Attached files
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EX-31.2 - EX-31.2 - DEL TACO RESTAURANT PROPERTIES II | a58272exv31w2.htm |
EX-32.1 - EX-32.1 - DEL TACO RESTAURANT PROPERTIES II | a58272exv32w1.htm |
EX-31.1 - EX-31.1 - DEL TACO RESTAURANT PROPERTIES II | a58272exv31w1.htm |
EXCEL - IDEA: XBRL DOCUMENT - DEL TACO RESTAURANT PROPERTIES II | Financial_Report.xls |
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
(Mark one) | ||
þ
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended June 30, 2011 | ||
OR
|
||
o
|
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. 0-16190
DEL TACO RESTAURANT PROPERTIES
II
A California limited partnership
(Exact name of registrant as
specified in its charter)
California
|
33-0064245 | |
(State or other jurisdiction
of incorporation or organization) |
(I.R.S. Employer Identification Number) |
25521 Commercentre Drive,
Lake Forest, California |
92630 (Zip Code) |
|
(Address of principal executive offices) |
(949) 462-9300
(Registrants 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 þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the registrants
Form S-11
Registration Statement filed December 17, 1982 are
incorporated by reference into Part IV of this report.
INDEX
DEL TACO RESTAURANT PROPERTIES II
-2-
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
DEL TACO RESTAURANT PROPERTIES II
CONDENSED BALANCE SHEETS
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash |
$ | 157,929 | $ | 162,482 | ||||
Receivable from Del Taco LLC |
44,927 | 46,950 | ||||||
Other current assets |
1,687 | 1,991 | ||||||
Total current assets |
204,543 | 211,423 | ||||||
PROPERTY AND EQUIPMENT: |
||||||||
Land |
1,430,345 | 1,430,345 | ||||||
Land improvements |
375,661 | 375,661 | ||||||
Buildings and improvements |
1,238,879 | 1,238,879 | ||||||
Machinery and equipment |
898,950 | 898,950 | ||||||
3,943,835 | 3,943,835 | |||||||
Lessaccumulated depreciation |
2,139,834 | 2,122,136 | ||||||
1,804,001 | 1,821,699 | |||||||
$ | 2,008,544 | $ | 2,033,122 | |||||
LIABILITIES AND PARTNERS EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Payable to limited partners |
$ | 42,675 | $ | 38,835 | ||||
Accounts payable |
10,300 | 14,973 | ||||||
Total current liabilities |
52,975 | 53,808 | ||||||
PARTNERS EQUITY: |
||||||||
Limited partners; 27,006 units outstanding at June 30, 2011 and December 31, 2010 |
1,985,065 | 2,008,573 | ||||||
General partner-Del Taco LLC |
(29,496 | ) | (29,259 | ) | ||||
1,955,569 | 1,979,314 | |||||||
$ | 2,008,544 | $ | 2,033,122 | |||||
See accompanying notes to condensed financial statements.
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Table of Contents
DEL TACO RESTAURANT PROPERTIES II
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
RENTAL REVENUES |
$ | 137,060 | $ | 139,639 | $ | 267,629 | $ | 268,973 | ||||||||
EXPENSES: |
||||||||||||||||
General and administrative |
13,237 | 11,002 | 51,439 | 47,947 | ||||||||||||
Depreciation |
8,849 | 8,849 | 17,698 | 17,698 | ||||||||||||
22,086 | 19,851 | 69,137 | 65,645 | |||||||||||||
Operating income |
114,974 | 119,788 | 198,492 | 203,328 | ||||||||||||
OTHER INCOME: |
||||||||||||||||
Interest |
45 | 45 | 90 | 90 | ||||||||||||
Other |
800 | 750 | 1,300 | 975 | ||||||||||||
Net income |
$ | 115,819 | $ | 120,583 | $ | 199,882 | $ | 204,393 | ||||||||
Net income per limited partnership unit (note 2) |
$ | 4.25 | $ | 4.42 | $ | 7.33 | $ | 7.49 | ||||||||
Number of units used in computing per unit amounts |
27,006 | 27,006 | 27,006 | 27,006 | ||||||||||||
See accompanying notes to condensed financial statements.
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Table of Contents
DEL TACO RESTAURANT PROPERTIES II
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 199,882 | $ | 204,393 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation |
17,698 | 17,698 | ||||||
Changes in operating assets and liabilities: |
||||||||
Receivable from Del Taco LLC |
2,023 | (754 | ) | |||||
Other current assets |
304 | 158 | ||||||
Payable to limited partners |
3,840 | 3,090 | ||||||
Accounts payable |
(4,673 | ) | (3,411 | ) | ||||
Net cash provided by operating activities |
219,074 | 221,174 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Cash distributions to partners |
(223,627 | ) | (208,775 | ) | ||||
Net change in cash |
(4,553 | ) | 12,399 | |||||
Beginning cash balance |
162,482 | 156,281 | ||||||
Ending cash balance |
$ | 157,929 | $ | 168,680 | ||||
See accompanying notes to condensed financial statements.
