UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the United States Securities Exchange Act of 1934
-----------------------
For Quarter Ended March 31, 1996 Commission File No. 2-95011
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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)
<S> <C> <C>
INDEX Page No.
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of March 31, 1996 and December 31, 1995 3
Statements of Operations For the Quarters Ended
March 31, 1996 and 1995 4
Statements of Cash Flows For the Quarters Ended
March 31, 1996 and 1995 5
Notes to Financial Statements 6 - 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)
3/31/96 12/31/95
<S> <C> <C>
Investment property, at cost (note 3):
Computer equipment $ 6,308,195 $ 7,636,323
Less accumulated depreciation 4,018,544 5,022,967
---------------- ----------------
Investment property, net 2,289,651 2,613,356
Cash and cash equivalents 478,316 245,755
Rents receivable, net (note 2) 171,899 173,959
Sales receivable - 4,275
Accounts receivable - affiliates (note 4) 117,413 66,971
Other assets 6,099 11,887
---------------- ----------------
Total assets $ 3,063,378 $ 3,116,203
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 312,357 $ 380,602
Accounts payable and accrued expenses - affiliates (note 4) 28,381 32,533
Accounts payable and accrued expenses 101,504 87,381
Unearned rental revenue - 540
Long-term debt, less current portion (note 5) 294,720 352,124
---------------- ----------------
Total liabilities 736,962 853,180
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 544,542 526,973
Cumulative cash distributions (545,542) (534,918)
---------------- ----------------
- (6,945)
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 3,704,378 3,446,080
Cumulative cash distributions (10,365,001) (10,163,151)
---------------- ----------------
2,326,416 2,269,968
---------------- ----------------
Total partners' equity 2,326,416 2,263,023
---------------- ----------------
Total liabilities and partners' equity $ 3,063,378 $ 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
For the Quarters Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
-------------- ---------------
<S> <C> <C>
Revenue:
Rental income $ 451,315 $ 628,401
Interest income 2,438 6,305
Net gain on sale of equipment 204,260 3,552
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Total revenue 658,013 638,258
-------------- ---------------
Costs and expenses:
Depreciation 302,118 326,114
Reversal of provision for doubtful accounts - (14,166)
Interest 15,463 7,077
Related party expenses (note 4):
Management fees 31,859 46,623
General and administrative 32,706 23,319
-------------- ---------------
Total costs and expenses 382,146 388,967
-------------- ---------------
Net income $ 275,867 $ 249,291
============== ===============
Net income per Limited Partnership Unit $ 12.80 $ 11.54
============== ===============
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See accompanying notes to financial statements.
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<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Quarters Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
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Cash flows from operating activities:
Net income $ 275,867 $ 249,291
---------------- ----------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 302,118 326,114
Reversal of provision for doubtful accounts - (14,166)
Net gain on sale of equipment (204,260) (3,552)
Net increase in current assets (38,319) (18,419)
Net increase in current liabilities 9,431 6,525
---------------- ----------------
Total adjustments 68,970 296,502
---------------- ----------------
Net cash provided by operating activities 344,837 545,793
---------------- ----------------
Cash flows from investing activities:
Purchase of investment property - (393,396)
Proceeds from sales of investment property 225,847 52,651
---------------- ----------------
Net cash provided by (used in)
investing activities 225,847 (340,745)
---------------- ----------------
Cash flows from financing activities:
Principal payments on long-term debt (125,649) (115,353)
Cash distributions to partners (212,474) (252,312)
---------------- ----------------
Net cash used in financing activities (338,123) (367,665)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 232,561 (162,617)
Cash and cash equivalents at beginning of period 245,755 592,377
---------------- ----------------
Cash and cash equivalents at end of period $ 478,316 $ 429,760
================ ================
Supplemental cash flow information:
Interest paid during the year $ 15,463 $ 7,077
================ ================
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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 Quarters Ended March 31, 1996 and March 31, 1995
(Unaudited)
(1) Organization and Partnership Matters
The foregoing financial statements of Wellesley Lease Income Limited Partnership
III-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 includes an allowance for estimated losses on
receivable balances. The allowance for doubtful accounts is based on past write
off experience and an evaluation of potential uncollectible accounts within the
current receivable balances. Receivable balances which are determined to be
uncollectible are charged against the allowance and subsequent recoveries, if
any, are credited to the allowance. At March 31, 1996 and December 31, 1995, the
allowance for doubtful accounts included in rents receivable was $28,448.
(3) Investment Property
At March 31, 1996, the Partnership owned computer equipment with a depreciated
cost basis of $2,076,650, subject to existing leases and equipment with a
depreciated cost basis of $213,001 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 Quarters Ended March 31, 1996 and March 31, 1995
(Unaudited)
(4) Related Party Transactions
Fees, commissions and other expenses paid or accrued by the Partnership to the
General Partner or affiliates of the General Partner for the years ended March
31, 1996 and 1995 are as follows:
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1996 1995
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Equipment acquisition fees $ - $ 11,458
Management fees 31,859 46,623
Reimbursable expenses paid 37,661 27,217
------------ ------------
$ 69,520 $ 85,298
============ ============
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Under the terms of the Partnership Agreement, the General Partner is entitled to
an equipment acquisition fee of 3% of the purchase price paid by the Partnership
for the equipment. The General Partner is also entitled to a management fee
equal to 7% of the monthly rental billings collected. Also, the Partnership
reimburses the General Partner and its affiliates for certain expenses incurred
by them in connection with the operation of the Partnership.
