Bloomin' Brands Annual Report 2016

Plain-text annual report

BLOOMIN' BRANDS, INC. FORM 10-K (Annual Report) Filed 02/22/17 for the Period Ending 12/25/16 Address Telephone CIK Symbol SIC Code 2202 NORTH WEST SHORE BOULEVARD SUITE 500 TAMPA, FL 33607 813-282-1225 0001546417 BLMN 5812 - Eating Places Industry Restaurants & Bars Sector Consumer Cyclicals Fiscal Year 12/28 http://www.edgar-online.com © Copyright 2017, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One) [X]Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended: December 25, 2016 Or[ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______Commission File Number: 001-35625BLOOMIN’ BRANDS, INC.(Exact name of registrant as specified in its charter) Delaware 20-8023465(State or other jurisdiction of incorporation or organization) (I.R.S. EmployerIdentification No.)2202 North West Shore Boulevard, Suite 500, Tampa, Florida 33607(Address of principal executive offices) (Zip Code)(813) 282-1225(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, $0.01 par value The Nasdaq Stock Market LLC(Nasdaq Global Select Market) Securities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ý NO oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO ýIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. YES ý NO oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). YES ý NO oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. ýIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ý Accelerated filer oNon-accelerated filer o (Do not check if smaller reporting company) Smaller reporting company oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO ýThe aggregate market value of common stock held by non-affiliates (based on the closing price on the last business day of the registrant’s most recently completedsecond fiscal quarter as reported on the Nasdaq Global Select Market) was $1.6 billion .As of February 17, 2017 , 102,843,651 shares of common stock of the registrant were outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive Proxy Statement for its 2017 Annual Meeting of Stockholders, expected to be held on April 21, 2017 , are incorporated byreference into Part III, Items 10-14 of this Annual Report on Form 10-K. Table of ContentsBLOOMIN’ BRANDS, INC.INDEX TO ANNUAL REPORT ON FORM 10-KFor Fiscal Year 2016TABLE OF CONTENTS PAGE NO.PART I Item 1. Business5Item 1A. Risk Factors15Item 1B. Unresolved Staff Comments25Item 2. Properties26Item 3. Legal Proceedings26Item 4. Mine Safety Disclosures27PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities27Item 6. Selected Financial Data30Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations31Item 7A. Quantitative and Qualitative Disclosures About Market Risk61Item 8. Financial Statements and Supplementary Data63Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure109Item 9A. Controls and Procedures109Item 9B. Other Information109PART III Item 10. Directors, Executive Officers and Corporate Governance110Item 11. Executive Compensation110Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters110Item 13. Certain Relationships and Related Transactions, and Director Independence110Item 14. Principal Accounting Fees and Services111PART IV Item 15. Exhibits, Financial Statement Schedules112Item 16. Form 10-K Summary116Signatures1172Table of ContentsBLOOMIN’ BRANDS, INC.PART ICautionary StatementThis Annual Report on Form 10-K (the “Report”) includes statements that express our opinions, expectations, beliefs, plans, objectives,assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements”within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, asamended (the “Exchange Act”). These forward-looking statements can generally be identified by the use of forward-looking terminology,including the terms “believes,” “estimates,” “anticipates,” “expects,” “feels,” “seeks,” “forecasts,” “projects,” “intends,” “plans,” “may,”“will,” “should,” “could” or “would” or, in each case, their negative or other variations or comparable terminology, although not all forward-looking statements are accompanied by such terms. These forward-looking statements include all matters that are not historical facts. Theyappear in a number of places throughout this Report and include statements regarding our intentions, beliefs or current expectationsconcerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry inwhich we operate.By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances thatmay or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable whenmade, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations,financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and industrydevelopments are consistent with the forward-looking statements contained in this Report, those results or developments may not beindicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially fromstatements made or suggested by forward-looking statements include, but are not limited to, those described in the “Risk Factors” section ofthis Report and the following:(i)Consumer reactions to public health and food safety issues;(ii)Our ability to compete in the highly competitive restaurant industry with many well-established competitors and new market entrants;(iii)Minimum wage increases and additional mandated employee benefits;(iv)Our ability to comply with governmental laws and regulations, the costs of compliance with such laws and regulations and the effectsof changes to applicable laws and regulations, including tax laws and unanticipated liabilities;(v)Economic conditions and their effects on consumer confidence and discretionary spending, consumer traffic, the cost and availabilityof credit and interest rates;(vi)Fluctuations in the price and availability of commodities;(vii)Our ability to implement our expansion, remodeling and relocation plans due to uncertainty in locating and acquiring attractive siteson acceptable terms, obtaining required permits and approvals, recruiting and training necessary personnel, obtaining adequatefinancing and estimating the performance of newly opened, remodeled or relocated restaurants;(viii)Our ability to protect our information technology systems from interruption or security breach and to protect consumer data andpersonal employee information;(ix)The effects of international economic, political and social conditions and legal systems on our foreign operations and on foreigncurrency exchange rates;3Table of ContentsBLOOMIN’ BRANDS, INC.(x)Our ability to preserve and grow the reputation and value of our brands;(xi)Seasonal and periodic fluctuations in our results and the effects of significant adverse weather conditions and other disasters orunforeseen events;(xii)Our ability to effectively respond to changes in patterns of consumer traffic, consumer tastes and dietary habits;(xiii)Strategic actions, including acquisitions and dispositions, and our success in integrating any acquired or newly created businesses.(xiv)The effects of our substantial leverage and restrictive covenants in our various credit facilities on our ability to raise additional capitalto fund our operations, to make capital expenditures to invest in new or renovate restaurants and to react to changes in the economy orour industry, and our exposure to interest rate risk in connection with our variable-rate debt; and(xv)The adequacy of our cash flow and earnings and other conditions which may affect our ability to pay dividends and repurchase sharesof our common stock.In light of these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Report speaks only as of the date of such statement, and we undertake no obligation to update anyforward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events ordevelopments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of futureperformance, unless specifically expressed as such, and should only be viewed as historical data.4Table of ContentsBLOOMIN’ BRANDS, INC.Item 1. BusinessGeneral and History - Bloomin’ Brands, Inc. (“Bloomin’ Brands,” the “Company,” “we,” “us,” and “our” and similar terms mean Bloomin’Brands, Inc. and its subsidiaries except where the context otherwise requires) is one of the largest casual dining restaurant companies in theworld, with a portfolio of leading, differentiated restaurant concepts. We have four founder-inspired concepts: Outback Steakhouse,Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Our restaurant concepts range in price point and degreeof formality from casual (Outback Steakhouse and Carrabba’s Italian Grill) to upscale casual (Bonefish Grill) and fine dining (Fleming’sPrime Steakhouse & Wine Bar).As of December 25, 2016 , we owned and operated 1,276 restaurants and franchised 240 restaurants across 48 states, Puerto Rico, Guam and20 countries.The first Outback Steakhouse restaurant opened in 1988 and in 1996, we expanded the Outback Steakhouse concept internationally. OSIRestaurant Partners, LLC (“OSI”) is our primary operating entity and New Private Restaurant Properties, LLC (“PRP”) owns and leases ourowned restaurant properties, primarily to OSI subsidiaries. Both OSI and PRP are wholly-owned subsidiaries of Bloomin’ Brands.Financial Information About Segments - We have two reportable segments, U.S. and International, which reflects how we manage ourbusiness, review operating performance and allocate resources. The U.S. segment includes all brands operating in the U.S., and brandsoperating outside the U.S. are included in the International segment. Following is a summary of reporting segments as of December 25, 2016:SEGMENT CONCEPT GEOGRAPHIC LOCATIONU.S. Outback Steakhouse United States of America Carrabba’s Italian Grill Bonefish Grill Fleming’s Prime Steakhouse & Wine Bar International Outback Steakhouse Brazil, Hong Kong, China Carrabba’s Italian Grill (Abbraccio) BrazilSegment information for fiscal years 2016 , 2015 and 2014 , which reflects financial information by geographic area, is included inManagement’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 and Note 19 - Segment Reportingof our Notes to Consolidated Financial Statements in Part II, Item 8.OUR SEGMENTSU.S. SegmentAs of December 25, 2016 , in our U.S. segment, we owned and operated 1,164 restaurants and franchised 113 restaurants across 48 states.Outback Steakhouse - Outback Steakhouse is a casual steakhouse restaurant concept focused on steaks, signature flavors and Australiandecor. The Outback Steakhouse menu offers seasoned and seared or wood-fire grilled steaks, chops, chicken, seafood, pasta, salads andseasonal specials. The menu also includes several specialty appetizers, including our signature Bloomin’ Onion ® , and desserts, together withfull bar service including Australian wine and beer.Carrabba’s Italian Grill - Carrabba’s Italian Grill is a casual authentic Italian restaurant concept featuring handcrafted dishes. The Carrabba’sItalian Grill menu includes a variety of Italian pasta, chicken, beef and seafood dishes, small plates, salads and wood-fired pizza. Ouringredients are sourced from around the world and our traditional Italian exhibition kitchen allows customers to watch handmade dishes beingprepared.5Table of ContentsBLOOMIN’ BRANDS, INC.Bonefish Grill - Bonefish Grill is an upscale casual seafood restaurant concept that specializes in market fresh fish from around the world,wood-grilled specialties and hand-crafted cocktails. In addition, Bonefish Grill offers beef, pork and chicken entrées, as well as severalspecialty appetizers, including our signature Bang Bang Shrimp ® , and desserts.Fleming’s Prime Steakhouse & Wine Bar - Fleming’s Prime Steakhouse & Wine Bar is a contemporary steakhouse concept featuring primecuts of beef, chops, fresh fish, seafood and poultry, salads and side dishes. The steak selection features USDA Prime corn-fed beef, both wet-and dry-aged for flavor and texture, in a variety of sizes and cuts. Fleming’s Prime Steakhouse & Wine Bar offers a large selection ofdomestic and imported wines, with 100 selections available by the glass.International SegmentWe have cross-functional, local management to support and grow restaurants in each of the countries where we have Company-ownedoperations. Our international operations are integrated with our corporate organization to leverage enterprise-wide capabilities, includingmarketing, finance, real estate, information technology, legal, human resources, supply chain management and productivity.On July 25, 2016, the Company completed the sale of its Outback Steakhouse subsidiary in South Korea (“Outback Steakhouse SouthKorea”). After completion of the sale, the Company’s restaurant locations in South Korea are operated as franchises.As of December 25, 2016 , in our International segment, we owned and operated 112 restaurants and franchised 127 restaurants across 20countries, Puerto Rico and Guam.Outback Steakhouse - International Outback Steakhouse restaurants have a menu similar to the U.S. menu with additional variety to meetlocal taste preferences. In addition to the traditional Outback Special sirloin, a typical international menu may feature local beef cuts such asthe Aussie Grilled Picanha in Brazil.Carrabba’s Italian Grill (Abbraccio Cucina Italiana) - Abbraccio Cucina Italiana, our Carrabba’s Italian Grill restaurant concept in Brazil,offers a blend of traditional modern Italian dishes. The menu varies, with additional pasta and pizza menu offerings, to account for local tastesand customs. Abbraccio Cucina Italiana also has a range of beverage options, including classically inspired cocktails and local favorites withan Italian twist.Restaurant OverviewSelected Sales Data - Following is sales mix by product type and average check per person for Company-owned restaurants during fiscal year2016 : U.S. INTERNATIONAL OutbackSteakhouse Carrabba’sItalian Grill Bonefish Grill Fleming’s Prime Steakhouse & Wine Bar OutbackSteakhouseBrazilFood & non-alcoholic beverage90% 85% 78% 73% 83%Alcoholic beverage10% 15% 22% 27% 17% 100% 100% 100% 100% 100% Average check per person ($USD)$22 $21 $25 $74 $15Average check per person (LC) R$526Table of ContentsBLOOMIN’ BRANDS, INC.System-wide Restaurant Summary - Following is a system-wide rollforward of restaurants in operation during fiscal year 2016 : DECEMBER 27, 2015 2016 ACTIVITY DECEMBER 25, 2016 U.S. STATE OPENED CLOSED OTHER COUNTNumber of restaurants: U.S. Outback Steakhouse Company-owned650 5 (3) (2) 650 Franchised105 2 (2) — 105 Total755 7 (5) (2) 755 48Carrabba’s Italian Grill Company-owned244 — (2) — 242 Franchised3 — (1) — 2 Total247 — (3) — 244 32Bonefish Grill Company-owned210 2 (8) — 204 Franchised5 1 — — 6 Total215 3 (8) — 210 36Fleming’s Prime Steakhouse & Wine Bar Company-owned66 2 — — 68 28International Company-owned Outback Steakhouse - Brazil (1)75 9 (1) — 83 Outback Steakhouse - South Korea (2)75 3 (6) (72) — Other16 14 (1) — 29 Franchised Outback Steakhouse - South Korea (2)— 1 — 72 73 Other58 3 (9) 2 54 Total224 30 (17) 2 239 System-wide total (3)1,507 42 (33) — 1,516 ____________________(1)The restaurant counts for Brazil are reported as of November 30, 2016 and 2015, respectively, to correspond with the balance sheet dates of this subsidiary.(2)On July 25, 2016, we sold our restaurant locations in South Korea, converting all restaurants in that market to franchised locations.(3)The restaurant count as of December 25, 2016 includes 43 locations scheduled to close in connection with the 2017 Closure Initiative (as defined below under Item 7.“Management’s Discussion and Analysis of Financial Condition and Results of Operations”).RESTAURANT DESIGN AND DEVELOPMENTSite Design - We generally construct freestanding buildings on leased properties, although certain leased sites are also located in stripshopping centers. Construction of a new restaurant typically takes 60 to 180 days from the date the location is leased or under contract andfully permitted. In the majority of cases, future restaurant development will result from the lease of existing third-party retail space. Wetypically design the interior of our restaurants in-house, utilizing outside architects when necessary. We have an ongoing remodel programacross all of our concepts to maintain the relevance of our restaurants’ ambience.Site Selection Process - We have a central site selection team comprised of real estate development, property/lease management and designand construction personnel. This site selection team also utilizes a combination of existing field operations managers, internal developmentpersonnel and outside real estate brokers to identify and qualify potential sites.7Table of ContentsBLOOMIN’ BRANDS, INC.We have a relocation initiative in process, primarily related to the Outback Steakhouse brand. This multi-year relocation plan is focused ondriving additional traffic to our restaurants by moving legacy restaurants from non-prime to prime locations within the same trade area.Restaurant DevelopmentWe utilize the ownership structure and market entry strategy that best fits the needs for a particular market, including Company-owned units,joint ventures and franchises. For each market, we determine whether we will focus on Company-owned units, joint ventures or franchisesbased on demand, cost structure and economic conditions.International Development - We continue to expand internationally, leveraging established equity and franchise markets in South Americaand Asia, and in strategically selected emerging and high-growth developed markets, focusing on Brazil and China. As we continue to expandinternationally, we complement our ownership positions in high growth markets with franchisee partnerships. During 2016, we entered into amulti-country franchise agreement for the development of up to 26 Outback Steakhouse and Abbraccio Cucina Italiana restaurants in theMiddle East over the next five years. We also entered into a development agreement in 2016 with an existing franchisee in Australia to open20 Outback Steakhouse restaurants over the next three years.See Item 2 - Properties for disclosure of our international restaurant count by country.U.S. Development - We plan to opportunistically pursue unit growth across our concepts through existing geography fill-in and marketexpansion opportunities based on their current location mix.RESEARCH & DEVELOPMENT / INNOVATIONWe utilize a global core menu policy to ensure consistency and quality in our menu offerings. Before we add an item to the core menu, ourresearch and development (“R&D”) team performs a thorough review of the item, including conducting consumer research, in order to assistin determining the viability of adding the item. Internationally, we have teams in our developed markets that tailor our menus to address thepreferences of local consumers.We continuously evolve our product offerings to improve efficiency based on consumer trends and feedback. We have a 12-month pipeline ofnew menu and promotional items across all concepts that allows us to quickly make adjustments in response to market demands, whennecessary. In addition, we continue to focus on productivity across the portfolio. For new menu items and significant product changes, wehave a testing process that includes direct consumer feedback on the product and its pricing.Menu innovation and enhancement remains a high priority across all concepts. During 2016, we introduced a new center-cut sirloin, increasedcertain portion sizes and simplified the menu at Outback Steakhouse. We reduced menu complexity to refocus efforts on fresh seafood atBonefish Grill and launched a new core menu at Carrabba’s in 2016.INFORMATION SYSTEMSThe Company leverages technology to support customer engagement, labor and food productivity initiatives and restaurant operations.To drive customer engagement, the Company continues to invest in technology infrastructure, including brand websites, online ordering andmobile apps. To increase customer convenience, we are leveraging our existing online ordering infrastructure to facilitate expanded off-premise dining. Additionally, we have developed systems to support our new customer loyalty program with a focus to increase traffic to ourrestaurants. Investments are also being made in a global supply chain management system to provide better inventory forecasting andreplenishment to our restaurants, which will help manage food quality and specifications. We also continue to invest in a range of tools andinfrastructure to support risk management and cyber security.8Table of ContentsBLOOMIN’ BRANDS, INC.Our integrated point-of-sale (“POS”) system allows us to transact business in our restaurants, communicate sales data through a securecorporate network to our enterprise resource planning system and data warehouse and automate financial and accounting controls. OurCompany-owned restaurants, and most of our franchised restaurants, are connected through a portal that provides our Company employeesand franchise partners with access to business information and tools that allow them to collaborate, communicate, train and share information.ADVERTISING AND MARKETINGWe generally advertise through national and spot television and radio media. Our concepts have an active public relations program and alsorely on national promotions, site visibility, local marketing, digital marketing, direct mail, billboards and point-of-sale materials to promoteour restaurants. In recent years, we have increased the use of digital advertising which has allowed us to be more efficient with ouradvertising expenditures. Internationally, we have teams in our developed markets that engage local agencies to tailor advertising to eachmarket and develop relevant and timely promotions based on local consumer demand.In July 2016, we launched our first multi-brand loyalty program called Dine Rewards. Additionally, to help maintain consumer interest andrelevance, each concept leverages limited-time offers featuring seasonal specials. We promote limited-time offers through integratedmarketing programs that utilize all of our advertising resources.RESTAURANT OPERATIONSManagement and Employees - The management staff of our restaurants varies by concept and restaurant size. Our restaurants employprimarily hourly employees, many of whom work part-time. The Restaurant Managing Partner has primary responsibility for the day-to-dayoperation of the restaurant and is required to follow Company-established operating standards. Area Operating Partners are responsible foroverseeing the operations of typically six to 13 restaurants and Restaurant Managing Partners in a specific region.Area Operating Partners, Restaurant Managing Partner and Chef Partner Programs - In addition to salary, Area Operating Partners,Restaurant Managing Partners and Chef Partners generally receive performance-based bonuses for providing management and supervisoryservices to their restaurants, certain of which may be based on a percentage of their restaurants’ monthly operating results or distributablecash flow (“Monthly Payments”).Restaurant Managing Partners and Chef Partners in the U.S. are eligible to participate in deferred compensation programs. Under thesedeferred compensation programs, the Restaurant Managing Partners and Chef Partners are eligible to receive payments beginning uponcompletion of their five-year employment agreement. We invest in various corporate-owned life insurance policies, which are held within anirrevocable grantor or “rabbi” trust account for settlement of our obligations under the deferred compensation plans. Also, on the fifthanniversary of the opening of each new U.S. Company-owned restaurant, the Area Operating Partner supervising the restaurant during thefirst five years of operation receives an additional performance-based bonus.Many of our International Restaurant Managing Partners are given the option to purchase participation interests in the cash distributions fromthe restaurants they manage. The amount, terms and availability vary by country. This interest gives the partners the right to receive apercentage of the restaurant’s annual cash flows for the duration of the agreement.Supervision and Training - We require our Area Operating Partners and Restaurant Managing Partners to have significant experience in thefull-service restaurant industry. All Area Operating Partners and Restaurant Managing Partners are required to complete a comprehensivetraining program that emphasizes our operating strategy, procedures and standards. The Restaurant Managing Partners and Area OperatingPartners, together with our Presidents, Regional Vice Presidents, Vice Presidents of Training and Directors of Training, are responsible forselecting and training the employees for each new restaurant.9Table of ContentsBLOOMIN’ BRANDS, INC.Service - In order to better assess and improve our performance, we use a third-party research firm to conduct an ongoing satisfactionmeasurement program that provides us with industry benchmarking information for our Company-owned and franchise locations in the U.S.We have a similar consumer satisfaction measurement program for our international Company-owned and certain franchise locations and weobtain industry benchmarking information for the international markets in which we operate, when available. These programs measuresatisfaction across a wide range of experience elements.SOURCING AND SUPPLYSourcing and Supply - We take a global approach to procurement and supply chain management, with our corporate team serving all U.S. andinternational concepts. In addition, we have dedicated supply chain management personnel for our international operations in South Americaand Asia. The supply chain management organization is responsible for all food and operating supply purchases as well as a large percentageof purchases of field and corporate services.We address the end-to-end costs associated with the products and goods we purchase by utilizing a combination of global, regional and localsuppliers to capture efficiencies and economies of scale. This “total cost of ownership” (“TCO”) approach focuses on the initial purchaseprice, coupled with the cost structure underlying the procurement and order fulfillment process. The TCO approach includes monitoringcommodity markets and trends to execute product purchases at the most advantageous times.We have a distribution program that includes food, beverage, smallwares and packaging goods in all major markets. This program is managedby a custom distribution company that only provides products approved for our system. This customized relationship also enables our staff toeffectively manage and prioritize our supply chain.Proteins represent 62% of our global commodity procurement composition, with beef representing 56% of purchased proteins. In 2016 , wepurchased: (i) more than 85% of our U.S. beef raw materials from four beef suppliers that represent approximately 83% of the total U.S. beefmarketplace and (ii) more than 95% of our Brazil beef raw materials from one beef supplier that represents approximately eight percent of thetotal Brazil beef marketplace. Due to the nature of our industry, we expect to continue purchasing a substantial amount of our beef from asmall number of suppliers. Other major commodity categories purchased include produce, dairy, bread and pasta, and energy sources tooperate our restaurants, such as natural gas and electricity.Quality Control - Our R&D facility is located in Tampa, Florida and serves as a global test kitchen and vendor product qualification site. Ourquality assurance team manages internal auditors responsible for supplier evaluations and external third parties who inspect supplieradherence to quality, food safety and product specification. Our suppliers also utilize third-party labs for food safety and quality verification.We have a program that ensures suppliers comply with quality, food safety and other specifications. We develop sourcing strategies for allcommodity categories based on the dynamics of each category. In addition, we require our supplier partners to meet or exceed our qualityassurance standards.Our operational teams have multiple touch points in the restaurants ensuring food safety, quality and freshness throughout all phases of thepreparation process. In addition, we employ third-party auditors to verify our standards of food safety, training and sanitation.RESTAURANT OWNERSHIP STRUCTURESOur restaurants are Company-owned or operated under franchise arrangements. We generate our revenues from our Company-ownedrestaurants and through ongoing royalties from our franchised restaurants and sales of franchise rights.10Table of ContentsBLOOMIN’ BRANDS, INC.Company-Owned Restaurants - Company-owned restaurants are wholly-owned by us or in which we have a majority ownership. Our cashflows from entities in which we have a majority ownership are limited to the portion of our ownership. The results of operations of Company-owned restaurants are included in our consolidated operating results and the portion of income or loss attributable to the noncontrollinginterests is eliminated in our Consolidated Statements of Operations and Comprehensive Income .We pay royalties that range from 1.0% to 1.5% of U.S. sales on the majority of our Carrabba’s Italian Grill restaurants, pursuant toagreements we entered into with the Carrabba’s Italian Grill founders (“Carrabba’s Founders”). Certain Carrabba’s Italian Grill restaurantsthat opened or started serving weekday lunch on or after June 1, 2014, pay royalties of 0.5% on lunch sales.Each Carrabba’s restaurant located outside the United States pays a one-time lump sum fee to the Carrabba’s Founders, which variesdepending on the size of the restaurant. No continuing royalty fee is paid to the Carrabba’s Founders for Carrabba’s restaurants locatedoutside the United States.Unaffiliated Franchise Program - Our unaffiliated franchise agreements grant third parties rights to establish and operate a restaurant usingone of our concepts. Franchised restaurants are required to be operated in accordance with the franchise agreement and in compliance withtheir respective concept’s standards and specifications.Under our franchise agreements, each of our franchisees is required to pay an initial franchise fee and pay monthly royalties based on apercentage of gross restaurant sales. Initial franchise fees are $40,000 for U.S. franchisees and range between $40,000 and $75,000 forinternational franchisees, depending on the market. Some franchisees may also pay administration fees based on a percentage of grossrestaurant sales. Following is a summary of franchise fee percentages based on our current existing unaffiliated franchise agreements:(as a % of gross Restaurant sales)MONTHLY FRANCHISE FEEPERCENTAGE (1)U.S. franchisees (1)3.50% - 5.75%International franchisees3.00% - 6.00%_________________(1)In addition, under U.S. franchise agreements, a U.S. franchisee must contribute a percentage of gross sales for national marketing programs and must also spend acertain amount of gross sales on local advertising, up to a maximum of 8.0% of gross restaurant sales for combined national marketing and local advertising.On July 25, 2016, the Company completed the sale of Outback Steakhouse South Korea. After completion of the sale, the Company’srestaurant locations in South Korea are operated under an international franchise agreement.T-Bird Restaurant Group, Inc. (“T-Bird”) is party to an Outback Steakhouse Master Franchise Agreement. T-Bird, through its affiliates, ownsand operates 55 Outback Steakhouse restaurants in California. T-Bird is also party to a separate Outback Steakhouse development agreement,which gives T-Bird the exclusive right to open additional Outback Steakhouse restaurants in California through 2031 and commits T-Bird toopening seven new Outback Steakhouse restaurants in California by January 2022. Each new Outback Steakhouse restaurant that T-Birdopens in California is governed by the Master Franchise Agreement. As of December 25, 2016 , no new Outback Steakhouse restaurants haveopened under T-Bird’s development agreement.COMPETITIONThe restaurant industry is highly competitive with a substantial number of restaurant operators that compete directly and indirectly with us inrespect to price, service, location and food quality, and there are other well-established competitors with significant financial and otherresources. There is also active competition for management personnel, attractive suitable real estate sites, supplies and restaurant employees.In addition, competition is also influenced strongly by marketing and brand reputation. At an aggregate level, all major U.S. casual diningrestaurants and casual dining restaurants in the international markets in which we operate would be considered competitors of our concepts.Further, we face growing competition from the supermarket industry and home delivery services and applications,11Table of ContentsBLOOMIN’ BRANDS, INC.with improved selections of prepared meals, and from quick service and fast casual restaurants, as a result of higher-quality food andbeverage offerings. Internationally, we face increasing competition due to an increase in the number of casual dining restaurant options in themarkets in which we operate.GOVERNMENT REGULATIONWe are subject to various federal, state, local and international laws affecting our business. Each of our restaurants is subject to licensing andregulation by a number of governmental authorities, which may include, among others, alcoholic beverage control, health and safety,nutritional menu labeling, health care, environmental and fire agencies in the state, municipality or country in which the restaurant is located.U.S. - Alcoholic beverage sales represent 14% of our U.S. restaurant sales. Alcoholic beverage control regulations require each of ourrestaurants to apply to a state authority and, in certain locations, county or municipal authorities for a license or permit to sell alcoholicbeverages on the premises and to provide service for extended hours and on Sundays.Our restaurant operations are also subject to federal and state laws for such matters as:•immigration, employment, minimum wages, overtime, tip credits, worker conditions and health care;•nutritional labeling, nutritional content, menu labeling and food safety;•the Americans with Disabilities Act, which, among other things, requires our restaurants to meet federally mandated requirements forthe disabled; and•information security, privacy, cashless payments, gift cards and consumer credit, protection and fraud.International - Our restaurants outside of the United States are subject to similar local laws and regulations as our U.S. restaurants, includinglabor, food safety and information security. In addition, we are subject to anti-bribery and anti-corruption laws and regulations.See Item 1A - Risk Factors for a discussion of risks relating to federal, state, local and international regulation of our business.EXECUTIVE OFFICERS OF THE REGISTRANTBelow is a list of the names, ages, positions and a brief description of the business experience of each of our executive officers as ofFebruary 17, 2017 .NAME AGE POSITIONElizabeth A. Smith 53 Chairman of the Board of Directors and Chief Executive OfficerChris Brandt 48 Executive Vice President and Chief Brand OfficerDavid J. Deno 59 Executive Vice President and Chief Financial and Administrative OfficerDonagh M. Herlihy 53 Executive Vice President, Digital and Chief Information OfficerJoseph J. Kadow 60 Executive Vice President and Chief Legal OfficerMichael Kappitt 47 Executive Vice President and President of Carrabba’s Italian GrillPatrick C. Murtha 58 Executive Vice President and President of Bloomin’ Brands InternationalGregg Scarlett 55 Executive Vice President and President of Outback SteakhouseDavid P. Schmidt 46 Executive Vice President and President of Bonefish GrillSukhdev Singh 53 Executive Vice President, Global Chief Development and Franchising Officer12Table of ContentsBLOOMIN’ BRANDS, INC.Elizabeth A. Smith was appointed Chairman in January 2012. Since November 2009, Ms. Smith has served as Chief Executive Officer andas a member of our Board of Directors. Ms. Smith is a member of the Board of Directors of Hilton Worldwide Holdings, Inc. and waspreviously a member of the Board of Directors of Staples, Inc. from September 2008 to June 2014.Chris Brandt joined Bloomin’ Brands as Executive Vice President and Chief Brand Officer in May 2016. Prior to joining Bloomin’ Brands,Mr. Brandt was the Chief Brand Officer/Chief Marketing Officer for Taco Bell, a subsidiary of Yum! Brands Inc., from May 2013 to May2016. Mr. Brandt was also a Senior Director and Vice President of Marketing for Taco Bell from November 2010 to May 2013.David J. Deno has served as Executive Vice President and Chief Financial and Administrative Officer since May 2012. From December2009 to May 2012, Mr. Deno served as Chief Financial Officer of the international division of Best Buy Co. Inc. Mr. Deno previously servedas President and later Chief Executive Officer of Quiznos and Chief Financial Officer and later Chief Operating Officer of YUM! Brands,Inc.Donagh M. Herlihy has served as Executive Vice President, Digital and Chief Information Officer since September 2014. Prior to joiningBloomin’ Brands, Mr. Herlihy was Senior Vice President, Chief Information Officer and eCommerce of Avon Products, Inc. from March2008 to August 2014.Joseph J. Kadow has served as Executive Vice President and Chief Legal Officer since April 2005. Mr. Kadow has served as AssistantSecretary since February 2016 and previously served as Secretary from April 1994 to February 2016.Michael Kappitt has served as Executive Vice President and President of Carrabba’s Italian Grill since February 2016. Mr. Kappitt served asSenior Vice President and Chief Marketing Officer from January 2014 to February 2016 and Chief Marketing Officer of Outback Steakhousefrom March 2011 to December 2013.Patrick C. Murtha has served as Executive Vice President and President of Bloomin’ Brands International since November 2013. FromJanuary 2006 to March 2013, Mr. Murtha was the Chief Operating Officer of Pizza Hut, Inc.Gregg Scarlett has served as Executive Vice President and President of Outback Steakhouse since July 2016. Mr. Scarlett previously servedas Executive Vice President and President of Bonefish Grill from March 2015 to July 2016; Senior Vice President, Casual Dining RestaurantOperations from January 2013 to March 2015; and Senior Vice President of Operations for Outback Steakhouse from March 2010 to January2013.David P. Schmidt has served as Executive Vice President and President of Bonefish Grill since July 2016. Mr. Schmidt previously served asGroup Vice President of Finance from April 2016 to July 2016; Vice President of Finance for Bonefish Grill from August 2015 to April2016; Vice President of Productivity from November 2011 to August 2015 and Vice President of Corporate Finance from April 2010 toNovember 2011 for Bloomin’ Brands.Sukhdev Singh has served as Executive Vice President, Global Chief Development and Franchising Officer since May 2015. Mr. Singhpreviously served as Senior Vice President, Chief Development Officer from January 2014 to May 2015. Prior to joining Bloomin’ Brands,Mr. Singh was Chief Development Officer for Darden Restaurants, Inc. from July 2006 to January 2014.EMPLOYEESAs of December 25, 2016 , we employed approximately 97,000 persons, of which approximately 950 are corporate personnel. None of ourU.S. employees are covered by a collective bargaining agreement. Various national industry-wide labor agreements apply to certain of ouremployees in Brazil. We consider our employee relations to be in good standing.13Table of ContentsBLOOMIN’ BRANDS, INC.TRADEMARKSWe regard our Outback ® , Outback Steakhouse ® , Carrabba’s Italian Grill ® , Bonefish Grill ® , and Fleming’s Prime Steakhouse & Wine Bar® service marks and our Bloomin’ Onion ® trademark as having significant value and as being important factors in the marketing of ourrestaurants. We have also obtained trademarks for several of our other menu items and for various advertising slogans. We are aware ofnames and marks similar to the service marks of ours used by other persons in certain geographic areas in which we have restaurants.However, we believe such uses will not adversely affect us. Our policy is to pursue registration of our marks whenever possible and to opposevigorously any infringement of our marks.We license the use of our registered trademarks to franchisees and third parties through franchise arrangements and licenses. The franchiseand license arrangements restrict franchisees’ and licensees’ activities with respect to the use of our trademarks, and impose quality controlstandards in connection with goods and services offered in connection with the trademarks.SEASONALITY AND QUARTERLY RESULTSOur business is subject to seasonal fluctuations. Historically, customer traffic patterns for our established U.S. restaurants are generallyhighest in the first quarter of the year and lowest in the third quarter of the year. International customer traffic patterns vary by market. Forexample, Brazil historically experiences minimal seasonal traffic fluctuations. Additionally, holidays and severe weather may affect salesvolumes seasonally in some of our markets.Quarterly results have been and will continue to be significantly affected by general economic conditions, the timing of new restaurantopenings and their associated pre-opening costs, restaurant closures and exit-related costs and impairments of goodwill, definite andindefinite-lived intangible assets and property, fixtures and equipment. As a result of these and other factors, our financial results for anygiven quarter may not be indicative of the results that may be achieved for a full fiscal year.ADDITIONAL INFORMATIONWe make available, free of charge, through our internet website www.bloominbrands.com, our Annual Report on Form 10-K, QuarterlyReports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and amendments to those reports filed or furnished pursuant toSection 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after electronically filing suchmaterial with the Securities and Exchange Commission (“SEC”). You may read and copy any materials filed with the SEC at the Securitiesand Exchange Commission’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on theoperation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our reports and other materials filed with the SEC are alsoavailable at www.sec.gov. The reference to these website addresses does not constitute incorporation by reference of the informationcontained on the websites and should not be considered part of this Report.14Table of ContentsBLOOMIN’ BRANDS, INC.Item 1A. Risk FactorsThe risk factors set forth below should be carefully considered. The risks described below are those that we believe could materially andadversely affect our business, financial condition or results of operations, however, they are not the only risks facing us. Additional risks anduncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business,financial condition or results of operations.Risks Related to Our Business and IndustryFood safety and food-borne illness concerns in our restaurants or throughout the industry or supply