-----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, VbgqgpQGlCBLMZc/9xAueQu+aKuNgxZlugprhyHNtidDqC/swyQyWCocKZUNT0dp ChcESDEkerFxX3uXajzsjA== 0000892569-96-002228.txt : 19961106 0000892569-96-002228.hdr.sgml : 19961106 ACCESSION NUMBER: 0000892569-96-002228 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961105 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEL TACO RESTAURANT PROPERTIES III CENTRAL INDEX KEY: 0000786360 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330139247 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16851 FILM NUMBER: 96654302 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 AVE CITY: ORANGE STATE: CA ZIP: 92667 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED 09-30-96 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, 1996 --------------------------------------------- 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. 33-2462 DEL TACO RESTAURANT PROPERTIES III a California limited partnership (Exact name of registrant as specified in its charter) CALIFORNIA 33-0139247 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 23041 AVENIDA DE LA CARLOTA, SUITE 400, LAGUNA HILLS, CA 92653 (Address of principal executive offices) (Zip Code) (714) 462-7399 (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 --- --- -1- 2 INDEX ----- DEL TACO RESTAURANT PROPERTIES III ----------------------------------
PART I. FINANCIAL INFORMATION PAGE NUMBER - ------------------------------ ----------- Item 1. Financial Statements and Supplementary Data Balance Sheets at September 30, 1996 (Unaudited) and December 31, 1995 3 Statements of Income for the three and nine months ended September 30, 1996 and 1995 (Unaudited) 4 Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 (Unaudited) 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION - -------------------------- Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 - ----------
-2- 3 DEL TACO RESTAURANT PROPERTIES III ---------------------------------- BALANCE SHEETS --------------
SEPTEMBER 30 DECEMBER 31 1996 1995 ------------ ----------- (UNAUDITED) ASSETS ------ CURRENT ASSETS: Cash $ 194,486 $ 184,497 Receivable from General Partner (Note 5) 54,183 60,034 Deposits 1,000 1,000 ---------- ---------- Total current assets 249,669 245,531 ---------- ---------- RESTRICTED CASH (NOTE 2) 110,617 126,277 REAL ESTATE HELD FOR SALE (NOTE 7) 274,500 - PROPERTY AND EQUIPMENT, AT COST Land and improvements 4,405,966 4,613,613 Buildings and improvements 2,954,959 3,188,900 Machinery and equipment 1,522,922 1,668,310 ---------- ---------- 8,883,847 9,470,823 Less--accumulated depreciation 2,105,650 2,100,693 ---------- ---------- 6,778,197 7,370,130 ---------- ---------- $7,412,983 $7,741,938 ========== ========== LIABILITIES AND PARTNERS' EQUITY -------------------------------- CURRENT LIABILITIES: Payable to Limited Partners $ 5,277 $ 3,248 Accounts Payable 731 1,424 ---------- ---------- Total current liabilities 6,008 4,672 ---------- ---------- OBLIGATION TO GENERAL PARTNER 577,510 577,510 ---------- ---------- PARTNERS' EQUITY Limited Partners 6,859,667 7,186,807 General Partner-Del Taco, Inc. (30,202) (27,051) ---------- ---------- 6,829,465 7,159,756 ---------- ---------- $7,412,983 $7,741,938 ========== ==========
The accompanying notes are an integral part of these financial statements -3- 4 DEL TACO RESTAURANT PROPERTIES III ---------------------------------- STATEMENTS OF INCOME -------------------- (UNAUDITED) -----------
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 1996 1995 1996 1995 -------- -------- -------- -------- REVENUES: Rent (Notes 4 and 5) $190,182 $190,358 $541,377 $543,957 Interest 2,279 2,027 6,556 6,108 Other 250 125 575 675 -------- -------- -------- -------- 192,711 192,510 548,508 550,740 -------- -------- -------- -------- EXPENSES: General and administrative 14,461 9,515 48,505 44,056 Depreciation 71,687 71,688 215,063 215,067 Writedown of real estate held for resale (Note 7) 102,369 - 102,369 - -------- -------- -------- -------- 188,517 81,203 365,937 259,123 -------- -------- -------- -------- Net income $ 4,194 $111,307 $182,571 $291,617 ======== ======== ======== ======== Net income per Limited Partnership Unit (Note 3) $ 0.08 $ 2.32 $ 3.80 $ 6.08 ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. -4- 5 DEL TACO RESTAURANT PROPERTIES III ---------------------------------- STATEMENTS OF CASH FLOWS ------------------------ (UNAUDITED) -----------
NINE MONTHS ENDED SEPTEMBER 30 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $182,571 $291,617 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 215,063 215,067 Writedown of real estate held for sale 102,369 - Increase (decrease)in payable to Limited Partners 2,029 (2,302) Decrease in receivable from General Partner 5,851 3,193 Increase (decrease) in accounts payable (691) 5,155 -------- -------- Net cash provided by operating activities 507,192 512,730 CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in restricted cash 15,659 5,985 CASH FLOWS FROM FINANCING ACTIVITIES: Redemption of Limited Partnership Units (15,659) (5,985) Cash distribution to partners 497,203 495,202 -------- -------- Increase in cash 9,989 17,528 Beginning cash balance 184,497 181,855 -------- -------- Ending cash balance $194,486 $199,383 ======== ========
