-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qn7eL7ABEK+6A7Dr0sGgA9qGiNI5NWsI4b09eKveHxL6eIAcutppQZz72QRBPnYR 5++pr7OUrv7vKqCpdoSiWA== 0000817900-00-000003.txt : 20000328 0000817900-00-000003.hdr.sgml : 20000328 ACCESSION NUMBER: 0000817900-00-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991228 FILED AS OF DATE: 20000327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RESTAURANT PARTNERS L P CENTRAL INDEX KEY: 0000817900 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 481037438 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09606 FILM NUMBER: 578759 BUSINESS ADDRESS: STREET 1: 555 N WOODLAWN STE 3102 CITY: WICHITA STATE: KS ZIP: 67208 BUSINESS PHONE: 3166845119 MAIL ADDRESS: STREET 1: 555 N WOODLAWN STREET 2: SUITE 3102 CITY: WICHITA STATE: KS ZIP: 67208 10-K 1 1999 10-K 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 28, 1999 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, 2000 the aggregate market value of the income preference units held by non-affiliates of the registrant was $2,561,215. 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 is held by Restaurant Management Company of Wichita, Inc. (the Management Company). APP and Magic are collectively referred to as the "Operating Partnerships". As of December 28, 1999, the Partnership owned and operated a total of 87 restaurants (collectively, the "Restaurants"). APP owned and operated 53 traditional "Pizza Hut" restaurants, 5 "Pizza Hut" delivery/carryout facilities and 3 dualbrand locations. During 1999, APP sold one "Pizza Hut" restaurant. Magic owned and operated 17 traditional "Pizza Hut" restaurants and 9 "Pizza Hut" delivery/carryout facilities. Magic closed one "Pizza Hut" delivery/carryout unit upon expiration of its lease during 1999. The following table sets forth the states in which the Partnership's Pizza Hut Restaurants are located: Units Units Units Units Open At Sold in Closed in Open At 12-29-98 1999 1999 12-28-99 -------- ------- --------- -------- Georgia 8 -- -- 8 Louisiana 1 -- -- 1 Montana 19 -- -- 19 Texas 26 1 -- 25 Wyoming 8 -- -- 8 Oklahoma 27 -- 1 26 --- --- --- --- Total 89 1 1 87 === === === === 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, PHI has become the world's largest pizza restaurant chain in terms of both sales and number of restaurants. As of year-end 1999, there were over 8,000 units in the United States and more than 3,000 units located outside the United States in 87 countries. PHI owns and operates approximately 29% of the restaurants in the United States and 20% 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. Food products not prescribed by PHI may only be offered with the prior express approval of PHI. PHI maintains a research and development department which 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 one-story brick building with 1,800 to 3,000 square feet, including kitchen and storage areas, and features a distinctive red roof. Seating capacity ranges from 75 to 140 persons and the typical property site will accommodate parking for 30 to 70 automobiles. 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. Effective January 1, 1996 through December 31, 1997, PHI and the members of IPHFHA agreed to decrease their contribution to the co-ops by 0.5% to 1.5% of gross sales and increase their national dues by 0.5% to 2.5% of gross sales. Effective January 1, 1998, PHI and the members of IPHFHA agreed to change both the contributions to the co-ops and national dues back to 2% of gross sales. 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. The Partnership entered into a five-year exclusive food and supplies distribution agreement with AmeriServe Food Distribution, Inc. ("AmeriServe") effective January 1, 1999. The initial term of the agreement will expire December 31, 2003. Thereafter, the agreement may 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 results in a reduction in the distribution costs incurred by the Partnership. Ameriserve acquired PFS in July 1997 and has been providing substantially all of the distribution services to the Partnership through its PFS relationship since the acquisition. 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 2000 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, 2000, the Partnership did not have any employees. The Operating Partnerships had approximately 1,950 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. Employees at one of the Restaurants were covered by a collective bargaining agreement through July 7, 1997. The employees at this restaurant voted to decertify as of that date. The Restaurants are managed by employees of the Management Company which has its principal offices in Wichita, Kansas. The Management Company has a total of 36 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 28, 1999. Leased From Leased From Unrelated Third Affiliate of the Parties General Partners Owned Total ------- ---------------- ----- ----- Georgia 1 - 7 8 Louisiana - - 1 1 Montana 9 - 10 19 Texas 15 - 10 25 Wyoming 1 1 6 8 -- -- -- -- Total APP 26 1 34 61 == == == == 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. Two leases with initial terms of less than five years contain renewal options extending through at least 2001. Management believes leases with shorter terms 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 28, 1999. Leased From Unrelated Third Leased From Parties Affiliate Total ------- --------- ----- Oklahoma 24 2 26 -- -- -- Total Magic 24 2 26 == == == Most of the properties including the two 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. One lease with an initial term of less than five years contains renewal options through 2002. In addition to the operating restaurants above, Magic has remaining lease obligations on two closed restaurants. Both of these leases expire during 2000. 