UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 000-17962
Applebee's International, Inc.
--------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1461763
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4551 W. 107th Street, Suite 100, Overland Park, Kansas 66207
------------------------------------------------------------------------------
(Address of principal executive offices and zip code)
(913) 967-4000
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes[X] No [ ]
The number of shares of the registrant's common stock outstanding as of October
24, 1997 was 31,475,956.
1
<PAGE>
APPLEBEE'S INTERNATIONAL, INC.
FORM 10-Q
FISCAL QUARTER ENDED September 28, 1997
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of September 28, 1997
and December 29, 1996....................................... 3
Consolidated Statements of Earnings for the 13 Weeks and
26 Weeks Ended September 28, 1997 and September 29, 1997.... 4
Consolidated Statement of Stockholders' Equity for the
26 Weeks Ended September 28, 1997........................... 5
Consolidated Statements of Cash Flows for the 26 Weeks
Ended September 28, 1997 and September 29, 1997............. 6
Notes to Consolidated Financial Statements.................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................. 19
Item 6. Exhibits and Reports on Form 8-K.............................. 19
Signatures ................................................................. 20
Exhibit Index............................................................... 21
2
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
September 28, December 29,
1997 1996
------------- --------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................... $ 6,189 $ 17,346
Short-term investments, at market value (amortized cost of $5,420 in 1997
and $39,763 in 1996)...................................................... 5,575 40,064
Receivables (less allowance for bad debts of $277 in 1997 and $270 in 1996).. 15,180 19,245
Inventories.................................................................. 5,665 4,557
Prepaid and other current assets............................................. 2,982 2,780
------------- --------------
Total current assets...................................................... 35,591 83,992
Property and equipment, net....................................................... 259,320 196,950
Goodwill, net..................................................................... 48,532 22,607
Franchise interest and rights, net................................................ 4,810 5,236
Deferred income taxes............................................................. 989 1,366
Other assets...................................................................... 4,370 3,960
------------- --------------
$ 353,612 $ 314,111
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................................ $ 5,361 $ 968
Current portion of obligations under noncompetition and consulting agreement. 220 220
Accounts payable............................................................. 16,555 11,949
Accrued expenses and other current liabilities............................... 22,334 25,597
Accrued dividends............................................................ -- 2,191
Accrued income taxes......................................................... 892 918
------------- --------------
Total current liabilities................................................. 45,362 41,843
------------- --------------
Non-current liabilities:
Long-term debt - less current portion........................................ 23,660 24,435
Franchise deposits........................................................... 1,637 1,793
Obligations under noncompetition and consulting agreement - less current
portion -- 220
------------- --------------
Total non-current liabilities............................................. 25,297 26,448
------------- --------------
Total liabilities......................................................... 70,659 68,291
Minority interest in joint venture................................................ -- 1,056
Commitments and contingencies (Note 3)
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 - 31,737,585 shares in 1997 and 31,580,955 shares in 1996.......... 317 316
Additional paid-in capital................................................... 155,919 153,028
Retained earnings............................................................ 127,436 92,081
Unrealized gain on short-term investments, net of income taxes............... 97 188
------------- --------------
283,769 245,613
Treasury stock - 270,558 shares in 1997 and 281,772 shares in 1996, at cost.. (816) (849)
------------- --------------
Total stockholders' equity................................................ 282,953 244,764
------------- --------------
$ 353,612 $ 314,111
============= ==============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
--------------------------------- ---------------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Company restaurant sales.................... $ 117,607 $ 92,969 $ 333,225 $ 266,725
Franchise income............................ 16,260 14,105 47,586 39,975
--------------- --------------- --------------- ---------------
Total operating revenues................. 133,867 107,074 380,811 306,700
--------------- --------------- --------------- ---------------
Cost of Company restaurant sales:
Food and beverage........................... 32,228 26,172 91,610 75,072
Labor....................................... 37,914 29,027 106,040 84,178
Direct and occupancy........................ 28,884 22,049 83,325 65,377
Pre-opening expense......................... 864 865 2,276 2,039
--------------- --------------- --------------- ---------------
Total cost of Company restaurant sales... 99,890 78,113 283,251 226,666
--------------- --------------- --------------- ---------------
General and administrative expenses.............. 13,060 11,152 38,615 32,646
Amortization of intangible assets................ 913 570 2,338 1,728
Loss on disposition of restaurants and equipment. 262 183 746 722
--------------- --------------- --------------- ---------------
Operating earnings............................... 19,742 17,056 55,861 44,938
--------------- --------------- --------------- ---------------
Other income (expense):
Investment income........................... 180 694 1,559 2,092
Interest expense............................ (407) (363) (1,239) (1,243)
Other income................................ 58 205 296 510
--------------- --------------- --------------- ---------------
Total other income (expense)............. (169) 536 616 1,359
--------------- --------------- --------------- ---------------
Earnings before income taxes..................... 19,573 17,592 56,477 46,297
Income taxes..................................... 7,320 6,598 21,122 17,363
--------------- --------------- --------------- ---------------
Net earnings..................................... $ 12,253 $ 10,994 $ 35,355 $ 28,934
=============== =============== =============== ===============
Net earnings per common share.................... $ 0.39 $ 0.35 $ 1.13 $ 0.93
=============== =============== =============== ===============
Weighted average shares outstanding.............. 31,444 31,277 31,375 31,152
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
Common Stock Additional on Total
------------------------- Paid-In Retained Short-Term Treasury Stockholders'
Shares Amount Capital Earnings Investments Stock Equity
-------------- ---------- ----------- ------------ ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 29, 1996........ 31,580,955 $ 316 $153,028 $ 92,081 $ 188 $ (849) $244,764
Stock options exercised........ 156,630 1 2,121 -- -- -- 2,122
Shares sold under employee stock
purchase plan................ -- -- 222 -- -- 33 255
Income tax benefit upon exercise
of stock options............. -- -- 548 -- -- -- 548
Change in unrealized gain on
short-term investments,
net of income taxes.......... -- -- -- -- (91) -- (91)
Net earnings................... -- -- -- 35,355 -- -- 35,355
-------------- ---------- ----------- ------------ ------------ ---------- --------------
Balance, September 28, 1997...... 31,737,585 $ 317 $155,919 $127,436 $ 97 $ (816) $282,953
============== ========== =========== ============ ============ ========== ==============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
39 Weeks Ended
-----------------------------------
September 28, September 29,
