<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, 1995
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 0-15381
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-4
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Texas 75-2083046
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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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<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-4
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
ASSETS
Investment in property:
Land $ 9,980,978 $ 9,980,978
Buildings and improvements 17,617,987 17,504,795
Furniture, fixtures and equipment 141,656 130,692
Less: Accumulated depreciation and amortization (5,675,137) (5,233,140)
Allowance for loss on impairment of assets (8,142,000) (8,142,000)
------------- ------------
Net investment in property 13,923,484 14,241,325
Cash and cash equivalents 769,773 588,802
Other assets 9,050 28,160
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Total assets $14,702,307 $14,858,287
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued real estate taxes $ 113,694 $ 117,119
Deposits due to tenants 96,516 98,987
Due to affiliates, net 94,260 30,185
Accounts payable and accrued expenses 92,639 37,303
Unearned rental income 7,477 17,775
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Total liabilities 404,586 301,369
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Contingencies
Partners' capital
Unitholders (66,555 depositary units issued and outstanding) 14,082,555 14,351,976
General partners 215,166 204,942
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Total partners' capital 14,297,721 14,556,918
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Total liabilities and partners' capital $14,702,307 $14,858,287
------------- ------------
------------- ------------
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</TABLE>
The accompanying notes are an integral part of these statements
2
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PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-4
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------- ------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
REVENUES
Rental income $1,453,214 $1,352,142 $ 489,357 $461,594
Interest 12,871 12,768 4,651 4,128
Other 49,997 70,423 15,425 16,443
---------- ---------- ----------- --------
1,516,082 1,435,333 509,433 482,165
---------- ---------- ----------- --------
EXPENSES
Property operating 475,138 471,752 151,267 168,706
Depreciation and amortization 441,997 468,452 148,164 151,352
General and administrative 232,207 123,175 91,615 37,997
Real estate taxes 150,929 167,101 54,557 57,041
---------- ---------- ----------- --------
1,300,271 1,230,480 445,603 415,096
---------- ---------- ----------- --------
Net income $ 215,811 $ 204,853 $ 63,830 $ 67,069
---------- ---------- ----------- --------
---------- ---------- ----------- --------
ALLOCATION OF NET INCOME
Unitholders $ 167,606 $ 155,673 $ 48,352 $ 51,109
---------- ---------- ----------- --------
---------- ---------- ----------- --------
General partners $ 48,205 $ 49,180 $ 15,478 $ 15,960
---------- ---------- ----------- --------
---------- ---------- ----------- --------
Net income per depositary unit $ 2.52 $ 2.34 $ .73 $ .77
---------- ---------- ----------- --------
---------- ---------- ----------- --------
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</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
GENERAL
UNITHOLDERS PARTNERS TOTAL
<S> <C> <C> <C>
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Partners' capital--December 31, 1994 $14,351,976 $204,942 $14,556,918
Net income 167,606 48,205 215,811
Distributions (437,027) (37,981 ) (475,008)
----------- -------- -----------
Partners' capital--September 30, 1995 $14,082,555 $215,166 $14,297,721
----------- -------- -----------
----------- -------- -----------
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</TABLE>
The accompanying notes are an integral part of these statements
3
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PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-4
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1995 1994
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income and deposits received $1,459,555 $1,353,262
Interest received 12,871 12,768
Other income received 49,997 70,423
Property operating expenses paid (464,523) (441,177)
Real estate taxes paid (154,354) (137,336)
General and administrative expenses paid (123,411) (182,030)
---------- ----------
Net cash provided by operating activities 780,135 675,910
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property improvements (124,156) (47,775)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid to partners (475,008) (708,492)
---------- ----------
Net increase (decrease) in cash and cash equivalents 180,971 (80,357)
Cash and cash equivalents at beginning of period 588,802 783,138
---------- ----------
Cash and cash equivalents at end of period $ 769,773 $ 702,781
---------- ----------
---------- ----------
- ---------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income $ 215,811 $ 204,853
---------- ----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 441,997 468,452
Changes in:
Other assets 19,110 17,402
Accounts payable and accrued expenses 55,336 23,528
Accrued real estate taxes (3,425) 29,765
Due to affiliates, net 64,075 (51,808)
Unearned rental income (10,298) (16,380)
Deposits due to tenants (2,471) 98
---------- ----------
Total adjustments 564,324 471,057
---------- ----------
Net cash provided by operating activities $ 780,135 $ 675,910
---------- ----------
---------- ----------
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SUPPLEMENTAL SCHEDULE OF FINANCING ACTIVITIES
Distributions to partners $ (475,008) $ (631,549)
Decrease in distribution payable -- (76,943)
---------- ----------
Distributions paid to partners $ (475,008) $ (708,492)
---------- ----------
---------- ----------
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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.-4
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
(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.-4 (the ``Partnership'') as of September
30, 1995, the results of its operations for the nine and three months ended
September 30, 1995 and 1994 and its cash flows for the nine months ended
September 30, 1995 and 1994. 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, 1994.
