Bloomin' Brands, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes. Unless the context otherwise indicates, as used in this report, the term the “Company,” “we,” “us,” “our” and other similar terms mean Bloomin’ Brands, Inc. and its subsidiaries. Cautionary Statement This Quarterly Report on Form 10-Q (the “Report”) includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “feels,” “seeks,” “forecasts,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could” or “would” or, in each case, their negative or other variations or comparable terminology, although not all forward-looking statements are accompanied by such terms. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially from statements made or suggested by forward-looking statements include, but are not limited to, the following: (i) Consumer reactions to public health and food safety issues; (ii) Minimum wage increases, additional mandated employee benefits and fluctuations in the cost and availability of employees; (iii) Our ability to recruit and retain high-quality leadership, restaurant-level management and team members; (iv) Economic conditions and their effects on consumer confidence and discretionary spending, consumer traffic, the cost and availability of credit and interest rates; (v) Our ability to compete in the highly competitive restaurant industry with many well-established competitors and new market entrants; (vi) Our ability to protect our information technology systems from interruption or security breach, including cyber security threats, and to protect consumer data and personal employee information; 21 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued (vii) Fluctuations in the price and availability of commodities, including supplier freight charges and restaurant distribution expenses, and other impacts of inflation and our dependence on a limited number of suppliers and distributors to meet our beef, chicken and other major product supply needs; (viii) The severity, extent and duration of a health pandemic, its impacts on our business and results of operations, financial condition and liquidity, including any adverse impact on our stock price and on the other factors listed in this Report, and the responses of domestic and foreign federal, state and local governments to the pandemic; (ix) Our ability to preserve and grow the reputation and value of our brands, particularly in light of changes in consumer engagement with social media platforms and limited control with respect to the operations of our franchisees; (x) The effects of international economic, political and social conditions and legal systems on our foreign operations and on foreign currency exchange rates; (xi) Our ability to comply with new environmental, social and governance (“ESG”) requirements or our failure to achieve any goals, targets or objectives with respect to ESG matters; (xii) Our ability to effectively respond to changes in patterns of consumer traffic, consumer tastes and dietary habits, including by maintaining relationships with third party delivery apps and services; (xiii) Our ability to comply with governmental laws and regulations, the costs of compliance with such laws and regulations and the effects of changes to applicable laws and regulations, including tax laws and unanticipated liabilities, and the impact of any litigation; (xiv) Our ability to implement our remodeling, relocation and expansion plans, due to uncertainty in locating and acquiring attractive sites on acceptable terms, obtaining required permits and approvals, recruiting and training necessary personnel, obtaining adequate financing and estimating the performance of newly opened, remodeled or relocated restaurants, and our cost savings plans to enable reinvestment in our business, due to uncertainty with respect to macroeconomic conditions and the efficiency that may be added by the actions we take; (xv) Seasonal and periodic fluctuations in our results and the effects of significant adverse weather conditions and other disasters or unforeseen events; (xvi) The effects of our leverage and restrictive covenants in our various credit facilities on our ability to raise additional capital to fund our operations, to make capital expenditures to invest in new or renovate restaurants and to react to changes in the economy or our industry; (xvii) Any impairment in the carrying value of our goodwill or other intangible or long-lived assets and its effect on our financial condition and results of operations; and (xviii) Such other factors as discussed in Part I, Item IA. Risk Factors of our Annual Report on Form 10-K for the year ended December 25, 2022. Given these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments. Comparisons of results for current and any prior 22 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data. Overview We are one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. As of June 25, 2023, we owned and operated 1,187 full-service restaurants and off-premises only kitchens and franchised 298 full-service restaurants and off-premises only kitchens across 47 states, Guam and 13 countries. We have four founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Financial Overview - Our financial overview for the thirteen weeks ended June 25, 2023 includes the following: • U.S. combined and Outback Steakhouse comparable restaurant sales of 0.8% and 0.6%, respectively; • Increase in Total revenues of 2.4%, as compared to the second quarter of 2022; • Operating income and restaurant-level operating margins of 7.8% and 16.4%, respectively, as compared to 7.8% and 15.5%, respectively, for the second quarter of 2022; • Operating income of $89.4 million, as compared to $87.7 million in the second quarter of 2022; and • Diluted earnings per share of $0.70 as compared to diluted loss per share of $(0.72) for the second quarter of 2022. Key Financial Performance Indicators - Key measures that we use in evaluating our restaurants and assessing our business include the following: • Average restaurant unit volumes —average sales (excluding gift card breakage and the benefit of value added tax exemptions in Brazil) per restaurant to measure changes in customer traffic, pricing and development of the brand. • Comparable restaurant sales —year-over-year comparison of the change in sales volumes (excluding gift card breakage and the benefit of value added tax exemptions in Brazil) for Company-owned restaurants