<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 7, 1998
U.S. RESTAURANT PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 1-13089 75-2687420
(STATE OF OTHER (COMMISSION FILE (I.R.S. EMPLOYER
JURISDICTION OF NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
5310 Harvest Hill Rd.
Suite 270, LB 168
Dallas, Texas 75230
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
972-387-1487
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
1
<PAGE>
EXPLANATORY NOTE
U.S. Restaurant Properties, Inc., (the "Registrant") a fully integrated,
self-administered and self-managed real estate investment trust hereby amends
its Form 8-K dated August 7, 1998, as filed with the Securities and Exchange
Commission on August 21, 1998 as follows:
The Company hereby submits the financial statements required for the
properties acquired and included in this Form 8-K/A and pro forma information
as shown in Item 7 and as further described in Item 2.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 8, 1998, U.S. Restaurant Properties, Inc. (the "Registrant")
acquired one Popeye's restaurant property located in Texas. The acquisition
was done pursuant to one asset purchase agreement. The purchase price equaled
$335,000 in cash and other capitalized costs of approximately $1,000. The
selling entity was Hub Hill, Inc., a Texas corporation. The acquisition was
funded by the Registrant's bank line of credit.
On August 10, 1998, the Registrant acquired one office building property
located in Texas. The acquisition was done pursuant to one asset purchase
agreement. The purchase price equaled $2,850,000 in cash and other
capitalized costs of approximately $27,000. The selling entity was Inwood
Plaza Joint Venture, a Texas Joint Venture. The acquisition was funded by
Registrant's bank line of credit and the assumption of a mortgage note
payable.
On August 3, 1998, the Registrant acquired 11 Applebee's Neighborhood Grill
and Bar restaurant properties located in Illinois and Iowa. The acquisition
was done pursuant to one asset purchase agreement. The purchase price equaled
$10,500,000 in cash and other capitalized costs of approximately $163,000.
The selling entity was Apple South, Inc., a Georgia corporation. The
acquisition was funded by the Registrant's bank line of credit.
On July 29, 1998, the Registrant acquired one Wendy's restaurant, one
Kentucky Fried Chicken restaurant and three regional restaurants and other
properties located in Kentucky, Maryland and Tennessee. The acquisition was
done pursuant to two purchase and sale agreements. The purchase price equaled
$2,367,183 in cash and other capitalized costs of approximately $89,000. The
selling entities were Shoney's, Inc., a Tennessee corporation and SHN
Properties, LLC, a Delaware limited liability company. The acquisition was
funded by the Registrant's bank line of credit.
On July 23, 1998, the Registrant acquired one Sonic Drive-In restaurant
property located in South Carolina. The acquisition was done pursuant to one
purchase and sale agreement. The purchase price equaled $508,700 in cash and
other capitalized costs of approximately $10,000. The selling entities were
Trustee Ralph L. Mason, u/t/a October 1, 1982 an Oklahoma Trust, Mack V.
Colt, Trustee of the Mack V. Colt Trust Agreement dated February 15, 1983 and
Mack C. Colt Trust FBO Ann V. Colt, Mack V. Colt Trustee, Trustees of the
Mack C. Colt Trust under Trust Agreement dated May 27, 1980, restated January
28, 1991. The acquisition was funded by cash proceeds from a property sale
and the Registrant's bank line of credit and sales proceeds from a property
sale.
On March 27, 1998, the Registrant acquired one Buca di Beppo restaurant
property located in Illinois from Buca (Wheeling), Inc., a Minnesota
corporation. The acquisition was done pursuant to one purchase and sale
agreement. The purchase price equaled $1,250,000 in cash and other
capitalized costs of approximately $13,000. This acquisition was previously
reported on Form 8-K dated June 24, 1998 and amended on August 21, 1998. This
property acquisition has subsequently been audited and that audit report is
being included in this Form 8-K. The acquisition was funded by the
Registrant's bank line of credit.
On various dates from April 15, 1998 though July 15, 1998, the Registrant
acquired six Arby's restaurant properties located in California, Michigan,
New Jersey and Pennsylvania from Sybra, Inc, a Michigan corporation and Sybra
of California, Inc., a California corporation (wholly-owned subsidiaries of
I.C.H. Corporation). These acquisitions were done pursuant to five purchase
and sale agreements. The aggregate purchase price equaled $4,475,000 in cash
and other capitalized costs of $7,000. Five of these acquisitions were
previously reported on Form 8-K dated June
2
<PAGE>
24, 1998 and amended August 21, 1998. The five previously reported property
acquisitions and the one property acquired on July 15, 1998 are leased to
Sybra, Inc. On each of those leases I.C.H. Corporation ("ICH") has guaranteed
the lease. ICH is a public registrant and the financial information
pertaining to ICH has been included in this Form 8-K. These acquisitions were
funded by the Registrant's bank line of credit and sales proceeds from a
property sale.
On various dates from July 1, 1998 through September 8, 1998, the Registrant
acquired nine properties consisting of one Schlotzsky's restaurant and seven
other regional restaurants and gas station properties and one billboard
property located in Arizona, Florida, Mississippi, Maryland, Michigan, and
Texas. The properties were acquired pursuant to nine purchase and sale
agreements. These properties were purchased for an aggregate cash purchase
price of approximately $5,703,000. These properties represent newly developed
properties and properties yet to be developed, which do not have any
historical operations. These are not considered to be an acquisition of a
business and consequently no financial information is presented herein on
these properties. The selling entities were Elektra Enterprises, Inc., a
Texas corporation, Branch Capital Partners, L.P., a Georgia limited
partnership, Southeast Valley Auto Mall, LLC, an Arizona limited liability
company, Goodman Road/I-55 Development Company, L.L.C., an Arkansas limited
liability company, Faison-Bowie Limited Partnership, a North Carolina limited
partnership, Long John Silver's, Inc., a Delaware corporation, Rosewood
Property Corporation, a Delaware corporation, East/West Partners, L.L.C., a
limited liability company, Robert L. Hopkins, a sole proprietor (d/b/a
Hopkins Outdoor Advertising). The cash portion of these acquisitions were
funded by the Registrant's bank line of credit and sales proceeds from a
property sale.
In addition, to the above acquisitions, 39 other properties (the "Other
Properties") were acquired during the period July 1, 1998 through September
8, 1998. These properties consist of 10 Phillips 66 gas station and
convenience stores, one Chevron gas station and convenience store, 26
regional restaurant and gas station and convenience store properties and two
billboard properties located in California, Georgia, Illinois, Missouri,
Rhode Island, Tennessee and Texas. The properties were purchased from
Woloohojian Realty Corp., a Rhode Island corporation, Kettle Restaurants,
Inc., a Texas corporation, Lincoln Trust Company, Trustee FBO M. Scott
Rohrman SEP IRA, Ricco Family Partners, Ltd., a Texas limited partnership,
B.C. Oil Ventures, L.L.C., a California limited liability company, West Cobb
Petroleum, L.L.C., a Georgia limited liability company, Atlantic Richfield
Company, a Delaware corporation, Phillips Petroleum Company, a Delaware
corporation, CRG Properties St. Louis, LLC, a Texas limited liability company
and Ahma Cahla, an individual. These properties were purchased for an
aggregate cash purchase price of approximately $23,000,000 and 3,212.43
operating partnership ("OP") units (667 valued at $26.5625 per unit and
2,545.43 valued at $27.125 per unit). The OP units may be exchanged for one
share of Common Stock of the Registrant. The Registrant's Common Stock price
on the transaction dates were used to value the OP units. The 667 and
2,545.43 OP units are guaranteed to have a value of $29.985 and $30,
respectively per OP unit two years from the transaction date. The cash
portion of these properties were funded by the Registrant's bank line of
credit.
