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) February 12, 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)
1
Item 5. Other Events
On February 12, 2003, Applebee's International, Inc.(the "Company") issued
a press release entitled " Applebee's International Reports Fourth Quarter
Earnings Per Share of 36 Cents and Record Full Year 2002 Earnings Per Share of
$1.46." The press release contained the following information.
FOR IMMEDIATE RELEASE
Contact: Carol DiRaimo,
Executive Director of Investor Relations
(913) 967-4109
Applebee's International Reports Fourth Quarter Earnings Per Share
of 36 Cents and Record Full Year 2002 Earnings Per Share of $1.46
Overland Park, Kan., February 12, 2003 -- Applebee's International, Inc.
(Nasdaq:APPB) today reported net earnings of $20.3 million, or 37 cents and 36
cents per share on a basic and diluted basis, respectively, for the fourth
quarter ended December 29, 2002, as compared to 23 cents per share on both a
basic and diluted basis for the fourth quarter of 2001 (including a $4.1 million
or 7 cents per share after-tax charge relating to refinancing costs in the
fourth quarter of 2001). Excluding such refinancing costs, net earnings were
$17.1 million, or 31 cents and 30 cents per share on a basic and diluted basis,
respectively, for the fourth quarter of 2001.
For the fiscal year ended December 29, 2002, net earnings were a record $83.0
million, or $1.49 and $1.46 per share on a basic and diluted basis,
respectively, as compared to $1.16 and $1.13 per share on a basic and diluted
basis, respectively, for fiscal year 2001 (including a $4.1 million or 7 cents
per share after-tax charge relating to refinancing costs in 2001). This
represents an increase in earnings per share of 21 percent as compared to fiscal
year 2001 earnings of $1.23 and $1.20 per share on a basic and diluted basis,
respectively, excluding such refinancing costs.
As previously reported, system-wide comparable sales for the fourth quarter of
2002 increased 3.4 percent, the 18th consecutive quarter of comparable sales
growth. Franchise and company restaurant comparable sales increased 3.5 percent
and 2.7 percent, respectively, for the quarter. System-wide comparable sales for
the 2002 fiscal year increased 3.2 percent. Franchise and company restaurant
comparable sales increased 3.6 percent and 1.8 percent, respectively, for the
year.
2
Lloyd L. Hill, chairman and chief executive officer, said, "Our strong fourth
quarter results capped a terrific year for Applebee's. We continued to expand
our market share with system-wide sales growing by 11 percent, exceeding the $3
billion mark for the first time. We also opened over 100 new restaurants for the
10th consecutive year. System-wide comparable sales growth of 3.2 percent for
the year substantially exceeded the casual dining industry average as measured
by Knapp-Track, despite significant declines in consumer confidence and a weaker
economy."
Hill continued, "Earnings per share growth exceeded 21 percent, and return on
equity was over 23 percent for the year, well above our 20 percent target and
one of the highest levels in the industry. We achieved record management
retention levels, continued to improve our food and menu, completed the rollout
of the first phase of our To Go initiative and acquired 21 stores from a
franchisee in the Washington, D.C. market."
Hill concluded, "This year is off to a great start with outstanding January
sales results, the opening of our 1500th restaurant, and our recently announced
plans to acquire 11 franchise restaurants. We believe that our strategies are
right on target to drive future sales and earnings growth."
Other results for the fourth quarter and fiscal year ended December 29, 2002
included:
o System-wide sales for the Applebee's concept were a record $3.24 billion
for the fiscal year ended December 29, 2002, an increase of 11 percent
over 2001 system sales.
o Operating revenues (comprised of company restaurant sales and franchise
income) reached $827 million for the fiscal year, an increase of 11
percent over 2001 operating revenues of $744 million. Franchise income
exceeded $100 million for the first time in fiscal year 2002.
o Applebee's ended the year with 1,496 restaurants system-wide (357 company
and 1,139 franchise restaurants). There were 107 new Applebee's
restaurants opened system-wide during fiscal year 2002, the 10th
consecutive year of over 100 new restaurant openings, including 26
company and 81 franchised restaurants.
o During 2002, the company repurchased 1,210,000 shares of common stock at
an average price of $21.58 for an aggregate cost of $26.1 million. As of
December 29, 2002, $69.5 million remains available under the company's
ongoing stock repurchase authorization.
o As of December 29, 2002, the company had total debt outstanding of $53
million, with over $90 million available under its revolving credit
facility.
