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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 JUNE 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 JUNE 30, 2000
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Balance Sheets (Unaudited)
JUNE 30, DECEMBER 31,
2000 1999
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ASSETS
Cash and cash equivalents $ 221,898 $7,064,263
Prepaid expenses and other assets -- 18,372
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Total Assets $ 221,898 $7,082,635
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LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 38,701 $ 88,329
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Total Liabilities 38,701 88,329
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Partners' Equity:
Limited partners' equity (300,005 units
issued and outstanding) 171,514 6,914,512
General partners' equity 11,683 79,794
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Total Partners' Equity 183,197 6,994,306
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Total Liabilities and Partners' Equity $ 221,898 $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 JUNE 30, 2000
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED
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JUNE 30, JUNE 30,
2000 1999
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Revenues:
Rental $ -- $ 415,500
Interest 123,443 67,356
Other 38,633 47,525
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Total revenues 162,076 530,381
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Costs and Expenses:
Provision for equipment impairment -- 787,000
Depreciation -- 186,970
General and administrative 102,524 117,979
Operating, net of refunds (69,339) 99,295
Fees to affiliates -- 20,775
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Total costs and expenses 33,185 1,212,019
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Net income (loss) $ 128,891 $ (681,638)
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Net income (loss) attributable to:
Limited partners $ 127,602 $ (674,822)
General partners 1,289 (6,816)
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$ 128,891 $ (681,638)
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Net income (loss) per unit of limited partnership
interest (300,005 units outstanding) $ .43 $ (2.25)
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See notes to financial statements.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q JUNE 30, 2000
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED
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JUNE 30, JUNE 30,
2000 1999
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Revenues:
Rental $ -- $ 207,750
Interest 44,870 42,667
Other 1,700 4,620
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Total revenues 46,570 255,037
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Costs and Expenses:
Provision for equipment impairment -- 572,000
Depreciation -- 93,485
General and administrative 63,373 59,962
Operating, net of refund (12,315) 46,287
Fees to affiliates -- 10,387
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Total costs and expenses 51,058 782,121
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Net loss $ (4,488) $(527,084)
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Net loss attributable to:
Limited partners $ (4,443) $(521,813)
General partners (45) (5,271)
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$ (4,488) $(527,084)
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Net loss per unit of limited partnership
interest (300,005 units) $ (.01) $ (1.74)
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See notes to financial statements.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q JUNE 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 127,602 1,289 128,891
Distributions to Partners ($22.90 per
limited partnership unit) (6,870,600) (69,400) (6,940,000)
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Balance - June 30, 2000 $ 171,514 $ 11,683 $ 183,197
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</TABLE>
See notes to financial statements.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q JUNE 30, 2000
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
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JUNE 30, JUNE 30,
2000 1999
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<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 128,891 $ (681,638)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Provision for equipment impairment -- 787,000
Depreciation -- 186,970
Changes in assets and liabilities:
Other receivables and prepaid expenses 18,372 (19,186)
Deferred costs -- (3,467)
Accounts payable and accrued expenses (49,628) (168,088)
Due to affiliates -- (25,329)
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Net cash provided by operating activities 97,635 76,262
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Cash Flows from Investing Activities:
Proceeds from sale of aircraft, net -- 2,248,781
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Cash provided by investing activities -- 2,248,781
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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 (6,842,365) 2,325,043
Cash and cash equivalents, beginning of period 7,064,263 2,287,311
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Cash and cash equivalents, end of period $ 221,898 $ 4,612,354
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</TABLE>
See notes to financial statements
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The summarized financial information of National Lease Income Fund 6 L.P.
(the "Partnership") 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 Partnership's annual report on
Form 10-K for the year ended December 31, 1999. The accounting policies
used in preparing these financial statements are consistent with those
described in the December 31, 1999 financial statements. The results of
operations for the six months ended June 30, 2000 are not necessarily
indicative of the results to be expected for the year ending December 31,
2000.
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 rights of the limited partners in 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.
In 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 the
day-to-day management of Presidio and its direct and indirect subsidiaries
and affiliates. During the six months ended June 30, 2000 and 1999
reimbursable expenses to NorthStar Presidio from the Partnership amounted
to $0 and $7,500, respectively.
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 to
provide asset management and investor relation services to the Partnership
and other entities affiliated with the Partnership.
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.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
2. CONFLICTS OF INTEREST AND TRANSACTION WITH RELATED PARTIES (CONTINUED)
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 $20,775, for the six months ended
June 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 six months ended June 30, 2000.
3. COMMITMENTS AND CONTINGENCIES
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 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.
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Tax assessment (Continued)
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. 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.
4. AIRCRAFT SALE
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 JUNE 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 $6,842,365 during the six months ended June
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
$97,635 of cash provided by operating activities.
As of December 31, 1999, the Partnership had sold all of its equipment
with a view towards wrapping up the business affairs of the
Partnership.
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 not anticipated at this time that any 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 JUNE 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 three and six month periods ended June
30, 2000, as compared to the three and six months periods ended June
30, 1999, principally due to a decrease in costs and expenses
partially offset by decreased revenues.
Revenues decreased overall for the three and six month periods ended
June 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 three and six month periods ended
June 30, 2000, compared to the corresponding periods of the prior year
due to higher cash balances available for short term investments.
Expenses decreased overall for the three and six month periods ended
June 30, 2000, as compared to the corresponding period 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 JUNE 30, 2000
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
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NATIONAL LEASE INCOME FUND 6 L.P.
FORM 10-Q JUNE 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
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Michael L. Ashner
President and Director
(Principal Executive Officer)
BY: /s/ CAROLYN B. TIFFANY
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Carolyn B. Tiffany
Vice President and Treasurer
(Principal Financial and Accounting Officer)
Dated: August 14, 2000
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