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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, MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
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COMMISSION FILE NO. 33-2462
DEL TACO RESTAURANT PROPERTIES III
A CALIFORNIA LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 33-0139247
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
23041 AVENIDA DE LA CARLOTA, LAGUNA HILLS, CALIFORNIA 92653
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(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 ___
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INDEX
DEL TACO RESTAURANT PROPERTIES III
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
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<S> <C>
Item 1. Financial Statements and Supplementary Data
Balance Sheets at March 31, 1999 (Unaudited) and
December 31, 1998 3
Statements of Income for the three months ended
March 31, 1999 and 1998 (Unaudited) 4
Statements of Cash Flows for the three months ended
March 31, 1999 and 1998 (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
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
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DEL TACO RESTAURANT PROPERTIES III
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 December 31
1999 1998
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(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 180,475 $ 219,876
Receivable from General Partner (Note 5) 62,809 63,803
Deposits 1,182 1,506
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Total current assets 244,466 285,185
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RESTRICTED CASH (NOTE 2) 97,291 99,896
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PROPERTY AND EQUIPMENT, AT COST:
Land and improvements 4,405,966 4,405,966
Buildings and improvements 2,954,959 2,954,959
Machinery and equipment 1,522,922 1,522,922
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8,883,847 8,883,847
Less--accumulated depreciation 2,707,565 2,679,255
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6,176,282 6,204,592
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$ 6,518,039 $ 6,589,673
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LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to Limited Partners $ 19,346 $ 31,604
Accounts Payable 10,490 7,628
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Total current liabilities 29,836 39,232
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OBLIGATION TO GENERAL PARTNER 577,510 577,510
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PARTNERS' EQUITY:
Limited Partners 5,947,155 6,008,797
General Partner-Del Taco, Inc. (36,462) (35,866)
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5,910,693 5,972,931
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$ 6,518,039 $ 6,589,673
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</TABLE>
The accompanying notes are an
integral part of these financial statements
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DEL TACO RESTAURANT PROPERTIES III
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1999 1998
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<S> <C> <C>
REVENUES:
Rent (Notes 4 and 5) $171,876 $166,524
Interest 2,215 2,108
Other 400 1,153
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174,491 169,785
EXPENSES:
General and administrative 22,888 22,513
Depreciation 28,310 66,383
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51,198 88,896
-------- --------
Net income $123,293 $ 80,889
======== ========
Net income per limited
partnership unit (Note 3) $ 2.58 $ 1.69
======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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DEL TACO RESTAURANT PROPERTIES III
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 123,293 $ 80,889
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 28,310 66,383
Decrease (increase) in receivable from
General Partner 994 (680)
Decrease in deposits 324 --
Decrease in accounts payable and
payable to limited partners (9,396) (7,163)
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Net cash provided by operating activities 143,525 139,429
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash 2,605 --
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CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of limited partnership units (2,605) --
Cash distribution to partners (182,926) (177,501)
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Net cash used by financing activities (185,531) (177,501)
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Net decrease in cash (39,401) (38,072)
Beginning cash balance 219,876 189,315
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Ending cash balance $ 180,475 $ 151,243
========= =========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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DEL TACO RESTAURANT PROPERTIES III
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 Registrant'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 March 31, 1999, the
results of operations and cash flows for the three month periods ended March 31,
1999 and 1998 have been included. Operating results for the three months ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
NOTE 2 - RESTRICTED CASH
At March 31, 1999 the partnership had a restricted cash balance of $97,291. The
restricted cash is a death and disability redemption fund. Such fund is
maintained in an interest bearing account at a major commercial bank. A limited
partner has the right, under certain circumstances involving such limited
partner's death or disability, to tender to the partnership for redemption all
of the units owned of record by such limited partner. The redemption price will
be equal to the partners capital account balance as of the redemption date. The
death and disability fund was established in 1987. The fund was limited to two
percent of the gross proceeds from sale of the limited partnership units.
Requests for redemption made after the funds in the death and disability fund
are depleted will not be accepted.
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DEL TACO RESTAURANT PROPERTIES III
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1999
NOTE 3 - 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
47,331 in 1999 and 47,394 in 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,
and until each class of limited partners receive their priority return as
defined in the partnership agreement. Additional gains will be allocated 15
percent to the General Partner and 85 percent to the limited partners.
NOTE 4 - 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.
On December 29, 1998, the franchise agreement for the West Sepulveda Boulevard
restaurant in Los Angeles expired. Del Taco began operation of this restaurant
as a company managed facility on December 29, 1998. For the three months ended
March 31, 1999, the nine restaurants operated by Del Taco, for which the
partnership is the lessor, had combined, unaudited sales of $1,432,300 and net
income of $55,380, as compared to $1,288,548 and $47,816 respectively, for the
corresponding period in 1998 which included eight restaurants operated by Del
Taco. Net income by restaurant includes charges for general and administrative
expenses incurred in connection with supervision of restaurant operations and
interest expense. For the three months ended March 31, 1998, the one restaurant
operated by a Del Taco franchisee, for which the partnership was the lessor, had
unaudited sales of $99,152.
For the three months ended March 31, 1999, the East Valley Blvd. Restaurant in
Walnut, California reported a net loss of $616 as compared to a net loss of
$2,602 for the corresponding period in 1998.
For the three months ended March 31, 1999, the West Sepulveda Blvd. Restaurant
in Los Angeles, California reported a net loss of $7,849. This restaurant was
operated by a franchisee during the three months ended March 31, 1998.
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DEL TACO RESTAURANT PROPERTIES III
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1999
NOTE 5 - 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 10, 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 6 with respect to certain distributions to the General
Partner.
NOTE 6 - DISTRIBUTIONS
On April 8, 1999, a distribution to the limited partners of $151,989, or
approximately $3.21 per limited partnership unit, was approved. Such
distribution was paid on April 24, 1999. The General Partner also received a
distribution of $1,535 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 February 1986
and June 1987. 14.7% of the $12 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 $9.5 million of the
remaining funds were used to acquire sites and build ten restaurants. In
February of 1992, approximately $281,000 raised during the offering but not
required to acquire sites and build restaurants was distributed to the limited
partners.
The nine 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.
As described in note 2 to the Notes to the Financial Statements, the partnership
has a death and disability redemption fund totaling $97,291 at March 31, 1999.
Investors should contact the General Partner with all questions regarding the
eligibility of a limited partner or the estate of a deceased limited partner to
participate in the redemption fund.
Results of Operations
The partnership owns nine properties that are under long-term lease to Del Taco
for restaurant operations.
The following table sets forth rental revenue earned by restaurant for the year:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1999 1998
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<S> <C> <C>
Rancho California Plaza, Rancho California, CA $ 27,138 $ 26,326
East Vista Way, Vista, CA 14,988 13,909
4th Street, Perris, CA 25,986 26,064
Foothill Blvd., Upland, CA 20,156 19,256
Plaza at Puente Hills, Industry, CA 13,126 12,293
East Valley Blvd., Walnut, CA 10,963 10,293
W. Sepulveda Blvd., Los Angeles, CA 12,592 11,898
Lassen Street, Chatsworth, CA 25,201 26,679
Hesperia Road, Victorville, CA 21,726 19,806
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Total $171,876 $166,524
======== ========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
The partnership receives rental revenues equal to 12 percent of gross sales from
the restaurants. The partnership earned rental revenue of $171,876 during the
three month period ended March 31, 1999, which represents an increase of $5,352
from 1998. The increase in rental revenue was caused by an increase in sales at
the restaurants under lease.
The following table breaks down general and administrative expenses by type of
expense:
<TABLE>
<CAPTION>
Percentage of Total
General & Administrative Expense
Three Months Ended
March 31
1999 1998
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<S> <C> <C>
Accounting fees 64.66% 63.52%
Distribution of information
to limited partners 35.34 36.48
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100.00% 100.00%
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</TABLE>
General and administrative costs increased from 1998 to 1999 due to increased
costs for accounting and income tax return preparation. Depreciation decreased
in 1999 because certain equipment became fully depreciated during 1998.
Net income increased by $42,404 from 1998 to 1999 due to the increase in
revenues of $4,706 and the decrease in depreciation expense of $38,073 which was
partially offset by the $375 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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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,
1999.
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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 III
(a California limited partnership)
Registrant
Del Taco, Inc.
General Partner
Date: April 30, 1999 /s/ Robert J. Terrano
-------------------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: April 30, 1999 /s/ C. Douglas Mitchell
-------------------------------
C. Douglas Mitchell
Vice President and Corporate
Controller
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 277,766
<SECURITIES> 1,182
<RECEIVABLES> 62,809
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 341,757
<PP&E> 8,883,847
<DEPRECIATION> 2,707,565
<TOTAL-ASSETS> 6,518,039
<CURRENT-LIABILITIES> 29,836
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,910,693
<TOTAL-LIABILITY-AND-EQUITY> 6,518,039
<SALES> 0
<TOTAL-REVENUES> 174,491
<CGS> 0
<TOTAL-COSTS> 51,198
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 123,293
<INCOME-TAX> 0
<INCOME-CONTINUING> 123,293
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123,293
<EPS-PRIMARY> 2.58
<EPS-DILUTED> 2.58
</TABLE>