3
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
13 Weeks Ended 52 Weeks Ended
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December 29, December 30, December 29, December 30,
2002 2001 2002 2001
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Revenues:
Company restaurant sales...................... $187,943 $ 164,703 $ 724,616 $ 651,119
Franchise income.............................. 25,823 23,319 102,180 93,225
------------- -------------- ------------- -------------
Total operating revenues................... 213,766 188,022 826,796 744,344
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Cost of company restaurant sales:
Food and beverage............................. 50,179 44,550 192,424 175,977
Labor......................................... 61,874 53,699 238,266 208,996
Direct and occupancy.......................... 47,595 41,643 181,767 164,965
Pre-opening expense........................... 542 802 1,974 1,701
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Total cost of company restaurant sales..... 160,190 140,694 614,431 551,639
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General and administrative expenses................ 22,290 18,487 81,138 72,935
Amortization of intangible assets.................. 96 1,463 381 5,851
Loss (gain) on disposition of restaurants and
equipment..................................... (341) 405 1,138 1,492
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Operating earnings................................. 31,531 26,973 129,708 112,427
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Other income (expense):
Investment income............................. 374 399 1,498 1,650
Interest expense.............................. (566) (1,225) (2,168) (7,456)
Other income (expense) (a).................... 2 (5,517) 1,098 (4,720)
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Total other income (expense)............... (190) (6,343) 428 (10,526)
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Earnings before income taxes....................... 31,341 20,630 130,136 101,901
Income taxes (a)................................... 11,049 7,592 47,109 37,500
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Net earnings....................................... $ 20,292 $ 13,038 $ 83,027 $ 64,401
============= ============== ============= =============
Basic net earnings per common share (b)............ $ 0.37 $ 0.23 $ 1.49 $ 1.16
============= ============== ============= =============
Diluted net earnings per common share (b).......... $ 0.36 $ 0.23 $ 1.46 $ 1.13
============= ============== ============= =============
Basic weighted average shares outstanding (b)...... 55,212 55,636 55,605 55,512
============= ============== ============= =============
Diluted weighted average shares outstanding (b).... 56,512 57,163 56,922 56,877
============= ============== ============= =============
(a) As a result of the adoption of Statement of Financial Accounting
Standards No. 145, the extraordinary loss from early extinguishment of
debt of $1,249,000 and the related tax benefit of $727,000 previously
recognized in the fourth quarter of fiscal year 2001 have been
reclassified to other expense.
(b) All earnings per share and weighted average share information reflects a
three-for-two stock split effective at the close of business on June 11,
2002.
4
The following table sets forth, for the periods indicated, information derived
from the Company's consolidated statements of earnings expressed as a percentage
of total operating revenues, except where otherwise noted. Percentages may not
add due to rounding.
