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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, 2004.

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. 33-13437

DEL TACO INCOME PROPERTIES IV

a California limited partnership


(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|California                                                         |  | 33-0241855                                 
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification Number)
|                                                                  
|25521 Commercentre Drive, Lake Forest,
    California              |  | 92630                                      
|(Address of principal executive
    offices)                       |  | (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 x  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 x



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INDEX DEL TACO INCOME PROPERTIES IV PART I. FINANCIAL INFORMATION
    
    PAGE NUMBERItem 1. Financial StatementsCondensed Balance Sheets at September 30, 2004 and
December 31, 2003 (Unaudited)
    
    
    3Condensed Statements of Income for the three and nine months ended
September 30, 2004 and 2003 (Unaudited)
    
    
    4Condensed Statements of Cash Flows for the nine months ended
September 30, 2004 and 2003 (Unaudited)
    
    
    5Notes to Condensed Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    8Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    10Item 4. Controls and Procedures
    
    
    11PART II. OTHER INFORMATIONItem 6. Exhibits and Reports on Form 8-K
    
    
    12SIGNATURE
    
    
    13EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  -2-




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DEL TACO INCOME PROPERTIES IV CONDENSED BALANCE SHEETS (Unaudited) September 30,
    
    December 31,2004
    
    2003ASSETSCURRENT ASSETS:Cash
    
    $
    149,826
    
    
    $
    127,447Receivable from Del Taco, Inc.
    
    
    36,173
    
    
    
    85,847Deposits
    
    
    400
    
    
    
    474Total current assets
    
    
    186,399
    
    
    
    213,768PROPERTY AND EQUIPMENT:Land and improvements
    
    
    1,236,700
    
    
    
    1,236,700Buildings and improvements
    
    
    1,289,860
    
    
    
    1,289,860Machinery and equipment
    
    
    484,789
    
    
    
    484,7893,011,349
    
    
    
    3,011,349Lessaccumulated depreciation
    
    
    1,291,415
    
    
    
    1,249,9641,719,934
    
    
    
    1,761,385$
    1,906,333
    
    
    $
    1,975,153LIABILITIES AND PARTNERS EQUITYCURRENT LIABILITIES:Payable to limited partners
    
    $
    34,200
    
    
    $
    31,690Accounts payable
    
    
    9,715
    
    
    
    3,035Total current liabilities
    
    
    43,915
    
    
    
    34,725OBLIGATION TO GENERAL PARTNER
    
    
    137,953
    
    
    
    137,953PARTNERS EQUITY:Limited partners; 165,375 units outstanding at September 30, 2004
and December 31, 2003
    
    
    1,738,354
    
    
    
    1,815,584General partner-Del Taco, Inc.
    
    
    (13,889
    )
    
    
    (13,109
    )1,724,465
    
    
    
    1,802,475$
    1,906,333
    
    
    $
    1,975,153
 See accompanying notes to condensed financial statements. -3-




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DEL TACO INCOME PROPERTIES IV CONDENSED STATEMENTS OF INCOME (Unaudited) Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003RENTAL REVENUES
    
    $
    112,574
    
    
    $
    99,812
    
    
    $
    323,762
    
    
    $
    286,226EXPENSES:General and administrative
    
    
    9,441
    
    
    
    10,109
    
    
    
    51,842
    
    
    
    53,434Depreciation
    
    
    13,817
    
    
    
    13,817
    
    
    
    41,451
    
    
    
    41,45123,258
    
    
    
    23,926
    
    
    
    93,293
    
    
    
    94,885Operating income
    
    
    89,316
    
    
    
    75,886
    
    
    
    230,469
    
    
    
    191,341OTHER INCOME:Interest
    
    
    294
    
    
    
    226
    
    
    
    994
    
    
    
    1,009Other
    
    
    125
    
    
    
    325
    
    
    
    550
    
    
    
    600Net income
    
    $
    89,735
    
    
    $
    76,437
    
    
    $
    232,013
    
    
    $
    192,950Net income per limited
partnership unit (note 2)
    
    $
    0.54
    
    
    $
    0.46
    
    
    $
    1.39
    
    
    $
    1.16Number of units used in computing
per unit amounts
    
    
    165,375
    
    
    
    165,375
    
    
    
    165,375
    
    
    
    165,375
 See accompanying notes to condensed financial statements. -4-




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DEL TACO INCOME PROPERTIES IV CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months EndedSeptember 30,2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    232,013
    
    
    $
    192,950Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation
    
    
    41,451
    
    
    
    41,451Changes in operating assets and liabilities:Decrease in receivable from Del Taco, Inc.
    
