Bloomin' Brands, Inc. 10-Q

Item 1. Financial Statements CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA, UNAUDITED) SEPTEMBER 26, 2021 DECEMBER 27, 2020 ASSETS Current assets Cash and cash equivalents $ 76,337 $ 109,980 Restricted cash and cash equivalents 4,247 428 Inventories 72,433 61,928 Other current assets, net 87,642 151,518 Total current assets 240,659 323,854 Property, fixtures and equipment, net 852,105 887,687 Operating lease right-of-use assets 1,152,268 1,172,910 Goodwill 273,490 271,164 Intangible assets, net 456,058 459,983 Deferred income tax assets, net 161,903 153,883 Other assets, net 82,119 92,626 Total assets $ 3,218,602 $ 3,362,107 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 157,410 $ 141,457 Accrued and other current liabilities 444,591 388,321 Unearned revenue 284,128 381,616 Current portion of long-term debt 11,086 38,710 Total current liabilities 897,215 950,104 Non-current operating lease liabilities 1,196,604 1,217,921 Long-term debt, net 828,065 997,770 Other long-term liabilities, net 130,382 185,355 Total liabilities 3,052,266 3,351,150 Commitments and contingencies (Note 19) Stockholders’ equity Bloomin’ Brands stockholders’ equity Preferred stock, $ 0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of September 26, 2021 and December 27, 2020 — — Common stock, $ 0.01 par value, 475,000,000 shares authorized; 89,248,056 and 87,855,571 shares issued and outstanding as of September 26, 2021 and December 27, 2020, respectively 892 879 Additional paid-in capital 1,115,464 1,132,808 Accumulated deficit ( 758,870 ) ( 918,096 ) Accumulated other comprehensive loss ( 197,670 ) ( 211,446 ) Total Bloomin’ Brands stockholders’ equity 159,816 4,145 Noncontrolling interests 6,520 6,812 Total stockholders’ equity 166,336 10,957 Total liabilities and stockholders’ equity $ 3,218,602 $ 3,362,107 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED) THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Revenues Restaurant sales $ 996,718 $ 766,487 $ 3,031,396 $ 2,338,985 Franchise and other revenues 13,745 4,773 43,906 19,071 Total revenues 1,010,463 771,260 3,075,302 2,358,056 Costs and expenses Food and beverage costs 304,300 230,547 908,272 730,998 Labor and other related 290,246 246,861 859,883 761,667 Other restaurant operating 299,788 207,301 762,531 631,702 Depreciation and amortization 40,827 43,417 122,592 137,469 General and administrative 58,880 57,443 182,590 197,732 Provision for impaired assets and restaurant closings 1,585 ( 54 ) 8,962 66,223 Total costs and expenses 995,626 785,515 2,844,830 2,525,791 Income (loss) from operations 14,837 ( 14,255 ) 230,472 ( 167,735 ) Loss on extinguishment and modification of debt — — ( 2,073 ) ( 237 ) Other income (expense), net 5 1 26 ( 211 ) Interest expense, net ( 14,245 ) ( 18,300 ) ( 43,863 ) ( 46,647 ) Income (loss) before (benefit) provision for income taxes 597 ( 32,554 ) 184,562 ( 214,830 ) (Benefit) provision for income taxes ( 4,454 ) ( 14,776 ) 24,827 ( 70,210 ) Net income (loss) 5,051 ( 17,778 ) 159,735 ( 144,620 ) Less: net income (loss) attributable to noncontrolling interests 1,602 ( 141 ) 4,879 ( 116 ) Net income (loss) attributable to Bloomin’ Brands 3,449 ( 17,637 ) 154,856 ( 144,504 ) Redemption of preferred stock in excess of carrying value — — — ( 3,496 ) Net income (loss) attributable to common stockholders $ 3,449 $ ( 17,637 ) $ 154,856 $ ( 148,000 ) Net income (loss) $ 5,051 $ ( 17,778 ) $ 159,735 $ ( 144,620 ) Other comprehensive income (loss): Foreign currency translation adjustment 1,673 ( 4,095 ) 5,113 ( 41,202 ) Unrealized (loss) gain on derivatives, net of tax ( 153 ) 261 ( 323 ) ( 14,631 ) Reclassification of adjustments for loss on derivatives included in Net income (loss), net of tax 1,519 2,962 6,036 6,943 Amortization of terminated interest rate swaps, net of tax 1,479 — 2,950 — Comprehensive income (loss) 9,569 ( 18,650 ) 173,511 ( 193,510 ) Less: comprehensive income (loss) attributable to noncontrolling interests 1,602 ( 141 ) 4,879 ( 780 ) Comprehensive income (loss) attributable to Bloomin’ Brands $ 7,967 $ ( 18,509 ) $ 168,632 $ ( 192,730 ) Earnings (loss) per share attributable to common stockholders: Basic $ 0.04 $ ( 0.20 ) $ 1.74 $ ( 1.69 ) Diluted $ 0.03 $ ( 0.20 ) $ 1.42 $ ( 1.69 ) Weighted average common shares outstanding: Basic 89,229 87,558 88,890 87,394 Diluted 107,783 87,558 109,410 87,394 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED) BLOOMIN’ BRANDS, INC. COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUM- ULATED DEFICIT ACCUMULATED OTHER COMPREHENSIVE LOSS NON-CONTROLLING INTERESTS TOTAL SHARES AMOUNT Balance, June 27, 2021 89,211 $ 892 $ 1,109,904 $ ( 762,319 ) $ ( 202,188 ) $ 6,618 $ 152,907 Net income — — — 3,449 — 1,602 5,051 Other comprehensive income, net of tax — — — — 4,518 — 4,518 Stock-based compensation — — 5,593 — — — 5,593 Common stock issued under stock plans (1) 37 — ( 42 ) — — — ( 42 ) Purchase of noncontrolling interests — — 9 — — ( 12 ) ( 3 ) Distributions to noncontrolling interests — — — — — ( 2,062 ) ( 2,062 ) Contributions from noncontrolling interests — — — — — 374 374 Balance, September 26, 2021 89,248 $ 892 $ 1,115,464 $ ( 758,870 ) $ ( 197,670 ) $ 6,520 $ 166,336 Balance, December 27, 2020 87,856 $ 879 $ 1,132,808 $ ( 918,096 ) $ ( 211,446 ) $ 6,812 $ 10,957 Cumulative-effect from a change in accounting principle, net of tax — — ( 47,323 ) 4,370 — — ( 42,953 ) Net income — — — 154,856 — 4,879 159,735 Other comprehensive income, net of tax — — — — 13,776 — 13,776 Stock-based compensation — — 20,100 — — — 20,100 Common stock issued under stock plans (1) 1,392 13 9,870 — — — 9,883 Purchase of noncontrolling interests — — 9 — — ( 12 ) ( 3 ) Distributions to noncontrolling interests — — — — — ( 6,203 ) ( 6,203 ) Contributions from noncontrolling interests — — — — — 1,044 1,044 Balance, September 26, 2021 89,248 $ 892 $ 1,115,464 $ ( 758,870 ) $ ( 197,670 ) $ 6,520 $ 166,336 (CONTINUED...) 5 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED) BLOOMIN’ BRANDS, INC. COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUM- ULATED DEFICIT ACCUMULATED OTHER COMPREHENSIVE LOSS NON-CONTROLLING INTERESTS TOTAL SHARES AMOUNT Balance, June 28, 2020 87,534 $ 875 $ 1,123,613 $ ( 886,248 ) $ ( 217,130 ) $ 8,088 $ 29,198 Net loss — — — ( 17,637 ) — ( 141 ) ( 17,778 ) Other comprehensive loss, net of tax — — — — ( 872 ) — ( 872 ) Stock-based compensation — — 2,712 — — — 2,712 Common stock issued under stock plans (1) 39 — ( 179 ) — — — ( 179 ) Distributions to noncontrolling interests — — — — — ( 745 ) ( 745 ) Contributions from noncontrolling interests — — — — — 219 219 Balance, September 27, 2020 87,573 $ 875 $ 1,126,146 $ ( 903,885 ) $ ( 218,002 ) $ 7,421 $ 12,555 Balance, December 29, 2019 86,946 $ 869 $ 1,094,338 $ ( 755,089 ) $ ( 169,776 ) $ 7,139 $ 177,481 Cumulative-effect from a change in accounting principle, net of tax — — — ( 4,292 ) — — ( 4,292 ) Net loss — — — ( 144,504 ) — ( 116 ) ( 144,620 ) Other comprehensive loss, net of tax — — — — ( 48,743 ) ( 147 ) ( 48,890 ) Cash dividends declared, $ 0.20 per common share — — ( 17,480 ) — — — ( 17,480 ) Stock-based compensation — 11,072 — — — 11,072 Consideration for preferred stock in excess of carrying value, net of tax — — ( 3,496 ) — 517 1,261 ( 1,718 ) Common stock issued under stock plans (1) 627 6 ( 3,047 ) — — — ( 3,041 ) Purchase of noncontrolling interests — — ( 58 ) — — 1 ( 57 ) Distributions to noncontrolling interests — — — — — ( 1,083 ) ( 1,083 ) Contributions from noncontrolling interests — — — — — 366 366 Equity component value of convertible note issuance, net of tax of $ 650 — — 64,367 — — — 64,367 Sale of common stock warrant — — 46,690 — — — 46,690 Purchase of convertible note hedge — — ( 66,240 ) — — — ( 66,240 ) Balance, September 27, 2020 87,573 $ 875 $ 1,126,146 $ ( 903,885 ) $ ( 218,002 ) $ 7,421 $ 12,555 ________________ (1) Net of forfeitures and shares withheld for employee taxes. The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents BLOOMIN’ BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS, UNAUDITED) THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Cash flows provided by operating activities: Net income (loss) $ 159,735 $ ( 144,620 ) Adjustments to reconcile Net income (loss) to cash provided by operating activities: Depreciation and amortization 122,592 137,469 Amortization of debt discounts and issuance costs 3,441 6,504 Amortization of deferred gift card sales commissions 19,277 15,553 Provision for impaired assets and restaurant closings 8,962 66,223 Amortization of unrealized loss on terminated interest rate swaps 3,973 — Non-cash operating lease costs 57,791 55,401 Provision for expected credit losses and contingent lease liabilities 937 7,420 Inventory obsolescence and spoilage — 6,835 Stock-based and other non-cash compensation expense 20,100 11,072 Deferred income tax expense (benefit) 3,842 ( 80,201 ) (Gain) loss on disposal of property, fixtures and equipment ( 1,218 ) 1,055 Other, net 1,408 ( 2,223 ) Change in assets and liabilities ( 96,594 ) ( 25,517 ) Net cash provided by operating activities 304,246 54,971 Cash flows used in investing activities: Proceeds from disposal of property, fixtures and equipment 7,052 2,088 Capital expenditures ( 85,339 ) ( 66,956 ) Other investments, net 9,202 8,706 Net cash used in investing activities $ ( 69,085 ) $ ( 56,162 ) (CONTINUED...) 