<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, SEPTEMBER 30, 1996
------------------------------------------
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. 33-13437
DEL TACO INCOME PROPERTIES IV
a California limited partnership
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0241855
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
23041 AVENIDA DE LA CARLOTA, SUITE 400, LAGUNA HILLS, CA 92653
(Address of principal executive offices) (Zip Code)
(714) 462-7399
(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 INCOME PROPERTIES IV
-----------------------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------ -----------
<S> <C>
Item 1. Financial Statements and Supplementary Data
Balance Sheets at September 30, 1996 (Unaudited) and
December 31, 1995 3
Statements of Income for the three and nine months ended
September 30, 1996 and 1995 (Unaudited) 4
Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995 (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 INCOME PROPERTIES IV
-----------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 71,234 $ 73,542
Receivable from General Partner (Note 4) 25,818 20,087
Deposits 400 400
---------- ----------
Total current assets 97,452 94,029
---------- ----------
PROPERTY AND EQUIPMENT, AT COST
Land and improvements 1,236,700 1,236,700
Buildings and improvements 1,289,860 1,289,860
Machinery and equipment 484,789 484,789
---------- ----------
3,011,349 3,011,349
Less--accumulated depreciation 687,859 610,047
---------- ----------
2,323,490 2,401,302
---------- ----------
$2,420,942 $2,495,331
========== ==========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES:
Payable to Limited Partners $ 3,068 $ 1,652
Accounts Payable 467 825
---------- ----------
Total current liabilities 3,535 2,477
OBLIGATION TO GENERAL PARTNER 137,953 137,953
---------- ----------
PARTNERS' EQUITY
Limited Partners 2,287,812 2,362,487
General Partner-Del Taco, Inc. (8,358) (7,586)
---------- ----------
2,279,454 2,354,901
---------- ----------
$2,420,942 $2,495,331
========== ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements
-3-
<PAGE> 4
DEL TACO INCOME PROPERTIES IV
-----------------------------
STATEMENTS OF INCOME
--------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rent (Notes 3 and 4) $ 71,440 $ 73,589 $263,122 $206,317
Interest 373 283 864 784
Other 25 - 25 75
-------- -------- -------- --------
71,838 73,872 264,011 207,176
-------- -------- -------- --------
EXPENSES:
General and administrative 7,629 5,856 34,357 31,997
Depreciation 25,937 25,937 77,813 77,802
-------- -------- -------- --------
33,566 31,793 112,170 109,799
-------- -------- -------- --------
Net income $ 38,272 $ 42,079 $151,841 $ 97,377
======== ======== ======== ========
Net income per Limited
Partnership Unit (Note 2) $ 0.23 $ 0.25 $ 0.91 $ 0.58
======== ======== ======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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<PAGE> 5
DEL TACO INCOME PROPERTIES IV
-----------------------------
STATEMENTS OF CASH FLOWS
------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1996 1995
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $151,841 $ 97,377
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 77,813 77,802
Increase (decrease) in payable
to Limited Partners 1,416 (522)
(Increase) decrease in receivable
from General Partner (5,731) (833)
Increase (decrease) in accounts payable (358) 3,353
-------- --------
Net cash provided by operating activities 224,981 177,177
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners 227,289 173,839
-------- --------
Net increase (decrease) in cash (2,308) 3,338
Beginning cash balance 73,542 74,956
-------- --------
Ending cash balance $ 71,234 $ 78,294
======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-5-
<PAGE> 6
DEL TACO INCOME PROPERTIES IV
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 1996
------------------
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, 1995. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) necessary to present fairly the partnership's financial position at
September 30, 1996, the results of operations and cash flows for the nine month
periods ended September 30, 1996 and 1995 have been included. Operating results
for the three and nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
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
165,415 in 1996 and 1995.
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 12
percent to the General Partner and 88 percent to the Limited Partners.
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 32 years
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<PAGE> 7
DEL TACO INCOME PROPERTIES IV
- -----------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- -----------------------------------------
SEPTEMBER 30, 1996
- ------------------
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 three Properties leased as of September 30, 1996 and
1995, one of which has been subleased to a Del Taco franchisee.
Rental revenue for the nine month periods ended September 30, 1996 was higher
than the corresponding period in 1995 due to the earning of supplemental rent,
as provided for in the lease agreements, based on the operating results of the
individual restaurants.
