<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, 1998
--------------------------------
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)
(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 [ ]
-1-
<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, 1998 (Unaudited) and
December 31, 1997 3
Statements of Income for the three and nine months ended
September 30, 1998 and 1997 (Unaudited) 4
Statements of Cash Flows for the nine months ended
September 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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<PAGE> 3
DEL TACO RESTAURANT PROPERTIES I
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
1998 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 163,548 $ 143,280
Receivable from General Partner (Note 4) 45,433 42,601
Deposits 994 600
---------- ----------
Total current assets 209,975 186,481
---------- ----------
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 1,705,144 1,672,315
---------- ----------
2,296,498 2,329,327
---------- ----------
$2,506,473 $2,515,808
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to Limited Partners $ 21,574 $ 12,690
Accounts payable 2,683 6,531
---------- ----------
Total current liabilities 24,257 19,221
---------- ----------
PARTNERS' EQUITY:
Limited Partners 2,217,407 2,231,634
General Partner-Del Taco, Inc. 264,809 264,953
---------- ----------
2,482,216 2,496,587
---------- ----------
$2,506,473 $2,515,808
========== ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements
-3-
<PAGE> 4
DEL TACO RESTAURANT PROPERTIES I
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rent (Notes 3 and 4) $141,492 $126,241 $392,023 $359,312
Interest 1,193 814 2,378 2,595
Other 650 1,125 1,274 1,600
-------- -------- -------- --------
143,335 128,180 395,675 363,507
-------- -------- -------- --------
EXPENSES:
General and administrative 7,498 5,664 38,122 35,231
Depreciation 10,943 10,943 32,829 32,829
-------- -------- -------- --------
18,441 16,607 70,951 68,060
-------- -------- -------- --------
Net income $124,894 $111,573 $324,724 $295,447
======== ======== ======== ========
Net income per Limited
Partnership Unit (Note 2) $ 14.13 $ 12.62 $ 36.74 $ 33.42
======== ======== ======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-4-
<PAGE> 5
DEL TACO RESTAURANT PROPERTIES I
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 324,724 $ 295,447
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 32,829 32,829
Increase in payable to Limited Partners 8,883 885
Increase in receivable from
General Partner (2,832) (5,964)
Decrease in accounts payable (3,848) (1,366)
Increase in deposits (394) --
--------- ---------
Net cash provided by operating activities 359,362 321,831
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (339,094) (313,075)
--------- ---------
Net increase in cash 20,268 8,756
Beginning cash balance 143,280 130,996
--------- ---------
Ending cash balance $ 163,548 $ 139,752
========= =========
</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, 1998
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 September 30, 1998,
the results of operations and cash flows for the nine month periods ended
September 30, 1998 and 1997 have been included. Operating results for the three
and nine months ended September 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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<PAGE> 7
DEL TACO RESTAURANT PROPERTIES I
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1998
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, 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 September 30, 1998, the five restaurants operated by
Del Taco, for which the Registrant is the lessor, had combined, unaudited sales
of $991,832 and net income of $63,716 as compared to $891,056 and $36,149
respectively, for the corresponding period in 1997. Net income by restaurant
includes charges for general & administrative expenses incurred in connection
with supervision of restaurant operations and interest expense. For the three
months ended September 30, 1998, the one restaurant operated by a Del Taco
franchisee, for which the Registrant is the lessor, had unaudited sales of
$187,269 as compared with $160,958 during the same period in 1997.
For the nine months ended September 30, 1998, the five restaurants operated by
Del Taco, for which the Registrant is the lessor, had combined, unaudited sales
of $2,753,257 and net income of $145,627 as compared to $2,549,509 and $87,122
respectively, for the corresponding period in 1997. For the nine months ended
September 30, 1998, the one restaurant operated by a Del Taco franchisee, for
which the Registrant is the lessor, had unaudited sales of $513,602 as compared
with $444,767 during the same period in 1997.
For the three months and nine months ended September 30, 1998, the Elkhorn
Boulevard restaurant in Sacramento, California reported net losses of $6,054 and
$14,778 as compared to net losses of $2,619 and $12,579 respectively, for the
corresponding period in 1997.
