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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, 1998
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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>
<S> <C>
CALIFORNIA 95-3852699
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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
--------------------------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------ -----------
<S> <C>
Item 1. Financial Statements and Supplementary Data
Balance Sheets at June 30, 1998 (Unaudited) and December 31, 1997 3
Statements of Income for the three and six months ended
June 30, 1998 and 1997 (Unaudited) 4
Statements of Cash Flows for the six months ended
June 30, 1998 and 1997 (Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
- ----------
</TABLE>
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DEL TACO RESTAURANT PROPERTIES I
--------------------------------
BALANCE SHEETS
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<TABLE>
<CAPTION>
JUNE 30 December 31
1998 1997
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(UNAUDITED)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 144,711 $ 143,280
Receivable from General Partner (Note 4) 45,062 42,601
Deposits 1,191 600
---------- ----------
Total current assets 190,964 186,481
---------- ----------
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 1,694,201 1,672,315
---------- ----------
2,307,441 2,329,327
---------- ----------
$2,498,405 $2,515,808
========== ==========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES:
Payable to Limited Partners $ 21,816 $ 12,690
Accounts payable 1,377 6,531
---------- ----------
Total current liabilities 23,193 19,221
---------- ----------
PARTNERS' EQUITY:
Limited Partners 2,210,473 2,231,634
General Partner-Del Taco, Inc. 264,739 264,953
---------- ----------
2,475,212 2,496,587
---------- ----------
$2,498,405 $2,515,808
========== ==========
</TABLE>
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)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------------- -----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rent (Notes 3 and 4) $131,156 $122,154 $250,531 $233,071
Interest 573 757 1,185 1,781
Other 175 400 624 475
-------- -------- -------- --------
131,904 123,311 252,340 235,327
-------- -------- -------- --------
EXPENSES:
General and administrative 9,977 8,760 30,624 29,567
Depreciation 10,943 10,943 21,886 21,886
-------- -------- -------- --------
20,920 19,703 52,510 51,453
-------- -------- -------- --------
Net income $110,984 $103,608 $199,830 $183,874
======== ======== ======== ========
Net income per Limited
Partnership Unit (Note 2) $12.56 $ 11.72 $22.61 $ 20.80
====== ======= ====== =======
</TABLE>
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)
-----------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
---------------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $199,830 $ 183,874
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 21,886 21,886
Increase in deposits (591) -
Increase in payable to limited partners 9,126 40
Increase in receivable from General Partner (2,461) (5,508)
Decrease in accounts payable (5,154) (1,854)
-------- --------
Net cash provided by
operating activities 222,636 198,438
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (221,205) (214,152)
-------- --------
Net increase (decrease) in cash 1,431 (15,714)
Beginning cash balance 143,280 130,996
-------- --------
Ending cash balance $144,711 $115,282
======== ========
</TABLE>
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, 1998
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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, 1997. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
to present fairly the partnership's financial position at June 30, 1998, the
results of operations and cash flows for the six month periods ended June 30,
1998 and 1997 have been included. Operating results for the three and six months
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
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 1998 and 1997.
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, 1998
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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, 1998 and 1997, two of which have been subleased to Del
Taco franchisees (one of which is affiliated with Del Taco, Inc.)
For the three months ended June 30, 1998, the five restaurants operated by Del
Taco, for which the Registrant is the lessor, had combined, unaudited sales of
$925,165 and net income of $51,211 as compared to $867,749 and $29,141
respectively, for the corresponding period in 1997. 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, 1998, the one restaurant operated by a Del Taco
franchisee, for which the Registrant is the lessor, had unaudited sales of
$167,803 as compared with $150,201 during the same period in 1997.
For the six months ended June 30, 1998, the five restaurants operated by Del
Taco, for which the Registrant is the lessor, had combined, unaudited sales of
$1,761,425 and net income of $81,911 as compared to $1,658,449 and $50,973
respectively, for the corresponding period in 1997. For the six months ended
June 30, 1998, the one restaurant operated by a Del Taco franchisee, for which
the Registrant is the lessor, had unaudited sales of $326,333 as compared with
$283,809 during the same period in 1997.
