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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-15643
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NATIONAL LEASE INCOME FUND 6 L.P.
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(Exact name of Registrant as specified in its charter)
DELAWARE 13-3275922
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
FIVE CAMBRIDGE CENTER, CAMBRIDGE, MA 02142-1493
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
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Indicate by check mark whether 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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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2000 1999
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Assets
Cash and cash equivalents $ 208,374 $ 7,064,263
Prepaid expenses and other assets -- 18,372
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Total Assets $ 208,374 $ 7,082,635
========= ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 60,446 $ 88,329
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Total Liabilities 60,446 88,329
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Partners' Equity:
Limited partners' equity (300,005 units
issued and outstanding) 136,598 6,914,512
General partners' equity 11,330 79,794
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Total Partners' Equity 147,928 6,994,306
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Total Liabilities and Partners' Equity $ 208,374 $ 7,082,635
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See notes to financial statements.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
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<S> <C> <C>
Revenues:
Rental $ -- $ 623,250
Interest 126,617 124,387
Other 39,583 49,731
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Total revenues 166,200 797,368
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Costs and Expenses:
Provision for equipment impairment -- 1,032,000
Depreciation -- 280,455
General and administrative 141,917 181,679
Operating, net of refunds (69,339) 129,626
Fees to affiliates -- 31,163
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Total costs and expenses 72,578 1,654,923
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Income (loss) before gain on sale of Aircraft 93,622 (857,555)
Gain on sale of aircrafts, net -- 22,709
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Net income (loss) $ 93,622 $ (834,846)
========= ===========
Net income (loss) attributable to:
Limited partners $ 92,686 $ (826,498)
General partners 936 (8,348)
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$ 93,622 $ (834,846)
========= ===========
Net income (loss) per unit of limited partnership
interest (300,005 units outstanding) $ .31 (2.75)
========= ===========
</TABLE>
See notes to financial statements.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED
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SEPTEMBER 30, SEPTEMBER 30,
2000 1999
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Revenues:
Rental $ -- $ 207,750
Interest 3,174 57,031
Other 950 2,206
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Total revenues 4,124 266,987
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Costs and Expenses:
Provision for equipment impairment -- 245,000
Depreciation -- 93,485
General and administrative 39,393 63,700
Operating, net of refund -- 30,331
Fees to affiliates -- 10,388
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Total costs and expenses 39,393 442,904
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Loss before gain on sale of Aircraft (35,269) (175,917)
Gain on sale of aircrafts, net -- 22,709
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Net loss $ (35,269) $ (153,208)
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Net loss attributable to:
Limited partners $ (34,916) $ (151,676)
General partners (353) (1,532)
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$ (35,269) $ (153,208)
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Net loss per unit of limited partnership
interest (300,005 units) $ (.12) $ (.50)
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See notes to financial statements.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
STATEMENT OF PARTNERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
LIMITED GENERAL TOTAL
PARTNERS' PARTNERS' PARTNERS'
EQUITY EQUITY EQUITY
------------ --------- ------------
<S> <C> <C> <C>
Balance - January 1, 2000 $ 6,914,512 $ 79,794 $ 6,994,306
Net income 92,686 936 93,622
Distributions to Partners ($22.90 per
limited partnership unit) (6,870,600) (69,400) (6,940,000)
------------ --------- ------------
Balance - September 30, 2000 $ 136,598 $ 11,330 $ 147,928
============ ========= ============
</TABLE>
See notes to financial statements.
5 of 13
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
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<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 93,622 $ (834,846)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Provision for equipment impairment -- 1,032,000
Depreciation -- 280,455
Gain on sale of aircrafts, net -- (22,709)
Changes in assets and liabilities:
Other receivables and prepaid expenses 18,372 (10,581)
Deferred costs -- (33,535)
Accounts payable and accrued expenses (27,883) (151,565)
Due to affiliates -- (14,941)
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Net cash provided by operating activities 84,111 244,278
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Cash Flows from Investing Activities:
Proceeds from sale of aircrafts, net -- 2,271,490
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Cash provided by investing activities -- 2,271,490
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Cash Flows from Financing Activities:
Distribution to Partners (6,940,000) --
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Cash used in financing activities (6,940,000) --
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Net (decrease) increase in cash and cash equivalents (6,855,889) 2,515,768
Cash and cash equivalents, beginning of period 7,064,263 2,287,311
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Cash and cash equivalents, end of period $ 208,374 $ 4,803,079
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</TABLE>
See notes to financial statements.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
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,
1999. The financial information contained herein is unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of
such financial information have been included. All adjustments are of a
normal recurring nature. The balance sheet at December 31, 1999 was derived
from audited financial statements at such date.
