UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ 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
Commission file number 0-15643
NATIONAL LEASE INCOME FUND 6 L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3275922
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue, Suite 270 Greenwich, CT 06830
(Address of principal executive offices)
(203) 862-7444
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check 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 [ ]
<PAGE>
NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q - JUNE 30, 1998
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - June 30, 1998 and December 31, 1997 ..................
STATEMENTS OF OPERATIONS - For the three months ended June 30, 1998 and
1997 and for the six months ended June 30, 1998 and 1997 ...........
STATEMENT OF PARTNERS' EQUITY - For the six months ended
June 30, 1998 ......................................................
STATEMENTS OF CASH FLOWS - For the six months ended
June 30, 1998 and 1997 .............................................
NOTES TO FINANCIAL STATEMENTS .........................................
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ............................
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS ...............................................
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K ................................
SIGNATURES .....................................................................
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NATIONAL LEASE INCOME FUND 6 L.P.
BALANCE SHEETS
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Leased equipment
Accounted for under the operating method, net of
accumulated depreciation of $16,720,742 and
$16,346,755 and allowance for equipment
impairment of $15,209,450 .................... $ 8,073,643 $ 9,679,601
Equipment held for lease or sale - net of accumulated
depreciation of $6,809,320 and an allowance
for equipment impairment of $6,367,750 ........... 1,231,964 --
Cash and cash equivalents ........................... 5,490,343 4,796,456
Deferred costs ...................................... 68,248 112,161
Other receivables and prepaid expenses .............. 39,517 26,188
Note receivable ..................................... -- 3,481
----------- -----------
$14,903,715 $14,617,887
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Distribution payable ................................ $ 3,030,354 $ --
Accounts payable and accrued expenses ............... 195,970 120,608
Due to affiliates ................................... 126,000 --
Deferred aircraft upgrade payable ................... 100,000 100,000
Deferred income ..................................... 69,250 69,250
----------- -----------
Total liabilities ................................ 3,521,574 289,858
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (300,005 units issued
and outstanding) ................................. 11,258,469 14,174,898
General partners' equity ............................ 123,672 153,131
----------- -----------
Total partners' equity ........................... 11,382,141 14,328,029
----------- -----------
$14,903,715 $14,617,887
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
NATIONAL LEASE INCOME FUND 6 L.P.
STATEMENTS OF OPERATIONS
For the three months ended For the six months ended
June 30, June 30,
-------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Rental ..................................... $ 565,500 $ 721,290 $1,181,000 $1,442,579
Interest ................................... 68,980 45,695 133,004 91,541
Other ...................................... -- -- 2,240 --
---------- ---------- ---------- ----------
634,480 766,985 1,316,244 1,534,120
---------- ---------- ---------- ----------
Costs and expenses
Operating .................................. 469,340 31,079 552,637 86,414
Depreciation ............................... 186,993 536,825 373,994 1,073,666
Fees to affiliates ......................... 154,275 36,065 185,050 101,130
General and administrative ................. 83,116 77,015 120,097 131,763
---------- ---------- ---------- ----------
893,724 680,984 1,231,778 1,392,973
---------- ---------- ---------- ----------
Net (loss) income ............................... $ (259,244) $ 86,001 $ 84,466 $ 141,147
========== ========== ========== ==========
Net (loss) income attributable to
Limited partners ........................... $ (256,652) $ 85,141 $ 83,621 $ 139,736
General partners ........................... (2,592) 860 845 1,411
---------- ---------- ---------- ----------
$ (259,244) $ 86,001 $ 84,466 $ 141,147
========== ========== ========== ==========
Net (loss) income per unit of limited partnership
interest (300,005 units outstanding) ....... $ (.86) $ .28 $ .28 $ .47
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
NATIONAL LEASE INCOME FUND 6 L.P.
STATEMENT OF PARTNERS' EQUITY
Limited General Total
Partners' Partners' Partners'
Equity Equity Equity
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1998 ............................. $ 14,174,898 $ 153,131 $ 14,328,029
Net income for the six months
ended June 30, 1998 ............................. 83,621 845 84,466
Distributions for the six months ended June 30,
1998 ($10.00 per limited partnership unit) ...... (3,000,050) (30,304) (3,030,354)
------------ ------------ ------------
Balance, June 30, 1998 ............................... $ 11,258,469 $ 123,672 $ 11,382,141
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
NATIONAL LEASE INCOME FUND 6 L.P.
