-----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, PJyFw7HqnoEUG/XdiTHI+xaygnn5F0rNLQCDdqMYobyjvx5JD4Gf79r0cDY7tnwQ gNDhRjW3ySWg0sj/HlQQvw== 0000892569-98-002913.txt : 19981109 0000892569-98-002913.hdr.sgml : 19981109 ACCESSION NUMBER: 0000892569-98-002913 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981106 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: SEC FILE NUMBER: 000-16851 FILM NUMBER: 98739853 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 QUARTER ENDED SEPTEMBER 30, 1998 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, 1998 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) (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 [ ] -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, 1998 (Unaudited) and December 31, 1997 3 Statements of Income for the three and nine months ended September 30, 1998 and 1997 (Unaudited) 4 Statements of Cash Flows for the nine months ended September 30, 1998 and 1997 (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 11 SIGNATURES 12
-2- 3 DEL TACO RESTAURANT PROPERTIES III BALANCE SHEETS
SEPTEMBER 30 December 31 1998 1997 ------------ ----------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash $ 212,645 $ 189,315 Receivable from General Partner (Note 5) 61,974 59,368 Deposits 2,011 1,000 ----------- ----------- Total current assets 276,630 249,683 ----------- ----------- RESTRICTED CASH (NOTE 2) 99,895 107,809 ----------- ----------- PROPERTY AND EQUIPMENT, AT COST: Land and improvements 4,405,966 4,405,966 Buildings and improvements 2,954,959 2,954,959 Machinery and equipment 1,522,922 1,522,922 ----------- ----------- 8,883,847 8,883,847 Less--accumulated depreciation 2,632,843 2,437,557 ----------- ----------- 6,251,004 6,446,290 ----------- ----------- $ 6,627,529 $ 6,803,782 =========== =========== LIABILITIES AND PARTNERS' EQUITY CURRENT LIABILITIES: Payable to Limited Partners $ 18,149 $ 4,006 Accounts Payable 3,035 9,938 ----------- ----------- Total current liabilities 21,184 13,944 ----------- ----------- OBLIGATION TO GENERAL PARTNER 577,510 577,510 ----------- ----------- PARTNERS' EQUITY: Limited Partners 6,064,143 6,245,880 General Partner-Del Taco, Inc. (35,308) (33,552) ----------- ----------- 6,028,835 6,212,328 ----------- ----------- $ 6,627,529 $ 6,803,782 =========== ===========
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 ------------------------ ------------------------ 1998 1997 1998 1997 -------- -------- -------- -------- REVENUES: Rent (Notes 4 and 5) $193,195 $187,675 $540,983 $543,882 Interest 2,645 2,497 6,798 7,874 Other 1,000 1,325 2,677 2,000 -------- -------- -------- -------- 196,840 191,497 550,458 553,756 -------- -------- -------- -------- EXPENSES: General and administrative 9,282 7,396 45,028 39,280 Depreciation 62,520 66,383 195,286 199,149 -------- -------- -------- -------- 71,802 73,779 240,314 238,429 -------- -------- -------- -------- Net income $125,038 $117,718 $310,144 $315,327 ======== ======== ======== ======== Net income per Limited Partnership Unit (Note 3) $ 2.61 $ 2.46 $ 6.48 $ 6.59 ======== ======== ======== ========
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 ------------------------- 1998 1997 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 310,144 $ 315,327 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 195,286 199,149 Increase (decrease)in payable to Limited Partners 14,143 (256) Increase in receivable from General Partner (2,606) (3,308) Decrease in accounts payable (6,902) (488) Increase in deposits (1,011) -- ---------- ---------- Net cash provided by operating activities 509,054 510,424 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in restricted cash 7,913 2,808 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Redemption of Limited Partnership Units (7,913) (2,808) Cash distribution to partners (485,724) (502,677) ---------- ---------- Net cash used in financing activities (493,637) (505,485) ---------- ---------- Increase in cash 23,330 7,747 Beginning cash balance 189,315 190,185 ---------- ---------- Ending cash balance $ 212,645 $ 197,932 ========== ==========
The accompanying notes are an integral part of these financial statements. -5- 6 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998 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, 1997. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the partnership's financial position at September 30, 1998, the results of operations and cash flows for the nine month periods ended September 30, 1998 and 1997 have been included. Operating results for the three and nine months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. NOTE 2 - RESTRICTED CASH At September 30, 1998 the partnership had a restricted cash balance of $99,895. 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. 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 47,378 in 1998 and 47,399 in 1997. -6- 7 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS - CONTINUED SEPTEMBER 30, 1998 NOTE 3 - NET INCOME PER LIMITED PARTNERSHIP UNIT - (Continued) 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 nine Properties leased to Del Taco as of September 30, 1998 (Del Taco, in turn, has subleased one 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. For the three months ended September 30, 1998, the eight restaurants operated by Del Taco, for which the Registrant is the lessor, had combined, unaudited sales of $1,494,530 and net income of $79,072 as compared to $1,371,159 and $49,770 respectively, for the corresponding period in 1997. Net income by restaurant includes charges for general & administrative expenses incurred in connection with supervision of restaurant operations and interest expense. For the three months ended September 30, 1998, the one restaurant operated by a Del Taco franchisee, for which the Registrant is the lessor, had unaudited sales of $115,438 as compared with $109,463 during the same period in 1997. For the nine months ended September 30, 1998, the eight restaurants operated by Del Taco, for which the Registrant is the lessor, had combined, unaudited sales of $4,183,655 and net income of $186,422 as compared to $3,980,197 and $126,752 respectively, for the corresponding period in 1997. For the nine months ended September 30, 1998, the one restaurant operated by a Del Taco franchisee, for which the Registrant is the lessor, had unaudited sales of $324,541 as compared with $302,159 during the same period in 1997. -7- 8 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS - CONTINUED SEPTEMBER 30, 1998 NOTE 4 - LEASING ACTIVITIES - (Continued) For the three months and nine months ended September 30, 1998, the East Valley Blvd. restaurant in Walnut, California reported net losses of $2,150 and $6,507 as compared to net losses of $4,512 and $16,599 respectively, for the corresponding period in 1997. For the three months and nine months ended September 30, 1998, the Vista Way restaurant in Vista, California reported net income of $1,355 and a net loss of $7,295 as compared to a net loss of $545 and net income of $492 respectively, for the corresponding period in 1997. 