What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-23 compared with 2021-02-24 · 327 added, 394 removed, 433 unchanged (62% of the section changed)

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We are one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts.

As of December 27, 2020, we owned and operated 1,157 restaurants and franchised 317 restaurants across 47 states, Guam and 20 countries.

As of December 26, 2021, we owned and operated 1,169 full-service restaurants and off-premises only kitchens and franchised 329 full-service restaurants and off-premises only kitchens across 47 states, Guam and 17 countries.

We have four founder-inspired concepts:

Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar.

Executive Summary

Our 2020 financial results include:

• A decrease in Total revenues of (23.4)% to $3.2 billion in 2020 as compared to 2019, primarily due to:

(i) significantly lower comparable restaurant sales and franchise revenues principally attributable to the COVID-19 pandemic, (ii) the effect of foreign currency translation of the Brazil Real relative to the U.S.

dollar and (iii) the net impact of restaurant closures and openings.

• Loss from operations of $(175.0) million in 2020, as compared to income from operations of $191.1 million in 2019, was primarily due to significantly lower comparable restaurant sales and franchise revenues and costs incurred in connection with the COVID-19 pandemic, and costs incurred in connection with our transformation initiatives.

These losses were partially offset by reduced operating costs and a reduction in prep labor hours, offset by higher labor costs.

Financial Highlights

Our financial highlights for 2021 include the following:

combined and Outback Steakhouse comparable restaurant sales of 30.5% and 24.2%, respectively, relative to 2020 and 4.5% and 3.2%, respectively, relative to 2019;

• An increase in Total revenues of 30.0%, as compared to 2020, and a decrease in Total revenues of 0.4%, as compared to 2019;

• Restaurant-level operating margin of 16.5% for 2021, as compared to 9.9% and 14.9% for 2020 and 2019, respectively;

• Decrease in General and administrative expense of $8.7 million and $29.6 million, as compared to 2020 and 2019, respectively;

• Income from operations of $309.0 million in 2021, as compared to Loss from operations of $(175.0) million in 2020 and Income from operations of $191.1 million in 2019;

• Diluted earnings (loss) per share attributable to common stockholders of $2.00 in 2021 as compared to $(1.85) and $1.45 in 2020 and 2019, respectively.

Business Strategies

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• Drive Long-Term Shareholder Value.

We plan to drive long-term shareholder value by reinvesting operational cash flow into our business and improving our credit profile.

We plan to drive long-term shareholder value by reinvesting operational cash flow into our business, improving our credit profile and returning excess cash to shareholders through share repurchases and dividends.

• Enrich Engagement Among Stakeholders.

We take the responsibility to our people, customers and communities seriously and continue to invest in programs that support the well-being of those engaged with us.

• Maximize International Opportunity.

We continue to focus on existing geographic regions in South America, with strategic expansion in Brazil, and pursue global franchise opportunities.

We intend to fund our business strategies, drive revenue growth and margin improvement, in part by reinvesting savings generated by cost savings and productivity initiatives across our businesses.

• Accelerate Growth Opportunities.

We believe a substantial development opportunity remains for our concepts in the U.S.

and internationally through existing geography fill-in and market expansion.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Recent Developments - COVID-19

In response to the COVID-19 pandemic, governmental authorities took dramatic action in an effort to slow the spread of the disease.

Along with many other restaurant businesses across the country, we temporarily limited our services in the U.S.

to carry-out and delivery only beginning March 20, 2020.

In early May 2020, we began to reopen our restaurant dining rooms with limited seating capacity in compliance with state and local regulations.

As of December 27, 2020, 85% of our restaurant dining rooms were open with many still subject to seating capacity restrictions.

The temporary closure of our dining rooms and the limitations on seating capacity in our reopened dining rooms has resulted in significantly reduced traffic in our restaurants.

In response to the COVID-19 pandemic, we have tightly managed expenses while taking steps to secure our liquidity position .

See the subsection below e ntitled “ Liquidity and Capital Resources ” for furthe r details.

Key Performance Indicators

continue to pursue U.S.

fill-in opportunities in key states such as Florida and Texas with Outback, and California and Florida with Fleming’s.

We will also focus on geographic regions in South America, with strategic expansion in Brazil, and pursue global franchise opportunities.

We intend to fund our business strategies, drive revenue growth and margin improvement, in part by reinvesting savings generated by cost savings and productivity initiatives across our businesses.

Key Financial Performance Indicators

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

• Average restaurant unit volumes —average sales (excluding gift card breakage) per restaurant to measure changes in consumer traffic, pricing and development of the brand;

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

• Average restaurant unit volumes —average sales (excluding gift card breakage) per restaurant to measure changes in customer traffic, pricing and development of the brand;

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

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

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

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

Restaurant-level operating margin is widely regarded in the industry as a useful metric to evaluate restaurant-level operating efficiency and performance of ongoing restaurant-level operations, and we use it for these purposes, overall and particularly within our two segments.

Our restaurant-level operating margin is expressed as the percentage of our Restaurant sales that Food and beverage costs, Labor and other related and Other restaurant operating expense (including advertising expenses) represent, in each case as such items are reflected in our Consolidated Statements of Operations.

Our restaurant-level operating margin is expressed as the percentage of our Restaurant sales that Food and beverage costs, Labor and other related expenses and Other restaurant operating expenses (including advertising expenses) represent, in each case as such items are reflected in our Consolidated Statements of Operations and Comprehensive Income (Loss).

The following categories of our revenue and operating expenses are not included in restaurant-level operating margin because we do not consider them reflective of operating performance at the restaurant-level within a period:

(i) Franchise and other revenues which are earned primarily from franchise royalties and other non-food and beverage revenue streams, such as rental and sublease income.

(ii) Depreciation and amortization which, although substantially all is related to restaurant-level assets, represent historical sunk costs rather than cash outlays for the restaurants.

(ii) Depreciation and amortization which, although substantially all of which is related to restaurant-level assets, represent historical sunk costs rather than cash outlays for the restaurants.

(iii) General and administrative expense which includes primarily non-restaurant-level costs associated with support of the restaurants and other activities at our corporate offices.

(iv) Asset impairment charges and restaurant closing costs which are not reflective of ongoing restaurant performance in a period.

Restaurant-level operating margin excludes various expenses, as discussed above, that are essential to support the operations of our restaurants and may materially impact our Consolidated Statements of Operations and Comprehensive (Loss) Income.

As a result, restaurant-level operating margin is not

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

indicative of our consolidated results of operations and is presented exclusively as a supplement to, and not a substitute for, net (loss) income or (loss) income from operations.

As a result, restaurant-level operating margin is not indicative of our consolidated results of operations and is presented exclusively as a supplement to, and not a substitute for, Net income (loss) or Income (loss) from operations.

In addition, our presentation of restaurant operating margin may not be comparable to similarly titled measures used by other companies in our industry;

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

• Consumer satisfaction scores —measurement of our consumers’ experiences in a variety of key areas.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

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

Selected Operating Data

The table below presents the number of our restaurants in operation as of the periods indicated:

DECEMBER 27, 2020 DECEMBER 29, 2019

The table below presents the number of our full-service restaurants in operation as of the periods indicated:

Number of restaurants (at end of the period):

DECEMBER 26, 2021 DECEMBER 27, 2020

Outback Steakhouse

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System-wide total 1,454 1,452

System-wide total - Company-owned 1,165 1,154

System-wide total - Franchised 289 298

____________________

Company-owned and International Franchised Other each include three and two fast-casual Aussie Grill locations as of December 27, 2020 and December 29, 2019, respectively.

(1) Restaurant counts as of December 27, 2020 have been adjusted to exclude off-premises only locations included in the table below.

(2) The restaurant counts for Brazil are reported as of November 30, 2021 and 2020, respectively, to correspond with the balance sheet dates of this subsidiary.

(3) As of December 27, 2020, we had 20 international dark kitchens that offer delivery only.

One of these locations was included within Company-owned Other and 19 were included in Franchised Outback Steakhouse - South Korea.

(3) International Company-owned Other included two and one Aussie Grill locations as of December 26, 2021 and December 27, 2020, respectively.

International Franchised Other included three Aussie Grill locations as of December 26, 2021 and December 27, 2020.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The table below presents the number of our off-premises only kitchens in operation as of the periods indicated:

Number of kitchens (at end of the period) (1):

DECEMBER 26, 2021 DECEMBER 27, 2020

Company-owned 3 2

International:

Company-owned 1 1

Franchised - South Korea 40 19

System-wide total 44 22

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(1) Excludes virtual concepts that operate out of existing restaurants and sports venue locations.

Results of Operations

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Total costs and expenses 92.5 105.5

(Loss) income from operations (5.5) 4.6

Loss on modification of debt (*) —

Other income (expense), net * (*)

Income (loss) from operations 7.5 (5.5)

Loss on extinguishment and modification of debt (0.1) (*)

Other income, net * *

Interest expense, net (1.4) (2.1)

(Loss) income before (benefit) provision for income taxes (7.6) 3.4

(Benefit) provision for income taxes (2.6) 0.2

Net (loss) income (5.0) 3.2

net (loss) income attributable to noncontrolling interests (*) *

Net (loss) income attributable to Bloomin’ Brands

Income (loss) before provision (benefit) for income taxes 6.0 (7.6)

Provision (benefit) for income taxes 0.6 (2.6)

Net income (loss) 5.4 (5.0)

net income (loss) attributable to noncontrolling interests 0.2 (*)

Net income (loss) attributable to Bloomin’ Brands

5.2 % (5.0) %

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Comparable restaurant sales (1) 912.7

Restaurant closings (66.1)

Effect of foreign currency translation (52.1)

Divestiture of restaurants through refranchising transactions (11.2)

Restaurant openings (1) 54.4

Restaurant closures (35.3)

Effect of foreign currency translation (15.3)

For fiscal year 2021 $ 4,061.1

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(1) Summation of quarterly changes for restaurant openings and comparable restaurant sales will not total to annual amounts as the restaurants that meet the definition of a comparable restaurant will differ each period based on when the restaurant opened.

