-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lOMhXcFJYjVOTWf0h8heaxAEEAFhDD/JY4MyprSUL5/M8mXn8Vphn7+em1xu7KXY 6fIjsSKxWEzZ548vu23MTw== 0000818145-94-000005.txt : 19941116 0000818145-94-000005.hdr.sgml : 19941116 ACCESSION NUMBER: 0000818145-94-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLARIS AIRCRAFT INCOME FUND IV CENTRAL INDEX KEY: 0000818145 STANDARD INDUSTRIAL CLASSIFICATION: 7359 IRS NUMBER: 943039169 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-15551 FILM NUMBER: 94559474 BUSINESS ADDRESS: STREET 1: 4 EMBARCADERO CENTER CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4153620333 MAIL ADDRESS: STREET 2: 4 EMBARCADERO CENTER CITY: SAN FRANCISCO STATE: CA ZIP: 94111 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 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. 33-15551 POLARIS AIRCRAFT INCOME FUND IV, A California Limited Partnership State of Organization: California IRS Employer Identification No. 94-3039169 201 Mission Street, 27th Floor, San Francisco, California 94105 Telephone - (415) 284-7400 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 16 pages. POLARIS AIRCRAFT INCOME FUND IV, A California Limited Partnership FORM 10-Q - For the Quarterly Period Ended September 30, 1994 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - September 30, 1994 and December 31, 1993 . . . . . . . . . . . . . . . . . . . . 3 b) Statements of Operations - Three Months and Nine Months Ended September 30, 1994 and 1993 . . . . . . 4 c) Statements of Changes in Partners' Capital (Deficit) - Year Ended December 31, 1993 and Nine Months Ended September 30, 1994 . . . . . . . . 5 d) Statements of Cash Flows - Nine Months Ended September 30, 1994 and 1993 . . . . . . . . . . . . 6 e) Notes to Financial Statements . . . . . . . . . . . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 11 Part II. Other Information Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 14 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 15 Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2 Part I. Financial Information Item 1. Financial Statements POLARIS AIRCRAFT INCOME FUND IV, A California Limited Partnership BALANCE SHEETS
September 30, December 31, 1994 1993 ---- ---- (Unaudited) ASSETS: CASH AND CASH EQUIVALENTS $ 19,000,751 $ 628,222 SHORT-TERM INVESTMENTS, at cost which approximates market value - 19,845,972 ----------------- ---------------- Total Cash and Cash Equivalents and Short-Term Investments 19,000,751 20,474,194 RENT AND OTHER RECEIVABLES 1,602,104 1,348,406 NOTES RECEIVABLE 6,400,519 1,522,301 AIRCRAFT at cost, net of accumulated depreciation of $45,283,459 in 1994 and $56,432,464 in 1993 73,108,814 92,256,548 OTHER ASSETS, net of accumulated amortization of $2,094,999 in 1994 and $2,069,479 in 1993 115,251 35,887 ----------------- ----------------- $ 100,227,439 $ 115,637,336 ================= ================= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT): PAYABLE TO AFFILIATES $ 1,117,177 $ 543,580 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 1,001,527 14,000 LESSEE SECURITY DEPOSITS 1,061,335 490,000 MAINTENANCE RESERVES 1,163,134 - ----------------- ----------------- Total Liabilities 4,343,173 1,047,580 ----------------- ----------------- PARTNERS' CAPITAL (DEFICIT): General Partner (3,496,937) (3,309,775) Limited Partners, 499,964 units issued and outstanding 99,381,203 117,899,531 ----------------- ----------------- Total Partners' Capital 95,884,266 114,589,756 ----------------- ----------------- $ 100,227,439 $ 115,637,336 ================= ================= The accompanying notes are an integral part of these statements.
3 POLARIS AIRCRAFT INCOME FUND IV, A California Limited Partnership STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 1994 1993 1994 1993 ---- ---- ---- ---- REVENUES: Rent from operating leases $ 2,919,948 $ 4,509,807 $ 9,079,340 $ 17,152,257 Interest 482,075 443,092 1,311,144 1,458,462 Net gain (loss) on sale of aircraft 245,937 - (6,036,625) (492,319) -------------- ------------- -------------- ------------- Total Revenues 3,647,960 4,952,899 4,353,859 18,118,400 -------------- ------------- -------------- ------------- EXPENSES: Depreciation and amortization 2,097,306 2,576,509 7,432,826 13,028,596 Management and advisory fees 145,997 225,490 453,967 857,613 Operating 1,440,085 26,950 3,170,992 487,358 Administration and other 57,605 66,043 196,858 187,535 -------------- ------------- -------------- ------------- Total Expenses 3,740,993 2,894,992 11,254,643 14,561,102 -------------- ------------- -------------- ------------- NET INCOME (LOSS) $ (93,033) $ 2,057,907 $ (6,900,784) $ 3,557,298 ============== ============= ============== ============= NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 311,516 $ 395,515 $ 993,309 $ 1,535,315 ============== ============= ============== ============= NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS $ (404,549) $ 1,662,392 $ (7,894,093) $ 2,021,983 ============== ============= ============== ============= NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ (0.81) $ 3.32 $ (15.79) $ 4.04 ============== ============= ============== ============= The accompanying notes are an integral part of these statements.
4 POLARIS AIRCRAFT INCOME FUND IV, A California Limited Partnership STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
Year Ended December 31, 1993 and Nine Months Ended September 30, 1994 (Unaudited) ------------------------------------------------ General Limited Partner Partners Total ------- -------- ----- Balance, December 31, 1992 $ (643,718) $ 156,836,664 $ 156,192,946 Net income 1,916,946 2,309,897 4,226,843 Cash distributions to partners (4,583,003) (41,247,030) (45,830,033) ------------------ ------------------- ------------------- Balance, December 31, 1993 (3,309,775) 117,899,531 114,589,756 Net income (loss) 993,309 (7,894,093) (6,900,784) Cash distributions to partners (1,180,471) (10,624,235) (11,804,706) ------------------ ------------------- ------------------- Balance, September 30, 1994 (Unaudited) $ (3,496,937) $ 99,381,203 $ 95,884,266 ================== =================== =================== The accompanying notes are an integral part of these statements.
5 POLARIS AIRCRAFT INCOME FUND IV, A California Limited Partnership STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ------------- 1994 1993 ---- ---- OPERATING ACTIVITIES: Net income (loss) $ (6,900,784) $ 3,557,298 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 7,432,826 13,028,596 Net loss on sale of aircraft 6,036,625 492,319 Changes in operating assets and liabilities: Increase in rent and other receivables (253,698) (889,982) Decrease (increase) in other assets (104,884) 38,365 Increase in payable to affiliates 573,597 42,384 Increase (decrease) in accounts payable and accrued liabilities 987,527 (18,000) Increase in lessee security deposits 571,335 - Increase in maintenance reserves 1,163,134 - Decrease in deferred income - (430,949) ------------------ ------------------ Net cash provided by operating activities 9,505,678 15,820,031 ------------------ ------------------ INVESTING ACTIVITIES: Increase in notes receivable (979,323) (1,164,800) Principal payments on notes receivable 1,133,971 99,673 Proceeds from sale of aircraft 670,937 27,500,000 ------------------ ------------------ Net cash provided by investing activities 825,585 26,434,873 ------------------ ------------------ FINANCING ACTIVITIES: Cash distributions to partners (11,804,706) (41,663,667) ------------------ ------------------ Net cash used in financing activities (11,804,706) (41,663,667) ------------------ ------------------ CHANGES IN CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS (1,473,443) 591,237 CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 20,474,194 20,900,830 ------------------ ------------------ CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 19,000,751 $ 21,492,067 ================== ================== The accompanying notes are an integral part of these statements.
