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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 March 27, 2022 |
| 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
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, FL 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 April 28, 2022, 88,702,869 shares of common stock of the registrant were outstanding.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended March 27, 2022
(Unaudited)
TABLE OF CONTENTS
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| Item 1. | | |
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| Item 2. | | |
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| Item 3. | | |
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| Item 4. | | |
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| Item 1. | | |
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| Item 1A. | | |
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| Item 2. | | |
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| Item 6. | | |
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA, UNAUDITED)
| | | | | | | | | | | |
| MARCH 27, 2022 | | DECEMBER 26, 2021 |
| ASSETS | | | |
| Current assets | | | |
| Cash and cash equivalents | $ | 97,795 | | | $ | 87,585 | |
| Restricted cash and cash equivalents | 101 | | | 1,472 | |
| Inventories | 68,803 | | | 79,112 | |
| | | |
| Other current assets, net | 104,588 | | | 184,623 | |
| Total current assets | 271,287 | | | 352,792 | |
| | | |
| | | |
| Property, fixtures and equipment, net | 841,120 | | | 842,012 | |
| Operating lease right-of-use assets | 1,124,517 | | | 1,130,873 | |
| Goodwill | 273,474 | | | 268,444 | |
| Intangible assets, net | 453,048 | | | 453,412 | |
| Deferred income tax assets, net | 162,743 | | | 168,068 | |
| Other assets, net | 77,167 | | | 78,670 | |
| Total assets | $ | 3,203,356 | | | $ | 3,294,271 | |
| |
| | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities | | | |
| Accounts payable | $ | 172,709 | | | $ | 167,978 | |
| Accrued and other current liabilities | 426,415 | | | 406,894 | |
| Unearned revenue | 325,304 | | | 398,795 | |
| | | |
| Current portion of long-term debt | 11,220 | | | 10,958 | |
| Total current liabilities | 935,648 | | | 984,625 | |
| | | |
| Non-current operating lease liabilities | 1,172,923 | | | 1,179,447 | |
| | | |
| | | |
| Long-term debt, net | 711,025 | | | 782,107 | |
| Other long-term liabilities, net | 90,503 | | | 125,242 | |
| Total liabilities | 2,910,099 | | | 3,071,421 | |
| Commitments and contingencies (Note 14) | | | |
| | | |
| | | |
| Stockholders’ equity | | | |
| Bloomin’ Brands stockholders’ equity | | | |
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of March 27, 2022 and December 26, 2021 | — | | | — | |
Common stock, $0.01 par value, 475,000,000 shares authorized; 89,185,040 and 89,252,823 shares issued and outstanding as of March 27, 2022 and December 26, 2021, respectively | 892 | | | 893 | |
| Additional paid-in capital | 1,115,458 | | | 1,119,728 | |
| Accumulated deficit | (634,356) | | | (698,171) | |
| Accumulated other comprehensive loss | (190,431) | | | (205,989) | |
| Total Bloomin’ Brands stockholders’ equity | 291,563 | | | 216,461 | |
| Noncontrolling interests | 1,694 | | | 6,389 | |
| Total stockholders’ equity | 293,257 | | | 222,850 | |
| Total liabilities and stockholders’ equity | $ | 3,203,356 | | | $ | 3,294,271 | |
|
| The accompanying notes are an integral part of these consolidated financial statements. |
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
| | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED |
| | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
| Revenues | | | | | | | |
| Restaurant sales | | | | | $ | 1,123,575 | | | $ | 979,451 | |
| Franchise and other revenues | | | | | 16,960 | | | 8,022 | |
| Total revenues | | | | | 1,140,535 | | | 987,473 | |
| Costs and expenses | | | | | | | |
| Food and beverage costs | | | | | 359,370 | | | 291,870 | |
| Labor and other related | | | | | 312,511 | | | 274,638 | |
| Other restaurant operating | | | | | 259,110 | | | 229,293 | |
| Depreciation and amortization | | | | | 41,775 | | | 41,226 | |
| General and administrative | | | | | 58,674 | | | 57,248 | |
| Provision for impaired assets and restaurant closings | | | | | 1,839 | | | 2,200 | |
| Total costs and expenses | | | | | 1,033,279 | | | 896,475 | |
| Income from operations | | | | | 107,256 | | | 90,998 | |
| | | | | | | |
| Other income, net | | | | | — | | | 21 | |
| Interest expense, net | | | | | (13,633) | | | (14,628) | |
