Applebee's International Reports First Quarter 2007 Results
OVERLAND PARK, Kan.--(BUSINESS WIRE)--May 2, 2007--Applebee's International, Inc. (Nasdaq:APPB) today reported net earnings of $9.5 million, or $0.13 per diluted share, for the first quarter ended April 1, 2007. Excluding discontinued operations, impairment and other restaurant closure costs, and strategic alternative expenses totaling $17.6 million after-tax or approximately $0.23 per share, net earnings were $27.1 million, or $0.36 per diluted share, for the first quarter of 2007. A reconciliation of non-GAAP measurements to GAAP results is attached to this release.
In March 2007, the company announced the decision to close 24 underperforming restaurants in 11 states. In the first quarter of 2007, 19 of these restaurants were closed. The company believes that four of the closed restaurants will have significant sales transfer to other existing restaurants, and in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the results of operations, impairment charges and lease obligations related to these four restaurants have been included in continuing operations. In addition, the write-down of the carrying value of the five restaurants which have yet to be closed are included in impairment charges and other restaurant closure costs in the accompanying consolidated statement of earnings. The results of operations, impairment charges and lease obligations for the remaining 15 closed restaurants are included in discontinued operations in the accompanying consolidated statements of earnings for the first quarter of 2007 and 2006.
System-wide domestic comparable sales for the first quarter of 2007 decreased 4.0 percent. Company and domestic franchise restaurant comparable sales decreased 4.5 percent and 3.9 percent, respectively, for the quarter. The negative impact of more severe winter weather this year on first quarter system-wide comparable sales is estimated to be approximately 0.5 to 1.0 percent, with company restaurants affected by approximately 1.0 to 1.5 percent and franchise restaurants affected by approximately 0.5 percent.
The company also reported comparable sales for the March fiscal period, comprised of the five weeks ended April 1, 2007. System-wide domestic comparable sales decreased 2.7 percent for the March period. Comparable sales for domestic franchise restaurants decreased 2.5 percent, and comparable sales for company restaurants decreased 3.0 percent, reflecting a decrease in guest traffic of between 2.5 and 3.0 percent, combined with a flat average check. The negative impact of more severe winter weather this year on March system-wide comparable sales is estimated to be between 0.0 and 0.5 percent, with company restaurants affected by between 0.5 and 1.0 percent and franchise restaurants affected by between 0.0 and 0.5 percent.
In addition, the company reported comparable sales for the April fiscal period, comprised of the four weeks ended April 29, 2007. System-wide domestic comparable sales decreased 0.7 percent for the April period, while comparable sales for domestic franchise restaurants decreased 0.6 percent. Comparable sales for company restaurants decreased 0.8 percent, reflecting a decrease in guest traffic of between 2.0 and 2.5 percent, combined with a higher average check.
System-wide domestic comparable sales for the year-to-date period through April have decreased 3.3 percent, with domestic franchise restaurant comparable sales down 3.1 percent and company comparable restaurant sales down 3.7 percent.
Dave Goebel, president and chief executive officer, said, "While the difficult macro environment for casual dining continued in the first quarter, we have started to see signs that our initiatives are beginning to gain some traction. We are particularly pleased with our traffic improvement since launching our Pick 'N Pair lunch program in early March. Our key strategic initiatives in 2007 include continued improvement of our food, evolution of our advertising, and a greater emphasis on communicating our value proposition to our guests. These long-term strategies are designed to make Applebee's more relevant to all of our guests with the goal of driving guest traffic and higher average unit volumes through existing restaurants."
Other results for the first quarter ended April 1, 2007 included:
- Total system-wide sales for the quarter increased by 0.8 percent over the prior year. System-wide sales are a non-GAAP financial measure that includes sales at all company and franchise Applebee's restaurants, as reported by franchisees. The company believes that system-wide sales information is useful in analyzing Applebee's market share and growth, and because franchisees pay royalties and contribute to the national advertising pool based on a percentage of their sales.
- Applebee's ended the quarter with 1,930 restaurants open system-wide (509 company and 1,421 franchise restaurants). During the first quarter of 2007, there were 20 new restaurants opened system-wide, including 7 company and 13 franchised restaurants, and 20 restaurants were closed during the quarter, including 19 company and one franchised restaurant.
