Bloomin' Brands, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL INFORMATION PAGE NO. Management’s Annual Report on Internal Control over Financial Reporting 63 Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 64 Consolidated Balance Sheets — December 25, 2022 and December 26, 2021 67 Consolidated Statements of Operations and Comprehensive Income (Loss) — For Fiscal Years 2022, 2021 and 2020 68 Consolidated Statements of Changes in Stockholders’ Equity — For Fiscal Years 2022, 2021 and 2020 69 Consolidated Statements of Cash Flows — For Fiscal Years 2022, 2021 and 2020 71 Notes to Consolidated Financial Statements 73 62 Table of Contents BLOOMIN’ BRANDS, INC. Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of our internal control over financial reporting as of December 25, 2022 using the criteria described in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”). Based upon our evaluation, management concluded that our internal control over financial reporting was effective as of December 25, 2022. The effectiveness of our internal control over financial reporting as of December 25, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein. 63 Table of Contents BLOOMIN’ BRANDS, INC. Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Bloomin’ Brands, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Bloomin’ Brands, Inc. and its subsidiaries (the “Company”) as of December 25, 2022 and December 26, 2021, and the related consolidated statements of operations and comprehensive income (loss), of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 25, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 25, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 25, 2022 and December 26, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 25, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 25, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible instruments and contracts in an entity’s own equity in 2021. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 64 Table of Contents BLOOMIN’ BRANDS, INC. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Insurance Reserves As described in Notes 2 and 22 to the consolidated financial statements, the Company’s consolidated discounted insurance reserves balance was $49.1 million as of December 25, 2022. The Company carries insurance programs with specific retention levels or high per-claim deductibles for a significant portion of expected losses under its workers’ compensation, general or liquor liability, health, property and management liability insurance programs. The Company records a liability for all unresolved claims and for an estimate of incurred but not reported claims at the anticipated cost that falls below its specified retention levels or per-claim deductible amounts. In establishing reserves, management considers certain actuarial assumptions and judgments regarding economic conditions and the frequency and severity of claims. Reserves recorded for workers’ compensation and general liability claims are discounted using the average of the one-year and five-year risk-free rate of monetary assets that have comparable maturities. The principal considerations for our determination that performing procedures relating to the valuation of insurance reserves is a critical audit matter are (i) the significant judgment by management when developing the estimated reserves, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the actuarial assumptions related to economic conditions and the frequency and severity of claims, and (iii) the audit effort included the involvement of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of insurance reserves. These procedures also included, among others (i) evaluating management’s process for developing the insurance reserves, (ii) evaluating the appropriateness of management’s actuarial methods used, (iii) evaluating the reasonableness of the actuarial assumptions related to economic conditions and the frequency and severity of claims, and (iv) testing the completeness and accuracy of underlying 65 Table of Contents BLOOMIN’ BRANDS, INC. data used in the valuation. Evaluating the actuarial assumptions related to economic conditions and the frequency and severity of claims involved evaluating whether the assumptions were reasonable considering inflation and the environment, and whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of management’s actuarial methods used in determining the insurance reserves and evaluating the reasonableness of assumptions related to economic conditions. /s/ PricewaterhouseCoopers LLP Tampa, Florida February 22, 2023 We have served as the Company’s auditor since 1998. 66 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) DECEMBER 25, 2022 DECEMBER 26, 2021 ASSETS Current assets Cash and cash equivalents $ 84,735 $ 87,585 Restricted cash and cash equivalents — 1,472 Inventories 78,124 79,112 Other current assets, net 183,718 184,623 Total current assets 346,577 352,792 Property, fixtures and equipment, net 914,142 842,012 Operating lease right-of-use assets 1,103,083 1,130,873 Goodwill 273,032 268,444 Intangible assets, net 448,326 453,412 Deferred income tax assets, net 153,118 168,068 Other assets, net 82,147 78,670 Total assets $ 3,320,425 $ 3,294,271 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 183,715 $ 167,978 Accrued and other current liabilities 399,301 406,894 Unearned revenue 394,215 398,795 Current portion of long-term debt 1,636 10,958 Total current liabilities 978,867 984,625 Non-current operating lease liabilities 1,148,607 1,179,447 Long-term debt, net 831,656 782,107 Other long-term liabilities, net 87,386 125,242 Total liabilities 3,046,516 3,071,421 Commitments and contingencies (Note 22) Stockholders’ equity Bloomin’ Brands stockholders’ equity Preferred stock, $ 0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of December 25, 2022 and December 26, 2021 — — Common stock, $ 0.01 par value, 475,000,000 shares authorized; 87,696,200 and 89,252,823 shares issued and outstanding as of December 25, 2022 and December 26, 2021, respectively 877 893 Additional paid-in capital 1,161,912 1,119,728 Accumulated deficit ( 706,109 ) ( 698,171 ) Accumulated other comprehensive loss ( 185,311 ) ( 205,989 ) Total Bloomin’ Brands stockholders’ equity 271,369 216,461 Noncontrolling interests 2,540 6,389 Total stockholders’ equity 273,909 222,850 Total liabilities and stockholders’ equity $ 3,320,425 $ 3,294,271 The accompanying notes are an integral part of these consolidated financial statements. 67 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (IN THOUSANDS, EXCEPT PER SHARE DATA) FISCAL YEAR 2022 2021 2020 Revenues Restaurant sales $ 4,352,695 $ 4,061,093 $ 3,144,636 Franchise and other revenues 63,813 61,292 25,925 Total revenues 4,416,508 4,122,385 3,170,561 Costs and expenses Food and beverage costs 1,383,632 1,229,689 982,702 Labor and other related 1,226,460 1,154,623 1,005,295 Other restaurant operating 1,065,662 1,006,371 846,566 Depreciation and amortization 169,617 163,391 180,261 General and administrative 234,752 245,616 254,356 Provision for impaired assets and restaurant closings 5,964 13,737 76,354 Total costs and expenses 4,086,087 3,813,427 3,345,534 Income (loss) from operations 330,421 308,958 ( 174,973 ) Loss on extinguishment and modification of debt ( 107,630 ) ( 2,073 ) ( 237 ) Loss on fair value adjustment of derivatives, net ( 17,685 ) — — Other (expense) income, net ( 23 ) 26 131 Interest expense, net ( 53,176 ) ( 57,614 ) ( 64,442 ) Income (loss) before provision (benefit) for income taxes 151,907 249,297 ( 239,521 ) Provision (benefit) for income taxes 42,704 26,384 ( 80,726 ) Net income (loss) 109,203 222,913 ( 158,795 ) Less: net income (loss) attributable to noncontrolling interests 7,296 7,358 ( 80 ) Net income (loss) attributable to Bloomin’ Brands 101,907 215,555 ( 158,715 ) Redemption of preferred stock in excess of carrying value — — ( 3,496 ) Net income (loss) attributable to common stockholders $ 101,907 $ 215,555 $ ( 162,211 ) Net income (loss) $ 109,203 $ 222,913 $ ( 158,795 ) Other comprehensive income (loss): Foreign currency translation adjustment 10,169 ( 6,597 ) ( 37,516 ) Unrealized gain (loss) on derivatives, net of tax 573 86 ( 14,741 ) Reclassification of adjustments for loss on derivatives included in Net income (loss), net of tax 954 7,392 9,923 Impact of terminated interest rate swaps included in Net income (loss), net of tax 8,982 4,576 — Comprehensive income (loss) 129,881 228,370 ( 201,129 ) Less: comprehensive income (loss) attributable to noncontrolling interests 7,296 7,358 ( 744 ) Comprehensive income (loss) attributable to Bloomin’ Brands $ 122,585 $ 221,012 $ ( 200,385 ) Earnings (loss) per share attributable to common stockholders: Basic $ 1.15 $ 2.42 $ ( 1.85 ) Diluted $ 1.03 $ 2.00 $ ( 1.85 ) Weighted average common shares outstanding: Basic 88,846 88,981 87,468 Diluted 98,512 107,803 87,468 Cash dividends declared per common share $ 0.56 $ — $ 0.20 The accompanying notes are an integral part of these consolidated financial statements. 68 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (IN THOUSANDS, EXCEPT PER SHARE DATA) BLOOMIN’ BRANDS COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUM- ULATED DEFICIT ACCUMULATED OTHER COMPREHENSIVE LOSS NON-CONTROLLING INTERESTS TOTAL SHARES AMOUNT Balance, December 29, 2019 86,946 $ 869 $ 1,094,338 $ ( 755,089 ) $ ( 169,776 ) $ 7,139 $ 177,481 Cumulative-effect from a change in accounting principle, net of tax — — — ( 4,292 ) — — ( 4,292 ) Net loss — — — ( 158,715 ) — ( 80 ) ( 158,795 ) Other comprehensive loss, net of tax — — — — ( 42,187 ) ( 147 ) ( 42,334 ) Cash dividends declared, $ 0.20 per common share — — ( 17,480 ) — — — ( 17,480 ) Stock-based compensation — — 14,802 — — — 14,802 Consideration for preferred stock in excess of carrying value, net of tax — — ( 3,496 ) — 517 1,261 ( 1,718 ) Common stock issued under stock plans (1) 910 10 ( 17 ) — — — ( 7 ) Purchase of noncontrolling interests — — ( 156 ) — — 96 ( 60 ) Distributions to noncontrolling interests — — — — — ( 1,908 ) ( 1,908 ) Contributions from noncontrolling interests — — — — — 451 451 Equity component value of convertible note issuance, net of tax of $ 650 — — 64,367 — — — 64,367 Sale of common stock warrant — — 46,690 — — — 46,690 Purchase of convertible note hedge — — ( 66,240 ) — — — ( 66,240 ) Balance, December 27, 2020 87,856 $ 879 $ 1,132,808 $ ( 918,096 ) $ ( 211,446 ) $ 6,812 $ 10,957 Cumulative-effect from a change in accounting principle, net of tax — — ( 47,323 ) 4,370 — — ( 42,953 ) Net income — — — 215,555 — 7,358 222,913 Other comprehensive income, net of tax — — — — 5,457 — 5,457 Stock-based compensation — — 24,405 — — — 24,405 Common stock issued under stock plans (1) 1,397 14 9,836 — — — 9,850 Purchase of noncontrolling interests — — 2 — — ( 5 ) ( 3 ) Distributions to noncontrolling interests — — — — — ( 9,123 ) ( 9,123 ) Contributions from noncontrolling interests — — — — — 1,347 1,347 Balance, December 26, 2021 89,253 $ 893 $ 1,119,728 $ ( 698,171 ) $ ( 205,989 ) $ 6,389 $ 222,850 (CONTINUED...) 69 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (IN THOUSANDS, EXCEPT PER SHARE DATA) BLOOMIN’ BRANDS COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUM- ULATED DEFICIT ACCUMULATED OTHER COMPREHENSIVE LOSS NON-CONTROLLING INTERESTS TOTAL SHARES AMOUNT Balance, December 26, 2021 89,253 $ 893 $ 1,119,728 $ ( 698,171 ) $ ( 205,989 ) $ 6,389 $ 222,850 Net income — — — 101,907 — 7,296 109,203 Other comprehensive income, net of tax — — — 100 20,678 — 20,778 Cash dividends declared, $ 0.56 per common share — — ( 49,736 ) — — — ( 49,736 ) Repurchase and retirement of common stock ( 5,429 ) ( 54 ) — ( 109,945 ) — — ( 109,999 ) Stock-based compensation — — 16,514 — — — 16,514 Common stock issued under stock plans (1) 1,559 15 12,940 — — — 12,955 Purchase of noncontrolling interests, net of tax of $ 489 — — ( 1,415 ) — — ( 3,400 ) ( 4,815 ) Distributions to noncontrolling interests — — — — — ( 9,127 ) ( 9,127 ) Contributions from noncontrolling interests — — — — — 1,382 1,382 Retirement of convertible senior note hedges — — 112,956 — — — 112,956 Retirement of warrants — — ( 97,617 ) — — — ( 97,617 ) Issuance of common stock from repurchase of convertible senior notes 2,313 23 48,542 — — — 48,565 Balance, December 25, 2022 87,696 $ 877 $ 1,161,912 $ ( 706,109 ) $ ( 185,311 ) $ 2,540 $ 273,909 ________________ (1) Net of forfeitures and shares withheld for employee taxes. The accompanying notes are an integral part of these consolidated financial statements. 70 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) FISCAL YEAR 2022 2021 2020 Cash flows provided by operating activities: Net income (loss) $ 109,203 $ 222,913 $ ( 158,795 ) Adjustments to reconcile Net income (loss) to cash provided by operating activities: Depreciation and amortization 169,617 163,391 180,261 Amortization of debt discounts and issuance costs 3,538 4,494 10,142 Amortization of deferred gift card sales commissions 24,091 26,012 20,927 Provision for impaired assets and restaurant closings 5,964 13,737 76,354 Non-cash interest expense from terminated interest rate swaps 12,215 6,160 — Non-cash operating lease costs 83,254 78,272 74,436 (Benefit) provision for expected credit losses and contingent lease liabilities ( 1,117 ) 946 7,225 Inventory obsolescence and spoilage — — 10,169 Stock-based and other non-cash compensation expense 16,514 24,405 14,802 Deferred income tax expense (benefit) 13,748 ( 3,346 ) ( 88,256 ) Loss on extinguishment and modification of debt 107,630 2,073 237 Loss on fair value adjustment of derivatives, net 17,685 — — Other, net 3,186 ( 1,879 ) ( 3,932 ) Change in assets and liabilities: Decrease (increase) in inventories 1,036 ( 18,210 ) 19,857 (Increase) decrease in other current assets ( 40,370 ) ( 58,397 ) 14,392 (Increase) decrease in other assets ( 6,670 ) ( 2,073 ) 3,688 Decrease in operating right-of-use assets, net 277 160 412 (Decrease) increase in accounts payable and accrued and other current liabilities ( 40,679 ) 25,619 ( 61,638 ) (Decrease) increase in unearned revenue ( 4,638 ) 17,225 10,569 Decrease in operating lease liabilities ( 82,540 ) ( 90,387 ) ( 50,626 ) (Decrease) increase in other long-term liabilities ( 1,022 ) ( 8,660 ) 58,625 Net cash provided by operating activities 390,922 402,455 138,849 Cash flows used in investing activities: Proceeds from disposal of property, fixtures and equipment 1,634 9,322 2,178 Proceeds received from company-owned life insurance 16,092 9,270 9,695 Capital expenditures ( 219,691 ) ( 122,830 ) ( 87,842 ) Other investments, net 827 ( 507 ) ( 670 ) Net cash used in investing activities $ ( 201,138 ) $ ( 104,745 ) $ ( 76,639 ) (CONTINUED...) 71 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) FISCAL YEAR 2022 2021 2020 Cash flows used in financing activities: Proceeds from issuance of long-term debt $ — $ 200,000 $ — Repayments of long-term debt and finance lease obligations ( 196,447 ) ( 431,166 ) ( 26,326 ) Proceeds from borrowings on revolving credit facilities 1,239,500 470,000 505,000 Repayments of borrowings on revolving credit facilities ( 889,500 ) ( 837,000 ) ( 657,000 ) Financing fees ( 1,205 ) ( 5,868 ) ( 3,096 ) Proceeds from issuance of senior notes — 300,000 — Issuance costs related to senior notes — ( 5,546 ) ( 8,416 ) Proceeds from issuance of convertible senior notes — — 230,000 Repurchase of convertible senior notes ( 196,919 ) — — Purchase of convertible note hedge — — ( 66,240 ) Proceeds from retirement of convertible senior note hedges 131,869 — — Proceeds from issuance of warrants — — 46,690 Payments for retirement of warrants ( 114,825 ) — — Proceeds (payments of taxes) from share-based compensation, net 12,955 9,850 ( 7 ) Distributions to noncontrolling interests ( 9,127 ) ( 9,123 ) ( 1,908 ) Contributions from noncontrolling interests 1,382 1,347 451 Purchase of noncontrolling interests ( 5,004 ) ( 3 ) ( 60 ) Payments for partner equity plan ( 9,292 ) ( 9,910 ) ( 16,906 ) Repurchase of common stock ( 109,152 ) — — Cash dividends paid on common stock ( 49,736 ) — ( 17,480 ) Redemption of subsidiary preferred stock — — ( 1,475 ) Net cash used in financing activities ( 195,501 ) ( 317,419 ) ( 16,773 ) Effect of exchange rate changes on cash and cash equivalents 1,395 ( 1,642 ) ( 2,174 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 4,322 ) ( 21,351 ) 43,263 Cash, cash equivalents and restricted cash as of the beginning of the period 89,057 110,408 67,145 Cash, cash equivalents and restricted cash as of the end of the period $ 84,735 $ 89,057 $ 110,408 Supplemental disclosures of cash flow information: Cash paid for interest $ 39,126 $ 47,036 $ 52,630 Cash paid for income taxes, net of refunds $ 35,450 $ 36,336 $ 8,415 Supplemental disclosures of non-cash investing and financing activities: Leased assets obtained in exchange for new operating lease liabilities $ 54,271 $ 43,363 $ 19,451 Leased assets obtained in exchange for new finance lease liabilities $ 4,066 $ 1,238 $ 1,367 Increase in liabilities from the acquisition of property, fixtures and equipment $ 12,762 $ 2,344 $ 1,152 The accompanying notes are an integral part of these consolidated financial statements. 72 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of the Business Bloomin’ Brands, Inc. (“Bloomin’ Brands” or the “Company”), a holding company that conducts its operations through its subsidiaries, is one of the largest casual dining restaurant companies in the world, with a portfolio of leading, differentiated restaurant concepts. OSI Restaurant Partners, LLC (“OSI”) is the Company’s primary operating entity. The Company owns and operates casual, upscale casual and fine dining restaurants. The Company’s restaurant portfolio has four concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Additional Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchise agreements. 