UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 2004
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 000-17962
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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)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act). Yes X No
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The number of shares of the registrant's common stock outstanding as of April
23, 2004 was 54,917,012.
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APPLEBEE'S INTERNATIONAL, INC.
FORM 10-Q
FISCAL QUARTER ENDED MARCH 28, 2004
INDEX
Page
Part I Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of March 28, 2004
and December 28, 2003................................................................ 3
Consolidated Statements of Earnings for the 13 Weeks
Ended March 28, 2004 and March 30, 2003.............................................. 4
Consolidated Statement of Stockholders' Equity for the
13 Weeks Ended March 28, 2004........................................................ 5
Consolidated Statements of Cash Flows for the 13 Weeks
Ended March 28, 2004 and March 30, 2003 ............................................. 6
Notes to Consolidated Financial Statements................................................ 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................................ 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................ 22
Item 4. Controls and Procedures................................................................... 22
Part II Other Information
Item 1. Legal Proceedings......................................................................... 23
Item 2. Changes in Securities and Use of Proceeds................................................. 23
Item 6. Exhibits and Reports on Form 8-K.......................................................... 24
Signatures .................................................................................................. 25
Exhibit Index................................................................................................ 26
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APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
March 28, December 28,
2004 2003
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 9,488 $ 17,867
Short-term investments, at market value.............................................. 280 27
Receivables (less allowance for bad debts of $4,243 in 2004 and $4,117 in 2003)...... 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
-------------- --------------
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
-------------- --------------
$ 664,226 $ 644,001
============== ==============
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
-------------- --------------
Total current liabilities....................................................... 153,534 149,332
-------------- --------------
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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Commitments and contingencies (Note 3)
Stockholders' equity:
Preferred stock - par value $0.01 per share: authorized - 1,000,000 shares;
no shares issued................................................................ -- --
Common stock - par value $0.01 per share: authorized - 125,000,000 shares;
issued - 72,336,788 shares...................................................... 723 723
Additional paid-in capital........................................................... 206,183 200,574
Retained earnings.................................................................... 553,819 524,316
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760,725 725,613
Treasury stock - 17,515,156 shares in 2004 and 17,143,845 shares in 2003, at cost.... (292,196) (265,881)
-------------- --------------
Total stockholders' equity...................................................... 468,529 459,732
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$ 664,226 $ 644,001
============== ==============
See notes to consolidated financial statements.
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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
============= =============
Basic net earnings per common share.......................... $ 0.54 $ 0.45
============= =============
Diluted net earnings per common share........................ $ 0.52 $ 0.43
============= =============
Basic weighted average shares outstanding.................... 54,658 55,272
============= =============
Diluted weighted average shares outstanding.................. 56,419 56,677
============= =============
See notes to consolidated financial statements.
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APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands, except share amounts)
Common Stock Additional Total
------------------------- Paid-In Retained Treasury Stockholders'
Shares Amount Capital Earnings Stock Equity
------------ ------------ ------------ ------------ ------------ --------------
Balance, December 28, 2003......................... 72,336,788 $ 723 $ 200,574 $ 524,316 $(265,881) $ 459,732
Net earnings................................... -- -- -- 29,503 -- 29,503
Purchases of treasury stock.................... -- -- -- -- (32,039) (32,039)
Stock options exercised and
related tax benefit....................... -- -- 3,746 -- 4,334 8,080
Shares issued under employee benefit
plans..................................... -- -- 1,929 -- 986 2,915
Restricted shares awarded under equity
incentive plan, net of cancellations...... -- -- (404) -- 404 --
Amortization of unearned compensation
relating to restricted shares............. -- -- 338 -- -- 338
------------ ------------ ------------ ------------ ------------ --------------
Balance, March 28, 2004............................ 72,336,788 $ 723 $ 206,183 $ 553,819 $(292,196) $ 468,529
============ ============ ============ ============ ============ ==============
See notes to consolidated financial statements.
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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
============== ==============
See notes to consolidated financial statements.
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APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(Unaudited)
(in thousands)
13 Weeks Ended
------------------------------------
March 28, March 30,
2004 2003
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the 13 week period for:
Income taxes........................................................ $ 114 $ 201
================ ================
Interest............................................................ $ 173 $ 306
================ ================
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
We issued restricted common stock, net of forfeitures, of $1,497,000 and
$1,666,000 for the thirteen weeks ended March 28, 2004 and March 30, 2003,
respectively.
On March 24, 2003, we assumed a loan of approximately $1,400,000 in connection
with the acquisition of 11 restaurants.
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the consolidated statements of cash flows, we consider all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.
See notes to consolidated financial statements.
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APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Our consolidated financial statements included in this Form 10-Q have been
prepared without audit (except that the balance sheet information as of December
28, 2003 has been derived from consolidated financial statements which were
audited) in accordance with the rules and regulations of the Securities and
Exchange Commission. Although certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted, we believe that the disclosures are adequate to make the
information presented not misleading. The accompanying consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in our Annual Report on Form 10-K for the fiscal year
ended December 28, 2003.
We believe that all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of the interim
periods presented have been made. The results of operations for the interim
periods presented are not necessarily indicative of the results to be expected
for the full year.
We have made certain reclassifications to the consolidated financial statements
to conform to the 2004 presentation.
