Popeye's 2015 Annual Report Download - page 14

(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 2015 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 23.1 million, 23.8 million, and 24.1 million for 2015,
2014, and 2013, 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 2015 includes $0.4 million for recoveries under Deepwater
Horizon Economic and Property Damages Settlement Program and
$0.2 million net gain on the sale of assets offset by $0.5 million
related to executive transition expenses and $0.1 million net loss on
disposal of fixed assets;
ii. 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
iii. 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;
iv. 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;
v. 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;
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 18 to the
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) the tax effect of these adjustments at the effective statutory rates.
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 2015, 2014, 2013, 2012 and 2011, 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) 2015 2014 2013 2012 2011
Net income $ 44.1 $ 38.0 $ 34.1 $ 30.4 $ 24.2
Other expense (income), net — 1.2 0.3 (0.5) 0.5
Interest expense associated with
credit facility retirements and
amendments — — 0.4 — —
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 effect — (0.5) (0.3) — (0.5)
Adjusted net income $ 44.1 $ 39.2 $ 34.5 $ 30.4 $ 24.7
Adjusted earnings per diluted share $ 1.91 $ 1.65 $ 1.43 $ 1.24 $ 0.99
Weighted average diluted shares
outstanding 23.1 23.8 24.1 24.5 25.0
(4) The Company defines Operating EBITDA as earnings before interest expense,
taxes, depreciation and amortization, and other expenses (income), net. The
following table reconciles on a historical basis for fiscal years 2015, 2014
and 2013, 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.
Non-GAAP Reconciliations
(dollars in millions) 2015 2014 2013
Net income $ 44.1 $ 38.0 $ 34.1
Interest expense, net 3.7 3.0 3.7
Income tax expense 26.5 23.8 20.4
Depreciation and amortization 9.7 8.7 6.7
Other expenses (income), net — 1.2 0.3
Operating EBITDA $ 84.0 $ 74.7 $ 65.2
Total Revenues $ 259.0 $ 235.6 $ 206.0
Operating EBITDA margin 32.4% 31.7% 31.7%
(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 2015, $0.4 million of
information technology hardware and software and $1.5 million in other
capital assets to maintain, replace and extend the lives of company-
operated restaurant and corporate facilities and equipment; for fiscal 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; and 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. In 2015, maintenance capital
expenditures exclude $10.9 million for the construction of new company-
operated restaurants. 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.
The following table reconciles on a historical basis for fiscal years 2015,
2014, and 2013, 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) 2015 2014 2013
Net income $ 44.1 $ 38.0 $ 34.1
Depreciation and amortization 9.7 8.7 6.7
Stock-based compensation expense 6.7 5.3 5.4
Maintenance capital expenditures (1.9) (4.0) (3.7)
Free cash flow $ 58.6 $ 48.0 $ 42.5
(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%.
12 POPEYES LOUISIANA KITCHEN, INC. 2015 ANNUAL REPORT