10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

  x   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008.

OR

o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                               to                               .

Commission file no. 0-16191

DEL TACO RESTAURANT PROPERTIES I

a California limited partnership

(Exact name of registrant as specified in its charter)

California	95-3852699
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
25521 Commercentre Drive, Lake Forest, California	92630
(Address of principal executive offices)	(Zip Code)

(949) 462-9300

(Registrant’s telephone number, including area code)

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 þ  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No þ

INDEX

DEL TACO RESTAURANT PROPERTIES I

	PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets at March 31, 2008 (Unaudited) and December 31, 2007		3
Condensed Statements of Income for the three months ended March 31, 2008 and 2007 (Unaudited)		4
Condensed Statements of Cash Flows for the three months ended March 31, 2008 and 2007 (Unaudited)		5
Notes to Condensed Financial Statements (Unaudited)		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
Item 3. Quantitative and Qualitative Disclosures About Market Risk		11
Item 4T. Controls and Procedures		11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		12
Item 6. Exhibits		12
SIGNATURE		13
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

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PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

DEL TACO RESTAURANT PROPERTIES I

CONDENSED BALANCE SHEETS

	March 31,		December 31,
	2008		2007
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	200,934	$	218,140
Receivable from Del Taco LLC		63,857		62,093
Deposits		1,296		986
Total current assets		266,087		281,219
PROPERTY AND EQUIPMENT:
Land and improvements		1,852,482		1,852,482
Buildings and improvements		1,013,134		1,013,134
Machinery and equipment		1,136,026		1,136,026
		4,001,642		4,001,642
Less—accumulated depreciation		2,084,272		2,077,035
		1,917,370		1,924,607
	$	2,183,457	$	2,205,826
LIABILITIES AND PARTNERS’ EQUITY
CURRENT LIABILITIES:
Payable to limited partners	$	41,082	$	39,157
Accounts payable		19,635		6,859
Total current liabilities		60,717		46,016
PARTNERS’ EQUITY:
Limited partners; 8,751 units outstanding at March 31, 2008 and December 31, 2007		1,861,416		1,898,115
General partner-Del Taco LLC		261,324		261,695
		2,122,740		2,159,810
	$	2,183,457	$	2,205,826

See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES I

CONDENSED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended
	March 31,
	2008		2007
RENTAL REVENUES	$	183,905	$	173,334
EXPENSES:
General and administrative		40,882		40,367
Depreciation		7,237		7,237
		48,119		47,604
Operating income		135,786		125,730
OTHER INCOME:
Interest		653		1,208
Other		475		575
Net income	$	136,914	$	127,513
Net income per limited partnership unit (Note 2)	$	15.49	$	14.43
Number of units used in computing per unit amounts		8,751		8,751

See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES I

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	136,914		$	127,513
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		7,237			7,237
Changes in operating assets and liabilities:
Receivable from Del Taco LLC		(1,764	)		191
Deposits		(310	)		(413	)
Payable to limited partners		1,925			(8,031	)
Accounts payable		12,776			22,210
Net cash provided by operating activities		156,778			148,707
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners		(173,984	)		(172,598	)
Net decrease in cash		(17,206	)		(23,891	)
Beginning cash balance		218,140			259,468
Ending cash balance	$	200,934		$	235,577

See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES I

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008

UNAUDITED

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and should therefore be read in conjunction with the financial statements and notes thereto contained in the annual report on Form 10-K for the year ended December 31, 2007 for Del Taco Restaurant Properties I (the Partnership or the Company). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the Partnership’s financial position at March 31, 2008, the results of operations and cash flows for the three month periods ended March 31, 2008 and 2007 have been included. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

NOTE 2 — NET INCOME PER LIMITED PARTNERSHIP UNIT

Net income per limited partnership unit is based on net income attributable to the limited partners (after 1% allocation to the general partner) using the weighted average number of units outstanding during the periods presented, which amounted to 8,751 in 2008 and 2007.

Pursuant to the partnership agreement, annual partnership net income is allocated one percent to Del Taco LLC, formerly known as Del Taco, Inc., (Del Taco or the General Partner) and 99 percent to the limited partners. A partnership net loss in any year will be allocated 24 percent to the General Partner and 76 percent to the limited partners until the losses so allocated equal income previously allocated. Any additional losses will be allocated one percent to the General Partner and 99 percent to the limited partners. Partnership gains from any sale or refinancing will be allocated one percent to the General Partner and 99 percent to the limited partners until allocated gains and profits equal losses. Additional gains will be allocated 24 percent to the General Partner and 76 percent to the limited partners.

