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) July 31, 2002
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Commission File Number: 000-17962
Applebee's International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 43-1461763
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4551 W. 107th Street, Suite 100, Overland Park, Kansas 66207
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(Address of principal executive offices and zip code)
(913) 967-4000
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(Registrant's telephone number, including area code)
None
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On July 31, 2002, Applebee's International, Inc. (the "Company") issued a
press release entitled "Applebee's International Reports 19 Percent Increase in
Second Quarter Diluted Earnings Per Share of 37 Cents." The press release
contained the following information.
FOR IMMEDIATE RELEASE
Contact: Carol DiRaimo,
Director of Investor Relations
(913) 967-4109
Applebee's International Reports 19 Percent Increase
in Second Quarter Diluted Earnings Per Share of 37 Cents
Overland Park, Kan., July 31, 2002 -- Applebee's International, Inc.
(Nasdaq:APPB) today reported net earnings of $21.5 million, or 38 cents and 37
cents per share on a basic and diluted basis, respectively, for the second
quarter ended June 30, 2002. This represents an increase in earnings per share
of 19 percent on both a basic and diluted basis as compared with 32 cents and 31
cents per share on a basic and diluted basis, respectively, for the second
quarter of 2001.
System-wide comparable sales exceeded the company's expectation of at least 2
percent, increasing 3.2 percent for the second quarter, the 16th consecutive
quarter of comparable sales growth. Comparable sales increased 3.7 percent for
franchise restaurants and 1.4 percent for company restaurants. System-wide
comparable sales for the year-to-date period have increased 3.3 percent, with
franchise and company restaurant comparable sales up 3.9 percent and 1.5
percent, respectively.
The company also reported comparable sales for the June fiscal period, comprised
of the five weeks ended June 30, 2002. System-wide comparable sales increased
1.4 percent, reflecting a 2.0 percent increase for franchise restaurants and a
0.5 percent decrease for company restaurants. The decrease in comparable sales
for company restaurants reflects a similar decrease in guest traffic, offset in
part by a slightly higher average check. June comparable sales were negatively
impacted by the Memorial Day holiday and the remainder of that week.
In addition, the company reported comparable sales for the July fiscal period,
comprised of the four weeks ended July 28, 2002. System-wide comparable sales
increased 1.5 percent, including a 1.8 percent increase for franchise
restaurants and a 0.3 percent increase for company restaurants. The increase in
comparable sales for company restaurants reflects flat guest traffic and a
slightly higher average check. July comparable sales were strong during the 4th
of July week, but trailed off over the next three weeks.
Lloyd L. Hill, chairman and chief executive officer, said, "We were pleased that
system-wide comparable sales for the quarter exceeded our expectations and
continue to believe that the strategies we set forth in May are on target to
drive future sales growth. There is no question that the consumer has exhibited
less predictable behavior in the face of the current economic climate,
unprecedented corporate failures and the decline in the stock market. We
witnessed this erratic behavior in both June and July when our sales were more
volatile on a weekly basis. That being said, we continue to view the long-term
sales outlook favorably as eating out is firmly established as a part of
consumer lifestyles."
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Hill continued, "As part of our strategy to improve our food, we successfully
introduced a new menu in more than 1,400 restaurants system-wide during the
second quarter. This menu includes new items, as well as improvements to both
the quality and portion size of existing items. Importantly, we have been able
to improve our food while driving down costs by leveraging the investments we
have made in our supply chain initiative.
"We are also focused on improving execution by investing in our people.
Management retention and staffing levels continue to improve and, as a result,
our guest satisfaction scores are at all-time highs. Our strategies are designed
to deliver exceptional price/value through both our food and service
initiatives. We recognize that price/value perceptions depend on more than just
the price we charge, but also on the value we provide in both food and service."
Hill concluded, "We are excited about the roll-out of Phase I of our To Go
initiative, which will be completed system-wide by Labor Day. Our positioning as
the most conveniently located concept in casual dining is a natural fit with
this strategy, and meets our guests' demand for food on the go."
