<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 MARCH 31, 1997
-------------------------
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, LAGUNA HILLS, CALIFORNIA 92653
(Address of principal executive offices) (Zip Code)
(714) 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
----- -----
<PAGE> 2
INDEX
DEL TACO RESTAURANT PROPERTIES II
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------ -----------
<S> <C> <C>
Item 1. Financial Statements and Supplementary Data
Balance Sheets at March 31, 1997 (Unaudited) and
December 31, 1996 3
Statements of Income for the three months ended
March 31, 1997 and 1996 (Unaudited) 4
Statements of Cash Flows for the three months ended
March 31, 1997 and 1996 (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>
MARCH 31, December 31
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 97,359 $ 117,357
Receivable from General Partner (Note 4) 38,054 37,271
Deposits 1,000 1,000
----------- -----------
Total current assets 136,413 155,628
----------- -----------
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 1,436,778 1,400,759
----------- -----------
2,507,057 2,543,076
----------- -----------
$ 2,643,470 $ 2,698,704
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to Limited Partners $ 5,047 $ 5,047
Accounts Payable 4,817 3,000
----------- -----------
Total current liabilities 9,864 8,047
----------- -----------
PARTNERS' EQUITY:
Limited Partners 2,656,320 2,712,800
General Partner-Del Taco, Inc. (22,714) (22,143)
----------- -----------
2,633,606 2,690,657
----------- -----------
$ 2,643,470 $ 2,698,704
=========== ===========
</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
MARCH 31
1997 1996
--------- ---------
<S> <C> <C>
REVENUES:
Rent (Notes 3 and 4) $ 104,167 $ 98,238
Interest 930 596
Other 75 175
--------- --------
$ 105,172 $ 99,009
--------- --------
EXPENSES:
General and administrative 21,894 20,282
Depreciation 36,019 36,019
-------- --------
57,913 56,301
-------- --------
Net income $ 47,259 $ 42,708
======== ========
Net income per Limited
Partnership Unit (Note 2) $ 1.73 $ 1.57
======== ========
</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>
THREE MONTHS ENDED
MARCH 31
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 47,259 $ 42,708
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 36,019 36,019
Increase in payable to Limited Partner -- 1,588
(Increase) decrease in receivable
from General Partner (783) 8,861
Increase in accounts payable 1,817 7,875
--------- ---------
Net cash provided by operating activities 84,312 97,051
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners 104,310 100,386
--------- ---------
Net decrease in cash (19,998) (3,335)
Beginning cash balance 117,357 108,954
--------- ---------
Ending cash balance $ 97,359 $ 105,619
========= =========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-5-
<PAGE> 6
DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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, 1996. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
to present fairly the partnership's financial position at March 31, 1997, the
results of operations and cash flows for the three month periods ended March 31,
1997 and 1996 have been included. Operating results for the three months ended
March 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
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 1997 and 1996.
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.
-6-
<PAGE> 7
DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1997
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 March 31, 1997 and 1996.
NOTE 4 - TRANSACTIONS WITH DEL TACO
The receivable from General Partner consists primarily of rent accrued for the
month of March. The March rent was collected on April 11, 1997.
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 April 9, 1997, a distribution to the Limited Partners of $91,435 or
approximately $3.38 per Limited Partnership Unit, was approved. Such
distribution was paid on April 18, 1996. The General Partner also received a
distribution of $924 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.
Rental revenues for the three months ended March 31, increased from $98,238 in
1996 to $104,167 in 1997. The increase in revenues is directly attributable to
increased sales at the restaurants.
-8-
<PAGE> 9
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
--------------------------------
Three Months Ended
March 31
1997 1996
------ ------
<S> <C> <C>
Accounting fees 75.90% 76.67%
Distribution of
information to
Limited Partners 24.10 22.10
Other -- 1.23
------ ------
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 March 31 from $20,282 in 1996 to $21,894 in 1997. Depreciation
expense was $36,019 for the three months ended March 31, 1997 and 1996.
For the three months ended March 31, 1997 revenues increased $6,163 and expenses
increased $1,612, creating an increase in net income from $42,708 in 1996 to
$47,259 in 1997.
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.
-9-
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K were filed during the three months ended March 31,
1997.
-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: April 30, 1997 /s/ Robert J. Terrano
----------------------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: April 30, 1997 /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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 97,359
<SECURITIES> 1,000
<RECEIVABLES> 38,054
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 136,413
<PP&E> 3,943,835
<DEPRECIATION> 1,436,778
<TOTAL-ASSETS> 2,643,470
<CURRENT-LIABILITIES> 9,864
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,633,606
<TOTAL-LIABILITY-AND-EQUITY> 2,643,470
<SALES> 0
<TOTAL-REVENUES> 105,172
<CGS> 0
<TOTAL-COSTS> 57,913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 47,259
<INCOME-TAX> 0
<INCOME-CONTINUING> 47,259
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,259
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.73
</TABLE>