7 Table of Contents BLOOMIN’ BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS, UNAUDITED) THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Cash flows (used in) provided by financing activities: Proceeds from issuance of long-term debt $ 200,000 $ — Repayments of long-term debt and finance lease obligations ( 428,364 ) ( 19,798 ) Proceeds from borrowings on revolving credit facilities 378,000 505,000 Repayments of borrowings on revolving credit facilities ( 701,000 ) ( 549,000 ) Financing fees ( 5,868 ) ( 3,096 ) Proceeds from issuance of senior notes 300,000 — Proceeds from issuance of convertible senior notes — 230,000 Proceeds from issuance of warrants — 46,690 Purchase of convertible note hedge — ( 66,240 ) Issuance costs related to senior notes ( 5,546 ) ( 8,416 ) Proceeds (payments of taxes) from share-based compensation, net 9,883 ( 3,041 ) Distributions to noncontrolling interests ( 6,203 ) ( 1,083 ) Contributions from noncontrolling interests 1,044 366 Purchase of limited partnership and noncontrolling interests ( 3 ) ( 57 ) Payments for partner equity plan ( 7,135 ) ( 12,517 ) Cash dividends paid on common stock — ( 17,480 ) Redemption of subsidiary preferred stock — ( 1,475 ) Net cash (used in) provided by financing activities ( 265,192 ) 99,853 Effect of exchange rate changes on cash and cash equivalents 207 ( 3,293 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 29,824 ) 95,369 Cash, cash equivalents and restricted cash as of the beginning of the period 110,408 67,145 Cash, cash equivalents and restricted cash as of the end of the period $ 80,584 $ 162,514 Supplemental disclosures of cash flow information: Cash paid for interest $ 28,787 $ 35,425 Cash paid for income taxes, net of refunds $ 23,449 $ 4,198 Supplemental disclosures of non-cash investing and financing activities: Leased assets obtained in exchange for new operating lease liabilities $ 38,154 $ 12,971 Leased assets obtained in exchange for new finance lease liabilities $ 1,229 $ 1,263 Increase (decrease) in liabilities from the acquisition of property, fixtures and equipment $ 3,006 $ ( 7,174 ) The accompanying notes are an integral part of these consolidated financial statements. 8 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 1. Description of the Business and Basis of Presentation Description of the Business - Bloomin’ Brands (“Bloomin’ Brands” or the “Company”) owns and operates casual, upscale casual and fine dining restaurants. The Company’s restaurant portfolio has four concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Additional Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchise agreements. Basis of Presentation - The accompanying interim unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of the Company, all adjustments necessary for fair financial statement presentation for the periods presented have been included and are of a normal, recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 27, 2020. Recently Adopted Financial Accounting Standards - On December 28, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity,” (“ASU No. 2020-06”) which removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. ASU No. 2020-06 also requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method is no longer permitted for convertible instruments. The Company adopted ASU No. 2020-06 using the modified retrospective approach which resulted in a cumulative-effect adjustment that increased (decreased) the following Consolidated Balance Sheet accounts during the first quarter of 2021: ADJUSTMENT CONSOLIDATED BALANCE SHEET CLASSIFICATION AMOUNT (in millions) Deferred tax impact of cumulative-effect adjustment Deferred income tax assets, net $ 14.9 Debt discount reclassification Long-term debt, net $ 59.9 Equity issuance costs reclassification Long-term debt, net $ ( 2.1 ) Debt discount amortization reclassification, net of tax Accumulated deficit $ 4.4 Reversal of separated equity component, net of tax Additional paid-in capital $ ( 47.3 ) After adopting ASU No. 2020-06, the Company’s convertible senior notes due 2025 (the “2025 Notes”) are reflected entirely as a liability since the embedded conversion feature is no longer separately presented within stockholders’ equity. During 2020, the Company recognized debt discount amortization of $ 6.3 million within Interest expense, net related to its 2025 Notes. In February 2021, the Company made an irrevocable election under the indenture to require the principal portion of its 2025 Notes to be settled in cash and any excess in shares. Following the irrevocable notice, only the amounts expected to be settled in excess of the principal are considered in diluted earnings per share under the if-converted method. Recently Issued Financial Accounting Standards Not Yet Adopted - Recent accounting guidance not discussed herein is not applicable, did not have, or is not expected to have a material impact to the Company. Reclassifications - The Company reclassified certain items in the accompanying consolidated financial statements for prior periods to be comparable with the classification for the current period. These reclassifications had no effect on previously reported net income. 9 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 2. COVID-19 Charges In March 2020, the Company temporarily closed all restaurant dining rooms in the U.S. to comply with state and local regulations in response to the COVID-19 pandemic (“COVID-19”). Following is a summary of charges recorded in connection with the COVID-19 pandemic for the period indicated (dollars in thousands): CHARGES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) CLASSIFICATION THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 2020 Inventory obsolescence and spoilage Food and beverage costs $ 6,748 Compensation for idle employees (1) Labor and other related 28,243 Other operating charges Other restaurant operating 2,467 Lease guarantee contingent liabilities (2) General and administrative 4,188 Allowance for expected credit losses (3) General and administrative 3,334 Other charges General and administrative 2,624 Right-of-use asset impairment (4) Provision for impaired assets and restaurant closings 25,740 Fixed asset impairment (4) Provision for impaired assets and restaurant closings 31,727 Goodwill and other impairment (5) Provision for impaired assets and restaurant closings 3,096 $ 108,167 ________________ (1) Represents relief pay for hourly employees impacted by the closure of dining rooms, net of $ 14.4 million of employee retention tax credits earned. (2) Represents additional contingent liabilities recorded for lease guarantees related to certain former restaurant locations now operated by franchisees or other third parties. (3) Includes additional reserves to reflect an increase in expected credit losses, primarily related to franchise receivables. (4) Includes impairments resulting from the remeasurement of assets utilizing projected future cash flows revised for then current economic conditions, restructuring charges and the closure of certain restaurants. (5) Includes impairment of goodwill for the Company’s Hong Kong subsidiary. 3. Revenue Recognition The following table includes the categories of revenue included in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Revenues Restaurant sales $ 996,718 $ 766,487 $ 3,031,396 $ 2,338,985 Franchise and other revenues Franchise revenues 12,908 4,216 31,918 15,716 Other revenues (1) 837 557 11,988 3,355 Total Franchise and other revenues 13,745 4,773 43,906 19,071 Total revenues $ 1,010,463 $ 771,260 $ 3,075,302 $ 2,358,056 ________________ (1) The thirteen and thirty-nine weeks ended September 26, 2021 include an adjustment of $( 3.2 ) million to reduce the Company’s initial recorded estimate and net $ 3.1 million benefit from the recognition of recoverable Program of Social Integration (“PIS”) and Contribution for the Financing of Social Security (“COFINS”) taxes, respectively, within other revenues in connection with favorable court rulings in Brazil regarding the calculation methodology and taxable base. The net amount recognized as a result of the favorable court rulings primarily represents refundable PIS and COFINS taxes for prior years, including accrued interest, and will be recovered by offsetting future PIS and COFINS taxes due. 10 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following tables include disaggregation of Restaurant sales and franchise revenues, by restaurant concept and major international market, for the periods indicated: THIRTEEN WEEKS ENDED SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 (dollars in thousands) RESTAURANT SALES FRANCHISE REVENUES RESTAURANT SALES FRANCHISE REVENUES U.S. Outback Steakhouse $ 523,142 $ 9,335 $ 443,286 $ 1,422 Carrabba’s Italian Grill 159,147 482 124,019 359 Bonefish Grill 134,603 169 100,410 44 Fleming’s Prime Steakhouse & Wine Bar 79,687 — 49,846 — Other 2,211 3 1,845 — U.S. total 898,790 9,989 719,406 1,825 International Outback Steakhouse Brazil 74,020 — 32,485 — Other (1) 23,908 2,919 14,596 2,391 International total 97,928 2,919 47,081 2,391 Total $ 996,718 $ 12,908 $ 766,487 $ 4,216 THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 (dollars in thousands) RESTAURANT SALES FRANCHISE REVENUES RESTAURANT SALES FRANCHISE REVENUES U.S. Outback Steakhouse $ 1,649,433 $ 20,709 $ 1,320,524 $ 8,099 Carrabba’s Italian Grill 488,241 1,764 364,632 827 Bonefish Grill 410,613 473 299,226 184 Fleming’s Prime Steakhouse & Wine Bar 234,099 — 151,962 — Other 6,756 3 4,718 — U.S. total 2,789,142 22,949 2,141,062 9,110 International Outback Steakhouse Brazil 178,178 — 148,078 — Other (1) 64,076 8,969 49,845 6,606 International total 242,254 8,969 197,923 6,606 Total $ 3,031,396 $ 31,918 $ 2,338,985 $ 15,716 ________________ (1) Includes Restaurant sales for the Company’s Abbraccio concept in Brazil. 