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

Stocks in this article: AFCE

Adjusted earnings per diluted share: Calculation and Definition

The Company defines “Adjusted earnings” for the periods presented as the Company’s reported “Net income” after adjusting for certain non-operating items consisting of the following:

(i) other expense (income), net, as follow:

  • for second quarter 2012 includes $0.1 million for impairments and disposals of fixed assets;
  • for second quarter 2011 includes $0.1 million for impairments and disposals of fixed assets, $0.2 million of other expenses related to the Company’s relocation to a new Global Service Center offset by $0.1 million for net gain on sales of assets;
  • for second quarter year-to-date 2012 includes $0.2 million for impairments and disposals of fixed assets offset by $0.1 million net gain on the sale of assets;
  • for second quarter year-to-date 2011 includes $0.2 million for impairments and disposals of fixed assets, $0.2 million of other expenses related to the Company’s relocation to a new Global Service Center offset by $0.7 million for net gain on sales of assets;
  • for fiscal 2011 includes $0.8 million in expenses for the Global Service Center relocation and $0.5 million in impairments and disposals of fixed assets, offset by a $0.8 million net gain on the sale of two properties to a franchisee;

(ii) for second quarter 2012 year-to-date approximately $0.5 million in legal fees related to licensing arrangements;

(iii) accelerated depreciation related to the Company’s relocation to a new Global Service Center;

(iv) and the tax effect of these adjustments at the effective statutory rates.

“Adjusted earnings per diluted share” provides the per share effect of Adjusted earnings on a diluted basis. The following table reconciles on a historical basis for second quarter 2012, second quarter 2011, second quarter year-to-date 2012, second quarter year-to-date 2011 and fiscal year 2011 the Company’s Adjusted earnings per diluted share on a consolidated basis to the line on its Condensed Consolidated Statement of Operations and Comprehensive Income entitled “Net income”, which the Company believes is the most directly comparable GAAP measure on its Condensed Consolidated Statement of Operations and Comprehensive Income to “Adjusted earnings per diluted share.”

(in millions, except per share data)    

Q2 2012

 

Q2 2011

 

Year-to-date 7/08/2012

 

Year-to-date 7/10/2011

  Fiscal 2011
Net income     $ 6.6   $ 5.5   $ 14.9   $ 12.7   $ 24.2
Other expense (income), net 0.1 0.2 0.1 (0.3 ) 0.5
Legal fees related to licensing arrangements - - 0.5 - -
Accelerated depreciation related to the Company’s relocation to a new Global Service Center - 0.1 - 0.3 0.5
Tax effect       (0.1 )     (0.1 )     (0.3 )     (0.1 )     (0.5 )
Adjusted earnings     $ 6.6     $ 5.7     $ 15.2     $ 12.6     $ 24.7  
Adjusted earnings per diluted share     $ 0.27     $ 0.23     $ 0.62     $ 0.50     $ 0.99  
Weighted average diluted shares outstanding       24.4       24.8       24.5       25.4       25.0  
 

Operating EBITDA: Calculation and Definition

The Company defines “Operating EBITDA” as earnings before interest expense, taxes, depreciation and amortization, other expenses (income), net, and legal fees related to licensing arrangements. The following table reconciles on a historical basis for second quarter year-to-date 2012 and second quarter year-to-date 2011, the Company’s earnings before interest expense, taxes, depreciation and amortization and other expenses (income), net and legal fees related to licensing arrangements (“Operating EBITDA”) on a consolidated basis to the line on its Condensed Consolidated Statement of Operations and Comprehensive Income entitled “Net income”, which the Company believes is the most directly comparable GAAP measure on its Condensed Consolidated Statement of Operations and Comprehensive Income to Operating EBITDA. “Operating EBITDA as a percentage of Total Revenues” is defined as “Operating EBITDA” divided by “Total revenues”.

(dollars in millions)    

Year-to-date 7/08/2012

   

Year-to-date 7/10/2011

Net income     $ 14.9     $ 12.7
Interest expense, net 2.0 2.0
Income tax expense 8.7 7.4
Depreciation and amortization 2.4 2.3
Other expenses (income), net 0.1 (0.3 )
Legal fees related to licensing arrangements       0.5         -  
Operating EBITDA     $ 28.6       $ 24.1  
Total revenues     $ 92.4       $ 82.1  
Operating EBITDA as a percentage of Total revenues       31.0 %       29.4 %
 

Company-operated restaurant operating profit: Calculation and Definition

The Company defines “Company-operated restaurant operating profit” as “Sales by company-operated restaurants” minus “Restaurant employee, occupancy and other expenses” minus “Restaurant food, beverages and packaging”. The following table reconciles on a historical basis for second quarter 2012, second quarter 2011, year-to-date 2012 and year-to-date 2011, Company-operated restaurant operating profit to the line item on its Condensed Consolidated Statement of Operations and Comprehensive Income entitled ”Sales by company-operated restaurants”, which the Company believes is the most directly comparable GAAP measure on its Condensed Consolidated Statement of Operations and Comprehensive Income to Company-operated restaurant operating profit. “Company-operated restaurant operating profit as a percentage of sales by company-operated restaurants” is defined as “Company-operated restaurant operating profit” divided by “Sales of company-operated restaurants.”

(dollars in millions)     Q2 2012   Q2 2011   Year-to-date 7/08/2012   Year-to-date 7/10/2011
Sales by company-operated restaurants     $ 14.3   $ 12.3   $ 34.1   $ 29.9
Less: Restaurant employee, occupancy and other expenses 7.0 6.2 16.4 14.6
Less: Restaurant food, beverages and packaging       4.8       4.1       11.4       9.9  
Company-operated restaurant operating profit     $ 2.5     $ 2.0     $ 6.3     $ 5.4  
Company-operated restaurant operating profit as a percentage of sales by company-operated restaurants       17.5 %     16.3 %     18.5 %     18.1 %
 

Free cash flow: Calculation and Definition

The Company defines “Free cash flow” as “Net income” plus “depreciation and amortization”, plus “stock-based compensation expense”, minus maintenance capital expenditures (which includes: for second quarter year-to-date 2012 $0.6 million in Company restaurant reimages, $0.4 million of information technology projects and $0.6 million in other capital assets to maintain, replace and extend the lives of Company-operated restaurant facilities and equipment; and for second quarter year-to-date 2011 $0.9 million in Company restaurant reimages, $0.4 million of information technology projects and $0.4 million in other capital assets to maintain, replace and extend the lives of Company-operated restaurant facilities and equipment).

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