The decrease in Restaurant sales in 2020 as compared to 2019 was primarily due to:

(i) significantly lower comparable restaurant sales principally attributable to the COVID-19 pandemic, (ii) the closure of 55 restaurants since December 30, 2018, (iii) the effect of foreign currency translation of the Brazilian Real relative to the U.S.

dollar and (iv) domestic refranchising.

The decrease in Restaurant sales was partially offset by the opening of 40 new restaurants not included in our comparable restaurant sales base.

The increase in Restaurant sales in 2021 as compared to 2020 was primarily due to:

(i) higher comparable restaurant sales from recovery of in-restaurant dining from the significantly reduced levels in 2020 after the onset of the pandemic and strong retention of off-premises sales and (ii) the opening of 48 new restaurants not included in our comparable restaurant sales base.

The increase in Restaurant sales was partially offset by the closure of 46 restaurants since December 29, 2019 and the effect of foreign currency translation of the Brazilian Real relative to the U.S.

Average Restaurant Unit Volumes and Operating Weeks

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Comparable Restaurant Sales, Traffic and Average Check Per Person (Decreases) Increases

Following is a summary of comparable restaurant sales, traffic and average check per person (decreases) increases for the periods indicated:

Comparable Restaurant Sales, Traffic and Average Check Per Person Increases (Decreases)

Following is a summary of comparable restaurant sales, traffic and average check per person increases (decreases) for the periods indicated:

COMPARABLE TO 2019 (1) COMPARABLE TO 2020 COMPARABLE TO 2019

Year over year percentage change:

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(1) Represents comparable restaurant sales, traffic and average check per person increases (decreases) relative to fiscal year 2019 for improved comparability due to the impact of COVID-19 on fiscal year 2020 restaurant sales.

(2) Relocated restaurants closed more than 60 days are excluded from comparable restaurant sales until at least 18 months after reopening.

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Includes trading day impact from calendar period reporting.

(3) During 2020, Bonefish Grill replaced guest count with entrée count to measure restaurant traffic.

Bonefish Grill and Combined U.S.

traffic for 2020 was calculated using the entrée count methodology for Bonefish Grill as if the new methodology was in effect at the start of the fiscal year.

(4) Average check per person includes the impact of menu pricing changes, product mix and discounts.

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(1) Represents franchise royalties, advertising fees and initial franchise fees.

Franchisee Deferred Payment Agreement - On December 27, 2020, we entered into an agreement (the “Resolution Agreement”) with Cerca Trova Southwest Restaurant Group, LLC (d/b/a Out West Restaurant Group) and certain of its affiliates (collectively, “Out West”), a franchisee of approximately 90 Outback Steakhouse restaurants in the western United States, primarily in California.

Franchise revenues increased during 2021 primarily due to higher franchise sales as a result of the impact of COVID-19 on 2020 franchise sales.

(2) Includes a $3.1 million benefit in 2021 from the recognition of recoverable Program of Social Integration (“PIS”) and Contribution for the Financing of Social Security (“COFINS”) taxes in connection with favorable court rulings in Brazil regarding the calculation methodology and taxable base.

The 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.

Franchisee Deferred Payment Agreement - On December 27, 2020, we entered into the Resolution Agreement with Out West, who currently franchises approximately 80 Outback Steakhouse restaurants in the western United States, primarily in California.

Under the terms of the Resolution Agreement, we agreed to permanently waive all past due royalties and advertising fees for the period of February 24, 2020 to July 26, 2020 and defer, among other items, all past due royalties and advertising fees for the period of July 27, 2020 to November 22, 2020 due to the significant impact of the COVID-19 pandemic on Out West’s business.

See Note 4 - Revenue Recognition of the Notes to Consolidated Financial Statements for further details regarding the Resolution Agreement.

During 2021, Out West franchise revenues recovered, approaching historical levels.

Following is a summary of franchise and other revenues and comparable restaurant sales for Out West franchised locations for the periods indicated:

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(1) Includes Franchise and other revenues recognized from December 30, 2019 through February 23, 2020.

No Franchise and other revenues were recognized after February 23, 2020 since collectability was not reasonably assured.

In 2021, we anticipate franchise revenues from Out West to be materially consistent with 2020, assuming a consistent level of COVID-19-related operating restrictions to the level currently in place.

However, if government mandated dining room closures are lifted and seating capacity restrictions for the states Out West operates in are relaxed during 2021, our franchise revenues may increase.

(1) Franchise and other revenues during 2020 were significantly impacted by the COVID-19 pandemic.

During 2021, we collected Out West monthly royalty and advertising fees, and $5.1 million of past due amounts deferred under the Resolution Agreement.

COSTS AND EXPENSES

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% of Restaurant sales 30.3 % 31.3 % (1.0) %

Food and beverage costs decreased as a percentage of Restaurant sales in 2020 as compared to 2019 primarily due to 0.4% from increases in average check per person and 0.3% from cost savings attributable to waste reduction initiatives, including menu simplification, partially offset by an increase as a percentage of Restaurant sales of 0.4% from commodity inflation.

Food and beverage costs decreased as a percentage of Restaurant sales in 2021 as compared to 2020 primarily due to:

(i) 0.9% from increases in average check per person, primarily driven by reduced discounting and an increase in menu pricing, (ii) 0.4% from the impact of certain cost savings initiatives and (iii) 0.3% from inventory obsolescence and spoilage costs during 2020 associated with the COVID-19 pandemic.

These decreases were partially offset by an increase as a percentage of Restaurant sales of 0.6% from commodity inflation.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

In 2021, we expect commodity costs to remain flat.

In 2022, we anticipate approximately 11.0% to 13.0% commodity inflation, with approximately 70% of our estimated annual food purchases currently covered by fixed contracts and the remainder subject to floating market prices.

Labor and other related expenses

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% of Restaurant sales 28.4 % 32.0 % (3.6) %

Labor and other related expenses include all direct and indirect labor costs incurred in operations, including distribution expense to Restaurant Managing Partners, costs related to field deferred compensation plans and other field incentive compensation expenses.

Labor and other related expenses increased as a percentage of Restaurant sales in 2020 as compared to 2019 primarily due to:

(i) 2.3% from decreased restaurant sales, (ii) 0.9% from relief pay primarily for hourly employees impacted by the closure of dining rooms due to COVID-19, offset by employee retention tax credits, and (iii) 0.6% from higher labor costs.

These increases were partially offset by a decrease as a percentage of Restaurant sales of 1.4% from lower prep labor hours.

In 2021, we anticipate approximately 3.0% to 3.5% labor cost inflation.

Labor and other related expenses include all direct and indirect labor costs incurred in operations, including distribution expense to Restaurant Managing Partners and other field incentive compensation expenses.

Labor and other related expenses decreased as a percentage of Restaurant sales in 2021 as compared to 2020 primarily due to 4.1% from leveraging increased restaurant sales and 0.8% from the 2020 impact of net relief pay.

These decreases were partially offset by increases as a percentage of Restaurant sales of 0.8% from wage rate increases and 0.4% from higher management bonus.

In 2022, we anticipate high-single digit labor cost inflation.

Other restaurant operating expenses

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% of Restaurant sales 24.8 % 26.9 % (2.1) %

In August 2021, we entered into the Royalty Termination Agreement with the Carrabba’s Founders for $61.9 million in cash.

See Note 22 - Commitments and Contingencies for additional details.

We recorded Carrabba’s Italian Grill royalty expense of $3.0 million and $3.8 million during fiscal years 2021 and 2020, respectively.

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.

Other restaurant operating expenses increased as a percentage of Restaurant sales in 2020 as compared to 2019 primarily due to lower sales volumes and costs incurred as a result of the COVID-19 pandemic, including 2.8% from decreased restaurant sales and 1.9% from incremental delivery-related costs.

These increases were partially offset by a decrease as a percentage of Restaurant sales of 2.0% from reduced advertising, utilities and operating expense.

Other restaurant operating expenses decreased as a percentage of Restaurant sales in 2021 as compared to 2020 primarily due to:

(i) 3.2% from leveraging increased restaurant sales, (ii) 1.0% from lower advertising expense and (iii) 0.3% from a decrease in off-premises related costs.

These decreases were partially offset by increases as a percentage of Restaurant sales of 1.5% from the Carrabba’s Italian Grill royalty termination payment and 0.8% from higher utilities, operating and rent expense.

Depreciation and amortization

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Depreciation and amortization $ 163.4 $ 180.3 $ (16.9)

Depreciation and amortization decreased in 2020 as compared to 2019 primarily due to impairment and the effect of foreign currency translation.

In 2021, we anticipate approximately $165 million to $175 million of depreciation and amortization expense.

Depreciation and amortization decreased in 2021 as compared to 2020 primarily due to a decreased level of capital expenditures since 2018, as compared to historical levels, and asset impairments during 2020.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

General and administrative expenses

General and administrative

General and administrative expense includes salaries and benefits, management incentive programs, related payroll tax and benefits, other employee-related costs and professional services.

Following is a summary of the changes in General and administrative expense for the period indicated:

Following is a summary of the change in General and administrative expense for the period indicated:

(dollars in millions) 2021

For fiscal year 2020 $ 254.4

Compensation, benefits and payroll tax (11.2)

Transformational costs (12.7)

Severance (7.0)

Expected credit losses and contingent lease liabilities (6.9)

Travel and entertainment (2.3)

Legal and professional fees (6.8)

Employee stock-based compensation 9.7

Foreign currency exchange (4.3)

Deferred compensation (3.8)

Incentive compensation 7.6

Transformational costs (2) 11.0

Expected credit losses and contingent lease liabilities 7.8

Severance 5.0

For fiscal year 2021 $ 245.6

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(1) Includes managing partner conference costs.

