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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, 1995
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. 2-92121
DEL TACO RESTAURANT PROPERTIES II
A CALIFORNIA LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
33-0064245
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
1800 W. KATELLA AVENUE, ORANGE, CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
92667
(ZIP CODE)
(714) 744-4334
(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 II
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
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<S> <C>
Item 1. Financial Statements and Supplementary Data
Balance Sheets at June 30, 1995 (Unaudited) and
December 31, 1994 3
Statements of Income for the three and six months ended
June 30, 1995 and 1994 (Unaudited) 4
Statements of Cash Flows for the six months ended
June 30, 1995 and 1994 (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
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Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
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</TABLE>
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DEL TACO RESTAURANT PROPERTIES II
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30 December 31
1995 1994
------------ -----------
(UNAUDITED)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 108,602 $ 133,369
Receivable from General Partner (Note 4) 37,323 35,871
Deposits 1,000 1,000
---------- ----------
Total current assets 146,925 170,240
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PROPERTY AND EQUIPMENT, AT COST
Land and improvements 1,806,006 1,806,006
Buildings and improvements 1,238,879 1,238,879
Machinery and equipment 898,950 898,950
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3,943,835 3,943,835
Less--accumulated depreciation 1,184,644 1,112,606
---------- ----------
2,759,191 2,831,229
---------- ----------
$2,906,116 $3,001,469
========== ==========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES:
Payable to Limited Partners $ 12,301 $ 17,436
---------- ----------
Total current liabilities 12,301 17,436
---------- ----------
PARTNERS' EQUITY
Limited Partners 2,913,926 3,003,242
General Partner-Del Taco, Inc. (20,111) (19,209)
---------- ----------
2,893,815 2,984,033
---------- ----------
$2,906,116 $3,001,469
========== ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements
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DEL TACO RESTAURANT PROPERTIES II
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rent (Notes 3 and 4) $113,269 $118,794 $214,336 $231,523
Interest 578 1,132 1,255 2,131
Other 100 275 375 400
-------- -------- -------- --------
113,947 120,201 215,966 234,054
-------- -------- -------- --------
EXPENSES:
General and administrative 9,497 11,863 30,171 37,598
Depreciation 36,019 36,019 72,038 72,038
-------- -------- -------- --------
45,516 47,882 102,209 109,636
-------- -------- -------- --------
Net income $ 68,431 $ 72,319 $113,757 $124,418
======== ======== ======== ========
Net income per Limited
Partnership Unit (Note 2) $2.51 $2.65 $4.17 $4.56
===== ===== ===== =====
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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DEL TACO RESTAURANT PROPERTIES II
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1995 1994
-------- --------
<S> <C> <C>
SOURCE OF CASH:
From operations:
Net income $113,757 $124,418
Depreciation 72,038 72,038
-------- --------
Total cash provided from operations 185,795 196,456
Cash distributions 203,975 854,678
-------- --------
Excess (deficiency) of cash generated
over distributions (18,180) (658,222)
Proceeds from sale of land - 497,202
Decrease in receivable from General Partner - 4,226
Increase in payable to Limited Partners - 4,334
Increase in accounts payable - 1,624
-------- --------
(18,180) (150,836)
-------- --------
USE OF CASH:
Increase in receivable to General Partner 1,452 -
Decrease in payable to Limited Partners 5,135 -
-------- --------
6,587 -
-------- --------
Decrease in cash during period (24,767) (150,836)
Beginning cash balance 133,369 307,070
-------- --------
Ending cash balance $108,602 $156,234
======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
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, 1994. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) necessary to present fairly the partnership's financial position at
June 30, 1995, the results of operations and cash flows for the six month
periods ended June 30, 1995 and 1994 have been included. Operating results for
the three and six months ended June 30, 1995 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1995.
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
27,006 in 1995 and 1994.
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
previously allocated. Additional gains will be allocated 15 percent to the
General Partner and 85 percent to the Limited Partners.
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DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995
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, 1994 and a total of five as of June 30, 1995.
On November 19 and 20, 1990, respectively, the restaurants located on the
Properties in South Gate and Fallbrook, California, respectively, (the "Closed
Properties") leased to Del Taco ceased operation. Pursuant to a Settlement
Agreement dated as of October 26, 1993 approved in connection with Del Taco's
voluntary bankruptcy case: (i) Del Taco was required to pay rent to the
Registrant in the amount of $2,248.87 per month for the South Gate Property and
$2,332.85 per month for the Fallbrook Property; (ii) on January 1 of each
calendar year commencing with January 1, 1994, the monthly base rent payable
was adjusted for any applicable Consumer Price Index increase; (iii) Del Taco
was required to market the Closed Properties and pay the Registrant, upon sale,
the difference between the most recent appraised value and the selling price;
and (iv) upon such sale, the relevant Leases were terminated. The South Gate
and Fallbrook properties were sold on May 18, 1994 and November 30, 1994,
respectively.
NOTE 4 - TRANSACTIONS WITH DEL TACO
The receivable from General Partner consists primarily of rent accrued for the
month of June. The June rent was collected on July 13, 1995.
