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
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For Quarter Ended March 31, 1997 Commission File No. 2-95011
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(Exact name of registrant as specified in its charter)
Massachusetts 04-2846629
(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 III-C
(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 - 7
Management's Discussion and Analysis of Financial Condition and 8 - 9
Results of Operations
Computer Equipment Portfolio 10
Part II. OTHER INFORMATION
Items 1 - 6 11
Signature 12
PART I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Balance Sheets
Assets
(Unaudited) (Audited)
3/31/97 12/31/96
---------------- ----------------
Investment property, at cost (note 3):
Computer equipment $ 438,842 $ 443,464
Less accumulated depreciation 343,761 334,414
---------------- ----------------
Investment property, net 95,081 109,050
Cash and cash equivalents 60,047 18,943
Marketable securities (note 5) - 27,976
Rents receivable, net (note 2) 6,955 5,611
Sales receivable 4,251 8,801
---------------- ----------------
Total assets $ 166,334 $ 170,381
================ ================
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued expenses - affiliates (note 4) $ 14,760 $ 4,826
Accounts payable and accrued expenses 126,583 118,436
Unearned rental revenue 6,910 4,288
---------------- ----------------
Total liabilities 148,253 127,550
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 636,595 636,408
Cumulative cash distributions (637,338) (637,338)
Unrealized losses on marketable securities (note 5) - (70)
---------------- ----------------
257 -
---------------- ----------------
Limited Partners (25,020 units):
Capital contribution, net of offering costs 11,139,685 11,139,685
Cumulative net income 1,018,844 1,019,500
Cumulative cash distributions (12,140,705) (12,109,430)
Unrealized losses on marketable securities (note 5) - (6,924)
---------------- ----------------
17,824 42,831
---------------- ----------------
Total partners' equity 18,081 42,831
---------------- ----------------
Total liabilities and partners' equity $ 166,334 $ 170,381
================ ================
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Statements of Operations
Quarters Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
-------------- ---------------
Revenue:
Rental income $ 30,016 $ 78,267
Other income 3,687 -
Interest income 435 913
Net gain on sale of equipment 4,250 96,525
Net loss on sale of marketable securities (5,250) -
-------------- ---------------
Total revenue 33,138 175,705
-------------- ---------------
Costs and expenses:
Depreciation 13,969 33,367
Interest - 676
Related party expenses (note 4):
Management fees 2,709 3,346
General and administrative 16,929 17,475
-------------- ---------------
Total costs and expenses 33,607 54,864
-------------- ---------------
Net (loss) income $ (469) $ 120,841
============== ===============
Net (loss) income per Limited Partnership Unit $ (.03) $ 3.64
============== ===============
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Statements of Cash Flows
Quarters Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
---------------- ----------------
Cash flows from operating activities:
Net (loss) income $ (469) $ 120,841
---------------- ----------------
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 13,969 33,367
Net gain on sale of equipment (4,250) (96,525)
Net loss on sale of marketable securities 5,250 -
Net decrease (increase) in current assets 3,206 (28,351)
Net increase (decrease) in current liabilities 20,703 (8,117)
---------------- ----------------
Total adjustments 38,878 (99,626)
---------------- ----------------
Net cash provided by operating activities 38,409 21,215
---------------- ----------------
Cash flows from investing activities:
Proceeds from sale of marketable securities 29,720 -
Proceeds from sales of investment property 4,250 96,525
---------------- ----------------
Net cash provided by investing activities 33,970 96,525
---------------- ----------------
Cash flows from financing activities:
Principal payments on long-term debt - (14,030)
Cash distributions to partners (31,275) (65,842)
---------------- ----------------
Net cash used in financing activities (31,275) (79,872)
---------------- ----------------
Net increase in cash and cash equivalents 41,104 37,868
Cash and cash equivalents at beginning of period 18,943 58,929
---------------- ----------------
Cash and cash equivalents at end of period $ 60,047 $ 96,797
================ ================
Supplemental cash flow information:
Interest paid during the period $ - $ 676
================ ================
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(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 Wellesley Lease Income Limited Partnership
III-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, 1996.
(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 March 31, 1997 and December 31, 1996, the
allowance for doubtful accounts included in rents receivable was $8,377.