(2) Primarily consists of consulting fees incurred in connection with our transformation initiatives.

In 2021, we anticipate approximately $225 million to $230 million of general and administrative expense.

Provision for impaired assets and restaurant closings

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Provision for impaired assets and restaurant closings $ 13.7 $ 76.4 $ (62.7)

COVID-19 Restructuring - During 2020, we recognized asset impairment and closure charges of $66.5 million and $3.6 million within the U.S.

During 2020, we recognized asset impairment and closure charges of $66.5 million and $3.6 million within the U.S.

and international segments, respectively, primarily related to the COVID-19 pandemic.

COVID-19-related pre-tax impairments and closure costs include $23.8 million in connection with the closure of 22 U.S.

COVID-19-related pre-tax asset impairments and closure costs include $23.8 million in connection with the closure of 22 U.S.

restaurants and from the update of certain cash flow assumptions, including lease renewal considerations.

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See Note 5 - Impairments, Exit Costs and Disposals of the Notes to Consolidated Financial Statements for further information.

International Restructuring - We recognized asset impairment and closure charges of $2.0 million during 2019, related to restructuring of certain international markets, including Puerto Rico within the international segment.

The remaining impairment and closing charges for the periods presented primarily resulted from locations identified for remodel, relocation or closure and certain other assets.

The impairment and closure charges during 2021 resulted primarily from locations identified for closure or relocation.

Income (loss) from operations

(dollars in millions) 2021 2020 CHANGE

Income (loss) from operations $ 309.0 $ (175.0)

% of Total revenues 7.5 % (5.5) % 13.0 %

Income from operations during 2021 as compared to Loss from operations during 2020 was primarily due to:

(i) higher comparable restaurant sales and franchise revenues, (ii) COVID-19 pandemic related charges and the impact of transformational and restructuring initiatives during 2020, (iii) lower advertising expense, (iv) the 2020 impact of net relief pay, (v) lower depreciation and amortization expense and (vi) the impact of certain cost savings initiatives.

These increases were partially offset by:

(i) the Carrabba’s Italian Grill royalty termination payment, (ii) higher labor costs and commodity inflation, (iii) an increase in incentive compensation and management bonus and (iv) higher utilities and operating expense.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

(Loss) income from operations

(dollars in millions) 2020 2019 Change

(Loss) income from operations $ (175.0) $ 191.1

% of Total revenues (5.5) % 4.6 % (10.1) %

Loss from operations during 2020 as compared to income from operations during 2019 was primarily due to:

(i) significantly lower comparable restaurant sales and franchise revenues, and costs incurred in connection with the COVID-19 pandemic, including asset impairment charges, incremental delivery-related costs and relief pay (net of tax credits), and (ii) certain costs incurred in connection with our transformation initiatives.

These losses were partially offset by reduced advertising, utilities and operating expenses and a reduction in prep labor hours, offset by higher labor costs.

Interest expense, net

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Interest expense, net $ 57.6 $ 64.4 $ (6.8)

The increase in Interest expense, net during 2020 as compared to 2019 was primarily due to interest expense from our convertible senior notes issued in May 2020 and additional draws on our revolving credit facility, partially offset by lower interest rates on our unhedged variable rate debt balances.

See Note 2 - Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements for details regarding the 2021 interest expense impact from the adoption of Accounting Standards Update No.

(Benefit) provision for income taxes

The decrease in Interest expense, net during 2021 as compared to 2020 was primarily due to:

(i) lower revolver and term loan borrowings, (ii) the discontinuance of debt discount amortization related to our 2025 Notes resulting from the modified retrospective adoption of a new accounting standard during 2021 and (iii) lower interest rates on our unhedged variable rate debt.

These decreases were partially offset by increases in interest expense from our 2029 Notes issued in April 2021 and our 2025 Notes issued in May 2020.

Provision (benefit) for income taxes

(dollars in millions) 2021 2020 CHANGE

(Loss) income before (benefit) provision for income taxes $ (239.5) $ 141.7 $ (381.2)

(Benefit) provision for income taxes $ (80.7) $ 7.6 $ (88.3)

Income (loss) before provision (benefit) for income taxes $ 249.3 $ (239.5) $ 488.8

Provision (benefit) for income taxes $ 26.4 $ (80.7) $ 107.1

Effective income tax rate 10.6 % 33.7 % (23.1) %

The net increase in the effective income tax rate in 2020 as compared to 2019 was primarily due to the benefit of the tax credits for FICA taxes on certain employees’ tips in 2020 and the 2020 pre-tax book loss.

The net decrease in the effective income tax rate in 2021 as compared to 2020 was primarily due to the benefit of FICA tax credits on certain employees’ tips reducing the effective income tax rate in 2021 as a result of pre-tax book income as compared to increasing the effective income tax rate in 2020 as a result of pre-tax book loss.

We have a blended federal and state statutory rate of approximately 26%.

The effective income tax rate for 2020 was higher than the blended federal and state statutory rate primarily due to the benefit of tax credits for FICA taxes on certain employees’ tips.

The effective income tax rate for fiscal year 2019 was lower than the blended federal and state statutory rate primarily due to the benefit of tax credits for FICA taxes on certain employees’ tips.

The effective income tax rate was lower in 2021 and higher in 2020 than the blended federal and state statutory rate primarily due to the benefit of tax credits for FICA taxes on certain employees’ tips.

We consider our restaurant concepts and international markets as operating segments, which reflects how we manage our business, review operating performance and allocate resources.

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We aggregate our operating segments into two reportable segments, U.S.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

international.

and international.

segment includes all restaurants operating in the U.S.

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are included in the international segment.

Revenues for both segments include only transactions with customers and excludes intersegment revenues.

Excluded from (Loss) income from operations for U.S.

Revenues for both 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.

During 2020, we recorded $32.4 million of pre-tax charges as a part of transformational initiatives implemented in connection with our previously announced review of strategic alternatives.

During 2020, we recorded $32.4 million of pre-tax charges as a part of transformational initiatives.

These costs were primarily recorded within General and administrative expense and Provision for impaired assets and restaurant closings and were not allocated to our segments since our CODM does not consider the impact of transformational initiatives when assessing segment performance.

Refer to Note 23 - Segment Reporting of the Notes to Consolidated Financial Statements for a reconciliation of segment (loss) income from operations to the consolidated operating results.

Refer to Note 23 - Segment Reporting of the Notes to Consolidated Financial Statements for reconciliations of segment income (loss) from operations to the consolidated operating results.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

(dollars in thousands) 2021 2020

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Restaurant-level operating margin 17.1 % 9.8 %

(Loss) income from operations $ (1,630) $ 311,666

Operating (loss) income margin (0.1) % 8.5 %

Income (loss) from operations $ 443,887 $ (1,630)

Operating income (loss) margin 11.8 % (0.1) %

Restaurant sales

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Comparable restaurant sales (1) 854.9

Restaurant closures (63.4)

Divestiture of restaurants through refranchising transactions (11.2)

Restaurant openings (1) 25.2

Restaurant closures (34.7)

For fiscal year 2021 $ 3,714.9

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The decrease in U.S.

The increase in U.S.

Restaurant sales in 2021 as compared to 2020 was primarily due to:

(i) significantly lower comparable restaurant sales principally attributable to the COVID-19 pandemic, (ii) the closure of 46 restaurants since December 30, 2018 and (iii) the refranchising of certain Company-owned restaurants.

The decrease in U.S.

Restaurant sales was partially offset by the opening of 11 new restaurants not included in our comparable restaurant sales base.

(i) higher comparable restaurant sales from recovery of in-restaurant dining from the significantly reduced levels in 2020 after the onset of the pandemic and strong retention of off-premises sales and (ii) the opening of 15 new restaurants not included in our comparable restaurant sales base.

These increases were partially offset by the closure of 45 restaurants since December 29, 2019.

Income (loss) from operations

Income from operations generated during 2021 as compared to Loss from operations during 2020 was primarily due to:

(i) higher comparable restaurant sales and franchise revenues, (ii) COVID-19 pandemic related charges during 2020, (iii) the 2020 impact of net relief pay, (iv) lower advertising expense, (v) lower delivery-related costs and (vi) the impact of certain cost savings initiatives.

These increases were partially offset by:

(i) the Carrabba’s Italian Grill royalty termination payment, (ii) higher labor costs and commodity inflation, (iii) higher utilities and operating expense and (iv) higher management bonus.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

(Loss) income from operations

loss from operations generated during 2020 as compared to income from operations during 2019 was primarily due to significantly lower comparable restaurant sales and franchise revenues, and costs incurred in connection with the COVID-19 pandemic, including asset impairment charges, incremental delivery-related costs and relief pay (net of tax credits).

These losses were partially offset by reduced advertising, utilities and operating expenses and a reduction in prep labor hours, offset by higher labor costs.

International Segment

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Restaurant-level operating margin 12.7 % 8.3 %

(Loss) income from operations $ (13,479) $ 44,428

Operating (loss) income margin (4.7) % 9.8 %

Income (loss) from operations $ 16,657 $ (13,479)

Operating income (loss) margin 4.6 % (4.7) %

Restaurant sales

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Comparable restaurant sales (1) 57.8

Restaurant openings (1) 29.2

Effect of foreign currency translation (15.3)

Restaurant closures (0.6)

Restaurant openings (1) 17.9

For fiscal year 2021 $ 346.2

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The decrease in international Restaurant sales in 2020 as compared to 2019 was primarily due to significantly lower comparable restaurant sales principally attributable to the COVID-19 pandemic and the effect of foreign currency translation of the Brazil Real relative to the U.S.

