-----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, D10zprVGRHc2sB7xKyuZ5WaeZaJJXD9qF+iXKxwb2uvJtoO/VturC2ohwsGRLniA Sc8y95dP3R0IlSNgBzL0iA== 0000857087-96-000001.txt : 19960710 0000857087-96-000001.hdr.sgml : 19960710 ACCESSION NUMBER: 0000857087-96-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLARIS AIRCRAFT INCOME FUND VI CENTRAL INDEX KEY: 0000857087 STANDARD INDUSTRIAL CLASSIFICATION: 7359 IRS NUMBER: 943102632 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-31810 FILM NUMBER: 96560046 BUSINESS ADDRESS: STREET 1: 201 MISSION ST 27TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4152847400 MAIL ADDRESS: STREET 1: 201 MISSION STREET 27TH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94105 10-Q 1 03/31/96 10Q 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, 1996 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. 33-31810 ___________________ POLARIS AIRCRAFT INCOME FUND VI, A California Limited Partnership State of Organization: California IRS Employer Identification No. 94-3102632 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 13 pages. POLARIS AIRCRAFT INCOME FUND VI, A California Limited Partnership FORM 10-Q - For the Quarterly Period Ended March 31, 1996 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - March 31, 1996 and December 31, 1995.............................................3 b) Statements of Income - Three Months Ended March 31, 1996 and 1995.......................................4 c) Statements of Changes in Partners' Capital - Year Ended December 31, 1995 and Three Months Ended March 31, 1996.............................5 d) Statements of Cash Flows - Three Months Ended March 31, 1996 and 1995.................................6 e) Notes to Financial Statements.................................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............10 Part II. Other Information Item 1. Legal Proceedings.........................................11 Item 6. Exhibits and Reports on Form 8-K..........................12 Signature..........................................................13 2 Part 1. Financial Information Item 1. Financial Statements POLARIS AIRCRAFT INCOME FUND VI, A California Limited Partnership BALANCE SHEETS (Unaudited) March 31, December 31, 1996 1995 ---- ---- ASSETS: CASH AND CASH EQUIVALENTS $ 3,369,987 $3,297,782 RENT AND INTEREST RECEIVABLE 436,668 467,025 AIRCRAFT, net of accumulated depreciation of $13,828,787 in 1996 and $13,390,080 in 1995 15,610,413 16,049,120 ----------- ---------- $19,417,068 $19,813,927 =========== =========== LIABILITIES AND PARTNERS' CAPITAL: PAYABLE TO AFFILIATES $ 26,012 $ 26,362 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 12,775 34,797 SECURITY DEPOSITS 94,000 94,000 ----------- ---------- Total Liabilities 132,787 155,159 ----------- ---------- PARTNERS' CAPITAL: General Partner 5,656 5,656 Limited Partners, 69,418 units issued and outstanding 19,278,625 19,653,112 ----------- ---------- Total Partners' Capital 19,284,281 19,658,768 ----------- ---------- $19,417,068 $19,813,927 =========== =========== The accompanying notes are an integral part of these statements. 3 POLARIS AIRCRAFT INCOME FUND VI, A California Limited Partnership STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, ---------------------------- 1996 1995 ---- ---- REVENUES: Rent from operating leases $ 434,643 $ 795,243 Interest 46,603 48,725 Gain on sale of aircraft 52,640 46,716 --------- --------- Total Revenues 533,886 890,684 --------- --------- EXPENSES: Depreciation and amortization 438,707 474,319 Administration and other 12,969 18,989 --------- --------- Total Expenses 451,676 493,308 --------- --------- NET INCOME $ 82,210 $ 397,376 ========= ========= NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 22,835 $ 27,402 ========= ========= NET INCOME ALLOCATED TO LIMITED PARTNERS $ 59,375 $ 369,974 ========= ========= NET INCOME PER LIMITED PARTNERSHIP UNIT $ 0.86 $ 5.33 ========= ========= The accompanying notes are an integral part of these statements. 4 POLARIS AIRCRAFT INCOME FUND VI, A California Limited Partnership STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (Unaudited) Year Ended December 31, 1995 and Three Months Ended March 31, 1996 --------------------------------- General Limited Partner Partners Total ------- -------- ----- Balance, December 31, 1994 $ 5,656 $23,280,997 $23,286,653 Net income (loss) 105,040 (1,632,117) (1,527,077) Cash distributions to partners (105,040) (1,995,768) (2,100,808) -------- ----------- ---------- Balance, December 31, 1995 5,656 19,653,112 19,658,768 Net income 22,835 59,375 82,210 Cash distributions to partners (22,835) (433,862) (456,697) -------- ----------- ---------- Balance, March 31, 1996 $ 5,656 $19,278,625 $19,284,281 ======== =========== =========== The accompanying notes are an integral part of these statements. 