UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 30, 2002
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Commission File Number: 000-17962
Applebee's International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 43-1461763
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4551 W. 107th Street, Suite 100, Overland Park, Kansas 66207
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(Address of principal executive offices and zip code)
(913) 967-4000
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(Registrant's telephone number, including area code)
None
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(Former name or former address, if changed since last report)
1
Item 5. Other Events
On October 30, 2002, Applebee's International, Inc.(the "Company") issued a
press release entitled " Applebee's International Reports 23 Percent Increase in
Third Quarter Diluted Earnings Per Share of 37 Cents." The press release
contained the following information.
FOR IMMEDIATE RELEASE
Contact: Carol DiRaimo,
Director of Investor Relations
(913) 967-4109
Applebee's International Reports 23 Percent Increase
in Third Quarter Diluted Earnings Per Share of 37 Cents
Overland Park, Kan., October 30, 2002 -- Applebee's International, Inc.
(Nasdaq:APPB) today reported net earnings of $21.0 million, or 38 cents and 37
cents per share on a basic and diluted basis, respectively, for the third
quarter ended September 29, 2002. This represents an increase in earnings per
share of 27 percent and 23 percent on a basic and diluted basis, respectively,
as compared with 30 cents per share on both a basic and diluted basis for the
third quarter of 2001.
System-wide comparable sales exceeded the company's expectation of at least 2
percent, increasing 2.8 percent for the third quarter, the 17th consecutive
quarter of comparable sales growth. Comparable sales increased 3.1 percent for
franchise restaurants and 1.7 percent for company restaurants. System-wide
comparable sales for the year-to-date period through September increased 3.1
percent, with franchise and company restaurant comparable sales up 3.6 percent
and 1.5 percent, respectively.
The company also reported comparable sales for the September fiscal period,
comprised of the five weeks ended September 29, 2002. System-wide comparable
sales increased 4.7 percent, reflecting a 5.0 percent increase for franchise
restaurants and a 3.6 percent increase for company restaurants. The increase in
comparable sales for company restaurants reflects an increase in guest traffic
of 5.0 to 5.5 percent, offset in part by a lower average check.
In addition, the company reported comparable sales for the October fiscal
period, comprised of the four weeks ended October 27, 2002. System-wide
comparable sales increased 4.1 percent, including a 4.3 percent increase for
franchise restaurants and a 3.3 percent increase for company restaurants. The
increase in comparable sales for company restaurants reflects an increase in
guest traffic of 2.0 to 2.5 percent as well as a higher average check.
Lloyd L. Hill, chairman and chief executive officer, said, "We were excited that
system-wide comparable sales for the quarter exceeded our expectations,
reflecting a strong value proposition with our All You Can Eat Riblets promotion
in August and September. Our strong traffic results for the quarter and October
are especially encouraging given uncertainty surrounding the overall economy."
2
Mr. Hill continued, "We believe that our To Go initiative will continue to
contribute to driving sales by leveraging our position as the most conveniently
located concept in casual dining. The roll-out of Phase I of this initiative was
completed during the quarter, and we are pleased with the initial results which
are exceeding our expectations. In addition, we currently have over 150
restaurants testing a variety of curbside alternatives. We will launch the
curbside phase of our To Go initiative next year to continue building sales
momentum surrounding this key convenience occasion for our guests."
Mr. Hill concluded, "We believe that the strategies we outlined in May are on
target to drive future sales growth. These strategies include the continued
improvement of our food and menu, coupled with compelling promotions, effective
advertising campaigns and our sizable network television presence. Our
operations excellence initiatives surrounding supply chain, technology and
people are gaining momentum. We remain optimistic about our future."
Other results for the third quarter and year-to-date periods ended September 29,
2002 included:
o Net earnings for the 39-week period ended September 29, 2002 were $62.7
million, or $1.12 and $1.10 per share, respectively, on a basic and diluted
basis. This compares to net earnings in the same period of 2001 of $51.4
million, or 93 cents and 91 cents per share, respectively, on a basic and
diluted basis. This represents an increase in basic and diluted earnings
per share of 20 percent and 21 percent, respectively.
o System-wide sales for the Applebee's concept were a record $822.6 million
for the third quarter, an increase of 10 percent over the prior year.
System-wide sales for the 39-week period ended September 29, 2002 exceeded
$2.4 billion, an increase of 11 percent.
o Operating revenues (comprised of company restaurant sales and franchise
income) increased 11 percent for the third quarter and 10 percent for the
year-to-date period.
o Applebee's ended the quarter with 1,458 restaurants system-wide (329
company and 1,129 franchise restaurants). During the third quarter of 2002,
there were 37 new Applebee's restaurants opened system-wide, including 11
company and 26 franchised restaurants.
o As of September 29, 2002, the company had total debt outstanding of $39
million, with over $110 million available under its revolving credit
facility.
o The company repurchased 835,000 shares of common stock in the third quarter
at an average price of $21.31 for an aggregate cost of $17.8 million.
