-----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, DS5bPY9OD6O9Sz91/z8bHCyo2XfjnWCYbj9BmuV6rNr0Eof0EklJSArO5GOPSFQJ v1JDVFB6ep1rayKSkKWqkA== 0001095811-00-000531.txt : 20000315 0001095811-00-000531.hdr.sgml : 20000315 ACCESSION NUMBER: 0001095811-00-000531 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000314 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-K SEC ACT: SEC FILE NUMBER: 000-16851 FILM NUMBER: 568841 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-K 1 FORM 10-K PERIOD END DECEMBER 31, 1999 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from __________ to __________ COMMISSION FILE NO. 33-2462 DEL TACO RESTAURANT PROPERTIES III (A California limited partnership) (Exact name of registrant specified in its charter) CALIFORNIA 33-0139247 (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification Number) 23041 AVENIDA DE LA CARLOTA LAGUNA HILLS, CALIFORNIA 92653 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (949) 462-9300 Securities registered pursuant to section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: None 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 [ ] DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Form S-11 Registration Statement filed December 30, 1985 are incorporated by reference into Part IV of this report. 2 PART I ITEM 1. BUSINESS The partnership is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act. The partnership's General Partner is Del Taco, Inc., a California corporation ("General Partner"). The partnership sold 48,000 units totaling $12 million through an offering of limited partnership units from February 1986 through June 1987. The term of the partnership agreement is until December 31, 2025 unless terminated earlier by means provided in the partnership agreement. The business of the partnership is ownership and leasing of restaurants in California to Del Taco, Inc. The partnership acquired land and constructed ten Mexican-American restaurants for long-term lease to Del Taco, Inc. Each property is leased for 35 years on a triple net basis. Rent is equal to twelve percent of gross sales of the restaurants. The restaurant originally built in Twentynine Palms was sold in November 1997 and net proceeds from the sale were distributed to the partners. As of December 31, 1999, the partnership had a total of nine properties leased to Del Taco. The partnership has no full time employees. The partnership agreement assigns full authority for general management and supervision of the business affairs of the partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the partnership. Limited partners have no right to participate in the management or conduct of the partnership's business affairs. 2 3 ITEM 2. PROPERTIES The partnership acquired ten properties with proceeds obtained from the sale of limited partnership units:
Date of Restaurant Commencement of Address City, State Date of Acquisition Constructed Operation (1) Rancho California Rancho California, December 23, 1986 60 seat with drive July 14, 1987 Plaza CA through service window East Vista Way Vista, CA February 24, 1987 60 seat with drive September 10, 1987 through service window 4th Street Perris, CA June 24, 1987 60 seat with drive December 16, 1987 through service window Foothill Boulevard Upland, CA August 3, 1987 60 seat with drive January 12, 1988 through service window Plaza at Puente Industry, CA May 12, 1987 60 seat with drive February 24, 1988 Hills through service window Twentynine Palms Twentynine Palms, December 14, 1987 60 seat with drive May 17, 1988 (2) Highway CA through service window East Walnut, CA April 29, 1988 60 seat with drive August 31, 1988 Valley through service Boulevard window West Los Angeles, CA July 8, 1988 60 seat with drive January 12, 1989 (3) Sepulveda through service Boulevard window Lassen Chatsworth, CA January 27, 1989 60 seat with drive August 21, 1989 Street through service window Hesperia Road Victorville, CA December 29, 1989 100 seat with drive July 5, 1990 through service window
3 4 (1) Commencement of operation is the first date Del Taco, Inc., as lessee, operated the facility on the site as a Del Taco restaurant. (2) In November 1997, the Twentynine Palms property was sold yielding net proceeds to the partnership of $278,612. (3) The restaurant was subleased to a franchisee of Del Taco, Inc. and the restaurant operated as a Del Taco restaurant. On December 29, 1998 the franchise agreement for this restaurant expired. Del Taco began operation of this restaurant as a company-managed facility on December 29, 1998. PART II ITEM 3. LEGAL PROCEEDINGS The partnership is not a party to any material pending legal proceedings. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS The partnership sold 48,000 ($12,000,000) limited partnership units during the public offering period ended June 1, 1987 and currently has 1,501 limited partners of record. There is no public market for the trading of the units. Distributions made by the partnership to the limited partners during the past three fiscal years are described in Note 8 to the Notes to the Financial Statements contained under Item 8. 4 5 ITEM 6. SELECTED FINANCIAL DATA
FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997 1996 1995 ---------- ---------- ---------- ---------- ---------- Rental revenue $ 726,135 $ 728,690 $ 725,397 $ 722,856 $ 724,382 Interest and other income 10,758 12,450 13,152 9,464 9,087 Net income 566,766 442,863 422,201 292,257 394,502 Net income per limited partnership unit (1) 11.85 9.26 8.82 6.10 8.22 Cash distributions per limited partnership unit From operations 14.47 14.10 14.38 14.09 14.18 Return of capital (2) - - 5.88 - - Total assets 6,460,098 6,589,673 6,803,782 7,345,412 7,741,938 Long-term obligations 577,510 577,510 577,510 577,510 577,510
(1) The net income per limited partnership unit was calculated based upon 47,331, 47,370, 47,398, 47,461 and 47,513 weighted average units outstanding for years 1999, 1998, 1997, 1996 and 1995, respectively. (2) In 1997, a special distribution was approved to disburse the proceeds from the sale of the Twentynine Palms property. 5 6 ITEM 7. 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 6 to the Notes to the Financial Statements contained under Item 8, the partnership has a death and disability redemption fund totaling $97,291 at December 31, 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. 6 7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) Results of Operations The partnership owns nine properties that are under long-term lease to Del Taco for restaurant operations. In November 1997, the Twentynine Palms property was sold yielding net proceeds of $278,612. The following table sets forth rental revenue earned by restaurant for the year:
YEAR ENDED DECEMBER 31, 1999 1998 1997 -------- -------- -------- Rancho California Plaza, Rancho Calif., CA $117,466 $113,412 $112,285 East Vista Way, Vista, CA 65,224 61,460 58,517 4th Street, Perris, CA 97,733 117,303 105,274 Foothill Blvd., Upland, CA 90,086 85,121 76,897 Plaza at Puente Hills, Industry, CA 51,404 55,176 55,947 Twentynine Palms Hwy., Twentynine Palms, CA - - 33,663 East Valley Blvd., Walnut, CA 45,059 45,705 42,274 W. Sepulveda Blvd., Los Angeles, CA 61,666 51,768 49,061 Lassen Street, Chatsworth, CA 106,462 112,348 108,711 Hesperia Road, Victorville, CA 91,035 86,397 82,768 -------- -------- -------- Total $726,135 $728,690 $725,397 ======== ======== ========
The partnership receives rental revenues equal to 12 percent of gross sales from the restaurants. The partnership earned rental revenue of $726,135 during the year ended December 31, 1999, which represents a decrease of $2,555 from 1998. The decrease in rental revenue was caused by a decrease in sales at the restaurants under lease. 7 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) Results of Operations - Continued The following table breaks down general and administrative expenses by type of expense: PERCENTAGE OF TOTAL GENERAL & ADMIN. EXPENSE
Year Ended December 31, 1999 1998 1997 ----- ----- ----- Accounting fees 54.19% 52.29% 52.08% Distribution of information to limited partners 44.40 46.30 46.46 Other 1.41 1.41 1.46 ------- ------- ------- 100.00% 100.00% 100.00% ======= ======= =======
Certain reclassifications have been made to the 1998 and 1997 amounts in the table above to conform to the current year presentation. General and administrative costs increased from 1998 to 1999 due to increased costs for accounting and income tax return preparation. Depreciation decreased in 1999 because certain equipment became fully depreciated in both 1998 and 1999. Net income increased by $123,903 from 1998 to 1999 due mostly to the decrease in depreciation expense of $128,457 which was partially offset by the $307 increase in general and administrative expenses and the $4,247 decrease in revenues. On May 19, 1998, the special limited partner resigned. Consistent with the partnership agreement, the General Partner assumed the duties and responsibilities of the special limited partner. 8 9 ITEM 8. FINANCIAL STATEMENTS PART I. INFORMATION
