-----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, Evc69nAhMp9yMED/VTAOC0X+e8MTKae6MIvSEJOxg1ohfzx7xESleOVRBQcAcWjy W3zuGafXpYbs5lW6jpfPIg== 0000892569-99-002103.txt : 19990810 0000892569-99-002103.hdr.sgml : 19990810 ACCESSION NUMBER: 0000892569-99-002103 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990809 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: 99680500 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 PERIOD END JUNE 30, 1999 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 JUNE 30, 1999 ------------------------ 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) (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 III
PAGE NUMBER ----------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements and Supplementary Data Balance Sheets at June 30, 1999 (Unaudited) and December 31, 1998 3 Statements of Income for the three and six months ended June 30, 1999 and 1998 (Unaudited) 4 Statements of Cash Flows for the six months ended June 30, 1999 and 1998 (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
JUNE 30, December 31, 1999 1998 ----------- ----------- (UNAUDITED) ASSETS ------ CURRENT ASSETS: Cash $ 195,818 $ 219,876 Receivable from General Partner (Note 5) 60,872 63,803 Deposits 1,088 1,506 ----------- ----------- Total current assets 257,778 285,185 ----------- ----------- RESTRICTED CASH (NOTE 2) 97,291 99,896 ----------- ----------- 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 2,735,876 2,679,255 ----------- ----------- 6,147,971 6,204,592 ----------- ----------- $ 6,503,040 $ 6,589,673 =========== =========== LIABILITIES AND PARTNERS' EQUITY -------------------------------- CURRENT LIABILITIES: Payable to Limited Partners $ 20,074 $ 31,604 Accounts payable 6,848 7,628 ----------- ----------- Total current liabilities 26,922 39,232 ----------- ----------- OBLIGATION TO GENERAL PARTNER 577,510 577,510 ----------- ----------- PARTNERS' EQUITY: Limited Partners 5,935,191 6,008,797 General Partner-Del Taco, Inc. (36,583) (35,866) ----------- ----------- 5,898,608 5,972,931 ----------- ----------- $ 6,503,040 $ 6,589,673 =========== ===========
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 SIX MONTHS ENDED JUNE 30, JUNE 30, 1999 1998 1999 1998 -------- -------- -------- -------- REVENUES: Rent (Notes 4 and 5) $179,651 $181,264 $351,527 $347,788 Interest 2,298 2,045 4,513 4,153 Other 919 525 1,320 1,678 -------- -------- -------- -------- 182,868 183,834 357,360 353,619 -------- -------- -------- -------- EXPENSES: General and administrative 12,921 13,233 35,809 35,746 Depreciation 28,311 66,383 56,621 132,766 -------- -------- -------- -------- 41,232 79,616 92,430 168,512 -------- -------- -------- -------- Net income $141,636 $104,218 $264,930 $185,107 ======== ======== ======== ======== Net income per limited partnership unit (Note 3) $ 2.96 $ 2.18 $ 5.54 $ 3.87 ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. -4- 5 DEL TACO RESTAURANT PROPERTIES III STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999 1998 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 264,930 $ 185,107 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 56,621 132,766 Decrease (increase) in receivable from General Partner 2,931 (2,756) Decrease (increase) in deposits 418 (1,516) Decrease in accounts payable and payable to limited partners (12,311) (7,791) --------- --------- Net cash provided by operating activities 312,589 305,810 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in restricted cash 2,605 -- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Redemption of limited partnership units (2,605) -- Cash distributions to partners (336,647) (319,867) --------- --------- Net cash used by financing activities (339,252) (319,867) --------- --------- Net decrease in cash (24,058) (14,057) Beginning cash balance 219,876 189,315 --------- --------- Ending cash balance $ 195,818 $ 175,258 ========= =========
The accompanying notes are an integral part of these financial statements. -5- 6 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 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, 1998. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the partnership's financial position at June 30, 1999, the results of operations and cash flows for the six month periods ended June 30, 1999 and 1998 have been included. Operating results for the three and six months ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. NOTE 2 - RESTRICTED CASH At June 30, 1999 the partnership had a restricted cash balance of $97,291. 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 partnership 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 JUNE 30, 1999 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 47,331 in 1999 and 47,394 in 1998. 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 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. On December 29, 1998, the franchise agreement for the West Sepulveda Boulevard restaurant in Los Angeles expired. Del Taco began operation of this restaurant as a company managed facility on December 29, 1998. For the three months ended June 30, 1999, the nine restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $1,497,095 and net income of $28,062, as compared to $1,400,577 and $59,534 respectively, for the corresponding period in 1998 which included eight restaurants operated by Del Taco. Net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense. For the three months ended June 30, 1998, the one restaurant operated by a Del Taco franchisee, for which the partnership was the lessor, had unaudited sales of $109,951. For the six months ended June 30, 1999, the nine restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $2,929,395 and net income of $83,442, as compared to $2,689,125 and $107,350 respectively, for the corresponding period in 1998 which included eight restaurants operated by Del Taco. For the six months ended June 30, 