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) April 28, 2004
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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, 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 12. Results of Operations and Financial Condition
On April 28, 2004, Applebee's International, Inc. (the "Company") issued
a press release entitled "Applebee's International Reports First Quarter Diluted
Earnings Per Share of $0.52." The release has been provided below.
FOR IMMEDIATE RELEASE
Contact: Carol DiRaimo,
Vice President of Investor Relations
(913) 967-4109
Applebee's International Reports First Quarter
Diluted Earnings Per Share of $0.52
Overland Park, Kan., April 28, 2004 -- Applebee's International, Inc.
(Nasdaq:APPB) today reported record net earnings of $29.5 million, or $0.52 per
diluted share, for the first quarter ended March 28, 2004. This represents an
increase in diluted earnings per share of 21 percent as compared to $0.43 per
share for the first quarter of 2003.
System-wide comparable sales for the first quarter of 2004 increased 8.2
percent, the 23rd consecutive quarter of comparable sales growth. Company and
franchise restaurant comparable sales increased 8.7 percent and 8.0 percent,
respectively, for the quarter.
The company also reported comparable sales for the March fiscal period,
comprised of the five weeks ended March 28, 2004. Comparable sales for company
restaurants increased 9.2 percent, reflecting an increase in guest traffic of
approximately 7.5 to 8.0 percent, combined with a higher average check.
System-wide comparable sales increased 8.3 percent for the March period, and
comparable sales for franchise restaurants increased 8.0 percent.
In addition, the company reported comparable sales for the April fiscal period,
comprised of the four weeks ended April 25, 2004. Comparable sales for company
restaurants increased 6.2 percent, reflecting an increase in guest traffic of
4.5 to 5.0 percent, combined with a higher average check. System-wide comparable
sales increased 6.5 percent for the April period, and comparable sales for
franchise restaurants increased 6.6 percent. Comparable sales for company
restaurants for the year-to-date period through April have increased 8.1
percent, with system-wide and franchise comparable sales up 7.8 percent and 7.7
percent, respectively.
Lloyd L. Hill, chairman and chief executive officer, said, "We are off to a
terrific start this year. Comparable sales and traffic growth accelerated during
the quarter and were the highest we've seen in over a decade. These results were
well above our own expectations and substantially exceeded the casual dining
industry average as measured by Knapp-Track(TM). Although we do not expect this
level of sales and traffic growth to be sustainable on an ongoing basis, we now
expect system-wide comparable sales to increase by at least 5 percent for the
full year.
2
"We continued to expand our market share during the quarter with system-wide
sales growing by 14 percent. In addition, we have increased our company
development plans, and now expect to open at least 32 company restaurants this
year.
"Our Carside To Go(TM) program continues to gain momentum, with the percentage
of company restaurant sales increasing to 9.4 percent in the first quarter of
2004 from 6.8 percent in the first quarter of 2003. Our franchisees will
continue implementation during 2004, and we expect this to be a significant
driver of sales and traffic growth as we've begun to leverage our marketing
muscle behind Carside To Go(TM).
"Lastly, we continue to be very excited about our previously announced alliance
with Weight Watchers. We are now preparing for a system-wide launch prior to
Memorial Day, which will be supported by our substantial marketing power. We
believe this strategic initiative can contribute to our results in the latter
half of 2004 and beyond."
Other results for the first quarter ended March 28, 2004 included:
o Total system-wide sales for the quarter increased by 14 percent over
the prior year. System-wide sales are a non-GAAP financial measure that
includes sales at all company and franchise Applebee's restaurants, as
reported by franchisees. The company believes that system-wide sales
information is useful in analyzing Applebee's market share and growth,
and because franchisees pay royalties and contribute to the national
advertising pool based on a percentage of their sales.
o Applebee's ended the quarter with 1,603 restaurants system-wide (391
company and 1,212 franchise restaurants). During the first quarter of
2004, there were 19 new Applebee's restaurants opened system-wide,
including 8 company and 11 franchised restaurants.
o The company repurchased 855,300 shares of common stock in the first
quarter at an average price of $37.46 for an aggregate cost of
approximately $32 million. As of March 28, 2004, $67.7 million remains
available under the company's ongoing stock repurchase authorization.
o As of March 28, 2004, the company had total debt outstanding of $26
million, with $118 million available under its revolving credit
facility.
