SEC Filing | Bloomin’ Brands, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	September 29, 2019
	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/2f9fb905b40e5de283881d6f23beeac6-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)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Trading Symbol(s)	Name of each exchange on which registered
Common Stock	$0.01 par value	BLMN	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 4, 2019, 86,865,175 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 September 29, 2019

(Unaudited)

TABLE OF CONTENTS



	PART I — FINANCIAL INFORMATION	Page No.

Item 1.	Financial Statements (Unaudited)	3

	Consolidated Financial Statements:

	Consolidated Balance Sheets — September 29, 2019 and December 30, 2018	3

	Consolidated Statements of Operations and Comprehensive (Loss) Income — For the Thirteen and Thirty-Nine Weeks Ended September 29, 2019 and September 30, 2018	4

	Consolidated Statements of Changes in Stockholders’ Equity — For the Thirteen and Thirty-Nine Weeks Ended September 29, 2019 and September 30, 2018	5

	Condensed Consolidated Statements of Cash Flows — For the Thirty-Nine Weeks Ended September 29, 2019 and September 30, 2018	7

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47

Item 4.	Controls and Procedures	47

	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	48

Item 1A.	Risk Factors	48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 6.	Exhibits	48

	Signature	50

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)



	SEPTEMBER 29, 2019			DECEMBER 30, 2018
ASSETS
Current assets
Cash and cash equivalents	$	51,408		$	71,823
Inventories	73,378			72,812
Other current assets, net	86,797			190,848
Total current assets	211,583			335,483
Property, fixtures and equipment, net	1,050,002			1,115,929
Operating lease right-of-use assets	1,262,449			—
Goodwill	290,042			295,427
Intangible assets, net	473,043			503,972
Deferred income tax assets, net	66,626			92,990
Other assets, net	115,202			120,973
Total assets	$	3,468,947		$	2,464,774
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	160,029		$	174,488
Accrued and other current liabilities	387,017			246,653
Unearned revenue	217,211			342,708
Current portion of long-term debt	26,548			27,190
Total current liabilities	790,805			791,039
Non-current operating lease liabilities	1,273,904			—
Deferred rent	—			167,027
Deferred income tax liabilities	14,835			14,790
Long-term debt, net	1,093,391			1,067,585
Long-term portion of deferred gain on sale-leaseback transactions, net	—			177,983
Other long-term liabilities, net	144,438			191,533
Total liabilities	3,317,373			2,409,957
Commitments and contingencies (Note 16)
Stockholders’ equity
Bloomin’ Brands stockholders’ equity
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of September 29, 2019 and December 30, 2018	—			—
Common stock, $0.01 par value, 475,000,000 shares authorized; 86,856,165 and 91,271,825 shares issued and outstanding as of September 29, 2019 and December 30, 2018, respectively	869			913
Additional paid-in capital	1,095,382			1,107,582
Accumulated deficit	(783,093		)	(920,010		)
Accumulated other comprehensive loss	(168,875		)	(142,755		)
Total Bloomin’ Brands stockholders’ equity	144,283			45,730
Noncontrolling interests	7,291			9,087
Total stockholders’ equity	151,574			54,817
Total liabilities and stockholders’ equity	$	3,468,947		$	2,464,774

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

Table of Contents

BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)



	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
	SEPTEMBER 29, 2019			SEPTEMBER 30, 2018			SEPTEMBER 29, 2019			SEPTEMBER 30, 2018
Revenues
Restaurant sales	$	951,816		$	949,400		$	3,069,145		$	3,063,887
Franchise and other revenues	15,328			15,621			48,060			49,413
Total revenues	967,144			965,021			3,117,205			3,113,300
Costs and expenses
Cost of sales	300,375			307,493			965,165			982,415
Labor and other related	288,552			289,023			908,780			902,006
Other restaurant operating	240,372			233,744			732,121			725,468
Depreciation and amortization	47,926			50,571			147,196			151,473
General and administrative	66,570			67,691			209,114			212,516
Provision for impaired assets and restaurant closings	1,391			3,962			6,917			15,590
Total costs and expenses	945,186			952,484			2,969,293			2,989,468
Income from operations	21,958			12,537			147,912			123,832
Other income (expense), net	11			(1		)	(145		)	(6		)
Interest expense, net	(13,256		)	(11,600		)	(36,885		)	(33,229		)
Income before (benefit) provision for income taxes	8,713			936			110,882			90,597
(Benefit) provision for income taxes	(660		)	(3,317		)	6,051			(6,516		)
Net income	9,373			4,253			104,831			97,113
Less: net income attributable to noncontrolling interests	125			181			2,262			922
Net income attributable to Bloomin’ Brands	$	9,248		$	4,072		$	102,569		$	96,191

