Bloomin' Brands, Inc. 10-Q

Item 1. Financial Statements CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) SEPTEMBER 29, 2024 DECEMBER 31, 2023 (UNAUDITED) ASSETS Current assets Cash and cash equivalents $ 83,632 $ 111,519 Restricted cash and cash equivalents — 2,854 Inventories 71,949 75,939 Other current assets, net 105,477 153,002 Total current assets 261,058 343,314 Property, fixtures and equipment, net 1,069,447 1,031,922 Operating lease right-of-use assets 1,081,498 1,084,951 Goodwill 268,594 276,317 Intangible assets, net 437,602 442,985 Deferred income tax assets, net 177,798 159,405 Other assets, net 137,612 85,187 Total assets $ 3,433,609 $ 3,424,081 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 168,293 $ 189,202 Current operating lease liabilities 169,407 175,442 Accrued and other current liabilities 217,773 255,814 Unearned revenue 293,497 381,877 Total current liabilities 848,970 1,002,335 Non-current operating lease liabilities 1,141,936 1,131,639 Long-term debt, net 1,092,189 780,719 Other long-term liabilities, net 105,543 97,385 Total liabilities 3,188,638 3,012,078 Commitments and contingencies (Note 13) Stockholders’ equity Bloomin’ Brands stockholders’ equity Preferred stock, $ 0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of September 29, 2024 and December 31, 2023 — — Common stock, $ 0.01 par value, 475,000,000 shares authorized; 84,830,409 and 86,968,536 shares issued and outstanding as of September 29, 2024 and December 31, 2023, respectively 848 870 Additional paid-in capital 1,291,576 1,115,387 Accumulated deficit ( 846,376 ) ( 528,831 ) Accumulated other comprehensive loss ( 203,929 ) ( 178,304 ) Total Bloomin’ Brands stockholders’ equity 242,119 409,122 Noncontrolling interests 2,852 2,881 Total stockholders’ equity 244,971 412,003 Total liabilities and stockholders’ equity $ 3,433,609 $ 3,424,081 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 (LOSS) INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED) THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Revenues Restaurant sales $ 1,025,090 $ 1,064,413 $ 3,308,142 $ 3,429,977 Franchise and other revenues 13,681 15,420 44,822 47,296 Total revenues 1,038,771 1,079,833 3,352,964 3,477,273 Costs and expenses Food and beverage 304,285 321,865 998,177 1,057,305 Labor and other related 312,968 314,432 985,083 981,908 Other restaurant operating 280,018 281,084 851,111 837,349 Depreciation and amortization 50,208 47,998 149,015 141,865 General and administrative 68,485 62,246 196,413 191,408 Provision for impaired assets and restaurant closings 5,597 ( 6,008 ) 32,731 ( 857 ) Total costs and expenses 1,021,561 1,021,617 3,212,530 3,208,978 Income from operations 17,210 58,216 140,434 268,295 Loss on extinguishment of debt ( 225 ) — ( 136,022 ) — Interest expense, net ( 15,953 ) ( 12,843 ) ( 44,371 ) ( 38,248 ) Income (loss) before (benefit) provision for income taxes 1,032 45,373 ( 39,959 ) 230,047 (Benefit) provision for income taxes ( 6,509 ) ( 58 ) 5,159 21,186 Net income (loss) 7,541 45,431 ( 45,118 ) 208,861 Less: net income attributable to noncontrolling interests 629 903 3,439 4,745 Net income (loss) attributable to Bloomin’ Brands $ 6,912 $ 44,528 $ ( 48,557 ) $ 204,116 Net income (loss) $ 7,541 $ 45,431 $ ( 45,118 ) $ 208,861 Other comprehensive (loss) income: Foreign currency translation adjustment ( 11,849 ) 3,103 ( 23,638 ) 6,471 Net loss on derivatives, net of tax ( 3,474 ) — ( 1,987 ) — Comprehensive (loss) income ( 7,782 ) 48,534 ( 70,743 ) 215,332 Less: comprehensive income attributable to noncontrolling interests 629 903 3,439 4,745 Comprehensive (loss) income attributable to Bloomin’ Brands $ ( 8,411 ) $ 47,631 $ ( 74,182 ) $ 210,587 Earnings (loss) per share: Basic $ 0.08 $ 0.50 $ ( 0.56 ) $ 2.30 Diluted $ 0.08 $ 0.45 $ ( 0.56 ) $ 2.08 Weighted average common shares outstanding: Basic 85,063 88,707 86,258 88,794 Diluted 86,164 98,548 86,258 97,987 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, June 30, 2024 85,776 $ 858 $ 1,309,482 $ ( 834,926 ) $ ( 188,606 ) $ 2,885 $ 289,693 Net income — — — 6,912 — 629 7,541 Other comprehensive loss, net of tax — — — — ( 15,323 ) — ( 15,323 ) Cash dividends declared, $ 0.24 per common share — — ( 20,375 ) — — — ( 20,375 ) Repurchase and retirement of common stock, including excise tax of $ 177 ( 969 ) ( 10 ) — ( 18,362 ) — — ( 18,372 ) Stock-based compensation — — 2,360 — — — 2,360 Common stock issued under stock plans (1) 23 — 109 — — — 109 Distributions to noncontrolling interests — — — — — ( 1,082 ) ( 1,082 ) Contributions from noncontrolling interests — — — — — 420 420 Balance, September 29, 2024 84,830 $ 848 $ 1,291,576 $ ( 846,376 ) $ ( 203,929 ) $ 2,852 $ 244,971 Balance, December 31, 2023 86,969 $ 870 $ 1,115,387 $ ( 528,831 ) $ ( 178,304 ) $ 2,881 $ 412,003 Net (loss) income — — — ( 48,557 ) — 3,439 ( 45,118 ) Other comprehensive loss, net of tax — — — — ( 25,625 ) — ( 25,625 ) Cash dividends declared, $ 0.72 per common share — — ( 62,212 ) — — — ( 62,212 ) Repurchase and retirement of common stock, including excise tax of $ 328 ( 10,073 ) ( 100 ) ( 5,681 ) ( 260,645 ) — — ( 266,426 ) Stock-based compensation — — 5,291 — — — 5,291 Common stock issued under stock plans (1) 734 7 ( 1,617 ) — — — ( 1,610 ) Distributions to noncontrolling interests — — — — — ( 4,556 ) ( 4,556 ) Contributions from noncontrolling interests — — — — — 1,088 1,088 Issuance of common stock from repurchase of convertible senior notes 7,489 74 216,078 — — — 216,152 Retirement of convertible senior note hedges ( 289 ) ( 3 ) 126,543 ( 8,343 ) — — 118,197 Retirement of warrants — — ( 102,213 ) — — — ( 102,213 ) Balance, September 29, 2024 84,830 $ 848 $ 1,291,576 $ ( 846,376 ) $ ( 203,929 ) $ 2,852 $ 244,971 (CONTINUED...) 5 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, June 25, 2023 87,339 $ 873 $ 1,132,732 $ ( 582,738 ) $ ( 181,943 ) $ 2,944 $ 371,868 Net income — — — 44,528 — 903 45,431 Other comprehensive income — — — — 3,103 — 3,103 Cash dividends declared, $ 0.24 per common share — — ( 20,901 ) — — — ( 20,901 ) Repurchase and retirement of common stock, including excise tax of $ 45 ( 590 ) ( 6 ) — ( 15,995 ) — — ( 16,001 ) Stock-based compensation — — 4,411 — — — 4,411 Common stock issued under stock plans (1) 422 5 9,080 — — — 9,085 Distributions to noncontrolling interests — — — — — ( 1,306 ) ( 1,306 ) Contributions from noncontrolling interests — — — — — 229 229 Balance, September 24, 2023 87,171 $ 872 $ 1,125,322 $ ( 554,205 ) $ ( 178,840 ) $ 2,770 $ 395,919 Balance, December 25, 2022 87,696 $ 877 $ 1,161,912 $ ( 706,109 ) $ ( 185,311 ) $ 2,540 $ 273,909 Net income — — — 204,116 — 4,745 208,861 Other comprehensive income — — — — 6,471 — 6,471 Cash dividends declared, $ 0.72 per common share — — ( 62,905 ) — — — ( 62,905 ) Repurchase and retirement of common stock, including excise tax of $ 93 ( 2,072 ) ( 21 ) — ( 52,212 ) — — ( 52,233 ) Stock-based compensation — — 12,453 — — — 12,453 Common stock issued under stock plans (1) 1,547 16 13,862 — — — 13,878 Distributions to noncontrolling interests — — — — — ( 5,946 ) ( 5,946 ) Contributions from noncontrolling interests — — — — — 1,431 1,431 Balance, September 24, 2023 87,171 $ 872 $ 1,125,322 $ ( 554,205 ) $ ( 178,840 ) $ 2,770 $ 395,919 ________________ (1) Net of shares withheld for employee taxes. The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 Table of Contents BLOOMIN’ BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS, UNAUDITED) THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Cash flows provided by operating activities: Net (loss) income $ ( 45,118 ) $ 208,861 Adjustments to reconcile Net (loss) income to cash provided by operating activities: Depreciation and amortization 149,015 141,865 Amortization of debt discounts and issuance costs 1,993 2,305 Amortization of deferred gift card sales commissions 17,155 17,891 Provision for impaired assets and restaurant closings 32,731 ( 857 ) Non-cash operating lease costs 64,729 64,845 Stock-based compensation expense 5,291 12,453 Deferred income tax benefit ( 18,166 ) ( 3,610 ) Loss on extinguishment of debt 136,022 — Other, net ( 3,653 ) ( 3,067 ) Change in assets and liabilities ( 231,617 ) ( 67,133 ) Net cash provided by operating activities 108,382 373,553 Cash flows used in investing activities: Capital expenditures ( 198,668 ) ( 227,086 ) Other investments, net 2,192 1,551 Net cash used in investing activities ( 196,476 ) ( 225,535 ) Cash flows provided by (used in) financing activities: Proceeds from borrowings on revolving credit facilities 2,040,000 728,000 Repayments of borrowings on revolving credit facilities ( 1,646,000 ) ( 768,000 ) Financing fees ( 6,945 ) — Repayments of finance lease obligations ( 2,060 ) ( 1,302 ) Principal settlements and repurchase of convertible senior notes ( 2,335 ) ( 214 ) Proceeds from retirement of convertible senior note hedges 118,197 — Payments for retirement of warrants ( 102,213 ) — (Payment of taxes) proceeds from share-based compensation, net ( 1,610 ) 13,878 Distributions to noncontrolling interests ( 4,556 ) ( 5,946 ) Contributions from noncontrolling interests 1,088 1,431 Purchase of noncontrolling interests ( 100 ) ( 100 ) Repurchase of common stock ( 265,695 ) ( 52,347 ) Cash dividends paid on common stock ( 62,212 ) ( 62,905 ) Net cash provided by (used in) financing activities 65,559 ( 147,505 ) Effect of exchange rate changes on cash and cash equivalents ( 8,206 ) 1,331 Net (decrease) increase in cash, cash equivalents and restricted cash ( 30,741 ) 1,844 Cash, cash equivalents and restricted cash as of the beginning of the period 114,373 84,735 Cash, cash equivalents and restricted cash as of the end of the period $ 83,632 $ 86,579 Supplemental disclosures of cash flow information: Cash paid for interest $ 41,914 $ 30,486 Cash paid for income taxes, net of refunds $ 19,509 $ 22,244 Supplemental disclosures of non-cash investing and financing activities: Leased assets obtained in exchange for new operating lease liabilities $ 79,758 $ 70,305 Leased assets obtained in exchange for new finance lease liabilities $ 1,163 $ 5,435 Increase in liabilities from the acquisition of property, fixtures and equipment $ 2,662 $ 15,486 Shares issued on settlement of convertible senior notes $ 216,152 $ — Shares received and retired on exercise of call option under bond hedge upon settlement of convertible senior notes $ ( 8,346 ) $ — Financing fees in accrued liabilities $ 2,040 $ — The accompanying notes are an integral part of these unaudited consolidated financial statements. 7 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. OSI Restaurant Partners, LLC (“OSI”) is the Company’s primary operating entity. The Company’s restaurant portfolio includes 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 (“SEC”). 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 31, 2023. Recently Issued Financial Accounting Standards Not Yet Adopted - In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” (“ASU No. 2023-07”) which requires disclosure of significant segment expenses regularly provided to the Company’s chief operating decision-maker (“CODM”). ASU No. 2023-07 also allows for multiple measures of segment profit (loss) if the CODM utilizes such measures to allocate resources or assess performance. ASU No. 2023-07 is effective for the Company beginning with the 2024 Form 10-K, with early adoption permitted, and is required to be applied retrospectively for all prior periods presented. The Company expects ASU No. 2023-07 to only impact its disclosures with no impacts to its results of operations, cash flows and financial condition. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” (“ASU No. 2023-09”) which expands existing income tax disclosures, including disaggregation of the Company’s effective income tax rate reconciliation table and income taxes paid disclosures. ASU No. 2023-09 is effective for the Company beginning with the 2025 Form 10-K, with early adoption permitted. The Company is currently evaluating the impact ASU No. 2023-09 will have on its disclosures. In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275, “The Enhancement and Standardization of Climate-Related Disclosures for Investors,” which requires registrants to include climate-related disclosures in their annual reports, including, but not limited to, material Scope 1 and Scope 2 greenhouse gas emissions, climate-related financial metrics, and governance, oversight and risk management processes for material climate-related risks in their audited financial statements. The final rule also requires certain disclosures regarding expenses incurred in relation to severe weather events and other natural conditions. The disclosure requirements are first effective for the Company beginning with the 2026 Form 10-K. In April 2024, the SEC voluntarily stayed the final rule due to pending legal challenges. The Company is currently monitoring legal challenges to the final rule and evaluating the impact the rule will have on its disclosures. In November 2024, the FASB issued ASU No. 2024-03, “Income Statement - Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses,” (“ASU No. 2024-03”) which requires detailed disclosures in the notes to financial statements of expense categories within relevant income statement captions including purchases of inventory, employee compensation, depreciation and intangible asset amortization. ASU No. 2024-03 is effective for the Company beginning with the 2027 Form 10-K, with early adoption permitted, and may 8 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued be applied either prospectively for reporting periods after the effective date or retrospectively to prior periods presented. The Company is currently evaluating the impact ASU No. 2024-03 will have on its disclosures. 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 presentation of certain items within the notes to the consolidated financial statements. These reclassifications had no effect on previously reported net income. 