-----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, Fbij45wTTaHAIdJaskIaMvenNDjKrswUTBYEJw5Cl6ZC0+dBw/FHRpBV9zpT18g9 2T+2FIIVErcuUYv0wT69HA== 0000948524-01-500058.txt : 20020410 0000948524-01-500058.hdr.sgml : 20020410 ACCESSION NUMBER: 0000948524-01-500058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011113 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: 1934 Act SEC FILE NUMBER: 002-91762 FILM NUMBER: 1782666 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_3q01.txt 09/30/01 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 September 30, 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 September 30, 2001 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - September 30, 2001 and December 31, 2000...........................................3 b) Statements of Operations - Three and Nine Months Ended September 30, 2001 and 2000...........................4 c) Statements of Changes in Partners' Capital - Year Ended December 31, 2000 and Nine Months Ended September 30, 2001....................5 d) Statements of Cash Flows - Nine Months Ended September 30, 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) September 30, December 31, 2001 2000 ---- ---- ASSETS: CASH AND CASH EQUIVALENTS $2,435,384 $2,469,034 OTHER ASSETS -- 6,297 AIRCRAFT ENGINES, held for sale -- 858,750 ---------- ---------- Total Assets $2,435,384 $3,334,081 ========== ========== LIABILITIES AND PARTNERS' CAPITAL: PAYABLE TO AFFILIATES $ 4,729 $ 48,904 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 368,044 364,071 MAINTENANCE RESERVES -- 631,316 ---------- ---------- Total Liabilities 372,773 1,044,291 ---------- ---------- PARTNERS' CAPITAL: General Partner 135,195 137,474 Limited Partners, 168,729 units issued and outstanding 1,927,416 2,152,316 ---------- ---------- Total Partners' Capital 2,062,611 2,289,790 ---------- ---------- Total Liabilities and Partners' Capital $2,435,384 $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 Nine Months Ended September 30, September 30, ------------- ------------- 2001 2000 2001 2000 ---- ---- ---- ---- REVENUES: Rent from operating leases $ -- $ 60,000 $ -- $240,000 Gain on Sale of Aircraft Engines 41,250 -- 41,250 -- Other income - Maintenance reserves -- -- 631,316 -- Interest 19,389 41,002 60,008 133,747 Lessee settlement (Notes 4, 5) -- -- 85,667 61,513 -------- -------- -------- -------- Total Revenues 60,639 101,002 818,241 435,260 -------- -------- -------- -------- EXPENSES: Depreciation -- 3,750 -- 11,250 Management fees to general partner -- 3,000 -- 12,000 Operating expenses 1,600 -- 5,900 -- Administration and other 36,015 26,623 102,137 96,333 -------- -------- -------- -------- Total Expenses 37,615 33,373 108,037 119,583 -------- -------- -------- -------- NET INCOME $ 23,024 $ 67,629 $710,204 $315,677 ======== ======== ======== ======== NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 230 $ 676 $ 91,459 $ 8,750 ======== ======== ======== ======== NET INCOME ALLOCATED TO LIMITED PARTNERS $ 22,794 $ 66,953 $618,745 $306,927 ======== ======== ======== ======== NET INCOME PER LIMITED PARTNERSHIP UNIT $ .14 $ 0.40 $ 3.67 $ 1.82 ======== ======== ======== ======== 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 Nine Months Ended September 30, 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 91,459 618,745 710,204 Cash distributions to partners (93,738) (843,645) (937,383) ----------- ----------- ----------- Balance, September 30, 2001 $ 135,195 $ 1,927,416 $ 2,062,611 =========== =========== =========== The accompanying notes are an integral part of these statements. 5 POLARIS AIRCRAFT INCOME FUND I STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, ------------------------------- 2001 2000 ---- ---- OPERATING ACTIVITIES: Net income $ 710,204 $ 315,677 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation -- 11,250 Gain on Sale of Aircraft Engines (41,250) -- Changes in operating assets and liabilities: Decrease in rent and other receivable -- 30,000 Decrease (Increase) in other assets 6,297 (4,273) Decrease in payable to affiliates (44,175) (6,297) Increase in accounts payable and accrued liabilities 3,973 34,889 Decrease in maintenance reserves (631,316) (1,073,399) ----------- ----------- Net cash provided by (used in) operating activities 3,733 (692,153) ----------- ----------- INVESTING ACTIVITIES: Proceeds from Sale of Aircraft Engines 900,000 -- ----------- ----------- Net cash provided by investing activities 900,000 -- ----------- ----------- 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 (33,650) (1,629,536) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,469,034 4,190,421 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,435,384 $ 2,560,885 =========== =========== 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 September 30, 2001 September 30, 2001 ------------------ ------------------ Aircraft Management Fees $ -- $ -- Out-of-Pocket Administrative Expense Reimbursement 52,319 4,729 ------- ------- $52,319 $ 4,729 ======= ======= 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. 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 7 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. CanAir Bankruptcy Settlement On June 27, 2001, the Partnership received $8,897 in connection with the CanAir Bankruptcy Settlement, which is comprised of amounts received for rents, maintenance reserve obligations and accrued interest. This settlement may prove to be the final settlement if certain additional claims are made before the statutory period expires. 5. 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 Investment Management Corporation, of which $76,770 was allocated to the Partnership based on its pro rata share of the total claims. 6. 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 subsequently sold the engines to Aeroturbine, Inc. as discussed below. The Partnership ceased depreciating these assets and reported these assets at the lower of carrying amount or fair value less cost to sell as of December 31, 2000. Due to the fact that the Partnership decided to sell the engines in an as-is-where-is condition in June 2001, the net maintenance reserve balance of $631,316 was taken into income during the quarter ended June 30, 2001. 7. 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. Sale of Engines On July 19, 2001 the Partnership sold the three remaining JT8D-9A engines to Aeroturbine, Inc., on an as-is-where-is basis for $900,000. The Partnership received the proceeds for these engines in the third quarter of 2001. This sale resulted in a gain of $41,250 which is reflected in the Statement of Operations. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations At September 30, 2001, Polaris Aircraft Income Fund I (the Partnership) owned 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 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. On July 19, 2001 the Partnership sold the three remaining JT8D-9A engines to Aeroturbine, Inc., on an as-is-where-is basis for $900,000. Partnership Operations The Partnership recorded a net income of $23,024, or $0.14 per limited partnership unit, for the three months ended September 30, 2001, compared to net income of $67,629, or $0.40 per unit for the same period in 2000. The Partnership recorded net income of $710,204 or $3.67 per limited partnership unit for the nine months ended September 30, 2001, compared to net income of $315,677, or $1.82 per limited partnership unit, for the nine months ended September 30, 2000. For the nine months ended September 30, 2001 the increase in net income was primarily due to the reduction in maintenance reserves and the gain resulting from the sale of the three remaining JT8D-9A engines. This was supplemented by lower depreciation and management fees and partially offset by the Partnership receiving no income from operating leases during 2001. For the three months ended September 30, 2001, the decrease in income was due partially to the Partnership receiving no rent from operating leases during 2001 due to the expiration of the engine leases to Royal Aviation in August 2000, and partially due to a decrease in interest income. These factors were partially offset by the gain on sale of the three remaining JT8D-9A engines. Due to the marketing and sale of the engines on an as-is-where-is basis, there was no further need to hold the maintenance reserves to pay future repair and maintenance costs. Maintenance reserves were therefore recognized as income during the three months ended June 30, 2001. In addition, a gain on sale of engines of $41,250 was recognized during the three months ended September 30, 2001. Interest income decreased during the nine months ended September 30, 2001 as compared to the same period in 2000, primarily due to lower average cash reserves and lower average interest rates over the same period. Lessee settlement increased during the nine months ended September 30, 2001, as compared to the same period in 2000, primarily due to the receipt of $76,770 in January 2001 related to the Braniff bankruptcy, as discussed in Note 5 and $8,897 received from the CanAir bankruptcy as discussed in Note 4, compared to a $61,513 settlement in the CanAir bankruptcy proceedings, received in 2000. Depreciation expense decreased during the three and nine months ended September 30, 2001, as compared to the same periods in 2000, as a result of the engines being off lease and subsequently sold. 9 Management fees decreased during the three and nine months ended September 30, 2001, as compared to the same periods in 2000 due to the expiration of the engine leases to Royal Aviation in August 2000. Liquidity and Cash Distributions Liquidity - When the Partnership had aircraft and engines on lease, the Partnership received maintenance reserve payments from the lessee. During the terms of the lease, such maintenance reserves could be applied to reimburse the lessee or pay directly 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. Due to the fact that the Partnership decided to sell its three JT8D-9A engines in an as-is-where-is condition, the net maintenance reserve balance of $631,316 from the lease to Royal Aviation was recognized as income during the quarter ended June 30, 2001. These engines were subsequently sold by the Partnership on July 19, 2001. 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 to cover expenses incurred by the Partnership. Since the General Partner has sold the Partnership's three remaining engines in July 2001, final distributions will be made after Polaris Investment Management Corporation, the general partner, has sold the remaining inventory of spare parts and determined what costs will be incurred in the liquidation of the Partnership. Cash Distributions - Cash distributions to limited partners during the nine months ended September 30, 2001 and 2000 were $843,645 or $5 per limited partnership unit. Since the General Partner has sold the Partnership's three remaining engines in July 2001, final distributions will be made after Polaris Investment Management Corporation, the general partner, has sold the remaining inventory of spare parts and determined what costs will be incurred in the liquidation of the Partnership. The timing and amount of the final distributions to partners are not yet known and will depend upon circumstances such as the costs incurred in the liquidation of the Partnership and the proceeds received from the sale of the remaining inventory of spare parts. 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) 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 June 30, 2001, there are several 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 2000 Form 10-K and Item 1 of Part II of the Partnership's Form 10-Q for the period ended June 30, 2001 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) None. 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 November 7, 2001 By: /S/Keith Helming - ----------------------------------- ------------------------- Keith Helming Chief Financial Officer 12 -----END PRIVACY-ENHANCED MESSAGE-----