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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1997 Commission File No. 0-19542
APPLE SOUTH, INC.
(Exact name of registrant as specified in its charter)
Georgia 59-2778983
(State of Incorporation) (I.R.S. Employer Identification No.)
Hancock at Washington
Madison, Georgia 30650
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (706) 342-4552
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share Nasdaq
(Title of Class) (Name of each exchange on which
registered)
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_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy statement incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[X]
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As of March 20, 1998, the aggregate market value of the common stock of
registrant held by non-affiliates of the registrant, as determined by the last
sales price, was $435,051,177.
As of March 20, 1998, the number of shares of common stock outstanding was
38,822,214.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Annual Report to Shareholders for the fiscal year ended December 28,
1997 (Part II of Form 10-K).
(2) Definitive Proxy Statement for use in connection with the 1998 Annual
Meeting of Shareholders (Part III of Form 10-K).
PART I
Unless otherwise noted, the information in this annual report reflects
stock dividends of four-tenths of a share for each share outstanding on
September 10, 1991, one-half share for each share outstanding on November 2,
1992, one-half share for each share outstanding on January 29, 1993, one-half
share for each share outstanding on August 30, 1993, and one-half share for each
share outstanding on June 1, 1994. In November 1995, the Company acquired DF&R
Restaurants, Inc. ("DF&R") in a transaction accounted for as a pooling of
interests, and accordingly all financial and other information concerning the
Company set forth in this annual report includes DF&R for all periods unless
otherwise indicated. References in this annual report to the "Company" or "Apple
South" include Apple South, Inc., and its operating subsidiaries unless
otherwise indicated.
Item 1. Business
General
Apple South is a rapidly growing, multi-concept restaurant operating
company. Since its inception in 1986, the Company has increased its
profitability and size through the efficient management of restaurant operations
and through a series of strategic restaurant openings and acquisitions. Over the
last five fiscal years, restaurant sales have increased at a compound annual
growth rate of 39.8% and restaurant margins have increased at a compound annual
growth rate of 41.2%.
At December 28, 1997, the Company operated 429 casual dining restaurants,
including 264 Applebee's Neighborhood Grill & Bar restaurants, 91 Don Pablo's
Mexican Kitchen restaurants, 30 Hops Restaurant Bar & Brewery restaurants, 17
McCormick & Schmick's seafood dinner houses plus one catering facility, 16
Canyon Cafe restaurants and 11 Harrigan's Grill & Bar restaurants. The Company
owns all of its brands on a proprietary basis except Applebee's which is
franchised. For the year ended December 28, 1997, restaurant sales were $808.3
million.
During 1997, the Company completed three purchase business combinations.
McCormick & Schmick Holding Corp. ("McCormick & Schmick's") was acquired for
$68.3 million. Hops Restaurant Bar & Brewery ("Hops") was acquired for $58.4
million. Additionally, the Company acquired Canyon Cafes, Inc. ("Canyon Cafes")
for $46.3 million. The Company's results for 1997 included ten months of
operations from McCormick & Schmick's and Hops and six months of operations from
Canyon Cafes.
The Company's Applebee's restaurants are operated under franchise
agreements with Applebee's International, Inc. ("AII"). AII is a publicly held
company headquartered in Overland Park, Kansas. As of December 28, 1997, the
Applebee's restaurant system consisted of 960 restaurants in 48 states, Canada,
the Caribbean and Europe. Approximately 20% of these restaurants are operated by
AII, 28% by Apple South and the remainder by other franchisees. During 1997, a
total of 145 new Applebee's restaurants were opened system-wide; 34 of these
were opened by the Company's Applebee's division.
On December 23, 1997, the Company announced its decision to sell its
franchised Applebee's restaurants in order to focus on the continued development
of its higher margin, better return, greater growth proprietary concepts as well
as the the acquisition of new proprietary concepts. The Company expects to
substantially complete this divestiture during 1998 and believes that net
proceeds, after selling expenses and income taxes, will be approximately $400
million. In furtherance of its divestiture strategy, the Company entered into an
Asset Purchase Agreement (the "Agreement") with AII whereby the Company has
agreed to sell 31 of its existing Applebee's restaurants and one restaurant
under construction to AII for a purchase price of $93.4 million in cash. The
restaurants and development territories to be sold to AII are located in the
Charlottesville, Norfolk, Richmond, and Roanoke, Virginia areas. The Agreement
provides that the Company use its reasonable best efforts to dispose of all its
remaining Applebee's restaurants by the end of 1999, and AII has agreed to
cooperate in accomplishing the disposition. The Company has an option to put up
to 15 remaining restaurants to AII at a predetermined formula through 1999.
Thereafter, AII has an option to acquire all of the Company's remaining
Applebee's restaurants. Existing covenants not to compete with the Applebee's
concept, which are contained in franchise and development agreements with AII,
are to be eliminated by the end of 1998. In addition, the Company has agreed to
complete 16 restaurants currently under development, but will be released from
all other restaurant development requirements.
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The Company has also entered into an Asset Purchase Agreement with Quality
Restaurant Concepts, Inc. for 26 restaurants in Mississippi and East Tennessee
for $48.0 million in cash. In addition, the Company has executed letters of
intent with ten purchasers for the sale of 154 additional Applebee's restaurants
and is finalizing letters of intent and reviewing verbal and written offers for
the remaining 53 Applebee's restaurants. These transactions are contingent upon
completion and signing of definitive purchase agreements and satisfaction of
customary closing conditions, including purchaser financing.
Also during 1997, the Company completed the sale of its 10-unit Hardee's
division for approximately $2.5 million and signed a contract to sell the
business operations of its Harrigan's division to Pinnacle Restaurant Group, LLC
("Pinnacle") for $3 million in cash plus a $4 million note. In addition, the
Company is to receive a 25% equity interest in Pinnacle and retain ownership of
certain real estate relating to two Harrigan's locations to be leased to
Pinnacle.
Subsequent to year end, the Company acquired a 20% interest in Belgo Group,
PLC ("Belgo"), a public restaurant company based in the United Kingdom that
operates two Belgo restaurants in London, for $6.1 million. In addition, the
Company and Belgo have established two, 50/50 joint ventures: one for the
initial development of one of the Company's proprietary brands in Europe,
probably McCormick & Schmick's, and the other for the development of Belgo
restaurants in the Western Hemisphere.
The Company's growth strategy includes the expansion of existing
proprietary concepts, acquiring new restaurant concepts, and leveraging
Company-wide expertise and resources across concepts to improve the
effectiveness of existing operations while maintaining concept integrity and
individuality. This multi-concept strategy allows the Company to reach a broad
customer base through specialized restaurant market segments. By operating
restaurant concepts as separate divisions, the Company protects each concept's
individuality, but allows each division to leverage the best practices of other
divisions. Each of the Company's restaurant concepts is established as an
entrepreneurial operating division and functions on a decentralized basis with
its own executive management, real estate development, purchasing, recruiting,
training, marketing, accounting, and restaurant operations. Each division is
supported by various centralized functions such as human resources, finance,
treasury and capital formation. The Company expects to open a total of 59 to 66
restaurants in 1998, including at least 35 Don Pablo's, 12 Hops, 8 Canyon Cafes
and 4 McCormick & Schmick's.
Apple South's Restaurant Concepts
Don Pablo's
Apple South acquired 44 Don Pablo's as a result of its merger with DF&R in
November 1995. The first Don Pablo's was opened in Lubbock, Texas in 1985. The
restaurants feature traditional Mexican dishes served in a distinctive, festive
dining atmosphere reminiscent of a Mexican village plaza. Each restaurant is
staffed with a highly experienced management team that is visible in the dining
area and interacts with both customers and the staff to ensure attentive
customer service and consistent food quality. Items are prepared fresh on-site
using high-quality ingredients at relatively low prices. The diverse menu,
generous portions and attractive price/value relationship appeal to a broad
customer base.