2. Summary of Significant Accounting Policies Basis of Presentation - The Company’s consolidated financial statements include the accounts and operations of Bloomin’ Brands and its subsidiaries. To ensure timely reporting, the Company consolidates the results of its Brazil operations on a one-month calendar lag. There were no intervening events that would materially affect the Company’s consolidated financial position, results of operations or cash flows as of and for the year ended December 25, 2022. COVID-19 Pandemic - As a result of the COVID-19 pandemic (“COVID-19”), traffic was significantly reduced in the Company’s restaurants which negatively impacted its operating results during 2020. See Note 3 - COVID-19 for details regarding certain charges resulting from the COVID-19 pandemic. During 2021, the recovery of in-restaurant dining continued while the Company retained a significant portion of the incremental off-premises volume it achieved during 2020. Internationally, COVID-19-related capacity constraints continued in 2021 during periods of increased case counts and new variants until the middle of 2022 when in-restaurant dining was operating without COVID-19-related capacity constraints. Principles of Consolidation - All intercompany accounts and transactions have been eliminated in consolidation. The Company consolidates variable interest entities where it has been determined that the Company is the primary beneficiary of those entities’ operations. The Company is a franchisor of 321 full-service restaurants and off-premises kitchens as of December 25, 2022, but does not possess any ownership interests in its franchisees and does not provide material direct financial support to its franchisees. These franchise relationships are not deemed variable interest entities and are not consolidated. Investments in entities the Company does not control, but where the Company’s interest is between 20 % and 50 % and the Company has the ability to exercise significant influence over the entity, are accounted for under the equity method. Fiscal Year - The Company utilizes a 52-53-week year ending on the last Sunday in December. In a 52-week fiscal year, each quarterly period is comprised of 13 weeks. The additional week in a 53-week fiscal year is added to the fourth quarter. All periods presented consisted of 52 weeks. Use of Estimates - The preparation of the accompanying consolidated financial statements in conformity with generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated. 73 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Cash and Cash Equivalents - Cash equivalents consist of investments that are readily convertible to cash with an original maturity date of three months or less. Cash and cash equivalents include $ 41.5 million and $ 41.3 million, as of December 25, 2022 and December 26, 2021, respectively, for amounts in transit from credit card companies since settlement is reasonably assured. Restricted Cash - From time to time, the Company may have short-term restricted cash balances consisting of amounts pledged for settlement of deferred compensation plan obligations. Concentrations of Credit and Counterparty Risk - Financial instruments that potentially subject the Company to a concentration of credit risk and credit losses are through credit card and trade receivables consisting primarily of amounts due for gift card, vendor, franchise and other receivables. Gift card, vendor and other receivables consist primarily of amounts due from gift card resellers and vendor rebates. The Company considers the concentration of credit risk for gift card, vendor and other receivables to be minimal due to the payment histories and general financial condition of its gift card resellers and vendors. Amounts due from franchisees consist of initial franchise fees, royalty income and advertising fees. See Note 8 - Other Current Assets, Net for disclosure of trade receivables by category as of December 25, 2022 and December 26, 2021. Financial instruments that potentially subject the Company to concentrations of counterparty risk are cash and cash equivalents, restricted cash and derivatives. The Company attempts to limit its counterparty risk by investing in certificates of deposit, money market funds, noninterest-bearing accounts and other highly rated investments. Whenever possible, the Company selects investment grade counterparties and rated money market funds in order to mitigate its counterparty risk. At times, cash balances may be in excess of FDIC insurance limits. See Note 17 - Derivative Instruments and Hedging Activities for a discussion of the Company’s use of derivative instruments and management of credit risk inherent in derivative instruments. Allowance for Expected Credit Losses - The Company evaluates the collectability of credit card and trade receivables based on historical loss experience by risk pool and records periodic adjustments for factors such as deterioration of economic conditions, specific customer circumstances and changes in the aging of accounts receivable balances. Losses are charged off in the period in which they are determined to be uncollectible. See Note 20 - Allowance for Expected Credit Losses for a discussion of the Company’s allowance for expected credit losses. In instances where there is no established loss history, S&P speculative-grade default rates are utilized as an estimated expected credit loss rate. The Company assigned its interest, and is contingently liable, under certain real estate leases, primarily related to divested restaurant properties. Contingent lease liabilities related to these guarantees are calculated based on management’s estimate of exposure to losses which includes historical analysis of credit losses, including known instances of default, and existing economic conditions. See Note 22 - Commitments and Contingencies for a discussion of the Company’s contingent lease liabilities. Fair Value - Fair value is the price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date. Fair value is categorized into one of the following three levels based on the lowest level of significant input: Level 1 Unadjusted quoted market prices in active markets for identical assets or liabilities Level 2 Observable inputs available at measurement date other than quoted prices included in Level 1 Level 3 Unobservable inputs that cannot be corroborated by observable market data Inventories - Inventories consist of food and beverages and are stated at the lower of cost (first-in, first-out) or net realizable value. 74 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Property, Fixtures and Equipment - Property, fixtures and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful life of the assets. Estimated useful lives by major asset category are generally as follows: Buildings (1) 5 to 30 years Furniture and fixtures 5 to 7 years Equipment 2 to 7 years Computer equipment and software 2 to 7 years ____________________ (1) Includes improvements to leased properties which are depreciated over the shorter of their useful life or the reasonably certain lease term, including renewal periods that are reasonably certain. Repair and maintenance costs that maintain the appearance and functionality of the restaurant, but do not extend the useful life of any restaurant asset are expensed as incurred. The Company suspends depreciation and amortization for assets held for sale. The cost and related accumulated depreciation of assets sold or disposed of are removed from the Company’s Consolidated Balance Sheets, and any resulting gain or loss is generally recognized in Other restaurant operating expense in its Consolidated Statements of Operations and Comprehensive Income (Loss). The Company capitalizes direct and indirect internal costs associated with the acquisition, development, design and construction of Company-owned restaurant locations as these costs have a future benefit to the Company. Upon restaurant opening, these costs are depreciated and charged to Depreciation and amortization expense over the reasonably certain lease term. Internal costs of $ 4.1 million, $ 3.7 million and $ 2.7 million were capitalized during 2022, 2021 and 2020, respectively. For 2022 and 2021, computer equipment and software costs of $ 9.2 million and $ 3.4 million, respectively, were capitalized. As of December 25, 2022 and December 26, 2021, there was $ 10.1 million and $ 6.4 million, respectively, of unamortized computer equipment and software included in Property, fixtures and equipment, net on the Company’s Consolidated Balance Sheets. Goodwill and Intangible Assets - Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations and is assigned to the reporting unit in which the acquired business will operate. The Company’s indefinite-lived intangible assets consist of trade names and are recorded at fair value as of the date of acquisition. Goodwill and indefinite-lived intangible assets are tested for impairment annually, as of the first day of the second fiscal quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If the qualitative assessment is not performed or if the Company determines that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the fair value of the reporting unit is calculated. The carrying value of the reporting unit is compared to its calculated fair value, with any excess of carrying value over fair value deemed to be an impairment. Definite-lived intangible assets, which consist primarily of trademarks and reacquired franchise rights, are recorded at fair value as of the date of acquisition, amortized over their estimated useful lives and tested for impairment, using the relief from royalty method, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Derivatives - The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. 75 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. If the derivative qualifies for hedge accounting treatment, any gain or loss on the derivative instrument is recognized in equity as a change to Accumulated other comprehensive loss and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements, foreign currency exchange rate movements, changes in energy prices and other identified risks. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. The Company has elected not to offset derivative positions in the balance sheet with the same counterparty under the same agreement. Deferred Debt Issuance Costs - For its revolving credit facility, the Company records deferred debt issuance costs related to the issuance of debt obligations in Other assets, net on its Consolidated Balance Sheets. For fees associated with all other debt obligations, the Company records deferred debt issuance costs as a reduction of Long-term debt, net. The Company amortizes deferred debt issuance costs to interest expense over the term of the respective financing arrangement, primarily using the effective interest method. The Company amortized deferred debt issuance costs of $ 3.5 million, $ 4.5 million and $ 3.9 million to Interest expense, net for 2022, 2021 and 2020, respectively. Liquor Licenses - The fees from obtaining non-transferable liquor licenses directly issued by local government agencies for nominal fees are expensed as incurred. The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are capitalized as indefinite-lived intangible assets and included in Other assets, net on the Company’s Consolidated Balance Sheets. Insurance Reserves - The Company carries insurance programs with specific retention levels or high per-claim deductibles for a significant portion of expected losses under its workers’ compensation, general or liquor liability, health, property and management liability insurance programs. The Company records a liability for all unresolved claims and for an estimate of incurred but not reported claims at the anticipated cost that falls below its specified retention levels or per-claim deductible amounts. In establishing reserves, the Company considers actuarial assumptions and judgments regarding economic conditions, and the frequency and severity of claims. Reserves recorded for workers’ compensation and general liability claims are discounted using the average of the one-year and five-year risk-free rate of monetary assets that have comparable maturities. Share Repurchase - The par value of the repurchased shares is deducted from common stock and the excess of the purchase price over the par value of the shares is recorded to Accumulated deficit. All shares of common stock acquired through share repurchase programs are retired and restored to authorized but unissued shares of common stock. Revenue Recognition - The Company records food and beverage revenues, net of discounts and taxes, upon delivery to the customer. Franchise-related revenues are included in Franchise and other revenues in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Royalties, which are generally a percentage of net sales of the franchisee, are recognized as revenue in the period in which the sales are reported to have occurred provided collectability is reasonably assured. Proceeds from the sale of gift cards, which do not have expiration dates, are recorded as deferred revenue and recognized as revenue upon redemption by the customer. The Company applies the portfolio approach practical expedient to account for gift card contracts and performance obligations. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized using estimates based on historical redemption patterns. If actual 76 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued redemptions vary from assumptions used to estimate breakage, gift card breakage income may differ from the amount recorded. The Company periodically updates its estimates used for breakage. Breakage revenue is recorded as a component of Restaurant sales in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Approximately 84 % of deferred gift card revenue is expected to be recognized within 12 months of inception. Gift card sales commissions paid to third-party providers are capitalized and subsequently amortized to Other restaurant operating expense based on historical gift card redemption patterns. See Note 4 - Revenue Recognition for rollforwards of deferred gift card sales commissions and unearned gift card revenue. Advertising fees charged to franchisees are recognized in Franchise and other revenues in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) provided collectability is reasonably assured. Initial franchise and renewal fees are recognized over the term of the franchise agreement and renewal period, respectively. The weighted average remaining term of franchise agreements and renewal periods was approximately 12 years as of December 25, 2022. The Company maintains a customer loyalty program, Dine Rewards, in the U.S., where customers earn a reward after attaining qualified spend amounts. The Company’s estimate of the value of the reward is recorded as deferred revenue. Each reward must be redeemed within specified time limits of earning such reward. The revenue associated with the fair value of the reward is recognized upon the earlier of redemption or expiration of the reward. The Company applies the practical expedient to exclude disclosures regarding loyalty program remaining performance obligations, which have original expected durations of less than one year. The Company collects and remits sales, food and beverage, alcoholic beverage and hospitality taxes on transactions with customers and reports revenue net of taxes in its Consolidated Statements of Operations and Comprehensive Income (Loss). Leases - The Company’s determination of whether an arrangement contains a lease is based on an evaluation of whether the arrangement conveys the right to use and control specific property or equipment. The Company leases restaurant and office facilities and certain equipment under operating leases primarily having initial terms between one and 20 years. Restaurant facility leases generally have renewal periods totaling five to 30 years, exercisable at the option of the Company. Contingent rentals represent payment of variable lease obligations based on a percentage of gross revenues, as defined by the terms of the applicable lease agreement for certain restaurant facility leases. The Company also has certain leases, which reset periodically based on a specified index. Such leases are recorded using the index that existed at lease commencement. Subsequent changes in the index are recorded as variable rental payments. Variable rental payments are expensed as incurred in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) and future variable rent obligations are not included within the lease liabilities on the Consolidated Balance Sheets. The depreciable life of lease assets and leasehold improvements are limited by the expected lease term. None of the Company’s leases contain any material residual value guarantees or restrictive covenants. The Company accounts for U.S. fixed lease and non-lease components of a restaurant facility lease as a single lease component. Additionally, for certain equipment leases, the Company applies a portfolio approach to account for the lease assets and liabilities. Leases with an initial term of 12 months or less are not recorded on its Consolidated Balance Sheets and are recognized on a straight-line basis over the lease term within Other restaurant operating expense in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Rent expense for the Company’s operating leases, which generally have escalating rentals over the term of the lease and may include rent holidays, is recorded on a straight-line basis over the initial lease term and those renewal periods that are reasonably certain. Operating lease rent expense for open Company-owned restaurants is recorded in Other restaurant operating expense in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Payments received from landlords as incentives for leasehold improvements are recorded as a 77 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued reduction of the right-of-use asset and amortized on a straight-line basis over the term of the lease as a reduction of rent expense. In April 2020, the FASB issued a question-and-answer document focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19 (the “Lease Modification Q&A”). The Lease Modification Q&A provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease when the total cash flows resulting from the modified lease are substantially similar to the cash flows in the original lease. The Company elected this practical expedient for COVID-19-related rent concessions, primarily rent deferrals or rent abatements, and elected not to remeasure the related lease liability and right-of-use asset for those leases. Rent deferrals are accrued with no impact to straight-line rent expense. Rent abatements are recognized as a reduction of variable rent expense in the month they occur. This election will continue while these concessions are in effect. Pre-Opening Expenses - Non-capital expenditures associated with opening new restaurants are expensed as incurred and are included in Other restaurant operating expense in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Consideration Received from Vendors - The Company receives consideration for a variety of vendor-sponsored programs, such as volume rebates, promotions and advertising allowances. Advertising allowances are intended to offset the Company’s costs of promoting and selling menu items in its restaurants. Vendor consideration is recorded as a reduction of Food and beverage costs or Other restaurant operating expense when recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Impairment of Long-Lived Assets and Costs Associated with Exit Activities - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows independent of other assets. For long-lived assets deployed at its restaurants, the Company reviews for impairment at the individual restaurant level. When evaluating for impairment, the total future undiscounted cash flows expected to be generated by the asset are compared to the carrying amount. If the total future undiscounted cash flows of the asset are less than its carrying amount, recoverability is measured by comparing the fair value of the assets to the carrying amount. An impairment loss is recognized in earnings when the asset’s carrying value exceeds its estimated fair value. Fair value is generally estimated using a discounted cash flow model. Restaurant closure costs, including lease termination fees, are expensed as incurred. When the Company ceases using the property rights under a non-cancelable operating lease, it records a liability for the net present value of any remaining non-rent lease-related obligations, less the estimated subtenant cost recovery that can reasonably be obtained for the property. Any subsequent adjustment to that liability as a result of lease termination or changes in estimates of cost recovery is recorded in the period incurred. The associated expense is recorded in Provision for impaired assets and restaurant closings in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Restaurant sites and certain other assets to be sold are included in assets held for sale when certain criteria are met, including the requirement that the likelihood of selling the assets within one year is probable. Advertising Costs - Advertising production costs are expensed in the period when the advertising first occurs. All other advertising costs are expensed in the period in which the costs are incurred. Advertising expense of $ 94.0 million, $ 59.7 million and $ 67.3 million for 2022, 2021 and 2020, respectively, was recorded in Other restaurant operating expense in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Legal Costs - Settlement costs are accrued when they are deemed probable and reasonably estimable. Legal fees are recognized as incurred and are reported in General and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). 78 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Research and Development Expenses (“R&D”) - R&D is expensed as incurred in General and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). R&D primarily consists of payroll and benefit costs. R&D was $ 2.7 million, $ 2.6 million and $ 2.4 million for 2022, 2021 and 2020, respectively. Partner Compensation - In addition to base salary, Market Vice Presidents, Area Operating Partners, Restaurant Managing Partners and Chef Partners generally receive performance-based bonuses for providing management and supervisory services to their restaurants, certain of which may be based on a percentage of their restaurants’ monthly operating results or cash flows and/or total controllable income (“Monthly Payments”). Certain Restaurant Managing Partners and Chef Partners in the U.S. (“U.S. Partners”) may also participate in deferred compensation programs and other performance-based compensation programs. The Company may invest in corporate-owned life insurance policies, which are held within an irrevocable grantor or “rabbi” trust account for settlement of certain of the Company’s obligations under the deferred compensation plans. Many of the Company’s international Restaurant Managing Partners are given the option to purchase participation interests in the cash distributions of the restaurants they manage. The amount, terms and availability vary by country. The Company estimates future bonuses and deferred compensation obligations to U.S. Partners and Area Operating Partners, using current and historical information on restaurant performance and records the long-term portion of partner obligations in Other long-term liabilities, net on its Consolidated Balance Sheets. Monthly Payments and deferred compensation expenses for U.S. Partners are included in Labor and other related expenses and Monthly Payments and bonus expense for Area Operating Partners are included in General and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Stock-based Compensation - Stock-based compensation awards are measured at fair value at the date of grant and expensed over their vesting or service periods. Stock-based compensation expense is recognized only for those awards expected to vest. The expense, net of forfeitures, is recognized using the straight-line method. Forfeitures of share-based compensation awards are recognized as they occur. Beginning in 2021, performance-based share units (“PSUs”) issued by the Company include a relative total shareholder return (“Relative TSR”) modifier to the final payout outcome, which can adjust the payout percentage based on the achieved performance metric. The Relative TSR is measured by comparing the Company’s Relative TSR to that of the constituents of the S&P 1500 Restaurants index. Basic and Diluted Earnings (Loss) per Share - The Company computes basic earnings (loss) per share based on the weighted average number of common shares that were outstanding during the period. Except where the result would be antidilutive, diluted earnings per share includes the dilutive effect of common stock equivalents, consisting of stock options, restricted stock units, performance-based share units and warrants, measured using the treasury stock method, and the Company’s convertible senior notes, measured using the if-converted method. PSUs are considered dilutive when the related performance criterion has been met. The Company has provided the trustee of the Company’s convertible senior notes due 2025 (the “ 2025 Notes”) notice of its irrevocable election under the 2025 Notes indenture to settle the principal portion of the 2025 Notes upon conversion in cash and any excess in shares. As a result, only the amounts in excess of the principal amount, if applicable, are considered in diluted earnings per share. Foreign Currency Translation and Transactions - For non-U.S. operations, the functional currency is the local currency. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the balance sheet date with the translation adjustments recorded in Accumulated other comprehensive loss in the Company’s Consolidated Statements of Changes in Stockholders’ Equity. Results of 79 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued operations are translated using the average exchange rates for the reporting period. Foreign currency exchange transaction losses are recorded in General and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Income Taxes - Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in the tax rate is recognized in income in the period that includes the enactment date of the rate change. A valuation allowance may reduce deferred income tax assets to the amount that is more likely than not to be realized. The Company records a tax benefit for an uncertain tax position using the highest cumulative tax benefit that is more likely than not to be realized. The Company adjusts its liability for unrecognized tax benefits in the period in which it determines the issue is effectively settled, the statute of limitations expires or when more information becomes available. Liabilities for unrecognized tax benefits, including penalties and interest, are recorded in Accrued and other current liabilities and Other long-term liabilities, net on the Company’s Consolidated Balance Sheets. Recently Adopted Financial Accounting Standards - During the thirteen weeks ended December 25, 2022, the Company adopted Accounting Standards Update (“ASU”) No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”, which requires financial statement footnote disclosure regarding government assistance accounted for by applying a grant or contribution accounting model by analogy. See Note 3 - COVID-19 for information regarding COVID-19-related government assistance. On December 28, 2020, the Company adopted ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” (“ASU No. 2020-06”) which removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. ASU No. 2020-06 also requires the application of the if-converted method for calculating the diluted earnings per share impact of the 2025 Notes. The Company adopted ASU No. 2020-06 using the modified retrospective approach which resulted in a cumulative-effect adjustment that increased (decreased) the following Consolidated Balance Sheet accounts during the first quarter of 2021: ADJUSTMENT CONSOLIDATED BALANCE SHEET CLASSIFICATION AMOUNT (in millions) Deferred tax impact of cumulative-effect adjustment Deferred income tax assets, net $ 14.9 Debt discount reclassification Long-term debt, net $ 59.9 Equity issuance costs reclassification Long-term debt, net $ ( 2.1 ) Debt discount amortization reclassification, net of tax Accumulated deficit $ 4.4 Reversal of separated equity component, net of tax Additional paid-in capital $ ( 47.3 ) After adopting ASU No. 2020-06, the 2025 Notes are reflected entirely as a liability since the embedded conversion feature is no longer separately presented within stockholders’ equity. Recent accounting guidance not discussed herein is not applicable, did not have, or is not expected to have a material impact to the Company. Reclassifications - The Company reclassified certain items in the accompanying consolidated financial statements for prior periods to be comparable with the classification for the current period, including, but not limited to, presentation of certain items within the condensed consolidated statements of cash flows and certain notes to the consolidated financial statements. These reclassifications had no effect on previously reported net income. 80 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 3. COVID-19 COVID-19 Charges - Following is a summary of the charges recorded in connection with the COVID-19 pandemic for the period indicated (dollars in thousands): CHARGES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) CLASSIFICATION FISCAL YEAR 2020 Inventory obsolescence and spoilage Food and beverage costs $ 10,450 Compensation for idle employees (1) Labor and other related 29,993 Other operating charges Other restaurant operating 3,219 Lease guarantee contingent liabilities (2) General and administrative 4,188 Allowance for expected credit losses (3) General and administrative 3,334 Other charges General and administrative 2,719 Right-of-use asset impairment (4) Provision for impaired assets and restaurant closings 32,992 Fixed asset impairment (4) Provision for impaired assets and restaurant closings 34,423 Goodwill and other impairment (5) Provision for impaired assets and restaurant closings 3,190 $ 124,508 ________________ (1) Represents relief pay for U.S. hourly employees impacted by the closure of dining rooms, net of employee retention tax credits earned. See COVID-19 Government Assistance below for further discussion regarding employee retention credits earned. (2) Represents additional contingent liabilities recorded for lease guarantees related to certain former restaurant locations now operated by franchisees or other third parties. (3) Includes additional reserves to reflect an increase in expected credit losses, primarily related to franchise receivables. (4) Includes impairments resulting from the remeasurement of assets utilizing projected future cash flows revised for then-current economic conditions, restructuring charges, the closure of certain restaurants and in connection with the Out West Resolution Agreement. See Note 5 - Impairments and Exit Costs and Note 4 - Revenue Recognition , for details regarding COVID-19 Restructuring costs and the Out West Resolution Agreement, respectively. (5) Includes impairment of goodwill for the Company’s Hong Kong subsidiary. See Note 10 - Goodwill and Intangible Assets, Net for details regarding impairment of goodwill. COVID-19 Government Assistance - During 2020, the Company recorded $ 19.6 million of COVID-19-related government assistance primarily in connection with the Employee Retention Credit (“ERC”) provided under the Coronavirus, Aid, Relief and Economic Security (“CARES”) Act, substantially all of which was recorded in Labor and other related expenses in its Consolidated Statements of Operations and Comprehensive Income (Loss). The Company filed ERC claims for relief pay paid to employees impacted by government mandated dining room closures or capacity restrictions and quarantine pay. The Company also received subsidies from the Hong Kong government primarily provided to help offset the cost of retaining employees. During 2022 and 2021, the Company recognized immaterial government assistance in connection with payments received for these programs. As there was no authoritative guidance under U.S. GAAP on accounting for government assistance provided to for-profit business entities, the Company accounted for government assistance by analogy to International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance. The Company recognized assistance under each program when it met the program terms for assistance and receipt of assistance was reasonably assured. Government assistance is generally recorded as a deduction to the related expenses or losses that the grants are intended to compensate. During the periods presented, the Company did no t receive any Paycheck Protection Program loans, a program under the CARES Act providing loans to assist entities with paying their payroll and other costs. 81 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 4. Revenue Recognition The following table includes the categories of revenue included in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Revenues Restaurant sales $ 4,352,695 $ 4,061,093 $ 3,144,636 Franchise and other revenues Franchise revenues 49,687 45,520 21,195 Other revenues (1) 14,126 15,772 4,730 Total Franchise and other revenues 63,813 61,292 25,925 Total revenues $ 4,416,508 $ 4,122,385 $ 3,170,561 ________________ (1) For 2021, includes a $ 3.1 million benefit from the recognition of recoverable Program of Social Integration (“PIS”) and Contribution for the Financing of Social Security (“COFINS”) taxes within other revenues in connection with favorable court rulings in Brazil regarding the calculation methodology and taxable base. The amount recognized primarily represents refundable PIS and COFINS taxes for prior years, including accrued interest. The following table includes the disaggregation of Restaurant sales and franchise revenues, by restaurant concept and major international market for the periods indicated: FISCAL YEAR 2022 2021 2020 (dollars in thousands) RESTAURANT SALES FRANCHISE REVENUES RESTAURANT SALES FRANCHISE REVENUES RESTAURANT SALES FRANCHISE REVENUES U.S. Outback Steakhouse $ 2,240,432 $ 31,418 $ 2,175,909 $ 29,725 $ 1,760,071 $ 9,898 Carrabba’s Italian Grill 676,467 2,938 653,231 2,439 497,212 1,309 Bonefish Grill 559,583 662 544,068 641 396,193 346 Fleming’s Prime Steakhouse & Wine Bar 374,388 — 332,607 — 209,564 — Other 12,146 49 9,033 9 6,507 — U.S. total 3,863,016 35,067 3,714,848 32,814 2,869,547 11,553 International Outback Steakhouse - Brazil 405,866 — 258,997 — 206,280 — Other (1) 83,813 14,620 87,248 12,706 68,809 9,642 International total 489,679 14,620 346,245 12,706 275,089 9,642 Total $ 4,352,695 $ 49,687 $ 4,061,093 $ 45,520 $ 3,144,636 $ 21,195 ____________________ (1) Includes Restaurant sales for the Company-owned Outback Steakhouse restaurants outside of Brazil and Abbraccio restaurants in Brazil. Franchise revenues primarily include revenues from franchised Outback Steakhouse restaurants. 