Bloomin' Brands, Inc. 10-Q

Item 1. Financial Statements CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) MARCH 26, 2023 DECEMBER 25, 2022 (UNAUDITED) ASSETS Current assets Cash and cash equivalents $ 94,441 $ 84,735 Inventories 67,898 78,124 Other current assets, net 85,507 183,718 Total current assets 247,846 346,577 Property, fixtures and equipment, net 936,225 914,142 Operating lease right-of-use assets 1,091,943 1,103,083 Goodwill 272,510 273,032 Intangible assets, net 446,696 448,326 Deferred income tax assets, net 151,436 153,118 Other assets, net 85,137 82,147 Total assets $ 3,231,793 $ 3,320,425 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 196,093 $ 183,715 Accrued and other current liabilities 399,465 399,301 Unearned revenue 322,608 394,215 Current portion of long-term debt 2,267 1,636 Total current liabilities 920,433 978,867 Non-current operating lease liabilities 1,136,694 1,148,607 Long-term debt, net 765,702 831,656 Other long-term liabilities, net 86,123 87,386 Total liabilities 2,908,952 3,046,516 Commitments and contingencies (Note 12) Stockholders’ equity Bloomin’ Brands stockholders’ equity Preferred stock, $ 0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of March 26, 2023 and December 25, 2022 — — Common stock, $ 0.01 par value, 475,000,000 shares authorized; 87,465,214 and 87,696,200 shares issued and outstanding as of March 26, 2023 and December 25, 2022, respectively 875 877 Additional paid-in capital 1,141,017 1,161,912 Accumulated deficit ( 635,451 ) ( 706,109 ) Accumulated other comprehensive loss ( 186,445 ) ( 185,311 ) Total Bloomin’ Brands stockholders’ equity 319,996 271,369 Noncontrolling interests 2,845 2,540 Total stockholders’ equity 322,841 273,909 Total liabilities and stockholders’ equity $ 3,231,793 $ 3,320,425 The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED) THIRTEEN WEEKS ENDED MARCH 26, 2023 MARCH 27, 2022 Revenues Restaurant sales $ 1,228,234 $ 1,123,575 Franchise and other revenues 16,512 16,960 Total revenues 1,244,746 1,140,535 Costs and expenses Food and beverage 384,214 359,370 Labor and other related 341,542 312,511 Other restaurant operating 282,927 259,110 Depreciation and amortization 46,302 41,775 General and administrative 65,804 58,674 Provision for impaired assets and restaurant closings 3,324 1,839 Total costs and expenses 1,124,113 1,033,279 Income from operations 120,633 107,256 Interest expense, net ( 12,444 ) ( 13,633 ) Income before provision for income taxes 108,189 93,623 Provision for income taxes 14,761 15,929 Net income 93,428 77,694 Less: net income attributable to noncontrolling interests 2,117 2,183 Net income attributable to Bloomin’ Brands $ 91,311 $ 75,511 Net income $ 93,428 $ 77,694 Other comprehensive income: Foreign currency translation adjustment ( 1,134 ) 11,283 Unrealized gain on derivatives, net of tax — 573 Reclassification of adjustments for loss on derivatives included in Net income, net of tax — 681 Impact of terminated interest rate swaps included in Net income, net of tax — 3,021 Comprehensive income 92,294 93,252 Less: comprehensive income attributable to noncontrolling interests 2,117 2,183 Comprehensive income attributable to Bloomin’ Brands $ 90,177 $ 91,069 Earnings per share: Basic $ 1.02 $ 0.85 Diluted $ 0.93 $ 0.73 Weighted average common shares outstanding: Basic 89,116 89,355 Diluted 98,011 103,454 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 Table of Contents BLOOMIN’ BRANDS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED) BLOOMIN’ BRANDS, INC. COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUM- ULATED DEFICIT ACCUMULATED OTHER COMPREHENSIVE LOSS NON-CONTROLLING INTERESTS TOTAL SHARES AMOUNT Balance, December 25, 2022 87,696 $ 877 $ 1,161,912 $ ( 706,109 ) $ ( 185,311 ) $ 2,540 $ 273,909 Net income — — — 91,311 — 2,117 93,428 Other comprehensive loss — — — — ( 1,134 ) — ( 1,134 ) Cash dividends declared, $ 0.24 per common share — — ( 21,014 ) — — — ( 21,014 ) Repurchase and retirement of common stock, including excise tax ( 863 ) ( 9 ) — ( 20,653 ) — — ( 20,662 ) Stock-based compensation — — 2,904 — — — 2,904 Common stock issued under stock plans (1) 632 7 ( 2,785 ) — — — ( 2,778 ) Distributions to noncontrolling interests — — — — — ( 2,555 ) ( 2,555 ) Contributions from noncontrolling interests — — — — — 743 743 Balance, March 26, 2023 87,465 $ 875 $ 1,141,017 $ ( 635,451 ) $ ( 186,445 ) $ 2,845 $ 322,841 BLOOMIN’ BRANDS, INC. 