Menu. The menu offers a wide variety of entrees, including enchiladas and
tacos served with various sauces and homemade salsa plus mesquite-grilled items
such as fajitas, carne asada and chicken. The menu also includes tortilla soup,
a selection of salads, Mexican-style appetizers such as quesadillas and unique
desserts. During 1997, the cost of a typical meal, including beverages, was
$7.00 to $9.00 for lunch and $8.00 to $11.00 for dinner. In addition to its
regular menu, Don Pablo's offers 15 lunch specials priced from $4.35 to $6.99
each and a lower- priced children's menu. Full bar service is also provided.
Alcoholic beverage sales accounted for approximately 20% of sales during 1997.
Restaurant Layout. Distinctive Mexican architecture and interior decor
provide a casual, fun dining atmosphere. The restaurants have an open, spacious
feel, created with the use of sky-lights and a Mexican village plaza design, and
are enhanced by an indoor fountain and the use of stucco, brick and tile, as
well as plants, signs and art work. Homemade tortillas cooked in the dining area
underscore the commitment to fresh, authentic Mexican food. Both one and
two-story building designs are utilized. The two-story design features a balcony
which provides seating for bar patrons and dining customers waiting to be
seated. The one-story design incorporates a smaller bar adjacent to the dining
area. Both designs use high
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ceiling architecture and have similar dining capacities. Restaurants range in
size from 6,000 square feet to 9,900 square feet, with the average restaurant
containing approximately 8,000 square feet. The restaurants generally have
dining room seating for approximately 230 customers and bar seating for
approximately 70 additional customers.
Unit Economics. During 1997, the average cost of developing and opening a
Don Pablo's restaurant was approximately $1.7 million, excluding land costs and
preopening expenses. The cost of land for these restaurants ranged from
approximately $600,000 to $1,200,000; preopening expenses averaged $135,000.
Field Management. Management is shared by 34 district and area managers who
report to two Regional Vice Presidents of Operations. The division's strategy is
to have each area manager responsible for a limited number of restaurants, thus
facilitating a focus on quality of operations and unit profitability. The
management staff of a typical restaurant consists of one general manager, one
kitchen manager and three assistant managers. General managers and kitchen
managers are eligible to receive bonuses equal to a percentage of their
restaurant's sales, subject to operating within budgeted costs.
Advertising and Marketing. Don Pablo's historical success has been achieved
with minimal expenditures on advertising and marketing, relying primarily on the
curb appeal of its buildings and customer word-of-mouth. Beginning in 1996, the
division devoted more resources to marketing efforts, including television
campaigns and radio advertising in certain core markets. During 1997,
advertising contributed to a 4% increase in annual sales for those restaurants
open for all of 1996 and 1997. The increased marketing efforts are expected to
continue in 1998.
McCormick & Schmick's
The Company acquired 16 McCormick & Schmick's restaurants plus one catering
facility in March 1997. McCormick & Schmick's was established in the early
1970's by co-founders William P. McCormick and Douglas L. Schmick. Each
restaurant is designed to capture the distinctive attributes of the local
market. Varying in design from a traditional, New England-style fish house to a
more contemporary dinner house with spectacular waterfront views, many of the
restaurants are located in historical buildings. Traditional-style bars are an
integral component of each restaurant. The same philosophy of distinctiveness
and quality applies equally to the bar operation and the dining rooms. Alcoholic
beverages, represent approximately 30% of sales. Restaurants are operated under
the names McCormick & Schmick's, McCormick's Fish House, Harborside, and Jake's.
McCormick & Schmick's offers superior service to its guests and is positioned in
a price range at the upper end of moderate.
Menu. McCormick & Schmick's features a daily menu, offering the freshest
seafood available based on price and product availability. With 25 to 30
distinctive species and over 85 individual selections, the menu gives range in
culinary appeal as well as price selection. The cost of a typical meal,
including beverage, is approximately $10.00 to $20.00 for lunch and $25.00 to
$35.00 for dinner.
Restaurant Layout. Restaurants range in size from 6,000 to 14,000 square
feet with an average restaurant containing approximately 8,500 square feet. The
restaurants generally seat 200 to 300 customers in the dining room with some
locations having 40 to 60 additional patio seats available.
Unit Economics. The average cost of developing a restaurant is
approximately $1,750,000, including leasehold improvements, fixtures and
equipment. All restaurant real estate is leased. Additionally, preopening
expenses average $200,000.
Field Management. Management is shared by five regional senior managers and
two Vice Presidents of Operations. Staffing levels vary depending on restaurant
size. A typical restaurant has a general manager, an executive chef, a sous chef
and four assistant managers and will employ 70 to 80 full and part-time
employees. The McCormick & Schmick's operating philosophy encourages and trains
the management of individual restaurant units to be creative by promoting a
large degree of self-sufficiency.
Advertising and Marketing. Advertising and marketing efforts are focused on
a grassroots philosophy. Advertising and marketing begins with the daily printed
menu and other grassroots efforts. Advertising strategies focus on existing and
4
local customers, but also emphasize out-of-town travelers as a key customer
component. Each region utilizes the services of a public relations firm and
makes full use of media events targeting the local market.
Hops Restaurant Bar & Brewery
The Company acquired 21 Hops restaurants in March 1997. The first Hops was
opened in Clearwater, Florida in 1989. Each restaurant offers a diverse menu of
popular foods, freshly prepared in a display kitchen with a strict commitment to
quality and value. Additionally, each restaurant features an on-premises
microbrewery.
Menu. The restaurants feature an American-style menu that includes top
choice steaks and prime rib, smoked baby back ribs, fresh fish, chicken and
pasta dishes, deluxe burgers and sandwiches, hand-tossed salads with homemade
dressings, appetizers, soups and desserts. The menu offers separate selections
for children. The cost of a typical meal, including beverages, ranges from $6.00
to $9.00 per person for lunch and $13.00 to $15.00 per person for dinner. Each
restaurant offers four distinctive lager-style beers and ales that are brewed
on-premises. An observation microbrewery at each restaurant allows customers to
view the entire brewing process. Except for one non-alcoholic beer, the brewed
beers are the only beers served. Full bar service is also available at each
restaurant. Alcoholic beverages accounted for approximately 16% of sales during
1997.
Restaurant Layout. Restaurants range in size from approximately 5,000 to
7,300 square feet. The on-premise brewing equipment is an integral aspect of the
design and occupies from 450 to 750 square feet. The restaurant dining and bar
areas seat from 160 to 240 customers.
Unit Economics. The cost of developing and opening a restaurant averaged
approximately $1,350,000 in 1997, excluding land and preopening costs but
including approximately $160,000 in microbrewery equipment. Land costs ranged
from $650,000 to $900,000 and preopening costs averaged $145,000.
Field Management. Management is shared by seven operating partners and one
area manager who report to both the Vice President of Operations and the Chief
Executive Officer. Each operating partner is responsible for four to five
restaurants, thus facilitating a focus on quality of operations and unit
profitability. The management staff of a typical restaurant consists of one
general manager, one kitchen manager and two assistant managers. General
managers and kitchen managers are eligible to receive bonuses equal to a
percentage of their restaurant's controllable income, subject to operating above
a minimum operating margin.
