10-Q
 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
 
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 27, 2015
 
or
[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ______ to ______
Commission File Number: 001-35625


BLOOMIN’ BRANDS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
20-8023465
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
2202 North West Shore Boulevard, Suite 500, Tampa, Florida 33607
(Address of principal executive offices) (Zip Code)

(813) 282-1225
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x  NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES x  NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer  o
Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES  o  NO  x

As of October 29, 2015, 119,810,801 shares of common stock of the registrant were outstanding.
 
 
 
 
 

Table of Contents
BLOOMIN’ BRANDS, INC.



INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended September 27, 2015
(Unaudited)

TABLE OF CONTENTS

 
Page No.
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 

2
Table of Contents
BLOOMIN’ BRANDS, INC.


PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA, UNAUDITED) 
 
SEPTEMBER 27,
2015
 
DECEMBER 28,
2014
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
135,590

 
$
165,744

Current portion of restricted cash and cash equivalents
4,895

 
6,829

Inventories
79,562

 
80,817

Deferred income tax assets
125,416

 
123,866

Assets held for sale
185

 
16,667

Other current assets, net
95,148

 
206,628

Total current assets
440,796

 
600,551

Restricted cash
16,184

 
25,451

Property, fixtures and equipment, net
1,622,954

 
1,629,311

Goodwill
306,306

 
341,540

Intangible assets, net
553,615

 
585,432

Deferred income tax assets
4,945

 
6,038

Other assets, net
148,387

 
155,963

Total assets
$
3,093,187

 
$
3,344,286

 
 
 
 
 
(CONTINUED...)
 

3
Table of Contents
BLOOMIN’ BRANDS, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA, UNAUDITED) 


 
SEPTEMBER 27,
2015
 
DECEMBER 28,
2014
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
 

 
 

Current Liabilities
 

 
 

Accounts payable
$
197,267

 
$
191,207

Accrued and other current liabilities
194,817

 
237,844

Current portion of partner deposits and accrued partner obligations
2,150

 
8,399

Unearned revenue
236,797

 
376,696

Current portion of long-term debt, net
21,731

 
25,964

Total current liabilities
652,762

 
840,110

Partner deposits and accrued partner obligations
57,360

 
69,766

Deferred rent
137,288

 
121,819

Deferred income tax liabilities
177,371

 
181,125

Long-term debt, net
1,377,942

 
1,289,879

Other long-term liabilities, net
248,174

 
260,405

Total liabilities
2,650,897

 
2,763,104

Commitments and contingencies (Note 14)


 


Mezzanine Equity
 
 
 
Redeemable noncontrolling interests
24,772

 
24,733

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 27, 2015 and December 28, 2014
—

 
—

Common stock, $0.01 par value, 475,000,000 shares authorized; 119,751,468 and 125,949,870 shares issued and outstanding as of September 27, 2015 and December 28, 2014, respectively
1,198

 
1,259

Additional paid-in capital
1,075,424

 
1,085,627

Accumulated deficit
(526,023
)
 
(474,994
)
Accumulated other comprehensive loss
(140,306
)
 
(60,542
)
Total Bloomin’ Brands stockholders’ equity
410,293

 
551,350

Noncontrolling interests
7,225

 
5,099

Total stockholders’ equity
417,518

 
556,449

Total liabilities, mezzanine equity and stockholders’ equity
$
3,093,187

 
$
3,344,286

 
The accompanying notes are an integral part of these consolidated financial statements.


4
Table of Contents
BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)



 
THIRTEEN WEEKS ENDED
 
THIRTY-NINE WEEKS ENDED
 
SEPTEMBER 27,
2015

SEPTEMBER 28,
2014

SEPTEMBER 27,
2015

SEPTEMBER 28,
2014
Revenues
 
 
 
 
 
 
 
Restaurant sales
$
1,020,131

 
$
1,059,217

 
$
3,307,700

 
$
3,314,179

Other revenues
6,590

 
6,237

 
20,677

 
20,046

Total revenues
1,026,721

 
1,065,454

 
3,328,377

 
3,334,225

Costs and expenses
 

 
 

 
 

 
 
Cost of sales
339,000

 
348,315

 
1,083,923

 
1,080,785

Labor and other related
286,628

 
295,532

 
911,653

 
909,422

Other restaurant operating
243,609

 
269,480

 
761,928

 
791,277

Depreciation and amortization
47,455

 
48,750

 
141,316

 
143,542

General and administrative
69,623

 
75,417

 
218,832

 
221,733

Provision for impaired assets and restaurant closings
1,682

 
29,081

 
11,715

 
36,170

Total costs and expenses
987,997

 
1,066,575

 
3,129,367

 
3,182,929

Income (loss) from operations
38,724

 
(1,121
)
 
199,010

 
151,296

Loss on extinguishment and modification of debt
—

 
—

 
(2,638
)
 
(11,092
)
Other (expense) income, net
(266
)
 
18

 
(1,356
)
 
171

Interest expense, net
(14,851
)
 
(13,837
)
 
(40,916
)
 
(45,544
)
Income (loss) before provision (benefit) for income taxes
23,607

 
(14,940
)
 
154,100

 
94,831

Provision (benefit) for income taxes
6,202

 
(4,110
)
 
41,557

 
22,839

Net income (loss)
17,405

 
(10,830
)
 
112,543

 
71,992

Less: net income attributable to noncontrolling interests
594

 
613

 
2,918

 
3,311

Net income (loss) attributable to Bloomin’ Brands
$
16,811

 
$
(11,443
)
 
$
109,625

 
$
68,681

 
 
 
 
 
 
 
 
Net income (loss)
$
17,405

 
$
(10,830
)
 
$
112,543

 
$
71,992

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Foreign currency translation adjustment
(34,157
)
 
(2,754
)
 
(85,801
)
 
10,969

Unrealized losses on derivatives, net of tax
(3,884
)
 
(486
)
 
(7,052
)
 
(486
)
Reclassification of adjustment for loss on derivatives included in net income, net of tax
1,115

 
—

 
1,115

 
—

Comprehensive (loss) income
(19,521
)
 
(14,070
)
 
20,805

 
82,475

Less: comprehensive (loss) income attributable to noncontrolling interests
(11,380
)
 
613

 
(9,056
)
 
3,311

Comprehensive (loss) income attributable to Bloomin’ Brands
$
(8,141
)
 
$
(14,683
)
 
$
29,861

 
$
79,164

 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.14

 
$
(0.09
)
 
$
0.89

 
$
0.55

Diluted
$
0.13

 
$
(0.09
)
 
$
0.87

 
$
0.54

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
121,567

 
125,289

 
123,337

 
125,023

Diluted
124,733

 
125,289

 
126,610

 
128,148

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.06

 
$
—

 
$
0.18

 
$
—

 
The accompanying notes are an integral part of these consolidated financial statements.

