<PAGE> 1
- --------------------------------------------------------------------------------
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 2-92121
DEL TACO RESTAURANT PROPERTIES II
(A CALIFORNIA LIMITED PARTNERSHIP)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code: (949) 462-9300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 ___
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Form S-11 Registration Statement filed July
10, 1984 are incorporated by reference into Part IV of this report.
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<PAGE> 2
PART I
ITEM 1. BUSINESS
The partnership is a publicly-held limited partnership organized under the
California Uniform Limited Partnership Act. The partnership's General Partner is
Del Taco, Inc., a California corporation ("General Partner"). The partnership
sold 27,006 units totaling $6.751 million through an offering of limited
partnership units from September 1984 through December 1985. The term of the
partnership agreement is until April 30, 2025 unless terminated earlier by means
provided in the partnership agreement.
The business of the partnership is ownership and leasing of restaurants in
California to Del Taco, Inc. The partnership acquired land and constructed seven
Mexican-American restaurants for long-term lease to Del Taco, Inc. Two
restaurants were sold in 1994. Each property is leased for 35 years on a triple
net basis. Rent is equal to twelve percent of gross sales of the restaurants. As
of December 31, 1998, the partnership had a total of five properties leased to
Del Taco.
The partnership has no full time employees. The partnership agreement assigns
full authority for general management and supervision of the business affairs of
the partnership to the General Partner. The General Partner has a one percent
interest in the profits or losses and distributions of the partnership. Limited
partners have no right to participate in the management or conduct of the
partnership's business affairs.
2
<PAGE> 3
ITEM 2. PROPERTIES
The partnership acquired seven properties with proceeds obtained from the sale
of partnership units:
<TABLE>
<CAPTION>
Date of
Date of Restaurant Commencement
Address City, State Acquisition Constructed of Operation(1)
- ------- ----------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
Bear Valley Road Victorville, CA February 4, 1986 60 seat with drive June 13, 1986
through service window
West Valley Boulevard Colton, CA March 11, 1986 60 seat with drive June 24, 1986
through service window
Palmdale Boulevard Palmdale, CA December 12, 1986 60 seat with drive May 7, 1987
through service window
South Gate Town Center South Gate, CA January 28, 1987 60 seat with drive May 28, 1987(2)
through service window
Main Avenue Fallbrook, CA March 10, 1987 60 seat with drive August 19, 1987(3)
through service window
De Anza Country Pedley, CA April 13, 1987 60 seat with drive October 28, 1987
Shopping Center through service window
Varner Road Thousand Palms, CA October 14, 1987 60 seat with drive April 28, 1988
through service window
</TABLE>
- ----------
(1) Commencement of operation is the first date Del Taco, Inc., as lessee,
operated the facility on the site as a Del Taco restaurant.
(2) In May 1994, the South Gate property was sold yielding net proceeds to the
partnership of $497,202.
(3) In November 1994, the Fallbrook property was sold yielding net proceeds to
the partnership of $357,531.
3
<PAGE> 4
PART II
ITEM 3. LEGAL PROCEEDINGS
The partnership is not a party to any material pending legal proceedings.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The partnership sold 27,006 ($6,751,500) limited partnership units during the
public offering period ended December 31, 1985 and currently has 1,262 limited
partners of record. There is no public market for the trading of the units.
Distributions made by the partnership to the limited partners during the past
three fiscal years are described in Note 6 to the Notes to the Financial
Statements contained under Item 8.
4
<PAGE> 5
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental revenue $ 481,219 $ 448,625 $ 431,906 $ 439,055 $ 467,568
Interest and
other income 5,149 5,523 2,810 2,799 4,815
Net income 380,601 315,041 239,807 250,634 198,359
Net income
per limited
partnership
unit (1) 13.95 11.55 8.79 9.19 7.27
Cash distributions
per limited
partnership
unit (2)(3)(4)(5)(6)
From operations 15.35 14.92 13.85 14.89 22.18
Sale of land -- -- -- -- 31.65
Total assets 2,578,195 2,612,583 2,698,704 2,833,273 3,001,469
Long-term obligations None None None None None
</TABLE>
- ----------
(1) The net income per limited partnership unit was calculated based upon
27,006 weighted average units outstanding for all years presented.