    
    49,674
    
    
    
    72,247Decrease (increase) in deposits
    
    
    74
    
    
    
    (20
    )Increase in accounts payable and
payable to limited partners
    
    
    9,190
    
    
    
    563Net cash provided by operating activities
    
    
    332,402
    
    
    
    307,191CASH FLOWS FROM FINANCING ACTIVITIES:Cash distributions to partners
    
    
    (310,023
    )
    
    
    (300,711
    )Net increase in cash
    
    
    22,379
    
    
    
    6,480Beginning cash balance
    
    
    127,447
    
    
    
    117,957Ending cash balance
    
    $
    149,826
    
    
    $
    124,437
 See accompanying notes to condensed financial statements. -5-




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DEL TACO INCOME PROPERTIES IV NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (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, 2003 for Del Taco Income Properties IV (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, 2004, the results of operations for the three and nine month
periods ended September 30, 2004 and 2003 and cash flows for the nine month
periods ended September 30, 2004 and 2003 have been included. Operating results
for the three and nine months ended September 30, 2004 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2004. 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 in the periods presented. Pursuant to the partnership agreement, annual partnership income or loss is
allocated one percent to 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, 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. 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 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. The leases terminate in the years 2023 to 2024. There is no
minimum rental under any of the leases. -6-




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DEL TACO INCOME PROPERTIES IV NOTES TO CONDENSED FINANCIAL STATEMENTS  CONTINUED SEPTEMBER 30, 2004 (Unaudited) NOTE 3  LEASING ACTIVITIES  continued For the three months ended September 30, 2004, the two restaurants operated by
Del Taco, for which the Partnership is the lessor, had combined, unaudited
sales of $561,609 and unaudited net income of $48,420 as compared to $497,422
and $34,952, respectively, for the corresponding period in 2003. Net income by
restaurant includes corporate charges for general and administrative expenses
incurred in connection with supervision of restaurant operations and interest.
For the three months ended September 30, 2004, the one restaurant operated by a
Del Taco franchisee, for which the Partnership is the lessor, had unaudited
sales of $376,509 as compared with $333,846 during the same period in 2003. For the nine months ended September 30, 2004, the two restaurants operated by
Del Taco, for which the Partnership is the lessor, had combined, unaudited
sales of $1,613,244 and unaudited net income of $128,318 as compared to
$1,430,427 and $99,344 respectively, for the corresponding period in 2003. For
the nine months ended September 30, 2004, the one restaurant operated by a Del
Taco franchisee, for which the Partnership is the lessor, had unaudited sales
of $1,084,775 as compared with $954,787 during the same period in 2003. NOTE 4  TRANSACTIONS WITH DEL TACO The receivable from Del Taco, Inc. consists primarily of rent accrued for the
month of September. The September rent was collected in October 2004. 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 On October 26, 2004, a distribution to the limited partners of $109,519 or
approximately $.66 per limited partnership unit, was approved. Such
distribution was paid October 28, 2004. The General Partner also received a
distribution of $1,106 with respect to its 1% partnership interest. Total cash
distributions made in January, April and July 2004 were $90,757, $125,089 and
$94,177, respectively. NOTE 6  PAYABLE TO LIMITED PARTNERS Payable to limited partners represents a reclassification from cash for
distribution checks to limited partners that have remained outstanding for 6
months or longer. -7-




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Del Taco Income Properties IV (the Partnership or the Company) 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 Del Taco, Inc. (Del Taco or 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 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 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
three and nine months ended September 30, 2004 and 2003: Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Orangethorpe Ave., Placentia, CA
    