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 — — — 75,511 — 2,183 77,694 Other comprehensive income, net of tax — — — — 15,558 — 15,558 Cash dividends declared, $ 0.14 per common share — — ( 12,559 ) — — — ( 12,559 ) Repurchase and retirement of common stock ( 551 ) ( 6 ) — ( 11,696 ) — — ( 11,702 ) Stock-based compensation — — 4,843 — — — 4,843 Common stock issued under stock plans (1) 483 5 880 — — — 885 Purchase of noncontrolling interests, net of tax of $ 888 — — 2,566 — — ( 4,454 ) ( 1,888 ) Distributions to noncontrolling interests — — — — — ( 2,641 ) ( 2,641 ) Contributions from noncontrolling interests — — — — — 217 217 Balance, March 27, 2022 89,185 $ 892 $ 1,115,458 $ ( 634,356 ) $ ( 190,431 ) $ 1,694 $ 293,257 ________________ (1) Net of forfeitures and shares withheld for employee taxes. The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 Table of Contents BLOOMIN’ BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS, UNAUDITED) THIRTEEN WEEKS ENDED MARCH 26, 2023 MARCH 27, 2022 Cash flows provided by operating activities: Net income $ 93,428 $ 77,694 Adjustments to reconcile Net income to cash provided by operating activities: Depreciation and amortization 46,302 41,775 Amortization of debt discounts and issuance costs 763 1,065 Amortization of deferred gift card sales commissions 7,797 8,017 Provision for impaired assets and restaurant closings 3,324 1,839 Non-cash interest expense from terminated interest rate swaps — 4,067 Non-cash operating lease costs 21,182 20,477 Stock-based and other non-cash compensation expense 2,904 4,843 Deferred income tax expense 1,682 3,209 Other, net ( 1,823 ) 2,229 Change in assets and liabilities 14,109 ( 18,080 ) Net cash provided by operating activities 189,668 147,135 Cash flows used in investing activities: Capital expenditures ( 64,415 ) ( 40,180 ) Other investments, net 1,470 1,030 Net cash used in investing activities ( 62,945 ) ( 39,150 ) Cash flows used in financing activities: Repayments of long-term debt and finance lease obligations ( 385 ) ( 2,863 ) Proceeds from borrowings on revolving credit facilities 190,000 90,000 Repayments of borrowings on revolving credit facilities ( 260,000 ) ( 160,000 ) (Payments of taxes) proceeds from share-based compensation, net ( 2,778 ) 885 Distributions to noncontrolling interests ( 2,555 ) ( 2,641 ) Contributions from noncontrolling interests 743 217 Purchase of noncontrolling interests ( 100 ) ( 1,000 ) Payments for partner equity plan — ( 2,748 ) Repurchase of common stock ( 20,898 ) ( 10,402 ) Cash dividends paid on common stock ( 21,014 ) ( 12,559 ) Net cash used in financing activities ( 116,987 ) ( 101,111 ) Effect of exchange rate changes on cash and cash equivalents ( 30 ) 1,965 Net increase in cash, cash equivalents and restricted cash 9,706 8,839 Cash, cash equivalents and restricted cash as of the beginning of the period 84,735 89,057 Cash, cash equivalents and restricted cash as of the end of the period $ 94,441 $ 97,896 Supplemental disclosures of cash flow information: Cash paid for interest $ 6,528 $ 2,444 Cash paid for income taxes, net of refunds $ 2,458 $ 2,257 Supplemental disclosures of non-cash investing and financing activities: Leased assets obtained in exchange for new operating lease liabilities $ 11,394 $ 11,515 Leased assets obtained in exchange for new finance lease liabilities $ 4,711 $ 1,313 Increase (decrease) in liabilities from the acquisition of property, fixtures and equipment $ 1,159 $ ( 6,178 ) The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Description of the Business and Basis of Presentation Description of the Business - Bloomin’ Brands (“Bloomin’ Brands” or the “Company”) owns and operates casual, upscale casual and fine dining restaurants. The Company’s restaurant portfolio has four concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Additional Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchise agreements. Basis of Presentation - The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of the Company, all adjustments necessary for fair financial statement presentation for the periods presented have been included and are of a normal, recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 25, 2022. Recently Issued Financial Accounting Standards Not Yet Adopted - Recent accounting guidance not discussed herein is not applicable, did not have or is not expected to have a material impact to the Company. Reclassifications - The Company reclassified certain items in the accompanying consolidated financial statements for prior periods to be comparable with the classification for the current period, including, but not limited to, presentation of certain notes to the consolidated financial statements. These reclassifications had no effect on previously reported net income. 