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 March 31, 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>
March 31,
1996 December 31,
(Unaudited) 1995
<S> <C> <C>
Assets
Rental properties, net $ 45,743,427 46,218,351
Temporary investments, at cost
which approximates market value -
Money market fund 2,293,052 2,217,339
Cash 70,804 61,643
Cash and cash equivalents 2,363,856 2,278,982
Accounts receivable 48,713 81,956
Deferred charges and other assets, at amortized cost 127,256 193,842
$ 48,283,252 48,773,131
Liabilities and Partners' Equity
Mortgages payable $ 16,585,669 16,638,886
Note payable to affiliate 6,000,000 6,000,000
Accounts payable, including amounts due
to affiliates of $32,722 and $44,323 49,520 57,801
Accrued expenses and other liabilities 269,386 251,595
Total liabilities 22,904,575 22,948,282
Minority interest in joint venture 4,354,137 4,310,989
Partners' equity
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 50,076 52,678
Cumulative distributions (124,168) (121,876)
(73,092) (68,198)
Limited Partners (60,495 interests):
Capital contributions, net of
offering costs 28,432,650 28,432,650
Cumulative net income 4,957,566 5,215,136
Cumulative distributions (12,292,584) (12,065,728)
21,097,632 21,582,058
Total Partners' equity 21,024,540 21,513,860
Commitment (note 3)
$ 48,283,252 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
Three months ended March 31, 1996 and 1995
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
Income
Rental income $ 911,195 1,279,211
Less direct expenses, including depreciation
of $474,924 and $467,011 534,172 487,436
Net operating income 377,023 791,775
Interest income 28,713 34,523
Total income 405,736 826,298
Expenses
General and administrative (note 1) 81,415 68,848
Management fee (note 1) 11,665 21,296
Interest (note 1) 529,680 532,867
Minority interest in joint venture earnings 43,148 45,383
Total expenses 665,908 668,394
Net income (loss) $ (260,172) 157,904
Net income (loss) per limited partnership interest $ (4.26) 2.58
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
USAA Income Properties IV Limited Partnership
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (260,172) 157,904
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 474,924 467,011
Amortization 6,027 6,027
Decrease (increase) in accounts receivable 33,243 (33,450)
Decrease in deferred charges and other
assets 60,559 72,961
Increase in accounts payable, accrued expenses
and other liabilities 9,510 14,590
Minority interest in joint venture earnings 43,148 45,383
Cash provided by operating activities 367,239 730,426
Cash flows used in investing activities-
Additions to rental properties -- (5,603)
Cash flows from financing activities:
Repayment of mortgages payable (53,217) (48,795)
Distributions to co-venturer -- (132,479)
Distributions to partners (229,148) (229,148)
Cash used in financing activities (282,365) (410,422)
Net increase in cash and cash equivalents 84,874 314,401
Cash and cash equivalents at beginning of period 2,278,982 2,208,744
Cash and cash equivalents at end of period $ 2,363,856 2,523,145
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
Notes to Condensed Consolidated Financial Statements
March 31, 1996
(Unaudited)
1. Transactions with Affiliates
A summary of transactions with affiliates follows for the
three-month period ended March 31, 1996:
Quorum
USAA Real Estate
Real Estate Services
Company Corporation
Reimbursement of
expenses (a) $ 34,530 10,042
Management fees 11,665 14,984
Lease commissions -- 2,450
Interest expense (b) 149,180 --
Total $ 195,375 27,476
(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 nine months of 1996 or any other future
period.
The financial information included in this interim report as of
March 31, 1996 and for the three months ended March 31, 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 March 31, 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 March 31, 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 March 31, 1996, the Partnership had cash of $70,804 and
temporary investments of $2,293,052. 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 prepaid rent and property
tax accruals.
During the quarter ended March 31, 1996, the Partnership
distributed $226,856 to Limited Partners and $2,292 to the General
Partner for a total of $229,148. 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 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. In addition, the Invitrogen lease expires in
1996. Due to significant decreases in 1996 cash flow,
distributions will be reduced beginning with the May 1996
distribution.
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.
Results of Operations
For the three-month periods ended March 31, 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.
7
<PAGE>
Rental properties decreased as of March 31, 1996 as compared to
December 31, 1995 due to depreciation. The decrease in accounts
receivable at March 31, 1996 was due to collections of receivables
from tenants.
Rental income decreased for the three-month period ended March 31,
1996 as compared to March 31, 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
months ended March 31, 1996 as compared to March 31, 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
months ended March 31, 1996 as compared to the three months ended
March 31, 1995.
General and administrative expenses increased for the three-month
period ended March 31, 1996 as compared to the three-month period
ended March 31, 1995 due to an increase in charges for preparation
of federal and state tax returns and providing tax information to
partners. 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 decreased for the three
months ended March 31, 1996 due to an increase in depreciation
expense at Apollo related to tenant improvements.
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 March 31, 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
May 9, 1996 By: /s/Edward B. Kelley
Edward B. Kelley
Chairman, President and
Chief Executive Officer
May 9, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,363,856
<SECURITIES> 0
<RECEIVABLES> 48,713
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 45,743,427
<DEPRECIATION> 0
<TOTAL-ASSETS> 48,283,252
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 21,024,540
<TOTAL-LIABILITY-AND-EQUITY> 48,283,252
<SALES> 0
<TOTAL-REVENUES> 911,195
<CGS> 0
<TOTAL-COSTS> 534,172
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 529,680
<INCOME-PRETAX> (260,172)
<INCOME-TAX> 0
<INCOME-CONTINUING> (260,172)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (260,172)
<EPS-PRIMARY> (4.26)
<EPS-DILUTED> 0
</TABLE>
