AFC Enterprises Reports Earnings for Third Quarter 2012

  AFC Enterprises Reports Earnings for Third Quarter 2012

                     Raises Guidance for Fiscal Year 2012

Business Wire

ATLANTA -- November 07, 2012

AFC Enterprises, Inc. (NASDAQ: AFCE), the franchisor and operator of Popeyes®
restaurants, today reported results for its fiscal third quarter which ended
September 30, 2012. The Company also raised earnings guidance for fiscal 2012
and provided a business update on its Strategic Plan.

Third Quarter Highlights:

  *Reported net income was $6.9 million, or $0.29 per diluted share, compared
    to $5.8 million or $0.24 per diluted share in 2011. Adjusted earnings per
    diluted share were $0.29, compared to $0.25 last year. Through the end of
    the third quarter, adjusted earnings per diluted share were $0.91 compared
    to $0.75 last year, an increase of 21%. 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.”
  *Global same-store sales increased 6.3% rolling over a 1.7% increase in the
    third quarter of 2011. Through the end of the third quarter, global
    same-store sales increased 7.1% rolling over a 2.2% increase last year,
    for a two-year same-store sales growth of 9.3%.
  *According to independent data, in the third quarter, Popeyes domestic
    same-store sales outpaced the Chicken QSR category for the 18^th
    consecutive quarter and the QSR category for the 4^th consecutive quarter.
  *Global system-wide sales increased 10.5% rolling over a 5.5% increase in
    2011 for a two-year growth rate of 16%.
  *The Popeyes system opened 28 new restaurants during the third quarter and
    permanently closed 23 restaurants, resulting in 5 net openings compared to
    1 in the prior year. Through the end of the third quarter, the Popeyes
    system opened 79 new restaurants and permanently closed 56, for 23 net
    restaurant openings compared to 24 in 2011.
  *Through the end of the third quarter, Operating EBITDA increased by 18.6%
    to $40.9 million, at 31.2% of total revenue, compared to $34.5 million, at
    29.4% of total revenue, in the prior year. Operating EBITDA is a
    supplemental non-GAAP measure of performance. See the heading entitled
    “Management’s Use of Non-GAAP Financial Measures.”
  *The Company generated $26.3 million of Free Cash Flow through the third
    quarter compared to $22.1 million last year. As a percentage of Total
    Revenue, Free Cash Flow increased to 20.0% compared to 18.8% last year.
    Free Cash Flow is a supplemental non-GAAP measure of performance. See the
    heading entitled “Management’s Use of Non-GAAP Financial Measures.”

AFC Enterprises CEO Cheryl Bachelder stated, “We delivered another solid
quarter with a 16% increase in adjusted EPS stemming from strong global
same-store sales of 6.3%. With strong advertising and our distinctive
Louisiana food, we are successfully driving traffic into our restaurants and
winning market share from the broader QSR category. We are ideally poised for
accelerated restaurant growth, both from existing franchisees that are
experiencing record profitability, and new franchisees that recognize the
brand’s success.”

Third Quarter 2012 Financial Performance

Global system-wide sales increased by 10.5%. System-wide sales were comprised
of $497.7 million in franchise restaurant sales and $13.5 million in
company-operated restaurant sales.

Global same-store sales increased 6.3% rolling over a 1.7% increase in 2011,
for a two-year growth of 8.0%. Through the end of the third quarter, global
same-store sales increased 7.1% rolling over a 2.2% increase last year, for a
two-year growth rate of 9.3%.

Total domestic same-store sales increased 6.8% compared to a 1.7% increase
last year, representing the 10^th consecutive quarter of same-store sales
growth. International same-store sales increased 2.5% compared to a 1.8%
increase in 2011, representing the 11^th consecutive quarter of same-store
sales growth. Same-store sales growth at company-operated restaurants in the
third quarter of 2012 was 1.9% compared to negative 1.9% last year. Adjusting
for the effect of Hurricane Isaac on the Company’s New Orleans restaurants,
company-operated restaurant same-store sales growth would have been positive
4.0%.