1997 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................................. $ 35,355 $ 28,934
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization......................... 14,936 11,422
Amortization of intangible assets..................... 2,338 1,728
Loss on sale of investments........................... 52 34
Deferred income tax provision......................... 240 27
Loss on disposition of restaurants and equipment...... 746 722
Changes in assets and liabilities (exclusive
of effects of acquisitions):
Receivables........................................... 3,661 (2,789)
Inventories........................................... (943) 4,736
Prepaid and other current assets...................... (11) (1,341)
Accounts payable...................................... 4,606 4,493
Accrued expenses and other current liabilities........ (3,513) 861
Accrued income taxes.................................. (26) (1,542)
Franchise deposits.................................... (156) 604
Other................................................. (925) (551)
--------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES............. 56,360 47,338
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments...................... (13,609) (49,487)
Maturities and sales of short-term investments........... 47,883 25,849
Purchases of property and equipment...................... (67,604) (46,716)
Acquisition of restaurants............................... (33,650) --
Acquisition of minority interest in joint venture........ (1,275) --
Proceeds from sale of restaurants and equipment.......... 979 802
--------------- ---------------
NET CASH USED BY INVESTING ACTIVITIES................. (67,276) (69,552)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid........................................... (2,191) (1,861)
Issuance of common stock upon exercise of stock options.. 2,122 3,726
Income tax benefit upon exercise of stock options........ 548 1,220
Shares sold under employee stock purchase plan........... 255 --
Payments on long-term debt............................... (824) (796)
Payments under noncompetition and consulting agreement... (220) (220)
Minority interest in net earnings of joint venture....... 69 202
--------------- ---------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES...... (241) 2,271
--------------- ---------------
NET DECREASE IN CASH AND CASH EQUIVALENTS..................... (11,157) (19,943)
CASH AND CASH EQUIVALENTS, beginning of period................ 17,346 30,188
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period...................... $ 6,189 $ 10,245
=============== ===============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(Unaudited)
(dollars in thousands)
<TABLE>
39 Weeks Ended
-------------------------------------
September 28, September 29,
1997 1996
---------------- -----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the 39 week period for:
Income taxes........................................................ $ 20,175 $ 17,649
================ =================
Interest............................................................ $ 1,803 $ 1,031
================ =================
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Capitalized leases of $4,055,000 were recorded in April 1997 when the Company
acquired the operations and assets of 11 franchise restaurants. In connection
with this acquisition, the Company issued $2,500,000 of promissory notes.
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the consolidated statements of cash flows, the Company considers
all highly liquid investments purchased with a maturity of three months or less
to be cash equivalents.
See notes to consolidated financial statements.
7
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements of Applebee's International, Inc. and
subsidiaries (the "Company") included in this Form 10-Q have been prepared
without audit (except that the balance sheet information as of December 29, 1996
has been derived from consolidated financial statements which were audited) in
accordance with the rules and regulations of the Securities and Exchange
Commission. Although certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, the Company believes that
the disclosures are adequate to make the information presented not misleading.
The accompanying consolidated financial statements should be read in conjunction
with the audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 29,
1996.
The Company believes that all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of the interim
periods presented have been made. The results of operations for the interim
periods presented are not necessarily indicative of the results to be expected
for the full year.
2. Acquisitions
In February 1997, the Company exercised its option to purchase the remaining 50%
interest in a joint venture arrangement with its franchisee in Nevada for
$1,275,000.
On April 14, 1997, the Company acquired the operations of 11 franchise
Applebee's restaurants located in the St. Louis metropolitan area and the
related furniture and fixtures, certain land and leasehold improvements and
rights to future development of restaurants for a total purchase price of
$36,150,000. The purchase price was paid in a combination of $33,650,000 in cash
and $2,500,000 of promissory notes, of which $1,500,000 is payable in January
1998 and $1,000,000 is payable in December 1998. One of the principals of the
franchisee was related to a former director of the Company. The acquisition was
accounted for as a purchase, and accordingly, the purchase price has been
allocated to the fair value of net assets acquired and resulted in an allocation
to goodwill of approximately $27,000,000 which is being amortized on a
straight-line basis over 20 years. The results of operations of such restaurants
have been reflected in the consolidated financial statements subsequent to the
date of acquisition. Results of operations of such restaurants prior to
acquisition were not material in relation to the Company's operating results for
the periods shown.
3. Commitments and Contingencies
Litigation, claims and disputes: As of September 28, 1997, the Company was using
assets owned by a former franchisee in the operation of one restaurant under a
purchase rights agreement which required the Company to make certain payments to
the franchisee's lender. In 1991, a dispute arose between the lender and the
Company over the amount of the payments due the lender. Based upon a then
current independent appraisal, the Company offered to settle the dispute and
purchase the assets for $1,000,000 in 1991. In November 1992, the lender was
declared insolvent by the FDIC and has since been liquidated. The Company closed
8
<PAGE>
one of the three restaurants in 1994 and one of the two remaining restaurants in
February 1996. In the fourth quarter of 1996, the Company received information
indicating that the franchisee's indebtedness to the FDIC had been acquired by a
third party. In June 1997, the third party filed a lawsuit against the Company
seeking approximately $3,800,000. The Company believes it has meritorious
defenses and will vigorously defend this lawsuit. In the event that the Company
were to pay an amount determined to be in excess of the fair market value of the
assets, the Company will recognize a loss at the time of such payment.
In addition, the Company is involved in various legal actions arising in the
normal course of business. While the resolution of any of such actions or the
matter described above may have an impact on the financial results for the
period in which it is resolved, the Company believes that the ultimate
disposition of these matters will not, in the aggregate, have a material adverse
effect upon its business or consolidated financial position.
Franchise financing: The Company entered into an agreement in 1992 with a
financing source to provide up to $75,000,000 of financing to Company
franchisees to fund development of new franchise restaurants. The Company
provided a limited guaranty of loans made under the agreement. The Company's
maximum recourse obligation of 10% of the amount funded is reduced beginning in
the second year of each long-term loan and thereafter decreases ratably to zero
after the seventh year of each loan. At September 28, 1997, approximately
$48,000,000 had been funded through this financing source, of which
approximately $20,000,000 was outstanding. This agreement expired on December
31, 1994 and was not renewed, although some loan commitments as of the
termination date were thereafter funded through December 31, 1995.