INDEX PAGE NUMBER Report of Independent Public Accountants 10 Balance Sheets at December 31, 1999 and 1998 11 Statements of Income for the years ended December 31, 1999, 1998 and 1997 12 Statement of Changes in Partners' Equity for the three years ended December 31, 1999 13 Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 14 Notes to Financial Statements 15-20
9 10 [ARTHUR ANDERSEN LOGO] REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Del Taco Restaurant Properties, III: We have audited the accompanying balance sheets of Del Taco Restaurant Properties III (a California Limited Partnership) as of December 31, 1999 and 1998, and the related statements of income, partners' equity and cash flows for the years then ended. These financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Del Taco Restaurant Properties III as of December 31, 1999 and 1998, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule in the index of the financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP - ------------------------- ARTHUR ANDERSEN LLP Orange County, California March 1, 2000 10 11 DEL TACO RESTAURANT PROPERTIES III BALANCE SHEETS
DECEMBER 31, 1999 1998 ----------- ----------- ASSETS CURRENT ASSETS: Cash $ 208,334 $ 219,876 Receivable from Del Taco, Inc. 62,122 63,803 Deposits 1,000 1,506 ----------- ----------- Total current assets 271,456 285,185 ----------- ----------- RESTRICTED CASH 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 2,792,496 2,679,255 ----------- ----------- 6,091,351 6,204,592 ----------- ----------- $ 6,460,098 $ 6,589,673 =========== =========== LIABILITIES AND PARTNERS' EQUITY CURRENT LIABILITIES: Payable to limited partners $ 25,130 $ 31,604 Accounts payable 11,801 7,628 ----------- ----------- Total current liabilities 36,931 39,232 ----------- ----------- OBLIGATION TO GENERAL PARTNER 577,510 577,510 ----------- ----------- PARTNERS' EQUITY: Limited partners 5,882,765 6,008,797 General Partner-Del Taco, Inc. (37,108) (35,866) ----------- ----------- 5,845,657 5,972,931 ----------- ----------- $ 6,460,098 $ 6,589,673 =========== ===========
The accompanying notes are an integral part of these financial statements. 11 12 DEL TACO RESTAURANT PROPERTIES III STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1999 1998 1997 -------- -------- -------- REVENUES: Rent $726,135 $728,690 $725,397 Interest 8,639 9,007 10,227 Other 2,119 3,443 2,925 Gain on sale of property - - 4,112 -------- -------- -------- 736,893 741,140 742,661 -------- -------- -------- EXPENSES: General and administrative 56,886 56,579 54,928 Depreciation 113,241 241,698 265,532 -------- -------- -------- 170,127 298,277 320,460 -------- -------- -------- Net income $566,766 $442,863 $422,201 ======== ======== ======== Net income per limited partnership unit $ 11.85 $ 9.26 $ 8.82 ======== ======== ========
The accompanying notes are an integral part of these financial statements. 12 13 DEL TACO RESTAURANT PROPERTIES III STATEMENT OF CHANGES IN PARTNERS' EQUITY THREE YEARS ENDED DECEMBER 31, 1999
Limited Partners ---------------------------- General Units Amount Partner Total ----------- ----------- ----------- ----------- Balance, December 31, 1996 47,410 $ 6,791,606 $ (30,885) $ 6,760,721 Net income - 417,979 4,222 422,201 Redemption of units (16) (2,808) - (2,808) Cash distributions - (960,897) (6,889) (967,786) ----------- ----------- ----------- ----------- Balance, December 31, 1997 47,394 6,245,880 (33,552) 6,212,328 Net income - 438,434 4,429 442,863 Redemption of units (48) (7,913) - (7,913) Cash distributions - (667,604) (6,743) (674,347) ----------- ----------- ----------- ----------- Balance, December 31, 1998 47,346 6,008,797 (35,866) 5,972,931 Net income - 561,098 5,668 566,766 Redemption of units (15) (2,605) - (2,605) Cash distributions - (684,525) (6,910) (691,435) ----------- ----------- ----------- ----------- Balance, December 31, 1999 47,331 $ 5,882,765 $ (37,108) $ 5,845,657 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 13 14 DEL TACO RESTAURANT PROPERTIES III STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999 1998 1997 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 566,766 $ 442,863 $ 422,201 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 113,241 241,698 265,532 Gain on sale of property - - (4,112) (Decrease) increase in payable to limited partners (6,474) 27,598 (175) Decrease (increase) in receivable from General Partner 1,681 (4,435) (2,080) Increase (decrease) in accounts payable 4,173 (2,310) 6,938 Decrease (increase) in deposits 506 (506) - --------- --------- --------- Net cash provided by operating activities 679,893 704,908 688,304 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from sale of property - - 278,612 Decrease in restricted cash 2,605 7,913 2,808 --------- --------- --------- Net cash provided by investing activities 2,605 7,913 281,420 --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Redemption of limited partnership units (2,605) (7,913) (2,808) Cash distributions to partners (691,435) (674,347) (967,786) --------- --------- --------- Net cash used by financing activities (694,040) (682,260) (970,594) --------- --------- --------- INCREASE (DECREASE) IN CASH (11,542) 30,561 (870) BEGINNING CASH BALANCE 219,876 189,315 190,185 --------- --------- --------- ENDING CASH BALANCE $ 208,334 $ 219,876 $ 189,315 ========= ========= =========
