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 March 31, 1997
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.
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Part I - Financial Information:
Item 1. Financial Statements
Balance Sheets --
March 31, 1997 and December 31, 1996................. 3
Statements of Income --
Three months ended March 31, 1997 and 1996........... 4
Condensed Statements of Cash Flows
Three months ended March 31, 1997 and 1996........... 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
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<CAPTION>
MARCH 31,
1997 DECEMBER 31,
(IN THOUSANDS EXCEPT UNIT DATA) (UNAUDITED) 1996
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,682 $ 580
Finance leases - net 87,813 83,056
Operating leases - net 999 1,090
Notes receivable (net of allowance for
doubtful accounts of $228 in 1997) 0 236
Prepaid expenses and other assets 257 168
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Total assets $90,751 $85,130
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LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Distribution payable to partners $ 2,102 $ 5,045
Accounts payable and accrued liabilities 1,235 972
Long-term notes payable 23,307 14,071
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Total liabilities 26,644 20,088
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COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY
Limited partners (4,625,000 units
outstanding) 63,466 64,391
General partner 641 651
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Total partners' equity 64,107 65,042
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Total liabilities and partners'
equity $90,751 $85,130
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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
(UNAUDITED; IN THOUSANDS MARCH 31,
EXCEPT PER UNIT AMOUNTS) 1997 1996
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<S> <C> <C>
REVENUES
Finance lease income $2,263 $2,253
Operating lease rentals 85 599
Gain on sale of equipment 0 556
Other income 10 23
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Total revenues 2,358 3,431
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EXPENSES
Interest 472 523
Depreciation - operating leases 71 443
Provision for doubtful accounts 228 0
Management fee - general partner 176 192
Investor reporting 201 63
General and administrative 43 39
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Total expenses 1,191 1,260
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Net Income $1,167 $2,171
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Net Income Allocated To:
General Partner $ 12 $ 22
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Limited Partners $1,155 $2,149
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Net Income Per Limited
Partnership Unit $ 0.25 $ 0.46
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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
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<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
(UNAUDITED; IN THOUSANDS) 1997 1996
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<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 1,660 $2,689
CASH FLOWS FROM INVESTING ACTIVITIES
Aircraft equipment purchase (5,753) 0
Proceeds from sale of equipment 0 6,559
Decrease in notes receivable 8 167
Rental receipts in excess of earned finance lease
income 996 1,007
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Net cash provided (used) by investing activities (4,749) 7,733
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing/(repayment) under lines of credit, net 1,405 (2,781)
Proceeds from issuance of long-term debt 9,000 0
Repayment of long-term debt (1,169) (1,538)
Distributions paid to partners (5,045) (2,336)
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Net cash provided (used) by financing activities 4,191 (6,655)
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Increase in cash 1,102 3,767
Cash at beginning of period 580 0
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Cash at end of period $1,682 $3,767
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ADDITIONAL INFORMATION
Interest paid $ 234 $ 426
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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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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, 1996 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, 1996, but does not include all disclosures
required by generally accepted accounting principles. The statements should
be read in conjunction with the Organization and Significant Accounting
Policies and other notes to financial statements included in the
Partnership's Annual Report for the year ended December 31, 1996.
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).
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
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The partnership presently has four long-term debt facilities. At March 31, 1997,
the following amounts were outstanding: $7.0 million on an 8.75% non-recourse
note collateralized by three aircraft leased to USAirways (formerly USAir); $6.0
million on a 7.4% non-recourse note collateralized by one aircraft leased to
FedEx and $1.4 million under a non-recourse long-term revolving declining
variable interest loan facility collateralized by a fourth aircraft leased to
USAirways. Approximately $3.8 million remains available under the revolving loan
facility. On January 31, 1997, the partnership entered into a fourth long-term
non-recourse note agreement in the amount of $9 million, part of which was used
to purchase an additional 50% interest in the MD-82 aircraft leased to Trans
World Airlines. At the time of the acquisition, the partnership already owned a
50% interest in this aircraft. The opportunity to purchase the additional
interest in this aircraft was available because Airlease had originally
negotiated the right to match a purchase offered to USL Capital Corporation by a
third party. The loan is collateralized by this aircraft and at March 31, 1997,
$8.9 million was outstanding.
