020264 U.S. Restaurant Properties 4Q Results

Dallas - U.S. Restaurant Properties, Inc. reported fourth quarter adjusted CAD (cash available for distribution before non-recurring expenses) of $6.6 million or $.35 cents per share.

CAD after non-recurring expenses was $6.1 million or $.33 per share. Non-recurring expenses for the quarter of $530,000 were primarily related to reopening costs associated with the Company's assumption of two restaurants within its Retail Operations and a $175,000 litigation reserve established in connection with an unfavorable trial court verdict now on appeal. FFO was $4.2 million or $.22 per diluted share. FFO was negatively impacted by nearly $1.8 million, or $.10 per share, of bad debt expense. Final resolution of two tenant related matters, including the write-off of approximately $250,000 of straight line rent, contributed significantly to the amount of bad debt expense recorded in the fourth quarter.

“While we were disappointed to have incurred a substantial amount of bad debt expense in the fourth quarter, we were pleased to have crafted a resolution to two tenant matters that we had been working on for many months,” said Robert Stetson, President and Chief Executive Officer. “In the first instance, we were able to effect a successful restructuring of an existing lease with one of our larger casual dining tenants that had ceased paying rent at the beginning of the fourth quarter due to certain operating difficulties. In the second case, we were able to extricate our largest gas station portfolio from a bankruptcy proceeding involving a former tenant and now have a lease with a new tenant. In both instances, these tenants are paying rent on a timely basis,” added Mr. Stetson.

Net loss allocable to common stockholders for the quarter, after payment of preferred dividends, was $1.4 million on Real Estate revenues of $17.8 million. Retail Operations revenue from properties operated by the Company on an interim basis was $7.0 million. The activities from the retail operations are segregated under the heading Retail Operations. USRP will continue to maintain the capability to transition the operation of any of its properties from one tenant to another. Profits from such activities reside in a taxable REIT subsidiary.

G & A expense increased to $1.8 million in the fourth quarter compared to $1.4 million in the third quarter. Most of the increase in G & A expense was related to higher legal/litigation expenses and income taxes. Interest expense for the fourth quarter was $4.7 million, a decline of nearly $1.2 million from the third quarter. Derivative settlement payments increased to $1.0 million in the fourth quarter from $0.5 million in the third quarter. The decline in interest expense, partially offset by the increase in derivative settlement payments, resulted from the combination of a decrease in short-term interest rates coupled with the impact of various interest rate protection arrangements entered into by the Company, primarily in August 2001.

During the quarter, the Company repaid $29.4 million of indebtedness. In addition, the Company's largest shareholder completed its commitment to purchase an additional $15.0 million of common stock from the Company. At December 31, 2001, total debt was $337.1 million and unrestricted cash and cash equivalents were $10.3 million. Other than for a modest amount of debt amortization related to the $180 million Triple Net Lease Mortgage Certificate financing completed in August 2001, the Company does not have any material debt repayments in 2002. The Company's next scheduled debt maturity is in August 2003 in the amount of $47.5 million.

“I believe the Company is now positioned to report improved results in Fiscal 2002. We have addressed a number of difficult situations and are working on long-term resolutions for the remainder of our under- performing assets. We strengthened our balance sheet and are pursuing a new $40 million credit facility which will permit us to make new triple-net lease property acquisitions. All of which leads me to be quite optimistic about our prospects for Fiscal 2002,” stated Mr. Stetson.

U.S. Restaurant Properties, Inc. is a non-taxed financial services and real estate company dedicated to acquiring, managing and financing branded chain restaurants such as Burger King, Arby's, Chili'sand Pizza Hut and selected service retail properties. The company currently owns 809 properties located in 48 states.

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