UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995 Commission File No. 2-95011
Wellesley Lease Income Limited Partnership III-D
(Exact Name of Registrant as Specified in its Charter)
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Massachusetts 04-2850823
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
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
Securities registered pursuant to Section 12(b) of the Act None
Securities registered pursuant to Section 12(g) of the Act Units of Limited Partnership Interests
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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
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 1996: Not applicable, since securities are
non-voting.
Documents incorporated by reference: None.
Exhibit Index on Page: 36
Page 1 of 37
<PAGE>
Graphic image depicting the corporate organization as discussed in Part I, Item
1 Business as follows:
Continental Information Systems Corporation ("Continental") controls CIS
Corporation ("CIS") which controls CMI Holding Co. ("Holding"). Holding controls
TLP Leasing Programs, Inc. ("TLP"), CMI Corporation ("CMI"), and TLP Securities,
Inc. TLP controls TLP Columbia Management Corp. ("TCMC") which serves as General
Partner to the Columbia Lease Income Funds. CMI controls CIS Management Services
Corp. ("CISMS"). Torchmark Corporation ("Torchmark") controls TMK/United, Inc.
which controls Waddell and Reed Financial Services, Inc. ("Waddell And Reed").
Through various dealer-manager arrangements, TLP, CISMS, and Waddell and Reed
serve as corporate general partners to the Wellesley Leasing Partnership
("Wellesley General Partner") and the Hanover Leasing Partnership. The Wellesley
General Partner is the general partner for the Wellesley Lease Income Limited
Partnership. Hanover Leasing Partnership serves as the General Partner for
Hanover Lease Income Limited Partnership with BOT Financial Corporation serving
as agent.
<PAGE>
Part I
Item 1. Business.
Wellesley Lease Income Limited Partnership III-D (the "Partnership") is a
limited partnership organized under the provisions of the Massachusetts Uniform
Limited Partnership Act on December 18, 1984. As of December 31, 1995, the
Partnership consisted of a General Partner and 1,978 Limited Partners owning
20,185 Units of Limited Partnership Interests of $500 each (the "Units"), except
that employees of the Corporate General Partners of the General Partner and
employees and securities representatives of its affiliates purchased 334 Units
for a net price of $460 per Unit, and the Partnership incurred no obligation to
pay any sales commissions with respect to such sales. The Units were sold
commencing March 19, 1985, pursuant to a Registration Statement on Form S-1
under the Securities Act of 1933. As set forth more fully at Item 10. Directors
and Executive Officers of the Partnership. of this report, the General Partner
is Wellesley Leasing Partnership, and the General Partner has three Corporate
General Partners (the "Corporate General Partners"): TLP Leasing Programs, Inc.
("TLP") and CIS Management Services Corporation ("CISMS"), both Massachusetts
corporations and Waddell & Reed Financial Services, Inc. ("Waddell & Reed",
formerly TUP Services, Inc., "TUPS"), a Missouri corporation.
The Partnership was organized to engage in the business of acquiring
income-producing computer peripheral equipment for investment purposes,
principally International Business Machines, Incorporated ("IBM") equipment. The
Partnership's principal objectives are as follows:
1. To acquire and lease equipment, primarily through operating leases, to
generate income during its entire useful life;
2. To provide quarterly distributions of cash to the Limited Partners from
leasing revenues and from the proceeds of sales or other disposition
of Partnership equipment; and
3. To reinvest a portion of lease revenues and a substantial portion of cash
from sales and refinancings in additional equipment during the first nine
years of the Partnership's operations.
The Partnership was formed primarily for investment purposes and not as a "tax
shelter".
The Partnership shall terminate on December 31, 2012, unless sooner dissolved or
terminated as provided in Section 11 of the Amended Agreement of Limited
Partnership.
The closing date of the Partnership was April 25, 1986, and aggregate equipment
purchased through December 31, 1995, is $29,439,217. At the end of 1995, there
are 41 leases in place with 22 lessees. The acquisition of these leases and
equipment is described more fully in Item 2. Properties. of this report and
notes 3 and 4 to the financial statements included in Item 8.
Financial Statements and Supplementary Data.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP from
CMI Holding Co. Under the new ownership, TLP will continue to operate in the
same manner of business as described below.
Under the Partnership Agreement, the General Partner, Wellesley Leasing
Partnership, is solely responsible for the operation of the Partnership and its
equipment. As discussed above, the General Partner has three Corporate General
Partners: TLP, CISMS and Waddell & Reed. TLP was formed in December 1982 and is
a wholly-owned subsidiary of CMI Holding Co. ("Holding"), the capital stock of
which was acquired in August 1987 by Continental Information Systems Corporation
("CISC"), in Syracuse, New York (a New York Stock Exchange-listed corporation).
Through this acquisition, CISC became the ultimate parent of TLP and CISMS. On
July 20, 1993, Holding became a wholly-owned subsidiary of CIS pursuant to a
court ordered settlement (see note 8 to the financial statements included in
Item 8. Financial Statements and Supplementary Data). While Holding and its
subsidiaries have retained their separate corporate identities since the
acquisition, their operations (except those of TLP and the limited partnerships
it manages) have been effectively integrated into those of CIS Corporation
("CIS") and its affiliates. These operations include buying, selling, financing,
leasing, and sub-leasing new and used computer equipment, and their services
include securing, financing, collecting rentals, and supervising equipment
maintenance and service. CISMS was formed in May 1985, and is a wholly-owned
subsidiary of CMI Corporation ("CMI"), which is another wholly-owned subsidiary
of Holding and an affiliate of TLP. CMI is engaged in equipment leasing,
primarily involving computer equipment and aircraft. Waddell & Reed, Inc.
(formerly TUPS) was formed in May 1986 and is an affiliate of Waddell & Reed,
Inc., which was one of the Soliciting Brokers for this offering. Both Waddell &
Reed and Waddell & Reed, Inc. are wholly-owned subsidiaries of TMK/United Inc.,
which itself is an indirect 85% owned subsidiary of Torchmark Corporation
("Torchmark").
The General Partnership Agreement between TLP and CISMS (the "General
Partnership Agreement"), provides that CISMS will propose to the Partnership
equipment acquisitions, leasing, financing and re-financing transactions, and
sale transactions, for approval by the Executive Committee, and will oversee the
operation, management and use of the Partnership's equipment, and that TLP will
oversee the marketing of the Units and all administrative functions of the
Partnership and, together with Waddell & Reed, will supply substantially all of
the General Partner's capital resources. All of the Partnership's equipment to
date has been acquired, and all dispositions of Partnership equipment have been
made, through CISMS, using the personnel and resources of CMI, another
Continental affiliate, both of which emerged from protection under Chapter 11 of
the United States Bankruptcy Code on December 21, 1994, and several outside
equipment lease brokers the General Partner believes would be most advantageous
for the Partnership; see note 8 Item 8. Financial Statements and Supplementary
Data. of this report.
The Partnership's investment policy provides for the acquisition of diversified
types of computer equipment and the leasing of such equipment to others on a
short-term basis under operating leases. The Partnership generally purchases
equipment for which a lease exists, or is entered into at the time of the
Partnership's acquisition of the equipment. This equipment is recorded and
depreciated at the Partnership cost (purchase price plus the acquisition fee).
