SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended July 1, 2003 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)
3020 North Cypress Road, Suite 100
Wichita, Kansas 67226
(Address of principal executive offices) (Zip-Code)
Registrant's telephone number, including area code (316) 634-1190
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
AMERICAN RESTAURANT PARTNERS, L.P.
INDEX
Page
Number
------
Part I. Financial Information
- -------------------------------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
July 1, 2003 and December 31, 2002 1
Consolidated Condensed Statements of Income
for the Three and Six Periods Ended
July 1, 2003 and June 25, 2002 2
Consolidated Condensed Statements of Cash
Flows for the Six Periods Ended
July 1, 2003 and June 25, 2002 3
Notes to Consolidated Condensed Financial Statements 4-6
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 7-12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
Item 4. Controls and Procedures 14
Part II. Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 15
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
July 1, December 31,
ASSETS 2003 2002
- ------------------------------------------ ----------- -----------
Current assets:
Cash and cash equivalents $ 551,446 $ 522,098
Investment securities available-for-sale - 190,174
Accounts receivable 182,009 328,356
Due from affiliates 23,713 74,424
Notes receivable from
affiliates - current portion 9,994 11,628
Inventories 503,731 430,542
Prepaid expenses 535,633 626,448
---------- ----------
Total current assets 1,806,526 2,183,670
Net property and equipment 19,520,770 18,704,186
Other assets:
Franchise rights, net 8,445,580 4,748,392
Notes receivable from affiliates 86,671 91,780
Deposit with affiliate 570,000 535,000
Goodwill 2,540,864 2,540,864
Other 845,396 800,374
---------- ----------
12,488,511 8,716,410
---------- ----------
$33,815,807 $29,604,266
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
- ----------------------------------------------
Current liabilities:
Accounts payable $ 2,402,295 $ 2,383,477
Due to affiliates 115,554 12,434
Accrued payroll and other taxes 812,998 738,773
Accrued liabilities 1,218,165 1,244,191
Current maturities of long-term debt 2,909,778 3,062,704
Current portion of capital lease obligations 434,636 560,405
---------- ----------
Total current liabilities 7,893,426 8,001,984
Long-term liabilities less current maturities:
Capital lease obligations 3,307,196 3,454,437
Long-term debt 26,004,408 22,036,387
Other noncurrent liabilities 983,375 1,067,792
---------- ----------
Total long-term liabilities 30,294,979 26,558,616
Minority interests in Operating Partnerships 403,567 147,163
Commitments and contingencies - -
Partners' capital (deficiency):
General Partners (7,276) (7,620)
Limited Partners:
Class A Income Preference 5,262,577 5,212,980
Classes B and C (7,400,729) (7,654,589)
Notes receivable employees - sale
of partnership units (554,332) (576,740)
Cost in excess of carrying value
of assets acquired (2,076,405) (2,076,405)
Cumulative comprehensive loss - (1,123)
---------- ----------
Total partners' capital (deficiency) (4,776,165) (5,103,497)
---------- ----------
$33,815,807 $29,604,266
========== ==========
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
July 1, June 25, July 1, June 25,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net sales $17,788,883 $17,033,867 $35,078,898 $34,552,563
Operating costs and expenses:
Cost of sales 4,279,710 4,109,466 8,512,005 8,288,837
Restaurant labor and benefits 5,148,582 4,832,451 10,107,362 9,714,846
Advertising 1,118,084 983,037 2,198,062 2,091,622
Other restaurant operating
expenses exclusive of
depreciation and amortization 3,638,233 3,187,260 6,898,767 6,256,782
General and administrative:
Management fees - related party 1,094,881 1,057,553 2,166,421 2,144,040
