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, 2000 Commission File Number 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
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 13
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
PART I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of September 30, 2000 and December 31, 1999 3
Statements of Operations
Quarters Ended September 30, 2000 and 1999 and
Nine Months Ended September 30, 2000 and 1999 4
Statements of Cash Flows
Nine Months Ended September 30, 2000 and 1999 5
Notes to Financial Statements 6 - 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 10
Computer Equipment Portfolio 11
PART II. OTHER INFORMATION
Items 1 - 6 12
Signature 13
PART I. FINANCIAL INFORMATION
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Balance Sheets
(Unaudited) (Audited)
Assets 9/30/00 12/31/99
------ --------------- ---------------
Investment property, at cost (note 3):
Computer equipment $ 348,569 $ 1,002,046
Less accumulated depreciation 346,381 793,493
--------------- ---------------
Investment property, net 2,188 208,553
Cash and cash equivalents 148,086 421,949
Rents receivable, net 2,740 3,701
Accounts receivable - affiliates - 51,229
--------------- ---------------
Total assets $ 153,014 $ 685,432
=============== ===============
Liabilities and Partners' Equity
--------------------------------
Liabilities:
Current portion of long-term debt $ - $ 3,947
Accounts payable and accrued expenses - affiliates 5,821 8,042
Accounts payable and accrued expenses 30,537 24,170
Unearned rental revenue - 7,188
--------------- ---------------
Total liabilities 36,358 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 4,270,065 4,341,331
Cumulative cash distributions (13,140,448) (12,686,285)
--------------- ---------------
116,656 642,085
--------------- ---------------
Total partners' equity 116,656 642,085
--------------- ---------------
Total liabilities and partners' equity $ 153,014 $ 685,432
=============== ===============
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Operations
(Unaudited)
Quarters Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
2000 1999 2000 1999
----------------------- ------------------------
Revenue:
Rental income $ 5,037 $ 190,523 $ 98,294 $ 628,278
Interest income 2,307 2,446 9,838 7,926
Warrant income 906 - 7,758 -
Other income - - - 16,249
Net gain on sale of equipment - 15,170 - 25,063
--------- --------- --------- ---------
Total revenue 8,250 208,139 115,890 677,516
--------- --------- --------- ---------
Costs and expenses:
Depreciation 15,758 118,656 107,607 420,741
(Reversal of) provision for
doubtful accounts 666 - 1,039 (938)
Interest - 700 43 7,029
Related party expenses (note 4):
Management fees 530 16,639 8,212 47,943
General and administrative 23,654 42,760 54,319 120,682
--------- --------- --------- ---------
Total costs and expenses 40,608 178,756 171,220 595,457
--------- --------- --------- ---------
Net income (loss) $ (32,358) $ 29,383 $ (55,330) $ 82,059
========= ========= ========= =========
Net income (loss) per Limited
Partnership Unit $ (1.60) $ 1.19 $ (3.53) $ 3.01
========= ========= ========= =========
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Cash Flows
Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
--------------- ---------------
Cash flows from operating activities:
Net income (loss) $ (55,330) $ 82,059
--------------- ---------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 107,607 420,741
(Reversal of) provision for doubtful accounts 1,039 (938)
Net gain on sale of equipment - (25,063)
Net decrease in current assets 51,151 17,934
Net (decrease) increase in current liabilities (3,042) 23,538
--------------- ---------------
Total adjustments 156,755 436,212
--------------- ---------------
Net cash provided by operating activities 101,425 518,271
--------------- ---------------
Cash flows from investing activities:
Proceeds from sales of investment property 98,758 79,156
--------------- ---------------
Net cash provided by investing activities 98,758 79,156
--------------- ---------------
Cash flows from financing activities:
Principal payments on long-term debt (3,947) (214,780)
Cash distributions to partners (470,099) (424,948)
--------------- ---------------
Net cash used in financing activities (474,046) (639,728)
--------------- ---------------
Net (decrease) in cash and cash equivalents (273,863) (42,301)
Cash and cash equivalents at beginning of period 421,949 403,150
--------------- ---------------
Cash and cash equivalents at end of period $ 148,086 $ 360,849
=============== ===============
Supplemental cash flow information:
Interest paid during the period $ 43 $ 7,029
=============== ===============
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Nine Months Ended September 30, 2000 and September 30, 1999
(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 September 30, 2000 and December 31, 1999,
the allowance for doubtful accounts included in rents receivable was $2,126 and
$1,087, respectively, and $0 and $0 included in sales receivable, respectively.