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 one-story brick building with 1,800 to 3,000 square feet, including kitchen and storage areas, and features a distinctive red roof. Seating capacity ranges from 75 to 140 persons and the typical property site will accommodate parking for 30 to 70 automobiles. 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 a restaurant facility are approximately $150,000 for land, $250,000 for the building and $135,000 for equipment and furnishings. Land costs can vary materially depending on the location of the site. Delivery/carryout facilities vary in size and appearance. These facilities are generally leased from unrelated third parties. Item 3. Legal Proceedings - -------------------------- As of December 28, 1999, 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. Market prices for units during 1999 and 1998 were: Calendar Period High Low - ----------------------------------------------------- 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 1998 - ---- First Quarter $2.75 $1.90 Second Quarter 2.60 2.25 Third Quarter 2.80 2.60 Fourth Quarter 2.80 2.70 As of December 28, 1999, approximately 1,100 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 - ------------------------------------------------------------- 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 ==== Per Record Date Payment Date Unit - ------------------------------------------------------------- 1998 - ---- January 12, 1998 January 30, 1998 $0.05 April 13, 1998 May 1, 1998 0.05 July 13, 1998 July 31, 1998 0.10 October 12, 1998 October 30, 1998 0.10 ---- Cash distributed during 1998 $0.30 ==== 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 28, December 29, December 30, December 31, December 26, 1999 1998 (d) 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ Income statement data: Net sales $ 57,820 $ 43,544 $ 38,977 $ 40,425 $ 40,004 Income from operations 3,990 2,443 433 3,076 3,890 Net income (loss) 1,315 809 (1,993) 1,584 2,481 Net income (loss) per Partnership unit 0.37 0.20 (0.50) 0.40 0.63 Balance sheet data: Total assets $ 29,625 $ 30,703 $ 22,226 $ 23,745 $ 16,134 Long-term debt 28,078 29,630 20,005 18,859 10,525 Obligations under capital leases 1,495 1,543 1,645 1,665 1,732 Partners capital (deficiency): General Partners (9) (8) (8) (5) (3) Class A 5,395 5,543 5,624 6,295 6,573 Class B and C (9,252) (10,058) (8,322) (5,811) (4,688) Notes receivable from employees (956) - - - (6) Cost in excess of carrying value of assets acquired (1,324) (1,324) (1,324) (1,324) (1,324) Cumulative comprehensive (loss) income - (108) 19 (44) - Cash dividends declared per unit 0.45 0.30 0.32 0.74 0.74 Statistical data: Capital expenditures: (b) Existing Restaurants $ 1,078 $ 2,465 $ 889 $ 2,612 $ 1,185 New Restaurants 300 162 935 4,136 - Average weekly sales per Restaurant: (c) Red Roof 12,683 11,918 11,813 12,544 12,862 Delivery/carryout facility/C-store 11,657 10,508 8,160 10,547 12,463 Restaurants in operation at end of period 87 89 63 67 60
NOTES TO SELECTED FINANCIAL DATA (a) Net earnings are 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 28, 1999, December 29, 1998 and December 30, 1997. 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 Operations as well as proforma results of operations assuming the Partnership's interest in Magic increased to 60% as of January 1, 1997. The proforma results are shown in order to provide a more meaningful basis for a comparative discussion of the years ended December 28, 1999, December 29, 1998 and December 30, 1997.
Historical Proforma (1) ------------------------------------ ----------------------- 1999 1998 1997 1998 1997 ------------------------------------ ----------------------- Net sales $ 57,820,215 $43,543,633 $38,977,341 $53,631,453 $54,689,655 Operating costs and expenses: Cost of sales 15,355,713 11,710,209 10,586,372 14,289,075 14,895,268 Restaurant labor and benefits 16,899,475 12,500,842 11,043,688 15,522,283 15,939,414 Advertising 3,766,662 2,844,451 2,511,470 3,595,040 3,827,444 Other restaurant operating expenses exclusive of depreciation and amortization 10,834,915 8,337,961 7,691,831 10,656,012 11,382,741 General and administrative: Management fees 3,582,943 2,894,911 2,710,449 3,348,863 3,261,044 Other 787,305 631,999 371,443 761,827 601,017 Depreciation and amortization 2,540,304 2,149,606 2,078,061 2,664,692 2,907,574 Loss (gain) on restaurant closings 63,398 23,747 792,219 (93,220) 1,577,018 Equity in loss of affiliate - 7,250 758,383 - - ---------------------------------------------------------- Income from operations 3,989,500 2,442,657 433,425 2,886,881 298,135 Interest income 25,994 29,783 29,350 29,783 29,350 Interest expense (2,590,720) (2,662,061) (2,476,304) (3,115,146) (3,267,918) 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 - - - - ---------------------------------------------------------- (2,502,884) (1,756,745) (2,446,954) (2,209,830) (3,238,568) Income (loss) before minority interest 1,486,616 685,912 (2,013,529) 677,051 (2,940,433) 33) Minority interest in income (loss) of Operating Partnerships (172,062) 122,805 20,135 129,273 696,778 ---------------------------------------------------------- Net income (loss) $ 1,314,554 $ 808,717 $(1,993,394)$ 806,324 $(2,243,655) ========================================================== (1) The proforma statements of operations for 1998 and 1997 include consolidation of Magic as if the Partnership's interest in Magic increased to 60% as of January 1, 1997.