Other results for the second quarter and year-to-date periods ended June 30,
2002 included:
o Net earnings for the 26-week period ended June 30, 2002 were $41.7 million,
or 75 cents and 73 cents per share, respectively, on a basic and diluted
basis. This compares to net earnings in the same period of 2001 of $34.6
million, or 62 cents and 61 cents per share, respectively, on a basic and
diluted basis. This represents an increase in basic and diluted earnings
per share of 21 percent and 20 percent, respectively.
o System-wide sales for the Applebee's concept were a record $812.7 million
for the second quarter, an increase of 11 percent over the prior year.
System-wide sales for the 26-week period ended June 30, 2002 exceeded $1.6
billion, also up 11 percent.
o Operating revenues (comprised of company restaurant sales and franchise
income) increased 10 percent for the second quarter and year-to-date
period.
o Applebee's ended the quarter with 1,421 restaurants system-wide (318
company and 1,103 franchise restaurants). During the second quarter of
2002, there were 19 new Applebee's restaurants opened system-wide,
including 4 company and 15 franchised restaurants.
o As of June 30, 2002, the company had total long-term debt outstanding of
$33 million, reflecting payments of $22 million during the quarter. The
company has nearly $117 million available under its revolving credit
facility.
o In May 2002, the company's board of directors authorized an additional
program to repurchase up to $75 million of the company's common stock,
subject to market conditions. As of June 30, 2002, $87.3 million remains
available under this and previous authorizations.
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APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
13 Weeks Ended 26 Weeks Ended
--------------------------- ---------------------------
June 30, July 1, June 30, July 1,
2002 2001 2002 2001
----------- ----------- ------------ -----------
Revenues:
Company restaurant sales.................... $178,893 $162,035 $353,866 $322,178
Franchise income............................ 25,484 23,885 50,324 46,119
----------- ----------- ------------ -----------
Total operating revenues................. 204,377 185,920 404,190 368,297
----------- ----------- ------------ -----------
Cost of company restaurant sales:
Food and beverage........................... 47,073 43,633 94,480 86,938
Labor....................................... 58,881 51,533 116,338 102,433
Direct and occupancy........................ 44,291 41,104 87,163 81,863
Pre-opening expense......................... 305 132 640 267
----------- ----------- ------------ -----------
Total cost of company restaurant sales... 150,550 136,402 298,621 271,501
----------- ----------- ------------ -----------
General and administrative expenses.............. 19,553 18,085 38,799 35,251
Amortization of intangible assets................ 52 1,462 190 2,925
Loss on disposition of restaurants and equipment. 727 571 1,021 758
----------- ----------- ------------ -----------
Operating earnings............................... 33,495 29,400 65,559 57,862
----------- ----------- ------------ -----------
Other income (expense):
Investment income........................... 381 415 778 772
Interest expense............................ (555) (2,043) (1,188) (4,400)
Other income................................ 482 385 583 475
----------- ----------- ------------ -----------
Total other income (expense)............. 308 (1,243) 173 (3,153)
----------- ----------- ------------ -----------
Earnings before income taxes..................... 33,803 28,157 65,732 54,709
Income taxes..................................... 12,338 10,361 23,992 20,132
----------- ----------- ------------ -----------
Net earnings..................................... $ 21,465 $ 17,796 $ 41,740 $ 34,577
=========== =========== ============ ===========
Basic net earnings per common share (a).......... $ 0.38 $ 0.32 $ 0.75 $ 0.62
=========== =========== ============ ===========
Diluted net earnings per common share (a)........ $ 0.37 $ 0.31 $ 0.73 $ 0.61
=========== =========== ============ ===========
Basic weighted average shares outstanding (a).... 55,872 55,370 55,874 55,522
=========== =========== ============ ===========
Diluted weighted average shares outstanding (a).. 57,374 56,808 57,352 56,661
=========== =========== ============ ===========
(a) All earnings per share and weighted average share information reflects
a three-for-two stock split effective at the close of business on
June 11, 2002.