| Income before provision for income taxes | | | | | 93,623 | | | 76,391 | |
| Provision for income taxes | | | | | 15,929 | | | 6,593 | |
| Net income | | | | | 77,694 | | | 69,798 | |
| Less: net income attributable to noncontrolling interests | | | | | 2,183 | | | 936 | |
Net income attributable to Bloomin’ Brands | | | | | $ | 75,511 | | | $ | 68,862 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net income | | | | | $ | 77,694 | | | $ | 69,798 | |
| Other comprehensive income: | | | | | | | |
| Foreign currency translation adjustment | | | | | 11,283 | | | (6,575) | |
| | | | | | | |
| Unrealized gain (loss) on derivatives, net of tax | | | | | 573 | | | (42) | |
| Reclassification of adjustments for loss on derivatives included in Net income, net of tax | | | | | 681 | | | 3,003 | |
| Impact of terminated interest rate swaps included in Net income, net of tax | | | | | 3,021 | | | — | |
| Comprehensive income | | | | | 93,252 | | | 66,184 | |
| Less: comprehensive income attributable to noncontrolling interests | | | | | 2,183 | | | 936 | |
| Comprehensive income attributable to Bloomin’ Brands | | | | | $ | 91,069 | | | $ | 65,248 | |
| | | | | | | |
| Earnings per share: | | | | | | | |
| Basic | | | | | $ | 0.85 | | | $ | 0.78 | |
| Diluted | | | | | $ | 0.73 | | | $ | 0.63 | |
| Weighted average common shares outstanding: | | | | | | | |
| Basic | | | | | 89,355 | | | 88,367 | |
| Diluted | | | | | 103,454 | | | 110,641 | |
The accompanying notes are an integral part of these consolidated financial statements.
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
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| BLOOMIN’ BRANDS, INC. | | | | |
| COMMON STOCK | | ADDITIONAL PAID-IN CAPITAL | | ACCUM-
ULATED DEFICIT | | ACCUMULATED OTHER
COMPREHENSIVE LOSS | | NON-CONTROLLING INTERESTS | | TOTAL |
| SHARES | | AMOUNT | | | | | |
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Balance,
December 26, 2021 | 89,253 | | | $ | 893 | | | $ | 1,119,728 | | | $ | (698,171) | | | $ | (205,989) | | | $ | 6,389 | | | $ | 222,850 | |
| | | | | | | | | | | | | |
| Net income | — | | | — | | | — | | | 75,511 | | | — | | | 2,183 | | | 77,694 | |
| Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 15,558 | | | — | | | 15,558 | |
Cash dividends declared, $0.14 per common share | — | | | — | | | (12,559) | | | — | | | — | | | — | | | (12,559) | |
| Repurchase and retirement of common stock | (551) | | | (6) | | | — | | | (11,696) | | | — | | | — | | | (11,702) | |
| Stock-based compensation | — | | | — | | | 4,843 | | | — | | | — | | | — | | | 4,843 | |
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| Common stock issued under stock plans (1) | 483 | | | 5 | | | 880 | | | — | | | — | | | — | | | 885 | |
Purchase of noncontrolling interests, net of tax of $888 | — | | | — | | | 2,566 | | | — | | | — | | | (4,454) | | | (1,888) | |
| Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (2,641) | | | (2,641) | |
| Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 217 | | | 217 | |
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Balance,
March 27, 2022 | 89,185 | | | $ | 892 | | | $ | 1,115,458 | | | $ | (634,356) | | | $ | (190,431) | | | $ | 1,694 | | | $ | 293,257 | |
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| BLOOMIN’ BRANDS, INC. | | | | |
| COMMON STOCK | | ADDITIONAL PAID-IN CAPITAL | | ACCUM-
ULATED DEFICIT | | ACCUMULATED OTHER
COMPREHENSIVE LOSS | | NON-CONTROLLING INTERESTS | | TOTAL |
| SHARES | | AMOUNT | | | | | |
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Balance,
December 27, 2020 | 87,856 | | | $ | 879 | | | $ | 1,132,808 | | | $ | (918,096) | | | $ | (211,446) | | | $ | 6,812 | | | $ | 10,957 | |
| Cumulative-effect from a change in accounting principle, net of tax | — | | | — | | | (47,323) | | | 4,370 | | | — | | | — | | | (42,953) | |
| Net income | — | | | — | | | — | | | 68,862 | | | — | | | 936 | | | 69,798 | |
| Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (3,614) | | | — | | | (3,614) | |
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| Stock-based compensation | — | | | | | 4,726 | | | — | | | — | | | — | | | 4,726 | |
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| Common stock issued under stock plans (1) | 999 | | | 10 | | | 7,428 | | | — | | | — | | | — | | | 7,438 | |
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| Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (1,458) | | | (1,458) | |
| Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | 511 | | | 511 | |
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Balance,