Other 382,431 467,151 750,609 847,217
Depreciation and amortization 839,107 776,241 1,608,464 1,490,815
---------- ---------- ---------- ----------
Income from operations 1,287,855 1,620,708 2,837,208 3,718,404
Equity in loss of
unconsolidated affiliates (38,715) (37,577) (124,923) (122,375)
Interest and other investment income 3,464 6,932 14,512 12,859
Interest expense (691,779) (686,250) (1,381,213) (1,435,209)
---------- ---------- ---------- ----------
Income before minority interest 560,825 903,813 1,345,584 2,173,679
Minority interests in income of
Operating Partnerships (346) (12,216) (9,406) (29,214)
---------- ---------- ---------- ----------
Net income $ 560,479 $ 891,597 $ 1,336,178 $ 2,144,465
========== ========== ========== ==========
Net income allocated to Partners:
Class A Income Preference $ 96,460 $ 166,421 $ 229,733 $ 403,003
Class B $ 169,214 $ 263,855 $ 403,514 $ 633,478
Class C $ 294,805 $ 461,321 $ 702,931 $ 1,107,984
Weighted average number of Partnership
units outstanding during period:
Class A Income Preference 680,126 695,516 680,878 695,931
Class B 1,193,104 1,102,719 1,195,926 1,093,928
Class C 2,078,626 1,927,986 2,083,331 1,913,334
Basic and diluted income
before minority interest
per Partnership unit $ 0.14 $ 0.24 $ 0.34 $ 0.59
Basic and diluted minority interest
per Partnership unit $ 0.00 $ 0.00 $ 0.00 $ 0.01
Basic and diluted net income
per Partnership unit $ 0.14 $ 0.24 $ 0.34 $ 0.58
Distributions per Partnership unit $ 0.125 $ 0.155 $ 0.250 $ 0.255
<FN>
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six Periods Ended
July 1, June 25,
2003 2002
---------- ----------
Cash flows from operating activities:
Net income $1,336,178 $2,144,465
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,608,464 1,490,815
Equity in loss of unconsolidated affiliates 124,923 122,375
Loss on disposition of assets 4,394 122,624
Gain on sale of investment securities (6,486) -
Minority interest in income of
Operating Partnerships 9,406 29,214
Unit compensation expense 40,634 33,426
Net change in operating assets and liabilities,
net of acquisition:
Accounts receivable 191,122 267,803
Due from affiliates 50,711 (153)
Inventories (12,576) (6,904)
Prepaid expenses 160,415 79,256
Deposit with affiliate (35,000) -
Accounts payable (478,736) (1,059,369)
Due to affiliates 103,120 (16,216)
Accrued payroll and other taxes (105,424) 51,445
Accrued liabilities (166,868) (231,676)
Other, net (139,073) (804)
--------- ---------
Net cash provided by operating activities 2,685,204 3,026,301
Investing activities:
Cash acquired in acquisition of MVP 91,900 -
Investment in unconsolidated affiliates (87,980) (108,212)
Proceeds from sale of investment securities 197,783 -
Additions to property and equipment (620,412) (669,469)
Proceeds from sale of property and equipment 999 -
Proceeds from sale and leaseback of property
and equipment - 3,188,044
Collections of notes receivable from affiliates 6,743 7,668
--------- ---------
Net cash provided by (used in) investing activities (410,967) 2,418,031
Financing activities:
Payments on long-term borrowings (2,657,621) (4,099,269)
Proceeds from long-term borrowings 1,749,347 336,250
Principal payments on capital lease obligations (273,010) (333,354)
Distributions to Partners (950,117) (879,636)
Proceeds from issuance of Class B and C units 6,750 9,698
Repurchase of units (107,236) (79,185)
General Partners' distributions
from Operating Partnerships (10,002) (9,545)
Minority interests' distributions
from Operating Partnerships (3,000) (3,000)
--------- ---------
Net cash used in financing activities (2,244,889) (5,058,041)
--------- ---------
Net increase in cash and cash equivalents 29,348 386,291
Cash and cash equivalents at beginning of period 522,098 1,594,934
--------- ---------
Cash and cash equivalents at end of period $ 551,446 $1,981,225
========= =========
See accompanying notes.