The decrease in international Restaurant sales was partially offset by the opening of 29 new restaurants not included in our comparable restaurant sales base.

(Loss) income from operations

International loss from operations generated during 2020 as compared to income from operations during 2019 was primarily due to:

(i) significantly lower comparable sales and costs incurred in connection with the COVID-19 pandemic, including incremental delivery-related costs and inventory obsolescence, and (ii) commodity inflation.

These decreases were partially offset by:

(i) reduced utilities, operating and advertising expenses, (ii) lower labor costs and (iii) lower General and administrative expense, primarily from the impact of foreign currency translation.

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The increase in international Restaurant sales in 2021 as compared to 2020 was primarily due to:

(i) higher comparable restaurant sales principally attributable to the impact of the COVID-19 pandemic on fiscal year 2020 international Restaurant sales and (ii) the opening of 33 new restaurants not included in our comparable restaurant sales base.

These increases were partially offset by the effect of foreign currency translation of the Brazil Real relative to the U.S.

Income (loss) from operations

International Income from operations generated during 2021 as compared to Loss from operations during 2020 was primarily due to higher restaurant sales due to the reopening of restaurant dining rooms and increases in average check per person.

These increases were partially offset by:

(i) additional utilities, rent and operating expense, (ii) commodity inflation and (iii) higher labor costs.

Non-GAAP Financial Measures

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GAAP and include the following:

(i) system-wide sales, (ii) Adjusted restaurant-level operating margins, (iii) Adjusted (loss) income from operations and the corresponding margins, (iv) Adjusted net (loss) income and (v) Adjusted diluted (loss) earnings per share.

(i) system-wide sales, (ii) Adjusted restaurant-level operating margins, (iii) Adjusted income (loss) from operations and the corresponding margins, (iv) Adjusted net income (loss) and (v) Adjusted diluted earnings (loss) per share.

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

We believe that our use of non-GAAP financial measures permits investors to assess the operating performance of our business relative to our performance based on U.S.

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However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur.

We believe that the disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and Board of Directors evaluate our operating performance, allocate resources and establish employee incentive plans.

We believe that the disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and our Board evaluate our operating performance, allocate resources and establish employee incentive plans.

These non-GAAP financial measures are not intended to replace U.S.

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For a summary of sales of Company-owned restaurants, refer to Note 4 - Revenue Recognition of the Notes to Consolidated Financial Statements.

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The following table provides a summary of sales of franchised restaurants for the periods indicated, which are not included in our consolidated financial results.

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____________________

(1) Franchise sales are not included in Total revenues in the Consolidated Statements of Operations and Comprehensive (Loss) Income.

Adjusted restaurant-level operating margin - Restaurant-level operating margin is calculated as Restaurant sales after deduction of the main restaurant-level operating costs, which includes Food and beverage costs, Labor and other related and Other restaurant operating expense.

Adjusted restaurant-level operating margin is Restaurant-level operating margin adjusted for certain items, as noted below.

The following tables show the percentages of certain operating cost financial statement line items in relation to Restaurant sales for the periods indicated:

GAAP ADJUSTED (1) U.S.

GAAP ADJUSTED (1)

Restaurant sales 100.0 % 100.0 % 100.0 % 100.0 %

Food and beverage costs 31.3 % 30.9 % 31.4 % 31.4 %

Labor and other related 32.0 % 32.0 % 29.6 % 29.6 %

Other restaurant operating 26.9 % 26.9 % 24.1 % 24.2 %

Restaurant-level operating margin 9.9 % 10.2 % 14.9 % 14.7 %

_________________

(1) Includes unfavorable (favorable) adjustments recorded in Other restaurant operating expense (unless otherwise noted below) for the following activities, as described in the Adjusted (loss) income from operations, Adjusted net (loss) income and Adjusted diluted (loss) earnings per share table below for the periods indicated:

(dollars in millions) 2020 2019

COVID-19-related costs (1) $ (14.3) $ —

Restaurant relocations and related costs (0.1) (0.6)

Legal and other matters (2) — 4.6

Restaurant and asset impairments and closing costs 2.8 4.3

$ (11.6) $ 8.3

_________________

(1) Includes $11.0 million of adjustments recorded in Food and beverage costs.

(2) Includes adjustments of $2.7 million and $1.9 million recorded in Food and beverage costs and Other restaurant operating expense, respectively.

(1) Franchise sales are not included in Total revenues in the Consolidated Statements of Operations and Comprehensive Income (Loss).

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Restaurant-level operating margin - The following tables reconcile consolidated and segment (Loss) income from operations and the corresponding margins to Restaurant-level operating income and the corresponding margins for the periods indicated:

Restaurant-level operating margin - The following tables reconcile consolidated and segment Income (loss) from operations and the corresponding margins to Restaurant-level operating income and the corresponding margins for the periods indicated:

Consolidated FISCAL YEAR

(dollars in thousands) 2021 2020

(Loss) income from operations $ (174,973) $ 191,090

Operating (loss) income margin (5.5) % 4.6 %

Income (loss) from operations $ 308,958 $ (174,973)

Operating income (loss) margin 7.5 % (5.5) %

Franchise and other revenues 61,292 25,925

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(dollars in thousands) 2021 2020

(Loss) income from operations $ (1,630) $ 311,666

Operating (loss) income margin (0.1) % 8.5 %

Income (loss) from operations $ 443,887 $ (1,630)

Operating income (loss) margin 11.8 % (0.1) %

Franchise and other revenues 45,133 15,995

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(dollars in thousands) 2021 2020

(Loss) income from operations $ (13,479) $ 44,428

Operating (loss) income margin (4.7) % 9.8 %

Income (loss) from operations $ 16,657 $ (13,479)

Operating income (loss) margin 4.6 % (4.7) %

Franchise and other revenues 16,159 9,930

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Adjusted (loss) income from operations, Adjusted net (loss) income and Adjusted diluted (loss) earnings per share - The following table reconciles Adjusted (loss) income from operations and the corresponding margins, Adjusted (loss) net income and Adjusted diluted (loss) earnings per share to their respective most comparable U.S.

Adjusted restaurant-level operating margin is Restaurant-level operating margin adjusted for certain items, as noted below.

The following table presents the percentages of certain operating cost financial statement line items in relation to Restaurant sales for the periods indicated:

GAAP ADJUSTED (1) U.S.

GAAP ADJUSTED (1)

Restaurant sales 100.0 % 100.0 % 100.0 % 100.0 %

Food and beverage costs 30.3 % 30.3 % 31.3 % 30.9 %

Labor and other related 28.4 % 28.4 % 32.0 % 32.0 %

Other restaurant operating 24.8 % 23.2 % 26.9 % 26.9 %

Restaurant-level operating margin 16.5 % 18.1 % 9.9 % 10.2 %

_________________

(1) Includes (favorable) unfavorable adjustments recorded in Other restaurant operating expense (unless otherwise noted below) for the following activities, as described in the Adjusted income (loss) from operations, Adjusted net income (loss) and Adjusted diluted earnings (loss) per share table below for the periods indicated:

(dollars in millions) 2021 2020

Royalty termination expense $ (61.9) $ —

Legal and other matters (2.7) —

COVID-19-related costs (i) — (14.3)

Asset impairments and closing costs — 2.7

$ (64.6) $ (11.6)

_________________

(i) Includes $11.0 million of adjustments recorded in Food and beverage costs.

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Adjusted income (loss) from operations, Adjusted net income (loss) and Adjusted diluted earnings (loss) per share - The following table reconciles Adjusted income (loss) from operations and the corresponding margins, Adjusted net income (loss) and Adjusted diluted earnings (loss) per share to their respective most comparable U.S.

GAAP measures for the periods indicated:

(in thousands, except share and per share data) 2021 2020

(Loss) income from operations $ (174,973) $ 191,090

Operating (loss) income margin (5.5) % 4.6 %

COVID-19-related costs (1) $ 93,811 $ —

Income (loss) from operations $ 308,958 $ (174,973)

Operating income (loss) margin 7.5 % (5.5) %

Royalty termination expense (1) 61,880 —

Severance and other transformational costs (2) 2,764 32,404

Restaurant relocations and related costs (3) 592 3,208

Legal and other matters (3) (372) 178

Restaurant and asset impairments and closing costs (5) (2,797) 3,550

Total (loss) income from operations adjustments $ 124,188 $ 9,273

Adjusted (loss) income from operations $ (50,785) $ 200,363

Adjusted operating (loss) income margin (1.6) % 4.8 %

Net (loss) income attributable to common stockholders $ (162,211) $ 130,573

(Loss) income from operations adjustments 124,188 9,273

COVID-19-related costs (4) — 93,811

Asset impairments and closure costs (5) — (2,205)

Total income (loss) from operations adjustments 64,272 124,188

Adjusted income (loss) from operations $ 373,230 $ (50,785)

Adjusted operating income (loss) margin 9.1 % (1.6) %

Diluted net income (loss) attributable to common stockholders $ 215,900 $ (162,211)

Convertible senior notes if-converted method interest adjustment, net of tax (6) 345 —

Net income (loss) attributable to common stockholders 215,555 (162,211)

Income (loss) from operations adjustments 64,272 124,188

Loss on extinguishment and modification of debt 2,073 —

Amortization of debt discount (7) — 6,275

3 unchanged sentences

Net adjustments 45,123 101,433

Adjusted net (loss) income $ (60,778) $ 138,583

Diluted (loss) earnings per share attributable to common stockholders (9) $ (1.85) $ 1.45

Adjusted diluted (loss) earnings per share (9) $ (0.69) $ 1.54

Adjusted net income (loss) $ 260,678 $ (60,778)

Diluted earnings (loss) per share attributable to common stockholders (10) $ 2.00 $ (1.85)

Adjusted diluted earnings (loss) per share (11) $ 2.70 $ (0.69)

Diluted weighted average common shares outstanding (10) 107,803 87,468

Adjusted diluted weighted average common shares outstanding (11) 96,426 87,468

_________________

(1) Costs incurred in connection with the economic impact of the COVID-19 pandemic, primarily consisting of fixed asset and right-of-use asset impairments, restructuring charges, inventory obsolescence and spoilage, contingent lease liabilities and current expected credit losses.

