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-D
(Exact name of registrant as specified in its charter)
Massachusetts 04-2819913
(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-D
(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-D
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
9/30/95 12/31/94
Investment property, at cost:
<S> <C> <C>
Computer equipment $ - $ 966,011
Less accumulated depreciation - 924,484
- -------
Investment property, net - 41,527
Cash and cash equivalents 65,313 871,445
Marketable securities (notes 2 & 4) 107,523 -
Rents receivable - 2,946
Accounts receivable - affiliates, net (note 2) - -
------ -----
Total assets $ 172,836 $ 915,918
= ======= = =======
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued expenses - affiliates $ - $ 43,219
Accounts payable and accrued expenses - 70,321
Unearned rental income - 4,769
----- -----
Total liabilities - 118,309
----- -------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 1,499,773 1,414,723
Cumulative cash distributions (1,500,773) (1,442,825)
---------- ----------
- (27,102)
----- -------
Limited Partners (55,050 units):
Capital contribution, net of offering costs 24,523,033 24,523,033
Cumulative net income 4,176,551 3,715,479
Cumulative cash distributions (28,514,801) (27,413,801)
----------- -----------
184,783 824,711
------- -------
Unrealized losses on marketable securities (note 4) (11,947) -
------- -------
Total partners' equity 172,836 797,609
------- -------
Total liabilities and partners' equity $ 172,836 $ 915,918
= ======= = =======
</TABLE>
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D
(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 $ - $ 89,609 $ 115,886 $ 253,791
Interest income 586 2,277 14,927 4,508
Other income - - 62,524 -
Net gain on sale
of equipment - 6,549 54,291 162,432
Recovery of net unsecured
pre-petition claim (note 5) 224,397 - 392,692 -
------- ------ ------- ------
Total revenue 224,983 98,435 640,320 420,731
------- ------ ------- -------
Costs and expenses:
Depreciation - 32,525 12,056 102,252
Interest - 354 43 1,683
Related party expenses (note 3):
Management fees - 4,219 4,658 11,462
General and administrative - 26,388 81,466 79,217
Net loss on sale of marketable
securities 2,207 - 2,207 -
(Reversal of) provision for
doubtful accounts - 4,181 (6,232) (9,201)
----- ----- ------ ------
Total costs and expenses 2,207 67,667 94,198 185,413
----- ------ ------ -------
Net income $ 222,776 $ 30,768 $ 546,122 $ 235,318
= ======= = ====== = ======= = =======
Net income (loss) per Limited
Partnership Unit $ 3.78 $ 0.43 $ 8.37 $ (3.91)
= ==== = ==== = ==== = =====
</TABLE>
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D
(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 $ 546,122 $ 235,318
- ------- - -------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 12,056 102,252
Net gain on sale of equipment (54,291) (162,432)
Net loss on sale of marketable securities 2,207 -
Reversal of provision for doubtful accounts (6,232) (9,201)
Net (increase) decrease in current assets (190,274) 67,232
Net decrease in current liabilities (118,309) (198,755)
-------- --------
Total adjustments (354,843) (200,904)
-------- --------
Net cash provided by operating activities 191,279 34,414
------- ------
Cash flows from investing activities:
Purchase of investment property - (1,137)
Proceeds from sales of marketable securities 77,775 -
Proceeds from sales of investment property 83,762 224,345
------ -------
Net cash provided by investing activities 161,537 223,208
------- -------
Cash flows from financing activities:
Principal payments on notes payable - affiliate - (41,424)
Cash distributions to partners (1,158,948) (217,304)
---------- --------
Net cash used in financing activities (1,158,948) (258,728)
---------- --------
Net decrease in cash and cash equivalents (806,132) (1,106)
Cash and cash equivalents at beginning of period 871,445 43,184
------- ------
Cash and cash equivalents at end of period $ 65,313 $ 42,078
= ====== = ======
Supplemental cash flow information:
Interest paid during the period $ 1,120 $ 1,683
= ===== = =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D
(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
II-D (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 June 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 common stock in Continental
Information Systems Corporation has been liquidated and the sales proceeds have
been distributed to the Partners (see note 5 for further discussion).
(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 September 30, 1995 and December 31, 1994,
the allowance for doubtful accounts included in accounts receivable - affiliates
was $0 and $246,368, respectively, all of which was related to the unsecured
pre-petition 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).
