ITEM 1. BUSINESS
The partnership is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act. The partnership's General Partner is Del Taco, Inc., a California corporation ("General Partner"). The partnership sold 8,751 units totaling $4.375 million through an offering of limited partnership units from March 1983 through March 1984. The term of the partnership agreement is until April 30, 2022 unless terminated earlier by means provided in the partnership agreement.
The business of the partnership is ownership and leasing of restaurants in California to Del Taco, Inc. The partnership acquired land and constructed six Mexican-American restaurants for long-term lease to Del Taco, Inc. Each property is leased for 35 years on a triple net basis. Rent is equal to twelve percent of gross sales of the restaurants. As of December 31, 2000, the partnership had a total of six properties leased to Del Taco (Del Taco, in turn, has subleased two of the restaurants).
The partnership has no full time employees. The partnership agreement assigns full authority for general management and supervision of the business affairs of the partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the partnership. Limited partners have no right to participate in the management or conduct of the partnership's business affairs.
ITEM 2.
ITEM 2. PROPERTIES
The partnership has acquired six properties with proceeds obtained from the sale of partnership units:
(1) Commencement of operation is the first date Del Taco, Inc., as lessee, operated the facility on the site as a Del Taco restaurant.
PART II
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The partnership is not a party to any material pending legal proceedings.
ITEM 4.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS
The partnership sold 8,751 ($4,375,500) limited partnership units during the public offering period ended March 20, 1984 and currently has 836 limited partners of record. There is no public market for the trading of the units. Distributions made by the partnership to the limited partners during the past three fiscal years are described in Note 6 to the Notes to the Financial Statements contained under Item 8.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
FOR THE YEAR ENDED DECEMBER 31,
(1) The net income per limited partnership unit was calculated based upon 8,751 weighted average units outstanding for all years presented.
ITEM 7.
ITEM 7. 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 March 1983 and March 1984. 15% of the $4.375 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 $4 million of the remaining funds were used to acquire sites and build six restaurants.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
The six 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 six properties that are under long-term lease to Del Taco for restaurant operations (Del Taco, in turn, has subleased two of the restaurants to Del Taco franchisees, one of which is affiliated with Del Taco).
The following table sets forth rental revenue earned by restaurant for the year:
The partnership receives rental revenues equal to 12 percent of gross sales from the restaurants. The partnership earned rental revenue of $587,657 during the year ended December 31, 2000, which represents an increase of $49,752 from 1999. The increase in rental revenue was caused by an increase in sales at the restaurants under lease.
ITEM 7. 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:
PERCENTAGE OF TOTAL GENERAL & ADMIN. EXPENSE
General and administrative costs decreased by $189 from 1999 to 2000. Depreciation expense was the same in both 2000 and 1999.
Net income increased by $52,163 from 1999 to 2000 due to the increase in revenues of $51,974 and the $189 decrease in general and administrative expenses.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
PART I. INFORMATION
INDEX PAGE NUMBER ----- -----------
Report of Independent Public Accountants 9
Balance Sheets at December 31, 2000 and 1999 10
Statements of Income for the years ended December 31, 2000, 1999 and 1998 11
Statement of Changes in Partners' Equity for the three years ended December 31, 2000 12
Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 13
Notes to Financial Statements 14-18
[ARTHUR ANDERSEN LOGO]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Del Taco Restaurant Properties, I:
We have audited the accompanying balance sheets of Del Taco Restaurant Properties I (a California Limited Partnership) as of December 31, 2000 and 1999, and the related statements of income, partners' equity and cash flows for the three years ended December 31, 2000. These financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Del Taco Restaurant Properties I as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the three years ended December 31, 2000 in conformity with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule in the index of the financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Orange County, California February 23, 2001
DEL TACO RESTAURANT PROPERTIES I
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
DEL TACO RESTAURANT PROPERTIES I
STATEMENTS OF INCOME
The accompanying notes are an integral part of these financial statements.
DEL TACO RESTAURANT PROPERTIES I
STATEMENT OF CHANGES IN PARTNERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 2000
The accompanying notes are an integral part of these financial statements.
DEL TACO RESTAURANT PROPERTIES I
STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements.
