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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 26, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from _______ to _______
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 N. Woodlawn, Suite 3102
Wichita, Kansas 67208
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (316) 684-5119
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class
-------------------
Class A Income Preference Units of
Limited Partner Interests
Securities registered pursuant to Section 12(g) of the Act: None
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
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K. (X)
As of March 1, 2001 the aggregate market value of the income preference
units held by non-affiliates of the registrant was $2,284,760.
PART I
Item 1. Business
- ------- --------
General Development of Business
- -------------------------------
American Restaurant Partners, L.P., a Delaware limited partnership
(the "Partnership"), was formed on April 27, 1987 for the purpose of
acquiring and operating through American Pizza Partners, L.P., a
Delaware limited partnership ("APP"), substantially all of the
restaurant operations of RMC Partners, L.P. ("RMC") in connection
with a public offering of Class A Income Preference units by the
Partnership. The transfer of assets from RMC was completed on August
21, 1987 and the Partnership commenced operations on that date.
Subsequently, the Partnership completed its public offering of
800,000 Class A Income Preference units and received net proceeds of
$6,931,944.
The Partnership is a 99% limited partner in APP which conducts
substantially all of the business for the benefit of the Partnership.
RMC American Management, Inc. ("RAM") is the managing general
partner of both the Partnership and APP. RAM and RMC own an aggregate
1% interest in APP.
On March 13, 1996, APP purchased a 45% interest in Oklahoma Magic,
L.P. (Magic), a newly formed limited partnership that owns and
operates Pizza Hut restaurants in Oklahoma. Effective August 11,
1998, APP's interest in Magic increased from 45% to 60% in connection
with Magic's purchase of a 25% interest from a former limited
partner. RAM, which owns a 1.0% interest in Magic, is the managing
general partner of Magic. The remaining 39.0% interest was held by
Restaurant Management Company of Wichita, Inc. (the Management
Company) until July 26, 2000. On that date, APP purchased the
Management Company's 39% interest in Magic. Upon completion of this
purchase, APP owns 99% of Magic. APP and Magic are collectively
referred to as the "Operating Partnerships".
As of December 26, 2000, the Partnership owned and operated a
total of 86 restaurants (collectively, the "Restaurants"). APP
owned and operated 53 traditional "Pizza Hut" restaurants, 4 "Pizza
Hut" delivery/carryout facilities and 3 dualbrand locations. During
2000, APP closed one "Pizza Hut" delivery/carryout restaurant.
Magic owned and operated 17 traditional "Pizza Hut" restaurants and
9 "Pizza Hut" delivery/carryout facilities. The following table
sets forth the states in which the Partnership's Pizza Hut
Restaurants are located:
Units Units Units
Open At Closed in Open At
12-28-99 2000 12-26-00
-------- --------- --------
Georgia 8 -- 8
Louisiana 1 -- 1
Montana 19 1 18
Texas 25 -- 25
Wyoming 8 -- 8
Oklahoma 26 -- 26
--- --- ---
Total 87 1 86
=== === ===
Financial Information About Industry Segments
- ---------------------------------------------
The restaurant industry is the only business segment in which the
Partnership operates.
Narrative Description of Business
- ---------------------------------
The Partnership operates the Restaurants under license from Pizza
Hut, Inc. ("PHI"), a subsidiary of Tricon Global Restaurants, Inc.
("Tricon") which was created with the spin-off of PepsiCo, Inc.'s
restaurant division. Since it was founded in 1958, Pizza Hut has
become the world's largest pizza restaurant chain in terms of both
sales and number of restaurants. As of year-end 2000, there were
over 6,600 units in the United States and more than 4,000 units
located outside the United States (both excluding licensed units).
PHI owns and operates approximately 27% of the Pizza Hut restaurants
in the United States and 41% of those in foreign countries.
All Pizza Hut restaurants offer substantially the same menu items,
including several varieties of pizza as well as pasta, salads and
sandwiches. All food items are prepared from high quality
ingredients in accordance with PHI's proprietary recipes and a
special blend of spices available only from PHI. Pizza is offered in
several different sizes with a thin crust, hand tossed traditional
crust, or a thick crust, known as "Pan Pizza", as well as with a
wide variety of toppings. Pizza Hut also serves the Big New Yorker
Pizza, a 16" traditional crust pizza. Food products not prescribed
by PHI may only be offered with the prior express approval of PHI.
PHI maintains a research and development department that develops
new recipes and products, tests new procedures for food preparation
and approves suppliers for Pizza Hut restaurants.
Pizza Hut restaurants are constructed in accordance with
prescribed design specifications and most are similar in exterior
appearance and interior decor. The typical restaurant building is a
freestanding, one-story building, with a wood, brick or stucco
exterior. Most Pizza Hut restaurants still feature the distinctive
red roof. The restaurants generally contain 1,800 to 3,000 square
feet, including kitchen and storage areas, and have seating capacity
for 75 to 140 persons. The typical property site will accommodate
parking for 30 to 70 vehicles. Building designs may be varied only
upon request and when required to comply with local regulations or
for unique marketing reasons.
Franchise Agreements
- --------------------
General. The relationships between PHI and its franchisees are
governed by franchise agreements (the "Franchise Agreements").
Pursuant to the Franchise Agreements, PHI franchisees are granted the
right to establish and operate restaurants under the Pizza Hut system
within a designated geographic area. The initial term of each
Franchise Agreement is 20 years, but prior to expiration, the
franchisee may renew the agreement for an additional 15 years, if not
then in default. Renewals are subject to execution of the then
current form of the Franchise Agreement, including the current fee
schedules. Unless the franchisee fails to develop its assigned
territory, PHI agrees not to establish, and not to license others to
establish, restaurants within the franchisee's territory.
Standards of Operation. PHI provides management training for
employees of franchisees and each restaurant manager is required to
meet certain training requirements. Standards of quality,
cleanliness, service, food, beverages, decor, supplies, fixtures and
equipment for Pizza Hut restaurants are prescribed by PHI. Although
new standards and products may be prescribed from time to time, any
revision requiring substantial expenditures by franchisees must be
first proven successful through market testing conducted in 5% of all
Pizza Hut restaurants. Failure to comply with the established
standards is cause for termination of a Franchise Agreement by PHI
and PHI has the right to inspect each restaurant to monitor
compliance. Management of the Partnership believes that the existing
Restaurants meet or exceed the applicable standards; neither the
predecessors to RMC nor the Partnership has ever had a Franchise
Agreement terminated by PHI.
Advertising. All franchisees are required to join a cooperative
advertising association ("co-op") with other franchisees within
local marketing areas defined by PHI. Contributions of 2% of each
restaurant's monthly gross sales must be made to such co-ops for the
purchase of advertising through local broadcast media. The term
"gross sales" shall mean gross revenues (excluding price discounts
and allowances) received as payment for the beverages, food, and
other goods, services and supplies sold in or from each restaurant,
and gross revenues from any other business operated on the premises,
excluding sales and other taxes required by law to be collected from
guests. All advertisements must be approved by PHI which contributes
on the same basis to the appropriate co-op for each restaurant
operated by PHI. Franchisees are also required to be members of
I.P.H.F.H.A., Inc. ("IPHFHA") an independent association of
franchisees which, together with representatives of PHI, develops and
directs national advertising and promotional programs.
Members of IPHFHA are required to pay national dues equal to 2% of
each restaurant's monthly gross sales. Such dues are primarily used
to conduct the national advertising and promotional programs.
Although it is not a member of IPHFHA, PHI contributes on the same
basis as members for each restaurant that PHI operates.
Purchase of Equipment, Supplies and Other Products. The Franchise
Agreements require that all equipment, supplies and other products
and materials required for operation of Pizza Hut restaurants be
obtained from suppliers that meet certain standards established and
approved by PHI. Purchasing is substantially provided by the Unified
Foodservice Purchasing Cooperative to all members who consist of Taco
Bell, KFC, and Pizza Hut franchisees and the restaurants operated by
Tricon. Prior to the PepsiCo, Inc. spin-off of its restaurant
division, substantially all distribution services were provided by
PepsiCo Food Systems, Inc., ("PFS") which was a wholly-owned
subsidiary of PepsiCo, Inc.
AmeriServe Food Distribution, Inc. (AmeriServe) acquired PFS in
July 1997 and provided substantially all of the distribution services
to the Partnership through its PFS relationship since the
acquisition. The Partnership entered into a five-year exclusive food
and supplies distribution agreement with AmeriServe effective January
1, 1999. The initial term of the agreement was to expire December
31, 2003. Thereafter, the agreement could be renewed for successive
one-year terms upon the written agreement of the parties. The terms
of the contract provide incentives for using more efficient
distribution practices and resulted in a reduction in the
distribution costs incurred by the Partnership.
On January 31, 2000 AmeriServe filed for protection under the U.S.
Bankruptcy Code. McLane Company, Inc., a subsidiary of Wal-Mart
Stores, Inc., completed the purchase of AmeriServe's U.S.
distribution business on November 30, 2000. As part of the sale, the
Partnership agreed to a two-year contract extension and will incur a
5% increase in distribution fees.
Franchise Fees. Franchisees must pay monthly service fees to PHI
based on each restaurant's gross sales. The monthly service fee
under each of the Partnership's Franchise Agreements is 4% of gross
sales, or, if payment of a percentage of gross sales of alcoholic
beverages is prohibited by state law, 4.5% of gross sales of food
products and nonalcoholic beverages. Fees are payable monthly by the
30th day after the end of each month and franchisees are required to
submit monthly gross sales data for each restaurant, as well as
quarterly and annual profit and loss data on each restaurant, to PHI.
In addition to the monthly service fees, an initial franchise fee of
$15,000 is payable to PHI prior to the opening of each new
restaurant.
No Transfer or Assignment without Consent. No rights or interests
granted to franchisees under the Franchise Agreements may be sold,
transferred or assigned without the prior written consent of PHI
which may not be unreasonably withheld if certain conditions are met.
Additionally, PHI has a first right of refusal to purchase all or any
part of a franchisee's interests if the franchisee proposes to accept
a bona fide offer from a third party to purchase such interests and
the sale would result in a change of control of the franchisee.
PHI requires that the principal management officials of a
franchisee retain a controlling interest in a franchisee that is a
corporation or partnership.
Default and Termination. Franchise Agreements automatically
terminate in the event of the franchisee's insolvency, dissolution or
bankruptcy. In addition, Franchise Agreements automatically
terminate if the franchisee attempts an unauthorized transfer of a
controlling interest of the franchise. PHI, at its option, may also
unilaterally terminate a Franchise Agreement if the franchisee (i) is
convicted of a felony, a crime of moral turpitude or another offense
that adversely affects the Pizza Hut system, its trademarks or
goodwill, (ii) discloses, in violation of the Franchise Agreement,
confidential or proprietary information provided to it by PHI, (iii)
knowingly or through gross negligence maintains false books or
records or submits false reports to PHI, (iv) conducts the business
so as to constitute an imminent danger to the public health, or (v)
receives notices of default on three (3) or more occasions in twelve
(12) months, or five (5) or more occasions in thirty-six (36) months
even if each default had been cured. A termination under item (v)
will affect only the individual restaurants in default, unless the
defaults relate to the franchisee's entire operation, or are part of
a common pattern or scheme, in which case all of the franchisee's
rights will be terminated.