Reclassifications
Certain prior year financial statement items have been reclassified to conform
with the current year's financial statement presentation.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(Unaudited)
(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 quarters ended
September 30, 1995 and 1994 are as follows:
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<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Management fees $ 4,658 $ 11,462
Reimbursable expenses paid 49,989 65,487
------ ------
$ 54,647 $ 76,949
= ====== = ======
</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 operation 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 $11,947.
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 $119,470 $107,523 $ - $ -
======== ======== ========= ==========
</TABLE>
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D
(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 4
Subsequent Events, the Partnership received the second and final distribution
from the Trustee, with respect to the net unsecured pre-petition claim. The
distribution consisted of cash proceeds of $193,239 and 12,463 shares of common
stock in Continental Information Systems Corporation with a carrying value of
$31,158. Following the Trustee's second distribution, the Partnership's net
unsecured pre-petition claim has been settled as of July 20, 1995 and there are
no other outstanding receivable balances.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D
(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 $222,776 and $30,768 for the quarters
ended September 30, 1995 and 1994, respectively. Interest income decreased as a
result of lower average short-term investment balances. The recovery of the net
unsecured pre-petition claim was the result of the second and final 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 97% in 1995 due to the Partnership's
discontinued operations as of September 30, 1995. The Partnership was able to
sell a portion of its marketable securities during the current quarter in
accordance with the Securities and Exchange Commission restrictions, realizing a
net loss of $2,207.
The Partnership realized net income of $546,122 and $235,318 and rental income
of $115,886 and $253,791 for the nine months ended September 30, 1995 and 1994,
respectively. Rental income decreased $137,905 between the nine month periods.
The decrease in rental income is primarily due to the continued decrease of the
equipment portfolio. Interest income increased as a result of higher average
short-term investment balances. Other income has increased from 1994 due to the
result of the reduction of overstated liabilities recorded in prior periods. The
large 1994 net gain on sale of equipment is due to significant sales of
equipment carrying low net book values in the first quarter of 1994. 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 final distribution along
with the second quarter of 1995 establishment of the carrying value of the stock
received in the December 27, 1994.
Total costs and expenses decreased $91,215 or 49% during the first nine months
of 1995 primarily as a result of lower depreciation expense. Depreciation
expense decreased due to a large portion of the equipment portfolio becoming
fully depreciated and the sale of the equipment portfolio. Management fees
expense decreased in relation to the decline in rental income. As mentioned
above, the net loss on sale of marketable securities in the current quarter is
due to the sale of stock having a fair value less than the carrying value.
During the quarter and nine months ended September 30, 1995, the Partnership
recorded net income per Limited Partnership Unit of $3.78 and $8.37,
respectively.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
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 June
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 5 Bankruptcy of Continental Information
Systems Corporation, the Partnership received the second and final distribution
from the Trustee, with respect to the unsecured pre-petition claim. The
distribution consisted of cash proceeds of $193,239 and 12,463 shares of common
stock in Continental Information Systems Corporation with a carrying value of
$31,158. Following the Trustee's second distribution, the Partnership's
unsecured pre-petition claim has been settled as of July 20, 1995 and there are
no other outstanding receivable balances.
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 by the end of 1995.
The Partnership's investing activities for the nine months resulted in the sale
of its entire equipment portfolio with a cost basis of $966,011, generating
$83,762 in proceeds. Also associated with the equipment sales were $39,114 of
loss charge offs against the reserve, initially set up in prior periods for
estimated losses on the ultimate disposition of equipment. The Partnership's
investing activities also resulted in the sale of marketable securities, with a
cost basis of $79,982, generating $77,775 in proceeds.
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 September 30, 1995, the Partnership declared a cash
distribution of $72,434, of which $3,622 was allocated to the General Partners
and $68,813 was 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 any material
impact in future periods.
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<CAPTION>
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D
(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-D
(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> 0000739712
<NAME> WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II D
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 65,313
<SECURITIES> 107,523
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 172,386
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 172,386
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 24,524,033
0
0
<OTHER-SE> (24,351,197)
<TOTAL-LIABILITY-AND-EQUITY> 172,386
<SALES> 115,886
<TOTAL-REVENUES> 640,320
<CGS> 0
<TOTAL-COSTS> 4,658
<OTHER-EXPENSES> 95,729
<LOSS-PROVISION> (6,232)
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 546,122
<INCOME-TAX> 0
<INCOME-CONTINUING> 546,122
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 546,122
<EPS-PRIMARY> 8.37
<EPS-DILUTED> 0
</TABLE>