chain may have an adverse effect onour business by reducing demand and increasing costs.Regardless of the source or cause, any report of food-borne illnesses and other food safety issues, whether at one of our restaurants or in theindustry or supply chain generally, could have a negative impact on our traffic and sales and adversely affect the reputation of our brands.Food safety issues could be caused by suppliers or distributors and, as a result, be out of our control. Health concerns or outbreaks of diseasein a food product could also reduce demand for particular menu offerings. Even instances of food-borne illness, food tampering or foodcontamination occurring solely at restaurants of other companies could result in negative publicity about the food service industry generallyand adversely impact our sales. The occurrence of food-borne illnesses or food safety issues could also adversely affect the price andavailability of affected ingredients, resulting in higher costs and lower margins.The restaurant industry is highly competitive. Our inability to compete effectively could adversely affect our business, financial conditionand results of operations.A substantial number of restaurant operators compete directly and indirectly with us with respect to price, service, location and food quality,some of which are well-established with significant resources. There is also active competition for management and other personnel, andattractive suitable real estate sites. Consumer tastes, nutritional and dietary trends, traffic patterns and the type, number and location ofcompeting restaurants often affect the restaurant business, and our competitors may react more efficiently, creatively and effectively to thoseconditions. In addition, our competitors may generate or better implement business strategies that improve the value and relevance of theirbrands and reputation, relative to ours. For example, our competitors may more successfully implement menu or technology initiatives, suchas remote ordering, social media or mobile technology platforms that expedite or enhance the customer experience. Further, we face growingcompetition from the supermarket industry and home delivery services and applications, with the improvement of their prepared foodofferings, and from quick service and fast casual restaurants. We believe all of the above factors have increased competitive pressures in thecasual dining sector in recent periods and we believe they will continue to present a challenging competitive environment in future periods. Ifwe are unable to continue to compete effectively, our traffic, sales and margins could decline and our business, financial condition and resultsof operations would be adversely affected.We are subject to various federal and state employment and labor laws and regulations.Various federal and state employment and labor laws and regulations govern our relationships with our employees and affect operating costs,and similar laws and regulations apply to our operations outside of the U.S. These laws and regulations relate to matters includingemployment discrimination, minimum wage requirements, overtime, tip credits, unemployment tax rates, workers’ compensation rates,working conditions, immigration status, tax reporting and other wage and benefit requirements. Any significant additional governmentregulations and new laws governing our relationships with employees, including minimum wage increases, mandated benefits or otherrequirements that impose additional obligations on us, could increase our costs and adversely affect our business and results of operations.As a significant number of our food service and preparation personnel are paid at rates related to the applicable minimum wage, federal, stateand local proposals related to minimum wage requirements or similar matters could, to the extent implemented, materially increase our laborand other costs. Several states in which we operate have recently approved minimum wage increases. As minimum wage increases areimplemented in these states or any other states in which15Table of ContentsBLOOMIN’ BRANDS, INC.we operate in the future, we expect our labor costs will increase. Our ability to respond to minimum wage increases by increasing menuprices would depend on the responses of our competitors and consumers. Our distributors and suppliers could also be affected by higherminimum wage, benefit standards and compliance costs, which could result in higher costs for goods and services supplied to us.We rely on our employees to accurately disclose the full amount of their tip income, and we base our FICA tax reporting on the disclosuresprovided to us by such tipped employees. Inaccurate employee FICA tax reporting could subject us to monetary liabilities, which could harmour business, results of operations and financial condition. In 2015, the IRS issued audit adjustments in aggregate of $6.4 million , for theemployer’s share of FICA taxes related to cash tips allegedly received and unreported by our employees during calendar years 2011 and2012.We are also subject, in the ordinary course of business, to employee claims against us based, among other things, on discrimination,harassment, wrongful termination, or violation of wage and labor laws. These claims may divert our financial and management resources thatwould otherwise be used to benefit our operations. The ongoing expense of any resulting lawsuits, and any substantial settlement payment ordamage award against us, could adversely affect our business and results of operations.Challenging economic conditions may have a negative effect on our business and financial results.Challenging economic conditions may negatively impact consumer spending and thus cause a decline in our financial results. For example,international, domestic and regional economic conditions, consumer income levels, financial market volatility, social unrest, governmental,political and budget matters and a slow or stagnant pace of economic growth generally may have a negative effect on consumer confidenceand discretionary spending. In recent years, we believe these factors and conditions have affected consumer traffic and comparable restaurantsales for us and throughout our industry and may continue to result in a challenging sales environment in the casual dining sector. A declinein economic conditions or negative developments with respect to any of the other factors mentioned above, generally or in particular marketsin which we operate, and our consumers’ reactions to these trends could result in increased pressure with respect to our pricing, traffic levels,commodity and other costs and the continuation of our innovation and productivity initiatives, which could negatively impact our businessand results of operations. These factors could also cause us to, among other things, reduce the number and frequency of new restaurantopenings, close restaurants or delay remodeling of our existing restaurant locations. Further, poor economic conditions may force nearbybusinesses to shut down, which could cause our restaurant locations to be less attractive.Increased commodity, energy and other costs could decrease our profit margins or cause us to limit or otherwise modify our menus orincrease prices, which could adversely affect our business.The performance of our restaurants depends on our ability to anticipate and react to changes in the price and availability of food commodities.Our business also incurs significant costs for energy, insurance, labor, marketing and real estate. Prices may be affected due to supply, marketchanges, increased competition, the general risk of inflation, changes in laws, shortages or interruptions in supply due to weather, disease orother conditions beyond our control, or other reasons. Increased prices or shortages could affect the cost and quality of the items we buy orrequire us to raise prices, limit our menu options or implement alternative processes or products. For example, in 2016 , average commoditycosts increased by 0.3% . As result, these events, combined with other more general economic and demographic conditions, could impact ourpricing and negatively affect our sales and profit margins.Our failure to comply with government regulation related to our restaurant operations, and the costs of compliance or non-compliance,could adversely affect our business.We are subject to various federal, state, local and foreign laws affecting our business. Each of our restaurants is subject to licensing andregulation by a number of governmental authorities, which may include, among others, alcoholic beverage control, food safety, nutritionalmenu labeling, health care, environmental and fire agencies in the state, municipality or country in which the restaurant is located. Oursuppliers are also subject to regulation in some of these areas. Any difficulties or inabilities to retain or renew licenses, or increasedcompliance costs due to changed regulations,16Table of ContentsBLOOMIN’ BRANDS, INC.could adversely affect operations at existing restaurants. Additionally, difficulties in obtaining or failing to obtain the required licenses orapprovals could delay or prevent the development of new restaurants.Alcoholic beverage sales represent 14% of our consolidated restaurant sales and are subject to extensive state and local licensing and otherregulations. The failure of a restaurant to obtain or retain a liquor license would adversely affect that restaurant’s operations. In addition, weare subject to “dram shop” statutes in certain states. These statutes generally provide a person injured by an intoxicated person the right torecover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.The FDA adopted final regulations to implement federal nutritional disclosure requirements in 2014, and, although implementation has beendelayed, we expect we will be required to comply with these regulations during 2017. The regulations will require us to include calorieinformation on our menus, and provide additional nutritional information upon request. If the costs of implementing or complying with thesenew requirements exceed our expectations, our results of operations could be adversely affected. Furthermore, the effect of such labelingrequirements on consumer choices, if any, is unclear. It is possible that we may also become subject to other regulation in the future seekingto tax or regulate high fat and high sodium foods in certain of our markets. Compliance with these regulations could be costly.The food service industry is affected by consumer preferences and perceptions. Changes in these preferences and perceptions may lessenthe demand for our products, which would reduce sales and harm our business.Food service businesses are affected by changes in consumer tastes and demographic trends. For instance, if prevailing health or dietarypreferences cause consumers to avoid steak and other products we offer in any of our concepts in favor of foods or ingredients that areperceived as healthier or otherwise reflect popular demand, our business and operating results would be harmed. If we are unable to anticipateor successfully respond to changes in consumer preferences, our results of operations could be adversely affected, generally or in particularconcepts or markets.Changes in tax laws and unanticipated tax liabilities could adversely affect the taxes we pay and our profitability.We are subject to income and other taxes in the United States and numerous foreign jurisdictions. Our effective income tax rate in the futurecould be adversely affected by a number of factors, including changes in the mix of earnings in countries with different statutory tax rates,changes in the valuation of deferred tax assets and liabilities, changes in tax laws or other legislative changes, including those that may resultfrom the Base Erosion Profit Shifting initiative being conducted by the Organization for Economic Co-operation and Development, theoutcome of income tax audits, and any repatriation of non-U.S. earnings for which we have not previously provided for U.S. taxes. Althoughwe believe our tax estimates are reasonable, the final determination of tax audits could be materially different from our historical income taxprovisions and accruals. The results of a tax audit could have a material effect on our results of operations or cash flows in the period orperiods for which that determination is made. In addition, our effective income tax rate and our results may be impacted by our ability torealize deferred tax benefits and by any increases or decreases of our valuation allowances applied to our existing deferred tax assets.Risks associated with our expansion, remodeling and relocation plans may have adverse effects on our operating results.As part of our business strategy, we intend to continue to expand our current portfolio of restaurants. Our current development schedule callsfor the construction of between 40 and 50 new system-wide locations in 2017. A variety of factors could cause the actual results and outcomeof those expansion plans to differ from the anticipated results, including among other things:•the availability of attractive sites for new restaurants;•acquiring or leasing those sites at acceptable prices and other terms;•funding or financing our development;•obtaining all required permits, approvals and licenses on a timely basis;17Table of ContentsBLOOMIN’ BRANDS, INC.•recruiting and training skilled management and restaurant employees and retaining those employees on acceptable terms;•weather, natural disasters and other events or factors beyond our control resulting in construction or other delays; and•consumer tastes in new geographic regions and acceptance of our restaurant concepts and awareness of our brands in those regions.It is difficult to estimate the performance of newly opened restaurants. Earnings achieved to date by restaurants open for less than two yearsmay not be indicative of future operating results. If new restaurants do not meet targeted performance, it could have a material adverse effecton our operating results, including as a result of any impairment losses that we may be required to recognize. There is also the possibility thatnew restaurants may attract consumers away from other restaurants we own, thereby reducing the revenues of those existing restaurants, orthat we will incur unrecoverable costs in the event a development project is abandoned prior to completion.International expansion is an important part of our strategy, and some of the challenges described above could be more significant ininternational markets in which we have more limited experience, either generally or with a particular brand. Those markets are likely to havedifferent competitive conditions, consumer tastes, discretionary spending patterns and brand awareness, which may cause our new restaurantsto be less successful than restaurants in our existing markets or make it more difficult to estimate the performance of new restaurants.In addition, in an effort to increase same-store sales and improve our operating performance, we continue to make improvements to ourfacilities through our remodeling and relocation programs. We also close underperforming restaurants from time to time in order to improvethe performance of our brands. As demographic and economic patterns change or there are declines in neighborhoods where our restaurantsare located or adverse economic conditions in local areas, current locations may not continue to be attractive or profitable. Because we lease asignificant majority of our restaurants, we incur significant lease termination expenses when we close or relocate a restaurant. We also incursignificant asset impairment and other charges in connection with closures and relocations. If the expenses associated with remodels,relocations or closures are higher than anticipated, we cannot find suitable locations or remodeled or relocated restaurants do not perform asexpected, these programs may not yield the desired return on investment, which could have a negative effect on our operating results.Security breaches of confidential consumer, personal employee and other material information may adversely affect our business.The majority of our restaurant sales are by credit or debit cards. We also maintain certain personal information regarding our employees.Despite our security measures, our technology systems may be vulnerable to damage, disability or failures due to physical theft, fire, powerloss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, employee error ormalfeasance, denial of service attacks, viruses, worms and other disruptive problems caused by hackers and cyber criminals. A breach in oursystems that compromises the information of our consumers or employees could result in widespread negative publicity, damage to thereputation of our brands, a loss of consumers and legal liabilities.We may in the future become subject to lawsuits or other proceedings for purportedly fraudulent transactions arising out of the actual oralleged theft of our consumers’ credit or debit card information or if consumer or employee information is obtained by unauthorized personsor used inappropriately. Any such claim or proceeding, or any adverse publicity resulting from such an event, may have a material adverseeffect on our business.We rely heavily on information technology in our operations and any material failure, weakness, interruption or breach of security couldprevent us from effectively operating our business.Our operations and corporate functions rely heavily on information systems, including point-of-sale processing in our restaurants,management of our supply chain, payment of obligations, collection of cash, data warehousing to support analytics, finance and accountingsystems, mobile technologies to enhance the customer experience and other various18Table of ContentsBLOOMIN’ BRANDS, INC.processes and procedures, some of which are handled by third parties. Our ability to efficiently and effectively manage our business dependssignificantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, maintenance problems,upgrading or transitioning to new platforms, or a breach in security relating to these systems could result in delays in consumer service,reduce efficiency in our operations or result in negative publicity. These problems could adversely affect our results of operations, andremediation could result in significant, unplanned capital investments.We face a variety of risks associated with doing business in foreign markets that could have a negative impact on our financialperformance.We have a significant number of restaurants outside the United States, and we intend to continue our efforts to grow internationally. Althoughwe believe we have developed an appropriate support structure for international operations and growth, there is no assurance thatinternational operations will be profitable or international growth will continue. In addition, if we have a significant concentration ofrestaurants in a foreign market the impact of any negative local conditions can have a sizable impact on our results.Our foreign operations are subject to all of the same risks as our U.S. restaurants, as well as additional risks including, among others,international economic, political, social and legal conditions and the possibility of instability and unrest, differing cultures and consumerpreferences, diverse government regulations and tax systems, corruption, anti-American sentiment, the ability to source high qualityingredients and other commodities in a cost-effective manner, uncertain or differing interpretations of rights and obligations in connectionwith international franchise agreements and the collection of ongoing royalties from international franchisees, the availability and costs ofland, construction and financing, and the availability of experienced management, appropriate franchisees and area operating partners.Currency regulations and fluctuations in exchange rates could also affect our performance. We have operations in a total of 20 foreigncountries, including direct investments in restaurants in Brazil, Hong Kong and China, as well as international franchises. Brazil is our largestinternational market and will continue to be our top international development priority. As a result, we may experience losses fromfluctuations in foreign currency exchange rates or any hedging arrangements we enter into to offset such fluctuations, and such losses couldadversely affect our overall sales and earnings.We are subject to governmental regulation of our foreign operations, including antitrust and tax requirements, anti-boycott regulations,import/export/customs regulations and other international trade regulations, the USA Patriot Act and the Foreign Corrupt Practices Act. Anynew regulatory or trade initiatives could impact our operations in certain countries. Failure to comply with any such legal requirements couldsubject us to monetary liabilities and other sanctions, which could harm our business, results of operations and financial condition.Loss of key management personnel could hurt our business and inhibit our ability to operate and grow successfully.Our success will continue to depend, to a significant extent, on our leadership team and other key management personnel. If we are unable toattract and retain sufficiently experienced and capable management personnel, our business and financial results may suffer.Our success depends substantially on the value of our brands.Our success depends on our ability to preserve and grow our brands. Our brand value and reputation are especially important to differentiateour concepts in the highly competitive casual dining sector. Brand value and reputation is based in large part on consumer perceptions, whichare driven by both our actions and actions beyond our control, such as new brand strategies or their implementation, business incidents,ineffective advertising or marketing efforts, or unfavorable mainstream or social media publicity involving us, our industry, our franchisees,or our suppliers.The risks of negative publicity could be amplified by the increased prevalence and influence of social media. The availability of informationon social media platforms is virtually immediate as is its impact, and users can post19Table of ContentsBLOOMIN’ BRANDS, INC.information often without filters or checks on the accuracy of the content posted. Adverse or inaccurate information concerning our companyor concepts may be posted on such platforms at any time, and such information can quickly reach a wide audience. The harm may beimmediate without affording us an opportunity for redress or correction, and it is challenging to monitor and anticipate developments onsocial media in order to respond in an effective and timely manner. We could also be exposed to these risks if we fail to use social mediaresponsibly in our marketing efforts. These factors could have a material adverse effect on our business.Regardless of its basis or validity, any unfavorable publicity could adversely affect public perception of our brands. If customers perceive thatwe and our franchisees fail to deliver a consistently positive and relevant experience, our brands could suffer and this could have an adverseeffect on our business.We have limited control with respect to the operations of our franchisees, which could have a negative impact on our business. In the past year, we have increased the number of our franchisees through the sale of our South Korea operations. As of December 25, 2016 ,we franchised 240 restaurants across 13 states, Puerto Rico, Guam and 18 countries. Our franchisees are contractually obligated to operatetheir restaurants in accordance with our standards and we provide training and support to franchisees. However, franchisees are independentthird parties that we do not control, and these franchisees own, operate and oversee the daily operations of their restaurants. As a result, theultimate success and quality of any franchise restaurant rests with the franchisee. If franchisees do not successfully operate restaurants in amanner consistent with our product and service quality standards and contractual requirements, our image and reputation could be harmed,which in turn could adversely affect our business and operating results.We have a limited number of suppliers for our major products and rely on one custom distribution company for our national distributionprogram in the U.S. and Brazil. If our suppliers or custom distributor are unable to fulfill their obligations under their contracts or we areunable to develop or maintain relationships with these or new suppliers or distributors, if needed, we could encounter supply shortagesand incur higher costs.We depend on frequent deliveries of fresh food products that meet our specifications, and we have a limited number of suppliers for ourmajor products, such as beef. In 2016 , we purchased: (i) more than 85% of our U.S. beef raw materials from four beef suppliers thatrepresent approximately 83% of the total beef marketplace in the U.S and (ii) more than 95% of our Brazil beef raw materials from one beefsupplier that represents approximately eight percent of the total Brazil beef marketplace. Due to the nature of our industry, we expect tocontinue to purchase a substantial amount of our beef from a small number of suppliers. We also use one supplier in the U.S. and Brazil,respectively, to process beef raw materials to our specifications and we use one distribution company to provide distribution services in theU.S and Brazil, respectively. Although we have not experienced significant problems with our suppliers or distributors, if our suppliers ordistributors are unable to fulfill their obligations under their contracts, we could encounter supply shortages and incur higher costs.In addition, if we are unable to maintain current purchasing terms or ensure service availability with our suppliers and distributor, we maylose consumers and experience an increase in costs in seeking alternative supplier or distribution services. The failure to develop and maintainsupplier and distributor relationships and any resulting disruptions to the provision of food and other supplies to our restaurant locations couldadversely affect our operating results.Failure to achieve our projected cost savings from our efficiency initiatives could adversely affect our results of operations and eliminatepotential funding for growth opportunities.In recent years, we have identified strategies and taken steps to reduce operating costs and free up resources to reinvest in our business. Thesestrategies include improved supply chain management, implementing labor scheduling tools and integrating restaurant information systemsacross our brands. We continue to evaluate and implement further cost-saving initiatives. However, the ability to reduce our operating coststhrough these initiatives is subject to risks and uncertainties, such as our ability to obtain improved supply pricing and the reliability of anynew suppliers or technology, and we cannot assure that these activities, or any other activities that we may undertake in the future, willachieve the20Table of ContentsBLOOMIN’ BRANDS, INC.desired cost savings and efficiencies. Failure to achieve such desired savings could adversely affect our results of operations and financialcondition and curtail investment in growth opportunities.There are risks and uncertainties associated with strategic actions and initiatives that we may implement.From time to time, we consider various strategic actions and initiatives in order to grow and evolve our business and brands and improve ouroperating results. These actions and initiatives could include, among other things, acquisitions or dispositions of restaurants or brands, newjoint ventures, new franchise arrangements, restaurant closures and changes to our operating model. For example, in fiscal year 2016, we sold72 South Korea restaurants and engaged in sale-leaseback transactions with respect to 159 restaurant properties. There can be no assurancethat any such actions or initiatives will be successful or deliver their anticipated benefits. We may be exposed to new and unforeseen risks andchallenges, particularly if we enter into markets or engage in activities with which we have no or limited prior experience, and it may bedifficult to predict the success of such endeavors. If we incur significant expenses or divert management, financial and other resources to astrategic initiative that is unsuccessful or does not meet our expectations, our results of operations and financial condition would be adverselyaffected. We may also incur significant asset impairment and other charges in connection with any such initiative. Regardless of the ultimatesuccess of a strategic initiative, the implementation and integration of new business or operational processes could be disruptive to our currentoperations. Even if we test and evaluate an initiative on a limited basis, the diversion of management time and resources could have anadverse effect on our business.Our business is subject to seasonal and periodic fluctuations and past results are not indicative of future results.Historically, consumer traffic patterns for our established restaurants are generally highest in the first quarter of the year and lowest in thethird quarter of the year. Holidays may also affect sales volumes seasonally in some of the markets in which we operate. In addition, ourquarterly results have been and will continue to be affected by the timing of new restaurant openings and their associated preopening costs, aswell as restaurant closures and exit-related costs, debt extinguishment and modification costs and impairments of goodwill, intangible assetsand property, fixtures and equipment. As a result of these and other factors, our financial results for any quarter may not be indicative of theresults that may be achieved for a full fiscal year.Significant adverse weather conditions and other disasters or unforeseen events could negatively impact our results of operations.Adverse weather conditions and natural disasters and other unforeseen events, such as winter storms, severe temperatures, thunderstorms,floods, hurricanes and earthquakes, terror attacks, war and widespread/pandemic illness, and the effects of such events on economicconditions and consumer spending patterns, could negatively impact our results of operations. Temporary and prolonged restaurant closuresmay occur and consumer traffic may decline due to the actual or perceived effects from these events. For example, severe winter weatherconditions have impacted our traffic and results of operations in the past.Our failure or inability to enforce our trademarks or other proprietary rights could adversely affect our competitive position or the valueof our brand.Our trademarks, including Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse & Wine Bar andBloomin’ Onion, and other proprietary rights are important to our success and our competitive position. The protective actions that we takemay not be sufficient to prevent unauthorized usage or imitation by others, which could harm our image, brand or competitive position.Furthermore, our ability to protect trademarks and other proprietary rights may be more limited in certain international markets where weoperate.Litigation could have a material adverse impact on our business and our financial performance.We are subject to lawsuits, administrative proceedings and claims that arise in the regular course of business. These matters typically involveclaims by consumers, employees and others regarding issues such as food borne illness, food21Table of ContentsBLOOMIN’ BRANDS, INC.safety, premises liability, “dram shop” statute liability, compliance with wage and hour requirements, work-related injuries, promotionaladvertising, discrimination, harassment, disability and other operational issues common to the foodservice industry, as well as contractdisputes and intellectual property infringement matters. Significant legal fees and costs in complex class action litigation or an adversejudgment or settlement that is not insured or is in excess of insurance coverage could have a material adverse effect on our financial positionand results of operations.Our insurance policies may not provide adequate levels of coverage against all claims, and fluctuating insurance requirements and costscould negatively impact our profitability.We carry insurance programs with specific retention levels or high per-claim deductibles, for a significant portion of our risks and associatedliabilities with respect to workers’ compensation, general liability, liquor liability, employment practices liability, property, health benefits,cyber security and other insurable risks. However, there are types of losses we may incur that cannot be insured against or that we believe arenot commercially reasonable to insure, including wage and hour claims. These losses, if they occur, could have a material and adverse effecton our business and results of operations. Additionally, if our insurance costs increase, there can be no assurance that we will be able tosuccessfully offset the effect of such increases and our results of operations may be adversely affected.Failure to maintain effective systems of internal control over financial reporting and disclosure controls and procedures could adverselyaffect the trading price of our common stock.Effective internal control over financial reporting is necessary for us to provide accurate financial information. If we are unable to adequatelymaintain effective internal control over financial reporting, we may not be able to accurately report our financial results, which could causeinvestors to lose confidence in our reported financial information and negatively affect the trading price of our common stock. Furthermore,we cannot be certain that our internal control over financial reporting and disclosure controls and procedures will prevent all possible errorand fraud. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all controlissues and instances of error or fraud, if any, in our company have been detected. These inherent limitations include the realities thatjudgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake, which could have an adverseimpact on our business.Risks Related to Our IndebtednessOur substantial leverage and our ability to refinance our indebtedness in the future could adversely affect our ability to raise additionalcapital to fund our operations, limit our ability to react to changes in the economy or our industry and expose us to interest rate risk inconnection with our variable-rate debt.We are highly leveraged. As of December 25, 2016 , our total indebtedness was $1.1 billion and we had $175.2 million in available unusedborrowing capacity under our revolving credit facility, net of undrawn letters of credit of $27.8 million .Our high degree of leverage could have important consequences, including:•making it more difficult for us to make payments on indebtedness;•increasing our vulnerability to general economic, industry and competitive conditions and the various risks we face in our business;•increasing our cost of borrowing;•requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on ourindebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures, dividend payments, sharerepurchases and future business opportunities;•exposing us to the risk of increased interest rates because certain of our borrowings are at variable rates of interest;•restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;22Table of ContentsBLOOMIN’ BRANDS, INC.•limiting our ability to obtain additional financing for working capital, capital expenditures, restaurant development, debt servicerequirements, acquisitions and general corporate or other purposes; and•limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitorswho may not be as highly leveraged.We may incur substantial additional indebtedness in the future, subject to the restrictions contained in our senior secured credit facilities (the“Senior Secured Credit Facility”). If new indebtedness is added to our current debt levels, the related risks that we now face could increase.We had $1.0 billion of variable-rate debt outstanding under our Senior Secured Credit Facility as of December 25, 2016 . In September 2014,we entered into variable-to-fixed interest rate swap agreements with eight counterparties to hedge a portion of the cash flows of our variablerate debt that had a start date of June 30, 2015 . The swap agreements have an aggregate notional amount of $400.0 million and mature onMay 16, 2019 . While these agreements limit our exposure to higher interest rates, an increase in the floating rate could nonetheless cause amaterial increase in our interest expense due to the total amount of our outstanding variable rate indebtedness.We cannot be certain that our financial condition or credit and other market conditions will be favorable when our Senior Secured CreditFacility matures in 2019, or at any earlier time we may seek to refinance our debt. If we are unable to refinance our indebtedness on favorableterms, our financial condition and results of operations would be adversely affected.Our debt agreements contain restrictions that limit our flexibility in operating our business.We are a holding company and conduct our operations through our subsidiaries, certain of which have incurred their own indebtedness. Oursubsidiaries’ debt agreements contain various covenants that limit our ability to obtain funds from our subsidiaries through dividends, loans oradvances. In addition, certain of our debt agreements limit our and our subsidiaries’ ability to, among other things, incur or guaranteeadditional indebtedness, pay dividends on, redeem or repurchase our capital stock, make certain acquisitions or investments, incur or permitto exist certain liens, enter into transactions with affiliates or sell our assets to, merge or consolidate with or into, another company. Our debtagreements require us to satisfy certain financial tests and ratios. Our ability to satisfy such tests and ratios may be affected by events outsideof our control.If we breach the covenants under our debt agreements, the lenders could elect to declare all amounts outstanding under the agreements to beimmediately due and payable and terminate all commitments to extend further credit. If we are unable to repay those amounts, the lenderscould proceed against the collateral granted to them to secure that indebtedness. We have pledged substantially all of our assets as collateralunder our debt agreement. If our lenders accelerate the repayment of borrowings, we cannot be certain that we will have sufficient assets torepay them.We may not be able to generate sufficient cash to service all of our indebtedness and operating lease obligations, and we may be forced totake other actions to satisfy our obligations under our indebtedness and operating lease obligations, which may not be successful. If wefail to meet these obligations, we would be in default under our debt agreements and the lenders could elect to declare all amountsoutstanding under them to be immediately due and payable and terminate all commitments to extend further credit.Our ability to make scheduled payments on our debt obligations and to satisfy our operating lease obligations depends on our financialcondition and operating performance, which is subject to prevailing economic and competitive conditions and to financial, business and otherfactors, many of which are beyond our control. We cannot be certain that we will maintain a level of cash flow from operating activitiessufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, or to pay our operating lease obligations. If ourcash flow and capital resources are insufficient to fund our debt service obligations and operating lease obligations, we may be forced toreduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternativemeasures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of sufficient operatingresults and resources, we could face substantial liquidity problems and might be23Table of ContentsBLOOMIN’ BRANDS, INC.required to dispose of material assets or operations or take other actions to meet our debt service and other obligations. Our debt agreementsrestrict our ability to dispose of assets and how we may use the proceeds from the disposition. We may not be able to consummate thosedispositions or to obtain the proceeds that we could otherwise realize from such dispositions and any such proceeds that are realized may notbe adequate to meet any debt service obligations then due. The failure to meet our debt service obligations or the failure to remain incompliance with the financial covenants under our debt agreements would constitute an event of default under those agreements and thelenders could elect to declare all amounts outstanding under them to be immediately due and payable and terminate all commitments toextend further credit.Risks Related to Our Common StockOur stock price is subject to volatility.The stock market in general is highly volatile. As a result, the market price of our common stock is similarly volatile. The price of ourcommon stock could be subject to wide fluctuations in response to a number of factors, some of which may be beyond our control. Thesefactors include actual or anticipated fluctuations in our operating results, changes in, or our ability to achieve, estimates of our operatingresults by analysts, investors or management, analysts’ recommendations regarding our stock or our competitors’ stock, sales of substantialamounts of our common stock by our stockholders, actions or announcements by us or our competitors, the maintenance and growth of thevalue of our brands, litigation, legislation or other regulatory developments affecting us or our industry, natural disasters, terrorist acts, war orother calamities and changes in general market and economic conditions.If we are unable to continue to pay dividends or repurchase our stock, your investment in our common stock may decline in value.In 2015, we initiated a quarterly dividend program. Our Board of Directors has also authorized several stock repurchase programscommencing in late 2014 and we have repurchased a significant amount of our stock since that time. The continuation of these programs, atall or consistent with past levels, will require the generation of sufficient cash flows and the existence of surplus. Any decisions to declare andpay dividends and continue stock repurchase programs in the future will be made at the discretion of our Board of Directors and will dependon, among other things, our results of operations, financial condition, cash requirements, borrowing capacity, contractual restrictions andother factors that our Board of Directors may deem relevant at the time.Our ability to pay dividends is dependent on our ability to obtain funds from our subsidiaries and to have access to our revolving creditfacility. Based on our credit agreement, restricted dividend payments from OSI to Bloomin’ Brands can be made on an unlimited basisprovided we are compliant with our debt covenants.If we discontinue our dividend or stock repurchase programs, or reduce the amount of the dividends we pay or stock that we repurchase, theprice of our common stock may fall. As a result, you may not be able to resell your shares at or above the price you paid for them.Provisions in our certificate of incorporation and bylaws, our Senior Secured Credit Facility and Delaware law may discourage, delay orprevent a change of control of our company or changes in our management and, therefore, may depress the trading price of our stock.Our certificate of incorporation and bylaws include certain provisions that could have the effect of discouraging, delaying or preventing achange of control of our company or changes in our management.In addition, our Senior Secured Credit Facility includes change of control provisions that require that no stockholder or “group” within themeaning of Section 13(d) of the Exchange Act (other than our former private equity sponsors, our founders and our management stockholdersor other permitted holders) has obtained more than 40% of our voting power.24Table of ContentsBLOOMIN’ BRANDS, INC.These provisions in our certificate of incorporation, bylaws, and Senior Secured Credit Facility may discourage, delay or prevent a transactioninvolving a change in control of the Company that is in the best interests of our stockholders. Even in the absence of a takeover attempt, theexistence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging futuretakeover attempts.Section 203 of the Delaware General Corporation Law may affect the ability of an “interested stockholder” to engage in certain businesscombinations, including mergers, consolidations or acquisitions of additional shares, for a period of three years following the time that thestockholder becomes an “interested stockholder.” An “interested stockholder” is defined to include persons owning directly or indirectly 15%or more of the outstanding voting stock of a corporation. Although we have elected in our certificate of incorporation not to be subject toSection 203 of the Delaware General Corporation Law our certificate of incorporation contains provisions that have the same effect asSection 203, except that they provide that our former private equity sponsors will not be deemed to be “interested stockholders,” regardless ofthe percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions.Our ability to raise capital in the future may be limited, which could make us unable to fund our capital requirements.Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds throughthe issuance of new equity securities, debt or a combination of both. Additional financing may not be available on favorable terms or at all. Ifadequate funds are not available on acceptable terms, we may be unable to fund our capital requirements. If we issue new debt securities, thedebt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict ouroperations, including our ability to pay dividends on our common stock. If we issue additional equity securities, existing stockholders mayexperience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issuesecurities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate theamount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the marketprice of our common stock and diluting their interest.Item 1B. Unresolved Staff CommentsNot applicable.25Table of ContentsBLOOMIN’ BRANDS, INC.Item 2. PropertiesDuring 2016, we entered into sale-leaseback transactions with third-parties in which we sold 159 restaurant properties. As of December 25,2016 , we owned 7% of our restaurant sites and leased the remaining 93% of our restaurant sites from third parties. We had 1,516 system-wide restaurants located across the following states, territories or countries as of December 25, 2016 :U.S.COMPANY-OWNED FRANCHISEAlabama20 Louisiana22 Ohio49 Alabama1Arizona28 Maryland41 Oklahoma11 Alaska1Arkansas11 Massachusetts22 Pennsylvania46 California62California15 Michigan37 Rhode Island3 Florida1Colorado30 Minnesota9 South Carolina39 Georgia1Connecticut15 Mississippi1 South Dakota2 Idaho6Delaware4 Missouri16 Tennessee37 Mississippi7Florida220 Montana1 Texas74 Montana2Georgia48 Nebraska7 Utah6 Ohio1Hawaii6 Nevada16 Vermont1 Oregon7Illinois26 New Hampshire3 Virginia60 Tennessee3Indiana23 New Jersey44 West Virginia8 Virginia1Iowa7 New Mexico6 Wisconsin12 Washington20Kansas7 New York45 Wyoming2 Kentucky17 North Carolina67 Total U.S. company-owned1,164 Total U.S. franchise113INTERNATIONALCOMPANY-OWNED FRANCHISEBrazil (1)97 Australia7 Ecuador1 Puerto Rico3China (Mainland)6 Bahamas1 Guam1 Qatar1Hong Kong9 Brazil1 Indonesia4 Saudi Arabia5 Canada2 Japan10 Singapore2 Chile1 Malaysia2 South Korea73 Costa Rica1 Mexico5 Thailand1 Dominican Republic2 Philippines4 Total International company-owned112 Total International franchise127____________________(1)The restaurant count for Brazil is reported as of November 2016 to correspond with the balance sheet date of this subsidiary.Following is a summary of the location and leased square footage for our corporate offices as of December 25, 2016 :LOCATION USE SQUARE FEET LEASE EXPIRATIONTampa, Florida Corporate Headquarters 168,000 1/31/2025São Paulo, Brazil Brazil Operations Center 22,000 7/31/2021We also have other smaller office locations regionally in China (mainland) and Hong Kong.Item 3. Legal ProceedingsFor a description of our legal proceedings, see Note 18 - Commitments and Contingencies , of the Notes to the Consolidated FinancialStatements of this Report.26Table of ContentsBLOOMIN’ BRANDS, INC.Item 4. Mine Safety DisclosuresNot applicable.PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMARKET INFORMATION AND DIVIDENDSOur common stock is listed on the Nasdaq Global Select Market under the symbol “BLMN”.In December 2014, our Board of Directors (our “Board”) adopted a dividend policy under which it intends to declare quarterly cash dividendson shares of our common stock. Future dividend payments will depend on earnings, financial condition, capital expenditure requirements,surplus and other factors that our Board considers relevant. The terms of our debt agreements permit regular quarterly dividend payments,subject to certain restrictions. The following table sets forth for the periods indicated the high and low sales prices per share of our commonstock as reported on Nasdaq and the dividends declared and paid during the periods indicated: SALES PRICE DIVIDENDS DECLAREDAND PAID (1) 2016 2015 HIGH LOW HIGH LOW 2016 2015First Quarter$18.09 $14.91 $26.25 $22.91 $0.07 $0.06Second Quarter19.83 16.01 24.53 20.86 0.07 0.06Third Quarter19.89 17.21 23.83 18.00 0.07 0.06Fourth Quarter19.99 15.82 19.44 15.90 0.07 0.06____________________(1)See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - DIVIDENDS AND SHARE REPURCHASES .”HOLDERSAs of February 17, 2017 , there were 91 holders of record of our common stock.SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANSThe following table presents the securities authorized for issuance under our equity compensation plans as of December 25, 2016 :(shares in thousands) (a) (b) (c)PLAN CATEGORY NUMBER OFSECURITIES TO BEISSUED UPONEXERCISE OFOUTSTANDINGOPTIONS,WARRANTS ANDRIGHTS WEIGHTED-AVERAGEEXERCISE PRICE OFOUTSTANDINGOPTIONS, WARRANTSAND RIGHTS NUMBER OFSECURITIESREMAININGAVAILABLE FORFUTURE ISSUANCEUNDER EQUITYCOMPENSATIONPLANS (EXCLUDINGSECURITIESREFLECTED INCOLUMN (a)) (1)Equity compensation plans approved by security holders 10,984 $14.24 6,128____________________(1)The shares remaining available for issuance may be issued in the form of stock options, restricted stock, restricted stock units or other stock awards under the 2016Omnibus Incentive Compensation Plan (the “2016 Incentive Plan”).27Table of ContentsBLOOMIN’ BRANDS, INC.STOCK PERFORMANCE GRAPHThe following graph depicts total return to stockholders from August 8, 2012, the date our common stock became listed on the Nasdaq GlobalSelect Market, through December 25, 2016 , relative to the performance of the Standard & Poor’s 500 Index and the Standard & Poor’s 500Consumer Discretionary Sector, a peer group. The graph assumes an investment of $100 in our common stock and each index on August 8,2012 and the reinvestment of dividends paid since that date. The stock price performance shown in the graph is not necessarily indicative offuture price performance.AUGUST 8, 2012 DECEMBER 31, 2012DECEMBER 31, 2013DECEMBER 28, 2014DECEMBER 27, 2015DECEMBER 25, 2016Bloomin’ Brands, Inc. (BLMN)$100.00 $126.03$193.47$191.38$139.38$151.25Standard & Poor’s 500100.00 102.72135.96156.76157.94177.32Standard & Poor’s ConsumerDiscretionary100.00 107.53153.58168.55186.16199.3028Table of ContentsBLOOMIN’ BRANDS, INC.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSThe following table provides information regarding our purchases of common stock during the thirteen weeks ended December 25, 2016 :PERIOD TOTAL NUMBER OFSHARES PURCHASED (1) AVERAGE PRICEPAID PER SHARE TOTAL NUMBER OFSHARES PURCHASEDAS PART OF PUBLICLYANNOUNCED PLANS ORPROGRAMS APPROXIMATE DOLLARVALUE OF SHARESTHAT MAY YET BEPURCHASED UNDERTHE PLANS ORPROGRAMSSeptember 26, 2016 through October 23, 2016 — $— — $165,000,032October 24, 2016 through November 20, 2016 619,700 $19.36 619,700 $153,004,103November 21, 2016 through December 25, 2016 1,199,256 $19.22 1,196,698 $130,004,739Total 1,818,956 1,816,398 ____________________(1)On July 26, 2016 , the Board of Directors authorized the repurchase of $300.0 million of our outstanding common stock as announced publicly in our press releaseissued on July 29, 2016 (the “July 2016 Share Repurchase Program”). The July 2016 Share Repurchase Program will expire on January 26, 2018 . Common stockrepurchased during the thirteen weeks ended December 25, 2016 represented shares repurchased under the July 2016 Share Repurchase Program and 2,558 shareswithheld for tax payments due upon vesting of employee restricted stock awards.29Table of ContentsBLOOMIN’ BRANDS, INC.Item 6. Selected Financial Data FISCAL YEAR(dollars in thousands, except per share data)2016 2015 2014 2013 2012Operating Results: Revenues Restaurant sales (1)$4,226,057 $4,349,921 $4,415,783 $4,089,128 $3,946,116Other revenues26,255 27,755 26,928 40,102 41,679Total revenues (1)4,252,312 4,377,676 4,442,711 4,129,230 3,987,795Income from operations (2)127,606 230,925 191,964 225,357 181,137Net income including noncontrolling interests (2) (3)46,347 131,560 95,926 214,568 61,304Net income attributable to Bloomin’ Brands (2) (3)$41,748 $127,327 $91,090 $208,367 $49,971Basic earnings per share$0.37 $1.04 $0.73 $1.69 $0.45Diluted earnings per share$0.37 $1.01 $0.71 $1.63 $0.44Cash dividends declared per common share$0.28 $0.24 $— $— $—Balance Sheet Data: Total assets$2,642,279 $3,032,569 $3,338,240 $3,267,421 $3,003,214Total debt, net1,089,485 1,316,864 1,309,797 1,408,088 1,481,101Total stockholders’ equity (4)195,353 421,900 556,449 482,709 220,205Common stock outstanding (4)103,922 119,215 125,950 124,784 121,148Cash Flow Data: Investing activities: Capital expenditures$260,578 $210,263 $237,868 $237,214 $178,720Proceeds from sale-leaseback transactions, net530,684 — — — 192,886Financing activities: Repurchase of common stock (4)$310,334 $170,769 $930 $436 $—____________________Note: This selected consolidated financial data should be read in conjunction with the consolidated financial statements and notes thereto, included in Item 8 of this Report andManagement’s Discussion and Analysis of Financial Condition and Results of Operations, included in Item 7 of this Report.(1)Due to the change in our fiscal year end, total revenues for 2015 include $24.3 million of higher restaurant sales and total revenues in fiscal year 2014 include $46.0million of lower restaurant sales.(2)Fiscal year 2016 includes: (i) $51.4 million of asset impairments and closing costs related to the 2017 Closure Initiative and Bonefish Restructuring (as defined later),(ii) $43.1 million of asset impairments related to our sale of Outback Steakhouse South Korea and for our Puerto Rico subsidiary, (iii) $7.2 million of assetimpairments and restaurant closing costs related to the relocation of certain restaurants and (iv) $5.5 million of severance related to restructuring of certain functionsand the relocation of our Fleming’s operations center to the corporate home office. Fiscal year 2015 results include $4.9 million of higher income from operations dueto a change in our fiscal year end and $31.8 million of asset impairments and restaurant closing costs related to our Bonefish Restructuring and our International andDomestic Restaurant Closure Initiatives. Fiscal year 2014 results include $9.2 million of lower income from operations due to a change in our fiscal year end, $26.8million of asset impairments and restaurant closing costs related to our International and Domestic Restaurant Closure Initiatives, $24.0 million of asset impairmentsrelated to our Roy’s concept and corporate airplanes and $9.0 million of severance related to our organizational realignment. Fiscal year 2013 results include $18.7million of asset impairments due to our Domestic Restaurant Closure Initiative. Fiscal year 2012 includes: (i) $34.1 million of certain executive compensation costsand non-cash stock compensation charges incurred in connection with the completion of our initial public offering (“IPO”), (ii) management fees and otherreimbursable expenses of $13.8 million related to a management agreement with our sponsors and founders, which terminated at the time of our IPO and (iii) $7.4million of legal and other professional fees, primarily related to a lease amendment between OSI and PRP.(3)Fiscal years 2016, 2015, 2014, 2013 and 2012 include $27.0 million , $3.0 million , $11.1 million , $14.6 million and $21.0 million, respectively, of loss ondefeasance, extinguishment and modification of debt. Fiscal year 2013 includes a $36.6 million gain on remeasurement of a previously held equity investment relatedto our Brazil acquisition. Fiscal year 2013 includes a $52.0 million income tax benefit for a U.S. valuation allowance release.(4)During fiscal years 2016 and 2015, we repurchased 16.6 million and 7.6 million shares of our outstanding common stock.30Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONSItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsManagement’s discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidatedfinancial statements and the related notes.OverviewWe are one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. As ofDecember 25, 2016 , we owned and operated 1,276 restaurants and franchised 240 restaurants across 48 states, Puerto Rico, Guam and 20countries. We have four founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s PrimeSteakhouse & Wine Bar.Executive SummaryOur 2016 financial results include:•A decrease in total revenues of 2.9% to $4.3 billion in 2016 as compared to 2015 , driven primarily by the sale of OutbackSteakhouse South Korea, lower U.S. comparable restaurant sales and the effect of foreign currency translation, partially offset bythe net benefit of restaurant openings and closings.•Operating margin at the restaurant level declined (0.7)% in fiscal year 2016 as compared to fiscal year 2015 , primarily due tohigher labor costs and commodity and operating expense inflation, partially offset by the impact of certain cost saving initiativesand increases in average check per person.•Income from operations decreased to $127.6 million in 2016 as compared to $230.9 million in 2015 , primarily due to impairmentcharges incurred in connection with the 2017 Closure Initiative and the sale of Outback South Korea and a decrease in operatingmargin at the restaurant-level, partially offset by lower general and administrative expense.•During fiscal year 2016, we repurchased $309.9 million of our common stock and declared and paid $31.4 million of dividends.Following is a summary of factors that impacted our operating results and liquidity in 2016 and significant actions we have taken during theyear:PRP Mortgage Loan - In February 2016 , New Private Restaurant Partners, LLC, our indirect wholly-owned subsidiary (“PRP”), entered intoa loan agreement (the “PRP Mortgage Loan”), pursuant to which PRP borrowed $300.0 million. The proceeds of the PRP Mortgage Loanwere used, together with borrowings under our revolving credit facility, to prepay a portion, and fully defease the remainder, of the 2012CMBS loan. In connection with the defeasance, we recognized a loss of $26.6 million during 2016. In July 2016, PRP entered into anAmendment to the PRP Mortgage Loan to provide for additional borrowings of $69.5 million . See Note 11 - Long-term Debt, Net of theNotes to Consolidated Financial Statements for further information.Sale-leaseback Transactions - During fiscal year 2016, we entered into sale-leaseback transactions with third-parties in which we sold 159restaurant properties at fair market value for gross proceeds of $560.4 million . With the proceeds from these transactions, we made paymentsof $322.3 million on our PRP Mortgage Loan.Subsequent to December 25, 2016 , we entered into sale-leaseback transactions with third parties in which we sold six restaurant properties atfair market value for gross proceeds of $21.6 million and made payments of $19.2 million on our PRP Mortgage Loan. As of the date of thisfiling, the PRP Mortgage Loan had a remaining balance of $28.0 million .31Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedOutback South Korea - On July 25, 2016, we sold Outback Steakhouse South Korea for $50.0 million in cash. In connection with the decisionto sell Outback Steakhouse South Korea, we recognized an impairment charge of $39.6 million during fiscal year 2016. After completion ofthe sale, our restaurant locations in South Korea are operated as franchises.Casual Dining Industry and Macroeconomic ConditionsThe combination of casual dining industry conditions and other macroeconomic factors has put considerable pressure on restaurant sales.Competitive pressures, including discounting and marketing strategies, excess capacity in the industry, the relative affordability and quality ofprepared meals from supermarkets and an increase in home delivery services and applications have impacted our traffic levels. We expectcomparable restaurant sales to continue to be impacted in fiscal 2017 by current and anticipated market conditions.2017 Closure InitiativeOn February 15, 2017 , we decided to close 43 underperforming restaurants (the “2017 Closure Initiative”). Most of these restaurants willclose in 2017, with the balance closing as leases and certain operating covenants expire or are amended or waived. In connection with the2017 Closure Initiative, we reassessed the future undiscounted cash flows of the impacted restaurants, and as a result, we recognized pre-taxasset impairments of $46.5 million during fiscal year 2016. See Note 3 - Impairments, Disposals and Exit Costs of our Notes to ConsolidatedFinancial Statements in Part II, Item 8 for additional details regarding the 2017 Closure Initiative.Business StrategiesIn 2017 , our key business strategies include:•Continued Focus on U.S. Sales and Profitability. We plan to continue to remodel and relocate restaurants, make investments toenhance our core guest experience, increase off-premise dining occasions, introduce innovative menu items that match evolvingconsumer preferences and use limited-time offers and multimedia marketing campaigns to drive traffic.•Accelerate International Growth. We continue to focus on existing geographic regions in South America and Asia, with strategicexpansion in selected emerging and high growth developed markets. Specifically, we are focusing our existing market growth inBrazil and new market growth in China. We expect to open between 40 and 50 system-wide locations in 2017 , with most expectedto be international locations.•Drive Long-Term Shareholder Value. We plan to drive long-term shareholder value by reinvesting operational cash flow in ourbusiness, improving our credit profile and returning excess cash to shareholders through share repurchases and dividends.We intend to fund our business strategies, in part, by utilizing productivity initiatives across our business. Productivity savings will bereinvested in the business to drive revenue growth and margin improvement.Key Performance IndicatorsKey measures that we use in evaluating our restaurants and assessing our business include the following:•Average restaurant unit volumes —average sales per restaurant to measure changes in consumer traffic, pricing and developmentof the brand;32Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued•Comparable restaurant sales —year-over-year comparison of sales volumes for Company-owned restaurants that are open 18months or more in order to remove the impact of new restaurant openings in comparing the operations of existing restaurants;•System-wide sales —total restaurant sales volume for all Company-owned, franchise and unconsolidated joint venture restaurants,regardless of ownership, to interpret the overall health of our brands;•Adjusted restaurant-level operating margin, Adjusted income from operations, Adjusted net income, Adjusted diluted earnings pershare —non-GAAP financial measures utilized to evaluate our operating performance, which definitions, usefulness andreconciliations are described in more detail in the “Non-GAAP Financial Measures” section below; and•Consumer satisfaction scores —measurement of our consumers’ experiences in a variety of key areas.33Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedSelected Operating DataThe table below presents the number of our restaurants in operation as of the end of the periods indicated: DECEMBER 25, 2016 DECEMBER 27, 2015 DECEMBER 28, 2014Number of restaurants (at end of the period): U.S. Outback Steakhouse Company-owned650 650 648Franchised105 105 105Total755 755 753Carrabba’s Italian Grill Company-owned242 244 242Franchised2 3 1Total244 247 243Bonefish Grill Company-owned204 210 201Franchised6 5 5Total210 215 206Fleming’s Prime Steakhouse & Wine Bar Company-owned68 66 66Roy’s (1) Company-owned— — 20International Company-owned Outback Steakhouse - Brazil (2)83 75 63Outback Steakhouse - South Korea (3)— 75 91Other29 16 11Franchised Outback Steakhouse - South Korea (3)73 — —Other54 58 55Total239 224 220System-wide total (4)1,516 1,507 1,508____________________(1)On January 26, 2015, we sold our Roy’s concept.(2)The restaurant counts for Brazil are reported as of November 30, 2016, 2015 and 2014, respectively, to correspond with the balance sheet dates of this subsidiary.(3)On July 25, 2016, we sold our restaurant locations in South Korea, converting all restaurants in that market to franchised locations.(4)The restaurant count as of December 25, 2016 includes 43 locations scheduled to close in connection with the 2017 Closure Initiative.34Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedResults of OperationsThe following table sets forth, for the periods indicated, the percentages of certain items in our Consolidated Statements of Operations andComprehensive Income in relation to Total revenues or Restaurant sales, as indicated: FISCAL YEAR 2016 2015 2014Revenues Restaurant sales99.4 % 99.4 % 99.4 %Franchise and other revenues0.6 0.6 0.6Total revenues100.0 100.0 100.0Costs and expenses Cost of sales (1)32.1 32.6 32.5Labor and other related (1)28.7 27.7 27.6Other restaurant operating (1)23.5 23.1 23.8Depreciation and amortization4.6 4.3 4.3General and administrative6.3 6.6 6.9Provision for impaired assets and restaurant closings2.5 0.8 1.2Total costs and expenses97.0 94.7 95.7Income from operations3.0 5.3 4.3Loss on defeasance, extinguishment and modification of debt(0.6) (0.1) (0.3)Other income (expense), net* (*) (*)Interest expense, net(1.1) (1.3) (1.3)Income before provision for income taxes1.3 3.9 2.7Provision for income taxes0.2 0.9 0.5Net income1.1 3.0 2.2Less: net income attributable to noncontrolling interests0.1 0.1 0.1Net income attributable to Bloomin’ Brands1.0 % 2.9 % 2.1 %____________________(1)As a percentage of Restaurant sales.*Less than 1/10 th of one percent of Total revenues.35Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedRevenuesRestaurant sales - Following is a summary of the change in Restaurant sales for fiscal years 2016 and 2015 : FISCAL YEAR(dollars in millions):2016 2015For fiscal years 2015 and 2014$4,349.9 $4,415.8Change from: Divestitures(86.9) (63.2)Comparable restaurant sales (1)(57.7) 37.7Restaurant closings(33.9) (99.2)Effect of foreign currency translation(31.6) (119.3)Restaurant openings (1)86.2 153.8Change in fiscal year— 24.3For fiscal years 2016 and 2015$4,226.0 $4,349.9____________________(1)Summation of quarterly changes for restaurant openings and comparable restaurant sales will not total to annual amounts as the restaurants that meet the definition of acomparable restaurant will differ each period based on when the restaurant opened.The decrease in Restaurant sales in 2016 as compared to 2015 was primarily attributable to: (i) the sale of Outback Steakhouse South Korearestaurants in July 2016, (ii) lower U.S. comparable restaurant sales, (iii) the closing of 24 restaurants since December 28, 2014 and (iv) theeffect of foreign currency translation, due to the depreciation of the Brazil Real. The decrease in restaurant sales was partially offset by salesfrom 92 new restaurants not included in our comparable restaurant sales base.The decrease in Restaurant sales in 2015 as compared to 2014 was primarily attributable to: (i) the effect of foreign currency translation, (ii)the closing of 84 restaurants since December 31, 2013 and (iii) the sale of 20 Roy’s restaurants. The decrease in restaurant sales was partiallyoffset by: (i) sales from 119 new restaurants not included in our comparable restaurant sales base, (ii) an increase in comparable restaurantsales and (iii) two additional operating days due to a change in our fiscal year end.36Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedComparable Restaurant Sales and Average Check Per Person Increases (Decreases)Following is a summary of comparable restaurant sales, traffic and average check per person increases (decreases): FISCAL YEAR 2016 2015 2014Year over year percentage change: Comparable restaurant sales (stores open 18 months or more) (1)(2): U.S. Outback Steakhouse(2.3)% 1.8 % 3.1 %Carrabba’s Italian Grill(2.7)% (0.7)% (1.0)%Bonefish Grill(0.5)% (3.3)% 0.5 %Fleming’s Prime Steakhouse & Wine Bar(0.2)% 1.3 % 3.2 %Combined U.S.(1.9)% 0.5 % 2.0 %International Outback Steakhouse - Brazil (3)6.7 % 6.3 % 7.6 % Traffic: U.S. Outback Steakhouse(5.7)% (1.5)% 0.4 %Carrabba’s Italian Grill(2.7)% (0.1)% (1.1)%Bonefish Grill(3.7)% (6.2)% (0.3)%Fleming’s Prime Steakhouse & Wine Bar(2.2)% (0.2)% 0.1 %Combined U.S.(4.7)% (1.8)% — %International Outback Steakhouse - Brazil0.2 % 0.5 % 1.2 % Average check per person increases (decreases) (4): U.S. Outback Steakhouse3.4 % 3.3 % 2.7 %Carrabba’s Italian Grill— % (0.6)% 0.1 %Bonefish Grill3.2 % 2.9 % 0.8 %Fleming’s Prime Steakhouse & Wine Bar2.0 % 1.5 % 3.1 %Combined U.S.2.8 % 2.3 % 2.0 %International Outback Steakhouse - Brazil6.5 % 6.0 % 6.5 %____________________(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)Fiscal years 2015 and 2014 include $24.3 million higher restaurant sales and $46.0 million lower restaurant sales, respectively, due to a change in our fiscal year end.(3)Includes the trading day impact from calendar period reporting of 0.0%, (0.2%) and (0.1%) for fiscal 2016, 2015 and 2014, respectively.(4)Average check per person increases (decreases) includes the impact of menu pricing changes, product mix and discounts.37Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedAverage Restaurant Unit Volumes and Operating WeeksFollowing is a summary of the average restaurant unit volumes and operating weeks: FISCAL YEAR 2016 2015 2014Average restaurant unit volumes (dollars in thousands): U.S. Outback Steakhouse$3,354 $3,430 $3,329Carrabba’s Italian Grill$2,857 $2,954 $2,945Bonefish Grill$3,007 $3,019 $3,135Fleming’s Prime Steakhouse & Wine Bar$4,277 $4,247 $4,163International Outback Steakhouse - Brazil (1)$3,856 $4,137 $5,659 Operating weeks: U.S. Outback Steakhouse33,812 33,758 33,687Carrabba’s Italian Grill12,658 12,678 12,467Bonefish Grill10,667 10,731 10,047Fleming’s Prime Steakhouse & Wine Bar3,469 3,432 3,411International Outback Steakhouse - Brazil4,096 3,563 2,859____________________(1)Translated at average exchange rates of 3.50 , 3.19 and 2.33 for fiscal years 2016, 2015 and 2014, respectively.Franchise and other revenues FISCAL YEAR(dollars in millions)2016 2015 2014Franchise revenues$19.8 $17.9 $17.2Other revenues6.5 9.9 9.7Franchise and other revenues$26.3 $27.8 $26.9COSTS AND EXPENSESCost of sales FISCAL YEAR FISCAL YEAR (dollars in millions):2016 2015 Change 2015 2014 ChangeCost of sales$1,354.9 $1,419.7 $1,419.7 $1,435.4 % of Restaurant sales32.1% 32.6% (0.5)% 32.6% 32.5% 0.1%Cost of sales, consisting of food and beverage costs, decreased as a percentage of Restaurant sales in 2016 as compared to 2015 . Thedecrease as a percentage of Restaurant sales was primarily due to: (i) 0.7% from the impact of certain cost savings initiatives and (ii) 0.4%from average check increases. These decreases were partially offset by increases as a percentage of Restaurant sales due to 0.5% from highercommodity costs.38Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedThe increase as a percentage of Restaurant sales in 2015 as compared to 2014 was primarily due to 1.2% higher commodity costs. Thisincrease was largely offset by decreases as a percentage of Restaurant sales due to: (i) 1.0% from the impact of certain cost savings initiativesand (ii) 0.2% from average check per person increases.During fiscal 2016 , we incurred commodity inflation of 0.3% . In fiscal year 2017 , we expect commodity costs to be flat to a 1.0% decline.Labor and other related expenses FISCAL YEAR FISCAL YEAR (dollars in millions):2016 2015 Change 2015 2014 ChangeLabor and other related$1,211.3 $1,205.6 $1,205.6 $1,219.0 % of Restaurant sales28.7% 27.7% 1.0% 27.7% 27.6% 0.1%Labor and other related expenses include all direct and indirect labor costs incurred in operations, including distribution expense to RestaurantManaging Partners, costs related to field deferred compensation plans and other field incentive compensation expenses. Labor and otherrelated expenses increased as a percentage of Restaurant sales for 2016 as compared to 2015 primarily attributable to 1.2% of higher kitchenand service labor costs due to higher wage rates and investments in our service model. This increase was partially offset by a decrease as apercentage of Restaurant sales due to 0.4% from increases in average check per person.Labor and other related expenses increased as a percentage of Restaurant sales for 2015 as compared to 2014 due to 0.9% from higher kitchenand service labor costs due to higher wage rates and lunch expansion across certain concepts. This increase was partially offset by decreasesas a percentage of Restaurant sales primarily attributable to: (i) 0.4% from the impact of certain cost savings initiatives and (ii) 0.4% fromincreases in average check per person.In fiscal year 2017, we expect to incur incremental expense of approximately $3.0 million in salary increases for restaurant managers. Weincreased salaries in advance of regulations enacted by the Department of Labor that raise the salary threshold to qualify as exempt fromovertime. The Department of Labor is currently enjoined from implementing these regulations.Other restaurant operating expenses FISCAL YEAR FISCAL YEAR (dollars in millions):2016 2015 Change 2015 2014 ChangeOther restaurant operating$992.2 $1,006.8 $1,006.8 $1,049.1 % of Restaurant sales23.5% 23.1% 0.4% 23.1% 23.8% (0.7)%Other restaurant operating expenses include certain unit-level operating costs such as operating supplies, rent, repairs and maintenance,advertising expenses, utilities, pre-opening costs and other occupancy costs. A substantial portion of these expenses is fixed or indirectlyvariable. The increase as a percentage of Restaurant sales for 2016 as compared to 2015 was primarily due to the following: (i) 0.4% from anincrease in operating expenses due to inflation and timing and (ii) 0.3% from higher net rent expense due to the sale-leaseback of certainproperties. These increases were partially offset by a decrease as a percentage of Restaurant sales primarily due to 0.3% from the impact ofcertain cost savings initiatives.The decrease as a percentage of Restaurant sales for 2015 as compared to 2014 was primarily due to the following: (i) 0.6% from a decreasedue to marketing efficiencies with a shift to digital advertising from television and lower marketing spend, (ii) 0.3% from increases in averagecheck per person and (iii) 0.3% from the impact of certain cost savings initiatives. The decreases were partially offset by increases as apercentage of Restaurant sales primarily due to: (i)39Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued0.2% from an increase in operating supplies due to lunch expansion and promotions and (ii) 0.2% from a legal settlement gain in 2014.Depreciation and amortization FISCAL YEAR FISCAL YEAR (dollars in millions):2016 2015 Change 2015 2014 ChangeDepreciation and amortization$193.8 $190.4 $3.4 $190.4 $190.9 $(0.5)Depreciation and amortization increased for 2016 as compared to 2015 primarily due to the opening of new restaurants and the remodeling ofexisting restaurants, partially offset by lower depreciation expense related to: (i) the sale of Outback South Korea, (ii) impairments related tothe Bonefish Grill Restructuring and (iii) the effect of foreign currency translation.Depreciation and amortization decreased slightly for 2015 as compared to 2014 due to: (i) the sale of Roy’s, (ii) lower depreciation for certaininformation technology assets that fully depreciated in the fourth quarter of 2014 and (iii) lower depreciation for South Korea assets due toimpairments related to the International Restaurant Closure Initiative. These decreases were partially offset by increases due to additionaldepreciation expense related to the opening of new restaurants and the remodeling of existing restaurants.General and administrative expensesGeneral and administrative expense includes salaries and benefits, management incentive programs, related payroll tax and benefits, otheremployee-related costs and professional services. Following is a summary of the changes in general and administrative expenses: FISCAL YEAR(dollars in millions):2016 2015For fiscal years 2015 and 2014$287.6 $304.4Change from: Life insurance and deferred compensation (1)(10.2) (1.2)Incentive compensation (2)(9.4) 0.3Legal and professional fees (3)(5.2) 3.2Foreign currency exchange (4)(3.4) (6.5)Compensation, benefits and payroll tax (5)— (7.2)Severance (6)3.6 (7.7)Employee stock-based compensation (7)1.5 2.9Other3.5 (0.6)For fiscal years 2016 and 2015$268.0 $287.6____________________(1)In 2016, life insurance and deferred compensation decreased primarily due to: (i) the acquisition of managing partners’ interests in certain Outback Steakhouserestaurants, (ii) a decrease in restaurant-level operating performance and (iii) an increase in the cash surrender value of life insurance investments related to our partnerdeferred compensation programs.(2)In 2016, incentive compensation decreased due to performance against current year objectives.(3)In 2016, legal and professional fees were lower due to legal costs in 2015 associated with the Cardoza litigation and certain professional service fees and technologyprojects incurred in 2015 that supported our planned operational growth.(4)For 2016 and 2015, foreign currency exchange primarily includes depreciation of the Brazil Real.(5)In 2015, employee compensation, benefits and payroll tax was lower primarily due to lower headcount resulting from our organizational realignment in 2014 and theInternational Restaurant Closure Initiative, partially offset by higher costs related to additional employee benefits.40Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued(6)Severance expense in 2016 was higher due to a restructuring of certain home office and field support functions. In 2015, severance expense was lower due to anorganizational realignment of certain functions during 2014, partially offset by severance incurred in 2015 for the International Restaurant Closure Initiative.(7)In 2016 and 2015, employee stock-based compensation increased due to new grants, partially offset by forfeitures.Provision for impaired assets and restaurant closings FISCAL YEAR FISCAL YEAR (dollars in millions):2016 2015 Change 2015 2014 ChangeProvision for impaired assets andrestaurant closings$104.6 $36.7 $67.9 $36.7 $52.1 $(15.4)Restructuring and Closure Initiatives - Following is a summary of expenses related to the 2017 Closure Initiative, Bonefish Restructuring andInternational and Domestic Restaurant Closure Initiatives (the “Closure Initiatives”) recognized in Provision for impaired assets andrestaurant closings in our Consolidated Statements of Operations and Comprehensive Income for the periods indicated: FISCAL YEAR(dollars in millions)2016 2015 2014Impairment, facility closure and other expenses 2017 Closure Initiative$46.5 $— $—Bonefish Restructuring4.9 24.2 —International Restaurant Closure Initiative— 6.0 19.7Domestic Restaurant Closure Initiative— 1.6 6.0Impairment, facility closure and other expenses for Closure Initiatives$51.4 $31.8 $25.72017 Closure Initiative - On February 15, 2017 , we decided to close 43 underperforming restaurants (the “2017 Closure Initiative”). Inconnection with the 2017 Closure Initiative, we reassessed the future undiscounted cash flows of the impacted restaurants, and as a result, werecognized pre-tax asset impairments of $46.5 million during fiscal year 2016. We expect to incur additional charges of approximately $17.0million to $19.0 million for the 2017 Closure Initiative over the next three years , including costs associated with lease obligations and otherclosure related obligations.Bonefish Restructuring - In February 2016, we decided to close 14 Bonefish restaurants (the “Bonefish Restructuring”). We expect tosubstantially complete these restaurant closings through the first quarter of 2019. We expect to incur additional charges of approximately $2.2million to $5.2 million for the Bonefish Restructuring over the next two years, including costs associated with lease obligations and otherclosure related obligations.Restaurant Closure Initiatives - During 2014 and 2013,we decided to close 36 underperforming international locations, primarily in SouthKorea (the “International Restaurant Closure Initiative”), and 22 underperforming domestic locations (the “Domestic Restaurant ClosureInitiative”), respectively.Sale of Outback Steakhouse South Korea - On July 25, 2016, we completed the sale of Outback Steakhouse South Korea. In connection withthe decision to sell Outback Steakhouse South Korea, we recognized an impairment charge of $39.6 million during fiscal year 2016.Roy’s - In connection with the decision to sell Roy’s, we recorded pre-tax impairment charges of $13.4 million for Assets held for sale duringfiscal year 2014.Other Disposals - During 2016, we recognized impairment charges of $3.5 million for our Puerto Rico subsidiary.During the third quarter of 2014, we decided to sell both of our corporate airplanes. In connection with the decision, we recognized pre-taxasset impairment charges of $10.6 million during fiscal year 2014.41Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedThe remaining restaurant impairment and closing charges resulted from: (i) the carrying value of a restaurant’s assets exceeding its estimatedfair market value, primarily due to locations identified for relocation, sale or closure and (ii) lease liabilities. Income from operations FISCAL YEAR FISCAL YEAR (dollars in millions):2016 2015 Change 2015 2014 ChangeIncome from operations$127.6 $230.9 $230.9 $192.0 % of Total revenues3.0% 5.3% (2.3)% 5.3% 4.3% 1.0%The decrease in income from operations during fiscal year 2016 as compared to fiscal year 2015 was primarily due to impairment chargesincurred in connection with the 2017 Closure Initiative and the sale of Outback South Korea and a decrease in operating margin at therestaurant-level. These decreases were partially offset by lower general and administrative expense.The increase in income from operations during fiscal year 2015 as compared to fiscal year 2014 was primarily due to lower general andadministrative expense, lower impairments and restaurant closing costs and an increase in operating margin at the restaurant-level.Loss on defeasance, extinguishment and modification of debt FISCAL YEAR FISCAL YEAR (dollars in millions)2016 2015 Change 2015 2014 ChangeLoss on defeasance, extinguishmentand modification of debt$27.0 $3.0 $24.0 $3.0 $11.1 $(8.1)We recognized a loss on defeasance, extinguishment and modification of debt in connection with the: (i) the defeasance of the 2012 CMBSloan and the amendment of the PRP Mortgage Loan in 2016 and (ii) the refinancing of our Senior Secured Credit Facility in 2015 and 2014. Other income (expense), netOther income (expense), net , includes items deemed to be non-operating based on management’s assessment of the nature of the item inrelation to our core operations: FISCAL YEAR FISCAL YEAR (dollars in millions):2016 2015 Change 2015 2014 ChangeOther income (expense), net$1.6 $(0.9) $2.5 $(0.9) $(1.2) $0.3We recorded other income (expense) primarily in connection with: (i) the gain on sale of Outback Steakhouse South Korea in fiscal year2016, (ii) the loss on sale of our Roy’s business during fiscal year 2015 and (iii) the loss on sale of an Outback Steakhouse restaurant inMexico in fiscal year 2014.42Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedInterest expense, net FISCAL YEAR FISCAL YEAR (dollars in millions):2016 2015 Change 2015 2014 ChangeInterest expense, net$45.7 $56.2 $(10.5) $56.2 $59.7 $(3.5)The decrease in interest expense, net in fiscal year 2016 as compared to fiscal year 2015 was primarily due to the refinancing of the 2012CMBS loan in February 2016, partially offset by deferred financing fee amortization, additional draws on our revolving credit facility andexpense related to the interest rate swaps.The decrease in net interest expense in fiscal year 2015 as compared to fiscal year 2014 was primarily due to the refinancing of the SeniorSecured Credit Facilities in March 2015 and May 2014 and the repayment of long-term debt during fiscal year 2014. These decreases werepartially offset by additional expense related to the interest rate swaps.Provision for income taxes FISCAL YEAR FISCAL YEAR 2016 2015 Change 2015 2014 ChangeEffective income tax rate18.0% 23.0% (5.0)% 23.0% 20.0% 3.0%The net decrease in the effective income tax rate in fiscal year 2016 as compared to fiscal year 2015 was primarily due to benefits fromemployment-related credits being a higher percentage of net income in 2016 and a change in the amount and mix of income and losses acrossthe Company’s domestic and international subsidiaries, partially offset by the sale of Outback Steakhouse South Korea.The net increase in the effective income tax rate in fiscal year 2015 as compared to fiscal year 2014 was primarily due to a change in theamount and mix of income and losses across our domestic and international subsidiaries and the payroll tax audit settlements.The effective income tax rate for fiscal years 2016 , 2015 and 2014 was lower than the blended federal and state statutory rate of 39.0%,primarily due to the benefit of tax credits for FICA taxes on certain employees’ tips.SegmentsWe have two reportable segments, U.S. and International, which reflects how we manage our business, review operating performance andallocate resources. The U.S. segment includes all brands operating in the U.S. while brands operating outside the U.S. are included in theInternational segment. Resources are allocated and performance is assessed by our Chief Executive Officer, whom we have determined to beour Chief Operating Decision Maker.Revenues for both segments include only transactions with customers and include no intersegment revenues. Excluded from income fromoperations for U.S. and International are legal and certain corporate costs not directly related to the performance of the segments, certainstock-based compensation expenses and certain bonus expense.Prior to 2016, certain insurance expenses were not allocated to our concepts as these expenses were reviewed and evaluated on a Company-wide basis and therefore, these costs were excluded from segment restaurant-level operating margin and income from operations. In 2016,management changed how insurance expenses related to our restaurants are reviewed and now considers those costs when evaluating theoperating performance of our concepts. Accordingly, we have recast all prior period segment information to reflect this change.43Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedFollowing is a reconciliation of segment income (loss) from operations to the consolidated operating results: FISCAL YEAR(dollars in thousands)2016 2015 2014Segment income (loss) from operations U.S.