Further, at its option, but only after thirty (30) days written
notice of default and the franchisee's failure to remedy such default
within the notice period, PHI may terminate a Franchise Agreement if
the franchisee (i) fails to make any required payments or submit
required financial or other data, (ii) fails to maintain prescribed
restaurant operating standards, (iii) fails to obtain any required
approval or consent, (iv) misuses any of PHI's trademarks or
otherwise materially impairs its goodwill, (v) conducts any business
under a name or trademark that is confusingly similar to those of
PHI, (vi) defaults under any lease, sublease, mortgage or deed of
trust covering a restaurant, (vii) fails to procure or maintain
required insurance, or (viii) ceases operation without the prior
consent of PHI. Management believes that the Partnership is in
compliance in all material respects with its current Franchise
Agreements; neither the predecessors to RMC nor the Partnership has
ever had a Franchise Agreement terminated by PHI.
In addition to items (i) through (viii) noted in the preceding
paragraph, the Franchise Agreements allow PHI to also terminate a
Franchise Agreement after thirty (30) days written notice if the
franchisee attempts an unauthorized transfer of less than a
controlling interest. A termination under these items will affect
only the individual restaurants in default, unless the defaults
relate to the franchisee's entire operation, in which case all of the
franchisee's rights will be terminated.
Tradenames, Trademarks and Service Marks. "Pizza Hut" is a
registered trademark of PHI. The Franchise Agreements license
franchisees to use the "Pizza Hut" trademark and certain other
trademarks, service marks, symbols, slogans, emblems, logos, designs
and other indicia or origin in connection with their Pizza Hut
restaurants and all franchisees agree to limit their use of such
marks to identify their restaurants and products and not to misuse or
otherwise jeopardize such marks. The success of the business of the
Restaurants is significantly dependent on the ability of the
Partnership to operate using these marks and names and on the
continued protection of these marks and names by PHI.
Future Expansion. Under the terms of the Franchise Agreements,
the Partnership has the right to open additional Pizza Hut
restaurants within certain designated territories. The Partnership
is not obligated to open any new restaurants in 2001 or future years.
Seasonality
- -----------
Historically, due to the locations of many of the Restaurants near
summer tourist attractions and the severity of winter weather in the
areas in which many of the Restaurants are located, the Partnership
has realized approximately 40% of its operating profits in periods
six through nine (18 weeks). However, due to the increased sales and
profits of the Partnership's restaurants in Texas and Oklahoma, the
Partnership no longer experiences significant seasonality. Sales do
continue to be largely driven through advertising and promotion.
Competition
- -----------
The retail restaurant business is highly competitive with respect
to trademark recognition, price, service, food quality and location,
and is often affected by changes in tastes, eating habits, national
and local economic conditions, population and traffic patterns. The
Restaurants compete with large regional and national chains,
including both fast food and full service chains, as well as with
independent restaurants offering moderately priced food. Many of the
Partnership's competitors have more locations, greater financial
resources, and longer operating histories than the Partnership. The
Restaurants compete directly with other pizza restaurants for dine-
in, carry-out and delivery customers.
Government Regulation
- ---------------------
The Partnership and the Restaurants are subject to various
government regulations, including zoning, sanitation, health, safety
and alcoholic beverage controls. Restaurant employment practices are
also governed by minimum wage, overtime and other working condition
regulations which, to date, have not had a material effect on the
operation of the Restaurants. The Partnership believes that it is in
compliance with all laws and regulations which govern its business.
In order to comply with the regulations governing alcoholic beverage
sales in Montana, Texas, Wyoming and Oklahoma, the licenses
permitting beer sales in certain Restaurants in those states are held
in the name of resident persons or domestic entities to whom they
were originally issued, and are utilized by the Partnership under
lease arrangements with such resident persons or entities. Because
of the varying requirements of various state agencies regulating
liquor and beer licenses, the Partnership Agreement provides that all
Unitholders and all other holders of limited partner interests must
furnish the Managing General Partner with all information it
reasonably requests in order to comply with any requirements of these
state agencies, and that the Partnership has the right to purchase
all Units held by any person whose ownership of Units would adversely
affect the ability of the Partnership to obtain or retain licenses to
sell beer or wine in any Restaurant.
Employees
- ---------
As of March 1, 2001, the Partnership did not have any employees.
The Operating Partnerships had approximately 2,100 employees at the
Restaurants. Each Restaurant is managed by one restaurant manager
and one or more assistant restaurant managers. Many of the other
employees are employed only part-time and, as is customary in the
restaurant business, turnover among the part-time employees is high.
The Partnership is not a party to any collective bargaining
agreements and believes its employee relations to be satisfactory.
The Restaurants' employees are supervised by employees of the
Management Company which has its principal offices in Wichita,
Kansas. The Management Company has a total of 41 employees which
devote all or a significant part of their time to management of the
Restaurants. In addition, the Partnership may employ certain
management officials of the Management Company on a part-time basis.
Employee relations are believed to be satisfactory.
Financial Information About Foreign and Domestic Operations and
- ---------------------------------------------------------------
Export Sales
- ------------
The Partnership operates no restaurants in foreign countries.
Item 2. Properties
- ------------------
The following table lists the location by state of Restaurants
operated by APP as of December 26, 2000.
Leased From Leased From
Unrelated Third Affiliate of the
Parties General Partners Owned Total
------- ---------------- ----- -----
Georgia 1 - 7 8
Louisiana - - 1 1
Montana 9 - 9 18
Texas 14 - 11 25
Wyoming 1 1 6 8
--- --- --- ---
Total APP 25 1 34 60
=== === === ===
Six of the properties owned by APP are subject to ground leases
from unrelated third parties. The property leased from an affiliate
of the General Partners is subject to a mortgage or deed of trust.
Most of the properties, including that owned by an affiliate of the
General Partners are leased for a minimum term of at least five years
and are subject to one or more five-year renewal options. Management
believes leases with initial or optional renewal periods expiring
within the next five years can be renewed for multiple-year periods,
or the property can be purchased, without significant difficulty or
unreasonable expense.
In addition to the operating restaurants above, APP has a
remaining lease obligation on one closed restaurant. This location
is subleased through its remaining lease term.
The following table lists the Restaurants operated by Magic as of
December 26, 2000.
Leased From
Unrelated Third Leased From
Parties Affiliate Owned Total
------- --------- ----- ----
Oklahoma 24 1 1 26
=== === === ===
Most of the properties including the one owned by an affiliate are
leased for a minimum term of at least five years and are subject to
one or more five-year renewal options. Management believes leases
with initial or optional renewal periods expiring within the next
five years can be renewed for multiple-year periods, or the property
can be purchased, without significant difficulty or unreasonable
expense.
The amount of rent paid is either fixed or includes a fixed rental
plus a percentage of the Restaurant's sales, subject, in some cases,
to maximum amounts. The leases require the Partnership to pay all
real estate taxes, insurance premiums, utilities, and to keep the
property in general repair.
Pizza Hut restaurants are constructed in accordance with
prescribed design specifications and most are similar in exterior
appearance and interior decor. The typical restaurant building is a
freestanding, one-story building, with a wood, brick or stucco
exterior. Most Pizza Hut restaurants still feature the distinctive
red roof. The restaurants generally contain 1,800 to 3,000 square
feet, including kitchen and storage areas, and have seating capacity
for 75 to 140 persons. The typical property site will accommodate
parking for 30 to 70 vehicles. Building designs may be varied only
upon request and when required to comply with local regulations or
for unique marketing reasons. Typical capital costs for the
Partnership's existing restaurant facilities are approximately
$150,000 for land, $250,000 for the building and $135,000 for
equipment and furnishings for each unit.
The cost of land, building and equipment for a typical Pizza Hut
restaurant vary with location, size, construction costs and other
factors. The Partnership estimates the average cost to construct and
equip a new restaurant in its existing franchise territories is
approximately $600,000 to $900,000 including the cost of land
acquisition. Delivery/carryout facilities vary in size and
appearance. These facilities are generally leased from unrelated
third parties. The Partnership estimates that the capital investment
necessary for a new delivery/carryout unit is approximately $200,000
in equipment and leasehold improvements.
Item 3. Legal Proceedings
- --------------------------
As of December 26, 2000, the Partnership was not a party to any
pending legal proceedings material to its business.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
PART II
Item 5. Market for the Registrant's Class A Income Preference Units
- --------------------------------------------------------------------
and Related Security Holder Matters
- -----------------------------------
The Partnership's Class A Income Preference Units were traded on
the American Stock Exchange under the symbol "RMC" through November
13, 1997. On that date, the Partnership delisted from the American
Stock Exchange and limited trading of its units. The Class A Income
Preference Units were traded on the Pink Sheets from December 1, 1997
through January 2, 1998. Effective January 1, 1998, the Partnership
offered a Qualified Matching Service, whereby the Partnership will
match persons desiring to buy units with persons desiring to sell
units. No units were matched during 2000. Market prices for units
during 2000 and 1999 were:
Calendar Period High Low
- -----------------------------------------------------
2000
- ----
All Quarters $3.25 $3.25
1999
- ----
First Quarter $2.80 $2.55
Second Quarter 2.80 2.60
Third Quarter 2.80 2.75
Fourth Quarter 2.95 2.75
As of December 26, 2000, approximately 900 unitholders owned
American Restaurant Partners, L.P. Class A Income Preference Units of
limited partner interest. Information regarding the number of
unitholders is based upon holders of record excluding individual
participants in security position listings.
Cash distributions to unitholders were:
Per
Record Date Payment Date Unit
- -----------------------------------------------------------
2000
- ----
January 14, 2000 January 28, 2000 $0.10
April 12, 2000 April 28, 2000 0.10
July 12, 2000 July 28, 2000 0.10
October 12, 2000 October 27, 2000 0.10
----
Cash distributed during 2000 $0.40
====
Per
Record Date Payment Date Unit
- -----------------------------------------------------------
1999
- ----
January 15, 1999 January 29, 1999 $0.10
April 12, 1999 April 30, 1999 0.10
July 12, 1999 July 30, 1999 0.10
October 12, 1999 October 29, 1999 0.15
----
Cash distributed during 1999 $0.45
====
The Partnership will make quarterly distributions of "Cash
Available for Distribution" with respect to the Income Preference,
Class B Units, and Class C Units. "Cash Available for Distribution"
consists, generally, of 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.
Therefore, the Partnership may experience quarters in which there is
no Cash Available for Distribution. The Partnership may retain cash
during certain quarters and distribute it in later quarters in order
to make quarterly distributions more consistent.
Item 6. Selected Financial Data
- ----------------------------------
(in thousands, except per Unit data, number of Restaurants,
and average weekly sales per Restaurant)
American Restaurant Partners, L.P.
