-----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, FqyyI3auhYzaEhh++pR+XZDr26zeMYmtzMBNQCrXOzuJ6Fhic92tHco7bUyp4n3P 9d7pMZykG1g0xb5zwBcUqg== 0000760375-95-000003.txt : 19951120 0000760375-95-000003.hdr.sgml : 19951120 ACCESSION NUMBER: 0000760375-95-000003 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 III-B CENTRAL INDEX KEY: 0000760375 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER RENTAL & LEASING [7377] IRS NUMBER: 042846627 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14472 FILM NUMBER: 95593096 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CENTER STREET 2: 21ST FLOOR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174828000 10-Q 1 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III B 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. 2-95011 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (Exact name of registrant as specified in its charter) Massachusetts 04-2846627 (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 13
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (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 For 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 - 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-B (A Massachusetts Limited Partnership) Balance Sheets Assets (Unaudited) (Audited) 9/30/95 12/31/94 Investment property, at cost (note 3): Computer equipment $ 1,710,632 1,779,340 Less accumulated depreciation 1,602,652 1,518,715 --------- --------- Investment property, net 107,980 260,625 Cash and cash equivalents 78,277 75,704 Marketable securities (notes 2 and 6) 9,457 - Rents receivable (note 2) 28,663 8,633 Accounts receivable - affiliates, net (notes 2 and 4) - - - - Total assets $ 224,377 $ 344,962 = ======= = ======= Liabilities and Partners' Equity Liabilities: Current portion of long-term debt (note 5) $ 3,482 $ 34,018 Accounts payable and accrued expenses - affiliates (note 4) 18,133 25,608 Accounts payable and accrued expenses 42,088 118,063 Distribution payable 1,646 - Unearned rental revenue - 19,148 ----- ------ Total liabilities 65,349 196,837 ------ ------- Partners' equity: General Partner: Capital contribution 1,000 1,000 Cumulative net income 655,822 643,610 Cumulative cash distributions (654,862) (646,632) -------- -------- 1,960 (2,022) ----- ------ Limited Partners (25,020 Units): Capital contribution, net of offering costs 11,139,998 11,139,998 Cumulative net income 1,460,567 1,296,220 Cumulative cash distributions (12,442,446) (12,286,071) ----------- ----------- 158,119 150,147 ------- ------- Unrealized losses on marketable securities (note 6) (1,051) - ------ ------- Total partners' equity 159,028 148,125 ------- ------- Total liabilities and partners' equity $ 224,377 $ 344,962 = ======= = =======
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (A Massachusetts Limited Partnership) Statements of Operations (Unaudited) Quarters Ended Nine Months Ended September 30, September 30, ------------- ------------- 1995 1994 1995 1994 ---- ---- ---- ---- Revenue: Rental income $ 117,174 $ 123,121 $ 355,205 $ 448,027 Interest income 717 2,163 2,651 4,451 Net gain (loss) on sale of equipment 825 (14,351) 3,562 (5,087) Recovery of net unsecured pre-petition claim (note 7) 19,646 - 30,154 - ------ ------ ------ ------ Total revenue 138,362 110,933 391,572 447,391 ------- ------- ------- ------- Costs and expenses: Depreciation 50,738 71,655 152,645 223,900 (Reversal of) provision for doubtful accounts 443 (4,759) (7,537) (4,759) Interest 162 744 1,007 3,635 Related party expenses (note 4): Management fees 5,731 7,520 17,973 28,447 General and administrative 16,718 15,694 50,925 50,202 ------ ------ ------ ------ Total costs and expenses 73,792 90,854 215,013 301,425 ------ ------ ------- ------- Net income $ 64,570 $ 20,079 $ 176,559 $ 145,966 = ====== = ====== = ======= = ======= Net income per Limited Partnership Unit $ 2.43 $ 0.74 $ 6.57 $ 4.99 = ==== = ==== = ==== = ====
See accompanying notes to financial statements.
