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EX-31.2 - EX-31.2 - DEL TACO RESTAURANT PROPERTIES Ia54347exv31w2.htm
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EX-31.1 - EX-31.1 - DEL TACO RESTAURANT PROPERTIES Ia54347exv31w1.htm
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 September 30, 2009
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. 0-16191
 
DEL TACO RESTAURANT PROPERTIES I
(A California limited partnership)
(Exact name of registrant as specified in its charter)
 
     
California
  95-3852699
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)
     
25521 Commercentre Drive
Lake Forest, California
(Address of principal executive offices)
  92630
(Zip Code)
 
 
(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 þ     No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o
 
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant’s Form S-11 Registration Statement filed December 17, 1982 are incorporated by reference into Part IV of this report.
 
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
 


 

INDEX
DEL TACO RESTAURANT PROPERTIES I
         
    PAGE NUMBER
       
 
       
       
 
       
    3  
 
       
    4  
 
       
    5  
 
       
    6  
 
       
    9  
 
       
    11  
 
       
    11  
 
       
       
 
       
    12  
 
       
    13  
 EX-31.1
 EX-31.2
 EX-32.1

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Table of Contents

PART I. FINANCIAL INFORMATION
ITEM I.   FINANCIAL STATEMENTS
DEL TACO RESTAURANT PROPERTIES I

CONDENSED BALANCE SHEETS
                 
    September 30,     December 31,  
    2009     2008  
    (Unaudited)          
ASSETS
               
 
               
CURRENT ASSETS:
               
Cash
  $ 224,724     $ 207,772  
Receivable from Del Taco LLC
    63,462       62,158  
Deposits
    1,368       1,110  
 
           
Total current assets
    289,554       271,040  
 
           
 
               
PROPERTY AND EQUIPMENT:
               
Land and improvements
    1,929,685       1,929,685  
Buildings and improvements
    1,013,134       1,013,134  
Machinery and equipment
    1,136,026       1,136,026  
 
           
 
    4,078,845       4,078,845  
Less—accumulated depreciation
    2,127,694       2,105,983  
 
           
 
    1,951,151       1,972,862  
 
           
 
               
 
  $ 2,240,705     $ 2,243,902  
 
           
 
               
LIABILITIES AND PARTNERS’ EQUITY
               
 
               
CURRENT LIABILITIES:
               
Payable to limited partners
  $ 37,397     $ 31,289  
Accounts payable
    15,944       6,967  
 
           
Total current liabilities
    53,341       38,256  
 
           
 
               
PARTNERS’ EQUITY:
               
Limited partners; 8,751 units outstanding at September 30, 2009 and December 31, 2008
    1,925,393       1,943,492  
General partner-Del Taco LLC
    261,971       262,154  
 
           
 
    2,187,364       2,205,646  
 
           
 
               
 
  $ 2,240,705     $ 2,243,902  
 
           
See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES I

CONDENSED STATEMENTS OF INCOME

(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
 
                       
RENTAL REVENUES
  $ 189,683     $ 189,942     $ 549,799     $ 559,806  
 
                       
 
                               
EXPENSES:
                               
General and administrative
    13,140       9,172       63,052       60,516  
Depreciation
    7,237       7,237       21,711       21,711  
 
                       
 
    20,377       16,409       84,763       82,227  
 
                       
 
                               
Operating income
    169,306       173,533       465,036       477,579  
 
                               
OTHER INCOME:
                               
Interest
    64       331       207       1,400  
Other
    175       225       625       2,475  
 
                       
 
                               
Net income
  $ 169,545     $ 174,089     $ 465,868     $ 481,454  
 
                       
 
                               
Net income per limited partnership unit (Note 2)
  $ 19.18     $ 19.69     $ 52.70     $ 54.47  
 
                       
 
                               
Number of units used in computing per unit amounts
    8,751       8,751       8,751       8,751  
 
                       
See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES I

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)
                 
    Nine Months Ended  
    September 30,  
    2009     2008  
 
           
CASH FLOWS FROM OPERATING ACTIVITIES:
               
 
               
