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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, 1998
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)
<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, LAGUNA HILLS, CALIFORNIA 92653
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</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 March 31, 1998 (Unaudited) and
December 31, 1997 3
Statements of Income for the three months ended
March 31, 1998 and 1997 (Unaudited) 4
Statements of Cash Flows for the three months ended
March 31, 1998 and 1997 (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>
MARCH 31 December 31
1998 1997
----------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 96,139 $ 75,411
Receivable from General Partner (Note 4) 26,168 65,132
Deposits 400 400
---------- ----------
Total current assets 122,707 140,943
---------- ----------
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 843,483 817,546
---------- ----------
2,167,866 2,193,803
---------- ----------
$2,290,573 $2,334,746
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to Limited Partners $ 2,503 $ 2,503
Accounts Payable 1,879 6,130
---------- ----------
Total current liabilities 4,382 8,633
---------- ----------
OBLIGATION TO GENERAL PARTNER 137,953 137,953
---------- ----------
PARTNERS' EQUITY:
Limited Partners 2,157,890 2,197,413
General Partner-Del Taco, Inc. (9,652) (9,253)
---------- ----------
2,148,238 2,188,160
---------- ----------
$2,290,573 $2,334,746
========== ==========
</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
MARCH 31
1998 1997
-------- --------
<S> <C> <C>
REVENUES:
Rent (Notes 3 and 4) $ 72,428 $ 65,548
Interest 388 734
Other 150 50
-------- --------
72,966 66,332
-------- --------
EXPENSES:
General and administrative 19,043 19,092
Depreciation 25,937 25,937
-------- --------
44,980 45,029
-------- --------
Net income $ 27,986 $ 21,303
======== ========
Net income per Limited
Partnership Unit (Note 2) $.17 $.13
==== ====
</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>
THREE MONTHS ENDED
MARCH 31
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 27,986 $ 21,303
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 25,937 25,937
Decrease in receivable from General Partner 38,964 28,086
Increase (decrease) in accounts payable (4,251) 688
-------- --------
Net cash provided by operating activities 88,636 76,014
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (67,908) (68,789)
-------- --------
Net increase in cash 20,728 7,225
Beginning cash balance 75,411 79,857
-------- --------
Ending cash balance $ 96,139 $ 87,082
======== ========
</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
MARCH 31, 1998
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, 1997. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
to present fairly the partnership's financial position at March 31, 1998, the
results of operations and cash flows for the three month periods ended March 31,
1998 and 1997 have been included. Operating results for the three months ended
March 31, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
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 1998 and 1997.
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.
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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1998
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 March 31, 1998 and 1997, one of which has been subleased to a Del
Taco franchisee.
For the three months ended March 31, 1998, the two restaurants operated by Del
Taco, for which the Registrant is the lessor, had combined, unaudited sales of
$387,499 and net income of $19,216 as compared to $345,724 and $10,988
respectively, for the corresponding period in 1997. 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 Registrant is the lessor, had unaudited sales of
$216,069 as compared with $200,510 during the same period in 1997.
For the three months ended March 31, 1998, the Highland Avenue restaurant in
Highland (San Bernardino), California reported net income of $989 as compared to
a net loss of $3,424 for the corresponding period in 1997.
NOTE 4 - TRANSACTIONS WITH DEL TACO
The receivable from the General Partner consists primarily of rent accrued for
the month of March. The March rent was collected on April 10, 1998.
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.
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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1998
NOTE 5 - DISTRIBUTIONS
On April 10, 1998, a distribution to the Limited Partners of $87,750 or
approximately $.53 per Limited Partnership Unit, was approved. Such distribution
was paid April 24, 1998. The General Partner also received a distribution of
$886 with respect to its 1% partnership interest.
-8-
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Registrant commenced 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.
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
$72,428 for the three months ended March 31, 1998 representing an increase from
the rental revenues of $65,548 in 1997. Such increase is directly attributable
to increased sales at the restaurants during the three months ended March 31,
1998.
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The following table sets forth rental revenue earned by restaurant for the
quarter:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1998 1997
-------- --------
<S> <C>
Orangethorpe Ave., Placentia, CA $ 31,675 $ 28,911
Lakeshore Drive, Lake Elsinore, CA 25,928 24,061
Highland Ave., San Bernardino, CA 14,825 12,576
------- -------
Total $ 72,428 $ 65,548
======== ========
</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
--------------------------------
Three Months Ended
March 31
1998 1997
------ ------
<S> <C> <C>
Accounting fees 75.09% 78.23%
Distribution of
information to
Limited Partners 24.91 21.77
------ ------
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 March 31, general and
administrative expenses decreased from $19,092 in 1997 to $19,043 in 1998. The
Registrant incurred depreciation expense in the amount of $25,937 for the three
months ended March 31, 1998 and 1997.
As a result of increased revenues totaling $6,634 for the three months ended
March 31, 1998 and decreased expenses totaling $49 for the three months ended
March 31, 1998, the net income of the Registrant increased from $21,303 for the
three months ended March 31, 1997 to $27,986 for the corresponding period in
1998.
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.
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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 three months ended
March 31, 1998.
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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: April 30, 1998 /s/ Robert J. Terrano
-----------------------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: April 30, 1998 /s/ C. Douglas Mitchell
-----------------------------------
Douglas Mitchell
Vice President and Corporate
Controller
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 96,139
<SECURITIES> 400
<RECEIVABLES> 26,168
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 122,707
<PP&E> 3,011,349
<DEPRECIATION> 843,483
<TOTAL-ASSETS> 2,290,573
<CURRENT-LIABILITIES> 4,382
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,148,238
<TOTAL-LIABILITY-AND-EQUITY> 2,290,573
<SALES> 0
<TOTAL-REVENUES> 72,966
<CGS> 0
<TOTAL-COSTS> 44,980
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 27,986
<INCOME-TAX> 0
<INCOME-CONTINUING> 27,986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,986
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
