Popeye's 2014 Annual Report Download - page 50

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of other commodities including shortening, wheat, gas and utility price fluctuations. Our ability to recover increased costs through
higher pricing is limited by the competitive environment in which we operate.
In order to ensure favorable pricing for fresh chicken purchases and to maintain an adequate supply of fresh chicken for the
Popeyes system, Supply Management Services, Inc. (a not-for-profit purchasing cooperative of which we are a member) has
entered into chicken purchasing contracts with chicken suppliers. The contracts, which pertain to the vast majority of our system-
wide purchases for Popeyes are “cost-plus” contracts that utilize prices based upon the cost of certain feed grains plus certain
agreed upon non-feed and processing costs. In order to stabilize pricing for the Popeyes system, Supply Management Services,
Inc. enters periodically based on market levels into commodity pricing agreements for certain commodities including corn, soy,
and wheat which impact the price of poultry and other food costs.
Foreign Currency Exchange Rate Risk. We are exposed to foreign currency exchange risk from the potential changes in
foreign currency rates that directly impact our royalty revenues and cash flows from our international franchise operations. In
2014, franchise revenues from these foreign currency based operations represented approximately 8.5% of our total franchise
revenues. For each of 2014, 2013 and 2012, foreign-sourced revenues represented approximately 4.7%, 4.6% and 4.8%, of our
total revenues, respectively. All other things being equal, for the fiscal year ended December 28, 2014, operating profit would have
decreased by approximately $1.0 million if all foreign currencies had uniformly weakened 10% relative to the U.S. Dollar.
As of December 28, 2014, approximately $1.4 million of our accounts receivable were denominated in foreign currencies.
During 2014 the net loss from the exchange rate was insignificant. Our international franchised operations are in 26 foreign
countries with approximately 50% or our revenues from international royalties originating from restaurants in South Korea, Canada
and Turkey.
Interest Rate Risk. Our net exposure to interest rate risk consists of our borrowings under our 2013 Credit Facility, as amended
and restated. Borrowings made pursuant to that facility include interest rates that are benchmarked to U.S. and European short-
term floating interest rates. As of December 28, 2014, the balances outstanding under our 2013 Credit Facility, totaled
$106.0 million . The impact on our annual results of operations of a hypothetical one-point interest rate change on the outstanding
balances under our 2013 Credit Facility would be approximately $0.5 million after the effects of its December 16, 2014 interest
rate swap agreement.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements can be found beginning on Page 42 of this Annual Report, and the relevant portions of
those statements and the accompanying notes are hereby incorporated by reference into this Item 8.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures of a registrant designed to ensure that information required
to be disclosed by the registrant in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms
and that such information is accumulated and communicated to a registrant’s management, including its principal executive and
financial officers, as appropriate, to allow for timely decisions regarding required disclosures.
(b) Our Evaluation of the Company’s Disclosure Controls and Procedures
We evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of
December 28, 2014, as required by Rule 13a-15(b) and 15d-15(b) of the Exchange Act. This evaluation was carried out under the
supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial
Officer (“CFO”).
Based on management’s assessment, the CEO and CFO concluded that the Company’s disclosure controls and procedures were
effective as of December 28, 2014 to ensure that information required to be disclosed in the reports we file or submit under the