Net Sales - --------- 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. Proforma net sales for the year ended December 29, 1998 decreased $1,059,000 or 1.9%, from $54,690,000 for the year ended December 30, 1997 to $53,631,000 for the year ended December 29, 1998. This decrease was entirely attributable to restaurants closed in 1997 as comparable restaurants sales increased 4.4%. Income From Operations - ---------------------- 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. Proforma income from operations for the year ended December 29, 1998 increased $2,589,000 from $298,000 to $2,887,000, an 868.8% increase over the year ended December 30, 1997. As a percentage of proforma net sales, proforma income from operations increased from 0.5% in 1997 to 5.4% in 1998. Proforma cost of sales decreased as a percentage of proforma net sales from 27.2% in 1997 to 26.6% of proforma net sales in 1998. Proforma labor and benefits expense decreased from 29.1% of proforma net sales in 1997 to 28.9% of proforma net sales in 1998 despite the minimum wage increase that took effect September 1, 1997. These margin improvements are the result of continued diligent follow-up and focus on efficiencies in the restaurants. Advertising decreased as a percentage of proforma net sales from 7.0% in 1997 to 6.7% in 1998. Other restaurant operating expenses decreased from 20.8% of proforma net sales in 1997 to 19.9% of proforma net sales in 1998 primarily attributable to the reduction of fixed costs through restaurant closings and consolidations during the last half of 1997. General and administrative expenses increased from 7.1% of proforma net sales in 1997 to 7.7% of proforma net sales in 1998. This increase is due to an increase in Magic's management fee from 3.5% of proforma net sales during 1997 to 4.5% of proforma net sales during 1998 and an increase in bonuses paid on improved operating results. Depreciation and amortization expense decreased from 5.3% of proforma net sales in 1997 to 5.0% of proforma net sales in 1998 due to restaurant closings and consolidations during the last half of 1997. Loss on restaurant closings amounted to 2.9% of proforma net sales or $1,577,000 in 1997 compared to a gain on restaurant closings in 1998 of $93,000. This gain is the result of favorable buyouts of two long-term leases on restaurants closed in 1997. Net Earnings - ------------ Net earnings 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 includes 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 $524,000. The cure of a default of certain loans within the Partnership's pooled borrowings from Franchise Mortgage Acceptance Company accounted for $424,000 of this decrease in interest expense (See Note 3 of the accompanying financial statements). These were offset by a $301,000 increase in minority interest in earnings of affiliate. Proforma net earnings increased $3,050,000 to proforma net income of $806,000 for the year ended December 29, 1998 compared to a proforma net loss of $2,244,000 for the year ended December 30, 1997. A gain on life insurance settlement of $876,000 is included in the 1998 proforma net income. This gain, the increase in proforma income from operations noted above, and a decrease in interest expense of $153,000 were offset by a decrease in the minority interest in loss of affiliate of $537,000. 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 28, 1999, the Partnership had a working capital deficiency of $5,465,000 compared to a deficiency of $9,211,000 at December 29, 1998. The decrease in working capital deficiency at December 28, 1999 is primarily a result of a $3,767,000 decrease in current portion of long-term debt. At December 29, 1998, the entire amount of Magic's outstanding notes payable FMAC were classified as a current liability because Magic was not in compliance of the fixed charge coverage ratio covenant requirement. There have been no defaults in making scheduled payments of either principal or interest. Subsequent to December 28, 1999, Magic refinanced $1,099,000 of notes payable to Intrust Bank and $479,000 of notes payable to a former limited partner with new notes from Intrust Bank that mature in 2001 and beyond, bringing Magic into compliance with the fixed charge coverage ratio covenant. 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 1999, net cash provided by operating activities amounted to $4,125,000, an increase of $3,288,000 over 1998. This increase is primarily attributable to the increase in net income and an increase in accounts payable in 1999 of $379,000 compared to a decrease in accounts payable in 1998 of $1,693,000. Investing Activities - -------------------- Property and equipment expenditures represent the largest investing activity by the Partnership. Capital expenditures for 1999 were $1,378,000 of which $867,000 was for replacement of equipment in existing restaurants, $286,000 was for the purchase of land for future development, and $225,000 was for the purchase of a previously leased restaurant. Financing Activities - -------------------- Cash distributions paid in 1999 totaled $1,549,000 and amounted to $0.45 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 1999, the Partnership's proceeds from long term borrowings amounted to $3,130,000 of which $1,605,000 was used to refinance debt to obtain favorable terms, $525,000 was used to purchase land and buildings, and the remainder was used primarily to replenish operating capital. The Partnership does not plan to open any new restaurants during 2000. Management anticipates spending $698,000 in 2000 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. In addition, if the nine Pizza Hut restaurants located within the Billings, Montana ADI, including the associated franchises, real estate and operating assets, (the BM Restaurants) are sold to an unrelated party in one or more transactions and the sale transaction(s) are closed prior to January 1, 2001, then the heirs will receive as additional consideration for the purchase of the units, a contingent payment of $0.50 per unit, or $219,300. If the BM Restaurants are not sold within that time, the obligation to make the contingent payment will expire. The Partnership is not required to market or sell the BM Restaurants or to accept any offer by any party to purchase such BM Restaurants. Year 2000 Compliance - -------------------- The Partnership did not incur any problems with Year 2000 compliance. Management is continuing to monitor Year 2000 issues. The Partnership does not anticipate any problems with Year 2000 compliance in the future. Other Matters - ------------- On January 31, 2000, AmeriServe, the Partnership's primary supplier of food ingredients and dry goods, filed for protection under the U.S. Bankruptcy Code. Tricon, the Unified Foodservice Purchasing Coop, and key representatives of the Tricon franchise community are working together to ensure the availability of supplies to Tricon's restaurant system during the bankruptcy proceedings. To date, the Partnership has not experienced any significant supply