-----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, HOGEWvoPCKQQ6SqVjsZudidC6EWH/qEeG3qId9D4Pm+tPFgoo4RyLf4aIxeuLXCR AnN9s9XZOyGmgcEHYP7bHw== 0000857087-96-000002.txt : 19960813 0000857087-96-000002.hdr.sgml : 19960813 ACCESSION NUMBER: 0000857087-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLARIS AIRCRAFT INCOME FUND VI CENTRAL INDEX KEY: 0000857087 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [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: 96609085 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 JUNE 30, 1996 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 June 30, 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 June 30, 1996 INDEX Part I. Financial Information Page Item 1. Financial Statements a) Balance Sheets - June 30, 1996 and December 31, 1995............................................ 3 b) Statements of Income - Three and Six Months Ended June 30, 1996 and 1995................................. 4 c) Statements of Changes in Partners' Capital - Year Ended December 31, 1995 and Six Months Ended June 30, 1996............................... 5 d) Statements of Cash Flows - Six Months Ended June 30, 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) June 30, December 31, 1996 1995 ----------- ----------- ASSETS: CASH AND CASH EQUIVALENTS $ 3,494,720 $ 3,297,782 RENT AND INTEREST RECEIVABLE 406,311 467,025 AIRCRAFT, net of accumulated depreciation of $14,267,494 in 1996 and $13,390,080 in 1995 15,171,706 16,049,120 ----------- ----------- $19,072,737 $19,813,927 =========== =========== LIABILITIES AND PARTNERS' CAPITAL: PAYABLE TO AFFILIATES $ 30,368 $ 26,362 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 11,929 34,797 SECURITY DEPOSITS 94,000 94,000 ----------- ----------- Total Liabilities 136,297 155,159 ----------- ----------- PARTNERS' CAPITAL: General Partner 5,656 5,656 Limited Partners, 69,418 units issued and outstanding 18,930,784 19,653,112 ----------- ----------- Total Partners' Capital 18,936,440 19,658,768 ----------- ----------- $19,072,737 $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 Six Months Ended June 30, June 30, 1996 1995 1996 1995 ---------- ---------- ---------- ---------- REVENUES: Rent from operating leases $ 434,643 $ 453,046 $ 869,286 $1,248,289 Interest 45,760 56,980 92,363 105,705 Gain on sale of aircraft 91,303 64,497 143,943 111,213 ---------- ---------- ---------- ---------- Total Revenues 571,706 574,523 1,105,592 1,465,207 ---------- ---------- ---------- ---------- EXPENSES: Depreciation and amortization 438,707 474,318 877,414 948,637 Administration and other 24,142 29,506 37,111 48,495 ---------- ---------- ---------- ---------- Total Expenses 462,849 503,824 914,525 997,132 ---------- ---------- ---------- ---------- NET INCOME $ 108,857 $ 70,699 $ 191,067 $ 468,075 ========== ========== ========== ========== NET INCOME ALLOCATED TO THE GENERAL PARTNER $ 22,835 $ 27,402 $ 45,670 $ 54,804 ========== ========== ========== ========== NET INCOME ALLOCATED TO LIMITED PARTNERS $ 86,022 $ 43,297 $ 145,397 $ 413,271 ========== ========== ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 1.24 $ 0.62 $ 2.10 $ 5.95 ========== ========== ========== ========== 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 Six Months Ended June 30, 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 45,670 145,397 191,067 Cash distributions to partners (45,670) (867,725) (913,395) -------- ----------- ----------- Balance, June 30, 1996 $ 5,656 $18,930,784 $18,936,440 ======== =========== =========== 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) Six Months Ended June 30, ------------------------- 1996 1995 ----------- ----------- OPERATING ACTIVITIES: Net income $ 191,067 $ 468,075 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 877,414 948,637 Gain on sale of aircraft (143,943) (111,213) Changes in operating assets and liabilities: Decrease in rent and interest receivable 60,714 231,750 Increase (decrease) in payable to affiliates 4,006 (17,684) Increase (decrease) in accounts payable and accrued liabilities (22,868) 3,257 ----------- ----------- Net cash provided by operating activities 966,390 1,522,822 ----------- ----------- INVESTING ACTIVITIES: Principal payments on finance sale of aircraft 143,943 111,213 ----------- ----------- Net cash provided by investing activities 143,943 111,213 ----------- ----------- FINANCING ACTIVITIES: Cash distributions to partners (913,395) (1,096,074) ----------- ----------- Net cash used in financing activities (913,395) (1,096,074) ----------- ----------- CHANGES IN CASH AND CASH EQUIVALENTS 196,938 537,961 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,297,782 2,695,546 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,494,720 $ 3,233,507 =========== =========== 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) at June 30, 1996 and December 31, 1995 is zero due to a recorded allowance for credit losses equal to the balance of the note. Aeroperu paid the note in full in July 1996 as discussed in Note 5. 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 two quarters of 1996. 2. Lease to American Trans Air, Inc. (ATA) As discussed in the Form 10-K, under the ATA lease, the Partnership may be required to finance an aircraft hushkit for use on the aircraft 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 as discussed in the Form 10-K. 