Advertising and Marketing. Hops has historically devoted minimal resources
to marketing efforts, relying primarily on the curb appeal of its buildings and
customer word-of-mouth. In 1997, marketing efforts were expanded, consisting
primarily of radio advertising in certain core markets. In addition, a
concentrated grassroots marketing effort was initiated through the use of
special events equipment. Increased marketing efforts are expected to continue
into 1998 primarily through radio and print media as well as continued
grassroots efforts.
Canyon Cafes
The Company acquired 13 Canyon Cafes restaurants in July 1997. Canyon Cafes
restaurants operate under the names Canyon Cafe and Sam's Cafe. The first
restaurant was opened in Dallas, Texas in 1989. Canyon Cafes is dedicated to the
flavor and feel of the American Southwest.
Menu. The menu offers a wide variety of unique items such as Desert Fire
Pasta, Chile Rubbed Grilled Tuna and Chipotle Mango Chicken. A variety of more
traditional items including chicken tacos and grilled chicken salad are also
offered. All food is prepared from scratch, including salad dressings, desserts,
and bread sticks. During 1997, the cost of a typical meal, including beverages,
was $7.00 to $11.00 for lunch and $13.00 to $16.00 for dinner. Full bar service
is also provided. Alcoholic beverages accounted for approximately 20% of sales
during 1997.
Restaurant Layout. The restaurants are based on a Santa Fe design which
reflects a strong southwestern influence through the use of heavy ponderosa pine
timbers. The walls, floors and furniture reflect surfaces and colors native to
the American Southwest. Restaurants are located in malls, in-line power centers
and as freestanding buildings. In-line and mall
5
sites average 7,000 square feet with some locations featuring an additional
800-1,000 square foot patio. The freestanding buildings have 6,700 square feet
with a 1,050 square foot patio. The goal at all locations is to have a minimum
of 190 interior dining seats, an average of 26 bar seats and 45-50 patio seats.
Unit Economics. The cost of developing and opening a restaurant averaged
$1,300,000 for in-line/mall locations and $1,500,000 for freestanding locations,
excluding land costs and preopening expenses. During 1997, the division
purchased one land site at a cost of $650,000. Preopening expenses averaged
$150,000.
Field Management. Management is structured with a general manager, two to
three assistant managers, an executive chef and a sous chef. Regional Directors
are responsible for quality of operations and sales and profitability of four to
five restaurants and report to a Director of Operations.
Advertising and Marketing. Canyon Cafes has historically incurred minimal
advertising expenditures, relying on the curb appeal of its buildings and
customer word-of-mouth. The division has implemented a grassroots marketing
strategy encompassing local radio and billboard advertising within targeted
markets and a system-wide "neighborhood networking" program.
Other Restaurant Operational Functions
Quality Control. All levels of management are responsible for ensuring that
restaurants are operated in accordance with strict quality standards. Each
divisions' management structure allows restaurant general managers to spend a
significant portion of their time in the dining area of the restaurant
supervising staff and providing service to customers. Compliance with quality
standards is monitored by periodic on-site visits and formal periodic
inspections by multi-unit management.
Training. Each division requires employees to participate in formal
training programs. Management training programs generally last ten to 16 weeks
and encompass three general areas, including (i) all service positions, (ii)
management accounting, personnel management, and dining room and bar operations
and (iii) kitchen management. Management positions at new restaurants are
typically staffed with personnel who have had previous experience in a
management position at another of the respective divisions' restaurants. In
addition, a highly experienced opening team assists in opening each restaurant.
Prior to opening, all personnel undergo intensive training conducted by the
restaurant opening team. A training department at the Corporate level assists
each division with the ongoing evolution of training policies and procedures.
Purchasing. Apple South strives to obtain consistent quality items at
competitive prices from reliable sources for all of its divisions. The Company
continually researches and tests various products in an effort to maintain the
highest quality products and to be responsive to changing customer tastes.
Purchasing is handled by each division, which, with the exception of McCormick &
Schmick's, uses one primary distributor for food products other than produce,
which is typically purchased locally. In the McCormick & Schmick's division,
purchasing is under the direction of each restaurants' executive chef in order
to obtain the freshest, highest quality seafood available with a focus on local
tastes. A Corporate purchasing department assists the divisions in evaluating
supplier alternatives and identifying opportunities for Company-wide cost
savings. All food and beverage products are available on short notice from
alternative qualified suppliers. The Company has not experienced any significant
delays in receiving food and beverage inventories, restaurant supplies or
equipment.
Restaurant Reporting. Financial controls are maintained through a
centralized accounting system at each divisions' headquarters. A point-of-sale
reporting system is utilized in each of the Company's restaurants. Restaurant
management submits to divisional headquarters various daily and weekly reports
of cash, deposits, sales, labor costs, etc. Physical inventories of all food,
beverage and supply items are taken at least monthly. Operating results compared
to prior periods and budgets are closely monitored by both divisional and
corporate personnel.
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Governmental Regulation
Alcoholic Beverage Regulation. Each restaurant is subject to licensing and
regulation by a number of governmental authorities, which include alcoholic
beverage control and health, safety and fire agencies in the state or
municipality in which the restaurant is located. Difficulties or failures in
obtaining the required licenses or approvals could delay or prevent the opening
of a new restaurant in a particular area. Alcoholic beverage control regulations
require restaurants to apply to a state authority and, in certain locations,
county or municipal authorities for a license or permit to sell alcoholic
beverages on the premises and to provide service for extended hours and on
Sundays. Some counties prohibit the sale of alcoholic beverages on Sundays.
Typically, licenses or permits must be renewed annually and may be revoked or
suspended for cause at any time. Alcoholic beverage control regulations relate
to numerous aspects of a restaurant's operations, including minimum age of
patrons and employees, hours of operation, advertising, wholesale purchasing,
inventory control and handling, storage and dispensing of alcoholic beverages.
The Company may be subject in certain states to "dram-shop" statutes which
generally provide a person injured by an intoxicated patron the right to recover
damages from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. The Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance.
Brewpub Regulation. The Hops division is subject to additional regulations
as a result of the on-premises microbrewery in each restaurant. Historically,
the alcoholic beverage laws of most states prohibited the manufacture and retail
sale of beer to consumers by a single person or entity or related persons or
entities. At present, 49 states allow for the limited manufacture and retail
sale of microbrewed beer by restaurants and bars classified as "brewpubs" under
state law. The Hops restaurants are required to comply with such state brewpub
laws in order to obtain necessary state licenses and permits. Additionally, many
states impose restrictions on the operations of brewpubs, such as a prohibition
on the bottling of beer, a prohibition on the sale of beer for consumption off
of restaurant premises, and a limitation on the volume of beer that may be
brewed at any location, as well as certain geographic limitations. In addition,
certain states limit the number of brewpubs that may be owned by any person or
entity or a related group of entities. The Company's ability to own and operate
Hops restaurants in any state is and will continue to be dependent upon its
ability to operate within the regulatory scheme of such states.
Other Regulation. The Company's restaurant operations are also subject to
Federal and state laws governing such matters as minimum wage, working
conditions, overtime and tip credits. The Company experienced a slight increase
in hourly labor costs as a result of the 1996 and 1997 increases in the federal
minimum wage rate. The impact of minimum wage increases is expected to slightly
increase hourly labor costs in 1998.
Competition
The restaurant industry in the U.S. is highly competitive with respect to
price, service, location, and food type and quality, and competition is expected
to intensify. There are a few, well-established competitors with greater
financial and other resources than Apple South. Some of the Company's
competitors have been in existence for a substantially longer period than Apple
South and may be better established in the markets where the Company's
restaurants are or may be located. The restaurant business is often affected by
changes in consumer tastes, national, regional or local economic conditions,
demographic trends, traffic patterns, the availability and cost of suitable
locations, and the type, number and location of competing restaurants. The
Company also experiences competition in attracting and retaining qualified
management level operating personnel. In addition, factors such as inflation,
increased food, labor and benefits costs, and difficulty in attracting hourly
employees may adversely affect the restaurant industry in general and Apple
South's restaurants in particular.
