-----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, Oc0+sOEyPN/OaC0WCXWUo5IMAfE9Unxd9WRx6U6czEFd28Hvzq5GfTfKlVGVcsUJ YuYdtaI4JptNJY3ic3dL7A== 0000948524-98-000055.txt : 19980515 0000948524-98-000055.hdr.sgml : 19980515 ACCESSION NUMBER: 0000948524-98-000055 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLARIS AIRCRAFT INCOME FUND III CENTRAL INDEX KEY: 0000806031 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943023671 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-10122 FILM NUMBER: 98620179 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, 1998 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, 1998 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. 33-10122 ---------------------- POLARIS AIRCRAFT INCOME FUND III, A California Limited Partnership State of Organization: California IRS Employer Identification No. 94-3023671 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 III, A California Limited Partnership FORM 10-Q - For the Quarterly Period Ended March 31, 1998 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - March 31, 1998 and December 31, 1997..........................................3 b) Statements of Operations - Three Months Ended March 31, 1998 and 1997....................................4 c) Statements of Changes in Partners' Capital (Deficit) - Year Ended December 31, 1997 and Three Months Ended March 31, 1998......................5 d) Statements of Cash Flows - Three Months Ended March 31, 1998 and 1997..............................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 I. Financial Information ----------------------------- Item 1. Financial Statements POLARIS AIRCRAFT INCOME FUND III, A California Limited Partnership BALANCE SHEETS (Unaudited)
March 31, December 31, 1998 1997 ---- ---- ASSETS: CASH AND CASH EQUIVALENTS $ 13,924,259 $ 28,632,488 RENT AND OTHER RECEIVABLES 851,130 850,760 AIRCRAFT, net of accumulated depreciation of $54,630,671 in 1998 and $53,612,863 in 1997 27,553,906 28,571,714 ------------ ------------ $ 42,329,295 $ 58,054,962 ============ ============ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT): PAYABLE TO AFFILIATES $ 147,821 $ 123,242 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 127,546 80,211 DEFERRED INCOME 929,236 626,578 NOTES PAYABLE 10,286,989 11,080,004 ------------ ------------ Total Liabilities 11,491,592 11,910,035 ------------ ------------ PARTNERS' CAPITAL (DEFICIT): General Partner (4,180,776) (2,854,104) Limited Partners, 499,960 and 500,000 units outstanding in 1998 and 1997, respectively 35,018,479 48,999,031 ------------ ------------ Total Partners' Capital 30,837,703 46,144,927 ------------ ------------ $ 42,329,295 $ 58,054,962 ============ ============ The accompanying notes are an integral part of these statements
3 POLARIS AIRCRAFT INCOME FUND III, A California Limited Partnership STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ---------------------------- 1998 1997 ---- ---- REVENUES: Rent from operating leases $2,247,342 $3,906,924 Interest 297,746 248,686 Gain on sale of aircraft inventory 89,534 84,937 Other -- 21,099 ---------- ---------- Total Revenues 2,634,622 4,261,646 ---------- ---------- EXPENSES: Depreciation 1,017,808 3,073,473 Management fees to general partner 86,787 195,346 Interest 256,148 322,556 Operating 36,720 4,874 Administration and other 97,334 80,007 ---------- ---------- Total Expenses 1,494,797 3,676,256 ---------- ---------- NET INCOME $1,139,825 $ 585,390 ========== ========== NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 317,641 $ 318,323 ========== ========== NET INCOME ALLOCATED TO LIMITED PARTNERS $ 822,184 $ 267,067 ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 1.64 $ 0.53 ========== ========== The accompanying notes are an integral part of these statements
4 POLARIS AIRCRAFT INCOME FUND III, A California Limited Partnership STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited)
Year Ended December 31, 1997 and Three Months Ended March 31, 1998 --------------------------------- General Limited Partner Partners Total ------- -------- ----- Balance, December 31, 1996 $(1,670,662) $ 55,159,826 $ 53,489,164 Net income 49,891 4,939,205 4,989,096 Cash distributions to partners (1,233,333) (11,100,000) (12,333,333) ----------- ------------ ------------ Balance, December 31, 1997 (2,854,104) 48,999,031 46,144,927 Net income 317,641 822,184 1,139,825 Capital redemptions (40 units) -- (3,920) (3,920) Cash distributions to partners (1,644,313) (14,798,816) (16,443,129) ----------- ------------ ------------ Balance, March 31, 1998 $(4,180,776) $ 35,018,479 $ 30,837,703 =========== ============ ============ The accompanying notes are an integral part of these statements
5 POLARIS AIRCRAFT INCOME FUND III, A California Limited Partnership STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ---------------------------- 1998 1997 ---- ---- OPERATING ACTIVITIES: Net income $ 1,139,825 $ 585,390 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of aircraft inventory (89,534) (84,937) Depreciation 1,017,808 3,073,473 Changes in operating assets and liabilities: Increase in rent and other receivables (370) (618,731) Decrease in other assets -- 70,427 Increase in payable to affiliates 24,579 110,370 Increase (decrease) in accounts payable and accrued liabilities 47,335 (30,433) Increase (decrease) in deferred income 302,658 (388,902) ------------ ------------ Net cash provided by operating activities 2,442,301 2,716,657 ------------ ------------ INVESTING ACTIVITIES: Net proceeds from sale of aircraft inventory 89,534 84,937 ------------ ------------ Net cash provided by investing activities 89,534 84,937 ------------ ------------ FINANCING ACTIVITIES: Principal payments on notes payable (793,015) (23,939) Capital redemptions (3,920) -- Cash distributions to partners (16,443,129) (3,472,222) ------------ ------------ Net cash used in financing activities (17,240,064) (3,496,161) ------------ ------------ CHANGES IN CASH AND CASH EQUIVALENTS (14,708,229) (694,567) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,632,488 20,229,105 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,924,259 $ 19,534,538 ============ ============ The accompanying notes are an integral part of these statements
