Edgar Filing: Bloomin' Brands, Inc.

Document

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 April 1, 2018
	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)		(IRS 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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 Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 May 3, 2018, 92,830,371 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 April 1, 2018

(Unaudited)

TABLE OF CONTENTS



	PART I — FINANCIAL INFORMATION	Page No.

Item 1.	Financial Statements (Unaudited)	3

	Consolidated Financial Statements:

	Consolidated Balance Sheets — April 1, 2018 and December 31, 2017	3

	Consolidated Statements of Operations and Comprehensive Income — For the Thirteen Weeks Ended April 1, 2018 and March 26, 2017	4

	Consolidated Statements of Changes in Stockholders’ Equity — For the Thirteen Weeks Ended April 1, 2018 and March 26, 2017	5

	Condensed Consolidated Statements of Cash Flows — For the Thirteen Weeks Ended April 1, 2018 and March 26, 2017	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.	Controls and Procedures	46

	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 6.	Exhibits	48

	Signature	49

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)



	APRIL 1, 2018			DECEMBER 31, 2017
ASSETS
Current Assets
Cash and cash equivalents	$	105,840		$	128,263
Current portion of restricted cash and cash equivalents	—			1,280
Inventories	50,182			51,264
Other current assets, net	115,269			179,402
Total current assets	271,291			360,209
Property, fixtures and equipment, net	1,166,960			1,173,414
Goodwill	310,824			310,234
Intangible assets, net	519,147			522,290
Deferred income tax assets, net	58,427			60,486
Other assets, net	127,619			135,261
Total assets	$	2,454,268		$	2,561,894

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	172,310		$	185,461
Accrued and other current liabilities	233,719			270,840
Unearned revenue	235,731			330,756
Current portion of long-term debt	25,620			26,335
Total current liabilities	667,380			813,392
Deferred rent	162,497			160,047
Deferred income tax liabilities	17,159			16,926
Long-term debt, net	1,116,570			1,091,769
Deferred gain on sale-leaseback transactions, net	185,017			188,086
Other long-term liabilities, net	197,210			210,443
Total liabilities	2,345,833			2,480,663
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 April 1, 2018 and December 31, 2017	—			—
Common stock, $0.01 par value, 475,000,000 shares authorized; 91,415,604 and 91,912,546 shares issued and outstanding as of April 1, 2018 and December 31, 2017, respectively	914			919
Additional paid-in capital	1,092,147			1,081,813
Accumulated deficit	(898,768		)	(913,191		)
Accumulated other comprehensive loss	(96,636		)	(99,199		)
Total Bloomin’ Brands stockholders’ equity	97,657			70,342
Noncontrolling interests	10,778			10,889
Total stockholders’ equity	108,435			81,231
Total liabilities and stockholders’ equity	$	2,454,268		$	2,561,894

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

Table of Contents

BLOOMIN’ BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)



	THIRTEEN WEEKS ENDED
	APRIL 1, 2018			MARCH 26, 2017
Revenues
Restaurant sales	$	1,099,003		$	1,143,831
Franchise and other revenues	17,462			10,880
Total revenues	1,116,465			1,154,711
Costs and expenses
Cost of sales	352,132			364,748
Labor and other related	311,062			324,398
Other restaurant operating	253,345			251,124
Depreciation and amortization	50,120			46,590
General and administrative	68,696			71,941
Provision for impaired assets and restaurant closings	2,739			19,076
Total costs and expenses	1,038,094			1,077,877
Income from operations	78,371			76,834
Other income (expense), net	1			(51		)
Interest expense, net	(10,310		)	(9,141		)
Income before provision for income taxes	68,062			67,642
Provision for income taxes	1,925			18,004
Net income	66,137			49,638
Less: net income attributable to noncontrolling interests	739			1,013
Net income attributable to Bloomin’ Brands	$	65,398		$	48,625

Net income	$	66,137		$	49,638
Other comprehensive income:
Foreign currency translation adjustment, net of tax	1,349			20,489
Unrealized gain on derivatives, net of tax	888			101
Reclassification of adjustment for loss on derivatives included in Net income, net of tax	308			784
Comprehensive income	68,682			71,012
Less: comprehensive income attributable to noncontrolling interests	721			925
Comprehensive income attributable to Bloomin’ Brands	$	67,961		$	70,087

Earnings per share:
Basic	$	0.71		$	0.47
Diluted	$	0.68		$	0.46
Weighted average common shares outstanding:
Basic	92,268			103,074
Diluted	95,782			106,413

Cash dividends declared per common share	$	0.09		$	0.08

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

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			ADDITIONAL PAID-IN CAPITAL			ACCUM-ULATED DEFICIT			ACCUMULATED OTHER COMPREHENSIVE LOSS			NON-CONTROLLING INTERESTS			TOTAL
Balance, December 31, 2017	91,913		$	919		$	1,081,813		$	(913,191	)	$	(99,199	)	$	10,889		$	81,231
Net income	—		—			—			65,398			—			818			66,216
Other comprehensive income (loss), net of tax	—		—			—			—			2,563			(18		)	2,545
Cash dividends declared, $0.09 per common share	—		—			(8,371		)	—			—			—			(8,371		)
Repurchase and retirement of common stock	(2,116	)	(21		)	—			(50,975		)	—			—			(50,996		)
Stock-based compensation	—		—			5,121			—			—			—			5,121
Common stock issued under stock plans (1)	1,619		16			13,663			—			—			—			13,679
Change in the redemption value of redeemable interests	—		—			(79		)	—			—			—			(79		)
Distributions to noncontrolling interests	—		—			—			—			—			(1,069		)	(1,069		)
Contributions from noncontrolling interests	—		—			—			—			—			158			158
Balance, April 1, 2018	91,416		$	914		$	1,092,147		$	(898,768	)	$	(96,636	)	$	10,778		$	108,435

															(CONTINUED...)