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DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995
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 11, 1995, a distribution to the Limited Partners of $90,194, or
approximately $3.34 per Limited Partnership Unit, was approved. Such
distribution was paid on July 12, 1995. The General Partner also received a
distribution of $911 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 September 11,
1984. By December 31, 1985, the sale of such Units provided a total
capitalization for the Registrant of $6,751,500. 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 seven restaurants. In June 1986, the first two restaurants opened for
business. Four additional restaurants opened in 1987, and the seventh
restaurant opened in April of 1988. Approximately $5,600,000 was expended for
such purposes.
As a result of continued lower-than-acceptable sales volumes, the South Gate
and Fallbrook restaurants ceased operation on November 19 and 20, 1990.
Pursuant to a Settlement Agreement dated as of October 26, 1993 approved in
connection with Del Taco's voluntary bankruptcy case: (i) Del Taco was required
to pay rent to the Registrant in the amount of $2,248.87 per month for the
South Gate property and $2,332.85 per month for the Fallbrook property; (ii) on
January 1 of each calendar year commencing with January 1, 1994, the monthly
base rent payable was adjusted for any applicable Consumer Price Index
increase; (iii) Del Taco was required to market the South Gate and Fallbrook
properties and pay the Registrant, upon sale, the difference between the most
recent appraised value and the selling price; and (iv) upon such sale, the
relevant Leases were terminated.
In February 1994, an escrow was opened pursuant to an agreement between the
Registrant and the City of South Gate for the sale of the South Gate property
to the City of South Gate for an amount which exceeded appraised value. Escrow
closed on May 18, 1994. The net proceeds of $497,202 were distributed by the
Partnership to Limited Partners of record as of May 31, 1994 and was paid June
1, 1994.
In September 1994, the Registrant entered into an agreement to sell the
Fallbrook property for a price which exceeded the appraised value but was less
than the net book value. Accordingly, the most recent carrying value of the
Fallbrook property was adjusted down to the expected sales price generating a
write down of $74,797 in the third
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quarter of 1994. Escrow closed on November 30, 1994. The net proceeds of
$357,531 were distributed by the Partnership to Limited Partners of record as
of November 30, 1994 and was paid December 12, 1994.
Since the restaurants owned by the Registrant commenced operation, cash flow
from Lease payments received from Del Taco, the Registrant's General Partner,
which leases all five remaining 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 owned seven Properties that were under long-term lease to Del
Taco for restaurant operations. Two restaurants were sold in 1994 and five are
currently operating. For the five operating Del Taco restaurants, the
registrant receives rental revenues equal to 12 percent of restaurant sales.
For the two restaurants which were sold in 1994, the Registrant received rental
revenues of approximately $2,000 per restaurant per month.
Revenues for the three months ended June 30 decreased from $118,794 in 1994 to
$113,269 in 1995. The Registrant had rental revenues of $214,336 for the six
months ended June 30, 1995, representing a decrease from the rental revenues of
$231,523 in 1994. Such decrease is directly attributable to lost revenues due
to the closing of the South Gate and Fallbrook stores. Rental revenues from
the five existing restaurants have increased for the three months ended June 30
from $107,079 in 1994 to $113,269 in 1995 and for the six months ended June 30
from $205,801 in 1994 to $214,336 in 1995.
The following table sets forth the percentage relationship to total general and
administrative expenses of items included in the Registrant's Statements of
Income:
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<TABLE>
<CAPTION>
Percentage of Total
General & Administrative Expense
--------------------------------
Six Months Ended
June 30
1995 1994
------- -------
<S> <C> <C>
Accounting fees 49.47% 46.66%
Distribution of
information to
Limited Partners 48.13 49.67
Other 2.40 3.67
------- -------
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. General and administrative expenses decreased for the three
months ended June 30 from $11,863 in 1994 to $9,497 in 1995. For the six months
ended June 30, general and administrative expenses decreased from $37,598 in
1994 to $30,171 in 1995. Depreciation expense was $36,019 for the three months
ended June 30, 1995 and 1994. The Registrant incurred depreciation expense in
the amount of $72,038 for the six months ended June 30, 1995 and 1994.
For the three months ended June 30, 1995 revenues decreased $6,254 and expenses
decreased $2,366, creating a decrease in net income from $72,319 in 1994 to
$68,431 in 1995. As a result of decreased revenues totaling $18,088 for the six
months ended June 30, 1995 and decreased expenses totaling $7,427 for the six
months ended June 30, 1995, the net income of the Registrant decreased from
$124,418 for the six months ended June 30, 1994 to $113,757 for the
corresponding period in 1995.
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.
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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, 1995.
(C) Exhibit 27 - Financial Data Schedule
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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 II
(a California limited partnership)
Registrant
Del Taco, Inc.
General Partner
Date: July 20, 1995 /s/ Robert J. Terrano
-------------------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
(duly authorized to sign on
behalf of the Registrant)
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 108,602
<SECURITIES> 0
<RECEIVABLES> 37,323
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 146,925
<PP&E> 3,943,835
<DEPRECIATION> 1,184,644
<TOTAL-ASSETS> 2,906,116
<CURRENT-LIABILITIES> 12,301
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,893,815
<TOTAL-LIABILITY-AND-EQUITY> 2,906,116
<SALES> 0
<TOTAL-REVENUES> 215,966
<CGS> 0
<TOTAL-COSTS> 102,209
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 113,757
<INCOME-TAX> 0
<INCOME-CONTINUING> 113,757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,757
<EPS-PRIMARY> 4.17
<EPS-DILUTED> 4.17
</TABLE>
