<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 2, 1999
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>
ITEM 5. OTHER EVENTS
On January 22, 1999, U.S. Restaurant Properties, Inc. (the "Registrant")
acquired 20 restaurant properties located in Georgia, Illinois, Massachusetts,
Oklahoma, North Carolina, Tennessee, Texas and Virginia. The acquisition was
done pursuant to one purchase and sale agreement. The purchase price equaled
$26,750,000 in cash and other capitalized costs of approximately $484,000. The
selling entity was Spaghetti Warehouse, Inc., a Texas corporation, SWEATAC,
Inc., a Delaware corporation and Spaghetti Warehouse of Texas, L.P., a Delaware
limited partnership. The acquisition was funded by the Registrant's lines of
credit.
On various dates from January 26, 1999 through May 7, 1999, the Registrant
acquired four restaurant properties located in North Carolina and South
Carolina. The acquisition was done pursuant to four purchase and sale
agreements. The purchase price equaled $1,755,000 in cash and other capitalized
costs of approximately $22,000. The selling entities were Howard Baetjer Family
Investment Limited Partnership, a Maryland limited partnership, Wade Moore
Construction Company, Inc., a North Carolina corporation and W. Borden James and
Diane C. James, both individuals. The acquisitions were funded by the
Registrant's lines of credit
On January 28, 1999, the Registrant acquired two restaurant properties located
in Michigan. The acquisition was done pursuant to one purchase and sale
agreement. The purchase price equaled $1,335,000 in cash and other capitalized
costs of approximately $13,000. The selling entity was 542 Hobart Company, a
California general partnership. The acquisition was funded by the Registrant's
lines of credit.
On various dates from March 10, 1999 through March 16, 1999, the Registrant
acquired 10 dealer gas station properties located in Hawaii. The acquisition was
done pursuant to one purchase and sale agreement. The purchase price for the 10
dealer properties equaled $3,067,000 in cash and other capitalized costs of
approximately $9,000. The selling entity was Equilon Enterprises LLC, a Delaware
limited liability company. The acquisition was funded by the Registrant's lines
of credit.
On April 6, 1999, the Registrant acquired one restaurant property located in
Illinois. The acquisition was done pursuant to one purchase and sale agreement.
The purchase price equaled $850,000 in cash and other capitalized costs of
approximately $11,000. The selling entity was American National Bank and Trust
Company of Chicago, as Trustee (u/t/a No. 117499-00 dated 9/30/93) and Rayburt
Systems, Inc., an Illinois corporation as Beneficiary. The acquisition was
funded by the Registrant's lines of credit.
On April 21, 1999, the Registrant acquired two restaurant properties located in
Texas. The acquisition was done pursuant to one purchase and sale agreement. The
purchase price equaled $1,995,000 in cash and other capitalized costs of
approximately $43,000. The selling entity was Mike Stehling, an individual. The
acquisition was funded by Registrant's lines of credit.
On May 6, 1999, the Registrant acquired one gas station property located in
California. The acquisition was done pursuant to one purchase and sale
agreement. The purchase price equaled $1,325,000 in cash and other capitalized
costs of approximately $52,000. The selling entity was Southfield Services
Corporation d/b/a Southfield Mobil Nili Dadashi and Hamid Dadashi, both
individuals. This property is being leased to Rowley Petroleum Lakewood, LLC.
The audited balance sheet of Rowley Petroleum - Lakewood, LLC is included
herein. The acquisition was funded by the Registrant's lines of credit.
On various dates from January 1, 1999 through June 30, 1999, the Registrant
entered into 11 transactions for properties located in Arizona, California,
Georgia, Michigan, New Hampshire, South Carolina and Texas. Three properties
were constructed by the Registrant, two properties represent exercised purchase
options on ground leases, one transaction was for land adjacent to property
already owned and one property represented the acquisition of improvements on
land already owned. In each instance the transaction did not increase the
Registrant's property count. The remaining four properties were raw land
acquisitions. These 11 properties were constructed or purchased for an aggregate
cash purchase price of approximately $6,869,000. These properties represent
newly developed properties and properties yet to be developed, which do not have
any historical operations. These properties are not considered to be an
acquisition of a business and consequently no financial information is presented
herein on these properties. The cash portion of these acquisitions were funded
by the Registrant's lines of credit.
2
<PAGE>
In addition, to the above acquisitions, 20 other properties (the "Other
Properties") were acquired during the period January 1, 1999 through June 30,
1999. These properties consist of 18 gas station and two restaurant properties
located in Hawaii, Oklahoma and Texas. The properties were purchased from
Equilon Enterprises LLC, a Delaware limited liability company, Kettle
Restaurants, Inc., a Texas corporation and Wesley C. Austin, an individual.
These properties were purchased for an aggregate purchase price of approximately
$30,122,000 with $15,000,000 financed as a note payable to one of the sellers.
The cash portion of these properties were funded by the Registrant's lines 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)
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties, Inc. (Equilon Dealer
Acquisition) for the year ended December 31, 1998.
Statement of Revenues and Certain Expenses of the Property Sold to
U.S. Restaurant Properties, Inc. by American National Bank and Trust
Company of Chicago, as Trustee and Rayburt Systems, Inc. as
Beneficiary for the year ended December 31, 1998.
