Popeye's 2014 Annual Report Download - page 66

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Popeyes Louisiana Kitchen, Inc.
Notes to Consolidated Financial Statements
For Fiscal Years 2014, 2013, and 2012
Note 1 — Description of Business
Popeyes Louisiana Kitchen, Inc. (“Popeyes” or “the Company”) develops, operates and franchises quick-service restaurants
under the trade name Popeyes® Chicken & Biscuits and Popeyes® Louisiana Kitchen in 48 states, the District of Columbia, three
territories, and 26 foreign countries.
Note 2 — Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation.
Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America (“GAAP”) requires the Company’s management to make estimates and assumptions that
affect the reported amounts of assets and liabilities. These estimates affect the disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of revenues and expenses during each reporting period.
Actual results could differ from those estimates.
Fiscal Year. The Company has a 52/53-week fiscal year that ends on the last Sunday in December. The 2014 and 2013 fiscal
years both consisted of 52 weeks. Fiscal year 2012 consisted of 53 weeks.
Cash and Cash Equivalents. The Company considers all money market investment instruments and certificates of deposit with
original maturities of three months or less to be cash equivalents. Under the terms of the Company’s bank agreements, outstanding
checks in excess of the cash balances in the Company’s primary disbursement accounts create a bank overdraft liability. Bank
overdrafts were insignificant for both fiscal years 2014, and 2013.
Supplemental Cash Flow Information.
(in millions) 2014 2013 2012
Interest paid $ 1.8 $ 3.1 $ 2.9
Property acquired under capital lease obligation — — 1.0
Accrued purchase of property and equipment 3.0 3.8 3.3
Income taxes paid, net 14.9 16.2 12.5
Accounts Receivable, Net. At December 28, 2014 and December 29, 2013, accounts receivable, net were $8.4 million and
$8.8 million, respectively. Accounts receivable consist primarily of amounts due from franchisees related to royalties, and rents,
and various miscellaneous items. The accounts receivable balance is stated net of an allowance for doubtful accounts. The Company
reserves a franchisee’s receivable balance based upon the age of the receivable and consideration of other factors and events.
During 2014, 2013, and 2012, changes in the allowance for doubtful accounts were as follows:
(in millions) 2014 2013 2012
Balance, beginning of year $ 0.1 $ 0.2 $ 0.6
Provisions for credit (recoveries) losses — — (0.1)
Write-offs — (0.1)(0.3)
Balance, end of year $ 0.1 $ 0.1 $ 0.2
Notes Receivable, Net. Notes receivable consist of notes from franchisees to finance certain past due franchise revenues and
rents. The notes receivable balance is stated net of an allowance for uncollectible amounts which is evaluated each reporting period
on a note-by-note basis. At December 28, 2014 and December 29, 2013, notes receivable, net, were approximately $0.6 million
and $0.7 million, respectively, of which $0.1 million was current. No notes were reserved at December 28, 2014. The balance in
the allowance account at December 29, 2013 and December 30, 2012 was approximately $0.1 million and $0.9 million.
Inventories. Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consist principally
of food, beverage items, paper and supplies. At December 28, 2014 and December 29, 2013, inventory of $0.8 million and $0.5
million was included as a component of “Other current assets.”