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, 1998 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) ntification 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 IV
(A Massachusetts Limited Partnership)
INDEX Page No.
Part I. FINANCIAL INFORMATION
<S> <C> <C>
Financial Statements
Balance Sheets as of March 31, 1998 and December 31, 1997 3
Statements of Operations
Quarters Ended March 31, 1998 and 1997 4
Statements of Cash Flows
Quarters Ended March 31, 1998 and 1997 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 IV
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
3/31/98 12/31/97
---------------- ----------------
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Investment property, at cost (note 3):
Computer equipment $ 2,964,287 $ 2,974,475
Less accumulated depreciation 2,463,295 2,341,847
---------------- ----------------
Investment property, net 500,992 632,628
Cash and cash equivalents 90,208 166,324
Rents receivable, net (note 2) 20,901 22,796
Account receivable - affiliates 486 2,456
Other assets 30,279 35,622
---------------- ----------------
Total assets $ 642,866 $ 859,826
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 160,645 $ 210,270
Accounts payable and accrued expenses - affiliates (note 4) 16,157 12,017
Accounts payable and accrued expenses 51,598 38,799
Unearned rental revenue 5,899 4,978
Long-term debt, less current portion (note 5) 41,780 66,109
---------------- ----------------
Total liabilities 276,079 332,173
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 630,533 625,237
Cumulative cash distributions (631,533) (626,237)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (27,226 units):
Capital contribution, net of offering costs 12,148,459 12,148,459
Cumulative net income 540,086 564,650
Cumulative cash distributions (12,321,758) (12,185,456)
---------------- ----------------
366,787 527,653
---------------- ----------------
Total partners' equity 366,787 527,653
---------------- ----------------
Total liabilities and partners' equity $ 642,866 $ 859,826
================ ================
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Statements of Operations
Quarters Ended March 31, 1998 and 1997
(Unaudited)
1998 1997
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Revenue:
Rental income $ 168,945 $ 254,428
Other income - 26,713
Interest income 1,188 1,379
Net gain on sale of equipment 2,079 157,008
Net loss on sale of marketable securities - (117)
----------------- ----------------
Total revenue 172,212 439,411
----------------- ----------------
Costs and expenses:
Depreciation 130,750 198,429
Interest 5,455 11,055
Related party expenses (note 4):
Management fees 12,756 14,766
General and administrative 37,680 42,809
Provision for (reversal of) doubtful accounts 4,836 (23,790)
----------------- ----------------
Total costs and expenses 191,477 243,269
----------------- ----------------
Net income (loss) $ (19,265) $ 196,142
================= ================
Net income (loss) per Limited Partnership Unit $ (0.71) $ 7.07
================= ================
See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Statements of Cash Flows
Quarters Ended March 31, 1998 and 1997
(Unaudited)
1998 1997
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Cash flows from operating activities:
Net income (loss) $ (19,265) $ 196,142
----------------- ----------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 130,750 198,429
Provision for (reversal of) doubtful accounts 4,836 (23,790)
Net gain on sale of equipment (2,079) (157,008)
Net loss on sale of marketable securities - 117
Net (increase) decrease in current assets 4,372 (102,996)
Net increase (decrease) in current liabilities 17,860 (227)
----------------- ----------------
Total adjustments 155,739 (85,475)
----------------- ----------------
Net cash provided by operating activities 136,474 110,667
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Cash flows from investing activities:
Proceeds from sale of investment property 2,965 162,513
Proceeds from sale of marketable securities - 633
----------------- ----------------
Net cash provided by (used in) investing activities 2,965 163,146
----------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings on long-term debt - 230,336
Principal payments on long-term debt (73,954) (291,205)
Cash distributions to partners (141,601) (71,647)
----------------- ----------------
Net cash (used in) provided by financing activities (215,555) (132,516)
----------------- ----------------
Net increase (decrease) in cash and cash equivalents (76,116) 141,297
Cash and cash equivalents at beginning of period 166,324 36,022
----------------- ----------------
Cash and cash equivalents at end of period $ 90,208 $ 177,319
================= ================
Supplemental cash flow information:
Interest paid during the period $ 5,455 $ 11,055
================= ================
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See accompanying notes to financial statements.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Quarters Ended March 31, 1998 and March 31, 1997
(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, 1997.
(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, 1998 and December 31, 1997, the
allowance for doubtful accounts included in rents receivable was $30,821 and
$25,985, respectively. At March 31, 1998 and December 31, 1997, the allowance
for doubtful accounts included in sales receivable was $0.
(3) Investment Property
At March 31, 1998, the Partnership owned computer equipment with a depreciated
cost basis of $500,992.
(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:
1998 1997
---- ----
Management fees $ 12,756 14,766
Reimbursable expenses paid 31,094 41,463
------------ ------------
$ 43,850 $ 56,229
============ ============
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Quarters Ended March 31, 1998 and March 31, 1997
(Unaudited)
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) Long-term Debt
Long-term debt at March 31, 1998 consists of one loan in the amount of $21,347
from Pullman Capital Corporation with an interest rate of 8.00% and four loans
totaling $181,078 from Liberty Bank, one bearing interest at 9.00% and the three
remaining loans bearing interest at 8.25%. The total outstanding debt balance is
collateralized by equipment with a net book value of $411,282, and assignment of
the related leases.
