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 The Quarter Ended June 30, 1996 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 12
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
INDEX Page No.
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of June 30, 1996 and December 31, 1995 3
Statements of Operations For the Quarters Ended
June 30, 1996 and 1995 and For the Six Months Ended
June 30, 1996 and 1995 4
Statements of Cash Flows For the Six Months Ended
June 30, 1996 and 1995 5
Notes to Financial Statements 6 - 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 9
Computer Equipment Portfolio 10
Part II. OTHER INFORMATION
Items 1 - 6 11
Signature 12
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PART I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
6/30/96 12/31/95
<S> <C> <C>
Investment property, at cost (note 3):
Computer equipment $ 5,870,620 $ 7,636,323
Less accumulated depreciation 3,945,617 5,022,967
---------------- ----------------
Investment property, net 1,925,003 2,613,356
Cash and cash equivalents 542,586 245,755
Rents receivable, net (note 2) 83,580 173,959
Sales receivable, net (note 2) 35,673 4,275
Accounts receivable - affiliates (note 4) 161,642 66,971
Other assets 4,536 11,887
---------------- ----------------
Total assets $ 2,753,020 $ 3,116,203
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 267,550 $ 380,602
Accounts payable and accrued expenses - affiliates (note 4) 17,680 32,533
Accounts payable and accrued expenses 88,495 87,381
Unearned rental revenue 8,067 540
Long-term debt, less current portion (note 5) 236,025 352,124
---------------- ----------------
Total liabilities 617,817 853,180
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 555,166 526,973
Cumulative cash distributions (556,166) (534,918)
---------------- ----------------
- (6,945)
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 3,715,014 3,446,080
Cumulative cash distributions (10,566,850) (10,163,151)
---------------- ----------------
2,135,203 2,269,968
---------------- ----------------
Total partners' equity 2,135,203 2,263,023
---------------- ----------------
Total liabilities and partners' equity $ 2,753,020 $ 3,116,203
================ ================
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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 Six Months Ended
June 30, June 30,
-------------------------------- ----------------------------------
1996 1995 1996 1995
--------------------------------- ----------------------------------
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Revenue:
Rental income $ 385,871 $ 600,236 $ 837,186 $ 1,228,637
Interest income 4,904 2,138 7,342 8,443
Net gain on sale
of equipment 25,088 7,702 229,348 11,254
--------------- ------------- -------------- ---------------
Total revenue 415,863 610,076 1,073,876 1,248,334
--------------- ------------- -------------- ---------------
Costs and expenses:
Depreciation 296,722 407,489 598,840 733,603
(Reversal of) provision for
doubtful accounts 11,244 (6,182) 11,244 (20,348)
Interest 12,358 6,092 27,821 13,169
Related party expenses (note 4):
Management fees 36,348 31,782 68,207 78,405
General and administrative 37,931 36,897 70,637 60,216
--------------- ------------- -------------- ---------------
Total costs and expenses 394,603 476,078 776,749 865,045
--------------- ------------- -------------- ---------------
Net income $ 21,260 $ 133,998 $ 297,127 $ 383,289
=============== ============= ============== ===============
Net income per Limited
Partnership Unit $ 0.52 $ 6.06 $ 13.32 $ 17.60
=============== ============= ============== ===============
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
1996 1995
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Cash flows from operating activities:
Net income $ 297,127 $ 383,289
-------------- ---------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 598,840 733,603
(Reversal of) provision for doubtful accounts 11,244 (20,348)
Net gain on sale of equipment (229,348) (11,254)
Net increase in current assets (39,583) (285,401)
Net (decrease) increase in current liabilities (6,212) 23,323
-------------- ---------------
Total adjustments 334,941 439,923
-------------- ---------------
Net cash provided by operating activities 632,068 823,212
-------------- ---------------
Cash flows from investing activities:
Purchase of investment property - (1,353,163)
Proceeds from sales of investment property 318,861 93,141
-------------- ---------------
Net cash provided by (used in) investing activities 318,861 (1,260,022)
-------------- ---------------
Cash flows from financing activities:
Proceeds from borrowings on notes payable - affiliates - 139,047
Principal payments on notes payable - affiliates - (38,322)
Proceeds from borrowings on long-term debt - 643,906
Principal payments on long-term debt (229,151) (203,851)
Cash distributions to partners (424,947) (504,625)
-------------- ---------------
Net cash (used in) provided by financing activities (654,098) 36,155
-------------- ---------------
Net increase (decrease) in cash and cash equivalents 296,831 (400,655)
Cash and cash equivalents at beginning of period 245,755 592,377
-------------- ---------------
Cash and cash equivalents at end of period $ 542,586 $ 191,722
============== ===============
Supplemental cash flow information:
Interest paid during the period $ 27,821 $ 14,246
============== ===============
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Six Months Ended June 30, 1996 and June 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, 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 June 30, 1996 and December 31, 1995, the
allowance for doubtful accounts included in rents receivable was $31,167 and
$28,448, respectively, and $8,525 and $0 included in sales receivable,
respectively.