$286,683 $348,731 $327,693International(5,954) 34,597 25,020Total segment income from operations280,729 383,328 352,713Unallocated corporate operating expense(153,123) (152,403) (160,749)Total income from operations127,606 230,925 191,964Loss on defeasance, extinguishment and modification of debt(26,998) (2,956) (11,092)Other income (expense), net1,609 (939) (1,244)Interest expense, net(45,726) (56,176) (59,658)Income before provision for income taxes$56,491 $170,854 $119,970U.S. Segment FISCAL YEAR(dollars in thousands)2016 2015 2014Revenues Restaurant sales$3,777,907 $3,857,162 $3,832,373Franchise and other revenues19,402 22,581 21,906Total revenues$3,797,309 $3,879,743 $3,854,279Restaurant-level operating margin15.4% 16.0% 15.6%Income from operations286,683 348,731 327,693Operating income margin7.5% 9.0% 8.5%Restaurant salesFollowing is a summary of the change in U.S. segment Restaurant sales for fiscal years 2016 and 2015 : FISCAL YEAR(dollars in millions)2016 2015For fiscal years 2015 and 2014$3,857.2 $3,832.4Change from: Comparable restaurant sales (1)(72.5) 20.1Restaurant closings(25.1) (21.1)Divestiture of Roy’s(5.7) (63.2)Restaurant openings (1)24.0 66.1Change in fiscal year— 22.8For fiscal years 2016 and 2015$3,777.9 $3,857.1____________________(1)Summation of quarterly changes for restaurant openings and comparable restaurant sales will not total to annual amounts as the restaurants that meet the definition of acomparable restaurant will differ each period based on when the restaurant opened.The decrease in U.S. Restaurant sales in fiscal year 2016 was primarily attributable to: (i) lower comparable restaurant sales, (ii) the closingof 18 restaurants since December 28, 2014 and (iii) the sale of 20 Roy’s restaurants in January 2015. The decrease in U.S. Restaurant saleswas partially offset by sales from 38 new restaurants not included in our comparable restaurant sales base.44Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedThe increase in U.S. Restaurant sales in fiscal year 2015 was primarily attributable to: (i) sales from 63 new restaurants not included in ourcomparable restaurant sales base, (ii) two additional operating days due to a change in our fiscal year end and (iii) higher comparablerestaurant sales at our existing restaurants. The increase in U.S. Restaurant sales was partially offset by: (i) the sale of 20 Roy’s restaurantsand (ii) the closing of 31 restaurants since December 31, 2013.Restaurant-level operating marginThe decrease in U.S. restaurant-level operating margin in fiscal year 2016 as compared to fiscal year 2015 was primarily due to: (i) higherkitchen and service labor costs due to higher wage rates and investments in our service model, (ii) an increase in operating expenses due toinflation and timing and (iii) higher net rent expense due to the sale-leaseback of certain properties. These increases were partially offset by:(i) the impact of certain cost saving initiatives and (ii) increases in average check per person.The increase in U.S. restaurant-level operating margin in fiscal year 2015 as compared to fiscal year 2014 was primarily due to: (i) the impactof certain cost savings initiatives, (ii) lower marketing expense and (iii) increases in average check per person. This increase was partiallyoffset by: (i) commodity inflation and (ii) higher kitchen and labor costs due to higher wage rates and lunch expansion across certainconcepts.Income from operationsThe decrease in U.S. income from operations generated in fiscal year 2016 as compared to fiscal year 2015 was primarily due to: (i) higherimpairment and restaurant closing costs, primarily related to the 2017 Closure Initiative and (ii) lower operating margin at the restaurant level,partially offset by lower general and administrative expense. General and administrative expense for the U.S. segment decreased primarilyfrom lower deferred compensation expense due to the acquisition of a managing partner’s interests in certain Outback Steakhouse restaurants.The increase in U.S. income from operations generated in fiscal year 2015 as compared to fiscal year 2014 was primarily due to: (i) higherrestaurant-level operating income and (ii) lower general and administrative expense. General and administrative expense for the U.S. segmentdecreased primarily due to lower compensation and benefits driven by our organizational realignment in fiscal 2014 and lower incentivecompensation due to performance against current year objectives compared to prior year. These increases in U.S. income from operationswere partially offset by higher impairment and restaurant closing costs, primarily related to the Bonefish Restructuring.International Segment FISCAL YEAR(dollars in thousands)2016 2015 2014Revenues Restaurant sales$448,150 $492,759 $583,410Franchise and other revenues6,853 5,174 5,022Total revenues$455,003 $497,933 $588,432Restaurant-level operating margin18.8 % 19.3% 18.4%Income (loss) from operations(5,954) 34,597 25,020Operating income (loss) margin(1.3)% 6.9% 4.3%45Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedRestaurant salesFollowing is a summary of the change in International segment Restaurant sales for fiscal years 2016 and 2015 : FISCAL YEAR(dollars in millions)2016 2015For fiscal years 2015 and 2014$492.8 $583.4Change from: Divestiture of Outback Steakhouse South Korea(81.2) —Effect of foreign currency translation(31.6) (119.3)Restaurant closings(8.8) (78.1)Restaurant openings (1)62.2 87.7Comparable restaurant sales (1)14.8 17.6Change in fiscal year— 1.5For fiscal years 2016 and 2015$448.2 $492.8____________________(1)Summation of quarterly changes for restaurant openings and comparable restaurant sales will not total to annual amounts as the restaurants that meet the definition of acomparable restaurant will differ each period based on when the restaurant opened.The decrease in Restaurant sales in fiscal year 2016 was primarily attributable to: (i) the sale of 72 Outback Steakhouse South Korearestaurants in July 2016, (ii) the effect of foreign currency translation and (iii) the closing of six restaurants since December 28, 2014 . Thedecrease in restaurant sales was partially offset by: (i) sales from 54 new restaurants not included in our comparable restaurant sales base and(ii) an increase in comparable restaurant sales.The decrease in Restaurant sales in fiscal year 2015 was primarily attributable to: (i) the effect of foreign currency translation and (ii) theclosing of 53 restaurants since December 31, 2013. The decrease in restaurant sales was partially offset by: (i) sales from 56 new restaurantsnot included in our comparable restaurant sales base, (ii) an increase in comparable restaurant sales and (iii) two additional operating days dueto a change in our fiscal year end.Restaurant-level operating marginThe decrease in International restaurant-level operating margin in fiscal year 2016 as compared to fiscal year 2015 was primarily due to: (i)higher commodity and labor inflation and (ii) higher operating expenses due to inflation. The decrease was partially offset by: (i) increases inaverage check per person and (ii) the impact of certain cost saving initiatives.The increase in International restaurant-level operating margin in fiscal year 2015 as compared to fiscal year 2014 was primarily due to: (i)increases in average check per person and (ii) the impact of certain cost saving initiatives. The increase was partially offset by: (i) commodityinflation, (ii) higher kitchen and labor costs due to higher wage rates and higher average unit volumes and (iii) additional costs associatedwith the opening of our Abbraccio concept in Brazil.Income (loss) from operationsThe decrease in International income from operations in fiscal year 2016 as compared to fiscal year 2015 was primarily due to: (i) impairmentcharges related to the sale of Outback Steakhouse South Korea and (ii) lower operating margin at the restaurant-level, partially offset bylower general and administrative expense.The increase in International income from operations in fiscal year 2015 as compared to fiscal year 2014 was primarily due to: (i) a decreasein impairment and restaurant closing costs related to the International Restaurant Closure Initiative, (ii) lower general and administrativeexpense and (iii) lower depreciation and amortization expense. General and46Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continuedadministrative expense for the International segment decreased primarily due to the impact of foreign currency translation, partially offset byincreased compensation and benefits.Non-GAAP Financial MeasuresIn addition to the results provided in accordance with U.S. GAAP, we provide certain non-GAAP measures, which present operating resultson an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with U.S. GAAPand include the following: (i) system-wide sales, (ii) Adjusted restaurant-level operating margins, (iii) Adjusted income from operations andthe corresponding margins, (iv) Adjusted net income and (v) Adjusted diluted earnings per share.We believe that our use of non-GAAP financial measures permits investors to assess the operating performance of our business relative to ourperformance based on U.S. GAAP results and relative to other companies within the restaurant industry by isolating the effects of certainitems 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 byunusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. We believe thatthe disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and Board ofDirectors evaluate our operating performance, allocate resources and establish employee incentive plans.These non-GAAP financial measures are not intended to replace U.S. GAAP financial measures, and they are not necessarily standardized orcomparable to similarly titled measures used by other companies. We maintain internal guidelines with respect to the types of adjustments weinclude in our non-GAAP measures. These guidelines endeavor to differentiate between types of gains and expenses that are reflective of ourcore 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 directlyaddressed by, or changes to, our guidelines will be considered by our disclosure committee. Refer to the reconciliations of non-GAAPmeasures for descriptions of the actual adjustments made in the current period and the corresponding prior period.Based on a review of our non-GAAP presentations, we have determined that, commencing with our results for the first fiscal quarter of 2017,when presenting the non-GAAP measures Adjusted income from operations and the corresponding margins, Adjusted net income andAdjusted diluted earnings per share, we will no longer adjust for expenses incurred in connection with our remodel program or intangibleamortization recorded as a result of the acquisition of our Brazil operations. We intend to recast the historical comparable periods presented inour future filings to conform to the revised presentation.System-Wide SalesSystem-wide sales is a non-GAAP financial measure that includes sales of all restaurants operating under our brand names, whether we ownthem or not. Management uses this information to make decisions about future plans for the development of additional restaurants and newconcepts, as well as evaluation of current operations. System-wide sales comprise sales of Company-owned and franchised restaurants and, inhistorical periods, sales of unconsolidated joint venture restaurants.47Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedFollowing is a summary of sales of Company-owned restaurants: FISCAL YEARCOMPANY-OWNED RESTAURANT SALES (dollars in millions):2016 2015 2014U.S. Outback Steakhouse$2,180 $2,226 $2,168Carrabba’s Italian Grill696 720 710Bonefish Grill617 623 609Fleming’s Prime Steakhouse & Wine Bar285 280 275Other— 8 71Total3,778 3,857 3,833International Outback Steakhouse-Brazil303 283 310Outback Steakhouse-South Korea (1)90 172 239Other55 38 34Total448 493 583Total Company-owned restaurant sales$4,226 $4,350 $4,416____________________(1)On July 25, 2016, we sold our restaurant locations in South Korea, converting all restaurants in that market to franchised locations.The following table provides a summary of sales of franchised restaurants, which are not included in our consolidated financial results, andour income from the royalties and/or service fees that franchisees pay us based generally on a percentage of sales. The following table doesnot represent our sales and is presented only as an indicator of changes in the restaurant system, which management believes is importantinformation regarding the health of our restaurant concepts and in determining our royalties and/or service fees. FISCAL YEARFRANCHISE SALES (dollars in millions): (1)2016 2015 2014U.S. Outback Steakhouse$334 $340 $323Carrabba's Italian Grill11 9 4Bonefish Grill13 12 13Total358 361 340International Outback Steakhouse-South Korea (2)74 — —Other111 115 122Total185 115 122Total franchise sales (1)$543 $476 $462Income from franchises (3)$20 $18 $17____________________(1)Franchise sales are not included in Total revenues in the Consolidated Statements of Operations and Comprehensive Income .(2)On July 25, 2016, we sold our restaurant locations in South Korea, converting all restaurants in that market to franchised locations.(3)Represents the franchise royalty income included in the Consolidated Statements of Operations and Comprehensive Income in Other revenues.48Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedAdjusted restaurant-level operating marginRestaurant-level operating margin is calculated as Restaurant sales after deduction of the main restaurant-level operating costs, whichincludes Cost of sales, Labor and other related and Other restaurant operating expenses. Adjusted restaurant-level operating margin isRestaurant-level operating margin adjusted for certain items, as noted below.The following tables show the percentages of certain operating cost financial statement line items in relation to Restaurant sales on both aU.S. GAAP basis and an adjusted basis, as indicated: FISCAL YEAR 2016 2015 2014 U.S. GAAP ADJUSTED (1) U.S. GAAP ADJUSTED (2) U.S. GAAP ADJUSTED (3)Restaurant sales100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales32.1% 32.1% 32.6% 32.6% 32.5% 32.5%Labor and other related28.7% 28.7% 27.7% 27.8% 27.6% 27.6%Other restaurant operating23.5% 23.5% 23.1% 23.1% 23.8% 24.0% Restaurant-level operating margin15.8% 15.7% 16.5% 16.5% 16.1% 15.9%_________________(1)Includes adjustments for the reversal of $5.9 million of deferred rent liabilities, primarily related to the 2017 Closure Initiative and the Bonefish Restructuring, partiallyoffset by $2.3 million of legal settlement costs related to the Sears matter. The reversal of the deferred rent liabilities and the legal settlement were recorded in Otherrestaurant operating.(2)Includes adjustments for the favorable resolution of payroll tax audit contingencies of $5.6 million, partially offset by legal settlement costs of $4.0 million, primarilyrelated to the Cardoza litigation. The payroll audit adjustment was recorded in Labor and other related and the legal settlement was recorded in Other restaurantoperating.(3)Includes adjustments, primarily related to a $6.1 million legal settlement gain and the reversal of $2.9 million of deferred rent liabilities associated with theInternational and Domestic Restaurant Closure Initiatives, which were recorded in Other restaurant operating. 49Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedAdjusted income from operations, Adjusted net income and Adjusted diluted earnings per shareThe following table reconciles Adjusted income from operations and the corresponding margins, Adjusted net income and Adjusted dilutedearnings per share to their respective most comparable U.S. GAAP measures for fiscal years 2016 , 2015 and 2014 : FISCAL YEAR(dollars in thousands, except per share amounts)2016 2015 2014Income from operations$127,606 $230,925 $191,964Operating income margin3.0% 5.3% 4.3%Adjustments: Restaurant impairments and closing costs (1)45,806 33,507 26,841Asset impairments and related costs (2)44,680 746 24,490Restaurant relocations, remodels and related costs (3)11,330 3,625 249Severance (4)5,463 — 9,045Purchased intangibles amortization (5)3,885 4,334 5,952Legal and contingent matters (6)2,340 5,843 (6,070)Transaction-related expenses (7)1,910 1,294 1,347Payroll tax audit contingency (8)— (5,587) —Total income from operations adjustments$115,414 $43,762 $61,854Adjusted income from operations$243,020 $274,687 $253,818Adjusted operating income margin5.7% 6.3% 5.7% Net income attributable to Bloomin’ Brands$41,748 $127,327 $91,090Adjustments: Income from operations adjustments115,414 43,762 61,854Loss on defeasance, extinguishment and modification of debt (9)26,998 2,956 11,092(Gain) loss on disposal of business (10)(1,632) 1,328 770Total adjustments, before income taxes140,780 48,046 73,716Adjustment to provision for income taxes (8) (11)(35,336) (15,314) (23,996)Net adjustments105,444 32,732 49,720Adjusted net income$147,192 $160,059 $140,810 Diluted earnings per share$0.37 $1.01 $0.71Adjusted diluted earnings per share$1.29 $1.27 $1.10 Diluted weighted average common shares outstanding114,311 125,585 128,317_________________(1)Represents expenses incurred for the 2017 Closure Initiative, Bonefish Restructuring and the International and Domestic Restaurant Closure Initiatives.(2)Represents asset impairment charges and related costs primarily related to: (i) the sale of Outback Steakhouse South Korea and our Puerto Rico subsidiary in 2016, (ii)our Roy’s concept in 2014 and (iii) the sale of corporate aircraft in 2015 and 2014.(3)Represents asset impairment charges and accelerated depreciation incurred in connection with our relocation and remodel programs.(4)Relates primarily to the following: (i) restructuring of certain functions in 2016, (ii) the relocation of our Fleming’s operations center to the corporate home office in2016 and (iii) our organizational realignment in 2014.(5)Represents intangible amortization recorded as a result of the acquisition of our Brazil operations.(6)Represents fees and expenses related to certain legal and contingent matters, including the Sears litigation in 2016 and the Cardoza litigation in 2015. During fiscalyear 2014, we recognized a gain on a legal settlement.(7)Relates primarily to the following: (i) costs incurred with our sale-leaseback initiative in 2016 and 2015 and (ii) costs incurred with the secondary offering of ourcommon stock in March 2015, November 2014 and March 2014. For the fiscal year ended December 25, 2016, includes an adjustment of $0.3 million for amortizationof deferred gains related to our sale-leaseback initiative from our50Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continuedsecond fiscal quarter. Subsequent to the second quarter, based on an ongoing review of our non-GAAP presentations, we determined not to adjust for this item. We donot consider this change material to the historical periods presented.(8)Relates to a payroll tax audit contingency adjustment for the employer’s share of FICA taxes related to cash tips allegedly received and unreported by our employeesduring calendar year 2011, which is recorded in Labor and other related expenses. In addition, a deferred income tax adjustment has been recorded for the allowableincome tax credits for the employer’s share of FICA taxes expected to be paid, which is included in Provision for income taxes and offsets the adjustment to Labor andother related expenses. As a result, there is no impact to Net income from this adjustment.(9)Relates to: (i) the amendment of the PRP Mortgage Loan and defeasance of the 2012 CMBS loan in 2016 and (ii) the refinancing of our Senior Secured Credit Facilityin 2015 and 2014.(10)Primarily relates to the sale of Outback Steakhouse South Korea in 2016 and Roy’s in 2015.(11)Represents income tax effect of the adjustments, on a jurisdiction basis. Included in the adjustment for fiscal year 2016 is $2.4 million for a tax obligation related to theOutback Steakhouse South Korea sale. Additionally, for fiscal year 2015, a deferred income tax adjustment has been recorded for the allowable income tax credits forthe employer’s share of FICA taxes expected to be paid. See footnote 8 to this table.51Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedLiquidity and Capital ResourcesLIQUIDITYOur liquidity sources consist of cash flow from our operations, cash and cash equivalents and credit capacity under our credit facilities. Weexpect to use cash primarily for general operating expenses, share repurchases and dividend payments, remodeling or relocating olderrestaurants, development of new restaurants and new markets, principal and interest payments on our debt, obligations related to our deferredcompensation plans and investments in technology.We believe that our expected liquidity sources are adequate to fund debt service requirements, lease obligations, capital expenditures andworking capital obligations for the next 12 months. However, our ability to continue to meet these requirements and obligations will dependon, among other things, our ability to achieve anticipated levels of revenue and cash flow and our ability to manage costs and working capitalsuccessfully.Cash and Cash Equivalents - As of December 25, 2016 , we had $127.2 million in cash and cash equivalents, of which $33.6 million washeld by foreign affiliates, a portion of which would be subject to additional taxes if repatriated to the United States. The internationaljurisdictions in which we have significant cash do not have any known restrictions that would prohibit the repatriation of cash and cashequivalents.We had aggregate undistributed earnings of $60.6 million for foreign subsidiaries as of December 25, 2016 , which we consider to bepermanently reinvested and are expected to continue to be permanently reinvested. It is not practical to determine the amount of unrecognizeddeferred income tax liabilities on the undistributed earnings we consider to be permanently reinvested.Sale of Outback Steakhouse South Korea - On July 25, 2016, we completed the sale of Outback Steakhouse South Korea for a purchase priceof $50.0 million .Sale-Leaseback Transactions - During fiscal year 2016, we entered into sale-leaseback transactions with third-parties in which we sold 159restaurant properties at fair market value for gross proceeds of $560.4 million . With the proceeds from these transactions, we made paymentsof $322.3 million on our PRP Mortgage Loan.Subsequent to December 25, 2016 , we entered into sale-leaseback transactions with third-parties in which we sold six restaurant properties atfair market value for gross proceeds of $21.6 million .Restructuring - Total aggregate future undiscounted cash expenditures of $41.6 million to $49.5 million for the 2017 Closure Initiative andBonefish Restructuring, primarily related to lease liabilities, are expected to occur over the remaining lease terms with the final term ending inJanuary 2029 .Capital Expenditures - We estimate that our capital expenditures will total between $260.0 million and $280.0 million in 2017 . The amountof actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among otherthings, including restrictions imposed by our borrowing arrangements.52Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedCredit Facilities - As of December 25, 2016 , our credit facilities consist of the Senior Secured Credit Facility and the PRP Mortgage Loan.See Note 11 - Long-term Debt, Net of the Notes to Consolidated Financial Statements for further information. Following is a summary ofprincipal payments and debt issuance from December 28, 2014 to December 25, 2016 : SENIOR SECURED CREDIT FACILITY 2012 CMBS LOAN PRP MORTGAGELOAN TOTAL CREDITFACILITIES TERM LOANS REVOLVINGFACILITY (dollars in thousands)A A-1 B Balance as of December 28, 2014$296,250 — $225,000 $325,000 $470,959 $— $1,317,2092015 new debt (1)— 150,000 — 565,300 — — 715,3002015 payments (1)(18,750) — (225,000) (458,300) (11,990) — (714,040)Balance as of December 27, 2015277,500 150,000 — 432,000 458,969 — 1,318,4692016 new debt (2)— — — 729,500 — 369,512 1,099,0122016 payments (2)(18,750) (9,375) — (539,500) (458,969) (322,310) (1,348,904)Balance as of December 25, 2016$258,750 $140,625 $— $622,000 $— $47,202 $1,068,577________________(1)Includes $215.0 million related to a refinancing of our Senior Secured Credit Facility to repay the remaining Term loan B balance and $150.0 million for anincremental Term loan A-1, which was used to repay a portion of the outstanding revolving credit facility.(2)In February 2016, we drew $185.0 million on our revolving credit facility. The drawdowns, together with the proceeds from the PRP Mortgage Loan, were used toprepay a portion, and fully defease the remainder, of the 2012 CMBS loan.Following is a summary of our outstanding credit facilities as of December 25, 2016 : INTEREST RATE DECEMBER 25, 2016 ORIGINALFACILITY PRINCIPALMATURITY DATE OUTSTANDING(dollars in thousands) DECEMBER 25, 2016 DECEMBER 27, 2015Term loan A, net of discount of $1.2 million(1)2.63% $300,000 May 2019 $258,750 $277,500Term loan A-12.70% 150,000 May 2019 140,625 150,000Revolving credit facility (1)2.67% 825,000 May 2019 622,000 432,000Total Senior Secured Credit Facility 1,275,000 1,021,375 859,500PRP Mortgage Loan3.21% 369,512 February 2018 47,202 —2012 CMBS loan 500,000 — 458,969Total credit facilities $2,144,512 $1,068,577 $1,318,469________________(1)Represents the weighted-average interest rate for the respective period.Credit Agreement - As of December 25, 2016 , we had $175.2 million in available unused borrowing capacity under our revolving creditfacility, net of letters of credit of $27.8 million .The Credit Agreement contains mandatory prepayment requirements for Term loan A and Term loan A-1. We are required to prepayoutstanding amounts under Term loan A and Term loan A-1 with 50% of our annual excess cash flow, as defined in the Credit Agreement.The amount of outstanding Term loan A and Term loan A-1 required to be prepaid may vary based on our leverage ratio and year end results.Other than the required minimum amortization premiums of $33.8 million , we do not anticipate any other payments will be required throughDecember 31, 2017.We are exploring options to address the 2019 maturity of our Senior Secured Credit Facility.PRP Mortgage Loan - On February 11, 2016 , PRP, as borrower, and Wells Fargo Bank, National Association, as lender (the “lender”),entered into the PRP Mortgage Loan, pursuant to which PRP borrowed $300.0 million . The PRP Mortgage Loan has an Initial Maturity dateof February 11, 2018 with an option to extend the Initial Maturity date for one twelve-53Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continuedmonth Extension provided that certain conditions are satisfied. The PRP Mortgage Loan is collateralized by certain properties owned by PRP.PRP has also made negative pledges with respect to certain unencumbered properties.The proceeds of the PRP Mortgage Loan were used, together with borrowings under our revolving credit facility, to prepay a portion, andfully defease the remainder, of the 2012 CMBS loan. In connection with the defeasance, we recognized a loss of $26.6 million during thefiscal year ended December 25, 2016 . Following the defeasance of the 2012 CMBS loan, $19.3 million of restricted cash was released. OnJuly 27, 2016, PRP and the Lender, entered into an Amendment to PRP’s Original Loan Agreement to provide for additional borrowings of$69.5 million .Subsequent to December 25, 2016 , we made payments of $19.2 million on our PRP Mortgage Loan with proceeds from sale-leasebacktransactions. The remaining $28.0 million PRP Mortgage Loan balance is due on the Initial Maturity date unless the we exercise theExtension.Debt Covenants - Our Credit Agreement and PRP Mortgage Loan contain various financial and non-financial covenants. A violation of thesecovenants could negatively impact our liquidity by restricting our ability to borrow under the revolving credit facility and cause anacceleration of the amounts due under the credit facilities. See Note 11 - Long-term Debt, Net of the Notes to Consolidated FinancialStatements for further information.As of December 25, 2016 and December 27, 2015 , we were in compliance with our debt covenants. We believe thatwe will remain in compliance with our debt covenants during the next 12 months.Cash Flow Hedges of Interest Rate Risk - In September 2014, we entered into variable-to-fixed interest rate swap agreements with eightcounterparties to hedge a portion of the cash flows of our variable rate debt. The swap agreements have an aggregate notional amount of$400.0 million , a start date of June 30, 2015 , and mature on May 16, 2019 . Under the terms of the swap agreements, we pay a weighted-average fixed rate of 2.02% on the $400.0 million notional amount and receive payments from the counterparty based on the 30-day LIBORrate. W e estimate $4.2 million will be reclassified to interest expense over the next twelve months. See Note 15 - Derivative Instruments andHedging Activities of the Notes to Consolidated Financial Statements for further information.SUMMARY OF CASH FLOWSThe following table presents a summary of our cash flows provided by (used in) operating, investing and financing activities for the periodsindicated: FISCAL YEAR(dollars in thousands)2016 2015 2014Net cash provided by operating activities$340,581 $397,430 $352,006Net cash provided by (used in) investing activities309,281 (180,643) (240,342)Net cash used in financing activities(657,978) (241,001) (148,731)Effect of exchange rate changes on cash and cash equivalents2,955 (9,193) (7,060)Net decrease in cash and cash equivalents$(5,161) $(33,407) $(44,127)Operating activities - Net cash provided by operating activities decreased in 2016 as compared to 2015 primarily as a result of the following:(i) higher income tax payments primarily due to sale-leaseback transactions and (ii) the timing of rent payments. These decreases werepartially offset by: (i) utilization of inventory on hand and (ii) lower cash interest payments.Net cash provided by operating activities increased in 2015 as compared to 2014 primarily as a result of the following: (i) timing ofcollections of holiday gift card sales from third-party vendors, (ii) lower income tax payments and (iii) lower cash interest payments. Theseincreases were partially offset by: (i) timing of payments on accounts payable and54Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continuedcertain accrual payments, (ii) a decrease in incremental gift card sales and (iii) the cash impact of settlement of obligations associated with theInternational Restaurant Closure Initiative.Investing activities - Net cash provided by investing activities during 2016 consisted primarily of: (i) proceeds from sale-leasebacktransactions, (ii) proceeds from the sale of Outback Steakhouse South Korea and (iii) a reduction in restricted cash related to the defeasanceof the 2012 CMBS loan, partially offset by capital expenditures.Net cash used in investing activities during 2015 consisted primarily of capital expenditures. Net cash used in investing activities waspartially offset by the following: (i) proceeds from other investments, net, (ii) proceeds from the sale of Roy’s, (iii) the release of escrow cashrelated to the Brazil Joint Venture acquisition and (iv) proceeds from the disposal of property, fixtures and equipment.Net cash used in investing activities during 2014 consisted primarily of: (i) capital expenditures, (ii) the net difference in restricted cash usedand restricted cash received and (iii) net cash paid to acquire certain franchise restaurants. Net cash used in investing activities was partiallyoffset by proceeds from the disposal of property, fixtures and equipment.Financing activities - Net cash used in financing activities during 2016 was primarily attributable to the following: (i) the defeasance of the2012 CMBS loan and payments on our PRP Mortgage Loan, (ii) the repurchase of common stock, (iii) the purchase of outstandingnoncontrolling interests and limited partnership interests in certain restaurants, (iv) payment of cash dividends on our common stock and (v)repayments of partner deposits and accrued partner obligations. Net cash used in financing activities was partially offset by the following: (i)proceeds from the PRP Mortgage Loan, (ii) drawdowns on our revolving credit facility, net of repayments and (iii) proceeds from the sale ofcertain properties, which are considered financing obligations.Net cash used in financing activities during 2015 was primarily attributable to the following: (i) repayments of the Term loan B due to theSenior Secured Credit Facility refinancing in March 2015 and voluntary prepayments, (ii) the repurchase of common stock, (iii) repaymentsof partner deposits and accrued partner obligations and (iv) payment of cash dividends on our common stock. Net cash used in financingactivities was partially offset by the following: (i) proceeds from the incremental Term loan A-1, net of financing fees, (ii) drawdowns on therevolving credit facility, net of repayments, and (iii) proceeds from the exercise of stock options.Net cash used in financing activities during 2014 was primarily attributable to the following: (i) repayment of the Term loan B due to theSenior Secured Credit Facility refinancing in May 2014 and voluntary repayments, (ii) repayment of borrowings on the 2012 CMBS loan,Term loan A and revolving credit facilities, (iii) repayments of partner deposits and accrued partner obligations and (iv) the purchase ofoutstanding limited partnership interests in certain restaurants. Net cash used in financing activities was partially offset by proceeds from therefinancing of the Senior Secured Credit Facility, net of financing fees, and proceeds from the exercise of stock options.FINANCIAL CONDITIONFollowing is a summary of our current assets, current liabilities and working capital:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015Current assets$390,519 $418,644Current liabilities823,408 814,166Working capital (deficit)$(432,889) $(395,522)Working capital (deficit) included Unearned revenue from unredeemed gift cards and loyalty program rewards of $388.5 million and $382.6million as of December 25, 2016 and December 27, 2015 , respectively. We have, and in the future may continue to have, negative workingcapital balances (as is common for many restaurant companies).55Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedWe operate successfully with negative working capital because cash collected on restaurant sales is typically received before payment is dueon our current liabilities, and our inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flowsfrom restaurant operations and gift card sales are used to service debt obligations and make capital expenditures.Deferred Compensation Programs - The deferred compensation obligation due to managing and chef partners was $113.0 million and $133.2million as of December 25, 2016 and December 27, 2015 , respectively. We invest in various corporate-owned life insurance policies, whichare held within an irrevocable grantor or “rabbi” trust account for settlement of our obligations under the deferred compensation plans. Therabbi trust is funded through our voluntary contributions. The unfunded obligation for managing and chef partners’ deferred compensation is$50.6 million and $74.0 million as of December 25, 2016 and December 27, 2015 , respectively.We use capital to fund the deferred compensation plans and currently expect annual cash funding of $18.0 million to $20.0 million. Actualfunding of the deferred compensation obligations and future funding requirements may vary significantly depending on the actualperformance compared to targets, timing of deferred payments of partner contracts, forfeiture rates, number of partner participants, growth ofpartner investments and our funding strategy.DIVIDENDS AND SHARE REPURCHASESDividends - We did not declare or pay any dividends on our common stock prior to 2015. In fiscal years 2016 and 2015, we declared and paidquarterly cash dividends of $0.07 and $0.06 per share, respectively.In February 2017, the Board declared a quarterly cash dividend of $0.08 per share, payable on March 10, 2017 . Future dividend payments aredependent on our earnings, financial condition, capital expenditure requirements, surplus and other factors that our Board considers relevant.Share Repurchases - The following table presents a summary of our share repurchase programs for 2014, 2015 and 2016 (dollars inthousands):SHARE REPURCHASEPROGRAM BOARD APPROVALDATE AUTHORIZED REPURCHASED CANCELED REMAINING2014 December 12, 2014 $100,000 $100,000 $— $—2015 August 3, 2015 100,000 69,999 30,001 —2016 February 12, 2016 250,000 139,892 110,108 —July 2016 (1) July 26, 2016 300,000 169,995 — 130,005________________(1)During January 2017, we repurchased $20.0 million of our outstanding common stock under a Rule 10b5-1 plan. The July 2016 Share Repurchase Program will expireon January 26, 2018.The following table presents our dividends and share repurchases for fiscal years 2016 and 2015 :(dollars in thousands)DIVIDENDS PAID SHARE REPURCHASES TAXES RELATED TOSETTLEMENT OF EQUITYAWARDS TOTALFiscal year 2016$31,379 $309,887 $447 $341,713Fiscal year 201529,332 169,999 770 200,101Total$60,711 $479,886 $1,217 $541,814Our ability to pay dividends and make share repurchases is dependent on our ability to obtain funds from our subsidiaries, have access to ourrevolving credit facility and the existence of surplus. Based on our Credit Agreement, restricted dividend payments from OSI to Bloomin’Brands can be made on an unlimited basis provided we are compliant with our debt covenants.56Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedOFF-BALANCE SHEET ARRANGEMENTSNone.OTHER MATERIAL COMMITMENTSOur contractual obligations, debt obligations and commitments as of December 25, 2016 are summarized in the table below: PAYMENTS DUE BY PERIOD LESS THAN 1-3 3-5 MORE THAN(dollars in thousands)TOTAL 1 YEAR YEARS YEARS 5 YEARSRecorded Contractual Obligations Long-term debt (1)$1,089,485 $35,079 $1,033,787 $967 $19,652Deferred compensation and other partner obligations (2)123,546 20,787 49,942 34,233 18,584Other recorded contractual obligations (3)23,197 5,286 3,507 1,965 12,439Unrecorded Contractual Obligations Interest (4)108,997 37,259 47,577 2,642 21,519Operating leases1,649,054 174,019 313,237 256,148 905,650Purchase obligations (5)439,436 230,312 122,074 42,830 44,220Total contractual obligations$3,433,715 $502,742 $1,570,124 $338,785 $1,022,064____________________(1)Includes capital lease obligations. Excludes unamortized debt issuance costs and discount of $2.8 million .(2)Includes deferred compensation obligations, deposits and other accrued obligations due to our restaurant partners. Timing and amounts of payments may varysignificantly based on employee turnover, return of deposits and changes to buyout values.(3)Includes other long-term liabilities, primarily consisting of non-partner deferred compensation obligations and restaurant closing cost liabilities. As of December 25,2016 , unrecognized tax benefits of $19.6 million were excluded from the table since it is not possible to estimate when these future payments will occur.(4)Projected future interest payments on long-term debt are based on interest rates in effect as of December 25, 2016 and assume only scheduled principal payments.Estimated interest expense includes the impact of financing obligations and our variable-to-fixed interest rate swap agreements. As of December 25, 2016 , we had aderivative liability of $6.0 million for the interest rate swap agreements recorded in our Consolidated Balance Sheet.