<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-12048
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-I
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(Exact name of Registrant as specified in its charter)
Texas 75-1861221
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Seaport Plaza, New York, N.Y. 10292-0116
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-1016
N/A
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Former name, former address and former fiscal year, if changed since last
report.
Indicate by check CK 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 _CK_ No __
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Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-I
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
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<S> <C> <C>
ASSETS
Property held for sale $ 7,184,245 $ 7,050,721
Cash and cash equivalents 706,306 838,954
Other assets 9,681 7,782
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Total assets $ 7,900,232 $ 7,897,457
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 368,138 $ 100,490
Accrued real estate taxes 179,155 238,178
Unearned rental income 81,714 81,263
Due to affiliates, net 42,571 33,171
Deposits due to tenants 26,474 28,635
------------- ------------
Total liabilities 698,052 481,737
------------- ------------
Partners' capital
Limited partners (29,187 limited and equivalent units issued and
outstanding) 7,109,288 7,320,693
General partners 92,892 95,027
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Total partners' capital 7,202,180 7,415,720
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Total liabilities and partners' capital $ 7,900,232 $ 7,897,457
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The accompanying notes are an integral part of these statements
</TABLE>
2
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PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-I
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine months Three months
ended September 30, ended September 30,
------------------------- ---------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
REVENUES
Rental income $1,824,451 $1,803,644 $608,804 $619,524
Interest 13,846 14,328 5,465 5,115
---------- ---------- -------- --------
1,838,297 1,817,972 614,269 624,639
---------- ---------- -------- --------
EXPENSES
General and administrative 644,403 192,719 220,174 73,499
Property operating 494,413 519,278 162,245 170,918
Real estate taxes 178,207 169,038 60,078 56,322
Depreciation -- 264,140 -- 91,008
---------- ---------- -------- --------
1,317,023 1,145,175 442,497 391,747
---------- ---------- -------- --------
Net income $ 521,274 $ 672,797 $171,772 $232,892
---------- ---------- -------- --------
---------- ---------- -------- --------
ALLOCATION OF NET INCOME
Limited partners $ 516,061 $ 666,069 $170,054 $230,563
---------- ---------- -------- --------
---------- ---------- -------- --------
General partners $ 5,213 $ 6,728 $ 1,718 $ 2,329
---------- ---------- -------- --------
---------- ---------- -------- --------
Net income per limited partnership unit $ 17.77 $ 22.94 $ 5.86 $ 7.94
---------- ---------- -------- --------
---------- ---------- -------- --------
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</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Partners' capital--December 31, 1995 $7,320,693 $95,027 $7,415,720
Net income 516,061 5,213 521,274
Distributions (727,466) (7,348 ) (734,814)
---------- -------- ----------
Partners' capital--September 30, 1996 $7,109,288 $92,892 $7,202,180
---------- -------- ----------
---------- -------- ----------
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The accompanying notes are an integral part of these statements
</TABLE>
3
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<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-I
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months
ended September 30,
-------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income and deposits received $1,820,842 $1,809,619
Interest received 13,846 14,328
General and administrative expenses paid (357,409) (130,284)
Property operating expenses paid (504,359) (532,837)
Real estate taxes paid (237,230) (225,360)
---------- ----------
Net cash provided by operating activities 735,690 935,466
CASH FLOWS FROM INVESTING ACTIVITIES
Property improvements (133,524) (116,839)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid to partners (734,814) (734,814)
---------- ----------
Net increase (decrease) in cash and cash equivalents (132,648) 83,813
Cash and cash equivalents at beginning of period 838,954 760,357
---------- ----------
Cash and cash equivalents at end of period $ 706,306 $ 844,170
---------- ----------
---------- ----------
- ---------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 521,274 $ 672,797
---------- ----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation -- 264,140
Changes in:
Other assets (1,899) 442
Accounts payable and accrued expenses 267,648 14,579
Accrued real estate taxes (59,023) (56,322)
Unearned rental income 451 (857)
Due to affiliates, net 9,400 34,297
Deposits due to tenants (2,161) 6,390
---------- ----------
Total adjustments 214,416 262,669
---------- ----------
Net cash provided by operating activities $ 735,690 $ 935,466
---------- ----------
---------- ----------
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</TABLE>
The accompanying notes are an integral part of these statements
4
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PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-I
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of Prudential-Bache Properties, Inc. (``Managing General Partner'') (``PBP''),
the financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of
Prudential-Bache/Watson & Taylor, Ltd.-I (the ``Partnership'') as of September
30, 1996, the results of its operations for the nine and three months ended
September 30, 1996 and 1995 and its cash flows for the nine months ended
September 30, 1996 and 1995. However, the operating results for the interim
periods may not be indicative of the results expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1995.
