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. 2-89177
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(Exact name of registrant as specified in its charter)
Massachusetts 4-2819912
(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-A
(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-A
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
6/30/95 12/31/94
Investment property, at cost (note 3):
Computer equipment $ 1,307,694 $ 1,562,489
Less accumulated depreciation 1,240,294 1,382,982
---------------------------
Investment property, net 67,400 179,507
Cash and cash equivalents 96,980 382,960
Marketable securities (note 2) 71,080 -
Rents receivable, net (note 2) 38,203 19,224
Sales receivable, net (note 2) - 8,835
Accounts receivable - affiliates, net (note 2) 1,182 -
---------------------------
Total assets $ 274,845 $ 590,526
---------------------------
---------------------------
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued expenses -
affiliates (note 4) $ 21,316 $ 30,551
Accrued expenses 3,190 7,974
Accounts payable 33,303 36,961
Distribution payable 4,882 -
Unearned rental revenue 1,746 5,500
---------------------------
Total liabilities 64,437 80,986
---------------------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 823,364 793,866
Cumulative cash distributions (824,364) (806,463)
---------------------------
- (11,597)
---------------------------
Limited Partners (24,737 units):
Capital contribution, net of offering costs 11,019,501 11,019,501
Cumulative net income 4,853,882 4,824,477
Cumulative cash distributions (15,662,975) (15,322,841)
---------------------------
210,408 521,137
---------------------------
Total partners' equity 210,408 509,540
---------------------------
Total liabilities and partners' equity $ 274,845 $ 590,526
---------------------------
---------------------------
See accompanying notes to financial statements.
(Page 4)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(A Massachusetts Limited Partnership)
Statements of Operations
(Unaudited)
Quarters Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
--------------------- ---------------------
Revenue:
Rental income $ 78,875 $ 137,863 $151,422 $295,955
Interest income 1,970 2,366 7,114 3,192
Recovery of net unsecured
pre-petition claim
(note 2) 71,080 - 71,080 -
--------------------- ---------------------
Total revenue 151,925 140,229 229,616 299,147
--------------------- ---------------------
Costs and expenses:
Depreciation 25,486 67,826 64,077 141,284
Interest (1,077) 1,216 43 2,962
Related party expenses
(note 4):
Management fees 2,061 4,771 5,976 16,321
General and administrative 17,911 11,631 33,877 27,393
Net loss (gain) on sale
of equipment - (3,045) 40,336 (3,845)
Provision for
doubtful accounts 13,407 14,834 26,404 14,834
--------------------- ---------------------
Total costs
and expenses 57,788 97,233 170,713 198,949
--------------------- ---------------------
Net income $ 94,137 $ 42,996 $ 58,903 $100,198
--------------------- ---------------------
--------------------- ---------------------
Net income (loss) per Limited
Partnership Unit $ 3.61 $ 1.56 $ 1.19 $ (1.82)
--------------------- ---------------------
--------------------- ---------------------
See accompanying notes to financial statements.
(Page 5)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(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 $ 58,903 $ 100,198
--------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 64,077 141,284
Provision for doubtful accounts 26,404 14,834
Net loss (gain) on sale of equipment 40,336 (3,845)
Net (increase) decrease in current assets (108,810) 26,063
Net (decrease) increase in current
liabilities (21,431) 69,271
--------------------------
Total adjustments 576 247,607
--------------------------
Net cash provided by operating activities 59,479 347,805
--------------------------
Cash flows from investing activities:
Purchase of investment property - (2,250)
Proceeds from sales of investment property 7,694 22,485
--------------------------
Net cash provided by investing activities 7,694 20,235
--------------------------
Cash flows from financing activities:
Principal payments on long-term debt - (133,077)
Cash distributions to partners (353,153) (195,291)
--------------------------
Net cash used in financing activities (353,153) (328,368)
--------------------------
Net (decrease) increase in cash and cash
equivalents (285,980) 39,672
--------------------------
Cash and cash equivalents
at beginning of period 382,960 141,087
--------------------------
Cash and cash equivalents at end of period $ 96,980 $ 180,759
--------------------------
--------------------------
Supplemental cash flow information:
Interest paid during the period $ 1,120 $ 4,111
--------------------------
--------------------------
See accompanying notes to financial statements.
