UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the United States Securities Exchange Act of 1934
-----------------------
For Quarter Ended September 30, 1995 Commission File No. 2-84106
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(Exact name of registrant as specified in its charter)
Massachusetts 04-2791213
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Financial Center, 21st Floor, Boston, MA 02111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 482-8000
----------------
Not Applicable
(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 X No
___ ---
There are no Exhibits.
Page 1 of 13
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<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
<S> <C> <C>
INDEX Page No.
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of September 30, 1995 and December 31, 1994 3
Statements of Operations For the Quarters Ended
September 30, 1995 and 1994 and the Nine Months Ended
September 30, 1995 and 1994 4
Statements of Cash Flows For the Nine Months Ended
September 30, 1995 and 1994 5
Notes to Financial Statements 6 - 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 10
Computer Equipment Portfolio 11
Part II. OTHER INFORMATION
Items 1 - 6 12
Signature 13
</TABLE>
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<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
9/30/95 12/31/94
Investment property, at cost (note 3):
<S> <C> <C>
Computer equipment $ 509,398 $ 727,048
Less accumulated depreciation 509,398 716,132
------- -------
Investment property, net - 10,916
Cash and cash equivalents 119,574 232,893
Marketable securities, net (notes 2 and 5) 444 -
Rents receivable, (note 2) 20,788 61,312
Accounts receivable - affiliates, net (notes 2 and 4) 1,141 48,978
----- ------
Total assets $ 141,947 $ 354,099
= ======= = =======
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued
expenses - affiliates (note 4) $ 7,190 $ 8,873
Accounts payable and accrued expenses 3,358 15,216
Distribution payable 4,950 -
Unearned rental income 472 -
------ ------
Total liabilities 15,970 24,089
------ ------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 539,943 525,093
Cumulative cash distributions (540,943) (526,093)
-------- --------
- -
Limited Partners (15,050 Units):
Capital contribution, net of
offering costs 6,710,991 6,710,991
Cumulative net income 3,692,986 3,614,781
Cumulative cash distributions (10,277,951) (9,995,762)
----------- ----------
126,026 330,010
------- -------
Unrealized losses on marketable securities (note 5) (49) -
------- -------
Total partners' equity 125,977 330,010
------- -------
Total liabilities and partners' equity $ 141,947 $ 354,099
= ======= = =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
Statements of Operations
(Unaudited)
Quarters Ended Nine Months Ended
September 30, September 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
Revenue:
<S> <C> <C> <C> <C>
Rental income $ 39,902 $ 67,314 $ 114,496 $ 210,102
Interest income 1,499 3,436 6,857 5,991
Recovery of net unsecured
pre-petition claim (note 6) 922 - 1,415 -
Net gain on sale
of equipment 425 16,285 14,050 137,520
------ ------ ------- -------
Total revenue 42,748 87,035 136,818 353,613
------ ------ ------- -------
Costs and expenses:
Depreciation - 27,368 - 101,904
Interest - 332 43 1,606
Related party expenses (note 4):
Management fees 2,642 4,111 11,201 12,669
General and administrative 9,713 2,308 30,732 11,238
(Reversal of) provision for
doubtful accounts - (13,265) 1,787 (13,265)
------ ------- ------ -------
Total costs and expenses 12,355 20,854 43,763 114,152
------ ------ ------ -------
Net income $ 30,393 $ 66,181 $ 93,055 $ 239,461
= ====== = ====== = ====== = =======
Net income per Limited
Partnership Unit $ 1.69 $ 4.26 $ 5.20 $ 8.68
= ==== = ==== = ==== = ====
</TABLE>
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
1995 1994
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 93,055 $ 239,461
- ------ - -------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation - 101,904
(Reversal of) provision for doubtful accounts 1,787 (13,265)
Net gain on sale of equipment (14,050) (137,520)
Net decrease in current assets 86,081 71,818
Net decrease in current liabilities (13,069) (40,257)
------- -------
Total adjustments 60,749 (17,320)
------ -------
Net cash provided by operating activities 153,804 222,141
------- -------
Cash flows from investing activities:
Proceeds from sales of investment property 24,966 218,532
------ -------
Net cash provided by investing activities 24,966 218,532
------ -------
Cash flows from financing activities:
Principal payments on notes payable - affiliate - (16,695)
Principal payments on long-term debt - (36,836)
Cash distributions to partners (292,089) (118,815)
-------- --------
Net cash used in financing activities (292,089) (172,346)
-------- --------
Net (decrease) increase in cash and cash equivalents (113,319) 268,327
Cash and cash equivalents at beginning of period 232,893 41,758
------- ------
Cash and cash equivalents at end of period $ 119,574 $ 310,085
= ======= = =======
Supplemental cash flow information:
Interest paid during the period $ 1,120 $ 1,903
= ===== = =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
(1) Organization and Partnership Matters
The foregoing financial statements of Wellesley Lease Income Limited Partnership
A (the "Partnership") have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission for Form 10-Q and reflect
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. Pursuant to such
rules and regulations, certain note disclosures which are normally required
under generally accepted accounting principles have been omitted. It is
recommended that these financial statements be read in conjunction with the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1994.
(2) Summary of Significant Accounting Policies
Allowance for Doubtful Accounts
The financial statements include allowances for estimated losses on receivable
balances. The allowances for doubtful accounts are based on past write off
experience and an evaluation of potential uncollectible accounts within the
current receivable balances. Receivable balances which are determined to be
uncollectible are charged against the allowance and subsequent recoveries, if
any, are credited to the allowance. At September 30, 1995 and December 31, 1994,
the allowance for doubtful accounts included in rents receivable was $7,501 and
$5,715, respectively. The allowance for doubtful accounts included in accounts
receivable - affiliates was $978 and $1,900 at September 30, 1995 and December
31, 1994, respectively, both of which were related to the net unsecured
pre-petition bankruptcy claim.
Marketable Securities
The marketable securities are stated at fair value at the balance sheet date and
consist of common stock in Continental Information Systems Corporation received
by the Partnership in the distributions made December 27, 1994 and July 20, 1995
by the Trustee of the Liquidating Estate of CIS Corporation, et al, ("the
Trustee"), with respect to the outstanding net unsecured pre-petition claim.
During the second quarter of 1995, the stock began trading, thereby providing an
objective valuation measure for establishing the cost basis. Unrealized gains
and losses are recorded directly in partners' equity except those gains and
losses that are deemed to be other than temporary, which would be reflected in
income or loss (see note 5).
Reclassifications
Certain prior year financial statement items have been reclassified to conform
with the current year's financial statement presentation.
(3) Investment Property
At September 30, 1995, the Partnership owned computer equipment with a cost
basis of $509,398, subject to existing leases. All purchases of computer
equipment are subject to a 3% acquisition fee paid to the General Partner.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(Unaudited)
(4) Related Party Transactions
Fees, commissions and other expenses paid or accrued by the Partnership to the
General Partner or affiliates of the General Partner for the quarters ended
September 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Management fees $ 11,201 $ 12,669
Reimbursable operating expenses 30,104 11,315
------ ------
$ 41,305 $ 23,984
= ====== = ======
</TABLE>
Under the terms of the Partnership Agreement, the General Partner is entitled to
an equipment acquisition fee of 3% of the purchase price paid by the Partnership
for the equipment. The General Partner is also entitled to a management fee
equal to 7% of the monthly rental billings collected. In addition, the
Partnership reimburses the General Partner and its affiliates for certain
expenses incurred by them in connection with the operation of the Partnership.
(5) Fair Values of Financial Instruments
Pursuant to Statement of Financial Accounting Standards No. 115 ("SFAS 115"),
"Accounting for Certain Investments in Debt and Equity Securities," which
requires investments in debt and equity securities other than those accounted
for under the equity method to be carried at fair value or amortized cost for
debt securities expected to be held to maturity, the Partnership has classified
its investments in equity securities as available for sale. Accordingly, the net
unrealized gains and losses computed in marking these securities to market are
reported as a component of partners' equity. At September 30, 1995 the
difference between the fair value and the original cost of these securities is
an unrealized loss of $49.
The fair value is based on currently quoted market prices. The carrying amount
and estimated fair value of the Partnership's marketable securities for the
quarters ended September 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
Investment in Continental Information
<S> <C> <C> <C> <C>
Systems Corporation Stock $ 493 $ 444 $ - $ -
======== ======= ========= ========
</TABLE>
As was discussed in note 2, Marketable Securities, the Partnership received
stock in Continental Information Systems Corporation as part of the December 27,
1994 and July 20, 1995 distributions from the Trustee, with respect to the
outstanding net unsecured pre-petition claim. The receivables comprising the net
unsecured pre-petition claim had been fully reserved during prior years; thus,
during the second quarter of 1995 when the stock began actively trading, the
carrying amount for the stock was established to be $2.50 per share which
approximated fair value at June 30, 1995.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(Unaudited)
(6) Bankruptcy of Continental Information Systems Corporation
As was discussed in the Form 10-Q for the quarter ended June 30, 1995, note 5
Subsequent Events, the Partnership received the second distribution from the
Trustee, with respect to the net unsecured pre-petition claim on July 20, 1995.