- The company repurchased 41,763 shares of common stock in the first quarter at an average price of $23.93 for an aggregate cost of $1.0 million. As of April 1, 2007, $239.4 million remains available under the company's current stock repurchase authorization.
- As of April 1, 2007, the company had total debt outstanding of $155.1 million, with $229.2 million available under its revolving credit facility.
A conference call to review the first quarter 2007 results will be held on Thursday morning, May 3, 2007, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time). The conference call will be broadcast live over the Internet and a replay will be available shortly after the call on the Investors section of the company's website (www.applebees.com).
Applebee's International, Inc., headquartered in Overland Park, Kan., develops, franchises and operates restaurants under the Applebee's Neighborhood Grill & Bar brand, the largest casual dining concept in the world. As of April 29, 2007, there were 1,937 Applebee's restaurants operating system-wide in 49 states, one U.S. territory and 16 international countries. Additional information on Applebee's International can be found at the company's website (www.applebees.com).
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
13 Weeks Ended
-------------------
April 1, March 26,
2007 2006
--------- ---------
Operating revenues:
Company restaurant sales $300,108 $302,326
Franchise royalties and fees 37,059 35,935
Other franchise income 463 445
--------- ---------
Total operating revenues 337,630 338,706
--------- ---------
Cost of company restaurant sales:
Food and beverage 79,435 80,735
Labor 101,748 98,820
Direct and occupancy 79,878 76,684
Pre-opening expense 921 750
--------- ---------
Total cost of company restaurant sales 261,982 256,989
--------- ---------
Cost of other franchise income 373 766
General and administrative expenses 32,775 35,606
Amortization of intangible assets 128 204
Impairment and other restaurant closure costs 6,636 1,600
Loss on disposition of property and equipment 370 577
--------- ---------
Operating earnings 35,366 42,964
--------- ---------
Other income (expense):
Investment income 835 745
Interest expense (2,606) (2,554)
Other income (expense) (60) 136
--------- ---------
Total other expense (1,831) (1,673)
--------- ---------
Earnings before income taxes and discontinued
operations 33,535 41,291
Income taxes 11,536 13,874
--------- ---------
Earnings before discontinued operations 21,999 27,417
Loss from discontinued operations, net of tax (12,532) (266)
--------- ---------
Net earnings $9,467 $27,151
========= =========
Basic net earnings per common share:
Earnings before discontinued operations $0.30 $0.37
Loss from discontinued operations, net of tax (0.17) --
--------- ---------
Basic net earnings per common share $0.13 $0.37
========= =========
Diluted net earnings per common share:
Earnings before discontinued operations $0.29 $0.36
Loss from discontinued operations, net of tax (0.17) --
--------- ---------
Diluted net earnings per common share $0.13 $0.36
========= =========
Basic weighted average shares outstanding 73,953 74,147
========= =========
Diluted weighted average shares outstanding 75,072 75,281
========= =========
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASUREMENTS TO GAAP RESULTS
(Unaudited)
(in thousands, except per share amounts)
In addition to the results provided in accordance with Generally
Accepted Accounting Principles ("GAAP") throughout this document, the
company has provided non-GAAP measurements which present operating
results on a basis before discontinued operations, impairment and
other restaurant closure costs and strategic alternative expenses.
The company is using earnings before discontinued operations,
impairment and other restaurant closure costs and strategic
alternative expenses as a key performance measure of results of
operations for purposes of evaluating performance internally. This
non-GAAP measurement is not intended to replace the presentation of
our financial results in accordance with GAAP. Rather, the company
believes that the presentation of earnings before discontinued
operations, impairment and other restaurant closure costs and
strategic alternative expenses provides additional information to
facilitate the comparison of past and present operations.
