10-Q/A 1 a53192qae10vqza.htm AMENDMENT TO FORM 10-Q e10vqza
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q/A
(Amendment No. 1)
 
     
(Mark One)    
þ
  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the quarterly period ended March 31, 2009
OR
o
  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. 0-16851
 
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
incorporation or organization) 		  (I.R.S. Employer
Identification Number)
     
25521 Commercentre Drive
Lake Forest, California
(Address of principal executive offices) 		  92630
(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 þ     No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o
 
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant’s Form S-11 Registration Statement filed December 17, 1982 are incorporated by reference into Part IV of this report.
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
 

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Explanatory Note
     We are filing this Amendment No.1 on Form 10-Q/A to amend our Form 10-Q for the quarter ended March 31, 2009, filed with the Securities and Exchange Commission on May 15, 2009, for the purpose of including the introductory language addressing internal control over financial reporting as required in paragraph four of the Principal Executive Officer and Principal Financial Officer certifications.
     This Amendment No. 1 only reflects the changes discussed above. No other information included in the Original Form 10-Q has been amended by this Form 10-Q/A, whether to reflect any information or events subsequent to the filing of the Original Form 10-Q or otherwise.

 

INDEX
DEL TACO RESTAURANT PROPERTIES III
         
    PAGE NUMBER  
       
 
        
       
 
        
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 EX-31.1
 EX-31.2
 EX-32.1

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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
DEL TACO RESTAURANT PROPERTIES III

CONDENSED BALANCE SHEETS
                 
    March 31,     December 31,  
    2009     2008  
    (Unaudited)          
ASSETS
                
 
                
CURRENT ASSETS:
                
Cash
   $ 299,864     $ 318,322  
Receivable from Del Taco LLC
     90,857       86,868  
Deposits
     1,771       1,888  
 
            
Total current assets
     392,492       407,078  
 
            
 
                
RESTRICTED CASH
     86,017       86,017  
 
            
 
                
PROPERTY AND EQUIPMENT:
                
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
     3,839,966       3,811,656  
 
            
 
     5,043,881       5,072,191  
 
            
 
                
 
   $ 5,522,390     $ 5,565,286  
 
            
 
                
LIABILITIES AND PARTNERS’ EQUITY
                
 
                
CURRENT LIABILITIES:
                
Payable to limited partners
   $ 66,743     $ 64,515  
Accounts payable
     36,591       15,291  
 
            
Total current liabilities
     103,334       79,806  
 
            
 
                
OBLIGATION TO GENERAL PARTNER
     577,510       577,510  
 
            
 
                
PARTNERS’ EQUITY:
                
Limited partners; 47,261 units outstanding at March 31, 2009 and December 31, 2008
     4,888,543       4,954,303`  
General partner-Del Taco LLC
     (46,997 )     (46,333 )
 
            
 
     4,841,546       4,907,970  
 
            
 
   $ 5,522,390     $ 5,565,286  
 
            
See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES III
CONDENSED STATEMENTS OF INCOME
(Unaudited)
                 
    Three Months Ended  
    March 31,  
    2009     2008  
RENTAL REVENUES
   $ 248,748     $ 256,889  
 
            
 
                
EXPENSES:
                
General and administrative
     38,225       42,755  
Depreciation
     28,310       28,310  
 
            
 
     66,535       71,065  
 
            
 
                
Operating income
     182,213       185,824  
 
                
OTHER INCOME:
                
Interest
     171       1,362  
Other
     325       670  
 
            
 
                
Net income
   $ 182,709     $ 187,856  
 
            
 
                
Net income per limited partnership unit (Note 3)
   $ 3.83     $ 3.94  
 
            
 
                
Number of units used in computing per unit amounts
     47,261       47,261  
 
            
See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES III
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Three Months Ended  
    March 31,  
    2009     2008  
CASH FLOWS FROM OPERATING ACTIVITIES:
                
 
                
Net income
   $ 182,709     $ 187,856  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation
     28,310       28,310  
Changes in operating assets and liabilities:
                