Long-term borrowing at March 31, 1997 represented 18% 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.
In March the partnership recorded an allowance for doubtful accounts of $228,000
relating to the outstanding note receivable representing advances made to
Continental Airlines to finance certain aircraft modifications. The agreement
for this financing was entered into as part of a 1991 stipulation in
Continental's bankruptcy. Continental had advised the partnership that because
the lease has terminated these amounts are no longer due. The partnership is
reviewing Continental's claim and has recorded the allowance until the matter
can be resolved.
Cash distributions paid in the first three months of 1997 amounted to $1.08 per
limited partnership unit consisting of the regular fourth quarter 1996 cash
distribution of $0.45 per unit and a special cash distribution of $0.63 per
unit, compared to a distribution of $0.50 per unit in the first quarter of 1996.
The special cash distribution was paid in January 1997 from the proceeds of the
sale on December 31, 1996 of the partnership's one-third interest in six 737-200
aircraft.
In March the partnership declared a first quarter cash distribution of $0.45 per
unit amounting to $2,102,000 payable on May 15, 1997 to unitholders of record on
March 31, 1997. This distribution exceeded first quarter net income of
$1,167,000, resulting in a return of capital of $935,000 or 20 cents per unit.
The 1996 first quarter cash distribution was $0.50 per unit.
<PAGE>
Results of Operations
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Net income for the first quarter ended March 31, 1997 was $1,167,000, a decrease
of $1,004,000 or 46% from the comparable 1996 three-month period. First quarter
revenues were $2,358,000, a decrease of $1,073,000 or 31% from the comparable
three-month period. These declines reflect the sale of an aircraft in the first
quarter of 1996 and recognition of a gain of $556,000, while no aircraft were
sold in the first quarter of 1997. In addition, the sale of seven aircraft
during 1996 reduced the size of the portfolio and reduced revenue from operating
lease rentals by $514,000. At March 31, 1997, the partnership owned an
interest in one aircraft subject to an operating lease, compared to interests in
seven aircraft subject to operating leases at March 31, 1996.
Total expenses declined by $69,000 from the first quarter of 1996. Depreciation
expense declined by $372,000 reflecting the 1996 sales of the seven aircraft
subject to operating leases. Offsetting this reduction were an allowance for
doubtful accounts of $228,000 (see Liquidity and Capital Resources above), and
higher investor reporting expenses incurred in connection with the 1998 change
in tax status. Interest expense declined due to lower average outstanding
balances on the partnership's borrowing facilities for the first quarter 1997
compared with last year's first quarter.
Other Developments
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The lease with Sun Jet International Airlines, Inc., which expires in December
1997, contains a fixed-price purchase option and Sun Jet has advised the
partnership that it wishes to exercise this option. However, Sun Jet has
experienced financial difficulties, and no assurance can be made as to whether
or at what price this purchase will be consummated. If Sun Jet does not purchase
the aircraft, the partnership intends to remarket the aircraft, which would
include attempting to sell or lease the aircraft. At March 31, 1997, this
aircraft represented about one percent of the partnership's total assets.
<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.
The partnership filed Form 8-K on March 14, 1997 Following Issu-
ance of Press Release Regarding Plan to Delist From the New York
Stock Exchange and To Cease Reinvesment.
<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
May 13, 1997 By: /s/ DAVID B. GEBLER
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Date David B. Gebler
Chairman, Chief Executive Officer and
President
May 13, 1997 By: /s/ RICHARD C. WALTER
- ------------ -----------------------
Date Richard C. Walter
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,682
<SECURITIES> 0
<RECEIVABLES> 42,541
<ALLOWANCES> 228
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,501
<DEPRECIATION> 3,502
<TOTAL-ASSETS> 90,751
<CURRENT-LIABILITIES> 0
<BONDS> 23,307
0
0
<COMMON> 0
<OTHER-SE> 64,107
<TOTAL-LIABILITY-AND-EQUITY> 90,751
<SALES> 2,348
<TOTAL-REVENUES> 2,358
<CGS> 0
<TOTAL-COSTS> 71
<OTHER-EXPENSES> 420
<LOSS-PROVISION> 228
<INTEREST-EXPENSE> 472
<INCOME-PRETAX> 1,167
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,167
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