(Page 6)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(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-A (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) Summary of 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 $27,911 and
$1,042, respectively, and $0 and $465 included in
sales receivable, respectively. The allowance
for doubtful accounts included in accounts
receivable - affiliates was $194,623 at June 30,
1995 and December 31, 1994, respectively, all of
which is related to the pre-petition bankruptcy
claim.
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
$67,400, subject to existing leases. 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 six
months ended June 30, 1995 and 1994 are as
follows:
1995 1994
Management fees $ 5,976 $ 16,321
Reimbursable expenses paid 35,142 21,166
---------------------
$ 41,118 $ 37,487
---------------------
---------------------
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
operations 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 $108,985 and 2,453 shares of common
stock in Continental Information Systems
Corporation with a carrying value of $6,133. 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 $75,114 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 INCOME LIMITED PARTNERSHIP II-A
(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
month periods ended June 30, 1995, compared to
the same period in 1994.
The Partnership realized net income of $94,137
for the quarter ended June 30, 1995 in comparison
to net income of $42,996 for the quarter ended
June 30, 1994. Rental income decreased $58,988
or 43% for the quarter ended June 30, 1995
primarily due to lower rental rates obtained on
equipment lease extensions and remarketings
resulting after the initial lease term expires
and due to a decrease in the overall size of the
equipment portfolio. Interest income decreased
as a result of lower average short-term
investment balances. 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 41% in 1995
primarily as a result of lower depreciation
expense. Depreciation expense decreased due to a
large portion of the equipment portfolio becoming
fully depreciated and an overall reduction in the
equipment portfolio. Interest expense decreased
between the three month periods due to an
overaccrual of interest expense that was reversed
in the current period. Management fees decreased
in relation to the decline in rental income.
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 Partnership realized net income of $58,903
and $100,198 and rental income of $151,422 and
$295,955 for the six months ended June 30, 1995
and 1994, respectively. This decrease in rental
income of 49% can be attributed to lower rental
rates obtained on equipment lease extensions and
remarketings after the initial lease term expires
and due to an overall reduction in the equipment
portfolio, as mentioned above. Interest income
increased as a result of higher average short-
term investment balances held during the six
month periods. 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 an objective stock value could be
determined due to the stock's trading activities.
Total costs and expenses decreased 15% in 1995.
The decrease in costs and expenses is due to a
significant decrease in depreciation expense
offset by the 1995 net loss on sale of equipment.
Depreciation expense decreased between 1995 and
1994 due to a large portion of the equipment
portfolio becoming fully depreciated and a
reduction in the overall equipment portfolio.
The decline in management fees reflects the
decline in rental income. As mentioned in the
quarter analysis above, general and
administrative expenses were lower in 1994 due to
a sales tax audit assessment refund that had
originally been included in general and
administrative expenses in 1990. The net loss on
sale of equipment for 1995 is attributable to
sales of equipment carrying high net book values.
The Partnership increased its provision for
doubtful accounts by $11,570 between the six
month periods to reserve for uncollectible
accounts.
(Page 9)
The Partnership recorded net income per Limited
Partnership Unit of $3.61 and $1.19 for the
quarter ended June 30, 1995 and the six months
ended June 30, 1995, respectively.
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 fourth quarter of 1994, the General
Partner announced its intentions of winding down
the operations of the Partnership beginning 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 has
been settled and the remaining proceeds have been
distributed to the Partners.
The Partnership's investing activities for the
current six months resulted in equipment sales
with a depreciated cost basis of $48,030,
generating $7,694 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
beginning 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
$97,646, of which $4,882 was allocated to the
General Partner and $92,764 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-A
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
June 30, 1995
Lessee
Bell Helicopter Textron, Incorporated
Bell South Services, Incorporated
Eaton Corporation
ITT Grinnell Corporation
Kenworth Truck Company
Owens Corning Fiberglass, Incorporated
Shared Medical Systems Company, Incorporated
Taco Bell Corporation
Equipment Description Acquisition Price
Computer peripherals $ 758,462
Processors & upgrades 183,078
Telecommunications 104,615
Other 261,539
----------
$1,307,694
----------
----------
(Page 11)
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-A
(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 II-A
(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