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			ADDITIONAL PAID-IN CAPITAL			ACCUM-ULATED DEFICIT			ACCUMULATED OTHER COMPREHENSIVE LOSS			NON- CONTROLLING INTERESTS			TOTAL
Balance, December 25, 2016	103,922		$	1,039		$	1,079,583		$	(756,070	)	$	(111,143	)	$	12,654		$	226,063
Net income	—		—			—			48,625			—			1,068			49,693
Other comprehensive income (loss), net of tax	—		—			—			—			21,462			(93		)	21,369
Cash dividends declared, $0.08 per common share	—		—			(8,254		)	—			—			—			(8,254		)
Repurchase and retirement of common stock	(2,887	)	(29		)	—			(53,024		)	—			—			(53,053		)
Stock-based compensation	—					5,990			—			—			—			5,990
Common stock issued under stock plans (1)	445		5			225			(143		)	—			—			87
Purchase of noncontrolling interests, net of tax of $45	—		—			(71		)	—			—			59			(12		)
Distributions to noncontrolling interests	—		—			—			—			—			(2,013		)	(2,013		)
Contributions from noncontrolling interests	—		—			—			—			—			339			339
Cumulative-effect from a change in accounting principle	—		—			—			14,364			—			—			14,364
Balance, March 26, 2017	101,480		$	1,015		$	1,077,473		$	(746,248	)	$	(89,681	)	$	12,014		$	254,573

________________


(1)	Net of forfeitures and shares withheld for employee taxes.

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

Table of Contents

BLOOMIN’ BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS, UNAUDITED)



	THIRTEEN WEEKS ENDED
	APRIL 1, 2018			MARCH 26, 2017
Cash flows provided by operating activities:
Net income	$	66,137		$	49,638
Adjustments to reconcile Net income to cash provided by operating activities:
Depreciation and amortization	50,120			46,590
Amortization of deferred discounts and issuance costs	643			1,004
Amortization of deferred gift card sales commissions	9,415			7,902
Provision for impaired assets and restaurant closings	2,739			19,076
Stock-based and other non-cash compensation expense	6,058			6,672
Deferred income tax expense	126			2,195
Recognition of deferred gain on sale-leaseback transactions	(3,069		)	(2,897		)
Other non-cash items, net	114			684
Change in assets and liabilities	(80,748		)	5,334
Net cash provided by operating activities	51,535			136,198
Cash flows used in investing activities:
Proceeds from sale-leaseback transactions, net	—			38,776
Capital expenditures	(48,347		)	(58,237		)
Other investments, net	2,137			(1,120		)
Net cash used in investing activities	(46,210		)	(20,581		)
Cash flows used in financing activities:
Repayments of long-term debt	(6,436		)	(42,878		)
Proceeds from borrowings on revolving credit facilities, net	151,829			115,500
Repayments of borrowings on revolving credit facilities	(122,000		)	(160,500		)
Proceeds from failed sale-leaseback transactions, net	—			5,942
Proceeds from the exercise of share-based compensation	13,679			230
Distributions to noncontrolling interests	(1,069		)	(2,013		)
Contributions from noncontrolling interests	158			339
Purchase of limited partnership and noncontrolling interests	(1,444		)	(3,158		)
Repayments of partner deposits and accrued partner obligations	(4,432		)	(6,367		)
Repurchase of common stock	(50,996		)	(53,196		)
Cash dividends paid on common stock	(8,371		)	(8,254		)
Net cash used in financing activities	(29,082		)	(154,355		)
Effect of exchange rate changes on cash and cash equivalents	54			1,740
Net decrease in cash, cash equivalents and restricted cash	(23,703		)	(36,998		)
Cash, cash equivalents and restricted cash as of the beginning of the period	129,543			136,186
Cash, cash equivalents and restricted cash as of the end of the period	$	105,840		$	99,188
Supplemental disclosures of cash flow information:
Cash paid for interest	$	9,401		$	8,334
Cash paid for income taxes, net of refunds	1,696			4,906
Supplemental disclosures of non-cash investing and financing activities:
Decrease in liabilities from the acquisition of property, fixtures and equipment or capital leases	$	(4,985	)	$	(4,139	)

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

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. The Company’s restaurant portfolio has four concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Each of the Company’s concepts has additional restaurants in which it has no direct investment and are operated under franchise agreements.

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 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, 2017.

Recently Adopted Financial Accounting Standards - On January 1, 2018, the Company elected to early adopt Accounting Standards Update (“ASU”) No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” (“ASU No. 2017-04”) on a prospective basis. ASU No. 2017-04 eliminates the second step of goodwill impairment, which requires a hypothetical purchase price allocation. Under ASU No. 2017-04, goodwill impairment is calculated as the amount a reporting unit’s carrying value exceeds its calculated fair value. The adoption of ASU No. 2017-04 did not impact the Company’s Consolidated Financial Statements. Goodwill and indefinite-lived intangible assets are tested for impairment annually, as of the first day of the second fiscal quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

On January 1, 2018, the Company adopted ASU No. 2014-09 “Revenue Recognition (Topic 606), Revenue from Contracts with Customers” (“ASU No. 2014-09”) using the full retrospective transition method. 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. The standard also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. Under the new standard, the Company recognizes gift card breakage proportional to redemptions, which are highest in the Company’s first fiscal quarter. Previously, under the remote method, the majority of breakage revenue was recorded in the Company’s fourth fiscal quarter corresponding with the timing of the original gift card sale. Advertising fees charged to franchisees, which were previously recorded as a reduction to Other restaurant operating expenses, are recognized as Franchise revenue. In addition, initial franchise and renewal fees are recognized over the term of the franchise agreements. As part of the adoption of ASU No. 2014-09, the Company applied the practical expedient to use the portfolio approach to assess contracts and performance obligations. In connection with adoption of ASU No. 2014-09, a cumulative effect adjustment of $33.1 million, net of tax, was recorded as a credit to the ending balance of Accumulated deficit as of December 27, 2015.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

The following table includes a restatement of the Company’s Consolidated Statement of Operations and Comprehensive Income for the thirteen weeks ended March 26, 2017 for the retrospective adoption of ASU No. 2014-09:



	THIRTEEN WEEKS ENDED
	MARCH 26, 2017
(dollars in thousands, except per share data)	AS REPORTED		2014-09 IMPACT		AS RESTATED
Revenues
Restaurant sales	$	1,135,488	$	8,343	$	1,143,831
Franchise and other revenues	8,335		2,545		10,880
Total revenues	$	1,143,823	$	10,888	$	1,154,711
Costs and expenses
Other restaurant operating	$	247,940	$	3,184	$	251,124
Income from operations	$	69,130	$	7,704	$	76,834
Income before provision for income taxes	$	59,938	$	7,704	$	67,642
Provision for income taxes	$	15,015	$	2,989	$	18,004
Net income	$	44,923	$	4,715	$	49,638
Net income attributable to Bloomin’ Brands	$	43,910	$	4,715	$	48,625

