Bloomin’ Brands Announces 2019 Q1 Diluted EPS of $0.69 and Adjusted Diluted EPS of $0.75

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TAMPA, Fla.–(BUSINESS WIRE)–Bloomin’ Brands, Inc. (Nasdaq:BLMN) today reported results for the first quarter 2019 (“Q1 2019”) compared to the first quarter 2018 (“Q1 2018”).

Highlights for Q1 2019 include the following:

  • Comparable restaurant sales increased 3.5% at U.S. Outback Steakhouse
  • Combined U.S. comparable restaurant sales increased 2.4%
  • Comparable restaurant sales increased 3.7% for Outback Steakhouse in Brazil
  • Opened six new restaurants, including five in international markets

Diluted EPS and Adjusted Diluted EPS

Our Q1 2019 results include the impact of adopting the new lease accounting standard. Among its impacts, we no longer recognize the benefit of deferred gains on sale-leaseback transactions, resulting in an increase to Other restaurant operating expense of approximately $3.1 million. This represents a three cent reduction in earnings per share. The following table includes both a reported and a comparable basis that adjusts for this lease accounting change.

The following table reconciles Diluted earnings per share to Adjusted diluted earnings per share for the periods as indicated below.

         
  Q1  
2019   2018 CHANGE
Diluted earnings per share $ 0.69 $ 0.68 $ 0.01
Adjustments 0.06   0.03   0.03
Adjusted diluted earnings per share $ 0.75   $ 0.71   $ 0.04
Remove new lease accounting standard impact (1)   (0.03 ) 0.03
Adjusted diluted earnings per share on a comparable basis (1) $ 0.75   $ 0.68   $ 0.07
                       
___________________
See Non-GAAP Measures later in this release.
 
(1)     In Q1 2018 both GAAP and adjusted diluted earnings per share were positively impacted by the benefit of deferred gains on sale-leaseback transactions by approximately $0.03. For comparability, we have presented adjusted diluted earnings per share excluding this benefit that we no longer recognize in 2019 as a result of the adoption of the new lease accounting standard.
 

CEO Comments

“The first quarter was a strong start to the year, and sets us up well to achieve our 2019 goals,” said David Deno, CEO. “Outback continues its strong sales momentum marking the ninth consecutive quarter of meaningful outperformance versus the industry. In addition, we continue to make progress against our growth platforms and this is showing up in increased sales and margin expansion across the portfolio. In the first quarter, operating margin grew on a comparable basis versus last year.”

First Quarter Financial Results

As described above, our Q1 2019 results include the impact from adopting the new lease accounting standard which reduces operating margins by 30 basis points. The following table includes both a reported and a comparable basis that adjusts for the lease accounting change:

   
AS REPORTED COMPARABLE BASIS (1)
(dollars in millions) Q1 2019   Q1 2018   CHANGE Q1 2018   CHANGE
Total revenues $ 1,128.1 $ 1,116.5 1.0% $ 1,116.5 1.0%
 
GAAP restaurant-level operating margin 17.1 % 16.6 % 0.5% 16.3 % 0.8%
Adjusted restaurant-level operating margin (2) 17.1 % 16.5 % 0.6% 16.2 % 0.9%
 
GAAP operating income margin 7.3 % 7.0 % 0.3% 6.7 % 0.6%
Adjusted operating income margin (2) 7.8 % 7.4 % 0.4% 7.1 % 0.7%
___________________
(1)     To improve comparability in this table, we removed the benefit of deferred gains on sale-leaseback transactions from our Q1 2018 results.
(2) See Non-GAAP Measures later in this release.
 
  • The increase in total revenues was primarily due to higher U.S. comparable restaurant sales and the net impact of restaurant openings and closures, partially offset by foreign currency translation.
  • The increase in reported GAAP operating income margin was primarily due to increases in U.S. comparable restaurant sales and the impact of certain cost savings initiatives. These increases were partially offset by labor and commodity inflation, and the impact from adopting the new lease accounting standard as described above.

First Quarter Comparable Restaurant Sales

THIRTEEN WEEKS ENDED MARCH 31, 2019   COMPANY-OWNED
Comparable restaurant sales (stores open 18 months or more):

U.S.

Outback Steakhouse 3.5%
Carrabba’s Italian Grill 0.3%
Bonefish Grill 1.9%
Fleming’s Prime Steakhouse & Wine Bar 0.6%
Combined U.S. 2.4%
 

International

Outback Steakhouse – Brazil 3.7%
 

Fiscal 2019 Financial Outlook

We are reaffirming all aspects of our full-year financial guidance as previously communicated in our February 14, 2019 earnings release.