See Note 3 - COVID-19 Charges of the Notes to Consolidated Financial Statements for additional details regarding the impact of certain COVID-19 pandemic-related charges on our financial results.

(1) Payment made to the Carrabba’s Founders in connection with the Royalty Termination Agreement.

See Note 22 - Commitments and Contingencies of the Notes to Consolidated Financial Statements for additional details regarding the Royalty Termination Agreement.

(2) Severance, professional fees and other costs incurred as a result of transformational and restructuring activities.

(3) Asset impairment charges and accelerated depreciation incurred in connection with our relocation program.

(4) For 2019, includes the recognition of certain value-added tax credits in Brazil of $4.6 million related to prior years, offset by fees and expenses related to certain legal matters.

(5) Asset impairment charges and related costs during 2019 primarily related to approved closure and restructuring initiatives and the restructuring of certain international markets.

Amount also includes a lease termination gain of $2.8 million during 2020 and gains on the sale of certain surplus properties of $3.8 million during 2019.

(6) Amortization of the debt discount related to the issuance of the 2025 Notes.

See Note 14 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for details.

(7) Income tax effect of the adjustments for the periods presented.

(8) Consideration paid in excess of the carrying value for the redemption of preferred stock of our Abbraccio subsidiary.

(9) Due to the net loss, the effect of dilutive securities was excluded from the calculation of diluted and adjusted diluted loss per share for fiscal year 2020.

(3) For 2021, includes:

(i) a $3.1 million benefit from the recognition of recoverable PIS and COFINS taxes, including accrued interest, within other revenues as a result of favorable court rulings and (ii) an accrual of $2.7 million for Imposto sobre Serviços (“ISS”), a Brazilian municipal service tax, in connection with royalties from our Brazilian subsidiary over the past five years, including related penalties and interest, recorded within Other restaurant operating expense as a result of an unfavorable Brazilian Supreme Court ruling.

(4) Costs incurred in connection with the COVID-19 pandemic, primarily consisting of fixed asset and right-of-use asset impairments, restructuring charges, inventory obsolescence and spoilage, contingent lease liabilities and current expected credit losses.

See Note 3 - 2020 COVID-19 Charges of the Notes to Consolidated Financial Statements for additional details regarding the impact of certain COVID-19 pandemic-related charges on our financial results.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

(5) Primarily includes a lease termination gain of $2.8 million.

(6) Adjustment for interest expense related to the 2025 Notes weighted for the portion of the period prior to our election under the 2025 Notes indenture to settle the principal portion of our 2025 Notes in cash.

The calculation of adjusted diluted earnings per share excludes 2025 Notes interest adjustment.

(7) Amortization of debt discount related to the issuance of the 2025 Notes.

See Note 14 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for details.

(8) Income tax effect of the adjustments for the periods presented.

Also includes a $4.2 million adjustment during 2021 for the reduction of certain unrecognized tax benefits related to tax positions taken during a prior period.

(9) Consideration paid in excess of the carrying value for the redemption of preferred stock of our Abbraccio concept.

(10) Due to the GAAP net loss, the effect of dilutive securities was excluded from the calculation of GAAP diluted loss per share for 2020.

(11) For fiscal year 2021, adjusted diluted weighted average common shares outstanding was calculated:

(i) assuming our February 2021 election to settle the principal portion of the 2025 Notes in cash was in effect for the entire fiscal year and (ii) excluding the dilutive effect of 9,992 shares to be issued upon conversion of the 2025 Notes to satisfy the amount in excess of the principal since our convertible notes hedge offsets the dilutive impact of the shares underlying the 2025 Notes.

Liquidity and Capital Resources

Typically, cash flows generated from operating activities and availability under our revolving credit facility are our principal sources of liquidity, which we use for operating expenses, payments on our debt, remodeling or relocating older restaurants, obligations related to our deferred compensation plans and investment in technology.

During 2020, the temporary closure of our dining rooms and the limitations on seating capacity due to the COVID-19 pandemic resulted in significantly reduced traffic in our restaurants which has negatively impacted our operating cashflows.

In response to the COVID-19 pandemic, we have tightly managed expenses while prioritizing support of our workforce, off-premises business and the safe reopening of our restaurant dining rooms.

In addition, we have taken several precautionary measures to preserve liquidity, including the following:

• suspended our quarterly cash dividend and stock repurchases;

• significantly reduced marketing and tightly managed other expenses;

• substantially limited capital expenditures to facility maintenance in support of our off-premises business and safe reopening of our restaurant dining rooms;

• engaged in constructive dialogue with our landlords regarding operating lease agreement amendments or deferrals.

The above actions are in addition to the significant cost cutting measures for 2020 that we announced and implemented earlier in the year.

In May 2020, we issued $230.0 million aggregate principal amount of 5.00% convertible senior notes due in 2025.

Net proceeds from the 2025 Notes were approximately $221.6 million, after deducting the initial purchaser’s discounts and commissions and our offering expenses.

See “ 2025 Notes” below for additional details regarding the convertible senior notes.

Subsequent to December 27, 2020, we made payments of $92.0 million on our revolving credit facility.

After consideration of payments made on the revolving credit facility in the second half of 2020 and subsequent to 2020, our total outstanding debt approximates pre-COVID-19 levels.

We believe that our expected liquidity sources are adequate to fund debt service requirements, lease obligations, capital expenditures and working capital obligations during the 12 months following this filing.

However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow and our ability to manage costs and working capital successfully.

Cash and Cash Equivalents - As of December 27, 2020, we had $110.0 million in cash and cash equivalents, of which $40.4 million was held by foreign affiliates.

Cash and Cash Equivalents

As of December 26, 2021, we had $87.6 million in cash and cash equivalents, of which $26.6 million was held by foreign affiliates.

The international jurisdictions in which we have significant cash do not have any known restrictions that would prohibit repatriation.

As of December 26, 2021, we had aggregate accumulated foreign earnings of approximately $28.8 million.

This amount primarily consists of historical earnings from 2017 and prior that were previously taxed in the U.S.

This amount consisted primarily of historical earnings from 2017 and prior that were previously taxed in the U.S.

under the 2017 Tax Cuts and Jobs Act and post-2017 foreign earnings, which we may repatriate to the U.S.

without additional material U.S.

federal income taxes.

federal income tax.

These amounts are no longer considered indefinitely reinvested in our foreign subsidiaries.

See Note 21 - Income Taxes of the Notes to Consolidated Financial Statements for further information regarding our indefinite reinvestment assertion.

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Closure and Restructuring Initiatives - Total aggregate future undiscounted cash expenditures of $9.7 million to $11.8 million related to lease liabilities for certain closure and restructuring initiatives are expected to occur over the remaining lease terms with the final term ending in January 2029.

Capital Expenditures - We estimate that our capital expenditures will total approximately $170 million to $185 million in 2021.

The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things, including restrictions imposed by our borrowing arrangements.

Under the Amended Credit Agreement, we are limited to $100.0 million of aggregate capital expenditures for the four fiscal quarters through March 28, 2021.

Credit Facilities - As of December 27, 2020, we had $1.1 billion of outstanding borrowings under our Senior Secured Credit Facility and 2025 Notes.

Following is a summary of our outstanding credit facilities as of the dates indicated and principal payments and debt issuance during the periods indicated:

SENIOR SECURED CREDIT FACILITY TOTAL CREDIT FACILITIES

TERM LOAN A REVOLVING FACILITY 2025 NOTES

Borrowing Capacity and Debt Service

Credit Facilities - Following is a summary of our outstanding credit facilities as of the dates indicated and principal payments and debt issuance during the periods indicated:

SENIOR SECURED CREDIT FACILITY FORMER CREDIT FACILITY TOTAL CREDIT FACILITIES

TERM LOAN A REVOLVING FACILITY TERM LOAN A REVOLVING FACILITY 2025 NOTES 2029 NOTES

(dollars in thousands)

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Balance as of December 26, 2021 (1) $ 195,000 $ 80,000 $ — $ — $ 230,000 $ 300,000 $ 805,000

Weighted-average interest rate, as of December 27, 2020 2.88 % 2.88 % 5.00 %

Principal maturity date November 2022 November 2022 May 2025

Interest rates, as of December 26, 2021 (2) 1.60 % 3.75 % 5.00 % 5.13 %

Principal maturity date April 2026 April 2026 May 2025 April 2029

____________________

(1) Subsequent to December 27, 2020, we made payments of $92.0 million on our revolving credit facility.

As of December 27, 2020, we had $533.7 million in available unused borrowing capacity under our revolving credit facility, net of letters of credit of $19.3 million.

Amended Credit Agreement - On November 30, 2017, we and OSI, as co-borrowers, entered into a credit agreement (the “Credit Agreement”) with a syndicate of institutional lenders, providing for senior secured financing of up to $1.5 billion, consisting of a $500.0 million Term loan A and a $1.0 billion revolving credit facility (the “Senior Secured Credit Facility”), including letter of credit and swing line loan sub-facilities.

Our Credit Agreement contains various financial and non-financial covenants.

A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the revolving credit facility and cause an acceleration of the amounts due under the credit facilities.

See Note 13 - Long-term Debt, Net of the Notes to Consolidated Financial Statements for further information.