Combined Statement of Revenues and Certain Expenses of Selected
Properties Sold to U.S. Restaurant Properties, Inc. (Cabana
Acquisition) for the year ended December 31, 1998.
Balance Sheet of Rowley Petroleum - Lakewood, LLC as of
February 1, 1999.
Financial information related to the acquisition of 20 restaurant
properties by U.S. Restaurant Properties, Inc. from Spaghetti
Warehouse, Inc. and wholly-owned subsidiaries SWEATAC, Inc.
and Spaghetti Warehouse of Texas, L.P.
Financial information related to the acquisition of four restaurant
properties by U. S. Restaurant Properties, Inc. The tenant on these
restaurant properties is AFC Enterprises, Inc.
Financial information related to the acquisition of two restaurant
properties by U.S. Restaurant Properties, Inc. The tenant on these
properties is Sybra, Inc. a wholly-owned subsidiary of I.C.H.
Corporation.
b) Pro forma Financial Information
c) Exhibits
23 (a) Consent of Deloitte & Touche LLP
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying combined statement of revenues and certain
expenses of Selected Properties Sold to U.S. Restaurant Properties, Inc.
(Equilon Dealer Acquisition) for the year ended December 31, 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 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, 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 Selected Properties Sold to U.S. Restaurant
Properties, Inc. (Equilon Dealer Acquisition) for the year ended December 31,
1998, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
July 1, 1999
5
<PAGE>
<TABLE>
<CAPTION>
Selected Properties Sold To U.S. Restaurant Properties, Inc. (Equilon Dealer Acquisition)
Combined Statement of Revenues and Certain Expenses
Year Ended December 31, 1998
<S> <C>
Rental Income
Minimum rent $ 1,118,163
Direct Expenses
Ground rent 828,702
Property taxes 72,342
CAM Expense 12,240
-----------------
Total Direct Expenses 913,284
-----------------
Net Rental Income $ 204,879
=================
</TABLE>
See Accompanying Notes to the Combined Statement of Revenues
and Certain Expenses.
6
<PAGE>
NOTES TO THE COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. (EQUILON DEALER
ACQUISITION)
1. Summary of Significant Accounting Policies
Nature of Operations
The accompanying combined statement of revenues and certain expenses
includes 10 properties acquired by U.S. Restaurant Properties, Inc.
("USRP") from Equilon Enterprises LLC, a Delaware limited liability company
(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 gas stations. 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. The
Company was self insured for these properties and for a large number of
their other properties. Accordingly, the cost, if any, would not be
comparable to future operations of the property and has been excluded.
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
Rental income represents amounts earned under non-cancelable lease
agreements with remaining terms ranging from approximately one to two
years. Under the terms of the leases, the tenant is responsible for all
maintenance to the property. Several leases expired in 1998 and early 1999.
All leases were renegotiated with the station operators in conjunction with
the property sale discussed in Note 5. Following is a schedule of minimum
rental income on the non-cancelable leases as of December 31, 1998:
1999 $ 290,479
2000 109,940
-------------------
$ 400,419
===================
4. Rental Expense
The Company is party to several non-cancelable ground leases with remaining
terms ranging from approximately one to four years. Under the terms of two
of the leases, additional rents are due based on the volume of gas sales.
For the year ended December 31, 1998, additional rent of $90,081 was paid
and is included in rent expense in the accompanying statement. Following is
a schedule of minimum rental expense on the non-cancelable leases as of
December 31, 1998:
1999 $ 700,996
2000 592,455
2001 482,487
2002 379,646
-------------------
$ 2,155,584
===================
5. Subsequent Events
On March 10, 1999 through March 16, 1999, the Company sold these 10 gas
station properties to USRP for $3,067,000. As part of this acquisition,
USRP assumed the ground leases and leased the properties to a third party
under a master lease agreement.
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 American National Bank
and Trust Company of Chicago, as Trustee and Rayburt Systems, Inc. as
Beneficiary, for the year ended December 31, 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 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, 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 American National
Bank and Trust Company of Chicago, as Trustee and Rayburt Systems, Inc. as
Beneficiary for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
June 21, 1999
8
<PAGE>
<TABLE>
<CAPTION>
Property Sold To U.S. Restaurant Properties, Inc. by American National
Bank and Trust Company of Chicago, as Trustee and Rayburt Systems, Inc. as Beneficiary
Statement of Revenues and Certain Expenses
Year Ended December 31, 1998
<S> <C>
Rental Income
Minimum rent $ 90,000
Percentage rent 2,426
Cost reimbursement 22,025
-----------------
Total Rental Income 114,451
Direct Expenses - property taxes 22,025
-----------------
Net Rental Income $ 92,426
=================
</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 AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, AS TRUSTEE AND RAYBURT SYSTEMS, INC. AS BENEFICIARY
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 American
National Bank and Trust Company of Chicago, as Trustee (u/t/a No. 117499-00
dated 9/30/93) and Rayburt Systems, Inc., an Illinois corporation, as
Beneficiary collectively (the "Trust"). The statement does not include any
revenues or expenses related to any other properties owned or managed by
the Trust. The property acquired is operated as a Burger King restaurant.
In accordance with the Securities and Exchange Commission Rule 3-14, the
statement of revenues and certain expenses 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.
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 lease on this property is "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.