Employees
As of December 28, 1997, Apple South employed approximately 28,500 persons
in 30 states plus the District of Columbia. Of those employees, approximately
450 held management or administrative positions, 2,250 were involved in
restaurant management, and the remainder were engaged in the operation of
restaurants. Management believes that the Company's continued success will
depend to a large degree on its ability to attract and retain good management
employees. While the Company will have to continually address a level of
employee attrition normally expected in the food-service
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industry, Apple South has taken steps to attract and keep qualified management
personnel through the implementation of a variety of employee benefit plans,
including an Employee Stock Ownership Plan, a 401(k) Plan, and an incentive
stock option plan for its key employees. None of the Company's employees is
covered by a collective bargaining agreement. The Company considers its employee
relations to be good.
Item 2. Properties
The Company owns a renovated historic building in Madison, Georgia,
containing approximately 19,000 square feet of office space and an adjoining
building containing approximately 41,000 square feet of office space. These
office buildings serve as the Company's corporate and Applebee's division
headquarters. During 1997, the Company completed construction of a new
divisional facility in Bedford, Texas, to house the Don Pablo's division
headquarters. The division headquarters for McCormick & Schmick's is located in
approximately 10,800 square feet of leased space in Portland, Oregon. The
division headquarters for Hops is located in approximately 9,000 square feet of
leased space in Tampa, Florida and the headquarters for the Canyon Cafe division
is located in approximately 7,500 square feet of leased space in Dallas, Texas.
The Company believes that its corporate and division headquarters are sufficient
for its present needs and believes that it will be able utilize the space
currently occupied by the Applebee's division headquarters, after the completion
of the Applebee's divestiture.
In selecting sites, the Company attempts to acquire prime locations in
market areas to maximize both short- and long-term revenues. Site selection is
made by each division's development department, subject to executive officer
approval. Within the target market areas, the divisions evaluate major retail
and office concentrations and major traffic arteries to determine focal points.
Site specific factors include visibility, ease of ingress and egress, proximity
to direct competition, accessibility to utilities, local zoning regulations,
laws regulating the sale of alcoholic beverages, and various other factors.
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As of February 23, 1998, the Company operated 442 restaurants in the
following locations:
Don McCormick Canyon
Pablo's & Schmick's Hops Cafes Sub-total Applebee's Harrigan's Total
- ----------------------------------------------------------------------------------------------------------------
Florida 11 23 34 31 65
Texas 13 6 19 7 26
Ohio 12 1 13 2 15
Indiana 9 9 1 10
Pennsylvania 8 8 1 9
California 6 1 7 7
Michigan 7 7 7
Virginia 6 1 7 41 48
Arizona 3 3 6 6
Minnesota 6 6 6
South Carolina 3 2 5 35 40
Oregon 5 5 5
Colorado 1 2 1 4 4
Kentucky 3 1 4 9 13
North Carolina 2 2 4 4 8
Oklahoma 4 4 3 7
Washington 3 1 4 4
Georgia 1 1 1 3 5 8
Maryland 2 1 3 9 12
New York 3 3 3
Tennessee 1 1 1 3 40 43
Missouri 2 2 2
Washington D.C. 1 1 2 2
Illinois 1 1 30 31
New Jersey 1 1 1
Wisconsin 24 24
Iowa 14 14
Mississippi 10 10
West Virginia 9 9
Delaware 2 2
New Mexico 1 1
- ----------------------------------------------------------------------------------------------------------------
Totals 96 18 32 18 164 267 11 442
================================================================================================================
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Item 3. Legal Proceedings
An action titled John Bryant, et al. v. Apple South, Inc., et al., Civil
Action No. 3:97-CV-83(DF) was filed on September 22, 1997 in the United States
District Court for the Middle District of Georgia. Additionally, an action
titled Artel Foam Corporation Pension Trust, et al. v. Apple South, Inc., et
al., Civil Action No. CV-97-6189 was filed on October 28, 1997 in the United
States District Court for the Eastern District of New York. Each of these
lawsuits was filed by a person who seeks to represent a class of shareholders of
the Company who purchased shares of the Company's common stock between May 26,
1995 and September 24, 1996. Each plaintiff named the Company and certain of its
officers and directors as defendants. The complaints alleged acts of fraudulent
misrepresentation by the defendants which induced the plaintiffs to purchase the
Company's common stock and alleged illegal insider trading by certain of the
defendants, each of which allegedly resulted in losses to the plaintiffs and
similarly situated shareholders of the Company. The complaints each seek damages
and other relief. Although the ultimate outcome of these lawsuits cannot be
determined at this time, based on its preliminary analysis the Company believes
that the allegations therein are without merit and intends to vigorously defend
itself.
The Company is involved in various other claims and legal actions arising
in the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
The Company did not submit any matter to a vote of its security holders
during the fourth quarter of the fiscal year ended December 28, 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information in response to this item is incorporated by reference to page
36 of the Company's Annual Report to Shareholders for the fiscal year ended
December 28, 1997, a copy of which is attached as Exhibit 13.1 hereto.
Item 6. Selected Financial Data
Information in response to this item is incorporated by reference to page
17 of the Company's Annual Report to Shareholders for the fiscal year ended
December 28, 1997, a copy of which is attached as Exhibit 13.1 hereto.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information in response to this item is incorporated by reference to pages
18 through 22 , inclusive, of the Company's Annual Report to Shareholders for
the fiscal year ended December 28, 1997, a copy of which is attached as Exhibit
13.1 hereto.
Item 8. Financial Statements and Supplementary Data
Information in response to this item is incorporated by reference to pages
23 through 35, inclusive, of the Company's Annual Report to Shareholders for the
fiscal year ended December 28, 1997, a copy of which is attached as Exhibit 13.1
hereto.
10
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
Part III
Item 10. Directors and Executive Officers of the Registrant
Information in response to this item is incorporated by reference to the
Company's definitive Proxy Statement for use in connection with the 1998 Annual
Meeting of Shareholders, a copy of which is attached as Exhibit 22.1 hereto.
Item 11. Executive Compensation
Information in response to this item is incorporated by reference to the
Company's definitive Proxy Statement for use in connection with the 1998 Annual
Meeting of Shareholders, a copy of which is attached as Exhibit 22.1 hereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information in response to this item is incorporated by reference to the
Company's definitive Proxy Statement for use in connection with the 1998 Annual
Meeting of Shareholders, a copy of which is attached as Exhibit 22.1 hereto.
Item 13. Certain Relationships and Related Transactions
In March 1995, the Company entered into a Split Dollar Insurance Agreement
(the "Agreement") with The DuPree Insurance Trust (the "Trust") whereby the
Company agreed to make premium payments on certain life insurance policies of
which the Trust is the owner and beneficiary. These policies provide a total of
$50 million in death proceeds payable upon the death of the survivor of Tom E.
DuPree, Jr., the Chairman of the Board and Chief Executive Officer of the
Company, and his wife. The devisees under the wills of Mr. DuPree and his wife
are the beneficiaries of the Trust.
The Trust has agreed to reimburse the Company on an annual basis for that
portion of the premiums which equals the current value of the economic benefit,
as defined by the Internal Revenue Service, attributable to the life insurance
protection provided. The premiums due under the policies total $850,000 per
year. Reimbursements for the current value of the economic benefit attributable
to the life insurance protection provided in 1997 totaled $2,003. There were no
reimbursements due to the Company from the Trust at December 28, 1997.
