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 29, 1999 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)
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 [ ]
AMERICAN RESTAURANT PARTNERS, L.P.
INDEX
Page
Number
------
Part I. Financial Information
- -------------------------------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
June 29, 1999 and December 29, 1998 1
Consolidated Condensed Statements of Operations
for the Three and Six Periods Ended
June 29, 1999 and June 30, 1998 2
Consolidated Condensed Statements of Cash
Flows for the Six Periods Ended
June 29, 1999 and June 30, 1998 3
Notes to Consolidated Condensed Financial Statements 4-5
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 6-12
Part II. Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 13
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
June 29, December 29,
ASSETS 1999 1998
- -------------------------- -------- ------------
Current assets:
Cash and cash equivalents $ 41,925 $ 329,946
Investments available for sale,
at fair market value 46,135 68,635
Accounts receivable 139,433 264,754
Due from affiliates 254,976 90,146
Notes receivable from
affiliates - current portion 46,486 62,511
Inventories 415,348 441,326
Prepaid expenses 300,940 287,046
---------- ----------
Total current assets 1,245,243 1,544,364
Net property and equipment 20,548,489 20,843,450
Other assets:
Franchise rights, net 5,645,160 5,780,163
Notes receivable from affiliates 47,534 50,201
Deposit with affiliate 450,000 450,000
Goodwill 706,822 714,469
Other 1,728,134 1,320,132
---------- ----------
$30,371,382 $30,702,779
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
- ----------------------------------------------
Current liabilities:
Accounts payable $ 2,132,293 $ 2,390,582
Due to affiliates 117,599 226,322
Accrued payroll and other taxes 702,963 635,805
Accrued liabilities 1,253,440 1,272,957
Current portion of long-term debt 6,976,275 6,182,101
Current portion of obligations
under capital leases 54,940 47,528
---------- ----------
Total current liabilities 11,237,510 10,755,295
Other noncurrent liabilities 944,583 563,095
Long-term debt 22,531,654 23,447,773
Obligations under capital leases 1,467,268 1,495,486
Minority interests in Operating
Partnerships 413,869 395,908
Partners' capital (deficiency):
General Partners (7,955) (8,245)
Limited Partners:
Class A Income Preference 5,500,740 5,543,603
Classes B and C (10,261,665) (10,058,014)
Cost in excess of carrying value
of assets acquired (1,323,681) (1,323,681)
Cumulative comprehensive loss (130,941) (108,441)
---------- ----------
Total partners' deficiency (6,223,502) (5,954,778)
---------- ----------
$30,371,382 $30,702,779
========== ==========
See accompanying notes.
<TABLE>
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
June 29, June 30, June 29, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $14,334,285 $ 9,461,329 $28,775,870 $18,687,975
Operating costs and expenses:
Cost of sales 3,669,824 2,325,864 7,665,228 4,756,696
Restaurant labor and benefits 4,224,750 2,650,274 8,502,750 5,278,474
Advertising 952,075 621,964 1,888,921 1,232,765
Other restaurant operating
expenses exclusive of
depreciation and amortization 2,616,017 1,698,582 5,296,773 3,413,372
General and administrative:
Management fees - related party 890,719 659,213 1,785,802 1,301,131
Other 214,863 146,452 362,729 258,997
Depreciation and amortization 645,828 514,898 1,202,648 960,168
Equity in (income) loss of affiliate - (10,947) - 14,376
---------- ---------- ---------- ----------
Income from operations 1,120,209 855,029 2,071,019 1,471,996
Interest income (1,887) (2,768) (5,217) (5,763)
Interest expense 780,516 660,197 1,545,184 1,213,385
Gain on life insurance settlement - (875,533) - (875,533)
---------- ---------- ---------- ----------
Income before minority interest 341,580 1,073,133 531,052 1,139,907
Minority interests in income of
Operating Partnerships 24,031 10,731 24,859 11,399
---------- ---------- ---------- ----------
Net income 317,549 1,062,402 506,193 1,128,508
========== ========== ========== ==========
Net income allocated to Partners:
Class A Income Preference $ 75,875 $ 216,783 $ 120,616 $ 230,272
Class B 87,478 318,035 139,426 337,823
Class C 154,196 527,584 246,151 560,413
Weighted average number of Partnership
units outstanding during period:
Class A Income Preference 813,975 813,840 813,993 813,840
Class B 938,456 1,193,852 940,934 1,193,852
Class C 1,654,210 1,976,807 1,661,188 1,976,807
Basic and diluted income
before minority interest
per Partnership unit $ 0.10 $ 0.27 $ 0.16 $ 0.28
Basic and diluted minority interest
per Partnership unit $ 0.01 $ - $ 0.01 $ -
Basic and diluted net income
per Partnership unit $ 0.09 $ 0.27 $ 0.15 $ 0.28
Distributions per Partnership interest $ 0.10 $ 0.05 $ 0.20 $ 0.10
<FN>
See accompanying notes.