AMERICAN RESTAURANT PARTNERS, L.P.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Six Periods Ended July 1, 2003 and June 25, 2002
1. General
-------
The accompanying consolidated condensed financial statements include
the accounts of American Restaurant Partners, L.P. and its majority
owned subsidiaries, American Pizza Partners, L.P. (APP), APP
Concepts, LLC and Oklahoma Magic, L.P. (Magic). Effective May 13,
2003, the Partnership purchased an 87% interest in Mountain View
Pizza, LLC (MVP). Accordingly, the Partnership began consolidating
the accounts of MVP from May 13, 2003. American Restaurant
Partners, L.P., APP, APP Concepts, LLC, Magic and MVP are
hereinafter collectively referred to as the Partnership. All
significant intercompany balances and transactions have been
eliminated. The consolidated condensed financial statements have
been prepared without audit. The Balance Sheet at December 31, 2002
has been derived from the Partnership's audited financial
statements. In the opinion of management, all adjustments of a
normal and recurring nature which are necessary for a fair
presentation of such financial statements have been included. These
statements should be read in conjunction with the consolidated
financial statements and notes contained in the Partnership's Annual
Report filed on Form 10-K for the fiscal year ended December 31,
2002.
The results of operations for interim periods are not necessarily
indicative of the results for the full year. The Partnership does
not experience significant seasonality but sales continue to be
largely driven through advertising and promotion.
2. Subsequent Events
-----------------
Subsequent to July 1, 2003, the Partnership refinanced $878,000 of
notes payable to Intrust Bank with a new note to Stillwater National
Bank of $900,000, which matures with a balloon payment in five
years. Accordingly, the current and non-current portions of long-
term debt reflect the terms of the new agreement.
The Partnership has declared a quarterly distribution of $0.10 per
unit to all unitholders of record as of July 12, 2003. The
distribution is not reflected in the July 1, 2003 consolidated
condensed financial statements.
3. Purchase of Mountain View Pizza, LLC (MVP)
------------------------------------------
Effective May 13, 2003, Restaurant Management Company of Wichita,
Inc. (the "Management Company"), an affiliate of the Partnership,
purchased the stock of Winny Enterprises, Inc. "Winny," a company
that owned and operated thirteen Pizza Hut restaurants in Colorado,
for $260,000. Winny was then merged into a newly formed limited
liability company, Mountain View Pizza, LLC (MVP), the surviving
entity resulting from the merger. The Partnership contributed
$1,740,000 to MVP, effectively acquiring an 87% ownership interest
in MVP. The remaining ownership interests are held by the
Management Company. A summary of the assets acquired and
liabilities assumed of Winny at the acquisition date is as follows:
Cash $ 91,900
Current assets 174,988
Property and equipment 1,650,000
Franchise rights 3,796,095
Other assets 113,356
Current liabilities (818,045)
Notes payable to bank (4,748,294)
----------
Cash paid by RMC $ 260,000
==========
4. Supplemental Cash Flow Information
----------------------------------
Six Periods Ended
7/01/03 6/25/02
--------- ---------
Cash paid for interest $1,481,779 $1,445,828
Noncash investing and financing
activities:
Distributions offset against
notes receivable 40,148 65,309
Reduction of notes receivable
recorded as compensation expense 40,634 33,426
Capital leases entered into as part
of sale-leaseback transactions - 2,039,283
Issuance of units for notes receivable 84,750 147,277
Acquisition of MVP, LLC:
Liabilities assumed 5,566,339 -
Minority ownership interest 260,000 -
5. FRANCHISE RIGHTS
----------------
The Partnership entered into a new franchise agreement effective
January 1, 2003 for a period of 30 years. The Partnership has
the option at the expiration of the initial or any subsequent
term of the franchise agreement to renew the franchise granted
thereunder for a renewable term of 20 years, subject to the
approval of the franchisor. Beginning January 1, 2003, the
remaining franchise rights are being amortized over the initial
term of the new franchise agreement of 30 years. Prior to
January 1, 2003, franchise rights were amortized over the 20 year
life of the original franchise agreement. Amortization expense
was $105,470 and $184,954 for the three and six periods ended
July 1, 2003, respectively, and $107,466 and $209,412 for the
three and six periods ended June 25, 2002, respectively.
