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. 2-95011
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-A
(Exact name of registrant as specified in its charter)
Massachusetts 04-2846626
(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 III-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 III-A
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
6/30/95 12/31/94
Investment property, at cost (note 3):
Computer equipment $ 410,678 $ 1,264,676
Less accumulated depreciation 364,962 1,088,859
----------------------------
Investment property, net 45,716 175,817
Cash and cash equivalents 162,520 347,728
Marketable securities (note 2) 13,313 -
Rents receivable, net (note 2) 22,212 21,989
Accounts receivable - affiliates, net (note 2) 1,789 -
----------------------------
Total assets $ 245,550 $ 545,534
============================
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued
expenses - affiliates (note 4) $ 23,786 $ 28,267
Accrued expenses 3,190 10,130
Accounts payable 107,115 169,258
Distribution payable 6,584 -
Unearned rental revenue - 500
----------------------------
Total liabilities 140,675 208,155
----------------------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 643,711 605,027
Cumulative cash distributions (644,711) (631,543)
----------------------------
- (25,516)
----------------------------
Limited Partners (25,020 units):
Capital contribution, net of offering costs 1,140,099 11,140,099
Cumulative net income 1,214,317 1,222,137
Cumulative cash distributions (12,249,541) (11,999,341)
----------------------------
104,875 362,895
----------------------------
Total partners' equity 104,875 337,379
----------------------------
Total liabilities and partners' equity $ 245,550 $ 545,534
============================
See accompanying notes to financial statements.
(Page 4)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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 $ 51,165 $ 119,665 $ 97,564 $225,500
Interest income 3,850 2,857 7,854 3,346
Recovery of net unsecured
pre-petition claim
(note 2) 13,313 - 13,313 -
--------------------- ---------------------
Total revenue 68,328 122,522 118,731 228,846
--------------------- ---------------------
Costs and expenses:
Depreciation 23,459 55,676 52,606 123,327
(Reversal of) provision for
doubtful accounts (12,099) 361 (12,099) 361
Interest (1,077) - 43 120
Related party expenses
(note 4):
Management fees 1,575 3,442 6,335 11,079
General and administrative 20,124 14,965 37,509 33,182
Net loss (gain) on sale
of equipment 57,488 (59,236) 3,473 (78,404)
--------------------- ---------------------
Total costs and expenses 89,470 15,208 87,867 89,665
--------------------- ---------------------
Net (loss) income $(21,142) $ 107,314 $ 30,864 $139,181
===================== =====================
Net (loss) income per Limited
Partnership Unit $ (0.39) $ 4.23 $ (0.31) $ 0.92
===================== =====================
See accompanying notes to financial statements.
(Page 5)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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 $ 30,864 $139,181
-------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 52,606 123,327
(Reversal of) provision for doubtful
accounts (12,099) 361
Net loss (gain) on sale of equipment 3,473 (78,404)
Net increase in current assets (3,226) (56,743)
Net (decrease) increase in current
liabilities (74,064) 114,237
-------------------------
Total adjustments (33,310) 102,778
-------------------------
Net cash (used in) provided by operating
activities (2,446) 241,959
-------------------------
Cash flows from investing activities:
Purchase of investment property - (62,281)
Proceeds from sales of investment property 74,022 154,096
-------------------------
Net cash provided by investing
activities 74,022 91,815
-------------------------
Cash flows from financing activities:
Principal payments on notes payable -
affiliate - (12,000)
Cash distributions to partners (256,784) (65,842)
-------------------------
Net cash used in financing activities (256,784) (77,842)
-------------------------
Net (decrease) increase in cash and cash
equivalents (185,208) 255,932
Cash and cash equivalents at beginning of
period 347,728 18,193
-------------------------
Cash and cash equivalents at end of period $162,520 $274,125
=========================
Supplemental cash flow information:
Interest paid during the period $ 1,120 $ 120
=========================
See accompanying notes to financial statements.
(Page 6)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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 III-
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.
During the second quarter of 1995, the General
Partner announced its intentions of winding
down the operations of the Partnership by the
end of 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 make a
final distribution.
(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 $1,169 and $13,268, respectively. The
allowance for doubtful accounts included in
accounts receivable - affiliates was $19,491
at June 30, 1995 and December 31, 1994,
respectively, which was related to the net
unsecured 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 $45,716, 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 quarters ended June 30, 1995 and 1994
are as follows:
1995 1994
Equipment acquisition fees $ - $ 1,800
Management fees 6,335 11,079
Reimbursable expenses paid 39,136 28,500
------------------------
$ 45,471 $ 41,379
========================
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 $15,287 and 985 shares of common
stock in Continental Information Systems
Corporation with a carrying value of $2,463.
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 net unsecured
pre-petition claim has been settled as of July
20, 1995 and there are no other outstanding
receivable balances.
(Page 8)
WELLESLEY INCOME LIMITED PARTNERSHIP III-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
Partnership operations for the quarter and for
the six months ended June 30, 1995 in
comparison to the same periods in the prior
year.
The Partnership realized a net loss of $21,142
and net income of $107,314 for the quarters
ended June 30, 1995 and 1994, respectively.
Rental income decreased $68,500 or 58%
primarily due to lower rental rates obtained
on equipment lease extensions and remarketings
resulting after the initial lease term expires
and due to a substantial decrease in the
overall size of the equipment portfolio.
Interest income increased in 1995 as a result
of higher 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 increased primarily
due to the $57,488 net loss on sale of
equipment realized for the quarter ended June
30, 1995 versus a $59,236 net gain realized in
the quarter ended June 30, 1994. The net loss
on sale of equipment was primarily due to the
result of the sale of installed equipment on
lease to American Telephone & Telegraph,
Incorporated, having a high net book value.
The reversal of provision for doubtful
accounts during the current quarter was
generated from successful collection efforts
on delinquent rents receivable. Depreciation
expense decreased between the three month
periods due to a portion of the equipment
portfolio becoming fully depreciated.
Management fees expense decreased in
correlation with the reduction in rental
income. The reversal of interest expense
resulted from an overaccrual of interest
expense made in the first quarter of 1995.
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 $30,864
and $139,181 for the six months ended June 30,
1995 and 1994, respectively. The Partnership
realized rental income of $97,564 and $225,500
for the six months ended June 30, 1995 and
1994, respectively. As discussed in the
quarter analysis above, the 57% decrease in
rental income between 1995 and 1994 can be
attributed to the re-lease of equipment at
lower rental rates and to the overall
reduction of the equipment portfolio. The
increase in interest income between 1995 and
1994 can be attributed to higher 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,
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, as mentioned above.
Total costs and expenses decreased 2% between
the six month periods. As discussed above,
the slight decrease in costs and expenses is
primarily due to a $78,404 net gain on sale of
equipment recognized for the period ended June
30, 1994 versus a current period net loss of
$3,473 and also due to lower depreciation of
$70,721. Depreciation expense decreased 58%
between the six month periods due to a large
portion of the equipment portfolio becoming
fully depreciated and an overall reduction of
the Partnership's equipment portfolio. The
reversal of provision for doubtful accounts
was generated due to successful collection
efforts on delinquent accounts, as discussed
above.
(Page 9)
For the six months ended June 30, 1995, the
decrease in management fees expense reflects a
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.
During the quarter ended June 30, 1995 and the
six months ended June 30, 1995, the
Partnership allocated profits and losses
resulting in $(0.39) and $(0.31) per Limited
Partnership Unit, respectively. The
allocation for the six months ended June 30,
1995 includes a cost recovery allocation of
profit and loss among the General and Limited
Partners which results in an allocation of net
loss to the Limited Partners in the second
quarter of 1995. This cost recovery
allocation is required to maintain capital
accounts consistent with the distribution
provisions of the Partnership Agreement. In
certain periods, the cost recovery allocation
of profit and loss may result in an allocation
of net loss to the Limited Partners in
instances when the Partnership's operations
were profitable for the period.
Liquidity and Capital Resources
For the six months ended June 30, 1995, rental
revenue generated from operating leases and
equipment sale proceeds were 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 option 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 second quarter of 1995, the General
Partner announced its intentions of winding
down the operations of the Partnership by the
end of 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.
In the first six months of 1995, the
Partnership's investing activities resulted in
equipment sales with a depreciated cost basis
of $77,495, generating $74,022 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 by the end of 1995.
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 $131,684, of which $6,584 is
allocated to the General Partner and $125,100
is 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 III-A
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
June 30, 1995
Lessee
American Body Armour and Equipment, Incorporated
Cummins Engine Company, Incorporated
FAX International, Incorporated
Gencorp Polymer Products, Incorporated
Hughes Aircraft Company, Incorporated
Sears, Roebuck & Company
Equipment Description Acquisition Price
Computer Peripherals $ 184,805
Processors & Upgrades 2,464
Other 223,409
----------
$ 410,678
==========
(Page 11)
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-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 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-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