March 28, 2021 | 88,855 | | | $ | 889 | | | $ | 1,097,639 | | | $ | (844,864) | | | $ | (215,060) | | | $ | 6,801 | | | $ | 45,405 | |
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________________
(1)Net of forfeitures and shares withheld for employee taxes.
The accompanying notes are an integral part of these consolidated financial statements.
BLOOMIN’ BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, UNAUDITED)
| | | | | | | | | | | |
| THIRTEEN WEEKS ENDED |
| MARCH 27, 2022 | | MARCH 28, 2021 |
| | | |
| Cash flows provided by operating activities: | | | |
| Net income | $ | 77,694 | | | $ | 69,798 | |
| Adjustments to reconcile Net income to cash provided by operating activities: | | | |
| Depreciation and amortization | 41,775 | | | 41,226 | |
| Amortization of debt discounts and issuance costs | 1,065 | | | 1,308 | |
| Amortization of deferred gift card sales commissions | 8,017 | | | 8,725 | |
| Provision for impaired assets and restaurant closings | 1,839 | | | 2,200 | |
| Non-cash interest expense from terminated interest rate swaps | 4,067 | | | — | |
| Non-cash operating lease costs | 20,477 | | | 19,502 | |
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| Stock-based and other non-cash compensation expense | 4,843 | | | 4,726 | |
| Deferred income tax expense | 3,209 | | | 1,571 | |
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| Other, net | 2,229 | | | (829) | |
| Change in assets and liabilities | (18,080) | | | (7,201) | |
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| Net cash provided by operating activities | 147,135 | | | 141,026 | |
| Cash flows used in investing activities: | | | |
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| Capital expenditures | (40,180) | | | (17,411) | |
| Other investments, net | 1,030 | | | 793 | |
| Net cash used in investing activities | (39,150) | | | (16,618) | |
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| Cash flows used in financing activities: | | | |
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| Repayments of long-term debt and finance lease obligations | (2,863) | | | (9,656) | |
| Proceeds from borrowings on revolving credit facilities | 90,000 | | | 15,000 | |
| Repayments of borrowings on revolving credit facilities | (160,000) | | | (107,000) | |
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| Proceeds from share-based compensation, net | 885 | | | 7,438 | |
| Distributions to noncontrolling interests | (2,641) | | | (1,458) | |
| Contributions from noncontrolling interests | 217 | | | 511 | |
| Purchase of noncontrolling interests | (1,000) | | | — | |
| Payments for partner equity plan | (2,748) | | | (1,747) | |
| Repurchase of common stock | (10,402) | | | — | |
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| Cash dividends paid on common stock | (12,559) | | | — | |
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| Net cash used in financing activities | (101,111) | | | (96,912) | |
| Effect of exchange rate changes on cash and cash equivalents | 1,965 | | | (1,246) | |
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| Net increase in cash, cash equivalents and restricted cash | 8,839 | | | 26,250 | |
| Cash, cash equivalents and restricted cash as of the beginning of the period | 89,057 | | | 110,408 | |
| Cash, cash equivalents and restricted cash as of the end of the period | $ | 97,896 | | | $ | 136,658 | |
| Supplemental disclosures of cash flow information: | | | |
| Cash paid for interest | $ | 2,444 | | | $ | 10,230 | |
| Cash paid for income taxes, net of refunds | $ | 2,257 | | | $ | 2,150 | |
| Supplemental disclosures of non-cash investing and financing activities: | | | |
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| Leased assets obtained in exchange for new operating lease liabilities | $ | 11,515 | | | $ | 14,819 | |
| Leased assets obtained in exchange for new finance lease liabilities | $ | 1,313 | | | $ | 15 | |
| (Decrease) increase in liabilities from the acquisition of property, fixtures and equipment | $ | (6,178) | | | $ | 2,005 | |
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The accompanying notes are an integral part of these consolidated financial statements.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of the Business and Basis of Presentation
Description of the Business - Bloomin’ Brands (“Bloomin’ Brands” or the “Company”) owns and operates casual, upscale casual and fine dining restaurants. The Company’s restaurant portfolio has four concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Additional Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchise agreements.