The accompanying notes are an integral part of these financial statements. 14 15 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES THE PARTNERSHIP: Del Taco Restaurant Properties III (a California limited partnership) was formed on December 19, 1985, for the purpose of acquiring real property in California for construction of ten Mexican-American restaurants to be leased under long-term agreements to Del Taco, Inc. (General Partner for operation under the Del Taco trade name). As of July 5, 1990, all ten restaurants had commenced operation on acquired properties. In November 1997, the Twentynine Palms property was sold yielding net proceeds of $278,612. As of December 31, 1999, Del Taco Restaurant Properties III had nine properties in operation. BASIS OF ACCOUNTING: The partnership utilizes the accrual method of accounting for transactions relating to the business of the partnership. Distributions are made to the General and limited partners in accordance with the provisions of the partnership agreement (see Note 2). 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. 121, "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed of." SFAS 121 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. INCOME TAXES: No provision has been made for federal or state income taxes on partnership net income, since the partnership is not subject to income tax. Partnership income is includable in the taxable income of the individual partners as required under applicable income tax laws. Certain items, primarily related to depreciation methods, are accounted for differently for income tax reporting purposes (see Note 7). 15 16 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1999 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED NET INCOME PER LIMITED PARTNERSHIP UNIT: The net income per limited partnership unit was calculated based upon 47,331, 47,370 and 47,398 weighted average units outstanding in 1999, 1998, and 1997, respectively. USE OF ESTIMATES: The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 - PARTNERS' EQUITY Pursuant to the partnership agreement, annual partnership net 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 3 - SITE ACQUISITION AND DEVELOPMENT FEE Under terms of the partnership agreement, the General Partner is entitled to receive a fee in an amount equal to five percent of aggregate capital contributions. The fee shall be for services rendered in connection with site selection and the design and supervision of construction of improvements to acquired properties. This fee shall be earned at the time the services are rendered, but shall not be paid and shall be subordinated to the limited partners' interests until all restaurants have opened and the limited partners have received certain minimum returns on their investment, as required by the partnership agreement. It is the policy of the partnership to accrue the site acquisition and development fee as an obligation to the General Partner. No fees were earned for such services during 1999, 1998 and 1997. 16 17 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1999 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, except for the restaurant which was located in Twentynine Palms, California. Prior to the sale of this property in November 1997, the subleasee paid a base rent of $3,333.33 per month. The partnership had a total of nine properties leased to Del Taco as of December 31, 1999. 