The purchase prices, which were negotiated with the Sellers, were determined
through internal analysis by the Registrant of historical cash flows and/or
fair market values of the acquired Properties.
3
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
a)(3)
Statement of Revenues of the Property Sold to U.S. Restaurant
Properties, Inc. by Hub Hill, Inc. for the year ended December
31, 1997
Statement of Revenues and Certain Expenses of Property Sold to U.S.
Restaurant Properties, Inc. by Inwood Plaza Joint Venture for the
year ended December 31, 1997
Statement of Revenues and Direct Operating Expenses Applicable to the
Acquisition of Eleven Applebee's Neighborhood Grill and Bar
Properties by U.S. Restaurant Properties Operating L.P. for the
Year ended December 28, 1997
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties, Inc. (Shoney's
Acquisition) for the year ended December 31, 1997
Statement of Revenues of the Property Sold to U.S. Restaurant
Properties, Inc. by Ralph L. Mason Trust, Mack V. Colt Trust
and Mack C. Colt Trust FBO Ann V. Colt for the year ended
June 30, 1998
Statement of Revenues and Certain Expenses of BUCA, Inc. - Wheeling,
Illinois, for the period from May 31, 1997 (inception) through
June 28, 1998 Acquired by U.S. Restaurant Properties, Inc.
Financial information related to the acquisition of six restaurant
properties by U.S. Restaurant Properties, Inc. from Sybra, Inc.
and Sybra of California (wholly-owned subsidiaries of I.C.H.
Corporation).
b) Pro forma Financial Information
c) Exhibits
23 (a) Consent of Deloitte & Touche LLP
23 (b) Consent of KPMG Peat Marwick LLP
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying statement of revenues of the Property Sold
to U.S. Restaurant Properties, Inc. by Hub Hill, Inc. for the year ended
December 31, 1997. This financial statement is the responsibility of the
management of U.S. Restaurant Properties, Inc. Our responsibility is to
express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenues is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Form 8-K of U.S. Restaurant Properties, Inc.
Material amounts of expenses, described in Note 1 to the statement of
revenues, that would not be comparable to those resulting from the proposed
future operations of the property sold to U.S. Restaurant Properties, Inc.
are excluded and the statement is not intended to be a complete presentation
of the revenues and expenses of this property.
In our opinion, such statement of revenues presents fairly, in all material
respects, the revenues, as defined above, of the Property Sold to U.S.
Restaurant Properties, Inc. by Hub Hill, Inc. for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
September 28, 1998
5
<PAGE>
PROPERTY SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY HUB HILL, INC.
STATEMENT OF REVENUES
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
RENTAL INCOME
Rental Income $ 37,065
Cumulative write-off deferred rent (7,960)
--------
TOTAL RENTAL INCOME $ 29,105
--------
--------
</TABLE>
See Accompanying Notes to the Statement of Revenues.
6
<PAGE>
NOTES TO THE STATEMENT OF REVENUES RELATING TO THE PROPERTY SOLD TO U.S.
RESTAURANT PROPERTIES, INC. BY HUB HILL, INC.
1. Summary of Significant Accounting Policies
Nature of Operations
The accompanying statement of revenues includes one property acquired by
U.S. Restaurant Properties, Inc. from Hub Hill, Inc., a Texas corporation
(the "Company"). The statement does not include any revenues or expenses
related to any other properties owned or managed by the Company. The
property acquired is operated as a Popeye's restaurant. In accordance with
the Securities and Exchange Commission Rule 3-14, the statement does not
include expenses not comparable to the proposed future operations of the
property such as depreciation, interest, or any other costs that are not
directly associated with the property and accordingly, it is not intended
to be a complete presentation of revenues and expenses of the property.
There are no continuing operating expenses of the property for 1997 which
were incurred by the lessor.
2. Use of Estimates
The preparation of this statement of revenues in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and certain
expenses during a reporting period. Actual results could differ from those
estimates.
3. Rental Income
The property lease is a "triple net" lease which requires the lessee to pay
all property taxes, assessments, insurance, maintenance costs and other
charges related to maintenance, repair and operation of the property. The
lease specifies increases in lease payments. The recognition of rental
income has been straight-lined over the original lease term in accordance
with generally accepted accounting principles. In October 1997, the
original lease was modified with a new lease term ending July 31, 2004. As
a result of the modification, the cumulative deferred rent amount from the
original lease term has been shown as a reduction of rental income. On
January 2, 1998, the tenant exercised two five-year renewal options which
extended the lease through July 31, 2014. Certain information regarding the
property lease is set forth in the table below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
-------- ------- ---------- -----------
<S> <C> <C> <C> <C>
San Antonio, TX $39,756 Per year through 7/31/1998 None July 2014
With annual increases of
$480 each lease year
thereafter
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
lease as of December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 39,956
1999 40,436
2000 40,916
2001 41,396
2002 41,876
Thereafter 519,987
--------
$724,567
</TABLE>
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying statement of revenues and certain expenses of
the Property Sold to U.S. Restaurant Properties, Inc. by Inwood Plaza Joint
Venture for the year ended December 31, 1997. This financial statement is the
responsibility of the management of U.S. Restaurant Properties, Inc. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form 8-K of U.S. Restaurant Properties,
Inc.. Material amounts of expenses, described in Note 1 to the statement of
revenues and certain expenses, that would not be comparable to those resulting
from the proposed future operations of the property sold to U.S. Restaurant
Properties, Inc. are excluded and the statement is not intended to be a complete
presentation of the revenues and expenses of this property.
In our opinion, such statement of revenues and certain expenses presents fairly,
in all material respects, the revenues and certain expenses, as defined above,
of the Property Sold to U.S. Restaurant Properties, Inc. by Inwood Plaza Joint
Venture for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
October 5, 1998
8
<PAGE>
PROPERTY SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY INWOOD PLAZA JOINT VENTURE
STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
RENTAL INCOME
Rental income, net $391,987
Other property income 5,115
Cost reimbursement 15,000
--------
TOTAL REVENUES 412,102
Payroll and payroll taxes/benefits 21,758
Property management fees 16,672
Administration expenses 8,879
Repairs and maintenance 43,040
Utilities 81,833
Insurance 5,797
Property taxes 29,940
--------
TOTAL EXPENSES 207,919
--------
EXCESS OF REVENUES OVER EXPENSES $204,183
--------
--------
</TABLE>
See Accompanying Notes to the Statement of Revenues and Certain Expenses.
9
<PAGE>
NOTES TO THE STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE PROPERTY
SOLD TO U.S. RESTAURANT PROPERTIES, INC. BY INWOOD PLAZA JOINT VENTURE
1. Summary of Significant Accounting Policies
Nature of Operations
The accompanying statement of revenues and certain expenses includes one
property acquired by U.S. Restaurant Properties, Inc. from Inwood Plaza
Joint Venture, a Texas joint venture (the "Joint Venture"). The statement
does not include any revenues or expenses related to any other properties
owned or managed by the Joint Venture. The property acquired is an office
building. In accordance with the Securities and Exchange Commission Rule
3-14, the statement does not include expenses not comparable to the
proposed future operations of the properties such as depreciation,
interest, or any other costs that are not directly associated with the
property and accordingly, it is not intended to be a complete presentation
of revenues and expenses of the property.
2. Use of Estimates
The preparation of this statement of revenues and certain expenses in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of revenues and certain expenses during a reporting period. Actual
results could differ from those estimates.
3. Rental Income
The property leases building space to various tenants. In addition to base
rents under all leases the tenants are required to pay property taxes,
assessments, insurance, maintenance costs and other charges related to
maintenance, repair and operation of the property in excess of certain
thresholds specific to each lease that are incurred by the lessor. Cost
reimbursement revenue includes those costs reimbursed to the Joint Venture.