3
BUSINESS OUTLOOK
The company updated its guidance for fiscal year 2004:
o More than 100 new restaurants are expected to open in 2004, including
at least 32 company restaurants and 70 to 80 franchise restaurants.
Twelve company restaurants are now expected to open in the first half
of the year, with the balance opening in the second half of the year.
Approximately 20 franchise restaurants are expected to open in the
first half of the year, with the remainder opening in the second half
of the year.
o System-wide comparable sales are now expected to increase by at least 5
percent for the full year, although monthly sales results may be more
volatile given economic conditions, calendar shifts, prior year
comparisons, or other unusual events.
o Overall restaurant margins before pre-opening expense for the full year
are expected to be similar to fiscal year 2003 results.
o General and administrative expenses, as a percentage of operating
revenues, are expected to be in the low-9 percent range.
o The effective income tax rate is currently expected to continue at 35.0
percent for the remainder of the year.
o Excluding the cost of franchise acquisitions, capital expenditures are
now expected to be between $95 and $105 million in 2004 due to
increased company restaurant development. On April 26, 2004, the
company completed the previously announced acquisition of 10 franchise
restaurants located in southern California for $13.4 million in cash.
Based on the foregoing assumptions and the company's performance during the
first quarter, diluted earnings per share for fiscal year 2004 are now expected
to be in the range of $2.02 to $2.06, including the impact of potential stock
repurchase activity.
A conference call to review the first quarter 2004 results and the current
business outlook will be held on Thursday morning, April 29, 2004, 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 &
Bar brand, the largest casual dining concept in the world. As of April 28, 2004,
there were 1,601 Applebee's restaurants operating system-wide in 49 states and
nine international countries. Additional information on Applebee's International
can be found at the company's website (www.applebees.com).
4
Certain statements contained in this release, including fiscal year 2004
guidance as set forth in the Business Outlook section, 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 ability of its franchisees to
obtain financing, 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 February 11, 2004. The
company disclaims any obligation to update these forward-looking statements.
# # #
5
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
13 Weeks Ended
--------------------------------
March 28, March 30,
2004 2003
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Revenues:
Company restaurant sales................................ $ 243,560 $ 208,410
Franchise royalties and fees............................ 30,772 27,163
Other franchise income.................................. 3,115 2,641
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Total operating revenues............................. 277,447 238,214
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Cost of company restaurant sales:
Food and beverage....................................... 63,515 54,846
Labor................................................... 79,659 68,364
Direct and occupancy.................................... 59,069 50,561
Pre-opening expense..................................... 550 221
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Total cost of company restaurant sales............... 202,793 173,992
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Cost of other franchise income............................... 2,937 2,500
General and administrative expenses.......................... 25,517 22,620
Amortization of intangible assets............................ 86 99
Loss on disposition of restaurants and equipment............. 495 467
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Operating earnings........................................... 45,619 38,536
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Other income (expense):
Investment income....................................... 223 336
Interest expense........................................ (344) (521)
Other income (expense).................................. (109) 205
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Total other income (expense)......................... (230) 20
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Earnings before income taxes................................. 45,389 38,556
Income taxes................................................. 15,886 13,954
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Net earnings................................................. $ 29,503 $ 24,602
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Basic net earnings per common share.......................... $ 0.54 $ 0.45
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Diluted net earnings per common share........................ $ 0.52 $ 0.43
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Basic weighted average shares outstanding.................... 54,658 55,272
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Diluted weighted average shares outstanding.................. 56,419 56,677
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6
The following table contains 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
