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
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: 0-16171
USAA Income Properties IV Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware 74-2449334
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 Robert F. McDermott Fwy., IH 10 West, Suite 600
San Antonio, Texas 78230-3884
(Address of principal executive offices) (Zip Code)
(210) 498-7391
(Registrant's telephone number, including area code)
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.
[X] Yes [ ] No
1
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
USAA Income Properties IV Limited Partnership
Condensed Consolidated Balance Sheets
<CAPTION>
June 30,
1996 December 31,
(Unaudited) 1995
<S> <C> <C>
Assets
Rental properties, net $ 45,290,665 46,218,351
Temporary investments, at cost
which approximates market value -
Money market fund 2,079,711 2,217,339
Cash 48,676 61,643
Cash and cash equivalents 2,128,387 2,278,982
Accounts receivable 43,609 81,956
Deferred charges and other assets, at amortized cost 95,587 193,842
$ 47,558,248 48,773,131
Liabilities and Partners' Equity
Mortgages payable $ 16,531,212 16,638,886
Note payable to affiliate 6,000,000 6,000,000
Accounts payable, including amounts due
to affiliates of $27,056 and $44,323 36,844 57,801
Accrued expenses and other liabilities 39,213 251,595
Total liabilities 22,607,269 22,948,282
Minority interest in joint venture 4,271,097 4,310,989
Partners' equity
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 47,852 52,678
Cumulative distributions (125,390) (121,876)
(76,538) (68,198)
Limited Partners (60,495 interests):
Capital contributions, net of
offering costs 28,432,650 28,432,650
Cumulative net income 4,737,344 5,215,136
Cumulative distributions (12,413,574) (12,065,728)
20,756,420 21,582,058
Total Partners' equity 20,679,882 21,513,860
Commitment (note 3)
$ 47,558,248 48,773,131
See accompanying notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
USAA Income Properties IV Limited Partnership
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Three Months
Ended Ended
June 30, 1996 June 30, 1995
<S> <C> <C>
Income
Rental income $ 940,804 1,161,480
Less direct expenses, including depreciation
of $453,384 and $467,736 563,104 500,159
Net operating income 377,700 661,321
Interest income 28,659 38,376
Total income 406,359 699,697
Expenses
General and administrative (note 1) 40,050 53,079
Management fee (note 1) 10,875 23,637
Interest (note 1) 528,440 533,703
Minority interest in joint venture earnings 49,440 47,002
Total expenses 628,805 657,421
Net income (loss) $ (222,446) 42,276
Net income (loss) per limited partnership interest $ (3.64) 0.69
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
<S> <C> <C>
Income
Rental income $ 1,851,999 2,440,691
Less direct expenses, including depreciation
of $928,309 and $934,747 1,097,275 987,595
Net operating income 754,724 1,453,096
Interest income 57,371 72,899
Total income 812,095 1,525,995
Expenses
General and administrative (note 1) 121,465 121,927
Management fee (note 1) 22,540 44,933
Interest (note 1) 1,058,120 1,066,570
Minority interest in joint venture earnings 92,588 92,385
Total expenses 1,294,713 1,325,815
Net income (loss) $ (482,618) 200,180
Net income (loss) per limited partnership interest $ (7.90) 3.28
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
USAA Income Properties IV Limited Partnership
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (482,618) 200,180
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 928,309 934,747
Amortization 9,884 12,054
Decrease in accounts receivable 38,347 3,740
Decrease in deferred charges and other
assets 88,371 108,681
Increase (decrease) in accounts payable, accrued
expenses and other liabilities (233,339) 72,623
Minority interest in joint venture earnings 92,588 92,385
Cash provided by operating activities 441,542 1,424,410
Cash flows used in investing activities-
Additions to rental properties (623) (81,448)
Cash flows from financing activities:
Repayment of mortgages payable (107,674) (98,398)
Distributions to co-venturer (132,480) (264,959)
Distributions to partners (351,360) (458,295)
Cash used in financing activities (591,514) (821,652)
Net increase (decrease) in cash and cash equivalents (150,595) 521,310
Cash and cash equivalents at beginning of period 2,278,982 2,208,744
Cash and cash equivalents at end of period $ 2,128,387 2,730,054
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
Notes to Condensed Consolidated Financial Statements
June 30, 1996
(Unaudited)
1. Transactions with Affiliates
A summary of transactions with affiliates follows for the
six-month period ended June 30, 1996:
Quorum
USAA Real Estate
Real Estate Services
Company Corporation
Reimbursement of
expenses (a) $ 56,935 19,163
Management fees 22,540 25,922
Lease commissions -- 6,377
Interest expense (b) 298,361 --
Total $ 377,836 51,462
(a) Reimbursement of expenses represents amounts paid or
accrued as reimbursement of expenses incurred on behalf of
the Partnership at actual cost and does not include any
mark-up or items normally considered as overhead.
