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
-----------------------
Quarter Ended September 30, 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 13
<PAGE>
<TABLE>
<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
INDEX Page No.
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of September 30, 1997 and December 31, 1996 3
Statements of Operations
Quarters Ended September 30, 1997 and 1996 and
Nine Months Ended September 30, 1997 and 1996 4
Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996 5
Notes to Financial Statements 6 - 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 10
Computer Equipment Portfolio 11
Part II. OTHER INFORMATION
Items 1 - 6 12
Signature 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
9/30/97 12/31/96
---------------- ----------------
<S> <C> <C>
Investment property, at cost (note 3):
Computer equipment $ 6,033,932 $ 5,844,357
Less accumulated depreciation 3,961,094 3,824,442
---------------- ----------------
Investment property, net 2,072,838 2,019,915
Cash and cash equivalents 344,441 265,199
Rents receivable, net (note 2) 31,961 69,908
Sales receivable, net (note 2) 5,200 -
Accounts receivable - affiliates 5,910 84,022
Other assets 19,887 12,779
---------------- ----------------
Total assets $ 2,480,237 $ 2,451,823
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 620,891 $ 550,139
Accounts payable and accrued expenses - affiliates (note 4) 32,210 27,168
Accounts payable and accrued expenses 51,405 93,581
Unearned rental revenue 32,070 15,125
Long-term debt, less current portion (note 5) 277,775 245,786
---------------- ----------------
Total liabilities 1,014,351 931,799
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 597,662 579,070
Cumulative cash distributions (598,662) (580,070)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 3,853,099 3,553,999
Cumulative cash distributions (11,374,252) (11,021,014)
---------------- ----------------
1,465,886 1,520,024
---------------- ----------------
Total partners' equity 1,465,886 1,520,024
---------------- ----------------
Total liabilities and partners' equity $ 2,480,237 $ 2,451,823
================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Operations
(Unaudited)
Quarters Ended Nine Months Ended
September 30, September 30,
--------------------------------- ----------------------------------
1997 1996 1997 1996
--------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Revenue:
Rental income $ 472,496 $ 321,786 $ 1,281,352 $ 1,158,972
Interest income 3,145 4,679 6,279 12,021
Net gain on sale
of equipment 2,776 4,132 43,332 233,480
--------------- ------------- -------------- ---------------
Total revenue 478,417 330,597 1,330,963 1,404,473
--------------- ------------- -------------- ---------------
Costs and expenses:
Depreciation 275,439 365,019 789,948 963,859
Interest 20,441 10,314 51,635 38,135
Related party expenses (note 4):
Management fees 35,054 28,323 96,800 96,530
General and administrative 40,295 42,825 125,766 113,462
(Reversal of) provision for
doubtful accounts (7,379) 3,367 (50,878) 14,611
--------------- ------------- -------------- ---------------
Total costs and expenses 363,850 449,848 1,013,271 1,226,597
--------------- ------------- -------------- ---------------
Net income (loss) $ 114,567 $ (119,251) $ 317,692 $ 177,876
=============== ============= ============== ===============
Net income (loss) per Limited
Partnership Unit $ 5.28 $ (6.57) $ 14.82 $ 6.76
=============== ============ ============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 317,692 $ 177,876
-------------- ---------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 789,948 963,859
(Reversal of) provision for doubtful accounts (50,878) 14,611
Net gain on sale of equipment (43,332) (233,480)
Net decrease in current assets 154,629 91,282
Net (decrease) increase in current liabilities (20,189) 46,609
-------------- ---------------
Total adjustments 830,178 882,881
-------------- ---------------
Net cash provided by operating activities 1,147,870 1,060,757
-------------- ---------------
Cash flows from investing activities:
Purchase of investment property (866,431) (451,363)
Proceeds from sales of investment property 66,892 373,478
-------------- ---------------
Net cash used in investing activities (799,539) (77,885)
-------------- ---------------
Cash flows from financing activities:
Proceeds from borrowings on long-term debt 533,704 109,263
Principal payments on long-term debt (430,963) (320,616)
Cash distributions to partners (371,830) (690,540)
-------------- ---------------
Net cash used in financing activities (269,089) (901,893)
-------------- ---------------
Net increase in cash and cash equivalents 79,242 80,979
Cash and cash equivalents at beginning of period 265,199 245,755
-------------- ---------------
Cash and cash equivalents at end of period $ 344,441 $ 326,734
============== ===============
Supplemental cash flow information:
Interest paid during the period $ 51,635 $ 38,135
============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Nine Months Ended September 30, 1997 and September 30, 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 September 30, 1997 and December 31, 1996,
the allowance for doubtful accounts included in rents receivable was $5,097 and
$51,713, respectively, and $0 and $1,703 included in sales receivable,
respectively.