Company-operated restaurant operating profit (“ROP”) was $2.2 million at 16.3%
of sales, compared to $2.1 million at 17.1% of sales last year. The majority
of the Company-operated restaurants located in New Orleans were temporarily
closed for some period during Hurricane Isaac. The 0.8% decrease in ROP was
primarily attributable to personnel expenses and other fixed expenses incurred
at those restaurants during the period they were closed. Company-operated
restaurant operating profit margin 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 $14.7million, at 2.9% of system-wide
sales, compared to $14.1million, at 3.0% of system-wide sales in 2011. The
$0.6 million increase was primarily attributable to a $0.4 million increase in
company-operated restaurant support and pre-opening development costs in new
markets and a $0.2 millionincrease in domestic franchise development
expenses. General and administrative expenses as a percentage of system-wide
sales remain among the lowest in the restaurant industry.

Through the end of the third quarter, Operating EBITDA of $40.9 million was
31.2% of total revenues, compared to $34.5 million, at 29.4% of total
revenues, in 2011. The 180 basis point increase in Operating EBITDA was
primarily due to strong same-store sales increases. Operating EBITDA as a
percentage of total revenues remains among the highest in the restaurant
industry. Operating EBITDA is a supplemental non-GAAP measure of performance.
See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”

Interest expense, net was $0.7 million compared to $0.8 million last year.

Income tax expense was $3.5 million at an effective tax rate of 33.7%,
compared to an effective tax rate of 31.0% in 2011. Excluding favorable return
to provision adjustments, adjustments to estimated tax reserves and
recognition of tax credits in each period, the effective tax rates were 37.5%
and 36.9% in 2012 and 2011, respectively. The effective tax rates differ from
statutory rates due to credits and permanent differences between reported
income before income taxes and taxable income for tax purposes.

Reported net income grew to $6.9 million, or $0.29 per diluted share, compared
to $5.8 million, or $0.24 per diluted share, in 2011. Adjusted earnings per
diluted share were $0.29 compared to $0.25 last year. This improvement was
primarily due to stronger same-store sales and higher average new restaurant
sales. Through the end of the third quarter, adjusted earnings per diluted
share were $0.91 compared to $0.75, representing a 21% increase over last
year. 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 through the end of the third quarter was $26.3 million compared
to $22.1 million in 2011. As a percentage of Total Revenue, Free Cash Flow was
20.0% compared to 18.8% last year. 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 third quarter, the Company repurchased approximately 132,000 shares
of its common stock for approximately $2.9 million. Through November 7, 2012,
the Company has repurchased approximately 600,000 shares of common stock for
approximately $11.5 million. These purchases were made in accordance with the
Company's previous share repurchase guidance of $15 million for 2012.
Approximately $5.2 million remains under the Company's current share
repurchase program.

During the third quarter, the Popeyes system opened 28 restaurants, which
included 18 domestic and 10 international. The Popeyes system permanently
closed 23 restaurants, including 14 domestic and 9 international. Through the
third quarter, Popeyes opened 79 restaurants and permanently closed 56
restaurants, resulting in 23 net openings, compared to 88 restaurant openings,
64 permanent closures and 24 net openings in 2011. The lower number of new
openings in 2012 is largely attributable to the more measured pace of growth
in international markets. Full-year international openings for 2012 are
expected to be approximately 60 units compared to 67 in 2011.

Strategic Plan Update

The Company’s Strategic Road Map is founded on the five Pillars below.

1. Build a Distinctive Brand

  *The Popeyes system continues to grow average unit volumes by complementing
    its core Bonafide® offerings with a wide array of distinctive, premium
    quality boneless chicken and seafood products.
  *Menu innovation, combined with the expansion of our highly effective
    national media advertising program, is resonating with a broader spectrum
    of guests and accelerating the performance of our brand.

2. Run Great Restaurants

  *At the end of the third quarter, approximately 18% of the Popeyes domestic
    system had incorporated the new Popeyes Louisiana Kitchen re-image. Our
    goal is to have approximately one-third of our domestic system in the new
    restaurant image by the end of 2012, and the balance of the system by the
    end of 2015.
  *Speed of service at the drive-thru continued to be an area of focus. By
    the end of the third quarter, approximately three quarters of our domestic
    system restaurants attained speed of service below our 180 second
    standard.
  *We revised our Guest Experience Monitor (“GEM”) process in the first
    quarter of 2012 and are pleased that we have doubled the number of guest
    survey responses. For the third quarter, GEM “Overall Delighted” scores
    were approximately 70%.

