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Bloomin' Brands, Inc. Announces Third Quarter Adjusted Diluted Earnings Per Pro Forma Share Of $0.10, A 43% Increase Versus 2012; GAAP Diluted Earnings Per Share Of $0.09

Stocks in this article: BLMN

Reconciliations of Non-GAAP Financial Measures - Adjusted Income from Operations, Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted Diluted Earnings Per Pro Forma Share

The following table reconciles 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, for the three and nine months ended September 30, 2013 and 2012 to their respective most comparable U.S. GAAP measures (in thousands, except per share amounts):

  THREE MONTHS ENDED NINE MONTHS ENDED
  SEPTEMBER 30, SEPTEMBER 30,
  2013 2012 2013 2012
Income (loss) from operations  $ 29,510  $ (11,545)  $ 194,256  $ 127,583
Transaction-related and payroll tax expenses (1) 5,938 37,726 6,642 44,487
Management fees and expenses (2) 9,159 13,776
Adjusted income from operations  $ 35,448  $ 35,340  $ 200,898  $ 185,846
         
Net income (loss) attributable to Bloomin' Brands, Inc.  $ 11,294  $ (35,866)  $ 149,385  $ 31,573
Transaction-related and payroll tax expenses (1) 5,938 37,726 6,642 44,487
Management fees and expenses (2) 9,159 13,776
Loss on extinguishment and modification of debt (3) 8,956 14,586 11,807
Total adjustments, before income taxes 5,938 55,841 21,228 70,070
Adjustment to (benefit) provision for income taxes (4) (4,047) (10,660) (62,417) (13,377)
Net adjustments 1,891 45,181 (41,189) 56,693
Adjusted net income attributable to Bloomin' Brands, Inc.  $ 13,185  $ 9,315  $ 108,196  $ 88,266
         
Diluted earnings (loss) per share  $ 0.09  $ (0.31)  $ 1.16  $ 0.28
Adjusted diluted earnings per share  $ 0.10  $ 0.08  $ 0.84  $ 0.79
Adjusted diluted earnings per pro forma share (5) (6)  $ 0.10  $ 0.07  $ 0.84  $ 0.75
         
Diluted weighted average common shares outstanding 129,439 114,331 128,464 111,145
Pro forma IPO adjustment (5) 6,461 6,461
Diluted weighted average common shares outstanding adjustment (6) 4,374
Pro forma diluted weighted average common shares outstanding (5) (6) 129,439 125,166 128,464 117,606
 