Severance agreements: The Company has severance and employment agreements with
certain officers providing for severance payments to be made in the event the
employee resigns or is terminated related to a change in control (as defined in
the agreements). If the severance payments had been due as of September 28,
1997, the Company would have been required to make payments aggregating
approximately $5,200,000. In addition, the Company has severance and employment
agreements with certain officers which contain severance provisions not related
to a change in control, and such provisions would have required aggregate
payments of approximately $4,000,000 if such officers had been terminated as of
September 28, 1997.
4. New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share." SFAS 128
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock. This statement is effective
for fiscal periods ending after December 15, 1997, and early adoption is not
permitted. The Company will adopt the provisions of SFAS 128 for its fiscal year
ending December 28, 1997. In addition to the Company's current presentation of
net earnings per share, this statement will require the Company to present
diluted net earnings per share, which includes the dilutive effect of stock
options. However, the Company does not believe the additional disclosure of
diluted net earnings per share will materially impact the financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards for reporting
and display of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial statements. This
9
<PAGE>
statement is effective for fiscal periods beginning after December 15, 1997. The
Company does not believe the reporting and display of comprehensive income will
materially impact the financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS 131
establishes standards for the way public business enterprises report information
about operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. This statement is effective for financial statements for periods
beginning after December 15, 1997. In the initial period of application,
comparative information for earlier periods is to be restated. This statement
need not be applied to interim financial statements in the initial period of its
application, but comparative information for interim periods in the initial
period of application is to be reported in financial statements for interim
periods in the second year of application.
5. Employee Benefit Plans
During 1996, the Company established an employee stock purchase plan in
accordance with Section 423 of the Internal Revenue Code. This plan was approved
at the 1997 Annual Meeting of Stockholders. The plan allows employees to
purchase shares of the Company's common stock at a 10% discount through payroll
deductions. The number of common shares authorized pursuant to the plan is
200,000.
6. Financing
During 1995, the Company obtained a $20,000,000 unsecured bank revolving credit
facility which was to expire on December 31, 1997. In September 1997, the terms
of the facility were amended to extend the expiration date to December 31, 1998.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Company's revenues are generated from two primary sources: Company
restaurant sales (food and beverage sales) and franchise income consisting of
franchise restaurant royalties (generally 4% of each franchise restaurant's
monthly gross sales) and franchise fees (which typically range from $30,000 to
$35,000 for each Applebee's restaurant opened and $40,000 for each Rio Bravo
Cantina restaurant opened). Beverage sales include sales of alcoholic beverages,
while non-alcoholic beverages are included in food sales. Certain expenses (food
and beverage, labor, direct and occupancy costs, and pre-opening expenses)
relate directly to Company restaurants, and other expenses (general and
administrative and amortization expenses) relate to both Company restaurants and
franchise operations.
The Company operates on a 52 or 53 week fiscal year ending on the last Sunday in
December. The Company's fiscal quarters ended September 28, 1997 and September
29, 1996 each contained 13 weeks, and are referred to hereafter as the "1997
quarter" and the "1996 quarter," respectively. The 39 week periods ended
September 28, 1997 and September 29, 1996 are referred to hereafter as the "1997
year-to-date period" and the "1996 year-to-date period," respectively.
On April 14, 1997, the Company acquired the operations and assets of 11
franchise restaurants in the St. Louis metropolitan area, referred to herein as
the "St. Louis Acquisition." The St. Louis Acquisition was accounted for as a
purchase, and accordingly, the results of operations of such restaurants have
been reflected in the consolidated financial statements subsequent to the date
of acquisition.
11
<PAGE>
Results of Operations
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.
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
------------------------------- -------------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Company restaurant sales........................... 87.9% 86.8% 87.5% 87.0%
Franchise income................................... 12.1 13.2 12.5 13.0
--------------- --------------- --------------- ---------------
Total operating revenues........................ 100.0% 100.0% 100.0% 100.0%
=============== =============== =============== ===============
Cost of sales (as a percentage of Company restaurant sales):
Food and beverage.................................. 27.4% 28.2% 27.5% 28.1%
Labor.............................................. 32.2 31.2 31.8 31.6
Direct and occupancy............................... 24.6 23.7 25.0 24.5
Pre-opening expense................................ 0.7 0.9 0.7 0.8
--------------- --------------- --------------- ---------------
Total cost of sales............................. 84.9% 84.0% 85.0% 85.0%
=============== =============== =============== ===============
General and administrative expenses..................... 9.8% 10.4% 10.1% 10.6%
Amortization of intangible assets....................... 0.7 0.5 0.6 0.6
Loss on disposition of restaurants and equipment........ 0.2 0.2 0.2 0.2
--------------- --------------- --------------- ---------------
Operating earnings...................................... 14.7 15.9 14.7 14.7
--------------- --------------- --------------- ---------------
Other income (expense):
Investment income.................................. 0.1 0.6 0.4 0.7
Interest expense................................... (0.3) (0.3) (0.3) (0.4)
Other income....................................... 0.1 0.2 0.1 0.2
--------------- --------------- --------------- ---------------
Total other income (expense).................... (0.1) 0.5 0.2 0.5
--------------- --------------- --------------- ---------------
Earnings before income taxes............................ 14.6 16.4 14.8 15.1
Income taxes............................................ 5.5 6.2 5.5 5.7
--------------- --------------- --------------- ---------------
Net earnings............................................ 9.2% 10.3% 9.3% 9.4%
=============== =============== =============== ===============
</TABLE>
12
<PAGE>
The following table sets forth certain unaudited financial information and other
restaurant data relating to Company and franchise restaurants, as reported to
the Company by franchisees.
