UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1997 Commission File No. 0-15630
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2923206
(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 11
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
INDEX Page No.
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of March 31, 1997 and December 31, 1996 3
Statements of Operations
Quarters Ended March 31, 1997 and 1996 4
Statements of Cash Flows
Quarters Ended March 31, 1997 and 1996 5
Notes to Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 8
Computer Equipment Portfolio 9
Part II. OTHER INFORMATION
Items 1 - 6 10
Signature 11
PART I. FINANCIAL INFORMATION
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
3/31/97 12/31/96
---------------- ----------------
Investment property, at cost (note 2):
Capital equipment $ 5,032,434 $ 5,447,101
Less accumulated depreciation 5,032,434 5,447,101
---------------- ----------------
Investment property, net - -
Cash and cash equivalents 109,181 199,970
Rents receivable 20,945 62,041
---------------- ---------------
Total assets $ 130,126 $ 262,011
================ ================
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued
expenses - affiliates (note 3) $ 8,729 $ 10,747
Accounts payable and accrued expenses 239,560 230,551
Unearned rental income - 22,500
---------------- ----------------
Total liabilities 248,289 263,798
---------------- ----------------
Partners' equity (deficit):
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 1,135,767 1,132,009
Cumulative cash distributions (1,135,837) (1,124,540)
---------------- ----------------
930 8,469
---------------- ----------------
Limited Partners (57,239 units):
Capital contribution, net of
offering costs 25,569,053 25,569,053
Cumulative net income 3,311,953 3,206,144
Cumulative cash distributions (29,000,099) (28,785,453)
---------------- ----------------
(119,093) (10,256)
---------------- ----------------
Total partners' deficit (118,163) (1,787)
---------------- ----------------
Total liabilities and partners' equity $ 130,126 $ 262,011
================ ================
See accompanying notes to financial statements.
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Statements of Operations
Quarters Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
---------------- ----------------
Revenue:
Rental income $ 34,212 $ 173,630
Other income 68,765 -
Interest income 1,656 1,283
Net gain on sale of equipment 43,000 45,000
---------------- ----------------
Total revenue 147,633 219,913
---------------- ----------------
Costs and expenses:
Related party expenses (note 3):
Management fees 1,711 8,682
General and administrative 36,355 21,425
---------------- ----------------
Total costs and expenses 38,066 30,107
---------------- ----------------
Net income $ 109,567 $ 189,806
================ ================
Net income per Limited Partnership Unit $ 1.85 $ 3.18
================ ================
See accompanying notes to financial statements.
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Statements of Cash Flows
Quarters Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 109,567 $ 189,806
---------------- ----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Net gain on sale of equipment (43,000) (45,000)
Net decrease in current assets 41,096 15,613
Net decrease in current liabilities (15,509) (19,097)
---------------- ----------------
Total adjustments (17,413) (48,484)
---------------- ----------------
Net cash provided by operating activities 92,154 141,322
---------------- ----------------
Cash flows from investing activities:
Proceeds from sales of investment property 43,000 45,000
---------------- ----------------
Net cash provided by investing activities 43,000 45,000
---------------- ----------------
Cash flows from financing activities:
Cash distributions to partners (225,943) (224,579)
---------------- ----------------
Net cash used in financing activities (225,943) (224,579)
---------------- ----------------
Net decrease in cash and cash equivalents (90,789) (38,257)
Cash and cash equivalents at beginning of period 199,970 98,385
---------------- ----------------
Cash and cash equivalents at end of period $ 109,181 $ 60,128
================ ================
Supplemental cash flow information:
Interest paid during the period $ - $ -
================ ================
See accompanying notes to financial statements.
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Quarters Ended March 31, 1997 and March 31, 1996
(Unaudited)
(1) Organization and Partnership Matters
The foregoing financial statements of Hanover Lease Income Limited Partnership
(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, 1996.
(2) Investment Property
At March 31, 1997, the Partnership owned capital equipment with a cost basis of
$5,032,434. All purchases of capital equipment are subject to a 4.75%
acquisition fee paid to the General Partner.
(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
March 31 are as follows:
1997 1996
---- ----
Management fees $ 1,711 $ 8,682
Reimbursable expenses paid 35,633 26,093
------------- ------------
$ 37,344 $ 34,775
============= ============
Under the terms of the Partnership Agreement, the General Partner is entitled to
an Equipment Acquisition Fee of 4.75% of the purchase price paid by the
Partnership for the equipment. The General Partner is also entitled to a
management fee equal to 5% of the monthly rental billings. Also, the Partnership
reimburses the General Partner and their affiliates for certain expenses
incurred by them in connection with the operation of the Partnership.
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(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, 1997, in comparison to the quarter ended March 31, 1996.
The Partnership realized net income of $109,567 and $189,806 for the quarters
ended March 31, 1997 and 1996, respectively. Rental income decreased $139,418 or
80% between the quarter periods. The decrease 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 decrease in the overall size of the
equipment portfolio. Other income is the result of helicopter inspection fees
and flight time charges, and includes a reduction of an overstated liability in
the amount of $41,630, which was recorded in a prior period. Interest income
increased as a result of higher average short-term investment balances.
Total costs and expenses increased $7,959 or 26% between 1997 and 1996. The
increase in general and administrative expense is attributed to an increase in
the allocable salaries of the accounting and reporting personnel of the General
Partner, which are reimbursable by the various partnerships under management.
Management fees decreased in relation to the decline in rental income.
The Partnership recorded net income per Limited Partnership Unit of $1.85
and $3.18 for the quarters ended March 31, 1997 and 1996, respectively.
Liquidity and Capital Resources
For the quarter ended March 31, 1997, rental revenue generated from the
operating leases and sales proceeds from equipment sales were the primary
sources of funds for the Partnership. As the 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.
Consistent with prior periods, the Partnership's operating activities resulted
in a decrease in rental revenue due to lease expirations and resulting equipment
sales, and due to lower rental rates obtained on remarketed equipment. The
helicopter lease with Sikorsky Aircraft Corporation expired in January, 1997. It
is anticipated that the helicopter will be sold and the Partnership will be
liquidated soon thereafter.
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
The Partnership's investing activities for the quarter ended March 31, 1997
resulted in sales of fully depreciated equipment, generating $43,000 in sales
proceeds. The Partnership has no material capital commitments and will not in
the future due to the Partnership having fulfilled its capital expenditure
commitments in prior years.
During the fourth 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 to the
Partners during 1997.
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.
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Equipment Portfolio (Unaudited)
March 31, 1997
Lessees
BASF Corporation
Federal Paper Board Company, Incorporated
Equipment Description Acquisition Price
Helicopter aircraft $ 4,678,826
Heavy duty equipment 328,500
Other 25,108
----------------
$ 5,032,434
================
PART II. OTHER INFORMATION
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(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 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.
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(Registrant)
By: Hanover Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
Date: May 12, 1997
By: Arthur P. Beecher,
President