UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
Commission file number 1-9259
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 94-3008908
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(State of Incorporation) (I.R.S. Employer Identification No.)
555 California Street, San Francisco, California 94104
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(Address of principal executive offices) (Zip Code)
(415) 765-1814
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(Registrant's telephone number, including area code)
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 (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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I N D E X
Page No.
Part I - Financial Information:
Item 1. Financial Statements
Balance Sheets --
September 30, 1996 and December 31, 1995................3
Statements of Income --
Three and nine months ended September 30, 1996 and
1995....................................................4
Condensed Statements of Cash Flows
Nine months ended September 30, 1996 and 1995...........5
Notes to Condensed Financial Statements...................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............7
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K..........................9
Signatures...............................................10
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 DECEMBER 31,
(IN THOUSANDS EXCEPT UNIT DATA) (UNAUDITED) 1995
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1 $ 0
Finance leases - net 84,824 91,564
Operating leases - net 2,463 10,259
Notes receivable 417 933
Prepaid expenses and other assets 177 265
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Total assets $87,882 $103,021
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LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Distribution payable to partners $ 2,102 $ 2,336
Accounts payable and accrued liabilities 923 1,490
Long-term notes payable 18,130 27,483
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Total liabilities 21,155 31,309
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COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY
Limited partners (4,625,000 units outstanding) 66,060 70,995
General partner 667 717
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Total partners' equity 66,727 71,712
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Total liabilities and partners' equity $87,882 $103,021
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</TABLE>
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See NOTES TO CONDENSED FINANCIAL STATEMENTS
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(UNAUDITED; IN THOUSANDS SEPTEMBER 30, SEPTEMBER 30,
EXCEPT PER UNIT AMOUNTS) 1996 1995 1996 1995
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<S> <C> <C> <C> <C>
REVENUES
Finance lease income $2,185 $2,413 $6,653 $7,171
Operating lease rentals 399 699 1,398 2,184
Gain on sale of equipment 0 0 556 0
Other income 14 67 139 148
------ ------ ------ ------
Total revenues 2,598 3,179 8,746 9,503
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EXPENSES
Interest 427 581 1,441 1,815
Depreciation - operating leases 353 581 1,148 1,625
Management fee - general partner 180 196 559 591
Investor reporting 62 58 186 170
General and administrative 44 38 121 128
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Total expenses 1,066 1,454 3,455 4,329
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Net Income $1,532 $1,725 $5,291 $5,174
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Net Income Allocated To:
General Partner $ 15 $ 17 $ 53 $ 52
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Limited Partners $1,517 $1,708 $5,238 $5,122
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Net Income Per Limited Partner-
ship Unit $ 0.33 $ 0.37 $ 1.13 $ 1.11
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</TABLE>
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See NOTES TO CONDENSED FINANCIAL STATEMENTS
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED; IN THOUSANDS) 1996 1995
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<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 6,050 $7,137
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CASH FLOWS FROM INVESTING ACTIVITIES
Aircraft equipment purchase 0 (66)
Proceeds from sale of equipment 6,559 0
(Increase)/decrease in notes receivable 516 (423)
Casualty settlement proceeds 0 444
Rental receipts in excess of earned finance
lease income 6,740 503
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Net cash from investing activities 13,815 458
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing/(repayment) under lines of credit, net (4,588) 553
Proceeds from issuance of long-term debt 0 600
Repayment of long-term debt (4,765) (2,020)
Distributions paid to partners (10,511) (6,728)
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Net cash used by financing activities (19,864) (7,595)
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Increase in cash 1 0
Cash at beginning of period 0 0
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Cash at end of period $ 1 $ 0
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ADDITIONAL INFORMATION
Interest paid $ 1,594 $ 1,356
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</TABLE>
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See NOTES TO CONDENSED FINANCIAL STATEMENTS
<PAGE>
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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NOTES TO CONDENSED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
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BASIS OF PRESENTATION - The accompanying unaudited condensed financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of the Partnership, necessary to a
fair statement of the results for the interim periods. The results of
operations for such interim periods are not necessarily indicative of
results of operations for a full year. The December 31, 1995 balance sheet
included herein is derived from the audited financial statements included in
the Partnership's Annual Report and incorporated by reference in the Form
10-K for the year ended December 31, 1995, but does not include all disclo-
sures required by generally accepted accounting principles. The statements
should be read in conjunction with the Organization and Significant Account-
ing Policies and other notes to financial statements included in the
Partnership's Annual Report for the year ended December 31, 1995.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of highly
liquid investments with a maturity of three months or less at the time of
purchase. For Cash and Cash Equivalents, the carrying amount is stated at
fair value.
2. NET INCOME PER LIMITED PARTNERSHIP UNIT
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Net Income Per Limited Partnership Unit is computed by dividing the net
income allocated to the Limited Partners by the weighted average units
outstanding (4,625,000).
<PAGE>
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
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The partnership presently has three long-term debt facilities. At September 30,
1996, the following amounts were outstanding: $9.0 million on an 8.75%
non-recourse note collateralized by three aircraft leased to USAir; $6.3 million
on a 7.4% non-recourse note collateralized by one aircraft leased to FedEx; and
$2.8 million under a non-recourse long-term revolving declining variable
interest loan facility collateralized by a fourth aircraft leased to USAir.
Approximately $3.2 million remains available under the revolving loan facility.
Long-term borrowing at September 30, 1996 represented 13% of the original cost
of the aircraft presently owned by the partnership, including capital
expenditures for upgrades. The terms of the Partnership Agreement permit debt to
be at a level not exceeding 50% of such cost.
Cash distributions paid in the first nine months of 1996 amounted to $10.5
million versus $6.7 million in the first nine months of 1995, an increase of
$3.8 million. The increase reflects the special cash distribution paid in May
1996 from the proceeds of the sale in March of the partnership's 50% interest in
one MD-82 aircraft.
In September 1996, the partnership declared a $0.45 per unit quarterly
distribution amounting to $2,102,000 payable on November 15, 1996 to unitholders
of record on September 30, 1996. This distribution exceeded third quarter net
income of $1,532,000.
Results of Operations
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Net income for the third quarter ended September 30, 1996 declined by 11% over
the comparable 1995 three-month period, primarily due to reduced revenues as a
result of the March 1996 aircraft sale. For the nine-month period ended
September 30, 1996 net income increased by 2% over the comparable 1995
nine-month period primarily due to the gain on the March 1996 aircraft sale.
Total revenues for the three- and nine-month period ended September 30, 1996
were $2,598,000 and $8,746,000, respectively, compared with $3,179,000 and
$9,503,000 for the comparable 1995 periods. For both periods, finance lease
income declined reflecting the normal reduction as the portfolio matures, and
operating rentals declined due primarily to the sale of the partnership's 50%
interest in one MD-82 aircraft in March at a gain of $556,000.
Change in Ownership
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On October 31, 1996, BA Leasing & Capital Corporation ("BALCAP") purchased the
stock of Airlease Management Services, Inc., the General Partner of Airlease
Ltd., and the stock of United States Airlease Holding, Inc. ("USAH") which owns
5 % of the limited partnership units. As a result of this purchase, and the
September purchase of 17% of the units from USL Capital, BALCAP now owns the
general partner and 22 percent of the limited partnership units. As sole
stockholder, BALCAP may be deemed to control AMSI and thus may be deemed to
control the operations of the partnership.
With the change in ownership, three new directors have been elected:
Richard V. Harris, Chairman and President of BALCAP, K. Thomas Rose,
Executive Vice President and Chief Operating Officer of BALCAP, and
Richard C. Walter, Senior Vice President/Controller of BALCAP. The two
outside directors, Leonard Marks, Jr. and William A. Hasler, will remain
on the board. David B. Gebler will also serve as Chairman and Chief
Executive Officer.
Portfolio Matters
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Six Boeing 737-200 aircraft on lease to Continental Airlines are scheduled to be
sold on December 31, 1996, the lease expiration date. Assuming the transaction
is consummated, the sale will result in net sale proceeds to the partnership of
$2.9 million and a gain on sale of approximately $1.9 million. The General
Partner has not yet determined the best use of the sale proceeds, which may
include reinvestment, repayment of debt, or a special cash distribution.
A reinvestment opportunity presently under consideration is the acquisition of
the remaining 50% interest in the MD-82 aircraft on lease to Trans World
Airlines. The aircraft currently is owned jointly by the partnership and USL
Capital Corporation. If purchased, the partnership would own the entire
aircraft.
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K.
Form 8-K was filed on August 20, 1996, regarding a Change in
Control of Registrant.
<PAGE>
SIGNATURES
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Pursuant to the requirements 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.
AIRLEASE LTD., A CALIFORNIA LIMITED
PARTNERSHIP
By: Airlease Management Services, Inc.
General Partner
November 12, 1996 By: /s/ David B. Gebler
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Date David B. Gebler
President
November 12 , 1996 By: /s/ Richard C. Walter
- ------------------------ -----------------------
Date Richard C. Walter
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 87,704
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 87,882
<CURRENT-LIABILITIES> 0
<BONDS> 18,130
0
0
<COMMON> 0
<OTHER-SE> 66,727
<TOTAL-LIABILITY-AND-EQUITY> 87,882
<SALES> 8,746
<TOTAL-REVENUES> 8,746
<CGS> 0
<TOTAL-COSTS> 1,148
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,441
<INCOME-PRETAX> 5,291
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,291
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,291
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