82 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The following table includes a detail of assets and liabilities from contracts with customers included on the Company’s Consolidated Balance Sheets as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Other current assets, net Deferred gift card sales commissions $ 17,755 $ 17,793 Unearned revenue Deferred gift card revenue $ 386,495 $ 387,945 Deferred loyalty revenue 5,628 9,386 Deferred franchise fees - current 460 443 Other 1,632 1,021 Total Unearned revenue $ 394,215 $ 398,795 Other long-term liabilities, net Deferred franchise fees - non-current $ 4,126 $ 4,280 The following table is a rollforward of deferred gift card sales commissions for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Balance, beginning of the period $ 17,793 $ 19,300 $ 18,554 Deferred gift card sales commissions amortization ( 24,091 ) ( 26,012 ) ( 20,927 ) Deferred gift card sales commissions capitalization 26,743 26,625 22,923 Other ( 2,690 ) ( 2,120 ) ( 1,250 ) Balance, end of the period $ 17,755 $ 17,793 $ 19,300 The following table is a rollforward of unearned gift card revenue for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Balance, beginning of the period $ 387,945 $ 373,048 $ 358,757 Gift card sales 326,603 330,841 306,016 Gift card redemptions ( 310,017 ) ( 298,397 ) ( 277,675 ) Gift card breakage ( 18,036 ) ( 17,547 ) ( 14,050 ) Balance, end of the period $ 386,495 $ 387,945 $ 373,048 83 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Franchisee Deferred Payment Agreement - On December 27, 2020, the Company 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”), who currently franchises 79 Outback Steakhouse restaurants in the western United States, primarily in California. The Resolution Agreement ends on December 31, 2023 or upon the earlier occurrence of certain specified events, including the sale of all or substantially all of the assets or equity of Out West, bankruptcy or a liquidation event (“Qualifying Event”) (the “Forbearance Period”). Prior to the Resolution Agreement, Out West was in default of its franchise agreements for nonpayment of certain amounts due, and simultaneously in default of its credit agreement with its lenders primarily due to the significant impact of the COVID-19 pandemic. Under the terms of the Resolution Agreement, the Company agreed to: • not call upon any previous default under the existing franchise agreements during the Forbearance Period; • reduce future advertising fees to 2.25 % of gross sales during the Forbearance Period; • permanently waive unpaid royalty and advertising fees for the period of February 24, 2020 to July 26, 2020; • allow for closure of four restaurants and certain sublease modifications (the “Property Concessions”); • allow for closure of up to ten additional restaurants during the first 12 months of the Resolution Agreement, without imposition of any penalties or accelerated royalties; • defer all non-waived past due royalties and advertising fees through November 22, 2020, and for certain permitted restaurant closings in connection with the Property Concessions, defer accelerated rent and royalties that otherwise would have been due under the terms and conditions of the respective franchise agreements and leases or subleases (the “Initial Deferred Balance”); and • defer all past due rents through December 27, 2020 on subleased properties totaling $ 3.6 million until April 2021 when the balance will be repaid over an 18-month period. In connection with the Property Concessions, the Company recognized $ 4.7 million of lease right-of-use asset impairment during the thirteen weeks ended December 27, 2020, within the U.S. segment. Out West also entered into a Forbearance Agreement and Second Amendment to Credit and Guaranty Agreement (“Forbearance Agreement”) with its lenders that, in conjunction with the Resolution Agreement, provides, among other things, for a pre-determined calculation of available monthly cash (“Available Cash”) that Out West may use to settle its obligations due to the Company and its lenders. Available Cash is calculated net of operating expenses, including local marketing expenditures required under the Resolution Agreement. Under the Resolution Agreement, if Out West is unable to satisfy monthly royalty or advertising fees with Available Cash, such amounts will automatically increase the Initial Deferred Balance. At the time of the Resolution Agreement, no amounts previously waived or reflected in the Initial Deferred Balance had been recorded as a receivable or revenue, with the exception of a $ 3.1 million receivable balance that had been previously fully reserved. Collections of the Initial Deferred Balance, and any future amounts due under the Resolution Agreement or the Company’s franchise agreements after November 22, 2020, will be recognized if collectability is reasonably assured which is typically upon receipt of cash. Since the execution of the Resolution Agreement, all current royalties and obligated amounts were collected, with the exception of $ 3.0 million of royalties during the thirteen weeks ended December 25, 2022 which were in excess of Out West’s calculation of Available Cash under the Forbearance Agreement. The Company recorded an allowance for expected credit losses against a portion of these uncollected amounts during the thirteen weeks ended December 25, 2022. See Note 20 - Allowance for Expected Credit Losses for additional details. The entire deferred balance will become collectible upon any Qualifying Event. If the Qualifying Event is the sale of all or substantially all of the assets or equity of Out West, the sale proceeds will be applied, between the Company and Out West’s lenders, in accordance with the payment priority established in the Resolution Agreement and Forbearance Agreement; if the sales proceeds are insufficient to satisfy the deferred balance due to the Company, then the Company agreed to permanently waive any remaining deferred balance due to the Company. 84 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 5. Impairments and Exit Costs The components of Provision for impaired assets and restaurant closings are as follows for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Impairment losses U.S. (1) $ 3,942 $ 11,945 $ 65,129 International (1)(2) 1,537 1,186 3,468 Corporate (3) 7 270 6,226 Total impairment losses 5,486 13,401 74,823 Restaurant closure charges (benefits) U.S. (1) 478 422 1,358 International (1) — ( 86 ) 173 Total restaurant closure charges 478 336 1,531 Provision for impaired assets and restaurant closings $ 5,964 $ 13,737 $ 76,354 ____________________ (1) U.S. and international impairment and closure charges during 2020 primarily relate to the COVID-19 pandemic, including charges related to the COVID-19 Restructuring discussed below and the Out West Resolution Agreement. See Note 3 - COVID-19 for details regarding the impact of the COVID-19 pandemic on the Company’s financial results. (2) Includes goodwill impairment charges of $ 2.0 million during 2020. See Note 10 - Goodwill and Intangible Assets, Net for details regarding impairment of goodwill. (3) Corporate impairment charges during 2020 primarily relate to transformational initiatives. COVID-19 Restructuring - During 2020, the Company recognized pre-tax asset impairments and closure charges in connection with the closure of 22 U.S. restaurants and from the update of certain cash flow assumptions, including lease renewal considerations (the “COVID-19 Restructuring”). Following is a summary of the COVID-19 Restructuring charges recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the period indicated (dollars in thousands): CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) CLASSIFICATION FISCAL YEAR DESCRIPTION 2020 Property, fixtures and equipment impairments Provision for impaired assets and restaurant closings $ 18,766 Lease right-of-use asset impairments and closure charges Provision for impaired assets and restaurant closings 5,003 Severance and other expenses General and administrative 1,097 $ 24,866 The remaining impairment and closure charges during the periods presented resulted primarily from locations identified for closure or relocation. 85 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Accrued Facility Closure and Other Costs Rollforward - The following table is a rollforward of the Company’s closed facility lease liabilities and other accrued costs associated with the closure and restructuring initiatives for the period indicated: FISCAL YEAR (dollars in thousands) 2022 Balance, beginning of the period $ 8,485 Cash payments ( 3,296 ) Accretion 558 Adjustments ( 271 ) Balance, end of the period (1) $ 5,476 ________________ (1) As of December 25, 2022, the Company had exit-related accruals related to certain closure and restructuring initiatives of $ 1.3 million recorded in Accrued and other current liabilities and $ 4.2 million recorded in Non-current operating lease liabilities on its Consolidated Balance Sheet. 6. Earnings (Loss) Per Share The dilutive effect of the 2025 Notes is calculated using the if-converted method. To the extent the Company has the ability to settle its 2025 Notes in shares of its common stock, the principal and conversion spread on the 2025 Notes will have a dilutive impact on diluted earnings per share when the average market price of the Company’s common stock for a given period exceeds the conversion price, which was initially $ 11.89 per share of common stock. In February 2021, the Company provided the trustee of its 2025 Notes notice of the Company’s irrevocable election to settle the principal portion of the 2025 Notes in cash and any excess in shares. As a result, subsequent to the election, only the amounts in excess of the principal amount are considered in diluted earnings per share under the if-converted method. In connection with the offering of the 2025 Notes, the Company entered into the Convertible Note Hedge Transactions and Warrant Transactions described in Note 14 - Convertible Senior Notes. However, the Convertible Note Hedge Transactions are not considered when calculating dilutive shares given their anti-dilutive impact as an offset to dilution of shares underlying the 2025 Notes. The Warrant Transactions have a dilutive effect on the Company’s common stock to the extent the price of its common stock exceeds the strike price of the Warrant Transactions, which was initially $ 16.64 . See Note 14 - Convertible Senior Notes for additional information regarding the 2025 Notes, Convertible Note Hedge Transactions and Warrant Transactions. 86 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The following table presents the computation of basic and diluted earnings (loss) per share attributable to common stockholders for the periods indicated: FISCAL YEAR (in thousands, except per share data) 2022 2021 2020 Net income (loss) attributable to Bloomin’ Brands $ 101,907 $ 215,555 $ ( 158,715 ) Redemption of preferred stock in excess of carrying value (1) — — ( 3,496 ) Net income (loss) attributable to common stockholders 101,907 215,555 ( 162,211 ) Convertible senior notes if-converted method interest adjustment, net of tax (2) — 345 — Diluted net income (loss) attributable to common stockholders $ 101,907 $ 215,900 $ ( 162,211 ) Basic weighted average common shares outstanding 88,846 88,981 87,468 Effect of dilutive securities: Stock options 261 779 — Nonvested restricted stock units 182 355 — Nonvested performance-based share units 180 61 — Convertible senior notes (2)(3) 6,089 11,377 — Warrants (3) 2,954 6,250 — Diluted weighted average common shares outstanding 98,512 107,803 87,468 Basic earnings (loss) per share attributable to common stockholders $ 1.15 $ 2.42 $ ( 1.85 ) Diluted earnings (loss) per share attributable to common stockholders $ 1.03 $ 2.00 $ ( 1.85 ) ________________ (1) Consideration paid in excess of carrying value for the redemption of its Abbraccio preferred stock is considered a deemed dividend and, for purposes of calculating earnings (loss) per share, reduces net income attributable to common stockholders. See Note 16 - Stockholders’ Equity for additional details. (2) Adjustment for interest related to the 2025 Notes weighted for the portion of the period prior to the Company’s election under the 2025 Notes indenture to settle the principal portion of the 2025 Notes in cash. Effective with the Company’s election, there will be no further numerator adjustments for interest or denominator adjustments for shares required to settle the principal portion. (3) During 2022, the Company repurchased $ 125.0 million of the 2025 Notes and retired the corresponding portion of the related warrants. See Note 14 - Convertible Senior Notes for additional details. Due to the Company’s net loss during 2020, dilutive excess shares, if applicable, and warrants were excluded from the computation of diluted loss per share as their effect would be antidilutive. Share-based compensation-related weighted average securities outstanding not included in the computation of net earnings (loss) per share attributable to common stockholders because their effect was antidilutive were as follows for the periods indicated: FISCAL YEAR (shares in thousands) 2022 2021 2020 Stock options 1,849 751 5,155 Nonvested restricted stock units 192 128 682 Nonvested performance-based share units 461 377 514 87 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 7. Stock-based and Deferred Compensation Plans Stock-based Compensation Plans The Company recognized stock-based compensation expense as follows for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Performance-based share units (1) $ 8,176 $ 13,821 $ 2,414 Restricted stock units 7,687 8,184 8,559 Stock options 503 2,286 3,743 $ 16,366 $ 24,291 $ 14,716 ________________ (1) For 2022, includes a cumulative life-to-date adjustment to decrease expense for PSUs granted in fiscal year 2020 based on Company performance against criteria set forth in the award agreements. For 2021, includes a cumulative life-to-date adjustment to increase expense for PSUs granted in fiscal years 2019, 2020 and 2021 based on Company performance against criteria set forth in the award agreements. Performance-based Share Units - The number of PSUs that vest is determined for each year based on the achievement of certain performance criteria as set forth in the award agreement and may range from zero to 200 % of the annual target grant. The PSUs are settled in shares of common stock, with holders receiving one share of common stock for each performance-based share unit that vests. Compensation expense for PSUs is recognized over the vesting period when it is probable the performance criteria will be achieved. The following table presents a summary of the Company’s PSU activity: (in thousands, except per unit data) PERFORMANCE-BASED SHARE UNITS WEIGHTED AVERAGE GRANT DATE FAIR VALUE PER UNIT AGGREGATE INTRINSIC VALUE (1) Outstanding as of December 26, 2021 759 $ 23.11 $ 15,896 Granted 313 $ 26.10 Performance Adjustment (2) 169 $ 19.69 Vested ( 338 ) $ 19.69 Forfeited ( 29 ) $ 23.30 Outstanding as of December 25, 2022 874 $ 24.83 $ 18,323 Expected to vest as of December 25, 2022 1,275 $ 26,715 ________________ (1) Based on the $ 20.95 and $ 20.96 share price of the Company’s common stock on December 23, 2021 and 2022, the last trading day of 2022 and 2021, respectively. (2) Represents adjustment to 200 % payout for PSUs granted during 2019. Prior to 2021, the fair value of PSUs was based on the closing price of the Company’s common stock on the grant date. During 2022 and 2021, the Company granted PSUs subject to final payout modification by a Relative TSR modifier. This Relative TSR modifier can adjust the final payout outcome by 75 %, 100 % or 125 % of the achieved performance metric, with the overall payout capped at 200 % of the annual target grant. These PSUs have a three-year cliff vesting period and their fair value was estimated using the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that the market conditions will be achieved and is applied to the closing price of the Company’s common stock on the date of the grant. 88 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Assumptions used in the Monte Carlo simulation model and the grant date fair value of PSUs granted were as follows for the periods indicated: FISCAL YEAR 2022 2021 Assumptions: Risk-free interest rate (1) 1.64 % 0.20 % Dividend yield (2) 2.31 % — % Volatility (3) 49.11 % 48.45 % ________________ (1) Risk-free interest rate is the U.S. Treasury yield curve in effect as of the grant date for the performance period of the unit. (2) Dividend yield is the level of dividends expected to be paid on the Company’s common stock over the expected term. (3) Based on the historical volatility of the Company’s stock over the last seven years. The following represents PSU compensation information for the periods indicated: FISCAL YEAR (dollars in thousands, except grant date fair value data) 2022 2021 2020 Weighted average grant date fair value for PSUs granted (1) $ 26.10 $ 29.73 $ 19.96 Intrinsic value for PSUs vested $ 7,626 $ 3,768 $ 6,550 Fair value of PSUs vested $ 6,646 $ 3,401 $ 4,809 Tax benefits for PSU compensation expense $ 348 $ 134 $ 1,570 Unrecognized PSU expense $ 11,955 Remaining weighted average vesting period (2) 1.2 years ________________ (1) Represents a premium above the per share value of the Company’s common stock for the Relative TSR modifier as of the grant date of 7.9 % and 14.3 % for grants during 2022 and 2021, respectively. (2) PSUs typically vest after three years . Restricted Stock Units (“RSUs”) - RSUs generally vest over a period of three years in an equal number of shares each year. Following is a summary of the Company’s RSU activity: (in thousands, except per unit data) RESTRICTED STOCK UNITS WEIGHTED AVERAGE GRANT DATE FAIR VALUE PER UNIT AGGREGATE INTRINSIC VALUE (1) Outstanding as of December 26, 2021 730 $ 21.16 $ 15,298 Granted 364 $ 21.59 Vested ( 396 ) $ 20.27 Forfeited ( 41 ) $ 24.69 Outstanding as of December 25, 2022 (2) 657 $ 21.72 $ 13,776 ________________ (1) Based on the $ 20.95 and $ 20.96 share price of the Company’s common stock on December 23, 2021 and 2022, the last trading day of 2022 and 2021, respectively. (2) All RSUs outstanding as of December 25, 2022 are expected to vest. 89 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The following represents RSU compensation information for the periods indicated: FISCAL YEAR (dollars in thousands, except grant date fair value data) 2022 2021 2020 Weighted average grant date fair value for RSUs granted (1) $ 21.59 $ 25.93 $ 16.66 Intrinsic value of RSUs vested $ 9,070 $ 13,482 $ 8,183 Fair value of RSUs vested $ 8,025 $ 9,434 $ 8,973 Tax benefits for RSU compensation expense $ 1,113 $ 1,592 $ 1,614 Unrecognized RSU expense $ 8,389 Remaining weighted average vesting period 1.8 years ________________ (1) The weighted average dividend yield was 2.43 % and 2.11 % for 2022 and 2020, respectively. There were no dividends in 2021. Stock Options - Stock options generally vest and become exercisable over a period of four years in an equal number of shares each year. Stock options have an exercisable life of no more than ten years from the date of grant. The Company settles stock option exercises with authorized but unissued shares of the Company’s common stock. The following table presents a summary of the Company’s stock option activity: (in thousands, except exercise price and contractual life data) OPTIONS WEIGHTED AVERAGE EXERCISE PRICE WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS) AGGREGATE INTRINSIC VALUE Outstanding as of December 26, 2021 4,276 $ 20.42 4.7 $ 7,304 Exercised ( 1,044 ) $ 17.15 Forfeited or expired ( 44 ) $ 24.89 Outstanding as of December 25, 2022 (1) 3,188 $ 21.43 4.0 $ 3,337 Exercisable as of December 25, 2022 3,149 $ 21.46 4.0 $ 3,244 ________________ (1) No stock options were granted during 2022. The following represents stock option compensation information for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Intrinsic value of options exercised $ 6,367 $ 8,419 $ 2,201 Cash received from option exercises, net of tax withholding $ 17,888 $ 14,951 $ 4,609 Fair value of stock options vested $ 7,645 $ 19,246 $ 16,468 Tax benefits for stock option compensation expense $ 1,495 $ 1,942 $ 535 As of December 25, 2022, the maximum number of shares of common stock available for issuance for equity instruments pursuant to the 2020 Omnibus Incentive Compensation Plan was 7,935,988 . Deferred Compensation Plans U.S. Partner Deferred Compensations Plans - Certain U.S. Partners may participate in deferred compensation programs that are subject to the rules of Section 409A of the Internal Revenue Code. The Company may invest in corporate-owned life insurance policies, which are held within an irrevocable grantor or rabbi trust account for settlement of certain of the obligations under the deferred compensation plans. The deferred compensation obligation due to U.S. Partners under these plans was $ 3.5 million and $ 15.5 million as of December 25, 2022 and 90 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued December 26, 2021, respectively. The rabbi trust is funded through the Company’s voluntary contributions and was fully funded as of December 25, 2022. 401(k) Plan - The Company has a qualified defined contribution plan that qualifies under Section 401(k) of the Internal Revenue Code of 1986, as amended. The Company incurred contribution costs of $ 5.6 million, $ 6.1 million and $ 5.5 million for the 401(k) Plan for 2022, 2021 and 2020, respectively. Highly Compensated Employee Plan - The Company provides a deferred compensation plan for its highly compensated employees who are not eligible to participate in the 401(k) Plan. The deferred compensation plan allows these employees to contribute a percentage of their base salary and cash bonus on a pre-tax basis. The deferred compensation plan is unsecured and funded through the Company’s voluntary contributions. 8. Other Current Assets, Net Other current assets, net, consisted of the following as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Prepaid expenses $ 29,343 $ 21,194 Accounts receivable - gift cards, net (1) 85,606 91,248 Accounts receivable - vendors, net (1) 25,385 11,793 Accounts receivable - franchisees, net (1) 2,550 1,701 Accounts receivable - other, net (1) 18,408 18,353 Deferred gift card sales commissions 17,755 17,793 Company-owned life insurance (2) — 17,244 Other current assets, net 4,671 5,297 $ 183,718 $ 184,623 ________________ (1) See Note 20 - Allowance for Expected Credit Losses for a rollforward of the related allowance for expected credit losses. (2) During 2022, the Company withdrew the current portion of its Company-owned life insurance policies to pay deferred compensation obligations. 9. Property, Fixtures and Equipment, Net Property, fixtures and equipment, net, consisted of the following as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Land $ 37,596 $ 38,417 Buildings 1,223,403 1,167,811 Furniture and fixtures 489,895 460,768 Equipment 739,136 641,715 Construction in progress 41,723 47,822 Less: accumulated depreciation ( 1,617,611 ) ( 1,514,521 ) $ 914,142 $ 842,012 Depreciation and repair and maintenance expense are as follows for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Depreciation expense $ 163,445 $ 157,386 $ 173,342 Repair and maintenance expense $ 116,318 $ 104,209 $ 88,829 91 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 10. Goodwill and Intangible Assets, Net Goodwill - The following table is a rollforward of goodwill for the periods indicated: (dollars in thousands) U.S. INTERNATIONAL CONSOLIDATED Balance as of December 27, 2020 $ 170,657 $ 100,507 $ 271,164 Translation adjustments — ( 2,720 ) ( 2,720 ) Balance as of December 26, 2021 170,657 97,787 268,444 Translation adjustments — 4,588 4,588 Balance as of December 25, 2022 $ 170,657 $ 102,375 $ 273,032 The following table is a summary of the Company’s gross goodwill balances and accumulated impairments as of the periods indicated: DECEMBER 25, 2022 DECEMBER 26, 2021 DECEMBER 27, 2020 (dollars in thousands) GROSS CARRYING AMOUNT ACCUMULATED IMPAIRMENTS GROSS CARRYING AMOUNT ACCUMULATED IMPAIRMENTS GROSS CARRYING AMOUNT ACCUMULATED IMPAIRMENTS U.S. $ 838,827 $ ( 668,170 ) $ 838,827 $ ( 668,170 ) $ 838,827 $ ( 668,170 ) International 222,258 ( 119,883 ) 217,670 ( 119,883 ) 220,390 ( 119,883 ) Total goodwill $ 1,061,085 $ ( 788,053 ) $ 1,056,497 $ ( 788,053 ) $ 1,059,217 $ ( 788,053 ) T he COVID-19 outbreak was considered a triggering event during the first quarter of 2020, indicating that the carrying amount of goodwill may not be recoverable. As a result, the Company performed a quantitative assessment for its four U.S. and three international reporting units to determine whether a reporting unit was impaired. Based on this assessment, which utilized a discounted cash flow analysis, the Company recorded full impairment of goodwill related to its Hong Kong reporting unit of $ 2.0 million within the international segment during the first quarter of 2020. Impairment was not recorded for any of the Company’s other reporting units as a result of the quantitative assessment. The Company performs its annual assessment for impairment of goodwill and other indefinite-lived intangible assets each year during the second quarter. The Company’s 2022 and 2021 assessments utilized a qualitative approach. As a result of these assessments, the Company did no t record any goodwill asset impairment charges during 2022 or 2021. Since the Company performed a quantitative assessment on the last day of the first quarter of 2020, as described above, the Company utilized the same assumptions and analysis in performing a quantitative annual assessment in its second quarter and concluded that no additional impairment was required. Intangible Assets, net - Intangible assets, net, consisted of the following as of the periods indicated: WEIGHTED AVERAGE REMAINING AMORTIZATION PERIOD (in years) DECEMBER 25, 2022 DECEMBER 26, 2021 (dollars in thousands) GROSS CARRYING VALUE ACCUMULATED AMORTIZATION NET CARRYING VALUE GROSS CARRYING VALUE ACCUMULATED AMORTIZATION NET CARRYING VALUE Trade names Indefinite $ 414,716 $ 414,716 $ 414,716 $ 414,716 Trademarks 6 81,952 $ ( 59,675 ) 22,277 81,951 $ ( 55,736 ) 26,215 Reacquired franchise rights 8 34,602 ( 23,269 ) 11,333 31,944 ( 19,463 ) 12,481 Total intangible assets 7 $ 531,270 $ ( 82,944 ) $ 448,326 $ 528,611 $ ( 75,199 ) $ 453,412 The Company did no t record any indefinite-lived intangible asset impairment charges during the periods presented. 92 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Definite-lived intangible assets are amortized on a straight-line basis. The following table presents the aggregate expense related to the amortization of the Company’s trademarks and reacquired franchise rights for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Amortization expense $ 6,172 $ 6,005 $ 6,919 The following table presents expected annual amortization of intangible assets as of December 25, 2022: (dollars in thousands) 2023 $ 5,891 2024 $ 5,752 2025 $ 5,408 2026 $ 5,293 2027 $ 3,554 11. Other Assets, Net Other assets, net, consisted of the following as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Company-owned life insurance $ 27,789 $ 30,970 Deferred debt issuance costs (1) 5,505 5,861 Liquor licenses 23,454 23,266 Other assets 25,399 18,573 $ 82,147 $ 78,670 ________________ (1) Net of accumulated amortization of $ 10.1 million and $ 8.5 million as of December 25, 2022 and December 26, 2021, respectively. 12. Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Accrued rent and current operating lease liabilities $ 187,136 $ 181,636 Accrued payroll and other compensation (1) 84,075 105,095 Accrued insurance 20,932 22,017 Other current liabilities 107,158 98,146 $ 399,301 $ 406,894 ________________ (1) During 2022, accrued payroll and other compensation decreased primarily due to payment of deferred compensation obligations and a decrease in incentive compensation. 93 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 13. Long-term Debt, Net Following is a summary of outstanding long-term debt as of the periods indicated: DECEMBER 25, 2022 DECEMBER 26, 2021 (dollars in thousands) OUTSTANDING BALANCE INTEREST RATE OUTSTANDING BALANCE INTEREST RATE Senior Secured Credit Facility: Term loan A (1) $ — $ 195,000 1.60 % Revolving credit facility (2) 430,000 5.79 % 80,000 3.75 % Total Senior Secured Credit Facility 430,000 275,000 2025 Notes (3) 105,000 5.00 % 230,000 5.00 % 2029 Notes 300,000 5.13 % 300,000 5.13 % Finance lease liabilities 5,976 2,376 Less: unamortized debt discount and issuance costs (4) ( 6,493 ) ( 14,157 ) Less: finance lease interest ( 1,191 ) ( 154 ) Total debt, net 833,292 793,065 Less: current portion of long-term debt ( 1,636 ) ( 10,958 ) Long-term debt, net $ 831,656 $ 782,107 ________________ (1) Interest rate represents the weighted average interest rate. (2) Interest rate represents the weighted average interest rate as of December 25, 2022 and the base rate option elected in anticipation of impending repayment as of December 26, 2021. Subsequent to December 25, 2022, the Company repaid $ 80.0 million on its revolving credit facility. (3) During 2022, the Company repurchased $ 125.0 million of the 2025 Notes. See Note 14 - Convertible Senior Notes for details regarding the 2025 Notes and related hedge and warrant transactions. (4) In connection with the Amended Credit Agreement and the partial repurchase of the 2025 Notes, $ 5.7 million of debt issuance costs were written off during 2022. See Note 14 - Convertible Senior Notes for details regarding the partial repurchase of the 2025 Notes. Bloomin’ Brands, Inc. is a holding company and conducts its operations through its subsidiaries, certain of which have incurred indebtedness as described below. Credit Agreement - On April 16, 2021, the Company and OSI, as co-borrowers, entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”), which provides for senior secured financing of up to $ 1.0 billion consisting of a $ 200.0 million Term loan A and an $ 800.0 million revolving credit facility (the “Senior Secured Credit Facility”). The Senior Secured Credit Facility matures on April 16, 2026 and replaced the Company’s prior senior secured financing of up to $ 1.5 billion (the “Former Credit Facility”). On April 26, 2022, the Company and OSI entered into the First Amendment to the Second Amended and Restated Credit Agreement and Incremental Amendment (the “Amended Credit Agreement”), which included an increase of the Company’s existing revolving credit facility from $ 800.0 million to $ 1.0 billion and a transition from the London Inter-Bank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) as the benchmark rate for purposes of calculating interest under the Senior Secured Credit Facility. At closing, an incremental $ 192.5 million was drawn on the revolving credit facility to fully repay the outstanding balance of Term loan A. The total indebtedness of the Company remained unchanged as a result of the Amended Credit Agreement. Under the Amended Credit Agreement, the Company may elect an interest rate at each reset period based on the Base Rate or Adjusted Term SOFR, plus an applicable spread. The Base Rate option is the highest of: (i) the prime rate of Wells Fargo Bank, National Association, (ii) the federal funds effective rate plus 0.5 of 1.0% or (iii) the Adjusted Term SOFR with a one-month interest period plus 1.0 % (the “Base Rate”). The Adjusted Term SOFR option is the 30, 90 or 180-day SOFR, plus a term SOFR adjustment of 0.10 %, subject to a 0 % floor (the “Adjusted Term SOFR”). The interest rate spreads are as follows: BASE RATE ELECTION ADJUSTED TERM SOFR ELECTION Revolving credit facility 50 to 150 basis points over the Base Rate 150 to 250 basis points over the Adjusted Term SOFR 94 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The transition to SOFR did not materially impact the interest rate applied to the Company’s borrowings. No other material changes were made to the terms of the Company’s Credit Agreement as a result of the Amended Credit Agreement. Fees on letters of credit and daily unused availability under the revolving credit facility are 150 to 250 basis points and 25 to 40 basis points, respectively. The commitments under the Senior Secured Credit Facility may be increased in an aggregate principal amount of up to: (i) $ 225.0 million or (ii) at the Company’s option, up to an unlimited amount of incremental facilities, so long as the Consolidated Senior Secured Net Leverage Ratio, as defined in the Amended Credit Agreement, is no more than 3.00 to 1.00 as of the last day of the most recent period of four consecutive fiscal quarters ended. The Amended Credit Agreement limits, subject to certain exceptions, the Company’s ability and the ability of its subsidiaries to incur additional indebtedness; make significant payments; sell assets; pay dividends and other restricted payments; make certain investments; acquire certain assets; effect mergers and similar transactions; and effect certain other transactions with affiliates. Total Net Leverage Ratio (“TNLR”) is the ratio of Consolidated Total Debt (Current portion of long-term debt and Long-term debt, net of cash, excluding the 2025 Notes) to Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization and certain other adjustments as defined in the Amended Credit Agreement). The Amended Credit Agreement requires a TNLR not to exceed 4.50 to 1.00. As of December 25, 2022 and December 26, 2021, the Company was in compliance with its debt covenants. 2029 Notes - On April 16, 2021, the Company and its wholly-owned subsidiary OSI, as co-issuers, issued $ 300.0 million aggregate principal amount of senior unsecured notes due 2029 (the “2029 Notes”). The 2029 Notes were issued pursuant to an Indenture, dated April 16, 2021 (the “Indenture”), by and among the Company, the guarantors named therein, and Wells Fargo Bank, National Association, as trustee. The 2029 Notes are guaranteed by each of the Company’s existing and future domestic restricted subsidiaries (other than OSI) that are guarantors or borrowers under its Senior Secured Credit Facility or certain other indebtedness. The 2029 Notes mature on April 15, 2029 , unless earlier redeemed or purchased by the Company. The 2029 Notes bear cash interest at an annual rate of 5.125 % payable semi-annually in arrears on April 15 and October 15 of each year. The Company may redeem some or all of the 2029 Notes at any time on or after April 15, 2024, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest. The Company may also redeem up to 40 % of the 2029 Notes in an amount not greater than the proceeds of certain equity offerings completed before April 15, 2024, at a redemption price equal to 105.125 % of the principal amount thereof, plus accrued and unpaid interest. In addition, at any time prior to April 15, 2024, the Company may redeem some or all of the 2029 Notes at a price equal to 100 % of the principal amount, plus a make-whole premium, plus accrued and unpaid interest. The Indenture contains restrictive covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness or issue certain preferred stock; pay dividends, redeem stock or make other distributions; make certain investments; create restrictions on the ability of the Company’s restricted subsidiaries to pay dividends or make other payments to the Company; create certain liens; transfer or sell certain assets; merge or consolidate; enter into certain transactions with the Company’s affiliates; and designate subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of exceptions and qualifications as set forth in the Indenture. The Indenture contains customary events of default, including, without limitation, failure to make required payments, failure to comply with certain agreements or covenants, cross-acceleration to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, and failure to pay certain judgments. 