Conference Call

The Company will host a conference call today, April 26th at 9:00 AM EDT. The conference call can be accessed live over the telephone by dialing (877) 407-9039 or (201) 689-8470 for international participants. A replay will be available beginning two hours after the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers. The replay will be available until Friday, May 10, 2019. The conference ID for the live call and replay is 13689766. The call will also be webcast live from the Company’s website at http://www.bloominbrands.com under the Investors section. A replay of this webcast will be available on the Company’s website after the call.

Non-GAAP Measures

In addition to the results provided in accordance with GAAP, this press release and related tables include certain non-GAAP measures, which present operating results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with GAAP and include the following: (i) Adjusted restaurant-level operating margin, (ii) Adjusted income from operations and the corresponding margin, (iii) Adjusted net income, (iv) Adjusted diluted earnings per share, (v) Adjusted segment restaurant-level operating margin and (vi) Adjusted segment income from operations and the corresponding margin. For purposes of improving comparability, we have also presented Adjusted diluted earnings per share and Adjusted operating income margin excluding the impact of the new lease accounting standard in the table above.

We believe that our use of non-GAAP financial measures permits investors to assess the operating performance of our business relative to our performance based on GAAP results and relative to other companies within the restaurant industry by isolating the effects of certain items that may vary from period to period without correlation to core operating performance or that vary widely among similar companies. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. We believe that the disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and Board of Directors evaluate our operating performance, allocate resources and administer employee incentive plans.

These non-GAAP financial measures are not intended to replace GAAP financial measures, and they are not necessarily standardized or comparable to similarly titled measures used by other companies. We maintain internal guidelines with respect to the types of adjustments we include in our non-GAAP measures. These guidelines endeavor to differentiate between types of gains and expenses that are reflective of our core operations in a period, and those that may vary from period to period without correlation to our core performance in that period. However, implementation of these guidelines necessarily involves the application of judgment, and the treatment of any items not directly addressed by, or changes to, our guidelines will be considered by our disclosure committee. You should refer to the reconciliations of non-GAAP measures in tables four, five, and six included later in this release for descriptions of the actual adjustments made in the current period and the corresponding prior period.

About Bloomin’ Brands, Inc.

Bloomin’ Brands, Inc. is one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. The Company has four founder-inspired brands: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. The Company operates approximately 1,500 restaurants in 48 states, Puerto Rico, Guam and 20 countries, some of which are franchise locations. For more information, please visit www.bloominbrands.com.

Forward-Looking Statements

Certain statements contained herein, including statements under the headings “CEO Comments” and “Fiscal 2019 Financial Outlook” are not based on historical fact and are “forward-looking statements” within the meaning of applicable securities laws. Generally, these statements can be identified by the use of words such as “guidance,” “believes,” “estimates,” “anticipates,” “expects,” “on track,” “feels,” “forecasts,” “seeks,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could,” “would” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the Company’s forward-looking statements. These risks and uncertainties include, but are not limited to: consumer reaction to public health and food safety issues; competition; increases in labor costs; government actions and policies; increases in unemployment rates and taxes; local, regional, national and international economic conditions; consumer confidence and spending patterns; price and availability of commodities; the effects of changes in tax laws; challenges associated with our remodeling, relocation and expansion plans; interruption or breach of our systems or loss of consumer or employee information; political, social and legal conditions in international markets and their effects on foreign operations and foreign currency exchange rates; our ability to preserve the value of and grow our brands; the seasonality of the Company’s business; weather, acts of God and other disasters; changes in patterns of consumer traffic, consumer tastes and dietary habits; the effectiveness of our strategic actions; the cost and availability of credit; interest rate changes; compliance with debt covenants and the Company’s ability to make debt payments and planned investments; and our ability to continue to pay dividends and repurchase shares of our common stock. Further information on potential factors that could affect the financial results of the Company and its forward-looking statements is included in its most recent Form 10-K and subsequent filings with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statement, except as may be required by law. These forward-looking statements speak only as of the date of this release. All forward-looking statements are qualified in their entirety by this cautionary statement.

Note: Numerical figures included in this release have been subject to rounding adjustments.