(5)Purchase obligations include agreements to purchase goods or services that are enforceable, are legally binding and specify all significant terms, including fixed orminimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We have purchase obligations withvarious vendors that consist primarily of inventory, restaurant level service contracts, advertising, marketing and technology.Critical Accounting Policies and EstimatesOur discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, whichhave been prepared in accordance with U.S. GAAP. The preparation of these accompanying consolidated financial statements requires us tomake estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure ofcontingent assets and liabilities during the reporting period. We base our estimates on historical experience and on various other assumptionsthat are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying valueof assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under differentassumptions or conditions. We consider an accounting estimate to be critical if it requires assumptions to be made and changes in theseassumptions could have a material impact on our consolidated financial condition or results of operations.Impairment or Disposal of Long-Lived Assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying value may not be recoverable. The evaluation is performed at the57Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continuedlowest level of identifiable cash flows independent of other assets. For long-lived assets deployed at our restaurants, we review forimpairment at the individual restaurant level.When evaluating for impairment, the total future undiscounted cash flows expected to be generated by the assets are compared to the carryingamount. If the total future undiscounted cash flows expected to be generated by the assets are less than the carrying amount, this may be anindicator of impairment. An impairment loss is recognized in earnings when the asset’s carrying value exceeds its estimated fair value. Fairvalue is generally estimated using a discounted cash flow model. The key estimates and assumptions used in this model are future cash flowestimates, with material changes generally driven by changes in expected use, and the discount rate.Goodwill and Indefinite-Lived Intangible Assets - Goodwill and indefinite-lived intangible assets are tested for impairment annually in thesecond fiscal quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.We may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. Inconsidering the qualitative approach, we evaluate factors including, but not limited to, macro-economic conditions, market and industryconditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operationalstability and the overall financial performance of the reporting units.If the qualitative assessment is not performed or if we determine that it is not more likely than not that the fair value of the reporting unitexceeds the carrying value, the fair value of the reporting unit is calculated. Fair value of a reporting unit is the price a willing buyer wouldpay for the reporting unit and is estimated using a discounted cash flow model. The key estimates and assumptions used in this model arefuture cash flow estimates, which are heavily influenced by growth rates, and the discount rate. The fair value of the trade name is determinedthrough a relief from royalty method.The carrying value of the reporting unit is compared to its estimated fair value, with any excess of carrying value over fair value deemed to bean indicator of potential impairment, in which case a second step is performed comparing the recorded amount of goodwill or indefinite-livedintangible assets to the implied fair value.The carrying value of goodwill as of December 25, 2016 was $310.1 million , which related to our U.S. and International reporting units. Weperformed our annual impairment test in the second quarter of 2016 utilizing the qualitative assessment and determined that none of ourreporting units with remaining goodwill were at risk for impairment. Sales declines at our restaurants, unplanned increases in commodity or labor costs, deterioration in overall economic conditions andchallenges in the restaurant industry may result in future impairment charges. It is possible that changes in circumstances or changes in ourjudgments, assumptions and estimates could result in an impairment charge of a portion or all of our goodwill or other intangible assets.Insurance Reserves - We carry insurance programs with specific retention levels or high per-claim deductibles for a significant portion ofexpected losses under our workers’ compensation, general liability/liquor liability, health, property and management liability insuranceprograms. For some programs, we maintain stop-loss coverage to limit the exposure relating to certain risks.We record a liability for all unresolved claims and for an estimate of incurred but not reported claims at the anticipated cost that falls belowour specified retention levels or per-claim deductible amounts. Our liability for insurance claims was $62.8 million and $61.5 million as ofDecember 25, 2016 and December 27, 2015 , respectively. In establishing our reserves, we consider certain actuarial assumptions andjudgments regarding economic conditions, the frequency and severity of claims and claim development history and settlement practices.Reserves recorded for workers’ compensation and general liability/liquor liability claims are discounted using the average of the one-year andfive-year risk free rate of monetary assets that have comparable maturities.58Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedWe do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate ourinsurance claim liabilities. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses orgains that could be material. A 50 basis point change in the discount rate in our insurance claim liabilities as of December 25, 2016 , wouldhave affected net earnings by $1.0 million in fiscal year 2016 .Stock-Based Compensation - We have a stock-based compensation plan that permits the grant of stock options, stock appreciation rights,restricted stock, restricted stock units, performance awards and other stock-based awards to our management and other key employees. Weaccount for our stock-based employee compensation using a fair value-based method of accounting.We use the Black-Scholes option pricing model to estimate the weighted-average grant date fair value of stock options granted. Expectedvolatilities are based on historical volatilities of our stock and the stock of comparable peer companies. The expected term of options grantedrepresents the period of time that options granted are expected to be outstanding. The simplified method of estimating expected term is usedsince we do not have significant historical exercise experience for our stock options. Dividend yield is the level of dividends expected to bepaid on our common stock over the expected term of our options. The risk-free rate for periods within the expected life of the option is basedon the U.S. Treasury yield curve in effect as of the grant date.Our performance-based share units (“PSUs”) require assumptions regarding the likelihood of achieving certain Company performance criteriaset forth in the award agreements. Assumptions used in our assessment are consistent with our internal forecasts and operating plans .Estimates and assumptions are based upon information currently available, including historical experience and current business and economicconditions. A simultaneous 10% change in our volatility, forfeiture rate, weighted-average risk-free interest rate, dividend rate and term ofgrant in our stock option pricing model for fiscal year 2016 would have affected net income by $0.5 million .If we assumed that the PSU performance conditions for stock-based awards were not met, stock-based compensation expense would havedecreased by $1.4 million for fiscal year 2016 . If we assumed that PSU share awards met their maximum threshold, expense would haveincreased by $3.4 million for fiscal year 2016 .Income Taxes - Deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts ofassets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the tax rates, based on certainjudgments regarding enacted tax laws and published guidance, in effect in the years in which we expect those temporary differences toreverse. As of December 25, 2016, tax loss carryforwards and credit carryforwards that do not have a valuation allowance are expected to berecoverable within the applicable statutory expiration periods. A valuation allowance is established against the deferred tax assets when it ismore likely than not that some portion or all of the deferred taxes may not be realized. Changes in assumptions regarding our level andcomposition of earnings, tax laws or the deferred tax valuation allowance and the results of tax audits, may materially impact the effectiveincome tax rate.Our income tax returns, like those of most companies, are periodically audited by U.S. and foreign tax authorities. In determining taxableincome, income or loss before taxes is adjusted for differences between local tax laws and generally accepted accounting principles. A taxbenefit from an uncertain position is recognized only if it is more likely than not that the position is sustainable based on its technical merits.For uncertain tax positions that do not meet this threshold, we recognize a liability. The liability for unrecognized tax benefits requiressignificant management judgment regarding exposures about our various tax positions. These assumptions and probabilities are periodicallyreviewed and updated based upon new information. An unfavorable tax settlement generally requires the use of cash and an increase in theamount of income tax expense we recognize.59Table of ContentsBLOOMIN’ BRANDS, INC.MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS - ContinuedRevenue Recognition - The following accounting estimates relating to revenue recognition contain uncertainty because they requiremanagement to make assumptions and to apply judgment regarding the effects of future events:Gift Card Breakage – We sell gift cards to customers in our restaurants, through our websites and through select third parties. A liability isinitially established for the value of the gift card when sold. We recognize revenue from gift cards when the card is redeemed by thecustomer. We recognize gift card breakage revenue for gift cards when the likelihood of redemption by the customer is remote, which wehave determined are those gift cards issued on or before three years prior to the balance sheet date. For fiscal year 2017, we do not believethere is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to record breakage.Upon the adoption of ASU No. 2014-09 “Revenue Recognition (Topic 606), Revenue from Contracts with Customers”, the Company expectsto recognize breakage proportional to actual gift card redemptions. See Note 2 - Summary of Significant Accounting Policies of our Notes toConsolidated Financial Statements in Part II, Item 8 for further information.Recently Issued Financial Accounting StandardsFor a description of recently issued Financial Accounting Standards that we adopted in 2016 and that are applicable to us but have not yetbeen adopted, see Note 2 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements of this Report.60Table of ContentsBLOOMIN’ BRANDS, INC.Item 7A. Quantitative and Qualitative Disclosures about Market RiskWe are exposed to market risk from changes in interest rates on debt, changes in foreign currency exchange rates and changes in commodityprices.Interest Rate RiskWe are exposed to market risk from fluctuations in interest rates, which could affect our consolidated balance sheet, earnings and cash flows.Stockholders’ equity can be adversely affected by changing interest rates, as after-tax changes in the fair value of interest rate swapsdesignated as cash flow hedges are reflected as increases and decreases to a component of stockholders’ equity.We manage our exposure to market risk through regular operating and financing activities and when deemed appropriate, through the use ofderivative financial instruments. We use derivative financial instruments as risk management tools and not for speculative purposes. See Note15 - Derivative Instruments and Hedging Activities of the Notes to Consolidated Financial Statements for further information.As of December 25, 2016 , our interest rate risk was primarily from variable interest rate changes on our Senior Secured Credit Facility. Tomanage the risk of fluctuations in variable interest rate debt, we entered into interest rate swaps for an aggregate notional amount of $400.0million in 2014 with a start date of June 30, 2015 , and a maturity date of May 16, 2019.We utilize valuation models to estimate the effects of changing interest rates. The following table summarizes the changes to fair value andinterest expense under a shock scenario. This analysis assumes that interest rates change suddenly, as an interest rate “shock” and continue toincrease or decrease at a consistent level above or below the LIBOR curve. DECEMBER 25, 2016(dollars in thousands)INCREASE (1) DECREASEChange in fair value: Interest rate swap$2,797 $(15,583) Change in annual interest expense (2): Variable rate debt$6,203 $(5,740)________________(1)The potential change from a hypothetical 100 basis point increase in short-term interest rates.(2)The potential change from a hypothetical basis point decrease in short-term interest rates based on the LIBOR curve with a floor of zero. The curve ranges from ourcurrent interest rate of 79 basis points to 121 basis points.Foreign Currency Exchange Rate RiskWe are subject to foreign currency exchange risk for our restaurants operating in foreign countries. Our exposure to foreign currencyexchange risk is primarily related to fluctuations in the Brazil Real relative to the U.S. dollar. Our operations in other markets consist ofCompany-owned restaurants on a smaller scale than Brazil. If foreign currency exchange rates depreciate in the countries in which weoperate, we may experience declines in our operating results.For fiscal year 2016 , 10.7% of our revenue was generated in foreign currencies. A 10% change in average foreign currency rates against theU.S. dollar would have increased or decreased our Total revenues and Net income for our foreign entities by $35.4 million and $0.8 million ,respectively, for fiscal year 2016 .Commodity Pricing Risk61Table of ContentsBLOOMIN’ BRANDS, INC.Many of the ingredients used in the products sold in our restaurants are commodities that are subject to unpredictable price volatility.Although we attempt to minimize the effect of price volatility by negotiating fixed price contracts for the supply of key ingredients, there areno established fixed price markets for certain commodities such as produce and wild fish, and we are subject to prevailing market conditionswhen purchasing those types of commodities. Other commodities are purchased based upon negotiated price ranges established with vendorswith reference to the fluctuating market prices. The related agreements may contain contractual features that limit the price paid byestablishing certain price floors and caps. Extreme changes in commodity prices or long-term changes could affect our financial resultsadversely. We expect that in most cases increased commodity prices could be passed through to our customers through increases in menuprices. However, if there is a time lag between the increasing commodity prices and our ability to increase menu prices, or if we believe thecommodity price increase to be short in duration and we choose not to pass on the cost increases, our short-term financial results could benegatively affected. Additionally, from time to time, competitive circumstances could limit menu price flexibility, and in those cases marginswould be negatively impacted by increased commodity prices.Our restaurants are dependent upon energy to operate and are impacted by changes in energy prices, including natural gas. We utilizederivative instruments to mitigate some of our overall exposure to material increases in natural gas prices. We record mark-to-market changesin the fair value of our natural gas derivative instruments in earnings in the period of change. We incurred gains of $0.1 million and losses of$0.5 million and $0.6 million as a result of changes in the fair value of the commodity derivative instruments during fiscal years 2016 , 2015 ,and 2014 , respectively. As of December 25, 2016 and December 27, 2015 , the fair value of the derivative instruments was $0.2 million and$0.6 million , respectively, in a liability position.In addition to the market risks identified above, we are subject to business risk as our U.S. beef supply is highly dependent upon a limitednumber of vendors. If these vendors were unable to fulfill their obligations under their contracts, we could encounter supply shortages andincur higher costs to secure adequate supplies. See Note 18 - Commitments and Contingencies of the Notes to Consolidated FinancialStatements for further details.This market risk discussion contains forward-looking statements. Actual results may differ materially from the discussion based upon generalmarket conditions and changes in U.S. and global financial markets.62Table of ContentsBLOOMIN’ BRANDS, INC.Item 8. Financial Statements and Supplementary DataINDEX TO FINANCIAL INFORMATION PAGE NO. Management’s Annual Report on Internal Control over Financial Reporting64 Report of Independent Registered Certified Public Accounting Firm65 Consolidated Balance Sheets — December 25, 2016 and December 27, 201566 Consolidated Statements of Operations and Comprehensive Income — For Fiscal Years 2016, 2015 and 201467 Consolidated Statements of Changes in Stockholders’ Equity — For Fiscal Years 2016, 2015 and 201468 Consolidated Statements of Cash Flows — For Fiscal Years 2016, 2015 and 201470 Notes to Consolidated Financial Statements7263Table of ContentsBLOOMIN’ BRANDS, INC.Management’s Annual Report on Internal Control over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inExchange Act Rule 13a-15(f). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertainto the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of theCompany; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only inaccordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financialstatements.Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of itsinherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) issued an updated version of itsInternal Control—Integrated Framework (“2013 Framework”). Under the supervision and with the participation of management, includingour Chief Executive Officer and Chief Financial and Administrative Officer, we carried out an evaluation of the effectiveness of our internalcontrol over financial reporting as of December 25, 2016 using the 2013 Framework. Based upon our evaluation, management concluded thatour internal control over financial reporting was effective as of December 25, 2016 .The effectiveness of our internal control over financial reporting as of December 25, 2016 has been audited by PricewaterhouseCoopers LLP,an independent registered certified public accounting firm, as stated in their report which is included herein.64Table of ContentsBLOOMIN’ BRANDS, INC.Report of Independent Registered Certified Public Accounting FirmTo the Board of Directors and Stockholders of Bloomin’ Brands, Inc.In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensiveincome, of changes in stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Bloomin’ Brands,Inc. and its subsidiaries at December 25, 2016 and December 27, 2015, and the results of their operations and their cash flows for each of thethree years in the period ended December 25, 2016 in conformity with accounting principles generally accepted in the United States ofAmerica. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as ofDecember 25, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, formaintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financialreporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is toexpress opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of thefinancial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statementpresentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financialreporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in thecircumstances. We believe that our audits provide a reasonable basis for our opinions.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, orthat the degree of compliance with the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLPTampa, FloridaFebruary 22, 201765Table of ContentsBLOOMIN’ BRANDS, INC.CONSOLIDATED BALANCE SHEETS(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) DECEMBER 25, 2016 DECEMBER 27, 2015ASSETS Current Assets Cash and cash equivalents$127,176 $132,337Current portion of restricted cash and cash equivalents7,886 6,772Inventories65,231 80,704Other current assets, net190,226 198,831Total current assets390,519 418,644Restricted cash1,124 16,265Property, fixtures and equipment, net1,237,148 1,594,460Goodwill310,055 300,861Intangible assets, net535,523 546,837Deferred income tax assets38,764 7,631Other assets, net129,146 147,871Total assets$2,642,279 $3,032,569LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable$195,371 $193,116Accrued and other current liabilities204,415 206,611Unearned revenue388,543 382,586Current portion of long-term debt, net35,079 31,853Total current liabilities823,408 814,166Deferred rent151,130 139,758Deferred income tax liabilities16,709 53,546Long-term debt, net1,054,406 1,285,011Deferred gain on sale-leaseback transactions, net181,696 33,154Other long-term liabilities, net219,030 261,508Total liabilities2,446,379 2,587,143Commitments and contingencies (Note 18) Mezzanine Equity Redeemable noncontrolling interests547 23,526Stockholders’ Equity Bloomin’ Brands Stockholders’ Equity Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding as of December 25,2016 and December 27, 2015— —Common stock, $0.01 par value, 475,000,000 shares authorized; 103,922,110 and 119,214,522 shares issued andoutstanding as of December 25, 2016 and December 27, 2015, respectively1,039 1,192Additional paid-in capital1,079,583 1,072,861Accumulated deficit(786,780) (518,360)Accumulated other comprehensive loss(111,143) (147,367)Total Bloomin’ Brands stockholders’ equity182,699 408,326Noncontrolling interests12,654 13,574Total stockholders’ equity195,353 421,900Total liabilities, mezzanine equity and stockholders’ equity$2,642,279 $3,032,569 The accompanying notes are an integral part of these consolidated financial statements.66Table of ContentsBLOOMIN’ BRANDS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(IN THOUSANDS, EXCEPT PER SHARE DATA) FISCAL YEAR 2016 2015 2014Revenues Restaurant sales$4,226,057 $4,349,921 $4,415,783Franchise and other revenues26,255 27,755 26,928Total revenues4,252,312 4,377,676 4,442,711Costs and expenses Cost of sales1,354,853 1,419,689 1,435,359Labor and other related1,211,250 1,205,610 1,218,961Other restaurant operating992,157 1,006,772 1,049,053Depreciation and amortization193,838 190,399 190,911General and administrative267,981 287,614 304,382Provision for impaired assets and restaurant closings104,627 36,667 52,081Total costs and expenses4,124,706 4,146,751 4,250,747Income from operations127,606 230,925 191,964Loss on defeasance, extinguishment and modification of debt(26,998) (2,956) (11,092)Other income (expense), net1,609 (939) (1,244)Interest expense, net(45,726) (56,176) (59,658)Income before provision for income taxes56,491 170,854 119,970Provision for income taxes10,144 39,294 24,044Net income46,347 131,560 95,926Less: net income attributable to noncontrolling interests4,599 4,233 4,836Net income attributable to Bloomin’ Brands$41,748 $127,327 $91,090 Net income$46,347 $131,560 $95,926Other comprehensive income: Foreign currency translation adjustment37,075 (96,194) (31,731)Unrealized loss on derivatives, net of tax(1,250) (6,033) (2,393)Reclassification of adjustment for loss on derivatives included in Net income, net of tax3,807 2,235 —Comprehensive income85,979 31,568 61,802Less: comprehensive income (loss) attributable to noncontrolling interests8,008 (8,934) 4,836Comprehensive income attributable to Bloomin’ Brands$77,971 $40,502 $56,966 Earnings per share: Basic$0.37 $1.04 $0.73Diluted$0.37 $1.01 $0.71Weighted average common shares outstanding: Basic111,381 122,352 125,139Diluted114,311 125,585 128,317 Cash dividends declared per common share$0.28 $0.24 $—The accompanying notes are an integral part of these consolidated financial statements.67Table of ContentsBLOOMIN’ BRANDS, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(IN THOUSANDS, EXCEPT PER SHARE DATA) BLOOMIN’ BRANDS COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUM-ULATED DEFICIT ACCUMULATED OTHER COMPREHENSIVE LOSS NON- CONTROLLING INTERESTS TOTAL SHARES AMOUNT Balance, December 31, 2013124,784 $1,248 $1,068,705 $(565,154) $(26,418) $4,328 $482,709Net income— — — 91,090 — 4,161 95,251Other comprehensive loss,net of tax— — — — (34,124) — (34,124)Stock-based compensation— — 17,420 — — — 17,420Excess tax benefit on stock-based compensation— — 2,732 — — — 2,732Common stock issued understock plans (1)1,166 11 9,059 (930) — — 8,140Purchase of limitedpartnership interests, net oftax of $6,785— — (11,662) — — 1,236 (10,426)Transfer to redeemablenoncontrolling interest— — (627) — — — (627)Distributions tononcontrolling interests— — — — — (5,062) (5,062)Contributions fromnoncontrolling interests— — — — — 436 436Balance, December 28, 2014125,950 $1,259 $1,085,627 $(474,994) $(60,542) $5,099 $556,449Net income— — — 127,327 — 3,228 130,555Other comprehensive (loss)income, net of tax— — — — (86,825) 9 (86,816)Cash dividends declared,$0.24 per common share— — (29,332) — — — (29,332)Repurchase and retirement ofcommon stock(7,645) (76) — (169,923) — — (169,999)Stock-based compensation— 21,672 — — — 21,672Excess tax benefit fromstock-based compensation— — 733 — — — 733Common stock issued understock plans (1)910 9 6,015 (770) — — 5,254Purchase of noncontrollinginterests— — (306) — — — (306)Change in the redemptionvalue of redeemable interests— — (11,548) — — — (11,548)Distributions tononcontrolling interests— — — — — (4,761) (4,761)Contributions fromnoncontrolling interests— — — — — 3,635 3,635Conversion of accruedpartner obligations tononcontrolling interests— — — — — 6,364 6,364Balance, December 27, 2015119,215 $1,192 $1,072,861 $(518,360) $(147,367) $13,574 $421,900 (CONTINUED...) 68Table of ContentsBLOOMIN’ BRANDS, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(IN THOUSANDS, EXCEPT PER SHARE DATA) BLOOMIN’ BRANDS COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUM-ULATED DEFICIT ACCUMULATED OTHER COMPREHENSIVE LOSS NON- CONTROLLING INTERESTS TOTAL SHARES AMOUNT Balance, December 27, 2015119,215 $1,192 $1,072,861 $(518,360) $(147,367) $13,574 $421,900Net income— — — 41,748 — 3,622 45,370Other comprehensive income(loss), net of tax— — — — 36,224 (43) 36,181Cash dividends declared,$0.28 per common share— — (31,379) — — — (31,379)Repurchase and retirement ofcommon stock(16,647) (166) — (309,721) — — (309,887)Stock-based compensation— — 23,539 — — — 23,539Excess tax benefit fromstock-based compensation— — 454 — — — 454Common stock issued understock plans (1)1,354 13 6,831 (447) — — 6,397Purchase of noncontrollinginterests, net of tax of $1,504— — 9,301 — — 581 9,882Change in the redemptionvalue of redeemable interests— — (2,024) — — — (2,024)Distributions tononcontrolling interests— — — — — (5,818) (5,818)Contributions fromnoncontrolling interests— — — — — 738 738Balance, December 25, 2016103,922 $1,039 $1,079,583 $(786,780) $(111,143) $12,654 $195,353________________(1)Net of forfeitures and shares withheld for employee taxes.The accompanying notes are an integral part of these consolidated financial statements.69Table of ContentsBLOOMIN’ BRANDS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(IN THOUSANDS) FISCAL YEAR 2016 2015 2014Cash flows provided by operating activities: Net income$46,347 $131,560 $95,926Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization193,838 190,399 190,911Amortization of deferred discounts and issuance costs7,857 4,722 5,194Amortization of deferred gift card sales commissions28,045 28,205 27,509Provision for impaired assets and restaurant closings104,627 36,667 52,081Stock-based and other non-cash compensation expense21,522 22,725 19,689Deferred income tax (benefit) expense(75,349) 3,996 (13,623)Loss on defeasance, extinguishment and modification of debt26,998 2,956 11,092(Gain) loss on sale of subsidiary or business(1,633) 1,182 770Recognition of deferred gain on sale-leaseback transactions(5,981) (2,121) (2,140)Excess tax benefit from stock-based compensation(2,252) (733) (2,732)Other non-cash items, net824 38 1,395Change in assets and liabilities: Decrease (increase) in inventories15,053 (3,831) (3,126)Increase in other current assets(22,778) (43,727) (116,828)Decrease in other assets5,752 16,969 9,459(Decrease) increase in accounts payable and accrued and other current liabilities(8,222) (9,141) 32,182Increase in deferred rent12,426 17,983 18,746Increase in unearned revenue7,812 6,106 21,030(Decrease) increase in other long-term liabilities(14,305) (6,525) 4,471Net cash provided by operating activities340,581 397,430 352,006Cash flows provided by (used in) investing activities: Proceeds from disposal of property, fixtures and equipment1,726 5,420 5,745Proceeds from sale-leaseback transactions, net530,684 — —Acquisition of business, net of cash acquired— — (3,063)Proceeds from sale of a business, net of cash divested28,635 7,798 —Capital expenditures(260,578) (210,263) (237,868)Decrease in restricted cash45,479 54,782 26,075Increase in restricted cash(31,446) (47,830) (30,176)Other investments, net(5,219) 9,450 (1,055)Net cash provided by (used in) investing activities$309,281 $(180,643) $(240,342) (CONTINUED...) 70Table of ContentsBLOOMIN’ BRANDS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(IN THOUSANDS) FISCAL YEAR 2016 2015 2014Cash flows used in financing activities: Proceeds from issuance of long-term debt, net$364,211 $149,250 $292,596Defeasance, extinguishment and modification of debt(478,906) (215,000) (700,000)Repayments of long-term debt(355,616) (43,076) (31,873)Proceeds from borrowings on revolving credit facilities, net729,500 564,040 519,000Repayments of borrowings on revolving credit facilities(539,500) (458,300) (194,000)Proceeds from failed sale-leaseback transactions, net18,246 — —Proceeds from the exercise of share-based compensation6,843 6,024 9,070Distributions to noncontrolling interests(5,818) (4,761) (5,062)Contributions from noncontrolling interests738 3,635 1,872Purchase of limited partnership and noncontrolling interests(39,476) (890) (17,211)Repayments of partner deposits and accrued partner obligations(18,739) (42,555) (24,925)Repurchase of common stock(310,334) (170,769) (930)Excess tax benefit from stock-based compensation2,252 733 2,732Cash dividends paid on common stock(31,379) (29,332) —Net cash used in financing activities(657,978) (241,001) (148,731)Effect of exchange rate changes on cash and cash equivalents2,955 (9,193) (7,060)Net decrease in cash and cash equivalents(5,161) (33,407) (44,127)Cash and cash equivalents as of the beginning of the period132,337 165,744 209,871Cash and cash equivalents as of the end of the period$127,176 $132,337 $165,744Supplemental disclosures of cash flow information: Cash paid for interest$41,645 $53,971 $57,241Cash paid for income taxes, net of refunds88,823 31,552 56,216Supplemental disclosures of non-cash investing and financing activities: Purchase of noncontrolling interest included in accrued and other current liabilities$1,414 $— $—Change in acquisition of property, fixtures and equipment included in accounts payable orcapital lease liabilities9,610 3,396 (1,669)Deferred tax effect of purchase of noncontrolling interests1,504 — 6,785Conversion of accrued partner obligations to noncontrolling interests— 6,364 —Conversion of partner deposits and accrued partner obligations to notes payable— — 503 The accompanying notes are an integral part of these consolidated financial statements.71Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Description of BusinessBloomin’ Brands, Inc. (“Bloomin’ Brands” or the “Company”) is one of the largest casual dining restaurant companies in the world, with aportfolio of leading, differentiated restaurant concepts. OSI Restaurant Partners, LLC (“OSI”) is the Company’s primary operating entity andNew Private Restaurant Properties, LLC (“PRP”), another indirect wholly-owned subsidiary of the Company, leases certain of the Company-owned restaurant properties to OSI’s subsidiaries.The Company owns and operates casual, upscale casual and fine dining restaurants. The Company’s restaurant portfolio has four concepts:Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Additional Outback Steakhouse,Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchiseagreements.2 . Summary of Significant Accounting PoliciesBasis of Presentation - The Company’s consolidated financial statements include the accounts and operations of Bloomin’ Brands and itssubsidiaries.To ensure timely reporting, the Company consolidates the results of its Brazil operations on a one -month calendar lag. In December 2016,the Company made payments of $24.8 million to purchase the remaining interests in its Outback Steakhouse operations in Brazil. As thesepayments were material to the Company’s Consolidated Balance Sheet and Consolidated Statement of Cash Flows, the cash payments andacquisition of the redeemable noncontrolling interest were recognized as of December 25, 2016. See Note 13 - Redeemable NoncontrollingInterests for further information.As of November 30, 2016 and December 25, 2016, the Brazil Real to U.S. dollar foreign exchange rate was 3.39 and 3.27 , respectively.There were no other intervening events that would materially affect the Company’s consolidated financial position, results of operations orcash flows as of and for the fiscal year ended December 25, 2016 .Principles of Consolidation - All intercompany accounts and transactions have been eliminated in consolidation.The Company consolidates variable interest entities where it has been determined the Company is the primary beneficiary of those entities’operations. The Company is a franchisor of 240 restaurants as of December 25, 2016 , but does not possess any ownership interests in itsfranchisees and does not provide financial support to its franchisees. These franchise relationships are not deemed variable interest entitiesand are not consolidated.Investments in entities the Company does not control, but where the Company’s interest is generally between 20% and 50% and the Companyhas the ability to exercise significant influence over the entity are accounted for under the equity method.Use of Estimates - The preparation of the accompanying consolidated financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reportingperiod. Actual results could differ from those estimated.Cash and Cash Equivalents - Cash equivalents consist of investments that are readily convertible to cash with an original maturity date ofthree months or less. Cash and cash equivalents include $50.0 million and $60.7 million , as of December 25, 2016 and December 27, 2015 ,respectively, for amounts in transit from credit card companies since settlement is reasonably assured.Concentrations of Credit and Counterparty Risk - Financial instruments that potentially subject the Company to a concentration of credit riskare vendor and other receivables. Vendor and other receivables consist primarily of amounts72Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continueddue from vendor rebates and gift card resellers, respectively. The Company considers the concentration of credit risk for vendor and otherreceivables to be minimal due to the payment histories and general financial condition of its vendors and gift card resellers.Financial instruments that potentially subject the Company to concentrations of counterparty risk are cash and cash equivalents, restrictedcash and derivatives. The Company attempts to limit its counterparty risk by investing in certificates of deposit, money market funds,noninterest-bearing accounts and other highly rated investments. Whenever possible, the Company selects investment grade counterpartiesand rated money market funds in order mitigate its counterparty risk. At times, cash balances may be in excess of FDIC insurance limits. SeeNote 15 - Derivative Instruments and Hedging Activities for a discussion of the Company’s use of derivative instruments and management ofcredit risk inherent in derivative instruments.Fair Value - Fair value is the price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transactionbetween market participants on the measurement date. Fair value is categorized into one of the following three levels based on the lowestlevel of significant input:Level 1Unadjusted quoted market prices in active markets for identical assets or liabilitiesLevel 2Observable inputs available at measurement date other than quoted prices included in Level 1Level 3Unobservable inputs that cannot be corroborated by observable market dataInventories - Inventories consist of food and beverages and are stated at the lower of cost (first-in, first-out) or market.Restricted Cash - The Company has both current and long-term restricted cash balances consisting of amounts: (i) pledged for payment of thePRP Mortgage loan, (ii) pledged for settlement of deferred compensation plan obligations and (iii) held in escrow for certain indemnificationsassociated with the sale of Roy’s.Property, Fixtures and Equipment - Property, fixtures and equipment are stated at cost, net of accumulated depreciation. Depreciation iscomputed on the straight-line method over the estimated useful life of the assets. Improvements to leased properties are depreciated over theshorter of their useful life or the lease term, which includes renewal periods that are reasonably assured. Estimated useful lives by major assetcategory are generally as follows:Buildings and building improvements20 to 30 yearsFurniture and fixtures5 to 7 yearsEquipment2 to 7 yearsLeasehold improvements5 to 20 yearsCapitalized software3 to 7 yearsRepair and maintenance costs that maintain the appearance and functionality of the restaurant, but do not extend the useful life of anyrestaurant asset are expensed as incurred. The Company suspends depreciation and amortization for assets held for sale. The cost and relatedaccumulated depreciation of assets sold or disposed are removed from the Company’s Consolidated Balance Sheets, and any resulting gain orloss is generally recognized in Other restaurant operating expenses in the Company’s Consolidated Statements of Operations andComprehensive Income .The Company capitalizes direct and indirect internal costs associated with the acquisition, development, design and construction ofCompany-owned restaurant locations as these costs have a future benefit to the Company. Upon restaurant opening, these costs aredepreciated and charged to depreciation and amortization expense. Internal costs of $7.6 million , $8.0 million and $8.7 million werecapitalized during fiscal years 2016 , 2015 and 2014 , respectively.For fiscal years 2016 and 2015 , software development costs of $7.1 million and $4.8 million , respectively, were capitalized. As ofDecember 25, 2016 and December 27, 2015 , there was $24.4 million and $27.9 million , respectively, of unamortized software included inProperty, fixtures and equipment in the Company’s Consolidated Balance Sheets .73Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedGoodwill and Intangible Assets - Goodwill represents the excess of the purchase price over the fair value of net assets acquired in businesscombinations and is assigned to the reporting unit in which the acquired business will operate. The Company’s indefinite-lived intangibleassets consist of trade names. Goodwill and indefinite-lived intangible assets are tested for impairment annually, as of the first day of thesecond fiscal quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.The Company may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired.If the qualitative assessment is not performed or if the Company determines that it is not more likely than not that the fair value of thereporting unit exceeds the carrying value, the fair value of the reporting unit is calculated. The carrying value of the reporting unit iscompared to its estimated fair value, with any excess of carrying value over fair value deemed to be an indicator of potential impairment, inwhich case a second step is performed comparing the recorded amount of goodwill or indefinite-lived intangible assets to the implied fairvalue.Definite-lived intangible assets, which consist primarily of trademarks, franchise agreements, reacquired franchise rights, favorable leases,and other long-lived assets, are amortized over their estimated useful lives and are tested for impairment, using the discounted cash flowmethod, whenever events or changes in circumstances indicate that the carrying value may not be recoverable.Derivatives - The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value ofderivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationshipand apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecastedtransactions, are considered cash flow hedges. If the derivative qualifies for hedge accounting treatment, then the effective portion of the gainor loss on the derivative instrument is recognized in equity as a change to Accumulated other comprehensive loss and reclassified intoearnings in the same period or periods during which the hedged transaction affects earnings. Any ineffective portion of the gain or loss on thederivative instrument is immediately recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income .The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accountingdoes not apply or the Company elects not to apply hedge accounting. Derivatives not designated as hedges are not speculative and are used tomanage the Company’s exposure to interest rate movements, foreign currency exchange rate movements and other identified risks. Changesin the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. The Company has elected not tooffset derivative positions in the balance sheet with the same counterparty under the same agreement.Deferred Financing Fees - For fees associated with its revolving credit facility, the Company records deferred financing fees related to theissuance of debt obligations in Other assets, net. For fees associated with all other debt obligations, the Company records deferred financingfees in Long-term debt, net.The Company amortizes deferred financing fees to interest expense over the term of the respective financing arrangement, primarily using theeffective interest method. The Company amortized deferred financing fees of $7.1 million , $2.9 million and $3.1 million to interest expensefor fiscal years 2016 , 2015 and 2014 , respectively.Liquor Licenses - The costs of obtaining non-transferable liquor licenses directly issued by local government agencies for nominal fees areexpensed as incurred. The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number ofauthorized liquor licenses are capitalized as indefinite-lived intangible assets and included in Other assets, net. Annual liquor license renewalfees are expensed over the renewal term.Insurance Reserves - The Company carries insurance programs with specific retention levels or high per-claim deductibles for a significantportion of expected losses under its workers’ compensation, general liability/liquor liability,74Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continuedhealth, property and management liability insurance programs. The Company records a liability for all unresolved claims and for an estimateof incurred but not reported claims at the anticipated cost that falls below its specified retention levels or per-claim deductible amounts. Inestablishing reserves, the Company considers certain actuarial assumptions and judgments regarding economic conditions, the frequency andseverity of claims, claim development history and settlement practices. Reserves