5
Table of Contents
BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, UNAUDITED)

 
BLOOMIN’ BRANDS, INC.
 
 
 
 

COMMON STOCK

ADDITIONAL
PAID-IN
CAPITAL
 
ACCUM- ULATED
DEFICIT

ACCUMULATED
OTHER
COMPREHENSIVE
LOSS

NON-
CONTROLLING
INTERESTS

TOTAL
 
SHARES
 
AMOUNT
 
 
 
 
 
Balance, December 28, 2014
125,950

 
$
1,259

 
$
1,085,627

 
$
(474,994
)
 
$
(60,542
)
 
$
5,099

 
$
556,449

Net income
—

 
—

 
—

 
109,625

 
—

 
1,984

 
111,609

Other comprehensive (loss) income, net of tax
—

 
—

 
—

 
—

 
(79,764
)
 
10

 
(79,754
)
Cash dividends declared, $0.18 per common share
—

 
—

 
(22,147
)
 
—

 
—

 
—

 
(22,147
)
Repurchase and retirement of common stock
(7,043
)
 
(70
)
 
—

 
(159,929
)
 
—

 
—

 
(159,999
)
Stock-based compensation
—

 
—

 
16,276

 
—

 
—

 
—

 
16,276

Excess tax benefit on stock-based compensation
—

 
—

 
1,058

 
—

 
—

 
—

 
1,058

Common stock issued under stock plans, net of forfeitures and shares withheld for employee taxes
844

 
9

 
6,387

 
(725
)
 
—

 
—

 
5,671

Purchase of noncontrolling interests
—

 
—

 
(229
)
 
—

 
—

 
—

 
(229
)
Change in the redemption value of redeemable interests
—

 
—

 
(11,548
)
 
—

 
—

 
—

 
(11,548
)
Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
(3,310
)
 
(3,310
)
Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
3,442

 
3,442

Balance, September 27, 2015
119,751

 
$
1,198

 
$
1,075,424

 
$
(526,023
)
 
$
(140,306
)
 
$
7,225

 
$
417,518

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(CONTINUED...)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


6
Table of Contents
BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(IN THOUSANDS, UNAUDITED)

 
BLOOMIN’ BRANDS, INC.
 
 
 
 
 
COMMON STOCK
 
ADDITIONAL
PAID-IN
CAPITAL
 
ACCUM- ULATED
DEFICIT
 
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
 
NON-
CONTROLLING
INTERESTS
 
TOTAL
 
SHARES
 
AMOUNT
 
 
 
 
 
Balance, December 31, 2013
124,784

 
$
1,248

 
$
1,068,705

 
$
(565,154
)
 
$
(26,418
)
 
$
4,328

 
$
482,709

Net income
—

 
—

 
—

 
68,681

 
—

 
2,853

 
71,534

Other comprehensive income, net of tax
—

 
—

 
—

 
—

 
10,483

 
—

 
10,483

Stock-based compensation
—

 


 
12,987

 
—

 
—

 
—

 
12,987

Excess tax benefit on stock-based compensation
—

 
—

 
1,067

 
—

 
—

 
—

 
1,067

Common stock issued under stock plans, net of forfeitures and shares withheld for employee taxes
845

 
8

 
6,643

 
(869
)
 
—

 
—

 
5,782

Purchase of limited partnership interests, net of tax of $6,519
—

 
—

 
(11,928
)
 
—

 
—

 
1,236

 
(10,692
)
Transfer to redeemable noncontrolling interest
—

 
—

 
(627
)
 
—

 
—

 
—

 
(627
)
Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
(3,505
)
 
(3,505
)
Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
174

 
174

Balance, September 28, 2014
125,629

 
$
1,256

 
$
1,076,847

 
$
(497,342
)
 
$
(15,935
)
 
$
5,086

 
$
569,912


The accompanying notes are an integral part of these consolidated financial statements.

7
Table of Contents
BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)


 
THIRTY-NINE WEEKS ENDED
 
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
Cash flows provided by operating activities:
 
 
 
Net income
$
112,543

 
$
71,992

Adjustments to reconcile net income to cash provided by operating activities:
 

 
 

Depreciation and amortization
141,316

 
143,542

Amortization of deferred financing fees
2,211

 
2,378

Amortization of capitalized gift card sales commissions
20,381

 
20,144

Provision for impaired assets and restaurant closings
11,715

 
36,170

Accretion on debt discounts
1,372

 
1,589

Stock-based and other non-cash compensation expense
16,797

 
14,546

Deferred income tax expense (benefit)
6,053

 
(1,687
)
Loss on disposal of property, fixtures and equipment
1,234

 
1,548

Gain on life insurance and restricted cash investments
(1,700
)
 
(1,305
)
Loss on disposal of business or subsidiary
1,168

 
—

Loss on extinguishment and modification of debt
2,638

 
11,092

Recognition of deferred gain on sale-leaseback transaction
(1,592
)
 
(1,605
)
Excess tax benefits from stock-based compensation
(1,058
)
 
(1,067
)
Change in assets and liabilities:
 

 
 

(Increase) decrease in inventories
(2,214
)
 
14,707

Decrease (increase) in other current assets
71,279

 
(34,489
)
Decrease in other assets
11,414

 
6,141

Decrease in accounts payable and accrued and other current liabilities
(16,932
)
 
(2,059
)
Increase in deferred rent
15,516

 
14,969

Decrease in unearned revenue
(139,672
)
 
(134,545
)
Decrease in other long-term liabilities
(5,175
)
 
(2,513
)
Net cash provided by operating activities
247,294

 
159,548

Cash flows used in investing activities:
 

 
 

Purchases of life insurance policies
(4,447
)
 
(1,682
)
Proceeds received from life insurance policies
14,942

 
627

Proceeds from disposal of property, fixtures and equipment
5,521

 
4,070

Acquisition of business, net of cash acquired
—

 
(3,063
)
Proceeds from sale of a business
7,798

 
—

Capital expenditures
(166,783
)
 
(174,432
)
Decrease in restricted cash
42,868

 
19,612

Increase in restricted cash
(33,960
)
 
(21,150
)
Investment in unconsolidated affiliates
(877
)
 
—

Net cash used in investing activities
$
(134,938
)
 
$
(176,018
)
 
 
 
 
 
(CONTINUED...)
 