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
------------------------------- -------------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Number of restaurant openings:
Applebee's:
Company....................................... 7 7 15 18
Franchise..................................... 30 35 77 102
--------------- --------------- --------------- ---------------
Total Applebee's.............................. 37 42 92 120
--------------- --------------- --------------- ---------------
Rio Bravo Cantinas:
Company....................................... 2 2 8 3
Franchise..................................... 5 2 14 3
--------------- --------------- --------------- ---------------
Total Rio Bravo Cantinas...................... 7 4 22 6
--------------- --------------- --------------- ---------------
Restaurants open (end of period):
Applebee's:
Company(1).................................... 173 144 173 144
Franchise..................................... 735 637 735 637
--------------- --------------- --------------- ---------------
Total Applebee's.............................. 908 781 908 781
--------------- --------------- --------------- ---------------
Rio Bravo Cantinas:
Company....................................... 29 19 29 19
Franchise..................................... 23 3 23 3
--------------- --------------- --------------- ---------------
Total Rio Bravo Cantinas...................... 52 22 52 22
Specialty restaurants............................. 4 4 4 4
--------------- --------------- --------------- ---------------
Total............................................. 964 807 964 807
=============== =============== =============== ===============
Weighted average weekly sales per restaurant:
Applebee's:
Company (1)................................... $ 41,476 $ 40,870 $ 41,705 $ 40,684
Franchise..................................... $ 39,428 $ 40,322 $ 40,294 $ 40,526
Total Applebee's.............................. $ 39,818 $ 40,423 $ 40,556 $ 40,556
Rio Bravo Cantinas:...............................
Company(2).................................... $ 62,123 $ 69,511 $ 64,241 $ 69,968
Franchise(3) ................................. $ 51,269 $ -- $ 52,685 $ --
Total Rio Bravo Cantinas(3)................... $ 57,494 $ -- $ 59,744 $ --
Change in comparable restaurant sales:(4)
Applebee's:
Company (1)................................... (0.8)% 0.8 % 0.2 % 1.3 %
Franchise..................................... (0.6)% (1.3)% 1.0 % (1.3)%
Total Applebee's.............................. (0.7)% (0.9)% 0.9 % (0.8)%
Rio Bravo Cantinas (Company)...................... (3.0)% 5.8 % (1.0)% 4.2 %
Total system sales (in thousands):
Applebee's........................................ $ 460,734 $ 398,695 $ 1,359,815 $ 1,139,774
Rio Bravo Cantinas................................ $ 36,127 $ 16,696 $ 94,473 $ 46,339
<FN>
- --------
(1) Includes one Texas restaurant operated by the Company under a management
agreement since July 1990.
(2) Excludes one restaurant which is open for dinner only.
(3) Weighted average weekly sales for franchise Rio Bravo Cantinas for the 1996
quarter and year-to-date period are not meaningful as only three
restaurants were open, of which two had been open for less than three
weeks.
(4) When computing comparable restaurant sales, restaurants open for at least
18 months are compared from period to period.
</FN>
</TABLE>
13
<PAGE>
Company Restaurant Sales. Company restaurant sales for the 1997 and 1996
quarters and the 1997 and 1996 year-to-date periods were as follows (in
thousands):
<TABLE>
<CAPTION>
13 Weeks Ended
---------------------------------------
September 28, September 29, Increase
1997 1996 (Decrease)
------------- ------------- ----------
<S> <C> <C> <C>
Applebee's........................ $ 91,413 $ 73,760 $ 17,653
Rio Bravo Cantinas................ 22,591 15,396 7,195
Specialty restaurants............. 3,603 3,813 (210)
------------- ------------- ----------
Total............................. $ 117,607 $ 92,969 $ 24,638
============= ============= ==========
39 Weeks Ended
---------------------------------------
September 28, September 29, Increase
1997 1996 (Decrease)
------------- ------------- ----------
Applebee's........................ $ 259,740 $ 211,390 $ 48,350
Rio Bravo Cantinas................ 62,651 44,384 18,267
Specialty restaurants............. 10,834 10,951 (117)
------------- ------------- ----------
Total........................ $ 333,225 $ 266,725 $ 66,500
============= ============= ==========
</TABLE>
Total Company restaurant sales increased 27% and 25% in the 1997 quarter and the
1997 year-to-date period, respectively. Sales increased 24% and 23% for
Applebee's restaurants in the 1997 quarter and the 1997 year-to-date period,
respectively, due primarily to Company restaurant openings and sales from the 11
St. Louis restaurants acquired in April 1997. Sales increased 47% and 41% for
Rio Bravo Cantina restaurants in the 1997 quarter and the 1997 year-to-date
period, respectively, due to Company restaurant openings.
Comparable restaurant sales at Company Applebee's restaurants decreased by 0.8%
in the 1997 quarter as compared to the 1996 quarter. The Company believes this
decrease was due, in part, to reduced levels of advertising spending in the
latter half of the summer promotion while the implementation of its food and
menu enhancement initiative was in process. The implementation of this
initiative is expected to be fully completed in all Applebee's restaurants by
the end of November 1997. Comparable restaurant sales at Company Applebee's
restaurants increased by 0.2% in the 1997 year-to-date period due partially to
lower sales in early 1996, which were negatively impacted by extremely harsh
winter weather. Weighted average weekly sales at Company Applebee's restaurants
increased 1.5% from $40,870 in the 1996 quarter to $41,476 in the 1997 quarter
and increased 2.5% from $40,684 in the 1996 year-to-date period to $41,705 in
the 1997 year-to-date period. Comparable restaurant sales and weighted average
weekly sales at Company Applebee's restaurants in both the 1997 quarter and the
1997 year-to-date period were positively affected by a menu price increase that
was implemented during the fourth quarter of 1996 for certain menu items. In
addition, weighted average weekly sales in the 1997 quarter and the 1997
year-to-date period increased as a result of the sale of six lower than average
volume restaurants in southern California in October 1996 and the purchase of 11
higher than average volume restaurants in St. Louis in April 1997. Excluding
these restaurants, weighted average weekly sales decreased 1.4% in the 1997
quarter and increased 0.1% in the 1997 year-to-date period.
A menu price increase was implemented at the end of the 1997 quarter for certain
menu items. The Company does not expect significant comparable restaurant sales
increases and may experience comparable restaurant sales decreases for the
remainder of the 1997 fiscal year for Company Applebee's restaurants, as many of
14
<PAGE>
its restaurants operate near sales capacity and various markets continue to
experience competitive pressures. Although the Company's experience in
developing markets indicates that the opening of multiple restaurants within a
particular market results in increased market share, decreases in comparable
restaurant sales may result.