recorded for workers’ compensation and general liabilityclaims are discounted using the average of the one -year and five -year risk free rate of monetary assets that have comparable maturities.Redeemable Noncontrolling Interests - The Company consolidates its Outback Steakhouse subsidiary in China, which has a noncontrollinginterest that is permitted to deliver subsidiary shares in exchange for cash at a future date. The Company believes that it is probable that thenoncontrolling interest will become redeemable.The Redeemable noncontrolling interest is reported at its estimated redemption value measured as the greater of estimated fair value at theend of each reporting period or the historical cost basis of the redeemable noncontrolling interest adjusted for cumulative earnings or lossallocations. The resulting increases or decreases to fair value, if applicable, are recognized as adjustments to Retained earnings, or in theabsence of Retained earnings, Additional paid-in capital. The redeemable noncontrolling interest is classified in Mezzanine equity in theCompany’s Consolidated Balance Sheets.Share Repurchase - Shares repurchased are retired. The par value of the repurchased shares is deducted from common stock and the excess ofthe purchase price over the par value of the shares is recorded to Accumulated deficit.Revenue Recognition - The Company records food and beverage revenues, net of discounts, upon sale. Initial and developmental franchisefees are recognized as income once the Company has substantially performed all of its material obligations under the franchise agreement,which is generally upon the opening of the franchised restaurant. Continuing royalties, which are a percentage of net sales of the franchisee,are recognized as income when earned. Franchise-related revenues are included in Other revenues in the Company’s Consolidated Statementsof Operations and Comprehensive Income , except for amounts received for national marketing, which are recorded as a reduction of Otherrestaurant operating expenses.The Company defers revenue for gift cards, which do not have expiration dates, until redemption by the customer. Gift cards sold at adiscount are recorded as revenue upon redemption of the associated gift cards at an amount net of the related discount. The Company alsorecognizes gift card breakage revenue for gift cards when the likelihood of redemption by the customer is remote, which the Companydetermined are those gift cards issued on or before three years prior to the balance sheet date. The Company recorded breakage revenue of$26.0 million , $22.9 million and $18.8 million for fiscal years 2016 , 2015 and 2014 , respectively. Breakage revenue is recorded as acomponent of Restaurant sales in the Company’s Consolidated Statements of Operations and Comprehensive Income .Gift card sales commissions paid to third-party providers are initially capitalized and subsequently recognized as Other restaurant operatingexpenses upon redemption of the associated gift card. Deferred expenses of $15.6 million and $16.1 million as of December 25, 2016 andDecember 27, 2015 , respectively, were reflected in Other current assets, net in the Company’s Consolidated Balance Sheets. Gift card salesthat are accompanied by a bonus gift card to be used by the customer at a future visit result in a separate deferral of a portion of the originalgift card sale. Revenue is recorded when the bonus card is redeemed at the estimated fair market value of the bonus card.The Company maintains a customer loyalty program, Dine Rewards, in the U.S., where customers have the ability to earn a reward after anumber of qualified visits. The Company has developed an estimated value of the partial reward earned from each qualified visit based onhistorical data. The estimated value of the partial reward is recorded as deferred revenue. Each reward has a maximum value and must beredeemed within three months of earning such reward. The revenue associated with the fair value of the qualified visit is recognized upon theearlier of redemption or expiration of the reward. Deferred revenue related to the loyalty program was $4.2 million and $0.8 million as ofDecember 25, 2016 and December 27, 2015 , respectively.75Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedThe Company collects and remits sales, food and beverage, alcoholic beverage and hospitality taxes on transactions with customers andreports revenue net of taxes in its Consolidated Statements of Operations and Comprehensive Income .Operating Leases - Rent expense for the Company’s operating leases, which generally have escalating rentals over the term of the lease andmay include rent holidays, is recorded on a straight-line basis over the initial lease term and those renewal periods that are reasonably assured.The difference between rent expense and rent paid is recorded as deferred rent and is included in the Company’s Consolidated BalanceSheets. Payments received from landlords as incentives for leasehold improvements are recorded as deferred rent and are amortized on astraight-line basis over the term of the lease as a reduction of rent expense. Favorable and unfavorable lease assets and liabilities areamortized on a straight-line basis to rent expense over the remaining lease term.Pre-Opening Expenses - Non-capital expenditures associated with opening new restaurants are expensed as incurred and are included inOther restaurant operating expenses in the Company’s Consolidated Statements of Operations and Comprehensive Income .Consideration Received from Vendors - The Company receives consideration for a variety of vendor-sponsored programs, such as volumerebates, promotions and advertising allowances. Advertising allowances are intended to offset the Company’s costs of promoting and sellingmenu items in its restaurants. Vendor consideration is recorded as a reduction of Cost of sales or Other restaurant operating expenses whenrecognized in the Company’s Consolidated Statements of Operations and Comprehensive Income .Impairment of Long-Lived Assets and Costs Associated with Exit Activities - Long-lived assets are reviewed for impairment whenever eventsor changes in circumstances indicate that the carrying value may not be recoverable. The evaluation is performed at the lowest level ofidentifiable cash flows independent of other assets. For long-lived assets deployed at its restaurants, the Company reviews for impairment atthe individual restaurant level. When evaluating for impairment, the total future undiscounted cash flows expected to be generated by theasset are compared to the carrying amount. If the total future undiscounted cash flows of the asset are less than its carrying amount,recoverability is measured by comparing the fair value of the assets to the carrying amount. An impairment loss is recognized in earningswhen the asset’s carrying value exceeds its estimated fair value. Fair value is generally estimated using a discounted cash flow model.Generally, restaurant closure costs, including lease termination fees, are expensed as incurred. When the Company ceases using the propertyrights under a non-cancelable operating lease, it records a liability for the net present value of any remaining lease obligations as a result oflease termination, less the estimated sublease income that can reasonably be obtained for the property. Any subsequent adjustments to thatliability as a result of lease termination or changes in estimates of sublease income are recorded in the period incurred. The associatedexpense is recorded in Provision for impaired assets and restaurant closings in the Company’s Consolidated Statements of Operations andComprehensive Income .Restaurant sites and certain other assets to be sold are included in assets held for sale when certain criteria are met, including the requirementthat the likelihood of selling the assets within one year is probable.Advertising Costs - Advertising production costs are expensed in the period when the advertising first occurs. All other advertising costs areexpensed in the period in which the costs are incurred. Advertising expense of $160.8 million , $161.6 million and $191.1 million for fiscalyears 2016 , 2015 and 2014 , respectively, was recorded in Other restaurant operating expenses in the Company’s Consolidated Statements ofOperations and Comprehensive Income .Legal Costs - Settlement costs are accrued when they are deemed probable and reasonably estimable. Legal fees are recognized as incurredand are reported in General and administrative expense in the Company’s Consolidated Statements of Operations and Comprehensive Income.76Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedResearch and Development Expenses (“R&D”) - R&D is expensed as incurred in General and administrative expense in the Company’sConsolidated Statements of Operations and Comprehensive Income . R&D primarily consists of payroll and benefit costs. R&D was $5.2million , $6.5 million and $5.8 million for fiscal years 2016 , 2015 and 2014 , respectively.Partner Compensation - In additional to salary, the Restaurant Managing Partner of each Company-owned U.S. restaurant and the ChefPartner of each Fleming’s Prime Steakhouse & Wine Bar, as well as Area Operating Partners, generally receive performance-based bonusesfor providing management and supervisory services to their restaurants, certain of which may be based on a percentage of their associatedrestaurants’ monthly operating results or distributable cash flows (“Monthly Payments”). The expense associated with the Monthly Paymentsfor Restaurant Managing Partners and Chef Partners is included in Labor and other related expenses, and the expense associated with theMonthly Payments for Area Operating Partners is included in General and administrative expenses in the Company’s ConsolidatedStatements of Operations and Comprehensive Income .Restaurant Managing Partners and Chef Partners in the U.S. that are eligible to participate in a deferred compensation program receive anunsecured promise of a cash contribution to their account (see Note 5 - Stock-based and Deferred Compensation Plans ). Also, on the fifthanniversary of the opening of each new U.S. Company-owned restaurant, the Area Operating Partner supervising the restaurant during thefirst five years of operation receives an additional performance-based bonus.The Company estimates future bonuses and deferred compensation obligations to Restaurant Managing, Chef Partners and Area OperatingPartners, using current and historical information on restaurant performance and records the long-term portion of partner obligations in Otherlong-term liabilities, net in its Consolidated Balance Sheets. Deferred compensation expenses for Restaurant Managing and Chef partners areincluded in Labor and other related expenses and bonus expense for Area Operating Partners is included in General and administrativeexpenses in the Company’s Consolidated Statements of Operations and Comprehensive Income .Stock-based Compensation - Stock-based compensation awards are measured at fair value at the date of grant and expensed over their vestingor service periods. Stock-based compensation expense is recognized only for those awards expected to vest. The expense, net of forfeitures, isrecognized using the straight-line method.Foreign Currency Translation and Transactions - For non-U.S. operations, the functional currency is the local currency. Foreign currencydenominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the balance sheet date with thetranslation adjustments recorded in Accumulated other comprehensive loss in the Company’s Consolidated Statements of Changes inStockholders’ Equity. Results of operations are translated using the average exchange rates for the reporting period.The Company recorded foreign currency exchange transaction losses of $1.3 million , $1.2 million and $0.7 million for fiscal years 2016 ,2015 and 2014 , respectively. Foreign currency exchange transaction losses are recorded in General and administrative in the Company’sConsolidated Statements of Operations and Comprehensive Income .Income Taxes - Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences betweenthe financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred income tax assets andliabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences areexpected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in the tax rate is recognized in incomein the period that includes the enactment date of the rate change. A valuation allowance may reduce deferred income tax assets to the amountthat is more likely than not to be realized.The Company records a tax benefit for an uncertain tax position using the highest cumulative tax benefit that is more likely than not to berealized. The Company adjusts its liability for unrecognized tax benefits in the period in which it determines the issue is effectively settled,the statute of limitations expires or when more information becomes available.77Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedLiabilities for unrecognized tax benefits, including penalties and interest, are recorded in Accrued and other current liabilities and Other long-term liabilities on the Company’s Consolidated Balance Sheets.Recently Adopted Financial Accounting Standards - In August 2014, the Financial Accounting Standards Board (“the FASB”) issuedAccounting Standards Update (“ASU”) 2014-15: “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure ofUncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU No. 2014-15”). ASU No. 2014-15 requires management toevaluate whether there is substantial doubt about an entity’s ability to continue as a going concern, and to provide related footnote disclosuresin certain circumstances. The adoption of ASU No. 2014-15 on December 25, 2016 did not have an impact on the Company’s financialposition, results of operations or cash flows.Recently Issued Financial Accounting Standards Not Yet Adopted - In January 2017, the FASB issued ASU No. 2017-04, “ Intangibles -Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” (“ASU No. 2017-04”).ASU No. 2017-04 eliminates the second step of goodwill impairment, which requires a hypothetical purchase price allocation. Under ASUNo. 2017-14, goodwill impairment will be calculated as the amount a reporting unit’s carrying value exceeds its calculated fair value. ASUNo. 2017-04 will be applied prospectively and is effective for the Company in fiscal year 2020, with early adoption permitted. The Companydoes not expect the adoption of ASU No. 2017-04 to have a material impact on its Consolidated Financial Statements.In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations - Clarifying the Definition of a Business,” (“ASU No. 2017-01”). ASU No. 2017-01 clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (ordisposals) of assets or businesses. The definition of a business affects various areas of accounting including acquisitions, disposals, goodwill,and consolidation. ASU No. 2017-01 is effective for the Company in fiscal year 2018 and is not expected to have an impact on theCompany’s Consolidated Financial Statements.In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230), Restricted Cash” (“ASU No. 2016-18”).ASU No. 2016-18 provides guidance on the presentation of restricted cash and restricted cash equivalents, which should now be includedwith cash and cash equivalents when reconciling the beginning and ending cash amounts shown on the Statements of Cash Flows. ASU No.2016-18 will be effective for the Company in fiscal year 2018, with early adoption permitted. Other than the change in presentation ofrestricted cash within the Statement of Cash Flows, the adoption of ASU No. 2016-18 is not expected to have an impact on the Company’sConsolidated Financial Statements.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments (“ASU No. 2016-15”), which provides guidance on the statement of cash flows presentation of certain transactions where diversityin practice exists. ASU No. 2016-15 will be effect ive for the Company in fiscal year 2018 , and early adoption is permitted. The Companydoes not expect ASU No. 2016-15 to have a material impact on its Consolidated Financial Statements.In March 2016, the FASB issued ASU 2016-09: “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-BasedPayment Accounting” (“ASU No. 2016-09”). ASU No. 2016-09 simplifies several aspects related to the accounting for share-based paymenttransactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cashflows. ASU No. 2016-09 will be effective for the Company in fiscal year 2017.Currently, the Company recognizes excess tax benefits for stock compensation in the Statement of Stockholder’s Equity when the benefits arerealized (on a with and without basis). Upon adoption of ASU No. 2016-09, excess tax benefits related to stock compensation will berecorded through the Statement of Operations and Comprehensive Income. Excess tax benefits of approximately $14.0 million to $15.0million will be recorded as a cumulative effect adjustment to equity in fiscal year 2017.78Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedThe impact of adopting ASU No. 2016-09 will depend on the difference between the market price of the Company’s stock between the grantdates and subsequent vesting dates of share-based awards, and this impact could be positive or negative depending on how the Company’sstock price fluctuates.In February 2016, the FASB issued ASU No. 2016-02: “Leases (Topic 842)” (“ASU No. 2016-02”). ASU No. 2016-02 requires the leaserights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on thebalance sheet. ASU No. 2016-02 is effective for the Company in fiscal year 2019 and must be adopted using a modified retrospectiveapproach. The Company is currently evaluating the impact the adoption of ASU No. 2016-02 will have on its Consolidated FinancialStatements.In May 2014, the FASB issued ASU No. 2014-09 “Revenue Recognition (Topic 606), Revenue from Contracts with Customers” (“ASU No.2014-09”). ASU No. 2014-09 provides a single source of guidance for revenue arising from contracts with customers and supersedes currentrevenue recognition standards. Under ASU No. 2014-09, revenue is recognized in an amount that reflects the consideration an entity expectsto receive for the transfer of goods and services. ASU No. 2014-09, as amended, will be effective for the Company in fiscal year 2018 and isapplied retrospectively to each period presented or as a cumulative effect adjustment at the date of adoption.While the Company continues to assess all potential impacts of the standard, it currently believes the most significant impact relates toaccounting for breakage and advertising fees charged to franchisees. Under the new standard, the Company expects to recognize breakageproportional to actual gift card redemptions. Advertising fees charged to franchisees, which are currently recorded as a reduction to Otherrestaurant operating expenses, will be recognized as Other revenue. In addition, initial franchise fees will be recognized over the term of thefranchise agreement, which is not expected to have a material impact on the Consolidated Financial Statements.Recent accounting guidance not discussed above is not applicable, did not have, or is not expected to have a material impact to the Company.79Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedOut-of-Period Adjustments - In the third quarter of 2015, the Company identified and corrected errors in accounting for the allocation offoreign currency translation adjustments (“CTA”) to Redeemable noncontrolling interests and fair value adjustments for Redeemablenoncontrolling interests. Management evaluated the materiality of the errors from a qualitative and quantitative perspective and concludedthat the errors were immaterial to the current and prior periods. As a result, the Company recorded the cumulative adjustment in itsConsolidated Statement of Stockholders’ Equity and Consolidated Statement of Operations and Comprehensive Income for fiscal year 2015: FINANCIAL STATMENT LINEITEM IMPACT IMPACT BY PERIOD CUMULATIVEADJUSTMENT FISCAL YEAR (dollars in thousands) 2013 2014 2015 Mezzanine equity: Allocation of CTA to redeemable noncontrolling interests Redeemable noncontrollinginterests $(1,762) $(2,677) $(4,793) $(9,232)Adjustment for the change in the redemption value of redeemableinterests Redeemable noncontrollinginterests 1,715 1,824 5,132 8,671Net impact to Mezzanine equity $(47) $(853) $339 $(561) Bloomin’ Brands stockholders’ equity: Allocation of CTA to redeemable noncontrolling interests Accumulated othercomprehensive loss $1,762 $2,677 $4,793 $9,232Adjustment for the change in the redemption value of redeemableinterests Additional paid-in capital (1,715) (1,824) (5,132) (8,671)Net impact to Bloomin’ Brands stockholders’ equity $47 $853 $(339) $561 Other comprehensive income (loss): Allocation of CTA to redeemable noncontrolling interests Comprehensive incomeattributable to Bloomin’ Brands $1,762 $2,677 $4,793 $9,232Allocation of CTA to redeemable noncontrolling interests Comprehensive (loss) incomeattributable to noncontrollinginterests (1,762) (2,677) (4,793) (9,232)Net impact to Other comprehensive income $— $— $— $—Reclassifications - The Company reclassified certain items in the accompanying consolidated financial statements for prior periods to becomparable with the classification for the current period. These reclassifications had no effect on previously reported net income.3 . Impairments, Disposals and Exit CostsThe components of Provision for impaired assets and restaurant closings are as follows: FISCAL YEAR(dollars in thousands)2016 2015 2014Impairment losses U.S.$57,464 $27,408 $13,822International41,599 — 12,690Corporate— 746 10,559Total impairment losses$99,063 $28,154 $37,071Restaurant closure expenses U.S.$5,596 $2,460 $7,334International(32) 6,053 7,676Total restaurant closure expenses$5,564 $8,513 $15,010Provision for impaired assets and restaurant closings$104,627 $36,667 $52,08180Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedClosure Initiative and Restructuring Costs - Following is a summary of expenses, related to the 2017 Closure Initiative, BonefishRestructuring and International and Domestic Restaurant Closure Initiatives (“Closure Initiatives”), recognized in Provision for impairedassets and restaurant closings in the Company’s Consolidated Statements of Operations and Comprehensive Income for the periods indicated: FISCAL YEAR(dollars in thousands)2016 2015 2014Impairment, facility closure and other expenses 2017 Closure Initiative (1)$46,500 $— $—Bonefish Restructuring4,859 24,204 —International Restaurant Closure Initiative (2)— 6,041 19,738Domestic Restaurant Closure Initiative (3)— 1,602 5,972Provision for impaired assets and restaurant closings$51,359 $31,847 $25,710Severance and other expenses Bonefish Restructuring$601 $143 $—International Restaurant Closure Initiative (2)— 1,715 3,007Domestic Restaurant Closure Initiative (3)— — 1,035General and administrative$601 $1,858 $4,042Reversal of deferred rent liability 2017 Closure Initiative (1)$(3,271) $— $—Bonefish Restructuring(3,410) — —International Restaurant Closure Initiative (2)— (198) (833)Domestic Restaurant Closure Initiative (3)— — (2,078)Other restaurant operating$(6,681) $(198) $(2,911) $45,279 $33,507 $26,841________________(1)Includes pre-tax asset impairments of $45.6 million within the U.S. segment and $0.9 million within the International segment.(2)During 2014, the Company decided to close 36 underperforming international locations, primarily in South Korea (the “International Restaurant Closure Initiative”).(3)During 2013, the Company decided to close 22 underperforming domestic locations (the “Domestic Restaurant Closure Initiative”).2017 Closure Initiative - On February 15, 2017 , the Company decided to close 43 underperforming restaurants (the “2017 ClosureInitiative”). Most of these restaurants will close in 2017, with the balance closing as leases and certain operating covenants expire or areamended or waived. In connection with the 2017 Closure Initiative, the Company reassessed the future undiscounted cash flows of theimpacted restaurants and determined the undiscounted cash flows would not recover the value of the impacted restaurants. As a result, theCompany estimated the fair value of the impacted restaurants and recognized pre-tax asset impairments of $46.5 million during fiscal year2016, which includes three restaurants that closed in the fourth quarter.Bonefish Restructuring - On February 12, 2016 , the Company decided to close 14 Bonefish restaurants (“Bonefish Restructuring”). TheCompany expects to substantially complete these restaurant closings through the first quarter of 2019 . In connection with the BonefishRestructuring, the Company reassessed the future undiscounted cash flows of the impacted restaurants, and as a result, the Companyrecognized pre-tax asset impairments during fiscal year 2015, within the U.S. segment.81Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedCumulative Closure Initiative and Restructuring Costs - Following is a summary of cumulative expenses related to the Closure Initiativesincurred through December 25, 2016 (dollars in thousands):DESCRIPTION LOCATION OF CHARGE IN THECONSOLIDATED STATEMENTS OFOPERATIONS AND COMPREHENSIVEINCOME CLOSURE INITIATIVES AND RESTRUCTURING 2017 BONEFISH INTERNATIONAL DOMESTIC TOTALImpairments, facilityclosure and otherexpenses Provision for impaired assets andrestaurant closings $46,500 $29,063 $25,779 $26,269 $127,611Severance and otherexpenses General and administrative — 744 4,722 1,035 6,501Reversal of deferred rentliability Other restaurant operating (3,271) (3,410) (1,031) (2,078) (9,790) $43,229 $26,397 $29,470 $25,226 $124,322Projected Future Expenses and Cash Expenditures - The Company currently expects to incur additional charges for the 2017 ClosureInitiative and Bonefish Grill Restructuring over the next three years , including costs associated with lease obligations, employee terminationsand other closure-related obligations. Following is a summary of estimated pre-tax expense by type:Estimated future expense (dollars in millions)2017 CLOSURE INITIATIVE BONEFISH GRILLRESTRUCTURINGLease related liabilities, net of subleases$17.0to$19.0 $2.2to$5.2Employee severance and other obligations$2.5to$4.5 $0.3to$1.0Total estimated future expense$19.5to$23.5 $2.5to$6.2 Total estimated future cash expenditures (dollars in millions)$31.5 $37.0 $10.1to$12.5Total future undiscounted cash expenditures for the 2017 Closures Initiative and Bonefish Grill Restructuring, primarily related to leaseliabilities, are expected to occur over the remaining lease terms with the final term ending in January 2029 and October 2024 , respectively.Accrued Facility Closure and Other Cost Rollforward - The following table summarizes the Company’s accrual activity related to facilityclosure and other costs during fiscal years 2016 and 2015 :(dollars in thousands)2016 2015Beginning of the year$5,699 $11,000Charges6,845 10,358Cash payments(4,706) (13,814)Adjustments(1,281) (1,845)End of the year (1)$6,557 $5,699________________(1)The Company had exit-related accruals of $2.6 million and $2.0 million , recorded in Accrued and other current liabilities and $4.0 million and $3.7 million , recordedin Other long-term liabilities, net, as of December 25, 2016 and December 27, 2015 , respectively.Outback Steakhouse South Korea - On July 25, 2016, the Company completed the sale of its Outback Steakhouse subsidiary in South Korea(“Outback Steakhouse South Korea”) for a purchase price of $50.0 million , in cash. In the second quarter of 2016, the Company recognizedan impairment charge of $39.6 million , including costs to sell of $3.3 million , within the International segment. The Company alsorecognized tax expense of $2.4 million for fiscal year 2016 with respect to undistributed earnings in South Korea that were previouslyconsidered to be permanently reinvested.During the third quarter of 2016, the Company recognized a gain on the sale of Outback Steakhouse South Korea of82Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued$2.1 million within Other income (expense), net in the Consolidated Statements of Operations and Comprehensive Income , primarily due toa change in foreign currency exchange rates subsequent to the Company’s second fiscal quarter. After completion of the sale, the Company’srestaurant locations in South Korea are operated as franchises.Following are the components of Outback Steakhouse South Korea included in the Consolidated Statements of Operations andComprehensive Income for the following periods: FISCAL YEAR(dollars in thousands)2016 2015 2014Restaurant sales$90,455 $171,649 $238,802(Loss) income before income taxes (1)$(32,348) $3,284 $(12,955)________________(1)Includes impairment charges of $39.6 million for Assets held for sale and a gain of $2.1 million on the sale of Outback Steakhouse South Korea for fiscal year 2016 .Roy’s - On January 26, 2015, the Company sold its Roy’s business to United Ohana, LLC (the “Buyer”), for a purchase price of $10.0 million, less certain liabilities, and recognized a loss on sale of $0.9 million , which was recorded in Other expense, net, during fiscal year 2015.In connection with the sale of Roy’s, the Company continues to provide lease guarantees for certain of the Roy’s locations. Under theguarantees, the Company will pay the rental expense over the remaining lease term in the event of default by the Buyer. The fair value andmaximum value of the lease guarantees is nominal. The maximum amount is calculated as the fair value of the lease payments, net ofsublease assumptions, over the remaining lease term.Following are the components of Roy’s included in the Company’s Consolidated Statements of Operations and Comprehensive Income forthe following periods: FISCAL YEAR(dollars in thousands)2015 2014Restaurant sales$5,729 $68,575Loss before income taxes (1)(2)$(831) $(13,612)________________(1)Loss before income taxes includes loss on sale of $0.9 million in fiscal year 2015.(2)Loss before income taxes includes impairment charges of $13.4 million in fiscal year 2014, which was recorded within the U.S. segment.Other Disposals - During 2016, the Company recognized impairment charges of $3.5 million for its Puerto Rico subsidiary, within the U.S.segment.During 2014, the Company decided to sell both of its corporate airplanes. In connection with this decision, the Company recognized pre-taxasset impairment charges of $0.7 million and $10.6 million in fiscal years 2015 and 2014, respectively.The remaining restaurant impairment and closing charges resulted from the carrying value of a restaurant’s assets exceeding its estimated fairmarket value, primarily due to locations identified for relocation or closure.4. Earnings Per ShareThe Company computes basic earnings per share based on the weighted average number of common shares that were outstanding during theperiod. Diluted earnings per share includes the dilutive effect of common stock equivalents consisting of restricted stock, restricted stockunits, performance-based share units and stock options, using the treasury stock method. Performance-based share units are considereddilutive when the related performance criterion has been met.83Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedThe following table presents the computation of basic and diluted earnings per share: FISCAL YEAR(in thousands, except per share amounts)2016 2015 2014Net income attributable to Bloomin’ Brands$41,748 $127,327 $91,090 Basic weighted average common shares outstanding111,381 122,352 125,139 Effect of diluted securities: Stock options2,659 2,992 3,079Nonvested restricted stock and restricted stock units260 216 91Nonvested performance-based share units11 25 8Diluted weighted average common shares outstanding114,311 125,585 128,317 Basic earnings per share$0.37 $1.04 $0.73Diluted earnings per share$0.37 $1.01 $0.71Dilutive securities outstanding not included in the computation of earnings per share because their effect was antidilutive were as follows: FISCAL YEAR(shares in thousands)2016 2015 2014Stock options5,151 2,670 3,090Nonvested restricted stock and restricted stock units219 27 206Nonvested performance-based share units92 — —5 . Stock-based and Deferred Compensation PlansStock-based Compensation PlansEquity Compensation Plans - On April 22, 2016, the Company’s shareholders approved the Bloomin’ Brands, Inc. 2016 Omnibus IncentiveCompensation Plan (the “2016 Incentive Plan”). Following approval of the 2016 Incentive Plan, no further awards have been granted underthe Company’s previous equity compensation plans. Existing awards under previous plans continue to vest in accordance with the originalvesting schedule and will expire at the end of their original term. The 2016 Incentive Plan permits the grant of stock options, stockappreciation rights, restricted stock, restricted stock units, performance awards and other cash-based or stock-based awards to Companymanagement, other key employees, consultants and directors.As of December 25, 2016 , the maximum number of shares of common stock available for issuance pursuant to the 2016 Incentive Plan was6,127,810 .The Company recognized stock-based compensation expense as follows: FISCAL YEAR(dollars in thousands)2016 2015 2014Stock options$11,926 $10,041 $11,946Restricted stock and restricted stock units9,275 6,758 3,857Performance-based share units1,393 3,596 1,190 $22,594 $20,395 $16,99384Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedStock Options - Beginning in August 2012, stock options generally vest and become exercisable over a period of four years in an equalnumber of shares each year. Stock options have an exercisable life of no more than ten years from the date of grant. The Company settlesstock option exercises with authorized but unissued shares of the Company’s common stock. Stock options granted prior to August 2012generally vest and become exercisable over a period of five years in an equal number of shares each year.The following table presents a summary of the Company’s stock option activity for fiscal year 2016 :(in thousands, except exercise price and contractual life)OPTIONS WEIGHTED- AVERAGE EXERCISE PRICE WEIGHTED- AVERAGE REMAINING CONTRACTUAL LIFE (YEARS) AGGREGATE INTRINSIC VALUEOutstanding as of December 27, 20159,718 $12.99 5.6 $59,427Granted3,164 17.58 Exercised(1,090) 8.26 Forfeited or expired(808) 20.32 Outstanding as of December 25, 201610,984 $14.24 5.8 $58,231Vested and expected to vest as of December 25, 201610,908 $14.20 5.8 $58,176Exercisable as of December 25, 20166,640 $10.77 3.9 $55,659Assumptions used in the Black-Scholes option pricing model and the weighted-average fair value of option awards granted were as followsfor the periods indicated: FISCAL YEAR 2016 2015 2014Assumptions: Weighted-average risk-free interest rate (1)1.32% 1.64% 1.82%Dividend yield (2)1.59% 1.00% —%Expected term (3)6.1 years 6.3 years 6.3 yearsWeighted-average volatility (4)35.2% 43.4% 48.4% Weighted-average grant date fair value per option$5.28 $10.11 $11.37________________(1)Risk-free rate is the U.S. Treasury yield curve in effect as of the grant date for periods within the expected term of the option.(2)Dividend yield is the level of dividends expected to be paid on the Company’s common stock over the expected term of the option.(3)Expected term represents the period of time that the options are expected to be outstanding. The simplified method of estimating the expected term is used since theCompany does not have significant historical exercise experience for its stock options.(4)Volatility is based on the historical volatilities of the Company’s stock and the stock of comparable peer companies.The following represents stock option compensation information for the periods indicated: FISCAL YEAR(dollars in thousands)2016 2015 2014Intrinsic value of options exercised$10,792 $11,843 $19,474Excess tax benefits for tax deductions related to the exercise of stock options$2,146 $702 $2,405Cash received from option exercises, net of tax withholding$8,998 $7,440 $9,540Fair value of stock options vested$19,431 $26,643 $36,614Tax benefits for stock option compensation expense$4,177 $4,594 $7,576 Unrecognized stock option expense$20,684 Remaining weighted-average vesting period2.3 years 85Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedRestricted Stock and Restricted Stock Units - Restricted stock and restricted stock units generally vest and become exercisable in an equalnumber of shares each year. Restricted stock and restricted stock units issued to members of the Board of Directors (the “Board”) andemployees vest over a period of three years and four years , respectively. Following is a summary of the Company’s restricted stock andrestricted stock unit activity for fiscal year 2016 :(shares in thousands)NUMBER OFRESTRICTED STOCK& RESTRICTEDSTOCK UNIT AWARDS WEIGHTED-AVERAGE GRANT DATE FAIR VALUE PERAWARDOutstanding as of December 27, 20151,145 $21.48Granted1,058 16.38Vested(370) 20.98Forfeited(239) 19.18Outstanding as of December 25, 20161,594 $18.55The following represents restricted stock and restricted stock unit compensation information as of December 25, 2016 : FISCAL YEAR(dollars in thousands)2016 2015 2014Fair value of restricted stock vested$7,752 $5,339 $2,680Tax benefits for restricted stock compensation expense$2,513 $2,303 $1,298 Unrecognized restricted stock expense$21,870 Remaining weighted-average vesting period2.7 years Performance-based Share Units - Beginning in 2013, the Company granted performance-based share units (“PSUs”) to certain employees.Typically, the PSUs vest in an equal number of shares over four years for awards granted prior to 2016, and in fiscal 2016, the Companygranted performance-based share units that vest after three years. The number of units that vest is determined for each year based on theachievement of certain Company performance criteria as set forth in the award agreement and may range from zero to 200% of the annualtarget grant. The PSUs are settled in shares of common stock, with holders receiving one share of common stock for each performance-basedshare unit that vests. The fair value of PSUs is based on the closing price of the Company’s common stock on the grant date. Compensationexpense for PSUs is recognized over the vesting period when it is probable the performance criteria will be achieved.As of December 25, 2016 , the following PSU programs were in progress: TARGET NO. OF PSUsREMAINING TO GRANT (1)(shares in thousands) MAXIMUM PAYOUT(AS A % OF TARGETNO. OF PSUs) (2)AWARD DATE PROGRAM 2/27/2014 2014 Program 40 200%2/26/2015 2015 Program 98 200%10/1/2015 2015 International Program 19 100% 157 ________________(1)Represents target PSUs awarded under each of the identified programs that have not been granted for accounting purposes. The PSUs issued 2015 and prior do notresult in the recognition of stock-based compensation expense until the performance target has been set by the Board as of the beginning of each fiscal year. There is noeffect of these PSUs on the Company’s basic or diluted shares outstanding.(2)Assumes achievement of target threshold of the Adjusted EPS goal for the Company for the 2014 Program and 2015 Program.86Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedThe following table presents a summary of the Company’s PSU activity for fiscal year 2016 :(shares in thousands)PERFORMANCE-BASEDSHARE UNITS WEIGHTED-AVERAGEGRANT DATE FAIR VALUE PERAWARDOutstanding as of December 27, 2015166 $24.11Granted (1)352 16.17Vested(145) 25.05Forfeited(61) 19.48Outstanding as of December 25, 2016312 $16.26________________(1)Share unit amounts include the number of PSUs at the target threshold in the current period grant and additional shares earned above target due to exceeding priorperiod performance criteria.The following represents PSU compensation information as of December 25, 2016 : FISCAL YEAR(dollars in thousands)2016 2015 2014Tax benefits for PSU compensation expense$910 $636 $26Unrecognized PSU expense$2,668 Remaining weighted-average vesting period1.5 years Deferred Compensation PlansRestaurant Managing Partners and Chef Partners - Restaurant Managing Partners and Chef Partners are eligible to participate in deferredcompensation programs. The Company invests in various corporate-owned life insurance policies, which are held within an irrevocablegrantor or “rabbi” trust account for settlement of the obligations under the deferred compensation plans. The deferred compensationobligation due to Restaurant Managing and Chef Partners was $113.0 million and $133.2 million as of December 25, 2016 and December 27,2015 , respectively. The unfunded obligation for Restaurant Managing and Chef Partners’ deferred compensation was $50.6 million and$74.0 million as of December 25, 2016 and December 27, 2015 , respectively.Other Benefit Plans401(k) Plan - The Company has a qualified defined contribution plan that qualifies under Section 401(k) of the Internal Revenue Code of1986, as amended. The Company incurred contribution costs of $3.2 million , $3.7 million and $1.1 million for the 401(k) Plan for fiscalyears 2016 , 2015 and 2014 , respectively.Deferred Compensation Plan - The Company provides a deferred compensation plan for its highly compensated employees who are noteligible to participate in the 401(k) Plan. The deferred compensation plan allows these employees to contribute a percentage of their basesalary and cash bonus on a pre-tax basis. The deferred compensation plan is unfunded and unsecured.87Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS6 . Other Current Assets, NetOther current assets, net, consisted of the following:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015Prepaid expenses$35,298 $30,373Accounts receivable - gift cards, net102,664 115,926Accounts receivable - vendors, net10,107 10,310Accounts receivable - franchisees, net1,677 1,149Accounts receivable - other, net20,497 21,158Assets held for sale1,331 784Other current assets, net18,652 19,131 $190,226 $198,8317 . Property, Fixtures and Equipment, NetProperty, fixtures and equipment, net, consisted of the following:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015Land$114,375 $256,906Buildings and building improvements726,418 1,043,699Furniture and fixtures383,758 392,849Equipment550,598 543,842Leasehold improvements492,465 492,628Construction in progress47,332 23,842Less: accumulated depreciation(1,077,798) (1,159,306) $1,237,148 $1,594,460Sale-leaseback Transactions - During 2016, the Company entered into sale-leaseback transactions with third-parties in which it sold 153restaurant properties at fair market value for gross proceeds of $541.9 million . In connection with the sale-leaseback transactions, theCompany recorded a deferred gain of $163.4 million , which are amortized to Other restaurant operating expense in the ConsolidatedStatements of Operations and Comprehensive Income over the initial term of each lease, ranging from 15 to 20 years.In the fourth quarter of 2016, the Company sold six restaurant properties to third parties for aggregate proceeds of $18.5 million . The sale ofthe properties does not qualify for sale-leaseback accounting and the book value of the buildings and land will remain on the Company’sConsolidated Balance Sheet. See Note 11 - Long-term Debt, Net and Note 18 - Commitments and Contingencies for additional detailsregarding the financing obligation.Leased Properties - As of December 25, 2016 , the Company leased $16.3 million and $23.4 million , respectively, of certain land andbuildings to third parties. Accumulated depreciation related to the leased building assets of $7.5 million is included in Property, fixtures andequipment as of December 25, 2016 .Depreciation and repair and maintenance expense is as follows for the periods indicated: FISCAL YEAR(dollars in thousands)2016 2015 2014Depreciation expense$183,049 $178,855 $177,504Repair and maintenance expense108,940 107,960 108,39288Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued8 . Goodwill and Intangible Assets, NetGoodwill - The following table is a rollforward of goodwill:(dollars in thousands)U.S. INTERNATIONAL CONSOLIDATEDBalance as of December 28, 2014$172,711 $168,829 $341,540Translation adjustments— (40,679) (40,679)Balance as of December 27, 2015$172,711 $128,150 $300,861Translation adjustments— 11,382 11,382Divestiture of Outback Steakhouse South Korea— (1,901) (1,901)Transfer to Assets held for sale(287) — (287)Balance as of December 25, 2016$172,424 $137,631 $310,055The following table is a summary of the Company’s gross goodwill balances and accumulated impairments as of the periods indicated: DECEMBER 25, 2016 DECEMBER 27, 2015 DECEMBER 28, 2014(dollars inthousands)GROSS CARRYINGAMOUNT ACCUMULATEDIMPAIRMENTS GROSS CARRYINGAMOUNT ACCUMULATEDIMPAIRMENTS GROSS CARRYINGAMOUNT ACCUMULATEDIMPAIRMENTSU.S.