<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 0-15381
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-4
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(Exact name of Registrant as specified in its charter)
Texas 75-2083046
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(State or other jurisdiction (I.R.S. Employer
of 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.-4
(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 $12,023,335 $12,176,738
Cash and cash equivalents 713,216 1,450,040
Other assets 23,922 9,160
------------- ------------
Total assets $12,760,473 $13,635,938
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 359,444 $ 113,462
Accrued real estate taxes 110,462 104,824
Deposits due to tenants 109,409 97,196
Due to affiliates 71,600 107,175
Unearned rental income 12,744 6,847
------------- ------------
Total liabilities 663,659 429,504
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Partners' capital
Unitholders (66,555 depositary units issued and outstanding) 11,909,078 13,002,889
General partners 187,736 203,545
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Total partners' capital 12,096,814 13,206,434
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Total liabilities and partners' capital $12,760,473 $13,635,938
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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 Three months
ended September 30, ended September 30,
------------------------- ----------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
REVENUES
Rental income $1,425,875 $1,453,214 $ 487,633 $489,357
Interest 14,596 12,871 4,360 4,651
Other 17,530 49,997 5,665 15,425
---------- ---------- --------- --------
1,458,001 1,516,082 497,658 509,433
---------- ---------- --------- --------
EXPENSES
General and administrative 623,949 232,207 226,299 91,615
Property operating 511,059 475,138 172,660 151,267
Real estate taxes 144,243 150,929 50,638 54,557
Provision for loss on impairment of assets 300,000 -- 300,000 --
Depreciation -- 441,997 -- 148,164
---------- ---------- --------- --------
1,579,251 1,300,271 749,597 445,603
---------- ---------- --------- --------
Net income (loss) $ (121,250) $ 215,811 $(251,939) $ 63,830
---------- ---------- --------- --------
---------- ---------- --------- --------
ALLOCATION OF NET INCOME
Unitholders $ (132,550) $ 167,606 $(252,784) $ 48,352
---------- ---------- --------- --------
---------- ---------- --------- --------
General partners $ 11,300 $ 48,205 $ 845 $ 15,478
---------- ---------- --------- --------
---------- ---------- --------- --------
Net income (loss) per depositary unit $ (1.99) $ 2.52 $ (3.80) $ .73
---------- ---------- --------- --------
---------- ---------- --------- --------
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</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
GENERAL
UNITHOLDERS PARTNERS TOTAL
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<S> <C> <C> <C>
Partners' capital--December 31, 1995 $13,002,889 $203,545 $13,206,434
Net income (loss) (132,550) 11,300 (121,250)
Distributions (961,261) (27,109 ) (988,370)
----------- -------- -----------
Partners' capital--September 30, 1996 $11,909,078 $187,736 $12,096,814
----------- -------- -----------
----------- -------- -----------
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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,
-------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income and deposits received $1,429,223 $1,459,555
Interest received 14,596 12,871
Other income received 17,530 49,997
General and administrative expenses paid (425,061) (123,411)
Property operating expenses paid (499,540) (464,523)
Real estate taxes paid (138,605) (154,354)
---------- ----------
Net cash provided by operating activities 398,143 780,135
CASH FLOWS FROM INVESTING ACTIVITIES
Property improvements (146,597) (124,156)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid to partners (988,370) (475,008)
---------- ----------
Net increase (decrease) in cash and cash equivalents (736,824) 180,971
Cash and cash equivalents at beginning of period 1,450,040 588,802
---------- ----------
Cash and cash equivalents at end of period $ 713,216 $ 769,773
---------- ----------
---------- ----------
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RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income (loss) $ (121,250) $ 215,811
---------- ----------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Provision for loss on impairment of assets 300,000 --
Depreciation -- 441,997
Changes in:
Other assets (14,762) 19,110
Accounts payable and accrued expenses 245,982 55,336
Accrued real estate taxes 5,638 (3,425)
Deposits due to tenants 12,213 (2,471)
Due to affiliates (35,575) 64,075
Unearned rental income 5,897 (10,298)
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Total adjustments 519,393 564,324
---------- ----------
Net cash provided by operating activities $ 398,143 $ 780,135
---------- ----------
---------- ----------
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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, 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.-4 (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 (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, 1996 and 1995 were approximately $93,000
and $96,000, respectively, and for the three months ended September 30, 1996 and
1995 were approximately $27,000 and $46,000, 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 $26,000 and $4,000 for the nine months ended September
30, 1996 and 1995, respectively, and for the three months ended September 30,
1996 and 1995 recorded approximately $4,000 and $1,000, respectively.
Prudential Securities Incorporated, an affiliate of PBP, owns 391 depositary
units at September 30, 1996.
