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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,
2003.

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                                      
|(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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TABLE OF CONTENTS



|                           |                                                                                               |                                         |  |  |  |  |  | 
|-------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------- |  |  |  |  |  | 
|                           |                                                                                               | CONDENSED BALANCE SHEETS               
|                           |                                                                                               | CONDENSED STATEMENTS OF INCOME         
|                           |                                                                                               | CONDENSED STATEMENTS OF CASH FLOWS     
|                           |                                                                                               | NOTES TO CONDENSED FINANCIAL STATEMENTS
|                           | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                           | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                           | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION
|                           | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                 
|Exhibit Index             
|EXHIBIT 31.1              
|EXHIBIT 31.2              
|EXHIBIT 32.1              



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INDEX

DEL TACO RESTAURANT PROPERTIES II

PART I. FINANCIAL INFORMATION
    
    PAGE NUMBERItem 1. Financial StatementsCondensed Balance Sheets at September 30, 2003 and
December 31, 2002 (Unaudited)
    
    
    3Condensed Statements of Income for the three and nine months ended
September 30, 2003 and 2002 (Unaudited)
    
    
    4Condensed Statements of Cash Flows for the nine months ended
September 30, 2003 and 2002 (Unaudited)
    
    
    5Notes to Condensed Financial Statements
    
    
    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
    
    
    13


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DEL TACO RESTAURANT PROPERTIES II

CONDENSED BALANCE SHEETS

(Unaudited)

September 30,
    
    December 31,2003
    
    2002ASSETSCURRENT ASSETS:Cash
    
    $
    185,851
    
    
    $
    166,116Receivable from Del Taco, Inc.
    
    
    49,701
    
    
    
    48,698Deposits
    
    
    1,414
    
    
    
    1,238Total current assets
    
    
    236,966
    
    
    
    216,052PROPERTY AND EQUIPMENT:Land and improvements
    
    
    1,806,006
    
    
    
    1,806,006Buildings and improvements
    
    
    1,238,879
    
    
    
    1,238,879Machinery and equipment
    
    
    898,950
    
    
    
    898,9503,943,835
    
    
    
    3,943,835Lessaccumulated depreciation
    
    
    1,801,806
    
    
    
    1,761,1712,142,029
    
    
    
    2,182,664$
    2,378,995
    
    
    $
    2,398,716LIABILITIES AND PARTNERS EQUITYCURRENT LIABILITIES:Payable to limited partners
    
    $
    32,935
    
    
    $
    25,977Accounts payable
    
    
    4,608
    
    
    
    4,551Total current liabilities
    
    
    37,543
    
    
    
    30,528PARTNERS EQUITY:Limited partners
    
    
    2,367,087
    
    
    
    2,393,556General partner-Del Taco, Inc.
    
    
    (25,635
    )
    
    
    (25,368
    )2,341,452
    
    
    
    2,368,188$
    2,378,995
    
    
    $
    2,398,716


See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES II

CONDENSED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002RENTAL REVENUES
    
    $
    157,114
    
    
    $
    151,958
    
    
    $
    448,133
    
    
    $
    449,810EXPENSES:General and administrative
    
    
    9,744
    
    
    
    7,281
    
    
    
    59,386
    
    
    
    47,907Depreciation
    
    
    13,545
    
    
    
    13,545
    
    
    
    40,635
    
    
    
    40,63523,289
    
    
    
    20,826
    
    
    
    100,021
    
    
    
    88,542Operating income
    
    
    133,825
    
    
    
    131,132
    
    
    
    348,112
    
    
    
    361,268OTHER INCOME:Interest
    
    
    331
    
    
    
    563
    
    
    
    1,152
    
    
    
    1,582Other
    
    
    400
    
    
    
    400
    
    
    
    1,350
    
    
    
    1,075Net income
    
    $
    134,556
    
    
    $
    132,095
    
    
    $
    350,614
    
    
    $
    363,925Net income per limited
partnership unit
    
    $
    4.93
    
    
    $
    4.84
    
    
    $
    12.85
    
    
    $
    13.34Number 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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DEL TACO RESTAURANT PROPERTIES II

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months EndedSeptember 30,2003
    
    2002CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    350,614
    
    
    $
    363,925Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation
    
    
    40,635
    
    
    
    40,635(Increase) decrease in receivable from Del Taco, Inc.
    