that are open 18 months or more in order to remove the impact of new restaurant openings in comparing the operations of existing restaurants. • System-wide sales —total restaurant sales volume for all Company-owned and franchise restaurants, regardless of ownership, to interpret the overall health of our brands. • Restaurant-level operating margin, Income from operations, Net income (loss) and Diluted earnings (loss) per share —financial measures utilized to evaluate our operating performance. Restaurant-level operating margin is a non-GAAP financial measure widely regarded in the industry as a useful metric to evaluate restaurant-level operating efficiency and performance of ongoing restaurant-level operations, and we use it for these purposes, overall and particularly within our two segments. Our restaurant-level operating margin is expressed as the percentage of our Restaurant sales that Food and beverage costs, Labor and other related expenses and Other restaurant operating expenses (including advertising expenses) represent, in each case as such items are reflected in our Consolidated Statements of Operations and Comprehensive Income (Loss). The following categories of revenue and operating expenses 23 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued are not included in restaurant-level operating margin because we do not consider them reflective of operating performance at the restaurant-level within a period: (i) Franchise and other revenues which are earned primarily from franchise royalties and other non-food and beverage revenue streams, such as rental and sublease income; (ii) Depreciation and amortization which, although substantially all of which is related to restaurant-level assets, represent historical sunk costs rather than cash outlays for the restaurants; (iii) General and administrative expense which includes primarily non-restaurant-level costs associated with support of the restaurants and other activities at our corporate offices; and (iv) Asset impairment charges and restaurant closing costs which are not reflective of ongoing restaurant performance in a period. Restaurant-level operating margin excludes various expenses, as discussed above, that are essential to support the operations of our restaurants and may materially impact our Consolidated Statements of Operations and Comprehensive Income (Loss). As a result, restaurant-level operating margin is not indicative of our consolidated results of operations and is presented exclusively as a supplement to, and not a substitute for, Net income (loss) or Income from operations. In addition, our presentation of restaurant-level operating margin may not be comparable to similarly titled measures used by other companies in our industry. • Adjusted restaurant-level operating margin, Adjusted income from operations, Adjusted net income and Adjusted diluted earnings per share —non-GAAP financial measures utilized to evaluate our operating performance. We believe that our use of these non-GAAP financial measures permits investors to assess the operating performance of our business relative to our performance based on U.S. GAAP results and relative to other companies within the restaurant industry by isolating the effects of certain items that may vary from period to period without correlation to core operating performance or that vary widely among similar companies. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. We believe that the disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and Board evaluate our operating performance, allocate resources and administer employee incentive plans. 24 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Selected Operating Data - The table below presents the number of our full-service restaurants in operation as of the periods indicated: Number of restaurants (at end of the period): JUNE 25, 2023 JUNE 26, 2022 U.S. Outback Steakhouse Company-owned 562 563 Franchised 127 130 Total 689 693 Carrabba’s Italian Grill Company-owned 199 198 Franchised 19 19 Total 218 217 Bonefish Grill Company-owned 170 174 Franchised 5 7 Total 175 181 Fleming’s Prime Steakhouse & Wine Bar Company-owned 64 64 Aussie Grill Company-owned 7 5 U.S. total 1,153 1,160 International Company-owned Outback Steakhouse - Brazil (1) 148 129 Other (1)(2) 36 33 Franchised Outback Steakhouse - South Korea 92 77 Other (2) 46 50 International total 322 289 System-wide total 1,475 1,449 System-wide total - Company-owned 1,186 1,166 System-wide total - Franchised 289 283 ____________________ (1) The restaurant counts for Brazil, including Abbraccio and Aussie Grill restaurants within International Company-owned Other, are reported as of May 31, 2023 and 2022, respectively, to correspond with the balance sheet dates of this subsidiary. (2) International Company-owned Other included four and two Aussie Grill locations as of June 25, 2023 and June 26, 2022, respectively. International Franchised Other included three Aussie Grill locations as of June 25, 2023 and June 26, 2022. The table below presents the number of our off-premises only kitchens in operation as of the periods indicated: Number of kitchens (at end of the period) (1): JUNE 25, 2023 JUNE 26, 2022 U.S. Company-owned 1 2 International Company-owned — 1 Franchised - South Korea 9 49 System-wide total 10 52 ____________________ (1) Excludes virtual concepts that operate out of existing restaurants and sports venue locations. 25 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Results of Operations The following table sets forth the percentages of certain items in our Consolidated Statements of Operations in relation to Restaurant sales or Total revenues for the periods indicated: THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 Revenues Restaurant sales 98.7 % 98.6 % 98.7 % 98.5 % Franchise and other revenues 1.3 1.4 1.3 1.5 Total revenues 100.0 100.0 100.0 100.0 Costs and expenses Food and beverage (1) 30.9 32.9 31.1 32.4 Labor and other related (1) 28.7 27.8 28.2 27.8 Other restaurant operating (1) 24.0 23.8 23.5 23.4 Depreciation and amortization 4.1 3.7 3.9 3.7 General and administrative 5.5 5.3 5.4 5.2 Provision for impaired assets and restaurant closings 0.2 * 0.2 0.1 Total costs and expenses 92.2 92.2 91.2 91.4 Income from operations 7.8 7.8 8.8 8.6 Loss on extinguishment and modification of debt — (9.6) — (4.7) Loss on fair value adjustment of derivatives, net — (1.6) — (0.8) Interest expense, net (1.2) (1.1) (1.1) (1.2) Income (loss) before provision for income taxes 6.6 (4.5) 7.7 1.9 Provision for income taxes 0.5 1.0 0.9 1.2 Net income (loss) 6.1 (5.5) 6.8 0.7 Less: net income attributable to noncontrolling interests 0.2 0.2 0.1 0.2 Net income (loss) attributable to Bloomin’ Brands 5.9 % (5.7) % 6.7 % 0.5 % ________________ (1) As a percentage of Restaurant sales. * Less than 1/10 th of one percent of Total revenues REVENUES Restaurant Sales - Following is a summary of the change in Restaurant sales for the periods indicated: (dollars in millions) THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED For the periods ended June 26, 2022 $ 1,108.9 $ 2,232.5 Change from: Restaurant openings (1) 18.0 37.6 Comparable restaurant sales (1) 11.9 87.2 Brazil value added tax exemptions (2) 9.6 19.2 Restaurant closures (1) (6.6) (12.0) Effect of foreign currency translation (4.5) 1.1 For the periods ended June 25, 2023 $ 1,137.3 $ 2,365.6 ________________ (1) Summation of quarterly changes for restaurant openings, closures and comparable restaurant sales will not total annual amounts as the restaurants that meet the definition of each will differ each period based on when the restaurant opened or closed. (2) See Note 12 - Income Taxes of the Notes to Consolidated Financial Statements for details regarding value added tax exemptions in connection with Brazil tax legislation. 26 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued The increase in Restaurant sales during the thirteen weeks ended June 25, 2023 was primarily due to: (i) the opening of 50 new restaurants not included in our comparable restaurant sales base, (ii) higher comparable restaurant sales, primarily driven by increases in menu pricing, and (iii) value added tax exemptions in Brazil. The increase was partially offset by the closure of 18 restaurants since March 27, 2022 and the effect of foreign currency translation of the Brazilian Real relative to the U.S. dollar. The increase in Restaurant sales during the twenty-six weeks ended June 25, 2023 was primarily due to: (i) higher comparable restaurant sales, primarily driven by increases in menu pricing, (ii) the opening of 55 new restaurants not included in our comparable restaurant sales base and (iii) value added tax exemptions in Brazil. The increase in Restaurant sales was partially offset by the closure of 24 restaurants since December 26, 2021. Average Restaurant Unit Volumes and Operating Weeks Following is a summary of the average restaurant unit volumes and operating weeks for the periods indicated: THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 Average restaurant unit volumes (weekly): U.S. Outback Steakhouse $ 78,321 $ 77,941 $ 81,421 $ 79,246 Carrabba’s Italian Grill $ 68,290 $ 66,016 $ 70,489 $ 66,954 Bonefish Grill $ 64,671 $ 64,113 $ 67,427 $ 65,193 Fleming’s Prime Steakhouse & Wine Bar $ 109,882 $ 112,900 $ 115,754 $ 115,141 International Outback Steakhouse - Brazil (1) $ 58,306 $ 61,210 $ 60,670 $ 57,645 Operating weeks: U.S. Outback Steakhouse 7,321 7,317 14,679 14,637 Carrabba’s Italian Grill 2,587 2,578 5,174 5,165 Bonefish Grill 2,218 2,269 4,466 4,554 Fleming’s Prime Steakhouse & Wine Bar 845 832 1,690 1,664 International Outback Steakhouse - Brazil 1,891 1,644 3,679 3,226 ____________________ (1) Translated at average exchange rates of 5.06 and 4.89 for the thirteen weeks ended June 25, 2023 and June 26, 2022, respectively, and 5.14 and 5.15 for the twenty-six weeks ended June 25, 2023 and June 26, 2022, respectively. Excludes the benefit of the Brazil value added tax exemptions discussed in Note 12 - Income Taxes of the Notes to Consolidated Financial Statements. 27 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Comparable Restaurant Sales, Traffic and Average Check Per Person Increases (Decreases) Following is a summary of comparable restaurant sales, traffic and average check per person increases (decreases) for the periods indicated: THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 Year over year percentage change: Comparable restaurant sales (restaurants open 18 months or more): U.S. (1) Outback Steakhouse 0.6 % (1.1) % 2.8 % 3.9 % Carrabba’s Italian Grill 3.5 % (1.0) % 5.1 % 5.0 % Bonefish Grill 0.5 % (1.1) % 3.4 % 9.2 % Fleming’s Prime Steakhouse & Wine Bar (2.5) % 6.0 % 0.4 % 23.1 % Combined U.S. 0.8 % (0.4) % 3.1 % 6.4 % International Outback Steakhouse - Brazil (2) 4.1 % 95.7 % 9.1 % 61.1 % Traffic: U.S. Outback Steakhouse (5.4) % (8.7) % (3.5) % (5.0) % Carrabba’s Italian Grill (0.8) % (7.5) % 0.5 % (2.5) % Bonefish Grill (4.4) % (8.6) % (2.0) % (1.0) % Fleming’s Prime Steakhouse & Wine Bar (2.3) % (2.9) % (1.1) % 11.1 % Combined U.S. (4.2) % (8.3) % (2.4) % (3.5) % International Outback Steakhouse - Brazil (4.0) % 57.8 % (0.9) % 42.0 % Average check per person (3): U.S. Outback Steakhouse 6.0 % 7.6 % 6.3 % 8.9 % Carrabba’s Italian Grill 4.3 % 6.5 % 4.6 % 7.5 % Bonefish Grill 4.9 % 7.5 % 5.4 % 10.2 % Fleming’s Prime Steakhouse & Wine Bar (0.2) % 8.9 % 1.5 % 12.0 % Combined U.S. 5.0 % 7.9 % 5.5 % 9.9 % International Outback Steakhouse - Brazil 8.5 % 37.3 % 10.0 % 19.2 % ____________________ (1) Relocated restaurants closed more than 60 days are excluded from comparable restaurant sales until at least 18 months after reopening. (2) Includes trading day impact from calendar period reporting. Excludes the effect of fluctuations in foreign currency rates and the benefit of the Brazil value added tax exemptions discussed in Note 12 - Income Taxes of the Notes to Consolidated Financial Statements. (3) Includes the impact of menu pricing changes, product mix and discounts. Franchise and other revenues THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in millions) JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 Franchise revenues $ 12.6 $ 12.6 $ 26.1 $ 26.0 Other revenues 2.8 3.6 5.8 7.2 Franchise and other revenues $ 15.4 $ 16.2 $ 31.9 $ 33.2 28 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued COSTS AND EXPENSES Food and beverage costs THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in millions) JUNE 25, 2023 JUNE 26, 2022 CHANGE JUNE 25, 2023 JUNE 26, 2022 CHANGE Food and beverage $ 351.2 $ 364.5 $ 735.4 $ 723.8 % of Restaurant sales 30.9 % 32.9 % (2.0) % 31.1 % 32.4 % (1.3) % Food and beverage costs decreased as a percentage of Restaurant sales during the thirteen weeks ended June 25, 2023 as compared to the thirteen weeks ended June 26, 2022 primarily due to 2.4% from