Reaffirms Full Year Earnings Guidance
Popeyes Louisiana Kitchen, Inc. (NASDAQ: PLKI), the franchisor
and operator of Popeyes® restaurants, today reported results for
its fiscal second quarter of 2016, which ended July 10, 2016. The
Company also reaffirmed earnings guidance for fiscal 2016.
“The second quarter was a productive one for Popeyes on each of
our three strategic pillars, despite the competitive pressures on
comparable sales,” said Cheryl Bachelder, Popeyes Chief Executive
Officer. “We have continued to offer our guests a balance of
exciting new products and value-oriented promotions, and our share
of chicken-QSR grew this quarter. We have successfully implemented
our new field visit protocols to advance our operations and we
completed the scoping of our One Technology initiative. Our
international team is delivering excellent results. So while we are
experiencing slower domestic sales, consistent with the sector; we
remain highly confident that our bold long term goals are
achievable.”
Second Quarter 2016 Highlights:
- Total revenues increased 3.9% to $61.7
million, compared to $59.4 million in the second quarter of
2015.
- Reported net income was $10.3 million,
or $0.47 per diluted share, compared to $10.3 million, or $0.44 per
diluted share in the second quarter 2015. Adjusted earnings per
diluted share(1) was $0.47, compared to $0.44 in 2015. Both
earnings per diluted share and adjusted earnings per diluted share
had a year over year growth of 6.8%.
- Total system-wide sales increased by
6.5% in the second quarter 2016 as a result of net unit growth and
same-store sales performance.
- Global same-store sales increased
0.7%.
- Total domestic same-store sales were
flat, compared to a 7.9% increase in the second quarter of 2015.
Popeyes increased its domestic market share of the chicken-QSR
category to a record high 26.6%, compared to 25.4% in the second
quarter of 2015.
- International same-store sales
increased 6.4%, compared to a 4.3% increase in the second quarter
of 2015, marking the 26th consecutive quarter of positive
international same-store sales growth.
- Sales by Company-operated restaurants
were $25.2 million in the second quarter compared to $25.1 million
last year. Company-operated restaurant operating profit(1) was $4.7
million, or 18.7% of sales, compared to $4.9 million, or 19.5% of
sales in the second quarter of 2015. The decrease was
primarily due to lower sales in our new markets along with higher
labor costs, which were partially offset by lower chicken and
grocery basket costs.
- Operating EBITDA(1) was $19.8 million,
or 32.1% of total revenue in the second quarter, compared to $19.5
million, or 32.8% of total revenue last year. The increase was
primarily due to an increase in franchise royalties and fees
partially offset by a planned increase in general and
administrative expenses to support the Company’s new strategic
roadmap along with a decrease in Company-operated restaurant
operating profit.
- Through the first 28 weeks of fiscal
2016, free cash flow(1) was $23.6 million, compared to $19.6
million in 2015.
- The Popeyes system opened 43
restaurants, which included 23 domestic and 20 international
restaurants. Net restaurant openings were 36 compared to 31 in the
same period last year.
- As of the end of the second quarter,
the Company operated and franchised 2,594 restaurants, compared to
2,443 at the end of the second quarter in 2015, representing a net
unit growth of 6.2% over the last twelve months.
- The Company repurchased 532,864 shares
of its common stock for approximately $30 million.
Fiscal 2016 Guidance:
Based on performance through the second quarter, the Company is
making the following adjustments to guidance for the full-year
fiscal 2016:
- System-wide same-store sales growth in
the range of 1.0% to 2.0%, a decrease from previous guidance in the
range of 2.0% to 3.0%.
- Two new Company-operated restaurant
openings, a decrease from previous guidance of three to five.
In addition, the Company reiterates the following guidance for
full year fiscal 2016:
- New restaurant openings in the range of
200 to 235, including approximately 85 to 100 internationally.
- Net new restaurant openings in the
range of 140 to 185, for a net new unit growth rate of
approximately 6% to 7%.
- General and administrative expenses to
be approximately 2.9% to 3.0% of system-wide sales, maintaining an
investment rate that supports long-term growth.