Maturities of long-term debt are as follows:
1998 $ 136,316
1999 66,109
--------------
$ 202,425
==============
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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, 1998 in comparison to the quarter ended March 31, 1997.
The Partnership realized net income (loss) of $(19,265) and $196,142 for the
quarters ended March 31, 1998 and 1997, respectively. Rental income decreased
$85,483 or 34% between the three month periods. The decrease is primarily due to
lower rental rates generated on equipment lease extensions and remarketings
resulting after the initial lease term expires, and due to a decrease in the
size of the equipment portfolio. Other income is the result of the reduction of
overstated liabilities recorded in prior periods. Interest income decreased as a
result of lower average short-term investment balances held during the current
quarter. The $2,079 net gain on sale of equipment recognized in the current
quarter is the result of sales of equipment carrying low net book values. The
net loss on sale of marketable securities in 1997 reflects the below-cost sale
of Continental Information Systems Corporation stock. The stock had been
received from the Trustee of the Liquidating Estate of CIS Corporation (the
"Estate"), the former ultimate parent company of the General Partner, as part of
a settlement of certain outstanding issues between the Partnership and the
Estate.
Total costs and expenses decreased $51,792 or 21% between the three month
periods. The most significant factor impacting the decrease is the current
quarter reduction in depreciation expense. Depreciation expense decreased due to
a portion of the equipment portfolio becoming fully depreciated and due to a
reduction in the size of the equipment portfolio. Interest expense decreased
$5,600 due to the continued paydown of long-term debt. Management fees decreased
with the decline in rental income on operating leases. During the first quarter
of 1997, the Partnership reversed a provision for doubtful accounts in the
amount of $23,790 due to successful collection efforts on delinquent rents
receivable.
The Partnership recorded net income (loss) per Limited Partnership Unit of
$(0.71) and $7.07 for the quarters ended March 31, 1998 and 1997, respectively.
The allocation for the quarter ended March 31, 1998 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 INCOME LIMITED PARTNERSHIP IV
(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, 1998, rental revenue generated from operating
leases and proceeds from the sale of investment property 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 has continued to decrease due to two factors. First, lower rates
are obtained on 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. 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 a reduction
in the rate of cash distributions.
The Partnership's investing activities resulted in sales of equipment with a
depreciated cost basis of $885, generating $2,965 in proceeds. Included in
equipment sales is a $553 loss. The Partnership will not purchase equipment in
the future as the Partnership has reached the end of its reinvestment period.
The Partnership's activities included a paydown on long-term debt of $73,954.
The Partnership will payoff its remaining long-term debt of $202,425 in 1999.
Total debt assumed by the Partnership from inception is $14,500,441, for a total
leverage of 43%.
Cash distributions are currently at an annual level of 4% per Limited
Partnership Unit or $5.00 per Limited Partnership Unit on a quarterly basis. 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 IV
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
March 31, 1998
Lessee
Carr Separations, Incorporated
Chrysler Corporation
Cincinnati Gas & Electric Company
Coulter Corporation
Cybersmith, Incorporated
H.J. Meyer Company, Incorporated
Hughes Aircraft Company, Incorporated
Internet Access Company, Incorporated
J. Walter Thompson Company
JumboSports, Incorporated
ON Technology Corporation
Sero Company, Incorporated
Equipment Description Acquisition Price
- --------------------- -----------------
Computer peripherals $ 1,300,764
Processors & upgrades 803,108
Telecommunications 89,234
Other 771,181
----------------
$ 2,964,287
================
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PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(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 IV
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
Date: May 12, 1998
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000825851
<NAME> WELLESLEY LEASE INCOME LTD PARTNERSHIP IV FDS 3/31/98
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 90,208
<SECURITIES> 0
<RECEIVABLES> 52,208
<ALLOWANCES> 30,821
<INVENTORY> 0
<CURRENT-ASSETS> 141,874
<PP&E> 2,964,287
<DEPRECIATION> 2,463,295
<TOTAL-ASSETS> 642,866
<CURRENT-LIABILITIES> 73,654
<BONDS> 202,425
<COMMON> 12,149,459
0
0
<OTHER-SE> (11,782,672)
<TOTAL-LIABILITY-AND-EQUITY> 642,866
<SALES> 168,945
<TOTAL-REVENUES> 172,212
<CGS> 0
<TOTAL-COSTS> 12,756
<OTHER-EXPENSES> 168,430
<LOSS-PROVISION> 4,836
<INTEREST-EXPENSE> 5,455
<INCOME-PRETAX> (19,265)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,265)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,265)
<EPS-PRIMARY> (0.71)
<EPS-DILUTED> 0
</TABLE>