Basis of Presentation - The accompanying interim unaudited condensed 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 26, 2021.
Recently Issued Financial Accounting Standards Not Yet Adopted - In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (“ASU No. 2021-10”), which requires financial statement footnote disclosure regarding government assistance accounted for by applying a grant or contribution accounting model by analogy. ASU No. 2021-10 is effective for the Company for the fiscal year ending December 25, 2022, with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU No. 2021-10 will have on its financial statement disclosures.
Recent accounting guidance not discussed herein is not applicable, did not have, or is not expected to have a material impact to the Company.
Reclassifications - The Company reclassified certain items in the accompanying consolidated financial statements for prior periods to be comparable with the classification for the current period, including, but not limited to, presentation of certain items within the condensed consolidated statements of cash flows and certain notes to the consolidated financial statements. These reclassifications had no effect on previously reported net income.
2. Revenue Recognition
The following table includes the categories of revenue included in the Company’s Consolidated Statements of Operations and Comprehensive Income for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED | | | | | | |
| (dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 | | | | | | |
| Revenues | | | | | | | | | | | | | |
| Restaurant sales | | | | | $ | 1,123,575 | | | $ | 979,451 | | | | | | | |
| Franchise and other revenues | | | | | | | | | | | | | |
| Franchise revenues | | | | | 13,406 | | | 6,789 | | | | | | | |
| Other revenues | | | | | 3,554 | | | 1,233 | | | | | | | |
| Total Franchise and other revenues | | | | | 16,960 | | | 8,022 | | | | | | | |
| Total revenues | | | | | $ | 1,140,535 | | | $ | 987,473 | | | | | | | |
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table includes the disaggregation of Restaurant sales and franchise revenues, by restaurant concept and major international market, for the periods indicated:
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| THIRTEEN WEEKS ENDED |
| MARCH 27, 2022 | | MARCH 28, 2021 |
| (dollars in thousands) | RESTAURANT SALES | | FRANCHISE REVENUES | | RESTAURANT SALES | | FRANCHISE REVENUES |
| U.S. | | | | | | | |
| Outback Steakhouse | $ | 595,393 | | | $ | 8,459 | | | $ | 547,195 | | | $ | 2,956 | |
| Carrabba’s Italian Grill | 175,628 | | | 661 | | | 157,686 | | | 617 | |
| Bonefish Grill | 151,416 | | | 177 | | | 126,974 | | | 130 | |
| Fleming’s Prime Steakhouse & Wine Bar | 97,662 | | | — | | | 66,311 | | | — | |
| Other | 3,536 | | | 5 | | | 1,893 | | | — | |
| U.S. total | 1,023,635 | | | 9,302 | | | 900,059 | | | 3,703 | |
| International | | | | | | | |
| Outback Steakhouse Brazil | 85,301 | | | — | | | 60,848 | | | — | |
| Other (1) | 14,639 | | | 4,104 | | | 18,544 | | | 3,086 | |
| International total | 99,940 | | | 4,104 | | | 79,392 | | | 3,086 | |
| Total | $ | 1,123,575 | | | $ | 13,406 | | | $ | 979,451 | | | $ | 6,789 | |
________________
(1)Includes Restaurant sales for Company-owned Outback Steakhouse restaurants outside of Brazil and Abbraccio restaurants in Brazil. Franchise revenues primarily includes revenues from franchised Outback Steakhouse restaurants.
The following table includes a detail of assets and liabilities from contracts with customers included on the Company’s Consolidated Balance Sheets as of the periods indicated:
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| (dollars in thousands) | MARCH 27, 2022 | | DECEMBER 26, 2021 | | | | | | |
| Other current assets, net | | | | | | | | | |
| Deferred gift card sales commissions | $ | 13,033 | | | $ | 17,793 | | | | | | | |
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| Unearned revenue | | | | | | | | | |
| Deferred gift card revenue | $ | 314,974 | | | $ | 387,945 | | | | | | | |
| Deferred loyalty revenue | 8,217 | | | 9,386 | | | | | | | |
| Deferred franchise fees - current | 439 | | | 443 | | | | | | | |
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| Other | 1,674 | | | 1,021 | | | | | | | |
| Total Unearned revenue | $ | 325,304 | | | $ | 398,795 | | | | | | | |
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| Other long-term liabilities, net | | | | | | | | | |
| Deferred franchise fees - non-current | $ | 4,284 | | | $ | 4,280 | | | | | | | |
The following table is a rollforward of deferred gift card sales commissions for the periods indicated:
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| | | THIRTEEN WEEKS ENDED |
| (dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
| Balance, beginning of period | | | | | $ | 17,793 | | | $ | 19,300 | |
| Deferred gift card sales commissions amortization | | | | | (8,017) | | | (8,725) | |
| Deferred gift card sales commissions capitalization | | | | | 4,169 | | | 3,499 | |
| Other | | | | | (912) | | | (572) | |
| Balance, end of period | | | | | $ | 13,033 | | | $ | 13,502 | |
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
The following table is a rollforward of unearned gift card revenue for the periods indicated:
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| | | THIRTEEN WEEKS ENDED |
| (dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
| Balance, beginning of period | | | | | $ | 387,945 | | | $ | 373,048 | |
| Gift card sales | | | | | 50,280 | | | 44,169 | |
| Gift card redemptions | | | | | (116,622) | | | (104,940) | |
| Gift card breakage | | | | | (6,629) | | | (6,202) | |
| Balance, end of period | | | | | $ | 314,974 | | | $ | 306,075 | |
3. Earnings Per Share
In February 2021, the Company provided the trustee of its convertible senior notes due in 2025 (the “2025 Notes”) notice of the Company’s irrevocable election to settle the principal portion of the 2025 Notes in cash and any excess in shares. As a result, subsequent to the election, only the amounts in excess of the principal amount are considered in diluted earnings per share. The amount of the 2025 Notes settled in shares of common stock will have a dilutive impact on diluted earnings per share when the average market price of the Company’s common stock for a given period exceeds the conversion price, which was initially $11.89 per share of common stock.
In connection with the offering of the 2025 Notes, the Company entered into warrant transactions (the “Warrant Transactions”), which have a dilutive effect on the Company’s common stock to the extent the price of its common stock exceeds the strike price of the Warrant Transactions, which was initially $16.64.
In connection with dividends paid during the thirteen weeks ended March 27, 2022, the conversion price of the 2025 Notes decreased to $11.82 per share of common stock and the strike price of the related warrants decreased to $16.55 per share of common stock.