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 year ended December 31, 1999, the nine restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $6,051,128 and unaudited net income of $206,060, as compared to unaudited sales of $5,641,018 and $5,355,612 and net income of $273,544 and $206,143 respectively, for the years ended December 31, 1998 and 1997, 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. The one restaurant operated by a Del Taco franchisee from January 1, 1997 to December 29, 1998, for which the partnership was the lessor, had unaudited sales of $431,400 and $408,841 for the years ended December 31, 1998 and 1997, respectively. The East Valley Blvd. Restaurant in Walnut, California had unaudited net losses of $5,616, $5,076 and $18,594 for the years ended December 31, 1999, 1998 and 1997, respectively. The Vista Way Restaurant in Vista, California had unaudited net income of $11,366 for the year ended December 31, 1999, an unaudited net loss of $1,899 for the year ended December 31, 1998 and unaudited net income of $1,546 for the year ended December 31, 1997. The Plaza at Puente Hills Restaurant in Industry, California had an unaudited net loss of $8,644 for the year ended December 31, 1999 and unaudited net income of $5,028 and $5,638 for the years ended December 31, 1998 and 1997. The West Sepulveda Boulevard restaurant in Los Angeles, California had an unaudited net loss of $15,279 for the year ended December 31, 1999. As noted above, the West Sepulveda Boulevard restaurant was operated by a franchisee during 1998 and 1997. NOTE 5 - RELATED PARTIES The receivable from Del Taco consists of rent accrued for the month of December 1999. The rent receivable was collected on January 17, 2000. The General Partner received $6,910 in distributions relating to its one percent interest in the partnership for the year ended December 31, 1999. 17 18 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1999 NOTE 5 - RELATED PARTIES - CONTINUED 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. NOTE 6 - RESTRICTED CASH At December 31, 1999 and 1998 the partnership had restricted cash balances of $97,291 and $99,896, respectively. 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. NOTE 7 - INCOME TAXES A reconciliation of financial statement net income to taxable income for each of the periods is as follows:
1999 1998 1997 --------- --------- --------- Net income per financial statements $ 566,766 $ 442,863 $ 422,201 Tax loss on sale of asset - - (107,920) Excess book depreciation 18,257 145,232 164,586 --------- --------- --------- Taxable income $ 585,023 $ 588,095 $ 478,867 ========= ========= =========
18 19 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1999 NOTE 7 - INCOME TAXES - CONTINUED A reconciliation of partnership equity per the financial statements to net worth for tax purposes as of December 31, 1999, is as follows:
Partners' equity per financial statements $ 5,845,657 Issue costs of limited partnership units capitalized for tax purposes 1,741,676 Excess book depreciation 414,915 Tax loss on sale of assets (107,920) Other 83 ----------- Net worth for tax purposes $ 7,894,411 ===========
NOTE 8 - CASH DISTRIBUTIONS TO LIMITED PARTNERS Cash distributions paid to limited partners for the three years ended December 31, 1999 were as follows:
Cash Weighted Number of Units Distributions per Average Number Outstanding at Limited Partnership of Units the End of Quarter Ended Unit Outstanding Quarter ------------------- -------------- --------------- December 31, 1996 $ 3.63 47,410 47,410 March 31, 1997 3.39 47,410 47,410 June 30, 1997 3.47 47,394 47,394 September 30, 1997 3.89 47,394 47,394 ------ Amount from operations 14.38 Return of capital (December 1997) 5.88 47,398 ------ Total paid in 1997 $20.26 ====== December 31, 1997 $ 3.71 47,394 47,394 March 31, 1998 2.97 47,394 47,394 June 30, 1998 3.47 47,378 47,346 September 30, 1998 3.95 47,370 47,346 ------ Total paid in 1998 $14.10 ====== December 31, 1998 $ 3.82 47,346 47,346 March 31, 1999 3.22 47,331 47,331 June 30, 1999 3.58 47,331 47,331 September 30, 1999 3.85 47,331 47,331 ------ Total paid in 1999 $14.47 ======
19 20 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 1999 NOTE 8 - CASH DISTRIBUTIONS TO LIMITED PARTNERS - CONTINUED Cash distributions per limited partnership unit were calculated based upon the weighted average number of units outstanding for each quarter and were paid from operations. Cash distributions for the quarter ended December 31, 1999 amounted to $3.73 per limited partnership unit and were paid January 28, 2000. NOTE 9 - REAL ESTATE HELD FOR SALE In November 1997, the Twentynine Palms property was sold yielding net proceeds of $278,612, resulting in a gain of $4,112. 20 21 PART III ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP'S GENERAL PARTNER (a) & (b) The executive officers and directors of the General Partner and their ages are set forth below:
Name Title Age Kevin K. Moriarty Director, Chairman and Chief Executive Officer 53 C. Ronald Petty President 55 Paul W. Hitzelberger Executive Vice President, Brand Strategy and Franchise Relations/Development 55 Robert J. Terrano Executive Vice President and Chief Financial Officer 44 James D. Stoops Executive Vice President, Operations 47 Janet D. Simmons Senior Vice President, Purchasing 43 Michael L. Annis Vice President, Secretary and General Counsel 53 C. Douglas Mitchell Vice President and Corporate Controller 49 Timothy A. Hackbardt Vice President, Marketing 36 Shirlene Lopez Vice President, Corporate Development 35
