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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, 1997
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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. 33-13437
DEL TACO INCOME PROPERTIES IV
A CALIFORNIA LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 33-0241855
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
23041 AVENIDA DE LA CARLOTA, SUITE 400, LAGUNA HILLS, 92653
CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
(714) 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 INCOME PROPERTIES IV
PART I. FINANCIAL INFORMATION PAGE NUMBER
-----------
Item 1. Financial Statements and Supplementary Data
Balance Sheets at September 30, 1997 (Unaudited) and
December 31, 1996 3
Statements of Income for the three and nine months ended
September 30, 1997 and 1996 (Unaudited) 4
Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996 (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
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DEL TACO INCOME PROPERTIES IV
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
1997 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 79,151 $ 79,857
Receivable from General Partner (Note 4) 24,398 51,558
Deposits 400 400
----------- -----------
Total current assets 103,949 131,815
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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 791,609 713,798
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2,219,740 2,297,551
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$ 2,323,689 $ 2,429,366
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to Limited Partners $ 2,503 $ 3,038
Accounts Payable 3,566 3,000
----------- -----------
Total current liabilities 6,069 6,038
OBLIGATION TO GENERAL PARTNER 137,953 137,953
----------- -----------
PARTNERS' EQUITY
Limited Partners 2,189,005 2,293,656
General Partner-Del Taco, Inc. (9,338) (8,281)
----------- -----------
2,179,667 2,285,375
----------- -----------
$ 2,323,689 $ 2,249,366
=========== ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements
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DEL TACO INCOME PROPERTIES IV
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rent (Notes 3 and 4) $ 75,161 $ 71,440 $212,911 $263,122
Interest 311 373 1,409 864
Other 225 25 300 25
-------- -------- -------- --------
75,697 71,838 214,620 264,011
-------- -------- -------- --------
EXPENSES:
General and administrative 4,360 7,629 29,367 34,357
Depreciation 25,937 25,937 77,811 77,813
-------- -------- -------- --------
30,297 33,566 107,178 112,170
-------- -------- -------- --------
Net income $ 45,400 $ 38,272 $107,442 $151,841
======== ======== ======== ========
Net income per Limited
Partnership Unit (Note 2) $ 0.27 $ 0.23 $ 0.64 $ 0.91
====== ====== ====== ======
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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DEL TACO INCOME PROPERTIES IV
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 107,442 $ 151,841
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 77,811 77,813
Increase (decrease)in payable
to Limited Partners (535) 1,416
(Increase) decrease in receivable
from General Partner 27,160 (5,731)
Increase (decrease) in accounts payable 566 (358)
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Net cash provided by operating activities 212,444 224,981
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (213,150) (227,289)
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Net decrease in cash (706) (2,308)
Beginning cash balance 79,857 73,542
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Ending cash balance $ 79,151 $ 71,234
========= =========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
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, 1996. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
to present fairly the partnership's financial position at September 30, 1997,
the results of operations and cash flows for the nine month periods ended
September 30, 1997 and 1996 have been included. Operating results for the three
and nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997.
In fiscal 1996, the Registrant 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 Registrant's
financial statements.
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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1997
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 1997 and 1996.
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 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, 1997 and 1996, one of which has been subleased to a
Del Taco franchisee.
Rental revenue for the nine month period ended September 30, 1997 was lower than
the corresponding period in 1996 due to the earning of supplemental rent, as
provided for in the lease agreements, based on the operating results of the
individual restaurants.
For the three months ended September 30, 1997, the two restaurants operated by
Del Taco, for which the Registrant is the lessor, had combined, unaudited sales
of $400,106 and net income of $22,772 as compared to $382,099 and $3,344
respectively, for the corresponding period in 1996. 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 September 30, 1997, the one restaurant operated by a Del Taco
franchisee, for which the Registrant is the lessor, had unaudited sales of
$226,231 as compared with $213,242 during the same period in 1996.