STATEMENTS OF CASH FLOWS
For the six months ended
June 30,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income ..................................... $ 84,466 $ 141,147
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation ................................ 373,994 1,073,666
Amortization of deferred costs .............. 56,258 56,258
Changes in assets and liabilities
Other receivables and prepaid expenses ...... (13,329) 19,584
Accounts receivable ......................... -- (1,930)
Deferred costs .............................. (12,345) --
Accounts payable and accrued expenses ....... 75,362 (35,775)
Due to affiliates ........................... 126,000 (71,527)
Due from affiliates ......................... -- (26,344)
----------- -----------
Net cash provided by operating activities 690,406 1,155,079
----------- -----------
Cash flows from investing activities
Note receivable collections .................... 3,481 184,986
----------- -----------
Cash flows from financing activities
Distributions to partners ...................... -- (1,454,569)
----------- -----------
Net increase (decrease) in cash and cash equivalents 693,887 (114,504)
Cash and cash equivalents, beginning of period ...... 4,796,456 3,481,745
----------- -----------
Cash and cash equivalents, end of period ............ $ 5,490,343 $ 3,367,241
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
NATIONAL LEASE INCOME FUND 6 L.P.
NOTES TO FINANCIAL STATEMENTS
1 INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management, all adjustments (consisting only
of recurring accruals) necessary for a fair presentation of such
financial information have been included. The accompanying financial
statements, footnotes and discussions should be read in conjunction
with the financial statements, related footnotes and discussions
contained in the National Lease Income Fund 6 L.P. (the "Partnership")
annual report on Form 10-K for the year ended December 31, 1997. The
results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the results to be expected for the full year.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Leases
The Partnership accounts for all of its leases in accordance with the
operating and financing methods. For operating leases, rental revenue
is recognized on a straight-line basis and expenses (including
depreciation) are charged to operations as incurred.
For financing leases, unearned income is recognized as revenue over the
respective lease term so as to produce a constant rate of return on the
net investment.
Leased equipment and equipment held for lease or sale
The cost of leased equipment and equipment held for lease or sale
represents the initial cost of the equipment to the Partnership plus
miscellaneous acquisition and closing costs, and is carried at the
lower of depreciated cost or net realizable value.
Depreciation is computed using the straight-line method over the
estimated useful lives of such assets (five years for computer
equipment and 13 to 18 years for aircraft and aircraft-related
equipment). The Partnership capitalizes major additions to its aircraft
and depreciates such capital improvements over the remaining estimated
useful life of such aircraft.
When equipment is sold or otherwise disposed of, the cost and
accumulated depreciation (and any related allowance for equipment
impairment) are removed from the accounts and any gain or loss on such
sale or disposal is reflected in operations. Normal maintenance and
repairs are charged to operations as incurred. The Partnership provides
allowances for equipment impairment based upon a quarterly review of
all equipment in its portfolio, when management believes that, based
upon market analysis, appraisal reports and leases currently in place
with respect to specific equipment, the investment in such equipment
may not be recoverable.
The allowance is inherently subjective and is based upon management's
best estimate of current conditions and assumptions about expected
future conditions. The Partnership may provide for additional losses in
subsequent periods and such losses could be material.
<PAGE>
NATIONAL LEASE INCOME FUND 6 L.P.
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred costs
Deferred costs represent the payments made by the Partnership, based
upon the terms of a certain lease, for maintenance which enhanced the
marketability with respect to the return of certain aircraft leased to
Alaska Airlines, Inc. ("Alaska"). Deferred costs are amortized over the
terms of the remarketed lease.
Note receivable
Note receivable represents financing provided by the Partnership to a
lessee of certain aircraft for modifications made to such aircraft.
Such note was repaid in January 1998 with interest at a rate of 9.31%
per annum.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The corporate general partner of the Partnership, ALI Capital Corp.
