UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of
--- the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
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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
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Commission file number: 0-16836
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JETSTREAM, L.P.
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Exact name of registrant as specified in its charter
Delaware 84-1053359
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State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
Attn.: Andre Anderson,
- ----------------------
3 World Financial Center, 29th Floor, New York, New York 10285
- -------------------------------------------------------- -----
Address of principal executive offices Zip code
Registrant's telephone number, including area code: (212) 526-3183
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP DEPOSITORY UNITS (the "Units")
LIMITED PARTNERSHIP INTERESTS (underlying the Units)
----------------------------------------------------
Title of Class
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 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
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
---
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: Not applicable
DOCUMENTS INCORPORATED BY REFERENCE:
Prospectus of the registrant dated September 10, 1987, as filed pursuant to rule
424(c) of the Securities Act of 1933, as amended (Portions of Parts I, II, III
and IV).
Annual Report to Unitholders for the year ended December 31, 1999 (Portions of
Parts I, II, III & IV).
1
<PAGE>
PART I
Item 1. Business.
General Development of Business
- -------------------------------
JetStream, L.P. (the "Partnership") is a limited partnership organized under the
laws of the State of Delaware on April 16, 1987. The general partners of the
Partnership (the "General Partners") are CIS Aircraft Partners, Inc. ("CAP"),
the Managing General Partner, a Delaware corporation that is an affiliate of
Continental Information Systems Corporation, and Jet Aircraft Leasing Inc., the
Administrative General Partner, a Delaware corporation that is an affiliate of
Lehman Brothers Inc. ("Lehman") (See Item 10).
Although the Partnership was organized on April 16, 1987, the Partnership
conducted no activities and recognized no revenues, profits or losses prior to
October 28, 1987, at which time the Partnership commenced operations. During the
period between October 29, 1987 and November 4, 1987, the Partnership acquired
for cash nine used commercial aircraft (together, the "Aircraft"). As of
December 31, 1999, the Partnership had five of the nine original Aircraft
remaining in its portfolio. For a description of the investments in the
Aircraft, please refer to the Message to Investors and Note 4 to the financial
statements of the Partnership's Annual Report to Unitholders for the year ended
December 31, 1999, which is filed as an exhibit under Item 14 and incorporated
herein by reference.
On September 10, 1987, the Partnership commenced an offering (the "Offering") on
a "best efforts basis" of $97,900,000 of limited partnership depositary units
("Units"). The closing of the offering occurred on October 28, 1987, with a
total of 4,895,005 Units being sold at a price of $20.00 per Unit, for a total
of approximately $97,900,000. The net proceeds of the offering after payment of
offering and organization costs and acquisition fees aggregated $85,747,510.
Narrative Description of Business
- ---------------------------------
The Partnership is liquidating a portfolio of used commercial aircraft subject
to triple net operating leases with commercial air carriers.
The General Partners are implementing a plan to sell the Partnership's remaining
aircraft and subsequently terminate the Partnership pursuant to a Plan of
Liquidation and Dissolution dated November 20, 1999 (the "Liquidation Plan").
The Liquidation Plan consists of: (1) the sale of all of the Partnership's
assets and the dissolution of the Partnership pursuant to the proposed
Liquidation Plan; (2) the amendment of the Partnership Agreement to permit the
engagement of the General Partners to market and sell the assets of the
Partnership for a fee pursuant to the terms of the Joint Marketing Agreement,
dated July 13, 1999, among each of the General Partners and the Partnership; and
(3) the grant of authority to the General Partners to take any action necessary
or incidental and consistent with the Partnership Agreement, the Liquidation
Plan and the Joint Marketing Agreement to complete the foregoing. The
Liquidation Plan required the approval of more than 50% of the limited partner
units entitled to vote. A consent solicitation statement requesting such
approval was forwarded to investors on October 15, 1999. On November 19, 1999,
the Partnership received the required approval from unitholders, and the General
Partners have begun to implement the Liquidation Plan by actively marketing the
aircraft for sale during the first quarter 2000, on the terms described in the
consent solicitation statement. Once the Partnership's aircraft are sold, the
Partnership's liabilities will be paid, the sales proceeds will be distributed
to the unitholders and the Partnership will be terminated and will cease to
exist. If the unitholders had not approved the Liquidation Plan, according to
the Partnership's Amended and Restated Partnership Agreement dated September 10,
1987, the Partnership would be required to dissolve and distribute all of its
assets not later than December 31, 2027.
The following table describes the Partnership's portfolio of aircraft as of
December 31, 1999. This table provides certain operational statistics and
estimated market values for the aircraft in the portfolio. The estimated market
values of the Aircraft are affected by, and subject to future changes in a
variety of factors, including, but not limited to, the Aircraft's usage, age and
lease rate, the credit worthiness of the lessee, government noise and
maintenance regulations and the supply and demand of aircraft in the market
place with similar lift capacity. See Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, of this Form 10-K and
Item 8 - Financial Statements and Supplementary Data (Note 4 to the Financial
Statements), for additional information on the lease terms for each aircraft.