6 POLARIS AIRCRAFT INCOME FUND IV, 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 IV'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. These statements should be read in conjunction with the financial statements and notes thereto for the years ended December 31, 1993, 1992, and 1991 included in the Partnership's 1993 Annual Report to the SEC on Form 10-K (Form 10-K). Cash and Cash Equivalents - This includes deposits at banks and investments in money market funds. 2. Lease to American Trans Air, Inc. (ATA) As discussed in the Form 10-K, the Partnership negotiated a seven-year lease with ATA for two Boeing 727-200 Advanced aircraft formerly on lease to USAir, Inc. The leases began in February and March 1993. ATA was not required to begin making cash rental payments until January 1994, although recognition of rental income will be amortized over the entire lease term. The leases are renewable for up to three one-year periods. ATA transferred to the Partnership two unencumbered Boeing 727-100 aircraft as part of the lease transaction. The Partnership has sold both of these aircraft as discussed in Note 4 and Note 10. Under the ATA lease, the Partnership agreed to incur certain maintenance costs estimated at approximately $817,000. In addition, the Partnership may be required to finance aircraft hushkits for use on the aircraft at an estimated aggregate cost of approximately $5.0 million, which will be partially recovered with interest through payments from ATA over the lease terms. The Partnership loaned $1,164,800 to ATA in 1993 to finance the purchase by ATA of two spare engines. This loan is reflected in notes receivable in the accompanying balance sheets. During the first nine months of 1994, the Partnership received all scheduled principal and interest payments due under the notes. The balances of the notes at September 30, 1994 and December 31, 1993 were $986,442 and $1,103,089, respectively. 3. Continental Airlines, Inc. (Continental) Lease Modification As discussed in the Form 10-K, the Continental leases for the Partnership's five McDonnell Douglas DC-9-30 aircraft and Five Boeing 727-200 aircraft were modified. The modified agreement specifies (i) extension of the leases for the five Boeing 727-200s to the earlier of April 1994 or 60,000 cycles, and for the five McDonnell Douglas DC-9-30 aircraft to June 1996; (ii) renegotiated rental rates averaging approximately 67% of the original lease rates; (iii) payment of ongoing rentals at the reduced rates beginning in October 1991; (iv) payment of deferred rentals with interest beginning in July 1992; and (v) payment by the Partnership of certain aircraft modification and refurbishment costs, not to exceed approximately $4.9 million, a portion of which will be recovered with interest through payments from Continental over the extended lease term. The Partnership's share of such costs will be capitalized and depreciated over the remaining lease terms. The Partnership's balance sheets reflect the net reimbursable costs incurred of $899,827 and $419,212 as of September 30, 1994 and December 31, 1993, respectively, as notes receivable. 7 4. Sale to Total Aerospace Services, Inc. (Total Aerospace) In February 1994, the Partnership sold one of the Boeing 727-100 aircraft that was transferred to the Partnership by ATA, as discussed in Note 2, to Total Aerospace for $425,000. The Partnership recorded a gain on sale of $425,000 in the first quarter of 1994. 5. Lease to GB Airways Limited (GB Airways) In February 1994, the Partnership leased two Boeing 737-200 Advanced aircraft, formerly on lease to Britannia Airways Limited (Britannia), to GB Airways. Lease payments for the interim lease term through March 1994 were at a variable rate based on usage. Thereafter and through March 1996, the lease rate is 58% of the original rate received from Britannia. The rate is then adjusted through the end of the lease in October 1996 to 67% of the original rate received from Britannia. GB Airways has the option to extend the lease for one year at the initial rate. The lease stipulates that the Partnership share in the cost of meeting certain Airworthiness Directives (ADs), not to exceed the present value of the remaining rent payable under the lease at the time the work is complete, which cannot be estimated at this time. The Partnership incurred legal costs related to the lease acquisition totaling $84,519. These costs, which were capitalized and reflected as other assets in the Partnership's September 30, 1994 balance sheet, are being amortized over the term of the lease. 