B. Related Parties
PBP and its affiliates perform services for the Partnership which include,
but are not limited to: accounting and financial management, transfer and
assignment functions, asset management, investor communications, printing and
other administrative services. PBP and its affiliates receive reimbursements for
costs incurred in connection with these services, the amount of which is limited
by the provisions of the Partnership Agreement. The costs and expenses incurred
on behalf of the Partnership which are reimbursable to PBP and its affiliates
for the nine months ended September 30, 1996 and 1995 were approximately $90,000
and $71,000, respectively, and for the three months ended September 30, 1996 and
1995 were approximately $11,000 and $29,000, respectively.
Affiliates of Messrs. Watson and Taylor, the individual General Partners,
also perform certain administrative and monitoring functions on behalf of the
Partnership. Relating to the reimbursement of these services, the Partnership
recorded approximately $20,000 and $4,000 for the nine months ended September
30, 1996 and 1995, respectively, and for the three months ended September 30,
1995 recorded approximately $1,000. There was no expense recorded for the three
months ended September 30, 1996 due to an overaccrual in the second quarter of
1996.
PBP and the two individual General Partners of the Partnership own 147, 73
and 73 equivalent limited partnership units, respectively. PBP receives funds
from the Partnership, such as General Partner distributions and reimbursement of
expenses, but has waived all of its rights resulting from its ownership of
equivalent limited partnership units. Accordingly, the 147 units owned by PBP
have been excluded from the calculation of net income per limited partnership
unit and distributions per limited partnership unit.
Prudential Securities Incorporated, an affiliate of PBP, owns 406 limited
partnership units at September 30, 1996.
C. Subsequent Event
In accordance with the Consent Statement dated September 17, 1996, the
limited partners approved the sale to Public Storage, Inc. of all six
miniwarehouse facilities owned by the Partnership. The properties were sold to
Public Storage, Inc. on October 25, 1996. The Partnership received, in cash,
gross sales proceeds of $17,150,000 reduced by certain selling expenses and
pro-rations of approximately $456,000. The gross sales price was in excess of
the appraised value of the properties.
A distribution of $550 per limited partnership unit was made on November 1,
1996 representing the net sales proceeds reduced by a contingency reserve and
funds required to meet current and future operating costs until the liquidation
of the Partnership. The Partnership intends to liquidate in 1997 and will
distribute any remaining funds at such time.
5
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PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-I
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
In accordance with the Consent Statement dated September 17, 1996, the
limited partners approved the sale to Public Storage, Inc. of all six
miniwarehouse facilities owned by the Partnership. The properties were sold to
Public Storage, Inc. on October 25, 1996. The Partnership received, in cash,
gross sales proceeds of $17,150,000 reduced by certain selling expenses and
pro-rations of approximately $456,000. The gross sales price was in excess of
the appraised value of the properties.
During the nine months ended September 30, 1996, the Partnership's cash and
cash equivalents decreased by approximately $133,000 due to distributions to
partners and capital expenditures in excess of cash flow from property
operations. Distributions made during the three months ended September 30, 1996
totaled approximately $245,000, of which $243,000 was paid to the limited
partners and $2,000 to the General Partners. These distributions were funded
from property operations.
