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
March 29, 1998
Date of Report (Date of earliest event reported)
APPLE SOUTH, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 0-19542
Georgia 59-2778983
(State of Incorporation) (I.R.S. Employer Identification No.)
Hancock at Washington
Madison, Georgia 30650
(Address of Principal Executive Offices and zip code)
Registrant's telephone number, including area code: (706) 342-4552
<PAGE>
ITEM 2. DISPOSITION OF ASSETS
On March 29, 1998, the Registrant completed the sale of 33 of its franchised
Applebee's Neighborhood Grill & Bar ("Applebee's") restaurants to Applebee's
International, Inc., the franchisor of Applebee's restaurants. The 33
restaurants are located in the Charlottesville, Norfolk, Richmond, and Roanoke,
Virginia markets. Total proceeds from the sale were $94.7 million in cash
reflecting $93.4 million for 32 restaurants, as originally disclosed in a Form
8-K filed by the Registrant on January 15, 1998, plus $1.3 million for one
additional restaurant and other routine closing adjustments. The consideration
for the sale was based on arm's-length negotiations between the parties. At
completion of the sale, the Registrant relinquished its rights to develop
Applebee's restaurants in these markets.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Statements.
Apple South, Inc.
Unaudited Pro Forma Consolidated Financial Statements
Basis of Presentation
The pro forma consolidated statement of earnings for the year ended December 28,
1997, presents the operating results of Apple South, Inc. (the "Company"),
excluding the operations of its Applebee's restaurants in the Norfolk, Richmond,
Roanoke, and Charlottesville, Virginia markets, as if such operations had been
disposed of at the beginning of the respective period. The pro forma
consolidated balance sheet has been prepared assuming the disposition took place
as of December 28, 1997.
The unaudited pro forma consolidated statement of earnings, balance sheet and
notes thereto should be read in conjunction with the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 28, 1997.
The unaudited pro forma information is not necessarily indicative of the
consolidated results of operations or the consolidated financial position that
would have resulted had the Applebee's restaurant disposition occurred as
described above, nor is it necessarily indicative of the results of operations
of future periods or future consolidated financial position.
Page 2
<PAGE>
<TABLE>
Apple South, Inc.
Pro Forma Consolidated Statement of Earnings
(In thousands, except per share data)
(Unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma
Year Ended Year Ended
December 28, Pro Forma December 28,
1997 Adjustments 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Restaurant sales:
Applebee's $ 454,127 (61,283)(B) 392,844
Don Pablo's 196,457 - 196,457
McCormick & Schmick's 67,373 - 67,373
Hops 49,511 - 49,511
Canyon Cafes 18,577 - 18,577
Harrigan's 19,560 - 19,560
Other 2,715 - 2,715
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 808,320 (61,283) 747,037
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 225,302 (16,555)(B) 208,747
Payroll and benefits 249,356 (17,095)(B) 232,261
Depreciation and amortization 31,441 (2,175)(B) 29,266
Other operating expenses 187,781 (12,522)(B) 175,259
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 693,880 (48,347) 645,533
- -----------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 39,617 (1,654)(B) 37,963
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 74,823 (11,282) 63,541
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (20,575) 4,671 (C) (15,904)
Distributions on preferred securities (6,412) - (6,412)
Interest income 71 - 71
Other, primarily goodwill amortization (5,834) 1 (B) (5,833)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (32,750) 4,672 (28,078)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 42,073 (6,610) 35,463
Income taxes 13,625 (2,140)(D) 11,485
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 28,448 (4,470) 23,978
====================================================================================================================================
Basic earnings per common share $ 0.74 0.62
=============================================================================================== ===============
Diluted earnings per common share $ 0.73 0.62
=============================================================================================== ===============
Average number of common shares used in basic calculation 38,620 38,620
=============================================================================================== ===============
Average number of common shares used in diluted calculation 44,927 44,927
=============================================================================================== ===============
See accompanying notes to unaudited pro forma consolidated financial statements.