(3) Investment Property
At March 31, 1997, the Partnership owned computer equipment with a depreciated
cost basis of $95,081, subject to existing leases. All purchases of computer
equipment are subject to a 3% acquisition fee paid to the General Partner.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Quarters Ended March 31, 1997 and March 31, 1996
(Unaudited)
(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
March 31 are as follows:
1997 1996
---- ----
Management fees $ 2,709 $ 3,346
Reimbursable expenses paid 20,215 21,610
------------ ------------
$ 22,924 $ 24,956
============ ============
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) Fair Values of Financial Instruments
Pursuant to Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which requires investments
in debt and equity securities other than those accounted for under the equity
method to be carried at fair value or amortized cost for debt securities
expected to be held to maturity, the Partnership has classified its investments
in equity securities as available for sale. Accordingly, the net unrealized
gains and losses computed in marking these securities to market are reported as
a component of partners' equity. At March 31, 1997, there are no marketable
securities owned by the Partnership, therefore, there is no unrealized gain or
loss included in partners' equity.
The fair value is based on currently quoted market prices. The cost basis and
estimated fair value of the Partnership's marketable securities at March 31,
1997 and December 31, 1996, respectively, are as follows:
March 31, 1997 December 31, 1996
------------------------- ---------------------------
Cost Fair Cost Fair
Basis Value Basis Value
Investment in Continental Information
Systems Corporation Stock $ - $ - $ 34,970 $ 27,976
=========== =========== ======== ========
WELLESLEY INCOME LIMITED PARTNERSHIP III-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
ended March 31, 1997, in comparison to the quarter ended March 31, 1996.
The Partnership realized a net loss of $469 and net income of $120,841 for the
quarters ended March 31, 1997 and 1996, respectively. Rental income decreased
$48,251 or 62% between the three month 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 net decrease in the
overall size of the equipment portfolio. Other income reported in 1997 is the
result of the reduction of overstated management fees recorded in prior periods.
Interest income decreased as a result of lower short-term investment balances
held during 1997. The decrease in net gain on sale of equipment is attributed to
a lower number of equipment sales in the current quarter. The net loss on sale
of marketable securities in 1997 reflects the below-cost sale of Continental
Information Systems Corporation stock. The stock had been received from the
Trustee of the Liquidating Estate of CIS Corporation (the "Estate"), the former
ultimate parent company of the General Partner, as part of a settlement of
certain outstanding issues between the Partnership and the Estate.
Total costs and expenses decreased $21,257 or 39% between the three month
periods. The decrease is primarily the result of lower depreciation expense.
Depreciation expense decreased in the current quarter due to a portion of the
equipment portfolio becoming fully depreciated and due to a reduction in the
equipment portfolio. Management fees and general and administrative expenses
decreased in relation to the reduction in rental income.
The Partnership recorded a net loss per Limited Partnership Unit of $.03 and
net income per Limited Partnership Unit of $3.64 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 operating
leases and sales proceeds generated from equipment and marketable securities
sales 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 sold. This decision is made
upon analyzing which option generates the most favorable result.
WELLESLEY INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Rental income has continued to decrease due to two factors. First, lower rates
are obtained on the remarketing of existing equipment upon the expiration of the
original lease. Typically the remarketed rates are lower due to the decrease in
useful life of the equipment. Second, 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. This decrease, however, should not affect
the Partnership's ability to meet its future cash requirements, including its
long-term debt obligations. In order that future cash flows should be sufficient
to meet the Partnership's operating expenses and liabilities, additional funds
will be obtained through the sale of equipment and through a reduction in the
rate of cash distributions. Future rental revenues amount to $91,623 and are
scheduled to be received over the next three years.
During the first quarter of 1997, 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 during 1997.
For the three months ended March 31, 1997, the Partnership's investing
activities generated $4,250 in sales proceeds on the sale of fully depreciated
equipment with an original cost basis of $4,622.
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.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
March 31, 1997
Lessee
Baylor Health Network, Incorporated
Centura Bank
Hughes Aircraft Company, Incorporated
J. Walter Thompson & Co.
JumboSports, Incorporated
New York Telephone
USG Corporation
Equipment Description Acquisition Price
Computer peripherals $ 83,380
Processors & upgrades 232,586
Telecommunications 109,711
Other 13,165
--------------
$ 438,842
==============
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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
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 III-C
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
By: Arthur P. Beecher,
President
Date: May 12, 1997