 
TABLE ONE
BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
  THIRTEEN WEEKS ENDED
(in thousands, except per share data) MARCH 31, 2019   APRIL 1, 2018
Revenues
Restaurant sales $ 1,111,642 $ 1,099,003
Franchise and other revenues 16,489   17,462  
Total revenues 1,128,131   1,116,465  
Costs and expenses
Cost of sales 352,111 352,132
Labor and other related 319,015 311,062
Other restaurant operating 250,854 253,345
Depreciation and amortization 49,482 50,120
General and administrative 70,589 68,696
Provision for impaired assets and restaurant closings 3,586   2,739  
Total costs and expenses 1,045,637   1,038,094  
Income from operations 82,494 78,371
Other (expense) income, net (168 ) 1
Interest expense, net (11,181 ) (10,310 )
Income before provision for income taxes 71,145 68,062
Provision for income taxes 5,496   1,925  
Net income 65,649 66,137
Less: net income attributable to noncontrolling interests 1,349   739  
Net income attributable to Bloomin’ Brands $ 64,300   $ 65,398  
 
Earnings per share:
Basic $ 0.70   $ 0.71  
Diluted $ 0.69   $ 0.68  
 
Weighted average common shares outstanding:
Basic 91,415   92,268  
Diluted 92,661   95,782  
 
 
TABLE TWO
BLOOMIN’ BRANDS, INC.
SEGMENT RESULTS
(UNAUDITED)
(dollars in thousands)   THIRTEEN WEEKS ENDED
U.S. Segment MARCH 31, 2019   APRIL 1, 2018
Revenues
Restaurant sales $ 1,000,813 $ 984,344
Franchise and other revenues 13,694   14,363  
Total revenues $ 1,014,507 $ 998,707
Restaurant-level operating margin 16.7 % 16.3 %
Income from operations $ 113,035 $ 109,134
Operating income margin 11.1 % 10.9 %
International Segment
Revenues
Restaurant sales $ 110,829 $ 114,659
Franchise and other revenues 2,795   3,099  
Total revenues $ 113,624 $ 117,758
Restaurant-level operating margin 22.3 % 19.4 %
Income from operations $ 13,720 $ 8,325
Operating income margin 12.1 % 7.1 %
Reconciliation of Segment Income from Operations to Consolidated Income from Operations
Segment income from operations
U.S. $ 113,035 $ 109,134
International 13,720   8,325  
Total segment income from operations 126,755 117,459
Unallocated corporate operating expense (44,261 ) (39,088 )
Total income from operations $ 82,494   $ 78,371  
 
 
TABLE THREE
BLOOMIN’ BRANDS, INC.
SUPPLEMENTAL BALANCE SHEET INFORMATION
(UNAUDITED)
(in thousands)   MARCH 31, 2019   DECEMBER 30, 2018
Cash and cash equivalents $ 82,766 $ 71,823
Net working capital (deficit) (1) $ (572,151 ) $ (455,556 )
Total assets $ 3,552,547 $ 2,464,774
Total debt, net $ 1,064,310 $ 1,094,775
Total stockholders’ equity $ 252,363 $ 54,817
Common stock outstanding 91,647 91,272
___________________
(1)     The change in net working capital (deficit) during the thirteen weeks ended March 31, 2019 is primarily due to current lease liabilities recognized as a result of the adoption of the new lease accounting standard. We have, and in the future may continue to have, negative working capital balances (as is common for many restaurant companies). We operate successfully with negative working capital because cash collected on Restaurant sales is typically received before payment is due on our current liabilities, and our inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flows from restaurant operations and gift card sales are used to service debt obligations and to make capital expenditures.
 
 
TABLE FOUR
BLOOMIN’ BRANDS, INC.
RESTAURANT-LEVEL OPERATING MARGIN NON-GAAP RECONCILIATION
(UNAUDITED)
  THIRTEEN WEEKS ENDED   THIRTEEN WEEKS ENDED  

(UNFAVORABLE)
FAVORABLE CHANGE IN
ADJUSTED
YEAR TO DATE

MARCH 31, 2019 APRIL 1, 2018
AS REPORTED AS REPORTED  

COMPARABLE
ADJUSTED
BASIS (2)

Consolidated: GAAP   ADJUSTED GAAP   ADJUSTED (1)

AS
REPORTED

 

COMPARABLE
BASIS (2)

Restaurant sales 100.0% 100.0% 100.0% 100.0% 100.0%
 
Cost of sales 31.7% 31.7% 32.0% 32.0% 32.0% 0.3% 0.3%
Labor and other related 28.7% 28.7% 28.3% 28.3% 28.3% (0.4)% (0.4)%
Other restaurant operating 22.6% 22.6% 23.1% 23.1% 23.4% 0.5% 0.8%
 
Restaurant-level operating margin (3) 17.1% 17.1% 16.6% 16.5% 16.2% 0.6% 0.9%
 
Segments – Restaurant-level operating margin (3):
U.S. 16.7% 16.7% 16.3% 16.2% 0.5%
International 22.3% 22.3% 19.4% 19.4% 2.9%
___________________
(1)    

The table set forth below titled “Restaurant-level Operating Margin Adjustments” provides additional information regarding the adjustments for each period presented.

(2) In Q1 2018 both GAAP and adjusted restaurant-level operating margin were positively impacted by the benefit of deferred gains on sale-leaseback transactions by approximately $3.1 million. For comparability, we presented adjusted restaurant-level operating margin excluding this benefit that we no longer recognize in 2019 as a result of the adoption of the new lease accounting standard.
(3) The following categories of our revenue and operating expenses are not included in restaurant-level operating margin because we do not consider them reflective of operating performance at the restaurant-level within a period:
        (i)     Franchise and other revenues, which are earned primarily from franchise royalties and other non-food and beverage revenue streams, such as rental and sublease income.
(ii) Depreciation and amortization which, although substantially all of which is related to restaurant-level assets, represent historical sunk costs rather than cash outlays for the restaurants .
(iii) General and administrative expense which includes primarily non-restaurant-level costs associated with support of the restaurants and other activities at our corporate offices.
(iv) Asset impairment charges and restaurant closing costs which are not reflective of ongoing restaurant performance in a period.
 

Restaurant-level Operating Margin Adjustments – Following is a summary of unfavorable restaurant-level operating margin adjustments recorded in Other restaurant operating for the following activities, as described in table five of this release:

 
THIRTEEN WEEKS ENDED
(dollars in millions) APRIL 1, 2018 (1)
Restaurant and asset impairments and closing costs $ 0.8
Restaurant relocations and related costs 0.2
$ 1.0
___________________
(1)     All adjustments were recorded within the U.S. segment.
 
 
TABLE FIVE
BLOOMIN’ BRANDS, INC.
INCOME FROM OPERATIONS, NET INCOME AND DILUTED EARNINGS PER SHARE NON-GAAP RECONCILIATIONS
(UNAUDITED)
  THIRTEEN WEEKS ENDED
(in thousands, except per share data) MARCH 31, 2019   APRIL 1, 2018
Income from operations $ 82,494 $ 78,371
Operating income margin 7.3 % 7.0 %
Adjustments:
Severance (1) $ 2,855 $ 965
Restaurant and asset impairments and closing costs (2) 2,131 1,295
Restaurant relocations and related costs (3) 1,032 1,725
Legal and contingent matters   470  
Total income from operations adjustments $ 6,018   $ 4,455  
Adjusted income from operations $ 88,512   $ 82,826  
Adjusted operating income margin 7.8 % 7.4 %
 
Net income attributable to Bloomin’ Brands $ 64,300 $ 65,398
Adjustments:
Income from operations adjustments 6,018   4,455  
Total adjustments, before income taxes 6,018 4,455
Adjustment to provision for income taxes (4) (819 ) (1,681 )
Net adjustments 5,199   2,774  
Adjusted net income $ 69,499   $ 68,172  
 
Diluted earnings per share $ 0.69   $ 0.68  
 
Adjusted diluted earnings per share $ 0.75 $ 0.71
Remove new lease accounting standard impact (5)   (0.03 )
Adjusted diluted earnings per share on a comparable basis (5) $ 0.75   $ 0.68  
 
Diluted weighted average common shares outstanding 92,661   95,782  
___________________
(1)     Relates to severance expense incurred as a result of restructuring activities.
(2) Represents asset impairment charges and related costs primarily associated with approved closure initiatives.
(3) Represents asset impairment charges and accelerated depreciation incurred in connection with our relocation program.
(4) Represents income tax effect of the adjustments for the periods presented.
(5) In Q1 2018 both GAAP and adjusted diluted earnings per share were positively impacted by the benefit of deferred gains on sale-leaseback transactions by approximately $0.03. For comparability, we have presented adjusted diluted earnings per share excluding this benefit that we no longer recognize in 2019 as a result of the adoption of the new lease accounting standard.
 