Cost reimbursement revenue includes costs reimbursed by the tenant for
property taxes. 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>
Chicago, IL $ 90,000 Per year through 3/8/2014 6.5% of annual sales less March 2014 or termination
minimum rent of the Burger King
Franchise Agreement.
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
lease as of December 31, 1998:
1999 $ 90,000
2000 90,000
2001 90,000
2002 90,000
2003 90,000
Thereafter 915,000
-----------------
$ 1,365,000
=================
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying combined statement of revenues and certain
expenses of Selected Properties Sold to U.S. Restaurant Properties, Inc. (Cabana
Acquisition) for the year ended December 31, 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 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, 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 Selected Properties Sold to U.S. Restaurant
Properties, Inc. (Cabana Acquisition) for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
June 18, 1999
11
<PAGE>
<TABLE>
<CAPTION>
Selected Properties Sold To U.S. Restaurant Properties, Inc. (Cabana Acquisition)
Combined Statement of Revenues and Certain Expenses
Year Ended December 31, 1998
<S> <C>
Rental Income
Minimum rent $ 246,641
Percentage and additional rent 4,582
Cost reimbursement 30,681
------------------
Total Rental Income 281,904
Direct Expenses - property taxes 30,681
------------------
Net Rental Income $ 251,223
==================
</TABLE>
See Accompanying Notes to the Combined Statement of Revenues
and Certain Expenses.
12
<PAGE>
NOTES TO THE COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES RELATING TO THE
SELECTED PROPERTIES SOLD TO U.S. RESTAURANT PROPERTIES, INC. (CABANA
ACQUISITION)
1. Summary of Significant Accounting Policies
Nature of Operations
The accompanying combined statement of revenues and certain expenses
includes two properties acquired by U.S. Restaurant Properties, Inc. from
Mike Stehling, an individual ("Stehling"). The statement does not include
any revenues or expenses related to any other properties owned or managed
by Stehling. The properties acquired are operated as Taco Cabana
restaurants. 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. Cost reimbursement revenue includes costs reimbursed by the
tenant for property taxes. In addition, the lessee and Stehling have
entered into four other leases on properties not acquired by USRP. The
leases on these other four properties and the Austin, Texas lease acquired
by USRP are collectively referred to as (the "Sub-Lease Group"). Stehling
is guaranteed to receive a minimum total annual aggregate rent of $500,000
from the Sub-Lease Group. For the year ended December 31, 1998, Stehling
recognized $4,116 in addition to minimum and percentage rent under the
guaranteed Sub-Lease Group for the Austin, Texas lease location. 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>
Austin, TX $ 98,728 Per year through 5/28/2001 with increase every 6.0% of sales (in May 2007 with one
three years equal to the lessor of 1.09 times excess of minimum five-year renewal
the rent of the prior period or the percentage rent on a monthly option.
increase in the Consumer Price Index as basis)
indicated in the lease.
San Antonio, TX 150,447 Per year through 7/1/2000 with increases every 6.0% of sales (in June 2009 with two
three years equal to the lessor of 1.09 times excess of minimum five-year renewal
the rent of the prior period or the percentage rent on a monthly options.
increase in the Consumer Price Index as basis)
indicated in the lease.
</TABLE>
The following is a schedule of minimum rental income on the non-cancelable
leases as of December 31, 1998(minimum rent in 1998 was $246,641):
1999 $ 249,175
2000 249,175
2001 249,175
2002 249,175
2003 249,175
Thereafter 1,164,781
------------------
$ 2,410,656
==================
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
U.S. Restaurant Properties, Inc.
We have audited the accompanying balance sheet of Rowley Petroleum - Lakewood,
LLC as of February 1, 1999. This balance sheet 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 balance sheet 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 balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Rowley Petroleum - Lakewood, LLC at
February 1, 1999, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
June 30, 1999
14
<PAGE>
Rowley Petroleum - Lakewood, LLC
Balance Sheet
February 1, 1999
MEMBERS' EQUITY
Members equity $ 500
Stock subscription receivable (500)
---------------
Total Members Equity $ 0
===============
See Accompanying Notes to the Balance Sheet.
15
<PAGE>
Rowley Petroleum - Lakewood, LLC
Notes to Balance Sheet
February 1, 1999
1. Organization
Rowley Petroleum - Lakewood, LLC (the "Company") is a newly-organized
California limited liability company. The Company is owned 20% by Rowley
Petroleum, Inc. ("RP"), 40% by Summit Petroleum, Inc. ("SP"), 20% by Steve
J. Weaver ("SW"), 10% by Craig Morrison ("CM") and 10% by Richard Atherton
("RA"). The Company, under its operating agreement, has a limited life that
expires December 31, 2030, unless sooner terminated under the provisions of
the Company's operating agreement or as provided by law.
2. Business
The Company's general business purpose is to construct, operate, and/or
acquire existing gas station and convenience store operations which can
include car wash facilities, as well as owning, purchasing and selling of
real property. The Company is currently being managed by RP.
3. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions that affect the amounts reported in the financial statements
and notes. Consequently, actual results could differ from the reported
amounts.
Manager Fees
The manager of the Company, currently RP, is entitled to compensation for
services rendered in the amount of $1,000 per month with annual increases
of 8% per year.
4. Members Equity
Under the Company's member operating agreement each member contributed an
initial contribution of $100, which was funded subsequent to February 1,
1999. No additional contributions are required by the members, however
additional optional contributions may be made to fund cash needs. As of May
31, 1999, the members have made additional contributions of approximately
$98,000 for working capital purposes.