 
 
 
 

8
Table of Contents
BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)


 
THIRTY-NINE WEEKS ENDED
 
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
Cash flows used in financing activities:
 
 
 
Proceeds from issuance of senior secured Term loan A
$
—

 
$
297,088

Extinguishment and modification of senior secured term loan
(215,000
)
 
(700,000
)
Repayments of long-term debt
(36,330
)
 
(25,159
)
Proceeds from borrowings on revolving credit facilities
523,485

 
474,500

Repayments of borrowings on revolving credit facilities
(193,300
)
 
(59,500
)
Financing fees
(1,260
)
 
(4,492
)
Proceeds from the exercise of stock options, net of tax withholdings
6,396

 
6,642

Distributions to noncontrolling interests
(3,310
)
 
(3,505
)
Contributions from noncontrolling interests
3,442

 
174

Purchase of limited partnership and noncontrolling interests
(652
)
 
(17,211
)
Repayments of partner deposits and accrued partner obligations
(35,884
)
 
(17,603
)
Repurchase of common stock
(160,724
)
 
(869
)
Excess tax benefits from stock-based compensation
1,058

 
1,067

Cash dividends paid on common stock
(22,147
)
 
—

Net cash used in financing activities
(134,226
)
 
(48,868
)
Effect of exchange rate changes on cash and cash equivalents
(8,284
)
 
138

Net cash decrease in cash and cash equivalents
(30,154
)
 
(65,200
)
Cash and cash equivalents as of the beginning of the period
165,744

 
209,871

Cash and cash equivalents as of the end of the period
$
135,590

 
$
144,671

Supplemental disclosures of cash flow information:
 

 
 

Cash paid for interest
$
39,408

 
$
43,369

Cash paid for income taxes, net of refunds
18,383

 
43,193

Supplemental disclosures of non-cash investing and financing activities:
 

 
 

Conversion of partner deposits and accrued partner obligations to notes payable
$
—

 
$
503

Change in acquisition of property, fixtures and equipment included in accounts payable or capital lease liabilities
17

 
11,174

Contribution receivable from noncontrolling interest
—

 
1,456

Deferred tax effect of purchase of noncontrolling interests
—

 
6,519


 The accompanying notes are an integral part of these consolidated financial statements.

9
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, Inc., through its subsidiaries (“Bloomin’ Brands” or the “Company”), owns and operates casual, upscale casual and fine dining restaurants primarily in the United States. The Company’s restaurant portfolio has four concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Additional Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchise agreements. In January 2015, the Company sold its Roy’s business.

Basis of Presentation - The accompanying interim unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of the Company, all adjustments necessary for the fair presentation of the Company’s results of operations, financial position and cash flows 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 28, 2014.

Recently Issued Financial Accounting Standards Not Yet Adopted - In April 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03: “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU No. 2015-03”). ASU No. 2015-03 requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability. Since ASU No. 2015-03 did not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements, the FASB issued ASU No. 2015-15: “Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements” (“ASU No. 2015-15”) in August 2015. ASU No. 2015-15 clarifies that debt issuance costs related to line-of-credit arrangements may be presented as an asset and subsequently amortized over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 requires retrospective application. ASU No. 2015-03 and ASU No. 2015-15 will be effective for the Company in fiscal year 2016, with early adoption permitted. The Company does not expect ASU No. 2015-03 and ASU No. 2015-15 to have a material impact on its financial position, results of operations and cash flows.

In August 2014, the FASB issued ASU No. 2014-15: “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU No. 2014-15”). ASU No. 2014-15 will explicitly require management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The new standard is applicable for all entities and will be effective for the Company in fiscal year 2016. The Company does not expect ASU No. 2014-15 to have a material impact on its financial position, results of operations and cash flows.

In May 2014, the FASB issued ASU No. 2014-09 “Revenue Recognition (Topic 606), Revenue from Contracts with Customers” (“ASU No. 2014-09”). ASU No. 2014-09 provides a single source of guidance for revenue arising from contracts with customers and supersedes current revenue recognition standards. Under ASU No. 2014-09, revenue is recognized in an amount that reflects the consideration an entity expects to receive for the transfer of goods and services. On July 9, 2015, the FASB agreed to delay the effective date of ASU 2014-09 by one year. As a result, the new guidance will be effective for the Company in fiscal year 2018 and is applied retrospectively to each period presented or as a cumulative effect adjustment at the date of adoption. The Company has not selected a transition method and is evaluating the impact this guidance will have on its financial position, results of operations and cash flows.

10
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued


Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material impact to the Company.

Out-of-Period Adjustments - In the third quarter of 2015, the Company identified and corrected errors in accounting for the allocation of foreign currency translation adjustments (“CTA”) to Redeemable noncontrolling interests and fair value adjustments for Redeemable noncontrolling interests. Management evaluated the materiality of the errors from a qualitative and quantitative perspective and concluded that the errors were immaterial to the current and prior periods. As a result, the Company recorded the cumulative adjustment in its Consolidated Statement of Stockholders’ Equity for the thirty-nine weeks ended September 27, 2015 and Consolidated Statements of Operations and Comprehensive (Loss) Income for the thirteen and thirty-nine weeks ended September 27, 2015:
 
 
FINANCIAL STATMENT LINE ITEM IMPACT
 
IMPACT BY PERIOD
 
CUMULATIVE ADJUSTMENT
 
 
 
FISCAL YEAR
 
 
 
 
 
(dollars in thousands)
 
 
2013
 
2014
 
Q1 2015
 
Q2 2015
 
Mezzanine equity:
 
 
 
 
 
 
 
 
 
 
 
 
Allocation of CTA to redeemable noncontrolling interests
 
Redeemable noncontrolling interests
 
$
(1,762
)
 
$
(2,677
)
 
$
(2,511
)
 
$
(2,282
)
 
$
(9,232
)
Adjustment for the change in the redemption value of redeemable interests
 
Redeemable noncontrolling interests
 
1,715

 
1,824

 
1,856

 
3,276

 
8,671

Net impact to Mezzanine equity
 
 
 
$
(47
)
 
$
(853
)
 
$
(655
)
 
$
994

 
$
(561
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Bloomin’ Brands stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
 
 
Allocation of CTA to redeemable noncontrolling interests
 
Accumulated other comprehensive loss
 
$
1,762

 
$
2,677

 
$
2,511

 
$
2,282

 
$
9,232

Adjustment for the change in the redemption value of redeemable interests
 
Additional paid-in capital
 
(1,715
)
 
(1,824
)
 
(1,856
)
 
(3,276
)
 
(8,671
)
Net impact to Bloomin’ Brands stockholders’ equity
 
 
 
$
47

 
$
853

 
$
655

 
$
(994
)
 
$
561

 
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
 
 
 
Allocation of CTA to redeemable noncontrolling interests
 
Comprehensive (loss) income attributable to Bloomin’ Brands
 
$
1,762

 
$
2,677

 
$
2,511

 
$
2,282

 
$
9,232

Allocation of CTA to redeemable noncontrolling interests
 
Comprehensive (loss) income attributable to noncontrolling interests
 
(1,762
)
 
(2,677
)
 
(2,511
)
 
(2,282
)
 
(9,232
)
Net impact to Other comprehensive (loss) income
 
 
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—


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. These reclassifications had no effect on previously reported net income.


11
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

2.    Disposals, Exit Costs and Acquisitions

The components of Provision for impaired assets and restaurant closings are as follows:
 
THIRTEEN WEEKS ENDED
 
THIRTY-NINE WEEKS ENDED
(dollars in thousands)
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
 
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
Impairment losses
$
1,637

 
$
28,734

 
$
3,789

 
$
29,216

Restaurant closure expenses
45

 
347

 
7,926

 
6,954

Provision for impaired assets and restaurant closings
$
1,682

 
$
29,081

 
$
11,715

 
$
36,170


Restaurant Closure Initiatives - During 2014, the Company decided to close 36 underperforming international locations, primarily in South Korea (the “International Restaurant Closure Initiative”). As of September 27, 2015, 35 of the 36 locations have closed. In connection with the International Restaurant Closure Initiative, the Company incurred pre-tax restaurant and other closing costs of $0.1 million and $6.2 million during the thirteen and thirty-nine weeks ended September 27, 2015, respectively, and pre-tax fixed asset impairment costs of $11.6 million during the thirteen and thirty-nine weeks ended September 28, 2014, which were recorded within the International segment.

The Company expects to incur additional charges of approximately $1.0 million, including costs associated with lease obligations, employee terminations and other closure related obligations, through the first half of 2016. Future cash expenditures of $5.0 million to $6.0 million, primarily related to lease liabilities, are expected to occur through the final lease expiration of August 2022.

In the fourth quarter of 2013, the Company completed an assessment of its domestic restaurant base and decided to close 22 underperforming domestic locations (the “Domestic Restaurant Closure Initiative”). Pre-tax restaurant and other closing costs of $1.3 million and $6.0 million were incurred during the thirty-nine weeks ended September 27, 2015 and September 28, 2014, respectively, in connection with the Domestic Restaurant Closure Initiative, which were recorded within the U.S. segment.

Following is a summary of expenses related to the Domestic and International Restaurant Closure Initiatives recognized in the Consolidated Statements of Operations and Comprehensive (Loss) Income (dollars in thousands):
DESCRIPTION
 
LOCATION OF CHARGE IN THE CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
 
THIRTEEN WEEKS ENDED
 
THIRTY-NINE WEEKS ENDED
 
 
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
 
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
Property, fixtures and equipment impairments
 
Provision for impaired assets and restaurant closings
 
$
—

 
$
11,573

 
$
—

 
$
11,573

Facility closure and other expenses
 
Provision for impaired assets and restaurant closings
 
45

 
—

 
7,477

 
5,972

Severance and other expenses
 
General and administrative
 
140

 
—

 
1,713

 
1,035

Reversal of deferred rent liability
 
Other restaurant operating
 
—

 
—

 
(198
)
 
(2,078
)
 
 
 
 
$
185

 
$
11,573

 
$
8,992

 
$
16,502



12
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Following is a summary of cumulative restaurant closure initiative expenses incurred to date as of September 27, 2015 (dollars in thousands):
DESCRIPTION
 
LOCATION OF CHARGE IN THE CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
 
DOMESTIC RESTAURANT CLOSURE INITIATIVE
 
INTERNATIONAL RESTAURANT CLOSURE INITIATIVE
 
RESTAURANT CLOSURE INITIATIVES TOTAL
Property, fixtures and equipment impairments
 
Provision for impaired assets and restaurant closings
 
$
18,695

 
$
11,573

 
$
30,268

Facility closure and other expenses
 
Provision for impaired assets and restaurant closings
 
7,289

 
14,325

 
21,614

Severance and other expenses
 
General and administrative
 
1,035

 
4,720

 
5,755

Reversal of deferred rent liability
 
Other restaurant operating
 
(2,078
)
 
(1,031
)
 
(3,109
)
 
 
 
 
$
24,941

 
$
29,587

 
$
54,528


The following table summarizes the Company’s accrual activity related to facility closure and other costs, primarily associated with the Domestic and International Restaurant Closure Initiatives, during the thirty-nine weeks ended September 27, 2015:
 
THIRTY-NINE WEEKS ENDED
(dollars in thousands)
SEPTEMBER 27,
2015
Beginning of the period
$
11,000

Charges
9,534

Cash payments
(11,878
)
Adjustments (1)
(1,608
)
End of the period (2)
$
7,048

________________
(1)
Adjustments to facility closure and other costs represent changes in sublease assumptions and the impact of lease settlements on the Company’s remaining lease obligations.
(2)
As of September 27, 2015, the Company had exit-related accruals of $2.8 million recorded in Accrued and other current liabilities and $4.2 million recorded in Other long-term liabilities, net.

Roy’s - On January 26, 2015, the Company sold its Roy’s business to United Ohana, LLC (the “Buyer”), for a purchase price of $10.0 million, less certain liabilities, and recognized a loss on sale of $0.1 million and $0.9 million, which was recorded in Other expense, net, during the thirteen and thirty-nine weeks ended September 27, 2015, respectively. The sale agreement contained a provision obligating the Company to pay the Buyer up to $5.0 million, if certain lease contingencies are not resolved prior to April 2018 and the Buyer is damaged. In July 2015, these lease contingencies were satisfactorily resolved.

In connection with the sale of Roy’s, the Company continues to provide lease guarantees for certain of the Roy’s locations. Under the guarantees, the Company will pay the rental expense over the remaining lease term in the event of default by the Buyer. The fair value and maximum value of the lease guarantees is nominal. The maximum amount is calculated as the fair value of the lease payments over the remaining lease term and assumes that there are subleases.

Following the decision to sell Roy’s, the Company recorded pre-tax impairment charges of $6.0 million for Assets held for sale during the thirteen and thirty-nine weeks ended September 28, 2014. This impairment charge was recorded in Provision for impaired assets and restaurant closings in the Consolidated Statements of Operations and Comprehensive (Loss) Income.


13
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Following are the components of Roy’s included in the Consolidated Statements of Operations and Comprehensive (Loss) Income during the periods indicated:
 
THIRTEEN WEEKS ENDED
 
THIRTY-NINE WEEKS ENDED
(dollars in thousands)
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
 
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
Restaurant sales
$
—

 
$
15,717

 
$
5,729

 
$
52,117

Loss before income taxes (1) (2)
$
(124
)
 
$
(6,962
)
 
$
(765
)
 
$
(6,393
)
________________
(1)
Includes loss on sale of $0.1 million and $0.9 million during the thirteen and thirty-nine weeks ended September 27, 2015.
(2)
Includes impairment charges of $6.0 million for Assets held for sale during the thirteen and thirty-nine weeks ended September 28, 2014.
 
Other Disposals - During the third quarter of 2014, the Company decided to sell both of its corporate airplanes. In connection with this decision, the Company recognized pre-tax asset impairment charges of $10.6 million for the thirteen and thirty-nine weeks ended September 28, 2014. During the thirty-nine weeks ended September 27, 2015, the Company recognized additional pre-tax asset impairment charges of $0.7 million. The impairment charges are recorded in Provision for impaired assets and restaurant closings in the Consolidated Statements of Operations and Comprehensive (Loss) Income. The Company completed the sale of its remaining corporate aircraft during the third quarter of 2015 for net proceeds of $2.0 million.

Acquisitions - In 2013, the Company completed the acquisition of a controlling interest in PGS Consultoria e Serviços Ltda. (the “Brazil Joint Venture”) by purchasing 80% of the issued and outstanding capital stock of PGS Participações Ltda (“PGS Par”). As a result of the acquisition, the Company had a 90% interest and the former equity holders of PGS Par (“Former Equity Holders”) retained a noncontrolling interest of 10% in the Brazil Joint Venture.

In April 2015, certain Former Equity Holders exercised options to sell their remaining interests in the Brazil Joint Venture to the Company for total cash consideration of $0.7 million. This transaction resulted in a reduction of $0.5 million and $0.2 million of Mezzanine equity and Additional paid-in capital, respectively, during the thirty-nine weeks ended September 27, 2015. As a result of the option exercise, the Company now owns 90.25% of the Brazil Joint Venture.

In connection with the Company’s acquisition of the Brazil Joint Venture in 2013, $7.9 million of the Company’s cash was held in escrow for customary indemnification obligations. The Former Equity Holders had an equal amount of cash held in escrow. In 2015, the Company and the Former Equity Holders agreed to release all escrow cash. The release of cash was reflected in the Company’s Consolidated Balance Sheet as of September 27, 2015.

3.    Earnings (Loss) Per Share

The Company computes basic and diluted earnings (loss) per share based on the weighted average number of common shares that were outstanding during the period. Diluted earnings per share includes the dilutive effect of common stock equivalents consisting of stock options, restricted stock, restricted stock units and performance-based share units, using the treasury stock method. Performance-based share units are considered dilutive when the related performance criterion has been met.

14
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued


The following table presents the computation of basic and diluted earnings (loss) per share:
 
THIRTEEN WEEKS ENDED
 
THIRTY-NINE WEEKS ENDED
(in thousands, except per share data)
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
 
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
Net income (loss) attributable to Bloomin’ Brands
$
16,811

 
$
(11,443
)
 
$
109,625

 
$
68,681

 
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
121,567

 
125,289

 
123,337

 
125,023

 
 
 
 
 
 
 
 
Effect of diluted securities:
 
 
 
 
 
 
 
Stock options
2,966

 
—

 
3,071

 
3,055

Nonvested restricted stock, restricted stock units and performance-based share units
200

 
—

 
202

 
70

Diluted weighted average common shares outstanding
124,733

 
125,289

 
126,610

 
128,148

 
 
 
 
 
 
 
 
Basic earnings (loss) per share
$
0.14

 
$
(0.09
)
 
$
0.89

 
$
0.55

Diluted earnings (loss) per share
$
0.13

 
$
(0.09
)
 
$
0.87

 
$
0.54


Dilutive securities outstanding not included in the computation of earnings (loss) per share because their effect was antidilutive were as follows:
 
THIRTEEN WEEKS ENDED
 
THIRTY-NINE WEEKS ENDED
(in thousands)
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
 
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
Stock options
2,828

 
5,519

 
2,616

 
3,385

Nonvested restricted stock and restricted stock units
28

 
359

 
38

 
251


4.    Stock-based Compensation

The Company recognized stock-based compensation expense as follows:
 
THIRTEEN WEEKS ENDED
 
THIRTY-NINE WEEKS ENDED
(dollars in thousands)
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
 
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
Stock options
$
2,633

 
$
3,611

 
$
7,612

 
$
9,177

Restricted stock and restricted stock units
1,823

 
863

 
4,973

 
2,601

Performance-based share units
939

 
398

 
2,628

 
933

 
$
5,395

 
$
4,872

 
$
15,213

 
$
12,711


During the thirty-nine weeks ended September 27, 2015, the Company made grants to its employees of 1.2 million stock options, 0.6 million time-based restricted stock units and 0.2 million performance-based share units.


15
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Assumptions used in the Black-Scholes option pricing model and the weighted-average fair value of option awards granted were as follows:
 
THIRTY-NINE WEEKS ENDED
 
SEPTEMBER 27,
2015
Assumptions:
 
Weighted-average risk-free interest rate (1)
1.64
%
Dividend yield (2)
1.0
%
Expected term (3)
6.3 years

Weighted-average volatility (4)
43.4
%
 
 
Weighted-average grant date fair value per option
$
10.11

________________
(1)
Risk-free rate is the U.S. Treasury yield curve in effect as of the grant date for periods within the contractual life of the option.
(2)
Dividend yield is the level of dividends expected be paid on the Company’s common stock over the expected term of the option.
(3)
Expected term represents the period of time that the options are expected to be outstanding. The simplified method of estimating the expected term is used since the Company does not have significant historical exercise experience for its stock options.
(4)
Volatility for the thirty-nine weeks ended September 27, 2015 is based on the historical volatilities of the Company’s stock and the stock of comparable peer companies.

The following represents unrecognized stock compensation expense and the remaining weighted-average vesting period as of September 27, 2015:
 
UNRECOGNIZED
COMPENSATION EXPENSE
(dollars in thousands)
 
REMAINING WEIGHTED-AVERAGE VESTING PERIOD
(in years)
Stock options
$
24,663

 
2.7
Restricted stock and restricted stock units
$
20,392

 
3.0
Performance-based share units
$
1,604

 
0.4

5.    Other Current Assets, Net

Other current assets, net, consisted of the following:
(dollars in thousands)
SEPTEMBER 27,
2015
 
DECEMBER 28,
2014
Prepaid expenses
$
24,271

 
$
30,260

Accounts receivable - vendors, net
20,398

 
27,340

Accounts receivable - franchisees, net
3,114

 
1,159

Accounts receivable - other, net
31,740

 
107,178

Other current assets, net
15,625

 
40,691

 
$
95,148

 
$
206,628



16
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

6.    Goodwill and Intangible Assets, Net

(dollars in thousands)
U.S. SEGMENT
 
INTERNATIONAL SEGMENT
 
CONSOLIDATED
Balance as of December 28, 2014
$
172,711

 
$
168,829

 
$
341,540

Translation adjustments
—

 
(35,234
)
 
(35,234
)
Balance as of September 27, 2015
$
172,711

 
$
133,595

 
$
306,306


The Company performed an annual assessment of goodwill and other indefinite-lived intangible assets during the fiscal second quarters of 2015 and 2014. In connection with the annual assessment, no goodwill or indefinite-lived intangible asset impairments were recorded in the thirteen and thirty-nine weeks ended September 27, 2015 and September 28, 2014, respectively.

7.    Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following:
(dollars in thousands)
SEPTEMBER 27,
2015
 
DECEMBER 28,
2014
Accrued payroll and other compensation
$
88,659

 
$
121,548

Accrued insurance
22,513

 
19,455

Other current liabilities
83,645

 
96,841

 
$
194,817

 
$
237,844


Accrued Payroll Taxes - In May 2015 and October 2015, the IRS issued an audit adjustment of $3.3 million and $3.1 million, respectively, to the Company for the employer’s share of FICA taxes related to cash tips allegedly received and unreported by the Company’s employees during calendar year 2011 and 2012, respectively. As of September 27, 2015 and December 28, 2014, the Company had $3.1 million and $12.0 million, respectively, recorded in Accrued and other current liabilities in the Company’s Consolidated Balance Sheet for payroll tax audits.


17
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

8.    Long-term Debt, Net

Following is a summary of outstanding long-term debt:
 
SEPTEMBER 27, 2015
 
DECEMBER 28, 2014
(dollars in thousands)
OUTSTANDING BALANCE
 
INTEREST RATE
 
OUTSTANDING BALANCE
 
INTEREST RATE
Senior Secured Credit Facility:
 
 
 
 
 
 
 
Term loan A (1)
$
281,250

 
2.19
%
 
$
296,250

 
2.16
%
Term loan B
—

 
—
%
 
225,000

 
3.50
%
Revolving credit facility (1)
655,000

 
2.18
%
 
325,000

 
2.16
%
Total Senior Secured Credit Facility
936,250

 
 
 
846,250

 
 
2012 CMBS loan:
 
 
 
 
 
 
 
First mortgage loan (1)
291,768

 
4.12
%
 
299,765

 
4.08
%
First mezzanine loan
84,317

 
9.00
%
 
85,127

 
9.00
%
Second mezzanine loan
85,546

 
11.25
%
 
86,067

 
11.25
%
Total 2012 CMBS Loan
461,631

 
 
 
470,959

 
 
Capital lease obligations
2,746

 
 
 
634

 
 
Other long-term debt (2)
2,513

 
0.73% to 7.60%

 
4,073

 
0.52% to 7.00%

 
$
1,403,140

 
 
 
$
1,321,916

 
 
Less: current portion of long-term debt, net
(21,731
)
 
 
 
(25,964
)
 
 
Less: unamortized debt discount
(3,467
)
 
 
 
(6,073
)
 
 
Long-term debt, net
$
1,377,942

 
 
 
$
1,289,879

 
 
________________
(1)
Represents the weighted-average interest rate for the respective period.
(2)
Balance is comprised of sale-leaseback obligations and uncollateralized notes payable. Interest rates presented relate to the notes payable.

Credit Agreement Amendment - On March 31, 2015, OSI Restaurant Partners, LLC (“OSI”), a wholly-owned subsidiary of the Company, entered into an amendment (the “Amendment”) to its existing credit agreement, dated October 26, 2012 (as previously amended, the “Existing Credit Agreement”), to effect an increase of OSI’s existing revolving credit facility from $600.0 million to $825.0 million in order to fully pay down its existing Term Loan B on April 2, 2015. No other material changes were made to the terms of OSI’s Existing Credit Agreement as a result of the Amendment.

Revolving Credit Facility - Fees on letters of credit and the daily unused availability under the revolving credit facility as of September 27, 2015 were 2.13% and 0.30%, respectively. As of September 27, 2015, $29.6 million of the revolving credit facility was committed for the issuance of letters of credit and not available for borrowing.

Debt Covenants - As of September 27, 2015 and December 28, 2014, the Company was in compliance with its debt covenants.


18
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Loss on Modification and Extinguishment of Debt - Following is a summary of loss on extinguishment and modification of debt recorded in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income:
 
THIRTY-NINE WEEKS ENDED
(dollars in thousands)
SEPTEMBER 27, 2015 (1)
 
SEPTEMBER 28, 2014 (2)
Refinancing of Senior Secured Credit Facility
$
2,638

 
$
11,092

________________
(1)
The loss was comprised of the write-off of $1.4 million of deferred financing fees and the write-off of $1.2 million of unamortized debt discount.
(2)
The loss was comprised of the write-off of $5.5 million of deferred financing fees, the write-off of $4.9 million of unamortized debt discount and a prepayment penalty of $0.7 million.

Deferred Financing Fees - During the second quarter of 2015, the Company deferred $1.2 million of financing costs incurred in connection with the amendment to the Credit Agreement. The deferred financing costs are included in Other assets, net in the Consolidated Balance Sheets.

9.    Redeemable Noncontrolling Interests
 
THIRTY-NINE WEEKS ENDED
(dollars in thousands)
SEPTEMBER 27,
2015
Balance, beginning of period
$
24,733

Change in redemption value of Redeemable noncontrolling interests
2,877

Net income attributable to Redeemable noncontrolling interests
934

Foreign currency translation attributable to Redeemable noncontrolling interests
(2,752
)
Purchase of Redeemable noncontrolling interests (1)
(459
)
Out-of period adjustment - foreign currency translation attributable to Redeemable noncontrolling interests (2)
(9,232
)
Out-of period adjustment - change in redemption value of Redeemable noncontrolling interests (2)
8,671

Balance, end of period
$
24,772

________________
(1)
In April 2015, certain equity holders of PGS Par exercised options to sell their remaining interests in the Brazil Joint Venture. See Note 2 - Disposals, Exit Costs and Acquisitions for further information.
(2)
In the third quarter of 2015, the Company identified and corrected errors in accounting for the allocation of foreign currency translation adjustments to Redeemable noncontrolling interests and fair value adjustments for Redeemable noncontrolling interests. See Note 1 - Description of the Business and Basis of Presentation for further details.

10.
Stockholders’ Equity

Secondary Public Offering - In March 2015, Bain Capital sold its remaining shares of the Company’s common stock through an underwritten secondary public offering. The selling stockholders received all of the proceeds from the offering. Pursuant to the underwriting agreement for the secondary public offering, the Company repurchased from the underwriters 2,759,164 of the shares sold by Bain Capital at a cost of $70.0 million.

Share Repurchases - In December 2014, the Company’s Board of Directors (the “Board”) approved a share repurchase program (the “2014 Share Repurchase Program”) under which the Company was authorized to repurchase up to $100.0 million of its outstanding common stock. As of September 27, 2015, no shares remained available for purchase under the 2014 Share Repurchase Program.


19
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

In August 2015, the Board approved a new share repurchase program (the “2015 Share Repurchase Program”) under which the Company is authorized to repurchase up to $100.0 million of its outstanding common stock. The authorization for the 2015 Share Repurchase Program will expire on February 3, 2017. As of September 27, 2015, $40.0 million remained available for the repurchase of common stock under the 2015 Share Repurchase Program.

Following is a summary of the shares repurchased under the Company’s share repurchase programs:

NUMBER OF SHARES
(in thousands)
 
AVERAGE REPURCHASE PRICE PER SHARE
 
AMOUNT
(in thousands)
Thirteen weeks ended March 29, 2015 (1)
2,759

 
$
25.37

 
$
70,000

Thirteen weeks ended June 28, 2015
1,370

 
$
21.90

 
30,000

Thirteen weeks ended September 27, 2015
2,914

 
$
20.59

 
59,999

Total common stock repurchases
7,043

 
$
22.72

 
$
159,999

________________
(1)
Includes the repurchase of $70.0 million of the Company’s common stock in connection with the secondary public offering by Bain Capital in March 2015.

Shares repurchased are retired. The par value of the repurchased shares is deducted from common stock and the excess of the purchase price over the par value of the shares is recorded to Accumulated deficit.

Dividends - The Company declared and paid dividends per share during the periods presented as follows:
 
DIVIDENDS
PER SHARE
 
AMOUNT
(in thousands)
Thirteen weeks ended March 29, 2015
$
0.06

 
$
7,423

Thirteen weeks ended June 28, 2015
0.06

 
7,391

Thirteen weeks ended September 27, 2015
0.06

 
7,333

Total cash dividends declared and paid
$
0.18

 
$
22,147


In October 2015, the Board declared a quarterly cash dividend of $0.06 per share, payable on November 25, 2015 to shareholders of record at the close of business on November 13, 2015.

Accumulated Other Comprehensive Loss - Following are the components of Accumulated other comprehensive loss (“AOCL”):
(dollars in thousands)
SEPTEMBER 27, 2015
 
DECEMBER 28, 2014
Foreign currency translation adjustment
$
(131,976
)
 
$
(58,149
)
Unrealized losses on derivatives, net of tax
(8,330
)
 
(2,393
)
Accumulated other comprehensive loss
$
(140,306
)
 
$
(60,542
)

20
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

Following are the components of Other comprehensive (loss) income during the periods presented:
 
THIRTEEN WEEKS ENDED
 
THIRTY-NINE WEEKS ENDED
 
SEPTEMBER 27, 2015
 
SEPTEMBER 27, 2015
(dollars in thousands)
BLOOMIN’ BRANDS, INC.
 
NON- CONTROLLING INTERESTS
 
REDEEMABLE NON- CONTROLLING INTERESTS
 
BLOOMIN’ BRANDS, INC.
 
NON- CONTROLLING INTERESTS
 
REDEEMABLE NON- CONTROLLING INTERESTS
Foreign currency translation adjustment
$
(31,415
)
 
$
10

 
$
(2,752
)
 
$
(83,059
)
 
$
10

 
$
(2,752
)
Out-of period adjustment - foreign currency translation (1)
9,232

 
—

 
(9,232
)
 
9,232

 
—

 
(9,232
)
Total foreign currency translation adjustment
$
(22,183
)
 
$
10

 
$
(11,984
)
 
$
(73,827
)
 
$
10

 
$
(11,984
)
Unrealized losses on derivatives, net of tax (2)
$
(3,884
)
 
$
—

 
$
—

 
$
(7,052
)
 
$
—

 
$
—

Reclassification of adjustment for loss on derivatives included in net income, net of tax (3)
1,115

 
—

 
—

 
1,115

 
—

 
—

Total unrealized losses on derivatives, net of tax
$
(2,769
)
 
$
—

 
$
—

 
$
(5,937
)
 
$
—

 
$
—

Other comprehensive loss
$
(24,952
)
 
$
10

 
$
(11,984
)
 
$
(79,764
)
 
$
10

 
$
(11,984
)
 
THIRTEEN WEEKS ENDED
 
THIRTY-NINE WEEKS ENDED
 
SEPTEMBER 28, 2014
 
SEPTEMBER 28, 2014
(dollars in thousands)
BLOOMIN’ BRANDS, INC.
 