$840,594 $(668,170) $840,881 $(668,170) $840,881 $(668,170)International254,097 (116,466) 244,616 (116,466) 285,295 (116,466)Total goodwill$1,094,691 $(784,636) $1,085,497 $(784,636) $1,126,176 $(784,636)The Company performs its annual assessment for impairment of goodwill and other indefinite-lived intangible assets each year during thesecond quarter. As a result of this assessment, the Company did not record any goodwill asset impairment charges during fiscal years 2016 ,2015 or 2014 .Intangible Assets, net - Intangible assets, net, consisted of the following as of December 25, 2016 and December 27, 2015 : WEIGHTEDAVERAGEAMORTIZATIONPERIOD (IN YEARS) DECEMBER 25, 2016 DECEMBER 27, 2015(dollars inthousands) GROSSCARRYINGVALUE ACCUMULATEDAMORTIZATION NETCARRYINGVALUE GROSSCARRYINGVALUE ACCUMULATEDAMORTIZATION NETCARRYINGVALUETrade namesIndefinite $414,041 $414,041 $414,000 $414,000Trademarks12 81,381 $(36,400) 44,981 82,131 $(32,662) 49,469Favorable leases10 73,665 (41,258) 32,407 80,909 (42,882) 38,027Franchiseagreements4 14,881 (10,922) 3,959 14,881 (9,777) 5,104Reacquiredfranchise rights11 53,045 (13,091) 39,954 46,447 (7,745) 38,702Other intangibles3 9,099 (8,918) 181 9,099 (7,564) 1,535Total intangibleassets (1)10 $646,112 $(110,589) $535,523 $647,467 $(100,630) $546,837________________(1)The Company recorded $0.6 million of intangible asset impairment charges during fiscal year 2016, within the International segment.The Company did not record any indefinite-lived intangible asset impairment charges during fiscal years 2016 , 2015 or 2014 .89Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedDefinite-lived intangible assets are amortized on a straight-line basis. The following table presents the aggregate expense related to theamortization of the Company’s trademarks, favorable leases, franchise agreements, reacquired franchise rights and other intangibles: FISCAL YEAR(dollars in thousands)2016 2015 2014Amortization expense (1)$15,666 $16,852 $19,807________________(1)Amortization expense is recorded in Depreciation and amortization and Other restaurant operating expenses in the Company’s Consolidated Statements of Operationsand Comprehensive Income .The following table presents expected annual amortization of intangible assets as of December 25, 2016 :(dollars in thousands) 2017$13,581201813,095201912,763202011,349202110,1109. Other Assets, NetOther assets, net, consisted of the following:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015Company-owned life insurance$74,629 $68,950Deferred financing fees (1)2,632 3,730Liquor licenses27,515 27,869Other assets24,370 47,322 $129,146 $147,871________________(1)Net of accumulated amortization of $3.3 million and $2.2 million as of December 25, 2016 and December 27, 2015 , respectively.10. Accrued and Other Current LiabilitiesAccrued and other current liabilities consisted of the following:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015Accrued payroll and other compensation$81,981 $95,994Accrued insurance23,533 20,824Other current liabilities98,901 89,793 $204,415 $206,61190Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued11 . Long-term Debt, NetFollowing is a summary of outstanding long-term debt: DECEMBER 25, 2016 DECEMBER 27, 2015(dollars in thousands)OUTSTANDINGBALANCE INTEREST RATE OUTSTANDINGBALANCE INTEREST RATESenior Secured Credit Facility: Term loan A (1)$258,750 2.63% $277,500 2.26%Term loan A-1140,625 2.70% 150,000 2.34%Revolving credit facility (1) (2)622,000 2.67% 432,000 2.29%Total Senior Secured Credit Facility1,021,375 859,500 PRP Mortgage Loan (2)47,202 3.21% — —%2012 CMBS loan: First mortgage loan (1)— —% 289,588 4.13%First mezzanine loan— —% 84,028 9.00%Second mezzanine loan— —% 85,353 11.25%Total 2012 CMBS loan— 458,969 Financing obligations19,595 7.45% to 7.60% 1,361 7.60%Capital lease obligations2,364 2,632 Other notes payable1,776 0.00% to 7.00% 931 0.73% to 7.00%Less: unamortized debt discount and issuance costs(2,827) (6,529) Total debt, net1,089,485 1,316,864 Less: current portion of long-term debt, net(35,079) (31,853) Long-term debt, net$1,054,406 $1,285,011 ________________(1)Represents the weighted-average interest rate for the respective period.(2)Subsequent to December 25, 2016 , the Company made payments of $19.2 million on its PRP Mortgage Loan.Bloomin’ Brands, Inc. is a holding company and conducts its operations through its subsidiaries, certain of which have incurred indebtednessas described below.Credit Agreement Amendments - On May 16, 2014, OSI completed a refinancing of its senior secured credit facility and entered into the ThirdAmendment (“Third Amendment”) to its existing credit agreement, dated October 26, 2012 (as amended, the “Credit Agreement”). TheCredit Agreement, provided for senior secured financing (the “Senior Secured Credit Facility”) of up to $1.125 billion , initially consisting ofa $300.0 million Term loan A, a $225.0 million Term loan B and a $600.0 million revolving credit facility, including letter of credit andswing line loan sub-facilities. The Term loan A and revolving credit facility mature May 16, 2019 . The Term loan A was issued with adiscount of $2.9 million .On March 31, 2015, OSI entered into the Fourth Amendment to its Credit Agreement (the “Fourth Amendment”), to effect an increase ofOSI’s existing revolving credit facility from $600.0 million to $825.0 million in order to fully pay down its existing Term loan B on April 2,2015.OSI entered into the Fifth Amendment to its Credit Agreement (the “Fifth Amendment”) on December 11, 2015. The Fifth Amendmentprovided an incremental Term loan A-1 in an aggregate principal amount of $150.0 million , increased certain leverage ratio tests forpurposes of restricted payments and mandatory prepayments and made certain other revisions to the terms of the Credit Agreement asdiscussed below under Debt Covenants and Other Restrictions .The Company may elect an interest rate for the Credit Agreement at each reset period based on the Base Rate or the Eurocurrency Rate. TheBase Rate option is the highest of: (i) the prime rate of Wells Fargo Bank, National Association , (ii) the federal funds effective rate plus 0.5of 1.0% or (iii) the Eurocurrency rate with a one-month interest period plus91Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued1.0% (the “Base Rate”). The Eurocurrency Rate option is the seven , 30 , 60 , 90 or 180-day Eurocurrency rate (“Eurocurrency Rate”). Theinterest rates are as follows: BASE RATE ELECTION EUROCURRENCY RATE ELECTIONTerm loan A, Term loan A-1 and revolving credit facility75 to 125 basis points over Base Rate 175 to 225 basis points over the Eurocurrency RateFees on letters of credit and the daily unused availability under the revolving credit facility as of December 25, 2016 , were 2.13% and 0.30%, respectively. As of December 25, 2016 , $27.8 million of the revolving credit facility was committed for the issuance of letters of credit andnot available for borrowing.Substantially all of the assets of the Company’s domestic OSI subsidiaries collateralize the Senior Secured Credit Facility.PRP Mortgage Loan - On February 11, 2016 , New Private Restaurant Partners, LLC, an indirect wholly-owned subsidiary of the Company(“PRP”), as borrower, and Wells Fargo Bank, National Association, as lender (the “Lender”), entered into a loan agreement (the “PRPMortgage Loan”), pursuant to which PRP borrowed $300.0 million . The PRP Mortgage Loan has an initial maturity date of February 11,2018 (the “Initial Maturity”) with an option to extend the Initial Maturity for one twelve -month extension period (the “Extension”) providedthat certain conditions are satisfied. The PRP Mortgage Loan is collateralized by certain properties owned by PRP (“Collateral Properties”).PRP has also made negative pledges with respect to certain properties (“Unencumbered Properties”).The proceeds of the PRP Mortgage Loan were used, together with borrowings under the Company’s revolving credit facility, to prepay aportion, and fully defease the remainder, of the 2012 CMBS loan. In connection with the defeasance, the Company recognized a loss of $26.6million during the fiscal year ended December 25, 2016 . Following the defeasance of the 2012 CMBS loan, $19.3 million of restricted cashwas released.The PRP Mortgage Loan bears interest, payable monthly, at a variable rate equal to 250 basis points above the seven-day LIBOR , subject toadjustment in certain circumstances.The PRP Mortgage Loan permits the Company to refinance or sell the Collateral Properties and the Unencumbered Properties, subject tocertain terms and conditions, including that specified release proceeds are applied against the outstanding loan balance.On July 27, 2016, PRP and the Lender, entered into a First Amendment (the “Amendment”) to the PRP Mortgage Loan to provide foradditional borrowings of $69.5 million .Financing Obligation - In the fourth quarter of 2016, the Company sold six restaurant properties to third parties for aggregate proceeds of$18.5 million and the Company entered into lease agreements under which the Company agreed to lease back each of the properties for aninitial term of 20 years . As the Company had continuing involvement in these restaurant properties, the sale of the properties does not qualifyfor sale-leaseback accounting. As a result, the aggregate proceeds have been recorded as a financing obligation and the assets related to thesold and leased restaurant properties remain on the Company’s Consolidated Balance Sheet and continue to be depreciated. As such, the leasepayments are recognized as interest expense. See Note 18 - Commitments and Contingencies for additional details regarding the financingobligation.Debt Covenants and Other Restrictions - Borrowings under the Company’s debt agreements are subject to various covenants that limit theCompany’s ability to: incur additional indebtedness; make significant payments; sell assets; pay dividends and other restricted payments;acquire certain assets; effect mergers and similar transactions; and effect certain other transactions with affiliates. The Credit Agreement alsohas a financial covenant to maintain a specified quarterly Total Net Leverage Ratio (“TNLR”). TNLR is the ratio of Consolidated Total Debt(Current portion of long-term debt and Long-term debt, net) to Consolidated EBITDA (earnings before interest, taxes, depreciation and92Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continuedamortization and certain other adjustments). The TNLR may not exceed a level set at 5.00 to 1.00 through fiscal 2017, with a step down to amaximum level of 4.75 to 1.00 in fiscal 2018 and thereafter.The Fifth Amendment to the Credit Agreement permits regular quarterly dividend payments, subject to certain restrictions.As of December 25, 2016 and December 27, 2015 , the Company was in compliance with its debt covenants.Loss on Defeasance, Extinguishment and Modification of Debt - Following is a summary of loss on defeasance, extinguishment andmodification of debt recorded in the Company’s Consolidated Statements of Operations and Comprehensive Income : FISCAL YEAR(dollars in thousands)2016 2015 2014Defeasance of 2012 CMBS Loan (1)$26,580 $— $—Modification of PRP Mortgage Loan (2)418 — —Refinancing of Senior Secured Credit Facility (3)— 2,956 11,092Loss on defeasance, extinguishment and modification of debt$26,998 $2,956 $11,092________________(1)The loss was comprised of a penalty of $23.2 million , write-offs of $1.7 million and $1.1 million of deferred financing fees and unamortized debt discount,respectively, and third-party financing costs of $0.6 million .(2)The loss was comprised of third-party financing costs.(3)Losses were comprised of write-offs of $1.4 million and $5.5 million of deferred financing fees and $1.2 million and $4.9 million of unamortized debt discount forfiscal years 2015 and 2014, respectively. Losses also included third-party financing costs of $0.3 million in fiscal year 2015 and a prepayment penalty of $0.7 millionin fiscal year 2014.Deferred financing fees - The Company deferred $5.8 million and $2.0 million of financing costs incurred in connection with the PRPMortgage Loan and related amendment and Credit Agreement amendments in fiscal years 2016 and 2015, respectively. Deferred financingfees of $1.3 million incurred in connection with the modification of the revolving credit facility were recorded in Other assets, net in fiscalyear 2015. All other deferred financing fees were recorded in Long-term debt, net.Maturities - Following is a summary of principal payments of the Company’s total consolidated debt outstanding as of December 25, 2016 :(dollars in thousands)DECEMBER 25, 2016Year 1$35,079Year 276,086Year 3957,701Year 4484Year 5483Thereafter19,652Total$1,089,485The following is a summary of required amortization payments for Term loan A and Term loan A-1 (dollars in thousands):SCHEDULED QUARTERLY PAYMENT DATES TERM LOAN A TERM LOAN A-1March 31, 2017 through June 30, 2018 $5,625 $2,813September 30, 2018 through March 31, 2019 $7,500 $3,750The Credit Agreement contains mandatory prepayment requirements for Term loan A and Term loan A-1. The Company93Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continuedis required to prepay outstanding amounts under its Term loan A and Term loan A-1 with 50% of its annual excess cash flow, as defined inthe Credit Agreement. The amount of outstanding Term loan A and Term loan A-1 required to be prepaid in accordance with the debtcovenants may vary based on the Company’s leverage ratio and year end results. Other than the required minimum amortization premiums of$33.8 million , the Company does not anticipate any other payments will be required through December 31, 2017.12. Other Long-term Liabilities, NetOther long-term liabilities, net, consisted of the following:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015Accrued insurance liability$39,260 $40,649Unfavorable leases (1)41,778 45,375Chef and Restaurant Managing Partner deferred compensation obligations and deposits102,768 134,470Other long-term liabilities35,224 41,014 $219,030 $261,508_______________(1)Net of accumulated amortization of $32.6 million and $29.8 million as of December 25, 2016 and December 27, 2015 , respectively.13 . Redeemable Noncontrolling InterestsBrazil Redeemable Noncontrolling Interests - In 2013, the Company, through its wholly-owned subsidiary, Outback Steakhouse RestaurantesBrasil S.A. (“OB Brasil”), completed the acquisition of a controlling interest in PGS Consultoria e Serviços Ltda. (the“Brazil Joint Venture”).As a result of the acquisition, the Company had a 90% interest and the former equity holders of PGS Participações Ltda, the Company’s jointventure partner (“Former Equity Holders”), retained a noncontrolling interest of 10% in the Brazil Joint Venture. The purchase agreementprovided the Former Equity Holders with options to sell their remaining interests to OB Brasil and provided OB Brasil with options topurchase such remaining interests (the “Options”), in various amounts and at various times through 2018, subject to acceleration in certaincircumstances. The Options were embedded features within the noncontrolling interest and were classified within the Company’sConsolidated Balance Sheets as Redeemable noncontrolling interests.In 2016 and 2015, the Former Equity Holders exercised Options to sell their interests in the Brazil Joint Venture to the Company for totalcash consideration of $27.3 million and $0.9 million , respectively. These transactions resulted in a reduction of $29.4 million and $0.6million of Mezzanine equity and an increase of $2.1 million and $0.3 million of Additional paid-in capital during fiscal years 2016 and 2015,respectively. As a result of the exercise of the Options, the Company owns 100% of the Brazil Joint Venture as of December 25, 2016 .In connection with the acquisition of the remaining interests in the Brazil Joint Venture, the Company recognized a cumulative translationadjustment of $9.6 million , which resulted in an increase to Additional paid-in capital and a decrease to Accumulated other comprehensiveloss during fiscal year 2016.China Redeemable Noncontrolling Interests - The Company also consolidates a subsidiary in China, which has noncontrolling interests thatare permitted to deliver subsidiary shares in exchange for cash at a future date.94Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedRollforward of Redeemable Noncontrolling Interests - The following table presents a rollforward of Redeemable noncontrolling interests forfiscal years 2016 and 2015 : FISCAL YEAR(dollars in thousands)2016 2015Balance, beginning of period$23,526 $24,733Change in redemption value of Redeemable noncontrolling interests2,024 2,877Net income attributable to Redeemable noncontrolling interests977 1,005Foreign currency translation attributable to Redeemable noncontrolling interests3,451 (3,944)Purchase of Redeemable noncontrolling interests(29,431) (584)Out-of period adjustment - foreign currency translation attributable to Redeemable noncontrolling interests (1)— (9,232)Out-of period adjustment - change in redemption value of Redeemable noncontrolling interests (1)— 8,671Balance, end of period$547 $23,526________________(1)In the third quarter of 2015, the Company identified and corrected errors in accounting for the allocation of foreign currency translation adjustments to Redeemablenoncontrolling interests and fair value adjustments for Redeemable noncontrolling interests.14 . Stockholders’ Equity Share Repurchases - The following table presents a summary of the Company’s share repurchase programs for 2014 , 2015 and 2016 (dollarsin thousands):SHARE REPURCHASEPROGRAM BOARD APPROVALDATE AUTHORIZED REPURCHASED CANCELED REMAINING2014 December 12, 2014 $100,000 $100,000 $— $—2015 August 3, 2015 $100,000 $69,999 $30,001 $—2016 February 12, 2016 $250,000 $139,892 $110,108 $—July 2016 (1) July 26, 2016 $300,000 $169,995 $— $130,005________________(1)In January 2017, the Company repurchased 1.1 million shares of its common stock for $20.0 million under a Rule 10b5-1 plan. The July 2016 Share RepurchaseProgram will expire on January 26, 2018 .Following is a summary of the shares repurchased under the Company’s share repurchase programs: NUMBER OF SHARES (in thousands) AVERAGE REPURCHASEPRICE PER SHARE AMOUNT (dollars in thousands) 2016 2015 2016 2015 2016 2015First fiscal quarter4,399 2,759 $17.05 $25.37 $75,000 $70,000Second fiscal quarter3,376 1,370 $19.22 $21.90 64,892 30,000Third fiscal quarter7,056 2,914 $19.13 $20.59 135,000 59,999Fourth fiscal quarter1,816 602 $19.27 $16.60 34,995 10,000Total common stock repurchases16,647 7,645 $18.62 $22.24 $309,887 $169,99995Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedDividends - The Company declared and paid dividends per share during the periods presented as follows: DIVIDENDS PER SHARE AMOUNT (dollars in thousands) 2016 2015 2016 2015First fiscal quarter$0.07 0.06 $8,238 $7,423Second fiscal quarter0.07 0.06 7,978 7,391Third fiscal quarter0.07 0.06 7,765 7,333Fourth fiscal quarter0.07 0.06 7,398 7,185Total cash dividends declared and paid$0.28 $0.24 $31,379 $29,332In February 2017, the Board declared a quarterly cash dividend of $0.08 per share, payable on March 10, 2017 to shareholders of record at theclose of business on February 27, 2017 .Acquisition of Limited Partnership Interests - During 2016, the Company purchased the remaining partnership interests in certain of theCompany’s limited partnerships for five Outback Steakhouse restaurants for an aggregate purchase price of $3.4 million . These transactionsresulted in a reduction of $2.5 million , net of tax, in Additional paid-in capital in the Company’s Consolidated Statement of Changes inStockholders’ Equity during fiscal year 2016 .During 2014, the Company purchased the remaining partnership interests in certain of the Company’s limited partnerships that either ownedor had a contractual right to varying percentages of cash flows in 37 Bonefish Grill restaurants for an aggregate purchase price of $17.2million . These transactions resulted in a reduction of $11.7 million , net of tax, in Additional paid-in capital in the Company’s ConsolidatedStatement of Changes in Stockholders’ Equity during fiscal year 2014.The following table sets forth the effect of the acquisition of the limited partnership interests on stockholders’ equity attributable to Bloomin’Brands for the following periods: NET INCOME ATTRIBUTABLE TO BLOOMIN’ BRANDS AND TRANSFERS TONONCONTROLLING INTERESTS FISCAL YEAR(dollars in thousands)2016 2015 2014Net income attributable to Bloomin’ Brands$41,748 $127,327 $91,090Transfers to noncontrolling interests: Decrease in Bloomin’ Brands additional paid-in capital for purchase of limitedpartnership interests(2,475) — (11,662)Change from net income attributable to Bloomin’ Brands and transfers tononcontrolling interests$39,273 $127,327 $79,428Accumulated Other Comprehensive Loss - Following are the components of Accumulated other comprehensive loss (“AOCL”):(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015Foreign currency translation adjustment (1)$(107,509) $(141,176)Unrealized losses on derivatives, net of tax(3,634) (6,191)Accumulated other comprehensive loss$(111,143) $(147,367)________________(1)During the fiscal year 2016, approximately $16.8 million of the foreign currency translation adjustment in Accumulated other comprehensive loss was disposed of inconnection with the sale of Outback Steakhouse South Korea.96Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedFollowing are the components of Other comprehensive (loss) income during the periods presented: FISCAL YEAR(dollars in thousands)2016 2015 2014Bloomin’ Brands: Foreign currency translation adjustment$33,667 $(92,259) $(31,731)Out-of period adjustment - foreign currency translation (1)— 9,232 —Total foreign currency translation adjustment$33,667 $(83,027) $(31,731)Unrealized loss on derivatives, net of tax (2)$(1,250) $(6,033) $(2,393)Reclassification of adjustment for loss on derivatives included in Net income, net of tax (3)3,807 2,235 —Total unrealized gain (loss) on derivatives, net of tax$2,557 $(3,798) $(2,393)Other comprehensive income (loss) attributable to Bloomin’ Brands$36,224 $(86,825) $(34,124) Non-controlling interests: Foreign currency translation adjustment$(43) $9 $—Other comprehensive (loss) income attributable to Non-controlling interests$(43) $9 $— Redeemable non-controlling interests: Foreign currency translation adjustment$3,451 $(3,944) $—Out-of period adjustment - foreign currency translation (1)— (9,232) —Total foreign currency translation adjustment$3,451 $(13,176) $—Other comprehensive income (loss) attributable to Redeemable non-controlling interests$3,451 $(13,176) $—________________(1)In the third quarter of 2015, the Company identified and corrected errors in accounting for the allocation of foreign currency translation adjustments to Redeemablenoncontrolling interests. See Note 2 - Summary of Significant Accounting Policies for further details.(2)Unrealized loss on derivatives is net of tax benefits of ($0.8) million , ($3.9) million and ($1.5) million for fiscal years 2016 , 2015 and 2014 , respectively.(3)Reclassifications of adjustments for losses on derivatives are net of tax benefits of $2.4 million and $1.4 million for fiscal years 2016 and 2015 , respectively.Noncontrolling Interests - In 2015, certain former equity holders of PGS Par contributed approximately $3.2 million to the Company for anoncontrolling interest in a new concept in Brazil (Abbraccio).15 . Derivative Instruments and Hedging ActivitiesInterest Rate Risk - The Company is exposed to certain risk arising from both its business operations and economic conditions. The Companymanages economic risks, including interest rate, primarily by managing the amount, sources and duration of its debt funding and through theuse of derivative financial instruments. The Company’s objectives in using interest rate derivatives are to add stability to interest expense andto manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps.Currency Exchange Rate Risk - The Company is exposed to foreign currency exchange rate risk arising from transactions and balancesdenominated in currencies other than the U.S. dollar. The Company may use foreign currency forward contracts to manage certain foreigncurrency exposures.97Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedDESIGNATED HEDGESCash Flow Hedges of Interest Rate Risk - On September 9, 2014 , the Company entered into variable-to-fixed interest rate swap agreementswith eight counterparties to hedge a portion of the cash flows of the Company’s variable rate debt. The swap agreements have an aggregatenotional amount of $400.0 million , a start date of June 30, 2015 , and mature on May 16, 2019 . Under the terms of the swap agreements, theCompany pays a weighted-average fixed rate of 2.02% on the $400.0 million notional amount and receives payments from the counterpartybased on the 30-day LIBOR rate.The interest rate swaps, which have been designated and qualify as a cash flow hedge, are recognized on the Company’s ConsolidatedBalance Sheets at fair value and are classified based on the instruments’ maturity dates. The Company estimates $4.2 million will bereclassified to interest expense over the next twelve months.The following table presents the fair value of the Company’s interest rate swaps as well as their classification on the Company’s ConsolidatedBalance Sheet:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015 CONSOLIDATED BALANCE SHEETCLASSIFICATIONInterest rate swaps - liability$3,968 $5,142 Accrued and other current liabilitiesInterest rate swaps - liability1,999 5,007 Other long-term liabilities, netTotal fair value of derivative instruments (1)$5,967 $10,149 Accrued interest$408 $556 Accrued and other current liabilities____________________(1) See Note 16 - Fair Value Measurements for fair value discussion of the interest rate swaps.The following table summarizes the effects of the interest rate swaps on Net income for the period indicated: FISCAL YEAR(dollars in thousands)2016 2015Interest rate swap expense recognized in Interest expense, net (1)$(6,241) $(3,664)Income tax benefit recognized in Provision for income taxes2,434 1,429Total effects of the interest rate swaps on Net income$(3,807) $(2,235)____________________(1)During fiscal years 2016 and 2015 , the Company did not recognize any gain or loss as a result of hedge ineffectiveness.The Company records its derivatives on the Consolidated Balance Sheets on a gross balance basis. The Company’s interest rate swaps aresubject to master netting arrangements. As of December 25, 2016 , the Company did not have more than one derivative between the samecounterparties and as such, there was no netting.By utilizing the interest rate swaps, the Company is exposed to credit-related losses in the event that the counterparty fails to perform underthe terms of the derivative contract. To mitigate this risk, the Company enters into derivative contracts with major financial institutions basedupon credit ratings and other factors. The Company continually assesses the creditworthiness of its counterparties. As of December 25, 2016and December 27, 2015 , all counterparties to the interest rate swaps had performed in accordance with their contractual obligations.The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared indefault on its derivative obligations if the repayment of the underlying indebtedness is accelerated by the lender due to the Company’s defaulton indebtedness.As of December 25, 2016 and December 27, 2015 , the fair value of the Company’s interest rate swaps in a net liability position, whichincludes accrued interest but excludes any adjustment for nonperformance risk, was $6.4 million and $10.9 million , respectively. As ofDecember 25, 2016 and December 27, 2015 , the Company has not posted any98Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continuedcollateral related to these agreements. If the Company had breached any of these provisions as of December 25, 2016 and December 27, 2015, it could have been required to settle its obligations under the agreements at their termination value of $6.4 million and $10.9 million ,respectively.NON-DESIGNATED HEDGES Commodities - The Company’s restaurants are dependent upon energy to operate and are impacted by changes in energy prices, includingnatural gas. The Company utilizes derivative instruments with a notional amount of $0.8 million to mitigate some of its overall exposure tomaterial increases in natural gas.16 . Fair Value MeasurementsFair Value Measurements on a Recurring Basis - The following table presents the Company’s financial assets and liabilities measured at fairvalue by hierarchy level on a recurring basis as of December 25, 2016 and December 27, 2015 : DECEMBER 25, 2016 DECEMBER 27, 2015(dollars in thousands)TOTAL LEVEL 1 LEVEL 2 TOTAL LEVEL 1 LEVEL 2Assets: Cash equivalents: Fixed income funds$90 $90 $— $6,333 $6,333 $—Money market funds18,607 18,607 — 7,168 7,168 —Restricted cash equivalents: Fixed income funds552 552 — 551 551 —Money market funds2,518 2,518 — 2,681 2,681 —Other current assets, net: Derivative instruments - foreign currency forwardcontracts— — — 59 — 59Total asset recurring fair value measurements$21,767 $21,767 $— $16,792 $16,733 $59 Liabilities: Accrued and other current liabilities: Derivative instruments - interest rate swaps$3,968 $— $3,968 $5,142 $— $5,142Derivative instruments - commodities157 — 157 583 — 583Derivative instruments - foreign currency forwardcontracts— — — 703 — 703Other long-term liabilities: Derivative instruments - interest rate swaps1,999 — 1,999 5,007 — 5,007Total liability recurring fair value measurements$6,124 $— $6,124 $11,435 $— $11,435Fair value of each class of financial instrument is determined based on the following:FINANCIAL INSTRUMENT METHODS AND ASSUMPTIONSFixed income funds andMoney market funds Carrying value approximates fair value because maturities are less than three months.Derivative instruments The Company’s derivative instruments include interest rate swaps, foreign currency forward contracts and commodities. Fair valuemeasurements are based on the contractual terms of the derivatives and use observable market-based inputs. The interest rate swaps arevalued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest ratecurves and credit spreads. The foreign currency forwards are valued by comparing the contracted forward exchange rate to the currentmarket exchange rate. Key inputs for the valuation of the foreign currency forwards are spot rates, foreign currency forward rates, and theinterest rate curve of the domestic currency. The Company incorporates credit valuation adjustments to reflect both its ownnonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. As of December 25, 2016and December 27, 2015, the Company has determined that the credit valuation adjustments are not significant to the overall valuation ofits derivatives.99Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedFair Value Measurements on a Nonrecurring Basis - Assets and liabilities that are measured at fair value on a nonrecurring basis relateprimarily to property, fixtures and equipment, goodwill and other intangible assets, which are remeasured when carrying value exceeds fairvalue. The following table summarizes the fair value remeasurements for Assets held for sale and Property, fixtures and equipment for fiscalyears 2016 , 2015 and 2014 aggregated by the level in the fair value hierarchy within which those measurements fall: 2016 2015 2014(dollars in thousands)CARRYINGVALUE TOTALIMPAIRMENT CARRYINGVALUE TOTALIMPAIRMENT CARRYINGVALUE TOTALIMPAIRMENTAssets held for sale (1)$45,901 $44,729 $4,136 $1,028 $9,613 $23,974Property, fixtures and equipment (2)21,450 53,136 3,634 27,126 2,429 13,097Other (3)39 1,198 — — — — $67,390 $99,063 $7,770 $28,154 $12,042 $37,071________________(1)Carrying value approximates fair value with all assets measured using Level 2 inputs (purchase contracts) to estimate the fair value. Refer to Note 3 - Impairments,Disposals and Exit Costs for discussion of impairments related to Outback Steakhouse South Korea, corporate airplanes and Roy’s.(2)Carrying value approximates fair value. Carrying values for assets measured using Level 2 inputs totaled $20.3 million , $2.5 million and $1.8 million for fiscal years2016 , 2015 and 2014 , respectively. Assets measured using Level 3 inputs, had carrying values of $1.2 million , $1.1 million and $0.6 million for fiscal years 2016 ,2015 and 2014 , respectively. Third-party market appraisals (Level 2) and discounted cash flow models (Level 3) were used to estimate the fair value. Refer to Note 3 -Impairments, Disposals and Exit Costs for discussion of impairments related to the 2017 Closure Initiative, Bonefish Restructuring and International and DomesticRestaurant Closure Initiatives.(3)Other primarily includes investment in unconsolidated affiliates and intangible assets. Carrying value approximates fair value with all assets measured using marketappraisals (Level 2) to estimate the fair value.Fair Value of Financial Instruments - The Company’s non-derivative financial instruments as of December 25, 2016 and December 27, 2015consist of cash equivalents, restricted cash, accounts receivable, accounts payable and current and long-term debt. The fair values of cashequivalents, restricted cash, accounts receivable and accounts payable approximate their carrying amounts reported in the Company’sConsolidated Balance Sheets due to their short duration.Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The following table includesthe carrying value and fair value of the Company’s debt as of December 25, 2016 and December 27, 2015 aggregated by the level in the fairvalue hierarchy in which those measurements fall: DECEMBER 25, 2016 DECEMBER 27, 2015 FAIR VALUE FAIR VALUE(dollars in thousands)CARRYINGVALUE LEVEL 2 LEVEL 3 CARRYINGVALUE LEVEL 2 LEVEL 3Senior Secured Credit Facility: Term loan A$258,750 $257,780 $— $277,500 $276,459 $—Term loan A-1140,625 140,098 — 150,000 149,438 —Revolving credit facility622,000 617,335 — 432,000 429,300 —PRP Mortgage Loan47,202 — 47,202 — — —2012 CMBS loan: Mortgage loan— — — 289,588 — 293,222First mezzanine loan— — — 84,028 — 83,608Second mezzanine loan— — — 85,353 — 85,780Other notes payable1,776 — 1,659 931 — 918100Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedFair value of debt is determined based on the following:DEBT FACILITY METHODS AND ASSUMPTIONSSenior Secured Credit Facility Quoted market prices in inactive markets.PRP Mortgage Loan and 2012 CMBS Loan Assumptions derived from current conditions in the real estate and credit markets, changes in the underlying collateral andexpectations of management.Other notes payable Discounted cash flow approach. Discounted cash flow inputs primarily include cost of debt rates which are used to derive thepresent value factors for the determination of fair value.17. Income TaxesThe following table presents the domestic and foreign components of Income before provision for income taxes: FISCAL YEAR(dollars in thousands)2016 2015 2014Domestic$70,481 $146,331 $124,157Foreign(13,990) 24,523 (4,187) $56,491 $170,854 $119,970Provision (benefit) for income taxes consisted of the following: FISCAL YEAR(dollars in thousands)2016 2015 2014Current provision: Federal$43,071 $17,952 $13,364State28,033 5,962 7,687Foreign14,389 11,384 16,616 85,493 35,298 37,667Deferred provision (benefit): Federal(53,647) 2,514 (8,842)State(21,316) 626 688Foreign(386) 856 (5,469) (75,349) 3,996 (13,623)Provision for income taxes$10,144 $39,294 $24,044101Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedEffective Income Tax Rate - The reconciliation of income taxes calculated at the United States federal tax statutory rate to the Company’seffective income tax rate is as follows: FISCAL YEAR 2016 2015 2014Income taxes at federal statutory rate35.0 % 35.0 % 35.0 %State and local income taxes, net of federal benefit8.2 2.3 3.2Valuation allowance on deferred income tax assets6.1 1.7 1.5Employment-related credits, net(53.5) (15.8) (24.2)Net life insurance expense(2.7) (0.3) (0.8)Noncontrolling interests(2.8) (0.8) (1.2)Tax settlements and related adjustments(0.2) (0.1) 1.7Sale of Outback Steakhouse South Korea27.4 — —Foreign rate differential0.8 0.6 2.7Other, net(0.3) 0.4 2.1Total18.0 % 23.0 % 20.0 %The net decrease in the effective income tax rate in fiscal year 2016 as compared to fiscal year 2015 was primarily due to benefits fromemployment-related credits being a higher percentage of net income in 2016 and a change in the amount and mix of income and losses acrossthe Company’s domestic and international subsidiaries, partially offset by the sale of Outback Steakhouse South Korea.The net increase in the effective income tax rate in fiscal year 2015 as compared to fiscal year 2014 was primarily due to a change in theamount and mix of income and losses across the Company’s domestic and international subsidiaries and the payroll tax audit settlements.Deferred Tax Assets and Liabilities - The income tax effects of temporary differences that give rise to significant portions of deferred incometax assets and liabilities are as follows:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015Deferred income tax assets: Deferred rent$57,783 $53,426Insurance reserves23,906 22,716Unearned revenue19,566 18,029Deferred compensation62,389 65,100Net operating loss carryforwards6,036 8,176Federal tax credit carryforwards58,963 148,447Partner deposits and accrued partner obligations8,245 13,248Other, net8,309 11,813Gross deferred income tax assets245,197 340,955Less: valuation allowance(7,220) (4,088)Net deferred income tax assets237,977 336,867Deferred income tax liabilities: Less: property, fixtures and equipment basis differences(37,847) (197,604)Less: intangible asset basis differences(155,053) (150,997)Less: deferred gain on extinguishment of debt(23,022) (34,181)Net deferred income tax assets (liabilities)$22,055 $(45,915)Undistributed Earnings - The Company had aggregate undistributed earnings of $60.6 million for foreign subsidiaries, which it considers tobe permanently reinvested and are expected to continue to be permanently reinvested. As such,102Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continuedno deferred tax liability has been recorded as of December 25, 2016 . If the Company identifies an exception to its reinvestment policy ofundistributed earnings, additional tax liabilities will be recorded. It is not practical to determine the amount of unrecognized deferred incometax liabilities on the undistributed earnings the Company considers to be permanently reinvested.Tax Carryforwards - The amount and expiration dates of tax loss carryforwards and credit carryforwards as of December 25, 2016 are asfollows:(dollars in thousands)EXPIRATION DATE AMOUNTUnited States federal tax credit carryforwards2026-2036 $71,335Foreign loss carryforwards2017-Indefinite $22,514 Unrecognized Tax Benefits - As of December 25, 2016 and December 27, 2015 , the liability for unrecognized tax benefits was $19.6 millionand $19.4 million , respectively. Of the total amount of unrecognized tax benefits, including accrued interest and penalties, $18.9 million and$19.3 million , respectively, if recognized, would impact the Company’s effective tax rate.The following table summarizes the activity related to the Company’s unrecognized tax benefits: FISCAL YEAR(dollars in thousands)2016 2015 2014Balance as of beginning of year$19,430 $17,563 $17,068Additions for tax positions taken during a prior period476 3,022 2,177Reductions for tax positions taken during a prior period(430) (848) (422)Additions for tax positions taken during the current period2,472 2,305 2,649Settlements with taxing authorities(391) (1,078) (3,935)Lapses in the applicable statutes of limitations(2,230) (540) (120)Translation adjustments256 (994) 146Balance as of end of year$19,583 $19,430 $17,563The Company recognizes interest and penalties related to uncertain tax positions in Provision for income taxes . The Company recognized abenefit related to interest and penalties of $0.4 million and $0.6 million and an expense of $1.5 million for fiscal years 2016 , 2015 and 2014 ,respectively. The Company had approximately $1.2 million and $1.6 million accrued for the payment of interest and penalties as ofDecember 25, 2016 and December 27, 2015 respectively.In many cases, the Company’s uncertain tax positions are related to tax years that remain the subject to examination by relevant taxableauthorities. Based on the outcome of these examinations, or a result of the expiration of the statute of limitations for specific jurisdictions, it isreasonably possible that the related recorded unrecognized tax benefits for tax positions taken on previously filed tax returns will change byapproximately $1.0 million to $2.0 million within the next twelve months.Open Tax Years - Following is a summary of the open audit years by jurisdiction: OPEN AUDIT YEARSUnited States federal2007-2015United States states2001-2015Foreign2009-2015The Company was previously under examination by tax authorities in South Korea for the 2008 to 2012 tax years. In connection with theexamination, the Company was assessed and paid $6.7 million of tax obligations. The Company103Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continuedis currently seeking relief from double taxation through competent authority. Accordingly, the