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 March 31, 1996 Commission File No. 33-18859
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(Exact name of registrant as specified in its charter)
Massachusetts 04-2985041
(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 IV
(A Massachusetts Limited Partnership)
INDEX Page No.
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of March 31, 1996 and December 31, 1995 3
Statements of Operations For the Quarters Ended
March 31, 1996 and 1995 4
Statements of Cash Flows For the Quarters Ended
March 31, 1996 and 1995 5
Notes to Financial Statements 6 - 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 10
Computer Equipment Portfolio 11
Part II. OTHER INFORMATION
Items 1 - 6 12
Signature 13
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<CAPTION>
PART I: FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
3/31/96 12/31/95
<S> <C> <C>
Investment property, at cost (note 3):
Computer equipment $ 7,250,108 $ 7,388,216
Less accumulated depreciation 5,554,559 5,674,559
---------------- ----------------
Investment property, net 1,695,549 1,713,657
Cash and cash equivalents 62,008 336,360
Rents receivable, net (note 2) 177,233 125,765
Account receivable - affiliates (note 4) 2,892 43,054
Sales receivable, net (note 2) 8,069 16,069
Marketable securities (notes 2 & 7) 4,781 4,644
---------------- ----------------
Total assets $ 1,950,532 $ 2,239,549
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 6) $ 572,776 $ 491,254
Notes payable - affiliate (note 5) 223,600 -
Accounts payable and accrued expenses - affiliates (note 4) 115,623 420,457
Accounts payable and accrued expenses 231,131 237,953
Unearned rental revenue 14,467 27,685
Long-term debt, less current portion (note 6) 446,219 469,249
---------------- ----------------
Total liabilities 1,603,816 1,646,598
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 477,554 476,748
Cumulative cash distributions (599,161) (588,414)
Unrealized losses on marketable securities (note 7) (7) (8)
---------------- ----------------
(120,614) (110,674)
---------------- ----------------
Limited Partners (27,226 units):
Capital contribution, net of offering costs 12,148,459 12,148,459
Cumulative net loss (277,747) (245,511)
Cumulative cash distributions (11,402,707) (11,198,512)
Unrealized losses on marketable securities (note 7) (675) (811)
---------------- ----------------
467,330 703,625
---------------- ----------------
Total partners' equity 346,716 592,951
---------------- ----------------
Total liabilities and partners' equity $ 1,950,532 $ 2,239,549
================ ================
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See accompanying notes to financial statements.
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<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Statements of Operations
For the Quarters Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
----------------- ----------------
<S> <C> <C>
Revenue:
Rental income $ 457,136 $ 467,453
Interest income 1,449 10,476
Net gain (loss) on sale of equipment 1,140 (1,820)
----------------- ----------------
Total revenue 459,725 476,109
----------------- ----------------
Costs and expenses:
Depreciation 403,109 393,960
Interest 23,349 12,564
Related party expenses (note 4):
Management fees 28,021 28,404
General and administrative 36,676 32,129
Provision for doubtful accounts - 3,100
----------------- ----------------
Total costs and expenses 491,155 470,157
----------------- ----------------
Net (loss) income $ (31,430) $ 5,952
================= ================
Net loss per Limited Partnership Unit $ (1.18) $ (0.96)
================= ================
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See accompanying notes to financial statements.
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<CAPTION>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Quarters Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (31,430) $ 5,952
----------------- ----------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 403,109 393,960
Provision for doubtful accounts - 3,100
Net (gain) loss on sale of equipment (1,140) 1,820
Net (increase) decrease in current assets (3,306) 100,773
Net decrease in current liabilities (324,874) (40,765)
----------------- ----------------
Total adjustments 73,789 458,888
----------------- ----------------
Net cash provided by operating activities 42,359 464,840
----------------- ----------------
Cash flows from investing activities:
Purchase of investment property (506,622) (536,508)
Proceeds from sale of investment property 122,761 211,010
----------------- ----------------
Net cash used in investing activities (383,861) (325,498)
----------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings on notes payable - affiliate 223,600 -
Proceeds from borrowings on long-term debt 189,942 -
Principal payments on long-term debt (131,450) (122,723)
Cash distributions to partners (214,942) (340,324)
----------------- ----------------
Net cash provided by (used in) financing activities 67,150 (463,047)
----------------- ----------------
Net decrease in cash and cash equivalents (274,352) (323,705)
Cash and cash equivalents at beginning of period 336,360 843,110
----------------- ----------------
Cash and cash equivalents at end of period $ 62,008 $ 519,405
================= ================
Supplemental cash flow information:
Interest paid during the period $ 20,722 $ 13,641
================= ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Quarters Ended March 31, 1996 and March 31, 1995
(Unaudited)
(1) Organization and Partnership Matters
The foregoing financial statements of Wellesley Lease Income Limited Partnership
IV (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) 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, 1996 and December 31, 1995, the
allowance for doubtful accounts included in rents receivable was $34,889 and the
allowance for doubtful accounts included in sales receivable was $4,906.
(3) Investment Property
At March 31, 1996, the Partnership owned computer equipment with a cost basis of
$5,257,666, subject to existing leases and equipment with a cost basis of
$1,992,442 in inventory, awaiting re-lease or sale. All purchases of computer
equipment are subject to a 3% acquisition fee paid to the General Partner.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Quarters Ended March 31, 1996 and March 31, 1995
(Unaudited)
(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, 1996 and 1995 are as follows:
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<CAPTION>
1996 1995
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<S> <C> <C>
Equipment acquisition fees $ 14,756 $ 15,627
Management fees 28,021 28,404
Reimbursable expenses paid 40,416 29,703
------------ ------------
$ 83,193 $ 73,734
============ ============
</TABLE>
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. In addition, the Partnership
reimburses the General Partner and its affiliates for certain expenses incurred
by them in connection with the operation of the Partnership.
(5) Notes Payable - Affiliate
Notes payable - affiliate at March 31, 1996, consists of three non-recourse
promissory notes payable to TLP Leasing Programs, Inc. in the total amount of
$223,600, bearing interest at the rate of 8.75%. The notes payable mature in
1996.
(6) Long-term Debt
Long-term debt at March 31, 1996 consisted of two loans totaling $25,030 from
Randolph Computer Company, each bearing interest at 6.00%, one loan in the
amount of $276,556 from Pioneer Bank and Trust Company, bearing interest at
8.15%, two loans totaling $442,791 from Pullman Capital Corporation, each
bearing interest at 8.00%, and three loans totaling $274,618 from Liberty Bank,
each bearing interest at 8.125%. The total outstanding debt balance is
collateralized by equipment with a net book value of $1,204,732, and assignment
of the related leases.
The annual maturities of long-term debt for the next three years are as follows:
Year Ending December 31,
1996 $ 427,822
1997 444,367
1998 146,806
-------------
$ 1,018,995
=============
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Quarters Ended March 31, 1996 and March 31, 1995
(Unaudited)
(7) Fair Values of Financial Instruments
Pursuant to Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which requires investments
in debt and equity securities other than those accounted for under the equity
method to be carried at fair value or amortized cost for debt securities
expected to be held to maturity, the Partnership has classified its investments
in equity securities as available for sale. Accordingly, the net unrealized
gains and losses computed in marking these securities to market are reported as
a component of partners' equity. At March 31, 1996 the difference between the
fair value and the cost basis of these securities is an unrealized loss of $682.
The fair value is based on currently quoted market prices. The cost basis and
estimated fair value of the Partnership's marketable securities at March 31,
1996 and December 31, 1995, respectively, are as follows:
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<CAPTION>
March 31, 1996 December 31, 1995
------------------------ ---------------------
Cost Fair Cost Fair
Basis Value Basis Value
<S> <C> <C> <C> <C>
Investment in Continental Information
Systems Corporation Stock $ 5,463 $ 4,781 $ 5,463 $ 4,644
======= ======= ======= =======
</TABLE>
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WELLESLEY INCOME LIMITED PARTNERSHIP IV
(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, 1996 in comparison to the quarter ended March 31, 1995.
The Partnership realized a net loss of $31,430 and net income of $5,952 for the
quarters ended March 31, 1996 and 1995, respectively. Rental income decreased
$10,317 or 2% between the three month periods primarily due to lower rental
rates generated 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. Interest income decreased as a result of lower average
short-term investment balances held during the current quarter.
Total costs and expenses increased $20,998 or 4% between the three month
periods. The slight increase in costs and expenses is primarily due to the
$9,149 increase in depreciation expense and the $10,785 increase in interest
expense. Depreciation expense increased due to the purchase of equipment during
the current quarter for which commitments were made in 1995. Interest expense
increased as the Partnership received additional financing of $189,942 during
the current quarter and continued to paydown its existing debt. The long-term
debt balance at March 31, 1996 was $1,018,995 versus a balance of $545,472 at
March 31, 1995.