2. Stock-Based Compensation
We have adopted the disclosure provisions of Statement of Financial Accounting
Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure, an amendment of FASB Statement No. 123." The
Statement requires prominent disclosures in both annual and interim financial
statements regarding the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. We account
for stock-based compensation awards under the intrinsic method of Accounting
Principles Board Opinion No. 25. Opinion No. 25 requires compensation cost to be
recognized based on the excess, if any, between the quoted market price of the
stock at the date of grant and the amount an employee must pay to acquire the
stock. All options awarded under all of our plans are granted with an exercise
price equal to the fair market value on the date of the grant. The following
table presents the effect on our net earnings and earnings per share had we
adopted the fair value method of accounting for stock-based compensation under
SFAS No. 123, "Accounting for Stock-Based Compensation" (in thousands, except
for per share amounts).
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13 Weeks Ended
----------------------------------
March 28, March 30,
2004 2003
---------------- ----------------
Net earnings, as reported....................................................... $ 29,503 $ 24,602
Add: Compensation expense included in net earnings,
net of related taxes........................................................ 298 455
Less: Total stock-based employee compensation expense
determined under fair value based methods for all
awards, net of related taxes................................................ 2,576 2,656
---------------- ----------------
Pro forma net earnings.......................................................... $ 27,225 $ 22,401
================ ================
Basic net earnings per common share, as reported................................ $ 0.54 $ 0.45
================ ================
Basic net earnings per common share, pro forma.................................. $ 0.50 $ 0.41
================ ================
Diluted net earnings per common share, as reported.............................. $ 0.52 $ 0.43
================ ================
Diluted net earnings per common share, pro forma................................ $ 0.48 $ 0.40
================ ================
3. Commitments and Contingencies
Litigation, claims and disputes: We are involved in various legal actions which
include, without limitation, employment law related matters, dram shop claims,
personal injury claims and other such normal restaurant operational matters. In
each instance, we believe that we have meritorious defenses to the allegations
made and we are vigorously defending these claims.
While the resolution of the matters described above may have an impact on our
financial results for the period in which they are resolved, we believe that the
ultimate disposition of these matters will not, individually or in the
aggregate, have a material adverse effect upon our business or consolidated
financial statements.
Lease guarantees: In connection with the sale of restaurants to franchisees and
other parties, we have, in certain cases, remained contingently liable for the
remaining lease payments. As of March 28, 2004, the aggregate amount of these
lease payments totaled approximately $23,000,000. These leases expire at various
times throughout the next several years with the final lease agreement expiring
in 2025. The buyers have indemnified us from any losses related to these
guarantees. We have not recorded a liability as of March 28, 2004 or December
28, 2003.
Franchisee guarantees: In November 2003, we arranged for a financing company to
provide up to $75,000,000 to qualified franchisees for short-term loans to fund
remodel investments. Under the terms of this financing program, we will provide
a limited guarantee pool for the loans advanced during the three-year period
ending December 2006. There were no loans outstanding under this program as of
March 28, 2004.
Contingent consideration: In 2002, we acquired the operations and assets of 21
Applebee's restaurants located in the Washington, D.C. area from a franchisee.
The purchase agreement provides for additional consideration in July 2004 if the
restaurants achieve cash flows in excess of historical levels. The amount of
additional payments, if any, under this agreement will not be material to our
consolidated financial statements.
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Severance agreements: We have severance and employment agreements with certain
officers and other senior executives providing for severance payments to be made
in the event the employee resigns or is terminated related to a change in
control. The agreements define the circumstances which will constitute a change
in control. If the severance payments had been due as of March 28, 2004, we
would have been required to make payments totaling approximately $11,900,000. In
addition, we have severance and employment agreements with certain officers
which contain severance provisions not related to a change in control. Those
provisions would have required aggregate payments of approximately $7,000,000 if
such officers had been terminated as of March 28, 2004.
4. Earnings Per Share
We compute basic earnings per share by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
reporting period. Diluted earnings per share reflects the potential dilution
that could occur if holders of options or other contracts to issue common stock
exercised or converted their holdings into common stock. Outstanding stock
options and equity-based compensation represent the only dilutive effects on
weighted average shares. The chart below presents a reconciliation between basic
and diluted weighted average shares outstanding and the related earnings per
share. All amounts in the chart, except per share amounts, are expressed in
thousands.
13 Weeks Ended
----------------------------------------------
March 28, March 30,
2004 2003
---------------------- ----------------------
Net earnings................................................................ $ 29,503 $ 24,602
====================== ======================
Basic weighted average shares outstanding................................... 54,658 55,272
Dilutive effect of stock options and
equity-based compensation.............................................. 1,761 1,405
---------------------- ----------------------
Diluted weighted average shares outstanding................................. 56,419 56,677
====================== ======================
Basic net earnings per common share......................................... $ 0.54 $ 0.45
====================== ======================
Diluted net earnings per common share....................................... $ 0.52 $ 0.43
====================== ======================
We excluded stock options with exercise prices greater than the average market
price of our common stock for the applicable periods from the computation of
diluted weighted average shares outstanding. There were approximately 14,000 and
50,000 of these options for the thirteen weeks ended March 28, 2004 and March
30, 2003, respectively.
