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-C
(Exact name of registrant as specified in its charter)
Massachusetts 04-2846629
(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-C
(A Massachusetts Limited Partnership)
INDEX Page No.
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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-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 $ 988,954 $ 1,495,761
Less accumulated depreciation 744,193 1,217,633
---------------- ----------------
Investment property, net 244,761 278,128
Cash and cash equivalents 96,797 58,929
Marketable securities (note 6) 45,922 44,599
Rents receivable, net (note 2) 54,126 25,775
Sales receivable 50 50
---------------- ----------------
Total assets $ 441,656 $ 407,481
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 24,021 $ 38,051
Accounts payable and accrued expenses - affiliates (note 4) 6,093 8,210
Accounts payable and accrued expenses 173,064 176,888
Unearned rental revenue - 2,176
---------------- ----------------
Total liabilities 203,178 225,325
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 569,996 540,111
Cumulative cash distributions (627,462) (624,170)
Unrealized losses on marketable securities (note 6) (65) (79)
---------------- ----------------
(56,531) (83,138)
---------------- ----------------
Limited Partners (25,020 units):
Capital contribution, net of offering costs 11,139,685 11,139,685
Cumulative net income 1,083,587 992,631
Cumulative cash distributions (11,921,780) (11,859,230)
Unrealized losses on marketable securities (note 6) (6,483) (7,792)
---------------- ----------------
295,009 265,294
---------------- ----------------
Total partners' equity 238,478 182,156
---------------- ----------------
Total liabilities and partners' equity $ 441,656 $ 407,481
================ ================
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Statements of Operations
For the Quarters Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
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Revenue:
Rental income $ 78,267 $ 136,281
Other income - 26,459
Interest income 913 3,519
Net gain (loss) on sale of equipment 96,525 (48,215)
-------------- ---------------
Total revenue 175,705 118,044
-------------- ---------------
Costs and expenses:
Depreciation 33,367 113,147
Interest 676 2,884
Related party expenses (note 4):
Management fees 3,346 9,435
General and administrative 17,475 13,857
-------------- ---------------
Total costs and expenses 54,864 139,323
-------------- ---------------
Net income (loss) $ 120,841 $ (21,279)
============== ===============
Net income (loss) per Limited Partnership Unit $ 3.64 $ (4.03)
============== ===============
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Quarters Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
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Cash flows from operating activities:
Net income (loss) $ 120,841 $ (21,279)
---------------- ----------------
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation 33,367 113,147
Net (gain) loss on sale of equipment (96,525) 48,215
Net (increase) decrease in current assets (28,351) 4,002
Net decrease in current liabilities (8,117) (16,670)
---------------- ----------------
Total adjustments (99,626) 148,694
---------------- ----------------
Net cash provided by operating activities 21,215 127,415
---------------- ----------------
Cash flows from investing activities:
Purchase of investment property - (167,898)
Proceeds from sales of investment property 96,525 12,865
---------------- ----------------
Net cash provided by (used in) investing activities 96,525 (155,033)
---------------- ----------------
Cash flows from financing activities:
Principal payments on long-term debt (14,030) (12,942)
Cash distributions to partners (65,842) (125,100)
---------------- ----------------
Net cash used in financing activities (79,872) (138,042)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 37,868 (165,660)
Cash and cash equivalents at beginning of period 58,929 325,125
---------------- ----------------
Cash and cash equivalents at end of period $ 96,797 $ 159,465
================ ================
Supplemental cash flow information:
Interest paid during the period $ 676 $ 2,884
================ ================
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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
III-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) Summary of 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 $814.
(3) Investment Property
At March 31, 1996, the Partnership owned computer equipment with a depreciated
cost basis of $244,761, 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-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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Equipment acquisition fees $ - $ 4,890
Management fees 3,346 9,435
Reimbursable expenses paid 21,610 18,449
------------ ------------
$ 24,956 $ 32,774
============ ============
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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. Also, the Partnership
reimburses the General Partner and its affiliates for certain expenses incurred
by them in connection with the operation of the Partnership.
(5) Long-term Debt
Long-term debt at March 31, 1996 consists of a $24,021 nonrecourse installment
note with an interest rate of 8.10% from Pioneer Bank and Trust Company,
collateralized by the equipment with a net book value of $52,516 and assignment
of the related lease.
Such long-term debt of $24,021 matures in 1996.