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Table of Contents
DEL TACO RESTAURANT PROPERTIES II
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
UNAUDITED
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America 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 accounting principles
generally accepted in the United States of America for complete financial statements and should
therefore be read in conjunction with the financial statements and notes thereto contained in the
annual report on Form 10-K for the year ended December 31, 2010 for Del Taco Restaurant Properties
II (the Partnership or the Company). In the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Partnerships financial position at June
30, 2011, the results of operations for the three and six month periods ended June 30, 2011 and
2010 and cash flows for the six month periods ended June 30, 2011 and 2010 have been included.
Operating results for the three and six months ended June 30, 2011 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2011. Amounts related to
disclosure of December 31, 2010 balances within these condensed financial statements were derived
from the audited 2010 financial statements.
Management has evaluated events subsequent to June 30, 2011 through the date that the accompanying condensed financial statements were filed with the Securities and Exchange Commission for transactions and other events which may require adjustment of and/or disclosure in such financial statements.
NOTE 2 NET INCOME PER LIMITED PARTNERSHIP UNIT
Net income per limited partnership unit is based on net income attributable to the limited partners
(after 1% allocation to the general partner) using the weighted average number of units outstanding
during the periods presented which amounted to 27,006 in 2011 and 2010.
Pursuant to the partnership agreement, annual partnership income or loss is allocated one percent
to Del Taco LLC, formerly known as Del Taco, Inc. (Del Taco or 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 previously allocated. Additional gains
will be allocated 15 percent to the General Partner and 85 percent to the limited partners.
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Table of Contents
DEL TACO RESTAURANT PROPERTIES II
NOTES TO CONDENSED FINANCIAL STATEMENTS CONTINUED
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
UNAUDITED
NOTE 3 LEASING ACTIVITIES
The Partnership leases five properties for operation of restaurants to Del Taco 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. The leases terminate in the years 2021 to 2023. Pursuant to the lease
agreements, minimum rentals of $3,500 per month are due to the Partnership during the first six
months of any non-operating period caused by an insured casualty loss.
For the three months ended June 30, 2011, the five restaurants operated by Del Taco, for which the
Partnership is the lessor, had combined, unaudited sales of $1,142,163 and unaudited net losses of
$25,006 as compared to unaudited sales of $1,163,657 and unaudited net losses of $92,236 for the
corresponding period in 2010. Net income or loss of each restaurant includes charges for general
and administrative expenses incurred in connection with supervision of restaurant operations and
interest expense and the decrease in net loss from the corresponding period of the prior year
relates to a decrease in operating costs.
For the six months ended June 30, 2011, the five restaurants operated by Del Taco, for which the
Partnership is the lessor, had combined, unaudited sales of $2,230,244 and unaudited net losses of
$88,467 as compared to unaudited sales of $2,241,443 and unaudited net losses of $231,509 for the
corresponding period in 2010. Net income or loss of each restaurant includes charges for general
and administrative expenses incurred in connection with supervision of restaurant operations and
interest expense and the decrease in net loss from the corresponding period of the prior year
relates to a decrease in operating costs.
NOTE 4 TRANSACTIONS WITH DEL TACO
The receivable from Del Taco consists primarily of rent accrued for the month of June 2011. The
June rent receivable was collected in July 2011.
Del Taco 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 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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Table of Contents
DEL TACO RESTAURANT PROPERTIES II
NOTES TO CONDENSED FINANCIAL STATEMENTS CONTINUED
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
UNAUDITED
NOTE 5 DISTRIBUTIONS
Total cash distributions declared and paid in January and April 2011 were $118,647 and $104,980,
respectively. On July 25, 2011, a distribution to the limited partners of $109,152, or
approximately $4.04 per limited partnership unit, was declared. Such distribution was paid on
August 2, 2011. The General Partner also received a distribution of $1,103 with respect to its 1%
partnership interest.
NOTE 6 PAYABLE TO LIMITED PARTNERS
Payable to limited partners represents a reclassification from cash for distribution checks made to
limited partners that have remained outstanding for six months or longer.
NOTE 7 CONCENTRATION OF RISK
The five restaurants leased to Del Taco make up all of the income producing assets of the
Partnership and contributed all of the Partnerships rental revenues during the three and six
months ended June 30, 2011 and 2010. Therefore, the business of the Partnership is entirely
dependent on the success of the Del Taco trade name restaurants that lease the properties.
The Partnership maintains substantially all of its cash and cash equivalents at one major
commercial bank. At various times, the cash balance is in excess of the Federal Depository
Insurance Corporations limits. The Federal Depository Insurance
Corporations limits were $250,000
at June 30, 2011 and 2010. At June 30, 2011 and December 31, 2010, the Partnership had
approximately $175,000 and $172,000, respectively, on deposit at one financial institution.
-8-
Table of Contents
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Del Taco Restaurant Properties II (the Partnership or the Company) offered limited partnership
units for sale between September 1984 and December 1985. $6.751 million was raised through the
sale of limited partnership units and used to acquire sites and build seven restaurants and also to
pay commissions to brokers and to reimburse Del Taco LLC (the General Partner or Del Taco) for
offering costs incurred. Two restaurants were sold in 1994.