(b) Represents interest expense at market rate on a note
payable.
2. Other
Reference is made to the consolidated financial statements in
the Annual Report filed as part of the Form 10-K for the year
ended December 31, 1995 with respect to significant accounting
and financial reporting policies as well as to other pertinent
information concerning the Partnership. Information furnished
in this report reflects all normal recurring adjustments which
are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented.
Further, the operating results presented for these interim
periods are not necessarily indicative of the results which may
occur for the remaining six months of 1996 or any other future
period.
The financial information included in this interim report as of
June 30, 1996 and for the three months and six months ended June
30, 1996 and 1995 has been prepared by management without audit
by independent certified public accountants who do not express
an opinion thereon. The Partnership's annual report includes
audited financial statements.
5
<PAGE>
3. Commitment
During 1995, the Linear Technology lease was renewed for an
additional five years. The original lease expiration has been
extended from June 1995 to June 2000. The Partnership has
committed to funding approximately $168,500 for tenant
improvements to be paid out of the working capital reserve. As
of June 30, 1996, none of the allowance had been expended.
During 1995, the lease with Hewlett-Packard Company at the
Apollo Building was renewed for an additional 41 months. The
original lease expiration has been extended from December 1996
to May 2000. The Partnership has committed to funding
approximately $565,000 to be paid from the working capital
reserve. As of June 30, 1996, approximately $108,000 of the
allowance had been expended.
6
<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At June 30, 1996, the Partnership had cash of $48,676 and temporary
investments of $2,079,711. These funds were held in the working
capital reserve for the payment of obligations of the Partnership.
Accounts receivable consisted of amounts due from tenants.
Deferred charges and other assets consisted primarily of deferred
rent resulting from recognition of income as required by generally
accepted accounting principles and lease commissions. Accounts
payable consisted of amounts due to affiliates for reimbursable
expenses and management fees, and amounts due to third parties for
expenses incurred for operations. Accrued expenses and other
liabilities consisted primarily of security deposits and property
tax accruals.
During the quarter ended June 30, 1996, the Partnership distributed
$120,990 to Limited Partners and $1,222 to the General Partner for
a total of $122,212. The single tenant lease at 1881 Pine Street
expired in May 1995 and substantial expenditures for tenant
improvements are anticipated in 1996 as new leases are signed.
Linear Technology renewed its lease effective June 1995 for an
additional five years with approximately $168,500 in tenant
improvement costs and a rental rate decrease to reflect market
conditions. Hewlett-Packard renewed its lease at Apollo effective
January 1997 for an additional 41 months at a reduced rental rate
to reflect current market conditions and with $565,000 in tenant
improvement costs. Due to significant decreases in 1996 cash flow,
distributions were reduced in May 1996.
The 1881 Pine Street Building remains vacant; however, negotiations
are in progress for two leases for a total of approximately 87,000
square feet of the 106,340 square feet available for lease in the
building. Rental rates for new leases will be lower than the rate
for the previous tenant, reflecting market conditions in the area
surrounding the property.
