Popeye's 2013 Annual Report Download - page 36

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Selected Financial Data, our
Consolidated Financial Statements and our Risk Factors that areincluded elsewhere in this filing.
Our discussion contains forward-looking statements based upon current expectations that involve risks and
uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could
differ materially from those anticipated in these forward-looking statements, as a result of anumber of factors including
those factors set forth in Item 1A. of this Annual Report and other factors presented throughout this filing.
Nature of Business
Popeyes develops, operates, and franchises quick-service restaurants under the trade names Popeyes®Chicken &
Biscuits and Popeyes®Louisiana Kitchen (collectively “Popeyes”) in 47 states, the District of Columbia, Puerto Rico,
Guam, the Cayman Islands, and 28 foreign countries. Popeyes has two reportable business segments: franchise
operations and company-operated restaurants. Financial information concerning these business segments can be found
at Note 20 to our Consolidated Financial Statements.
2013 Overview
We accomplished the following results in 2013 as a result of disciplined execution against our strategic plan:
• Reported net income was $34.1 million, or $1.41 per diluted share, compared to $30.4 million, or $1.24 per
diluted share, in 2012. Adjusted earnings per diluted share were $1.43 compared to $1.24 in 2012, an increase
of approximately 15%. Adjusted earnings per diluted share is a supplemental non-GAAP measure of
performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”
• Global same-store sales increased 3.7%, compared to a6.9% increase last year, for a two-year growth of
10.6%.
• Global system-wide sales increased approximately 9.9%, for a two-year growth rate of over 21%, after adjusting
for the 53rd week of operations in fiscal 2012.
•The Popeyes system opened 194 restaurants, compared to 141 last year, and permanently closed 68 restaurants,
resulting in 126 net openings, compared to 66 in 2012. The Popeyes system opened more new restaurants in
fiscal 2013 than in any single year in the last 15 years.
• Popeyes expanded its strategic investment in company-operated restaurants by adding six new restaurants in
our two new markets, Indianapolis and Charlotte, and three in our heritage markets, New Orleans and Memphis.
We expect that this strategy will allow the Company to demonstrate its dominant real estate approach and our
investment in our employee and guest experiences. In addition, the profitability of our restaurants represents
agood long-term investment of capital and fuels our investment in our franchise system as a whole.
•Approximately 550 domestic restaurants were remodeled bringing the total to over 1,100 restaurants, or 60%
of the domestic system, in the new Popeyes Louisiana Kitchen image.
• General and administrative expenses were $73.4 million, at 3.0% of system-wide sales compared to $67.6
million at 3.0% of system-wide sales in 2012.
• Operating EBITDA of $65.2 million was 31.7% of total revenues, compared to $55.9 million, at 31.3% of
total revenues last year. Operating EBITDA is a supplemental non-GAAP measure of performance. See the
heading entitled “Management’s Use of Non-GAAP Financial Measures.”
•Free cash flow was $42.0 million, compared to $36.7 million in 2012. Free cash flow is a supplemental non-
GAAP measure of performance. See the heading entitled “Management’s Use of Non-GAAP Financial
Measures.”