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 September 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
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-A
(A Massachusetts Limited Partnership)
INDEX Page No.
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of September 30, 1995 and December 31, 1994 3
Statements of Operations For the Quarters Ended
September 30, 1995 and 1994 and the Nine Months Ended
September 30, 1995 and 1994 4
Statements of Cash Flows for the Nine Months Ended
September 30, 1995 and 1994 5
Notes to Financial Statements 6 - 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 10
Part II. OTHER INFORMATION
Items 1 - 6 11
Signature 12
Part I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-A
(A Massachusetts Limited Partnership)
Balance Sheets
Assets (Unaudited) (Audited)
9/30/95 12/31/94
Investment property, at cost:
Computer equipment $ - $ 1,264,676
Less accumulated depreciation - 1,088,859
------- ---------
Investment property, net - 175,817
Cash and cash equivalents 36,817 347,728
Marketable securities (notes 2 and 4) 14,197 -
Rents receivable, net - 21,989
Accounts receivable - affiliates, net (notes 2 and 3) - -
------ ------
Total assets $ 51,014 $ 545,534
= ====== = =======
Liabilities and Partners' Equity
Liabilities:
Accounts payable and accrued expenses - affiliates (note 3) $ - $ 28,267
Accounts payable and accrued expenses - 179,388
Unearned rental revenue - 500
----- -----
Total liabilities - 208,155
----- -------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 650,295 605,027
Cumulative cash distributions (651,295) (631,543)
-------- --------
- (25,516)
-------- -------
Limited Partners (25,020 units):
Capital contribution, net of
offering costs 11,140,099 11,140,099
Cumulative net income 1,287,134 1,222,137
Cumulative cash distributions (12,374,641) (11,999,341)
----------- -----------
52,592 362,895
-------- -------
Unrealized losses on marketable securities (note 4) (1,578) -
-------- -
Total partners' equity 51,014 337,379
-------- -------
Total liabilities and partners' equity $ 51,014 $ 545,534
= ======== = =======
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-A
(A Massachusetts Limited Partnership)
Statements of Operations
(Unaudited)
Quarters Ended Nine Months Ended
September 30, September 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
Revenue:
Rental income $ 18,105 $ 51,598 $ 115,669 $ 277,098
Interest income 1,765 3,556 9,619 6,902
Other income 58,924 - 58,924 -
Net gain (loss) on sale
of equipment 28,721 (48,667) 25,248 29,737
Recovery of net unsecured
pre-petition claim (note 5) 17,750 - 31,063 -
------- ----- ------ -----
Total revenue 125,265 6,487 240,523 313,737
------- ----- ------- -------
Costs and expenses:
Depreciation - 31,808 52,606 155,135
(Reversal of) provision for
doubtful accounts 5,446 167 (6,653) 528
Interest - - 43 120
Related party expenses (note 3):
Management fees 577 3,344 6,912 14,423
General and administrative 39,841 18,766 77,350 51,948
------ ------ ------ ------
Total costs and expenses 45,864 54,085 130,258 222,154
------ ------ ------- -------
Net income (loss) $ 79,401 $ (47,598) $ 110,265 $ 91,583
= ====== = ======= = ======= = ======
Net income (loss) per Limited
Partnership Unit $ 2.91 $ (0.03) $ 2.60 $ 0.89
= ====== = ======= = ====== = ======
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-A
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
1995 1994
---- ----
Cash flows from operating activities:
Net income $ 110,265 $ 91,583
- ------- - ------
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation 52,606 155,135
(Reversal of) provision for doubtful accounts (6,653) 528
Net gain on sale of equipment (25,248) (29,737)
Net decrease in current assets 12,867 75,562
Net (decrease) increase in current liabilities (208,155) 88,763
-------- ------
Total adjustments (174,583) 290,251
-------- -------
Net cash (used in) provided by operating activities (64,318) 381,834
------- -------
Cash flows from investing activities:
Purchase of investment property - (62,281)
Proceeds from sales of investment property 148,459 174,256
------- -------
Net cash provided by investing activities 148,459 111,975
------- -------
Cash flows from financing activities:
Principal payments on notes payable - affiliate - (12,000)
Cash distributions to partners (395,052) (164,605)
-------- --------
Net cash used in financing activities (395,052) (176,605)
-------- --------
Net (decrease) increase in cash and cash equivalents (310,911) 317,204
Cash and cash equivalents at beginning of period 347,728 18,193
------- ------
Cash and cash equivalents at end of period $ 36,817 $ 335,397
= ====== = =======
Supplemental cash flow information:
Interest paid during the period $ 1,120 $ 120
= ===== = ===
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-A
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Nine Months Ended September 30, 1995 and 1994
(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.
In the second quarter of 1995, the General Partner announced its intentions of
winding down the operations of the Partnership beginning in 1995. As of
September 30, 1995, all assets have been sold with the exception of the
marketable securities, and the proceeds have been accumulated to settle all
outstanding liabilities and make a final distribution. The Partnership will not
be terminated until all of the stock has been sold and the sales proceeds have
been distributed to the Partners.
(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 September 30, 1995 and December 31, 1994,
the allowance for doubtful accounts included in rents receivable was $0 and
$13,268, respectively. The allowance for doubtful accounts included in accounts
receivable - affiliates was $0 and $19,491 at September 30, 1995 and December
31, 1994, respectively, which was related to the net unsecured pre-petition
bankruptcy claim.
