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 September 26, 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
September 26, 1995 and December 27, 1994 1
Consolidated Statements of Income for the
Three and Nine Periods Ended
September 26, 1995 and September 27, 1994 2
Consolidated Statements of Cash Flows for
the Nine Periods Ended September 26, 1995
and September 27, 1994 3
Notes to Consolidated Condensed Financial Statements 4-5
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 6-9
Part II. Other Information
- - ---------------------------
Item 6. Exhibits and Reports on Form 8-K 10
Exhibit 11. Computation of Earnings per Partnership Interest 11
<PAGE>
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
September 26, December 27,
ASSETS 1995 1994
-------- ---------- ----------
Current assets:
Cash and cash equivalents $ 964,194 $ 843,902
Certificate of deposit 152,532 259,888
Accounts receivable 63,846 89,879
Due from affiliates 21,609 20,301
Deposit with affiliate 330,000 330,000
Notes receivable from
affiliates - current portion 35,527 27,172
Inventories 308,548 292,467
Prepaid expenses 197,813 107,803
---------- ----------
Total current assets 2,074,069 1,971,412
Net property and equipment 12,468,847 12,712,309
Other assets:
Franchise rights, net 1,119,493 1,179,742
Notes receivable from affiliates 164,625 171,250
Other 492,909 409,884
---------- ----------
$16,319,943 $16,444,597
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
- - ---------------------------------
Current liabilities:
Accounts payable $ 1,937,490 $ 1,554,972
Due to affiliates 17,077 78,976
Accrued payroll and other taxes 308,378 297,486
Accrued liabilities 773,355 785,067
Current portion of long-term debt 1,059,435 1,557,312
Current portion of obligations
under capital leases 70,752 76,248
---------- ----------
Total current liabilities 4,166,487 4,350,061
Other noncurrent liabilities 84,068 76,746
Long-term debt 8,992,917 9,229,894
Obligations under capital leases 1,677,641 1,724,077
General Partners' interest
in Operating Partnership 174,736 171,949
Partners' capital:
General Partners (3,071) (3,347)
Limited Partners:
Class A Income Preference 6,787,281 6,729,290
Classes B and C (4,223,835) (4,478,892)
Cost in excess of carrying value
of assets acquired (1,323,681) (1,323,681)
Notes receivable from employees (12,600) (31,500)
---------- ----------
1,224,094 891,870
---------- ----------
$16,319,943 $16,444,597
========== ==========
See accompanying notes.
<PAGE>
<TABLE>
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Periods Ended Nine Periods Ended
September 26, September 27, September 26, September 27,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $10,274,920 $ 9,843,609 $30,338,263 $28,382,085
Operating costs and expenses:
Cost of sales 2,688,769 2,509,719 8,002,238 7,266,428
Restaurant labor and benefits 2,657,742 2,606,368 7,932,631 7,532,612
Advertising 652,979 603,248 1,905,612 1,789,395
Other restaurant operating
expenses exclusive of
depreciation and amortization 1,924,647 1,805,149 5,548,228 5,153,998
General and administrative:
Management fees 713,492 683,490 2,105,836 1,969,086
Other 263,148 184,275 590,013 588,977
Depreciation and amortization 385,728 392,404 1,109,302 1,076,838
---------- ---------- ---------- ----------
Income from operations 988,415 1,058,956 3,144,403 3,004,751
Interest income (12,475) (17,085) (29,444) (33,775)
Interest expense 321,929 303,924 990,814 905,381
---------- ---------- ---------- ----------
Income before General Partners'
interest in income of
Operating Partnership 678,961 772,117 2,183,033 2,133,145
General Partners' interest in
income of Operating Partnership 6,790 7,721 21,831 16,790
---------- ---------- ---------- ----------
Net income $ 672,171 $ 764,396 $ 2,161,202 $ 2,116,355
========== ========== ========== ==========
Net income allocated to Partners:
Class A Income Preference $ 141,098 $ 161,226 $ 454,382 $ 805,300
Class B $ 199,784 $ 226,911 $ 642,091 $ 493,219
Class C $ 331,289 $ 376,259 $ 106,729 $ 817,836
Weighted average number of Partnership
units outstanding during period:
Class A Income Preference 825,764 825,764 825,764 825,764
Class B 1,169,216 1,162,185 1,166,898 1,159,919
Class C 1,938,834 1,927,115 1,934,971 1,923,338
Net income per Partnership interest:
Class A Income Preference $ 0.17 $ 0.20 $ 0.55 $ 0.98
Class B $ 0.17 $ 0.20 $ 0.55 $ 0.43
Class C $ 0.17 $ 0.20 $ 0.55 $ 0.43
Distributions per Partnership interest:
Class A Income Preference $ 0.16 $ 0.16 $ 0.48 $ 0.91
Class B $ 0.16 $ 0.16 $ 0.48 $ 0.36
Class C $ 0.16 $ 0.16 $ 0.48 $ 0.36
Pro Forma Amounts per Partnership interest
upon expiration of Class A Income
Preference distributions (Note 2):
Net income $ 0.54
Distributions $ 0.48
<FN>
See accompanying notes.
