-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OPBYiVNWwRvOQaHR2gWoPEmCOWxOEdd2j3HizfngfyfLps4IzumbwBqbZBVnCd2M u2HDI3SI9bWJQZxX966aqw== 0000720307-95-000006.txt : 19951120 0000720307-95-000006.hdr.sgml : 19951120 ACCESSION NUMBER: 0000720307-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLESLEY LEASE INCOME LTD PARTNERSHIP II C CENTRAL INDEX KEY: 0000720307 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER RENTAL & LEASING [7377] IRS NUMBER: 042819910 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12032 FILM NUMBER: 95593154 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CENTER 21ST FLR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174828000 10-Q 1 WELLESLEY LEASE INCOME LTD PSHP II-C 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. 2-89177 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C (Exact name of registrant as specified in its charter) Massachusetts 04-2819910 (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 14
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C (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 - 11 Computer Equipment Portfolio 12 Part II. OTHER INFORMATION Items 1 - 6 13 Signature 14
Part I. FINANCIAL INFORMATION WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C (A Massachusetts Limited Partnership) Balance Sheets Assets (Unaudited) (Audited) 9/30/95 12/31/94 Investment property, at cost (note 3): Computer equipment $ 588,810 $ 617,239 Less accumulated depreciation 517,201 499,170 ------- ------- Investment property, net 71,609 118,069 Cash and cash equivalents 59,419 150,468 Marketable securities (notes 2 and 5) 11,857 - Rents receivable, net (note 2) 1,878 1,071 Accounts receivable - affiliates, net (notes 2 and 4) 2,665 2,799 ----- ----- Total assets $ 147,428 $ 272,407 = ======= = ======= Liabilities and Partners' Equity Liabilities: Accounts payable and accrued expenses - affiliates (note 4) $ 13,553 $ 26,745 Accounts payable and accrued expenses 21,479 30,688 Distribution payable 1,648 - Unearned rental income - 4,553 ----- ----- Total liabilities 36,680 61,986 ------ ------ Partners' equity: General Partner: Capital contribution 1,000 1,000 Cumulative net income 751,042 735,147 Cumulative cash distributions (752,042) (743,802) -------- -------- - (7,655) ------ ------ Limited Partners (25,050 Units): Capital contribution, net of offering costs 11,158,769 11,158,769 Cumulative net income 3,242,320 3,191,769 Cumulative cash distributions (14,289,023) (14,132,462) ----------- ----------- 112,066 218,076 ------- ------- Unrealized losses on marketable securities (note 5) (1,318) - ------ ------ Total partners' equity 110,748 210,421 ------- ------- Total liabilities and partners' equity $ 147,428 $ 272,407 = ======= = =======
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C (A Massachusetts Limited Partnership) Statements of Operations (Unaudited) Quarters Ended Nine Months Ended September 30, September 30, ------------- ------------- 1995 1994 1995 1994 ---- ---- ---- ---- Revenue: Rental income $ 35,719 $ 65,562 $ 120,018 $ 128,720 Interest income 815 2,943 4,491 5,626 Recovery of net unsecured pre-petition claim (note 6) 14,823 - 25,941 - Net (loss) gain on sale of equipment - (647) 1,651 99,508 ----- ----- ----- ------ Total revenue 51,357 67,858 152,101 233,854 ------ ------ ------- ------- Costs and expenses: Depreciation 9,655 32,025 41,265 133,280 Interest - - 43 - Related party expenses (note 4): Management fees 2,257 3,288 6,782 2,303 General and administrative 13,638 19,564 42,391 51,248 (Reversal of) provision for doubtful accounts - (2,657) (4,826) 2,756 ------ ------ ------ ----- Total costs and expenses 25,550 52,220 85,655 189,587 ------ ------ ------ ------- Net income $ 25,807 $ 15,638 $ 66,446 $ 44,267 = ====== = ====== = ====== = ====== Net income (loss) per Limited Partnership Unit $ 0.86 $ (0.15) $ 2.02 $ (3.99) = ==== = ===== = ==== = =====
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C (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 $ 66,446 $ 44,267 - ------ - ------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 41,265 133,280 (Reversal of) provision for doubtful accounts (4,826) 2,756 Net gain on sale of equipment (1,651) (99,508) Net (increase) decrease in current assets (9,022) 1,293 Net decrease in current liabilities (26,954) (21,864) ------- ------- Total adjustments (1,188) 15,957 ------ ------ Net cash provided by operating activities 65,258 60,224 ------ ------ Cash flows from investing activities: Proceeds from sales of investment property 6,846 293,949 ----- ------- Net cash provided by investing activities 6,846 293,949 ----- ------- Cash flows from financing activities: Cash distributions to partners (163,153) (296,646) -------- -------- Net cash used in financing activities (163,153) (296,646) -------- -------- Net (decrease) increase in cash and cash equivalents (91,049) 57,527 Cash and cash equivalents at beginning of period 150,468 105,018 ------- ------- Cash and cash equivalents at end of period $ 59,419 $ 162,545 = ====== = ======= Supplemental cash flow information: Interest paid during period $ 1,120 $ - = ===== = ======