interruption. AmeriServe has advised Tricon that it is actively seeking to arrange the financing necessary to maintain AmeriServe operations. The Partnership, along with Tricon, has commenced contingency planning and believes that it can arrange with an alternative distributor or distributors to meet the needs of the restaurants if AmeriServe is no longer able to adequately service the restaurants. In November, 1996 Magic notified Hospitality Group of Oklahoma, Inc. (HGO), a 25% limited partner in Magic, that it was seeking to terminate HGO's interest in Magic pursuant to the terms of the related Partnership Agreement for alleged violations of the Pizza Hut Franchise Agreement and the alleged occurrence of an Adverse Terminating Event as defined in the Partnership Agreement. Magic alleged that HGO contacted and offered employment to a significant number of the management employees of Magic. Magic also alleged that HGO made certain misrepresentations at the formation of Magic. HGO denied that such franchise violations occurred and that it made any misrepresentations at the formation of Magic. HGO asserted that it was fraudulently induced to enter into the Magic Partnership Agreement by Restaurant Management Company of Wichita, Inc. and was further damaged by alleged mismanagement of Magic's operations. The matter was settled in August 1998 with Magic paying HGO a section 736(a) guaranteed payment of $255,000 for the period November 11, 1996 through the settlement date. In addition, Magic purchased HGO's interest in Magic for $205,000 consisting of $105,000 cash and a $100,000 note at 8% interest, payable quarterly for five years. Magic also paid the two stockholders of HGO $240,000 for a noncompete agreement prohibiting them from engaging in the pizza business for the next 60 months in any market Magic operated in as of May 11, 1998. Upon completion of the settlement, the Partnership's interest in Magic increased from 45% to 60%. The Partnership delisted from the American Stock Exchange effective November 13, 1997 and limited trading of its units. As a result, the Partnership will continue to be taxed as a partnership rather than being taxed as a corporation. The Partnership does offer a Qualified Matching Service, whereby the Partnership will match persons desiring to buy units with persons desiring to sell units. Effects of Inflation and Future Outlook - --------------------------------------- Inflationary factors such as increases in food and labor costs directly affect the Partnership's operations. Because most of the Partnership's employees are paid on an hourly basis, changes in rates related to federal and state minimum wage and tip credit laws will effect the Partnership's labor costs. The Partnership cannot always effect immediate price increases to offset higher costs and no assurance can be given the Partnership will be able to do so in the future. The Partnership's earnings are affected by changes in interest rates primarily from its long-term debt arrangements. Under its current policies, the Partnership does not use interest rate derivative instruments to manage exposure to interest rate changes. A hypothetical 100 basis point adverse move (increase) in interest rates along the entire interest rate yield curve would increase the Partnership's interest expense and decrease net income by $3,500 over the term of the related debt. This amount was determined by considering the impact of the hypothetical interest rates on the Partnership's borrowing cost. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act, which are intended to be covered by the safe harbors created thereby. Although the Partnership believes 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 54 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 112 franchised "Pizza Hut" and "Long John Silver's" restaurants. Hal W. McCoy II 32 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 57 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 44 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 1999 $174,831 $47,969 $222,800 $176,389 Chief Executive Officer 1998 171,627 40,370 211,997 142,821 1997 127,322 36,451 163,773 79,716 Hal W. McCoy II 1999 97,765 32,899 130,664 98,725 President Terry Freund 1999 96,227 30,078 126,305 96,739 Assistant Secretary and 1998 84,297 20,063 104,360 67,441 Chief Financial Officer 1997 83,049 13,275 93,324 48,343 Incentive Bonus Plan - -------------------- The Management Company maintains a discretionary supervisory incentive bonus plan (the "Incentive Bonus Plan") pursuant to which approximately 20 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 1999, 1998 and 1997 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 28, 1999 was $295,419 of which $73,305 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 27, 2000 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 28, 1999 the Partnership's income from operations plus depreciation and amortization expenses was $6,529,804. 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 28, 1999. Item 12. Security Ownership of Certain Beneficial Owners and - ----------------------------------------------------------------- Management - ---------- PRINCIPAL UNITHOLDERS The following table sets forth, as of March 1, 2000, 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 656,537 (1) 59.55% 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 1,271,876 (1) 66.11% 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 95.83% of RMC Partners, L.P. which owns 686,164 Class B Units and 1,322,266 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, 2000, 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 656,537 (1) 59.55% C Hal W. McCoy 1,271,876 (1) 66.11% B Director & all 786,750 (1) 71.37% officers as a group (4 Persons) C Director & all 1,502,817 (1) 78.12% 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 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 33. (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 23.2 Consent of Ernst & Young LLP F-27 27.1 Financial Data Schedule G 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 dated December 29, 1998. G. Submitted electronically to the Securities and Exchange Commission for information only and not filed. 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: 3/24/00 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 3/24/00 - --------------- (Principal Executive Officer ------- Hal W. McCoy of RMC American Management, Inc. /s/Terry Freund Chief Financial Officer 3/24/00 - --------------- ------- 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 28, 1999 and December 29, 1998. . . . . . . . . . . . . . . . . . F-4 Consolidated Statements of Operations for the years ended December 28, 1999, December 29, 1998, and December 30, 1997 . . . . . . . . . . . . . . . . . F-6 Consolidated Statements of Partners' Capital (Deficiency) for the years ended December 28, 1999, December 29, 1998 and December 30, 1997 . . . . . . . . F-7 Consolidated Statements of Cash Flows for the years ended December 28, 1999, December 29, 1998, and December 30, 1997 . . . . . . . . . . . . . . . . . 