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-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
(Page 2)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
INDEX
Page No.
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-C
(A Massachusetts Limited Partnership)
Balance Sheets
Assets
(Unaudited) (Audited)
6/30/95 12/31/94
Investment property, at cost (note 3):
Computer equipment $ 1,961,993 $ 3,574,018
Less accumulated depreciation 1,549,800 3,094,357
----------------------------
Investment property, net 412,193 479,661
Cash and cash equivalents 72,759 325,125
Marketable securities (note 2) 44,275 -
Rents receivable, net (note 2) 12,478 10,842
Accounts receivable - affiliates, net (note 2) - -
-----------------------------
Total assets $ 541,705 $ 815,628
=============================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 55,570 $ 53,371
Accounts payable and accrued expenses -
affiliates (note 4) 22,772 31,461
Accrued expenses 3,190 8,594
Accounts payable 100,433 132,003
Unearned rental revenue 2,176 30,098
Distribution payable 6,584 -
Long-term debt, less current portion (note 5) 9,706 38,051
----------------------------
Total liabilities 200,431 293,578
----------------------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 532,404 447,566
Cumulative cash distributions (612,648) (599,480)
----------------------------
(79,244) (150,914)
----------------------------
Limited Partners (25,020 units):
Capital contribution, net of offering costs 11,139,685 11,139,685
Cumulative net income 921,138 923,384
Cumulative cash distributions (11,640,305) (11,390,105)
----------------------------
420,518 672,964
----------------------------
Total partners' equity 341,274 522,050
----------------------------
Total liabilities and partners' equity $ 541,705 $ 815,628
============================
See accompanying notes to financial statements.
(Page 4)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Statements of Operations
(Unaudited)
Quarters Ended Six Months Ended
June 30, June 30,
---------------------- --------------------
1995 1994 1995 1994
---------------------- --------------------
Revenue:
Rental income $113,181 $ 97,056 $249,462 $314,086
Other income 24,764 - 51,223 -
Interest income 1,532 3,069 5,051 4,000
Net gain (loss) on sale
of equipment 836 24,341 (47,379) 31,844
Recovery of net unsecured
pre-petition claim
(note 2) 44,275 - 44,275 -
--------------------- ---------------------
Total revenue 184,588 124,466 302,632 349,930
--------------------- ---------------------
Costs and expenses:
Depreciation 60,461 111,370 173,608 234,143
Interest 424 - 3,308 -
Related party expenses
(note 4):
Management fees 6,536 5,966 15,971 21,668
General and administrative 20,623 14,069 34,480 28,526
Reversal of provision for
doubtful accounts (7,327) - (7,327) -
--------------------- ---------------------
Total costs and expenses 80,717 131,405 220,040 284,337
--------------------- ---------------------
Net income (loss) $103,871 $ (6,939) $ 82,592 $ 65,593
===================== =====================
Net income (loss) per
Limited Partnership Unit $ 3.94 $ (0.89) $ (0.09) $ (3.92)
===================== =====================
See accompanying notes to financial statements.
(Page 5)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(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 $ 82,592 $ 65,593
--------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 173,608 234,143
(Reversal of) provision for doubtful
accounts (7,327) -
Net loss (gain) on sale of equipment 47,379 (31,844)
Net (increase) decrease in current assets (38,584) 6,839
Net decrease in current liabilities (73,585) (7,991)
--------------------------
Total adjustments 101,491 201,147
--------------------------
Net cash provided by operating activities 184,083 266,740
--------------------------
Cash flows from investing activities:
Purchase of investment property (167,898) (174,991)
Proceeds from sales of investment property 14,379 119,377
--------------------------
Net cash used in investing activities (153,519) (55,614)
--------------------------
Cash flows from financing activities:
Principal payments on long-term debt (26,146) (3,363)
Cash distributions to partners (256,784) (263,368)
--------------------------
Net cash used in financing activities (282,930) (266,731)
--------------------------
Net decrease in cash and cash equivalents (252,366) (55,605)
Cash and cash equivalents at beginning of period 325,125 269,150
--------------------------
Cash and cash equivalents at end of period $ 72,759 $213,545
==========================
Supplemental cash flow information:
Interest paid during the period $ 4,385 $ 27
==========================
See accompanying notes to financial statements.
(Page 6)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(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-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, 1994.
(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 June 30, 1995 and
December 31, 1994, the allowance for doubtful
accounts included in rents receivable was $814 and
$8,141, respectively. The allowance for doubtful
accounts included in accounts receivable -
affiliates was $1,015 at June 30, 1995 and December
31, 1994, respectively, all of 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 $400,244,
subject to existing leases and equipment with a
depreciated cost basis of $11,949 in inventory,
awaiting re-lease or sale. 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 $ 4,890 $ 3,871
Management fees 15,971 21,668
Reimbursable expenses paid 36,787 22,138
---------------------
$ 57,648 $ 47,677
=====================
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) Long-term Debt
Long-term debt at June 30, 1995 consists of a
$65,276 nonrecourse installment note with the
interest rate of 8.10% from Pioneer Bank and Trust
Company, collateralized by the equipment with a net
book value of $77,801 and assignment of the related
lease. Total long-term debt of $65,276 matures in
1996.