95 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The net proceeds from the 2029 Notes offering were approximately $ 294.5 million, after deducting the initial purchaser’s discount and the Company’s offering expenses. The net proceeds were used to repay a portion of the Company’s outstanding Term loan A and revolving credit facility in conjunction with the refinancing of its Former Credit Facility. Maturities - Following is a summary of principal payments of the Company’s total consolidated debt outstanding as of the period indicated: (dollars in thousands) DECEMBER 25, 2022 2023 $ 1,674 2024 1,275 2025 105,821 2026 430,426 2027 338 Thereafter 301,442 Total payments 840,976 Less: unamortized debt discount and issuance costs ( 6,493 ) Less: finance lease interest ( 1,191 ) Total principal payments $ 833,292 14. Convertible Senior Notes 2025 Notes - In May 2020, the Company completed a $ 230.0 million principal amount private offering of 5.00 % convertible senior unsecured notes due in 2025. The 2025 Notes are governed by the terms of an indenture between the Company and Wells Fargo Bank, National Association, as the Trustee. The 2025 Notes mature on May 1, 2025 , unless earlier converted, redeemed or purchased by the Company. The 2025 Notes bear cash interest at an annual rate of 5.00 %, payable semi-annually in arrears on May 1 and November 1 of each year. Net proceeds from the 2025 Notes offering were approximately $ 221.6 million, after deducting the initial purchaser’s discounts and commissions and the Company’s offering expenses. The initial conversion rate applicable to the 2025 Notes was 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 was equivalent to an initial conversion price of approximately $ 11.89 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events. Prior to the close of business on the business day immediately preceding November 1, 2024, holders may convert all or a portion of their 2025 Notes under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020, if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (ii) during the five consecutive business days immediately after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2025 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company’s common stock and the conversion rate on each such trading day; (iii) upon the occurrence of specified corporate events or distributions on the Company’s common stock; (iv) if the Company calls the 2025 Notes for redemption and (v) at any time from, and including November 1, 2024 until the close of business on the second scheduled trading day immediately before the maturity date. 96 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The 2025 Notes will be redeemable by the Company, in whole or in part, at the Company’s option at any time, and from time to time, on or after May 1, 2023 and on or before the 40 th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest, but only if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price on: (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any of the 2025 Notes for redemption will constitute a make-whole fundamental change with respect to that note, in which case the conversion rate applicable to the conversion of the 2025 Notes will be increased in certain circumstances if it is converted after it is called for redemption. If a fundamental change occurs prior to the maturity date, holders may require the Company to repurchase all or a portion of their 2025 Notes for cash at a price equal to 100 % of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest. Holders of 2025 Notes who convert their 2025 Notes in connection with a notice of redemption or a make-whole fundamental change may be entitled to a premium in the form of an increase in the conversion rate of the 2025 Notes. Based on the daily closing prices of the Company’s stock during the quarter ended December 25, 2022, holders of the 2025 Notes are eligible to convert their 2025 Notes during the first quarter of 2023. The Company has provided the trustee of the 2025 Notes notice of its irrevocable election under the 2025 Notes indenture to settle the principal portion of the 2025 Notes upon conversion in cash and any excess in shares. On May 25, 2022, the Company entered into exchange agreements (the “Exchange Agreements”) with certain holders (the “Noteholders”) of the 2025 Notes. The Noteholders agreed to exchange $ 125.0 million in aggregate principal amount of the Company’s outstanding 2025 Notes for $ 196.9 million in cash, plus accrued interest, and approximately 2.3 million shares of the Company’s common stock (the “2025 Notes Partial Repurchase”). Under the Exchange Agreements, the total amount of cash paid and number of shares of common stock issued by the Company were based upon the volume-weighted average price per share of the Company’s common stock during a ten-trading day averaging period ending on June 14, 2022. Upon entering into the Exchange Agreements, the conversion feature related to the 2025 Notes repurchased, as well as the settlements of the related convertible senior note hedges and warrants, were subject to derivative accounting. In connection with the 2025 Notes Partial Repurchase, the Company recognized a loss on extinguishment of debt of $ 104.7 million and a loss on fair value adjustment of derivatives, net of $ 17.7 million, and recorded a $ 48.5 million increase to Additional paid-in capital during 2022. In connection with dividends paid during 2022, the conversion rate for the remaining 2025 Notes decreased to approximately $ 11.59 per share, which represents 86.267 shares of common stock per $ 1,000 principal amount of the 2025 Notes, or a total of approximately 9.058 million shares. The following table includes the outstanding principal amount and carrying value of the 2025 Notes as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Long-term debt, net Principal $ 105,000 $ 230,000 Less: debt issuance costs (1) ( 1,939 ) ( 5,898 ) Net carrying amount $ 103,061 $ 224,102 ________________ (1) Debt issuance costs are amortized to Interest expense, net using the effective interest method over the 2025 Notes’ expected life. During 2022, the Company wrote off $ 2.8 million of debt issuance costs as a result of the 2025 Notes Partial Repurchase. 97 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Following is a summary of interest expense for the 2025 Notes, by component for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Coupon interest $ 8,080 $ 11,500 $ 7,443 Deferred discount amortization — — 6,275 Debt issuance cost amortization 1,156 1,557 569 Total interest expense (1) $ 9,236 $ 13,057 $ 14,287 ________________ (1) The effective rate of the 2025 Notes over their expected life was 5.85 % for 2022 and 2021 and 13.73 % for 2020. Convertible Note Hedge and Warrant Transactions - In connection with the offering of the 2025 Notes, the Company entered into convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with certain of the initial purchasers of the 2025 Notes and/or their respective affiliates and other financial institutions (in this capacity, the “Hedge Counterparties”). Concurrently with the Company’s entry into the Convertible Note Hedge Transactions, the Company also entered into separate, warrant transactions with the Hedge Counterparties collectively relating to the same number of shares of the Company’s common stock, subject to customary anti-dilution adjustments, and for which the Company received proceeds that partially offset the cost of entering into the Convertible Note Hedge Transactions (the “Warrant Transactions”). The Convertible Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock that initially underlie the 2025 Notes, and are expected generally to reduce the potential equity dilution in excess of the principal amount due upon conversion of the 2025 Notes. The Warrant Transactions have a dilutive effect on the Company’s common stock to the extent that the price of its common stock exceeds the strike price of the Warrant Transactions. The strike price was initially $ 16.64 per share and is subject to certain adjustments under the terms of the Warrant Transactions. The portion of the net proceeds to the Company from the offering of the 2025 Notes that was used to pay the premium on the Convertible Note Hedge Transactions, net of the proceeds to the Company from the Warrant Transactions, was approximately $ 19.6 million. The net costs incurred in connection with the Convertible Note Hedge Transactions and Warrant Transactions were recorded as a reduction to Additional paid-in capital on the Company’s Consolidated Balance Sheet during 2020. The Convertible Note Hedge Transactions are exercisable upon conversion of the 2025 Notes. The Convertible Note Hedge Transactions expire upon maturity of the 2025 Notes. The Warrant Transactions are exercisable on the expiration dates included in the related forms of confirmation. In connection with the 2025 Notes Partial Repurchase, the Company entered into partial unwind agreements with certain financial institutions relating to a portion of the convertible note hedge transactions (the “Note Hedge Early Termination Agreements”) and a portion of the Warrant Transactions (the “Warrant Early Termination Agreements”) that were previously entered into by the Company in connection with the issuance of the 2025 Notes. Upon settlement, the Company received $ 131.9 million for the Note Hedge Early Termination Agreements and paid $ 114.8 million for the Warrant Early Termination Agreements. In connection with the Note Hedge Early Termination Agreements and the Warrant Early Termination Agreements the Company recorded a $ 113.0 million increase and a $ 97.6 million decrease, respectively, to Additional paid-in capital during 2022. The remaining Warrant Transactions have a dilutive effect on the Company’s common stock to the extent that the price of its common stock exceeds the strike price of the Warrant Transactions. In connection with dividends paid during 2022, the strike price for the remaining Warrant Transactions decreased to $ 16.23 . 98 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 15. Other Long-term Liabilities, Net Other long-term liabilities, net, consisted of the following as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Accrued insurance liability $ 28,133 $ 31,517 Deferred payroll tax liabilities (1) — 27,302 Deferred compensation obligations 31,608 37,514 Other long-term liabilities 27,645 28,909 $ 87,386 $ 125,242 _______________ (1) During 2022, the Company made a payment of $ 27.3 million related to payroll taxes deferred under the CARES Act. 16. Stockholders’ Equity Share Repurchases - On February 8, 2022, the Company’s Board of Directors (the “Board”) approved a share repurchase program (the “2022 Share Repurchase Program”) under which the Company was authorized to repurchase up to $ 125.0 million of its outstanding common stock. The 2022 Share Repurchase Program will expire on August 9, 2023. As of December 25, 2022, $ 15.0 million remained available for repurchase under the 2022 Share Repurchase Program. Following is a summary of the shares repurchased under the 2022 Share Repurchase Program during fiscal year 2022: (in thousands, except per share data) NUMBER OF SHARES AVERAGE REPURCHASE PRICE PER SHARE AMOUNT First fiscal quarter 551 $ 21.26 $ 11,702 Second fiscal quarter 1,761 $ 20.30 35,749 Third fiscal quarter 1,746 $ 19.21 33,549 Fourth fiscal quarter 1,371 $ 21.15 28,999 Total common stock repurchases (1) 5,429 $ 20.26 $ 109,999 ________________ (1) Subsequent to December 25, 2022, the Company repurchased 644 thousand shares of its common stock for $ 15.0 million under a Rule 10b5-1 plan. On February 7, 2023, the Company’s Board approved a new $ 125.0 million authorization (the “2023 Share Repurchase Program”). The 2023 Share Repurchase Program will expire on August 7, 2024. Dividends - The Company declared and paid dividends per share during the periods presented as follows: DIVIDENDS PER SHARE AMOUNT FISCAL YEAR FISCAL YEAR (dollars in thousands, except per share data) 2022 2020 2022 2020 First fiscal quarter $ 0.14 $ 0.20 $ 12,559 $ 17,480 Second fiscal quarter 0.14 — 12,418 — Third fiscal quarter 0.14 — 12,475 — Fourth fiscal quarter 0.14 — 12,284 — Total cash dividends declared and paid $ 0.56 $ 0.20 $ 49,736 $ 17,480 On February 7, 2023, the Board declared a quarterly cash dividend of $ 0.24 per share, payable on March 15, 2023 to shareholders of record at the close of business on March 1, 2023 . 99 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Redeemable Preferred Stock - In connection with the development of its Abbraccio Cucina Italiana (“Abbraccio”) concept in 2015, the Company sold preferred shares of its Abbraccio concept (“Abbraccio Shares”) to certain investors. During 2020, the Company exercised a call option to purchase all outstanding Abbraccio Shares for $ 1.0 million and recorded a reduction to Accumulated deficit and an increase in Net loss applicable to common stockholders of $ 3.5 million for the consideration paid in excess of the Abbraccio Shares’ carrying value. Accumulated Other Comprehensive Loss (“AOCL”) - Following are the components of AOCL as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Foreign currency translation adjustment $ ( 185,311 ) $ ( 195,480 ) Unrealized loss on derivatives, net of tax — ( 10,509 ) Accumulated other comprehensive loss $ ( 185,311 ) $ ( 205,989 ) Following are the components of Other comprehensive income (loss) attributable to Bloomin’ Brands for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Foreign currency translation adjustment $ 10,169 $ ( 6,597 ) $ ( 36,852 ) Unrealized gain (loss) on derivatives, net of tax (1) 573 86 ( 14,741 ) Reclassification of adjustments for loss on derivatives included in Net income (loss), net of tax (2) 954 7,392 9,923 Impact of terminated interest rate swaps included in Net income (loss), net of tax (2) 8,982 4,576 — Total gain (loss) on derivatives, net of tax 10,509 12,054 ( 4,818 ) Other comprehensive income (loss) attributable to Bloomin’ Brands $ 20,678 $ 5,457 $ ( 41,670 ) ________________ (1) Unrealized loss on derivatives during 2020 is net of tax of $ 5.1 million. (2) See Note 17 - Derivative Instruments and Hedging Activities for the tax impact of reclassifications and the terminated swaps. 17. Derivative Instruments and Hedging Activities Interest Rate Risk - The Company manages economic risks, including interest rate variability, primarily by managing the amount, sources and duration of its debt funding and through the use of derivative financial instruments. The Company’s objectives in using interest rate derivatives are to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps. Designated Hedges Cash Flow Hedges of Interest Rate Risk - In October 2018, the Company entered into variable-to-fixed interest rate swap agreements with 12 counterparties to hedge a portion of the cash flows of the Company’s variable rate debt (the “2018 Swap Agreements”). The 2018 Swap Agreements had an aggregate notional amount of $ 550.0 million and matured on November 30, 2022 . Under the terms of the 2018 Swap Agreements, the Company paid a weighted average fixed rate of 3.04 % on the notional amount and received payments from the counterparties based on the one-month LIBOR rate. In connection with the refinancing of its Former Credit Facility, on April 16, 2021 the Company terminated its variable-to-fixed interest rate swap agreements with seven counterparties having an aggregate notional amount of $ 275.0 million for a payment of approximately $ 13.3 million, including accrued interest. Following these terminations, $ 13.4 million of unrealized losses related to the terminated swap agreements included in AOCL were amortized on a straight-line basis to Interest expense, net over the remaining original term of the terminated swaps. 100 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued As a result of the Company’s anticipated decrease in variable rate debt balances due to significant voluntary debt payments, on December 9, 2021 the Company terminated its 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 were amortized to Interest expense, net over the remaining original term of the terminated swaps. In connection with the Amended Credit Agreement, on April 26, 2022 the Company terminated its remaining variable-to-fixed interest rate swap agreements. Following these terminations, the unrealized losses related to the terminated swap agreements included in Accumulated other comprehensive loss were amortized to Interest expense, net over the remaining original term of the terminated swaps. The Company’s swap agreements were designated and qualified as cash flow hedges, recognized on its Consolidated Balance Sheet at fair value as of December 26, 2021 and classified based on the instruments’ maturity dates. The following table presents the fair value and classification of the Company’s swap agreements as of the period indicated: (dollars in thousands) DECEMBER 26, 2021 CONSOLIDATED BALANCE SHEET CLASSIFICATION Interest rate swaps - liability (1) $ 3,056 Accrued and other current liabilities Accrued interest $ 276 Accrued and other current liabilities ____________________ (1) See Note 19 - Fair Value Measurements for fair value discussion of the interest rate swaps. The Company’s interest rate swaps were subject to master netting arrangements. As of December 26, 2021, the Company did not have more than one derivative between the same counterparties and as such, there was no netting. The following table summarizes the effects of the swap agreements on Net income (loss) for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Interest rate swap agreements: Interest rate swap expense recognized in Interest expense, net $ ( 1,284 ) $ ( 9,951 ) $ ( 13,370 ) Income tax benefit recognized in Provision (benefit) for income taxes 330 2,559 3,447 Net effects of interest rate swap agreements $ ( 954 ) $ ( 7,392 ) $ ( 9,923 ) Terminated interest rate swap agreements: Terminated interest rate swap expense recognized in Interest expense, net $ ( 12,115 ) $ ( 6,160 ) $ — Income tax benefit recognized in Provision (benefit) for income taxes 3,133 1,584 — Net effects of terminated interest rate swap agreements $ ( 8,982 ) $ ( 4,576 ) $ — Total net effects on Net income (loss) $ ( 9,936 ) $ ( 11,968 ) $ ( 9,923 ) By utilizing the interest rate swaps, the Company was exposed to credit-related losses in the event that the counterparty failed to perform under the terms of the derivative contract. To mitigate this risk, the Company entered into derivative contracts with major financial institutions based upon credit ratings and other factors. The Company continually assessed the creditworthiness of its counterparties. As of December 26, 2021, all counterparties to the interest rate swaps performed in accordance with their contractual obligations. 