If at any time the General Partner deems the equipment to be obsolete or related
maintenance and storage costs to be in excess of its fair market value, the
equipment is scrapped or sold at the current fair market value, which ever is
most advantageous for the Partnership.
Pursuant to its leasing policies, the General Partner performs a credit analysis
of potential lessees to determine their creditworthiness. The General Partner
leases all of its equipment to third parties by means of operating leases with
fixed base lease rates. Rents are payable monthly or quarterly. Operating leases
generally do not have terms greater than five years in duration and the
aggregate noncancelable rental payments during the term of the lease (on a net
present value basis), are not sufficient to permit the lessor to recover the
purchase price of the equipment.
At the termination of the lease, the General Partner arranges for the equipment
to be re-leased (either to the same lessee or a new lessee) if it determines
that re-leasing is in the Partnership's best interests. Generally, equipment is
re-leased at least once and possibly several times during the Partnership's
life, unless it is determined that the equipment is not marketable and therefore
may be sold. The General Partner provides, or arranges for the installation,
removal, maintenance and modification of the Partnership's equipment. Also, the
General Partner will purchase and maintain, or cause to be purchased and
maintained, appropriate insurance coverage to protect the interests of the
Partnership.
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Of the leases in place at December 31, 1995, the Partnership owned various
computer equipment with an original cost basis of $7,636,323. Listed below is a
breakdown of the various types of computer equipment owned:
Computer peripherals $ 2,978,166
Processors & upgrades 3,207,256
Other 1,450,901
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$ 7,636,323
===============
Of the leases in place at December 31, 1995, the average lease term is 32 months
and the average monthly lease rate as a percentage of original equipment cost is
2.85%.
The Partnership's investments in computer peripheral equipment are and will
continue to be subject to various risk factors. The principal business risk
associated with ownership of the equipment is the inability to keep it fully
leased at rentals which, after payment of operating expenses and debt service on
Partnership borrowings, provide, together with any anticipated sales proceeds or
salvage value, an acceptable rate of return. Other risk factors include:
1. Technological and economic equipment obsolescence, physical
deterioration, malfunction, and risks attendant upon defaults by
lessees and credit losses.
2. Residual Values of Equipment. The Partnership's return on its
investment in equipment will depend in part upon the continuing value
of such equipment which in turn, depends upon, among other things: (1)
the quality of the equipment; (2) the condition of the equipment; (3)
the timing of the equipment's acquisition; (4) the cost of comparable
new equipment; (5) the technological obsolescence of the equipment; (6)
the General Partner's ability to forecast technological changes which
may reduce the value of the equipment; and (7) market factors.
3. Competition from Full Payout Lessors. In connection with operating
leases, the Partnership will encounter considerable competition from
those offering full payout leases, which are written for a longer term
and a lower rate than the Partnership's operating leases.
4. Competition from Manufacturers. Leases offered by the Partnership will
compete with operating leases and full payout leases offered by
equipment manufacturers in their own lease programs. In addition to
attractive financial terms, manufacturers may also provide certain
ancillary services which the Partnership cannot offer directly, such as
maintenance service (including possible equipment substitution rights),
warranty services and trade-in privileges.
5. Other Competition. There are numerous other potential investors,
including limited partnerships organized and managed similarly to the
Partnership, seeking to purchase equipment subject to either operating
leases or full payout leases, many of which will have greater financial
resources than the Partnership and more experience than the General
Partner. The Partnership will compete in the computer leasing
marketplace with many non-manufacturing firms, including other
equipment dealers, brokers and leasing companies, as well as with
financial institutions.
6. Changes in Marketing Policies. IBM's current marketing policy of
offering accrual discounts (i.e., applying lease payments as a credit
toward the purchase of equipment) and volume discounts enables certain
customers to obtain IBM equipment at a cost lower than its fair market
value. In the case of accrual discounts, lessees of IBM equipment
who have earned a purchase credit toward that equipment can purchase
the equipment from IBM and arrange a cost-effective sale and leaseback
arrangement with CMI or the Partnership. The sale price to the
Partnership will typically be less than the fair market value of the
equipment. The Partnership may be able to participate in volume
discounts through purchases arranged by lessees of CMI. The
Partnership's lower equipment costs in turn should enable the
Partnership to offer lower lease rates to customers and help offset the
risk of early obsolescence. If IBM were to eliminate these policies,
raise its prices, lower its lease rates, or become more active as a
lessor, the Partnership might find it more difficult to compete
successfully as a lessor of IBM equipment.
7. Defaults by Lessees. Default by a lessee may cause equipment to be
returned to the Partnership at a time when the General Partner may
be unable to promptly arrange for its re-leasing (at the rental rate
previously received or otherwise) or sale (with or without a loss),
thus resulting in the loss of anticipated revenues and the inability
to recover the Partnership's investment and repay related debt. Any
related debt may be secured by the returned equipment and, in some
cases, by the Partnership's other equipment. If the debt is not paid
in a timely manner, the lender may foreclose and assume ownership
of all equipment securing the debt, resulting in economic loss
and adverse tax consequences to the Partnership's partners. Three
lessees, Halliburton Company, Incorporated, New York Life Insurance
Company and ON Technology Corporation, lease equipment in excess
of 10% of total rental income for the year ended December 31, 1995.
The related rental payments comprise 14.48%, 11.53% and 11.39%,
respectively, of the total rental income for the year ended December
31, 1995. Halliburton Company, Incorporated, New York Life Insurance
Company and ON Technology Corporation lease equipment comprising
11.42%, 15.45% and 10.19%, respectively of the total equipment
portfolio at December 31, 1995.
8. Changes in Technology. The General Partner intends to offer lease rates
to the Partnership's lessees which take into account the risk of
technological advances which may reduce the value of such equipment
owned by the Partnership. However, the introduction of an entirely new
technology could lead to a radical reduction in the fair market value
of certain equipment and make such equipment difficult to re-lease.
The Partnership considers itself to be engaged in only one industry segment, the
business of investing primarily in IBM computer peripheral equipment and leasing
the equipment to major national corporations on an operating lease basis, and
therefore, industry segment information has not been provided.
For information regarding the settlements between the Partnership and the
Liquidating Estate of CIS Corporation, et al, arising out of the emergence from
bankruptcy of CIS and CMI, see Item 3. Legal Proceedings.
<PAGE>
Item 2. Properties.
At December 31, 1995, the Partnership owned computer equipment with a
depreciated cost basis of $2,364,039, subject to 41 existing leases with 22
different lessees, and equipment held in inventory, awaiting re-lease or sale,
with depreciated cost basis of $249,317. All purchases of computer equipment are
subject to a 3% acquisition fee paid to the General Partner.
<PAGE>
Item 3. Legal Proceedings:
There are no material pending legal proceedings that the Partnership is a party
or of which any of its equipment or leases is the subject, except as described
below and in note 8 to the financial statements herein in Item 8. Financial
Statements and Supplementary Data.
On January 13, 1989 (the "Petition Date"), Continental Information Systems
Corporation ("Continental"), CIS Corporation ("CIS"), CMI Holding Co.
