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. 2-89177
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(Exact name of registrant as specified in its charter)
Massachusetts 4-2819912
(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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<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(A Massachusetts Limited Partnership)
INDEX Page No.
Part I. FINANCIAL INFORMATION
<S> <C> <C>
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
Part II. OTHER INFORMATION
Items 1 - 6 11
Signature 12
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<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
9/30/95 12/31/94
Investment property, at cost:
<S> <C> <C>
Computer equipment $ - $ 1,562,489
Less accumulated depreciation - 1,382,982
------- ---------
Investment property, net - 179,507
Cash and cash equivalents 109,758 382,960
Marketable securities (notes 2 and 4) 69,491 -
Rents receivable, net (note 2) - 19,224
Sales receivable, net (note 2) - 8,835
Accounts receivable - affiliates, net (notes 2 and 3) - -
------- ------
Total assets $ 179,249 $ 590,526
= ======= = =======
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued expenses - affiliates (note 3) $ - $ 30,551
Accounts payable and accrued expenses - 44,935
Unearned rental income - 5,500
----- -----
Total liabilities - 80,986
----- ------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 828,246 793,866
Cumulative cash distributions (829,246) (806,463)
-------- --------
- (11,597)
-------- -------
Limited Partners (24,737 Units):
Capital contribution, net of offering costs 11,019,501 11,019,501
Cumulative net income 4,923,208 4,824,477
Cumulative cash distributions (15,755,738) (15,322,841)
----------- -----------
186,971 521,137
------- -------
Unrealized losses on marketable securities (note 4) (7,722) -
------ -------
Total partners' equity 179,249 509,540
------- -------
Total liabilities and partners' equity $ 179,249 $ 590,526
= ======= = =======
</TABLE>
See accompanying notes to financial statements.
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<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-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 (loss) income $ (19,249) $ 104,219 $ 132,173 $ 400,174
Interest income 2,672 2,782 9,786 5,974
Recovery of net unsecured
pre-petition claim (note 4) 115,118 - 186,198 -
Net (loss) gain on sale
of equipment (14,981) 42,717 (55,317) 46,562
------- ------ ------- ------
Total revenue 83,560 149,718 272,840 452,710
------ ------- ------- -------
Costs and expenses:
Depreciation - 64,254 64,077 205,538
Interest - 436 43 3,398
Related party expenses (note 3):
Management fees (478) 7,981 5,498 24,301
General and administrative 37,741 14,826 71,618 42,219
(Reversal of) provision for
doubtful accounts (27,911) (8,126) (1,507) 6,708
------- ------ ------ -----
Total costs and expenses 9,352 79,371 139,729 282,164
----- ------ ------- -------
Net income $ 74,208 $ 70,347 $ 133,111 $ 170,546
= ====== = ====== = ======= = =======
Net income (loss) per Limited
Partnership Unit $ 2.81 $ (0.63) $ 4.00 $ (2.45)
= ==== = ===== = ==== = =====
</TABLE>
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-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 $ 133,111 $ 170,546
- ------- - -------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 64,077 205,538
(Reversal of) provision for doubtful accounts (1,507) 6,708
Net loss (gain) on sale of equipment 55,317 (46,562)
Net (increase) decrease in current assets (47,647) 39,984
Net decrease in current liabilities (80,986) (11,795)
------- -------
Total adjustments (10,746) 193,873
------- -------
Net cash provided by operating activities 122,365 364,419
------- -------
Cash flows from investing activities:
Purchase of investment property - (2,250)
Proceeds from sales of investment property 60,113 92,655
------ ------
Net cash provided by investing activities 60,113 90,405
------ ------
Cash flows from financing activities:
Principal payments on long-term debt - (149,528)
Cash distributions to partners (455,680) (292,937)
-------- --------
Net cash used in financing activities (455,680) (442,465)
-------- --------
Net (decrease) increase in cash and cash equivalents (273,202) 12,359
Cash and cash equivalents at beginning of period 382,960 141,087
------- -------
Cash and cash equivalents at end of period $ 109,758 $ 153,446
= ======= = =======
Supplemental cash flow information:
Interest paid during the period $ 1,120 $ 4,546
= ===== = =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Nine Months Ended September 30, 1995
(Unaudited)
(1) Organization and Partnership Matters
The foregoing financial statements of Wellesley Lease Income Limited Partnership
II-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.