(the "Corporate General Partner"), the managing general partner of the
Partnership, ALI Equipment Management Corp. ("Equipment Management")
and Integrated Resources Equipment Group, Inc. ("IREG") are wholly
owned subsidiaries of Presidio Capital Corp. ("Presidio"). Z Square G
Partners II was the associate general partner of the Partnership
through February 27, 1995. On February 28, 1995, Presidio Boram Corp.,
a subsidiary of Presidio, became the associate general partner. Other
limited partnerships and similar investment programs have been formed
by Equipment Management or its affiliates to acquire equipment and,
accordingly, conflicts of interest may arise between the Partnership
and such other limited partnerships. Affiliates of Equipment Management
have also engaged in business related to the management of equipment
and the sale of various types of equipment and may transact business
with the Partnership.
Subject to the rights of the Limited Partners under the Limited
Partnership Agreement, Presidio controls the Partnership through its
direct or indirect ownership of all of the shares of Equipment
Management, the Corporate General Partner and the associate general
partner. Effective July 31, 1998, Presidio is indirectly controlled by
NorthStar Capital Investment Corp., a Maryland corporation. Effective
as of August 28, 1997, Presidio has a management agreement with
NorthStar Presidio Management Company, LLC ("NorthStar Presidio")
pursuant to which NorthStar Presidio provides the day-to-day management
of Presidio and its direct and indirect subsidiaries and affiliates.
During the six months ended June 30, 1998, reimbursable expenses due to
NorthStar Presidio from the Partnership amounted to $5,872.
<PAGE>
NATIONAL LEASE INCOME FUND 6 L.P.
NOTES TO FINANCIAL STATEMENTS
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
The Partnership has a management agreement with IREG, pursuant to which
IREG receives 5% of annual gross rental revenues on operating leases;
2% of annual gross rental revenues on full payout leases which contain
net lease provisions; and 1% of annual gross rental revenues if
services are performed by third parties under the active supervision of
Equipment Management, as defined in the Limited Partnership Agreement.
The Partnership incurred equipment management fees of $59,050 and
$72,130 for the six months ended June 30, 1998 and 1997, respectively.
During the operating and liquidating stage of the Partnership, IREG is
entitled to a partnership management fee equal to 4% of cash from
operations as defined in the Limited Partnership Agreement, subject to
increase after the limited partners have received certain specified
minimum returns on their investment. The Partnership incurred
partnership management fees of $126,000 and $29,000 for the six months
ended June 30, 1998 and 1997.
The general partners are entitled to 1% of distributable cash from
operations, cash from sales or financing and cash from the equipment
reserve account and, in general, an allocation of 1% of taxable net
income or loss of the Partnership.
During the operating and liquidating stage of the Partnership, IREG may
be entitled to receive certain other fees which are subordinated to the
receipt by the limited partners of their original invested capital and
certain specified minimum returns on their investment.
Upon the ultimate liquidation of the Partnership, the general partners
may be required to remit to the Partnership certain payments
representing capital account deficit restoration based upon a formula
provided within the Limited Partnership Agreement. Such restoration
amount may be less than the recorded general partners' deficit, which
could result in distributions to the limited partners of less than
recorded equity.
In April 1995, Equipment Management and certain affiliates entered into
an agreement with Fieldstone Private Capital Group, L.P. ("Fieldstone")
pursuant to which Fieldstone performed certain management and
administrative services relating to the Partnership as well as certain
other partnerships in which Equipment Management serves as general
partner. Substantially all costs associated with the retention of
Fieldstone, other than legal fees, were paid by Equipment Management.
Fieldstone continued to perform such services until July 31, 1998.
<PAGE>
NATIONAL LEASE INCOME FUND 6 L.P.
NOTES TO FINANCIAL STATEMENTS
4 DISTRIBUTION TO PARTNERS
Distributions to the Limited Partners and General Partners of
$3,000,050 ($10.00 per unit) and $30,304, respectively, at June 30,
1998 were paid in July 1998.
5 COMMITMENTS AND CONTINGENCIES
a. Continental Micronesia, Inc.
On March 31, 1993, the Partnership leased two Boeing 727-227 Advanced
aircraft to Continental Airlines, Inc. ("Continental") for a term of
approximately 69 months to be used by Continental's Air Micronesia
operation (the "Air Mike Leases"). Each Air Mike Lease provides for a
monthly base rent of $69,250, subject to adjustments for rent credits
relating to initial modifications (the "Initial Modifications") which
include Traffic Collision Avoidance Systems, windshear detection and
upgraded avionics, aggregating approximately $1,308,000 for both
aircraft. Such modifications were funded by Continental and are being
repaid by the Partnership through the application of rent credits such
that Continental would recoup the aggregate cost of the Initial
Modifications over a 36-month period with interest at 9.31% per annum.