5. Acquisition
On March 24, 2003, we acquired the operations and assets of 11 Applebee's
restaurants located in Illinois, Indiana, Kentucky and Missouri for $21,800,000
in cash and $1,400,000 in assumed debt from a franchisee. The total cash payment
included $20,800,000 paid at closing, approximately $200,000 paid as a deposit
in fiscal 2002 and approximately $800,000 paid in the second quarter of 2003.
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Our financial statements reflect the results of operations for these restaurants
subsequent to the date of acquisition. The purchase price of $23,200,000 has
been allocated to the fair value of property and equipment of $7,900,000,
goodwill of $16,600,000, and other net liabilities of $1,300,000.
Actual company restaurant sales included in our consolidated financial
statements for these restaurants were approximately $6,500,000 and $500,000 for
the thirteen weeks ended March 28, 2004 and March 30, 2003, respectively.
Company restaurant sales for these restaurants would have been approximately
$6,600,000 for the thirteen weeks ended March 30, 2003 had the acquisition
occurred at the beginning of the period.
6. Disposition
On July 20, 2003, we completed the sale of eight company restaurants in the
Atlanta, Georgia market to an affiliate of an existing franchisee for
$8,000,000. In connection with the sale of these restaurants, we closed one
restaurant in the Atlanta market in June 2003. This transaction did not have a
significant impact on our net earnings for fiscal 2003. Actual company
restaurant sales included in our consolidated financial statements for the nine
restaurants were approximately $4,800,000 for the thirteen weeks ended March 30,
2003.
7. Goodwill and Other Intangible Assets
Changes in goodwill are summarized below (in thousands):
March 28, December 28,
2004 2003
---------------------- ----------------------
Carrying amount, beginning of the year...................................... $ 105,326 $ 88,715
Goodwill acquired during the period......................................... -- 16,611
---------------------- ----------------------
$ 105,326 $ 105,326
====================== ======================
Intangible assets subject to amortization pursuant to SFAS No. 142 consist of
franchise interest and rights and are summarized below (in thousands):
March 28, December 28,
2004 2003
---------------------- ----------------------
Gross carrying amount....................................................... $ 6,371 $ 6,371
Less, accumulated amortization.............................................. 5,317 5,234
---------------------- ----------------------
Net......................................................................... $ 1,054 $ 1,137
====================== ======================
We expect annual amortization expense for all intangible assets for the next
five fiscal years to range from approximately $40,000 to $335,000.
8. Captive Insurance Subsidiary
In 2002, we formed Neighborhood Insurance, Inc., a Vermont corporation and a
wholly-owned captive insurance subsidiary to provide Applebee's International,
Inc. and qualified franchisees with workers' compensation and general liability
insurance. Applebee's International, Inc. and covered franchisees make premium
payments to the captive insurance company which pays administrative fees and
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insurance claims, subject to individual and aggregate maximum claim limits under
the captive insurance company's reinsurance policies. Franchisee premium amounts
billed by the captive insurance company are established based upon third-party
actuarial estimates of settlement costs for incurred claims and administrative
fees. The franchisee premiums are included in other franchise income ratably
over the policy year. The related offsetting expenses are included in cost of
other franchise income. Accordingly, we do not expect franchisee participation
in the captive insurance company to have a material impact on our net earnings.
As of March 28, 2004, our consolidated balance sheet includes the following
balances related to the captive insurance subsidiary:
o Deferred policy acquisition costs of approximately $2,900,000 included
in other current assets related to captive insurance subsidiary.
o Franchise premium receivables of approximately $8,200,000 included in
receivables related to captive insurance subsidiary.
o Cash equivalent investments restricted for the payment of claims of
approximately $13,100,000 included in restricted assets related to
captive insurance subsidiary.
o Current liabilities of approximately $25,100,000 recorded primarily in
loss reserve and unearned premiums related to captive insurance
subsidiary.
o Other miscellaneous items, net, of approximately $900,000 included in
several line items in the consolidated balance sheet.
9. New Accounting Pronouncement
In December 2003, the FASB issued FASB Interpretation No. ("FIN") 46R,
"Consolidation of Variable Interest Entities and Interpretation of ARB No. 51."
This interpretation, which replaces FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities," clarifies the application of Accounting Research
Bulletin No. 51, "Consolidated Financial Statements," to certain entities in
which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support. This
interpretation is required in financial statements for periods ending after
March 15, 2004 for those companies that have yet to adopt the provisions of FIN
46. We adopted FIN 46R in January 2004 and the initial adoption did not have a
material impact on our consolidated financial statements.
10. Subsequent Event
On April 26, 2004, we completed our acquisition of the operations and assets of
10 Applebee's franchise restaurants located in Southern California for
$13,400,000 in cash, subject to adjustment, and the assumption of certain
liabilities. We do not expect this transaction to have a significant impact on
our net earnings for fiscal 2004.
-12-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Our results continue to be driven by the execution of integrated strategies,
including improved food, promotions backed by effective advertising, meeting our
guests' desires for more convenience, our focus on operations excellence and the
retention of better people.
We completed the rollout of our Carside To Go(TM) program in all company
restaurants in November 2003 where practicable and our franchisees will continue
implementation during 2004. We expect Carside To Go(TM) to be a significant
driver of sales and traffic growth in 2004.
