-----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, VkrR1xWoo8VG/oCQPGHCw+vUsxOuULh9FBaKlC9DP2nBNsxn2WiVoxEweivaqKnQ 7xgpCdtOJNvtBXgf4v8KzQ== 0000009672-98-000080.txt : 19981104 0000009672-98-000080.hdr.sgml : 19981104 ACCESSION NUMBER: 0000009672-98-000080 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRLEASE LTD CENTRAL INDEX KEY: 0000799033 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE LESSORS [6172] IRS NUMBER: 943008908 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09259 FILM NUMBER: 98736998 BUSINESS ADDRESS: STREET 1: 555 CALIFORNIA STREET STREET 2: 4TH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4157651814 MAIL ADDRESS: STREET 1: 555 CALIFORNIA STREET STREET 2: 4TH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 10-Q 1 THIRD QUARTER 1998 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1998 Commission file number 1-9259 AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 94-3008908 - ------------------------ ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 555 California Street, 4th floor, San Francisco, CA 94104 - --------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (415) 765-1814 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP =============================================== I N D E X Page No. Part I - Financial Information: Item 1. Financial Statements Balance Sheets -- September 30, 1998 and December 31, 1997..................3 Statements of Income -- Three and nine months ended September 30, 1998 and 1997...............................................4 Statements of Cash Flows Nine months ended September 30, 1998 and 1997.............5 Notes to Financial Statements.............................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............7 Part II - Other Information: Item 6. Exhibits and Reports on Form 8-K..........................9 Signatures...............................................10 PART I - FINANCIAL INFORMATION AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP =============================================== BALANCE SHEETS
September 30, 1998 December 31, (In thousands except unit data) (Unaudited) 1997 - -------------------------------------------------------------------------------- ASSETS Cash $ 12 $ 1 Finance leases - net 77,628 82,590 Operating leases - net 0 0 Prepaid expenses and other assets 307 268 ------- ------- Total assets $77,947 $82,859 ======= ======= LIABILITIES AND PARTNERS' EQUITY LIABILITIES Distribution payable to partners $ 1,915 $ 2,102 Accounts payable and accrued liabilities 522 553 Taxes Payable 510 0 Long-term notes payable 15,967 19,115 ------- ------- Total liabilities 18,914 21,770 ------- ------- COMMITMENTS AND CONTINGENCIES PARTNERS' EQUITY Limited partners (4,625,000 units outstanding) 58,443 60,478 General partner 590 611 ------- ------- Total partners' equity 59,033 61,089 ------- ------- Total liabilities and partners' equity $77,947 $82,859 ======= =======
- ------------------------------------------- See NOTES TO CONDENSED FINANCIAL STATEMENTS 3 AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP =============================================== STATEMENTS OF INCOME
Three Months Ended Nine Months Ended (Unaudited; in thousands September 30, September 30, except per unit amounts) 1998 1997 1998 1997 - -------------------------------------------------------------------------------- REVENUES Finance lease income $2,079 $2,257 $6,371 $6,816 Operating lease rentals 0 29 0 170 Gain on sale of equipment 0 393 0 393 Other income 0 0 0 12 ------ ------ ------ ------ Total revenues 2,079 2,679 6,371 7,391 ------ ------ ------ ------ EXPENSES Interest 424 553 1,335 1,559 Depreciation - operating leases 0 91 0 273 Allowance for doubtful accounts 0 0 0 228 Management fee - general partner 162 179 490 514 Investor reporting 72 201 196 602 General and administrative 56 25 149 77 ------ ------ ------ ------ Total expenses 714 1,049 2,170 3,253 ------ ------ ------ ------ Income before Taxes 1,365 1,630 4,201 4,138 Provision for Taxes 160 0 510 0 ------ ------ ------ ------ Net Income $1,205 $1,630 $3,691 $4,138 ====== ====== ====== ====== Net Income Allocated To: General Partner $ 12 $ 16 $ 37 $ 41 ====== ====== ====== ====== Limited Partners $1,193 $1,614 $3,654 $4,097 ====== ====== ====== ====== Net Income Per Limited Partnership Unit $ 0.26 $ 0.35 $ 0.79 $ 0.89 ====== ====== ====== ======