("Holding"), CMI Corporation ("CMI") and certain of its affiliates
(collectively, the "Debtors"), voluntarily petitioned for relief under Chapter
11 of the United States Bankruptcy Code ("Chapter 11"), and thereafter continued
in the management and operation of their businesses and property as Debtors In
Possession until October 25, 1989, when the United States Bankruptcy Court (the
"Court") confirmed the appointment of James P. Hassett as Chapter 11 trustee
(the "Trustee") of the Debtors. Holding is the parent of TLP and CMI is the
parent of CISMS. TLP and CISMS, neither of which filed under Chapter 11, are the
two Corporate General Partners of Wellesley Leasing Partnership, the General
Partner of the Partnership. Both before and after the Petition Date, CIS and CMI
have acted as agents for the Partnership in selling, leasing and remarketing
Partnership equipment. Holding became a wholly-owned subsidiary of CIS pursuant
to a Court ordered settlement on July 20, 1993.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP from
Holding. Under the new ownership, it is expected that TLP will continue to
operate in the same manner of business as it has in the past.
As of the Petition Date, there were a number of unsettled transactions between
CIS and CMI and the Partnership and other affiliated partnerships (the
Partnership and such other partnerships are herein collectively referred to as
the "Partnerships"), including outstanding accounts receivable and accounts
payable between each of the Partnerships and CIS and CMI and their affiliates,
sales of equipment and related leases from CIS and CMI to each of the
Partnerships for which not all documentation had been completed as of the
Petition Date, and sales of equipment and related leases from which CIS had
failed to remove prior third-party liens. In addition, accounts receivable and
accounts payable continued to accrue and be paid between each of the
Partnerships and CIS and CMI and their affiliates subsequent to the Petition
Date.
On February 28, 1992, the Court granted an order implementing a settlement of
the outstanding issues between each of the Partnerships and the Debtors. The
settlement occurred on March 13, 1992. In the order the Court approved a set-off
on a partnership-by-partnership basis of pre-petition amounts owed by each
affected Debtor to each Partnership to the extent of pre-petition amounts owed
by that Partnership to that Debtor. The Partnership was a net creditor to the
Debtors and paid in full its amounts owing them.
On November 29, 1994, the Court confirmed the Trustee's proposed Joint Plan of
Reorganization dated October 4, 1994, and the Debtors emerged from Chapter 11
bankruptcy protection on December 21, 1994.
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Item 4. Submission of Matters to a Vote of Security Holders.
None.
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Item 5. Market for the Partnership's Securities and Related Security Holder
Matters.
(a) Market Information
The Partnership's outstanding securities consist of Limited Partnership
Interests in Units of $500 each. As of December 31, 1995, 20,185 Units had been
sold to the public at a price of $500 per Unit (except for 334 Units which were
sold for a net price of $460 per Unit to employees of the Corporate General
Partners of the General Partner and employees and securities representatives of
its affiliates).
There is no public market for the Units, and it is not anticipated that such a
public market will develop.
(b) Approximate Number of Security Holders
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Number of Unit Number of Units
holders on Record as of
Title of Class as of 12/31/95 12/31/95
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Units of
Limited
Partnership Interests 1,978 20,185
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(c) Dividend History and Restrictions
During the fiscal period ended December 31, 1986 the Partnership completed its
offering of 20,185 Units. Pursuant to Section 8 of the Limited Partnership
Agreement, the Partnership's "Distributable Cash From Operations" for each year
will be determined and then distributed to the Partners. Upon reaching the end
of its reinvestment period (the ninth anniversary of the Partnership's closing
date), the Partnership will also distribute to the Partners "Distributable Cash
From Sales or Refinancings", if any. The Partnership distributed $908,326,
$1,009,251 and $1,009,250 to the Limited Partners and $47,808, $53,120 and
$53,120 to the General Partners in 1995, 1994 and 1993, respectively. The
cumulative cash distributions to the Limited Partners through December 31, 1995,
are $10,163,151 as compared with the contributed Limited Partners' net capital
of $8,987,039.
"Cash From Operations" and "Cash From Sales or Refinancing" means the net cash
provided by the Partnership's normal operations or as a result of any sales,
refinancings or other dispositions of equipment, respectively, after the general
expenses and current liabilities of the Partnership (other than the equipment
management fee) are paid, as reduced by any reserves for working capital and
contingent liabilities to the extent deemed reasonable by the General Partner,
and as increased by any portion of such reserves then deemed by the General
Partner not to be required for Partnership operations. "Distributable Cash From
Operations" and "Distributable Cash From Sales or Refinancings" means Cash From
Operations or Cash From Sales or Refinancings, respectively, reduced by amounts
which the General Partner determines shall be reinvested (through the ninth
anniversary of the Partnership's closing date) in additional Equipment and by
payments of all accrued but unpaid equipment management fees.
For rendering services in connection with the normal operations of the
Partnership, the Partnership will pay to the General Partner a Partnership
management fee equal to 7% of the monthly rental billings collected.
Each distribution of Distributable Cash From Operations and any Distributable
Cash From Sales or Refinancings from gains of the Partnership shall be allocated
95% to the Limited Partners and 5% to the General Partner. Any losses from sales
or refinancings of equipment shall be allocated 99% to the Limited Partners and
1% to the General Partner until "Payout" has occurred. "Payout" means the time
when the aggregate amount of all distributions to the Limited Partners of
Distributable Cash From Operations and of Distributable Cash From Sales or
Refinancings equals the aggregate amount of the Limited Partners' original
invested capital plus a cumulative 10% annual return (compounded daily) on their
aggregate unreturned invested capital (calculated from the beginning of the
first full fiscal quarter following the Partnership's closing date). Including
the distribution for the fourth quarter of 1995 made February 29, 1996,
cumulative distributions to date are $513.50 per Unit. This cumulative
distribution per Unit amount represents 13.39% of "Payout". After Payout has
occurred, any Distributable Cash From Sales or Refinancings will be distributed
15% (plus an additional 1% for each 1% by which the total of all Limited
Partners' original Capital Contributions actually paid or allocated to the
Partnership's investment in equipment exceeds the greater of (i) 80% of the
gross proceeds of the Partnership's offering of Units, reduced by 0.0625% for
each 1% of leverage encumbering Partnership equipment, or (ii) 75% of the gross
proceeds of such offering) to the General Partner, and the remainder to the
Limited Partners. It is not anticipated that Payout will occur as of the
liquidation of this Partnership.
Distributable Cash, if any, will be distributed within 60 days after the
completion of each of the first three fiscal quarters of each Partnership fiscal
year, and within 120 days after the completion of each fiscal year, beginning
after the first full fiscal quarter following the Partnership's closing date.
Each such distribution will be described in a statement sent to the Limited
Partners.
For information regarding the settlements between the Partnership and the
Liquidating Estate of CIS Corporation, et al, arising out of the emergence from
bankruptcy of CIS and CMI, see Item 3. Legal Proceedings.
<PAGE>
Item 6. Selected Financial Data.
The following table sets forth selected financial information regarding the
Partnership's financial position and operating results. This information should
be read in conjunction with the financial statements and notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included in Items 8. and 7., respectively, of this report.