The results of operations for the three and nine months ended September 30,
2000 and 1999 are not necessarily indicative of the results to be expected
for the full year.
2. CONFLICTS OF INTEREST AND TRANSACTION WITH RELATED PARTIES
The general partners of the Partnership are ALI Equipment Management Corp.
(the "Managing General Partner"), ALI Capital Corp. ("Corporate General
Partner") and Presidio Boram Corp. ("Associate General Partner"), all of
which are direct or indirect subsidiaries of Presidio Capital Corp.
("Presidio").
Subject to the provisions of the Agreement of Limited Partnership
("Partnership Agreement"), Presidio controls the Partnership through its
direct or indirect ownership of all of the shares of the Managing General
Partner, the Corporate General Partner and the Associate General Partner
(collectively the "General Partners"). On August 28, 1997, an affiliate of
NorthStar Capital Partners acquired all of the Class B shares of Presidio.
This acquisition, when aggregated with previous acquisitions, caused
NorthStar Capital Partners to acquire indirect control of the General
Partners. Effective July 31, 1998, Presidio is indirectly controlled by
NorthStar Capital Investment Corp. ("NorthStar"), a Maryland corporation.
On August 28, 1997, Presidio entered into a management agreement with
NorthStar Presidio Management Company, LLC ("NorthStar Presidio"). Under
the terms of the management agreement, NorthStar Presidio provided, until
October 21, 1999, the day-to-day management of Presidio and its direct and
indirect subsidiaries and affiliates. During the nine months ended
September 30, 1999 reimbursable expenses to NorthStar Presidio from the
Partnership amounted to $15,000.
On October 21, 1999, Presidio entered into a new Services Agreement with
AP-PCC III, L.P. (the "Agent") pursuant to which the Agent was retained and
is compensated by Presidio to provide asset management and investor
relation services to the Partnership and other entities affiliated with the
Partnership, which were previously provided by NorthStar Presidio.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
NOTES TO FINANCIAL STATEMENTS
2. CONFLICTS OF INTEREST AND TRANSACTION WITH RELATED PARTIES (CONTINUED)
As a result of this agreement, the Agent has the duty to direct the day to
day affairs of the Partnership, including, without limitation, reviewing
and analyzing potential sale, financing or restructuring proposals
regarding the Partnership's assets, preparation of all Partnership reports,
maintaining Partnership records and maintaining bank accounts of the
Partnership. The Agent is not permitted, however, without the consent of
Presidio, or as otherwise required under the terms of the Partnership
Agreement to, among other things, cause the Partnership to acquire an asset
or file for bankruptcy.
The Partnership has a management agreement with Integrated Resources
Equipment Group, Inc. ("IREG") pursuant to which IREG receives equipment
management fees of 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 Partnership Agreement. The Partnership
incurred equipment management fees of $31,163, for the nine months ended
September 30, 1999. No such fees were incurred during 2000.
During the operating and liquidating stage of the Partnership, IREG may be
entitled to a partnership management fee equal to 4% of cash from
operations as defined in the Partnership Agreement, subject to increase
after the limited partners have received certain specified minimum returns
on their investment. In addition, 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.
The general partners are entitled to 1% of distributable cash from
operations, cash from sales or financing and cash from the equipment
reserve accounts and an allocation of 1% of taxable net income or loss of
the Partnership. The general partner received $69,400 in distributions for
the nine months ended September 30, 2000.
3. AIRCRAFT SALES
On April 20, 1999, the Partnership sold one Boeing 737-200 aircraft to an
unaffiliated third party for proceeds of approximately $1,250,000,
exclusive of selling expenses of approximately $52,000. At the time of
sale, the aircraft had a net carrying value of approximately $1,198,000. At
March 31, 1999, the Partnership recorded a provision for equipment
impairment of approximately $34,000 with respect to this aircraft.
On May 5, 1999, a Boeing 737-200 aircraft owned by the Partnership was sold
to an unaffiliated third party for proceeds of approximately $1,100,000,
exclusive of selling expenses of approximately $49,000. At the time of
sale, the aircraft had a net carrying value of approximately $1,051,000. At
March 31, 1999, the Partnership recorded a provision for equipment
impairment of approximately $181,000 with respect to this aircraft.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
NOTES TO FINANCIAL STATEMENTS
3. AIRCRAFT SALES (CONTINUED)
On September 23, 1999, the Partnership sold an aircraft engine and
components to an unaffiliated third party for proceeds of $22,709. At the
time of sale, the engine and components had a net carrying value of zero.