During 2002, the company has repurchased 1,210,000 shares at an average
price of $21.58 for an aggregate cost of $26.1 million. As of September 29,
2002, $69.5 million remains available under previous authorizations.
3
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
13 Weeks Ended 39 Weeks Ended
------------------------------ ------------------------------
September 29, September 30, September 29, September 30,
2002 2001 2002 2001
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Revenues:
Company restaurant sales.................... $ 182,807 $ 164,238 $ 536,673 $ 486,416
Franchise income............................ 26,033 23,787 76,357 69,906
------------- -------------- ------------- -------------
Total operating revenues................. 208,840 188,025 613,030 556,322
------------- -------------- ------------- -------------
Cost of company restaurant sales:
Food and beverage........................... 47,765 44,489 142,245 131,427
Labor....................................... 60,054 52,864 176,392 155,297
Direct and occupancy........................ 47,009 41,459 134,172 123,322
Pre-opening expense......................... 792 632 1,432 899
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Total cost of company restaurant sales... 155,620 139,444 454,241 410,945
------------- -------------- ------------- -------------
General and administrative expenses.............. 20,049 19,197 58,848 54,448
Amortization of intangible assets................ 95 1,463 285 4,388
Loss on disposition of restaurants and equipment. 458 329 1,479 1,087
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Operating earnings............................... 32,618 27,592 98,177 85,454
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Other income (expense):
Investment income........................... 346 479 1,124 1,251
Interest expense............................ (414) (1,831) (1,602) (6,231)
Other income................................ 513 322 1,096 797
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Total other income (expense)............. 445 (1,030) 618 (4,183)
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Earnings before income taxes..................... 33,063 26,562 98,795 81,271
Income taxes..................................... 12,068 9,776 36,060 29,908
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Net earnings..................................... $ 20,995 $ 16,786 $ 62,735 $ 51,363
============= ============== ============= =============
Basic net earnings per common share (a).......... $ 0.38 $ 0.30 $ 1.12 $ 0.93
============= ============== ============= =============
Diluted net earnings per common share (a)........ $ 0.37 $ 0.30 $ 1.10 $ 0.91
============= ============== ============= =============
Basic weighted average shares outstanding (a).... 55,654 55,366 55,801 55,470
============= ============== ============= =============
Diluted weighted average shares outstanding (a).. 56,714 56,821 57,119 56,736
============= ============== ============= =============
(a) All earnings per share and weighted average share information reflects a
three-for-two stock split effective at the close of business on June 11,
2002.
4
The following table sets forth, for the periods indicated, information derived
from the Company's consolidated statements of earnings expressed as a percentage
of total operating revenues, except where otherwise noted. Percentages may not
add due to rounding.
13 Weeks Ended 39 Weeks Ended
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September 29, September 30, September 29, September 30,
2002 2001 2002 2001
---------------- --------------- ---------------- ----------------
Revenues:
Company restaurant sales.................... 87.5% 87.3% 87.5% 87.4%
Franchise income............................ 12.5 12.7 12.5 12.6
---------------- --------------- ---------------- ----------------
Total operating revenues................. 100.0% 100.0% 100.0% 100.0%
================ =============== ================ ================
Cost of sales (as a percentage of company
restaurant sales):
Food and beverage........................... 26.1% 27.1% 26.5% 27.0%
Labor....................................... 32.9 32.2 32.9 31.9
Direct and occupancy........................ 25.7 25.2 25.0 25.4
Pre-opening expense......................... 0.4 0.4 0.3 0.2
---------------- --------------- ---------------- ----------------
Total cost of sales...................... 85.1% 84.9% 84.6% 84.5%
================ =============== ================ ================
General and administrative expenses.............. 9.6% 10.2% 9.6% 9.8%
Amortization of intangible assets................ -- 0.8 -- 0.8
Loss on disposition of restaurants and equipment. 0.2 0.2 0.2 0.2
---------------- --------------- ---------------- ----------------
Operating earnings............................... 15.6 14.7 16.0 15.4
---------------- --------------- ---------------- ----------------
Other income (expense):
Investment income........................... 0.2 0.3 0.2 0.2
Interest expense............................ (0.2) (1.0) (0.3) (1.1)
Other income................................ 0.2 0.2 0.2 0.1
---------------- --------------- ---------------- ----------------
Total other income (expense)............. 0.2 (0.5) 0.1 (0.8)
---------------- --------------- ---------------- ----------------
Earnings before income taxes..................... 15.8 14.1 16.1 14.6
Income taxes..................................... 5.8 5.2 5.9 5.4
---------------- --------------- ---------------- ----------------
Net earnings..................................... 10.1% 8.9% 10.2% 9.2%
================ =============== ================ ================
5
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
September 29, December 30,
2002 2001
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ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 7,522 $ 22,048
Short-term investments, at market value (amortized cost of $478 in 2002 and
$677 in 2001)................................................................... 504 699
Receivables (less allowance for bad debts of $5,443 in 2002 and $4,343 in 2001).... 25,207 22,827
Inventories........................................................................ 7,070 10,165
