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, 2000 Commission File No. 2-95011
Wellesley Lease Income Limited Partnership III-D
------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Massachusetts 04-2850823
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
77 Franklin Street, 4th Floor, Boston, MA 02110
- --------------------------------------------------------------------------------
(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-D
(A Massachusetts Limited Partnership)
INDEX Page No.
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of June 30, 2000 and December 31, 1999 3
Statements of Operations
Quarters Ended June 30, 2000 and 1999 and
Six Months Ended June 30, 2000 and 1999 4
Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999 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
PART I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Balance Sheets
Assets
------
(Unaudited) (Audited)
6/30/00 12/31/99
-------------- --------------
Investment property, at cost (note 3):
Computer equipment $ 571,587 $ 1,002,046
Less accumulated depreciation 522,516 793,493
-------------- --------------
Investment property, net 49,071 208,553
Cash and cash equivalents 272,290 421,949
Rents receivable, net 9,723 3,701
Accounts receivable - affiliates 6,451 51,229
-------------- --------------
Total assets $ 337,535 $ 685,432
============== ==============
Liabilities and Partners' Equity
--------------------------------
Liabilities:
Current portion of long-term debt $ - $ 3,947
Accounts payable and accrued expenses-affiliates 7,147 8,042
Accounts payable and accrued expenses 29,987 24,170
Unearned rental revenue - 7,188
-------------- --------------
Total liabilities 37,134 43,347
-------------- --------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 682,654 666,718
Cumulative cash distributions (683,654) (667,718)
-------------- --------------
- -
-------------- --------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 4,302,423 4,341,331
Cumulative cash distributions (12,989,061) (12,686,285)
-------------- --------------
300,401 642,085
-------------- --------------
Total partners' equity 300,401 642,085
-------------- --------------
Total liabilities and partners' equity $ 337,535 $ 685,432
============== ==============
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Operations
Quarters and Six Months Ended June 30, 2000 and 1999
(Unaudited)
Quarters Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
2000 1999 2000 1999
------------------------ -----------------------
Revenue:
Rental income $ 24,937 $ 175,193 $ 100,173 $ 437,755
Interest income 3,532 2,301 7,531 5,480
Warrant income - - 6,852 -
Other income - 16,249 - 16,249
Net gain on sale of equipment - 8,398 - 9,893
---------- ---------- ---------- ----------
Total revenue 28,469 202,141 114,556 419,377
---------- ---------- ---------- ----------
Costs and expenses:
Depreciation 45,038 137,205 91,849 302,085
(Reversal of) provision for doubtful accounts 350 (1,452) 373 (938)
Interest - 1,892 43 6,328
Related party expenses (note 4):
Management fees 2,666 13,480 7,682 31,305
General and administrative 22,087 35,967 37,581 77,921
---------- ---------- ---------- ----------
Total costs and expenses 70,141 187,092 137,528 416,701
---------- ---------- ---------- ----------
Net income $ (41,672) $ 15,049 $ (22,972) $ 52,676
========== ========== ========== ==========
Net income per Limited Partnership Unit $ (2.46) $ 0.35 $ (1.93) $ 1.82
========== ========== ========== ==========
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999
(Unaudited)
2000 1999
-------------- --------------
Cash flows from operating activities:
Net income $ (22,972) $ 52,676
-------------- --------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 91,849 302,085
(Reversal of) provision for doubtful accounts 373 (938)
Net gain on sale of equipment - (9,893)
Net decrease (increase) in current assets 38,383 44,206
Net increase (decrease) in current liabilities (2,266) (45,018)
-------------- --------------
Total adjustments 128,339 290,442
-------------- --------------
Net cash provided by operating activities 105,367 343,118
-------------- --------------
Cash flows from investing activities:
Proceeds from sales of investment property 67,633 30,736
-------------- --------------
Net cash provided by investing activities 67,633 30,736
-------------- --------------
Cash flows from financing activites:
Principal payments on long-term debt (3,947) (174,601)
Cash distributions to partners (318,712) (318,711)
-------------- --------------
Net cash used in financing activities (322,659) (493,312)
-------------- --------------
Net (decrease) increase in cash and cash equivalents (149,659) (119,458)
Cash and cash equivalents at beginning of period 421,949 403,150
-------------- --------------
Cash and cash equivalents at end of period $ 272,290 $ 283,692
============== ==============
Supplemental cash flow information:
Interest paid during the period $ 43 $ 6,328
============== ==============
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Six Months Ended June 30, 2000 and 1999
(Unaudited)
(1) Organization and Partnership Matters
The foregoing financial statements of Wellesley Lease Income Limited Partnership
III-D (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, 1999.