NOTE 4 - TRANSACTIONS WITH DEL TACO
The receivable from the General Partner consists primarily of rent accrued for
the month of September. The September rent was collected on October 11, 1996.
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 October 14, 1996, a distribution to the Limited Partners of $60,902, or
approximately $.37 per Limited Partnership Unit, was approved. Such
distribution was paid October 15, 1996. The General Partner also received a
distribution of $615 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 an offering of Limited Partnership Units on June 5,
1987. By June 1, 1988, the sale of such Units provided a total capitalization
for the Registrant of $4,135,375 including $1,000 attributable to the Special
Limited Partner. 14.5 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. Approximately $3,000,000 of the
remaining funds were expended for the acquisition of sites and construction of
three restaurants. During 1989, the first restaurant opened for business. The
two additional restaurants commenced operation in 1990. In February 1992, the
Registrant distributed to Limited Partners of record on December 31, 1991
$442,270 of net proceeds not utilized as reserves and not invested in
properties.
Since the three restaurants owned by the Registrant opened, cash flow from
Lease payments received from Del Taco, the Registrant's General Partner, which
leases all three 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.
-8-
<PAGE> 9
Results of Operations
- ---------------------
The Registrant owns three Properties that are under long-term lease to Del Taco
for restaurant operations (Del Taco, in turn, has sub-leased one of the
restaurants to a Del Taco franchisee). The Registrant receives rental revenues
equal to 12 percent of restaurant sales. The Registrant had rental revenue of
$71,440 for the three months ended September 30, 1996 representing a decrease
from the rental revenues of $73,589 in 1995. The Registrant had rental revenue
of $263,122 for the nine months ended September 30, 1996 representing an
increase from the rental revenues of $206,317 in 1995. Such increase was
attributable to the earning of supplemental rent, as provided for in the lease
agreements, based on the operating results of individual restaurants.
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
--------------------------------
Nine Months Ended
September 30
1996 1995
------- -------
<S> <C> <C>
Accounting fees 45.45% 49.77%
Distribution of
information to
Limited Partners 51.31 47.62
Other 3.24 2.61
------ ------
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. For the three months ended September 30, general and
administrative expenses increased from $5,856 in 1995 to $7,629 in 1996. The
increase in general and administrative expense was caused primarily by printing
costs for new checks, envelopes and stationary. For the nine months ended
September 30, general and administrative expenses increased from $31,997 in
1995 to $34,357 in 1996. The Registrant incurred depreciation expense in the
amount of $25,937 for the three months ended September 30, 1996 and 1995,
respectively. The Registrant incurred depreciation expense in the amount of
$77,813 and $77,802 for the nine months ended September 30, 1996 and 1995,
respectively.
-9-
<PAGE> 10
As a result of decreased revenues totaling $2,034 for the three months ended
September 30,1996 and increased expenses totaling $1,773 for the three months
ended September 30, 1996, the net income of the Registrant decreased from
$42,079 for the three months ended September 30, 1995 to $38,272 for the
corresponding period in 1996. As a result of increased revenues totaling
$56,835 for the nine months ended September 30, 1996 and increased expenses
totaling $2,371 for the nine months ended September 30, 1996, the net income of
the Registrant increased from $97,377 for the nine months ended September 30,
1995 to $151,841 for the corresponding period in 1996.
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.
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, 1996.
(c) Exhibit 27 - Financial Data Schedule.
-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 INCOME PROPERTIES IV
(a California limited partnership)
Registrant
Del Taco, Inc.
General Partner
Date: October 30, 1996 /s/ Robert J. Terrano
--------------------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: October 30, 1996 /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-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 71,234
<SECURITIES> 400
<RECEIVABLES> 25,818
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 97,452
<PP&E> 3,011,349
<DEPRECIATION> 687,859
<TOTAL-ASSETS> 2,420,942
<CURRENT-LIABILITIES> 3,535
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,279,454
<TOTAL-LIABILITY-AND-EQUITY> 2,420,942
<SALES> 0
<TOTAL-REVENUES> 71,838
<CGS> 0
<TOTAL-COSTS> 33,566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 38,272
<INCOME-TAX> 0
<INCOME-CONTINUING> 38,272
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,272
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
