COMPARISON OF THE YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Interest Expense--Consolidated interest expense was $8.1 million, or 3.3% of sales in 1999 as compared to $6.0 million, or 4.3% of sales in 1998, an increase of $2.1 million primarily as a result of debt incurred in connection with the Company's acquisition of the Lyon's restaurants and debt incurred in connection with new store openings and store acquisitions at Sybra.
The Company operates entirely in the food service industry with substantially all revenues resulting from the sale of menu products at the restaurants operated by its wholly-owned subsidiaries. At December 31, 1999, Sybra owned and operated 188 Arby's restaurants and Lyon's owned and operated 73 Lyon's restaurants. The Company considers each subsidiary a reportable segment. The Company evaluates performance based on several factors, of which the primary financial measure is business segment operating income.
Sales--As discussed above, the Lyon's restaurants were acquired on December 14, 1998. Lyon's sales for the year ended December 31, 1999 were $99.9 million. Lyon's sales for the period from the date of acquisition (December 14, 1998) through December 31, 1998 were $7.0 million.
The Company's primary liquidity needs arise from debt service on indebtedness incurred in connection with the Sybra acquisition, the Lyon's acquisition, operating lease requirements and the funding of capital expenditures primarily for new store openings. As of December 31, 1999, the Company had total long-term debt of $82.3 million, which included $30.3 million under a term facility with Atherton Capital Incorporated (the "Atherton Loan"), $15.9 million under a term facility with USRP (Finance) LLC (the "USRP Loan") and certain other indebtedness totaling $36.1 million. The Atherton Loan has a weighted-average maturity of 12.5 years (of which approximately 9.5 years remain), bears interest at 10.63%, requires monthly payments of principal and interest, is collateralized by substantially all of the assets owned by Sybra at the time it was acquired by the Company and imposes certain financial restrictions and covenants. The USRP Loan has a weighted average maturity of 12 years (of which approximately 11 years remain) a weighted average interest rate of 12.75%, requires monthly payments of principal and interest, is collateralized by substantially all of the assets owned by Lyon's and imposes certain financial restrictions and covenants. In December, 1999, the Company completed three separate financing transactions totalling $15.0 million, the proceeds of which were used both to repay existing indebtedness and to contribute to the Company's working capital. (See "Recent Developments").
In the future, the Company's liquidity and capital resources will primarily depend on the operations of Sybra and Lyon's which, under the provisions of the Company's loan agreements, would permit, under certain conditions, distributions and dividends to the Company. Sybra and Lyon's, like most restaurant businesses, are able to operate with nominal or deficit working capital because all sales are for cash and inventory turnover is rapid. Renovation and/or remodeling of existing restaurants is either funded directly from available cash or, in some instances, is financed through outside lenders. Construction or acquisition of new restaurants is generally, although not always, financed by outside lenders. The Company believes that it will continue to be able to secure adequate financing on acceptable terms for new restaurant construction and acquisitions and that cash generated from operations will be adequate to meet its needs for the foreseeable future, although no assurances can be given.