UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 12b-25
NOTIFICATION OF LATE FILING
SEC FILE NUMBER: 000-17962
CUSIP NUMBER: 037899101
(Check One) |X| Form 10-K |_| Form 20-F |_| Form 11-K |_| Form 10-Q |_| Form
N-SAR |_| Form N-CSR
For Period Ended: December 26, 2004
[ ] Transition Report on Form 10-K [ ] Transition Report on Form 20-F
[ ] Transition Report on Form 11-K [ ] Transition Report on Form 10-Q
[ ] Transition Report on Form N-SAR
For the Transition Period Ended:
Nothing in this form shall be construed to imply that the Commission has
verified any information contained herein.
If the notification relates to a portion of the filing checked above, identify
the Item(s) to which the notification relates:
PART I--REGISTRANT INFORMATION
Applebee's International, Inc.
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Full Name of Registrant
Not Applicable
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Former Name if Applicable
4551 W. 107th Street
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Address of Principal Executive Office (Street and Number)
Overland Park, Kansas 66207
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City, State and Zip Code
PART II--RULES 12b-25(b) AND (c)
If the subject report could not be filed without unreasonable effort or expense
and the registrant seeks relief pursuant to Rule 12b-25(b), the following should
be completed. (Check box if appropriate)
|X| (a) The reasons described in reasonable detail in Part III of this form
could not be eliminated without unreasonable effort or expense;
|X| (b) The subject annual report, semi-annual report, transition report on
Form 10-K, Form 20-F, Form 11-K, Form N-SAR or Form N-CSR, or portion thereof,
will be filed on or before the fifteenth calendar day following the prescribed
due date; or the subject quarterly report or transition report on Form 10-Q, or
portion thereof, will be filed on or before the fifth calendar day following the
prescribed due date; and
|_| (c) The accountant's statement or other exhibit required by Rule 12b-25
(c) has been attached if applicable.
PART III--NARRATIVE
State below in reasonable detail why Forms 10-K, 20-F, 11-K, 10-Q, N-SAR, N-CSR,
or the transition report or portion thereof, could not be filed within the
prescribed time period.
The annual report on Form 10-K of Applebee's International, Inc. (the "Company")
for the period ended December 26, 2004 could not be filed with the Securities
and Exchange Commission on a timely basis without unreasonable effort or expense
in light of the circumstances described below.
The Company had previously announced that, like many other companies in the
restaurant, retail and other industries, the Company is reviewing its accounting
treatment for leases and depreciation of related leasehold improvements. The
Company has discussed its lease accounting practices with its audit committee
and consulted with its independent registered public accountants, Deloitte &
Touche LLP and has determined it will correct its accounting practices in this
area. The Company has not yet made a final determination as to whether the
corrections will be made as a cumulative adjustment in the fourth quarter of
2004 or as a restatement of historical financial statements. Due to the time and
effort involved in determining the effect of the corrections on the Company's
financial statements and to allow Deloitte & Touche time to complete the audit
of the Company's financial statements, the decision was made to delay the filing
of the Form 10-K for the period ended December 26, 2004.
PART IV--OTHER INFORMATION
(1) Name and telephone number of person to contact in regard to this
notification
Steven K. Lumpkin (913) 967-4000
------------------- ------------------------------
(Name) (Area Code) (Telephone Number)
26
(2) Have all other periodic reports required under Section 13 or 15(d) of
the Securities Exchange Act of 1934 or Section 30 of the Investment Company Act
of 1940 during the preceding 12 months or for such shorter period that the
registrant was required to file such report(s) been filed? If answer is no,
identify report(s). |X|Yes |_| No
(3) Is it anticipated that any significant change in results of operations
from the corresponding period for the last fiscal year will be reflected by the
earnings statements to be included in the subject report or portion thereof?
|X|Yes |_|No
If so, attach an explanation of the anticipated change, both narratively and
quantitatively, and, if appropriate, state the reasons why a reasonable estimate
of the results cannot be made.
Prior to a determination of the necessary corrections as described in response
to Part III, above, a number of which may involve the fiscal year ended December
28, 2003, the Company is unable to reasonably estimate the significant change,
if any, in results of operations for the fiscal year ended December 28, 2003.
