UNITED STATES 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, 1994
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: 0-16836
JETSTREAM, L.P.
(Exact name of registrant as specified in its charter)
Delaware 84-1053359
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, New York, NY 10285
(Address of principal executive offices) (Zip code)
(212) 526-3237
(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
Balance Sheets
June 30, December 31,
Assets 1994 1993
Aircraft, at adjusted cost $ 25,334,000 $ 25,684,000
Less-accumulated depreciation (2,612,238) ---
22,721,762 25,684,000
Cash and cash equivalents 1,439,752 1,089,805
Restricted cash 1,782,453 3,048,884
Rent receivable 20,000 20,000
Interest receivable 4,000 7,303
Loan receivable 272,574 ---
Prepaid expenses --- 36,841
Total Assets $ 26,240,541 $ 29,886,833
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 252,702 $ 252,007
Maintenance payable --- 791,000
Distribution payable 1,289,752 939,805
Deferred revenue 170,000 150,000
Security deposit --- 80,000
Total Liabilities 1,712,454 2,212,812
Partners' Capital (Deficit):
General Partners (732,731) (701,271)
Limited Partners 25,260,818 28,375,292
Total Partners' Capital 24,528,087 27,674,021
Total Liabilities and
Partners' Capital $ 26,240,541 $ 29,886,833
Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1994 1993 1994 1993
Rental $1,395,000 $1,297,321 $2,340,000 $2,934,182
Interest 18,614 35,791 47,041 46,632
Other --- --- 13,228 ---
Total Income 1,413,614 1,333,112 2,400,269 2,980,814
Expenses
Depreciation 1,306,119 1,533,957 2,612,238 3,067,914
Management fees 116,238 85,860 200,769 198,577
General and administrative 45,751 49,363 121,043 109,157
Operating 13,344 23,425 59,394 31,456
Total Expenses 1,481,452 1,692,605 2,993,444 3,407,104
Net Loss $ (67,838) $ (359,493) $ (593,175) $ (426,290)
Net Loss Allocated:
To the General Partners $ (679) $ (3,595) $ (5,932) $ (4,263)
To the Limited Partners (67,159) (355,898) (587,243) (422,027)
$ (67,838) $ (359,493) $ (593,175) $ (426,290)
Per limited partnership unit
(4,895,005 outstanding) $ (0.01) $ (0.08) $ (0.12) $ (0.09)
Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1994
Limited General Total
Partners' Partners' Partners'
Capital (Deficit) Capital
Balance at December 31, 1993 $28,375,292 $ (701,271) $ 27,674,021
Net Loss (587,243) (5,932) (593,175)
Cash distributions (2,527,231) (25,528) (2,552,759)
Balance at June 30, 1994 $ 25,260,818 $ (732,731) $ 24,528,087
Statements of Cash Flows
For the six months ended June 30, 1994 and 1993
Cash Flows from Operating Activities: 1994 1993
Net loss $ (593,175) $ (426,290)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 2,612,238 3,067,914
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash 1,266,431 ---
Rent receivable --- (5,000)
Interest receivable 3,303 (8,604)
Prepaid expenses 36,841 (28,205)
Accounts payable and accrued expenses 695 (50,919)
Maintenance payable (791,000) ---
Deferred revenue 20,000 (168,720)
Security deposit (80,000) ---
Net cash provided by operating activities 2,475,333 2,380,176
Cash Flows from Investing Activities:
Proceeds from sale of aircraft - net 350,000 ---
Loan receivable (272,574) ---
Net cash provided by investing activities 77,426 ---
Cash Flows from Financing Activities:
Cash distributions (2,202,812) (3,213,892)
Net cash used for financing activities (2,202,812) (3,213,892)
Net increase (decrease) in
cash and cash equivalents 349,947 (833,716)
Cash and cash equivalents
at beginning of period 1,089,805 2,417,644
Cash and cash equivalents at end of period $1,439,752 $1,583,928
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1993 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments consisting of only
normal recurring accruals which are, in the opinion of management, necessary to
present a fair statement of financial position as of June 30, 1994 and the
results of operations, changes in partners' capital (deficit), and cash flows
for the six months then ended. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
The following significant events have occurred subsequent to fiscal year 1993,
and material contingencies exist that require disclosure in this interim report
per Regulation S-X, Rule 10-01, Paragraph (a)(5).
(1) On February 9, 1994, Continental entered into a new lease agreement.
