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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, 1996
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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. 33-13437
DEL TACO INCOME PROPERTIES IV
a California limited partnership
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0241855
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1800 W. KATELLA AVENUE, ORANGE, CALIFORNIA 92667
(Address of principal executive offices) (Zip Code)
(714) 744-4334
(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
--- ---
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INDEX
DEL TACO INCOME PROPERTIES IV
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PART I. FINANCIAL INFORMATION PAGE NUMBER
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Item 1. Financial Statements and Supplementary Data
Balance Sheets at June 30, 1996 (Unaudited) and
December 31, 1995 3
Statements of Income for the three and six months ended
June 30, 1996 and 1995 (Unaudited) 4
Statements of Cash Flows for the six months ended
June 30, 1996 and 1995 (Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 10
27 Financial Data Schedule
SIGNATURES 11
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DEL TACO INCOME PROPERTIES IV
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BALANCE SHEETS
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JUNE 30 December 31
1996 1995
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(UNAUDITED)
ASSETS
------
CURRENT ASSETS:
Cash $ 58,352 $ 73,542
Receivable from General Partner (Note 4) 81,397 20,087
Deposits 400 400
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Total current assets 140,149 94,029
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PROPERTY AND EQUIPMENT, AT COST
Land and improvements 1,236,700 1,236,700
Buildings and improvements 1,289,860 1,289,860
Machinery and equipment 484,789 484,789
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3,011,349 3,011,349
Less--accumulated depreciation 661,922 610,047
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2,349,427 2,401,302
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$2,489,576 $2,495,331
========== ==========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES:
Payable to Limited Partners $ 2,474 $ 1,652
Accounts Payable -- 825
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Total current liabilities 2,474 2,477
OBLIGATION TO GENERAL PARTNER 137,953 137,953
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PARTNERS' EQUITY
Limited Partners 2,356,797 2,362,487
General Partner-Del Taco, Inc. (7,648) (7,586)
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2,349,149 2,354,901
---------- ----------
$2,489,576 $2,495,331
========== ==========
The accompanying notes are an
integral part of these financial statements
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DEL TACO INCOME PROPERTIES IV
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STATEMENTS OF INCOME
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(UNAUDITED)
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1996 1995 1996 1995
-------- -------- -------- --------
REVENUES:
Rent (Notes 3 and 4) $126,726 $ 68,567 $191,682 $132,728
Interest 185 301 491 501
Other -- -- -- 75
-------- -------- -------- --------
126,911 68,868 192,173 133,304
-------- -------- -------- --------
EXPENSES:
General and administrative 6,851 6,161 26,728 26,141
Depreciation 25,939 25,939 51,876 51,865
-------- -------- -------- --------
32,790 32,100 78,604 78,006
-------- -------- -------- --------
Net income $ 94,121 $ 36,768 $113,569 $ 55,298
======== ======== ======== ========
Net income per Limited
Partnership Unit (Note 2) $ 0.56 $ 0.22 $ 0.68 $ 0.33
====== ====== ====== ======
The accompanying notes are an
integral part of these financial statements.
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DEL TACO INCOME PROPERTIES IV
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STATEMENTS OF CASH FLOWS
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(UNAUDITED)
-----------
SIX MONTHS ENDED
JUNE 30
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $113,569 $ 55,298
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 51,876 51,865
Increase (decrease)in payable to Limited Partner 822 (145)
(Increase) decrease in receivable
from General Partner (61,310) 92
Decrease in accounts payable (825) --
-------- --------
Net cash provided by operating activities 104,132 107,110
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners 119,322 122,142
-------- --------
Net decrease in cash (15,190) (15,032)
Beginning cash balance 73,542 74,956
-------- --------
Ending cash balance $ 58,352 $ 59,924
======== ========
The accompanying notes are an
integral part of these financial statements.
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DEL TACO INCOME PROPERTIES IV
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NOTES TO FINANCIAL STATEMENTS
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JUNE 30, 1996
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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, 1995. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) necessary to present fairly the partnership's financial position at
June 30, 1996, the results of operations and cash flows for the six month
periods ended June 30, 1996 and 1995 have been included. Operating results for
the three and six months ended June 30, 1996 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1996.
NOTE 2 - 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
165,415 in 1996 and 1995.
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 12
percent to the General Partner and 88 percent to the Limited Partners.
NOTE 3 - LEASING ACTIVITIES
The Registrant leases (the "Leases") certain properties (the "Properties") for
operation of restaurants to Del Taco, Inc. ("General Partner") on a triple net
basis. The Leases are for terms of 32 years
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DEL TACO INCOME PROPERTIES IV
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NOTES TO FINANCIAL STATEMENTS - CONTINUED
- -----------------------------------------
JUNE 30, 1996
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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. The
Registrant had a total of three Properties leased as of June 30, 1996 and 1995,
one of which has been subleased to a Del Taco franchisee.
Rental revenue for the three and six month periods ended June 30, 1996 was
higher than the corresponding period in 1995 due to the earning of supplemental
rent, as provided for in the lease agreements, based on the operating results
of the individual restaurants.