Company has not recorded any tax expenserelated to the assessment in South Korea.18 . Commitments and ContingenciesOperating Leases - The Company leases restaurant and office facilities and certain equipment under operating leases mainly having initialterms expiring between 2017 and 2036. The restaurant facility leases have renewal clauses primarily from five to 30 years , exercisable at theoption of the Company. Certain of these leases require the payment of contingent rentals leased on a percentage of gross revenues, as definedby the terms of the applicable lease agreement.Total rent expense is as follows for the periods indicated: FISCAL YEAR(dollars in thousands)2016 2015 2014Rent expense (1)$173,507 $164,754 $169,701____________________(1)Includes contingent rent expense of $5.9 million , $7.4 million and $8.0 million for fiscal years 2016 , 2015 and 2014 , respectively.As of December 25, 2016 , future minimum rental payments under non-cancelable operating leases are as follows:(dollars in thousands) 2017$174,0192018163,7212019149,5162020135,9982021120,150Thereafter905,650Total minimum lease payments (1)$1,649,054____________________(1)Total minimum lease payments have not been reduced by minimum sublease rentals of $6.3 million due in future periods under non-cancelable subleases.Financing Obligation - Following is a summary of the Company’s minimum financing payments during the initial term of the various leasesas of December 25, 2016 :(dollars in thousands)DECEMBER 25, 2016Year 1$1,182Year 21,202Year 31,224Year 41,245Year 51,267Thereafter21,519Total (1)$27,639____________________(1)Refer to Note 11 - Long-term Debt, Net for additional details regarding the Company’s financing obligation.Purchase Obligations - Purchase obligations were $439.4 million and $509.7 million as of December 25, 2016 and December 27, 2015 ,respectively. These purchase obligations are primarily due within five years, however, commitments with various vendors extend throughApril 2022. Outstanding commitments consist primarily of food and beverage products related to normal business operations and contractsfor restaurant level service contracts, advertising and technology. In 2016 , the Company purchased more than 85% of its U.S. beef rawmaterials from four beef suppliers that represent approximately 83% of the total beef marketplace in the U.S.104Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedLitigation and Other Matters - In relation to the various legal matters discussed below, the Company had $3.5 million and $4.5 million ofliability recorded as of December 25, 2016 and December 27, 2015 , respectively. During fiscal years 2016 , 2015 and 2014 , the Companyrecognized $4.0 million , $4.6 million and $1.2 million , respectively, in Other restaurant operating expenses in its Consolidated Statements ofOperations and Comprehensive Income for legal settlements.In November 2015, David Sears and Elizabeth Thomas, two former Outback Managers (“Manager Plaintiffs”), sent a demand letter seekingunpaid overtime compensation on behalf of all Managers and Kitchen Managers employed at Outback Steakhouse restaurants fromNovember 2012 to present. The Manager Plaintiffs claim that Managers were not assigned sufficient management duties to qualify as exemptfrom overtime. In December 2016, the Company agreed to a tentative class settlement for eligible Kitchen Managers and has accrued asettlement, inclusive of legal fees, of $2.4 million in fiscal year 2016.On October 4, 2013, two then-current employees (the “Nevada Plaintiffs”) filed a purported collective action lawsuit against the Company,OSI Restaurant Partners, LLC, and two of its subsidiaries in the U.S. District Court for the District of Nevada (Cardoza, et al. v. Bloomin’Brands, Inc., et al., Case No.: 2:13-cv-01820-JAD-NJK). The complaint alleges violations of the Fair Labor Standards Act by requiringemployees to work off the clock, complete on-line training without pay, and attend meetings in the restaurant without pay. The nationwidecollective action permitted all hourly employees in all Outback Steakhouse restaurants to join. The suit requested an unspecified amount inback pay for the employees that joined the lawsuit, an equal amount in liquidated damages, costs, expenses, and attorney’s fees. The NevadaPlaintiffs also filed a companion lawsuit in Nevada state court alleging that the Company violated the state break time rules. In November2015, the Company reached a tentative settlement agreement resolving all claims and the cost of class administration for $3.2 million . TheCourt issued final approval in November 2016 and the Company subsequently made payment during the fourth quarter of 2016.In addition, the Company is subject to legal proceedings, claims and liabilities, such as liquor liability, sexual harassment and slip and fallcases, which arise in the ordinary course of business and are generally covered by insurance if they exceed specified retention or deductibleamounts. In the opinion of management, the amount of ultimate liability with respect to those actions will not have a material adverse impacton the Company’s financial position or results of operations and cash flows.Insurance - As of December 25, 2016 , the future payments the Company expects for workers’ compensation, general liability and healthinsurance claims are:(dollars in thousands) 2017$23,652201813,46720198,93420205,06620212,803Thereafter11,549 $65,471105Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedDiscount rates of 1.32% and 1.08% were used for December 25, 2016 and December 27, 2015 , respectively. A reconciliation of the expectedaggregate undiscounted reserves to the discounted reserves for insurance claims recognized in the Company’s Consolidated Balance Sheets isas follows:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015Undiscounted reserves$65,471 $63,791Discount(2,678) (2,318)Discounted reserves$62,793 $61,473 Discounted reserves recognized in the Company ’ s Consolidated Balance Sheets: Accrued and other current liabilities$23,533 $20,824Other long-term liabilities, net39,260 40,649 $62,793 $61,47319 . Segment ReportingThe Company has two reportable segments, U.S. and International, which reflects how the Company manages its business, reviews operatingperformance and allocates resources. The U.S. segment includes all brands operating in the U.S. while brands operating outside the U.S. areincluded in the International segment. Resources are allocated and performance is assessed by the Company’s Chief Executive Officer, whomthe Company has determined to be its Chief Operating Decision Maker. Following is a summary of reporting segments as of December 25,2016 :SEGMENT CONCEPT GEOGRAPHIC LOCATIONU.S. Outback Steakhouse United States of America Carrabba’s Italian Grill Bonefish Grill Fleming’s Prime Steakhouse & Wine Bar International Outback Steakhouse Brazil, Hong Kong, China Carrabba’s Italian Grill (Abbraccio) BrazilSegment accounting policies are the same as those described in Note 2 - Summary of Significant Accounting Policies . Revenues for allsegments include only transactions with customers and include no intersegment revenues. Excluded from income from operations for U.S.and International are certain legal and corporate costs not directly related to the performance of the segments, certain stock-basedcompensation expenses and certain bonus expense.Prior to 2016, certain insurance expenses were not allocated to the Company’s concepts as these expenses were reviewed and evaluated on aCompany-wide basis and therefore, these costs were excluded from segment restaurant-level operating margin and income fromoperations. In 2016, the Company’s management changed how insurance expenses related to its restaurants are reviewed and now considersthose costs when evaluating the operating performance of the Company’s concepts. Accordingly, the Company has recast all prior periodsegment information to reflect this change.106Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedThe following table is a summary of Total revenue by segment: FISCAL YEAR(dollars in thousands)2016 2015 2014Total revenues U.S.$3,797,309 $3,879,743 $3,854,279International455,003 497,933 588,432Total revenues$4,252,312 $4,377,676 $4,442,711 The following table is a reconciliation of Segment income (loss) from operations to Income before provision for income taxes : FISCAL YEAR(dollars in thousands)2016 2015 2014Segment income (loss) from operations U.S.$286,683 $348,731 $327,693International(5,954) 34,597 25,020Total segment income from operations280,729 383,328 352,713Unallocated corporate operating expense(153,123) (152,403) (160,749)Total income from operations127,606 230,925 191,964Loss on defeasance, extinguishment and modification of debt(26,998) (2,956) (11,092)Other income (expense), net1,609 (939) (1,244)Interest expense, net(45,726) (56,176) (59,658)Income before provision for income taxes$56,491 $170,854 $119,970The following table is a summary of Depreciation and amortization expense by segment: FISCAL YEAR(dollars in thousands)2016 2015 2014Depreciation and amortization U.S.$155,434 $151,868 $147,686International26,013 26,736 29,705Corporate12,391 11,795 13,520Total depreciation and amortization$193,838 $190,399 $190,911The following table is a summary of capital expenditures by segment: FISCAL YEAR(dollars in thousands)2016 2015 2014Capital expenditures U.S.$211,855 $153,445 $174,952International40,662 46,803 55,594Corporate17,671 10,015 7,322Total capital expenditures$270,188 $210,263 $237,868107Table of ContentsBLOOMIN’ BRANDS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ContinuedThe following table sets forth Total assets by segment:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015Assets U.S.$1,995,227 $2,405,196International436,024 472,518Corporate211,028 154,855Total assets$2,642,279 $3,032,569International assets are defined as assets residing in a country other than the U.S. The following table details long-lived assets, excludinggoodwill, intangible assets and deferred tax assets, by major geographic area:(dollars in thousands)DECEMBER 25, 2016 DECEMBER 27, 2015U.S.$1,231,154 $1,601,691International136,264 156,905 $1,367,418 $1,758,59620 . Selected Quarterly Financial Data (Unaudited)2016 FISCAL QUARTERS (dollars in thousands, except per share data)FIRST (1) SECOND (1) THIRD (1) FOURTH (1)Total revenues$1,164,188 $1,078,588 $1,005,387 $1,004,149Income (loss) from operations86,684 13,333 31,734 (4,145)Net income (loss)35,883 (8,065) 21,228 (2,699)Net income (loss) attributable to Bloomin’ Brands34,475 (9,177) 20,733 (4,283)Earnings (loss) per share: Basic$0.29 $(0.08) $0.19 $(0.04) Diluted$0.29 $(0.08) $0.18 $(0.04)2015 FISCAL QUARTERS (dollars in thousands, except per share data)FIRST (2) SECOND (2) THIRD (2) FOURTH (2)Total revenues$1,202,059 $1,099,597 $1,026,721 $1,049,299Income from operations97,701 62,585 38,724 31,915Net income62,082 33,056 17,405 19,017Net income attributable to Bloomin’ Brands60,588 32,226 16,811 17,702Earnings per share: Basic$0.48 $0.26 $0.14 $0.15 Diluted$0.47 $0.26 $0.13 $0.14____________________(1)Income from operations in the first quarter includes $3.6 million of restaurant closing costs incurred in connection with the Bonefish Restructuring. Income fromoperations in the second quarter of 2016 includes $39.6 million of asset impairment charges and related costs associated with the Company’s decision to sell itsOutback South Korea subsidiary. Income from operations in the third quarter of 2016 includes $3.2 million of asset impairment charges and related costs for its PuertoRico subsidiary. Income from operations in the fourth quarter of 2016 includes: (i) $46.5 million of pre-tax asset impairments incurred offset by the reversal of $3.3million of deferred rent liabilities in connection with the 2017 Closure Initiative, (ii) $6.4 million of asset impairments and closing costs related to the relocation ofcertain restaurants and (iii) $3.6 million of severance related to restructuring of certain functions. Net income for the first quarter of 2016 includes $26.6 million relatedto the defeasance of the 2012 CMBS loan.(2)Total revenues in the first quarter of 2015 include $24.3 million higher restaurant sales due to a change in the Company’s fiscal year end. Income from operations inthe first quarter of 2015 includes $7.7 million of pre-tax impairments and restaurant closing costs incurred in connection with the Domestic and InternationalRestaurant Closure Initiatives. Income from operations in the fourth quarter includes $24.2 million of pre-tax asset impairments incurred in connection with theBonefish Restructuring. Net income for the second quarter of 2015 includes $2.6 million of loss in connection with a refinancing of the Company’s Senior SecuredCredit Facility. Net income in the first quarter of 2015 includes $4.9 million of less net income due to a change in the Company’s fiscal year end.108Table of ContentsBLOOMIN’ BRANDS, INC.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresWe have established and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed byus in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, andreported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information isaccumulated and communicated to our management, including our Chief Executive Officer and Chief Financial and Administrative Officer,as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with theparticipation of our management, including our Chief Executive Officer and Chief Financial and Administrative Officer, of the effectivenessof our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief ExecutiveOfficer and Chief Financial and Administrative Officer concluded that our disclosure controls and procedures were effective as ofDecember 25, 2016 .Management’s Annual Report on Internal Control over Financial ReportingManagement’s report on our internal control over financial reporting and the attestation report of PricewaterhouseCoopers LLP, ourindependent registered certified public accounting firm, on our internal control over financial reporting are included in Item 8, FinancialStatements and Supplementary Data, of this Annual Report on Form 10-K.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting during our most recent quarter ended December 25, 2016 thathave materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Item 9B. Other InformationNone.109Table of ContentsBLOOMIN’ BRANDS, INC.PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information required by this item relating to our directors and nominees will be included under the captions “Proposal No. 1-Election ofDirectors: Nominees for Election at this Annual Meeting” and “—Directors Continuing in Office” in our definitive Proxy Statement for the2017 Annual Meeting of Stockholders (“Definitive Proxy Statement”) and is incorporated herein by reference.The information required by this item relating to our executive officers is included under the caption “Executive Officers of the Registrant” inPart I of this Report on Form 10-K.The information required by this item regarding compliance with Section 16(a) of the Securities Act of 1934 will be included under thecaption “Ownership of Securities—Section 16(a) Beneficial Ownership Reporting Compliance” in our Definitive Proxy Statement and isincorporated herein by reference.We have adopted a Business Conduct and Code of Ethics that applies to all employees. A copy of our Business Conduct and Code of Ethics isavailable on our website, free of charge. The Internet address for our website is www.bloominbrands.com, and the Business Conduct andCode of Ethics may be found on our main webpage by clicking first on “Investors” and then on “Corporate Governance” and next on “Codeof Business Conduct and Ethics.”We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of thiscode of ethics by posting such information on our website, on the webpage found by clicking through to “Code of Business Conduct andEthics” as specified above.The information required by this item regarding our Audit Committee will be included under the caption “Proposal No. 1: Election ofDirectors—Board Committees and Meetings” in our Definitive Proxy Statement and is incorporated herein by reference.Item 11. Executive CompensationThe information required by this item will be included under the captions “Proposal No. 1: Election of Directors—Director Compensation”and “Executive Compensation and Related Information” in our Definitive Proxy Statement and is incorporated herein by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this item will be included under the caption “Ownership of Securities” in our Definitive Proxy Statement and isincorporated herein by reference.The information relating to securities authorized for issuance under equity compensation plans is included under the caption “SecuritiesAuthorized for Issuance Under Equity Compensation Plans” in Item 5 of this Report on Form 10-K.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this item relating to transactions with related persons will be included under the caption “Certain Relationshipsand Related Party Transactions,” and the information required by this item relating to director independence will be included under thecaption “Proposal No. 1: Election of Directors—Independent Directors,” in each case in our Definitive Proxy Statement, and is incorporatedherein by reference.110Table of ContentsBLOOMIN’ BRANDS, INC.Item 14. Principal Accounting Fees and ServicesThe information required by this item will be included under the captions “Proposal No. 2: Ratification of Independent Registered CertifiedPublic Accounting Firm—Principal Accountant Fees and Services” and “—Policy on Audit Committee Pre-Approval of Audit andPermissible Non-Audit Services of Independent Registered Certified Public Accounting Firm” in our Definitive Proxy Statement and isincorporated herein by reference.111Table of ContentsBLOOMIN’ BRANDS, INC.PART IVItem 15. Exhibits and Financial Statement Schedules.(a)(1) LISTING OF FINANCIAL STATEMENTSThe following consolidated financial statements of the Company and subsidiaries are included in Item 8 of this Report:•Consolidated Balance Sheets - December 25, 2016 and December 27, 2015•Consolidated Statements of Operations and Comprehensive Income – Fiscal years 2016 , 2015 , and 2014•Consolidated Statements of Changes in Stockholders’ Equity – Fiscal years 2016 , 2015 , and 2014•Consolidated Statements of Cash Flows – Fiscal years 2016 , 2015 , and 2014•Notes to Consolidated Financial Statements(a)(2) FINANCIAL STATEMENT SCHEDULESAll financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient torequire submission of the schedule, or because the information required is included in the consolidated financial statements and notes theretoincluded in this Report.(a)(3) EXHIBITSEXHIBITNUMBER DESCRIPTION OF EXHIBITS FILINGS REFERENCED FOR INCORPORATION BY REFERENCE 2.1 Quota Purchase and Sale Agreement dated October 31, 2013 and effectiveNovember 1, 2013, by and between Bloomin’ Brands, Inc., OutbackSteakhouse Restaurantes Brasil S.A. (formerly known as Bloom HoldcoParticipações Ltda.), PGS Participações Ltda., the equity holders of PGSParticipações Ltda., PGS Consultoria e Serviços Ltda., and BloomParticipações Ltda. 1 December 31, 2013 Form 10-K, Exhibit 2.1 3.1 Second Amended and Restated Certificate of Incorporation of Bloomin’Brands, Inc. Registration Statement on Form S-8, File No.333-183270, filed on August 13, 2012,Exhibit 4.1 3.2 Second Amended and Restated Bylaws of Bloomin’ Brands, Inc. Registration Statement on Form S-8, File No.333-183270, filed on August 13, 2012,Exhibit 4.2 4.1 Form of Common Stock Certificate Amendment No. 4 to Registration Statementon Form S-1, File No. 333-180615, filed onJuly 18, 2012, Exhibit 4.1 10.1 Credit Agreement dated October 26, 2012 among OSI Restaurant Partners,LLC, OSI HoldCo, Inc., the Lenders and Deutsche Bank Trust CompanyAmericas, as administrative agent for the Lenders 1 September 30, 2012 Form 10-Q, Exhibit 10.1 10.2 First Amendment to Credit Agreement, Guaranty and Security Agreementdated as of April 10, 2013 among OSI Restaurant Partners, LLC, OSIHoldCo, Inc., the Subsidiary Guarantors, the Lenders and Deutsche BankTrust Company Americas, as administrative agent for the Lenders March 31, 2013 Form 10-Q, Exhibit 10.1 10.3 Second Amendment to Credit Agreement dated as of January 3, 2014 amongOSI Restaurant Partners, LLC, OSI HoldCo, Inc., the Subsidiary Guarantorsand Deutsche Bank Trust Company Americas, as administrative agent December 31, 2013 Form 10-K, Exhibit 10.3 112Table of ContentsBLOOMIN’ BRANDS, INC.EXHIBITNUMBER DESCRIPTION OF EXHIBITS FILINGS REFERENCED FOR INCORPORATION BY REFERENCE10.4 Third Amendment to Credit Agreement dated as of May 16, 2014 amongOSI Restaurant Partners, LLC, OSI HoldCo, Inc., the Subsidiary Guarantors,Deutsche Bank Trust Company Americas, as administrative agent, collateralagent, L/C issuer, swing line lender and assigning Lender, Deutsche BangAG New York Branch, as assignee and Wells Fargo Bank, NationalAssociation, as successor administrative agent June 29, 2014 Form 10-Q, Exhibit 10.5 10.5 Fourth Amendment to Credit Agreement and Incremental Amendment datedas of March 31, 2015, among OSI Restaurant Partners, LLC, OSI Holdco,Inc., the Subsidiary Guarantors party thereto, the lenders party thereto, andWells Fargo Bank, National Association, as administrative agent March 29, 2015 Form 10-Q, Exhibit 10.1 10.6 Fifth Amendment to Credit Agreement and Incremental Amendment dated asof December 11, 2015, among OSI Restaurant Partners, LLC, OSI Holdco,Inc., the Subsidiary Guarantors party thereto, the lenders party thereto, andWells Fargo Bank, National Association, as administrative agent December 27, 2015 Form 10-K, Exhibit 10.6 10.7 Loan Agreement, dated February 11, 2016, between New Private RestaurantProperties, LLC, as borrower, and Wells Fargo Bank, National Association,as lender 1 March 27, 2016 Form 10-Q, Exhibit 10.1 10.8 First Amendment to Loan Agreement, dated July 27, 2016, between NewPrivate Restaurant Properties, LLC as borrower, and Wells Fargo Bank,National Association, as lender. 1 September 25, 2016 Form 10-Q, Exhibit 10.1 10.9 Secured Promissory Note, dated February 11, 2016, between New PrivateRestaurant Properties, LLC, as borrower, and Wells Fargo Bank, NationalAssociation, as lender March 27, 2016 Form 10-Q, Exhibit 10.2 10.10 Royalty Agreement dated April 1995 among Carrabba’s Italian Grill, Inc.,Outback Steakhouse, Inc., Mangia Beve, Inc., Carrabba, Inc., CarrabbaWoodway, Inc., John C. Carrabba, III, Damian C. Mandola, and John C.Carrabba, Jr., as amended by First Amendment to Royalty Agreement datedJanuary 1997 and Second Amendment to Royalty Agreement made andentered into effective April 7, 2010 by and among Carrabba’s Italian Grill,LLC, OSI Restaurant Partners, LLC, Mangia Beve, Inc., Mangia Beve II,Inc., Original, Inc., Voss, Inc., John C. Carrabba, III, Damian C. Mandola,and John C. Carrabba, Jr. Registration Statement on Form S-1, File No.333-180615, filed on April 6, 2012, Exhibit10.6 10.11 Third Amendment to Royalty Agreement made and entered into effectiveJune 1, 2014, by and among Carrabba’s Italian Grill, LLC, OSI RestaurantPartners, LLC, Mangia Beve, Inc., Mangia Beve II, Inc., Original, Inc., Voss,Inc., John C. Carrabba, III, Damian C. Mandola, and John C. Carrabba, Jr. June 29, 2014 Form 10-Q, Exhibit 10.6 10.12 Amended and Restated Operating Agreement for OSI/Fleming’s, LLC madeas of June 4, 2010 by and among OS Prime, LLC, a wholly-owned subsidiaryof OSI Restaurant Partners, LLC, FPSH Limited Partnership and AWA IIISteakhouses, Inc. Registration Statement on Form S-1, File No.333-180615, filed on April 6, 2012, Exhibit10.8 10.13 Amended and Restated Master Lease Agreement, dated March 27, 2012,between New Private Restaurant Properties, LLC, as landlord, and PrivateRestaurant Master Lessee, LLC, as tenant 1 Amendment No. 1 to Registration Statementon Form S-1, File No. 333-180615, filed onMay 17, 2012, Exhibit 10.26 113Table of ContentsBLOOMIN’ BRANDS, INC.EXHIBITNUMBER DESCRIPTION OF EXHIBITS FILINGS REFERENCED FOR INCORPORATION BY REFERENCE10.14 Lease, dated June 14, 2007, between OS Southern, LLC andSelmon’s/Florida-I, Limited Partnership (predecessor to MVP LRS, LLC), asamended May 27, 2010 Amendment No. 1 to Registration Statementon Form S-1, File No. 333-180615, filed onMay 17, 2012, Exhibit 10.52 10.15 Lease, dated January 21, 2014, between OS Southern, LLC and MVP LRS,LLC December 31, 2013 Form 10-K, Exhibit10.28 10.16* Employee Rollover Agreement for conversion of OSI Restaurant Partners,Inc. restricted stock to Kangaroo Holdings, Inc. restricted stock entered intoby the individuals listed on Schedule 1 thereto Registration Statement on Form S-1, File No.333-180615, filed on April 6, 2012, Exhibit10.4 10.17* OSI Restaurant Partners, LLC HCE Deferred Compensation Plan effectiveOctober 1, 2007 Registration Statement on Form S-1, File No.333-180615, filed on April 6, 2012, Exhibit10.46 10.18* Kangaroo Holdings, Inc. 2007 Equity Incentive Plan, as amended Registration Statement on Form S-1, File No.333-180615, filed on April 6, 2012, Exhibit10.1 10.19* Form of Option Agreement for Options under the Kangaroo Holdings, Inc.2007 Equity Incentive Plan Registration Statement on Form S-1, File No.333-180615, filed on April 6, 2012, Exhibit10.42 10.20* Bloomin’ Brands, Inc. 2012 Incentive Award Plan Amendment No. 4 to Registration Statementon Form S-1, File No. 333-180615, filed onJuly 18, 2012, Exhibit 10.2 10.21* Form of Nonqualified Stock Option Award Agreement for options grantedunder the Bloomin’ Brands, Inc. 2012 Incentive Award Plan December 7, 2012 Form 8-K, Exhibit 10.2 10.22* Form of Restricted Stock Award Agreement for restricted stock granted todirectors under the Bloomin’ Brands, Inc. 2012 Incentive Award Plan December 7, 2012 Form 8-K, Exhibit 10.3 10.23* Form of Restricted Stock Award Agreement for restricted stock granted toemployees and consultants under the Bloomin’ Brands, Inc. 2012 IncentiveAward Plan December 7, 2012 Form 8-K, Exhibit 10.4 10.24* Form of Restricted Stock Unit Award Agreement for restricted stock grantedto directors under the Bloomin’ Brands, Inc. 2012 Incentive Award Plan September 30, 2013 Form 10-Q, Exhibit 10.1 10.25* Form of Restricted Stock Unit Award Agreement for restricted stock grantedto employees and consultants under the Bloomin’ Brands, Inc. 2012Incentive Award Plan September 30, 2013 Form 10-Q, Exhibit 10.2 10.26* Form of Performance Unit Award Agreement for performance units grantedunder the Bloomin’ Brands, Inc. 2012 Incentive Award Plan December 7, 2012 Form 8-K, Exhibit 10.5 10.27* Form of Bloomin’ Brands, Inc. Indemnification Agreement by and betweenBloomin’ Brands, Inc. and each member of its Board of Directors and eachof its executive officers Amendment No. 4 to Registration Statementon Form S-1, File No. 333-180615, filed onJuly 18, 2012, Exhibit 10.39 10.28* Bloomin’ Brands, Inc. 2016 Omnibus Incentive Compensation Plan June 26, 2016 Form 10-Q, Exhibit 10.1 114Table of ContentsBLOOMIN’ BRANDS, INC.EXHIBITNUMBER DESCRIPTION OF EXHIBITS FILINGS REFERENCED FOR INCORPORATION BY REFERENCE10.29* Form of Nonqualified Stock Option Award Agreement for options granted toexecutive management under the Bloomin’ Brands, Inc. 2016 OmnibusIncentive Compensation Plan June 26, 2016 Form 10-Q, Exhibit 10.2 10.30* Form of Restricted Stock Unit Award Agreement for restricted stock grantedto directors under the Bloomin’ Brands, Inc. 2016 Omnibus IncentiveCompensation Plan June 26, 2016 Form 10-Q, Exhibit 10.3 10.31* Form of Restricted Stock Unit Award Agreement for restricted stock grantedto executive management under the Bloomin’ Brands, Inc. 2016 OmnibusIncentive Compensation Plan June 26, 2016 Form 10-Q, Exhibit 10.4 10.32* Form of Performance Award Agreement for performance units granted underthe Bloomin’ Brands, Inc. 2016 Omnibus Incentive Compensation Plan June 26, 2016 Form 10-Q, Exhibit 10.5 10.33* Bloomin’ Brands, Inc. Executive Change in Control Plan, effectiveDecember 6, 2012 December 7, 2012 Form 8-K, Exhibit 10.1 10.34* Amended and Restated Employment Agreement made and entered intoSeptember 4, 2012 by and between Elizabeth A. Smith and Bloomin’ Brands,Inc. June 30, 2012 Form 10-Q, Exhibit 10.1 10.35* Option Agreement, dated November 16, 2009, by and between KangarooHoldings, Inc. and Elizabeth A. Smith, as amended December 31, 2009 Registration Statement on Form S-1, File No.333-180615, filed on April 6, 2012, Exhibit10.40 10.36* Option Agreement, dated July 1, 2011, by and between Kangaroo Holdings,Inc. and Elizabeth A. Smith Registration Statement on Form S-1, File No.333-180615, filed on April 6, 2012, Exhibit10.41 10.37* Officer Employment Agreement, made and entered into effective May 7,2012, by and among David Deno and OSI Restaurant Partners, LLC Amendment No. 1 to Registration Statementon Form S-1, File No. 333-180615, filed onMay 17, 2012, Exhibit 10.53 10.38* Amendment, dated July 16, 2014, to the Officer Employment Agreement,made and entered into effective May 7, 2012, by and among David Deno andOSI Restaurant Partners, LLC June 29, 2014 Form 10-Q, Exhibit 10.7 10.39* Amended and Restated Employment Agreement dated June 14, 2007,between Joseph J. Kadow and OSI Restaurant Partners, LLC, as amended onJanuary 1, 2009, June 12, 2009, December 30, 2010 and December 16, 2011 Registration Statement on Form S-1, File No.333-180615, filed on April 6, 2012, Exhibit10.29 10.40* Split-Dollar Agreement dated August 12, 2008 and effective March 30,2006, by and between OSI Restaurant Partners, LLC (formerly known asOutback Steakhouse, Inc.) and Joseph J. Kadow Registration Statement on Form S-1, File No.333-180615, filed on April 6, 2012, Exhibit10.48 10.41* Employment Offer Letter Agreement, dated as of November 1, 2013,between Bloomin’ Brands, Inc. and Patrick Murtha December 31, 2013 Form 10-K, Exhibit10.55 10.42* Employment Offer Letter Agreement, dated as of July 30, 2014, betweenBloomin’ Brands, Inc. and Donagh Herlihy December 28, 2014 Form 10-K, Exhibit10.58 10.43* Employment Offer Letter Agreement, dated as of May 4, 2015, betweenBloomin’ Brands, Inc. and Sukhdev Singh December 27, 2015 Form 10-K, Exhibit10.57 10.44* Employment Offer Letter Agreement, dated as of February 12, 2016,between Bloomin’ Brands, Inc. and Michael Kappitt March 27, 2016 Form 10-Q, Exhibit 10.3 115Table of ContentsBLOOMIN’ BRANDS, INC.EXHIBITNUMBER DESCRIPTION OF EXHIBITS FILINGS REFERENCED FOR INCORPORATION BY REFERENCE10.45* Employment Offer Letter Agreement, dated as of April 15, 2016, betweenBloomin’ Brands, Inc. and Christopher Brandt June 26, 2016 Form 10-Q, Exhibit 10.6 10.46* Employment Offer Letter Agreement, dated as of July 29, 2016, betweenBloomin’ Brands, Inc. and Gregg Scarlett September 25, 2016 Form 10-Q, Exhibit 10.2 10.47* Employment Offer Letter Agreement, dated as of July 29, 2016, betweenBloomin’ Brands, Inc. and David Schmidt September 25, 2016 Form 10-Q, Exhibit 10.3 10.48 Registration Rights Agreement among Bloomin’ Brands, Inc. and certainstockholders of Bloomin’ Brands, Inc. made as of April 29, 2014 May 1, 2014 Form 8-K, Exhibit 10.3 21.1 List of Subsidiaries Filed herewith 23.1 Consent of PricewaterhouseCoopers LLP Filed herewith 31.1 Certification of Chief Executive Officer pursuant to Section 302 of theSarbanes-Oxley Act of 2002 Filed herewith 31.2 Certification of Chief Financial and Administrative Officer pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 2 Filed herewith 32.2 Certification of Chief Financial and Administrative Officer pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 2 Filed herewith 101.INS XBRL Instance Document Filed herewith 101.SCH XBRL Taxonomy Extension Schema Document Filed herewith 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith 101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed herewith 101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed herewith 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith* Management contract or compensatory plan or arrangement required to be filed as an exhibit1 Confidential treatment has been granted with respect to portions of Exhibits 2.1 , 10.1 , 10.7 , 10.8 and 10.13 and such portions have beenfiled separately with the Securities and Exchange Commission.2 These certifications are not deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of thatsection. These certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act,except to the extent that the registrant specifically incorporates them by reference.Item 16. Form 10-K SummaryNone.116Table of ContentsBLOOMIN’ BRANDS, INC.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized. Date:February 22, 2017Bloomin’ Brands, Inc. By: /s/ Elizabeth A. Smith Elizabeth A. SmithChief Executive Officer(Principal Executive Officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.Signature Title Date /s/ Elizabeth A. Smith Chief Executive Officer and Director(Principal Executive Officer) Elizabeth A. Smith February 22, 2017 /s/ David J. Deno Executive Vice President and Chief Financial and AdministrativeOfficer(Principal Financial and Accounting Officer) David J. Deno February 22, 2017 /s/ James R. Craigie James R. Craigie Director February 22, 2017 /s/ David R. Fitzjohn David R. Fitzjohn Director February 22, 2017 /s/ Mindy Grossman Mindy Grossman Director February 22, 2017 /s/ Tara Walpert Levy Tara Walpert Levy Director February 22, 2017 /s/ John J. Mahoney John J. Mahoney Director February 22, 2017 /s/ Chris T. Sullivan Chris T. Sullivan Director February 22, 2017Exhibit 21.1SUBSIDIARY NAME STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATIONAnnapolis Outback, LLC MDBBI International Holdings, Inc. FLBBI Ristorante Italiano, LLC FLBel Air Outback, Inc. MDBFG Florida Services, Ltd FLBFG Georgia Services, Ltd FLBFG Indiana Services, Limited Partnership FLBFG Nebraska, Inc. FLBFG New Jersey Services, Limited Partnership FLBFG North Carolina Services, Ltd FLBFG Oklahoma, Inc. FLBFG Pennsylvania Services, Ltd FLBFG South Carolina Services, Ltd FLBFG/FPS of Marlton Partnership FLBloom Brands Holdings I C.V. NLBloom Brands Holdings II C.V. NLBloom Group Holdings B.V. NLBloom Group Holdings II, B.V. NLBloom Group Restaurants, B.V. NLBloom Group Restaurants, LLC FLBloom No.1 Limited HKBloom No.2 Limited HKBloom Participações, Ltda. BRBloom Restaurantes Brasil S.A. BRBloomin’ Brands Gift Card Services, LLC FLBloomin’ Brands International, LLC FLBloomin Canada Inc. ONBloomin Hong Kong Limited HKBloomin Korea Holding CIBloomin Puerto Rico L.P. CIBonefish Baltimore County, LLC MDBonefish Beverages, LLC TXBonefish Brandywine, LLC MDBonefish Designated Partner, LLC DEBonefish Grill International, LLC FLBonefish Grill of Florida Designated Partner, LLC DEBonefish Grill of Florida, LLC DEBonefish Grill of Rogers, Inc. ARBonefish Grill, LLC FLBonefish Holdings, LLC TXBonefish Kansas Designated Partner, LLC DEBonefish Kansas LLC KSBonefish of Bel Air, LLC MDBonefish of Gaithersburg, Inc. MDBonefish/Anne Arundel, LLC MDBonefish/Asheville, Limited Partnership FLBonefish/Carolinas, Limited Partnership FLBonefish/Centreville, Limited Partnership FLBonefish/Columbus-I, Limited Partnership FLBonefish/Crescent Springs, Limited Partnership FLBonefish/Fredericksburg, Limited Partnership FLBonefish/Glen Burnie, LLC MDBonefish/Greensboro, Limited Partnership FLExhibit 21.1SUBSIDIARY NAME STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATIONBonefish/Gulf Coast, Limited Partnership FLBonefish/Hyde Park, Limited Partnership FLBonefish/Newport News, Limited Partnership FLBonefish/Richmond, Limited Partnership FLBonefish/South Florida-I, Limited Partnership FLBonefish/Southern Virginia, Limited Partnership FLBonefish/Southern, Limited Partnership FLBonefish/Virginia, Limited Partnership FLBoomerang Air, Inc. FLCarrabba’s Designated Partner, LLC DECarrabba’s Italian Grill of Howard County, Inc. MDCarrabba’s Italian Grill of Overlea, Inc. MDCarrabba’s Italian Grill of Rogers, Inc. ARCarrabba’s Italian Grill, LLC FLCarrabba’s Kansas Designated Partner, LLC DECarrabba’s Kansas LLC KSCarrabba’s of Bowie, LLC MDCarrabba’s of Germantown, Inc. MDCarrabba’s of Ocean City, Inc. MDCarrabba’s of Pasadena, Inc. MDCarrabba’s of Waldorf, Inc. MDCarrabba’s/Birmingham 280, Limited Partnership FLCarrabba’s/Cool Springs, Limited Partnership FLCarrabba’s/DC-I, Limited Partnership FLCarrabba’s/Deerfield Township, Limited PartnershipFLCarrabba’s/Green Hills, Limited Partnership FLCarrabba’s/Lexington, Limited Partnership FLCarrabba’s/Louisville, Limited Partnership FLCarrabba’s/Miami Beach, Limited Partnership FLCarrabba’s/Montgomery, Limited Partnership FLCarrabba’s/Rocky Top, Limited Partnership FLCIGI Alabama Services, Ltd FLCIGI Beverages of Texas, LLC TXCIGI Florida Services, Ltd FLCIGI Holdings, LLC TXCIGI Nebraska, Inc. FLCIGI New York Services, Limited Partnership FLCIGI Oklahoma, Inc. FLCIGI South Carolina Services, Ltd FLCIGI/BFG of East Brunswick Partnership FLDoorSide, LLC FLDutch Holdings I, LLC FLFleming’s Beverages, LLC TXFleming’s International, LLC FLFleming’s of Baltimore, LLC MDFlemings Restaurantes do Brasil Ltda. BRFleming’s/Outback Holdings, Inc. TXFPS Florida Services, Ltd FLFPS NEBRASKA, INC. FLFPS Oklahoma, Inc. FLFrederick Outback, Inc. MDHagerstown Outback, Inc. MDNew Private Restaurant Properties, LLC DEExhibit 21.1SUBSIDIARY NAME STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATIONNew PRP Mezz 1, LLC DENew PRP Mezz 2, LLC DEOBTex Holdings, LLC TXOcean City Outback, Inc. MDOS Management, Inc. FLOS Mortgage Holdings, Inc. DEOS Niagara Falls, LLC FLOS Prime, LLC FLOS Realty, LLC FLOS Restaurant Services, LLC FLOS Southern, LLC FLOS Tropical, LLC FLOSF Arkansas Services, Ltd FLOSF Connecticut Services, Limited Partnership FLOSF Florida Services, Ltd FLOSF Illinois Services, Ltd FLOSF Maryland Services, Ltd FLOSF Nebraska, Inc. FLOSF Nevada Services, Limited Partnership FLOSF New Jersey Services, Limited Partnership FLOSF New York Services, Limited Partnership FLOSF North Carolina Services, Ltd FLOSF Oklahoma, Inc. FLOSF Pennsylvania Services, Ltd FLOSF South Carolina Services, Ltd FLOSF Texas Services, Ltd FLOSF Utah Services, Ltd FLOSF Virginia Services, Limited Partnership FLOSF/BFG of Deptford Partnership FLOSF/BFG of Lawrenceville Partnership FLOSF/CIGI of Evesham Partnership FLOSI China Venture CIOSI Co-Issuer, Inc. DEOSI HoldCo I, Inc. DEOSI HoldCo II, Inc. DEOSI HoldCo, Inc. DEOSI International, LLC FLOSI Restaurant Partners, LLC DEOSI/Fleming’s, LLC DEOSSIVT, LLC VTOutback & Carrabba’s of New Mexico, Inc. NMOutback Alabama, Inc. ALOutback Beverages of Texas, LLC TXOutback Catering Designated Partner, LLC DEOutback Catering, Inc. FLOutback Designated Partner, LLC DEOutback International Designated Partner, LLC DEOutback Kansas Designated Partner, LLC DEOutback Kansas LLC KSOutback of Aspen Hill, Inc. MDOutback of Calvert County, Inc. MDOutback of Conway, Inc. AROutback of Germantown, Inc. MDExhibit 21.1SUBSIDIARY NAME STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATIONOutback of La Plata, Inc. MDOutback of Laurel, LLC MDOutback of Waldorf, Inc. MDOutback Philippines Development Holdings CorporationPIOutback Puerto Rico Designated Partner, LLC DEOutback Steakhouse Brasil Participações Ltda. BROutback Steakhouse International Investments, Co.CIOutback Steakhouse International Services, LLC FLOutback Steakhouse International, L.P. GAOutback Steakhouse International, LLC FLOutback Steakhouse Korea, Ltd. (f/k/a/ Aussie Chung Ltd.)KOOutback Steakhouse of Bowie, Inc. MDOutback Steakhouse of Canton, Inc. MDOutback Steakhouse of Florida, LLC FLOutback Steakhouse of Howard County, Inc. MDOutback Steakhouse of Jonesboro, Inc. AROutback Steakhouse of Rogers, Inc. AROutback Steakhouse of Salisbury, Inc. MDOutback Steakhouse of St. Mary’s County, Inc. MDOutback Steakhouse Restaurantes Brasil, S.A. (f/k/a Bloom Holdco)BROutback Steakhouse West Virginia, Inc. WVOutback Steakhouse-NYC, Ltd. FLOutback/Carrabba’s Partnership FLOutback/DC, Limited Partnership FLOutback/Fleming’s Designated Partner, LLC DEOutback/Hampton, Limited Partnership FLOutback/Mid Atlantic-I, Limited Partnership FLOutback/Stone-II, Limited Partnership FLOutback-Carrabba’s of Hunt Valley, Inc. MDOwings Mills Incorporated MDPerry Hall Outback, Inc. MDPrime Designated Partner, LLC DEPrince George’s County Outback, Inc. MDPrivate Restaurant Master Lessee, LLC DEPrivate Restaurant Properties, LLC DEPRP Holdings, LLC DESnyderman Restaurant Group Inc NJWilliamsburg Square Joint Venture PAXuanmei Food and Beverage (Shanghai) Co., Ltd. CNExhibit 23.1CONSENT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-194295) and S-8 (Nos. 333-183270, 333-187035, 333-194261, 333-202259, 333-209691 and 333-210868) of Bloomin’ Brands, Inc. of our report dated February 22,2017 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLPTampa, FloridaFebruary 22, 2017Exhibit 31.1CERTIFICATIONI, Elizabeth A. Smith, certify that:1.I have reviewed this Annual Report on Form 10-K of Bloomin’ Brands, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing theequivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting. Date:February 22, 2017/s/ Elizabeth A. Smith Elizabeth A. Smith Chief Executive Officer(Principal Executive Officer)Exhibit 31.2CERTIFICATIONI, David J. Deno, certify that:1.I have reviewed this Annual Report on Form 10-K of Bloomin’ Brands, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing theequivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting. Date:February 22, 2017/s/ David J. Deno David J. Deno Executive Vice President and Chief Financial and Administrative Officer(Principal Financial Officer)Exhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Bloomin’ Brands, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 25, 2016as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elizabeth A. Smith, Chief Executive Officer of theCompany, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to thebest of my knowledge, that:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany for the dates and periods covered by the Report.Date:February 22, 2017/s/ Elizabeth A. Smith Elizabeth A. Smith Chief Executive Officer(Principal Executive Officer)A signed original of this written statement required by Section 906 has been provided to, and will be retained by, Bloomin’ Brands, Inc. andfurnished to the Securities and Exchange Commission or its staff upon request.Exhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Bloomin’ Brands, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 25, 2016as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Deno, Executive Vice President andChief Financial and Administrative Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany for the dates and periods covered by the Report.Date:February 22, 2017/s/ David J. Deno David J. Deno Executive Vice President and Chief Financial and Administrative Officer(Principal Financial Officer)A signed original of this written statement required by Section 906 has been provided to, and will be retained by, Bloomin’ Brands, Inc. andfurnished to the Securities and Exchange Commission or its staff upon request.

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