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. 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 12
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
<S> <C> <C>
INDEX Page No.
Part I. FINANCIAL INFORMATION
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 IV
(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 $ 1,388,564 $ 2,046,773
Less accumulated depreciation 1,203,272 1,756,522
---------------- ----------------
Investment property, net 185,292 290,251
Cash and cash equivalents 35,774 118,463
Rents receivable, net (note 2) 19,066 3,609
Other assets 8,906 14,249
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Total assets $ 249,038 $ 426,572
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 49,951 $ 66,109
Accounts payable and accrued expenses - affiliates (note 4) 22,274 25,775
Accounts payable and accrued expenses 20,037 36,968
Unearned rental revenue 5,103 5,030
Long-term debt, less current portion (note 5) - -
---------------- ----------------
Total liabilities 97,365 133,882
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 645,143 639,846
Cumulative cash distributions (646,143) (640,846)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (27,226 units):
Capital contribution, net of offering costs 12,148,459 12,148,459
Cumulative net income 597,233 670,185
Cumulative cash distributions (12,594,019) (12,525,954)
---------------- ----------------
151,673 292,690
---------------- ----------------
Total partners' equity 151,673 292,690
---------------- ----------------
Total liabilities and partners' equity $ 249,038 $ 426,572
================ ================
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, 1999 and 1998
(Unaudited)
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Revenue:
Rental income $ 45,805 $ 168,945
Interest income 781 1,188
Net gain on sale
of equipment 3,016 2,079
-------------- ---------------
Total revenue 49,602 172,212
-------------- ---------------
Costs and expenses:
Depreciation 85,808 130,750
Interest 931 5,455
Related party expenses (note 4):
Management fees 4,626 12,756
General and administrative 28,944 37,680
Provision for (reversal of)
doubtful accounts (3,052) 4,836
-------------- ---------------
Total costs and expenses 117,257 191,477
-------------- ---------------
Net income (loss) $ (67,655) $ (19,265)
============== ===============
Net income (loss) per Limited
Partnership Unit $ (2.68) $ (0.71)
============== ===============
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, 1999 and 1998
(Unaudited)
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (67,655) $ (19,265)
-------------- ---------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 85,808 130,750
Provision for (reversal of) doubtful accounts (3,052) 4,836
Net gain on sale of equipment (3,016) (2,079)
Net (increase) decrease in current assets (7,065) 4,372
Net increase (decrease) in current liabilities (20,359) 17,860
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Total adjustments 52,316 155,739
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Net cash (used in) provided by operating activities (15,339) 136,474
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Cash flows from investing activities:
Proceeds from sale of investment property 22,169 2,965
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Net cash provided by investing activities 22,169 2,965
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Cash flows from financing activities:
Principal payments on long-term debt (16,158) (73,954)
Cash distributions to partners (73,361) (141,601)
-------------- ---------------
Net cash used in financing activities (89,519) (215,555)
-------------- ---------------
Net increase (decrease) in cash and cash equivalents (82,689) (76,116)
Cash and cash equivalents at beginning of period 118,463 166,324
Cash and cash equivalents at end of period $ 35,774 $ 90,208
Supplemental cash flow information:
Interest paid during the period $ 931 $ 5,455
============== ===============
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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, 1999 and March 31, 1998
(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, 1998.
(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, 1999 and December 31, 1998, the
allowance for doubtful accounts included in rents receivable was $1,200 and
$4,252, respectively. At March 31, 1999 and December 31, 1998, the allowance for
doubtful accounts included in sales receivable was $0.
(3) Investment Property
At March 31, 1999, the Partnership owned computer equipment with a depreciated
cost basis of $185,292.
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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Quarters Ended March 31, 1999 and March 31, 1998
(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 are as follows:
1999 1998
---- ----
Management fees $ 4,626 $ 12,756
Reimbursable expenses paid 32,349 31,094
------------ ------------
$ 36,975 $ 43,850
============ ============
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, 1999 consists of one loan totaling $49,951. The
total outstanding debt balance is collateralized by equipment with a net book
value of $55,489, and assignment of the related lease.
Maturities of long-term debt are as follows:
1999 $ 49,951
--------------
$ 49,951
==============
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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, 1999 in comparison to the quarter ended March 31, 1998.
The Partnership realized a net loss of $67,655 and $19,265 for the quarters
ended March 31, 1999 and 1998, respectively. Rental income decreased $123,140 or
73% 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. Interest income decreased as a result of lower average
short-term investment balances held during the current quarter. The $3,016 net
gain on sale of equipment recognized in the current quarter is the result of
sales of equipment carrying low net book values.
Total costs and expenses decreased $74,220 or 39% 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 $4,524 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 1999, the Partnership reversed a provision for doubtful
accounts in the amount of $3,052 due to successful collection efforts on
delinquent rents receivable.
The Partnership recorded net loss per Limited Partnership Unit of $2.68 and
$0.71 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.
Liquidity and Capital Resources
For the quarter ended March 31, 1999, 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 through a
reduction in the rate of cash distributions.
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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)
During the last quarter of 1998, 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 during
1999.
The Partnership's investing activities resulted in sales of equipment with a
depreciated cost basis of $103,263, generating $22,169 in proceeds. Associated
with the equipment sales were $84,110 of losses charged off against the reserve,
initially set up in prior periods for estimated losses on the ultimate
disposition of equipment. The Partnership will not purchase equipment in the
future as the Partnership has reached the end of its reinvestment period.
The Partnership's financing activities included a paydown on long-term debt of
$16,158. The Partnership will payoff its remaining long-term debt of $49,951
in 1999. Total debt assumed by the Partnership from inception is $14,500,441,
for a total leverage of 43%.
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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WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
March 31, 1999
Lessees
Elron Software, Incorporated
Hughes Aircraft Company, Incorporated
J. Walter Thompson Company
Equipment Description Acquisition Price
Computer peripherals $ 651,287
Processors & upgrades 577,081
Telecommunications 46,317
Other 113,879
----------------
$ 1,388,564
================
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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 13, 1999
By: Arthur P. Beecher,
President
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<ARTICLE> 5
<CIK> 0000825851
<NAME> WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV FDS 3/31/99
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 35,774
<SECURITIES> 0
<RECEIVABLES> 20,266
<ALLOWANCES> 1,200
<INVENTORY> 0
<CURRENT-ASSETS> 63,746
<PP&E> 1,388,564
<DEPRECIATION> 1,203,272
<TOTAL-ASSETS> 249,038
<CURRENT-LIABILITIES> 47,414
<BONDS> 49,951
12,149,459
0
<COMMON> 0
<OTHER-SE> (11,997,786)
<TOTAL-LIABILITY-AND-EQUITY> 249,038
<SALES> 45,805
<TOTAL-REVENUES> 49,602
<CGS> 0
<TOTAL-COSTS> 4,626
<OTHER-EXPENSES> 114,752
<LOSS-PROVISION> (3,052)
<INTEREST-EXPENSE> 931
<INCOME-PRETAX> (67,655)
<INCOME-TAX> 0
<INCOME-CONTINUING> (67,655)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,655)
<EPS-PRIMARY> (2.68)
<EPS-DILUTED> 0
</TABLE>