The agreement between Continental and the Partnership provides for Continental
to lease the plane for a term of four years. Effective March 15, 1994,
Continental shall pay $180,000 per month in advance. In addition, the
Partnership made a one-time payment of $750,000 in March 1994 to perform
various maintenance work on the plane. Also, the Partnership has agreed to
provide up to $600,000 of financing to Continental to perform modification work
on the aircraft including advanced avionics, interior furnishings and exterior
paint. The modification financing is repayable over the life of the lease at
an interest rate of 8% per annum for advances made before February 1, 1996, and
with respect to advances made after February 1, 1996, a rate per annum equal to
the yield to maturity of United States Treasury Notes having a maturity closest
to the remaining term of the lease, plus 4.25 percent. On June 7, 1994, the
Partnership made its first advance to Continental in the amount of $278,203.
(2) The current lease agreement with Delta for the Partnership's 737-200
advanced aircraft was scheduled to expire in December 1994. However, in early
May 1994, Delta exercised its option to extend the lease for a term of two
years from the previous expiration date, with the remaining terms of the lease
unchanged.
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
As of June 30, 1994, the Partnership had all seven of its aircraft on lease.
Two aircraft were on lease to USAir, Inc. ("USAir"), three aircraft were on
lease to Trans World Airlines Inc. ("TWA"), one aircraft was on lease to Delta
Air Lines, Inc. ("Delta") and one aircraft was on lease to Continental Airlines
("Continental"). In early May 1994, Delta exercised its option to extend the
lease for the Partnership's 737-200 advanced aircraft for a term of two years
from the previous expiration date in December 1994, with the remaining terms of
the lease unchanged. At June 30, 1994, all airlines were current on their
lease obligations.
Pursuant to the terms of the lease agreement executed with Continental in
February 1994, the Partnership agreed to provide up to $600,000 of financing to
the airline to perform modification work on the Partnership's MD-80 Series
aircraft, including advanced avionics, interior furnishings and exterior paint.
On June 7, 1994, the Partnership made its first advance to Continental in the
amount of $278,203. The modification financing is repayable over the life of
the lease at an interest rate of 8% per annum for advances made before February
1, 1996, and, with respect to advances made after February 1, 1996, a rate per
annum equal to the yield to maturity of United States Treasury Notes having a
maturity closest to the remaining terms of the lease, plus 4.25 percent.
The Partnership is faced with an increasingly competitive environment in the
aircraft leasing industry which has had an immediate and material impact on the
business of the Partnership. In particular, the large oversupply of aircraft
available for lease has resulted in significant reductions in market lease
rates thereby impacting the lease rates obtained by the Partnership as leases
for the aircraft have been either renewed or extended. The General Partners
are currently attempting to negotiate lease extensions or renewals for the
Partnership's three 727-200 aircraft on lease to TWA, the leases for which
expire on October 31, 1994 (one aircraft) and November 30, 1994 (two aircraft).
The General Partners anticipate that, even if the leases for these three
aircraft are renewed or extended, it will result in a decline in the
Partnership's cash flow. If efforts to negotiate a lease renewal or extension
with TWA are unsuccessful, the General Partners believe it will be very
difficult to re-lease the aircraft to another airline. In the event that
efforts to re-lease the aircraft are ultimately unsuccessful, the General
Partners will evaluate the potential sale of the aircraft.
At June 30, 1994, the Partnership had cash and cash equivalents of $1,439,752,
as compared to $1,089,805 at December 31, 1993. The $349,947 increase in cash
and cash equivalents is primarily attributable to the re-leasing of the
Partnership's MD-80 Series aircraft with Continental commencing in March 1994.
The Partnership's restricted cash totalled $1,782,453 at June 30, 1994, as
compared to $3,048,884 at December 31, 1993. At June 30, 1994, the
Partnership's restricted cash was comprised of aircraft maintenance reserves.
At December 31, 1993, the Partnership's restricted cash was comprised of: (i)
$2,968,884 of aircraft maintenance reserves; and (ii) an $80,000 security
deposit from Carnival, which was subsequently returned to Carnival in February
1994, as a result of the termination of its lease. At December 31, 1993, a
portion of the aircraft maintenance reserves are also reflected as a liability
under "maintenance payable" and Carnival's security deposit is reflected as a
liability under "security deposit." The $1,266,431 decrease in restricted
cash from December 31, 1993 to June 30, 1994 is comprised of: (i) $750,000 paid
to Continental in March 1994 in accordance with their new lease agreement; (ii)
$121,000 paid to Carnival in February 1994 to reimburse their security deposit
and a portion of maintenance costs incurred while leasing the Partnership's
aircraft; (iii) $117,228 which was transferred from restricted to operating
cash and included in the first quarter 1994 distribution; and (iv) $278,203
which was loaned to Continental on June 7, 1994 pursuant to the terms of the
lease agreement discussed above.
On April 29, 1994, the Partnership paid a cash distribution to the Unitholders
for the period from January 1, 1994 to March 31, 1994, in the amount of
$1,263,007, which represents approximately $.26 per Unit. At June 30, 1994,
the Partnership had a cash distribution payable of $1,289,752 or approximately
$.26 per Unit. This amount reflects the 1994 second quarter cash flow from
operations. This distribution was subsequently paid on July 29, 1994. Future
cash distributions will be determined on a quarterly basis after an evaluation
of the Partnership's current and expected financial position.
At June 30, 1994, deferred revenue totalled $170,000 as compared to $150,000 at
December 31, 1993. The increase is primarily attributable to the new lease
agreement with Continental.
Results of Operations
Substantially all of the Partnership's revenue was generated from the leasing
of the Partnership's aircraft to commercial air carriers under triple net
operating leases. The majority of the balance of the Partnership's revenue
consisted of interest income from short-term investments.
For the three months ended June 30, 1994, the Partnership reported a net loss
of $67,838 as compared to a net loss of $359,493 for the corresponding period
in 1993. The decrease in net loss is primarily attributable to the re-leasing
of the Partnership's MD-80 Series aircraft to Continental airlines and due to
a decrease in depreciation. For the six months ended June 30, 1994, the
Partnership reported a net loss of $593,175 as compared to a net loss of
$426,290 for the corresponding period in 1993. The increase in net loss is
primarily attributable to lower rental income from the Partnership's operating
leases.
Rental income for the three and six months ended June 30, 1994, was $1,395,000
and $2,340,000, respectively, as compared to $1,297,321 and $2,934,182,
respectively, for the corresponding periods in 1993. The increase for the
three month period is the result of Continental re-leasing the MD-80 Series
aircraft. The decrease in the six month period is primarily the result of: (i)
TWA paying lower rental rates pursuant to the airlines' amended lease
agreements; and (ii) the expiration of the lease with Carnival in December
1993.
Interest income for the three months ended June 30, 1994, was $18,614 as
compared to $35,791 for the corresponding period in 1993. The decrease is due
to lower cash balances maintained by the Partnership during the first quarter
of 1994 as compared to the same period in 1993. Interest income for the six
months ended June 30, 1994 of $47,041 was virtually unchanged from $46,632 for
the corresponding period in 1993. Other income for the six months ended June
30, 1994 of $13,228 was attributable to rent paid by McDonnell Douglas to test
certain equipment on the MD-80 Series aircraft.
Depreciation for the three and six months ended June 30, 1994 was $1,306,119
and $2,612,238, respectively, as compared to $1,533,957 and $3,067,914,
respectively, for the corresponding periods in 1993. The decrease is due to
the write-down of the value of the Partnership's aircraft in December 1993.
Management fees for the three and six months ended June 30, 1994, were $116,238
and $200,769, respectively, as compared to $85,860 and $198,577, respectively,
for the corresponding periods in 1993. Management fees are based on rental
income and operating cash flow. The increases are primarily the result of the
new lease agreement with Continental.
General and administrative expenses for the three and six months ended June 30,
1994, were $45,751 and $121,043, respectively, as compared to $49,363 and
$109,157, respectively, for the corresponding periods in 1993. The increase
for the six month period is primarily due to higher legal and postage fees.
Operating expenses for the three and six months ended June 30, 1994, were
$13,344 and $59,394, respectively, as compared to $23,425 and $31,456,
respectively, for the corresponding period in 1993. The decrease for the three
month period is mainly due to the reduction of storage and maintenance costs
incurred by the Partnership due to the re-leasing of the MD-80 Series aircraft
in March 1994. The increase in operating expenses for the six month period is
attributable to costs associated with re-leasing the MD-80 Series aircraft, and
to expenses associated with the sale of the plane formerly on lease to
Carnival.
PART II OTHER INFORMATION
Items 1-4 Not applicable
Item 5 Other information.
Effective May 20, 1994, American Express Company ("American Express")
distributed to holders of record of American Express, shares of Lehman
Brothers Holdings Inc. ("Lehman Brothers") common stock. As a result
of this transaction, the Jet Aircraft Leasing Inc. General Partner,
is no longer an affiliate of American Express. This change is not
expected to have any impact on the Partnership.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended June 30, 1994
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.
JETSTREAM, L.P.
BY: JET AIRCRAFT LEASING INC.
Administrative General Partner
Date: August 12, 1994
BY: /s/ Moshe Braver
Title: Director and President
Date: August 12, 1994
BY: /s/ Daniel M. Palmier
Title: Vice President and
Chief Financial Officer