increases in average check per person driven by an increase in menu pricing and 0.3% from the impact of certain cost saving initiatives. These decreases were partially offset by an increase as a percentage of Restaurant sales of 0.9% from commodity inflation. Food and beverage costs decreased as a percentage of Restaurant sales during the twenty-six weeks ended June 25, 2023 as compared to the twenty-six weeks ended June 26, 2022 primarily due to 2.3% from increases in average check per person driven by an increase in menu pricing and 0.3% from the impact of certain cost saving initiatives. These decreases were partially offset by an increase as a percentage of Restaurant sales of 1.5% from commodity inflation. Labor and other related expenses THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in millions) JUNE 25, 2023 JUNE 26, 2022 CHANGE JUNE 25, 2023 JUNE 26, 2022 CHANGE Labor and other related $ 325.9 $ 308.8 $ 667.5 $ 621.3 % of Restaurant sales 28.7 % 27.8 % 0.9 % 28.2 % 27.8 % 0.4 % Labor and other related expenses increased as a percentage of Restaurant sales during the thirteen weeks ended June 25, 2023 as compared to the thirteen weeks ended June 26, 2022 primarily due to an increase of 1.9% from higher hourly and field management labor costs, primarily due to wage rate inflation. This increase was partially offset by decreases as a percentage of Restaurant sales of 1.0% from leveraging increased comparable restaurant sales and 0.2% from the impact of certain cost saving initiatives. Labor and other related expenses increased as a percentage of Restaurant sales during the twenty-six weeks ended June 25, 2023 as compared to the twenty-six weeks ended June 26, 2022 primarily due to an increase of 1.7% from higher hourly and field management labor costs, primarily due to wage rate inflation. This increase was partially offset by decreases as a percentage of Restaurant sales of 1.2% from leveraging increased comparable restaurant sales and 0.2% from the impact of certain cost saving initiatives. Other restaurant operating expenses THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in millions) JUNE 25, 2023 JUNE 26, 2022 CHANGE JUNE 25, 2023 JUNE 26, 2022 CHANGE Other restaurant operating $ 273.3 $ 263.5 $ 556.3 $ 522.6 % of Restaurant sales 24.0 % 23.8 % 0.2 % 23.5 % 23.4 % 0.1 % Other restaurant operating expenses increased as a percentage of Restaurant sales during the thirteen weeks ended June 25, 2023 as compared to the thirteen weeks ended June 26, 2022 primarily due to 1.1% from higher operating expenses including utilities, primarily due to inflation, and 0.3% from higher advertising expense. These increases were offset by decreases as a percentage of Restaurant sales of 0.7% from leveraging increased comparable restaurant sales and 0.2% from the impact of certain cost saving initiatives. 29 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Other restaurant operating expenses increased as a percentage of Restaurant sales during the twenty-six weeks ended June 25, 2023 as compared to the twenty-six weeks ended June 26, 2022 primarily due to 1.3% from higher operating expenses including utilities, primarily due to inflation, and 0.3% from higher advertising expense. These increases were offset by decreases as a percentage of Restaurant sales of 1.1% from leveraging increased comparable restaurant sales and 0.2% from the impact of certain cost saving initiatives. Depreciation and amortization THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in millions) JUNE 25, 2023 JUNE 26, 2022 CHANGE JUNE 25, 2023 JUNE 26, 2022 CHANGE Depreciation and amortization $ 47.6 $ 41.3 $ 6.3 $ 93.9 $ 83.0 $ 10.9 Depreciation and amortization increased during the thirteen and twenty-six weeks ended June 25, 2023 as compared to the thirteen and twenty-six weeks ended June 26, 2022 primarily due to additional depreciation expense related to technology projects and restaurant development. General and administrative General and administrative expense includes salaries and benefits, management incentive programs, related payroll tax and benefits, other employee-related costs and professional services. Following is a summary of the change in General and administrative expense for the periods indicated: (dollars in millions) THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED For the periods ended June 26, 2022 $ 59.2 $ 117.9 Change from: Incentive compensation 2.2 3.7 Compensation, benefits and payroll tax 0.8 3.4 Travel and entertainment 0.5 1.7 Legal and professional fees 0.3 3.3 Other 0.4 (0.8) For the periods ended June 25, 2023 $ 63.4 $ 129.2 Income from operations THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in millions) JUNE 25, 2023 JUNE 26, 2022 CHANGE JUNE 25, 2023 JUNE 26, 2022 CHANGE Income from operations $ 89.4 $ 87.7 $ 1.7 $ 210.1 $ 195.0 $ 15.1 % of Total revenues 7.8 % 7.8 % — % 8.8 % 8.6 % 0.2 % The increase in Income from operations generated during the thirteen weeks ended June 25, 2023 as compared to the thirteen weeks ended June 26, 2022 was primarily due to: (i) leveraging increased comparable restaurant sales, (ii) the impact of certain cost saving initiatives and (iii) value added tax exemptions in Brazil. These increases were partially offset by: (i) higher labor costs, primarily due to wage rate inflation, (ii) higher operating expenses including utilities, primarily due to inflation, (iii) commodity inflation and (iv) higher depreciation and advertising expense. The increase in Income from operations generated during the twenty-six weeks ended June 25, 2023 as compared to the twenty-six weeks ended June 26, 2022 was primarily due to: (i) leveraging increased comparable restaurant sales, (ii) the impact of certain cost saving initiatives and (iii) value added tax exemptions in Brazil. These increases were partially offset by: (i) higher labor costs, primarily due to wage rate inflation, (ii) commodity inflation, (iii) 30 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued higher operating expenses including utilities, primarily due to inflation, and (iv) higher depreciation and advertising expense. Operating income margin d uring the thirteen and twenty-six weeks ended June 25, 2023 includes net increases of approximately 0.4% and 0.3%, respectively, attributable to exemptions from Brazil federal value added taxes (PIS and COFINS) provided by Brazil tax legislation. See Note 12 - Income Taxes of the Notes