Profits and losses, as defined, are allocable to the members in accordance
with their economic interest.
5. Subsequent Events
On May 6, 1999, the Company entered into a 20 year lease agreement with a
subsidiary of U.S. Restaurant Properties, Inc. on a gas station property
located in Bellflower, California. This lease agreement requires the
Company to pay annual base rent of $93,844 per year. The annual base rent
increases on the first day of lease year six, and thereafter, on each fifth
anniversary throughout the term of the lease (including renewal periods) by
an amount equal to 15% of the base rent for the immediately preceding year.
In addition, the Company is required to pay additional fixed base rent of
$66,234 per year through the first 15 years of the lease. At the end of the
initial 20 year term the Company has the option to renew the lease for
three additional terms of 10 years each.
On May 6, 1999, the Company signed a note payable in the amount of $150,000
with the seller of the Bellflower, California property to be used in the
event the Company is unable to obtain financing for franchise conversion
costs.
16
<PAGE>
Financial information related to the acquisition of 20 restaurant properties by
U.S. Restaurant Properties, Inc. from Spaghetti Warehouse, Inc. a Texas
corporation and subsidiaries SWEATAC, Inc., a Delaware corporation, and
Spaghetti Warehouse of Texas, L.P. a Delaware limited partnership collectively
("SWH").
SWH was up to the date of acquisition of the 20 restaurant properties by USRP a
public registrant with the Securities and Exchange Commission. As reported in
the Form 10-K and Form 10-Q of SWH, net income totaled $1,192,665 for the year
ended June 28, 1998 and unaudited net income totaled $104,406 for the 14 week
period ended October 4, 1998. SWH reported total assets of $57,738,616 and
stockholders' equity of $47,195,043 as of June 28, 1998 and unaudited total
assets of $58,340,651 and stockholders' equity of $47,345,058 as of October 4,
1998. Persons interested in receiving copies of SWH's publicly issued financial
statements for the year ended June 28, 1998 and for the 14 week period ended
October 4, 1998 can do so by contacting Spaghetti Warehouse, Inc., 402 West I
30, Garland, Texas 75043 or by accessing the Securities and Exchange
Commission's EDGAR archives through their web site located at:
http://www.sec.gov
17
<PAGE>
Financial information related to the acquisition of four restaurant properties
by U. S. Restaurant Properties, Inc. from various sellers. The tenant on these
restaurant properties is AFC Enterprises, Inc. ("AFC").
AFC is a public registrant with the Securities and Exchange Commission. As
reported in the Form 10-K and Form 10-Q of AFC, net loss totaled $(8,646,000)
for the year ended December 27, 1998 and unaudited net loss totaled $(592,000)
for the 12 weeks ended March 21, 1999. AFC reported total assets of $556,465,000
and stockholders' equity of $87,917,000 as of December 27, 1998 and unaudited
total assets of $551,855,000 and stockholders' equity of $87,493,000 as of March
21, 1999. Persons interested in receiving copies of AFC's publicly issued
financial statements for the year ended December 27, 1998 and for the 12 week
period ended March 21, 1999 can do so by contacting AFC Enterprises, Inc., Six
Concourse Parkway, Suite 1700, Atlanta, GA 30328 or by accessing the Securities
and Exchange Commission's EDGAR archives through their web site located at:
http://www.sec.gov
18
<PAGE>
Financial information related to the acquisition of two restaurant properties by
U. S. Restaurant Properties, Inc. from 542 Hobart Company, a California general
partnership. The tenant on these properties is Sybra, Inc. a wholly-owned
subsidiary of I.C.H. Corporation ("ICH").
ICH is a public registrant with the Securities and Exchange Commission. As
reported in the Form 10-K and Form 10-Q of ICH, net income totaled $3,304,000
for the year ended December 31, 1998 and unaudited net income totaled $707,000
for the three months ended March 31, 1999. ICH reported total assets of
$113,466,000 and stockholders' equity of $15,026,000 as of December 31, 1998 and
unaudited total assets of $113,348,000 and stockholders' equity of $15,733,000
as of March 31, 1999. Persons interested in receiving copies of ICH's publicly
issued financial statements for the year ended December 31, 1998 and for the
three months ended March 31, 1999 can do so by contacting 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
19
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following March 31, 1999 unaudited Pro Forma Condensed Consolidated
Balance Sheet of U.S. Restaurant Properties, Inc. (the "Company") consists of
the Company's March 31, 1999 historical balance sheet adjusted on a pro forma
basis to reflect as of March 31, 1999: (a) the acquisition of eight operating
properties for $6,075,000 between April 1, 1999 and June 30, 1999; (b) the
acquisition of eight newly constructed and undeveloped properties for $3,638,000
between April 1, 1999 and June 30, 1999; (c) the sale of four properties for net
proceeds of $1,336,000 between April 1, 1999 and June 30, 1999; and (d) the
additional borrowings required to purchase the properties acquired. The
transactions relating to all property acquisitions between January 1, 1999 and
March 31, 1999 are reflected in the Company's historical March 31, 1999 balance
sheet. 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 March 31, 1999 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, 1998 is presented as if the following had occurred as of
January 1, 1998: (a) the acquisition of 286 properties for $214,909,000
including the market value of 24,768 shares of the Company's Common Stock and
14,254 OP units issued in connection with acquisitions and the sale of 12
properties for $8,174,000 on various dates between January 1, 1998 and December
31, 1998; (b) the acquisition of 63 properties including newly constructed and
undeveloped properties for $74,702,000 between January 1, 1999 and June 30,
1999; (c) the sale of 16 properties for net proceeds of $7,270,000 between
January 1, 1999 and June 30, 1999; (d) the issuance of $111,000,000 of 7.15%
fixed rate debt; (e) the issuance of $47,500,000 of 8.22% fixed rate debt; (f)
the issuance of 1,359,063 shares in five separate transactions to individual
investors with net proceeds of $32,407,000; and (g) the additional borrowings
required to purchase the properties. 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, 1998, nor
do they purport to represent the results of operations for future periods.