Net income	$	9,373		$	4,253		$	104,831		$	97,113
Other comprehensive (loss) income:
Foreign currency translation adjustment	(10,133		)	(16,349		)	(12,854		)	(45,044		)
Unrealized (loss) gain on derivatives, net of tax	(2,036		)	37			(13,656		)	1,221
Reclassification of adjustment for loss (gain) on derivatives included in Net income, net of tax	812			(51		)	578			328
Comprehensive (loss) income	(1,984		)	(12,110		)	78,899			53,618
Less: comprehensive income attributable to noncontrolling interests	297			423			2,450			1,504
Comprehensive (loss) income attributable to Bloomin’ Brands	$	(2,281	)	$	(12,533	)	$	76,449		$	52,114

Earnings per share:
Basic	$	0.11		$	0.04		$	1.15		$	1.04
Diluted	$	0.11		$	0.04		$	1.14		$	1.02
Weighted average common shares outstanding:
Basic	86,843			92,202			89,484			92,197
Diluted	87,305			93,324			90,306			94,489

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

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			ADDITIONAL PAID-IN CAPITAL			ACCUM- ULATED DEFICIT			ACCUMULATED OTHER COMPREHENSIVE LOSS			NON-CONTROLLING INTERESTS			TOTAL
Balance, June 30, 2019	86,827		$	868		$	1,099,598		$	(792,341	)	$	(157,346	)	$	7,814		$	158,593
Net income	—		—			—			9,248			—			125			9,373
Other comprehensive (loss) income, net of tax	—		—			—			—			(11,529		)	172			(11,357		)
Cash dividends declared, $0.10 per common share	—		—			(8,674		)	—			—			—			(8,674		)
Stock-based compensation	—		—			4,613			—			—			—			4,613
Common stock issued under stock plans (1)	29		1			(155		)	—			—			—			(154		)
Distributions to noncontrolling interests	—		—			—			—			—			(1,221		)	(1,221		)
Contributions from noncontrolling interests	—		—			—			—			—			401			401
Balance, September 29, 2019	86,856		$	869		$	1,095,382		$	(783,093	)	$	(168,875	)	$	7,291		$	151,574

Balance, December 30, 2018	91,272		$	913		$	1,107,582		$	(920,010	)	$	(142,755	)	$	9,087		$	54,817
Cumulative-effect from a change in accounting principle, net of tax	—		—			—			141,285			—			—			141,285
Net income	—		—			—			102,569			—			2,262			104,831
Other comprehensive (loss) income, net of tax	—		—			—			—			(26,154		)	222			(25,932		)
Cash dividends declared, $0.30 per common share	—		—			(27,041		)	—			—			—			(27,041		)
Repurchase and retirement of common stock	(5,469	)	(55		)	—			(106,937		)	—			—			(106,992		)
Stock-based compensation	—		—			13,743			—			—			—			13,743
Common stock issued under stock plans (1)	1,053		11			1,255			—			—			—			1,266
Purchase of noncontrolling interests	—		—			(157		)	—			34			82			(41		)
Distributions to noncontrolling interests	—		—			—			—			—			(5,228		)	(5,228		)
Contributions from noncontrolling interests	—		—			—			—			—			866			866
Balance, September 29, 2019	86,856		$	869		$	1,095,382		$	(783,093	)	$	(168,875	)	$	7,291		$	151,574

															(CONTINUED...)