As of December 31, 1997, the lease terms ranged from one to four years,
with renewal options of up to five additional years. The following is a
schedule of minimum rental income on the leases as of December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 344,316
1999 275,775
2000 249,895
2001 139,278
2002 24,382
Thereafter 0
----------
$1,033,646
----------
----------
</TABLE>
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Apple South, Inc.:
We have audited the accompanying statement of revenues and direct operating
expenses applicable to the acquisition of eleven Applebee's Neighborhood Grill
and Bar properties by U.S. Restaurant Properties Operating L.P. (a majority
owned subsidiary of U.S. Restaurant Properties, Inc.) for the year ended
December 28, 1997. This financial statement is the responsibility of Apple
South, Inc.'s management. Our responsibility is to express an opinion on this
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and direct operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and for inclusion in the current report on
Form 8-K of U.S. Restaurant Properties, Inc. This statement is not intended to
be a complete presentation of revenues and expense of the eleven Applebee's
Neighborhood Grill and Bar properties acquired by U.S. Restaurant Properties,
Inc.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses described in note 1 applicable to the acquisition of the
eleven Applebee's Neighborhood Grill and Bar properties by U.S. Restaurant
Properties Operating L.P. for the year ended December 28, 1997, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
August 28, 1998
11
<PAGE>
APPLE SOUTH, INC.
Statement of Revenues and Direct Operating
Expenses Applicable to the Acquisition of Eleven
Applebee's Neighborhood Grill and Bar Properties
by U.S. Restaurant Properties Operating L.P.
Year Ended December 28, 1997
(In thousands)
<TABLE>
<CAPTION>
<S> <C>
Revenues $15,556
-------
Direct operating expenses:
Cost of sales 4,370
Wages and related expenses 3,998
Management salaries 1,468
Restaurant expense 905
Royalties and marketing fees paid to Applebee's International, Inc. 854
Other promotion and marketing 691
Training and pre-opening costs 656
Utilities 409
Rent and property taxes 362
Other 179
-------
Total direct operating expenses 13,892
-------
Excess of revenues over direct operating expenses $ 1,664
-------
-------
</TABLE>
See accompanying notes to the financial statement.
12
<PAGE>
APPLE SOUTH, INC.
Statement of Revenues and Direct Operating
Expenses Applicable to the Acquisition of Eleven
Applebee's Neighborhood Grill and Bar Properties
by U.S. Restaurant Properties Operating L.P.
Year Ended December 28, 1997
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
Apple South, Inc. (the "Company") is a multi-concept restaurant
company owning and operating restaurants in 30 states plus the
District of Columbia. At December 28, 1997, the Company owned and
operated 264 Applebee's Neighborhood Grill and Bar restaurants and 165
other restaurants operating under various names. The Company owns all
concepts on a proprietary basis except Applebee's, which is
franchised.
(b) BASIS OF PRESENTATION
The accompanying statement of revenues and direct operating expenses
applicable to the acquisition of eleven Applebee's Neighborhood Grill
and Bar Properties ("Applebee's") by U.S. Restaurant Properties
Operating L.P. ("U.S. Restaurant") includes only the eleven Applebee's
acquired by U.S. Restaurant. U.S. Restaurant only acquired the real
estate of the 11 aforementioned Applebee's. The statement does not
include any revenues or expenses related to the remaining properties
owned by the Company. The statement does not include interest expense,
depreciation and amortization, corporate general and administrative
expenses, or income taxes.
(c) FISCAL YEAR
The Company's fiscal year is 52-or 53-week year ending on the last
Sunday closest to December 31.
(d) REVENUE
Revenue is recognized at time of retail sale, whether paid by cash or
credit card.
(e) ROYALTIES AND MARKETING FEES
Royalties of 4% and marketing fees of 1.5% are paid to Applebee's
International, Inc. based on a percentage of revenue in accordance
with the franchise agreement. The Company must also spend an
additional 1.5% of revenue for local marketing in accordance with the
franchise agreement.
(f) ADVERTISING
The Company generally expenses advertising over the period covered by
the related promotions.
(g) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions related to the reported amounts of revenue and
expenses. Actual results may ultimately differ from estimates.
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying combined statement of revenues and certain
expenses of the Selected Properties Sold to U.S. Restaurant Properties, Inc.
(Shoney's Acquisition) for the year ended December 31, 1997. This financial
statement is the responsibility of the management of U.S. Restaurant Properties,
Inc. Our responsibility is to express an opinion on this statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K of U.S.
Restaurant Properties, Inc. Material amounts of expenses, described in Note 1 to
the combined statement of revenues and certain expenses, that would not be
comparable to those resulting from the proposed future operations of the
properties sold to U.S. Restaurant Properties, Inc. are excluded and the
statement is not intended to be a complete presentation of the combined revenues
and expenses of these properties.
In our opinion, such combined statement of revenues and certain expenses
presents fairly, in all material respects, the combined revenues and certain
expenses, as defined above, of the Selected Properties Sold to U.S. Restaurant
Properties, Inc. (Shoney's Acquisition) for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
October 5, 1998
14
<PAGE>
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. (SHONEY'S
ACQUISITION) COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
RENTAL INCOME
Minimum rent $192,141
Percentage rent 10,912
Cost reimbursement 15,157
--------
TOTAL RENTAL INCOME 218,210
DIRECT EXPENSES - PROPERTY TAXES 26,019
--------
TOTAL DIRECT EXPENSES 26,019
--------
NET RENTAL INCOME $192,191
--------
--------
</TABLE>
See Accompanying Notes to the Combined Statement of Revenues and Certain
Expenses.
15
<PAGE>
NOTES TO THE COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. (SHONEY'S
ACQUISITION)
1. Summary of Significant Accounting Policies
Nature of Operations
The accompanying combined statement of revenues and certain expenses
includes five properties acquired by U.S. Restaurant Properties, Inc. from
Shoney's, Inc., a Tennessee Corporation and SHN Properties, L.L.C., a
Delaware limited liability company, collectively (the "Company"). The
statement does not include any revenues or expenses related to any other
properties owned or managed by the Company. The properties acquired are
operated as a Wendy's restaurant, KFC restaurant, Lee's Chicken restaurant
and one is operated as a financial services business. One location in
Baltimore Maryland was vacant during the calendar year 1997. In accordance
with the Securities and Exchange Commission Rule 3-14, the combined
statement of revenues and certain expenses does not include expenses not
comparable to the proposed future operations of the properties such as
depreciation, interest, or any other costs that are not directly associated
with the properties and accordingly, it is not intended to be a complete
presentation of combined revenues and expenses of the properties.
2. Use of Estimates
The preparation of this combined statement of revenues and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of combined revenues and certain expenses during a reporting
period. Actual results could differ from those estimates.
3. Rental Income
The leases on these properties are "triple net" leases which require the
lessee to pay all property taxes, assessments, insurance, maintenance costs
and other charges related to maintenance, repair and operation of the
properties. Certain of the leases specify increases in lease payments. The
recognition of rental income has been recorded on a straight-lined basis
over the original lease terms in accordance with generally accepted
accounting principles. Cost reimbursement revenue includes costs
reimbursed by the tenant for property taxes on lease revenues. Certain
information regarding each of the property leases is set forth in the
table below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Clarksville, TN $25,200 Per year through 11/30/1999 None November 2002
26,400 Per year through 11/30/2002
1660 Whitehead Ct. 112,000 Per year through 02/07/2002 6% of sales less February 2008 with
Baltimore, MD 117,000 Per year through 02/07/2008 minimum rent two five-year renewal
options
1628 Whitehead Ct. Vacant
Baltimore, MD
4419 Cane Run Road 38,468 Per year through 10/25/1999 October 2001 with
Louisville, KY On October 26, 1999 and every three years after two five-year renewal
that the minimum base rent will be increased but options
not decreased by the Consumer Price Index, but
6% of sales less not to increase greater than
the average of 2.5% minimum rent per year from
previous minimum rent.