See accompanying notes to financial statements. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C (A Massachusetts Limited Partnership) Notes to Financial Statements For the Nine Months Ended September 30, 1995 (Unaudited) (1) Organization and Partnership Matters The foregoing financial statements of Wellesley Lease Income Limited Partnership II-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. During the second quarter of 1995, the General Partner announced its intentions of winding down the operations of the Partnership. It is anticipated that substantially all of the assets will be liquidated and the proceeds will be used to settle all outstanding liabilities and make a final distribution within the next twelve months. (2) 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, 1995 and December 31, 1994, the allowance for doubtful accounts included in rents receivable was $205 and $56, respectively. The allowance for doubtful accounts included in accounts receivable - affiliates was $0 and $21,250 at September 30, 1995 and December 31, 1994, respectively, of which $16,275 was related to the net unsecured pre-petition bankruptcy claim in 1994. 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 5). 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 II-C (A Massachusetts Limited Partnership) Notes to Financial Statements (Unaudited) (3) Investment Property At September 30, 1995, the Partnership owns computer equipment with a cost basis of $404,968, subject to existing leases, and equipment with a cost basis of $183,842 in inventory, awaiting re-lease or sale. All purchases of computer equipment are subject to a 3% acquisition fee paid to the General Partner. (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 September 30, 1995 and 1994 are as follows:
1995 1994 ---- ---- Management fees $ 6,782 $ 2,303 Reimbursable operating expenses 39,538 15,046 ------ ------ $ 46,320 $ 17,349 = ====== = ======
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) 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 $1,318. 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 $ 13,175 $ 11,857 $ - $ - ======== ======== =========== ===========
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C (A Massachusetts Limited Partnership) Notes to Financial Statements (Unaudited) 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. (6) 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 $12,765 and 823 shares of common stock in Continental Information Systems Corporation with a carrying value of $2,058. 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 II-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 nine months ended September 30, 1995 in comparison to the same periods in the prior year. The Partnership realized net income of $25,807 and $15,638 and rental income of $35,719 and $65,562 for the quarters ended September 30, 1995 and 1994, respectively. Rental income decreased $29,843 or 46% due to lower rental rates obtained on equipment extensions and remarketings and a reduction in the overall equipment portfolio available for lease. The recovery of the net unsecured pre-petition claim of $14,823 during the current quarter 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 $26,670 or 51% in comparison with the quarter ended September 30, 1994. The decrease in total costs and expenses was primarily the result of lower depreciation expense, which accounted for a decrease of $22,370. Depreciation expense decreased due to a reduction in the size of the equipment portfolio and an increased portion of the equipment portfolio becoming fully depreciated. The decline in management fees expense reflects a decline in rental income. General and administrative expenses decreased due to lower storage charges as a result of reduced equipment in inventory and due to lower rates paid for outside services for income tax return preparation. The Partnership reduced its provision for doubtful accounts by $2,657 in the third quarter of 1994 due to successful collection efforts on delinquent accounts. The Partnership realized net income of $66,446 and $44,267 and rental income of $120,018 and $128,720 for the nine months ended September 30, 1995 and 1994, respectively. Rental income decreased $8,702 or 7%. As discussed above, the decrease in rental income is primarily due to lower rental rates obtained on equipment lease extensions and remarketings and due to a reduction in the equipment portfolio. Rental income for the nine months ended September 30, 1994 reflects a reduction due to Boeing Computer Services, Inc.'s ("Boeing") exercise of their option to apply previously accrued and paid rental proceeds toward the purchase price of equipment leased to them. Boeing's option exercise caused a reclass of rental income previously accrued and collected in the amount of $56,442 to sales proceeds. Interest income decreased as a result of lower average short-term investment balances. 