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. 2-95011
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(Exact name of registrant as specified in its charter)
Massachusetts 04-2850823
(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-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 - 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 10
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-D
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
9/30/95 12/31/94
Investment property, at cost (note 3):
<S> <C> <C>
Computer equipment $ 8,367,083 $ 7,469,559
Less accumulated depreciation 5,379,001 4,853,270
--------- ---------
Investment property, net 2,988,082 2,616,289
Cash and cash equivalents 451,381 592,377
Rents receivable, net (note 2) 173,982 58,471
Sales receivable, net (note 2) - 4,940
Accounts receivable - affiliates (note 4) - 12,332
------- ------
Total assets $ 3,613,445 $ 3,284,409
= ========= = =========
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 6) $ 421,392 $ 278,737
Accounts payable and accrued expenses - affiliates (note 4) 131,167 48,297
Accounts payable and accrued expenses 35,452 89,863
Unearned rental income 13,584 31,494
Distribution payable 23,904 -
Notes payable - affiliates (note 5) 200,000 -
Long-term debt, less current portion (note 6) 207,626 88,008
------- ------
Total liabilities 1,033,125 536,399
--------- -------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 519,826 479,918
Cumulative cash distributions (524,294) (487,110)
-------- --------
(3,468) (6,192)
------ ------
Limited Partners (20,185 Units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 3,558,050 3,021,988
Cumulative cash distributions (9,961,301) (9,254,825)
---------- ----------
2,583,788 2,754,202
--------- ---------
Total partners' equity 2,580,320 2,748,010
--------- ---------
Total liabilities and partners' equity $ 3,613,445 $ 3,284,409
= ========= = =========
</TABLE>
See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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 $ 685,802 $ 638,072 $ 1,914,439 $ 1,773,451
Interest income 4,134 11,734 12,577 26,885
Net (loss) gain on sale
of equipment (10,144) 24,672 1,110 344,646
------- ------ ----- -------
Total revenue 679,792 674,478 1,928,126 2,144,982
------- ------- --------- ---------
Costs and expenses:
Depreciation 394,084 428,167 1,127,687 1,154,646
Interest 17,249 4,873 30,418 8,851
Related party expenses (note 4):
Management fees 47,454 37,705 125,859 112,987
General and administrative 28,324 26,161 88,540 75,716
(Reversal of) provision for
doubtful accounts - 11,465 (20,348) 11,465
------ ------ ------- ------
Total costs and expenses 487,111 508,371 1,352,156 1,363,665
------- ------- --------- ---------
Net income $ 192,681 $ 166,107 $ 575,970 $ 781,317
= ======= = ======= = ======= = =======
Net income per Limited
Partnership Unit $ 8.96 $ 7.77 $ 26.56 $ 36.72
= ==== = ==== = ===== = =====
</TABLE>
See accompanying notes to financial statements.
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<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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 $ 575,970 $ 781,317
- ------- - -------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 1,127,687 1,154,646
(Reversal of) provision for doubtful accounts (20,348) 11,465
Net gain on sale of equipment (1,110) (344,646)
Net (increase) decrease in current assets (77,891) 64,176
Net increase (decrease) in current liabilities 10,549 (57,102)
------ -------
Total adjustments 1,038,887 828,539
--------- -------
Net cash provided by operating activities 1,614,857 1,609,856
--------- ---------
Cash flows from investing activities:
Purchase of investment property (1,601,412) (1,222,451)
Proceeds from sales of investment property 103,042 623,998
------- -------
Net cash used in investing activities (1,498,370) (598,453)
---------- --------
Cash flows from financing activities:
Proceeds from borrowings on notes payable - affiliates 339,047 -
Principal payments on notes payable - affiliates (139,047) -
Proceeds from borrowings on long-term debt 643,906 266,596
Principal payments on long-term debt (381,633) (194,732)
Cash distributions to partners (719,756) (796,778)
-------- --------
Net cash used in financing activities (257,483) (724,914)
-------- --------
Net (decrease) increase in cash and cash equivalents (140,996) 286,489
Cash and cash equivalents at beginning of period 592,377 621,024
------- -------
Cash and cash equivalents at end of period $ 451,381 $ 907,513
= ======= = =======
Supplemental cash flow information:
Interest paid during the period $ 31,496 $ 9,866
= ====== = =====
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(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
III-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.
(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 September 30, 1995 and December 31, 1994,
the allowance for doubtful accounts included in rents receivable was $39,170 and
$55,208, respectively, and $0 and $4,310 included in sales receivable,
respectively.
