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 March 31, 1996 Commission File No. 2-95011
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(Exact name of registrant as specified in its charter)
Massachusetts 04-2846627
(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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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(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 - 8
Management's Discussion and Analysis of Financial Condition and 9 - 10
Results of Operations
Computer Equipment Portfolio 11
Part II. OTHER INFORMATION
Items 1 - 6 12
Signature 13
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PART I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(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 $ 1,556,972 $ 1,556,972
Less accumulated depreciation 1,478,970 1,444,538
---------------- ----------------
Investment property, net 78,002 112,434
Cash and cash equivalents 41,006 123,547
Marketable securities (notes 2 & 5) 10,459 10,158
Rents receivable, net (note 2) 67,364 17,627
Sales receivable - 1,125
Accounts receivable - affiliates (notes 2, 4 & 6) - -
---------------- ----------------
Total assets $ 196,831 $ 264,891
================ ================
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued expenses - affiliates (note 4) $ 13,050 $ 6,657
Accounts payable and accrued expenses 29,592 31,749
Unearned rental revenue - 550
---------------- ----------------
Total liabilities 42,642 38,956
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 662,281 660,945
Cumulative cash distributions (661,446) (656,508)
Unrealized losses on marketable securities (note 5) (15) (18)
---------------- ----------------
1,820 5,419
---------------- ----------------
Limited Partners (25,020 units):
Capital contribution, net of offering costs 11,139,998 11,139,998
Cumulative net income 1,581,394 1,556,014
Cumulative cash distributions (12,567,546) (12,473,721)
Unrealized losses on marketable securities (note 5) (1,477) (1,775)
---------------- ----------------
152,369 220,516
---------------- ----------------
Total partners' equity 154,189 225,935
---------------- ----------------
Total liabilities and partners' equity $ 196,831 $ 264,891
================ ================
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See accompanying notes to financial statements.
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<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(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 $ 77,066 $ 117,243
Net gain on equipment - 1,690
Interest income 938 1,541
Recovery of net unsecured pre-petition claim (note 6) 2,630 -
-------------- --------------
Total revenue 80,634 120,474
-------------- --------------
Costs and expenses:
Depreciation 34,432 51,169
Interest - 1,599
Related party expenses (note 4):
Management fees 2,216 6,157
General and administrative 17,270 15,605
-------------- --------------
Total costs and expenses 53,918 74,530
-------------- --------------
Net income $ 26,716 $ 45,944
============== ==============
Net income per Limited Partnership Unit $ 1.01 $ 1.59
============== ==============
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See accompanying notes to financial statements.
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<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(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 $ 26,716 $ 45,944
--------------- ----------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 34,432 51,169
Net gain on sale of equipment - (1,690)
Net (increase) decrease in current assets (48,612) 6,248
Net increase (decrease) in current liabilities 3,686 (44,493)
--------------- ----------------
Total adjustments (10,494) 11,234
--------------- ----------------
Net cash provided by operating activities 16,222 57,178
--------------- ----------------
Cash flows from investing activities:
Proceeds from sales of investment property - 1,690
--------------- ----------------
Net cash provided by investing activities - 1,690
--------------- ----------------
Cash flows from financing activities:
Principal payments on long-term debt - (10,021)
Cash distributions to partners (98,763) (93,825)
--------------- ----------------
Net cash used in financing activities (98,763) (103,846)
--------------- ----------------
Net decrease in cash and cash equivalents (82,541) (44,978)
Cash and cash equivalents at beginning of period 123,547 75,704
--------------- ----------------
Cash and cash equivalents at end of period $ 41,006 $ 30,726
=============== ================
Supplemental cash flow information:
Interest paid during the period $ - $ 1,599
=============== ================
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(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
III-B (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) 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 March 31, 1996 and December 31, 1995, the
allowance for doubtful accounts included in rents receivable was $839. The
allowance for doubtful accounts - affiliates was $14,810 and $17,440 at March
31, 1996 and December 31, 1995, respectively, both of which pertained to the net
unsecured pre-petition claim balance.
(3) Investment Property
At March 31, 1996, the Partnership owned computer equipment with a depreciated
cost basis of $78,002, 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 III-B
(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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<S> <C> <C>
Management fees $ 2,216 $ 6,157
Reimbursable expenses paid 21,500 16,242
------------ ------------
$ 23,716 $ 22,399
============ ============
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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
$1,492.
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 $ 11,951 $ 10,459 $ 11,951 $ 10,158
======== ======== ======== ========
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Quarters Ended March 31, 1996 and March 31, 1995
(Unaudited)
(6) Bankruptcy of Continental Information Systems Corporation
On January 19, 1996, the Partnership received the fourth distribution from the
Trustee of the Liquidating Estate, et al, ("the Trustee") with respect to the
net unsecured pre-petition claim. The distribution consisted of cash proceeds of
$2,630. Following the Trustee's fourth distribution, the Partnership has a
remaining unsecured pre-petition claim balance of $14,346 as of March 31, 1996
(see note 7).
(7) Subsequent Events
On April 19, 1996, the Partnership received the fifth distribution from the
Trustee with respect to the net unsecured pre-petition claim. The distribution
consisted of cash proceeds of $4,965. Following the Trustee's fifth
distribution, the Partnership has a remaining unsecured pre-petition claim
balance of $9,381 as of April 19, 1996. 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.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(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 $26,716 and $45,944 for the quarters
ended March 31, 1996, and 1995, respectively. Rental income decreased $40,177 or
34% due to lower rental rates obtained on equipment lease extensions and
remarketings resulting after the initial lease term expires and due to the
decrease in the equipment portfolio. Interest income decreased $603 as a result
of lower average short-term investment balances held during the current quarter
of 1996. The recovery of the net unsecured pre-petition claim of $2,630 for the
quarter ended March 31, 1996 was the result of the receipt of the Trustee's
fourth distribution on the fully reserved net unsecured pre-petition receivable
(for further discussion refer to note 6 to the financial statements).
Total costs and expenses decreased $20,612 or 28% between the three month
periods primarily as a result of lower depreciation expense. Depreciation
expense decreased due to a portion of the equipment portfolio becoming fully
depreciated and due to the reduction in the overall equipment portfolio.
Management fees expense decreased with the reduction in rental income and the
rise in rent receivables. General and administrative expenses increased $1,665
or 11%. 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 $1.01 and
$1.59 for the quarters ended March 31, 1996 and 1995, respectively.
Liquidity and Capital Resources
For the quarter ended March 31, 1996, 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 option would generate the most
favorable results.
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 $70,716 and are to be received during the current year.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
During the fourth 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 will not be terminated until the unsecured pre-petition claim
against CIS has been settled and the proceeds have been distributed to the
Partners.
The Partnership has no material capital expenditure commitments and will not
purchase equipment in the future as the Partnership has announced its intentions
of liquidating the Partnership this year.
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 $32,921, of which $1,646 is allocated to the General Partner and
$31,275 is 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.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
March 31, 1996
Lessee
Brian Unlimited Distributions Company
Brylane, Incorporated
Crowley Foods, Incorporated
FAX International, Incorporated
Halliburton Company
Hughes Aircraft Company, Incorporated
Securities Industry Automation Corporation
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<CAPTION>
Equipment Description Acquisition Price
<S> <C>
Computer Peripherals $ 1,121,020
Processors & Upgrades 108,988
Other 326,964
----------------
$ 1,556,972
================
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PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B
(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 Section 13 or 15(d) 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 III-B
(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> 0000760375
<NAME> WELLESLEY LEASE INCOME LTD PSHP III-B 3-31-96 FDS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 41,006
<SECURITIES> 10,459
<RECEIVABLES> 83,013
<ALLOWANCES> 15,649
<INVENTORY> 0
<CURRENT-ASSETS> 118,829
<PP&E> 1,556,972
<DEPRECIATION> 1,478,970
<TOTAL-ASSETS> 196,831
<CURRENT-LIABILITIES> 42,642
<BONDS> 0
<COMMON> 11,140,998
0
0
<OTHER-SE> (10,986,809)
<TOTAL-LIABILITY-AND-EQUITY> 196,831
<SALES> 77,066
<TOTAL-REVENUES> 80,634
<CGS> 0
<TOTAL-COSTS> 2,216
<OTHER-EXPENSES> 51,702
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 26,716
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,716
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,716
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 0
</TABLE>
