Popeye's 2014 Annual Report Download - page 16

(1) Additional information concerning financial performance can be found on
Popeyes Louisiana Kitchen, Inc.’s Consolidated Financial Statements and
Management’s Discussion & Analysis of Financial Condition and Results of
Operations in the 2014 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 23.8 million, 24.1 million, 24.5 million, 25.0 million for 2014,
2013 and 2012, 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 2014 includes $2.0 million related to executive transition expenses,
$0.2 million on loss of disposals of property and equipment partially
offset by $1.0 million in net gain on the sale of assets; and
ii. fiscal 2013 includes $0.4 million loss on disposals of property and
equipment partially offset by $0.1 million in net gain on sale of assets, net;
iii. 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;
iv. 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;
v. 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
b) for fiscal 2014, $0.5 million in tax expense for an out-of-period adjustment to
the Company’s deferred tax liability associated with its indefinite lived
intangible assets as discussed in Note 2 to the Condensed Consolidated
Financial Statements;
c) for fiscal 2013, $0.4 million in interest expenses from the retirement of the
2010 Credit Facility;
d) for fiscal 2012, $0.5 million in legal fees related to licensing arrangements;
e) for fiscal 2011, $0.5 million in accelerated depreciation related to the
Company’s relocation to a new corporate service center;
f) for fiscal 2010, $0.6 million in interest charges associated with the refinancing
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;
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 fiscal 2014, 2013, 2012, 2011 and 2010, 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:
(in millions, except per share data) 2014 2013 2012 2011 2010
Net income $ 38.0 $ 34.1 $ 30.4 $ 24.2 $ 22.9
Other expense (income), net $ 1.2 $ 0.3 $ (0.5) $ 0.5 $ 0.2
Interest expense associated with
credit facility retirements and
amendments — $ 0.4 — — $ 0.6
Legal fees related to licensing
arrangements — — $ 0.5 — —
Accelerated depreciation related
to the Company’s relocation — — — $ 0.5 —
Deferred tax liability adjustment $ 0.5 — — — —
Tax audit benefit — — — — $ (1.4)
Tax effect $ (0.5) $ (0.3) — $ (0.5) $ (0.3)
Adjusted net income $ 39.2 $ 34.5 $ 30.4 $ 24.7 $ 22.0
Adjusted earnings per diluted share $ 1.65 $ 1.43 $ 1.24 $ 0.99 $ 0.86
Weighted average diluted shares
outstanding 23.8 24.1 24.5 25.0 25.5
(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 2014, 2013 and 2012, 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.
(dollars in millions) 2014 2013 2012
Net income $ 38.0 $ 34.1 $ 30.4
Interest expense, net 3.0 3.7 3.6
Income tax expense 23.8 20.4 17.3
Depreciation and amortization 8.7 6.7 4.6
Other expenses (income), net 1.2 0.3 (0.5)
Legal fees related to licensing arrangements — — 0.5
Operating EBITDA $ 74.7 $ 65.2 $ 55.9
Total Revenues $ 235.6 $ 206.0 $ 178.8
Operating EBITDA margin 31.7% 31.7% 31.3%
(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 2014, $0.6 million in
company-operated restaurant reimages, $0.8 million of information technology
hardware and software and $2.6 million in other capital assets to maintain,
replace and extend the lives of company-operated restaurant and corporate
facilities and equipment, for fiscal year 2013, $1.7 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, $1.1 million in company-operated restaurant reimages, $1.3 million of
information technology hardware and software and $2.2 million in other capital
assets to maintain, replace and extend the lives of company-operated restaurant
facilities; In 2014, maintenance capital expenditures exclude $20.9 million for the
construction of new company-operated restaurants and $2.9 million related to
the acquired restaurants in Minnesota and California. In 2013, maintenance
capital expenditures exclude $15.5 million for the construction of new company-
operated restaurants and $13.6 million related to the acquired restaurants in
Minnesota and California. In 2012, maintenance capital expenditures exclude
$6.7 million for the construction of new company-operated restaurants and
$14.9 million related to the acquired restaurants in Minnesota and California.
The following table reconciles on a historical basis for fiscal years 2014, 2013,
and 2012, the Company’s Free Cash Flow on a consolidated basis to the line on its
consolidated statements of operations entitled net income, which the Company
believes is the most directly comparable GAAP measure on its consolidated
statements of operations.
(dollars in millions) 2014 2013 2012
Net income $ 38.0 $ 34.1 $ 30.4
Depreciation and amortization 8.7 6.7 4.6
Stock-based compensation expense 5.3 5.4 4.9
Maintenance capital expenditures (4.0) (3.7) (4.6)
Free cash flow $ 48.0 $ 42.5 $ 35.3
(6) Adjusted earnings per diluted share, Operating EBITDA, and Free cash flow are
supplemental non-GAAP financial measures. The Company uses Adjusted
earnings per diluted 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 performance of its business. Adjusted earnings per diluted share,
Operating EBITDA 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
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.
(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. Fiscal year 2012 consisted of
53 weeks. All other fiscal years presented consisted of 52 weeks. The 53rd week
in 2012 contributed approximately 2.0% to global system-wide sales growth.
Excluding the impact of the 53rd week in 2012, global system-wide sales growth
in 2013 was approximately 9.9%.
NON-GAAP RECONCILIATIONS
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POPEYES LOUISIANA KITCHEN, INC. 2014 ANNUAL REPORT