Our revenues are generated from three primary sources:
o Company restaurant sales (food and beverage sales)
o Franchise royalties and fees
o Other franchise income
Beverage sales consist of sales of alcoholic beverages, while non-alcoholic
beverages are included in food sales. Franchise royalties are generally 4% of
each franchise restaurant's monthly gross sales. Franchise fees typically range
from $30,000 to $35,000 for each restaurant opened. 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.
Comparable restaurant sales are based upon those restaurants open for at least
18 months and are compared from period to period.
Certain expenses relate only to company operated restaurants. These include:
o Food and beverage costs
o Labor costs
o Direct and occupancy costs
o Pre-opening expenses
Cost of other franchise income includes the costs related to franchisee
participation in our captive insurance company and costs related to information
technology products and services provided to certain franchisees.
Other expenses, such as general and administrative and amortization expenses,
relate to both company operated restaurants and franchise operations.
In 2002, we formed Neighborhood Insurance, Inc., a Vermont corporation and a
wholly-owned captive insurance subsidiary to provide Applebee's International,
Inc. and qualified franchisees with workers' compensation and general liability
insurance. Applebee's International, Inc. and covered franchisees make premium
payments to the captive insurance company which pays administrative fees and
-13-
insurance claims, subject to individual and aggregate maximum claim limits under
the captive insurance company's reinsurance policies. Franchisee premium amounts
billed by the captive insurance company are established based upon third-party
actuarial estimates of settlement costs for incurred claims and administrative
fees. The franchisee premiums are included in other franchise income ratably
over the policy year. The related offsetting expenses are included in cost of
other franchise income. Accordingly, we do not expect franchisee participation
in the captive insurance company to have a material impact on our net earnings.
As of March 28, 2004, our consolidated balance sheet includes the following
balances related to the captive insurance subsidiary:
o Deferred policy acquisition costs of approximately $2,900,000 included
in other current assets related to captive insurance subsidiary.
o Franchise premium receivables of approximately $8,200,000 included in
receivables related to captive insurance subsidiary.
o Cash equivalent investments restricted for the payment of claims of
approximately $13,100,000 included in restricted assets related to
captive insurance subsidiary.
o Current liabilities of approximately $25,100,000 recorded primarily in
loss reserve and unearned premiums related to captive insurance
subsidiary.
o Other miscellaneous items, net, of approximately $900,000 included in
several line items in the consolidated balance sheet.
Application of Critical Accounting Policies
Management's Discussion and Analysis of Financial Condition and Results of
Operations is based upon our consolidated financial statements, which were
prepared in accordance with accounting principles generally accepted in the
United States of America. These principles require us to make estimates and
assumptions that affect the reported amounts in the consolidated financial
statements and notes thereto. Actual results may differ from these estimates,
and such differences may be material to our consolidated financial statements.
We believe that the following significant accounting policies involve a higher
degree of judgment or complexity.
Franchise revenues: Franchise revenues consist of franchise royalties, franchise
fees and other franchise income. We recognize royalties on a franchisee's sales
in the period in which the sales are reported to have occurred. We also receive
a franchise fee for each restaurant that a franchisee opens. The recognition of
franchise fees is deferred until we have performed substantially all of our
related obligations as franchisor, typically when the restaurant opens. 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. Income from franchise premiums and
information technology services is recognized ratably over the related contract
period. Income from information technology products is recognized when the
products are installed at the restaurant.
Property and equipment: Property and equipment are depreciated on a
straight-line basis over the estimated useful lives of the assets. The useful
lives of the assets are based upon management's expectations. We periodically
review the assets for changes in circumstances which may impact their useful
lives.
Impairment of long-lived assets: We periodically review property and equipment
for impairment on a restaurant by restaurant basis using historical cash flows
as well as current estimates of future cash flows and/or appraisals. This
assessment process requires the use of estimates and assumptions which are
subject to a significant degree of judgment. In addition, we periodically assess
the recoverability of goodwill and other intangible assets, which requires us to
make assumptions regarding the future cash flows and other factors to determine
the fair value of the assets. If these assumptions change in the future, we may
be required to record impairment charges for these assets.
-14-
Legal and insurance reserves: We are periodically involved in various legal
actions. We are required to assess the probability of any adverse judgments as
well as the potential range of loss. We determine the required accruals after a
review of the facts of each legal action.
We use estimates in the determination of the appropriate liabilities for general
liability, workers' compensation and health insurance. The estimated liability
is established based upon historical claims data and third-party actuarial
estimates of settlement costs for incurred claims. Unanticipated changes in
these factors may require us to revise our estimates.
Employee incentive compensation plans: We have various long-term employee
incentive compensation plans which require us to make estimates to determine our
liability based upon projected performance of plan criteria. If actual
performance against the criteria differs from our estimates in the future, we
will be required to adjust our liability accordingly.
Receivables: We continually assess the collectibility of our franchise
receivables. We establish our allowance for bad debts based on several factors,
including historical collection experience, the current economic environment and
other specific information available to us at the time. The allowance for bad
debts may change in the future due to changes in the factors above or other
developments.
We periodically reassess our assumptions and judgments and make adjustments when
significant facts and circumstances dictate. A change in any of the above
estimates could impact our consolidated statements of earnings and the related
asset or liability recorded in the consolidated balance sheets would be adjusted
accordingly. Historically, actual results have not been materially different
than the estimates that are described above.
