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 September 30, 2013
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. 0-16191
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 |
92630 | |
(Address of principal executive offices) | (Zip Code) |
(949) 462-9300
(Registrants 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 ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
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.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | 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 ¨ No x
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants Form S-11 Registration Statement filed December 17, 1982 are incorporated by reference into Part IV of this report.
DEL TACO RESTAURANT PROPERTIES III
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DEL TACO RESTAURANT PROPERTIES III
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: |
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Cash |
$ | 333,356 | $ | 326,328 | ||||
Receivable from Del Taco LLC |
85,374 | 80,664 | ||||||
Other current assets |
1,993 | 1,654 | ||||||
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Total current assets |
420,723 | 408,646 | ||||||
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RESTRICTED CASH |
86,017 | 86,017 | ||||||
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PROPERTY AND EQUIPMENT: |
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Land |
3,284,629 | 3,284,629 | ||||||
Land improvements |
494,254 | 494,254 | ||||||
Buildings and improvements |
2,534,393 | 2,534,393 | ||||||
Machinery and equipment |
1,306,171 | 1,306,171 | ||||||
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7,619,447 | 7,619,447 | |||||||
Lessaccumulated depreciation |
3,662,107 | 3,607,798 | ||||||
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3,957,340 | 4,011,649 | |||||||
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$ | 4,464,080 | $ | 4,506,312 | |||||
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LIABILITIES AND PARTNERS EQUITY | ||||||||
CURRENT LIABILITIES: |
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Payable to limited partners |
$ | 85,382 | $ | 75,944 | ||||
Accounts payable |
18,727 | 25,258 | ||||||
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Total current liabilities |
104,109 | 101,202 | ||||||
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OBLIGATION TO GENERAL PARTNER |
577,510 | 577,510 | ||||||
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PARTNERS EQUITY: |
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Limited partners; 47,261 units outstanding at September 30, 2013 and December 31, 2012 |
3,827,732 | 3,872,420 | ||||||
General partner-Del Taco LLC |
(45,271 | ) | (44,820 | ) | ||||
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3,782,461 | 3,827,600 | |||||||
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$ | 4,464,080 | $ | 4,506,312 | |||||
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See accompanying notes to condensed financial statements.
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DEL TACO RESTAURANT PROPERTIES III
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
RENTAL REVENUES |
$ | 261,201 | $ | 255,739 | $ | 760,651 | $ | 737,660 | ||||||||
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EXPENSES: |
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General and administrative |
13,936 | 15,788 | 75,145 | 78,965 | ||||||||||||
Depreciation |
18,103 | 18,103 | 54,309 | 54,309 | ||||||||||||
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32,039 | 33,891 | 129,454 | 133,274 | |||||||||||||
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Operating income |
229,162 | 221,848 | 631,197 | 604,386 | ||||||||||||
OTHER INCOME: |
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Interest |
137 | 124 | 398 | 362 | ||||||||||||
Other |
475 | 815 | 1,400 | 2,565 | ||||||||||||
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Net income |
$ | 229,774 | $ | 222,787 | $ | 632,995 | $ | 607,313 | ||||||||
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Net income per limited partnership unit (Note 3) |
$ | 4.81 | $ | 4.67 | $ | 13.26 | $ | 12.72 | ||||||||
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Number of units used in computing per unit amounts |
47,261 | 47,261 | 47,261 | 47,261 | ||||||||||||
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See accompanying notes to condensed financial statements.
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DEL TACO RESTAURANT PROPERTIES III
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended | ||||||||
September 30, | ||||||||
2013 | 2012 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
$ | 632,995 | $ | 607,313 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
54,309 | 54,309 | ||||||
Changes in operating assets and liabilities: |
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Receivable from Del Taco LLC |
(4,710 | ) | (486 | ) | ||||
Other current assets |
(339 | ) | (245 | ) | ||||
Payable to limited partners |
9,438 | 5,094 | ||||||
Accounts payable |
(6,531 | ) | (22,475 | ) | ||||
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Net cash provided by operating activities |
685,162 | 643,510 | ||||||
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Cash distributions to partners |
(678,134 | ) | (609,667 | ) | ||||
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Net change in cash |
7,028 | 33,843 | ||||||
Beginning cash balance |
326,328 | 277,636 | ||||||
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Ending cash balance |
$ | 333,356 | $ | 311,479 | ||||
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See accompanying notes to condensed financial statements.
