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TheStreet Open House

AFC Reports Financial Results For Second Quarter 2012; Raises Fiscal 2012 Earnings Guidance

Conference Call

The Company will host a conference call and internet webcast with the investment community at 9:00 A.M. Eastern Time on August 16, 2012, to review the results of the second quarter 2012. To access the Company’s webcast, go to www.afce.com, select “Investor relations” and then select “AFC Enterprises Second Quarter 2012 Earnings Conference Call.” A replay of the conference call will be available for 90 days at the Company’s website or through a dial-in number for a limited time following the call.

Corporate Profile

AFC Enterprises, Inc. is the franchisor and operator of Popeyes® restaurants, the world's second-largest quick-service chicken restaurant concept based on number of units. As of July 8, 2012, Popeyes had 2,049 restaurants operating in the United States, Puerto Rico, Guam, the Cayman Islands and 25 foreign countries. AFC’s primary objective is to deliver industry-competitive growth in sales and profits by offering excellent investment opportunities in its Popeyes brand and providing exceptional support systems and services to its franchisee owners. AFC Enterprises can be found at www.afce.com.

Supplemental Financial Information on pages 7 – 16.

AFC Enterprises, Inc.

Condensed Consolidated Balance Sheets (unaudited)

 (In millions, except share data)

 
ASSETS 7/08/2012

 

12/25/2011
Current assets:
Cash and cash equivalents $ 20.6 $ 17.6
Accounts and current notes receivable, net 7.2 7.0
Other current assets 3.4 4.8
Advertising cooperative assets, restricted 25.5   18.9  
Total current assets 56.7   48.3  
Long-term assets:
Property and equipment, net 27.1 27.4
Goodwill 11.1 11.1
Trademarks and other intangible assets, net 46.2 46.5
Other long-term assets, net 1.9   2.3  
Total long-term assets 86.3   87.3  
Total assets $ 143.0   $ 135.6  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3.3 $ 6.1
Other current liabilities 7.2 8.2
Current debt maturities 5.8 5.2
Advertising cooperative liabilities 25.5   18.9  
Total current liabilities 41.8   38.4  
Long-term liabilities:
Long-term debt 54.4 58.8
Deferred credits and other long-term liabilities 23.9   24.6  
Total long-term liabilities 78.3   83.4  
 
Commitments and contingencies
Shareholders' equity:
Preferred stock ($.01 par value; 2,500,000 shares authorized; $ - $ -
0 issued and outstanding)
Common stock ($.01 par value; 150,000,000 shares authorized; authorized; 0.2 0.2
24,165,184 and 24,383,274 shares issued and outstanding
at July 8, 2012 and December 25, 2011, respectively)
Capital in excess of par value 91.8 97.6
Accumulated deficit (68.3 ) (83.2 )
Accumulated other comprehensive loss (0.8 ) (0.8 )
Total shareholders' equity 22.9   13.8  
 
Total liabilities and shareholders' equity $ 143.0   $ 135.6  
 

AFC Enterprises, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited)

(In millions, except per share data)

   
12 Weeks Ended 28 Weeks Ended
7/08/2012     7/10/2011 7/08/2012     7/10/2011
 
Revenues:
Sales by company-operated restaurants $ 14.3 $ 12.3 $ 34.1 $ 29.9
Franchise revenues 24.3 22.0 56.0 49.9
Rent and other revenues 1.0 1.0 2.3 2.3  
Total revenues 39.6 35.3 92.4 82.1  
 
Expenses:
Restaurant employee, occupancy and other

expenses

7.0 6.2 16.4 14.6
Restaurant food, beverages and packaging 4.8 4.1 11.4 9.9
Rent and other occupancy expenses 0.6 0.6 1.5 1.4
General and administrative expenses 14.6 13.6 35.0 32.1
Depreciation and amortization 1.1 1.0 2.4 2.3
Other expenses (income), net 0.1 0.2 0.1 (0.3 )
Total expenses 28.2 25.7 66.8 60.0  
 
Operating profit 11.4 9.6 25.6 22.1
Interest expense, net 0.9 0.9 2.0 2.0  
 
Income before income taxes 10.5 8.7 23.6 20.1
Income tax expense 3.9 3.2 8.7 7.4  
 
Net income $ 6.6 $ 5.5 $ 14.9 $ 12.7  
 
Earnings per common share, basic: $ 0.28 $ 0.22 $ 0.62 $ 0.51  
 
Earnings per common share, diluted: $ 0.27 $ 0.22 $ 0.61 $ 0.50  
 
Weighted average shares outstanding
Basic 23.9 24.4 24.0 25.0
Diluted 24.4 24.8 24.5 25.4
 
