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 June 30, 1995 Commission File No. 2-84106
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP D
(Exact name of registrant as specified in its charter)
Massachusetts 04-2794296
(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 D
(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 D
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
6/30/95 12/31/94
Investment property, at cost (note 3):
Computer equipment $ 1,540,485 $ 2,541,961
Less accumulated depreciation 1,449,730 2,395,541
----------------------------
Investment property, net 90,755 146,420
Cash and cash equivalents 134,213 434,029
Marketable securities (note 2) 44,593 -
Rents receivable, net (note 2) 20,399 16,161
Accounts receivable - affiliates, net (note 2) 3,871 -
----------------------------
Total assets $ 293,831 $ 596,610
----------------------------
----------------------------
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued
expenses - affiliates (note 4) $ 18,666 $ 28,766
Accrued expenses 3,190 9,854
Accounts payable 42,240 78,859
Unearned rental revenue 1,285 5,242
Distribution payable 9,596 -
----------------------------
Total liabilities 74,977 122,721
----------------------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 1,243,626 1,185,408
Cumulative cash distributions (1,244,626) (1,223,036)
----------------------------
- (36,628)
----------------------------
Limited Partners (36,463 units):
Capital contribution, net of offering costs 16,259,064 16,259,064
Cumulative net income 7,607,506 7,488,960
Cumulative cash distributions (23,647,716) (23,237,507)
----------------------------
218,854 510,517
----------------------------
Total partners' equity 218,854 473,889
----------------------------
Total liabilities and partners' equity $ 293,831 $ 596,610
----------------------------
----------------------------
See accompanying notes to financial statements.
(Page 4)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP D
(A Massachusetts Limited Partnership)
Statements of Operations
(Unaudited)
Quarters Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Revenue:
Rental income $ 38,411 $ 177,230 $133,676 $332,623
Interest income 2,853 3,662 8,290 5,614
Other income - - - 26,114
Net gain on sale
of equipment 33,060 749 61,057 34,555
Recovery of net unsecured
pre-petition claim (note 2) 44,593 - 4,593 -
--------------------- ---------------------
Total revenue 118,917 181,641 247,616 398,906
--------------------- ---------------------
Costs and expenses:
Depreciation 22,118 83,188 47,414 148,637
Interest - - 43 -
Related party expenses
(note 4):
Management fees 2,618 2,757 8,058 14,175
General and administrative 22,694 13,824 39,785 35,191
(Reversal of) provision for
doubtful accounts (23,334) 20,948 (24,448) 20,948
--------------------- ---------------------
Total costs and expenses 24,096 120,717 70,852 218,951
--------------------- ---------------------
Net income $ 94,821 $ 60,924 $176,764 $179,955
--------------------- ---------------------
--------------------- ---------------------
Net income per Limited
Partnership Unit $ 2.34 $ 1.49 $ 3.25 $ 0.69
--------------------- ---------------------
--------------------- ---------------------
See accompanying notes to financial statements.
(Page 5)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP D
(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 $ 176,764 $ 179,955
----------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 47,414 148,637
(Reversal of) provision for doubtful
accounts (24,448) 20,948
Net gain on sale of equipment (61,057) (34,555)
Net (increase) decrease in current assets (28,254) 6,658
Net decrease in current liabilities (57,340) (43,179)
----------------------------
Total adjustments (123,685) 98,509
----------------------------
Net cash provided by
operating activities 53,079 278,464
-----------------------------
Cash flows from investing activities:
Proceeds from sales of investment property 69,308 48,020
-----------------------------
Net cash provided by
investing activities 69,308 48,020
-----------------------------
Cash flows from financing activities:
Cash distributions to partners (422,203) (383,822)
-----------------------------
Net cash used in financing activities (422,203) (383,822)
-----------------------------
Net decrease in cash and cash equivalents (299,816) (57,338)
Cash and cash equivalents at beginning of period 434,029 348,438
----------------------------
Cash and cash equivalents at end of period $ 134,213 $ 291,100
----------------------------
----------------------------
Supplemental cash flow information:
Interest paid during the period $ 1,120 $ -
----------------------------
----------------------------
See accompanying notes to financial statements.
(Page 6)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(Unaudited)
(1) Organization and Partnership Matters
The foregoing financial statements of Wellesley
Lease Income Limited Partnership D (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.
(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 $4,441 and
$28,289, respectively. The allowance for
doubtful accounts included in accounts
receivable - affiliates was $99,031 and $99,631
at June 30, 1995 and December 31, 1994,
respectively, of which $98,981 was related to
the net unsecured pre-petition bankruptcy claim
for both periods.
Marketable Securities
The marketable securities consist of common
stock in Continental Information Systems
Corporation received by the Partnership in the
distribution made December 27, 1994 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.
(3) Investment Property
At June 30, 1995, the Partnership owned computer
equipment with a depreciated cost basis of
$81,214, subject to existing leases and
equipment with a depreciated cost basis of
$9,541 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 7)
(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 $ 8,058 $ 14,175
Reimbursable expenses paid 41,470 31,116
----------------------
$ 49,528 $ 45,291
----------------------
----------------------
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 $61,386 and 2,256 shares of common
stock in Continental Information Systems
Corporation with a carrying value of $5,640.