The distribution consisted of cash proceeds of $922. Following the Trustee's
second distribution, the Partnership has a remaining net unsecured pre-petition
claim of $978 as of July 20, 1995 (see note 7).
(7) Subsequent Events
On October 20, 1995, the Partnership received the third distribution from the
Trustee of the Liquidating Estate of CIS Corporation, et al, with respect to the
net unsecured pre-petition claim. The distribution consisted of cash proceeds of
$43 and 27 shares of common stock in Continental Information Systems Corporation
with a carrying value of $68. The cash and stock will be reflected in the
financial statements for the fourth quarter of 1995. Following the Trustee's
third distribution and an additional charge off made during the year, the
Partnership has a remaining net unsecured pre-petition claim balance of $797 as
of October 20, 1995. The General Partner anticipates that the Liquidating Estate
will make future distributions on the remaining outstanding claim balance,
although it is not possible at this time to determine when these distributions
will be made.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Results of Operations
The following discussion relates to the Partnership's operations for the quarter
and the nine month periods ended September 30, 1995 in comparison to the same
periods in the prior year.
The Partnership realized net income of $30,393 and $66,181 for the quarters
ended September 30, 1995 and 1994, respectively. Rental income decreased $27,412
or 41% primarily due to lower rental rates obtained on equipment lease
extensions and remarketings resulting after the initial lease term expires and
due to a decrease in the overall size of the equipment portfolio. Interest
income decreased as a result of lower average short-term investment balances
held during the current quarter. The recovery of the net unsecured pre-petition
claim was the result of the second distribution from the Trustee of the
Liquidating Estate of CIS Corporation, et al ("the Trustee"), with respect to
the outstanding claim balance. The decrease in net gain on sale of equipment is
attributed to fewer equipment sales during the quarter.
Total costs and expenses decreased 41% between the three month periods primarily
as a result of lower depreciation expense. Depreciation expense decreased due to
the equipment portfolio becoming fully depreciated in 1995. Management fees have
decreased from 1994 in relation to the decline in rental income. General and
administrative expenses for the current quarter are in line with similar
expenses recorded during the first and second quarters of 1995. The 1994 general
and administrative expenses balance was unusually low because it reflected a
reversal for overstated liabilities recorded in prior years that had been
included in General and administrative expenses at that time. The reversal of
the provision for doubtful accounts in 1994 was generated due to successful
collection efforts on delinquent accounts.
The Partnership realized net income of $93,055 and $239,461 and rental income of
$114,496 and $210,102 for the nine months ended September 30, 1995 and 1994,
respectively. The 46% decrease in rental income can be attributed to lower
rental rates obtained on equipment lease extensions and remarketings resulting
after the initial lease term expires and due to an overall reduction the
equipment portfolio, as discussed above. Interest income increased as a result
of higher average short-term investment balances held during 1995. The recovery
of the net unsecured pre-petition claim was the result of the third quarter of
1995 receipt of the Trustee's July 20, 1995 second distribution along with the
second quarter of 1995 establishment of the carrying value of the stock received
in the December 27, 1994 distribution. The receivables associated with the stock
settlement had been fully reserved in a prior year; accordingly, the Partnership
was able to show a recovery on those receivables as of June 30, 1995, at which
time an objective stock value could be determined due to the stock's trading
activities. As discussed in the quarter analysis above, there were fewer
equipment sales in 1995; however, all future sales will result in gains since
the equipment is fully depreciated.
Total costs and expenses decreased 62% primarily as a result of lower
depreciation expense. As discussed above, depreciation expense decreased
$101,904 between 1995 and 1994 due to the equipment portfolio becoming fully
depreciated. Management fees have decreased along with the decrease in rental
income, as mentioned in the quarter analysis above. General and administrative
expenses were lower in 1994 due to a refund received in the second quarter of
1994 related to a sales tax audit assessment that was paid in 1990 and included
in general and administrative expenses at that time combined with the third
quarter of 1994 reversal of overstated liabilities as discussed above.
The Partnership recorded net income per Limited Partnership Unit of $1.69
and $5.20 for the quarter and nine months ended September 30, 1995,
respectively.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Liquidity and Capital Resources
For the nine months ended September 30, 1995, rental revenue generated from
operating leases was the primary source of funds for the Partnership. As
equipment leases terminate, the General Partner determines if the equipment will
be extended to the same lessee, remarketed to another lessee, or if it is less
marketable, sold. This decision is made upon analyzing which options would
generate the most favorable results.
