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, 1998
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 --
March 31, 1998 and December 31, 1997............3
Statements of Income --
Three months ended March 31, 1998 and 1997......4
Condensed Statements of Cash Flows
Three months ended March 31, 1998 and 1997......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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PART I - FINANCIAL INFORMATION
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(In thousands except unit data) (Unaudited) 1997
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 51 $ 1
Finance leases - net 81,001 82,590
Operating leases - net 0 0
Prepaid expenses and other assets 334 268
------ --------
Total assets $81,386 $82,859
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LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Distribution payable to partners $ 1,915 $ 2,102
Accounts payable and accrued liabilities 462 553
Income Taxes Payable 160 0
Long-term notes payable 18,379 19,115
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Total liabilities 20,916 21,770
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COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY
Limited partners (4,625,000 units outstanding) 59,864 60,478
General partner 605 611
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Total partners' equity 60,469 61,089
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Total liabilities and partners' equity $81,386 $82,859
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</TABLE>
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See NOTES TO CONDENSED FINANCIAL STATEMENTS
3
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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) 1998 1997
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<S> <C> <C>
REVENUES
Finance lease income $2,170 $2,263
Operating lease rentals 0 85
Other income 0 10
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Total revenues 2,170 2,358
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EXPENSES
Interest 460 472
Depreciation - operating leases 0 71
Provision for doubtful accounts 0 228
Management fee - general partner 165 176
Investor reporting 52 201
General and administrative 37 43
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Total expenses 714 1,191
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Income before Income Taxes 1,456 1,167
Provision for Income Taxes 160 0
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Net Income and Comprehensive Income $1,296 $1,167
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Net Income Allocated To:
General Partner $ 13 $ 12
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Limited Partners $1,283 $1,155
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Net Income Per Limited
Partnership Unit $ 0.28 $ 0.25
====== ======
</TABLE>
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See NOTES TO CONDENSED FINANCIAL STATEMENTS
4
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
(Unaudited; in thousands) 1998 1997
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<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 1,299 $ 1,660
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Aircraft equipment purchase 0 (5,753)
Decrease in notes receivable 0 8
Rental receipts in excess of earned finance
lease income 1,589 996
-------- --------
Net cash (used in) provided by investing
activities 1,589 (4,749)
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing under lines of credit, net 770 1,405
Proceeds from issuance of long-term debt 0 9,000
Repayment of long-term debt (1,506) (1,169)
Distributions paid to partners (2,102) (5,045)
-------- --------
Net cash (used in) provided by financing
activities (2,838) 4,191
-------- --------
Increase in cash 50 1,102
Cash at beginning of period 1 580
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Cash at end of period $ 51 $ 1,682
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ADDITIONAL INFORMATION
Interest paid $ 419 $ 234
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</TABLE>
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See NOTES TO CONDENSED FINANCIAL STATEMENTS
5
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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NOTES TO CONDENSED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
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, 1997, 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, 1997, 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,
1997.
2. NET INCOME PER LIMITED PARTNERSHIP UNIT
---------------------------------------
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).
3. INCOME TAXES
------------
In January 1998, the Partnership made an election to pay an annual combined
federal and state tax at the Partnership level of 4.5% tax on its gross
income beginning January 1, 1998. The election was made in order to avoid a
limitation on the public trading of the Partnership's units. For the
quarter ended March 31, 1998, the Partnership recorded a provision for
income taxes of $160,000. This amount represents 4.5% of the first-quarter
lease rental payments of $3,559,000.
6
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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
- -------------------------------
The Partnership presently has five long-term debt facilities. At March 31, 1998,
the following amounts were outstanding: $2.4 million on an 8.75% non-recourse
note collateralized by three aircraft leased to USAir-ways (formerly USAir);
$5.6 million on a 7.4% non-recourse note collateralized by one aircraft leased
to FedEx; $7.9 million on a 9.85% non-recourse note collateralized by one
aircraft on lease to Trans World Airlines; $2.2 million under a non-recourse
long-term revolving declining variable interest loan facility collateralized by
a fourth aircraft leased to USAirways. Approximately $1.2 million remains
available under this revolving loan facility. In February 1998, the Partnership
obtained a $7.5 million three-year, floating rate, revolving loan facility. This
loan is collatreralized by a fifth aircraft leased to USAirways, and is
guaranteed by the Partnership. At March 31, 1998, $0.3 million was drawn on this
revolving loan facility, and $7.1 million remained available.
Long-term borrowing at March 31, 1998 represented 15% 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 three months of 1998 were $0.45 per
limited partnership unit representing the regular fourth quarter 1997 cash
distribution.
In March the Partnership declared a first quarter 1998 cash distribution of
$0.41 per unit totaling $1,915,000 payable on May 15, 1998 to unitholders of
record on March 31, 1998. Since this distribution was in excess of earnings,
Partnership equity declined to $60.5 million at March 31, 1998, and limited
partner equity per unit declined to $12.94. The portion of the distribution in
excess of net income constitutes a return of capital. The 1997 first quarter
cash distribution was $0.45 per unit.
Results of Operations
- ---------------------
Net income for the first quarter ended March 31, 1998 was $1,296,000, an
increase of $129,000 or 11% from the comparable 1997 three-month period. Higher
earnings result from a slight decline in revenue, which was more than offset by
a reduction in expenses.
Revenues for the quarter were $2,170,000, a decrease of $188,000 or 8% from last
year's first quarter revenues of $2,358,000. The revenue reduction is primarily
due to the scheduled decline in finance lease income in 1998 as the balances due
from the lessees declined. Additionally, no operating lease rental income was
earned in 1998, whereas $85,000 was earned in the first quarter of 1997. In
September 1997, the Partnership sold the aircraft which was subject to an
operating lease.
7
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Expenses for the 1998 first quarter were $714,000, compared with last year's
first quarter expenses of $1,191,000. In the first quarter of 1997, the
Partnership incurred higher investor reporting expenses in connection with the
solicitation of unitholder consents and depreciation expense related to an
aircraft which was sold later in 1997, and recorded a provision for doubtful
accounts. No similar expenses were incurred in 1998.
A provision for income taxes of $160,000 relating to the newly imposed federal
and state tax on gross income at the partnership level was recorded in the first
quarter of 1998.
8
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PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K.
None.
9
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SIGNATURES
==========
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 1, 1998 By: /s/ David B. Gebler
- ----------- -------------------------------------
Date David B. Gebler
Chairman, Chief Executive Officer and
President
May 1, 1998 By: /s/ Richard C. Walter
- ----------- -------------------------------------
Date Richard C. Walter
Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 51
<SECURITIES> 0
<RECEIVABLES> 35,501
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 81,386
<CURRENT-LIABILITIES> 0
<BONDS> 18,379
0
0
<COMMON> 0
<OTHER-SE> 60,469
<TOTAL-LIABILITY-AND-EQUITY> 81,386
<SALES> 2,170
<TOTAL-REVENUES> 2,170
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 254
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 460
<INCOME-PRETAX> 1,456
<INCOME-TAX> 160
<INCOME-CONTINUING> 1,296
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,296
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