</TABLE>
Page 3
<PAGE>
<TABLE>
Apple South, Inc
Pro Forma Consolidated Balance Sheet
(In thousands, except share data)
(Unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma
December 28, Pro Forma December 28,
1997 Adjustments 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,503 18,620 (A)
(45)(A) 21,078
Short-term investments 37 - 37
Accounts receivable 8,983 - 8,983
Inventories 10,732 (520)(A) 10,212
Prepaid expenses and other 9,047 (109)(A) 8,938
Assets held for sale 331,104 (35,545)(A) 295,559
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 362,406 (17,599) 344,807
Premises and equipment, net 283,839 - 283,839
Franchise costs, net - - -
Goodwill, net 138,403 - 138,403
Other assets 19,641 (151)(A) 19,490
- ------------------------------------------------------------------------------------------------------------------------------------
$ 804,289 (17,750) 786,539
====================================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 24,819 - 24,819
Accrued liabilities 40,266 - 40,266
Current installments of long-term debt 206 - 206
Income taxes - 18,620 (A) 18,620
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 65,291 18,620 83,911
Long-term debt 381,843 (66,730)(A) 315,113
Deferred income taxes 14,231 - 14,231
Other long-term liabilities 7,142 (20)(A) 7,122
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 468,507 (48,130) 420,377
- ------------------------------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable preferred securities of Apple South
Financing I, a subsidiary holding solely Apple South, Inc. 7% convertible
subordinated debentures due March 1, 2027 115,000 - 115,000
Shareholders' equity:
Preferred stock, $0.01 par value. Authorized 10,000,000 shares;
none issued - - -
Common stock, $0.01 par value. Authorized 75,000,000 shares;
40,478,760 issued in 1997 405 - 405
Additional paid-in capital 145,269 - 145,269
Retained earnings 97,905 30,380 (A) 128,285
Treasury stock at cost; 1,662,812 shares in 1997 (22,797) - (22,797)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 220,782 30,380 251,162
- ------------------------------------------------------------------------------------------------------------------------------------
$ 804,289 (17,750) 786,539
====================================================================================================================================
See accompanying notes to unaudited pro forma consolidated financial statements.
</TABLE>
Page 4
<PAGE>
Apple South, Inc.
Notes to Unaudited Pro Forma
Consolidated Financial Statements
Note A
Pursuant to an Asset Purchase Agreement (the "Agreement") dated December
23, 1997, the Company completed the sale of 33 of its franchised Applebee's
Neighborhood Grill & Bar restaurants on March 29, 1998. Proceeds from the sale
were $94.7 million in cash resulting in a pro forma gain on sale before tax
effect of $49.0 million ($30.4 million gain after tax effect).
The pro forma adjustment to long term debt reflects the assumption that the
proceeds would have been used to reduce long term debt related to the Company's
revolving credit agreements by $66.7 million, with the remaining proceeds
maintained as cash and cash equivalents.
The pro forma adjustment to income tax liability reflects the tax liability
relating to the gain on sale using a 38.0% effective rate.
The remaining pro forma adjustments to cash and cash equivalents,
inventories, prepaid expenses and other, assets held for sale, other assets and
other long-term liabilities reflects the sale of certain assets and assumption
of certain liabilities related to the Company's Applebee's restaurants pursuant
to the Agreement.
Note B
The pro forma adjustment eliminates the direct revenues and direct
operating expenses related to the 31 disposed Applebee's restaurants which were
in operation at December 28, 1997.
Note C
The pro forma adjustment to interest expense reflects the decrease in
interest expense resulting from the assumed use of sales proceeds to reduce
long-term debt related to the Company's revolving credit agreements by $66.7
million.
Note D
The pro forma adjustment to income taxes reflects the income tax effects of
the above adjustments assuming a 32.4% effective rate.
(c) Exhibits
2.1 Asset Purchase Agreement dated December 23, 1997 by and between
Applebee's International, Inc. and Apple South, Inc.*
*Incorporated by reference to Exhibit 2.1 to the Registrant's
8-K filed on January 15, 1998.
Page 5
<PAGE>
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 hereunto duly authorized.
APPLE SOUTH, INC.
(Registrant)
Date: April 13, 1998 By: /s/ Erich J. Booth
-------------------------------
Erich J. Booth
Chief Financial Officer and Treasurer
/s/ Philip L. Ammons
-------------------------------
Philip L. Ammons
Chief Accounting Officer
Page 6
<PAGE>