- Capital expenditures to be in the range
of $10 million to $15 million, including approximately $10 million
for new Company-operated restaurants and other capital improvements
at existing restaurants.
- Earnings per diluted share and adjusted
earnings per diluted share to be in the range of $2.10 to
$2.15.
- Share repurchases of $80 million to
$120 million in outstanding shares, compared to $62 million in
2015, with $60 million purchased from operating cash flows and up
to $60 million from additional borrowings.
- Effective income tax rate in 2016 to be
approximately 38%.
Conference Call
The Company will host a conference call and Internet webcast at
9:00 A.M. ET on August 17, 2016, to review second quarter 2016
results. A live listen-only webcast of the conference call will be
available on the Popeyes website at www.popeyes.com/investors. The
conference call can also be accessed live over the phone by dialing
(855) 427-4392 or for international callers by dialing (484)
756-4257. A replay will be available after the call and can be
accessed by dialing (855) 859-2056, or for international callers by
dialing (404) 537-3406; the conference ID is 41416512. The replay
will be available until Wednesday, August 31, 2016. A replay of the
conference call will also be available for 90 days at the Company's
website.
Corporate Profile
Popeyes Louisiana Kitchen, Inc. is the franchisor and operator
of Popeyes® restaurants, the world's second-largest Quick- Service
Restaurant (“QSR”) chicken concept based on number of units. As of
July 10, 2016, Popeyes had 2,594 operating restaurants in the
United States, the District of Columbia, three territories, and 26
foreign countries. The Company’s primary objective is to deliver
sales and profits by offering excellent investment opportunities in
its Popeyes brand and providing exceptional franchisee support
systems and services to its owners. Popeyes Louisiana Kitchen, Inc.
can be found at www.popeyes.com.
(1) Adjusted earnings per diluted share, operating EBITDA,
Company-operated restaurant operating profit, and free cash flow
are supplemental non-GAAP measures of performance. See the heading
entitled “Management’s Use of Non-GAAP Financial Measures.”
Popeyes Louisiana Kitchen, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(In millions, except share and per share
data)
7/10/2016 12/27/2015 Current assets:
Cash and cash equivalents $ 7.9 $ 9.1 Accounts and current notes
receivable, net 9.7 9.2 Other current assets 5.0 8.5 Advertising
cooperative assets, restricted 32.9 35.4 Total
current assets 55.5 62.2
Long-term assets:
Property and equipment, net 98.9 97.7 Goodwill 11.1 11.1 Trademarks
and other intangible assets, net 94.0 94.2 Other long-term assets,
net 0.8 0.8 Total long-term assets 204.8 203.8
Total assets $ 260.3 $ 266.0
Current
liabilities: Accounts payable $ 6.4 $ 6.7 Other current
liabilities 7.6 13.1 Current debt maturities 0.5 0.3 Advertising
cooperative liabilities 32.9 35.4 Total current
liabilities 47.4 55.5
Long-term liabilities:
Long-term debt 145.9 111.6 Deferred credits and other long-term
liabilities 41.1 39.3 Total long-term liabilities
187.0 150.9
Commitments and contingencies
Shareholders’ equity: Preferred stock ($.01 par value;
2,500,000 shares authorized; 0 shares issued and outstanding) — —
Common stock ($.01 par value; 150,000,000
shares authorized; 21,450,410 and 22,449,697 sharesissued and
outstanding at July 10, 2016 and December 27, 2015,
respectively)
0.2 0.2 Capital in excess of par value — — Accumulated earnings
26.2 59.6 Accumulated other comprehensive loss (0.5 ) (0.2 ) Total
shareholders’ equity 25.9 59.6 Total liabilities and
shareholders’ equity $ 260.3 $ 266.0
Popeyes Louisiana Kitchen, Inc.
