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 September 30, 1998 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
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
INDEX Page No.
Part I. FINANCIAL INFORMATION
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Financial Statements
Balance Sheets as of September 30, 1998 and December 31, 1997 3
Statements of Operations
Quarters Ended September 30, 1998 and 1997 and
Nine Months Ended September 30, 1998 and 1997 4
Statements of Cash Flows
Nine Months Ended September 30, 1998 and 1997 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
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PART I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
9/30/98 12/31/97
---------------- ----------------
<S> <C> <C>
Investment property, at cost (note 3):
Computer equipment $ 4,012,068 $ 6,164,470
Less accumulated depreciation 2,750,350 4,119,544
---------------- ----------------
Investment property, net 1,261,718 2,044,926
Cash and cash equivalents 306,118 253,590
Rents receivable, net (note 2) 55,677 46,355
Sales receivable, net (note 2) - 2,200
Accounts receivable - affiliates 111,970 17,768
Other assets 15,421 17,293
---------------- ----------------
Total assets $ 1,750,904 $ 2,382,132
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 342,745 $ 628,925
Accounts payable and accrued expenses - affiliates (note 4) 33,458 31,639
Accounts payable and accrued expenses 53,313 61,989
Unearned rental revenue 23,906 39,641
Long-term debt, less current portion (note 5) 14,937 229,717
---------------- ----------------
Total liabilities 468,359 991,911
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 629,534 605,630
Cumulative cash distributions (630,534) (606,630)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 4,275,316 3,928,822
Cumulative cash distributions (11,979,810) (11,525,640)
---------------- ----------------
1,282,545 1,390,221
---------------- ----------------
Total partners' equity 1,282,545 1,390,221
---------------- ----------------
Total liabilities and partners' equity $ 1,750,904 $ 2,382,132
================ ================
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Operations
(Unaudited)
Quarters Ended Nine Months Ended
September 30, September 30,
--------------------------------- ----------------------------------
1998 1997 1998 1997
--------------------------------- ----------------------------------
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Revenue:
Rental income $ 346,265 $ 472,496 $ 1,277,961 $ 1,281,352
Interest income 3,066 3,145 8,970 6,279
Net gain on sale
of equipment 850 2,776 28,233 43,332
---------------- -------------- -------------- ---------------
Total revenue 350,181 478,417 1,315,164 1,330,963
---------------- -------------- -------------- ---------------
Costs and expenses:
Depreciation 182,200 275,439 642,943 789,948
(Reversal of) provision for
doubtful accounts 1,727 (7,379) (1,272) (50,878)
Interest 10,636 20,441 43,763 51,635
Related party expenses (note 4):
Management fees 23,889 36,498 92,262 96,530
General and
administrative 55,671 38,851 167,078 126,036
---------------- -------------- -------------- ---------------
Total costs
and expenses 274,123 363,850 944,774 1,013,271
---------------- -------------- -------------- ---------------
Net income $ 76,058 $ 114,567 $ 370,390 $ 317,692
================ ============== ============== ===============
Net income per Limited
Partnership Unit $ 3.37 $ 5.28 $ 17.17 $ 14.82
================ =============== ============== ===============
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
Nine Months Ended September 30, 1998 and 1997
(Unaudited)
1998 1997
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Cash flows from operating activities:
Net income $ 370,390 $ 317,692
---------------- ----------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 642,943 789,948
(Reversal of) provision for
doubtful accounts (1,272) (50,878)
Net gain on sale of equipment (28,233) (43,332)
Net (increase) decrease in current assets (98,172) 154,629
Net (decrease) increase in
current liabilities (22,592) (20,189)
---------------- ----------------
Total adjustments 492,674 830,178
---------------- ----------------
Net cash provided by
operating activities 863,064 1,147,870
---------------- ----------------
Cash flows from investing activities:
Purchase of investment property - (866,431)
Proceeds from sales of investment property 168,498 66,892
---------------- ----------------
Net cash used in investing activities 168,498 (799,539)
---------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings on long-term debt - 533,704
Principal payments on long-term debt (500,960) (430,963)
Cash distributions to partners (478,074) (371,830)
---------------- ----------------
Net cash used in financing activities (979,034) (269,089)
---------------- ----------------
Net increase in cash and cash equivalents 52,528 79,242
Cash and cash equivalents
at beginning of period 253,590 265,199
---------------- ----------------
Cash and cash equivalents at end of period $ 306,118 $ 344,441
================ ================
Supplemental cash flow information:
Interest paid during the period $ 43,763 $ 51,635
================ ================
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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
Nine Months Ended September 30, 1998 and September 30, 1997
(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, 1998.
(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, 1998 and December 31, 1997,
the allowance for doubtful accounts included in rents receivable was $8,334 and
$9,806, respectively, and $0 and $0 included in sales receivable, respectively.
(3) Investment Property
At September 30, 1998, the Partnership owned computer equipment with a
depreciated cost basis of $1,261,718. 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
Nine Months Ended September 30, 1998 and September 30, 1997
(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 nine months ended
September 30 are as follows:
1998 1997
---- ----
Equipment acquisition fees $ - $ 13,147
Management fees 92,262 96,530
Reimbursable expenses paid 147,686 100,294
------------ ------------
$ 239,948 $ 209,971
============ ============
Under the terms of the Partnership Agreement, the General Partner is entitled to
an equipment acquisition fee of 3% of the purchase price paid by the Partnership
for the equipment. The General Partner is also entitled to a management fee
equal to 7% of the monthly rental billings collected. The Partnership reimburses
the General Partner and its affiliates for certain expenses incurred by them in
connection with the operation of the Partnership.
(5) Long-term Debt
Long-term debt at September 30, 1998 consists of two installment notes from
Pullman Capital Corporation totaling $95,693 with interest rates of 8.75% and
10.50%, and twelve loans totaling $261,989 from Liberty Bank, one bearing
interest at 8.25%, two loans bearing interest at 8.50%, and the remaining nine
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 $425,974 and assignment of the related leases.
Maturities on long-term debt are as follows:
1998 $ 127,965
1999 225,770
2000 3,947
--------------
$ 357,682
==============
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Results of Operations
The following discussion relates to the Partnership's operations for the quarter
and nine months ended September 30, 1998 in comparison to the same periods ended
September 30, 1997.
The Partnership realized net income of $76,058 and $114,567 for the quarters
ended September 30, 1998 and 1997, respectively. Rental income decreased
$126,231 or 27% between the three month periods. 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.
Total costs and expenses decreased $89,727 or 25% between the three month
periods. Depreciation expense decreased $93,239 or 34% due to a portion of the
equipment portfolio becoming fully depreciated. Also included in depreciation
expense for the quarter ended September 30, 1998 is a provision of $10,446 for
estimated losses on the ultimate disposition of equipment. Interest expense
decreased $9,805 in the current quarter due to the continued paydown of
long-term debt. The long-term debt balance at September 30, 1998 was $14,937
versus a balance of $277,775 at September 30, 1997. Management fees decreased as
a result of the decline in rental income. General and administrative expenses
increased $16,820 or 43% mainly due to an increase in the allocable salaries of
the partnership accounting and reporting personnel of the General Partner.
The Partnership realized net income of $370,390 and $317,692 for the nine months
ended September 30, 1998 and 1997, respectively. The decrease in net gain on the
sale of equipment is primarily due to a fewer number of equipment sales carrying
low net book values.
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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)
Total costs and expenses decreased $68,497 or 7% during the nine month periods.
As discussed in the quarter analysis above, depreciation expense decreased
$147,005 or 19% between 1998 and 1997 due to the initial equipment portfolio
becoming fully depreciated and a reduction in the overall equipment portfolio.
Management fees decreased between the nine month periods due to the decline in
rental income. General and administrative expenses increased $41,042 or 33%
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 per Limited Partnership Unit of $3.37 and
$5.28 for the quarters ended September 30, 1998 and 1997, respectively, and net
income of $17.17 and $14.82 for the nine months ended September 30, 1998 and
1997, respectively.
Liquidity and Capital Resources
For the quarter ended September 30, 1998, rental revenue generated from
operating leases and sales proceeds generated from equipment sales were the
primary sources of funds for the Partnership. As equipment leases terminate, the
General Partner determines if the equipment will be extended to the same lessee,
remarketed to another lessee, or if it is less marketable, sold. This decision
is made upon analyzing which options would generate the most favorable results.
Rental income will continue to decrease due to two factors. First, lower rental
rates are obtained on the remarketing of existing equipment after 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 $1,101,738 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 sales with a depreciated cost basis of $232,232, generating $168,498
in proceeds. Included in equipment sales is a $91,966 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's financing activities resulted in the paydown on long-term debt
in the amount of $500,960 for the nine months ended September 30, 1998. The
Partnership will payoff its remaining long-term debt of $357,682 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, 1998, 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 27, 1998. The Partnership expects to continue paying near this
level in the future. The effects of inflation have not been significant to the
Partnership and are not expected to have any material impact in future periods.
On January 9, 1997, TLP Holding LLC purchased all the common stock of TLP
Leasing Programs, Inc. from CMI Holding Co. Under the new ownership, it is
expected that TLP Leasing Programs, Inc. will continue to operate in the same
manner of business as it has in the past.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
September 30, 1998
Lessee
American Hard Cider
Caterpillar Company, Incorporated
Cerulean, Incorporated
Direct Cable TV, Incorporated
Evare, Incorporated
Faxnet, Incorporated
George Melhado and Company
H.J. Meyers & Company, Incorporated
Hughes Aircraft
Internet Access Company
J. Walter Thompson, U.S.A., Incorporated
Jumbo Sports, Incorporated
Mercury Marine, Division of Brunswick Corporation
NYNEX National, Incorporated
ON Technology Corporation
Owens Corning Fiberglass, Incorporated
Packard Hughes Interconnect, Incorporated
USG Corporation
Venturcom, Incorporated
VIP Calling, Incorporated
Equipment Description Acquisition Price
Computer peripherals $ 1,546,149
Processors & upgrades 1,508,935
Other 956,984
----------------
$ 4,012,068
================
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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: November 12, 1998
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000760386
<NAME> WELLELSEY III-D FDS 9/30/98
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 306,118
<SECURITIES> 0
<RECEIVABLES> 175,981
<ALLOWANCES> 8,334
<INVENTORY> 0
<CURRENT-ASSETS> 489,186
<PP&E> 4,012,068
<DEPRECIATION> 2,750,350
<TOTAL-ASSETS> 1,750,904
<CURRENT-LIABILITIES> 110,677
<BONDS> 357,682
8,988,039
0
<COMMON> 0
<OTHER-SE> (7,705,494)
<TOTAL-LIABILITY-AND-EQUITY> 1,750,904
<SALES> 1,277,961
<TOTAL-REVENUES> 1,315,164
<CGS> 0
<TOTAL-COSTS> 92,262
<OTHER-EXPENSES> 810,021
<LOSS-PROVISION> (1,272)
<INTEREST-EXPENSE> 43,763
<INCOME-PRETAX> 370,390
<INCOME-TAX> 0
<INCOME-CONTINUING> 370,390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 370,390
<EPS-PRIMARY> 17.17
<EPS-DILUTED> 0
</TABLE>