Receivable from Del Taco LLC
     (3,989 )     (4,018 )
Deposits
     117       (584 )
Payable to limited partners
     2,228       2,138  
Accounts payable
     21,300       14,107  
 
            
 
                
Net cash provided by operating activities
     230,675       227,809  
 
                
CASH FLOWS FROM FINANCING ACTIVITIES:
                
 
                
Cash distributions to partners
     (249,133 )     (254,714 )
 
            
 
                
Net decrease in cash
     (18,458 )     (26,905 )
 
                
Beginning cash balance
     318,322       321,231  
 
            
 
                
Ending cash balance
   $ 299,864     $ 294,326  
 
            
See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2009
UNAUDITED
NOTE 1 — BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America for complete financial statements and should therefore be read in conjunction with the financial statements and notes thereto contained in the annual report on Form 10-K for the year ended December 31, 2008 for Del Taco Restaurant Properties III (the Partnership or the Company). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the Partnership’s financial position at March 31, 2009, the results of operations and cash flows for the three month periods ended March 31, 2009 and 2008 have been included. Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. Amounts related to the disclosure of December 31, 2008 balances within these condensed financial statements were derived from the 2008 audited financial statements.
NOTE 2 — RESTRICTED CASH
At March 31, 2009 and December 31, 2008, the Partnership had a restricted cash balance of $86,017. 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.

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DEL TACO RESTAURANT PROPERTIES III
NOTES TO CONDENSED FINANCIAL STATEMENTS — CONTINUED
MARCH 31, 2009
UNAUDITED
NOTE 3 — NET INCOME PER LIMITED PARTNERSHIP UNIT
Net income per limited partnership unit is based on net income attributable to the limited partners (after 1% allocation to the general partner) using the weighted average number of units outstanding during the periods presented which amounted to 47,261 in 2009 and 2008.
Pursuant to the partnership agreement, annual partnership income or loss is allocated one percent to Del Taco LLC, formerly known as Del Taco, Inc., (Del Taco or 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 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. The leases expire in the years 2021 to 2024. There is no minimum rental payment required under any of the leases.
For the three months ended March 31, 2009, the nine restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $2,072,902 and unaudited net losses of $63,440, as compared to unaudited sales of $2,140,740 and $32,001, respectively, for the corresponding period in 2008. Net income or loss of each restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense and the increase in net loss from the corresponding period of the prior year primarily relates to a reduction in restaurant revenues.

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DEL TACO RESTAURANT PROPERTIES III
NOTES TO CONDENSED FINANCIAL STATEMENTS — CONTINUED
MARCH 31, 2009
UNAUDITED
NOTE 5 — TRANSACTIONS WITH DEL TACO
The receivable from Del Taco consists primarily of rent accrued for the month of March 2009. The March rent receivable was collected in April 2009.
Del Taco 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 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 28, 2009, a distribution to the limited partners of $226,137, or approximately $4.78 per limited partnership unit, was approved. Such distribution was paid on April 30, 2009. The General Partner also received a distribution of $2,284 with respect to its 1% partnership interest.
Total cash distributions declared and paid in January 2009 were $249,133.
NOTE 7 — PAYABLE TO LIMITED PARTNERS
Payable to limited partners represents a reclassification from cash for distribution checks made to limited partners that have remained outstanding for 6 months or longer.
NOTE 8 — CONCENTRATION OF RISK
The nine restaurants leased to Del Taco make up all of the income producing assets of the Partnership and contributed all of the Partnership’s rental revenues during the three months ended March 31, 2009 and 2008. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco trade name restaurants that lease the properties.
The Partnership maintains substantially all of its cash and cash equivalents at one major commercial bank. The Federal Depository Insurance Commission’s limits were $250,000 and $100,000 at March 31, 2009 and 2008, respectively. At March 31, 2009 and December 31, 2008, the Partnership had approximately $394,000 and $425,000, respectively, on deposit at one financial institution.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Del Taco Restaurant Properties III (The Partnership or the Company) offered limited partnership units for sale between February 1986 and June 1987. $12 million was raised through the sale of limited partnership units and used to acquire sites and build ten restaurants and also to pay commissions to brokers and to reimburse Del Taco LLC (Del Taco or the General Partner) for offering costs incurred. 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. One restaurant was sold in November 1997.
The nine restaurants leased to Del Taco make up all of the income producing assets of the Partnership. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco trade name and the restaurants that lease the Properties. The success of the restaurants is dependent on a large variety of factors, including, but not limited to, competition, 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 Condensed Financial Statements, the Partnership has a death and disability redemption fund totaling $86,017 at March 31, 2009 and December 31, 2008, respectively. 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 (unaudited):
                 