6. Lease to TBG Airways Limited (TBG Airways) In February 1994, the Partnership leased two Boeing 737-200 Advanced aircraft, formerly on lease to Britannia, to TBG Airways. Lease payments for the interim lease term through April 1994 were at a variable rate based on usage. Thereafter and through the end of the lease in October 1998, the rate is increased annually from 55% to as much as 80% of the original rate received from Britannia. The lease stipulates that the Partnership share in the cost of certain ADs, not to exceed the present value of the remaining rent payable under the lease at the time the work is complete, which cannot be estimated at this time. TBG Airways has the option to terminate the lease early in April 1997 after paying a termination fee of $250,000. TBG Airways also has the option to purchase the aircraft at the end of the lease term for $8.0 million each. The Partnership incurred legal costs related to the lease acquisition totaling $56,252. These costs, which were capitalized and reflected as other assets in the Partnership's September 30, 1994 balance sheet, are being amortized over the term of the lease. 7. Sale to Continental The leases of five Boeing 727-200 aircraft to Continental expired on April 30, 1994. In May 1994, the Partnership sold these aircraft to Continental for an aggregate sale price of $5,032,865. The Partnership agreed to accept payment of the sale price in 29 monthly installments of $192,500, with interest at a rate of 9.5% per annum. The Partnership recorded a note receivable for the sale price and recognized a loss on sale of $6,707,562 in the second quarter of 1994. During the second and third quarters of 1994, the Partnership received all scheduled payments due under the note. The note receivable balance at September 30, 1994 was $4,187,235. 8 8. Lease to Viscount Air Services, Inc. (Viscount) The Partnership leased two Boeing 737-200 aircraft, formerly on lease to Britannia, to Viscount for five years beginning in July 1994 and September 1994. The lease rates are the same as the prior rates received from Britannia during the lease extension period as discussed in the Form 10-K. Prior to the delivery of the aircraft to Viscount, the Partnership performed certain maintenance and modification work on the aircraft estimated to aggregate approximately $2.53 million, which is included in operating expense in the nine months ended September 30, 1994 statement of operations. In addition, the Partnership may be required to finance certain aircraft hushkits at an estimated aggregate cost of $3.0 million to $4.0 million, which will be recovered with interest through payments from Viscount over an extended lease term. 9. Viscount Restructuring Rent Deferral - To assist Viscount with the funding of costs associated with Federal Aviation Regulation compliance relating to the Partnership's aircraft, the Partnership has entered into an agreement with Viscount to defer certain rents due the Partnership for the first six months on the leases of two aircraft. The deferred rents, which will aggregate $600,000, will be repaid by Viscount with interest at a rate of 6% per annum beginning in February 1995, over the remaining terms of the leases. Maintenance Advance - The Partnership has also agreed to extend a line of credit to Viscount for a total of $387,000 to be used primarily for maintenance expenses relating to the Partnership's aircraft. Payments of interest only at variable rates in arrears are being paid by Viscount beginning in August 1994 through December 1994. Beginning in January 1995, level payments to amortize the advance over a 30-month period will be due in arrears, together with interest at a rate of 4% per annum over the 18-month U.S. Treasury Rate on December 29, 1994. In accordance with the agreement, the Partnership advanced Viscount $327,015 during the third quarter of 1994. Option - The Partnership has the option to acquire approximately 1.86% of the issued and outstanding shares of Viscount stock as of July 26, 1994 for an option price of approximately $279,000. The option may be exercised at any time during the option period, which expires on July 20, 1999. 10. Sale to Sunrise Partners, Inc. (Sunrise Partners) In August 1994, the Partnership sold one of the Boeing 727-100 aircraft that was transferred to the Partnership by ATA, as discussed in Note 2, to Sunrise Partners for $250,000. The Partnership paid excise tax on the transfer of ownership of the aircraft in the amount of $4,062 and recorded a net gain on sale of $245,938 in the third quarter of 1994. 9 11. 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 September 30, 1994 September 30, 1994 ------------------ ------------------ Aircraft Management Fees $ 137,022 $ 78,349 Out-of-Pocket Administrative Expense Reimbursement 58,261 189,743 Out-of-Pocket Maintenance and Remarketing Expense Reimbursement 48,253 849,085 ------------- ------------- $ 243,536 $1,117,177 ============= =============
