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
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For Quarter Ended March 31, 1996 Commission File No. 2-89177
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(Exact name of registrant as specified in its charter)
Massachusetts 04-2819910
(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 12
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
<S> <C> <C>
INDEX Page No.
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of March 31, 1996 and December 31, 1995 3
Statements of Operations For the Quarters Ended
March 31, 1996 and 1995 4
Statements of Cash Flows For the Quarters Ended
March 31, 1996 and 1995 5
Notes to Financial Statements 6 - 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations 8 - 9
Computer Equipment Portfolio 10
Part II. OTHER INFORMATION
Items 1 - 6 11
Signature 12
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PART I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
3/31/96 12/31/95
<S> <C> <C>
Investment property, at cost (note 3):
Computer equipment $ 378,895 $ 529,185
Less accumulated depreciation 331,401 472,222
---------------- ----------------
Investment property, net 47,494 56,963
Cash and cash equivalents 39,812 44,985
Marketable securities (note 5) 2,427 2,357
Rents receivable, net (note 2) 3,715 3,675
Accounts receivable - affiliates (note 4) - 7,995
---------------- ----------------
Total assets $ 93,448 $ 115,975
================ ================
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued expenses - affiliates (note 4) $ 3,938 $ 4,184
Accrued expenses and accounts payable 21,403 26,037
Unearned rental revenue - 1,835
---------------- ----------------
Total liabilities 25,341 32,056
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 754,341 752,694
Cumulative cash distributions (755,338) (753,690)
Unrealized losses on marketable securities (note 5) (3) (4)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (25,050 units):
Capital contribution, net of offering costs 11,158,769 11,158,769
Cumulative net income 3,261,329 3,245,897
Cumulative cash distributions (14,351,648) (14,320,335)
Unrealized losses on marketable securities (note 5) (343) (412)
---------------- ----------------
68,107 83,919
---------------- ----------------
Total partners' equity 68,107 83,919
---------------- ----------------
Total liabilities and partners' equity $ 93,448 $ 115,975
================ ================
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Statements of Operations
For the Quarters ended March 31, 1996 and 1995
(Unaudited)
1996 1995
--------------- --------------
<S> <C> <C>
Revenue:
Rental income $ 16,952 $ 46,813
Interest income 262 2,728
Net gain on sale of equipment 23,642 585
--------------- --------------
Total revenue 40,856 50,126
--------------- --------------
Costs and expenses:
Depreciation 7,920 15,805
Reversal of provision for doubtful accounts - (4,866)
Interest - 1,120
Related party expenses (note 4):
Management fees 1,095 2,708
General and administrative 14,762 13,077
--------------- --------------
Total costs and expenses 23,777 27,844
--------------- --------------
Net income $ 17,079 $ 22,282
=============== ==============
Net income per Limited Partnership Unit $ 0.62 $ 0.50
=============== ==============
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See accompanying notes to financial statements.
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<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Quarters Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 17,079 $ 22,282
--------------- ---------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 7,920 15,805
Reversal of provision for doubtful accounts - (4,866)
Net gain on sale of equipment (23,642) (585)
Net decrease in current assets 7,955 2,812
Net decrease in current liabilities (6,715) (7,679)
--------------- ---------------
Total adjustments (14,482) 5,487
--------------- ---------------
Net cash provided by operating activities 2,597 27,769
--------------- ---------------
Cash flows from investing activities:
Proceeds from sales of investment property 25,191 585
--------------- ---------------
Net cash provided by investing activities 25,191 585
--------------- ---------------
Cash flows from financing activities:
Cash distributions to partners (32,961) (93,938)
--------------- ---------------
Net cash used in financing activities (32,961) (93,938)
--------------- ---------------
Net decrease in cash and cash equivalents (5,173) (65,584)
Cash and cash equivalents at beginning of period 44,985 150,468
--------------- ---------------
Cash and cash equivalents at end of period $ 39,812 $ 84,884
=============== ===============
Supplemental cash flow information:
Interest paid during the period $ - $ 1,120
=============== ===============
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Quarters Ended March 31, 1996 and March 31, 1995
(Unaudited)
(1) Organization and Partnership Matters
The foregoing financial statements of Wellesley Lease Income Limited Partnership
II-C (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, 1995.
(2) Significant Accounting Policies
Allowance for Doubtful Accounts
The financial statements include an allowance for estimated losses on receivable
balances. The allowance for doubtful accounts is 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 March 31, 1996 and December 31, 1995, the
allowance for doubtful accounts included in rents receivable was $635.
(3) Investment Property
At March 31, 1996, the Partnership owned computer equipment with a depreciated
cost basis of $47,494, subject to existing leases. All purchases of computer
equipment are subject to a 3% acquisition fee paid to the General Partner.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Quarters Ended March 31, 1996 and March 31, 1995
(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
March 31, 1996 and 1995 are as follows:
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1996 1995
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Management fees $ 1,095 $ 2,708
Reimbursable expenses paid 17,816 12,748
------------ ------------
$ 18,911 $ 15,456
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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, "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 March 31, 1996 the difference between the
fair value and the cost basis of these securities is an unrealized loss of $346.