-------------------------------------------------------------------
Year Ended
December 26, December 28, December 29, December 30, December 31,
2000 1999 1998 (d) 1997 1996
------------ ------------ ------------ ------------ ------------
Income statement data:
Net sales $ 60,505 $ 57,820 $ 43,544 $ 38,977 $ 40,425
Income from operations 5,178 3,990 2,443 433 3,076
Net income (loss) 1,372 1,315 809 (1,993) 1,584
Net income (loss) per Partnership unit (a) 0.37 0.37 0.20 (0.50) 0.40
Balance sheet data:
Total assets $ 31,791 $ 29,197 $ 30,703 $ 22,226 $ 23,745
Long-term debt 29,885 27,649 29,630 20,005 18,859
Obligations under capital
leases 2,572 1,495 1,543 1,645 1,665
Partners capital (deficiency):
General Partners (9) (9) (8) (8) (5)
Class A 5,099 5,395 5,543 5,624 6,295
Class B and C (9,416) (9,252) (10,058) (8,322) (5,811)
Notes receivable from employees (749) (956) - - -
Cost in excess of carrying
value of assets acquired (1,859) (1,324) (1,324) (1,324) (1,324)
Cumulative comprehensive income (loss) - - (108) 19 (44)
Cash dividends declared per unit 0.40 0.45 0.30 0.32 0.74
Statistical data:
Capital expenditures: (b)
Existing Restaurants $ 2,092 $ 1,078 $ 2,465 $ 889 $ 2,612
New Restaurants 147 300 162 935 4,136
Average weekly sales per
Restaurant: (c)
Red Roof 13,573 12,683 11,918 11,813 12,544
Delivery/carryout facility/C-store 12,591 11,657 10,508 8,160 10,547
Restaurants in operation
at end of period 86 87 89 63 67
NOTES TO SELECTED FINANCIAL DATA
(a) Net income is allocated to all partners in accordance with their
respective units in the Partnership with all outstanding units being
treated equally.
(b) Capital expenditures include the cost of land, buildings, new and
replacement restaurant equipment and refurbishment of leasehold
improvements. Capital expenditures for existing restaurants
represent such capitalized costs for all restaurants other than newly
constructed restaurants.
(c) Average weekly sales were calculated by dividing net sales by the
weighted average number of restaurants open during the period. The
quotient was then divided by the number of days in the period
multiplied times seven days.
(d) The Partnership began consolidating the accounts of Magic on
August 11, 1998 when APP's interest in Magic increased from 45% to
60%. The 1998 selected financial data reflects this consolidation.
Item 7. Management's Discussion and Analysis of Consolidated
- -------------------------------------------------------------
Financial Condition and Results of Operations
- ---------------------------------------------
Results of Operations
- ---------------------
The following discussion compares the Partnership's results for the
years ended December 26, 2000, December 28, 1999 and December 29,
1998. This discussion should be read in conjunction with the
Selected Financial Data and the Consolidated Financial Statements
included elsewhere herein.
The accompanying consolidated financial statements include the
accounts of the Partnership 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
Magic increased from 45% to 60% in connection with Magic's purchase
of a 25% interest from a former limited partner (see Note 13 to the
accompanying financial statements). Accordingly, the Partnership
began consolidating the accounts of Magic from that date. All
significant intercompany balances and transactions have been
eliminated. The table below shows the historical Statements of
Income as well as proforma results of operations 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 years ended
December 26, 2000, December 28, 1999 and December 29, 1998.
Historical Proforma (1)
--------------------------------------------------
2000 1999 1998 1998
--------------------------------------------------
Net sales $60,504,753 $57,820,215 $43,543,633 $53,631,453
Operating costs and
expenses:
Cost of sales 15,000,081 15,355,713 11,710,209 14,289,075
Restaurant labor and
benefits 17,346,143 16,899,475 12,500,842 15,522,283
Advertising 3,927,433 3,766,662 2,844,451 3,595,040
Other restaurant
operating expenses
exclusive of
depreciation and
amortization 11,379,040 10,834,915 8,337,961 10,656,012
General and
administrative:
Management fees 3,738,150 3,582,943 2,894,911 3,348,863
Other 1,084,454 787,305 631,999 761,827
Depreciation and
amortization 2,826,337 2,540,304 2,149,606 2,664,692
Loss (gain) on
restaurant closings 24,910 63,398 23,747 (93,220)
Equity in loss of Magic - - 7,250 -
---------- ---------- ---------- ----------
Income from operations 5,178,205 3,989,500 2,442,657 2,886,881
Equity in loss of
unconsolidated
affiliates (176,896) - - -
Interest income 39,117 25,994 29,783 29,783
Interest expense (3,047,986) (3,014,620) (2,662,061) (3,115,146)
Cure of (loss on)
default of pooled
loans (409,016) 423,900 - -
Gain on life insurance
settlement - - 875,533 875,533
Loss on sale of
investments held
for sale - (134,766) - -
Gain on sale of
restaurant - 196,608 - -
---------- ---------- ---------- ----------
(3,594,781) (2,502,884) (1,756,745) (2,209,830)
---------- ---------- ---------- ----------
Income before
minority interest 1,583,424 1,486,616 685,912 677,051
Minority interest in
(income) loss of
Operating
Partnerships (211,300) (172,062) 122,805 129,273
---------- ---------- ---------- ----------
Net income $ 1,372,124 $ 1,314,554 $ 808,717 $ 806,324
========== ========== ========== ==========
(1) The proforma statements of operations for 1998 include consolidation
of Magic as if APP's interest in Magic increased to 60% as of
December 31, 1997.
Net Sales
- ---------
Net sales for the year ended December 26, 2000 increased $2,685,000
from net sales of $57,820,000 in 1999 to net sales of $60,505,000 in
2000, a 4.6% increase. Comparable restaurant sales increased 6.4%
over the prior year. The stronger than expected sales results in
2000 were achieved primarily through continued improvement in
restaurant operations and the success of The Insider Pizza introduced
during the fourth quarter of 2000.
Net sales for the year ended December 28, 1999 increased $4,189,000
from proforma net sales of $53,631,000 in 1998 to $57,820,000 in
1999, a 7.8% 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 year ended December 26, 2000 increased
$1,188,000 from $3,990,000 to $5,178,000, a 29.8% increase over the
year ended December 28, 1999. As a percentage of net sales, income
from operations increased from 6.9% of net sales for the year ended
December 28, 1999 to 8.6% of net sales for the year ended December
26, 2000. Cost of sales decreased as a percentage of net sales from
26.6% in 1999 to 24.8% in 2000 due to significantly lower cheese
costs. Labor and benefits expense decreased as a percentage of net
sales from 29.2% in 1999 to 28.7% in 2000 attributable to better cost
controls and increased productivity in the restaurants. Advertising
remained at 6.5% of net sales for both years. Other restaurant
operating expenses increased slightly from 18.7% of net sales for the
year ended December 28, 1999 to 18.8% of net sales for the year ended
December 26, 2000. General and administrative expenses increased
from 7.6% of net sales in 1999 to 8.0% of net sales in 2000
reflecting increased bonuses paid on improved operating results.
Depreciation and amortization expense increased to 4.7% of net sales
in 2000 compared to 4.4% of net sales in 1999 primarily due to the
addition of point-of-sale terminals under capital leases.
Income from operations for the year ended December 28, 1999 increased
$1,103,000 from $2,887,000 to $3,990,000, a 38.2% increase over the
year ended December 29, 1998. Income from operations represented
6.9% of net sales for the year ended December 28, 1999 compared to
proforma income from operations of 5.4% of proforma net sales for the
year ended December 29, 1998. Cost of sales as a percentage of net
sales was 26.6% of net sales in both 1999 and 1998. Labor and
benefits expense increased slightly from 28.9% of net sales for the
year ended December 29, 1998 to 29.2% of net sales for the year ended
December 28, 1999 due to improved staffing of the restaurants.
Advertising decreased from 6.7% of proforma net sales in 1998 to 6.5%
of net sales in 1999. Other restaurant operating expenses amounted
to 18.7% of net sales in 1999 compared to 19.9% of proforma net sales
in 1998. This decrease is primarily attributable to 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 7.7% of proforma net sales in 1998 to 7.6% of net sales in 1999.
Depreciation and amortization expense decreased from 5.0% of proforma
net sales in 1998 to 4.4% of net sales in 1999.
Net Income
- ----------
Net income increased $57,000 to $1,372,000 for the year ended
December 26, 2000 compared to net income of $1,315,000 for the year
ended December 28, 1999. The 1999 period net income included a loss
on sale of investments held for sale of $135,000 and a $197,000 gain
on sale of a restaurant. The 1999 period net income was increased by
$424,000 to record the cure of a default of certain loans within the
Partnership's pooled borrowings from Franchise Mortgage Acceptance
Company (FMAC) while the 2000 net income includes a $409,000 charge
to record the default of certain loans within the Partnership's
pooled borrowings with FMAC (See Note 3 of the accompanying financial
statements). The 2000 period net income also includes equity in loss
of unconsolidated affiliates of $177,000.
Net income increased $509,000 to net income of $1,315,000 for the
year ended December 28, 1999 compared to proforma net income of
$806,000 for the year ended December 29, 1998. The 1998 period net
income included a gain on life insurance settlement of $876,000. The
1999 period net income included a $135,000 loss on sale of
investments held for sale and a $197,000 gain on sale of a
restaurant. The increase in net earnings is primarily attributable
to the increase in income from operations noted above and a decrease
in interest expense of $100,000. In addition, the cure of a default
of certain loans within the Partnership's pooled borrowings from FMAC
increased net income by $424,000 (See Note 3 of the accompanying
financial statements). These were offset by a $301,000 increase in
minority interest in earnings of affiliate.
Liquidity and Capital Resources
- -------------------------------
The Partnership generates its principal source of funds from net cash
provided by operating activities. Management believes that 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 for the next twelve months.
At December 26, 2000, the Partnership had a working capital
deficiency of $6,543,000 compared to a deficiency of $5,543,000 at
December 28, 1999. The increase in working capital deficiency at
December 26, 2000 is primarily a result of a $486,000 increase in
current portion of obligations under capital leases related to point-
of-sale terminals and a $367,000 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.
Net Cash Provided by Operating Activities
- -----------------------------------------
During 2000, net cash provided by operating activities amounted to
$5,413,000, an increase of $1,288,000 over 1999. This increase is
primarily attributable to a $1,189,000 increase in income from
operations. Non-operating items of income and expense include a
noncash charge in 2000 of $409,000 to record a loss on default in
pooled loans versus recording a $424,000 cure of default in pooled
loans in 1999.
Investing Activities
- --------------------
Capital expenditures for 2000 were $2,239,000 of which $1,022,000 was
for replacement of equipment in existing restaurants, $147,000 was
for the purchase of land for future development, and $1,070,000 was
for the purchase of previously leased restaurants. The Partnership
also entered into capital leases of $1,461,000 for point-of-sale
terminals. In addition, the Partnership purchased a minority
interest in Oklahoma Magic, L.P. for $2,500,000.
Financing Activities
- --------------------
Cash distributions paid in 2000 totaled $1,389,000 and amounted to
$0.40 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 2000, the Partnership's proceeds from long-term borrowings
amounted to $5,106,000 of which $2,500,000 was used to purchase a 39%
interest in Magic from an affiliate and $1,025,000 was used to
purchase previously leased restaurants. The remainder was used to
refinance existing debt. The financing costs related to this
refinancing are being amortized over the terms of the loan
agreements. The Partnership plans to open four to six new restaurants
during 2001. The land for two of these new restaurants has been
purchased. Management anticipates spending approximately $900,000
for the buildings and equipment at these two locations. The
remaining restaurants planned for development will be
delivery/carryout units leased from unrelated third parties.
Management anticipates the cost of developing these locations at
approximately $200,000 per restaurant. Development of the new
restaurants will be financed through existing lenders. Management
anticipates spending $828,000 in 2001 for recurring replacement of
equipment in existing restaurants which the Partnership expects to
finance 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.
During 1998, the Partnership collected on a life insurance policy
purchased in 1993 on one of its original investors. This investor
owned approximately 438,600 Class B and C units. The policy was
purchased with the intent of providing the Partnership a means of
repurchasing his units upon his death if his heirs so desired. The
investor died in May of 1998. The Partnership recognized a gain of
$876,000 upon receipt of the insurance proceeds. The units were
repurchased on December 29, 1998 at $2.55 per unit for a total
purchase price of $1,118,430.