The Company or the Trust can cancel the Agreement at any time. Upon
cancellation, the Trust is obligated to repay the Company an amount equal to the
lesser of either the cash surrender value of the policies or the total amount of
unreimbursed premiums paid by the Company. Upon receipt of the death proceeds
under the policies, the Trust is required to repay the Company for all
unreimbursed premium payments. The policies have been assigned to the Company to
secure the repayment obligations of the Trust.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements
11
The following financial statement items are set forth in pages 23 through
35 of the Company's Annual Report to Shareholders for the fiscal year ended
December 28, 1997, which is attached as Exhibit 13.1 hereto:
Consolidated Statements of Earnings for the years ended December 28,
1997, December 29, 1996 and December 31, 1995
Consolidated Balance Sheets as of December 28, 1997 and December 29, 1996
Consolidated Statements of Shareholders' Equity for the years ended
December 28, 1997, December 29, 1996 and December 31, 1995
Consolidated Statements of Cash Flows for the years ended December 28,
1997, December 29, 1996 and December 31, 1995
Notes to Consolidated Financial Statements
Report of Management
Independent Auditors' Report
2. Financial Statement Schedules
None
(b) Reports on Form 8-K
Report on Form 8-K dated January 15, 1998, reporting unaudited pro forma
consolidated financial statements of the Applebee's restaurants expected to be
disposed.
(c) Exhibits
2.1 Stock Purchase Agreement among the Company, the owners of the
partnership interests in Apple Tenn-Flo, L.P., et al. dated March 18, 1994. (4)
2.2 Asset Purchase Agreement among the Company, TUG, Inc., et al. dated
February 1, 1995. (6)
2.3 Asset Purchase Agreement among Apple South, Inc. And Marcus
Restaurants, Inc. Et al, dated April 12, 1995. (8)
2.4 Agreement and Plan of Merger, dated August 15, 1995, by and among the
Company, SALSA Acquisition Corp., and DF&R Restaurants, Inc. (9)
2.5 Agreement and Plan of Merger among Apple South, Inc., M&S Acquisition
of Delaware Inc., and McCormick & Schmick Holding Corp., et. al., dated February
6, 1997. (12)
2.6 Agreements and Plan of Merger among Apple South, Inc., HG Acquisition
Corp., and Mason and Schelldorf Leasing Company, Hops Restaurants, Inc., et.
al., dated February 6, 1997. (12)
2.7 Agreement and Plan of Merger among Apple South, Inc., Coyote
Acquisition Corp., and Canyon Cafes, Inc., et. al., dated June 19, 1997. (13)
2.8 Asset Purchase Agreement dated December 23, 1997 by and among
Applebee's International, Inc. and Apple South, Inc. (14)
2.9 Asset Purchase Agreement dated March 16, 1998 by and among Quality
Restaurant Concepts, L.L.C., and Apple South, Inc.
3.1 Amended and Restated Articles of Incorporation of the Company, as
amended August 1, 1995. (8)
12
3.2 By-laws of the Company. (1)
4.1 See Exhibits 3.1 and 3.2 for provisions in the Company's Amended and
Restated Articles of Incorporation and by-laws defining the rights of holders of
the Company's Common Stock. (1)
4.2 Indenture dated May 1, 1996, between the Company and SunTrust Bank,
Atlanta, as Trustee. (10)
4.3 Trust Agreement of Apple South Financing I, dated as of February 18,
1997, among Apple South, Inc., First Union National Bank of Georgia, First Union
Bank of Delaware and Lansing S. Patterson.(15)
4.4 Amended and Restated Declaration of Trust of Apple South Financing I,
dated as of March 11, 1997, among Apple South, Inc., as Sponsor, First Union
National Bank of Georgia, as Institutional Trustee, First Union Bank of
Delaware, as Delaware Trustee, and the Regular Trustees named therein. (15)
4.5 Indenture for the 7% Convertible Subordinated Debentures, dated as of
March 6, 1997, between Apple South, Inc. and First Union National Bank of
Georgia, as Trustee. (15)
4.6 Form of $3.50 Term Convertible Security, Series A (included in Exhibit
4.4).
4.7 Form of 7% Convertible Subordinated Debenture (included in Exhibit
4.5).
4.8 Preferred Securities Guarantee Agreement, dated as of March 11, 1997,
between Apple South, Inc., as Guarantor, and First Union National Bank of
Georgia, as Preferred Guarantee Trustee. (15)
4.9 Registration Rights Agreement, dated as of March 11, 1997 among Apple
South, Inc., Apple South Financing I, J.P. Morgan Securities, Inc., and Smith
Barney, Inc. (15)
10.1 Apple South, Inc. 1988 Stock Option Plan. (1)
10.2 Form of Stock Option Agreement under the Apple South, Inc. 1988 Stock
Option Plan. (1) (11)
10.3 Form of Apple South, Inc. Director's Indemnification Agreement
executed by and between the Company and each member of its Board of Directors.
(1)
10.4 Form of Apple South, Inc. Officer's Indemnification Agreement executed
between the Company and each of its executive officers. (1)
10.5 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., as amended and supplemented, pertaining to South Carolina. (1) (11)
10.6 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., as amended and supplemented, pertaining to West Palm Beach, Ft. Myers and
Sarasota A.D.I. (1) (11)
10.7 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., as amended and supplemented, pertaining to Tennessee/Mississippi A.D.I.
(1) (11)
10.8 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., as amended and supplemented, pertaining to Nashville, Tennessee A.D.I. and
Bowling Green, Kentucky A.D.I. (1) (11)
13
10.9 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., as amended and supplemented, pertaining to Virginia, West Virginia,
Washington, D.C., and Louisville, Kentucky. (1) (11)
10.10 Standard Form Applebee's Neighborhood Grill & Bar Franchise Agreement
among the Company, Tom E. DuPree, Jr. and Applebee's International, Inc. (5)
(11)
10.11 Foodservice Distribution Agreement between PYA/Monarch, Inc. and the
Company. (1)
10.12 Apple South, Inc. Employee Stock Ownership Plan and Trust. (1) (11)
10.13 Apple South, Inc. Profit Sharing Plan and Trust. (1) (11)
10.14 Amendment No. 2 to the Apple South, Inc. Employee Stock Ownership
Plan and Trust, dated November 22, 1993. (3)
10.15 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., pertaining to Jacksonville, Florida A.D.I. (2) (11)
10.16 Amendment to Development Agreement dated January 10, 1992, Second
Amendment and Supplement to Development Agreement dated May 14, 1993, and Third
Amendment to Development Agreement dated January 26, 1994, amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement among the
Company, Tom E. DuPree, Jr. and Applebee's International, Inc., as amended and
supplemented, pertaining to South Carolina. (3)
10.17 Third Amendment to Development Agreement dated January 10, 1992, and
Fourth Amendment to Development Agreement dated January 26, 1994, amending the
Standard Form Applebee's Neighborhood Grill & Bar Development Agreement among
the Company, Tom E. DuPree, Jr. and Applebee's International, Inc., as amended
and supplemented, pertaining to West Palm Beach, Ft. Meyers and Sarasota A.D.I.
