-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uz7t3TD5CShd525i3nUZW6qygB9k1j22ey7gFlLDCXDRFAZ7y3U/hWF3jP1HqN4E 9yDtN9a3ZtssI1svM/O0Lw== 0000853665-97-000102.txt : 19971030 0000853665-97-000102.hdr.sgml : 19971030 ACCESSION NUMBER: 0000853665-97-000102 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970928 FILED AS OF DATE: 19971029 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLEBEES INTERNATIONAL INC CENTRAL INDEX KEY: 0000853665 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 431461763 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17962 FILM NUMBER: 97703179 BUSINESS ADDRESS: STREET 1: 4551 W 107TH ST STE 100 CITY: OVERLAND PARK STATE: KS ZIP: 66207 BUSINESS PHONE: 9139674000 MAIL ADDRESS: STREET 1: 4551 W 107TH STREET STREET 2: SUITE 100 CITY: OVERLAND PARK STATE: KS ZIP: 66207 10-Q 1 10-Q FOR THE QUARTER ENDED 9/28/97 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 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 APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (dollars in thousands, except per share amounts)
September 28, December 29, 1997 1996 ------------- -------------- ASSETS 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 ============= ==============
See notes to consolidated financial statements. 3 APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (in thousands, except per share amounts)
13 Weeks Ended 39 Weeks Ended --------------------------------- --------------------------------- September 28, September 29, September 28, September 29, 1997 1996 1997 1996 --------------- --------------- --------------- --------------- 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
See notes to consolidated financial statements. 4 APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (dollars in thousands)
Unrealized Gain (Loss) Common Stock Additional on Total ------------------------- Paid-In Retained Short-Term Treasury Stockholders' Shares Amount Capital Earnings Investments Stock Equity -------------- ---------- ----------- ------------ ------------ ---------- -------------- 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 ============== ========== =========== ============ ============ ========== ==============
See notes to consolidated financial statements. 5 APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (dollars in thousands)
39 Weeks Ended ----------------------------------- September 28, September 29, 1997 1996 --------------- --------------- 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 =============== ===============
See notes to consolidated financial statements. 6 APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued) (Unaudited) (dollars in thousands) 39 Weeks Ended ------------------------------------- September 28, September 29, 1997 1996 ---------------- ----------------- 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 ================ =================
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 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 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 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 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 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.
13 Weeks Ended 39 Weeks Ended ------------------------------- ------------------------------- September 28, September 29, September 28, September 29, 1997 1996 1997 1996 --------------- --------------- --------------- --------------- 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% =============== =============== =============== ===============
12 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.
13 Weeks Ended 39 Weeks Ended ------------------------------- ------------------------------- September 28, September 29, September 28, September 29, 1997 1996 1997 1996 --------------- --------------- --------------- --------------- 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 - -------- (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.
13 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):
13 Weeks Ended --------------------------------------- September 28, September 29, Increase 1997 1996 (Decrease) ------------- ------------- ---------- 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 ============= ============= ==========
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 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 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 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 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 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 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 APPLEBEE'S INTERNATIONAL, INC. EXHIBIT INDEX Exhibit Number Description of Exhibit - ------------- ------------------------------------------------- 10.1 First Amendment to Unsecured Credit Agreement. 27 Financial Data Schedule. EX-10.1 2 FIRST AMENDMENT TO UNSECURED CREDIT AGREEMENT 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. 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 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. 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 --------------------------- 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. 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 ---------------------------- EX-27 3 FINANCIAL DATA SCHEDULE
5 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. 1,000 9-MOS DEC-28-1997 SEP-28-1997 6,189 5,575 15,457 277 5,665 35,591 320,924 61,604 353,612 45,362 23,660 0 0 317 282,636 353,612 333,225 380,811 283,251 321,866 3,084 0 1,239 56,477 21,122 35,355 0 0 0 35,355 1.13 1.13
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