</FN>
</TABLE>
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(Unaudited)
Six Periods Ended
June 29, June 30,
1999 1998
-------- --------
Cash flows from operating activities:
Net income $ 506,193 $1,128,508
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,202,648 960,168
Provision for deferred rent - 8,184
Equity in loss of affiliate - 14,376
Loss (gain) on disposition of assets 6,898 (5,331)
Gain on insurance settlement - (875,533)
Minority interests in income
of Operating Partnerships 24,859 11,399
Net change in operating assets and liabilities:
Accounts receivable 125,321 (1,809)
Due from affiliates (164,830) (1,328)
Inventories 25,978 48,350
Prepaid expenses (13,894) 77,940
Accounts payable (258,289) (1,512,222)
Due to affiliates (108,723) 31,658
Accrued payroll and other taxes 67,158 98,708
Accrued liabilities (24,166) 21,272
Other, net 395,882 (165,245)
---------- ----------
Net cash provided by (used in)
operating activities 1,785,035 (160,905)
Cash flows from investing activities:
Additions to property and equipment (704,542) (325,554)
Proceeds from sale of property and equipment 470 16,452
Collections of notes receivable from affiliates 18,692 17,707
Other (35,610) -
---------- ----------
Net cash used in
investing activities (720,990) (291,395)
Cash flows from financing activities:
Payments on long-term borrowings (1,051,945) (9,729,109)
Proceeds from long-term borrowings 480,000 10,700,000
Payments on capital lease obligations (20,806) (17,748)
Proceeds from insurance settlement - 1,039,747
Distributions to Partners (682,710) (398,493)
Repurchase of units (69,707) -
General Partners' distributions
from Operating Partnerships (6,898) (4,025)
Other, net - 37,766
---------- ----------
Net cash (used in) provided by
financing activities (1,352,066) 1,628,138
---------- ----------
Net (decrease) increase in cash
and cash equivalents (288,021) 1,175,838
Cash and cash equivalents at beginning of period 329,946 509,398
---------- ----------
Cash and cash equivalents at end of period $ 41,925 $1,685,236
========== ==========
Supplemental disclosure of non-cash activity: During the first six periods
of 1999, the Partnership signed a note payable for $450,000, payable over 15
years, to purchase a 25% interest in a Limited Liability Company that owns
and operates an aircraft.
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Six Periods Ended June 29, 1999 and June 30, 1998
(Unaudited)
1. General
-------
The accompanying consolidated condensed financial statements
include the accounts of American Restaurant Partners, L.P. and its
majority owned subsidiaries, American Pizza Partners, L.P. and APP
Concepts, LLC. Effective August 11, 1998, the interest of American
Pizza Partners, L.P. in Oklahoma Magic, L.P. (Magic) increased from
45% to 60% in connection with Magic's purchase of a 25% interest
from a former limited partner. Accordingly, the Partnership began
consolidating the accounts of Magic from that date. American
Restaurant Partners, L.P., American Pizza Partners, L.P., APP
Concepts, LLC and Magic are hereinafter collectively referred to as
the Partnership. All significant intercompany balances and
transactions have been eliminated. The Partnership accounted for
its investment in Magic using the equity method of accounting prior
to the increase in their ownership from 45% to 60%. The
consolidated condensed financial statements have been prepared
without audit. The Balance Sheet at December 29, 1998 has been
derived from the Partnership's audited financial statements. 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 consolidated financial
statements and notes contained in the Partnership's Annual Report
filed on Form 10-K for the fiscal year ended December 29, 1998.
The results of operations for interim periods are not necessarily
indicative of the results for the full year. The Partnership
historically has realized approximately 40% of its operating
profits in periods six through nine (18 weeks).