The Kodak Building is currently 100% leased with Eastman Kodak
occupying 34,600 square feet and Invitrogen Corporation occupying
the remaining 23,147 square feet. The lease with Invitrogen was
scheduled to expire in April 1996; however, the lease has been
extended through December 1996. Invitrogen will be relocating at
the end of this extension to a new facility they are constructing.
In addition, Invitrogen paid a one-time extension fee of $20,000.
Future liquidity is expected to result from cash generated from
operations of the properties, interest on temporary investments and
ultimately through the sale of the properties.
7
<PAGE>
Results of Operations
For the three-month and six-month periods ended June 30, 1996 and
1995, income was generated from rental income from the income-
producing real estate properties and interest income earned on the
funds in temporary investments.
Expenses incurred during the same periods were associated with the
operation of the Partnership's properties, interest on the
mortgages payable and various other costs required for
administration of the Partnership.
Rental properties decreased as of June 30, 1996 as compared to
December 31, 1995 due to depreciation. The decrease in accounts
receivable at June 30, 1996 was due to collections of receivables
from tenants. The decrease in deferred charges and other assets
was primarily a result of a decrease in deferred rent. Accrued
expenses and other liabilities decreased as of June 30, 1996 due to
a decrease in prepaid rent.
Rental income decreased for the three-month and six-month periods
ended June 30, 1996 as compared to the three-month and six-month
periods ended June 30, 1995 primarily as a result of MagneTek
vacating the 1881 Pine Street property in May 1995 on expiration of
the lease. Direct expenses were higher for the three-month and
six-month periods ended June 30, 1996 as compared to the same
periods ended June 30, 1995 as a result of property operating
expenses incurred for the vacant 1881 Pine Street property. These
expenses were formerly reimbursed by MagneTek under terms of the
lease.
Interest income decreased due to lower cash balances for the three-
month and six-month periods ended June 30, 1996 as compared to the
three-month and six-month periods ended June 30, 1995.
General and administrative expenses decreased for the three-month
period ended June 30, 1996 as compared to the three-month period
ended June 30, 1995 due to a decrease in printing charges. The
management fee is based on cash flow from operations of the
Partnership adjusted for cash reserves and fluctuated accordingly.
Minority interest in joint venture earnings increased for the three
months ended June 30, 1996 primarily due to a decrease in property
interest expense at the Apollo Building as a result of principal
balance reductions on the mortgage loan.
8
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Sequentially
Exhibit Numbered
No. Description Page
4 Restated Certificate and Agreement of
Limited Partnership dated as of June 8,
1987, attached as Exhibit A to the
Partnership's Prospectus dated June 8,
1987 filed pursuant to Rule 424(b),
Registration No. 33-11892 incorporated
herein by this reference. --
27 Financial Data Schedule 11
(b) During the quarter ended June 30, 1996, there
were no Current Reports on Form 8-K filed.
9
<PAGE>
FORM 10-Q
SIGNATURES
USAA INCOME PROPERTIES IV LIMITED PARTNERSHIP
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.
USAA INCOME PROPERTIES IV
LIMITED PARTNERSHIP (Registrant)
BY: USAA PROPERTIES IV, INC.,
General Partner
August 12, 1996 By: /s/Edward B. Kelley
Edward B. Kelley
Chairman, President and
Chief Executive Officer
August 12, 1996 BY: /s/Martha J. Barrow
Martha J. Barrow
Vice President -
Administration
and Finance/Treasurer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,128,387
<SECURITIES> 0
<RECEIVABLES> 43,609
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 45,290,665
<DEPRECIATION> 0
<TOTAL-ASSETS> 47,558,248
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,679,882
<TOTAL-LIABILITY-AND-EQUITY> 47,558,248
<SALES> 0
<TOTAL-REVENUES> 1,851,999
<CGS> 0
<TOTAL-COSTS> 1,097,275
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,058,120
<INCOME-PRETAX> (482,618)
<INCOME-TAX> 0
<INCOME-CONTINUING> (482,618)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (482,618)
<EPS-PRIMARY> (7.90)
<EPS-DILUTED> 0
</TABLE>
