SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 28, 1995 Commission file number 1-9606
AMERICAN RESTAURANT PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 48-1037438
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 North Woodlawn, Suite 3102
Wichita, Kansas 67208
(Address of principal executive offices) (Zip-Code)
Registrant's telephone number, including area code (316) 684-5119
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES [X] NO [ ]
<PAGE>
AMERICAN RESTAURANT PARTNERS, L.P.
INDEX
Page
Number
------
Part I. Financial Information
- - - - - -------------------------------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
March 28, 1995 and December 27, 1994 1
Consolidated Statements of Income for the Three
Periods Ended March 28, 1995 and March 29, 1994 2
Consolidated Statements of Cash Flows for
the Three Periods Ended March 28, 1995
and March 29, 1994 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 5-7
Part II. Other Information
- - - - - ---------------------------
Item 6. Exhibits and Reports on Form 8-K 8
Exhibit 11. Computation of Earnings per Partnership Interest 9
<PAGE>
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
March 28, December 27,
ASSETS 1995 1994
-------- --------- ---------
Current assets:
Cash and cash equivalents $ 1,032,064 $ 843,902
Certificate of deposit 150,000 259,888
Accounts receivable 67,836 89,879
Due from affiliates 15,991 20,301
Deposit with affiliate 330,000 330,000
Notes receivable from
affiliates - current portion 29,225 27,172
Inventories 284,538 292,467
Prepaid expenses 204,075 107,803
---------- ----------
Total current assets 2,113,729 1,971,412
Net property and equipment 12,649,078 12,712,309
Other assets:
Franchise rights, net 1,159,619 1,179,742
Notes receivable from affiliates 178,559 171,250
Other 413,486 409,884
---------- ----------
$16,514,471 $16,444,597
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
- - - - - ---------------------------------
Current liabilities:
Accounts payable $ 1,933,335 $ 1,554,972
Due to affiliates 25,425 78,976
Accrued payroll and other taxes 308,805 297,486
Accrued liabilities 658,796 785,067
Current portion of long-term debt 1,599,652 1,557,312
Current portion of obligations
under capital leases 73,154 76,248
---------- ----------
Total current liabilities 4,599,167 4,350,061
Other noncurrent liabilities 79,286 76,746
Long-term debt 9,216,251 9,229,894
Obligations under capital leases 1,709,042 1,724,077
General Partners' interest
in Operating Partnership 170,168 171,949
Partners' capital:
General Partners (3,524) (3,347)
Limited Partners:
Class A Income Preference 6,692,179 6,729,290
Classes B and C (4,599,217) (4,478,892)
Cost in excess of carrying value
of assets acquired (1,323,681) (1,323,681)
Notes receivable from employees (25,200) (31,500)
---------- ----------
740,557 891,870
---------- ----------
$16,514,471 $16,444,597
========== ==========
See accompanying notes.
<PAGE>
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Periods Ended
March 28, March 29,
1995 1994
---------- ----------
Net sales $ 9,067,057 $ 9,003,190
Operating costs and expenses:
Cost of sales 2,373,107 2,296,427
Restaurant labor and benefits 2,522,886 2,383,474
Advertising 566,708 582,230
Other restaurant operating
expenses exclusive of
depreciation and amortization 1,719,784 1,609,740
General and administrative:
Management fees 629,356 624,278
Other 130,553 186,377
Depreciation and amortization 354,048 330,363
---------- ----------
Income from operations 770,615 990,301
Interest income (11,014) (10,592)
Interest expense 325,470 303,802
---------- ----------
Income before General Partners'
interest in income of
Operating Partnership 456,159 697,091
General Partners' interest in
income of Operating Partnership 4,562 4,700
---------- ----------
Net income $ 451,597 $ 692,391
========== ==========
Net income allocated to Partners:
Class A Income Preference $ 95,026 $ 325,455
Class B $ 134,140 $ 138,041
Class C $ 222,431 $ 228,895
Weighted average number of Partnership
units outstanding during period:
Class A Income Preference 825,764 825,764
Class B 1,165,662 1,158,785
Class C 1,932,910 1,921,449
Net income per Partnership interest:
Class A Income Preference $ 0.12 $ 0.39
Class B $ 0.12 $ 0.12
Class C $ 0.12 $ 0.12
Distributions per Partnership interest:
Class A Income Preference $ 0.16 $ 0.37
Class B $ 0.16 $ 0.10
Class C $ 0.16 $ 0.10
Pro Forma Amounts per Partnership interest
upon expiration of Class A Income
Preference distributions (Note 2):
Net income $ 0.18
Distributions $ 0.16
See accompanying notes.