The fair value is based on currently quoted market prices. The cost basis and
estimated fair value of the Partnership's marketable securities at March 31,
1996 and December 31, 1995, respectively, are as follows:
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March 31, 1996 December 31, 1995
------------------------- ------------------------
Cost Fair Cost Fair
Basis Value Basis Value
<S> <C> <C> <C> <C>
Investment in Continental Information
Systems Corporation Stock $ 2,773 $ 2,427 $ 2,773 $ 2,357
======== ======== ======== ========
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WELLESLEY INCOME LIMITED PARTNERSHIP II-C
(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
ended March 31, 1996 in comparison to the quarter ended March 31, 1995.
The Partnership realized net income of $17,079 and $22,282 for the quarters
ended March 31, 1996 and 1995, respectively. Rental income decreased $29,861 or
64% between the three month periods primarily due to lower rental rates
generated on equipment lease extensions and remarketings resulting after the
initial lease term expires and due to a decrease in the size of the equipment
portfolio. Interest income decreased as a result of lower average short-term
investment balances held during the first quarter of 1996. The increase in net
gain on sale of equipment can be attributed to equipment sales carrying lower
net book values during the current quarter.
Total costs and expenses decreased $4,067 or 15% in 1996 primarily as a result
of lower depreciation expense in the current quarter combined with the reversal
of provision for doubtful accounts during the prior quarter. Depreciation
expense decreased due to a portion of the equipment portfolio becoming fully
depreciated and due to an overall reduction in the equipment portfolio.
Management fees expense decreased with the decline in rental income. The
Partnership was able to reverse its provision for doubtful accounts in the prior
quarter due to successful collection efforts on delinquent rents receivables.
General and administrative expenses increased $1,685 or 13%. A major factor
contributing to this increase is that salaries and expenses of the partnership
accounting and reporting personnel of the General Partner, which are
reimbursable by the various partnerships under management, are being allocated
over a diminishing number of partnerships.
The Partnership recorded net income per Limited Partnership Unit of $0.62 and
$0.50 for the quarters ended March 31, 1996 and 1995, respectively. The
allocation for the quarters ended March 31, 1996 and 1995, respectively,
includes a cost recovery allocation of profit and loss among the General and
Limited Partners which results in an allocation of net loss to the Limited
Partners. This cost recovery allocation is required to maintain capital accounts
consistent with the distribution provisions of the Partnership Agreement. In
certain periods, the cost recovery of profit and loss may result in an
allocation of net loss to the Limited Partners in instances when the
Partnership's operations were profitable for the period.
Liquidity and Capital Resources
For the quarter ended March 31, 1996, rental revenue generated from operating
leases and sales proceeds generated from equipment sales were the primary
sources 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.
<PAGE>
WELLESLEY INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Rental income will continue to decrease due to two factors. The first factor is
the lower rate obtained due to the remarketing of existing equipment upon the
expiration of the original lease. 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. Future rental revenues
amount to $29,213 and are to be received over the next three years.
During the second quarter of 1995, the General Partner announced its intentions
of winding down the operations of the Partnership. It is anticipated that
substantially all of the assets will be liquidated and the proceeds will be used
to settle all outstanding liabilities and make a final distribution during 1996.
The Partnership's investing activities for the year resulted in equipment sales
having a depreciated cost basis of $1,549, generating $25,191 in proceeds. 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 1% per Limited
Partnership Unit or $1.25 per Limited Partnership Unit on a quarterly basis. For
the quarter ended March 31, 1996, the Partnership declared a cash distribution
of $32,961, of which $1,648 was allocated to the General Partner and $31,313 was
allocated to the Limited Partners. The distribution will be made on May 29,
1996. 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.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP
Leasing Programs, Inc. from CMI Holding Co. Under the new ownership, it is
expected that TLP Leasing Programs, Inc. will continue to operate in the same
manner of business as it has in the past.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
March 31, 1996
Lessee
Caterpillar Tractor Company
Coast Pump & Supply Company, Incorporated
First Options of Chicago, Incorporated
New York Life Insurance Company
Owens Corning Fiberglass, Incorporated
Equipment Description Acquisition Price
Computer Peripherals $ 220,517
Other 158,378
------------
$ 378,895
============
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PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(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
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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 II-C
(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: May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000720307
<NAME> WELLESLEY LEASE INCOME LTD PSHP II-C FDS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 39,812
<SECURITIES> 2,427
<RECEIVABLES> 6,142
<ALLOWANCES> 635
<INVENTORY> 0
<CURRENT-ASSETS> 45,954
<PP&E> 378,895
<DEPRECIATION> 331,401
<TOTAL-ASSETS> 93,448
<CURRENT-LIABILITIES> 25,341
<BONDS> 0
<COMMON> 11,159,769
0
0
<OTHER-SE> (11,091,662)
<TOTAL-LIABILITY-AND-EQUITY> 93,448
<SALES> 16,952
<TOTAL-REVENUES> 40,856
<CGS> 0
<TOTAL-COSTS> 1,095
<OTHER-EXPENSES> 22,682
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17,079
<INCOME-TAX> 0
<INCOME-CONTINUING> 17,079
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,079
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0
</TABLE>