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 (including direct management of the
Partnership's unimproved properties); 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, 1995 and 1994 were approximately $96,000
and $63,000, respectively, and for the three months ended September 30, 1995 and
1994 were approximately $46,000 and $22,000, respectively.
Affiliates of Messrs. Watson and Taylor, the individual General Partners,
also perform certain administrative and monitoring functions on behalf of the
Partnership. The Partnership recorded $25,850 relating to the reimbursement for
these services for the period from November 1988 through December 1993 during
the three months ended March 31, 1994. Beginning January 1, 1994, the
Partnership has incurred $1,250 quarterly for the continuing reimbursement of
these services.
Prudential Securities Incorporated (``PSI''), an affiliate of PBP, owns 391
depositary units at September 30, 1995.
C. Contingencies
There are no material legal proceedings pending by or against the Partnership
or its properties.
By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, a number of purported class actions then pending in various federal
district courts were transferred to a single judge of the United States District
Court for the Southern District of New York and consolidated for pretrial
proceedings under the caption In re Prudential Securities Incorporated Limited
Partnerships Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs in the
transferred cases filed a complaint that consolidated the previously filed
complaints and named as defendants, among others, PSI, certain of its present
and former employees and PBP. The Partnership is not named a defendant in the
consolidated complaint, but the name of the Partnership is listed as being among
the limited partnerships at issue in the case. The consolidated complaint
alleges violations of the federal and New Jersey Racketeer Influenced and
Corrupt Organizations Act (``RICO'') statutes, fraud, negligent
misrepresentation, breach of fiduciary duties, breach of third-party beneficiary
contracts, and breach of implied covenants in connection with the marketing and
sales of limited partnership interests. Plaintiffs request relief in the nature
of rescission of the purchase of securities and recovery of all consideration
and expenses in connection therewith, as well as compensation for lost use of
money invested less cash distributions; compensatory damages; consequential
damages; treble damages for
5
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defendants' RICO violations (both federal and New Jersey); general damages for
all injuries resulting from negligence, fraud, breaches of contract, and
breaches of duty in an amount to be determined at trial; disgorgement and
restitution of all earnings, profits, benefits and compensation received by
defendants as a result of their unlawful acts; costs and disbursements of the
action; reasonable attorneys' fees; and such other and further relief as the
court deems just and proper.
PSI and PBP, along with various other defendants, filed a motion to dismiss
the consolidated complaint on December 20, 1994. By order dated August 29, 1995,
the transferee court granted plaintiffs' motion for temporary class
certification, preliminarily approved a settlement entered into between
plaintiffs and PBP and PSI, scheduled a fairness hearing for November 17, 1995,
approved the form and content of notice to be provided to class members and
directed that it be provided to class members. The full amount due under the
settlement agreement has been paid by PSI.
D. Sale of Land
The Partnership has entered into a contract with a third party for the sale
of unimproved property located in Olathe, Kansas for a sales price of $725,000.
It is currently anticipated that the sale will close during the first quarter of
1996, subject to certain contingencies.
E. Subsequent Event
In November 1995, distributions of approximately $146,000 and $13,000 were
paid to the Unitholders and the General Partners, respectively, for the quarter
ended September 30, 1995.
6
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PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-4
(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 five commercial properties consisting of
office warehouse/mini-warehouse and retail facilities as well as seven
unimproved properties. During the nine months ended September 30, 1995, the
Partnership's cash and cash equivalents increased by approximately $181,000
primarily due to cash flow from property operations in excess of capital
expenditures and distributions to the partners.
Distributions of approximately $146,000 and $13,000 were paid in November
1995 to the Unitholders and General Partners, respectively, for the quarter
ended September 30, 1995. These distributions were funded from property
operations.
The Partnership's ability to make future distributions and the amount of the
distributions that may be made will be affected not only by the amount of cash
generated by the Partnership from the operations of its properties, but also by
the amount expended for property improvements and the amount set aside for
anticipated property improvements.