2124 W. Broadway 23,415 Per year through 12/31/2004 6% of sales less December 2004 with
Louisville, KY minimum rent four five-year renewal
options
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
leases as of December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 199,083
1999 199,183
2000 200,283
2001 193,871
2002 164,198
Thereafter 629,873
------------
$ 1,586,491
------------
------------
</TABLE>
16
<PAGE>
NOTES TO THE COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. (SHONEY'S
ACQUISITION) (CONTINUED)
4. Subsequent Events
On January 18, 1998, the Company leased the vacant property located in
Baltimore, Maryland to a third party. Certain information regarding this
property lease is set forth in the table below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1628 Whitehead Ct. $ 45,000 Per year through 01/21/2001 None January 2008 with
Baltimore, MD 46,350 Per year through 01/21/2002 two five-year renewal
47,741 Per year through 01/21/2003 options.
49,193 Per year through 01/21/2004
50,648 Per year through 01/21/2005
52,167 Per year through 01/21/2006
53,732 Per year through 01/21/2007
55,344 Per year through 01/21/2008
</TABLE>
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the statement of revenues of the Property Sold to U.S.
Restaurant Properties, Inc. by Ralph L. Mason Trust, Mack V. Colt Trust and
Mack C. Colt Trust FBO Ann V. Colt for the year ended June 30, 1998. This
financial statement is the responsibility of the management of U.S.
Restaurant Properties, Inc. Our responsibility is to express an opinion on
this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenues is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Form 8-K of U.S. Restaurant Properties, Inc.
Material amounts of expenses, described in Note 1 to the statement of
revenues, that would not be comparable to those resulting from the proposed
future operations of the property sold to U.S. Restaurant Properties, Inc.
are excluded and the statement is not intended to be a complete presentation
of the revenues and expenses of this property.
In our opinion, such statement of revenues presents fairly, in all material
respects, the revenues, as defined above, of the Property Sold to U.S.
Restaurant Properties, Inc. by Ralph L. Mason Trust, Mack V. Colt Trust and
Mack C. Colt Trust FBO Ann V. Colt for the year ended June 30, 1998, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
October 5, 1998
18
<PAGE>
PROPERTY SOLD TO U.S. RESTAURANT PROPERTIES, INC. RALPH L. MASON TRUST,
MACK V. COLT TRUST AND MACK C. COLT TRUST FBO ANN V. COLT
STATEMENT OF REVENUES
YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C>
TOTAL RENTAL INCOME $ 57,229
-----------
-----------
</TABLE>
See Accompanying Notes to the Statement of Revenues.
19
<PAGE>
NOTES TO THE STATEMENT OF REVENUES RELATING TO THE PROPERTY SOLD TO U.S.
RESTAURANT PROPERTIES, INC. BY RALPH L. MASON TRUST, MACK V. COLT TRUST AND
MACK C. COLT TRUST FBO ANN V. COLT
1. Summary of Significant Accounting Policies
Nature of Operations
The accompanying statement of revenues includes one property acquired by
U.S. Restaurant Properties, Inc. from Trustee Ralph L. Mason, u/t/a October
1, 1982 an Oklahoma Trust (as to an undivided 50%), Mack V. Colt, Trustee
of the Mack V. Colt Trust Agreement dated February 15, 1983 (as to an
undivided 25%), and Mack C. Colt Trust FBO Ann V. Colt, Mack V. Colt,
Trustee, Trustees of the Mack C. Colt Trust Under Trust Agreement dated May
27, 1980, restated January 28, 1991 (as to an undivided 25%) collectively
referred to as (the "Trustees"). The statement does not include any
revenues or expenses related to any other properties owned or managed by
the Trustees. The property acquired is operated as a Sonic Drive-In
restaurant. In accordance with the Securities and Exchange Commission Rule
3-14, the statement does not include expenses not comparable to the
proposed future operations of the property such as depreciation, interest,
or any other costs that are not directly associated with the property and
accordingly, it is not intended to be a complete presentation of revenues
and expenses of the property. There are no continuing operating expenses of
the properties for the fiscal year ended June 30, 1998 which were incurred
by the lessor.
2. Use of Estimates
The preparation of this statement of revenues in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and certain
expenses during a reporting period. Actual results could differ from those
estimates.
3. Rental Income
The property lease is a "triple net" lease which requires the lessee to pay
all property taxes, assessments, insurance, maintenance costs and other
charges related to maintenance, repair and operation of the property.
Certain information regarding the property lease is set forth in the table
below.
<TABLE>
<CAPTION>
MINIMUM
ANNUAL PERCENTAGE TERMINATION
LOCATION RENTAL RENTAL DATE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Barnwell, SC $ 57,229 Per year through 6/15/2007 5% of sales greater than June 2007 with
$95,382 monthly. two five-year renewal
options.
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
lease as of June 30, 1998:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 57,229
2000 57,229
2001 57,229
2002 57,229
2003 57,229
Thereafter 226,533
-------------
$ 512,678
-------------
-------------
</TABLE>
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the statement of revenues and certain expenses (defined as
being operating revenues less direct operating expenses) of BUCA, Inc. -
Wheeling, Illinois, for the period from May 31, 1997 (inception) through June
28, 1998, which property was acquired by U.S. Restaurant Properties, Inc.
(USRP). This financial statement is the responsibility of USRP. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenues and
certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form 8-K of USRP. Material amounts,
described in Note 1 to the statement of revenues and certain expenses, that
would not be comparable to those resulting from the proposed future
operations of the property sold to USRP are excluded and the statement is not
intended to be a complete presentation of revenues and expenses of the
restaurant.
In our opinion, such statement of revenues and certain expenses presents
fairly, in all material respects, the revenues and certain expenses, as
defined above, of BUCA, Inc. - Wheeling, Illinois for the period May 31, 1997
(inception) through June 28, 1998, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
September 15, 1998
21
<PAGE>
BUCA, INC. - WHEELING, ILLINOIS
STATEMENT OF REVENUES AND CERTAIN EXPENSES
PERIOD FROM MAY 31, 1997 (INCEPTION) THROUGH JUNE 28, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SALES $ 1,866,715
DIRECT COSTS AND EXPENSES:
Cost of food 562,996
Labor 769,848
Other direct operating expenses 437,149
Management fees 32,000
-------------------
Total direct costs and expenses 1,801,993
-------------------
EXCESS OF STORE SALES OVER CERTAIN DIRECT
OPERATING EXPENSES $ 64,722
-------------------
-------------------
</TABLE>
See accompanying notes to statement of revenues and certain expenses.
22
<PAGE>
BUCA, INC. - WHEELING, ILLINOIS
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
PERIOD FROM MAY 31, 1997 (INCEPTION) THROUGH JUNE 28, 1998
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The statement of revenues and certain expenses includes the operating
results of the BUCA, Inc. - Wheeling, Illinois restaurant, which property
was acquired by U.S. Restaurant Properties, Inc. (USRP). USRP did not
purchase the restaurant operations. The statement does not include any
revenues or expenses related to any other properties owned by BUCA, Inc. In
accordance with the Securities and Exchange Commission Regulation S-X,
Article 3-14, the statement does not include expenses not comparable to the
proposed future operations of the property such as depreciation, interest,
income taxes, or any other costs that are directly associated with the
property, and, accordingly, it is not intended to be a complete
presentation of revenues and expenses of the restaurant.
2. SIGNIFICANT ACCOUNTING POLICIES
Sales are recorded at the time of the retail sale.