2. Revenue Recognition The following tables include the disaggregation of Restaurant sales and franchise revenues by restaurant concept and major international market for the periods indicated: THIRTEEN WEEKS ENDED SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 (dollars in thousands) RESTAURANT SALES FRANCHISE REVENUES RESTAURANT SALES FRANCHISE REVENUES U.S. Outback Steakhouse $ 518,152 $ 7,542 $ 526,960 $ 7,517 Carrabba’s Italian Grill 159,840 635 165,742 704 Bonefish Grill 118,941 97 128,425 87 Fleming’s Prime Steakhouse & Wine Bar 78,424 — 76,919 — Other 1,695 30 3,092 16 U.S. total 877,052 8,304 901,138 8,324 International Outback Steakhouse - Brazil 127,175 — 138,187 — Other (1) 20,863 3,331 25,088 3,496 International total 148,038 3,331 163,275 3,496 Total $ 1,025,090 $ 11,635 $ 1,064,413 $ 11,820 THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 (dollars in thousands) RESTAURANT SALES FRANCHISE REVENUES RESTAURANT SALES FRANCHISE REVENUES U.S. Outback Steakhouse $ 1,684,669 $ 23,938 $ 1,732,132 $ 24,280 Carrabba’s Italian Grill 518,845 2,123 530,450 2,257 Bonefish Grill 397,723 385 429,572 353 Fleming’s Prime Steakhouse & Wine Bar 262,976 — 272,543 — Other 5,823 86 10,448 41 U.S. total 2,870,036 26,532 2,975,145 26,931 International Outback Steakhouse - Brazil 370,369 — 379,498 — Other (1) 67,737 10,029 75,334 10,980 International total 438,106 10,029 454,832 10,980 Total $ 3,308,142 $ 36,561 $ 3,429,977 $ 37,911 ________________ (1) 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. 9 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table includes a detail of assets and liabilities from contracts with customers included on the Company’s Consolidated Balance Sheets as of the periods indicated: (dollars in thousands) SEPTEMBER 29, 2024 DECEMBER 31, 2023 Other current assets, net Deferred gift card sales commissions $ 11,137 $ 18,081 Unearned revenue Deferred gift card revenue $ 283,810 $ 374,274 Deferred loyalty revenue 6,633 5,664 Deferred franchise fees - current 491 473 Other 2,563 1,466 Total Unearned revenue $ 293,497 $ 381,877 Other long-term liabilities, net Deferred franchise fees - non-current $ 3,939 $ 4,036 The following table is a rollforward of deferred gift card sales commissions for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Balance, beginning of the period $ 12,650 $ 12,694 $ 18,081 $ 17,755 Deferred gift card sales commissions amortization ( 4,494 ) ( 4,711 ) ( 17,155 ) ( 17,891 ) Deferred gift card sales commissions capitalization 3,570 3,766 12,426 13,509 Other ( 589 ) ( 608 ) ( 2,215 ) ( 2,232 ) Balance, end of the period $ 11,137 $ 11,141 $ 11,137 $ 11,141 The following table is a rollforward of unearned gift card revenue for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Balance, beginning of the period $ 300,590 $ 304,942 $ 374,274 $ 386,495 Gift card sales 42,541 44,374 148,486 162,717 Gift card redemptions ( 55,733 ) ( 60,412 ) ( 225,057 ) ( 248,870 ) Gift card breakage ( 3,588 ) ( 3,641 ) ( 13,893 ) ( 15,079 ) Balance, end of the period $ 283,810 $ 285,263 $ 283,810 $ 285,263 10 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 3. Impairments and Exit Costs The components of Provision for impaired assets and restaurant closings are as follows for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 29, 2024 Impairment losses U.S. (1) $ 1,251 $ 3,103 International (2) 17 14,065 Total impairment losses $ 1,268 $ 17,168 Restaurant closure charges U.S. (1) $ 615 $ 11,834 International (2) 3,714 3,729 Total restaurant closure charges 4,329 15,563 Provision for impaired assets and restaurant closings $ 5,597 $ 32,731 ________________ (1) Primarily includes charges in connection with the 2023 Restaurant Closures, as discussed below. (2) Primarily includes charges in connection with the Q2 2024 decision to close nine restaurants in Hong Kong. 2023 Restaurant Closures - During the fourth quarter of 2023, the Company closed three U.S. and two international Aussie Grill restaurants and made the decision to close 36 predominantly older, underperforming U.S. restaurants (the “2023 Restaurant Closures”). Following is a summary of expenses recognized in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the period indicated (dollars in thousands): DESCRIPTION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME CLASSIFICATION THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2024 Asset impairments and closure charges Provision for impaired assets and restaurant closings $ 11,890 Severance and other expenses General and administrative 3,403 Closure-related labor costs Labor and other related 434 Total (1) $ 15,727 ________________ (1) During the fourth quarter of 2023, the Company recognized $ 32.4 million of net charges in connection with the 2023 Restaurant Closures. 11 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 4. Earnings (Loss) Per Share The following table presents the computation of basic and diluted earnings (loss) per share for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (in thousands, except per share data) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Net income (loss) attributable to Bloomin’ Brands $ 6,912 $ 44,528 $ ( 48,557 ) $ 204,116 Basic weighted average common shares outstanding 85,063 88,707 86,258 88,794 Effect of dilutive securities: Stock-based compensation awards 84 674 — 719 Convertible senior notes (1) 744 5,367 — 5,067 Warrants (1) 273 3,800 — 3,407 Diluted weighted average common shares outstanding 86,164 98,548 86,258 97,987 Basic earnings (loss) per share $ 0.08 $ 0.50 $ ( 0.56 ) $ 2.30 Diluted earnings (loss) per share $ 0.08 $ 0.45 $ ( 0.56 ) $ 2.08 Antidilutive stock-based compensation awards 2,155 373 1,541 951 ________________ (1) During the thirty-nine weeks ended September 29, 2024, the Company repurchased $ 83.6 million of the convertible notes due in 2025 and settled the corresponding portion of the related note hedges and warrants (the “2025 Notes Partial Repurchase”). 5. Stock-based Compensation Plans The Company recognized stock-based compensation expense as follows for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Stock-based compensation expense, net of capitalized expense (1) $ 2,342 $ 4,392 $ 5,237 $ 12,395 ________________ (1) The thirty-nine weeks ended September 29, 2024 includes a cumulative life-to-date adjustment to decrease expense for PSUs granted in fiscal year 2023 based on updated assumptions regarding the criteria set forth in the award agreements. 12 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table presents a summary of the Company’s performance-based share units (“PSUs”) and restricted stock units (“RSUs”) activity: WEIGHTED AVERAGE GRANT DATE FAIR VALUE PER UNIT AGGREGATE INTRINSIC VALUE (1) (in thousands, except per unit data) PSUs RSUs PSUs RSUs PSUs RSUs Outstanding as of December 31, 2023 818 631 $ 26.92 $ 23.58 $ 23,026 $ 17,757 Granted (2) 290 619 $ 27.26 $ 20.25 Performance adjustment (3) 237 — $ 25.40 $ — Vested ( 473 ) ( 288 ) $ 25.40 $ 24.26 Forfeited ( 150 ) ( 73 ) $ 27.55 $ 23.93 Outstanding as of September 29, 2024 722 889 $ 27.42 $ 21.02 $ 12,133 $ 14,937 Expected to vest as of September 29, 2024 (4) 264 889 $ 4,432 $ 14,937 ________________ (1) Based on the $ 28.15 and $ 16.80 share price of the Company’s common stock on December 29, 2023 and September 27, 2024, the last trading day of the year ended December 31, 2023 and thirty-nine weeks ended September 29, 2024, respectively. (2) The weighted average dividend yield for RSUs granted during 2024 is 4.53 %. (3) Represents adjustment to 200 % payout for PSUs granted during 2021. (4) For PSUs, estimated number of units to be issued upon the vesting of outstanding PSUs based on Company performance projections of