Comparable restaurant sales for Company Rio Bravo Cantina restaurants decreased
by 3.0% in the 1997 quarter and by 1.0% in the 1997 year-to-date period due
primarily to increased competition in the Atlanta market. In addition, sales in
the Atlanta market were positively impacted in the 1996 quarter as a result of
the 1996 Olympics. Weighted average weekly sales (excluding one restaurant that
is open for dinner only) decreased from $69,511 in the 1996 quarter to $62,123
in the 1997 quarter and from $69,968 in the 1996 year-to-date period to $64,241
in the 1997 year-to-date period. Weighted average weekly sales in the 1997
quarter and the 1997 year-to-date period were impacted by the ten new Company
restaurants which have opened since the end of the 1996 quarter; five of these
restaurants were in new markets. When entering new markets where the Company has
not yet established a market presence, sales levels are expected to be lower
than in the Georgia and Florida markets where the Company has a concentration of
Rio Bravo Cantina restaurants and high customer awareness.
Franchise Income. Overall franchise income increased $2,155,000 (15%) from
$14,105,000 in the 1996 quarter to $16,260,000 in the 1997 quarter and increased
$7,611,000 (19%) from $39,975,000 in the 1996 year-to-date period to $47,586,000
in the 1997 year-to-date period. Such increases were due primarily to the
increased number of franchise Applebee's and Rio Bravo Cantina restaurants
operating during the 1997 quarter and 1997 year-to-date period as compared to
the 1996 quarter and 1996 year-to-date period. In addition, comparable
restaurant sales for franchise Applebee's restaurants increased by 1.0% in the
1997 year-to-date period. Such increases were partially offset by a decrease of
0.6% in comparable restaurant sales in the 1997 quarter and decreases in
weighted average weekly sales for franchise Applebee's restaurants of 2.2% and
0.6% in the 1997 quarter and the 1997 year-to-date period, respectively.
Cost of Company Restaurant Sales. Food and beverage costs decreased from 28.2%
and 28.1% in the 1996 quarter and the 1996 year-to-date period, respectively, to
27.4% and 27.5% in the 1997 quarter and the 1997 year-to-date period,
respectively, due primarily to operational improvements, purchasing efficiencies
resulting from the Company's rapid growth, and the menu price increase
implemented in the fourth quarter of 1996. Such decreases were partially offset
by an increase in food costs during the implementation of the Company's food and
menu initiative. Beverage sales, as a percentage of Company restaurant sales,
declined from 17.8% and 18.4% in the 1996 quarter and the 1996 year-to-date
period, respectively, to 17.4% and 17.9% in the 1997 quarter and the 1997
year-to-date period, respectively, which had a negative impact on overall food
and beverage costs. Management believes that the reduction in beverage sales is
due in part to the continuation of the overall trend toward increased awareness
of responsible alcohol consumption.
Labor costs increased from 31.2% and 31.6% in the 1996 quarter and the 1996
year-to-date period, respectively, to 32.2% and 31.8% in the 1997 quarter and
the 1997 year-to-date period, respectively. Such increases were due primarily to
the short-term negative impact on restaurant labor costs during, and for
approximately 60 days following, the implementation of the Company's food and
menu enhancement initiative in its Applebee's restaurants. The Company expects
labor costs, as a percentage of sales, to be temporarily impacted during the
remainder of the 1997 fiscal year as a result of this implementation. In
addition, the 1997 quarter and the 1997 year-to-date period were negatively
15
<PAGE>
impacted by an increase in group medical insurance costs. An increase in the
Federal minimum wage went into effect on October 1, 1996 and a second increase
became effective on September 1, 1997. Increases in the minimum wage as well as
the highly competitive nature of the restaurant industry continue to exert
pressure on both hourly labor and management costs.
Direct and occupancy costs increased from 23.7% and 24.5% in the 1996 quarter
and the 1996 year-to-date period, respectively, to 24.6% and 25.0% in the 1997
quarter and the 1997 year-to-date period, respectively. Such increases were due,
in part, to the new plateware costs relating to the Company's food and menu
enhancement initiative in its Applebee's restaurants. The Company expects direct
and occupancy costs, as a percentage of sales, to be temporarily impacted during
the remainder of the 1997 fiscal year as a result of this initiative. In
addition, such increases were partially due to an increase in rent expense
resulting from a higher proportion of leased properties and higher depreciation
expense associated with new restaurants.
General and Administrative Expenses. General and administrative expenses
decreased from 10.4% and 10.6% in the 1996 quarter and 1996 year-to-date period,
respectively, to 9.8% and 10.1% in the 1997 quarter and 1997 year-to-date
period, respectively, due primarily to the absorption of general and
administrative expenses over a larger revenue base as well as the additional
leverage resulting from the St. Louis Acquisition. A portion of the decrease in
the 1997 quarter was due to a decrease in executive bonuses. General and
administrative expenses increased by $1,908,000 and $5,969,000 during the 1997
quarter and 1997 year-to-date period, respectively, compared to the 1996 quarter
and 1996 year-to-date period, respectively, due primarily to the costs of
additional personnel associated with the Company's development efforts and
system-wide expansion, including costs related to the franchising and expansion
of the Rio Bravo Cantina concept.
Income Taxes. The effective income tax rate, as a percentage of earnings before
income taxes, was 37.4% in both the 1997 quarter and 1997 year-to-date period,
compared to 37.5% in both the 1996 quarter and the 1996 year-to-date period.
Liquidity and Capital Resources
The Company's need for capital resources historically has resulted from, and for
the foreseeable future is expected to relate primarily to, the construction and
acquisition of restaurants. Such capital has been provided by public stock
offerings, debt financing, and ongoing Company operations, including cash
generated from Company and franchise operations, credit from trade suppliers,
real estate lease financing, and landlord contributions to leasehold
improvements. The Company has also used its common stock as consideration in the
acquisition of restaurants. In addition, the Company assumed debt or issued new
debt in connection with certain mergers and acquisitions.
Capital expenditures were $65,672,000 in fiscal year 1996 and $105,029,000 in
the 1997 year-to-date period (which includes $36,150,000 related to the St.