    
    (1,003
    )
    
    
    2,562Increase in deposits
    
    
    (176
    )
    
    
    (358
    )Increase (decrease) in accounts payable and payable
to limited partners
    
    
    7,015
    
    
    
    (1,639
    )Net cash provided by operating activities
    
    
    397,085
    
    
    
    405,125CASH FLOWS FROM FINANCING ACTIVITIES:Cash distributions to partners
    
    
    (377,350
    )
    
    
    (390,560
    )Net increase in cash
    
    
    19,735
    
    
    
    14,565Beginning cash balance
    
    
    166,116
    
    
    
    165,411Ending cash balance
    
    $
    185,851
    
    
    $
    179,976


See accompanying notes to condensed financial statements.

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DEL TACO RESTAURANT PROPERTIES II

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

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, 2002 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 Partnerships financial
position at September 30, 2003 and December 31, 2002, the results of operations
for the three and nine month periods ended September 30, 2003 and 2002 and cash
flows for the nine month periods ended September 30, 2003 and 2002 have been
included. Operating results for the three and nine months ended September 30,
2003 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2003.

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
27,006 in 2003 and 2002.

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 previously allocated. Additional gains
will be allocated 15 percent to the General Partner and 85 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 terminate in the years 2021 to 2022. There is no
minimum rental under any of the leases.

For the three months ended September 30, 2003, the five restaurants operated by
Del Taco, for which the Partnership is the lessor, had combined, unaudited
sales of $1,309,283 and unaudited net income of $97,980 as compared to
$1,266,317 and $97,939 respectively, for the corresponding period in 2002. Net
income by restaurant includes charges for general and administrative expenses
incurred in connection with supervision of restaurant operations and interest
expense.

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DEL TACO RESTAURANT PROPERTIES II

NOTES TO CONDENSED FINANCIAL STATEMENTS  CONTINUED

SEPTEMBER 30, 2003

NOTE 3  LEASING ACTIVITIES  continued

For the nine months ended September 30, 2003, the five restaurants operated by
Del Taco, for which the partnership is the lessor, had combined, unaudited
sales of $3,734,444 and net income of $298,248 as compared to $3,748,418 and
$288,415 respectively, for the corresponding period in 2002.

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 2003.

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 15, 2003, a distribution to the limited partners of $146,484 or
approximately $5.42 per limited partnership unit, was approved. Such
distribution was paid on October 31, 2003. The General Partner also received a
distribution of $1,480 with respect to its 1% partnership interest. Total cash
distributions paid in January, April and July 2003 were $135,139, $109,283 and
$132,928, respectively.

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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 II (the Partnership or the Company) offered
limited partnership units for sale between September 1984 and December 1985.
15% of the $6.751 million raised through sale of limited partnership units was
used to pay commissions to brokers and to reimburse Del Taco, Inc. (the General
Partner or Del Taco) for offering costs incurred. Approximately $5.6 million
of the remaining funds were used to acquire sites and build seven restaurants.
Two restaurants were sold in 1994.