(3) Investment Property
At September 30, 2000, the Partnership owned computer equipment with a
depreciated cost basis of $2,188. All purchases of computer equipment are
subject to a 3% acquisition fee paid to the General Partner.
(4) Related Party Transactions
Fees and expenses paid or accrued by the Partnership to the General Partner or
affiliates of the General Partner for the nine months ended September 30 are as
follows:
2000 1999
------------ ------------
Management fees $ 8,212 $ 47,943
Reimbursable expenses paid 54,464 106,936
------------ ------------
$ 62,676 $ 154,879
============ ============
Under the terms of the Partnership Agreement, the General Partner is entitled to
a management fee equal to 7% of the monthly rental billings collected. 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 nine months ended September 30, 2000 in comparison to the same periods ended
September 30, 1999.
The Partnership realized net income (loss) of $(32,358) and $29,383 for the
quarters ended September 30, 2000 and 1999, respectively. Rental income
decreased $185,486 or 97% between the three month periods. The decrease is
primarily due to a reduction in the overall size of the equipment portfolio.
Total costs and expenses decreased $138,148 or 77% between the three month
periods. Depreciation expense decreased $102,898 or 87% due to a portion of the
equipment portfolio becoming fully depreciated. Also included in depreciation
expense for the quarter ended September 30, 2000 is a provision of $12,500 for
estimated losses on the ultimate disposition of equipment. General and
administrative expenses decreased $19,106 as a result of our cost cutting
efforts. Management fees decreased in correlation to the decline in rental
income.
The Partnership realized net income (loss) of $(55,330) and $82,059 for the nine
months ended September 30, 2000 and 1999, respectively. The $529,984 or 84%
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 nine
month period, the Partnership exercised its rights to redeem warrants, which
resulted in $7,758 of additional income.
Total costs and expenses decreased $424,237 or 71% during the nine month
periods. As discussed in the quarter analysis above, depreciation expense
decreased $313,134 or 74% between 2000 and 1999 due to the initial equipment
portfolio becoming fully depreciated and to a reduction in the overall size of
the equipment portfolio. Management fees decreased between the nine month
periods due to the decline in rental income. The decline in interest expense is
due to the payoff of its long-term debt. General and administrative expenses
decreased $66,363 or 55% mainly due to successful cost cutting effects.
The Partnership recorded net income (loss) per Limited Partnership Unit of
$(1.06) and $1.19 for the quarters ended September 30, 2000 and 1999,
respectively, and net income (loss) of $(3.53) and $3.01 for the nine months
ended September 30, 2000 and 1999, respectively. The allocation for the nine
months ended September 30, 2000 includes a cost recovery allocation of profit
and loss among the General and Limited Partners. The 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.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
Liquidity and Capital Resources
For the quarter ended September 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 options would generate the most favorable results.
Rental income will continue to decrease due to two factors. First, lower rental
rates are obtained on the remarketing of existing equipment after 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. 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 nine month period resulted in
equipment sales with a depreciated cost basis of $156,899, generating $98,758 in
proceeds. Included in equipment sales is a $(58,132) 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 financing activities resulted in the paydown on long-term debt
in the amount of $3,947 for the nine months ended September 30, 2000. The
Partnership has paid off all of its long-term debt.
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 September 30, 2000, the Partnership declared a cash
distribution of $106,237, of which $5,312 was allocated to the General Partner
and $100,425 was allocated to the Limited Partners. The distribution was made on
November 10, 2000. The Partnership expects to be liquidating all assets before
year-end and will be making a final cash distribution shortly thereafter.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
September 30, 2000
Lessee
Hughes Aircraft
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
By: Arthur P. Beecher
President
Date: November 13, 2000