On October 20, 1999, the Partnership sold one Boeing 727-227 aircraft to an
unaffiliated third party for proceeds of approximately $2,261,000,
exclusive of selling expenses of approximately $125,000. At the time of
sale, the aircraft had a net carrying value of approximately $2,136,000. At
September 30, 1999, the Partnership recorded an additional provision for
equipment impairment of $245,000 with respect to this aircraft. During the
quarter ended June 30, 1999, the Partnership had recorded a provision for
equipment impairment of $572,000.
4. DISTRIBUTIONS TO PARTNERS
In February 2000, the Partnership declared and paid a $3,000,000
distribution to partners, of which the Limited Partners collectively
received $2,970,000 or $9.90 per unit. In June 2000, the Partnership
declared and paid a $3,940,000 distribution to partners, of which the
Limited Partners collectively received $3,900,600 or $13.00 per unit.
5. COMMITMENTS AND CONTINGENCIES
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 the Partnership owes GET 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.
The Partnership recently reached a settlement with Aloha pursuant to which
Aloha agreed to indemnify the Partnership for any costs it may ultimately
incur. The Partnership has further been advised that Hawaiian is pursuing a
legislative remedy. In addition, both the Partnership and Hawaiian have
independently filed an appeal with the taxing authority of the State of
Hawaii challenging such assessment. 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.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosure contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Partnership from time to
time. The discussion of the Partnership's liquidity, capital resources and
results of operations, including forward-looking statements pertaining to
such matters, does not take into account the effects of any changes to the
Partnership's operations. Accordingly, actual results could differ
materially from those projected in the forward-looking statements as a
result of a number of factors, including those identified herein.
This Item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.
Liquidity and Capital Resources
The Partnership's level of liquidity based upon cash and cash equivalents
decreased by $6,855,889 during the nine months ended September 30, 2000, as
compared to December 31, 1999. The decrease is due to a $6,940,000
distribution to partners which was partially offset by $84,111 of cash
provided by operating activities.
In February 2000, the Partnership declared and paid a $3,000,000
distribution to partners, of which the Limited Partners collectively
received $2,970,000 or $9.90 per unit. In June 2000, the Partnership
declared and paid a $3,940,000 distribution to partners, of which the
Limited Partners collectively received $3,900,600 or $13.00 per unit. It is
anticipated at this time that no further distributions will be made to
partners until the resolution of the Hawaiian GET matter (see below).
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 the Partnership owes GET 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.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources (Continued)
The Partnership recently reached a settlement with Aloha pursuant to which
Aloha agreed to indemnify the Partnership for any costs it may ultimately
incur. The Partnership has further been advised that Hawaiian is pursuing a
legislative remedy. 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.
Upon resolution of the tax examination relating to the GET, the Managing
General Partner will then prepare a final accounting of the Partnership's
assets and liabilities, commence the dissolution and termination of the
Partnership and make a final distribution to partners.
Results of Operations
Net income increased for the nine month period ended September 30, 2000, as
compared to the nine month periods ended September 30, 1999, principally
due to a decrease in costs and expenses partially offset by decreased
revenues. Net loss decreased for the three months ended September 30, 2000,
as compared to 1999 due to a decrease in costs and expense partially offset
by decreased revenue.
Revenues decreased overall for the three and nine month periods ended
September 30, 2000, as compared to the corresponding periods of the prior
year. Rental income decreased due to the sale of all equipment prior to
2000.
Interest income increased for the nine month period ended September 30,
2000, compared to the corresponding period of the prior year due to higher
cash balances available for short term investments. Interest income
decreased for the three month period ended September 30, 2000 compared to
the corresponding period of prior year due to a lower cash balances
available for short term investment resulting from distributions to
partners in February and June 2000.
Expenses decreased overall for the three and nine month periods ended
September 30, 2000, as compared to the corresponding periods of the prior
year primarily due to no equipment operations in 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is not subject to market risk as its cash and cash
equivalents are invested in short term money market mutual funds. The
Partnership has no loans outstanding.
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NATIONAL LEASE INCOME FUND 6, L.P.
FORM 10-Q SEPTEMBER 30, 2000
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
a. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits: 27. Financial Data Schedule
b. Reports on Form 8-K: On August 2, 2000, the Registrant filed an
8-K to disclosed the dismissal of its prior independent auditors
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q SEPTEMBER 30, 2000
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant 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.
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Managing General Partner
BY: /S/ MICHAEL L. ASHNER
---------------------------------
Michael L. Ashner
President and Director
(Principal Executive Officer)
BY: /S/ CAROLYN B. TIFFANY
---------------------------------
Carolyn B. Tiffany
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Dated: November 14, 2000
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