-----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, SBbEfN1teUVpRpD96T1jgeg5bniQMtHlgZEEwZ8AMzKsXoSiXarzdwofuIyEDKEM 5+8mEln+gRt+OtVdCDU/uA== 0000948524-98-000114.txt : 19981118 0000948524-98-000114.hdr.sgml : 19981118 ACCESSION NUMBER: 0000948524-98-000114 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLARIS AIRCRAFT INCOME FUND IV CENTRAL INDEX KEY: 0000818145 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943039169 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-15551 FILM NUMBER: 98751745 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 SEPTEMBER 30, 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 September 30, 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. 33-15551 ---------------------- POLARIS AIRCRAFT INCOME FUND IV, a California Limited Partnership State of Organization: California IRS Employer Identification No. 94-3039169 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 IV, A California Limited Partnership FORM 10-Q - For the Quarterly Period Ended September 30, 1998 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - September 30, 1998 and December 31, 1997...........................................3 b) Statements of Operations - Three and Nine Months Ended September 30, 1998 and 1997...........................4 c) Statements of Changes in Partners' Capital (Deficit) - Year Ended December 31, 1997 and Nine Months Ended September 30, 1998....................5 d) Statements of Cash Flows - Nine Months Ended September 30, 1998 and 1997...........................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......................................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 IV, A California Limited Partnership BALANCE SHEETS (Unaudited) September 30, December 31, 1998 1997 ---- ---- ASSETS: CASH AND CASH EQUIVALENTS $ 1,851,733 $ 34,023,841 OTHER RECEIVABLES 250 -- ------------ ------------ $ 1,851,983 $ 34,023,841 ============ ============ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT): PAYABLE TO AFFILIATES $ 206,891 $ 190,967 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 309,373 325,984 ------------ ------------ Total Liabilities 516,264 516,951 ------------ ------------ PARTNERS' CAPITAL (DEFICIT): General Partner (7,744,007) (4,825,310) Limited Partners, 499,954 and 499,964 units outstanding in 1998 and 1997, respectively 9,079,726 38,332,200 ------------ ------------ Total Partners' Capital 1,335,719 33,506,890 ------------ ------------ $ 1,851,983 $ 34,023,841 ============ ============ 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, ------------- ------------- 1998 1997 1998 1997 ---- ---- ---- ---- REVENUES: Rent from operating leases $ -- $ 94,889 $ -- $3,813,721 Interest 26,133 193,370 286,608 756,218 Gain on sale of aircraft -- 951,579 -- 951,579 Other -- 779,893 -- 807,388 ---------- ---------- ---------- ---------- Total Revenues 26,133 2,019,731 286,608 6,328,906 ---------- ---------- ---------- ---------- EXPENSES: Depreciation and amortization -- 3,013 -- 2,685,475 Management fees to general partner -- -- -- 106,632 Operating 76,722 56,807 199,265 113,659 Administration and other 57,421 84,269 249,548 277,562 ---------- ---------- ---------- ---------- Total Expenses 134,143 144,089 448,813 3,183,328 ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ (108,010) $1,875,642 $ (162,205) $3,145,578 ========== ========== ========== ========== NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 24,792 $ 885,108 $ 282,120 $1,397,721 ========== ========== ========== ========== NET INCOME (LOSS) ALLOCATED TOLIMITED PARTNERS $ (132,802) $ 990,534 $ (444,325) $1,747,857 ========== ========== ========== ========== NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ (0.27) $ 1.98 $ (0.89) $ 3.50 ========== ========== ========== ==========
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) (Unaudited) Year Ended December 31, 1997 and Nine Months Ended September 30, 1998 ------------------------------------ General Limited Partner Partners Total ------- -------- ----- Balance, December 31, 1996 $ (3,975,366) $ 52,044,872 $ 48,069,506 Net income 979,368 2,751,143 3,730,511 Cash distributions to partners (1,829,312) (16,463,815) (18,293,127) ------------ ------------ ------------ Balance, December 31, 1997 (4,825,310) 38,332,200 33,506,890 Net income (loss) 282,120 (444,325) (162,205) Capital redemptions (10 units) -- (800) (800) Cash distributions to partners (3,200,817) (28,807,349) (32,008,166) ------------ ------------ ------------ Balance, September 30, 1998 $ (7,744,007) $ 9,079,726 $ 1,335,719 ============ ============ ============ 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, ------------------------------- 1998 1997 ---- ---- OPERATING ACTIVITIES: Net income (loss) $ (162,205) $ 3,145,578 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization -- 2,685,475 Gain on sale of aircraft -- (951,579) Changes in operating assets and liabilities: Decrease (increase) in rent and other receivables (250) 3,219 Increase (decrease) in payable to affiliates 15,924 (2,949) Decrease in accounts payable and accrued liabilities (16,611) (88,016) Decrease in lessee security deposits -- (1,124,529) Decrease in maintenance reserves -- (5,408,614) ------------ ------------ Net cash used in operating activities (163,142) (1,741,415) ------------ ------------ INVESTING ACTIVITIES: Proceeds from sale of aircraft -- 4,940,755 Payments to Purchaser related to sale of aircraft -- (1,792,380) Principal payments on notes receivable -- 7,851,494 ------------ ------------ Net cash provided by investing activities -- 10,999,869 ------------ ------------ FINANCING ACTIVITIES: Capital redemptions (800) -- Cash distributions to partners (32,008,166) (15,182,240) ------------ ------------ Net cash used in financing activities (32,008,966) (15,182,240) ------------ ------------ CHANGES IN CASH AND CASH EQUIVALENTS (32,172,108) (5,923,786) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 34,023,841 23,989,285 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,851,733 $ 18,065,499 ============ ============ 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 (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 the Three Months Ended Payable at September 30, 1998 September 30, 1998 ------------------ ------------------ Out-of-Pocket Administrative and Selling Expense Reimbursement $109,186 $ 36,772 Out-of-Pocket Operating and Remarketing Expense Reimbursement 5,302 170,119 -------- -------- $114,488 $206,891 ======== ======== 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 As discussed below under "Liquidity and Cash Distributions," Polaris Investment Management Corporation (PIMC, or the General Partner), is in the process of winding up the business of Polaris Aircraft Income Fund IV (the Partnership). During 1997, the Partnership sold its remaining portfolio of 13 used commercial jet aircraft out of its original portfolio of 33 aircraft. Partnership Operations The Partnership recorded a net loss of $108,010, or $0.27 per limited partnership unit for the three months ended September 30, 1998, compared to net income of $1,875,642, or $1.98 per limited partnership unit, for the same period in 1997. The Partnership recorded a net loss of $162,205, or $0.89 per limited partnership unit for the nine months ended September 30, 1998, compared to net income of $3,145,578, or $3.50 per limited partnership unit, for the same period in 1997. The decline in operating results during the three and nine months ended September 30, 1998, as compared to the same periods in 1997, was primarily due to the sale of the Partnership's remaining aircraft in 1997. The Partnership recognized a gain on this sale of $951,579 during the third quarter of 1997. The variance in net income per limited partnership unit will differ from the variance of total net income from period to period due to the methods by which income or loss from operations and gain or loss on the sale of aircraft are allocated in accordance with the partnership agreement. The Partnership also recognized as other revenue in the third quarter of 1997, excess maintenance reserves aggregating $779,893 that were previously paid to the Partnership by a former lessee for the aircraft that was sold to Triton in 1997. Interest income decreased during the three months and nine months ended September 30, 1998, as compared to the same periods in 1997, primarily due to a decrease in the cash reserves in 1998. The decrease in the cash reserves resulted from cash distributions, as discussed in the liquidity section. Another factor contributing to the decrease in interest income was the absence of interest income on the deferred rent payments due from Continental that ended when the final payment was made in 1997. Operating expenses increased during the three and nine months ended September 30, 1998 as compared to the same periods in 1997, primarily due to an increase in legal expenses related to the sale of the remaining aircraft, partially offset by the elimination of expenses related to insuring and maintaining those aircraft. Administrative expenses decreased during the three and nine months ended September 30, 1998 as compared to the same periods in 1997, primarily due to a decrease in consulting expenses. Liquidity and Cash Distributions Liquidity - As previously discussed, the Partnership sold its remaining aircraft during 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 sufficient funds to satisfy anticipated contingencies and expenses in connection with winding up its business. The Partnership's cash reserves will be monitored and may be revised from time to time as further information becomes available in the future. 8 Cash Distributions - There were no cash distributions to limited partners during the three months ended September 30, 1998, compared to $8,664,376, or $17.33 per limited partnership unit, during the three months ended September 30, 1997. Cash distributions to limited partners during the nine months ended September 30, 1998 were $28,807,349, or $57.62 per limited partnership unit, compared to $13,664,016, or $27.33 per limited partnership unit for the nine months ended September 30, 1997. The increase in distributions during the nine months ended September 30, 1998, as compared to the same period in 1997, is due to the distribution of the proceeds received from the prepayment of a note due from Triton Aviation Services IV LLC on December 30, 1997. The Partnership is now in the process of winding up its business. With the exception of reserves maintained for anticipated expenses and costs of winding up, the Partnership distributed all of its available cash during 1997 and the first quarter of 1998. Consequently, the timing and amount of future cash distributions, if any, are not yet known and will depend upon whether the Partnership's reserves exceed its actual expenses and contingencies in winding up and on the time required to complete the winding up process. Impact of the Year 2000 Issue The inability of business processes to continue to function correctly after the beginning of the Year 2000 could have serious adverse effects on companies and entities throughout the world. As previously discussed, the Partnership is currently in the process of winding up its business and has no assets other than cash and cash equivalent securities held as reserves against the anticipated expenses of winding up and dissolution. Accordingly, the