Popeye's 2014 Annual Report Download - page 35

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 are included 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 a number 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 48 states, the District of Columbia, Puerto Rico, Guam, the Cayman
Islands, and 26 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.
2014 Overview
We accomplished the following results in 2014 as a result of disciplined execution against our strategic plan:
• Reported net income was $38.0 million, or $1.60 per diluted share, compared to $34.1 million, or $1.41 per diluted share,
in 2013. Adjusted earnings per diluted share were $1.65 compared to $1.43 in 2013, 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 system-wide sales increased approximately 12.3%, for a two-year growth rate of over 20%.
• Global same-store sales increased 6.2%, compared to a 3.7% increase last year, for a two-year growth of 9.9%.
• The Popeyes system opened 201 restaurants including 13 company-operated restaurants, compared to 194 last year, and
permanently closed 53 restaurants, resulting in 148 net openings, compared to 126 in 2013. The Popeyes system opened
more new restaurants in fiscal 2014 than in any single year in the last 16 years.
• Approximately 430 domestic restaurants were remodeled in the new Popeyes Louisiana Kitchen image bringing the total
to about 1,530 restaurants, or 82% of the domestic system.
• General and administrative expenses were $78.9 million, at 2.9% of system-wide sales, compared to $73.4 million at
3.0% of system-wide sales in 2013.
• Operating EBITDA of $74.7 million was 31.7% of total revenues, compared to $65.2 million, at 31.7% 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 $48.0 million, compared to $42.5 million in 2013. Free cash flow is a supplemental non-GAAP
measure of performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”
• The Company repurchased 891,931 shares of its common stock for approximately $40.0 million.
• The Company purchased the recipes and formulas it uses in the preparation on many of its core menu items for $43.0
million from Diversified Foods and Seasonings, L.L.C. ("Diversified").
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