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For the Years Ended December 31,
1995 1994 1993 1992 1991
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Operating Data
Rental Income $ 2,483,009 $ 2,315,814 $ 2,438,414 $ 2,854,774 $ 3,052,435
Interest Income 16,961 30,787 18,320 12,361 42,937
Net Income (Loss) 471,147 759,459 1,100,540 930,904 (109,777)
Net Income (Loss) Per
Limited Partnership Unit 21.01 35.30 51.90 31.38 (5.99)
Balance Sheet Data
Cash and Cash Equivalents $ 245,755 $ 592,377 $ 621,024 $ 226,142 $ 218,551
Computer Equipment at Cost 7,636,323 7,469,559 9,161,088 10,175,119 12,746,555
Total Assets 3,116,203 3,284,409 3,444,411 3,271,941 4,541,931
Long-term Debt 732,726 366,745 199,949 149,327 1,080,966
Distributions to Partners 956,134 1,062,371 1,062,370 1,062,371 1,062,370
Distributions Per Limited
Partnership Unit 45.00 50.00 50.00 50.00 50.00
Partners' Equity 2,263,023 2,748,010 3,050,922 3,012,752 3,144,219
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
On April 25, 1986, the Partnership completed its offering and received from the
escrow account $10,079,140 representing 20,185 Units of Limited Partnership
Interests. Of this amount, the Partnership received proceeds from the sale of
334 Units at a price net of sales commissions for employees of the General
Partners of the General Partner and employees and securities representatives of
its affiliates, who are allowed to purchase Units for a net price of $460 per
Unit.
Results of Operations
The Partnership realized net income of $471,147, $759,459 and $1,100,540 for the
years ended December 31, 1995, 1994 and 1993, respectively. Rental income
increased $167,195 or 7% and decreased $122,600 or 5% in 1995 and 1994,
respectively. The increase is primarily due to the rental stream related to the
current and prior year equipment acquisitions in the amount of $1,923,713 and
$1,930,160, respectively. The 1994 decrease in rental income is primarily due to
lower rental rates obtained on equipment lease extensions and remarketings
resulting after the initial lease term expires. Interest income decreased in the
current year as a result of lower average short-term investment balances held
during 1995, versus the prior year in which interest income increased due to the
higher average short-term balances held. The $161,510 net loss on sale of
equipment recognized in 1995 resulted from the large sales of equipment carrying
high net book values as compared to the prior year in which there was a $354,031
net gain on sale of equipment.
Total costs and expenses decreased 4% in 1995, and increased 4% in 1994,
compared to prior periods. The decrease in costs and expenses is primarily a
result of lower depreciation expense. The current year decrease in depreciation
expense is attributable to a large portion of the equipment becoming fully
depreciated. Included in depreciation expense in 1995 and 1993, respectively, is
a provision for $110,000 and $100,000 to properly reflect the equipment
portfolio's net realizable value. Interest expense increased $34,142 from 1995
to 1994 due to the payoff and continued paydown on the installment notes
payable-affiliates and long-term debt. The reversal of provision for doubtful
accounts of $31,070 is due to successful collection efforts on delinquent
accounts in 1995. Management fees increased in the current year as a result of
the increase in rental income. General and administrative expenses increased
$22,926 and $19,431 for the years ended December 31, 1995 and 1994,
respectively. 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 General Partner
managed 15 partnerships in 1995, 19 partnerships in 1994 and 21 partnerships in
1993.
The Partnership recorded net income per Limited Partnership Unit of $21.01,
$35.30 and $51.90 for the years ended December 31, 1995, 1994 and 1993,
respectively. The allocation for the years ended December 31, 1995 and 1994
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. 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.
<PAGE>
Liquidity and Capital Resources
For the year ended December 31, 1995, 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 options would generate the most
favorable results.
Rental income will continue to decrease 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
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 $2,734,502
and are to be received over the next four years (see note 4 to the financial
statements).
The Partnership's investing activities for the year resulted in equipment
purchases of $1,923,713 and equipment sales with a depreciated cost basis of
$369,728, generating $208,218 in proceeds. The Partnership has no material
capital expenditure commitments, but will continue to purchase equipment as new
operating leases are presented.
The Partnership's financing activities resulted in proceeds from borrowings on
long-term debt of $913,792. The Partnership activities also included a paydown
on long-term debt during 1995 of $547,811. The Partnership will payoff its
remaining long-term debt of $732,726 by 1998. Total long-term debt assumed by
the Partnership from inception is $6,798,951, for a total leverage of 23%. The
Partnership's financing activities in 1995 also resulted in the short-term
borrowing of notes payable-affiliate in the amount of $339,047 to finance
equipment purchases which was paid off during the year.
Cash distributions paid in this first quarter of 1996 are currently at an annual
level of 8% per Limited Partnership Unit, or $10.00 per Limited Partnership
Unit. During 1995, the Partnership distributed a total of $45.00 per Limited
Partnership Unit, of which $21.01 per Unit represents income and $23.99 per Unit
represents a return of capital. For the quarter ended December 31, 1995, the
Partnership declared a cash distribution of $212,474, of which $10,624 was
distributed to the General Partner and $201,850 was distributed to the Limited
Partners. The distribution subsequently occurred on February 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 future periods.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP from
Holding. Under the new ownership, it is expected that TLP will continue to
operate in the same manner of business as it has in the past.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
The Partners of Wellesley Lease Income Limited Partnership III-D:
We have audited the accompanying balance sheets of Wellesley Lease Income
Limited Partnership III-D (a Massachusetts Limited Partnership) as of December
31, 1995 and 1994, and the related statements of operations, partners' equity
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1995. In connection with our audits of the financial statements, we
have also audited the accompanying financial statement schedule II for each of
the years in the three-year period ended December 31, 1995. These financial
statements and this financial statement schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and this financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wellesley Lease Income Limited
Partnership III-D as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Boston, Massachusetts
March 15, 1996
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets
1995 1994
---------------- ----------------
<S> <C> <C>
Investment property, at cost (notes 3 & 4):
Computer equipment $ 7,636,323 $ 7,469,559
Less accumulated depreciation 5,022,967 4,853,270
---------------- ----------------
Investment property, net 2,613,356 2,616,289
Cash and cash equivalents 245,755 592,377
Rents receivable, net (notes 2 & 4) 173,959 58,471
Sales receivable, net (note 2) 4,275 4,940
Accounts receivable - affiliates (notes 4 & 8) 66,971 12,332
Other assets 11,887 -
---------------- ----------------
Total assets $ 3,116,203 $ 3,284,409
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 6) $ 380,602 $ 278,737
Accounts payable and accrued expenses - affiliates (note 5) 32,533 48,297
Accounts payable and accrued expenses 87,381 89,863
Unearned rental revenue 540 31,494
Long-term debt, less current portion (note 6) 352,124 88,008
---------------- ----------------
Total liabilities 853,180 536,399
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 526,973 479,918
Cumulative cash distributions (534,918) (487,110)
---------------- ----------------
(6,945) (6,192)
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 3,446,080 3,021,988
Cumulative cash distributions (10,163,151) (9,254,825)
---------------- ----------------
2,269,968 2,754,202
