-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JmKwXbZBNX9ba8SjTJlN6HHp7mU4Hh4C5JkkrYIzmfz7+mh1mbSfKszEcVMLfBhl Fqn3T4fS540o7KW1llZSVQ== 0000892569-97-000643.txt : 19970314 0000892569-97-000643.hdr.sgml : 19970314 ACCESSION NUMBER: 0000892569-97-000643 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970313 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEL TACO RESTAURANT PROPERTIES II CENTRAL INDEX KEY: 0000749153 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330064245 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16190 FILM NUMBER: 97555626 BUSINESS ADDRESS: STREET 1: 23041 AVENIDA DE LA CARLOTA, SUITE 400 CITY: LAGUNA HILLS STATE: CA ZIP: 92653 BUSINESS PHONE: 714 462-9300 MAIL ADDRESS: STREET 1: 1800 W KATELLA AVENUE CITY: ORANGE STATE: CA ZIP: 92667 10-K 1 FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1996 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER: 2-92121 DEL TACO RESTAURANT PROPERTIES II (A CALIFORNIA LIMITED PARTNERSHIP) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 23041 AVENIDA DE LA CARLOTA LAGUNA HILLS, CALIFORNIA (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 33-0064245 (I.R.S. EMPLOYER IDENTIFICATION NUMBER) 92653 (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 462-9300 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 ---- ---- DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's From S-11 Registration Statement filed July 10, 1984 are incorporated by reference into Part IV of this report. ================================================================================ 2 PART I ITEM 1. BUSINESS The Registrant is a publicly-held Limited Partnership organized under the California Uniform Limited Partnership Act. In accordance with the Partnership Agreement, the Registrant's General Partner is Del Taco, Inc., a California corporation ("General Partner"). The Registrant sold 27,006 Units aggregating $6,751,500 through offering of Limited Partnership Units from September 11, 1984 through December 31, 1985. The Registrant has engaged in the business of acquiring sites in California for the construction of seven Mexican-American restaurants for long-term lease to Del Taco, Inc. for operation under the Del Taco trade name. Two of the seven restaurants are no longer operating and were sold by the Registrant during 1994. Each Property is leased for 35 years on a triple-net basis for a rent equal to twelve percent of gross sales of the restaurant constructed thereon. The activities of the Registrant relating to acquisition and development of the Properties is presented under Item 2 below. The term of the Partnership Agreement is until April 30, 2025, unless terminated earlier by means provided therein. Because the five Properties owned by the Registrant constitute virtually all of the Registrant's income producing assets, the business of the Registrant is almost entirely dependent on the success of the Del Taco trade name restaurants which lease those Properties. In turn, the success of those restaurants, which are not operated by the Registrant, is dependent on a larger variety of factors, including, but not limited to, consumer demand and preference for fast food, in general, and Mexican-American food in particular. The Registrant has no full time employees. The General Partner is vested with full authority as to the general management and supervision of the business and affairs of the Registrant, and has a one percent interest in the profits or losses and distributions of the Registrant. Limited Partners have no right to participate in the management or conduct of such business and affairs. 2 3 ITEM 2. PROPERTIES The Registrant acquired seven Properties with proceeds obtained from the sale of Limited Partnership Units:
Date of Date of Restaurant Commencement of Address City, State Acquisition Constructed Operation (1) - ------- ----------- ----------- ----------- ------------- Bear Valley Road Victorville, CA February 4, 60 seat with June 13, 1986 drive through 1986 service window West Valley Colton, CA March 11, 1986 60 seat with June 24, Boulevard drive through 1986 service window Palmdale Palmdale, CA December 12, 60 seat with May 7, Boulevard 1986 drive through 1987 service window South Gate Town South Gate, CA January 28, 60 seat with May 28, Center 1987 drive through 1987 (2) service window Main Avenue Fallbrook, CA March 10, 1987 60 seat with August 19, drive through 1987 (3) service window De Anza Country Pedley, CA April 13, 1987 60 seat with October 28, Shopping Center drive through 1987 service window Varner Road Thousand Palms, CA October 14, 60 seat with April 28, 1987 drive through 1988 service window