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DEL TACO RESTAURANT PROPERTIES III
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013
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, 2012 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 Partnerships financial position at September 30, 2013, the results of operations for the three and nine month periods ended September 30, 2013 and 2012 and cash flows for the nine month periods ended September 30, 2013 and 2012 have been included. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. Amounts related to disclosure of December 31, 2012 balances within these condensed financial statements were derived from the 2012 audited financial statements.
Management has evaluated events subsequent to September 30, 2013 through the date that the accompanying condensed financial statements were filed with the Securities and Exchange Commission for transactions and other events which may require adjustment of and/or disclosure in such financial statements.
NOTE 2 - RESTRICTED CASH
At September 30, 2013 and December 31, 2012, the Partnership had a restricted cash balance of $86,017. The restricted cash results from a death and disability fund that the Company is required to maintain under the terms of the Partnership agreement. 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 partners 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 3 - NET INCOME PER LIMITED PARTNERSHIP UNIT
Net income per limited partnership unit is based on net income attributable to the limited partners (after one percent allocation to the general partner) using the weighted average number of units outstanding during the periods presented which amounted to 47,261 in 2013 and 2012.
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 2022 to 2024.
Pursuant to the lease agreements, minimum rentals of $3,500 per month are due to the Partnership during the first six months of any non-operating period caused by an insured casualty loss.
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DEL TACO RESTAURANT PROPERTIES III
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013
UNAUDITED
NOTE 4 - LEASING ACTIVITIES - continued
For the three months ended September 30, 2013, the restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $2,176,679 and unaudited net losses of $12,562 as compared to unaudited sales of $2,131,161 and unaudited net losses of $7,111, respectively, for the corresponding period in 2012. 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 increases in operating costs and decreases in revenues.
For the nine months ended September 30, 2013, the restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $6,338,757 and unaudited net losses of $57,717 as compared to $6,147,167 and unaudited net losses of $53,054 for the corresponding period in 2012. 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 increases in operating costs.
NOTE 5 - TRANSACTIONS WITH DEL TACO
The receivable from Del Taco consists primarily of rent accrued for the month of September 2013. The September rent receivable was collected in October 2013.
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
Total cash distributions declared and paid in February, June and August 2013 were $237,696, $207,639 and $232,799, respectively. On October 21, 2013, a distribution to the limited partners of $240,859, or approximately $5.09 per limited partnership unit, was approved. Such distribution was paid on November 6, 2013. The General Partner also received a distribution of $2,433 with respect to its 1% partnership interest in November 2013.
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 six months or longer.
NOTE 8 - CONCENTRATION OF RISK
The restaurants leased to Del Taco make up all of the income producing assets of the Partnership and contributed all of the Partnerships rental revenues during the three and nine months ended September 30, 2013 and 2012. 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. Although the Partnership at times maintains balances that exceed the federally insured limit, it has not experienced any losses related to these balances and management believes the credit risk to be minimal.
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Item 2. | Managements 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 (the General Partner or Del Taco) 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 and one restaurant was sold in December 2012.
The 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 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 Financial Statements, the Partnership has a death and disability redemption fund totaling $86,017 at September 30, 2013. 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 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 | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Rancho California Plaza, Rancho California, CA |
$ | 45,099 | $ | 45,169 | $ | 128,909 | $ | 125,500 | ||||||||
East Vista Way, Vista, CA |
27,976 | 28,633 | 81,547 | 82,558 | ||||||||||||
4th Street, Perris, CA |
32,150 | 31,711 | 95,093 | 91,187 | ||||||||||||
Foothill Blvd., Upland, CA |
36,474 | 32,931 | 105,627 | 92,808 | ||||||||||||
East Valley Blvd., Walnut, CA |
21,139 | 20,010 | 61,183 | 59,428 | ||||||||||||
Lassen Street, Chatsworth, CA |
38,024 | 37,293 | 110,798 | 108,843 | ||||||||||||
Hesperia Road, Victorville, CA |
38,289 | 37,109 | 113,522 | 111,026 | ||||||||||||
W. Sepulveda Blvd., Los Angeles, CA |
22,050 | 22,883 | 63,972 | 66,310 | ||||||||||||
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Total |
$ | 261,201 | $ | 255,739 | $ | 760,651 | $ | 737,660 | ||||||||
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The Partnership receives rental revenues equal to 12 percent of gross sales from the restaurants. The Partnership earned rental revenue of $261,201 during the three month period ended September 30, 2013, which represents an increase of $5,462 from the corresponding period in 2012. The Partnership earned rental revenue of $760,651 during the nine month period ended September 30, 2013, which represents an increase of $22,991 from the corresponding period in 2012. The changes in rental revenues between 2012 and 2013 are directly attributable to changes in sales levels at the restaurants under lease due to local competitive and industry factors.
