-----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, EuxqHPS1Rmsjn1bWKMenK6WcqYEFj3lBXn23veeVpD/A+/Xe50rm4ZXaPp+3kQbJ kft42qirGQ99wcy5jcYTmw== 0000948524-00-000031.txt : 20000515 0000948524-00-000031.hdr.sgml : 20000515 ACCESSION NUMBER: 0000948524-00-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLARIS AIRCRAFT INCOME FUND II CENTRAL INDEX KEY: 0000789895 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 942985086 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-02794 FILM NUMBER: 628222 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 MARCH 31, 2000 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, 2000 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. 33-2794 --------------- POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership State of Organization: California IRS Employer Identification No. 94-2985086 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 II, A California Limited Partnership FORM 10-Q - For the Quarterly Period Ended March 31, 2000 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - March 31, 2000 and December 31, 1999...........................................3 b) Statements of Operations - Three Months Ended March 31, 2000 and 1999.....................................4 c) Statements of Changes in Partners' Capital (Deficit) - Year Ended December 31, 1999 and Three Months Ended March 31, 2000.......................5 d) Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999...............................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 II, A California Limited Partnership BALANCE SHEETS (Unaudited) March 31, December 31, 2000 1999 ---- ---- ASSETS: CASH AND CASH EQUIVALENTS $ 18,749,861 $ 18,789,625 RENT AND OTHER RECEIVABLES 935,004 935,004 AIRCRAFT, net of accumulated depreciation of $84,595,272 in 2000 and $83,330,258 in 1999 30,768,037 32,033,051 OTHER ASSETS 2,316 2,835 ------------ ------------ Total Assets $ 50,455,218 $ 51,760,515 ============ ============ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT): PAYABLE TO AFFILIATES $ 240,456 $ 226,242 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 488,239 518,032 DEFERRED INCOME 4,446,580 4,022,256 NOTES PAYABLE 4,699,912 6,037,021 ------------ ------------ Total Liabilities 9,875,187 10,803,551 ------------ ------------ PARTNERS' CAPITAL (DEFICIT): General Partner (3,291,258) (3,287,469) Limited Partners, 499,973 units issued and outstanding 43,871,289 44,244,433 ------------ ------------ Total Partners' Capital (Deficit) 40,580,031 40,956,964 ------------ ------------ Total Liabilities and Partners' Capital (Deficit) $ 50,455,218 $ 51,760,515 ============ ============ The accompanying notes are an integral part of these statements. 3 POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, ---------------------------- 2000 1999 ---- ---- REVENUES: Rent from operating leases $3,145,676 $3,145,676 Interest 259,869 216,343 Gain on sale of aircraft inventory -- 65,619 ---------- ---------- Total Revenues 3,405,545 3,427,638 ---------- ---------- EXPENSES: Depreciation 1,265,014 1,329,790 Management fees to general partner 121,617 121,617 Operating 6,860 12,189 Interest 132,297 253,109 Administration and other 62,364 61,649 ---------- ---------- Total Expenses 1,588,152 1,778,354 ---------- ---------- NET INCOME $1,817,393 $1,649,284 ========== ========== NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 215,644 $ 273,953 ========== ========== NET INCOME ALLOCATED TO LIMITED PARTNERS $1,601,749 $1,375,331 ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 3.20 $ 2.75 ========== ========== The accompanying notes are an integral part of these statements. 4 POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) Year Ended December 31, 1999 and Three Months Ended March 31, 2000 --------------------------------- General Limited Partner Partners Total ------- -------- ----- Balance, December 31, 1998 $ (3,256,230) $ 46,701,630 $ 43,445,400 Net income 879,823 5,742,360 6,622,183 Cash distributions to partners (911,062) (8,199,557) (9,110,619) ------------ ------------ ------------ Balance, December 31, 1999 (3,287,469) 44,244,433 40,956,964 Net income 215,644 1,601,749 1,817,393 Cash distributions to partners (219,433) (1,974,893) (2,194,326) ------------ ------------ ------------ Balance, March 31, 2000 $ (3,291,258) $ 43,871,289 $ 40,580,031 ============ ============ ============ The accompanying notes are an integral part of these statements. 5 POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, ---------------------------- 2000 1999 ---- ---- OPERATING ACTIVITIES: Net income $ 1,817,393 $ 1,649,284 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,265,014 1,329,790 Gain on sale of aircraft inventory -- (65,619) Changes in operating assets and liabilities: Decrease in rent and other receivables -- 6,462 Decrease in other assets 519 472 Increase in payable to affiliates 14,214 37,549 Decrease in accounts payable and accrued liabilities (29,793) (32,370) Increase in deferred income 424,324 424,324 ------------ ------------ Net cash provided by operating activities 3,491,671 3,349,892 ------------ ------------ FINANCING ACTIVITIES: Principal payments on notes payable (1,337,109) (1,216,531) Cash distributions to partners (2,194,326) (2,860,956) ------------ ------------ Net cash used in financing activities (3,531,435) (4,077,307) ------------ ------------ CHANGES IN CASH AND CASH EQUIVALENTS (39,764) (727,415) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,789,625 19,228,093 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,749,861 $ 18,500,678 ============ ============ The accompanying notes are an integral part of these statements. 