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<PAGE> 8
DEL TACO RESTAURANT PROPERTIES I
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 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,
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 October 12, 1998, a distribution to the Limited Partners of $135,365 or
approximately $15.47 per Limited Partnership Unit, was approved. Such
distribution was paid on October 15, 1998. The General Partner also received a
distribution of $1,367 with respect to its 1% partnership interest.
-8-
<PAGE> 9
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 September 30, rental revenues increased from $126,241 in
1997 to $141,492 in 1998. For the nine months ended September 30, rental
revenues increased from $359,312 1997 to $392,023 in 1998. The increases in
rental revenue are directly attributable to increases in sales at the
restaurants.
-9-
<PAGE> 10
The following table sets forth rental revenue earned by restaurant for the
quarter and year to date:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Riverside Avenue, Rialto, CA $ 22,814 $ 21,458 $ 63,832 $ 59,580
Elden Avenue, Moreno Valley, CA 21,970 18,558 60,585 55,331
Foothill Boulevard, La Verne, CA 30,386 26,865 84,532 77,744
Baseline & Archibald, Rancho 22,472 19,315 61,632 53,372
Cucamonga, CA
Elkhorn Boulevard, Sacramento, CA 14,691 12,957 39,974 35,911
Haven Avenue, Rancho 29,159 27,088 81,468 77,374
-------- -------- -------- --------
Cucamonga, CA
Total $141,492 $126,241 $392,023 $359,312
======== ======== ======== ========
</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:
Percentage of Total
General & Administrative Expense
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1998 1997
------- -------
<S> <C> <C>
Accounting fees 60.53% 59.61%
Distribution of
information to
Limited Partners 37.37 38.12
Other 2.10 2.27
------- -------
100.00% 100.00%
======= =======
</TABLE>
Certain reclassifications have been made to the fiscal year 1997 general and
administrative expenses to conform to the fiscal year 1998 presentation.
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 $5,664 in 1997 to $7,498 in 1998. For the
nine months ended September 30, general and administrative expenses increased
from $35,231 in 1997 to $38,122 in 1998. General and administrative expenses
increased due to increased costs of printing and distribution. For the three
months ended September 30, the Registrant incurred depreciation expense in the
amount of $10,943 in 1998 and 1997. The Registrant incurred depreciation expense
of $32,829 for nine months ended September 30, 1998 and 1997,respectively.
-10-
<PAGE> 11
For the three months ended September 30, revenues increased by $15,155 while
expenses increased by $1,834 resulting in an increase in net income from
$111,573 in 1997 to $124,894 in 1998. For the nine months ended September 30,
revenues increased by $32,168 while expenses increased by $2,891 resulting in an
increase in the Registrant's net income from $295,447 for the nine months ended
September 30, 1997 to $324,724 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.
Management does not believe the operations of the Company will be significantly
impacted by the year 2000 software issue and does not believe the year 2000
software issue will materially effect the Company's operations, financial
position or cash flows.
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 nine months ended
September 30, 1998.
-11-
<PAGE> 12
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, 1998 /s/ Robert J. Terrano
-----------------------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: October 30, 1998 /s/ C. Douglas Mitchell
-----------------------------------
C. Douglas Mitchell
Vice President and Corporate
Controller
-12-
<PAGE> 13
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 163,548
<SECURITIES> 994
<RECEIVABLES> 45,433
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 209,975
<PP&E> 4,001,642
<DEPRECIATION> 1,705,144
<TOTAL-ASSETS> 2,506,473
<CURRENT-LIABILITIES> 24,257
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,482,216
<TOTAL-LIABILITY-AND-EQUITY> 2,506,473
<SALES> 0
<TOTAL-REVENUES> 395,675
<CGS> 0
<TOTAL-COSTS> 70,951
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 324,724
<INCOME-TAX> 0
<INCOME-CONTINUING> 324,724
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 324,724
<EPS-PRIMARY> 36.74
<EPS-DILUTED> 36.74
</TABLE>