The unaudited Pro Forma Condensed Consolidated Statement of Income for the
three months ended March 31, 1999 is presented as if the following had occurred
as of January 1, 1999: (a) the acquisition of 63 properties including newly
constructed and undeveloped properties for $74,702,000 between January 1, 1999
and June 30, 1999; (b) the sale of 16 properties for net proceeds of $7,270,000
between January 1, 1999 and June 30, 1999; and (c) the additional borrowings
required to purchase the properties. 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, 1999, 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 based upon what they would be 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.
20
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1999
(Unaudited)
(Dollars In thousands)
<TABLE>
<CAPTION>
Operating Newly
Historical Property Constructed
3/31/99 Acquisitions (a) Acquisitions (b) Sales (c) Pro Forma
--------------- ------------------ ------------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Property, net
Land $ 195,657 $ 2,466 $ 163 $ (407) $ 197,879
Building and leasehold improvements 389,376 3,609 1,018 (768) 393,235
Machinery and equipment 11,624 11,624
Less: Accumulated depreciation (32,795) 33 (32,762)
Construction in progress 19,943 1,760 21,703
Cash and cash equivalents 206 206
Cash restricted 700 700
Rent and other receivables, net 10,098 (5) 10,093
Prepaid expenses and purchase
deposits 2,184 (111) (20) 2,053
Investments 3,809 3,809
Notes receivable 18,233 18,233
Mortgage loan receivable 23,949 23,949
Net investment in direct financing
leases 9,151 9,151
Intangibles and other assets, net 10,515 10,515
--------------- ------------------ ------------------ ------------ ----------------
$ 662,650 $ 5,964 $ 2,921 $ (1,147) $ 670,388
=============== ================== ================== ============ ================
Accounts payable and accrued
liabilities $ 11,456 $ -- $ 17 $ (11) $ 11,462
Accrued dividends and distributions 8,635 8,635
Unearned contingent rent 1,928 1,928
Deferred gain on sale of property 556 556
Lines of credit 164,000 5,964 2,904 (1,136) 171,732
Notes payable 240,050 240,050
Mortgage note payable 1,056 1,056
Capitalized lease obligations 46 46
Minority interest in operating
partnership 31,656 31,656
Stockholders' Equity 203,267 203,267
--------------- ------------------ ------------------ ------------ ----------------
$ 662,650 $ 5,964 $ 2,921 $ (1,147) $ 670,388
=============== ================== ================== ============ ================
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects pro forma adjustments for certain 1999 acquisitions completed
during the period April 1, 1999 through June 30, 1999 which consist of the
purchase of eight operating properties and the borrowings required to
complete the purchase of these properties as follows:
Number of
Properties
--------------- ----------------
AFC Enterprises, Inc. - Popeye's 3 $ 1,351
Stehling - Taco Cabana 2 2,038
Rowley Petroleum - Chevron 1 1,377
Rayburt Trust - Burger King 1 861
Kettle restaurant 1 448
--------------- ----------------
8 6,075
===============
Less March 31, 1999 prepaid expenses and
purchase deposits relating to acquisitions (111)
----------------
Increase in lines of credit $ 5,964
================
Costs of the acquisitions are allocated as follows:
Land $ 2,466
Buildings and leasehold improvements 3,609
Machinery and equipment --
----------------
$ 6,075
================
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, 1999.
Management does not expect material adjustments to occur.
22
<PAGE>
(b) Reflects pro forma adjustments for certain 1999 acquisitions completed
for the period April 1, 1999 through June 30, 1999 which consist of the
purchase of one newly constructed and five undeveloped properties, one
transfer from construction in progress and one raw land purchase where
the building was already owned by the Company and the borrowings required
to complete the purchase of these properties as follows:
Number of
Properties
--------------- ---------------
Schlotzsky's 1 $ 321
Other 7 3,317
--------------- ---------------
8 3,638
===============
Less transfer from construction in progress (697)
Less March 31, 1999 prepaid expenses and
purchase deposits relating to acquisitions (20)
Less tenant security deposit and escrow (17)
received
---------------
Increase in lines of credit $ 2,904
===============
Costs of the acquisitions are allocated as follows:
Land $ 163
Buildings and leasehold improvements 1,018
Construction in progress 2,457
---------------
$ 3,638
===============
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, 1999.
Management does not expect material adjustments to occur.