2. Subsequent Events
-----------------
On June 30, 1999, the Partnership refinanced $1.6 million of notes
payable to Intrust Bank with new notes to CNL Financial Services,
Inc. which mature July 1, 2019. Accordingly, the current and non-
current portion of long-term debt reflects the terms of the
agreements.
On July 1, 1999 the Partnership declared a distribution of $0.10
per unit to all unitholders of record as of July 12, 1999. The
distribution is not reflected in the June 29, 1999 consolidated
condensed financial statements.
3. Comprehensive Income
--------------------
Comprehensive income is comprised of the following:
Three periods ended Six periods ended
June 29, June 30, June 29, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
Net income $ 317,549 $1,062,402 $ 506,193 $1,128,508
Change in unrealized
loss in available for
sale securities (2,250) (31,500) (22,500) (83,250)
--------- --------- --------- ---------
$ 315,299 $1,030,902 $ 483,693 $1,045,258
========== ========= ========= =========
4. Long-term Debt - Covenant Noncompliance
---------------------------------------
The Partnership has made all scheduled debt payments; however, at
June 29, 1999 and December 29, 1998, Magic was not in compliance
with the fixed charge coverage ratio covenant required by the
outstanding notes payable to Franchise Mortgage Acceptance Company
(FMAC). Accordingly, the entire $3,966,000 of Magic's borrowings
with FMAC is reflected in the current portion of long-term debt.
5. Recently Issued Accounting Standards
------------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities (Statement No. 133). Statement No. 133 defines
derivative instruments and requires these items be recognized as
assets or liabilities in the statements of financial position.
This Statement is effective for fiscal years beginning after June
15, 2000. As of June 29, 1999, the Partnership does not have any
derivative instruments.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
As of June 29, 1999, the Partnership operated 71 traditional Pizza
Hut red roof restaurants, 15 delivery/carryout units and three
dualbrand locations.
As discussed in the notes to the accompanying consolidated
condensed financial statements, the Partnership's interest in Magic
increased from 45% to 60% effective August 11, 1998. The
Partnership began consolidating the accounts of Magic from that
date. The Partnership accounted for its investment in Magic using
the equity method of accounting prior to the increase in ownership
from 45% to 60%. Therefore, the consolidated results of operations
include the accounts of Magic for the three and six periods ended
June 29, 1999 but not for the three and six periods ended June 30,
1998. The tables below show the historical statements of
operations as well as proforma results of operations for the three
and six periods ended June 30, 1998 assuming the Partnership's
interest in Magic increased to 60% as of December 31, 1997. The
proforma results are shown in order to provide a more meaningful
basis for a comparative discussion of the three and six periods
ended June 29, 1999 and June 30, 1998.
Three Periods Ended June 29, 1999 Compared to
- ---------------------------------------------
Proforma Three Periods Ended June 30, 1998
- ------------------------------------------
Three Periods Ended
------------------------------------
June 29, June 30, June 30,
1999 1998 1998
----------------------- ------------
Historical Proforma (1)
----------------------- ------------
Net sales $14,334,285 $ 9,461,329 $13,345,388
Operating costs and expenses:
Cost of sales 3,669,824 2,325,864 3,265,559
Restaurant labor and benefits 4,224,750 2,650,274 3,818,182
Advertising 952,075 621,964 929,992
Other restaurant operating
expenses exclusive of
depreciation and
amortization 2,616,017 1,698,582 2,571,328
General and administrative:
Management fees 890,719 659,213 833,995
Other 214,863 146,452 204,833
Depreciation and amortization 645,828 514,898 645,382
Equity in income of affiliate - (10,947) -
---------- ---------- ----------
Income from operations 1,120,209 855,029 1,076,117
Interest income (1,887) (2,768) (2,768)
Interest expense 780,516 660,197 801,619
Gain on life insurance
settlement - (875,533) (875,533)
---------- ---------- ----------
Income before minority
interest 341,580 1,073,133 1,152,799
Minority interests in income
of Operating Partnerships 24,031 10,731 9,730
---------- ---------- ----------
Net income $ 317,549 $ 1,062,402 $ 1,143,069
========== ========== ==========
(1) The proforma statement of operations for the three periods ended
June 30, 1998 includes the consolidation of Magic as if the
Partnership's interest in Magic increased to 60% as of
December 31, 1997.
