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 The Quarter Ended June 30, 1995 Commission File No. 2-89177
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(Exact name of registrant as specified in its charter)
Massachusetts 04-2819910
(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
(Page 2)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
INDEX Page No.
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of June 30, 1995
and December 31, 1994 3
Statements of Operations For the
Quarters Ended June 30, 1995 and 1994 and the
Six Months Ended June 30, 1995 and 1994 4
Statements of Cash Flows For the
Six Months Ended June 30, 1995 and 1994 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
(Page 3)
PART I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
6/30/95 12/31/94
Investment property, at cost (note 3):
Computer equipment $ 588,810 $ 617,239
Less accumulated depreciation 507,546 499,170
---------------------------
Investment property, net 81,264 118,069
Cash and cash equivalents 64,118 150,468
Marketable securities (note 2) 11,118 -
Rents receivable, net (note 2) 3,906 1,071
Accounts receivable - affiliates, net (note 2) 3,768 2,799
--------------------------
Total assets $ 164,174 $ 272,407
==========================
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued
expenses - affiliates (note 4) $ 18,510 $ 26,745
Accrued expenses 3,189 8,408
Accounts payable 21,607 22,280
Distribution payable 1,648 -
Unearned rental revenue - 4,553
--------------------------
Total liabilities 44,954 61,986
--------------------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 746,629 735,147
Cumulative cash distributions (750,394) (743,802)
---------------------------
(2,765) (7,655)
---------------------------
Limited Partners (25,050 units):
Capital contribution, net of
offering costs 11,158,769 11,158,769
Cumulative net income 3,220,926 3,191,769
---------------------------
Cumulative cash distributions (14,257,710) (14,132,462)
---------------------------
121,985 218,076
---------------------------
Total partners' equity 119,220 210,421
===========================
Total liabilities and partners' equity $ 164,174 $ 272,407
===========================
See accompanying notes to financial statements.
(Page 4)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Statements of Operations
(Unaudited)
Quarters Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
1995 1994 1995 1994
-------------------- ---------------------
Revenue:
Rental income (loss) $ 37,486 $ (27,247) $ 84,299 $ 63,158
Interest income 948 2,294 3,676 2,683
Net gain on sale
of equipment 1,066 91,928 1,651 100,155
Recovery of net unsecured
pre-petition claim (note 2) 11,118 - 11,118 -
-------------------- ---------------------
Total revenue 50,618 66,975 100,744 165,996
-------------------- ---------------------
Costs and expenses:
Depreciation 15,805 38,940 31,610 101,255
Interest (1,077) - 43 -
Related party expenses (note 4):
Management fees 1,817 (7,351) 4,525 (985)
General and administrative 15,676 16,134 28,753 31,684
(Reversal of) provision for
doubtful accounts 40 5,413 (4,826) 5,413
--------------------- ---------------------
Total costs and expenses 32,261 53,136 60,105 137,367
--------------------- ---------------------
Net income $ 18,357 $ 13,839 $ 40,639 $ 28,629
===================== =====================
Net income (loss) per Limited
Partnership Unit $ 0.66 $ (1.37) $ 1.16 $ (3.84)
===================== =====================
See accompanying notes to financial statements.
(Page 5)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Six Months Ended June 30, 1995 and 1994
(Unaudited)
1995 1994
Cash flows from operating activities:
Net income $ 40,639 $ 28,629
---------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 31,610 101,255
(Reversal of) provision for
doubtful accounts (4,826) 5,413
Net gain on sale of equipment (1,651) (100,155)
Net increase in current assets (10,096) (32,850)
Net (decrease) increase in
current liabilities (18,680) 29,394
--------------------------
Total adjustments (3,643) 3,057
--------------------------
Net cash provided by
operating activities 36,996 31,686
--------------------------
Cash flows from investing activities:
Proceeds from sales of investment property 6,846 283,064
--------------------------
Net cash provided by investing activities 6,846 283,064
--------------------------
Cash flows from financing activities:
Cash distributions to partners (130,192) (197,763)
--------------------------
Net cash used in financing activities (130,192) (197,763)
--------------------------
Net (decrease) increase in cash
and cash equivalents (86,350) 116,987
Cash and cash equivalents at
beginning of period 150,468 105,018
--------------------------
Cash and cash equivalents at end of period $ 64,118 $ 222,005
==========================
Supplemental cash flow information:
Interest paid during period $ 1,120 $ -
==========================
See accompanying notes to financial statements.
(Page 6)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(Unaudited)
(1) Organization and Partnership Matters
The foregoing financial statements of Wellesley
Lease Income Limited Partnership II-C (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, 1994.
During the second 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.
(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 June 30, 1995 and December
31, 1994, the allowance for doubtful accounts
included in rents receivable was $205 and $56,
respectively. The allowance for doubtful
accounts included in accounts receivable -
affiliates was $16,275 and $21,250 at June 30,
1995 and December 31, 1994, respectively, of
which $16,275 was related to the net unsecured
pre-petition bankruptcy claim, respectively.
Marketable Securities
The marketable securities consist of the common
stock in Continental Information Systems
Corporation received by the Partnership in the
distribution made December 27, 1995 by the
Trustee of the Liquidating Estate of CIS
Corporation, et al with respect to the
outstanding net unsecured pre-petition claim.
During the second quarter of 1995, the stock
began trading, thereby providing an objective
valuation measure for establishing the cost
basis which approximates fair market value at
the balance sheet date.
Reclassifications
Certain prior year financial statement items
have been reclassified to conform with the
current year's financial statement presentation.
(Page 7)
(3) Investment Property
At June 30, 1995, the Partnership owned computer
equipment with a depreciated cost basis of
$70,754, subject to existing leases and
equipment with a depreciated cost basis of
$10,510 in inventory, awaiting re-lease or sale.