The accompanying notes are an integral part of these financial statements. -5- 6 DEL TACO RESTAURANT PROPERTIES III ---------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- SEPTEMBER 30, 1996 ------------------ 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, 1995. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the partnership's financial position at September 30, 1996, the results of operations and cash flows for the nine month periods ended September 30, 1996 and 1995 have been included. Operating results for the three and nine months ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. NOTE 2 - RESTRICTED CASH At September 30, 1996 the partnership had a restricted cash balance of $110,617. The restricted cash is a death and disability redemption fund. Such fund is maintained in an interest bearing account at a major commercial bank. A Limited Partner has the right, under certain circumstances involving such Limited Partner's death or disability, to tender to the Registrant for redemption all of the Units owned of record by such Limited Partner. The redemption price will be equal to the partners capital account balance as of the redemption date. The death and disability fund was established in 1987. The fund was limited to two percent of the gross proceeds from sale of the limited partnership units. Requests for redemption made after the funds in the death and disability fund are depleted will not be accepted. -6- 7 DEL TACO RESTAURANT PROPERTIES III - ---------------------------------- NOTES TO FINANCIAL STATEMENTS - CONTINUED - ----------------------------------------- SEPTEMBER 30, 1996 - ------------------ NOTE 3 - 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 47,472 in 1996 and 47,518 in 1995. The decrease is due to redemptions during the period ended September 30, 1996. 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, and until each class of Limited Partners receive their priority return as defined in the Partnership Agreement. Additional gains will be allocated 15 percent to the General Partner and 85 percent to the Limited Partners. 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 Registrant had a total of ten Properties leased to Del Taco as of September 30, 1996 (Del Taco, in turn, has subleased two of the restaurants). 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, except for the restaurant location in Twentynine Palms, California. In accordance with an agreement entered into November 30, 1993, effective February 1, 1994, the Del Taco restaurant in Twentynine Palms, California ceased operation as a Del Taco and reopened on February 3, 1994 under the trade name of Bobby Lyle's Incredible Edibles. In connection with the agreement, the lease agreement has been amended to reflect a base rent of $3,333.33 per month and overage rent of 12% of sales for annual sales greater than $333,333. On July 22, 1996, the subleasee ceased operation at the Twentynine Palms location. (see note 7) -7- 8 DEL TACO RESTAURANT PROPERTIES III - ---------------------------------- NOTES TO FINANCIAL STATEMENTS - CONTINUED - ----------------------------------------- SEPTEMBER 30, 1996 - ------------------ NOTE 5 - 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 11, 1996. Del Taco, Inc. serves in the capacity of general partner in other partnerships which are engaged in the business of operating restaurants, and four 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 6 with respect to certain distributions to the General Partner. NOTE 6 - DISTRIBUTIONS On October 14, 1996, a distribution to the Limited Partners of $176,858 or approximately $3.72 per Limited Partnership Unit, was approved. Such distribution was paid on October 15, 1996. The General Partner also received a distribution of $1,786 with respect to its 1% partnership interest. NOTE 7 - REAL ESTATE HELD FOR SALE In the third quarter of 1996, the Twentynine Palms location was reviewed for suitability as a continuing partnership property and it was concluded that the site is no longer suitable for operation of a Del Taco restaurant or as a partnership investment under a sublease arrangement. After the review of the site suitability, an estimate of current market value was prepared by an independent real estate appraiser. As a result of the review, the Twentynine Palms location was listed for sale with a broker and the property was written down it its net realizable value. Accordingly, the carrying value of the Twentynine Palms property was adjusted down to $274,500 generating a write down of 102,369 in the third quarter of 1996. -8- 9 ITEM 2. 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 February 21, 1986. By June 1, 1987, the sale of such Units provided a total capitalization for the Registrant of $12,001,000 including $1,000 attributable to the Original Limited Partner. 14.7 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. Approximately $9,500,000 of the remaining funds were expended for the acquisition of sites and construction of ten restaurants. During 1987, the first three restaurants opened for business. Four additional restaurants opened in 1988, two additional restaurants opened in 1989, and the tenth restaurant opened in 1990. In February 1992, the Registrant distributed to Limited Partners of record on December 31, 1991 $280,553 of net proceeds not utilized as reserves and not invested in Properties. Since the ten restaurants owned by the Registrant opened, cash flow from Lease payments received from Del Taco, the Registrant's General Partner, which leases all ten restaurants (two of which have been subleased), have provided adequate liquidity for operation of the Registrant. 