-----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, LnU4DaQJTuZHnZfyHDoU7Y8gn2gNJZZn725ZbtuGG8r5bXh9fSVvMYl781HcfTAD Nk1nyRc4E99QdDjDeh/n6w== 0001095811-01-503774.txt : 20010809 0001095811-01-503774.hdr.sgml : 20010809 ACCESSION NUMBER: 0001095811-01-503774 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010808 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: 1701129 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 a74751e10-q.txt FORM 10-Q QUARTERLY PERIOD ENDED JUNE 30,2001 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, 2001. 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, 2001 (Unaudited) and December 31, 2000 3 Statements of Income for the three and six months ended June 30, 2001 and 2000 (Unaudited) 4 Statements of Cash Flows for the six months ended June 30, 2001 and 2000 (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, 2001 2000 ----------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash $ 229,839 $ 230,275 Receivable from General Partner 70,188 69,017 Deposits 1,000 1,622 ----------- ----------- Total current assets 301,027 300,914 ----------- ----------- RESTRICTED CASH 97,291 97,291 ----------- ----------- 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 2,962,356 2,905,737 ----------- ----------- 5,921,491 5,978,110 ----------- ----------- $ 6,319,809 $ 6,376,315 =========== =========== LIABILITIES AND PARTNERS' EQUITY CURRENT LIABILITIES: Payable to Limited Partners $ 39,627 $ 34,067 Accounts payable 15,059 15,979 ----------- ----------- Total current liabilities 54,686 50,046 ----------- ----------- OBLIGATION TO GENERAL PARTNER 577,510 577,510 ----------- ----------- PARTNERS' EQUITY: Limited Partners 5,726,265 5,786,836 General Partner-Del Taco, Inc. (38,652) (38,077) ----------- ----------- 5,687,613 5,748,759 ----------- ----------- $ 6,319,809 $ 6,376,315 =========== ===========
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, 2001 2000 2001 2000 -------- -------- -------- -------- REVENUES: Rent $203,933 $192,383 $396,910 $370,965 Interest 2,383 3,049 5,867 5,360 Other 450 475 1,125 1,083 -------- -------- -------- -------- 206,766 195,907 403,902 377,408 -------- -------- -------- -------- EXPENSES: General and administrative 14,836 12,464 38,766 35,460 Depreciation 28,311 28,311 56,621 56,621 -------- -------- -------- -------- 43,147 40,775 95,387 92,081 -------- -------- -------- -------- Net income $163,619 $155,132 $308,515 $285,327 ======== ======== ======== ======== Net income per limited partnership unit $ 3.42 $ 3.24 $ 6.45 $ 5.97 ======== ======== ======== ========
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, 2001 2000 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 308,515 $ 285,327 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 56,621 56,621 Increase in receivable from General Partner (1,173) (5,938) Decrease in deposits 622 -- Increase in accounts payable and payable to limited partners 4,640 1,410 --------- --------- Net cash provided by operating activities 369,225 337,420 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions to partners (369,661) (343,238) --------- --------- Net decrease in cash (436) (5,818) Beginning cash balance 230,275 208,334 --------- --------- Ending cash balance $ 229,839 $ 202,516 ========= =========
The accompanying notes are an integral part of these financial statements. -5- 6 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 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, 2000. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the partnership's financial position at June 30, 2001, the results of operations and cash flows for the six month periods ended June 30, 2001 and 2000 have been included. Operating results for the three and six months ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. NOTE 2 - RESTRICTED CASH At June 30, 2001, 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, 2001 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 2001 and 2000. 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. For the three months ended June 30, 2001, the nine restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $1,699,436 and net income of $94,528, as compared to $1,603,188 and $73,485, respectively, for the corresponding period in 2000. Net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense. For the six months ended June 30, 2001, the nine restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $3,307,581 and net income of $182,471, as compared to $3,091,375 and $100,526, respectively, for the corresponding period in 2000. -7- 8 DEL TACO RESTAURANT PROPERTIES III NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2001 NOTE 4 - LEASING ACTIVITIES - CONTINUED For the three months and six months ended June 30, 2001, the East Valley Blvd. restaurant in Walnut, California reported net income of $35 and a net loss of $2,352 as compared to net losses of $425 and $2,830 for the corresponding period in 2000. For the three months and six months ended June 30, 2001, the East Gale Blvd. restaurant in Puente Hills, California reported net losses of $2,032 and $3,768 as compared to net losses of $2,856 and $6,529 for the corresponding period in 2000. For the three months and six months ended June 30, 2001, the West Sepulveda Blvd. restaurant in Los Angeles, California reported net income of $651 and $1,122 as compared to net losses of $1,750 and $9,203 for the corresponding period in 2000. 