-----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, O/q4xGwm6Yd0KublRERvAPqV8Dg8I61DtXG2gqiQR664yMA2ATN+tPdc1qWcZPaX qvo7rHPbeuXcIQY61dgAbg== /in/edgar/work/20000811/0000948524-00-000057/0000948524-00-000057.txt : 20000921 0000948524-00-000057.hdr.sgml : 20000921 ACCESSION NUMBER: 0000948524-00-000057 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLARIS AIRCRAFT INCOME FUND II CENTRAL INDEX KEY: 0000789895 STANDARD INDUSTRIAL CLASSIFICATION: [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: 693693 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 0001.txt JUNE 30, 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 June 30, 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 12 pages. POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership FORM 10-Q - For the Quarterly Period Ended June 30, 2000 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - June 30, 2000 and December 31, 1999...........................................3 b) Statements of Operations - Three and Six Months Ended June 30, 2000 and 1999................................4 c) Statements of Changes in Partners' Capital (Deficit) - Year Ended December 31, 1999 and Six Months Ended June 30, 2000..........................5 d) Statements of Cash Flows - Six Months Ended June 30, 2000 and 1999................................6 e) Notes to Financial Statements...............................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........8 Part II. Other Information Item 1. Legal Proceedings.....................................10 Item 6. Exhibits and Reports on Form 8-K......................10 Signature ......................................................11 2 Part 1. Financial Information ----------------------------- Item 1. Financial Statements POLARIS AIRCRAFT INCOME FUND II, A California Limited Partnership BALANCE SHEETS (Unaudited) June 30, December 31, 2000 1999 ---- ---- ASSETS: CASH AND CASH EQUIVALENTS $ 18,861,820 $ 18,789,625 RENT AND OTHER RECEIVABLES 943,734 935,004 AIRCRAFT, net of accumulated depreciation of $85,860,286 in 2000 and $83,330,258 in 1999 29,503,023 32,033,051 OTHER ASSETS 1,785 2,835 ------------ ------------ Total Assets $ 49,310,362 $ 51,760,515 ============ ============ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT): PAYABLE TO AFFILIATES $ 243,444 $ 226,242 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 528,694 518,032 DEFERRED INCOME 4,870,905 4,022,256 NOTES PAYABLE 3,330,784 6,037,021 ------------ ------------ Total Liabilities 8,973,827 10,803,551 ------------ ------------ PARTNERS' CAPITAL (DEFICIT): General Partner (3,293,712) (3,287,469) Limited Partners, 499,973 units issued and outstanding 43,630,247 44,244,433 ------------ ------------ Total Partners' Capital (Deficits) 40,336,535 40,956,964 ------------ ------------ Total Liabilities and Partners' Capital (Deficit) $ 49,310,362 $ 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 Six Months Ended June 30, June 30, -------- -------- 2000 1999 2000 1999 ---- ---- ---- ---- REVENUES: Rent from operating leases $3,145,675 $3,145,675 $6,291,351 $6,291,351 Interest 282,863 211,883 542,732 428,226 Gain on sale of aircraft inventory -- -- -- 65,619 ---------- ---------- ---------- ---------- Total Revenues 3,428,538 3,357,558 6,834,083 6,785,196 ---------- ---------- ---------- ---------- EXPENSES: Depreciation 1,265,014 1,329,790 2,530,028 2,659,580 Management fees to general partner 121,617 121,617 243,234 243,234 Operating 8,645 10,019 15,505 22,208 Interest 100,263 223,970 232,560 477,079 Administration and other 93,274 79,608 155,638 141,257 ---------- ---------- ---------- ---------- Total Expenses 1,588,813 1,765,004 3,176,965 3,543,358 ---------- ---------- ---------- ---------- NET INCOME $1,839,725 $1,592,554 $3,657,118 $3,241,838 ========== ========== ========== ========== NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 205,868 $ 197,492 $ 421,512 $ 471,445 ========== ========== ========== ========== NET INCOME ALLOCATED TO LIMITED PARTNERS $1,633,857 $1,395,062 $3,235,606 $2,770,393 ========== ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 3.27 $ 2.79 $ 6.47 $ 5.54 ========== ========== ========== ========== 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 Six Months Ended June 30, 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 421,512 3,235,606 3,657,118 Cash distributions to partners (427,755) (3,849,792) (4,277,547) ------------ ------------ ------------ Balance, June 30, 2000 $ (3,293,712) $ 43,630,247 $ 40,336,535 ============ ============ ============ 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) Six Months Ended June 30, ------------------------- 2000 1999 ---- ---- OPERATING ACTIVITIES: Net income $ 3,657,118 $ 3,241,838 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,530,028 2,659,580 Gain on sale of aircraft inventory -- (65,619) Changes in operating assets and liabilities: Decrease (increase) in rent and other receivables (8,730) 6,392 Decrease in other assets 1,050 956 Increase in payable to affiliates 17,202 36,074 Increase (decrease) in accounts payable and accrued liabilities 10,662 (8,545) Increase in deferred income 848,649 848,649 ------------ ------------ Net cash provided by operating