A distribution of $550 per limited partnership unit was made on November 1,
1996 representing the net proceeds from the sale of the properties reduced by a
contingency reserve and funds required to meet current and future operating
costs until the liquidation of the Partnership. The Partnership intends to
liquidate in 1997 and will distribute any remaining funds at such time.
Results of Operations
Average occupancy rates for the nine months ended September 30, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
September 30,
--------------
Property 1996 1995
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<S> <C> <C>
Hempstead 86.0% 88.8%
Pasadena 87.8 87.5
Northwest Highway 85.9 91.0
I-35 90.7 92.8
Santiago 92.3 96.5
Reinli 92.8 95.8
------------------------------------------------------------------------------------
</TABLE>
(Average occupancy rates are calculated by averaging the monthly
occupancies determined by dividing occupied square footage by
available square footage as of each month-end.)
Net income decreased by approximately $152,000 and $61,000 for the nine and
three months ended September 30, 1996 as compared to the corresponding periods
in 1995 for the reasons discussed below.
Rental income increased by approximately $21,000 and decreased by
approximately $11,000 for the nine and three months ended September 30, 1996 as
compared to the corresponding periods in 1995. The nine month increase was
primarily due to higher rental income collected at Reinli and Santiago as a
result of an increase in rental rates at the two properties. This increase was
partially offset by lower average occupancy rates at most properties
particularly Northwest Highway where occupancy rates have been affected by
competition. The three month decrease is primarily due to reduced occupancy
rates at all the properties.
General and administrative expenses increased by approximately $452,000 and
$147,000 for the nine and three months ended September 30, 1996 as compared to
the corresponding periods in 1995. This variance was primarily due to the
accrual of professional fees and other costs relating to the solicitation of the
consent of the limited partners for the sale of the properties.
Property operating expenses decreased by approximately $25,000 and $9,000 for
the nine and three months ended September 30, 1996 as compared to the
corresponding periods in 1995 primarily due to reductions in utilities and
payroll expenses.
6
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<PAGE>
Depreciation expense decreased by approximately $264,000 and $91,000 for the
nine and three months ended September 30, 1996 as compared to the corresponding
periods in 1995 due to the reclassification of the Partnership's properties from
held for use to held for sale as of December 31, 1995. Under generally accepted
accounting principles, such properties are no longer depreciated and therefore
no depreciation expense has been recorded for the nine and three months ended
September 30, 1996. However, depreciation was recorded for income tax purposes.
7
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--None
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Description:
4.01 Revised Certificate of Limited Partnership Interest (filed as an
exhibit to Registrant's Form 10-K for the year ended December 31,
1988 and incorporated herein by reference)
27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K--None
8
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<PAGE>
SIGNATURES
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.
Prudential-Bache/Watson & Taylor, Ltd.-I
By: Prudential-Bache Properties, Inc.
A Delaware corporation,
Managing General Partner
By: /s/ Eugene D. Burak Date: November 14, 1996
----------------------------------------
Eugene D. Burak
Vice President
Chief Accounting Officer for the
Registrant
9
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for P-B Watson & Taylor Ltd.-I
and is qualified in its entirety by
reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000708320
<NAME> P-B Watson & Taylor Ltd.-I
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Sep-30-1996
<PERIOD-TYPE> 9-Mos
<CASH> 706,306
<SECURITIES> 0
<RECEIVABLES> 9,681
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 715,987
<PP&E> 7,184,245
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,900,232
<CURRENT-LIABILITIES> 698,052
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,202,180
<TOTAL-LIABILITY-AND-EQUITY> 7,900,232
<SALES> 0
<TOTAL-REVENUES> 1,838,297
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,317,023
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 521,274
<EPS-PRIMARY> 17.77
<EPS-DILUTED> 0
</TABLE>