(1) Commencement of operation is the first date Del Taco, Inc., as lessee, operated the facility on the site as a Del Taco restaurant. (2) In May 1994, the South Gate property was sold yielding net proceeds to the Registrant of $497,202. (3) In November 1994, the Fallbrook property was sold yielding net proceeds to the Registrant of $357,531. 3 4 PART II ITEM 3. LEGAL PROCEEDINGS The Registrant is not a party to any material pending legal proceedings. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS On July 14, 1994, the General Partner held a special meeting of limited partners of the Partnership at the Doubletree Hotel, 100 The City Drive, Orange, California, for the purpose of voting on whether Del Taco should continue to serve as the General Partner of the Partnership. A proposal to remove Del Taco as General Partner failed to obtain the necessary majority vote, receiving only 5.39 percent of eligible votes, and was defeated. Thus, Del Taco will continue to serve as sole General Partner of the Partnership, subject to all of the rights and responsibilities set forth in the Partnership's Restated Certificate and Agreement of Limited Partnership. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS The Registrant, a publicly-held Limited Partnership, sold 27,006 ($6,751,500) Limited Partnership Units during the offering period ended December 31, 1985 and currently has 1,488 Limited Partners of record. There is no public market for the trading of the Units. Distributions made by the Registrant to the Limited Partners during the past three fiscal years are described in Note 7 to the Notes to the Financial Statements contained under Item 8. 4 5 ITEM 6. SELECTED FINANCIAL DATA
For the Year Ended December 31, 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Rental Revenue $431,906 $439,055 $467,568 $480,017 $441,816 Interest and other income 2,810 2,799 4,815 4,555 3,987 Net income (loss) 239,807 250,634 198,359 (111,128) 224,729 Net income (loss) per limited Partnership Unit (1) 8.79 9.19 7.27 (4.07) 8.24 Cash Distributions per Limited Partnership Unit (2)(3)(4)(5)(6) From Operations 13.86 14.89 22.18 7.39 19.29 Sale of Land - - 31.65 - - Total Assets 2,698,704 2,833,273 3,001,469 4,255,885 4,575,792 Long-term Obligations None None None None None
(1) The net income (loss) per Limited Partnership Unit was calculated based upon 27,006 weighted average Units outstanding for all years presented. (2) Cash distributions for the quarter ended December 31, 1992 amounted to $3.92 per Limited Partnership Unit and were paid December 31, 1992. Five quarterly distributions were disbursed during the year ended December 31, 1992. (3) Two quarterly distributions were disbursed during the year ended December 31, 1993. Cash distributions for the quarters ended September 30, 1993 and December 31, 1993 amounted to $9.56 and were paid January 31, 1994 and February 2, 1994 respectively. (4) Cash distributions for the quarter ended December 31, 1994 amounted to $4.07 per Limited Partnership Unit and were paid January 17, 1995. Seven distributions were disbursed during the year ended December 31, 1994. (5) Cash distributions for the quarter ended December 31, 1995 amounted to $3.68 per Limited Partnership Unit and were paid January 15, 1995. Four distributions were disbursed during the year ended December 31, 1995. 5 6 ITEM 6. SELECTED FINANCIAL DATA - CONTINUED (6) Cash distributions for the quarter ended December 31, 1996 amounted to $3.82 per Limited Partnership Unit and were paid January 31, 1996. Four distributions were disbursed during the year ended December 31, 1996. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Registrant commenced offering of Limited Partnership Units on September 11, 1984. By December 31, 1985, the sale of such Units provided a total capitalization for the Registrant of $6,751,500. Fifteen percent of the cash received from the sale of Limited Partnership Units was used to pay commissions to brokers and to reimburse the General Partner for offering costs incurred. The remaining funds were expended for the acquisition of sites and construction of seven restaurants. In June 1986, the first two restaurants opened for business. Four additional restaurants opened in 1987, and the seventh restaurant opened in April of 1988. Approximately $5,600,000 was expended for such purposes. In February 1994, an escrow was opened pursuant to an agreement between the Registrant and the City of South Gate for the sale of the South Gate property to the city of South Gate for an amount which exceeded appraised value. Escrow closed on May 18, 1994. The net proceeds of $497,202 were distributed by the Partnership to Limited Partners of record as of May 31, 1994 and was paid June 1, 1994. In September 1994, the Registrant entered into agreement to sell the Fallbrook property for a price which exceeded the appraised value but was less than the net book value. Accordingly, the most recent carrying value of the Fallbrook property was adjusted down to the expected sales price generating a write down of $74,797 in the third quarter of 1994. Escrow closed on November 30, 1994. The net proceeds of $357,531 were distributed by the Partnership to Limited Partners of record as of November 30, 1994 and was paid December 12, 1994. Since the restaurants owned by the Registrant commenced operation, cash flow from Lease payments received from Del Taco, the Registrant's General Partner, which leases all five remaining restaurants, has provided adequate liquidity for operation of the Registrant (notwithstanding the sale of two of the restaurants, as noted above). However, the Registrant's overwhelmingly predominant source of income to meet its expenses and fund distributions to its Limited Partners is payments from Del Taco under the Leases, comprising primarily rent calculated on the basis of the gross 6 7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED sales of the restaurants operated on the Properties, as to which there are no contractually specified minimum or guaranteed amounts. Thus, the adequacy of the Registrant's liquidity and capital resources in the future will depend primarily upon the gross revenues of such restaurants as well as upon Del Taco's financial condition and results of operations generally. Results of Operations The Registrant owned seven Properties that were under long-term lease to Del Taco for restaurant operations. Two restaurants were sold in 1994 and five are currently operating. For the five operating Del Taco restaurants, the Registrant receives rental revenues equal to 12 percent of restaurant sales. The South Gate and Fallbrook properties were sold on May 18, 1994 and November 30, 1994, respectively. No gain or loss was recorded as a result of the sale of the South Gate property. In September 1994, the Registrant entered an agreement to sell the Fallbrook property for a price which exceeded the most recent appraised value but was less than the net book value. Accordingly, the carrying value was adjusted down to the expected sale price generating a write down of $74,797 in the third quarter of 1994. The Registrant had rental revenues of $431,906 for the year ended December 31, 1996, representing a decrease from the rental revenues of $439,055 in 1995. Such decrease is directly attributable to decreased sales at the remaining restaurants. The following table sets forth, for the periods indicated, the percentage relationship to total general and administrative expenses of items included in the Registrant's Statements of Income: PERCENTAGE OF TOTAL GENERAL & ADMIN. EXPENSE
Year Ended December 31, 1996 1995 1994 ------ ------ ------ Accounting fees 32.56% 31.66% 33.30% Distribution of information to Limited Partners 64.81 65.28 63.52 Other 2.63 3.06 3.18 ------ ------ ------ 100.00% 100.00% 100.00% ====== ====== ======
7 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED Operating expenses include general and administrative expenses which consist primarily of accounting fees and costs of distribution of information to the Limited Partners. For the years ended December 31, general and administrative expenses increased from $47,145 in 1995 to $50,834 in 1996 reflecting higher costs for accounting and distribution of information to the Limited Partners. The Registrant incurred depreciation expense in the amount of $144,075 for each of the years ended December 31, 1996, 1995 and 1994. For the reasons stated under "Liquidity and Capital Resources" above, the Registrant's results of operations in the future will depend primarily upon the gross revenues of the restaurants located on the Properties leased to Del Taco as well as upon Del Taco's financial condition and results of operations generally. In Fiscal 1996, the Registrant adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed of." The adoption of SFAS No. 121 did not have a material impact on the Registrant's financial statements. 8 9 ITEM 8. FINANCIAL STATEMENTS PART I. INFORMATION
INDEX PAGE NUMBER ----- ----------- Report of Independent Public Accountants 10 Balance Sheets at December 31, 1996 and 1995 11 Statements of Income for the years ended December 31, 1996, 1995 and 1994 12 Statement of Changes in Partners' Equity for the three years ended December 31, 1996 13 Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 14 Notes to Financial Statements 15-20
9 10 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Partners of Del Taco Restaurant Properties II: We have audited the accompanying balance sheets of DEL TACO RESTAURANT PROPERTIES II (a California limited partnership) as of December 31, 1996 and 1995, and the related statements of income, changes in partners' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Del Taco Restaurant Properties II as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP -------------------------------- ARTHUR ANDERSEN LLP Orange County, California February 14, 1997 10 11 DEL TACO RESTAURANT PROPERTIES II BALANCE SHEETS
DECEMBER 31 1996 1995 --------------- --------------- ASSETS CURRENT ASSETS: Cash $ 117,357 $ 108,954 Receivable from Del Taco, Inc. (Note 5) 37,271 36,166 Deposits 1,000 1,000 --------------- --------------- Total current assets 155,628 146,120 --------------- --------------- PROPERTY AND EQUIPMENT, AT COST (NOTE 1) Land and improvements 1,806,006 1,806,006 Buildings and improvements 1,238,879 1,238,879 Machinery and equipment 898,950 898,950 --------------- --------------- 3,943,835 3,943,835 Less: accumulated depreciation 1,400,759 1,256,682 --------------- --------------- 2,543,076 2,687,153 --------------- --------------- $2,698,704 $2,833,273 =============== =============== LIABILITIES AND PARTNERS' EQUITY CURRENT LIABILITIES: Payable to Limited Partners $ 5,047 $ 3,562 Accounts Payable 3,000 1,050 --------------- --------------- Total current liabilities 8,047 4,612 --------------- --------------- PARTNERS' EQUITY (NOTE 2) Limited Partners 2,712,800 2,849,424 General Partner - Del Taco, Inc. (22,143) (20,763) --------------- --------------- 2,690,657 2,828,661 --------------- --------------- $2,698,704 $2,833,273 =============== ===============
The accompanying notes are an integral part of these financial statements. 11 12 DEL TACO RESTAURANT PROPERTIES II STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31 1996 1995 1994 ------------ ------------ -------------- REVENUES: Rent (Note 4) $431,906 $439,055 $467,568 Interest 2,120 2,299 3,990 Other 690 500 825 ------------ ------------ -------------- 434,716 441,854 472,383 ------------ ------------ -------------- EXPENSES: Writedown of real estate held for sale (Note 8) - - 77,266 General and administrative 50,834 47,145 52,683 Depreciation 144,075 144,075 144,075 ------------ ------------ -------------- 194,909 191,220 274,024 ------------ ------------ -------------- Net income $239,807 $250,634 $198,359 ============ ============ ============== Net income per Limited Partnership Unit (Note 1) $8.79 $9.19 $7.27 ===== ===== =====
The accompanying notes are an integral part of these financial statements. 12 13 DEL TACO RESTAURANT PROPERTIES II STATEMENT OF CHANGES IN PARTNERS' EQUITY THREE YEARS ENDED DECEMBER 31, 1996
Limited Partners ------------------------- General Units Amount Partner Total ----------- ----------- ----------- ----------- Balance, December 31, 1993 27,006 $4,260,108 $(15,147) $4,244,961 Net income 196,375 1,984 198,359 Cash distributions (Note 7) (1,453,241) (6,046) (1,459,287) ----------- ----------- ----------- ----------- Balance, December 31, 1994 27,006 3,003,242 (19,209) 2,984,033 Net income 248,128 2,506 250,634 Cash distributions (Note 7) (401,946) (4,060) (406,006) ----------- ----------- ----------- ----------- Balance, December 31, 1995 27,006 2,849,424 (20,763) 2,828,661 Net income 237,409 2,398 239,807 Cash distributions (Note 7) (374,033) (3,778) (377,811) ----------- ----------- ----------- ----------- Balance, December 31, 1996 27,006 $2,712,800 ($22,143) $2,690,657 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 13 14 DEL TACO RESTAURANT PROPERTIES II STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31 1996 1995 1994 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $239,807 $250,634 $198,359 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 144,075 144,075 144,075 Writedown of real estate held for sale -- -- 77,266 Increase (decrease) in payable to Limited Partners 1,485 (13,874) 7,329 (Increase) decrease in receivable from General Partner (1,103) (294) 4,640 Increase (decrease) in accounts payable 1,950 1,050 (816) ------------- ------------- ------------- Net cash provided by operating activities 386,214 381,591 430,853 ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of land -- -- 854,733 ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions to partners (377,811) (406,006) (1,459,287) ------------- ------------- ------------- Net increase (decrease) in cash 8,403 (24,415) (173,701) Beginning cash balance 108,954 133,369 307,070 ------------- ------------- ------------- Ending cash balance $117,357 $108,954 $133,369 ============= ============= =============
The accompanying notes are an integral part of these financial statements. 14 15 DEL TACO RESTAURANT PROPERTIES II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES THE PARTNERSHIP: Del Taco Restaurant Properties II (a California limited partnership) was formed on June 20, 1984, for the purpose of acquiring real property in California for construction of seven Mexican-American restaurants to be leased under long-term agreements to Del Taco, Inc. (General Partner for operation under the Del Taco trade name). As of April 28, 1988, all seven restaurants had commenced operation on acquired properties. The South Gate and Fallbrook properties were sold on May 18, 1994 and November 30, 1994, respectively. (see Note 8). BASIS OF ACCOUNTING: The Partnership utilizes the accrual method of accounting for transactions relating to the business of the Partnership. Distributions are made to the General and Limited Partners in accordance with the provisions of the Partnership Agreement (see Note 2). 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. INCOME TAXES: No provision has been made for federal or state income taxes on Partnership net income, since the Partnership is not subject to income tax. Partnership income is includable in the taxable income of the individual partners as required under applicable income tax laws. Certain items, primarily related to depreciation methods, are accounted for differently for income tax reporting purposes (see Note 6). NET INCOME PER LIMITED PARTNERSHIP UNIT: Net income per Limited Partnership Unit is based upon the weighted average number of Units outstanding during the period which amounted to 27,006 for all years presented. USE OF ESTIMATES: The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 15 16 DEL TACO RESTAURANT PROPERTIES II NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1996 NOTE 2 - PARTNERS' EQUITY Pursuant to the Partnership Agreement, annual partnership net income or loss is 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, distributions and syndication costs previously allocated. Additional gains will be allocated 15 percent to the General Partner and 85 percent to the Limited Partners. NOTE 3 - SITE ACQUISITION AND DEVELOPMENT FEE Under terms of the Partnership Agreement, the General Partner is entitled to receive a site acquisition and development fee in an amount equal to the lesser of five percent of the cost of the related property or $35,000. The fee shall be for service rendered in connection with site selection and the design and supervision of construction of improvements to acquired properties. No site acquisition and development fees were paid in 1996, 1995 and 1994. NOTE 4 - LEASING ACTIVITIES The Registrant leases (the "Leases") certain properties (the "Properties") for operation of restaurants to Del Taco, Inc. ("General Partner") 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. The Registrant had a total of five Properties leased as of December 31, 1996, 1995 and 1994. 16 17 DEL TACO RESTAURANT PROPERTIES II NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1996 NOTE 5 - RELATED PARTIES The receivable from Del Taco consists of rent accrued for the month of December 1996. The rent receivable was collected on January 17, 1997. The General Partner received $3,778 in distributions during 1996 relating to its one percent interest in the Registrant. 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. 17 18 DEL TACO RESTAURANT PROPERTIES II NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1996 NOTE 6 - INCOME TAXES A reconciliation of financial statement net income to taxable income for each of the periods is as follows:
1996 1995 1994 ---------- ---------- ---------- Net income per financial statements $239,807 $250,634 $198,359 Tax loss on real estate held for sale -- -- (199,087) Excess book depreciation 98,136 90,287 45,483 ---------- ---------- ---------- Taxable income $337,943 $340,921 $44,755 ========== ========== ==========
A reconciliation of partnership equity per the financial statements to net worth for tax purposes as of December 31, 1996, is as follows: Partners' equity per financial statements $2,690,657 Issue costs of Limited Partnership Units capitalized for tax purposes 986,745 Excess tax depreciation (33,784) Writedown of Real Estate held for Sale 161,963 Other 5,465 ---------- Net worth for tax purposes $3,811,046 ==========
18 19 DEL TACO RESTAURANT PROPERTIES II NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1996 NOTE 7 - CASH DISTRIBUTIONS TO LIMITED PARTNERS Cash distributions to Limited Partners were as follows:
Number of Weighted Units Distributions per Average Number Outstanding ------------------------------- of Units at the End of Quarter Ended Limited Partnership Unit Outstanding Quarter ------------------------------- ---------------- --------------- From Sale Operations of Land September 30, 1993 $ 2.64 $ - 27,006 27,006 December 31, 1993 6.92 - 27,006 27,006 March 31, 1994 3.56 - 27,006 27,006 June 30, 1994 4.59 18.41 (1) 27,006 27,006 September 30, 1994 4.47 - 27,006 27,006 December 31, 1994 - 13.24 (2) 27,006 27,006 ------ ------ Total paid in 1994 $22.18 $31.65 ====== ====== December 31, 1994 $ 4.07 $ - 27,006 27,006 March 31, 1995 3.41 - 27,006 27,006 June 30, 1995 3.34 - 27,006 27,006 September 30, 1995 4.07 - 27,006 27,006 ------ ------- Total paid in 1995 $14.89 $ - ====== ======= December 31, 1995 $ 3.68 $ - 27,006 27,006 March 31, 1996 3.49 - 27,006 27,006 June 30, 1996 2.85 - 27,006 27,006 September 30, 1996 3.83 - 27,006 27,006 ------ ------- Total paid in 1996 $13.85 $ - ====== =======
Cash distributions per Limited Partnership Unit were calculated based upon the weighted average number of Units outstanding for each quarter and were paid from operations. Cash distributions for the quarter ended December 31, 1996 amounted to $3.82 per Limited Partnership Unit and were paid January 31, 1997. (1) On June 1, 1994, the Partnership distributed to Limited Partners of record as of May 31, 1994, $497,202 of net proceeds received from the sale of the South Gate property. (2) On December 12, 1994, the Partnership distributed to Limited Partners of record as of November 30, 1994, $357,531 of net proceeds received from the sale of the Fallbrook property. 19 20 DEL TACO RESTAURANT PROPERTIES II NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1996 NOTE 8 - WRITEDOWN OF REAL ESTATE HELD FOR SALE In May 1994, the South Gate property was sold yielding net proceeds to the Registrant of $497,202. In September 1994, the Registrant entered an agreement to sell the Fallbrook property for a price which exceeded the appraised value but was less than the net book value. Accordingly, the carrying value of the Fallbrook property was adjusted down to the expected sale price generating a write down of $74,797 in the third quarter of 1994. 20 21 PART III ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER (a) & (b) The executive officers and directors of the General Partner and their ages are set forth below:
Name Title Age - ---- ----- --- Kevin K. Moriarty Director, Chairman and Chief Executive Officer 50 Paul W. Hitzelberger Executive Vice President, Brand Strategy and Franchise Relations/Development 52 Robert Terrano Executive Vice President and Chief Financial Officer 41 James D. Stoops Executive Vice President, Operations 44 Janet D. Simmons Senior Vice President, Purchasing 40 Michael L. Annis Vice President, Secretary and General Counsel 50 C. Douglas Mitchell Vice President and Corporate Controller 46
The above referenced executive officers and directors of the General Partner will hold office until the annual meeting of its shareholders and directors, which is scheduled for the later part of 1997. (c) None (d) No family relationship exists between any such director or executive officer of the General Partner. (e) The following is an account of the business experience during the past five years of each such director and executive officer: 21 22 Kevin K. Moriarty, Director, Chairman and Chief Executive Officer of Del Taco, Inc. Mr. Moriarty began his career with Burger King Corporation in 1974 in Operations Unit Management. In 1983, he was promoted to Area Manager in New York, and was subsequently promoted to the Regional Vice President, Chicago Region in 1985. In 1988, he became Executive Vice President and General Manager of the North Central Division. Mr. Moriarty served in that position until 1990 when he joined Del Taco, Inc. as President and Chief Executive Officer on July 31, 1990. Mr. Moriarty has served as a director of the General Partner since 1990. Paul W. Hitzelberger, Executive Vice President, Brand Strategy and Franchise Relations/Development of Del Taco, Inc. He was appointed to his current position in December 1995. Previously, Mr. Hitzelberger was Executive Vice President, Marketing from February 1991 and Vice President, Marketing from 1989 to 1991. Mr. Hitzelberger has responsibility for franchise development, relations and training and will oversee public relations and training for the corporation. From September 1988 through September 1989, Mr. Hitzelberger was Chief Executive Officer of Environmental Marketing Group. Prior to that, Mr. Hitzelberger was a Vice President of Del Taco, Inc. Prior to joining Del Taco, Inc., he served as Vice President - Marketing at the department store division of Lucky Stores, Inc., a major supermarket retailer. Prior to his position with Lucky, Mr. Hitzelberger held various positions in marketing and retailing at Wallpapers to Go, Inc., a division of General Mills, Inc., and Coast to Coast Stores, Inc. a subsidiary of Household Merchandising, Inc. Mr. Hitzelberger received a Master of Business Administration degree from Loyola University in Chicago, Illinois. Robert J. Terrano, Executive Vice President and Chief Financial Officer of Del Taco, Inc. From May 1994 to April 1995, Mr. Terrano served as Chief Financial Officer for Denny's, Inc. in Spartanburg, S.C. From August 1983 to May 1994, he served with Burger King Corporation, Miami Florida, in a variety of positions, most recently as Division Controller. Mr. Terrano joined Del Taco, Inc. in April 1995. James D. Stoops, Executive Vice President, Operations of Del Taco, Inc. From 1968 to 1991, Mr. Stoops served in a wide variety of Operations positions with Burger King Corporation with increasing levels of responsibility. In 1985, Mr. Stoops was appointed Region Vice President/General Manager for the New York region and served in that position until October of 1990. In January of 1991, he joined Del Taco, Inc. in his current post. Janet D. Simmons, Senior Vice President, Purchasing of Del Taco, Inc. From 1979 to 1986, Ms. Simmons was with Denny's Incorporated. She served in the Research and Development department in a variety of positions until 1982 when she was promoted to the position of Purchasing Agent. Ms. Simmons was hired in 1986 as Manager of Contract Purchasing with Carl Karcher Enterprises, a post she held until March 1990 when she became Vice President, Purchasing for Del Taco, Inc. Ms. Simmons has a Bachelor of Science degree in Foods and Nutrition from Cal State Polytechnic University in Pomona, California. 22 23 Michael L. Annis, Vice President, Secretary and General Counsel of Del Taco, Inc. From 1981 to 1986 Mr. Annis served as Regional Real Estate Manager and Director of Real Estate Services with Taco Bell, Inc. In 1986 he served as Regional General Manager with Quaker State Minit Lube. In January of 1987 Mr. Annis joined Red Robin International, Inc. as General Counsel and was subsequently promoted to Vice President/Secretary and later Vice President Real Estate Development/Secretary and General Counsel, the position he held until joining Del Taco, Inc. in December of 1993. Mr. Annis received his J.D. Degree from Whittier College. C. Douglas Mitchell, Vice President and Corporate Controller. Mr. Mitchell joined Del Taco, Inc. in August of 1994 as Controller and was promoted to his current position in January 1996. From 1990 to 1994, Mr. Mitchell was a Senior Audit Manager with Coopers & Lybrand. Prior to 1990, Mr. Mitchell held various positions in finance and accounting with the Geneva Companies (a subsidiary of Chemical Bank), Zaremba Corporation (a real estate developer) and The Dexter Corporation (an international manufacturer of specialty materials). Mr. Mitchell has a Bachelor of Science degree with a major in accounting from the University of Southern California. ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS The Registrant has no executive officers or directors and pays no direct remuneration to any executive officer or director of its General Partner. The Registrant has not issued any options or stock appreciation rights to any executive officer or director of its General Partner, nor does the Registrant propose to pay any annuity, pension or retirement benefits to any executive officer or director of its General Partner. The Registrant has no plan, nor does the Registrant presently propose a plan, which will result in any remuneration being paid to any executive officer or director of the General Partner upon termination of employment. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) No person of record currently owns more than five percent of Limited Partnership Units of the Registrant, nor was any person known of by the Registrant to own of record and beneficially, or beneficially only, more than five percent of such securities. (b) Neither Del Taco, Inc., nor any executive officer or director of Del Taco, Inc. owns any Limited Partnership Units of the Registrant. (c) The Registrant knows of no contractual arrangements, the operation or the terms of which may at a subsequent date result in a change in control of the Registrant, except for provisions in the Partnership Agreement providing for removal of the General Partner by holders of a majority of the Limited Partnership Units and if a material event of default occurs under the financing agreements of the General Partner. 23 24 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (a) No transactions have occurred between the Registrant and any executive officer or director of its General Partner. During 1996, the following transactions occurred between the Registrant and the General Partner pursuant to the terms of the Partnership Agreement. (1) The General Partner earned $2,398 as its one percent share of the net income of the Registrant. (2) The General Partner received $3,778 in distributions relating to its one percent interest in the Registrant. (b) During 1996, the Registrant had no business relationships with any entity of a type required to be reported under this item. (c) Neither the General Partner, any director or officer of the General Partner or any associate of any such person, was indebted to the Registrant at any time during 1996 for any amount in excess of $60,000. (d) Not applicable. 24 25 PART IV ITEM 14(A)(1) AND (2). EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. (b) No reports on Form 8-K were filed during the last quarter of 1996. (c) Exhibits required by Item 601 of Regulation S-K: 1. Incorporated herein by reference, Agreement of Limited Partnership of Del Taco Restaurant Properties II filed as Exhibit 3.01 to Registrant's Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on July 10, 1984. 2. Incorporated herein by reference, Amendment to Agreement of Limited Partnership of Del Taco Restaurant Properties II. 3. Incorporated herein by reference, Form of Standard Lease to be entered into by Registrant and Del Taco, Inc., as lessee, filed as Exhibit 10.02 to Registrant's Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on July 10, 1984. 27. Financial Data Schedule. 25 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 II a California limited partnership Registrant Del Taco, Inc. General Partner Date March 07, 1997 Kevin K. Moriarty -------------- ----------------- Kevin K. Moriarty Director, Chairman and Chief Executive Officer Date March 07, 1997 Michael L. Annis -------------- ---------------- Michael L. Annis Vice President, Secretary and General Counsel Date March 07, 1997 Robert J. Terrano -------------- ----------------- Robert J. Terrano Executive Vice President and Chief Financial Officer Date March 07, 1997 C. Douglas Mitchell -------------- ------------------- C. Douglas Mitchell Vice President and Corporate Controller
26 EX-27 2 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 117,357 1,000 37,271 0 0 155,628 3,943,835 1,400,759 2,698,704 8,047 0 0 0 0 2,690,857 2,698,704 0 434,716 0 194,909 0 0 0 239,807 0 239,807 0 0 0 239,807 8.79 8.79
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