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 30, 2013	
 	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)	 	(I.R.S. 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, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o  Accelerated filer  o
Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company 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 26, 2013, 124,187,352 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 30, 2013 
(Unaudited)

TABLE OF CONTENTS

 	 	 	
 	PART I — FINANCIAL INFORMATION	 	
            	 	Page No.	
 	 	 	
Item 1.	Financial Statements 	3	
 	 	 	
 	Consolidated Financial Statements (Unaudited):

            	Consolidated Balance Sheets — June 30, 2013 and December 31, 2012	3	
 	 	 	
 	Consolidated Statements of Operations and Comprehensive Income  —
For the Three and Six Months Ended June 30, 2013 and 2012	5	
 	 	 	
 	Consolidated Statements of Changes in Stockholders’ Equity —
For the Six Months Ended June 30, 2013 and 2012 	6	
 	 	 	
 	Consolidated Statements of Cash Flows  —
For the Six Months Ended June 30, 2013 and 2012	8	
 	 	 	
 	Notes to Consolidated Financial Statements	10	
 	 	 	
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22	
 	 	 	
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48	
 	 	 	
Item 4.	Controls and Procedures	48	
 	 	 	
 	PART II — OTHER INFORMATION 	 	
 	 	 	
Item 1A.	Risk Factors	49	
 	 	 	
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49	
 	 	 	
Item 6.	Exhibits	50	
 	 	 	
 	Signature	51	

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 30,	 	DECEMBER 31,	
 	2013	 	2012	
ASSETS	 	 	 	
Current Assets	 	 	 	
Cash and cash equivalents	$	222,441	
 	 	$	261,690	
 	
Current portion of restricted cash	3,874	
 	 	4,846	
 	
Inventories	64,977	
 	 	78,181	
 	
Deferred income tax assets	49,321	
 	 	39,774	
 	
Other current assets, net	99,330	
 	 	103,321	
 	
Total current assets	439,943	
 	 	487,812	
 	
Restricted cash	15,419	
 	 	15,243	
 	
Property, fixtures and equipment, net	1,527,149	
 	 	1,506,035	
 	
Investments in and advances to unconsolidated affiliates, net	38,959	
 	 	36,748	
 	
Goodwill	269,231	
 	 	270,972	
 	
Intangible assets, net	544,660	
 	 	551,779	
 	
Deferred income tax assets	2,714	
 	 	2,532	
 	
Other assets, net	142,315	
 	 	145,432	
 	
Total assets	$	2,980,390	
 	 	$	3,016,553	

 	(CONTINUED...)	 	

3

Table of Contents
BLOOMIN’ BRANDS, INC.

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

 	
 	 	 	 	 	 	 	 	
 	JUNE 30,	 	DECEMBER 31,	
 	2013	 	2012	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	

Current Liabilities	 	

Accounts payable	$	131,713	
 	 	$	131,814	
 	
Accrued and other current liabilities	170,849	
 	 	192,284	
 	
Current portion of partner deposits and accrued partner obligations	13,658	
 	 	14,771	
 	
Unearned revenue	220,420	
 	 	329,518	
 	
Current portion of long-term debt	13,483	
 	 	22,991	
 	
Total current liabilities	550,123	
 	 	691,378	
 	
Partner deposits and accrued partner obligations	79,411	
 	 	85,762	
 	
Deferred rent	97,117	
 	 	87,641	
 	
Deferred income tax liabilities	150,011	
 	 	195,874	
 	
Long-term debt, net	1,450,288	
 	 	1,471,449	
 	
Other long-term liabilities, net	257,966	
 	 	264,244	
 	
Total liabilities	2,584,916	
 	 	2,796,348	
 	
Commitments and contingencies	

 	
 	
Stockholders’ Equity	 	 	 	
Bloomin’ Brands, Inc. Stockholders’ Equity	 	 	 	
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding at June 30, 2013 and December 31, 2012	—	
 	 	—	
 	
Common stock, $0.01 par value, 475,000,000 shares authorized; 124,005,274 and 121,148,451 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively	1,240	
 	 	1,211	
 	
Additional paid-in capital	1,052,255	
 	 	1,000,963	
 	
Accumulated deficit	(635,364	)	 	(773,085	)	
Accumulated other comprehensive loss	(27,477	)	 	(14,801	)	
Total Bloomin’ Brands, Inc. stockholders’ equity	390,654	
 	 	214,288	
 	
Noncontrolling interests	4,820	
 	 	5,917	
 	
Total stockholders’ equity	395,474	
 	 	220,205	
 	
Total liabilities and stockholders’ equity	$	2,980,390	
 	 	$	3,016,553	

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

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BLOOMIN’ BRANDS, INC.

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

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED JUNE 30,	 	SIX MONTHS ENDED JUNE 30,	
 	2013	 	2012	 	2013	 	2012	
Revenues	 	 	 	 	 	 	 	
Restaurant sales	$	1,007,991	
 	 	$	970,021	
 	 	$	2,090,347	
 	 	$	2,015,487	
 	
Other revenues	10,865	
 	 	10,845	
 	 	20,759	
 	 	21,005	
 	
Total revenues	1,018,856	
 	 	980,866	
 	 	2,111,106	
 	 	2,036,492	
 	
Costs and expenses	 	

 	 	 	
Cost of sales	325,453	
 	 	315,472	
 	 	675,442	
 	 	651,331	
 	
Labor and other related	284,028	
 	 	271,400	
 	 	583,895	
 	 	564,901	
 	
Other restaurant operating	237,440	
 	 	230,877	
 	 	471,249	
 	 	449,842	
 	
Depreciation and amortization	40,889	
 	 	39,247	
 	 	81,085	
 	 	78,107	
 	
General and administrative	65,094	
 	 	72,216	
 	 	137,585	
 	 	148,218	
 	
Provision for impaired assets and restaurant closings	689	
 	 	4,654	
 	 	2,585	
 	 	9,089	
 	
Income from operations of unconsolidated affiliates	(2,623	)	 	(1,720	)	 	(5,481	)	 	(4,124	)	
Total costs and expenses	950,970	
 	 	932,146	
 	 	1,946,360	
 	 	1,897,364	
 	
Income from operations	67,886	
 	 	48,720	
 	 	164,746	
 	 	139,128	
 	
Loss on extinguishment and modification of debt	(14,586	)	 	—	
 	 	(14,586	)	 	(2,851	)	
Other expense, net	(133	)	 	(183	)	 	(350	)	 	(129	)	
Interest expense, net	(18,015	)	 	(24,037	)	 	(38,895	)	 	(45,011	)	
Income before (benefit) provision for income taxes	35,152	
 	 	24,500	
 	 	110,915	
 	 	91,137	
 	
(Benefit) provision for income taxes	(41,312	)	 	3,936	
 	 	(30,605	)	 	16,741	
 	
Net income	76,464	
 	 	20,564	
 	 	141,520	
 	 	74,396	
 	
Less: net income attributable to noncontrolling interests	1,596	
 	 	3,124	
 	 	3,429	
 	 	6,957	
 	
Net income attributable to Bloomin’ Brands, Inc.	$	74,868	
 	 	$	17,440	
 	 	$	138,091	
 	 	$	67,439	

Net income	$	76,464	
 	 	$	20,564	
 	 	$	141,520	
 	 	$	74,396	
 	
Other comprehensive income:	 	 	 	 	 	 	 	
Foreign currency translation adjustment	(8,144	)	 	(6,662	)	 	(12,676	)	 	(3,513	)	
Comprehensive income	68,320	
 	 	13,902	
 	 	128,844	
 	 	70,883	
 	
Less: comprehensive income attributable to noncontrolling interests	1,596	
 	 	3,124	
 	 	3,429	
 	 	6,957	
 	
Comprehensive income attributable to Bloomin’ Brands, Inc.	$	66,724	
 	 	$	10,778	
 	 	$	125,415	
 	 	$	63,926	

Earnings per share:	 	 	 	 	 	 	 	
Basic	$	0.61	
 	 	$	0.16	
 	 	$	1.13	
 	 	$	0.63	
 	
Diluted	$	0.58	
 	 	$	0.16	
 	 	$	1.08	
 	 	$	0.63	
 	
Weighted average common shares outstanding:	 	 	 	 	 	 	 	
Basic	122,858	
 	 	106,361	
 	 	122,052	
 	 	106,361	
 	
Diluted	128,338	
 	 	107,380	
 	 	127,599	
 	 	107,255	

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

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BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, UNAUDITED)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	BLOOMIN’ BRANDS, INC.	 	 	 	 	

 	COMMON
STOCK	
 	COMMON
STOCK
AMOUNT	
 	ADDITIONAL PAID-IN
CAPITAL	 	ACCUM- ULATED
DEFICIT	
 	ACCUMULATED
OTHER
COMPREHENSIVE
LOSS	
 	NON-
CONTROLLING
INTERESTS	
 	TOTAL	
Balance, December 31, 2012	121,148	
 	 	$	1,211	
 	 	$	1,000,963	
 	 	$	(773,085	)	 	$	(14,801	)	 	$	5,917	
 	 	$	220,205	
 	
Net income	—	
 	 	—	
 	 	—	
 	 	138,091	
 	 	—	
 	 	3,429	
 	 	141,520	
 	
Foreign currency translation adjustment	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(12,676	)	 	—	
 	 	(12,676	)	
Release of valuation allowance related to purchases of limited partnerships and joint venture interests	—	
 	 	—	
 	 	15,669	
 	 	—	
 	 	—	
 	 	—	
 	 	15,669	
 	
Stock-based compensation	—	
 	 	—	
 	 	7,612	
 	 	—	
 	 	—	
 	 	—	
 	 	7,612	
 	
Exercises of stock options	2,658	
 	 	27	
 	 	22,195	
 	 	—	
 	 	—	
 	 	—	
 	 	22,222	
 	
Repurchase of common stock	(18	)	 	—	
 	 	—	
 	 	(370	)	 	—	
 	 	—	
 	 	(370	)	
Issuance of restricted stock	244	
 	 	2	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	2	
 	
Forfeiture of restricted stock	(27	)	 	—	
 	 	(13	)	 	—	
 	 	—	
 	 	—	
 	 	(13	)	
Repayments of notes receivable due from stockholders	—	
 	 	—	
 	 	5,829	
 	 	—	
 	 	—	
 	 	—	
 	 	5,829	
 	
Distributions to noncontrolling interests	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(4,526	)	 	(4,526	)	
Balance, June 30, 2013	124,005	
 	 	$	1,240	
 	 	$	1,052,255	
 	 	$	(635,364	)	 	$	(27,477	)	 	$	4,820	
 	 	$	395,474	

 	 	 	 	 	 	 	 	 	 	 	(CONTINUED...)	 	

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BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, UNAUDITED)

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	BLOOMIN’ BRANDS, INC.	 	 	 	 	
 	COMMON
STOCK	 	COMMON
STOCK
AMOUNT	 	ADDITIONAL PAID-IN
CAPITAL	 	ACCUM- ULATED
DEFICIT	 	ACCUMULATED
OTHER
COMPREHENSIVE
LOSS	 	NON-
CONTROLLING
INTERESTS	 	TOTAL	
Balance, December 31, 2011	106,573	
 	 	$	1,066	
 	 	$	874,753	
 	 	$	(822,625	)	 	$	(22,344	)	 	$	9,447	
 	 	$	40,297	
 	
Net income	—	
 	 	—	
 	 	—	
 	 	67,439	
 	 	—	
 	 	6,957	
 	 	74,396	
 	
Foreign currency translation adjustment	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(3,513	)	 	—	
 	 	(3,513	)	
Stock-based compensation	—	
 	 	—	
 	 	1,587	
 	 	—	
 	 	—	
 	 	—	
 	 	1,587	
 	
Repurchase of common stock	(36	)	 	(1	)	 	316	
 	 	(431	)	 	—	
 	 	—	
 	 	(116	)	
Issuance of restricted stock	261	
 	 	3	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	3	
 	
Forfeiture of restricted stock	(20	)	 	—	
 	 	(127	)	 	—	
 	 	—	
 	 	—	
 	 	(127	)	
Issuance of notes receivable due from stockholders	—	
 	 	—	
 	 	(518	)	 	—	
 	 	—	
 	 	—	
 	 	(518	)	
Repayments of notes receivable due from stockholders	—	
 	 	—	
 	 	1,463	
 	 	—	
 	 	—	
 	 	—	
 	 	1,463	
 	
Distributions to noncontrolling interests	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(8,031	)	 	(8,031	)	
Balance, June 30, 2012	106,778	
 	 	$	1,068	
 	 	$	877,474	
 	 	$	(755,617	)	 	$	(25,857	)	 	$	8,373	
 	 	$	105,441	

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

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BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)

 	
 	 	 	 	 	 	 	 	
 	SIX MONTHS ENDED JUNE 30,	
 	2013	 	2012	
Cash flows provided by operating activities:	 	 	 	
Net income	$	141,520	
 	 	$	74,396	
 	
Adjustments to reconcile net income to cash provided by operating activities:	 	

Depreciation and amortization	81,085	
 	 	78,107	
 	
Amortization of deferred financing fees	1,800	
 	 	4,983	
 	
Amortization of capitalized gift card sales commissions	12,664	
 	 	11,193	
 	
Provision for impaired assets and restaurant closings	2,585	
 	 	9,089	
 	
Accretion on debt discounts	1,248	
 	 	362	
 	
Stock-based and other non-cash compensation expense	10,328	
 	 	16,029	
 	
Income from operations of unconsolidated affiliates	(5,481	)	 	(4,124	)	
Deferred income tax benefit	(40,127	)	 	(330	)	
Loss on disposal of property, fixtures and equipment	279	
 	 	1,001	
 	
Unrealized gain on derivative financial instruments	(191	)	 	(191	)	
Gain on life insurance and restricted cash investments	(2,602	)	 	(2,208	)	
Loss on extinguishment and modification of debt	14,586	
 	 	2,851	
 	
Recognition of deferred gain on sale-leaseback transaction	(1,065	)	 	(537	)	
Change in assets and liabilities:	 	

Decrease (increase) in inventories	12,952	
 	 	(4,949	)	
(Increase) decrease in other current assets	(10,757	)	 	6,642	
 	
Decrease in other assets	4,468	
 	 	892	
 	
Decrease in accounts payable and accrued and other current liabilities	(28,585	)	 	(38,141	)	
Increase in deferred rent	9,698	
 	 	7,208	
 	
Decrease in unearned revenue	(108,832	)	 	(106,084	)	
(Decrease) increase in other long-term liabilities	(853	)	 	1,515	
 	
Net cash provided by operating activities	94,720	
 	 	57,704	
 	
Cash flows (used in) provided by investing activities:	 	

Purchases of life insurance policies	(759	)	 	(308	)	
Proceeds from sale of life insurance policies	1,059	
 	 	—	
 	
Proceeds from disposal of property, fixtures and equipment	2,672	
 	 	1,255	
 	
Proceeds from sale-leaseback transaction	—	
 	 	192,886	
 	
Capital expenditures	(97,150	)	 	(79,743	)	
Decrease in restricted cash	13,267	
 	 	50,614	
 	
Increase in restricted cash	(12,460	)	 	(70,032	)	
Return on investment from unconsolidated affiliates	267	
 	 	332	
 	
Net cash (used in) provided by investing activities	$	(93,104	)	 	$	95,004	

 	(CONTINUED...)	 	

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BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)

 	
 	 	 	 	 	 	 	 	
 	SIX MONTHS ENDED JUNE 30,	
 	2013	 	2012	
Cash flows used in financing activities:	 	 	 	
Proceeds from issuance of 2012 CMBS Loan	$	—	
 	 	$	495,186	
 	
Repayments of long-term debt	(33,859	)	 	(12,211	)	
Extinguishment of CMBS loan	—	
 	 	(777,563	)	
Repayments of borrowings on revolving credit facilities	—	
 	 	(33,000	)	
Financing fees	(12,519	)	 	(5,442	)	
Proceeds from the exercise of stock options	22,222	
 	 	—	
 	
Distributions to noncontrolling interests	(4,526	)	 	(8,031	)	
Repayments of partner deposits and accrued partner obligations	(12,477	)	 	(15,306	)	
Issuance of notes receivable due from stockholders	—	
 	 	(83	)	
Repayments of notes receivable due from stockholders	5,829	
 	 	1,463	
 	
Repurchase of common shares	(370	)	 	—	
 	
Net cash used in financing activities	(35,700	)	 	(354,987	)	
Effect of exchange rate changes on cash and cash equivalents	(5,165	)	 	149	
 	
Net decrease in cash and cash equivalents	(39,249	)	 	(202,130	)	
Cash and cash equivalents at the beginning of the period	261,690	
 	 	482,084	
 	
Cash and cash equivalents at the end of the period	$	222,441	
 	 	$	279,954	
 	
Supplemental disclosures of cash flow information:	 	

Cash paid for interest	$	37,338	
 	 	$	39,923	
 	
Cash paid for income taxes, net of refunds	8,897	
 	 	15,916	
 	
Supplemental disclosures of non-cash investing and financing activities:	 	

Conversion of partner deposits and accrued partner obligations to notes payable	$	755	
 	 	$	3,932	
 	
Acquisition of property, fixtures and equipment through accounts payable or capital lease liabilities	5,690	
 	 	1,577	
 	
Release of valuation allowance through additional paid-in capital related to purchases of limited partnerships and joint venture interests	15,669	
 	 	—	

 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.           Basis of Presentation

Bloomin’ Brands, Inc. (“Bloomin’ Brands” or the “Company”) was formed by an investor group comprised of funds advised by Bain Capital Partners, LLC and Catterton Management Company, LLC (the “Sponsors”) and Chris T. Sullivan, Robert D. Basham and J. Timothy Gannon (the “Founders”) and certain members of management. Bloomin’ Brands is a holding company and conducts its operations through OSI Restaurant Partners, LLC (“OSI”), the Company’s primary operating entity, and New Private Restaurant Properties, LLC, an indirect wholly-owned subsidiary of the Company that leases certain Company-owned restaurant properties to a subsidiary of OSI. In August 2012, the Company completed an initial public offering of its common stock.

The Company owns and operates casual, polished casual and fine dining restaurants primarily in the United States. The Company’s restaurant portfolio has five concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar and Roy’s. Additional Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchise agreements.
 
The Company has reclassified certain items in the accompanying consolidated financial statements for prior periods to be comparable with the classification for the three and six months ended June 30, 2013. These reclassifications had no effect on previously reported Net income.

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 the fair presentation of the Company’s results of operations, financial position and cash flows 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 31, 2012 (the “2012 Form 10-K”).
 
2.         Recently Issued Financial Accounting Standards

In December 2011, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities” (“ASU No. 2011-11”), which enhances current disclosures about financial instruments and derivative instruments that are either offset on the statement of financial position or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the statement of financial position. The guidance requires the Company to provide both net and gross information for these assets and liabilities. In January 2013, the FASB issued ASU No. 2013-01, “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU No. 2013-01”), to limit the scope of the new balance sheet offsetting disclosure requirements to derivatives (including bifurcated embedded derivatives), repurchase agreements and reverse repurchase agreements, and securities borrowing and lending transactions. Both ASU No. 2011-11 and ASU No. 2013-01 were effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods with retrospective application required. The adoption of ASU No. 2011-11 and ASU No. 2013-01 on January 1, 2013 did not have an impact on the Company’s financial position, results of operations or cash flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

In July 2012, the FASB issued ASU No. 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU No. 2012-02”), which permits an entity to make a qualitative assessment of whether it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying value before applying the two-step quantitative impairment test. If it is determined through the qualitative assessment that an indefinite-lived intangible asset’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing entities to go directly to the quantitative assessment. ASU No. 2012-02 was effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of ASU No. 2012-02 on January 1, 2013 did not have an impact on the Company’s financial position, results of operations or cash flows.

In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU No. 2013-02”), which requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The guidance requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other required disclosures that provide additional detail about those amounts. ASU No. 2013-02 was effective for the Company prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU No. 2013-02 on January 1, 2013 did not have an impact on the Company’s financial position, results of operations or cash flows.

In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force)” (“ASU No. 2013-05”). Under ASU No. 2013-05, an entity would recognize cumulative translation adjustments in earnings when it ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets resided. However, when an entity sells either a part or all of its investment in a consolidated foreign entity, an entity would recognize cumulative translation adjustments in earnings only if the parent no longer has a controlling financial interest in the foreign entity as a result of the sale. In the case of sales of an equity method investment that is a foreign entity, a pro rata portion of cumulative translation adjustments attributable to the equity method investment would be recognized in earnings upon sale of the equity method investment. In addition, cumulative translation adjustments would be recognized in earnings upon a business combination achieved in stages such as a step acquisition. ASU No. 2013-05 is effective for public companies for fiscal years beginning on or after December 15, 2013 and interim periods within those fiscal years, with early adoption permitted. The Company will adopt ASU No. 2013-05 effective January 1, 2014 with prospective application to the derecognition of any foreign entity subsidiaries, groups of assets or investments in foreign entities completed on or after January 1, 2014. The impact of ASU No. 2013-05 on the Company’s financial position, results of operations and cash flows is dependent on future transactions resulting in derecognition of the Company’s foreign assets, subsidiaries or investments in foreign entities completed on or after adoption.

In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)” (“ASU No. 2013-11”). Under ASU No. 2013-11, an entity is required to present its unrecognized tax benefits net of its deferred tax assets when settlement in this manner is available under the tax law, which would be based on facts and circumstances as of the balance sheet reporting date and would not consider future events. Gross presentation in the notes to the financial statements will still be required. ASU No. 2013-11 is effective for public companies for fiscal years beginning on or after December 15, 2013 and interim periods within those fiscal years, with early adoption permitted. ASU No. 2013-11 will apply on a prospective basis to all

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

unrecognized tax benefits that exist at the effective date, with the option to apply it retrospectively. This guidance will not have an impact on the Company’s financial position, results of operations or cash flows as the Company currently presents its unrecognized tax benefits net of its deferred tax assets where applicable.

3.         Earnings Per Share

The computation of basic and diluted earnings per share is as follows (in thousands, except per share amounts):

 	THREE MONTHS ENDED	 	SIX MONTHS ENDED	
 	JUNE 30,	 	JUNE 30,	
 	2013	 	2012	 	2013	 	2012	
Net income attributable to Bloomin’ Brands, Inc.	$	74,868	
 	 	$	17,440	
 	 	$	138,091	
 	 	$	67,439	

Basic weighted average common shares outstanding	122,858	
 	 	106,361	
 	 	122,052	
 	 	106,361	

Effect of diluted securities:	 	 	 	 	 	 	 	
  Stock options	5,342	
 	 	901	
 	 	5,204	
 	 	804	
 	
  Unvested restricted stock	138	
 	 	118	
 	 	343	
 	 	90	
 	
Diluted weighted average common shares outstanding	128,338	
 	 	107,380	
 	 	127,599	
 	 	107,255	

Basic earnings per share	$	0.61	
 	 	$	0.16	
 	 	$	1.13	
 	 	$	0.63	
 	
Diluted earnings per share	$	0.58	
 	 	$	0.16	
 	 	$	1.08	
 	 	$	0.63	

Dilutive securities outstanding not included in the computation of earnings per share because their effect was antidilutive were as follows (in thousands):

 	THREE MONTHS ENDED	 	SIX MONTHS ENDED	
 	JUNE 30,	 	JUNE 30,	
 	2013	 	2012	 	2013	 	2012	
Stock options	1,276	
 	 	550	
 	 	1,673	
 	 	550	

4.         Stock-based Compensation

During the six months ended June 30, 2013, the Company granted performance-based share units (“PSUs”) to executives and key members of management. There were no PSUs awarded in periods prior to 2013. The PSUs vest over a period of four years following the date of grant, and 25% of the grant is earned or forfeited on each grant anniversary date, subject to certification of the performance criteria by the Board of Directors. The number of units that actually vest will be determined for each year based on the achievement of certain Company performance criteria set forth in the award agreement and may range from zero to 200% of the annual target grant. PSUs that do not vest based on failure to satisfy the stated performance criteria for any annual period are forfeited. In addition to the satisfaction of the performance criteria for the PSUs, vesting is dependent upon continued service with forfeiture of all unvested PSUs upon termination, unless in the case of death or disability, in which case a pro rata portion of the target number of PSUs are eligible to immediately vest based on actual performance during the performance period. The PSUs are settled in shares of common stock. Holders will receive one share of common stock for each performance-based share unit that vests. The fair value of PSUs is based on the closing price of the Company’s common stock on the grant date. Compensation expense for PSUs is recognized over the vesting period when it is probable the performance criteria will be achieved. During the three and six months ended June 30, 2013, compensation expense recorded for PSUs was immaterial to the Company’s consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

The following table presents a summary of the Company’s stock-based compensation activity for the six months ended June 30, 2013 (in thousands):

 	 	 	 	 	 	 	 	 	
 	STOCK OPTIONS	 	RESTRICTED STOCK AWARDS	 	PERFORMANCE-BASED SHARE UNITS (1)	
Outstanding at December 31, 2012	12,379	
 	 	299	
 	 	—	
 	
Granted	1,335	
 	 	244	
 	 	58	
 	
Exercised or vested	(2,658	)	 	(66	)	 	—	
 	
Forfeited or expired	(502	)	 	(27	)	 	(7	)	
Outstanding at June 30, 2013	10,554	
 	 	450	
 	 	51	
 	
________________
 	 	
(1)	Share unit amounts represent the target number of PSUs considered granted for accounting recognition based on the establishment of performance targets for future years. The actual number of shares that will be earned upon vesting is dependent upon actual performance and may range from zero to 200% of the target number of shares.	

At June 30, 2013 and December 31, 2012, approximately 5.2 million and 7.3 million, respectively, of outstanding stock options were exercisable.

The weighted-average grant date fair value of stock options granted during the six months ended June 30, 2013 and 2012 was $8.52 and $6.98, respectively, and was estimated using the Black-Scholes option pricing model. The following assumptions were used to calculate the fair value of options granted for the periods indicated:

 	 	 	 	 	 	
 	SIX MONTHS ENDED JUNE 30,	
 	2013	 	2012	
Weighted-average risk-free interest rate	1.09	%	 	1.14	%	
Dividend yield	—	%	 	—	%	
Expected term	6.3 years	
 	 	6.5 years	
 	
Weighted-average volatility	48.6	%	 	48.5	%	

During the three months ended June 30, 2013 and 2012, the Company recognized aggregate stock-based compensation expense of $3.0 million and $0.8 million, respectively, and during the six months ended June 30, 2013 and 2012 the Company recognized aggregate stock-based compensation expense of $7.4 million and $1.5 million, respectively.

5.           Investment in Equity Method Investee

Through a joint venture arrangement with PGS Participacoes Ltda., the Company holds a 50% ownership interest in PGS Consultoria e Serviços Ltda. (the “Brazilian Joint Venture”), which operates Outback Steakhouse restaurants in Brazil.  The Company accounts for the Brazilian Joint Venture under the equity method of accounting.  At June 30, 2013 and December 31, 2012, the Company’s net investment of $38.5 million and $36.0 million, respectively, was recorded in Investments in and advances to unconsolidated affiliates, net, and a foreign currency translation adjustment of ($3.0) million and ($3.6) million was recorded in Accumulated other comprehensive loss in the Company’s Consolidated Balance Sheets for the six months ended June 30, 2013 and 2012, respectively. The Company’s share of earnings of $2.6 million and $1.4 million for the three months ended June 30, 2013 and 2012, respectively, and $5.5 million and $3.8 million for the six months ended June 30, 2013 and 2012, respectively, was recorded in Income from operations of unconsolidated affiliates in the Company’s Consolidated Statements of Operations and Comprehensive Income.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

The following table presents summarized financial information for 100% of the Brazilian Joint Venture for the periods ending as indicated (in thousands):

 	THREE MONTHS ENDED	 	SIX MONTHS ENDED	
 	JUNE 30,	 	JUNE 30,	
 	2013	 	2012	 	2013	 	2012	
Net revenue from sales	$	63,774	
 	 	$	55,562	
 	 	$	129,707	
 	 	$	114,126	
 	
Gross profit	44,176	
 	 	39,008	
 	 	89,499	
 	 	79,832	
 	
Income from continuing operations	7,436	
 	 	6,049	
 	 	14,513	
 	 	14,196	
 	
Net income	5,291	
 	 	2,776	
 	 	10,055	
 	 	7,584	

6.           Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):

 	 	 	 	 	 	 	 	 	
 	 	JUNE 30,	 	DECEMBER 31,	
 	 	2013	 	2012	
Accrued payroll and other compensation	 	$	93,236	
 	 	$	108,612	
 	
Accrued insurance	 	25,583	
 	 	22,235	
 	
Other current liabilities	 	52,030	
 	 	61,437	
 	
 	 	$	170,849	
 	 	$	192,284	

7.           Long-term Debt, Net

Long-term debt, net consisted of the following (in thousands):

 	JUNE 30,	 	DECEMBER 31,	
 	2013	 	2012	
Senior secured term loan B facility, interest rates of 3.50% and 4.75% at June 30, 2013 and December 31, 2012, respectively (1) (2)	$	975,000	
 	 	$	1,000,000	
 	
Mortgage loan, weighted average interest rates of 4.00% and 3.98% at June 30, 2013 and December 31, 2012, respectively (3)	315,649	
 	 	319,574	
 	
First mezzanine loan, interest rate of 9.00% at June 30, 2013 and December 31, 2012 (3)	86,589	
 	 	87,048	
 	
Second mezzanine loan, interest rate of 11.25% at June 30, 2013 and December 31, 2012 (3)	86,983	
 	 	87,273	
 	
Other notes payable, uncollateralized, interest rates ranging from 0.58% to 7.00% and from 0.63% to 7.00% at June 30, 2013 and December 31, 2012, respectively (2)	6,878	
 	 	9,848	
 	
Sale-leaseback obligations (2)	2,375	
 	 	2,375	
 	
Capital lease obligations (2)	1,652	
 	 	2,112	
 	
 	1,475,126	
 	 	1,508,230	
 	
Less: current portion of long-term debt	(13,483	)	 	(22,991	)	
Less: unamortized debt discount	(11,355	)	 	(13,790	)	
Long-term debt, net	$	1,450,288	
 	 	$	1,471,449	
 	
________________
 	 	
(1)	At December 31, 2012, $50.0 million of OSI’s outstanding senior secured term loan B facility was at an interest rate of 5.75%.	
 	 	
(2)	Represents obligations of OSI.	
 	 	
(3)	Represents obligations of New PRP (as defined below).	

Bloomin’ Brands, Inc. is a holding company and conducts its operations through its subsidiaries, certain of which have incurred their own indebtedness as described below.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

On October 26, 2012, OSI entered into a credit agreement (“Credit Agreement”) with a syndicate of institutional lenders and financial institutions.  The senior secured credit facilities provide for senior secured financing of up to $1.225 billion, consisting of a $1.0 billion term loan B and a $225.0 million revolving credit facility, including letter of credit and swing-line loan sub-facilities (the “Credit Facilities”). The term loan B was issued with an original issue discount of $10.0 million.

On April 10, 2013, OSI completed a repricing of its senior secured term loan B facility pursuant to the First Amendment to Credit Agreement, Guaranty and Security Agreement, among OSI, OSI HoldCo, Inc., the subsidiary guarantors named therein, Deutsche Bank Trust Company Americas, as administrative agent and collateral agent, and a syndicate of institutional lenders and financial institutions (the “Amended Credit Agreement”). The Amended Credit Agreement replaces OSI’s existing senior secured term loan B facility with a new senior secured term loan B facility (the “Amended Term Loan B”). The Amended Term Loan B had the same principal amount outstanding (as of the repricing date) of $975.0 million, maturity date of October 26, 2019, amortization schedule and financial covenants but a lower applicable interest rate than the existing senior secured term loan B facility. Voluntary prepayments made on the principal amount outstanding since the inception of the Credit Agreement will continue to be treated as prepayments for purposes of determining amortization payment and mandatory prepayment requirements under the Amended Term Loan B. Prepayments or amendments of the Amended Term Loan B that constitute a “repricing transaction” (as defined in the Amended Credit Agreement) will be subject to a premium of 1.00% of the Amended Term Loan B if prepaid or amended on or prior to October 10, 2013. Prepayments and repricings made after October 10, 2013 will not be subject to premium or penalty.

As a result of the repricing transaction, the Company recorded a Loss on extinguishment and modification of debt of $14.6 million in the Company’s Consolidated Statement of Operations and Comprehensive Income during the second quarter of 2013. The loss was comprised of a prepayment penalty of $9.8 million, third-party financing costs of $2.4 million and the write-off of $1.2 million each of deferred financing fees and unamortized debt discount. The third-party financing costs included in the loss related to debt held by lenders that participated in both the original, and repriced debt and therefore, the debt was treated as modified rather than extinguished. The deferred financing fees and unamortized debt discount amounts included in the loss were related to the extinguished portion of the debt.

The Amended Credit Agreement decreased the interest rate applicable to the Amended Term Loan B to 150 basis points over the Base Rate or 250 basis points over the Eurocurrency Rate and reduced the interest rate floors applicable to the Amended Term Loan B to 2.00% for the Base Rate and 1.00% for the Eurocurrency Rate. The Base Rate option is the highest of (i) the prime rate of Deutsche Bank Trust Company Americas, (ii) the federal funds effective rate plus 0.5 of 1.0% or (iii) the Eurocurrency Rate with a one-month interest period plus 1.0% (“Base Rate”) (3.25% at June 30, 2013 and December 31, 2012).  The Eurocurrency Rate option is the 30, 60, 90 or 180-day Eurocurrency Rate (“Eurocurrency Rate”) (ranging from 0.19% to 0.41% and 0.21% to 0.51%  at June 30, 2013 and December 31, 2012, respectively).  The Eurocurrency Rate may have a nine- or twelve-month interest period if agreed upon by the applicable lenders.

Prior to the repricing of the senior secured term loan B facility, borrowings under this facility bore interest at rates ranging from 225 to 250 basis points over the Base Rate or 325 to 350 basis points over the Eurocurrency Rate. The Base Rate was subject to an interest rate floor of 2.25%, and the Eurocurrency Rate was subject to an interest rate floor of 1.25%.

OSI is required to prepay outstanding term loans, subject to certain exceptions, with:
 	 	
•	50% of its “annual excess cash flow” (with step-downs to 25% and 0% based upon its consolidated first lien net leverage ratio), as defined in the Credit Agreement, beginning with the fiscal year ending December 31, 2013 and subject to certain exceptions;	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued
 	 	
•	100% of the net proceeds of certain assets sales and insurance and condemnation events, subject to reinvestment rights and certain other exceptions; and	
 	 	
•	100% of the net proceeds of any debt incurred, excluding permitted debt issuances.	

The Amended Term Loan B requires amortization payments of approximately $10.0 million per calendar year, payable in scheduled equal quarterly installments through September 2019. These payments are reduced by the application of any prepayments, and any remaining balance is due at maturity in October 2019. The outstanding balance on the Amended Term Loan B and term loan B, excluding the unamortized debt discount, was $975.0 million and $1.0 billion at June 30, 2013 and December 31, 2012, respectively. The remaining unamortized debt discount on the Amended Term Loan B and term loan B was $7.7 million and $9.7 million at June 30, 2013 and December 31, 2012, respectively. At June 30, 2013, none of the outstanding balance on the Amended Term Loan B was classified as current due to voluntary prepayments of $25.0 million made by OSI during the first quarter of 2013 and the results of its projected covenant calculations, which indicate the additional term loan prepayments, as described above, will not be required in the next 12 months. The amount of outstanding term loans required to be prepaid in accordance with OSI’s debt covenants may vary based on year-end results. At December 31, 2012, $10.0 million of the outstanding balance on the term loan B was classified as current due to OSI’s required quarterly payments.
 
The revolving credit facility matures October 26, 2017 and provides for swing-line loans and letters of credit of up to $225.0 million for working capital and general corporate purposes. The revolving credit facility bears interest at rates ranging from 200 to 250 basis points over the Base Rate or 300 to 350 basis points over the Eurocurrency Rate. There were no loans outstanding under the revolving credit facility at June 30, 2013 or December 31, 2012, however, $37.6 million and $41.2 million, respectively, of the revolving credit facility was committed for the issuance of letters of credit and not available for borrowing. Total outstanding letters of credit issued under OSI’s revolving credit facility may not exceed $100.0 million.

At June 30, 2013 and December 31, 2012, the Company was in compliance with its debt covenants. See the 2012 Form 10-K for further information about OSI’s debt covenant requirements.

Effective March 27, 2012, New Private Restaurant Properties, LLC and two of the Company’s other indirect wholly-owned subsidiaries (collectively, “New PRP”) entered into a commercial mortgage-backed securities loan (the “2012 CMBS Loan”) with German American Capital Corporation and Bank of America, N.A. The 2012 CMBS Loan totaled $500.0 million at origination and was comprised of a first mortgage loan in the amount of $324.8 million, collateralized by 261 of the Company’s properties, and two mezzanine loans totaling $175.2 million. The loans have a maturity date of April 10, 2017. The first mortgage loan has five fixed-rate components and a floating rate component. The fixed-rate components bear interest at rates ranging from 2.37% to 6.81% per annum. The floating rate component bears interest at a rate per annum equal to the 30-day London Interbank Offered Rate (“LIBOR”) (with a floor of 1%) plus 2.37%. The first mezzanine loan bears interest at a rate of 9.00% per annum, and the second mezzanine loan bears interest at a rate of 11.25% per annum.

The proceeds from the 2012 CMBS Loan, together with the proceeds from a sale-leaseback transaction and excess cash held in Private Restaurant Properties, LLC (“PRP”), a wholly-owned subsidiary, were used to repay PRP’s original first mortgage and mezzanine notes (together, the commercial mortgage-backed securities loan) (“CMBS Loan”). During the first quarter of 2012, the Company recorded a $2.9 million loss related to the extinguishment in Loss on extinguishment and modification of debt in its Consolidated Statement of Operations and Comprehensive Income.

At June 30, 2013 and December 31, 2012, the outstanding balance, excluding the unamortized debt discount, on the 2012 CMBS Loan was $489.2 million and $493.9 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

8.     Other Long-term Liabilities, Net

The Company maintains endorsement split-dollar insurance policies with a death benefit ranging from $5.0 million to $10.0 million for one of its current and certain of its former executive officers.  The Company is the beneficiary of the policies to the extent of premiums paid or the cash value, whichever is greater, with the remaining death benefit being paid to personal beneficiaries designated by the executive officers.  During the first quarter of 2013, the Company terminated the split-dollar agreements with two of its former executive officers in exchange for $2.2 million in cash. The Company terminated an additional split-dollar agreement during the second quarter of 2013 with one of its former executive officers in exchange for $2.0 million in cash. Upon termination, the release of the death benefit and related liabilities and net of the associated cash termination payment resulted in net gains of $1.5 million and $3.7 million during the three and six months ended June 30, 2013, which were recorded in General and administrative in the Consolidated Statement of Operations and Comprehensive Income. As a result of the terminations, the Company became the sole and exclusive owner of the related split-dollar insurance policies and elected to cancel them.

As of June 30, 2013 and December 31, 2012, the Company had $6.7 million and $14.3 million, respectively, recorded in Other long-term liabilities, net in its Consolidated Balance Sheets for the outstanding obligations under th e endorsement split-dollar insurance policies.

9.           Fair Value Measurements

Fair Value Measurements on a Recurring Basis

In connection with the 2012 CMBS Loan, the Company entered into an interest rate cap with a notional amount of $48.7 million as a method to limit the volatility of the floating rate component of the first mortgage loan. This interest rate cap had a nominal fair market value at June 30, 2013 and December 31, 2012.

Fair Value Measurements on a Nonrecurring Basis

The Company did not record material impairment charges as a result of fair value measurements on a nonrecurring basis of its long-lived assets held and used during the three and six months ended June 30, 2013. The following tables present losses related to the Company’s assets and liabilities that were measured at fair value on a nonrecurring basis during the three and six months ended June 30, 2012 aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	JUNE 30, 2012	 	 	
 	 	 	 	REMAINING FAIR VALUE	 	THREE MONTHS ENDED
JUNE 30, 2012	
 	 	CARRYING VALUE	 	LEVEL 1	 	LEVEL 2	 	LEVEL 3	 	TOTAL
LOSSES	
Long-lived assets held and used	 	$	2,075	
 	 	$	—	
 	 	$	—	
 	 	$	2,075	
 	 	$	3,674	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	JUNE 30, 2012	 	 	
 	 	 	 	REMAINING FAIR VALUE	 	SIX MONTHS ENDED
JUNE 30, 2012	
 	 	CARRYING VALUE	 	LEVEL 1	 	LEVEL 2	 	LEVEL 3	 	TOTAL
LOSSES	
Long-lived assets held and used	 	$	2,933	
 	 	$	—	
 	 	$	650	
 	 	$	2,283	
 	 	$	7,558	

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

The Company recorded $3.7 million and $7.6 million of impairment charges during the three and six months ended June 30, 2012, respectively, as a result of the fair value measurement on a nonrecurring basis of its long-lived assets held and used, primarily related to certain specifically identified restaurant locations that have, or are scheduled to be, relocated or renovated or were under-performing. At the time of the impairment recognized in the second quarter of 2012, the impaired long-lived assets had $2.1 million of remaining fair value. As of June 30, 2012, there was $2.9 million of  rem aining fair value associated with long-lived assets for which asset impairment losses were recognized during the six months ended June 30, 2012. Restaurant closure and related expenses of $0.7 million and $1.0 million were recognized for the three months ended June 30, 2013 and 2012, respectively, and $1.5 million was recognized for the six months ended June 30, 2013 and 2012, respectively.  Impairment losses for long-lived assets held and used and restaurant closure and related expenses were recognized in Provision for impaired assets and restaurant closings in the Consolidated Statements of Operations and Comprehensive Income.

The Company primarily used third-party market appraisals (Level 2) and discounted cash flow models (Level 3) to estimate the fair value of the long-lived assets included in the tables above.  Projected future cash flows, including discount rate and growth rate assumptions, are derived from current economic conditions, expectations of management and projected trends of current operating results.  

The following table presents quantitative information related to the range of unobservable inputs used in the Company’s Level 3 fair value measurements for the impairment losses incurred in the six months ended June 30, 2012:

 	 	SIX MONTHS ENDED	
UNOBSERVABLE INPUT	 	JUNE 30, 2012	
Weighted-average cost of capital (1)	 	10.4% - 11.2%	
Long-term growth rates	 	3.0%	
Annual revenue growth rates (2)	 	(8.7)% - 4.3%	
________________
 	 	
(1)	Weighted average of the cost of capital unobservable input range was 10.9% for the six months ended June 30, 2012.	
 	 	
(2)	Weighted average of the annual revenue growth rates unobservable input range was 2.6% for the six months ended June 30, 2012.	

The Company performed its annual goodwill and other indefinite-lived intangible assets impairment test during the second quarters of 2013 and 2012. The impairment test performed in the second quarter of 2013 utilized a qualitative assessment. This qualitative assessment is referred to as a “step zero” approach and allows the Company the option to assess qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, based on the review of the qualitative factors, an entity determines there is sufficient evidence to support a more likely than not (greater than 50%) probability that the fair value of a reporting unit is greater than its carrying value, the entity may skip the two-step impairment test. During 2012, the Company elected to forgo step zero and proceeded to the first step of the impairment test for goodwill and other indefinite-lived intangible assets.

In considering the step zero approach in 2013, the Company evaluated factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units. As a result of the Company’s step zero assessment, no impairment conditions were identified and no further testing was deemed necessary.

The Company did not have any impairment charges in the second quarter of 2013 or 2012 as a result of the annual goodwill and other indefinite-live intangible assets impairment test.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Interim Disclosures about Fair Value of Financial Instruments

The Company’s non-derivative financial instruments at June 30, 2013 and December 31, 2012 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.  The fair value of OSI’s senior secured term loan B facility is determined based on quoted market prices in inactive markets. The fair value of New PRP’s commercial mortgage-backed securities is based on assumptions derived from current conditions in the real estate and credit markets, changes in the underlying collateral and expectations of management.  Fair value estimates for other notes payable are derived using a 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. These inputs represent assumptions impacted by economic conditions and management expectations and may change in the future based on period-specific facts and circumstances.

The following tables include the carrying value and fair value of the Company’s financial instruments at June 30, 2013 and December 31, 2012 aggregated by the level in the fair value hierarchy in which those measurements fall (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	JUNE 30, 2013	
 	 	 	 	FAIR VALUE	
 	 	CARRYING VALUE	 	LEVEL 1	 	LEVEL 2	 	LEVEL 3	
Senior secured term loan B facility (1)	 	$	975,000	
 	 	$	—	
 	 	$	970,125	
 	 	$	—	
 	
Mortgage loan (2)	 	315,649	
 	 	—	
 	 	—	
 	 	328,248	
 	
First mezzanine loan (2)	 	86,589	
 	 	—	
 	 	—	
 	 	86,589	
 	
Second mezzanine loan (2)	 	86,983	
 	 	—	
 	 	—	
 	 	86,983	
 	
Other notes payable (1)	 	6,878	
 	 	—	
 	 	—	
 	 	6,461	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	DECEMBER 31, 2012	
 	 	 	 	FAIR VALUE	
 	 	CARRYING VALUE	 	LEVEL 1	 	LEVEL 2	 	LEVEL 3	
Senior secured term loan B facility (1)	 	$	1,000,000	
 	 	$	—	
 	 	$	1,010,000	
 	 	$	—	
 	
Mortgage loan (2)	 	319,574	
 	 	—	
 	 	—	
 	 	334,678	
 	
First mezzanine loan (2)	 	87,048	
 	 	—	
 	 	—	
 	 	90,371	
 	
Second mezzanine loan (2)	 	87,273	
 	 	—	
 	 	—	
 	 	91,423	
 	
Other notes payable (1)	 	9,848	
 	 	—	
 	 	—	
 	 	9,230	
 	
_______________
 	 	
(1)	Represents obligations of OSI.	
 	 	
(2)	Represents obligations of New PRP.	

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

10.           Income Taxes

The effective income tax rates for the three and six months ended June 30, 2013 were (117.5)% and (27.6)% compared to 16.1% and 18.4% for the same periods in 2012. These net decreases in the effective income tax rates as compared to the prior year were primarily due to the benefit of the release of valuation allowance in the second quarter of 2013 as discussed below.

The effective income tax rates for the three and six months ended June 30, 2013 were lower than the blended federal and state statutory rate of 38.7% primarily due to the benefit of the expected tax credit for excess FICA tax on employee-reported tips, the release of valuation allowance, the elimination of noncontrolling interest and the foreign rate differential, together being such a large percentage of projected annual pretax income. The effective income tax rates for the three and six months ended June 30, 2012 were lower than the blended federal and state statutory rate of 38.7% primarily due to the benefit of the expected tax credit for excess FICA tax on employee-reported tips and the elimination of noncontrolling interest together being such a large percentage of projected annual pretax income. This was partially offset by an increase in the valuation allowance.

At December 31, 2012, the Company had a valuation allowance against net deferred income tax assets recorded of $72.5 million, of which $67.7 million was for U.S. net deferred income tax assets. The Company established the domestic portion of the valuation allowance in 2009 with increases through 2012 against its then existing U.S. net deferred income tax assets as it was deemed the negative evidence outweighed the positive evidence and therefore the deferred income tax assets were not likely to be realized in future periods.

As it does each reporting period, the Company conducted an assessment of the recoverability of its net deferred income tax assets as of June 30, 2013 and determined it was more likely than not that its existing net deferred income tax assets for general business tax credit carryforwards would be realized. The Company’s assessment included consideration of all available positive and negative evidence including, among other evidence, historical cumulative operating income, projected future taxable income and recent utilization of U.S. net operating loss carryforwards and tax credit carryforwards. Accordingly, the Company recorded a $67.7 million reduction of the valuation allowance against the U.S. net deferred income tax assets as of June 30, 2013 of which $52.0 million was recorded as income tax benefit and $15.7 million was an increase to Additional paid-in capital. As the general business tax credits are expected to be realized due to current year and future year’s income, the portion attributable to future year’s income, or $44.8 million, was released as a discrete event during the second quarter of 2013. The remainder was allocated to interim periods as current year activity as income is expected to be realized and impacts the estimated 2013 annual effective income tax rate. The Company did not release the valuation allowance against foreign net operating loss carryforwards.

The Company expects to continue to generate significant U.S. income tax credits, which combined with the mix of U.S. and foreign earnings in periods subsequent to 2013 will result in an effective income tax rate that is higher than the rates in the current and prior periods but continues to be lower than the blended federal and state statutory rate.

As of June 30, 2013 and December 31, 2012, the Company had $14.1 million and $13.6 million, respectively, of unrecognized tax benefits ($0.7 million and $1.0 million, respectively, in Other long-term liabilities, net, $0.9 million each period in Accrued and other current liabilities and $12.5 million and $11.7 million, respectively, in Deferred income tax liabilities).  Additionally, the Company accrued $2.4 million of interest and penalties related to uncertain tax positions as of June 30, 2013 and December 31, 2012, respectively.  Of the total amount of unrecognized tax benefits, including accrued interest and penalties, $14.3 million  and $13.8 million, respectively, if recognized, would impact the Company’s effective income tax rate.  The difference between the total amount of unrecognized tax benefits and the amount that would impact the effective income tax rate consists of items that are offset by deferred income tax assets and the federal income tax benefit of state income tax items.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant taxable authorities.  Based on the outcome of these examinations, or as a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related recorded unrecognized tax benefits for tax positions taken on previously filed tax returns will change by approximately $0.5 million to $0.6 million within the next twelve months after June 30, 2013.

The Company is currently open to audit under the statute of limitations by the IRS for the years ended December 31, 2007 through 2012. The Company and its subsidiaries’ state and foreign income tax returns are also open to audit under the statute of limitations for the years ended December 31, 2000 through 2012. The Company is currently under examination by the Internal Revenue Service for the years ended December 31, 2009 through 2011. At this time, the Company does not believe that the outcome of any examination will have a material impact on the Company’s results of operations or financial position.

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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 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. 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, capital expenditures 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. We believe that these risks and uncertainties include, but are not limited to, the following:
 	 	
(i)	The restaurant industry is a highly competitive industry with many well-established competitors;	

(ii)	Challenging economic conditions may affect our liquidity by adversely impacting numerous items that include, but are not limited to: consumer confidence and discretionary spending; the availability of credit presently arranged from our revolving credit facilities; the future cost and availability of credit; interest rates; foreign currency exchange rates; and the liquidity or operations of our third-party vendors and other service providers;	

(iii)	Our ability to expand is dependent upon various factors such as the availability of attractive sites for new restaurants; our ability to obtain appropriate real estate sites at acceptable prices; our ability to obtain all required governmental permits including zoning approvals and liquor licenses on a timely basis; the impact of government moratoriums or approval processes, which could result in significant delays; our ability to obtain all necessary contractors and subcontractors; union activities such as picketing and hand billing that could delay construction; our ability to generate or borrow funds; our ability to negotiate suitable lease terms; our ability to recruit and train skilled management and restaurant employees; and our ability to receive the premises from the landlord’s developer without any delays;	

(iv)	Our results can be impacted by changes in consumer tastes and the level of consumer acceptance of our restaurant concepts (including consumer tolerance of our prices); local, regional, national and international economic and political conditions; the seasonality of our business; demographic trends; traffic patterns and	

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BLOOMIN’ BRANDS, INC.

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

our ability to effectively respond in a timely manner to changes in traffic patterns; changes in consumer dietary habits; employee availability; the cost of advertising and media; government actions and policies; inflation or deflation; unemployment rates; interest rates; exchange rates; and increases in various costs, including construction, real estate and health insurance costs;
 	 	
(v)	Weather, natural disasters and other disasters could result in construction delays and also adversely affect the results of one or more restaurants for an indeterminate amount of time;	

(vi)	Our results can be negatively impacted by the effects of actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, or other military action affecting countries in which we do business and by the effects of heightened security requirements on local, regional, national, or international economies or consumer confidence;	

(vii)	Our results can be impacted by tax and other legislation and regulation in the jurisdictions in which we operate and by accounting standards or pronouncements;	

(viii)	Our results can be impacted by unanticipated changes in our tax rates, exposure to additional income tax liabilities, or a change in our ability to realize deferred tax benefits;	

(ix)	Minimum wage increases and mandated employee benefits could cause a significant increase in our labor costs;	

(x)	Commodities, including but not limited to, such items as beef, chicken, shrimp, pork, seafood, dairy, produce, potatoes, onions and energy supplies, are subject to fluctuation in price and availability and price could increase or decrease more than we expect;	

(xi)	Our results can be affected by consumer reaction to public health issues;	

(xii)	Our results can be affected by consumer perception of food safety;	

(xiii)	We could face liabilities if we are unable to protect customer credit and debit card data or personal employee information; and	

(xiv)	Our substantial leverage and significant restrictive covenants in our various credit facilities could adversely affect our ability to raise additional capital to fund our operations, limit our ability to make capital expenditures to invest in new or renovate restaurants, limit our ability to react to changes in the economy or our industry and expose us to interest rate risk in connection with our variable-rate debt.	

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.

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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 30, 2013, we owned and operated 1,276 restaurants and had 207 restaurants operating under a franchise or joint venture arrangement across 48 states, Puerto Rico, Guam and 20 countries. We have five founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar and Roy’s. Our concepts seek to provide a compelling customer experience combining great food, highly attentive service and lively and contemporary ambience at attractive prices. Our restaurants attract customers across a variety of occasions, including everyday dining, celebrations and business entertainment. Each of our concepts maintains a unique, founder-inspired brand identity and entrepreneurial culture, while leveraging our scale and enhanced operating model. We consider Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse and Wine Bar to be our core concepts.
The restaurant industry is a highly competitive and fragmented industry and is sensitive to changes in the economy, trends in lifestyles, seasonality (customer spending patterns at our restaurants are generally highest in the first quarter of the year and lowest in the third quarter of the year) and fluctuating costs. Operating margins for restaurants can vary due to competitive pricing strategies, labor costs and fluctuations in prices of commodities, including beef, chicken, seafood, butter, cheese, produce and other necessities to operate a restaurant, such as natural gas or other energy supplies.  Restaurant companies tend to focus on increasing market share, comparable restaurant sales growth and new unit growth. Competitive pressure for market share, commodity inflation, foreign currency exchange rates and other market conditions have had and could continue to have an adverse impact on our business.
Our industry is characterized by high initial capital investment, coupled with high labor costs. Chain restaurants have been increasingly taking share from independent restaurants over the past several years. We believe that this trend will continue due to increasing barriers that may prevent independent restaurants and/or start-up chains from building scale operations, including menu labeling, burdensome labor regulations and healthcare reforms that will be enforced once chains grow past a certain number of restaurants or number of employees. The combination of these factors underscores our initiative to drive increased sales at existing restaurants in order to raise margins and profits, because the incremental contribution to profits from every additional dollar of sales above the minimum costs required to open, staff and operate a restaurant is relatively high.  Historically, we have not focused on growth in the number of restaurants just to generate additional sales. Our expansion and operating strategies have balanced investment and operating cost considerations in order to generate reasonable, sustainable margins and achieve acceptable returns on investment from our restaurant concepts.
Our strategic plan and operating model entails maintaining an experienced executive management team and adapting practices from the consumer products and retail industries to complement our restaurant acumen and enhance our brand management, analytics and innovation. This model keeps the customer at the center of our decision-making and focuses on continuous innovation and productivity to drive sustainable sales and profit growth. In addition, we remain recommitted to new unit development after curtailing expansion from 2009 to 2011. We believe that a substantial development opportunity remains for our concepts in the U.S. and internationally.

We continue to balance near-term growth in market share with investments to achieve sustainable growth. In 2013, our key growth strategies, which are enabled by continued improvements in infrastructure and organizational effectiveness include:
 	 	
•	Grow Comparable Restaurant Sales. We plan to continue our efforts to remodel our Outback Steakhouse and Carrabba’s Italian Grill restaurants, use limited-time offers and multimedia marketing campaigns to drive traffic, selectively expand the lunch daypart and introduce innovative menu items that match evolving consumer preferences. In addition, in April 2013, we accelerated our restaurant relocation plan primarily related to the Outback Steakhouse brand.   	

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
 	 	
•	Pursue New Domestic and International Development With Strong Unit Level Economics. We believe that a substantial development opportunity remains for our concepts in the U.S. and internationally. Our top domestic development priority is Bonefish Grill unit growth. Internationally, we are focusing on developing Outback Steakhouse in the existing markets of South Korea, Hong Kong and Brazil, with strategic expansion in selected emerging and high growth developed markets. We are focusing our new market growth in China, Mexico and South America. We expect to open between 45 and 55 system-wide locations in 2013 and increase the pace thereafter.	

•	Drive Margin Improvement. We believe we have the opportunity to increase our margins through leveraging increases in average unit volumes and cost reductions in labor, food, supply chain and restaurant facilities.	

We believe that the combination of macro-economic and other factors have put considerable pressure on sales in the casual dining industry thus far in 2013 and, as a result, the first half of 2013 has reflected a slowdown in our comparable restaurant sales growth.  For example, the ongoing impacts of the housing crisis, high unemployment, the so-called “sequester” and related governmental spending and budget matters, gasoline prices, reduced disposable consumer income and consumer confidence have had a negative effect on discretionary consumer spending.  As these conditions persist, we will face increased pressure with respect to our pricing, traffic levels and commodity costs.  We believe that in this environment, we will need to maintain our focus on value and innovation to continue to drive sales.

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 domestic, 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, franchise and unconsolidated joint venture restaurants, regardless of ownership, to interpret the overall health of our brands;	

•	Adjusted income from operations, Adjusted net income attributable to Bloomin’ Brands, Inc., Adjusted diluted earnings per share and Adjusted diluted earnings per pro forma share —non-GAAP financial measures utilized to evaluate our operating performance (see “—Non-GAAP Financial Measures” section below for further information); and	

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

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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:

 	 	 	 	 	 	
 	JUNE 30,	
 	2013	 	2012	
Number of restaurants (at end of the period):	 	 	 	
Outback Steakhouse	 	 	 	
Company-owned—domestic (1)	663	
 	 	670	
 	
Company-owned—international (1)	117	
 	 	112	
 	
Franchised—domestic	106	
 	 	106	
 	
Franchised and joint venture—international	93	
 	 	83	
 	
Total	979	
 	 	971	
 	
Carrabba’s Italian Grill	 	 	 	
Company-owned	234	
 	 	230	
 	
Franchised	1	
 	 	1	
 	
Total	235	
 	 	231	
 	
Bonefish Grill	 	 	 	
Company-owned	175	
 	 	155	
 	
Franchised	7	
 	 	7	
 	
Total	182	
 	 	162	
 	
Fleming’s Prime Steakhouse and Wine Bar	 	 	 	
Company-owned	65	
 	 	64	
 	
Roy’s	 	 	 	
Company-owned	22	
 	 	22	
 	
System-wide total	1,483	
 	 	1,450	
 	
____________________
 	 	
(1)	One Company-owned restaurant in Puerto Rico that was previously included in Outback Steakhouse (international) is now included in Outback Steakhouse (domestic). The prior period has been revised to conform to the current period presentation.	

We operate restaurants under brands that have similar economic characteristics, nature of products and services, class of customer and distribution methods, and as a result, aggregate our operating segments into a single reporting segment.

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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, percentages that items in our Consolidated Statements of Operations and Comprehensive Income bear to Total revenues or Restaurant sales, as indicated:  

 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	SIX MONTHS ENDED	
 	JUNE 30,	 	JUNE 30,	
 	2013	 	2012	 	2013	 	2012	
Revenues	 	
 	 	 	 	 	 	 	
Restaurant sales	98.9	 %	 	98.9	 %	 	99.0	 %	 	99.0	 %	
Other revenues	1.1	
 	 	1.1	
 	 	1.0	
 	 	1.0	
 	
Total revenues	100.0	
 	 	100.0	
 	 	100.0	
 	 	100.0	
 	
Costs and expenses	 	

 	 	 	
Cost of sales (1)	32.3	
 	 	32.5	
 	 	32.3	
 	 	32.3	
 	
Labor and other related (1)	28.2	
 	 	28.0	
 	 	27.9	
 	 	28.0	
 	
Other restaurant operating (1)	23.6	
 	 	23.8	
 	 	22.5	
 	 	22.3	
 	
Depreciation and amortization	4.0	
 	 	4.0	
 	 	3.8	
 	 	3.8	
 	
General and administrative	6.4	
 	 	7.4	
 	 	6.5	
 	 	7.3	
 	
Provision for impaired assets and restaurant closings	0.1	
 	 	0.5	
 	 	0.1	
 	 	0.4	
 	
Income from operations of unconsolidated affiliates	(0.3	)	 	(0.2	)	 	(0.3	)	 	(0.2	)	
Total costs and expenses	93.3	
 	 	95.0	
 	 	92.2	
 	 	93.2	
 	
Income from operations	6.7	
 	 	5.0	
 	 	7.8	
 	 	6.8	
 	
Loss on extinguishment and modification of debt	(1.4	)	 	—	
 	 	(0.7	)	 	(0.1	)	
Other expense, net	(*)	
 	 	(*)	
 	 	(*)	
 	 	(*)	
 	
Interest expense, net	(1.8	)	 	(2.5	)	 	(1.8	)	 	(2.2	)	
Income before (benefit) provision for income taxes	3.5	
 	 	2.5	
 	 	5.3	
 	 	4.5	
 	
(Benefit) provision for income taxes	(4.0	)	 	0.4	
 	 	(1.4	)	 	0.8	
 	
Net income	7.5	
 	 	2.1	
 	 	6.7	
 	 	3.7	
 	
Less: net income attributable to noncontrolling interests	0.2	
 	 	0.3	
 	 	0.2	
 	 	0.4	
 	
Net income attributable to Bloomin’ Brands, Inc.	7.3	 %	 	1.8	 %	 	6.5	 %	 	3.3	 %	
 	 	 	 	 	 	 	 	
Net income	7.5	 %	 	2.1	 %	 	6.7	 %	 	3.7	 %	
Other comprehensive income:	 	 	 	 	 	 	 	
Foreign currency translation adjustment	(0.8	)	 	(0.7	)	 	(0.6	)	 	(0.2	)	
Comprehensive income	6.7	
 	 	1.4	
 	 	6.1	
 	 	3.5	
 	
Less: comprehensive income attributable to noncontrolling interests	0.2	
 	 	0.3	
 	 	0.2	
 	 	0.4	
 	
Comprehensive income attributable to Bloomin’ Brands, Inc.	6.5	 %	 	1.1	 %	 	5.9	 %	 	3.1	 %	
________________
 	 	
(1)	As a percentage of Restaurant sales.	
 	 	
*	Less than 1/10th of one percent of Total revenues.	

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BLOOMIN’ BRANDS, INC.

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

REVENUES

Restaurant sales

 	THREE MONTHS ENDED	 	 	 	 	 	SIX MONTHS ENDED	 	 	 	 	
 	JUNE 30,	 	 	 	 	 	JUNE 30,	 	 	 	 	
(dollars in millions):	2013	 	2012	 	$ Change	 	% Change	 	2013	 	2012	 	$ Change	 	% Change	
Restaurant sales	$	1,008.0	
 	 	$	970.0	
 	 	$	38.0	
 	 	3.9	%	 	$	2,090.3	
 	 	$	2,015.5	
 	 	$	74.8	
 	 	3.7	%	

The increase in restaurant sales in the three months ended June 30, 2013 as compared to the same period in 2012 was primarily attributable to (i) additional revenues of approximately $23.7 million from the opening of 45 new restaurants not included in our comparable restaurant sales base and (ii) a $18.5 million increase in comparable restaurant sales at our existing restaurants (including a 2.0% combined comparable restaurant sales increase in the second quarter of 2013 at our core domestic concepts), primarily due to increases in general menu prices and customer traffic, which were partially offset by mix in our product sales. The increase in customer traffic was primarily driven by selective daypart expansion across certain concepts, innovations in menu, service, promotions and operations across the portfolio and renovations at additional Outback Steakhouse locations. The increase in restaurant sales in the three months ended June 30, 2013 as compared to the same period in 2012 was partially offset by a $4.2 million decrease from the closing of nine restaurants since June 30, 2012.

The increase in restaurant sales in the six months ended June 30, 2013 as compared to the same period in 2012 was primarily attributable to (i) additional revenues of approximately $58.9 million from the opening of 46 new restaurants not included in our comparable restaurant sales base and (ii) a $23.9 million increase in comparable restaurant sales at our existing restaurants (including a 1.8% combined comparable restaurant sales increase in the first half of 2013 at our core domestic concepts), primarily due to increases in general menu prices and customer traffic, which were partially offset by mix in our product sales. The increase in customer traffic was primarily driven by selective daypart expansion across certain concepts, innovations in menu, service, promotions and operations across the portfolio and renovations at additional Outback Steakhouse locations partially offset by unfavorable winter weather conditions and the additional day in February 2012 due to Leap Year. The increase in restaurant sales in the six months ended June 30, 2013 as compared to the same period in 2012 was partially offset by a $8.0 million decrease from the closing of nine restaurants since June 30, 2012.

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BLOOMIN’ BRANDS, INC.

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

The following table includes additional information about changes in Restaurant sales at domestic Company-owned restaurants for our core brands:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	SIX MONTHS ENDED	
 	JUNE 30,	 	JUNE 30,	
 	2013	 	2012	 	2013	 	2012	
Average restaurant unit volumes (weekly):	 	 	 	 	 	 	 	
Outback Steakhouse (1)	$	62,552	
 	 	$	60,571	
 	 	$	64,739	
 	 	$	62,495	
 	
Carrabba’s Italian Grill	$	58,116	
 	 	$	57,979	
 	 	$	60,114	
 	 	$	60,245	
 	
Bonefish Grill	$	61,815	
 	 	$	62,417	
 	 	$	63,678	
 	 	$	63,634	
 	
Fleming’s Prime Steakhouse and Wine Bar	$	75,531	
 	 	$	73,136	
 	 	$	80,223	
 	 	$	76,824	
 	
Operating weeks:	 	 	 	 	 	
 	 	 	
Outback Steakhouse (1)	8,619	
 	 	8,710	
 	 	17,161	
 	 	17,420	
 	
Carrabba’s Italian Grill	3,042	
 	 	2,990	
 	 	6,051	
 	 	5,981	
 	
Bonefish Grill	2,268	
 	 	1,985	
 	 	4,460	
 	 	3,943	
 	
Fleming’s Prime Steakhouse and Wine Bar	845	
 	 	832	
 	 	1,681	
 	 	1,664	
 	
Year over year percentage change:	 	 	 	 	 	
 	 	 	
Menu price increases: (2)	 	 	 	 	 	
 	 	 	
Outback Steakhouse	2.7	%	 	2.1	%	 	2.4	 %	 	2.1	%	
Carrabba’s Italian Grill	2.2	%	 	2.0	%	 	1.8	 %	 	2.2	%	
Bonefish Grill	1.9	%	 	2.2	%	 	1.9	 %	 	2.5	%	
Fleming’s Prime Steakhouse and Wine Bar	3.3	%	 	2.2	%	 	2.7	 %	 	2.3	%	
Comparable restaurant sales (stores open 18 months or more):	 	 	 	 	 	
 	 	 	
Outback Steakhouse (1)	2.8	%	 	2.3	%	 	2.6	 %	 	3.8	%	
Carrabba’s Italian Grill	0.3	%	 	1.5	%	 	(0.7	)%	 	2.9	%	
Bonefish Grill	0.2	%	 	2.1	%	 	0.4	 %	 	4.2	%	
Fleming’s Prime Steakhouse and Wine Bar	3.8	%	 	6.8	%	 	4.5	 %	 	6.1	%	
Combined (concepts above)	2.0	%	 	2.4	%	 	1.8	 %	 	3.8	%	
____________________
 	 	
(1)	One Company-owned restaurant in Puerto Rico that was previously included in Outback Steakhouse (international) is now included in Outback Steakhouse (domestic). This change affects the calculation of average restaurant unit volumes, operating weeks and comparable restaurant sales. The prior period has been revised to conform to the current period presentation.	
 	 	
(2)	The stated menu price changes exclude the impact of product mix shifts to new menu offerings.	

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BLOOMIN’ BRANDS, INC.

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

COSTS AND EXPENSES

Cost of sales

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	 	 	SIX MONTHS ENDED	 	 	
 	JUNE 30,	 	 	 	JUNE 30,	 	 	
(dollars in millions):	2013	 	2012	 	Change	 	2013	 	2012	 	Change	
Cost of sales	$	325.5	
 	 	$	315.5	
 	 	 	 	$	675.4	
 	 	$	651.3	
 	 	 	
% of Restaurant sales	32.3	%	 	32.5	%	 	(0.2	)%	 	32.3	%	 	32.3	%	 	—	%	

Cost of sales, consisting of food and beverage costs, decreased as a percentage of Restaurant sales in the three months ended June 30, 2013 as compared to the same period in 2012.  The decrease as a percentage of Restaurant sales was primarily attributable to the following: (i) 0.6% from the impact of certain cost savings initiatives, (ii) 0.6% from menu price increases and (iii) 0.3% from decreases in seafood. The decrease was partially offset by increases as a percentage of Restaurant sales of 1.2% from increases in beef and other commodity costs and 0.1% from changes in our liquor, beer and wine mix.

Cost of sales as a percentage of Restaurant sales was consistent in the six months ended June 30, 2013 as compared to the same period in 2012. Increases as a percentage of Restaurant sales were primarily due to 0.9% from higher beef and other commodity costs and 0.2% from changes in our liquor, beer and wine mix. These increases were offset by decreases as a percentage of Restaurant sales attributable to the following: (i) 0.5% from the impact of certain cost savings initiatives, (ii) 0.5% from menu price increases and (iii) 0.3% from decreases in seafood.

Labor and other related expenses

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	 	 	SIX MONTHS ENDED	 	 	
 	JUNE 30,	 	 	 	JUNE 30,	 	 	
(dollars in millions):	2013	 	2012	 	Change	 	2013	 	2012	 	Change	
Labor and other related	$	284.0	
 	 	$	271.4	
 	 	 	 	$	583.9	
 	 	$	564.9	
 	 	 	
% of Restaurant sales	28.2	%	 	28.0	%	 	0.2	%	 	27.9	%	 	28.0	%	 	(0.1	)%	
 
Labor and other related expenses include all direct and indirect labor costs incurred in operations, including distribution expense to managing partners, costs related to the Partner Equity Plan (“PEP”) and Partner Ownership Account (“POA”) deferred compensation plans (see “—Liquidity and Capital Resources—Deferred Compensation Plans”), and other incentive compensation expenses.  Labor and other related expenses increased as a percentage of Restaurant sales in the three months ended June 30, 2013 as compared to the same period in 2012.  The increase as a percentage of Restaurant sales was primarily attributable to 0.6% from higher kitchen and service labor costs and 0.3% from higher field management labor and bonus expenses. The increases were partially offset by decreases as a percentage of Restaurant sales of 0.4% from the impact of certain cost savings initiatives and 0.3% from higher average unit volumes at the majority of our restaurants.

The decrease as a percentage of Restaurant sales in the six months ended June 30, 2013 as compared to the same period in 2012 was primarily attributable to the following: (i) 0.3% from changes in deferred compensation participant accounts, (ii) 0.3% from the impact of certain cost savings initiatives and (iii) 0.3% from higher average unit volumes at the majority of our restaurants. The decreases were partially offset by increases as a percentage of Restaurant sales of 0.6% from higher kitchen and service labor costs and 0.2% from higher field management labor and bonus expenses.

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BLOOMIN’ BRANDS, INC.

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

Other restaurant operating expenses

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	 	 	SIX MONTHS ENDED	 	 	
 	JUNE 30,	 	 	 	JUNE 30,	 	 	
(dollars in millions):	2013	 	2012	 	Change	 	2013	 	2012	 	Change	
Other restaurant operating	$	237.4	
 	 	$	230.9	
 	 	 	 	$	471.2	
 	 	$	449.8	
 	 	 	
% of Restaurant sales	23.6	%	 	23.8	%	 	(0.2	)%	 	22.5	%	 	22.3	%	 	0.2	%	
 
Other restaurant operating expenses include certain unit-level operating costs such as operating supplies, rent, repairs and maintenance, advertising expenses, utilities, pre-opening costs and other occupancy costs. A substantial portion of these expenses is fixed or indirectly variable.  The decrease as a percentage of Restaurant sales in the three months ended June 30, 2013 as compared to the same period in 2012 was primarily attributable to 0.5% from higher average unit volumes at the majority of our restaurants and 0.3% from certain cost savings initiatives. The decreases were offset by increases as a percentage of Restaurant sales primarily due to 0.3% of higher restaurant operating supplies expense and 0.2% in higher restaurant utilities and repair and maintenance costs.

The increase as a percentage of Restaurant sales in the six months ended June 30, 2013 as compared to the same period in 2012 was primarily due to the following: (i) 0.4% in higher restaurant repair and maintenance and other operating costs, (ii) 0.2% in higher advertising expense and (iii) 0.2% of higher restaurant occupancy costs as a result of a sale-leaseback transaction. The increases were offset by decreases as a percentage of Restaurant sales primarily attributable to 0.4% from higher average unit volumes at the majority of our restaurants and 0.2% from certain cost savings initiatives. 

General and administrative 

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	 	 	SIX MONTHS ENDED	 	 	
 	JUNE 30,	 	 	 	JUNE 30,	 	 	
(in millions):	2013	 	2012	 	Change	 	2013	 	2012	 	Change	
General and administrative	$	65.1	
 	 	$	72.2	
 	 	$	(7.1	)	 	$	137.6	
 	 	$	148.2	
 	 	$	(10.6	)	
 
General and administrative costs decreased in the three months ended June 30, 2013 as compared to the same period in 2012 primarily due to the following: (i) $3.9 million of lower expenses due to the timing of our annual managing partner conference, (ii) $2.3 million of lower management fees due to the termination of the management agreement in connection with our initial public offering, (iii) $1.6 million of net decrease in losses associated with the cash surrender value of life insurance investments and (iv) $1.5 million of net gain on the termination of a split-dollar life insurance policy. These decreases were partially offset by $2.3 million of higher stock-based compensation.

General and administrative costs decreased in the six months ended June 30, 2013 as compared to the same period in 2012 primarily due to the following: (i) $6.7 million of lower legal and other professional fees resulting from amendment and restatement of a lease between OSI and PRP in the first quarter of 2012, (ii) $4.6 million of lower management fees due to the termination of the management agreement in connection with our initial public offering, (iii) $3.7 million of net gains on the termination of split-dollar life insurance policies and (iv) $2.9 million of decreased general and administrative costs associated with field support, managers-in-training and field compensation and bonus expense. These decreases were partially offset by $6.0 million of higher stock-based compensation.

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BLOOMIN’ BRANDS, INC.

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

Provision for impaired assets and restaurant closings

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	 	 	SIX MONTHS ENDED	 	 	
 	JUNE 30,	 	 	 	JUNE 30,	 	 	
(in millions):	2013	 	2012	 	Change	 	2013	 	2012	 	Change	
Provision for impaired assets and restaurant closings	$	0.7	
 	 	$	4.7	
 	 	$	(4.0	)	 	$	2.6	
 	 	$	9.1	
 	 	$	(6.5	)	

Restaurant impairment charges primarily resulted from the carrying value of a restaurant’s assets exceeding its estimated fair market value, mainly due to declining future cash flows from lower projected sales at existing locations and locations identified for relocation or renovation (see “—Liquidity and Capital Resources—Fair Value Measurements” for additional information).

Income from operations 

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	 	 	SIX MONTHS ENDED	 	 	
 	JUNE 30,	 	 	 	JUNE 30,	 	 	
(dollars in millions):	2013	 	2012	 	Change	 	2013	 	2012	 	Change	
Income from operations	$	67.9	
 	 	$	48.7	
 	 	$	19.2	
 	 	$	164.7	
 	 	$	139.1	
 	 	$	25.6	

During the three and six months ended June 30, 2013, income from operations increased as compared to the same period in 2012 primarily as a result of increases of $8.8 million and $10.3 million, respectively, in operating margins at the restaurant level and higher average unit volumes at the majority of our restaurants combined with lower General and administrative expenses and charges for asset impairment and restaurant closings as discussed above. Operating margins are calculated as Restaurant sales after deduction of the main restaurant-level operating costs (comprised of Cost of sales, Labor and other related and Other restaurant operating).

Loss on extinguishment and modification of debt

During the second quarter of 2013, we recorded a $14.6 million loss in connection with a repricing amendment to OSI’s senior secured term loan B facility, which included a prepayment penalty of approximately $9.8 million, $2.4 million of third-party financing costs related to the modified portion of the term loan B and a write-off of $1.2 million each for deferred financing fees and unamortized debt discount, which were associated with the portion of the debt treated as extinguished.

During the first quarter of 2012, we recorded a $2.9 million loss related to the extinguishment of the CMBS Loan in connection with New PRP entering into the 2012 CMBS Loan.

See “—Liquidity and Capital Resources—Credit Facilities and Other Indebtedness” for a further description of each transaction.

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BLOOMIN’ BRANDS, INC.

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

Interest expense, net

 	THREE MONTHS ENDED	 	 	 	SIX MONTHS ENDED	 	 	
 	JUNE 30,	 	 	 	JUNE 30,	 	 	
(in millions):	2013	 	2012	 	Change	 	2013	 	2012	 	Change	
Interest expense, net	$	18.0	
 	 	$	24.0	
 	 	$	(6.0	)	 	$	38.9	
 	 	$	45.0	
 	 	$	(6.1	)	

The decrease in net interest expense in the three months ended June 30, 2013 as compared to the same period in 2012 was primarily due to a $6.5 million decline in interest expense for OSI’s senior notes that were satisfied and discharged in August 2012. This decrease was partially offset by $1.2 million of net higher interest expense resulting from increased interest rates on OSI’s Credit Facilities, which were refinanced in October 2012 and subsequently repriced in April 2013.

The decrease in net interest expense in the six months ended June 30, 2013 as compared to the same period in 2012 was primarily due to a $12.9 million decline in interest expense for OSI’s senior notes that were satisfied and discharged in August 2012. This decrease was partially offset by $5.0 million of net higher interest expense resulting from increased interest rates on OSI’s Credit Facilities, which were refinanced in October 2012 and subsequently repriced in April 2013. The decrease was also partially offset by $1.8 million of higher interest expense resulting from increased interest rates on New PRP’s 2012 CMBS Loan which was refinanced in March 2012.

(Benefit) provision for income taxes

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	 	 	SIX MONTHS ENDED	 	 	
 	JUNE 30,	 	 	 	JUNE 30,	 	 	
 	2013	 	2012	 	Change	 	2013	 	2012	 	Change	
Effective income tax rate	(117.5	)%	 	16.1	%	 	(133.6	)%	 	(27.6	)%	 	18.4	%	 	(46.0	)%	

The net decreases in the effective income tax rates in the three and six months ended June 30, 2013 as compared to the same periods in the prior year were primarily due to the benefit of the release of valuation allowance in the second quarter of 2013. See “—Liquidity and Capital Resources—Income Taxes” for a further description of the release of the valuation allowance.
 
The effective income tax rates for the three and six months ended June 30, 2013 were lower than the blended federal and state statutory rate of 38.7% primarily due to the benefit of the expected tax credit for excess FICA tax on employee-reported tips, the release of valuation allowance, the elimination of noncontrolling interest and the foreign rate differential, together being such a large percentage of projected annual pretax income.  The effective income tax rates for the three and six months ended June 30, 2012 were lower than the blended federal and state statutory rate of 38.7% primarily due to the benefit of the expected tax credit for excess FICA tax on employee-reported tips and the elimination of noncontrolling interest together being such a large percentage of projected annual pretax income. This was partially offset by an increase in the valuation allowance.

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BLOOMIN’ BRANDS, INC.

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

Non-GAAP Financial Measures

In addition to the results provided in accordance with U.S. GAAP, we provide non-GAAP measures which present operating results on an adjusted or pro forma basis. These are supplemental measures of performance that are not required by or presented in accordance with U.S. GAAP and include system-wide sales, Adjusted income from operations, Adjusted net income attributable to Bloomin’ Brands, Inc., Adjusted diluted earnings per share and Adjusted diluted earnings per pro forma share. These non-GAAP measures are not measurements of our operating or financial performance under U.S. GAAP and should not be considered as an alternative to performance measures derived in accordance with U.S. GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.

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. System-wide sales is comprised of sales of Company-owned restaurants and sales of franchised and unconsolidated joint venture restaurants. The table below presents the first component of system-wide sales, which is sales of Company-owned restaurants:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	SIX MONTHS ENDED	
 	JUNE 30,	 	JUNE 30,	
 	2013	 	2012	 	2013	 	2012	
COMPANY-OWNED RESTAURANT SALES (in millions):	 	 	 	 	 	 	 	
Outback Steakhouse	 	 	 	 	 	 	 	
Domestic (1)	$	538	
 	 	$	527	
 	 	$	1,110	
 	 	$	1,088	
 	
International (1)	69	
 	 	64	
 	 	157	
 	 	146	
 	
Total	607	
 	 	591	
 	 	1,267	
 	 	1,234	
 	
Carrabba’s Italian Grill	177	
 	 	173	
 	 	364	
 	 	360	
 	
Bonefish Grill	141	
 	 	124	
 	 	284	
 	 	251	
 	
Fleming’s Prime Steakhouse and Wine Bar	64	
 	 	61	
 	 	135	
 	 	128	
 	
Other	19	
 	 	21	
 	 	40	
 	 	42	
 	
Total Company-owned restaurant sales	$	1,008	
 	 	$	970	
 	 	$	2,090	
 	 	$	2,015	
 	
____________________
 	 	
(1)	Company-owned restaurant sales for one location in Puerto Rico that were previously included in Outback Steakhouse (international) are now included in Outback Steakhouse (domestic). The prior period has been revised to conform to the current period presentation.	

The following information presents the second component of system-wide sales, which is sales of franchised and unconsolidated joint venture restaurants. These are restaurants that are not consolidated and from which we only receive a franchise royalty or a portion of their total income. Management believes that franchise and unconsolidated joint venture sales information is useful in analyzing our revenues because franchisees and affiliates pay royalties and/or service fees that generally are based on a percentage of sales. Management also 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.

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BLOOMIN’ BRANDS, INC.

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

The following do not represent our sales and are presented only as an indicator of changes in the restaurant system, which management believes is important information regarding the health of our restaurant concepts.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	SIX MONTHS ENDED	
 	JUNE 30,	 	JUNE 30,	
 	2013	 	2012	 	2013	 	2012	
FRANCHISE AND UNCONSOLIDATED JOINT VENTURE SALES (in millions) (1):	 	 	 	 	 	 	 	
Outback Steakhouse	 	 	 	 	 	 	 	
Domestic	$	80	
 	 	$	78	
 	 	$	163	
 	 	$	160	
 	
International	94	
 	 	86	
 	 	188	
 	 	173	
 	
Total	174	
 	 	164	
 	 	351	
 	 	333	
 	
Carrabba’s Italian Grill	1	
 	 	1	
 	 	2	
 	 	2	
 	
Bonefish Grill	4	
 	 	4	
 	 	9	
 	 	9	
 	
Total franchise and unconsolidated joint venture sales (1)	$	179	
 	 	$	169	
 	 	$	362	
 	 	$	344	
 	
Income from franchise and unconsolidated joint ventures (2)	$	12	
 	 	$	10	
 	 	$	23	
 	 	$	21	
 	
_____________________
 	 	
(1)	Franchise and unconsolidated joint venture sales are not included in revenues in the Consolidated Statements of Operations and Comprehensive Income.	
 	 	
(2)	Represents the franchise royalty and the portion of total income related to restaurant operations included in the Consolidated Statements of Operations and Comprehensive Income in Other revenues and Income from operations of unconsolidated affiliates, respectively.	

Other Financial Measures

Adjusted income from operations, Adjusted net income attributable to Bloomin’ Brands, Inc., Adjusted diluted earnings per share and Adjusted diluted earnings per pro forma share are non-GAAP measures calculated by eliminating from income from operations, net income and diluted earnings per share the impact of items we do not consider indicative of our ongoing operations including application of a normalized annual effective tax rate. We provide these non-GAAP measures because we believe they are useful for investors to assess the operating performance of our business without the effect of these adjustments. For the periods presented, the non-GAAP adjustments include transaction-related expenses primarily attributable to the completion of a secondary offering of our common stock and the refinancing of our long-term debt, management fees paid to the management company associated with our Sponsors and Founders, losses incurred on the extinguishment and modification of long-term debt and an adjustment to the (Benefit) provision for income taxes based on a normalized tax rate for periods in 2013 and the effective tax rate for periods in 2012. In addition, Adjusted diluted earnings per pro forma share gives effect to the issuance of shares in our initial public offering as if they were all outstanding on January 1, 2012.

The use of these measures permits a comparative assessment of our operating performance relative to our performance based on U.S. GAAP results, while isolating the effects of certain items that vary from period to period without correlation to core operating performance or that vary widely among similar companies. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent. In the future, we may incur expenses or generate income similar to the adjusted items. We further believe that the disclosure of these non-GAAP measures is useful to investors as they form the basis for how our management team and Board of Directors evaluate our performance including for achievement of objectives under our cash and equity compensation plans. By disclosing these non-GAAP measures, we believe that we create for investors a greater understanding of, and an enhanced level of transparency into, the means by which our management team operates our business.

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

The following table reconciles Adjusted income from operations, Adjusted net income attributable to Bloomin’ Brands, Inc., Adjusted diluted earnings per share and Adjusted diluted earnings per pro forma share, for the three and six months ended June 30, 2013 and 2012 to their respective most comparable U.S. GAAP measures (in thousands, except per share amounts):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	THREE MONTHS ENDED	 	SIX MONTHS ENDED	
 	JUNE 30,	 	JUNE 30,	
 	2013	 	2012	 	2013	 	2012	
Income from operations	$	67,886	
 	 	$	48,720	
 	 	$	164,746	
 	 	$	139,128	
 	
Transaction-related expenses (1)	704	
 	 	—	
 	 	704	
 	 	6,761	
 	
Management fees and expenses (2)	—	
 	 	2,291	
 	 	—	
 	 	4,617	
 	
Adjusted income from operations	$	68,590	
 	 	$	51,011	
 	 	$	165,450	
 	 	$	150,506	

Net income attributable to Bloomin’ Brands, Inc.	$	74,868	
 	 	$	17,440	
 	 	$	138,091	
 	 	$	67,439	
 	
Transaction-related expenses (1)	704	
 	 	—	
 	 	704	
 	 	6,761	
 	
Management fees and expenses (2)	—	
 	 	2,291	
 	 	—	
 	 	4,617	
 	
Loss on extinguishment and modification of debt (3)	14,586	
 	 	—	
 	 	14,586	
 	 	2,851	
 	
Total adjustments, before income taxes	15,290	
 	 	2,291	
 	 	15,290	
 	 	14,229	
 	
Adjustment to (benefit) provision for income taxes (4)	(58,370	)	 	(426	)	 	(58,370	)	 	(2,647	)	
Net adjustments	(43,080	)	 	1,865	
 	 	(43,080	)	 	11,582	
 	
Adjusted net income attributable to Bloomin’ Brands, Inc.	$	31,788	
 	 	$	19,305	
 	 	$	95,011	
 	 	$	79,021	

Diluted earnings per share	$	0.58	
 	 	$	0.16	
 	 	$	1.08	
 	 	$	0.63	
 	
Adjusted diluted earnings per share	$	0.25	
 	 	$	0.18	
 	 	$	0.74	
 	 	$	0.74	
 	
Adjusted diluted earnings per pro forma share	$	0.25	
 	 	$	0.16	
 	 	$	0.74	
 	 	$	0.65	

Diluted weighted average common shares outstanding	128,338	
 	 	107,380	
 	 	127,599	
 	 	107,255	
 	
Pro forma IPO adjustment (5)	—	
 	 	14,197	
 	 	—	
 	 	14,197	
 	
Pro forma diluted weighted average common shares outstanding (5)	128,338	
 	 	121,577	
 	 	127,599	
 	 	121,452	
 	
_________________
 	 	
(1)	Transaction-related expenses primarily relate to costs incurred in association with the secondary offering of our common stock completed in May 2013 and the refinancing of the 2012 CMBS Loan in March 2012.	
 	 	
(2)	Represents management fees, out-of-pocket expenses and certain other reimbursable expenses paid to a management company owned by our Sponsors and Founders under a management agreement with us. In accordance with the terms of an amendment, this agreement terminated immediately prior to the completion of our initial public offering in August 2012.	
 	 	
(3)	Loss on extinguishment and modification of debt is related to the repricing of OSI’s term loan B facility in April 2013 and the extinguishment of the CMBS Loan in connection with New PRP entering into the 2012 CMBS Loan in March 2012.	
 	 	
(4)	Adjustment to (benefit) provision for income taxes for the three and six months ended June 30, 2013 represents an adjustment to the (Benefit) provision for income taxes to apply a normalized annual effective income tax rate, which excludes the income tax benefit of the valuation allowance release, to Adjusted income before (benefit) provision for income taxes. The normalized 2013 full-year tax rate is more comparable to our expectation for future effective income tax rates. Our expected future effective income tax rate is lower than the U.S. blended federal and state statutory rate because of the continued generation of U.S. tax credits and expected earnings in foreign jurisdictions with lower income tax rates. See calculation below of the income tax effect of adjustments for the three and six months ended June 30, 2013. Adjustment to (benefit) provision for income taxes for the three and six months ended June 30, 2012 was calculated using the projected full-year effective income tax rate of 18.6%. 	

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

 	
 	 	 	 	 	 	 	 	 	
 	 	THREE MONTHS ENDED	 	SIX MONTHS ENDED	
 	 	JUNE 30, 2013	 	JUNE 30, 2013	
Income before (benefit) provision for income taxes	 	$	35,152	
 	 	$	110,915	
 	
Transaction-related expenses	 	704	
 	 	704	
 	
Loss on extinguishment and modification of debt	 	14,586	
 	 	14,586	
 	
Adjusted income before (benefit) provision for income taxes	 	50,442	
 	 	126,205	
 	
Income tax expense at normalized tax rate of approximately 33.8% and 22.0% for the three and six months ended June 30, 2013, respectively (a)	 	17,058	
 	 	27,765	
 	
Less: (Benefit) provision for income taxes	 	(41,312	)	 	(30,605	)	
Adjustment to (benefit) provision for income taxes	 	$	58,370	
 	 	$	58,370	
 	
_________________
 	 	
(a)	Due to the second quarter 2013 income tax valuation allowance release, we utilized a normalized annual effective tax rate of 22.0% for the six months ended June 30, 2013. As a result, the Adjustment to (benefit) provision for income taxes for the three months ended June 30, 2013 includes approximately $6.0 million of higher income tax effect for the true-up of a normalized tax rate treatment on the first quarter of 2013 which, as previously reported, did not include any adjustments. Excluding the effect of this true-up in the second quarter of 2013, the Adjusted net income attributable to Bloomin’ Brands, Inc. would have been $37.7 million and Adjusted diluted earnings per pro forma share would have been $0.29 per share for the three months ended June 30, 2013. If the normalized tax rate had been applied during the first quarter of 2013, Adjusted net income attributable to Bloomin’ Brands, Inc. would have been $57.3 million and Adjusted diluted earnings per pro forma share would have been $0.45 per share for the three months ended March 31, 2013 (reported amounts were $63.2 million and $0.50 per share, respectively).	
 	 	
(5)	Gives pro forma effect to the issuance of shares in the initial public offering as if they were all outstanding on January 1, 2012. There is no effect of this adjustment for the three and six months ended June 30, 2013.	

Liquidity and Capital Resources

We believe that expected cash flow from operations, available borrowing capacity and restricted cash balances are adequate to finance our growth strategies and to fund debt service requirements, operating lease obligations, capital expenditures, working capital obligations and other significant commitments for the next twelve 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.

As of June 30, 2013, we had approximately $187.4 million in available unused borrowing capacity under OSI’s senior secured revolving credit facility (after giving effect to undrawn letters of credit of approximately $37.6 million) (see “—Credit Facilities and Other Indebtedness”).

TRANSACTIONS

In connection with the settlement of litigation with T-Bird Nevada, LLC and its affiliates (collectively, “T-Bird”), which include the franchisees of 56 Outback Steakhouse restaurants in California, T-Bird has a right (referred to as the “Put Right”), which would require us to purchase for cash all of the ownership interests in the T-Bird entities that own Outback Steakhouse restaurants and certain rights under the development agreement with T-Bird. The Put Right is non-transferable, other than under limited circumstances set forth in the settlement agreement. The Put Right is exercisable by T-Bird until August 13, 2013. If the Put Right is exercised, we will pay a purchase price equal to a multiple of the T-Bird entities’ adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the trailing 12 months, net of liabilities of the T-Bird entities. The multiple is equal to 75% of the multiple of our adjusted EBITDA reflected in our stock price. We have a one-time right to reject the exercise of the Put Right if the transaction would be dilutive to our consolidated earnings per share. In such event, the Put Right is extended until the first anniversary of our notice to the T-Bird entities of such rejection. If exercised, the closing of the Put Right will be the last business day of the third full calendar month immediately following the month in which notification of the

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

exercise of the Put Right (the “Put Notice”) is given. If the weighted average closing price of our common stock during the month immediately prior to the month the closing date is to occur is more than 20% less than the closing price on the date the Put Notice is delivered, the T-Bird entities will have a one-time right to delay the closing for two months. If the closing date is delayed, the T-Bird entities multiple will be calculated based on the weighted average closing price of our common stock during the calendar month immediately prior to the month of the newly scheduled closing date. The closing of the Put Right is subject to certain conditions, including the negotiation of a transaction agreement reasonably acceptable to the parties, the absence of dissenters’ rights being exercised by the equity owners above a specified level, non-revocation by the T-Bird entities of the exercise of the Put Right and compliance with our debt agreements.

On April 10, 2013, OSI completed a repricing of its senior secured term loan B facility pursuant to the Amended Credit Agreement. The Amended Credit Agreement replaces OSI’s existing senior secured term loan B facility with the Amended Term Loan B. The Amended Term Loan B has the same principal amount outstanding (as of the repricing date) of $975.0 million, maturity date of October 26, 2019, amortization schedule and financial covenants but a lower applicable interest rate than the existing senior secured term loan B facility. The Amended Credit Agreement decreased the interest rate applicable to the Amended Term Loan B to 150 basis points over the Base Rate or 250 basis points over the Eurocurrency Rate as defined in the Credit Agreement and reduced the interest rate floors applicable to the Amended Term Loan B to 2.00% for the Base Rate and 1.00% for the Eurocurrency Rate. As a result of the repricing transaction, we recorded a Loss on extinguishment and modification of debt of $14.6 million in our Consolidated Statement of Operations and Comprehensive Income during the second quarter of 2013 (see “—Credit Facilities and Other Indebtedness”).

SUMMARY OF CASH FLOWS

We require capital primarily for principal and interest payments on our debt, prepayment requirements under our term loan B facility (see “—Credit Facilities and Other Indebtedness”), obligations related to our deferred compensation plans, the development of new restaurants, remodeling or relocating older restaurants, investments in technology and acquisitions of the interests of our franchisees and joint venture partners.

The following table presents a summary of our cash flows provided by (used in) operating, investing and financing activities for the periods indicated (in thousands):

 	 	 	 	 	 	 	 	
 	SIX MONTHS ENDED JUNE 30,	
 	2013	 	2012	
Net cash provided by operating activities	$	94,720	
 	 	$	57,704	
 	
Net cash (used in) provided by investing activities	(93,104	)	 	95,004	
 	
Net cash used in financing activities	(35,700	)	 	(354,987	)	
Effect of exchange rate changes on cash and cash equivalents	(5,165	)	 	149	
 	
Net decrease in cash and cash equivalents	$	(39,249	)	 	$	(202,130	)	

Operating activities

Net cash provided by operating activities increased during the six months ended June 30, 2013 as compared to the same period in 2012 primarily as a result of the following: (i) utilization of inventory on hand, (ii) timing of accounts payable and certain accrual payments and (iii) a decrease in cash paid for income taxes.  The increase in net cash provided by operating activities was partially offset by a decrease in cash due to timing of collections of holiday gift card sales from third-party vendors and $4.2 million of cash paid to terminate certain split-dollar life insurance agreements.

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

Investing activities

Net cash used in investing activities during the six months ended June 30, 2013 consisted primarily of capital expenditures of $97.2 million partially offset by proceeds from the disposal of property, fixtures and equipment of $2.7 million. Net cash provided by investing activities during the six months ended June 30, 2012 consisted primarily of proceeds from a sale-leaseback transaction of $192.9 million partially offset by capital expenditures of $79.7 million and the $19.4 million net difference between restricted cash received and restricted cash used.

We estimate that our capital expenditures will total between approximately $220.0 million and $250.0 million in 2013. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things. We expect to continue to review the level of capital expenditures throughout the remainder of 2013.

Financing activities

Net cash used in financing activities during the six months ended June 30, 2013 was primarily attributable to the following: (i) repayments of long-term debt of $33.9 million, (ii) repayments of partner deposits and accrued partner obligations of $12.5 million, (iii) payments of financing fees of $12.5 million for the Amended Term Loan B repricing transaction completed in April 2013 and (iv) distributions to noncontrolling interests of $4.5 million.  This was partially offset by the receipt of proceeds from the exercise of stock options of $22.2 million and repayments of notes receivable due from stockholders of $5.8 million. Net cash used in financing activities during the six months ended June 30, 2012 was primarily attributable to the following: (i) extinguishment of PRP’s CMBS Loan of $777.6 million, (ii) repayments of long-term debt and borrowings on revolving credit facilities of $45.2 million, (iii) repayments of partner deposits and accrued partner obligations of $15.3 million and (iv) distributions to noncontrolling interests of $8.0 million. This was partially offset by the proceeds received from the 2012 CMBS Loan of $495.2 million.

FINANCIAL CONDITION

Current assets decreased to $439.9 million at June 30, 2013 as compared with $487.8 million at December 31, 2012. This decrease was primarily due to a $39.2 million decrease in Cash and cash equivalents (see “—Summary of Cash Flows”) and a $13.2 million decrease in Inventories primarily due to the utilization of inventory on hand and timing of deliveries at the end of the period. This decrease was partially offset by a $9.5 million increase in deferred income tax assets primarily associated with the release of the valuation allowance in the second quarter of 2013. Current liabilities decreased to $550.1 million at June 30, 2013 as compared with $691.4 million at December 31, 2012 primarily due to the following: (i) a $109.1 million decrease in Unearned revenue as a result of the seasonal pattern of gift card and promotional sales and redemptions, (ii) a $21.4 million decrease in Accrued and other current liabilities primarily from a decrease in accrued payroll and other compensation for 2012 related compensation paid in March 2013 and timing of payments, and (iii) a $9.5 million decrease in the Current portion of long-term debt mainly due to the voluntary prepayments on the Amended Term Loan B made in the first quarter of 2013 extending future principal payments in excess of 12 months.

Working capital (deficit) totaled ($110.2) million and ($203.6) million at June 30, 2013 and December 31, 2012, respectively, and included Unearned revenue from unredeemed gift cards of $220.4 million and $329.5 million at June 30, 2013 and December 31, 2012, 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 for capital expenditures.

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BLOOMIN’ BRANDS, INC.

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

CREDIT FACILITIES AND OTHER INDEBTEDNESS

We are a holding company and conduct our operations through our subsidiaries, certain of which have incurred their own indebtedness as described below.

On October 26, 2012, OSI entered the Credit Agreement with a syndicate of institutional lenders and financial institutions.  The Credit Facilities provide for senior secured financing of up to $1.225 billion, consisting of a $1.0 billion term loan B and a $225.0 million revolving credit facility, including letter of credit and swing-line loan sub-facilities. The term loan B was issued with an original issue discount of $10.0 million.

On April 10, 2013, OSI completed a repricing of its senior secured term loan B facility pursuant to the First Amendment to Credit Agreement, Guaranty and Security Agreement, among OSI, OSI HoldCo, Inc., the subsidiary guarantors named therein, Deutsche Bank Trust Company Americas, as administrative agent and collateral agent, and a syndicate of institutional lenders and financial institutions. The Amended Credit Agreement replaces OSI’s existing senior secured term loan B facility with the Amended Term Loan B. The Amended Term Loan B had the same principal amount outstanding (as of the repricing date) of $975.0 million, maturity date of October 26, 2019, amortization schedule and financial covenants but a lower applicable interest rate than the existing senior secured term loan B facility. Voluntary prepayments made on the principal amount outstanding since the inception of the Credit Agreement will continue to be treated as prepayments for purposes of determining amortization payment and mandatory prepayment requirements under the Amended Term Loan B. Prepayments or amendments of the Amended Term Loan B that constitute a “repricing transaction” (as defined in the Amended Credit Agreement) will be subject to a premium of 1.00% of the Amended Term Loan B if prepaid or amended on or prior to October 10, 2013. Prepayments and repricings made after October 10, 2013 will not be subject to premium or penalty.

As a result of the repricing transaction, we recorded a Loss on extinguishment and modification of debt of $14.6 million in our Consolidated Statement of Operations and Comprehensive Income during the second quarter of 2013. The loss was comprised of a prepayment penalty of $9.8 million, third-party financing costs of $2.4 million and the write-off of $1.2 million each of deferred financing fees and unamortized debt discount. The third-party financing costs included in the loss related to debt held by lenders that participated in both the original, and repriced debt and therefore, the debt was treated as modified rather than extinguished. The deferred financing fees and unamortized debt discount amounts included in the loss were related to the extinguished portion of the debt.

The Amended Credit Agreement decreased the interest rate applicable to the Amended Term Loan B to 150 basis points over the Base Rate or 250 basis points over the Eurocurrency Rate and reduced the interest rate floors applicable to the Amended Term Loan B to 2.00% for the Base Rate and 1.00% for the Eurocurrency Rate.  The Base Rate option is the highest of (i) the prime rate of Deutsche Bank Trust Company Americas, (ii) the federal funds effective rate plus 0.5 of 1.0% or (iii) the Eurocurrency Rate with a one-month interest period plus 1.0% (“Base Rate”) (3.25% at June 30, 2013 and December 31, 2012).  The Eurocurrency Rate option is the 30, 60, 90 or 180-day Eurocurrency Rate (“Eurocurrency Rate”) (ranging from 0.19% to 0.41% and 0.21% to 0.51%  at June 30, 2013 and December 31, 2012, respectively).  The Eurocurrency Rate may have a nine- or twelve-month interest period if agreed upon by the applicable lenders.

Prior to the repricing of the senior secured term loan B facility, borrowings under this facility bore interest at rates ranging from 225 to 250 basis points over the Base Rate or 325 to 350 basis points over the Eurocurrency Rate. The Base Rate was subject to an interest rate floor of 2.25%, and the Eurocurrency Rate was subject to an interest rate floor of 1.25%.

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BLOOMIN’ BRANDS, INC.

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

OSI is required to prepay outstanding term loans, subject to certain exceptions, with:
 	 	
•	50% of its “annual excess cash flow” (with step-downs to 25% and 0% based upon its consolidated first lien net leverage ratio), as defined in the Credit Agreement, beginning with the fiscal year ending December 31, 2013 and subject to certain exceptions;	
 	 	
•	100% of the net proceeds of certain assets sales and insurance and condemnation events, subject to reinvestment rights and certain other exceptions; and	
 	 	
•	100% of the net proceeds of any debt incurred, excluding permitted debt issuances.	

The Amended Term Loan B requires amortization payments of approximately $10.0 million per calendar year, payable in scheduled equal quarterly installments through September 2019. These payments are reduced by the application of any prepayments, and any remaining balance is due at maturity in October 2019.  The outstanding balance on the Amended Term Loan B and term loan B, excluding the unamortized debt discount, was $975.0 million and $1.0 billion at June 30, 2013 and December 31, 2012, respectively. The remaining unamortized debt discount on the Amended Term Loan B and term loan B was $7.7 million and $9.7 million at June 30, 2013 and December 31, 2012, respectively. At June 30, 2013, none of the outstanding balance on the Amended Term Loan B was classified as current due to voluntary prepayments of $25.0 million made by OSI during the first quarter of 2013 and the results of its projected covenant calculations, which indicate the additional term loan prepayments, as described above, will not be required in the next 12 months. The amount of outstanding term loans required to be prepaid in accordance with OSI’s debt covenants may vary based on year-end results. At December 31, 2012, $10.0 million of the outstanding balance on the term loan B was classified as current due to OSI’s required quarterly payments.

The revolving credit facility matures October 26, 2017 and provides for swing-line loans and letters of credit of up to $225.0 million for working capital and general corporate purposes.  The revolving credit facility bears interest at rates ranging from 200 to 250 basis points over the Base Rate or 300 to 350 basis points over the Eurocurrency Rate.  There were no loans outstanding under the revolving credit facility at June 30, 2013 or December 31, 2012, however, $37.6 million and $41.2 million, respectively, of the revolving credit facility was committed for the issuance of letters of credit and not available for borrowing. Total outstanding letters of credit issued under OSI’s revolving credit facility may not exceed $100.0 million.

At June 30, 2013 and December 31, 2012, OSI was in compliance with its debt covenants. See the 2012 Form 10-K for further information about OSI’s debt covenant requirements.

Effective March 27, 2012, New PRP entered into the 2012 CMBS Loan with German American Capital Corporation and Bank of America, N.A. The 2012 CMBS Loan totaled $500.0 million at origination and was comprised of a first mortgage loan in the amount of $324.8 million, collateralized by 261 of our properties, and two mezzanine loans totaling $175.2 million. The loans have a maturity date of April 10, 2017. The first mortgage loan has five fixed-rate components and a floating rate component. The fixed-rate components bear interest at rates ranging from 2.37% to 6.81% per annum. The floating rate component bears interest at a rate per annum equal to the 30-day LIBOR (with a floor of 1%) plus 2.37%. The first mezzanine loan bears interest at a rate of 9.00% per annum, and the second mezzanine loan bears interest at a rate of 11.25% per annum.

The proceeds from the 2012 CMBS Loan, together with the proceeds from a sale-leaseback transaction and excess cash held in PRP, were used to repay PRP’s existing CMBS Loan. During the first quarter of 2012, we recorded a $2.9 million loss related to the extinguishment in Loss on extinguishment of debt in our Consolidated Statement of Operations and Comprehensive Income.

At June 30, 2013 and December 31, 2012, the outstanding balance, excluding the unamortized debt discount, on the 2012 CMBS Loan was $489.2 million and $493.9 million, respectively.

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

GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS

We performed our annual goodwill and other indefinite-lived intangible assets impairment test during the second quarters of 2013 and 2012. The impairment test performed in the second quarter of 2013 utilized a qualitative assessment. This qualitative assessment is referred to as a “step zero” approach and allows us the option to assess qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, based on the review of the qualitative factors, an entity determines there is sufficient evidence to support a more likely than not (greater than 50%) probability that the fair value of a reporting unit is greater than its carrying value, the entity may skip the two-step impairment test.

In considering the step zero approach in 2013, we evaluated factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units. As a result of our step zero assessment, no impairment conditions were identified and no further testing was deemed necessary.

During 2012, we elected to forgo step zero and proceeded to the first step of the impairment test for goodwill and other indefinite-lived intangible assets. Our review of the recoverability of goodwill was based primarily upon an analysis of the discounted cash flows of the related reporting units as compared to the carrying values. We also used the relief from royalty method to determine the fair value of our indefinite-lived intangible assets.
 
We did not record any goodwill or indefinite-lived intangible asset impairment charges as a result of these assessments and determined that none of our reporting units are at risk for material goodwill impairment.

FAIR VALUE MEASUREMENTS

Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date (exit price) and is a market-based measurement, not an entity-specific measurement. To measure fair value, we incorporate assumptions that market participants would use in pricing the asset or liability, and utilize market data to the maximum extent possible.  Measurement of fair value incorporates nonperformance risk (i.e., the risk that an obligation will not be fulfilled). In measuring fair value, we reflect the impact of our own credit risk on our liabilities, as well as any collateral. We also consider the credit standing of our counterparties in measuring the fair value of our assets.

In connection with the 2012 CMBS Loan, we entered into an interest rate cap with a notional amount of $48.7 million as a method to limit the volatility of the floating rate component of the first mortgage loan. This interest rate cap had a nominal fair market value at June 30, 2013 and December 31, 2012.

We did not record any material impairment charges as a result of fair value measurements on a nonrecurring basis of our long-lived assets held and used during the three and six months ended June 30, 2013. We recorded $3.7 million and $7.6 million of impairment charges during the three and six months ended June 30, 2012, respectively, as a result of fair value measurements on a nonrecurring basis of our long-lived assets held and used, primarily related to certain specifically identified restaurant locations that have, or are scheduled to be, relocated or renovated or were under-performing. At the time of the impairment recognized in the second quarter of 2012, the impaired long-lived assets had $2.1 million of remaining fair value. As of June 30, 2012, there was $2.9 million  rem aining fair value associated with long-lived assets for which asset impairment losses were recognized during the six months ended June 30, 2012. Restaurant closure and related expenses of $0.7 million and $1.0 million were recognized for the three months ended June 30, 2013 and 2012, respectively, and $1.5 million was recognized for the six months ended June 30, 2013 and 2012, respectively.  Impairment losses for long-lived assets held and used and restaurant closure and related expenses

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

were recognized in Provision for impaired assets and restaurant closings in the Consolidated Statements of Operations and Comprehensive Income.

We primarily used third-party market appraisals (Level 2) and discounted cash flow models (Level 3) to estimate the fair value of the long-lived assets.  Discount rate and growth rate assumptions are derived from current economic conditions, expectations of management and projected trends of current operating results.  

The following table presents quantitative information related to the range of unobservable inputs used in our Level 3 fair value measurements for the impairment losses incurred in the six months ended June 30, 2012:

 	 	 	
 	 	SIX MONTHS ENDED	
UNOBSERVABLE INPUT	 	JUNE 30, 2012	
Weighted-average cost of capital (1)	 	10.4% - 11.2%	
Long-term growth rates	 	3.0%	
Annual revenue growth rates (2)	 	(8.7)% - 4.3%	
________________
 	 	
(1)	Weighted average of the cost of capital unobservable input range was 10.9% for the six months ended June 30, 2012.	
 	 	
(2)	Weighted average of the annual revenue growth rates unobservable input range was 2.6% for the six months ended June 30, 2012.	

Sales declines at our restaurants, unplanned increases in health insurance, commodity or labor costs, deterioration in overall economic conditions and challenges in the restaurant industry may result in future impairment charges.  It is possible that changes in circumstances or changes in our judgments, assumptions and estimates, could result in a future impairment charge of a portion or all of our goodwill, other intangible assets or long-lived assets held and used.

DEFERRED COMPENSATION PLANS

Managing and Chef Partners

Historically, the managing partner of each Company-owned domestic restaurant and the chef partner of each Fleming’s Prime Steakhouse and Wine Bar and Roy’s restaurant were required, as a condition of employment, to sign a five-year employment agreement and to purchase a non-transferable ownership interest in a partnership (“Management Partnership”) that provided management and supervisory services to his or her restaurant.  The purchase price for a managing partner’s ownership interest was fixed at $25,000, and the purchase price for a chef partner’s ownership interest ranged from $10,000 to $15,000.  Managing and chef partners had the right to receive monthly distributions from the Management Partnership based on a percentage of their restaurant’s monthly cash flows for the duration of the agreement, which varied by concept from 6% to 10% for managing partners and 2% to 5% for chef partners.  Further, managing and chef partners were eligible to participate in the PEP, a deferred compensation program, upon completion of their five-year employment agreement. Amounts credited to partners’ PEP accounts are fully vested at all times and participants have no discretion with respect to the form of benefit payments under the PEP.

In April 2011, we modified our managing and chef partner compensation structure to provide greater incentives for sales and profit growth.  Under the revised program, managing and chef partners continue to sign five-year employment agreements and receive monthly distributions of the same percentage of their restaurant’s cash flow as under the prior program. However, under the revised program, in lieu of participation in the PEP, managing partners and chef partners are eligible to receive deferred compensation payments under the POA.  The POA places greater emphasis on year-over-year growth in cash flow than the PEP. Managing and chef partners receive a greater value under the POA than they would have received under the PEP if certain levels of year-over-year cash flow growth are achieved and a lesser value than under the PEP if these levels are not achieved. As of June 30, 2013 and December 31, 2012, our POA liability was $18.6 million and $15.3 million, respectively, which primarily was recorded in Partner deposits and accrued partner obligations in our Consolidated Balance Sheets.

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

In June 2007, certain stock options that had been granted to managing and chef partners under a previously existing managing partner stock plan upon completion of a previous employment contract were converted into the right to receive cash in the form of a “Supplemental PEP” contribution.

As of June 30, 2013, our total vested liability with respect to obligations primarily under the PEP and Supplemental PEP was approximately $127.4 million, of which $17.5 million and $109.9 million was included in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in our Consolidated Balance Sheet. As of December 31, 2012, our total vested liability with respect to obligations primarily under the PEP and Supplemental PEP was approximately $122.6 million, of which $17.8 million and $104.8 million was included in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in our Consolidated Balance Sheet. Partners allocate the contributions into benchmark investment funds, and these amounts due to participants will fluctuate according to the performance of their allocated investments and may differ materially from the initial contribution and current obligation.

As of June 30, 2013 and December 31, 2012, we had approximately $69.4 million and $67.8 million, respectively, in various corporate owned life insurance policies held within an irrevocable grantor or “rabbi” trust account for settlement of our obligations primarily under the PEP, Supplemental PEP and POA. We are the sole owner of any assets within the rabbi trust and participants are considered our general creditors with respect to assets within the rabbi trust.

As of June 30, 2013 and December 31, 2012, there were $73.5 million and $65.1 million, respectively, of unfunded obligations primarily related to the PEP, Supplemental PEP and POA, excluding amounts not yet contributed to the partners’ investment funds, which may require the use of cash resources in the future.

We require the use of capital to fund the PEP and the POA as each managing and chef partner earns a contribution, and currently estimate funding requirements ranging from $17.0 million to $19.0 million for PEP and from $5.0 million to $7.0 million for POA in each of the next two years through June 30, 2015.  Actual funding of the current PEP and POA obligations and future funding requirements may vary significantly depending on timing of partner contracts, forfeiture rates and numbers of partner participants and may differ materially from estimates.

Area Operating Partners

Historically, an area operating partner was required, as a condition of employment and within 30 days of the opening of his or her first restaurant, to make an initial investment of $50,000 in the Management Partnership that provides supervisory services to the restaurants that the area operating partner oversees.  This interest gave the area operating partner the right to distributions from the Management Partnership based on a percentage of his or her restaurants’ monthly cash flows for the duration of the agreement, typically ranging from 4.0% to 9.0%.  We have the option to purchase an area operating partner’s interest in the Management Partnership after the restaurant has been open for a five-year period on the terms specified in the agreement.

For restaurants opened on or between January 1, 2007 and December 31, 2011, the area operating partner’s percentage of cash distributions and buyout percentage is calculated based on the associated restaurant’s return on investment compared to our targeted return on investment and ranges from 3.0% to 12.0% depending on the concept.  This percentage is determined after the first five full calendar quarters from the date of the associated restaurant’s opening and is adjusted each quarter thereafter based on a trailing 12-month restaurant return on investment.  The buyout percentage is the area operating partner’s average distribution percentage for the 24 months immediately preceding the buyout.  Buyouts are paid in cash within 90 days or paid over a two-year period.

In April 2012, we revised our area operating partner program for restaurants opened on or after January 1, 2012. For these restaurants, an area operating partner is required, as a condition of employment, to make a deposit of $10,000 within thirty days of the opening of each new restaurant that he or she oversees, up to a maximum deposit of $50,000

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

(taking into account investments under prior programs).  This deposit gives the area operating partner the right to monthly payments based on a percentage of his or her restaurants’ monthly cash flows for the time period that the area operating partner oversees the restaurant, typically ranging from 4.0% to 4.5%. After the restaurant has been open for a five-year period, the area operating partner will receive a bonus equal to a multiple of the area operating partner’s average monthly payments for the 24 months immediately preceding the bonus date.  The bonus will be paid within 90 days or over a two-year period, depending on the bonus amount.

INCOME TAXES

Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in the tax rate is recognized in income in the period that includes the enactment date of the rate change. We recorded a valuation allowance to reduce our deferred income tax assets to the amount that is more likely than not to be realized. We have considered future taxable income and ongoing feasible tax planning strategies in assessing the need for the valuation allowance. Our conclusion that it is more likely than not that such deferred income tax assets will be realized is strongly influenced by our forecast of future taxable income.

At December 31, 2012, we had a valuation allowance against net deferred income tax assets recorded of $72.5 million, of which $67.7 million was for U.S. net deferred income tax assets. We established the domestic portion of the valuation allowance in 2009 with increases through 2012 against our then existing U.S. net deferred income tax assets because we determined that the deferred income tax assets were not likely to be realized in future periods based on the negative evidence that outweighed the positive evidence.

As we do each reporting period, we conducted an assessment of the recoverability of its net deferred income tax assets as of June 30, 2013 and determined it was more likely than not that our existing net deferred income tax assets for general business tax credit carryforwards would be realized. Our assessment included consideration of all available positive and negative evidence including, among other evidence, historical cumulative operating income, projected future taxable income and recent utilization of U.S. net operating loss carryforwards and tax credit carryforwards. Accordingly, we recorded a $67.7 million reduction of the valuation allowance against the U.S. net deferred income tax assets as of June 30, 2013 of which $52.0 million was recorded as an income tax benefit and $15.7 million was recorded as an increase to Additional paid-in capital. As the general business tax credits are expected to be realized due to current year and future year’s income, the portion attributable to future year’s income, or $44.8 million, was released as a discrete event during the second quarter of 2013. The remainder was allocated to interim periods as current year activity as income is expected to be realized and impacts the estimated 2013 annual effective income tax rate. We did not release the valuation allowance against foreign net operating loss carryforwards.

Although the release of the valuation allowance will have a positive effect on our results of operations in 2013, the release will most likely have the effect of reducing our earnings in periods subsequent to 2013 as a result of an increase in the provision for income taxes in such future periods. This negative effect on earnings in subsequent periods occurs because the release of the valuation allowance reflects the recognition of previously generated, but not recognized, income tax benefits in 2013. Absent the release of the valuation allowance, any such income tax benefits would be recognized in the future periods in which their realization were to occur upon the generation of taxable income. We expect to continue to generate significant U.S. income tax credits, which combined with the mix of U.S. and foreign earnings in periods subsequent to 2013 will result in an effective income tax rate that is higher than those in the current and prior periods but continues to be lower than the blended federal and state statutory rate. In addition, until such time as our tax credit carryforwards are exhausted or expire, income tax expense is expected to substantially exceed the amount of cash income taxes payable by us.

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

As of June 30, 2013 and December 31, 2012, we had $222.4 million and $261.7 million, respectively, in cash and cash equivalents (excluding restricted cash of $19.3 million and $20.1 million, respectively), of which approximately $83.2 million and $92.9 million, respectively, was held by foreign affiliates, a portion of which would be subject to additional taxes if repatriated to the United States. Based on cash and working capital projections within domestic tax jurisdictions, we believe we will generate sufficient cash flows from our United States operations to meet our future debt repayment requirements, anticipated working capital needs and planned capital expenditures, as well as all of our other business needs in the United States.
A provision for income taxes has not been recorded for any United States or additional foreign taxes on undistributed earnings related to our foreign affiliates as these earnings were and are expected to continue to be permanently reinvested.  If we identify an exception to our general reinvestment policy of undistributed earnings, additional taxes will be recorded.  It is not practical to determine the amount of unrecognized deferred income tax liabilities on the undistributed earnings. The international jurisdictions in which we operate do not have any known restrictions that would prohibit the repatriation of cash and cash equivalents.
We are currently under examination by the IRS for the years ended December 31, 2009 through 2011. At this time, we do not believe that the outcome of any examination will have a material impact on our results of operations or financial position.
DIVIDENDS
We did not declare or pay any dividends on our common stock during 2012 or in the six months ended June 30, 2013. Our Board of Directors does not intend to pay regular dividends on our common stock. However, we expect to reevaluate our dividend policy on a regular basis and may, subject to compliance with the covenants contained in the Credit Facilities and other considerations, determine to pay dividends in the future.
Our ability to pay dividends is dependent on our ability to obtain funds from our subsidiaries. Payment of dividends by OSI to Bloomin’ Brands is restricted under the Credit Facilities to dividends for the purpose of paying Bloomin’ Brands’ franchise and income taxes and ordinary course operating expenses; dividends for certain other limited purposes; and other dividends subject to an aggregate cap over the term of the agreement.

Recently Issued Financial Accounting Standards
 
In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force)” (“ASU No. 2013-05”). Under ASU No. 2013-05, an entity would recognize cumulative translation adjustments in earnings when it ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets resided. However, when an entity sells either a part or all of its investment in a consolidated foreign entity, an entity would recognize cumulative translation adjustments in earnings only if the parent no longer has a controlling financial interest in the foreign entity as a result of the sale. In the case of sales of an equity method investment that is a foreign entity, a pro rata portion of cumulative translation adjustments attributable to the equity method investment would be recognized in earnings upon sale of the equity method investment. In addition, cumulative translation adjustments would be recognized in earnings upon a business combination achieved in stages such as a step acquisition. ASU No. 2013-05 is effective for public companies for fiscal years beginning on or after December 15, 2013 and interim periods within those fiscal years, with early adoption permitted. We will adopt ASU No. 2013-05 effective January 1, 2014 with prospective application to the derecognition of any foreign entity subsidiaries, groups of assets or investments in foreign entities completed on or after January 1, 2014. The impact of ASU No. 2013-05 on our financial position, results of operations and cash flows is dependent on future transactions resulting in derecognition of our foreign assets, subsidiaries or investments in foreign entities completed on or after adoption.

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

In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)” (“ASU No. 2013-11”). Under ASU No. 2013-11, an entity is required to present its unrecognized tax benefits net of its deferred tax assets when settlement in this manner is available under the tax law, which would be based on facts and circumstances as of the balance sheet reporting date and would not consider future events. Gross presentation in the notes to the financial statements will still be required. ASU No. 2013-11 is effective for public companies for fiscal years beginning on or after December 15, 2013 and interim periods within those fiscal years, with early adoption permitted. ASU No. 2013-11 will apply on a prospective basis to all unrecognized tax benefits that exist at the effective date, with the option to apply it retrospectively. This guidance will not have an impact on our financial position, results of operations or cash flows as we currently present unrecognized tax benefits net of deferred tax assets where applicable.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in interest rates on debt, changes in foreign currency exchange rates and changes in commodity prices.  We have not experienced a material change in market risk from changes in interest rates on debt, changes in foreign currency exchange rates and changes in commodity prices since December 31, 2012.  See Part II, Item 7A., “Quantitative and Qualitative Disclosures about Market Risk” in our 2012 Form 10-K for further information about 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 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 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 Officer concluded that our disclosure controls and procedures were effective as of June 30, 2013.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recent quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II:  OTHER INFORMATION

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 2012 Form 10-K which could materially affect our business, financial condition or future results. There have not been any significant changes with respect to the risks described in our 2012 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 2013 that were not registered under the Securities Act of 1933.

The following table provides information regarding our purchases of common stock during the three months ended June 30, 2013:

 	 	 	 	 	 	 	 	 	 	 	 	
MONTH	 	TOTAL NUMBER OF SHARES PURCHASED (1)	 	AVERAGE PRICE PAID PER SHARE	 	TOTAL NUMBER OF SHARES PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS	 	MAXIMUM NUMBER OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS	
April 1, 2013 through April 30, 2013	 	17,796	
 	 	$	20.78	
 	 	*	 	*	
May 1, 2013 through May 31, 2013	 	—	
 	 	n/a	
 	 	*	 	*	
June 1, 2013 through June 30, 2013	 	—	
 	 	n/a	
 	 	*	 	*	
Total	 	17,796	
 	 	 	 	*	 	*	
____________________
*     These amounts are not applicable as we do not have a share repurchase program in effect.
 	 	
(1)	Common stock purchased during the three months ended June 30, 2013 represented shares which were withheld for tax payments due upon the vesting of employee restricted stock awards.	

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Item 6.  Exhibits

 	 	 	
Exhibit Number	 	Description of Exhibits	
 	 	 	
10.01	 	First Amendment to Credit Agreement, Guaranty and Security Agreement dated as of April 10, 2013 among OSI Restaurant Partners, LLC, OSI HoldCo, Inc., the Subsidiary Guarantors, the Lenders and Deutsche Bank Trust Company Americas, as administrative agent for the Lenders (included as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, File No. 001-35625, and incorporated herein by reference)	
 	 	 	
31.1	 	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
 	 	 	
31.2	 	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
 	 	 	
32.1	 	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 1	
 	 	 	
32.2	 	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 1	
 	 	 	
101.INS	 	XBRL Instance Document	
 	 	 	
101.SCH	 	XBRL Taxonomy Extension Schema Document	
 	 	 	
101.CAL	 	XBRL Taxonomy Extension Calculation Linkbase Document	
 	 	 	
101.DEF	 	XBRL Taxonomy Extension Definition Linkbase Document	
 	 	 	
101.LAB	 	XBRL Taxonomy Extension Label Linkbase Document	
 	 	 	
101.PRE	 	XBRL Taxonomy Extension Presentation Linkbase Document	
 
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.

The registrant hereby undertakes to furnish supplementally a copy of any omitted schedule or other attachment to the Securities and Exchange Commission upon request.

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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, 2013	 	BLOOMIN’ BRANDS, INC.	
 	 	 	           (Registrant)	
 	 	 	 	
 	 	 	By: /s/ David J. Deno                   	
 	 	 	David J. Deno
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)	

 
[Remainder of page intentionally left blank]

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 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 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, 2013	/s/ Elizabeth A. Smith	
 	 	Elizabeth A. Smith	
 	 	Chief Executive Officer	

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 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 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, 2013	/s/ David J. Deno	
 	 	David J. Deno	
 	 	Executive Vice President and Chief Financial Officer	

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 30, 2013 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, 2013	/s/ Elizabeth A. Smith	
 	 	Elizabeth A. Smith	
 	 	Chief 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 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 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Deno, Executive Vice President and Chief Financial 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, 2013	/s/ David J. Deno	
 	 	David J. Deno	
 	 	Executive Vice President and Chief 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.