activities 7,055,979 6,719,325 ------------ ------------ FINANCING ACTIVITIES: Principal payments on notes payable (2,706,237) (2,461,828) Cash distributions to partners (4,277,547) (4,944,177) ------------ ------------ Net cash used in financing activities (6,983,784) (7,406,005) ------------ ------------ CHANGES IN CASH AND CASH EQUIVALENTS 72,195 (686,680) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,789,625 19,228,093 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,861,820 $ 18,541,413 ============ ============ SUPPLEMENTAL INFORMATION: Interest paid $ 233,763 $ 478,173 ============ ============ 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 June 30, 2000 June 30, 2000 ------------- ------------- Aircraft Management Fees $105,000 $242,500 Out-of-Pocket Administrative Expense Reimbursement 236,310 944 -------- -------- $341,310 $243,444 ======== ======== 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 distribution of remaining cash will be based on the tax basis capital accounts following liquidation, in accordance with the Agreement. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations At June 30, 2000, Polaris Aircraft Income Fund II (the Partnership) owned a portfolio of 14 used commercial jet aircraft and spare parts 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 $1,839,725, or $3.27 per limited partnership unit, for the three months ended June 30, 2000, compared to net income of $1,592,554, or $2.79 per limited partnership unit, for the three months ended June 30, 1999. The Partnership recorded net income of $3,657,118, or $6.47 per limited partnership unit, for the six months ended June 30, 2000, compared to net income of $3,241,838, or $5.54 per limited partnership unit, for the six months ended June 30, 1999. The increase in net income is primarily due to increased interest revenue and decreases in depreciation, interest expense, operating expense, partially offset by increases in administration expenses and a decrease in the sale of aircraft inventory, as discussed below. The increase in the deferred income balance at June 30, 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 six months ended June 30, 2000 exceeded the rental income earned, causing an increase in the deferred income balance. Interest income increased during the three and six months ended June 30, 2000, as compared to the same periods 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 and six months ended June 30, 2000 as compared to the same periods in 1999, as a result of the sale of aircraft inventory to Soundair, Inc. during 1999. 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. Operating expenses decreased during the three and six months ended June 30, 2000, as compared to the same periods in 1999, due to a decrease in legal expenses related to the Viscount default and Chapter 11 bankruptcy filing. Interest expense decreased during the three and six months ended June 30, 2000, as compared to the same period in 1999, due to the continued payments made on the notes payable for the TWA hushkits. Administration expenses increased during the three and six months ended June 30, 2000, as compared to the same periods in 1999, primarily due to consulting fees incurred for the research and reissue of a large number of investor distribution checks during 2000. The increase in printing and postage costs also contributed to the higher administration expenses during 2000. 8 Liquidity and Cash Distributions Liquidity - The Partnership received all payments due from its sole lessee, TWA, during the six months ended June 30, 2000, except for the June 2000 lease payment. On July 5, 2000, the Partnership received its $935,000 rental payment from TWA that was due on June 27, 2000. This amount was included in rent and other receivables on the balance sheet at June 30, 2000. Polaris Investment Management Corporation, the general partner, has determined that cash reserves be maintained as a prudent measure to ensure that 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 June 30, 2000 and 1999 were $1,874,899, or $3.75 per limited partnership unit, respectively. Cash distributions to limited partners during the six months ended June 30, 2000 and 1999 were $3,849,792, or $7.70 per limited partnership unit and $4,449,759, or $8.90 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), the need to retain cash reserves as previously discussed in the Liquidity section and the receipt of rental payments from TWA. 9 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) 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, 2000, 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 of Part III of the Partnership's 1999 Form 10-K and Item 1 of Part II of the Partnership's Form 10-Q for the period ended March 31, 2000 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. 10 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 August 10, 2000 By: /S/Stephen E. Yost ---------------- -------------------------------- Stephen E. Yost Chief Financial Officer (principal financial officer and principal accounting officer of Polaris Investment Management Corporation, General Partner of the Registrant) 11 EX-27 2 0002.txt
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