6. COMPREHENSIVE INCOME
--------------------
Comprehensive income is comprised of the following:
Three Periods Ended Six Periods Ended
7/01/03 6/25/02 7/01/03 6/25/02
-------- -------- -------- --------
Net income $560,479 $891,597 $1,336,178 $2,144,465
Change in unrealized
loss on investments
held for sale - - 1,123 -
------- ------- --------- ---------
Comprehensive income $560,479 $891,597 $1,337,301 $2,144,465
======= ======= ========= =========
7. RECENT ACCOUNTING PRNOUNCEMENTS
-------------------------------
In May 2003, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS)
No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity." SFAS No. 150
requires that certain financial instruments, which under previous
guidance were accounted for as equity, must now be accounted for
as liabilities. SFAS No. 150 is effective for all financial
instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The Partnership has not
yet determined the effects of SFAS No. 150 on its financial
statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
As discussed in the notes to the accompanying consolidated financial
statements, the consolidated results of operations include the full
quarterly results of American Restaurant Partners, LP and its
majority owned subsidiaries, American Pizza Partners, L.P. (APP),
APP Concepts, LLC and Oklahoma Magic, L.P. (Magic). They also
include the consolidated results of operations of MVP for the seven-
week period May 13, 2003 through July 1, 2003 (see detail
following). The consolidated results of operations were not
significantly impacted by the results of MVP.
As of July 1, 2003, the Partnership operated 78 traditional Pizza
Hut red roof restaurants, 21 delivery/carryout units and 2 dualbrand
locations.
Comparison of the Three and Six Periods Ended July 1, 2003
- ----------------------------------------------------------
with the Three and Six Periods Ended June 25, 2002
- --------------------------------------------------
The following discussion relates to the comparison of the results of
operations for the three and six periods ended July 1, 2003 compared
to the three and six periods ended June 25, 2002, excluding the
effects of the consolidation of MVP. The table below separates the
effects of consolidating MVP from the consolidated totals for the
three and six periods ended July 1, 2003 in order to provide a more
meaningful basis for a comparative discussion of these results
versus the three and six periods ended June 25, 2002.
Three Periods Ended
---------------------------------------------------------
July 1, 2003 June 25, 2002
------------------------------------------ -------------
Consolidated MVP Comparable Consolidated
------------ ------------ ------------ ------------
Net sales $17,788,883 $ 1,187,069 $16,601,814 $17,033,867
Operating costs and expenses:
Cost of sales 4,279,710 292,910 3,986,800 4,109,466
Restaurant labor and benefits 5,148,582 373,566 4,775,016 4,832,451
Advertising 1,118,084 76,194 1,041,890 983,037
Other restaurant operating
expenses exclusive of
depreciation and amortization 3,638,233 300,217 3,338,016 3,187,260
General and administrative:
Management fees - related party 1,094,881 59,368 1,035,513 1,057,553
Other 382,431 22,086 360,345 467,151
Depreciation and amortization 839,107 72,008 767,099 776,241
---------- ---------- ---------- ----------
Income (loss) from operations 1,287,855 (9,280) 1,297,135 1,620,708
Equity in loss of
unconsolidated affiliates (38,715) - (38,715) (37,577)
Interest and other investment income 3,464 - 3,464 6,932
Interest expense (691,779) (36,667) (655,112) (686,250)
---------- ---------- ---------- ----------
Income (loss) before minority interest 560,825 (45,947) 606,772 903,813
Minority interests in (income) loss of
Operating Partnerships (346) 5,973 (6,319) (12,216)
---------- ---------- ---------- ----------
Net income (loss) $ 560,479 $ (39,974) $ 600,453 $ 891,597
========== ========== ========== ==========
Six Periods Ended
---------------------------------------------------------
July 1, 2003 June 25, 2002
------------------------------------------ -------------
Consolidated MVP Comparable Consolidated
------------ ------------ ------------ ------------
Net sales $35,078,898 $ 1,187,069 $33,891,829 $34,552,563
Operating costs and expenses:
Cost of sales 8,512,005 292,910 8,219,095 8,288,837
Restaurant labor and benefits 10,107,362 373,566 9,733,796 9,714,846
Advertising 2,198,062 76,194 2,121,868 2,091,622
Other restaurant operating
expenses exclusive of
depreciation and amortization 6,898,767 300,217 6,598,550 6,256,782
General and administrative:
Management fees - related party 2,166,421 59,368 2,107,053 2,144,040
Other 750,609 22,086 728,523 847,217
Depreciation and amortization 1,608,464 72,008 1,536,456 1,490,815
---------- ---------- ---------- ----------
Income (loss) from operations 2,837,208 (9,280) 2,846,488 3,718,404
Equity in loss of
unconsolidated affiliates (124,923) - (124,923) (122,375)
Interest and other investment income 14,512 - 14,512 12,859
Interest expense (1,381,213) (36,667) (1,344,546) (1,435,209)
---------- ---------- ---------- ----------
Income (loss) before minority interest 1,345,584 (45,947) 1,391,531 2,173,679
Minority interests in (income) loss of
Operating Partnerships (9,406) 5,973 (15,379) (29,214)
---------- ---------- ---------- ----------
Net income (loss) $ 1,336,178 $ (39,974) $ 1,376,152 $ 2,144,465
========== ========== ========== ==========
Net sales for the three periods ended July 1, 2003 decreased
$432,000 from $17,034,000 to $16,602,000, a 2.5% decrease from the
same three periods of 2002. For the year-to-date, net sales
decreased $661,000, or 1.9% from the prior year. Comparable
restaurant sales decreased 2.2% for the quarter and 1.9% for the
year-to-date. These decreases were not unexpected, as second
quarter comparable restaurant sales in 2002 were 3.6% higher than in
the same three periods of the prior year and year-to-date comparable
restaurant sales in 2002 were 6.3% higher than in the same six
periods of the prior year. The high sales in 2002 were primarily
due to the introduction of a new product, P'Zone, in the first
quarter of 2002.
Results of Operations
as a Percentage of Sales:
Three Periods Six Periods
Ended Ended
7/01/03 6/25/02 7/01/03 6/25/02
------- ------- ------- -------
Cost of sales 24.0% 24.1% 24.3% 24.0%
Restaurant labor and benefits 28.8% 28.4% 28.7% 28.1%
Advertising 6.3% 5.8% 6.3% 6.1%
Other restaurant operating
expenses exclusive of
depreciation and amortization 20.1% 18.7% 19.5% 18.1%
General and administrative:
Management fees 6.2% 6.2% 6.2% 6.2%
Other 2.2% 2.7% 2.1% 2.5%
Depreciation and amortization 4.6% 4.6% 4.5% 4.3%
Income from operations 7.8% 9.5% 8.4% 10.8%
Income from operations for the three periods ended July 1, 2003,
decreased $324,000 from $1,621,000 to 1,297,000, a 20.0% decrease
from the three periods ended June 25, 2002. Year-to-date income
from operations decreased $872,000, or 23.5%, from $3,718,000 to
$2,846,000.
Cost of sales as a percentage of net sales decreased 10 basis points
for the quarter but increased 30 basis points year-to-date. The
year-to-date increase is primarily due to promoting more high-cost
products in the first quarter of 2003, as well as offering free
Cinnamon Sticks with certain orders in the same quarter.
Labor and benefits expense for the quarter and year-to-date
increased 40 and 60 basis points, respectively. Labor efficiencies
were realized during 2002 due to significant sales increases.
Advertising expense increased 50 and 20 basis points for the quarter
and year-to-date, respectively. These increases were primarily due
to a net increase in advertising fees of .25% effective January 1,
2003, as required by the new franchise agreement.
Other restaurant operating expenses increased 140 basis points for
the quarter and year-to-date. These increases were primarily due to
a 40% increase in property and liability insurance premiums and a
60% increase in workers' compensation insurance premiums effective
July 1, 2002, as well as an increase in utilities in 2003.
Other general and administrative expense decreased 50 and 40 basis
points for the quarter and year-to-date, respectively, due to a
decrease in management bonuses paid in 2003 from lower cash flow
results.
Depreciation and amortization expense remained at 4.6% of net sales
for the quarter and increased 20 basis points year-to-date.
For the quarter, the Partnership had net income of $600,000, a
$292,000 decrease over the prior year's net income of $892,000.
This decrease was primarily due to the decrease in income from
operations noted above which was offset by a $31,000 decrease in
interest expense. The Partnership had year-to-date net income of
$1,376,000, a decrease of $768,000 from the prior year net income of
$2,144,000.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At July 1, 2003 the Partnership had a working capital deficiency of
$6,087,000 compared to a working capital deficiency of $5,818,000 at
December 31, 2002. The Partnership routinely operates with a
negative working capital position which is common in the restaurant
industry and which results from the cash sales nature of the
restaurant business and payment terms with vendors.
The Partnership generates its principal source of funds from net
cash provided by operating activities. Management believes net cash
provided by operating activities and various other sources of income
will provide sufficient funds to meet planned capital expenditures
for recurring replacement of equipment in existing restaurants and
to service debt obligations.
NET CASH PROVIDED BY OPERATING ACTIVITIES. For the six periods
ended July 1, 2003, net cash provided by operating activities
amounted to $2,685,000 compared to $3,026,000 for the six periods
ended June 25, 2002. The decrease in net income of $808,000 in 2003
as compared to 2002 reduced cash flows by a like amount. Operating
cash flows were also significantly affected by a decrease in
operating liabilities, including accounts payable and accrued
liabilities, of approximately $648,000 in the first six periods of
2003 compared to $1,256,000 in the same six periods of 2002. The
2002 reduction resulted from the deferred payment of certain
liabilities in anticipation of sale-leaseback transactions that
occurred in the first quarter of 2002.
INVESTING ACTIVITIES. Capital expenditures for the six periods
ended July 1, 2003 were $620,000, all of which was used for
replacement of equipment in existing restaurants.
FINANCING ACTIVITIES. Cash distributions paid during the six
periods ended July 1, 2003 were $950,000 net of a reduction in
employee notes receivable of $40,000. Distributions amounted to
$.25 per unit. The Partnership's distribution objective, generally,
is to distribute all operating revenues less operating expenses
(excluding noncash items such as depreciation and amortization),
capital expenditures for existing restaurants, interest and
principal payments on Partnership debt, and such cash reserves as
the managing General Partner may deem appropriate.
During the six periods ended July 1, 2003, the Partnership's
payments on long-term borrowings totaled $2,658,000, which included
a pay-down of $1,000,000 on debt assumed in connection with the
purchase of an 87% interest in MVP. Proceeds from borrowings
amounted to $1,749,000 during the six periods ended July 1, 2003.
$1,740,000 of this amount was contributed to MVP for the purchase of
the 87% interest. Management plans to open one new restaurant
during 2003. Development of this restaurant will be financed
through existing lenders. Management anticipates spending an
additional $600,000 during the remainder of 2003 for recurring
replacement of equipment in existing restaurants which will be
financed from net cash provided by operating activities. The actual
level of capital expenditures may be higher in the event of
unforeseen breakdowns of equipment or lower in the event of
inadequate net cash flow from operating activities.
OTHER MATTERS
- -------------
The Partnership delisted from the American Stock Exchange effective
November 13, 1997 and limited trading of its units. As a result,
the Partnership will continue to be taxed as a partnership rather
than being taxed as a corporation. The Partnership does offer a
Qualified Matching Service, whereby the Partnership will match
persons desiring to buy units with persons desiring to sell units.
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 affect 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 property and liability insurance and workers'
compensation insurance policies renew annually on July 1. Effective
July 1, 2002, the Partnership's property and liability insurance
premiums increased 40% and its workers' compensation premiums
increased 60%. The Partnership has implemented a renewed focus on
risk management in order to mitigate these premium increases.
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act, and Section 21E of the
Exchange Act which are intended to be covered by the safe harbors
created thereby. Although the Partnership believes that the
assumptions underlying the forward-looking statements contained
herein are reasonable, any of the assumptions could be inaccurate,
and therefore, there can be no assurance that the forward-looking
statements included in this report will prove to be accurate.
