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AFC Reports Financial Results For Second Quarter 2013; Reiterates Fiscal 2013 Earnings Guidance

Long-Term Guidance

Consistent with previous guidance, over the course of the upcoming five years, the Company believes the execution of its Strategic Plan will deliver on an average annualized basis the following results: same-store sales growth of 1% to 3%; net unit growth of 4% to 6%; and earnings per diluted share growth of 13% to 15%.

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 22, 2013, to review the results of the second quarter 2013. To access the Company’s webcast, go to www.afce.com, select “Investor relations” and then select “AFC Enterprises Second Quarter 2013 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 14, 2013, Popeyes had 2,153 restaurants operating in the United States, Puerto Rico, Guam, the Cayman Islands and 28 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 franchise owners. AFC Enterprises can be found at www.afce.com.
 
 
AFC Enterprises, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(In millions, except share data)
       
7/14/2013

 
12/30/2012
Current assets:
Cash and cash equivalents $ 15.2 $ 17.0
Accounts and current notes receivable, net 7.6 7.3
Other current assets 5.8 4.2
Advertising cooperative assets, restricted 27.7   25.7  
Total current assets 56.3   54.2  
Long-term assets:
Property and equipment, net 63.4 51.3
Goodwill 11.1 11.1
Trademarks and other intangible assets, net 53.6 53.9
Other long-term assets, net 1.6   1.9  
Total long-term assets 129.7   118.2  
Total assets $ 186.0   $ 172.4  
 
 
Current liabilities:
Accounts payable $ 7.6 $ 7.6
Other current liabilities 6.2 5.9
Current debt maturities 6.3 6.0
Advertising cooperative liabilities 27.7   25.7  
Total current liabilities 47.8   45.2  
Long-term liabilities:
Long-term debt 62.1 66.8
Deferred credits and other long-term liabilities 27.9   26.2  
Total long-term liabilities 90.0   93.0  
 
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; 23,852,163 and 23,907,428 shares issued and outstanding at July 14, 2013 and December 30, 2012, respectively)
0.2 0.2
Capital in excess of par value 83.3 87.6
Accumulated deficit (34.7 ) (52.8 )
Accumulated other comprehensive loss (0.6 ) (0.8 )
Total shareholders' equity 48.2   34.2  
 
Total liabilities and shareholders' equity $ 186.0   $ 172.4  
 
 
AFC Enterprises, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(In millions, except per share data)
       
12 Weeks Ended 28 Weeks Ended
7/14/2013     7/8/2012 7/14/2013     7/8/2012
 
Revenues:
Sales by company-operated restaurants $ 17.5 $ 14.3 $ 41.4 $ 34.1
Franchise revenues 29.1 24.3 64.3 56.0
Rent and other revenues 1.3 1.0 2.6 2.3
Total revenues 47.9 39.6 108.3 92.4
 
Expenses:

Restaurant employee, occupancy and other expenses
8.5 7.0 19.8 16.4
Restaurant food, beverages and packaging 5.8 4.8 13.7 11.4
Rent and other occupancy expenses 0.8 0.6 1.9 1.5
General and administrative expenses 16.8 14.6 38.8 35.0
Depreciation and amortization 1.5 1.1 3.3 2.4
Other expenses (income), net - 0.1 0.1 0.1
Total expenses 33.4 28.2 77.6 66.8
 
Operating profit 14.5 11.4 30.7 25.6
Interest expense, net 0.9 0.9 2.0 2.0
 
Income before income taxes 13.6 10.5 28.7 23.6
Income tax expense 5.1 3.9 10.6 8.7
 
Net income $ 8.5 $ 6.6 $ 18.1 $ 14.9
 
Earnings per common share, basic: $ 0.36 $ 0.28 $ 0.77 $ 0.62
 
Earnings per common share, diluted: $ 0.35 $ 0.27 $ 0.75 $ 0.61
 
Weighted average shares outstanding
Basic 23.6 23.9 23.6 24.0
Diluted 24.1 24.4 24.2 24.5
 
 
AFC Enterprises, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(In millions)
 
28 Weeks Ended
7/14/2013     7/8/2012
Cash flows provided by (used in) operating activities:
Net income $ 18.1 $ 14.9
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 3.3 2.4
Asset write-downs 0.2 0.2
Net gain on sale of assets (0.1 ) (0.1 )
Deferred income taxes 0.4 (0.6 )
Non-cash interest expense, net 0.2 0.2
Provision for credit losses 0.1 (0.1 )
Excess tax benefits from share-based payment arrangements (1.9 ) (0.8 )
Stock-based compensation expense 2.9 2.5
Change in operating assets and liabilities:
Accounts receivable (0.4 ) (0.1 )
Other operating assets 1.0 2.1
Accounts payable and other operating liabilities (0.3 ) (4.4 )
Net cash provided by operating activities 23.5   16.2  
 
Cash flows used in investing activities:
Capital expenditures (15.8 ) (1.9 )
Net cash used in investing activities (15.8 ) (1.9 )
 
Cash flows provided by (used in) financing activities:
Principal payments - 2010 Credit Facility (term loan) (4.3 ) (3.8 )
Share repurchases (8.4 ) (8.6 )
Proceeds from exercise of employee stock options 1.5 0.5
Excess tax benefits from share-based payment arrangements 1.9 0.8
Other financing activities, net (0.2 ) (0.2 )
Net cash used in financing activities (9.5 ) (11.3 )
 
Net increase (decrease) in cash and cash equivalents (1.8 ) 3.0
Cash and cash equivalents at beginning of year 17.0   17.6  
Cash and cash equivalents at end of the quarter $ 15.2   20.6  
 
 
AFC Enterprises, Inc.
Same-store sales and restaurant count
         
12 Weeks ended   Year-to-date
7/14/2013     7/8/2012   7/14/2013     7/8/2012
Same-store sales growth  
Company-operated restaurants 1.7% 7.8% 2.5% 5.5%
Domestic franchised restaurants 4.3% 8.4% 4.5% 8.3%
Total domestic (company-operated and franchised restaurants) 4.3% 8.4% 4.4% 8.2%
International franchised restaurants 5.8% 0.9% 4.8% 1.8%
Total global system 4.4% 7.5% 4.5% 7.5%
 
Company-operated restaurants (all domestic)
Restaurants at beginning of quarter 46 40 45 40
New restaurant openings 2 - 3 -
Permanent closings (1) -   (1)   -
Restaurants at end of quarter 47 40 47 40
 
Franchised restaurants (domestic)
Restaurants at beginning of quarter 1,650 1,589 1,634 1,587
New restaurant openings 27 13 49 24
Permanent closings (5) (1) (12) (9)
Temporary (closings)/re-openings, net 2 (4)   3   (5)
Restaurants at end of quarter 1,674 1,597 1,674 1,597
 
Franchised restaurants (international)
Restaurants at beginning of quarter 423 415 425 408
New restaurant openings 15 12 32 27
Permanent closings (10) (15) (27) (24)
Temporary (closings)/re-openings, net 4 -   2   1
Restaurants at end of quarter 432 412 432 412
 
Total restaurant count at end of quarter 2,153 2,049   2,153   2,049
 
 

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 the performance of its business. 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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