---------------- ----------------
Total partners' equity 2,263,023 2,748,010
---------------- ----------------
Total liabilities and partners' equity $ 3,116,203 $ 3,284,409
================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Operations
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- ---------------
<S> <C> <C> <C>
Revenue:
Rental income $ 2,483,009 $ 2,315,814 $ 2,438,414
Interest income 16,961 30,787 18,320
Net (loss) gain on sale of equipment (161,510) 354,031 512,229
--------------- -------------- ---------------
Total revenue 2,338,460 2,700,632 2,968,963
--------------- -------------- ---------------
Costs and expenses:
Depreciation 1,556,918 1,655,122 1,601,597
Interest 47,667 13,525 11,229
Related party expenses (note 5):
Management fees 166,811 149,918 170,967
General and administrative 126,987 104,061 84,630
(Reversal of) provision for
doubtful accounts (31,070) 18,547 -
--------------- -------------- ---------------
Total costs and expenses 1,867,313 1,941,173 1,868,423
--------------- -------------- ---------------
Net income $ 471,147 $ 759,459 $ 1,100,540
=============== ============== ===============
Net income per Limited
Partnership Unit $ 21.01 $ 35.30 $ 51.90
=============== ============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Partners' Equity (Deficit)
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------------- --------------- ----------------
<S> <C> <C> <C>
Equity at
December 31, 1992 $ - $ 3,012,752 $ 3,012,752
Net income 53,120 1,047,420 1,100,540
Cash distributions (53,120) (1,009,250) (1,062,370)
------------- --------------- ----------------
Equity at
December 31, 1993 - 3,050,922 3,050,922
Net income 46,928 712,531 759,459
Cash distributions (53,120) (1,009,251) (1,062,371)
------------- --------------- ----------------
Equity (deficit) at
December 31, 1994 (6,192) 2,754,202 2,748,010
Net income 47,055 424,092 471,147
Cash distributions (47,808) (908,326) (956,134)
------------- --------------- ----------------
Equity (deficit) at
December 31, 1995 $ (6,945) $ 2,269,968 $ 2,263,023
============= =============== ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 471,147 $ 759,459 $ 1,100,540
--------------- ---------------- ----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,556,918 1,655,122 1,601,597
(Reversal of) provision for doubtful accounts (31,070) 18,547 -
Net loss (gain) on sale of equipment 161,510 (354,031) (512,229)
Net (increase) decrease in current assets (150,279) 34,474 86,720
Net (decrease) increase in current liabilities (49,200) (23,886) 83,678
--------------- ---------------- ----------------
Total adjustments 1,487,879 1,330,226 1,259,766
--------------- ---------------- ----------------
Net cash provided by operating activities 1,959,026 2,089,685 2,360,306
--------------- ---------------- ----------------
Cash flows from investing activities:
Purchase of investment property (1,923,713) (1,930,160) (1,906,866)
Proceeds from sales of investment property 208,218 707,403 953,190
--------------- ---------------- ----------------
Net cash used in investing activities (1,715,495) (1,222,757) (953,676)
--------------- ---------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings on notes payable - affiliate 339,047 - -
Principal payments on notes payable - affiliate (339,047) - -
Proceeds from borrowings on long-term debt 913,792 427,765 343,795
Principal payments on long-term debt (547,811) (260,969) (293,173)
Cash distributions to partners (956,134) (1,062,371) (1,062,370)
--------------- ---------------- ----------------
Net cash used in financing activities (590,153) (895,575) (1,011,748)
--------------- ---------------- ----------------
Net (decrease) increase in cash and cash equivalents (346,622) (28,647) 394,882
Cash and cash equivalents at beginning of year 592,377 621,024 226,142
--------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 245,755 $ 592,377 $ 621,024
=============== ================ ================
Supplemental cash flow information:
Interest paid during the year $ 46,503 $ 13,463 $ 16,139
=============== ================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(1) Organization and Partnership Matters
The Partnership was organized under the Massachusetts Uniform Limited
Partnership Act on March 19, 1985. The Amended Agreement of Limited Partnership
authorized the issuance of up to 25,000 Limited Partnership Units at a per unit
gross price of $500 and up to 20 additional units to affiliates. The Partnership
closed on April 25, 1986, with 20,185 units.
Pursuant to the terms of the Amended Agreement of Limited Partnership,
Distributable Cash From Operations and Profits for federal income tax and
financial reporting purposes from normal operations and any Distributable Cash
From Sales or Refinancings from gains of the Partnership shall be allocated 95%
to the Limited Partners and 5% to the General Partner. Further, gains on sales
of equipment occurring after the reinvestment period end shall be allocated
first to eliminate negative capital accounts, if any, and second 95% to the
Limited Partners and 5% to the General Partner until "Payout". "Payout" means
the time when the aggregate amount of all distributions to the Limited Partners
of Distributable Cash From Operations and of Distributable Cash From Sales or
Refinancings equals the aggregate amount of the Limited Partners' original
invested capital plus a cumulative 10% annual return (compounded daily) on their
aggregate unreturned invested capital (calculated from the beginning of the
first full fiscal quarter following the Partnership's closing date). Losses for
federal income tax and financial reporting purposes from normal operations and
any Distributable Cash From Sales or Refinancings from losses of the Partnership
shall be allocated 99% to the Limited Partners and 1% to the General Partner
until Payout has occurred, and 85% to the Limited Partners and 15% to the
General Partner thereafter. In addition, special cost recovery allocations may
be required to reflect the differing initial capital contributions of the
General Partner and the Limited Partners. The Partnership's books and records
are in accordance with the terms of the Amended Agreement of Limited
Partnership. Including the fourth quarter of 1995 distribution made February 29,
1996, cumulative distributions to date are $513.50 per Unit. This cumulative
distribution per Unit amount represents 13.39% of Payout. It is not anticipated
that Payout will occur as of the liquidation of this Partnership.
The General Partner has contributed $1,000 in respect of its General Partnership
interest. In addition, the General Partner and its affiliates have acquired an
additional $10,000 of Limited Partnership Units in accordance with the Amended
Agreement of Limited Partnership.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(2) Summary of Significant Accounting Policies
General
The Partnership's records are maintained on the accrual basis of accounting so
that revenues are recognized as earned and expenses are recognized as incurred.
Assets and liabilities are those of the Partnership and do not include any
assets and liabilities of the individual partners. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Depreciation on investment property purchased in 1987 and thereafter is provided
using the double-declining balance method, generally over a five-year period.
The Partnership's policy is to periodically review the estimated fair market
value of its equipment to assess the recoverability of its undepreciated cost.
In accordance with this policy, the Partnership records a charge to depreciation
expense in instances when the net book value of equipment exceeds its net
realizable value. Included in depreciation expense in 1995 and 1993,
respectively, is a provision for $110,000 and $100,000 to properly reflect the
equipment portfolio's net realizable value. Routine maintenance and repairs are
expensed as incurred. Major betterments and enhancements are capitalized and
depreciated in accordance with the Partnership's depreciation policy.
Cash and Cash Equivalents
The Partnership considers cash and short-term investments with original
maturities of three months or less to be cash and cash equivalents.
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 December 31, 1995 and 1994, the allowance
for doubtful accounts included in rents receivable was $28,448 and $55,208,
respectively, and $0 and $4,310 included in sales receivable, respectively.