Rental income will continue to decrease due to two factors. The first factor is
the rate obtained when the original leases expire and are remarketed at a lower
rate. Typically, the remarketed rates are lower due to the decrease in useful
life of the equipment. Secondly, the increasing change of technology in the
computer industry usually decreases the demand for older equipment, thus
increasing the possibility of obsolescence. Both of these factors together will
cause remarketed rates to be lower than original rates and will cause certain
leases to terminate upon expiration.
During the fourth quarter of 1993, the General Partner announced its intentions
of winding down the operations of the Partnership beginning in 1994. The General
Partner currently expects to wind down the operations of the Partnership within
the next six months. It is anticipated that substantially all of the assets will
be liquidated and the proceeds will be used to settle all outstanding
liabilities and to make a final distribution. The Partnership will not be
terminated until the net unsecured pre-petition claim against CIS has been
settled, the stock received has been sold and the remaining proceeds have been
distributed to the Partners.
The stock cannot be sold immediately by the Partnership due to limitations
imposed by the Securities Exchange Act of 1933 (the "Exchange Act"). Because TLP
Leasing Programs, Inc., one of the Corporate General Partners, is a wholly-owned
subsidiary of Continental Information Systems Corporation ("CIS"), the
Partnership is considered an "Affiliate" of CIS. Accordingly, in order for the
Partnership to sell the shares, the Partnership must comply with the
restrictions imposed by Rule 144 of the Exchange Act
The Partnership's investing activities for the nine months ended September 30,
1995 resulted in equipment sales with a depreciated cost basis of $28,115,
generating $24,966 in proceeds. Associated with the equipment sales were $17,199
of loss charge offs against the reserve, initially set up in prior periods for
estimated losses on the ultimate disposition of equipment. The Partnership has
no material capital expenditure commitments and will not purchase equipment in
the future as the Partnership has reached the end of its reinvestment period and
has announced its intentions of winding down the Partnership.
Cash distributions are currently at an annual level of 5% per Limited
Partnership Unit or $6.25 per Limited Partnership Unit on a quarterly basis. For
the quarter ended September 30, 1995, the Partnership declared a cash
distribution of $99,013, of which $4,950 is allocated to the General Partner and
$94,063 is allocated to the Limited Partners. The distribution will be made on
November 28, 1995. The Partnership expects distributions to be more volatile as
its operations are winding down. The effects of inflation have not been
significant to the Partnership and are not expected to have any material impact
in future periods.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio
(Unaudited)
Lessee
Allied Signal, Incorporated
Apprise Corporation
Carlon, Incorporated
Halliburton, Incorporated
Hughes Aircraft Company, Incorporated
Maryland Casualty Insurance, Incorporated
Nissan Motor Corporation
Snap On Tools, Incorporated
<TABLE>
<CAPTION>
Equipment Description Acquisition Price
<S> <C>
Computer peripherals $ 509,398
= =======
</TABLE>
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<TABLE>
<CAPTION>
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
(A Massachusetts Limited Partnership)
<S> <C>
Item 1. Legal Proceedings
Response: None
Item 2. Changes in the Rights of the Partnership's Security Holders
Response: None
Item 3. Defaults by the Partnership on its Senior Securities
Response: None
Item 4. Results of Votes of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response:
A. None
B. None
</TABLE>
<PAGE>
SIGNATURE
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.
WELLESLEY LEASE INCOME LIMITED
PARTNERSHIP A
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
By: Arthur P. Beecher,
President
Date:November 14, 1995
-----------------
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000720276
<NAME> WELLESLEY LEASE INCOME LIMITED PARTNERSHIP A
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 119,574
<SECURITIES> 444
<RECEIVABLES> 30,408
<ALLOWANCES> 8,479
<INVENTORY> 0
<CURRENT-ASSETS> 141,947
<PP&E> 509,398
<DEPRECIATION> 509,398
<TOTAL-ASSETS> 141,947
<CURRENT-LIABILITIES> 15,970
<BONDS> 0
<COMMON> 6,711,991
0
0
<OTHER-SE> (6,586,014)
<TOTAL-LIABILITY-AND-EQUITY> 141,947
<SALES> 114,496
<TOTAL-REVENUES> 136,818
<CGS> 0
<TOTAL-COSTS> 11,201
<OTHER-EXPENSES> 30,732
<LOSS-PROVISION> 1,787
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 93,055
<INCOME-TAX> 0
<INCOME-CONTINUING> 93,055
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,055
<EPS-PRIMARY> 5.20
<EPS-DILUTED> 0
</TABLE>
