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, 1997 Commission File No. 2-95011
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(Exact name of registrant as specified in its charter)
Massachusetts 04-2850823
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Financial Center, 21st Floor, Boston, MA 02111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 482-8000
-----------------------------
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
There are no Exhibits.
Page 1 of 12
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
INDEX Page No.
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Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of March 31, 1997 and December 31, 1996 3
Statements of Operations
Quarters Ended March 31, 1997 and 1996 4
Statements of Cash Flows
Quarters Ended March 31, 1997 and 1996 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)
3/31/97 12/31/96
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Investment property, at cost (note 3):
Computer equipment $ 5,998,909 $ 5,844,357
Less accumulated depreciation 3,875,359 3,824,442
---------------- ----------------
Investment property, net 2,123,550 2,019,915
Cash and cash equivalents 150,683 265,199
Rents receivable, net (note 2) 18,740 69,908
Sales receivable, net (note 2) - -
Accounts receivable - affiliates (note 4) 52,974 84,022
Other assets 1,950 12,779
---------------- ----------------
Total assets $ 2,347,897 $ 2,451,823
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 527,701 $ 550,139
Accounts payable and accrued expenses - affiliates (note 4) 55,856 27,168
Accounts payable and accrued expenses 73,049 93,581
Unearned rental revenue 11,972 15,125
Long-term debt, less current portion (note 5) 180,675 245,786
---------------- ----------------
Total liabilities 849,253 931,799
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 585,710 579,070
Cumulative cash distributions (586,710) (580,070)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 3,658,775 3,553,999
Cumulative cash distributions (11,147,170) (11,021,014)
---------------- ----------------
1,498,644 1,520,024
---------------- ----------------
Total partners' equity 1,498,644 1,520,024
---------------- ----------------
Total liabilities and partners' equity $ 2,347,897 $ 2,451,823
================ ================
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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
Quarters Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
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Revenue:
Rental income $ 385,147 $ 451,315
Interest income 1,769 2,438
Net gain on sale of equipment 32,144 204,260
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Total revenue 419,060 658,013
-------------- ---------------
Costs and expenses:
Depreciation 241,707 302,118
Reversal of provision for doubtful accounts (25,539) -
Interest 15,976 15,463
Related party expenses (note 4):
Management fees 31,498 31,859
General and administrative 44,002 32,706
-------------- ---------------
Total costs and expenses 307,644 382,146
-------------- ---------------
Net income $ 111,416 $ 275,867
============== ===============
Net income per Limited Partnership Unit $ 5.19 $ 12.80
============== ===============
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Cash Flows
Quarters Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
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Cash flows from operating activities:
Net income $ 111,416 $ 275,867
---------------- ----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 241,707 302,118
Reversal of provision for doubtful accounts (25,539) -
Net gain on sale of equipment (32,144) (204,260)
Net decrease (increase) in current assets 118,584 (38,319)
Net increase in current liabilities 5,003 9,431
---------------- ----------------
Total adjustments 307,611 68,970
---------------- ----------------
Net cash provided by operating activities 419,027 344,837
---------------- ----------------
Cash flows from investing activities:
Purchase of investment property (352,515) -
Proceeds from sales of investment property 39,317 225,847
---------------- ----------------
Net cash (used in) provided by investing activities (313,198) 225,847
---------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings on long-term debt 61,475 -
Principal payments on long-term debt (149,024) (125,649)
Cash distributions to partners (132,796) (212,474)
---------------- ----------------
Net cash used in financing activities (220,345) (338,123)
---------------- ----------------
Net (decrease) increase in cash and cash equivalents (114,516) 232,561
Cash and cash equivalents at beginning of period 265,199 245,755
---------------- ----------------
Cash and cash equivalents at end of period $ 150,683 $ 478,316
================ ================
Supplemental cash flow information:
Interest paid during the period $ 15,976 $ 15,463
================ ================
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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
Quarters Ended March 31, 1997 and March 31, 1996
(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, 1996.
(2) Summary of Significant Accounting Policies
Allowance for Doubtful Accounts
The financial statements include allowances for estimated losses on receivable
balances. The allowances for doubtful accounts are based on past write off
experience and an evaluation of potential uncollectible accounts within the
current receivable balances. Receivable balances which are determined to be
uncollectible are charged against the allowance and subsequent recoveries, if
any, are credited to the allowance. At March 31, 1997 and December 31, 1996, the
allowance for doubtful accounts included in rents receivable was $26,938 and
$51,713, respectively, and $939 and $1,703 included in sales receivable,
respectively.
(3) Investment Property
At March 31, 1997, the Partnership owned computer equipment with a depreciated
cost basis of $2,036,408, subject to existing leases and equipment with a
depreciated cost basis of $87,142 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
Quarters Ended March 31, 1997 and March 31, 1996
(Unaudited)
(4) Related Party Transactions
Fees, commissions and other expenses paid or accrued by the Partnership to the
General Partner or affiliates of the General Partner for the quarters ended
March 31 are as follows:
1997 1996
---- ----
Equipment acquisition fees $ 10,267 $ -
Management fees 31,498 31,859
Reimbursable expenses paid 43,896 37,661
------------ ------------
$ 85,661 $ 69,520
============ ============
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, 1997 consists of two loans totaling $94,537 from
Union Chelsea National Bank each with an interest rate of 9.00%, one loan for
$23,543 from CIT Group/Equipment Financing, Incorporated with an interest rate
of 14.17%, one installment note from Pullman Capital Corporation in the amount
of $61,475 with an interest rate of 8.75%, and nine loans totaling $528,821 from
Liberty Bank, one bearing interest at 7.75%, one bearing interest at 11.00%, two
bearing interest at 7.90% and the five remaining loans bearing interest at
8.25%. All loans are non-recourse and are collateralized by equipment on the
respective leases with a total net book value of $715,843 and assignment of the
related leases.
