<PAGE> 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, 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)
23041 AVENIDA DE LA CARLOTA, SUITE 400, LAGUNA HILLS, CA 92653
(Address of principal executive offices) (Zip Code)
(714) 462-7399
(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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<PAGE> 2
INDEX
DEL TACO RESTAURANT PROPERTIES I
--------------------------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------ -----------
<S> <C>
Item 1. Financial Statements and Supplementary Data
Balance Sheets at September 30, 1996 (Unaudited) and
December 31, 1995 3
Statements of Income for the three and nine months ended
September 30, 1996 and 1995 (Unaudited) 4
Statements of Cash Flows for the nine months ended
September 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
- --------------------------
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
- ----------
</TABLE>
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<PAGE> 3
DEL TACO RESTAURANT PROPERTIES I
--------------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 128,039 $ 115,012
Receivable from General Partner (Note 4) 37,789 36,654
Deposits 600 600
---------- ----------
Total current assets 166,428 152,266
---------- ----------
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 1,617,600 1,584,768
---------- ----------
2,384,042 2,416,874
---------- ----------
$2,550,470 $2,569,140
========== ==========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES:
Payable to Limited Partners $ 11,163 $ 8,898
Accounts payable 550 907
---------- ----------
Total current liabilities 11,713 9,805
---------- ----------
PARTNERS' EQUITY
Limited Partners 2,273,386 2,293,755
General Partner-Del Taco, Inc. 265,371 265,580
---------- ----------
2,538,757 2,559,335
---------- ----------
$2,550,470 $2,569,140
========== ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements
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<PAGE> 4
DEL TACO RESTAURANT PROPERTIES I
--------------------------------
STATEMENTS OF INCOME
--------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rent (Notes 3 and 4) $120,783 $113,958 $334,752 $ 326,854
Interest 705 583 1,823 1,707
Other 25 100 375 325
-------- -------- -------- ---------
121,513 114,641 336,950 328,886
-------- -------- -------- ---------
EXPENSES:
General and administrative 9,705 6,923 39,020 35,239
Depreciation 10,944 31,322 32,829 106,690
-------- -------- -------- ---------
20,649 38,245 71,849 141,929
-------- -------- -------- ---------
Net income $100,864 $ 76,396 $265,101 $ 186,957
======== ======== ======== =========
Net income per Limited
Partnership Unit (Note 2) $ 11.41 $ 8.64 $ 29.99 $ 21.15
======== ======== ======== =========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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<PAGE> 5
DEL TACO RESTAURANT PROPERTIES I
--------------------------------
STATEMENTS OF CASH FLOWS
------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $265,101 $186,957
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 32,829 106,690
Increase (decrease)in payable to
Limited Partners 2,265 (3,459)
(Increase) decrease in receivable from
General Partner (1,135) 4,251
Increase (decrease) in accounts payable (355) 4,188
-------- --------
Net cash provided by operating activities 298,705 298,627
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners 285,678 292,290
-------- --------
Net increase in cash 13,027 6,337
Beginning cash balance 115,012 120,720
-------- --------
Ending cash balance $128,039 $127,057
======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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<PAGE> 6
DEL TACO RESTAURANT PROPERTIES I
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 1996
------------------
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
September 30, 1996, the results of operations and cash flows for the nine month
periods ended September 30, 1996 and 1995 have been included. Operating
results for the three and nine months ended September 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.
-6-
<PAGE> 7
DEL TACO RESTAURANT PROPERTIES I
- --------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- -----------------------------------------
SEPTEMBER 30, 1996
- ------------------
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 September 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 December 31, 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 September. The September rent receivable was collected on October 11,
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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<PAGE> 8
NOTE 5 - DISTRIBUTIONS
On October 14, 1996, a distribution to the Limited Partners of $109,123 or
approximately $12.47 per Limited Partnership Unit, was approved. Such
distribution was paid on October 15, 1996. The General Partner also received a
distribution of $1,102 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
- -------------------------------
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.
-8-
<PAGE> 9
Results of Operations
- ---------------------
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 September 30, rental revenues increased from
$113,958 in 1995 to $120,783 in 1996. For the nine months ended September 30,
rental revenues increased from $326,854 in 1995 to $334,752 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:
<TABLE>
<CAPTION>
Percentage of Total
General & Administrative Expense
--------------------------------
Nine Months Ended
September 30
1996 1995
------ -------
<S> <C> <C>
Accounting fees 39.85% 42.55%
Distribution of
information to
Limited Partners 57.15 55.38
Other 3.00 2.07
------ ------
100.00% 100.00%
====== ======
</TABLE>
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 September 30, general and
administrative expenses increased from $6,923 in 1995 to $9,705 in 1996. The
increase in general and administrative expense was caused primarily by printing
costs for new checks and envelopes and stationary and nonrecurring costs
associated with a special mailing to Limited Partners. For the nine months
ended September 30, general and administrative expenses increased from $35,239
in 1995 to $39,020 in 1996. For the three months ended September 30, the
Registrant incurred depreciation expense in the amount of $10,944 in 1996 and
$31,322 in 1995. The Registrant incurred depreciation expense of $32,829 and
$106,690 for nine months ended
-9-
<PAGE> 10
September 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.
For the three months ended September 30, revenues increased by $6,872 while
expenses decreased by $17,596 resulting in an increase in net income from
$76,396 in 1995 to $100,864 in 1996. For the nine months ended September 30,
revenues increased by $8,064 while expenses decreased by $70,080 resulting in
an increase in the Registrant's net income from $186,957 for the nine months
ended September 30, 1995 to $265,101 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
- ---------------------------
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, 1996.
(c) Exhibit 27 - Financial Data Schedule.
-10-
<PAGE> 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 30, 1996 /s/ Robert J. Terrano
------------------------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: October 30, 1996 /s/ C. Douglas Mitchell
------------------------------------
C. Douglas Mitchell
Vice President and Corporate
Controller
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 128,039
<SECURITIES> 600
<RECEIVABLES> 37,789
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 166,428
<PP&E> 4,001,642
<DEPRECIATION> 1,617,600
<TOTAL-ASSETS> 2,550,470
<CURRENT-LIABILITIES> 11,713
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,538,757
<TOTAL-LIABILITY-AND-EQUITY> 2,550,470
<SALES> 0
<TOTAL-REVENUES> 121,513
<CGS> 0
<TOTAL-COSTS> 20,649
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 100,864
<INCOME-TAX> 0
<INCOME-CONTINUING> 100,864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,864
<EPS-PRIMARY> 11.41
<EPS-DILUTED> 11.41
</TABLE>