On May 4, 2020, we and OSI, as co-borrowers, entered into the Amended Credit Agreement which provides relief for the financial covenant to maintain a specified quarterly Total Net Leverage Ratio (“TNLR”).

Without such amendment, violation of financial covenants under the original credit agreement could have resulted in default.

The Amended Credit Agreement waived the TNLR requirement for the remainder of fiscal year 2020 and requires a TNLR based on a seasonally annualized calculation of Consolidated EBITDA (earnings before interest, taxes,

(1) Subsequent to December 26, 2021, we repaid the remaining $80.0 million balance on our revolving credit facility.

(2) Interest rate for Term loan A represents the weighted average interest rate.

Interest rate for the revolving credit facility represents the base rate option elected in anticipation of impending repayment.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

depreciation and amortization and certain other adjustments as defined in the Amended Credit Agreement) not to exceed the following thresholds for the periods indicated:

QUARTERLY PERIOD ENDED MAXIMUM RATIO

March 28, 2021 (1) 5.50 to 1.00

June 27, 2021 (2) 5.00 to 1.00

September 26, 2021 and thereafter (3) 4.50 to 1.00

________________

(1) Seasonally annualized Consolidated EBITDA calculated as Consolidated EBITDA for the fiscal quarter ending March 28, 2021 divided by 34.1%.

(2) Seasonally annualized Consolidated EBITDA calculated as Consolidated EBITDA for the two consecutive quarters ending June 27, 2021 divided by 58.5%.

(3) Seasonally annualized Consolidated EBITDA calculated as Consolidated EBITDA for the three consecutive quarters ending September 26, 2021 divided by 77.0%.

Under the terms of the Amended Credit Agreement, we are required to meet a minimum monthly liquidity threshold of $125.0 million through March 28, 2021, calculated as the sum of available capacity under our revolving credit facility, unrestricted domestic cash on hand and up to $25.0 million of unrestricted cash held by foreign subsidiaries.

We are also prohibited from making certain restricted payments, investments or acquisitions until after September 26, 2021, with an exception for investments in our foreign subsidiaries which are capped at $27.5 million.

Repurchasing shares of our outstanding common stock and paying dividends are also restricted until after September 26, 2021.

Interest rates under the Amended Credit Agreement are 275 and 175 basis points above the Eurocurrency Rate and Base Rate, respectively, and letter of credit fees and fees for the daily unused availability under the revolving credit facility are 2.75% and 0.40%, respectively, subject to reversion to rates under the original credit agreement when we are in compliance with the TNLR covenant for the test period ending September 26, 2021.

We are also subject to a 0% Eurocurrency floor under the Amended Credit Agreement.

The Amended Credit Agreement contains term loan mandatory prepayment requirements of 50% of our annual excess cash flow (as defined in the Amended Credit Agreement) after December 27, 2020.

The amount outstanding required to be prepaid may vary based on our leverage ratio and year end results.

As of December 26, 2021, we had $699.3 million in available unused borrowing capacity under our revolving credit facility, net of letters of credit of $20.7 million.

2029 Notes - On April 16, 2021, we issued $300.0 million aggregate principal amount of senior unsecured notes due 2029.

The 2029 Notes mature on April 15, 2029, unless earlier redeemed or purchased by us.

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.

The net proceeds from the 2029 Notes were approximately $294.5 million, after deducting the initial purchaser’s discount and our offering expenses.

The net proceeds were used to repay a portion of our outstanding Term loan A and revolving credit facility in conjunction with the refinancing of our Former Credit Facility.

Credit Agreement - On April 16, 2021, we and OSI, as co-borrowers, entered into the Credit Agreement, which provides for senior secured financing of up to $1.0 billion consisting of a $200.0 million Term loan A and an $800.0 million revolving credit facility (the “Senior Secured Credit Facility”).

The Senior Secured Credit Facility matures on April 16, 2026 and replaced our prior senior secured financing of up to $1.5 billion (the “Former Credit Facility”).

Our Senior Secured Credit Facility contains mandatory prepayment requirements for Term loan A, including the requirement that we prepay outstanding amounts under these loans with 50% of our annual excess cash flow, as defined in the Credit Agreement, commencing with the fiscal year ending December 25, 2022.

The amount of outstanding loans required to be prepaid in accordance with the debt covenants may vary based on our Consolidated Senior Secured Net Leverage Ratio and year end results.

Other than the annual required minimum amortization premiums of $10.0 million, we do not anticipate any other payments will be required through December 25, 2022.

See Note 13 - Long-term Debt, Net for additional details regarding the 2029 Notes and Credit Agreement.

As of December 26, 2021 and December 27, 2020, we were in compliance with our debt covenants.

We believe that we will remain in compliance with our debt covenants during the 12 months following the issuance of our financial statements.

2025 Notes - On May 8, 2020, we completed a $200.0 million principal amount private offering of 5.00% convertible senior notes due in 2025 and on May 12, 2020, issued an additional $30.0 million principal amount in connection with the option granted to the initial purchasers as part of the offering (collectively, the “2025 Notes”).

The 2025 Notes will mature on May 1, 2025, unless earlier converted, redeemed or purchased by us.

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, beginning on November 1, 2020.

Net proceeds from this offering were approximately $221.6 million, after deducting the initial purchaser’s discounts and commissions and our 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.

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

As of December 27, 2020, we had the option to settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, based on the applicable conversion rate.

In February 2021, we provided the trustee of the 2025 Notes notice of our irrevocable election under the indenture to settle the principal portion of the 2025 Notes in cash and any excess in shares.

Convertible Note Hedge and Warrant Transactions - In connection with the offering of the 2025 Notes , we 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 our entry into the Convertible Note Hedge Transactions, we also entered into separate warrant transactions with the Hedge Counterparties collectively relating to the same number of shares of our common stock, subject to customary anti-dilution adjustments, and for which we received proceeds that partially offset the cost of entering into the Convertible Note Hedge Transactions (the “Warrant Transactions”).

The portion of the net proceeds from our offering of the 2025 Notes that was used to pay the premium on the Convertible Note Hedge Transactions (calculated after taking into account our proceeds from the Warrant Transactions) was approximately $19.6 million .

See Note 14 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for additional details regarding the convertible senior notes and related hedge and warrant transactions.

Cash Flow Hedges of Interest Rate Risk - We have variable-to-fixed interest rate swap agreements with 12 counterparties to hedge a portion of the cash flows of our variable rate debt.

We believe that we will remain in compliance with our debt covenants during the next 12 months.

Cash Flow Hedges of Interest Rate Risk - In October 2018, we entered into variable-to-fixed interest rate swap agreements with 12 counterparties to hedge a portion of the cash flows of our variable rate debt.

The swap agreements have an aggregate notional amount of $550.0 million and mature on November 30, 2022.

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See Note 17 - Derivative Instruments and Hedging Activities of the Notes to Consolidated Financial Statements for further information.

SUMMARY OF CASH FLOWS

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

(dollars in thousands) 2020 2019

Net cash provided by operating activities $ 138,849 $ 317,603

Net cash used in investing activities (76,639) (131,291)

Net cash used in financing activities (16,773) (189,359)

Effect of exchange rate changes on cash and cash equivalents (2,174) (1,631)

Net increase (decrease) in cash, cash equivalents and restricted cash $ 43,263 $ (4,678)

Operating activities - Net cash provided by operating activities decreased during 2020 as compared to 2019 primarily due to a decrease in net restaurant sales and lower gift card sales.

These decreases were partially offset by:

(i) decreased variable operating costs as a result of lower net restaurant sales, offset by relief payments made to employees as a result of the COVID-19 pandemic, (ii) deferral of payroll tax payments as a result of the CARES Act, (iii) the timing of collections of receivables and payments made, (iv) lower inventory purchases and (v) lower income tax payments.

In connection with the refinancing of the Former Credit Facility, on April 16, 2021 we terminated our 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 Accumulated Other Comprehensive Loss (“AOCL”) will be amortized on a straight-line basis to Interest expense, net over the remaining original term of the terminated swaps.

As a result of our anticipated decrease in variable rate debt balances due to significant voluntary debt payments, on December 9, 2021 we terminated our variable-to-fixed interest rate swap agreements with three counterparties having an aggregate notional amount of $150.0 million for a payment of approximately $4.1 million, including accrued interest.

Following these terminations, $4.1 million of unrealized losses related to the terminated swap agreements included in AOCL will be amortized to Interest expense, net during 2022.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Investing activities - The decrease in net cash used in investing activities during 2020 as compared to 2019 was primarily due to:

(i) lower capital expenditures from liquidity management in response to the COVID-19 pandemic and restrictions under the Amended Credit Agreement and (ii) an increase in cash withdrawn from Company-owned life insurances policies to settle deferred compensation obligations, partially offset by lower proceeds from the disposal of property, fixtures and equipment and from sale-leaseback transactions.

Financing activities - The decrease in net cash used in financing activities during 2020 as compared to 2019 was primarily due to:

(i) proceeds from issuance of convertible senior notes and related warrant transactions and (ii) a decrease in the repurchase of our common stock and payment of dividends on our common stock from liquidity management in response to the COVID-19 pandemic and restrictions under the Amended Credit Agreement.

These decreases were partially offset by increases primarily due to:

(i) increased repayments on our revolving credit facility, net of drawdowns, (ii) premium payments for Convertible Note Hedge Transactions and (iii) issuance costs and financing fees in connection with our 2025 Notes and Amended Credit Agreement.

