Bloomin' Brands reports Q4 net earnings of US$59M, compared to year-ago earnings of US$18.4M, as total revenues rise 5.2% to US$1.1B
February 25, 2014
– 16th Consecutive Quarter of Positive Traffic for Core Domestic Concepts
Bloomin' Brands, Inc. (BLMN) today reported financial results for the fourth quarter and year ended December 31, 2013.
Key highlights for the fourth quarter of 2013 include the following:
-- Total revenues increased 5.2% to $1.1 billion
-- Comparable sales for Company-owned core domestic concepts increased 1.4% while traffic rose 0.3%
-- Opened 15 system-wide locations and completed 36 restaurant renovations
-- Adjusted operating income margin* was 6.1% versus 5.1% in the fourth quarter of 2012 and GAAP operating income margin was 3.0% versus 5.4% in the fourth quarter of 2012
-- Adjusted net income* was $34.2 million versus $25.8 million in the fourth quarter of 2012 and GAAP Net income attributable to Bloomin' Brands was $59.0 million versus $18.4 million in the fourth quarter of 2012
-- Adjusted diluted earnings per pro forma share* were $0.27 per share, a 35.0% increase from the fourth quarter of 2012 and GAAP Diluted earnings per share were $0.46 per share, an increase of $0.31 from the fourth quarter of 2012
Key highlights for the full-year of 2013 include the following:
-- Total revenues increased 3.5% to $4.1 billion
-- Comparable sales for Company-owned core domestic concepts increased 1.2% while traffic rose 1.1%
-- Opened 46 system-wide locations and completed 143 restaurant renovations
-- Adjusted operating income margin was 6.4% versus 5.9% in 2012 and GAAP operating income margin was 5.5% versus 4.5% in 2012
-- Adjusted net income was $142.4 million versus $114.0 million in 2012 and GAAP Net income attributable to Bloomin' Brands was $208.4 million versus $50.0 million in 2012
-- Adjusted diluted earnings per pro forma share were $1.11 per share, a 20.7% increase from 2012 and GAAP Diluted earnings per share were $1.63 per share, an increase of $1.19 from 2012
"The fourth quarter was a good finish to a strong 2013. We delivered on our earnings goal despite a difficult industry environment," said Elizabeth Smith, CEO. "Adjusted net income grew by 33% for the quarter and 25% for the year. We beat the Knapp-Track index for traffic by 400 basis points for the quarter and 390 basis points for the year and continued to gain market share across all four core concepts. In 2014, we remain focused on our core growth strategies of superior same store sales increases, and domestic and international unit expansion to drive another year of strong portfolio performance."
Fourth Quarter 2013 Financial Results
The following summarizes the Company's results for the fourth quarter ended December 31, 2013:
-- Total revenues increased 5.2% to $1.1 billion. This increase was primarily due to additional revenues from opening new restaurants and an increase in comparable restaurant sales. In addition, revenues increased due to the consolidation of one-month of Restaurant sales generated by the formerly unconsolidated joint venture restaurants in Brazil. The comparable restaurant sales increase was driven by increases in general menu prices and customer traffic. This was partially offset by a change in mix in the Company's product sales driven primarily by lunch expansion. In addition, Total revenues were impacted by the closing of six restaurants since December 31, 2012.
-- Comparable sales for Company-owned core domestic concepts increased 1.4% while traffic rose 0.3%. Results were as follows:
THREE MONTHS ENDED DECEMBER 31, 2013 COMPANY-OWNED
Domestic comparable restaurant sales (stores open 18 months or more)
Outback Steakhouse 1.1%
Carrabba's Italian Grill 0.9%
Bonefish Grill 0.9%
Fleming's Prime Steakhouse and Wine Bar 4.9%
-- Adjusted restaurant-level operating margin as a percentage of Restaurant sales was 15.9% in the fourth quarter of 2013 versus 15.4% for the same period in 2012. This increase was primarily attributable to higher productivity savings, lower health and general liability claims and higher average unit volumes. The increase was partially offset by commodity inflation primarily associated with beef and seafood, higher kitchen labor expense and increased advertising expenses. GAAP restaurant-level operating margin as a percentage of Restaurant sales was 14.8% in the fourth quarter versus 15.4% for the same period in 2012. The decrease in GAAP restaurant-level operating margin was driven by a payroll tax audit contingency recorded in Labor and other related costs partially offset by higher Adjusted restaurant-level operating margin.
-- Adjusted operating income as a percentage of Total revenues was 6.1% in the fourth quarter of 2013 versus 5.1% for the same period in 2012. This increase was driven primarily by higher Adjusted restaurant-level operating margins and lower corporate and field compensation expenses.
-- The Company opened 15 new system-wide locations: six Bonefish Grill restaurants, two Carrabba's Italian Grill restaurants, six Company-owned international Outback Steakhouse restaurants, four in Brazil and one each in South Korea and China and one international franchise restaurant. The Company also completed 36 restaurant renovations: 29 Outback Steakhouse, four Carrabba's Italian Grill and three international Outback Steakhouse locations.