NON- CONTROLLING INTERESTS
 
REDEEMABLE NON- CONTROLLING INTERESTS
 
BLOOMIN’ BRANDS, INC.
 
NON- CONTROLLING INTERESTS
 
REDEEMABLE NON- CONTROLLING INTERESTS
Foreign currency translation adjustment
$
(2,754
)
 
$
—

 
$
—

 
$
10,969

 
$
—

 
$
—

Unrealized losses on derivatives, net of tax (2)
(486
)
 
—

 
—

 
(486
)
 
—

 
—

Other comprehensive (loss) income
$
(3,240
)
 
$
—

 
$
—

 
$
10,483

 
$
—

 
$
—

________________
(1)
In the third quarter of 2015, the Company identified and corrected errors in accounting for the allocation of foreign currency translation adjustments to Redeemable noncontrolling interests. See Note 1 - Description of the Business and Basis of Presentation for further details.
(2)
Amounts attributable to Bloomin’ Brands, Inc are net of tax benefit of $2.5 million and $4.5 million for the thirteen and thirty-nine weeks ended September 27, 2015, respectively, and $0.3 million for the thirteen and thirty-nine weeks ended September 28, 2014.
(3)
Amounts attributable to Bloomin’ Brands, Inc are net of tax benefit of $0.7 million for the thirteen and thirty-nine weeks ended September 27, 2015.

Noncontrolling Interests - In 2015, certain former equity holders of PGS Par contributed approximately $3.2 million to the Company for a noncontrolling interest in a new concept in Brazil (Abbraccio). Recognition of the noncontrolling interest was reflected in the Company’s Consolidated Statement of Stockholders’ Equity for the thirty-nine weeks ended September 27, 2015.

11.    Derivative Instruments and Hedging Activities

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages economic risks, including interest rate risk, primarily by managing the amount, sources and duration of its debt funding and through the use of derivative financial instruments. The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps.

21
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

DESIGNATED HEDGES
Cash Flow Hedges of Interest Rate Risk - On September 9, 2014, the Company entered into variable-to-fixed interest rate swap agreements with eight counterparties to hedge a portion of the cash flows of the Company’s variable rate debt. The swap agreements have an aggregate notional amount of $400.0 million, a start date of June 30, 2015, and mature on May 16, 2019. Under the terms of the swap agreements, the Company pays a weighted-average fixed rate of 2.02% on the $400.0 million notional amount and receives payments from the counterparty based on the 30-day LIBOR rate.

The interest rate swaps, which have been designated and qualify as a cash flow hedge, are recognized on the Company’s Consolidated Balance Sheets at fair value and are classified based on the instruments’ maturity dates. Fair value changes in the interest rate swaps are recognized in AOCL for all effective portions. Balances in AOCL are subsequently reclassified to earnings in the same period that the hedged interest payments affect earnings. The Company estimates $6.5 million will be reclassified as an increase to interest expense over the next twelve months.

The following table presents the fair value, accrued interest and classification of the Company’s interest rate swaps:
(dollars in thousands)
SEPTEMBER 27,
2015
 
DECEMBER 28,
2014
 
CONSOLIDATED BALANCE SHEET CLASSIFICATION
Interest rate swaps - liability
$
6,104

 
$
2,617

 
Accrued and other current liabilities
Interest rate swaps - liability
7,552

 
1,307

 
Other long-term liabilities, net
Total fair value of derivative instruments (1)
$
13,656

 
$
3,924

 
 
 
 
 
 
 
 
Accrued interest
$
627

 
$
—

 
Accrued and other current liabilities
____________________
(1)
See Note 12 - Fair Value Measurements for fair value discussion of the interest rate swaps.

The following table summarizes the effects of the interest rate swap on Net income (loss) for the thirteen and thirty-nine weeks ended September 27, 2015 and September 28, 2014:
 
THIRTEEN WEEKS ENDED
 
THIRTY-NINE WEEKS ENDED
(dollars in thousands)
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
 
SEPTEMBER 27,
2015
 
SEPTEMBER 28,
2014
Interest rate swap expense recognized in Interest expense, net (1)
$
(1,828
)
 
$
—

 
$
(1,828
)
 
$
—

Income tax benefit recognized in (Provision) benefit for income taxes
713

 
—

 
713

 
—

Total effects of the interest rate swaps on Net income (loss)
$
(1,115
)
 
$
—

 
$
(1,115
)
 
$
—

____________________
(1)
During the thirteen and thirty-nine weeks ended September 27, 2015 and September 28, 2014, the Company did not recognize any gain or loss as a result of hedge ineffectiveness.

The Company records its derivatives on the Consolidated Balance Sheets on a gross balance basis. The Company’s derivatives are subject to master netting arrangements. As of September 27, 2015, the Company did not have more than one derivative between the same counterparties and as such, there was no netting.

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 27, 2015, all counterparties to the interest rate swaps had performed in accordance with their contractual obligations.


22
Table of Contents
BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - Continued

As of September 27, 2015, the fair value of the Company’s derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, was $14.6 million. As of September 27, 2015, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions as of September 27, 2015, it could have been required to settle its obligations under the agreements at their termination value of $14.6 million.

12.    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 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 September 27, 2015 and December 28, 2014:
 
SEPTEMBER 27, 2015
 
DECEMBER 28, 2014
(dollars in thousands)
TOTAL
 
LEVEL 1
 
LEVEL 2
 
TOTAL
 
LEVEL 1
 
LEVEL 2
Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
Fixed income funds
$
3,888

 
$
3,888

 
$
—

 
$
4,602

 
$
4,602

 
$
—

Money market funds
9,741

 
9,741

 
—

 
7,842

 
7,842

 
—

Restricted cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
Fixed income funds
551

 
551

 
—

 
—

 
—

 
—

Money market funds
65

 
65

 
—

 
3,360

 
3,360

 
—

Total asset recurring fair value measurements
$
14,245

 
$
14,245

 
$
—

 
$
15,804

 
$
15,804

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Accrued and other current liabilities:
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments - interest rate swaps
$
6,104

 
$
—

 
$
6,104

 
$
2,617

 
$
—

 
$
2,617

Derivative instruments - commodities
577

 
—

 
577

 
566

 
—

 
566

Other long-term liabilities:
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments - interest rate swaps
7,552

 
—

 
7,552

 
1,307

 
—

 
1,307

Total liability recurring fair value measurements
$
14,233