5 POLARIS AIRCRAFT INCOME FUND VI, A California Limited Partnership STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, ---------------------------- 1996 1995 ---- ---- OPERATING ACTIVITIES: Net income $ 82,210 $ 397,376 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 438,707 474,319 Gain on sale of aircraft (52,640) (46,716) Changes in operating assets and liabilities: Decrease in rent and interest receivable 30,357 30,263 Decrease in payable to affiliates (350) (25,594) Increase (decrease) in accounts payable and accrued liabilities (22,022) 3,240 ---------- ---------- Net cash provided by operating activities 476,262 832,888 ---------- ---------- INVESTING ACTIVITIES: Principal payments on finance sale of aircraft 52,640 46,716 ---------- ---------- Net cash provided by investing activities 52,640 46,716 ---------- ---------- FINANCING ACTIVITIES: Cash distributions to partners (456,697) (548,037) ---------- ---------- Net cash used in financing activities (456,697) (548,037) ---------- ---------- CHANGES IN CASH AND CASH EQUIVALENTS 72,205 331,567 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,297,782 2,695,546 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,369,987 $3,027,113 ========== ========== The accompanying notes are an integral part of these statements. 6 POLARIS AIRCRAFT INCOME FUND VI, 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 VI'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, 1995, 1994 and 1993, included in the Partnership's 1995 Annual Report to the SEC on Form 10-K (Form 10-K). Aircraft and Depreciation - The aircraft are recorded at cost, which includes acquisition costs. Depreciation to an estimated residual value is computed using the straight-line method over the estimated economic life of the aircraft which was originally estimated to be 30 years from the date of manufacture. Depreciation in the year of acquisition was calculated based upon the number of days that the aircraft were in service. The Partnership periodically reviews the estimated realizability of the residual values at the projected end of each aircraft's economic life based on estimated residual values obtained from independent parties which provide current and future estimated aircraft values by aircraft type. For any downward adjustment in estimated residual value or decrease in the projected remaining economic life, the depreciation expense over the projected remaining economic life of the aircraft is increased. If the projected net cash flow for each aircraft (projected rental revenue, net of management fees, less projected maintenance costs, if any, plus the estimated residual value) is less than the carrying value of the aircraft, an impairment loss is recognized. Pursuant to Statement of Financial Accounting Standards (SFAS) No. 121, as discussed below, measurement of an impairment loss will be based on the "fair value" of the asset as defined in the statement. Capitalized Costs - Aircraft modification and maintenance costs which are determined to increase the value or extend the useful life of the aircraft are capitalized and amortized using the straight-line method over the estimated useful life of the improvement. These costs are also subject to periodic evaluation as discussed above. Financial Accounting Pronouncements - SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires the Partnership to disclose the fair value of financial instruments. Cash and cash equivalents is stated at cost, which approximates fair value. As discussed in Note 3, the carrying value of the Partnership's note receivable from Empresa de Transporte Aereo del Peru S.A. (Aeroperu) is zero due to a recorded allowance for credit losses equal to the balance of the note. As of March 31, 1996, the aggregate fair value of the Aeroperu notes receivable was estimated to be approximately $65,000. 7 The Partnership adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of January 1, 1996. This statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Partnership estimates that this pronouncement will not have a material impact on the Partnership's financial position or results of operation unless events or circumstances change that would cause the projected net cash flows to be adjusted. No impairment loss was recognized by the Partnership during the first quarter of 1996. 