Maturities on long-term debt are as follows:
1997 $ 421,887
1998 255,139
1999 27,403
2000 3,947
--------------
$ 708,376
==============
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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, 1997 in comparison to the quarter ended March 31, 1996.
The Partnership realized net income of $111,416 and $275,867 for the quarters
ended March 31, 1997 and 1996, respectively. Rental income decreased $66,168 or
15% in 1997. 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 decrease in net gain on
sale of equipment is the result of fewer equipment sales occurring during the
current quarter versus the first quarter of 1996.
Total costs and expenses decreased $74,502 or 19% in 1997. The most significant
factor impacting the decrease in costs and expenses is the current quarter
reduction in depreciation expense. Depreciation expense decreased due to a
portion of the equipment portfolio becoming fully depreciated. During the first
quarter of 1997, the Partnership was able to reverse a provision for doubtful
accounts due to successful collection efforts on delinquent rents receivable.
Interest expense increased 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 $11,296. 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 $5.19 and
$12.80 for the quarters ended March 31, 1997 and 1996, respectively. The
allocation for the quarter ended March 31, 1997 includes a cost recovery
allocation of profit and loss among the General and 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 to the
Limited Partners in instances when the Partnership's operations were profitable
for the period.
Liquidity and Capital Resources
For the quarter ended March 31, 1997, 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 sold. This decision is made upon analyzing
which option generates the most favorable result.
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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. First, lower rates
are obtained on 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. Second, 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 $2,606,000
and are to be received over the next four years.
The Partnership's investing activities for the quarter resulted in equipment
purchases of $352,515 and equipment sales with a depreciated cost basis of
$6,418, generating $39,317 in proceeds. Included in equipment sales is a $755
loss which was charged against the reserve, initially set up in a prior period
to account for estimated losses on the ultimate disposition of equipment. The
Partnership will purchase equipment in the future as the Partnership has
extended its reinvestment period through June, 1997.
The Partnership's financing activities resulted in proceeds from borrowings on
long-term debt of $61,475. The Partnership's activities also included a paydown
on long-term debt during 1997 of $149,024. The Partnership will payoff its
remaining long-term debt of $708,376 by 2000. Total long-term debt assumed by
the Partnership from inception is $7,348,748, for a total leverage of 24%.
Cash distributions are currently at an annual level of 3% per Limited
Partnership Unit, or $3.75 per Limited Partnership Unit on a quarterly basis.
For the quarter ended March 31, 1997, the Partnership declared a cash
distribution of $79,678, of which $3,984 was distributed to the General Partner
and $75,694 was distributed to the Limited Partners. The distribution will be
made on May 30, 1997. 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.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
March 31, 1997
Lessee
American Hard Cider, Incorporated
Caterpillar, Incorporated
Cerulean Technology, Incorporated
Coulter Leasing Corporation
Direct Cable TV, Incorporated
Evare, Limited Liability Corporation
Faxnet, Incorporated
George Melhado and Company
H.J. Meyers & Company, Incorporated
Hughes Aircraft Corporation
Invetech Company
J. Walter Thompson, U.S.A., Incorporated
JumboSports Incorporated
Magnavox Electronic Systems Company, Incorporated
Merchants Association of Florida, Incorporated
Mercury Marine, Division of Brunswick Corporation
NYNEX National, Incorporated
ON Technology Corporation
Owens - Corning Fiberglass Corporation
Simmons Market Research Bureau, Incorporated
The Internet Access Company, Incorporated
Equipment Description Acquisition Price
Computer peripherals $ 2,339,574
Processors & upgrades 2,519,542
Other 1,139,793
----------------
$ 5,998,909
================
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PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
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
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
Date: May 12, 1997
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000760386
<NAME> WELLESLEY LEASE INCOME LTD PARTNERSHIP III-D FDS 3/31/97
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 150,683
<SECURITIES> 0
<RECEIVABLES> 99,591
<ALLOWANCES> 27,877
<INVENTORY> 0
<CURRENT-ASSETS> 224,347
<PP&E> 5,998,909
<DEPRECIATION> 3,875,359
<TOTAL-ASSETS> 2,347,897
<CURRENT-LIABILITIES> 140,877
<BONDS> 708,376
0
0
<COMMON> 8,988,039
<OTHER-SE> (7,489,395)
<TOTAL-LIABILITY-AND-EQUITY> 2,347,897
<SALES> 385,147
<TOTAL-REVENUES> 419,060
<CGS> 0
<TOTAL-COSTS> 31,498
<OTHER-EXPENSES> 285,709
<LOSS-PROVISION> (25,539)
<INTEREST-EXPENSE> 15,976
<INCOME-PRETAX> 111,416
<INCOME-TAX> 0
<INCOME-CONTINUING> 111,416
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,416
<EPS-PRIMARY> 5.19
<EPS-DILUTED> 0
</TABLE>
