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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, 2001.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________________ TO
_____________________ .
COMMISSION FILE NO. 2-80930
DEL TACO RESTAURANT PROPERTIES I
A CALIFORNIA LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<Table>
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)
</Table>
(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 [ ]
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INDEX
DEL TACO RESTAURANT PROPERTIES I
PAGE NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Supplementary Data
Balance Sheets at June 30, 2001 (Unaudited) and
December 31, 2000 3
Statements of Income for the three and six months ended
June 30, 2001 and 2000 (Unaudited) 4
Statements of Cash Flows for the six months ended
June 30, 2001 and 2000 (Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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DEL TACO RESTAURANT PROPERTIES I
BALANCE SHEETS
JUNE 30, December 31,
2001 2000
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(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 193,852 $ 190,915
Receivable from General Partner 54,563 53,331
Deposits 600 876
---------- ----------
Total current assets 249,015 245,122
---------- ----------
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 1,825,517 1,803,631
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2,176,125 2,198,011
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$2,425,140 $2,443,133
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to Limited Partners $ 49,298 $ 41,937
Accounts payable 8,659 10,153
---------- ----------
Total current liabilities 57,957 52,090
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PARTNERS' EQUITY:
Limited Partners 2,103,414 2,127,036
General Partner-Del Taco, Inc. 263,769 264,007
---------- ----------
2,367,183 2,391,043
---------- ----------
$2,425,140 $2,443,133
========== ==========
The accompanying notes are an integral part of these financial statements.
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DEL TACO RESTAURANT PROPERTIES I
STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2001 2000 2001 2000
-------- -------- -------- --------
REVENUES:
Rent $157,539 $144,883 $305,190 $279,134
Interest 1,205 1,489 3,120 2,367
Other 275 75 975 375
-------- -------- -------- --------
159,019 146,447 309,285 281,876
-------- -------- -------- --------
EXPENSES:
General and administrative 11,727 9,621 33,463 30,875
Depreciation 10,943 10,943 21,886 21,886
-------- -------- -------- --------
22,670 20,564 55,349 52,761
-------- -------- -------- --------
Net income $136,349 $125,883 $253,936 $229,115
======== ======== ======== ========
Net income per limited
partnership unit $ 15.43 $ 14.24 $ 28.73 $ 25.92
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
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DEL TACO RESTAURANT PROPERTIES I
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 253,936 $ 229,115
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 21,886 21,886
Increase in receivable from General Partner (1,232) (4,463)
Decrease in deposits 276 -
Increase in accounts payable and payable
to limited partners 5,867 4,851
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Net cash provided by operating activities 280,733 251,389
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (277,796) (254,338)
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Net increase (decrease) in cash 2,937 (2,949)
Beginning cash balance 190,915 170,290
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Ending cash balance $ 193,852 $ 167,341
========= =========
The accompanying notes are an integral part of these financial statements.
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DEL TACO RESTAURANT PROPERTIES I
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements, some of which are unaudited, have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements and should therefore be read in conjunction with the
financial statements and notes thereto contained in the Registrant's annual
report on Form 10-K for the year ended December 31, 2000. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
to present fairly the partnership's financial position at June 30, 2001, the
results of operations and cash flows for the six month periods ended June 30,
2001 and 2000 have been included. Operating results for the three and six months
ended June 30, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001.
NOTE 2 - 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 2001 and 2000.
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.
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.
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DEL TACO RESTAURANT PROPERTIES I
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 2001
NOTE 3 - LEASING ACTIVITIES - CONTINUED
For the three months ended June 30, 2001, the five restaurants operated by Del
Taco, for which the partnership is the lessor, had combined, unaudited sales of
$1,080,919 and net income of $75,048 as compared to $1,005,834 and $61,342,
respectively, for the corresponding period in 2000. Net income by restaurant
includes charges for general and administrative expenses incurred in connection
with supervision of restaurant operations and interest expense. For the three
months ended June 30, 2001, the one restaurant operated by a Del Taco
franchisee, for which the partnership is the lessor, had unaudited sales of
$231,904 as compared with $201,525 during the same period in 2000.