(3)
10.18 Second Amendment to Development Agreement dated January 10, 1992, and
Third Amendment to Development Agreement dated January 26, 1994, amending the
Standard Form Applebee's Neighborhood Grill & Bar Development Agreement among
the Company, Tom E. DuPree, Jr. and Applebee's International, Inc., as amended
and supplemented, pertaining to Tennessee/Mississippi A.D.I. (3)
10.19 Amendment to Development Agreement dated January 10, 1992, and its
Second Amendment to Development Agreement dated January 26, 1994, amending the
Standard Form Applebee's Neighborhood Grill & Bar Development Agreement among
the Company, Tom E. DuPree, Jr. and Applebee's International, Inc., as amended
and supplemented, pertaining to Nashville, Tennessee A.D.I. and Bowling Green,
Kentucky A.D.I. (3)
10.20 Second Amendment to Development Agreement dated January 10, 1992, and
Third Amendment to Development Agreement dated January 26, 1994, amending the
Standard Form Applebee's Neighborhood Grill & Bar Development Agreement among
the Company, Tom E. DuPree, Jr. and Applebee's International, Inc., as amended
and supplemented, pertaining to Virginia, West Virginia, Washington, D.C., and
Louisville, Kentucky. (3)
10.21 Amendment to Development Agreement dated January 26, 1994, amending
the Standard Form Applebee's Neighborhood Grill & Bar Development Agreement
among the Company, Tom E. DuPree, Jr. and Applebee's International, Inc.,
pertaining to Jacksonville, Florida A.D.I. (3)
10.22 Apple South, Inc. [Restated] Profit Sharing Plan and Trust dated
October 26, 1993. (3)
10.23 Amended form of Stock Option Agreement under the Apple South, Inc.
1988 Stock Option Plan. (3)
14
10.24 Apple South, Inc. 1993 Stock Incentive Plan. (3)
10.25 Form of Stock Option Agreement under the Apple South, Inc. 1993 Stock
Incentive Plan. (3)
10.26 Second Supplement to Development Agreement dated July 27, 1994,
between the Company and Applebee's International, Inc., pertaining to
Chattanooga, Tennessee A.D.I., Knoxville, Tennessee A.D.I. and Bristol-
Kingsport-Johnson City: Tri-Cities A.D.I. (5) (11)
10.27 Universal Agreement dated June 30, 1995, by and between the Company
and Applebee's International, Inc. amending the Standard Form Development
Agreements appearing as Exhibits 10.5 through 10.9, 10.15, and 10.28 through
10.30.
10.28 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement, dated April 25, 1995, by and between the Company and Applebee's
International, Inc., pertaining to the Cedar Rapids, and Des Moines, Iowa
A.D.I.s, the Rockford, Illinois A.D.I. and portions of the Davenport-Rock
Island- Moline: Quad City A.D.I.; the Sioux City, Iowa A.D.I.; the
Peoria-Bloomington, Illinois, A.D.I.; and the Rochester-Mason City- Austin
A.D.I. (11)
10.29 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement, dated June 30, 1995, by and between the Company and Applebee's
International, Inc., pertaining to a portion of the Chicago, Illinois A.D.I.
(11)
10.30 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement dated December 29, 1989 by and between Marcus Restaurants, Inc. And
Applebee's International, Inc. pertaining to the Milwaukee, Madison,
LaCrosse-Eau Claire, Wausau-Rhinelander, and Green Bay-Appleton, Wisconsin
A.D.I.s. (11)
10.31 Consent and Release Agreement by and among the company, Marcus
Restaurants, Inc. and Applebee's International, Inc. dated June 30, 1995
pertaining to the development and franchise rights in the Milwaukee, Madison,
LaCrosse-Eau Claire, Wausau-Rhinelander, and Green Bay-Appleton, Wisconsin
A.D.I.s. (11)
10.32 Amendment to Development Agreement dated June 30, 1995 by and between
the Company and Applebee's International, pertaining to market areas in portion
of Illinois, Iowa, Missouri and Wisconsin. (11)
10.33 Second Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., pertaining to the
Milwaukee, Madison, LaCrosse-Eau Claire, Wausau- Rhinelander and Green
Bay-Appleton, Wisconsin A.D.I.s. (11)
10.34 Fifth Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
West Palm Beach, Ft. Myers and Sarasota A.D.I. (11)
10.35 Fourth Amendment to Development Agreement dated June 30, 1995 and
Third Amendment to Development Agreement dated February 24, 1995 by and between
the Company and Applebee's International, Inc., amending the Standard Form
Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
South Carolina market. (11)
10.36 Second Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
Chattanooga A.D.I., the Knoxville A.D.I. and the Bristol-Kingsport- Johnson
City: Tri-Cities A.D.I. (11)
10.37 Fourth Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
Tennessee/Mississippi A.D.I. (11)
15
10.38 Second Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
Jacksonville, Florida A.D.I. (11)
10.39 Fifth Amendment to Development Agreement dated June 30, 1995 and
Fourth Amendment to Development Agreement dated February 24, 1995, by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to
Virginia, West Virginia, Washington, D.C. and Louisville, Kentucky. (11)
10.40 Third Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
Nashville, Tennessee A.D.I. and the Bowling Green, Kentucky A.D.I. (11)
10.41 $30 Million Amended and Restated Participation Agreement Between
Apple South, Inc., DR Holdings, L.P., Trust Company Bank, Southtrust Bank of
Georgia, N.A., Life Insurance Company of Georgia, and Columbine Life Insurance
Company. (7)
10.42 Lease and Development Agreement Between DR Holdings, L.P. and Apple
South, Inc. (7)
10.43 Second Amended and Restated Credit Agreement, dated March 1, 1998,
among Apple South, Inc. Wachovia Bank, National Association, as agent for the
lenders, and the Banks listed as parties thereto.
10.44 Participation Agreement (Apple South Trust No. 97-1), dated as of
September 24, 1997, among Apple South, Inc., as lessee, First Security Bank,
National Association, as lessor, SunTrust Bank, Atlanta, as administrative
agent, and the holders and lenders signatory thereto.
10.45 $70 million Credit Agreement, dated December 10, 1997, among Apple
South, Inc., Wachovia Bank, National Association, as agent for the lenders, and
the Banks listed as parties thereto.
13.1 Annual Report to Shareholders for the fiscal year ended December 28,
1997.
22.1 Definitive Proxy Statement for use in connection with the 1998 Annual
Meeting of Shareholders, filed with the Commission on March 20, 1998.
23.1 Consent of KPMG Peat Marwick LLP.
27.1 Financial Data Schedule (EDGAR version only).
99.1 Safe harbor under the Private Securities Litigation Reform Act of
1995. (13)
(1) Incorporated by reference to the corresponding exhibit number filed
with the Company's Registration Statement on Form S-1, File No. 33-42662.
(2) Incorporated by reference to the corresponding exhibit number filed
with the Company's Registration Statement on Form S-1, File No. 33-58378.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K
for its fiscal year ended December 31, 1993.
(4) Incorporated by reference to Exhibit 2.1 filed with the Company's
Report on Form 8-K dated April 12, 1994.
16
(5) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994.
(6) Incorporated by reference to Exhibit 10.30 filed with the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994.
(7) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended April 2, 1995.
(8) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended July 2, 1995.
(9) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended October 1, 1995.
(10) Incorporated by reference to the Company's registration statement on
Form S-3, File No. 333-02958.
(11) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
(12) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended March 30, 1997.
(13) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended June 29, 1997.
(14) Incorporated by reference to Exhibit 2.1 filed with the Company's
Report on Form 8-K dated January 15, 1998.
(15) Incorporated by reference to the Company's registration statement on
Form S-3, File No. 333-25205.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
APPLE SOUTH, INC.
By:/s/ Tom E. DuPree, Jr.
---------------------------
Tom E. DuPree, Jr.