Prepaid and other current assets................................................... 13,782 12,260
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Total current assets............................................................ 54,085 67,999
Property and equipment, net............................................................. 353,730 330,924
Goodwill, net........................................................................... 78,614 78,614
Franchise interest and rights, net...................................................... 1,551 1,800
Other assets............................................................................ 20,864 21,074
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$ 508,844 $ 500,411
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................................. $ 375 $ 43
Notes payable...................................................................... 3,500 --
Accounts payable................................................................... 28,106 22,196
Accrued expenses and other current liabilities..................................... 63,894 71,551
Accrued dividends.................................................................. -- 2,977
Accrued income taxes............................................................... 1,919 979
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Total current liabilities....................................................... 97,794 97,746
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Non-current liabilities:
Long-term debt - less current portion.............................................. 35,192 74,525
Franchise deposits................................................................. 1,182 1,515
Deferred income taxes.............................................................. 2,026 1,442
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Total non-current liabilities................................................... 38,400 77,482
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Total liabilities............................................................... 136,194 175,228
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Stockholders' equity:
Preferred stock - par value $0.01 per share: authorized - 1,000,000 shares;
no shares issued................................................................ -- --
Common stock - par value $0.01 per share: authorized - 125,000,000 shares;
issued - 72,336,788 shares...................................................... 723 723
Additional paid-in capital......................................................... 186,055 180,802
Retained earnings.................................................................. 417,652 354,950
Accumulated other comprehensive income, net of income taxes ....................... 17 14
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604,447 536,489
Treasury stock - 17,123,011 shares in 2002 and 16,522,099 shares in 2001, at cost.. (231,797) (211,306)
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Total stockholders' equity...................................................... 372,650 325,183
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$ 508,844 $ 500,411
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6
Item 9. Regulation FD Disclosure
Applebee's International, Inc. (the "Company") also included guidance
regarding its business outlook in the press release. These comments are included
below.
BUSINESS OUTLOOK
The company also provided guidance as to its business outlook for the remainder
of fiscal year 2002.
o The company expects to complete the previously announced acquisition of 21
franchise restaurants located in the Washington, D.C. area from an existing
franchisee in early November.
o Excluding the cost of this acquisition, capital expenditures are now
expected to be between $63 and $68 million in 2002.
o Consistent with current analyst estimates, diluted earnings per share for
fiscal year 2002 are now expected to be in the range of $1.44 to $1.45,
excluding any impact of additional stock repurchases.
A conference call to review the third quarter 2002 results and the current
business outlook will be held on Thursday morning, October 31, 2002, at 10:00
a.m. Central Time (11:00 a.m. Eastern Time). The conference call will be
broadcast live over the Internet and a replay will be available shortly after
the call on the Investor Relations section of the company's website
(www.applebees.com).
Applebee's International, Inc., headquartered in Overland Park, Kan., develops,
franchises and operates restaurants under the Applebee's Neighborhood Grill and
Bar brand, the largest casual dining concept in the world. There are currently
1,470 Applebee's restaurants operating system-wide in 49 states and eight
international countries. Additional information on Applebee's International can
be found at the company's website (www.applebees.com).
Certain statements in this release are forward looking and based on current
expectations. There are several risks and uncertainties that could cause actual
results to differ materially from those described, including but not limited to
the ability of the company and its franchisees to open and operate additional
restaurants profitably, the continued growth of its franchisees and its ability
to attract and retain qualified franchisees, the impact of intense competition
in the casual dining segment of the restaurant industry, and its ability to
control restaurant operating costs which are impacted by market changes, minimum
wage and other employment laws, food costs and inflation. For additional
discussion of the principal factors that could cause actual results to be
materially different, the reader is referred to the company's current report on
Form 8-K filed with the Securities and Exchange Commission on July 16, 2002. The
company disclaims any obligation to update these forward-looking statements.
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APPLEBEE'S INTERNATIONAL, INC.
(Registrant)
Date: October 30, 2002 By: /s/ Steven K. Lumpkin
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Steven K. Lumpkin
Executive Vice President and
Chief Financial Officer
8