Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
BLMN > SEC Filings for BLMN > Form 10-Q on 1-Aug-2013All Recent SEC Filings

Show all filings for BLOOMIN' BRANDS, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for BLOOMIN' BRANDS, INC.


1-Aug-2013

Quarterly Report


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 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. 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, capital expenditures 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. We believe that these risks and uncertainties include, but are not limited to, the following:

(i) The restaurant industry is a highly competitive industry with many well-established competitors;

(ii) Challenging economic conditions may affect our liquidity by adversely impacting numerous items that include, but are not limited to: consumer confidence and discretionary spending; the availability of credit presently arranged from our revolving credit facilities; the future cost and availability of credit; interest rates; foreign currency exchange rates; and the liquidity or operations of our third-party vendors and other service providers;

(iii) Our ability to expand is dependent upon various factors such as the availability of attractive sites for new restaurants; our ability to obtain appropriate real estate sites at acceptable prices; our ability to obtain all required governmental permits including zoning approvals and liquor licenses on a timely basis; the impact of government moratoriums or approval processes, which could result in significant delays; our ability to obtain all necessary contractors and subcontractors; union activities such as picketing and hand billing that could delay construction; our ability to generate or borrow funds; our ability to negotiate suitable lease terms; our ability to recruit and train skilled management and restaurant employees; and our ability to receive the premises from the landlord's developer without any delays;

(iv) Our results can be impacted by changes in consumer tastes and the level of consumer acceptance of our restaurant concepts (including consumer tolerance of our prices); local, regional, national and international economic and political conditions; the seasonality of our business; demographic trends; traffic patterns and


Table of Contents
BLOOMIN' BRANDS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

our ability to effectively respond in a timely manner to changes in traffic patterns; changes in consumer dietary habits; employee availability; the cost of advertising and media; government actions and policies; inflation or deflation; unemployment rates; interest rates; exchange rates; and increases in various costs, including construction, real estate and health insurance costs;

(v) Weather, natural disasters and other disasters could result in construction delays and also adversely affect the results of one or more restaurants for an indeterminate amount of time;

(vi) Our results can be negatively impacted by the effects of actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, or other military action affecting countries in which we do business and by the effects of heightened security requirements on local, regional, national, or international economies or consumer confidence;

(vii) Our results can be impacted by tax and other legislation and regulation in the jurisdictions in which we operate and by accounting standards or pronouncements;

(viii) Our results can be impacted by unanticipated changes in our tax rates, exposure to additional income tax liabilities, or a change in our ability to realize deferred tax benefits;

(ix) Minimum wage increases and mandated employee benefits could cause a significant increase in our labor costs;

(x) Commodities, including but not limited to, such items as beef, chicken, shrimp, pork, seafood, dairy, produce, potatoes, onions and energy supplies, are subject to fluctuation in price and availability and price could increase or decrease more than we expect;

(xi) Our results can be affected by consumer reaction to public health issues;

(xii) Our results can be affected by consumer perception of food safety;

(xiii) We could face liabilities if we are unable to protect customer credit and debit card data or personal employee information; and

(xiv) Our substantial leverage and significant restrictive covenants in our various credit facilities could adversely affect our ability to raise additional capital to fund our operations, limit our ability to make capital expenditures to invest in new or renovate restaurants, limit our ability to react to changes in the economy or our industry and expose us to interest rate risk in connection with our variable-rate debt.

In light of these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.


Table of Contents
BLOOMIN' BRANDS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Overview

We are one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. As of June 30, 2013, we owned and operated 1,276 restaurants and had 207 restaurants operating under a franchise or joint venture arrangement across 48 states, Puerto Rico, Guam and 20 countries. We have five founder-inspired concepts: Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, Fleming's Prime Steakhouse and Wine Bar and Roy's. Our concepts seek to provide a compelling customer experience combining great food, highly attentive service and lively and contemporary ambience at attractive prices. Our restaurants attract customers across a variety of occasions, including everyday dining, celebrations and business entertainment. Each of our concepts maintains a unique, founder-inspired brand identity and entrepreneurial culture, while leveraging our scale and enhanced operating model. We consider Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill and Fleming's Prime Steakhouse and Wine Bar to be our core concepts.
The restaurant industry is a highly competitive and fragmented industry and is sensitive to changes in the economy, trends in lifestyles, seasonality (customer spending patterns at our restaurants are generally highest in the first quarter of the year and lowest in the third quarter of the year) and fluctuating costs. Operating margins for restaurants can vary due to competitive pricing strategies, labor costs and fluctuations in prices of commodities, including beef, chicken, seafood, butter, cheese, produce and other necessities to operate a restaurant, such as natural gas or other energy supplies. Restaurant companies tend to focus on increasing market share, comparable restaurant sales growth and new unit growth. Competitive pressure for market share, commodity inflation, foreign currency exchange rates and other market conditions have had and could continue to have an adverse impact on our business.
Our industry is characterized by high initial capital investment, coupled with high labor costs. Chain restaurants have been increasingly taking share from independent restaurants over the past several years. We believe that this trend will continue due to increasing barriers that may prevent independent restaurants and/or start-up chains from building scale operations, including menu labeling, burdensome labor regulations and healthcare reforms that will be enforced once chains grow past a certain number of restaurants or number of employees. The combination of these factors underscores our initiative to drive increased sales at existing restaurants in order to raise margins and profits, because the incremental contribution to profits from every additional dollar of sales above the minimum costs required to open, staff and operate a restaurant is relatively high. Historically, we have not focused on growth in the number of restaurants just to generate additional sales. Our expansion and operating strategies have balanced investment and operating cost considerations in order to generate reasonable, sustainable margins and achieve acceptable returns on investment from our restaurant concepts.
Our strategic plan and operating model entails maintaining an experienced executive management team and adapting practices from the consumer products and retail industries to complement our restaurant acumen and enhance our brand management, analytics and innovation. This model keeps the customer at the center of our decision-making and focuses on continuous innovation and productivity to drive sustainable sales and profit growth. In addition, we remain recommitted to new unit development after curtailing expansion from 2009 to 2011. We believe that a substantial development opportunity remains for our concepts in the U.S. and internationally.

We continue to balance near-term growth in market share with investments to achieve sustainable growth. In 2013, our key growth strategies, which are enabled by continued improvements in infrastructure and organizational effectiveness include:

Grow Comparable Restaurant Sales. We plan to continue our efforts to remodel our Outback Steakhouse and Carrabba's Italian Grill restaurants, use limited-time offers and multimedia marketing campaigns to drive traffic, selectively expand the lunch daypart and introduce innovative menu items that match evolving consumer preferences. In addition, in April 2013, we accelerated our restaurant relocation plan primarily related to the Outback Steakhouse brand.


Table of Contents
BLOOMIN' BRANDS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Pursue New Domestic and International Development With Strong Unit Level Economics. We believe that a substantial development opportunity remains for our concepts in the U.S. and internationally. Our top domestic development priority is Bonefish Grill unit growth. Internationally, we are focusing on developing Outback Steakhouse in the existing markets of South Korea, Hong Kong and Brazil, with strategic expansion in selected emerging and high growth developed markets. We are focusing our new market growth in China, Mexico and South America. We expect to open between 45 and 55 system-wide locations in 2013 and increase the pace thereafter.

Drive Margin Improvement. We believe we have the opportunity to increase our margins through leveraging increases in average unit volumes and cost reductions in labor, food, supply chain and restaurant facilities.

We believe that the combination of macro-economic and other factors have put considerable pressure on sales in the casual dining industry thus far in 2013 and, as a result, the first half of 2013 has reflected a slowdown in our comparable restaurant sales growth. For example, the ongoing impacts of the housing crisis, high unemployment, the so-called "sequester" and related governmental spending and budget matters, gasoline prices, reduced disposable consumer income and consumer confidence have had a negative effect on discretionary consumer spending. As these conditions persist, we will face increased pressure with respect to our pricing, traffic levels and commodity costs. We believe that in this environment, we will need to maintain our focus on value and innovation to continue to drive sales.

Key Performance Indicators

Key measures that we use in evaluating our restaurants and assessing our business include the following:

Average restaurant unit volumes-average sales per restaurant to measure changes in customer traffic, pricing and development of the brand;

Comparable restaurant sales-year-over-year comparison of sales volumes for domestic, Company-owned restaurants that are open 18 months or more in order to remove the impact of new restaurant openings in comparing the operations of existing restaurants;

System-wide sales-total restaurant sales volume for all Company-owned, franchise and unconsolidated joint venture restaurants, regardless of ownership, to interpret the overall health of our brands;

Adjusted income from operations, Adjusted net income attributable to Bloomin' Brands, Inc., Adjusted diluted earnings per share and Adjusted diluted earnings per pro forma share-non-GAAP financial measures utilized to evaluate our operating performance (see "-Non-GAAP Financial Measures" section below for further information); and

Customer satisfaction scores-measurement of our customers' experiences in a variety of key attributes.


Table of Contents
                             BLOOMIN' BRANDS, INC.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Selected Operating Data

The table below presents the number of our restaurants in operation at the end
of the periods indicated:

                                                 JUNE 30,
                                               2013     2012
Number of restaurants (at end of the period):
Outback Steakhouse
Company-owned-domestic (1)                      663      670
Company-owned-international (1)                 117      112
Franchised-domestic                             106      106
Franchised and joint venture-international       93       83
Total                                           979      971
Carrabba's Italian Grill
Company-owned                                   234      230
Franchised                                        1        1
Total                                           235      231
Bonefish Grill
Company-owned                                   175      155
Franchised                                        7        7
Total                                           182      162
Fleming's Prime Steakhouse and Wine Bar
Company-owned                                    65       64
Roy's
Company-owned                                    22       22
System-wide total                             1,483    1,450


____________________


(1) One Company-owned restaurant in Puerto Rico that was previously included in Outback Steakhouse (international) is now included in Outback Steakhouse (domestic). The prior period has been revised to conform to the current period presentation.

We operate restaurants under brands that have similar economic characteristics, nature of products and services, class of customer and distribution methods, and as a result, aggregate our operating segments into a single reporting segment.


Table of Contents
                             BLOOMIN' BRANDS, INC.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Results of Operations

The following table sets forth, for the periods indicated, percentages that
items in our Consolidated Statements of Operations and Comprehensive Income bear
to Total revenues or Restaurant sales, as indicated:

                                          THREE MONTHS ENDED              SIX MONTHS ENDED
                                               JUNE 30,                       JUNE 30,
                                         2013             2012           2013           2012
Revenues
Restaurant sales                          98.9  %          98.9  %        99.0  %        99.0  %
Other revenues                             1.1              1.1            1.0            1.0
Total revenues                           100.0            100.0          100.0          100.0
Costs and expenses
Cost of sales (1)                         32.3             32.5           32.3           32.3
Labor and other related (1)               28.2             28.0           27.9           28.0
Other restaurant operating (1)            23.6             23.8           22.5           22.3
Depreciation and amortization              4.0              4.0            3.8            3.8
General and administrative                 6.4              7.4            6.5            7.3
Provision for impaired assets and
restaurant closings                        0.1              0.5            0.1            0.4
Income from operations of
unconsolidated affiliates                 (0.3 )           (0.2 )         (0.3 )         (0.2 )
Total costs and expenses                  93.3             95.0           92.2           93.2
Income from operations                     6.7              5.0            7.8            6.8
Loss on extinguishment and
modification of debt                      (1.4 )              -           (0.7 )         (0.1 )
Other expense, net                         (*)              (*)            (*)            (*)
Interest expense, net                     (1.8 )           (2.5 )         (1.8 )         (2.2 )
Income before (benefit) provision
for income taxes                           3.5              2.5            5.3            4.5
(Benefit) provision for income taxes      (4.0 )            0.4           (1.4 )          0.8
Net income                                 7.5              2.1            6.7            3.7
Less: net income attributable to
noncontrolling interests                   0.2              0.3            0.2            0.4
Net income attributable to Bloomin'
Brands, Inc.                               7.3  %           1.8  %         6.5  %         3.3  %

Net income                                 7.5  %           2.1  %         6.7  %         3.7  %
Other comprehensive income:
Foreign currency translation
adjustment                                (0.8 )           (0.7 )         (0.6 )         (0.2 )
Comprehensive income                       6.7              1.4            6.1            3.5
Less: comprehensive income
attributable to noncontrolling
interests                                  0.2              0.3            0.2            0.4
Comprehensive income attributable to
Bloomin' Brands, Inc.                      6.5  %           1.1  %         5.9  %         3.1  %


________________
(1) As a percentage of Restaurant sales.

* Less than 1/10th of one percent of Total revenues.


Table of Contents
                             BLOOMIN' BRANDS, INC.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

REVENUES

Restaurant sales
               THREE MONTHS ENDED                                        SIX MONTHS ENDED
                    JUNE 30,                                                 JUNE 30,
(dollars
in
millions):      2013           2012        $ Change      % Change       2013          2012         $ Change      % Change
Restaurant
sales      $    1,008.0     $  970.0     $     38.0         3.9 %    $ 2,090.3     $ 2,015.5     $     74.8         3.7 %

The increase in restaurant sales in the three months ended June 30, 2013 as compared to the same period in 2012 was primarily attributable to (i) additional revenues of approximately $23.7 million from the opening of 45 new restaurants not included in our comparable restaurant sales base and (ii) a $18.5 million increase in comparable restaurant sales at our existing restaurants (including a 2.0% combined comparable restaurant sales increase in the second quarter of 2013 at our core domestic concepts), primarily due to increases in general menu prices and customer traffic, which were partially offset by mix in our product sales. The increase in customer traffic was primarily driven by selective daypart expansion across certain concepts, innovations in menu, service, promotions and operations across the portfolio and renovations at additional Outback Steakhouse locations. The increase in restaurant sales in the three months ended June 30, 2013 as compared to the same period in 2012 was partially offset by a $4.2 million decrease from the closing of nine restaurants since June 30, 2012.

The increase in restaurant sales in the six months ended June 30, 2013 as compared to the same period in 2012 was primarily attributable to (i) additional revenues of approximately $58.9 million from the opening of 46 new restaurants not included in our comparable restaurant sales base and (ii) a $23.9 million increase in comparable restaurant sales at our existing restaurants (including a 1.8% combined comparable restaurant sales increase in the first half of 2013 at our core domestic concepts), primarily due to increases in general menu prices and customer traffic, which were partially offset by mix in our product sales. The increase in customer traffic was primarily driven by selective daypart expansion across certain concepts, innovations in menu, service, promotions and operations across the portfolio and renovations at additional Outback Steakhouse locations partially offset by unfavorable winter weather conditions and the additional day in February 2012 due to Leap Year. The increase in restaurant sales in the six months ended June 30, 2013 as compared to the same period in 2012 was partially offset by a $8.0 million decrease from the closing of nine restaurants since June 30, 2012.


Table of Contents
                             BLOOMIN' BRANDS, INC.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The following table includes additional information about changes in Restaurant
sales at domestic Company-owned restaurants for our core brands:

                                          THREE MONTHS ENDED              SIX MONTHS ENDED
                                               JUNE 30,                       JUNE 30,
                                         2013            2012           2013            2012
Average restaurant unit volumes
(weekly):
Outback Steakhouse (1)               $    62,552     $   60,571     $   64,739      $   62,495
Carrabba's Italian Grill             $    58,116     $   57,979     $   60,114      $   60,245
Bonefish Grill                       $    61,815     $   62,417     $   63,678      $   63,634
Fleming's Prime Steakhouse and Wine
Bar                                  $    75,531     $   73,136     $   80,223      $   76,824
Operating weeks:
Outback Steakhouse (1)                     8,619          8,710         17,161          17,420
Carrabba's Italian Grill                   3,042          2,990          6,051           5,981
Bonefish Grill                             2,268          1,985          4,460           3,943
Fleming's Prime Steakhouse and Wine
Bar                                          845            832          1,681           1,664
Year over year percentage change:
Menu price increases: (2)
Outback Steakhouse                           2.7 %          2.1 %          2.4  %          2.1 %
Carrabba's Italian Grill                     2.2 %          2.0 %          1.8  %          2.2 %
Bonefish Grill                               1.9 %          2.2 %          1.9  %          2.5 %
Fleming's Prime Steakhouse and Wine
Bar                                          3.3 %          2.2 %          2.7  %          2.3 %
Comparable restaurant sales (stores
open 18 months or more):
Outback Steakhouse (1)                       2.8 %          2.3 %          2.6  %          3.8 %
Carrabba's Italian Grill                     0.3 %          1.5 %         (0.7 )%          2.9 %
Bonefish Grill                               0.2 %          2.1 %          0.4  %          4.2 %
Fleming's Prime Steakhouse and Wine
Bar                                          3.8 %          6.8 %          4.5  %          6.1 %
Combined (concepts above)                    2.0 %          2.4 %          1.8  %          3.8 %


____________________


(1) One Company-owned restaurant in Puerto Rico that was previously included in Outback Steakhouse (international) is now included in Outback Steakhouse (domestic). This change affects the calculation of average restaurant unit volumes, operating weeks and comparable restaurant sales. The prior period has been revised to conform to the current period presentation.

(2) The stated menu price changes exclude the impact of product mix shifts to new menu offerings.


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.