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (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 $ 176,559 $ 145,966 - ------- - ------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 152,645 223,900 Reversal of provision for doubtful accounts (7,537) (4,759) Net (gain) loss on sale of equipment (3,562) 5,087 Net (increase) decrease in current assets (23,001) 20,192 Net decrease in current liabilities (102,598) (37,482) -------- ------- Total adjustments 15,947 206,938 ------ ------- Net cash provided by operating activities 192,506 352,904 ------- ------- Cash flows from investing activities: Purchase of investment property - (144,097) Proceeds from sales of investment property 3,562 122,377 ----- ------- Net cash provided by (used in) investing activities 3,562 (21,720) ----- ------- Cash flows from financing activities: Principal payments on long-term debt (30,536) (90,776) Cash distributions to partners (162,959) (296,289) -------- -------- Net cash used in financing activities (193,495) (387,065) -------- -------- Net increase (decrease) in cash and cash equivalents 2,573 (55,881) Cash and cash equivalents at beginning of period 75,704 111,975 ------ ------- Cash and cash equivalents at end of period $ 78,277 $ 56,094 = ====== = ====== Supplemental cash flow information: Interest paid during the period $ 2,083 $ 4,228 = ===== = =====
See accompanying notes to financial statements. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (A Massachusetts Limited Partnership) Notes to Financial Statements For the Nine Months Ended September 30, 1995 and 1994 (Unaudited) (1) Organization and Partnership Matters The foregoing financial statements of Wellesley Lease Income Limited Partnership III-B (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) 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 $1,508 and $9,046, respectively. The allowance for doubtful accounts included in accounts receivable - affiliates was $20,820 and $40,466 at September 30, 1995 and December 31, 1994, respectively, which was related to the net unsecured pre-petition bankruptcy claim. 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 6). Reclassifications Certain prior year financial statement items have been reclassified to conform with the current year's financial statement presentation. (3) Investment Property At September 30, 1995, the Partnership owned computer equipment with a depreciated cost basis of $107,980 subject to existing leases. All purchases of computer equipment are subject to a 3% acquisition fee paid to the General Partner. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (A Massachusetts Limited Partnership) Notes to Financial Statements (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 nine months ended September 30, 1995 and 1994 are as follows:
1995 1994 ---- ---- Equipment acquisition fees $ - $ 4,197 Management fees 17,973 28,447 Reimbursable expenses paid 49,753 41,658 ------ ------ $ 67,726 $ 74,302 = ====== = ======
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. In addition, 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 September 30, 1995, consists of one installment note from Bank of Lincolnwood for $3,482 with an interest rate of 6.25%, collateralized by the equipment with a net book value of $29,047, and the assignment of the related lease. Such long-term debt matures in 1995. (6) 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 $1,051. 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 $ 10,508 $ 9,457 $ - $ - ======== ======= ========= ==========
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (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. (7) Bankruptcy of Continental Information Systems Corporation As was discussed in the Form 10-Q for the quarter ended June 30, 1995, note 6 Subsequent Events, the Partnership received the second distribution from the Trustee with respect to the net unsecured pre-petition claim. The distribution consisted of cash proceeds of $19,646. Following the Trustee's second distribution, the Partnership has a remaining net unsecured pre-petition claim of $20,820 as of September 30, 1995 (see note 8). (8) Subsequent Events On October 20, 1995, the Partnership received the third distribution from the Trustee with respect to the net unsecured pre-petition claim. The distribution consisted of cash proceeds of $905 and 577 shares of common stock in Continental Information Systems Corporation with a carrying value of $1,443. The cash and stock will be reflected in the financial statements for the fourth quarter of 1995. Following the Trustee's third distribution and an additional charge off made during the year, the Partnership has a remaining net unsecured pre-petition claim balance of $16,976 as of October 20, 1995. The General Partner anticipates that the Liquidating Estate will make future distributions on the remaining outstanding claim balance, although it is not possible at this time to determine when these distributions will be made. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (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 $64,570 and $20,079 for the quarters ended September 30, 1995 and 1994, respectively. Rental income decreased $5,947 or 5% due to lower rental rates obtained on equipment lease extension and remarketings resulting after the initial lease term expires and due to the slight decrease in the overall size of the equipment portfolio. Interest income decreased as a result of lower average short-term investment balances. The current quarter equipment sales resulted in a net gain on sale of equipment of $825 versus a net loss on sale of equipment of $14,351 in the quarter ended September 30, 1994. The net gain on sale of equipment was due to equipment sales being fully depreciated thus producing $825 in sales proceeds. The recovery of the net unsecured pre-petition claim was the result of the second 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 19% between the three month periods as a result of lower depreciation expense. Depreciation expense decreased between the three month periods due to a large portion of the equipment portfolio becoming fully depreciated and because of the reduction in the equipment portfolio. The Partnership established a provision for doubtful accounts of $443 in the current quarter to reserve for delinquent rents receivable. Interest expense decreased between the three month periods due to the continued paydown of long-term debt. For the quarter ended September 30, 1995, management fees expense decreased in correlation to the reduction in rental income. The Partnership realized net income of $176,559 and $145,966 for the nine months ended September 30, 1995 and 1994, respectively. The Partnership realized rental income of $355,205 and $448,027 for the nine months ended September 30, 1995 and 1994, respectively. As discussed in the quarter analysis above, the 21% decrease in rental income between 1995 and 1994 can be attributed to the remarketing of equipment at lower rates and the overall decrease in the equipment portfolio. The decrease in interest income can be attributed to the lower average short-term investment balances. As mentioned above, 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 second 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. Total costs and expenses decreased $86,412 or 29% in 1995 as a result of lower depreciation expense combined with the$10,474 decrease in management fees expense. Depreciation expense decreased between 1995 and 1994 due to the initial equipment portfolio becoming fully depreciated and due to the reduction of the Partnership's equipment portfolio. Interest expense decreased between 1995 and 1994 due to the continued paydown of long-term debt. As discussed above, the decrease in management fees expense reflects a decline in rental income. The reversal of provision for doubtful accounts was generated in the second quarter of 1995 due to successful collection efforts on delinquent rents receivable. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (A Massachusetts Limited Partnership) Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) During the quarter and nine months ended September 30, 1995, the Partnership recorded net income per Limited Partnership Unit of $2.43 and $6.57, 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 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. Typically, the remarketed rates are lower due to the decrease in the 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 on existing leases amount to $151,520 and are to be received over the next three years. In the first nine months of 1995, the Partnership's investing activities resulted in equipment sales with a depreciated cost basis of $1,727 generating $3,562 in proceeds. Associated with the equipment sales were $1,727 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 investment period. The Partnership's financing activities for the year resulted in the paydown on long-term debt of $30,536. The Partnership will pay off its remaining long-term debt obligation of $3,482 in 1995. Cash distributions are 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 cash distribution of $32,921, of which $1,646 is allocated to the General Partner and $31,275 is allocated to the Limited Partners. The distribution will be made on November 28, 1995. 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 a material impact in future periods. WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (A Massachusetts Limited Partnership) Computer Equipment Portfolio (Unaudited) September 30, 1995 Lessee Brian Unlimited Distribution Company Brylane, Incorporated Crowley Foods, Incorporated FAX International, Incorporated Goodyear Tire & Rubber Company, Incorporated Halliburton Company, Incorporated Hughes Aircraft Company, Incorporated Maryland Casualty Insurance Company, Incorporated Packard Hughes Interconnect, Incorporated Western Atlas Company, Incorporated
Equipment Description Acquisition Price Computer peripherals $ 1,231,655 Processors & upgrades 119,744 Other 359,233 --------- $ 1,710,632 = =========
PART II. OTHER INFORMATION WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III-B (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-B (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 LD PSHP III B EX-27 9/30/95
5 0000760375 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP III B 9-MOS DEC-31-1995 SEP-30-1995 78,277 9,458 50,991 22,329 0 116,397 1,710,632 1,602,652 224,377 61,867 3,482 11,140,998 0 0 (10,981,970) 224,377 355,205 391,572 0 17,973 203,570 (7,537) 1,007 176,559 0 176,559 0 0 0 176,559 6.57 0
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