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 30, 2003
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Commission File Number: 000-17962
Applebee's International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 43-1461763
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4551 W. 107th Street, Suite 100, Overland Park, Kansas 66207
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(Address of principal executive offices and zip code)
(913) 967-4000
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(Registrant's telephone number, including area code)
None
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(Former name or former address, if changed since last report)
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Item 9. Regulation FD Disclosure
This information is being provided pursuant to Item 12, "Disclosure of
Results of Operations and Financial Condition." On April 30, 2003, Applebee's
International, Inc. (the "Company") issued a press release entitled "Applebee's
International Reports First Quarter Diluted Earnings Per Share of 43 Cents." The
release has been provided below.
FOR IMMEDIATE RELEASE
Contact: Carol DiRaimo,
Executive Director of Investor Relations
(913) 967-4109
Applebee's International Reports First Quarter
Diluted Earnings Per Share of 43 Cents
Overland Park, Kan., April 30, 2003 -- Applebee's International, Inc.
(Nasdaq:APPB) today reported record net earnings of $24.6 million, or 43 cents
per diluted share, for the first quarter ended March 30, 2003. This represents
an increase in diluted earnings per share of 23 percent as compared to 35 cents
per share for the first quarter of 2002.
System-wide comparable sales for the first quarter of 2003 increased 3.3
percent, the 19th consecutive quarter of comparable sales growth. Company and
franchise restaurant comparable sales increased 4.6 percent and 2.9 percent,
respectively, for the quarter.
The company also reported comparable sales for the March fiscal period,
comprised of the five weeks ended March 30, 2003. Comparable sales for company
restaurants increased 5.5 percent, including the 21 franchise restaurants in
Washington, D.C. acquired in November 2002 as well as the 11 franchise
restaurants adjacent to the St. Louis market that were acquired on March 24,
2003. Excluding the acquired restaurants, comparable sales for company
restaurants increased 5.2 percent, reflecting an increase in guest traffic of
approximately 1.0 percent, combined with a higher average check. System-wide
comparable sales increased 4.1 percent for the March period, and comparable
sales for franchise restaurants increased 3.7 percent. The Easter holiday
shifted from the company's March fiscal period in 2002 to the company's April
fiscal period in 2003 and had a positive impact on March comparable sales
results of approximately 0.7 percent. However, the benefit from the holiday
shift was more than offset by the adverse affect of the war in Iraq and more
severe winter weather in 2003.
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In addition, the company reported comparable sales for the April fiscal period,
comprised of the four weeks ended April 27, 2003. Comparable sales for company
restaurants increased 2.5 percent, including the 32 franchise restaurants
acquired in November and March. Excluding the acquired restaurants, comparable
sales for company restaurants increased 2.3 percent, reflecting a decrease in
guest traffic of 2.5 to 3.0 percent, combined with a higher average check.
System-wide comparable sales increased 2.1 percent for the April period, and
comparable sales for franchise restaurants increased 1.9 percent. In addition to
the negative impact of the shift in the Easter holiday of approximately 0.8
percent, April comparable sales were adversely affected during the first part of
the month by the war as well as lingering winter storms, contributing to
significant volatility in daily sales results. Comparable sales for company
restaurants for the year-to-date period through April have increased 4.1
percent, with system-wide and franchise comparable sales up 3.0 percent and 2.6
percent, respectively.
Lloyd L. Hill, chairman and chief executive officer, said, "Earnings per share
grew by 23 percent and return on equity exceeded 24 percent for the quarter,
both of which significantly surpassed our long-term targets. Our stellar results
are even more impressive given the confluence of events that occurred during the
first quarter - the worst winter weather seen in many years, heightened terror
alerts, the lowest consumer confidence levels in nearly a decade, and the
beginning of the war in the last ten days of the quarter. Despite all of these
external factors, system-wide comparable sales increased by 3.3 percent for the
quarter, substantially exceeding the casual dining industry average as measured
by Knapp-Track, and we continued to expand our market share with system-wide
sales growing by 11 percent."