Louis Acquisition and $1,275,000 related to the purchase of the remaining 50%
interest in a joint venture arrangement with the Company's franchisee in
Nevada). The Company presently anticipates capital expenditures of between
$125,000,000 and $130,000,000 in 1997 and between $90,000,000 and $95,000,000 in
1998 primarily for the development of new restaurants, acquisitions of
restaurants, refurbishments of and capital replacements for existing
restaurants, and enhancements to information systems for the Company's
restaurants and corporate office. The Company currently expects to open
approximately 32 Applebee's restaurants and ten Rio Bravo Cantina restaurants in
1997 and 32 Applebee's restaurants and 13 Rio Bravo Cantina restaurants in 1998.
16
<PAGE>
The amount of actual capital expenditures will be dependent upon, among other
things, the proportion of leased versus owned properties as the Company expects
to continue to purchase a portion of its sites. In addition, if the Company
opens more restaurants than it currently anticipates or acquires additional
restaurants, its capital requirements will increase accordingly.
The Company has certain debt agreements containing various covenants and
restrictions which, among other things, require the maintenance of a stipulated
fixed charge coverage ratio and minimum consolidated net worth, as defined, and
also limit additional indebtedness in excess of specified amounts. The debt
agreements also restrict the amount of retained earnings available for the
payment of cash dividends. At September 28, 1997, retained earnings were not
restricted for the payment of cash dividends. The Company is currently in
compliance with the covenants of all of its debt agreements.
During 1995, the Company obtained a $20,000,000 unsecured bank revolving credit
facility which was to expire on December 31, 1997. In September 1997, the terms
of the facility were amended to extend the expiration date to December 31, 1998.
As of September 28, 1997, the Company held liquid assets totaling $11,764,000,
consisting of cash and cash equivalents ($6,189,000) and short-term investments
($5,575,000). No amounts were outstanding under the revolving credit facility;
however, standby letters of credit issued under the facility totaling $1,652,000
were outstanding as of September 28, 1997. The Company believes that its liquid
assets and cash generated from operations, combined with borrowings available
under its $20,000,000 revolving credit facility, will provide sufficient funds
for its capital requirements for the foreseeable future.
Inflation
Substantial increases in costs and expenses, particularly food, supplies, labor
and operating expenses, could have a significant impact on the Company's
operating results to the extent that such increases cannot be passed along to
customers. The Company does not believe that inflation has materially affected
its operating results during the past three years.
A majority of the Company's employees are paid hourly rates related to federal
and state minimum wage laws and various laws that allow for credits to that
wage. An increase in the Federal minimum wage went into effect on October 1,
1996 and a second increase became effective on September 1, 1997. In addition,
increases in the minimum wage are also being discussed by various state
governments. Although the Company has been able to and will continue to attempt
to pass along increases in costs through food and beverage price increases,
there can be no assurance that all such increases can be reflected in its prices
or that increased prices will be absorbed by customers without diminishing, to
some degree, customer spending at its restaurants.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share." SFAS 128
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock. This statement is effective
for fiscal periods ending after December 15, 1997 and early adoption is not
permitted. The Company will adopt the provisions of SFAS 128 for its fiscal year
ending December 28, 1997. In addition to the Company's current presentation of
net earnings per share, this statement will require the Company to present
17
<PAGE>
diluted net earnings per share, which includes the dilutive effect of stock
options. However, the Company does not believe the additional disclosure of
diluted net earnings per share will materially impact the financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards for reporting
and display of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial statements. This
statement is effective for fiscal periods beginning after December 15, 1997. The
Company does not believe the reporting and display of comprehensive income will
materially impact the financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS 131
establishes standards for the way public business enterprises report information
about operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. This statement is effective for financial statements for periods
beginning after December 15, 1997. In the initial period of application,
comparative information for earlier periods is to be restated. This statement
need not be applied to interim financial statements in the initial period of its
application, but comparative information for interim periods in the initial
period of application is to be reported in financial statements for interim
periods in the second year of application.
Forward-Looking Statements
The statements contained herein regarding future restaurant development and
capital expenditures 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. For a discussion of the principal
factors that could cause actual results to be materially different, refer to the
Company's current report on Form 8-K filed with the Securities and Exchange
Commission on October 7, 1997.
18
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As of September 28, 1997, the Company was using assets owned by a former
franchisee in the operation of one restaurant under a purchase rights agreement
which required the Company to make certain payments to the franchisee's lender.
In 1991, a dispute arose between the lender and the Company over the amount of
the payments due the lender. Based upon a then current independent appraisal,
the Company offered to settle the dispute and purchase the assets for $1,000,000
in 1991. In November 1992, the lender was declared insolvent by the FDIC and has
since been liquidated. The Company closed one of the three restaurants in 1994
and one of the two remaining restaurants in February 1996. In the fourth quarter
of 1996, the Company received information indicating that the franchisee's
indebtedness to the FDIC had been acquired by a third party. In June 1997, the
third party filed a lawsuit against the Company seeking approximately
$3,800,000. The Company believes it has meritorious defenses and will vigorously
defend this lawsuit. In the event that the Company were to pay an amount
determined to be in excess of the fair market value of the assets, the Company
will recognize a loss at the time of such payment
In addition, the Company is involved in various legal actions arising in the
normal course of business. While the resolution of any of such actions or the
matter described above may have an impact on the financial results for the
period in which it is resolved, the Company believes that the ultimate
disposition of these matters will not, in the aggregate, have a material adverse
effect upon its business or consolidated financial position.
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits listed on the accompanying Exhibit Index are filed as part of
this report.
(b) The Company did not file any reports on Form 8-K during the quarter ended
September 28, 1997.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: October 29, 1997 By: /s/ Abe J. Gustin, Jr.
----------------------- --------------------------
Abe J. Gustin, Jr.