2. Revenue Recognition The following table includes the categories of revenue included in the Company’s Consolidated Statements of Operations and Comprehensive Income for the periods indicated: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Revenues Restaurant sales $ 1,228,234 $ 1,123,575 Franchise and other revenues Franchise revenues 13,523 13,406 Other revenues 2,989 3,554 Total Franchise and other revenues 16,512 16,960 Total revenues $ 1,244,746 $ 1,140,535 7 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table includes the disaggregation of Restaurant sales and franchise revenues, by restaurant concept and major international market, for the periods indicated: THIRTEEN WEEKS ENDED MARCH 26, 2023 MARCH 27, 2022 (dollars in thousands) RESTAURANT SALES FRANCHISE REVENUES RESTAURANT SALES FRANCHISE REVENUES U.S. Outback Steakhouse $ 628,183 $ 8,544 $ 595,393 $ 8,459 Carrabba’s Italian Grill 188,042 795 175,628 661 Bonefish Grill 157,689 171 151,416 177 Fleming’s Prime Steakhouse & Wine Bar 102,773 — 97,662 — Other 3,882 15 3,536 5 U.S. total 1,080,569 9,525 1,023,635 9,302 International Outback Steakhouse - Brazil (1) 122,016 — 85,301 — Other (1)(2) 25,649 3,998 14,639 4,104 International total 147,665 3,998 99,940 4,104 Total $ 1,228,234 $ 13,523 $ 1,123,575 $ 13,406 ________________ (1) Restaurant sales in Brazil increased $ 9.6 million during the thirteen weeks ended March 26, 2023 in connection with value added tax exemptions resulting from recent tax legislation. See Note 11 - Income Taxes for details regarding the Brazil tax legislation. (2) Includes Restaurant sales for Company-owned Outback Steakhouse restaurants outside of Brazil and Abbraccio restaurants in Brazil. Franchise revenues primarily include revenues from franchised Outback Steakhouse restaurants. 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) MARCH 26, 2023 DECEMBER 25, 2022 Other current assets, net Deferred gift card sales commissions $ 13,403 $ 17,755 Unearned revenue Deferred gift card revenue $ 314,096 $ 386,495 Deferred loyalty revenue 6,024 5,628 Deferred franchise fees - current 471 460 Other 2,017 1,632 Total Unearned revenue $ 322,608 $ 394,215 Other long-term liabilities, net Deferred franchise fees - non-current $ 4,193 $ 4,126 The following table is a rollforward of deferred gift card sales commissions for the periods indicated: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Balance, beginning of the period $ 17,755 $ 17,793 Deferred gift card sales commissions amortization ( 7,797 ) ( 8,017 ) Deferred gift card sales commissions capitalization 4,403 4,169 Other ( 958 ) ( 912 ) Balance, end of the period $ 13,403 $ 13,033 8 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table is a rollforward of unearned gift card revenue for the periods indicated: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Balance, beginning of the period $ 386,495 $ 387,945 Gift card sales 53,005 50,280 Gift card redemptions ( 118,283 ) ( 116,622 ) Gift card breakage ( 7,121 ) ( 6,629 ) Balance, end of the period $ 314,096 $ 314,974 3. Earnings Per Share The following table presents the computation of basic and diluted earnings per share for the periods indicated: THIRTEEN WEEKS ENDED (in thousands, except per share data) MARCH 26, 2023 MARCH 27, 2022 Net income attributable to Bloomin’ Brands $ 91,311 $ 75,511 Basic weighted average common shares outstanding 89,116 89,355 Effect of dilutive securities: Stock options 401 370 Nonvested restricted stock units 269 279 Nonvested performance-based share units 286 276 Convertible senior notes 4,831 8,732 Warrants 3,108 4,442 Diluted weighted average common shares outstanding 98,011 103,454 Basic earnings per share $ 1.02 $ 0.85 Diluted earnings per share $ 0.93 $ 0.73 Share-based compensation-related weighted average securities outstanding not included in the computation of earnings per share because their effect was antidilutive were as follows for the periods indicated: THIRTEEN