Basic earnings per share	$	0.43	$	0.05	$	0.47
Diluted earnings per share	$	0.41	$	0.04	$	0.46

The following table includes a restatement of the Company’s Consolidated Balance Sheet as of December 31, 2017 for the retrospective adoption of ASU No. 2014-09:



	DECEMBER 31, 2017
(dollars in thousands)	AS REPORTED			2014-09 IMPACT			AS RESTATED
ASSETS
Deferred income tax assets, net	$	71,499		$	(11,013	)	$	60,486
Total assets	$	2,572,907		$	(11,013	)	$	2,561,894
LIABILITIES AND STOCKHOLDERS’ EQUITY
Unearned revenue
Deferred gift card revenue	$	371,455		$	(47,827	)	$	323,628
Deferred loyalty revenue	6,667			—			6,667
Deferred franchise fees - current	105			356			461
Total Unearned revenue	378,227			(47,471		)	330,756
Total current liabilities	860,863			(47,471		)	813,392
Other long-term liabilities, net (1)	205,745			4,698			210,443
Total liabilities	2,523,436			(42,773		)	2,480,663
Bloomin’ Brands Stockholders’ Equity
Accumulated deficit	(944,951		)	31,760			(913,191		)
Total Bloomin’ Brands stockholders’ equity	$	38,582		$	31,760		$	70,342
Total stockholders’ equity	49,471			31,760			81,231
Total liabilities and stockholders’ equity	$	2,572,907		$	(11,013	)	$	2,561,894

____________________


(1)	Includes the non-current portion of deferred franchise fees.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

See Note 2 - Revenue Recognition for required disclosures under ASU No. 2014-09.

Effective June 26, 2017, the Company adopted ASU No. 2016-18, “Statement of Cash Flows (Topic 230), Restricted Cash” (“ASU No. 2016-18”). ASU No. 2016-18 provides guidance on the presentation of restricted cash and restricted cash equivalents, which are now included with cash and cash equivalents when reconciling the beginning and ending cash amounts shown on the statements of cash flows. Using the retrospective transition method required under the standard, the Company has adjusted the presentation of its Condensed Consolidated Statements of Cash Flows for all periods presented. The adoption of ASU No. 2016-18 did not have any other impact on the Company’s Consolidated Financial Statements.

The following table provides additional details by financial statement line item of the restated presentation in the Company’s Condensed Consolidated Statement of Cash Flows for the thirteen weeks ended March 26, 2017:



	THIRTEEN WEEKS ENDED
	MARCH 26, 2017
(dollars in thousands)	AS REPORTED			2016-18 IMPACT			AS RESTATED
Cash flows used in investing activities:
Decrease in restricted cash	$	14,079		$	(14,079	)	$	—
Increase in restricted cash	$	(5,873	)	$	5,873		$	—
Net cash used in investing activities	$	(12,375	)	$	(8,206	)	$	(20,581	)

Net decrease in cash, cash equivalents and restricted cash	$	(28,793	)	$	(8,205	)	$	(36,998	)
Cash, cash equivalents and restricted cash as of the beginning of the period	127,176			9,010			136,186
Cash, cash equivalents and restricted cash as of the end of the period	$	98,383		$	805		$	99,188

Recently Issued Financial Accounting Standards Not Yet Adopted - In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02: “Leases (Topic 842)” (“ASU No. 2016-02”). ASU No. 2016-02 requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. ASU No. 2016-02 is effective for the Company in 2019 and must be adopted using a modified retrospective approach. The Company has begun evaluating and planning for adoption and implementation of ASU No. 2016-02, including selecting a new lease accounting system, evaluating practical expedients and accounting policy elections, and assessing the overall financial statement impact. The Company expects the adoption of ASU No. 2016-02 to have a significant impact on its Consolidated Balance Sheets due to recognition of right-of-use assets and lease liabilities for operating leases. The Company’s evaluation of ASU No. 2016-02 is ongoing and may identify additional impacts on its Consolidated Financial Statements and related disclosures.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU No. 2017-12”) which provides guidance for reporting the economic results of hedging activities and to simplify the disclosures of risk exposures and hedging strategies. ASU No. 2017-12 will be effective for the Company in 2019, with early adoption permitted and is not expected to have a material impact on the Company’s Consolidated Financial Statements and related disclosures.

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.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

2. Revenue Recognition

The Company records food and beverage revenues, net of discounts and taxes, upon sale. Franchise-related revenues are included in Franchise and other revenues in the Company’s Consolidated Statements of Operations and Comprehensive Income. Royalties, which are a percentage of net sales of the franchisee, are recognized as income when earned. The following table includes the categories of revenue included in the Company’s Consolidated Statement of Operations and Comprehensive Income for the periods indicated:



	THIRTEEN WEEKS ENDED
	APRIL 1, 2018		MARCH 26, 2017
(dollars in thousands)			(Restated) (1)
Revenues
Restaurant sales	$	1,099,003	$	1,143,831
Franchise and other revenues:
Franchise revenue	$	14,215	$	9,097
Other revenue	3,247		1,783
Total Franchise and other revenues	$	17,462	$	10,880
Total revenues	$	1,116,465	$	1,154,711

____________________


(1)	See Note 1 - Description of the Business and Basis of Presentation for details of the impact of implementing ASU No. 2014-09.