The above referenced executive officers and directors of the General Partner will hold office until the annual meeting of its shareholders and directors, which is scheduled for the later part of 2000. (c) None (d) No family relationship exists between any such director or executive officer of the General Partner. (e) The following is an account of the business experience during the past five years of each such director and executive officer: 21 22 Kevin K. Moriarty, Director, Chairman and Chief Executive Officer of Del Taco, Inc. Mr. Moriarty began his career with Burger King Corporation in 1974 in Operations Unit Management. In 1983, he was promoted to Area Manager in New York, and was subsequently promoted to the Regional Vice President, Chicago Region in 1985. In 1988, he became Executive Vice President and General Manager of the North Central Division. Mr. Moriarty served in that position until 1990 when he joined Del Taco, Inc. as President and Chief Executive Officer on July 31, 1990. Mr. Moriarty has served as a Director of the General Partner since 1990. C. Ronald Petty, President of Del Taco, Inc. Mr. Petty began his career in the restaurant business in 1973 with McDonald's Corporation. He was employed by McDonald's in a real estate capacity until 1978. For the next 12 years, Mr. Petty was in various officer positions with Burger King. These positions included Vice President of Real Estate, Sr. Vice President of Development, Region Vice President, Sr. Vice President European Operations, President of International and President of U.S. Mr. Petty served as President of Miami Subs from 1990-1992; President and CEO of Denny's 1993-1996; President and CEO of Peter Piper Pizza 1996-1998; President of Del Taco December 1998-present. Paul W. Hitzelberger, Executive Vice President, Brand Strategy and Franchise Relations/Development of Del Taco, Inc. He was appointed to his current position in December 1995. Mr. Hitzelberger has responsibility for franchise development, relations and training. He also oversees public relations and training for the corporation. From 1991 to 1995, Mr. Hitzelberger was Executive Vice President, Marketing of Del Taco, Inc. From September 1988 through September 1989, Mr. Hitzelberger was Chief Executive Officer of Environmental Marketing Group. Prior to that, Mr. Hitzelberger was a Vice President of Del Taco, Inc. Prior to joining Del Taco, Inc., he served as Vice President - Marketing at the department store division of Lucky Stores, Inc., a major supermarket retailer. Mr. Hitzelberger received a Master of Business Administration degree from Loyola University in Chicago, Illinois. Robert J. Terrano, Executive Vice President and Chief Financial Officer of Del Taco, Inc. From May 1994 to April 1995, Mr. Terrano served as Chief Financial Officer for Denny's, Inc. in Spartanburg, S.C. From August 1983 to May 1994, he served with Burger King Corporation, Miami Florida, in a variety of positions, most recently as Division Controller. Mr. Terrano joined Del Taco, Inc. in April 1995. James D. Stoops, Executive Vice President, Operations of Del Taco, Inc. From 1968 to 1991, Mr. Stoops served in a wide variety of Operations positions with Burger King Corporation with increasing levels of responsibility. In 1985, Mr. Stoops was appointed Region Vice President/General Manager for the New York region and served in that position until October of 1990. In January of 1991, he joined Del Taco, Inc. in his current post. Janet D. Simmons, Senior Vice President, Purchasing of Del Taco, Inc. From 1979 to 1986, Ms. Simmons was with Denny's Incorporated. She served in the Research and Development department in a variety of positions until 1982 when she was promoted to the position of Purchasing Agent. Ms. Simmons was hired in 1986 as Manager of Contract Purchasing with Carl Karcher Enterprises, a post she held until March 1990 when she became Vice President, Purchasing for Del Taco, Inc. Ms. Simmons has a Bachelor of Science degree in Foods and Nutrition from Cal State Polytechnic University in Pomona, California. 