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			ADDITIONAL PAID-IN CAPITAL			ACCUM- ULATED DEFICIT			ACCUMULATED OTHER COMPREHENSIVE LOSS			NON-CONTROLLING INTERESTS			TOTAL
Balance, July 1, 2018	92,437		$	924		$	1,109,015		$	(902,038	)	$	(126,672	)	$	10,241		$	91,470
Net income	—		—			—			4,072			—			188			4,260
Other comprehensive (loss) income, net of tax	—		—			—			—			(16,604		)	241			(16,363		)
Cash dividends declared, $0.09 per common share	—		—			(8,344		)	—			—			—			(8,344		)
Repurchase and retirement of common stock	(967	)	(9		)	—			(17,959		)	—			—			(17,968		)
Stock-based compensation	—		—			5,300			—			—			—			5,300
Common stock issued under stock plans (1)	384		4			2,672			—			—			—			2,676
Change in the redemption value of redeemable interests	—		—			(7		)	—			—			—			(7		)
Distributions to noncontrolling interests	—		—			—			—			—			(1,133		)	(1,133		)
Contributions from noncontrolling interests	—		—			—			—			—			251			251
Balance, September 30, 2018	91,854		$	919		$	1,108,636		$	(915,925	)	$	(143,276	)	$	9,788		$	60,142

Balance, December 31, 2017	91,913		$	919		$	1,081,813		$	(913,191	)	$	(99,199	)	$	10,889		$	81,231
Net income	—		—			—			96,191			—			1,251			97,442
Other comprehensive (loss) income, net of tax	—		—			—			—			(44,077		)	582			(43,495		)
Cash dividends declared, $0.27 per common share	—		—			(25,078		)	—			—			—			(25,078		)
Repurchase and retirement of common stock	(4,371	)	(43		)	—			(98,925		)	—			—			(98,968		)
Stock-based compensation	—					16,478			—			—			—			16,478
Common stock issued under stock plans (1)	4,312		43			35,752			—			—			—			35,795
Change in the redemption value of redeemable interests	—		—			(329		)	—			—			—			(329		)
Distributions to noncontrolling interests	—		—			—			—			—			(4,505		)	(4,505		)
Contributions from noncontrolling interests	—		—			—			—			—			1,571			1,571
Balance, September 30, 2018	91,854		$	919		$	1,108,636		$	(915,925	)	$	(143,276	)	$	9,788		$	60,142

________________


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

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

Table of Contents

BLOOMIN’ BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS, UNAUDITED)



	THIRTY-NINE WEEKS ENDED
	SEPTEMBER 29, 2019			SEPTEMBER 30, 2018
Cash flows provided by operating activities:
Net income	$	104,831		$	97,113
Adjustments to reconcile Net income to cash provided by operating activities:
Depreciation and amortization	147,196			151,473
Amortization of deferred discounts and issuance costs	1,891			1,930
Amortization of deferred gift card sales commissions	18,927			20,151
Provision for impaired assets and restaurant closings	6,917			15,590
Non-cash operating lease costs	54,815			—
Stock-based and other non-cash compensation expense	18,752			19,692
Deferred income tax benefit	(1,982		)	(1,318		)
Loss on sale of a business or subsidiary	206			—
Recognition of deferred gain on sale-leaseback transactions	—			(9,237		)
Gain on disposal of property, fixtures and equipment	(3,217		)	(814		)
Other, net	(6,818		)	2,991
Change in assets and liabilities	(160,592		)	(142,375		)
Net cash provided by operating activities	180,926			155,196
Cash flows used in investing activities:
Proceeds from disposal of property, fixtures and equipment	16,418			10,453
Proceeds from sale-leaseback transactions, net	3,052			11,332
Capital expenditures	(117,478		)	(146,288		)
Other investments, net	4,298			200
Net cash used in investing activities	$	(93,710	)	$	(124,303	)

	(CONTINUED...)

Table of Contents

BLOOMIN’ BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS, UNAUDITED)



	THIRTY-NINE WEEKS ENDED
	SEPTEMBER 29, 2019			SEPTEMBER 30, 2018
Cash flows used in financing activities:
Proceeds from issuance of long-term debt, net	$	—		$	1,637
Repayments of long-term debt	(20,646		)	(20,164		)
Proceeds from borrowings on revolving credit facilities, net	533,300			378,529
Repayments of borrowings on revolving credit facilities	(469,000		)	(329,700		)
Proceeds from the exercise of share-based compensation, net	1,266			35,795
Distributions to noncontrolling interests	(5,228		)	(4,505		)
Contributions from noncontrolling interests	866			1,571
Purchase of limited partnership and noncontrolling interests	(41		)	(1,619		)
Repayments of partner deposits and accrued partner obligations	(12,928		)	(14,458		)
Repurchase of common stock	(106,992		)	(98,968		)
Cash dividends paid on common stock	(27,041		)	(25,078		)
Net cash used in financing activities	(106,444		)	(76,960		)
Effect of exchange rate changes on cash and cash equivalents	(1,187		)	(4,861		)
Net decrease in cash, cash equivalents and restricted cash	(20,415		)	(50,928		)
Cash, cash equivalents and restricted cash as of the beginning of the period	71,823			129,543
Cash, cash equivalents and restricted cash as of the end of the period	$	51,408		$	78,615
Supplemental disclosures of cash flow information:
Cash paid for interest	$	35,855		$	31,376
Cash paid for income taxes, net of refunds	20,025			9,696
Supplemental disclosures of non-cash investing and financing activities:
Leased assets obtained in exchange for new operating lease liabilities	$	43,101		$	—
Leased assets obtained in exchange for new finance lease liabilities	200			—
Increase in liabilities from the acquisition of property, fixtures and equipment or capital leases	2,655			5,075

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

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Description of the Business and Basis of Presentation

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

Basis of Presentation - The accompanying interim unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. 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 30, 2018.

Recently Adopted Financial Accounting Standards - On December 31, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02: Leases (Topic 842) (“ASU No. 2016-02”), ASU No. 2018-01: Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 (“ASU No. 2018-01”), and ASU No. 2018-11: Leases (Topic 842): Targeted Improvements (“ASU No. 2018-11”). ASU No. 2016-02 requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. ASU No. 2018-01 allows an entity to elect an optional transition practical expedient to not evaluate land easements that exist or expired before the Company’s adoption of ASU No. 2016-02. ASU No. 2018-11 allows for an additional transition method, which permits use of the effective date of adoption as the date of initial application of ASU No. 2016-02 without restating comparative period financial statements and provides entities with a practical expedient that allows entities to elect not to separate lease and non-lease components when certain conditions are met.

The Company adopted ASU No. 2016-02 using December 31, 2018 as the date of initial application. Consequently, financial information and the disclosures required under the new standard were not provided for dates and periods before December 31, 2018. The Company also elected a transition package including practical expedients that permitted it not to reassess the classification and initial direct costs of expired or existing contracts and leases, to not separate lease and non-lease components of restaurant facility leases executed subsequent to adoption, and to not evaluate land easements that exist or expired before the adoption. In preparation for adoption, the Company implemented a new lease accounting system.

Adoption resulted in the following, as of December 31, 2018:


(i)	recording of right-of-use assets of $1.3 billion and lease liabilities of $1.5 billion;


(ii)	a credit to the beginning balance of Accumulated Deficit of $190.4 million to derecognize deferred gains on sale-leaseback transactions and a debit to the beginning balance of Accumulated Deficit of $49.2 million to derecognize the related deferred tax assets; and


(iii)	derecognition of existing debt obligations of $19.6 million and existing fixed assets of $16.1 million related to restaurant properties sold and leased back from third parties that previously did not qualify for sale accounting, with gains or losses associated with this change recognized in Accumulated Deficit.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

Other restaurant operating expense increased during the thirteen and thirty-nine weeks ended September 29, 2019 from the adoption of ASU No. 2016-02 since the Company no longer recognizes the benefit of deferred gains on sale-leaseback transactions through its statements of operations over the corresponding lease term. During the thirteen and thirty-nine weeks ended September 30, 2018, the Company recognized $3.1 million and $9.2 million, respectively, of sale-leaseback deferred gain amortization.

As a result of adoption of ASU No. 2016-02, the Company recorded reclassification adjustments to certain balances that were recorded under Accounting Standards Codification Topic 840, “Leases” (“ASC 840”) on its Consolidated Balance Sheet as of December 30, 2018. The following table summarizes accounts with material reclassification adjustments which impacted Operating lease right-of-use assets as a part of the adoption of ASU No. 2016-02:



ACCOUNT		CONSOLIDATED BALANCE SHEET CLASSIFICATION UNDER ASC 840
Favorable leases