The five 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,
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 for the
three and nine months ended September 30, 2003 and 2002:

Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Bear Valley Rd., Victorville, CA
    
    $
    29,687
    
    
    $
    28,111
    
    
    $
    85,049
    
    
    $
    79,987West Valley Blvd., Colton, CA
    
    
    37,683
    
    
    
    36,404
    
    
    
    107,262
    
    
    
    106,390Palmdale Blvd., Palmdale, CA
    
    
    20,597
    
    
    
    20,679
    
    
    
    56,594
    
    
    
    62,242DeAnza Country Shopping Center, Pedley, CA
    
    
    29,020
    
    
    
    26,597
    
    
    
    83,642
    
    
    
    78,566Varner Road, Thousand Palms, CA
    
    
    40,127
    
    
    
    40,167
    
    
    
    115,586
    
    
    
    122,625Total
    
    $
    157,114
    
    
    $
    151,958
    
    
    $
    448,133
    
    
    $
    449,810


The Partnership receives rental revenues equal to 12 percent of gross sales
from the restaurants. The Partnership earned rental revenue of $157,114 during
the three month period ended September 30, 2003, which represents an increase
of $5,156 from 2002. The Partnership earned rental revenue of $448,133 during
the nine month period ended September 30, 2003, which represents a decrease of
$1,677 from 2002. The changes in rental revenue between 2003 and 2002 are
directly attributable to increases and decreases in sales levels at the
restaurants under lease.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations continued

The following table breaks down general and administrative expenses by type of
expense:

Percentage of TotalGeneral & Administrative ExpenseThree Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Accounting fees
    
    
    40.65
    %
    
    
    49.58
    %
    
    
    65.51
    %
    
    
    60.96
    %Distribution of information
to Limited Partners
    
    
    59.35
    %
    
    
    50.42
    %
    
    
    34.49
    %
    
    
    39.04
    %100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %


General and administrative costs for the three and nine month periods ended
September 30, increased from 2002 to 2003 due to costs incurred in changing
auditors and increased costs for printing and mailing, and audit and tax
preparation fees.

For the three month period ended September 30, 2003, net income increased by
$2,461 from 2002 to 2003 due to the $5,156 increase in revenues, which was
partially offset by the $2,463 increase in general and administrative expenses
and the $232 decrease in interest and other income. For the nine month period
ended September 30, 2003, net income decreased by $13,311 from 2002 to 2003 due
to the $11,479 increase in general and administrative expenses, the $1,677
decrease in revenues and the $155 decrease in interest and other income.

Recent Accounting Pronouncements

In November 2002, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others
(Interpretation 45), an interpretation of FASB Statements No. 5, 57 and 107
and rescission of FASB Interpretation No. 34. Interpretation 45 elaborates on
the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued.
It also clarifies that a guarantor is required to recognize, at the inception
of a guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. Interpretation 45s initial recognition and initial
measurement provisions are effective on a prospective basis to guarantees
issued or modified after December 31, 2002. The disclosure requirements are
effective for financial statements of interim or annual periods ending after
December 15, 2002. The Company adopted the disclosure requirements of
Interpretation 45 effective December 31, 2002 and has not entered into any
guarantees since December 31, 2002.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  continued

Recent Accounting Pronouncements -continued

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (Interpretation 46), an
interpretation of Accounting Research Bulletin ARB No.
51. Interpretation 46 addresses consolidation by business enterprises of
variable interest entities. Interpretation 46 applies immediately to variable
interest entities created after January 31, 2003, and to variable interest
entities in which an enterprise obtains an interest after that date. It
applies in the first year or interim period beginning after December 15, 2003,
to variable interest entities in which an enterprise holds a variable interest
that it acquired before February 1, 2003. The Company believes it has no
variable interest entities to which Interpretation 46 would apply.

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 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 Partnerships December 31, 2002 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.

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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 our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures.
Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that these disclosure controls and
procedures are effective in timely alerting them to material
information relating to the Company (including its subsidiaries)
required to be included in our 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




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) |  | Reports
| | --- |  | -------



| |  |  | None
| |  |  | ----

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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 RESTAURANT PROPERTIES II(a California limited partnership)RegistrantDel Taco, Inc.General PartnerDate:
    
    November 14, 2003
    
    /s/ Robert J. TerranoRobert J. TerranoExecutive Vice President,
Chief Financial Officer


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EXHIBIT INDEX



| |  |  | 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
| |  |  | ----------------------------------------------------------------------------

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