Hill concluded, "Our To Go initiative continued to gain momentum during the
quarter, and we have finalized our plans for implementing our curbside approach
throughout the system. The continued execution of To Go as well as our other
sales-building strategies was recognized in the "Choice in Chains" survey
published in the March 2003 issue of Restaurants and Institutions magazine,
where Applebee's tied for the highest overall score of all bar and grill
concepts. We are proud of the substantial improvements being made in our food
quality, value, service, atmosphere, cleanliness and convenience, and believe
that our strategies are aligned to deliver consistent, sustainable growth."
Other results for the first quarter ended March 30, 2003 included:
o System-wide sales for the Applebee's concept were a record $884.7
million for the first quarter ended March 30, 2003, an increase of
over 11 percent over the prior year.
o Applebee's ended the quarter with 1,513 restaurants system-wide (371
company and 1,142 franchise restaurants). During the first quarter of
2003, there were 19 new Applebee's restaurants opened system-wide,
including 3 company and 16 franchised restaurants.
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o The company repurchased 545,000 shares of common stock in the first
quarter at an average price of $24.37 for an aggregate cost of $13.3
million. As of March 30, 2003, $56.2 million remains available under
the company's ongoing stock repurchase authorization.
o As of March 30, 2003, the company had total debt outstanding of $59
million, with nearly $88 million available under its revolving credit
facility.
BUSINESS OUTLOOK
The company reaffirmed its previously stated guidance for fiscal year 2003:
o Approximately 100 new restaurants are expected to open in 2003,
including 25 company restaurants and 70 to 80 franchise restaurants.
Seven company restaurants are currently expected to open in the first
half of the year, with the balance opening in the second half of the
year. Approximately 25 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 expected to increase by at least 3
percent for the full year, although monthly sales results may be more
volatile given the geopolitical environment, current economy, calendar
shifts, or other unusual events.
o Overall restaurant margins before pre-opening expense are expected to
increase slightly in 2003 as a result of higher sales volumes and the
impact of recent franchise acquisitions.
o General and administrative expenses, as a percentage of operating
revenues, are expected to be in the mid-9 percent range, reflecting
leverage from franchise acquisitions.
o The effective income tax rate is currently expected to continue at
36.2 percent in 2003.
o Excluding the cost of franchise acquisitions, capital expenditures are
expected to be between $65 and $75 million in 2003.
Based on the foregoing assumptions and the company's performance during the
first quarter, diluted earnings per share for fiscal year 2003 are now expected
to be in the range of $1.67 to $1.69, excluding the impact of any additional
franchise acquisitions or stock repurchase activity.
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A conference call to review the first quarter 2003 results and the current
business outlook will be held on Thursday morning, May 1, 2003, 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 27, 2003,
there were 1,517 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).
Certain statements contained in this release, including those 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 12, 2003. The company disclaims any
obligation to update these forward-looking 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
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March 30, March 31,
2003 2002
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Revenues:
Company restaurant sales................................ $ 208,410 $ 174,973
Franchise royalties and fees............................ 27,163 24,840
Other franchise income (a).............................. 2,641 134
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Total operating revenues............................. 238,214 199,947
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Cost of company restaurant sales:
Food and beverage....................................... 54,846 47,407
Labor................................................... 68,364 57,457
Direct and occupancy.................................... 50,561 42,872
Pre-opening expense..................................... 221 335
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Total cost of company restaurant sales............... 173,992 148,071
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Cost of other franchise income (a)........................... 2,500 60
General and administrative expenses (a)...................... 22,620 19,320
Amortization of intangible assets............................ 99 138
Loss on disposition of restaurants and equipment............. 467 294
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Operating earnings........................................... 38,536 32,064
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Other income (expense):
Investment income....................................... 336 397
Interest expense........................................ (521) (633)
Other income............................................ 205 101
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Total other income (expense)......................... 20 (135)
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Earnings before income taxes................................. 38,556 31,929
Income taxes................................................. 13,954 11,654
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Net earnings................................................. $ 24,602 $ 20,275
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Basic net earnings per common share (b)...................... $ 0.45 $ 0.36
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Diluted net earnings per common share (b).................... $ 0.43 $ 0.35
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Basic weighted average shares outstanding (b)................ 55,272 55,878
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Diluted weighted average shares outstanding (b).............. 56,677 57,327
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(a) Other franchise income and cost of other franchise income consist primarily
of revenues and expenses relating to the company's wholly-owned captive
insurance subsidiary. Certain amounts previously included in general and
administrative expenses have been reclassified to conform to the 2003
presentation.