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 sheet of American Restaurant Partners, L.P. (the Partnership) as of December 28, 1999, and the related consolidated statements of operations, partners' capital (deficiency), and cash flows for the year 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 audit. We conducted our audit in accordance with generally accepted auditing standards. 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 financial position of American Restaurant Partners, L.P. at December 28, 1999 and the consolidated results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/Grant Thornton LLP Wichita, Kansas March 6, 2000 REPORT OF INDEPENDENT AUDITORS The General Partners and Limited Partners American Restaurant Partners, L.P. We have audited the accompanying consolidated balance sheet of American Restaurant Partners, L.P. (the Partnership) as of December 29, 1998, and the related consolidated statements of operations, partners' capital (deficiency), and cash flows for each of the two years in the period 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 audits. We conducted our audits in accordance with generally accepted auditing standards. 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. at December 29, 1998, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 29, 1998, in conformity with generally accepted accounting principles. /s/Ernst & Young LLP Kansas City, Missouri March 12, 1999 AMERICAN RESTAURANT PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS December 28, December 29, ASSETS 1999 1998 - --------------------------- ------------ ------------ Current assets: Cash and cash equivalents $ 742,452 $ 329,946 Investments available-for-sale, at fair market value - 68,635 Accounts receivable 258,388 264,754 Due from affiliates 69,948 90,146 Notes receivable from affiliates - current portion 19,531 62,511 Inventories 410,997 441,326 Prepaid expenses 270,300 287,046 ---------- ---------- Total current assets 1,771,616 1,544,364 Property and equipment, at cost: Land 4,312,468 4,082,418 Buildings 8,374,351 8,586,103 Restaurant equipment 12,808,308 12,823,544 Leasehold rights and improvements 8,164,307 8,006,852 Property under capital leases 2,077,751 2,077,751 ---------- ---------- 35,737,185 35,576,668 Less accumulated depreciation and amortization 16,406,881 14,733,218 ---------- ---------- 19,330,304 20,843,450 Other assets: Franchise rights, net of accumulated amortization of $1,686,489 ($1,416,937 in 1998) 5,510,611 5,780,163 Notes receivable from affiliates 75,952 50,201 Deposit with affiliate 485,000 450,000 Goodwill, net of accumulated amortization of $130,110 ($109,402 in 1998) 694,391 714,469 Other 1,757,137 1,320,132 ---------- ---------- $29,625,011 $30,702,779 ========== ========== AMERICAN RESTAURANT PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS December 28, December 29, LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY) 1999 1998 - ---------------------------------------------- ------------ ------------ Current liabilities: Accounts payable $ 2,818,985 $ 2,390,582 Due to affiliates 111,988 226,322 Accrued payroll and other taxes 750,474 635,805 Accrued liabilities 1,177,506 1,272,957 Current maturities of long-term debt, including $4,186,311 of notes payable in default in 1998 2,415,469 6,182,101 Current portion of obligations under capital leases 59,124 47,528 ---------- ---------- Total current liabilities 7,333,546 10,755,295 Long-term liabilities less current maturities: Obligations under capital leases 1,436,375 1,495,486 Long-term debt 25,662,277 23,447,773 Other noncurrent liabilities 787,208 563,095 ---------- ---------- 27,885,860 25,506,354 Minority interests in Operating Partnerships 551,541 395,908 Commitments and contingencies - - Partners' capital (deficiency): General Partners (8,585) (8,245) Limited Partners: Class A Income Preference, authorized 875,000 units; issued 789,866 units (814,010 in 1998) 5,394,796 5,543,603 Classes B and C, issued 1,102,418 and 1,923,808 class B and C units, respectively (948,039 and 1,663,820 units in 1998, respectively) (9,252,030) (10,058,014) Notes receivable employees - sale of partnership units (956,436) - Cost in excess of carrying value of assets acquired (1,323,681) (1,323,681) Cumulative comprehensive loss - (108,441) ---------- ---------- Total partners' capital (deficiency) (6,145,936) (5,954,778) ---------- ---------- $29,625,011 $30,702,779 ========== ========== See accompanying notes. AMERICAN RESTAURANT PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 28, 1999, December 29, 1998 and December 30, 1997
1999 1998 1997 ---------- ---------- ---------- Net sales $57,820,215 $43,543,633 $38,977,341 Operating costs and expenses: Cost of sales 15,355,713 11,710,209 10,586,372 Restaurant labor and benefits 16,899,475 12,500,842 11,043,688 Advertising 3,766,662 2,844,451 2,511,470 Other restaurant operating expenses exclusive of depreciation and amortization 10,834,915 8,337,961 7,691,831 General and administrative: Management fees - related party 3,582,943 2,894,911 2,710,449 Other 787,305 631,999 371,443 Depreciation and amortization 2,540,304 2,149,606 2,078,061 Loss on restaurant closings 63,398 23,747 792,219 Equity in loss of affiliate - 7,250 758,383 ---------- ---------- ---------- Income from operations 3,989,500 2,442,657 433,425 Interest income 25,994 29,783 29,350 Interest expense (2,590,720) (2,662,061) (2,476,304) Gain on life insurance settlement - 875,533 - Loss on sale of investments held for sale (134,766) - - Gain on sale of restaurants 196,608 - - ---------- ---------- ---------- (2,502,884) (1,756,745) (2,446,954) ---------- ---------- ---------- Income (loss) before minority interest 1,486,616 685,912 (2,013,529) Minority interests in (income) loss of Operating Partnerships (172,062) 122,805 20,135 ---------- ---------- ---------- Net income (loss) $ 1,314,554 $ 808,717 $(1,993,394) ========== ========== ========== Net income (loss) allocated to Partners: Class A Income Preference $ 298,258 $ 165,210 $ (406,975) Class B $ 368,528 $ 242,003 $ (596,643) Class C $ 647,768 $ 401,504 $ (989,776) Weighted average number of Partnership units outstanding during period: Class A Income Preference 813,642 814,145 815,305 Class B 1,005,338 1,192,579 1,195,273 Class C 1,767,105 1,978,589 1,982,849 Basic and diluted income (loss) before minority interest per Partnership unit $ 0.41 $ 0.17 $ (0.50) Basic and diluted minority interest per Partnership unit $ (0.05) $ 0.03 $ - Basic and diluted net income (loss) per Partnership unit $ 0.37 $ 0.20 $ (0.50) Distributions per Partnership unit $ 0.45 $ 0.30 $ 0.32 See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P. Consolidated Statements of Partners' Capital (Deficiency) Years ended December 28, 1999, December 29, 1998, and December 30, 1997