Chairman and Co-Chief Executive Officer
Date: October 29, 1997 By: /s/ Lloyd L. Hill
----------------------- ---------------------
Lloyd L. Hill
Co-Chief Executive Officer, President
and Chief Operating Officer
Date: October 29, 1997 By: /s/ George D. Shadid
----------------------- ------------------------
George D. Shadid
Executive Vice President and
Chief Financial Officer
(principal financial officer)
Date: October 29, 1997 By: /s/ Mark A. Peterson
----------------------- ------------------------
Mark A. Peterson
Vice President and Controller
(principal accounting officer)
16
<PAGE>
APPLEBEE'S INTERNATIONAL, INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------------- -------------------------------------------------
10.1 First Amendment to Unsecured Credit Agreement.
27 Financial Data Schedule.
FIRST AMENDMENT TO UNSECURED CREDIT AGREEMENT
THIS First Amendment is made as of this 26th day of September, 1997 to
that certain Unsecured Credit Agreement by and among Applebee's International,
Inc., UMB Bank, n.a., NBD Bank and UMB Bank, n.a., as agent, dated as of
February 1, 1995 (the "Agreement").
WHEREAS, Applebee's International, Inc., (hereinafter the"Company") has
requested UMB Bank, n.a. ("UMB") and NBD Bank ("NBD") (UMB and NBD being
sometimes collectively referred to herein as the "Banks") to extend the term of
the Agreement from December 31, 1997 to December 31, 1998; and
WHEREAS, the Banks are willing to so extend the term of such Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties mutually agree as follows:
1. The definition of "Revolving Credit Maturity Date" set forth in
Section 1.2 of the Agreement is hereby amended to mean December 31, 1998.
2. Exhibits D-1 and D-2 to the Agreement are also hereby amended to
state the date for payment of sums payable thereon to be December 31, 1998
instead of December 31, 1997, and new notes as renewals of the existing notes
evidenced by Exhibits D-1 and D-2 to the Agreement showing the December 31, 1998
maturity date shall be executed and delivered by the Company to the Banks as of
the date of this Agreement.
3. All terms and conditions of the Agreement and all exhibits thereto
not expressly amended hereby shall remain in full force and effect as if this
First Amendment to the Agreement had not been executed.
4. Statutory Statement. (Mo. Rev. Stat. ss. 432.045)
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING PAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW
SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT THE COMPANY AND THE BANKS FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING AND THE DOCUMENTS REFERRED TO HEREIN,
WHICH ARE THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US,
EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
<PAGE>
5. NOTICE. THIS AGREEMENT IS THE FINAL EXPRESSION OF THE CREDIT
AGREEMENT BETWEEN THE BORROWER (THE COMPANY) AND THE BANKS, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR OR CONTEMPORANEOUS ORAL CREDIT AGREEMENT
BETWEEN THE BORROWER (THE COMPANY) AND THE BANKS. IF THERE ARE ANY ADDITIONAL
TERMS, THEY ARE REDUCED TO WRITING AS FOLLOWS: _________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
I/WE AFFIRM THAT NO UNWRITTEN ORAL AGREEMENT EXISTS BETWEEN THE
BORROWER (THE COMPANY) AND THE BANKS.
BANKS BORROWER (THE COMPANY)
UMB BANK, n.a. Applebee's International, Inc.
By: /s/ Terry Dierks By: /s/ George D. Shadid
-------------------------- ---------------------------
NBD Bank
By: /s/ Thomas A. Levasseur
--------------------------
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers duly authorized as of the date first
written above.
APPLEBEE'S INTERNATIONAL, INC.
By: /s/ George D. Shadid
--------------------------
UMB Bank, n.a. NBD Bank
Individually and as Agent
By: /s/ Terry Dierks By: /s/ Thomas A. Levasseur
-------------------------- ---------------------------
2
<PAGE>
EXHIBIT D-1
MASTER REVOLVING CREDIT NOTE
$12,000,000.00 and Interest September 26, 1997
PAYMENTS, DISBURSEMENTS AND INTEREST
FOR VALUE RECEIVED, the undersigned promises to pay to the order of the
UMB Bank, n.a., Kansas City, Missouri (hereinafter called "Bank"), at its main
office, on December 31, 1998 the principal sum of Twelve Million and no/100
Dollars ($12,000,000.00) or such other lesser amount as shall be noted on the
Schedule of Disbursements and Payments of Principal and Interest included herein
or attached hereto pursuant to the authority set forth herein, together with
interest on the unpaid principal balance hereof from time to time outstanding
from date(s) of disbursement(s) until paid, at the rate or rates as provided in
that certain Unsecured Credit Agreement between the undersigned, the Bank and
others dated as of February 1, 1995, as amended through the date hereof
("Agreement") the provisions of which are incorporated herein by reference, and
adjusted from time to time as provided in said Agreement, with all accrued
interest payable as set forth in the Agreement. Interest hereunder shall be
computed as set forth in the Agreement. Unless provided in the Agreement to the
contrary, all payments shall be applied first to payment of accrued interest,
and then to reduction of the principal sum due hereunder. This note shall bear
interest after maturity, whether by reason of acceleration or otherwise, at a
rate of interest equal to two percent (2%) in excess of the rate otherwise then
in effect until paid in full or cured and such interest shall be compounded
annually if not paid annually. All or any part of the outstanding principal
balance hereof may be paid prior to maturity and the undersigned may from time
to time until maturity receive, except as limited by said Agreement, further
disbursements hereunder; provided, however, the aggregate amount of all
principal amounts outstanding hereunder shall at no time exceed the face amount
hereof; and provided further, that each and every disbursement made under this
MASTER REVOLVING CREDIT NOTE shall be made pursuant to and governed by the terms
of the Agreement. The principal amount due hereunder shall be the last amount
stated to be the Unpaid Principal Balance of Note on the Schedule of
Disbursements and Payments of Principal and Interest and the undersigned hereby
authorize(s) any officer of the Bank to make notations on the Schedule of
Disbursements and Payments of Principal and Interest from time to time to
evidence payments and disbursements hereunder. The statements on such schedule
shall be rebuttably presumed to be correct. The Bank is hereby directed by the
undersigned to credit all future advances in the manner provided for in the
Agreement and the undersigned agrees that the Bank or holder hereof may make
advances, at its discretion, upon oral or written instructions of the
undersigned, or any other person(s) duly authorized by the undersigned.
ACCELERATION AND EVENTS OF DEFAULT
Upon the occurrence of any of the events of default defined in Section
7 of the Agreement, the provisions of which are hereby incorporated by
reference, then this note and all other obligations of the undesigned to the
holder shall, subject to the terms of Section 8 of the Agreement, immediately
become due and payable in full in accordance with the terms of said Agreement.
