 
(83,608
)
Total income from operations
42,154

 
13,333

 
111,284

 
100,017

Loss on defeasance, extinguishment and modification of debt
(260
)
 

 
(260
)
 
(26,580
)
Other income (expense), net
7,281

 
(1
)
 
7,230

 
(20
)
Interest expense, net
(9,543
)
 
(10,302
)
 
(18,684
)
 
(23,177
)
Income before provision for income taxes
$
39,632

 
$
3,030

 
$
99,570

 
$
50,240


The following table is a summary of Depreciation and amortization expense by segment:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Depreciation and amortization
 
 
 
 
 
 
 
U.S.
$
37,406

 
$
38,960

 
$
74,006

 
$
77,162

International
7,014

 
6,954

 
13,514

 
13,501

Corporate
3,643

 
3,090

 
7,133

 
5,992

Total depreciation and amortization
$
48,063

 
$
49,004

 
$
94,653

 
$
96,655



25

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes. Unless the context otherwise indicates, as used in this report, the term the “Company,” “we,” “us,” “our” and other similar terms mean Bloomin’ Brands, Inc. and its subsidiaries.

Cautionary Statement

This Quarterly Report on Form 10-Q (the “Report”) includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “feels,” “seeks,” “forecasts,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could” or “would” or, in each case, their negative or other variations or comparable terminology, although not all forward-looking statements are accompanied by such terms. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially from statements made or suggested by forward-looking statements include, but are not limited to, the following:

(i)
Consumer reactions to public health and food safety issues;

(ii)
Our ability to compete in the highly competitive restaurant industry with many well-established competitors and new market entrants;

(iii)
Minimum wage increases and additional mandated employee benefits;

(iv)
Our ability to comply with governmental laws and regulations, the costs of compliance with such laws and regulations and the effects of changes to applicable laws and regulations, including tax laws and unanticipated liabilities;

(v)
Economic conditions and their effects on consumer confidence and discretionary spending, consumer traffic, the cost and availability of credit and interest rates;

(vi)
Fluctuations in the price and availability of commodities;

(vii)
Our ability to implement our expansion, remodeling and relocation plans due to uncertainty in locating and acquiring attractive sites on acceptable terms, obtaining required permits and approvals, recruiting and training

26

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

necessary personnel, obtaining adequate financing and estimating the performance of newly opened, remodeled or relocated restaurants;

(viii)
Our ability to protect our information technology systems from interruption or security breach and to protect consumer data and personal employee information;

(ix)
The effects of international economic, political and social conditions and legal systems on our foreign operations and on foreign currency exchange rates;

(x)
Our ability to preserve and grow the reputation and value of our brands;

(xi)
Seasonal and periodic fluctuations in our results and the effects of significant adverse weather conditions and other disasters or unforeseen events;

(xii)
Our ability to effectively respond to changes in patterns of consumer traffic, consumer tastes and dietary habits;

(xiii)
Strategic actions, including acquisitions and dispositions, and our success in integrating any newly acquired or newly created businesses;

(xiv)
The effects of our substantial leverage and restrictive covenants in our various credit facilities on our ability to raise additional capital to fund our operations, to make capital expenditures to invest in new or renovate restaurants and to react to changes in the economy or our industry, and our exposure to interest rate risk in connection with our variable-rate debt;

(xv)
The adequacy of our cash flow and earnings and other conditions which may affect our ability to pay dividends and repurchase shares of our common stock; and

(xvi)
Such other factors as discussed in Part I, Item IA. Risk Factors of our Annual Report on Form 10-K for the year ended December 25, 2016.

In light of these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.



27

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Overview

We are one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. As of June 25, 2017, we owned and operated 1,192 restaurants and franchised 296 restaurants across 48 states, Puerto Rico, Guam and 19 countries. We have four founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar.
Executive Summary

Our financial results for the thirteen weeks ended June 25, 2017 (“second quarter of 2017”) include the following:

A decrease in total revenues of 4.2% to $1.0 billion in the second quarter of 2017, as compared to the second quarter of 2016, was primarily due to refranchising internationally and domestically and the net impact of restaurant closings and new restaurant openings, partially offset by the effect of foreign currency translation and increases in franchise revenues.

Income from operations of $42.2 million in the second quarter of 2017, as compared to $13.3 million in the second quarter of 2016, increased primarily due to impairment related to the sale of Outback Steakhouse South Korea in 2016 and increases in franchise revenues, partially offset by a decrease in restaurant-level operating margin and the timing of our annual partner’s conference which occurred in Q2 of 2017 and Q1 of 2016.

Following is a summary of significant actions we have taken and other factors that impacted our operating results and liquidity to date in 2017:

Refranchising - During the thirteen weeks ended June 25, 2017, we completed the sale of 54 of our existing U.S. Company-owned Outback Steakhouse and Carrabba’s Italian Grill locations for aggregate cash proceeds of $36.2 million, net of certain closing adjustments. The transactions resulted in aggregate net gain of $7.4 million within Other income (expense), net, in the Consolidated Statements of Operations and Other Comprehensive Income. See Note 2 - Disposals of our Notes to Consolidated Financial Statements for additional details.

Sale-leaseback Transactions - During the twenty-six weeks ended June 25, 2017, we entered into sale-leaseback transactions with third-parties in which we sold 15 restaurant properties at fair market value for gross proceeds of $57.5 million. Subsequent to June 25, 2017, we entered into sale-leaseback transactions with third-parties in which we sold ten restaurant properties at fair market value for gross proceeds of $32.3 million.

2017 Closure Initiative - On February 15, 2017, we decided to close 43 underperforming restaurants. Most of these restaurants were closed in 2017 to date, with the balance closing as leases and certain operating covenants expire or are amended or waived. See Note 3 - Impairments and Exit Costs of our Notes to Consolidated Financial Statements for additional details regarding the 2017 Closure Initiative.

Credit Agreement Amendment - On May 22, 2017, OSI entered into an Amendment to its existing Credit Agreement, dated October 26, 2012. The Amendment provided an incremental Term loan A-2 in an aggregate principal amount of $125.0 million, a portion of which was used to repay outstanding borrowings under our revolving credit facility. See Note 9 - Long-term Debt, Net of our Notes to Consolidated Financial Statements for additional details regarding the Amendment to the Credit Agreement.

Share Repurchase Programs - On April 21, 2017, the Board approved the 2017 Share Repurchase Program, a new $250.0 million authorization which will expire on October 21, 2018. We repurchased 11.5 million shares of common stock year-to-date for a total of $232.7 million and had $95.0 million remaining available for repurchase under the 2017 Share Repurchase Program, through the date of this filing.


28

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Key Performance Indicators

Key measures that we use in evaluating our restaurants and assessing our business include the following:

Average restaurant unit volumes—average sales per restaurant to measure changes in customer traffic, pricing and development of the brand;

Comparable restaurant sales—year-over-year comparison of sales volumes for Company-owned restaurants that are open 18 months or more in order to remove the impact of new restaurant openings in comparing the operations of existing restaurants;

System-wide sales—total restaurant sales volume for all Company-owned and franchise restaurants, regardless of ownership, to interpret the overall health of our brands;

Restaurant-level operating margin, Income from operations, Net income and Diluted earnings per share—financial measures utilized to evaluate our operating performance.

Restaurant-level operating margin is widely regarded in the industry as a useful metric to evaluate restaurant-level operating efficiency and performance of ongoing restaurant-level operations, and we use it for these purposes, overall and particularly within our two segments. Our restaurant-level operating margin is expressed as the percentage of our Restaurant sales that Cost of sales, Labor and other related and Other restaurant operating (including advertising expenses) represent, in each case as such items are reflected in our Consolidated Statement of Operations. The following categories of our revenue and operating expenses are not included in restaurant-level operating margin because we do not consider them reflective of operating performance at the restaurant-level within a period:

(i)
Franchise and other revenues which are earned primarily from franchise royalties and other non-food and beverage revenue streams, such as rental and sublease income.
(ii)
Depreciation and amortization which, although substantially all of which is related to restaurant-level assets, represent historical sunk costs rather than cash outlays for the restaurants.
(iii)
General and administrative expense which includes primarily non-restaurant-level costs associated with support of the restaurants and other activities at our corporate offices.
(iv)
Asset impairment charges and restaurant closing costs which are not reflective of ongoing restaurant performance in a period.

Adjusted restaurant-level operating margin, Adjusted income from operations, Adjusted net income and Adjusted diluted earnings per share—non-GAAP financial measures utilized to evaluate our operating performance, and for which definitions, usefulness and reconciliations are described in more detail in the “Non-GAAP Financial Measures” section below; and

Customer satisfaction scores—measurement of our customers’ experiences in a variety of key areas.


29

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Selected Operating Data

The table below presents the number of our restaurants in operation at the end of the periods indicated:
Number of restaurants (at end of the period):
JUNE 25, 2017
 
JUNE 26, 2016
U.S.
 
 
 
Outback Steakhouse
 
 
 
Company-owned (1)
584

 
650

Franchised (1)
158

 
105

Total
742

 
755

Carrabba’s Italian Grill
 
 
 
Company-owned (1)
227

 
244

Franchised (1)
3

 
3

Total
230

 
247

Bonefish Grill
 
 
 
Company-owned
196

 
204

Franchised
7

 
6

Total
203

 
210

Fleming’s Prime Steakhouse & Wine Bar
 
 
 
Company-owned
67

 
66

International
 
 
 
Company-owned
 
 
 
Outback Steakhouse - Brazil (2)
85

 
78

Outback Steakhouse - South Korea (3)

 
74

Other
33

 
19

Franchised


 


Outback Steakhouse - South Korea (3)
74

 

Other
54

 
52

Total
246

 
223

System-wide total
1,488

 
1,501

____________________
(1)
In April 2017, we sold 53 Outback Steakhouse restaurants and one Carrabba’s Italian Grill restaurant which are now operated as franchises under agreements with the Buyers.
(2)
The restaurant counts for Brazil are reported as of May 31, 2017 and 2016, respectively, to correspond with the balance sheet dates of this subsidiary.
(3)
On July 25, 2016, we sold our restaurant locations in South Korea, converting all restaurants in that market to franchised locations.

30

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Results of Operations

The following table sets forth, for the periods indicated, the percentages of certain items in our Consolidated Statements of Operations and Comprehensive Income in relation to Total revenues or Restaurant sales, as indicated:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
 
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Revenues
 

 
 
 
 
 
 
Restaurant sales
98.7
 %
 
99.4
 %
 
99.0
 %
 
99.5
 %
Franchise and other revenues
1.3

 
0.6

 
1.0

 
0.5

Total revenues
100.0

 
100.0

 
100.0

 
100.0

Costs and expenses
 

 
 

 
 

 
 
Cost of sales (1)
31.7

 
32.3

 
31.9

 
32.4

Labor and other related (1)
29.2

 
28.8

 
28.9

 
28.3

Other restaurant operating (1)
23.9

 
23.4

 
22.8

 
22.6

Depreciation and amortization
4.7

 
4.5

 
4.3

 
4.3

General and administrative
7.5

 
6.4

 
6.8

 
6.4

Provision for impaired assets and restaurant closings
0.1

 
3.8

 
0.9

 
2.0

Total costs and expenses
95.9

 
98.8

 
94.9

 
95.5

Income from operations
4.1

 
1.2

 
5.1

 
4.5

Loss on defeasance, extinguishment and modification of debt
(*)

 

 
(*)

 
(1.2
)
Other income (expense), net
0.7

 
(*)

 
0.3

 
(*)

Interest expense, net
(1.0
)
 
(0.9
)
 
(0.8
)
 
(1.1
)
Income before provision for income taxes
3.8

 
0.3

 
4.6

 
2.2

Provision for income taxes
0.3

 
1.0

 
0.8

 
1.0

Net income (loss)
3.5

 
(0.7
)
 
3.8

 
1.2

Less: net income attributable to noncontrolling interests
0.1

 
0.2

 
0.1

 
0.1

Net income (loss) attributable to Bloomin’ Brands
3.4
 %
 
(0.9
)%
 
3.7
 %
 
1.1
 %
________________
(1)
As a percentage of Restaurant sales.
*
Less than 1/10th of one percent of Total revenues.

RESTAURANT SALES

Following is a summary of the change in Restaurant sales for the thirteen and twenty-six weeks ended June 25, 2017:
(dollars in millions)
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
For the period ending June 26, 2016
$
1,072.5

 
$
2,230.6

Change from:
 
 
 
Divestiture of restaurants through refranchising transactions
(68.4
)
 
(110.7
)
Restaurant closings
(23.0
)
 
(40.1
)
Restaurant openings
21.3

 
41.7

Effect of foreign currency translation
12.2

 
30.1

Comparable restaurant sales
5.4

 
3.8

For the period ending June 25, 2017
$
1,020.0

 
$
2,155.4


The decrease in Restaurant sales in the thirteen weeks ended June 25, 2017 was primarily attributable to: (i) refranchising internationally and domestically and (ii) the closing of 51 restaurants since March 27, 2016. The decrease in restaurant

31

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

sales was partially offset by: (i) the opening of 48 new restaurants not included in our comparable restaurant sales base and (ii) the effect of foreign currency translation, due to the appreciation of the Brazil Real.

The decrease in Restaurant sales in the twenty-six weeks ended June 25, 2017 was primarily attributable to: (i) refranchising internationally and domestically and (ii) the closing of 54 restaurants since December 27, 2015. The decrease in restaurant sales was partially offset by: (i) the opening of 57 new restaurants not included in our comparable restaurant sales base and (ii) the effect of foreign currency translation, due to the appreciation of the Brazil Real.

