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 SEPTEMBER 30, 1999 . 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) 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 I PART I. FINANCIAL INFORMATION PAGE NUMBER - ------------------------------ ----------- Item 1. Financial Statements and Supplementary Data Balance Sheets at September 30, 1999 (Unaudited) and December 31, 1998 3 Statements of Income for the three and nine months ended September 30, 1999 and 1998 (Unaudited) 4 Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 (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 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 -2- 3 DEL TACO RESTAURANT PROPERTIES I BALANCE SHEETS SEPTEMBER 30, December 31, 1999 1998 ------------- ------------ (UNAUDITED) ASSETS CURRENT ASSETS: Cash $ 165,285 $ 162,979 Receivable from General Partner (Note 4) 45,654 47,833 Deposits 684 797 ---------- ---------- Total current assets 211,623 211,609 ---------- ---------- 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 ---------- ---------- 4,001,642 4,001,642 Less--accumulated depreciation 1,748,916 1,716,087 ---------- ---------- 2,252,726 2,285,555 ---------- ---------- $2,464,349 $2,497,164 ========== ========== LIABILITIES AND PARTNERS' EQUITY CURRENT LIABILITIES: Payable to Limited Partners $ 26,681 $ 24,702 Accounts payable 3,976 5,703 ---------- ---------- Total current liabilities 30,657 30,405 ---------- ---------- PARTNERS' EQUITY: Limited Partners 2,169,227 2,201,963 General Partner-Del Taco, Inc. 264,465 264,796 ---------- ---------- 2,433,692 2,466,759 ---------- ---------- $2,464,349 $2,497,164 ========== ========== The accompanying notes are an integral part of these financial statements -3- 4 DEL TACO RESTAURANT PROPERTIES I STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 -------- -------- -------- -------- REVENUES: Rent (Notes 3 and 4) $141,151 $141,492 $397,688 $392,023 Interest 1,222 1,193 3,304 2,378 Other 353 650 953 1,274 -------- -------- -------- -------- 142,726 143,335 401,945 395,675 -------- -------- -------- -------- EXPENSES: General and administrative 7,199 7,498 38,225 38,122 Depreciation 10,943 10,943 32,829 32,829 -------- -------- -------- -------- 18,142 18,441 71,054 70,951 -------- -------- -------- -------- Net income $124,584 $124,894 $330,891 $324,724 ======== ======== ======== ======== Net income per limited partnership unit (Note 3) $ 14.09 $ 14.13 $ 37.43 $ 36.74 ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements. -4- 5 DEL TACO RESTAURANT PROPERTIES I STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 330,891 $ 324,724 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 32,829 32,829 Decrease (increase) in receivable from General Partner 2,179 (2,832) Decrease (increase) in deposits 113 (394) Increase in accounts payable and payable to limited partners 252 5,035 --------- --------- Net cash provided by operating activities 366,264 359,362 CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions to partners (363,958) (339,094) --------- --------- Net increase in cash 2,306 20,268 Beginning cash balance 162,979 143,280 --------- --------- Ending cash balance $ 165,285 $ 163,548 ========= ========= The accompanying notes are an integral part of these financial statements. -5- 6 DEL TACO RESTAURANT PROPERTIES I NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 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, 1998. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the partnership's financial position at September 30, 1999, the results of operations and cash flows for the nine month periods ended September 30, 1999 and 1998 have been included. Operating results for the three and nine months ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. 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 1999 and 1998. 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. -6- 7 DEL TACO RESTAURANT PROPERTIES I NOTES TO FINANCIAL STATEMENTS - CONTINUED SEPTEMBER 30, 1999 NOTE 3 - 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 September 30, 1999, the five restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $977,544 and net income of $61,546 as compared to $991,832 and $63,716 respectively, for the corresponding period in 1998. Net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense. For the three months ended September 30, 1999, the one restaurant operated by a Del Taco franchisee, for which the partnership is the lessor, had unaudited sales of $198,717 as compared with $187,269 during the same period in 1998. For the nine months ended September 30, 1999, the five restaurants operated by Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $2,756,556 and net income of $140,234 as compared to $2,753,257 and $145,627 