Popeye's 2015 Annual Report Download - page 38

22
• $2.9 million increase in personnel expenses in the corporate support center primarily related to incentive compensation
and marketing;
• $1.7 million increase in multi-unit management expenses in new Company-operated restaurant markets in our new
Indianapolis and Charlotte markets;
• $1.1 million increase in domestic franchise restaurant support services;
• $0.7 million decrease in provision for credit recoveries;
• $0.5 million increase in domestic new restaurant development expenses; and
• $0.6 million increase in leadership development training and field training expenses;
partially offset by:
• $1.7 million lower royalty expense under the old royalty and supply agreement with Diversified. The Company reinvested
approximately $1.1 million of this savings into the initiatives supporting its Develop Servant Leaders strategy; and
• $1.4 million lower information technology outsourcing fees, other professional fees and other general and administrative
expenses, net.
General and administrative expenses remain among the most efficient in the industry at approximately 2.9% and 3.0% of
system-wide sales during 2014 and 2013, respectively.
Depreciation and Amortization
Depreciation and amortization was $8.7 million in 2014 compared to $6.7 million in 2013. The increase in depreciation and
amortization is primarily attributable to depreciation associated with new Company-operated restaurants, restaurant reimages,
acquired restaurant properties converted and leased to franchisees in Minnesota and California, information technology assets
and our corporate support center facility.
Other Expenses (Income), Net
Other expense was $1.2 million in expense in 2014 compared to other income of $0.3 million in 2013. In 2014, other expense
included $0.2 million in loss on disposals of property and equipment and $2.0 million in expenses related to executive transition
expenses, offset by $1.0 million in net gain on sales of assets. In 2013, other income includes a $0.4 million in loss on disposals
of property and equipment offset by $0.1 million in net gain on sales of assets.
See Note 16 to our Consolidated Financial Statements for a description of Other expenses (income), net for 2014 and 2013.
Operating Profit
Operating profit in 2014 was $64.8 million, a $6.6 million increase compared to 2013. Fluctuations in the components of
revenue and expense giving rise to this change are discussed above. The following is an analysis of the fluctuations in operating
profit by business segment. Operating profit for each reportable segment includes operating results directly attributable to each
segment.
(Dollars in millions) 2014 2013
Increase
(Decrease)
As a
Percent
Franchise operations $ 62.2 $ 54.7 $ 7.5 13.7%
Company-operated restaurants 12.5 10.5 2.0 19.0%
Operating profit before unallocated expenses 74.7 65.2 9.5 14.6%
Less unallocated expenses:
Depreciation and amortization 8.7 6.7 2.0 29.9%
Other expenses (income), net 1.2 0.3 0.9 300.0%
Total $ 64.8 $ 58.2 $ 6.6 11.3%
The $7.5 million growth in franchise operations was primarily due to the $9.4 million increase in franchise revenue partially
offset by increases in general and administrative expenses related to the corporate support center, domestic franchise restaurant
support, new restaurant development expenses and expenses supporting the Company's Develop Servant Leaders strategy.
22