Other direct operating expenses represent kitchen and restaurant supplies,
linens, uniforms, rent, utilities, advertising, licenses, and other costs
directly associated with the restaurant operations.
The BUCA, Inc. - Wheeling, Illinois restaurant's fiscal year ends on the
Sunday on or preceding December 31.
The preparation of the statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the expected amounts of revenues and certain expenses during a
reporting period. Actual results could differ from those estimates.
3. MANAGEMENT FEES
Management fees are paid to Parasole Restaurant Holdings, Inc., a related
party of BUCA, Inc. These fees represent the restaurant's allocable share
of management services related to accounting and other operating costs.
4. LEASE ON PROPERTY
On August 29, 1997, USRP entered into a lease with BUCA, Inc. for the
rental of the restaurant property it purchased. The term of the lease is 20
years expiring on March 30, 2018. The annual rent is $146,875 per year
through lease year three. On the first day of lease year four the annual
rent will be increase by 6% of the immediately preceding annual base rent.
The base rent will increase every third anniversary thereafter by 6% over
the immediately preceding annual base rent.
If certain conditions are met, as defined in the lease agreement, USRP will
make a disbursement of $450,000 for improvements to the restaurant
property. Commencing on the date of disbursement, the annual base rent
would be increased to $199,750.
23
<PAGE>
Financial information related to the acquisition of six restaurant properties by
U. S. Restaurant Properties, Inc. from Sybra, Inc. and Sybra of California
(wholly-owned subsidiaries of I.C.H. Corporation) ("ICH").
ICH is a public registrant with the Securities and Exchange Commission. With
respect to ICH, as reported by its management, net loss totaled $(864,000) for
the year ended December 31, 1997 and unaudited net income totaled $824,000 for
the six months ended June 30, 1998. ICH reported total assets of $75,264,000 and
stockholders' equity of $11,185,000 as of December 31, 1997 and unaudited total
assets of $81,859,000 and stockholders' equity of $12,035,000 as of June 30,
1998. Persons interested in receiving copies of ICH's publicly issued financial
statements for the year ended December 31, 1997 and for the six months ended
June 30, 1998 can do so by contacting ICH Corporation at: PO Box 2699, Suite
400, Dallas, TX 75221 or by accessing the Securities and Exchange Commission's
EDGAR archives through their web site located at: http://www.sec.gov
24
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following June 30, 1998 unaudited Pro Forma Condensed Consolidated
Balance Sheet of U.S. Restaurant Properties, Inc. (the "Company") consists of
the Company's June 30, 1998 historical balance sheet adjusted on a pro forma
basis to reflect as of June 30, 1998: (a) the acquisition of 59 operating
properties for $40,524,000 between July 1, 1998 and September 8, 1998, (b)
the acquisition of one newly constructed and eight undeveloped properties for
$5,703,000 between July 1, 1998 and September 8, 1998, (c) the sale of five
properties for $4,434,000 between July 1, 1998 and September 8, 1998, and (d)
the additional borrowings required to purchase the properties acquired. The
unaudited Pro Forma Condensed Consolidated Balance Sheet is not necessarily
indicative of what the actual financial position of the Company would have
been at June 30, 1998 had all of these transactions occurred as of such date
and it does not purport to represent the future financial position of the
Company.
The unaudited Pro Forma Condensed Consolidated Statement of Income for the
year ended December 31, 1997 is presented as if the following had occurred as of
January 1, 1997: (a) the acquisition of 277 properties for $182,396,000
including the market value of 680,695 shares of the Company's Common Stock
issued in connection with acquisitions and the sale of eight properties for
$5,822,000 on various dates between January 1, 1997 and December 31, 1997; (b)
the acquisition of 161 properties including 40 newly constructed and undeveloped
properties for $128,761,000 including the market value of 3,212.43 operating
partnership units ("OP") issued in connection with acquisitions between January
1, 1998 and September 8, 1998; (c) the sale of seven properties for $5,747,000
between January 1, 1998 and September 8, 1998; (d) the issuance of $111,000,000
of 7.15% fixed rate debt; (e) the issuance of 1,434,831 shares of common
stock in five separate transactions to individual investors with net proceeds
of $25,000,000; (f) the additional borrowings required to purchase the
properties; (g) the preferred stock dividends required and the reduction of
interest expense as a result of the preferred stock offering in November 1997
based on the offering proceeds to reduce the total debt outstanding by
$87,622,000; and (h) the three-for-two stock split on October 30, 1997.
Proceeds from the property sales and stock issuances were used to finance the
property acquisitions. The unaudited Pro Forma Condensed Consolidated
Statement of Income is not necessarily indicative of what the actual results
of operations of the Company would have been assuming the transactions
described above had been completed as of January 1, 1997, nor do they purport
to represent the results of operations for future periods.
The unaudited Pro Forma Condensed Consolidated Statement of Income for the
six months ended June 30, 1998 is presented as if the following had occurred as
of January 1, 1998: (a) the acquisition of 161 properties including 40 newly
constructed and undeveloped properties for $128,761,000 including the market
value of 3,212.43 operating partnership units ("OP") issued in connection with
acquisitions between January 1, 1998 and September 8, 1998, (b) the sale of
seven properties for $5,747,000 between January 1, 1998 and September 8, 1998
and (c) the issuance of $111,000,000 of 7.15% fixed rate debt and related
financing transactions. The unaudited Pro Forma Condensed Consolidated Statement
of Income is not necessarily indicative of what the actual results of operations
of the Company would have been assuming the transactions described above had
been completed as of January 1, 1998, nor do they purport to represent the
results of operations for future periods.
Base rents are recorded in the attached pro forma statements of income on a
straight-line basis from the date of acquisition to the termination of the lease
which may differ from historical straight-line rents due to the different lease
periods. Percentage rents are excluded from the following pro forma financial
statements since the required information for all properties and for all periods
is not available.
25
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(Unaudited)
(Dollars In thousands)
<TABLE>
<CAPTION>
Operating Newly
Historical Property Constructed
6/30/98 Acquisitions(a) Acquisitions(b) Sales(c) Pro Forma
---------- --------------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Property, net
Land $145,829 $13,117 $5,388 $(1,466) $162,868
Building and leasehold
improvements 256,773 25,298 315 (2,722) 279,664
Machinery and equipment 5,599 2,109 (150) 7,558
Less: Accumulated Depreciation (20,025) 150 (19,875)
Cash and cash equivalents 8,781 8,781
Cash restricted 1,332 (72) (560) 700
Rent and other receivables, net 6,480 6,480
Prepaid expenses and purchase
deposits 2,237 (224) (118) 1,895
Notes receivable 10,000 750 10,750
Mortgage note receivable 6,307 6,307
Net investment in direct financing
leases 12,416 12,416
Intangibles, net 11,923 11,923
---------- --------------- --------------- -------- ---------
$447,652 $40,978 $5,025 $(4,188) $489,467
---------- --------------- --------------- -------- ---------
---------- --------------- --------------- -------- ---------
Accounts payable and accrued
liabilities $ 5,294 $ 190 $6 $ (19) $ 5,471
Unearned contingent rent 468 468
Deferred gain on sale of property 555 555
Lines of credit 67,000 39,626 5,019 (4,169) 107,476
Notes payable 150,593 150,593
Mortgage note payable 0 1,075 1,075
Capitalized lease obligations 118 118
Minority interest in operating
partnership 19,172 87 19,259
Stockholders' Equity 204,452 204,452
---------- --------------- --------------- -------- ---------
$447,652 $40,978 $5,025 $(4,188) $489,467
---------- --------------- --------------- -------- ---------
---------- --------------- --------------- -------- ---------
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET.