Reclassifications
Certain prior year financial statement items have been reclassified to conform
with the current year's financial statement presentation.
(3) Investment Property
At September 30, 1995, the Partnership owned computer equipment with a
depreciated cost basis of $2,988,082 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-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(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 years ended
September 30, 1995 and 1994 are as follows:
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1995 1994
---- ----
<S> <C> <C>
Equipment acquisition fees $ 46,643 $ 35,370
Management fees 125,859 112,987
Reimbursable expenses paid 89,336 71,294
------ ------
$ 261,838 $ 219,651
= ======= = =======
</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.
(5) Notes Payable-Affiliates
Notes payable-affiliates at September 30, 1995, consists of one non-recourse
promissory note payable to TLP Leasing Programs, Inc. in the amount of $200,000,
bearing interest at the rate of 8.75%. The note payable matures in 1996.
(6) Long-term Debt
Long-term debt at September 30, 1995 consists of one loan for $16,211 from
Randolph Computer Company with an interest rate of 5.75%, one loan for $94,891
from Relational Funding with an interest rate of 8.15%, two loans totaling
$224,894 from Union Chelsea National Bank each with an interest rate of 9.00%,
one loan for $56,078 from CIS Group/Equipment Financing, Incorporated with an
interest rate of 14.17%, and seven installment notes from Pullman Capital
Corporation totaling $236,944, all with an interest rate of 8.00%. All loans are
non-recourse and are collateralized by equipment on the respective leases with a
total net book value of $1,122,243 and assignment of the related leases.
Maturities of long-term debt are as follows:
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<S> <C> <C>
1995 $ 166,178
1996 292,364
1997 141,602
1998 28,874
------
$ 629,018
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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 month periods ended September 30, 1995 compared to the same period in
1994.
The Partnership realized net income of $192,681 and $166,107 for the quarters
ended September 30, 1995 and 1994, respectively. Rental income on operating
leases increased $47,730 or 7% between the three month periods. The increase in
rental income can be attributed to rents resulting from new equipment
acquisitions totaling $1,601,412 and $1,222,451, in 1995 and 1994, respectively.
Interest income decreased as a result of lower average short-term investment
balances held during the current quarter. The decrease in net gain on the sale
of equipment between the three month periods is primarily due to fewer equipment
sales in the third quarter of 1995.
Total costs and expenses decreased $21,260 or 4% between the three month
periods. The decrease in costs and expenses is primarily a result of lower
depreciation expense. Depreciation expense decreased due to a large portion of
the equipment portfolio becoming fully depreciated. Also included in
depreciation expense for the quarter ended September 30, 1995 is a provision of
$10,000 for estimated losses on the ultimate disposition of equipment. Interest
expense increased $12,376 between the three month periods due to the payoff and
continued paydown of the notes payable-affiliates and long-term debt. Management
fees have increased due to the increase in rental income on operating leases.
General and administrative expenses increased with the overall rise in rental
income. The third quarter of 1994 reflected a provision for doubtful accounts of
$11,465 to reserve for uncollectible accounts.
The Partnership realized net income of $575,970 and $781,317 for the nine month
periods ended September 30, 1995 and 1994, respectively. Rental income on
operating leases increased $140,988 or 8%. As discussed in the quarter analysis
above, the increase in rental income is directly related to the significant
amount of equipment acquisitions in 1994 and 1995. Interest income decreased
$14,308 due to the Partnership carrying lower average short-term investment
balances during 1995. The decrease in net gain on sale of equipment is
attributed to fewer equipment sales in 1995. The large 1994 net gain on sale of
equipment is due to the large number of equipment sales of equipment carrying
low net book values.
Total costs and expenses decreased $11,509 or 1% between the nine month periods.
The decrease in costs and expenses is primarily the result of lower depreciation
expense along with the current year reversal of provision for doubtful accounts.
As discussed above, depreciation expense decreased due to a large portion of the
equipment portfolio becoming fully depreciated. Also included in depreciation
expense for the nine months ended September 30, 1995 is a provision for $10,000
for estimated losses on the ultimate disposition of equipment. Interest expense
increased $21,567 due to the payoff and continued paydown on the installment
notes payable-affiliates and long-term debt. Management fees have increased
along with the increase in rental income, as mentioned in the quarter analysis
above. Correspondingly, general and administrative expenses increased in
relation to the overall increase rental income. The reversal of provision for
doubtful accounts of $20,348 is due to successful collection efforts on
delinquent accounts in 1995.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
During the quarter ended September 30, 1995 and the nine months ended September
30, 1995, the Partnership allocated profits and losses resulting in $8.96 and
$26.56 per Limited Partnership Unit, respectively. The allocation for the nine
months ended September 30, 1995 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 in the first nine months of 1995. 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 the
Limited Partners in instances when the Partnership's operations were profitable
for the period.