WEEKS ENDED (shares in thousands) MARCH 26, 2023 MARCH 27, 2022 Stock options 725 1,417 Nonvested restricted stock units 120 217 Nonvested performance-based share units 344 365 4. Stock-based Compensation Plans The Company recognized stock-based compensation expense as follows for the periods indicated: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Performance-based share units $ 923 $ 2,619 Restricted stock units 1,963 1,810 Stock options — 377 $ 2,886 $ 4,806 9 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued In February 2023, the Company granted performance-based share units (“PSUs”) subject to final payout modification by a Relative Total Shareholder Return (“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 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 25, 2022 874 $ 24.83 $ 18,323 Granted 301 $ 29.01 Performance adjustment (2) 154 $ 19.84 Vested ( 470 ) $ 19.84 Forfeited ( 32 ) $ 26.39 Outstanding as of March 26, 2023 827 $ 26.92 $ 20,630 Expected to vest as of March 26, 2023 1,067 $ 26,611 ________________ (1) Based on the $ 20.96 and $ 24.94 share price of the Company’s common stock on December 23, 2022 and March 24, 2023, the last trading day of the year ended December 25, 2022 and the thirteen weeks ended March 26, 2023, respectively. (2) Represents adjustment to 148 % payout for PSUs granted during 2020. Assumptions used in the Monte Carlo simulation model and the grant date fair value of PSUs granted were as follows for the periods indicated: THIRTEEN WEEKS ENDED MARCH 26, 2023 MARCH 27, 2022 Assumptions: Risk-free interest rate (1) 4.26 % 1.64 % Dividend yield (2) 3.47 % 2.31 % Volatility (3) 51.02 % 49.11 % Grant date fair value per unit (4) $ 29.01 $ 26.10 ________________ (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. (4) 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 2.7 % and 7.9 % as of March 26, 2023 and March 27, 2022, respectively. The following represents unrecognized stock-based compensation expense and the remaining weighted average vesting period as of March 26, 2023: UNRECOGNIZED COMPENSATION EXPENSE (dollars in thousands) REMAINING WEIGHTED AVERAGE VESTING PERIOD (in years) Performance-based share units $ 16,617 2.0 Restricted stock units $ 11,864 2.2 10 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 5. Other Current Assets, Net Other current assets, net, consisted of the following as of the periods indicated: (dollars in thousands) MARCH 26, 2023 DECEMBER 25, 2022 Prepaid expenses $ 27,856 $ 29,343 Accounts receivable - gift cards, net 8,515 85,606 Accounts receivable - vendors, net 10,209 25,385 Accounts receivable - franchisees, net 3,755 2,550 Accounts receivable - other, net 17,488 18,408 Deferred gift card sales commissions 13,403 17,755 Other current assets, net 4,281 4,671 $ 85,507 $ 183,718 6. Long-term Debt, Net Following is a summary of outstanding Long-term debt, net, as of the periods indicated: MARCH 26, 2023 DECEMBER 25, 2022 (dollars in thousands) OUTSTANDING BALANCE INTEREST RATE OUTSTANDING BALANCE INTEREST RATE Senior secured credit facility - revolving credit facility (1) $ 360,000 6.28 % $ 430,000 5.79 % 2025 Notes 105,000 5.00 % 105,000 5.00 % 2029 Notes 300,000 5.13 % 300,000 5.13 % Finance lease liabilities 9,114 4,785 Less: unamortized debt discount and issuance costs ( 6,145 ) ( 6,493 ) Total debt, net 767,969 833,292 Less: current portion of long-term debt ( 2,267 ) ( 1,636 ) Long-term debt, net $ 765,702 $ 831,656 ________________ (1) Interest rate represents the weighted average interest rate as of the respective periods. Debt Covenants - As of March 26, 2023 and December 25, 2022, the Company was in compliance with its debt covenants. 7. Convertible Senior Notes 2025 Notes - In connection with dividends paid during the thirteen weeks ended March 26, 2023, the conversion rate for the Company’s remaining convertible senior notes due 2025 (“2025 Notes”) decreased to approximately $ 11.49 per share, which represents 87.059 shares of common stock per $ 1,000 principal amount of the 2025 Notes, or a total of approximately 9.141 million shares. 