-----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, G1q+oqHuQaEXPUbBYt7bX2d2c9NRxyNTqriMxkGsULVdSf96NX3TFWofZqHDTy7k AvQBKoR9NRlNia6dz/MFog== 0000948524-98-000079.txt : 19980814 0000948524-98-000079.hdr.sgml : 19980814 ACCESSION NUMBER: 0000948524-98-000079 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLARIS AIRCRAFT INCOME FUND I CENTRAL INDEX KEY: 0000748218 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 942938977 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 002-91762 FILM NUMBER: 98685030 BUSINESS ADDRESS: STREET 1: 201 HIGH RIDGE ROAD STREET 2: 27TH FL CITY: STAMFORD STATE: CT ZIP: 06927 BUSINESS PHONE: (203) 357- MAIL ADDRESS: STREET 1: 201 HIGH RIDGE ROAD STREET 2: 27TH FL CITY: STAMFORD STATE: CT ZIP: 06927 10-Q 1 JUNE 30, 1998 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM 10-Q ------------------ _X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from___to___ ----------------- Commission File No. 2-91762 ----------------- POLARIS AIRCRAFT INCOME FUND I State of Organization: California IRS Employer Identification No. 94-2938977 201 High Ridge Road, Stamford, Connecticut 06927 Telephone - (203) 357-3776 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, and (2) has been subject to such filing requirements for the past 90 days. Yes_X_ No___ This document consists of 13 pages. POLARIS AIRCRAFT INCOME FUND I FORM 10-Q - For the Quarterly Period Ended June 30, 1998 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - June 30, 1998 and December 31, 1997..........................................3 b) Statements of Operations - Three and Six Months Ended June 30, 1998 and 1997...............................4 c) Statements of Changes in Partners' Capital (Deficit) - Year Ended December 31, 1997 and Six Months Ended June 30, 1998.........................5 d) Statements of Cash Flows - Six Months Ended June 30, 1998 and 1997...............................6 e) Notes to Financial Statements..............................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........9 Part II. Other Information Item 1. Legal Proceedings.....................................11 Item 6. Exhibits and Reports on Form 8-K......................11 Signature ......................................................12 2 Part 1. Financial Information Item 1. Financial Statements POLARIS AIRCRAFT INCOME FUND I BALANCE SHEETS (Unaudited) June 30, December 31, 1998 1997 ---- ---- ASSETS: CASH AND CASH EQUIVALENTS $ 5,646,058 $ 6,466,511 RENT AND OTHER RECEIVABLES, net of allowance for credit losses of $30,365 in 1998 and 1997 1,224 - AIRCRAFT ENGINES, net of accumulated depreciation of $67,500 in 1998 and $60,000 in 1997 892,500 900,000 ----------- ----------- $ 6,539,782 $ 7,366,511 =========== =========== LIABILITIES AND PARTNERS' CAPITAL : PAYABLE TO AFFILIATES $ 28,127 $ 42,286 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 456,547 446,822 LESSEE SECURITY DEPOSITS 45,000 95,000 DEFERRED INCOME 30,000 - MAINTENANCE RESERVES 1,651,567 1,466,687 ----------- ----------- Total Liabilities 2,211,241 2,050,795 ----------- ----------- PARTNERS' CAPITAL : General Partner 247,447 392,302 Limited Partners, 168,729 units issued and outstanding 4,081,094 4,923,414 ----------- ----------- Total Partners' Capital 4,328,541 5,315,716 ----------- ----------- $ 6,539,782 $ 7,366,511 =========== =========== The accompanying notes are an integral part of these statements. 3 POLARIS AIRCRAFT INCOME FUND I STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, -------- -------- 1998 1997 1998 1997 ---- ---- ---- ---- REVENUES: Rent from operating leases $ 90,000 $ 90,000 $ 180,000 $ 180,000 Gain on sale of aircraft inventory 14,856 49,802 64,309 136,220 Gain on sale of aircraft -- 1,051,169 -- 1,832,673 Interest and other 73,333 186,222 376,509 333,933 ---------- ---------- ---------- ---------- Total Revenues 178,189 1,377,193 620,818 2,482,826 ---------- ---------- ---------- ---------- EXPENSES: Depreciation 3,750 3,750 7,500 7,500 Management fees to general partner 4,500 4,500 9,000 9,000 Operating 3,514 105,469 3,514 159,341 Administration and other 47,200 49,964 88,166 85,131 ---------- ---------- ---------- ---------- Total Expenses 58,964 163,683 108,180 260,972 ---------- ---------- ---------- ---------- NET INCOME $ 119,225 $1,213,510 $ 512,638 $2,221,854 ========== ========== ========== ========== NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 1,192 $ 12,135 $ 5,126 $ 157,188 ========== ========== ========== ========== NET INCOME ALLOCATED TO LIMITED PARTNERS $ 118,033 $1,201,375 $ 507,512 $2,064,666 ========== ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 0.70 $ 7.12 $ 3.01 $ 12.24 ========== ========== ========== ========== The accompanying notes are an integral part of these statements
