Quantitative and Qualitative Disclosures about Market Risk
−Removed: We are exposed to market risk from changes in interest rates on debt, changes in foreign currency exchange rates and changes in commodity prices.
−Removed: Interest Rate Risk
−Removed: We are exposed to market risk from fluctuations in interest rates, which could affect our consolidated balance sheet, earnings and cash flows.
−Removed: Stockholders’ equity can be adversely affected by changing interest rates, as after-tax changes in the fair value of interest rate swaps designated as cash flow hedges are reflected as increases and decreases to a component of stockholders’ equity.
−Removed: We manage our exposure to market risk through regular operating and financing activities and when deemed appropriate, through the use of derivative financial instruments.
−Removed: We use derivative financial instruments as risk management tools and not for speculative purposes.
−Removed: See Note 17 - Derivative Instruments and Hedging Activities of the Notes to Consolidated Financial Statements for further information.
−Removed: As of December 27, 2020, our interest rate risk was primarily from variable interest rate changes on our Senior Secured Credit Facility.
−Removed: To manage the risk of fluctuations in variable interest rate debt, we have interest rate swaps for an aggregate notional amount of $550.0 million that mature on November 30, 2022.
−Removed: We utilize valuation models to estimate the effects of changing interest rates.
−Removed: The following table summarizes the changes to fair value and interest expense under a shock scenario.
−Removed: This analysis assumes that interest rates change suddenly, as an interest rate “shock” and continue to increase or decrease at a consistent level above or below the LIBOR curve.
−Removed: DECEMBER 27, 2020
−Removed: (dollars in thousands) INCREASE DECREASE
−Removed: Change in fair value (1):
−Removed: Interest rate swap $ 10,716 $ (10,983)
−Removed: Change in annual interest expense (2):
−Removed: Variable rate debt $ 3,079 $ (369)
−Removed: ________________
−Removed: (1) The potential change from a hypothetical 100 basis point increase (decrease) in short-term interest rates.
−Removed: (2) The potential change from a hypothetical 100 basis point increase and a decrease to zero basis points in short-term interest rates based on the LIBOR curve.
−Removed: The curve ranges from our interest rate of 11 basis points to 13 basis points.
−Removed: Foreign Currency Exchange Rate Risk
−Removed: We are subject to foreign currency exchange risk for our restaurants operating in foreign countries.
−Removed: Our exposure to foreign currency exchange risk is primarily related to fluctuations in the Brazilian Real relative to the U.S.
−Removed: Our operations in other markets consist of Company-owned restaurants on a smaller scale than Brazil.
−Removed: If foreign currency exchange rates depreciate in the countries in which we operate, we may experience declines in our operating results.
−Removed: For 2020, 9.0% of our revenue was generated in foreign currencies.
−Removed: A 10% change in average foreign currency rates against the U.S.
−Removed: dollar would have increased or decreased our Total revenues and Net (loss) income for our foreign entities by $30.6 million and $1.7 million, respectively.
−Removed: BLOOMIN’ BRANDS, INC.
+Added: We are exposed to market risk from changes in commodity prices, labor inflation and foreign currency exchange rates.
+Added: During 2021, we substantially reduced our variable rate debt borrowings and terminated a significant portion of our interest rate swap agreements, which significantly reduced our market risk exposure related to interest rate risk.
Commodity Pricing Risk
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The related agreements may contain contractual features that limit the price paid by establishing certain price floors and caps.
+Added: As of December 26, 2021, approximately 70% of our estimated 2022 annual food purchases were covered by fixed contracts, most of which are scheduled to expire during 2022.
+Added: During 2021, commodity markets began experiencing elevated levels of inflation across all proteins given strong consumer demand and product shortages due to supply chain disruptions.
+Added: In addition, higher input costs across labor, fuel, freight and packaging contributed to increases as well.
+Added: We anticipate commodity inflation to be approximately 11.0% to 13.0% for 2022.
Extreme changes in commodity prices or long-term changes could affect our financial results adversely.
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Additionally, from time to time, competitive circumstances could limit menu price flexibility, and in those cases, margins would be negatively impacted by increased commodity prices.
−Removed: Historically, we have utilized derivative instruments to mitigate some of our overall exposure to material increases in natural gas prices.
−Removed: As of December 27, 2020 and December 29, 2019, no derivatives were included in our consolidated financial statements.
+Added: Currently we do not use financial instruments to hedge our commodity risk.
In addition to the market risks identified above, we are subject to business risk as our U.S.
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See Note 22 - Commitments and Contingencies of the Notes to Consolidated Financial Statements for further details.
+Added: Labor Inflation
+Added: Our restaurant operations are subject to federal and state minimum wage and other laws governing such matters as working conditions, overtime and tip credits.
+Added: A significant number of our restaurant team members are paid at rates related to the federal and/or state minimum wage and, accordingly, increases in the minimum wage increase our labor costs.
+Added: To the extent permitted by competition and the economy, we have mitigated increased costs by increasing menu prices and may continue to do so if deemed necessary in future years.
+Added: Substantial increases in costs and expenses could impact our operating results to the extent such increases cannot be passed through to our guests.
+Added: We anticipate high-single digit labor cost inflation during 2022.
+Added: Foreign Currency Exchange Rate Risk
+Added: We are subject to foreign currency exchange risk for our restaurants operating in foreign countries.
+Added: Our exposure to foreign currency exchange risk is primarily related to fluctuations in the Brazilian Real relative to the U.S.
+Added: Our operations in other markets consist of Company-owned restaurants on a smaller scale than Brazil.
+Added: If foreign currency exchange rates depreciate in the countries in which we operate, we may experience declines in our operating results.
+Added: Currently, we do not use financial instruments to hedge foreign currency exchange rate changes.
+Added: BLOOMIN’ BRANDS, INC.
+Added: For 2021, 8.8% of our revenue was generated in foreign currencies.
+Added: A 10% change in average foreign currency rates against the U.S.
+Added: dollar would have increased or decreased our Total revenues for our foreign entities by $38.9 million.
+Added: The 10% change would not have had a material effect on Net income.
+Added: Interest Rate Risk
+Added: We are exposed to market risk from fluctuations in interest rates, which could affect our consolidated balance sheet, earnings and cash flows.
+Added: As of December 26, 2021, our interest rate risk was primarily from variable interest rate changes on our Senior Secured Credit Facility.
+Added: We manage our exposure to market risk through regular operating and financing activities and when deemed appropriate, through the use of derivative financial instruments.
+Added: We use derivative financial instruments as risk management tools and not for speculative purposes.
+Added: To manage the risk of fluctuations in variable interest rate debt, we have interest rate swaps.
+Added: As of December 26, 2021, we had interest rate swaps with an aggregate notional amount of $125.0 million that mature on November 30, 2022 .
+Added: See Note 17 - Derivative Instruments and Hedging Activities of the Notes to Consolidated Financial Statements for further information.
+Added: We utilize valuation models to estimate the effects of changing interest rates.
+Added: As of December 26, 2021, a potential change from a hypothetical 100 basis point increase/decrease in short-term interest rates would not materially impact the fair value of our interest rate swaps or our annual interest expense.
This market risk discussion contains forward-looking statements.
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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.