<PAGE>
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Three Periods Ended
March 28, March 29,
1995 1994
---------- ----------
Cash flows from operating activities:
Net income $ 451,597 $ 692,391
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 354,048 330,363
Provision for deferred rent 2,540 3,270
Provision for deferred compensation 6,300 --
(Gain) Loss on disposal of assets 13,859 5,233
General Partners' interest in net
income of Operating Partnersip 4,562 4,700
Accounts receivable 22,043 57,429
Due from affiliates 4,310 16,122
Inventories 7,929 20,191
Prepaid expenses (96,272) 21,474
Accounts payable 378,363 30,967
Due to affiliates (53,551) (22,417)
Accrued payroll and other taxes 11,319 32,474
Accrued liabilities (126,271) (51,625)
Other, net (9,114) (15,715)
---------- ----------
Net cash provided by
operating activities 971,662 1,124,857
Cash flows from investing activities:
Additions to property (280,441) (404,960)
Redemption of certificate of deposit 109,888 --
Proceeds from sale of property 1,400 1,904
Collections of notes receivable from affiliate 5,638 724
Funds advanced to affiliates (15,000) --
Decrease in restricted cash -- 170,000
---------- ----------
Net cash provided by
investing activities (178,515) (232,332)
Cash flows from financing activities:
Payments on long-term borrowings (371,303) (331,839)
Proceeds from long-term borrowings 400,000 --
Payments on capital lease obligations (18,129) (24,817)
Distributions to Partners (627,960) (617,684)
Proceeds from issuance of Class B and C units 18,750 --
General Partners' distributions
from Operating Partnerships (6,343) (3,945)
---------- ----------
Net cash used in
financing activities (604,985) (978,285)
---------- ----------
Net increase (decrease) in
cash and cash equivalents 188,162 (85,760)
Cash and cash equivalents at beginning of period 843,902 1,233,301
---------- ----------
Cash and cash equivalents at end of period $ 1,032,064 $ 1,147,541
========== ==========
See accompanying notes.
<PAGE>
AMERICAN RESTAURANT PARTNERS, L.P.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. General
-------
The accompanying consolidated financial statements include the accounts of
American Restaurant Partners, L.P. and its majority owned subsidiary, American
Pizza Partners, L.P., hereinafter collectively referred to as the Partnership,
and have been prepared without audit. The Balance Sheet at December 27, 1994
has been derived from financial statements which have been audited by Ernst &
Young, independent auditors. In the opinion of management, all adjustments of
a normal and recurring nature which are necessary for a fair presentation of
such financial statements have been included. These statements should be read
in conjunction with the financial statements and notes contained in the
Partnership's Annual Report filed on Form 10-K for the fiscal year ended
December 27, 1994.
The results of operations for interim periods are not necessarily indicative
of the results for the full year. The Partnership historically has realized
approximately 45% of its operating profits in periods six through nine (18
weeks).
2. Class A Income Preference Units
-------------------------------
From the inception of the Partnership in August, 1987, the Partnership paid a
preference payment of $0.275 each quarter until such time as the Class A Income
Preference units had received $10.00 in aggregate cash distributions. The
quarterly preference payment expired with the May 6, 1994 distribution. While
the preference distribution was in effect, net income was allocated to the
Class A Income Preference units until the amount allocated equaled the
preference amount. The remaining net income was allocated to all units in
accordance with their ratio to all outstanding units. Since the final
preference payment, net income and distributions have been allocated to all
partners in accordance with their respective units in the Partnership with all
outstanding units being treated equally.