4 POLARIS AIRCRAFT INCOME FUND I STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) Year Ended December 31, 1997 and Six Months Ended June 30, 1998 ------------------------------ General Limited Partner Partners Total ------- -------- ----- Balance, December 31, 1996 $ (624,341) $ 11,047,769 $ 10,423,428 Net income 1,846,228 1,341,903 3,188,131 Cash distributions to partners (829,585) (7,466,258) (8,295,843) ------------ ------------ ------------ Balance, December 31, 1997 392,302 4,923,414 5,315,716 Net income 5,126 507,512 512,638 Cash distributions to partners (149,981) (1,349,832) (1,499,813) ------------ ------------ ------------ Balance, June 30, 1998 $ 247,447 $ 4,081,094 $ 4,328,541 ============ ============ ============ The accompanying notes are an integral part of these statements 5 POLARIS AIRCRAFT INCOME FUND I STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ------------------------- 1998 1997 ---- ---- OPERATING ACTIVITIES: Net income $ 512,638 $ 2,221,854 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 7,500 7,500 Gain on sale of aircraft inventory (64,309) (136,220) Gain on sale of aircraft -- (1,832,673) Changes in operating assets and liabilities: Decrease (increase) in rent and other receivables (1,224) 18,816 Increase in other assets -- (4,877) Decrease in payable to affiliates (14,159) (36,199) Increase in deferred income 30,000 -- Increase in accounts payable and accrued liabilities 9,725 108,134 Increase in maintenance reserves 184,880 176,814 Decrease in security deposits (50,000) -- ----------- ------------ Net cash provided by operating activities 615,051 523,149 ----------- ------------ INVESTING ACTIVITIES: Principal payments on note receivable -- 418,145 Net proceeds from sale of aircraft inventory 64,309 136,220 Proceeds from sale of aircraft -- 2,620,000 ----------- ------------ Net cash provided by investing activities 64,309 3,174,365 ----------- ------------ FINANCING ACTIVITIES: Cash distributions to partners (1,499,813) (1,499,813) ----------- ------------ Net cash used in financing activities (1,499,813) (1,499,813) ----------- ------------ CHANGES IN CASH AND CASH EQUIVALENTS (820,453) 2,197,701 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,466,511 10,065,652 ----------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,646,058 $ 12,263,353 =========== ============ The accompanying notes are an integral part of these statements 6
POLARIS AIRCRAFT INCOME FUND I NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. Accounting Principles and Policies In the opinion of management, the financial statements presented herein include all adjustments, consisting only of normal recurring items, necessary to summarize fairly Polaris Aircraft Income Fund I's (the Partnership's) financial position and results of operations. The financial statements have been prepared in accordance with the instructions of the Quarterly Report to the Securities and Exchange Commission (SEC) Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles (GAAP). These statements should be read in conjunction with the financial statements and notes thereto for the years ended December 31, 1997, 1996, and 1995 included in the Partnership's 1997 Annual Report to the SEC on Form 10-K. 2. Related Parties Under the Limited Partnership Agreement, the Partnership paid or agreed to pay the following amounts for the current quarter to the general partner, Polaris Investment Management Corporation, in connection with services rendered or payments made on behalf of the Partnership: Payments for Three Months Ended Payable at June 30, 1998 June 30, 1998 ------------- ------------- Aircraft Management Fees $ 4,500 $ 1,518 Out-of-Pocket Administrative Expense Reimbursement 56,333 25,964 Out-of-Pocket Operating and Remarketing Expense Reimbursement - 645 ------------ ------------- $ 60,833 $ 28,127 ============ ============= 3. Claims Related to Lessee Defaults Jet Fleet Bankruptcy - As previously reported, in September 1992, Jet Fleet, former lessee of one of the Partnership's aircraft, defaulted on its obligations under the lease for the Partnership's aircraft by failing to pay reserve payments and to maintain required insurance. The Partnership repossessed its Aircraft on September 28, 1992. Thereafter, Jet Fleet filed for bankruptcy protection in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. On April 13, 1993, the Partnership filed a proof of claim in the Jet Fleet bankruptcy to recover its damages. The bankrupt estate was subsequently determined to be insolvent. The bankruptcy proceeding of Jet Fleet Corporation was closed on August 6, 1997, and the bankruptcy proceeding of Jet Fleet International Airlines, Inc. was closed on February 10, 1998. Distributions from the bankrupt estate have not been made to the unsecured creditors, and the Partnership is not likely to receive any distributions on its Proof of Claim. 7 The Partnership had been holding deposits and maintenance reserves pending the outcome of the Jet Fleet bankruptcy proceedings. Consequently, the Partnership recognized, during the quarter ended March 31, 1998, revenue of $92,610 that had been held as deposits and maintenance reserves, which is included in interest and other income. Braniff, Inc. (Braniff) Bankruptcy - As previously reported, in September 1989, Braniff filed a petition under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida, Orlando Division. On September 26, 1990 the Partnership filed a proof of claim to recover unpaid rent and other damages, and on November 27, 1990, the Partnership filed a proof of administrative claim to recover damages for detention of aircraft, non-compliance with court orders and post-petition use of engines as well as liquidated damages. On July 27, 1992, the