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, 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 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, 1999 and December 31, 1998 3
Statements of Operations
Quarters Ended September 30, 1999 and 1998 and
Six Months Ended September 30, 1999 and 1998 4
Statements of Cash Flows
Six Months Ended September 30, 1999 and 1998 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)
9/30/99 12/31/98
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Investment property, at cost (note 3):
Computer equipment $ 2,550,722 $ 3,589,735
Less accumulated depreciation 2,011,523 2,575,703
---------------- ----------------
Investment property, net 539,199 1,014,032
Cash and cash equivalents 360,849 403,150
Rents receivable, net (note 2) 3,329 5,483
Accounts receivable - affiliates 40,134 48,059
Other assets - 6,917
---------------- ----------------
Total assets $ 943,511 $ 1,477,641
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 14,937 $ 225,770
Accounts payable and accrued expenses - affiliates (note 4) 16,115 23,637
Accounts payable and accrued expenses 100,657 52,371
Unearned rental revenue 14,429 31,655
Long-term debt, less current portion (note 5) - 3,947
---------------- ----------------
Total liabilities 146,138 337,380
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 658,750 637,502
Cumulative cash distributions (659,750) (638,502)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 4,345,232 4,284,420
Cumulative cash distributions (12,534,898) (12,131,198)
---------------- ----------------
797,373 1,140,261
---------------- ----------------
Total partners' equity 797,373 1,140,261
---------------- ----------------
Total liabilities and partners' equity $ 943,511 $ 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 Nine Months Ended
September 30, September 30,
--------------------------------- -----------------------------------
1999 1998 1999 1998
--------------------------------- -----------------------------------
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Revenue:
Rental income $ 190,523 $ 346,265 $ 628,278 $ 1,277,961
Interest income 2,446 3,066 7,926 8,970
Other income - - 16,249 -
Net gain on sale
of equipment 15,170 850 25,063 28,233
--------------- ------------- --------------- ---------------
Total revenue 208,139 350,181 677,516 1,315,164
--------------- ------------- --------------- ---------------
Costs and expenses:
Depreciation 118,656 182,200 420,741 642,943
(Reversal of) provision for
doubtful accounts - 1,727 (938) (1,272)
Interest 700 10,636 7,029 43,763
Related party expenses (note 4):
Management fees 16,639 23,889 47,943 92,262
General and administrative 42,760 55,671 120,682 167,078
--------------- ------------- --------------- ---------------
Total costs and expenses 178,756 274,123 595,457 944,774
--------------- ------------- --------------- ---------------
Net income $ 29,383 $ 76,058 $ 82,059 $ 370,390
=============== ============= =============== ===============
Net income per Limited
Partnership Unit $ 1.19 $ 3.37 $ 3.01 $ 17.17
=============== ============= =============== ===============
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, 1999 and 1998
(Unaudited)
1999 1998
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Cash flows from operating activities:
Net income $ 82,059 $ 370,390
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 420,741 642,943
(Reversal of) provision for doubtful accounts (938) (1,272)
Net gain on sale of equipment (25,063) (28,233)
Net increase (decrease) in current assets 17,934 (98,172)
Net decrease (increase) in current liabilities 23,538 (22,592)
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Total adjustments 436,212 492,674
-------------- ---------------
Net cash provided by operating activities 518,271 863,064
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Cash flows from investing activities:
Proceeds from sales of investment property 79,156 168,498
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Net cash provided by investing activities 79,156 168,498
-------------- ---------------
Cash flows from financing activities:
Principal payments on long-term debt (214,780) (500,960)
Cash distributions to partners (424,948) (478,074)
-------------- ---------------
Net cash used in financing activities (639,728) (979,034)
-------------- ---------------
Net (decrease) increase in cash and cash equivalents (42,301) 52,528
Cash and cash equivalents at beginning of period 403,150 253,590
-------------- ---------------
Cash and cash equivalents at end of period $ 360,849 $ 306,118
============== ===============
Supplemental cash flow information:
Interest paid during the period $ 7,029 $ 43,763
============== ===============
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, 1999 and September 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 September 30, 1999 and December 31, 1998,
the allowance for doubtful accounts included in rents receivable was $0 and
$938, respectively, and $0 and $0 included in sales receivable, respectively.
(3) Investment Property
At September 30, 1999, the Partnership owned computer equipment with a
depreciated cost basis of $539,199. All purchases of computer equipment are
subject to a 3% acquisition fee paid to the General Partner.
(4) Related Party Transactions
Fees and 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:
1999 1998
---- ----
Management fees $ 47,943 $ 92,262
Reimbursable expenses paid 106,936 147,686
------------ ------------
$ 154,879 $ 239,948
============ ============
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Nine Months Ended September 30, 1999 and September 30, 1998
(Unaudited)
Under the terms of the Partnership Agreement, the General Partner is 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, 1999 consists of two installment notes from
Pullman Capital Corporation totaling $14,937. All loans are non-recourse and
are collateralized by equipment on the respective leases with a total net book
value of $36,968 and assignment of the related leases.
Maturities on long-term debt are as follows:
1999 $ 10,990
2000 3,947
--------------
$ 14,937
==============
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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, 1999 in comparison to the same periods ended
September 30, 1998.
The Partnership realized net income of $29,383 and $76,058 for the quarters
ended September 30, 1999 and 1998, respectively. Rental income decreased
$155,742 or 45% 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 $95,367 or 35% between the three month
periods. Depreciation expense decreased $63,544 or 35% due to a portion of the
equipment portfolio becoming fully depreciated. Also included in depreciation
expense for the quarter ended September 30, 1999 is a provision of $25,000 for
estimated losses on the ultimate disposition of equipment. Interest expense
decreased $9,936 in the current quarter due to the continued paydown of
long-term debt. The long-term debt balance at September 30, 1999 was $0 versus
a balance of $14,937 at September 30, 1998. Management fees decreased as a
result of the decline in rental income.
The Partnership realized net income of $82,059 and $370,390 for the nine months
ended September 30, 1999 and 1998, respectively. Rental income decreased
$649,683 or 51% primarily due 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.
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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 $349,317 or 37% during the nine month
periods. As discussed in the quarter analysis above, depreciation expense
decreased $222,202 or 35% between 1999 and 1998 due to the initial equipment
portfolio becoming fully depreciated and to a reduction in the overall size of
the equipment portfolio. Management fees decreased between the nine month
periods due to the decline in rental income. General and administrative expenses
decreased $46,396 or 28% mainly due to successful cost cutting effects.
The Partnership recorded net income per Limited Partnership Unit of $1.19 and
$3.37 for the quarters ended September 30, 1999 and 1998, respectively, and net
income of $3.01 and $17.17 for the nine months ended September 30, 1999, and
1998, respectively.
Liquidity and Capital Resources
For the quarter ended September 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 if it is less marketable, sold. This
decision is made upon analyzing which option generates the most favorable
results.
Rental income will begin 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
$162,547 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 nine month period resulted
in equipment sales with a depreciated cost basis of $131,357, generating
$79,156 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 resulted in the paydown on long-term
debt in the amount of $214,780 for the nine months ended September 30, 1999. The
Partnership will payoff its remaining long-term debt of $14,937 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 September 30, 1999, the Partnership declared a cash
distribution of $159,355, of which $7,968 was allocated to the General Partner
and $151,387 was distributed to the Limited Partners. The distribution will be
made on November 12, 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)
September 30, 1999
Lessee
American Hard Cider, Incorporated
Direct Cable TV, Incorporated
Evare, Limited Liability Corporation
Faxnet, Incorporated
George Melhado and Company
Hughes Aircraft Corporation
Internet Access Company
J. Walter Thompson, U.S.A., Incorporated
USG Corporation
VIP Calling, Incorporated
Equipment Description Acquisition Price
Computer $ 373,624
Peripherals 1,132,977
Other 1,044,121
----------------
$ 2,550,722
================
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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 11, 1999
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000760386
<NAME> WELLESLEY III-D FDS 9/30/99
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 360,849
<SECURITIES> 0
<RECEIVABLES> 43,463
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 404,312
<PP&E> 2,550,722
<DEPRECIATION> 2,011,523
<TOTAL-ASSETS> 943,511
<CURRENT-LIABILITIES> 131,201
<BONDS> 14,937
8,988,039
0
<COMMON> 0
<OTHER-SE> (8,190,666)
<TOTAL-LIABILITY-AND-EQUITY> 943,511
<SALES> 628,278
<TOTAL-REVENUES> 677,516
<CGS> 0
<TOTAL-COSTS> 47,943
<OTHER-EXPENSES> 541,423
<LOSS-PROVISION> (938)
<INTEREST-EXPENSE> 7,029
<INCOME-PRETAX> 82,059
<INCOME-TAX> 0
<INCOME-CONTINUING> 82,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,059
<EPS-BASIC> 3.01
<EPS-DILUTED> 0
</TABLE>