---------------------------------
March 28, March 30,
2004 2003
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Revenues:
Company restaurant sales.................................... 87.8% 87.5%
Franchise royalties and fees................................ 11.1 11.4
Other franchise income...................................... 1.1 1.1
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Total operating revenues................................. 100.0% 100.0%
=============== ===============
Cost of sales (as a percentage of company restaurant sales):
Food and beverage........................................... 26.1% 26.3%
Labor....................................................... 32.7 32.8
Direct and occupancy........................................ 24.3 24.3
Pre-opening expense......................................... 0.2 0.1
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Total cost of sales...................................... 83.3% 83.5%
=============== ===============
Cost of other franchise income (as a percentage
of other franchise income).................................. 94.3% 94.7%
General and administrative expenses.............................. 9.2 9.5
Amortization of intangible assets................................ -- --
Loss on disposition of restaurants and equipment................. 0.2 0.2
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Operating earnings............................................... 16.4 16.2
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Other income (expense):
Investment income........................................... 0.1 0.1
Interest expense............................................ (0.1) (0.2)
Other income (expense)...................................... -- 0.1
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Total other income (expense)............................. (0.1) --
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Earnings before income taxes..................................... 16.4 16.2
Income taxes..................................................... 5.7 5.9
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Net earnings..................................................... 10.6% 10.3%
=============== ===============
7
The following table sets forth certain unaudited financial information and other
restaurant data relating to company and franchise restaurants, as reported to us
by franchisees:
13 Weeks Ended
-----------------------------------------
March 28, March 30,
2004 2003
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Number of restaurants:
Company:
Beginning of period........................................ 383 357
Restaurant openings........................................ 8 3
Restaurants acquired from franchisees...................... -- 11
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End of period.............................................. 391 371
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Franchise:
Beginning of period........................................ 1,202 1,139
Restaurant openings........................................ 11 16
Restaurant closings........................................ (1) (2)
Restaurants acquired from franchisees...................... -- (11)
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End of period.............................................. 1,212 1,142
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Total:
Beginning of period........................................ 1,585 1,496
Restaurant openings........................................ 19 19
Restaurant closings........................................ (1) (2)
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End of period.............................................. 1,603 1,513
=================== ===================
Weighted average weekly sales per restaurant:
Company.................................................... $ 48,402 $ 44,666
Franchise.................................................. $ 48,769 $ 45,424
Total...................................................... $ 48,680 $ 45,243
Change in comparable restaurant sales:(1)
Company.................................................... 8.7% 4.6%
Franchise.................................................. 8.0% 2.9%
Total...................................................... 8.2% 3.3%
Total operating revenues (in thousands):
Company restaurant sales................................... $ 243,560 $ 208,410
Franchise royalties and fees(2)............................ 30,772 27,163
Other franchise income(3).................................. 3,115 2,641
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Total...................................................... $ 277,447 $ 238,214
=================== ===================
(1) When computing comparable restaurant sales, restaurants open for at
least 18 months are compared from period to period.
(2) Franchise royalties are generally 4% of each franchise restaurant's
reported monthly gross sales. Reported franchise sales, in thousands,
were $764,116 and $676,312 in the first quarter of 2004 and the first
quarter of 2003, respectively. Franchise fees typically range from
$30,000 to $35,000 for each restaurant opened.
(3) Other franchise income includes insurance premiums from franchisee
participation in our captive insurance company and revenue from
information technology products and services provided to certain
franchisees.