Comprehensive income $ 6.6 $ 5.2 $ 14.9 $ 12.1  
 

AFC Enterprises, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(In millions)

   
28 Weeks Ended
7/08/2012       7/10/2011
Cash flows provided by (used in) operating activities:  
Net income $ 14.9 $ 12.7
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 2.4 2.3
Asset write-downs 0.2 0.2
Net gain on sale of assets (0.1 ) (0.7 )
Deferred income taxes (0.6 ) 0.5
Non-cash interest expense, net 0.2 0.3
Provision for credit losses (0.1 ) -
Excess tax benefit from stock-based compensation (0.8 ) (0.1 )
Stock-based compensation expense 2.5 1.4
Change in operating assets and liabilities:
Accounts receivable (0.1 ) (0.8 )
Other operating assets 2.1 1.3
Accounts payable and other operating liabilities (4.4 ) (3.4 )
Net cash provided by operating activities 16.2   13.7  
 
Cash flows provided by (used in) investing activities:
Capital expenditures (1.9 ) (1.7 )
Proceeds from dispositions of property and equipment - 0.7
Proceeds from notes receivables and other investing activities -   0.2  
Net cash used in investing activities (1.9 ) (0.8 )
 
Cash flows provided by (used in) financing activities:
Principal payments - 2010 Credit Facility (term loan) (3.8 ) (2.5 )
Borrowings under 2010 revolving line of credit - 2.0
Share repurchases (8.6 ) (22.3 )
Proceeds from exercise of employee stock options 0.5 0.6
Excess tax benefit from stock-based compensation 0.8 0.1
Other financing activities, net (0.2 ) (0.4 )
Net cash used in financing activities (11.3 ) (22.5 )
 
Net increase (decrease) in cash and cash equivalents 3.0 (9.6 )
Cash and cash equivalents at beginning of year 17.6   15.9  
Cash and cash equivalents at end of the quarter $ 20.6   6.3  
 

AFC Enterprises, Inc.

Same-store sales and restaurant count

     
12 Weeks ended   Year-to-date
7/08/2012   7/10/2011 7/08/2012   7/10/2011
Same-store sales growth  
Company-operated restaurants 7.8 % (0.2 %) 5.5 % 3.6 %
Domestic franchised restaurants 8.4 % 0.5 % 8.3 % 2.3 %
Total domestic (company-operated and franchised restaurants) 8.4 % 0.5 % 8.2 % 2.4 %
International franchised restaurants 0.9 % 2.3 % 1.8 % 3.3 %
Total global system 7.5 % 0.7 % 7.5 % 2.5 %
 
Company-operated restaurants (all domestic)
Restaurants at beginning of period 40 38 40 38
New restaurant openings - - - -
Permanent closings - - - -
Temporary (closings)/re-openings, net -   -     -     -  
Restaurants at end of period 40 38 40 38
 
Franchised restaurants (domestic)
Restaurants at beginning of period 1,589 1,549 1,587 1,542
New restaurant openings 13 19 24 30
Permanent closings (1 ) (9 ) (9 ) (15 )
Temporary (closings)/re-openings, net (4 ) (2 )   (5 )   -  
Restaurants at end of period 1,597 1,557 1,597 1,557
 
Franchised restaurants (international)
Restaurants at beginning of period 415 410 408 397
New restaurant openings 12 11 27 32
Permanent closings (15 ) (16 ) (24 ) (24 )
Temporary (closings)/re-openings, net -   -     1     -  
Restaurants at end of period 412 405 412 405
 
Total restaurant count at end of period 2,049   2,000     2,049     2,000  
 

Management’s Use of Non-GAAP Financial Measures

Adjusted earnings per diluted share, Operating EBITDA, Company-operated restaurant operating profit and Free cash flow are supplemental non-GAAP financial measures. The Company uses Adjusted earnings per diluted share, Operating EBITDA, Company-operated restaurant operating profit and Free cash flow in addition to Net income, Operating profit and Cash flows from operating activities, to assess its performance and believes it is important for investors to be able to evaluate the Company using the same measures used by management. The Company believes these measures are important indicators of its operational strength and performance of its business because they provide a link between profitability and operating cash flow. Adjusted earnings per diluted share, Operating EBITDA, Company-operated restaurant operating profit and Free cash flow as calculated by the Company are not necessarily comparable to similarly titled measures reported by other companies. In addition, Adjusted earnings per diluted share, Operating EBITDA, Company-operated restaurant operating profit and Free cash flow: (a) do not represent Net income, Cash flows from operations or Earnings per share as defined by GAAP; (b) are not necessarily indicative of cash available to fund cash flow needs; and (c) should not be considered as an alternative to Net income, Earnings per share, Operating profit, Cash flows from operating activities or other financial information determined under GAAP.

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