<PAGE>
<PAGE>
UNITED STATES
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 June 30, 1996
/ / 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: 0-14397
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-1991528
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
One Seaport Plaza, New York, NY 10292-0116
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-1016
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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 _CK_ No __
<PAGE>
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Property held for sale $10,721,990 $11,720,794
Cash and cash equivalents 1,147,692 1,008,091
Other assets 47,613 13,148
----------- -------------
Total assets $11,917,295 $12,742,033
----------- -------------
----------- -------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Note payable $ 638,000 $ 638,000
Accounts payable and accrued expenses 318,462 157,860
Accrued real estate taxes 175,581 142,130
Deposits due to tenants 102,684 95,365
Due to affiliates, net 99,110 78,018
Unearned rental income 23,865 32,944
----------- -------------
Total liabilities 1,357,702 1,144,317
----------- -------------
Partners' capital
Limited partners (53,855 limited and equivalent units issued and
outstanding) 10,349,475 11,394,078
General partners 210,118 203,638
----------- -------------
Total partners' capital 10,559,593 11,597,716
----------- -------------
Total liabilities and partners' capital $11,917,295 $12,742,033
----------- -------------
----------- -------------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
2
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
------------------------- ---------------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Rental income $1,510,354 $1,461,017 $501,945 $501,213
Interest 20,797 12,784 7,935 4,518
Other 11,326 10,941 3,779 3,812
---------- ---------- -------- --------
1,542,477 1,484,742 513,659 509,543
---------- ---------- -------- --------
EXPENSES
Property operating 541,624 516,180 172,435 165,330
General and administrative 479,311 178,625 249,945 62,231
Real estate taxes 184,457 154,859 51,260 52,166
Depreciation 136,271 394,548 -- 133,072
Interest 20,624 37,022 (2,877) 12,483
---------- ---------- -------- --------
1,362,287 1,281,234 470,763 425,282
---------- ---------- -------- --------
Net income $ 180,190 $ 203,508 $ 42,896 $ 84,261
---------- ---------- -------- --------
---------- ---------- -------- --------
ALLOCATION OF NET INCOME
Limited partners $ 156,236 $ 159,609 $ 39,464 $ 68,205
---------- ---------- -------- --------
---------- ---------- -------- --------
General partners $ 23,954 $ 43,899 $ 3,432 $ 16,056
---------- ---------- -------- --------
---------- ---------- -------- --------
Net income per limited partnership unit $ 2.92 $ 2.98 $ .74 $ 1.27
---------- ---------- -------- --------
---------- ---------- -------- --------
- ----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital--September 30, 1995 $11,394,078 $203,638 $11,597,716
Net income 156,236 23,954 180,190
Distributions (1,200,839) (17,474) (1,218,313)
----------- -------- -----------
Partners' capital--June 30, 1996 $10,349,475 $210,118 $10,559,593
----------- -------- -----------
----------- -------- -----------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-------------------------
1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income and deposits received $1,474,128 $1,486,748
Interest received 20,797 12,784
Other income received 11,326 10,941
Property operating expenses paid (525,474) (639,170)
Real estate taxes paid (151,006) (183,224)
General and administrative expenses paid (294,778) (197,173)
Interest paid (39,612) (37,022)
---------- ----------
Net cash provided by operating activities 495,381 453,884
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of land 1,000,000 --
Property improvements (137,467) (74,273)
---------- ----------
Net cash provided by (used in) investing activities 862,533 (74,273)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid to partners (1,218,313) (291,227)
---------- ----------
Net increase (decrease) in cash and cash equivalents 139,601 88,384
Cash and cash equivalents at beginning of period 1,008,091 708,909
---------- ----------
Cash and cash equivalents at end of period $1,147,692 $ 797,293
---------- ----------
---------- ----------
- ---------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 180,190 $ 203,508
---------- ----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 136,271 394,548
Changes in:
Other assets (34,465) 10,536
Accounts payable and accrued expenses 160,602 (145,354)
Accrued real estate taxes 33,451 (28,365)
Due to affiliates, net 21,092 3,816
Deposits due to tenants 7,319 16,344
Unearned rental income (9,079) (1,149)
---------- ----------
Total adjustments 315,191 250,376
---------- ----------
Net cash provided by operating activities $ 495,381 $ 453,884
---------- ----------
---------- ----------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 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.-3 (the ``Partnership'') as of June 30,
1996 and the results of its operations for the nine and three months ended June
30, 1996 and 1995, and its cash flows for the nine months ended June 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 September 30, 1995.
