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AFC Enterprises Reports Fiscal 2012 Results; Provides Fiscal 2013 Guidance

Stocks in this article: AFCE

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

  • Fourth quarter 2012 includes a $0.3 million gain on the sale of real estate assets and the recognition of $0.5 million in deferred gains related to seven properties formerly leased to a franchisee, partially offset by $0.1 million in disposals of fixed assets and other expenses, net.
  • Fourth quarter 2011 includes $0.4 million in expenses for the global service center relocation and $0.2 million in other expenses offset by $0.1 million net gain on the sale of assets;
  • Fiscal 2012 includes $0.9 million in gains on sale of real estate assets to franchisees, partially offset by $0.3 million loss on disposals of property and equipment and $0.1 million of hurricane-related expenses, net;
  • Fiscal 2011 includes $0.8 million in expenses for the global service center relocation, and $0.5 million in disposals of fixed assets offset by a $0.8 million net gain on the sale of assets;

(ii) for fiscal 2011, $0.5 million in accelerated depreciation related to the Company’s relocation to a new global service center;

(iii) for fiscal 2012, $0.5 million in legal fees related to licensing arrangements; and

(iv) the tax effect of these adjustments.

Adjusted earnings per diluted share provides the per share effect of adjusted net income on a diluted basis. The following table reconciles on a historical basis the fourth quarter 2012, fourth quarter 2011, fiscal 2012 and fiscal 2011, the Company’s adjusted earnings per diluted share on a consolidated basis to the line on its consolidated statement of operations entitled net income, which the Company believes is the most directly comparable GAAP measure on its consolidated statement of operations to adjusted earnings per diluted share:

(in millions, except per share data)     Q4 2012       Q4 2011      

Fiscal 2012

     

Fiscal 2011

Net income     $   8.6       $   5.7       $   30.4       $   24.2
Other expense (income), net (0.7 ) 0.5 (0.5 ) 0.5

Accelerated depreciation related to the Company’s

 

relocation to a new Global Service Center - - - 0.5
Fees related to licensing arrangements - - 0.5 -
Tax effect         0.3             (0.2 )           -             (0.5 )
Adjusted net income     $   8.2         $   6.0         $   30.4         $   24.7  
Adjusted earnings per diluted share     $   0.34         $   0.24         $   1.24         $   0.99  
Weighted average diluted shares outstanding         24.3             24.5             24.5             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 2012 and 2011, the Company’s earnings before interest expense, taxes, depreciation and amortization, other expenses (income), net and legal fees related to licensing arrangements (“Operating EBITDA”) on a consolidated basis to the line on its consolidated statement of operations entitled net income, which the Company believes is the most directly comparable GAAP measure on its consolidated statement of operations to Operating EBITDA. “Operating EBITDA as a percentage of Total Revenues” is defined as “Operating EBITDA” divided by “Total Revenues”.

(dollars in millions)   Fiscal 2012   Fiscal 2011
 
Net income

$

30.4

$ 24.2
Interest expense, net 3.6 3.7
Income tax expense 17.3 12.8
Depreciation and amortization 4.6 4.2
Other expenses (income), net (0.5 ) 0.5
Legal fees related to licensing arrangements     0.5       -  
Operating EBITDA  

$

55.9

    $ 45.4  
 
Total Revenues  

$

178.8

    $ 153.8  
Operating EBITDA as a percentage of Total Revenues     31.3 %     29.5 %
 
 

Company-Operated Restaurant Operating Profit Margin: Calculation and Definition

The Company defines adjusted 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 2012 and 2011, the Company’s Company-operated restaurant operating profits to the line item on its consolidated statement of operations entitled “sales by Company-operated restaurants,” which the Company believes is the most directly comparable GAAP measure on its consolidated statement of operations to Company-operated restaurant operating profit. “Company-operated restaurant operating profit margin” is defined as “Company-operated restaurant operating profit” divided by “sales by Company-operated restaurants”.

(dollars in millions)   Fiscal 2012   Fiscal 2011
   
Sales by Company-operated restaurants $   64.0 $   54.6
Restaurant employee, occupancy and other expenses (31.2 ) (26.1 )
Restaurant food, beverages and packaging       (21.7 )       (18.3 )
Company-operated restaurant operating profit   $   11.1     $   10.2  
Company-operated restaurant operating profit margin       17.3 %       18.7 %
 
 

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 fiscal 2012, $0.6 million in Company-operated restaurant reimages, $1.1 million of information technology hardware and software and $1.5 million in other capital assets to maintain, replace and extend the lives of Company-operated restaurant facilities, and for fiscal 2011, $1.5 million in Company-operated restaurant reimages, $0.8 million of information technology hardware and software and $0.5 million in other capital assets to maintain, replace and extend the lives of Company-operated restaurant facilities). In 2012, maintenance capital expenditures exclude $16.9 million related to the acquired restaurants in Minnesota and California and $7.2 million for the construction of new Company-operated restaurants. In 2011, maintenance capital expenditures exclude $3.3 million related to the construction of the new corporate office, and $1.5 million for the construction of new Company-operated restaurants.

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