DEL TACO RESTAURANT PROPERTIES I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE PARTNERSHIP: Del Taco Restaurant Properties I (a California limited partnership) was formed on November 30, 1982, for the purpose of acquiring real property in California for construction of six Mexican-American restaurants to be leased under long-term agreements to Del Taco, Inc. (General Partner for operation under the Del Taco trade name).
BASIS OF ACCOUNTING: The partnership utilizes the accrual method of accounting for transactions relating to the business of the partnership. Distributions are made to the general and limited partners in accordance with the provisions of the partnership agreement (see Note 2).
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 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.
DEL TACO RESTAURANT PROPERTIES I NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
INCOME TAXES: No provision has been made for federal or state income taxes on partnership net income, since the partnership is not subject to income tax. Partnership income is includable in the taxable income of the individual partners as required under applicable income tax laws. Certain items, primarily related to depreciation methods, are accounted for differently for income tax reporting purposes (see Note 5).
NET INCOME PER LIMITED PARTNERSHIP UNIT: Net income per limited partnership unit is based upon the weighted average number of units outstanding during the period which amounted to 8,751 for all years presented.
USE OF ESTIMATES: The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 2 - PARTNERS' EQUITY
Pursuant to the partnership agreement, annual partnership net income is allocated one percent to 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.
In 1986, the General Partner contributed additional capital of $280,000 to the partnership in order to provide funds necessary to complete the sixth and final restaurant.
DEL TACO RESTAURANT PROPERTIES I NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2000
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 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. There is no minimum rental under any of the leases. The partnership had a total of six properties leased as of December 31, 2000, 1999 and 1998, two of which have been subleased to Del Taco franchisees (one of which is affiliated with Del Taco, Inc.)
The five restaurants operated by or affiliated with Del Taco, for which the partnership is the lessor, had combined, unaudited sales of $4,065,829, $3,725,831 and $3,721,166 and unaudited net income of $250,957, $192,444 and $207,430 for the years ended December 31, 2000, 1999 and 1998, respectively. Net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense. The one restaurant operated by a Del Taco franchisee, for which the partnership is the lessor, had unaudited sales of $831,309, $756,708 and $708,908 for the years ended December 31, 2000, 1999 and 1998, respectively.
The Elkhorn Boulevard restaurant in Sacramento, California had unaudited net income of $6,945, and unaudited net losses of $9,658 and $13,373 for the years ended December 31, 2000, 1999 and 1998, respectively.
NOTE 4 - RELATED PARTIES
The receivable from Del Taco consists of rent accrued for the month of December 2000. The rent receivable was collected on January 11, 2001.
The General Partner received $5,336 in distributions relating to its one percent interest in the partnership for the year ended December 31, 2000.
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.
DEL TACO RESTAURANT PROPERTIES I NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2000
NOTE 5 - INCOME TAXES
A reconciliation of financial statement net income to taxable income for each of the periods is as follows:
A reconciliation of partnership equity per the financial statements to net worth for tax purposes as of December 31, 2000, is as follows:
DEL TACO RESTAURANT PROPERTIES I NOTES TO FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2000
NOTE 6 - CASH DISTRIBUTIONS TO LIMITED PARTNERS
Cash distributions paid to limited partners for the three years ended December 31, 2000 were as follows:
Cash distributions per limited partnership unit were calculated based upon the weighted average number of units outstanding for each quarter and were paid from operations. Cash distributions for the quarter ended December 31, 2000 amounted to $16.29 per limited partnership unit and were paid January 22, 2001.
PART III
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP'S GENERAL PARTNER
(a) & (b) The executive officers and directors of the General Partner and their ages are set forth below:
The above referenced executive officers and directors of the General Partner will hold office until the annual meeting of its shareholders and directors, which is scheduled for the later part of 2001.
(c) None
(d) No family relationship exists between any such director or executive officer of the General Partner.
(e) The following is an account of the business experience during the past five years of each such director and executive officer:
Kevin K. Moriarty, Director, Chairman and Chief Executive Officer of Del Taco, Inc. Mr. Moriarty began his career with Burger King Corporation in 1974 in Operations Unit Management. In 1983, he was promoted to Area Manager in New York, and was subsequently promoted to the Regional Vice President, Chicago Region in 1985. In 1988, he became Executive Vice President and General Manager of the North Central Division. Mr. Moriarty served in that position until 1990 when he joined Del Taco, Inc. as President and Chief Executive Officer on July 31, 1990. Mr. Moriarty has served as a Director of the General Partner since 1990.
