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-D (Exact name of registrant as specified in its charter) Massachusetts 04-2819913 (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 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-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 - 10 Part II. OTHER INFORMATION Items 1 - 6 11 Signature 12 PART I. FINANCIAL INFORMATION WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D (A Massachusetts Limited Partnership) Balance Sheets Assets (Unaudited) (Audited) 6/30/95 12/31/94 Investment property, at cost: Computer equipment $ - $ 966,011 Less accumulated depreciation - 924,484 Investment property, net - 41,527 Cash and cash equivalents 83,449 871,445 Marketable securities (note 2) 168,295 - Rents receivables, net - 2,946 Accounts receivable - affiliates, net (note 2) - - Total assets $ 251,744 $ 915,918 Liabilities and Partners' Equity Liabilities: Accounts payable and accrued expenses - affiliates $ - $ 43,219 Accrued expenses - 11,901 Accounts payable - 58,420 Unearned rental revenue - 4,769 Total liabilities - 118,309 Partners' equity: General Partner: Capital contribution 1,000 1,000 Cumulative net income 1,485,286 1,414,723 Cumulative cash distributions (1,486,286) (1,442,825) - (27,102) Limited Partners (55,050 units): Capital contribution, net of offering costs 24,523,033 24,523,033 Cumulative net income 3,968,262 3,715,479 Cumulative cash distributions (28,239,551) (27,413,801) 251,744 824,711 Total partners' equity 251,744 797,609 Total liabilities and partners' equity $ 251,744 $ 915,918 See accompanying notes to financial statements. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-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 $44,838 $69,687 $115,886 $164,182 Interest income 3,824 2,000 14,341 2,231 Other income 62,524 - 62,524 - Net gain on sale of equipment 52,536 149,428 54,291 155,883 Recovery of net unsecured pre-petition claim (note 2) 168,295 - 168,295 - Total revenue 332,017 221,115 415,337 322,296 Costs and expenses: Depreciation - 31,957 12,056 69,727 Interest - 562 43 1,329 Related party expenses (note 4): Management fees 1,674 591 4,658 7,243 General and administrative 57,818 26,952 81,466 52,829 Reversal of provision for doubtful accounts (6,232) (13,382) (6,232) (13,382) Total costs and expenses 53,260 46,680 91,991 117,746 Net income $278,757 $174,435 $323,346 $204,550 Net income (loss) per Limited Partnership Unit $ 4.80 $ 1.69 $ 4.59 $ (4.34) See accompanying notes to financial statements. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-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 $323,346 $204,550 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation 12,056 69,727 Net gain on sale of equipment (54,291) (155,883) Reversal of provision for doubtful accounts (6,232) (13,382) Net (increase) decrease in current assets (159,117) 77,967 Net decrease in current liabilities (118,309) (123,144) Total adjustments (325,893) (144,715) Net cash (used in) provided by operating activities (2,547) 59,835 Cash flows from investing activities: Purchase of investment property - (1,037) Proceeds from sales of investment property 83,762 217,796 Net cash provided by investing activities 83,762 216,759 Cash flows from financing activities: Principal payments on notes payable - affiliate - (27,409) Cash distributions to partners (869,211) (144,869) Net cash used in financing activities (869,211) (172,278) Net (decrease) increase in cash and cash equivalents (787,996) 104,316 Cash and cash equivalents at beginning of period 871,445 43,184 Cash and cash equivalents at end of period $ 83,449 $147,500 Supplemental cash flow information: Interest paid during the period $ 1,120 $ 1,329 See accompanying notes to financial statements. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-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 II-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. In the fourth quarter of 1994, the General Partner announced its intentions of winding down the operations of the Partnership beginning in 1995. As of June 30, 1995, all assets have been sold with the exception of the marketable securities and the unsecured pre-petition claim, and the proceeds have been accumulated to settle all outstanding liabilities and make a final distribution. The Partnership will not be terminated until the unsecured pre-petition claim against CMI has been settled and the remaining proceeds have been distributed to the Partners (see note 4 for further discussion). (2) Significant Accounting Policies Allowance for Doubtful Accounts The financial statements include an allowance for estimated losses on receivable balances. The allowance for doubtful accounts is 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 accounts receivable - affiliates was $246,368, respectively, all of which was related to the unsecured pre-petition 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 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. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D (A Massachusetts Limited Partnership) Notes to Financial Statements (Unaudited) (3) 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 $ 4,658 $ 7,243 Reimbursable expenses paid 49,989 39,263 $ 54,647 $46,506 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. (4) 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 unsecured pre-petition claim. The distribution consisted of cash proceeds of $193,239 and 12,463 shares of common stock in Continental Information Systems Corporation with a carrying value of $31,158. 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 unsecured pre-petition claim has been settled as of July 20, 1995 and there are no other outstanding receivable balances. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-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 the Partnership's operations for the quarter and six months ended June 30, 1995 in comparison to the same periods in 1994. The Partnership realized net income of $278,757 and $174,435 for the quarters ended June 30, 1995 and 1994, respectively. Rental income decreased $24,849 between the three month periods. The decrease is primarily due to the continued decrease in the overall size of the equipment portfolio. The sale of the equipment portfolio and the related leases did not occur until the end of June, 1995; thus, there was no direct impact of the sale on current quarter rental revenue. Interest income increased from 1994 as a result of higher average short-term investment balances. Other income has increased from 1994 due to the result of the reduction of overstated liabilities recorded in prior periods. The decrease in gain on the sale of equipment between the two periods is primarily due to significant sales of equipment carrying lower net book values in the second quarter of 1994. 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 increased 14% during the second quarter of 1995 primarily due to a significant increase in general and administrative expenses. General and administrative expenses increased due to the establishment and satisfaction of outstanding liabilities related to the liquidation of the Partnership in 1995. For example, the Partnership will still need to cover costs relating to investor reports, Schedule K-1 preparation and mailings, etc. The Partnership did not recognize any depreciation expense in the current quarter due to a portion of the equipment portfolio becoming fully depreciated in the first quarter of 1995 and the sale of the equipment portfolio. Management fees expense was lower in 1994 than the quarter ended June 30, 1995, due to a one time adjustment for a change in method on which management fees are calculated. The reversal of provision for doubtful accounts is due to successful collection efforts on delinquent rents receivable. The Partnership realized net income of $323,346 and $204,550 and rental income of $115,886 and $164,182 for the six months ended June 30, 1995 and 1994, respectively. Rental income decreased $48,296 between the six month periods. As discussed above in the quarter analysis, the decrease in rental income is primarily due to the continued decrease in the overall size of the equipment portfolio. Interest income increased as a result of higher average short-term investment balances. Other income has increased from 1994 due to the result of the reduction of overstated liabilities recorded in prior periods. The large 1994 net gain on sale of equipment is due to significant sales of equipment carrying low net book values in the first quarter of 1994. 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. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D (A Massachusetts Limited Partnership) Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) Total costs and expenses decreased $25,755 or 22% during the first six months of 1995 primarily as a result of lower depreciation expense exceeding the increase in general and administrative expenses. As discussed above in the quarter analysis, depreciation expense decreased due to a large portion of the equipment portfolio becoming fully depreciated and the sale of the equipment portfolio. Management fees expense decreased in relation to the decline in rental income. The reversal of provision for doubtful accounts for the six months is due to successful collection efforts on delinquent rents receivable, as mentioned above. The Partnership recorded net income per Limited Partnership Unit of $4.80 and $4.59 for the quarter and six months ended June 30, 1995, respectively. Liquidity and Capital Resources During the fourth quarter of 1994, the General Partner announced its intentions of winding down the operations of the Partnership beginning in 1995. As of June 30, 1995, substantially all of the assets have been liquidated and the proceeds have been accumulated to settle all outstanding liabilities and make a final distribution. As discussed in note 4 Subsequent Events, the Partnership received the second and final distribution from the Trustee of the Liquidating Estate of CIS Corporation, et al, with respect to the unsecured pre-petition claim. The distribution consisted of cash proceeds of $193,239 and 12,463 shares of common stock in Continental Information Systems Corporation with a carrying value of $31,158. 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 unsecured pre-petition claim has been settled as of July 20, 1995 and there are no other outstanding receivable balances. The stock cannot be sold immediately by the Partnership due to limitations imposed by the Securities Exchange Act of 1933 (the "Exchange Act"). Because TLP Leasing Programs, Inc., one of the Corporate General Partners, is a wholly- owned subsidiary of Continental Information Systems Corporation ("CIS"), the Partnership is considered an "Affiliate" of CIS. Accordingly, in order for the Partnership to sell the shares, the Partnership must comply with the restrictions imposed by Rule 144 of the Exchange Act. In doing so, the Partnership anticipates selling the stock and distributing the proceeds to the investors in the form of a final distribution by the end of 1995. The Partnership's investing activities for the six months resulted in the sale of its entire equipment portfolio with a cost basis of $966,011, generating $83,762 in proceeds. Also associated with the equipment sales were $39,114 of loss charge offs against the reserve, initially set up in prior periods for estimated losses on the ultimate disposition of equipment. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-D (A Massachusetts Limited Partnership) Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) 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. For the quarter ended June 30, 1995, the Partnership declared a cash distribution of $289,737, of which $14,487 was allocated to the General Partners and $275,250 was allocated to the Limited Partners. The distribution will be made on August 28, 1995. As discussed above, the Partnership is accumulating its cash in anticipation of a final distribution. The effects of inflation have not been significant to the Partnership and are not expected to have a material impact in future periods. PART II. OTHER INFORMATION WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-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 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-D (Registrant) By: Wellesley Leasing Partnership, its General Partner By: TLP Leasing Programs, Inc., one of its Corporate General Partners Date: August 14, 1995 By: Arthur P. Beecher, President