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. 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. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C (A Massachusetts Limited Partnership) Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) Total costs and expenses decreased $103,932 or 55% in comparison with the nine months ended September 30, 1995. The decrease in total costs and expenses is primarily attributable to the $92,015 or 69% decrease in depreciation expense. As discussed above in the quarter analysis, the decrease in depreciation expense is the result of an increased portion of the equipment portfolio becoming fully depreciated and a reduction in the overall size of the equipment portfolio. The increase in management fees expense in the current year reflects the reclass of rental proceeds to sales proceeds in 1994 related to the Boeing option exercise as discussed above. General and administrative expenses decreased due to lower storage charges and lower tax preparation costs, as stated above. During the nine months ended September 30, 1995, the Partnership was able to reverse its provision for doubtful accounts in the amount of $4,826 due to successful collection efforts of delinquent rents receivable. During the quarter and nine months ended September 30, 1995, the Partnership allocated profits and losses resulting in $0.86 and $2.02 per Limited Partnership Unit, respectively. Liquidity and Capital Resources For the nine months ended September 30, 1995, rental revenue generated from the operating leases was the primary source of funds for the Partnership. As the 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 option would derive 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. During the second quarter of 1995, the General Partner announced its intentions of winding down the operations of the Partnership. It is anticipated that substantially all of the assets will be liquidated and the proceeds will be used to settle all outstanding liabilities and make a final distribution within the next twelve months. The Partnership will not be terminated until the stock received in the settlement of the claim against CMI Corporation has been sold and the sales proceeds have been distributed to the partners. 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 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C (A Massachusetts Limited Partnership) Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) The Partnership's investing activities for the nine months ended September 30, 1995 resulted in sales of equipment having a depreciated cost basis of $5,195, generating $6,846 in proceeds. 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 and has announced its intentions of winding down the Partnership. 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 distribution of $32,961, of which $1,648 is allocated to the General Partner and $31,313 is allocated to the Limited Partners. The distribution will be made on November 28, 1995. The Partnership expects distibutions to be more volatile as its operations are winding down. The effects of inflation have not been significant to the Partnership and are not expected to have a material impact in future periods. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-C (A Massachusetts Limited Partnership) Computer Equipment Portfolio (Unaudited) September 30, 1995 Lessee Bangor Hydro Electric Power, Incorporated Caterpillar Tractor Company Coast Pump & Supply Company, Incorporated First Options of Chicago, Incorporated New York Life Insurance Company Owens-Corning Fiberglass Corporation
Equipment Description Acquisition Price Computer peripherals $ 342,746 Other 246,064 ------- $ 588,810
PART II. OTHER INFORMATION WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II-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
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 II-C (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 ------------------- EX-27 2 WELLESLEY LEASE INCOME LTD PSHP II-C EX-27 9/30/95
5 0000720307 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP II C 9-MOS DEC-31-1995 SEP-30-1995 59,419 11,857 4,748 205 0 75,819 588,810 517,201 147,428 36,680 0 11,159,769 0 0 (11,049,021) 147,428 120,018 152,101 0 6,782 83,656 (4,826) 43 66,446 0 66,446 0 0 0 66,446 2.02 0
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