(2) Cash distributions for the quarter ended December 31, 1994 amounted to
$4.07 per limited partnership unit and were paid January 17, 1995.
Seven distributions were disbursed during the year ended December 31,
1994.
(3) Cash distributions for the quarter ended December 31, 1995 amounted to
$3.68 per limited partnership unit and were paid January 15, 1996. Four
distributions were disbursed during the year ended December 31, 1995.
(4) Cash distributions for the quarter ended December 31, 1996 amounted to
$3.82 per limited partnership unit and were paid January 31, 1997. Four
distributions were disbursed during the year ended December 31, 1996.
5
<PAGE> 6
ITEM 6. SELECTED FINANCIAL DATA - CONTINUED
(5) Cash distributions for the quarter ended December 31, 1997 amounted to
$3.96 per limited partnership unit and were paid January 31, 1998. Four
distributions were disbursed during the year ended December 31, 1997.
(6) Cash distributions for the quarter ended December 31, 1998 amounted to
$4.34 per limited partnership unit and were paid January 31, 1999. Four
distributions were disbursed during the year ended December 31, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
The partnership offered limited partnership units for sale between September
1984 and December 1985. 15% of the $6.751 million raised through sale of limited
partnership units was used to pay commissions to brokers and to reimburse the
General Partner for offering costs incurred. Approximately $5.6 million of the
remaining funds were used to acquire sites and build seven restaurants. Two
restaurants were sold in 1994.
The five restaurants leased to Del Taco make up almost all of the income
producing assets of the partnership. Therefore, the business of the partnership
is almost entirely dependent on the success of the Del Taco trade name
restaurants that lease the properties. The success of the restaurants is
dependent on a large variety of factors, including, but not limited to, consumer
demand and preference for fast food, in general, and for Mexican-American food
in particular.
Results of Operations
The partnership 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.
The following table sets forth rental revenue earned by restaurant for the year:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Bear Valley Rd., Victorville, CA $ 96,067 $ 88,858 $ 90,392
West Valley Blvd., Colton, CA 103,013 95,315 85,203
Palmdale Blvd., Palmdale, CA 83,284 88,048 101,290
DeAnza Country Shopping Center, Pedley, CA 64,971 55,595 50,211
Varner Road, Thousand Palms, CA 133,884 120,809 104,810
-------- -------- --------
Total $481,219 $448,625 $431,906
======== ======== ========
</TABLE>
The partnership receives rental revenues equal to 12 percent of gross sales from
the restaurants. The partnership earned rental revenue of $481,219 during the
year ended December 31, 1998, which represents an increase of $32,594 from 1997.
The increase in rental revenue was caused by an increase in sales at the
restaurants under lease.
6
<PAGE> 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
The following table breaks down general and administrative expenses by type of
expense:
PERCENTAGE OF TOTAL GENERAL & ADMIN. EXPENSE
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Accounting fees 32.08% 29.84% 32.56%
Distribution of
information to
limited partners 66.37 68.55 64.81
Other 1.55 1.61 2.63
------ ------ ------
100.00% 100.00% 100.00%
====== ====== ======
</TABLE>
General and administrative costs increased from 1997 to 1998 due to increased
costs for printing and distribution of documents. Depreciation decreased in 1998
and 1997 because certain equipment became fully depreciated during 1997.
Net income increased by $65,560 from 1997 to 1998 due to the increase in
revenues of $32,220 and the decrease in depreciation expense of $35,332 which
was partially offset by the $1,992 increase in general and administrative
expenses.
The General Partner does not believe the operations of the partnership will be
significantly impacted by the year 2000 software issue and does not believe the
year 2000 software issue will materially effect the partnerships operations,
financial position or cash flows.