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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 26 Weeks Ended
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June 30, July 1, June 30, July 1,
2002 2001 2002 2001
------------ ------------ ------------- ------------
Revenues:
Company restaurant sales................................ 87.5% 87.2% 87.8% 87.5%
Franchise income........................................ 12.5 12.8 12.2 12.5
------------ ------------ ------------- ------------
Total operating revenues............................. 100.0% 100.0% 100.0% 100.0%
============ ============ ============= ============
Cost of sales (as a percentage of company restaurant sales):
Food and beverage....................................... 26.3% 26.9% 26.7% 27.0%
Labor................................................... 32.9 31.8 32.9 31.8
Direct and occupancy.................................... 24.8 25.4 24.6 25.4
Pre-opening expense..................................... 0.2 0.1 0.2 0.1
------------ ------------ ------------- ------------
Total cost of sales.................................. 84.2% 84.2% 84.4% 84.3%
============ ============ ============= ============
General and administrative expenses.......................... 9.6% 9.7% 9.6% 9.6%
Amortization of intangible assets............................ -- 0.8 -- 0.8
Loss on disposition of restaurants and equipment............. 0.4 0.3 0.3 0.2
------------ ------------ ------------- ------------
Operating earnings........................................... 16.4 15.8 16.2 15.7
------------ ------------ ------------- ------------
Other income (expense):
Investment income....................................... 0.2 0.2 0.2 0.2
Interest expense........................................ (0.3) (1.1) (0.3) (1.2)
Other income............................................ 0.2 0.2 0.1 0.1
------------ ------------ ------------- ------------
Total other income (expense)......................... 0.2 (0.7) -- (0.9)
------------ ------------ ------------- ------------
Earnings before income taxes................................. 16.5 15.1 16.3 14.9
Income taxes................................................. 6.0 5.6 5.9 5.5
------------ ------------ ------------- ------------
Net earnings................................................. 10.5% 9.6% 10.3% 9.4%
============ ============ ============= ============
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Item 9. Regulation FD Disclosure
Applebee's International, Inc. (the "Company") also included guidance
regarding its business outlook in the press release. These comments are included
below.
BUSINESS OUTLOOK
The company also provided guidance as to its business outlook for fiscal year
2002.
o With regard to system-wide comparable sales, the company's previously
stated guidance remains unchanged. The company continues to expect
system-wide comparable sales to increase by at least 2 percent for the
remainder of 2002, although monthly sales results may be more volatile
given the current economy, calendar shifts, or unusual events. Combining
year-to-date sales performance through July with this expectation, the
company expects system-wide comparable sales to increase at least 2.5
percent for the full year.
o Consistent with current consensus analyst estimates, diluted earnings per
share for fiscal year 2002 are now expected to be in the range of $1.42 to
$1.44, excluding any impact of additional stock repurchases.
o With respect to the previously announced potential acquisition of 21
franchise restaurants located in the Washington, D.C. area from an existing
franchisee, on July 30, 2002, procedures were established to control the
bidding and sale process for the Apple Capitol restaurants and September
13th was confirmed as the date for the final sale approval hearing. The
company continues to expect to close under its negotiated purchase
agreement to acquire the 21 restaurants in the fourth quarter.
A conference call to review the second quarter 2002 results and the current
business outlook will be held on Thursday morning, August 1, 2002, at 10:00 a.m.
Central Time (11:00 a.m. Eastern Time). The conference call will be broadcast
live over the Internet and a replay will be available shortly after the call on
the Investor Relations section of the company's website (www.applebees.com).
6
Applebee's International, Inc., headquartered in Overland Park, Kan., develops,
franchises and operates restaurants under the Applebee's Neighborhood Grill and
Bar brand, the largest casual dining concept in the world. There are currently
1,436 Applebee's restaurants operating system-wide in 49 states and seven
international countries. Additional information on Applebee's International can
be found at the company's website (www.applebees.com).
The statements contained in the Business Outlook section of this release are
forward looking and based on current expectations. There are several risks and
uncertainties that could cause actual results to differ materially from those
described, including but not limited to the ability of the company and its
franchisees to open and operate additional restaurants profitably, the continued
growth of its franchisees and its ability to attract and retain qualified
franchisees, the impact of intense competition in the casual dining segment of
the restaurant industry, and its ability to control restaurant operating costs
which are impacted by market changes, minimum wage and other employment laws,
food costs and inflation. For additional discussion of the principal factors
that could cause actual results to be materially different, the reader is
referred to the company's current report on Form 8-K filed with the Securities
and Exchange Commission on July 16, 2002. The company disclaims any obligation
to update these forward-looking statements.
# # #
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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: July 31, 2002 By: /s/ Steven K. Lumpkin
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Steven K. Lumpkin
Executive Vice President and
Chief Financial Officer
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