12. Subsequent Event Viscount Maintenance Advance - In accordance with the Viscount restructuring agreement as discussed in Note 9, the Partnership advanced $59,985, the balance of the line of credit, to Viscount in October 1994. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Polaris Aircraft Income Fund IV (the Partnership) owns a portfolio of 13 used commercial jet aircraft out of its original portfolio of 33 aircraft. The portfolio includes five DC-9-30 aircraft leased to Continental Airlines, Inc. (Continental), two Boeing 727-200 Advanced aircraft leased to American Trans Air, Inc. (ATA), two Boeing 737-200 Advanced aircraft formerly on lease to Britannia Airways Limited (Britannia) that were leased to GB Airways Limited (GB Airways) in February 1994, two Boeing 737-200 Advanced aircraft formerly on lease to Britannia, that were leased to TBG Airways Limited (TBG Airways) in February 1994, two Boeing 737-200 aircraft formerly on lease to Britannia, that were leased to Viscount Air Services, Inc. (Viscount) beginning in July 1994 and September 1994 as discussed below. Out of an original portfolio of 33 aircraft, one Boeing 727-100 Freighter formerly leased to Emery Aircraft Leasing Corporation (Emery) was declared a casualty loss due to an accident in 1991, fourteen Boeing 727-100 Freighters were sold to Emery in 1993, and five Boeing 727-200 aircraft were sold to Continental in May 1994. In 1993, ATA transferred to the Partnership two Boeing 727-100 aircraft as part of the ATA lease transaction. One of these Boeing 727-100 aircraft was sold to Total Aerospace Services, Inc. (Total Aerospace) in February 1994 and the second Boeing 727-100 aircraft was sold to Sunrise Partners, Inc. (Sunrise Partners) in August 1994 as discussed below. Remarketing Update Lease to Viscount - As discussed in the Partnership's Quarterly Report to the Securities and Exchange Commission on Form 10-Q (Form 10-Q) for the quarterly period ended June 30, 1994, the Partnership has leased two Boeing 737-200 aircraft, formerly on lease to Britannia, to Viscount for five years beginning in July 1994 and September 1994. Sale to Sunrise Partners - In August 1994, the Partnership sold one of the Boeing 727-100 aircraft that was transferred to the Partnership by ATA, as discussed in the Partnership's 1993 Annual Report to the Securities and Exchange Commission on Form 10-K (Form 10-K), to Sunrise Partners for $250,000. The Partnership paid excise taxes on the transfer of ownership of the aircraft in the amount of $4,062 and recorded a net gain on sale of $245,938 in the third quarter of 1994. Viscount Restructuring As discussed in the June 30, 1994 Form 10-Q, the Partnership agreed to extend a line of credit to Viscount for a total of $387,000 to be used primarily for maintenance expenses relating to the Partnership's aircraft. In accordance with the agreement, the Partnership advanced Viscount $327,015 during the third quarter of 1994. The Partnership advanced $59,985, the balance of the line of credit, to Viscount in October 1994. Partnership Operations The Partnership recorded a net loss of $93,033, or $0.81 per limited partnership unit, for the three months ended September 30, 1994, compared to net income of $2,057,907, or $3.32 per unit, for the same period in 1993. The Partnership recorded a net loss of $6,900,784, or $15.79 per limited partnership unit, for the nine months ended September 30, 1994, compared to net income of $3,557,298, or $4.04 per unit, for the same period in 1993. The net loss for the nine months ended September 30, 1994 was primarily attributable to the loss of $6,707,562 recorded in the second quarter of 1994 on the sale of five Boeing 727-200 aircraft to Continental as discussed in the June 30, 1994 Form 10-Q. Partially offsetting the loss on sale was a gain of $425,000 on the sale of one Boeing 727-100 aircraft to Total Aerospace in the first quarter of 1994 and a gain of $245,938 on the sale of one Boeing 727-100 aircraft to Sunrise Partners in the third quarter of 1994, compared to a net loss of $492,319 on fourteen Boeing 727-100 aircraft sold to Emery during the first two quarters of 1993. 