On December 15, 1995, the Management Committee of the Partnership determined
to seek bids for all the properties held by the Partnership. On June 10, 1996,
the Partnership entered into a contract with Public Storage, Inc., the current
property manager of the Partnership's properties, for the sale of substantially
all the Partnership's properties for an aggregate sales price of $11,050,000.
This sale is subject to the approval by the limited partners holding a majority
of the limited partnership units and certain other conditions and potential
price adjustments.
The Partnership anticipates sending proxy statements in August 1996 or as
soon thereafter as practicable for the purpose of advising limited partners of
the terms of the agreement and to solicit their consent of the proposed sale. It
is expected that, if approved, the sale will close before December 31, 1996.
Following the closing, the Partnership will make one or more cash distributions
to the limited partners. The bulk of the distributions are expected to occur
shortly after the closing with the remainder expected to be distributed within
twelve months after the closing, at which time the Partnership would then be
liquidated.
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 (including direct management of the Partnership's
unimproved property), 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 June 30, 1996 and 1995 were approximately $96,000 and
$66,000, respectively, and for the three months ended June 30, 1996 and 1995,
were approximately $35,000 and $12,000, 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 $24,000 and $4,000 for the nine months ended June 30,
1996 and 1995, respectively and for the three months ended June 30, 1996 and
1995 recorded approximately $18,000 and $1,000, respectively.
PBP and the two individual General Partners of the Partnership own 270, 135
and 135 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 270 units owned by PBP
have been excluded from the calculation of net income per limited partnership
unit and distributions per limited partnership unit.
5
<PAGE>
<PAGE>
Prudential Securities Incorporated (``PSI''), an affiliate of PBP, owns 253
limited partnership units at June 30, 1996.
C. Subsequent Event
In August 1996, distributions of approximately $67,000 and $6,000 were paid
to the limited partners and the General Partners, respectively, for the quarter
ended June 30, 1996.
6
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership owns and operates three office/showroom/warehouse facilities,
three mini-storage complexes and one office facility, along with one parcel of
undeveloped land. On December 15, 1995, the Management Committee of the
Partnership determined to seek bids for all of the properties held by the
Partnership. On June 10, 1996, the Partnership entered into a contract with
Public Storage, Inc., the current property manager of the Partnership's
properties, for the sale of substantially all the Partnership's properties for
an aggregate sales price of $11,050,000. This sale is subject to the approval by
the limited partners holding a majority of the limited partnership units and
certain other conditions and potential price adjustments. The Partnership
anticipates sending proxy statements in August 1996 or as soon thereafter as
practicable for the purpose of advising limited partners of the terms of the
agreement and to solicit their consent of the proposed sale. It is expected
that, if approved, the sale will close before December 31, 1996. Following the
closing, the Partnership will make one or more cash distributions to the limited
partners. The bulk of the distributions are expected to occur shortly after the
closing with the remainder expected to be distributed within twelve months after
the closing, at which time the Partnership would then be liquidated.
During the nine months ended June 30, 1996, the Partnership's cash and cash
equivalents increased by approximately $140,000 due to cash flow from property
operations and net proceeds from the sale of land in excess of distributions to
partners and capital expenditures. Distributions made during the three months
ended June 30, 1996 totaled approximately $1,073,000 of which $1,067,000 and
$6,000 were paid to the limited partners and General Partners, respectively.
These distributions were funded from current property operations and from the
net proceeds of approximately $1,000,000 from the sale of the Southlake, Texas
unimproved land in April 1996.
The Partnership's ability to make future distributions to the partners and
the amount that may be made will be affected not only by the amount of cash
generated by the Partnership from the operations of its properties including the
amount expended for property improvements, but also by the amount from and the
timing of any sale of the Partnership's properties.
Results of Operations
Average occupancy rates for the nine months ended June 30, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
June 30,
--------------------
Property 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Barrow Road 95.0% 90.3%
La Prada 94.7 95.3
Tulsa Peoria 94.8 91.1
Westheimer 85.6 78.4
Eastgate 93.2 98.6
Quail Valley 99.7 100.0
Mt. Holly 88.4 92.1
- ------------------------------------------------------------------------------------
(Average occupancy rates are calculated by averaging the monthly occupancies deter-
mined by dividing occupied square footage by available square footage as of each
month-end.)