(3) Investment Property
At June 30, 1996, the Partnership owned computer equipment with a depreciated
cost basis of $1,636,950, subject to existing leases and equipment with a
depreciated cost basis of $288,053 in inventory, awaiting re-lease or sale. 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
For the Six Months Ended June 30, 1996 and June 30, 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 six months ended
June 30, 1996 and 1995 are as follows:
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1996 1995
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Equipment acquisition fees $ - $ 39,413
Management fees 68,207 78,405
Reimbursable expenses paid 77,809 60,177
------------ ------------
$ 146,016 $ 177,995
============ ============
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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. 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 June 30, 1996 consists of one loan for $24,450 from Relational
Funding with an interest rate of 8.15%, two loans totaling $161,907 from Union
Chelsea National Bank, each bearing interest at 9.00%, one loan for $40,669 from
CIS Group/Equipment Financing, Incorporated, bearing interest at 14.17%, five
installment notes from Pullman Capital Corporation totaling $49,665, each
bearing interest at 8.00%, and one loan for $226,884 from Liberty Bank bearing
interest at 7.75%. All loans are non-recourse and are collateralized by
equipment on the respective leases with a total net book value of $612,783 and
assignment of the related leases.
Maturities on long-term debt are as follows:
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1996 $ 151,451
1997 237,488
1998 114,636
--------------
$ 503,575
==============
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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 six months ended June 30, 1996 in comparison to the same periods ended June
30, 1995.
The Partnership realized net income of $21,260 and $133,998 for the quarters
ended June 30, 1996 and 1995, respectively. Rental income decreased $214,365 or
36% 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 decrease in the overall size of the equipment
portfolio. Interest income increased from 1995 as a result of higher average
short-term investment balances held during the current quarter. The increase in
net gain on the sale of equipment in the current quarter is primarily due to a
larger number of equipment sales carrying low net book values.
Total costs and expenses decreased $81,475 or 17% in 1996. The most significant
factor impacting the decrease in costs and expenses is the current quarter
reduction of depreciation expense. Depreciation expense decreased $110,767 or
27% due to a portion of the equipment portfolio becoming fully depreciated.
During the current quarter, the Partnership established a provision for
doubtful accounts of $11,244 to reserve for potential uncollectible rents
and sales receivables. Interest expense increased $6,266 in the current quarter
due to the continued paydown of long-term debt. Management fees increased
$4,566 or 14%, despite the reduction in rental income, due to a significant
increase in collections of rent receivables during the current quarter.
The Partnership realized net income of $297,127 and $383,289 for the six months
ended June 30, 1996 and 1995, respectively. The $391,451 or 32% decrease in
rental income can be attributed to lower rental rates obtained on equipment
lease extensions and remarketings resulting after the initial lease term expires
and due to an overall reduction in equipment portfolio, as mentioned above.
Interest income decreased from 1995 as a result of lower average short-term
investment balances held during the current six month period. The significant
increase in net gain on sale of equipment in 1996 is due to the large number of
equipment sales carrying low net book values.
