As of December 31, 1999, the Company operated 261 restaurants in the areas listed below. The Company's land and building leases generally are for terms of 20 years with one or more five-year renewal options. Certain leases require the payment of additional rent equal to a percentage of annual sales in excess of specified amounts.
Accordingly, the selected historical financial data for the four months ended April 30, 1997 and as of and for the years ended December 31, 1996 and December 31, 1995 were derived from the financial statements of the Predecessor. Due to required purchase accounting adjustments relating to the acquisition and certain corporate administrative expenses that are necessary to operate on a stand-alone basis, the consolidated financial and other data for the period subsequent to the acquisition (the "Successor Period") is not comparable to such data for the periods prior to the acquisition (the "Predecessor Period"). Pro forma net income (loss) was derived by retroactively adjusting all prior years as if the acquisition had occurred on January 1, 1995. As such, the effects of purchase accounting, including the impact of the different capital structure of the Predecessor, has been reflected in arriving at pro forma net income (loss) for the prior periods.
In addition, adjustments reflecting the costs of operating a stand-alone company have been retroactively included in arriving at pro forma net income (loss) for the prior periods. Such costs include, but are not limited to, administrative services, tax compliance, treasury service, human resource administration and legal services. The information contained in this table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's financial statements and accompanying notes thereto included herein.
On April 30, 1997, the Company acquired all of the outstanding capital stock of Sybra, Inc. ("Sybra"), the second largest franchisee of Arby's restaurants. The aggregate purchase price was approximately $39.8 million which included the repayment of $23.7 million of Sybra indebtedness and an additional $2 million of acquisition indebtedness due to the seller within two years. Concurrently with the Company's acquisition of Sybra, Sybra entered into a sale/leaseback transaction on 61 of its restaurant sites with U.S. Restaurant Properties, Inc. ("USRP"). As of December 31, 1999, Sybra owned and operated 188 Arby's restaurants located primarily in Michigan, Texas, Pennsylvania, New Jersey and Florida.
The Company's revenues consist almost entirely of restaurant sales from its principal operating subsidiaries, Sybra and Lyon's.
Restaurant Costs & Expenses--Consolidated restaurant costs and expenses were $206.9 million, or 84.5% of sales for 1999 as compared to $113.8 million, or 81.3% of sales for 1998, an increase of $93.1 million. The increase in total restaurant costs and expenses is due primarily to the acquisition of the Lyon's restaurants on December 14, 1998, as well as the sales increase explained above. As a percentage of sales, restaurant costs and expenses increased as a result of including the lower margin Lyon's restaurants with Sybra.
Depreciation and Amortization--Consolidated depreciation and amortization expense was $5.7 million, or 2.3% of sales in 1999 as compared to $4.9 million, or 3.5% of sales in 1998, a decrease as a percentage of sales as a result of the lower depreciation charges related to the Lyon's restaurants.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Restaurant Costs & Expenses--Consolidated Restaurant costs and expenses were $113.8 million, or 81.3% of sales, for 1998 as compared to $93.5 million, or 82.8% of sales for 1997, an increase of $20.3 million due to the sales increase explained above and the acquisition of the Lyon's restaurants on December 14, 1998. As a percentage of sales, costs decreased as a result of lower labor costs due to improved efficiency, net of increases in rent expense associated with the Company's sale/leaseback of 61 properties previously classified as owned.
Depreciation and Amortization--Consolidated depreciation and amortization expense was $4.9 million, or 3.5% of sales in 1998 as compared to $5.4 million, or 4.8% of sales in 1997, a decrease as a percent of sales as a result of the impact of the sale/leasebacks explained above, net of goodwill amortization as a result of purchase accounting related to the Sybra acquisition.