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations - continued |
The following table breaks down general and administrative expenses by type of expense:
General & Administrative Expense | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Accounting fees |
40.15 | % | 35.68 | % | 60.54 | % | 57.97 | % | ||||||||
Distribution of information to limited partners |
59.85 | % | 64.32 | % | 39.46 | % | 42.03 | % | ||||||||
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100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | |||||||||
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General and administrative costs decreased during the three and nine month periods primarily due to a one time decrease in costs for mailing.
For the three month period ended September 30, 2013, net income increased by $6,987 from 2012 to 2013 due to the increase in revenues of $5,462 and the decrease in general and administrative expenses of $1,852, partially offset by the decrease in interest and other income of $327. For the nine month period ended September 30, 2013, net income increased $25,682 from 2012 to 2013 due to the increase in revenues of $22,991 and the decrease in general and administrative expenses of $3,820, partially offset by and decrease in interest and other income of $1,129.
Significant Recent Accounting Pronouncements
None.
Off-Balance Sheet Arrangements
None
Critical Accounting Policies and Estimates
Managements 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 Partnerships 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 Partnerships December 31, 2012 Form 10-K.
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. | Managements Discussion and Analysis of Financial Condition and Results of Operations - continued |
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 authoritative guidance issued by the Financial Accounting Standards Board that requires 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.
Item 4. | 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 Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Companys periodic Securities and Exchange Commission filings.
(b) | Changes in internal controls: |
There were no significant changes in the Companys 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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There is no information required to be reported for any items under Part II, except as follows:
Item 6. | Exhibits |
(a) | Exhibits |
31.1 | Paul J. B. Murphy, IIIs Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Steven L. Brakes 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 |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
- 11 -
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: November 14, 2013 | /s/ Steven L. Brake | |||||
Steven L. Brake | ||||||
Chief Financial Officer (Principal Financial Officer) |
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES
ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul J. B. Murphy, III, certify that:
1. | I have reviewed this quarterly (report) on Form 10-Q of Del Taco Restaurant Properties III; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: November 14, 2013 | /s/ Paul J. B. Murphy, III | |||||
Paul J. B. Murphy, III | ||||||
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES
ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Steven L. Brake, certify that:
1. | I have reviewed this quarterly report (report) on Form 10-Q of Del Taco Restaurant Properties III; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: November 14, 2013 | /s/ Steven L. Brake | |||||
Steven L. Brake | ||||||
Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18,
UNITED STATES CODE)
In connection with the Quarterly Report of Del Taco Restaurant Properties III (the Company) on Form 10-Q for the period ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the Report), each of the undersigned officers of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
Date: November 14, 2013 | /s/ Paul J. B. Murphy, III | |||||
Paul J. B. Murphy, III | ||||||
Chief Executive Officer |
Date: November 14, 2013 | /s/ Steven L. Brake | |||||
Steven L. Brake | ||||||
Chief Financial Officer (Principal Financial Officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Transactions with Del Taco - Additional Information (Detail)
|
9 Months Ended |
---|---|
Sep. 30, 2013
PartnershipUnit
|
|
Related Party Transactions [Abstract] | |