Acquisition
On March 24, 2003, we acquired the operations and assets of 11 Applebee's
restaurants located in Illinois, Indiana, Kentucky and Missouri for $21,800,000
in cash and $1,400,000 in assumed debt from a franchisee. The total cash payment
included $20,800,000 paid at closing, approximately $200,000 paid as a deposit
in fiscal 2002 and approximately $800,000 paid in the second quarter of 2003.
Our financial statements reflect the results of operations for these restaurants
subsequent to the date of acquisition. The purchase price of $23,200,000 has
been allocated to the fair value of property and equipment of $7,900,000,
goodwill of $16,600,000, and other net liabilities of $1,300,000.
Actual company restaurant sales included in our consolidated financial
statements for these restaurants were approximately $6,500,000 and $500,000 for
the thirteen weeks ended March 28, 2004 and March 30, 2003, respectively.
Company restaurant sales for these restaurants would have been approximately
$6,600,000 for the thirteen weeks ended March 30, 2003 had the acquisition
occurred at the beginning of the period.
Disposition
On July 20, 2003, we completed the sale of eight company restaurants in the
Atlanta, Georgia market to an affiliate of an existing franchisee for
$8,000,000. In connection with the sale of these restaurants, we closed one
restaurant in the Atlanta market in June 2003. This transaction did not have a
significant impact on our net earnings for fiscal 2003. Actual company
restaurant sales included in our consolidated financial statements for the nine
restaurants were approximately $4,800,000 for the thirteen weeks ended March 30,
2003.
-15-
Results of Operations
The following table contains information derived from our 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
--------------- ---------------
Revenues:
Company restaurant sales.......................................... 87.8% 87.5%
Franchise royalties and fees...................................... 11.1 11.4
Other franchise income............................................ 1.1 1.1
--------------- ---------------
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
--------------- ---------------
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
--------------- ---------------
Operating earnings..................................................... 16.4 16.2
--------------- ---------------
Other income (expense):
Investment income................................................. 0.1 0.1
Interest expense.................................................. (0.1) (0.2)
Other income (expense)............................................ -- 0.1
--------------- ---------------
Total other income (expense)................................. (0.1) --
--------------- ---------------
Earnings before income taxes........................................... 16.4 16.2
Income taxes........................................................... 5.7 5.9
--------------- ---------------
Net earnings........................................................... 10.6% 10.3%
=============== ===============
-16-
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
------------------- -------------------
Number of restaurants:
Company:
Beginning of period............................................... 383 357
Restaurant openings............................................... 8 3
Restaurants acquired from franchisees............................. -- 11
------------------- -------------------
End of period..................................................... 391 371
------------------- -------------------
Franchise:
Beginning of period............................................... 1,202 1,139
Restaurant openings............................................... 11 16
Restaurant closings............................................... (1) (2)
Restaurants acquired from franchisees............................. -- (11)
------------------- -------------------
End of period..................................................... 1,212 1,142
------------------- -------------------
Total:
Beginning of period............................................... 1,585 1,496
Restaurant openings............................................... 19 19
Restaurant closings............................................... (1) (2)
------------------- -------------------
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
------------------- -------------------
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 2004 quarter and the 2003 quarter, 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.
-17-
Company Restaurant Sales. Total company restaurant sales increased $35,150,000
(17%) from $208,410,000 in the 2003 quarter to $243,560,000 in the 2004 quarter.
Company restaurant openings and weighted average weekly sales each contributed
approximately 8% of the increase in total company restaurant sales in the 2004
quarter. The acquisition of 11 restaurants in Illinois, Indiana, Kentucky, and
Missouri in late March 2003 contributed approximately 3% of the increase in
company restaurant sales. These increases were partially offset by the sale of 8
restaurants in the Atlanta, Georgia market in July 2003.
Comparable restaurant sales at company restaurants increased by 8.7% in the 2004
quarter. Weighted average weekly sales at company restaurants increased 8.4%
from $44,666 in the 2003 quarter to $48,402 in the 2004 quarter. These increases
were due primarily to increases in guest traffic and in the average guest check
resulting from our food promotions. In addition, a portion of the increase
resulted from the implementation of our Carside To Go(TM) initiative and menu
price increases of approximately 1.5% in the 2004 quarter. To Go sales mix
increased from 6.8% of company restaurant sales in the 2003 quarter to 9.4% of
company restaurant sales in the 2004 quarter.
Franchise Royalties and Fees. Franchise royalties and fees increased $3,609,000
(13%) from $27,163,000 in the 2003 quarter to $30,772,000 in the 2004 quarter
due primarily to the increased number of franchise restaurants operating during
2004 as compared to 2003 and increases in franchisee comparable restaurant
sales. Weighted average weekly sales and franchise comparable restaurant sales
increased 7.4% and 8.0%, respectively, in the 2004 quarter.
Other Franchise Income. Other franchise income increased $474,000 (18%) from
$2,641,000 in the 2003 quarter to $3,115,000 in the 2004 quarter due primarily
to an increase of approximately $360,000 in revenues recognized related to the
franchisee premium amounts earned by the captive insurance company. Franchisee
premiums are included in other franchise income ratably over the policy year.
Cost of Company Restaurant Sales. Food and beverage costs decreased from 26.3%
in the 2003 quarter to 26.1% in the 2004 quarter, due to menu price increases,
operational improvements and benefits resulting from our supply chain management
initiatives which were partially offset by higher commodity costs.