<FN>
</TABLE>
<PAGE>
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Nine Periods Ended
September 26, September 27,
1995 1994
---------- ----------
Cash flows from operating activities:
Net income $ 2,161,202 $ 2,116,355
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,109,302 1,076,838
Provision for deferred rent 7,322 8,795
Provision for deferred compensation 18,900 --
(Gain) Loss on disposal of assets 21,066 7,041
General Partners' interest in net
income of Operating Partnersip 21,831 16,790
Accounts receivable 26,033 83,127
Due from affiliates (1,308) 17,955
Inventories (16,081) 20,807
Prepaid expenses (90,010) 10,034
Accounts payable 382,518 71,461
Due to affiliates (61,899) (40,995)
Accrued payroll and other taxes 10,892 37,113
Accrued liabilities (11,712) 50,850
Other, net (104,363) (30,763)
---------- ----------
Net cash provided by
operating activities 3,473,693 3,445,408
Cash flows from investing activities:
Additions to property (810,294) (1,870,576)
Redemption of certificate of deposit 107,356 129,945
Proceeds from sale of property 4,975 3,830
Collections of notes receivable from affiliates 13,270 6,719
Funds advanced to affiliates (15,000) --
Decrease in restricted cash -- 750,000
Purchase of franchise rights -- (30,000)
---------- ----------
Net cash provided by
investing activities (699,693) (1,010,082)
Cash flows from financing activities:
Payments on long-term borrowings (1,134,854) (1,046,768)
Proceeds from short-term borrowings -- 360,000
Proceeds from long-term borrowings 400,000 200,000
Payments on capital lease obligations (51,932) (78,115)
Distributions to Partners (1,885,378) (1,861,829)
Proceeds from issuance of Class B and C units 37,500 18,750
General Partners' distributions
from Operating Partnerships (19,044) (14,219)
---------- ----------
Net cash used in
financing activities (2,653,708) (2,422,181)
---------- ----------
Net increase (decrease) in
cash and cash equivalents 120,292 13,145
Cash and cash equivalents at beginning of period 843,902 1,233,301
---------- ----------
Cash and cash equivalents at end of period $ 964,194 $ 1,246,446
========== ==========
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 October 2, 1995 the Partnership declared a distribution of $0.16 per unit,
and an additional special cash distribution of $0.10 per unit, for a total of
$0.26 per unit to all unitholders of record as of October 12, 1995 payable on
October 27, 1995. The distribution is not reflected in the September 26, 1995
consolidated condensed financial statements.
<PAGE>
4. Refinancing of Debt
-------------------
During the fourth quarter, the Partnership entered into two new loan
agreements. One loan agreement allows the Partnership to borrow $1,500,000
at a fixed interest rate of 9.23% with the principal due in monthly
installments of $31,223 including interest through October 2000. The
second loan agreement allows the Partnership to borrow $1,300,000 at a fixed
interest rate of 9.55% with the principal due in monthly installments of
$16,280 including interest through October 2005. Proceeds of these loans
were used to liquidate several term notes with varying due dates. The
effect of the new loan agreements was to reclassify approximately $900,000
of the previous term notes in existence at September 26, 1995 from short-term
to long-term and such transaction has been given retroactive effect in the
accompanying balance sheet, in accordance with Financial Accounting
Standards Board Statement No. 6. In connection with the refinancing,
the Partnership experienced an extraordinary charge of $142,000 in the
fourth quarter due to the early extinguishment debt. The debt was
refinanced to obtain a favorable interest rate.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ---------------------
As of September 26, 1995, the Partnership operated 54 Pizza Hut
restaurants and six Pizza Hut delivery/carryout facilities.
Quarter Ended September 26, 1995 Compared to Quarter
- - ----------------------------------------------------
Ended September 27, 1994
- - ------------------------
NET SALES. Net sales for the quarter ended September 26, 1995 increased
$431,000 to $10,275,000, a 4.4% increase over the same quarter of 1994. This
increase is primarily the result of the continued success of a new product,
Stuffed Crust Pizza, which was introduced in April. Stuffed Crust is a pizza
with a ring of mozzarella cheese hand-stuffed in the crust.