NET SALES. Net sales for the three periods ended June 29, 1999
increased $989,000 from proforma net sales of $13,345,000 in 1998
to net sales of $14,334,000 for 1999, a 7.4% increase. This
increase was attributable primarily to the continued success of The
Big New Yorker pizza, a 16 inch traditional style pizza introduced
in early 1999.
INCOME FROM OPERATIONS. Income from operations for the three
periods ended June 29, 1999 increased $44,000 to $1,120,000, a 4.1%
increase over the proforma income from operations of $1,076,000 for
the three periods ended June 30, 1998. Income from operations
represented 7.8% of net sales for the three periods ended June 29,
1999 compared to proforma income from operations of 8.1% of
proforma net sales for the three periods ended June 30, 1998. Cost
of sales as a percentage of net sales increased from 24.5% of
proforma net sales for the three periods ended June 30, 1998 to
25.6% of net sales for the three periods ended June 30, 1999
primarily due to costs associated with the Star Wars promotion.
Labor and benefits expense was 28.6% of proforma net sales in 1998
compared to 29.5% of net sales in 1999. This increase is primarily
attributable to increased staffing of delivery drivers at higher,
more competitive wages. Advertising decreased slightly as a
percentage of net sales from 7.0% of proforma net sales in 1998 to
6.6% of net sales in 1999. Other restaurant operating expenses
amounted to 18.3% of net sales in 1999 compared to 19.3% of
proforma net sales in 1998. This decrease is primarily
attributable to two factors: 1) increased premium sales in 1999
related to the Star Wars promotion and 2) lower occupancy costs in
1999 through the purchase of previously leased properties and the
buyout or expiration of leases on closed restaurants during the
last half of 1998. General and administrative expenses were 7.9%
of net sales in 1999 compared to 7.8% of proforma net sales in
1998. Depreciation and amortization expense decreased from 4.8% of
proforma net sales in 1998 to 4.5% of net sales in 1999.
NET EARNINGS. Net earnings decreased $825,000 to net income of
$318,000 for the three periods ended June 29, 1999 compared to
proforma net income of $1,143,000 for the three periods ended June
30, 1998. The 1998 period net income included a gain on life
insurance settlement of $876,000. Net of the gain on life
insurance settlement, net earnings increased $51,000 over the prior
period primarily due to the increase in income from operations
noted above.
Six Periods Ended June 29, 1999 Compared to
- -------------------------------------------
Proforma Six Periods Ended June 30, 1998
- ----------------------------------------
Six Periods Ended
------------------------------------
June 29, June 30, June 30,
1999 1998 1998
----------------------- ------------
Historical Proforma (2)
----------------------- ------------
Net sales $28,775,870 $18,687,975 $26,393,198
Operating costs and expenses:
Cost of sales 7,665,228 4,756,696 6,718,923
Restaurant labor and benefits 8,502,750 5,278,474 7,604,040
Advertising 1,888,921 1,232,765 1,791,058
Other restaurant operating
expenses exclusive of
depreciation and
amortization 5,296,773 3,413,372 5,163,368
General and administrative:
Management fees 1,785,802 1,301,131 1,647,865
Other 362,729 258,997 364,324
Depreciation and amortization 1,202,648 960,168 1,277,462
Equity in loss of affiliate - 14,376 -
---------- ---------- ----------
Income from operations 2,071,019 1,471,996 1,826,158
Interest income (5,217) (5,763) (5,763)
Interest expense 1,545,184 1,213,385 1,518,831
Gain on life insurance
settlement - (875,533) (875,533)
---------- ---------- ----------
Income before minority
interest 531,052 1,139,907 1,188,623
Minority interests in
income (loss) of Operating
Partnerships 24,859 11,399 (12,778)
---------- ---------- ----------
Net income $ 506,193 $ 1,128,508 $ 1,201,401
========== ========== ==========
(2) The proforma statement of operations for the six periods ended
June 30, 1998 includes the consolidation of Magic as if the
Partnership's interest in Magic increased to 60% as of
December 31, 1997.
NET SALES. Net sales for the six periods ended June 29, 1999
increased $2,383,000 from proforma net sales of $26,393,000 in 1998
to net sales of $28,776,000 for 1999, a 9.0% increase. This
increase was attributable primarily to the success of The Big New
Yorker pizza, a 16 inch traditional style pizza introduced in
early 1999.