Condensed Consolidated Statements of
Operations (unaudited)
(In millions, except per share data)
12 Weeks Ended 28 Weeks Ended 7/10/2016
7/12/2015 7/10/2016 7/12/2015
Revenues: Sales by Company-operated restaurants $ 25.2 $
25.1 $ 59.8 $ 59.8 Franchise royalties and fees 35.3 33.0 81.0 76.1
Rent from franchised restaurants 1.2 1.3 3.1
3.0 Total revenues 61.7 59.4 143.9
138.9
Expenses: Restaurant food, beverages and
packaging 8.0 8.1 18.9 19.4 Restaurant employee, occupancy and
other expenses 12.5 12.1 29.2 28.0 General and administrative
expenses 20.8 19.0 49.5 44.3 Occupancy expenses - franchise
restaurants 0.6 0.7 1.5 1.6 Depreciation and amortization 2.3 2.3
5.3 5.2 Other expenses (income), net — (0.3 ) (0.1 ) (0.2 )
Total expenses 44.2 41.9 104.3 98.3
Operating profit 17.5 17.5 39.6 40.6 Interest expense, net
1.0 0.8 2.3 1.9
Income before income
taxes 16.5 16.7 37.3 38.7 Income tax expense 6.2
6.4 14.1 14.8
Net income
$ 10.3 $ 10.3 $ 23.2 $
23.9
Earnings per common share, basic: $ 0.48
$ 0.45 $ 1.06 $ 1.04
Earnings per common share, diluted: $ 0.47 $
0.44 $ 1.05 $ 1.03
Weighted-average
shares outstanding: Basic 21.6 22.9 21.9 22.9
Diluted 21.8 23.2 22.1 23.3
Popeyes Louisiana Kitchen, Inc.
Condensed Consolidated Statements of Cash
Flows (unaudited)
(In millions)
28 Weeks Ended 7/10/2016
7/12/2015 Cash flows provided by (used in) operating
activities: Net income $ 23.2 $ 23.9 Adjustments to reconcile
net income to net cash provided by (used in) operating activities:
Depreciation and amortization 5.3 5.2 Net (gain) loss on sale and
disposal of assets (0.1 ) (0.2 ) Deferred income taxes (0.5 ) 0.5
Non-cash interest expense, net 0.3 0.2 Provision for credit losses
— — Excess tax benefits from stock-based payment arrangements (1.5
) (6.7 ) Stock-based compensation expense 3.9 3.2 Change in
operating assets and liabilities: Accounts receivable (0.4 ) 0.2
Other operating assets 4.9 6.5 Accounts payable and other operating
liabilities (6.2 ) (5.3 ) Net cash provided by operating activities
28.9 27.5
Cash flows provided by (used in)
investing activities: Capital expenditures (5.3 ) (7.9 )
Proceeds from dispositions of property and equipment 0.2 0.1
Net cash used in investing activities (5.1 ) (7.8 )
Cash
flows provided by (used in) financing activities: Principal
payments — 2013 credit facility (109.0 ) — Borrowings under 2016
credit facility 143.5 — Share repurchases (60.0 ) (26.0 ) Proceeds
from exercise of employee stock options 0.4 1.0 Excess tax benefits
from stock-based payment arrangements 1.5 6.7 Debt issuance costs
(1.1 ) — Other financing activities, net (0.3 ) (0.3 ) Net cash
used in financing activities (25.0 ) (18.6 ) Net increase
(decrease) in cash and cash equivalents (1.2 ) 1.1 Cash and cash
equivalents at beginning of year 9.1 8.4 Cash and
cash equivalents at end of quarter $ 7.9 $ 9.5
Popeyes Louisiana Kitchen, Inc.
