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 June 27, 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
June 27, 1995 and December 27, 1994 1
Consolidated Statements of Income for the Three
and Six Periods Ended June 27, 1995 and June 28, 1994 2
Consolidated Statements of Cash Flows for
the Six Periods Ended June 27, 1995
and June 28, 1994 3
Notes to Consolidated Condensed Financial Statements 4
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)
June 27, December 27,
ASSETS 1995 1994
-------- ---------- ----------
Current assets:
Cash and cash equivalents $ 1,209,150 $ 843,902
Certificate of deposit 200,000 259,888
Accounts receivable 75,187 89,879
Due from affiliates 16,259 20,301
Deposit with affiliate 330,000 330,000
Notes receivable from
affiliates - current portion 34,607 27,172
Inventories 298,975 292,467
Prepaid expenses 190,135 107,803
---------- ----------
Total current assets 2,354,313 1,971,412
Net property and equipment 12,574,268 12,712,309
Other assets:
Franchise rights, net 1,139,515 1,179,742
Notes receivable from affiliates 166,089 171,250
Other 443,465 409,884
---------- ----------
$16,677,650 $16,444,597
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Current liabilities:
Accounts payable $ 2,010,068 $ 1,554,972
Due to affiliates 17,597 78,976
Accrued payroll and other taxes 348,093 297,486
Accrued liabilities 684,127 785,067
Current portion of long-term debt 2,038,026 1,557,312
Current portion of obligations
under capital leases 70,173 76,248
---------- ----------
Total current liabilities 5,168,084 4,350,061
Other noncurrent liabilities 81,827 76,746
Long-term debt 8,403,528 9,229,894
Obligations under capital leases 1,693,575 1,724,077
General Partners' interest
in Operating Partnership 174,304 171,949
Partners' capital:
General Partners (3,114) (3,347)
Limited Partners:
Class A Income Preference 6,778,339 6,729,290
Classes B and C (4,276,312) (4,478,892)
Cost in excess of carrying value
of assets acquired (1,323,681) (1,323,681)
Notes receivable from employees (18,900) (31,500)
---------- ----------
1,156,332 891,870
---------- ----------
$16,677,650 $16,444,597
========== ==========
See accompanying notes.
<PAGE>
<TABLE>
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Periods Ended Six Periods Ended
June 27, June 28, June 27, June 28,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $10,996,286 $ 9,535,286 $20,063,343 $18,538,476
Operating costs and expenses:
Cost of sales 2,940,362 2,460,282 5,313,469 4,756,709
Restaurant labor and benefits 2,752,003 2,542,770 5,274,889 4,926,244
Advertising 685,925 603,917 1,252,633 1,186,147
Other restaurant operating
expenses exclusive of
depreciation and amortization 1,903,797 1,739,109 3,623,581 3,348,849
General and administrative:
Management fees 762,988 661,318 1,392,344 1,285,596
Other 196,312 218,325 326,865 404,702
Depreciation and amortization 369,526 354,071 723,574 684,434
---------- ---------- ---------- ----------
Income from operations 1,385,373 955,494 2,155,988 1,945,795
Interest income (5,955) (6,098) (16,969) (16,690)
Interest expense 343,415 297,655 668,885 601,457
---------- ---------- ---------- ----------
Income before General Partners'
interest in income of
Operating Partnership 1,047,913 663,937 1,504,072 1,361,028
General Partners' interest in
income of Operating Partnership 10,479 4,369 15,041 9,069
---------- ---------- ---------- ----------
Net income $ 1,037,434 $ 659,568 $ 1,489,031 $ 1,351,959
========== ========== ========== ==========
Net income allocated to Partners:
Class A Income Preference $ 218,275 $ 318,516 $ 313,307 $ 643,971
Class B $ 308,162 $ 128,304 $ 442,299 $ 266,345
Class C $ 510,997 $ 212,748 $ 733,425 $ 441,643
Weighted average number of Partnership
units outstanding during period:
Class A Income Preference 825,764 825,764 825,764 825,764
Class B 1,165,816 1,158,785 1,165,739 1,158,785
Class C 1,933,168 1,921,449 1,933,039 1,921,449
Net income per Partnership interest:
Class A Income Preference $ 0.26 $ 0.39 $ 0.38 $ 0.78
Class B $ 0.26 $ 0.11 $ 0.38 $ 0.23
Class C $ 0.26 $ 0.11 $ 0.38 $ 0.23
Distributions per Partnership interest:
Class A Income Preference $ 0.16 $ 0.38 $ 0.32 $ 0.75
Class B $ 0.16 $ 0.10 $ 0.32 $ 0.20
Class C $ 0.16 $ 0.10 $ 0.32 $ 0.20
Pro Forma Amounts per Partnership interest
upon expiration of Class A Income
Preference distributions (Note 2):
Net income $ 0.17 $ 0.35
Distributions $ 0.16 $ 0.32
<FN>
See accompanying notes.