    Three Months Ended  
    March 31,  
    2009     2008  
Rancho California Plaza, Temecula, CA
   $ 40,622     $ 40,582  
East Vista Way, Vista, CA
     24,160       22,890  
Plaza at Puente Hills, Industry, CA
     18,001       19,318  
4th Street, Perris, CA
     29,568       32,712  
Foothill Blvd., Upland, CA
     30,547       32,541  
East Valley Blvd., Walnut, CA
     17,106       18,517  
Lassen Street, Chatsworth, CA
     35,945       35,713  
Hesperia Road, Victorville, CA
     33,971       36,282  
W. Sepulveda Blvd., Los Angeles, CA
     18,828       18,334  
 
            
 
                
Total
   $ 248,748     $ 256,889  
 
            

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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 $248,748 during the three month period ended March 31, 2009, which represents a decrease of $8,141 from 2008. The changes in rental revenues between 2008 and 2009 are directly attributable to decreases in sales levels at the restaurants under lease due to local competitive and industry factors.
The increase in accounts payable from December 31, 2008 is a seasonal increase due to the timing of payment for certain annual accounting, audit and tax services.
The following table breaks down general and administrative expenses by type of expense:
                 
    Percentage of Total
    General & Administrative Expense
    Three Months Ended
    March 31,
    2009   2008
Accounting fees
     79.12 %     78.97 %
Distribution of information to limited partners
     20.88       21.03  
 
                
 
                
 
     100.00 %     100.00 %
 
                
General and administrative costs decreased from 2008 to 2009 primarily due to decreased audit fees, tax preparation fees, and costs for printing and the distribution of information to limited partners.
Net income decreased by $5,147 from 2008 to 2009 due to decreases in revenues of $8,141 and interest and other income of $1,536, partially offset by the decrease in general and administrative expenses of $4,530.
Significant Recent Accounting Pronouncements
None
Off-Balance Sheet Arrangements
None
Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of the restaurants for the corresponding period, and is earned at the point of sale.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations — continued
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations, as well as disclosures included elsewhere in this report on Form 10-Q are based upon the Partnership’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Partnership believes the critical accounting policies that most impact the financial statements are described below. A summary of the significant accounting policies of the Partnership can be found in Note 1 to the Financial Statements which is included in the Partnership’s December 31, 2008 Form 10-K.
Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.
The Partnership accounts for property and equipment in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets.” SFAS 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is recognized if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the asset. Once a determination has been made that an impairment loss should be recognized for long-lived assets, various assumptions and estimates are used to determine fair value including, among others, estimated costs of construction and development, recent sales of comparable properties and the opinions of fair value prepared by independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
None.

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Item 4T. Controls and Procedures
  (a)   Evaluation of disclosure controls and procedures:
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Treasurer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Treasurer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic Securities and Exchange Commission filings.
  (b)   Changes in internal controls:
There were no significant changes in the Company’s internal controls over financial reporting that occurred during our most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
  (c)   Asset-Backed issuers:
Not applicable.

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PART II. OTHER INFORMATION
There is no information required to be reported for any items under Part II, except as follows:
Item 6. Exhibits
             
 
    31.1     Paul J. B. Murphy, III’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
            
 
    31.2     Steven L. Brake’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
            
 
    32.1     Certification pursuant to Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, 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 LLC    
 
  General Partner    
 
        
Date: July 22, 2009
  /s/ Steven L. Brake
 
Steven L. Brake 		   
 
  Treasurer    

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