-----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, B+ImiD862iBEeKTTX+6BzdolwT0Mc8sjuGcQiAAfYzWIp6UzWIaGyCkez95+Iqb6 mqM4rBYfFKt/Hvd+YGz3Ig== 0000948524-02-000023.txt : 20020513 0000948524-02-000023.hdr.sgml : 20020513 ACCESSION NUMBER: 0000948524-02-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020513 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: 02644101 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_1q02.txt MARCH 31, 2002 FORM 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 March 31, 2002 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 March 31, 2002 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - March 31, 2002 and December 31, 2001...........................................3 b) Statements of Operations - Three Months Ended March 31, 2002 and 2001...............................4 c) Statements of Changes in Partners' Capital - Year Ended December 31, 2001 and Three Months Ended March 31, 2002.......................5 d) Statements of Cash Flows - Three Months Ended March 31, 2002 and 2001...............................6 e) Notes to Financial Statements...............................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........10 Part II. Other Information Item 1. Legal Proceedings......................................11 Item 6. Exhibits and Reports on Form 8-K.......................12 Signature .......................................................13 2 Part 1. Financial Information ----------------------------- Item 1. Financial Statements POLARIS AIRCRAFT INCOME FUND I BALANCE SHEETS (Unaudited) March 31, December 31, 2002 2001 ---- ---- ASSETS: CASH AND CASH EQUIVALENTS $1,241,937 $2,445,482 ---------- ---------- Total Assets $1,241,937 $2,445,482 ========== ========== LIABILITIES AND PARTNERS' CAPITAL: PAYABLE TO AFFILIATES $ 37,917 $ 38,214 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 364,295 368,821 ---------- ---------- Total Liabilities 402,212 407,035 ---------- ---------- PARTNERS' CAPITAL: General Partner 23,820 134,953 Limited Partners, 168,729 units issued and outstanding 815,905 1,903,494 ---------- ---------- Total Partners' Capital 839,725 2,038,447 ---------- ---------- Total Liabilities and Partners' Capital $1,241,937 $2,445,482 ========== ========== 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, ---------------------------- 2002 2001 ---- ---- REVENUES: Interest $ 6,372 $ 23,051 Lessee settlement (Note 5) -- 76,770 -------- -------- Total Revenues 6,372 99,821 -------- -------- EXPENSES: Administration and other 33,365 30,876 -------- -------- Total Expenses 33,365 30,876 -------- -------- NET INCOME (LOSS) $(26,993) $ 68,945 ======== ======== NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 6,040 $ 85,046 ======== ======== NET LOSS ALLOCATED TO LIMITED PARTNERS $(33,033) $(16,101) ======== ======== NET LOSS PER LIMITED PARTNERSHIP UNIT $ (0.20) $ (0.10) ======== ======== 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, 2001 and Three Months Ended March 31, 2002 --------------------------------- General Limited Partner Partners Total ------- -------- ----- Balance, December 31, 2000 $ 137,474 $ 2,152,316 $ 2,289,790 Net income 91,217 594,824 686,041 Cash distributions to partners (93,738) (843,646) (937,384) ----------- ----------- ----------- Balance, December 31, 2001 134,953 1,903,494 2,038,447 Net income 6,040 (33,033) (26,993) Cash distributions to partners (117,173) (1,054,556) (1,171,729) ----------- ----------- ----------- Balance, March 31, 2002 $ 23,820 $ 815,905 $ 839,725 =========== =========== =========== 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, ---------------------------- 2002 2001 ---- ---- OPERATING ACTIVITIES: Net income (Loss) $ (26,993) $ 68,945 Adjustments to reconcile net income to net cash provided by operating activities: Changes in operating assets and liabilities: Decrease in other assets -- 6,297 Decrease in payable to affiliates (297) (38,988) Decrease in accounts payable and accrued liabilities (4,526) (8,263) ----------- ----------- Net cash provided (used) by operating activities (31,816) 27,991 ----------- ----------- FINANCING ACTIVITIES: Cash distributions to partners (1,171,729) (937,383) ----------- ----------- Net cash used in financing activities (1,171,729) (937,383) ----------- ----------- CHANGES IN CASH AND CASH EQUIVALENTS (1,203,545) (909,392) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,445,482 2,469,034 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,241,937 $ 1,559,642 =========== =========== 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 accounting principles generally accepted in the United States ("GAAP"). These statements should be read in conjunction with the financial statements and notes thereto for the years ended December 31, 2001, 2000 and 1999 included in the Partnership's 2001 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, 2002 March 31, 2002 -------------- -------------- Out-of-Pocket Operating Expense Reimbursement $ 2,272 $ 2,200 Out-of-Pocket Administrative Expense Reimbursement 35,942 35,717 ------- ------- $38,214 $37,917 ======= ======= 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. 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. An additional amount to be determined will be paid to the Partnership before the end of the second quarter 2002 or shortly thereafter, and will be recognized as income when received. 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 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 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. The Partnership subsequently sold the engines to Aeroturbine, Inc. on an as-is-where-is basis in July 2001, as discussed below. 7. New Accounting Pronouncements In June 2001, the FASB approved for issuance Statement of Financial Accounting Standard ("SFAS") No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred and that the associated asset retirement costs be capitalized as part of the carrying value of the related long-lived asset. SFAS No. 143 will be effective January 1, 2003 for the Partnership. Management does not expect this standard to have a material impact on the Partnership's balance sheet or statement of operations. In August 2001, the FASB approved for issuance SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 broadens the presentation of discontinued operations to include more transactions and eliminates the need to accrue for future operating losses. Additionally, SFAS No. 144 prohibits the retroactive classification of assets as held for sale and requires revisions to the depreciable lives of long-lived assets to be abandoned. SFAS No. 144 became effective January 1, 2002 for the Partnership and 8 has not had a material impact on the Partnership's balance sheet or statement 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. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Business Overview At March 31, 2002, 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 remaining inventory of spare parts, including one engine, has been made available for sale such that the Partnership plans to liquidate all its assets in an orderly manner and make a final distribution thereafter. Partnership Operations The Partnership recorded a net loss of $(26,993), or $(0.20) per limited partnership unit, for the three months ended March 31, 2001, compared to net income of $68,945, or $(0.10) per unit for the same period in 2001. The decline in operating results was primarily due to decreases in Lessee settlement income and Interest income, and an increase in Administration and other expense. Interest income decreased during the three months ended March 31, 2002, as compared to the same period in 2001 primarily due to lower interest rates and a decrease in the cash reserves primarily due to distributions. Lessee settlement decreased during the three months ended March 31, 2002, as compared to the same period in 2001, primarily due to the receipt of $76,770 on January 16, 2001 related to the Braniff bankruptcy for which there was no corresponding receipt in 2002. Administration and other expenses increased primarily due to increases in printing and postage costs. Liquidity and Cash Distributions Liquidity - 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 winding up the affairs of the Partnership and for other contingencies. 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 during the three months ended March 31, 2002 and 2001 were $1,054,556, and $843,645, respectively. Cash distributions per Limited Partnership unit for the three months ended March 31, 2002, and 2001 were $6.25, and $5.00 respectively. The timing and amount of the final cash distribution to partners is not yet known and will depend upon the Partnership's future cash requirements and the timing of the sale and amount of proceeds from the sale of it's remaining inventory of spare parts including one engine. 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) 2001 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 12, 2002, the receiver appointed by the Ontario Court of Justice on behalf of CanAir's creditors issued a check for 3,250 Canadian Dollars (approximately $2,066 U.S. Dollars) to be delivered to GE Capital Aviation Services, Inc., as agent for Polaris Holding Company, General Electric Capital Leasing Canada, Inc. and the Partnership ("the GECAS Parties"). The Partnership will receive its pro-rata share of this amount before the end of the second quarter or shortly thereafter. Prior to the end of the second quarter, the receiver intends to deliver the remaining amount of 5,168 Canadian Dollars (approximately $3,285 U.S. Dollars), less the costs and fees associated with its services, to the GECAS Parties. Other Proceedings - Item 10 in Part III of the Partnership's 2001 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. 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. Sara J. Bishop, et al. v. Kidder, Peabody & Co., et al., Superior Court of California, County of Sacramento; Wilson et al. v. Polaris Holding Company et al., Superior Court of California, County of Sacramento, and ten other California Actions(1) - In the California actions filed in 1996, approximately 4000 plaintiffs who purchased limited partnership units in Polaris Aircraft Income Funds I through VI and other limited partnerships sold by Kidder, Peabody named Kidder, Peabody, KP Realty Advisors, Inc., Polaris Holding Company, Polaris Aircraft Leasing Corporation, Polaris Investment Management Corporation, Polaris Securities Corporation, Polaris Jet Leasing, Inc., Polaris Technical Services, Inc., General Electric Company, General Electric Financial Services, Inc., General Electric Capital Corporation, and General Electric Credit Corporation and Does 1-100 as defendants. The Partnership was not named as a defendant in these actions. The complaints all allege violations of state common law, including fraud, negligent misrepresentation, breach of fiduciary duty, and violations of the rules of the National Association of Securities Dealers. The complaints seek to recover compensatory damages and punitive damages in an unspecified amount, interest, and rescission with respect to Polaris Aircraft Income Funds III-VI and all other limited partnerships alleged to have been sold by Kidder Peabody to the plaintiffs. The California actions have been settled. - -------- 1 The ten other actions are Abrams, et al. v. Polaris Holding Company, et al., Elphick, et al. v. Kidder Peabody & Co., et al., Johnson, et al. v. Polaris Holding Company, et al., Kuntz, et al. v. Polaris Holding Company, et al., McDevitt, et al. v. Polaris Holding Company, et al., Ouellette, et al. v. Kidder Peabody & Co., et al., Rolph, et al. v. Polaris Holding Company, et al., Self, et al. v. Polaris Holding Company, et al., Tarrer, et al. v. Kidder Peabody & Co., et al., Zicos, et al. v. Polaris Holding Company, et al., all filed in Superior Court of California, County of Sacramento. 11 An additional settlement was entered into with certain plaintiffs who had refused to participate in the first settlement. Plaintiffs' counsel advised the Court that they would withdraw from representing the remaining plaintiffs -- approximately 330 -- who refused to participate in either of the settlements. In July, 2000, plaintiffs' counsel submitted to the Court motions to withdraw as counsel of record for all of the actions. The Court indicated that it would grant such motions and thereafter would consider dismissing each of the actions if no plaintiff came forward to prosecute. On August 2, 2001, the Court conducted a series of status conferences in connection with each of the twelve California actions and at the conferences dismissed most of the remaining plaintiffs in those actions. On November 9, 2001, defendants moved for summary judgment against most of the remaining plaintiffs based upon a settlement and bar order entered in a multi-district litigation in 1997. On March 1, 2002 the judge granted the defendants' summary judgment motions. This action does not have a material adverse effect on the Partnership. 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. 12 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 13, 2002 By: /S/Stephen E. Yost ---------------- ---------------------------------------- Stephen E. Yost, Chief Financial Officer 13 -----END PRIVACY-ENHANCED MESSAGE-----