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 March 31, 1998 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 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-D
(A Massachusetts Limited Partnership)
INDEX Page No.
Part I. FINANCIAL INFORMATION
Financial Statements
Balance Sheets as of March 31, 1998 and December 31, 1997 3
Statements of Operations
Quarters Ended March 31, 1998 and 1997 4
Statements of Cash Flows
Quarters Ended March 31, 1998 and 1997 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)
3/31/98 12/31/97
---------------- ----------------
Investment property, at cost (note 3):
Computer equipment $ 5,877,320 $ 6,164,470
Less accumulated depreciation 4,102,572 4,119,544
---------------- ----------------
Investment property, net 1,774,748 2,044,926
Cash and cash equivalents 334,638 253,590
Rents receivable, net (note 2) 32,349 46,355
Sales receivable, net (note 2) - 2,200
Accounts receivable - affiliates 5,910 17,768
Other assets 14,699 17,293
---------------- ----------------
Total assets $ 2,162,344 $ 2,382,132
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 5) $ 565,034 $ 628,925
Accounts payable and accrued expenses - affiliates (note 4) 36,093 31,639
Accounts payable and accrued expenses 85,756 61,989
Unearned rental revenue 14,407 39,641
Long-term debt, less current portion (note 5) 98,699 229,717
---------------- ----------------
Total liabilities 799,989 991,911
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 613,598 605,630
Cumulative cash distributions (614,598) (606,630)
---------------- ----------------
- -
---------------- ----------------
Limited Partners (20,185 units):
Capital contribution, net of offering costs 8,987,039 8,987,039
Cumulative net income 4,052,351 3,928,822
Cumulative cash distributions (11,677,035) (11,525,640)
---------------- ----------------
1,362,355 1,390,221
---------------- ----------------
Total partners' equity 1,362,355 1,390,221
---------------- ----------------
Total liabilities and partners' equity $ 2,162,344 $ 2,382,132
================ ================
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Operations
Quarters Ended March 31, 1998 and 1997
(Unaudited)
1998 1997
-------------- ---------------
Revenue:
Rental income $ 466,849 $ 385,147
Interest income 2,906 1,769
Net gain on sale of equipment 15,181 32,144
-------------- ---------------
Total revenue 484,936 419,060
-------------- ---------------
Costs and expenses:
Depreciation 238,010 241,707
Provision for (reversal of) doubtful accounts 7,855 (25,539)
Interest 18,735 15,976
Related party expenses (note 4):
Management fees 34,707 31,498
General and administrative 54,140 44,002
-------------- ---------------
Total costs and expenses 353,447 307,644
-------------- ---------------
Net income $ 131,489 $ 111,416
============== ===============
Net income per Limited Partnership Unit $ 6.12 $ 5.19
============== ===============
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Statements of Cash Flows
Quarters Ended March 31, 1998 and 1997
(Unaudited)
1998 1997
---------------- -----------------
Cash flows from operating activities:
Net income $ 131,489 $ 111,416
---------------- ----------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 238,010 241,707
Provision for (reversal of) doubtful accounts 7,855 (25,539)
Net gain on sale of equipment (15,181) (32,144)
Net decrease in current assets 22,803 118,584
Net increase in current liabilities 2,987 5,003
---------------- ----------------
Total adjustments 256,474 307,611
---------------- ----------------
Net cash provided by operating activities 387,963 419,027
---------------- ----------------
Cash flows from investing activities:
Purchase of investment property - (352,515)
Proceeds from sales of investment property 47,349 39,317
---------------- ----------------
Net cash provided by (used in) nvesting activities 47,349 (313,198)
---------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings on long-term debt - 61,475
Principal payments on long-term debt (194,909) (149,024)
Cash distributions to partners (159,355) (132,796)
---------------- ----------------
Net cash used in financing activities (354,264) (220,345)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 81,048 (114,516)
Cash and cash equivalents at beginning of period 253,590 265,199
---------------- ----------------
Cash and cash equivalents at end of period $ 334,638 $ 150,683
================ ================
Supplemental cash flow information:
Interest paid during the period $ 18,735 $ 15,976
================ ================
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-D
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Quarters Ended March 31, 1998 and March 31, 1997
(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, 1997.