6 POLARIS AIRCRAFT INCOME FUND III, 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 III'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, 1997, 1996, and 1995 included in the Partnership's 1997 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, 1998 March 31, 1998 -------------- -------------- Aircraft Management Fees $ 75,000 $ 69,316 Out-of-Pocket Administrative Expense Reimbursement 67,216 68,859 Out-of-Pocket Operating and Remarketing Expense Reimbursement 14,535 9,646 ------------ ----------- $ 156,751 $ 147,821 ============ =========== 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. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations At March 31, 1998, Polaris Aircraft Income Fund III (the Partnership) owned a portfolio of 10 used McDonnell Douglas DC-9-30 aircraft leased to Trans World Airlines, Inc. (TWA) and certain inventoried aircraft parts out of its original portfolio of 38 aircraft. The Partnership transferred three McDonnell Douglas DC-9-10 aircraft and six Boeing 727-100 aircraft to aircraft inventory in 1992. The inventoried aircraft have been disassembled for sale of their component parts. Partnership Operations The Partnership reported net income of $1,139,825, or $1.64 per limited partnership unit, for the three months ended March 31, 1998 compared to net income of $585,390, or $0.53 per unit, for the same period in 1997. The increase in net income during the three months ended March 31, 1998, as compared to the same period in 1997, was primarily the result of decreased depreciation, partially offset by a decrease in rental revenues. The decrease in rental revenues, management fees and depreciation was due to the sale of aircraft to Triton in 1997. Operating expenses increased during the three months ended March 31, 1998 as compared to the same period in 1997, due to an increase in legal expenses related to the sale of the remaining aircraft. Administration and other expenses increased during the three months ended March 31, 1998 as compared to the same period in 1997, due to increases in printing and postage costs related to an additional distribution. The increase in the deferred income balance at March 31, 1998 is attributable to differences between the payments due and the rental income earned on the TWA leases for the 10 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, 1998 exceeded the rental income earned on the TWA leases, causing an increase in the deferred income balance. Liquidity and Cash Distributions Liquidity - The Partnership received all lease payments from its sole lessee, TWA, except for the March 1998 lease payment. On April 1, 1998, the Partnership received its $850,000 rental payment from TWA that was due on March 27, 1998. This amount was included in rent and other receivables on the balance sheet at March 31, 1998. In addition, payments totaling $89,534 have been received during the first quarter of 1998 from the sale of parts from the nine disassembled aircraft, as compared to payments of $84,937 during the same period in 1997. Polaris Investment Management Corporation, the general partner, has determined that the Partnership maintain cash reserves 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. 9 Cash Distributions - Cash distributions to limited partners during the three months ended March 31, 1998 and 1997 were $14,798,816, or $29.60 per limited partnership unit, and $3,125,000, or $6.25 per unit, respectively. The increase, as compared to 1997, is due to the distribution of the proceeds received from the prepayment of a note due from Triton Aviation Services III LLC on December 30, 1997. 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; the receipt of rental payments from TWA; and payments generated from the aircraft disassembly process. 10 Part II. Other Information Item 1. Legal Proceedings As discussed in Item 3 of Part I of Polaris Aircraft Income Fund III's (the Partnership) 1997 Annual Report to the Securities and Exchange Commission on Form 10-K (Form 10-K), there are a number of 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 1997 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 A Current Report on Form 8-K, dated December 30, 1997, reporting a prepayment in full of the Promissory Note from Triton Aviation Services III LLC, was filed on January 5, 1998. 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 III, A California Limited Partnership (Registrant) By: Polaris Investment Management Corporation, General Partner May 13, 1998 By: /S/Marc A. Meiches - ------------------------- ------------------ Marc 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-31-1998 MAR-31-1998 13924259 0 851130 0 0 0 82184577 54630671 42329295 0 0 0 0 0 30837703 42329295 0 2634622 0 0 1238649 0 256148 1139825 0 1139825 0 0 0 1139825 1.64 0
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