NOTE 4 - TRANSACTIONS WITH DEL TACO
The receivable from the General Partner consists primarily of rent accrued for
the month of June. The June rent was collected on July 12, 1996.
Del Taco, Inc. serves in the capacity of general partner in other partnerships
which are engaged in the business of operating restaurants, and four
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 5 with respect to certain distributions to the General
Partner.
NOTE 5 - DISTRIBUTIONS
On July 16, 1996, a distribution to the Limited Partners of $108,062, or
approximately $.65 per Limited Partnership Unit, was approved. Such
distribution was paid July 23, 1996. The General Partner also received a
distribution of $1,092 with respect to its 1% partnership interest.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
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The Registrant commenced offering of Limited Partnership Units on June 5, 1987.
By June 1, 1988, the sale of such Units provided a total capitalization for the
Registrant of $4,135,375 including $1,000 attributable to the Special Limited
Partner. 14.5 percent of the cash received from the sale of Limited
Partnership Units was used to pay commissions to brokers and to reimburse the
General Partner for offering costs incurred. Approximately $3,000,000 of the
remaining funds were expended for the acquisition of sites and construction of
three restaurants. During 1989, the first restaurant opened for business. The
two additional restaurants commenced operation in 1990. In February 1992, the
Registrant distributed to Limited Partners of record on December 31, 1991
$442,270 of net proceeds not utilized as reserves and not invested in
properties.
Since the three restaurants owned by the Registrant opened, cash flow from
Lease payments received from Del Taco, the Registrant's General Partner, which
leases all three restaurants, has provided adequate liquidity for operation of
the Registrant. However, the Registrant's overwhelmingly predominant source of
income to meet its expenses and fund distributions to its Limited Partners is
payments from Del Taco under the Leases, comprising primarily rent calculated
on the basis of the gross sales of the restaurants operated on the Properties,
as to which there are no contractually specified minimum or guaranteed amounts.
Thus, the adequacy of the Registrant's liquidity and capital resources in the
future will depend primarily upon the gross revenues of such restaurants as
well as upon Del Taco's financial condition and results of operations
generally.
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Results of Operations
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The Registrant owns three Properties that are under long-term lease to Del Taco
for restaurant operations (Del Taco, in turn, has sub-leased one of the
restaurants to a Del Taco franchisee). The Registrant receives rental revenues
equal to 12 percent of restaurant sales. The Registrant had rental revenue of
$126,726 for the three months ended June 30, 1996 representing an increase from
the rental revenues of $68,567 in 1995. The Registrant had rental revenue of
$191,682 for the six months ended June 30, 1996 representing an increase from
the rental revenues of $132,728 in 1995. Such increase was attributable to the
earning of supplemental rent, as provided for in the lease agreements, based on
the operating results of individual restaurants.
The following table sets forth the percentage relationship to total general and
administrative expenses of items included in the Registrant's Statements of
Income:
Percentage of Total
General & Administrative Expense
--------------------------------
Six Months Ended
June 30
1996 1995
------ ------
Accounting fees 58.18% 60.92%
Distribution of
information to
Limited Partners 37.67 36.30
Other 4.15 2.78
------ ------
100.00% 100.00%
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Operating expenses include general and administrative expenses which consist
primarily of accounting fees and costs of distribution of information to the
Limited Partners. For the three months ended June 30, general and
administrative expenses increased from $6,161 in 1995 to $6,851 in 1996. For
the six months ended June 30, general and administrative expenses increased
from $26,141 in 1995 to $26,728 in 1996. The Registrant incurred depreciation
expense in the amount of $25,939 for the three months ended June 30, 1996 and
1995 respectively. The Registrant incurred depreciation expense in the amount
of $51,876 and $51,865 for the six months ended June 30, 1996 and 1995
respectively.
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As a result of increased revenues totaling $58,043 for the three months ended
June 30,1996 and increased expenses totaling $690 for the three months ended
June 30, 1996, the net income of the Registrant increased from $36,768 for the
three months ended June 30, 1995 to $94,121 for the corresponding period in
1996. As a result of increased revenues totaling $58,869 for the six months
ended June 30, 1996 and increased expenses totaling $598 for the six months
ended June 30, 1996, the net income of the Registrant increased from $55,298
for the six months ended June 30, 1995 to $113,569 for the corresponding period
in 1996.
For the reasons stated under "Liquidity and Capital Resources" above, the
Registrant's results of operations in the future will depend primarily upon the
gross revenues of the restaurants located on the Properties leased to Del Taco
as well as upon Del Taco's financial condition and results of operations
generally.
PART II. OTHER INFORMATION
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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,
1996.
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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 INCOME PROPERTIES IV
(a California limited partnership)
Registrant
Del Taco, Inc.
General Partner
Date: July 30, 1996 /s/ Robert J. Terrano
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Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: July 30, 1996 /s/ C. Douglas Mitchell
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C. Douglas Mitchell
Vice President and Corporate
Controller
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