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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1997
NOTE 3 - LEASING ACTIVITIES - (Continued)
For the nine months ended September 30, 1997, the two restaurants operated by
Del Taco, for which the Registrant is the lessor, had combined, unaudited sales
of $1,123,008 and net income of $48,204 as compared to $1,080,489 and $36,368
respectively, for the corresponding period in 1996. For the nine months ended
September 30, 1997, the one restaurant operated by a Del Taco franchisee, for
which the Registrant is the lessor, had unaudited sales of $651,250 as compared
with $626,564 during the same period in 1996.
For the three months and nine months ended September 30, 1997, the Highland
Avenue restaurant in Highland, California reported net income of $350 and net
loss of $6,805 as compared to net losses of $6,222 and $15,732 respectively, for
the corresponding period in 1996.
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, 1997.
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 15, 1997, a distribution to the Limited Partners of $70,932, or
approximately $.43 per Limited Partnership Unit, was approved. Such distribution
was paid October 16, 1997. The General Partner also received a distribution of
$716 with respect to its 1% partnership interest.
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<PAGE> 9
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.
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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
$75,161 for the three months ended September 30, 1997 representing an increase
from the rental revenues of $71,440 in 1996. The Registrant had rental revenue
of $212,911 for the nine months ended September 30, 1997 representing a decrease
from the rental revenues of $263,122 in 1996. Such decrease 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 rental revenue earned by restaurant for the
quarter and year to date:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Orangethorpe Ave., Placentia, CA $ 32,897 $ 32,151 $ 92,840 $119,159
Lakeshore Dr., Lake Elsinore, CA 27,148 25,588 78,150 95,025
Highland Ave., San Bernardino, CA 15,116 13,701 41,921 48,938
-------- -------- -------- --------
Total $ 75,161 $ 71,440 $212,911 $263,122
======== ======== ======== ========
</TABLE>
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
------------------
1997 1996
------ ------
<S> <C> <C>
Accounting fees 46.06% 45.45%
Distribution of
information to
Limited Partners 51.22 51.31
Other 2.72 3.24
------ ------
100.00% 100.00%
====== ======
</TABLE>
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<PAGE> 11
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 decreased from $7,629 in 1996 to $4,360 in 1997. The
quarter ended September 30, 1996 included printing cost for new checks,
envelopes and stationary. For the nine months ended September 30, general and
administrative expenses decreased from $34,357 in 1996 to $29,367 in 1997. The
Registrant incurred depreciation expense in the amount of $25,937 for both three
month periods ended September 30, 1997 and 1996. The Registrant incurred
depreciation expense in the amount of $77,811 and $77,813 for the nine months
ended September 30, 1997 and 1996, respectively.
As a result of increased revenues totaling $3,859 for the three months ended
September 30, 1997 and decreased expenses totaling $3,269 for the three months
ended September 30, 1997, the net income of the Registrant increased from
$38,272 for the three months ended September 30, 1996 to $45,400 for the
corresponding period in 1997. As a result of decreased revenues totaling $49,391
for the nine months ended September 30, 1997 and decreased expenses totaling
$4,992 for the nine months ended September 30, 1997, the net income of the
Registrant decreased from $151,841 for the nine months ended September 30, 1996
to $107,442 for the corresponding period in 1997.
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,
1997.
Ex. 27 Financial Data Schedule.
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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 INCOME PROPERTIES IV
(a California limited partnership)
Registrant
Del Taco, Inc.
General Partner
Date: October 30, 1997 /s/ Robert J. Terrano
---------------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: October 30, 1997 /s/ C. Douglas Mitchell
---------------------------
C. Douglas Mitchell
Vice President and Corporate
Controller
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 79,151
<SECURITIES> 400
<RECEIVABLES> 24,398
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 103,949
<PP&E> 3,011,349
<DEPRECIATION> 791,609
<TOTAL-ASSETS> 2,323,689
<CURRENT-LIABILITIES> 6,069
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,179,667
<TOTAL-LIABILITY-AND-EQUITY> 2,323,689
<SALES> 0
<TOTAL-REVENUES> 214,620
<CGS> 0
<TOTAL-COSTS> 107,178
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 107,442
<INCOME-TAX> 0
<INCOME-CONTINUING> 107,442
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,442
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.64
</TABLE>