performance criteria set forth in the 2022, 2023 and 2024 PSU award agreements. Assumptions used in the Monte Carlo simulation model and the grant date fair value of PSUs granted were as follows for the periods indicated: THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Assumptions: Risk-free interest rate (1) 4.37 % 4.26 % Dividend yield (2) 3.49 % 3.47 % Volatility (3) 51.41 % 51.02 % Grant date fair value per unit (4) $ 27.26 $ 29.01 ________________ (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 discount below and a premium above the grant date per share value of the Company’s common stock for the relative total shareholder return modifier of ( 1.6 )% and 2.7 % during the thirty-nine weeks ended September 29, 2024 and September 24, 2023, respectively. The following represents unrecognized stock-based compensation expense and the remaining weighted average recognition period as of September 29, 2024: UNRECOGNIZED COMPENSATION EXPENSE (dollars in thousands) REMAINING WEIGHTED AVERAGE RECOGNITION PERIOD (in years) Performance-based share units $ 5,787 2.4 Restricted stock units $ 14,308 1.9 13 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 6. Supplemental Balance Sheet Information Other current assets, net , consisted of the following as of the periods indicated: (dollars in thousands) SEPTEMBER 29, 2024 DECEMBER 31, 2023 Prepaid expenses $ 30,102 $ 26,674 Accounts receivable - gift cards, net 7,887 67,424 Accounts receivable - vendors, net 23,466 13,648 Accounts receivable - franchisees, net 3,789 3,671 Accounts receivable - other, net 21,534 18,100 Deferred gift card sales commissions 11,137 18,081 Other current assets, net 7,562 5,404 $ 105,477 $ 153,002 Goodwill and Intangible Assets - The Company performs its annual assessment for impairment of goodwill and other indefinite-lived intangible assets during its second fiscal quarter. The Company’s 2024 assessment was qualitative and its 2023 assessment was quantitative. In connection with these assessments, the Company did no t record any impairment charges. Other assets, net , consisted of the following as of the periods indicated: (dollars in thousands) SEPTEMBER 29, 2024 DECEMBER 31, 2023 Company-owned life insurance $ 31,874 $ 28,018 Deferred debt issuance costs - revolving credit facility (1) 11,310 3,813 Liquor licenses 22,583 23,125 Judicial deposits (2) 64,493 20,485 Other assets 7,352 9,746 $ 137,612 $ 85,187 ________________ (1) Net of accumulated amortization of $ 0.1 million and $ 11.7 million as of September 29, 2024 and December 31, 2023, respectively. During the thirteen weeks ended September 29, 2024, the Company recorded $ 9.0 million of deferred debt issuance costs in connection with the Third Amended and Restated Credit Agreement, as defined below. See Long-term debt, net below for details regarding the Third Amended and Restated Credit Agreement. (2) These assets arise from the Company’s Brazilian operations and their realization could take several years. Includes $ 43.2 million as of September 29, 2024 related to the Brazil tax legislation. See Note 12 - Income Taxes for details regarding the judicial deposits in connection with Brazil tax legislation. Accrued and other current liabilities consisted of the following as of the periods indicated: (dollars in thousands) SEPTEMBER 29, 2024 DECEMBER 31, 2023 Accrued payroll and other compensation $ 72,976 $ 98,903 Accrued insurance 16,995 19,310 Other current liabilities 127,802 137,601 $ 217,773 $ 255,814 14 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Long-term debt, net , consisted of the following as of the periods indicated: SEPTEMBER 29, 2024 DECEMBER 31, 2023 (dollars in thousands) OUTSTANDING BALANCE INTEREST RATE OUTSTANDING BALANCE INTEREST RATE Senior secured credit facility - revolving credit facility (1) $ 775,000 6.86 % $ — Former credit facility - revolving credit facility (1) — 381,000 6.96 % 2025 Notes (2)(3) 20,724 5.00 % 104,786 5.00 % 2029 Notes 300,000 5.13 % 300,000 5.13 % Long-term debt 1,095,724 785,786 Less: unamortized debt discount and issuance costs (2) ( 3,535 ) ( 5,067 ) Long-term debt, net $ 1,092,189 $ 780,719 ________________ (1) Interest rate represents the weighted average interest rate as of the respective periods. (2) During the thirty-nine weeks ended September 29, 2024, the Company repurchased $ 83.6 million of the 2025 Notes and as a result, wrote off $ 0.8 million of debt issuance costs. See Note 7 - Convertible Senior Notes for additional details. (3) Obligations under the 2025 Notes, which mature on May 1, 2025, have been classified as long-term, reflecting the Company’s intent and ability to refinance these notes through its existing revolving credit facility. Third Amended and Restated Credit Agreement – On September 19, 2024, the Company and OSI, as co-borrowers, entered into the Third Amended and Restated Credit Agreement (the “Third Amended and Restated Credit Agreement”), which provides for senior secured financing of up to $ 1.2 billion consisting of a revolving credit facility (the “Senior Secured Credit Facility”). The Senior Secured Credit Facility matures on September 19, 2029 and replaced the Company’s prior senior secured financing of up to $ 1.0 billion (the “Former Credit Facility”). The total indebtedness of the Company and interest rate applied to the Company’s borrowings remained unchanged as a result of the Third Amended and Restated Credit Agreement. The commitments under the Third Amended and Restated Credit Agreement may be increased in an aggregate principal amount of up to; (i) $ 550.0 million or (ii) at the Company’s option, up to an unlimited amount of incremental facilities, so long as the Consolidated Senior Secured Net Leverage Ratio, as defined in the Third Amended and Restated Credit Agreement, is no more than 3.00 to 1.00 as of the last day of the most recent period of four consecutive fiscal quarters ended, after giving effect to any such incurrence on a pro forma basis. Under the Third Amended and Restated Credit Agreement, the Company may elect an interest rate at each reset period based on the Base Rate or Term SOFR, plus an applicable spread. The Term SOFR rate is the forward-looking term rate based on the secured overnight financing rate (“SOFR”) that is published by CME Group Benchmark Administration Limited (“Term SOFR”). The Base Rate option is the highest of: (i) the prime rate of Wells Fargo Bank, National Association, (ii) the federal funds effective rate plus 0.5 of 1.0% or (iii) the one-month Term SOFR plus a 0.10 % Term SOFR Adjustment, plus 1.0 % (the “Base Rate”). The Adjusted Term SOFR option is the Term SOFR rate plus a 0.10 % Term SOFR Adjustment, subject to a 0 % floor. The interest rate spreads are as follows: BASE RATE ELECTION ADJUSTED TERM SOFR ELECTION Revolving credit facility 50 to 150 basis points over the Base Rate 150 to 250 basis points over the Adjusted Term SOFR The Third Amended and Restated Credit Agreement requires a Total Net Leverage Ratio (“TNLR”) not to exceed 4.50 to 1.00 (with a limited ability to temporarily increase TNLR to 5.00 to 1.00 in connection with material acquisitions). TNLR is the ratio of Consolidated Total Debt (Current portion of long-term debt and Long-term debt, net of cash, excluding the 2025 Notes) to Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization and certain other adjustments as defined in the Third Amended and Restated Credit Agreement). Debt Covenants - As of September 29, 2024 and December 31, 2023, the Company was in compliance with its debt covenants. 