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 13, 1998. 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 12, 1998, a distribution to the Limited Partners of $186,862 or approximately $3.95 per Limited Partnership Unit, was approved. Such distribution was paid on October 15, 1998. The General Partner also received a distribution of $1,887 with respect to its 1% partnership interest. NOTE 7 - SALE OF PROPERTY In November 1997, the Twentynine Palms property was sold yielding net proceeds of $278,612, resulting in a gain of $4,112. -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. 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. One restaurant was sold in November 1997. Since the nine restaurants owned by the Registrant opened, cash flow from Lease payments received from Del Taco, the Registrant's General Partner, which leases all nine remaining restaurants (one of which has 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 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, 1998 restricted cash balance is a death and disability redemption fund totaling $99,895. 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. 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 General Partner. -9- 10 Results of Operations The Registrant owns nine properties that are under long-term lease to Del Taco for restaurant operations (Del Taco, in turn, has subleased one of the restaurants). The Registrant receives rental revenues equal to 12 percent of restaurant sales. The Registrant had rental revenue of $193,195 for the three months ended September 30, 1998, representing an increase from the rental revenues of $187,675 during the same period in 1997. The Registrant had rental revenues of $540,983 for the nine months ended September 30, 1998, representing a decrease from the rental revenues of $543,882 during the same period in 1997. The changes in rental revenues was caused by increased sales at most restaurants and the sale of the Twentynine Palms restaurant. The following table sets forth rental revenue earned by restaurant for the quarter and year to date:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------ ------------------------ 1998 1997 1998 1997 -------- -------- -------- -------- Rancho California Plaza, Rancho California, CA $ 30,064 $ 27,864 $ 84,188 $ 84,095 East Vista Way, Vista, CA 16,205 15,193 45,324 43,924 4th Street, Perris, CA 30,788 26,757 86,163 78,052 Foothill Blvd., Upland, CA 22,603 20,070 62,616 57,251 Plaza at Puente Hills, Industry, CA 14,967 14,712 41,104 41,893 Twentynine Palms Hwy., Twentynine Palms, CA -- 10,000 -- 30,000 East Valley Blvd., Walnut, CA 12,463 10,997 33,995 31,642 W. Sepulveda Blvd., Los Angeles, CA 13,853 13,136 38,945 36,259 Lassen Street, Chatsworth, CA 29,586 28,813 85,068 80,766 Hesperia Road, Victorville, CA 22,666 20,133 63,580 60,000 -------- -------- -------- -------- Total $193,195 $187,675 $540,983 $543,882 ======== ======== ======== ========
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 --------------------- 1998 1997 -------- -------- Accounting fees 53.91% 53.32% Distribution of information to Limited Partners 44.29 44.64 Other 1.80 2.04 -------- -------- 100.00% 100.00% ======== ========
-10- 11 Certain reclassifications have been made to the fiscal year 1997 general and administrative expenses to conform to the fiscal year 1998 presentation. 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 $7,396 in 1997 to $9,282 in 1998. For the nine months ended September 30, general and administrative expenses increased from $39,280 in 1997 to $45,028 in 1998. General and administrative expenses increased due to increased costs of printing and distribution. The Registrant incurred depreciation expense in the amount of $62,520 and $66,383 for the three months ended September 30, 1998 and 1997, respectively. The Registrant incurred depreciation expense in the amount of $195,286 and $199,149 for the nine months ended September 30, 1998 and 1997, respectively. The decrease in depreciation expense is a result of certain equipment becoming fully depreciated in 1998. As a result of the increase in revenues totaling $5,343 for the three months ended September 30, 1998 as compared to the corresponding period in 1997, and the decrease in expenses totaling $1,977, the Registrant's net income increased from $117,718 for the three months ended September 30, 1997 to $125,038 for the corresponding period in 1998. As a result of the decrease in revenues totaling $3,298 for the nine months ended September 30, 1998 as compared to the corresponding period in 1997, and the increase in expenses totaling $1,885, the Registrant's net income decreased from $315,327 for the nine months ended September 30, 1997 to $310,144 for the corresponding period in 1998. 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. Management does not believe the operations of the Company will be significantly impacted by the year 2000 software issue and does not believe the year 2000 software issue will materially effect the Company's operations, financial position or cash flows. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule. (b) No reports on Form 8-K were filed during the nine months ended September 30, 1998. -11- 12 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, 1998 /s/ Robert J. Terrano ---------------------------------------- Robert J. Terrano Executive Vice President, Chief Financial Officer Date: October 30, 1998 /s/ C. Douglas Mitchell ---------------------------------------- C. Douglas Mitchell Vice President and Corporate Controller -12- 13 EXHIBIT INDEX Exhibit Number Description - ------ ----------- 27 Financial Data Schedule. EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 312,540 2,011 61,974 0 0 276,630 8,883,847 2,632,843 6,627,529 21,184 0 0 0 0 6,028,835 6,627,529 0 550,458 0 240,314 0 0 0 310,144 0 310,144 0 0 0 310,144 6.48 6.48
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