3. Distribution to Partners
------------------------
On April 3, 1995 the Partnership declared a distribution of $0.16 per unit to
all unitholders of record as of April 12, 1995 payable on April 28, 1995. The
distribution is not reflected in the March 28, 1995 consolidated condensed
financial statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - - - - ---------------------
As of March 28, 1995, the Partnership operated 54 Pizza Hut
restaurants and six Pizza Hut delivery/carryout facilities.
Quarter Ended March 28, 1995 Compared to Quarter Ended
- - - - - ------------------------------------------------------
March 29, 1994
- - - - - --------------
NET SALES. Net sales for the quarter ended March 28, 1995 increased $64,000
to $9,067,000, a .7% increase over the first quarter of 1994. This increase
is due to sales from newly developed restaurants as sales for comparable
restaurants decreased 2.3%. This decrease is due to national advertising
programs that did not increase traffic as anticipated.
INCOME FROM OPERATIONS. Income from operations decreased $220,000 from
$990,000 to $770,000, a 22.2% decrease from the same quarter in 1994. As a
percentage of net sales, income from operations decreased from 11.0% for the
quarter ended March 29, 1994 to 8.5% for the quarter ended March 28, 1995.
Cost of sales increased as a percentage of net sales from 25.5% for the
quarter ended March 29, 1994 to 26.2% for the quarter ended March 28, 1995 due
to the promotion of items with high food costs during the first quarter of
1995. Labor and benefits expense increased as a percentage of net sales from
26.5% in 1994 to 27.8% in 1995. This increase is primarily attributable to
the implementation and follow-up of the new procedures designed to improve
product quality and customer service, and training for the Stuffed Crust Pizza
rollout. Advertising decreased slightly as a percentage of net sales from
6.5% in 1994 to 6.3% in 1995. Operating expenses increased from 17.9% of net
sales in 1994 to 19.0% of net sales in 1995. This increase is the result of
several factors: a decrease in premium income as there was no NCAA basketball
promotion in 1995, costs associated with the settlement of a claim under the
Texas Employee Safety Plan, and a general increase in operating expenses which
was not offset by an increase in sales. General and administrative expenses
decreased from 9.0% of net sales in 1994 to 8.3% of net sales in 1995
attributable to a decrease in bonuses paid due to lower operating results.
Depreciation and amortization expense increased slightly from 3.7% of net
sales in 1994 to 3.9% of net sales in 1995 due to depreciation of the new
stores opened in May of 1994.
NET INCOME. Net income decreased $240,000 to $452,000 for the quarter ended
March 28, 1995 from $692,000 for the quarter ended March 29, 1994. This 34.7%
decrease is attributable to the decrease in income from operations noted above
and an increase in interest expense due to higher interest rates.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- - - - - -------------------------------
The Partnership generates its principal source of funds from net cash provided
by operating activities. Net cash provided by operating activities is expected
to provide sufficient funds to meet planned capital expenditures for recurring
replacement of equipment in existing restaurants, to service debt obligations
and to make quarterly cash distributions.
At March 28, 1995 the Partnership had a working capital deficiency of
$2,485,000 compared to a working capital deficiency of $2,379,000 at December
27, 1994. The increase in working capital deficiency is primarily a result of
an increase in accounts payable. The Partnership routinely operates with a
negative working capital position which is common in the restaurant industry
and which results from the cash sales nature of the restaurant business and
payment terms with vendors.
Master Limited Partnerships (MLPs) are not currently subject to federal or
state income taxes. However, under the Omnibus Budget Reconciliation Act of
1987, certain MLPs, including the Partnership, will be taxed as corporations
beginning in 1998.
NET CASH PROVIDED BY OPERATING ACTIVITIES. For the three periods
ended March 28, 1995 net cash provided by operating activities amounted to
$972,000 compared to $1,125,000 for the three periods ended March 29, 1994.