7
<PAGE> 8
ITEM 8. FINANCIAL STATEMENTS
PART I. INFORMATION
<TABLE>
<CAPTION>
INDEX PAGE NUMBER
----- -----------
<S> <C>
Report of Independent Public Accountants 9
Balance Sheets at December 31, 1998 and 1997 10
Statements of Income for the years ended
December 31, 1998, 1997 and 1996 11
Statement of Changes in Partners' Equity for
the three years ended December 31, 1998 12
Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 13
Notes to Financial Statements 14-17
</TABLE>
8
<PAGE> 9
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Del Taco Restaurant Properties, II:
We have audited the accompanying balance sheets of Del Taco Restaurant
Properties II (a California Limited Partnership) as of December 31, 1998 and
1997, and the related statements of income, changes in partners' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements and the schedule referred to below are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Del Taco Restaurant Properties
II as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998,
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule in the index of the
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, fairly
states in all material respects, the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
-----------------------------------
ARTHUR ANDERSEN LLP
Orange County, California
February 12, 1999
9
<PAGE> 10
DEL TACO RESTAURANT PROPERTIES II
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 134,928 $ 119,687
Receivable from Del Taco, Inc. (Note 4) 42,415 38,332
Deposits 1,468 1,000
----------- -----------
Total current assets 178,811 159,019
----------- -----------
PROPERTY AND EQUIPMENT, AT COST (NOTE 1):
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 1,544,451 1,490,271
----------- -----------
2,399,384 2,453,564
----------- -----------
$ 2,578,195 $ 2,612,583
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to limited partners $ 12,099 $ 6,608
Accounts payable 5,434 7,365
----------- -----------
Total current liabilities 17,533 13,973
----------- -----------
PARTNERS' EQUITY (NOTE 2):
Limited partners 2,584,106 2,621,674
General Partner - Del Taco, Inc. (23,444) (23,064)
----------- -----------
2,560,662 2,598,610
----------- -----------
$ 2,578,195 $ 2,612,583
=========== ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
10
<PAGE> 11
DEL TACO RESTAURANT PROPERTIES II
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Rent (Note 3) $481,219 $448,625 $431,906
Interest 2,424 2,848 2,120
Other 2,725 2,675 690
-------- -------- --------
486,368 454,148 434,716
-------- -------- --------
EXPENSES:
General and administrative 51,587 49,595 50,834
Depreciation 54,180 89,512 144,075
-------- -------- --------
105,767 139,107 194,909
-------- -------- --------
Net income $380,601 $315,041 $239,807
======== ======== ========
Net income per limited
partnership unit (Note 1) $ 13.95 $ 11.55 $ 8.79
======== ======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
11
<PAGE> 12
DEL TACO RESTAURANT PROPERTIES II
STATEMENT OF CHANGES IN PARTNERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Limited Partners
---------------------- General
Units Amount Partner Total
----- ------ ------- -----
<S> <C> <C> <C> <C>
Balance, December 31, 1995 27,006 $ 2,849,424 $ (20,763) $ 2,828,661
Net income -- 237,409 2,398 239,807
Cash distributions (Note 6) -- (374,033) (3,778) (377,811)
------ ----------- ----------- -----------
Balance, December 31, 1996 27,006 2,712,800 (22,143) 2,690,657
Net income -- 311,891 3,150 315,041
Cash distributions (Note 6) -- (403,017) (4,071) (407,088)
------ ----------- ----------- -----------
Balance, December 31, 1997 27,006 2,621,674 (23,064) 2,598,610
Net income -- 376,795 3,806 380,601
Cash distributions (Note 6) -- (414,363) (4,186) (418,549)
====== =========== =========== ===========
Balance, December 31, 1998 27,006 $ 2,584,106 $ (23,444) $ 2,560,662
====== =========== =========== ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
12
<PAGE> 13
DEL TACO RESTAURANT PROPERTIES II
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 380,601 $ 315,041 $ 239,807
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 54,180 89,512 144,075
Increase in payable to Limited Partners 5,491 1,561 1,485
Increase in receivable from General Partner (4,083) (1,061) (1,103)
(Decrease) increase in accounts payable (1,931) 4,365 1,950
Increase in deposits (468) -- --
--------- --------- ---------
Net cash provided by operating activities 433,790 409,418 386,214
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (418,549) (407,088) (377,811)
--------- --------- ---------
NET INCREASE IN CASH 15,241 2,330 8,403
BEGINNING CASH BALANCE 119,687 117,357 108,954
--------- --------- ---------
ENDING CASH BALANCE $ 134,928 $ 119,687 $ 117,357
========= ========= =========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
13
<PAGE> 14
DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE PARTNERSHIP: Del Taco Restaurant Properties II (a California limited
partnership) was formed on June 20, 1984, for the purpose of acquiring real
property in California for construction of seven Mexican-American restaurants to
be leased under long-term agreements to Del Taco, Inc. (General Partner for
operation under the Del Taco trade name). As of April 28, 1988, all seven
restaurants had commenced operation on acquired properties. The South Gate and
Fallbrook properties were sold on May 18, 1994 and November 30, 1994,
respectively.
