AFC Enterprises Inc., the franchisor and operator of Popeyes Louisiana Kitchen restaurants, reported operating results for its fiscal 2010 fourth quarter and full year, which ended December 26, and increased fiscal 2010 earnings guidance.
Global same-store sales increased 6 percent in the fourth quarter compared to a 1 percent decrease last year. For the full year 2010, global same-store sales increased 2.6 percent compared to a 0.7 percent increase in 2009, exceeding the company’s previous guidance of positive 2 percent to 2.5 percent.
During the fourth quarter, the Popeyes system opened 22 domestic and 26 international restaurants, bringing full year 2010 openings to 106 restaurants, compared to 95 restaurants last year. Openings were lower than previous guidance of 120–130 restaurants due primarily to year-end construction delays resulting from poor weather and permitting delays. Management expects to have approximately eight of these restaurants opened by the end of January. The Popeyes system permanently closed 67 restaurants in fiscal 2010, resulting in net unit growth of 39 restaurants, compared to 14 net restaurants in 2009.
“We continue to be pleased with our strong same-store sales momentum, which reflects our superior food and effective marketing campaigns in the U.S. and around the globe,” says AFC Enterprises CEO Cheryl Bachelder. “Today our business model is stronger and more profitable to our franchise owners. While we missed our aggressive new unit-opening goal by 14 units, we expect half of those units will be open in this month. We remain in a very good position to continue the acceleration of unit growth in 2011 and beyond.”
The company plans to build off the success of 2010 by increasing its number of domestic franchised locations in 2011. Specific markets the company plans to focus expansion on include San Diego, Los Angeles, Indianapolis, Phoenix, Cleveland, Philadelphia, and Tampa.
Based on the fourth quarter sales performance, the company expects fiscal 2010 fourth quarter reported earnings will be $0.16–$0.17 per diluted share and full year reported earnings will be $0.88–$0.89 per diluted share. Adjusted earnings per diluted share for the fourth quarter is now expected to be $0.18–$0.19, bringing full year adjusted earnings per diluted share to $0.85–$0.86, compared to adjusted earnings per diluted share of $0.74 in fiscal 2009. This is an increase from the company’s previous adjusted earnings per diluted share guidance of $0.81–$0.83. Adjusted earnings per diluted share is a supplemental non-GAAP measure of performance.
Within this updated guidance, the company continues to expect general and administrative expenses for the fourth quarter of 2010 will be in the range of $14–14.5 million and full year 2010 general and administrative expenses will be approximately 3 percent of system-wide sales, among the lowest in the restaurant industry.
Management expects to provide fiscal 2011 guidance concurrent with the filing of the company’s 2010 Annual Report on Form 10-K.
As previously announced, on December 23 the company completed a new five-year $100 million credit facility, comprised of a $40 million term loan and a $60 million revolver. Proceeds from the refinancing together with available cash were used to retire approximately $63 million of the outstanding principal debt balance of its previous credit facility. At closing, $22 million was drawn on the revolver.
The rate of interest under the new facility is 2.8 percent and is determined using the LIBO Rate plus a spread of 250 basis points. The spread above the LIBO Rate can adjust from 225 to 325 basis points depending on the company’s total leverage. In the fourth quarter of 2010, the company will recognize approximately $0.6 million of interest charges and defer approximately $1 million of fees associated with the refinancing to be amortized over the life of the new facility.
The company’s required quarterly principal payments will be $1.25 million for the first two years, $1.5 million for the third and fourth years, and $4.5 million in the fifth year.
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