C. Ronald Petty, President of Del Taco, Inc. Mr. Petty began his career in the restaurant business in 1973 with McDonald's Corporation. He was employed by McDonald's in a real estate capacity until 1978. For the next 12 years, Mr. Petty was in various officer positions with Burger King. These positions included Vice President of Real Estate, Sr. Vice President of Development, Region Vice President, Sr. Vice President European Operations, President of International and President of U.S. Mr. Petty served as President of Miami Subs from 1990-1992; President and CEO of Denny's 1993-1996; President and CEO of Peter Piper Pizza 1996-1998; President of Del Taco December 1998-present.
Paul W. Hitzelberger, Executive Vice President, Franchise Development/Relations of Del Taco, Inc. He was appointed to his current position in December 1995. Mr. Hitzelberger has responsibility for franchise development and relations. From 1991 to 1995, Mr. Hitzelberger was Executive Vice President, Marketing of Del Taco, Inc. From September 1988 through September 1989, Mr. Hitzelberger was Chief Executive Officer of Environmental Marketing Group. Prior to that, Mr. Hitzelberger was a Vice President of Del Taco, Inc. Prior to joining Del Taco, Inc., he served as Vice President - Marketing at the department store division of Lucky Stores, Inc., a major supermarket retailer. Mr. Hitzelberger received a Master of Business Administration degree from Loyola University in Chicago, Illinois.
Robert J. Terrano, Executive Vice President and Chief Financial Officer of Del Taco, Inc. From May 1994 to April 1995, Mr. Terrano served as Chief Financial Officer for Denny's, Inc. in Spartanburg, S.C. From August 1983 to May 1994, he served with Burger King Corporation, Miami Florida, in a variety of positions, most recently as Division Controller. Mr. Terrano joined Del Taco, Inc. in April 1995.
James D. Stoops, Executive Vice President, Operations of Del Taco, Inc. From 1968 to 1991, Mr. Stoops served in a wide variety of Operations positions with Burger King Corporation with increasing levels of responsibility. In 1985, Mr. Stoops was appointed Region Vice President/General Manager for the New York region and served in that position until October of 1990. In January of 1991, he joined Del Taco, Inc. in his current post.
Janet D. Simmons, Senior Vice President, Purchasing of Del Taco, Inc. From 1979 to 1986, Ms. Simmons was with Denny's Incorporated. She served in the Research and Development department in a variety of positions until 1982 when she was promoted to the position of Purchasing Agent. Ms. Simmons was hired in 1986 as Manager of Contract Purchasing with Carl Karcher Enterprises, a post she held until March 1990 when she became Vice President, Purchasing for Del Taco, Inc. Ms. Simmons has a Bachelor of Science degree in Foods and Nutrition from Cal State Polytechnic University in Pomona, California.
Michael L. Annis, Vice President, Secretary and General Counsel of Del Taco, Inc. From 1981 to 1986 Mr. Annis served as Regional Real Estate Manager and Director of Real Estate Services with Taco Bell, Inc. In 1986 he served as Regional General Manager with Quaker State Minit Lube. In January of 1987 Mr. Annis joined Red Robin International, Inc. as General Counsel and was subsequently promoted to Vice President/Secretary and later Vice President Real Estate Development/Secretary and General Counsel, the position he held until joining Del Taco, Inc. in December of 1993. Mr. Annis received his J.D. Degree from Whittier College.
C. Douglas Mitchell, Vice President and Corporate Controller. Mr. Mitchell joined Del Taco, Inc. in August of 1994 as Controller and was promoted to his current position in January 1996. From 1990 to 1994, Mr. Mitchell was a Senior Audit Manager with Coopers & Lybrand. Prior to 1990, Mr. Mitchell held various positions in finance and accounting with the Geneva Companies (a subsidiary of Chemical Bank), Zaremba Corporation (a real estate developer) and The Dexter Corporation (an international manufacturer of specialty materials). Mr. Mitchell has a Bachelor of Science degree with a major in accounting from the University of Southern California.
