Popeye's 2013 Annual Report Download - page 14

(1) Additional information concerning financial performance can be found in
Popeyes Louisiana Kitchen, Inc.’s Consolidated Financial Statements and
Management’s Discussion & Analysis of Financial Condition and Results of
Operations in the 2013 Annual Report on Form 10-K.
(2) Weighted average common shares for the computation of diluted earnings per
common share were 24.1 million, 24.5 million and 25.0 million for fiscal years
2013, 2012 and 2011, respectively.
(3) The Company defines adjusted net income for the periods presented as the
Company’s reported net income after adjusting for certain non-operating items
consisting of the following:
a) other expense (income), net, as follows:
i. fiscal 2013 includes $0.4 million loss on disposals of property and equip-
ment partially offset by $0.1 million in net gain on sale of assets;
ii. fiscal 2012 includes $0.9 million in gains on sale of real estate assets to
franchisees partially offset by $0.3 million loss on disposals of property
and equipment and $0.1 million of hurricane-related expenses, net;
iii. fiscal 2011 includes $0.8 million in expenses for the global service center
relocation, and $0.5 million in disposals of fixed assets offset by a $0.8
net gain on the sale of assets;
iv. fiscal 2010 includes $0.7 million for impairments and disposals of fixed
assets partially offset by $0.5 million for net gain on sales of assets; and
v. fiscal 2009 includes $3.3 million on the sale of assets partially offset by a
$0.4 million loss on insurance recoveries related to asset damages, a $0.2
million impairment related to restaurant closures and $0.6 million related
to impairments and disposals of fixed assets.
b) for fiscal 2013, $0.4 million in interest expenses from the retirement of the
2010 Credit Facility;
c) for fiscal 2012, $0.5 million in legal fees related to licensing arrangements;
d) for fiscal 2011, $0.5 million in accelerated depreciation related to the
Company’s relocation to a new corporate service center;
e) for fiscal 2010, $0.6 million in interest charges associated with the retire-
ment of the Company’s 2005 Credit Facility, and a $1.4 million tax audit
benefit related to the completion of a federal income tax audit for years
2004 and 2005;
f) for fiscal 2009, $1.9 million in interest charges associated with the Company’s
2005 Credit Facility amendment; and
g) the tax effect of these adjustments.
Adjusted earnings per diluted share provides the per share effect of adjusted
net income on a diluted basis. The following table reconciles on a historical
basis for fiscal years 2013, 2012, 2011, 2010 and 2009, the Company’s adjusted
earnings per diluted share on a consolidated basis to the line on its consoli-
dated statement of operations entitled net income, which the Company believes
is the most directly comparable GAAP measure on its consolidated statement of
operations:
(4) 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 fiscal years 2013, 2012 and 2011, the Company’s 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.
Operating EBITDA margin is defined as Operating EBITDA divided by total
revenues.
Non-GAAP Reconciliations
(in millions, except per share data) 2013 2012 2011 2010 2009
Net income $ 34.1 $ 30.4 $ 24.2 $ 22.9 $ 18.8
Other expense (income), net $ 0.3 $ (0.5) $ 0.5 $ 0.2 $ (2.1)
Interest expense associated with credit
facility retirements and amendments $ 0.4 — — $ 0.6 $ 1.9
Legal fees related to licensing
arrangements — $ 0.5 — — —
Accelerated depreciation related to
the Company’s relocation to a
new Global Service Center — — $ 0.5 — —
Tax audit benefit — — — $ (1.4) —
Tax effect $ (0.3) — $ (0.5) $ (0.3) $ 0.1
Adjusted net income $ 34.5 $ 30.4 $ 24.7 $ 22.0 $ 18.7
Adjusted earnings per diluted share $ 1.43 $ 1.24 $ 0.99 $ 0.86 $ 0.74
Weighted average diluted shares
outstanding 24.1 24.5 25.0 25.5 25.4
(in millions) 2013 2012 2011
Net income $ 34.1 $ 30.4 $ 24.2
Interest expense, net 3.7 3.6 3.7
Income tax expense 20.4 17.3 12.8
Depreciation and amortization 6.7 4.6 4.2
Other expenses (income), net 0.3 (0.5) 0.5
Legal fees related to licensing arrangements — 0.5 —
Operating EBITDA $ 65.2 $ 55.9 $ 45.4
Total Revenues $ 206.0 $ 178.8 $ 153.8
Operating EBITDA margin 31.7% 31.3% 29.5%
(in millions) 2013 2012 2011
Net income $ 34.1 $ 30.4 $ 24.2
Depreciation and amortization 6.7 4.6 4.2
Stock-based compensation expense 5.4 4.9 2.9
Maintenance capital expenditures (4.2) (3.2) (2.8)
Free cash flow $ 42.0 $ 36.7 $ 28.5
(5) 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 fiscal year 2013, $2.2 million in company-
operated restaurant reimages, $0.9 million of information technology hardware
and software and $1.1 million in other capital assets to maintain, replace and
extend the lives of company-operated restaurant facilities and equipment; for
fiscal 2012, $0.6 million in company-operated restaurant reimages, $1.1 million of
information technology hardware and software and $1.5 million in other capital
assets to maintain, replace and extend the lives of company-operated restau-
rant facilities; and for fiscal 2011, $1.5 million in company-operated restaurant
reimages, $0.8 million of information technology hardware and software and
$0.5 million in other capital assets to maintain, replace and extend the lives of
company-operated restaurant facilities. In 2013, maintenance capital expendi-
tures exclude $13.8 million related to the acquired restaurants in Minnesota and
California and $15.3 million for the construction of new Company-operated
restaurants. In 2012, maintenance capital expenditures exclude $16.9 million
related to the acquired restaurants in Minnesota and California and $7.2 million
for the construction of new Company-operated restaurants. In 2011, mainte-
nance capital expenditures exclude $3.3 million related to the construction of
the new corporate office and $1.5 million for the construction of new company-
operated restaurants.
The following table reconciles on a historical basis for fiscal years 2013, 2012,
and 2011, 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.
(6) Adjusted earnings per share, Operating EBITDA and free cash flow are supple-
mental non-GAAP financial measures. The Company uses adjusted earnings per
share, operating EBITDA 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 perfor-
mance of its business. Adjusted earnings per diluted share, operating EBITDA,
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, free cash flow: (a) do not repre-
sent 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, earn-
ings 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.
Check out our online annual report at http://popeyes.com/investors/annual-reports/2013/
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