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. McLane Company, Inc., a subsidiary of Wal-Mart
Stores, Inc., completed the purchase of AmeriServe's U.S.
distribution business on November 30, 2000. As part of the sale, the
Partnership agreed to a two-year contract extension and will incur a
5% increase in distribution fees. The overall impact of the
increased distribution fees on cost of sales is expected to be
approximately 0.1%.
On March 13, 1996, the Partnership purchased a 45% interest in Magic,
a newly-formed limited partnership, for $3.0 million in cash. Magic
owns and operates twenty-six Pizza Hut restaurants in Oklahoma. In
August 1998, Magic purchased a 25% interest in Magic from a former
limited partner which effectively increased the Partnership's
interest in Magic from 45% to 60%. Therefore, beginning August 11,
1998, Magic's financial statements were consolidated into the
Partnership's consolidated financial statements. Prior to August 11,
1998, the Partnership accounted for its investment in Magic using the
equity method of accounting. In connection with the consolidation,
the Partnership recorded goodwill of $728,000 which represented the
excess purchase price of the original equity investment in the net
assets acquired, net of subsequent amortization.
On July 26, 2000, APP purchased 39% of Magic from the Management
Company for $2,500,000 cash and contingent consideration of $700,000.
The $2,500,000 cash payment was financed by INTRUST Bank over five
years at 9.5%. The contingent consideration will become due in the
event that Magic's cash flow (determined on a 12 month trailing
basis) exceeds $2.6 million at any time between January 1, 2001 and
December 31, 2005. Payment of the remaining balance shall be made in
Class B and Class C Units of the Partnership. In the event that
Magic's cash flow does not reach this cash flow goal on or prior to
December 31, 2005, APP shall owe no additional consideration. Upon
completion of this purchase, the Partnership owns 99% of Magic. The
Management Company is considered a related party in that one
individual has controlling interest in both the Management Company
and the Partnership's general partner. To the extent that the
Partnership and the Management Company have common ownership, the
transaction was recorded at the Management Company's historical cost.
As a result of the transaction, the Partnership recorded goodwill of
$1,407,991 and cost in excess of carrying value of assets acquired
of $534,962.
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. Congress is considering legislation which could increase the
minimum wage by up to as much as $1 per hour over a two-year period.
While an increase in the minimum wage would increase the
Partnership's labor costs, due to the uncertainty regarding
legislation on the matter, management cannot reliably estimate the
potential impact on labor costs at this time.
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. Due to the
small amount of debt at variable interest rates, a hypothetical 100
basis point adverse move (increase) in interest rates along the
entire interest rate yield curve would not have a material effect on
the Partnership's interest expense and net income 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 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 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.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
See the consolidated financial statements and supplementary data
listed in the accompanying "Index to Consolidated Financial
Statements and Supplementary Data" on Page F-1 herein. Information
required for financial statement schedules under Regulation S-X is
either not applicable or is included in the consolidated financial
statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting
- --------------------------------------------------------------------
and Financial Disclosure
- ------------------------
The Partnership filed a Form 8-K to report a change in certifying
accountants with the firm of Ernst & Young LLP being replaced by
Grant Thornton LLP effective September 9, 1999.
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
RAM, as the Managing General Partner, is responsible for the
management and administration of the Partnership under a Management
Services Agreement with the Operating Partnerships. Partnership
management services include, but are not limited to: preparing and
reviewing projections of cash flow, taxable income or loss, and
working capital requirements; conducting periodic physical
inspections, market surveys and continual Restaurant reviews to
determine when assets should be sold and, if so, determining
acceptable terms of sale; arranging any debt financing for capital
improvements or the purchase of assets; supervising any litigation
involving the Partnerships; preparing and reviewing Partnership
reports; communicating with Unitholders; supervising and reviewing
Partnership bookkeeping, accounting and audits; supervising the
presentation of and reviewing Partnership state and federal tax
returns; personnel functions, and supervising professionals employed
by the Partnerships in connection with any of the foregoing,
including attorneys, accountants and appraisers.
The direct management of the Restaurants is performed by the
Management Company pursuant to a substantially identical Management
Services Agreement with RAM. As compensation for management
services, the Management Company will receive a management fee equal
to 7% of the gross sales of the Restaurants in APP and 4.5% of gross
sales of the Restaurants in Magic. In addition, the Management
Company will be reimbursed for the cost of certain products purchased
for use directly in the operation of the Restaurants and for outside
legal, accounting, tax, auditing, advertising, and marketing
services. Certain other expenses incurred by the Management Company
which relate directly to the operation of the Restaurants, including
insurance and profit sharing and incentive bonuses and related
payroll taxes for supervisory personnel, shall be paid by the
Operating Partnerships through RAM.
Set forth below is certain information concerning the director and
executive officers of both RAM and the Management Company.
Present Position with the Management
Company and Business Experience for
Name Age Past 5 Years
- ---- --- -------------------------------------
Hal W. McCoy 55 Chairman, Chief Executive Officer
and sole director. McCoy holds a Bachelor
of Arts degree from the University of
Oklahoma. From 1970 to 1974, he was at
different times Marketing Manager at PHI,
where he was responsible for consumer
research, market research, and market
planning, and Systems Manager, where he
was responsible for the design and
installation of PHI's first management
data processing system. In 1974, he
founded the predecessor to the Management
Company and today owns or has controlling
ownership in entities operating a combined
total of 117 franchised "Pizza Hut" and
"Long John Silver's" restaurants.
Hal W. McCoy II 33 President. McCoy holds a Bachelor of
Science degree in Business Administration
from the University of Kansas. In 1990, he
founded, owned and operated CenTex Pizza
Partners, L.P., which operated four Pizza
Huts in Texas. After improving the
operations and selling CenTex in 1992, he
joined the Management Company where he
currently oversees all operations for the
Pizza Huts and Long John Silver's managed
by the Management Company.
J. Leon Smith 58 Vice President. Smith holds a Bachelor of
Science degree in Hotel and Restaurant
Management from Oklahoma State University
and a Juris Doctorate from the University
of Oklahoma. He has been employed by McCoy
since 1974, first as Director of Operations
for the Long John Silver's division and
then as Director of Real Estate Development
and General Counsel.
Terry Freund 45 Chief Financial Officer. Freund holds a
Bachelor of Arts degree in Accounting
from Wichita State University. He has
been employed by McCoy since 1984.
He is responsible for virtually all of
the financial and administrative
functions in the company.
Item 11. Executive Compensation
- -------------------------------
The executive officers of the Management Company perform services
for all of the restaurants managed by the Management Company,
including the Restaurants. Cash compensation of executive officers
of the Management Company who are also officers of affiliated
companies is allocated for accounting purposes among the various
entities owning such restaurants on the basis of the number of
restaurants each entity owns. Only the compensation of the Chief
Executive Officer, President, and Chief Financial Officer is shown
below as the other officer's total cash compensation does not exceed
$100,000. Neither RAM nor the Operating Partnerships compensate
their officers, directors or partners for services performed, and the
salaries of the executive officers of the Management Company are paid
out of its management fee and not directly by the Partnership.
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
Name and Allocable to
Principal Position Year Salary Bonus Total Partnership
- ------------------ ---- ------ ----- ----- -----------
Hal W. McCoy 2000 $173,858 $83,878 $257,736 $199,283
Chief Executive Officer 1999 174,831 47,969 222,800 176,389
1998 171,627 40,370 211,997 142,821
Hal W. McCoy II 2000 106,257 74,950 181,207 145,310
President 1999 97,765 32,899 130,664 98,725
Terry Freund 2000 103,900 59,732 163,632 129,673
Assistant Secretary and 1999 96,227 30,078 126,305 96,739
Chief Financial Officer 1998 84,297 20,063 104,360 67,441
Incentive Bonus Plan
- --------------------
The Management Company maintains a discretionary supervisory
incentive bonus plan (the "Incentive Bonus Plan") pursuant to which
approximately 21 employees in key management positions, including Mr.
McCoy are eligible to receive quarterly cash bonus payments if
certain management objectives are achieved. Performance is measured
each quarter and bonus payments are awarded and paid at the
discretion of Mr. McCoy. The amounts paid under this plan for fiscal
year 2000, 1999 and 1998 to Mr. McCoy, Mr. McCoy II and Mr. Freund
are included in the amounts shown in the cash compensation amounts
set forth above. The total amount allocated to the Restaurants under
the Incentive Bonus Plan for the fiscal year ended December 26, 2000
was $448,892 of which $135,692 was paid to all executive officers as
a group. Bonuses paid under the Incentive Bonus Plan are paid by the
Operating Partnerships.
The Incentive Bonus Plan in effect for the fiscal year ending
December 25, 2001 provides for payment of aggregate supervisory
bonuses in an amount equal to 15% of the amount by which the
Partnership's income from operations plus depreciation and
amortization expenses exceed a prescribed threshold. The threshold
generally represents capital expenditures, interest and principal
payments on Partnership debt, and cash distributions. For the fiscal
year ended December 26, 2000 the Partnership's income from operations
plus depreciation and amortization expenses was $8,004,542.
Class A Unit Option Plan
- ------------------------
The Partnership, APP, RAM and the Management Company have adopted
a Class A Unit Option Plan (the "Plan") pursuant to which 75,000
Class A Units are reserved for issuance to employees, including
officers, of the Partnership, APP, RAM and the Management Company.
Participants will be entitled to purchase a designated number of
Units at an option price which shall be equal to the fair market
value of the Units on the date the option is granted. Options
granted under the Plan will be for a term to be determined by the
Managing General Partner at the time of issuance (not to exceed ten
years) and shall not be transferable except in the event of the death
of the optionee, unless the Managing General Partner otherwise
determines and so specifies in the terms of the grant. The Plan is
administered by the Managing General Partner which, among other
things, designates the individuals to whom options are granted, the
number of Units for which such options are to be granted and other
terms of grant. The executive officers have no outstanding options
at December 26, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and
- ------------------------------------------------------------
Management
- ----------
PRINCIPAL UNITHOLDERS
The following table sets forth, as of March 1, 2001, information
with respect to persons known to the Partnership to be beneficial
owners of more than five percent of the Class A Income Preference
Units, Class B or Class C Units of the Partnership:
Name & Address Amount & Nature
Title of Beneficial of Beneficial Percent
of Class Owner Ownership of Class
- -------- -------------- --------------- --------
Class A Income
Preference Units None
Class B Hal W. McCoy 641,537 (1) 58.59%
555 N. Woodlawn
Suite 3102
Wichita, KS 67208
Class B Hal W. McCoy II 84,105 7.68%
555 N. Woodlawn
Suite 3102
Wichita, KS 67208
Class B John Hunter 116,564 10.57%
117 Lilac Lane
San Antonio, TX 78209
Class C Hal W. McCoy 1,246,876 (1) 65.24%
555 N. Woodlawn
Suite 3102
Wichita, KS 67208
Class C Hal W. McCoy II 141,129 7.38%
555 N. Woodlawn
Suite 3102
Wichita, KS 67208
Class C John Hunter 106,536 5.54%
117 Lilac Lane
San Antonio, TX 78209
(1) Hal W. McCoy beneficially owns 95.75% of RMC Partners, L.P. which owns
671,164 Class B Units and 1,297,266 Class C Units. Mr. McCoy owns 95.65% of
RMC American Management, Inc. which owns 3,680 Class C Units. Mr. McCoy has
voting authority over the units.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 2001, the number
of Class A Income Preference Units, Class B Units, or Class C Units
beneficially owned by the director and by the director and executive
officers of both RAM and the Management Company as a group.