<FN>
</TABLE>
<PAGE>
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Six Periods Ended
June 27, June 28,
1995 1994
---------- ----------
Cash flows from operating activities:
Net income $ 1,489,031 $ 1,351,959
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 723,574 684,434
Provision for deferred rent 5,081 6,254
Provision for deferred compensation 12,600 --
(Gain) Loss on disposal of assets 14,923 5,783
General Partners' interest in net
income of Operating Partnersip 15,041 9,069
Accounts receivable 14,692 82,549
Due from affiliates 4,042 17,530
Inventories (6,508) 12,137
Prepaid expenses (82,332) 36,365
Accounts payable 455,096 118,951
Due to affiliates (61,379) 8,221
Accrued payroll and other taxes 50,607 56,194
Accrued liabilities (100,940) (56,983)
Other, net (44,772) (19,300)
---------- ----------
Net cash provided by
operating activities 2,488,756 2,313,163
Cash flows from investing activities:
Additions to property (553,787) (1,338,355)
Purchase of certificate of deposit (50,000) --
Redemption of certificate of deposit 109,888 129,945
Proceeds from sale of property 4,749 3,005
Collections of notes receivable from affiliates 12,726 6,218
Funds advanced to affiliates (15,000) --
Decrease in restricted cash -- 701,937
---------- ----------
Net cash used in
investing activities (491,424) (497,250)
Cash flows from financing activities:
Payments on long-term borrowings (745,652) (688,905)
Proceeds from long-term borrowings 400,000 --
Payments on capital lease obligations (36,577) (50,947)
Distributions to Partners (1,255,919) (1,235,369)
Proceeds from issuance of Class B and C units 18,750 --
General Partners' distributions
from Operating Partnerships (12,686) (7,891)
---------- ----------
Net cash used in
financing activities (1,632,084) (1,983,112)
---------- ----------
Net increase (decrease) in
cash and cash equivalents 365,248 (167,199)
Cash and cash equivalents at beginning of period 843,902 1,233,301
---------- ----------
Cash and cash equivalents at end of period $ 1,209,150 $ 1,066,102
========== ==========
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 July 5, 1995 the Partnership declared a distribution of $0.16 per unit to
all unitholders of record as of July 12, 1995 payable on July 28, 1995. The
distribution is not reflected in the June 27, 1995 consolidated condensed
financial statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
As of June 27, 1995, the Partnership operated 54 Pizza Hut restaurants
and six Pizza Hut delivery/carryout facilities.
Quarter Ended June 27, 1995 Compared to Quarter Ended
- ------------------------------------------------------
June 28, 1994
- --------------
NET SALES. Net sales for the quarter ended June 27, 1995 increased $1,461,000
to $10,996,000, a 15.3% increase over the same quarter of 1994. Comparable
restaurant sales increased 13.4%. This increase is primarily the result of
the introduction of a new product, Stuffed Crust Pizza, in the second quarter.
Stuffed Crust is a pizza with a ring of mozzarella cheese hand-stuffed in the
crust.
INCOME FROM OPERATIONS. Income from operations increased $430,000 from
$955,000 to $1,385,000, a 45% increase over the same quarter in 1994. As a
percentage of net sales, income from operations increased from 10.0% for the
quarter ended June 28, 1994 to 12.6% for the quarter ended June 27, 1995.
Cost of sales increased as a percentage of net sales from 25.8% for the
quarter ended June 28, 1994 to 26.7% of net sales for the quarter ended June
27, 1995. This increase is due primarily to the higher food cost of Stuffed
Crust Pizza. Restaurant labor and benefits deceased as a percentage of net
sales from 26.7% in 1994 to 25.0% in 1995 due to the effeciencies achieved at
higher sales levels. Advertising decreased from 6.3% of net sales in 1994 to
6.2% of net sales in 1995. Operating expenses decreased as a percentage of
net sales from 18.2% for the quarter ended June 28,1994 to 17.3% for the
quarter ended June 27, 1995. This decrease is attributable to fixed costs
being a lower percentage of the increased net sales. General and
administrative expense decreased from 9.2% of net sales in 1994 to 8.7% of net
sales in 1995 primarily due to a decrease in bonuses paid. Depreciation and
amortization decreased as a percentage of net sales from 3.7% for the quarter
ended June 28, 1994 to 3.4% for the same quarter in 1995.
NET INCOME. Net income increased $377,000 to $1,037,000 for the quarter ended
June 27, 1995 from $660,000 for the quarter ended June 28, 1994. This 57.3%
increase is attributable to the increase in income from operations noted above
which was partially offset by an increase in interest expense of $46,000 due
to higher interest rates.
<PAGE>
Six Periods Ended June 27, 1995 Compared to Six Periods
- -------------------------------------------------------
Ended June 28, 1994
- -------------------
NET SALES. Net sales for the six periods ended June 27, 1995 increased
$1,525,000 to $20,063,000 from $18,538,000, an 8.2% increase over the same
quarter in 1994. Sales for comparable restaurants increased 5.8%. This
increase is due to the success of Stuffed Crust Pizza during the second
quarter.
