May 25, 2011 · 0 Comments
ATLANTA– May 25, 2011 (www.hospitalitybusinessnews.com) –AFC Enterprises, Inc. the franchisor and operator of Popeyes® restaurants, today reported results for its fiscal first quarter which ended April 17, 2011. The Company also reaffirmed its fiscal 2011 guidance and provided a business update on its Strategic Plan.
AFC Enterprises Chief Executive Officer Cheryl Bachelder stated, “We delivered another strong quarter of positive results operationally and financially. This growth was primarily driven by global top-line sales momentum from both same-store sales and new unit growth, as we continue to focus on our strategic roadmap. Our restaurants are managing in a tough commodity environment by keeping sales strong, selectively raising prices, and tightly controlling labor. We remain on track to deliver our 2011 goals.”
The Company’s Strategic Plan is built on the foundation of the Four Pillars below.
1. Build the Popeyes Brand
2. Run Great Restaurants
3. Strengthen Unit Economics
4. Ramp Up New Unit Growth
First Quarter 2011 Financial Performance Compared to First Quarter 2010
Global system-wide sales increased by 6.9 percent. System-wide sales were comprised of $575.4 million in franchise restaurant sales and $17.6 million in Company-operated restaurant sales.
Global same-store sales increased 3.9 percent compared to a 0.3 percent decrease in 2010. Total domestic same-store sales increased 3.9 percent compared to a 0.4 percent decrease last year. According to independent data, in the first quarter 2011, Popeyes same-store sales outpaced the chicken QSR category for the 12th consecutive quarter and the QSR category for the 4th consecutive quarter.
International same-store sales increased 4.1 percent and represented the 5th consecutive quarter of positive same-store sales. This increase was primarily driven by strong same-store sales in Turkey, Latin America and Canada pa
rtially offset by Korea and U.S. military bases abroad.
Total revenues were $46.8 million, compared to $43.8 million last year. This increase was primarily attributable to positive same-store sales and sales from new restaurants opened in 2010.
Company-operated restaurant operating profit (“ROP”) was $3.4 million, or 19.3 percent of sales, compared to $3.2 million, or 19.9 percent of sales, last year. The $0.2 million increase in ROP was primarily due an increase in same store sales of 6.4 percent partially offset by higher food costs as a result of increased commodity costs. Company-operated Restaurant Operating Profit is a supplemental non-GAAP measure of performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”
General and administrative expenses were $18.5 million, or 3.1 percent of system-wide sales, compared to $16.8 million, or 3.0 percent of system-wide sales, last year. This increase was primarily attributable to selective investments to support global new restaurant development.
Other income was $0.5 million, primarily due to a net gain on the sale of two real estate properties.
Operating EBITDA was $13.3 million, at 28.4 percent of total revenue, compared to first quarter 2010 of $13.3 million, at 30.4 percent of total revenue. The decrease in Operating EBITDA as a percentage of total revenue was primarily due to investments in general and administrative expenses, partially offset by revenue from stronger same-store sales. Operating EBITDA is a supplemental non-GAAP measure of performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”
Operating profit was $12.5 million, compared to operating profit of $12.2 million last year.
Interest expense, net was $1.1 million, a $1.7 million decrease from 2010. This decrease was primarily due to lower average interest rates under the Company’s new 2010 credit facility, and lower amortization for bank fees and swap settlement charges recognized in first quarter 2010.
Income tax expense was $4.2 million, yielding an effective tax rate of 36.8 percent, compared to an effective tax rate of 38.3 percent in the prior year. The effective rates differ from statutory rates due to tax credits.
Reported net income was $7.2 million, or $0.28 per diluted share, compared to $5.8 million, or $0.23 per diluted share, in 2010. Adjusted earnings per diluted share were $0.27 compared to $0.23 last year. This improvement was primarily due to stronger same-store sales and a decrease in interest expense, net. Adjusted earnings per diluted share is a supplemental non-GAAP measure of performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”
Free cash flow was $6.9 million, which included $0.5 million of other income, compared to $6.3 million in 2010, which included $0.1 million of other income. Free cash flow is a supplemental non-GAAP measure of performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”
During the first quarter, the Company repurchased 438,288 shares of its common stock for approximately $6.5 million.
During fiscal year 2011 through May 25, 2011, AFC has repurchased 1,085,036 shares of common stock for approximately $16.2 million. These purchases were made in accordance with the Company’s previous stock repurchase guidance for 2011 of $20-$25 million. As of May 15, 2011, approximately 24.8 million shares of the Company’s common stock were outstanding.
The Popeyes system opened 32 restaurants in the first quarter, which included 11 domestic and 21 international restaurants, compared to 17 openings last year. The Company permanently closed 14 restaurants, resulting in 18 net openings compared to 5 net openings in the first quarter of 2010. The 14 closures in 2011 included 6 domestic and 8 international restaurants.
On a system-wide basis, Popeyes had 1,997 restaurants operating at the end of the first quarter, compared to 1,944 at the end of the first quarter 2010. Total unit count was comprised of 1,587 domestic restaurants and 410 international restaurants in 25 foreign countries and three territories. Of this total, 1,959 were franchised restaurants and 38 were Company-operated restaurants.
Fiscal 2011 Guidance
The Company reaffirms its expectation that Popeyes global same-store sales growth will be in the range of positive 1.0 to 3.0 percent. This guidance reflects stronger same-store sales in the first half of the year and softer in the second half, as Popeyes restaurants roll over strong same-store sales from the third and fourth quarters of 2010.