Income Taxes
No provision for federal income taxes has been made as the liability for such
taxes is that of the Partners rather than the Partnership. Taxable income, as
reported on Schedule K-1, Form 1065 "Partner's Share of Income, Credits,
Deductions, etc.", was $410,616, $711,665 and $1,200,540 in 1995, 1994 and 1993,
respectively (see note 7).
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 III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(3) Investment Property
At December 31, 1995, the Partnership owned computer equipment with a
depreciated cost basis of $2,364,039, subject to existing leases and equipment
with a depreciated cost basis of $249,317 in inventory, awaiting re-lease or
sale. All purchases of computer equipment are subject to a 3% acquisition fee
paid to the General Partner.
(4) Leases
Description of leasing arrangements:
Operations consist primarily of leasing computer equipment. All equipment leases
are classified as operating leases and expire over the next four years.
Minimum lease payments scheduled to be received in the future under existing
noncancelable operating leases are as follows:
1996 $ 1,415,785
1997 964,513
1998 349,247
1999 4,957
--------------
$ 2,734,502
==============
The following schedule provides an analysis of the cost of capital equipment by
major classes as of December 31, 1995:
Computer peripherals $ 2,978,166
Processors & upgrades 3,207,256
Other 1,450,901
---------------
$ 7,636,323
===============
Three lessees, Halliburton Company, Incorporated, New York Life Insurance
Company and ON Technology Corporation, lease equipment in excess of 10% of total
rental income for the year ended December 31, 1995. The related rental payments
comprise 14.48%, 11.53% and 11.39%, respectively, of the total rental income for
the year ended December 31, 1995. Halliburton Company, Incorporated, New York
Life Insurance Company and ON Technology Corporation lease equipment comprising
11.42%, 15.45% and 10.19%, respectively of the total equipment portfolio at
December 31, 1995.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(5) 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
December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Equipment acquisition fees $ 56,030 $ 55,983 $ 55,540
Management fees 166,811 149,918 170,967
Reimbursable expenses paid 119,397 100,349 75,573
------------ ------------ ------------
$ 342,238 $ 306,250 $ 302,080
============ ============ ============
</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.
(6) Long-term Debt
Long-term debt at December 31, 1995 consists of one loan for $71,886 from
Relational Funding with an interest rate of 8.15%, two loans totaling $204,367
from Union Chelsea National Bank each with an interest rate of 9.00%, one loan
for $51,121 from CIS Group/Equipment Financing, Incorporated with an interest
rate of 14.17%, six installment notes from Pullman Capital Corporation totaling
$135,466, all with an interest rate of 8.00%, and one loan for $269,886 from
Liberty Bank with an interest rate of 7.75%. All loans are non-recourse and are
collateralized by equipment on the respective leases with a total net book value
of $834,073 and assignment of the related leases.
Maturities on long-term debt are as follows:
1996 $ 380,602
1997 237,488
1998 114,636
--------------
$ 732,726
==============
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(7) Reconciliation of Financial Statement Net Income to Taxable Income to
Partners
A reconciliation of financial statement net income to taxable income to partners
is as follows for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------- -------------
<S> <C> <C> <C>
Net income per financial statements $ 471,147 $ 759,459 $ 1,100,540
Provision for doubtful accounts expense for financial
statement purposes (less than) in excess of provision
for doubtful accounts expense for tax purposes (31,070) 3,614 -
Depreciation expense for financial statement purposes
in excess of depreciation expense for tax purposes 94,021 - 100,000
Net gain on sale of equipment for financial statement
purposes in excess of net gain on sale of equipment
for tax purposes (123,482) (51,408) -
-------------- ------------- -------------
Taxable income to partners $ 410,616 $ 711,665 $ 1,200,540
============== ============= =============
</TABLE>
Losses for federal tax purposes from normal operations are allocated 99% to the
Limited Partners and 1% to the General Partner. Profits for federal tax purposes
from normal operations are allocated 95% to the Limited Partners and 5% to the
General Partner. In addition, special cost recovery allocations may be required
to reflect the differing initial capital contribution of the General Partner and
the Limited Partners.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(8) Bankruptcy of Continental Information Systems Corporation
On January 13, 1989 (the "Petition Date"), Continental Information Systems
Corporation ("Continental"), CIS Corporation ("CIS"), CMI Holding Co.
("Holding"), CMI Corporation ("CMI") and certain of its affiliates
(collectively, the "Debtors"), voluntarily petitioned for relief under Chapter
11 of the United States Bankruptcy Code ("Chapter 11"), and thereafter continued
in the management and operation of their businesses and property as Debtors In
Possession until October 25, 1989, when the United States Bankruptcy Court (the
"Court") confirmed the appointment of James P. Hassett as Chapter 11 trustee
(the "Trustee") of the Debtors. Holding is the parent of TLP and CMI is the
parent of CISMS. TLP and CISMS, neither of which filed under Chapter 11, are the
two Corporate General Partners of Wellesley Leasing Partnership, the General
Partner of the Partnership. Both before and after the Petition Date, CIS and CMI
have acted as agents for the Partnership in selling, leasing and remarketing
Partnership equipment. Holding became a wholly-owned subsidiary of CIS pursuant
to a Court ordered settlement on July 20, 1993.
As of the Petition Date, there were a number of unsettled transactions between
CIS and CMI and the Partnership and other affiliated partnerships (the
Partnership and such other partnerships are herein collectively referred to as
the "Partnerships"), including outstanding accounts receivable and accounts
payable between each of the Partnerships and CIS and CMI and their affiliates,
sales of equipment and related leases from CIS and CMI to each of the
Partnerships for which not all documentation had been completed as of the
Petition Date, and sales of equipment and related leases from which CIS had
failed to remove prior third-party liens. In addition, accounts receivable and
accounts payable continued to accrue and be paid between each of the
Partnerships and CIS and CMI and their affiliates subsequent to the Petition
Date.
On February 28, 1992, the Court granted an order implementing a settlement of
the outstanding issues between each of the Partnerships and the Debtors. The
settlement occurred on March 13, 1992. In the order the Court approved a set-off
on a partnership-by-partnership basis of pre-petition amounts owed by each
affected Debtor to each Partnership to the extent of pre-petition amounts owed
by that Partnership to that Debtor. The Partnership was a net creditor to the
Debtors and paid in full its amounts owing them.
On November 29, 1994, the Court confirmed the Trustee's proposed Joint Plan of
Reorganization dated October 4, 1994, and the Debtors emerged from Chapter 11
bankruptcy protection on December 21, 1994.
(9) Subsequent Events
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP from
Holding. Under the new ownership, it is expected that TLP 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)
Schedule II - Valuation and Qualifying Accounts and Reserves
<TABLE>
<CAPTION>
Additions charged
Balance at to (recoveries Balance
beginning credited from) at end
Classification of year costs and expenses Charge-offs of year
<S> <C> <C> <C> <C>
Year ended
December 31, 1993 $ 55,904 $ - $ - $ 55,904
================ ================ ================ =================
Year ended
December 31, 1994 $ 55,904 $ 18,547 $ 14,933 $ 59,518
================ ================ ================ =================
Year ended
December 31, 1995 $ 59,518 $ (31,070) $ - $ 28,448
================ ================ ================ =================
</TABLE>
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
December 31, 1995
Lessee
American Telephone & Telegraph Company, Incorporated
Caterpillar, Incorporated
Coulter Leasing Corporation
Exxon Company, U.S.A.