Same-store sales and restaurant count
12 Weeks Ended
28 Weeks Ended 7/10/2016
7/12/2015 7/10/2016 7/12/2015
Same-store sales
increase
Company-operated restaurants (4.3 )% 2.3 % (3.2 )% 1.6 % Domestic
franchised restaurants 0.2 % 8.1 % 0.8 % 7.7 % Total domestic
(Company-operated and franchised restaurants) — % 7.9 % 0.6 % 7.5 %
International franchised restaurants 6.4 % 4.3 % 6.2 % 5.3 % Total
global system 0.7 % 7.5 % 1.2 % 7.2 %
Company-operated
restaurants (all domestic)
Restaurants at beginning of period 70 66 70 65 New restaurant
openings 1 1 1 2 Restaurants at end of
quarter 71 67 71 67
Franchised
restaurants (domestic)
Restaurants at beginning of period 1,921 1,833 1,900 1,805 New
restaurant openings 22 17 41 45 Permanent closings (4 ) (4 ) (6 )
(11 ) Temporary (closings)/re-openings, net (5 ) (4 ) (1 ) 3
Restaurants at end of quarter 1,934 1,842 1,934
1,842
Franchised
restaurants (international)
Restaurants at beginning of period 578 521 569 509 New restaurant
openings 20 19 45 43 Permanent closings (3 ) (2 ) (20 ) (13 )
Temporary (closings)/re-openings, net (6 ) (4 ) (5 ) (5 )
Restaurants at end of quarter 589 534 589 534
Total restaurant count at end of quarter 2,594
2,443 2,594 2,443
Management’s Use of Non-GAAP Financial Measures
Adjusted earnings per diluted share, operating EBITDA,
Company-operated restaurant operating profit and free cash flow are
supplemental non-GAAP financial measures. The Company uses adjusted
earnings per diluted share, operating EBITDA, Company-operated
restaurant operating profit and free cash flow, in addition to
earnings per share, 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, Company-operated restaurant operating
profit 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, Company-operated restaurant operating profit and
free cash flow: (a) do not represent earnings per share, net
income, operating profit or cash flows from operating activities
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 earnings per share, net income, operating
profit, cash flows from operating activities or other financial
information determined under GAAP.
Adjusted earnings per diluted share: Calculation and
Definition
The Company defines adjusted earnings for the periods presented
as the Company’s reported net income after adjusting for certain
non-operating items consisting of the following:
i. other expense (income), net,
which included $0.1 million net gain on sale of assets for the
twenty-eight weeks ended July 10, 2016 and $0.1 million and $0.2
million net gain on sales of assets for the twelve and twenty-eight
weeks ended July 10, 2016 and July 12, 2015 respectively,
ii. $0.2 million and $0.4 million in executive transition expenses
in the twelve and twenty-eight weeks ended July 12, 2015,
respectively, iii. other income of $0.4 million for
recoveries under the Deepwater Horizon Economic and Property
Damages Settlement Program for the twelve and twenty-eight weeks
ended July 12, 2015, and iv. 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 for the twelve and
twenty-eight week periods ended July 10, 2016 and
July 12, 2015, respectively, the Company’s adjusted earnings
per diluted share on a consolidated basis to the line on its
condensed consolidated statement of operations entitled net income,
which the Company believes is the most directly comparable GAAP
measure.
12 Weeks Ended
28 Weeks Ended (In millions, except per share data)
7/10/2016 7/12/2015
7/10/2016 7/12/2015
Net income $ 10.3 $ 10.3 $ 23.2
$ 23.9 Other expense (income), net — (0.3 ) (0.1 ) (0.2 ) Tax
effect — 0.2 0.1
0.1 Adjusted earnings $
10.3 $ 10.2 $ 23.2 $ 23.8
Adjusted earnings per diluted share $
0.47 $ 0.44 $ 1.05 $ 1.02
Weighted average diluted shares outstanding
21.8 23.2 22.1
23.3
Operating EBITDA: Calculation and Definition
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 the twelve and twenty-eight week periods ended July 10,
2016 and July 12, 2015, respectively, the Company’s operating
EBITDA on a consolidated basis to the line on its condensed
consolidated statement of operations entitled net income, which the
Company believes is the most directly comparable GAAP measure.
Operating EBITDA margin is defined as operating EBITDA divided by
total revenues.
