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 March 31, 1998
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
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(Exact name of Registrant as specified in its charter)
Texas 75-1933081
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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. 10292-0128
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-3500
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.-2
(a limited partnership)
STATEMENTS OF NET ASSETS
(in process of liquidation)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
<S> <C> <C>
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ASSETS
Property held for sale $1,518,521 $1,518,521
Cash and cash equivalents 888,690 870,538
Other assets 116,791 78,983
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Total assets 2,524,002 2,468,042
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LIABILITIES
Estimated liquidation costs 389,222 377,989
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Net assets available to limited and general partners $2,134,780 $2,090,053
---------- ------------
---------- ------------
Limited and equivalent partnership units issued and outstanding 51,818 51,818
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---------- ------------
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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, 1997 $2,090,053 $ -- $2,090,053
Changes in estimated liquidation values of assets and
liabilities 44,727 -- 44,727
---------- -------- ----------
Net assets in liquidation--March 31, 1998 $2,134,780 $ -- $2,134,780
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---------- -------- ----------
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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.-2
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(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 March 31, 1998 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
should 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, 1997.
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.
Affiliates of Messrs. Watson and Taylor, the individual General Partners,
also perform certain administrative functions on behalf of the Partnership. In
addition, effective February 28, 1998, American Office Park Properties, Inc., a
subsidiary of Public Storage, Inc., terminated its management of the Hampton
Park property. The Partnership has entered into a management agreement
('Management Agreement') with Watson & Taylor Management, Inc. ('WTMI'), an
affiliate of the individual General Partners, effective March 1, 1998. WTMI will
be responsible for the day-to-day operation of the property, including the
supervision of the on-site managers and the establishment of rental policies and
rates for new rentals and renewals and will direct the marketing activity for
the property. The Management Agreement may be terminated by either party with 60
days' written notice, with or without cause, and can be terminated upon a sale
of the property. WTMI will receive 4.5% of the property's gross revenues (as
defined in the Management Agreement) as a management fee.
In conjunction with the liquidation basis of accounting, the Partnership has
an accrual as of March 31, 1998 for the estimated costs expected to be incurred
to liquidate the Partnership,including $142,000 expected to be payable to the
General Partners and their affiliates during the anticipated remaining
liquidation period. The actual charges to be incurred by the Partnership will
depend primarily upon the length of time required to liquidate the Partnership's
remaining net assets, and may differ from the amounts accrued as of March 31,
1998.
3
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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 March 31, 1998.
4
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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
Partnership sold substantially all of its properties on December 16, 1996. The
Partnership has retained funds for a contingency reserve and to meet current and
future operating costs until the liquidation of the Partnership.
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.
The Partnership intends to liquidate after the sale of the Hampton Park
property, and will distribute any remaining funds at such time. However, no
buyer for the property has been identified and it is uncertain when any such
sale will be consummated. 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 the liquidation basis of 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 1998 and 1997 periods.
5
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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)
10.01 Management Agreement dated March 1, 1998 by and between the
Registrant and Watson & Taylor Management, Inc., a Texas
corporation (incorporated by reference to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1997)
27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K--None
6
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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: May 15, 1998
----------------------------------------
Eugene D. Burak
Vice President
Chief Accounting Officer for the
Registrant
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<TABLE> <S> <C>
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<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-31-1998
<PERIOD-START> Jan-1-1998
<PERIOD-END> Mar-31-1998
<PERIOD-TYPE> 3-Mos
<CASH> 888,690
<SECURITIES> 0
<RECEIVABLES> 116,791
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,005,481
<PP&E> 1,518,521
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,524,002
<CURRENT-LIABILITIES> 389,222
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,134,780
<TOTAL-LIABILITY-AND-EQUITY> 2,524,002
<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>