to Consolidated Financial Statements for further discussion regarding Brazil tax legislation. Loss on extinguishment and modification of debt and Loss on fair value adjustment of derivatives, net In connection with the partial repurchase of our 2025 Notes, we 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 during the thirteen weeks ended June 26, 2022. Provision for income taxes THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in millions) JUNE 25, 2023 JUNE 26, 2022 CHANGE JUNE 25, 2023 JUNE 26, 2022 CHANGE Income (loss) before provision for income taxes $ 76.5 $ (50.1) $ 126.6 $ 184.7 $ 43.5 $ 141.2 Provision for income taxes $ 6.5 $ 11.5 $ (5.0) $ 21.2 $ 27.5 $ (6.3) Effective income tax rate 8.5 % (23.0) % 31.5 % 11.5 % 63.2 % (51.7) % The effective income tax rate for the thirteen weeks ended June 25, 2023 changed by 31.5 percentage points as compared to the thirteen weeks ended June 26, 2022. This change is primarily due to the non-deductible losses associated with the 2025 Notes Partial Repurchase which, relative to the Loss before provision for income taxes during the thirteen weeks ended June 26, 2022, resulted in a negative effective income tax rate. This change was partially offset by a reduction in the effective income tax rate during the thirteen weeks ended June 25, 2023 from benefits of Brazil tax legislation that include a temporary reduction in the Brazilian income tax rate from 34% to 0% and the revaluation of Brazilian deferred tax assets and liabilities as a result of the May 2023 Brazil tax legislation. The effective income tax rate for the twenty-six weeks ended June 25, 2023 decreased by 51.7 percentage points as compared to the twenty-six weeks ended June 26, 2022. The decrease was primarily due to the benefits of Brazil tax legislation that include a temporary reduction in the Brazilian inc ome tax rate from 34% to 0% for the twenty-six weeks ended June 25, 2023, and the non-deductible losses associated with the 2025 Notes Partial Repurchase recorded during the twenty-six weeks ended June 26, 2022. See Note 12 - Income Taxes of the Notes to Consolidated Financial Statements for further discussion regarding Brazil tax legislation. 31 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued SEGMENT PERFORMANCE 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. Revenues for both 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. Refer to Note 14 - Segment Reporting of the Notes to Consolidated Financial Statements for reconciliations of segment income from operations to the consolidated operating results. Restaurant-level operating margin is widely regarded in the industry as a useful non-GAAP measure to evaluate restaurant-level operating efficiency and performance of ongoing restaurant-level operations, and we use it for these purposes, overall and particularly within our two segments. See the Overview-Key Financial Performance Indicators and Non-GAAP Financial Measures sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional details regarding the calculation of restaurant-level operating margin. U.S. Segment THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in thousands) JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 Revenues Restaurant sales $ 993,438 $ 985,927 $ 2,074,007 $ 2,009,562 Franchise and other revenues 11,791 12,700 24,218 25,472 Total revenues $ 1,005,229 $ 998,627 $ 2,098,225 $ 2,035,034 Income from operations $ 103,008 $ 104,620 $ 236,251 $ 236,846 Operating income margin 10.2 % 10.5 % 11.3 % 11.6 % Restaurant-level operating income $ 154,856 $ 149,304 $ 342,664 $ 327,019 Restaurant-level operating margin 15.6 % 15.1 % 16.5 % 16.3 % 32 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Restaurant sales - Following is a summary of the change in U.S. segment Restaurant sales for the periods indicated: (dollars in millions) THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (1) For the periods ended June 26, 2022 $ 985.9 $ 2,009.6 Change from: Restaurant openings 8.1 19.4 Comparable restaurant sales 6.0 57.0 Restaurant closures (6.6) (12.0) For the periods ended June 25, 2023 $ 993.4 $ 2,074.0 ________________ (1) Summation of quarterly changes will not total to annual amounts as the restaurants that meet the definition of each change category will differ each period based on when the restaurant opened or closed. The increase in U.S. Restaurant sales during the thirteen weeks ended June 25, 2023 was primarily due to the opening of 15 new restaurants not included in our comparable restaurant sales base and higher comparable restaurant sales, primarily driven by increases in menu pricing. The increase was partially offset by the closure of 17 restaurants since March 27, 2022. The increase in U.S. Restaurant sales during the twenty-six weeks ended June 25, 2023 was primarily due to higher comparable restaurant sales, primarily driven by increases in menu pricing, and the opening of 17 new restaurants not included in our comparable restaurant sales base. The increase in Restaurant sales was partially offset by the closure of 23 restaurants since December 26, 2021. Income from operations U.S. Income from operations generated during the thirteen weeks ended June 25, 2023 as compared to the thirteen weeks ended June 26, 2022 decreased slightly primarily due to: (i) higher labor costs, primarily due to wage rate inflation, (ii) higher operating expenses including utilities, primarily due to inflation, (iii) commodity inflation and (iv) higher depreciation and advertising expense. These decreases were partially offset by: (i) an increase in comparable restaurant sales and (ii) the impact of certain cost saving initiatives. U.S. Income from operations generated during the twenty-six weeks ended June 25, 2023 as compared to the twenty-six weeks ended June 26, 2022 was flat primarily due to: (i) higher labor costs, primarily due to wage rate inflation, (ii) commodity inflation, (iii) higher operating expenses including utilities, primarily due to inflation, and (iv) higher depreciation and advertising expense. These decreases were partially offset by: (i) an increase in comparable restaurant sales and (ii) the impact of certain cost saving initiatives. International Segment THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in thousands) JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 Revenues Restaurant sales $ 143,892 $ 122,991 $ 291,557 $ 222,931 Franchise and other revenues 3,573 