Total costs and expenses decreased $88,296 or 10% primarily as a result of lower
depreciation expense. As discussed in the quarter analysis above, depreciation
expense decreased $134,763 or 18% between 1996 and 1995 due to the initial
equipment portfolio becoming fully depreciated and a reduction in the overall
equipment portfolio. Interest expense increased $14,652 due to the continued
paydown of long-term debt in the current year. Management fees decreased overall
between the six month periods due to the decline in rental income on operating
leases. General and administrative expenses increased $10,421. A major
factor contributing to the 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 $0.52 and
$6.06 for the quarters ended June 30, 1996 and 1995, respectively, and $13.32
and $17.60 for the six months ended June 30, 1996 and 1995, respectively.
<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)
Liquidity and Capital Resources
For the quarter ended June 30, 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.
Rental income will continue to decrease due to two factors. The first factor is
the lower rental 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 $1,945,893 and are to be received over the next four years.
The Partnership's investing activities for the quarter resulted in equipment
sales with a depreciated cost basis of $89,513, generating $318,861 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 the paydown on long-term debt
during 1996 of $229,151. The Partnership will payoff its remaining long-term
debt of $503,575 in 1998. Total long-term debt assumed by the Partnership from
inception is $6,798,951, for a total leverage of 23%.
Cash distributions are currently at an annual level of 10% per Limited
Partnership Unit, or $12.50 per Limited Partnership Unit on a quarterly basis.
For the quarter ended June 30, 1996, the Partnership declared a cash
distribution of $265,593, of which $13,280 is allocated to the General Partner
and $252,313 is allocated to the Limited Partners. The distribution will be made
on August 29, 1996. The Partnership expects to continue paying 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 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-D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
June 30, 1996
Lessee
American Telephone & Telegraph Company, Incorporated
Applied Magnetics Corporation
Coulter Leasing Corporation
Exxon Company, U.S.A.
George Melhado and Company
Halliburton Company
H.J. Meyers & Company, Incorporated
Hughes Aircraft Company, Incorporated
Invetech Company
J. Walter Thompson, U.S.A., Incorporated
Magnavox Electronic Systems Company, Incorporated
Maryland Casualty Insurance, Incorporated
Merchants Association of Florida, Incorporated
Mercury Marine, Division of Brunswick Corporation
NYNEX National, Incorporated
ON Technology Corporation
Owens Corning Fiberglass, Incorporated
Packard Hughes Interconnect, Incorporated
Simmons Market Research Bureau, Incorporated
Sports & Recreation Company, Incorporated
Western Atlas Company, Incorporated
Xerox Corporation
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<CAPTION>
Equipment Description Acquisition Price
<S> <C>
Computer peripherals $ 2,289,542
Processors & upgrades 2,465,660
Other 1,115,418
----------------
$ 5,870,620
================
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PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(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
</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
Date: August 14, 1996
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000760386
<NAME> WELLESLEY LSE INCOME LTD PARTNERSHIP III-D FDS 6/30/96
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 542,586
<SECURITIES> 0
<RECEIVABLES> 320,587
<ALLOWANCES> 39,692
<INVENTORY> 0
<CURRENT-ASSETS> 828,017
<PP&E> 5,870,620
<DEPRECIATION> 3,945,617
<TOTAL-ASSETS> 2,753,020
<CURRENT-LIABILITIES> 114,242
<BONDS> 503,575
<COMMON> 8,988,039
0
0
<OTHER-SE> (6,852,836)
<TOTAL-LIABILITY-AND-EQUITY> 2,753,020
<SALES> 837,186
<TOTAL-REVENUES> 1,073,876
<CGS> 0
<TOTAL-COSTS> 68,207
<OTHER-EXPENSES> 669,477
<LOSS-PROVISION> 11,244
<INTEREST-EXPENSE> 27,821
<INCOME-PRETAX> 297,127
<INCOME-TAX> 0
<INCOME-CONTINUING> 297,127
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 297,127
<EPS-PRIMARY> 13.32
<EPS-DILUTED> 0
</TABLE>