INCOME FROM OPERATIONS. Income from operations decreased $71,000 from
$1,059,000 to $988,000, a 6.7% decrease from the same quarter in 1994. As a
percentage of net sales, income from operations decreased from 10.8% for the
third quarter of 1994 to 9.6% for the third quarter of 1995. Cost of sales
increased as a percentage of net sales from 25.5% for the quarter ended
September 27, 1994 to 26.2% of net sales for the quarter ended September 26,
1995. This increase is attributable to the higher food cost of Stuffed Crust
Pizza and an increase in cheese prices. Restaurant labor and benefits
decreased as a percentage of net sales from 26.5% in 1994 to 25.9% in 1995 due
to lower benefit costs. Advertising increased from 6.1% of net sales in 1994
to 6.4% of net sales in 1995 as a result of increased print advertising aimed
at increasing delivery sales. Operating expenses increased as a percentage of
net sales from 18.3% for the quarter ended September 27, 1994 to 18.7% for the
quarter ended September 26, 1995. This increase primarily reflects increased
delivery expenses due to an increase in delivery sales resulting from the
success of Stuffed Crust Pizza and additional advertising. General and
administrative expense increased from 8.8% of net sales in 1994 to 9.5% of net
sales in 1995 primarily due to an increase in bonuses paid as a result of the
success of Stuffed Crust Pizza. Depreciation and amortization decreased as a
percentage of net sales from 4.0% for the quarter ended September 27, 1994 to
3.8% for the same quarter in 1995.
NET INCOME. Net income decreased $92,000 to $672,000 for the quarter ended
September 26, 1995 compared to $764,000 for the quarter ended September 27,
1994. This 12% decrease reflects the decrease in income from operations noted
above and an increase in interest expense of $18,000 due to higher interest
rates.
<PAGE>
Nine Periods Ended September 26, 1995 Compared to Nine Periods
- - --------------------------------------------------------------
Ended September 27, 1994
- - ------------------------
NET SALES. Net sales for the nine periods ended September 26, 1995 increased
$1,956,000 to $30,338,000 from $28,382,000, a 6.9% increase over the same nine
periods in 1994. Sales for comparable restaurants increased 5.3% over the
first nine periods of 1994. This increase is primarily attributable to the
success of a new product, Stuffed Crust Pizza.
INCOME FROM OPERATIONS. Income from operations increased $140,000 to
$3,144,000 for the nine periods ended September 26, 1995, a 4.6% increase over
the nine periods ended September 27, 1994. As a percentage of net sales,
income from operations decreased to 10.4% for the first nine periods of 1995
compared to 10.6% for the first nine periods of 1994. Cost of sales increased
as a percentage of net sales from 25.6% for the nine periods ended September
27, 1994 to 26.4% for the nine periods ended September 26, 1995. This
increase is a result of promoting items, including Stuffed Crust Pizza, that
have higher food costs and an increase in cheese prices. Restaurant labor and
benefits decreased slightly from 26.5% of net sales in 1994 to 26.1% of net
sales in 1995 primarily due to lower benefit costs. Advertising remained at
6.3% of net sales in both 1994 and 1995. Operating expenses were 18.3% of net
sales in 1994 and 18.2% in 1995. General and administrative expense decreased
from 9% of net sales in 1994 to 8.8% of net sales in 1995. Depreciation and
amortization decreased from 3.8% of net sales in 1994 to 3.7% of net sales
in 1995.
NET INCOME. Net income increased $45,000 to $2,161,000 for the nine periods
ended September 26, 1995 compared to $2,116,000 for the nine periods ended
September 27, 1994. This increase is a result of the increase in income from
operations noted above which was partially offset by an increase in interest
expense of $86,000 due to higher interest rates.
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 September 26, 1995 the Partnership had a working capital deficiency of
$2,092,000 compared to a working capital deficiency of $2,379,000 at December
27, 1994. The decrease in working capital deficiency is due to a $500,000
decrease in current portion of long-term debt as a result of the retroactive
recording of the fourth quarter refinancing. This decrease in working capital
deficiency was partially offset by 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.
<PAGE>
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 nine periods
ended September 26, 1995 net cash provided by operating activities amounted to
$3,474,000 compared to $3,445,000 for the nine periods ended September 27,
1994. This increase is primarily the result of the increase 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 nine periods ended September 26, 1995 were $810,000, of which $467,000 was
for the replacement of equipment in existing restaurants. The remaining
$343,000 was for quality upgrades and Stuffed Crust Pizza requirements.
