<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. 2-92121
DEL TACO RESTAURANT PROPERTIES II
a California limited partnership
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0064245
(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 II
---------------------------------
<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 II
---------------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
1996 1995
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 117,157 $ 108,954
Receivable from General Partner (Note 4) 35,548 36,166
Deposits 1,000 1,000
---------- ----------
Total current assets 153,705 146,120
---------- ----------
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
---------- ----------
3,943,835 3,943,835
Less--accumulated depreciation 1,364,739 1,256,682
---------- ----------
2,579,096 2,687,153
---------- ----------
$2,732,801 $2,833,273
========== ==========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES:
Payable to Limited Partners 6,023 3,562
Accounts Payable 759 1,050
---------- ----------
Total current liabilities 6,782 4,612
---------- ----------
PARTNERS' EQUITY
Limited Partners 2,747,811 2,849,424
General Partner-Del Taco, Inc. (21,792) (20,763)
---------- ----------
2,726,019 2,828,661
---------- ----------
$2,732,801 $2,833,273
========== ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements
-3-
<PAGE> 4
DEL TACO RESTAURANT PROPERTIES II
---------------------------------
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) $114,583 $114,459 $319,601 $328,795
Interest 569 547 1,542 1,802
Other 275 75 665 450
-------- -------- -------- --------
115,427 115,081 321,808 331,047
-------- -------- -------- --------
EXPENSES:
General and administrative 10,726 8,867 42,734 39,038
Depreciation 36,017 36,017 108,054 108,055
-------- -------- -------- --------
46,743 44,884 150,788 147,093
-------- -------- -------- --------
Net income $ 68,684 $ 70,197 $171,020 $183,954
======== ======== ======== ========
Net income per Limited
Partnership Unit (Note 2) $ 2.52 $ 2.57 $ 6.27 $ 6.74
======== ======== ======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-4-
<PAGE> 5
DEL TACO RESTAURANT PROPERTIES II
---------------------------------
STATEMENTS OF CASH FLOWS
------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $171,020 $183,954
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 108,054 108,055
Increase (decrease) in payable to
Limited Partners 2,461 (13,605)
(Increase) decrease in receivable from
General Partner 618 (121)
Increase (decrease) in accounts payable (288) 4,955
-------- --------
Net cash provided by operating activities 281,865 283,238
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners 273,662 295,080
-------- --------
Net increase (decrease) in cash 8,203 (11,842)
Beginning cash balance 108,954 133,369
-------- --------
Ending cash balance $117,157 $121,527
======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-5-
<PAGE> 6
DEL TACO RESTAURANT PROPERTIES II
---------------------------------
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
27,006 in 1996 and 1995.
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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<PAGE> 7
DEL TACO RESTAURANT PROPERTIES II
- ---------------------------------
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 five Properties
leased as of September 30, 1996 and 1995.
NOTE 4 - TRANSACTIONS WITH DEL TACO
The receivable from General Partner consists primarily of rent accrued for the
month of September. The September rent 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.
NOTE 5 - DISTRIBUTIONS
On October 14, 1996, a distribution to the Limited Partners of $103,342 or
approximately $3.83 per Limited Partnership Unit, was approved. Such
distribution was paid on October 15, 1996. The General Partner also received a
distribution of $1,044 with respect to its 1% partnership interest.
-7-
<PAGE> 8
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. Two restaurants were sold in 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.
-8-
<PAGE> 9
Rental revenues for the three months ended September 30, increased from
$114,459 in 1995 to $114,583 in 1996. The Registrant had rental revenues of
$319,601 for the nine months ended September 30, 1996, representing a decrease
from the rental revenues of $328,795 in 1995. The decrease in revenues is
directly attributable to decreased 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 36.39% 38.23%
Distribution of
information to
Limited Partners 60.49 59.25
Other 3.12 2.52
------ ------
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 increased for the three
months ended September 30 from $8,867 in 1995 to $10,726 in 1996. The increase
in general and administrative expense was caused primarily by printing costs
for new checks, 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 $39,038 in 1995 to $42,734
in 1996. Depreciation expense was $36,017 for the three months ended September
30, 1996 and 1995. The Registrant incurred depreciation expense in the amount
of $108,054 for the nine months ended September 30, 1996 and $108,055 for the
nine months ended September 30, 1995.
-9-
<PAGE> 10
For the three months ended September 30, 1996 revenues increased $346 and
expenses increased $1,859, creating a decrease in net income from $70,197 in
1995 to $68,684 in 1996. As a result of decreased revenues totaling $9,239 for
the nine months ended September 30, 1996 and increased expenses totaling $3,695
for the nine months ended September 30, 1996, the net income of the Registrant
decreased from $183,954 for the nine months ended September 30, 1995 to
$171,020 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 II
(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> 117,157
<SECURITIES> 1,000
<RECEIVABLES> 35,548
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 153,705
<PP&E> 3,943,835
<DEPRECIATION> 1,364,739
<TOTAL-ASSETS> 2,732,801
<CURRENT-LIABILITIES> 6,782
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,726,019
<TOTAL-LIABILITY-AND-EQUITY> 2,732,801
<SALES> 0
<TOTAL-REVENUES> 115,427
<CGS> 0
<TOTAL-COSTS> 46,743
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 68,684
<INCOME-TAX> 0
<INCOME-CONTINUING> 68,684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,684
<EPS-PRIMARY> 2.52
<EPS-DILUTED> 2.52
</TABLE>