The five restaurants leased to Del Taco make up all of the income producing assets of the
Partnership. Therefore, the business of the Partnership is 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, competition, consumer
demand and preference for fast food, in general, and for Mexican-American food in particular.
Results of Operations
The Partnership owned seven properties that were under long-term lease to Del Taco for restaurant
operations. Two restaurants were sold in 1994 and five are currently operating.
The following table sets forth rental revenue earned by restaurant (unaudited):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Bear Valley Rd., Victorville, CA |
$ | 23,616 | $ | 24,185 | $ | 46,677 | $ | 47,263 | ||||||||
West Valley Blvd., Colton, CA |
33,040 | 33,483 | 65,140 | 64,554 | ||||||||||||
Palmdale Blvd., Palmdale, CA |
17,638 | 16,382 | 34,568 | 32,096 | ||||||||||||
DeAnza Country Shopping Center, Pedley, CA |
29,951 | 29,321 | 58,680 | 56,949 | ||||||||||||
Varner Road, Thousand Palms, CA |
32,815 | 36,268 | 62,564 | 68,111 | ||||||||||||
Total |
$ | 137,060 | $ | 139,639 | $ | 267,629 | $ | 268,973 | ||||||||
The Partnership receives rental revenues equal to 12 percent of gross sales from the
restaurants. The Partnership earned rental revenue of $137,060 during the three month period ended
June 30, 2011, which represents a decrease of $2,579 from the corresponding period in 2010. The
Partnership earned rental revenue of $267,629 during the six month period ended June 30, 2011,
which represents a decrease of $1,344 from the corresponding period in 2010. The changes in rental
revenues between 2011 and 2010 are directly attributable to changes in sales levels at the
restaurants under lease due to local competitive and industry factors.
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Table of Contents
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations continued
The following table breaks down general and administrative expenses by type of expense:
Percentage of Total | ||||||||||||||||
General & Administrative Expense | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Accounting fees |
46.50 | % | 49.65 | % | 73.19 | % | 74.70 | % | ||||||||
Distribution of information to limited partners |
53.50 | % | 50.35 | % | 26.81 | % | 25.30 | % | ||||||||
100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | |||||||||
General and administrative costs increased during the three month and six month periods from
2010 to 2011 primarily due to increased audit fees, accounting and legal fees, bank charges and
costs for printing and the distribution of information to limited partners.
For the three month period ended June 30, 2011, net income decreased by $4,764 from 2010 to 2011
due to the decrease in revenues of $2,579 and the increase in general and administrative expenses
of $2,235, partially offset by the increase in interest and other income of $50. For the six month
period ended June 30, 2011, net income decreased by $4,511 from 2010 to 2011 due to the decrease in
revenues of $1,344 and the increase in general and administrative expenses of $3,492, partially
offset by the increase in interest and other income of $325.
Significant Recent Accounting Pronouncements
None
Off-Balance Sheet Arrangements
None
-10-
Table of Contents
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations continued
Critical Accounting Policies and Estimates
Managements discussion and analysis of financial condition and results of operations, as well as
disclosures included elsewhere in this report on Form 10-Q are based upon the Partnerships
financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires
management to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. The Partnership believes the critical accounting policies that most impact
the financial statements are described below. A summary of the significant accounting policies of
the Partnership can be found in Note 1 to the Financial Statements which is included in the
Partnerships December 31, 2010 Form 10-K.
Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of
the restaurants for the corresponding period, and is earned at the point of sale.
Property and Equipment: Property and equipment is stated at cost. Depreciation is
computed using the straight-line method over estimated useful lives which are 20 years for land
improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.
The Partnership accounts for property and equipment in accordance with authoritative guidance
issued by the Financial Accounting Standards Board that requires 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
None.
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Table of Contents
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures:
As of the end of the period covered by this quarterly report, we carried out an
evaluation, under the supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls and
procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Companys disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company required to be
included in the Companys periodic Securities and Exchange Commission filings.
(b) Changes in internal controls:
There were no significant changes in the Companys internal controls over financial
reporting that occurred during our most recent fiscal quarter that materially affected,
or is reasonably likely to materially affect, our internal control over financial
reporting.
(c) Asset-backed issuers:
Not applicable
-12-
Table of Contents
PART II. OTHER INFORMATION
There is no information required to be reported for any items under Part II, except as follows:
Item 6. Exhibits
(a) Exhibits
31.1 | Paul J. B. Murphy, IIIs Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31.2 | Steven L. Brakes Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32.1 | Certification pursuant to subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101.INS | XBRL Instance Document* | ||
101.SCH | XBRL Taxonomy Extension Schema Document* | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document* | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document* | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document* |
* | Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections. |
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Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DEL TACO RESTAURANT PROPERTIES II (a California limited partnership) Registrant Del Taco LLC General Partner |
||||
Date: August 15, 2011 | /s/ Steven L. Brake | |||
Steven L. Brake | ||||
Chief Financial Officer (Principal Financial Officer) |
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