<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 JUNE 30, 1999
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)
(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 [ ]
<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 June 30, 1999 (Unaudited) and
December 31, 1998 3
Statements of Income for the three and six months ended
June 30, 1999 and 1998 (Unaudited) 4
Statements of Cash Flows for the six months ended
June 30, 1999 and 1998 (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>
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 124,994 $ 134,928
Receivable from General Partner (Note 4) 41,038 42,415
Deposits 1,215 1,468
------------ ------------
Total current assets 167,247 178,811
------------ ------------
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 1,571,541 1,544,451
------------ ------------
2,372,294 2,399,384
------------ ------------
$ 2,539,541 $ 2,578,195
============ ============
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to Limited Partners $ 13,842 $ 12,099
Accounts payable 4,880 5,434
------------ ------------
Total current liabilities 18,722 17,533
------------ ------------
PARTNERS' EQUITY:
Limited Partners 2,544,661 2,584,106
General Partner-Del Taco, Inc. (23,842) (23,444)
------------ ------------
2,520,819 2,560,662
------------ ------------
$ 2,539,541 $ 2,578,195
============ ============
</TABLE>
The accompanying notes are an
integral part of these financial statements
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<PAGE> 4
DEL TACO RESTAURANT PROPERTIES II
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rent (Notes 3 and 4) $121,512 $121,761 $235,711 $230,189
Interest 770 317 1,636 787
Other 925 425 1,450 950
-------- -------- -------- --------
123,207 122,503 238,797 231,926
-------- -------- -------- --------
EXPENSES:
General and administrative 11,501 11,612 33,804 33,490
Depreciation 13,545 13,545 27,090 27,090
-------- -------- -------- --------
25,046 25,157 60,894 60,580
-------- -------- -------- --------
Net income $ 98,161 $ 97,346 $177,903 $171,346
======== ======== ======== ========
Net income per limited
partnership unit (Note 2) $ 3.60 $ 3.57 $ 6.52 $ 6.28
======== ======== ======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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<PAGE> 5
DEL TACO RESTAURANT PROPERTIES II
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 177,903 $ 171,346
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 27,090 27,090
Decrease (increase) in receivable from
General Partner 1,377 (2,670)
Decrease (increase) in deposits 253 (1,406)
Increase in accounts payable and
payable to limited partners 1,190 1,197
---------- ----------
Net cash provided by operating activities 207,813 195,557
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (217,747) (190,130)
---------- ----------
Net (decrease) increase in cash (9,934) 5,427
Beginning cash balance 134,928 119,687
---------- ----------
Ending cash balance $ 124,994 $ 125,114
========== ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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<PAGE> 6
DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
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 partnership's annual
report on Form 10-K for the year ended December 31, 1998. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
to present fairly the partnership's financial position at June 30, 1999, the
results of operations and cash flows for the six month periods ended June 30,
1999 and 1998 have been included. Operating results for the three and six months
ended June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
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 1999 and 1998.
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
JUNE 30, 1999
NOTE 3 - LEASING ACTIVITIES
The partnership leases certain 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.
For the three months ended June 30, 1999, the five restaurants operated by Del
Taco, for which the partnership is the lessor, had combined, unaudited sales of
$1,012,599 and net income of $39,608 as compared to $1,014,674 and $65,788
respectively, for the corresponding period in 1998. Net income by restaurant
includes charges for general and administrative expenses incurred in connection
with supervision of restaurant operations and interest expense.
For the six months ended June 30, 1999, the five restaurants operated by Del
Taco, for which the partnership is the lessor, had combined, unaudited sales of
$1,964,264 and net income of $100,352 as compared to $1,918,242 and $105,787
respectively, for the corresponding period in 1998.
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, 1999.
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.
In addition, see Note 5 with respect to certain distributions to the General
Partner.
NOTE 5 - DISTRIBUTIONS
On July 13, 1999, a distribution to the limited partners of $105,515 or
approximately $3.90 per limited partnership unit, was approved. Such
distribution was paid on July 24, 1999. The General Partner also received a
distribution of $1,066 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 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>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Bear Valley Rd., Victorville, CA $ 23,186 $ 23,772 $ 45,114 $ 45,273
West Valley Blvd., Colton, CA 27,963 25,506 52,701 48,150
Palmdale Blvd., Palmdale, CA 20,171 20,262 39,883 39,229
DeAnza Country Shopping Center, Pedley, CA 16,414 16,145 32,162 30,808
Varner Road, Thousand Palms, CA 33,778 36,076 65,851 66,729
-------- -------- -------- --------
Total $121,512 $121,761 $235,711 $230,189
======== ======== ======== ========
</TABLE>
The partnership receives rental revenues equal to 12 percent of gross sales from
the restaurants. The partnership earned rental revenue of $121,512 during the
three month period ended June 30, 1999, which represents a decrease of $249 from
1998. The partnership earned rental revenue of $235,711 during the six month
period ended June 30, 1999, which represents an increase of $5,522 from 1998.
The changes in rental revenues were caused by a slight decrease in sales at the
restaurants under lease for the three months ended June 30, 1999 and an increase
in sales for the six months ended June 30, 1999.
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<PAGE> 9
ITEM 2. 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 & Administrative Expense
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1999 1998
------ ------
<S> <C> <C>
Accounting fees 63.99% 64.66%
Distribution of
information to
limited partners 36.01 35.34
------ ------
100.00% 100.00%
====== ======
</TABLE>
General and administrative costs for the six month period ended June 30,
increased from 1998 to 1999 due to increased costs for accounting and income tax
return preparation.
For the three month period ended June 30, 1999, net income increased by $815
from 1998 to 1999 due to the increase in revenues of $704 and the $111 decrease
in general and administrative expenses. For the six month period ended June 30,
1999, net income increased by $6,557 from 1998 to 1999 due to the increase in
revenues of $6,871, which was partially offset by the $314 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.
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<PAGE> 10
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 six months ended June 30, 1999.
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<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: July 30, 1999 /s/ Robert J. Terrano
----------------------------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: July 30, 1999 /s/ C. Douglas Mitchell
----------------------------------------
C. Douglas Mitchell
Vice President and Corporate Controller
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<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 124,994
<SECURITIES> 1,215
<RECEIVABLES> 41,038
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 167,247
<PP&E> 3,943,835
<DEPRECIATION> 1,571,541
<TOTAL-ASSETS> 2,539,541
<CURRENT-LIABILITIES> 18,722
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,520,819
<TOTAL-LIABILITY-AND-EQUITY> 2,539,541
<SALES> 0
<TOTAL-REVENUES> 238,797
<CGS> 0
<TOTAL-COSTS> 60,894
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 177,903
<INCOME-TAX> 0
<INCOME-CONTINUING> 177,903
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 177,903
<EPS-BASIC> 6.52
<EPS-DILUTED> 6.52
</TABLE>