8
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
March 28, December 28,
2004 2003
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ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 9,488 $ 17,867
Short-term investments, at market value........................................ 280 27
Receivables, net of allowance.................................................. 35,946 31,950
Receivables related to captive insurance subsidiary............................ 8,155 450
Inventories.................................................................... 30,309 20,799
Prepaid income taxes........................................................... -- 5,800
Other current assets related to captive insurance subsidiary................... 2,867 657
Prepaid and other current assets............................................... 11,372 9,072
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Total current assets........................................................ 98,417 86,622
Property and equipment, net......................................................... 422,032 419,802
Goodwill............................................................................ 105,326 105,326
Restricted assets related to captive insurance subsidiary........................... 13,837 10,763
Franchise interest and rights, net.................................................. 1,054 1,137
Other assets........................................................................ 23,560 20,351
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$ 664,226 $ 644,001
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.............................................. $ 198 $ 192
Accounts payable............................................................... 41,237 37,633
Accrued expenses and other current liabilities................................. 79,873 96,637
Loss reserve and unearned premiums related to captive insurance subsidiary..... 23,803 11,007
Accrued income taxes........................................................... 8,423 --
Accrued dividends.............................................................. -- 3,863
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Total current liabilities................................................... 153,534 149,332
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Non-current liabilities:
Long-term debt - less current portion.......................................... 25,623 20,670
Other non-current liabilities.................................................. 16,540 14,267
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Total non-current liabilities............................................... 42,163 34,937
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Total liabilities........................................................... 195,697 184,269
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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 $0.01 per share: authorized - 125,000,000 shares;
issued - 72,336,788 shares.................................................. 723 723
Additional paid-in capital..................................................... 206,183 200,574
Retained earnings.............................................................. 553,819 524,316
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760,725 725,613
Treasury stock - 17,515,156 shares in 2004 and 17,143,845 shares in 2003, at
cost......................................................................... (292,196) (265,881)
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Total stockholders' equity.................................................. 468,529 459,732
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$ 664,226 $ 644,001
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9
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
13 Weeks Ended
--------------------------------
March 28, March 30,
2004 2003
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings....................................................... $ 29,503 $ 24,602
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization................................... 11,071 9,940
Amortization of intangible assets............................... 86 99
Amortization of deferred financing costs........................ 39 48
Amortization of unearned compensation........................... 338 254
Deferred income tax provision................................... 145 287
Loss on disposition of restaurants and equipment................ 495 467
Income tax benefit from exercise of stock options............... 3,108 2,154
Changes in assets and liabilities (exclusive of effects of
acquisition):
Receivables..................................................... (3,996) (3,022)
Receivables related to captive insurance subsidiary............. (7,705) (9,573)
Inventories..................................................... (9,510) (8,154)
Prepaid income taxes............................................ 5,800 5,002
Other current assets related to captive insurance subsidiary.... (2,210) (2,655)
Prepaid and other current assets................................ (1,953) 1,201
Accounts payable................................................ 3,604 1,513
Accrued expenses and other current liabilities.................. (16,764) (9,082)
Loss reserve and unearned premiums related to captive insurance
subsidiary................................................... 12,796 12,206
Accrued income taxes............................................ 8,423 6,809
Other........................................................... (504) (859)
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NET CASH PROVIDED BY OPERATING ACTIVITIES....................... 32,766 31,237
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................................ (13,796) (10,215)
Restricted assets related to captive insurance subsidiary.......... (3,074) --
Acquisition of restaurants......................................... -- (20,758)
Purchases of short-term investments................................ (253) --
Maturities and sales of short-term investments..................... -- 50
Other investing activities......................................... (966) --
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NET CASH USED BY INVESTING ACTIVITIES........................... (18,089) (30,923)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock........................................ (32,039) (13,282)
Dividends paid..................................................... (3,863) (3,323)
Issuance of common stock upon exercise of stock options............ 4,972 5,342
Shares issued under employee benefit plans......................... 2,915 590
Net proceeds from issuance of long-term debt....................... 4,959 4,995
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NET CASH USED BY FINANCING ACTIVITIES........................... (23,056) (5,678)
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NET DECREASE IN CASH AND CASH EQUIVALENTS............................... (8,379) (5,364)
CASH AND CASH EQUIVALENTS, beginning of period.......................... 17,867 15,169
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CASH AND CASH EQUIVALENTS, end of period................................ $ 9,488 $ 9,805
============== =============
# # #
10
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: April 28, 2004 By: /s/ Steven K. Lumpkin
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Steven K. Lumpkin
Executive Vice President and
Chief Financial Officer
11