101 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 18. Leases The following table includes a detail of lease assets and liabilities included on the Company’s Consolidated Balance Sheets as of the periods indicated: (dollars in thousands) CONSOLIDATED BALANCE SHEET CLASSIFICATION DECEMBER 25, 2022 DECEMBER 26, 2021 Operating lease right-of-use assets Operating lease right-of-use assets $ 1,103,083 $ 1,130,873 Finance lease right-of-use assets (1) Property, fixtures and equipment, net 4,679 2,074 Total lease assets, net $ 1,107,762 $ 1,132,947 Current operating lease liabilities (2) Accrued and other current liabilities $ 183,510 $ 177,028 Current finance lease liabilities Current portion of long-term debt 1,636 958 Non-current operating lease liabilities (2) Non-current operating lease liabilities 1,148,379 1,178,998 Non-current finance lease liabilities Long-term debt, net 3,149 1,264 Total lease liabilities $ 1,336,674 $ 1,358,248 ________________ (1) Net of accumulated amortization of $ 3.6 million and $ 3.3 million as December 25, 2022 and December 26, 2021, respectively. (2) Excludes current accrued contingent percentage rent of $ 3.4 million and $ 3.5 million, as of December 25, 2022 and December 26, 2021, respectively, and immaterial current and non-current COVID-19-related deferred rent accruals. Following is a summary of expenses and income related to leases recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods indicated: CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) CLASSIFICATION FISCAL YEAR (dollars in thousands) 2022 2021 2020 Operating leases (1) Other restaurant operating $ 182,091 $ 178,733 $ 178,740 Variable lease cost (2) Other restaurant operating 6,508 4,350 ( 2,326 ) Finance leases: Amortization of leased assets Depreciation and amortization 1,420 1,079 1,248 Interest on lease liabilities Interest expense, net 172 129 160 Sublease revenue Franchise and other revenues ( 9,016 ) ( 9,396 ) ( 3,121 ) Lease costs, net $ 181,175 $ 174,895 $ 174,701 ________________ (1) Excludes rent expense for office facilities and Company-owned closed or subleased properties of $ 12.2 million, $ 12.9 million and $ 13.8 million for 2022, 2021 and 2020, respectively, which is included in General and administrative expense. Also excludes certain immaterial supply chain related rent expense included in Food and beverage costs for 2021 and 2020. (2) Includes COVID-19-related rent abatements for 2021 and 2020. 102 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued As of December 25, 2022, future minimum lease payments and sublease revenues under non-cancelable leases are as follows: (dollars in thousands) OPERATING LEASES (1) FINANCE LEASES SUBLEASE REVENUES 2023 (2) $ 190,933 $ 1,674 $ ( 5,552 ) 2024 192,371 1,275 ( 5,782 ) 2025 179,377 821 ( 5,518 ) 2026 171,279 426 ( 5,514 ) 2027 165,906 338 ( 5,617 ) Thereafter 1,407,054 1,442 ( 40,598 ) Total minimum lease payments (receipts) (3) 2,306,920 5,976 $ ( 68,581 ) Less: Interest ( 974,623 ) ( 1,191 ) Present value of future lease payments $ 1,332,297 $ 4,785 ____________________ (1) Includes immaterial current and non-current COVID-19-related deferred rent accruals as of December 25, 2022. (2) Net of operating lease prepaid rent of $ 4.6 million. (3) Includes $ 919.7 million related to operating lease renewal options that are reasonably certain of exercise and excludes $ 172.9 million of signed operating leases that have not yet commenced. The following table is a summary of the weighted average remaining lease terms and weighted average discount rates of the Company’s leases as of the periods indicated: DECEMBER 25, 2022 DECEMBER 26, 2021 Weighted average remaining lease term (1): Operating leases 13.2 years 13.7 years Finance leases 5.4 years 2.8 years Weighted average discount rate (2): Operating leases 8.44 % 8.42 % Finance leases 6.63 % 5.01 % ____________________ (1) Includes lease renewal options that are reasonably certain of exercise. (2) Based on the Company’s incremental borrowing rate at lease commencement or lease remeasurement. The following table is a summary of cash flow impacts to the Company’s Consolidated Financial Statements related to its leases for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Cash flows from operating activities: Cash paid for amounts included in the measurement of operating lease liabilities $ 193,822 $ 205,253 $ 177,961 Properties Leased to Third Parties - The Company leases certain owned land and buildings to third parties, generally related to closed or refranchised restaurants. The following table is a summary of assets leased to third parties as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Land $ 4,906 $ 5,021 Buildings $ 4,289 $ 4,987 Less: accumulated depreciation ( 3,298 ) ( 3,746 ) Buildings, net $ 991 $ 1,241 103 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 19. Fair Value Measurements Fair Value Measurements on a Recurring Basis - The following table summarizes the Company’s financial assets and liabilities measured at fair value by hierarchy level on a recurring basis as of the periods indicated: DECEMBER 25, 2022 DECEMBER 26, 2021 (dollars in thousands) TOTAL LEVEL 1 TOTAL LEVEL 1 LEVEL 2 Assets: Cash equivalents: Fixed income funds $ 3,301 $ 3,301 $ 6,714 $ 6,714 $ — Money market funds 4,786 4,786 9,039 9,039 — Restricted cash equivalents: Money market funds — — 1,472 1,472 — Total asset recurring fair value measurements $ 8,087 $ 8,087 $ 17,225 $ 17,225 $ — Liabilities: Accrued and other current liabilities: Derivative instruments - interest rate swaps $ — $ — $ 3,056 $ — $ 3,056 Fair value of each class of financial instrument is determined based on the following: FINANCIAL INSTRUMENT METHODS AND ASSUMPTIONS Fixed income funds and Money market funds Carrying value approximates fair value because maturities are less than three months. Derivative instruments Historically, the Company’s derivative instruments included interest rate swaps. Fair value measurements were based on the contractual terms of the derivatives and used observable market-based inputs. The interest rate swaps were valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest rate curves and credit spreads. The Company also considered its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. As of December 26, 2021, the Company determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. Fair Value Measurements on a Nonrecurring Basis - Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to property, fixtures and equipment, operating lease right-of-use assets, goodwill and other intangible assets, which are remeasured when carrying value exceeds fair value. Carrying value after impairment approximates fair value. The following table summarizes the Company’s assets measured at fair value by hierarchy level on a nonrecurring basis for the periods indicated: 2022 2021 2020 (dollars in thousands) REMAINING CARRYING VALUE TOTAL IMPAIRMENT REMAINING CARRYING VALUE TOTAL IMPAIRMENT REMAINING CARRYING VALUE TOTAL IMPAIRMENT Assets held for sale (1) $ — $ — $ — $ — $ 1,934 $ 123 Operating lease right-of-use assets (2) 2,219 1,233 8,647 3,950 72,615 30,940 Property, fixtures and equipment (3) 2,807 4,253 11,647 8,445 26,311 41,077 Goodwill and other assets (4) — — — 1,006 748 2,683 $ 5,026 $ 5,486 $ 20,294 $ 13,401 $ 101,608 $ 74,823 ________________ (1) Carrying values measured using Level 3 inputs to estimate fair value totaled $ 1.2 million during 2020. All other assets were valued using Level 2 inputs. Third-party market appraisals or executed sales contracts (Level 2) and discounted cash flow models (Level 3) were used to estimate fair value. (2) Carrying values measured using discounted cash flow models (Level 3). Refer to Note 5 - Impairments and Exit Costs for a more detailed discussion of impairments. (3) Carrying values measured using Level 2 inputs to estimate fair value totaled $ 1.4 million and $ 2.2 million for 2021 and 2020, respectively. All other assets were valued using Level 3 inputs. Third-party market appraisals (Level 2) and discounted cash flow models (Level 3) were used to estimate the fair value. Refer to Note 5 - Impairments and Exit Costs for a more detailed discussion of impairments. (4) Other assets were generally measured using the quoted market value of comparable assets (Level 2). 104 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued See Note 5 - Impairments and Exit Costs for information regarding impairment charges resulting from the fair value measurement performed on a nonrecurring basis during 2020. Projected future cash flows, including discount rate and growth rate assumptions, are derived from then-current economic conditions, expectations of management and projected trends of current operating results. As a result, the Company has determined that the majority of the inputs used to value its long-lived assets held and used are unobservable inputs that fall within Level 3 of the fair value hierarchy. In assessment of impairment for operating locations, the Company determined the fair values of individual operating locations using an income approach, which required discounting projected future cash flows. When determining the stream of projected future cash flows associated with an individual operating location, management made assumptions, including highest and best use and inputs from restaurant operations, where necessary, and about key variables including the following unobservable inputs: revenue growth rates, controllable and uncontrollable expenses, and asset residual values. In order to calculate the present value of those future cash flows, the Company discounted cash flow estimates at its weighted average cost of capital applicable to the country in which the measured assets reside. The following table presents quantitative information related to certain unobservable inputs used in the Company’s Level 3 fair value measurements of Operating lease right-of-use assets and Property, fixtures and equipment for the impairment losses incurred during the period indicated: FISCAL YEAR UNOBSERVABLE INPUTS 2020 Weighted average cost of capital 10.4 % to 11.3 % Long-term growth rate 1.5 % to 2.0 % Fair Value of Financial Instruments - The Company’s non-derivative financial instruments consist of cash equivalents, accounts receivable, accounts payable and current and long-term debt. The fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts reported on its Consolidated Balance Sheets due to their short duration. Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The following table includes the carrying value and fair value of the Company’s debt by hierarchy level as of the periods indicated: DECEMBER 25, 2022 DECEMBER 26, 2021 CARRYING VALUE FAIR VALUE LEVEL 2 CARRYING VALUE FAIR VALUE LEVEL 2 (dollars in thousands) Senior Secured Credit Facility: Term loan A $ — $ — $ 195,000 $ 190,125 Revolving credit facility $ 430,000 $ 430,000 $ 80,000 $ 76,926 2025 Notes $ 105,000 $ 198,843 $ 230,000 $ 447,615 2029 Notes $ 300,000 $ 260,265 $ 300,000 $ 304,395 105 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 20. Allowance for Expected Credit Losses The following table is a rollforward of the Company’s trade receivables allowance for expected credit losses for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Allowance for expected credit losses, beginning of the period $ 4,050 $ 4,095 $ 199 Adjustment for adoption of ASU No. 2016-13 — — 1,018 Provision for expected credit losses (1) 1,547 64 3,472 Charge-off of accounts ( 146 ) ( 109 ) ( 594 ) Allowance for expected credit losses, end of the period $ 5,451 $ 4,050 $ 4,095 ________________ (1) In March 2020, the Company fully reserved substantially all of its outstanding franchise receivables in response to the economic impact of the COVID-19 pandemic. See Note 3 - COVID-19 for details regarding the impact of the COVID-19 pandemic on the Company’s financial results. The Company is also exposed to credit losses from off-balance sheet lease guarantees primarily related to the divestiture of certain formerly Company-owned restaurant sites. See Note 22 - Commitments and Contingencies for details regarding these lease guarantees. 21. Income Taxes The following table presents the domestic and foreign components of Income (loss) before provision (benefit) for income taxes for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Domestic $ 134,465 $ 258,202 $ ( 206,941 ) Foreign 17,442 ( 8,905 ) ( 32,580 ) Income (loss) before provision (benefit) for income taxes $ 151,907 $ 249,297 $ ( 239,521 ) Provision (benefit) for income taxes consisted of the following for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Current provision: Federal $ 13,026 $ 16,951 $ 2,606 State 10,576 10,917 2,301 Foreign 5,354 1,862 2,623 28,956 29,730 7,530 Deferred provision (benefit): Federal 5,172 ( 2,057 ) ( 66,498 ) State 3,470 1,194 ( 12,527 ) Foreign 5,106 ( 2,483 ) ( 9,231 ) 13,748 ( 3,346 ) ( 88,256 ) Provision (benefit) for income taxes $ 42,704 $ 26,384 $ ( 80,726 ) 106 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Effective Income Tax Rate - The reconciliation of income taxes calculated at the United States federal tax statutory rate to the Company’s effective income tax rate is as follows for the periods indicated: FISCAL YEAR 2022 2021 2020 (1) Income taxes at federal statutory rate 21.0 % 21.0 % 21.0 % State and local income taxes, net of federal benefit 7.3 3.8 3.3 Non-deductible loss on 2025 Notes Partial Repurchase 18.0 — — Non-deductible expenses 2.8 2.3 ( 1.4 ) Foreign tax rate differential 2.3 ( 0.2 ) 1.1 U.S. tax on foreign earnings - GILTI 1.6 — — Brazil tax legislation 0.2 — — Employment-related credits, net ( 22.4 ) ( 13.2 ) 9.9 Net changes in deferred tax valuation allowances ( 2.8 ) ( 0.7 ) ( 0.6 ) Tax settlements and related adjustments ( 0.1 ) ( 1.7 ) 0.1 Other, net 0.2 ( 0.7 ) 0.3 Total 28.1 % 10.6 % 33.7 % ________________ (1) Due to the pre-tax book loss, a positive percentage change in the effective income tax rate table reflects a favorable income tax benefit, whereas a negative percentage change in the effective income tax rate table reflects an unfavorable income tax expense. The net increase in the effective income tax rate in 2022 as compared to 2021 was primarily due to the non-deductible losses associated with the 2025 Notes Partial Repurchase recorded during 2022. 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. A restaurant company employer may claim a credit against its federal income taxes for FICA taxes paid on certain tipped wages (the “FICA tax credit”). The level of FICA tax credits is primarily driven by U.S. Restaurant sales and is not impacted by costs incurred that may reduce pre-tax income. The Company has a blended federal and state statutory rate of approximately 26 %. The effective income tax rate for 2022 was higher than the blended federal and state statutory rate primarily due to the non-deductible losses associated with the 2025 Notes Partial Repurchase recorded during 2022, partially offset by the benefit of FICA tax credits on certain employees’ tips. The effective income tax rate for 2021 was lower than the blended federal and state statutory rate primarily due to the benefit of FICA tax credits on certain employees’ tips. On December 28, 2021, the U.S. Treasury and the Internal Revenue Service released final regulations that, among other things, provide guidance on several aspects of the foreign tax credit rules. As part of the guidance issued, these regulations change longstanding foreign tax credit regulations that now make foreign taxes paid to certain countries no longer creditable in the United States. The Company expects that a portion of post-2022 foreign taxes paid will not be creditable in the United States. Furthermore, the impact of these regulations will result in the utilization of existing prior year foreign tax credit carryforwards for which the Company had previously recorded a valuation allowance. The valuation allowance related to the credits expected to be utilized was released during 2022. 