11 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table includes the outstanding principal amount and carrying value of the 2025 Notes as of the periods indicated: (dollars in thousands) MARCH 26, 2023 DECEMBER 25, 2022 Long-term debt, net Principal $ 105,000 $ 105,000 Less: debt issuance costs (1) ( 1,744 ) ( 1,939 ) Net carrying amount $ 103,256 $ 103,061 ________________ (1) Debt issuance costs are amortized to Interest expense, net using the effective interest method over the 2025 Notes’ expected life. Following is a summary of interest expense for the 2025 Notes by component for the periods indicated: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Coupon interest $ 1,313 $ 2,875 Debt issuance cost amortization 195 404 Total interest expense (1) $ 1,508 $ 3,279 ________________ (1) The effective rate of the 2025 Notes over their expected life is 5.85 % . Based on the daily closing prices of the Company’s stock during the quarter ended March 26, 2023, the remaining holders of the 2025 Notes are eligible to convert their 2025 Notes during the second quarter of 2023. 8. 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. During the thirteen weeks ended March 26, 2023, the Company fully utilized the remaining share repurchase authorization under the 2022 Share Repurchase Program. On February 7, 2023, the Company’s Board approved a new $ 125.0 million authorization (the “2023 Share Repurchase Program”) expiring on August 7, 2024. As of March 26, 2023, $ 119.4 million remained available for repurchase under the 2023 Share Repurchase Program. Following is a summary of the shares repurchased during fiscal year 2023: (in thousands, except per share data) NUMBER OF SHARES AVERAGE REPURCHASE PRICE PER SHARE AMOUNT First fiscal quarter (1) 863 $ 23.92 $ 20,645 ________________ (1) Excludes excise tax on share repurchases. Subsequent to March 26, 2023, the Company repurchased 291 thousand shares of its common stock for $ 7.2 million under a Rule 10b5-1 plan. Dividends - The Company declared and paid dividends per share during fiscal year 2023 as follows: (dollars in thousands, except per share data) DIVIDENDS PER SHARE AMOUNT First fiscal quarter $ 0.24 $ 21,014 In April 2023, the Board declared a quarterly cash dividend of $ 0.24 per share, payable on May 24, 2023 to shareholders of record at the close of business on May 10, 2023 . 12 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Accumulated Other Comprehensive Loss (“AOCL”) - AOCL consisted of foreign currency translation adjustments as of March 26, 2023 and December 25, 2022. Following are the components of Other comprehensive (loss) income attributable to Bloomin’ Brands for the periods indicated: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Foreign currency translation adjustment $ ( 1,134 ) $ 11,283 Unrealized gain on derivatives, net of tax — 573 Reclassification of adjustments for loss on derivatives included in Net income, net of tax — 681 Impact of terminated interest rate swaps included in Net income, net of tax — 3,021 Total gain on derivatives, net of tax — 4,275 Other comprehensive (loss) income attributable to Bloomin’ Brands $ ( 1,134 ) $ 15,558 9. 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 MARCH 26, 2023 DECEMBER 25, 2022 Operating lease right-of-use assets Operating lease right-of-use assets $ 1,091,943 $ 1,103,083 Finance lease right-of-use assets (1) Property, fixtures and equipment, net 8,909 4,679 Total lease assets, net $ 1,100,852 $ 1,107,762 Current operating lease liabilities (2) Accrued and other current liabilities $ 182,782 $ 183,510 Current finance lease liabilities Current portion of long-term debt 2,267 1,636 Non-current operating lease liabilities (2) Non-current operating lease liabilities 1,136,493 1,148,379 Non-current finance lease liabilities Long-term debt, net 6,847 3,149 Total lease liabilities $ 1,328,389 $ 1,336,674 ________________ (1) Net of accumulated amortization of $ 3.0 million and $ 3.6 million as of March 26, 2023 and December 25, 2022, respectively. (2) Excludes current accrued contingent percentage rent of $ 3.4 million as of March 26, 2023 and December 25, 2022 and immaterial current and non-current COVID-19-related deferred rent accruals. 13 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Following is a summary of expenses and income related to leases recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income for the periods indicated: CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME CLASSIFICATION THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Operating leases (1) Other restaurant operating $ 45,747 $ 45,361 Variable lease cost Other restaurant operating 1,724 1,883 Finance leases: Amortization of leased assets Depreciation and amortization 488 337 Interest on lease liabilities Interest expense, net 136 32 Sublease revenue Franchise and other revenues ( 1,708 ) ( 2,558 ) Lease costs, net $ 46,387 $ 45,055 ________________ (1) Excludes rent expense for office facilities and Company-owned closed or subleased properties of $ 3.0 million for both the thirteen weeks ended March 26, 2023 and March 27, 2022, which is included in General and administrative expense. 