George Melhado and Company
H.J. Meyers & Company, Incorporated
Halliburton Company, Incorporated
Hughes Aircraft Corporation
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 Corporation
Packard Hughes Interconnect, Incorporated
Simmons Market Research Bureau, Incorporated
Sports & Recreation Company, Incorporated
Western Atlas Company, Incorporated
Xerox Corporation
Equipment Description Acquisition Price
Computer peripherals $ 2,978,166
Processors & upgrades 3,207,256
Other 1,450,901
----------------
$ 7,636,323
================
<PAGE>
Exhibit 11 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Computation of Net Income per Limited Partnership Unit
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ---------------- ----------------
<S> <C> <C> <C>
Net income $ 471,147 $ 759,459 $ 1,100,540
Gain on sale (36,097) (430,824) (623,256)
Loss on sale 197,607 76,793 111,027
Special cost recovery allocation (6,945) (6,192) -
-------------- ---------------- ----------------
Available income from operations 625,712 399,236 588,311
-------------- ---------------- ----------------
Allocations to General Partner:
Income from operations 31,286 19,962 29,416
Gain on sale 10,800 21,541 24,815
Loss on sale (1,976) (767) (1,111)
Special cost recovery allocation 6,945 6,192 -
-------------- ---------------- ----------------
Income allocated to General Partner 47,055 46,928 53,120
-------------- ---------------- ----------------
Income allocated to Limited Partners $ 424,092 $ 712,531 $ 1,047,420
============== ================ ================
Number of Limited Partnership Units 20,185 20,185 20,185
Net income per Limited Partnership Unit $ 21.01 $ 35.30 $ 51.90
============== ================ ================
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Statement Disclosures.
None.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1. of this
report, the General Partner of the Partnership is Wellesley Leasing Partnership.
Under the Partnership Agreement, the General Partner is solely responsible for
the operation of the Partnership's properties, and the Limited Partners have no
right to participate in the control of such operations. The General Partner has
three Corporate General Partners: TLP and CISMS, both Massachusetts corporations
and Waddell & Reed (formerly TUPS), a Missouri corporation. The names and ages
of the Directors and Executive Officers of the Corporate General Partners are as
follows:
<TABLE>
<CAPTION>
TLP
Name Title Age
<S> <C> <C>
Arthur P. Beecher * President and Director 59
Thomas J. Prinzing * Director 49
Frank J. Corcoran Director, Vice President, Treasurer 45
and Clerk
CISMS
Name Title Age
Arthur P. Beecher * President and Assistant Secretary 59
Thomas J. Prinzing * Director 49
Frank J. Corcoran Vice President, Treasurer and Clerk 45
* Executive Committee Member
Waddell & Reed
Name Title Age
Keith A. Tucker President, Chief Executive Officer 51
and Director
Robert L. Hechler Vice President, Chief Operations Officer, 59
Treasurer and Director
Henry J. Herrmann Vice President, Chief Investment Officer 54
and Director
George L. Wirkkula Vice President, National Sales Manager 59
and Director
Sharon K. Pappas Vice President, Secretary 37
and General Counsel
</TABLE>
<PAGE>
(c) Identification of certain significant persons
See Item 10. (a-b)
(d) Family relationship
No family relationship exists between any of the foregoing Directors or
Officers.
(e) Business experience
Arthur P. Beecher is President and Director of TLP. He is also President and
Assistant Secretary of CISMS. Prior to joining TLP in October 1983, Mr. Beecher
was an Officer of Computer Systems of America, Inc., in Boston, Massachusetts,
most recently as Vice President, Finance and Administration since 1975. Mr.
Beecher holds a B.S. from Boston University and is a Certified Public
Accountant.
Thomas J. Prinzing is a Director of TLP and CISMS. On December 18, 1995, Mr.
Prinzing was elected President, Chief Executive Officer and Director of
Continental Information Systems Corporation ("CISC"). Mr. Prinzing is also the
President of CIS Air Corporation, a position he has held since 1991. From 1984
to 1991 he was Senior Vice President and Chief Financial Officer of CIS. Mr.
Prinzing has an Honors Bachelor of Commerce degree of the University of Windsor
and is a Certified Public Accountant.
Frank J. Corcoran is Director, Vice President, Treasurer and Clerk of TLP, and
is also Vice President, Treasurer and Clerk of CISMS. Mr. Corcoran is Senior
Vice President, Chief Financial Officer, Treasurer and Director of CIS and a
Vice President and Treasurer of Holding. Prior to joining CIS in November 1994,
he was with Unisys Finance Corporation, from 1985 to 1994, most recently as the
Vice President and General Manager. Mr. Corcoran holds a B.S. from Wayne State
University, a M.S. in Taxation from Walsh College and is a Certified Public
Accountant.
Keith A. Tucker is President, Chief Executive Officer and Director of Waddell &
Reed; Chairman of the Board of Directors of WRIMCO, Waddell & Reed, Inc.,
Waddell & Reed Services Company, Waddell & Reed Asset Management Company and
Torchmark Distributors, Inc., an affiliate of Waddell & Reed, Inc.; Vice
Chairman of the Board of Directors, Chief Executive Officer and President of
United Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; and President of each of the funds in the United, Waddell
& Reed and TMK/United mutual fund groups. He is also Director of Southwestern
Life Corporation. Prior to joining Torchmark Corporation in 1991, Mr. Tucker was
with Trivest, Inc. and Trivest Securities Corporation in Miami, Florida since
1987, most recently as the Senior Vice President and President, respectively.
Prior to Trivest, Inc., he was Director of Atlantis Group, Inc., a diversified
company. Mr. Tucker holds a B.B.A. and a J. D. both from the University of
Texas.
Robert L. Hechler is Vice President, Chief Operations Officer, Director and
Treasurer of Waddell & Reed; Executive Vice President, Principal Financial
Officer, Director and Treasurer of WRIMCO; President, Chief Executive Officer,
Principal Financial Officer, Director and Treasurer of Waddell & Reed, Inc.;
Director and Treasurer of Waddell & Reed Services Company; Vice President,
Treasurer and Director of Torchmark Distributors, Inc.; and Vice President and
Principal Financial Officer of each of the funds in the United, Waddell & Reed
and TMK/United mutual fund groups. He has been employed by Waddell & Reed and
its affiliates since 1977. Mr. Hechler holds a B.S. from the University of
Illinois and an M.B.A. from the University of Chicago.
Henry J. Herrmann is Vice President, Chief Investment Officer and Director of
Waddell & Reed; Director of Waddell & Reed, Inc.; President, Chief Executive
Officer, Chief Investment Officer and Director of WRIMCO and Waddell & Reed
Asset Management Company; Senior Vice President and Chief Investment Officer of
United Investors Management Company; and Vice President of each of the funds in
the United, Waddell & Reed and TMK/United mutual fund groups. He has been
employed by Waddell & Reed and its affiliates since 1971. Mr. Herrmann holds a
B.S. from New York University.