Marketable Securities
The marketable securities are stated at fair value at the balance sheet date and
consist of common stock in Continental Information Systems Corporation received
by the Partnership in the distributions made December 27, 1994 and July 20, 1995
by the Trustee of the Liquidating Estate of CIS Corporation, et al, ("the
Trustee") 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. Unrealized gains
and losses are recorded directly in partners' equity except those gains and
losses that are deemed to be other than temporary, which would be reflected in
income or loss (see note 4).
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 III-A
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Nine Months Ended September 30, 1995 and 1994
(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 nine months ended
September 30, 1995 and 1994 are as follows:
1995 1994
---- ----
Equipment acquisition fees $ - $ 1,800
Management fees 6,912 14,423
Reimbursable expenses paid 51,818 48,524
------ ------
$ 58,730 $ 64,747
= ====== = ======
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) Fair Values of Financial Instruments
Pursuant to Statement of Financial Accounting Standards No. 115 ("SFAS 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 September 30, 1995 the
difference between the fair value and the original cost of these securities is
an unrealized loss of $1,578.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-A
(A Massachusetts Limited Partnership)
Notes to Financial Statements
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
The fair value is based on currently quoted market prices. The carrying amount
and estimated fair value of the Partnership's marketable securities for the
quarters ended September 30, 1995 and 1994 are as follows:
1995 1994
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
Investment in Continental Information
Systems Corporation Stock $ 15,775 $ 14,197 $ - $ -
======== ======== ========= ==========
As was discussed in note 2, Marketable Securities, the Partnership received
stock in Continental Information Systems Corporation as part of the December 27,
1994 and July 20, 1995 distributions from the Trustee, with respect to the
outstanding net unsecured pre-petition claim. The receivables comprising the net
unsecured pre-petition claim had been fully reserved during prior years; thus,
during the second quarter of 1995 when the stock began actively trading, the
carrying amount for the stock was established to be $2.50 per share which
approximated fair value at June 30, 1995.
(5) Bankruptcy of Continental Information Systems Corporation
As was discussed in the Form 10-Q for the quarter ended June 30, 1995, note 5
Subsequent Events, the Partnership received the second and final distribution
from the Trustee, 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. 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.
WELLESLEY LEASE 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 the Partnership's operations for the quarter
and nine months ended September 30, 1995 in comparison to the same periods in
1994.
The Partnership realized net income of $79,401 and a net loss of $47,598 for the
quarters ended September 30, 1995 and 1994, respectively. Rental income
decreased $33,493 between the three month periods. The decrease is primarily due
to the continued decrease in the overall size of the equipment portfolio; and
therefore, the rents. The sale of the equipment portfolio and the related leases
did not occur until the end of September, 1995; thus there was no direct impact
of the sale on current quarter rental revenue. Interest income decreased from
1994 as a result of lower average short-term investment balances. Other income
has increased $58,924 from 1994 due to the result of the reduction of overstated
liabilities recorded in prior periods. The current third quarter equipment sales
resulted in a net gain on sale of equipment of $28,721 versus a net loss on sale
of equipment of $48,667 in the quarter ended September 30, 1995. The increase in
net gain on sale of equipment between the two periods is primarily due to
significant sales of equipment carrying lower net book values in the third
quarter of 1995. The recovery of the net unsecured pre-petition claim was the
result of the second and final distribution from the Trustee of the Liquidating
Estate of CIS Corporation, et al ("the Trustee"), with respect to the
outstanding claim balance.
Total costs and expenses decreased 15% during the three month periods primarily
due to the significant decrease in depreciation expense. The Partnership did not
recognize any depreciation expense in the current quarter due to a portion of
the equipment portfolio becoming fully depreciated and the sale of the equipment
portfolio. Management fees expense decreased in correlation with the reduction
in rental income. 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 realized net income of $110,265 and $91,583 and rental income of
$115,669 and $277,098 for the nine months ended September 30, 1995 and 1994,
respectively. Rental income decreased $161,429 between the nine 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, as stated
above. The recovery of the net unsecured pre-petition claim was the result of
the third quarter of 1995 receipt of the Trustee's July 20, 1995 final
distribution along with the second quarter of 1995 establishment of the carrying
value of the stock received in the December 27, 1994 distribution.
Total costs and expenses decreased $91,896 or 41% during the first nine 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 $102,529 due to a large portion
of the equipment portfolio becoming fully depreciated and the sale of the
equipment portfolio. The reversal of provision for doubtful accounts for the
nine months is due to successful collection efforts on delinquent rents
receivable. Management fees expense decreased in relation to the decline in
rental income. General and administrative expenses increased due to the
establishment and satisfaction of outstanding liabilities related to the
liquidation of the Partnership in 1995.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-A
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
The Partnership recorded net income per Limited Partnership Unit of $2.91 and
$2.60 for the quarter and nine months ended September 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
September 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 5 Bankruptcy of Continental Information
Systems, the Partnership received the second and final distribution from the
Trustee, with respect to the 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.
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 within the next six months.
The Partnership's investing activities for the nine months resulted in the sale
of its entire equipment portfolio with a cost basis of $123,211 generating
$148,459 in proceeds.
Cash distributions are currently at an annual level of 1% per Limited
Partnership Unit, or $1.25 per Limited Partnership Unit on a quarterly basis.
For the quarter ended September 30, 1995, the Partnership declared a cash
distribution of $32,921, of which $1,646 was allocated to the General Partner
and $31,275 was allocated to the Limited Partners. The distribution will be made
on November 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 any material
impact in future periods.
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
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
By: Arthur P. Beecher
President
Date: November 14, 1995
-------------------