Number of other partnerships formed for acquisition | 3 |
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CONDENSED STATEMENTS OF INCOME (USD $)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2013
|
Sep. 30, 2012
|
Sep. 30, 2013
|
Sep. 30, 2012
|
|
Income Statement [Abstract] | ||||
RENTAL REVENUES | $ 261,201 | $ 255,739 | $ 760,651 | $ 737,660 |
EXPENSES: | ||||
General and administrative | 13,936 | 15,788 | 75,145 | 78,965 |
Depreciation | 18,103 | 18,103 | 54,309 | 54,309 |
Total expenses | 32,039 | 33,891 | 129,454 | 133,274 |
Operating income | 229,162 | 221,848 | 631,197 | 604,386 |
OTHER INCOME: | ||||
Interest | 137 | 124 | 398 | 362 |
Other | 475 | 815 | 1,400 | 2,565 |
Net income | $ 229,774 | $ 222,787 | $ 632,995 | $ 607,313 |
Net income per limited partnership unit (Note 3) | $ 4.81 | $ 4.67 | $ 13.26 | $ 12.72 |
Number of units used in computing per unit amounts | 47,261 | 47,261 | 47,261 | 47,261 |
Transactions with Del Taco
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Related Party Transactions [Abstract] | |
Transactions with Del Taco | NOTE 5 - TRANSACTIONS WITH DEL TACO The receivable from Del Taco consists primarily of rent accrued for the month of September 2013. The September rent receivable was collected in October 2013. 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. |
Distributions - Additional Information (Detail) (USD $)
|
1 Months Ended | 3 Months Ended | ||
---|---|---|---|---|
Aug. 31, 2013
|
Jun. 30, 2013
|
Feb. 28, 2013
|
Sep. 30, 2013
|
|
Cash Distributions [Abstract] | ||||
Total cash distributions declared and paid | $ 232,799 | $ 207,639 | $ 237,696 | |
Distribution to limited partner, declaration date | Oct. 21, 2013 | |||
Distribution to limited partners amount approved | 240,859 | |||
Distribution to limited partner, per unit amount declared | $ 5.09 | |||
Distribution to limited partner, distribution date | Nov. 06, 2013 | |||
Distributions to general partner | $ 2,433 | |||
General partner, partnership interest percentage | 1.00% | |||
Distribution to general partner, distribution date | Nov. 30, 2013 |
Basis of Presentation
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Accounting Policies [Abstract] | |
Basis of Presentation | 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, 2012 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 September 30, 2013, the results of operations for the three and nine month periods ended September 30, 2013 and 2012 and cash flows for the nine month periods ended September 30, 2013 and 2012 have been included. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. Amounts related to disclosure of December 31, 2012 balances within these condensed financial statements were derived from the 2012 audited financial statements. Management has evaluated events subsequent to September 30, 2013 through the date that the accompanying condensed financial statements were filed with the Securities and Exchange Commission for transactions and other events which may require adjustment of and/or disclosure in such financial statements. |
Net Income Per Limited Partnership Unit
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Earnings Per Share [Abstract] | |
Net Income Per Limited Partnership Unit | 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 one percent allocation to the general partner) using the weighted average number of units outstanding during the periods presented which amounted to 47,261 in 2013 and 2012. 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. |
Distributions
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Equity [Abstract] | |
Distributions | NOTE 6 - DISTRIBUTIONS Total cash distributions declared and paid in February, June and August 2013 were $237,696, $207,639 and $232,799, respectively. On October 21, 2013, a distribution to the limited partners of $240,859, or approximately $5.09 per limited partnership unit, was approved. Such distribution was paid on November 6, 2013. The General Partner also received a distribution of $2,433 with respect to its 1% partnership interest in November 2013. |
Leasing Activities
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Leases [Abstract] | |
Leasing Activities | 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 2022 to 2024. Pursuant to the lease agreements, minimum rentals of $3,500 per month are due to the Partnership during the first six months of any non-operating period caused by an insured casualty loss.