The elimination of an exit ramp that provided access to the Big A property
has had a negative impact on operations. A second phase of this highway project
will have a further negative impact on the property. This phase will greatly
reduce access to the property and take a portion of the Big A site as well as
one or more buildings. The Partnership is continuing to explore the options
available to mitigate the negative impact of these activities on rental revenue.
Results of Operations
Occupancies at the improved properties at September 30, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
Property 1995 1994
<S> <C> <C>
---------------------------------------------------------------------------------
Airport South Business Center 100.0% 94.2%
Big A Mini-Warehouse 36.6 36.3
Downtown Business Center 100.0 96.7
Towneast Business Center 94.7 100.0
Dale City 96.5 100.0
---------------------------------------------------------------------------------
(Occupancies are calculated by dividing occupied units by total units).
</TABLE>
Net income increased by approximately $11,000 and decreased by approximately
$3,000 for the nine and three months ended September 30, 1995 as compared to the
same periods in the prior year due to the reasons discussed below.
Rental income increased by approximately $101,000 and $28,000 for the nine
and three months ended September 30, 1995 as compared to the same periods in
1994. Rental income increased at all of the properties, except Dale City which
remained stable. Rental income increased at the Airport South Business Center,
Big A Mini-Warehouse and Downtown Business Center primarily due to higher
average occupancies and at the Towneast Business Center primarily due to higher
commercial space rental rates.
Other income decreased by approximately $20,000 and $1,000 for the nine and
three months ended September 30, 1995 as compared to the same periods in 1994
primarily due to the decreasing number of older leases that include charges to
recover operating expenses.
Real estate taxes decreased by approximately $16,000 and $2,000 for the nine
and three months ended September 30, 1995 as compared to the same periods in
1994 due to lower reassessed property values.
General and administrative expenses increased by approximately $109,000 and
54,000 for the nine and three months ended September 30, 1995 as compared to the
same periods in 1994 due to increases in costs of administering the Partnership
and increased professional fees. The nine month increase was also
7
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<PAGE>
caused by the Partnership being effectually reimbursed for previously expensed
general and administrative costs in March 1994, which decreased expenses in that
period.
Property operating expenses increased by approximately $3,000 and decreased
by approximately $17,000 for the nine and three months ended September 30, 1995
as compared to the same periods in 1994. The nine month increase is due to
increases in utilities, payroll expense and management fees offset by decreases
in repairs and maintenance expenses and leasing commissions. The three month
decrease is primarily the result of decreases in repairs and maintenance
expenses and leasing commissions.
Depreciation and amortization decreased by approximately $26,000 and $3,000
for the nine and three months ended September 30, 1995 as compared to the same
periods in 1994 due to a significant amount of older assets becoming fully
depreciated.
8
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--This information is incorporated by reference to Note
C to the financial statements filed herewith in Item 1 of Part I of the
Registrant's Quarterly Report.
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 Certificate of Limited Partnership Interest (filed as an
exhibit to Registration Statement on Form S-11 (No. 33-1213)
and incorporated herein by reference)
4.02 Depositary Receipt (filed as an exhibit to Registration
Statement on Form S-11
(No. 33-1213) and incorporated herein by reference)
27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K--None
9
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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.-4
<TABLE>
<S> <C>
By: Prudential-Bache Properties, Inc.
A Delaware corporation,
Managing General Partner
By: /s/ Eugene D. Burak Date: November 14, 1995
----------------------------------------
Eugene D. Burak
Vice President
Chief Accounting Officer for the
Registrant
</TABLE>
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Prudential-Bache Watson & Taylor Ltd 4
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000780352
<NAME> Prudential-Bache Watson & Taylor Ltd 4
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jul-1-1995
<PERIOD-END> Sep-30-1995
<PERIOD-TYPE> 9-Mos
<CASH> 769,773
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> (8,142,000)
<INVENTORY> 0
<CURRENT-ASSETS> 9,050
<PP&E> 27,740,621
<DEPRECIATION> (5,675,137)
<TOTAL-ASSETS> 14,702,307
<CURRENT-LIABILITIES> 404,586
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14,297,721
<TOTAL-LIABILITY-AND-EQUITY> 14,702,307
<SALES> 0
<TOTAL-REVENUES> 1,516,082
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,300,271
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 215,811
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,811
<EPS-PRIMARY> 2.52
<EPS-DILUTED> 0
</TABLE>