Title Name of Amount & Nature Percent
of Class Beneficial Owner of Beneficial Ownership of Class
- -------- ---------------- ----------------------- --------
B Hal W. McCoy 641,537 (1) 58.59%
C Hal W. McCoy 1,246,876 (1) 65.24%
B Director & all 807,069 (1) 73.71%
officers as a group
(4 Persons)
C Director & all 1,530,315 (1) 80.07%
officers as a group
(4 Persons)
(1) See the table under "Principal Unitholders"
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
One of the Restaurants is located in a building owned by an
affiliate of the General Partners. The lease provides for minimum
annual rentals of $25,000 and is subject to additional rentals based
on a percentage of sales in excess of a specified amount. The lease
is a net lease, under which the lessee pays the taxes, insurance and
maintenance costs. The lease is for an initial term of 15 years with
options to renew for three additional five-year periods. Although
this lease was not negotiated at arm's length, RMC believes that the
terms and conditions thereof, including the rental rate, is not less
favorable to the Partnership than would be available from unrelated
parties.
Pursuant to the Management Services Agreements (Agreements) entered
into June 26, 1987, the Restaurants of APP are managed by the
Management Company for a fee equal to 7% of the gross sales of the
Restaurants and reimbursement of certain costs incurred for the
direct benefit of the Restaurants. Neither the terms and conditions
of the Agreements, nor the amount of the fee were negotiated at arm's
length. Based on prior experience in managing the Restaurants,
however, the Managing General Partner believes that the terms and
conditions of the Management Services Agreement, including the amount
of the fee, are fair and reasonable and not less favorable to the
Partnership than those generally prevailing with respect to similar
transactions between unrelated parties. The 7% fee approximated the
actual unreimbursed costs incurred by the Managing General Partner in
managing the Restaurants when the Agreements were entered into in
June of 1987. The 7% fee remains in effect for the life of the
Agreements which expire December 31, 2007.
Pursuant to separate Management Services Agreements entered into
March 13, 1996, the Restaurants of Magic are managed by the
Management Company for a fee equal to 4.5% of the gross sales of the
Restaurants and reimbursement of certain costs incurred for the
direct benefit of the Restaurants. The terms and conditions of the
Agreements were negotiated at arm's length with the former owners of
the Oklahoma restaurants who were originally 25% partners in Magic.
The Management Company agreed to a reduced fee due to its ownership
interest in Magic. The 4.5% fee remains in effect for the remaining
life of the Agreements which expire February 28, 2010.
PART IV
Item 14. Exhibits, Financial Statements and Reports
- ----------------------------------------------------
on Form 8-K
- -----------
(a) 1. Financial statements
--------------------
See "Index to Consolidated Financial Statements and
Supplementary Data" which appears on page F-1 herein.
3. Exhibits
--------
The exhibits filed as part of this annual report are listed in
the "Index to Exhibits" at page 32.
(b) Reports on Form 8-K
-------------------
During the third quarter of 1999, the Partnership filed a
Form 8-K dated September 9, 1999 reporting a change in
certifying accountants.
INDEX TO EXHIBITS
(Item 14(a))
Exhibit
No. Description of Exhibits Page/Notes
3.1 Amended and Restated Certificate of Limited
Partnership of American Restaurant Partners, L.P. A
3.2 Amended and Restated Agreement of Limited
Partnership of American Restaurant Partners, L.P. A
3.3 Amended and Restated Certificate of Limited
Partnership of American Pizza Partners, L.P. A
3.4 Amended and Restated Agreement of Limited
Partnership of American Pizza Partners, L.P. A
4.1 Form of Class A Certificate A
4.2 Form of Application for Transfer of Class A Units A
10.1 Management Services Agreement dated
June 26, 1987 between American Pizza
Partners, L.P. and RMC American Management, Inc. A
10.2 Management Services Agreement dated
June 26, 1987 between RMC American
Management, Inc. and Restaurant Management
Company of Wichita, Inc. A
10.3 Form of Superseding Franchise Agreement
between the Partnership and Pizza Hut, Inc.
and schedule pursuant to Item 601 of
Regulation S-K. A
10.4 Form of Blanket Amendment to Franchise Agreements A
10.5 Incentive Bonus Plan A
10.6 Class A Unit Option Plan B
10.7 Revolving Term Credit Agreement dated
June 29, 1987 between American Pizza
Partners, L.P. and the First National Bank
in Wichita C
10.8 Form of 1990 Franchise Agreement between the
Partnership and Pizza Hut, Inc. and schedule
pursuant to Item 601 of Regulation S-K D
10.9 Contribution Agreement, dated as of February 1,
1996, relating to the closing date of March 13,
1996, by and among American Pizza Partners, L.P.,
Hospitality Group of Oklahoma, Inc., RMC American
Management, Inc., Restaurant Management Company
of Wichita, Inc. and Oklahoma Magic, L.P. E
10.10 Settlement Agreement between Oklahoma Magic, L.P.
and Hospitality Group of Oklahoma, Inc. F
23.1 Consent of Grant Thornton LLP F-26
A. Included as exhibits in the Partnership's Registration Statement
on Form S-1 (Registration No.33-15243) dated August 20, 1987 and
included herein by reference to exhibit of same number.
B. Incorporated by reference to the Partnership's Registration
Statement on Form S-8 dated March 21, 1988.
C. Incorporated by reference to Exhibit 10.7 of the Partnership's
Form 10-K for the year ended December 31, 1987.
D. Incorporated by reference to Exhibit 10.8 of the Partnership's
Form 10-K for the year ended December 31, 1991.
E. Incorporated by reference to Exhibit 2 of the Partnership's Form
8-K dated March 13, 1996.
F. Incorporated by reference to Exhibit 10.10 of the Partnership's
Form 10-K for the year ended December 29, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: 3/23/01 By: /s/Hal W. McCoy
-------- ---------------
Hal W. McCoy
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Name Title Date
- ---- ----- ----
/s/Hal W. McCoy Chairman and Chief Executive Officer 3/23/01
- --------------- (Principal Executive Officer) -------
Hal W. McCoy of RMC American Management, Inc.
/s/Terry Freund Chief Financial Officer 3/23/01
- --------------- -------
Terry Freund
Index to Consolidated Financial Statements
and Supplementary Data
The following financial statements are included in Item 8:
Page
----
Report of Independent Certified Public Accountants . . . . . F-2
Report of Independent Auditors . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets as of December 26, 2000
and December 28, 1999 . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Income for the years ended
December 26, 2000, December 28, 1999,
and December 29, 1998 . . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Partners' Capital (Deficiency)
for the years ended December 26, 2000,
December 28, 1999 and December 28, 1998 . . . . . . . . F-7
Consolidated Statements of Cash Flows for the
years ended December 26, 2000, December 28, 1999,
and December 29, 1998 . . . . . . . . . . . . . . . . . F-8
Notes to Consolidated Financial Statements . . . . . . . . . F-9
All financial statement schedules have been omitted since the
required information is not present.
Report of Independent Certified Public Accountants
The General Partners and Limited Partners
American Restaurant Partners, L.P.
We have audited the accompanying consolidated balance sheets of
American Restaurant Partners, L.P. (the Partnership) as of December
26, 2000 and December 28, 1999, and the related consolidated
statements of income, partners' capital (deficiency) and cash flows
for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above, present fairly, in all material respects, the consolidated
financial position of American Restaurant Partners, L.P. as of December
26, 2000 and December 28, 1999 and the consolidated results of its
operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of
America.
/s/Grant Thornton LLP
Wichita, Kansas
March 2, 2001
REPORT OF INDEPENDENT AUDITORS
The General Partners and Limited Partners
American Restaurant Partners, L.P.
We have audited the accompanying consolidated statements of
operations, partner's capital (deficiency), and cash flows of
American Restaurant Partners, L.P. (the Partnership) for the
year ended December 29, 1998. These financial statements are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above, present fairly, in all material respects, the consolidated
results of operations and cash flows of American Restaurant Partners,
L.P. for the year ended December 29, 1998, in conformity with auditing
standards generally accepted in the United States.