The following table includes the disaggregation of Restaurant sales and Franchise revenue, by restaurant concept and major international market, for the periods indicated:



	THIRTEEN WEEKS ENDED				THIRTEEN WEEKS ENDED
	APRIL 1, 2018				MARCH 26, 2017
	RESTAURANT SALES		FRANCHISE REVENUE		RESTAURANT SALES		FRANCHISE REVENUE
U.S.					(Restated) (1)		(Restated) (1)
Outback Steakhouse (2)	$	571,479	$	11,074	$	611,475	$	6,234
Carrabba’s Italian Grill (2)	173,927		147		182,650		89
Bonefish Grill	156,849		240		163,644		259
Fleming’s Prime Steakhouse & Wine Bar	80,990		—		77,786		—
Other	1,099		—		—		—
U.S. Total	$	984,344	$	11,461	$	1,035,555	$	6,582
International
Outback Steakhouse-Brazil	$	95,123	—		$	90,890	$	—
Other	19,536		2,754		17,386		2,515
International Total	$	114,659	$	2,754	$	108,276	$	2,515
Total	$	1,099,003	$	14,215	$	1,143,831	$	9,097

____________________


(1)	See Note 1 - Description of the Business and Basis of Presentation for details of the impact of implementing ASU No. 2014-09.


(2)	In 2017, the Company sold 53 Outback Steakhouse restaurants and one Carrabba’s Italian Grill restaurant, which are now operated as franchises.

Gift Card Revenue - Proceeds from the sale of gift cards, which do not have expiration dates, are recorded as deferred revenue and recognized as revenue upon redemption by the customer. Gift cards sold at a discount are recorded as revenue upon redemption of the associated gift cards at an amount net of the related discount. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized using estimates based on historical redemption patterns.

Table of Contents

BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

If actual redemptions vary from the estimated breakage, gift card breakage income may differ from the amount recorded. The Company periodically updates its estimates used for breakage. Gift card sales that are accompanied by a bonus card to be used by the customer at a future visit result in a separate deferral of a portion of the original gift card sale. Revenue is recorded when the bonus card is redeemed at the estimated fair market value of the bonus card. Approximately 87% of the current deferred gift card revenue is expected to be recognized over the next 12 months.

Gift card sales commissions paid to third-party providers are initially capitalized and subsequently amortized to Other restaurant operating expenses upon redemption of the associated gift card.

Advertising Fees - Advertising fees charged to franchisees are recognized as Franchise revenue in the Company’s Consolidated Statements of Operations and Comprehensive Income.

Franchise Fees - Initial franchise and renewal fees are recognized over the term of the franchise agreement and renewal period, respectively. The weighted average remaining term of franchise agreements and renewal periods was approximately 15 years as of April 1, 2018.

Loyalty Program - The Company maintains a customer loyalty program, Dine Rewards, in the U.S., where customers have the ability to earn a reward after a number of qualified visits. The Company has developed an estimated value of the partial reward earned from each qualified visit, which is recorded as deferred revenue. Each reward has a maximum value and must be redeemed within three months of earning such reward. The revenue associated with the fair value of the qualified visit is recognized upon the earlier of redemption or expiration of the reward.

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)	APRIL 1, 2018		DECEMBER 31, 2017
Other current assets, net
Deferred gift card sales commissions	$	10,039	$	16,231

Unearned revenue
Deferred gift card revenue (1)	$	227,783	$	323,628
Deferred loyalty revenue	7,377		6,667
Deferred franchise fees - current (1)	571		461
Total Unearned revenue	$	235,731	$	330,756

Other long-term liabilities, net
Deferred franchise fees - non-current (1)	$	4,686	$	4,698

____________________


(1)	See Note 1 - Description of the Business and Basis of Presentation for details of the impact of implementing ASU No. 2014-09 on the Company’s Consolidated Balance Sheet as of December 31, 2017.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

The following table is a rollforward of deferred gift card sales commissions for the periods indicated:



	THIRTEEN WEEKS ENDED
(dollars in thousands)	APRIL 1, 2018			MARCH 26, 2017
Balance, beginning of period	$	16,231		$	15,584
Deferred gift card sales commissions amortization	(9,415		)	(7,902		)
Deferred gift card sales commissions capitalization	3,858			3,730
Other	(635		)	(1,186		)
Balance, end of period	$	10,039		$	10,226

The following table is a rollforward of unearned gift card revenue for the periods indicated:



	THIRTEEN WEEKS ENDED
(dollars in thousands)	APRIL 1, 2018			MARCH 26, 2017
Balance, beginning of period	$	323,628		$	331,803
Gift card sales	56,285			58,870
Gift card redemptions	(144,556		)	(164,153		)
Gift card breakage (1)	(7,574		)	(8,648		)
Balance, end of period	$	227,783		$	217,872

____________________


(1)	See Note 1 - Description of the Business and Basis of Presentation for details of the impact of implementing ASU No. 2014-09 for the thirteen weeks ended March 26, 2017.

3. Impairments and Exit Costs

The components of Provision for impaired assets and restaurant closings are as follows:



	THIRTEEN WEEKS ENDED
(dollars in thousands)	APRIL 1, 2018		MARCH 26, 2017
Impairment losses
U.S.	$	111	$	920
International	2,160		—
Total impairment losses	$	2,271	$	920
Restaurant closure expenses
U.S.	$	348	$	18,156
International	120		—
Total restaurant closure expenses	$	468	$	18,156
Provision for impaired assets and restaurant closings	$	2,739	$	19,076

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

Closure Initiatives and Restructuring Costs - In 2017, the Company decided to close certain underperforming restaurants in the U.S. and certain Abbraccio restaurants outside of the core markets of São Paulo and Rio de Janeiro in Brazil and in 2016 the Company decided to close certain Bonefish Grill restaurants (collectively, the “Closure Initiatives”). Following is a summary of expenses related to the Closure Initiatives recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income for the periods indicated:



		THIRTEEN WEEKS ENDED
(dollars in thousands)	INCOME STATEMENT LOCATION	APRIL 1, 2018		MARCH 26, 2017
Impairment, facility closure and other expenses (1)	Provision for impaired assets and restaurant closings	$	25	$	18,256
Severance and other expenses	General and administrative	122		2,182
Reversal of deferred rent liability	Other restaurant operating	—		(4,941		)
Total		$	147	$	15,497

________________


(1)	Impairments related to the Closure Initiatives for the thirteen weeks ended April 1, 2018 and March 26, 2017 were recognized within the U.S. segment.

The remaining restaurant impairment and closing charges resulted primarily from the carrying value of a restaurant’s assets exceeding its estimated fair market value, primarily due to locations identified for remodel, relocation or closure.