General Partners Limited Partners Cost in ---------------- ------------------------------------------ excess of Classes B Class A Income Notes carrying Cumulative and C Preference Classes B and C receivable value comprehensive -------------- ------------------- --------------------- from of assets income Units Amounts Units Amounts Units Amounts employees acquired (loss) Total ----- ------- ----- ------- ----- ------- -------- -------- ----------- ----- Balance at January 1, 1997 3,940 $(4,634) 815,309 $6,294,520 3,129,409 $(5,811,117) $ - $(1,323,681) $ (44,325) $ (889,237) Net Loss - (1,970) - (406,975) - (1,584,449) - - - (1,993,394) Unrealized gain on investments available-for-sale - - - - - - - - 63,000 63,000 ---------- Comprehensive loss (1,930,394) Partnership distributions - (1,260) - (260,718) - (1,015,039) - - - (1,277,017) Units sold to employees - - - - 47,250 106,233 - - - 106,233 Units purchased - - (995) (3,037) (6,000) (18,000) - - - (21,037) ----- ------ ------- --------- --------- ---------- -------- ---------- -------- ---------- Balance at December 30, 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) ===== ====== ======= ========= ========= ========== ========= ========== ======= ========== See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 28, 1999, December 29, 1998 and December 30, 1997
1999 1998 1997 ---- ---- ---- Cash flows from operating activities: Net income (loss) $ 1,314,554 $ 808,717 $(1,993,394) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 2,540,304 2,149,606 2,078,061 Provision for deferred rent - 9,554 10,067 Equity in loss of affiliate - 7,250 758,383 Loss on default in pooled loans - 67,963 269,761 Cure of default in pooled loans (423,900) - - (Gain) loss on disposition of assets 20,150 (41,498) 4,876 Loss on sale of investments held for sale 134,766 - - Gain on life insurance settlement - (875,533) - Loss on restaurant closings 63,398 23,747 792,219 Minority interest in Operating Partnerships 172,062 (122,805) (20,135) Gain on sale of restaurants (196,608) - - Unit compensation expense 13,952 - - Net change in operating assets and liabilities: Accounts receivable 6,366 (121,199) 71,277 Due from affiliates 20,198 (16,525) (48,503) Inventories 30,329 (26,398) 32,487 Prepaid expenses 16,746 204,523 (33,169) Deposit with affiliate (35,000) - - Accounts payable 378,601 (1,692,680) 857,340 Due to affiliates (114,334) 173,306 (38,115) Accrued payroll and other taxes 114,669 248,360 (160,800) Accrued liabilities (100,100) 35,092 (224,276) Other, net 169,344 6,151 - --------- --------- --------- Net cash provided by operating activities 4,125,497 837,631 2,356,079 Investing activities: Investment in affiliate prior to consolidation - (390,000) - Net cash from consolidation of affiliate - 56,061 - Purchases of certificates of deposit - - (6,567) Redemption of certificates of deposit - - 164,202 Proceeds from sale of investments held for sale 42,310 - - Additions to property and equipment (1,378,400) (2,626,566) (1,824,195) Proceeds from sale of property and equipment 209,118 518,641 24,810 Proceeds from sale of restaurants 717,639 - - Purchase of franchise rights (15,000) - (15,000) Collections of notes receivable from affiliates 17,229 35,574 87,255 Other, net (35,610) - (69,856) --------- --------- --------- Net cash used in investing activities (442,714) (2,406,290) (1,639,351) Financing activities: Proceeds from long-term borrowings 3,129,500 13,394,950 2,369,000 Payments on long-term borrowings (4,707,728) (10,466,003) (1,492,740) Payments on capital lease obligations (47,515) (36,689) (20,196) Proceeds from life insurance settlement - 1,039,747 - Distributions to Partners (1,548,720) (1,195,031) (1,277,017) Contribution of capital in Magic from minority partners - 94,200 - Proceeds from issuance of Class B and C units 68,213 - 68,733 Repurchase of units (147,598) (1,429,896) (21,037) General Partners' distributions from Operating Partnerships (16,429) (12,071) (12,899) --------- --------- --------- Net cash (used in) provided by financing activities (3,270,277) 1,389,207 (386,156) --------- --------- --------- Net increase (decrease) in cash and cash equivalents 412,506 (179,452) 330,572 Cash and cash equivalents at beginning of period 329,946 509,398 178,826 --------- --------- --------- Cash and cash equivalents at end of period $ 742,452 $ 329,946 509,398 ========= ========= Noncash investing and financing activities: During 1999, the Partnership signed a note payable for $450,000 payable over 15 years, to purchase a 25% interest in a Limited Liability Company that owns and operates an aircraft. In addition, the Partnership issued 437,500 Class B and C units at $2.55 per unit to certain employees in exchange for $68,000 cash and notes receivable of $1,047,000. Notes receivable from employees were reduced by distributions of $77,024 and $13,952 recorded as compensation expense. 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. The remaining partnership interests are held by Restaurant Management Company of Wichita, Inc. (39%) (the Management Company) and RAM (1%), 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: 1999 1998 1997 ---- ---- ---- American Pizza Partners, L.P. - ----------------------------- Restaurants in operation at beginning of period 62 63 67 Opened -- 1 1 Closed -- (2) (5) Sold (1) -- -- --- --- --- Restaurants in operation at end of period 61 62 63 === === === Oklahoma Magic, L.P. - -------------------- Restaurants in operation at beginning of period 27 27 Opened -- -- Closed (1) -- --- --- Restaurants in operation at end of period 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 $2,036,396, $1,795,783 and $1,856,547 for the years ended December 28, 1999, December 29, 1998 and December 30, 1997, respectively. AMORTIZATION OF GOODWILL Goodwill resulting from APP's original investment in Magic is being amortized over 29 years using the straight-line method. 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. PREOPENING COSTS Costs incurred before a restaurant is opened, which represent the cost of staffing, advertising, and similar preopening costs, 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, certificates of deposit 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 28, 1999, 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 $681,000. The differences between generally accepted accounting principles net income and taxable income (loss) are as follows: 1999 1998 1997 ---- ---- ---- Generally accepted accounting net income $ 1,314,554 $ 808,717 $(1,993,394) Depreciation and amortization 36,348 (133,606) (205,737) Capitalized leases (59,601) 163,641 128,791 Equity in loss of affiliate (274,257) (751,845) (655,814) Loss on restaurant closings (42,149) (190,972) 784,297 Gain (loss) on disposition of assets 437,316 (36,642) (216,534) Unicap adjustment 4,731 (70,985) (76) Non-taxable life insurance proceeds - (866,778) - Other 147,371 32,295 (12,946) --------- ---------- ---------- Taxable income (loss) $ 1,564,313 $(1,046,175) $(2,171,413) ========= ========== ========== The Omnibus Budget Reconciliation Act of 1987 requires 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 The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. 