15 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Maturities - Following is a summary of principal payments of the Company’s total consolidated debt outstanding as of September 29, 2024: PERIOD (dollars in thousands) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 THEREAFTER TOTAL Debt repayments $ 20,724 $ — $ — $ — $ 1,075,000 $ — $ 1,095,724 7. Convertible Senior Notes 2025 Notes - On February 29, 2024, the Company entered into exchange agreements (the “Exchange Agreements”) with certain holders (the “Noteholders”) of its 5.00 % Convertible Senior Notes due 2025 (the “2025 Notes”). The Exchange Agreements provided for the Company to deliver and pay at the closing of the transactions on March 5, 2024, an aggregate of approximately 7.5 million shares of its common stock and $ 3.3 million in cash, including accrued interest, in exchange for $ 83.6 million in aggregate principal amount of the Company’s outstanding 2025 Notes (the “2025 Notes Partial Repurchase”). In connection with the 2025 Notes Partial Repurchase, the Company recognized a loss on extinguishment of debt of $ 135.8 million and recorded a $ 216.1 million increase to Additional paid-in capital during the thirty-nine weeks ended September 29, 2024. In connection with dividends paid during the thirty-nine weeks ended September 29, 2024, the conversion rate for the Company’s remaining 2025 Notes decreased to approximately $ 10.79 per share, which represents 92.643 shares of common stock per $ 1,000 principal amount of the 2025 Notes, or a total of approximately 1.920 million shares. The following table includes the outstanding principal amount and carrying value of the 2025 Notes as of the periods indicated: (dollars in thousands) SEPTEMBER 29, 2024 DECEMBER 31, 2023 Principal $ 20,724 $ 104,786 Less: unamortized debt issuance costs (1) ( 97 ) ( 1,138 ) Net carrying amount $ 20,627 $ 103,648 ________________ (1) During the thirty-nine weeks ended September 29, 2024, the Company wrote off $ 0.8 million of debt issuance costs as a result of the 2025 Notes Partial Repurchase. Following is a summary of interest expense for the 2025 Notes by component for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Coupon interest $ 259 $ 1,310 $ 1,524 $ 3,932 Debt issuance cost amortization 41 201 239 594 Total interest expense (1) $ 300 $ 1,511 $ 1,763 $ 4,526 ________________ (1) The effective rate of the 2025 Notes over their expected life is 5.85 %. The decrease in interest expense during the thirteen and thirty-nine weeks ended September 29, 2024 relates to the 2025 Notes Partial Repurchase in February 2024. Based on the daily closing prices of the Company’s stock during the quarter ended September 29, 2024, the remaining holders of the 2025 Notes are eligible to convert their notes during the fourth quarter of 2024. Convertible Note Hedge and Warrant Transactions - In connection with the 2025 Notes Partial Repurchase, on February 29, 2024, the Company entered into partial unwind agreements with certain financial institutions (the “Derivative Counterparties”) relating to a portion of the convertible note hedge transactions (the “Note Hedge Early Termination Agreements”) and a portion of the warrant transactions (the “Warrant Early Termination Agreements” and together with the Note Hedge Early Termination Agreements, the “Early Termination Agreements”) that were 16 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued previously entered into by the Company in connection with the issuance of the 2025 Notes. Pursuant to the Early Termination Agreements, the Derivative Counterparties made a termination payment to the Company which consisted of approximately $ 118.2 million in cash and 0.3 million shares of common stock, and the Company made a termination payment to the Derivative Counterparties in an aggregate amount of approximately $ 102.2 million in cash. In connection with the Note Hedge Early Termination Agreements and the Warrant Early Termination Agreements, the Company recorded a $ 126.5 million increase and a $ 102.2 million decrease, respectively, to Additional paid-in capital during the thirty-nine weeks ended September 29, 2024. The Company also recorded an $ 8.3 million increase to Accumulated deficit in connection with the Note Hedge Early Termination Agreements. The remaining warrants have a dilutive effect on the Company’s common stock to the extent that the price of its common stock exceeds the strike price of the warrants. In connection with dividends paid during thirty-nine weeks ended September 29, 2024, the strike price for the remaining warrants decreased to $ 15.11 . 8. Stockholders’ Equity Share Repurchases - In February 2024, the Company’s Board of Directors (the “Board”) canceled the remaining $ 57.5 million under the Company’s former share repurchase authorization and approved a new $ 350.0 million share repurchase authorization (the “2024 Share Repurchase Program”). The 2024 Share Repurchase Program includes capacity above the Company’s normal repurchase activity to provide flexibility in retiring the 2025 Notes at or prior to their May 2025 maturity. The 2024 Share Repurchase Program will expire on August 13, 2025 . On March 1, 2024, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”), in connection with the 2024 Share Repurchase Program, with Wells Fargo Bank, National Association (“Wells Fargo”) to repurchase $ 220.0 million of the Company’s common stock. Under the ASR Agreement, the Company made an aggregate payment of $ 220.0 million to Wells Fargo and received an aggregate initial delivery of approximately 6.5 million shares of common stock on March 4, 2024, representing approximately 80 % of the total shares that were estimated to be repurchased under the ASR Agreement based on the price per share of common stock as of that date. The $ 176.0 million fair value of the initial shares received was recorded as a reduction to Accumulated deficit and the par value from Common stock, with the remaining $ 44.0 million recorded within Additional paid-in capital during the thirteen weeks ended March 31, 2024. The exact number of shares the Company repurchased under the ASR Agreement was based generally on the average of the daily volume-weighted average price per share of common stock during the repurchase period, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement. On April 23, 2024, the Company received 1.4 million additional shares of common stock from Wells Fargo in connection with the final settlement of the ASR Agreement. In connection with the settlement, the Company reduced Accumulated deficit and the par value from Common stock by an aggregate of $ 38.3 million based on the fair value of the shares delivered on the date of settlement, with an offset of $ 38.3 million within Additional paid-in capital during the thirteen weeks ended June 30, 2024. The Company funded the payment under the ASR Agreement, together with the cash portion of the amounts payable under the Exchange Agreements, primarily with borrowings under the revolving credit facility and net proceeds from the Early Termination Agreements. 