-- The Company's fourth quarter results contain adjustments related to the following events:
As previously announced, effective November 1, 2013, the Company completed the acquisition of a controlling interest in its Brazilian joint venture, which was previously operated as an unconsolidated entity. Included in purchase accounting was a gain on remeasurement to fair value of the previously held equity investment in the Brazilian joint venture of $36.6 million during the fourth quarter ended December 31, 2013.
The Company recently completed an assessment of its restaurant base in advance of capital and development planning for the 2014 fiscal year. As a result of this assessment, the Company decided to close 22 underperforming restaurants primarily within the Outback Steakhouse concept. The Company expects to substantially complete the restaurant closings by the end of the first quarter of 2014. In connection with this initiative, the Company incurred pre-tax asset impairment charges of approximately $18.7 million in the fourth quarter of 2013 and expects to incur approximately $5.0 million for non-cancelable operating lease liabilities and store closing costs in 2014. The lease liabilities will be recorded at the time that the location is closed.
Based on supplementary information received, the Company recorded an additional $12.0 million expense in the fourth quarter of 2013 related to the IRS payroll tax audit. This expense was recorded in Labor and other related expense in the income statement and impacts restaurant operating margin and operating income. The expense relates to periods prior to 2013. The payroll tax audit has a corresponding adjustment in the (Benefit) provision for income taxes that offsets the additional Labor and other related expense in 2013. As a result of the associated income tax benefit, recording of the liability has no impact on Net income.
-- During the fourth quarter ended December 31, 2013, $40.0 million of voluntary prepayments on the outstanding senior secured term loan B of the Company's wholly-owned subsidiary, OSI Restaurant Partners, LLC, were made. In addition, the Company repaid in full the revolving credit facility borrowings of $100.0 million utilized to finance the Brazil acquisition.
-- On January 3, 2014, the Company's Board of Directors approved a change in the Company's fiscal year end from a calendar year ending on December 31 to a 52-53 week fiscal year ending on the last Sunday in December, effective beginning with fiscal year 2014. The fiscal year change will be made on a prospective basis and the Company will not adjust operating results for prior periods. The change to our fiscal year does not impact the fourth quarter or full-year results for fiscal year 2013 ending on December 31, 2013, which are reported on a calendar year. However, the change will impact the prior year comparability of each of the Company's fiscal quarters and annual period in 2014.
2014 Financial Outlook
The Company's change to a 52-53 week fiscal year end results in the loss of three high revenue days in the 2014 fiscal year compared to calendar year reporting. The fiscal year end change is expected to have the following impacts to the 2014 annual financial results as compared to calendar year reporting:
-- Total revenues will be approximately $43.0 million lower;
-- Adjusted net income and GAAP Net income will be approximately $8.2 million lower; and
-- Adjusted diluted earnings per share and GAAP Diluted earnings per share will be approximately $0.06 lower.
The table below presents the Company's current expectations for selected 2014 financial and operating results. For ease of comparability, calendar year and 52-53 week based forecasts are provided, where applicable. Beginning with the first quarter of 2014 and going forward, the Company will only report on a 52-53 week basis.
All Financial Results are expressed on an "at least" basis (i.e. Adjusted diluted earnings per share of "at least $1.21").
2014 FINANCIAL OUTLOOK
-- An adjustment of approximately $6.5 million for pre-tax, non-cash amortization of intangibles recorded as a result of the Brazil acquisition and includes amortization of reacquired franchise rights and favorable and unfavorable leases. This amount is added back to Adjusted net income and Adjusted diluted earnings per share. This adjustment has been translated to U.S. Dollars using an exchange rate of $0.42, which approximates the Brazilian Real conversion rate to U.S. Dollars on December 31, 2013. The comparable adjustment in the fourth quarter of 2013 was $0.6 million.
-- An adjustment of approximately $5.0 million for pre-tax, non-cancelable operating lease liabilities and the costs of closing 22 restaurants in 2014. This amount is added back to Adjusted net income and Adjusted diluted earnings per share.
First Quarter 2014 Commentary
The Company has identified three items that will impact first quarter 2014 financial results, which have already been incorporated into the full-year 2014 guidance. These items are as follows:
-- Comparable sales for Company-owned core domestic concepts are expected to be in the range of -1.0% to 1.0% in the first quarter driven primarily by unfavorable weather;
-- The annual managing partner's conference will be held in the second quarter of 2014. In 2013, the conference was held in the first quarter. The cost of the conference is approximately $3.0 million;
-- The first quarter 2014 effective income tax rate is expected to be 27.0% to 29.0%, which is consistent with the full-year effective income tax rate guidance. The effective income tax rate in the first quarter of 2013 was 14.1%.
The Company will host a conference call today, February 25, 2014 at 9:00 AM ET. The conference call can be accessed live over the telephone by dialing (877) 941-2068 or (480) 629-9712 for international callers. A replay will be available beginning two hours after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 4666603. The replay will be available through Tuesday, March 4, 2014. 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.
About Bloomin' Brands, Inc.
The Company is one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. The Company has five founder-inspired brands: Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, Fleming's Prime Steakhouse and Wine Bar and Roy's, with all except Roy's considered core concepts. The Company owns and operates more than 1,500 restaurants in 48 states, Puerto Rico, Guam and 21 countries, some of which operate under a franchise agreement. For more information, please visit www.bloominbrands.com.