(3) Investment Property
At September 30, 1997, the Partnership owned computer equipment with a
depreciated cost basis of $2,031,494, subject to existing leases and equipment
with a depreciated cost basis of $41,344 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) 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 nine months ended
September 30 are as follows:
1997 1996
---- ----
Equipment acquisition fees $ 25,236 $ 13,147
Management fees 96,800 96,530
Reimbursable expenses paid 119,529 100,294
------------ ------------
$ 241,565 $ 209,971
============ ============
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Nine Months Ended September 30, 1997 and September 30, 1996
(Unaudited)
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 September 30, 1997 consists of two loans totaling $47,041 from
Union Chelsea National Bank, each bearing interest at 9.00%, one loan for
$11,079 from CIT Group/Equipment Financing, Incorporated, with an interest rate
of 14.17%, two installment notes from Pullman Capital Corporation in the amount
of $168,781, with an interest rate of 8.75% and 10.50%, and eighteen loans
totaling $671,765 from Liberty Bank, one bearing interest at 8.50%, one bearing
interest at 11.00%, two bearing interest at 7.90%, five bearing interest at
8.25%, and the nine remaining loans bearing interest at 10.50%. All loans are
non-recourse and are collateralized by equipment on the respective leases with a
total net book value of $899,731 and assignment of the related leases.
Maturities on long-term debt are as follows:
1997 $ 195,471
1998 505,898
1999 193,350
2000 3,947
--------------
$ 898,666
==============
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Results of Operations
The following discussion relates to the Partnership's operations for the quarter
and nine months ended September 30, 1997 in comparison to the same periods ended
September 30, 1996.
The Partnership realized net income of $114,567 and a net loss of $119,251 for
the quarters ended September 30, 1997 and 1996, respectively. Rental income
increased $150,710 or 47% between the three month periods. The increase in
rental income between the two periods is due to new leases resulting from
equipment acquisitions as a result of the extension of the reinvestment period.
Interest income decreased as a result of lower cash balances held during the
current quarter. The decrease in net gain on the sale of equipment in the
current quarter is primarily due to a smaller number of equipment sales.
Total costs and expenses decreased $85,998 or 19% between the three month
periods. The decrease in cost and expenses is mainly due to the $89,580
reduction in depreciation expense during the current quarter in comparison to
the same period in 1996. The decline in depreciation expense is primarily due to
a portion of the equipment portfolio becoming fully depreciated. Interest
expense increased $10,127 as a result of the continued paydown of long-term
debt. Management fees increased in correlation to the increase in rental income.
General and administrative expenses remained relatively flat between the three
month periods. The $7,379 reversal of the provision for doubtful accounts in the
current quarter is due to successful collection efforts on delinquent accounts.
The Partnership realized net income of $317,692 and $177,876 for the nine months
ended September 30, 1997 and 1996, respectively. Rental income increased
$122,380 or 11% in 1997. As discussed in the quarter analysis above, the
increase in rental income is primarily due to new leases resulting from
equipment acquisitions as a result of the extension of the reinvestment period.
Interest income decreased from 1996 as a result of lower cash balances held
during the nine month period. The significant decrease in net gain on sale of
equipment in 1997 is due to a smaller number of equipment sales and sales of
equipment carrying high net book values.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Total costs and expenses decreased $213,326 or 17% during the nine month
periods. The decrease in costs and expenses is mainly due to the $173,911 or 18%
decline in depreciation expense. As discussed in the quarter analysis above, the
reduction in depreciation expense is due to a portion of the initial equipment
portfolio becoming fully depreciated. Another element impacting the decline in
costs and expenses is the $50,878 reversal of provision for doubtful accounts.
The reversal is a result of successful collection efforts on delinquent accounts
in 1997. Interest expense increased $13,500 due to the continued paydown of
long-term debt during the nine month period ended September 30, 1997. Management
fees increased between the nine month periods in relation to the increase in
rental income. General and administrative expenses increased $12,304 or 11%
mainly due to an increase in the allocable salaries of the partnership
accounting and reporting personnel of the General Partner during the current
year.
The Partnership recorded net income and net loss per Limited Partnership Unit of
$5.28 and $6.57 for the quarters ended September 30, 1997 and 1996,
respectively, and net income of $14.82 and $6.76 for the nine month periods
ended September 30, 1997 and 1996, respectively. The allocation for the nine
months ended September 30, 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 September 30, 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.
Operating activities have resulted in a 11% increase in rental revenue due to
equipment lease acquisitions in 1997 as a result of the extension of the
reinvestment period. It is expected that rental income will decline in the
future due to two factors. First, lower rates are obtained on the remarketing of
existing equipment upon expiration of the original leases. 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 through a reduction in the rate of
cash distributions. Future rental revenues amount to $2,527,227 and are to be
received over the next four years.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
The Partnership's investing activities for the nine month periods resulted in
equipment purchases of $866,431 and equipment sales with a depreciated cost
basis of $21,862, generating $66,892 in proceeds. Included in equipment sales is
a $1,698 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 not purchase equipment in the future as the Partnership
reached the end of its extended reinvestment period in June, 1997.
The Partnership's financing activities resulted in proceeds from borrowings on
long-term debt of $533,704. The Partnership's activities also included a paydown
on long-term debt during 1997 of $430,963. The Partnership will payoff its
remaining long-term debt of $898,666 by 2000. Total long-term debt assumed by
the Partnership from inception is $7,820,977, for a total leverage of 25%.
Cash distributions are currently at an annual level of 6% per Limited
Partnership Unit or $7.50 per Limited Partnership Unit on a quarterly basis. For
the quarter ended September 30, 1997, the Partnership declared a cash
distribution of $159,356, of which $7,968 was allocated to the General Partner
and $151,388 was allocated to the Limited Partners. The distribution will be
made on November 26, 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)
September 30, 1997
Lessee
American Hard Cider, Incorporated
Baylor Heath Network, Incorporated
Caterpillar, Incorporated
Cerulean Technology, Incorporated
Coulter Leasing Corporation
Direct Cable TV, Incorporated
Evare, Limited Liability Corporation
Faxnet, Incorporated
George Melhado and Company
Halliburton Company
H.J. Meyers & Company, Incorporated
Hughes Aircraft Corporation
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, Incorporated
Packard Hughes Interconnect, Incorporated
The Internet Access Company, Incorporated
USG Corporation
VenturCom, Incorporated
VIP Calling, Incorporated
Equipment Description Acquisition Price
Computer peripherals $ 2,353,234
Processors & upgrades 2,534,251
Other 1,146,447
----------------
$ 6,033,932
================
<PAGE>
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: November 7, 1997
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000760386
<NAME> WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D FDS 9/30/97
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 344,441
<SECURITIES> 0
<RECEIVABLES> 48,168
<ALLOWANCES> 5,097
<INVENTORY> 0
<CURRENT-ASSETS> 407,399
<PP&E> 6,033,932
<DEPRECIATION> 3,961,094
<TOTAL-ASSETS> 2,480,237
<CURRENT-LIABILITIES> 115,685
<BONDS> 898,666
8,988,039
0
<COMMON> 0
<OTHER-SE> (7,522,153)
<TOTAL-LIABILITY-AND-EQUITY> 2,480,237
<SALES> 1,281,352
<TOTAL-REVENUES> 1,330,963
<CGS> 0
<TOTAL-COSTS> 96,800
<OTHER-EXPENSES> 915,714
<LOSS-PROVISION> (50,878)
<INTEREST-EXPENSE> 51,635
<INCOME-PRETAX> 317,962
<INCOME-TAX> 0
<INCOME-CONTINUING> 317,962
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 317,962
<EPS-PRIMARY> 14.82
<EPS-DILUTED> 0
</TABLE>