The Company's preliminary results for fiscal 2004 are attached hereto as Exhibit
A for informational purposes only. These numbers do not reflect any corrections
that may result from the issues discussed in Part III, above, and may therefore
change.
Applebee's International, Inc.
--------------------------------------------
(Name of Registrant as Specified in Charter)
has caused this notification to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: March 11, 2005 By: /s/ Steven K. Lumpkin
---------------------------------------
Name: Steven K. Lumpkin
Title: Executive Vice President and
Chief Financial Officer
3
EXHIBIT A
FOR IMMEDIATE RELEASE
Contact: Carol DiRaimo,
Vice President of Investor Relations
(913) 967-4109
Applebee's International Reports Preliminary Unaudited
Fourth Quarter and Fiscal Year 2004 Results
Overland Park, Kan., February 9, 2005 -- Applebee's International, Inc.
(Nasdaq:APPB) today reported preliminary unaudited net earnings of $23.6
million, or $0.29 per diluted share, for the fourth quarter ended December 26,
2004. This compares to net earnings of $23.2 million, or $0.27 per diluted
share, for the fourth quarter of 2003.
For the fiscal year ended December 26, 2004, preliminary unaudited net earnings
were a record $109.6 million, or $1.31 per diluted share. This compares to net
earnings of $93.6 million, or $1.10 per diluted share, for fiscal year 2003,
which included an $8.8 million pre-tax ($5.6 million after-tax or approximately
$0.06 per share) charge resulting from the impairment of a note receivable
relating to the 1999 sale of the Rio Bravo concept to Chevys Holdings, Inc.
("Chevys").
Like numerous companies in the restaurant industry, the company has recently
reviewed its accounting treatment for leases and depreciation of related
leasehold improvements. Historically, when accounting for leases with renewal
options, the company has recorded rent expense on a straight-line basis over the
initial non-cancelable lease term, with the term commencing when actual rent
payments began. The company depreciated leasehold improvements on those
properties over a maximum period of 20 years which, in certain cases, would have
included a portion of the renewal option periods.
The company has discussed its lease accounting practices with its independent
external auditors and its audit committee and has determined that it will
correct its accounting practices in this area. The company has not yet made a
final determination as to whether the corrections will be made as a cumulative
adjustment in the fourth quarter of 2004 or as a restatement of prior periods.
Accordingly, the results included in this release are preliminary and do not
reflect any adjustments for this correction.
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February 9, 2005
Page 2
The primary result of this correction will be to accelerate the recognition of
rent expense under certain leases that include fixed-rent escalations by
revising the computation of straight-line rent expense to include certain option
periods up to a maximum of 20 years, where failure to exercise such options
would result in an economic penalty. The company estimates that the cumulative
effect of lease accounting corrections through fiscal year 2004 would be an
increase in expense of less than $9 million on a pre-tax basis ($6 million
after-tax). If the company restates prior periods, the annual impact of
lease-related errors on diluted earnings per share would not exceed $0.01 in any
year. The company anticipates that the impact of this correction may reduce
diluted earnings per share by approximately $0.01 in fiscal year 2005. These
estimates and our preliminary results are subject to change as the company's
independent external auditors complete their audit procedures. This correction
will not affect the company's previously reported or future cash flows, the
timing of payments under the related leases, or compliance with any debt
covenants.
As previously reported, system-wide comparable sales for the fourth quarter of
2004 increased 2.3 percent, the 26th consecutive quarter of comparable sales
growth. Company and franchise restaurant comparable sales increased 0.1 percent
and 3.0 percent, respectively, for the quarter. System-wide comparable sales for
the 2004 fiscal year increased 4.8 percent. Company and franchise restaurant
comparable sales increased 3.8 percent and 5.2 percent, respectively, for the
year.