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: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Cash flows from operating activities: Cash paid for amounts included in the measurement of operating lease liabilities $ 48,620 $ 48,560 10. Fair Value Measurements Fair value is the price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date. Fair value is categorized into one of the following three levels based on the lowest level of significant input: Level 1 Unadjusted quoted market prices in active markets for identical assets or liabilities Level 2 Observable inputs available at measurement date other than quoted prices included in Level 1 Level 3 Unobservable inputs that cannot be corroborated by observable market data Fair Value Measurements on a Recurring Basis - The following table summarizes the Company’s financial assets measured at fair value by hierarchy level on a recurring basis as of the periods indicated: MARCH 26, 2023 DECEMBER 25, 2022 (dollars in thousands) TOTAL LEVEL 1 TOTAL LEVEL 1 Assets (1): Cash equivalents: Fixed income funds $ 3,886 $ 3,886 $ 3,301 $ 3,301 Money market funds 8,602 8,602 4,786 4,786 Total asset recurring fair value measurements $ 12,488 $ 12,488 $ 8,087 $ 8,087 ________________ (1) Carrying value approximates fair value because maturities are less than three months. Interim Disclosures about Fair Value of Financial Instruments - The Company’s 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. 14 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The following table includes the carrying value and fair value of the Company’s debt by hierarchy level as of the periods indicated: MARCH 26, 2023 DECEMBER 25, 2022 CARRYING VALUE FAIR VALUE LEVEL 2 CARRYING VALUE FAIR VALUE LEVEL 2 (dollars in thousands) Senior secured credit facility - revolving credit facility $ 360,000 $ 360,000 $ 430,000 $ 430,000 2025 Notes $ 105,000 $ 233,054 $ 105,000 $ 198,843 2029 Notes $ 300,000 $ 268,212 $ 300,000 $ 260,265 11. Income Taxes THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Income before provision for income taxes $ 108,189 $ 93,623 Provision for income taxes $ 14,761 $ 15,929 Effective income tax rate 13.6 % 17.0 % The effective income tax rate for the thirteen weeks ended March 26, 2023 decreased by 3.4 percentage points as compared to the thirteen weeks ended March 27, 2022. This decrease was primarily due to the benefits of Brazil tax legislation that include a temporary reduction in the Brazilian income tax rate from 34 % to 0 % applicable to the thirteen weeks ended March 26, 2023. 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 Company’s Brazilian subsidiary due to the uncertainty regarding the restaurant industry’s eligibility for the exemptions under this legislation. The Company will continue to evaluate and assess the exemptions, the status of its preliminary injunction and all other available evidence to determine the exemption status with respect to this subsidiary in future periods. 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 effective income tax rate for the thirteen weeks ended March 26, 2023 was lower than the Company’s blended federal and state statutory rate of approximately 26 % primarily due to the benefit of FICA tax credits on certain tipped wages and benefits of Brazil tax legislation that include a temporary reduction in the Brazilian income tax rate from 34 % to 0 %. 12. Commitments and Contingencies Litigation and Other Matters - The Company is subject to legal proceedings, claims and liabilities, such as liquor liability, slip and fall cases, wage and hour and other employment-related litigation, which arise in the ordinary course of business. A reserve is recorded when it is both: (i) probable that a loss has occurred and (ii) the amount of loss can be reasonably estimated. There may be instances in which an exposure to loss exceeds the recorded reserve. The Company evaluates, on a quarterly basis, developments in legal proceedings that could cause an increase or decrease in the amount of the reserve that has been previously recorded, or a revision to the disclosed estimated range of possible losses, as applicable. 