Factors that could cause actual results to differ from the results
discussed in the forward-looking statements include, but are not
limited to, consumer demand and market acceptance risk, the effect
of economic conditions, including interest rate fluctuations, the
impact of competing restaurants and concepts, the cost of
commodities and other food products, labor shortages and costs and
other risks detailed in the Partnership's Securities and Exchange
Commission filings.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's earnings are affected by changes in interest rates
primarily from its long-term debt arrangements. Under its current
policies, the Partnership does not use interest rate derivative
instruments to manage exposure to interest rate changes. Due to the
small amount of debt at variable interest rates, a hypothetical 100
basis point adverse move (increase) in interest rates along the
entire interest rate yield curve would not have a material effect on
either the Partnership's interest expense or net income over the
term of the related debt. This 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.
Item 4. CONTROLS AND PROCEDURES
Within the 90 day period prior to the filing date of this Quarterly
Report on Form 10-Q, the Partnership, under the supervision and with
the participation of its Management, including its Chief Executive
Officer and Chief Financial and Accounting Officer, performed an
evaluation of the Partnership's disclosure controls and procedures,
as contemplated by Rule 13a-15 under the Securities Exchange Act of
1934, as amended. Based on that evaluation, the Partnership's Chief
Executive Officer and Chief Financial and Accounting Officer
concluded that such disclosure controls and procedures are effective
to ensure that material information relating to the Partnership is
made known to them, particularly during the period for which the
periodic reports are being prepared.
No significant changes were made in the Partnership's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation performed pursuant
to Rule 13a-15 under the Securities Exchange Act of 1934, as
amended, referred to above.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
During the second quarter of 2003, the Partnership filed a
Form 8-K dated May 20, 2003, reporting an acquisition of
assets.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AMERICAN RESTAURANT PARTNERS, L.P.
(Registrant)
By: RMC AMERICAN MANAGEMENT, INC.
Managing General Partner
Date: 8/14/03 By: /s/Hal W. McCoy
------- --------------------------------------
Hal W. McCoy
Chairman and Chief Executive Officer
Date: 8/14/03 By: /s/Terry Freund
------- --------------------------------------
Terry Freund
Chief Financial and Accounting Officer
CERTIFICATIONS
I, Hal W. McCoy, Chairman and Chief Executive Officer of American
Restaurant Partners, L.P., certify that:
1. I have reviewed this quarterly report on Form 10-Q of American
Restaurant Partners, L.P.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: 8/14/03 By: /s/Hal W. McCoy
------- ------------------------------------
Hal W. McCoy
Chairman and Chief Executive Officer
CERTIFICATIONS
I, Terry Freund, Chief Financial and Accounting Officer of American
Restaurant Partners, L.P., certify that:
1. I have reviewed this quarterly report on Form 10-Q of American
Restaurant Partners, L.P.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: 8/14/03 By: /s/Terry Freund
------- --------------------------------------
Terry Freund
Chief Financial and Accounting Officer
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, Hal W. McCoy, Chairman and Chief Executive Officer of American
Restaurant Parnters, L.P. (the "Partnership"), certify, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
that:
(1) the Quarterly Report on Form 10-Q of the Partnership for the
quarterly period ended July 1, 2003 (the "Report") fully
complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));
and
(2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
the operations of the Partnership.
AMERICAN RESTAURANT PARTNERS, L.P.
(Registrant)
By: RMC AMERICAN MANAGEMENT, INC.
Managing General Partner
Date: 8/14/03 By: /s/Hal W. McCoy
------- ------------------------------------
Hal W. McCoy
Chairman and Chief Executive Officer
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, Terry Freund, Chief Financial and Accounting Officer of American
Restaurant Parnters, L.P. (the "Partnership"), certify, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
that:
(1) the Quarterly Report on Form 10-Q of the Partnership for the
quarterly period ended July 1, 2003 (the "Report") fully
complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));
and
(2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
the operations of the Partnership.
AMERICAN RESTAURANT PARTNERS, L.P.
(Registrant)
By: RMC AMERICAN MANAGEMENT, INC.
Managing General Partner
Date: 8/14/03 By: /s/Terry Freund
------- --------------------------------------
Terry Freund
Chief Financial and Accounting Officer