Bankruptcy Court approved a stipulation embodying a settlement among the Partnership, the Braniff creditor committees and Braniff in which it was agreed that the Partnership would be allowed an administrative claim in the bankruptcy proceeding of approximately $2,076,923. As the final disposition of the Partnership's claim in the Bankruptcy proceedings, the Partnership was permitted by the Bankruptcy Court to exchange a portion of its unsecured claim for Braniff's right (commonly referred to as a "Stage 2 Base Level right") under the FAA noise regulations to operate nine Stage 2 aircraft and has been allowed a net remaining unsecured claim of $6,923,077 in the proceedings. Braniff's bankrupt estate has made a payment in the amount of $200,000 in respect of the unsecured claims of the Partnership and other affiliates of Polaris Investment Management Corporation. Of this amount, $138,462 was allocated to the Partnership, based on its pro rata share of the total claims, and recognized as revenue during the quarter ended March 31, 1998, which is included in interest and other income. 4. Partners' Capital The Partnership Agreement (the Agreement) stipulates different methods by which revenue, income and loss from operations and gain or loss on the sale of aircraft are to be allocated to the general partner and the limited partners. Such allocations are made using income or loss calculated under GAAP for book purposes, which varies from income or loss calculated for tax purposes. Cash available for distributions, including the proceeds from the sale of aircraft, is distributed 10% to the general partner and 90% to the limited partners. The different methods of allocating items of income, loss and cash available for distribution combined with the calculation of items of income and loss for book and tax purposes result in book basis capital accounts that may vary significantly from tax basis capital accounts. The ultimate liquidation and distribution of remaining cash will be based on the tax basis capital accounts following liquidation, in accordance with the Agreement. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations At June 30, 1998, Polaris Aircraft Income Fund I (the Partnership) owned three engines and certain inventoried aircraft parts out of its original portfolio of eleven aircraft. The three engines are leased to Royal Aviation Inc. and Royal Cargo, Inc. (Royal Aviation). In addition, the Partnership transferred four aircraft to aircraft inventory during 1992 and 1993. These aircraft have been disassembled for sale of their component parts. In August 1998, the Partnership entered into an agreement for the sale of its remaining inventory of aircraft parts, with a net carrying value of $0, from the four disassembled aircraft to Soundair, Inc. The remaining inventory was sold effective February 1, 1998 for $100,000, less amounts previously received for sales in the month of February of $1,855. The net purchase price will be paid in four monthly installments commencing in August. Partnership Operations The Partnership recorded net income of $119,225, or $0.70 per limited partnership unit for the three months ended June 30, 1998 compared to net income of $1,213,510 or $7.12 per limited partnership unit, for the three months ended June 30, 1997. The Partnership recorded net income of $512,638, or $3.01 per limited partnership unit for the six months ended June 30, 1998, compared to net income of $2,221,854, or $12.24 per limited partnership unit, for the six months ended June 30, 1997. The decrease in operating results during the three and six months ended June 30, 1998, as compared to the same periods in 1997, is primarily the result of gains on the sale of aircraft in 1997 as discussed below. During the first quarter of 1997, the Partnership sold two Boeing 737-200s and two spare engines formerly leased to Viscount to Solair, Inc. for cash proceeds of $1,620,000. In addition, the Partnership retained certain maintenance reserves and deposits received from the former lessee of these aircraft aggregating approximately $968,000 that had been held by the Partnership to offset potential future maintenance expenses for these aircraft. As a result, the Partnership recognized a net gain of $781,504 on the sale of these aircraft during the first quarter of 1997. During the second quarter of 1997, the Partnership sold one Boeing 737-200 formerly leased to Viscount and subleased to Nations Air Express, Inc. for $1,000,000. In addition, the Partnership retained certain maintenance reserves and deposits received from the former lessee of this aircraft aggregating approximately $1,081,000 that had been held by the Partnership to offset potential future maintenance expenses for this aircraft. As a result, the Partnership recognized a net gain of $1,051,169 on the sale of this aircraft during the second quarter of 1997. Interest income decreased during the three and six months ended June 30, 1998, as compared to the same periods in 1997, primarily due to a decrease in the cash reserves as discussed in the liquidity section. Operating expenses decreased during the three and six months ended June 30, 1998, as compared to the same periods in 1997, due to a decrease in legal expenses during the three months and six months ended June 30, 1998. During the six months ended June 30, 1997, the Partnership recognized legal expenses of approximately $130,000 related to the Nations Air Express, Inc. default and the Viscount default and Chapter 11 bankruptcy filing. During the six months ended June 30, 1998, the Partnership recognized legal expenses of only $3,514 related to the Braniff bankruptcy. 