respectively, for the corresponding period in 1998. For the nine months ended September 30, 1999, the one restaurant operated by a Del Taco franchisee, for which the partnership is the lessor, had unaudited sales of $557,517 as compared with $513,602 during the same period in 1998. For the three months and nine months ended September 30, 1999, the Elkhorn Boulevard restaurant in Sacramento, California reported net losses of $1,986 and $6,927 as compared to net losses of $6,054 and $14,778 for the corresponding periods in 1998. NOTE 4 - TRANSACTIONS WITH DEL TACO The receivable from General Partner consists primarily of rent accrued for the month of September. The September rent receivable was collected on October 13, 1999. 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 5 with respect to certain distributions to the General Partner. NOTE 5 - DISTRIBUTIONS On October 12, 1999, a distribution to the limited partners of $132,268, or approximately $15.11 per limited partnership unit, was approved. Such distribution was paid on October 19, 1999. The General Partner also received a distribution of $1,367 with respect to its 1% partnership interest. -7- 8 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 March 1983 and March 1984. 15% of the $4.375 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 $4 million of the remaining funds were used to acquire sites and build six restaurants. The six 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. Results of Operations The partnership owns six properties that are under long-term lease to Del Taco for restaurant operations (Del Taco, in turn, has subleased two of the restaurants to Del Taco franchisees, one of which is affiliated with Del Taco). The following table sets forth rental revenue earned by restaurant for the year: THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 -------- -------- -------- -------- Riverside Avenue, Rialto, CA $ 22,671 $ 22,814 $ 64,123 $ 63,832 Elden Avenue, Moreno Valley, CA 20,736 21,970 59,543 60,585 Foothill Boulevard, La Verne, CA 30,650 30,386 86,111 84,532 Baseline & Archibald, Rancho Cucamonga, CA 23,846 22,472 66,902 61,632 Elkhorn Boulevard, Sacramento, CA 16,233 14,691 45,140 39,974 Haven Avenue, Rancho Cucamonga, CA 27,015 29,159 75,869 81,468 -------- -------- -------- -------- Total $141,151 $141,492 $397,688 $392,023 ======== ======== ======== ======== The partnership receives rental revenues equal to 12 percent of gross sales from the restaurants. The partnership earned rental revenue of $141,151 during the three month period ended September 30, 1999, which represents a decrease of $341 from 1998. The partnership earned rental revenue of $397,688 during the nine month period ended September 30, 1999, which represents an increase of $5,665 from 1998. The changes in rental revenue between 1998 and 1999 are directly attributable to changes in sales levels at the restaurants under lease. -8- 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED The following table breaks down general and administrative expenses by type of expense: Percentage of Total General & Administrative Expense -------------------------------- Nine Months Ended September 30, 1999 1998 ------- ------- Accounting fees 67.68% 68.32% Distribution of information to Limited Partners 32.32 31.68 ------- ------- 100.00% 100.00% ======= ======= General and administrative costs for the nine month period ended September 30, increased from 1998 to 1999 due to increased costs for accounting and income tax return preparation. For the three month period ended September 30, 1999, net income decreased $310 from 1998 to 1999 due to the decrease in revenues of $609 which was partially offset by the $299 decrease in general and administrative expenses. For the nine month period ended September 30, 1999, net income increased by $6,167 from 1998 to 1999 due to the increase in revenues of $6,270 which was partially offset by the $103 increase in general and administrative expenses. The General Partner does not believe the operations of the partnership will be significantly impacted by the year 2000 software issue and does not believe the year 2000 software issue will materially effect the partnerships operations, financial position or cash flows. -9- 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b) No reports on Form 8-K were filed during the nine months ended September 30, 1999. -10- 11 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: October 29, 1999 /s/ Robert J. Terrano ---------------------------- Robert J. Terrano Executive Vice President, Chief Financial Officer Date: October 29, 1999 /s/ C. Douglas Mitchell ---------------------------- C. Douglas Mitchell Vice President and Corporate Controller -11- 12 EXHIBIT INDEX 27 Financial Data Schedule