(6) 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
$6,548.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Quarters Ended March 31, 1996 and March 31, 1995
(Unaudited)
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
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Investment in Continental Information
Systems Corporation Stock $ 52,470 $ 45,922 $ 52,470 $ 44,599
======== ======== ======== ========
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WELLESLEY INCOME LIMITED PARTNERSHIP III-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 $120,841 and a net loss of $21,279 for
the quarters ended March 31, 1996 and 1995, respectively. Rental income
decreased $58,014 or 43% in 1996. The decrease is primarily due to lower rental
rates obtained on equipment lease extensions and remarketings resulting after
the initial lease term expires and due to a net decrease in the overall size of
the equipment portfolio. Other income reported in 1995 is the result of the
reduction of overstated liabilities recorded in prior periods. Interest income
has decreased as a result of lower short-term investment balances held during
1996. The net gain on sale of equipment of $96,525 can be attributed to sales of
fully depreciated equipment during the current quarter, versus a net loss on
sale of equipment of $48,215 recognized in the prior period.
Total cost and expenses decreased $84,459 or 61% between the three month
periods. The decrease in costs and expenses is primarily a result of lower
depreciation expense. Depreciation expense decreased in the current quarter due
to a portion of the equipment portfolio becoming fully depreciated. Interest
expense decreased $2,208 due to the larger paydown of principal of long-term
debt during the current quarter. Management fees expenses have decreased due to
the decline in rental income. General and administrative expenses increased
$3,618 or 26%. 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 $3.64 and a
net loss per Limited Partnership Unit of $4.03 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 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.
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WELLESLEY INCOME LIMITED PARTNERSHIP III-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. This decrease, however,
should not affect the Partnership's ability to meet its future cash
requirements, including its long-term debt obligations. To the extent that
future cash flows should be insufficient to meet the Partnership's operating
expenses and liabilities, additional funds could be obtained through the sale of
equipment, or a reduction in the rate of cash distributions. Future rental
revenues amount to $210,847 and are to be received over the next three years.
The Partnership's investing activities for the current quarter resulted in fully
depreciated equipment sales, generating $96,525 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.
The Partnership's financing activities resulted in a paydown on long-term debt
during the quarter of $14,030. Such long-term debt bears interest at 8.10% with
installments to be paid monthly. Total long-term debt assumed by the Partnership
from inception is $10,641,478, for a total leverage of 43%.
Cash distributions are currently at an annual level of 2% per Limited
Partnership Unit, or $2.50 per Limited Partnership Unit on a quarterly basis.
For the quarter ended March 31, 1996, the Partnership declared a cash
distribution of $65,842, of which $3,292 was allocated to the General Partner
and $62,550 was allocated to the Limited Partners. The distribution will be made
on May 29, 1996. The Partnership expects to continue paying at or near this
level in the future. The effects of inflation have not been significant to the
Partnership and are not expected to have any material impact in the 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 III-C
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
March 31, 1996
Lessee
Baylor Health Network, Incorporated
Centura Bank
Genix Corporation
Hughes Aircraft Company, Incorporated
J. Walter Thompson & Co.
Mitsubishi, Incorporated
New York Life Insurance Company, Incorporated
NYNEX National, Incorporated
Sports & Recreation, Incorporated
USG Corporation
Xerox Corporation
Equipment Description Acquisition Price
Computer peripherals $ 187,902
Processors & upgrades 524,145
Telecommunications 247,238
Other 29,669
--------------
$ 988,954
==============
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PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
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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 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-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> 0000760382
<NAME> WELLESLEY III-C 03/31/96
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 96,797
<SECURITIES> 45,922
<RECEIVABLES> 54,990
<ALLOWANCES> 814
<INVENTORY> 0
<CURRENT-ASSETS> 196,895
<PP&E> 988,954
<DEPRECIATION> 744,193
<TOTAL-ASSETS> 441,656
<CURRENT-LIABILITIES> 179,157
<BONDS> 24,021
<COMMON> 11,140,685
0
0
<OTHER-SE> (10,902,208)
<TOTAL-LIABILITY-AND-EQUITY> 441,655
<SALES> 78,267
<TOTAL-REVENUES> 175,705
<CGS> 0
<TOTAL-COSTS> 3,346
<OTHER-EXPENSES> 50,842
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 676
<INCOME-PRETAX> 120,841
<INCOME-TAX> 0
<INCOME-CONTINUING> 120,841
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,841
<EPS-PRIMARY> 3.64
<EPS-DILUTED> 0
</TABLE>