3. Grow Restaurant Profits

  *In the second quarter of 2012, our franchisees reported average restaurant
    operating profits nearly 20% higher than last year despite commodity cost
    inflation of 1.5%.
  *On a full year basis, the Company now expects commodity costs to increase
    by approximately 2%, which equates to an approximate 0.7% negative impact
    on restaurant operating profit margins.
  *We expect to offset the full year impact of commodity inflation by
    continuing to deliver top-line sales growth and implementing on-going
    supply chain cost savings and in-restaurant cost controls.
  *For 2013, we expect commodity inflation of approximately 1-2% based on
    current market indications.

4. Accelerate Quality Restaurants

  *Approximately two-thirds of the 42 domestic restaurant openings through
    the end of the third quarter have been in top priority development
    markets.
  *The average unit volumes of the new freestanding restaurants continue to
    be significantly higher than the system average as a direct result of the
    improved site selection discipline we have in place.
  *We believe that our opportunity in the U.S. is to at least double our
    current footprint through additional development in existing markets and
    entry into new markets.
  *Company-operated restaurant development remains on track, with 4 to 6 new
    restaurants expected to open in the fourth quarter.

5. Create a Culture of Servant Leaders

  *Our work on key initiatives to transform the Popeyes culture into one of
    Servant Leadership punctuates the importance we place on human capital and
    its proven impact on long term performance.
  *We are intent on delivering a branded guest experience that differentiates
    Popeyes among our competitors. The foundation of this effort is based on
    establishing Popeyes unique employee value proposition, defining the guest
    experience and developing leaders at all levels of the organization who
    can execute that experience.
  *We are currently gathering insights from our guests and employees. We
    believe feedback from these important stakeholdersis key to understanding
    what they expect from an employee and guest experience.

Pending Transaction

On October 11, 2012, we entered into an agreement to acquire 29 restaurants in
Minnesota and California at a price of $13.8 million. The Company intends to
convert 28 of the restaurants to Popeyes Louisiana Kitchen restaurants at a
cost of approximately $11.5 million and to dispose of one of the restaurant
sites. Following the conversions, the restaurants will be leased to Popeyes
franchisees to operate. The closing of the acquisition, the Asset Purchase
Agreement, the number of acquired restaurants, the resulting number of
restaurants converted to the Popeyes concept, and the conversion costs are
subject to bankruptcy court approval of the transaction and customary closing
conditions. As of 12:00 noon Eastern Time on November 7, 2012, the bankruptcy
court had not ruled with respect to approval. The Company will provide an
update following such ruling.

During November 2012, the Company’s 2010 Credit Facility was amended to
exclude the initial purchase price and conversion costs for the acquired
restaurants from the Company’s debt covenant calculations. As a result, the
Company expects to be compliant with its covenant requirementsthrough the
life of the facility.

Fiscal 2012 Guidance

Global same-store sales were positive 7.1% through the end of the third
quarter. Accordingly, the Company is raising full year guidance on global
same-store sales for fiscal 2012 to positive 6% to 6.5% from 5% to 6% to
reflect the strong third quarter performance tempered by a difficult 5.8%
comparison in the fourth quarter. Global same-store sales for fiscal 2011 were
3.1%.

Popeyes now expects its global new openings will be in the range of 140-150
restaurants, compared to previous guidance of 135-155 restaurants. Many of the
fourth quarter units are scheduled to open in late December. The Company
expects net unit growth of 65-85, compared to previous guidance of 60-90 net
unit growth. Total net unit growth in 2011 was 65.

Adjusted earnings per diluted share are now expected to be in the range of
$1.19-$1.21, an increase from our previous guidance of $1.17 to $1.19. This
represents an approximate 21% increase over the $0.99 of adjusted earnings per
diluted share reported in fiscal 2011. Our guidance includes approximately
$0.01 for the 53^rd week in fiscal 2012.

The Company also reiterates its guidance on the following items:

  *General and administrative expenses are expected to be between $67 and $68
    million for FY 2012, at approximately 3% of system-wide sales.
  *We expect our full year effective tax rate to be approximately 37%.
  *In 2012, the Company plans to repurchase approximately $15 million of its
    outstanding shares, continuing its efforts to steadily grow shareholder
    value.
  *Excluding our pending acquisition of 29 restaurant properties for $13.8
    million, we expect capital expenditures for 2012 to be $10 to $12 million.
    Subject to the bankruptcy court’s ruling, we anticipate investing an
    additional $2 to $3 million in the fourth quarter for the conversion of
    units in Minnesota and California.