(1)  Transaction-related and payroll tax expenses primarily relate to costs incurred in association with the IPO and subsequent secondary offering of the Company's common stock completed in August 2012 and May 2013, respectively, costs incurred during the third quarter of 2013 in association with the acquisition of a controlling ownership interest in the Company's Brazilian operations, accrued expenses associated with a payroll tax audit and the refinancing of the 2012 CMBS Loan in March 2012. The expenses related to the initial public offering primarily included $18.1 million of accelerated Chief Executive Officer retention bonus and incentive bonus and $16.0 million of non-cash stock compensation charges for the vested portion of outstanding stock options recorded upon completion of the initial public offering. The expenses associated with a payroll tax audit relate to an Internal Revenue Service ("IRS") proposed issuance of an audit adjustment for the employer's share of FICA taxes related to cash tips allegedly received and unreported by the Company's tipped employees during calendar year 2010. The cash tips allegedly unreported by the tipped employees are based on an IRS estimate of the aggregate amount of tips directly received by tipped employees from the Company's customers. The potential employer's FICA tax liability based on the IRS' preliminary estimate of allegedly unreported tips is $10.0 million. The Company recorded a liability that it believes is appropriate in Accrued and other current liabilities in its Consolidated Balance Sheet at September 30, 2013. The associated expense is included in Labor and other related expenses for the three months ended September 30, 2013. In addition, a deferred income tax benefit has been recorded for the allowable income tax credits for the employer share of FICA taxes expected to be paid as result of the assessment. This income tax benefit is included in (Benefit) provision for income taxes and offsets the additional Labor and other related expenses in 2013. 
(2)  Represents management fees, out-of-pocket expenses and certain other reimbursable expenses paid to a management company owned by the sponsors and founders under a management agreement with the Company. In accordance with the terms of an amendment, this agreement terminated immediately prior to the completion of the IPO in August 2012 and a termination fee of $8.0 million was paid to the management company in 2012, in addition to a prorated periodic fee.
(3)  Loss on extinguishment and modification of debt is related to the repricing of OSI Restaurant Partner, LLC's term loan B facility in April 2013, retirement of OSI's senior notes in August 2012 and the extinguishment of the previous CMBS loan in connection with New Private Restaurant Properties, LLC, and two of the Company's other indirect wholly-owned subsidiaries, entering into the 2012 CMBS loan in March 2012. 
(4)  Adjustment to (benefit) provision for income taxes for the three and nine months ended September 30, 2013 represents an adjustment to the (Benefit) provision for income taxes to apply a normalized annual effective income tax rate, which excludes the income tax benefit of the valuation allowance release, to Adjusted income before (benefit) provision for income taxes. The normalized 2013 full-year tax rate is more comparable to the Company's expectation for future effective income tax rates. The Company's expected future effective income tax rate is lower than the U.S. blended federal and state statutory rate because of the continued generation of U.S. tax credits and expected earnings in foreign jurisdictions with lower income tax rates. See calculation below of the income tax effect of adjustments for the three and nine months ended September 30, 2013. Adjustment to (benefit) provision for income taxes for the three and nine months ended September 30, 2012 was calculated using the projected full-year effective income tax rate of 19.1%. 
 
  THREE MONTHS ENDED NINE MONTHS ENDED
  SEPTEMBER 30, 2013 SEPTEMBER 30, 2013
Income (loss) before (benefit) provision for income taxes $ 12,043 $ 122,958
Transaction-related and payroll tax expenses 5,938 6,642
Loss on extinguishment and modification of debt 14,586
Adjusted income before (benefit) provision for income taxes 17,981 144,186
Income tax expense at normalized tax rate of approximately 22.0% for the three and nine months ended September 30, 2013, respectively 3,956 31,721
Less: (Benefit) provision for income taxes (91) (30,696)
Adjustment to (benefit) provision for income taxes $ 4,047 $ 62,417
 
(5) Gives pro forma effect to the issuance of shares in the IPO as if they were all outstanding on January 1, 2012. There is no effect of this adjustment for the three and nine months ended September 30, 2013.
(6) On a U.S. GAAP basis, the Company recognized a Net loss attributable to Bloomin' Brands, Inc. during the three months ended September 30, 2012 and, therefore, did not report a dilutive effect of stock options and restricted stock awards.  Since the Company generated net income on an adjusted basis, the additional dilutive effect of stock options and restricted stock awards during the three months ended September 30, 2012 is included to appropriately represent the diluted weighted average common shares outstanding.  There is no effect of this adjustment on the three months ended September 30, 2013 or the nine months ended September 30, 2013 and 2012 as each of these periods generated Net income attributable to Bloomin' Brands, Inc. on a U.S. GAAP and adjusted basis.

Comparative Store Information

The table below presents the number of the Company's restaurants in operation at the end of the periods indicated:

  SEPTEMBER 30,
  2013 2012
Number of restaurants (at end of the period):    
Outback Steakhouse    
Company-owned—domestic (1) 664 667
Company-owned—international (1) 119 114
Franchised—domestic 106 106
Franchised and joint venture—international 94 83
Total 983 970
Carrabba's Italian Grill    
Company-owned 237 232
Franchised 1 1
Total 238 233
Bonefish Grill    
Company-owned 181 160
Franchised 7 7
Total 188 167
Fleming's Prime Steakhouse and Wine Bar    
Company-owned 65 64
Roy's    
Company-owned 21 22
System-wide total 1,495 1,456
 
(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.
CONTACT: Mark W. Seymour, Jr.
         Vice President, Investor Relations
         (813) 830-5311

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