The remaining balance of available rent credits to be applied by
Continental towards such modifications was $100,000 as of June 30, 1998
and December 31, 1997.
In addition, Continental has made certain other modifications to such
aircraft. The Partnership has agreed to provide financing for the rent
credits ("Lessor Financing Credits") against the base rental payments
due under the Air Mike Leases. The lessee has repaid Lessor Financing
Credits through monthly installments which were being amortized at the
rate of 9.31% per annum over 36 months. Through June 30, 1998, the
Partnership had provided financing aggregating approximately
$1,308,000. Such amount, net of amounts repaid, is reflected on the
accompanying balance sheets as Note Receivable at June 30, 1998 and
December 31, 1997. The net carrying value of both aircraft aggregated
$6,841,718 and $7,215,657 (net of allowances for equipment impairment
aggregating $10,009,450 provided in prior periods) at June 30, 1998 and
December 31, 1997, respectively.
In April 1993, Continental transferred all of its rights and
obligations under the Air Mike Leases to Air Micronesia, a stand-alone
air carrier affiliated with Continental.
b. Southwest Airlines Co.
The Lease extensions with Southwest Airlines, Co. ("Southwest") dated
November 30, 1995 were scheduled to expire in December 1997. The
Partnership and Southwest agreed to a short term extension of the
leases to facilitate the return of the aircraft. In January 1998, one
of the aircraft was returned and the second was returned in August
1998. The Partnership is actively remarketing the aircraft.
<PAGE>
NATIONAL LEASE INCOME FUND 6 L.P.
NOTES TO FINANCIAL STATEMENTS
5 COMMITMENTS AND CONTINGENCIES (continued)
b. Southwest Airlines Co. (continued)
The net carrying value of the Southwest Aircraft aggregated $2,463,889
and $2,463,944 (net of allowances for equipment impairment aggregating
$10,400,000 previously provided) at June 30, 1998 and December 31,
1997, respectively.
c. Tax assessment
In July 1998, the Partnership received proposed notices of assessment
from the State of Hawaii with respect to general excise tax ("GET")
aggregating approximately $1,757,000 (including interest and penalties)
for the years 1987 through 1995. The state is alleging that GET is owed
by the Partnership with respect to rents received from Aloha Airlines,
Inc. ("Aloha") and Hawaiian Airlines, Inc. ("Hawaiian") under the
leases between the Partnership and each of the airlines.
The leases with both Aloha and Hawaiian provided for full
indemnification of the Partnership for such taxes, but the bankruptcy
of Hawaiian may relieve Hawaiian of its indemnification obligation for
any periods prior to September 21, 1993, when Hawaiian and its
affiliates sought bankruptcy protection. In any event, it is the
Partnership, as taxpayer, which is ultimately liable for GET, if it is
applicable.
The State of Hawaii has not previously applied the GET to rentals
received by a lessor of aircraft where the lessor's only contact with
the State of Hawaii is that it has leased its aircraft to airlines
which are based in the state. Aloha and Hawaiian, as well as the
Partnership, have separately engaged tax counsel and both airlines are
cooperating with the Partnership in vigorously contesting the proposed
assessments.
Final notices of assessment have not yet been issued. Although there
can be no assurance that the contest of the assessments will be
successful, the Partnership believes that the state's position on the
applicability of GET in this instance is without merit. The Partnership
has not recorded any provision or liability as a result of the proposed
notices of assessment.
6 SUBSEQUENT EVENT
On July 31, 1998, the Partnership entered into a non-binding letter of
intent to sell three aircraft for an aggregate purchase price of
approximately $6,400,000. The letter is subject to various conditions
as well as the execution of definitive documentation. Accordingly,
there can be no assurance that such sales will be consummated.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership is actively seeking to sell a significant portion of its
equipment portfolio in order to take advantage of the currently strong aircraft
market and on July 31, 1998, entered into a non-binding letter of intent to sell
three aircraft for an aggregate purchase price of approximately $6,400,000. The
letter is subject to various conditions as well as the execution of definitive
documentation. Accordingly, there can be no assurance that such sales will be
consummated.