BASIS OF ACCOUNTING: The partnership utilizes the accrual method of accounting
for transactions relating to the business of the partnership. Distributions are
made to the general and limited partners in accordance with the provisions of
the partnership agreement (see Note 2).
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost. Depreciation
is computed using the straight-line method over estimated useful lives which are
20 years for land improvements, 35 years for buildings and improvements, and 10
years for machinery and equipment.
In fiscal 1996, the partnership adopted Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long Lived Assets
and for Long Lived Assets to be Disposed of." SFAS 121 requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying value of the asset may not be recoverable. In
evaluating long-lived assets held for use, an impairment loss is recognized if
the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying value of the asset. Once a determination has
been made that an impairment loss should be recognized for long-lived assets,
various assumptions and estimates are used to determine fair value including,
among others, estimated costs of construction and development, recent sales of
comparable properties and the opinions of fair value prepared by independent
real estate appraisers. Long-lived assets to be disposed of are reported at the
lower of carrying amount or fair value less cost to sell.
The adoption of SFAS No. 121 did not have a material effect on the partnership's
financial statements.
INCOME TAXES: No provision has been made for federal or state income taxes on
partnership net income, since the partnership is not subject to income tax.
Partnership income is includable in the taxable income of the individual
partners as required under applicable income tax laws. Certain items, primarily
related to depreciation methods, are accounted for differently for income tax
reporting purposes (see Note 5).
14
<PAGE> 15
DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
NET INCOME PER LIMITED PARTNERSHIP UNIT: Net income per limited partnership unit
is based upon the weighted average number of units outstanding during the period
which amounted to 27,006 for all years presented.
USE OF ESTIMATES: The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 2 - PARTNERS' EQUITY
Pursuant to the partnership agreement, annual partnership net 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.
NOTE 3 - LEASING ACTIVITIES
The partnership leases certain properties (the "Properties") for operation of
restaurants to Del Taco, Inc. 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
partnership had a total of five Properties leased as of December 31, 1998, 1997
and 1996.
The five restaurants operated by Del Taco, for which the partnership is the
lessor, had combined, unaudited sales of $4,010,160, $3,738,542, and $3,599,217
and unaudited net income of $262,790, $194,001, and $162,868 for the years ended
December 31, 1998, 1997 and 1996, respectively. Net income by restaurant
includes charges for general and administrative expenses incurred in connection
with supervision of restaurant operations and interest expense.
The Clay Street restaurant in Pedley (Riverside), California had unaudited net
income of $14,347 and $2,641 and a net loss of $1,636 for the years ended
December 31, 1998, 1997 and 1996, respectively.
15
<PAGE> 16
DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 4 - RELATED PARTIES
The receivable from Del Taco consists of rent accrued for the month of December
1998. The rent receivable was collected on January 17, 1999.
The General Partner received $4,186 in distributions during 1998 relating to its
one percent interest in the partnership.
Del Taco, Inc. serves in the capacity of General Partner in other partnerships
which are engaged in the business of operating restaurants, and three other
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.