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 10, 2001. 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 18, 2001, a distribution to the limited partners of $183,600, or approximately $3.88 per limited partnership unit, was approved. Such distribution was paid on July 20, 2001. The General Partner also received a distribution of $1,855 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. One restaurant was sold in November 1997. 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, 2001. 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 three and six months ended June 30, 2001 and 2000:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 -------- -------- -------- -------- Rancho California Plaza, Rancho California, CA $ 32,193 $ 31,494 $ 61,512 $ 60,405 East Vista Way, Vista, CA 19,223 19,675 37,716 37,691 Plaza at Puente Hills, Industry, CA 12,992 12,333 25,619 23,993 4th Street, Perris, CA 28,131 26,705 53,899 50,654 Foothill Blvd., Upland, CA 24,333 23,836 48,977 45,897 East Valley Blvd., Walnut, CA 12,588 11,664 24,676 23,038 Lassen Street, Chatsworth, CA 29,809 27,417 58,232 53,002 Hesperia Road, Victorville, CA 27,831 24,125 53,385 47,100 W. Sepulveda Blvd., Los Angeles, CA 16,833 15,134 32,894 29,185 -------- -------- -------- -------- Total $203,933 $192,383 $396,910 $370,965 ======== ======== ======== ========
-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 $203,933 during the three month period ended June 30, 2001, which represents an increase of $11,550 from 2000. The partnership earned rental revenue of $396,910 during the six month period ended June 30, 2001, which represents an increase of $25,945 from 2000. The increases in rental revenue are directly attributable to changes in sales levels at the restaurants under lease. The following table breaks down general and administrative expenses by type of expense:
Percentage of Total General & Administrative Expense Six Months Ended June 30, 2001 2000 ---------- ---------- Accounting fees 65.07 % 60.17 % Distribution of information to Limited Partners 34.93 39.83 ---------- ---------- 100.00 % 100.00 % ========== ==========
General and administrative costs for the six month period ended June 30, increased from 2000 to 2001 due to increased costs for income tax preparation and annual audit fees. For the three month period ended June 30, 2001, net income increased by $8,487 from 2000 to 2001 due to the increase in revenues of $10,859 which was partially offset by the increase in general and administrative expenses of $2,372. For the six month period ended June 30, 2001, net income increased by $23,188 from 2000 to 2001 due to an increase in revenues of $26,494 which was partially offset by an increase in general and administrative expenses of $3,306. In accordance with recent U.S. Government regulations, the partnership is required to file annual K-1 income tax forms with the Internal Revenue Service electronically beginning in 2002 for the year ending December 31, 2001. In order to comply with this regulation, the partnership will incur additional costs to lease software to 1) prepare the tax forms electronically and 2) maintain the underlying partnership database. The General Partner and outside consultants are evaluating available software and expect to select a software package in the third calendar quarter of 2001. Estimates of additional general and administrative costs to lease the software range from $2,000 to $9,000 in 2001 (the conversion year) and range from $4,500 to $7,500 in each subsequent year. -10- 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b) No reports on Form 8-K were filed during the six months ended June 30, 2001. -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 31, 2001 /s/ Robert J. Terrano ------------------------------- Robert J. Terrano Executive Vice President, Chief Financial Officer Date: July 31, 2001 /s/ C. Douglas Mitchell ------------------------------- C. Douglas Mitchell Vice President and Corporate Controller -12- -----END PRIVACY-ENHANCED MESSAGE-----