The Partnership declared a cash distribution of $10.00 per unit of limited
partnership interest totaling $3,030,354 which was paid in July 1998. After
giving effect to the foregoing distribution, the Partnership had cash available
of approximately $2,077,536, inclusive of the original general working capital
reserve of $1,500,000.
As the Partnership's aircraft come off-lease, the Partnership may need to use
cash which would otherwise be available for distribution, to upgrade or enhance
these aircraft if the Partnership determines that such expenditures are in its
best interest in order to maximize the remarketing value of such aircraft.
Upgrades to aircraft may include "Hush Kits", which reduce the noise levels of
engines. The estimated costs of Hush Kits range from approximately $1,200,000
for Boeing 737 aircraft to approximately $2,000,000 for Boeing 727 aircraft.
Furthermore, because of market conditions, the Partnership may be required to
bear some of the related costs of compliance with mandatory federal regulations
covering maintenance and upgrading of aging aircraft.
The leasing arrangements entered into by the Partnership with respect to its
equipment generally provide for fixed or minimum rentals, and, together with
available reserves, provide reasonable assurance that all of the Partnership's
operating needs, such as administrative costs and management fees, will be met
in the foreseeable future.
Although expense levels have been reduced, most of the Partnership's future
administrative expenses (i.e., accounting and investor services including
printing) are fixed and will not decrease significantly during the Partnership's
future operating period. Other expenses such as insurance and fees to affiliates
will decline during such period.
Set forth below is a description of various transactions which have impacted the
liquidity of the Partnership during 1998 and 1997:
(i) On March 31, 1993, the Partnership leased two Boeing 727-227 Advanced
aircraft to Continental Airlines, Inc. ("Continental") for a term of
approximately 69 months to be used by Continental's Air Micronesia
operation (the "Air Mike Leases").
Each Air Mike Lease provides for a monthly base rent of $69,250,
subject to adjustments for rental credits relating to initial
modifications (the "Initial Modifications") which include Traffic
Collision Avoidance Systems, windshear detection and upgraded avionics,
aggregating approximately $1,308,000 for both aircraft. Such
modifications were funded by Continental and are being repaid by the
<PAGE>
Liquidity and Capital Resources (continued)
(i) (continued)
Partnership through the application of rental credits such that
Continental would recoup the aggregate cost of the Initial
Modifications over a 36-month period with interest at 9.31% per annum.
As of June 30, 1998, the remaining balance of available credit to be
applied by Continental towards such modifications costs was $100,000
and was included on the balance sheets as Deferred Aircraft Upgrade
Payable.
Further, Continental has made certain other modifications to the
aircraft for which the Partnership has agreed to provide financing
through credits ("Lessor Financing Credits") against base rental
payments due under the Air Mike Leases. The lessee will then repay any
Lessor Financing Credits through monthly payments which will be
amortized at the rate of 9.31% per annum over 36 months. Through June
30, 1998, the Partnership had provided financing aggregating
approximately $1,308,000 and all of such amount have been repaid. At
June 30, 1998, the net carrying value of both aircraft aggregated
$6,841,718 (net of allowances for equipment impairment aggregating
$10,009,450 provided in prior periods).
(ii) On December 5, 1997, the leases of two Boeing 737-200 aircraft (the
"Southwest Aircraft") were scheduled to expire in accordance with their
terms. The Partnership and Southwest agreed to a short term extension
of such leases to facilitate the orderly return of the Aircraft. In
January 1998, one of the aircraft was returned and the second was
returned in August 1998. At June 30, 1998, the net carrying value of
the Southwest Aircraft aggregated $2,463,889 (net of allowances for
equipment impairment aggregating $10,400,000 previously provided).
As of June 30, 1998, the Partnership remained the owner of four aircraft and
related engines as well as additional aircraft engine components, which in the
aggregate represented 100% of its remaining equipment, on an original cost
basis. Such aircraft and engine had an original cost of approximately
$54,413,000 (net carrying value of approximately $9,306,000). All associated
nonrecourse debt related to the aircraft has been repaid. At June 30, 1998,
equipment with an original cost of approximately $8,041,000 is off-lease (on an
original cost basis).
