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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. 33-13437
DEL TACO INCOME PROPERTIES IV
A CALIFORNIA LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<Table>
CALIFORNIA 33-0241855
(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 INCOME PROPERTIES IV
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------- --------------------- -----------
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 INCOME PROPERTIES IV
BALANCE SHEETS
JUNE 30, December 31,
2001 2000
----------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 108,293 $ 108,643
Receivable from General Partner 31,139 108,105
Deposits 400 476
----------- -----------
Total current assets 139,832 217,224
----------- -----------
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
----------- -----------
3,011,349 3,011,349
Less--accumulated depreciation 1,111,794 1,084,160
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1,899,555 1,927,189
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$ 2,039,387 $ 2,144,413
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to Limited Partners $ 30,515 $ 24,200
Accounts payable 8,872 10,080
----------- -----------
Total current liabilities 39,387 34,280
----------- -----------
OBLIGATION TO GENERAL PARTNER 137,953 137,953
----------- -----------
PARTNERS' EQUITY:
Limited Partners 1,874,560 1,983,592
General Partner-Del Taco, Inc. (12,513) (11,412)
----------- -----------
1,862,047 1,972,180
----------- -----------
$ 2,039,387 $ 2,144,413
=========== ===========
The accompanying notes are an integral part
of these financial statements.
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DEL TACO INCOME PROPERTIES IV
STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2001 2000 2001 2000
-------- -------- -------- --------
REVENUES:
Rent $ 88,959 $ 84,573 $170,187 $162,716
Interest 778 886 2,420 2,186
Other - 250 200 575
-------- -------- -------- --------
89,737 85,709 172,807 165,477
-------- -------- -------- --------
EXPENSES:
General and administrative 10,154 8,261 30,383 27,727
Depreciation 13,817 13,817 27,634 31,851
-------- -------- -------- --------
23,971 22,078 58,017 59,578
-------- -------- -------- --------
Net income $ 65,766 $ 63,631 $114,790 $105,899
======== ======== ======== ========
Net income per limited
partnership unit $ 0.39 $ 0.38 $ 0.69 $ 0.63
======== ======== ======== ========
The accompanying notes are an integral part
of these financial statements.
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DEL TACO INCOME PROPERTIES IV
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-------------------------
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 114,790 $ 105,899
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 27,634 31,851
Decrease in receivable from General Partner 76,966 81,842
Decrease in deposits 76 -
Increase in accounts payable and
payable to limited partners 5,107 2,486
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Net cash provided by operating activities 224,573 222,078
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (224,923) (225,852)
--------- ---------
Net decrease in cash (350) (3,774)
Beginning cash balance 108,643 100,224
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Ending cash balance $ 108,293 $ 96,450
========= =========
The accompanying notes are an integral part
of these financial statements.
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DEL TACO INCOME PROPERTIES IV
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 partnership'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
165,375 in 2001 and 2000.
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.
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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 2001
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 32 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 June 30, 2001, the two restaurants operated by Del
Taco, for which the partnership is the lessor, had combined, unaudited sales of
$453,954 and net income of $30,663 as compared to $440,807 and $29,700,
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. 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 $287,369 as compared
with $263,968 during the same period in 2000.
For the six months ended June 30, 2001, the two restaurants operated by Del
Taco, for which the partnership is the lessor, had combined, unaudited sales of
$871,766 and net income of $54,513 as compared to $857,911 and $53,903,
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 $546,457 as compared with
$498,058 during the same period in 2000.
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 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 $72,050 or
approximately $.44 per limited partnership unit, was approved. Such distribution
was paid July 20, 2001. The General Partner also received a distribution of $728
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 June 1987 and
June 1988. 14.5% of the $4.135 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 $3 million of the
remaining funds were used to acquire sites and build three restaurants. In
February of 1992, approximately $442,000 raised during the offering but not
required to acquire sites and build restaurants was distributed to the limited
partners.
The three 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 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 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
-------- -------- -------- --------
Orangethorpe Ave., Placentia, CA $ 36,318 $ 35,450 $ 69,448 $ 69,153
Lakeshore Drive, Lake Elsinore, CA 34,484 31,676 65,575 59,767
Highland Ave., San Bernardino, CA 18,157 17,447 35,164 33,796
-------- -------- -------- --------
Total $ 88,959 $ 84,573 $170,187 $162,716
======== ======== ======== ========
The partnership receives rental revenues equal to 12 percent of gross sales from
the restaurants. The partnership earned rental revenue of $88,959 during the
three month period ended June 30, 2001, which represents an increase of $4,386
from 2000. The partnership earned rental revenue of $170,187 during the six
month period ended June 30, 2001, which represents an increase of $7,471 from
2000. The changes in rental revenue between 2001 and 2000 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
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Accounting fees 76.17% 70.04%
Distribution of information
to Limited Partners 23.83 29.96
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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. Depreciation decreased in 2001 because certain equipment
became fully depreciated during 2000.
For the three month period ended June 30, 2001, net income increased by $2,135
from 2000 to 2001 due to the increase in revenues of $4,028 which was partially
offset by the $1,893 increase in general and administrative expenses. For the
six month period ended June 30, 2001, net income increased by $8,891 from 2000
to 2001 due to an increase in revenues of $7,330 and a decrease in depreciation
expense of $4,217 which was partially offset by an increase in general and
administrative expenses of $2,656.
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 $2,000 in 2001 (the conversion year) and range from $1,000
to $2,000 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 INCOME PROPERTIES IV
(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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