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 The Quarter Ended September 30, 1996 Commission File No. 0-15630
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2923206
(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 11
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HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
<S> <C> <C>
INDEX Page No.
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of September 30, 1996 and December 31, 1995 3
Statements of Operations For the Quarters Ended
September 30, 1996 and 1995 and the Nine Months Ended
September 30, 1996 and 1995 4
Statements of Cash Flows For the Nine Months Ended
September 30, 1996 and 1995 5
Notes to Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operation 7 - 8
Computer Equipment Portfolio 9
Part II. OTHER INFORMATION
Items 1 - 6 10
Signature 11
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PART I. FINANCIAL INFORMATION
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
9/30/96 12/31/95
---------------- ---------------
<S> <C> <C>
Investment property, at cost (note 2):
Capital equipment $ 5,834,359 $ 6,453,248
Less accumulated depreciation 5,834,359 6,453,248
---------------- ---------------
Investment property, net - -
Cash and cash equivalents 295,777 98,385
Rents receivable 13,274 40,087
Sales receivable - 8,100
---------------- ---------------
Total assets $ 309,051 $ 146,572
================ ===============
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued
expenses - affiliates (note 3) $ 9,471 $ 13,594
Accounts payable and accrued expenses 229,617 74,209
Unearned rental income 36,000 38,207
---------------- ---------------
Total liabilities 275,088 126,010
---------------- ---------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 1,124,003 1,104,971
Cumulative cash distributions (1,114,506) (1,096,564)
---------------- ---------------
10,497 9,407
---------------- ---------------
Limited Partners (57,239 units):
Capital contribution, net of
offering costs 25,569,053 25,569,053
Cumulative net income 3,025,220 2,583,616
Cumulative cash distributions (28,570,807) (28,141,514)
---------------- ---------------
23,466 11,155
---------------- ---------------
Total partners' equity 33,963 20,562
---------------- ---------------
Total liabilities and partners' equity $ 309,051 $ 146,572
================ ===============
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See accompanying notes to financial statements.
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HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Statements of Operations
(Unaudited)
Quarters Ended Nine Months Ended
September 30, September 30,
------------------------------- ---------------------------------
1996 1995 1996 1995
------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Revenue:
Rental income $ 159,614 $ 188,173 $ 495,176 $ 591,002
Other income 750 - 750 -
Interest income 2,283 1,609 4,649 6,034
Net gain on sale
of equipment 30,000 - 100,000 206,727
------------ ------------ ------------ ---------------
Total revenue 192,647 189,782 600,575 803,763
------------ ------------ ------------ ---------------
Costs and expenses:
Depreciation - - - 927
Related party expenses (note 3):
Management fees 7,981 9,215 24,760 28,633
General and administrative 58,395 27,569 115,179 91,645
------------ ------------ ------------ ---------------
Total costs and expenses 66,376 36,784 139,939 121,205
------------ ------------ ------------ ---------------
Net income $ 126,271 $ 152,998 $ 460,636 $ 682,558
============ ============ ============ ===============
Net income per Limited
Partnership Unit $ 2.12 $ 2.54 $ 7.72 $ 11.47
============ ============ ============ ===============
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See accompanying notes to financial statements.
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HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
1996 1995
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Cash flows from operating activities:
Net income $ 460,636 $ 682,558
---------------- ---------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation - 927
Net gain on sale of equipment (100,000) (206,727)
Net decrease (increase) in current assets 34,913 (41,628)
Net increase (decrease) in current liabilities 149,078 (18,100)
---------------- ---------------
Total adjustments 83,991 (265,528)
---------------- ---------------
Net cash provided by operating activities 544,627 417,030
---------------- ---------------
Cash flows from investing activities:
Proceeds from sales of investment property 100,000 206,727
---------------- ---------------
Net cash provided by investing activities 100,000 206,727
---------------- ---------------
Cash flows from financing activities:
Cash distributions to partners (447,235) (735,195)
---------------- ---------------
Net cash used in financing activities (447,235) (735,195)
---------------- ---------------
Net increase (decrease) in cash and cash equivalents 197,392 (111,438)
Cash and cash equivalents at beginning of period 98,385 213,715
---------------- ---------------
Cash and cash equivalents at end of period $ 295,777 $ 102,277
================ ===============
Supplemental cash flow information:
Interest paid during the period $ - $ -
================ ===============
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See accompanying notes to financial statements.
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HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Nine Months Ended September 30, 1996 and September 30, 1995
(Unaudited)
(1) Organization and Partnership Matters
The foregoing financial statements of Hanover Lease Income Limited Partnership
(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, 1995.
(2) Investment Property
At September 30, 1996, the Partnership owned capital equipment with a cost basis
of $5,834,359. All purchases of capital equipment are subject to a 4.75%
acquisition fee paid to the General Partner.
(3) 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, 1996 and 1995 are as follows:
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1996 1995
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Management fees $ 24,760 $ 28,633
Reimbursable expenses paid 78,094 66,399
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$ 102,854 $ 95,032
============= ============
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Under the terms of the Partnership Agreement, the General Partner is entitled to
an Equipment Acquisition Fee of 4.75% of the purchase price paid by the
Partnership for the equipment. The General Partner is also entitled to a
management fee equal to 5% of the monthly rental billings. The Partnership
reimburses the General Partner and their affiliates for certain expenses
incurred by them in connection with the operation of the Partnership.
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HANOVER LEASE INCOME LIMITED PARTNERSHIP
(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 for the nine months ended September 30, 1996, in comparison to the same
periods ended September 30, 1995.
The Partnership realized net income of $126,271 and $152,998 for the quarters
ended September 30, 1996 and 1995, respectively. Rental income decreased $28,559
or 15% between the quarter periods. The decrease is 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. Interest income increased $674 from 1995 to 1996 as a
result of higher average short-term investment balances held during the third
quarter of 1996. The increase in net gain on sale of equipment between 1996 and
1995 can be attributed to an increase in equipment sales. During the first
quarter of 1995, the equipment portfolio became fully depreciated which will
result in a gain on all future sales of equipment.
Total costs and expenses increased $29,592 or 80% during the current quarter as
compared to the prior period quarter. The increase in costs and expenses can be
attributed to an increase in the allocable salaries of the partnership
accounting and reporting personnel of the General Partner and an increase in
expenses associated with the helicopter lease with Storage Technology
Corporation between the quarter periods. Management fees decreased in the
current quarter as a result of the decline in rental income.
The Partnership realized net income of $460,636 and $682,558 for the nine months
ended September 30, 1996 and 1995, respectively. Rental income decreased $95,826
or 16% between the nine month periods. The decrease is 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, as discussed above. Interest income decreased $1,385 from
1995 to 1996 as a result of lower average short-term investment balances held
between the nine month periods. The decrease in net gain on sale of equipment
between 1996 and 1995 can be attributed to a reduction in equipment sales.
Total costs and expenses increased $18,734 or 15% between the nine month periods
ended September 30, 1996 and 1995. The increase in costs and expenses can be
attributed to an increase in the allocable salaries of the partnership
accounting and reporting personnel of the General Partner during the nine month
periods and an increase in expenses associated with the helicopter lease, as
mentioned above. Management fees decreased as a result of the decline in rental
income.
Liquidity and Capital Resources
For the nine months ended September 30, 1996, rental revenue generated from the
operating leases and sales proceeds generated from equipment sales were the
primary sources of funds for the Partnership. As the 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 would derive the most
favorable results.
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HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Consistent with prior periods, Hanover's operating activities resulted in a
decrease of rental revenues due to expired leases resulting in equipment sales
and due to older equipment being remarketed at lower rental rates. The
helicopter lease with Storage Technology Corporation, scheduled to expire in
October, 1996, has been extended through January, 1997. The rent associated with
the Storage Technology Corporation lease comprises 65% of the total rental
revenue for the nine months ended September 30, 1996. Upon expiration, the
helicopter will likely be sold and the Partnership will be liquidated soon
thereafter.
During the fourth quarter of 1995, the General Partner announced its intentions
of winding down the operations of the Partnership. As discussed above, once the
helicopter lease terminates, it is anticipated that substantially all of the
assets will be liquidated and the proceeds will be used to settle all
outstanding liabilities and make a final distribution to the Partners in the
first half of 1997.
The Partnership's investing activities for the nine months ended September 30,
1996 resulted in sales of fully depreciated equipment, generating $100,000 in
sales proceeds. The Partnership has no material capital commitments and will not
purchase equipment in the future due to the Partnership having fulfilled its
capital expenditure commitments in prior years.
Cash distributions are currently at a level of 3% per Limited Partnership Unit,
or $3.75 per Limited Partnership Unit on a quarterly basis. For the quarter
ended September 30, 1996, the Partnership declared a cash distribution of
$224,680, of which $10,034 was distributed to the General Partner and $214,646
will be distributed to the Limited Partners. The distribution will be made on
November 27, 1996. The Partnership expects distributions to be volatile as its
operations are winding down. The effects of inflation have not been significant
to the Partnership to date and are not anticipated to have any material impact
in future years.
On January 9, 1996, 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.
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HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Equipment Portfolio (Unaudited)
September 30, 1996
Lessees
BASF Corporation
Federal Paper Board Company, Incorporated
North Shore Data Services, Incorporated
Storage Technology Corporation
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<CAPTION>
Equipment Description Acquisition Price
<S> <C>
Helicopter aircraft $ 4,678,826
Heavy duty equipment 738,906
Computer equipment & printers 107,269
Research & experimentation equipment 143,088
Other 166,270
----------------
$ 5,834,359
================
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PART II. OTHER INFORMATION
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
<S> <C>
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 Section 13 or 15(d) 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.
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(Registrant)
By: Hanover Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
Date: November 14, 1996
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000796529
<NAME> HANOVER LSE INCOME FUND FDS 9/30/96
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 295,777
<SECURITIES> 0
<RECEIVABLES> 13,274
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 309,051
<PP&E> 5,834,359
<DEPRECIATION> 5,834,359
<TOTAL-ASSETS> 309,051
<CURRENT-LIABILITIES> 275,088
<BONDS> 0
<COMMON> 25,570,053
0
0
<OTHER-SE> (25,536,090)
<TOTAL-LIABILITY-AND-EQUITY> 309,051
<SALES> 495,176
<TOTAL-REVENUES> 600,575
<CGS> 0
<TOTAL-COSTS> 24,760
<OTHER-EXPENSES> 115,179
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 460,636
<INCOME-TAX> 0
<INCOME-CONTINUING> 460,636
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 460,636
<EPS-PRIMARY> 7.72
<EPS-DILUTED> 0
</TABLE>