11 The decline in operating results for both the three- and nine-month periods ended September 30, 1994 as compared with the same periods in 1993 was further impacted by a decrease in rental revenues during 1994. The Emery aircraft were sold at the termination of the extended leases in January and April 1993, and no further rentals were received. Additionally, the six aircraft formerly on lease to Britannia beginning in 1988 were returned to the Partnership on various dates in October, November and December 1993. Four of the aircraft were re-leased in February 1994 and two of the aircraft were re-leased in July and September 1994. Lastly, the leases of five Boeing 727-200 aircraft to Continental expired in April 1994 and the aircraft were subsequently sold to Continental in May 1994. Further impacting the decline in operating results in 1994 was an increase in operating expenses during both the three- and nine-month periods ended September 30, 1994 as compared to the same periods in 1993. This increase was the result of maintenance and remarketing costs necessary to remarket the Boeing 737-200 aircraft and Boeing 737-200 Advanced aircraft, formerly on lease to Britannia, to GB Airways, TBG Airways and Viscount. Partially offsetting the decrease in total revenues and the increase in operating expense in 1994, depreciation expense was significantly lower for the nine months ended September 30, 1994 as compared to the same period in 1993. The nine months ended September 30, 1993 include approximately $3.5 million of increased depreciation expense as a result of adjustments to the aircraft carrying values of the Emery aircraft. Consequently, depreciation expense for the nine months ended September 30, 1994 does not include depreciation expense for the Emery aircraft sold during 1993 and includes only five months of depreciation expense for the five Boeing 727-200 aircraft sold to Continental in May 1994. Liquidity and Cash Distributions Liquidity - The Partnership has received all lease payments due from current lessees. However, to assist Viscount with the funding of costs associated with Federal Aviation Regulation compliance relating to the Partnership's aircraft, the Partnership has negotiated an agreement with Viscount under which it agreed to defer certain rents due the Partnership on two aircraft. These deferred rents will be repaid by Viscount with interest over the remaining terms of the leases. The agreement with Viscount also stipulates that the Partnership will advance Viscount $387,000, primarily for maintenance expenses incurred by Viscount relating to the Partnership's aircraft. In accordance with the agreement, the Partnership advanced Viscount $387,000 in four installments from July 1994 through October 1994. As described in Item 7 of the Form 10-K, the Continental leases provide for payment by the Partnership of the costs of certain maintenance work, AD compliance, aircraft modification and refurbishment costs, which are not to exceed approximately $4.9 million, a portion of which will be recovered with interest through payments from Continental over the lease terms. In accordance with the Continental leases, the Partnership financed an additional $489,231 for new image modifications during the third quarter of 1994. The Partnership's balance sheets reflect as notes receivable such reimbursable costs financed through September 30, 1994 and December 31, 1993. The Partnership's cash reserves are being retained to finance a portion of the cost that may be incurred under the leases with Continental and ATA as discussed in the Form 10-K and obligations under the Viscount restructuring agreement as previously discussed. 12 Cash Distributions - Cash distributions to limited partners during the three months ended September 30, 1994 and 1993 were $3,124,775, or $6.25 per limited partnership unit and $26,248,110, or $52.50 per unit, respectively. Cash distributions to limited partners during the nine months ended September 30, 1994 and 1993 were $10,624,235, or $21.25 per limited partnership unit, and $37,497,300, or $75.00 per unit, respectively. The timing and amount of future cash distributions will depend on the Partnership's future cash requirements, the receipt of payments from Continental for the sale of the five Boeing 727- 200 aircraft, the receipt of rental payments from Continental, ATA, GB Airways, TBG Airways and Viscount, and the receipt of deferred rental payments and financing payments from Viscount. 13 Part II. Other Information Item 1. Legal Proceedings As discussed in Item 3 of Part I of Polaris Aircraft Income Fund IV's (the Partnership) 1993 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 Reports to the SEC on Form 10-Q for the quarterly periods ended March 31, 1994 and June 30, 1994, respectively, there are a number of pending legal actions or proceedings to which the Partnership is a party or to which any of its properties are subject. 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. Continental Airlines, Inc. (Continental) - The Partnership continues to negotiate with Continental regarding administrative claims in Continental's bankruptcy proceeding. Vern A. Kepford, et al. v. Prudential Securities, et al. - On July 14, 1994, plaintiffs filed their Second Amended Original Petition which added plaintiffs. On July 18, 1994, plaintiffs filed their response and opposition to defendants' motion for partial summary judgment and also moved for a continuance on the motion for partial summary judgment. Defendants objections and responses to Plaintiffs' First Request for Production were filed on July 29, 1994. On August 11, 1994, after plaintiffs again amended their petition by adding numerous plaintiffs, the defendants withdrew their summary judgment motion and motion to stay discovery, without prejudice to refiling these motions at a later date. Reuben Riskind, et al. v. Prudential Securities Inc., et al. - On August 31, 1994, plaintiffs filed their Fifth Amended Original Petition adding additional plaintiffs. On that same day, plaintiffs also filed their Second Plea in Intervention adding nearly 2,000 plaintiffs. On September 7, 1994, the court determined to sever from the primary lawsuit four plaintiffs and set the action for trial on November 7, 1994. On September 29, 1994, defendants removed the severed action to the United States District Court, Western District of Texas, Del Rio Division. On October 27, 1994, the action was remanded back to state court. On October 4, 1994, plaintiffs filed their Sixth Amended Petition adding as defendants: the Partnership, Polaris Aircraft Income Fund II, Polaris Aircraft Income Fund III, Polaris Aircraft Income Fund V, Polaris Aircraft Income Fund VI, Polaris Holding Company, Polaris Aircraft Leasing Corporation, Polaris Securities Corporation, General Electric Capital Corporation, General Electric Financial Services, Inc., and General Electric Company. Other Proceedings - Item 10 of Part III of the Partnership's 1993 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. Except as described below, there have been no material developments with respect to any of the other actions described therein during the period covered by this report. Weisl, et al., v. Polaris Holding Company, et al. - On April 19, 1994, the Supreme Court of the State of New York, County of New York, granted the defendants' motion to dismiss the complaint on the grounds that the statute of limitations barred almost all of the claims in the action. On July 20, 1994, the court entered an order dismissing almost all of the claims in the complaint and amended complaint. Certain claims, however, remain pending. Plaintiffs filed a notice of appeal on September 2, 1994. 14 Novak, et al. v. Polaris Holding Company, et al. - On August 11, 1994, the court denied in part and granted in part defendants' motions to dismiss the purported derivative complaint. Specifically, the court denied the motions as to the claims for breach of fiduciary duty, but dismissed plaintiffs' claim for constructive fraud with leave to plaintiffs to replead. On October 7, 1994, defendants filed a notice of appeal. Harner, et al. v. Prudential Bache Securities - On September 8, 1994, the Sixth Circuit affirmed the lower court's decision dismissing the action. Item 6. Exhibits and Reports on Form 8-K a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) 27. Financial Data Schedules 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. 15 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 IV, A California Limited Partnership (Registrant) By: Polaris Investment Management Corporation, General Partner November 10, 1994 By: /S/James F. Walsh ----------------- ---------------------- James F. Walsh Chief Financial Officer (principal financial officer and principal accounting officer of Polaris Investment Management Corporation, General Partner of the Registrant)
16 EX-27 2
5 DEC-31-1994 SEP-30-1994 9-MOS 19000751 0 8002623 0 0 0 118392273 45283459 100227439 0 0 0 0 0 95884266 100227439 0 4353859 0 0 11254643 0 0 (6900784) 0 (6900784) 0 0 0 (6900784) (15.79) 0
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