3,544 7,658 7,732 Total revenues $ 147,465 $ 126,535 $ 299,215 $ 230,663 Income from operations $ 20,486 $ 14,126 $ 44,994 $ 23,010 Operating income margin 13.9 % 11.2 % 15.0 % 10.0 % Restaurant-level operating income $ 29,673 $ 21,933 $ 63,688 $ 38,868 Restaurant-level operating margin 20.6 % 17.8 % 21.8 % 17.4 % 33 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Restaurant sales - Following is a summary of the change in international segment Restaurant sales for the periods indicated: (dollars in millions) THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED For the periods ended June 26, 2022 $ 123.0 $ 222.9 Change from: Restaurant openings (1) 9.9 18.2 Brazil value added tax exemptions (2) 9.6 19.2 Comparable restaurant sales (1) 5.9 30.2 Effect of foreign currency translation (4.5) 1.1 For the periods ended June 25, 2023 $ 143.9 $ 291.6 ________________ (1) Summation of quarterly changes for restaurant openings and comparable restaurant sales will not total to annual amounts as the restaurants that meet the definition of each will differ each period based on when the restaurant opened. (2) See Note 12 - Income Taxes of the Notes to Consolidated Financial Statements for details regarding value added tax exemptions in connection with Brazil tax legislation. The increase in international Restaurant sales during the thirteen weeks ended June 25, 2023 was primarily due to: (i) the opening of 35 new restaurants not included in our comparable restaurant sales base, (ii) value added tax exemptions in Brazil and (iii) higher comparable restaurant sales in Brazil and Hong Kong. The increase was partially offset by the effect of foreign currency translation of the Brazilian Real relative to the U.S. dollar. The increase in international Restaurant sales during the twenty-six weeks ended June 25, 2023 was primarily due to: (i) higher comparable restaurant sales in Brazil and Hong Kong, primarily driven by the lapping of Q1 2022 COVID-19 related capacity restrictions, (ii) value added tax exemptions in Brazil and (iii) the opening of 38 new restaurants not included in our comparable restaurant sales base. Income from operations The increase in international Income from operations generated during the thirteen weeks ended June 25, 2023 as compared to the thirteen weeks ended June 26, 2022 was primarily due to: (i) an increase in restaurant sales, primarily driven by increases in menu pricing, and (ii) value added tax exemptions in Brazil. These increases were partially offset by decreases primarily due to: (i) higher operating costs, (ii) higher labor costs, primarily due to wage rate inflation, (iii) commodity inflation and (iv) higher advertising expense. The increase in international Income from operations generated during the twenty-six weeks ended June 25, 2023 as compared to the twenty-six weeks ended June 26, 2022 was primarily due to: (i) an increase in restaurant sales, primarily driven by the recovery of in-restaurant dining and increases in menu pricing, and (ii) value added tax exemptions in Brazil. These increases were partially offset by decreases primarily due to: (i) higher operating costs, (ii) higher labor costs, primarily due to wage rate inflation, (iii) commodity inflation and (iv) higher a dvertising expense. 34 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Non-GAAP Financial Measures Consolidated restaurant-level operating income and corresponding margin non-GAAP reconciliations - The following table reconciles consolidated Income from operations and the corresponding margin to restaurant-level operating income and the corresponding margin for the periods indicated: Consolidated THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in thousands) JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 Income from operations $ 89,446 $ 87,719 $ 210,079 $ 194,975 Operating income margin 7.8 % 7.8 % 8.8 % 8.6 % Less: Franchise and other revenues 15,364 16,244 31,876 33,204 Plus: Depreciation and amortization 47,565 41,257 93,867 83,032 General and administrative 63,358 59,246 129,162 117,920 Provision for impaired assets and restaurant closings 1,827 193 5,151 2,032 Restaurant-level operating income $ 186,832 $ 172,171 $ 406,383 $ 364,755 Restaurant-level operating margin 16.4 % 15.5 % 17.2 % 16.3 % Segment restaurant-level and operating margin non-GAAP reconciliations - The following tables reconcile segment Income from operations and the corresponding margin to segment restaurant-level operating income and the corresponding margin for the periods indicated: U.S. THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in thousands) JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 Income from operations $ 103,008 $ 104,620 $ 236,251 $ 236,846 Operating income margin 10.2 % 10.5 % 11.3 % 11.6 % Less: Franchise and other revenues 11,791 12,700 24,218 25,472 Plus: Depreciation and amortization 39,376 33,545 77,539 68,303 General and administrative 22,436 23,648 47,941 47,093 Provision for impaired assets and restaurant closings 1,827 191 5,151 249 Restaurant-level operating income $ 154,856 $ 149,304 $ 342,664 $ 327,019 Restaurant-level operating margin 15.6 % 15.1 % 16.5 % 16.3 % International THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in thousands) JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 Income from operations $ 20,486 $ 14,126 $ 44,994 $ 23,010 Operating income margin 13.9 % 11.2 % 15.0 % 10.0 % Less: Franchise and other revenues 3,573 3,544 7,658 7,732 Plus: Depreciation and amortization 6,125 6,020 12,044 11,556 General and administrative 6,635 5,331 14,308 10,259 Provision for impaired assets and restaurant closings — — — 1,775 Restaurant-level operating income $ 29,673 $ 21,933 $ 63,688 $ 38,868 Restaurant-level operating margin 20.6 % 17.8 % 21.8 % 17.4 % 35 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Restaurant-level operating margin non-GAAP reconciliations (continued) - The following tables present the percentages of certain operating cost financial statement line items in relation to Restaurant sales for the periods indicated: THIRTEEN WEEKS ENDED JUNE 25, 2023 JUNE 26, 2022 Restaurant sales 100.0 % 100.0 % Food and beverage 30.9 % 32.9 % Labor and other related 28.7 % 27.8 % Other restaurant operating 24.0 % 23.8 % Restaurant-level operating margin 16.4 % 15.5 % TWENTY-SIX WEEKS ENDED JUNE 25, 2023 JUNE 26, 2022 Restaurant sales 100.0 % 100.0 % Food and beverage 31.1 % 32.4 % Labor