Chief Executive Officer and
Chairman of the Board
March 3, 1998
Atlanta, Georgia
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Tom E. DuPree, Jr. Chairman of the Board of March 3, 1998
- ----------------------- Directors and Chief Executive
Tom E. DuPree, Jr. Officer (principal executive officer)
/s/ S. Kirk Kinsell Director and President and Chief March 3, 1998
- ----------------------- Operating Officer
S. Kirk Kinsell
/s/ Erich J. Booth Director and Chief Financial March 3, 1998
- ----------------------- Officer
Erich J. Booth
/s/ John G. McLeod, Jr. Senior Vice President - Human March 3, 1998
- ----------------------- Resources, and Secretary
John G. McLeod, Jr.
/s/ Margaret E. Waldrep Chief Administrative Officer March 3, 1998
- -----------------------
Margaret E. Waldrep
/s/ Philip L. Ammons Chief Accounting Officer March 3, 1998
- -----------------------
Philip L. Ammons
/s/ Thomas R. Williams Director March 3, 1998
- -----------------------
Thomas R. Williams
/s/ James W. Rowe Director March 3, 1998
- -----------------------
James W. Rowe
/s/ Dr. Ruth G. Shaw Director March 3, 1998
- -----------------------
Dr. Ruth G. Shaw
/s/ John L. Moorhead Director March 3, 1998
- -----------------------
John L. Moorhead
18
Exhibit Index
Exhibit Number
2.1 Stock Purchase Agreement among the Company, the owners of the
partnership interests in Apple Tenn-Flo, L.P., et al. dated March 18, 1994.
(4)
2.2 Asset Purchase Agreement among the Company, TUG, Inc., et al. dated
February 1, 1995. (6)
2.3 Asset Purchase Agreement among Apple South, Inc. And Marcus
Restaurants, Inc. Et al, dated April 12, 1995. (8)
2.4 Agreement and Plan of Merger, dated August 15, 1995, by and among the
Company, SALSA Acquisition Corp., and DF&R Restaurants, Inc. (9)
2.5 Agreement and Plan of Merger among Apple South, Inc., M&S Acquisition
of Delaware Inc., and McCormick & Schmick Holding Corp., et. al., dated February
6, 1997. (12)
2.6 Agreements and Plan of Merger among Apple South, Inc., HG Acquisition
Corp., and Mason and Schelldorf Leasing Company, Hops Restaurants, Inc., et.
al., dated February 6, 1997. (12)
2.7 Agreement and Plan of Merger among Apple South, Inc., Coyote
Acquisition Corp., and Canyon Cafes, Inc., et. al., dated June 19, 1997. (13)
2.8 Asset Purchase Agreement dated December 23, 1997 by and among
Applebee's International, Inc. and Apple South, Inc. (14)
2.9 Asset Purchase Agreement dated March 16, 1998 by and among Quality
Restaurant Concepts, L.L.C., and Apple South, Inc.
3.1 Amended and Restated Articles of Incorporation of the Company, as
amended August 1, 1995. (8)
3.2 By-laws of the Company. (1)
4.1 See Exhibits 3.1 and 3.2 for provisions in the Company's Amended and
Restated Articles of Incorporation and by-laws defining the rights of holders of
the Company's Common Stock. (1)
4.2 Indenture dated May 1, 1996, between the Company and SunTrust Bank,
Atlanta, as Trustee. (10)
4.3 Trust Agreement of Apple South Financing I, dated as of February 18,
1997, among Apple South, Inc., First Union National Bank of Georgia, First Union
Bank of Delaware and Lansing S. Patterson.(15)
4.4 Amended and Restated Declaration of Trust of Apple South Financing I,
dated as of March 11, 1997, among Apple South, Inc., as Sponsor, First Union
National Bank of Georgia, as Institutional Trustee, First Union Bank of
Delaware, as Delaware Trustee, and the Regular Trustees named therein. (15)
4.5 Indenture for the 7% Convertible Subordinated Debentures, dated as of
March 6, 1997, between Apple South, Inc. and First Union National Bank of
Georgia, as Trustee. (15)
4.6 Form of $3.50 Term Convertible Security, Series A (included in Exhibit
4.4).
19
4.7 Form of 7% Convertible Subordinated Debenture (included in Exhibit
4.5).
4.8 Preferred Securities Guarantee Agreement, dated as of March 11, 1997,
between Apple South, Inc., as Guarantor, and First Union National Bank of
Georgia, as Preferred Guarantee Trustee. (15)
4.9 Registration Rights Agreement, dated as of March 11, 1997 among Apple
South, Inc., Apple South Financing I, J.P. Morgan Securities, Inc., and Smith
Barney, Inc. (15)
10.1 Apple South, Inc. 1988 Stock Option Plan. (1)
10.2 Form of Stock Option Agreement under the Apple South, Inc. 1988 Stock
Option Plan. (1) (11)
10.3 Form of Apple South, Inc. Director's Indemnification Agreement
executed by and between the Company and each member of its Board of Directors.
(1)
10.4 Form of Apple South, Inc. Officer's Indemnification Agreement executed
between the Company and each of its executive officers. (1)
10.5 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., as amended and supplemented, pertaining to South Carolina. (1) (11)
10.6 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., as amended and supplemented, pertaining to West Palm Beach, Ft. Myers and
Sarasota A.D.I. (1) (11)
10.7 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., as amended and supplemented, pertaining to Tennessee/Mississippi A.D.I.
(1) (11)
10.8 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., as amended and supplemented, pertaining to Nashville, Tennessee A.D.I. and
Bowling Green, Kentucky A.D.I. (1) (11)
10.9 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., as amended and supplemented, pertaining to Virginia, West Virginia,
Washington, D.C., and Louisville, Kentucky. (1) (11)
10.10 Standard Form Applebee's Neighborhood Grill & Bar Franchise Agreement
among the Company, Tom E. DuPree, Jr. and Applebee's International, Inc. (5)
(11)
10.11 Foodservice Distribution Agreement between PYA/Monarch, Inc. and the
Company. (1)
10.12 Apple South, Inc. Employee Stock Ownership Plan and Trust. (1) (11)
10.13 Apple South, Inc. Profit Sharing Plan and Trust. (1) (11)
10.14 Amendment No. 2 to the Apple South, Inc. Employee Stock Ownership
Plan and Trust, dated November 22, 1993. (3)
10.15 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement among the Company, Tom E. DuPree, Jr. and Applebee's International,
Inc., pertaining to Jacksonville, Florida A.D.I. (2) (11)
10.16 Amendment to Development Agreement dated January 10, 1992, Second
Amendment and
20
Supplement to Development Agreement dated May 14, 1993, and Third Amendment
to Development Agreement dated January 26, 1994, amending the Standard Form
Applebee's Neighborhood Grill & Bar Development Agreement among the Company, Tom
E. DuPree, Jr. and Applebee's International, Inc., as amended and supplemented,
pertaining to South Carolina. (3)
10.17 Third Amendment to Development Agreement dated January 10, 1992, and
Fourth Amendment to Development Agreement dated January 26, 1994, amending the
Standard Form Applebee's Neighborhood Grill & Bar Development Agreement among
the Company, Tom E. DuPree, Jr. and Applebee's International, Inc., as amended
and supplemented, pertaining to West Palm Beach, Ft. Meyers and Sarasota A.D.I.
