10-Q 1 a74753e10-q.txt FORM 10-Q QUARTERLY PERIOD ENDED JUNE 30,2001 1 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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 JUNE 30, 2001. OR [ ] 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. 2-80930 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 (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 23041 AVENIDA DE LA CARLOTA, LAGUNA HILLS, CALIFORNIA 92653 (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 [X] NO [ ] -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2 INDEX DEL TACO RESTAURANT PROPERTIES I
PAGE NUMBER ----------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements and Supplementary Data Balance Sheets at June 30, 2001 (Unaudited) and December 31, 2000 3 Statements of Income for the three and six months ended June 30, 2001 and 2000 (Unaudited) 4 Statements of Cash Flows for the six months ended June 30, 2001 and 2000 (Unaudited) 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11
-2- 3 DEL TACO RESTAURANT PROPERTIES I BALANCE SHEETS
JUNE 30, December 31, 2001 2000 ----------- ------------ (UNAUDITED) ASSETS CURRENT ASSETS: Cash $ 193,852 $ 190,915 Receivable from General Partner 54,563 53,331 Deposits 600 876 ---------- ---------- Total current assets 249,015 245,122 ---------- ---------- PROPERTY AND EQUIPMENT, AT COST: 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 1,825,517 1,803,631 ---------- ---------- 2,176,125 2,198,011 ---------- ---------- $2,425,140 $2,443,133 ========== ========== LIABILITIES AND PARTNERS' EQUITY CURRENT LIABILITIES: Payable to Limited Partners $ 49,298 $ 41,937 Accounts payable 8,659 10,153 ---------- ---------- Total current liabilities 57,957 52,090 ---------- ---------- PARTNERS' EQUITY: Limited Partners 2,103,414 2,127,036 General Partner-Del Taco, Inc. 263,769 264,007 ---------- ---------- 2,367,183 2,391,043 ---------- ---------- $2,425,140 $2,443,133 ========== ==========
The accompanying notes are an integral part of these financial statements. -3- 4 DEL TACO RESTAURANT PROPERTIES I STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 -------- -------- -------- -------- REVENUES: Rent $157,539 $144,883 $305,190 $279,134 Interest 1,205 1,489 3,120 2,367 Other 275 75 975 375 -------- -------- -------- -------- 159,019 146,447 309,285 281,876 -------- -------- -------- -------- EXPENSES: General and administrative 11,727 9,621 33,463 30,875 Depreciation 10,943 10,943 21,886 21,886 -------- -------- -------- -------- 22,670 20,564 55,349 52,761 -------- -------- -------- -------- Net income $136,349 $125,883 $253,936 $229,115 ======== ======== ======== ======== Net income per limited partnership unit $ 15.43 $ 14.24 $ 28.73 $ 25.92 ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. -4- 5 DEL TACO RESTAURANT PROPERTIES I STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001 2000 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 253,936 $ 229,115 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 21,886 21,886 Increase in receivable from General Partner (1,232) (4,463) Decrease in deposits 276 - Increase in accounts payable and payable to limited partners 5,867 4,851 --------- --------- Net cash provided by operating activities 280,733 251,389 CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions to partners (277,796) (254,338) --------- --------- Net increase (decrease) in cash 2,937 (2,949) Beginning cash balance 190,915 170,290 --------- --------- Ending cash balance $ 193,852 $ 167,341 ========= =========
The accompanying notes are an integral part of these financial statements. -5- 6 DEL TACO RESTAURANT PROPERTIES I NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 NOTE 1 - BASIS OF PRESENTATION The accompanying financial statements, some of which are unaudited, have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete financial statements and should therefore be read in conjunction with the financial statements and notes thereto contained in the Registrant's annual report on Form 10-K for the year ended December 31, 2000. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the partnership's financial position at June 30, 2001, the results of operations and cash flows for the six month periods ended June 30, 2001 and 2000 have been included. Operating results for the three and six months ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. NOTE 2 - NET INCOME PER LIMITED PARTNERSHIP UNIT Net income per limited partnership unit is based upon the weighted average number of units outstanding during the periods presented, which amounted to 8,751 in 2001 and 2000. Pursuant to the partnership agreement, annual partnership net income is allocated one percent to 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, Inc. 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. There is no minimum rental under any of the leases. -6- 7 DEL TACO RESTAURANT PROPERTIES I NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2001 NOTE 3 - LEASING ACTIVITIES - CONTINUED For the three months ended June 30, 2001, the five restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $1,080,919 and net income of $75,048 as compared to $1,005,834 and $61,342, respectively, for the corresponding period in 2000. Net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense. For the three months ended June 30, 2001, the one restaurant operated by a Del Taco franchisee, for which the partnership is the lessor, had unaudited sales of $231,904 as compared with $201,525 during the same period in 2000. For the six months ended June 30, 2001, the five restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $2,095,477 and net income of $131,332 as compared to $1,933,897 and $105,100, respectively, for the corresponding period in 2000. For the six months ended June 30, 2001, the one restaurant operated by a Del Taco franchisee, for which the partnership is the lessor, had unaudited sales of $447,770 as compared with $392,223 during the same period in 2000. For the three months and six months ended June 30, 2001, the Elkhorn Boulevard restaurant in Sacramento, California reported net income of $5,304 and $8,610 as compared to net income of $629 and a net loss of $3,187 for the corresponding periods in 2000. NOTE 4 - TRANSACTIONS WITH DEL TACO The receivable from General Partner consists primarily of rent accrued for the month of June. The June rent receivable was collected on July 10, 2001. Del Taco, Inc. 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, Inc. 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 July 18, 2001, a distribution to the limited partners of $138,159, or approximately $15.79 per limited partnership unit, was approved. Such distribution was paid on July 20, 2001. The General Partner also received a distribution of $1,396 with respect to its 1% partnership interest. -7- 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The partnership offered limited partnership units for sale between March 1983 and March 1984. 15% of the $4.375 million raised through sale of limited partnership units was used to pay commissions to brokers and to reimburse the General Partner for offering costs incurred. Approximately $4 million of the remaining funds were used to acquire sites and build six restaurants. The six restaurants leased to Del Taco make up almost all of the income producing assets of the partnership. Therefore, the business of the partnership is almost entirely dependent on the success of the Del Taco trade name restaurants that lease the properties. The success of the restaurants is dependent on a large variety of factors, including, but not limited to, 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 two of the restaurants to Del Taco franchisees, one of which is affiliated with Del Taco). The following table sets forth rental revenue earned by restaurant for the three and six months ended June 30, 2001 and 2000:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 -------- -------- -------- -------- Riverside Avenue, Rialto, CA $ 22,996 $ 22,228 $ 44,474 $ 43,455 Elden Avenue, Moreno Valley, CA 26,103 24,184 50,458 46,169 Foothill Boulevard, La Verne, CA 33,035 30,639 63,790 58,115 Baseline & Archibald, Rancho Cucamonga, CA 27,828 24,183 53,733 47,067 Elkhorn Boulevard, Sacramento, CA 19,595 15,843 37,697 30,222 Haven Avenue, Rancho Cucamonga, CA 27,982 27,806 55,038 54,106 -------- -------- -------- -------- Total $157,539 $144,883 $305,190 $279,134 ======== ======== ======== ========
The partnership receives rental revenues equal to 12 percent of gross sales from the restaurants. The partnership earned rental revenue of $157,539 during the three month period ended June 30, 2001, which represents an increase of $12,656 from 2000. The partnership earned rental revenue of $305,190 during the six month period ended June 30, 2001, which represents an increase of $26,056 from 2000. The changes in rental revenue between 2000 and 2001 are directly attributable to changes in sales levels at the restaurants under lease. -8- 9 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 Six Months Ended June 30, 2001 2000 ------ ------ Accounting fees 69.26% 65.58% Distribution of information to Limited Partners 30.74 34.42 ------ ------ 100.00% 100.00% ====== ======
General and administrative costs for the six month period ended June 30, increased from 2000 to 2001 due to increased costs for income tax preparation and annual audit fees. For the three month period ended June 30, 2001, net income increased $10,466 from 2000 to 2001 due to the increase in revenues of $12,572 which was partially offset by the $2,106 increase in general and administrative expenses. For the six month period ended June 30, 2001, net income increased by $24,821 from 2000 to 2001 due to an increase in revenues of $27,409 which was partially offset by an increase in general and administrative expenses of $2,588. In accordance with recent U.S. Government regulations, the partnership is required to file annual K-1 income tax forms with the Internal Revenue Service electronically beginning in 2002 for the year ending December 31, 2001. In order to comply with this regulation, the partnership will incur additional costs to lease software to 1) prepare the tax forms electronically and 2) maintain the underlying partnership database. The General Partner and outside consultants are evaluating available software and expect to select a software package in the third calendar quarter of 2001. Estimates of additional general and administrative costs to lease the software range from $1,000 to $6,000 in 2001 (the conversion year) and range from $2,500 to $4,000 in each subsequent year. -9- 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b) No reports on Form 8-K were filed during the six months ended June 30, 2001. -10- 11 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. DEL TACO RESTAURANT PROPERTIES I (a California limited partnership) Registrant Del Taco, Inc. General Partner Date: July 31, 2001 /s/ Robert J. Terrano --------------------- Robert J. Terrano Executive Vice President, Chief Financial Officer Date: July 31, 2001 /s/ C. Douglas Mitchell ----------------------- C. Douglas Mitchell Vice President and Corporate Controller -11-