Labor costs decreased from 32.8% in the 2003 quarter to 32.7% in the 2004
quarter. This decrease was due to lower management and hourly costs due to
higher sales volume at company restaurants and was partially offset by higher
costs related to the addition of dedicated To Go hourly labor at most of our
restaurants beginning in the second half of 2003, higher workers' compensation
costs and higher management incentive compensation.
Direct and occupancy costs were 24.3% in both the 2003 quarter and the 2004
quarter due primarily to lower rent expense and depreciation expense, as a
percentage of sales, which were offset by increased advertising costs, as a
percentage of sales, due primarily to Carside To Go(TM) advertising in company
markets, higher insurance costs and higher packaging costs as a result of
increased To Go sales volumes.
Cost of Other Franchise Income. Cost of other franchise income increased
$437,000 (17%) from $2,500,000 in the 2003 quarter to $2,937,000 in the 2004
quarter due primarily to an increase of $360,000 in costs related to the
operation of our captive insurance company.
-18-
General and Administrative Expenses. General and administrative expenses
decreased from 9.5% in the 2003 quarter to 9.2% in the 2004 quarter due
primarily to the absorption of general and administrative expenses over a larger
revenue base which was partially offset by higher compensation expense due to
staffing levels.
Income Taxes. The effective income tax rate, as a percentage of earnings before
income taxes, decreased from 36.2% in the 2003 quarter to 35.0% in the 2004
quarter due to a reduction in state and local income taxes.
Liquidity and Capital Resources
Our need for capital historically has resulted from the construction and
acquisition of restaurants, the repurchase of our common shares and investment
in information technology systems. In the past, we have obtained capital through
public stock offerings, debt financing, and our ongoing operations. Cash flows
from our ongoing operations include cash generated from company and franchise
operations, credit from trade suppliers, real estate lease financing, and
landlord contributions to leasehold improvements. We have also used our common
stock as consideration in the acquisition of restaurants. In addition, we have
assumed debt or issued new debt in connection with certain mergers and
acquisitions.
Capital expenditures were $82,562,000 in 2003 (excluding the acquisition of 11
restaurants) and $13,796,000 in the 2004 quarter. We currently expect to open at
least 32 company restaurants, and capital expenditures excluding acquisitions,
are expected to be between $95,000,000 and $105,000,000 in 2004. These
expenditures will primarily be for the development of new restaurants,
refurbishment and capital replacement for existing restaurants, and the
enhancement of information systems. Because we expect to continue to purchase a
portion of our sites, the amount of actual capital expenditures will be
dependent upon, among other things, the proportion of leased versus owned
properties. In addition, if we open more restaurants than we currently
anticipate or acquire additional restaurants, our capital requirements will
increase accordingly.
On March 24, 2003, we acquired the operations and assets of 11 Applebee's
restaurants located in Illinois, Indiana, Kentucky and Missouri for $21,800,000
in cash and $1,400,000 in assumed debt from a franchisee. The total cash payment
included $20,800,000 paid at closing, approximately $200,000 paid as a deposit
in fiscal 2002 and approximately $800,000 paid in the second quarter of 2003.
Our financial statements reflect the results of operations for these restaurants
subsequent to the date of acquisition.
On July 20, 2003, we completed the sale of eight company restaurants in the
Atlanta, Georgia market to an affiliate of an existing franchisee for
$8,000,000. In connection with the sale of these restaurants, we closed one
restaurant in the Atlanta market in June 2003. This transaction did not have a
significant impact on our net earnings for fiscal 2003.
Our bank credit agreement, as amended, expires in November of 2005 and provides
for a $150,000,000 unsecured revolving credit facility, of which $25,000,000 may
be used for the issuance of letters of credit. The facility is subject to
various covenants and restrictions which, among other things, require the
maintenance of stipulated fixed charge, leverage and indebtedness to
capitalization ratios, as defined, and limit additional indebtedness and capital
expenditures in excess of specified amounts. Cash dividends are limited to
$10,000,000 annually. The facility is subject to standard other terms,
conditions, covenants, and fees. We are currently in compliance with the
covenants contained in our credit agreement. As of March 28, 2004, we had
borrowings of $20,000,000 and had standby letters of credit of approximately
$11,900,000 outstanding under our revolving credit facility.
-19-
In December 2003, our Board of Directors authorized an additional repurchase of
$80,000,000 of our common stock. As of December 28, 2003, we had $99,800,000
remaining on our authorizations. During the 2004 quarter, we repurchased 855,300
shares of our common stock at an average price of $37.46 for an aggregate cost
of $32,000,000. As of March 28, 2004, we had $67,700,000 remaining under our
repurchase authorization.
As of March 28, 2004, our liquid assets totaled $9,768,000. These assets
consisted of cash and cash equivalents in the amount of $9,488,000 and
short-term investments in the amount of $280,000. The working capital deficit
decreased from $62,710,000 as of December 28, 2003 to $55,117,000 as of March
28, 2004. This decrease was due primarily to the redemption of gift cards in the
2004 quarter sold in 2003, the payment of accrued dividends and bonuses and
increases in inventories and was partially offset by decreases in cash and cash
equivalents due to repurchases of our common stock in the 2004 quarter.