11 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table includes a detail of assets and liabilities from contracts with customers included on the Company’s Consolidated Balance Sheets as of the periods indicated: (dollars in thousands) SEPTEMBER 26, 2021 DECEMBER 27, 2020 Other current assets, net Deferred gift card sales commissions $ 10,832 $ 19,300 Unearned revenue Deferred gift card revenue $ 274,204 $ 373,048 Deferred loyalty revenue 9,478 8,099 Deferred franchise fees - current 446 469 Total Unearned revenue $ 284,128 $ 381,616 Other long-term liabilities, net Deferred franchise fees - non-current $ 4,332 $ 4,301 The following table is a rollforward of deferred gift card sales commissions for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Balance, beginning of period $ 12,548 $ 13,624 $ 19,300 $ 18,554 Deferred gift card sales commissions amortization ( 4,841 ) ( 3,961 ) ( 19,277 ) ( 15,553 ) Deferred gift card sales commissions capitalization 3,698 3,068 12,494 10,534 Other ( 573 ) ( 146 ) ( 1,685 ) ( 950 ) Balance, end of period $ 10,832 $ 12,585 $ 10,832 $ 12,585 The following table is a rollforward of unearned gift card revenue for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Balance, beginning of period $ 293,955 $ 279,973 $ 373,048 $ 358,757 Gift card sales 45,036 42,531 153,126 142,619 Gift card redemptions ( 61,189 ) ( 49,964 ) ( 237,988 ) ( 220,549 ) Gift card breakage ( 3,598 ) ( 2,599 ) ( 13,982 ) ( 10,886 ) Balance, end of period $ 274,204 $ 269,941 $ 274,204 $ 269,941 12 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 4. Impairments and Exit Costs The components of Provision for impaired assets and restaurant closings are as follows for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Impairment losses U.S. (1) $ 1,115 $ 332 $ 8,289 $ 55,045 International (1)(2) 28 — 180 3,468 Corporate (3) 19 32 257 6,193 Total impairment losses 1,162 364 8,726 64,706 Restaurant closure charges (benefits) U.S. (1) 423 ( 418 ) 389 1,344 International (1) — — ( 153 ) 173 Total restaurant closure charges (benefits) 423 ( 418 ) 236 1,517 Provision for impaired assets and restaurant closings $ 1,585 $ ( 54 ) $ 8,962 $ 66,223 ________________ (1) U.S. and international impairment and closure charges for the thirteen and thirty-nine weeks ended September 27, 2020 primarily relate to the COVID-19 pandemic, including charges related to the COVID-19 Restructuring discussed below. See Note 2 - COVID-19 Charges for details regarding the impact of the COVID-19 pandemic on the Company’s financial results. (2) Includes goodwill impairment charges of $ 2.0 million during the thirty-nine weeks ended September 27, 2020. (3) Corporate impairment charges for the thirty-nine weeks ended September 27, 2020 primarily relate to transformational initiatives. COVID-19 Restructuring - During the thirty-nine weeks ended September 27, 2020, the Company recognized pre-tax asset impairments and closure charges in connection with the closure of 22 restaurants and from the update of certain cash flow assumptions, including lease renewal considerations (the “COVID-19 Restructuring”). Following is a summary of the COVID-19 Restructuring charges recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the period indicated (dollars in thousands): CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) CLASSIFICATION THIRTY-NINE WEEKS ENDED DESCRIPTION SEPTEMBER 27, 2020 Property, fixtures and equipment impairments Provision for impaired assets and restaurant closings $ 16,932 Lease right-of-use asset impairments and closing costs Provision for impaired assets and restaurant closings 4,008 Severance and other expenses General and administrative 1,021 $ 21,961 The remaining impairment and closure charges during the periods presented resulted primarily from locations identified for closure. Annual Goodwill and Intangible Asset Impairment Assessment - The Company performs its annual assessment for impairment of goodwill and other indefinite-lived intangible assets during its second fiscal quarter. The Company’s 2021 assessment was qualitative and its 2020 assessment was quantitative. In connection with these assessments, the Company did no t record any impairment charges. 13 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Accrued Facility Closure and Other Costs Rollforward - The following table is a rollforward of the Company’s closed facility lease liabilities and other accrued costs associated with closure and restructuring initiatives, for the period indicated: THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 Balance, beginning of the period $ 12,879 Cash payments ( 3,861 ) Accretion 702 Adjustments ( 484 ) Balance, end of the period (1) $ 9,236 ________________ (1) As of September 26, 2021, the Company had exit-related accruals associated with closure and restructuring initiatives of $ 3.1 million recorded in Accrued and other current liabilities and $ 6.1 million recorded in Non-current operating lease liabilities on its Consolidated Balance Sheet. 5. Earnings (Loss) Per Share The dilutive effect of the 2025 Notes is calculated using the if-converted method which was required upon the Company’s adoption of ASU No. 2020-06. To the extent the Company has ability to settle its 2025 Notes in shares of its common stock, the principal and conversion spread on the 2025 Notes will have a dilutive impact on diluted earnings per share when the average market price of the Company’s common stock for a given period exceeds the conversion price of $ 11.89 per share of common stock. In February 2021, the Company provided the trustee of its 2025 Notes notice of the Company’s irrevocable election to settle the principal portion of the 2025 Notes in cash and any excess in shares. As a result, subsequent to the election, only the amounts in excess of the principal amount are considered in diluted earnings per share under the if-converted method. In connection with the offering of the 2025 Notes, the Company entered into the Convertible Note Hedge Transactions and Warrant Transactions described in Note 11 - Convertible Senior Notes. However, the Convertible Note Hedge Transactions are not considered when calculating dilutive shares given their anti-dilutive impact as an offset to dilution of shares underlying the 2025 Notes. The Warrant Transactions have a dilutive effect on the Company’s common stock to the extent the price of its common stock exceeds the $ 16.64 strike price of the Warrant Transactions. See Note 11 - Convertible Senior Notes for additional information regarding the 2025 Notes, Convertible Note Hedge Transactions and Warrant Transactions . 14 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table presents the computation of basic and diluted earnings (loss) per share attributable to common stockholders for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (in thousands, except per share data) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Net income (loss) attributable to Bloomin’ Brands $ 3,449 $ ( 17,637 ) $ 154,856 $ ( 144,504 ) Redemption of preferred stock in excess of carrying value (1) — — — ( 3,496 ) Net income (loss) attributable to common stockholders 3,449 ( 17,637 ) 154,856 ( 148,000 ) Convertible senior notes if-converted method interest adjustment, net of tax (2) — — 460 — Diluted net income (loss) attributable to common stockholders $ 3,449 $ ( 17,637 ) $ 155,316 $ ( 148,000 ) Basic weighted average common shares outstanding 89,229 87,558 88,890 87,394 Effect of dilutive securities: Stock options 864 — 913 — Nonvested restricted stock units 286 — 380 — Nonvested performance-based share units — — 31 — Convertible senior notes (2)(3) 10,476 — 12,300 — Warrants (3) 6,928 — 6,896 — Diluted weighted average common shares outstanding 107,783 87,558 109,410 87,394 Basic earnings (loss) per share attributable to common stockholders $ 0.04 $ ( 0.20 ) $ 1.74 $ ( 1.69 ) Diluted earnings (loss) per share attributable to common stockholders $ 0.03 $ ( 0.20 ) $ 1.42 $ ( 1.69 ) ________________ (1) Consideration paid in excess of carrying value for the redemption of its Abbraccio preferred stock is considered a deemed dividend and, for purposes of calculating earnings per share, reduces net income attributable to common stockholders for the thirty-nine weeks ended September 27, 2020. See Note 13 - Stockholders’ Equity for additional details. (2) Adjustment for interest related to the 2025 Notes weighted for the portion of the period prior to the Company’s election under the 2025 Notes indenture to settle the principal portion of its 2025 Notes in cash. Effective with the Company’s election, there will be no further numerator adjustments for interest or denominator adjustments for shares required to settle the principal portion. (3) Due to the Company’s net loss during the thirteen and thirty-nine weeks ended September 27, 2020, dilutive excess shares, if applicable, and warrants were excluded from the computation of diluted earnings per share as their effect would be antidilutive. Share-based compensation-related weighted-average securities outstanding not included in the computation of net earnings (loss) per share attributable to common stockholders because their effect was antidilutive were as follows, for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (shares in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Stock options — 5,381 455 5,133 Nonvested restricted stock units 77 797 53 813 Nonvested performance-based share units 376 628 424 595 15 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 6. Stock-based Compensation Plans The Company recognized stock-based compensation expense as follows for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Stock options $ 495 $ 992 $ 1,829 $ 2,862 Restricted stock units 2,043 2,303 6,373 6,326 Performance-based share units (1) 3,026 ( 588 ) 11,813 1,804 $ 5,564 $ 2,707 $ 20,015 $ 10,992 ________________ (1) The thirty-nine weeks ended September 26, 2021 includes a cumulative life-to-date adjustment for PSUs granted in fiscal years 2019, 2020 and 2021 based on revised Company performance projections of performance criteria set forth in the award