The Company's total capital expenditures were $19.1 million, $12.9 million and $5.1 million in 1999, 1998 and 1997, respectively, which include new store development, as well as store maintenance, store remodel and store renovation capital expenditures. The Company anticipates that store maintenance, store remodel and store renovation capital expenditures for 2000 will approximate $6.0 million. The level of capital expenditures for new store development and acquisitions will be dependent upon several factors, including the number of stores constructed and/or acquired, the availability of appropriate financing as well as the capital structure of any such transactions.
For purposes of the discussion below, the results of operations for the year ended December 31, 1997 represent the mathematical addition of the historical amounts of Sybra for the Predecessor Period (December 29, 1996 to April 30, 1997) and the Successor Period (May 1, 1997 to December 31, 1997) and are not necessarily indicative of the results that would actually have been obtained if the Sybra acquisition had occurred on December 31, 1996. The amounts reported for Lyon's reflect only the periods subsequent to the acquisition date (December 14, 1998).
Sales--Sybra's sales for the year ended December 31, 1999 were $144.5 million, an increase of $13.2 million or 10.1% over the prior year comparable period. This increase is the result of a same store sales increase of 2.4%, sales from new store openings and store acquisitions, offset by the fact that Sybra, which operates on a 52/53 week accounting cycle, had 53 weeks of sales in 1998 and only 52 weeks of sales in 1999. Additionally, Sybra sold 9 of its Arby's units early in the fourth quarter of 1999.
Depreciation and Amortization--Sybra's depreciation and amortization expense was $4.5 million, or 3.1% of sales in 1999, as compared to $4.9 million, or 3.7% of sales in 1998, a decrease as a percentage of sales as a result of changes in the depreciation schedule of Sybra's assets related to the Company's acquisition of Sybra.
Sales--Sybra's sales for the year ended December 31, 1998 were $131.3 million, an increase of $19.7 million or 17.6% over the prior year combined comparable period. This increase is a result of the fact that Sybra, which operates on a 52/53 week accounting cycle, had 53 weeks of sales in 1998 and only 52 weeks of sales in 1997, as well as a same store sales increase of 4.8%, sales from new store openings and store acquisitions.
Restaurant Costs & Expenses--Sybra's restaurant costs and expenses were $108.1 million, or 82.3% of sales, for 1998 as compared to $93.5 million, or 83.7% of sales for 1997, an increase of $14.6 million due to the sales increase explained above. As a percentage of sales, costs decreased as a result of lower labor and other operating costs due to improved efficiency, net of increases in rent expense associated with the Company's sale/leaseback of 61 properties previously classified as owned.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD FROM DATE OF ACQUISITION (DECEMBER 14, 1998) THROUGH DECEMBER 31, 1998
Depreciation and Amortization--Lyon's depreciation and amortization expense was $1.2 million, or 1.2% of sales, in 1999 as compared to $38, or 0.5% of sales, for the period from the date of acquisition (December 14, 1998) through December 31, 1998. Depreciation and amortization expense increased as a percentage of sales in 1999 as a result of the fact that the Christmas shopping season and Christmas day (the period of time that Lyon's was owned by the Company in 1998) are generally higher sales volume periods. As a result, costs as a percentage of sales decrease during these higher sales volume periods.
Lyon's total capital expenditures were $2.1 million in 1999. For the period from the date of acquisition (December 14, 1998) through December 31, 1998, Lyon's had no capital expenditures. Lyon's anticipates that store maintenance, store remodel and store renovation capital expenditures for 2000 will approximate $2.6 million.
The Company's primary source of liquidity during the year was the operation of the restaurants owned by its principal operating subsidiaries, Sybra and Lyon's, and debt and lease financing.
On April 25, 1997, the Company sold its interest in the stock of Bankers Multiple Line Insurance Company, which generated a significant tax loss (see Note 3 of Notes to Consolidated Financial Statements). Due to limitations pursuant to the Internal Revenue Code and Treasury regulations thereunder, no deferred tax asset has been recorded for the capital loss carry forward due to the uncertainty of its availability and realizability.