10-Q 1 a66765e10-q.txt FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2000 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 SEPTEMBER 30, 2000 . 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. 2-92121 DEL TACO RESTAURANT PROPERTIES II A CALIFORNIA LIMITED PARTNERSHIP (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 33-0064245 (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 II
PART I. FINANCIAL INFORMATION PAGE NUMBER ----------- Item 1. Financial Statements and Supplementary Data Balance Sheets at September 30, 2000 (Unaudited) and December 31, 1999 3 Statements of Income for the three and nine months ended September 30, 2000 and 1999 (Unaudited) 4 Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 (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 II BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash $ 164,231 $ 139,292 Receivable from General Partner 46,034 41,324 Deposits 1,000 1,000 ----------- ----------- Total current assets 211,265 181,616 ----------- ----------- PROPERTY AND EQUIPMENT, AT COST: 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 1,639,266 1,598,631 ----------- ----------- 2,304,569 2,345,204 ----------- ----------- $ 2,515,834 $ 2,526,820 =========== =========== LIABILITIES AND PARTNERS' EQUITY CURRENT LIABILITIES: Payable to Limited Partners $ 19,768 $ 15,666 Accounts payable 12,703 8,666 ----------- ----------- Total current liabilities 32,471 24,332 ----------- ----------- PARTNERS' EQUITY: Limited Partners 2,507,579 2,526,513 General Partner-Del Taco, Inc. (24,216) (24,025) ----------- ----------- 2,483,363 2,502,488 ----------- ----------- $ 2,515,834 $ 2,526,820 =========== ===========
The accompanying notes are an integral part of these financial statements. -3- 4 DEL TACO RESTAURANT PROPERTIES II STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 -------- -------- -------- -------- REVENUES: Rent $140,179 $128,625 $389,994 $364,337 Interest 1,401 934 2,905 2,570 Other 550 750 1,020 2,200 -------- -------- -------- -------- 142,130 130,309 393,919 369,107 -------- -------- -------- -------- EXPENSES: General and administrative 8,669 8,699 42,465 42,503 Depreciation 13,545 13,545 40,635 40,635 -------- -------- -------- -------- 22,214 22,244 83,100 83,138 -------- -------- -------- -------- Net income $119,916 $108,065 $310,819 $285,969 ======== ======== ======== ======== Net income per limited partnership unit $ 4.40 $ 3.96 $ 11.39 $ 10.48 ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. -4- 5 DEL TACO RESTAURANT PROPERTIES II STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 310,819 $ 285,969 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 40,635 40,635 (Increase) decrease in receivable from General Partner (4,710) 1,481 Decrease in deposits -- 360 Increase in accounts payable and payable to limited partners 8,141 1,452 --------- --------- Net cash provided by operating activities 354,885 329,897 CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions to partners (329,946) (324,328) --------- --------- Net increase in cash 24,939 5,569 Beginning cash balance 139,292 134,928 --------- --------- Ending cash balance $ 164,231 $ 140,497 ========= =========
The accompanying notes are an integral part of these financial statements. -5- 6 DEL TACO RESTAURANT PROPERTIES II NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 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 partnership's annual report on Form 10-K for the year ended December 31, 1999. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the partnership's financial position at September 30, 2000, the results of operations and cash flows for the nine month periods ended September 30, 2000 and 1999 have been included. Operating results for the three and nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. 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 27,006 in 2000 and 1999. Pursuant to the partnership agreement, annual partnership 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. -6- 7 DEL TACO RESTAURANT PROPERTIES II NOTES TO FINANCIAL STATEMENTS - CONTINUED SEPTEMBER 30, 2000 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. For the three months ended September 30, 2000, the five restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $1,168,160 and net income of $73,032 as compared to $1,071,879 and $69,381 respectively, for the corresponding period in 1999. Net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense. For the nine months ended September 30, 2000, the five restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $3,249,951 and net income of $184,709 as compared to $3,036,143 and $169,733 respectively, for the corresponding period in 1999. NOTE 4 - TRANSACTIONS WITH DEL TACO The receivable from General Partner consists primarily of rent accrued for the month of September. The September rent was collected on October 13, 2000. 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 October 13, 2000, a distribution to the limited partners of $138,069 or approximately $5.11 per limited partnership unit, was approved. Such distribution was paid on October 18, 2000. The General Partner also received a distribution of $1,395 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 September 1984 and December 1985. 15% of the $6.751 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 $5.6 million of the remaining funds were used to acquire sites and build seven restaurants. Two restaurants were sold in 1994. The five 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 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. The following table sets forth rental revenue earned by restaurant for the year:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 -------- -------- -------- -------- Bear Valley Rd., Victorville, CA $ 25,099 $ 25,291 $ 70,585 $ 70,406 West Valley Blvd., Colton, CA 34,294 30,495 93,913 83,195 Palmdale Blvd., Palmdale, CA 22,242 20,820 61,136 60,703 DeAnza Country Shopping Center, Pedley, CA 22,174 18,541 60,402 50,703 Varner Road, Thousand Palms, CA 36,370 33,478 103,958 99,330 -------- -------- -------- -------- Total $140,179 $128,625 $389,994 $364,337 ======== ======== ======== ========
The partnership receives rental revenues equal to 12 percent of gross sales from the restaurants. The partnership earned rental revenue of $140,179 during the three month period ended September 30, 2000, which represents an increase of $11,554 from 1999. The partnership earned rental revenue of $389,994 during the nine month period ended September 30, 2000, which represents an increase of $25,657 from 1999. The changes in rental revenue between 2000 and 1999 are directly attributable to increases 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 -------------------------------- Nine Months Ended September 30, 2000 1999 ------- ------ Accounting fees 55.32% 53.72% Distribution of information to limited partners 44.68 46.28 ------ ------ 100.00% 100.00% ====== ======
For the three month period ended September 30, 2000, net income increased by $11,851 from 1999 to 2000 due to the increase in revenues of $11,821 and the $30 decrease in general and administrative expenses. For the nine month period ended September 30, 2000, net income increased by $24,850 from 1999 to 2000 due to the increase in revenues of $24,812 and the $38 decrease in general and administrative expenses. -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 nine months ended September 30, 2000. -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 II (a California limited partnership) Registrant Del Taco, Inc. General Partner Date: October 31, 2000 /s/ Robert J. Terrano --------------------- Robert J. Terrano Executive Vice President, Chief Financial Officer Date: October 31, 2000 /s/ C. Douglas Mitchell ----------------------- C. Douglas Mitchell Vice President and Corporate Controller -11- 12 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 27.1 Financial Data Schedule