Projected Future Expenses and Cash Expenditures - The Company currently expects to incur additional charges for the Closure Initiatives over the next year, including costs associated with lease obligations, employee terminations and other closure-related obligations. Following is a summary of remaining estimated pre-tax expense and future cash expenditures, by type, as of April 1, 2018:



Estimated future expense (dollars in millions)	CLOSURE INITIATIVES
Lease related liabilities, net of subleases	$	3.3	to	$	5.1
Employee severance and other obligations	0.3		to	0.9
Total estimated future expense	$	3.6	to	$	6.0

Total estimated future cash expenditures (dollars in millions)	$	22.2	to	$	29.0

Total future undiscounted cash expenditures for the Closure Initiatives, primarily related to lease liabilities, are expected to occur over the remaining lease terms with the final term ending in January 2029.

Accrued Facility Closure and Other Costs Rollforward - The following table summarizes the Company’s accrual activity related to facility closure and other costs, primarily associated with the Closure Initiatives, during the thirteen weeks ended April 1, 2018:



	THIRTEEN WEEKS ENDED
(dollars in thousands)	APRIL 1, 2018
Balance, beginning of the period	$	22,709
Charges	1,436
Cash payments	(1,657		)
Adjustments	(968		)
Balance, end of the period (1)	$	21,520

________________


(1)	As of April 1, 2018, the Company had exit-related accruals of $6.1 million recorded in Accrued and other current liabilities and $15.4 million recorded in Other long-term liabilities, net in the Consolidated Balance Sheet.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

4. Earnings Per Share

The following table presents the computation of basic and diluted earnings per share:



	THIRTEEN WEEKS ENDED
	APRIL 1, 2018		MARCH 26, 2017
(in thousands, except per share data)			(Restated) (1)
Net income attributable to Bloomin’ Brands	$	65,398	$	48,625

Basic weighted average common shares outstanding	92,268		103,074

Effect of diluted securities:
Stock options	2,950		2,933
Nonvested restricted stock and restricted stock units	524		354
Nonvested performance-based share units	40		52
Diluted weighted average common shares outstanding	95,782		106,413

Basic earnings per share	$	0.71	$	0.47
Diluted earnings per share	$	0.68	$	0.46

____________________


(1)	See Note 1 - Description of the Business and Basis of Presentation for details of the impact of implementing ASU No. 2014-09.

Dilutive securities outstanding not included in the computation of earnings per share because their effect was antidilutive were as follows:



	THIRTEEN WEEKS ENDED
(shares in thousands)	APRIL 1, 2018	MARCH 26, 2017
Stock options	1,950	5,566
Nonvested restricted stock and restricted stock units	111	191
Nonvested performance-based share units	162	371

5. Stock-based Compensation Plans

The Company recognized stock-based compensation expense as follows:



	THIRTEEN WEEKS ENDED
(dollars in thousands)	APRIL 1, 2018		MARCH 26, 2017
Stock options	$	1,897	$	2,755
Restricted stock and restricted stock units	2,332		2,553
Performance-based share units	596		416
	$	4,825	$	5,724

During the thirteen weeks ended April 1, 2018, the Company made grants to its employees of 0.5 million stock options, 0.3 million time-based restricted stock units and 0.2 million performance-based share units.

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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:



	THIRTEEN WEEKS ENDED
	APRIL 1, 2018			MARCH 26, 2017
Assumptions:
Weighted-average risk-free interest rate (1)	2.66		%	1.93		%
Dividend yield (2)	1.50		%	1.85		%
Expected term (3)	5.8 years			6.3 years
Weighted-average volatility (4)	32.76		%	33.74		%

Weighted-average grant date fair value per option	$	7.23		$	5.05

________________


(1)	Risk-free interest rate is the U.S. Treasury yield curve in effect as of the grant date for periods within the expected term of the option.


(2)	Dividend yield is the level of dividends expected to 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 Company estimates the expected term based on historical exercise experience for its stock options.


(4)	Based on the historical volatility of the Company’s stock.

The following represents unrecognized stock compensation expense and the remaining weighted-average vesting period as of April 1, 2018:



	UNRECOGNIZED COMPENSATION EXPENSE (dollars in thousands)		REMAINING WEIGHTED-AVERAGE VESTING PERIOD (in years)
Stock options	$	13,290	2.7
Restricted stock and restricted stock units	$	20,676	2.8
Performance-based share units	$	6,253	1.4

As of April 1, 2018, the maximum number of shares of common stock available for issuance pursuant to the Bloomin’ Brands, Inc. 2016 Omnibus Incentive Compensation Plan was 4,330,569.

6. Other Current Assets, Net

Other current assets, net, consisted of the following:



	APRIL 1, 2018		DECEMBER 31, 2017
(dollars in thousands)			(Restated) (1)
Prepaid expenses	$	46,113	$	40,688
Accounts receivable - gift cards, net	8,732		66,361
Accounts receivable - vendors, net	8,379		19,483
Accounts receivable - franchisees, net	3,018		2,017
Accounts receivable - other, net	19,129		22,808
Deferred gift card sales commissions	10,039		16,231
Assets held for sale	5,204		6,217
Other current assets, net	14,655		5,597
	$	115,269	$	179,402

____________________


(1)	See Note 1 - Description of the Business and Basis of Presentation for details of the impact of implementing ASU No. 2014-09.

Table of Contents

BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

7. Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following:



(dollars in thousands)	APRIL 1, 2018		DECEMBER 31, 2017
Accrued payroll and other compensation	$	93,629	$	113,636
Accrued insurance	24,347		23,482
Other current liabilities	115,743		133,722
	$	233,719	$	270,840

8. Long-term Debt, Net

Following is a summary of outstanding long-term debt:



	APRIL 1, 2018					DECEMBER 31, 2017
(dollars in thousands)	OUTSTANDING BALANCE			INTEREST RATE		OUTSTANDING BALANCE			INTEREST RATE
Senior Secured Credit Facility:
Term loan A (1)	$	493,750		3.54	%	$	500,000		3.27	%
Revolving credit facility (1)	631,000			3.53	%	600,000			3.26	%
Total Senior Secured Credit Facility	$	1,124,750				$	1,100,000
Financing obligations	19,575			7.65% to 7.82%		19,579			7.52% to 7.82%
Capital lease obligations	1,892					2,015
Other notes payable	141			1.03% to 2.18%		904			0.00% to 2.18%
Less: unamortized debt discount and issuance costs	(4,168		)			(4,394		)
Total debt, net	$	1,142,190				$	1,118,104
Less: current portion of long-term debt	(25,620		)			(26,335		)
Long-term debt, net	$	1,116,570				$	1,091,769

________________


(1)	Represents the weighted-average interest rate for the respective period.