(c) Reflects pro forma adjustments for 1999 sales of properties completed for
the period April 1, 1999 through June 30, 1999 which consist of the sale
of four operating properties and the reduction in borrowings as a result
of these sales as follows:
Number of
Properties
--------------- ---------------
Schlotzsky's 1 $ (763)
Other 3 (379)
--------------- ---------------
4 (1,142)
===============
Less tenant deferred rent receivable (5)
Less tenant security deposit and escrow
received 11
---------------
Decrease in line of credit and notes payable $ (1,136)
===============
Costs of the properties sold are allocated as follows:
Land $ (407)
Buildings and leasehold improvements (768)
Accumulated depreciation 33
---------------
$ (1,142)
===============
23
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, 1998
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
1998
Acquisitions
HISTORICAL and 1999 Spaghetti AFC ICH Equilon
12/31/98 Sales (a) Sales (b) Warehouse Enterprises Corporation Dealers Stehling
---------- ------------- ---------- ----------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $ 58,530 $ 14,099 $ (945) $ 3,349(c) $ 240(d) $ 148(e) $ 1,290(f) $ 249(g)
Expenses
Ground lease expense 3,158 264 (7) 2(c) -- -- 649(f) --
Depreciation and
amortization 15,753 4,256 (296) 1,021(m) 67(m) 51(m) 132(m) 29(m)
General and administrative 4,793 120 -- -- -- -- -- --
Interest expense 16,689 8,603 -- -- -- -- -- --
Termination of management
contract 12,047 -- -- -- -- -- -- --
Equity in net loss of
affiliates 317 -- -- -- -- -- -- --
Non-cash charge for
impairment of long
lived assets 127 -- -- -- -- -- -- --
---------- ------------- ---------- ----------- ----------- ------------ --------- ----------
Total expenses 52,884 13,243 (303) 1,023 67 51 781 29
---------- ------------- ---------- ----------- ----------- ------------ --------- ----------
Income (loss) before gain
on sale of property,
minority interest and
extraordinary item 5,646 856 (642) 2,326 173 97 509 220
Gain on sale of property 403 -- -- -- -- -- -- --
---------- ------------- ---------- ----------- ----------- ------------ --------- ----------
Income (loss) before
minority interest and
extraordinary item 6,049 856 (642) 2,326 173 97 509 220
Minority interest in
operating partnership 58 (64) -- -- -- -- -- --
---------- ------------- ---------- ----------- ----------- ------------ --------- ----------
Net income (loss) before
extraordinary item 6,107 792 (642) 2,326 173 97 509 220
Loss on early extinguishment
of debt (190) -- -- -- -- -- -- --
---------- ------------- ---------- ----------- ----------- ------------ --------- ----------
Net income (loss) 5,917 $ 792 $ (642) $ 2,326 $ 173 $ 97 $ 509 $ 220
============= ========== =========== =========== ============ ========= ==========
Preferred stock dividend (7,102)
-----------
Net income (loss) allocable
to Common Stockholders $ (1,185)
===========
Net income (loss) per share
Basic $ (0.09)
Diluted $ (0.09)
Weighted average shares
outstanding
Basic 13,325
Dilut 13,325
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income
continued on next page
24
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (continued)
For the year ended December 31, 1998
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Newly
Rayburt Rowley Constructed Other Pro Forma PRO FORMA
Trust Petroleum Properties Properties Adjustments 12/31/98
----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $ 90 (h) $ 183 (i) $ 721 (j) $ 4,959 (k) $ (4,603) (l) $ 78,310
Expenses
Ground lease expense -- -- (76)(j) 873 (k) (4,603) (l) 260
Depreciation and
amortization 32 (m) 52 (m) 211 (m) 933 (m) -- 22,241
General and administrative -- -- -- -- -- 4,913
Interest expense -- -- -- -- 5,116 (n) 30,408
Termination of management
contract -- -- -- -- -- 12,047
Equity in net loss of
affiliates -- -- -- -- -- 317
Non-cash charge for
impairment of long
lived assets -- -- -- -- -- 127
----------- ----------- ------------ ------------ ------------ ------------
Total expenses 32 52 135 1,806 513 70,313
----------- ----------- ------------ ------------ ------------ ------------
Income (loss) before gain
on sale of property,
minority interest and
extraordinary item 58 131 586 3,153 (5,116) 7,997
Gain on sale of property -- -- -- -- -- 403
----------- ----------- ------------ ------------ ------------ ------------
Income (loss) before
minority interest and
extraordinary item 58 131 586 3,153 (5,116) 8,400
Minority interest in
operating partnership -- -- -- -- (111) (o) (117)
----------- ----------- ------------ ------------ ------------ ------------
Income (loss) before
extraordinary item 58 131 586 3,153 (5,227) 8,283
Loss on early
extinguishment of debt -- -- -- -- -- (190)
----------- ----------- ------------ ------------ ------------ ------------
Net income (loss) $ 58 $ 131 $ 586 $ 3,153 $ (5,227) 8,093
=========== =========== ============ ============ ============
Preferred stock dividend (7,102)
------------
Net income (loss) allocable
to Common Stockholders $ 991
============
Net loss per share/unit
Basic $ 0.07
Diluted $ 0.07
Weighted average shares
outstanding
Basic 14,357
Diluted 15,042
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED 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 and all related
expenses for the 1998 acquisitions comprised of 286 properties purchased
on various dates from January 1, 1998 through December 31, 1998 and the
sale of 12 properties on various dates from January 1, 1998 through
December 31, 1998.