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 sales of the restaurants operated on the Properties, as to which, except for the restaurant located in Twentynine Palms, 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. The September 30, 1996 restricted cash balance is a death and disability redemption fund totaling $110,617. Such fund is maintained in an interest bearing account at a major commercial bank. A Limited Partner has the right, under certain circumstances involving such Limited Partner's death or disability, to tender to the Registrant for redemption all of the Units owned of record by such Limited Partner. The redemption price will be equal to the partners capital account balance as of the redemption date. The death and disability fund was established in 1987. The fund was limited to two percent of the gross proceeds from sale of the limited partnership units. Requests for redemption made after the funds in the death and disability fund are -9- 10 depleted will not be accepted. All questions regarding the eligibility of a Limited Partner or the estate of a deceased Limited Partner to participate in the redemption fund are determined by the Special Limited Partner. Results of Operations - --------------------- The Registrant owns ten Properties that are under long-term lease to Del Taco for restaurant operations (Del Taco, in turn, has subleased two of the restaurants). In accordance with an agreement entered into November 30, 1993, effective February 1, 1994, the Del Taco restaurant in Twentynine Palms, California ceased operation as a Del Taco franchise and reopened February 3, 1994 under the trade name of Bobby Lyle's Incredible Edibles. On July 22, 1996, the subleasee ceased operation at the Twentynine Palms location. In the third quarter of 1996, the Twentynine Palms location was reviewed for suitability as a continuing partnership property and it was concluded that the site is no longer suitable for operation of a Del Taco restaurant or as a partnership investment under a sublease arrangement. After the review of the site suitability, an estimate of current market value was prepared by an independent real estate appraiser. As a result of the review, the Twentynine Palms location was listed for sale with a broker and the property was written down it its net realizable value. Accordingly, the carrying value of the Twentynine Palms property was adjusted down to $274,500 generating a write down of 102,369 in the third quarter of 1996. The Registrant receives rental revenues equal to 12 percent of restaurant sales. The Registrant had rental revenue of $190,182 for the three months ended September 30, 1996, representing a decrease from the rental revenues of $190,358 during the same period in 1995. The Registrant had rental revenues of $541,377 for the nine months ended September 30, 1996, representing a decrease from the rental revenues of $543,957 during the same period in 1995. Such decrease is directly attributable to decreased sales at the restaurants. -10- 11 The following table sets forth the percentage relationship to total general and administrative expenses of items included in the Registrant's Statements of Income:
Percentage of Total General & Administrative Expense -------------------------------- Nine Months Ended September 30 1996 1995 ------ ------- Accounting fees 32.06% 35.01% Distribution of information to Limited Partners 64.75 61.69 Other 3.19 3.30 ------ ------ 100.00% 100.00% ====== ======
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 three months ended September 30, general and administrative expenses increased from $9,515 in 1995 to $14,461 in 1996. The increase in general and administrative expense was caused primarily by printing costs for new checks, envelopes, stationary and an appraisal fee for the Twentynine Palms restaurant. For the nine months ended September 30, general and administrative expenses increased from $44,056 in 1995 to $48,505 in 1996. The Registrant incurred depreciation expense in the amount of $71,687 and $71,688 for the three months ended September 30, 1996 and 1995 respectively. The Registrant incurred depreciation expense in the amount of $215,063 and $215,067 for the nine months ended September 30, 1996 and 1995 respectively. As a result of the increase in revenues totaling $201 for the three months ended September 30, 1996 as compared to the corresponding period in 1995, and the increase in expenses totaling $107,314, primarily due to the writedown of real estate held for sale, the Registrant's net income decreased from $111,307 for the three months ended September 30, 1995 to $4,194 for the corresponding period in 1996. As a result of the decrease in revenues totaling $2,232 for the nine months ended -11- 12 September 30, 1996 as compared to the corresponding period in 1995, and the increase in expenses totaling $106,814, the Registrant's net income decreased from $291,617 for the nine months ended September 30, 1995 to $182,571 for the corresponding period in 1996. 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. 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, 1996. (c) Exhibit 27 - Financial Data Schedule. -12- 13 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 III (a California limited partnership) Registrant Del Taco, Inc. General Partner Date: October 30, 1996 /s/ Robert J. Terrano ---------------------------------- Robert J. Terrano Executive Vice President, Chief Financial Officer Date: October 30, 1996 /s/ C. Douglas Mitchell ---------------------------------- C. Douglas Mitchell Vice President and Corporate Controller -13- EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 JUL-01-1996 SEP-30-1996 194,486 1,000 54,183 0 0 249,669 9,158,347 2,105,650 7,412,983 6,008 0 0 0 0 6,829,465 7,412,983 0 192,711 0 188,517 0 0 0 4,194 0 4,194 0 0 0 4,194 0.08 0.08
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