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, 2000 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
March 28, 2000 and December 28, 1999 1
Consolidated Condensed Statements of Income
for the Three Periods Ended March 28, 2000
and March 30, 1999 2
Consolidated Condensed Statements of Cash
Flows for the Three Periods Ended
March 28, 2000 and March 30, 1999 3
Notes to Consolidated Condensed Financial Statements 4-5
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 6-9
Part II. Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 10
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
March 28, December 28,
ASSETS 2000 1999
- ------------------------------ ---------- ----------
Current assets:
Cash and cash equivalents $ 934,274 $ 742,452
Accounts receivable 342,906 258,388
Due from affiliates 93,042 69,948
Notes receivable from
affiliates - current portion 19,668 19,531
Inventories 449,519 410,997
Prepaid expenses 244,514 270,300
---------- ----------
Total current assets 2,083,923 1,771,616
Net property and equipment 18,981,634 19,330,304
Other assets:
Franchise rights, net 5,442,912 5,510,611
Notes receivable from affiliates 75,815 75,952
Deposit with affiliate 485,000 485,000
Goodwill 688,174 694,391
Other 1,217,045 1,328,781
---------- ----------
$28,974,503 $29,196,655
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
- ----------------------------------------------
Current liabilities:
Accounts payable $ 3,086,644 $ 2,818,985
Due to affiliates 171,420 111,988
Accrued payroll and other taxes 651,984 750,474
Accrued liabilities 1,116,216 1,177,506
Current portion of long-term debt 2,843,973 2,396,678
Current portion of obligations
under capital leases 61,855 59,124
---------- ----------
Total current liabilities 7,932,092 7,314,755
Long-term liabilities less current maturities:
Obligations under capital leases 1,419,726 1,436,375
Long-term debt 24,273,824 25,252,712
Other noncurrent liabilities 721,717 787,208
---------- ----------
27,885,860 25,506,354
Minority interests in Operating
Partnerships 678,787 551,541
Partners' capital (deficiency):
General Partners (8,528) (8,585)
Limited Partners:
Class A Income Preference 5,397,004 5,394,796
Classes B and C (9,208,546) (9,252,030)
Notes receivable employees - sale
of partnership units (907,892) (956,436)
Cost in excess of carrying value
of assets acquired (1,323,681) (1,323,681)
---------- ----------
Total partners' deficiency (6,051,643) (6,145,936)
---------- ----------
$28,974,503 $29,196,655
========== ==========
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
March 28, March 30,
2000 1999
----------- -----------
Net sales $14,799,542 $14,441,585
Operating costs and expenses:
Cost of sales 3,612,544 3,995,404
Restaurant labor and benefits 4,289,687 4,278,000
Advertising 972,303 936,846
Other restaurant operating
expenses exclusive of
depreciation and amortization 2,782,489 2,680,756
General and administrative:
Management fees - related party 911,592 895,083
Other 250,061 147,866
Depreciation and amortization 625,985 556,820
---------- ----------
Income from operations 1,354,881 950,810
Equity in loss of investment
in unconsolidated affiliates 86,896 -
Interest income (10,416) (3,330)
Interest expense 710,806 764,668
---------- ----------
Income before minority interest 567,595 189,472
Minority interests in income of
Operating Partnerships 131,104 828
---------- ----------
Net income $ 436,491 $ 188,644
========== ==========
Net income allocated to Partners:
Class A Income Preference $ 90,194 $ 52,488
Class B $ 126,000 $ 60,832
Class C $ 220,297 $ 75,324
Weighted average number of Partnership
units outstanding during period:
Class A Income Preference 789,216 814,010
Class B 1,102,518 943,411
Class C 1,927,648 1,668,167
Basic and diluted income before
minority interest per Partnership unit $ 0.15 $ 0.06
Basic and diluted minority interest
per Partnership unit $ 0.03 $ 0.00
Basic and diluted net income
per Partnership unit $ 0.11 $ 0.06
Distributions per Partnership unit $ 0.10 $ 0.10
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(Unaudited)
Three Periods Ended
March 28, March 30,
2000 1999
---------- ----------
Cash flows from operating activities:
Net income $ 436,491 $ 188,644
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 625,985 556,820
Loss on disposition of assets 422 1,653
Equity in loss of investment in
unconsolidated affiliates 86,896 -
Minority interests in income