FINANCIAL CONDITION

Following is a summary of our current assets, current liabilities and working capital (deficit) as of the periods indicated:

(dollars in thousands) DECEMBER 27, 2020 DECEMBER 29, 2019

Current assets $ 323,854 $ 340,468

Current liabilities 950,104 962,021

Working capital (deficit) $ (626,250) $ (621,553)

Working capital (deficit) includes:

(i) Unearned revenue primarily from unredeemed gift cards of $381.6 million and $369.3 million as of December 27, 2020 and December 29, 2019, respectively and (ii) current operating lease liabilities of $176.8 million and $171.9 million as of December 27, 2020 and December 29, 2019, respectively, with the corresponding operating right-of-use assets recorded as non-current on our Consolidated Balance Sheets.

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 make capital expenditures.

Deferred Compensation Programs - Certain Restaurant Managing Partners and Chef Partners in the U.S.

Partners”) participate in deferred compensation programs that are subject to the rules of Section 409A of the Internal Revenue Code.

The deferred compensation obligation due under these plans was $28.1 million and $49.0 million as of December 27, 2020 and December 29, 2019, respectively.

We invest in various corporate-owned life insurance policies, which are held within an irrevocable grantor or “rabbi” trust account for settlement of our obligations under these deferred compensation plans.

The rabbi trust is funded through our voluntary contributions.

The obligation for U.S.

Partners’ deferred compensation was fully funded as of December 27, 2020.

From time to time, we may utilize operating cash for short periods to fund deferred compensation plan distributions due to restrictions on the timing of withdrawals from the “rabbi” trust account, however, once available for withdrawal, funds from the “rabbi” trust may be returned to operating cash.

Other Compensation Programs - Certain U.S.

Partners participate in a non-qualified long-term compensation program that we fund as the obligation for each participant becomes due.

Cash flows generated from operating activities and availability under our revolving credit facility are our principal sources of liquidity, which we use for operating expenses, debt payments, share repurchases and dividend payments, development of new restaurants, remodeling or relocating older restaurants and investment in technology.

Capital Expenditures - We estimate that our capital expenditures will total approximately $225 million to $240 million in 2022.

The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things, including raw material constraints.

Material Cash Requirements - The following table presents current and long-term material cash requirements as of December 26, 2021:

PAYMENTS DUE BY PERIOD

LESS THAN 1-3 3-5 MORE THAN

(dollars in thousands) TOTAL 1 YEAR YEARS YEARS 5 YEARS

Operating leases (1) $ 2,383,335 $ 185,093 $ 372,180 $ 335,428 $ 1,490,634

Long-term debt:

Principal (2) 807,376 10,976 23,683 472,717 300,000

Interest (3) 187,845 38,524 69,711 44,376 35,234

Purchase obligations (4) 206,634 167,753 37,100 1,781 —

Other obligations (5) 58,963 20,939 10,842 3,247 23,935

Total $ 3,644,153 $ 423,285 $ 513,516 $ 857,549 $ 1,849,803

____________________

(1) Amounts represent undiscounted future minimum rental commitments under non-cancelable operating leases.

Includes $1.0 billion related to lease renewal options that are reasonably certain of exercise.

(2) Includes Senior Secured Credit Facility, 2029 Notes, 2025 Notes and finance lease obligations.

Amount is not reduced by unamortized debt issuance costs and finance lease interest totaling $14.3 million.

(3) Projected future interest payments on long-term debt are based on interest rates in effect as of December 26, 2021 and assume only scheduled principal payments.

Estimated interest expense includes the impact of remaining variable-to-fixed interest rate swap agreements.

(4) Purchase obligations include agreements to purchase goods or services that are enforceable, legally binding and specify all significant terms, including fixed or minimum quantities to be purchased;

fixed, minimum or variable price provisions;

and the approximate timing of the transaction.

We have purchase obligations with various vendors that consist primarily of inventory, technology, restaurant-level service contracts and advertising.

(5) Includes other long-term liabilities, primarily consisting of deferred compensation obligations, deposits and other accrued obligations.

Unrecognized tax benefits are excluded from this table since it is not possible to estimate when these future payments will occur.

Dividends and Share Repurchases - In April 2021, we entered into our Credit Agreement, the terms of which contained certain restrictions on cash dividends and share repurchases until after September 26, 2021 and we were compliant with our financial covenants.

We were compliant with our financial covenants as of December 26, 2021 and we believe that we will remain in compliance with our debt covenants during the next 12 months.

As such, absent unanticipated circumstances, we do not believe that compliance with our financial covenants will materially limit our ability to pay dividends in the near term and future dividend payments will depend on various other factors considered by our Board as noted below.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

DIVIDENDS AND SHARE REPURCHASES

During the first quarter of 2020, we declared and paid dividends of $0.20 per share.

In May 2020, we entered into an Amended Credit Agreement, the terms of which contain certain restrictions on cash dividends and share repurchases until after September 26, 2021 and we are compliant with our financial covenants.

In 2019, we declared and paid quarterly cash dividends of $0.10 per share.

Following is a summary of our share repurchase programs as of December 27, 2020 (dollars in thousands):

We did not pay dividends during 2021.

In February 2022, our Board declared a quarterly cash dividend of $0.14 per share, payable on March 16, 2022 to shareholders of record at the close of business on March 2, 2022.

We did not repurchase any shares of our outstanding common stock during 2021.

On February 8, 2022, our Board approved the 2022 Share Repurchase Program under which we are authorized to repurchase up to $125.0 million of our outstanding common stock.

The 2022 Share Repurchase Program will expire on August 9, 2023.

Following is a summary of our former share repurchase programs as of December 26, 2021 (dollars in thousands):

SHARE REPURCHASE PROGRAM BOARD APPROVAL DATE AUTHORIZED REPURCHASED CANCELLED OR EXPIRED REMAINING

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Fiscal year 2016 31,379 309,887 341,266

Fiscal year 2015 29,332 169,999 199,331

Total $ 178,225 $ 973,581 $ 1,151,806

________________

(1) Excludes share repurchases for the settlement of taxes related to equity awards of $180, $447 and $770 for fiscal years 2017, 2016 and 2015, respectively.

Our ability to pay dividends and make share repurchases is dependent on our ability to obtain funds from our subsidiaries, have access to our revolving credit facility and the existence of surplus.

OFF-BALANCE SHEET ARRANGEMENTS

We guarantee certain lease agreements primarily related to divested restaurant properties in circumstances where we have assigned our lease interest.

Our ability to pay dividends and make share repurchases is dependent on our ability to obtain funds from our subsidiaries, continued compliance with the financial covenants in our debt agreements and the existence of surplus, as well as our earnings, financial condition, capital expenditure requirements and other factors that our Board deems relevant.

Lease Guarantees - We guarantee certain lease agreements primarily related to divested restaurant properties in circumstances where we have assigned our lease interest.

In the event of non-payment by the primary lessees, we may be required to satisfy these lease agreements with cash.

See Note 22 - Commitments and Contingencies for additional details regarding our lease guarantees.

Deferred Compensation Programs - Certain Restaurant Managing Partners and Chef Partners in the U.S.

Partners”) participate in deferred compensation programs that are subject to the rules of Section 409A of the Internal Revenue Code.

The deferred compensation obligations due under these plans was $15.5 million and $28.1 million as of December 26, 2021 and December 27, 2020, respectively.

We invest in various corporate-owned life insurance policies, which are held within an irrevocable grantor or rabbi trust account for settlement of our obligations under the deferred compensation plans.

The obligation for U.S.

Partners’ deferred compensation was fully funded as of December 26, 2021.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

OTHER MATERIAL COMMITMENTS

Our operating lease obligations, debt obligations, contractual obligations and commitments as of December 27, 2020 are summarized in the following table:

PAYMENTS DUE BY PERIOD

LESS THAN 1-3 3-5 MORE THAN

(dollars in thousands) TOTAL 1 YEAR YEARS YEARS 5 YEARS

Recorded Contractual Obligations

Operating leases (1) $ 2,510,001 $ 196,616 $ 375,572 $ 349,396 $ 1,588,417

Long-term debt (2) 1,104,405 38,750 835,260 230,395 —

Deferred compensation and other partner obligations (3) 47,488 15,182 21,100 4,321 6,885

Other recorded contractual obligations (4) 27,612 4,557 4,456 1,681 16,918

Unrecorded Contractual Obligations

Interest (5) 132,958 55,114 62,511 15,333 —

Purchase obligations (6) 230,608 146,550 49,981 34,077 —

Total contractual obligations $ 4,053,072 $ 456,769 $ 1,348,880 $ 635,203 $ 1,612,220

____________________

(1) Amounts represent undiscounted future minimum rental commitments under non-cancelable operating leases.

Includes $1.0 billion related to lease renewal options that are reasonably certain of exercise.

(2) Includes finance lease obligations and convertible senior notes.

Amount is not reduced by unamortized debt discount, debt issuance costs and finance lease interest totaling $67.9 million.

(3) Includes deferred compensation obligations, deposits and other accrued obligations due to our restaurant partners.

Timing and amounts of payments may vary significantly based on employee turnover, return of deposits and changes to buyout values.

(4) Includes other long-term liabilities, primarily consisting of non-partner deferred compensation obligations.

Unrecognized tax benefits are excluded from this table since it is not possible to estimate when these future payments will occur.

(5) Projected future interest payments on long-term debt are based on interest rates in effect as of December 27, 2020 and assume only scheduled principal payments.

Estimated interest expense includes the impact of our variable-to-fixed interest rate swap agreements.

(6) Purchase obligations include agreements to purchase goods or services that are enforceable, legally binding and specify all significant terms, including fixed or minimum quantities to be purchased;

fixed, minimum or variable price provisions;

and the approximate timing of the transaction.

We have purchase obligations with various vendors that consist primarily of inventory, technology, advertising and restaurant-level service contracts.