1998, the one restaurant operated by a Del Taco franchisee, for which the partnership was the lessor, had unaudited sales of $209,103. -7- 8 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 1999 NOTE 4 - LEASING ACTIVITIES - CONTINUED For the three months and six months ended June 30, 1999, the East Valley Blvd. restaurant in Walnut, California reported net losses of $2,898 and $3,514 as compared to net losses of $1,755 and $4,357 for the corresponding period in 1998. For the three months and six months ended June 30, 1999, the East Gale Blvd. restaurant in Puente Hills, California reported net losses of $4,069 and $3,923 as compared to net income of $943 and $506 for the corresponding period in 1998. For the three months and six months ended June 30, 1999, the West Sepulveda Blvd. restaurant in Los Angeles, California reported net losses of $5,806 and $13,655. This restaurant was operated by a franchisee during the six months ended June 30, 1998. NOTE 5 - TRANSACTIONS WITH DEL TACO The receivable from General Partner consists primarily of rent accrued for the month of June. The June rent was collected on July 13, 1999. 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 6 with respect to certain distributions to the General Partner. NOTE 6 - DISTRIBUTIONS On July 13, 1999, a distribution to the limited partners of $169,036, or approximately $3.57 per limited partnership unit, was approved. Such distribution was paid on July 24, 1999. The General Partner also received a distribution of $1,707 with respect to its 1% partnership interest. -8- 9 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 February 1986 and June 1987. 14.7% of the $12 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 $9.5 million of the remaining funds were used to acquire sites and build ten restaurants. In February of 1992, approximately $281,000 raised during the offering but not required to acquire sites and build restaurants was distributed to the limited partners. The nine 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. As described in note 2 to the Notes to the Financial Statements, the partnership has a death and disability redemption fund totaling $97,291 at June 30, 1999. Investors should contact the General Partner with all questions regarding the eligibility of a limited partner or the estate of a deceased limited partner to participate in the redemption fund. Results of Operations The partnership owns nine properties that are under long-term lease to Del Taco for restaurant operations. The following table sets forth rental revenue earned by restaurant for the year:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1999 1998 1999 1998 -------- -------- -------- -------- Rancho California Plaza, Rancho California, CA $ 29,215 $ 27,799 $ 56,353 $ 54,125 East Vista Way, Vista, CA 15,906 15,209 30,893 29,118 Plaza at Puente Hills, Industry, CA 12,834 13,844 25,960 26,137 4th Street, Perris, CA 23,553 29,311 49,540 55,375 Foothill Blvd., Upland, CA 21,955 20,758 42,111 40,013 East Valley Blvd., Walnut, CA 10,853 11,239 21,816 21,532 Lassen Street, Chatsworth, CA 26,743 28,803 51,943 55,482 Hesperia Road, Victorville, CA 22,788 21,107 44,516 40,914 W. Sepulveda Blvd., Los Angeles, CA 15,804 13,194 28,395 25,092 -------- -------- -------- -------- Total $179,651 $181,264 $351,527 $347,788 ======== ======== ======== ========
-9- 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED The partnership receives rental revenues equal to 12 percent of gross sales from the restaurants. The partnership earned rental revenue of $179,651 during the three month period ended June 30, 1999, which represents a decrease of $1,613 from 1998. The partnership earned rental revenue of $351,527 during the six month period ended June 30, 1999, which represents an increase of $3,739 from 1998. The changes in rental revenue were caused by about a 1% decrease in sales at the restaurants under lease for the three months ended June 30, 1999 and an increase in sales for the six months ended June 30, 1999. The following table breaks down general and administrative expenses by type of expense:
Percentage of Total General & Administrative Expense -------------------------------- Six Months Ended June 30, 1999 1998 ------ ------ Accounting fees 61.78% 61.96% Distribution of information to limited partners 38.22 38.04 ------ ------ 100.00% 100.00% ====== ======
Depreciation decreased in 1999 because certain equipment became fully depreciated during 1998. For the three month period ended June 30, 1999 net income increased by $37,418 from 1998 to 1999 due the decrease in depreciation expense of $38,072 and the $312 decrease in general and administrative expenses which was partially offset by the decrease in revenues of $966. For the six month period ended June 30, 1999 net income increased by $79,823 from 1998 to 1999 due to the increase in revenues of $3,741 and the decrease in depreciation expense of $76,145 which was partially offset by the $63 increase in general and administrative expenses. The General Partner does not believe the operations of the partnership will be significantly impacted by the year 2000 software issue and does not believe the year 2000 software issue will materially effect the partnerships operations, financial position or cash flows. -10- 11 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 six months ended June 30, 1999. -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: July 30, 1999 /s/ Robert J. Terrano --------------------------------------- Robert J. Terrano Executive Vice President, Chief Financial Officer Date: July 30, 1999 /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 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 293,109 1,088 60,872 0 0 355,069 8,883,847 2,735,876 6,503,040 26,922 0 0 0 0 5,898,608 6,503,040 0 357,360 0 92,430 0 0 0 264,930 0 264,930 0 0 0 264,930 5.54 5.54
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