(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, 2000 and December 31, 1999,
the allowance for doubtful accounts included in rents receivable was $1,460
and $1,087, respectively.
(3) Investment Property
At June 30, 2000, the Partnership owned computer equipment with a depreciated
cost basis of $49,071. All purchases of computer equipment are subject to
a 3% acquisition fee paid to the General Partner.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(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 six months ended
June 30 are as follows:
2000 1999
---- ----
Management fees $ 7,682 $ 31,305
Reimbursable expenses paid 39,001 78,221
---------- ----------
$ 46,683 $ 109,526
========== ==========
Under the terms of the Partnership Agreement, the General Partner is entitled to
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.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(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, 2000 in comparison to the same periods ended June
30, 1999.
The Partnership realized net income (loss) of $(41,672) and $15,049 for the
quarters ended June 30, 2000 and 1999, respectively. Rental income decreased
$150,256 or 86% in 2000. The decrease is primarily due to a reduction in the
overall size of the equipment portfolio. Interest income increased as a result
of higher average short-term investment balances held during the current
quarter.
Total costs and expenses decreased $116,951 or 63% in 2000. The decrease in
costs and expenses is mainly due to the $92,167 reduction in depreciation
expense during the current quarter in comparison to the same period in 1999. The
decline in depreciation expense is primarily due to a portion of the equipment
portfolio becoming fully depreciated. Management fees decreased in correlation
to the decline in rental income. General and administrative expenses decreased
$13,880 as a result of our cost cutting efforts.
The Partnership realized net income (loss) of $(22,972) and $52,676 for the six
months ended June 30, 2000 and 1999, respectively. The $337,582 or 77% decrease
in rental income is attributed to a net decrease in the overall size of the
equipment portfolio. Interest income increased as a result of higher average
short-term investment balances held during the period. During the first quarter,
the Partnership exercised its rights to redeem warrants which resulted in $6,852
of additional income.
Total costs and expenses decreased $279,173 or 67% during the six month periods.
Depreciation expense decreased due to a portion of the equipment portfolio
becoming fully depreciated. Management fees decreased between the six month
periods in relation to the decline in rental income. The decline in interest
expense is due to the payoff of its long-term debt.
The Partnership recorded net income (loss) per Limited Partnership Unit of
$(2.46) and $0.35 for the quarters ended June 30, 2000 and 1999, respectively,
and $(1.93) and $1.82 for the six month periods ended June 30, 2000, and 1999,
respectively. The allocation for the six months ended June 30, 2000 includes a
cost recovery allocation of profit and loss among the General and Limited
Partners. 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 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 quarter ended June 30, 2000, rental revenue generated from operating
leases and sales proceeds generated from equipment 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 LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Rental income will continue 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 partnerhip's ability to meet its future cash requirements. 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.
The Partnership's investing activities for the six months ended June 30
consisted of equipment sales with a depreciated cost basis of $84,998,
generating $58,908 in proceeds. Included in equipment sales is a $26,090 loss
which was charged against the reserve, initially set up in a prior period to
account for estimated losses on the ultimate disposition of equipment.
The Partnership's activities also included a paydown on long-term debt during
2000 of $3,947. The Partnership has paid off all of its long-term debt.
Cash distributions are currently at an annual level of 6% per Limited
Partnership Unit, or $7.50 per Limited Partnership Unit on a quarterly basis.
For the quarter ended June 30, 2000, the Partnership declared a cash
distribution of $159,356, of which $7,968 was distributed to the General Partner
and $151,388 was distributed to the Limited Partners. The distribution will be
made on August 11, 2000. The Partnership expects to continue paying at or near
this level in the future. 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-D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
June 30, 2000
Lessees
Hughes Aircraft Corporation
J. Walter Thompson, U.S.A., Incorporated
USG Corporation
PART II. OTHER INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(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-D
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
Date: August 9, 2000
By: Arthur P. Beecher,
President