(b) Reflects pro forma adjustments to operations for historical 1998 financial
results for 16 properties sold or disposed on various dates from January
1, 1999 through June 30, 1999.
(c) Reflects pro forma adjustments to operations relating to base rent related
to executed leases for the Spaghetti Warehouse acquisition of 20 properties
acquired on January 22, 1999.
(d) Reflects pro forma adjustments to revenues relating to base rent related to
executed leases for the AFC Enterprises, Inc. acquisitions comprised of
four properties acquired on various dates between January 26, 1999 and
May 7, 1999.
(e) Reflects pro forma adjustments to revenues relating to base rent related to
executed leases for the Sybra, Inc. (wholly-owned subsidiaries of I.C.H.
Corporation) acquisition comprised of two properties acquired on
January 28, 1999.
(f) Reflects pro forma adjustment to revenues relating to base rent related to
executed leases for 10 properties that were acquired from Equilon
Enterprises, LLC on various dates from March 10, 1999 through March
16, 1999. See combined statement of revenues and certain expenses included
herein.
(g) Reflects pro forma adjustment to revenues relating to base rent using
historical financial information for the Stehling acquisition comprised of
two properties acquired on April 21, 1999. See combined statement of
revenues and certain expenses included herein.
(h) Reflects pro forma adjustment to revenues relating to base rent using
historical financial information for the Rayburt Trust acquisition
comprised of one property acquired on April 6, 1999. See statement of
revenues and certain expense included herein.
(i) Reflects pro forma adjustment to revenues relating to base rent relating to
executed lease information for the Rowley Petroleum - Lakewood, LLC gas
station property acquisition on May 6, 1999. See balance sheet included
herein.
(j) Reflects pro forma adjustment to operations based on executed lease
information for the newly constructed and undeveloped acquisitions and
land acquired under purchase options on various dates from January 1, 1999
through June 30, 1999. 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. The pro forma
adjustment to operations for revenues on newly constructed properties
and undeveloped properties are computed at the beginning of the lease,
which generally coincides with the date construction is complete.
(k) Reflects pro forma adjustment to operations relating to base rent related
to a newly executed lease and historical financial information for 20 other
properties acquired on various dates from January 1, 1999 through June 30,
1999.
(l) Reflects pro forma reduction to rent revenue associated with those tenants
whose triple-net lease feature requires the tenant to be responsible for
property operating costs including ground rent. Accordingly, ground rent
has been recorded as a reduction to rent revenues with no impact on net
income.
26
<PAGE>
(m) 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.
(n) 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 7.27%
Fixed Rate Debt 47,500,000 8.22%
Note payable 6,550,000 8.75%
Note payable 15,000,000 7.25%
Note payable 20,000,000 7.797%
Line of credit 171,732,000 6.77%
Mortgage note payable 1,056,000 8.00%
</TABLE>
(o) Reflects pro forma allocation of operating income to minority interest.
27
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the three months ended March 31, 1999
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL 1999 Spaghetti AFC ICH Equilon
3/31/99 Sales (a) Warehouse Enterprises Corporation Dealers Stehling
----------- ----------- ------------ ------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $ 18,742 $ (73) $ 211(b) $ 51(c) $ 12(d) $ 249(e) $ 62(f)
Expenses
Ground lease expense 115 (2) -- -- -- 126(e) --
Depreciation and
amortization 5,474 (34) 60(l) 14(l) 4(l) 22(l) 7(l)
General and administrative 1,312 -- -- -- -- -- --
Interest expense 6,739 -- -- -- -- -- --
Termination of management
contract 2,550 -- -- -- -- -- --
Equity in net loss of
affiliates 61 -- -- -- -- -- --
----------- ---------- ------------ ------------- ------------ ------------ -----------
Total expenses 16,251 (36) 60 14 4 148 7
----------- ---------- ------------ ------------- ------------ ------------ -----------
Income before gain on sale
of property, minority
interest in operating
partnership 2,491 (37) 151 37 8 101 55
Gain on sale of property 72 -- -- -- -- -- --
----------- ---------- ------------ ------------- ------------ ------------ -----------
Income before minority
interest in operating
partnership 2,563 (37) 151 37 8 101 55
Minority interest in operating
partnership net income (53) -- -- -- -- -- --
----------- ---------- ------------ ------------- ------------ ------------ -----------
Net income 2,510 $ (37) $ 151 $ 37 $ 8 $ 101 $ 55
========== ============ ============= ============ ============ ===========
Preferred stock dividend (1,776)
-----------
Net income allocable to
Common Stockholders $ 734
===========
Net income per share
Basic $ 0.05
Diluted $ 0.05
Avg. no. of shares o/s
Basic 14,352
Diluted 15,300
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income
continued on next page
28
<PAGE>
U.S. RESTAURANT PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (continued)
For the three months ended March 31, 1999
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Newly
Rayburt Rowley Constructed Other Pro Forma PRO FORMA
Trust Petroleum Properties Properties Adjustment 3/31/99
----------- ------------ ------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $ 23(g) $ 46(h) $ 126 (i) $ 946(j) $ (294)(k) $ 20,101
Expenses
Ground lease expense -- -- (8)(i) 169(j) (294)(k) 106
Depreciation and amortization 8(l) 13(l) 33 (l) 155(l) -- 5,756
General and administrative -- -- -- -- -- 1,312
Interest expense -- -- -- -- 764 (m) 7,503
Termination of management
contract -- -- -- -- -- 2,550
Equity in net loss of
affiliates -- -- -- -- -- 61
----------- ------------ ------------- ------------ -------------- -----------
Total expenses 8 13 25 324 470 17,288
----------- ------------ ------------- ------------ -------------- -----------
Income before gain on sale of
property, minority in
operating partnership 15 33 101 622 (764) 2,813
Gain on sale of property -- -- -- -- -- 72
----------- ------------ ------------- ------------ -------------- -----------
Income before minority interest
in operating partnership 15 33 101 622 (764) 2,885
Minority interest in operating
partnership -- -- -- -- (24)(n) (77)
----------- ------------ ------------- ------------ -------------- -----------
Net income $ 15 $ 33 $ 101 $ 622 $ (788) $ 2,808
=========== ============ ============= ============ ==============
Preferred stock dividend (1,776)
-----------
Net income allocable to
Common Stockholders $ 1,032
===========
Net income per share
Basic $ 0.07
Diluted $ 0.07
Avg. no. of shares o/s
Basic 14,352
Diluted 15,300
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(a) Reflects pro forma adjustment to operations for historical March 31,
1999 financial results for 16 properties sold or disposed on various dates
from January 1, 1999 through June 30, 1999.