26
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects pro forma adjustments for certain 1998 acquisitions completed for
the period July 1, 1998 through September 8, 1998 which consist of the
purchase of 59 operating properties and the borrowings required to complete
the purchase of these properties as follows:
<TABLE>
<CAPTION>
Number of
Properties
------------ ------------
<S> <C> <C>
Applebee's 11 $ 10,663
Shoney's Acquisition 5 2,456
Inwood Plaza 1 2,887
I.C.H. Corporation - Arby's 1 577
Ralph Mason and Mack C. Colt
Trusts 1 518
Hub Hill 1 336
Other 39 23,087
----------------------------------
59 40,524
------------
------------
Add notes receivable 750
Less restricted cash (72)
Less June 30, 1998 prepaid expenses and
purchase deposits relating to acquisitions (224)
Less tenant security deposit and escrows
received (190)
Less mortgage assumed (1,075)
Less operating partnership units issued (87)
-----------
Increase in line of credit and notes payable $ 39,626
-----------
-----------
Costs of the acquisitions are allocated as follows:
Land $ 13,117
Buildings and leasehold improvements 25,298
Machinery and equipment 2,109
-----------
$ 40,524
-----------
-----------
</TABLE>
The respective purchase price for the properties has been allocated between land
and buildings and leasehold improvements, on a preliminary basis. Final
determination of the proper allocation between these accounts will be made prior
to finalizing the financial statements for the year ended December 31, 1998.
Management does not expect material adjustments to occur.
27
<PAGE>
(b) Reflects pro forma adjustments for certain 1998 acquisitions completed for
the period July 1, 1998 through September 8, 1998 which consist of the
purchase of one newly constructed and eight undeveloped properties and the
borrowings required to complete the purchase of these properties as
follows:
<TABLE>
<CAPTION>
Number of
Properties
--------------- ---------------
<S> <C> <C>
Schlotzsky's 1 $ 498
Other 8 5,205
--------------- ---------------
9 5,703
---------------
---------------
Less restricted cash (560)
Less June 30, 1998 prepaid expenses and
purchase deposits relating to acquisitions (118)
Less tenant security deposit and escrow
received (6)
---------------
Increase in line of credit and notes payable $ 5,019
---------------
---------------
Costs of the acquisitions are allocated as follows:
Land $ 5,388
Buildings and leasehold improvements 315
---------------
$ 5,703
---------------
---------------
</TABLE>
The respective purchase price for the properties has been allocated between land
and buildings and leasehold improvements, on a preliminary basis. Final
determination of the proper allocation between these accounts will be made prior
to finalizing the financial statements for the year ending December 31, 1998.
Management does not expect material adjustments to occur.
(c) Reflects pro forma adjustments for certain 1998 sales completed for the
period July 1, 1998 through September 8, 1998 which consist of the sale of
five operating properties and the reduction in borrowings as a result of
these sales as follows:
<TABLE>
<CAPTION>
Number of
Properties
--------------- ---------------
<S> <C> <C>
Schlotzsky's 2 $ (1,705)
Other 3 (2,483)
--------------- ---------------
5 (4,188)
---------------
---------------
Less tenant security deposit and escrow
received 19
---------------
Decrease in line of credit and notes payable $ (4,169)
---------------
---------------
Costs of the acquisitions are allocated as follows:
Land $ (1,466)
Buildings and leasehold improvements (2,722)
Machinery and equipment (150)
Accumulated depreciation 150
---------------
$ (4,188)
---------------
---------------
</TABLE>
28
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE/UNIT DATA)
<TABLE>
<CAPTION>
1997 Jan-June 1998
Acquisitions Preferred Acquisitions July-September
ACTUAL and Stock and 8, 1998
12/31/97 Sales (a) Offering Sales Sales
------------ ------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 35,584 $ 12,180 $ -- $ 7,915 (c) $ (575) (d)
Expenses
Ground Lease expense 2,488 514 -- -- --
Depreciation and
amortization 9,415 3,590 -- 2,191 (n) (157) (n)
General and administrative 3,590 609 -- -- --
Interest expense 10,011 5,930 (6,572)(b) -- --
------------ ------------- ----------- -------------- ---------------
Total expenses 25,504 10,643 (6,572) 2,191 (157)
------------ ------------- ----------- -------------- ---------------
Income before gain on sale of
property, minority interest
and unusual items 10,080 1,537 6,572 5,724 (418)
------------ ------------- ----------- -------------- ---------------
Minority interest in income (202) -- -- -- --
Gain on sale of property 869 -- -- -- --
Termination of management
contract (19,220) -- -- -- --
REIT conversion costs (920) -- -- -- --
------------ ------------- ----------- -------------- ---------------
Net income (loss) (9,393) $ 1,537 $ 6,572 $ 5,724 $(418)
------------- ----------- -------------- ---------------
------------- ----------- -------------- ---------------
Preferred stock dividend (868) (6,234)(b)
------------
Net loss allocable to
Common Stock/unitholders $ (10,261)
------------
------------
Avg. no. of shares/units o/s
Basic 11,693
------------
------------
Diluted 11,693
------------
------------
Net loss per share/unit
Basic $ (0.88)
------------
------------
Diluted $ (0.88)
------------
------------
</TABLE>
<TABLE>
<CAPTION>
Inwood Shoney's
Hub Hill Plaza Applebee's Acquisition
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Total Revenues $ 44 (e) $ 408 (f) $ 1,446 (g) $ 252 (h)
Expenses
Ground Lease expense -- -- 212 (g) --
Depreciation and
amortization 13 (n) 108 (n) 452 (n) 69 (n)
General and administrative -- 192 (f) -- --
Interest expense -- -- -- --
---------- ----------- ----------- ------------
Total expenses 13 300 664 69
---------- ----------- ----------- ------------
Income before gain on sale of
property, minority interest
and unusual items 31 108 782 183
---------- ----------- ----------- ------------
Minority interest in income -- -- -- --
Gain on sale of property -- -- -- --
Termination of management
contract -- -- -- --
REIT conversion costs -- -- -- --
---------- ----------- ----------- ------------
Net income (loss) $ 31 $ 108 $ 782 $ 183
---------- ----------- ----------- ------------
---------- ----------- ----------- ------------
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
continued on next page
29
<PAGE>
xxxxxxxx
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE/UNIT DATA)
<TABLE>
<CAPTION>
Ralph Mason,
Mack V. Colt
and
Mack C. Colt ICH
Trusts BUCA Corporation
------------- ------------ -------------
<S> <C> <C> <C>
Total Revenues $ 57 (i) $ 189 (j) $ 428 (k)
Expenses
Ground Lease expense -- -- --
Depreciation and
amortization 13 (n) 47 (n) 151 (n)
General and
administrative -- -- --
Interest expense -- -- --
--------- ------------ -------------
Total expenses 13 47 151
--------- ------------ -------------
Income before gain on sale
of property, minority
interest and unusual items 44 142 277
--------- ------------ -------------
Minority interest in income -- -- --
Gain on sale of property -- -- --
Termination of management
contract -- -- --
REIT conversion costs -- -- --
--------- ------------ -------------
Net income (loss) $ 44 $ 142 $ 277
--------- ------------ -------------
--------- ------------ -------------
<CAPTION>
Newly
Constructed Other Pro Forma PRO FORMA
Properties Properties Adjustment 12/31/97
------------- -------------- ------------- ----------
<S> <C> <C> <C> <C>
Total Revenues $ 76 (l) $ 2,825(m) $ -- $ 60,829
Expenses
Ground Lease expense 5 (l) 12(m) -- 3,231
Depreciation and
amortization 16 (n) 806(n) -- 16,714
General and
administrative -- -- -- 4,391
Interest expense -- -- 8,475 (o) 17,844
------------- -------------- ------------ ----------
Total expenses 21 818 8,475 42,180
------------- -------------- ------------ ----------
Income before gain on sale
of property, minority
interest and unusual items 55 2,007 (8,475) 18,649
Minority interest in income -- -- (172) (p) (374)
Gain on sale of property -- -- -- 869
Termination of management
contract -- -- -- (19,220)
REIT conversion costs -- -- -- (920)
------------- -------------- ------------ ----------
Net income (loss) $ 55 $ 2,007 $ (8,647) (996)
------------- -------------- ------------
------------- -------------- ------------
Preferred stock dividend (7,102)
----------
Net loss allocable to
Common Stock/unitholders $ (8,098)
----------
Avg. no. of shares/units o/s
Basic 12,631
----------
----------
Diluted 12,631
----------
----------
Net loss per share/unit
Basic $ (.64)
----------
----------
Diluted $ (.64)
----------
----------
</TABLE>
30
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(a) Reflects pro forma adjustment to operations relating to the period between
January 1, 1997 and the date of acquisition for base and percentage rent
for the 1997 acquisitions comprised of 277 properties acquired on various
dates from January 1, 1997 through December 31, 1997 and the sale of eight
properties on various dates from January 1, 1997 through December 31, 1997.
