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

  • third quarter and year-to-date 2013 and 2012 are comprised of asset write downs offset by 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 of asset write downs and $0.1 million of hurricane-related expenses, net;

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

(iii) 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 third quarter 2013, third quarter 2012, third quarter year-to-date 2013, third quarter year-to-date 2012 and fiscal year 2012, the Company’s Adjusted earnings per diluted share on a consolidated basis to the line on its Condensed Consolidated Statements of Operations entitled Net income, which the Company believes is the most directly comparable GAAP measure on its Condensed Consolidated Statements of Operations.

(in millions, except per share data)    

Q3 2013

   

Q3 2012

   

Year-to-Date 10/6/13

   

Year-to-Date 9/30/12

    Fiscal 2012
Net income     $ 9.0     $ 6.9     $ 27.1     $ 21.8     $ 30.4
Other expense (income), net 0.1 0.1 0.2 0.2 (0.5 )
Legal fees related to licensing arrangements - - - 0.5 0.5
Tax effect       -       (0.1 )       (0.1 )       (0.3 )       -  
Adjusted earnings     $ 9.1     $ 6.9       $ 27.2       $ 22.2       $ 30.4  
Adjusted earnings per diluted share     $ 0.38     $ 0.29       $ 1.13       $ 0.91       $ 1.24  
Weighted average diluted shares outstanding       24.1       24.2         24.1         24.4         24.5  

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 third quarter year-to-date 2013 and third quarter year-to-date 2012, the Company’s Operating EBITDA on a consolidated basis to the line on its Condensed Consolidated Statements of Operations entitled Net income, which the Company believes is the most directly comparable GAAP measure on its Condensed Consolidated Statements of Operations. Operating EBITDA margin is defined as Operating EBITDA divided by Total revenues.

(in millions)

   

Year-to-Date 10/6/13

   

Year-to-Date 9/30/12

Net income     $ 27.1     $ 21.8
Interest expense, net 2.8 2.7
Income tax expense 16.2 12.2
Depreciation and amortization 4.9 3.5
Other expenses (income), net 0.2 0.2
Legal fees related to licensing arrangements       -         0.5  
Operating EBITDA     $ 51.2       $ 40.9  
Total revenues     $ 157.6       $ 131.3  
Operating EBITDA margin       32.5 %       31.2 %

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 third quarter 2013, third quarter 2012, third quarter year-to-date 2013 and third quarter year-to-date 2012, Company-operated restaurant operating profit to the line item on its Condensed Consolidated Statements of Operations entitled Sales by company-operated restaurants, which the Company believes is the most directly comparable GAAP measure on its Condensed Consolidated Statements of Operations. Company-operated restaurant operating profit margin is defined as Company-operated restaurant operating profit divided by Sales of Company-operated restaurants.

(in millions)

    Q3 2013     Q3 2012    

Year-to-Date 10/6/13

   

Year-to-Date 9/30/12

Sales by company-operated restaurants     $ 18.6     $ 13.5     $ 60.0     $ 47.6

Less: Restaurant employee, occupancy and other expenses

9.0 6.7 28.8 23.1

Less: Restaurant food, beverages and packaging

      6.3         4.6         20.0         16.0  
Company-operated restaurant operating profit     $ 3.3       $ 2.2       $ 11.2       $ 8.5  
Company-operated restaurant operating profit margin       17.7 %       16.3 %       18.7 %       17.9 %

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 third quarter year-to-date 2013 $1.4 million in Company-operated restaurant reimages, $0.8 million of information technology projects and $0.7 million in other capital assets to maintain, replace and extend the lives of Company-operated restaurant facilities and equipment; and for third quarter year-to-date 2012 $0.6 million in Company-operated restaurant reimages, $0.9 million in information technology projects and $1.0 million in other capital assets to maintain, replace and extend the lives of Company-operated restaurant facilities and equipment.

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