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 June 30, 1999 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.
Part I. FINANCIAL INFORMATION
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Financial Statements
Balance Sheets as of June 30, 1999 and December 31, 1998 3
Statements of Operations
Quarters Ended June 30, 1999 and 1998 and
Six Months Ended June 30, 1999 and 1998 4
Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998 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)
6/30/99 12/31/98
---------------- ----------------
<S> <C> <C>
Investment property, at cost (note 3):
Computer equipment $ 2,649,680 $ 3,589,735
Less accumulated depreciation 1,958,575 2,575,703
---------------- ----------------
Investment property, net 691,105 1,014,032
Cash and cash equivalents 283,692 403,150
Rents receivable, net (note 2) 12,325 5,483
Accounts receivable - affiliates 3,136 48,059
Other assets 1,729 6,917
---------------- ----------------
Total assets $ 991,987 $ 1,477,641
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 55,116 $ 225,770
Accounts payable and accrued expenses - affiliates (note 4) 13,847 23,637
Accounts payable and accrued expenses 28,282 52,371
Unearned rental revenue 20,516 31,655
Long-term debt, less current portion (note 5) - 3,947
---------------- ----------------
Total liabilities 117,761 337,380
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 653,438 637,502
Cumulative cash distributions (654,438) (638,502)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 4,321,160 4,284,420
Cumulative cash distributions (12,433,973) (12,131,198)
---------------- ----------------
874,226 1,140,261
---------------- ----------------
Total partners' equity 874,226 1,140,261
---------------- ----------------
Total liabilities and partners' equity $ 991,987 $ 1,477,641
================ ================
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 Six Months Ended
June 30, June 30,
--------------------------------- -----------------------------------
1999 1998 1999 1998
--------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Revenue:
Rental income $ 175,193 $ 464,846 $ 437,755 $ 931,696
Interest income 2,301 2,998 5,480 5,904
Other income 16,249 - 16,249 -
Net gain on sale
of equipment 8,398 12,202 9,893 27,383
--------------- ------------- --------------- ---------------
Total revenue 202,141 480,046 469,377 964,983
--------------- ------------- --------------- ---------------
Costs and expenses:
Depreciation 137,205 222,733 302,085 460,743
(Reversal of) provision for
doubtful accounts (1,452) (10,854) (938) (2,999)
Interest 1,892 14,392 6,328 33,127
Related party expenses (note 4):
Management fees 13,480 33,751 31,305 68,373
General and administrative 35,967 57,181 77,921 111,407
--------------- ------------- --------------- ---------------
Total costs and expenses 187,092 317,203 416,701 670,651
--------------- ------------- --------------- ---------------
Net income $ 15,049 $ 162,843 $ 52,676 $ 294,332
=============== ============= =============== ===============
Net income per Limited
Partnership Unit $ 0.35 $ 7.67 $ 1.82 $ 13.79
=============== ============= =============== ===============
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
Six Months Ended June 30, 1999 and 1998
(Unaudited)
1999 1998
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Cash flows from operating activities:
Net income $ 52,676 $ 294,332
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 302,085 460,743
(Reversal of) provision for doubtful accounts (938) (2,999)
Net gain on sale of equipment (9,893) (27,383)
Net decrease (increase) in current assets 44,206 (105,886)
Net increase (decrease) in current liabilities (45,018) 11,007
-------------- ---------------
Total adjustments 290,442 335,482
-------------- ---------------
Net cash provided by operating activities 343,118 629,814
-------------- ---------------
Cash flows from investing activities:
Proceeds from sales of investment property 30,736 94,250
-------------- ---------------
Net cash provided by investing activities 30,736 94,250
-------------- ---------------
Cash flows from financing activities:
Principal payments on long-term debt (174,601) (372,615)
Cash distributions to partners (318,711) (318,711)
-------------- ---------------
Net cash used in financing activities (493,312) (691,326)
Net (decrease) increase in cash and cash equivalents (119,458) 32,738
Cash and cash equivalents at beginning of period 403,150 253,590
-------------- ---------------
Cash and cash equivalents at end of period $ 283,692 $ 286,328
============== ===============
Supplemental cash flow information:
Interest paid during the period $ 6,328 $ 33,127
============== ===============
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
Six Months Ended June 30, 1999 and June 30, 1998
(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 June 30, 1999 and December 31, 1998, the
allowance for doubtful accounts included in rents receivable was $0 and $938,
respectively.
(3) Investment Property
At June 30, 1999, the Partnership owned computer equipment with a depreciated
cost basis of $691,105. 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 six months ended
June 30 are as follows:
1999 1998
---- ----
Management fees $ 31,305 $ 68,373
Reimbursable expenses paid 78,221 99,158
------------ ------------
$ 109,526 $ 167,531
============ ============
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Six Months Ended June 30, 1999 and June 30, 1998
(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 June 30, 1999 consists of four installment notes in the amount
of $55,116. All loans are non-recourse and are collateralized by equipment on
the respective leases with a total net book value of $127,673 and assignment of
the related leases.
Maturities on long-term debt are as follows:
1999 $ 51,169
2000 3,947
--------------
$ 55,116
==============
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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 six months ended June 30, 1999 in comparison to the same periods ended June
30, 1998.
The Partnership realized net income of $15,049 and $162,843 for the quarters
ended June 30, 1999 and 1998, respectively. Rental income decreased $289,653 or
62% in 1999. The decrease in rental income between the two periods is due
primarily to lower rental rates obtained on equipment lease extensions and
remarketings resulting after the initial lease term expires and due to a net
decrease in the overall size of the equipment portfolio. Other income is the
result of the reduction of overstated liabilities recorded in prior periods.
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 $130,111 or 41% in 1999. The decrease in
costs and expenses is mainly due to the $85,528 reduction in depreciation
expense during the current quarter in comparison to the same period in 1998. The
decline in depreciation expense is primarily due to a portion of the equipment
portfolio becoming fully depreciated. For the quarters ended June 30, 1999 and
1998, the reversal of provision for doubtful accounts was $1,452 and
$10,845, respectively. The reversal is a result of the successful collection
efforts of delinquent rents receivable. Interest expense decreased due to the
continued paydown of its existing long-term debt. Management fees decreased in
correlation to the decline in rental income. General and administrative expenses
decreased $21,214 as a result of our cost cutting efforts.
The Partnership realized net income of $52,676 and $294,332 for the six months
ended June 30, 1999 and 1998, respectively. The $493,941 or 53% decrease in
rental income is attributed to lower rental rates obtained on equipment lease
extensions and remarketings resulting after the initial lease term expires and
due to a net decrease in the overall size of the equipment portfolio. Other
income is the result of the reduction of overstated liabilities recorded in
prior periods. The decrease in net gain on sale of equipment in 1999 is due to
a smaller number of equipment sales carrying high 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 $253,950 or 38% during the six month periods.
The decrease in costs and expenses is mainly due to the $158,658 decline in
depreciation expense which is the result of a net decrease in the overall size
of the equipment portfolio. Management fees decreased between the six month
periods in relation to the decline in rental income. The decline in interest
expense is due to the continued paydown of its existing long-term debt.
The Partnership recorded net income per Limited Partnership Unit of $0.35 and
$7.67 for the quarters ended June 30, 1999 and 1998, respectively, and $1.82
and $13.79 for the six month periods ended June 30, 1999 and 1998, respectively.
The allocation for the six months ended June 30, 1999 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 June 30, 1999, 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.
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 through a reduction in the rate of cash distributions. Future rental revenues
amount to $360,239 and are to be received over the next three years.
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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)
The Partnership's investing activities for the six months ended June 30
consisted of equipment sales with a depreciated cost basis of $98,106,
generating $30,736 in proceeds. Included in equipment sales is a $77,264 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 included a paydown on long-term debt
during 1999 of $174,601. The Partnership will payoff its remaining long-term
debt of $55,116 by 2000.
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 June 30, 1999, the Partnership declared a cash
distribution of $106,237, of which $5,312 was distributed to the General Partner
and $100,925 was distributed to the Limited Partners. The distribution will be
made on August 27, 1999. 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.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
June 30, 1999
Lessee
American Hard Cider, Incorporated
Direct Cable TV, Incorporated
Evare, Limited Liability Corporation
Faxnet, Incorporated
George Melhado and Company
Hughes Aircraft Corporation
J. Walter Thompson, U.S.A., Incorporated
JumboSports Incorporated
The Internet Access Company, Incorporated
USG Corporation
Venturcom, Incorporated
VIP Calling, Incorporated
Equipment Description Acquisition Price
Computer $ 409,777
Peripherals 1,195,782
Other 1,044,121
----------------
$ 2,649,680
================
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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: August 6, 1999
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000760386
<NAME> WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 283,692
<SECURITIES> 0
<RECEIVABLES> 15,461
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 300,882
<PP&E> 2,649,680
<DEPRECIATION> 1,958,575
<TOTAL-ASSETS> 991,987
<CURRENT-LIABILITIES> 62,645
<BONDS> 55,116
8,988,039
0
<COMMON> 0
<OTHER-SE> (8,113,813)
<TOTAL-LIABILITY-AND-EQUITY> 991,987
<SALES> 437,755
<TOTAL-REVENUES> 469,377
<CGS> 0
<TOTAL-COSTS> 31,305
<OTHER-EXPENSES> 380,006
<LOSS-PROVISION> (938)
<INTEREST-EXPENSE> 6,328
<INCOME-PRETAX> 52,676
<INCOME-TAX> 0
<INCOME-CONTINUING> 52,676
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,676
<EPS-BASIC> 1.82
<EPS-DILUTED> 0
</TABLE>
