On January 1, 2018, the Company adopted Accounting Standard Update 2014-09 “Revenue Recognition (Topic 606), Revenue from Contracts with Customers” (“ASU No. 2014-09”), using the full retrospective transition method. Under ASU No. 2014-09, revenue is recognized in an amount that reflects the consideration an entity expects to receive for the transfer of goods and services. Changes are applied retrospectively to each period presented and a cumulative effect adjustment of $33.1 million was recorded as a credit to the ending balance of Accumulated deficit as of December 27, 2015. The impacts of the adoption of the new guidance are summarized below.
Gift Card Revenue - Gift card breakage, the amount of gift cards which will not be redeemed, is now recognized using estimates based on historical redemption patterns. Previously, under the remote method, gift card breakage was recognized when the likelihood of redemption by the customer was considered remote. Changes in the recognition pattern will have an impact to quarterly results. Under the remote method, approximately 80% of breakage revenue was recorded in the Company’s fourth fiscal quarter. Under the proportional method, the Company will recognize breakage revenue proportional to gift card redemptions, of which approximately 40% is expected to occur in the Company’s first fiscal quarter, with the remaining split relatively evenly across the other three fiscal quarters.
Advertising Fees - The new guidance requires that advertising fees charged to franchisees are recognized as revenue. Previously, the Company recorded advertising fees as a reduction to Other restaurant operating expenses. As this is a reclassification, there is no impact to net income related to the change in accounting for advertising fees.
Franchise Fees - The new guidance changed the timing of recognition of both initial franchise and renewal fees. Previously, these fees were recognized once the Company had substantially performed all of its material obligations under the franchise agreement, which was generally upon the opening of the franchised restaurant or upon renewal of the franchise agreement. The new guidance requires initial franchise and renewal fees to be recognized over the term of the franchise agreement.
The following tables include a recast of fiscal year 2017 for the full retrospective application of ASU No. 2014-09:
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| | | | | | | | | | | |
| BLOOMIN’ BRANDS, INC. |
INCOME FROM OPERATIONS, NET INCOME AND DILUTED EARNINGS PER SHARE GAAP RECONCILIATIONS RESTATED FISCAL YEAR 2017 PRESENTATION - UNAUDITED |
| | DECEMBER 31, 2017 |
| (dollars in thousands, except per share data) | AS REPORTED | | 2014-09 IMPACT | | AS RESTATED |
| Revenues | | | | | |
| Restaurant sales | $ | 4,168,658 |
| | $ | (4,595 | ) | | $ | 4,164,063 |
|
| Franchise and other revenues | 44,688 |
| | 14,385 |
| | 59,073 |
|
| Total revenues | $ | 4,213,346 |
| | $ | 9,790 |
| | $ | 4,223,136 |
|
| Costs and expenses | | | | | |
| Other restaurant operating | $ | 978,984 |
| | $ | 17,196 |
| | $ | 996,180 |
|
| Income from operations | $ | 146,092 |
| | $ | (7,406 | ) | | $ | 138,686 |
|
| Income before provision for income taxes | $ | 118,543 |
| | $ | (7,406 | ) | | $ | 111,137 |
|
| Provision for income taxes (1) | $ | 15,985 |
| | $ | (8,456 | ) | | $ | 7,529 |
|
| Net income | $ | 102,558 |
| | $ | 1,050 |
| | $ | 103,608 |
|
| Net income attributable to Bloomin’ Brands | $ | 100,243 |
| | $ | 1,050 |
| | $ | 101,293 |
|
| | | | | | |
| Basic earnings per share | $ | 1.04 |
| | $ | 0.01 |
| | $ | 1.05 |
|
| Diluted earnings per share | $ | 1.01 |
| | $ | 0.01 |
| | $ | 1.02 |
|
| | | |
| | |
| Basic weighted average common shares outstanding | 96,365 |
| | | | 96,365 |
|
| Diluted weighted average common shares outstanding | 99,707 |
| | | | 99,707 |
|
____________________
| |
| (1) | Includes a $5.6 million impact from to the enactment of the Tax Cuts and Jobs Act, consisting of the re-measurement of additional deferred tax balances related to the adoption. |
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| BLOOMIN’ BRANDS, INC. |
GAAP REVENUES, INCOME FROM OPERATIONS AND NET INCOME BY QUARTER RESTATED FISCAL YEAR 2017 PRESENTATION - UNAUDITED |
| | QUARTER ENDED | | |
| (dollars in thousands, except per share data) | MARCH 26, 2017 | | JUNE 25, 2017 | | SEPTEMBER 24, 2017 | | DECEMBER 31, 2017 | | FISCAL YEAR 2017 |
| Total revenues - As Reported | $ | 1,143,823 |
| | $ | 1,032,982 |
| | $ | 948,899 |
| | $ | 1,087,642 |
| | $ | 4,213,346 |
|
| Impact of ASU No. 2014-09 | 10,888 |
| | 3,476 |
| | 6,688 |
| | (11,262 | ) | | 9,790 |
|
| Total revenues - Restated | $ | 1,154,711 |
| | $ | 1,036,458 |
| | $ | 955,587 |
| | $ | 1,076,380 |
| | $ | 4,223,136 |
|
| | | | | | | | | | |
| Income from operations - As Reported | $ | 69,130 |
| | $ | 42,154 |
| | $ | 3,182 |
| | $ | 31,626 |
| | $ | 146,092 |
|
| Impact of ASU No. 2014-09 | 7,704 |
| | (811 | ) | | 2,037 |
| | (16,336 | ) | | (7,406 | ) |
| Income from operations - Restated | $ | 76,834 |
| | $ | 41,343 |
| | $ | 5,219 |
| | $ | 15,290 |
| | $ | 138,686 |
|
| | | | | | | | | | |
| Net income attributable to Bloomin’ Brands - As Reported | $ | 43,910 |
| | $ | 35,630 |
| | $ | 4,336 |
| | $ | 16,367 |
| | $ | 100,243 |
|
| Impact of ASU No. 2014-09 | 4,715 |
| | (497 | ) | | 1,247 |
| | (10,043 | ) | | (4,578 | ) |
| Impact of the Tax Cuts and Jobs Act (1) | — |
| | — |
| | — |
| | 5,628 |
| | 5,628 |
|
| Net income attributable to Bloomin’ Brands - Restated | $ | 48,625 |
| | $ | 35,133 |
| | $ | 5,583 |
| | $ | 11,952 |
| | $ | 101,293 |
|
| | | | | | | | | | |
| Diluted earnings per share - As Reported | $ | 0.41 |
| | $ | 0.35 |
| | $ | 0.05 |
| | $ | 0.17 |
| | $ | 1.01 |
|
| Impact of No. ASU 2014-09 | 0.04 |
| | — |
| | 0.01 |
| | (0.11 | ) | | (0.05 | ) |
| Impact of the Tax Cuts and Jobs Act (1) | — |
| | — |
| | — |
| | 0.06 |
| | 0.06 |
|
| Diluted earnings per share - Restated | $ | 0.46 |
| | $ | 0.34 |
| | $ | 0.06 |
| | $ | 0.13 |
| | $ | 1.02 |
|
| | | | | | | | | | |
| Diluted weighted average common shares outstanding | 106,413 |
| | 102,421 |
| | 95,655 |
| | 94,721 |
| | 99,707 |
|
____________________
| |
| (1) | Includes the impact of the re-measurement of additional deferred tax balances related to the adoption of ASU No. 2014-09 which is included as a net income adjustment within Adjustment to provision for income taxes in the non-GAAP table below. |
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| BLOOMIN’ BRANDS, INC. |
NET INCOME AND DILUTED EARNINGS PER SHARE NON-GAAP RECONCILIATIONS RESTATED FISCAL YEAR 2017 PRESENTATION - UNAUDITED |
| | QUARTER ENDED | | |
| (dollars in thousands, except per share data) | MARCH 26, 2017 | | JUNE 25, 2017 | | SEPTEMBER 24, 2017 | | DECEMBER 31, 2017 | | FISCAL YEAR 2017 |
| Net income attributable to Bloomin’ Brands - Restated | $ | 48,625 |
| | $ | 35,133 |
| | $ | 5,583 |
| | $ | 11,952 |
| | $ | 101,293 |
|
| | | | | | | | | | |
| Total adjustments, before income taxes | 17,811 |
| | (2,831 | ) | | 12,480 |
| | 27,067 |
| | 54,527 |
|
| Adjustment to provision for income taxes | (4,419 | ) | | (4,525 | ) | | (5,074 | ) | | (10,495 | ) | | (24,513 | ) |
| Net adjustments | 13,392 |
| | (7,356 | ) | | 7,406 |
| | 16,572 |
| | 30,014 |
|
| Adjusted net income - Restated | $ | 62,017 |
| | $ | 27,777 |
| | $ | 12,989 |
| | $ | 28,524 |
| | $ | 131,307 |
|
| | | | | | | | | | |
| Adjusted diluted earnings per share - As Reported | $ | 0.54 |
| | $ | 0.28 |
| | $ | 0.12 |
| | $ | 0.41 |
| | $ | 1.36 |
|
| Impact of ASU 2014-09 | 0.04 |
| | — |
| | 0.01 |
| | (0.11 | ) | | (0.05 | ) |
| Adjusted diluted earnings per share - Restated | $ | 0.58 |
| | $ | 0.27 |
| | $ | 0.14 |
| | $ | 0.30 |
| | $ | 1.32 |
|
| | | | | | | | | | |
| Diluted weighted average common shares outstanding | 106,413 |
| | 102,421 |
| | 95,655 |
| | 94,721 |
| | 99,707 |
|
____________________
Note: All adjustments are consistent with our prior SEC filings and earnings releases, except for the Adjustment to provision for income taxes for the quarter and year ended December 31, 2017 which has been revised for the $5.6 million impact of the enactment of the Tax Cuts and Jobs Act on the adoption of ASU No. 2014-09, consisting of the re-measurement of additional deferred tax balances related to the adoption.
Note: Numerical figures included in this exhibit have been subject to rounding adjustments.