    $
    43,192
    
    
    $
    39,606
    
    
    $
    125,092
    
    
    $
    114,280Lakeshore Drive, Lake Elsinore, CA
    
    
    45,181
    
    
    
    40,061
    
    
    
    130,173
    
    
    
    114,574Highland Ave., San Bernardino, CA
    
    
    24,201
    
    
    
    20,145
    
    
    
    68,497
    
    
    
    57,372Total
    
    $
    112,574
    
    
    $
    99,812
    
    
    $
    323,762
    
    
    $
    286,226
 The Partnership receives rental revenues equal to 12 percent of gross sales
from the restaurants plus supplemental rent as required by the Partnership
agreement. The Partnership earned rental revenue of $112,574 during the three
month period ended September 30, 2004, which represents an increase of $12,762
from the corresponding period in 2003. The Partnership earned rental revenue
of $323,762 during the nine month period ended September 30, 2004, which
represents an increase of $37,536 from the corresponding period in 2003. The
changes in rental revenue between 2004 and 2003 are directly attributable to
changes in sales levels at the restaurants under lease. -8-




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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 TotalGeneral & Administrative ExpenseThree Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Accounting fees
    
    
    38.19
    %
    
    
    33.21
    %
    
    
    67.14
    %
    
    
    66.19
    %Distribution of information
to Limited Partners
    
    
    61.81
    %
    
    
    66.79
    %
    
    
    32.86
    %
    
    
    33.81
    %100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
 General and administrative costs for the three month period ended September 30,
2004 decreased from the corresponding period in the previous year due to
decreased printing costs. General and administrative costs for the nine month
period ended September 30, 2004 decreased from the corresponding period in the
previous year due to decreased accounting and printing costs. For the three month period ended September 30, 2004, net income increased by
$13,298 from 2003 to 2004 due to the increase in revenues of $12,762, the
decrease in interest and other income of $132 and the $668 decrease in general
and administrative expenses. For the nine month period ended September 30,
2004, net income increased by $39,063 from 2003 to 2004 due to an increase in
revenues of $37,536, the decrease in interest and other income of $65 and the
decrease in general and administrative expenses of $1,592. Recent Accounting Pronouncements In December 2003, the FASB issued FASB Interpretation No. 46 (revised December
2003), Consolidation of Variable Interest Entities, which addresses how a
business enterprise should evaluate whether it has a controlling financial
interest in an entity through means other than voting rights and accordingly
should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, which was issued in January 2003.
The Company is required to apply FIN 46R to variable interests in VIEs created
after December 31, 2003. For variable interests in VIEs created before January
1, 2004, the Interpretation will be applied beginning on January 1, 2005. For
any VIEs that must be consolidated under FIN 46R that were created before
January 1, 2004, the assets, liabilities and noncontrolling interests of the
VIE initially would be measured at their carrying amounts with any difference
between the net amount added to the balance sheet and any previously recognized
interest being recognized as the cumulative effect of an accounting change. If
determining the carrying amounts is not practicable, fair value at the date FIN
46R first applies may be used to measure the assets, liabilities and
noncontrolling interest of the VIE. The Company believes it has no variable
interest entities to which FIN 46R applies. -9-




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  continued 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, 2003 Form 10-K. 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 No. (SFAS) 144, Accounting for the
Impairment or Disposal of Long Lived Assets. SFAS 144 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. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk. None. -10-




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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 Companys management, including the Companys
Chief Executive Officer and Chief Financial Officer, 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 Chief Financial Officer 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. -11-




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PART II. OTHER INFORMATION 
 Item 6. Exhibits and Reports on Form 8-K  (a)
    
    Exhibits 31.1 Kevin K. Moriartys Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Robert J. Terranos Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  (b)
    
    ReportsNone. -12-




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SIGNATURE 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)
RegistrantDel Taco, Inc.
General PartnerDate:
    
    November 12, 2004
    
    /s/ Robert J. TerranoRobert J. Terrano
Executive Vice President,
Chief Financial Officer
 -13-




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Exhibit Index Exhibit 31.1
    
    Kevin K. Moriartys Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 31.2
    
    Robert J. Terranos Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 -14-