INCOME FROM OPERATIONS. Income from operations for the six periods
ended June 29, 1999 increased $245,000 to $2,071,000, a 13.4%
increase over the proforma income from operations of $1,826,000 for
the first six periods of 1998. Income from operations represented
7.2% of net sales for the six periods ended June 29, 1999 compared
to proforma income from operations of 6.9% of proforma net sales
for the six periods ended June 30, 1998. Cost of sales as a
percentage of net sales increased from 25.5% of proforma net sales
for the six periods ended June 30, 1998 to 26.6% of net sales for
the six periods ended June 29, 1999 due to higher commodity costs
and costs associated with the Star Wars promotion. Labor and
benefits expense was 28.8% of proforma net sales in 1998 compared
to 29.5% of net sales in 1999. This increase is primarily
attributable to increased delivery driver staffing at higher, more
competitive wages. Advertising decreased slightly as a percentage
of net sales from 6.8% of proforma net sales in 1998 to 6.6% of net
sales in 1999. Other restaurant operating expenses amounted to
18.4% of net sales in 1999 compared to 19.6% of proforma net sales
in 1998. This decrease is primarily attributable to two factors:
1) increased premium sales in 1999 related to the Star Wars
promotion and 2) lower occupancy costs in 1999 through the purchase
of previously leased properties and the buyout or expiration of
leases on closed restaurants during the last half of 1998. General
and administrative expenses decreased from 7.6% of proforma net
sales in 1998 to 7.5% of net sales in 1999. Proforma depreciation
and amortization expense decreased from 4.8% of proforma net sales
in 1998 to 4.2% of net sales in 1999.
NET EARNINGS. Net earnings decreased $695,000 to net income of
$506,000 for the six periods ended June 29, 1999 compared to
proforma net income of $1,201,000 for the six periods ended June
30, 1998. The 1998 period net income included a gain on life
insurance settlement of $876,000. Without the gain on life
insurance settlement, net earnings increased $181,000 over the
prior period due primarily to the increase in income from
operations noted above net of a $26,000 increase in interest
expense and a $38,000 increase in minority interest in earnings of
affiliate.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At June 29, 1999 the Partnership had a working capital deficiency
of $9,992,000 compared to a working capital deficiency of
$9,211,000 at December 29, 1998. At June 29, 1999 and December 29,
1998, Magic was not in compliance with the fixed charge coverage
ratio covenant required by the outstanding notes payable to
Franchise Mortgage Acceptance Company (FMAC). Accordingly, the
entire $3,966,000 of Magic's borrowings with FMAC is reflected in
the current portion of long-term debt. There have been no defaults
in making scheduled payments of either principal or interest. The
remaining increase in working capital deficiency is primarily due
to a $794,000 increase in current portion of long-term debt. 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.
The Partnership generates its principal source of funds from net
cash provided by operating activities. Management believes net cash
provided by operating activities and various other sources of
income will provide sufficient funds to meet planned capital
expenditures for recurring replacement of equipment in existing
restaurants and to service debt obligations.
NET CASH PROVIDED BY OPERATING ACTIVITIES. For the six periods
ended June 29, 1999, net cash provided by operating activities
amounted to $1,785,000 compared to net cash used by operating
activities of $161,000 for the six periods ended June 30, 1998.
This increase is primarily attributable to a $1,512,000 decrease in
accounts payable in 1998.
INVESTING ACTIVITIES. Property and equipment expenditures
represent the largest investing activity by the Partnership.
Capital expenditures for the six periods ended June 29, 1999 were
$705,000 of which $419,000 was for replacement of equipment in
existing restaurants and $286,000 was for the purchase of land for
future development.
FINANCING ACTIVITIES. Cash distributions declared during the six
periods ended June 29, 1999 were $683,000 amounting to $0.10 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 29, 1999, the Partnership's
proceeds from borrowings amounted to $480,000 of which $300,000 was
used to purchase land for future development. The remaining
$180,000 was for a short-term loan to an affiliate from whom the
Partnership leases a restaurant. The affiliate has a commitment to
refinance debt related to the leased property and repay the loan to
the Partnership by August 31, 1999. Management anticipates
spending an additional $320,000 during the remainder of 1999 for
recurring replacement of equipment in existing restaurants which
will be financed from net cash provided by operating activities.
The actual level of capital expenditures may be higher in the event
of unforeseen equipment needs or lower in the event of inadequate
net cash flow from operating activities.
Sales growth in the second quarter was primarily attributable to
the continued success of the Big New Yorker pizza. The expected
increase in sales from the promotional tie-in with Star Wars
never materialized. Since the beginning of July, cheese prices
have significantly increased and will have a negative impact on
margins. This increase was unexpected, as it is a demand driven
increase and not a milk supply issue. Cheese prices are expected
to remain at this high level for third quarter and possibly most of
fourth quarter. Cheese prices increased last July and reached
record levels in December and January before decreasing to below
normal levels in February.
YEAR 2000 COMPLIANCE
- --------------------
The Partnership has instituted a Year 2000 project to prepare its
computer systems and communication systems for the Year 2000. The
project includes identification and assessment of all software,
hardware and equipment that could potentially be affected by the
Year 2000 issue. The Partnership uses external agents on nearly
all critical applications and systems. The external agents have
assured the Partnership they expect to be fully Year 2000
compatible before Year 2000 issues will impact the Partnership.
The Year 2000 compatible programs are currently being tested by the
Partnership. The Partnership also receives representations and
warranties from vendors of all new hardware and software that such
systems are Year 2000 compliant.
The Partnership does not believe costs related to Year 2000
compatibility will be material to its financial position or results
of operations. However, the Partnership may be vulnerable to the
failure of external agents and critical suppliers to resolve their
own Year 2000 issues. Where practicable, the Partnership will
assess and attempt to mitigate its risks with respect to the
failure of these entities to be Year 2000 ready. In the event
external agents do not complete their Year 2000 readiness, the
Partnership would be unable to process accounts payable and
payroll. The Partnership has contingency plans for critical
applications that include, among other actions, manual workarounds,
adjusting staffing strategies and outsourcing applications. The
effect, if any, on the Partnership's results of operations from the
failure of such parties to be Year 2000 ready is not reasonably
estimable.
OTHER MATTERS
- -------------
The Partnership delisted from the American Stock Exchange effective
November 13, 1997 and limited trading of its units. As a result,
the Partnership will continue to be taxed as a partnership rather
than being taxed as a corporation. The Partnership does offer a
Qualified Matching Service, whereby the Partnership will match
persons desiring to buy units with persons desiring to sell units.
The Partnership's earnings are affected by changes in interest
rates primarily from its long-term debt arrangements. Under its
current policies, the Partnership does not use interest rate
derivative instruments to manage exposure to interest rate changes.
A hypothetical 100 basis point adverse move (increase) in interest
rates along the entire interest rate yield curve would increase the
Partnership's interest expense and decrease net income by $63,000
over the term of the related debt. This amount was determined by
considering the impact of the hypothetical interest rates on the
Partnership's borrowing cost. These analyses do not consider the
effects of the reduced level of overall economic activity that
could exist in such an environment.
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act, and Section 21E of
the Exchange Act which are intended to be covered by the safe
harbors created thereby. Although the Partnership believes that
the assumptions underlying the forward-looking statements contained
herein are reasonable, any of the assumptions could be inaccurate,
and therefore, there can be no assurance that the forward-looking
statements included in this report will prove to be accurate.
Factors that could cause actual results to differ from the results
discussed in the forward-looking statements include, but are not
limited to, consumer demand and market acceptance risk, the effect
of economic conditions, including interest rate fluctuations, the
impact of competing restaurants and concepts, the cost of
commodities and other food products, labor shortages and costs and
other risks detailed in the Partnership's Securities and Exchange
Commission filings.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
During the fiscal period covered by this Form 10-Q, no
reports on Form 8-K were filed.
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: 8/12/99 By: /s/Hal W. McCoy
------- ----------------------------
Hal W. McCoy
President and Chief Executive Officer
Date: 8/12/99 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 29, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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<FISCAL-YEAR-END> DEC-28-1999
<PERIOD-END> JUN-29-1999
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<SECURITIES> 46135
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<ALLOWANCES> 0
<INVENTORY> 415348
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<PP&E> 36266705
<DEPRECIATION> 15718216
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<CURRENT-LIABILITIES> 11237510
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0
0
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