and other related 28.2 % 27.8 % Other restaurant operating 23.5 % 23.4 % Restaurant-level operating margin 17.2 % 16.3 % Adjusted net income and adjusted diluted earnings per share non-GAAP reconciliations - The following table reconciles Net income (loss) attributable to Bloomin’ Brands to adjusted diluted earnings per share for the periods indicated: THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (in thousands, except share and per share data) JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 Net income (loss) attributable to Bloomin’ Brands $ 68,277 $ (63,635) $ 159,588 $ 11,876 Adjustments: Loss on extinguishment and modification of debt (1) — 107,630 — 107,630 Loss on fair value adjustment of derivatives, net (1) — 17,685 — 17,685 Total adjustments, before income taxes — 125,315 — 125,315 Adjustment to provision for income taxes (2) — 1,322 — 1,322 Net adjustments — 126,637 — 126,637 Adjusted net income $ 68,277 $ 63,002 $ 159,588 $ 138,513 Diluted earnings (loss) per share (3) $ 0.70 $ (0.72) $ 1.63 $ 0.12 Adjusted diluted earnings per share (4) $ 0.74 $ 0.68 $ 1.72 $ 1.48 Diluted weighted average common shares outstanding (3) 97,401 88,898 97,706 102,045 Adjusted diluted weighted average common shares outstanding (4) 92,399 92,863 92,789 93,792 _________________ (1) For 2022, includes losses primarily in connection with the 2025 Notes Partial Repurchase, including settlements of the related convertible senior note hedges and warrants. (2) The tax effects of non-GAAP adjustments were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates. For 2022, the primary difference between GAAP and adjusted effective income tax rates relates to certain non-deductible losses and other tax costs associated with the 2025 Notes Partial Repurchase. 36 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued (3) Due to the GAAP net loss, the effect of dilutive securities was excluded from the calculation of GAAP diluted loss per share for the thirteen weeks ended June 26, 2022 as their effect would be antidilutive. (4) Adjusted diluted weighted average common shares outstanding was calculated excluding the dilutive effect of 5,002 and 7,774 shares for the thirteen weeks ended June 25, 2023 and June 26, 2022, respectively, and 4,917 and 8,253 shares for the twenty-six weeks ended June 25, 2023 and June 26, 2022, respectively, to be issued upon conversion of the 2025 Notes to satisfy the amount in excess of the principal since our convertible note hedge offsets the dilutive impact of the shares underlying the 2025 Notes. For adjusted diluted earnings per share, the calculation includes 3,965 dilutive shares for the thirteen weeks ended June 26, 2022, primarily related to outstanding warrants. These shares were excluded from the calculation of GAAP diluted loss per share during the period as their effect would be antidilutive. System-Wide Sales - System-wide sales is a non-GAAP financial measure that includes sales of all restaurants operating under our brand names, whether we own them or not. Management uses this information to make decisions about future plans for the development of additional restaurants and new concepts, as well as evaluation of current operations. System-wide sales comprise sales of Company-owned and franchised restaurants. For a summary of sales of Company-owned restaurants, refer to Note 2 - Revenue Recognition of the Notes to Consolidated Financial Statements. The following table provides a summary of sales of franchised restaurants for the periods indicated, which are not included in our consolidated financial results. Franchise sales within this table do not represent our sales and are presented only as an indicator of changes in the restaurant system, which management believes is important information regarding the health of our restaurant concepts and in determining our royalties and/or service fees. THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED (dollars in millions) JUNE 25, 2023 JUNE 26, 2022 JUNE 25, 2023 JUNE 26, 2022 U.S. Outback Steakhouse $ 131 $ 129 $ 267 $ 258 Carrabba’s Italian Grill 12 13 25 25 Bonefish Grill 2 3 5 6 U.S. total 145 145 297 289 International Outback Steakhouse - South Korea 76 65 170 143 Other (1) 25 28 52 62 International total 101 93 222 205 Total franchise sales (2) $ 246 $ 238 $ 519 $ 494 _____________________ (1) Includes franchise sales for off-premises only kitchens in South Korea. (2) Franchise sales are not included in Total revenues in the Consolidated Statements of Operations and Comprehensive Income (Loss). Liquidity and Capital Resources Cash and Cash Equivalents As of June 25, 2023, we had $88.8 million in cash and cash equivalents, of which $34.3 million was held by foreign affiliates. The international jurisdictions in which we have significant cash do not have any known restrictions that would prohibit repatriation. As of June 25, 2023, we had aggregate undistributed foreign earnings of approximately $40.5 million. This amount consisted primarily of historical earnings from 2017 and prior that were previously taxed in the U.S. under the 2017 Tax Cuts and Jobs Act and post-2017 foreign earnings, which we may repatriate to the U.S. without additional material U.S. federal income tax. These amounts are not considered indefinitely reinvested in our foreign subsidiaries. 37 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Borrowing Capacity and Debt Service Credit Facilities - Following is a summary of our outstanding credit facilities as of the dates indicated and principal payments and debt issuance during the period indicated: SENIOR SECURED CREDIT FACILITY TOTAL CREDIT FACILITIES (dollars in thousands) REVOLVING CREDIT FACILITY 2025 NOTES 2029 NOTES Balance as of December 25, 2022 $ 430,000 $ 105,000 $ 300,000 $ 835,000 2023 new debt 448,000 — — 448,000 2023 payments (513,000) (214) — (513,214) Balance as of June 25, 2023 $ 365,000 $ 104,786 $ 300,000 $ 769,786 Interest rates, as of June 25, 2023 (1) 6.77 % 5.00 % 5.13 % Principal maturity date April 2026 May 2025 April 2029 ____________________ (1) Interest rate for revolving credit facility represents the weighted average interest rate as of June 25, 2023. As of June 25, 2023, we had $615.2 million in available unused borrowing capacity under our revolving credit facility, net of letters of credit of $19.8 million. Our credit agreement, as amended, contains various financial and non-financial