17 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued As of September 29, 2024, $ 96.8 million remained available for repurchase under the 2024 Share Repurchase Program. Following is a summary of the shares repurchased during fiscal year 2024: (in thousands, except per share data) NUMBER OF SHARES AVERAGE REPURCHASE PRICE PER SHARE AMOUNT First fiscal quarter 6,948 $ 27.13 $ 188,500 Second fiscal quarter (1) 2,156 $ 27.36 59,000 Third fiscal quarter 969 $ 18.78 18,195 Total common stock repurchases (2) 10,073 $ 26.38 $ 265,695 ________________ (1) Includes $ 44.0 million of share repurchases in connection with the ASR Agreement that settled during the thirteen weeks ended June 30, 2024. (2) Excludes $ 0.4 million of fees recorded in Accumulated deficit related to repurchases under the ASR Agreement. Dividends - The Company declared and paid dividends per share during fiscal year 2024 as follows: (dollars in thousands, except per share data) DIVIDENDS PER SHARE AMOUNT First fiscal quarter $ 0.24 $ 21,075 Second fiscal quarter 0.24 20,762 Third fiscal quarter 0.24 20,375 Total cash dividends declared and paid $ 0.72 $ 62,212 In October 2024, the Board declared a quarterly cash dividend of $ 0.24 per share, payable on December 11, 2024 to shareholders of record at the close of business on November 25, 2024 . Accumulated Other Comprehensive Loss (“AOCL”) - The following table is a rollforward of the components of AOCL for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Foreign currency translation adjustment: Balance, beginning of the period $ ( 189,478 ) $ ( 181,943 ) $ ( 177,689 ) $ ( 185,311 ) Foreign currency translation adjustment ( 11,849 ) 3,103 ( 23,638 ) 6,471 Balance, end of the period $ ( 201,327 ) $ ( 178,840 ) $ ( 201,327 ) $ ( 178,840 ) Loss on derivatives, net of tax: Balance, beginning of the period $ 872 $ ( 615 ) Change in fair value of derivatives, net of tax ( 2,917 ) ( 584 ) Reclassification realized in Net income (loss), net of tax ( 557 ) ( 1,403 ) Balance, end of the period $ ( 2,602 ) $ ( 2,602 ) Accumulated other comprehensive loss: Balance beginning of the period $ ( 188,606 ) $ ( 181,943 ) $ ( 178,304 ) $ ( 185,311 ) Other comprehensive (loss) income attributable to Bloomin' Brands ( 15,323 ) 3,103 ( 25,625 ) 6,471 Balance, end of the period $ ( 203,929 ) $ ( 178,840 ) $ ( 203,929 ) $ ( 178,840 ) 18 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 9. Derivative Instruments and Hedging Activities Cash Flow Hedges of Interest Rate Risk - In March 2024 and December 2023, OSI entered into 11 interest rate swap agreements with ten counterparties (the “Swap Transactions”) to manage its exposure to fluctuations in variable interest rates. The Swap Transactions have an aggregate notional amount of $ 375.0 million and include one and two-year tenors with the following terms: NOTIONAL AMOUNT WEIGHTED AVERAGE FIXED INTEREST RATE (1) EFFECTIVE DATE TERMINATION DATE $ 100,000,000 4.92 % December 29, 2023 December 31, 2024 100,000,000 4.34 % December 29, 2023 December 31, 2025 175,000,000 4.40 % March 29, 2024 March 31, 2026 $ 375,000,000 4.52 % ____________________ (1) The weighted average fixed interest rate excludes the term SOFR adjustment and interest rate spread described below. In connection with the Swap Transactions, the Company effectively converted $ 375.0 million of its outstanding indebtedness from SOFR, plus a term SOFR adjustment of 0.10 % and a spread of 150 to 250 basis points, to the weighted average fixed interest rates within the table above, plus a term SOFR adjustment of 0.10 % and a spread of 150 to 250 basis points. The Swap Transactions have an embedded floor of minus 0.10 %. The Swap Transactions have been designated and qualify as cash flow hedges, are recognized on the Company’s Consolidated Balance Sheets at fair value and are classified based on the instruments’ maturity dates. The Company estimates $ 1.9 million of interest expense will be reclassified from AOCL to Interest expense, net over the next 12 months related to its Swap Transactions. The following table presents the fair value and classification of the Company’s swap agreements as of the periods indicated: (dollars in thousands) SEPTEMBER 29, 2024 DECEMBER 31, 2023 CONSOLIDATED BALANCE SHEET CLASSIFICATION Interest rate swaps - asset (1) $ — $ 320 Other current assets, net Interest rate swaps - liability $ 1,617 $ 253 Accrued and other current liabilities Interest rate swaps - liability 1,879 893 Other long-term liabilities, net Total fair value of derivative instruments - liabilities (1) $ 3,496 $ 1,146 ____________________ (1) See Note 11 - Fair Value Measurements for fair value discussion of the interest rate swaps. By utilizing the interest rate swaps, the Company is exposed to credit-related losses in the event that the counterparty fails to perform under the terms of the derivative contract. To mitigate this risk, the Company enters into derivative contracts with major financial institutions based upon credit ratings and other factors. The Company continually assesses the creditworthiness of its counterparties. As of September 29, 2024, all counterparties to the Swap Transactions performed in accordance with their contractual obligations. As of September 29, 2024 and December 31, 2023, the fair value of the Swap Transactions was in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk, of $ 3.3 million and $ 0.8 million, respectively. As of September 29, 2024 and December 31, 2023, the Company has not posted any collateral related to the Swap Transactions. The Swap Transactions contain provisions whereby the Company could be declared in default on its derivative obligations if the repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on indebtedness. If the Company had breached any of these provisions as of September 29, 2024 and 19 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued December 31, 2023, it could have been required to settle its obligations under the Swap Transactions at their termination value of $ 3.3 million and $ 0.8 million, resp ectively. 10. 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 SEPTEMBER 29, 2024 DECEMBER 31, 2023 Operating lease right-of-use assets Operating lease right-of-use assets $ 1,081,498 $ 1,084,951 Finance lease right-of-use assets (1) Property, fixtures and equipment, net 8,733 9,941 Total lease assets, net $ 1,090,231 $ 1,094,892 Current operating lease liabilities Current operating lease liabilities $ 169,407 $ 175,442 Current finance lease liabilities Accrued and other current liabilities 2,481 3,197 Non-current operating lease liabilities Non-current operating lease liabilities 1,141,936 1,131,639 Non-current finance lease liabilities Other long-term liabilities, net 7,127 7,414 Total lease liabilities $ 1,320,951 $ 1,317,692 ________________ (1) Net of accumulated amortization of $ 5.3 million and $ 4.7 million as of September 29, 2024 and December 31, 2023, respectively. Following is a summary of expenses and income related to leases recognized in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income for the periods indicated: CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME CLASSIFICATION THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Operating lease cost (1) Other restaurant operating $ 44,622 $ 46,686 $ 135,557 $ 138,670 Variable lease cost Other restaurant operating 2,085 2,081 6,867 5,434 Finance lease costs: Amortization of leased assets Depreciation and amortization 732 572 2,299 1,609 Interest on lease liabilities Interest expense, net 191 191 581 501 Sublease revenue Franchise and other revenues ( 1,833 ) ( 2,530 ) ( 5,426 ) ( 5,873 ) Lease costs, net $ 45,797 $ 47,000 $ 139,878 $ 140,341 ________________ (1) Excludes rent expense for office facilities and Company-owned closed or subleased properties of $ 3.7 million and $ 3.1 million for the thirteen weeks ended September 29, 2024 and September 24, 2023, respectively, and $ 10.9 million and $ 9.1 million for the thirty-nine weeks ended September 29, 2024 and September 24, 2023, respectively, 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: THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Cash flows from operating activities: Cash paid for amounts included in the measurement of operating lease liabilities $ 147,845 $ 147,051 20 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 11. 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 and liabilities measured at fair value by hierarchy level on a recurring basis as of the periods indicated: CONSOLIDATED BALANCE SHEET CLASSIFICATION MEASUREMENT LEVEL FAIR VALUE (dollars in thousands) SEPTEMBER 29, 2024 DECEMBER 31, 2023 Assets: Short-term investments Cash and cash equivalents Level 1 $ 12,106 $ 23,920 Short-term investments Restricted cash and cash equivalents Level 1 $ — $ 2,854 Interest rate swaps Other current assets, net Level 2 $ — $ 320 Liabilities: Interest rate swaps Accrued and other current liabilities Level 2 $ 1,617 $ 253 Interest rate swaps Other long-term liabilities Level 2 $ 1,879 $ 893 Fair value of each class of financial instruments is determined based on the following: FINANCIAL INSTRUMENT METHODS AND ASSUMPTIONS Short-term investments Carrying value approximates fair value because maturities are less than three months. Interest rate swaps Fair value measurements are based on the contractual terms of the derivatives and observable market-based inputs. The interest rate swaps are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest rate curves and credit spreads. The Company also considers its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. As of September 29, 2024 and December 31, 2023, the Company determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. Interim Disclosures about Fair Value of Financial Instruments - The Company’s non-derivative financial instruments consist of cash equivalents, accounts receivable, accounts payable and long-term debt. The fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts reported on its Consolidated Balance Sheets due to their short duration. Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The following table includes the carrying value and fair value of the Company’s debt by hierarchy level as of the periods indicated: SEPTEMBER 29, 2024 DECEMBER 31, 2023 (dollars in thousands) CARRYING VALUE FAIR VALUE LEVEL 2 CARRYING VALUE FAIR VALUE LEVEL 2 Senior secured credit facility - revolving credit facility $ 775,000 $ 775,000 $ 381,000 $ 381,000 2025 Notes $ 20,724 $ 31,767 $ 104,786 $ 265,896 2029 Notes $ 300,000 $ 280,887 $ 300,000 $ 277,809 21 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 12. Income Taxes THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Income (loss) before (benefit) provision for income taxes $ 1,032 $ 45,373 $ ( 39,959 ) $ 230,047 (Benefit) provision for income taxes $ ( 6,509 ) $ ( 58 ) $ 5,159 $ 21,186 Effective income tax rate (NM) ( 0.1 ) % ( 12.9 ) % 9.2 % ________________ NM Not meaningful. For the thirteen weeks ended September 29, 2024, the benefit for income taxes includes: (i) the impact of changes to the estimate of forecasted annual pre-tax book income relative to the prior quarter in 2024, (ii) the benefit of FICA tax credits on certain tipped wages and (iii) the temporary reduction in the Brazilian income tax rate from 34 % to 0 % under the new Brazil tax legislation. For the thirteen weeks ended September 24, 2023, the benefit for income taxes includes the benefits of Brazil tax legislation, that included a temporary reduction in the Brazilian income tax rate from 34 % to 0 % , as well as the income tax exemption on Brazil state value added tax (“VAT”) benefits. The effective income tax rate for the thirty-nine weeks ended September 29, 2024 is lower than the effective income tax rate for the thirty-nine weeks ended September 24, 2023, primarily due to the impact of nondeductible losses associated with the 2025 Notes Partial Repurchase which, relative to a pre-tax book loss during the period, resulted in a negative effective income tax rate. On January 24, 2024, the Company’s Brazilian subsidiary received an unfavorable second level court ruling related to its ongoing litigation regarding its eligibility for tax exemptions under the Brazil tax legislation. This legislation temporarily granted certain industries a 100 % exemption from income tax (IRPJ and CSLL) and federal value added taxes (PIS and COFINS). The Company claimed this benefit for the periods between September 2022 and December 2023. The Company is appealing this ruling and in connection with the appeal made a cash judicial deposit of $ 42.9 million, inclusive of principal, interest and potential penalties, in July 2024. The deposit was recorded in Other assets, net, on the Company’s Consolidated Balance Sheet. The judicial deposit accumulates interest income until final resolution of the judicial proceedings. The Company believes that it will more likely than not prevail in this appeal and, accordingly, has not recorded any expense or liability for the disputed amounts. On November 6, 2024, the Company entered into a purchase agreement to sell 67 % of its Brazil operations. In connection with the purchase agreement, the Company expects to retain the legal rights to fully recover the judicial deposit related to the Brazil tax legislation. The Company is still evaluating the value of those legal rights to recovery and the accounting for such amounts. See Note 15 - Subsequent Events of the Notes to Consolidated Financial Statements for additional details regarding the purchase agreement. During the second quarter of 2024, Brazil enacted new tax legislation that temporarily grants certain industries a 100 % exemption from income tax (IRPJ and CSLL) for the periods between May 23, 2024 and December 2024 and 100 % exemption from federal value added taxes (PIS and COFINS) for the periods between May 23, 2024 and December 2026. The Company applied for this exemption and was approved by the Brazilian tax authorities. The Company’s estimated annual effective income tax rate for the thirteen and thirty-nine weeks ended September 29, 2024 includes the benefit expected from this legislation. The new Brazil tax legislation also established a country-wide limitation to the total benefits that will be granted under this law. The exemption from value added taxes could end before December 2026 due to this country-wide limitation. In the U.S., 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 Income before provision for income taxes. 