(3)
10.18 Second Amendment to Development Agreement dated January 10, 1992, and
Third Amendment to Development Agreement dated January 26, 1994, amending the
Standard Form Applebee's Neighborhood Grill & Bar Development Agreement among
the Company, Tom E. DuPree, Jr. and Applebee's International, Inc., as amended
and supplemented, pertaining to Tennessee/ Mississippi A.D.I. (3)
10.19 Amendment to Development Agreement dated January 10, 1992, and its
Second Amendment to Development Agreement dated January 26, 1994, amending the
Standard Form Applebee's eighborhood Grill & Bar Development Agreement among the
Company, Tom E. DuPree, Jr. and Applebee's International, Inc., as amended and
supplemented, pertaining to Nashville, Tennessee A.D.I. and Bowling Green,
Kentucky A.D.I. (3)
10.20 Second Amendment to Development Agreement dated January 10, 1992, and
Third Amendment to Development Agreement dated January 26, 1994, amending the
Standard Form Applebee's Neighborhood Grill & Bar Development Agreement among
the Company, Tom E. DuPree, Jr. and Applebee's International, Inc., as amended
and supplemented, pertaining to Virginia, West Virginia, Washington, D.C., and
Louisville, Kentucky. (3)
10.21 Amendment to Development Agreement dated January 26, 1994, amending
the Standard orm Applebee's Neighborhood Grill & Bar Development Agreement among
the Company, Tom E. DuPree, Jr. and Applebee's International, Inc., pertaining
to Jacksonville, Florida A.D.I. (3)
10.22 Apple South, Inc. [Restated] Profit Sharing Plan and Trust dated
October 26, 1993. (3)
10.23 Amended form of Stock Option Agreement under the Apple South, Inc.
1988 Stock Option Plan. (3)
10.24 Apple South, Inc. 1993 Stock Incentive Plan. (3)
10.25 Form of Stock Option Agreement under the Apple South, Inc. 1993 Stock
Incentive Plan. (3)
10.26 Second Supplement to Development Agreement dated July 27, 1994,
between the Company and Applebee's International, Inc., pertaining to
Chattanooga, Tennessee A.D.I., Knoxville, Tennessee A.D.I. and
Bristol-Kingsport-Johnson City: Tri-Cities A.D.I. (5) (11)
10.27 Universal Agreement dated June 30, 1995, by and between the Company
and Applebee's International, Inc. amending the Standard Form Development
Agreements appearing as Exhibits 10.5 through 10.9,10.15, and 10.28 through
10.30.
10.28 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement, dated April 25, 1995, by and between the Company and Applebee's
International, Inc., pertaining to the Cedar Rapids, and Des Moines, Iowa
A.D.I.s, the Rockford, Illinois A.D.I. and portions of the Davenport- Rock
Island- Moline: Quad City A.D.I.; the Sioux City, Iowa A.D.I.; the
Peoria-Bloomington, Illinois, A.D.I.; and the Rochester-Mason City-Austin A.D.I.
(11)
21
10.29 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement, dated June 30, 1995, by and between the Company and Applebee's
International, Inc., pertaining to a portion of the Chicago, Illinois A.D.I.
(11)
10.30 Standard Form Applebee's Neighborhood Grill & Bar Development
Agreement dated December 29, 1989 by and between Marcus Restaurants, Inc. And
Applebee's International, Inc. pertaining to the Milwaukee, Madison,
LaCrosse-Eau Claire, Wausau-Rhinelander, and Green Bay-Appleton, Wisconsin
A.D.I.s. (11)
10.31 Consent and Release Agreement by and among the company, Marcus
Restaurants, Inc. and Applebee's International, Inc. dated June 30, 1995
pertaining to the development and franchise rights in the Milwaukee, Madison,
LaCrosse-Eau Claire, Wausau-Rhinelander, and Green Bay- Appleton, Wisconsin
A.D.I.s. (11)
10.32 Amendment to Development Agreement dated June 30, 1995 by and between
the Company and Applebee's International, pertaining to market areas in portion
of Illinois, Iowa, Missouri and Wisconsin. (11)
10.33 Second Amendment to Development Agreement dated June 30, 1995 by and
between the ompany and Applebee's International, Inc., pertaining to the
Milwaukee, Madison, LaCrosse-Eau Claire, Wausau-Rhinelander and Green
Bay-Appleton, Wisconsin A.D.I.s. (11)
10.34 Fifth Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
West Palm Beach, Ft. Myers and Sarasota A.D.I. (11)
10.35 Fourth Amendment to Development Agreement dated June 30, 1995 and
Third Amendment to Development Agreement dated February 24, 1995 by and between
the Company and Applebee's International, Inc., amending the Standard Form
Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
South Carolina market. (11)
10.36 Second Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
Chattanooga A.D.I., the Knoxville A.D.I. and the Bristol-Kingsport-Johnson City:
Tri-Cities A.D.I. (11)
10.37 Fourth Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
Tennessee/Mississippi A.D.I. (11)
10.38 Second Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
Jacksonville, Florida A.D.I. (11)
10.39 Fifth Amendment to Development Agreement dated June 30, 1995 and
Fourth Amendment to Development Agreement dated February 24, 1995, by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to
Virginia, West Virginia, Washington, D.C. and Louisville, Kentucky. (11)
10.40 Third Amendment to Development Agreement dated June 30, 1995 by and
between the Company and Applebee's International, Inc., amending the Standard
Form Applebee's Neighborhood Grill & Bar Development Agreement pertaining to the
Nashville, Tennessee A.D.I. and the Bowling Green, Kentucky A.D.I. (11)
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10.41 $30 Million Amended and Restated Participation Agreement Between
Apple South, Inc., DR Holdings, L.P., Trust Company Bank, Southtrust Bank of
Georgia, N.A., Life Insurance Company of Georgia, and Columbine Life Insurance
Company. (7)
10.42 Lease and Development Agreement Between DR Holdings, L.P. and Apple
South, Inc. (7)
10.43 Second Amended and Restated Credit Agreement, dated March 1, 1998,
among Apple South, Inc. Wachovia Bank, National Association, as agent for the
lenders, and the Banks listed as parties thereto.
10.44 Participation Agreement (Apple South Trust No. 97-1), dated as of
September 24, 1997, among Apple South, Inc., as lessee, First Security Bank,
National Association, as lessor, SunTrust Bank, Atlanta, as administrative
agent, and the holders and lenders signatory thereto.
10.45 $70 million Credit Agreement, dated December 10, 1997, among Apple
South, Inc., Wachovia Bank, National Association, as agent for the lenders, and
the Banks listed as parties thereto.
13.1 Annual Report to Shareholders for the fiscal year ended December 28,
1997.
22.1 Definitive Proxy Statement for use in connection with the 1998 Annual
Meeting of Shareholders, filed with the Commission on March 20, 1998.
23.1 Consent of KPMG Peat Marwick LLP.
27.1 Financial Data Schedule (EDGAR version only)
99.1 Safe harbor under the Private Securities Litigation Reform Act of
1995. (13)
(1) Incorporated by reference to the corresponding exhibit number filed
with the Company's Registration Statement on Form S-1, File No. 33-42662.
(2) Incorporated by reference to the corresponding exhibit number filed
with the Company's Registration Statement on Form S-1, File No. 33-58378.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K
for its fiscal year ended December 31, 1993.
(4) Incorporated by reference to Exhibit 2.1 filed with the Company's
Report on Form 8-K dated April 12, 1994.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994.
(6) Incorporated by reference to Exhibit 10.30 filed with the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994.
(7) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended April 2, 1995.
(8) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended July 2, 1995.
(9) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended October 1, 1995.
23
(10) Incorporated by reference to the Company's registration statement on
Form S-3, File No. 333-02958.
(11) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
(12) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended March 30, 1997.
(13) Incorporated by reference to the registrant's Quarterly Report on Form
10-Q for its fiscal quarter ended June 29, 1997.
(14) Incorporated by reference to Exhibit 2.1 filed with the Company's
Report on Form 8-K dated January 15, 1998.
(15) Incorporated by reference to the Company's registration statement on
Form S-3, File No. 333-25205.
24