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AFC Reports Financial Results For First Quarter 2009
Expects Earnings per Share to be at the Higher-end of Range for Full Year 2009
First Quarter 2009 Highlights compared to First Quarter 2008:
- Net income was above street expectations at
$5.0 million , or$0.20 per diluted share, compared to$6.4 million , or$0.24 per diluted share, last year. Excluding the impact from other non-operating expenses or income, net income would have been$5.2 million , or$0.21 per diluted share, compared to$5.6 million , or$0.21 per diluted share last year.
- System-wide sales increased by 1.1 percent compared to an increase of 1.5 percent last year.
- Global same-store sales increased 0.2 percent compared to a decrease of 1.3 percent last year. Domestic same-store sales decreased 0.3 percent compared to a decrease of 1.8 percent last year. International same-store sales increased 4.8 percent compared to an increase of 3.5 percent last year.
- The Company opened 14 restaurants and closed 31 restaurants, resulting in net closings of 17 restaurants. At the end of the first quarter of 2009, total unit count was 1,909 compared to 1,889 last year.
- The Company generated free cash flow of
$7.1 million and repaid$3.9 million on its 2005 Credit Facility. AFC's free cash flow computation and reconciliation to GAAP measures are described in detail under the heading "Use of Non-GAAP Financial Measures."
AFC Enterprises Chief Executive Officer
Strategic Plan Update
1. Build the Popeyes Brand
Popeyes successful famous and favorites promotions are outlined below.
- During the first quarter, Popeyes kicked-off the Lenten season with its new
$4.99 Butterfly Shrimp Tackle Box promotion featuring 8-pieces of Butterfly Shrimp with Cajun fries and a buttermilk biscuit. Popeyes promoted its Bonafide(TM) chicken with two compelling value offerings featuring 2-pieces of bone-in chicken and a biscuit for$1.99 and 9-pieces of bone-in chicken or 9-tenders for$7.99 . Both promotions, supported by national cable advertising, delivered positive guest counts and same-store sales.
- The Popeyes system promoted 'Popeyes Pay Day' on
April 22nd , during the first week of its second quarter. This national one-day promotion featured 8-pieces of Popeyes signature Bonafide(TM) chicken for only$4.99 . The Company was pleased with the exceptional guest response and strong same-store sales for that week.
- In May the Company featured a 2-piece Louisiana Tenders meal for
$2.99 and 9-pieces of bone-in chicken or 9-tenders for$7.99 . This promotion also delivered positive same-store sales which were driven by positive guest counts. Popeyes restaurants are continuing to promote famous and favorite menu items in the second quarter.
2. Run Great Restaurants
- Popeyes continues to see improvement in its guest experience monitoring survey. Overall delighted scores were up 11 percentage points since the implementation of the program last year.
- The Company remains focused on improving speed of service for its guests. By the end of June, all restaurants will be required to purchase headsets and timers - essential equipment in running good drive-thru restaurants.
3. Grow Profitability
- The Company will continue to focus on improving unit economics and identifying key markets and growth-ready franchisees for accelerating unit growth in 2010 and beyond. The Company's goal is to position Popeyes to ramp up new unit growth as soon as the consumer environment and credit market conditions improve.
4. Align People and Resources to Deliver Results
- As previously indicated, the Company is in continued negotiations to re-franchise the remaining company-operated restaurants in the
Atlanta market and expects to complete the transaction once buyer financing is secured.
First Quarter Financial Performance Review compared to First Quarter Last Year
System-wide sales increased by 1.1 percent compared to an increase of 1.5 percent last year.
Global same-store sales increased 0.2 percent compared to a decrease of 1.3 percent last year. Domestic same-store sales decreased 0.3 percent compared to a decrease of 1.8 percent last year. International same-store sales increased 4.8 percent compared to an increase of 3.5 percent last year.
Total revenues were
Company-operated restaurant expenses for food, beverages and packaging as a percentage of sales were 33.2 percent compared to 34.8 percent last year. This 1.6 percentage point improvement was primarily attributable to better restaurant-level disciplines and the re-franchising of company-operated restaurants. Restaurant employee, occupancy and other expenses as a percentage of sales were 51.9 percent compared to 50.0 percent last year. This increase was primarily due to costs for additional management talent to operate company restaurants, planned incremental advertising fund contributions and insurance.
General and administrative expenses were
Other expenses were
EBITDA was
Interest expense, net was
Income tax expense had an effective tax rate of 39.0 percent, compared to an effective tax rate of 39.0 percent in the prior year.
Net income was
The Company generated
The Company opened 14 restaurants globally, including 5 domestic and 9 international, compared to 37 restaurants last year. As planned, the Company's 31 restaurant closures in the first quarter exceeded openings, but were comparable to last year's closure of 32 restaurants. Closures consisted of 23 domestic restaurants and 8 international restaurants.