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 In accordance with Accounting Principles Board Opinion (APBO) No. 25, 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 of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation have not been presented as there are no material unvested options and no options have been granted in 1999, 1998 or 1997. 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 28, 1999, the Partnership does not have any derivative instruments. 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 1999, 1998 or 1997. The Partnership maintains a deposit with the Management Company equal to approximately one and one-half month's management fee. Such deposit, $485,000 and $450,000 at December 28, 1999 and December 29, 1998, respectively, 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. Transactions with related parties included in the accompanying consolidated financial statements and notes are summarized as follows: 1999 1998 1997 ---- ---- ---- Management fees $3,582,943 $2,894,911 $2,710,448 Management Company bonuses 322,308 226,522 155,637 Advertising commissions 77,702 75,745 73,062 Divestiture fee on sale of restaurant 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: 2000 - $19,531; 2001 - $21,113; 2002 - $22,828; 2003 - $7,375; 2004 - $8,148; Thereafter - $16,488. 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 28, 1999 and December 29, 1998: 1999 1998 ---- ---- Notes payable to Intrust Bank in Wichita, payable in monthly installments aggregating $171,403, including interest at variable rates from 8.5% to 9.50%, due at various dates through 2004 $ 5,933,513 $ 8,045,758 Notes payable to Franchise Mortgage Acceptance Company (FMAC) payable in monthly installments aggregating $257,742, including interest at fixed rates from 8.81% to 10.95%, due at various dates through May 2013 19,167,158 20,815,919 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 1,779,406 - 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 478,963 600,115 Note payable to Sierra Bravo Aviation, LLC payable in quarterly installments of $12,441 including interest at a fixed rate of 7.35%, with remaining balance due August 2003 428,356 - Notes payable to various banks, payable in monthly installments aggregating $5,374, including interest at a fixed rate of 10.00% at December 28, 1999, due at various dates through January 2010 290,350 168,082 ---------- ---------- 28,077,746 29,629,874 Less current portion 2,415,469 6,182,101 ---------- ---------- $25,662,277 $23,447,773 ========== ========== Magic was not in compliance with the fixed charge coverage ratio required by the FMAC loan covenants during and subsequent to the year ended December 29, 1998. Accordingly, the entire amount of Magic's borrowings with FMAC was reflected in the current portion of long-term debt at December 29, 1998. 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. The accommodation fee amounted to $98,710 and $70,775 for the years ended December 28, 1999 and December 29, 1998, respectively. 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 ($1,078,751 at December 28, 1999), referred to as the "Performance Guarantee Amount" (PGA). At December 29, 1998 and December 30, 1997, certain loans within the Partnership's "pool" were in default. This resulted in the Partnership recording interest expense of $67,963 and $280,062, during 1998 and 1997 respectively, representing the Partnership's total liability for these defaulted loans under the PGA. During the year ended December 28, 1999 the loans within the Partnership's "pool" that had been in default 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 write-off of $423,900 is included as a reduction of interest expense in the accompanying statement of operations. The PGA remains in effect until the loans are discharged, prepaid, accelerated, or mature, as defined in the secured promissory note. Subsequent to December 28, 1999, Magic refinanced $1,099,463 of notes payable to Intrust Bank and $478,963 of notes payable to a former partner with new notes from Intrust Bank dated February 15, 2000 and March 1, 2000 that mature in 2001 and beyond. Accordingly, the current and non-current portion of long-term debt reflects the terms of the agreements. 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: 2000 - $2,415,469; 2001 - $2,712,251; 2002 - $2,365,465; 2003 - $4,169,084 and 2004 - $2,021,473. Cash paid for interest was $2,734,143, $2,194,670, and $1,943,870 for the years ended December 28, 1999, December 29, 1998, and December 30, 1997, respectively. 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, $30,250 and $27,500 for the years ended December 28, 1999, December 29, 1998 and December 30, 1997. Total minimum and contingent rent expense under all operating lease agreements were as follows: 1999 1998 1997 ---- ---- ---- Minimum rentals $1,263,873 $904,665 $780,143 Contingent rentals 231,070 147,673 101,657 Future minimum payments under capital leases and noncancelable operating leases with an initial term of one year or more at December 28, 1999, are as follows: Operating Leases With Operating Capital Unrelated Leases With Leases Parties Affiliates ------ ------- ---------- 2000 $ 226,829 $1,200,012 $30,250 2001 230,077 1,089,149 30,250 2002 230,077 926,384 7,563 2003 230,077 723,350 - 2004 239,825 562,474 - Thereafter 1,594,776 2,077,683 - --------- --------- ------ Total minimum payments 2,751,661 $6,579,052 $68,063 Less interest 1,256,162 ========= ====== --------- 1,495,499 Less current portion 59,124 --------- $1,436,375 ========= Amortization of property under capital leases, determined on the straight-line basis over the lease terms totaled $82,149, $106,677, and $150,288 for the years ended December 28, 1999, December 29, 1998 and December 30, 1997, respectively. Capital lease interest was $172,098, $290,374 and $212,890, respectively, over the same years ended. The amortization is included in depreciation and amortization expense and the interest is included in interest expense in the accompanying consolidated statements of operations. The cost of property under capital leases was $2,077,751 at December 28, 1999 and December 29, 1998, respectively, and accumulated amortization on such property under capital leases was $1,176,069 and $1,188,156 at December 28, 1999 and December 29, 1998, 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 5, 2000, the Partnership declared a distribution of $.10 per Unit to all Unitholders of record as of January 14, 2000. The total distribution is not reflected in the December 28, 1999 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 30, 1997, December 29, 1998 and December 28, 1999 625 $8.50 At December 28, 1999, options on 625 Units were exercisable. Unit options available for future grants totaled 48,611 at December 28, 1999 and December 29, 1998. 