George L. Wirkkula is Vice President, National Sales Manager and Director of
Waddell & Reed; Executive Vice President, National Sales Manager and a Director
of Waddell & Reed, Inc.; and President and Director of Waddell & Reed Leasing,
Inc. He is also a member of the Investment Committee for Hanover Lease Income
Limited Partnership. He has been employed by Waddell & Reed and its affiliates
since 1973. Mr. Wirkkula holds a B.S. from Macalester College.
Sharon K. Pappas is Vice President, Secretary and General Counsel of Waddell &
Reed; Senior Vice President, Secretary and General Counsel of WRIMCO and Waddell
& Reed, Inc.; Director, Senior Vice President, Secretary and General Counsel of
Waddell & Reed Services Company; Director, Secretary and General Counsel of
Waddell & Reed Asset Management Company; Vice President, Secretary and General
Counsel of Torchmark Distributors, Inc.; formerly, Assistant General Counsel of
WRIMCO, Waddell & Reed Financial Services, Inc., Waddell & Reed, Inc., Waddell &
Reed Asset Management Company and Waddell & Reed Services Company. She is Vice
President, Secretary and General Counsel of each of the funds in the United,
Waddell & Reed and TMK/United mutual fund groups. Prior to joining Waddell &
Reed and its affiliates in 1989, Ms. Pappas was employed with Stinson, Mag &
Fizzell in Kansas City, Missouri. Ms. Pappas holds a B.S. from Kansas State
University and a J.D. from the University of Kansas.
(f) Involvement in certain legal proceedings
The Partnership is not aware of any legal proceedings against any Director or
Executive Officer of the Corporate General Partners which may be important for
the evaluation of any such person's ability and integrity.
<PAGE>
Item 11. Management Remuneration and Transactions.
(a), (b), (c), (d), and (e): The Officers and Directors of the Corporate General
Partners receive no current or proposed direct remuneration in such capacities,
pursuant to any standard arrangements or otherwise, from the Partnership. In
addition, the Partnership has not paid and does not propose to pay any options,
warrants or rights to the Officers and Directors of the Corporate General
Partners. There exists no remuneration plan or arrangement with any Officer or
Director of the Corporate General Partners resulting from the resignation,
retirement or any other termination. See note 5 to the financial statements
included in Item 8. of this report for a description of the remuneration paid by
the Partnership to the General Partner and its affiliates during 1995, 1994 and
1993.
<PAGE>
Item 12. Security Ownership of Certain Owners and Management.
By virtue of its organization as a limited partnership, the Partnership has
outstanding no securities possessing traditional voting rights. However, as
provided for in Section 13.2 of the Amended Agreement of Limited Partnership
(subject to Section 13.3), a majority interest of the Limited Partners have
voting rights with respect to:
1. Amendment of the Limited Partnership Agreement;
2. Termination of the Partnership;
3. Removal of the General Partner; and
4. Approval or disapproval of the sale of substantially all the assets of
the Partnership.
No person or group is known by the General Partner to own beneficially more than
5% of the Partnership's 20,185 outstanding Limited Partnership Units as of
December 31, 1995.
By virtue of its organization as a limited partnership, the Partnership has no
Officers or Directors. See also note 1 to the financial statements included in
Item 8. and Item 10. of this report.
<PAGE>
Item 13. Certain Relationships and Related Transactions.
(a), (b), and (c): The General Partner of the Partnership is Wellesley Leasing
Partnership, a Massachusetts general partnership which in turn has three
Corporate General Partners: TLP and CISMS, both Massachusetts corporations and
Waddell & Reed, a Missouri corporation. The Corporate General Partners'
Directors and Executive Officers are identified in Item 10. of this report. The
Partnership was not involved in any transaction involving any of these Directors
or Officers or any member of the immediate family of these individuals, nor did
any of these persons provide services to the Partnership for which they received
direct or indirect remuneration. Similarly, there exists no business
relationship between the Partnership and any of the Directors or Officers of the
Corporate General Partners, nor were any of the individuals indebted to the
Partnership.
The General Partner is responsible for acquiring, financing, leasing and selling
equipment for the Partnership. CISMS proposes for the Partnership equipment
acquisitions, leasing transactions, financing and refinancing transactions, and
sale transactions for approval by the Executive Committee and oversees the
operation, management and use of each Partnership's equipment. TLP oversaw the
marketing of the Units and oversees all administrative functions of the
Partnership and, together with Waddell & Reed, provides substantially all of the
General Partner's capital resources. In consideration of such services and
capital commitments, TLP receives 30%, Waddell & Reed receives 10% and CISMS
receives 60% of all compensation received by the General Partner in connection
with the formation and operation of the Partnership (including equipment
management fees, acquisition fees, subordinated remarketing fees and the General
Partner's share of Distributable Cash From Sales or Refinancings), except for
Acquisition Fees, as to which TLP receives 15%, Waddell & Reed receives 10% and
CISMS receives 75%. The General Partner also was reimbursed in an amount equal
to 3% of the gross proceeds of the Partnership's offerings for organizational
and offering expenses; all such expenses in excess of that amount were borne by
TLP. See note 5 to the financial statements included in Item 8. of this report
for a description of payments made by the Partnership to the General Partner.
For information regarding the settlements between the Partnership and the
Liquidating Estate of CIS Corporation, et al, arising out of the emergence from
bankruptcy of CIS and CMI, see Item 3. Legal Proceedings.
<PAGE>
Part IV
<TABLE>
<CAPTION>
<S> <C>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K: None.
(a) 1. Financial Statements Page No.
Independent Auditors' Report 15
Balance Sheets at December 31, 1995 and 1994 16
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 17
Statements of Partners' Equity (Deficit) for
the Years Ended December 31, 1995, 1994 and 1993 18
Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993 19
Notes to Financial Statements 20 - 26
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and Reserves 27
All other financial statement schedules are omitted because they are
not applicable, the data is not significant, or the required
information is shown elsewhere in this report.
Computer Equipment Portfolio (Unaudited) 28
3. Exhibit Index
11 Statement regarding computation of net income per Limited Partnership Unit 29
(b) Report on Form 8-K
N/A
</TABLE>
<PAGE>
SIGNATURES
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-D
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General
Partners
Date: March 28, 1996
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000760386
<NAME> WELLESLEY III-D 12/31/95
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 245,755
<SECURITIES> 0
<RECEIVABLES> 273,653
<ALLOWANCES> 28,448
<INVENTORY> 0
<CURRENT-ASSETS> 502,847
<PP&E> 7,636,323
<DEPRECIATION> 5,022,967
<TOTAL-ASSETS> 3,116,203
<CURRENT-LIABILITIES> 120,454
<BONDS> 732,726
<COMMON> 8,988,039
0
0
<OTHER-SE> (6,725,016)
<TOTAL-LIABILITY-AND-EQUITY> 3,116,203
<SALES> 2,483,009
<TOTAL-REVENUES> 2,338,460
<CGS> 0
<TOTAL-COSTS> 166,811
<OTHER-EXPENSES> 1,683,905
<LOSS-PROVISION> (31,070)
<INTEREST-EXPENSE> 47,667
<INCOME-PRETAX> 471,147
<INCOME-TAX> 0
<INCOME-CONTINUING> 471,147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 471,147
<EPS-PRIMARY> 21.01
<EPS-DILUTED> 0
</TABLE>