Timothy A. Hackbardt, Vice President, Marketing of Del Taco, Inc. Mr. Hackbardt joined Del Taco, Inc. in November 1999. From November 1995 to November 1999, he served as Vice President of Marketing of Taco Time International, Inc., Eugene, OR. From September 1994 to November 1995, Mr. Hackbardt was Director of Marketing for Wok Spirit Chinese Delivery restaurants in Newport Beach, CA. From December 1992 to September 1994, Mr. Hackbardt was Director of Marketing for Fosters Freeze International, Inc., San Luis Obispo, CA. Prior to then, Mr. Hackbardt held various positions in the television and radio industry in sales and sales management. Mr. Hackbardt is a graduate of Central Michigan University where he received a Bachelor of Applied Arts, majoring in Broadcast and Cinematic Arts and minoring in Marketing.
Shirlene Lopez, Vice President, Corporate Development & Design of Del Taco, Inc. Ms. Lopez began her career with Del Taco in 1978 as an hourly employee and advanced through the ranks to General Manager in 1984. Ms. Lopez was promoted to the corporate office in 1989 as Human Resource Manager. In 1994, she was promoted to Executive Project Manager reporting to the CEO and in 1996, to Director of Corporate Development in charge of all interior image and design. Ms. Lopez has held her current position since August 1997.
ITEM 11.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
The partnership has no executive officers or directors and pays no direct remuneration to any executive officer or director of its General Partner. The partnership has not issued any options or stock appreciation rights to any executive officer or director of its General Partner, nor does the partnership propose to pay any annuity, pension or retirement benefits to any executive officer or director of its General Partner. The partnership has no plan, nor does the partnership presently propose a plan, which will result in any remuneration being paid to any executive officer or director of the General Partner upon termination of employment.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person of record currently owns more than five percent of limited partnership units of the partnership, nor was any person known of by the partnership to own of record and beneficially, or beneficially only, more than five percent of such securities.
(b) Neither Del Taco, Inc., nor any executive officer or director of Del Taco, Inc. owns any limited partnership units of the partnership.
(c) The partnership knows of no contractual arrangements, the operation or the terms of which may at a subsequent date result in a change in control of the partnership, except for provisions in the partnership agreement providing for removal of the General Partner by holders of a majority of the limited partnership units and if a material event of default occurs under the financing agreements of the General Partner.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) No transactions have occurred between the partnership and any executive officer or director of its General Partner.
During 2000, the following transactions occurred between the partnership and the General Partner pursuant to the terms of the partnership agreement.
(1) The General Partner earned $5,038 as its one percent share of the net income of the partnership.
(2) The General Partner received $5,336 in distributions relating to its one percent interest in the partnership.
(b) During 2000, the partnership had no business relationships with any entity of a type required to be reported under this item.
(c) Neither the General Partner, any director or officer of the General Partner or any associate of any such person, was indebted to the partnership at any time during 2000 for any amount in excess of $60,000.
(d) Not applicable.
PART IV
ITEM 14(a)(1) AND (2). EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
Financial statement schedules:
Schedule III - Real Estate and Accumulated Depreciation
Financial statement schedules other than those referred to above have been omitted because they are not applicable or not required.
(b) No reports on Form 8-K were filed during the last quarter of 2000.
(c) Exhibits required by Item 601 of Regulation S-K:
1. Incorporated herein by reference, Restated Certificate and Agreement of Limited Partnership of Del Taco Restaurant Properties I filed as Exhibit 3.01 to Partnership's Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on December 17, 1982.
2. Incorporated herein by reference, Amendment to Restated Certificate and Agreement of Limited Partnership of Del Taco Restaurant Properties I.
3. Incorporated herein by reference, Form of Standard Lease to be entered into by partnership and Del Taco, Inc., as lessee, filed as Exhibit 10.02 to Partnership's Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on December 17, 1982.
DEL TACO RESTAURANT PROPERTIES I - SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the partnership 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
Del Taco, Inc. General Partner
Date March 07, 2001 Kevin K. Moriarty -------------- --------------------------------- Kevin K. Moriarty Director, Chairman and Chief Executive Officer
Date March 07, 2001 Michael L. Annis -------------- --------------------------------- Michael L. Annis Vice President, Secretary and General Counsel
Date March 07, 2001 Robert J. Terrano -------------- --------------------------------- Robert J. Terrano Executive Vice President and Chief Financial Officer
Date March 07, 2001 C. Douglas Mitchell -------------- --------------------------------- C. Douglas Mitchell Vice President and Corporate Controller