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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 March 31, 2005.

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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INDEX DEL TACO RESTAURANT PROPERTIES II PAGE NUMBERPART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Balance Sheets at March 31, 2005 and
December 31, 2004 (Unaudited)
    
    
    3Condensed Statements of Income for the three months ended
March 31, 2005 and 2004 (Unaudited)
    
    
    4Condensed Statements of Cash Flows for the three months ended
March 31, 2005 and 2004 (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
    
    
    10PART II. OTHER INFORMATIONItem 6. Exhibits and Reports on Form 8-K
    
    
    11SIGNATURE
    
    
    12EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  -2-




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DEL TACO RESTAURANT PROPERTIES II 
 CONDENSED BALANCE SHEETS (Unaudited) March 31,
    
    
    December 31,2005
    
    
    2004ASSETSCURRENT ASSETS:Cash
    
    $
    192,255
    
    
    $
    197,784Receivable from Del Taco, Inc.
    
    
    62,064
    
    
    
    56,537Deposits
    
    
    1,560
    
    
    
    1,780Total current assets
    
    
    255,879
    
    
    
    256,101PROPERTY 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
    
    
    1,883,076
    
    
    
    1,869,5312,060,759
    
    
    
    2,074,304$
    2,316,638
    
    
    $
    2,330,405LIABILITIES AND PARTNERS EQUITYCURRENT LIABILITIES:Payable to limited partners
    
    $
    36,276
    
    
    $
    37,207Accounts payable
    
    
    41,514
    
    
    
    15,138Total current liabilities
    
    
    77,790
    
    
    
    52,345PARTNERS EQUITY:Limited partners; 27,006 units outstanding at March 31, 2005
and December 31, 2004
    
    
    2,265,509
    
    
    
    2,304,328General partner-Del Taco, Inc.
    
    
    (26,661
    )
    
    
    (26,268
    )2,238,848
    
    
    
    2,278,060$
    2,316,638
    
    
    $
    2,330,405
 See accompanying notes to condensed financial statements. -3-




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DEL TACO RESTAURANT PROPERTIES II 
 CONDENSED STATEMENTS OF INCOME (Unaudited) Three Months EndedMarch 31,2005
    
    
    2004RENTAL REVENUES
    
    $
    167,343
    
    
    $
    156,878EXPENSES:General and administrative
    
    
    38,740
    
    
    
    36,545Depreciation
    
    
    13,545
    
    
    
    13,54552,285
    
    
    
    50,090Operating income
    
    
    115,058
    
    
    
    106,788OTHER INCOME:Interest
    
    
    608
    
    
    
    376Other
    
    
    700
    
    
    
    575Net income
    
    $
    116,366
    
    
    $
    107,739Net income per limited
partnership unit
    
    $
    4.27
    
    
    $
    3.95Number of units used in computing per unit amounts
    
    
    27,006
    
    
    
    27,006
 See accompanying notes to condensed financial statements. -4-




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DEL TACO RESTAURANT PROPERTIES II 
 CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Three Months EndedMarch 31,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    116,366
    
    
    $
    107,739Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation
    
    
    13,545
    
    
    
    13,545Changes in operating assets and liabilities:Increase in receivable from Del Taco, Inc.
    
    
    (5,527
    )
    
    
    (164
    )Decrease in deposits
    
    
    220
    
    
    
    120Increase in accounts payable and payable
to limited partners
    
    
    25,445
    
    
    
    36,056Net cash provided by operating activities
    
    
    150,049
    
    
    
    157,296CASH FLOWS FROM FINANCING ACTIVITIES:Cash distributions to partners
    
    
    (155,578
    )
    
    
    (145,328
    )Net increase (decrease) in cash
    
    
    (5,529
    )
    
    
    11,968Beginning cash balance
    
    
    197,784
    
    
    
