-----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, P1KF+MgYDvnG4sip/F9xmsvgkYphZx8gwU7e1piIQ2H99O6XVxnywUkUWLOXD0p1 6V+VRluHie918rLg6utQsQ== 0000948524-01-500021.txt : 20010516 0000948524-01-500021.hdr.sgml : 20010516 ACCESSION NUMBER: 0000948524-01-500021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1640030 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 if1_1q01.txt IF1 1Q01 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 March 31, 2001 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 12 pages. POLARIS AIRCRAFT INCOME FUND I FORM 10-Q - For the Quarterly Period Ended March 31, 2001 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - March 31, 2001 and December 31, 2000...........................................3 b) Statements of Operations - Three Months Ended March 31, 2001 and 2000...............................4 c) Statements of Changes in Partners' Capital - Year Ended December 31, 2000 and Three Months Ended March 31, 2001.......................5 d) Statements of Cash Flows - Three Months Ended March 31, 2001 and 2000...............................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) March 31, December 31, 2001 2000 ---- ---- ASSETS: CASH AND CASH EQUIVALENTS $1,559,642 $2,469,034 OTHER ASSETS -- 6,297 AIRCRAFT ENGINES, held for sale 858,750 858,750 ---------- ---------- Total Assets $2,418,392 $3,334,081 ========== ========== LIABILITIES AND PARTNERS' CAPITAL: PAYABLE TO AFFILIATES $ 9,916 $ 48,904 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 355,808 364,071 MAINTENANCE RESERVES 631,316 631,316 ---------- ---------- Total Liabilities 997,040 1,044,291 ---------- ---------- PARTNERS' CAPITAL: General Partner 128,782 137,474 Limited Partners, 168,729 units issued and outstanding 1,292,570 2,152,316 ---------- ---------- Total Partners' Capital 1,421,352 2,289,790 ---------- ---------- Total Liabilities and Partners' Capital $2,418,392 $3,334,081 ========== ========== The accompanying notes are an integral part of these statements. 3 POLARIS AIRCRAFT INCOME FUND I STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, ---------------------------- 2001 2000 ---- ---- REVENUES: Rent from operating leases $ -- $ 90,000 Interest 23,051 50,634 Lessee settlement (Note 4) 76,770 61,513 -------- -------- Total Revenues 99,821 202,147 -------- -------- EXPENSES: Depreciation -- 3,750 Management fees to general partner -- 4,500 Administration and other 30,876 28,205 -------- -------- Total Expenses 30,876 36,455 -------- -------- NET INCOME $ 68,945 $165,692 ======== ======== NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 85,046 $ 7,251 ======== ======== NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS $(16,101) $158,441 ======== ======== NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ (0.10) $ 0.94 ======== ======== The accompanying notes are an integral part of these statements. 4 POLARIS AIRCRAFT INCOME FUND I STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (Unaudited) Year Ended December 31, 2000 and Three Months Ended March 31, 2001 --------------------------------- General Limited Partner Partners Total ------- -------- ----- Balance, December 31, 1999 $ 222,894 $ 2,731,907 $ 2,954,801 Net income 8,318 264,054 272,372 Cash distributions to partners (93,738) (843,645) (937,383) ----------- ----------- ----------- Balance, December 31, 2000 137,474 2,152,316 2,289,790 Net income 85,046 (16,101) 68,945 Cash distributions to partners (93,738) (843,645) (937,383) ----------- ----------- ----------- Balance, March 31, 2001 $ 128,782 $ 1,292,570 $ 1,421,352 =========== =========== =========== The accompanying notes are an integral part of these statements. 5 POLARIS AIRCRAFT INCOME FUND I STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, ---------------------------- 2001 2000 ---- ---- OPERATING ACTIVITIES: Net income $ 68,945 $ 165,692 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation -- 3,750 Changes in operating assets and liabilities: Decrease in rent and other receivable -- 30,000 Decrease in other assets 6,297 -- Decrease in payable to affiliates (38,988) (1,264) Decrease in accounts payable and accrued liabilities (8,263) (12,309) Decrease in maintenance reserves -- 69,453 ----------- ----------- Net cash provided by operating activities 27,991 255,322 ----------- ----------- FINANCING ACTIVITIES: Cash distributions to partners (937,383) (937,383) ----------- ----------- Net cash used in financing activities (937,383) (937,383) ----------- ----------- CHANGES IN CASH AND CASH EQUIVALENTS (909,392) (682,061) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,469,034 4,190,421 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,559,642 $ 3,508,360 =========== =========== 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, 2000, 1999 and 1998 included in the Partnership's 2000 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 March 31, 2001 March 31, 2001 -------------- -------------- Out-of-Pocket Operating Expense Reimbursement 36,238 -- Out-of-Pocket Administrative Expense Reimbursement 37,886 9,916 ------- ------- $74,124 $ 9,916 ======= ======= 3. 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. 7 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. 4. Braniff Bankruptcy Settlement On January 16, 2001, Braniff's bankrupt estate made a $110,890 payment in respect of the unsecured claims of the Partnership and other affiliates of Polaris Management Corporation, of which $76,770 was allocated to the Partnership based on its pro rata share of the total claims. 5. Engine Lease Expiration The lease for the three JT8D-9A engines to Royal Aviation, Inc. and Royal Cargo, Inc. (Royal Aviation) expired on August 31, 2000. The engines were redelivered on September 7, 2000 and security deposit of $45,000 was refunded to Royal Aviation on November 21, 2000. The Partnership has made these engines available for sale along with the remaining inventory of spare parts such that all the assets of the Partnership will be liquidated and a final distribution made thereafter. The Partnership has ceased depreciating these assets and is currently reporting these assets at the lower of carrying amount or fair value less cost to sell. The net maintenance reserve balance was $631,316 as of March 31, 2001. The Partnership is currently assessing the return conditions of the engines to determine how much, if any, of the maintenance reserve balance may be recognized as revenue. 