NOTE 3 — LEASING ACTIVITIES

The Partnership leases certain properties for operation of restaurants to Del Taco on a triple net basis. The leases are for terms of 35 years commencing with the completion of the restaurant facility located on each property and require monthly rentals equal to 12 percent of the gross sales of the restaurants. The leases expire in the years 2019 to 2020. There is no minimum rental payment required under any of the leases.

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DEL TACO RESTAURANT PROPERTIES I

NOTES TO CONDENSED FINANCIAL STATEMENTS — CONTINUED

FOR THE THREE MONTHS ENDED MARCH 31, 2008

UNAUDITED

NOTE 3 — LEASING ACTIVITIES — continued

For the three months ended March 31, 2008, the five restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $1,290,326 and unaudited net losses of $18,172 as compared to unaudited sales of $1,204,237 and unaudited net income of $3,464, respectively, for the corresponding period in 2007. Net income or loss of each restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense and the decrease in net income from the corresponding period of the prior year primarily relates to food, labor and operating expense increases that exceeded the growth in restaurant revenues. For the three months ended March 31, 2008, the one restaurant operated by a Del Taco franchisee, for which the Partnership is the lessor, had unaudited sales of $242,213 as compared to $240,215 during the same period in 2007.

NOTE 4 — TRANSACTIONS WITH DEL TACO

The receivable from Del Taco consists primarily of rent accrued for the month of March 2008. The March rent receivable was collected in April 2008.

Del Taco serves in the capacity of general partner in other partnerships which are engaged in the business of operating restaurants, and three other partnerships which were formed for the purpose of acquiring real property in California for construction of Mexican-American restaurants for lease under long-term agreements to Del Taco for operation under the Del Taco trade name.

In addition, see Note 5 with respect to certain distributions to the General Partner.

NOTE 5 — DISTRIBUTIONS

On April 24, 2008, a distribution to the limited partners of $84,004, or approximately $9.60 per limited partnership unit, was approved. Such distribution was paid on April 30, 2008. The General Partner also received a distribution of $849 with respect to its 1% partnership interest.

Total cash distributions declared and paid in January 2008 were $173,984.

NOTE 6 — PAYABLE TO LIMITED PARTNERS

Payable to limited partners represents a reclassification from cash for distribution checks made to limited partners that have remained outstanding for 6 months or longer.

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DEL TACO RESTAURANT PROPERTIES I

NOTES TO CONDENSED FINANCIAL STATEMENTS — CONTINUED

FOR THE THREE MONTHS ENDED MARCH 31, 2008

UNAUDITED

NOTE 7 — CONCENTRATION OF RISK

The six restaurants leased to Del Taco make up all of the income producing assets of the Partnership and contributed all of the Partnership’s rental revenues during the three months ended March 31, 2008 and 2007. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco trade name restaurants that lease the properties.

NOTE 8 — COMMITMENTS AND CONTINGENCIES

On February 21, 2008, the General Partner settled a property encroachment lawsuit regarding the Partnership’s restaurant on Haven Avenue in Rancho Cucamonga, California. To settle the case, the General Partner agreed in principal to have the Partnership purchase the encroachment area for $70,000 and obtain a full release of both parties’ claims subject to completion of the transfer of ownership, which is expected during the second quarter of 2008.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources

Del Taco Restaurant Properties I (the Partnership or the Company) offered limited partnership units for sale between March 1983 and March 1984. $4.375 million was raised through the sale of limited partnership units and used to acquire sites and build six restaurants and also to pay commissions to brokers and to reimburse Del Taco LLC (the General Partner or Del Taco) for offering costs incurred.

The six restaurants leased to Del Taco make up all of the income producing assets of the Partnership. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco trade name and the restaurants that lease the properties. The success of the restaurants is dependent on a large variety of factors, including, but not limited to, competition, consumer demand and preference for fast food, in general, and for Mexican-American food in particular.

Results of Operations

The Partnership owns six properties that are under long-term lease to Del Taco for restaurant operations (Del Taco, in turn, has subleased one of the restaurants to a Del Taco franchisee).

The following table sets forth rental revenue earned by restaurant (unaudited):

	Three Months Ended
	March 31,
	2008		2007
Riverside Avenue, Rialto, CA	$	27,805	$	28,781
Elden Avenue, Moreno Valley, CA		24,324		25,598
Foothill Boulevard, La Verne, CA		44,305		41,755
Baseline & Archibald, Rancho Cucamonga, CA		29,066		28,826
Elkhorn Boulevard, Sacramento, CA		21,683		18,411
Haven Avenue, Rancho Cucamonga, CA		36,722		29,963
Total	$	183,905	$	173,334

The Partnership receives rental revenues equal to 12 percent of gross sales from the restaurants. The Partnership earned rental revenue of $183,905 during the three month period ended March 31, 2008, which represents an increase of $10,571 from 2007. The change in rental revenues between 2007 and 2008 is directly attributable to increases in sales at the restaurants under lease.

The increase in accounts payable from December 31, 2007 is a seasonal increase due to the timing of payment for certain annual accounting, audit and tax services.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — continued

The following table breaks down general and administrative expenses by type of expense:

	Percentage of Total
	General & Administrative Expense
	Three Months Ended
	March 31,
	2008			2007
Accounting fees		80.60	%		78.27	%
Distribution of information to limited partners		19.40			21.73
		100.00	%		100.00	%

General and administrative costs increased slightly from 2007 to 2008 primarily due to increased audit and tax preparation fees, which was partially offset by decreased printing costs.

Net income increased by $9,401 from 2007 to 2008 due to the increase in rental revenues of $10,571 which was partially offset by the increase in general and administrative expenses of $515 and the decrease in interest and other income of $655.

Significant Recent Accounting Pronouncements

None

Off-Balance Sheet Arrangements

None

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations, as well as disclosures included elsewhere in this report on Form 10-Q are based upon the Partnership’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Partnership believes the critical accounting policies that most impact the financial statements are described below. A summary of the significant accounting policies of the Partnership can be found in Note 1 to the Financial Statements which is included in the Partnership’s December 31, 2007 Form 10-K.

Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of the restaurants for the corresponding period, and is earned at the point of sale.

Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.

The Partnership accounts for property and equipment in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets.” SFAS 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is recognized if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the asset.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — continued

Once a determination has been made that an impairment loss should be recognized for long-lived assets, various assumptions and estimates are used to determine fair value including, among others, estimated costs of construction and development, recent sales of comparable properties and the opinions of fair value prepared by independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

None.

Item 4T. Controls and Procedures

(a) Evaluation of disclosure controls and procedures:

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Treasurer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the President and Treasurer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic Securities and Exchange Commission filings.

(b) Changes in internal controls:

There were no significant changes in the Company’s internal controls over financial reporting that occurred during our most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

(c) Asset-Backed issuers:

Not applicable.

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PART II. OTHER INFORMATION

There is no information required to be reported for any items under Part II, except as follows:

Item 1. Legal Proceedings

On February 21, 2008, the General Partner settled a property encroachment lawsuit regarding the Partnership’s restaurant on Haven Avenue in Rancho Cucamonga, California. To settle the case, the General Partner agreed in principal to have the Partnership purchase the encroachment area for $70,000 and obtain a full release of both parties’ claims subject to completion of the transfer of ownership, which is expected during the second quarter of 2008.

Item 6. Exhibits

31.1	Shirlene Lopez’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Steven L. Brake’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DEL TACO RESTAURANT PROPERTIES I
	(a California limited partnership)
	Registrant
	Del Taco LLC
	General Partner
Date: May 15, 2008	/s/ Steven L. Brake
	Steven L. Brake Treasurer

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EXHIBIT INDEX

Exhibit No.	Description
31.1	Shirlene Lopez’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Steven L. Brake’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRESIDENT PURSUANT TO SECURITIES
ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Shirlene Lopez, certify that:

1.	I have reviewed this quarterly (“report”) on Form 10-Q of Del Taco Restaurant Properties I;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2008	/s/ Shirlene Lopez
	Shirlene Lopez
	President

EX-31.2

Exhibit 31.2

CERTIFICATION OF TREASURER PURSUANT TO SECURITIES
ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven L. Brake, certify that:

1.	I have reviewed this quarterly (“report”) on Form 10-Q of Del Taco Restaurant Properties I;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2008	/s/ Steven L. Brake
	Steven L. Brake
	Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18,
UNITED STATES CODE)

In connection with the Quarterly Report of Del Taco Restaurant Properties I (the “Company”) on Form 10-Q for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

   (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

   (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

 

Date: May 15, 2008	/s/ Shirlene Lopez
	Shirlene Lopez
	President
Date: May 15, 2008	/s/ Steven L. Brake
	Steven L. Brake
	Treasurer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.