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 one Boeing 727-200 Advanced aircraft. The lease began in March 1993 and is renewable for up to three one-year periods. ATA was not required to begin making cash rental payments until February 1994, although rental revenue is to be recognized over the entire lease term. ATA transferred to the Partnership one unencumbered Boeing 727-100 aircraft as part of the lease transaction. The Partnership sold this aircraft as discussed in Note 3. Under the ATA lease, the Partnership may be required to finance an aircraft hushkit at an estimated cost of approximately $2.6 million, which would be partially recovered with interest through payments from ATA over an extended lease term. 3. Sale to Aeroperu In August 1993, the Partnership negotiated a sale to Aeroperu for the Boeing 727-100 aircraft that was transferred to the Partnership under the ATA lease (Note 2). The Partnership agreed to accept payment of the sales price of approximately $578,000 in 36 monthly installments of $19,000, with interest at a rate of 12% per annum. The Partnership recorded a note receivable and an allowance for credit losses equal to the discounted sale price. Gain on sale of aircraft will be recognized as payments are received. The remaining balance of the security deposit posted by Aeroperu will be applied to the last installment due in August 1996, at which time title to the aircraft will transfer to Aeroperu. During the three months ended March 31, 1996, the Partnership received principal and interest payments from Aeroperu totaling $57,000, of which $52,640 was recorded as gain on sale in the statement of operations for the three months ended March 31, 1996. The note receivable and corresponding allowance for credit losses are reduced by the principal portion of payments received. As of March 31, 1996, Aeroperu had not paid to the Partnership the monthly payments due for February and March 1996 (Note 5). The balances of the note receivable and corresponding allowance for credit losses were $110,115 and $162,755 as of March 31, 1996 and December 31, 1995, respectively. 4. 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, 1996 March 31, 1996 -------------- -------------- Out-of-Pocket Administrative and Operating Expense Reimbursement $ 35,341 $ 26,012 8 Management fees payable to the general partner are subordinated each year to receipt by unit holders of distributions equaling a 10% per annum, non-compounded return on adjusted capital contributions, as defined in the Partnership Agreement. Based on the subordination provisions, no management fee expense was recognized or paid during the quarter ended March 31, 1996. 5. Subsequent Event Payment from Aeroperu - As discussed in Note 3, at March 31, 1996 Aeroperu had not paid to the Partnership two of the monthly installments due in the first quarter of 1996. Aeroperu has since paid one of the installments past due as of March 31, 1996. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Polaris Aircraft Income Fund VI (the Partnership) owns one Boeing 737-200 Advanced aircraft leased to British Airways Plc (British Airways) and one Boeing 727-200 Advanced aircraft leased to American Trans Air, Inc. (ATA). In addition, the Partnership retains title to one Boeing 727-100 aircraft that ATA transferred to the Partnership as part of the ATA lease transaction in April 1993, subject to a conditional sale agreement to Empresa de Transporte Aereo del Peru S.A. (Aeroperu). The sale was financed by the Partnership and title will transfer to Aeroperu in August 1996 if Aeroperu performs its payment obligations. Partnership Operations The Partnership recorded net income of $82,210, or $0.86 per limited partnership unit, for the three months ended March 31, 1996, compared to net income of $397,376, or $5.33 per unit, for the same period in 1995. Current year operating results reflect substantially lower rental revenues as compared to the same period in 1995. As discussed in the Partnership's 1995 Annual Report to the Securities and Exchange Commission on Form 10-K (Form 10-K), the Partnership negotiated a lease extension with British Airways for three years from April 1995 until March 1998 at the current fair market rental rate, which is approximately 40% of the prior rate. The Partnership recognized a reduction in rental revenue beginning in the second quarter of 1995 which negatively impacted the Partnership's operating results, as well as its liquidity, as discussed below. Liquidity and Cash Distributions Liquidity -The Partnership continues to receive all lease payments on a current basis, with the exception of payments due from Aeroperu, which have not been made on a timely basis. The Partnership's cash reserves have been negatively impacted by the reduction in rental payments received from British Airways upon extension of the lease in April 1995 as discussed above. The ATA lease specifies that the Partnership may be required to finance an aircraft