C. Subsequent Event
In accordance with the Consent Statement dated September 17, 1996, the
Unitholders approved the sale to Public Storage, Inc. of all five
miniwarehouse/office warehouse facilities and four of the six undeveloped land
parcels owned by the Partnership. The five miniwarehouse/office warehouse
facilities and three of the four undeveloped land parcels which were under
contract were sold to Public Storage, Inc. on November 13, 1996. The Partnership
received, in cash, gross sales proceeds of $12,030,000 reduced by certain
selling expenses and pro-rations of approximately $440,000. The gross sales
price was in excess of the appraised value of the properties. The fourth land
parcel, Yancy Camp, located in Dallas, Texas, has evidenced certain
concentrations of petroleum related environmental contaminants which were
discovered in an environmental review of the property. The Managing General
Partner has reported the results of the environmental assessment to the
appropriate State environmental regulatory departments. It has been agreed that
the sale of this property to Public Storage, Inc. would be deferred in the
expectation that the Partnership will shortly receive direction from the State
environmental regulatory departments in resolving the environmental issue at the
property.
A distribution is expected to be made later in November 1996 representing the
net sales proceeds reduced by a contingency reserve and funds required to meet
current and future operating costs until the
5
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liquidation of the Partnership. The Partnership intends to sell its remaining
land parcels and liquidate in 1997 and will distribute any remaining funds at
such time.
6
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<PAGE>
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
In accordance with the Consent Statement dated September 17, 1996, the
Unitholders approved the sale to Public Storage, Inc. of all five
miniwarehouse/office warehouse facilities and four of the six undeveloped land
parcels owned by the Partnership. The five miniwarehouse/office warehouse
facilities and three of the four undeveloped land parcels which were under
contract were sold to Public Storage, Inc. on November 13, 1996. The Partnership
received, in cash, gross sales proceeds of $12,030,000 reduced by certain
selling expenses and pro-rations of approximately $440,000. The gross sales
price was in excess of the appraised value of the properties.The fourth land
parcel, Yancy Camp, located in Dallas, Texas, has evidenced certain
concentrations of petroleum related environmental contaminants which were
discovered in an environmental review of the property. The Managing General
Partner has reported the results of the environmental assessment to the
appropriate State environmental regulatory departments. It has been agreed that
the sale of this property to Public Storage, Inc. would be deferred in the
expectation that the Partnership will shortly receive direction from the State
environmental regulatory departments in resolving the environmental issue at the
property.
During the nine months ended September 30, 1996, the Partnership's cash and
cash equivalents decreased by approximately $737,000 due to distributions paid
to partners (including a $649,000 distribution from the sale in December 1995 of
the Black Bob undeveloped land parcel) and capital expenditures in excess of
cash flow from property operations. Distributions made during the three months
ended September 30, 1996 totaled approximately $90,000, of which $83,000 was
paid to the Unitholders and $7,000 to the General Partners. These distributions
were funded from current and prior periods' property operations.
A distribution is expected to be made later in November 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 sell its remaining
land parcels and liquidate in 1997 and will distribute any remaining funds at
such time.
Results of Operations
Average occupancy rates at the improved properties for the nine months ended
September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
September 30,
-----------------
<S> <C> <C>
Property 1996 1995
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Airport South Business Center 97.8% 99.4%
Big A Mini-Warehouse 50.8 54.7
Downtown Business Center 98.3 99.6
Towneast Business Center 96.8 97.4
Dale City 95.2 97.6
---------------------------------------------------------------------------------
</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 $337,000 and $316,000 for the nine and
three months ended September 30, 1996 as compared to the corresponding periods
in 1995 for the reasons discussed below.
A provision for loss on impairment of assets of $300,000 was recorded for the
quarter ended September 30, 1996 to reflect the Partnership's property held for
sale at the lower of the carrying amount or the estimated fair value less costs
to sell.
Rental income decreased by approximately $27,000 and $2,000 for the nine and
three months ended September 30, 1996 as compared to the corresponding periods
in 1995. These decreases were primarily due to lower average occupancies at all
five properties but were partially offset by increased rental income at Downtown
Business Center and Towneast Business Center as a result of to higher commercial
space rental rates.
7
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<PAGE>
Other income decreased by approximately $32,000 and $10,000 for the nine and
three months ended September 30, 1996 as compared to the corresponding periods
in 1995 as a result of the decreasing number of older leases that include
charges to recover operating expenses.
General and administrative expenses increased by approximately $392,000 and
$135,000 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 Unitholders for the sale of the properties.
Property operating expenses increased by approximately $36,000 and $21,000
for the nine and three months ended September 30, 1996 as compared to the
corresponding period in 1995 primarily due to increases in utilities and payroll
expenses.
Depreciation expense decreased by approximately $442,000 and $148,000 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.
8
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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 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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<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.-4
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
10
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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.-4
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000780352
<NAME> P-B Watson & Taylor Ltd.-4
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Sep-30-1996
<PERIOD-TYPE> 9-MOS
<CASH> 713,216
<SECURITIES> 0
<RECEIVABLES> 23,922
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 737,138
<PP&E> 12,023,335
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,760,473
<CURRENT-LIABILITIES> 663,659
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 12,096,814
<TOTAL-LIABILITY-AND-EQUITY> 12,760,473
<SALES> 0
<TOTAL-REVENUES> 1,458,001
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,279,251
<LOSS-PROVISION> 300,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,250)
<EPS-PRIMARY> (1.99)
<EPS-DILUTED> 0
</TABLE>