For the three months ended September 30, 2013, the restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $2,176,679 and unaudited net losses of $12,562 as compared to unaudited sales of $2,131,161 and unaudited net losses of $7,111, respectively, for the corresponding period in 2012. 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 increases in operating costs and decreases in revenues. For the nine months ended September 30, 2013, the restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $6,338,757 and unaudited net losses of $57,717 as compared to $6,147,167 and unaudited net losses of $53,054 for the corresponding period in 2012. 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 increases in operating costs. |
CONDENSED BALANCE SHEETS (Parenthetical)
|
Sep. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Statement Of Financial Position [Abstract] | ||
Limited partners, units outstanding | 47,261 | 47,261 |
Restricted Cash - Additional Information (Detail) (USD $)
|
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2013
|
Dec. 31, 2012
|
|
Cash And Cash Equivalents [Abstract] | ||
Restricted cash balance | $ 86,017 | $ 86,017 |
Percentage of gross proceeds from sale | 2.00% | 2.00% |
CONDENSED STATEMENTS OF CASH FLOWS (USD $)
|
9 Months Ended | |
---|---|---|
Sep. 30, 2013
|
Sep. 30, 2012
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 632,995 | $ 607,313 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 54,309 | 54,309 |
Changes in operating assets and liabilities: | ||
Receivable from Del Taco LLC | (4,710) | (486) |
Other current assets | (339) | (245) |
Payable to limited partners | 9,438 | 5,094 |
Accounts payable | (6,531) | (22,475) |
Net cash provided by operating activities | 685,162 | 643,510 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Cash distributions to partners | (678,134) | (609,667) |
Net change in cash | 7,028 | 33,843 |
Beginning cash balance | 326,328 | 277,636 |
Ending cash balance | $ 333,356 | $ 311,479 |
Concentration of Risk
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Risks And Uncertainties [Abstract] | |
Concentration of Risk | NOTE 8 - CONCENTRATION OF RISK The 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 and nine months ended September 30, 2013 and 2012. 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. Although the Partnership at times maintains balances that exceed the federally insured limit, it has not experienced any losses related to these balances and management believes the credit risk to be minimal. |
Leasing Activities - Additional Information (Detail) (USD $)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2013
|
Sep. 30, 2012
|
Sep. 30, 2013
|
Sep. 30, 2012
|
|
Leases [Abstract] | ||||
Number of lease years | 35 years | |||
Percentage of gross sales of the restaurants | 12.00% | |||
Leases expiration period | 2022 to 2024 | |||
Minimum rentals due to Partnership | $ 3,500 | |||
Combined unaudited sales | 2,176,679 | 2,131,161 | 6,338,757 | 6,147,167 |
Combined unaudited net losses | $ 12,562 | $ 7,111 | $ 57,717 | $ 53,054 |
Payable to Limited Partners
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Other Liabilities Disclosure [Abstract] | |
Payable to Limited Partners | 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 six months or longer. |
Restricted Cash
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Cash And Cash Equivalents [Abstract] | |
Restricted Cash | NOTE 2 - RESTRICTED CASH At September 30, 2013 and December 31, 2012, the Partnership had a restricted cash balance of $86,017. The restricted cash results from a death and disability fund that the Company is required to maintain under the terms of the Partnership agreement. 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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Payable to Limited Partners - Additional Information (Detail)
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Payables And Accruals [Abstract] | |
Period of payable outstanding to limited partners | Six months or longer |
Net Income Per Limited Partnership Unit - Additional Information (Detail)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2013
|
Sep. 30, 2012
|
Sep. 30, 2013
|
Sep. 30, 2012
|
|
Earnings Per Share [Abstract] | ||||
Number of units used in computing per unit amounts | 47,261 | 47,261 | 47,261 | 47,261 |
Percentage of net income attributable general partner | 1.00% | |||
Percentage of net income or loss attributable limited partners | 99.00% | |||
Percentage of net income attributable General Partner | 1.00% | |||
Percentage of gains on sale or refinancing allocated to General Partner | 1.00% | |||
Percentage of gains on sale and refinancing allocated to limited partners | 99.00% | |||
Percentage of additional gains on sale or refinancing allocated to General Partner | 15.00% | |||
Percentage of additional gains on sale or refinancing allocated to limited partners | 85.00% |
Concentration of Risk - Additional Information (Detail)
|
Sep. 30, 2013
CommercialBank
|
---|---|
Risks And Uncertainties [Abstract] | |
Commercial bank | 1 |
Document and Entity Information
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Document And Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Sep. 30, 2013 |
Document Fiscal Year Focus | 2013 |
Document Fiscal Period Focus | Q3 |
Trading Symbol | DTRPIII |
Entity Registrant Name | DEL TACO RESTAURANT PROPERTIES III |
Entity Central Index Key | 0000786360 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Non-accelerated Filer |