NOTE 5 - INCOME TAXES
A reconciliation of financial statement net income to taxable income for each of
the periods is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income per financial statements $380,601 $315,042 $239,807
Excess book depreciation 8,241 43,573 98,136
-------- -------- --------
Taxable income $388,842 $358,615 $337,943
======== ======== ========
</TABLE>
A reconciliation of partnership equity per the financial statements to net worth
for tax purposes as of December 31, 1998, is as follows:
<TABLE>
<S> <C>
Partners' equity per financial statements $2,560,662
Issue costs of limited partnership
units capitalized for tax purposes 986,745
Excess tax depreciation 18,030
Writedown of Real Estate held for Sale 161,963
Other 5,465
----------
Net worth for tax purposes $3,732,865
==========
</TABLE>
16
<PAGE> 17
DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 6 - CASH DISTRIBUTIONS TO LIMITED PARTNERS
Cash distributions to limited partners were as follows:
<TABLE>
<CAPTION>
Cash
Distributions per Weighted Average Number of Units
Limited Partnership Number of Units Outstanding at the
Quarter Ended Unit Outstanding End of Quarter
- ------------- ------------------- ---------------- ------------------
<S> <C> <C> <C>
December 31, 1995 $ 3.68 27,006 27,006
March 31, 1996 3.49 27,006 27,006
June 30, 1996 2.85 27,006 27,006
September 30, 1996 3.83 27,006 27,006
------
Total paid in 1996 $13.85
======
December 31, 1996 $ 3.82 27,006 27,006
March 31, 1997 3.38 27,006 27,006
June 30, 1997 3.54 27,006 27,006
September 30, 1997 4.18 27,006 27,006
------
Total paid in 1997 $14.92
======
December 31, 1997 $ 3.96 27,006 27,006
March 31, 1998 3.01 27,006 27,006
June 30, 1998 3.80 27,006 27,006
September 30, 1998 4.58 27,006 27,006
------
Total paid in 1998 $15.35
======
</TABLE>
Cash distributions per limited partnership unit were calculated based upon the
weighted average number of units outstanding for each quarter and were paid from
operations. Cash distributions for the quarter ended December 31, 1998 amounted
to $4.34 per limited partnership unit and were paid January 31, 1999.
17
<PAGE> 18
PART III
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP'S GENERAL PARTNER
(a) & (b) The executive officers and directors of the General Partner and their
ages are set forth below:
<TABLE>
<CAPTION>
Name Title Age
- ---- ----- ---
<S> <C> <C>
Kevin K. Moriarty Director, Chairman and Chief Executive Officer 52
C. Ronald Petty President 54
Paul W. Hitzelberger Executive Vice President, Brand Strategy and
Franchise Relations/Development 54
Robert Terrano Executive Vice President and
Chief Financial Officer 43
James D. Stoops Executive Vice President, Operations 46
Janet D. Simmons Senior Vice President, Purchasing 42
Michael L. Annis Vice President, Secretary and General Counsel 52
C. Douglas Mitchell Vice President and Corporate Controller 48
Annette D. Shehan Vice President, Marketing 37
Shirlene Lopez Vice President, Corporate Development 34
</TABLE>
The above referenced executive officers and directors of the General Partner
will hold office until the annual meeting of its shareholders and directors,
which is scheduled for the later part of 1999.
(c) None
(d) No family relationship exists between any such director or executive
officer of the General Partner.
(e) The following is an account of the business experience during the past
five years of each such director and executive officer:
18
<PAGE> 19
KEVIN K. MORIARTY, Director, Chairman and Chief Executive Officer of Del Taco,
Inc. Mr. Moriarty began his career with Burger King Corporation in 1974 in
Operations Unit Management. In 1983, he was promoted to Area Manager in New
York, and was subsequently promoted to the Regional Vice President, Chicago
Region in 1985. In 1988, he became Executive Vice President and General Manager
of the North Central Division. Mr. Moriarty served in that position until 1990
when he joined Del Taco, Inc. as President and Chief Executive Officer on July
31, 1990. Mr. Moriarty has served as a director of the General Partner since
1990.