</TABLE>
Net income decreased by approximately $23,000 and $41,000 for the nine and
three months ended June 30, 1996, as compared to the corresponding periods in
fiscal 1995 primarily for the reasons discussed below.
Rental income increased by approximately $49,000 for the nine months ended
June 30, 1996, as compared to the same period in fiscal 1995 (the three month
comparable periods were similar.) The nine month increase was primarily due to
increased revenue at the Barrow Road, La Prada and Westheimer properties as a
result of increased rental rates and average occupancies, principally during the
first and
7
<PAGE>
<PAGE>
second quarters. Rental income at the remaining properties remained relatively
stable for the nine and three months ended June 30, 1996 as compared to the same
periods in fiscal 1995.
Property operating expenses increased by approximately $25,000 and $7,000 for
the nine and three months ended June 30, 1996, as compared to the same periods
in fiscal 1995 due to increases in property payroll, utilities and insurance
expenses.
General and administrative expenses increased by approximately $301,000 and
$188,000 for the nine and three months ended June 30, 1996, as compared to the
same periods in fiscal 1995. This variance was primarily due to the accrual of
professional fees and other costs relating to the anticipated solicitation of
the consent of the limited partners for the sale of the properties.
Real estate taxes increased by approximately $30,000 and were essentially
flat for the nine and three months ended June 30, 1996, as compared to the same
periods in fiscal 1995. This was due to higher actual payments made during the
first quarter of 1996 for 1995 taxes which were higher than had been accrued for
in 1995 as well as a proportionate increase in tax accruals for 1996.
Depreciation expense decreased by approximately $258,000 and $133,000 for the
nine and three months ended June 30, 1996, as compared to the corresponding
periods in fiscal 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
six months ended June 30, 1996.
Interest expense decreased in the nine and three months ended June 30, 1996
by approximately $16,000 and $15,000. This was due to the negative cash flow
caused by capital improvements on the Eastgate property which, in turn, reduced
the interest on the note payable in the third quarter of fiscal 1996.
8
<PAGE>
<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. (a) Exhibits and Reports on Form 8-K
Description:
3.01 Amended and Restated Certificate and Agreement of Limited
Partnership (filed as an exhibit to Registration Statement on Form
S-11 (No. 2-94976) and incorporated herein by reference)
3.02 Amendment to the Amended and Restated Certificate and Agreement of
Limited Partnership (filed as an exhibit to Registrant's Form 10-K
for the year ended September 30, 1989 and incorporated herein by
reference)
4.01 Certificate of Limited Partnership interest (filed as an exhibit to
Registration Statement on Form S-11 (No. 2-94976) and incorporated
herein by reference)
27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
Registrant's Current Report on Form 8-K dated June 14, 1996, as filed
with the Securities and Exchange Commission on June 20, 1996,
relating to Item 5 regarding the Registrant's entering into a
contract of sale for substantially all of the Registrant's properties.
9
<PAGE>
<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.-3
By: Prudential-Bache Properties, Inc.
A Delaware corporation,
Managing General Partner
By: /s/ Eugene D. Burak Date: August 14, 1996
----------------------------------------
Eugene D. Burak
Vice President
Chief Accounting Officer for the
Registrant
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for P-B Watson & Taylor, Ltd. 3
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000759726
<NAME> P-B Watson & Taylor, Ltd. 3
<MULTIPLIER> 1
<FISCAL-YEAR-END> Sep-30-1996
<PERIOD-START> Oct-01-1996
<PERIOD-END> Jun-30-1996
<PERIOD-TYPE> 9-Mos
<CASH> 1,147,692
<SECURITIES> 0
<RECEIVABLES> 47,613
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,721,990
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,917,295
<CURRENT-LIABILITIES> 1,357,702
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,559,593
<TOTAL-LIABILITY-AND-EQUITY> 11,917,295
<SALES> 0
<TOTAL-REVENUES> 1,542,477
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,341,663
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,624
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 156,236
<EPS-PRIMARY> 2.92
<EPS-DILUTED> 0
</TABLE>