13 Weeks Ended 52 Weeks Ended
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December 29, December 30, December 29, December 30,
2002 2001 2002 2001
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Revenues:
Company restaurant sales...................... 87.9% 87.6% 87.6% 87.5%
Franchise income.............................. 12.1 12.4 12.4 12.5
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Total operating revenues................... 100.0% 100.0% 100.0% 100.0%
============= ============== ============= =============
Cost of sales (as a percentage of company
restaurant sales):
Food and beverage............................. 26.7% 27.0% 26.6% 27.0%
Labor......................................... 32.9 32.6 32.9 32.1
Direct and occupancy.......................... 25.3 25.3 25.1 25.3
Pre-opening expense........................... 0.3 0.5 0.3 0.3
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Total cost of sales........................ 85.2% 85.4% 84.8% 84.7%
============= ============== ============= =============
General and administrative expenses................ 10.4% 9.8% 9.8% 9.8%
Amortization of intangible assets.................. -- 0.8 -- 0.8
Loss (gain) on disposition of restaurants and
equipment..................................... (0.2) 0.2 0.1 0.2
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Operating earnings................................. 14.8 14.3 15.7 15.1
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Other income (expense):
Investment income............................. 0.2 0.2 0.2 0.2
Interest expense.............................. (0.3) (0.7) (0.3) (1.0)
Other income (expense)........................ -- (2.9) 0.1 (0.6)
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Total other income (expense)............... (0.1) (3.4) 0.1 (1.4)
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Earnings before income taxes....................... 14.7 11.0 15.7 13.7
Income taxes....................................... 5.2 4.0 5.7 5.0
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Net earnings....................................... 9.5% 6.9% 10.0% 8.7%
============= ============== ============= =============
5
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
December 29, December 30,
2002 2001
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ASSETS
Current assets:
Cash and cash equivalents................................................... $ 15,169 $ 22,048
Short-term investments, at market value..................................... 503 699
Receivables, net of allowance............................................... 27,895 22,827
Inventories................................................................. 11,504 10,165
Prepaid and other current assets............................................ 14,508 12,260
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Total current assets..................................................... 69,579 67,999
Property and equipment, net...................................................... 383,002 330,924
Goodwill, net.................................................................... 88,715 78,614
Franchise interest and rights, net............................................... 1,468 1,800
Other assets..................................................................... 23,350 21,074
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$ 566,114 $ 500,411
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt........................................... $ 377 $ 43
Accounts payable............................................................ 27,479 22,196
Accrued expenses and other current liabilities.............................. 84,007 71,551
Accrued dividends........................................................... 3,323 2,977
Accrued income taxes........................................................ -- 979
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Total current liabilities................................................ 115,186 97,746
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Non-current liabilities:
Long-term debt - less current portion....................................... 52,186 74,525
Other non-current liabilities............................................... 6,161 2,957
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Total non-current liabilities............................................ 58,347 77,482
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Total liabilities........................................................ 173,533 175,228
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Stockholders' equity:
Preferred stock - par value $0.01 per share: authorized - 1,000,000 shares;
no shares issued......................................................... -- --
Common stock - par value $0.01 per share: authorized - 125,000,000 shares;
issued - 72,336,788 shares............................................... 723 723
Additional paid-in capital.................................................. 187,523 180,802
Retained earnings........................................................... 434,621 354,950
Accumulated other comprehensive income, net of income taxes ................ 16 14
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622,883 536,489
Treasury stock - 16,948,371 shares in 2002 and 16,522,099 shares in 2001,
at cost.................................................................. (230,302) (211,306)
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Total stockholders' equity............................................... 392,581 325,183
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$ 566,114 $ 500,411
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Fiscal year 2002 financial statements have not yet been filed with the
Securities and Exchange Commission.
# # #
6
Item 9. Regulation FD Disclosure
Applebee's International, Inc. (the "Company") also included guidance
regarding its business outlook in the press release. These comments are included
below.
BUSINESS OUTLOOK
The company also updated its business outlook 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 20
to 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 geo-political 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 the recent acquisition of 21 franchise restaurants in the
Washington, D.C. market.
o General and administrative expenses, as a percentage of operating
revenues, are expected to be in the mid-9 percent range.
o The effective income tax rate is currently expected to continue at 36.2
percent in 2003.
o The company expects to complete the recently announced acquisition of 11
franchise restaurants from an existing franchisee in late March.
o Excluding the cost of this acquisition, capital expenditures are expected
to be between $65 and $75 million in 2003.
o Based on the foregoing assumptions, diluted earnings per share for fiscal
year 2003 are expected to be in the range of $1.66 to $1.68, excluding
the impact of any additional franchise acquisitions or stock repurchase
activity.
A conference call to review the fourth quarter and fiscal year 2002 results and
the current business outlook will be held on Thursday morning, February 13,
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. There are currently
1,506 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 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 February
12, 2003. The company disclaims any obligation to update these forward-looking
statements.
# # #
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APPLEBEE'S INTERNATIONAL, INC.
(Registrant)
Date: February 12, 2003 By: /s/ Steven K. Lumpkin
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Steven K. Lumpkin
Executive Vice President and
Chief Financial Officer
8