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
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For Quarter Ended MARCH 31, 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 March 31, 1999 and December 31, 1998 3
Statements of Operations
Quarters Ended March 31, 1999 and 1998 4
Statements of Cash Flows
Quarters Ended March 31, 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)
3/31/99 12/31/98
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Investment property, at cost (note 3):
Computer equipment $ 3,461,593 $ 3,589,735
Less accumulated depreciation 2,613,841 2,575,703
---------------- ----------------
Investment property, net 847,752 1,014,032
Cash and cash equivalents 324,133 403,150
Rents receivable, net (note 2) 26,871 5,483
Accounts receivable - affiliates 10,800 48,059
Other assets 4,323 6,917
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Total assets $ 1,213,879 $ 1,477,641
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 117,926 $ 225,770
Accounts payable and accrued expenses - affiliates (note 4) 19,068 23,637
Accounts payable and accrued expenses 34,766 52,371
Unearned rental revenue 23,586 31,655
Long-term debt, less current portion (note 5) - 3,947
---------------- ----------------
Total liabilities 195,346 337,380
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 645,470 637,502
Cumulative cash distributions (646,470) (638,502)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 4,314,079 4,284,420
Cumulative cash distributions (12,282,585) (12,131,198)
---------------- ----------------
1,018,533 1,140,261
---------------- ----------------
Total partners' equity 1,018,533 1,140,261
---------------- ----------------
Total liabilities and partners' equity $ 1,213,879 $ 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
Quarters Ended March 31, 1999 and 1998
(Unaudited)
1999 1998
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Revenue:
Rental income $ 262,561 $ 466,849
Interest income 3,180 2,906
Net gain on sale
of equipment 1,495 15,181
--------------- ---------------
Total revenue 267,236 484,936
--------------- ---------------
Costs and expenses:
Depreciation 164,880 238,010
Provision for doubtful accounts 514 7,855
Interest 4,436 18,735
Related party expenses (note 4):
Management fees 17,825 34,707
General and administrative 41,954 54,140
--------------- ---------------
Total costs and expenses 229,609 353,447
--------------- ---------------
Net income $ 37,627 $ 131,489
=============== ===============
Net income per Limited
Partnership Unit $ 1.47 $ 6.12
=============== ===============
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, 1999 and 1998
(Unaudited)
1999 1998
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Cash flows from operating activities:
Net income $ 37,627 $ 131,489
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 164,880 238,010
Provision for doubtful accounts 514 7,855
Net gain on sale of equipment (1,495) (15,181)
Net decrease in current assets 17,951 22,803
Net (decrease) increase in current liabilities (30,243) 2,987
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Total adjustments 151,607 256,474
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Net cash provided by operating activities 189,234 387,963
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Cash flows from investing activities:
Proceeds from sales of investment property 2,895 47,349
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Net cash provided by investing activities 2,895 47,349
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Cash flows from financing activities:
Principal payments on long-term debt (111,791) (194,909)
Cash distributions to partners (159,355) (159,355)
-------------- --------------
Net cash used in financing activities (271,146) (354,264)
Net increase (decrease) in cash and cash equivalents (79,017) 81,048
Cash and cash equivalents at beginning of period 403,150 253,590
-------------- --------------
Cash and cash equivalents at end of period $ 324,133 $ 334,638
============== ==============
Supplemental cash flow information:
Interest paid during the period $ 4,436 $ 18,735
============== ==============
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, 1999 and March 31, 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 March 31, 1999 and December 31, 1998, the
allowance for doubtful accounts included in rents receivable was $1,452 and
$938, respectively.
(3) Investment Property
At March 31, 1999, the Partnership owned computer equipment with a depreciated
cost basis of $847,752. 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 quarters ended
March 31 are as follows:
1999 1998
---- ----
Management fees $ 17,825 $ 34,707
Reimbursable expenses paid 42,871 44,768
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$ 60,696 $ 79,475
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Quarters Ended March 31, 1999 and March 31, 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. 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, 1999 consists of thirteen loans totaling $117,926.
All loans are non-recourse and are collateralized by equipment on the respective
leases with a total net book value of $263,381 and assignment of the related
leases.
Maturities on long-term debt are as follows:
1999 $ 113,980
2000 3,946
--------------
$ 117,926
==============
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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, 1999 in comparison to the quarter ended March 31, 1998.
The Partnership realized net income of $37,627 and $131,489 for the quarters
ended March 31, 1999 and 1998, respectively. Rental income decreased $204,288
or 44% in 1999. The decrease is primarily due to lower rental rates obtained on
equipment lease extensions and remarketings resulting after the initial lease
term expires. Interest income increased as a result of higher 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 1998.
Total costs and expenses decreased $123,838 or 35% in 1999. Depreciation expense
decreased due to a portion of the equipment potfolio becoming fully depreciated.
Interest expense decreased due to continued paydown on long-term debt.
Management fees decreased as a result of the decline in rental income. General
and administrative expenses decreased $12,186 due to successful cost cutting
efforts.
The Partnership recorded net income per Limited Partnership Unit of $1.47 and
$6.12 for the quarters ended March 31, 1999 and 1998, respectively. The
allocation for the quarter ended March 31, 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.
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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)
Liquidity and Capital Resources
For the quarter ended March 31, 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 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.
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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 quarter resulted in equipment
sales with a depreciated cost basis of $13,272, generating $2,895 in
proceeds. Included in equipment sales is a $11,873 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 also included a paydown on long-term
debt during 1999 of $111,791. The Partnership will payoff its remaining
long-term debt of $117,926 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 March 31, 1999, the Partnership declared a cash
distribution of $159,356, of which $7,968 was distributed to the General Partner
and $151,388 was distributed to the Limited Partners. The distribution will be
made on May 28, 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)
March 31, 1999
Lessees
American Hard Cider, Incorporated
Cerulean Technology, Incorporated
Direct Cable TV, Incorporated
Elron Software, Incorporated
Evare, Limited Liability Corporation
Faxnet, Incorporated
George Melhado and Company
Hughes Aircraft Corporation
J. Walter Thompson, U.S.A., Incorporated
The Internet Access Company, Incorporated
USG Corporation
VIP Calling, Incorporated
Equipment Description Acquisition Price
Computers $ 701,009
Peripherals 1,312,672
Other 1,447,912
----------------
$ 3,461,593
================
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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
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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 13, 1999
By: Arthur P. Beecher,
President
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<ARTICLE> 5
<CIK> 0000760386
<NAME> WELLESLEY III-D FDS 3/31/99
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 324,133
<SECURITIES> 0
<RECEIVABLES> 39,123
<ALLOWANCES> 1,452
<INVENTORY> 0
<CURRENT-ASSETS> 366,127
<PP&E> 3,461,593
<DEPRECIATION> 2,613,841
<TOTAL-ASSETS> 1,213,879
<CURRENT-LIABILITIES> 77,420
<BONDS> 117,926
8,988,039
0
<COMMON> 0
<OTHER-SE> (7,969,506)
<TOTAL-LIABILITY-AND-EQUITY> 1,213,879
<SALES> 262,561
<TOTAL-REVENUES> 267,236
<CGS> 0
<TOTAL-COSTS> 17,825
<OTHER-EXPENSES> 206,834
<LOSS-PROVISION> 514
<INTEREST-EXPENSE> 4,436
<INCOME-PRETAX> 37,627
<INCOME-TAX> 0
<INCOME-CONTINUING> 37,627
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,627
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 0
</TABLE>