(b) Reflects pro forma adjustment for the issuance of preferred stock. Proceeds
of which were used to finance the acquisitions.
(c) Reflects pro forma adjustment to operations relating to base rent for the
1998 acquisitions comprised of 87 properties acquired and two properties
sold on various dates from January 1, 1998 through June 30, 1998.
(d) Reflects pro forma adjustment to operations for historical financial
results for five properties sold on various dates from July 1, 1998 through
September 8, 1998.
(e) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Hub Hill, Inc. acquisition
comprised of one property acquired on September 8, 1998. See statement of
revenues included herein.
(f) Reflects pro forma adjustment to operations relating to base rent and
property operating expenses based on historical financial information for
the Inwood Plaza acquisition comprised of one property acquired on August
10, 1998. See statement of revenues and certain expenses included herein.
(g) Reflects pro forma adjustment to operations relating to base rent based on
executed lease information for the Applebee's Neighborhood Grill and Bar
properties comprised of 11 properties acquired on August 3, 1998. See
statement of revenues and certain expenses included herein.
(h) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Shoney's Acquisition comprised of
five properties acquired on July 29, 1998. See combined statement of
revenues and certain expenses included herein.
(i) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Ralph Mason, Mack C. Colt and Mack
V. Colt Trusts acquisition comprised of one property acquired on July 23,
1998. See statement of revenues included herein.
(j) Reflects pro forma adjustment to operations relating to base rent based on
executed lease information for the Buca acquisition comprised of one
property acquired on March 27, 1998. See statement of revenues and certain
expense included herein.
(k) Reflects pro forma adjustment to operations relating to base rent based on
executed lease information for the Sybra, Inc. and Sybra of California,
Inc. (wholly-owned subsidiaries of I.C.H. Corporation) acquisition
comprised of six properties acquired on various dates between April 15,
1998 and July 15, 1998.
(l) Reflects pro forma adjustment to operations based on executed lease
information for the newly constructed and undeveloped acquisitions
comprised of nine properties acquired on various dates from July 1, 1998
through September 8, 1998. These are not considered to be an acquisition of
a business and consequently no financial information is presented herein on
these properties. Leases on these properties may have been entered into
subsequent to their development or redevelopment and the properties revenue
therefrom is included in the pro forma statement of income.
31
<PAGE>
(m) Reflects pro forma adjustment to operations relating to base rent based on
newly executed lease and historical financial information for 39 other
properties acquired on various dates from July 1, 1998 through September 8,
1998.
(n) Reflects pro forma increase in depreciation expense related to the purchase
price of the respective properties or decrease in depreciation expense due
to the sale of the respective properties. Depreciation is computed using
the straight-line method over the estimated useful lives of building,
leasehold improvements, machinery and equipment which range from 10 to 20
years.
(o) Reflects the pro forma adjustment to interest expense as a result of the
purchase of the respective properties. Pro forma interest expense is based
on the increase in debt outstanding and borrowings for payment of
distributions on units issued on a pro forma basis using interest rates
based on the Company's credit arrangements which are as follows:
<TABLE>
<CAPTION>
Principal Interest Rate
<S> <C> <C>
Series A Senior Secured Guaranteed Notes $ 12,500,000 8.06%
Series B Senior Secured Guaranteed Notes 27,500,000 8.30%
Fixed Rate Debt 111,000,000 7.15%
Line of credit 107,000,000 7.50%
Mortgage note payable 1,075,000 8.00%
</TABLE>
(p) Reflects pro forma allocation of operating income to minority interest.
32
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Jan-June 1998
Acquisitions July-September 8,
ACTUAL and 1998
6/30/98 Sales Sales Hub Hill
------- ------------- ----------------- --------
<S> <C> <C> <C> <C>
Total Revenues $27,416 $1,357(a) $(288)(b) $ 22(c)
Expenses
Ground Lease expense 1,468 -- -- --
Depreciation and amortization 7,060 462(l) (80)(l) 6(l)
General and administrative 2,198 -- -- --
Interest expense 7,132 -- -- --
------- ------ ----- ----
Total expenses 17,858 462 (80) 6
------- ------ ----- ----
Income before gain on sale of property,
minority interest, unusual item,
extraordinary item and other
9,558 895 (208) 16
------- ------ ----- ----
Gain on sale of property 457 -- -- --
Equity in net income (loss) of affiliates (56) -- -- --
Minority interest in operating
Partnership net income (503) -- -- --
Loss on early extinguishment of debt (190) -- -- --
------- ------ ----- ----
Net income 9,266 $ 895 $(208) $ 16
------ ----- ----
------ ----- ----
Preferred stock dividend (3,551)
-------
Net income allocable to
Common Stockholders $ 5,715
-------
-------
Avg. no. of shares o/s
Basic 12,938
-------
-------
Diluted 13,124
-------
-------
Net income per share
Basic $0.44
-------
-------
Diluted $0.44
-------
-------
<CAPTION>
Inwood Shoney's
Plaza Applebee's Acquisition
------ ---------- -----------
<S> <C> <C> <C>
Total Revenues $204(d) $722(e) $126(f)
Expenses
Ground Lease expense -- 106(e) --
Depreciation and amortization 54(l) 226(l) 35(l)
General and administrative 96(d) -- --
Interest expense -- -- --
---- ---- ----
Total expenses 150 332 35
---- ---- ----
Income before gain on sale of property,
minority interest, unusual item,
extraordinary item and other 54 390 91
---- ---- ----
Gain on sale of property -- -- --
Equity in net income (loss) of affiliates -- -- --
Minority interest in operating
Partnership net income -- -- --
Loss on early extinguishment of debt -- -- --
---- ---- ----
Net income $ 54 $390 $ 91
---- ---- ----
---- ---- ----
Preferred stock dividend
Net income allocable to
Common Stockholders
Avg. no. of shares o/s
Basic
Diluted
Net income per share
Basic
Diluted
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
continued on next page
33
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Ralph Mason,
Mack V. Colt and
Mack C. Colt ICH
Trusts BUCA Corporation
------------ ----- -----------
<S> <C> <C> <C>
Total Revenues $ 29(g) $45(h) $153(i)
Expenses
Ground Lease expense -- -- --
Depreciation and amortization 8(l) 12(l) 54(l)
General and administrative -- -- --
Interest expense -- -- --
---- --- ----
Total expenses 8 12 54
---- --- ----
Income before gain on sale of
property, minority interest, unusual
item, extraordinary item
and other 21 33 99
---- --- ----
Gain on sale of property -- -- --
Equity in net income (loss) of affiliates -- -- --
Minority interest in operating
Partnership net income -- -- --
Loss on extinguishment of debt -- -- --
---- --- ----
Net income $ 21 $33 $99
---- --- ----
---- --- ----
Preferred stock dividend
Net income allocable to
Common Stockholders
Avg. no. of shares o/s
Basic
Diluted
Net income per share
Basic
Diluted
<CAPTION>
Newly
Constructed Other Pro Forma PRO FORMA
Properties Properties Adjustment 6/30/98
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Total Revenues $39(j) $1,413(k) $ -- $31,238
Expenses
Ground Lease expense 2(j) 6(k) -- 1,582
Depreciation and amortization 8(l) 403(l) -- 8,248
General and administrative -- -- -- 2,294
Interest expense -- -- 2,209(m) 9,341
--- ------ ------- -------
Total expenses 10 409 2,209 21,465
--- ------ ------- -------
Income before gain on sale of
property, minority interest,
unusual item, extraordinary item
and other 29 1,004 (2,209) 9,773
--- ------ ------- -------
Gain on sale of property -- -- -- 457
Equity in net income (loss) of affiliates -- -- -- (56)
Minority interest in operating
Partnership net income -- -- (17)(n) (520)
Loss on extinguishment of debt -- -- -- (190)
--- ------ ------- -------
Net income $29 $1,004 $ (2,226) 9,464
--- ------ -------
--- ------ -------
Preferred stock dividend (3,551)
--------
Net income allocable to
Common Stockholders $ 5,913
--------
--------
Avg. no. of shares o/s
Basic 12,947
--------
--------
Diluted 13,178
--------
--------
Net income per share
Basic $ 0.46
--------
--------
Diluted $ 0.45
--------
--------
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
34
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(a) Reflects pro forma adjustment to operations relating to the period between
January 1, 1998 and the date of acquisition for base rent for 1998
acquisitions comprised of 87 properties acquired and two properties sold on
various dates from January 1, 1998 through June 30, 1998.