In the fourth quarter of 1994, the General Partner announced its intentions of
winding down the operations of the Partnership beginning in 1995. As of
September 30, 1995, all assets have been sold with the exception of the
marketable securities and the unsecured pre-petition claim, and the proceeds
have been accumulated to settle all outstanding liabilities and make a final
distribution. The Partnership will not be terminated until the unsecured
pre-petition claim against CIS has been settled and the remaining proceeds have
been distributed to the Partners (see note 4 for further discussion).
(2) 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 $27,911 and
$1,042, respectively, and $0 and $465 included in sales receivable,
respectively. The allowance for doubtful accounts included in accounts
receivable - affiliates was $75,114 and $194,623 at September 30, 1995 and
December 31, 1994, respectively, all of which is related to the 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 4).
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(Unaudited)
Reclassifications
Certain prior year financial statement items have been reclassified to conform
with the current year's financial statement presentation.
(3) 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 nine months ended
September 30, 1995 and 1994 are as follows:
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<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Management fees $ 5,498 $ 24,301
Reimbursable expenses paid 47,457 17,009
------ ------
$ 52,955 $ 41,310
= ====== = ======
</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. Also, the Partnership
reimburses the General Partner and its affiliates for certain expenses incurred
by them in connection with the operations of the Partnership.
(4) 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 $7,722.
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:
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<CAPTION>
1995 1994
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
Investment in Continental Information
<S> <C> <C> <C> <C>
Systems Corporation Stock $ 77,213 $ 69,491 $ - $ -
======== ======== ========= ==========
</TABLE>
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(Unaudited)
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.
(5) 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. The distribution
consisted of cash proceeds of $108,985 and 2,453 shares of common stock in
Continental Information Systems Corporation with a carrying value of $6,133.
Following the Trustee's second distribution, the Partnership has a remaining net
unsecured pre-petition claim of $75,114 as of July 20, 1995 (see note 6).
(6) Subsequent Events
On October 20, 1995, the Partnership received the third distribution from the
Trustee, with respect to the net unsecured pre-petition claim. The distribution
consisted of cash proceeds of $3,269 and 2,083 shares of common stock in
Continental Information Systems Corporation with a carrying value of $5,208. 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 $61,300 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 II-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 nine months ended September 30, 1995 in comparison to the same periods in
1994.
The Partnership realized net income of $74,208 and $70,347 for the quarters
ended September 30, 1995 and 1994, respectively. Rental income decreased
$123,468 between the three month periods. The decrease in rental income relates
to a sale of equipment previously on lease to Shared Medical. The sale was
executed in July, 1995 with a sale date of December, 1994 causing a $77,700
adjustment to the current quarter rental income. Accordingly, the Partnership
experienced a rental loss of $19,249 for the current quarter as a result of that
adjustment. The sale of the entire equipment portfolio and the related leases
did not occur until September, 1995; thus, there was no direct impact of the
sale on current quarter rental revenue. The net loss on the sale of equipment
between the two periods is primarily due to the current year sale of the entire
equipment portfolio, of which some equipment carried high net book values. 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.
Total costs and expenses decreased $70,019 or 88% during the third quarter of
1995 primarily due to the $64,254 decrease in depreciation expense offset by the
$22,915 increase in general and administrative expenses. The Partnership did not
recognize any depreciation expense in the current quarter due to a portion of
the equipment portfolio becoming fully depreciated and the sale of the equipment
portfolio. General and administrative expenses increased due to the
establishment and satisfaction of outstanding liabilities related to the
liquidation of the Partnership in 1995. For example, the Partnership will still
need to cover costs relating to investor reports, Schedule K-1 preparation and
mailings, etc. Management fees have decrease in relation to the adjustment
related to the Shared Medical lease and the decline in rental income, as
discussed above. The reversal of provision for doubtful accounts of $27,911 is
due to successful collection efforts on delinquent rents receivable.