<PAGE>
Liquidity and Capital Resources (continued)
At the present time, the level of fees payable to IREG for services rendered to
the Partnership and other affiliated equipment leasing partnerships is
declining. The effect of this situation cannot be determined at this point. The
management agreements between the Partnership and IREG may be terminated by
either party to such agreements.
In July 1998, the Partnership received proposed notices of assessment from the
State of Hawaii with respect to general excise tax ("GET") aggregating
approximately $1,757,000 (including interest and penalties) for the years 1987
through 1995. The state is alleging that GET is owed by the Partnership with
respect to rents received from Aloha Airlines, Inc. ("Aloha") and Hawaiian
Airlines, Inc. ("Hawaiian") under the leases between the Partnership and each of
the airlines.
The leases with both Aloha and Hawaiian provided for full indemnification of the
Partnership for such taxes, but the bankruptcy of Hawaiian may relieve Hawaiian
of its indemnification obligation for any periods prior to September 21, 1993,
when Hawaiian and its affiliates sought bankruptcy protection. In any event, it
is the Partnership, as taxpayer, which is ultimately liable for GET, if it is
applicable.
The State of Hawaii has not previously applied the GET to rentals received by a
lessor of aircraft where the lessor's only contact with the State of Hawaii is
that it has leased its aircraft to airlines which are based in the state. Aloha
and Hawaiian, as well as the Partnership, have separately engaged tax counsel
and both airlines are cooperating with the Partnership in vigorously contesting
the proposed assessments.
Final notices of assessment have not yet been issued. Although there can be no
assurance that the contest of the assessments will be successful, the
Partnership believes that the state's position on the applicability of GET in
this instance is without merit. The Partnership has not recorded any provision
or liability as a result of the proposed notices of assessment.
Inflation and changing prices have not had any material effect on the
Partnership's revenues since its inception nor does the Partnership anticipate
any material effect on its business from these factors.
Results of Operations
Net income decreased for the three and six month periods ended June 30, 1998 as
compared to the three and six month periods ended June 30, 1997, due to the
reduction in revenue which was more than offset by the overall reduction in
expenses.
Revenues decreased overall for the three and six month periods ended June 30,
1998 compared to the corresponding periods of the prior year. Rental income
decreased due to the expiration of the Southwest lease in accordance with its
terms subsequent to the prior year's period.
Interest income increased for the three and six month periods ended June 30,
1998 compared to the corresponding periods of the prior year due to higher cash
balances available for short term investments.
Expenses increased for the quarter ended June 30, 1998 but decreased overall for
the six months ended June 30, 1998 as compared to the corresponding periods of
the prior year as follows:
<PAGE>
Results of Operations (continued)
Operating expenses increased for the three and six month periods ended June 30,
1998 as compared to the corresponding periods of the prior year due to costs
associated with the off-lease aircraft in order to comply with certain
airworthiness directives issued by the Federal Aviation Authority as well as
expenses related to the return and storage of the aircraft.
Depreciation expense decreased resulting from the disposition of certain
equipment subsequent to the prior year's period, as well as to the fact that
certain equipment reached salvage value prior to the current year's period.
Fees to affiliates increased due to an increase in partnership management fees
resulting from an increase in distributable cash from operations offset by lower
equipment management fees due to reduced rentals on which such fee is based.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on form 8-K: None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Lease Income Fund 6 L.P.
By: ALI Equipment Management Corp.
Managing General Partner
/s/ Richard Sabella
------------------------
Richard Sabella
President
/s/ Lawrence Schachter
-----------------------
Lawrence Schachter
Senior Vice President and Chief
Financial Officer
Date: August 7, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the financial
statements of the June 30, 1998 Form 10-Q of National Lease Income Fund 6 L.P.
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 5,490,343
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,598,108
<PP&E> 32,835,669
<DEPRECIATION> 23,530,062
<TOTAL-ASSETS> 14,903,715
<CURRENT-LIABILITIES> 3,521,574
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,382,141
<TOTAL-LIABILITY-AND-EQUITY> 14,903,715
<SALES> 0
<TOTAL-REVENUES> 1,316,244
<CGS> 0
<TOTAL-COSTS> 857,784
<OTHER-EXPENSES> 373,994
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 84,466
<INCOME-TAX> 0
<INCOME-CONTINUING> 84,466
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,466
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