(5) Long-term Debt
Long-term debt at March 31, 1996 consists of one loan for $48,409 from
Relational Funding with an interest rate of 8.15%, two loans totaling $183,375
from Union Chelsea National Bank, each bearing interest at 9.00%, one loan for
$45,987 from CIS Group/Equipment Financing, Incorporated bearing interest at
14.17%, six installment notes from Pullman Capital Corporation totaling $80,451,
each bearing interest at 8.00%, and one loan for $248,855 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 $728,779 and
assignment of the related leases.
Maturities on long-term debt are as follows:
1996 $ 254,954
1997 237,488
1998 114,635
--------------
$ 607,077
==============
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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
ended March 31, 1996 in comparison to the quarter ended March 31, 1995.
The Partnership realized net income of $275,867 and $249,291 for the quarters
ended March 31, 1996 and 1995, respectively. Rental income decreased $177,086 or
28% 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 decreased as a result of lower average short-term
investment balances held during the current quarter. The $204,260 net gain on
sale of equipment recognized in the current quarter is due to the large number
of equipment sales carrying low net book values.
Total costs and expenses decreased $6,821 or 2% in 1996. The most significant
factor impacting the decrease in costs and expenses is the current quarter
reduction of depreciation expense. Depreciation expense decreased due to a
portion of the equipment portfolio becoming fully depreciated. During the first
quarter of 1995, the Partnership was able to reverse a provision for doubtful
accounts due to successful collection efforts on delinquent rents receivable.
Interest expense increased $8,386 due to the continued paydown of long-term
debt. Management fees decreased with the decline in rental income on operating
leases. General and administrative expenses increased $9,387. A major factor
contributing to this increase is that salaries and expenses of the partnership
accounting and reporting personnel of the General Partner, which are
reimbursable by the various partnerships under management, are being allocated
over a diminishing number of partnerships.
The Partnership recorded net income per Limited Partnership Unit of $12.80 and
$11.54 for the quarters ended March 31, 1996 and 1995, respectively.
Liquidity and Capital Resources
For the quarter ended March 31, 1996, rental revenue generated from operating
leases and sales proceeds generated from equipment sales were the primary
sources of funds for the Partnership. As equipment leases terminate, the General
Partner determines if the equipment will be extended to the same lessee,
remarketed to another lessee, or if it is less marketable, sold. This decision
is made upon analyzing which options would generate the most favorable results.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Rental income will continue to decrease due to two factors. The first factor is
the lower rate obtained due to the remarketing of existing equipment upon the
expiration of the original lease. Typically the remarketed rates are lower due
to the decrease in useful life of the equipment. Secondly, the increasing change
of technology in the computer industry usually decreases the demand for older
equipment, thus increasing the possibility of obsolescence. Both of these
factors together will cause remarketed rates to be lower than original rates and
will cause certain leases to terminate upon expiration. This decrease however,
should not affect the partnership's ability to meet its future cash
requirements, including its long-term debt obligations. To the extent that
future cash flows should be insufficient to meet the Partnership's operating
expenses and liabilities, additional funds could be obtained through the sale of
equipment, or a reduction in the rate of cash distributions. Future rental
revenues amount to $2,314,139 and are to be received over the next four years.
The Partnership's investing activities for the quarter resulted equipment sales
with a depreciated cost basis of $21,587, generating $225,847 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 $125,649. The Partnership will payoff its remaining long-term
debt of $607,077 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 8% per Limited
Partnership Unit, or $10.00 per Limited Partnership Unit on a quarterly basis.
For the quarter ended March 31, 1996, 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
will be made on May 29, 1996. The Partnership expects to continue paying at or
near this level in the future. The effects of inflation have not been
significant to the Partnership and are not expected to have any material impact
in future periods.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP
Leasing Programs, Inc. from CMI Holding Co. Under the new ownership, it is
expected that TLP Leasing Programs, Inc. will continue to operate in the same
manner of business as it has in the past.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
March 31, 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 $ 2,460,196
Processors & upgrades 2,649,442
Other 1,198,557
----------------
$ 6,308,195
================
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PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
<S> <C>
Item 1. Legal Proceedings
Response: None
Item 2. Changes in the Rights of the Partnership's Security Holders
Response: None
Item 3. Defaults by the Partnership on its Senior Securities
Response: None
Item 4. Results of Votes of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response:
A. None
B. None
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
By: Arthur P. Beecher,
President
Date: May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000760386
<NAME> WELLESLEY III-D 03/31/96
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 478,316
<SECURITIES> 0
<RECEIVABLES> 317,760
<ALLOWANCES> 28,448
<INVENTORY> 0
<CURRENT-ASSETS> 767,628
<PP&E> 6,308,195
<DEPRECIATION> 4,018,544
<TOTAL-ASSETS> 3,063,378
<CURRENT-LIABILITIES> 129,885
<BONDS> 607,077
<COMMON> 8,988,039
0
0
<OTHER-SE> (6,661,623)
<TOTAL-LIABILITY-AND-EQUITY> 3,063,378
<SALES> 451,315
<TOTAL-REVENUES> 658,013
<CGS> 0
<TOTAL-COSTS> 31,859
<OTHER-EXPENSES> 334,824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,463
<INCOME-PRETAX> 275,867
<INCOME-TAX> 0
<INCOME-CONTINUING> 275,867
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 275,867
<EPS-PRIMARY> 12.80
<EPS-DILUTED> 0
</TABLE>
