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AFC Enterprises Reports Earnings For Third Quarter 2013; Narrows Fiscal Year 2013 EPS Guidance

Stocks in this article: AFCE

Conference Call

The Company will host a conference call and internet webcast with the investment community at 9:00 A.M. Eastern Time on November 14, 2013, to review the results of the third quarter 2013. To access the Company’s webcast, go to www.afce.com, select “Investor Information” and then select “AFC Enterprises Third 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 concept based on number of units. As of October 6, 2013, Popeyes had 2,187 operating restaurants in the United States, Guam, Puerto Rico, the Cayman Islands and 27 foreign countries. AFC’s primary objective is to deliver sales and profits by offering excellent investment opportunities in its Popeyes brand and providing exceptional franchisee support systems and services to its owners. AFC Enterprises can be found at www.afce.com.

AFC Enterprises, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(In millions, except share data)

     
ASSETS

10/6/13

  12/30/12  
Current assets:
Cash and cash equivalents $

13.2

$ 17.0
Accounts and current notes receivable, net 7.9 7.3
Other current assets 4.3 4.2
Advertising cooperative assets, restricted 28.9   25.7  
Total current assets 54.3   54.2  
Long-term assets:
Property and equipment, net 71.3 51.3
Goodwill 11.1 11.1
Trademarks and other intangible assets, net 53.5 53.9
Other long-term assets, net 1.5   1.9  
Total long-term assets 137.4   118.2  
Total assets $ 191.7   $ 172.4  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7.8 $ 7.6
Other current liabilities 7.4 5.9
Current debt maturities 6.3 6.0
Advertising cooperative liabilities 28.9   25.7  
Total current liabilities 50.4   45.2  
Long-term liabilities:
Long-term debt 60.5 66.8
Deferred credits and other long-term liabilities 27.6   26.2  
Total long-term liabilities 88.1   93.0  
 
Commitments and contingencies
Shareholders' equity:
Preferred stock ($.01 par value; 2,500,000 shares authorized;
0 shares issued and outstanding) - -
Common stock ($.01 par value; 150,000,000 shares authorized;
23,755,370 and 23,907,428 shares issued and outstanding
at October 6, 2013 and December 30, 2012, respectively) 0.2 0.2
Capital in excess of par value 79.3 87.6
Accumulated deficit (25.7 ) (52.8 )
Accumulated other comprehensive loss (0.6 ) (0.8 )
Total shareholders' equity 53.2   34.2  
 
Total liabilities and shareholders' equity $ 191.7   $ 172.4  

AFC Enterprises, Inc.

Condensed Consolidated Statements of Operations (unaudited)

(In millions, except per share data)

       
12 Weeks Ended 40 Weeks Ended

10/6/13

    9/30/12

10/6/13

    9/30/12
 
Revenues:
Sales by company-operated restaurants $ 18.6 $ 13.5 $ 60.0 $ 47.6
Franchise revenues 29.2 24.4 93.5 80.4
Rent and other revenues 1.5 1.0 4.1 3.3
Total revenues 49.3 38.9 157.6 131.3
 
Expenses:
Restaurant employee, occupancy and other

expenses

9.0 6.7 28.8 23.1
Restaurant food, beverages and packaging 6.3 4.6 20.0 16.0
Rent and other occupancy expenses 0.7 0.6 2.6 2.1
General and administrative expenses 16.2 14.7 55.0 49.7
Depreciation and amortization 1.6 1.1 4.9 3.5
Other expenses (income), net 0.1 0.1 0.2 0.2
Total expenses 33.9 27.8 111.5 94.6
 
Operating profit 15.4 11.1 46.1 36.7
Interest expense, net 0.8 0.7 2.8 2.7
 
Income before income taxes 14.6 10.4 43.3 34.0
Income tax expense 5.6 3.5 16.2 12.2
 
Net income $ 9.0 $ 6.9 $ 27.1 $ 21.8
 

Earnings per common share, basic

$ 0.38 $ 0.29 $ 1.15 $ 0.91
 

Earnings per common share, diluted

$ 0.37 $ 0.29 $ 1.12 $ 0.89
 
Weighted-average shares outstanding:
Basic 23.6 23.7 23.6 23.9
Diluted 24.1 24.2 24.1 24.4

AFC Enterprises, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(In millions)

   
40 Weeks Ended

10/6/13

      9/30/12  
Cash flows provided by (used in) operating activities:
Net income

$

27.1

$

21.8
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 4.9 3.5
Asset write-downs 0.3 0.2
Net gain on sale of assets (0.1 ) (0.1 )
Deferred income taxes 1.1 1.9
Non-cash interest expense, net 0.3 0.3
Provision for credit losses - (0.1 )
Excess tax benefits from share-based payment arrangements (2.4 ) (0.3 )
Stock-based compensation expense 4.1 3.5
Change in operating assets and liabilities:
Accounts receivable (0.6 ) 0.4
Other operating assets 2.6 1.4
Accounts payable and other operating liabilities   (0.1 )   (4.3 )
Net cash provided by operating activities   37.2     28.2  
 
Cash flows provided by (used in) investing activities:
Capital expenditures (25.2 ) (5.0 )
Proceeds from dispositions of property and equipment   0.6     -  
Net cash used in investing activities   (24.6 )   (5.0 )
 
Cash flows provided by (used in) financing activities:
Principal payments - 2010 credit facility (term loan) (5.8 ) (5.0 )
Share repurchases (14.9 ) (11.5 )
Proceeds from exercise of employee stock options 2.3 0.5
Excess tax benefits from share-based payment arrangements 2.4 0.3
Other financing activities, net   (0.4 )   (0.3 )
Net cash used in financing activities   (16.4 )   (16.0 )
 
Net increase (decrease) in cash and cash equivalents (3.8 ) 7.2
Cash and cash equivalents at beginning of year   17.0     17.6  
Cash and cash equivalents at end of quarter $ 13.2   $ 24.8  

AFC Enterprises, Inc.

Same-store sales and restaurant count

       

12 Weeks Ended

40 Weeks Ended

10/6/13

      9/30/12  

10/6/13

      9/30/12  
Same-store sales growth
Company-operated restaurants 4.8 % 1.9 % 3.2 % 4.7 %
Domestic franchised restaurants 5.1 % 7.0 % 4.7 % 7.9 %
Total domestic (company-operated and franchised restaurants) 5.1 % 6.8 % 4.6 % 7.8 %
International franchised restaurants 5.1 % 2.5 % 4.9 % 2.0 %
Total global system 5.1 % 6.3 % 4.6 % 7.1 %
 
Company-operated restaurants (all domestic)
Restaurants at beginning of period 47 40 45 40
New restaurant openings 2 - 5 -
Permanent closings -   -   (1 ) -  
Restaurants at end of period 49 40 49 40
 
Franchised restaurants (domestic)
Restaurants at beginning of period 1,674 1,597 1,634 1,587
New restaurant openings 21 18 70 42
Permanent closings (1 ) (14 ) (13 ) (23 )
Temporary (closings)/re-openings, net 2   5   5   -  
Restaurants at end of period 1,696 1,606 1,696 1,606
 
Franchised restaurants (international)
Restaurants at beginning of period 432 412 425 408
New restaurant openings 16 10 48 37
Permanent closings (5 ) (9 ) (32 ) (33 )
Temporary (closings)/re-openings, net (1 ) 1   1   2  
Restaurants at end of period 442 414 442 414
 
Total restaurant count at end of period 2,187   2,060   2,187   2,060  

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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