22 23 Michael L. Annis, Vice President, Secretary and General Counsel of Del Taco, Inc. From 1981 to 1986 Mr. Annis served as Regional Real Estate Manager and Director of Real Estate Services with Taco Bell, Inc. In 1986 he served as Regional General Manager with Quaker State Minit Lube. In January of 1987 Mr. Annis joined Red Robin International, Inc. as General Counsel and was subsequently promoted to Vice President/Secretary and later Vice President Real Estate Development/Secretary and General Counsel, the position he held until joining Del Taco, Inc. in December of 1993. Mr. Annis received his J.D. Degree from Whittier College. C. Douglas Mitchell, Vice President and Corporate Controller. Mr. Mitchell joined Del Taco, Inc. in August of 1994 as Controller and was promoted to his current position in January 1996. From 1990 to 1994, Mr. Mitchell was a Senior Audit Manager with Coopers & Lybrand. Prior to 1990, Mr. Mitchell held various positions in finance and accounting with the Geneva Companies (a subsidiary of Chemical Bank), Zaremba Corporation (a real estate developer) and The Dexter Corporation (an international manufacturer of specialty materials). Mr. Mitchell has a Bachelor of Science degree with a major in accounting from the University of Southern California. Timothy A. Hackbardt, Vice President, Marketing of Del Taco, Inc. Mr. Hackbardt joined Del Taco, Inc. in November 1999. Prior to then, since November of 1995, he served as Vice President of Marketing of Taco Time International, Inc., Eugene, OR. From September 1994 to November 1995, Mr. Hackbardt was Director of Marketing for Wok Spirit Chinese Delivery restaurants in Newport Beach, CA. From December 1992 to September 1994, Mr. Hackbardt was Director of Marketing for Fosters Freeze International, Inc., San Luis Obispo, CA. Prior to then, Mr. Hackbardt held various positions in the television and radio industry in sales and sales management. Mr. Hackbardt is a graduate of Central Michigan University where he received a Bachelor of Applied Arts, majoring in Broadcast and Cinematic Arts and minoring in Marketing. Shirlene Lopez, Vice President, Corporate Development & Design of Del Taco, Inc. Ms. Lopez began her career with Del Taco in 1978 as an hourly employee and advanced through the ranks to General Manager in 1984. Ms. Lopez was promoted to the corporate office in 1989 as Human Resource Manager. In 1994, she was promoted to Executive Project Manager reporting to the CEO and in 1996, to Director of Corporate Development in charge of all interior image and design. Ms. Lopez has held her current position since August 1997. ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS The partnership has no executive officers or directors and pays no direct remuneration to any executive officer or director of its General Partner. The partnership has not issued any options or stock appreciation rights to any executive officer or director of its General Partner, nor does the partnership propose to pay any annuity, pension or retirement benefits to any executive officer or director of its General Partner. The partnership has no plan, nor does the partnership presently propose a plan, which will result in any remuneration being paid to any executive officer or director of the General Partner upon termination of employment. 23 24 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) No person of record currently owns more than five percent of limited partnership units of the partnership, nor was any person known of by the partnership to own of record and beneficially, or beneficially only, more than five percent of such securities. (b) Neither Del Taco, Inc., nor any executive officer or director of Del Taco, Inc. owns any limited partnership units of the partnership. (c) The partnership knows of no contractual arrangements, the operation or the terms of which may at a subsequent date result in a change in control of the partnership, except for provisions in the partnership agreement providing for removal of the General Partner by holders of a majority of the limited partnership units and if a material event of default occurs under the financing agreements of the General Partner. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (a) No transactions have occurred between the partnership and any executive officer or director of its General Partner. During 1999, the following transactions occurred between the partnership and the General Partner pursuant to the terms of the partnership agreement. (1) The General Partner earned $5,668 as its one percent share of the net income of the partnership. (2) The General Partner received $6,910 in distributions relating to its one percent interest in the partnership. (b) During 1999, the partnership had no business relationships with any entity of a type required to be reported under this item. (c) Neither the General Partner, any director or officer of the General Partner or any associate of any such person, was indebted to the partnership at any time during 1999 for any amount in excess of $60,000. (d) Not applicable. 