agreements. In February 2021, the Company granted 0.3 million performance-based share units (“PSUs”). These PSUs maintain a three-year cliff vesting period and the underlying adjusted diluted earnings per share performance metric can range from zero to 200 % of the annual target grant. The grants additionally include a Relative Total Shareholder Return (“Relative TSR”) modifier to the final payout outcome, which can adjust the payout by 75 %, 100 % or 125 % of the achieved performance metric, with the overall payout capped at 200 % of the annual target grant. The Relative TSR is measured by comparing the Company’s Relative TSR to that of the constituents of the S&P 1500 Restaurants index. The fair value of PSUs granted was estimated using the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that the market conditions will be achieved and was applied to the trading price of the Company’s common stock on the date of the grant. Assumptions used in the Monte Carlo simulation model and the grant date fair value of PSUs granted were as follows for the period indicated: THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 2021 Assumptions: Risk-free interest rate (1) 0.20 % Volatility (2) 48.45 % Grant date fair value per unit (3) $ 29.73 ________________ (1) Risk-free interest rate is the U.S. Treasury yield curve in effect as of the grant date for the performance period of the unit. (2) Based on the historical volatility of the Company’s stock over the last seven years. (3) Represents a 14.3 % premium above the per share value of the Company’s common stock as of the grant date. The following represents unrecognized stock-based compensation expense and the remaining weighted-average vesting period as of September 26, 2021: UNRECOGNIZED COMPENSATION EXPENSE (dollars in thousands) REMAINING WEIGHTED-AVERAGE VESTING PERIOD (in years) Stock options $ 1,061 0.7 Restricted stock units $ 11,663 1.9 Performance-based share units $ 20,862 1.5 16 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 7. Other Current Assets, Net Other current assets, net, consisted of the following as of the periods indicated: (dollars in thousands) SEPTEMBER 26, 2021 DECEMBER 27, 2020 Prepaid expenses $ 22,944 $ 12,148 Accounts receivable - gift cards, net (1) 8,491 76,808 Accounts receivable - vendors, net (1) 8,568 8,886 Accounts receivable - franchisees, net (1) 1,658 1,007 Accounts receivable - other, net (1) 15,775 16,782 Deferred gift card sales commissions 10,832 19,300 Assets held for sale 1,374 3,831 Other current assets, net 18,000 12,756 $ 87,642 $ 151,518 ________________ (1) See Note 17 - Allowance for Expected Credit Losses for a rollforward of the related allowance for expected credit losses. 8. Other Assets, Net Other assets, net, consisted of the following as of the periods indicated: (dollars in thousands) SEPTEMBER 26, 2021 DECEMBER 27, 2020 Company-owned life insurance (1) $ 33,799 $ 44,814 Deferred debt issuance costs (2) 6,200 4,694 Liquor licenses 23,296 24,250 Other assets 18,824 18,868 $ 82,119 $ 92,626 ________________ (1) During the thirty-nine weeks ended September 26, 2021, the Company withdrew $ 9.1 million from its Company-owned life insurance policies to pay deferred compensation obligations. (2) Net of accumulated amortization of $ 8.2 million and $ 9.0 million as of September 26, 2021 and December 27, 2020, respectively. 9. Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following as of the periods indicated: (dollars in thousands) SEPTEMBER 26, 2021 DECEMBER 27, 2020 Accrued rent and current operating lease liabilities $ 184,240 $ 192,369 Accrued payroll and other compensation (1) 126,306 79,291 Accrued insurance 21,412 20,648 Other current liabilities (2) 112,633 96,013 $ 444,591 $ 388,321 ________________ (1) During the thirty-nine weeks ended September 26, 2021, the Company reclassified $ 27.3 million of payroll taxes deferred under the Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”) to current. (2) During the thirty-nine weeks ended September 26, 2021, other current liabilities increased primarily due to an $ 8.7 million increase in accrued interest related to the 2029 Notes. See Note 10 - Long-term Debt, Net for details regarding the 2029 Notes. 17 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 10. Long-term Debt, Net Following is a summary of outstanding long-term debt, as of the periods indicated: SEPTEMBER 26, 2021 DECEMBER 27, 2020 (dollars in thousands) OUTSTANDING BALANCE INTEREST RATE OUTSTANDING BALANCE INTEREST RATE Senior Secured Credit Facility: Term loan A (1) $ 197,500 2.58 % $ — Revolving credit facility (1) 124,000 2.69 % — Total Senior Secured Credit Facility 321,500 — Former Credit Facility: Term loan A (1) — 425,000 2.88 % Revolving credit facility (1) — 447,000 2.88 % Total Former Credit Facility — 872,000 2025 Notes (2) 230,000 5.00 % 230,000 5.00 % 2029 Notes 300,000 5.13 % — Finance lease liabilities 2,704 2,405 Less: unamortized debt discount and issuance costs (3) ( 14,871 ) ( 67,704 ) Less: finance lease interest ( 182 ) ( 221 ) Total debt, net 839,151 1,036,480 Less: current portion of long-term debt ( 11,086 ) ( 38,710 ) Long-term debt, net $ 828,065 $ 997,770 ________________ (1) Interest rate represents the weighted-average interest rate as of the respective periods. (2) See Note 11 - Convertible Senior Notes for details regarding the 2025 Notes and related hedge and warrant transactions . (3) In connection with the adoption of ASU No. 2020-06, debt discount of $ 59.9 million related to the 2025 Notes was de-recognized and $ 2.1 million of equity issuance costs were reclassified as debt issuance costs during the thirty-nine weeks ended September 26, 2021. 2029 Notes - On April 16, 2021, the Company and its wholly-owned subsidiary OSI Restaurant Partners, LLC (“OSI”), as co-issuers, issued $ 300.0 million aggregate principal amount of senior unsecured notes due 2029 (the “2029 Notes”). The 2029 Notes were issued pursuant to an Indenture, dated April 16, 2021 (the “Indenture”), by and among the Company, the guarantors named therein, and Wells Fargo Bank, National Association, as trustee. The 2029 Notes are guaranteed by each of the Company’s existing and future domestic restricted subsidiaries (other than OSI) that are guarantors or borrowers under its Senior Secured Credit Facility (as defined below) or certain other indebtedness. The 2029 Notes mature on April 15, 2029 , unless earlier redeemed or purchased by the Company. The 2029 Notes bear cash interest at an annual rate of 5.125 % payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021. The Company may redeem some or all of the 2029 Notes at any time on or after April 15, 2024, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest. The Company may also redeem up to 40 % of the 2029 Notes in an amount not greater than the proceeds of certain equity offerings completed before April 15, 2024, at a redemption price equal to 105.125 % of the principal amount thereof, plus accrued and unpaid interest. In addition, at any time prior to April 15, 2024, the Company may redeem some or all of the 2029 Notes at a price equal to 100 % of the principal amount, plus a make-whole premium, plus accrued and unpaid interest. The Indenture contains restrictive covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness or issue certain preferred stock; pay dividends, redeem stock or 18 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued make other distributions; make certain investments; create restrictions on the ability of the Company’s restricted subsidiaries to pay dividends or make other payments to the Company; create certain liens; transfer or sell certain assets; merge or consolidate; enter into certain transactions with the Company’s affiliates; and designate subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of exceptions and qualifications as set forth in the Indenture. The Indenture contains customary events of default, including, without limitation, failure to make required payments, failure to comply with certain agreements or covenants, cross-acceleration to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, and failure to pay certain judgments. The net proceeds from the 2029 Notes offering were approximately $ 294.5 million, after deducting the initial purchaser’s discount and the Company’s offering expenses. The net proceeds were used to repay a portion of the Company’s outstanding Term loan A and revolving credit facility in conjunction with the refinancing of its Former Credit Facility. Second Amended and Restated Credit Agreement - On April 16, 2021, the Company and OSI, as co-borrowers, entered into the Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”), which provides for senior secured financing of up to $ 1.0 billion consisting of a $ 200.0 million Term loan A and an $ 800.0 million revolving credit facility (the “Senior Secured Credit Facility”). The Senior Secured Credit Facility matures on April 16, 2026 and replaced the Company’s prior senior secured financing of up to $ 1.5 billion (the “Former Credit Facility”). The commitments under the Senior Secured Credit Facility may be increased in an aggregate principal amount of up to: (i) $ 425.0 million or (ii) at the Company’s option, up to an unlimited amount of incremental facilities, so long as the Consolidated Senior Secured Net Leverage Ratio (“CSSNLR”), as defined in the Second Amended and Restated Credit Agreement, is no more than 3.00 to 1.00 as of the last day of the most recent period of four consecutive fiscal quarters ended. The Company may elect an interest rate at each reset period based on the Base Rate or the Eurocurrency Rate, plus an applicable spread. The Base Rate option is the highest of: (i) the prime rate of Wells Fargo Bank, National Association, (ii) the federal funds effective rate plus 0.5 of 1.0% or (iii) the Eurocurrency rate with a one-month interest period plus 1.0 % (the “Base Rate”). The Eurocurrency Rate option is the seven, 30, 60, 90 or 180-day Eurocurrency rate, subject to a 0 % floor (the “Eurocurrency Rate”). The interest rates are as follows: BASE RATE ELECTION EUROCURRENCY RATE ELECTION Term loan A and revolving credit facility 50 to 150 basis points over the Base Rate 150 to 250 basis points over the Eurocurrency Rate Fees on letters of credit and daily unused availability under the revolving credit facility are 150 to 250 basis points and 25 to 40 basis points, respectively. The following is a summary of required quarterly amortization payments for the Term loan A (dollars in thousands): SCHEDULED QUARTERLY PAYMENT DATES TERM LOAN A December 26, 2021 through June 30, 2024 $ 2,500 September 29, 2024 through June 29, 2025 $ 3,750 September 28, 2025 and December 28, 2025 $ 5,000 The Senior Secured Credit Facility contains mandatory prepayment requirements for the Term loan A, including the requirement that the Company prepay outstanding amounts under these loans with 50 % of its annual excess cash flow, as defined in the Second Amended and Restated Credit Agreement, commencing with the fiscal year ending 19 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued December 25, 2022. The amount of outstanding loans required to be prepaid in accordance with the debt covenants may vary based on the Company’s CSSNLR and year end results. Total Net Leverage Ratio (“TNLR”) is the ratio of Consolidated Total Debt (Current portion of long-term debt and Long-term debt, net of cash, excluding the 2025 Notes) to Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization and certain other adjustments as defined in the Second Amended and Restated Credit Agreement). The Second Amended and Restated Credit Agreement requires a TNLR not to exceed 4.50 to 1.00. Seasonally annualized Consolidated EBITDA for the quarterly period ended September 26, 2021 was calculated as Consolidated EBITDA for the three consecutive quarters ending September 26, 2021 divided by 77.0 %. The Second Amended and Restated Credit Agreement limits, subject to certain exceptions, the Company’s ability and the ability of its subsidiaries to: incur additional indebtedness; make significant payments; sell assets; pay dividends and other restricted payments; make certain investments; acquire certain assets; effect mergers and similar transactions; and effect certain other transactions with affiliates. The Company is also limited to $ 200.0 million of aggregate capital expenditures during the year ended December 26, 2021. The Second Amended and Restated Credit Agreement also prohibited the Company from paying certain dividends and making certain restricted payments and acquisitions until the Company was in compliance with its TNLR covenant for the period ended September 26, 2021. As of September 26, 2021 and December 27, 2020, the Company was in compliance with its debt covenants. Following is a summary of principal payments of the Company’s total consolidated debt outstanding as of the period indicated: (dollars in thousands) SEPTEMBER 26, 2021 Year 1 $ 11,110 Year 2 10,757 Year 3 11,826 Year 4 246,424 Year 5 274,087 Thereafter 300,000 Total payments 854,204 Less: unamortized debt discount and issuance costs ( 14,871 ) Less: finance lease interest ( 182 ) Total principal payments $ 839,151 Deferred Financing Fees - During the thirty-nine weeks ended September 26, 2021, the Company deferred $ 5.5 million and $ 5.9 million of financing costs incurred in connection with the 2029 Notes and Second Amended Credit Agreement, respectively. Deferred financing fees of $ 3.7 million associated with the revolving credit facility portion of the Second Amended Credit Agreement were recorded in Other assets, net and all other deferred financing fees were recorded in Long-term debt, net. 11. Convertible Senior Notes 2025 Notes - In May 2020, the Company completed a $ 230.0 million principal amount private offering of 5.00 % convertible senior notes due in 2025. The 2025 Notes are governed by the terms of an indenture between the Company and Wells Fargo Bank, National Association, as the Trustee. The 2025 Notes mature on May 1, 2025 , unless earlier converted, redeemed or purchased by the Company. The 2025 Notes bear cash interest at an annual rate of 5.00 %, payable semi-annually in arrears on May 1 and November 1 of each year. Net proceeds from the 20 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 2025 Notes offering were approximately $ 221.6 million, after deducting the initial purchaser’s discounts and commissions and the Company’s offering expenses. The initial conversion rate applicable to the 2025 Notes is 84.122 shares of common stock per $ 1,000 principal amount of 2025 Notes, or a total of approximately 19.348 million shares for the total $ 230.0 million principal amount. This initial conversion rate is equivalent to an initial conversion price of approximately $ 11.89 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events. Prior to the close of business on the business day immediately preceding November 1, 2024, holders may convert all or a portion of their 2025 Notes under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020, if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (ii) during the five consecutive business days immediately after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2025 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company’s common stock and the conversion rate on each such trading day; (iii) upon the occurrence of specified corporate events or distributions on the Company’s common stock; (iv) if the Company calls the 2025 Notes for redemption, and (v) at any time from, and including November 1, 2024 until the close of business on the second scheduled trading day immediately before the maturity date. The 2025 Notes will be redeemable by the Company, in whole or in part, at the Company’s option at any time, and from time to time, on or after May 1, 2023 and on or before the 40 th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest, but only if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price on: (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any of the 2025 Notes for redemption will constitute a make-whole fundamental change with respect to that note, in which case the conversion rate applicable to the conversion of the 2025 Notes will be increased in certain circumstances if it is converted after it is called for redemption. If a fundamental change occurs prior to the maturity date, holders may require the Company to repurchase all or a portion of their 2025 Notes for cash at a price equal to 100 % of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest. Holders of 2025 Notes who convert their 2025 Notes in connection with a notice of a redemption or a make-whole fundamental change may be entitled to a premium in the form of an increase in the conversion rate of the 2025 Notes . 21 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table includes the outstanding principal amount and carrying value of the 2025 Notes as of the periods indicated: (dollars in thousands) SEPTEMBER 26, 2021 DECEMBER 27, 2020 Long-term debt, net Principal $ 230,000 $ 230,000 Less: debt discount (1) — ( 59,862 ) Less: debt issuance costs (1)(2) ( 6,296 ) ( 5,427 ) Net carrying amount $ 223,704 $ 164,711 Equity component (1) $ — $ 64,367 ________________ (1) In connection with the adoption of ASU No. 2020-06, debt discount and the equity component of the 2025 Notes were de-recognized and $ 2.1 million of issuance costs that were previously allocated to the equity component were reclassified as debt issuance costs during the thirty-nine weeks ended September 26, 2021. (2) Debt issuance costs are amortized to Interest expense, net using the effective interest method over the 2025 Notes’ expected life. Following is a summary of interest expense for the 2025 Notes, by component, for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Coupon interest $ 2,875 $ 2,875 $ 8,625 $ 4,568 Deferred discount amortization — 2,407 — 3,786 Deferred issuance cost amortization 392 215 1,159 343 Total interest expense (1) $ 3,267 $ 5,497 $ 9,784 $ 8,697 ________________ (1) The effective rate of the 2025 Notes over their expected life was 5.85 % for the thirteen and thirty-nine weeks ended September 26, 2021 and 13.73 % for the thirteen and thirty-nine weeks ended September 27, 2020. Based on the daily closing prices of the Company’s stock during the quarter ended September 26, 2021, holders of the 2025 Notes are eligible to convert their 2025 Notes during the fourth quarter of 2021. In February 2021, the Company provided the trustee of the 2025 Notes notice of its irrevocable election under the 2025 Notes indenture to settle the principal portion of the 2025 Notes upon conversion in cash and any excess in shares. Convertible Note Hedge and Warrant Transactions - In connection with the offering of the 2025 Notes , the Company entered into convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with certain of the initial purchasers of the 2025 Notes and/or their respective affiliates and other financial institutions (in this capacity, the “Hedge Counterparties”). Concurrently with the Company’s entry into the Convertible Note Hedge Transactions, the Company also entered into separate, warrant transactions with the Hedge Counterparties collectively relating to the same number of shares of the Company’s common stock, subject to customary anti-dilution adjustments, and for which the Company received proceeds that partially offset the cost of entering into the Convertible Note Hedge Transactions (the “Warrant Transactions”). The Convertible Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock that initially underlie the 2025 Notes , and are expected generally to reduce the potential equity dilution in excess of the principal amount due upon conversion of the 2025 Notes . The Warrant Transactions have a dilutive effect on the Company’s common stock to the extent that the price of its common stock exceeds the strike price of the Warrant Transactions. The strike price is initially $ 16.64 per share and is subject to certain adjustments under the terms of the Warrant Transactions. The Convertible Note Hedge Transactions are exercisable upon conversion of the 2025 Notes . The Convertible Note Hedge Transactions expire upon maturity of the 2025 Notes . The Warrant Transactions are exercisable on the expiration dates included in the related forms of confirmation. 22 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 12. Other Long-term Liabilities, Net Other long-term liabilities, net, consisted of the following as of the periods indicated: (dollars in thousands) SEPTEMBER 26, 2021 DECEMBER 27, 2020 Accrued insurance liability $ 31,422 $ 32,128 Chef and Restaurant Managing Partner deferred compensation obligations 18,413 32,306 Deferred payroll tax liabilities (1) 27,302 55,204 Other long-term liabilities (2) 53,245 65,717 $ 130,382 $ 185,355 _______________ (1) During the thirty-nine weeks ended September 26, 2021, the Company reclassified $ 27.3 million of payroll taxes deferred under the CARES Act to current. (2) The Company’s hedge liability decreased by $ 13.7 million during the thirty-nine weeks ended September 26, 2021 primarily from the termination of certain interest rate swaps. See Note 14 - Derivative Instruments and Hedging Activities for additional details. 13. Stockholders’ Equity Redeemable Preferred Stock - In connection with the development of its Abbraccio Cucina Italiana (“Abbraccio”) concept in 2015, the Company sold preferred shares of its Abbraccio concept (“Abbraccio Shares”) to certain investors. During the thirteen weeks ended March 29, 2020, the Company exercised a call option to purchase all outstanding Abbraccio Shares for $ 1.0 million and recorded a reduction to Accumulated deficit and an increase in Net loss applicable to common stockholders of $ 3.5 million for the consideration paid in excess of the Abbraccio Shares’ carrying value. Accumulated Other Comprehensive Loss (“AOCL”) - Following are the components of AOCL as of the periods indicated: (dollars in thousands) SEPTEMBER 26, 2021 DECEMBER 27, 2020 Foreign currency translation adjustment $ ( 183,770 ) $ ( 188,883 ) Unrealized loss on derivatives, net of tax ( 13,900 ) ( 22,563 ) Accumulated other comprehensive loss $ ( 197,670 ) $ ( 211,446 ) Following are the components of Other comprehensive income (loss) attributable to Bloomin’ Brands for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Foreign currency translation adjustment $ 1,673 $ ( 4,095 ) $ 5,113 $ ( 40,538 ) Unrealized (loss) gain on derivatives, net of tax (1) ( 153 ) 261 ( 323 ) ( 14,631 ) Reclassification of adjustments for loss on derivatives included in Net income (loss), net of tax (2) 1,519 2,962 6,036 6,943 Amortization of terminated interest rate swaps, net of tax 1,479 — 2,950 — Total unrealized gain (loss) on derivatives, net of tax 2,845 3,223 8,663 ( 7,688 ) Other comprehensive income (loss) attributable to Bloomin’ Brands $ 4,518 $ ( 872 ) $ 13,776 $ ( 48,226 ) ________________ (1) Unrealized loss on derivatives is net of tax of $ 5.1 million for the thirty-nine weeks ended September 27, 2020. (2) Reclassifications of adjustments for loss on derivatives are net of tax. See Note 14 - Derivative Instruments and Hedging Activities for the tax impact of reclassifications. 23 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 14. Derivative Instruments and Hedging Activities Cash Flow Hedges of Interest Rate Risk - In October 2018, the Company entered into variable-to-fixed interest rate swap agreements with 12 counterparties to hedge a portion of the cash flows of the Company’s variable rate debt. The swap agreements had an aggregate notional amount of $ 550.0 million and mature on November 30, 2022 . Under the terms of the swap agreements, the Company pays a weighted-average fixed rate of 3.04 % on the notional amount and receives payments from the counterparty based on the one-month LIBOR rate. In connection with the refinancing of its Former Credit Facility, on April 16, 2021 the Company terminated its variable-to-fixed interest rate swap agreements with seven counterparties having an aggregate notional amount of $ 275.0 million for a payment of approximately $ 13.3 million, including accrued interest. Following these terminations, $ 13.4 million of unrealized losses related to the terminated swap agreements included in AOCL will be amortized on a straight-line basis to Interest expense, net over the remaining original term of the terminated swaps. The Company’s swap agreements have been designated and qualify as cash flow hedges, are recognized on its Consolidated Balance Sheets at fair value and are classified based on the instruments’ maturity dates. As of September 26, 2021, the Company estimated $ 16.1 million will be reclassified to Interest expense, net over the next 12 fiscal months, including interest expense related to the terminated swap agreements discussed above. The following table presents the fair value and classification of the Company’s swap agreements, as of the periods indicated: (dollars in thousands) SEPTEMBER 26, 2021 DECEMBER 27, 2020 CONSOLIDATED BALANCE SHEET CLASSIFICATION Interest rate swaps - liability $ 7,502 $ 14,855 Accrued and other current liabilities Interest rate swaps - liability 1,917 15,640 Other long-term liabilities, net Total fair value of derivative instruments - liabilities (1) $ 9,419 $ 30,495 Accrued interest $ 609 $ 1,237 Accrued and other current liabilities ____________________ (1) See Note 16 - Fair Value Measurements for fair value discussion of the interest rate swaps. The following table summarizes the effects of the swap agreements on Net income (loss) for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Interest rate swap expense recognized in Interest expense, net $ ( 2,045 ) $ ( 3,991 ) $ ( 8,127 ) $ ( 9,353 ) Income tax benefit recognized in (Benefit) provision for income taxes 526 1,029 2,091 2,410 Total effects on Net income (loss) $ ( 1,519 ) $ ( 2,962 ) $ ( 6,036 ) $ ( 6,943 ) By utilizing the interest rate swaps, the Company is exposed to credit-related losses in the event that the counterparty fails to perform under the terms of the derivative contract. To mitigate this risk, the Company enters into derivative contracts with major financial institutions based upon credit ratings and other factors. The Company continually assesses the creditworthiness of its counterparties. As of September 26, 2021, all counterparties to the interest rate swaps had performed in accordance with their contractual obligations. The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if the repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on indebtedness. 24 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued As of September 26, 2021 and December 27, 2020, the fair value of the Company’s interest rate swaps was in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk, of $ 10.1 million and $ 32.2 million, respectively. As of September 26, 2021 and December 27, 2020, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions as of September 26, 2021 and December 27, 2020, it could have been required to settle its obligations under the agreements at their termination value of $ 10.1 million and $ 32.2 million, respectively. 15. Leases The following table includes a detail of lease assets and liabilities included on the Company’s Consolidated Balance Sheets as of the periods indicated: (dollars in thousands) CONSOLIDATED BALANCE SHEET CLASSIFICATION SEPTEMBER 26, 2021 DECEMBER 27, 2020 Operating lease right-of-use assets Operating lease right-of-use assets $ 1,152,268 $ 1,172,910 Finance lease right-of-use assets (1) Property, fixtures and equipment, net 2,349 1,947 Total lease assets, net $ 1,154,617 $ 1,174,857 Current operating lease liabilities (2) Accrued and other current liabilities $ 178,563 $ 176,791 Current finance lease liabilities Current portion of long-term debt 1,087 1,210 Non-current operating lease liabilities (3) Non-current operating lease liabilities 1,195,996 1,216,666 Non-current finance lease liabilities Long-term debt, net 1,435 974 Total lease liabilities $ 1,377,081 $ 1,395,641 ________________ (1) Net of accumulated amortization of $ 3.1 million and $ 2.3 million as of September 26, 2021 and December 27, 2020, respectively. (2) Excludes COVID-19-related deferred rent accruals of $ 2.1 million and $ 12.8 million as of September 26, 2021 and December 27, 2020, respectively, and accrued contingent percentage rent of $ 3.6 million and $ 2.7 million, as of September 26, 2021 and December 27, 2020, respectively. (3) Excludes COVID-19-related non-current deferred rent accruals of $ 0.6 million and $ 1.2 million as of September 26, 2021 and December 27, 2020, respectively. Following is a summary of expenses and income related to leases recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods indicated: CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) CLASSIFICATION THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Operating leases (1) Other restaurant operating $ 44,807 $ 45,341 $ 133,362 $ 133,999 Variable lease cost (2) Other restaurant operating 1,574 ( 1,677 ) 3,082 ( 1,603 ) Finance leases: Amortization of leased assets Depreciation and amortization 280 328 800 985 Interest on lease liabilities Interest expense, net 34 37 101 120 Sublease revenue Franchise and other revenues ( 3,276 ) ( 409 ) ( 6,936 ) ( 2,195 ) Lease costs, net $ 43,419 $ 43,620 $ 130,409 $ 131,306 ________________ (1) Excludes rent expense for office facilities and Company-owned closed or subleased properties of $ 3.2 million and $ 3.6 million for the thirteen weeks ended September 26, 2021 and September 27, 2020, respectively, and $ 9.9 million and $ 10.4 million for the thirty-nine weeks ended September 26, 2021 and September 27, 2020, respectively, which is included in General and administrative expense. Also excludes certain immaterial supply chain related rent expense included in Food and beverage costs. (2) Includes COVID-19-related rent abatement for all periods presented. 