Long-Term Guidance

Consistent with previous guidance, over the course of the next five years, the
Company believes that the execution of its Strategic Plan will deliver on an
average annualized basis the following results:same-store sales growthof 1%
to 3%; net unit growth of 4% to 6%;and earnings per diluted share growth of
13% to 15%.

Conference Call

The Company will host a conference call and internet webcast with the
investment community at 9:00 A.M. Eastern Time on November 8, 2012, to review
the results of the third quarter 2012. To access the Company’s webcast, go to
www.afce.com, select “Investor Information” and then select “AFC Enterprises
Third Quarter 2012 Earnings Conference Call.” A replay of the conference call
will be available for 90 days at the Company’s website or through a dial-in
number for a limited time following the call.

Corporate Profile

AFC Enterprises, Inc. is the franchisor and operator of Popeyes® restaurants,
the world's second-largest quick-service chicken concept based on number of
units. As of September 30, 2012, Popeyes had 2,060 operating restaurants in
the United States, Guam, Puerto Rico, the Cayman Islands and 25 foreign
countries. AFC’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. AFC
Enterprises can be found at www.afce.com.

              Supplemental Financial Information on pages 7-16.

AFC Enterprises, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(In millions, except share data)
                                                                
ASSETS                                              9/30/12        12/25/11 
Current assets:
Cash and cash equivalents                         $ 24.8          $ 17.6
Accounts and current notes receivable, net          6.7             7.0
Other current assets                                3.6             4.8
Advertising cooperative assets, restricted          23.5           18.9     
Total current assets                                58.6           48.3     
Long-term assets:
Property and equipment, net                         29.2            27.4
Goodwill                                            11.1            11.1
Trademarks and other intangible assets, net         46.0            46.5
Other long-term assets, net                         1.9            2.3      
Total long-term assets                              88.2           87.3     
Total assets                                      $ 146.8        $ 135.6    
                                                                    
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                                  $ 3.1           $ 6.1
Other current liabilities                           7.6             8.2
Current debt maturities                             6.0             5.2
Advertising cooperative liabilities                 23.5           18.9     
Total current liabilities                           40.2           38.4     
Long-term liabilities:
Long-term debt                                      52.9            58.8
Deferred credits and other long-term liabilities    26.8           24.6     
Total long-term liabilities                         79.7           83.4     
Total liabilities                                 $ 119.9        $ 121.8    
                                                                    
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;
24,020,745 and 24,383,274 shares issued and         0.2             0.2
outstanding
at September 30, 2012 and December 25, 2011,
respectively)
Capital in excess of par value                      89.0            97.6
Accumulated deficit                                 (61.4   )       (83.2    )
Accumulated other comprehensive loss                (0.9    )       (0.8     )
Total shareholders' equity                          26.9           13.8     
                                                                    
Total liabilities and shareholders' equity        $ 146.8        $ 135.6    
                                                                             
                                                                             

AFC Enterprises, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(In millions, except per share data)
                                                  
                         12 Weeks Ended               40 Weeks Ended
                          9/30/12     10/02/11      9/30/12     10/02/11
                                                                    
Revenues:
Sales by
company-operated       $   13.5      $   12.3       $   47.6      $   42.2
restaurants
Franchise revenues         24.4          22.2           80.4          72.1
Rent and other            1.0          0.9           3.3          3.2
revenues
Total revenues            38.9         35.4          131.3        117.5
                                                                    
Expenses:
Restaurant employee,
occupancy and other
expenses                   6.7           6.0            23.1          20.6
Restaurant food,
beverages and              4.6           4.2            16.0          14.1
packaging
Rent and other             0.6           0.7            2.1           2.1
occupancy expenses
General and
administrative             14.7          14.1           49.7          46.2
expenses
Depreciation and           1.1           0.9            3.5           3.2
amortization
Other expenses            0.1          0.3           0.2          -
(income), net
Total expenses            27.8         26.2          94.6         86.2
                                                                    
Operating profit           11.1          9.2            36.7          31.3
Interest expense, net     0.7          0.8           2.7          2.8
                                                                    
Income before income       10.4          8.4            34.0          28.5
taxes
Income tax expense        3.5          2.6           12.2         10.0
                                                                    
Net income             $  6.9       $  5.8        $  21.8      $  18.5
                                                                    
Earnings per common    $  0.29      $  0.24       $  0.91      $  0.75
share, basic:
                                                                    
Earnings per common    $  0.29      $  0.24       $  0.89      $  0.74
share, diluted:
                                                                    
Weighted-average
shares outstanding:
Basic                      23.7          24.1           23.9          24.7
Diluted                    24.2          24.5           24.4          25.1
                                                                    
Comprehensive Income     $ 6.8         $ 5.5          $ 21.7        $ 17.6
                                                                      
                                                                      

AFC Enterprises, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(In millions)
                                                
                                                  40 Weeks Ended
                                                   9/30/12     10/02/11 
Cash flows provided by (used in) operating
activities:
Net income                                        $ 21.8          $ 18.5
Adjustments to reconcile net income to net cash
provided by
(used in) operating activities:
Depreciation and amortization                       3.5             3.2
Asset write-downs                                   0.2             0.3
Net gain on sale of assets                          (0.1    )       (0.7     )
Deferred income taxes                               1.9             0.2
Non-cash interest expense, net                      0.3             0.4
Provision for credit losses                         (0.1    )       (0.2     )
Excess tax benefits from stock-based                (0.3    )       -
compensation
Stock-based compensation expense                    3.5             2.2
Change in operating assets and liabilities:
Accounts receivable                                 0.4             (0.9     )
Other operating assets                              1.4             0.8
Accounts payable and other operating               (4.3    )      (2.0     )
liabilities
Net cash provided by operating activities          28.2          21.8     
                                                                  
Cash flows provided by (used in) investing
activities:
Capital expenditures                                (5.0    )       (2.7     )
Proceeds from dispositions of property and          -               0.7
equipment
Proceeds from notes receivable and other           -             0.3      
investing activities
Net cash used in investing activities              (5.0    )      (1.7     )
                                                                  
Cash flows provided by (used in) financing
activities:
Principal payments - 2010 credit facility (term     (5.0    )       (3.8     )
loan)
Borrowings under 2010 revolving line of credit      -               2.0
Share repurchases                                   (11.5   )       (22.3    )
Proceeds from exercise of employee stock            0.5             0.5
options
Excess tax benefits from stock-based                0.3             -
compensation
Other financing activities, net                    (0.3    )      (0.3     )
Net cash used in financing activities              (16.0   )      (23.9    )
                                                                  
Net increase (decrease) in cash and cash            7.2             (3.8     )
equivalents
Cash and cash equivalents at beginning of year     17.6          15.9     
Cash and cash equivalents at end of quarter       $ 24.8         $ 12.1     
                                                                             
                                                                             

AFC Enterprises, Inc.
Same-store sales and restaurant count
                                                       
                          12 Weeks ended                 Year-to-date
                          9/30/12     10/02/11      9/30/12     10/02/11 
Same-store sales growth                                                 
Company-operated          1.9     %       (1.9     %)       4.7     %       1.9      %
restaurants
Domestic franchised       7.0     %       1.8      %        7.9     %       2.2      %
restaurants
Total domestic
(company-operated and     6.8     %       1.7      %        7.8     %       2.2      %
franchised restaurants)
International             2.5     %       1.8      %        2.0     %       2.8      %
franchised restaurants
Total global system       6.3     %       1.7      %        7.1     %       2.2      %
                                                                                       
Company-operated
restaurants (all
domestic)
Restaurants at            40              38                40              38
beginning of period
New restaurant openings   -               -                 -               -
Permanent closings        -               -                 -               -
Temporary
(closings)/re-openings,   -              -                -              -        
net
Restaurants at end of     40              38                40              38
period
                                                                                       
Franchised restaurants
(domestic)
Restaurants at            1,597           1,557             1,587           1,542
beginning of period
New restaurant openings   18              11                42              41
Permanent closings        (14     )       (10      )        (23     )       (25      )
Temporary
(closings)/re-openings,   5              2                -              2        
net
Restaurants at end of     1,606           1,560             1,606           1,560
period
                                                                                       
Franchised restaurants
(international)
Restaurants at            412             405               408             397
beginning of period
New restaurant openings   10              15                37              47
Permanent closings        (9      )       (15      )        (33     )       (39      )
Temporary
(closings)/re-openings,   1              (5       )        2              (5       )
net
Restaurants at end of     414             400               414             400
period
                                                                                       
Total restaurant count    2,060          1,998            2,060          1,998    
at end of period
                                                                                       
                                                                                       

Management’s Use of Non-GAAP Financial Measures

Company-operated restaurant operating profit margins, Operating EBITDA, free
cash flow and adjusted earnings per diluted share are supplemental non-GAAP
financial measures. The Company uses Company-operated restaurant operating
profit margins, Operating EBITDA, free cash flow and adjusted earnings per
diluted share, 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. Company-operated
restaurant operating profit margins, Operating EBITDA, free cash flow and
adjusted earnings per diluted share as calculated by the Company are not
necessarily comparable to similarly titled measures reported by other
companies. In addition, Company-operated restaurant operating profit margins,
Operating EBITDA, free cash flow and adjusted earnings per diluted share: (a)
do not represent net income, cash flows from operations or earnings per share
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, earnings per share, 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, as follow:

  *for third quarter 2012 includes $0.1 million for disposals of fixed
    assets;
  *for third quarter 2011 includes $0.1 million for disposals of fixed
    assets, $0.2 million of other expenses related to the Company’s relocation
    to a new Global Service Center;
  *for third quarter year-to-date 2012 includes $0.2 million for disposals of
    fixed assets and $0.1 million of other hurricane-related expenses offset
    by $0.1 million net gain on the sale of assets;
  *for third quarter year-to-date 2011 includes $0.3 million for disposals of
    fixed assets, $0.4 million of other expenses related to the Company’s
    relocation to a new Global Service Center offset by $0.7 million for net
    gain on sales of assets;
  *for fiscal 2011 includes $0.8 million in expenses for the Global Service
    Center relocation and $0.5 million for disposals of fixed assets, offset
    by a $0.8 million net gain on the sale of two properties to a franchisee;

(ii) for third quarter 2012 year-to-date approximately $0.5 million in legal
fees related to licensing arrangements;

(iii) accelerated depreciation for the third quarter 2011 related to the
Company’s relocation to a new Global Service Center; 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
earnings on a diluted basis. The following table reconciles on a historical
basis for third quarter 2012, third quarter 2011, third quarter year-to-date
2012, third quarter year-to-date 2011 and fiscal year 2011 the Company’s
Adjusted earnings per diluted share on a consolidated basis to the line on its
Condensed Consolidated Statement of Operations and Comprehensive Income
entitled “Net income”, which the Company believes is the most directly
comparable GAAP measure on its Condensed Consolidated Statement of Operations
and Comprehensive Income to “Adjusted earnings per diluted share.”

(in millions,   Q3         Q3         Year-to-date   Year-to-date   Fiscal
except per     2012      2011      9/30/12       10/02/11      2011
share data)
Net income     $ 6.9     $ 5.8     $   21.8      $   18.5      $ 24.2
Other expense     0.1        0.3          0.2            -            0.5
(income), net
Legal fees
related to        -          -            0.5            -            -
licensing
arrangements
Accelerated
depreciation
related to
the
Company’s
relocation to
a new Global
Service           -          0.2          -              0.5          0.5
Center
Tax effect      (0.1 )   (0.2 )     (0.3  )      (0.3  )    (0.5 )
Adjusted       $ 6.9    $ 6.1       22.2     $   18.7     $ 24.7 
earnings
Adjusted
earnings per   $ 0.29   $ 0.25   $   0.91     $   0.75     $ 0.99 
diluted share
Weighted
average
diluted
shares
outstanding     24.2    24.5      24.4        25.1      25.0 
                                                                             
                                                                             

Operating EBITDA: Calculation and Definition

The Company defines “Operating EBITDA” as earnings before interest expense,
taxes, depreciation and amortization, other expenses (income), net, and legal
fees related to licensing arrangements. The following table reconciles on a
historical basis for third quarter year-to-date 2012 and third quarter
year-to-date 2011, the Company’s earnings before interest expense, taxes,
depreciation and amortization and other expenses (income), net and legal fees
related to licensing arrangements (“Operating EBITDA”) on a consolidated basis
to the line on its Condensed Consolidated Statement of Operations and
Comprehensive Income entitled “Net income”, which the Company believes is the
most directly comparable GAAP measure on its Condensed Consolidated Statement
of Operations and Comprehensive Income to Operating EBITDA. “Operating EBITDA
as a percentage of Total Revenues” is defined as “Operating EBITDA” divided by
“Total revenues”.

(dollars in millions)                           Year-to-date  Year-to-date
                                                 9/30/12        10/02/11
Net income                                      $  21.8       $  18.5
Interest expense, net                               2.7            2.8
Income tax expense                                  12.2           10.0
Depreciation and amortization                       3.5            3.2
Other expenses (income), net                        0.2            -
Legal fees related to licensing arrangements      0.5         -      
Operating EBITDA                                $  40.9      $  34.5   
Total revenues                                  $  131.3     $  117.5  
Operating EBITDA as a percentage of Total         31.2   %     29.4   %
revenues
                                                                             
                                                                             

Company-operated restaurant operating profit: Calculation and Definition

The Company defines “Company-operated restaurant operating profit” as “Sales
by company-operated restaurants” minus “Restaurant employee, occupancy and
other expenses” minus “Restaurant food, beverages and packaging”. The
following table reconciles on a historical basis for third quarter 2012, third
quarter 2011, year-to-date 2012 and year-to-date 2011, Company-operated
restaurant operating profit to the line item on its Condensed Consolidated
Statement of Operations and Comprehensive Income entitled ”Sales by
company-operated restaurants”, which the Company believes is the most directly
comparable GAAP measure on its Condensed Consolidated Statement of Operations
and Comprehensive Income to Company-operated restaurant operating profit.
“Company-operated restaurant operating profit as a percentage of sales by
company-operated restaurants” is defined as “Company-operated restaurant
operating profit” divided by “Sales of company-operated restaurants.”

                                                          Year-to-   Year-to-
(dollars in millions)                Q3 2012  Q3 2011  date      date
                                                          9/30/12    10/02/11
Sales by company-operated            $13.5    $12.3    $47.6     $42.2
restaurants
Less: Restaurant employee,
occupancy and other
expenses                              6.7       6.0       23.1       20.6
Less: Restaurant food, beverages     4.6      4.2      16.0      14.1
and packaging
Company-operated restaurant          $2.2     $2.1     $8.5      $7.5
operating profit
Company-operated restaurant
operating profit as a
percentage of sales by
company-operated
restaurants                          16.3%    17.1%    17.9%     17.8%

Free cash flow: Calculation and Definition

The Company defines “Free cash flow” as “Net income” plus “Depreciation and
amortization”, plus “Stock-based compensation expense”, minus “Maintenance
capital expenditures” (which includes for third quarter year-to-date 2012 $0.6
million in Companyrestaurant reimages, $0.9 million in information technology
projects and $1.0 million in other capital assets to maintain, replace and
extend the lives of Company-operated restaurant facilities and equipment; and
for third quarter year-to-date 2011 approximately $1.3 million in company
restaurant reimages, $0.2 million of IT projects and $0.3 million in other
capital assets to maintain, replace and extend the lives of company-operated
restaurant facilities and equipment).

The following table reconciles on a historical basis for the third quarter
year-to-date 2012 and third quarter year-to-date 2011, the Company’s Free cash
flow on a consolidated basis to the line on its Condensed Consolidated
Statement of Operations and Comprehensive Income entitled “Net income”, which
the Company believes is the most directly comparable GAAP measure on its
Condensed Consolidated Statement of Operations and Comprehensive Income to
“Free cash flow”.

(dollars in millions)                            Year-to-date  Year-to-date
                                                  9/30/12        10/02/11
Net income                                       $  21.8       $  18.5
Depreciation and amortization                        3.5            3.2
Stock-based compensation expense                     3.5            2.2
Maintenance capital expenditures                   (2.5   )     (1.8   )
Free cash flow                                   $  26.3      $  22.1   
Total revenue                                    $  131.3     $  117.5  
Free cash flow as a percentage of Total Revenue    20.0   %     18.8   %
(Free cash flow margin)

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 strategic plan, projections and expectations
regarding same-store sales for fiscal 2012 and beyond, expectations regarding
covenant compliance, the Company’s ability to improve restaurant level
margins, guidance for new restaurant openings and closures, the Company’s
pending restaurant acquisition, and the Company’s anticipated 2012 and
long-term performance including projections regarding general and
administrative expenses, and net earnings per diluted share, expected benefits
from the Company’s new corporate support center 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, 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 restaurants, a decline in our ability to franchise new restaurants,
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 our 2011
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.

Contact:

AFC Enterprises
Investor inquiries:
Rebecca Gardy, 404-459-4673
Director, Finance & Investor Relations
investor.relations@afce.com
or
Media inquiries:
Alicia Thompson, 404-459-4572
Vice President, Popeyes Communications & Public Relations
popeyescommunications@popeyes.com
 
Press spacebar to pause and continue. Press esc to stop.