107 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Deferred Tax Assets and Liabilities - The income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Deferred income tax assets: Operating lease liabilities $ 346,482 $ 352,041 Insurance reserves 15,695 14,329 Unearned revenue 52,366 50,284 Deferred compensation 14,726 25,164 Net operating loss carryforwards 14,277 18,227 Federal tax credit carryforwards 165,411 146,734 Other, net (1) 12,248 21,222 Gross deferred income tax assets 621,205 628,001 Less: valuation allowance ( 12,664 ) ( 16,998 ) Deferred income tax assets, net of valuation allowance 608,541 611,003 Deferred income tax liabilities: Less: operating lease right-of-use asset basis differences ( 284,701 ) ( 290,697 ) Less: property, fixtures and equipment basis differences ( 63,344 ) ( 48,284 ) Less: intangible asset basis differences ( 109,162 ) ( 103,954 ) Deferred income tax assets, net $ 151,334 $ 168,068 Reported as: Deferred income tax assets $ 153,118 $ 168,068 Deferred income tax liabilities (included in Other long-term liabilities, net) ( 1,784 ) — Net deferred tax assets $ 151,334 $ 168,068 ________________ (1) As of December 25, 2022 and December 26, 2021, the Company maintained deferred tax liabilities for state income taxes on historical foreign earnings of $ 0.3 million and $ 0.2 million, respectively. As of December 25, 2022, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled $ 0.4 million and $ 12.3 million, respectively. The Company will maintain the valuation allowances in each applicable tax jurisdiction until it determines it is more likely than not the deferred tax assets will be realized. The net change in the deferred tax valuation allowance in 2022 is primarily attributable to net operating loss carryforwards in certain foreign jurisdictions with full valuation allowances recorded that expired or are no longer available to the Company and the release of the valuation allowance recorded against foreign tax credits that are now more likely than not to be realized. The Company has considered the impact of the COVID-19 pandemic on the Company’s Brazilian operating subsidiary, including assessing the realizability of Brazilian deferred tax assets. As part of the Company’s evaluation of positive and negative evidence, management considered whether there has been cumulative income or loss in the past three years, the impact of non-deductible amounts, the scheduled reversal of deferred tax assets and liabilities, projected future taxable income and the state of the Company’s business in Brazil. As of December 25, 2022 and December 26, 2021, the Company has concluded that no valuation allowance is required against the deferred tax assets of its Brazilian operating subsidiary. Although management uses the best information available, it is reasonably possible that the estimates used by the Company could be materially different from the actual results. These differences could result in a material adjustment to the Company’s valuation allowance in a future reporting period. In September 2022, the Company’s Brazilian subsidiary received a preliminary injunction authorizing it to benefit from the exemptions enacted by Law 14,148/2021 which provides for emergency and temporary actions that would grant certain industries a 100 % exemption from income tax (IRPJ and CSLL) and federal value added taxes (PIS and COFINS) for a five-year period. The injunction was issued as part of an ongoing lawsuit initiated by the 108 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Company’s Brazilian subsidiary due to the uncertainty regarding the restaurant industry’s eligibility for the exemptions under this legislation. During the thirteen weeks ended December 25, 2022, the Company concluded that it is more likely than not eligible for benefits under this legislation. The Company will continue to evaluate and assess the exemptions, the status of its preliminary injunction and all other available evidence in future periods. The benefits of the Brazil tax legislation include an increase in revenues as a result of not being required to remit certain PIS and COFINS during the exemption period. The increase in revenues is partially offset by higher costs in several financial statement line items that were previously reduced by PIS and COFINS tax credits that will not be generated during the exemption period. Benefits of this legislation also include a reduction in the Brazilian income tax rate from 34 % to 0 % for a period of five years on certain income earned in Brazil. Benefits began in the thirteen weeks ended December 25, 2022 and end in the first quarter of 2027 with a return to full statutory income tax rates. The Company’s 2022 Net income and Earnings per share were not materially impacted by the overall income tax impacts of the Brazil tax legislation which included revaluing Brazilian deferred tax assets and liabilities that are expected to reverse during the exemption period. Undistributed Earnings - As of December 25, 2022, the Company had aggregate undistributed foreign earnings of approximately $ 23.2 million. These earnings may be repatriated to the U.S. without additional material U.S. federal income tax. These amounts are not considered indefinitely reinvested in the Company’s foreign subsidiaries. The Company has not recorded a deferred tax liability on the financial statement carrying amount over the tax basis of its investments in foreign subsidiaries because the Company continues to assert that it is indefinitely reinvested in its underlying investments in foreign subsidiaries. The determination of any unrecorded deferred tax liability on this amount is not practicable due to the uncertainty of how these investments would be recovered. Tax Carryforwards - The amount and expiration dates of tax loss carryforwards and credit carryforwards as of December 25, 2022 are as follows: (dollars in thousands) EXPIRATION DATE AMOUNT Federal tax credit carryforwards 2026 - 2042 $ 177,676 Foreign loss carryforwards 2023 - Indefinite $ 62,213 Foreign credit carryforwards Indefinite $ 864 As of December 25, 2022, the Company had $ 175.5 million in general business tax credit carryforwards, which have a 20-year carryforward period and are utilized on a first-in, first-out basis. The Company currently expects to utilize these tax credit carryforwards within a 10 -year period. However, the Company’s ability to utilize these tax credits could be adversely impacted by, among other items, a future “ownership change” as defined under Section 382 of the Internal Revenue Code. Unrecognized Tax Benefits - As of December 25, 2022 and December 26, 2021, the liability for unrecognized tax benefits was $ 18.3 million and $ 19.2 million, respectively. Of the total amount of unrecognized tax benefits, including accrued interest and penalties, $ 17.9 million and $ 18.8 million, respectively, if recognized, would impact the Company’s effective income tax rate. 109 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The following table summarizes the activity related to the Company’s unrecognized tax benefits for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Balance, beginning of the period $ 19,238 $ 25,524 $ 27,201 Additions for tax positions taken during a prior period 114 166 1,061 Reductions for tax positions taken during a prior period ( 401 ) ( 4,209 ) ( 324 ) Additions for tax positions taken during the current period 1,100 1,292 762 Settlements with taxing authorities ( 375 ) ( 2,674 ) ( 1,290 ) Lapses in the applicable statutes of limitations ( 1,424 ) ( 854 ) ( 1,857 ) Translation adjustments 6 ( 7 ) ( 29 ) Balance, end of the period $ 18,258 $ 19,238 $ 25,524 The Company had approximately $ 0.8 million and $ 0.9 million accrued for the payment of interest and penalties as of December 25, 2022 and December 26, 2021, respectively. The Company recognized immaterial interest and penalties related to uncertain tax positions in the Provision (benefit) for income taxes, for all periods presented. In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant taxable authorities. Based on the outcome of these examinations, or a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related recorded unrecognized tax benefits for tax positions taken on previously filed tax returns will change by approximately $ 1.0 million to $ 2.0 million within the next 12 months. Open Tax Years - Following is a summary of the open audit years by jurisdiction as of December 25, 2022: OPEN AUDIT YEARS United States - federal 2007 - 2021 United States - state 2009 - 2021 Foreign 2016 - 2021 22. Commitments and Contingencies Lease Guarantees - The Company assigned its interest, and is contingently liable, under certain real estate leases. These leases have varying terms, the latest of which expires in 2032. As of December 25, 2022, the undiscounted payments the Company could be required to make in the event of non-payment by the primary lessees was approximately $ 22.9 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of December 25, 2022 was approximately $ 16.8 million. In the event of default, the indemnity clauses in the Company’s purchase and sale agreements govern its ability to pursue and recover damages incurred. As of December 25, 2022 and December 26, 2021, the Company’s recorded contingent lease liability was $ 6.2 million and $ 8.7 million, respectively. Purchase Obligations - Purchase obligations were $ 226.6 million and $ 206.6 million as of December 25, 2022 and December 26, 2021, respectively. These purchase obligations are primarily due within three years , however commitments with various vendors extend through December 2030. Outstanding commitments consist primarily of inventory, kitchen equipment, technology, advertising and restaurant-level service contracts. In 2022, the Company purchased more than 95 % of its U.S. beef raw materials from four beef suppliers that represent more than 80 % of the total beef marketplace in the U.S. 110 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Litigation and Other Matters - The Company is subject to legal proceedings, claims and liabilities, such as liquor liability, slip and fall cases, wage and hour and other employment-related litigation, which arise in the ordinary course of business. A reserve is recorded when it is both: (i) probable that a loss has occurred and (ii) the amount of loss can be reasonably estimated. There may be instances in which an exposure to loss exceeds the recorded reserve. The Company evaluates, on a quarterly basis, developments in legal proceedings that could cause an increase or decrease in the amount of the reserve that has been previously recorded, or a revision to the disclosed estimated range of possible losses, as applicable. The Company’s legal proceedings range from cases brought by a single plaintiff to threatened class actions with many putative class members. While some matters pending against the Company specify the damages claimed by the plaintiff or class, many seek unspecified amounts or are at very early stages of the legal process. Even when the amount of damages claimed against the Company are stated, the claimed amount may be exaggerated, unsupported or unrelated to possible outcomes, and as such, are not meaningful indicators of the Company’s potential liability or financial exposure. As a result, some matters have not yet progressed sufficiently through discovery or development of important factual information and legal issues to enable the Company to estimate an amount of loss or a range of possible loss. Certain subsidiaries of the Company have been named in collective actions alleging violations of the Fair Labor Standards Act and state wage and hour laws. The Company believes its employees were properly paid and is defending these matters vigorously. During the thirteen weeks ended December 25, 2022, the Company accrued $ 5.9 million within Accrued and other current liabilities on its Consolidated Balance Sheet for these matters. The Company intends to defend itself in legal matters. Some of these matters may be covered, at least in part, by insurance if they exceed specified retention or deductible amounts. However, it is possible that claims may be denied by the Company’s insurance carriers, the Company may be required by its insurance carriers to contribute to the payment of claims, or the Company’s insurance coverage may not continue to be available on acceptable terms or in sufficient amounts. The Company records receivables from third party insurers when recovery has been determined to be probable. The Company believes that the ultimate determination of liability in connection with legal claims pending against the Company, if any, in excess of amounts already provided for such matters in the consolidated financial statements, will not have a material adverse effect on its business, annual results of operations, liquidity or financial position. However, it is possible that the Company’s business, results of operations, liquidity, or financial condition could be materially affected in a particular future reporting period by the unfavorable resolution of one or more matters or contingencies during such period. Including the matters discussed above, the Company recorded reserves of $ 15.1 million and $ 7.1 million for certain of its outstanding legal proceedings as of December 25, 2022 and December 26, 2021, respectively, within Accrued and other current liabilities and Other long-term liabilities on its Consolidated Balance Sheets. While the Company believes that additional losses beyond these accruals are reasonably possible, it cannot estimate a possible loss contingency or range of reasonably possible loss contingencies beyond these accruals. During 2022, 2021 and 2020, the Company recognized $ 9.4 million, $ 5.4 million and $ 2.3 million, respectively, in Other restaurant operating expense in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for certain legal reserves and settlements. Royalty Termination - On August 2, 2021, wholly-owned subsidiaries of the Company entered into the Purchase and Sale of Royalty Payment Stream and Termination of Royalty Agreement (the “Royalty Termination Agreement”) with the Carrabba’s Italian Grill founders (the “Carrabba’s Founders”), pursuant to which the Company’s obligation to pay future royalties on U.S. Carrabba’s Italian Grill restaurant sales and lump sum royalty fees on Carrabba’s Italian Grill (and Abbraccio) restaurants opened outside the U.S. was terminated. Upon execution of the Royalty Termination Agreement, the Company made a cash payment of $ 61.9 million to the Carrabba’s Founders, which was recorded in Other restaurant operating expense in its Consolidated Statements of Operations and Comprehensive Income (Loss) during 2021. 111 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Insurance - As of December 25, 2022, the future undiscounted payments the Company expects for workers’ compensation, general liability and health insurance claims are as follows: (dollars in thousands) 2023 $ 21,308 2024 11,826 2025 7,597 2026 4,058 2027 2,102 Thereafter 8,473 $ 55,364 The following is a reconciliation of the expected aggregate undiscounted reserves to the discounted reserves for insurance claims recognized on the Company’s Consolidated Balance Sheets as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Undiscounted reserves $ 55,364 $ 54,664 Discount (1) ( 6,299 ) ( 1,130 ) Discounted reserves $ 49,065 $ 53,534 Discounted reserves recognized on the Company’s Consolidated Balance Sheets: Accrued and other current liabilities $ 20,932 $ 22,017 Other long-term liabilities, net 28,133 31,517 $ 49,065 $ 53,534 ____________________ (1) Discount rates of 4.47 % and 0.69 % were used for December 25, 2022 and December 26, 2021, respectively. 23. Segment Reporting The Company considers each of its restaurant concepts and international markets as operating segments, which reflects how the Company manages its business, reviews operating performance and allocates resources. Resources are allocated and performance is assessed by the Company’s Chief Executive Officer, whom the Company has determined to be its Chief Operating Decision Maker. The Company aggregates its operating segments into two reportable segments, U.S. and international. The U.S. segment includes all restaurants operating in the U.S. while restaurants operating outside the U.S. are included in the international segment. The following is a summary of reporting segments as of December 25, 2022: REPORTABLE SEGMENT (1) CONCEPT GEOGRAPHIC LOCATION U.S. Outback Steakhouse United States of America Carrabba’s Italian Grill Bonefish Grill Fleming’s Prime Steakhouse & Wine Bar International Outback Steakhouse Brazil, Hong Kong/China Carrabba’s Italian Grill (Abbraccio) Brazil _________________ (1) Includes franchise locations. Segment accounting policies are the same as those described in Note 2 - Summary of Significant Accounting Policies . Revenues for all segments include only transactions with customers and exclude intersegment revenues. Excluded from Income (loss) from operations for U.S. and international are certain legal and corporate costs not 112 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued directly related to the performance of the segments, most stock-based compensation expenses, certain insurance expenses and certain bonus expenses. The following table is a summary of Total revenues by segment for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Total revenues U.S. $ 3,911,870 $ 3,759,981 $ 2,885,542 International 504,638 362,404 285,019 Total revenues $ 4,416,508 $ 4,122,385 $ 3,170,561 The following table is a reconciliation of segment income (loss) from operations to Income (loss) before provision (benefit) for income taxes for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Segment income (loss) from operations U.S. $ 407,860 $ 443,887 $ ( 1,630 ) International 57,333 16,657 ( 13,479 ) Total segment income (loss) from operations 465,193 460,544 ( 15,109 ) Unallocated corporate operating expense (1) ( 134,772 ) ( 151,586 ) ( 159,864 ) Total income (loss) from operations 330,421 308,958 ( 174,973 ) Loss on extinguishment and modification of debt ( 107,630 ) ( 2,073 ) ( 237 ) Loss on fair value adjustment of derivatives, net ( 17,685 ) — — Other (expense) income, net ( 23 ) 26 131 Interest expense, net ( 53,176 ) ( 57,614 ) ( 64,442 ) Income (loss) before provision (benefit) for income taxes $ 151,907 $ 249,297 $ ( 239,521 ) ____________________ (1) Includes $ 32.4 million of charges for 2020 that were not allocated to the Company’s segments related to its transformational initiatives, primarily recorded within General and administrative expense and Provision for impaired assets and restaurant closings . The following table is a summary of Depreciation and amortization expense by segment for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Depreciation and amortization U.S. $ 139,170 $ 134,243 $ 144,298 International 23,397 22,649 23,723 Corporate 7,050 6,499 12,240 Total depreciation and amortization $ 169,617 $ 163,391 $ 180,261 The following table is a summary of capital expenditures by segment for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 Capital expenditures U.S. $ 196,163 $ 103,303 $ 64,516 International 28,647 14,074 18,542 Corporate 11,709 9,035 5,936 Total capital expenditures $ 236,519 $ 126,412 $ 88,994 113 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The following table sets forth Total assets by segment as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 Assets U.S. $ 2,669,953 $ 2,626,808 International 400,052 383,075 Corporate 250,420 284,388 Total assets $ 3,320,425 $ 3,294,271 Geographic areas — International assets are defined as assets residing in a country other than the U.S. The following table details long-lived assets, excluding goodwill, operating lease right-of-use assets, intangible assets and deferred tax assets, by major geographic area as of the periods indicated: (dollars in thousands) DECEMBER 25, 2022 DECEMBER 26, 2021 U.S. $ 891,379 $ 831,634 International Brazil 93,972 73,706 Other 10,938 15,342 Total long-lived assets $ 996,289 $ 920,682 International revenues are defined as revenues generated from restaurant sales originating in a country other than the U.S. The following table details Total revenues by major geographic area for the periods indicated: FISCAL YEAR (dollars in thousands) 2022 2021 2020 U.S. $ 3,911,870 $ 3,759,981 $ 2,885,542 International Brazil 448,411 297,167 222,283 Other 56,227 65,237 62,736 Total revenues $ 4,416,508 $ 4,122,385 $ 3,170,561 114 Table of Contents BLOOMIN’ BRANDS, INC. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.