25 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table is a summary of other impacts to the Company’s Consolidated Financial Statements related to its leases for the periods indicated: THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Cash flows from operating activities: Cash paid for amounts included in the measurement of operating lease liabilities $ 155,661 $ 127,642 16. Fair Value Measurements Fair value is the price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date. Fair value is categorized into one of the following three levels based on the lowest level of significant input: Level 1 Unadjusted quoted market prices in active markets for identical assets or liabilities Level 2 Observable inputs available at measurement date other than quoted prices included in Level 1 Level 3 Unobservable inputs that cannot be corroborated by observable market data Fair Value Measurements on a Recurring Basis - The following table summarizes the Company’s financial assets and liabilities measured at fair value by hierarchy level on a recurring basis as of the periods indicated: SEPTEMBER 26, 2021 DECEMBER 27, 2020 (dollars in thousands) TOTAL LEVEL 1 LEVEL 2 TOTAL LEVEL 1 LEVEL 2 Assets: Cash equivalents: Fixed income funds $ 7,973 $ 7,973 $ — $ 15,404 $ 15,404 $ — Money market funds 10,308 10,308 — 16,494 16,494 — Restricted cash equivalents: Money market funds 4,247 4,247 — 428 428 — Total asset recurring fair value measurements $ 22,528 $ 22,528 $ — $ 32,326 $ 32,326 $ — Liabilities: Accrued and other current liabilities: Derivative instruments - interest rate swaps $ 7,502 $ — $ 7,502 $ 14,855 $ — $ 14,855 Other long-term liabilities: Derivative instruments - interest rate swaps 1,917 — 1,917 15,640 — 15,640 Total liability recurring fair value measurements $ 9,419 $ — $ 9,419 $ 30,495 $ — $ 30,495 Fair value of each class of financial instrument is determined based on the following: FINANCIAL INSTRUMENT METHODS AND ASSUMPTIONS Fixed income funds and Money market funds Carrying value approximates fair value because maturities are less than three months. Derivative instruments The Company’s derivative instruments include interest rate swaps. Fair value measurements are based on the contractual terms of the derivatives and use observable market-based inputs. The interest rate swaps are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest rate curves and credit spreads. The Company also considers its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. As of September 26, 2021 and December 27, 2020, the Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. 26 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Fair Value Measurements on a Nonrecurring Basis - Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to property, fixtures and equipment, operating lease right-of-use assets, goodwill and other intangible assets, which are remeasured when carrying value exceeds fair value. Carrying value after impairment approximates fair value. The following table summarizes the Company’s assets measured at fair value by hierarchy level on a nonrecurring basis, for the periods indicated: THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 (dollars in thousands) REMAINING CARRYING VALUE TOTAL IMPAIRMENT REMAINING CARRYING VALUE TOTAL IMPAIRMENT Assets held for sale (1) $ — $ — $ 1,182 $ 75 Operating lease right-of-use assets (1) 7,651 1,466 70,841 23,567 Property, fixtures and equipment (2) 8,928 7,260 27,978 38,381 Goodwill and other assets (3) — — 748 2,683 $ 16,579 $ 8,726 $ 100,749 $ 64,706 ____________________ (1) Asset carrying values measured using discounted cash flow models (Level 3). (2) Carrying values measured using Level 2 inputs to estimate fair value totaled $ 2.2 million for the thirty-nine weeks ended September 27, 2020. All other assets were valued using Level 3 inputs. Third-party market appraisals (Level 2) and discounted cash flow models (Level 3) were used to estimate fair value. (3) Other assets generally measured using the quoted market value of comparable assets (Level 2). See Note 4 - Impairments and Exit Costs for information regarding impairment charges resulting from the fair value measurement performed on a nonrecurring basis during the thirty-nine weeks ended September 27, 2020. Projected future cash flows, including discount rate and growth rate assumptions, are derived from then current economic conditions, expectations of management and projected trends of current operating results. As a result, the Company has determined that the majority of the inputs used to value its long-lived assets held and used are unobservable inputs that fall within Level 3 of the fair value hierarchy. In assessment of impairment for operating locations, the Company determined the fair values of individual operating locations using an income approach, which required discounting projected future cash flows. When determining the stream of projected future cash flows associated with an individual operating location, management made assumptions, including highest and best use and inputs from restaurant operations, where necessary, and about key variables including the following unobservable inputs: revenue growth rates, controllable and uncontrollable expenses, and asset residual values. In order to calculate the present value of those future cash flows, the Company discounted cash flow estimates at its weighted-average cost of capital applicable to the country in which the measured assets reside. The following table presents quantitative information related to certain unobservable inputs used in the Company’s Level 3 fair value measurements of Operating lease right-of-use assets and Property, fixtures and equipment for the impairment losses incurred during the period indicated: THIRTY-NINE WEEKS ENDED UNOBSERVABLE INPUTS SEPTEMBER 27, 2020 Weighted-average cost of capital 10.4 % to 11.3 % Long-term growth rate 1.5 % to 2.0 % Interim Disclosures about Fair Value of Financial Instruments - The Company’s non-derivative financial instruments consist of cash equivalents, accounts receivable, accounts payable and current and long-term debt. The fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts reported on its Consolidated Balance Sheets due to their short duration. 27 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The following table includes the carrying value and fair value of the Company’s debt by hierarchy level as of the periods indicated: SEPTEMBER 26, 2021 DECEMBER 27, 2020 CARRYING VALUE FAIR VALUE LEVEL 2 CARRYING VALUE FAIR VALUE LEVEL 2 (dollars in thousands) Senior Secured Credit Facility: Term loan A $ 197,500 $ 192,809 $ — $ — Revolving credit facility $ 124,000 $ 119,390 $ — $ — Former Credit Facility: Term loan A $ — $ — $ 425,000 $ 412,250 Revolving credit facility $ — $ — $ 447,000 $ 419,612 2025 Notes $ 230,000 $ 541,719 $ 230,000 $ 413,818 2029 Notes $ 300,000 $ 314,001 $ — $ — 17. Allowance for Expected Credit Losses The following table is a rollforward of the Company’s trade receivables allowance for expected credit losses for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Allowance for expected credit losses, beginning of period $ 3,989 $ 4,566 $ 4,095 $ 199 Adjustment for adoption of ASU No. 2016-13 — — — 1,018 Provision for expected credit losses (1) — 2 — 3,351 Charge-off of accounts ( 2 ) ( 29 ) ( 108 ) ( 29 ) Allowance for expected credit losses, end of period $ 3,987 $ 4,539 $ 3,987 $ 4,539 ________________ (1) In March 2020, the Company fully reserved substantially all of its outstanding franchise receivables in response to the economic impact of the COVID-19 pandemic. See Note 2 - COVID-19 Charges for details regarding the impact of the COVID-19 pandemic on the Company’s financial results. The Company is also exposed to credit losses from off-balance sheet lease guarantees primarily related to the divestiture of certain formerly Company-owned restaurant sites. See Note 19 - Commitments and Contingencies for details regarding these lease guarantees. 