The following table presents the computation of basic and diluted earnings per share for the periods indicated:
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| | | THIRTEEN WEEKS ENDED |
| (in thousands, except per share data) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
Net income attributable to Bloomin’ Brands | | | | | $ | 75,511 | | | $ | 68,862 | |
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| Convertible senior notes if-converted method interest adjustment, net of tax (1) | | | | | — | | | 1,381 | |
| Diluted net income attributable to Bloomin’ Brands | | | | | $ | 75,511 | | | $ | 70,243 | |
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| Basic weighted average common shares outstanding | | | | | 89,355 | | | 88,367 | |
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| Effect of dilutive securities: | | | | | | | |
| Stock options | | | | | 370 | | | 709 | |
| Nonvested restricted stock units | | | | | 279 | | | 503 | |
| Nonvested performance-based share units | | | | | 276 | | | 94 | |
| Convertible senior notes (1) | | | | | 8,732 | | | 15,193 | |
| Warrants | | | | | 4,442 | | | 5,775 | |
| Diluted weighted average common shares outstanding | | | | | 103,454 | | | 110,641 | |
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| Basic earnings per share | | | | | $ | 0.85 | | | $ | 0.78 | |
| Diluted earnings per share | | | | | $ | 0.73 | | | $ | 0.63 | |
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________________
(1)Adjustment for interest related to the 2025 Notes weighted for the portion of the period prior to the Company’s election under the 2025 Notes indenture to settle the principal portion of its 2025 Notes in cash. Effective with the Company’s election, there will be no further numerator adjustments for interest or denominator adjustments for shares required to settle the principal portion.
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
Share-based compensation-related weighted average securities outstanding not included in the computation of earnings per share because their effect was antidilutive were as follows, for the periods indicated:
| | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED |
| (shares in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
| Stock options | | | | | 1,417 | | | 1,364 | |
| Nonvested restricted stock units | | | | | 217 | | | 73 | |
| Nonvested performance-based share units | | | | | 365 | | | 431 | |
| | | | | | | |
4. Stock-based Compensation Plans
The Company recognized stock-based compensation expense as follows for the periods indicated:
| | | | | | | | | | | | | | | |
| | | THIRTEEN WEEKS ENDED |
| (dollars in thousands) | | | | | MARCH 27, 2022 | | MARCH 28, 2021 |
| Performance-based share units | | | | | $ | 2,619 | | | $ | 1,469 | |
| Restricted stock units | | | | | 1,810 | | | 2,366 | |
| Stock options | | | | | 377 | | | 865 | |
| | | | | | | |
| | | | | $ | 4,806 | | | $ | 4,700 | |
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In February 2022, the Company granted 0.5 million performance-based share units (“PSUs”) subject to final payout modification by a Relative Total Shareholder Return (“Relative TSR”) modifier. This Relative TSR modifier can adjust the final payout outcome by 75%, 100% or 125% of the achieved performance metric, with the overall payout capped at 200% of the annual target grant. These PSUs have a three-year cliff vesting period and their fair value was estimated using the Monte Carlo simulation model.
Assumptions used in the Monte Carlo simulation model and the grant date fair value of PSUs granted were as follows for the periods indicated:
| | | | | | | | | | | |
| THIRTEEN WEEKS ENDED |
| MARCH 27, 2022 | | MARCH 28, 2021 |
| Assumptions: | | | |
| Risk-free interest rate (1) | 1.64 | % | | 0.20 | % |
| Dividend yield (2) | 2.31 | % | | — | % |
| | | |
| Volatility (3) | 49.11 | % | | 48.45 | % |
| | | |
| Grant date fair value per unit (4) | $ | 26.10 | | | $ | 29.73 | |
________________
(1)Risk-free interest rate is the U.S. Treasury yield curve in effect as of the grant date for the performance period of the unit.
(2)Dividend yield is the level of dividends expected to be paid on the Company’s common stock over the expected term.
(3)Based on the historical volatility of the Company’s stock over the last seven years.
(4)Represents a premium above the per share value of the Company’s common stock for the Relative TSR modifier as of the grant date of 7.9% and 14.3% as of March 27, 2022 and March 28, 2021, respectively.
The following represents unrecognized stock-based compensation expense and the remaining weighted average vesting period as of March 27, 2022:
| | | | | | | | | | | |
| UNRECOGNIZED COMPENSATION EXPENSE
(dollars in thousands) | | REMAINING WEIGHTED AVERAGE VESTING PERIOD (in years) |
| Performance-based share units | $ | 21,163 | | | 1.6 |
| Restricted stock units | $ | 12,002 | | | 2.2 |
| | | |
| | | |
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
5. Other Current Assets, Net
Other current assets, net, consisted of the following as of the periods indicated:
| | | | | | | | | | | |
| (dollars in thousands) | MARCH 27, 2022 | | DECEMBER 26, 2021 |
| Prepaid expenses | $ | 21,431 | | | $ | 21,194 | |
| Accounts receivable - gift cards, net | 8,660 | | | 91,248 | |
| Accounts receivable - vendors, net | 14,297 | | | 11,793 | |
| Accounts receivable - franchisees, net | 1,345 | | | 1,701 | |
| Accounts receivable - other, net | 21,665 | | | 18,353 | |
| Deferred gift card sales commissions | 13,033 | | | 17,793 | |
| | | |
| Company-owned life insurance policies | 18,023 | | | 17,244 | |
| Other current assets, net | 6,134 | | | 5,297 | |
| $ | 104,588 | | | $ | 184,623 | |
6. Long-term Debt, Net
Following is a summary of outstanding Long-term debt, net as of the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| MARCH 27, 2022 | | DECEMBER 26, 2021 |
| (dollars in thousands) | OUTSTANDING BALANCE | | INTEREST RATE | | OUTSTANDING BALANCE | | INTEREST RATE |
| Senior Secured Credit Facility: | | | | | | | |
| Term loan A (1) | $ | 192,500 | | | 1.76 | % | | $ | 195,000 | | | 1.60 | % |
| Revolving credit facility (2) | 10,000 | | | 4.00 | % | | 80,000 | | | 3.75 | % |
| Total Senior Secured Credit Facility | 202,500 | | | | | 275,000 | | | |
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| 2025 Notes | 230,000 | | | 5.00 | % | | 230,000 | | | 5.00 | % |
| 2029 Notes | 300,000 | | | 5.13 | % | | 300,000 | | | 5.13 | % |
| Finance lease liabilities | 3,380 | | | | | 2,376 | | | |
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| Less: unamortized debt discount and issuance costs | (13,433) | | | | | (14,157) | | | |
| Less: finance lease interest | (202) | | | | | (154) | | | |
| Total debt, net | 722,245 | | | | | 793,065 | | | |
| Less: current portion of long-term debt | (11,220) | | | | | (10,958) | | | |
| Long-term debt, net | $ | 711,025 | | | | | $ | 782,107 | | | |
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(1)Interest rate represents the weighted average interest rate as of the respective periods.
(2)Interest rate represents the base rate option elected in anticipation of impending repayment.
Debt Covenants - As of March 27, 2022 and December 26, 2021, the Company was in compliance with its debt covenants.
Credit Agreement Amendment - On April 16, 2021, the Company and its wholly-owned subsidiary OSI Restaurant Partners, LLC (“OSI”), as co-borrowers, entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”), which provides for senior secured financing of up to $1.0 billion consisting of a $200.0 million Term loan A and an $800.0 million revolving credit facility (the “Senior Secured Credit Facility”).
On April 26, 2022, the Company and OSI entered into the First Amendment to the Second Amended and Restated Credit Agreement and Incremental Amendment (the “Amended Credit Agreement”), which included an increase of the Company’s existing revolving credit facility from $800.0 million to $1.0 billion and a transition from London Inter-Bank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”) as the benchmark rate for
BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
purposes of calculating interest under the Senior Secured Credit Facility. At closing, an incremental $192.5 million was drawn on the revolving credit facility to fully repay the outstanding balance of Term loan A. The total indebtedness of the Company remained unchanged as a result of the Amended Credit Agreement.
Under the Amended Credit Agreement, the Company may elect an interest rate at each reset period based on the Base Rate or Adjusted Term SOFR, plus an applicable spread. The Base Rate option is the highest of: (i) the prime rate of Wells Fargo Bank, National Association, (ii) the federal funds effective rate plus 0.5 of 1.0% or (iii) the Adjusted Term SOFR with a one-month interest period plus 1.0% (the “Base Rate”). The Adjusted Term SOFR option is the 30, 90 or 180-day SOFR, plus a term SOFR adjustment of 0.10%, subject to a 0% floor (the “Adjusted Term SOFR”). The interest rates are as follows:
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| BASE RATE ELECTION | | ADJUSTED TERM SOFR ELECTION |
| Revolving credit facility | 50 to 150 basis points over the Base Rate | | 150 to |
