Popeye's 2010 Annual Report Download - page 9

AFC ENTERPRISES, INC.
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1. Kelvin J. Pennington
President: Pennington
Partners & Co.
Director since: 1996 Age: 52
2. R. William Ide, III
Partner: McKenna Long &
Aldridge, LLP
Director since: 2001 Age: 70
3. Cheryl A. Bachelder
Chief Executive Officer:
AFC Enterprises, Inc.
Director since: 2006 Age: 54
4. Victor Arias, Jr. (not shown)
Senior Client Partner:
Korn/Ferry International
Director since: 2001 Age: 54
1. Krishnan Anand
President: International Division of
Molson Coors Brewing Company
Director since: 2010 Age: 53
2. John M. Cranor, III
Chairman: AFC Enterprises, Inc.
Director since: 2006 Age: 64
3. John F. Hoffner
Director: AFC Enterprises, Inc.
Director since: 2006 Age: 63
4. Carolyn Hogan Byrd
Founder, Chair & Chief Executive
Officer: GlobalTech Financial, LLC
Director since: 2001 Age: 62
Board of Directors
[Back row, left to right] [Front row, left to right]
(1)AdditionalinformationconcerningfinancialperformancecanbefoundinAFC’sConsolidatedFinancialStatementsandManagement’sDiscussion&AnalysisofFinancialConditionandResultsofOperationsinthe2010Annual
ReportonForm10-K,including,withoutlimitations,informationinItem7oftheAnnualReportrelatedtototalrevenues.
(2)Weightedaveragecommonsharesforthecomputationofdilutedearningspercommonsharewere25.5million,25.4million,and25.7millionfor2010,2009,and2008,respectively.
(Dollarsinmillions)  2010  2009  2008
Netincome  $22.9  $ 18.8  $ 19.4
Depreciationandamortization  $ 3.9  $ 4.4  $ 6.3
Stock-basedcompensationexpense  $ 2.7  $ 1.9  $ 2.5
Maintenancecapitalexpenses  $ (3.2)  $ (1.4)  $ (2.0)
Mandatorydebtpayments  $ (1.0)  $ (1.6)  $ (4.2)
Freecashflow  $25.3  $ 22.1  $ 22.0
Totalrevenues  $146.4  $148.0  $166.8
Freecashflowasapercentageoftotal
revenues(freecashflowmargin)  17.3%  14.9%  13.2%
(Inmillions,exceptpersharedata)  2010  2009  2008
Netincome  $22.9  $ 18.8  $ 19.4
Otherexpenses(income),net  $ 0.2  $ (2.1)  $ (4.6)
Interestexpenseassociatedwithcreditfacility  $ 0.6  $ 1.9   —
Taxeffect  $ (0.3)  $ 0.1  $ 2.0
Taxauditbenefit  $ (1.4)   —   —
Adjustednetincome  $22.0  $ 18.7  $ 16.8
Adjustedearningsperdilutedshare  $0.86  $ 0.74  $ 0.65
Weighted-averagedilutedsharesoutstanding  25.5   25.4   25.7
(Dollarsinmillions)  2010  2009  2008
Netincome  $22.9  $ 18.8  $ 19.4
Interestexpense,net  $ 8.0  $ 8.4  $ 8.1
Incometaxexpense  $10.3  $ 11.5  $ 12.8
Depreciationandamortization  $ 3.9  $ 4.4  $ 6.3
Otherexpenses(income),net  $ 0.2  $ (2.1)  $ (4.6)
OperatingEBITDA  $45.3  $ 41.0  $ 42.0
Totalrevenues  $146.4  $148.0  $166.8
OperatingEBITDAasapercentageof
totalrevenues(operatingEBITDAmargin)  30.9%  27.7%  25.2%
(6)OperatingEBITDA,freecashflow,andadjustedearningsperdilutedsharearesupplementalnon-GAAP
financialmeasures.TheCompanyusesoperatingEBITDA,freecashflow,andadjustedearningsperdiluted
share,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performanceofitsbusinessbecausetheyprovidealinkbetweenprofitabilityand
operatingcashflow.OperatingEBITDA,freecashflow,andadjustedearningsperdilutedshareascalculated
bytheCompanyarenotnecessarilycomparabletosimilarlytitledmeasuresreportedbyothercompanies.
Inaddition,operatingEBITDA,freecashflow,andadjustedearningsperdilutedshare:(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.
(7)System-widesalesgrowthcalculatescombinedsalesofallrestaurantsthatweoperateorfranchise.Sales
informationforfranchisedrestaurantsisprovidedbyourfranchisees.System-widesalesareunaudited.
(4)TheCompanydefinesoperatingEBITDAas“earningsbeforeinterestexpense,taxes,depreciationandamortization,
andotherexpenses(income),net.”Thefollowingtablereconcilesonahistoricalbasisfor2010,2009,and2008,
theCompany’searningsbeforeinterestexpense,taxes,depreciationandamortization,andotherexpenses
(income),net(“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:
(5)TheCompanydefinesfreecashflowasnetincomeplusdepreciationandamortization,plusstockcompensa-
tionexpense,minusmaintenancecapitalexpenses(whichinclude:for2010$1.4millionforinformation
technologyhardwareandsoftware,$1.2millionforreopeningacompany-operatedrestaurantinNew
Orleansandrestaurantreimagingandcorporateofficeconstruction,and$0.6millioninothercapitalassets
tomaintain,replace,andextendthelivesofcompany-operatedQSRequipmentandfacilities;for2009
$0.3millionforinformationtechnologyhardwareandsoftwareand$1.1millioninothercapitalassetsto
maintain,replace,andextendthelivesofcompany-operatedQSRequipmentandfacilities;for2008$0.4
millionforinformationtechnologyhardwareandsoftwareincludingnewrestaurantsitemodelingsoftware
and$1.6millioninothercapitalassetstorepairandrebuilddamagedrestaurantsandtomaintain,replace,
andextendthelivesofcompany-operatedQSRequipmentandfacilities),minusmandatorydebtpayments.
Thefollowingtablereconcilesonahistoricalbasisfor2010,2009,and2008,theCompany’sfreecash
flow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freecashflow:
(3)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(i)otherexpenses(income),net(whichfor2010include
$0.7millionforimpairmentsanddisposalsoffixedassetspartiallyoffsetby$0.5millionfornetgainonsalesofassets;
for2009include$3.3milliononthesaleofassetspartiallyoffsetby$0.6millionrelatedtoimpairmentsand
disposalsoffixedassetsand$0.6millionofotherexpense;andfor2008include$12.9millionfromrecoveries
fromdirectorsandofficersinsuranceclaims,$0.9millioningainonthesaleofassets,and$0.3millionofother
incomepartiallyoffsetby$9.5millionofimpairmentsoffixedassetsandgoodwillimpairment),(ii)theinterest
expenseassociatedwiththecreditfacility,(iii)thetaxeffectoftheseadjustments,and(iv)thetaxauditbenefit.
Adjustedearningsperdilutedshareprovidethepershareeffectofadjustednetincomeonadilutedbasis.The
followingtablereconcilesonahistoricalbasisfor2010,2009,and2008,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: