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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 SEPTEMBER 30, 2000.
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. 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 NUMBER)
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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<PAGE> 2
INDEX
DEL TACO RESTAURANT PROPERTIES III
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
------------------------------ -----------
<S> <C>
Item 1. Financial Statements and Supplementary Data
Balance Sheets at September 30, 2000 (Unaudited) and
December 31, 1999 3
Statements of Income for the three and nine months ended
September 30, 2000 and 1999 (Unaudited) 4
Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999 (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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<PAGE> 3
DEL TACO RESTAURANT PROPERTIES III
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 243,937 $ 208,334
Receivable from General Partner 67,450 62,122
Deposits 1,000 1,000
----------- -----------
Total current assets 312,387 271,456
----------- -----------
RESTRICTED CASH 97,291 97,291
----------- -----------
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
----------- -----------
8,883,847 8,883,847
Less--accumulated depreciation 2,877,426 2,792,496
----------- -----------
6,006,421 6,091,351
----------- -----------
$ 6,416,099 $ 6,460,098
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to Limited Partners $ 32,478 $ 25,130
Accounts payable 15,537 11,801
----------- -----------
Total current liabilities 48,015 36,931
----------- -----------
OBLIGATION TO GENERAL PARTNER 577,510 577,510
----------- -----------
PARTNERS' EQUITY:
Limited Partners 5,828,233 5,882,765
General Partner-Del Taco, Inc. (37,659) (37,108)
----------- -----------
5,790,574 5,845,657
----------- -----------
$ 6,416,099 $ 6,460,098
=========== ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements
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<PAGE> 4
DEL TACO RESTAURANT PROPERTIES III
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rent $204,427 $190,476 $575,391 $542,003
Interest 3,357 2,574 8,717 7,087
Other 800 500 1,883 1,820
-------- -------- -------- --------
208,584 193,550 585,991 550,910
-------- -------- -------- --------
EXPENSES:
General and administrative 9,123 8,914 44,583 44,723
Depreciation 28,310 28,310 84,931 84,931
-------- -------- -------- --------
37,433 37,224 129,514 129,654
-------- -------- -------- --------
Net income $171,151 $156,326 $456,477 $421,256
======== ======== ======== ========
Net income per limited
partnership unit $ 3.58 $ 3.27 $ 9.55 $ 8.81
======== ======== ======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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<PAGE> 5
DEL TACO RESTAURANT PROPERTIES III
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 456,477 $ 421,256
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 84,931 84,931
(Increase) decrease in receivable from General Partner (5,328) 2,524
Decrease in deposits -- 462
Increase (decrease) in accounts payable and
payable to limited partners 11,084 (12,831)
--------- ---------
Net cash provided by operating activities 547,164 496,342
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash -- 2,605
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of limited partnership units -- (2,605)
Cash distributions to partners (511,561) (507,612)
--------- ---------
Net cash used by financing activities (511,561) (510,217)
--------- ---------
Net increase (decrease) in cash 35,603 (11,270)
Beginning cash balance 208,334 219,876
--------- ---------
Ending cash balance $ 243,937 $ 208,606
========= =========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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<PAGE> 6
DEL TACO RESTAURANT PROPERTIES III
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
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, 1999. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
to present fairly the partnership's financial position at September 30, 2000,
the results of operations and cash flows for the nine month periods ended
September 30, 2000 and 1999 have been included. Operating results for the three
and nine months ended September 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000.
NOTE 2 - RESTRICTED CASH
At September 30, 2000 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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<PAGE> 7
DEL TACO RESTAURANT PROPERTIES III
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2000
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 2000 and 1999.
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.
For the three months ended September 30, 2000, the nine restaurants operated by
Del Taco, for which the partnership is the lessor, had combined, unaudited sales
of $1,703,554 and net income of $72,235, as compared to $1,587,297 and $72,043
respectively, for the corresponding period in 1999. Net income by restaurant
includes charges for general and administrative expenses incurred in connection
with supervision of restaurant operations and interest expense.
For the nine months ended September 30, 2000, the nine restaurants operated by
Del Taco, for which the partnership is the lessor, had combined, unaudited sales
of $4,794,929 and net income of $172,761, as compared to $4,516,692 and $155,485
respectively, for the corresponding period in 1999.
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<PAGE> 8
DEL TACO RESTAURANT PROPERTIES III
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2000
NOTE 4 - LEASING ACTIVITIES - CONTINUED
For the three months and nine months ended September 30, 2000, the East Valley
Blvd. restaurant in Walnut, California reported net losses of $1,950 and $4,780
as compared to net losses of $1,203 and $4,717 for the corresponding period in
1999.
For the three months and nine months ended September 30, 2000, the East Gale
Blvd. restaurant in Puente Hills, California reported net losses of $1,971 and
$8,500 as compared to net losses of $2,377 and $6,300 for the corresponding
period in 1999.
For the three months and nine months ended September 30, 2000, the West
Sepulveda Blvd. restaurant in Los Angeles, California reported net losses of
$2,629 and $11,832 as compared to net income of $120 and a net loss of $13,535
for the corresponding period in 1999.
NOTE 5 - 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 13, 2000.
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 October 13, 2000, a distribution to the limited partners of $204,662, or
approximately $4.32 per limited partnership unit, was approved. Such
distribution was paid on October 18, 2000. The General Partner also received a
distribution of $2,067 with respect to its 1% partnership interest.
-8-
<PAGE> 9
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. One restaurant was sold in November 1997.
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 September 30,
2000. 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Rancho California Plaza, Rancho California, CA $ 32,275 $ 30,563 $ 92,679 $ 86,917
East Vista Way, Vista, CA 20,513 16,911 58,205 47,805
Plaza at Puente Hills, Industry, CA 13,705 12,936 37,698 38,896
4th Street, Perris, CA 28,073 24,754 78,727 74,294
Foothill Blvd., Upland, CA 25,834 24,632 71,731 66,743
East Valley Blvd., Walnut, CA 12,618 11,686 35,656 33,502
Lassen Street, Chatsworth, CA 30,020 27,753 83,021 79,697
Hesperia Road, Victorville, CA 24,816 23,709 71,916 68,225
W. Sepulveda Blvd., Los Angeles, CA 16,573 17,532 45,758 45,924
-------- -------- -------- --------
Total $204,427 $190,476 $575,391 $542,003
======== ======== ======== ========
</TABLE>
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<PAGE> 10
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 $204,427 during the
three month period ended September 30, 2000, which represents an increase of
$13,951 from 1999. The partnership earned rental revenue of $575,391 during the
nine month period ended September 30, 2000, which represents an increase of
$33,388 from 1999. The changes in rental revenue between 2000 and 1999 are
directly attributable to increases in sales levels 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
--------------------------------
Nine Months Ended
September 30,
2000 1999
------- ------
<S> <C> <C>
Accounting fees 53.74% 52.15%
Distribution of information
to limited partners 46.26 47.85
------ ------
100.00% 100.00%
====== ======
</TABLE>
For the three month period ended September 30, 2000 net income increased by
$14,825 from 1999 to 2000 due the increase in revenues of $15,034 which was
partially offset by the increase in general and administrative expenses of $209.
For the nine month period ended September 30, 2000 net income increased by
$35,221 from 1999 to 2000 due to the increase in revenues of $35,081 and the
decrease in general and administrative expenses of $140.
-10-
<PAGE> 11
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,
2000.
-11-
<PAGE> 12
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: October 31, 2000 /s/ Robert J. Terrano
---------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: October 31, 2000 /s/ C. Douglas Mitchell
-----------------------
C. Douglas Mitchell
Vice President and Corporate
Controller
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<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