Net income
  $ 465,868     $ 481,454  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    21,711       21,711  
Changes in operating assets and liabilities:
               
Receivable from Del Taco LLC
    (1,304 )     (351 )
Deposits
    (258 )     (186 )
Payable to limited partners
    6,108       (7,220 )
Accounts payable
    8,977       (262 )
 
           
 
               
Net cash provided by operating activities
    501,102       495,146  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
 
               
Purchase of land and improvements
          (72,103 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
 
               
Cash distributions to partners
    (484,150 )     (432,662 )
 
           
 
               
Net increase (decrease) in cash
    16,952       (9,619 )
 
               
Beginning cash balance
    207,772       218,140  
 
           
 
               
Ending cash balance
  $ 224,724     $ 208,521  
 
           
See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES I

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009

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, 2008 for Del Taco Restaurant Properties I (the Partnership or the Company). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the Partnership’s financial position at September 30, 2009, the results of operations for the three and nine month periods ended September 30, 2009 and 2008 and cash flows for the nine month periods ended September 30, 2009 and 2008 have been included. Operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. Amounts related to disclosure of December 31, 2008 balances within these condensed financial statements were derived from the audited 2008 financial statements. Management has evaluated subsequent events through November 16, 2009, which is the date the financial statements were issued.
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 8,751 in 2009 and 2008.
Pursuant to the partnership agreement, annual partnership net income 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. A partnership net loss in any year will be allocated 24 percent to the General Partner and 76 percent to the limited partners until the losses so allocated equal income previously allocated. Any additional losses will be 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. Additional gains will be allocated 24 percent to the General Partner and 76 percent to the limited partners.
NOTE 3 — LEASING ACTIVITIES
The Partnership leases certain 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 expire in the years 2019 to 2020. There is no minimum rental under any of the leases.

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DEL TACO RESTAURANT PROPERTIES I

NOTES TO CONDENSED FINANCIAL STATEMENTS — CONTINUED

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009

UNAUDITED
NOTE 3 — LEASING ACTIVITIES — continued
For the three months ended September 30, 2009, the five restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $1,332,576 and unaudited net losses of $36,630 as compared to unaudited sales of $1,331,519 and unaudited net losses of $57,832 for the corresponding period in 2008. 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 primarily relates to reduced operating expenses. For the three months ended September 30, 2009, the one restaurant operated by a Del Taco franchisee, for which the Partnership is the lessor, had unaudited sales of $248,119 as compared with $251,331 during the same period in 2008.
For the nine months ended September 30, 2009, the five restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $3,849,874 and unaudited net losses of $134,837 as compared to unaudited sales of $3,923,228 and unaudited net losses of $127,287 for the corresponding period in 2008. 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 increase in net loss from the corresponding period of the prior year primarily relates to a reduction in restaurant revenues. For the nine months ended September 30, 2009, the one restaurant operated by a Del Taco franchisee, for which the Partnership is the lessor, had unaudited sales of $731,782 as compared with $741,822 during the same period in 2008.
NOTE 4 — TRANSACTIONS WITH DEL TACO
The receivable from Del Taco consists primarily of rent accrued for the month of September 2009. The September rent receivable was collected in October 2009.
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.
NOTE 5 — DISTRIBUTIONS
Total cash distributions declared and paid in January, April and July 2009 were $171,483, $158,683 and $153,984, respectively. On October 27, 2009, a distribution to the limited partners of $180,504, or approximately $20.63 per limited partnership unit, was declared. Such distribution was paid on October 30, 2009. The General Partner also received a distribution of $1,823 with respect to its 1% partnership interest in October 2009.