/s/Ernst & Young LLP
Kansas City, Missouri
March 12, 1999
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
December 26, December 28,
ASSETS 2000 1999
- ----------------------------- ----------- ------------
Current assets:
Cash and cash equivalents $ 788,485 $ 742,452
Accounts receivable 320,038 258,388
Due from affiliates 66,244 69,948
Notes receivable from
affiliates - current portion 15,221 19,531
Inventories 407,413 410,997
Prepaid expenses 307,894 270,300
---------- ----------
Total current assets 1,905,295 1,771,616
Property and equipment, at cost:
Land 4,991,222 4,312,468
Buildings 8,920,125 8,374,351
Restaurant equipment 13,502,699 12,808,308
Leasehold rights and improvements 8,259,820 8,164,307
Property under capital leases 3,538,902 2,077,751
---------- ----------
39,212,768 35,737,185
Less accumulated depreciation and amortization 18,552,936 16,406,881
---------- ----------
20,659,832 19,330,304
Other assets:
Franchise rights, net of accumulated
amortization of $1,951,824
($1,686,489 in 1999) 5,236,276 5,510,611
Notes receivable from affiliates 66,111 75,952
Deposit with affiliate 485,000 485,000
Goodwill, net of accumulated
amortization of $179,977 ($130,110 in 1999) 2,052,515 694,391
Other 1,386,337 1,328,781
---------- ----------
$31,791,366 $29,196,655
========== ==========
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
December 26, December 28,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY) 2000 1999
------------ ------------
Current liabilities:
Accounts payable $ 2,719,592 $ 2,818,985
Due to affiliates 158,755 111,988
Accrued payroll and other taxes 899,140 750,474
Accrued liabilities 1,361,631 1,177,506
Current maturities of long-term debt 2,763,409 2,396,678
Current portion of obligations
under capital leases 545,381 59,124
---------- ----------
Total current liabilities 8,447,908 7,314,755
Long-term liabilities less current maturities:
Obligations under capital leases 2,026,327 1,436,375
Long-term debt 27,121,884 25,252,712
Other noncurrent liabilities 992,674 787,208
---------- ----------
30,140,885 27,476,295
Minority interests in Operating Partnerships 135,780 551,541
Commitments and contingencies - -
Partners' capital (deficiency):
General Partners (8,727) (8,585)
Limited Partners:
Class A Income Preference, authorized
875,000 units; issued 707,138 units
(789,866 in 1999) 5,099,355 5,394,796
Classes B and C, issued 1,095,018 and
1,915,148 class B and C units,
respectively (1,102,418 and
1,923,808 units in 1999, respectively) (9,415,842) (9,252,030)
Notes receivable employees - sale
of partnership units (749,350) (956,436)
Cost in excess of carrying value
of assets acquired (1,858,643) (1,323,681)
---------- ----------
Total partners' capital (deficiency) (6,933,207) (6,145,936)
---------- ----------
$31,791,366 $29,196,655
========== ==========
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 26, 2000,
December 28, 1999 and December 29, 1998
2000 1999 1998
---------- ---------- ----------
Net sales $60,504,753 $57,820,215 $43,543,633
Operating costs and expenses:
Cost of sales 15,000,081 15,355,713 11,710,209
Restaurant labor and benefits 17,346,143 16,899,475 12,500,842
Advertising 3,927,433 3,766,662 2,844,451
Other restaurant operating
expenses exclusive of
depreciation and amortization 11,379,040 10,834,915 8,337,961
General and administrative:
Management fees - related party 3,738,150 3,582,943 2,894,911
Other 1,084,454 787,305 631,999
Depreciation and amortization 2,826,337 2,540,304 2,149,606
Loss on restaurant closings 24,910 63,398 23,747
Equity in loss of Magic - - 7,250
---------- ---------- ----------
Income from operations 5,178,205 3,989,500 2,442,657
Equity in loss of unconsolidated affiliates (176,896) - -
Interest income 39,117 25,994 29,783
Interest expense (3,047,986) (3,014,620) (2,662,061)
Cure of (loss on) default of pooled loans (409,016) 423,900 -
Gain on life insurance settlement - - 875,533
Loss on sale of investments held for sale - (134,766) -
Gain on sale of restaurant - 196,608 -
---------- ---------- ----------
(3,594,781) (2,502,884) (1,756,745)
---------- ---------- ----------
Income before minority interest 1,583,424 1,486,616 685,912
Minority interests in (income) loss
of Operating Partnerships (211,300) (172,062) 122,805
---------- ---------- ----------
Net income $ 1,372,124 $ 1,314,554 $ 808,717
========== ========== ==========
Net income allocated to Partners:
Class A Income Preference $ 270,654 $ 298,258 $ 165,210
Class B $ 400,710 $ 368,528 $ 242,003
Class C $ 700,760 $ 647,768 $ 401,504
Weighted average number of Partnership
units outstanding during period:
Class A Income Preference 741,052 813,642 814,145
Class B 1,097,151 1,005,338 1,192,579
Class C 1,918,702 1,767,105 1,978,589
Basic and diluted income
before minority interest per
Partnership unit $ 0.42 $ 0.41 $ 0.17
Basic and diluted minority interest
per Partnership unit $ (0.06) $ (0.05) $ 0.03
Basic and diluted net income
per Partnership unit $ 0.37 $ 0.37 $ 0.20
Distributions per Partnership unit $ 0.40 $ 0.45 $ 0.30
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
Consolidated Statements of Partners' Capital (Deficiency)
Years ended December 26, 2000, December 28, 1999, and December 29, 1998
General Partners Limited Partners Cost in
---------------- --------------------------------------- excess of
Classes B Class A Income Notes carrying
and C Preference Classes B and C receivable value of Cumulative
---------------- --------------------------------------- from assets comprehensive
Units Amounts Units Amounts Units Amounts employees acquired income (loss) Total
------ -------- ----- ------- ----- ------- --------- -------- ------------- -----
Balance at
December 31, 1997 3,940 $(7,864) 814,314 $5,623,790 3,170,659 $(8,322,372) $ - $(1,323,681) $ 18,675 $(4,011,452)
Net Income - 801 - 165,210 - 642,706 - - - 808,717
Unrealized loss on
investments
available-for-sale - - - - - - - - (127,116) (127,116)
---------
Comprehensive income 681,601
Partnership distributions - (1,182) - (244,128) - (949,721) - - - (1,195,031)
Units purchased - - (304) (1,269) (558,800) (1,428,627) - - - (1,429,896)
----- ------ ------- --------- --------- ---------- --------- --------- ------- ---------
Balance at
December 29, 1998 3,940 (8,245) 814,010 5,543,603 2,611,859 (10,058,014) - (1,323,681) (108,441) (5,954,778)
Net Income - 1,446 - 298,258 - 1,014,850 - - - 1,314,554
Change in unrealized
loss on
investments
available-for-sale - - - - - - - - 108,441 108,441
---------
Comprehensive income 1,422,995
Partnership distributions - (1,786) - (368,863) - (1,255,095) 77,024 - - (1,548,720)
Units purchased - - (24,144) (78,202) (23,133) (69,396) - - - (147,598)
Units sold to employees - - - - 437,500 1,115,625 (1,047,412) - - 68,213
Employee compensation -
reduction of notes
receivable - - - - - - 13,952 - - 13,952
----- ------ ------- --------- --------- ---------- ---------- ---------- ------- ----------
Balance at
December 28, 1999 3,940 (8,585) 789,866 5,394,796 3,026,226 (9,252,030) (956,436) (1,323,681) - (6,145,936)
Net Income - 1,438 - 270,654 - 1,100,032 - - - 1,372,124
Partnership distributions - (1,580) - (297,229) - (1,208,044) 117,551 - - (1,389,302)
Units purchased - - (82,728) (268,866) (25,000) (69,750) 47,705 - - (290,911)
Units sold to employees - - - - 5,000 13,950 (12,555) - - 1,395
Employee compensation -
reduction of notes
receivable - - - - - - 54,385 - - 54,385
Purchase of Oklahoma
Magic, L.P.'s minority
interest from
a related party - - - - - - - (534,962) - (534,962)
----- ------ ------- --------- --------- ---------- ---------- ---------- ------- ---------
Balance at
December 26, 2000 3,940 $(8,727) 707,138 $5,099,355 3,006,226 $(9,415,842)$ (749,350)$(1,858,643) $ - $(6,933,207)
===== ====== ======= ========= ========= ========== ========= ========== ======= =========
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 26, 2000, December 28, 1999 and December 29, 1998
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net income $ 1,372,124 $ 1,314,554 $ 808,717
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,826,337 2,540,304 2,149,606
Provision for deferred rent - - 9,554
Equity in loss of Magic - - 7,250
Equity in loss of unconsoliated affiliates 176,896 - -
Loss on default in pooled loans 409,016 - 67,963
Cure of default in pooled loans - (423,900) -
(Gain) loss on disposition of assets 5,786 20,150 (41,498)
Loss on sale of investments held for sale - 134,766 -
Gain on life insurance settlement - - (875,533)
Loss on restaurant closings 24,910 63,398 23,747
Minority interest in Operating Partnerships 211,300 172,062 (122,805)
Gain on sale of restaurants - (196,608) -
Unit compensation expense 54,385 13,952 -
Net change in operating assets and liabilities:
Accounts receivable (61,650) 6,366 (121,199)
Due from affiliates 3,704 20,198 (16,525)
Inventories 3,584 30,329 (26,398)
Prepaid expenses (37,594) 16,746 204,523
Deposit with affiliate - (35,000) -
Accounts payable (106,418) 378,601 (1,692,680)
Due to affiliates 46,767 (114,334) 173,306
Accrued payroll and other taxes 148,666 114,669 248,360
Accrued liabilities 184,125 (100,100) 35,092
Other, net 151,557 169,344 6,151
---------- ---------- ----------
Net cash provided by operating activities 5,413,495 4,125,497 837,631
Investing activities:
Investment in Magic prior to consolidation - - (390,000)
Purchase of minority interest in Magic (2,500,000) - -
Investment in unconsolidated affiliates (341,952) - -
Net cash from consolidation of affiliate - - 56,061
Proceeds from sale of investments held for sale - 42,310 -
Additions to property and equipment (2,239,355) (1,378,400) (2,626,566)
Proceeds from sale of property and equipment 6,538 209,118 518,641
Proceeds from sale of restaurants - 717,639 -
Purchase of franchise rights - (15,000) -
Collections of notes receivable from affiliates 14,151 17,229 35,574
Other, net - (35,610) -
---------- ---------- ----------
Net cash used in investing activities (5,060,618) (442,714) (2,406,290)
Financing activities:
Proceeds from long-term borrowings 5,105,739 3,129,500 13,394,950
Payments on long-term borrowings (3,278,852) (4,707,728) (10,466,003)
Payments on capital lease obligations (384,942) (47,515) (36,689)
Proceeds from life insurance settlement - - 1,039,747
Distributions to Partners (1,389,302) (1,548,720) (1,195,031)
Contribution of capital in Magic
from minority partners - - 94,200
Proceeds from issuance of Class B and C units 1,395 68,213 -
Repurchase of units (290,911) (147,598) (1,429,896)
General Partners' distributions
from Operating Partnerships (15,221) (16,429) (12,071)
Minority interests' distributions
from Operating Partnerships (54,750) - -
---------- ---------- ----------
Net cash provided by (used in)
financing activities (306,844) (3,270,277) 1,389,207
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 46,033 412,506 (179,452)
Cash and cash equivalents at beginning of period 742,452 329,946 509,398
---------- ---------- ----------
Cash and cash equivalents at end of period $ 788,485 $ 742,452 $ 329,946
========== ========== ==========
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
ORGANIZATION
American Restaurant Partners, L.P. was formed in connection with a
public offering of Class A Income Preference Units in 1987 and owns a
99% limited partnership interest in American Pizza Partners, L.P.
(APP). The remaining 1% of American Pizza Partners, L.P. is owned by
RMC Partners, L.P. and RMC American Management, Inc. (RAM) as the
general partners.
On March 13, 1996, APP purchased a 45% interest in a newly formed
limited partnership, Oklahoma Magic, L.P. (Magic), that owns and
operates twenty-six Pizza Hut restaurants in Oklahoma. Effective
August 11, 1998, APP's interest in Magic increased from 45% to 60% in
connection with Magic's purchase of a 25% interest from a former
limited partner. On July 26, 2000, APP purchased 39% of Magic from
Restaurant Management Company of Wichita, Inc. (the Management
Company) bringing their interest in Magic to 99%. The remaining 1%
interest in Magic is held by RAM, the managing general partner.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of American Restaurant Partners, L.P. and its majority owned
subsidiaries, American Pizza Partners, L.P. and APP Concepts, L.C.
The Partnership also began consolidating the accounts of Magic
effective August 11, 1998. American Restaurant Partners, L.P., APP,
APP Concepts, L.C. and Magic are hereinafter collectively referred to
as the Partnership. All significant intercompany transactions and
balances have been eliminated. The Partnership accounted for its
investment in Oklahoma Magic, L.P. using the equity method of
accounting prior to the increase in their ownership from 45% to 60%.
FISCAL YEAR
The Partnership operates on a 52 or 53 week fiscal year ending on the
last Tuesday in December.
EARNINGS PER PARTNERSHIP UNIT
Basic earnings per Partnership unit are computed based on the
weighted average number of Partnership units outstanding. For
purposes of diluted computations, the number of Partnership units
that would be issued from the exercise of dilutive Partnership unit
options has been reduced by the number of Partnership units which
could have been purchased from the proceeds of the exercise at the
average market price of the Partnership's units or the price of the
Partnership's units on the exercise date.
OPERATIONS
All of the restaurants owned by the Partnership are operated under a
franchise agreement with Pizza Hut, Inc., the franchisor. The
agreement grants the Partnership exclusive rights to develop and
operate restaurants in certain franchise territories. The
Partnership operates restaurants in Georgia, Louisiana, Montana,
Texas, Wyoming and Oklahoma.
A schedule of restaurants in operation for the periods presented in
the accompanying consolidated financial statements is as follows:
2000 1999 1998
---- ---- ----
American Pizza Partners, L.P.
- -----------------------------
Restaurants in operation at beginning of period 61 62 63
Opened -- -- 1
Closed (1) -- (2)
Sold -- (1) --
--- --- ---
Restaurants in operation at end of period 60 61 62
=== === ===
Oklahoma Magic, L.P.
- --------------------
Restaurants in operation at beginning of period 26 27 27
Closed -- (1) --
--- --- ---
Restaurants in operation at end of period 26 26 27
=== === ===
INVENTORIES
Inventories consist of food and supplies and are stated at the lower
of cost (first-in, first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the related
assets. Leasehold improvements are amortized over the life of the
lease or improvement, whichever is shorter.