Debt Covenants - As of April 1, 2018 and December 31, 2017, the Company was in compliance with its debt covenants.


9.	Stockholders’ Equity

Share Repurchases - On February 16, 2018, the Company’s Board of Directors (the “Board”) canceled the remaining $55.0 million of authorization under the 2017 Share Repurchase Program and approved a new $150.0 million authorization (the “2018 Share Repurchase Program”). The 2018 Share Repurchase Program will expire on August 16, 2019.

Following is a summary of the shares repurchased under the Company’s share repurchase program during fiscal year 2018:



	NUMBER OF SHARES (in thousands)	AVERAGE REPURCHASE PRICE PER SHARE		AMOUNT (dollars in thousands)
First fiscal quarter (1)	2,116	$	24.10	$	50,996

________________


(1)	Excludes the repurchase of 0.2 million shares for $4.0 million pursuant to trades executed in, but not settled until after, the thirteen weeks ended April 1, 2018.

Table of Contents

BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

Dividends - The Company declared and paid dividends per share during fiscal year 2018 as follows:



	DIVIDENDS PER SHARE		AMOUNT (dollars in thousands)
First fiscal quarter	$	0.09	$	8,371

In April 2018, the Board declared a quarterly cash dividend of $0.09 per share, payable on May 18, 2018, to shareholders of record at the close of business on May 7, 2018.

Accumulated Other Comprehensive Loss - Following are the components of Accumulated other comprehensive loss:



(dollars in thousands)	APRIL 1, 2018			DECEMBER 31, 2017
Foreign currency translation adjustment	$	(97,206	)	$	(98,573	)
Unrealized gains (losses) on derivatives, net of tax	570			(626		)
Accumulated other comprehensive loss	$	(96,636	)	$	(99,199	)

Following are the components of the Company’s Other comprehensive income during the periods presented:



	THIRTEEN WEEKS ENDED
(dollars in thousands)	APRIL 1, 2018		MARCH 26, 2017
Foreign currency translation adjustment, net of tax (1)	$	1,367	$	20,577

Unrealized gain on derivatives, net of tax (2)	$	888	$	101
Reclassification of adjustment for loss on derivatives included in Net income, net of tax (3)	308		784
Total unrealized gain on derivatives, net of tax	$	1,196	$	885
Other comprehensive income attributable to Bloomin’ Brands	$	2,563	$	21,462

________________


(1)	Foreign currency translation adjustment is net of tax of $0.1 million for the thirteen weeks ended April 1, 2018.


(2)	Unrealized gain on derivatives is net of tax of $0.3 million and $0.1 million for the thirteen weeks ended April 1, 2018 and March 26, 2017, respectively.


(3)	Reclassifications of adjustments for losses on derivatives are net of tax of $0.1 million and $0.5 million for the thirteen weeks ended April 1, 2018 and March 26, 2017, respectively.

10. Derivative Instruments and Hedging Activities

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.

Table of Contents

BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

The following table presents the fair value and classification of the Company’s interest rate swaps:



(dollars in thousands)	APRIL 1, 2018		DECEMBER 31, 2017		CONSOLIDATED BALANCE SHEET CLASSIFICATION
Interest rate swaps - asset	$	449	$	—	Other current assets, net
Interest rate swaps - asset	219		67		Other assets, net
Total fair value of derivative instruments - assets (1)	$	668	$	67

Interest rate swaps - liability (1)	$	—	$	1,010	Accrued and other current liabilities

____________________


(1)	See Note 11 - Fair Value Measurements for fair value discussion of the interest rate swaps.

The following table summarizes the effects of the interest rate swaps on Net income for the periods indicated:



	THIRTEEN WEEKS ENDED
(dollars in thousands)	APRIL 1, 2018			MARCH 26, 2017
Interest rate swap expense recognized in Interest expense, net (1)	$	(415	)	$	(1,265	)
Income tax benefit recognized in Provision for income taxes	107			481
Total effects of the interest rate swaps on Net income	$	(308	)	$	(784	)

____________________


(1)	During the thirteen weeks ended April 1, 2018 and March 26, 2017, the Company did not recognize any gain or loss as a result of hedge ineffectiveness.

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

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

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 dates indicated:



	APRIL 1, 2018						DECEMBER 31, 2017
(dollars in thousands)	TOTAL		LEVEL 1		LEVEL 2		TOTAL		LEVEL 1		LEVEL 2
Assets:
Cash equivalents:
Fixed income funds	$	1,765	$	1,765	$	—	$	1,830	$	1,830	$	—
Money market funds	24,368		24,368		—		24,656		24,656		—
Restricted cash equivalents:
Money market funds	—		—		—		1,280		1,280		—
Other current assets, net
Derivative instruments - interest rate swaps	449		—		449		—		—		—
Other assets, net:
Derivative instruments - interest rate swaps	219		—		219		67		—		67
Total asset recurring fair value measurements	$	26,801	$	26,133	$	668	$	27,833	$	27,766	$	67

Liabilities:
Accrued and other current liabilities:
Derivative instruments - interest rate swaps	$	—	$	—	$	—	$	1,010	$	—	$	1,010
Total liability recurring fair value measurements	$	—	$	—	$	—	$	1,010	$	—	$	1,010

Fair value of each class of financial instrument is determined based on the following:



FINANCIAL INSTRUMENT		METHODS AND ASSUMPTIONS
Fixed income funds and Money market funds		Carrying value approximates fair value because maturities are less than three months.
Derivative instruments		The Company’s derivative instruments include interest rate swaps. Fair value measurements are based on the contractual terms of the derivatives and use 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 when performing fair value measurements. As of April 1, 2018 and December 31, 2017, the Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

Fair Value Measurements on a Nonrecurring Basis - Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to property, fixtures and equipment, goodwill and other intangible assets, which are remeasured when carrying value exceeds fair value. The following table summarizes the Company’s assets measured at fair value by hierarchy level on a nonrecurring basis:



	THIRTEEN WEEKS ENDED
	APRIL 1, 2018				MARCH 26, 2017
(dollars in thousands)	CARRYING VALUE (1)		TOTAL IMPAIRMENT		CARRYING VALUE (1)		TOTAL IMPAIRMENT
Assets held for sale	$	50	$	50	$	400	$	70
Property, fixtures and equipment	320		2,221		1,067		850
	$	370	$	2,271	$	1,467	$	920

________________


(1)	Carrying value approximates fair value with all assets measured using third-party market appraisals (Level 2).