(b) Reflects pro forma adjustments to operations relating to base rent related
to executed leases for the Spaghetti Warehouse acquisition of 20 properties
acquired on January 22, 1999.
(c) Reflects pro forma adjustments to revenues relating to base rent related to
executed leases for the AFC Enterprises, Inc. acquisitions comprised of
four properties acquired on various dates between January 26, 1999 and
May 7, 1999.
(d) Reflects pro forma adjustments to revenues relating to base rent related to
executed leases for the Sybra, Inc. (wholly-owned subsidiaries of I.C.H.
Corporation) acquisition comprised of two properties acquired on
January 28, 1999.
(e) Reflects pro forma adjustment to revenues relating to base rent related to
executed leases for 10 properties that were acquired from Equilon
Enterprises, LLC on various dates from March 10, 1999 through March
16, 1999. See combined statement of revenues and certain expenses included
herein.
(f) Reflects pro forma adjustment to revenues relating to base rent using
historical financial information for the Stehling acquisition comprised of
two properties acquired on April 21, 1999. See combined statement of
revenues and certain expenses included herein.
(g) Reflects pro forma adjustment to revenues relating to base rent using
historical lease information for the Rayburt Trust acquisition comprised of
one property acquired on April 6, 1999. See statement of revenues and
certain expense included herein.
(h) Reflects pro forma adjustment to revenues relating to base rent relating to
executed lease information for the Rowley Petroleum - Lakewood, LLC gas
station property acquisition on May 6, 1999. See balance sheet included
herein.
(i) Reflects pro forma adjustment to operations based on executed lease
information for the newly constructed and undeveloped acquisitions and
land acquired under purchase options on various dates from January 1, 1999
through June 30, 1999. 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. The
pro forma adjustment to operations for revenues on newly constructed
properties and undeveloped properties are computed at the beginning of
the lease, which generally coincides with the date construction is
complete.
(j) Reflects pro forma adjustment to operations relating to base rent related
to newly executed lease and historical financial information for 20 other
properties acquired on various dates from January 1, 1999 through June 30,
1999.
(k) Reflects pro forma reduction to rent revenue associated with those tenants
whose triple-net lease feature requires the tenant to be responsible for
property operating costs including ground rent. Accordingly, ground rent
has been recorded as a reduction to rent revenues with no impact on net
income.
30
<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 7.27%
Fixed Rate Debt 47,500,000 8.22%
Note payable 6,550,000 8.75%
Note payable 15,000,000 7.25%
Note payable 20,000,000 7.797%
Line of credit 171,732,000 6.54%
Mortgage note payable 1,056,000 8.00%
</TABLE>
(n) Reflects pro forma allocation of operating income to minority interest.
31
<PAGE>
SIGNATURES
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: July 6, 1999 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
32
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements on Form
S-3 (Registration Statement Nos. 333-34263 and 333-49587) and Form S-8
(Registration No. 333-48905) of U.S. Restaurant Properties, Inc. of: our report
dated June 30, 1999 with respect to the combined statement of revenues and
certain expenses of Selected Properties Sold to U.S. Restaurant Properties, Inc.
(Equilon Dealer Acquisition) for the year ended December 31, 1998; our report
dated June 18, 1999 with respect to the combined statement of revenues and
certain expenses of Selected Properties Sold to U.S. Restaurant Properties, Inc.
(Cabana Acquisition) for the year ended December 31, 1998; our report dated June
21, 1999 with respect to the statement of revenues and certain expenses of the
Property Sold to U.S. Restaurant Properties, Inc. by American National Bank and
Trust Company of Chicago, as trustee and Rayburt Systems, Inc. as beneficiary,
for the year ended December 31, 1998; and our report dated June 30, 1999 with
respect to the balance sheet of Rowley Petroleum - Lakewood, LLC as of February
1, 1999, each appearing in this Current Report on Form 8-K of U.S. Restaurant
Properties, Inc.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Dallas, Texas
July 2, 1999