Lloyd L. Hill, chairman and chief executive officer, said, "Although we ended
the year on a somewhat softer note, 2004 was still a terrific year on many
fronts. System-wide comparable sales growth of 4.8 percent for the year
substantially exceeded the casual dining industry average as measured by
Knapp-Track(TM), and reflected our highest annual rate of growth since 1993. A
total of 109 new restaurants were opened system-wide, the 12th consecutive year
of at least 100 new restaurant openings. As a result of these strong sales and
continued rapid development, we continued to expand our market share with
system-wide sales growing by nearly 11 percent."
Hill continued, "We continue to remain focused on improving operations
throughout the system, as well as optimizing our key strategies. 2005 is off to
a good start with strong January sales, especially in the face of extremely
difficult comparisons. We have essentially completed the rollout of our Carside
To Go(TM) program in all company and franchise restaurants and will launch
national advertising beginning on Valentine's Day. We also are very pleased with
the results of our strategic alliance with Weight Watchers, particularly since
the start of the year as we've supported it with national advertising.
Leveraging our significant marketing muscle in 2005 is a key initiative, as we
will use a more than 30 percent increase in our national advertising budget to
convey multiple messages to our guests, including our branded campaign events,
Carside To Go(TM), our partnership with Weight Watchers, and our neighborhood
branding messages."
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February 9, 2005
Page 3
Other results for the fiscal year ended December 26, 2004 included:
o Total system-wide sales for the 2004 fiscal year increased by 10.7 percent
over 2003. System-wide sales are a non-GAAP financial measure that includes
sales at all company and franchise Applebee's restaurants, as reported by
franchisees. The company believes that system-wide sales information is
useful in analyzing Applebee's market share and growth, and because
franchisees pay royalties and contribute to the national advertising pool
based on a percentage of their sales.
o Applebee's ended the year with 1,671 restaurants system-wide (424 company
and 1,247 franchise restaurants). There were 109 new Applebee's restaurants
opened system-wide during fiscal year 2004, the 12th consecutive year of at
least 100 new restaurant openings, including 32 company and 77 franchised
restaurants.
o During 2004, the company repurchased 3,993,670 shares of common stock at an
average price of $24.97 for an aggregate cost of $99.7 million. As
previously announced, the company's Board of Directors has authorized
additional stock repurchases of up to $150,000,000 beginning in 2005 and
has approved a written plan for repurchases of common stock in the open
market in accordance with Rule 10b5-1 of the Securities Exchange Act of
1934.
o As of December 26, 2004, the company had total debt outstanding of $35.7
million, with $108 million available under its revolving credit facility.
BUSINESS OUTLOOK
The company reiterated its previously stated guidance with respect to its
business outlook for fiscal year 2005.
o Over 125 new restaurants are expected to open in 2005, including at least
40 company and 85 franchise restaurants. Approximately 25 company
restaurants and 20 to 25 franchise restaurants are currently expected to
open in the first half of the year, with the balance 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, with results expected to be lower during the first part
of the year and accelerate throughout the year.
o Overall restaurant margins before pre-opening expense for the full year of
2005 are expected to be similar to fiscal year 2004 results.
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February 9, 2005
Page 4
o General and administrative expenses, as a percentage of operating revenues,
are expected to be in the high-8 percent range.
o The effective income tax rate is expected to be 34.6 percent for the year.
o Excluding the cost of franchise acquisitions, capital expenditures are
expected to be between $130 and $140 million in 2005.
o Based on the foregoing assumptions, diluted earnings per share for fiscal
year 2005 are expected to be in the range of $1.48 to $1.51, with diluted
earnings per share for the first quarter expected to be slightly less than
the prior year. These earnings per share estimates exclude the potential
impact of any corrections to the company's lease accounting practices as
discussed above, as well as the impact of expensing stock options beginning
in the third quarter of 2005.
A conference call to review the fourth quarter and fiscal year 2004 results and
the current business outlook will be held on Thursday morning, February 10,
2005, 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
1,682 Applebee's restaurants operating system-wide in 49 states and 12
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 fiscal year 2005
guidance as set forth in the Business Outlook section, are forward-looking and
based on current expectations. There are several risks and uncertainties that
could cause actual results to differ materially from those described, including
but not limited to the ability of the company and its franchisees to open and
operate additional restaurants profitably, the ability of its franchisees to
obtain financing, the continued growth of its franchisees, and its ability to
attract and retain qualified franchisees, the impact of intense competition in
the casual dining segment of the restaurant industry, and its ability to control
restaurant operating costs which are impacted by market changes, minimum wage
and other employment laws, food costs and inflation. For additional discussion
of the principal factors that could cause actual results to be materially
different, the reader is referred to the company's current report on Form 8-K
filed with the Securities and Exchange Commission on February 9, 2005. The
company disclaims any obligation to update these forward-looking statements.