Following is a summary of the financial statement line item classification of the net income adjustments:

 
THIRTEEN WEEKS ENDED
(in thousands) MARCH 31, 2019   APRIL 1, 2018
Other restaurant operating $ (22 ) $ (958 )
Depreciation and amortization 565 1,588
General and administrative 3,255 1,557
Provision for impaired assets and restaurant closings 2,220 2,268
Provision for income taxes (819 ) (1,681 )
Net adjustments $ 5,199   $ 2,774  
 
 
TABLE SIX
BLOOMIN’ BRANDS, INC.
SEGMENT INCOME FROM OPERATIONS NON-GAAP RECONCILIATION
(UNAUDITED)
U.S. Segment   THIRTEEN WEEKS ENDED
(dollars in thousands) MARCH 31, 2019   APRIL 1, 2018
Income from operations $ 113,035 $ 109,134
Operating income margin 11.1 % 10.9 %
Adjustments:
Restaurant and asset impairments and closing costs (1) $ 1,835 $ (616 )
Restaurant relocations and related costs (2) 1,032 1,725
Severance (3) 700   888  
Adjusted income from operations $ 116,602   $ 111,131  
Adjusted operating income margin 11.5 % 11.1 %
 
International Segment
(dollars in thousands)
Income from operations $ 13,720 $ 8,325
Operating income margin 12.1 % 7.1 %
Adjustments:
Restaurant and asset impairments and closing costs (1) 296   1,911  
Adjusted income from operations $ 14,016   $ 10,236  
Adjusted operating income margin 12.3 % 8.7 %
___________________
(1)     Represents asset impairment charges and related costs primarily associated with approved closure initiatives.
(2) Represents asset impairment charges and accelerated depreciation incurred in connection with our relocation program.
(3) Relates to severance expense incurred as a result of restructuring activities.
 
 
TABLE SEVEN
BLOOMIN’ BRANDS, INC.
COMPARATIVE RESTAURANT INFORMATION
(UNAUDITED)
Number of restaurants (at end of the period):   DECEMBER 30, 2018   OPENINGS   CLOSURES   OTHER   MARCH 31, 2019
U.S.
Outback Steakhouse
Company-owned 579 1 (1 ) 579
Franchised 154     (1 )   153
Total 733   1   (2 )   732
Carrabba’s Italian Grill
Company-owned (1) 224 (1 ) (18 ) 205
Franchised (1) 3       18   21
Total 227     (1 )   226
Bonefish Grill
Company-owned 190 (1 ) 189
Franchised 7         7
Total 197     (1 )   196
Fleming’s Prime Steakhouse & Wine Bar
Company-owned 70         70
Other
Company-owned 5     (3 )   2
U.S. Total 1,232   1   (7 )   1,226
International
Company-owned
Outback Steakhouse—Brazil (2) 92 3 95
Other 33 1 34
Franchised
Outback Steakhouse – South Korea 76 (4 ) 72
Other 55   1   (2 )   54
International Total 256   5   (6 )   255
System-wide total 1,488   6   (13 )   1,481
___________________
(1)     In March 2019, we sold 18 Carrabba’s Italian Grill locations, which are now operated as franchises.
(2) The restaurant counts for Brazil are reported as of November 30, 2018 and February 28, 2019 to correspond with the balance sheet dates of this subsidiary.
 
TABLE EIGHT
BLOOMIN’ BRANDS, INC.
COMPARABLE RESTAURANT SALES INFORMATION
(UNAUDITED)
  THIRTEEN WEEKS ENDED
MARCH 31, 2019   APRIL 1, 2018
Year over year percentage change:
Comparable restaurant sales (stores open 18 months or more) (1):
U.S.
Outback Steakhouse 3.5% 4.3%
Carrabba’s Italian Grill 0.3% 0.9%
Bonefish Grill 1.9% (0.1)%
Fleming’s Prime Steakhouse & Wine Bar 0.6% 2.9%
Combined U.S. 2.4% 2.8%
International
Outback Steakhouse – Brazil (2) 3.7% 1.1%
 
Traffic:
U.S.
Outback Steakhouse (0.5)% 2.2%
Carrabba’s Italian Grill (1.3)% (5.6)%
Bonefish Grill (1.9)% (2.4)%
Fleming’s Prime Steakhouse & Wine Bar (1.6)% (2.4)%
Combined U.S. (0.9)% (0.2)%
International
Outback Steakhouse – Brazil (2.4)% (1.6)%
 
Average check per person (3):
U.S.
Outback Steakhouse 4.0% 2.1%
Carrabba’s Italian Grill 1.6% 6.5%
Bonefish Grill 3.8% 2.3%
Fleming’s Prime Steakhouse & Wine Bar 2.2% 5.3%
Combined U.S. 3.3% 3.0%
International
Outback Steakhouse – Brazil 6.5% 3.0%
___________________
(1)     Comparable restaurant sales exclude the effect of fluctuations in foreign currency rates. Relocated international restaurants closed more than 30 days and relocated U.S. restaurants closed more than 60 days are excluded from comparable restaurant sales until at least 18 months after reopening.
(2) Includes trading day impact from calendar period reporting.
(3) Average check per person includes the impact of menu pricing changes, product mix and discounts.
 

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