Popeye's 2015 Annual Report Download - page 47

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Forward-Looking Statements
Forward-Looking Statement: Certain statements in this Annual Report on Form 10-K contain “forward-looking statements”
within the meaning of the federal securities laws. Statements regarding future events and developments and our future
performance, as well as management’s current expectations, beliefs, plans, estimates or projections relating to the future, are
forward-looking statements within the meaning of these laws. These forward-looking statements are subject to a number of risks
and uncertainties. Examples of such statements in this Annual Report on Form 10-K include discussions regarding the Company’s
planned implementation of its strategic plan, expectations regarding future growth, planned share repurchases, projections and
expectations regarding same-store sales for fiscal 2016 and beyond, expected capital expenditures, guidance for new restaurant
openings and closures, effective income tax rate, and the Company’s anticipated 2016 and long-term performance, including
projections regarding general and administrative expenses, net earnings per diluted share, and similar statements of belief or
expectation regarding future events. Among the important factors that could cause actual results to differ materially from those
indicated by such forward-looking statements are: competition from other restaurant concepts and food retailers, disruptions in
the financial markets, the loss of franchisees and other business partners, labor shortages or increased labor costs, increased
costs of our principal food products, changes in consumer preferences and demographic trends, as well as concerns about health
or food quality, instances of avian flu or other food-borne illnesses, general economic conditions, the loss of senior management
and the inability to attract and retain additional qualified management personnel, limitations on our business under our credit
facility, our ability to comply with the repayment requirements, covenants, tests and restrictions contained in our credit facility,
failure of our franchisees, a decline in the number of franchised units, a decline in our ability to franchise new units, slowed
expansion into new markets, unexpected and adverse fluctuations in quarterly results, increased government regulation, the
reliability of our information technology systems and network security, effects of volatile gasoline prices, supply and delivery
shortages or interruptions, cyber security risks, currency, economic and political factors that affect our international operations,
inadequate protection of our intellectual property and liabilities for environmental contamination and the other risk factors
detailed in this Annual Report on Form 10-K and other documents we file with the Securities and Exchange Commission.
Therefore, you should not place undue reliance on any forward-looking statements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in certain commodity prices, foreign currency exchange rates and interest rates.
All of these market risks arise in the normal course of business, as we do not engage in speculative trading activities. The
following analysis provides quantitative information regarding these risks.
Commodity Market Risk. We are exposed to market risk from changes in poultry and other commodity prices. Chicken is
the principal raw material for our Popeyes operations, constituting approximately 45% of our combined “Restaurant food,
beverages and packaging” costs. These costs are significantly affected by fluctuations in the cost of chicken, which can result
from a number of factors, including increases in the cost of grain, disease, declining market supply of fast-food sized chickens
and other factors that affect availability, and greater international demand for domestic chicken products. We are affected by
fluctuations in the cost 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 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
2015, franchise revenues from these foreign currency based operations represented approximately 7.0% of our total franchise
revenues. For each of 2015, 2014, and 2013, foreign-sourced revenues represented approximately 4.7%, 4.7% and 4.6%, of
our total revenues, respectively. All other things being equal, for the fiscal year ended December 27, 2015, 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 27, 2015, approximately $1.5 million of our accounts receivable were denominated in foreign currencies.
Our international franchised operations are in 27 foreign countries with approximately 50% or our revenues from international
royalties originating from restaurants in South Korea, Canada and Turkey.
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