# # #
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
PRELIMINARY(a) UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
13 Weeks Ended 52 Weeks Ended
------------------------------ ------------------------------
December 26, December 28, December 26, December 28,
2004 2003 2004 2003
------------- -------------- ------------- -------------
Revenues:
Company restaurant sales...................... $238,296 $ 216,212 $ 976,798 $ 867,158
Franchise royalties and fees.................. 29,854 27,745 121,510 109,833
Other franchise income........................ 3,188 4,266 13,615 13,147
------------- -------------- ------------- -------------
Total operating revenues................... 271,338 248,223 1,111,923 990,138
------------- -------------- ------------- -------------
Cost of company restaurant sales:
Food and beverage............................. 63,857 56,260 259,134 225,346
Labor......................................... 78,760 70,559 319,104 283,745
Direct and occupancy.......................... 62,665 55,861 243,616 216,677
Pre-opening expense........................... 976 819 2,915 1,950
------------- -------------- ------------- -------------
Total cost of company restaurant sales..... 206,258 183,499 824,769 727,718
------------- -------------- ------------- -------------
Cost of other franchise income..................... 2,908 4,187 14,401 12,697
General and administrative expenses................ 27,509 25,917 104,627 95,013
Amortization of intangible assets.................. 220 86 663 364
Loss (gain) on disposition of restaurants and
equipment........................................ 435 (615) 1,955 699
------------- -------------- ------------- -------------
Operating earnings................................. 34,008 35,149 165,508 153,647
------------- -------------- ------------- -------------
Other income (expense):
Investment income............................. 718 506 1,284 1,554
Interest expense.............................. (487) (364) (1,626) (1,733)
Impairment of Chevys note receivable.......... -- -- -- (8,803)
Other income.................................. 990 919 2,400 1,520
------------- -------------- ------------- -------------
Total other income (expense)............... 1,221 1,061 2,058 (7,462)
------------- -------------- ------------- -------------
Earnings before income taxes....................... 35,229 36,210 167,566 146,185
Income taxes....................................... 11,660 13,036 57,978 52,627
------------- -------------- ------------- -------------
Net earnings....................................... $ 23,569 $ 23,174 $ 109,588 $ 93,558
============= ============== ============= =============
Basic net earnings per common share(b)............. $ 0.29 $ 0.28 $ 1.34 $ 1.13
============= ============== ============= =============
Diluted net earnings per common share(b)........... $ 0.29 $ 0.27 $ 1.31 $ 1.10
============= ============== ============= =============
Basic weighted average shares outstanding(b)....... 80,835 82,380 81,528 82,944
============= ============== ============= =============
Diluted weighted average shares outstanding(b)..... 82,518 85,012 83,600 85,409
============= ============== ============= =============
(a) Fiscal year 2004 financial statements have not yet been filed with the
Securities and Exchange Commission. These results do not reflect the
potential adjustments discussed in this press release related to lease
accounting.
(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
15, 2004.