Summary of Cash Flows and Financial Condition

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

(dollars in thousands) 2021 2020

Net cash provided by operating activities $ 402,455 $ 138,849

Net cash used in investing activities (104,745) (76,639)

Net cash used in financing activities (317,419) (16,773)

Effect of exchange rate changes on cash and cash equivalents (1,642) (2,174)

Net (decrease) increase in cash, cash equivalents and restricted cash $ (21,351) $ 43,263

Operating activities - Net cash provided by operating activities increased during 2021 as compared to 2020 primarily due to a significant improvement in revenues and operating results, partially offset by:

(i) cash paid in connection with the Carrabba’s Italian Grill royalty termination, (ii) timing of collections of gift card receivables, (iii) higher inventory purchases, (iv) payment of payroll taxes deferred in 2020 as a result of the Coronavirus, Aid, Relief and Economic Security Act, (v) cash paid to terminate interest rate swap agreements and (vi) timing of operational payments and receipts.

Investing activities - The increase in net cash used in investing activities during 2021 as compared to 2020 was primarily due to higher capital expenditures, partially offset by higher proceeds from the disposal of property, fixtures and equipment.

Financing activities - The increase in net cash used in financing activities during 2021 as compared to 2020 was primarily due to our capital restructuring and debt payments throughout the fiscal year that lowered bank debt and unsecured notes by an aggregate of $297.0 million.

Financial Condition - Following is a summary of our current assets, current liabilities and working capital (deficit) as of the periods indicated:

(dollars in thousands) DECEMBER 26, 2021 DECEMBER 27, 2020

Current assets $ 352,792 $ 323,854

Current liabilities 984,625 950,104

Working capital (deficit) $ (631,833) $ (626,250)

Working capital (deficit) includes:

(i) Unearned revenue primarily from unredeemed gift cards of $398.8 million and $381.6 million as of December 26, 2021 and December 27, 2020, respectively, and (ii) current operating lease liabilities of $177.0 million and $176.8 million as of December 26, 2021 and December 27, 2020, respectively, with the corresponding operating right-of-use assets recorded as non-current on our Consolidated Balance Sheets.

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 are 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 typically used to service debt obligations and to make capital expenditures.

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Critical Accounting Policies and Estimates

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When evaluating for impairment, the total future undiscounted cash flows expected to be generated by the assets are compared to the carrying amount.

If the total future undiscounted cash flows expected to be generated by the assets

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

are less than the carrying amount, this may be an indicator of impairment.

If the total future undiscounted cash flows expected to be generated by the assets are less than the carrying amount, this may be an indicator of impairment.

An impairment loss is recognized in earnings when the asset’s carrying value exceeds its estimated fair value.

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The key estimates and assumptions used in this model are future cash flow estimates, with material changes generally driven by changes in expected use, and the discount rate.

These estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as ongoing maintenance and improvement of the assets, changes in economic conditions and changes in our operating performance.

Historically, the change in useful lives of our assets as a result of planned closures or the decision not to renew leases has been a key factor in the impairment we have recognized.

Goodwill and Indefinite-Lived Intangible Assets - Goodwill and indefinite-lived intangible assets are tested for impairment annually in the second fiscal quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

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The key estimates and assumptions used in these models are future cash flow estimates, which are heavily influenced by revenue growth rates, operating margins and capital expenditures.

The fair value of the trade name is determined through a relief from royalty method.

The carrying value of the reporting unit is compared to its estimated fair value, with any excess of carrying value over fair value deemed to be an indicator of impairment.

These estimates are subjective, and our ability to achieve the forecasted cash flows used in our fair value calculations is affected by factors such as the success of strategic initiatives, changes in economic conditions, changes in our operating performance and changes in our business strategies.

The fair value of the trade names is determined through a relief from royalty method.

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The carrying value of the reporting unit or trade name is compared to its estimated fair value, with any excess of carrying value over fair value deemed to be an indicator of impairment.

The carrying value of goodwill as of December 26, 2021 was $268.4 million.

The COVID-19 outbreak was considered a triggering event during the first quarter of 2020 and therefore we performed a quantitative assessment for our four U.S.

and three international reporting units.

Based on this assessment, which utilized a discounted cash flow analysis, we recorded full impairment of goodwill related to our Hong Kong reporting unit of $2.0 million, within the international segment during the first quarter of 2020.

We also determined the fair value of each remaining reporting unit was more than 100% in excess of its carrying value with the exception of one international reporting unit, which had a goodwill carrying value of $69.3 million and a reporting unit fair value approximately 39% in excess of its reporting unit carrying value.

We also performed our annual impairment test in the second quarter of 2020 by utilizing the quantitative approach with the same assumptions and analysis used in the first quarter and determined that there were no additional events or circumstances to indicate that it was more likely than not that the fair value of our reporting units was less than their carrying values.

Our interim and annual impairment tests utilized a discounted cash flows model, using significant assumptions to project future cash flows including operating margins, to estimate the fair value of our reporting units.

We performed our annual impairment test in the second quarter of 2021 by utilizing the qualitative approach and determined that there were no events or circumstances to indicate that it was more likely than not that the fair value of our reporting units was less than their carrying values.

Sales declines at our restaurants, unplanned increases in commodity or labor costs, deterioration in overall economic conditions and challenges in the restaurant industry may result in future impairment charges.

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Leases - We use judgment to determine the reasonably certain lease term, which in turn, impacts the applicable incremental borrowing rate (“IBR”) used to calculate the initial lease liability for each portfolio of leases.

BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

determined the present value of the lease liabilities by using a country specific IBR and applying a single rate to the respective portfolio of leases based on term, regardless of the underlying asset type.

Other assumptions used in determining our incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based on comparable market data.

We determined the present value of the lease liabilities by using a country specific IBR and applying a single rate to the respective portfolio of leases based on term, regardless of the underlying asset type.

The reasonably certain lease term used in the evaluation of existing leases at transition and new leases after adoption of the new lease standard includes renewal option periods only in instances in which the exercise of the renewal option is reasonably certain because failure to exercise such an option would result in an economic penalty.

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In establishing our reserves, we consider certain actuarial assumptions and judgments regarding economic conditions, and the frequency and severity of claims.

The establishment of the reserves utilizing such estimates and assumptions is in part based on the premise that historical claims experience is indicative of current or future expected activity, which could differ significantly.

Reserves recorded for workers’ compensation and general or liquor liability claims are discounted using the average of the one-year and five-year risk-free rate of monetary assets that have comparable maturities.

If actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

A 50 basis point increase to the discount rate and a decrease to a zero discount rate in our insurance claim liabilities as of December 27, 2020, would have affected net earnings by $0.8 million and $(0.4) million, respectively, in 2020.

Stock-Based Compensation - We have a stock-based compensation plan that permits the grant of stock options, stock appreciation rights, restricted stock units, performance awards and other stock-based awards to our management and other key employees.

We account for our stock-based employee compensation using a fair value-based method of accounting.

We use the Black-Scholes option pricing model to estimate the weighted-average grant date fair value of stock options granted.

Expected volatility is based on historical volatility of our stock.

The expected term of options granted represents the period of time that options granted are expected to be outstanding.

Expected term is estimated based on historical exercise experience of our stock options.

Dividend yield is the level of dividends expected to be paid on our common stock over the expected term of our options.

The risk-free rate for periods within the expected life of the option is based on the U.S.

Treasury yield curve in effect as of the grant date.

Forfeitures of share-based compensation awards are recognized as they occur.

BLOOMIN’ BRANDS, INC.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Estimates and assumptions are based upon information currently available, including historical experience and current business and economic conditions.

A simultaneous 10% change in our volatility, forfeiture rate, weighted-average risk-free interest rate, dividend rate and term of grant in our stock option pricing model for 2020 would not have a material effect on net income.

Our performance-based share units (“PSUs”) require assumptions regarding the likelihood of achieving certain Company performance criteria set forth in the award agreements.

Assumptions used in our assessment are consistent with our internal forecasts and operating plans .

If we assumed that the PSU performance conditions for stock-based awards were not met, stock-based compensation expense would have decreased by $8.1 million for 2020, including reversal of expense recorded in prior years.

If we assumed that all granted PSU share awards met or will meet their maximum threshold, expense would have increased by $5.1 million for 2020.

If actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

A 50 basis point change in the discount rate in our insurance claim liabilities as of December 26, 2021, would have affected net earnings by $0.8 million in 2021.

Income Taxes - Deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis.

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Changes in assumptions regarding our level and composition of earnings, tax laws or the deferred tax valuation allowance and the results of tax audits, may materially impact the effective income tax rate.

Our income tax returns, like those of most companies, are periodically audited by U.S.

While we consider all of our tax positions to be fully supportable, our income tax returns, like those of most companies, are periodically audited by U.S.

and foreign tax authorities.

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These assumptions and probabilities are reviewed and updated based upon new information.

An unfavorable tax settlement generally requires the use of cash and an increase in the amount of income tax expense we recognize.

Revenue Recognition - We sell gift cards to customers in our restaurants, through our websites and through select third parties.

A liability is initially established for the value of the gift card when sold.

We recognize revenue from gift cards when the card is redeemed by the customer.

There is uncertainty when calculating gift card breakage, the amount of gift cards which will not be redeemed, because management is required to make assumptions and to apply judgment regarding the effects of future events.

We recognize gift card breakage revenue using estimates based on historical redemption patterns.

If actual redemptions vary from the estimated breakage, gift card breakage revenue may differ from the amount recorded.

We periodically update our estimates used for breakage and apply that rate to gift card redemptions.

A change in our breakage rate estimates by 50 basis points would have resulted in an adjustment in our breakage revenue of $1.5 million for 2020.

An unfavorable tax settlement could require the use of cash and an increase in the amount of income tax expense we recognize.

As of December 26, 2021, we had $18.8 million of unrecognized tax benefits, including accrued interest and penalties, that if recognized, would impact our effective income tax rate.

Recently Issued Financial Accounting Standards

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis