Income tax expense was $5.1 million at an effective tax rate of 37.5%, compared to an effective tax rate of 37.1% in the prior year. The effective tax rates differ from statutory rates due to tax credits and permanent differences between reported income before income taxes and taxable income for tax purposes.
Reported net income was $8.5 million, or $0.35 per diluted share, compared to $6.6 million, or $0.27 per diluted share last year. This improvement was primarily due to strong same-store sales, new restaurant openings, one-time franchise fees associated with the conversion of the restaurants in Minnesota and California acquired in 2012 and stronger restaurant operating profit at Company-operated restaurants. Through the end of the second quarter, adjusted earnings per diluted share were $0.75 compared to $0.62 last year, an increase of 21%. Adjusted earnings per diluted share is a supplemental non-GAAP measure of performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”
As a result of strong revenue and operating profit, the Company generated Free cash flow through the second quarter of $21.8 million compared to $18.2 million in 2012. As a percentage of total revenue, Free cash flow increased to 20.1%, compared to 19.7% last year. Free cash flow is a supplemental non-GAAP measure of performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”
During the second quarter, the Company repurchased approximately 96,000 shares of its common stock for approximately $3.4 million. Through the end of the second quarter, the Company has repurchased approximately 234,000 shares of common stock for approximately $8.4 million.Through the end of the second quarter, the Company invested $6.1 million in the conversion of restaurants acquired in Minnesota and California in 2012, and $7.2 million in the construction and opening of new company restaurants. The Popeyes system opened 44 new restaurants in the second quarter, which included 29 domestic and 15 international restaurants, compared to 25 openings last year. The Company permanently closed 16 restaurants, resulting in 28 net openings compared to 9 net openings in the second quarter of 2012. The 16 closures in the second quarter included 6 domestic and 10 international restaurants. Through the end of the second quarter, Popeyes had net openings of 44 restaurants compared to 18 the prior year.
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