Global new openings are still expected to be in the range of 120-140 restaurants. As previously indicated, international new unit openings are expected to remain on pace with 2010 growth of approximately 60 restaurants.
Consistent with previous guidance, the Company projects system-wide unit closings will be in the range of 60-80 restaurants, resulting in 40-80 net openings as compared to 39 net openings in 2010.
The Company continues to expect general and administrative expenses will be in the range of $60-$62 million, at a rate of 3.1-3.2 percent of system-wide sales, among the lowest in the restaurant industry. As previously disclosed, this expense includes $1.0 million for a planned corporate office relocation. Absent this unusual item, general and administrative expenses as a percent of system-wide sales would be 3.0-3.1 percent.
The Company now expects 2011 reported earnings per diluted share will be in the range of $0.87-$0.91, which includes $0.5 million of other income, net, recognized in the first quarter primarily from the sale of two real estate properties; compared to the previous guidance of $0.86-$0.90.
|AFC Enterprises, Inc.|
|Condensed Consolidated Balance Sheets (unaudited)|
|(In millions, except share data)|
|Cash and cash equivalents||$||15.4||$||15.9|
|Accounts and current notes receivable, net||6.4||5.6|
|Other current assets||2.1||4.3|
|Advertising cooperative assets, restricted||17.7||16.1|
|Total current assets||41.6||41.9|
|Property and equipment, net||20.8||21.2|
|Trademarks and other intangible assets, net||46.9||47.0|
|Other long-term assets, net||2.6||2.7|
|Total long-term assets||81.4||82.0|
|LIABILITIES AND SHAREHOLDERS’ EQUITY|
|Other current liabilities||4.9||7.6|
|Current debt maturities||5.2||4.0|
|Advertising cooperative liabilities||17.7||16.1|
|Total current liabilities||31.9||32.5|
|Deferred credits and other long-term liabilities||21.0||20.2|
|Total long-term liabilities||80.5||82.2|
|Commitments and contingencies|
|Preferred stock ($.01 par value; 2,500,000 shares authorized;|
|0 issued and outstanding)||-||-|
|Common stock ($.01 par value; 150,000,000 shares authorized;||&nbs
|25,407,161 and 25,685,705 shares issued and outstanding|
|at April 17, 2011 and December 26, 2010, respectively)||0.3||0.3|
|Capital in excess of par value||110.9||116.4|
|Accumulated other comprehensive loss||(0.4||)||(0.1||)|
|Total shareholders’ equity||10.6||9.2|
|Total liabilities and shareholders’ equity||$||123.0||$||123.9|
|AFC Enterprises, Inc.|
|Condensed Consolidated Statements of Operations (unaudited)|
|(In millions, except per share data)|
|16 Weeks Ended|
|Sales by company-operated restaurants||$||17.6||$||16.1|
|Rent and other revenues||1.3||1.3|
|Restaurant employee, occupancy and other
|Restaurant food, beverages and packaging||5.8||5.1|
|Rent and other occupancy expenses||0.8||0.8|
|General and administrative expenses||18.5||16.8|
|Depreciation and amortization||1.3||1.2|
|Other expense (income), net||(0.5||)||(0.1||)|
|Interest expense, net||1.1||2.8|
|Income before income taxes||11.4||9.4|
|Income tax expense||4.2||3.6|
|Earnings per common share, basic:||$||0.28||$||0.23|
|Earnings per common share, diluted:||$||0.28||$||0.23|
|Weighted-average shares outstanding:|
|AFC Enterprises, Inc.|
|Condensed Consolidated Statements of Cash Flows (unaudited)|
|16 Weeks Ended|
|Cash flows provided by (used in) operating activities:|
|Adjustments to reconcile net income to net cash provided by (used in) operating activities:|
|Depreciation and amortization||1.3||1.2|
|Asset write downs||0.1||0.1|
|Net gain on sale of assets||(0.6||)||(0.2||)|
|Deferred income taxes||0.5||0.4|
|Non-cash interest expense, net||0.1||0.8|
|Provision for credit losses||−||(0.1||)|
|Stock-based compensation expense||0.7||0.6|
|Change in operating assets and liabilities:|
|Other operating assets||2.0||(0.5||)|
|Accounts payable and other operating liabilities||(3.2||)||(3.3||)|
|Net cash provided by operating activities||7.2||5.7|
|Cash flows provided by (used in) investing activities:|
|Proceeds from dispositions of property and equipment||0.7||−|
|Proceeds from notes receivables and other investing activities||0.1||1.7|
|Net cash provided by (used in) investing activities||(0.2||)||0.9|
|Cash flows provided by (used in) financing activities:|
|Principal payments – 2005 Credit Facility (term loan)||−||(6.7||)|
|Principal payments – 2010 Credit Facility (term loan)||(1.2||)||−|
|Proceeds from exercise of employee stock options||0.4||−|
|Other financing activities, net||(0.2||)||(0.2||)|
|Net cash used in financing activities||(7.5||)||(6.9||)|
|Net (decrease) in cash and cash equivalents||(0.5||)||(0.3||)|
|Cash and cash equivalents at beginning of year||15.9|| |
|Cash and cash equivalents at end of the quarter||$||15.4||$||3.8|
Total Same-Store Sales
|Domestic Franchised a||3.8||%||(0.5||%)|
|International Franchise b||4.1||%||1.2||%|
|Total Franchised (a and b)||3.8||%||(0.3||%)|
New Unit Openings