13 Weeks Ended
--------------------
April 1, March 26,
2007 2006
---------- ---------
Discontinued operations $(19,277) $(401)
Impairment and other restaurant closure costs (6,636) (1,600)
Strategic alternative expenses (1,074) --
Income taxes 9,397 702
---------- ---------
Discontinued operations, impairment and other
restaurant closure costs and strategic
alternative expenses, net of tax $ (17,590) $ (1,299)
========== =========
Diluted weighted average shares outstanding 75,072 75,281
========== =========
Diluted earnings per share impact of discontinued
operations, impairment and other restaurant
closure costs and strategic alternative expenses $(0.23) $(0.02)
========== =========
Reconciliation of earnings before discontinued
operations, impairment and other restaurant
closure costs and strategic alternative expenses
to net earnings:
Earnings before discontinued operations,
impairment and other restaurant closure costs
and strategic alternative expenses $27,057 $28,450
Discontinued operations, impairment and other
restaurant closure costs and strategic
alternative expenses, net of tax (17,590) (1,299)
---------- ---------
Net earnings $9,467 $27,151
========== =========
Reconciliation of earnings per share before
discontinued operations, impairment and other
restaurant closure costs and strategic
alternative expenses to reported earnings per
share:
Diluted earnings per share before discontinued
operations, impairment and other restaurant
closure costs and strategic alternative
expenses $ 0.36 $ 0.38
Diluted earnings per share impact of
discontinued operations, impairment and other
restaurant closure costs and strategic
alternative expenses (0.23) (0.02)
---------- ---------
Reported diluted earnings per share $0.13 $0.36
========== =========
The following table contains 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
---------------------
April 1, March 26,
2007 2006
---------- ----------
Operating revenues:
Company restaurant sales 88.9% 89.3%
Franchise royalties and fees 11.0 10.6
Other franchise income 0.1 0.1
---------- ----------
Total operating revenues 100.0% 100.0%
========== ==========
Cost of sales (as a percentage of company
restaurant sales):
Food and beverage 26.5% 26.7%
Labor 33.9 32.7
Direct and occupancy 26.6 25.4
Pre-opening expense 0.3 0.2
---------- ----------
Total cost of sales 87.3% 85.0%
========== ==========
Cost of other franchise income (as a percentage
of other franchise income) 80.6% 172.1%
General and administrative expenses 9.7 10.5
Amortization of intangible assets -- 0.1
Impairment and other restaurant closure costs 2.0 0.5
Loss on disposition of property and equipment 0.1 0.2
---------- ----------
Operating earnings 10.5 12.7
---------- ----------
Other income (expense):
Investment income 0.2 0.2
Interest expense (0.8) (0.8)
Other income -- --
---------- ----------
Total other expense (0.5) (0.5)
---------- ----------
Earnings before income taxes and discontinued
operations 9.9 12.2
Income taxes 3.4 4.1
---------- ----------
Earnings before discontinued operations 6.5 8.1
Loss on discontinued operations, net of tax (3.7) (0.1)
---------- ----------
Net earnings 2.8% 8.0%
========== ==========
The following table sets forth certain financial information and other
restaurant data relating to company and franchise restaurants, as
reported to us by franchisees:
13 Weeks Ended
-------------------
April 1, March 26,
2007 2006
--------- ---------
Number of restaurants:
Company:
Beginning of period 521 486
Restaurant openings 7 9
Restaurant closings (19) (2)
Restaurants acquired from franchisees -- 4
--------- ---------
End of period 509 497
--------- ---------
Franchise:
Beginning of period 1,409 1,318
Restaurant openings 13 20
Restaurant closings (1) (2)
Restaurants acquired by franchisor -- (4)
--------- ---------
End of period 1,421 1,332
--------- ---------
Total:
Beginning of period 1,930 1,804
Restaurant openings 20 29
Restaurant closings (20) (4)
--------- ---------
End of period 1,930 1,829
========= =========
Weighted average weekly sales per restaurant:
Company(1) $44,852 $48,087
Domestic franchise $50,864 $53,622
Domestic total $49,159 $52,055
Change in comparable restaurant sales(2):
Company(3) (4.5)% 1.2%
Domestic franchise (3.9)% 3.1%
Domestic total (4.0)% 2.6%
Total operating revenues (in thousands):
Company restaurant sales(4) $300,108 $302,326
Franchise royalties and fees(5) 37,059 35,935
Other franchise income(6) 463 445
--------- ---------
Total $337,630 $338,706
========= =========
---------------------------------------------------
(1) Includes restaurants presented as discontinued operations.
Excluding the restaurants presented as discontinued operations,
company average weekly sales were $45,382 and $48,699 in the 2007
quarter and the 2006 quarter, respectively.
(2) When computing comparable restaurant sales, restaurants open for
at least 18 months are compared from period to period.
(3) Includes restaurants presented as discontinued operations.
Excluding the restaurants presented as discontinued operations,
company comparable restaurant sales were (4.5)% and 1.3% in the 2007
quarter and the 2006 quarter, respectively.
(4) Excludes restaurants presented as discontinued operations. Sales
for these restaurants, in thousands, were $5,243 and $5,573 in the
2007 quarter and the 2006 quarter, respectively.
(5) Franchise royalties are generally 4% of each franchise
restaurant's reported monthly gross sales. Reported unaudited
franchise sales, in thousands, were $917,308 and $904,644 in the 2007
quarter and the 2006 quarter, respectively. Franchise fees typically
are $35,000 for each restaurant opened.
(6) Other franchise income includes revenue from information
technology products and services provided to certain franchisees.
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
April 1, December 31,
2007 2006
---------- ------------
ASSETS
Current assets:
Cash and cash equivalents $15,338 $22,309
Short-term investments, at market value 295 293
Receivables, net of allowance 40,265 48,224
Inventories 11,677 11,524
Prepaid and other current assets 17,815 15,310
Assets held for sale 5,388 7,633
Current assets related to discontinued
operations 9,494 1,798
---------- ------------
Total current assets 100,272 107,091
Property and equipment, net 618,812 619,508
Goodwill 138,950 138,950
Restricted assets related to captive insurance
subsidiary 12,900 13,356
Other intangible assets, net 6,280 6,408
Other assets, net 35,117 34,351
Non-current assets related to discontinued
operations 3,203 17,590
---------- ------------
$915,534 $937,254
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $279 $265
Accounts payable 53,270 43,235
Accrued expenses and other current
liabilities 91,974 113,641
Loss reserve related to captive insurance
subsidiary 5,714 6,094
Accrued dividends -- 16,299
Accrued income taxes 14,034 9,183
Current liabilities related to discontinued
operations 1,577 --
---------- ------------
Total current liabilities 166,848 188,717
---------- ------------
Non-current liabilities:
Long-term debt, less current portion 154,846 174,920
Deferred income taxes 24,329 24,956
Other non-current liabilities 62,391 61,837
Non-current liabilities related to
discontinued operations 6,362 170
---------- ------------
Total non-current liabilities 247,928 261,883
---------- ------------
Total liabilities 414,776 450,600
---------- ------------
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 -
108,503,243 shares 1,085 1,085
Additional paid-in capital 267,373 265,122
Retained earnings 782,801 774,884
---------- ------------
1,051,259 1,041,091
Treasury stock - 33,942,484 shares in 2007
and 34,393,331 shares in 2006, at cost (550,501) (554,437)
---------- ------------
Total stockholders' equity 500,758 486,654
---------- ------------
$915,534 $937,254
========== ============
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
13 Weeks Ended
-------------------
April 1, March 26,
2007 2006
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $9,467 $27,151
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 17,010 15,361
Amortization of intangible assets 128 204
Stock-based compensation 3,335 6,165
Other amortization 83 45
Deferred income tax provision (benefit) (4,029) 1,278
Impairment and other restaurant closure costs 25,500 1,600
Loss on disposition of property and equipment 370 577
Income tax benefit from stock-based
compensation 288 1,005
Changes in assets and liabilities, exclusive of
effect of acquisition:
Receivables 7,959 1,027
Inventories (221) 5,104
Prepaid and other current assets (2,474) (7,794)
Accounts payable 10,840 (9,750)
Accrued expenses and other current liabilities (22,231) (21,146)
Loss reserve and unearned premiums related to
captive insurance subsidiary (380) (1,365)
Income taxes 1,557 7,624
Other non-current liabilities (2,731) 23
Other 236 (191)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 44,707 26,918
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (20,835) (30,968)
Change in restricted assets related to captive
insurance subsidiary 456 214
Acquisition of restaurants -- (7,962)
Proceeds from sale of property and equipment 2,496 --
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (17,883) (38,716)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (999) (5,171)
Dividends paid (16,299) (14,840)
Issuance of common stock upon exercise of stock
options 2,421 5,075
Shares issued under employee benefit plans 922 1,020
Excess tax benefits from stock-based compensation 220 680
Net debt proceeds (payments) (20,060) 19,445
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (33,795) 6,209
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,971) (5,589)
CASH AND CASH EQUIVALENTS, beginning of period 22,309 13,040
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $15,338 $7,451
========= =========
CONTACT: Applebee's International, Inc. Carol DiRaimo, 913-967-4109 Vice President of Investor Relations SOURCE: Applebee's International, Inc.