6 POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership 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 II'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, 1999, 1998, and 1997 included in the Partnership's 1999 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, 2000 March 31, 2000 -------------- -------------- Aircraft Management Fees $105,000 $225,883 Out-of-Pocket Administrative Expense Reimbursement 100,310 14,573 -------- -------- $205,310 $240,456 ======== ======== 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 significantly from tax basis capital accounts. The ultimate liquidation and 7 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 March 31, 2000, Polaris Aircraft Income Fund II (the Partnership) owned a portfolio of 14 used commercial jet aircraft and spare parts inventory out of its original portfolio of 30 aircraft. The portfolio consists of 14 McDonnell Douglas DC-9-30 aircraft leased to Trans World Airlines, Inc. (TWA). Partnership Operations The Partnership recorded net income of $1,817,393, or $3.20 per limited partnership unit, for the three months ended March 31, 2000, compared to net income of $1,649,284, or $2.75 per limited partnership unit, for the three months ended March 31, 1999. The increase in net income is primarily due to increased interest revenue and decreases in depreciation, interest, operating expense, partially offset by a decrease in the sale of aircraft inventory, as discussed below. The increase in the deferred income balance at March 31, 2000 is attributable to differences between the payments due and the rental income earned on the TWA leases for the 14 aircraft currently on lease to TWA. For income recognition purposes, the Partnership recognizes rental income over the life of the lease in equal monthly amounts. As a result, the difference between rental income earned and the rental payments due is recognized as deferred income. The rental payments due from TWA during the three months ended March 31, 2000 exceeded the rental income earned, causing an increase in the deferred income balance. The decrease in depreciation expense is the result of several aircraft having been fully depreciated down to their original estimated residual values during 1999 offset by additional ongoing depreciation. The residual values at lease end on all aircraft were reviewed and adjusted downward in the fourth quarter of 1999 resulting in additional ongoing depreciation on aircraft previously fully depreciated. Interest expense decreased during the three months ended March 31, 2000, as compared to the same period in 1999, due to the continuing payments being made on the TWA hushkit notes payable. Interest income increased during the three months ended March 31, 2000, as compared to the same period in 1999, primarily due to higher average cash reserves and a higher rate of return on those cash reserves. Gains on the sale of aircraft inventory decreased during the three months ended March 31, 2000 as compared to the same period in 1999, as a result of the sale of aircraft inventory to Soundair, Inc. during 1999. Liquidity and Cash Distributions Liquidity - The Partnership received all payments due from its sole lessee, TWA, during 2000, except for the March 2000 lease payment. On April 3, 2000, the Partnership received its $935,000 rental payment from TWA that was due on March 27, 2000. This amount was included in rent and other receivables on the balance sheet at March 31, 2000. Polaris Investment Management Corporation, the general partner, has determined that the Partnership maintain cash reserves as a prudent measure to ensure that 9 the Partnership has available funds in the event that the aircraft presently on lease to TWA 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 during the three months ended March 31, 2000 and 1999 were $1,974,893, or $3.95 per limited partnership unit, and $2,574,860, or $5.15 per unit, respectively. The timing and amount of future cash distributions are not yet known and will depend on the Partnership's future cash requirements (including expenses of the Partnership) and need to retain cash reserves as previously discussed in the Liquidity section; and the receipt of rental payments from TWA. 10 Part II. Other Information -------------------------- Item 1. Legal Proceedings As discussed in Item 3 of Part I of Polaris Aircraft Income Fund II's (the Partnership) 1999 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. Viscount Air Services, Inc. (Viscount) Bankruptcy - In connection with the lawsuit by First Security Bank, National Association, as owner trustee (FSB), against BAE Aviation, Inc. and Piping Design Services, Inc. (the "Claimants"), on March 20, 2000, the Superior Court entered an order denying the Claimants' motion for a new trial and denied FSB's supplemental application for award of attorneys' fees and expenses. The Claimants filed an appeal on April 18, 2000. Other Proceedings - Item 10 in Part III of the Partnership's 1999 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. 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 II, A California Limited Partnership (Registrant) By: Polaris Investment Management Corporation, General Partner May 11, 2000 By: /S/Marc A. Meiches ---------------- -------------------------------- Mark 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
5 3-MOS DEC-31-2000 MAR-31-2000 18749861 0 935004 0 0 0 115363309 84595272 50455218 0 0 0 0 0 40580031 50455218 0 3405545 0 0 1588152 0 0 1817393 0 1817393 0 0 0 1817393 3.20 0
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