-----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, SagTpTunFuQVmDf9TCczaQpv78CZkD4p6BX9b9izNev4NO02mRABsE74QN2G7enr N/JtE1hHaqtcAUcMrkSMeA== 0000892569-97-001275.txt : 19970512 0000892569-97-001275.hdr.sgml : 19970512 ACCESSION NUMBER: 0000892569-97-001275 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 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: 97598964 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 QUARTERLY REPORT FOR THE PERIOD ENDED 03/31/1997 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 MARCH 31, 1997 ------------------------- 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, LAGUNA HILLS, CALIFORNIA 92653 (Address of principal executive offices) (Zip Code) (714) 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 III
PART I. FINANCIAL INFORMATION PAGE NUMBER - ------------------------------ ----------- Item 1. Financial Statements and Supplementary Data Balance Sheets at March 31, 1997 (Unaudited) and December 31, 1996 3 Statements of Income for the three months ended March 31, 1997 and 1996 (Unaudited) 4 Statements of Cash Flows for the three months ended March 31, 1997 and 1996 (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
MARCH 31 December 31 1997 1996 ----------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash $ 167,528 $ 190,185 Receivable from General Partner (Note 5) 58,638 57,288 Deposits 1,000 1,000 ----------- ----------- Total current assets 227,166 248,473 ----------- ----------- RESTRICTED CASH (NOTE 2) 110,617 110,617 REAL ESTATE HELD FOR SALE (NOTE 7) 274,500 274,500 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 2,238,408 2,172,025 ----------- ----------- 6,645,439 6,711,822 ----------- ----------- $ 7,257,722 $ 7,345,412 =========== =========== LIABILITIES AND PARTNERS' EQUITY CURRENT LIABILITIES: Payable to Limited Partners $ 4,003 $ 4,181 Accounts Payable 4,823 3,000 ----------- ----------- Total current liabilities 8,826 7,181 ----------- ----------- OBLIGATION TO GENERAL PARTNER 577,510 577,510 ----------- ----------- PARTNERS' EQUITY: Limited Partners 6,703,164 6,791,606 General Partner-Del Taco, Inc. (31,778) (30,885) ----------- ----------- 6,671,386 6,760,721 ----------- ----------- $ 7,257,722 $ 7,345,412 =========== ===========
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 MARCH 31 1997 1996 -------- -------- REVENUES: Rent (Notes 4 and 5) $170,593 $170,189 Interest 2,875 2,184 Other 250 50 -------- -------- 173,718 172,423 -------- -------- EXPENSES: General and administrative 22,580 24,315 Depreciation 66,383 71,684 -------- -------- 88,963 95,999 -------- -------- Net income $ 84,755 $ 76,424 ======== ======== Net income per Limited Partnership Unit (Note 3) $ 1.77 $ 1.59 ======== ========
The accompanying notes are an integral part of these financial statements. -4- 5 DEL TACO RESTAURANT PROPERTIES III STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31 1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 84,755 $ 76,424 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 66,383 71,684 Decrease in payable to Limited Partners (178) (328) (Increase) decrease in receivable from General Partner (1,350) 1,507 Increase in accounts payable 1,823 11,371 --------- --------- Net cash provided by operating activities 151,433 160,658 CASH FLOWS FROM FINANCING ACTIVITIES: Cash distribution to partners 174,090 174,416 --------- --------- Net decrease in cash (22,657) (13,758) Beginning cash balance 190,185 184,497 --------- --------- Ending cash balance $ 167,528 $ 170,739 ========= =========
The accompanying notes are an integral part of these financial statements. -5- 6 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 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, 1996. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the partnership's financial position at March 31, 1997, the results of operations and cash flows for the three month periods ended March 31, 1997 and 1996 have been included. Operating results for the three months ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. NOTE 2 - RESTRICTED CASH At March 31, 1997 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 MARCH 31, 1997 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 47,410 in 1997 and 47,498 in 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 March 31, 1997 (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 property (see Note 7). -7- 8 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS - CONTINUED MARCH 31, 1997 NOTE 5 - TRANSACTIONS WITH DEL TACO The receivable from General Partner consists primarily of rent accrued for the month of March. The March rent was collected on April 11, 1997. 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 April 9, 1997, a distribution to the Limited Partners of $160,903, or approximately $3.39 per Limited Partnership Unit, was approved. Such distribution was paid on April 18, 1997. The General Partner also received a distribution of $1,625 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 to its estimated fair value. Accordingly, the carrying value of the Twentynine Palms property was adjusted down to $274,500. -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 March 31, 1997 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 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. -9- 10 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, one of which ceased operation as a Del Taco franchise February 1, 1994 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 was 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 to its estimated fair value. Accordingly, the carrying value of the Twentynine Palms property was adjusted down to $274,500. The Registrant receives rental revenues equal to 12 percent of restaurant sales. The Registrant had rental revenue of $170,593 for the three months ended March 31, 1997, representing an increase from the rental revenues of $170,189 during the same period in 1996. Such increase is directly attributable to increased sales at the restaurants. 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 -------------------------------- Three Months Ended March 31 1997 1996 ------ ------ Accounting fees 75.71% 61.91% Distribution of information to Limited Partners 24.29 33.90 Other -- 4.19 ------ ------ 100.00% 100.00% ====== ======
-10- 11 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 March 31, 1997, general and administrative expenses decreased from $24,315 in 1996 to $22,580 in 1997. The Registrant incurred depreciation expense in the amount of $66,383 and $71,684 for the three months ended March 31, 1997 and 1996 respectively. The decrease in depreciation expense is a direct result of the write down of the Twentynine Palms property during the third quarter of 1996. As a result of the increase in revenues totaling $1,295 for the three months ended March 31, 1997 as compared to the corresponding period in 1996, and the decreases in general and administrative expenses of $1,735 and depreciation expense of $5,301, the Registrant's net income increased from $76,424 for the three months ended March 31, 1996 to $84,755 for the corresponding period in 1997. 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 three months ended March 31, 1997. 27. Financial Data Schedule -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: April 30, 1997 /s/ Robert J. Terrano ----------------------------------- Robert J. Terrano Executive Vice President, Chief Financial Officer Date: April 30, 1997 /s/ C. Douglas Mitchell ----------------------------------- C. Douglas Mitchell Vice President and Corporate Controller -12- EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 278,145 1,000 58,638 0 0 227,166 9,158,347 2,238,408 7,257,722 8,826 0 0 0 0 6,671,386 7,257,722 0 173,718 0 88,963 0 0 0 84,755 0 84,755 0 0 0 84,755 1.77 1.77
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