On a system-wide basis, Popeyes had 1,909 restaurants operating at the end of first quarter 2009, compared to 1,889 restaurants last year. Total unit count was comprised of 1,571 domestic restaurants and 338 international restaurants in 26 foreign countries and two territories. Of this total, 1,858 were franchised restaurants and 51 were company-operated restaurants.
Fiscal 2009 Guidance
Given the favorable guest response to Popeyes new value offerings, the Company is projecting global same-store sales for fiscal 2009 to be in the range of negative 1.0 percent to positive 1.0 percent, an increase from our previous guidance of negative 1.0 percent to negative 3.0 percent.
In the current consumer and credit market environment, and consistent with previous guidance, the Company expects its global new openings to be in the range of 90-110 restaurants and its closures to be in the range of 140-160 restaurants, resulting in 30-70 net restaurant closings. Popeyes restaurant closures typically have sales significantly lower than the system average.
The Company expects fiscal 2009 general and administrative expenses to be consistent with its previous guidance of 3.1-3.2 percent of system-wide sales, among the lowest in the restaurant industry. The Company will continue to tightly manage its general and administrative expenses and invest in key strategic initiatives, including its continued commitment to national cable advertising and operations improvements which management believes are essential for the long-term growth of the brand.
Based on the projected improvements in same-store sales, the Company now expects its 2009 earnings per share projection to be at the upper end of the guidance range of
Conference Call
The Company will host a conference call and internet webcast with the investment community at
Corporate Profile
AFC Enterprises, Inc. is the franchisor and operator of Popeyes(R) restaurants, the world's second-largest quick-service chicken concept based on number of units. As of
AFC Contact Information
Investor inquiries:
Cheryl Fletcher, Director, Finance & Investor Relations
(404) 459-4487 or investor.relations@afce.com
Media inquiries:
Alicia Thompson
Vice President, Popeyes Communications & Public Relations
(404) 459-4572 or popeyescommunications@popeyes.com
AFC Enterprises, Inc.
Condensed Consolidated Balance Sheets (unaudited)
As of April 19, 2009 and December 28, 2008
(In millions, except share data)
ASSETS 4/19/2009 12/28/2008
--------- ----------
Current assets:
Cash and cash equivalents $5.6 $2.1
Accounts and current notes receivable, net 13.3 13.6
Assets held for sale 3.5 4.5
Other current assets 12.2 13.8
------ ------
Total current assets 34.6 34.0
Long-term assets:
Property and equipment, net 24.0 25.3
Goodwill 11.1 11.1
Trademarks and other intangible assets, net 48.0 48.2
Noncurrent notes receivable and other
long-term assets, net 13.3 13.4
------ ------
Total long-term assets 96.4 98.0
------ ------
Total assets $131.0 $132.0
====== ======
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $18.7 $19.3
Other current liabilities 12.0 13.6
Current debt maturities 1.4 4.7
------ ------
Total current liabilities 32.1 37.6
------ ------
Long-term liabilities:
Long-term debt 113.9 114.5
Deferred credits and other long-term
liabilities 18.5 19.2
------ ------
Total long-term liabilities 132.4 133.7
------ ------
Total liabilities 164.5 171.3
------ ------
Commitments and contingencies
Shareholders' deficit:
Preferred stock ($.01 par value; 2,500,000
shares authorized; 0 issued and
outstanding) - -
Common stock ($.01 par value; 150,000,000
shares authorized; 25,287,915 and
25,294,973 shares issued and outstanding
at April 19, 2009 and December 28, 2008,
respectively) 0.3 0.3
Capital in excess of par value 111.1 110.5
Accumulated deficit (144.1) (149.1)
Accumulated other comprehensive loss (0.8) (1.0)
------ ------
Total shareholders' deficit (33.5) (39.3)
------ ------
Total liabilities and shareholders'
deficit $131.0 $132.0
====== ======
AFC Enterprises, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(In millions, except per share data)
16 Weeks Ended
------------------------
4/19/2009 4/20/2008
--------- ---------
Revenues:
Sales by company-operated restaurants $20.8 $26.4
Franchise revenues 25.7 25.8
Rent and other revenues 1.4 1.1
------ ------
Total revenues 47.9 53.3
------ ------
Expenses:
Restaurant employee, occupancy and
other expenses 10.8 13.2
Restaurant food, beverages and packaging 6.9 9.2
Rent and other occupancy expenses 0.6 0.7
General and administrative expenses 17.7 16.1
Depreciation and amortization 1.6 2.1
Other expenses (income), net 0.4 (1.3)
------ ------
Total expenses 38.0 40.0
------ ------
Operating profit 9.9 13.3
Interest expense, net 1.7 2.8
------ ------
Income before income taxes 8.2 10.5
Income tax expense 3.2 4.1
------ ------
Net income $5.0 $6.4
====== ======
Earnings per common share, basic: $0.20 $0.24
====== ======
Earnings per common share, diluted: $0.20 $0.24
====== ======
AFC Enterprises, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(In millions)
16 Weeks Ended
------------------------
4/19/2009 4/20/2008
--------- ---------
Cash flows provided by (used in)
operating activities:
Net income $5.0 $6.4
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1.6 2.1
Asset write downs 0.2 -
Net gain on sales of assets (0.1) (0.7)
Deferred income taxes (0.1) 0.8
Non-cash interest, net 0.1 -
Provision for credit losses 0.3 -
Stock-based compensation expense 0.6 0.8
Change in operating assets and liabilities:
Accounts receivable (0.4) 1.1
Prepaid income taxes 0.9 0.5
Other operating assets 0.8 0.5
Accounts payable and other operating
liabilities (2.0) (10.7)
------ ------
Net cash provided by operating
activities 6.9 0.8
------ ------
Cash flows provided by (used in) investing
activities:
Capital expenditures (0.2) (0.7)
Proceeds from dispositions of property and
equipment 1.0 0.7
Property insurance proceeds 0.2 -
Proceeds from notes receivable 0.3 0.3
------ ------
Net cash provided by investing
activities 1.3 0.3
------ ------
Cash flows provided by (used in) financing
activities:
Principal payments - 2005 Credit Facility
(term loan) (3.4) (8.3)
Principal payments - 2005 revolving credit
facility (0.5) -
Borrowings under 2005 revolving credit
facility - 20.0
Special cash dividend - (0.5)
Stock repurchases - (16.6)
(Increase) decrease in restricted cash (0.4) 2.7
Other, net (0.4) (0.1)
------ ------
Net cash used in financing
activities (4.7) (2.8)
------ ------
Net increase (decrease) in cash and cash
equivalents 3.5 (1.7)
Cash and cash equivalents at beginning of year 2.1 5.0
------ ------
Cash and cash equivalents at end of quarter $5.6 $3.3
====== ======
Q1 Ended Q1 Ended
4/19/2009 4/20/2008
Total Same-Store Sales --------- ---------
----------------------
Company-operated (4.1%) (5.9%)
Franchised (a) (0.2%) (1.6%)
------ ------
Total Domestic (0.3%) (1.8%)
International (b) 4.8% 3.5%
------ ------
Global 0.2% (1.3%)
Total Franchised (a and b) 0.3% (1.1%)
New Unit Openings
-----------------
Company-operated 0 0
Franchised 5 17
------ ------
Total Domestic 5 17
International 9 20
------ ------
Global 14 37
Unit Count
----------
Company-operated 51 64
Franchised 1,520 1,501
------ ------
Total Domestic 1,571 1,565
International 338 324
------ ------
Global 1,909 1,889
Use of Non-GAAP Financial Measures
EBITDA: Calculation and Definition
The following table reconciles on a historical basis for first quarter of 2009 and first quarter of 2008, the Company's earnings before interest expense, taxes, depreciation and amortization ("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 to EBITDA:
(dollars in millions) Q1 2009 Q1 2008
Net income $5.0 $6.4
Interest expense, net $1.7 $2.8
Income tax expense $3.2 $4.1
Depreciation and amortization $1.6 $2.1
EBITDA $11.5 $15.4
Total Revenues $47.9 $53.3
EBITDA as a percentage of
Total Revenues (EBITDA margin) 24.0% 28.9%
Free cash flow: Calculation and Definition
The following table reconciles on a historical basis for first quarter of 2009 and first quarter of 2008, the Company's free cash flow 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 to free cash flow:
(dollars in millions) Q1 2009 Q1 2008
Net income $5.0 $6.4
Depreciation and amortization $1.6 $2.1
Stock-based compensation expense $0.6 $0.8
Maintenance capital expenses $(0.1) $(0.5)
Free cash flow $7.1 $8.8
Management's Use of Non-GAAP Financial Measures
EBITDA and free cash flow are supplemental non-GAAP financial measures. The Company uses 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 performance of its business because they provide a link between profitability and operating cash flow. EBITDA and free cash flow as calculated by the Company are not necessarily comparable to similarly titled measures reported by other companies. In addition, EBITDA and free cash flow: (a) do not represent net income or cash flows from operations 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, operating profit, cash flows from operating activities or other financial information determined under GAAP.
Forward-Looking Statement: Certain statements in this release 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 press release include discussions regarding the Company's planned implementation of its new strategic plan including the re-franchising of company-operated restaurants, projections and expectations regarding same-store sales for fiscal 2009 and beyond, the Company's ability to improve restaurant level margins, guidance for new openings and restaurant closures, and the Company's anticipated 2009 performances including projections regarding general and administrative expenses, net earnings per diluted share, EBITDA margins and free cash flows 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 2005 Credit Facility, our ability to comply with the repayment requirements, covenants, tests and restrictions contained in the 2005 Credit Facility, our ability to refinance our outstanding indebtedness, 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, adverse effects of regulatory actions arising in connection with the restatement of our previously issued financial statements, effects of volatile gasoline prices, supply and delivery shortages or interruptions, 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 our 2008 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.
SOURCE AFC Enterprises, Inc.