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 is recognized as payments are received. During the three and six months ended June 30, 1996, the Partnership received principal and interest payments due from Aeroperu totaling $95,000 and $152,000, respectively, of which $91,302 and $143,943 was recorded as gain on sale in the statement of operations for the three and six months ended June 30, 1996, respectively. The note receivable and corresponding allowance for credit losses are reduced by the principal portion of payments received. The balances of the note receivable and corresponding allowance for credit losses were $18,812 and $162,755 as of June 30, 1996 and December 31, 1995, respectively. The remaining balance of the security deposit posted by Aeroperu was applied to the last installment due from Aeroperu, as discussed in Note 5. 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 June 30, 1996 June 30, 1996 ------------- ------------- Out-of-Pocket Administrative and Operating Expense Reimbursement $ 20,632 $ 30,368 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 June 30, 1996. 8 5. Subsequent Event In July 1996, the Partnership received the final payment due from Aeroperu for the sale of one Boeing 727-100 aircraft as discussed in Note 3. 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). The Partnership sold one Boeing 727-100 aircraft that ATA transferred to the Partnership as part of the ATA lease transaction in April 1993, to Empresa de Transporte Aereo del Peru S.A. (Aeroperu). Aeroperu completed its payment obligations to the Partnership in July 1996. Partnership Operations The Partnership recorded net income of $108,857, or $1.24 per limited partnership unit, for the three months ended June 30, 1996, compared to net income of $70,699, or $0.62 per unit, for the same period in 1995. The Partnership recorded net income of $191,067, or $2.10 per limited partnership unit, for the six months ended June 30, 1996, compared to net income of $468,075, or $5.95 per unit, for the same period in 1995. Year to date 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 then current fair market rental rate, which was 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. Liquidity and Cash Distributions Liquidity -The Partnership continues to receive all lease payments on a current basis. 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 June 30, 1996 and 1995 were $433,863, or $6.25 per limited partnership unit and $520,635 or $7.50 per unit, respectively. Cash distributions to limited partners during the six months ended June 30, 1996 and 1995 were $867,725, or $12.50 per limited partnership unit and $1,041,270 or $15.00 per unit, respectively. The timing and amount of future cash distributions will depend upon the Partnership's future cash requirements and the receipt of rental payments from British Airways and ATA. 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) 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 period ended March 31, 1996, 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 and Item 1 in Part II of the Partnership's Form 10-Q for the period ended March 31, 1996 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. With the exception of Novak, et al v. Polaris Holding Company, et al, (which has been dismissed, as discussed in Item 10 of the Partnership's 1995 Form 10-K) where the Partnership was named as a defendant for procedural purposes, the Partnership is not a party to these actions. Except as discussed below, there have been no material developments with respect to any of the actions described therein during the period covered by this report. Bishop v. Kidder Peabody & Co., Incorporated et al. - On June 18, 1996, defendants filed a motion to transfer venue from Sacramento to San Francisco County. The Court subsequently denied the motion. Weisl et al. v. Polaris Holding Company et al. - On April 25, 1996, the Appellate Division for the First Department affirmed the trial court's order which had dismissed most of plaintiffs' claims. In re Prudential Securities Inc. Limited Partnerships Litigation - On June 5, 1996, the Court certified a class with respect to claims against Polaris Holding Company, one of its former officers, Polaris Aircraft Leasing Corporation, Polaris Investment Management Corporation, and Polaris Securities Corporation. The class is comprised of all investors who purchased securities in any of Polaris Aircraft Income Funds I through VI during the period from January 1985 until January 29, 1991, regardless of which brokerage firm the investor purchased from. Excepted from the class are those investors who settled in the SEC/Prudential settlement or otherwise opted for arbitration pursuant to the settlement and any investor who has previously released the Polaris defendants through any other settlement. On June 10, 1996, the Court issued an opinion denying summary judgment to Polaris on plaintiffs' Section 1964(c) and (d) RICO claims and state causes of action, and granting summary judgment to Polaris on plaintiffs' 1964(a) RICO claims and the New Jersey State RICO claims. On August 5, 1996, the Court signed an order providing for notice to be given to the class members. The case has been set for trial on November 11, 1996. 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 August 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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