Here is an interesting balance sheet analysis I put together on Applebees. It is based on the analysis the Motley Fool recently did on Safeskin. The point of it, I think, is to compare percentage changes, on a quarterly basis, to see if anything is out of line. For example, if sales increase by 10 percent year over year, then it would be reasonable to expect a corresponding 10 percent increase in inventories, accounts receivable, etc. However, if accounts receivable and inventories increased by 30%, then this would signal a potential problem with the company.
In the case of Applebees, notice how cash and cash and short-term investments has decreased while sales have increased. Applebees says this is due to capital expenditures and the repurchase of stock. APPB bought back $50 million worth of stock last year. However, this has reduced the current ratio and quick ratios to very low levels. Accounts Receivable and inventories seem ok but notice the rapid increase in accrued expenses and other current liabilities. The annual report doesn't really explain what this is all about (at least, I can't figure it out by reading the annual report).
APPB has been reporting a profit (or earnings) every quarter. However, it looks to me like earnings will be hurt going forward due to the increasing accrued current expenses that are eventually going to have to be paid.
APPB's reported 4th qtr eps seems questionable to me. For example, their accrued and other current expenses increased by approximately 25 cents per share between 3rd & 4th quarter. The company reported eps for the 4th quarter at 39 cents. Shouldn't they have subtracted out 25 cents to pay for these increased current expenses/liabilities?
Also, take a look at their massive increase in debt. They added approx $110 million in long-term debt in the 1st quarter of 98. Approx. Approx $50 million was used to buy back approx. 2 million shares while the rest was used to buy approx 30 AppleSouth restaurants. I'm not sure that it made any sense to buy back shares (although it probably did help to support the stock price).
The debt will/should be reduced by approx. $60 million this quarter due to the sale of their money-losing Rio Bravo mexican restaurants. Perhaps the sale of these restaurants will result in declines in the accrued expenses and other current liabilities category going forward.
Any comments?
Pct. Change
Qtr Ending Sales Y/Y Sequential
12-31-99 $165,900,000 22.9 (1.6)
9-27-98 $168,650,000 26.0 1.3
6-28-98 $166,409,000 27.3 13.5
3-29-98 $146,603,000 26.1 8.6
12-28-97 $135,000,000 5.7 (74.5)
Cash &
Short-Term
Investments Y/Y Sequential
12-31-99 $6,646,000 (66.5) (6.9)
9-27-98 $7,135,000 (66.6) (50.4)
6-28-98 $14,371,000 (14.8) (32.3)
3-29-98 $21,239,000 (67.0) 7.2
12-28-97 $19,814,000 (65.5) (7.3)
Accounts
Receivable Y/Y Sequential
12-31-99 $17,159,000 4.7 3.9
9-27-98 $16,507,000 8.7 (6.3)
6-28-98 $17,613,000 17.3 2.0
3-29-98 $17,264,000 16.7 5.3
12-28-97 $16,390,000 (14.8) 8.0
Inventories Y/Y Sequential
12-31-99 $6,709,000 40.1 25.6
9-27-98 $4,992,000 (11.9) (0.7)
6-28-98 $5,025,000 (16.5) 10.2
3-29-98 $4,513,000 (15.8) (6.1)
12-28-97 $4,788,000 5.1 (18.3)
Accrued Expenses
& Other Current
Liabilities Y/Y Sequential
12-31-99 $44,114,000 54.5 19.7
9-27-98 $36,849,000 63.4 (1.7)
6-28-98 $37,492,000 67.7 16.9
3-29-98 $32,071,000 39.2 12.3
12-28-97 $28,547,000 10.6 26.6
Shareholder's
Equity Y/Y Sequential
12-31-99 $296,053,000 1.9 (0.1)
9-27-98 $296,422,000 4.8 2.5
6-28-98 $289,105,000 7.2 3.9
3-29-98 $278,120,000 8.7 (4.2)
12-28-97 $290,443,000 18.7 2.6
LT Debt/Equity Ratio
12-31-99 0.49
9-27-98 0.47
6-28-98 0.46
3-29-98 0.08
12-28-97 0.08
Total Debt/Equity Ratio
12-31-99 0.73
9-27-98 0.67
6-28-98 0.68
3-29-98 0.37
12-28-97 0.30
Current Ratio Quick Ratio
12-31-99 0.53 0.10
9-27-98 0.55 0.13
6-28-98 0.66 0.24
3-29-98 0.57 0.27
12-28-97 0.70 0.32
9-28-97 1.00 0.47
6-29-97 0.89 0.37
3-30-97 1.95 1.45
12-29-97 2.01 1.37
Y/Y = Year year |
