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
-----------------------
Quarter Ended September 30, 1997 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)
INDEX Page No.
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Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of September 30, 1997 and December 31, 1996 3
Statements of Operations
Quarters Ended September 30, 1997 and 1996 and
Nine Months Ended September 30, 1997 and 1996 4
Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996 5
Notes to Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 8
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)
9/30/97 12/31/96
---------------- ----------------
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Investment property, at cost (note 2):
Capital equipment $ 5,032,434 $ 5,447,101
Less accumulated depreciation 5,032,434 5,447,101
---------------- ----------------
Investment property, net - -
Cash and cash equivalents 12,275 199,970
Rents receivable 17,484 62,041
---------------- ----------------
Total assets $ 29,759 $ 262,011
================ ================
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and accrued
expenses - affiliates (note 3) $ 15,905 $ 10,747
Accounts payable and accrued expenses 107,700 230,551
Unearned rental income 1,465 22,500
---------------- ----------------
Total liabilities 125,070 263,798
---------------- ----------------
Partners' deficit:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 1,136,910 1,132,009
Cumulative cash distributions (1,135,837) (1,124,540)
---------------- ----------------
2,073 8,469
---------------- ----------------
Limited Partners (57,239 units):
Capital contribution, net of
offering costs 25,569,053 25,569,053
Cumulative net income 3,333,662 3,206,144
Cumulative cash distributions (29,000,099) (28,785,453)
---------------- ----------------
(97,384) (10,256)
---------------- ----------------
Total partners' deficit (95,311) (1,787)
---------------- ----------------
Total liabilities and partners' deficit $ 29,759 $ 262,011
================ ================
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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,
------------------------------- --------------------------------
1997 1996 1997 1996
------------------------------- --------------------------------
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Revenue:
Rental income $ 10,768 $ 159,614 $ 58,267 $ 495,176
Other income 41,630 750 152,025 750
Interest income 111 2,283 2,329 4,649
Net gain on sale
of equipment - 30,000 43,000 100,000
------------ ------------ ------------ ---------------
Total revenue 52,509 192,647 255,621 600,575
------------ ------------ ------------ ---------------
Costs and expenses:
Related party expenses (note 3):
Management fees 538 7,981 2,913 24,760
General and administrative 39,142 58,395 120,289 115,179
------------ ------------ ------------ ---------------
Total costs and expenses 39,680 66,376 123,202 139,939
------------ ------------ ------------ ---------------
Net income $ 12,829 $ 126,271 $ 132,419 $ 460,636
============ ============ ============ ===============
Net income per Limited
Partnership Unit $ 0.22 $ 2.12 $ 2.23 $ 7.72
============ ============ ============ ===============
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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
Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1997 1996
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Cash flows from operating activities:
Net income $ 132,419 $ 460,636
---------------- ---------------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Net gain on sale of equipment (43,000) (100,000)
Net decrease in current assets 44,557 34,913
Net (decrease) increase in current liabilities (138,728) 149,078
---------------- ---------------
Total adjustments (137,171) 83,991
---------------- ---------------
Net cash (used in) provided by operating activities (4,752) 544,627
---------------- ---------------
Cash flows from investing activities:
Proceeds from sales of investment property 43,000 100,000
---------------- ---------------
Net cash provided by investing activities 43,000 100,000
---------------- ---------------
Cash flows from financing activities:
Cash distributions to partners (225,943) (447,235)
---------------- ---------------
Net cash used in financing activities (225,943) (447,235)
---------------- ---------------
Net (decrease) increase in cash and cash equivalents (187,695) 197,392
Cash and cash equivalents at beginning of period 199,970 98,385
---------------- ---------------
Cash and cash equivalents at end of period $ 12,275 $ 295,777
================ ===============
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
Nine Months Ended September 30, 1997 and September 30, 1996
(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, 1996.
(2) Investment Property
At September 30, 1997, the Partnership owned capital equipment with a cost basis
of $5,032,434. 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 are as follows:
1997 1996
---- ----
Management fees $ 2,913 $ 24,760
Reimbursable expenses paid 100,287 78,094
----------- ------------
$ 103,200 $ 102,854
=========== ============
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. Also, 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, 1997, in comparison to the same
periods ended September 30, 1996.
The Partnership realized net income of $12,829 and $126,271 for the quarters
ended September 30, 1997 and 1996, respectively. Rental income decreased
$148,846 or 93% between the quarter 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. Other income is the result of a
reduction of an overstated liability recorded in a prior period. Interest income
decreased $2,172 as a result of lower average short-term investment balances
held during the third quarter of 1997. There were no sales of equipment during
the current quarter.
Total costs and expenses decreased $26,696 or 40% during the current quarter as
compared to the prior period quarter. The decrease in general and administrative
expenses is primarily due to a decrease in expenses associated with the
helicopter lease with Storage Technology Corporation which came off lease in
January, 1997. Management fees decreased in the current quarter as a result of
the decline in rental income.
The Partnership realized net income of $132,419 and $460,636 for the nine months
ended September 30, 1997 and 1996, respectively. Rental income decreased
$436,909 or 88% 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. Other income is the result of
helicopter inspection fees and flight time charges, and includes a reduction of
an overstated liability in the amount of $124,890, which was recorded in a prior
period. Interest income decreased $2,320 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 1997 and 1996 is attributed to a reduction in
equipment sales.
Total costs and expenses decreased $16,737 or 12% between the nine month periods
ended September 30, 1997 and 1996. The increase in general and administrative
expenses is mainly due to an increase in the allocable salaries of the
partnership accounting and reporting personnel of the General Partner during the
current year. Management fees decreased between the nine month periods due to
the decline in rental income.
The Partnership recorded net income per Limited Partnership Unit of $0.22 and
$2.12 for the quarters ended September 30, 1997 and 1996, respectively, and net
income of $2.23 and $7.72 for the nine months ended September 30, 1997 and 1996,
respectively.
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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)
Liquidity and Capital Resources
For the nine months ended September 30, 1997, rental revenue generated from the
operating leases and sales proceeds 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 sold. This decision is made upon analyzing
which option generates the most favorable result.
Consistent with prior periods, the Partnership's operating activities resulted
in a decrease in rental revenue due to lease expirations and resulting equipment
sales, and due to lower rental rates obtained on remarketed equipment. The
helicopter lease with Sikorsky Aircraft Corporation expired in January, 1997. It
is anticipated that the helicopter will be sold and the Partnership will be
liquidated soon thereafter.
The Partnership's investing activities for the nine months ended September 30,
1997 resulted in sales of fully depreciated equipment, generating $43,000 in
sales proceeds. The Partnership has no material capital commitments and will not
have any in the future due to the Partnership having fulfilled its capital
expenditure commitments in prior years.
During the fourth quarter of 1995, the General Partner announced its intentions
of winding down the operations of the Partnership. 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 early 1998.
Cash distributions are currently halted in an effort to minimize costs and
accumulate cash in anticipation of a final distribution to the Partners once the
Partnership has been liquidated. 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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HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Equipment Portfolio (Unaudited)
September 30, 1997
Lessees
BASF Corporation
Federal Paper Board Company, Incorporated
Equipment Description Acquisition Price
-----------------
Helicopter aircraft $ 4,678,826
Heavy duty equipment 328,500
Other 25,108
----------------
$ 5,032,434
================
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PART II. OTHER INFORMATION
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(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 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 7, 1997
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000796529
<NAME> HANOVER LEASE INCOME LIMITED PARTNERSHIP FDS 9/30/97
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 12,275
<SECURITIES> 0
<RECEIVABLES> 17,484
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,759
<PP&E> 5,032,434
<DEPRECIATION> 5,032,434
<TOTAL-ASSETS> 29,759
<CURRENT-LIABILITIES> 125,070
<BONDS> 0
25,570,053
0
<COMMON> 0
<OTHER-SE> (25,665,364)
<TOTAL-LIABILITY-AND-EQUITY> 29,759
<SALES> 58,267
<TOTAL-REVENUES> 255,621
<CGS> 0
<TOTAL-COSTS> 2,913
<OTHER-EXPENSES> 120,289
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 132,419
<INCOME-TAX> 0
<INCOME-CONTINUING> 132,419
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,419
<EPS-PRIMARY> 2.23
<EPS-DILUTED> 0
</TABLE>