The Partnership recorded a net loss per Limited Partnership Unit of $1.18 and
$0.96 for the quarters ended March 31, 1996 and 1995, respectively. The
allocation for the quarter ended March 31, 1996 includes a cost recovery
allocation of profit and loss among the General and Limited Partners which
results in an allocation of net loss to the 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 March 31, 1996, rental revenue generated from operating
leases was the primary source 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 options would generate the most
favorable results.
<PAGE>
WELLESLEY INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Rental income will continue to decrease due to two factors. The first factor is
the lower rate obtained due to the remarketing of existing equipment upon
expiration of the original leases. Typically the remarketed rates are lower due
to the decrease in useful life of the equipment. Secondly, 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 and notes payable - affiliate
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 a reduction in the rate of cash
distributions, as was the case this quarter. Future rental revenues amount to
$2,878,178 and are to be received over the next six years.
The Partnership's investing activities resulted in equipment purchases of
$506,622 and sales of equipment with a depreciated cost basis of $121,621,
generating $122,761 in proceeds. The Partnership has no material capital
expenditure commitments and will not purchase equipment in the future as the
Partnership has reached the end of its reinvestment period.
The Partnership's financing activities during the quarter resulted in the
receipt of $189,942 in cash proceeds and the paydown on long-term debt of
$131,450. Such long-term debt bears interest rates ranging from 6.00% to 8.15%
with installments to be paid monthly. Total debt assumed by the Partnership from
inception is $14,270,105, for a total leverage of 43%. The Partnership also
received $223,600 in cash proceeds from the borrowing of three notes payable -
affiliate. The notes payable each bear interest at 8.75% and mature in 1996.
Cash distributions are currently at an annual level of 2% per Limited
Partnership Unit or $2.50 per Limited Partnership Unit on a quarterly basis. For
the quarter ended March 31, 1996, the Partnership declared a cash distribution
of $71,647, of which $3,582 was allocated to the General Partner and $68,065 was
allocated to the Limited Partners. The distribution will be made on May 29,
1996. The Partnership's distribution rate dropped significantly during the first
quarter of 1996 due to the large amount of equipment purchases, for which there
existed firm purchase commitments in 1995. Since the Partnership's reinvestment
period ended on December 31, 1995, the General Partner made a concerted effort
to purchase as many equipment leases as possible to sustain the Partnership in
future years. The effort resulted in significant equipment lease acquisitions
with a resulting reduction in cash available for distribution purposes. All
future cash received will be used to cover operating expenses and to make cash
distributions to the Partners.
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.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
March 31, 1996
Lessee
American Freightways, Incorporated American Telephone and Telegraph Company,
Incorporated Bassin Distributors, Incorporated Blue Cross of Western New York
Burroughs Welcome Company, Incorporated Carr Separations, Incorporated Case
Corporation Chrysler Corporation Cincinnati Gas & Electric Company Comdisco,
Incorporated Coulter Corporation Cybersmith, Incorporated Dave's Custom Caps
Delphi Internet, Incorporated FAX International, Incorporated Halliburton
Company H.J. Meyer Company, Incorporated Hughes Aircraft Company, Incorporated
Internet Access Company, Incorporated J. Walter Thompson Company Mastercard,
Incorporated ON Technology Corporation Sero Company, Incorporated Sports &
Recreation, Incorporated
<TABLE>
<CAPTION>
Equipment Description Acquisition Price
<S> <C>
Computer peripherals $ 3,190,048
Processors & upgrades 1,957,529
Telecommunications 521,362
Other 1,581,169
----------------
$ 7,250,108
================
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<CAPTION>
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(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
</TABLE>
<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 IV
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
By: Arthur P. Beecher,
President
Date: May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000825851
<NAME> WELLESLEY IV 03/31/96 FDS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 62,008
<SECURITIES> 4,781
<RECEIVABLES> 227,989
<ALLOWANCES> 39,795
<INVENTORY> 0
<CURRENT-ASSETS> 254,983
<PP&E> 7,250,108
<DEPRECIATION> 5,554,559
<TOTAL-ASSETS> 1,950,532
<CURRENT-LIABILITIES> 361,221
<BONDS> 1,242,595
<COMMON> 12,149,459
0
0
<OTHER-SE> (11,802,743)
<TOTAL-LIABILITY-AND-EQUITY> 1,950,532
<SALES> 457,136
<TOTAL-REVENUES> 459,725
<CGS> 0
<TOTAL-COSTS> 28,021
<OTHER-EXPENSES> 439,785
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,349
<INCOME-PRETAX> (31,430)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,430)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,430)
<EPS-PRIMARY> (1.18)
<EPS-DILUTED> 0
</TABLE>