24 25 PART IV ITEM 14(a)(1) AND (2). EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K Financial statement schedules: Schedule III - Real Estate and Accumulated Depreciation Financial statement schedules other than those referred to above have been omitted because they are not applicable or not required. (b) No reports on Form 8-K were filed during the last quarter of 1999. (c) Exhibits required by Item 601 of Regulation S-K: 1. Incorporated herein by reference, Restated Agreement of Limited Partnership of Del Taco Restaurant Properties III filed as Exhibit 3.01 to Partnership's Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on December 30, 1985. 2. Incorporated herein by reference, Amendment to Restated Agreement of Limited Partnership of Del Taco Restaurant Properties III. 3. Incorporated herein by reference, Form of Standard Lease to be entered into by partnership and Del Taco, Inc., as lessee, filed as Exhibit 10.02 to Partnership's Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on December 30, 1985. 25 26 DEL TACO RESTAURANT PROPERTIES III - SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999
Cost capitalized Gross amount at Initial cost subsequent to which carried at Description Encumbrances to company acquisition close of period -------------------------------------------------------------------------- Land Buildings & Land, buildings & (All Restaurants) & land Improve- Carrying improvements improvements ments costs Total - -------------------------------------------------------------------------------------------------------------------------------- Rancho California, CA $ - $ 384,400 $ 257,807 $ - $ 642,207 Vista, CA - 512,130 343,471 - 855,601 Industry, CA - 627,082 420,566 - 1,047,648 Perris, Ca - 437,522 293,434 - 730,956 Upland, CA - 281,827 189,014 - 470,841 Walnut, CA - 340,848 228,597 - 569,445 Los Angeles, CA - 674,283 452,223 - 1,126,506 Chatsworth, CA - 642,475 430,890 - 1,073,365 Victorville, CA - 505,399 338,957 - 844,356 --------------------------------------------------------------------------------------------- $ - $ 4,405,966 $ 2,954,959 $ - $ 7,360,925 ============================================================================================= Life on which depreciation in latest Description Accumulated Date of Date income statement (All Restaurants) depreciation construction acquired is computed - --------------------------------------------------------------------------------------------------- Rancho California, CA $ 110,765 1986 1986 20 (LI), 35 (BI) Vista, CA 147,569 1987 1987 20 (LI), 35 (BI) Industry, CA 180,693 1987 1987 20 (LI), 35 (BI) Perris, Ca 126,071 1987 1987 20 (LI), 35 (BI) Upland, CA 81,207 1987 1987 20 (LI), 35 (BI) Walnut, CA 98,214 1988 1988 20 (LI), 35 (BI) Los Angeles, CA 194,294 1988 1988 20 (LI), 35 (BI) Chatsworth, CA 185,127 1989 1989 20 (LI), 35 (BI) Victorville, CA 145,635 1989 1989 20 (LI), 35 (BI) ------------- $ 1,269,575 ============= Accumulated Restaurants Depreciation ----------- ------------- Balances at December 31, 1996: $ 7,360,925 $ 929,854 Acquisitions - 113,240 Sales - - ----------- ------------- Balances at December 31, 1997: 7,360,925 1,043,094 Acquisitions - 113,240 Sales - - ----------- ------------- Balances at December 31, 1998: 7,360,925 1,156,334 Acquisitions - 113,241 Sales - - ----------- ------------ Balances at December 31, 1999: $ 7,360,925 $ 1,269,575 =========== ============
26 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the partnership 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 Del Taco, Inc. General Partner Date March 07, 2000 Kevin K. Moriarty -------------- -------------------------------- Kevin K. Moriarty Director, Chairman and Chief Executive Officer Date March 07, 2000 Michael L. Annis -------------- -------------------------------- Michael L. Annis Vice President, Secretary and General Counsel Date March 07, 2000 Robert J. Terrano -------------- ------------------------------ Robert J. Terrano Executive Vice President and Chief Financial Officer Date March 07, 2000 C. Douglas Mitchell -------------- ------------------- C. Douglas Mitchell Vice President and Corporate Controller 27 28 EXHIBIT INDEX EXHIBIT - ------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 305,625 1,000 62,122 0 0 368,747 8,883,847 2,792,496 6,460,098 36,931 0 0 0 0 5,845,657 6,460,098 0 736,893 0 170,127 0 0 0 566,766 0 566,766 0 0 0 566,766 11.85 11.85
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