15 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The Company’s legal proceedings range from cases brought by a single plaintiff to threatened class actions with many putative class members. While some matters pending against the Company specify the damages claimed by the plaintiff or class, many seek unspecified amounts or are at very early stages of the legal process. Even when the amount of damages claimed against the Company are stated, the claimed amount may be exaggerated, unsupported or unrelated to possible outcomes, and as such, are not meaningful indicators of the Company’s potential liability or financial exposure. As a result, some matters have not yet progressed sufficiently through discovery or development of important factual information and legal issues to enable the Company to estimate an amount of loss or a range of possible loss. The Company 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. The Company recorded reserves of $ 15.9 million and $ 15.1 million for certain of its outstanding legal proceedings as of March 26, 2023 and December 25, 2022, respectively, within Accrued and other current 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. 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 March 26, 2023, the undiscounted payments that the Company could be required to make in the event of non-payment by the primary lessees was approximately $ 22.7 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of March 26, 2023 was approximately $ 17.2 million. In the event of default, the indemnity clauses in the Company’s purchase and sale agreements generally govern its ability to pursue and recover damages incurred. As of March 26, 2023 and December 25, 2022, the Company’s recorded contingent lease liability was $ 6.2 million. 13. Segment Reporting The following is a summary of reporting segments: REPORTABLE SEGMENT (1) CONCEPT GEOGRAPHIC LOCATION U.S. Outback Steakhouse United States of America Carrabba’s Italian Grill Bonefish Grill Fleming’s Prime Steakhouse & Wine Bar International Outback Steakhouse Brazil, Hong Kong/China Carrabba’s Italian Grill (Abbraccio) Brazil _________________ (1) Includes franchise locations. 16 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Segment accounting policies are the same as those described in Note 2 - Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 25, 2022. Revenues for all segments include only transactions with customers and exclude intersegment revenues. Excluded from Income from operations for U.S. and international are certain legal and corporate costs not directly related to the performance of the segments, most stock-based compensation expenses, certain insurance expenses and certain bonus expenses. The following table is a summary of Total revenues by segment for the periods indicated: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Total revenues U.S. $ 1,092,996 $ 1,036,407 International 151,750 104,128 Total revenues $ 1,244,746 $ 1,140,535 The following table is a reconciliation of segment income from operations to Income before provision for income taxes for the periods indicated: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Segment income from operations U.S. $ 133,243 $ 132,226 International 24,508 8,884 Total segment income from operations 157,751 141,110 Unallocated corporate operating expense ( 37,118 ) ( 33,854 ) Total income from operations 120,633 107,256 Interest expense, net ( 12,444 ) ( 13,633 ) Income before provision for income taxes $ 108,189 $ 93,623 The following table is a summary of Depreciation and amortization expense by segment for the periods indicated: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 Depreciation and amortization U.S. $ 38,163 $ 34,759 International 5,919 5,537 Corporate 2,220 1,479 Total depreciation and amortization $ 46,302 $ 41,775 Geographic Areas - 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: THIRTEEN WEEKS ENDED (dollars in thousands) MARCH 26, 2023 MARCH 27, 2022 U.S. $ 1,092,996 $ 1,036,407 International Brazil 138,994 90,100 Other 12,756 14,028 Total revenues $ 1,244,746 $ 1,140,535 17 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS