UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q/A
Amendment No. 1
--------------------
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 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. 33-2794
--------------------
POLARIS AIRCRAFT INCOME FUND II,
A California Limited Partnership
State of Organization: California
IRS Employer Identification No. 94-2985086
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 4 pages.
<PAGE>
The undersigned registrant hereby amends Item 2 of its Quarterly Report on Form
10-Q for the period ended June 30, 1998 in its entirety as follows:
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
At June 30, 1998, Polaris Aircraft Income Fund II (the Partnership) owned a
portfolio of 14 used commercial jet aircraft and certain inventoried aircraft
parts out of its original portfolio of 30 aircraft. The portfolio consists of 14
McDonnell Douglas DC-9-30 aircraft leased to Trans World Airlines, Inc. (TWA).
The Partnership transferred six Boeing 727-200 aircraft, previously leased to
Pan American World Airways, Inc., to aircraft inventory in 1992. These aircraft
have been disassembled for sale of their component parts.
Partnership Operations
The Partnership recorded net income of $793,949, or $1.20 per limited
partnership unit, for the three months ended June 30, 1998, compared to net
income of $889,991, or $0.76 per limited partnership unit, for the three months
ended June 30, 1997. The Partnership recorded net income of $1,702,229, or $1.30
per limited partnership unit, for the six months ended June 30, 1998, compared
to net income of $2,404,459, or $3.13 per limited partnership unit, for the six
months ended June 30, 1997.
The decrease in year to date net income is primarily due to a decrease in other
income. The Partnership recorded other income of $802,443 during the six months
ended June 30, 1997, as a result of the receipt of amounts due under a TWA
maintenance credit and rent deferral agreement.
Further impacting the decrease in net income was a decline in rental revenues,
net of related management fees, during the first three and six months of 1998,
as compared to the same periods in 1997. This decline was the result of an
absence of rental revenues from the aircraft sold to Triton Aviation Services II
LLC in 1997. The decrease in depreciation expense related to the sold aircraft
partially offset the decline in rental revenues.
The increase in the deferred income balance at June 30, 1998 is attributable to
differences between the payments due and the rental income earned on the TWA
leases for the 14 aircraft currently on lease to TWA. For income recognition
purposes, the Partnership recognizes rental income over the life of the lease in
equal monthly amounts. As a result, the difference between rental income earned
and the rental payments due is recognized as deferred income. The rental
payments due from TWA during the six months ended June 30, 1998 exceeded the
rental income earned, causing an increase in the deferred income balance.
On January 30, 1997, one Boeing 737-200, formerly on lease to Viscount Air
Services, Inc. (Viscount), was sold to American Aircarriers Support, Inc. on an
"as-is, where-is" basis for $660,000 cash. In addition, the Partnership retained
maintenance reserves from the previous lessee of $217,075, that had been held by
the Partnership, which were recognized as additional sale proceeds. A net loss
of $26,079 was recorded on the sale of the aircraft during the first six months
of 1997.
Operating expenses increased during the three and six months ended June 30,
1998, as compared to the same periods in 1997, due to an increase in legal
expenses. During the six months ended June 30, 1998, the Partnership recognized
legal expenses of $124,000 related to the Viscount default and Chapter 11
bankruptcy filing, compared to $60,000 during the same period in 1997. The
Partnership also recognized legal expenses of approximately $57,000 during the
six months ended June 30, 1998, related to the sale of aircraft to Triton in
1997.
The Partnership had been holding a security deposit, received from Jet Fleet in
2
<PAGE>
1992, pending the outcome of bankruptcy proceedings. The bankruptcy proceeding
of Jet Fleet Corporation was closed on August 6, 1997, and the bankruptcy
proceeding of Jet Fleet International Airlines, Inc. was closed on February 10,
1998. Consequently, the Partnership recognized, during the six months ended June
30, 1998, revenue of $50,000 that had been held as a deposit.
Claims Related to Lessee Defaults
Braniff, Inc. (Braniff) Bankruptcy - As discussed more fully in Note 3,
Braniff's bankrupt estate has made a payment in the amount of $200,000 in
respect of the unsecured claims of the Partnership and other affiliates of
Polaris Investment Management Corporation. Of this amount, $15,385 was allocated
to the Partnership, based on its pro rata share of the total claims, and
recognized as revenue during the quarter ended March 31, 1998, which is included
in other income.
Liquidity and Cash Distributions
Liquidity - The Partnership received all payments due from its sole lessee, TWA,
during 1998, except for the June 1998 lease payment. On July 2, 1998, the
Partnership received its $935,000 rental payment from TWA that was due on June
27, 1998. This amount was included in rent and other receivables on the balance
sheet at June 30, 1998.
Payments totaling $48,205 and $95,270 were received during the first two
quarters of 1998 and 1997, respectively, from the sale of inventoried parts from
the six disassembled aircraft.
Polaris Investment Management Corporation, the general partner, has determined
that the Partnership maintain cash reserves as a prudent measure to ensure that
the Partnership has available funds in the event that the aircraft presently on
lease to TWA require remarketing and for other contingencies, including expenses
of the Partnership. The Partnership's cash reserves will be monitored and may be
revised from time to time as further information becomes available in the
future.
Cash Distributions - Cash distributions to limited partners during the three
months ended June 30, 1998 and 1997 were $1,874,899, or $3.75 per limited
partnership unit and $4,999,970, or $10.00 per unit, respectively. Cash
distributions to limited partners during the six months ended June 30, 1998 and
1997 were $14,924,194, or $29.85 per limited partnership unit and $8,124,951, or
$16.25 per unit, respectively. The increase, as compared to 1997, is due to the
distribution of the proceeds received from the prepayment of a note due from
Triton Aviation Services II LLC on December 30, 1997. The timing and amount of
future cash distributions are not yet known and will depend on the Partnership's
future cash requirements (including expenses of the Partnership) and need to
retain cash reserves as previously discussed in the Liquidity section; and the
receipt of rental payments from TWA.
3
<PAGE>
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 II,
A California Limited Partnership
(Registrant)
By: Polaris Investment
Management Corporation,
General Partner
August 24, 1998 By: /S/Marc A. Meiches
- ------------------------- ------------------------
Mark A. Meiches
Chief Financial Officer
(principal financial officer and
principal accounting officer of
Polaris Investment Management
Corporation, General Partner of
the Registrant)
4