We believe that our liquid assets and cash generated from operations, combined
with borrowings available under our credit facilities, will provide sufficient
funds for our operating, capital and other requirements for the foreseeable
future.
The following table shows our debt amortization schedule, future capital lease
commitments (including principal and interest payments), future operating lease
commitments and future purchase obligations as of March 28, 2004 (in thousands):
Payments due by period
----------------------------------------------------------------------
Certain Less than 1 1-3 3-5 More than 5
Contractual Obligations Total year Years years years
------------------------------------------------- ------------- ------------- ------------- ------------- -------------
Long-term Debt (excluding capital
lease obligations)........................... $ 21,624 $ 120 $ 20,242 $ 104 $ 1,158
Capital Lease Obligations....................... 9,657 747 1,575 1,687 5,648
Operating Leases................................ 220,911 19,530 37,232 36,279 127,870
Purchase Obligations - Company(1)............... 139,652 44,179 65,911 2,625 26,937
Purchase Obligations - Franchise(2)............. 297,767 48,197 187,985 -- 61,585
(1) The amounts for company purchase obligations include commitments for
food items and supplies, severance and employment agreements, and other
miscellaneous commitments.
(2) The amounts for franchise purchase obligations include commitments for
food items and supplies made by Applebee's International, Inc. for our
franchisees. Applebee's International, Inc. contracts with certain suppliers
to ensure competitive pricing. These amounts will only be payable by
Applebee's International, Inc. if our franchisees do not meet certain
minimum contractual requirements.
Other Contractual Obligations
We have outstanding lease guarantees of approximately $23,000,000 as of March
28, 2004 (see Note 3). We have not recorded a liability for these guarantees as
of March 28, 2004 or December 28, 2003.
We have severance and employment agreements with certain officers and other
senior executives providing for severance payments to be made in the event the
employee resigns or is terminated related to a change in control. The agreements
define the circumstances which will constitute a change in control. If the
severance payments had been due as of March 28, 2004, we would have been
required to make payments totaling approximately $11,900,000. In addition, we
have severance and employment agreements with certain officers which contain
severance provisions not related to a change in control. Those provisions would
have required aggregate payments of approximately $7,000,000 if such officers
had been terminated as of March 28, 2004.
-20-
In 2002, we acquired the operations and assets of 21 Applebee's restaurants
located in the Washington, D.C. area from a franchisee. The purchase agreement
provides for additional consideration in July 2004 if the restaurants achieve
cash flows in excess of historical levels. The amount of additional payments, if
any, under this agreement will not be material to our consolidated financial
statements.
Inflation
Substantial increases in costs and expenses could impact our operating results
to the extent such increases cannot be passed along to customers. In particular,
increases in food, supplies, labor and operating expenses could have a
significant impact on our operating results. We do not believe that inflation
has materially affected our operating results during the past three years.
A majority of our employees are paid hourly rates related to federal and state
minimum wage laws and various laws that allow for credits to that wage. The
Federal government continues to consider an increase in the minimum wage.
Several state governments have increased the minimum wage and other state
governments are also considering an increased minimum wage. In the past, we have
been able to pass along cost increases to customers through food and beverage
price increases, and we will attempt to do so in the future. We cannot
guarantee, however, that all future cost increases can be reflected in our
prices or that increased prices will be absorbed by customers without at least
somewhat diminishing customer spending in our restaurants.
New Accounting Pronouncement
In December 2003, the FASB issued FASB Interpretation No. ("FIN") 46R,
"Consolidation of Variable Interest Entities and Interpretation of ARB No. 51."
This interpretation, which replaces FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities," clarifies the application of Accounting Research
Bulletin No. 51, "Consolidated Financial Statements," to certain entities in
which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support. This
interpretation is required in financial statements for periods ending after
March 15, 2004 for those companies that have yet to adopt the provisions of FIN
46. We adopted FIN 46R in January 2004 and the initial adoption did not have a
material impact on our consolidated financial statements.
Forward-Looking Statements
The statements contained in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section regarding restaurant
development, capital expenditures and financial commitments 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. These
risks include but are not limited to our ability and the ability of our
franchisees to open and operate additional restaurants profitably, the ability
of our franchisees to obtain financing, the continued growth of our franchisees,
our ability to attract and retain qualified franchisees, the impact of intense
competition in the casual dining segment of the restaurant industry, and our
ability to control restaurant operating costs which are impacted by market
changes, minimum wage and other employment laws, food costs and inflation. For a
more detailed discussion of the principal factors that could cause actual
results to be materially different, you should read our current report on Form
8-K which we filed with the Securities and Exchange Commission on February 11,
2004. We disclaim any obligation to update forward-looking statements.
-21-
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from fluctuations in interest rates and changes in
commodity prices. Our revolving credit facility bears interest at either the
bank's prime rate or LIBOR plus 0.625%, at our option. As of March 28, 2004, the
total amount of debt subject to interest rate fluctuations was $20,000,000 which
was outstanding on our revolving credit facility. A 1% change in interest rates
would result in an increase or decrease in interest expense of $200,000 per
year. We may from time to time enter into interest rate swap agreements to
manage the impact of interest rate changes on our earnings. Many of the food
products we purchase are subject to price volatility due to factors that are
outside of our control such as weather and seasonality. As part of our strategy
to moderate this volatility, we have entered into fixed price purchase
commitments.