The following table sets forth, for the periods indicated, information derived
from the Company's preliminary unaudited 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
------------------------------ -------------------------------
December 26, December 28, December 26, December 28,
2004 2003 2004 2003
------------- -------------- ------------- --------------
Revenues:
Company restaurant sales...................... 87.8% 87.1% 87.8% 87.6%
Franchise royalties and fees.................. 11.0 11.2 10.9 11.1
Other franchise income........................ 1.2 1.7 1.2 1.3
------------- -------------- ------------- -------------
Total operating revenues................... 100.0% 100.0% 100.0% 100.0%
============= ============== ============= =============
Cost of sales (as a percentage of
company restaurant sales):
Food and beverage............................. 26.8% 26.0% 26.5% 26.0%
Labor......................................... 33.1 32.6 32.7 32.7
Direct and occupancy.......................... 26.3 25.8 24.9 25.0
Pre-opening expense........................... 0.4 0.4 0.3 0.2
------------- -------------- ------------- -------------
Total cost of sales........................ 86.6% 84.9% 84.4% 83.9%
============= ============== ============= =============
Cost of other franchise income (as a percentage
of other franchise income).................... 91.2% 98.1% 105.8% 96.6%
General and administrative expenses................ 10.1 10.4 9.4 9.6
Amortization of intangible assets.................. 0.1 -- 0.1 --
Loss (gain) on disposition of restaurants
and equipment................................... 0.2 (0.2) 0.2 0.1
------------- -------------- ------------- -------------
Operating earnings................................. 12.5 14.2 14.9 15.5
------------- -------------- ------------- -------------
Other income (expense):
Investment income............................. 0.3 0.2 0.1 0.2
Interest expense.............................. (0.2) (0.1) (0.1) (0.2)
Impairment of Chevys note receivable.......... -- -- -- (0.9)
Other income.................................. 0.4 0.4 0.2 0.2
------------- -------------- ------------- -------------
Total other income (expense)............... 0.4 0.4 0.2 (0.8)
------------- -------------- ------------- -------------
Earnings before income taxes....................... 13.0 14.6 15.1 14.8
Income taxes....................................... 4.3 5.3 5.2 5.3
------------- -------------- ------------- -------------
Net earnings....................................... 8.7% 9.3% 9.9% 9.4%
============= ============== ============= =============
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 52 Weeks Ended
------------------------------- -------------------------------
December 26, December 28, December 26, December 28,
2004 2003 2004 2003
------------- ------------- -------------- -------------
Number of restaurants:
Company:
Beginning of period....................... 413 372 383 357
Restaurant openings....................... 11 11 32 26
Restaurants closed........................ -- -- (1) (2)
Restaurants acquired from franchisees..... -- -- 10 11
Restaurants acquired by franchisees....... -- -- -- (9)
------------- ------------- -------------- -------------
End of period............................. 424 383 424 383
------------- ------------- -------------- -------------
Franchise:
Beginning of period....................... 1,224 1,171 1,202 1,139
Restaurant openings....................... 37 33 77 74
Restaurants closed........................ (14) (2) (22) (9)
Restaurants acquired from franchisees..... -- -- (10) (11)
Restaurants acquired by franchisees....... -- -- -- 9
------------- ------------- -------------- -------------
End of period............................. 1,247 1,202 1,247 1,202
------------- ------------- -------------- -------------
Total:
Beginning of period....................... 1,637 1,543 1,585 1,496
Restaurant openings....................... 48 44 109 100
Restaurants closed........................ (14) (2) (23) (11)
------------- ------------- -------------- -------------
End of period............................. 1,671 1,585 1,671 1,585
============= ============= ============== =============
Weighted average weekly sales per restaurant:
Company....................................... $ 43,812 $ 43,963 $ 46,536 $ 45,000
Franchise..................................... $ 45,695 $ 44,116 $ 47,613 $ 45,271
Total......................................... $ 45,215 $ 44,079 $ 47,345 $ 45,205
Change in comparable restaurant sales:(1)
Company....................................... 0.1% 5.2% 3.8% 5.2%
Franchise..................................... 3.0% 4.4% 5.2% 3.7%
Total......................................... 2.3% 4.6% 4.8% 4.1%
Total operating revenues (in thousands):
Company restaurant sales...................... $ 238,296 $ 216,212 $ 976,798 $ 867,158
Franchise royalties and fees(2)............... 29,854 27,745 121,510 109,833
Other franchise income(3)..................... 3,188 4,266 13,615 13,147
------------- ------------- -------------- -------------
Total......................................... $ 271,338 $ 248,223 $1,111,923 $ 990,138
============= ============= ============== =============
(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 $726,510 and $677,444 in the 2004 quarter and the 2003 quarter,
respectively, and $3,001,287 and $2,725,179 in the 2004 year-to-date
and 2003 year-to-date period, 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.