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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
-------------------------
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. 2-80930
DEL TACO RESTAURANT PROPERTIES I
a California limited partnership
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3852699
(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 RESTAURANT PROPERTIES I
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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 RESTAURANT PROPERTIES I
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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 $ 105,479 $ 115,012
Receivable from General Partner (Note 4) 37,241 36,654
Deposits 600 600
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Total current assets 143,320 152,266
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PROPERTY AND EQUIPMENT, AT COST
Land and improvements 1,852,482 1,852,482
Buildings and improvements 1,013,134 1,013,134
Machinery and equipment 1,136,026 1,136,026
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4,001,642 4,001,642
Less--accumulated depreciation 1,606,654 1,584,768
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2,394,988 2,416,874
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$2,538,308 $2,569,140
========== ==========
LIABILITIES AND PARTNERS' EQUITY
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CURRENT LIABILITIES:
Payable to Limited Partners $ 10,406 $ 8,898
Accounts payable -- 907
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Total current liabilities 10,406 9,805
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PARTNERS' EQUITY
Limited Partners 2,262,638 2,293,755
General Partner-Del Taco, Inc. 265,264 265,580
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2,527,902 2,559,335
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$2,538,308 $2,569,140
========== ==========
The accompanying notes are an
integral part of these financial statements
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DEL TACO RESTAURANT PROPERTIES I
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STATEMENTS OF INCOME
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(UNAUDITED)
-----------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1996 1995 1996 1995
-------- -------- -------- --------
REVENUES:
Rent (Notes 3 and 4) $111,986 $117,499 $213,969 $212,896
Interest 489 567 1,118 1,124
Other 200 75 350 225
-------- -------- -------- --------
112,675 118,141 215,437 214,245
-------- -------- -------- --------
EXPENSES:
General and administrative 9,260 7,949 29,315 28,316
Depreciation 10,942 36,024 21,885 75,368
-------- -------- -------- --------
20,202 43,973 51,200 103,684
-------- -------- -------- --------
Net income $ 92,473 $ 74,168 $164,237 $110,561
======== ======== ======== ========
Net income per Limited
Partnership Unit (Note 2) $ 10.46 $ 8.39 $ 18.58 $ 12.51
======== ======== ======== ========
The accompanying notes are an
integral part of these financial statements.
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DEL TACO RESTAURANT PROPERTIES I
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STATEMENTS OF CASH FLOWS
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(UNAUDITED)
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SIX MONTHS ENDED
JUNE 30
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $164,237 $110,561
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 21,885 75,368
Increase (decrease)in payable to
Limited Partners 1,508 (1,165)
Increase (decrease)in receivable from
General Partner (587) 2,811
Decrease in accounts payable (907) --
-------- --------
Net cash provided by operating activities 186,136 187,575
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners 195,669 199,785
-------- --------
Net decrease in cash (9,533) (12,210)
Beginning cash balance 115,012 120,720
-------- --------
Ending cash balance $105,479 $108,510
======== ========
The accompanying notes are an
integral part of these financial statements.
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DEL TACO RESTAURANT PROPERTIES I
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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
8,751 in 1996 and 1995.
Pursuant to the Partnership Agreement, annual partnership net income is
allocated one percent to the General Partner and 99 percent to the Limited
Partners. A Partnership net loss in any year will be allocated 24 percent to
the General Partner and 76 percent to the Limited Partners until the losses so
allocated equal income previously allocated. Any additional losses will be
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. Additional gains will be allocated
24 percent to the General Partner and 76 percent to the Limited Partners.
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DEL TACO RESTAURANT PROPERTIES I
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NOTES TO FINANCIAL STATEMENTS - CONTINUED
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JUNE 30, 1996
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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 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. The Registrant had a total of six Properties
leased as of June 30, 1996 and 1995, two of which have been subleased to Del
Taco franchisees (one of which is affiliated with Del Taco, Inc.)
The Registrant's property at Baseline and Archibald in Rancho Cucamonga,
California is subleased by Del Taco, Inc. to a franchisee. In November 1995,
the franchise agreement and the sublease expired. In a letter dated November
20, 1995, the franchise agreement and the sublease were extended to May 26,
1996. Del Taco, Inc. and the franchisee have not reached an agreement regarding
the franchise and sublease terms after May 26, 1996. Management of the General
Partner (Del Taco, Inc.) anticipates that on or before September 30, 1996 one
of the following dispositions will be initiated: 1) the franchise agreement and
sublease will be renewed for a 15 year term; 2) Del Taco, Inc. will operate the
restaurant; 3) Del Taco will sublease the property to a new third party; or 4)
the property will be offered for sale.
NOTE 4 - TRANSACTIONS WITH DEL TACO
The receivable from General Partner consists primarily of rent accrued for the
month of June. The June rent receivable 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.
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NOTE 5 - DISTRIBUTIONS
On July 16, 1996, a distribution to the Limited Partners of $89,333 or
approximately $10.21 per Limited Partnership Unit, was approved. Such
distribution was paid on July 23, 1996. The General Partner also received a
distribution of $902 with respect to its 1% partnership interest.
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 March 21,
1983. By March 20, 1984, the sale of such Units provided a total
capitalization for the Registrant of $4,375,500. Fifteen 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.
The remaining funds were expended for the acquisition of sites and construction
of six restaurants. In 1985, the first four restaurants opened for business
and two additional restaurants were opened in 1986. Approximately $4,002,000
was expended for such purposes.
Since the six restaurants owned by the Registrant opened, cash flow from Lease
payments received from Del Taco, the Registrant's General Partner, which leases
all six 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 six Mexican-American restaurants that are under long-term
lease to its General Partner for operation under the Del Taco trade name. The
Registrant receives rental revenues equal to 12 percent of restaurant sales.
For the three months ended June 30, rental revenues decreased from $117,499 in
1995 to $111,986 in 1996. For the six months ended June 30, rental revenues
increased from $212,896 in 1995 to $213,969 in 1996. Such changes in rental
revenue are directly attributable to changes in sales at the 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
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Accounting fees 53.04% 52.71%
Distribution of
information to
Limited Partners 42.96 44.73
Other 4.00 2.56
------ ------
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 $7,949 in 1995 to $9,260 in 1996. For
the six months ended June 30, general and administrative expenses increased
from $28,316 in 1995 to $29,315 in 1996. For the three months ended June 30,
the Registrant incurred depreciation expense in the amount of $10,942 in 1996
and $36,024 in 1995. The Registrant incurred depreciation expense of $21,885
and $75,368 for six months ended June 30, 1996 and 1995,respectively.
Depreciation expense decreased because signs and food processing equipment
(included as part of machinery and equipment) became fully depreciated during
1995.
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For the three months ended June 30, revenues decreased by $5,466 while expenses
decreased by $23,771 resulting in an increase in net income from $74,168 in
1995 to $92,473 in 1996. For the six months ended June 30, revenues increased
by $1,192 while expenses decreased by $52,484 resulting in an increase in
Registrant's net income from $110,561 for the six months ended June 30, 1995 to
$164,237 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 RESTAURANT PROPERTIES I
(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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