FINANCING ACTIVITIES. Cash distributions declared during the first nine
periods of 1995 were $1,885,000 amounting to $0.48 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 nine periods ended September 26, 1995 the Partnership's proceeds
from long-term borrowings amounted to $400,000. The proceeds were used
primarily to finance equipment upgrades relating to the quality focus and the
Stuffed Crust Pizza rollout. Management anticipates spending an additional
$318,000 for recurring replacement of equipment in existing restaurants which
will be financed from net cash provided by operating activities. The
Partnership does not plan to open any new restaurants in 1995.
During the fourth quarter, the Partnership entered into two new loan
agreements. Proceeds of these loans were used to liquidate several
term notes with varying due dates. The effect of the new loan agreements
was to reclassify approximately $900,000 of the previous term notes in
existence at September 26, 1995 from short-term to long-term and such
transaction has been given retroactive effect in the balance sheet at
September 26, 1995, in accordance with Financial Accounting Standards
Board Statement No. 6. In connection with the refinancing, the Partnership
experienced an extraordinary charge of $142,000 in the fourth quarter due
to the early extinguishment of debt. The debt was refinanced to obtain
a favorable interest rate.
<PAGE>
The Partnership announced on July 5, 1995 that its managing general partner
has authorized the purchase by the Partnership of up to 300,000 Class A Income
Preference Units of limited partner interests. Such purchases which may be
made either by open market purchases effected on the American Stock Exchange
or otherwise or in privately negotiated transactions, may be made from time to
time through December 31, 1996, depending on market factors and other
conditions.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits Page
----
11. Computation of Earnings per Partnership Interest 11
(b) Reports on Form 8-K
During the third quarter of 1995, the Partnership
filed a Form 8-K, dated July 5, 1995, reporting that
the managing general partner had authorized the
purchase by the Partnership of up to 300,000 Class A
Income Preference Units of limited partner interests.
<PAGE>
<TABLE>
AMERICAN RESTAURANT PARTNERS, L.P.
COMPUTATION OF EARNINGS PER PARTNERSHIP INTEREST
<CAPTION>
Three Periods Ended Nine Periods Ended
---------------------- --------------------
Sept 26, Sept 27, Sept 26, Sept 27,
1995 1994 1995 1994
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Income before General Partners'
interest in income of
Operating Partnership $ 678,961 $ 772,117 $2,183,033 $2,133,145
Priority amount attributable to
Class A Income Preference units -- -- -- (454,170)
--------- -------- --------- ---------
Balance attributable to
all partnership interests $ 678,961 $ 772,117 $2,183,033 $1,678,975
========= ======== ========= =========
Income before General Partners'
interest in income of
Operating Partnership $ 678,961 $ 772,117 $2,183,033 $2,133,145
Net income attributable to
General Partners (1%) (6,790) (7,721) (21,831) (16,790)
--------- -------- --------- ---------
Net income attributable to
American Restaurant Partners, L.P.
unitholders $ 672,171 $ 764,396 $2,161,202 $2,116,355
========= ======== ========= =========
Net income allocated to Partners:
Class A Income Preference $ 141,098 $ 161,226 $ 454,382 $ 805,300
Class B $ 199,784 $ 226,911 $ 642,091 $ 493,219
Class C $ 331,289 $ 376,259 $1,064,729
Weighted average number of
Partnership units
outstanding during period:
Class A Income Preference 825,764 825,764 825,764 825,764
Class B 1,169,216 1,162,185 1,166,898 1,159,919
Class C 1,938,834 1,927,115 1,934,971 1,923,338
Net income per Partnership interest:
Class A Income Preference $ 0.17 $ 0.20 $ 0.55 $ 0.98
Class B $ 0.17 $ 0.20 $ 0.55 $ 0.43
Class C $ 0.17 $ 0.20 $ 0.55 $ 0.43
</TABLE>
<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: 11/13/95 By: /s/Hal W. McCoy
-------- --------------------
Hal W. McCoy
President and Chief Executive Officer
Date: 11/10/95 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 September 26, 1995 and is qualified in its entirety by reference to
such financial statements.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-26-1995
<PERIOD-END> SEP-26-1995
<CASH> 964194
<SECURITIES> 0
<RECEIVABLES> 615607
<ALLOWANCES> 0
<INVENTORY> 308548
<CURRENT-ASSETS> 2074069
<PP&E> 22408174
<DEPRECIATION> 9939327
<TOTAL-ASSETS> 16319943
<CURRENT-LIABILITIES> 4166487
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1224094
<TOTAL-LIABILITY-AND-EQUITY> 16319943
<SALES> 30338263
<TOTAL-REVENUES> 30338263
<CGS> 8002238
<TOTAL-COSTS> 27193860
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 990814
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 2161202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2161202
<EPS-PRIMARY> .55
<EPS-DILUTED> 000
</TABLE>