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 has a remaining
net unsecured pre-petition claim of $27,916 as
of July 20, 1995. The General Partner
anticipates that the Liquidating Estate will
make future distributions on the remaining
outstanding claim balance, although it is not
possible at this time to determine when these
distributions will be made.
(Page 8)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP D
(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 Partnership
operations for the quarter and six month periods
ended June 30, 1995 compared to the same period
in 1994.
The Partnership realized net income of $94,821
and $60,924 for the three months ended June 30,
1995 and 1994, respectively. Rental income
decreased $138,819 or 79% between the three
month periods. The significant decrease in
rental income 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 net decrease in the
overall size of the equipment portfolio. Net
gain on sale of equipment increased between the
three month periods due to sales of equipment
carrying low book values. 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 an objective stock value
could be determined due to the stock's trading
activities.
Total costs and expenses decreased $96,621 or
80% between the three month periods. The
decrease in costs and expenses is primarily the
result of lower depreciation expense and the
reversal of provision for doubtful accounts.
Depreciation expense decreased due to an overall
decrease in the equipment portfolio and a large
portion of the equipment portfolio becoming
fully depreciated. Management fees expense
shows little change in the current quarter due
to a one time adjustment for a change in method
by which management fees are calculated made in
the quarter ended June 30, 1994 causing
management fees expense to be lower than usual.
General and administrative expenses were lower
in 1994 due to the receipt of a refund related
to a sales tax audit assessment that was paid in
1990 and included in general and administrative
expenses at that time. The significant reversal
of provision for doubtful accounts made during
the current quarter is due to successful
collection efforts made on delinquent rents
receivable.
The Partnership realized net income of $176,764
and $179,955 for the six month periods ended
June 30, 1995 and 1994, respectively. Rental
income decreased $198,947 or 60% between the six
month periods. The decrease in rental income,
as mentioned above, is primarily due to lower
rental rates obtained on lease extensions and
remarketings and to a net decrease in the
overall size of the equipment portfolio.
Interest income increased between the six month
periods as a result of higher average short-term
investment balances. Other income in 1994 is a
result of the write-off of overstated
liabilities recorded in prior years. As
discussed above, net gain on sale of equipment
increased from 1994 to 1995 due to sales of
equipment carrying low book values. 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, as
mentioned above. 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 an
objective stock value could be determined due to
the stock's trading activities.
Total costs and expenses decreased $148,099 or
68% between the six month periods. As discussed
above, the decrease in total costs and expenses
is primarily due to a decrease in depreciation
expense and the reversal of provision for
doubtful accounts. Depreciation expense
decreased due to an increased portion of the
equipment portfolio becoming fully depreciated
and due to a decrease in the overall equipment
portfolio. Management fees
(Page 9)
decreased in 1995 due to the decrease in rental
income. As discussed above, general and
administrative expenses were lower in 1994 due
to a sales tax audit assessment refund that was
included in general and administrative expenses
in 1990 when it was paid. As mentioned above,
the Partnership reversed a significant portion
of its provision for doubtful accounts as a
result of successful collection efforts of
delinquent rents receivable.
The Partnership had net income per Limited
Partnership Unit of $3.25 and $0.69 for the six
months ended June 30, 1995 and 1994,
respectively.
Liquidity and Capital Resources
For the quarter ended June 30, 1995, rental
revenue generated from operating leases and
sales of equipment 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 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 fourth quarter of 1994, the General
Partner announced its intentions of winding down
the operations of the Partnership in 1995. It
is anticipated that substantially all of the
assets will be liquidated and the proceeds will
be used to settle all outstanding liabilities
and to make a final distribution. The
Partnership will not be terminated until the net
unsecured pre-petition claim against CIS and CMI
has been settled and the remaining proceeds have
been distributed to the Partners.
The Partnership's investing activities for the
six months resulted in equipment sales with a
depreciated cost basis of $14,549, generating
$69,308 in proceeds. Associated with the
equipment sales were $6,298 of charge offs of
losses against the reserve, initially set up in
prior periods for estimated losses on the
ultimate disposition of equipment. 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
in 1995.
Cash distributions are currently at an annual
level of 3% per Limited Partnership Unit, or
$3.75 per Limited Partnership Unit on a
quarterly basis. For the quarter ended June 30,
1995, the Partnership declared a cash
distribution of $143,933, of which $7,197 is
allocated to the General Partner and $136,736 is
allocated to the Limited Partners. The
distribution will be paid 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 D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
June 30, 1995
Lessee
Allied Signal Corporation
Caterpillar, Incorporated
FAX International, Incorporated
GPU Service Corporation
Halliburton Company
Hughes Aircraft Company, Incorporated
Kroger, Incorporated
Maryland Casualty Insurance, Incorporated
Owens Corning Fiberglass, Incorporated
Smith Kline, Incorporated
Equipment Description Acquisition Price
Computer peripherals $ 770,243
Processors & upgrades 30,810
Telecommunications 92,429
Other 647,003
-----------
$ 1,540,485
-----------
-----------
(Page 11)
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP D
(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 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.
WELLESLEY LEASE INCOME LIMITED
PARTNERSHIP D
(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