The estimated useful lives used in computing depreciation and
amortization are as follows:
Buildings 10 to 30 years
Restaurant equipment 3 to 7 years
Leasehold rights and improvements 5 to 20 years
Expenditures for maintenance and repairs are charged to operations as
incurred. Expenditures for renewals and betterments, which
materially extend the useful lives for assets or increase their
productivity, are capitalized. Depreciation expense was $2,345,383,
$2,036,396, and $1,795,783 for the years ended December 26, 2000,
December 28, 1999 and December 29, 1998, respectively.
AMORTIZATION OF GOODWILL
Goodwill resulting from APP's investment in Magic is being amortized
over 29 years using the straight-line method.
The Partnership reviews goodwill to assess recoverability from future
operations using undiscounted cash flows. Impairments are recognized
in operating results when the carrying value exceeds undiscounted
future cash flows.
INVESTMENTS IN AFFILIATES
Investments in affilated entities owned less than 50% are accounted
for on the equity method. Accordingly, consolidated net income
includes the Partnership's share of their net income or loss.
FRANCHISE RIGHTS AND FEES
Agreements with the franchisor provide franchise rights for a period
of 20 years and are renewable at the option of the Partnership for an
additional 15 years, subject to the approval of the franchisor.
Initial franchise fees are capitalized and amortized by the straight-
line method over periods not in excess of 30 years. Periodic
franchise royalty and advertising fees, which are based on a percent
of sales, are charged to operations as incurred.
CONCENTRATION OF CREDIT RISKS
The Partnership's financial instruments that are exposed to
concentration of credit risks consist primarily of cash and accounts
receivable. The Partnership places its funds into high credit
quality financial institutions and, at times, such funds may be in
excess of the Federal Depository insurance limit. The Partnership
generally does not require collateral against accounts receivable.
Credit risks associated with the majority of customer sales are
minimal as such sales are primarily for cash. All notes receivable
from affiliates are supported by the guarantee of the majority owner
of the Partnership.
INCOME TAXES
The Partnership is not subject to federal or state income taxes and,
accordingly, no provision for income taxes has been reflected in the
accompanying consolidated financial statements. Such taxes are the
responsibility of the partners based on their proportionate share of
the Partnership's taxable earnings.
Due to differences in the rules related to reporting income for
financial statement purposes and for purposes of income tax returns
by individual limited partners, the tax information sent to
individual limited partners differs from the information contained
herein. At December 26, 2000, the Partnership's reported amount of
its net assets for financial statement purposes were more than the
income tax bases of such net assets by approximately $767,000. The
differences between net income in conformance with accounting
principles generally accepted in the United States of America (US
GAAP) and taxable income (loss) are as follows:
2000 1999 1998
---- ---- ----
US GAAP net income $1,372,124 $1,314,554 $ 808,717
Depreciation and amortization 153,712 36,348 (133,606)
Capitalized leases (11,750) (59,601) 163,641
Equity in earnings
(loss) of affiliate 89,127 (274,257) (751,845)
Loss on restaurant closings (1,750) (42,149) (190,972)
Gain (loss) on disposition
of assets 7,051 437,316 (36,642)
Unicap adjustment 1,830 4,731 (70,985)
Non-taxable life
insurance proceeds - - (866,778)
Loss on default of pooled loans 313,465 - -
Other 23,139 147,371 32,295
--------- --------- ---------
Taxable income (loss) $1,946,948 $1,564,313 $(1,046,175)
========= ========= =========
The Omnibus Budget Reconciliation Act of 1987 required public limited
partnerships to become taxable entities beginning in 1998. After
considering various alternatives, the Partnership delisted from the
American Stock Exchange effective November 13, 1997 and now limits
trading of its units. As a result, the Partnership continues to be
taxed as a partnership rather than being taxed as a corporation.
ADVERTISING COSTS
Advertising production and media costs are expensed as incurred.
USE OF ESTIMATES
In preparing the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of
America, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
CASH EQUIVALENTS
For purposes of the statements of cash flows, the Partnership
considers all highly liquid debt instruments, purchased with a
maturity of three months or less, to be cash equivalents.
ACCOUNTING FOR UNIT BASED COMPENSATION
The Partnership uses the intrinsic value-based method for measuring
unit-based compensation cost which measures compensation cost as the
excess, if any, of the quoted market price of Partnership units at
the grant date over the amount the employee must pay for the units.
Required pro forma disclosures of compensation expense determined
under the fair value method have not been presented as there are no
material unvested options and no options have been granted in 2000,
1999 or 1998.
INVESTMENTS AVAILABLE-FOR-SALE
Investments available-for-sale are carried at fair value, with the
unrealized gains and losses reported as comprehensive income.
Realized gains and losses and declines in value judged to be other-
than-temporary on available-for-sale securities are included in other
income. The cost of securities sold is based on the specific
identification method. Interest and dividends on securities
classified as available-for-sale are included in other income.
EFFECT OF NEW 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
December 26, 2000, the Partnership does not have any derivative
instruments.
RECLASSIFICATIONS
Certain amounts shown in the 1999 consolidated financial statements
have been reclassified to conform with the 2000 presentation.
2. RELATED PARTY TRANSACTIONS
--------------------------
The Partnership has entered into a management services agreement with
RAM whereby RAM is responsible for management of the restaurants for
a fee equal to 7% for APP, and 4.5% for Magic, of the gross receipts
of the restaurants, as defined. RAM has entered into a management
services agreement containing substantially identical terms and
conditions with Restaurant Management Company of Wichita, Inc. (the
Management Company).
Affiliates of the Management Company provide various other services
for the Partnership including promotional advertising. In addition
to participating in advertising provided by the franchisor, an
affiliated company engages in promotional activities to further
enhance restaurant sales. The affiliate's fees for such services are
based on the actual costs incurred and principally relate to the
reimbursement of print and media costs. In exchange for advertising
services provided directly by the affiliate, the Partnership pays a
commission based upon 15% of the advertising costs incurred. Such
costs were not significant in 2000, 1999 or 1998.
The Partnership maintains a deposit with the Management Company equal
to approximately one and one-half month's management fee. Such
deposit, $485,000 at December 26, 2000 and December 28, 1999 may be
increased or decreased at the discretion of RAM.
The Management Company maintains an incentive bonus plan whereby
certain employees are eligible to receive bonus payments if specified
management objectives are achieved. Such bonuses are not greater
than 15% of the amount by which the Partnership's cash flow exceeds
threshold amounts as determined by management. Bonuses paid under
the plan are reimbursed to the Management Company by the Partnership.
The Partnership owns a 25% interest in a limited liability company
(LLC) which owns an airplane. The Management Company leases the
airplane from the LLC on an hourly basis. The Partnership recorded
a loss of $156,398 on the LLC. The Partnership also owns a 4.34%
interest in Seaside Pizza, LLC (Seaside), a company formed to acquire
eleven Pizza Hut restaurants in December 2000. Certain Partnership
principal unitholders are also owners of Seaside. The Partnership's
share of Seaside's income is not significant for the year ended
December 26, 2000.
Transactions with related parties included in the accompanying
consolidated financial statements and notes are summarized as
follows:
2000 1999 1998
---- ---- ----
Management fees $3,738,150 $3,582,943 $2,894,911
Management Company bonuses 510,641 322,308 226,522
Advertising commissions 96,592 77,702 75,745
Accommodation fee (See Note 3) 94,982 98,710 70,775
Acquisition/divestiture fee
on sale of assets 15,000 35,850 -
The Partnership has made advances to various affiliates under notes
receivable which bear interest at market rates. The advances are to
be received in varying installments with maturities as follows: 2001
- - $15,221; 2002 - $22,019; 2003 - $17,384; 2004 - $10,219; 2005 -
$9,001; Thereafter - $7,488. All such notes are guaranteed by the
majority owner of the Partnership. In addition, the Partnership has
certain other amounts due from and to affiliates which are on a
noninterest bearing basis.
3. LONG-TERM DEBT
--------------
Long-term debt consists of the following at December 26, 2000 and
December 28, 1999:
2000 1999
---- ----
Notes payable to INTRUST Bank in Wichita,
payable in monthly installments
aggregating $138,865, including interest
at variable rates from 8.5% to 10.00%,
due at various dates through July 2005 $ 8,707,682 $ 5,933,513
Notes payable to Franchise Mortgage
Acceptance Company (FMAC) payable
in monthly installments aggregating
$259,491, including interest at fixed
rates from 8.81% to 10.95%, due
at various dates through May 2013 18,098,354 19,167,158
Notes payable to CNL Financial
Services, Inc. payable in monthly
installments aggregating
$16,844, including interest at
a fixed rate of 9.62%,
through July 2019 1,747,048 1,779,406
Notes payable to Peachtree Franchise
Finance, LLC payable in monthly
installments aggregating
$11,854 including interest at
a fixed rate of 10.05%, due
June 2015 1,083,813 -
Notes payable to Hospitality Group
of Oklahoma, Inc., payable
in quarterly installments of
$41,397 including interest at
a fixed rate of 8.00%, due at
various dates through August 2003
(notes were repaid during 2000) - 478,963
Notes payable to various banks,
payable in monthly installments
aggregating $5,374, including
interest at rates from 9.00%
to 10.00%, due at various
dates through January 2010 248,396 290,350
---------- ----------
29,885,293 27,649,390
Less current portion 2,763,409 2,396,678
---------- ----------
$27,121,884 $25,252,712
========== ==========
Certain refinancing with FMAC required the Management Company to act
as Accommodation Maker and execute the promissory notes and security
agreements as borrower, enabling APP to obtain a lower interest rate
and favorable borrowing terms. In return, APP must pay the
Management Company an annual fee equal to 1% of the outstanding loan
balance, determined as of the first day of each calendar quarter,
payable in advance.
Certain borrowings through FMAC are part of loans "pooled" together
with other franchisees in good standing and approved restaurant
concepts, as defined, and sold to the secondary market. The
Partnership has provided to FMAC a limited, contingent guarantee
equal to 13% of the original loan balance for APP and 15% of the
original loan balance for Magic ($507,222 at December 26, 2000),
referred to as the "Performance Guarantee Amount" (PGA). The
Partnership promises to pay to FMAC up to the total of the PGA to the
extent required to cover delinquent loans or defaults in the
"pooled" loans. Each month, the Partnership pays to FMAC a
"Periodic Guarantee Charge Amount" (PGCA) which is the monthly
amortization of the PGA. If none of the other loans in the "pool"
are delinquent in respect of any payment due or in default during a
monthly period, the Partnership is entitled to a rebate of the PGCA.
To the extent that the other loans in the "pool" are delinquent or
in default, the amount of the PGCA rebate will be reduced
proportionately. At December 26, 2000 and December 29, 1998, certain
loans within the Partnership's "pool" were in default. This
resulted in the Partnership recording expense of $409,016 and
$67,963, during 2000 and 1998, respectively, representing the
Partnership's total liability for these defaulted loans under the
PGA. During the year ended December 28, 1999 certain loans within
the Partnership's "pool" that had been in default at December 29,
1998 were cured. This resulted in the Partnership writing off the
remaining $423,900 of its liability for these formerly defaulted
loans under the PGA. The PGA remains in effect until the loans are
discharged, prepaid, accelerated, or mature, as defined in the
secured promissory note.