(b) Reflects pro forma adjustment to operations for historical financial
results for five properties sold on various dates from July 1, 1998 through
September 8, 1998.
(c) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Hub Hill, Inc. acquisition
comprised of one property acquired on September 8, 1998. See statement of
revenues included herein.
(d) Reflects pro forma adjustment to operations relating to base rent and
operating expenses based on historical financial information for the
Inwood Plaza acquisition comprised of one property acquired on August 10,
1998. See statement of revenues and certain expenses included herein.
(e) Reflects pro forma adjustment to operations relating to base rent based on
executed lease information for the Applebee's Neighborhood Grill and Bar
properties comprised of 11 properties acquired on August 3, 1998. See
statement of revenues and certain expenses included herein.
(f) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Shoney's Acquisition comprised of
five properties acquired on July 29, 1998. See combined statement of
revenues and certain expenses included herein.
(g) Reflects pro forma adjustment to operations relating to base rent based on
historical financial information for the Ralph Mason, Mack C. Colt and Mack
V. Colt Trusts acquisition comprised of one property acquired on July 23,
1998. See statement of revenues included herein.
(h) Reflects pro forma adjustment to operations relating to base rent based on
executed lease information for the Buca acquisition comprised of one
property acquired on March 27, 1998. See statement of revenues and certain
expense included herein.
(i) Reflects pro forma adjustment to operations relating to base rent based on
executed lease information for the Sybra, Inc. and Sybra of California,
Inc. (wholly-owned subsidiaries of I.C.H. Corporation) acquisition
comprised of six properties acquired on various dates between April 15,
1998 and July 15, 1998.
(j) Reflects pro forma adjustment to operations based on executed lease
information for the newly constructed and undeveloped acquisitions
comprised of nine properties acquired on various dates from July 1, 1998
through September 8, 1998. These are not considered to be an acquisition of
a business and consequently no financial information is presented herein on
these properties. Leases on these properties may have been entered into
subsequent to their development or redevelopment and the properties revenue
therefrom is included in the pro forma statement of income. Reflects pro
forma adjustment to operations for historical financial results for two
properties sold.
(k) Reflects pro forma adjustment to operations relating to base rent based on
newly executed lease and historical financial information for 39 other
properties acquired on various dates from July 1, 1998 through September 8,
1998.
35
<PAGE>
(l) Reflects pro forma increase in depreciation expense related to the purchase
price of the respective properties or decrease in depreciation expense due
to the sale of the respective properties. Depreciation is computed using
the straight-line method over the estimated useful lives of building,
leasehold improvements, machinery and equipment which range from 10 to 20
years.
(m) Reflects the pro forma adjustment to interest expense as a result of the
purchase of the respective properties. Pro forma interest expense is based
on the increase in debt outstanding and borrowings for payment of
distributions on units issued on a pro forma basis using interest rates
based on the Company's credit arrangements which are as follows:
<TABLE>
<CAPTION>
Principal Interest Rate
<S> <C> <C>
Series A Senior Secured Guaranteed Notes $ 12,500,000 8.06%
Series B Senior Secured Guaranteed Notes 27,500,000 8.30%
Fixed Rate Debt 111,000,000 7.15%
Line of credit 107,000,000 6.74%
Mortgage note payable 1,075,000 8.00%
</TABLE>
(n) Reflects pro forma allocation of operating income to minority interest.
36
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 6, 1998 U.S. RESTAURANT PROPERTIES, INC
By: /s/ Robert J. Stetson
-----------------------------------
Robert J. Stetson
President, Chief Executive Officer
By: /s/ Michael D. Warren
-----------------------------------
Michael D. Warren
Director of Finance
37
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement on
Form S-3 (Registration No. 333-34263) of U.S. Restaurant Properties, Inc. of our
report dated September 28, 1998 with respect to the statement of revenues of the
Property Sold to U.S. Restaurant Properties, Inc. by Hub Hill, Inc. for the year
ended December 31, 1997, our report dated October 5, 1998 with respect to the
statement of revenues and certain expenses of the Property Sold to U.S.
Restaurant Properties, Inc. by Inwood Plaza Joint Venture for the year ended
December 31, 1997, our report dated October 5, 1998 with respect to the combined
statement of revenues and certain expenses of the Selected Properties Sold to
U.S. Restaurant Properties, Inc. (Shoney's Acquisition) for the year ended
December 31, 1997, our report dated October 5, 1998 with respect to the
statement of revenues of the Property Sold to U.S. Restaurant Properties, Inc.
by Ralph L. Mason Trust, Mack V. Colt Trust and Mack C. Colt Trust FBO Ann V.
Colt for the year ended June 30, 1998 and our report dated September 15, 1998
with respect to the statement of revenues and certain expenses of BUCA, Inc. -
Wheeling, Illinois for the period from May 31, 1997 (inception) through June
28, 1998, appearing in this Current Report on Form 8-K of U.S. Restaurant
Properties, Inc.
/s/ DELOITTE & TOUCHE LLP
Dallas, Texas
October 6, 1998
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Apple South, Inc.:
We consent to the incorporation by reference in the registration statement (No.
333-34263) on Form S-3 of U.S. Restaurant Properties, Inc. of our report dated
August 28, 1998, with respect to the Statement of Revenues and Direct Operating
Expenses of Apple South, Inc. Applicable to the Acquisition of Eleven Applebee's
Neighborhood Bar and Grill Properties by U.S. Restaurant Properties Operating
L.P. (a majority owned subsidiary of U.S. Restaurant Properties, Inc.) for the
year ended December 28, 1997, which report appears in the Form 8-K of U.S.
Restaurant Properties, Inc. dated October 6, 1998.
/s/ KPMG Peat Marwick, LLP
Atlanta, Georgia
October 6, 1998