C. RONALD PETTY, President of Del Taco, Inc. Mr. Petty began his career in the
restaurant business in 1973 with McDonald's Corporation. He was employed by
McDonald's in a real estate capacity until 1978. For the next 12 years, Mr.
Petty was in various officer positions with Burger King. These positions
included Vice President of Real Estate, Sr. Vice President of Development,
Region Vice President, Sr. Vice President European Operations, President of
International and President of U.S. Mr. Petty served as President of Miami Subs
from 1990-1992; President and CEO of Denny's 1993-1996; President and CEO of
Peter Piper Pizza 1996-1998; President of Del Taco December 1998-present.
PAUL W. HITZELBERGER, Executive Vice President, Brand Strategy and Franchise
Relations/Development of Del Taco, Inc. He was appointed to his current position
in December 1995. Previously, Mr. Hitzelberger was Executive Vice President,
Marketing from February 1991 and Vice President, Marketing from 1989 to 1991.
Mr. Hitzelberger has responsibility for franchise development, relations and
training and will oversee public relations and training for the corporation.
From September 1988 through September 1989, Mr. Hitzelberger was Chief Executive
Officer of Environmental Marketing Group. Prior to that, Mr. Hitzelberger was a
Vice President of Del Taco, Inc. Prior to joining Del Taco, Inc., he served as
Vice President - Marketing at the department store division of Lucky Stores,
Inc., a major supermarket retailer. Prior to his position with Lucky, Mr.
Hitzelberger held various positions in marketing and retailing at Wallpapers to
Go, Inc., a division of General Mills, Inc., and Coast to Coast Stores, Inc. a
subsidiary of Household Merchandising, Inc. Mr. Hitzelberger received a Master
of Business Administration degree from Loyola University in Chicago, Illinois.
ROBERT J. TERRANO, Executive Vice President and Chief Financial Officer of Del
Taco, Inc. From May 1994 to April 1995, Mr. Terrano served as Chief Financial
Officer for Denny's, Inc. in Spartanburg, S.C. From August 1983 to May 1994, he
served with Burger King Corporation, Miami Florida, in a variety of positions,
most recently as Division Controller. Mr. Terrano joined Del Taco, Inc. in April
1995.
JAMES D. STOOPS, Executive Vice President, Operations of Del Taco, Inc. From
1968 to 1991, Mr. Stoops served in a wide variety of Operations positions with
Burger King Corporation with increasing levels of responsibility. In 1985, Mr.
Stoops was appointed Region Vice President/General Manager for the New York
region and served in that position until October of 1990. In January of 1991, he
joined Del Taco, Inc. in his current post.
JANET D. SIMMONS, Senior Vice President, Purchasing of Del Taco, Inc. From 1979
to 1986, Ms. Simmons was with Denny's Incorporated. She served in the Research
and Development department in a variety of positions until 1982 when she was
promoted to the position of Purchasing Agent. Ms. Simmons was hired in 1986 as
Manager of Contract Purchasing with Carl Karcher Enterprises, a post she held
until March 1990 when she became Vice President, Purchasing for Del Taco, Inc.
Ms. Simmons has a Bachelor of Science degree in Foods and Nutrition from Cal
State Polytechnic University in Pomona, California.
19
<PAGE> 20
MICHAEL L. ANNIS, Vice President, Secretary and General Counsel of Del Taco,
Inc. From 1981 to 1986 Mr. Annis served as Regional Real Estate Manager and
Director of Real Estate Services with Taco Bell, Inc. In 1986 he served as
Regional General Manager with Quaker State Minit Lube. In January of 1987 Mr.
Annis joined Red Robin International, Inc. as General Counsel and was
subsequently promoted to Vice President/Secretary and later Vice President Real
Estate Development/Secretary and General Counsel, the position he held until
joining Del Taco, Inc. in December of 1993. Mr. Annis received his J.D. Degree
from Whittier College.
C. DOUGLAS MITCHELL, Vice President and Corporate Controller. Mr. Mitchell
joined Del Taco, Inc. in August of 1994 as Controller and was promoted to his
current position in January 1996. From 1990 to 1994, Mr. Mitchell was a Senior
Audit Manager with Coopers & Lybrand. Prior to 1990, Mr. Mitchell held various
positions in finance and accounting with the Geneva Companies (a subsidiary of
Chemical Bank), Zaremba Corporation (a real estate developer) and The Dexter
Corporation (an international manufacturer of specialty materials). Mr. Mitchell
has a Bachelor of Science degree with a major in accounting from the University
of Southern California.
ANNETTE D. SHEHAN, Vice President, Marketing of Del Taco, Inc. From 1984-1994
Ms. Shehan was with Jack In The Box Restaurants where she held various positions
in Research & Development, Product Marketing and Advertising/Media. Ms. Shehan
was hired in 1994 as Manager of Broadcast Advertising with HomeBase, Inc. a home
improvement retailer, a post she held until 1998 when she became Vice President,
Marketing for Del Taco, Inc. Ms. Shehan has a Bachelor of Science Degree in Food
Science from California Polytechnic University, San Luis Obispo and a Master of
Business Administration from San Diego State University.
SHIRLENE LOPEZ, Vice President, Corporate Development & Design of Del Taco, Inc.
Ms. Lopez began her career with Del Taco in 1978 as an hourly employee and
advanced through the ranks to General Manager in 1984. Ms. Lopez was promoted to
the corporate office in 1989 as Human Resource Manager in support of the field
and office manager. In 1994, she was promoted to Executive Project Manager of
reporting to the CEO and in 1996, to Director of Corporate Development in charge
of all interior image and design. Ms. Lopez has held her current position since
August 1997.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
The partnership has no executive officers or directors and pays no direct
remuneration to any executive officer or director of its General Partner. The
partnership has not issued any options or stock appreciation rights to any
executive officer or director of its General Partner, nor does the partnership
propose to pay any annuity, pension or retirement benefits to any executive
officer or director of its General Partner. The partnership has no plan, nor
does the partnership presently propose a plan, which will result in any
remuneration being paid to any executive officer or director of the General
Partner upon termination of employment.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person of record currently owns more than five percent of limited
partnership units of the partnership, nor was any person known of by
the partnership to own of record and beneficially, or beneficially
only, more than five percent of such securities.
(b) Neither Del Taco, Inc., nor any executive officer or director of Del
Taco, Inc. owns any limited partnership units of the partnership.
20
<PAGE> 21
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT - (CONTINUED)
(c) The partnership knows of no contractual arrangements, the operation or
the terms of which may at a subsequent date result in a change in
control of the partnership , except for provisions in the partnership
agreement providing for removal of the General Partner by holders of a
majority of the limited partnership units and if a material event of
default occurs under the financing agreements of the General Partner.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) No transactions have occurred between the partnership and any executive
officer or director of its General Partner.
During 1998, the following transactions occurred between the
partnership and the General Partner pursuant to the terms of the
partnership agreement.
(1) The General Partner earned $3,806 as its one percent share of the
net income of the partnership.
(2) The General Partner received $4,186 in distributions relating to
its one percent interest in the partnership.
(b) During 1998, the partnership had no business relationships with any
entity of a type required to be reported under this item.
(c) Neither the General Partner, any director or officer of the General
Partner or any associate of any such person, was indebted to the
partnership at any time during 1998 for any amount in excess of
$60,000.
(d) Not applicable.
21
<PAGE> 22
PART IV
ITEM 14(a)(1) AND (2). EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS
ON FORM 8-K
Financial statement schedules:
Schedule III - Real Estate and Accumulated Depreciation
Financial statement schedules other than those referred to above have
been omitted because they are not applicable or not required.
(b) No reports on Form 8-K were filed during the last quarter of 1998.
(c) Exhibits required by Item 601 of Regulation S-K:
1. Incorporated herein by reference, Agreement of Limited
Partnership of Del Taco Restaurant Properties II filed as
Exhibit 3.01 to Partnership's Registration Statement on Form
S-11 as filed with the Securities and Exchange Commission on
July 10, 1984.
2. Incorporated herein by reference, Amendment to Agreement of
Limited Partnership of Del Taco Restaurant Properties II.
3. Incorporated herein by reference, Form of Standard Lease to be
entered into by partnership and Del Taco, Inc., as lessee,
filed as Exhibit 10.02 to Partnership's Registration Statement
on Form S-11 as filed with the Securities and Exchange
Commission on July 10, 1984.
22
<PAGE> 23
DEL TACO RESTAURANT PROPERTIES II - SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Cost capitalized Gross amount at
Initial cost subsequent to which carried at
to company acquisition close of period
--------------------------- ---------------- ----------------
Land Buildings & Land, buildings
Description & land Improve- Carrying & improvements Accumulated
(All Restaurants) Encumbrances improvements ments costs Total depreciation
- ----------------- ------------ ------------ ----------- -------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Victorville, CA $ -- $ 327,770 $ 224,843 $ -- $ 552,613 $ 117,151
Colton, CA -- 262,661 180,179 -- 442,840 93,880
Palmdale, CA -- 404,791 277,677 -- 682,468 144,680
Pedley, CA -- 364,334 249,925 -- 614,259 130,220
Thousand Palms, CA -- 446,450 306,255 -- 752,705 159,569
--------------------------------------------------------------------------------------------
$ -- $1,806,006 $1,238,879 $ -- $3,044,885 $ 645,500
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Life on which
depreciation in latest
Description Date of Date income statement
(All Restaurants) construction acquired is computed
- ----------------- ------------ -------- ----------------------
<S> <C> <C> <C>
Victorville, CA 1986 1986 20 (LI), 35 (BI)
Colton, CA 1986 1986 20 (LI), 35 (BI)
Palmdale, CA 1986 1986 20 (LI), 35 (BI)
Pedley, CA 1987 1987 20 (LI), 35 (BI)
Thousand Palms, CA 1987 1987 20 (LI), 35 (BI)
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Restaurants Depreciation
----------- ------------
<S> <C> <C>
Balances at December 31, 1995: $ 3,044,885 $ 482,960
Acquisitions -- 54,180
Sales -- --
----------- ---------
Balances at December 31, 1996: 3,044,885 537,140
Acquisitions -- 54,180
Sales -- --
----------- ---------
Balances at December 31, 1997: 3,044,885 591,320
Acquisitions -- 54,180
Sales -- --
----------- ---------
Balances at December 31, 1998: $ 3,044,885 $ 645,500
=========== =========
</TABLE>
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the partnership 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
Del Taco, Inc.
General Partner
Date March 07, 1999 Kevin K. Moriarty
-------------- -----------------
Kevin K. Moriarty
Director, Chairman and Chief
Executive Officer
Date March 07, 1999 Michael L. Annis
-------------- ----------------
Michael L. Annis
Vice President, Secretary and
General Counsel
Date March 07, 1999 Robert J. Terrano
-------------- -----------------
Robert J. Terrano
Executive Vice President and
Chief Financial Officer
Date March 07, 1999 C. Douglas Mitchell
-------------- -------------------
C. Douglas Mitchell
Vice President and Corporate
Controller
24
<PAGE> 25
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 134,928
<SECURITIES> 1,468
<RECEIVABLES> 42,415
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 178,811
<PP&E> 3,943,835
<DEPRECIATION> 1,544,451
<TOTAL-ASSETS> 2,578,195
<CURRENT-LIABILITIES> 17,533
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,560,662
<TOTAL-LIABILITY-AND-EQUITY> 2,560,662
<SALES> 0
<TOTAL-REVENUES> 486,368
<CGS> 0
<TOTAL-COSTS> 105,767
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 380,601
<INCOME-TAX> 0
<INCOME-CONTINUING> 380,601
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 380,601
<EPS-PRIMARY> 13.95
<EPS-DILUTED> 13.95
</TABLE>