This decrease is primarily the result of the decrease in net income noted
above.
INVESTING ACTIVITIES. Property and equipment expenditures represent the
largest nonoperating use of funds by the Partnership. Capital expenditures for
the three periods ended March 28, 1995 were $280,000, of which $103,000 was
for the replacement of equipment in existing restaurants. The remaining
$177,000 was for quality upgrades and Stuffed Crust Pizza requirements.
FINANCING ACTIVITIES. Cash distributions declared during the first quarter of
1995 were $628,000 amounting to $0.16 per unit. The Partnership's distribution
objective, generally, is to distribute all operating revenues less operating
expenses (excluding noncash items such as depreciation and amortization),
capital expenditures for existing restaurants, interest and principal payments
on Partnership debt, and such cash reserves as the managing General Partner
may deem appropriate.
During the three periods ended March 28, 1995 the Partnership made no long-
term borrowings. The Partnership does not plan to open any new restaurants in
1995. Management anticipates spending an additional $490,000 for recurring
replacement of equipment in existing restaurants which will be financed from
net cash provided by operating activities. While first quarter results were
below expectations, management remains optimistic about the remainder of 1995.
The procedures implemented to insure a consistent, quality pizza for each
customer began to pay off near the end of first quarter as the Partnership's
quality scores are consistently higher than they were six months ago. Stuffed
Crust Pizza, a pizza with a ring of mozzarella cheese hand-stuffed in the
crust, has increased sales since its introduction on March 26, 1995.
Management anticipates continuing to distribute quarterly at the rate of $0.64
per unit throughout 1995.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits Page
----
11. Computation of Earnings per Partnership Interest 9
(b) Reports on Form 8-K
During the fiscal period covered by this Form 10-Q,
no reports on Form 8-K were filed.
<PAGE>
AMERICAN RESTAURANT PARTNERS, L.P.
COMPUTATION OF EARNINGS PER PARTNERSHIP INTEREST
Three Periods Ended
-------------------
March 28, March 29,
1995 1994
--------- ---------
Income before General Partners'
interest in income of
Operating Partnership $ 456,159 $ 697,091
Priority amount attributable to
Class A Income Preference units -- (227,085)
-------- --------
Balance attributable to
all partnership interests $ 456,159 $ 470,006
======== ========
Income before General Partners'
interest in income of
Operating Partnership $ 456,159 $ 697,091
Net income attributable to
General Partners (1%) (4,562) (4,700)
-------- --------
Net income attributable to
American Restaurant Partners, L.P.
unitholders $ 451,597 $ 692,391
======== ========
Net income allocated to Partners:
Class A Income Preference $ 95,026 $ 325,455
Class B $ 134,140 $ 138,041
Class C $ 222,431 $ 228,895
Weighted average number of
Partnership units
outstanding during period:
Class A Income Preference 825,764 825,764
Class B 1,165,662 1,158,785
Class C 1,932,910 1,921,449
Net income per Partnership interest:
Class A Income Preference $ 0.12 $ 0.39
Class B $ 0.12 $ 0.12
Class C $ 0.12 $ 0.12
<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.
AMERICAN RESTAURANT PARTNERS, L.P.
(Registrant)
By: RMC AMERICAN MANAGEMENT, INC.
Managing General Partner
Date: 5/12/95 By: /s/Hal W. McCoy
-------- --------------------
Hal W. McCoy
President and Chief Executive Officer
Date: 5/12/95 By: /s/Terry Freund
-------- --------------------
Terry Freund
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated condensed financial statements of American Restaurant Partners,
L.P. at March 28, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1995
<PERIOD-END> MAR-28-1995
<CASH> 1032064
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<INVENTORY> 284538
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<DEPRECIATION> (9311995)
<TOTAL-ASSETS> 16514471
<CURRENT-LIABILITIES> 4599167
<BONDS> 0
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0
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<OTHER-SE> 740557
<TOTAL-LIABILITY-AND-EQUITY> 16514471
<SALES> 9067057
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<CGS> 2373107
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</TABLE>