Partnership's exposure to the Year 2000 problem arises not in the context of its own operations, but rather in the context of the compliance or non-compliance by third-party vendors to the Partnership with their respective Year 2000 assessment and remediation obligations. As discussed in prior filings with the Securities and Exchange Commission, the General Partner has engaged GE Capital Aviation Services, Inc. ("GECAS") to provide certain management services to the Partnership. Both the General Partner and GECAS are wholly-owned subsidiaries (either direct or indirect) of General Electric Capital Corporation ("GECC"). All of the Partnership's operational functions are handled either by the General Partner and GECAS or by third parties (as discussed in the following paragraphs), and the Partnership has no information systems of its own. GECC and GECAS have undertaken a global effort to identify and mitigate Year 2000 issues in their information systems, products and services, facilities and suppliers as well as to assess the extent to which Year 2000 issues will impact their customers. Each business has a Year 2000 leader who oversees a multi-functional remediation project team responsible for applying a Six Sigma quality approach in four phases: (1) define/measure -- identify and inventory possible sources of Year 2000 issues; (2) analyze -- determine the nature and extent of Year 2000 issues and develop project plans to address those issues; (3) improve -- execute project plans and perform a majority of the testing; and (4) control -- complete testing, continue monitoring readiness and complete necessary contingency plans. The progress of this program is monitored at each business, and company-wide reviews with senior management are conducted monthly. GECC and GECAS management plan to have completed the first three phases of the program for a substantial majority of mission-critical systems by the end of 1998 and to have nearly all significant information systems, products and services, facilities and suppliers in the control phase of the program by mid-1999. Due to the limited nature of the Partnership's operations, the only third-party vendors to the Partnership are those providing the Partnership with services 9 such as accounting, auditing, banking and investor services. GECAS intends to apply the same standards in determining the Year 2000 capabilities of the Partnership's third-party vendors as GECAS will apply with respect to its outside vendors pursuant to its internal Year 2000 program. The scope of the global Year 2000 effort encompasses many thousands of applications and computer programs; products and services; facilities and facilities-related equipment; suppliers; and, customers. The Partnership, like all business operations, is also dependent on the Year 2000 readiness of infrastructure suppliers in areas such as utility, communications, transportation and other services. In this environment, there will likely be instances of failure that could cause disruption in business processes or that could affect vendors' ability to provide services without interruption. The likelihood and effects of failures in infrastructure systems, over which the Partnership has no control, cannot be estimated. However, aside from the impact of any such possible failures, the General Partner does not believe that occurrences of Year 2000 failures will have a material adverse effect on the financial position, results of operations or liquidity of the Partnership. To date, the Partnership has not incurred any Year 2000 expenditures nor does it expect to incur any material costs in the future. However, the activities involved in the Year 2000 effort necessarily involve estimates and projections of activities and resources that will be required in the future. These estimates and projections could change as work progresses. 10 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) 1997 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 periods ended March 31, 1998 and June 30, 1998, there are a number of 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. Ron Wallace v. Polaris Investment Management Corporation, et al. - On November 9, 1998, defendants, acting through their counsel, entered into a settlement agreement with plaintiffs and with the plaintiff in a related action, Accelerated High Yield Income Fund v. Polaris Investment Management Corporation, et al. The settlement is subject to final approval by the Court. The settlement agreement does not provide for any payments to be made to the Partnership. Plaintiff's counsel is seeking reimbursement from the Partnership of an as yet to be determined amount of fees and expenses. A settlement notice setting forth the terms of the settlement will be mailed to the last known address of each unitholder of the Partnership by November 20, 1998. On November 10, 1998, the Court preliminarily approved the settlement. A hearing to determine whether the settlement should be finally approved by the Court is scheduled for December 22, 1998. Other Proceedings - Item 10 in Part III of the Partnership's 1997 Form 10-K and Item 1 in Part II of the Partnership's Form 10-Q for the periods ended March 31, 1998 and June 30, 1998 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. 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 IV, A California Limited Partnership (Registrant) By: Polaris Investment Management Corporation, General Partner November 16, 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 9-MOS DEC-31-1998 SEP-30-1998 1851733 0 250 0 0 0 0 0 1851983 0 0 0 0 0 1335719 1851983 0 286608 0 0 448813 0 0 (162205) 0 (162205) 0 0 0 (162205) (0.89) 0
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