hushkit at an estimated cost of approximately $2.6 million, which would be partially recovered with interest through payments from ATA over an extended lease term. The Partnership's cash reserves are being retained to finance a portion of the cost that may be incurred under the lease with ATA and to cover other potential cash requirements. Cash Distributions - Cash distributions to limited partners during the three months ended March 31, 1996 and 1995 were $433,862, or $6.25 per limited partnership unit and $520,635 or $7.50 per unit, respectively. The timing and amount of future cash distributions will depend upon the Partnership's future cash requirements, the receipt of rental payments from British Airways and ATA, and the receipt of aircraft sale proceeds from Aeroperu. 10 Part II. Other Information Item 1. Legal Proceedings As discussed in Item 3 of Part I of Polaris Aircraft Income Fund VI's (the Partnership) 1995 Annual Report to the Securities and Exchange Commission (SEC) 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 1995 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, but the following new proceedings have been commenced. In or around December 1994, a complaint entitled John J. Jones, Jr. v. Prudential Securities Incorporated et al., was filed in the Civil District Court for the Parish of Orleans, State of Louisiana. The complaint named as defendants Prudential Securities, Incorporated and Stephen Derby Gisclair. On or about March 29, 1996, plaintiffs filed a First Supplemental and Amending Petition adding as additional defendants General Electric Company and General Electric Capital Corporation. Plaintiff alleges claims of tort, breach of fiduciary duty in tort, contract and quasi-contract, violation of sections of the Louisiana Blue Sky Law and violation of the Louisiana Civil Code concerning the inducement and solicitation of purchases arising out of the public offering of Polaris Aircraft Income Fund III. Plaintiff seeks compensatory damages, attorneys' fees, interest, costs and general relief. The Partnership is not named as a defendant in this action. On or around February 16, 1996, a complaint entitled Henry Arwe, et al. v. General Electric Company, et al., was filed in the Civil District Court for the Parish of Orleans, State of Louisiana. The complaint named as defendants General Electric Company and General Electric Capital Corporation. Plaintiffs allege claims of tort, breach of fiduciary duty in tort, contract and quasi-contract, violation of sections of the Louisiana Blue Sky Law and violation of the Louisiana Civil Code concerning the inducement and solicitation of purchases arising out of the public offering of Polaris Aircraft Income Funds III and IV. Plaintiffs seek compensatory damages, attorneys' fees, interest, costs and general relief. The Partnership is not named as a defendant in this action. On or about April 9, 1996, a summons and First Amended Complaint entitled Sara J. Bishop, et al. v. Kidder Peabody & Co., et al. was filed in the Superior Court of the State of California, County of Sacramento, by over one hundred individual plaintiffs who purchased limited partnership units in Polaris Aircraft Income Funds III, IV, V and VI and other limited partnerships sold by Kidder Peabody. The complaint names Kidder, Peabody & Co. Incorporated, KP Realty Advisors, Inc., Polaris Holding Company, Polaris Aircraft Leasing Corporation, Polaris Investment Management Corporation, Polaris Securities Corporation, Polaris Jet Leasing, Inc., Polaris Technical Services, Inc., General Electric Company, General Electric Financial Services, Inc., General Electric Capital Corporation, General Electric Credit Corporation and DOES 1-100 as defendants. The complaint alleges violations of state common law, including fraud, negligent misrepresentation, breach of fiduciary duty, and violations of the rules of the National Association of Securities Dealers. The complaint seeks to recover compensatory damages and punitive damages in an unspecified amount, interest, and rescission with respect to the Polaris Aircraft Income Funds III-VI and all other limited partnerships alleged to have been sold by Kidder Peabody to the plaintiffs. The Partnership is not named as a defendant in this action. 11 Item 6. Exhibits and Reports on Form 8-K a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) None 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. 12 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 VI, A California Limited Partnership (Registrant) By: Polaris Investment Management Corporation, General Partner May 8, 1996 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) 13 EX-27 2
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