Interim Disclosures about Fair Value of Financial Instruments - The Company’s non-derivative financial instruments consist of cash equivalents, restricted cash, accounts receivable, accounts payable and current and long-term debt. The

Table of Contents

BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

fair values of cash equivalents, restricted cash, accounts receivable and accounts payable approximate their carrying amounts reported in the 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 dates indicated:



	APRIL 1, 2018						DECEMBER 31, 2017
	CARRYING VALUE		FAIR VALUE				CARRYING VALUE		FAIR VALUE
(dollars in thousands)	CARRYING VALUE		LEVEL 2		LEVEL 3		CARRYING VALUE		LEVEL 2		LEVEL 3
Senior Secured Credit Facility:
Term loan A	$	493,750	$	496,219	$	—	$	500,000	$	502,500	$	—
Revolving credit facility	$	631,000	$	629,423	$	—	$	600,000	$	598,500	$	—
Other notes payable	$	141	$	—	$	135	$	904	$	—	$	891

Fair value of debt is determined based on the following:



DEBT FACILITY		METHODS AND ASSUMPTIONS
Senior Secured Credit Facility		Quoted market prices in inactive markets.
Other notes payable		Discounted cash flow approach with inputs that primarily include cost of debt interest rates used to determine fair value.

12. Income Taxes



	THIRTEEN WEEKS ENDED
	APRIL 1, 2018		MARCH 26, 2017
Effective income tax rate	2.8	%	26.6	%

The effective income tax rate for the thirteen weeks ended April 1, 2018 decreased by 23.8 percentage points as compared to the thirteen weeks ended March 26, 2017. The decrease is primarily due to the reduction in the U.S. federal corporate tax rate from 35% to 21% as part of the legislation enacted in December 2017 known as the Tax Cuts and Jobs Act (the “Tax Act”), lower forecasted pre-tax income and excess tax benefits from equity-based compensation arrangements.

The Company has a blended federal and state statutory rate of approximately 26%. The effective income tax rate for the thirteen weeks ended April 1, 2018 was lower than the statutory rate primarily due to the benefit of tax credits for FICA taxes on certain employees’ tips and excess tax benefits from equity-based compensation arrangements.

The Company has applied guidance under SEC Staff Accounting Bulletin No. 118 which allows for a measurement period up to one year after the December 22, 2017 enactment date of the Tax Act to complete the accounting requirements. As of April 1, 2018, the Company made reasonable estimates of the effects of the Tax Act but has not completed its accounting for all tax effects. A provisional $7.5 million net tax expense was recorded during 2017. With the exception of the retrospective adjustment for the January 2018 adoption of ASU No. 2014-09, no adjustments were made to these provisional amounts during the thirteen weeks ended April 1, 2018. The Company is continuing to gather information and additional guidance is expected from the U.S. Treasury and state taxing authorities on the application of certain provisions of the Tax Act and will continue to make and refine its calculations as additional analysis is completed. The Company’s estimates may also be affected as it gains a more thorough understanding of the tax law. These changes could be material to income tax expense. The Company expects to complete its analysis within the year measurement period.

Table of Contents

BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

In connection with its analysis of the impact of the Tax Act, the Company recorded a provisional net tax expense of $7.5 million in December 2017, as described in the following table:



	FISCAL YEAR
(dollars in thousands)	2017
Transition Tax (provisional)	$	100
Net impact on U.S. deferred tax assets and liabilities (provisional) (1)	1,600
Net changes in deferred tax liability associated with anticipated repatriation taxes (provisional)	200
Impact from the adoption of ASU No. 2014-09 (provisional)	5,600
	$	7,500

________________


(1)	Includes $4.7 million of expense for a valuation allowance recorded against foreign tax credit carryforwards, $3.9 million of benefit from the impact of the corporate rate reduction on net deferred tax liability balances, and an expense of $0.8 million for the write-off of certain deferred tax assets that will no longer be realized.

Items considered provisional include:

Reduction of U.S. Federal Corporate Income Tax Rate - The Tax Act reduced the corporate income tax rate to 21%, effective January 1, 2018. While the Company is able to make a reasonable estimate of the impact of the reduction in corporate rate on its deferred tax assets and liabilities, it may be affected by other analyses related to the Tax Act, including, but not limited to, its calculation of deemed repatriation of deferred foreign income and the state tax effect of adjustments made to federal temporary differences.

Deemed Repatriation Transition Tax - The Deemed Repatriation Transition Tax (“Transition Tax”) is a tax on previously untaxed accumulated and current earnings and profits (“E&P”) of the Company’s foreign subsidiaries. To determine the amount of the Transition Tax, the Company must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company is able to make a reasonable estimate of the Transition Tax and recorded a provisional amount. Due to the ability to utilize foreign tax credits in the calculation of the Transition Tax, the obligation primarily related to the estimated state impacts. However, the Company is continuing to gather additional information. Additional guidance from the U.S. Treasury and state taxing authorities on the application of certain provisions of the Tax Act is expected in the future.

Valuation Allowances - The Company must assess whether its valuation allowance analyses or deferred tax assets are affected by various aspects of the Tax Act (e.g., deemed repatriation of deferred foreign income, GILTI inclusions and new categories of FTCs). While the Company did record an additional valuation allowance against foreign tax credit carryforwards, the Company has recorded provisional amounts related to certain portions of the Tax Act and any corresponding determination of the need for a change in a valuation allowance is also provisional.

For tax years beginning after December 31, 2017, the Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. As of April 1, 2018, the Company has not yet determined its accounting policy with regard to GILTI, and does not expect GILTI in 2018.