12 Weeks Ended 28 Weeks Ended (Dollars
in millions)
7/10/2016
7/12/2015 7/10/2016 7/12/2015
Net income $ 10.3 $ 10.3 $ 23.2 $ 23.9
Interest expense, net 1.0 0.8 2.3 1.9 Income tax expense 6.2 6.4
14.1 14.8 Depreciation and amortization 2.3 2.3 5.3 5.2 Other
expenses (income), net — (0.3 )
(0.1 ) (0.2 ) Operating EBITDA $
19.8 $ 19.5 $ 44.8 $ 45.6
Total revenues $ 61.7 $
59.4 $ 143.9 $ 138.9 Operating
EBITDA margin 32.1 % 32.8 % 31.1
% 32.8 %
Company-operated restaurant operating profit: Calculation and
Definition
The Company defines Company-operated restaurant operating profit
as sales by Company-operated restaurants minus restaurant food,
beverages and packaging minus restaurant employee, occupancy and
other expenses. The following table reconciles on a historical
basis for the twelve and twenty-eight week periods ended
July 10, 2016 and July 12, 2015, respectively,
Company-operated restaurant operating profit to the line item on
its condensed consolidated statement of operations entitled sales
by Company-operated restaurants, which the Company believes is the
most directly comparable GAAP measure. Company-operated restaurant
operating profit margin is defined as Company-operated restaurant
operating profit divided by sales by Company-operated
restaurants.
12 Weeks Ended 28 Weeks Ended (Dollars
in millions)
7/10/2016
7/12/2015 7/10/2016 7/12/2015
Sales by Company-operated restaurants $ 25.2 $ 25.1 $
59.8 $ 59.8 Restaurant food, beverages and packaging 8.0 8.1
18.9 19.4 Restaurant employee, occupancy and other expenses
12.5 12.1 29.2
28.0 Company-operated restaurant operating profit
$ 4.7 $ 4.9 $ 11.7
$ 12.4 Company-operated restaurant operating
profit margin 18.7 % 19.5 % 19.6
% 20.7 %
Free cash flow: Calculation and Definition
The Company defines “free cash flow” as net cash provided by
operating activities less capital expenditures. Free cash flow is
an important measure utilized by management in determining the
amount of cash available for reinvestment in our strategic
initiatives, share repurchases, and reduction of long-term debt. We
believe it provides a more representative assessment of operating
cash flows and that it is important for investors to be able to
evaluate the Company using the same measures as management. Free
cash flow is not a term defined by GAAP, and as a result, our
measure of free cash flow might not be comparable to similarly
titled measures used by other companies and does not represent
residual cash available for discretionary investments. Free cash
flow should be considered as supplemental in nature and not be
considered in isolation or as a substitute for our liquidity as
reported in the Company’s consolidated statements of cash flows
prepared in accordance with GAAP.
The following table reconciles on a historical basis for the
twenty-eight week periods ended July 10, 2016 and
July 12, 2015, respectively, the Company’s free cash flow on a
consolidated basis to the line on its consolidated statements of
cash flows entitled net cash provided by operating activities,
which the Company believes is the most directly comparable GAAP
measure:
28 Weeks Ended (Dollars in
millions)
7/10/2016
7/12/2015 Net cash provided by operating activities $ 28.9
$ 27.5 Capital expenditures (a) (5.3 )
(7.9 ) Free cash flow $ 23.6
$ 19.6 (a) Our capital expenditures consist
primarily of new restaurant construction, equipment replacements,
re-imaging activities associated with Company-operated restaurants,
investments in information technology and other capital assets.
Forward Looking Statements:
This Press Release contains “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 strategic plan, planned
share repurchases, projections and expectations regarding
same-store sales for fiscal 2016 and beyond, expectations regarding
future growth and commodity costs, expectations regarding
restaurant reimaging, 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, capital expenditures, and
adjusted 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, continued
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, our ability to protect our information
systems against cyber attacks or information security breaches, our
ability to protect individually identifiable data of our customers,
franchisees and employees, 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 2016 Revolving Credit Facility, our ability to
comply with the repayment requirements, covenants, tests and
restrictions contained in our 2016 Revolving 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, 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 the Company’s
2015 Annual Report on Form 10-K and other filings with the
Securities and Exchange Commission, which details are incorporated
herein by reference. Therefore, you should not place undue reliance
on any forward-looking statements.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160816006152/en/
Investor inquiries:ICRDara Dierks, 404-459-4584Investor
Relationsinvestor.relations@popeyes.comorMedia inquiries:Popeyes
Louisiana Kitchen, Inc.Renee Kopkowski, 404-459-4630Vice President,
Brand Communicationsrenee.kopkowski@popeyes.com
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