(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 March 31, 1998 and December 31, 1997, the
allowance for doubtful accounts included in rents receivable was $15,461 and
$9,806, respectively, and $2,200 and $0 included in sales receivable,
respectively.
(3) Investment Property
At March 31, 1998, the Partnership owned computer equipment with a depreciated
cost basis of $1,774,748, subject to existing leases and equipment with a
depreciated cost basis of $67,753 in inventory, awaiting re-lease or sale. 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
Quarters Ended March 31, 1998 and March 31, 1997
(Unaudited)
(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
March 31 are as follows:
1998 1997
---- ----
Equipment acquisition fees $ - $ 10,267
Management fees 34,707 31,498
Reimbursable expenses paid 44,768 43,896
------------ ------------
$ 79,475 $ 85,661
============ ============
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 March 31, 1998 consists of one loan totaling $2,911 from Union
Chelsea National Bank with an interest rate of 9.00%, two installment notes from
Pullman Capital Corporation totaling $133,148 with interest rates of 8.75% and
10.50%, and eighteen loans totaling $527,674 from Liberty Bank, two bearing
interest at 8.50%, one bearing interest at 11.00%, two bearing interest at
7.90%, four bearing interest at 8.25%, and the nine remaining loans bearing
interest at 10.50%. All loans are non-recourse and are collateralized by
equipment on the respective leases with a total net book value of $832,008 and
assignment of the related leases.
Maturities on long-term debt are as follows:
1998 $ 434,016
1999 225,770
2000 3,947
--------------
$ 663,733
==============
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
ended March 31, 1998 in comparison to the quarter ended March 31, 1997.
The Partnership realized net income of $131,489 and $111,416 for the quarters
ended March 31, 1998 and 1997, respectively. Rental income increased $81,702 or
21% in 1998. The increase is primarily due to the new leases generated from the
extended reinvestment period, thus resulting in an increase 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. The
decrease in net gain on sale of equipment is the result of fewer equipment sales
occurring during the current quarter versus the first quarter of 1997.
Total costs and expenses increased $45,803 or 15% in 1998. Depreciation expense
decreased due to a portion of the equipment portfolio becoming fully
depreciated. During the first quarter of 1997, the Partnership was able to
reverse a provision for doubtful accounts due to successful collection efforts
on delinquent rents receivable. Interest expense increased due to the additional
financing of long-term debt. Management fees increased with the rise in rental
income on operating leases. General and administrative expenses increased
$10,138. A major factor contributing to this increase is that salaries and
expenses of the partnership accounting and reporting personnel of the General
Partner, which are reimbursable by the various partnerships under management,
are being allocated over a diminishing number of partnerships.
The Partnership recorded net income per Limited Partnership Unit of $6.12 and
$5.19 for the quarters ended March 31, 1998 and 1997, respectively. The
allocation for the quarter ended March 31, 1998 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 March 31, 1998, 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 begin 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 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.
The Partnership's investing activities for the quarter resulted in equipment
sales with a depreciated cost basis of $45,261, generating $47,349 in proceeds.
Included in equipment sales is a $13,094 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
1998 of $194,909. The Partnership will payoff its remaining long-term debt of
$663,733 by 2000.
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 March 31, 1998, 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 May 29, 1998. 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)
March 31, 1998
Lessee
American Hard Cider, Incorporated
Caterpillar, Incorporated
Cerulean Technology, Incorporated
Coulter Leasing Corporation
Direct Cable TV, Incorporated
Evare, Limited Liability Corporation
Faxnet, Incorporated
George Melhado and Company
H.J. Meyers & Company, Incorporated
Hughes Aircraft Corporation
J. Walter Thompson, U.S.A., Incorporated
JumboSports Incorporated
Magnavox Electronic Systems Company, Incorporated
Mercury Marine, Division of Brunswick Corporation
NYNEX National, Incorporated
ON Technology Corporation
Owens - Corning Fiberglass Corporation
The Internet Access Company, Incorporated
Equipment Description Acquisition Price
- --------------------- -----------------
Computer peripherals $ 2,377,482
Processors & upgrades 2,340,311
Other 1,159,527
----------------
$ 5,877,320
================
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: May 12, 1998
By: Arthur P. Beecher,
President