22 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The effective income tax rate for the thirty-nine weeks ended September 29, 2024 was lower than the Company’s blended federal and state statutory rate of approximately 26 % primarily due to the impact of nondeductible losses associated with the 2025 Notes Partial Repurchase which, relative to a pre-tax book loss during the period, resulted in a negative effective income tax rate. The effective income tax rates for the thirteen and thirty-nine weeks ended September 24, 2023 were 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, benefits of Brazil tax legislation that include a temporary reduction in the Brazilian income tax rate from 34 % to 0 %, and the income tax exemption on Brazil state VAT benefits. 13. Commitments and Contingencies Litigation and Other Matters - The Company recorded reserves of $ 5.1 million and $ 13.3 million for certain of its outstanding legal proceedings as of September 29, 2024 and December 31, 2023, 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 September 29, 2024, the undiscounted payments that the Company could be required to make in the event of non-payment by the primary lessees was $ 11.1 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of September 29, 2024 was $ 8.7 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 September 29, 2024 and December 31, 2023, the Company’s recorded contingent lease liability was $ 1.8 million and $ 5.3 million, respectively. 14. 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. 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 31, 2023. 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, a portion of insurance expenses and certain bonus expenses. 23 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following tables summarize Total revenues, Depreciation and amortization, and Income (loss) from operations by segment for the periods indicated: THIRTEEN WEEKS ENDED SEPTEMBER 29, 2024 (dollars in thousands) U.S. INTERNATIONAL CORPORATE CONSOLIDATED Total revenues $ 887,325 $ 151,446 $ — $ 1,038,771 Depreciation and amortization $ 41,922 $ 6,184 $ 2,102 $ 50,208 Income (loss) from operations $ 38,853 $ 15,608 $ ( 37,251 ) $ 17,210 THIRTEEN WEEKS ENDED SEPTEMBER 24, 2023 (dollars in thousands) U.S. INTERNATIONAL CORPORATE CONSOLIDATED Total revenues $ 912,972 $ 166,861 $ — $ 1,079,833 Depreciation and amortization $ 39,829 $ 6,231 $ 1,938 $ 47,998 Income (loss) from operations $ 68,014 $ 22,034 $ ( 31,832 ) $ 58,216 THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2024 (dollars in thousands) U.S. INTERNATIONAL CORPORATE CONSOLIDATED Total revenues $ 2,904,602 $ 448,362 $ — $ 3,352,964 Depreciation and amortization $ 122,506 $ 20,140 $ 6,369 $ 149,015 Income (loss) from operations $ 216,014 $ 30,496 $ ( 106,076 ) $ 140,434 THIRTY-NINE WEEKS ENDED SEPTEMBER 24, 2023 (dollars in thousands) U.S. INTERNATIONAL CORPORATE CONSOLIDATED Total revenues $ 3,011,197 $ 466,076 $ — $ 3,477,273 Depreciation and amortization $ 117,367 $ 18,276 $ 6,222 $ 141,865 Income (loss) from operations $ 304,265 $ 67,028 $ ( 102,998 ) $ 268,295 The following table is a reconciliation of segment income from operations to Income (loss) before (benefit) provision for income taxes for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Income from operations $ 17,210 $ 58,216 $ 140,434 $ 268,295 Loss on extinguishment of debt ( 225 ) — ( 136,022 ) — Interest expense, net ( 15,953 ) ( 12,843 ) ( 44,371 ) ( 38,248 ) Income (loss) before (benefit) provision for income taxes $ 1,032 $ 45,373 $ ( 39,959 ) $ 230,047 15. Subsequent Events On November 6, 2024, Bloom Group Holdings, B.V., (the “Seller”) and an indirect wholly owned subsidiary of the Company, entered into a Quota Purchase Agreement and Other Covenants (the “Purchase Agreement”), by and among the Seller, Bloom Participações Ltda. (“BPar”), Outback Steakhouse Restaurantes Brasil S.A. (“OSRB” and, together with BPar, the “Target Entities”), and Osaka Participações Societárias S.A. (“Buyer”). Buyer is owned by a fund managed by an affiliate of Vinci Partners Investments Ltd. BPar is a wholly owned subsidiary of Seller and owns substantially all of the capital stock and all of the voting rights of OSRB. Pursuant to the Purchase Agreement, the Seller will sell to Buyer shares representing 67 % of the capital stock of BPar and, as a consequence, Buyer will hold the corresponding pro rata portion of the capital stock of the Target Entities (such purchase and sale, together with the other transactions and agreements contemplated by the Purchase Agreement, the “Transaction”). The Company will retain an indirect 33 % interest in its Brazil operations through the Target Entities.Under the terms and conditions of the Purchase Agreement, the aggregate 24 Table of Contents BLOOMIN’ BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued consideration paid to the Seller consists of 67 % of the enterprise valuation of the Target Entities in the amount of R$ 2.06 billion Brazilian Reais, which equals R$ 1.4 billion Brazilian Reais (approximately $ 243 million in U.S. Dollars based on the current exchange rate), subject to customary adjustments for working capital, net indebtedness and unpaid transactions expenses, and withholding for Brazilian taxes (the “Purchase Price”). The Purchase Price will be paid in two installments: 52 % on the closing date (the “Closing Date”) of the Purchase Agreement and 48 % on the first anniversary of the Closing Date. The Purchase Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, and customary indemnification obligations of the Company. Subject to satisfaction of closing conditions, the Company expects the Transaction to close on or before December 31, 2024. Following the closing, the Brazil restaurants will be operated as unconsolidated franchisees and a subsidiary of the Company will enter into amended and restated franchise agreements with OSRB. At the closing, the Seller will also enter into a Shareholders Agreement (the “Shareholders Agreement”) by and among Seller, BPar, OSRB and Buyer, pursuant to which Buyer and Seller will have representation on the board of directors and in executive management of the Target Entities based on their respective post-Transaction interests. The Shareholders Agreement will also contain customary corporate governance provisions, customary restrictions on transfer of shares and customary shareholders’ rights. The Shareholders Agreement will set forth a put-call mechanism pursuant to which: (i) Buyer may cause Seller to sell the totality of its interest in the Target Entities for a period between October 1, 2028 and December 31, 2028 (the “Option Exercise Period”), and (ii) the Seller may cause Buyer to purchase the totality of Seller’s interest in the Target Entities during the Option Exercise Period. In connection with the Transaction, the Company expects to mitigate most of the exchange rate risk associated with the Purchase Price installment payments by entering into foreign exchange forward contracts. 25 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS