Bloomin’ Brands, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 25, 2022 (52 weeks). This is an annual filing, not a standalone fourth-quarter report. The company operates Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s; it owned and operated 1,186 restaurants and kitchens and franchised 321 across 47 U.S. states, Guam and 13 countries.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $4.417 billion | $4.122 billion |
| Operating income | $330.4 million; 7.5% margin | $309.0 million; 7.5% margin |
| Net income attributable to Bloomin’ Brands | $101.9 million | $215.6 million |
| Diluted EPS | $1.03 | $2.00 |
| Adjusted diluted EPS (non-GAAP) | $2.52 | $2.70 |
| Operating cash flow | $390.9 million | $402.5 million |
| Capital expenditures | $219.7 million | $122.8 million |
Revenue increased 7.1%, with comparable sales, new restaurants and favorable foreign-currency translation contributing. U.S. comparable sales rose 4.0%, while U.S. traffic fell 5.3% and average check increased 9.3%. Brazil Outback comparable sales increased 38.3%. Consolidated restaurant-level operating margin fell to 15.6% from 16.5%; food and beverage costs rose to 31.8% of restaurant sales from 30.3%, mainly reflecting commodity inflation.
FY2022 results included $107.6 million of debt extinguishment and modification losses and $17.7 million of derivative fair-value losses, primarily associated with repurchasing $125 million principal of 2025 convertible notes. These losses, including non-deductible amounts, contributed to the effective tax rate rising to 28.1% from 10.6%. Interest expense declined to $53.2 million from $57.6 million.
Liquidity, debt and capital allocation
At year-end, cash and cash equivalents were $84.7 million. Total debt, net of discounts and issuance costs, was $833.3 million; reported long-term debt, net, was $831.7 million. The revolving facility had $430 million drawn and $550 million of unused capacity, net of letters of credit. The company reported compliance with debt covenants and believed it could maintain compliance. A subsequent $80 million revolver repayment is disclosed.
Current liabilities exceeded current assets by $632.3 million. Management says negative working capital is common in the restaurant sector and reflects, in part, gift-card liabilities and lease obligations. Operating lease liabilities were approximately $1.332 billion. Cash flow from operations was slightly lower year over year, while capital expenditures increased substantially.
The company reinstated quarterly dividends in 2022 and paid $0.56 per share for the year; it also repurchased $110.0 million of common stock. In February 2023, the board declared a $0.24 quarterly dividend and authorized a new $125 million repurchase program, subject to covenant compliance and other conditions.
Outlook, commentary and risks
- Management plans to invest in guest experience, digital capabilities, restaurant remodels and growth, while improving the credit profile and returning excess cash to shareholders. It did not provide a specific revenue or earnings forecast in the supplied filing text.
- For 2023, management anticipated mid-single-digit commodity and labor cost inflation; approximately 60% of estimated annual food purchases were covered by fixed contracts at year-end. The filing also cites 14.6% commodity inflation and 7.8% labor cost inflation in 2022.
- Planned 2023 capital expenditures were approximately $240–$260 million. The development schedule called for approximately 30–35 new system-wide locations, including about 20 in Brazil.
- Management estimated Brazil’s tax-law benefits could contribute approximately $17 million to operating income and $6 million to income tax benefit in 2023. Eligibility relies on a preliminary injunction and remains subject to ongoing evaluation.
- Key exposures include food and labor inflation, staffing and retention, consumer spending and traffic, reliance on a small number of beef suppliers, interest-rate and foreign-exchange movements, franchisee financial health, cyber and food-safety incidents, litigation, and lease and debt obligations.
- The company recorded a $5.9 million accrual in Q4 for collective wage-and-hour actions. Total reserves for certain legal proceedings were $15.1 million at year-end; management said it could not estimate reasonably possible losses beyond recorded accruals.
- Out West, a franchisee operating 79 Outback restaurants, remains subject to a payment-resolution arrangement through December 31, 2023, absent earlier specified events. $3.0 million of Q4 royalties exceeded its available cash calculation and were not collected; an allowance was recorded.
- The independent auditor issued an unqualified opinion on the financial statements and internal controls. The audit identified valuation of insurance reserves ($49.1 million) as a critical audit matter; management and the auditor concluded internal control over financial reporting was effective.
Important facts for investors to verify
- How much of the GAAP-to-adjusted earnings gap reflects the convertible-note transaction and whether remaining 2025 Notes or related warrants create further dilution or cash needs.
- Whether comparable-sales growth can be sustained as traffic declines and price increases face consumer resistance.
- Actual 2023 commodity and labor inflation, the extent of fixed-price food coverage, and resulting restaurant-level margins.
- The realization, duration and legal status of the projected Brazilian tax benefits.
- Collections and deferred balances under the Out West arrangement, plus developments in wage-and-hour litigation and potential exposure beyond reserves.
- Debt covenant headroom, refinancing requirements, lease commitments and the funding of planned capital expenditures, dividends and repurchases.