All borrowings are secured by substantially all land, buildings, and
equipment of the Partnership. In addition, all borrowings, except
for the FMAC loans are supported by the guarantee of the majority
owner of the Partnership.
Future annual long-term debt maturities, exclusive of capital lease
commitments over the next five years are as follows: 2001 -
$2,736,409; 2002 - $3,639,290; 2003 - $4,488,285; 2004 - $3,012,320
and 2005 - $3,443,646.
4. LEASES
------
The Partnership leases land and buildings for various restaurants
under both operating and capital lease arrangements. Initial lease
terms normally range from 5 to 20 years with renewal options
generally available. The leases are net leases under which the
Partnership pays the taxes, insurance, and maintenance costs, and
they generally provide for both minimum rent payments and contingent
rentals based on a percentage of sales in excess of specified
amounts.
Minimum and contingent rent payments for land and buildings leased
from affiliates were $30,250 for each of the years ended December 26,
2000, December 28, 1999, and December 29, 1998.
The Partnership also leases point-of-sale terminals for the
restaurants under capital lease arrangements. The leases contain
initial lease terms ranging from 3 to 4 years and are guaranteed by
the majority owner of the Partnership.
Total minimum and contingent rent expense under all operating lease
agreements was as follows:
2000 1999 1998
---- ---- ----
Minimum rentals $1,271,774 $1,263,873 $904,665
Contingent rentals 277,858 231,070 147,673
Future minimum payments under capital leases and noncancelable
operating leases with an initial term of one year or more at December
26, 2000, are as follows:
Operating
Leases With Operating
Capital Unrelated Leases With
Leases Parties Affiliates
------ ------- ----------
2001 $ 788,149 $1,053,966 $ 30,250
2002 647,578 900,767 7,563
2003 532,609 768,183 -
2004 239,825 609,307 -
2005 245,889 466,740 -
Thereafter 1,348,888 1,457,209 -
--------- --------- ------
Total minimum payments 3,802,938 $5,256,172 $ 37,813
Less interest 1,231,230 ========= ======
---------
2,571,708
Less current portion 545,381
---------
$2,026,327
=========
Amortization of property under capital leases, determined on the
straight-line basis over the lease terms totaled $360,575, $82,149
and $106,677 for the years ended December 26, 2000, December 28,
1999, and December 29, 1998, respectively. The amortization is
included in depreciation and amortization expense in the accompanying
consolidated statements of income. The cost of property under
capital leases was $3,538,902 at December 26, 2000 and $2,077,751 at
December 28, 1999. Accumulated amortization on such property under
capital leases was $1,536,644 and $1,176,069 at December 26, 2000
and December 28, 1999, respectively.
5. LIMITED PARTNERSHIP UNITS
-------------------------
The Partnership has three classes of Partnership Units outstanding,
consisting of Class A Income Preference, Class B, and Class C Units.
The Units are in the nature of equity securities entitled to
participate in cash distributions of the Partnership on a quarterly
basis at the discretion of RAM, the General Partner. In the event
the Partnership is terminated, the Unitholders will receive the
remaining assets of the Partnership after satisfaction of Partnership
liability and capital account requirements.
6. DISTRIBUTIONS TO PARTNERS
-------------------------
On January 2, 2001, the Partnership declared a distribution of $.10
per Unit to all Unitholders of record as of January 12, 2001. The
distribution is not reflected in the December 26, 2000 consolidated
financial statements.
7. UNIT OPTION PLAN
----------------
The Partnership, RAM, and the Management Company adopted a Class A
Unit Option Plan (the Plan) pursuant to which 75,000 Class A Units
are reserved for issuance to employees, including officers of the
Partnership, RAM, and the Management Company. The Plan is
administered by the Managing General Partner which will, among other
things, designate the number of Units and individuals to whom options
will be granted. Participants in the Plan are entitled to purchase a
designated number of Units at an option price equal to the fair
market value of the Unit on the date the option is granted. Units
under option are exercisable over a three-year period with 50%
exercisable on the date of grant and 25% exercisable on each of the
following two anniversary dates. The term of options granted under
the Plan will be determined by the Managing General Partner at the
time of issuance (not to exceed ten years) and will not be
transferable except in the event of the death of the optionee, unless
the Managing General Partner otherwise determines and so specifies in
the terms of the grant. Units covered by options which expire or are
terminated will again be available for option grants.
A summary of Units under options in the Plan is as follows:
Units Option Price
----- ------------
Balance at December 29, 1998,
December 28, 1999 and
December 26, 2000 625 $8.50
At December 26, 2000, options on 625 Units were exercisable. Unit
options available for future grants totaled 48,611 at December 26,
2000 and December 28, 1999.
8. SALE OF RESTAURANT
------------------
In December 1999, the Partnership sold substantially all the assets,
including land and building, of one restaurant. The Partnership
recognized a gain of $196,608 on the sale.
9. LIFE INSURANCE SETTLEMENT
-------------------------
During 1998, the Partnership collected on a life insurance policy
purchased in 1993 on one of its original investors. This investor
owned approximately 438,600 Class B and C units. The policy was
purchased with the intent of providing the Partnership a means of
repurchasing his units upon his death if his heirs so desired. The
investor died in May of 1998. The Partnership recognized a gain of
$875,533 upon receipt of the insurance proceeds. The units were
repurchased on December 29, 1998 at $2.55 per unit for a total
purchase price of $1,118,430.
10. CLASS B AND C RESTRICTED UNITS SOLD TO EMPLOYEES
------------------------------------------------
During 2000 and 1999, the Partnership issued 5,000 and 437,500 Class B
and C Units, respectively, at $2.79 and $2.55 per unit, respectively,
to certain employees in exchange for either a 10% down payment and
notes receivable for the remaining 90% of the purchase price or for
notes receivable for 100% of the purchase price. Notes receivable
representing 40% or 50%, respectively, of the purchase price, together
with interest thereon at a rate of 9%, will be repaid by the cash
distributions paid on the units. Non-interest bearing notes receivable
representing the remaining 50% of the purchase price will be reduced
over a 4 1/2 year period through annual charges to compensation
expense, included under the caption of "General and administrative -
other" in the accompanying statements of income, as long as the
employee remains employed by the Company. The units are subject to a
repurchase agreement whereby the Partnership has agreed to repurchase
the Units in the event the employee is terminated for an amount equal
to the greater of issue price or fair market value at the time of
termination.
11. PARTNERS' CAPITAL
-----------------
During 2000, 1999 and 1998, the Partnership purchased 82,728, 24,144,
and 304 Class A Income Preference Units for $268,866, $78,202 and
$1,269, respectively. These Units were retired by the Partnership.
12. INVESTMENT IN MAGIC
-------------------
On March 13, 1996, the Partnership purchased a 45% interest in Magic,
a newly formed limited partnership, for $3.0 million in cash. Magic
owns and operates twenty-six Pizza Hut restaurants in Oklahoma. In
August 1998, Magic purchased a 25% interest in Magic from a former
limited partner which effectively increased the Partnership's
interest in Magic from 45% to 60%. Therefore, beginning August 11,
1998, Magic's financial statements were consolidated into the
Partnership's consolidated financial statements. Prior to August 11,
1998, the Partnership accounted for its investment in Magic using the
equity method of accounting. In connection with the consolidation,
the Partnership recorded goodwill of $728,000 which represented the
excess purchase price of the original equity investment in the net
assets acquired, net of subsequent amortization.
On July 26, 2000, APP purchased 39% of Magic from the Management
Company for $2,500,000 cash and contingent consideration of $700,000.
The $2,500,000 cash payment was financed by INTRUST Bank over five
years at 9.5%. The contingent consideration will become due in the
event that Magic's cash flow (determined on a 12 month trailing
basis) exceeds $2.6 million at any time between January 1, 2001 and
December 31, 2005. Payment of the remaining balance shall be made in
Class B and Class C Units of the Partnership. In the event that
Magic's cash flow does not reach this cash flow goal on or prior to
December 31, 2005, APP shall owe no additional consideration. Upon
completion of this purchase, the Partnership owns 99% of Magic. The
Management Company is considered a related party in that one
individual has controlling interest in both the Management Company
and the Partnership's general partner. To the extent that the
Partnership and the Management Company have common ownership, the
transaction was recorded at the Management Company's historical cost.
As a result of the transaction, the Partnership recorded goodwill of
$$1,407,991 and cost in excess of carrying value of assets acquired
of $534,962.
Condensed financial information for Magic accounted for under the
equity method of accounting through August 10, 1998 is as follows:
(Unaudited)
For the 32
weeks ended
August 10,
1998
-----------
Statement of Operations:
Revenues $10,087,820
Cost of sales 2,578,865
Operating expenses 7,071,979
----------
Operating income 436,976
Other expense
(principally interest) 453,087
----------
Net loss $ (16,111)
==========
The proforma unaudited results of operations for the year ended
December 29, 1998, assuming the increase in the Partnership's
interest in Magic from 45% to 60% occurred as of December 31, 1997,
are as follows:
(Unaudited)
December 29,
1998
------------
Net sales $53,631,453
Net income 806,324
Net income per Partnership unit $ 0.20
13. MAJOR SUPPLIER
--------------
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. McLane Company, Inc., a subsidiary of Wal-Mart
Stores, Inc., completed the purchase of AmeriServe's U.S.
distribution business on November 30, 2000. As part of the sale, the
Partnership agreed to a two-year contract extension and will incur a
5% increase in distribution fees.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amount reported on the balance sheets for all financial
instruments including cash and cash equivalents, notes receivable,
and debt instruments approximates their fair value.
15. QUARTERLY FINANCIAL DATA (unaudited)
------------------------------------
Unaudited quarterly consolidated statement of income information for
the years ended December 26, 2000 and December 28, 1999 is summarized
below:
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
2000
- ----
Net sales $14,799,542 $14,690,511 $15,088,559 $15,926,141
Income from
operations 1,366,166 1,252,186 1,150,891 1,408,962
Net income 436,491 445,259 319,505 170,869
Basic and diluted
net income per
Partnership unit 0.11 0.12 0.09 0.05
1999
- ----
Net sales $14,441,585 $14,334,285 $14,602,367 $14,441,978
Income from
operations 950,810 1,120,209 938,556 979,925
Net income 188,644 317,549 53,070 755,291
Basic and diluted
net income per
Partnership unit 0.06 0.09 0.01 0.21
Fourth quarter 2000 net income includes a $409,016 loss on default in
pooled loans. Fourth quarter 1999 net income includes a $423,900
cure of default in pooled loans. The loss on default and cure of
default in pooled loans were recorded in the quarter the Partnership
received notification from FMAC. (See Note 3)
16. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
2000 1999 1998
---- ---- ----
Cash paid during the year
for interest $3,050,092 $2,906,241 $2,485,044
Noncash investing and
financing activity:
Issuance of units for
notes receivable 12,555 1,047,000 -
Distributions offset against
notes receivable 117,551 77,024 -
Unit repurchases offset
against notes receivable 47,705 - -
Capital leases entered into 1,461,151 - -
Reduction of notes
receivable recorded as
compensation expense 54,385 13,952 -
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 2, 2001, accompanying the
consolidated financial statements included in the Annual Report
of American Restaurant Partners, L.P. on Form 10-K for the year
ended December 26, 2000. We hereby consent to the incorporation
by reference of said report in the Registration Statement of
American Restaurant Partners, L.P. on Form S-8 (No. 33-20784).
/s/Grant Thornton LLP
Wichita, Kansas
March 2, 2001