INCOME FROM OPERATIONS. Income from operations increased $210,000 to
$2,156,000 for the six periods ended June 27, 1995, a 10.8% increase over the
six periods ended June 28, 1994. As a percentage of net sales, income from
operations increased to 10.7% for the six periods ended June 27, 1995 compared
to 10.5% for the first six periods of 1994. Cost of sales increased as a
percentage of net sales from 25.7% for the six periods ended June 28, 1994 to
26.5% for the six periods ended June 27, 1995. This increase is due to the
promotion of items, including Stuffed Crust Pizza, that have higher food cost.
Restaurant labor and benefits decreased slightly from 26.6% of net sales in
1994 to 26.3% of net sales in 1995 due to the effeciencies achieved at higher
sales levels. Advertising decreased as a percentage of net sales from 6.4% in
1994 to 6.2% in 1995. Operating expenses remained at 18.1% of net sales for
both years. General and administrative expense decreased from 9.1% of net
sales in 1994 to 8.5% of net sales in 1995 attributable to a decrease in
bonuses paid. Depreciation and amortization decreased from 3.7% of net sales
in 1994 to 3.6% of net sales in 1995.
NET INCOME. Net income increased $137,000 to $1,489,000 for the six periods
ended June 27, 1995 compared to $1,352,000 for the six periods ended June 28,
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
$68,000 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.
<PAGE>
At June 27, 1995 the Partnership had a working capital deficiency of
$2,814,000 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
borrowing $400,000 to finance equipment upgrades relating to the quality focus
and the Stuffed Crust Pizza rollout. This note is due April 1, 1996. 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 six periods
ended June 27, 1995 net cash provided by operating activities amounted to
$2,489,000 compared to $2,313,000 for the six periods ended June 28, 1994.
This improvement 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 six periods ended June 27, 1995 were $554,000, of which $211,000 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 six
periods of 1995 were $1,256,000 amounting to $0.32 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 six periods ended June 27, 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. The Partnership does not plan to open any new
restaurants in 1995. Management anticipates spending an additional $424,000
for recurring replacement of equipment in existing restaurants which will be
financed from net cash provided by operating activities. The procedures
implemented during the fourth quarter of 1994 designed to improve product
quality and customer service laid the foundation for the success the
Partnership is currently enjoying with Stuffed Crust Pizza. During the
remainder of 1995, management will concentrate on providing a consistent,
quality product whether it is a Stuffed Crust Pizza or one of the other
quality products served.
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 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>
<TABLE>
AMERICAN RESTAURANT PARTNERS, L.P.
COMPUTATION OF EARNINGS PER PARTNERSHIP INTEREST
<CAPTION>
Three Periods Ended Six Periods Ended
---------------------- --------------------
June 27, June 28, June 27, June 28,
1995 1994 1995 1994
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Income before General Partners'
interest in income of
Operating Partnership $1,047,913 $ 663,937 $1,504,072 $1,361,028
Priority amount attributable to
Class A Income Preference units -- (227,085) -- (454,170)
--------- -------- --------- ---------
Balance attributable to
all partnership interests $1,047,913 $ 436,852 $1,504,072 $ 906,858
========= ======== ========= =========
Income before General Partners'
interest in income of
Operating Partnership $1,047,913 $ 663,937 $1,504,072 $1,361,028
Net income attributable to
General Partners (1%) (10,479) (4,369) (15,041) (9,069)
--------- -------- --------- ---------
Net income attributable to
American Restaurant Partners, L.P.
unitholders $1,037,434 $ 659,568 $1,489,031 $1,351,959
========= ======== ========= =========
Net income allocated to Partners:
Class A Income Preference $ 218,275 $ 318,516 $ 313,307 $ 643,971
Class B $ 308,162 $ 128,304 $ 442,299 $ 266,345
Class C $ 510,997 $ 212,748 $ 733,425 $ 441,643
Weighted average number of
Partnership units
outstanding during period:
Class A Income Preference 825,764 825,764 825,764 825,764
Class B 1,165,816 1,158,785 1,165,739 1,158,785
Class C 1,933,168 1,921,449 1,933,039 1,921,449
Net income per Partnership interest:
Class A Income Preference $ 0.26 $ 0.39 $ 0.38 $ 0.78
Class B $ 0.26 $ 0.11 $ 0.38 $ 0.23
Class C $ 0.26 $ 0.11 $ 0.38 $ 0.23
</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: 8/11/95 By: /s/Hal W. McCoy
-------- --------------------
Hal W. McCoy
President and Chief Executive Officer
Date: 8/11/95 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 June 27, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1995
<PERIOD-END> JUN-27-1995
<CASH> 1209150
<SECURITIES> 0
<RECEIVABLES> 622142
<ALLOWANCES> 0
<INVENTORY> 298975
<CURRENT-ASSETS> 2354313
<PP&E> 22216509
<DEPRECIATION> 9642241
<TOTAL-ASSETS> 16677650
<CURRENT-LIABILITIES> 5168084
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1156332
<TOTAL-LIABILITY-AND-EQUITY> 16677650
<SALES> 20063343
<TOTAL-REVENUES> 20063343
<CGS> 5313469
<TOTAL-COSTS> 17907355
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 668885
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1489031
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1489031
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
</TABLE>