9 Claims Related to Lessee Defaults Braniff, Inc. (Braniff) Bankruptcy - As more fully discussed in Note 3, Braniff's bankrupt estate has made a payment in the amount of $200,000 in respect of the unsecured claims of the Partnership and other affiliates of Polaris Investment Management Corporation. Of this amount, $138,462 was allocated to the Partnership, based on its pro rata share of the total claims, and recognized as revenue during the six months ended June 30, 1998. Jet Fleet Bankruptcy - As more fully discussed in Note 3, the bankruptcy proceeding of Jet Fleet Corporation was closed on August 6, 1997, and the bankruptcy proceeding of Jet Fleet International Airlines, Inc. was closed on February 10, 1998. Distributions from the bankrupt estate have not been made to the unsecured creditors, and the Partnership is not likely to receive any distributions on its Proof of Claim. The Partnership had been holding deposits and maintenance reserves pending the outcome of the Jet Fleet bankruptcy proceedings. Consequently, the Partnership recognized, during the six months ended June 30, 1998, revenue of $92,610 that had been held as deposits and maintenance reserves. Liquidity and Cash Distributions Liquidity - The Partnership receives maintenance reserve payments from Royal Aviation that may be reimbursed to the lessee or applied against certain costs incurred by the Partnership for maintenance work performed on the Partnership's aircraft or engines, as specified in the leases. Maintenance reserve balances remaining at the termination of the lease, if any, may be used by the Partnership to offset future maintenance expenses or recognized as revenue. The net maintenance reserves balances aggregate $1,651,567 as of June 30, 1998. The Partnership received payments of approximately $15,000 and $64,000 during the three months and six months ended June 30, 1998, respectively, compared to payments of approximately $50,000 and $136,000 during the three and six months ended June 30, 1997, respectively, from the sale of parts from the four disassembled aircraft. Polaris Investment Management Corporation, the general partner, has determined that the Partnership maintain cash reserves as a prudent measure to insure that the Partnership has available funds in the event that the engines presently on lease to Royal Aviation require remarketing and for other contingencies, including expenses of the Partnership. The Partnership's cash reserves will be monitored and may be revised from time to time as further information becomes available in the future. Cash Distributions - Cash distributions to limited partners were $1,349,832, or $8.00 per limited partnership unit for the six months ended June 30, 1998 and 1997. The timing and amount of future cash distributions to partners are not yet known and will depend upon the Partnership's future cash requirements, including the receipt of rental payments from Royal Aviation. 10 Part II. Other Information -------------------------- Item 1. Legal Proceedings As discussed in Item 3 of Part I of Polaris Aircraft Income Fund I's (the Partnership) 1997 Annual Report to the Securities and Exchange Commission (SEC) on Form 10-K (Form 10-K) and in Item 1 of Part II of the Partnership's Quarterly Report to the SEC on Form 10-Q (Form 10-Q) for the period ended March 31, 1998, there are a number of pending legal actions or proceedings involving the Partnership. There have been no material developments with respect to any such actions or proceedings during the period covered by this report. Other Proceedings - Item 10 in Part III of the Partnership's 1997 Form 10-K and Item 1 in Part II of the Partnership's Form 10-Q for the period ended March 31, 1998 discuss certain actions which have been filed against Polaris Investment Management Corporation and others in connection with the sale of interests in the Partnership and the management of the Partnership. The Partnership is not a party to these actions. There have been no material developments with respect to any of the actions described therein during the period covered by this report. Item 6. Exhibits and Reports on Form 8-K a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) 27. Financial Data Schedule (in electronic format only). b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter for which this report is filed. 11 SIGNATURE Pursuant to the requirements of section 13 or 15(d) 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. POLARIS AIRCRAFT INCOME FUND I (Registrant) By: Polaris Investment Management Corporation, General Partner August 12, 1998 By: /S/Marc A. Meiches - ---------------------------------- ------------------ Marc A. Meiches Chief Financial Officer (principal financial officer and principal accounting officer of Polaris Investment Management Corporation, General Partner of the Registrant) 12 EX-27 2
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