All purchases of computer equipment are subject
to a 3% acquisition fee paid to the General
Partner.
(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 June 30, 1995 and 1994 are as
follows:
1995 1994
Management fees $ 4,525 $ (985)
Reimbursable expenses paid 28,693 28,103
---------------------
$ 33,218 $ 27,118
=====================
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
collected. Also, the Partnership reimburses the
General Partner and its affiliates for certain
expenses incurred by them in connection with the
operation of the Partnership.
(5) Subsequent Events
On July 20, 1995, the Partnership received the
second distribution from the Trustee of the
Liquidating Estate of CIS Corporation, et al,
with respect to the net unsecured pre-petition
claim. The distribution consisted of cash
proceeds of $12,765 and 823 shares of common
stock in Continental Information Systems
Corporation with a carrying value of $2,058.
The cash and stock will be reflected in the
financial statements for the third quarter of
1995. Following the Trustee's second
distribution, the Partnership's net unsecured
pre-petition claim has been settled as of July
20, 1995 and there are no other outstanding
receivable balances.
(Page 8)
WELLESLEY INCOME LIMITED PARTNERSHIP II-C
(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 six
months ended June 30, 1995 in comparison to the
same periods in the prior year.
The Partnership realized net income of $18,357
and $13,839 for the three month periods ended
June 30, 1995 and 1994, respectively. Rental
income increased from 1994 due to Boeing
Computer Services, Inc. ("Boeing") exercise, in
1994, of their option to apply previously
accrued and paid rental proceeds toward the
purchase price of equipment leased to them.
Boeing's option exercise caused a reclass of
rental income previously accrued and collected
in the amount of $56,442 to sales proceeds.
Interest income decreased as a result of lower
average short-term investment balances. The
significant decrease in net gain on sale of
equipment was the result of fewer equipment
sales in the current quarter. The recovery of
net unsecured pre-petition claim was the result
of the establishment of the carrying value of
the stock received in the December 27, 1994
distribution from the Trustee of the Liquidating
Estate of CIS Corporation, et al. The
receivables associated with the stock settlement
had been fully reserved in a prior year;
accordingly, the Partnership was able to show a
recovery on those receivables as of June 30,
1995 at which time a stock value could be
determined due to the stock's trading
activities.
Total costs and expenses decreased 40% between
the three month periods primarily as a result of
lower depreciation expense. Depreciation
expense decreased due to a large portion of the
equipment portfolio becoming fully depreciated
and a reduction in the equipment portfolio. For
the quarter ended June 30, 1995, the increase in
management fees expense reflects an increase in
rental income as compared to the same period in
the prior year. The Partnership decreased its
provision for doubtful accounts by $5,373 from
the quarter ended June 30, 1994 due to fewer
delinquent accounts receivable in the current
quarter.
The Partnership realized net income of $40,639
and $28,629 for the six months ended June 30,
1995 and 1994, respectively. Rental income
increased $21,141 or 34% between the six month
periods. The increase in rental income is
attributed to the above mentioned Boeing
exercised option. As mentioned above, the
recovery of net unsecured pre-petition claim was
the result of the establishment of the carrying
value of the stock received in the December 27,
1994 distribution from the Trustee of the
Liquidating Estate of CIS Corporation, et al.
The receivables associated with the stock
settlement had been fully reserved in a prior
year; accordingly, the Partnership was able to
show a recovery on those receivables as of June
30, 1995 at which time a stock value could be
determined due to the stock's trading
activities.
Total costs and expenses decreased $77,262 or
57% between the six month periods. The decrease
in total costs and expenses is primarily
attributable to the decrease in depreciation
expense. The 69% decrease in depreciation
expense is the result of an increased portion of
the equipment portfolio becoming fully
depreciated and the reduction in the equipment
portfolio. For the six months ended June 30,
1995, management fees expense increased in
relationship to rental income along with the
Boeing option exercise to reclass rental
proceeds to sales proceeds in 1994. The
reversal of provision for doubtful accounts was
generated due to successful collection efforts
of delinquent rents receivable.
The Partnership recorded net income per Limited
Partnership Unit of $0.66 and $1.16 for the
quarter and six months ended June 30, 1995,
respectively.
(Page 9)
Liquidity and Capital Resources
For the six months ended June 30, 1995, 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.
Rental income will continue to decrease due to
two factors. The first factor is the rate
obtained when the original leases expire and are
remarketed at a lower rate. 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.
During the second 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.
The Partnership's investing activities for the
six months ended June 30, 1995 resulted in
equipment sales with a depreciated cost basis of
$5,195, generating $6,846 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 and has announced
its intentions of winding down the Partnership.
Cash distributions are currently at an annual
level of 1% per Limited Partnership Unit or
$1.25 per Limited Partnership Unit on a
quarterly basis. For the quarter ended June 30,
1995, the Partnership declared a cash
distribution of $32,961, of which $1,648 was
allocated to the General Partner and $31,313 was
allocated to the Limited Partners. The
distribution will be made on August 28, 1995.
The Partnership expects distributions to be more
volatile as its operations are winding down.
The effects of inflation have not been
significant to the Partnership and are not
expected to have any material impact in future
periods.
(Page 10)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
June 30, 1995
Lessee
Caterpillar Tractor Company
Coast Pump & Supply Company, Incorporated
First Options of Chicago, Incorporated
New York Life Insurance Company
Owens Corning Fiberglass, Incorporated
Equipment Description Acquisition Price
Computer Peripherals $342,746
Other 246,064
--------
$588,810
========
(Page 11)
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C
(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
(Page 12)
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 II-C
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
Date: August 11, 1995
By: Arthur P. Beecher,
President