18. Income Taxes THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Income (loss) before (benefit) provision for income taxes $ 597 $ ( 32,554 ) $ 184,562 $ ( 214,830 ) (Benefit) provision for income taxes $ ( 4,454 ) $ ( 14,776 ) $ 24,827 $ ( 70,210 ) Effective income tax rate (NM) 45.4 % 13.5 % 32.7 % ________________ NM Not meaningful. For the thirteen weeks ended September 26, 2021, the benefit for income taxes includes the impact of changes to the estimate of the forecasted full-year effective tax rate relative to prior quarters in 2021. The benefit of FICA tax credits on certain employees’ tips reduced the effective tax rate as a result of forecasted pre-tax income. For the 28 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued thirteen weeks ended September 27, 2020, the benefit of FICA tax credits on certain employees’ tips increased the effective tax rate as a result of forecasted pre-tax book loss. The effective income tax rate for the thirty-nine weeks ended September 26, 2021 decreased by 19.2 percentage points as compared to the thirty-nine weeks ended September 27, 2020. The decrease was primarily due to the benefit of FICA tax credits on certain employees’ tips reducing the effective tax rate in 2021 as a result of forecasted pre-tax book income as compared to increasing the effective tax rate in 2020 as a result of forecasted pre-tax book loss. As of December 27, 2020, the Company had $ 155.3 million in general business tax credit carryforwards, which have a 20-year carryforward period and are utilized on a first-in, first-out basis. The Company expects to increase its general business credit carryforwards in 2021 by approximately $ 5 million to $ 10 million. The Company currently expects to utilize these tax credit carryforwards within a 10-year period. However, the Company’s ability to utilize these tax credits could be adversely impacted by, among other items, a future ownership change as defined under Section 382 of the Internal Revenue Code. The Company has a blended federal and state statutory rate of approximately 26 %. The effective income tax rate for the thirty-nine weeks ended September 26, 2021 was lower than the statutory rate primarily due to the benefit of FICA tax credits on certain employees’ tips. 19. Commitments and Contingencies Litigation and Other Matters - The Company is subject to legal proceedings, claims and liabilities, such as liquor liability, slip and fall cases, wage-and-hour and other employment-related litigation, which arise in the ordinary course of business. A reserve is recorded when it is both: (i) probable that a loss has occurred and (ii) the amount of loss can be reasonably estimated. There may be instances in which an exposure to loss exceeds the recorded reserve. The Company evaluates, on a quarterly basis, developments in legal proceedings that could cause an increase or decrease in the amount of the reserve that has been previously recorded, or a revision to the disclosed estimated range of possible losses, as applicable. The Company’s legal proceedings range from cases brought by a single plaintiff to threatened class actions with many putative class members. While some matters pending against the Company specify the damages claimed by the plaintiff or class, many seek unspecified amounts or are at very early stages of the legal process. Even when the amount of damages claimed against the Company are stated, the claimed amount may be exaggerated, unsupported or unrelated to possible outcomes, and as such, are not meaningful indicators of the Company’s potential liability or financial exposure. As a result, some matters have not yet progressed sufficiently through discovery or development of important factual information and legal issues to enable the Company to estimate an amount of loss or a range of possible loss. The Company recorded reserves of $ 6.3 million and $ 4.6 million for certain of its outstanding legal proceedings as of September 26, 2021 and December 27, 2020, respectively, within Accrued and other current liabilities and Other long-term liabilities on its Consolidated Balance Sheets. While the Company believes that additional losses beyond these accruals are reasonably possible, it cannot estimate a possible loss contingency or range of reasonably possible loss contingencies beyond these accruals. The Company intends to defend itself in legal matters. Some of these matters may be covered, at least in part, by insurance if they exceed specified retention or deductible amounts. However, it is possible that claims may be denied by the Company’s insurance carriers, the Company may be required by its insurance carriers to contribute to the payment of claims, or the Company’s insurance coverage may not continue to be available on acceptable terms or in sufficient amounts. The Company records receivables from third party insurers when recovery has been determined to be probable. The Company believes that the ultimate determination of liability in connection with 29 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued legal claims pending against the Company, if any, in excess of amounts already provided for such matters in the consolidated financial statements, will not have a material adverse effect on its business, annual results of operations, liquidity or financial position. However, it is possible that the Company’s business, results of operations, liquidity, or financial condition could be materially affected in a particular future reporting period by the unfavorable resolution of one or more matters or contingencies during such period. Lease Guarantees - The Company assigned its interest, and is contingently liable, under certain real estate leases. These leases have varying terms, the latest of which expires in 2032. As of September 26, 2021, the undiscounted payments that the Company could be required to make in the event of non-payment by the primary lessees was approximately $ 25.9 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of September 26, 2021 was approximately $ 21.2 million. In the event of default, the indemnity clauses in the Company’s purchase and sale agreements govern its ability to pursue and recover damages incurred. As of September 26, 2021, the Company’s recorded contingent lease liability was $ 8.8 million. Royalty Termination - On August 2, 2021, wholly-owned subsidiaries of the Company entered into the Purchase and Sale of Royalty Payment Stream and Termination of Royalty Agreement (the “Royalty Termination Agreement”) with the Carrabba’s Italian Grill founders (the “Carrabba’s Founders”), pursuant to which the Company’s obligation to pay future royalties on U.S. Carrabba’s Italian Grill restaurant sales and lump sum royalty fees on Carrabba’s Italian Grill (and Abbraccio) restaurants opened outside the U.S. was terminated. Upon execution of the Royalty Termination Agreement, the Company made a cash payment of $ 61.9 million to the Carrabba’s Founders, which was recorded in Other restaurant operating expense in its Consolidated Statements of Operations and Comprehensive Income (Loss) during the thirteen weeks ended September 26, 2021. 20. Segment Reporting The Company considers its restaurant concepts and international markets as operating segments, which reflects how the Company manages its business, reviews operating performance and allocates resources. Resources are allocated and performance is assessed by the Company’s Chief Executive Officer (“CEO”), whom the Company has determined to be its Chief Operating Decision Maker (“CODM”). The Company aggregates its operating segments into two reportable segments, U.S. and international. The U.S. segment includes all restaurants operating in the U.S. while restaurants operating outside the U.S. are included in the international segment. The following is a summary of reporting segments: REPORTABLE SEGMENT (1) CONCEPT GEOGRAPHIC LOCATION U.S. Outback Steakhouse United States of America Carrabba’s Italian Grill Bonefish Grill Fleming’s Prime Steakhouse & Wine Bar International Outback Steakhouse Brazil, Hong Kong/China Carrabba’s Italian Grill (Abbraccio) Brazil _________________ (1) Includes franchise locations. Segment accounting policies are the same as those described in Note 2 - Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 27, 2020. Revenues for all segments include only transactions with customers and exclude intersegment revenues. Excluded from Income (loss) from operations for U.S. and international are certain legal and corporate costs not directly related to the performance of the segments, most stock-based compensation expenses and certain bonus expenses. 30 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table is a summary of Total revenues by segment, for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Total revenues U.S. $ 912,733 $ 721,738 $ 2,820,709 $ 2,153,315 International 97,730 49,522 254,593 204,741 Total revenues $ 1,010,463 $ 771,260 $ 3,075,302 $ 2,358,056 The following table is a reconciliation of Segment income (loss) from operations to Income (loss) before (benefit) provision for income taxes, for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Segment income (loss) from operations U.S. $ 47,294 $ 29,574 $ 334,326 $ ( 21,968 ) International 1,412 ( 7,926 ) 7,419 ( 18,209 ) Total segment income (loss) from operations 48,706 21,648 341,745 ( 40,177 ) Unallocated corporate operating expense (1) ( 33,869 ) ( 35,903 ) ( 111,273 ) ( 127,558 ) Total income (loss) from operations 14,837 ( 14,255 ) 230,472 ( 167,735 ) Loss on extinguishment and modification of debt — — ( 2,073 ) ( 237 ) Other income (expense), net 5 1 26 ( 211 ) Interest expense, net ( 14,245 ) ( 18,300 ) ( 43,863 ) ( 46,647 ) Income (loss) before (benefit) provision for income taxes $ 597 $ ( 32,554 ) $ 184,562 $ ( 214,830 ) ____________________ (1) The thirteen and thirty-nine weeks ended September 27, 2020 include $ 4.2 million and $ 28.8 million, respectively, of charges that were not allocated to the Company’s segments related to its transformational initiatives, primarily recorded within General and administrative expense and Provision for impaired assets and restaurant closings. The following table is a summary of Depreciation and amortization expense by segment for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Depreciation and amortization U.S. $ 33,422 $ 35,056 $ 100,645 $ 110,004 International 5,842 5,672 17,128 18,314 Corporate 1,563 2,689 4,819 9,151 Total depreciation and amortization $ 40,827 $ 43,417 $ 122,592 $ 137,469 The following table is a summary of capital expenditures by segment for the periods indicated: THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 26, 2021 SEPTEMBER 27, 2020 Capital expenditures U.S. $ 74,076 $ 45,094 International 8,985 12,567 Corporate 6,513 3,384 Total capital expenditures $ 89,574 $ 61,045 31 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS