UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
Amendment No. 1
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_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
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
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Commission File No. 33-10122
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POLARIS AIRCRAFT INCOME FUND III,
A California Limited Partnership
State of Organization: California
IRS Employer Identification No. 94-3023671
201 High Ridge Road, Stamford, Connecticut 06927
Telephone - (203) 357-3776
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
This document consists of 4 pages.
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The undersigned registrant hereby amends Item 2 of its Quarterly Report on Form
10-Q for the period ended June 30, 1998 in its entirety as follows:
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
At June 30, 1998, Polaris Aircraft Income Fund III (the Partnership) owned a
portfolio of 10 used McDonnell Douglas DC-9-30 aircraft leased to Trans World
Airlines, Inc. (TWA) and certain inventoried aircraft parts out of its original
portfolio of 38 aircraft. The Partnership transferred three McDonnell Douglas
DC-9-10 aircraft and six Boeing 727-100 aircraft to aircraft inventory in 1992.
The inventoried aircraft have been disassembled for sale of their component
parts.
Partnership Operations
The Partnership recorded net income of $1,437,265, or $2.57 per limited
partnership unit, for the three months ended June 30, 1998, as compared to net
income of $1,868,968, or $3.08 per limited partnership unit, for the three
months ended June 30, 1997. The Partnership recorded net income of $2,577,090 or
$4.21 per limited partnership unit, for the six months ended June 30, 1998
compared to net income of $2,454,358, or $3.61 per limited partnership unit, for
the six months ended June 30, 1997.
Rental revenues, management fees and depreciation decreased during the three and
six months ended June 30, 1998, as compared to the same periods in 1997,
primarily due to the sale of aircraft to Triton Aviation Services III LLC
(Triton) in 1997.
The Partnership recorded other income of $785,094 during the six months ended
June 30, 1997. This other income was primarily the result of the receipt of
$743,476 during the second quarter of 1997 related to amounts due under the TWA
maintenance credit and rent deferral agreement.
Interest income decreased during the three and six months ended June 30, 1998,
as compared to the same periods in 1997, due to the payoff of notes receivable
from Continental Airlines, Inc. and Triton during 1997.
Interest expense decreased during the three and six months ended June 30, 1998,
as compared to the same periods in 1997, due to the continuing principal
payments on the TWA hushkit notes payable.
Operating expenses increased during the three and six months ended June 30, 1998
as compared to the same periods in 1997, due to an increase in legal expenses
related to the sale of the remaining aircraft.
The increase in the deferred income balance at June 30, 1998 is attributable to
differences between the payments due and the rental income earned on the TWA
leases for the 10 aircraft currently on lease to TWA. For income recognition
purposes, the Partnership recognizes rental income over the life of the lease in
equal monthly amounts. As a result, the difference between rental income earned
and the rental payments due is recognized as deferred income. The rental
payments due from TWA during the three and six months ended June 30, 1998
exceeded the rental income earned on the TWA leases, causing an increase in the
deferred income balance.
Liquidity and Cash Distributions
Liquidity - The Partnership received all lease payments from its sole lessee,
TWA, except for the June 1998 lease payment. On July 2, 1998, the Partnership
received its $850,000 rental payment from TWA that was due on June 27, 1998.
This amount was included in rent and other receivables on the balance sheet at
June 30, 1998. In addition, payments totaling $141,981 have been received during
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the first six months of 1998 from the sale of parts from the nine disassembled
aircraft, as compared to payments of $296,247 during the same period in 1997.
Polaris Investment Management Corporation, the general partner, has determined
that the Partnership maintain cash reserves as a prudent measure to ensure that
the Partnership has available funds in the event that the aircraft presently on
lease to TWA require remarketing and for other contingencies, including expenses
of the Partnership. The Partnership's cash reserves will be monitored and may be
revised from time to time as further information becomes available in the
future.
Cash Distributions - Cash distributions to limited partners during the three
months ended June 30, 1998 and 1997 were $1,449,884, or $2.90 per limited
partnership unit, and $3,125,000, or $6.25 per limited partnership unit,
respectively. Cash distributions to limited partners during the six months ended
June 30, 1998 and 1997 were $16,248,700, or $32.50 per limited partnership unit,
and $6,250,000, or $12.50 per limited partnership unit, respectively. The
increase, as compared to 1997, is due to the distribution of the proceeds
received from the prepayment of a note due from Triton Aviation Services III LLC
on December 30, 1997. The timing and amount of future cash distributions are not
yet known and will depend on the Partnership's future cash requirements
(including expenses of the Partnership) and need to retain cash reserves as
previously discussed in the Liquidity section; and the receipt of rental
payments from TWA.
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SIGNATURE
Pursuant to the requirements of section 13 or 15(d) 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.
POLARIS AIRCRAFT INCOME FUND III,
A California Limited Partnership
(Registrant)
By: Polaris Investment
Management Corporation,
General Partner
August 24, 1998 By: /S/Marc A. Meiches
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Marc A. Meiches
Chief Financial Officer
(principal financial officer and
principal accounting officer of
Polaris Investment Management
Corporation, General Partner of
the Registrant)
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