For the three months and six months ended June 30, 1998, the Elkhorn Boulevard
restaurant in Sacramento, California reported net losses of $4,600 and $8,724 as
compared to net losses of $5,394 and $9,960 respectively, for the corresponding
period in 1997.
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DEL TACO RESTAURANT PROPERTIES I
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NOTES TO FINANCIAL STATEMENTS - CONTINUED
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JUNE 30, 1998
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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, 1998.
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.
NOTE 5 - DISTRIBUTIONS
On July 15, 1998, a distribution to the Limited Partners of $116,715, or
approximately $13.34 per Limited Partnership Unit, was approved. Such
distribution was paid on August 5, 1998. The General Partner also received a
distribution of $1,179 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 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.
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 June 30, rental revenues increased from $122,154 in 1997
to $131,156 in 1998. For the six months ended June 30, rental revenues increased
from $233,071 in 1997 to $250,531 in 1998. Such increases are directly
attributable to increased sales at the restaurants.
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The following table sets forth rental revenue earned by restaurant for the
quarter and year to date:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ -----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Riverside Avenue, Rialto, CA 21,562 20,553 41,018 38,123
Elden Avenue, Moreno Valley, CA 20,667 19,430 38,615 36,772
Foothill Boulevard, La Verne, CA 28,340 26,105 54,146 50,879
Baseline & Archibald, Rancho Cucamonga, 20,136 18,024 39,160 34,057
CA
Elkhorn Boulevard, Sacramento, CA 13,268 12,380 25,283 22,954
Haven Avenue, Rancho Cucamonga, CA 27,183 25,662 52,309 50,286
-------- -------- -------- --------
Total $131,156 $122,154 $250,531 $233,071
======== ======== ======== ========
</TABLE>
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
--------------------------------
Six Months Ended
June 30
--------------------
1998 1997
------ ------
<S> <C> <C>
Accounting fees 68.32% 70.42%
Distribution of information to
Limited Partners 31.68 29.58
------ ------
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 June 30, general and administrative
expenses increased from $8,760 in 1997 to $9,977 in 1998. For the six months
ended June 30, general and administrative expenses increased from $29,567 in
1997 to $30,624 in 1998. General and administrative expenses increased due to
increased costs of printing and distribution. For the three months ended June
30, the Registrant incurred depreciation expense in the amount of $10,943 in
1997 and 1998. The Registrant incurred depreciation expense of $21,886 for the
six months ended June 30, 1997 and 1998.
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For the three months ended June 30, revenues increased by $8,593 while expenses
increased by $1,217 resulting in an increase in net income from $103,608 in 1997
to $110,984 in 1998. For the six months ended June 30, revenues increased by
$17,013 while expenses increased by $1,057 resulting in an increase in
Registrant's net income from $183,874 for the six months ended June 30, 1997 to
$199,830 for the corresponding period in 1998.
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
(a) Exhibit 27 - Financial Data Schedule.
(b) No reports on Form 8-K were filed during the six months ended June 30, 1998.
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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, 1998 /s/ Robert J. Terrano
---------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: July 31, 1998 /s/ C. Douglas Mitchell
-----------------------
C. Douglas Mitchell
Vice President and Corporate
Controller
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 144,711
<SECURITIES> 1,191
<RECEIVABLES> 45,062
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 190,964
<PP&E> 4,001,642
<DEPRECIATION> 1,694,201
<TOTAL-ASSETS> 2,498,405
<CURRENT-LIABILITIES> 23,193
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,475,212
<TOTAL-LIABILITY-AND-EQUITY> 2,498,405
<SALES> 0
<TOTAL-REVENUES> 252,340
<CGS> 0
<TOTAL-COSTS> 52,510
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 199,830
<INCOME-TAX> 0
<INCOME-CONTINUING> 199,830
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 199,830
<EPS-PRIMARY> 22.61
<EPS-DILUTED> 22.61
</TABLE>