- ------------------------------------------- See NOTES TO CONDENSED FINANCIAL STATEMENTS 4 AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP =============================================== STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, (Unaudited; in thousands) 1998 1997 - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3,691 $ 4,138 Adjustments to reconcile net income to net cash provided by operating activities: Operating lease depreciation 0 273 Increase/(Decrease) in accounts payable and accrued liabilities (31) (442) Increase/(Decrease) in taxes payable 510 0 Decrease/(Increase) in prepaid expenses and other assets (39) (602) Gain on sale of equipment 0 (393) Provision for doubtful accounts 0 228 ------- ------- Net cash provided by operating activities 4,131 3,202 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Aircraft equipment purchase 0 (5,753) Proceeds from sale of equipment 0 1,182 (Increase) decrease in notes receivable 0 8 Rental receipts in excess of earned finance lease income 4,962 4,217 ------- ------- Net cash provided (used) by investing activities 4,962 (346) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Borrowings under lines of credit, net 1,452 896 Proceeds from issuance of long-term notes payable 0 9,000 Repayment of long-term notes payable (4,601) (4,083) Distributions paid to partners (5,933) (9,249) ------- ------- Net cash used by financing activities (9,082) (3,436) ------- ------- Increase (decrease) in cash 11 (580) Cash at beginning of period 1 580 ------- ------- Cash at end of period $ 12 $ 0 ======= ======= ADDITIONAL INFORMATION Interest paid $ 1,227 $ 1,282 ======= =======
- ------------------------------------------- See NOTES TO CONDENSED FINANCIAL STATEMENTS 5 AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP =============================================== NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES ------------------------------- BASIS OF PRESENTATION - The accompanying unaudited financial statements reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of the Partnership's management, necessary for a fair presentation of the financial position and results of operations for the presented periods. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. The December 31, 1997 balance sheet included herein is from the audited financial statements included in the Partnership's Annual Report and incorporated by reference in the Form 10-K for the year ended December 31, 1997. The statements should be read in conjunction with the Organization and Significant Accounting Policies and other notes to financial statements included in the Partnership's Annual Report for the year ended December 31, 1997. 2. NET INCOME PER LIMITED PARTNERSHIP UNIT --------------------------------------- Net Income Per Limited Partnership Unit is computed by dividing the net income allocated to the Limited Partners by the weighted average units outstanding (4,625,000). 3. INCOME TAXES ------------ In January 1998, the Partnership made an election to pay an annual combined federal and state tax at the Partnership level of 4.5% tax on its gross income beginning January 1, 1998. The election was made in order to avoid a limitation on the public trading of the Partnership's units. For the three and nine months ended September 30, 1998, the Partnership recorded provisions for income taxes of $160,000 and $510,000 respectively. 6 AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP =============================================== MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources - ------------------------------- The Partnership presently has four long-term debt facilities. At September 30, 1998, the following amounts were outstanding: $5.3 million on a 7.4% non-recourse note collateralized by one aircraft leased to FedEx; $7.4 million on a 9.85% non-recourse note collateralized by one aircraft on lease to Trans World Airlines; and a $3.2 million on a long-term variable rate revolving loan facility guaranteed by the Partnership and collateralized by one aircraft on lease to USAirways. As of September 30, 1998 no funds were drawn on a non-recourse long-term revolving declining variable rate loan facility collateralized by a second aircraft leased to USAirways. At September 30, 1998 approximately $5.6 million remains available under the two revolving loan facilities. Long-term borrowings at September 30, 1998 represented 13 % of the original cost of the aircraft presently owned by the partnership, including capital expenditures for upgrades. The terms of the Partnership Agreement permit debt to be at a level not exceeding 50% of such cost. Cash distributions