Bloomin’ Brands, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 26, 2021 (52 weeks). This annual filing reports full-year results, not a standalone fourth-quarter summary. Bloomin’ Brands operates Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. At year-end, it had 1,169 company-operated and 329 franchised restaurants and off-premises kitchens across the U.S. and 17 countries and Guam.
Financial and operating performance
| Metric | FY2021 | FY2020 | FY2019 |
|---|---|---|---|
| Total revenue | $4.122 billion | $3.171 billion | $4.139 billion |
| Operating income (loss) | $309.0 million | $(175.0) million | $191.1 million |
| Net income (loss) attributable to common stockholders | $215.6 million | $(162.2) million | $130.6 million |
| Diluted EPS | $2.00 | $(1.85) | $1.45 |
| Restaurant-level operating margin | 16.5% | 9.9% | 14.9% |
| Operating cash flow | $402.5 million | $138.8 million | $317.6 million |
Revenue rose 30.0% from 2020, largely reflecting reopened dining rooms, comparable-sales recovery and new restaurants; it was 0.4% below 2019. U.S. comparable sales increased 30.5% versus 2020 and 4.5% versus 2019. U.S. traffic was down 0.6% versus 2019, while average check was up 5.1%. U.S. restaurant-level margin was 17.1%, compared with 9.8% in 2020; international margin was 12.7%, compared with 8.3%.
FY2021 food and beverage costs were 30.3% of restaurant sales, labor costs 28.4%, and other restaurant operating expenses 24.8%. Margin improvement versus 2020 reflected sales leverage, pricing and cost savings, partly offset by commodity and wage inflation and a $61.9 million Carrabba’s royalty-termination payment. The company reported GAAP diluted EPS of $2.00 and adjusted diluted EPS of $2.70; adjusted measures are non-GAAP and should be considered alongside GAAP results.
Cash, debt and liquidity
- Cash and cash equivalents were $87.6 million at year-end. Operating cash flow of $402.5 million was offset by $104.7 million of net investing outflows and $317.4 million of net financing outflows; capital expenditures were $122.8 million.
- Long-term debt, net, was $793.1 million, including $195 million on the term loan, $80 million drawn on the revolver, $230 million of 5.00% convertible notes due 2025 and $300 million of 5.125% notes due 2029. The company reported $699.3 million of unused revolver capacity, net of letters of credit, and compliance with debt covenants. It repaid the remaining $80 million revolver balance after year-end.
- Current assets of $352.8 million were below current liabilities of $984.6 million, producing a $631.8 million working-capital deficit. Management notes that deferred gift-card revenue and current lease obligations contribute to the deficit and states it expects liquidity sources to cover obligations for the next 12 months.
- Operating lease liabilities were substantial; undiscounted operating lease commitments totaled $2.383 billion, including $1.0 billion tied to renewal options considered reasonably certain to be exercised.
Material changes and notable items
- Recovery from the pandemic drove a sharp rebound from 2020’s loss and depressed sales. FY2021 revenue nevertheless remained slightly below 2019, with international Outback Brazil comparable sales down 12.0% versus 2019.
- The company paid $61.9 million to terminate future Carrabba’s and Abbraccio royalty obligations. It also recognized a $3.1 million benefit for recoverable Brazilian PIS/COFINS taxes and accrued $2.7 million related to a Brazilian municipal service-tax matter.
- FY2020 included $124.5 million in COVID-related charges and $32.4 million of transformational initiative costs; FY2021 provision for impaired assets and restaurant closings was $13.7 million, versus $76.4 million in 2020.
- The company issued $300 million of 2029 notes and refinanced its secured credit facility in 2021. It made no common-stock repurchases and paid no dividends during FY2021. In February 2022, the board declared a $0.14-per-share quarterly dividend and authorized up to $125 million in repurchases.
Outlook, risks and contingencies
Management estimated 2022 capital expenditures of $225 million to $240 million and planned approximately 30 new system-wide locations, about half in Brazil. It also planned further development of the smaller Joey Outback prototype, Aussie Grill, off-premises kitchens, remodeling and digital and loyalty initiatives. Management anticipated 2022 commodity inflation of approximately 11% to 13% and high-single-digit labor cost inflation; about 70% of estimated annual food purchases were covered by fixed contracts at year-end.
Key risks include renewed COVID-19 disruptions, labor availability and wage pressure, inflation and commodity supply constraints, reliance on a small group of beef suppliers, competition and changing consumer preferences, cybersecurity and data privacy, foreign-exchange exposure, franchisee financial distress, and the company’s leverage and restrictive debt covenants. The company disclosed $25.1 million of undiscounted potential payments under lease guarantees, $7.1 million of accrued legal reserves, and stated that possible additional legal losses could not be estimated. The auditor issued an unqualified opinion on the financial statements and internal controls; insurance-reserve valuation was identified as a critical audit matter.
Investor verification priorities
- Verify the durability of sales recovery: FY2021 comparable sales benefited from comparison with pandemic-affected 2020, while U.S. traffic remained below 2019.
- Track whether menu pricing and fixed purchasing contracts offset the disclosed 2022 commodity and labor inflation assumptions without weakening traffic or margins.
- Confirm cash generation, planned capital spending and debt reduction against the company’s lease commitments, covenant requirements and dividend/repurchase plans.
- Review the 2025 convertible notes’ conversion and dilution mechanics, including the company’s cash-settlement election and related warrants.
- Monitor franchisee health, especially Out West’s deferred obligations and payment arrangements, and assess any developments in legal, tax or lease-guarantee contingencies.