For the six months ended June 30, 2001, the five restaurants operated by Del
Taco, for which the partnership is the lessor, had combined, unaudited sales of
$2,095,477 and net income of $131,332 as compared to $1,933,897 and $105,100,
respectively, for the corresponding period in 2000. For the six months ended
June 30, 2001, the one restaurant operated by a Del Taco franchisee, for which
the partnership is the lessor, had unaudited sales of $447,770 as compared with
$392,223 during the same period in 2000.
For the three months and six months ended June 30, 2001, the Elkhorn Boulevard
restaurant in Sacramento, California reported net income of $5,304 and $8,610 as
compared to net income of $629 and a net loss of $3,187 for the corresponding
periods in 2000.
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 10, 2001.
Del Taco, Inc. serves in the capacity of general partner in other partnerships
which are engaged in the business of operating restaurants, and three other
partnerships which were formed for the purpose of acquiring real property in
California for construction of Mexican-American restaurants for lease under
long-term agreements to Del Taco, Inc. for operation under the Del Taco trade
name.
In addition, see Note 5 with respect to certain distributions to the General
Partner.
NOTE 5 - DISTRIBUTIONS
On July 18, 2001, a distribution to the limited partners of $138,159, or
approximately $15.79 per limited partnership unit, was approved. Such
distribution was paid on July 20, 2001. The General Partner also received a
distribution of $1,396 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
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 three
and six months ended June 30, 2001 and 2000:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2001 2000 2001 2000
-------- -------- -------- --------
Riverside Avenue, Rialto, CA $ 22,996 $ 22,228 $ 44,474 $ 43,455
Elden Avenue, Moreno Valley, CA 26,103 24,184 50,458 46,169
Foothill Boulevard, La Verne, CA 33,035 30,639 63,790 58,115
Baseline & Archibald, Rancho Cucamonga, CA 27,828 24,183 53,733 47,067
Elkhorn Boulevard, Sacramento, CA 19,595 15,843 37,697 30,222
Haven Avenue, Rancho Cucamonga, CA 27,982 27,806 55,038 54,106
-------- -------- -------- --------
Total $157,539 $144,883 $305,190 $279,134
======== ======== ======== ========
The partnership receives rental revenues equal to 12 percent of gross sales from
the restaurants. The partnership earned rental revenue of $157,539 during the
three month period ended June 30, 2001, which represents an increase of $12,656
from 2000. The partnership earned rental revenue of $305,190 during the six
month period ended June 30, 2001, which represents an increase of $26,056 from
2000. The changes in rental revenue between 2000 and 2001 are directly
attributable to changes in sales levels at the restaurants under lease.
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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
Six Months Ended
June 30,
2001 2000
------ ------
Accounting fees 69.26% 65.58%
Distribution of information
to Limited Partners 30.74 34.42
------ ------
100.00% 100.00%
====== ======
General and administrative costs for the six month period ended June 30,
increased from 2000 to 2001 due to increased costs for income tax preparation
and annual audit fees.
For the three month period ended June 30, 2001, net income increased $10,466
from 2000 to 2001 due to the increase in revenues of $12,572 which was partially
offset by the $2,106 increase in general and administrative expenses. For the
six month period ended June 30, 2001, net income increased by $24,821 from 2000
to 2001 due to an increase in revenues of $27,409 which was partially offset by
an increase in general and administrative expenses of $2,588.
In accordance with recent U.S. Government regulations, the partnership is
required to file annual K-1 income tax forms with the Internal Revenue Service
electronically beginning in 2002 for the year ending December 31, 2001. In order
to comply with this regulation, the partnership will incur additional costs to
lease software to 1) prepare the tax forms electronically and 2) maintain the
underlying partnership database.
The General Partner and outside consultants are evaluating available software
and expect to select a software package in the third calendar quarter of 2001.
Estimates of additional general and administrative costs to lease the software
range from $1,000 to $6,000 in 2001 (the conversion year) and range from $2,500
to $4,000 in each subsequent year.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K were filed during the six months ended June 30, 2001.
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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 31, 2001 /s/ Robert J. Terrano
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Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: July 31, 2001 /s/ C. Douglas Mitchell
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C. Douglas Mitchell
Vice President and Corporate
Controller
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