The Partnership realized net income of $133,111 and $170,546 for the nine months
ended September 30, 1995 and 1994, respectively. Rental income decreased
$268,001 or 67% between the nine month periods. As discussed above in the
quarter analysis, the decrease in rental income is primarily due to the $77,700
adjustment to rental income in the third quarter of 1995. Interest income
increased as a result of higher average short-term investment balances. 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. s mentioned above, the net loss
on the sale of equipment is primarily due to the current year sales of
equipment, of which some equipment carried high net book values.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Total costs and expenses decreased $142,435 or 50% during the first nine months
of 1995 primarily as a result of lower depreciation expense exceeding the
increase in general and administrative expenses. As discussed above in the
quarter analysis, depreciation expense decreased $141,461 due to a large portion
of the equipment portfolio becoming fully depreciated and the sale of the
equipment portfolio. General and administrative expenses increased $29,399 due
to the establishment and satisfaction of outstanding liabilities related to the
liquidation of the Partnership in 1994, as discussed above. Management fees
expense decreased $18,803 as a result of the current quarter adjustment related
to the Shared Medical lease and the decline in rental income. The reversal of
provision for doubtful accounts for the nine months is due to successful
collection efforts on delinquent rents receivable, as mentioned above.
During the quarter and nine months ended September 30, 1995, the Partnership
allocated profits and losses resulting in $2.81 and $4.00 per Limited
Partnership Unit, respectively.
Liquidity and Capital Resources
During the fourth quarter of 1994, the General Partner announced its intentions
of winding down the operations of the Partnership beginning in 1995. As of
September 30, 1995, substantially all of the assets have been liquidated and the
proceeds have been accumulated to settle all outstanding liabilities and make a
final distribution. As discussed in note 6 Subsequent Events, the Partnership
received the third distribution from the Trustee, with respect to the unsecured
pre-petition claim. The distribution consisted of cash proceeds of $3,269 and
2,083 shares of common stock in Continental Information Systems Corporation with
a carrying value of $5,208. 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 unsecured pre-petition claim balance of $61,300 as
of October 20, 1995.
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. In doing so, the
Partnership anticipates selling the stock and distributing the proceeds to the
investors in the form of a final distribution within the next twelve months.
The Partnership's investing activities for the nine months resulted in the sales
of its entire equipment portfolio with a depreciated cost basis of $165,430
generating $60,113 in sales proceeds. Also associated with the equipment sales
were $50,000 of loss charge offs against the reserve, initially set up in prior
periods for estimated losses on the ultimate disposition of equipment.
Cash distributions are currently at an annual level of 3% per Limited
Partnership Unit or $3.75 per Limited Partnership Unit on a quarterly basis. For
the quarter ended September 30, 1995, the Partnership declared a distribution of
$97,646, of which $4,882 is allocated to the General Partners and $92,764 is
allocated to the Limited Partners. The distribution will be made on November 28,
1995. As discussed above, the Partnership is accumulating its cash in
anticipation of a final distribution. The effects of inflation have not been
significant to the Partnership and are not expected to have a material impact in
future periods.
<PAGE>
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<CAPTION>
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-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 II-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> 0000739709
<NAME> WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II A
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 109,758
<SECURITIES> 69,491
<RECEIVABLES> 75,114
<ALLOWANCES> 75,114
<INVENTORY> 0
<CURRENT-ASSETS> 179,249
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 179,249
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 11,020,501
0
0
<OTHER-SE> (10,841,252)
<TOTAL-LIABILITY-AND-EQUITY> 179,249
<SALES> 132,173
<TOTAL-REVENUES> 272,840
<CGS> 0
<TOTAL-COSTS> 5,498
<OTHER-EXPENSES> 135,695
<LOSS-PROVISION> (1,507)
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 133,111
<INCOME-TAX> 0
<INCOME-CONTINUING> 133,111
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133,111
<EPS-PRIMARY> 4.00
<EPS-DILUTED> 0
</TABLE>