<PAGE>
MISSOURI LAW
The interpretation of this instrument and the rights and remedies of
the parties hereto shall be governed by the laws of the State of Missouri.
COLLECTION EXPENSES
To the extent permitted by applicable law, the undersigned agrees to
pay all expenses of the holder in collecting this note and enforcing all rights
with respect hereto including reasonable attorneys' fees.
DEMAND, NOTICE, ENDORSERS, GUARANTORS AND SURETIES
Demand for payment, notice of nonpayment, protest, dishonor, diligence
and suit are hereby waived by all parties liable hereon.
NO WAIVERS
Any failure by the holder hereof to exercise any right hereunder shall
not be construed as a waiver of the right to exercise the same or any other
right at any other time and from time to time thereafter.
HEADINGS
All headings or titles appearing in this note are used as a matter of
convenience only and shall not affect the interpretation of the provisions
hereof.
RENEWAL NOTE
This note renews that certain promissory note between the parties
hereto dated February 17, 1995 which was executed and delivered pursuant to the
Agreement and extends the maturity of the obligations covered thereby until
December 31, 1998.
APPLEBEE'S INTERNATIONAL, INC.
By: /s/ George D. Shadid
---------------------------
<PAGE>
EXHIBIT D-2
MASTER REVOLVING CREDIT NOTE
$8,000,000.00 and Interest September 26, 1997
PAYMENTS, DISBURSEMENTS AND INTEREST
FOR VALUE RECEIVED, the undersigned promises to pay to the order of the
NBD Bank, Detroit, Michigan (hereinafter called "Bank"), at its main office, on
December 31, 1998 the principal sum of Eight Million and no/100 Dollars
($8,000,000.00) or such other lesser amount as shall be noted on the Schedule of
Disbursements and Payments of Principal and Interest included herein or attached
hereto pursuant to the authority set forth herein, together with interest on the
unpaid principal balance hereof from time to time outstanding from date(s) of
disbursement(s) until paid, at the rate or rates as provided in that certain
Unsecured Credit Agreement between the undersigned, the Bank and others dated as
of February 1, 1995, as amended through the date hereof ("Agreement") the
provisions of which are incorporated herein by reference, and adjusted from time
to time as provided in said Agreement, with all accrued interest payable as set
forth in the Agreement. Interest hereunder shall be computed as set forth in the
Agreement. Unless provided in the Agreement to the contrary, all payments shall
be applied first to payment of accrued interest, and then to reduction of the
principal sum due hereunder. This note shall bear interest after maturity,
whether by reason of acceleration or otherwise, at a rate of interest equal to
two percent (2%) in excess of the rate otherwise then in effect until paid in
full or cured and such interest shall be compounded annually if not paid
annually. All or any part of the outstanding principal balance hereof may be
paid prior to maturity and the undersigned may from time to time until maturity
receive, except as limited by said Agreement, further disbursements hereunder;
provided, however, the aggregate amount of all principal amounts outstanding
hereunder shall at no time exceed the face amount hereof; and provided further,
that each and every disbursement made under this MASTER REVOLVING CREDIT NOTE
shall be made pursuant to and governed by the terms of the Agreement. The
principal amount due hereunder shall be the last amount stated to be the Unpaid
Principal Balance of Note on the Schedule of Disbursements and Payments of
Principal and Interest and the undersigned hereby authorize(s) any officer of
the Bank to make notations on the Schedule of Disbursements and Payments of
Principal and Interest from time to time to evidence payments and disbursements
hereunder. The statements on such schedule shall be rebuttably presumed to be
correct. The Bank is hereby directed by the undersigned to credit all future
advances in the manner provided for in the Agreement and the undersigned agrees
that the Bank or holder hereof may make advances, at its discretion, upon oral
or written instructions of the undersigned, or any other person(s) duly
authorized by the undersigned.
ACCELERATION AND EVENTS OF DEFAULT
Upon the occurrence of any of the events of default defined in Section
7 of the Agreement, the provisions of which are hereby incorporated by
reference, then this note and all other obligations of the undesigned to the
holder shall, subject to the terms of Section 8 of the Agreement, immediately
become due and payable in full in accordance with the terms of said Agreement.
<PAGE>
MISSOURI LAW
The interpretation of this instrument and the rights and remedies of
the parties hereto shall be governed by the laws of the State of Missouri.
COLLECTION EXPENSES
To the extent permitted by applicable law, the undersigned agrees to
pay all expenses of the holder in collecting this note and enforcing all rights
with respect hereto including reasonable attorneys' fees.
DEMAND, NOTICE, ENDORSERS, GUARANTORS AND SURETIES
Demand for payment, notice of nonpayment, protest, dishonor, diligence
and suit are hereby waived by all parties liable hereon.
NO WAIVERS
Any failure by the holder hereof to exercise any right hereunder shall
not be construed as a waiver of the right to exercise the same or any other
right at any other time and from time to time thereafter.
HEADINGS
All headings or titles appearing in this note are used as a matter of
convenience only and shall not affect the interpretation of the provisions
hereof.
RENEWAL NOTE
This note renews that certain promissory note between the parties
hereto dated February 17, 1995 which was executed and delivered pursuant to the
Agreement and extends the maturity of the obligations covered thereby until
December 31, 1998.
APPLEBEE'S INTERNATIONAL, INC.
By: /s/ George D. Shadid
----------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 28, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 6,189
<SECURITIES> 5,575
<RECEIVABLES> 15,457
<ALLOWANCES> 277
<INVENTORY> 5,665
<CURRENT-ASSETS> 35,591
<PP&E> 320,924
<DEPRECIATION> 61,604
<TOTAL-ASSETS> 353,612
<CURRENT-LIABILITIES> 45,362
<BONDS> 23,660
0
0
<COMMON> 317
<OTHER-SE> 282,636
<TOTAL-LIABILITY-AND-EQUITY> 353,612
<SALES> 333,225
<TOTAL-REVENUES> 380,811
<CGS> 283,251
<TOTAL-COSTS> 321,866
<OTHER-EXPENSES> 3,084
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<INCOME-PRETAX> 56,477
<INCOME-TAX> 21,122
<INCOME-CONTINUING> 35,355
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,355
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.13
</TABLE>