Liquidity and Capital Resources
For the nine months ended September 30, 1995, rental revenue generated from the
operating leases was the primary source of funds for the Partnership. As the
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 derive
the most favorable results.
Rental income will begin to decrease in 1995 due to two factors. The first
factor is the rate obtained when the original leases expire and are remarketed
at a lower rate. 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 and notes payable-affiliates 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 $2,985,523 and are expected to be received over the next four
years.
In the first nine months, the Partnership's investing activities resulted in
equipment purchases of $1,601,412 and equipment sales with a depreciated cost
basis of $113,631, generating $103,042 in proceeds. Associated with the
equipment sales were $11,699 of loss charge offs against the reserve, initially
set up in prior periods for estimated losses on the ultimate disposition of
equipment. 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 the paydown on long-term debt
in the amount of $381,633 and proceeds from borrowing on long-term debt of
$643,906 for the nine months ended September 30, 1995. The Partnership will
payoff its remaining long-term debt of $629,018 by 1998. Total long-term debt
assumed by the Partnership from inception is $6,529,065, for a total leverage of
23%. The Partnership's financing activities also resulted in proceeds from the
borrowing on notes payable - affiliates in the amount of $339,047 and the
paydown on the installment note during the first nine months of 1995 in the
amount of $139,047. Such notes payable - affiliates will be paid off in 1996.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Cash distributions are currently at an annual level of 8% per Limited
Partnership Unit or $10.00 per Limited Partnership Unit on a quarterly basis.
For the quarter ended September 30, 1995, the Partnership declared a cash
distribution of $212,474, of which $10,624 was allocated to the General Partner
and $201,850 was allocated to the Limited Partners. The distribution will be
made on November 28, 1995. 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 a material impact in future
periods.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
Lessee
American Telephone & Telegraph, Incorporated
Applied Magnetics Corporation
Caterpillar, Incorporated
Champs Software, Incorporated
Chrysler Motors Corporation
Coulter Leasing Corporation
Delphi Internet Services Corporation
Exxon Company, U.S.A.
George Melhado and Company
H.J. Meyers & Company, Incorporated
Halliburton Company, Incorporated
Hughes Aircraft Corporation
Integrated Systems Technology Corporation
Invetech Company
J. Walter Thompson, U.S.A., Incorporated
Magnavox Electronic Systems Company, Incorporated Maryland Casualty Insurance
Company, Incorporated Merchants Association of Florida, Incorporated Mercury
Marine, Division of Brunswick Corporation Mobil Oil Corporation New York Life
Insurance Company NYNEX National, Incorporated ON Technology Corporation Owens -
Corning Fiberglass Corporation Packard Hughes Interconnect, Incorporated Simmons
Market Research Bureau, Incorporated Thomas James Associates, Incorporated Troll
Associates, Incorporated Western Atlas Company, Incorporated Xerox Corporation
<TABLE>
<CAPTION>
Equipment Description Acquisition Price
<S> <C>
Computer peripherals $ 3,263,163
Processors & upgrades 3,514,175
Other 1,589,745
---------
$ 8,367,083
= =========
</TABLE>
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<CAPTION>
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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>
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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 III-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> 0000760386
<NAME> WELLESLEY LEASE INCOME LIMITED PARTNESHIP III D
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 451,381
<SECURITIES> 0
<RECEIVABLES> 213,152
<ALLOWANCES> 39,170
<INVENTORY> 0
<CURRENT-ASSETS> 625,363
<PP&E> 8,367,083
<DEPRECIATION> 5,379,001
<TOTAL-ASSETS> 3,613,445
<CURRENT-LIABILITIES> 204,107
<BONDS> 829,018
<COMMON> 8,988,039
0
0
<OTHER-SE> (6,407,719)
<TOTAL-LIABILITY-AND-EQUITY> 3,613,445
<SALES> 1,914,439
<TOTAL-REVENUES> 1,928,126
<CGS> 0
<TOTAL-COSTS> 125,859
<OTHER-EXPENSES> 1,216,227
<LOSS-PROVISION> (20,348)
<INTEREST-EXPENSE> 30,418
<INCOME-PRETAX> 575,970
<INCOME-TAX> 0
<INCOME-CONTINUING> 575,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 575,970
<EPS-PRIMARY> 26.56
<EPS-DILUTED> 0
</TABLE>
