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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, 1999
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 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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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, 1999 (Unaudited) and
December 31, 1998 3
Statements of Income for the three and nine months ended
September 30, 1999 and 1998 (Unaudited) 4
Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998 (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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DEL TACO INCOME PROPERTIES IV
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 99,034 $ 101,404
Receivable from General Partner (Note 4) 26,575 106,724
Deposits 426 504
---------- ----------
Total current assets 126,035 208,632
---------- ----------
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 999,105 921,294
---------- ----------
2,012,244 2,090,055
---------- ----------
$2,138,279 $2,298,687
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Payable to Limited Partners $ 18,954 $ 18,684
Accounts payable 4,767 5,271
---------- ----------
Total current liabilities 23,721 23,955
---------- ----------
OBLIGATION TO GENERAL PARTNER 137,953 137,953
---------- ----------
PARTNERS' EQUITY:
Limited Partners 1,987,973 2,146,545
General Partner-Del Taco, Inc. (11,368) (9,766)
---------- ----------
1,976,605 2,136,779
---------- ----------
$2,138,279 $2,298,687
========== ==========
</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,
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rent (Notes 3 and 4) $82,484 $83,729 $235,844 $236,540
Interest 518 447 2,512 1,102
Other 225 200 500 825
------- ------- -------- --------
83,227 84,376 238,856 238,467
------- ------- -------- --------
EXPENSES:
General and administrative 7,075 6,923 35,221 34,757
Depreciation 25,937 25,937 77,811 77,811
------- ------- -------- --------
33,012 32,860 113,032 112,568
------- ------- -------- --------
Net income $50,215 $51,516 $125,824 $125,899
======= ======= ======== ========
Net income per limited
partnership unit (Note 2) $ 0.30 $ 0.31 $ 0.75 $ 0.75
======= ======= ======== ========
</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,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 125,824 $ 125,899
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 77,811 77,811
Decrease in receivable from General Partner 80,149 38,123
Decrease (increase) in deposits 78 (208)
(Decrease) increase in accounts payable and
payable to limited partners (234) 13,055
--------- ---------
Net cash provided by operating activities 283,628 254,680
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (285,998) (225,848)
--------- ---------
Net (decrease) increase in cash (2,370) 28,832
Beginning cash balance 101,404 75,411
--------- ---------
Ending cash balance $ 99,034 $ 104,243
========= =========
</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, 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 partnership'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 September 30, 1999,
the results of operations and cash flows for the nine month periods ended
September 30, 1999 and 1998 have been included. Operating results for the three
and nine months ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
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
165,375 and 165,415 in 1999 and 1998, respectively.
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
SEPTEMBER 30, 1999
NOTE 3 - 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 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.
For the three months ended September 30, 1999, the two restaurants operated by
Del Taco, for which the partnership is the lessor, had combined, unaudited sales
of $442,290 and net income of $42,179 as compared to $443,637 and $33,419
respectively, for the corresponding period in 1998. 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, 1999, the one restaurant operated by a Del Taco
franchisee, for which the partnership is the lessor, had unaudited sales of
$245,067 as compared with $254,096 during the same period in 1998.
For the nine months ended September 30, 1999, the two restaurants operated by
Del Taco, for which the partnership is the lessor, had combined, unaudited sales
of $1,266,114 and net income of $95,660 as compared to $1,251,044 and $80,268
respectively, for the corresponding period in 1998. For the nine months ended
September 30, 1999, the one restaurant operated by a Del Taco franchisee, for
which the partnership is the lessor, had unaudited sales of $699,250 as compared
with $720,128 during the same period in 1998.
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 13, 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 5 with respect to certain distributions to the General
Partner.
NOTE 5 - DISTRIBUTIONS
On October 12, 1999, a distribution to the limited partners of $74,329 or
approximately $.45 per limited partnership unit, was approved. Such distribution
was paid October 18, 1999. The General Partner also received a distribution of
$751 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 June 1987 and
June 1988. 14.5% of the $4.135 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 $3 million of the
remaining funds were used to acquire sites and build three restaurants. In
February of 1992, approximately $442,000 raised during the offering but not
required to acquire sites and build restaurants was distributed to the limited
partners.
The three 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.
Results of Operations
The partnership 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 following table sets forth rental revenue earned by restaurant for the year:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
Orangethorpe Ave., Placentia, CA $35,240 $36,025 $102,786 $102,047
Lakeshore Drive, Lake Elsinore, CA 29,409 30,492 83,910 86,415
Highland Ave., San Bernardino, CA 17,835 17,212 49,148 48,078
------- ------- -------- --------
Total $82,484 $83,729 $235,844 $236,540
======= ======= ======== ========
</TABLE>
The partnership receives rental revenues equal to 12 percent of gross sales from
the restaurants. The partnership earned rental revenue of $82,484 during the
three month period ended September 30, 1999, which represents a decrease of
$1,245 from 1998. The partnership earned rental revenue of $235,844 during the
nine month period ended September 30, 1999, which represents a decrease of $696
from 1998. The changes in rental revenue between 1999 and 1998 are directly
attributable to changes in sales levels at the restaurants under lease.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
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,
--------------------------------
1999 1998
-------- -------
<S> <C> <C>
Accounting fees 61.63% 64.40%
Distribution of
information to
limited partners 38.37 35.60
------ ------
100.00% 100.00%
</TABLE>
General and administrative costs for the nine month period ended September 30,
increased from 1998 to 1999 due to increased costs for accounting and income tax
return preparation.
For the three months ended September 30, 1999, net income decreased by $1,301
from 1998 to 1999 due to the decrease in revenues of $1,149 and by the $152
increase in general and administrative expenses. For the nine months ended
September 30, 1999, net income decreased by $75 from 1998 to 1999 due to the
increase in revenues of $389 which was offset by the $464 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 nine months ended September 30,
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 INCOME PROPERTIES IV
(a California limited partnership)
Registrant
Del Taco, Inc.
General Partner
Date: October 29, 1999 /s/ Robert J. Terrano
-----------------------------------
Robert J. Terrano
Executive Vice President,
Chief Financial Officer
Date: October 29, 1999 /s/ C. Douglas Mitchell
-----------------------------------
C. Douglas Mitchell
Vice President and Corporate
Controller
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EXHIBIT INDEX
<TABLE>
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 99,034
<SECURITIES> 426
<RECEIVABLES> 26,575
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 126,035
<PP&E> 3,011,349
<DEPRECIATION> 999,105
<TOTAL-ASSETS> 2,138,279
<CURRENT-LIABILITIES> 23,721
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,976,605
<TOTAL-LIABILITY-AND-EQUITY> 2,138,279
<SALES> 0
<TOTAL-REVENUES> 238,856
<CGS> 0
<TOTAL-COSTS> 113,032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 125,824
<INCOME-TAX> 0
<INCOME-CONTINUING> 125,824
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 125,824
<EPS-BASIC> 0.75
<EPS-DILUTED> 0.75
</TABLE>
