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, 1999
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
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
555 California Street, 4th floor, San Francisco, CA 94104
- --------------------------------------------------- ----------
(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, 1999 and December 31, 1998......................3
Statements of Income --
Three months ended March 31, 1999 and 1998................4
Statements of Cash Flows
Three months ended March 31, 1999 and 1998................5
Notes to 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
===============================================
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(In thousands except unit data) (Unaudited) 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 3 $ 9
Finance leases - net 73,865 75,443
Prepaid expenses and other assets 346 361
-------- --------
Total assets $ 74,214 $ 75,813
======== ========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Distribution payable to partners $ 1,915 $ 1,915
Accounts payable and accrued liabilities 447 393
Taxes Payable 175 699
Long-term notes payable 14,100 14,505
-------- --------
Total liabilities 16,637 17,512
-------- --------
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY
Limited partners (4,625,000 units outstanding) 57,001 57,718
General partner 576 583
-------- --------
Total partners' equity 57,577 58,301
-------- --------
Total liabilities and partners'
equity $ 74,214 $ 75,813
======== ========
</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) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Finance lease income $1,982 $2,170
------ ------
Total revenues 1,982 2,170
------ ------
EXPENSES
Interest 347 460
Management fee - general partner 159 165
Investor reporting 70 52
General and administrative 39 37
Tax on gross income 175 160
------ ------
Total expenses 790 874
------ ------
Net Income $1,192 $1,296
====== ======
Net Income Allocated To:
General Partner $ 12 $ 13
====== ======
Limited Partners $1,180 $1,283
====== ======
Net Income Per Limited Partnership Unit $ 0.26 $ 0.28
====== ======
</TABLE>
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See NOTES TO CONDENSED FINANCIAL STATEMENTS
4
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
===============================================
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Unaudited; in thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,192 $ 1,296
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase/(decrease) in accounts payable
and accrued liabilities 54 (91)
Increase/(decrease) in taxes payable (524) 160
Decrease/(increase) in prepaid expenses
and other assets 15 (66)
-------- --------
Net cash provided by operating
activities 737 1,299
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Rental receipts in excess of earned finance
lease income 1,578 1,589
-------- --------
Net cash provided by investing activities 1,578 1,589
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings/(repayments) under lines of
credit, net (40) 770
Repayment of long-term notes payable (365) (1,506)
Distributions paid to partners (1,916) (2,102)
-------- --------
Net cash used by financing activities (2,321) (2,838)
-------- --------
Increase (decrease) in cash (6) 50
Cash at beginning of period 9 1
-------- --------
Cash at end of period $ 3 $ 51
======== ========
ADDITIONAL INFORMATION
Interest paid $ 206 $ 419
======== ========
</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 FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
BASIS OF PRESENTATION - The accompanying unaudited financial statements
reflect all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of the Partnership's management, necessary for a
fair presentation of the financial position and results of operations for
the presented periods. The results of operations for such interim periods
are not necessarily indicative of results of operations for a full year.
The December 31, 1998 balance sheet included herein is taken 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, 1998. 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, 1998.
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 of the
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.
6
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
===============================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
The Partnership presently has three long-term debt facilities. At March 31,
1999, the following amounts were outstanding: $5.1 million on a 7.4%
non-recourse note collateralized by one aircraft leased to FedEx; $4.8 million
on a 9.35% non-recourse note collateralized by one aircraft on lease to Trans
World Airlines; and $4.2 million on a long-term variable rate revolving loan
facility guaranteed by the Partnership and collateralized by two aircraft on
lease to USAirways. At March 31, 1999 approximately $5.8 million remains
available under the revolving loan facility.
In December 1998, the Partnership modified the fixed-rate loan collateralized by
the TWA aircraft. As a result of these modifications, the principal on the loan
was paid down by $2 million and the average life of the loan was reduced. In
addition, the interest rate on the remaining principal of $5.2 million
(principal balance at December 31, 1998) was reduced from 9.85% to 9.35%.
Also in December 1998, the Partnership expanded its variable-rate revolving loan
facility by $5 million, $2 million of which was used to prepay the higher-cost
TWA debt mentioned above. In addition, the interest rate on this loan facility
was reduced slightly.
At March 31, 1999, long-term borrowings of $14.1 million represented 11.6 % 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 1999 were $0.41 per limited
partnership unit, representing the regular 1998 fourth-quarter cash
distribution.
In March 1999, the Partnership declared a first-quarter 1999 cash distribution
of $0.41 per unit totaling $1,915,404 payable on May 14, 1999, to unitholders of
record on March 31, 1999. Since this distribution was in excess of earnings,
Partnership equity declined to $57.6 million at March 31, 1999, and limited
partner equity per unit declined to $12.32. The portion of the distribution in
excess of net income constitutes a return of capital. The 1998 first-quarter
cash distribution was also $0.41 per unit.
Results of Operations
- ---------------------
Airlease earned $1,192,000 in the first quarter ended March 31, 1999, a decrease
of $104,000 or 8% from 1998 first quarter earnings of $1,296,000. First-quarter
revenues were $1,982,000, compared with last year's first quarter revenues of
$2,170,000 a decrease of $188,000 or 8.7%.
The revenue reduction in the first three months of 1999 is primarily due to the
scheduled decline in finance lease income as the balances due from the lessees
declined (smaller assets base.)
Expenses for the first three months of 1999 were $790,000, a decrease of $84,000
or 9.6% from $874,000 for the comparable 1998 period. The decline in expenses is
primarily due to lower 1999 interest expenses as a result of the partnership's
reduced debt balances and lower interest rates.
7
<PAGE>
Portfolio Matters
- -----------------
As of March 31, 1999 the partnership's portfolio consisted entirely of Stage III
aircraft; six are MD 82s and one is a 727-200 FH. Stage-III aircraft meet the
FAA noise compliance regulations for aircraft operated in the continental United
States after December 31, 1999.
Forward-Looking Statements
- --------------------------
The information set forth in this quarterly report contains certain
forward-looking statements, which reflect the current view of the partnership
with respect to future events and financial performance. The words, "expect",
"intend", "believe", "anticipate", "likely" and "will" and similar expressions
generally identify forward-looking statements. These statements are subject to
certain risks and uncertainties, which could cause actual results, and events to
differ materially from those anticipated in the forward-looking statements.
Factors that could cause the partnership's actual results to differ from current
expectations include, among others, changes in the aircraft or aircraft leasing
market, economic downturn in the airline industry, default by lessees under
leases causing the partnership to incur uncontemplated expenses or not to
receive rental income as and when expected, changes in interest rates and
legislative or regulatory changes that adversely affect the value of aircraft.
8
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
27. Financial Data Schedule.
9
<PAGE>
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 4, 1999 By: /s/ DAVID B. GEBLER
- ----------- -------------------
Date David B. Gebler
Chairman, Chief Executive Officer
and President
May 4, 1999 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-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 28,365
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 74,214
<CURRENT-LIABILITIES> 0
<BONDS> 14,100
0
0
<COMMON> 0
<OTHER-SE> 57,577
<TOTAL-LIABILITY-AND-EQUITY> 74,214
<SALES> 1,982
<TOTAL-REVENUES> 1,982
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 443
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 347
<INCOME-PRETAX> 1,192
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,192
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,192
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
