<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, 1997
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: 0-13518
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Texas 75-1933081
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(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
One Seaport Plaza, New York, N.Y. 10292-0128
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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 __
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
(a limited partnership)
STATEMENT OF NET ASSETS
(in process of liquidation)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
ASSETS
Property held for sale $ 1,518,521 $1,518,521
Cash and cash equivalents 850,079 1,227,972
Other assets 99,996 63,620
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Total assets 2,468,596 2,810,113
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LIABILITIES
Estimated liquidation costs 325,993 800,791
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Net assets available to limited and general partners $ 2,142,603 $2,009,322
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------------- ------------
Limited and equivalent partnership units issued and outstanding 51,818 51,818
------------- ------------
------------- ------------
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</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in process of liquidation)
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Net assets in liquidation--December 31, 1996 $2,009,322 $ -- $2,009,322
Changes in estimated liquidation values of assets and
liabilities 133,281 -- 133,281
---------- -------- ----------
Net assets in liquidation--September 30, 1997 $2,142,603 $ -- $2,142,603
---------- -------- ----------
---------- -------- ----------
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</TABLE>
The accompanying notes are an integral part of these statements
2
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
(a limited partnership)
STATEMENT OF OPERATIONS
(going concern basis)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended Ended
September 30, September 30,
1996 1996
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
REVENUES
Rental income $2,190,501 $750,512
Interest 18,769 7,315
-------------- --------------
2,209,270 757,827
-------------- --------------
EXPENSES
Property operating 772,224 271,686
General and administrative 631,977 212,692
Real estate taxes 185,950 66,606
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1,590,151 550,984
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Net income $ 619,119 $206,843
-------------- --------------
-------------- --------------
ALLOCATION OF NET INCOME
Limited partners $ 612,928 $204,775
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-------------- --------------
General partners $ 6,191 $ 2,068
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-------------- --------------
Net income per limited partnership unit $ 11.89 $ 3.97
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</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
(a limited partnership)
STATEMENT OF CASH FLOWS
(going concern basis)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
1996
<S> <C>
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income and deposits received $2,199,943
Interest received 18,769
Property operating expenses paid (776,748)
General and administrative expenses paid (435,568)
Real estate taxes paid (200,963)
--------------
Net cash provided by operating activities 805,433
CASH FLOWS FROM INVESTING ACTIVITIES
Property improvements (49,491)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid to partners (580,329)
--------------
Net increase in cash and cash equivalents 175,613
Cash and cash equivalents at beginning of period 957,903
--------------
Cash and cash equivalents at end of period $1,133,516
--------------
--------------
- ---------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net income $ 619,119
--------------
Adjustments to reconcile net income to net cash provided by operating activities:
Changes in:
Other assets (13,933)
Accounts payable and accrued expenses 197,792
Due to affiliates (5,907)
Accrued real estate taxes (15,013)
Unearned rental income 14,787
Deposits due to tenants 8,588
--------------
Total adjustments 186,314
--------------
Net cash provided by operating activities $ 805,433
--------------
--------------
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</TABLE>
The accompanying notes are an integral part of this statement
4
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(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 for the period ended September 30, 1997 contain all
adjustments necessary to present fairly such information subject to the effects
of any further liquidation accounting adjustments that would have been required
had the current realizable values of assets and the amounts of liabilities been
known when Prudential-Bache/Watson & Taylor, Ltd.-2 (the 'Partnership') first
adopted the liquidation basis of accounting as of October 1, 1996. Prior to
October 1, 1996, the books and records of the Partnership were maintained on a
going concern accrual basis of accounting.
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, 1996. Certain balances from
prior periods have been reclassified to conform with the current financial
statement presentation.
The Partnership continues to own the Hampton Park property located in Capitol
Heights, Maryland. This property evidenced certain concentrations of hazardous
materials discovered in an environmental review of the property. The property
continues to be monitored by the State environmental regulatory department, but
it is uncertain at this time what will ultimately be required to resolve the
environmental issue at the property. The Partnership intends to sell the
property as soon as possible, however, no buyer for the property has been
identified and it is uncertain when any such sale will be consummated.
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 and three months ended September 30, 1996 were approximately
$113,000 and $18,000, respectively.
Affiliates of Messrs. Watson and Taylor, the individual General Partners,
also perform certain administrative functions on behalf of the Partnership. The
Partnership recorded approximately $20,000 and $1,000 for the nine and three
months ended September 30, 1996, respectively, relating to the reimbursement of
these services.
Estimated liquidation costs payable to the General Partners and their
affiliates were approximately $98,000 and $187,000 as of September 30, 1997 and
December 31, 1996, respectively.
PBP and the two individual General Partners of the Partnership own 258, 130
and 130 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 258 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 180 limited
partnership units at September 30, 1997.
5
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
(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, on October 18, 1996, the sale to Public Storage, Inc.
of all eight miniwarehouse facilities owned by the Partnership and the
liquidation and dissolution of the Partnership. Seven of the eight properties
which were under contract were sold to Public Storage, Inc. and its affiliates
on December 16, 1996.
The Partnership continues to own the Hampton Park property located in Capitol
Heights, Maryland. This property evidenced certain concentrations of hazardous
materials discovered in an environmental review of the property. The property
continues to be monitored by the State environmental regulatory department, but
it is uncertain at this time what will ultimately be required to resolve the
environmental issue at the property. The Partnership intends to sell the
property as soon as possible, however, no buyer for the property has been
identified and it is uncertain when any such sale will be consummated.
A distribution of $300 per limited partnership unit was made on December 19,
1996 representing the net sales proceeds reduced by a contingency reserve and
funds required to meet the anticipated current and future operating costs until
the liquidation of the Partnership. The Partnership intends to liquidate in
1998, subject to and assuming the prior sale of the Hampton Park property, and
will distribute any remaining funds at such time. In accordance with the
Partnership Agreement, such distributions to partners will be made based upon
each partner's capital account for Federal income tax purposes. Estimated costs
expected to be incurred through the date of liquidation of the Partnership have
been accrued in the accompanying financial statements.
Results of Operations
As a result of the Partnership adopting liquidation accounting in accordance
with generally accepted accounting principles as of October 1, 1996 and thus not
reporting results of operations thereafter, there is no management discussion
comparing the corresponding 1997 and 1996 periods.
6
<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
7
<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 hereunto duly authorized.
Prudential-Bache/Watson & Taylor, Ltd.-2
By: Prudential-Bache Properties, Inc.
A Delaware corporation
Managing General Partner
By: /s/ Eugene D. Burak Date: November 14, 1997
----------------------------------------
Eugene D. Burak
Vice President
Chief Accounting Officer for the
Registrant
8
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for P-B Watson & Taylor Ltd.-2
and is qualified in its entirety by
reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000737296
<NAME> P-B Watson & Taylor Ltd.-2
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Sep-30-1997
<PERIOD-TYPE> 9-Mos
<CASH> 850,079
<SECURITIES> 0
<RECEIVABLES> 99,996
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 950,075
<PP&E> 1,518,521
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,468,596
<CURRENT-LIABILITIES> 325,993
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,142,603
<TOTAL-LIABILITY-AND-EQUITY> 2,468,596
<SALES> 0
<TOTAL-REVENUES> 0<F1>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0<F1>
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>
Registrant adopted the liquidation basis of accounting
on October 1, 1996, and, accordingly, does not reflect
Statement of Operations subsequent to 1996. See Note A
to the financial statements for further details.
</FN>
</TABLE>