of Operating Partnerships 131,104 828
Compensation expense-reduction
of notes receivable 13,952 -
Net change in operating assets and liabilities:
Accounts receivable (84,518) 7,542
Due from affiliates (23,094) 46,087
Inventories (38,522) 50,824
Prepaid expenses 25,786 (55,350)
Accounts payable 267,659 603,653
Due to affiliates 59,432 (65,869)
Accrued payroll and other taxes (98,490) (94,965)
Accrued liabilities (61,290) (126,502)
Other, net (74,055) 402,546
--------- ---------
Net cash provided by operating activities 1,267,758 1,515,911
Cash flows from investing activities:
Additions to property and equipment (152,263) (477,052)
Proceeds from sale of property and equipment - 200
Collections of notes receivable from affiliates - 9,241
Other (12,500) (35,610)
--------- ---------
Net cash used in investing activities (164,763) (503,221)
Cash flows from financing activities:
Payments on long-term borrowings (1,017,990) (517,854)
Proceeds from long-term borrowings 480,739 300,000
Payments on capital lease obligations (13,918) (9,082)
Distributions to Partners (347,017) (342,437)
Repurchase of units (9,133) (69,399)
General Partners' distributions
from Operating Partnerships (3,854) (3,458)
--------- ---------
Net cash used in financing activities (911,173) (642,230)
--------- ---------
Net increase in cash and cash equivalents 191,822 370,460
Cash and cash equivalents at beginning of period 742,452 329,946
--------- ---------
Cash and cash equivalents at end of period $ 934,274 $ 700,406
========= =========
Noncash investing and financing activities: During the first quarter of 2000,
notes receivable from employees resulting from the issuance of stock during
1999 were reduced by distributions of $34,592 paid on these units, and by
$13,952 charged to compensation expense.
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Three Periods Ended March 28, 2000 and March 30, 1999
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., APP
Concepts, LLC and Oklahoma Magic, L.P. 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 consolidated condensed
financial statements have been prepared without audit. The Balance
Sheet at December 28, 1999 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 28, 1999.
The results of operations for interim periods are not necessarily
indicative of the results for the full year. The Partnership does
not experience significant seasonality but sales continue to be
largely driven through advertising and promotion.
2. Subsequent Event - Distribution to Partners
-------------------------------------------
On April 3, 2000 the Partnership declared a distribution of $0.10
per unit to all unitholders of record as of April 12, 2000. The
distribution is not reflected in the March 28, 2000 consolidated
condensed financial statements.
3. Comprehensive Income
---------------------
Comprehensive income is comprised of the following:
For the three periods ended
--------------------------------
March 28, 2000 March 30, 1999
-------------- --------------
Net income $ 436,491 $ 188,644
Change in unrealized loss
in investment securities - (20,250)
-------- --------
$ 436,491 $ 168,394
======== ========
4. Reclassifications
-----------------
Certain amounts shown in the 1999 consolidated condensed financial
statements have been reclassified to conform with the 2000
presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
As of March 28, 2000, the Partnership operated 70 traditional Pizza
Hut red roof restaurants, 14 delivery/carryout units and three
dualbrand locations.
Three Periods Ended March 28, 2000 Compared to
- ----------------------------------------------
Three Periods Ended March 30, 1999
- ----------------------------------
NET SALES. Net sales for the three periods ended March 28, 2000
increased $358,000 from net sales of $14,442,000 in 1999 to net
sales of $14,800,000 for 2000, a 2.5% increase. Comparable
restaurant sales increased 4.1% over the prior year in which the
Partnership experienced a 10.8% increase in comparable restaurant
sales due to the successful introduction of the Big New Yorker
Pizza. The stronger than expected comparable store sales results
were achieved primarily through continued improvement in restaurant
operations.
INCOME FROM OPERATIONS. Income from operations for the three
periods ended March 28, 2000 increased $404,000 from $951,000 to
$1,355,000, a 42.5% increase over the first three periods of 1999.
As a percentage of net sales, income from operations increased from
6.6% for the three periods ended March 30, 1999 to 9.2% for the
three periods ended March 28, 2000. Cost of sales decreased as a
percentage of net sales from 27.7% for the three periods ended
March 30, 1999 to 24.4% for the three periods ended March 28, 2000
due to significantly lower cheese costs. Labor and benefits
expense decreased as a percentage of net sales from 29.6% in 1999
to 29.0% in 2000. Labor and benefits expense was higher in 1999
due to increased staffing and training in preparation for the sales
increases resulting from the introduction of the Big New Yorker
Pizza. Advertising increased slightly as a percentage of net sales
from 6.5% of net sales in 1999 to 6.6% of net sales in 2000. Other
restaurant operating expenses amounted to 18.8% of net sales in
2000 compared to 18.6% of net sales in 1999. General and
administrative expenses increased from 7.2% of net sales in 1999 to
7.9% of net sales in 2000 reflecting increased bonuses paid on
improved operating results. Depreciation and amortization expense
increased from 3.9% of net sales in 1999 to 4.2% of net sales in
2000.
NET EARNINGS. Net earnings increased $247,000 to net income of
$436,000 for the three periods ended March 28, 2000 compared to net
income of $189,000 for the three periods ended March 30, 1999. This
increase is attributable to the increase in income from operations
noted above and a $61,000 decrease in net interest expense. The
increase was partially offset by an $87,000 loss from investment in
unconsolidated affiliates and a $130,000 increase in minority
interest in income of Operating Partnerships.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 28, 2000 the Partnership had a working capital deficiency
of $5,848,000 compared to a working capital deficiency of
$5,543,000 at December 28, 1999. This increase is primarily due to
an 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 three periods
ended March 28, 2000, net cash provided by operating activities
amounted to $1,268,000 compared to $1,516,000 for the three periods
ended March 30, 1999. This decrease from prior year is primarily
the result of an increase in accounts payable in 1999 of $604,000
compared to an increase in 2000 of $268,000.
INVESTING ACTIVITIES. Property and equipment expenditures
represent the largest investing activity by the Partnership.
Capital expenditures for the three periods ended March 28, 2000
were $152,000 for replacement of equipment in existing restaurants.
FINANCING ACTIVITIES. Cash distributions declared during the
quarter ended March 28, 2000 were $347,000 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 three periods ended March 28, 2000, the Partnership's
proceeds from borrowings amounted to $481,000 from Intrust Bank
used to pay off Magic's notes to a former limited partner.
Management anticipates spending an additional $546,000 during the
remainder of 2000 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 breakdowns of equipment or
lower in the event of inadequate net cash flow from operating
activities.
YEAR 2000 COMPLIANCE
- --------------------
The Partnership did not incur any problems with Year 2000
compliance. Management is continuing to monitor Year 2000 issues.
The Partnership does not anticipate any problems with Year 2000
compliance in the future.
OTHER MATTERS
- -------------
On January 31, 2000, AmeriServe, the Partnership's primary supplier
of food ingredients and dry goods, filed for protection under the
U.S. Bankruptcy Code. Tricon, the Unified Foodservice Purchasing
Coop, and key representatives of the Tricon franchise community are
working together to ensure the availability of supplies to Tricon's
restaurant system during the bankruptcy proceedings. To date, the
Partnership has not experienced any significant supply
interruption. AmeriServe has advised Tricon that it is actively
seeking to arrange the financing necessary to maintain AmeriServe
operations. The Partnership, along with Tricon, has commenced
contingency planning and believes that it can arrange with an
alternative distributor or distributors to meet the needs of the
restaurants if AmeriServe is no longer able to adequately service
the restaurants.
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.
EFFECTS OF INFLATION AND FUTURE OUTLOOK
- ---------------------------------------
Inflationary factors such as increases in food and labor costs
directly affect the Partnership's operations. Because most of the
Partnership's employees are paid on an hourly basis, changes in
rates related to federal and state minimum wage and tip credit laws
will effect the Partnership's labor costs. The Partnership cannot
always effect immediate price increases to offset higher costs and
no assurance can be given the Partnership will be able to do so in
the future.
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 $3,500
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: 05/11/00 By: /s/Hal W. McCoy
-------- ---------------------
Hal W. McCoy
Chairman and Chief Executive Officer
Date: 05/11/00 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, 2000 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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