    182,997Ending cash balance
    
    $
    192,255
    
    
    $
    194,965
 See accompanying notes to condensed financial statements. -5-




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DEL TACO RESTAURANT PROPERTIES II 
 NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 2005 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, 2004 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
March 31, 2005, the results of operations and cash flows for the three month periods ended March
31, 2005 and 2004 have been included. Operating results for the three months ended March 31, 2005
are not necessarily indicative of the results that may be expected for the year ending December 31,
2005. NOTE 2  NET INCOME PER LIMITED PARTNERSHIP UNIT Net income per limited partnership unit is based upon the limited partners 99 percent share of net
income divided by the weighted average number of units outstanding during the periods presented
which amounted to 27,006 in 2005 and 2004. 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. -6-




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DEL TACO RESTAURANT PROPERTIES II NOTES TO CONDENSED FINANCIAL STATEMENTS  CONTINUED MARCH 31, 2005 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 March 31, 2005, the five restaurants operated by Del Taco, for which the
Partnership is the lessor, had combined, unaudited sales of $1,394,525 and net income of $121,212
as compared to $1,307,321 and $102,424, respectively, for the corresponding period in 2004. Net
income by restaurant includes charges for general and administrative expenses incurred in
connection with supervision of restaurant operations and interest expense. NOTE 4  TRANSACTIONS WITH DEL TACO The receivable from Del Taco consists primarily of rent accrued for the month of March. The March
rent receivable was collected in April 2005. 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 April 20, 2005, a distribution to the limited partners of $149,470, or approximately $5.53 per
limited partnership unit, was approved. Such distribution was paid on April 29, 2005. The General
Partner also received a distribution of $1,510 with respect to its 1% partnership interest. Total
cash distributions paid in January 2005 were $155,578. -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 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. (Del Taco or the General Partner) 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 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. The increase in accounts payable from December 31, 2004 is a seasonal increase due to the timing of
certain accounting, audit and tax services. 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: Three Months EndedMarch 31,2005
    
    
    2004Bear Valley Rd., Victorville, CA
    
    $
    30,162
    
    
    $
    29,203West Valley Blvd., Colton, CA
    
    
    39,896
    
    
    
    36,066Palmdale Blvd., Palmdale, CA
    
    
    19,941
    
    
    
    20,044DeAnza Country Shopping Center, Pedley, CA
    
    
    31,804
    
    
    
    30,561Varner Road, Thousand Palms, CA
    
    
    45,540
    
    
    
    41,004Total
    
    $
    167,343
    
    
    $
    156,878
 The Partnership receives rental revenues equal to 12 percent of gross sales from the
restaurants. The Partnership earned rental revenue of $167,343 during the three month period ended
March 31, 2005, which represents an increase of $10,465 from 2004. The changes in rental revenues
between 2004 and 2005 are directly attributable to increases 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: Percentage of TotalGeneral & Administrative ExpenseThree Months EndedMarch 31,2005
    
    
    2004Accounting fees
    
    
    71.44
    %
    
    
    75.39
    %Distribution of information
to limited partners
    
    
    28.56
    
    
    
    24.61100.00
    %
    
    
    100.00
    %
 General and administrative costs increased from 2004 to 2005 primarily due to increased costs for
software licensing fees which slightly increased the percentage of general and administrative
expense related to distribution of information to limited partners as shown in the table above. Net income increased by $8,627 from 2004 to 2005 due to the increases in revenues of $10,465 and
interest and other income of $357, partially offset by the $2,195 increase in general and
administrative expenses. 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, 2004 Form
10-K. -9-




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations -
continued 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. 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. 
 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 -10-




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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 200231.2
    Robert J. Terranos Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002  (b)
    ReportsNone. -11-




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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:
    
    May 13, 2005
    
    /s/ Robert J. TerranoRobert J. TerranoExecutive Vice President,Chief Financial Officer
 -12-




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EXHIBIT INDEX Exhibits
    

Description31.1
    
    Kevin K. Moriartys Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Robert J. Terranos Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 -13-