paid in the first nine months of 1998 were $1.27 per limited partnership unit representing the regular fourth quarter 1997 cash distribution of $0.45 per unit and the regular first and second quarters 1998 cash distributions of $0.41 per unit each. In September 1998, the Partnership declared a third quarter 1998 cash distribution of $0.41 per unit totaling $1,915,000 payable on November 13, 1998 to unitholders of record on September 30, 1998. Since this distribution was in excess of earnings, Partnership equity declined to $59.0 million at September 30, 1998, and limited partner equity per unit declined to $12.64. The portion of the distribution in excess of net income constitutes a return of capital. The 1997 third quarter cash distribution was $0.45 per unit. Results of Operations - --------------------- Net income for the third quarter ended September 30, 1998 was $1,205,000, a decrease of $425,000 or 26% from 1997 third quarter earnings of $1,630,000. Third-quarter revenues were $2,079,000, compared with last year's third quarter revenues of $2,679,000. Net Income for the first nine months of 1998 was $3,691,000, compared with the nine-month period ended September 30, 1997 earnings of $4,138,000. The $447,000 decline in earnings coincides with the $510,000 tax provision recorded in 1998 pursuant to the newly imposed federal and state gross income tax. Revenues for the first nine months of 1998 were $6,371,000, versus revenues of $7,391,000 for the comparable period of 1997. The revenue reduction in the first nine-months of 1998 is primarily due to the scheduled decline in finance lease income as the balances due from the lessees declined. In addition, no operating lease rental income was earned in 1998, whereas $170,000 was earned in the first nine months of 1997. In September 1997, the partnership sold the aircraft that was subject to an operating lease. Expenses for the first nine months of 1998 were $2,170,000 or $1,083,000 lower than expenses for the first nine months of 1997 of $3,253,000. In the first nine months of 1997, the partnership incurred investor reporting expenses in connection with the solicitation of unitholder consents and depreciation expense related to the aircraft that was sold in September 1997. Expenses for the first nine months of 1997 also included a provision for doubtful accounts. No similar expenses were incurred in 1998. 7 Portfolio Matters - ----------------- As of September 30, 1998 the partnership's portfolio consisted entirely of Stage III aircraft; six are MD 82s and one is a 727-200 FH. The aircraft are leased to USAirways, TWA and FedEx. Year 2000 Readiness - ------------------- The general partner has reviewed the impact of the Year 2000 issue on the partnership. This issue results from computer programs using two, rather than four, digits to define a year, thus the programs do not recognize a year that begins with "20" rather than the familiar"19." If not corrected, many computer applications could fail or create erroneous results. Because the partnership's operations consist primarily of collecting periodic lease payments on a limited number of leases and making periodic debt payments and distributions to its partners, the general partner believes that the partnership's exposure to the Year 2000 problem is limited to the software programs and services it obtains from suppliers and vendors. The general partner has surveyed its vendors and has been advised that the programs either are Year 2000 compliant or will be so compliant prior to December 31, 1999. 8 PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits 27. Financial Data Schedule (b) Reports on Form 8-K. A Report on Form 8-K was filed on July 7, 1998, and reported information required by form 4, Changes in the Registrant's Certifying Accountants. 9 SIGNATURES ========== Pursuant to the requirements 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. AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP By: Airlease Management Services, Inc. General Partner November 2, 1998 By: /s/ DAVID B. GEBLER - ---------------- --------------------- Date David B. Gebler Chairman, Chief Executive Officer and President November 2, 1998 By: /s/ RICHARD C. WALTER - ---------------- --------------------- Date Richard C. Walter Chief Financial Officer 10 EX-27 2 FDS -- 09/30/98
5 1,000 9-MOS DEC-31-1998 SEP-30-1998 12 0 32,128 0 0 0 0 0 77,947 0 15,967 0 0 0 59,033 77,947 6,371 6,371 0 0 835 0 1,335 4,201 510 3,691 0 0 0 3,691 0.79 0.79
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