covenants. A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the revolving credit facility and cause an acceleration of the amounts due under the credit facilities. See Note 13 - Long-term Debt, Net in our Annual Report on Form 10-K for the year ended December 25, 2022 for further information. As of June 25, 2023 and December 25, 2022, we were in compliance with our debt covenants. We believe that we will remain in compliance with our debt covenants during the next 12 months and beyond. Use of Cash Cash flows generated from operating activities and availability under our revolving credit facility are our principal sources of liquidity, which we use for operating expenses, remodeling or relocating older restaurants, development of new restaurants, investment in technology, debt payments, dividend payments and share repurchases. We believe that our expected liquidity sources are adequate to fund debt service requirements, lease obligations, capital expenditures and working capital obligations during the 12 months following this filing. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow and our ability to manage costs and working capital successfully. Capital Expenditures - We estimate that our capital expenditures will total approximately $240 million to $260 million in 2023. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things, including raw material constraints. Dividends and Share Repurchases - In July 2023, our Board declared a quarterly cash dividend of $0.24 per share, payable on August 25, 2023. Future dividend payments are dependent on our earnings, financial condition, capital expenditure requirements, surplus and other factors that our Board considers relevant, as well as continued compliance with the financial covenants in our debt agreements. 38 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued On February 7, 2023, our Board approved the 2023 Share Repurchase Program under which we are authorized to repurchase up to $125.0 million of our outstanding common stock. The 2023 Share Repurchase Program will expire on August 7, 2024. As of June 25, 2023, we had $103.8 million remaining available for repurchase under the 2023 Share Repurchase Program. Following is a summary of dividends and share repurchases from fiscal year 2022 through June 25, 2023: (dollars in thousands) DIVIDENDS PAID SHARE REPURCHASES TOTAL Fiscal year 2022 $ 49,736 $ 109,999 $ 159,735 First fiscal quarter 2023 21,014 20,645 41,659 Second fiscal quarter 2023 20,990 15,539 36,529 Total (1) $ 91,740 $ 146,183 $ 237,923 ________________ (1) Subsequent to June 25, 2023, we repurchased $7.3 million of our common stock under a Rule 10b5-1 plan. Summary of Cash Flows and Financial Condition Cash Flows - The following table presents a summary of our cash flows provided by (used in) operating, investing and financing activities for the periods indicated: TWENTY-SIX WEEKS ENDED (dollars in thousands) JUNE 25, 2023 JUNE 26, 2022 Net cash provided by operating activities $ 287,293 $ 218,818 Net cash used in investing activities (140,651) (75,738) Net cash used in financing activities (143,214) (140,922) Effect of exchange rate changes on cash and cash equivalents 631 4,232 Net increase in cash, cash equivalents and restricted cash $ 4,059 $ 6,390 Operating activities - The increase in net cash provided by operating activities during the twenty-six weeks ended June 25, 2023 as compared to the twenty-six weeks ended June 26, 2022 was primarily due to: (i) higher operational receipts, net of payments, (ii) lower inventory purchases and (iii) decreased employee compensation payments. Investing activities - The increase in net cash used in investing activities during the twenty-six weeks ended June 25, 2023 as compared to the twenty-six weeks ended June 26, 2022 was primarily due to higher capital expenditures. Financing activities - The increase in net cash used in financing activities during the twenty-six weeks ended June 25, 2023 as compared to the twenty-six weeks ended June 26, 2022 was primarily due to higher payments of cash dividends on our common stock and higher net repayments on the revolving credit facility, independent of draws used to settle certain outstanding debt obligations discussed below. These increases were partially offset by: (i) a decrease in repurchases of common stock, (ii) partner equity plan payments during 2022 and (iii) lower payments for the purchase of noncontrolling interests. The twenty-six weeks ended June 26, 2022 also included the 2025 Notes Partial Repurchase and the repayment of our Term loan A which were funded by draws on our revolving credit facility and proceeds from the 2025 Notes hedge transactions. 39 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Financial Condition - Following is a summary of our current assets, current liabilities and working capital (deficit) as of the periods indicated: (dollars in thousands) JUNE 25, 2023 DECEMBER 25, 2022 Current assets $ 247,891 $ 346,577 Current liabilities 911,606 978,867 Working capital (deficit) $ (663,715) $ (632,290) Working capital (deficit) includes: (i) Unearned revenue primarily from unredeemed gift cards of $312.6 million and $394.2 million as of June 25, 2023 and December 25, 2022, respectively, and (ii) current operating lease liabilities of $185.4 million and $183.5 million as of June 25, 2023 and December 25, 2022, respectively, with the corresponding operating right-of-use assets recorded as non-current on our Consolidated Balance Sheets. We have, and in the future may continue to have, negative working capital balances (as is common for many restaurant companies). We operate successfully with negative working capital because cash collected on restaurant sales is typically received before payment is due on our current liabilities, and our inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flows from restaurant operations and gift card sales are typically used to service debt obligations and to make capital expenditures. Recently Issued Financial Accounting Standards For a description of recently issued Financial Accounting Standards that we adopted during the thirteen weeks ended June 25, 2023 and, that are applicable to us and likely to have material effect on our consolidated financial statements, but have not yet been adopted, see Note 1 - Description of the Business and Basis of Presentation of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q. 40 Table of Contents BLOOMIN’ BRANDS, INC.