Comparable Restaurant Sales, Traffic and Average Check Per Person Increases (Decreases)
Following is a summary of comparable restaurant sales, traffic and average check per person increases (decreases):
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
 
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Year over year percentage change:
 
 
 
 
 
 
 
Comparable restaurant sales (stores open 18 months or more) (1):
 
 
 
 
 

 
 
U.S.
 
 
 
 
 
 
 
Outback Steakhouse
0.3
 %
 
(2.5
)%
 
0.9
 %
 
(1.9
)%
Carrabba’s Italian Grill
0.4
 %
 
(4.8
)%
 
(1.8
)%
 
(3.3
)%
Bonefish Grill
(2.6
)%
 
0.9
 %
 
(1.6
)%
 
(1.0
)%
Fleming’s Prime Steakhouse & Wine Bar
(1.3
)%
 
(0.8
)%
 
(2.1
)%
 
0.3
 %
Combined U.S.
(0.3
)%
 
(2.3
)%
 
(0.3
)%
 
(1.9
)%
International
 
 
 
 
 
 
 
Outback Steakhouse - Brazil (2)
12.6
 %
 
3.9
 %
 
8.2
 %
 
6.4
 %
 
 
 
 
 
 
 
 
Traffic:
 
 
 
 
 

 
 
U.S.
 
 
 
 
 
 
 
Outback Steakhouse
(0.8
)%
 
(5.9
)%
 
(1.5
)%
 
(4.4
)%
Carrabba’s Italian Grill
(2.0
)%
 
(4.8
)%
 
(4.7
)%
 
(1.6
)%
Bonefish Grill
(3.1
)%
 
(2.8
)%
 
(2.6
)%
 
(4.0
)%
Fleming’s Prime Steakhouse & Wine Bar
(5.5
)%
 
(3.7
)%
 
(6.5
)%
 
(1.2
)%
Combined U.S.
(1.5
)%
 
(5.2
)%
 
(2.5
)%
 
(3.7
)%
International
 
 
 
 
 
 
 
Outback Steakhouse - Brazil
3.2
 %
 
(1.5
)%
 
0.7
 %
 
(0.4
)%
 
 
 
 
 
 
 
 
Average check per person increases (decreases) (3):
 
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
 
Outback Steakhouse
1.1
 %
 
3.4
 %
 
2.4
 %
 
2.5
 %
Carrabba’s Italian Grill
2.4
 %
 
 %
 
2.9
 %
 
(1.7
)%
Bonefish Grill
0.5
 %
 
3.7
 %
 
1.0
 %
 
3.0
 %
Fleming’s Prime Steakhouse & Wine Bar
4.2
 %
 
2.9
 %
 
4.4
 %
 
1.5
 %
Combined U.S.
1.2
 %
 
2.9
 %
 
2.2
 %
 
1.8
 %
International
 
 
 
 
 
 
 
Outback Steakhouse - Brazil
8.2
 %
 
6.3
 %
 
7.3
 %
 
6.7
 %
____________________
(1)
Comparable restaurant sales exclude the effect of fluctuations in foreign currency rates. 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.
(2)
Includes trading day impact from calendar period reporting of 1.2% and (0.9%) for the thirteen weeks ended June 25, 2017 and June 26, 2016, respectively and 0.2% and 0.1% for the twenty-six weeks ended June 25, 2017 and June 26, 2016, respectively.

32

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

(3)
Increases (decreases) in average check per person includes the impact of menu pricing changes, product mix and discounts.

Average Restaurant Unit Volumes and Operating Weeks
Following is a summary of the average restaurant unit volumes and operating weeks:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
 
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Average restaurant unit volumes:
 
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
 
Outback Steakhouse
$
66,065

 
$
65,158

 
$
69,165

 
$
67,978

Carrabba’s Italian Grill
$
57,114

 
$
55,396

 
$
58,362

 
$
58,267

Bonefish Grill
$
59,431

 
$
60,136

 
$
61,227

 
$
61,462

Fleming’s Prime Steakhouse & Wine Bar
$
80,707

 
$
80,432

 
$
84,571

 
$
85,171

International
 
 
 
 
 
 
 
Outback Steakhouse - Brazil (1)
$
86,653

 
$
68,534

 
$
85,925

 
$
68,289

Operating weeks:
 
 
 
 
 

 
 
U.S.
 
 
 
 
 
 
 
Outback Steakhouse
7,821

 
8,440

 
16,193

 
16,884

Carrabba’s Italian Grill
2,956

 
3,172

 
6,024

 
6,344

Bonefish Grill
2,548

 
2,653

 
5,148

 
5,362

Fleming’s Prime Steakhouse & Wine Bar
871

 
858

 
1,749

 
1,716

International
 
 
 
 
 
 
 
Outback Steakhouse - Brazil
1,106

 
1,008

 
2,173

 
1,984

____________________
(1)
Translated at an average exchange rate of 3.16 and 3.59 for the thirteen weeks ended June 25, 2017 and June 26, 2016, respectively and 3.19 and 3.77 for the twenty-six weeks ended June 25, 2017 and June 26, 2016, respectively.

Franchise and other revenues
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in millions)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Franchise revenues (1)
$
9.3

 
$
4.5

 
$
15.9

 
$
9.1

Other revenues
3.7

 
1.6

 
5.5

 
3.1

Franchise and other revenues
$
13.0

 
$
6.1

 
$
21.4

 
$
12.2

____________________
(1)
Represents franchise royalties and initial franchise fees.

COSTS AND EXPENSES

Cost of sales
 
THIRTEEN WEEKS ENDED
 
 
 
TWENTY-SIX WEEKS ENDED
 
 
(dollars in millions)
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
 
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
Cost of sales
$
323.1

 
$
346.8

 
 
 
$
687.9

 
$
722.1

 
 
% of Restaurant sales
31.7
%
 
32.3
%
 
(0.6
)%
 
31.9
%
 
32.4
%
 
(0.5
)%

Cost of sales, consisting of food and beverage costs, decreased as a percentage of Restaurant sales in the thirteen weeks ended June 25, 2017 as compared to the thirteen weeks ended June 26, 2016. The decrease as a percentage of Restaurant sales was primarily due to: (i) 0.8% from increases in average check per person, (ii) 0.5% lower beef costs and (iii) 0.3% from the impact of certain cost saving initiatives. These decreases were partially offset by increases as a percentage

33

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

of Restaurant sales primarily attributable to: (i) 0.6% for other commodity costs and (ii) 0.2% for product investments at Outback Steakhouse.

Cost of sales decreased as a percentage of Restaurant sales in the twenty-six weeks ended June 25, 2017 as compared to the twenty-six weeks ended June 26, 2016. The decrease as a percentage of Restaurant sales was primarily due to: (i) 0.7% from increases in average check per person, (ii) 0.4% lower beef costs and (iii) 0.3% from the impact of certain cost saving initiatives. These decreases were partially offset by increases as a percentage of Restaurant sales primarily attributable to: (i) 0.4% for other commodity costs and (ii) 0.3% for product investments at Outback Steakhouse.

Labor and other related expenses
 
THIRTEEN WEEKS ENDED
 
 
 
TWENTY-SIX WEEKS ENDED
 
 
(dollars in millions)
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
 
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
Labor and other related
$
297.9

 
$
309.2

 
 
 
$
622.3

 
$
632.0

 
 
% of Restaurant sales
29.2
%
 
28.8
%
 
0.4
%
 
28.9
%
 
28.3
%
 
0.6
%

Labor and other related expenses increased as a percentage of Restaurant sales in the thirteen weeks ended June 25, 2017 as compared to the thirteen weeks ended June 26, 2016. The increase as a percentage of Restaurant sales was primarily due to 1.4% of higher kitchen and service labor costs due to wage rate increases and investments in our service model. The increase was offset by decreases as a percentage of Restaurant sales primarily due to: (i) 0.5% from increases in average check per person and (ii) 0.3% impact from the sale of Outback Steakhouse South Korea in 2016.

Labor and other related expenses increased as a percentage of Restaurant sales in the twenty-six weeks ended June 25, 2017 as compared to the twenty-six weeks ended June 26, 2016. The increase as a percentage of Restaurant sales was primarily due to 1.5% of higher kitchen and service labor costs due to wage rate increases and investments in our service model. The increase was partially offset by decreases as a percentage of Restaurant sales primarily due to: (i) 0.6% from increases in average check per person and (ii) 0.3% impact from the sale of Outback Steakhouse South Korea in 2016.

Other restaurant operating expenses
 
THIRTEEN WEEKS ENDED
 
 
 
TWENTY-SIX WEEKS ENDED
 
 
(dollars in millions)
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
 
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
Other restaurant operating
$
244.1

 
$
250.4

 
 
 
$
492.1

 
$
504.0

 
 
% of Restaurant sales
23.9
%
 
23.4
%
 
0.5
%
 
22.8
%
 
22.6
%
 
0.2
%

Other restaurant operating expenses increased as a percentage of Restaurant sales in the thirteen weeks ended June 25, 2017 as compared to the thirteen weeks ended June 26, 2016. The increase as a percentage of Restaurant sales was primarily due to: (i) 0.8% from operating expense inflation and (ii) 0.4% from higher rent expense due to the sale-leaseback of certain properties. These increases were partially offset by decreases as a percentage of Restaurant sales primarily due to: (i) 0.4% from higher advertising expense in 2016, (ii) 0.3% from lower insurance costs and (iii) 0.2% from the impact of certain cost saving initiatives.

Other restaurant operating expenses increased as a percentage of Restaurant sales in the twenty-six weeks ended June 25, 2017 as compared to the twenty-six weeks ended June 26, 2016. The increase as a percentage of Restaurant sales was primarily due to: (i) 0.7% from operating expense inflation and (ii) 0.5% from higher rent expense due to the sale-leaseback of certain properties. These increases were partially offset by decreases as a percentage of Restaurant sales primarily due to: (i) 0.6% from higher advertising expense in 2016, (ii) 0.2% from lower insurance costs and (iii) 0.2% from the impact of certain cost saving initiatives.


34

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Depreciation and amortization
 
THIRTEEN WEEKS ENDED
 
 
 
TWENTY-SIX WEEKS ENDED
 
 
(dollars in millions)
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
 
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
Depreciation and amortization
$
48.1

 
$
49.0

 
$
(0.9
)
 
$
94.7

 
$
96.7

 
$
(2.0
)

Depreciation and amortization expense decreased in the thirteen and twenty-six weeks ended June 25, 2017 as compared to the thirteen and twenty-six weeks ended June 26, 2016. The decrease was primarily due to: (i) refranchising internationally and domestically, (ii) disposal of assets related to the sale-leaseback of certain properties, (iii) assets impaired in connection with the 2017 Closure Initiative, partially offset by additional depreciation expense related to the opening of new restaurants and the relocation or remodel of existing restaurants.

General and administrative

General and administrative expense includes salaries and benefits, management incentive programs, related payroll tax and benefits, other employee-related costs and professional services. Following is a summary of the change in general and administrative expense for the thirteen and twenty-six weeks ended June 25, 2017:
(dollars in millions)
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
For the period ended June 26, 2016
$
68.6

 
$
143.6

Change from:
 
 
 
Conference expense (1)
4.2

 
(0.2
)
Legal and professional fees (2)
1.3

 
2.3

Foreign currency exchange (3)
1.2

 
2.6

Compensation, benefits and payroll tax (4)
(0.5
)
 
(2.7
)
Other
2.3

 
3.4

For the period ended June 25, 2017
$
77.1

 
$
149.0

________________
(1)
Conference expense was higher during the second quarter of 2017 due to the timing of our annual managing partner conference.
(2)
Legal and professional fees were higher primarily due to certain tax projects.
(3)
Foreign currency exchange primarily includes appreciation of the Brazil Real.
(4)
Employee compensation, benefits and payroll tax was lower primarily due to lower headcount resulting from the sale of Outback Steakhouse South Korea and the restructuring of certain corporate functions in 2016.

Provision for impaired assets and restaurant closings
 
THIRTEEN WEEKS ENDED
 
 
 
TWENTY-SIX WEEKS ENDED
 
 
(dollars in millions)
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
 
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
Provision for impaired assets and restaurant closings
$
0.6

 
$
41.3

 
$
(40.7
)
 
$
19.7

 
$
44.4

 
$
(24.7
)

Sale of Outback Steakhouse South Korea - On July 25, 2016, we completed the sale of Outback Steakhouse South Korea. In connection with the decision to sell Outback Steakhouse South Korea, we recognized an impairment charge of $39.6 million during thirteen and twenty-six weeks ended June 26, 2016.


35

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Closure Initiatives - Following is a summary of expenses related to the Closure Initiatives recognized in Provision for impaired assets and restaurant closings in our Consolidated Statements of Operations and Comprehensive Income for the periods indicated:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in millions)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Impairment, facility closure and other expenses
 
 
 
 
 
 
 
2017 Closure Initiative (1)
$
(0.2
)
 
$

 
$
17.2

 
$

Bonefish Restructuring (2)

 
0.8

 
0.8

 
4.4

Impairment, facility closure and other expense for Closure Initiatives
$
(0.2
)
 
$
0.8

 
$
18.0

 
$
4.4

________________
(1)
We expect to incur additional charges of approximately $3.2 million to $4.1 million for the 2017 Closure Initiative over the next two years, including costs associated with lease obligations and other closure related obligations.
(2)
We expect to incur additional charges of approximately $2.2 million to $5.1 million for the Bonefish Restructuring over the next three years, including costs associated with lease obligations and other closure related obligations.

The remaining restaurant impairment and closing charges resulted from the carrying value of a restaurant’s assets exceeding its estimated fair market value, primarily due to locations identified for relocation.

See Note 3 - Impairments and Exit Costs of the Notes to Consolidated Financial Statements for further information.

Income from operations
 
THIRTEEN WEEKS ENDED
 
 
 
TWENTY-SIX WEEKS ENDED
 
 
(dollars in millions)
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
 
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
Income from operations
$
42.2

 
$
13.3

 
$
28.9

 
$
111.3

 
$
100.0

 
$
11.3

% of Total revenues
4.1
%
 
1.2
%
 
2.9
%
 
5.1
%
 
4.5
%
 
0.6
%

The increase in income from operations generated in the thirteen and twenty-six weeks ended June 25, 2017 as compared to the thirteen and twenty-six weeks ended June 26, 2016 was primarily due to: (i) impairment related to the sale of Outback Steakhouse South Korea in 2016 and (ii) increases in franchise revenues. These increases were partially offset by decreases primarily due to: (i) a decrease in restaurant-level operating margin and (ii) higher general and administrative expense.

Loss on defeasance, extinguishment and modification of debt

In connection with an Amendment to OSI’s Credit Agreement in May 2017, we recognized a loss on modification of debt of $0.3 million for the thirteen and twenty-six weeks ended June 25, 2017. As a result of the February 2016 defeasance of our 2012 CMBS loan, we recognized a loss on defeasance and extinguishment of debt of $26.6 million for the twenty-six weeks ended June 26, 2016.

Other income (expense), net

Other income (expense), net, includes items deemed to be non-operating based on management’s assessment of the nature of the item in relation to our core operations. During thirteen and twenty-six weeks ended June 25, 2017 we recorded aggregate net gain of $7.4 million within Other income (expense), net in connection with the sale of 54 of our U.S. Company-owned locations to two of our existing franchisees.


36

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Interest expense, net
 
THIRTEEN WEEKS ENDED
 
 
 
TWENTY-SIX WEEKS ENDED
 
 
(dollars in millions)
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
 
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
Interest expense, net
$
9.5

 
$
10.3

 
$
(0.8
)
 
$
18.7

 
$
23.2

 
$
(4.5
)

The decrease in interest expense, net in the thirteen and twenty-six weeks ended June 25, 2017 as compared to the thirteen and twenty-six weeks ended June 26, 2016 was primarily due to lower interest expense related to the February 2016 refinancing and subsequent repayment of the PRP Mortgage loan in April 2017, partially offset by higher interest expense from: (i) additional draws on our revolving credit facility and (ii) our May 2017 incremental Term loan A-2.

Provision for income taxes
 
THIRTEEN WEEKS ENDED
 
 
 
TWENTY-SIX WEEKS ENDED
 
 
 
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
 
JUNE 25, 2017
 
JUNE 26, 2016
 
Change
Effective income tax rate
8.3
%
 
366.2
%
 
(357.9
)%
 
18.4
%
 
44.6
%
 
(26.2
)%

The effective income tax rate for the thirteen weeks ended June 25, 2017 decreased 357.9% as compared to the thirteen weeks ended June 26, 2016. Approximately 348% of this net decrease was due to the impairment and additional tax liabilities recorded in connection with the sale of Outback Steakhouse South Korea in 2016. The remaining decrease was primarily due to the impact of certain favorable discrete tax items recorded in 2017 and the change in the blend of taxable income across our U.S. and international subsidiaries.

The effective income tax rate for the twenty-six weeks ended June 25, 2017 decreased 26.2% as compared to the twenty-six weeks ended June 26, 2016. Approximately 23% of this net decrease was due to the impairment and additional tax liabilities recorded in connection with the sale of Outback Steakhouse South Korea in 2016. The remaining decrease was primarily due to the impact of certain favorable discrete tax items recorded in 2017 and the change in the blend of taxable income across our U.S. and international subsidiaries.

SEGMENT PERFORMANCE

We have two reportable segments, U.S. and International, which reflects how we manage our business, review operating performance and allocate resources. The U.S. segment includes all brands operating in the U.S. while brands operating outside the U.S. are included in the International segment. Resources are allocated and performance is assessed by our CEO, whom we have determined to be our CODM. Following is a summary of reporting segments:
SEGMENT
 
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

Revenues for both segments include only transactions with customers and include no intersegment revenues. Excluded from net income from operations for U.S. and International are legal and certain corporate costs not directly related to the performance of the segments, certain stock-based compensation expenses and certain bonus expenses.


37

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Following is a reconciliation of segment income (loss) from operations to the consolidated operating results:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Segment income (loss) from operations
 
 
 
 
 
 
 
U.S.
$
75,068

 
$
89,010

 
$
176,014

 
$
206,849

International
9,679

 
(34,573
)
 
18,481

 
(23,224
)
Total segment income from operations
84,747

 
54,437

 
194,495

 
183,625

Unallocated corporate operating expense
(42,593
)
 
(41,104
)
 
(83,211
)
 
(83,608
)
Total income from operations
42,154

 
13,333

 
111,284

 
100,017

Loss on defeasance, extinguishment and modification of debt
(260
)
 

 
(260
)
 
(26,580
)
Other income (expense), net
7,281

 
(1
)
 
7,230

 
(20
)
Interest expense, net
(9,543
)
 
(10,302
)
 
(18,684
)
 
(23,177
)
Income before provision for income taxes
$
39,632

 
$
3,030

 
$
99,570

 
$
50,240

 
U.S. Segment
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Revenues
 
 
 
 
 
 
 
Restaurant sales
$
907,037

 
$
953,992

 
$
1,934,249

 
$
1,992,741

Franchise and other revenues
10,332

 
4,989

 
15,738

 
10,019

Total revenues
$
917,369

 
$
958,981

 
$
1,949,987

 
$
2,002,760

Restaurant-level operating margin
14.1
%
 
15.5
%
 
15.8
%
 
16.5
%
Income from operations
$
75,068

 
$
89,010

 
$
176,014

 
$
206,849

Operating income margin
8.2
%
 
9.3
%
 
9.0
%
 
10.3
%

Restaurant sales

Following is a summary of the change in U.S. segment Restaurant sales for the thirteen and twenty-six weeks ended June 25, 2017:
(dollars in millions)
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
For the period ending June 26, 2016
$
954.0

 
$
1,992.8

Change from:
 
 
 
Divestiture of restaurants through refranchising transactions
(31.7
)
 
(32.0
)
Restaurant Closings
(22.6
)
 
(39.1
)
Comparable restaurant sales
(2.2
)
 
(6.0
)
Restaurant openings
9.6

 
18.5

For the period ending June 25, 2017
$
907.1

 
$
1,934.2


The decrease in U.S. Restaurant sales in the thirteen weeks ended June 25, 2017 was primarily attributable to: (i) the refranchising of certain U.S. Company-owned restaurants in April 2017 and (ii) the closing of 49 restaurants since March 27, 2016, partially offset by the opening of 13 new restaurants not included in our comparable restaurant sales base.


38

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The decrease in U.S. Restaurant sales in the twenty-six weeks ended June 25, 2017 was primarily attributable to: (i) the closing of 51 restaurants since December 27, 2015, (ii) the refranchising of certain U.S. Company-owned restaurants in April 2017 and (iii) lower comparable restaurant sales, partially offset by the opening of 16 new restaurants not included in our comparable restaurant sales base.

Restaurant-level operating margin

The decrease in U.S. restaurant-level operating margin in the thirteen weeks ended June 25, 2017 as compared to the thirteen weeks ended June 26, 2016, was primarily due to: (i) higher labor costs, (ii) operating expense inflation, (iii) service and product investments at Outback Steakhouse and (iv) higher net rent expense due to the sale-leaseback of certain properties. These decreases were partially offset by: (i) increases in average check per person, (ii) lower advertising expense, (iii) the impact of certain cost saving initiatives and (iv) lower insurance costs.

The decrease in U.S. restaurant-level operating margin in the twenty-six weeks ended June 25, 2017 as compared to the twenty-six weeks ended June 26, 2016, was primarily due to: (i) higher labor costs, (ii) operating expense inflation, (iii) service and product investments at Outback Steakhouse and (iv) higher net rent expense due to the sale-leaseback of certain properties. These decreases were partially offset by: (i) increases in average check per person, (ii) lower advertising expense and (iii) the impact of certain cost saving initiatives.

Income from operations

The decrease in U.S. income from operations generated in the thirteen weeks ended June 25, 2017 as compared to the thirteen weeks ended June 26, 2016, was primarily due to lower operating margin at the restaurant-level, partially offset by increases in franchise revenues.

The decrease in U.S. income from operations generated in the twenty-six weeks ended June 25, 2017 as compared to the twenty-six weeks ended June 26, 2016, was primarily due to: (i) lower operating margin at the restaurant-level and (ii) restaurant closing costs from the 2017 Closure Initiative, partially offset by increases in franchise revenues.

International Segment
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Revenues
 
 
 
 
 
 
 
Restaurant sales
$
112,920

 
$
118,527

 
$
221,196

 
$
237,830

Franchise and other revenues
2,693

 
1,080

 
5,622

 
2,186

Total revenues
$
115,613

 
$
119,607

 
$
226,818

 
$
240,016

Restaurant-level operating margin
21.1
%
 
16.2
 %
 
20.7
%
 
17.8
 %
Income (loss) from operations
$
9,679

 
$
(34,573
)
 
$
18,481

 
$
(23,224
)
Operating income (loss) margin
8.4
%
 
(28.9
)%
 
8.1
%
 
(9.7
)%


39

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Restaurant sales

Following is a summary of the change in International segment Restaurant sales for the thirteen and twenty-six weeks ended June 25, 2017:
(dollars in millions)
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
For the period ending June 26, 2016
$
118.5

 
$
237.8

Change from:
 
 
 
Refranchising of Outback Steakhouse South Korea
(36.7
)
 
(78.7
)
Restaurant closings
(0.4
)
 
(1.0
)
Effect of foreign currency translation
12.2

 
30.1

Restaurant openings
11.7

 
23.2

Comparable restaurant sales
7.6

 
9.8

For the period ending June 25, 2017
$
112.9

 
$
221.2


The decrease in Restaurant sales in the thirteen weeks ended June 25, 2017 as compared to the thirteen weeks ended June 26, 2016 was primarily attributable to the refranchising of Outback Steakhouse South Korea in 2016, partially offset by: (i) the effect of foreign currency translation of the Brazil Real relative to the U.S. dollar, (ii) the opening of 35 new restaurants not included in our comparable restaurant sales base and (iii) an increase in comparable restaurant sales.

The decrease in Restaurant sales in the twenty-six weeks ended June 25, 2017 as compare to the twenty-six weeks ended June 26, 2016 primarily attributable to the refranchising of Outback Steakhouse South Korea in 2016, partially offset by: (i) the effect of foreign currency translation of the Brazil Real relative to the U.S. dollar, (ii) the opening of 41 new restaurants not included in our comparable restaurant sales base and (iii) an increase in comparable restaurant sales.

Restaurant-level operating margin

The increase in International restaurant-level operating margin in the thirteen weeks ended June 25, 2017 as compared to the thirteen weeks ended June 26, 2016 was primarily due to: (i) increases in average check per person, (ii) the impact of the sale of Outback Steakhouse South Korea in 2016 and (iii) the impact of certain cost saving initiatives. These increases were partially offset by: (i) higher labor and commodity inflation and (ii) higher advertising expense.

The increase in International restaurant-level operating margin in the twenty-six weeks ended June 25, 2017 as compared to the twenty-six weeks ended June 26, 2016 was primarily due to: (i) increases in average check per person, (ii) the impact of the sale of Outback Steakhouse South Korea in 2016 and (iii) the impact of certain cost saving initiatives. These increases were partially offset by: (i) higher labor and commodity inflation and (ii) operating expense inflation.

Income from operations

The increase in International income from operations in the thirteen weeks ended June 25, 2017 as compared to the thirteen weeks ended June 26, 2016 was primarily due to: (i) impairment related to the sale of Outback Steakhouse South Korea in 2016 and (ii) higher operating margin at the restaurant-level.

The increase in International income from operations in the twenty-six weeks ended June 25, 2017 as compared to the twenty-six weeks ended June 26, 2016 was primarily due to: (i) impairment related to the sale of Outback Steakhouse South Korea in 2016, (ii) increases in franchise revenues and (iii) higher operating margin at the restaurant-level,

40

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

partially offset by higher General administrative expense. General and administrative expense for the International segment increased primarily from the effects of foreign currency exchange.

Non-GAAP Financial Measures

In addition to the results provided in accordance with U.S. GAAP, we provide 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) system-wide sales, (ii) Adjusted restaurant-level operating margins, (iii) Adjusted income from operations and the corresponding margins, (iv) Adjusted net income and (v) Adjusted diluted earnings per share.

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

These non-GAAP financial measures are not intended to replace U.S. GAAP financial measures, and they are not necessarily standardized or comparable to similarly titled measures used by other companies. We maintain internal guidelines with respect to the types of adjustments we include in our non-GAAP measures. These guidelines endeavor to differentiate between types of gains and expenses that are reflective of our core operations in a period, and those that may vary from period to period without correlation to our core performance in that period. However, implementation of these guidelines necessarily involves the application of judgment, and the treatment of any items not directly addressed by, or changes to, our guidelines will be considered by our disclosure committee. Refer to the reconciliations of non-GAAP measures for descriptions of the actual adjustments made in the current periods and the corresponding prior periods.

As previously announced, based on a review of our non-GAAP presentations, we determined that, commencing with our results for the first fiscal quarter of 2017, when presenting the non-GAAP measures Adjusted income from operations and the corresponding margins, Adjusted net income and Adjusted diluted earnings per share, we will no longer adjust for expenses incurred in connection with our remodel program or intangible amortization recorded as a result of the acquisition of our Brazil operations. We recast historical comparable periods to conform to the revised presentation.


41

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

System-Wide Sales

System-wide sales is a non-GAAP financial measure that includes sales of all restaurants operating under our brand names, whether we own them or not. Management uses this information to make decisions about future plans for the development of additional restaurants and new concepts, as well as evaluation of current operations. System-wide sales comprise sales of Company-owned and franchised restaurants. Following is a summary of sales of Company-owned restaurants:
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
COMPANY-OWNED RESTAURANT SALES (dollars in millions)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
U.S.
 
 
 
 
 
 
 
Outback Steakhouse (1)
$
517

 
$
550

 
$
1,120

 
$
1,148

Carrabba’s Italian Grill (1)
168

 
176

 
351

 
370

Bonefish Grill
151

 
159

 
315

 
329

Fleming’s Prime Steakhouse & Wine Bar
71

 
69

 
148

 
146

Total
$
907

 
$
954

 
$
1,934

 
$
1,993

International
 
 
 
 
 
 
 
Outback Steakhouse-Brazil
$
96

 
$
69

 
$
187

 
$
135

Outback Steakhouse-South Korea (2)

 
37

 

 
79

Other
17

 
13

 
34

 
24

Total
$
113

 
$
119

 
$
221

 
$
238

Total Company-owned restaurant sales
$
1,020

 
$
1,073

 
$
2,155

 
$
2,231

_____________________
(1)
In April 2017, we sold 53 Outback Steakhouse restaurants and one Carrabba’s Italian Grill restaurant which are now operated as franchises under agreements with the Buyers.
(2)
On July 25, 2016, we sold our restaurant locations in South Korea, converting all restaurants in that market to franchised locations.

The following table provides a summary of sales of franchised restaurants, which are not included in our consolidated financial results, and our income from the royalties and/or service fees that franchisees pay us based generally on a percentage of sales. The following table does not represent our sales and is presented only as an indicator of changes in the restaurant system, which management believes is important information regarding the health of our restaurant concepts and in determining our royalties and/or service fees.
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
FRANCHISE SALES (dollars in millions) (1)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
U.S.
 
 
 
 
 
 
 
Outback Steakhouse (2)
$
114

 
$
83

 
$
204

 
$
175

Carrabba's Italian Grill (2)
2

 
3

 
4

 
6

Bonefish Grill
4

 
4

 
8

 
7

Total
120

 
90

 
216

 
188

International
 
 
 
 
 
 
 
Outback Steakhouse-South Korea (3)
40

 

 
84

 

Other
28

 
28

 
57

 
56

Total
68

 
28

 
141

 
56

Total franchise sales (1)
$
188

 
$
118

 
$
357

 
$
244

Income from franchise sales (4)
$
9

 
$
4

 
$
16

 
$
9

_____________________
(1)
Franchise sales are not included in Total revenues in the Consolidated Statements of Operations and Comprehensive Income.
(2)
In April 2017, we sold 53 Outback Steakhouse restaurants and one Carrabba’s Italian Grill restaurant which are now operated as franchises under agreements with the Buyers.
(3)
On July 25, 2016, we sold our restaurant locations in South Korea, converting all restaurants in that market to franchised locations.

42

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

(4)
Represents franchise royalties and initial franchise fees included in the Consolidated Statements of Operations and Comprehensive Income in Franchise and other revenues.

Adjusted restaurant-level operating margin

The following table shows the percentages of certain operating cost financial statement line items in relation to Restaurant sales:
 
THIRTEEN WEEKS ENDED
 
JUNE 25, 2017
 
JUNE 26, 2016
 
U.S. GAAP
 
ADJUSTED
 
U.S. GAAP
 
ADJUSTED (1)
Restaurant sales
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
Cost of sales
31.7
%
 
31.7
%
 
32.3
%
 
32.3
%
Labor and other related
29.2
%
 
29.2
%
 
28.8
%
 
28.8
%
Other restaurant operating
23.9
%
 
23.9
%
 
23.4
%
 
23.3
%
 
 
 
 
 
 
 
 
Restaurant-level operating margin
15.2
%
 
15.2
%
 
15.5
%
 
15.5
%
 
 
 
 
 
 
 
 
 
TWENTY-SIX WEEKS ENDED
 
JUNE 25, 2017
 
JUNE 26, 2016
 
U.S. GAAP
 
ADJUSTED (2)
 
U.S. GAAP
 
ADJUSTED (1)(3)
Restaurant sales
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
Cost of sales
31.9
%
 
31.9
%
 
32.4
%
 
32.4
%
Labor and other related
28.9
%
 
28.9
%
 
28.3
%
 
28.3
%
Other restaurant operating
22.8
%
 
23.1
%
 
22.6
%
 
22.7
%
 
 
 
 
 
 
 
 
Restaurant-level operating margin
16.4
%
 
16.1
%
 
16.7
%
 
16.6
%
_________________
(1)
Includes adjustments for loss of $0.3 million on the sale of certain properties, recorded in Other restaurant operating.
(2)
Includes adjustments for the write-off of $5.3 million of deferred rent liabilities associated with the 2017 Closure Initiative and our relocation program, recorded in Other restaurant operating.
(3)
Includes adjustments for the write-off of $1.9 million of deferred rent liabilities, primarily associated with the Bonefish Restructuring, recorded in Other restaurant operating.


43

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Adjusted income from operations, Adjusted net income and Adjusted diluted earnings per share
 
THIRTEEN WEEKS ENDED
 
TWENTY-SIX WEEKS ENDED
(in thousands, except per share data)
JUNE 25, 2017
 
JUNE 26, 2016
 
JUNE 25, 2017
 
JUNE 26, 2016
Income from operations
$
42,154

 
$
13,333

 
$
111,284

 
$
100,017

Operating income margin
4.1
%
 
1.2
%
 
5.1
%
 
4.5
%
Adjustments:
 
 
 
 
 
 
 
Restaurant relocations and related costs (1)
2,251

 
550

 
4,358

 
906

Transaction-related expenses (2)
1,240

 
(106
)
 
1,447

 
466

Restaurant impairments and closing costs (3)
702

 
335

 
16,199

 
2,120

Asset impairments and related costs (4)

 
39,677

 

 
40,023

Severance (5)

 
737

 

 
1,872

Total income from operations adjustments
4,193

 
41,193

 
22,004

 
45,387

Adjusted income from operations
$
46,347

 
$
54,526

 
$
133,288

 
$
145,404

Adjusted operating income margin
4.5
%
 
5.1
%
 
6.1
%
 
6.5
%
 
 
 
 
 
 
 
 
Net income (loss) attributable to Bloomin’ Brands
$
35,630

 
$
(9,177
)
 
$
79,540

 
$
25,298

Adjustments:
 
 
 
 
 
 
 
Income from operations adjustments
4,193

 
41,193

 
22,004

 
45,387

Gain on disposal of business (6)
(7,284
)
 

 
(7,284
)
 

Loss on defeasance, extinguishment and modification of debt (7)
260

 

 
260

 
26,580

Total adjustments, before income taxes
(2,831
)
 
41,193

 
14,980

 
71,967

Adjustment to provision for income taxes (8)
(4,525
)
 
2,032

 
(8,944
)
 
(7,044
)
Net adjustments
(7,356
)
 
43,225

 
6,036

 
64,923

Adjusted net income
$
28,274

 
$
34,048

 
$
85,576

 
$
90,221

 
 
 
 
 
 
 
 
Diluted earnings (loss) per share
$
0.35

 
$
(0.08
)
 
$
0.76

 
$
0.21

Adjusted diluted earnings per share
$
0.28

 
$
0.29

 
$
0.82

 
$
0.76

 
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
98,852

 
113,330

 
100,963

 
115,630

Diluted weighted average common shares outstanding (9)
102,421

 
116,343

 
104,417

 
118,560

_________________
(1)
Represents asset impairment charges and accelerated depreciation incurred in connection with our relocation program.
(2)
Relates primarily to the following: (i) professional fees related to certain income tax items in which the associated tax benefit is adjusted in Adjustments to provision for income taxes, as described in footnote 8 to this table, and (ii) costs incurred in connection with our sale-leaseback initiative.
(3)
Represents expenses incurred for approved closure and restructuring initiatives.
(4)
Represents asset impairment charges and related costs associated with the decision to sell Outback Steakhouse South Korea in 2016.
(5)
Relates to severance expense incurred primarily as a result of the relocation of our Fleming’s operations center to the corporate home office in 2016.
(6)
Primarily relates to the sale of 54 U.S. Company-owned restaurants to existing franchisees.
(7)
Relates to modification of our Credit Agreement in 2017 and the defeasance of the 2012 CMBS loan in 2016.
(8)
Represents income tax effect of the adjustments for the thirteen and twenty-six weeks ended June 25, 2017 and June 26, 2016. Adjustments include the impact of excluding $4.6 million of discrete income tax items for the thirteen and twenty-six weeks ended June 25, 2017.
(9)
Due to the GAAP net loss in the thirteen weeks ended June 26, 2016, the effect of dilutive securities was excluded from the calculation of GAAP diluted loss per share for that period. For adjusted diluted earnings per share, the calculation includes dilutive shares of 3,013 for the thirteen weeks ended June 26, 2016.


44

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Liquidity and Capital Resources

LIQUIDITY

Our liquidity sources consist of cash flow from our operations, cash and cash equivalents and credit capacity under our credit facilities. We expect to use cash primarily for general operating expenses, share repurchases and dividend payments, remodeling or relocating older restaurants, development of new restaurants and new markets, principal and interest payments on our debt, obligations related to our deferred compensation plans and investments in technology.

We believe that our expected liquidity sources are adequate to fund debt service requirements, operating lease obligations, capital expenditures and working capital obligations for at least the next 12 months. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow and our ability to manage costs and working capital successfully.

Cash and Cash Equivalents - As of June 25, 2017, we had $103.5 million in cash and cash equivalents, of which $39.2 million was held by foreign affiliates, a portion of which would be subject to additional taxes if repatriated to the United States. The international jurisdictions in which we have significant cash do not have any known restrictions that would prohibit the repatriation of cash and cash equivalents.

Refranchising - In April 2017, we completed the sale of 54 of our existing Outback Steakhouse and Carrabba’s Italian Grill locations for aggregate cash proceeds of $36.2 million, net of certain closing adjustments. After completion of the sale, these restaurant locations are operated as franchises under an agreement with the Buyers.

Sale-Leaseback Transactions - During the twenty-six weeks ended June 25, 2017, we entered into sale-leaseback transactions with third-parties in which we sold 15 restaurant properties at fair market value for gross proceeds of $57.5 million. With a portion of the proceeds from these transactions, we repaid the remaining balance of our PRP Mortgage Loan in April 2017.

Subsequent to June 25, 2017, we entered into sale-leaseback transactions with third-parties in which we sold ten restaurant properties at fair market value for gross proceeds of $32.3 million.

Closure Initiatives - Total aggregate future undiscounted cash expenditures of $35.4 million to $41.8 million for the Closure Initiatives, primarily related to lease liabilities, are expected to occur over the remaining lease terms with the final term ending in January 2029.

Capital Expenditures - We estimate that our capital expenditures will total between $260.0 million and $280.0 million in 2017. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things, including restrictions imposed by our borrowing arrangements.


45

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Credit Facilities - As of June 25, 2017, we had $1.1 billion of outstanding borrowings under our Senior Secured Credit Facility. Following is a summary of principal payments and debt issuance from December 25, 2016 to June 25, 2017:
 
SENIOR SECURED CREDIT FACILITY
 
PRP MORTGAGE LOAN
 
TOTAL CREDIT FACILITIES
 
TERM LOANS
 
REVOLVING FACILITY
 
 
(dollars in thousands)
A
 
A-1
 
A-2
 
 
 
Balance as of December 25, 2016
$
258,750

 
$
140,625

 
$

 
$
622,000

 
$
47,202

 
$
1,068,577

2017 new debt (1)

 

 
125,000

 
341,000

 

 
466,000

2017 payments
(11,250
)
 
(5,625
)
 

 
(364,500
)
 
(47,202
)
 
(428,577
)
Balance as of June 25, 2017
$
247,500

 
$
135,000

 
$
125,000

 
$
598,500

 
$

 
$
1,106,000

________________
(1)
On May 22, 2017, OSI entered into an Amendment to its Credit Agreement which provided an incremental Term loan A-2 in an aggregate principal amount of $125.0 million. A portion of the proceeds from Term loan A-2 were used to repay $25.0 million of our outstanding revolving credit facility.

We continue to evaluate whether we will make further payments of our outstanding debt ahead of scheduled maturities. Following is a summary of our outstanding credit facilities as of June 25, 2017 and December 25, 2016:
 
INTEREST RATE
JUNE 25, 2017
 
ORIGINAL FACILITY
 
PRINCIPAL MATURITY DATE
 
OUTSTANDING
(dollars in thousands)
 
 
 
JUNE 25,
2017
 
DECEMBER 25,
2016
Term loan A, net of discount of $1.0 million (1)
3.07
%
 
$
300,000

 
May 2019
 
$
247,500

 
$
258,750

Term loan A-1
3.19
%
 
150,000

 
May 2019
 
135,000

 
140,625

Term loan A-2
3.19
%
 
125,000

 
May 2019
 
125,000

 

Revolving credit facility (1)
3.14
%
 
825,000

 
May 2019
 
598,500

 
622,000

Total Senior Secured Credit Facility
 
 
$
1,400,000

 
 
 
$
1,106,000

 
$
1,021,375

PRP Mortgage Loan
%
 
$
369,512

 
 
 
$

 
$
47,202

Total credit facilities
 
 
$
1,769,512

 
 
 
$
1,106,000

 
$
1,068,577

________________
(1)
Represents the weighted-average interest rate.

Credit Agreement - On May 22, 2017, OSI entered into an Amendment to its Credit Agreement which provided an incremental Term loan A-2 in an aggregate principal amount of $125.0 million. Proceeds from Term loan A-2 were used for general business purposes and to repay a portion of our outstanding revolving credit facility. As of June 25, 2017, we had $198.7 million in available unused borrowing capacity under our revolving credit facility, net of letters of credit of $27.8 million.

The Credit Agreement contains term loan mandatory prepayment requirements of 50% of our annual excess cash flow, as defined in the Credit Agreement. The amount outstanding required to be prepaid may vary based on our leverage ratio and year end results. Other than the required minimum amortization premiums of $43.1 million, we do not anticipate any other payments will be required through July 1, 2018.
We are currently exploring options to address the 2019 maturity of our Senior Secured Credit Facility.
Debt Covenants - Our Credit Agreement contains various financial and non-financial covenants. A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the revolving credit facility and cause an acceleration of the amounts due under the credit facilities. See Note 11 - Long-term Debt, Net in our Annual Report on Form 10-K for the year ended December 25, 2016 for further information.

As of June 25, 2017 and December 25, 2016, we were in compliance with our debt covenants. We believe that we will remain in compliance with our debt covenants during the next 12 months.

46

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Cash Flow Hedges of Interest Rate Risk - In September 2014, we entered into variable-to-fixed interest rate swap agreements with eight counterparties to hedge a portion of the cash flows of our variable rate debt. The swap agreements have an aggregate notional amount of $400.0 million, a start date of June 30, 2015, and mature on May 16, 2019. Under the terms of the swap agreements, we pay a weighted-average fixed rate of 2.02% on the $400.0 million notional amount and receive payments from the counterparty based on the 30-day LIBOR rate. We estimate $2.8 million will be reclassified to interest expense over the next twelve months. See Note 12 - Derivative Instruments and Hedging Activities of the Notes to Consolidated Financial Statements for further information.

SUMMARY OF CASH FLOWS

The following table presents a summary of our cash flows provided by (used in) operating, investing and financing activities for the periods indicated:
 
TWENTY-SIX WEEKS ENDED
(dollars in thousands)
JUNE 25, 2017
 
JUNE 26, 2016
Net cash provided by operating activities
$
183,135

 
$
205,416

Net cash (used in) provided by investing activities
(24,589
)
 
70,134

Net cash used in financing activities
(183,250
)
 
(284,471
)
Effect of exchange rate changes on cash and cash equivalents
1,002

 
853

Transfer of cash and cash equivalents to assets held for sale

 
(22,195
)
Net decrease in cash and cash equivalents
$
(23,702
)
 
$
(30,263
)

Operating activities - Net cash provided by operating activities decreased during the twenty-six weeks ended June 25, 2017, as compared to the twenty-six weeks ended June 26, 2016 primarily due to: (i) higher income tax payments, (ii) the timing of collections of receivables and (iii) the timing of payments. These decreases were partially offset by lower cash interest payments.

Investing activities - Net cash used in investing activities for the twenty-six weeks ended June 25, 2017 consisted primarily of capital expenditures, partially offset by: (i) proceeds from sale-leaseback transactions, (ii) proceeds from refranchising transactions and (iii) a reduction in restricted cash related to payments on our PRP Mortgage loan.

Net cash provided by investing activities for the twenty-six weeks ended June 26, 2016 consisted primarily of proceeds from sale-leaseback transactions and a reduction in restricted cash related to the defeasance of the 2012 CMBS loan, partially offset by capital expenditures.

Financing activities - Net cash used in financing activities for the twenty-six weeks ended June 25, 2017 was primarily attributable to the following: (i) the repurchase of common stock, (ii) repayments on our PRP Mortgage Loan, (iii) payments on our revolving credit facility, net of drawdowns, (iv) payment of cash dividends on our common stock and (v) repayments of partner deposits and accrued partner obligations. Net cash used in financing activities was partially offset by proceeds from: (i) net proceeds from the incremental Term loan A-2 and (ii) the sale of a property that did not qualify for sale-leaseback accounting.

Net cash used in financing activities for the twenty-six weeks ended June 26, 2016 was primarily attributable to the following: (i) the defeasance of the 2012 CMBS loan and payments on our revolving credit facility, (ii) the repurchase of common stock, (iii) payment of cash dividends on our common stock and (iv) repayments of partner deposits and accrued partner obligations. Net cash used in financing activities was partially offset by proceeds from the PRP Mortgage loan and drawdowns on our revolving credit facility.


47

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

FINANCIAL CONDITION

Following is a summary of our current assets, current liabilities and working capital (deficit):
(dollars in thousands)
JUNE 25, 2017
 
DECEMBER 25, 2016
Current assets
$
253,154

 
$
390,519

Current liabilities
724,231

 
823,408

Working capital (deficit)
$
(471,077
)
 
$
(432,889
)

Working capital (deficit) included Unearned revenue from unredeemed gift cards of $269.9 million and $388.5 million as of June 25, 2017 and December 25, 2016, respectively. We have, and in the future may continue to have, negative working capital balances (as is common for many restaurant companies). We operate successfully with negative working capital because cash collected on restaurant sales is typically received before payment is due on our current liabilities, and our inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flows from restaurant operations and gift card sales are used to service debt obligations and to make capital expenditures.

Deferred Compensation Programs - The deferred compensation obligation due to managing and chef partners was $101.5 million and $113.0 million as of June 25, 2017 and December 25, 2016, respectively. We invest in various corporate-owned life insurance policies, which are held within an irrevocable grantor or “rabbi” trust account for settlement of our obligations under the deferred compensation plans. The rabbi trust is funded through our voluntary contributions. The unfunded obligation for managing and chef partners’ deferred compensation was $38.3 million as of June 25, 2017.

We use capital to fund the deferred compensation plans and currently expect annual cash funding of $18.0 million to $20.0 million. Actual funding of the deferred compensation obligations and future funding requirements may vary significantly depending on the actual performance compared to targets, timing of deferred payments of partner contracts, forfeiture rates, number of partner participants, growth of partner investments and our funding strategy.

DIVIDENDS AND SHARE REPURCHASES

Dividends - In July 2017, the Board declared a quarterly cash dividend of $0.08 per share, payable on August 23, 2017. Future dividend payments are dependent on our earnings, financial condition, capital expenditure requirements, surplus and other factors that the Board considers relevant.

Share Repurchases - On April 21, 2017, the Board approved the 2017 Share Repurchase Program, a new $250.0 million authorization which will expire on October 21, 2018. We had $95.0 million remaining available for repurchase under the 2017 Share Repurchase Program, as of the date of this filing.

The following table presents our dividends and share repurchases from December 29, 2014 through June 25, 2017:
(dollars in thousands)
DIVIDENDS PAID
 
SHARE REPURCHASES
 
TAXES RELATED TO SETTLEMENT OF EQUITY AWARDS
 
TOTAL
Fiscal year 2015
$
29,332

 
$
169,999

 
$
770

 
$
200,101

Fiscal year 2016
31,379

 
309,887

 
447

 
341,713

First fiscal quarter 2017
8,254

 
53,053

 
143

 
61,450

Second fiscal quarter 2017 (1)
8,054

 
145,675

 

 
153,729

Total
$
77,019

 
$
678,614

 
$
1,360

 
$
756,993

________________
(1)
Subsequent to June 25, 2017, we repurchased 1.6 million shares of our common stock for $34.0 million under a Rule 10b5-1 plan.


48

Table of Contents
BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Recently Issued Financial Accounting Standards
 
For a description of recently issued Financial Accounting Standards, see Note 1 - Description of the Business and Basis of Presentation of the Notes to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.


49

Table of Contents
BLOOMIN’ BRANDS, INC.


Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in interest rates, changes in foreign currency exchange rates and changes in commodity prices. We believe that there have been no material changes in our market risk since December 25, 2016. See Part II, Item 7A., “Quantitative and Qualitative Disclosures about Market Risk,” in our Annual Report on Form 10-K for the year ended December 25, 2016 for further information regarding market risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial and Administrative Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial and Administrative Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial and Administrative Officer concluded that our disclosure controls and procedures were effective as of June 25, 2017.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the thirteen weeks ended June 25, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



50

Table of Contents
BLOOMIN’ BRANDS, INC.

PART II: OTHER INFORMATION

Item 1.    Legal Proceedings

For a description of our legal proceedings, see Note 15 - Commitments and Contingencies, of the Notes to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

In addition to the other information discussed in this report, please consider the factors described in Part I, Item 1A., “Risk Factors” in our 2016 Form 10-K which could materially affect our business, financial condition or future results. There have not been any material changes to the risk factors described in our 2016 Form 10-K, but these are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of equity securities during the second quarter of 2017 that were not registered under the Securities Act of 1933.

The following table provides information regarding our purchases of common stock during the thirteen weeks ended June 25, 2017:
REPORTING PERIOD
 
TOTAL NUMBER OF SHARES PURCHASED
 
AVERAGE PRICE PAID PER SHARE
 
TOTAL NUMBER OF SHARES PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS
 
APPROXIMATE DOLLAR VALUE OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS (1)
March 27, 2017 through April 23, 2017
 
1,283,784

 
$
19.23

 
1,283,784

 
$
52,268,413

April 24, 2017 through May 21, 2017
 
2,261,558

 
$
21.66

 
2,261,558

 
$
201,018,592

May 22, 2017 through June 25, 2017
 
3,484,427

 
$
20.67

 
3,484,427

 
$
129,007,899

Total (2)
 
7,029,769

 
 
 
7,029,769

 


____________________
(1)
On July 26, 2016, the Board of Directors authorized the repurchase of $300.0 million of our outstanding common stock as announced in our press release issued on July 29, 2016 (the “July 2016 Share Repurchase Program”). On April 21, 2017, the Board of Directors canceled the remaining $52.3 million of authorization under the July 2016 Share Repurchase Program and authorized the repurchase of $250.0 million of our outstanding common stock as announced in our press release issued on April 26, 2017 (the “2017 Share Repurchase Program”). The 2017 Share Repurchase Program will expire on October 21, 2018. As of the date of this filing, $95.0 million remains available for repurchase under the 2017 Share Repurchase Program.
(2)
Common stock repurchased during the thirteen weeks ended June 25, 2017 represent shares repurchased under the 2017 Share Repurchase Program and July 2016 Share Repurchase Program.


51

Table of Contents
BLOOMIN’ BRANDS, INC.


Item 6. Exhibits

EXHIBIT
NUMBER
 
DESCRIPTION OF EXHIBITS
 
FILINGS REFERENCED FOR
INCORPORATION BY REFERENCE
 
 
 
 
 
10.1
 
 
Filed herewith
 
 
 
 
 
10.2
 
 
Filed herewith
 
 
 
 
 
31.1
 
 
Filed herewith
 
 
 
 
 
31.2
 
 
Filed herewith
 
 
 
 
 
32.1
 
 
Filed herewith
 
 
 
 
 
32.2
 
 
Filed herewith
 
 
 
 
 
101.INS
 
XBRL Instance Document
 
Filed herewith
 
 
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
Filed herewith
 
 
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
Filed herewith
 
 
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
Filed herewith
 
 
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
Filed herewith
 
 
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
Filed herewith

(1) These certifications are not deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. These certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates them by reference.



52

Table of Contents
BLOOMIN’ BRANDS, INC.



SIGNATURE

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


Date:
August 1, 2017
 
BLOOMIN’ BRANDS, INC.
 
 
 
           (Registrant)
 
 
 
 
 
 
 
By: /s/ David J. Deno
 
 
 
David J. Deno
Executive Vice President and Chief Financial and
Administrative Officer
(Principal Financial and Accounting Officer)
 

 
[Remainder of page intentionally left blank]



Exhibit

Exhibit 10.1

FOURTH AMENDMENT TO ROYALTY AGREEMENT

This FOURTH AMENDMENT TO ROYALTY AGREEMENT (“Agreement”) is made and entered into effective May 1, 2017, by and among CARRABBA’S ITALIAN GRILL, LLC (successor to Carrabba’s Italian Grill, Inc.), a Florida limited liability company having its principal office located at 2202 N. West Shore Blvd., Suite 500, Tampa, Florida 33607 (“CIGI”), OSI RESTAURANT PARTNERS, LLC (as successor to OSI Restaurant Partners, Inc.), a Delaware limited liability company having its principal office located at 2202 N. West Shore Blvd., Suite 500, Tampa, Florida 33607 (“OSI”), MANGIA BEVE, INC., a Texas corporation having its principal office at 3131 Argonne Street, Houston, Texas 77098 (“MBI”), MANGIA BEVE II, INC., a Texas corporation having its principal office at 3131 Argonne Street, Houston, Texas 77098 (“MBI2”), ORIGINAL, INC. (formerly Carrabba, Inc.), a Texas corporation having its principal office at 3131 Argonne Street, Houston, Texas 77098 (“CI”), VOSS, INC. (formerly Carrabba Woodway, Inc.), a Texas corporation having its principal office at 3131 Argonne Street, Houston, Texas 77098 (“CWI”), JOHN C. CARRABBA III, an individual residing in the state of Texas (“Johnny Carrabba”), DAMIAN C. MANDOLA, an individual residing in the state of Texas (“Damian Mandola”) and JOHN C. CARRABBA, Jr., an individual residing in the state of Texas (“John C. Carrabba Jr.”).

RECITALS

A.
The parties entered into that certain Royalty Agreement dated April 1995, as amended by: (i) First Amendment to Royalty Agreement dated January 1997, (ii) Second Amendment to Royalty Agreement dated April 7, 2010, and (iii) Third Amendment to Royalty Agreement dated effective June 1, 2014 (as may be further amended and revised, the “Royalty Agreement”); and

B.
The parties desire to further amend the Royalty Agreement to: (i) exclude delivery sales from the definition of Net Restaurant Sales, (ii) provide for a fixed royalty percentage for delivery sales, and (iii) remove such delivery sales from the sales volumes used to calculate Restaurant royalty rates (iv) remove the requirement to develop additional restaurants, as set forth in Section 8.6 of the Royalty Agreement.

Now therefore, intending to be legally bound, in consideration for the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.
Amendment to Section 1.14. Section 1.14 of the Royalty Agreement is hereby amended by adding thereto a clause (d) to read as follows:

(d) The term “U.S. Restaurant” shall mean a Restaurant located in the U.S. regardless of when first opened.

2.
Amendment to Section 1.17. Section 1.17 of the Royalty Agreement is hereby amended in its entirety to read as follows:



1



1.17    Net Sales. The term “Net Sales” shall mean, with respect to any U.S. Restaurant, all Net Sales, all Net Lunch Sales and all Net Delivery Sales, collectively, at or from such U.S. Restaurant.

3.
New Section 1.21. There is hereby added to the Royalty Agreement a new Section 1.21 to read as follows:

1.21    Net Delivery Sales. The term “Net Delivery Sales” shall mean, with respect to any U.S. Restaurant, all monetary compensation received for the sale of all products that are delivered to a location other than the Restaurant, whether delivery is made by Carrabba’s employees or by a third party, whether for cash or credit and regardless of collection in the case of credit, including the face value of gift certificates redeemed by customers, reduced by (i) delivery fees, service charges, booking fees or similar charges regardless of whether charged to the customer or paid to a third party delivery service, (ii) discounts and complimentary food and beverages, (iii) sales and other taxes and surcharges collected for transmittal to taxing authorities, (iv) revenue received from the sale of gift certificates and (v) revenue from catering activities done for charitable, marketing or community involvement purposes. For the avoidance of doubt, with respect to clause (i) above, in the case of third party delivery services that receive the sale proceeds and remit a portion to the Restaurant after withholding the fees described in clause (i), the monetary compensation shall be the amount paid to the Restaurant by the third-party delivery service.

4.
Amendment to Section 1.10. Section 1.10 of the Royalty Agreement (definition of Net Restaurant Sales) is hereby amended by deleting the last sentence thereof and substituting in its place the following sentence:

Notwithstanding the foregoing, (i) for New U.S. Restaurants there shall be excluded from Net Restaurant Sales all Net Weekly Lunch Sales, (ii) for New U.S. Lunch Restaurants there shall be excluded from Net Restaurant Sales all Net Weekday Lunch Sales, and (iii) for all U.S. Restaurants there shall be excluded from Net Restaurant Sales all Net Delivery Sales.

5.
Amendment to Section 3.1. Section 3.1 of the Royalty Agreement is hereby amended in its entirety to read as follows:

“3.1 Restaurant Royalties.

a.
For each Restaurant owned by CIGI or a franchisee/licensee of CIGI (other than the Joint Ventures, Cl or CWI) located in U.S. and which is not a New U.S. Restaurant or a New U.S. Lunch Restaurant, CIGI shall pay to MBI2, as provided in Section 3.2 hereof, an annual royalty fee during the term of this Agreement as follows:
i.
For such Restaurants, whose annual Net Restaurant Sales are Two Million Seven Hundred Thousand ($2,700,000) or less, a royalty fee of


2



one percent (1%) of Net Restaurant Sales and one half percent (.5%) of Net Delivery Sales;
ii.
For such Restaurants, whose annual Net Restaurant Sales exceed Two Million Seven Hundred Thousand ($2,700,000) but are less than Three Million Dollars ($3,000,000), a royalty fee of one and one quarter percent (1.25%) of Net Restaurant Sales and one half percent (.5%) of Net Delivery Sales;
iii.
For such Restaurants, whose annual Net Restaurant Sales exceed Three Million Dollars ($3,000,000), a royalty fee of one and one half percent (1.50%) of Net Restaurant Sales and one half percent (.5%) of Net Delivery Sales.
b.
For each New U.S. Restaurant owned by CIGI or a Franchisee/licensee of CIGI (other than the Joint Ventures, CI or CWI), CIGI shall pay to MBI2, as provided in Section 3.2 hereof, an annual royalty fee during the term of this Agreement as follows:
i.
For New U.S. Restaurants whose annual Net Restaurant Sales are Two Million Seven Hundred Thousand ($2,700,000) or less, a royalty fee of one percent (1%) of Net Restaurant Sales and one half percent (.5%) of Net Weekly Lunch Sales and Net Delivery Sales;
ii.
For New U.S. Restaurants whose annual Net Restaurant Sales exceed Two Million Seven Hundred Thousand ($2,700,000) but are less than Three Million Dollars ($3,000,000), a royalty fee of one and one quarter percent (1.25%) of Net Restaurant Sales and one half percent (.5%) of Net Weekly Lunch Sales and Net Delivery Sales;
iii.
For New U.S. Restaurants whose annual Net Restaurant Sales exceed Three Million Dollars ($3,000,000), a royalty fee of one and one half percent (1.50%) of Net Restaurant Sales and one half percent (.5%) of Net Weekly Lunch Sales and Net Delivery Sales.
c.
For each New U.S. Lunch Restaurant owned by CIGI or a Franchisee/licensee of CIGI (other than Joint Ventures, CI or CWI), CIGI shall pay to MB12, as provided in Section 3.2 hereof, an annual royalty fee during the term of this Agreement as follows:
i.
For New U.S. Lunch Restaurants whose annual Net Restaurant Sales are Two Million Seven Hundred Thousand ($2,700,000) or less, a royalty fee of one percent (1%) of Net Restaurant Sales and one half percent (.5%) of Net Weekday Lunch Sales and Net Delivery Sales;
ii.
For New U.S. Lunch Restaurants whose annual Net Restaurant Sales exceed Two Million Seven Hundred Thousand ($2,700,000) but are less than Three Million Dollars ($3,000,000), a royalty fee of one and one quarter percent (1.25%) of Net Restaurant Sales and one half percent (.5%) of Net Weekday Lunch Sales and Net Delivery Sales;
iii.
For New U.S. Lunch Restaurants whose annual Net Restaurant Sales

3



exceed Three Million Dollars ($3,000,000), a royalty fee of one and one half percent (1.50%) of Net Restaurant Sales and one half percent (.5%) of Net Weekday Lunch Sales and Net Delivery Sales;
d.
For each Restaurant owned by CIGI or a franchisee/licensee of CIGI and located outside the U.S., CIGI shall pay to MBI2 a one-time royalty fee as follows:
i.
For Restaurants of 5,000 square feet and larger, a royalty fee of One Hundred Thousand Dollars ($100,000);
ii.
For Restaurants of 3,500 square feet and larger, but less than 5,000 square feet, a royalty fee of Seventy-Five Thousand Dollars ($75,000);
iii.
For Restaurants of less than 3,500 square feet, a royalty fee of Fifty Thousand Dollars ($50,000).
iv.
The parties acknowledge that CIGI paid to MBl2, upon execution of the Third Amendment to Royalty Agreement, the sum of one Million Dollars ($1,000,000) as a non-refundable pre-payment of the royalty fees for the first ten (10) Restaurants of 5,000 square feet or more. Thereafter, CIGI shall pay to MBl2 the one-time royalty fees provided for in this subsection (d) not less than thirty (30) days prior to opening to the public of the applicable Restaurant. As an example, if CIGI shall first open a Restaurant located outside the U.S. which is 5,500 square feet, such Restaurant shall count as the first of the ten (10) Restaurants for which a pre-payment of royalty fees has been made. If CIGI shall next open a Restaurant located outside the U.S. which is 4,000 square feet, CIGI shall pay a $75,000 royalty fee to MBl2 not less than thirty (30) days prior to the opening to the public of such Restaurant.
e.
For the avoidance of doubt, no royalty fee based on Net Restaurant Sales shall be payable for any Restaurant located outside the U.S., and the royalty fee provided for in subsection (d) of this Section 3.1 shall be the only royalty fee payable under Section 3.1 for Restaurants located outside the U.S.

6.
Amendment to Section 3.2. The first sentence only of Section 3.2 of the Royalty Agreement is deleted and the following is substituted therefore:

For each Restaurant for which annual royalty fees are payable under subsections (a), (b) or (c) of Section 3.1 of this Agreement, CIGI shall pay to MBI2 a monthly royalty fee at the rate of one percent (1%) of Net Restaurant Sales for each of the first six months of such Restaurant's operation.


4



In addition, CIGI shall pay to MBI2 each month (i) for all U.S. Restaurants the royalty fee of one half percent (.5%) of Net Delivery Sales, (ii) for New U.S. Restaurants the royalty fee of one half percent (.5%) of Net Weekly Lunch Sales and (iii) for New U.S. Lunch Restaurants the royalty fee of one half percent (.5%) of Net Weekday Lunch Sales. For the avoidance of doubt, in the case of New U.S. Restaurants, Net Weekly Lunch Sales are excluded from Net Restaurant Sales and in the case of New U.S. Lunch Restaurants, Net Weekday Lunch Sales are excluded from Net Restaurant Sales, and for all U.S. Restaurants Net Delivery Sales are excluded from Net Restaurant Sales.

7.
Deletion of Section 8.6. Section 8.6 of the Royalty Agreement is hereby deleted in its entirety. For the avoidance of doubt, CIGI shall be deemed to have fulfilled all obligations to develop the System and shall not be required to open additional Restaurants. The failure to open additional Restaurants shall not give any rights to any Carrabba’s Entity to the System or to own or operate Restaurants utilizing the System.

8.
Ratification. The Royalty Agreement, as previously amended by the First Amendment, Second Amendment and Third Amendment, is hereby ratified and conformed and shall remain in full force and effect as amended hereby.


IN WITNESS, WHEREOF, the parties have executed this Fourth Amendment effective as of May 1, 2017. This Fourth Amendment may be executed in one or more counterparts and may be executed by different parties in separate counterparts, each of which shall he deemed an original and shall collectively constitute one and the same instrument.


This FOURTH AMENDMENT TO ROYALTY AGREEMENT is dated effective as of the day and year first set forth above.
 
 
CARRABBA’S ITALIAN GRILL, LLC
 
 
 
By its sole manager-member
 
 
 
 
OSI Restaurant Partners, LLC
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
Joseph J. Kadow, Executive Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OSI RESTAURANT PARTNERS, LLC
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
Joseph J. Kadow, Executive Vice President
 

5



 
 
 
MANGIA BEVE II, INC.
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ John C. Carrabba, III
 
 
 
 
 
 
 
 
 
 
Title:
President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ORIGINAL, INC.
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ John C. Carrabba, III
 
 
 
 
 
 
 
 
 
 
Title:
President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VOSS, INC.
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ John C. Carrabba, III
 
 
 
 
 
 
 
 
 
 
 
Title:
President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
/s/ John C. Carrabba, III
 
 
 
 
JOHN C. CARRABBA, III, individually
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
/s/ Damian C. Mandola
 
 
 
 
DAMIAN C. MANDOLA, individually
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
/s/ John C. Carrabba, Jr.
 
 
 
 
JOHN C. CARRABBA, JR, individually
 

6

Exhibit
Exhibit 10.2

EXECUTION VERSION

SIXTH AMENDMENT TO CREDIT AGREEMENT AND INCREMENTAL AMENDMENT
SIXTH AMENDMENT TO CREDIT AGREEMENT AND INCREMENTAL AMENDMENT (this “Amendment”), dated as of May 22, 2017, among OSI RESTAURANT PARTNERS, LLC, a Delaware limited liability company (the “Borrower”), OSI HOLDCO, INC., a Delaware corporation (“Holdings”), the Subsidiary Guarantors (as defined in the Credit Agreement referred to below) party hereto, each of the Lenders party hereto that is consenting to the amendments set forth in Section 1 below (collectively, the “Consenting Lenders”), each of the Lenders party hereto that has committed to make the Incremental Term A-2 Loan (as defined below) (collectively, the “Incremental Term A-2 Loan Lenders”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent (the “Administrative Agent”). Unless otherwise indicated, all capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Borrower, Holdings, the lenders party thereto (the “Lenders”), the Administrative Agent and the other parties thereto have entered into that certain Credit Agreement, dated as of October 26, 2012 (as amended prior to the date hereof, the “Credit Agreement”);
WHEREAS, the Borrower hereby requests an Incremental Term A Loan in an aggregate principal amount of $125,000,000, in accordance with Section 2.16(a) of the Credit Agreement (the “Incremental Term A-2 Loan”);
WHEREAS, subject to the terms of this Amendment, each of the Incremental Term A-2 Loan Lenders party hereto have severally committed (such several commitments, the “Incremental Term A-2 Loan Commitments”) to make the Incremental Term A-2 Loan;
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows:
SECTION 1.    Amendments to Credit Agreement. Effective as of the Sixth Amendment Effective Date (as defined below) and subject to the terms and conditions set forth herein and in reliance upon representations and warranties set forth herein, the Credit Agreement is hereby amended as follows:
(a)    the definition of “Excluded Assets” in Section 1.01 of the Credit Agreement is hereby amended to (i) add the following new clause (xiii) in correct numerical order and (ii) to amend the proviso at the end of such definition to replace each of the references therein to “(xii)” with “(xiii)”:
“and (xiii) Excluded Real Property;”
(b)    Section 1.01 of the Credit Agreement is hereby amended to add the following new definition of “Excluded Real Property” in correct alphabetical position:
““Excluded Real Property” means any fee-owned real property and any leasehold rights and leasehold interests in real property that were on the Sixth Amendment Effective Date owned by PRP Holdings, LLC or any of its Subsidiaries (including, without limitation, any Specified Lease Entity), which property shall continue to constitute Excluded Real Property notwithstanding any subsequent transfer of any such property to any Loan Party or any Person that is designated as a Restricted Subsidiary, the owner of such property becoming a Loan Party or designated as a Restricted

89347770_6



Subsidiary (through a Company Consolidation or otherwise), the transfer of such property to a newly formed entity that is required to become a Loan Party or is designated as a Restricted Subsidiary hereunder, in all cases, it being the understanding and intent of the parties hereto that any property constituting Excluded Real Property on the Sixth Amendment Effective Date shall continue to constitute Excluded Real Property for all purposes of this Agreement and the other Loan Documents notwithstanding any such transfer, designation, or requirement.”
(c)    the definition of “Material Real Property” in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
““Material Real Property” means any real property (other than any Excluded Real Property) owned by any Loan Party with a Fair Market Value of $5,000,000 or more.”
(d)    Section 2.06(b)(ii)(A)(x) of the Credit Agreement is hereby amended to amend and restate the parenthetical “(other than any Disposition of any property or assets permitted by Section 7.05(a), (b), (c), (d) (to the extent constituting a Disposition by any Restricted Subsidiary to a Loan Party), (e), (g), (h), (i), (j), (p), (q) or (r))” with “(other than any Disposition of any property or assets permitted by Section 7.05(a), (b), (c), (d) (to the extent constituting a Disposition by any Restricted Subsidiary to a Loan Party), (e), (g), (h), (i), (j), (l), (p), (q) or (r)) ”;
(e)    Section 7.05(l) of the Credit Agreement is hereby amended and restated in its entirety as follows:
“(l)    Dispositions of Excluded Real Property;”
SECTION 2.    Incremental Term A-2 Loan.

(a)    The Administrative Agent and each Incremental Term A-2 Loan Lender hereby agrees that this Amendment constitutes an Incremental Loan Request pursuant to Section 2.16(a) of the Credit Agreement.

(b)    The Borrower hereby acknowledges that the Incremental Term A-2 Loan is being made under Section 2.16(d)(iv)(B).

(c)    Each Incremental Term A-2 Loan Lender severally agrees to make a single loan in Dollars to the Borrower on the Sixth Amendment Effective Date in accordance with Article II of the Credit Agreement and this Amendment in an amount equal to its Incremental Term A-2 Loan Commitment set forth opposite such Incremental Term A-2 Loan Lender’s name on Schedule 1 hereto.

(d)    On and as of the Sixth Amendment Effective Date, each Incremental Term A-2 Loan Lender (i) shall be deemed to be an “Incremental Term Lender” as defined in the Credit Agreement with an “Incremental Term A Commitment” as defined in the Credit Agreement, (ii) shall perform all of the obligations that are required to be performed by it as such under the Loan Documents and (iii) shall be entitled to the benefits, rights and remedies as such are set forth in the Loan Documents.

(e)    Except to the extent otherwise set forth herein, the terms and conditions applicable to the Incremental Term A-2 Loan shall be the same as the terms and conditions applicable to the Term A Loans. Without limiting the generality of the foregoing, the parties hereto agree that the Incremental Term A-2 Loan shall (i) bear interest at the same interest rate (including the Applicable Rate) applicable

2
89347770_6



to the outstanding Term A Loans, (ii) mature on the Maturity Date for the Term A Loans, (iii) share ratably in all payments (including all optional and mandatory prepayments) with the outstanding Term A Loans and (iv) be repaid (A) in consecutive quarterly installments on the last Business Day of each of March, June, September and December, commencing September 30, 2017, in the aggregate outstanding principal amount as set forth below (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.06 of the Credit Agreement):  
FISCAL YEAR
PAYMENT DATE
PRINCIPAL INSTALLMENT
2017
September 30, 2017
$2,343,750
December 31, 2017
$2,343,750
2018
March 31, 2018
$2,343,750
June 30, 2018
$2,343,750
September 30, 2018
$3,125,000
December 31, 2018
$3,125,000
2019
March 31, 2019
$3,125,000
Maturity Date for Term A Loans
The aggregate outstanding principal amount of all Incremental Term A-2 Loans
and (B) on the Maturity Date for the Term A Loans, in the aggregate principal amount of all Incremental Term A-2 Loans outstanding on such date.

(f)    This Amendment shall (i) be deemed to be an “Incremental Amendment” in accordance with Section 2.16(f) of the Credit Agreement and (ii) constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.

SECTION 3.    Acknowledgement and Confirmation. Each of the Loan Parties party hereto hereby agrees that with respect to each Loan Document to which it is a party, after giving effect to the Amendment and the transactions contemplated hereunder:
(a)    all of its obligations, liabilities and indebtedness under such Loan Document, including guarantee obligations, shall, except as expressly set forth herein or in the Credit Agreement, remain in full force and effect on a continuous basis; and
(b)    all of the Liens and security interests created and arising under such Loan Document remain in full force and effect on a continuous basis, and the perfected status and priority to the extent provided for in Section 5.19 of the Credit Agreement of each such Lien and security interest continues in full force and effect on a continuous basis, unimpaired, uninterrupted and undischarged as collateral security for the Obligations, to the extent provided in such Loan Documents.
SECTION 4.    Conditions of Effectiveness of this Amendment. This Amendment shall become effective on the date when the following conditions shall have been satisfied or waived (such date, the “Sixth Amendment Effective Date”):
(a)    The Administrative Agent’s receipt of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each in form and substance reasonably satisfactory to the Administrative Agent and its legal counsel:

3
89347770_6



(i)this Amendment, duly executed by Holdings, the Borrower, the Subsidiary Guarantors existing as of the Sixth Amendment Effective Date, the Administrative Agent, the Required Lenders, the Consenting Lenders and the Incremental Term A-2 Loan Lenders;
(ii)a Note executed by the Borrower in favor of each Incremental Term A-2 Loan Lender that has requested a Note at least two (2) Business Days in advance of the Sixth Amendment Effective Date;
(iii)a certificate of a Responsible Officer of each Loan Party certifying as to the incumbency and genuineness of the signature of each officer of such Loan Party executing Loan Documents to which it is a party and certifying that (A) the articles or certificate of incorporation or formation (or equivalent), as applicable, of such Loan Party have not been amended since the date of the last delivered certificate, or if they have been amended, attached thereto are true, correct and complete copies of the same, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation, organization or formation (or equivalent), as applicable, (B) the bylaws or other governing document of such Loan Party have not been amended since the date of the last delivered certificate, or if they have been amended, attached thereto are true, correct and complete copies of the same, (C) attached thereto is a true, correct and complete copy of resolutions duly adopted by the board of directors (or other governing body) of such Loan Party authorizing and approving the transactions contemplated hereunder and the execution, delivery and performance of this Amendment and (D) attached thereto is a true, correct and complete copy of such certificates of good standing (including bring down certificates) from the applicable secretary of state of the state of incorporation, organization or formation (or equivalent), as applicable, of each Loan Party; and
(iv)opinion from Buchanan Ingersoll & Rooney PC, New York counsel to the Loan Parties, in form and substance reasonably satisfactory to the Administrative Agent.
(b)    Payment of all fees and expenses of the Administrative Agent and Wells Fargo Securities, LLC, and in the case of expenses, to the extent invoiced at least three (3) Business Days prior to the Sixth Amendment Effective Date (except as otherwise reasonably agreed to by the Borrower), required to be paid on the Sixth Amendment Effective Date.
(c)    Payment of all fees to the Lenders required to be paid on the Sixth Amendment Effective Date.
(d)    The representations and warranties in Section 6 of this Amendment shall be true and correct as of the Sixth Amendment Effective Date.
For purposes of determining compliance with the conditions specified in this Section 4, each Lender that has signed this Amendment shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Sixth Amendment Effective Date specifying its objection thereto.
SECTION 5.    Costs and Expenses. The Borrower hereby reconfirms its obligations pursuant to Section 10.04 of the Credit Agreement to pay and reimburse the Administrative Agent in accordance with the terms thereof.
SECTION 6.    Representations and Warranties. To induce the Administrative Agent and the other Lenders to enter into this Amendment, each Loan Party represents and warrants to the

4
89347770_6



Administrative Agent and the other Lenders on and as of the Sixth Amendment Effective Date that, in each case:
(a)    the representations and warranties of each Loan Party set forth in Article V of the Credit Agreement and in each other Loan Document are true and correct in all material respects on and as of the Sixth Amendment Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; provided that any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates; and
(b)    no Default or Event of Default exists and is continuing.
SECTION 7.    Reference to and Effect on the Credit Agreement and the Loan Documents.
(a)    On and after the Sixth Amendment Effective Date, each reference in the Credit Agreement to “this Agreement,” “herein,” “hereto”, “hereof” and “hereunder” or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment.
(b)    The Credit Agreement and each of the other Loan Documents, as specifically amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.
(c)    The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. Without limiting the generality of the foregoing, the Collateral Documents in effect immediately prior to the date hereof and all of the Collateral described therein in existence immediately prior to the date hereof do and shall continue to secure the payment of all Obligations of the Loan Parties under the Loan Documents, in each case, as amended by this Amendment.
SECTION 8.    Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 9.    Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery by facsimile or electronic transmission of an executed counterpart of a signature page to this Amendment shall be effective as delivery of an original executed counterpart of this Amendment.
[The remainder of this page is intentionally left blank.]






5
89347770_6



IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Amendment as of the date first above written.
 
 
OSI RESTAURANT PARTNERS, LLC, as Borrower
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OSI HOLDCO, INC., as Holdings
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Elizabeth Smith
 
 
 
 
 
Name: Elizabeth Smith
 
 
 
 
 
Title: Director
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BLOOMIN’ BRANDS GIFT CARD SERVICES, LLC
 
 
OS RESTAURANT SERVICES, LLC
 
 
 
OUTBACK DESIGNATED PARTNER, LLC
 
 
 
OUTBACK KANSAS LLC
 
 
 
 
 
 
 
 
 
 
 
By: OUTBACK STEAKHOUSE OF FLORIDA, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 


OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
BONEFISH OF BEL AIR LLC
 
 
 
BONEFISH GRILL OF FLORIDA, LLC
 
 
 
 
 
 
 
 
 
 
 
By: BONEFISH GRILL, LLC, its managing member
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BONEFISH GRILL, LLC
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its members
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BONEFISH KANSAS DESIGNATED PARTNER, LLC
 
 
 
 
 
 
 
 
 
 
By: BONEFISH KANSAS LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By: BONEFISH GRILL, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
BONEFISH/ASHEVILLE, LIMITED PARTNERSHIP
 
 
BONEFISH/CAROLINAS, LIMITED PARTNERSHIP
 
 
BONEFISH/COLUMBUS-I, LIMITED PARTNERSHIP
 
 
BONEFISH/CRESCENT SPRINGS, LIMITED PARTNERSHIP
 
 
 
BONEFISH/GREENSBORO, LIMITED PARTNERSHIP
 
 
 
BONEFISH/HYDE PARK, LIMITED PARTNERSHIP
 
 
BONEFISH/SOUTHERN, LIMITED PARTNERSHIP
 
 
 
 
 
 
 
 
 
 
By: BONEFISH GRILL, LLC, its general partner
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BONEFISH/SOUTH FLORIDA-I, LIMITED PARTNERSHIP
 
 
 
 
 
 
 
 
 
 
 
By: BONEFISH GRILL OF FLORIDA, LLC, its general partner
 
 
 
 
 
 
 
 
 
 
 
 
By: BONEFISH GRILL, LLC, its managing member
 
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page




 
 
BONEFISH BEVERAGES, LLC
 
 
 
BONEFISH HOLDINGS, LLC
 
 
 
CIGI BEVERAGES OF TEXAS, LLC
 
 
 
CIGI HOLDINGS, LLC
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Manager
 
 
 
 
 
 
 
 
 
 
 
OUTBACK BEVERAGES OF TEXAS, LLC
 
 
 
OBTEX HOLDINGS, LLC
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Manager
 
 
 
 
 
 
 
 
 
 
 
BONEFISH BRANDYWINE, LLC
 
 
 
BONEFISH DESIGNATED PARTNER, LLC
 
 
 
BONEFISH KANSAS, LLC
 
 
 
 
 
 
 
 
 
 
 
By: BONEFISH GRILL, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
BONEFISH GRILL OF FLORIDA DESIGNATED PARTNER, LLC
 
 
 
 
 
 
 
 
 
 
 
By: BONEFISH GRILL OF FLORIDA, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By: BONEFISH GRILL, LLC, its managing member
 
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BFG NEBRASKA, INC.
 
 
 
BFG OKLAHOMA, INC.
 
 
 
BOOMERANG AIR, INC.
 
 
 
CIGI NEBRSKA, INC.
 
 
 
CIGI OKLAHOMA, INC.
 
 
 
OS MANAGEMENT, INC.
 
 
 
OS MORTGAGE HOLDINGS, INC.
 
 
 
OSF NEBRASKA, INC.
 
 
 
OSF OKLAHOMA, INC.
 
 
 
OUTBACK ALABAMA, INC.
 
 
 
OUTBACK CATERING, INC.
 
 
 
OUTBACK & CARRABBA’S OF NEW MEXICO, INC.
 
 
 
 
 
 
 
 
 
 
By:
/s/ David J. Deno
 
 
 
 
 
Name: David J. Deno
 
 
 
 
 
Title: Chief Financial and Administrative Officer, Executive Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OSI CO-ISSUER, INC.
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Elizabeth Smith
 
 
 
 
 
Name: Elizabeth Smith
 
 
 
 
 
Title: Director
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
CARRABBA’S DESIGNATED PARTNER, LLC
CARRABBA’S KANSAS LLC
 
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S ITALIAN GRILL, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
CARRABBA’S ITALIAN GRILL OF HOWARD COUNTY, INC.
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Malcolm Mordue
 
 
 
 
 
Name: Malcolm Mordue
 
 
 
 
 
Title: Secretary, Treasurer & President
 
 
 
 
 
 
 
 
 
 
 
CARRABBA’S ITALIAN GRILL, LLC
 
 
 
OS REALTY, LLC
 
 
 
OUTBACK STEAKHOUSE OF FLORIDA, LLC
 
 
 
PRIVATE RESTAURANT MASTER LESSEE, LLC
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 









OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
CARRABBA’S KANSAS DESIGNATED PARTNER, LLC
 
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S KANSAS LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S ITALIAN GRILL, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CARRABBA’S OF BOWIE, LLC
 
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S ITALIAN GRILL, LLC, its managing member
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CARRABBA’S OF GERMANTOWN, INC.
 
 
 
CARRABBA’S OF WALDORF, INC.
 
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S ITALIAN GRILL, LLC, its sole shareholder
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
CARRABBA’S/BIRMINGHAM 280, LIMITED PARTNERSHIP
 
 
 
CARRABBA’S/COOL SPRINGS, LIMITED PARTNERSHIP
 
 
 
CARRABBA’S/DEERFIELD TOWNSHIP, LIMITED PARTNERSHIP
 
 
CARRABBA’S/GREEN HILLS, LIMITED PARTNERSHIP
 
 
 
CARRABBA’S/LEXINGTON, LIMITED PARTNERSHIP
 
 
 
CARRABBA’S/LOUISVILLE, LIMITED PARTNERSHIP
 
 
 
CARRABBA’S/MONTGOMERY, LIMITED PARTNERSHIP
 
 
 
CARRABBA’S/ROCKY TOP, LIMITED PARTNERSHIP
 
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S ITALIAN GRILL, LLC, its general partner
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S DESIGNATED PARTNER, LLC, its general partner
 
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S ITALIAN GRILL, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
CARRABBA’S/DC-I, LIMITED PARTNERSHIP
 
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S ITALIAN GRILL, LLC, its general partner
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CIGI/BFG OF EAST BRUNSWICK PARTNERSHIP
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S ITALIAN GRILL, LLC, its partner
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By: BONEFISH GRILL, LLC, its partner
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page




 
 
OUTBACK OF ASPEN HILL, INC.
 
 
 
OUTBACK OF GERMANTOWN, INC.
 
 
 
FREDERICK OUTBACK, INC.
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Steven S. Newton
 
 
 
 
 
 
Name: Steven S. Newton
 
 
 
 
 
 
Title: Treasurer, President & Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OSF/BFG OF DEPTFORD PARTNERSHIP
 
 
 
OSF/BFG OF LAWRENCEVILLE PARTNERSHIP
 
 
 
 
 
 
 
 
 
 
 
By: OUTBACK STEAKHOUSE OF FLORIDA, LLC, its partner
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By: BONEFISH GRILL, LLC, its partner
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
OSF/CIGI OF EVESHAM PARTNERSHIP
 
 
 
OUTBACK/CARRABBA’S PARTNERSHIP
 
 
 
 
 
 
 
 
 
 
 
By: OUTBACK STEAKHOUSE OF FLORIDA, LLC, its partner
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
By: CARRABBA’S ITALIAN GRILL, LLC, its partner
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OUTBACK KANSAS DESIGNATED PARTNER, LLC
 
 
 
 
 
 
 
 
 
 
 
By: OUTBACK KANSAS LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By: OUTBACK STEAKHOUSE OF FLORIDA, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
OUTBACK STEAKHOUSE WEST VIRGINIA, INC.
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
Title: Director
 
 
 
 
 
 
 
 
 
 
OUTBACK STEAKHOUSE-NYC, LTD.
 
 
 
OUTBACK/DC, LIMITED PARTNERSHIP
 
 
 
OUTBACK/STONE-II, LIMITED PARTNERSHIP
 
 
 
 
 
 
 
 
 
 
 
By: OUTBACK STEAKHOUSE OF FLORIDA, LLC, its general partner
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OUTBACK CATERING DESIGNATED PARTNER, LLC
 
 
 
 
 
 
 
 
 
 
By: OUTBACK CATERING, INC., its member
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ David J. Deno
 
 
 
 
 
Name: David J. Deno
 
 
 
 
 
Title: Chief Financial and Administrative Officer, Executive Vice President
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
OUTBACK OF LAUREL, LLC
 
 
 
 
 
 
 
 
 
 
 
By: OUTBACK STEAKHOUSE OF FLORIDA, LLC, the Sole Manager
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its member
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DOORSIDE, LLC
 
 
 
 
 
 
 
 
 
 
 
 
By: OSI RESTAURANT PARTNERS, LLC, its Sole Member
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph J. Kadow
 
 
 
 
 
 
Name: Joseph J. Kadow
 
 
 
 
 
 
Title: Executive Vice President, Chief Legal Officer & Assistant Secretary
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, Swing Line Lender, Collateral Agent, an L/C Issuer, a Consenting Lender and Incremental Term A-2 Loan Lender
 
 
 
 
 
 
 
By:
/s/ Maureen S. Malphus
 
 
 
 
Name: Maureen S. Malphus
 
 
 
 
Title: Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
BANK OF AMERICA, N.A., as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
By:
/s/ Aron Frey
 
 
 
 
Name: Aron Frey
 
 
 
 
Title: Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
JPMORGAN CHASE BANK, N.A., as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
By:
/s/ Tony Yung
 
 
 
 
Name: Tony Yung
 
 
 
 
Title: Executive Director
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
PNC BANK, NA, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
By:
/s/ Misty C. Johnson
 
 
 
 
Name: Misty C. Johnson
 
 
 
 
Title: SVP, Credit Products
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
FIFTH THIRD BANK, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ John A. Marian
 
 
 
 
Name: John A. Marian
 
 
 
 
Title: Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
CITIZENS BANK, NA, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ William Bulger
 
 
 
 
Name: William Bulger
 
 
 
 
Title: Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
HSBC BANK USA, NATIONAL ASSOCIATION, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
By:
/s/ Rafael De Paoli
 
 
 
 
Name: Rafael De Paoli
 
 
 
 
Title: Director
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
By:
/s/ Chris Grimes
 
 
 
 
Name: Chris Grimes
 
 
 
 
Title: Executive Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Erin MacEachern
 
 
 
 
Name: Erin MacEachern
 
 
 
 
Title: Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
REGIONS BANK, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ Scott C. Tocci
 
 
 
 
Name: Scott C. Tocci
 
 
 
 
Title: Managing Director
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
TD BANK, N.A., as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ Alan Garson
 
 
 
 
Name: Alan Garson
 
 
 
 
Title: Senior Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
U.S. BANK NATIONAL ASSOCIATION, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ Steven L. Sawyer
 
 
 
 
Name: Steven L. Sawyer
 
 
 
 
Title: Senior Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
SUMITOMO MITSUI BANKING CORPORATION, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ James D. Weinstein
 
 
 
 
Name: James D. Weinstein
 
 
 
 
Title: Managing Director
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
FIRSTBANK PUERTO RICO D/B/A FIRSTBANK FLORIDA, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ Jose M. Lacasa
 
 
 
 
Name: Jose M. Lacasa
 
 
 
 
Title: SVP Corporate Banking
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
IBERIABANK, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ John Garthwaite
 
 
 
 
Name: John Garthwaite
 
 
 
 
Title: Commercial Group Manager, EVP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
FIRST TENNESSEE BANK, NATIONAL ASSOCIATION, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ Jamie M. Swisher
 
 
 
 
Name: Jamie M. Swisher
 
 
 
 
Title: Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
RAYMOND JAMES BANK, N.A., as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
By:
/s/ Daniel Gendron
 
 
 
 
Name: Daniel Gendron
 
 
 
 
Title: Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
CITY NATIONAL BANK OF FLORIDA, as an Incremental Term A-2 Loan Lender and a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ William H. Lutes
 
 
 
 
Name: William H. Lutes
 
 
 
 
Title: Wholesale Market Executive, Tampa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
CADENCE BANK N.A. as a Consenting Lender
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Vance Waldron
 
 
 
 
Name: Vance Waldron
 
 
 
 
Title: Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
MORGAN STANLEY BANK, N.A., as a Consenting Lender
 
 
 
 
 
 
 
 
By:
/s/ Jonathan Kerner
 
 
 
 
Name: Jonathan Kerner
 
 
 
 
Title: Authorized Signatory
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
PARK STERLING BANK, as a Consenting Lender
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Randy Royther
 
 
 
 
Name: Randy Royther
 
 
 
 
Title: Managing Director/Capital Markets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as a Consenting Lender
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Christine Howatt
 
 
 
 
Name: Christine Howatt
 
 
 
 
Title: Authorized Signatory
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
USAMERIBANK, as a Consenting Lender
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Ronald L. Ciganek
 
 
 
 
Name: Ronald L. Ciganek
 
 
 
 
Title: Executive Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



 
 
WEBSTER BANK, N.A., as a Consenting Lender
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Carol A. Pirek
 
 
 
 
Name: Carol A. Pirek
 
 
 
 
Title: Vice President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

OSI Restaurant Partners LLC
Sixth Amendment to Credit Agreement and Incremental Amendment
Signature Page



Schedule 1
(as of the Sixth Amendment Effective Date)

Incremental Term A-2 Loan Lender
Incremental Term A-2 Loan Commitment
Wells Fargo Bank, National Association
$19,000,000.00
Bank of America, N.A.
$14,000,000.00
JPMorgan Chase Bank, N.A.
$14,000,000.00
PNC Bank, National Association
$14,000,000.00
Fifth Third Bank
$10,000,000.00
Citizens Bank, N.A.
$6,500,000.00
HSBC Bank USA, National Association
$6,500,000.00
Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. “Rabobank Nederland”, New York Branch
$6,500,000.00
Regions Bank
$6,500,000.00
TD Bank, N.A.
$6,500,000.00
U.S. Bank, National Association
$6,500,000.00
Sumitomo Mitsui Banking Corporation
$5,500,000.00
FirstBank Puerto Rico
$3,500,000.00
IberiaBank
$1,900,000.00
First Tennessee Bank National Association
$1,800,000.00
Raymond James Bank
$1,600,000.00
City National Bank of Florida
$700,000.00
Total
$125,000,000.00




Exhibit
Exhibit 31.1


CERTIFICATION

I, Elizabeth A. Smith, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of Bloomin’ Brands, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date:
August 1, 2017
/s/ Elizabeth A. Smith
 
 
Elizabeth A. Smith
 
 
Chief Executive Officer
(Principal Executive Officer)


Exhibit
Exhibit 31.2


CERTIFICATION

I, David J. Deno, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of Bloomin’ Brands, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date:
August 1, 2017
/s/ David J. Deno
 
 
David J. Deno
 
 
Executive Vice President and Chief Financial and Administrative Officer
(Principal Financial Officer)


Exhibit


Exhibit 32.1



CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Bloomin’ Brands, Inc. (the “Company”) on Form 10-Q for the quarter ended June 25, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elizabeth A. Smith, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and periods covered by the Report.

Date:
August 1, 2017
/s/ Elizabeth A. Smith
 
 
Elizabeth A. Smith
 
 
Chief Executive Officer
(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to, and will be retained by, Bloomin’ Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.


Exhibit


Exhibit 32.2



CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Bloomin’ Brands, Inc. (the “Company”) on Form 10-Q for the quarter ended June 25, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Deno, Executive Vice President and Chief Financial and Administrative Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and periods covered by the Report.

Date:
August 1, 2017
/s/ David J. Deno
 
 
David J. Deno
 
 
Executive Vice President and Chief Financial and Administrative Officer
(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to, and will be retained by, Bloomin’ Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.