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DEL TACO RESTAURANT PROPERTIES I

NOTES TO CONDENSED FINANCIAL STATEMENTS — CONTINUED

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009

UNAUDITED
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 six restaurants leased to Del Taco make up all of the income producing assets of the Partnership and contributed all of the Partnership’s rental revenues during the three and nine months ended September 30, 2009 and 2008. 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. The Federal Depository Insurance Commission’s limit was $250,000 at September 30, 2009 and December 31, 2008. At September 30, 2009 and December 31, 2008, the Partnership had approximately $233,000 and $220,000, respectively, on deposit at one financial institution.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Del Taco Restaurant Properties I (the Partnership or the Company) offered limited partnership units for sale between March 1983 and March 1984. $4.375 million was raised through the sale of limited partnership units and used to acquire sites and build six restaurants and also to pay commissions to brokers and to reimburse Del Taco LLC (the General Partner or Del Taco) for offering costs incurred.
The six 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 owns six properties that are under long-term lease to Del Taco for restaurant operations (Del Taco, in turn, has subleased one of the restaurants to a Del Taco franchisee).
The following table sets forth rental revenue earned by restaurant for the three and nine months ended September 30, 2009 and 2008 (unaudited):
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
 
                       
Riverside Avenue, Rialto, CA
  $ 29,514     $ 29,541     $ 84,834     $ 86,009  
Elden Avenue, Moreno Valley, CA
    25,825       26,817       73,937       76,325  
Foothill Boulevard, La Verne, CA
    43,686       44,028       128,154       132,283  
Baseline & Archibald, Rancho Cucamonga, CA
    29,774       30,159       87,814       89,018  
Elkhorn Boulevard, Sacramento, CA
    25,329       22,894       73,790       66,978  
Haven Avenue, Rancho Cucamonga, CA
    35,555       36,503       101,270       109,193  
 
                       
Total
  $ 189,683     $ 189,942     $ 549,799     $ 559,806  
 
                       
The Partnership receives rental revenues equal to 12 percent of gross sales from the restaurants. The Partnership earned rental revenue of $189,683 during the three month period ended September 30, 2009, which represents a decrease of $259 from the corresponding period in 2008. The Partnership earned rental revenue of $549,799 during the nine month period ended September 30, 2009, which represents a decrease of $10,007 from the corresponding period in 2008. The changes in rental revenues between 2008 and 2009 are directly attributable to decreases in sales levels at the restaurants under lease due to local competitive and industry factors.

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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:
                                 
    Percent of Total
    General & Administrative Expense
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2009   2008   2009   2008
Accounting fees
    41.77 %     63.53 %     67.40 %     75.62 %
Distribution of information to limited partners
    58.23 %     36.47 %     32.60 %     24.38 %
 
                               
 
                               
 
    100.00 %     100.00 %     100.00 %     100.00 %
 
                               
General and administrative costs for the three month period ended September 30, 2009 increased from the corresponding period in 2008 primarily due to increased printing costs and bank charges, partially offset by decreased accounting costs. General and administrative costs for the nine month period ended September 30, 2009 increased from the corresponding period in 2008 primarily due to increased printing costs and bank charges, partially offset by decreased accounting and tax preparation costs.
For the three month period ended September 30, 2009, net income decreased by $4,544 from 2008 to 2009 due to the decrease in revenues of $259, the decrease in interest and other income of $317 and the increase in general and administrative expenses of $3,968. For the nine month period ended September 30, 2009, net income decreased by $15,586 from 2008 to 2009 due to the decrease in revenues of $10,007, the decrease in interest and other income of $3,043 and the increase in general and administrative expenses of $2,536.
Significant Recent Accounting Pronouncements
None.
Off-Balance Sheet Arrangements
None
Critical Accounting Policies and Estimates
Management’s 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 Partnership’s 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 Partnership’s December 31, 2008 Form 10-K.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — continued
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.
Item 4T.   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 Company’s management, including the Company’s Chief Executive Officer and Treasurer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Treasurer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic Securities and Exchange Commission filings.
  (b)   Changes in internal controls:
There were no significant changes in the Company’s 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.

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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, III’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
  31.2   Steven L. Brake’s 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

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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 I
(a California limited partnership)
Registrant

Del Taco LLC
General Partner
 
 
Date: November 16, 2009  /s/ Steven L. Brake    
  Steven L. Brake   
  Treasurer   

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EXHIBIT INDEX
     
Exhibit No.   Description
 
   
31.1
  Paul J. B. Murphy, III’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
31.2
  Steven L. Brake’s 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

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