6. New Accounting Pronouncements On January 1, 2001, the Partnership adopted Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), as amended by SFAS 138, which establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Partnership does not own any derivative instruments, and as such, the implementation of this statement did not have a material impact on the Partnership's financial position or result of operations. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations At March 31, 2001, Polaris Aircraft Income Fund I (the Partnership) owned three JT8D-9A engines and certain inventoried aircraft parts, which includes one engine, out of its original portfolio of eleven aircraft. The three JT8D-9A engines, which were leased to Royal Aviation Inc. and Royal Cargo, Inc. (Royal Aviation), were redelivered to the Partnership on September 7, 2000. The Partnership has made these engines available for sale along with the remaining inventory of spare parts such that all the assets of the Partnership will be liquidated and a final distribution made thereafter. Partnership Operations The Partnership recorded net income of $68,945, or $(0.10) per limited partnership unit, for the three months ended March 31, 2001, compared to net income of $165,692, or $0.94 per unit for the same period in 2000. The decline in operating results was primarily due to a decrease in rent and interest revenue, partially offset by decreased management fees and depreciation expense as well as an increase in Lessee settlement. There was no rent recognized during the three months ended March 31, 2001, as compared to the same period in 2000 due to the expiration of the engine leases to Royal Aviation in August 2000. Interest income decreased during the three months ended March 31, 2001, as compared to the same period in 2000 as a result of a decrease in the cash reserves due to distributions as well as a reduction in rental income in connection with the expiration of the engine leases to Royal Aviation. Other income increased during the three months ended March 31, 2001, as compared to the same period in 2000, primarily to the receipt of $76,770 on January 16, 2001 related to the Braniff bankruptcy, as discussed in Note 4. No management fees were paid during the three months ended March 31, 2001, as compared to the same period in 2000 due to the expiration of the engine leases to Royal Aviation in August 2000. No depreciation expense was recognized during the three months ended March 31, 2001, as compared to the same period in 2000, since the engines were off lease and held-for-sale. Liquidity and Cash Distributions Liquidity - The Partnership received maintenance reserve payments from its lessee 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 reserve balances aggregate $631,316 as of March 31, 2001. The Partnership is currently assessing the return conditions of the engines to determine how much, if any, of the maintenance reserve balance may be recognized as revenue. 9 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 for the remarketing of the engines returned from Royal Aviation 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 until further information becomes available. Cash Distributions - Cash distributions to limited partners during the three months ended March 31, 2001 and 2000 were $843,645, or $5 per limited partnership unit. The timing and amount of a final cash distribution to partners is not yet known and will depend upon circumstances such as the Partnership's future cash requirements, and the timing and proceeds related to the ultimate liquidation of the Partnership's assets. As stated above, the three engines on lease to Royal Aviation were redelivered on September 7, 2000. The Partnership has made these engines available for sale along with the remaining inventory of spare parts such that all the assets of the Partnership will be liquidated and a final distribution made thereafter. 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) 2000 Annual Report to the Securities and Exchange Commission (SEC) on Form 10-K (Form 10-K), there are several pending legal actions or proceedings involving the Partnership. Except as described below, there have been no material developments with respect to any such actions or proceedings during the period covered by this report. CanAir Cargo Ltd. (CanAir) Order under the Companies' Creditors Arrangement Act of Canada - On March 29, 2001, the receiver appointed by the Ontario Court of Justice on behalf of CanAir's creditors issued a check for 620,116 Canadian Dollars (approximately $397,122 U.S. Dollars converted as of 4/24/01) to GE Capital Aviation Services, Inc. (GECAS) on behalf of the GECAS Parties (GECAS , as agent for Polaris Holding Company, General Electric Capital Leasing Canada, Inc. and the Partnership). Including this latest amount, the receiver has distributed to the GECAS Parties a total amount in this liquidation of approximately $1,138,822 U.S. Dollars, of which the Partnership's pro rata share is approximately $95,874 U.S. Dollars. The Partnership's pro rata share of the latest distribution of $397,122 U.S. Dollars is approximately $34,361 U.S. Dollars. After deducting the legal fees related to this matter, out of the latest distribution, the Partnership will receive a net pro rata share of approximately $9,020 U.S. Dollars. Other Proceedings - Item 10 in Part III of the Partnership's 2000 Form 10-K discusses 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. As discussed in Item 3 of Part I of Polaris Aircraft Income Fund I's (the Partnership) 2000 Annual Report to the Securities and Exchange Commission (SEC) on Form 10-K (Form 10-K), there are several pending legal actions or proceedings involving the Partnership. Except as described below, there have been no material developments with respect to any such actions or proceedings 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 A California Limited Partnership (Registrant) By: Polaris Investment Management Corporation, General Partner May 14, 2001 By: /S/Edwin Forti - ------------------------------- ---------------------- Edwin Forti, President 12 -----END PRIVACY-ENHANCED MESSAGE-----