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on November 14, 2016

Popeyes reports Q3 results

The company reaffirms same-store sales guidance and updates earnings guidance

Popeyes Louisiana Kitchen, Inc. (NASDAQ: PLKI), the franchisor and operator of Popeyes restaurants, has reported results for its fiscal third quarter of 2016, which ended Oct. 2. The Company also reaffirmed same-store sales guidance and updated earnings guidance for fiscal 2016.

"We are pleased to report strong progress for the quarter" said Cheryl Bachelder, Popeyes Chief Executive Officer. "We generated global same store sales of 1.8%, opened 25 net new global restaurants and announced the refranchising of the Indianapolis company-operated market. We continue to expand our brand which has led to the achievement of another record high market share of 26.9%. We are firmly on the path of achieving our long term bold growth goals and we are creating value for our franchisees and shareholders."

3Q highlights

  • Total revenues increased 4.7% to $64.0 million, compared to $61.1 million in the third quarter of 2015. The $2.9 million increase in revenues was primarily due to a $2.6 million increase in franchise royalties, a $0.7 million increase in sales by Company-operated restaurants partially offset by a $0.4 million decrease in franchise fees. The increase in franchise royalties was driven by net unit growth and positive same store sales.
  • Reported net income was $10.4 million, or $0.49 per diluted share, compared to $10.6 million, or $0.46 per diluted share in the third quarter of 2015. Reported net income includes $3.7 million of asset impairment expenses related to Company-operated restaurants and restaurants leased to franchisees. Excluding the impacts of the asset impairments and other non-operating items, adjusted earnings per diluted share1 was $0.59 in the third quarter of 2016 compared to $0.47 in the third quarter of 2015, representing an increase of 25.5%.
  • Total system-wide sales increased by 8.3% in the third quarter of 2016 compared to the same period last year because of net new unit growth and positive same-store sales performance.
  • Global same-store sales increased 1.8% in the third quarter of 2016 compared to a 6.0% increase in the third quarter of 2015, marking the 26th quarter of positive global same-store sales.
  • Total domestic same-store sales increased 1.5%, compared to a 5.6% increase in the third quarter of 2015. Popeyes increased its domestic market share of the chicken-QSR category to a record high 26.9%, compared to 26.0% in the third quarter of 2015.
  • International same-store sales increased 3.7%, compared to a 9.1% increase in the third quarter of 2015, marking the 27th consecutive quarter of positive international same-store sales growth.
  • The Popeyes system opened 40 restaurants, which included 24 domestic and 16 international restaurants, compared to 47 total openings in the same period of last year. Net new restaurant openings were 25, compared to 39 net new restaurant openings in the same period last year.
  • As of the end of the third quarter, the Company operated and franchised 2,631 restaurants, compared to 2,475 at the end of the third quarter in 2015, representing net new unit growth of 6.3% over the last twelve months.
  • Sales by Company-operated restaurants were $26.1 million in the third quarter compared to $25.4 million in the same period last year. Company-operated restaurant operating profit1 was $5.0 million, or 19.2% of sales, compared to $4.9 million, or 19.3% of sales, in the same period last year. The increase in Company-operated restaurant operating profit was primarily due to higher sales and lower chicken and grocery basket costs partially offset by higher labor costs.
  • Operating EBITDA1 was $23.8 million, or 37.2% of total revenue, in the third quarter of 2016, compared to $20.3 million, or 33.2% of total revenue, in the same period last year. The $3.5 million increase in Operating EBITDA was primarily due to a $2.2 million increase in franchise royalties and fees, a $1.2 million decrease in general and administrative expenses, and a $0.1 million increase in Company-operated restaurant operating profit.
  • Through the first 40 weeks of fiscal 2016, free cash flow1 was $43.0 million, compared to $37.0 million in the same period of 2015, a 16.2% increase.
  • The Company repurchased 537,957 shares of its common stock for $30.0 million in the third quarter.

Fiscal 2016 Guidance

Based on performance through the third quarter, the Company is making the following adjustments to guidance for the full-year fiscal 2016:

  • Reported earnings per diluted share in the range of $2.00 to $2.05, compared to the previous guidance of $2.10 to $2.15. Excluding the impacts of asset impairments and other non-operating items, the Company maintains its adjusted earnings per diluted share range of $2.10 to $2.15, and now guides to the lower end of the adjusted earnings per share range.
  • General and administrative expenses in the range of $90 million to $92 million, approximately 2.8% of system-wide sales, compared to a previous range of 2.9% to 3.0% of system-wide sales.
  • Capital expenditures to be in the range of $15 million to $17 million from a previous range of $10 million to $15 million.
  • Share repurchases of approximately $100 million in outstanding shares from a previous range of $80 million to $120 million.

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."

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