13. Commitments and Contingencies

Litigation and Other Matters - The Company had $5.0 million and $4.3 million of liabilities recorded for various legal matters as of April 1, 2018 and December 31, 2017, respectively.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

The Company is subject to legal proceedings, claims and liabilities, such as liquor liability, slip and fall cases, wage-and-hour and other employment-related litigation, which arise in the ordinary course of business and are generally covered by insurance if they exceed specified retention or deductible amounts. In the opinion of management, the amount of ultimate liability with respect to those actions will not have a material adverse impact on the Company’s financial position or results of operations and cash flows.

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 April 1, 2018, the undiscounted payments the Company could be required to make in the event of non-payment by the primary lessees was approximately $28.8 million. The present value of these potential payments discounted at the Company’s incremental borrowing rate as of April 1, 2018 was approximately $19.8 million. In the event of default, the indemnity clauses in the Company’s purchase and sale agreements govern its ability to pursue and recover damages incurred. The Company believes the financial strength and operating history of the buyers significantly reduces the risk that it will be required to make payments under these leases. Accordingly, no liability has been recorded.

14. Segment Reporting

The Company has two reportable segments, U.S. and International, which reflects how the Company manages its business, reviews operating performance and allocates resources. The U.S. segment includes all brands operating in the U.S. while brands operating outside the U.S. are included in the International segment. Resources are allocated and performance is assessed by the Company’s Chief Executive Officer (“CEO”), whom the Company has determined to be its Chief Operating Decision Maker (“CODM”). Following is a summary of reporting segments:



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
International	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, 2017. Revenues for all segments include only transactions with customers and exclude intersegment revenues. Excluded from net income from operations for U.S. and International are certain legal and corporate costs not directly related to the performance of the segments, stock-based compensation expenses and certain bonus expenses.

The following table is a summary of Total revenue by segment:



	THIRTEEN WEEKS ENDED
	APRIL 1, 2018		MARCH 26, 2017
(dollars in thousands)			(Restated) (1)
Total revenues
U.S.	$	998,707	$	1,043,673
International	117,758		111,038
Total revenues	$	1,116,465	$	1,154,711

____________________


(1)	See Note 1 - Description of the Business and Basis of Presentation for details of the impact of implementing ASU No. 2014-09.

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BLOOMIN’ BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) - Continued

The following table is a reconciliation of Segment income from operations to Income before Provision for income taxes:



	THIRTEEN WEEKS ENDED
	APRIL 1, 2018			MARCH 26, 2017
(dollars in thousands)				(Restated) (1)
Segment income from operations
U.S.	$	109,134		$	108,817
International	8,325			8,635
Total segment income from operations	117,459			117,452
Unallocated corporate operating expense	(39,088		)	(40,618		)
Total income from operations	78,371			76,834
Other income (expense), net	1			(51		)
Interest expense, net	(10,310		)	(9,141		)
Income before Provision for income taxes	$	68,062		$	67,642

____________________


(1)	See Note 1 - Description of the Business and Basis of Presentation for details of the impact of implementing ASU No. 2014-09.

The following table is a summary of Depreciation and amortization expense by segment:



	THIRTEEN WEEKS ENDED
(dollars in thousands)	APRIL 1, 2018		MARCH 26, 2017
Depreciation and amortization
U.S.	$	39,274	$	36,600
International	6,732		6,500
Corporate	4,114		3,490
Total depreciation and amortization	$	50,120	$	46,590

Geographic Areas — International assets are defined as assets residing in a country other than the U.S. The following table details long-lived assets, excluding goodwill, intangible assets and deferred tax assets, by major geographic area:



(in thousands)	APRIL 1, 2018		DECEMBER 31, 2017
U.S.	$	1,147,173	$	1,164,322
International
Brazil	129,230		126,341
Other	18,176		18,012
Total assets	$	1,294,579	$	1,308,675

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes. Unless the context otherwise indicates, as used in this report, the term the “Company,” “we,” “us,” “our” and other similar terms mean Bloomin’ Brands, Inc. and its subsidiaries.

Cautionary Statement

This Quarterly Report on Form 10-Q (the “Report”) includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “feels,” “seeks,” “forecasts,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could” or “would” or, in each case, their negative or other variations or comparable terminology, although not all forward-looking statements are accompanied by such terms. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially from statements made or suggested by forward-looking statements include, but are not limited to, the following:


(i)	Consumer reactions to public health and food safety issues;


(ii)	Our ability to compete in the highly competitive restaurant industry with many well-established competitors and new market entrants;


(iii)	Minimum wage increases and additional mandated employee benefits;


(iv)	Economic conditions and their effects on consumer confidence and discretionary spending, consumer traffic, the cost and availability of credit and interest rates;


(v)	Fluctuations in the price and availability of commodities;


(vi)	Our ability to effectively respond to changes in patterns of consumer traffic, consumer tastes and dietary habits;


(vii)	Our ability to comply with governmental laws and regulations, the costs of compliance with such laws and regulations and the effects of changes to applicable laws and regulations, including tax laws and unanticipated liabilities;

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued


(viii)	Our ability to implement our expansion, remodeling and relocation plans due to uncertainty in locating and acquiring attractive sites on acceptable terms, obtaining required permits and approvals, recruiting and training necessary personnel, obtaining adequate financing and estimating the performance of newly opened, remodeled or relocated restaurants;


(ix)	Our ability to protect our information technology systems from interruption or security breach, including cyber security threats, and to protect consumer data and personal employee information;


(x)	The effects of international economic, political and social conditions and legal systems on our foreign operations and on foreign currency exchange rates;


(xi)	Our ability to preserve and grow the reputation and value of our brands, particularly in light of changes in consumer engagement with social media platforms;


(xii)	Any impairment in the carrying value of our goodwill or other intangible or long-lived assets and its effect on our financial condition and results of operations;


(xiii)	Strategic actions, including acquisitions and dispositions, and our success in implementing these initiatives or integrating any acquired or newly created businesses;


(xiv)	Seasonal and periodic fluctuations in our results and the effects of significant adverse weather conditions and other disasters or unforeseen events;


(xv)	The effects of our substantial leverage and restrictive covenan