Item 4. Controls and Procedures
As of March 28, 2004, we have evaluated the effectiveness of the design and
operation of our disclosure controls and procedures under the supervision and
with the participation of the Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO"). Based on this evaluation, our management, including
the CEO and CFO, concluded that our disclosure controls and procedures were
effective. During our most recent fiscal quarter, there have been no changes in
our internal control over financial reporting that occurred that have materially
affected or are reasonably likely to materially affect our internal control over
financial reporting.
-22-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in various legal actions which include, without limitation,
employment law related matters, dram shop claims, personal injury claims and
other such normal restaurant operational matters. In each instance, we believe
that we have meritorious defenses to the allegations made and we are vigorously
defending these claims.
While the resolution of the matters described above may have an impact on our
financial results for the period in which they are resolved, we believe that the
ultimate disposition of these matters will not, individually or in the
aggregate, have a material adverse effect upon our business or consolidated
financial statements.
Item 2. Changes in Securities and Use of Proceeds
(e) Issuer Purchases of Equity Securities.
Purchases of Equity Securities(1)
------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d)
---------------------------- -------------- ---------- ------------------------- ---------------------------
Maximum Dollar Value of
Average Total Number of Shares Shares that May Yet Be
Total Number Price Purchased as Part of Purchased Under the
of Shares Paid Per Publicly Announced Plans or Programs
Period Purchased Share Plans or Programs (in thousands)
---------------------------- -------------- ---------- ------------------------- ---------------------------
December 29, 2003 through
January 28, 2004 611,600 $37.25 611,600 $76,976
---------------------------- -------------- ---------- ------------------------- ---------------------------
January 29, 2004 through
February 28, 2004 244,493(2) $38.13 243,700 $67,717
---------------------------- -------------- ---------- ------------------------- ---------------------------
February 29, 2004 through
March 28, 2004 8,568(3) $40.42 -- $67,717
---------------------------- -------------- ---------- ------------------------- ---------------------------
Total 864,661 855,300
============================ ============== ========== ========================= ===========================
(1) In May 2002, our Board of Directors authorized a repurchase of up to
$75,000,000 of our common stock through May 2005. In December 2003, our
Board of Directors authorized an additional repurchase of up to $80,000,000
of our common stock. The May 2002 authorization limit was met in January
2004. The December 2003 authorization has no expiration date.
(2) Includes 793 shares received as partial payment for shares issued under
stock option plans.
(3) Represents shares received as partial payment for shares issued under stock
option plans.
-23-
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits listed on the accompanying Exhibit Index are filed as part
of this report.
(b) We filed a report on Form 8-K on January 5, 2004 announcing executive
promotions.
We furnished a report on Form 8-K on January 7, 2004 announcing our
presentation at the 2nd Annual SG Cowen Consumer Conference.
We furnished a report on Form 8-K on January 12, 2004 reporting
December comparable sales and updating fourth quarter earnings guidance
and our 2004 outlook.
We filed a report on Form 8-K on January 27, 2004 reporting January
comparable sales and announcing the webcast of our fourth quarter
earnings conference call over the Internet.
We furnished a report on Form 8-K on February 11, 2004 reporting fourth
quarter earnings per share and full year 2003 earnings per share.
We filed a report on Form 8-K on February 11, 2004 in accordance with
the Private Securities Litigation Reform Act of 1995 as it relates to a
safe harbor for companies making forward-looking statements. The
factors listed in the report are important factors that could cause
actual results to differ materially from those we project in
forward-looking statements.
We furnished a report on Form 8-K on February 18, 2004 announcing our
presentation at the Tenth Annual Bear Stearns Retail, Restaurants &
Apparel Conference.
We furnished a report on Form 8-K on February 23, 2004 announcing our
presentation at the Raymond James Institutional Investors Conference.
We filed a report on Form 8-K on February 24, 2004 reporting February
comparable sales.
We filed a report on Form 8-K on February 24, 2004 announcing the
acquisition of 10 franchise restaurants.
We furnished a report on Form 8-K on March 4, 2004 announcing our
presentation at the Goldman Sachs Restaurant Denver Property Tour &
Management Presentation 2004.
We filed a report on March 17, 2004 announcing our CFO has established
a 10b5-1 plan.
We furnished a report on Form 8-K on March 23, 2004 announcing our
presentation at the Banc of America Securities Consumer Conference.
-24-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ Lloyd L. Hill
----------------------- -----------------------------------------
Lloyd L. Hill
Chairman and Chief Executive Officer
(principal executive officer)
Date: April 28, 2004 By: /s/ Steven K. Lumpkin
----------------------- -----------------------------------------
Steven K. Lumpkin
Executive Vice President and
Chief Financial Officer
(principal financial officer)
Date: April 28, 2004 By: /s/ Beverly O. Elving
----------------------- -----------------------------------------
Beverly O. Elving
Vice President, Accounting
(principal accounting officer)
-25-
APPLEBEE'S INTERNATIONAL, INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------- ------------------------------------------------------------------------------------------------
10.1 Executive Retirement Plan.
10.2 Executive Health Plan.
10.3 New Form of Change in Control and Noncompete Agreement.
31.1 Certification of Chairman and Chief Executive Officer Pursuant to SEC Rule 13a-14(a)
31.2 Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14(a)
32.1 Certification of Chairman and Chief Executive Officer and Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350
-26-