Maturities of long-term debt are as follows:
1995 $ 27,224
1996 38,052
----------
$ 65,276
==========
(6) 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
$50,840 and 3,278 shares of common stock in
Continental Information Systems Corporation with a
carrying value of $8,195. The cash and stock will
be reflected in the financial statements for the
third quarter of 1995. The cash portion of the
Trustee's distribution will be included in the
second quarter of 1995 distribution payment to be
mailed August 28, 1995. Following the Trustee's
second distribution, the Partnership's net unsecured
pre-petition claim has been settled as of July 20,
1995.
(Page 8)
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 and six
months ended June 30, 1995, compared to the same
period in 1994.
The Partnership realized net income of $103,871 and
a net loss of $6,939 for the three month periods
ended June 30, 1995 and 1994, respectively. Rental
income increased $16,125 or 17% in 1995. The
increase can be attributed to rents on new equipment
acquisitions in 1994 and in the first quarter of
1995. Other income is the result of the reduction
of overstated liabilities recorded in prior periods.
Interest income has decreased between the three
month periods as a result of lower 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 cost and expenses decreased 39% between the
three month periods. The decrease in costs and
expenses is primarily the result of lower
depreciation expense. Depreciation expense
decreased due to a large portion of the equipment
portfolio becoming fully depreciated and a reduction
in the overall equipment portfolio. Management fees
expense increased between the three month periods in
correlation to the increase 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. The provision for doubtful accounts was
reversed $7,327 in the current quarter due to the
successful collection efforts of delinquent accounts
receivable.
The Partnership realized net income of $82,592 and
$65,593 and rental income of $249,462 and $314,086
for the six months ended June 30, 1995 and 1994,
respectively. This overall decrease in rental
income can be attributed to lower rental rates
obtained on equipment lease extensions and
remarketings after the initial lease term expires
and due to an overall reduction in the equipment
portfolio. As mentioned above, other income is the
result of the reduction of overstated liabilities
recorded in prior periods. 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 discussed 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.
Total costs and expenses decreased 23% between the
six month periods. The decrease in costs and
expenses is primarily the result of lower
depreciation expense. As discussed above in the
quarter analysis, depreciation expense decreased
between 1994 and 1995 due to a large portion of the
equipment portfolio becoming fully depreciated and
an overall reduction in the equipment portfolio.
Management fees decreased due to the decline in
rental income. As mentioned above, 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 1995, the Partnership was able to reverse a
portion of its provision for doubtful accounts taken
in a prior period due to successful collection
efforts on delinquent accounts.
(Page 9)
During the quarter ended June 30, 1995 and the six
months ended June 30, 1995, the Partnership
allocated profits and losses resulting in $3.94 and
$(0.09) 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 first 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 was 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 options 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. This
decrease, however, should not affect the
Partnership's ability to meet its future cash
requirements including its long-term debt
obligations. To the extent that future cash flows
should be insufficient to meet the Partnership's
operating expenses and liabilities, additional funds
could be obtained through the sale of equipment, or
a reduction in the rate of cash distributions.
Future rental revenues amount to $481,390 and are
expected to be received over the next four years.
The Partnership's investing activities for the first
six months of 1995 resulted in equipment purchases
of $167,898 and equipment sales with a depreciated
cost basis of $61,856, generating $14,379 in
proceeds. Associated with the equipment sales were
$98 of loss charge offs against the reserve,
initially set up in prior periods for estimated
losses on the ultimate disposition of equipment.
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.
The Partnership's financing activities resulted in
the paydown on long-term debt during the six months
ended June 30, 1995 of $26,146. Such long-term debt
bears interest at 8.10% with installments to be paid
monthly. Total long-term debt assumed by the
Partnership from inception is $10,641,478, for a
total leverage of 44%.
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 was allocated to the General Partner and
$125,100 was allocated to the Limited Partners. The
distribution will be paid on August 28, 1995. The
Partnership expects to continue paying at or near
this level in the future.
(Page 10)
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-C
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
June 30, 1995
Lessee
Baylor Health Network, Incorporated
Centura Bank
Genix Corporation
Hughes Aircraft Company, Incorporated
J. Walter Thompson & Co.
Mitsubishi, Incorporated
New York Life Insurance Company, Incorporated
NYNEX National, Incorporated
Sports & Recreation, Incorporated
USG Corporation
Xerox Corporation
Equipment Description Acquisition Price
Computer peripherals $ 372,778
Processors & upgrades 1,039,857
Telecommunications 490,499
Other 58,859
------------
$ 1,961,993
============
(Page 11)
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
(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-C
(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