(b) All earnings per share and weighted average share information reflect a
three-for-two stock split effective at the close of business on June 11,
2002.
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The following table sets forth, for the periods indicated, information derived
from the Company's consolidated statements of earnings expressed as a percentage
of total operating revenues, except where otherwise noted. Percentages may not
add due to rounding.
13 Weeks Ended
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March 30, March 31,
2003 2002
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Revenues:
Company restaurant sales.................................... 87.5% 87.5%
Franchise royalties and fees................................ 11.4 12.4
Other franchise income...................................... 1.1 0.1
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Total operating revenues................................. 100.0% 100.0%
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Cost of sales (as a percentage of company restaurant sales):
Food and beverage........................................... 26.3% 27.1%
Labor....................................................... 32.8 32.8
Direct and occupancy........................................ 24.3 24.5
Pre-opening expense......................................... 0.1 0.2
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Total cost of sales...................................... 83.5% 84.6%
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Cost of other franchise income (as a percentage
of other franchise income).................................. 94.7% 44.8%
General and administrative expenses.............................. 9.5 9.7
Amortization of intangible assets................................ -- 0.1
Loss on disposition of restaurants and equipment................. 0.2 0.1
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Operating earnings............................................... 16.2 16.0
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Other income (expense):
Investment income........................................... 0.1 0.2
Interest expense............................................ (0.2) (0.3)
Other income................................................ 0.1 0.1
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Total other expense...................................... -- (0.1)
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Earnings before income taxes..................................... 16.2 16.0
Income taxes..................................................... 5.9 5.8
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Net earnings..................................................... 10.3% 10.1%
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APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
March 30, December 29,
2003 2002
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ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 9,805 $ 15,169
Short-term investments, at market value....................................... 471 503
Receivables, net of allowance................................................. 29,469 26,092
Receivables related to captive insurance subsidiary........................... 14,031 1,803
Inventories................................................................... 19,852 11,504
Prepaid income taxes.......................................................... -- 5,002
Prepaid and other current assets.............................................. 7,489 9,506
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Total current assets....................................................... 81,117 69,579
Property and equipment, net........................................................ 390,143 383,002
Goodwill........................................................................... 105,326 88,715
Franchise interest and rights, net................................................. 1,385 1,468
Other assets....................................................................... 25,667 23,350
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$ 603,638 $ 566,114
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................................. $ 497 $ 377
Accounts payable.............................................................. 28,992 27,479
Accrued expenses and other current liabilities................................ 72,836 82,204
Accrued liabilities related to captive insurance subsidiary................... 14,009 1,803
Accrued dividends............................................................. -- 3,323
Accrued income taxes.......................................................... 6,809 --
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Total current liabilities.................................................. 123,143 115,186
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Non-current liabilities:
Long-term debt - less current portion......................................... 58,789 52,186
Other non-current liabilities................................................. 8,163 6,161
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Total non-current liabilities.............................................. 66,952 58,347
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Total liabilities.......................................................... 190,095 173,533
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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 $0.01 per share: authorized - 125,000,000 shares;
issued - 72,336,788 shares................................................. 723 723
Additional paid-in capital.................................................... 191,830 187,523
Retained earnings............................................................. 459,223 434,621
Accumulated other comprehensive income, net of income taxes .................. 27 16
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651,803 622,883
Treasury stock - 16,908,555 shares in 2003 and 16,948,371 shares in 2002,
at cost.................................................................... (238,260) (230,302)
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Total stockholders' equity................................................. 413,543 392,581
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$ 603,638 $ 566,114
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# # #
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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 30, 2003 By: /s/ Steven K. Lumpkin
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Steven K. Lumpkin
Executive Vice President and
Chief Financial Officer
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