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. In addition, if the nine Pizza Hut restaurants located within the Billings, Montana ADI, including the associated franchises, real estate and operating assets, (the BM Restaurants) are sold to an unrelated party in one or more transactions and the sale transaction(s) are closed prior to January 1, 2001, then the heirs will receive as additional consideration for the purchase of the units a contingent payment of $0.50 per unit, or $219,300. If the BM Restaurants are not sold within that time, the obligation to make the contingent payment will expire. The Partnership is not required to market or sell the BM Restaurants or to accept any offer by any party to purchase such BM Restaurants. 10. CLASS B AND C RESTRICTED UNITS SOLD TO EMPLOYEES ------------------------------------------------ On July 1, 1994, the Partnership entered into a Unit Purchase Agreement with certain employees whereby the employees may purchase Class B and C Units every six months beginning July 1, 1994, and continuing until January 1, 1998. The purchase price per unit was $2.00 with a total of 75,000 units to be purchased over three and one-half years. During 1997, the Partnership issued 47,250 Class B and C units for $94,500. During 1999, the Partnership issued 437,500 Class B and C Units at $2.55 per unit 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 operations, 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 not to exceed $2.55 per unit. 11. PARTNERS' CAPITAL ----------------- During 1999, 1998 and 1997, the Partnership purchased 24,070, 304 and 995 Class A Income Preference Units for $78,202, $1,269 and $3,037, respectively. These Units were retired by the Partnership. 12. INVESTMENTS ----------- The Partnership purchased common stock of a publicly traded company for investment purposes. This stock was sold in 1999 resulting in a loss on sale of investments held for sale of $134,766. The following is a summary of available-for-sale securities: Cumulative Estimated Unrealized Fair Cost Gains/(Losses) Value ---- -------------- ----- December 28, 1999 $ - $ - $ - ======= ======== ======= December 29, 1998 $177,076 $(108,441) $ 68,635 ======= ======== ======= December 30, 1997 $177,076 $ 18,675 $195,751 ======= ======== ======= The net adjustment to unrealized gain/(loss) on securities available-for-sale is included in comprehensive income. 13. INVESTMENT IN AFFILIATE ----------------------- 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 November 1996 Magic notified Hospitality Group of Oklahoma, Inc. (HGO), the former owners of the Oklahoma restaurants, that it was seeking to terminate HGO's interest in Magic pursuant to the terms of the Partnership Agreement for alleged violations of the Pizza Hut Franchise Agreement and the alleged occurrence of an Adverse Terminating Event as defined in the Partnership Agreement. Magic alleged HGO contacted and offered employment to a significant number of the management employees of Magic. Magic also alleged HGO made certain misrepresentations at the formation of Magic. HGO denied such franchise violations occurred and that it had made any misrepresentations at the formation of Magic. HGO asserted it was fraudulently induced to enter into the Magic Partnership Agreement by Restaurant Management Company of Wichita, Inc. and was further damaged by alleged mismanagement of Magic's operations. The matter was settled in August 1998 with Magic paying HGO a Section 736(a) guaranteed payment of $255,000 for the period November 11, 1996 through the settlement date. In addition, Magic purchased HGO's interest in Magic for $205,000 consisting of $105,000 cash and a $100,000 note at 8% interest for five years, payable quarterly. Magic also paid the two stockholders of HGO $240,000 for a noncompete agreement prohibiting them from engaging in the pizza business for the next 60 months in any market Magic operated in as of May 11, 1998. Upon completion of the settlement, the Partnership's interest in Magic increased 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. As of December 28, 1999, the Partnership has goodwill, net of accumulated amortization, of $694,391 representing the excess purchase price of the original equity investment in the net assets acquired. The goodwill is being amortized over 29 years. Condensed financial information for Magic accounted for under the equity method of accounting through August 10, 1998 is as follows: (Unaudited) For the 32 For the weeks ended Year ended August 10, December 30, 1998 1997 ---------- ------------ Statement of Operations: Revenues $10,087,820 $15,712,313 Cost of sales 2,578,865 4,308,896 Operating expenses 7,071,979 12,297,095 ---------- ---------- Operating income (loss) 436,976 (893,678) Other expense (principally interest) 453,087 791,610 ---------- ---------- Net loss $ (16,111) $(1,685,288) ========== ========== The proforma unaudited results of operations for the years ended December 29, 1998 and December 30, 1997, assuming the increase in the Partnership,s interest in Magic from 45% to 60% occurred as of January 1, 1997, are as follows: (Unaudited) December 29, December 30, 1998 1997 ------------ ------------ Net sales $53,631,453 $54,689,655 Net income (loss) 806,324 (2,243,655) Net income (loss) per per Partnership unit $ 0.20 $ (0.56) 14. 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. Tricon, the Unified Foodservice Purchasing Coop, and key representatives of the Tricon franchise community are working together to ensure the availability of supplies to Tricon's restaurant system during the bankruptcy proceedings. To date, the Partnership has not experienced any significant supply interruption. AmeriServe has advised Tricon that it is actively seeking to arrange the financing necessary to maintain AmeriServe operations. The Partnership, along with Tricon, has commenced contingency planning and believes that it can arrange with an alternative distributor or distributors to meet the needs of the restaurants if AmeriServe is no longer able to adequately service the restaurants. 15. 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. Exhibit 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated March 6, 2000, 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 28, 1999. 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 23, 2000 Exhibit 23.2 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-20784) pertaining to the Class A Unit Option Plan of American Restaurant Partners, L.P. of our report dated March 12, 1999, with respect to the consolidated financial statements of American Restaurant Partners, L.P., as of December 29, 1998, and for the two years then ended, included in the Annual Report (Form 10-K) for the year ended December 28, 1999. /s/Ernst & Young LLP Kansas City, Missouri March 24, 2000 EX-27 2 ARTICLE 5 FDS ANNUAL
5 This schedule contains summary financial information extracted from the consolidated condensed financial statments of American Restaurant Partners, L.P. at December 28, 1999 and is qualified in its entirety by reference to such financial statements. YEAR DEC-28-1999 DEC-28-1999 742452 0 908819 0 410997 1771616 35737185 16406881 29625011 7333546 0 0 0 0 (6145936) 29625011 57820215 57820215 15355713 53830715 0 0 2590720 1314554 0 1314554 0 0 0 1314554 0.37 0.37
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