2
<PAGE>
<TABLE>
<CAPTION>
Estimated Cumulative Cumulative
Aircraft Model Acquisition Net Book Market Lease Noise Flight Flight
Year Delivered Lessee Cost(1) Value(2) Value(3) Expiration(4) Compliance Cycles(5) Hours(5)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MD-80 Series Continental $27,396,997 $ 2,739,700 $13,646,000 9/15/00 Stage 3 19,397 (a) 39,620 (a)
1986
B-737-200 ADV Delta $15,222,609 $ 532,791 $ 3,274,000 9/30/00 Stage 3 40,278 (b) 59,593 (b)
1979
B-737-200 (6) $ 7,601,999 $ -- $ 250,000 (6) Stage 2 73,559 (c) 65,452 (c)
1971
B-737-200 (6) $ 7,601,999 $ -- $ 350,000 (6) Stage 2 74,023 (c) 65,250 (c)
1971
B-727-200 (7) $ 5,448,499 $ -- $ 450,000 (7) Stage 2 47,871 (d) 70,746 (d)
1969 ----------- ----------- -----------
TOTALS $63,272,103 $ 3,272,491 $17,970,000
=========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
NOTES:
(1) Includes a 1.5% fee paid to the Managing General Partner at the acquisition
of the Aircraft. Totals do not include aircraft which have been sold.
(2) As of December 31, 1999.
(3) Estimated market values for the Aircraft are based upon annual independent
appraisals as of December 31, 1999, which are subject to a variety of
assumptions. Additionally, there can be no assurance that the Partnership
would receive an amount equal to the market value shown above upon the sale
of any of the Aircraft.
(4) Lease expiration dates do not include renewal options.
(5) Data as of (a) December 2, 1999
(b) November 12, 1999
(c) October 27, 1999
(d) January 2, 2000
(6) The Partnership's two 737-200 non-advanced aircraft were previously leased
to Eastwind. An affiliate of the Managing General Partner, along with two
other creditors, filed an involuntary petition for bankruptcy relief
against Eastwind in the United States Bankruptcy Court for the District of
Delaware on September 29, 1999. The Partnership's two aircraft on lease to
Eastwind have been returned to the Partnership. As of the date of this
document, the Bankruptcy Court has not yet ordered an order for relief
adjudicating Eastwind as a debtor under Title 11 of the United States Code.
(7) The Partnership's two B-727-200 aircraft were leased to TWA on a
month-to-month basis until the third quarter of 1998. In September 1998,
the General Partners negotiated new lease agreements with Sun Pacific
International Inc., commencing with completion of required maintenance on
the aircraft. On April 2, 1999, the Partnership sold one of the aircraft to
an unaffiliated entity. On April 16, 1999, Sun Pacific ceased commercial
operations. The Partnership has notified Sun Pacific that they are in
default of their lease agreement with respect to the second plane due to
their failure to make the required rental payments to the Partnership. See
Item 7 below for a discussion of the Sun Pacific lease agreements.
</FN>
</TABLE>
The General Partners are currently implementing a plan to sell the Partnership's
remaining aircraft and subsequently terminate the Partnership. See Items 1 and 4
for a description of the Liquidation Plan.
3
<PAGE>
Aging Aircraft Maintenance
- -------------------------- - The Federal Aviation Administration (the "FAA"),
acting on recommendations from industry trade groups, adopted a series of
Airworthiness Directives ("AD's") for certain Boeing and McDonnell Douglas
aircraft models. AD's are mandates requiring the airline to perform a specific
maintenance task within a specified period of time. The FAA imposes strict
requirements governing aircraft inspection and certification, maintenance,
equipment requirements, corrosion control, noise levels and general operating
and flight rules. In addition to mandating more intensive inspections of certain
structural components, including the fuselage, wing and tail sections, certain
of these AD's mandate that structural modifications to certain aircraft be
completed within specified periods, generally not less than 48 months from the
effective date of the relevant AD. Aircraft are generally subject to these
structural modification requirements based on flight cycle, flight hour and
chronological age thresholds.
Two of the Partnership's five Aircraft are subject to AD's mandating structural
modification, specifically the two B-737 aircraft previously leased to Eastwind.
AD's presently applicable to the Boeing aircraft owned by the Partnership
require extensive repetitive inspections of such aircraft. There can be no
assurance that such inspections will not lead to mandatory structural
modifications similar to those noted above.
The Partnership's existing leases require the lessees to maintain the
Partnership's aircraft in accordance with FAA approved maintenance programs
during the lease term. At the end of the leases, each lessee is required to
return the aircraft in airworthy condition, including compliance with all AD's
for which action is mandated by the FAA during the lease term. Thus, certain of
the modifications required by the new AD's may not be implemented by the
Partnership's lessees prior to the expiration of the current leases since, in
many cases, the relevant AD will not require action before the expiration of the
lease term.
In negotiating the sale of the aircraft now owned by the Partnership, the
Partnership may be required to bear some or all of the costs of compliance with
future AD's or AD's that have been issued but which did not mandate action
during the previous lessee's lease term or in respect of which the previous
lessee failed to comply. The aggregate effect on the Partnership of compliance
with these standards is not determinable at this time and will depend upon a
variety of factors, including, but not limited to, the state of the commercial
aircraft market, the extent of the AD, the availability of capable repair
facilities and the effect, if any, that such compliance may have on the service
lives of the affected aircraft. As described above, the cost to the Partnership
of such compliance may be reduced to the extent that current or future lessees
of the Partnership's aircraft effect such modifications under the terms of the
current or future operating leases.
Aircraft Noise
- -------------- - Beginning in 1985, the FAA and various airport industry task
forces released reports suggesting various alternatives for reducing the number
of Stage 2 aircraft operating in the United States, including a proposed
requirement to bring all aircraft operating in the United States into compliance
with Stage 3 requirements in the 1990s or shortly thereafter. The FAA has
categorized aircraft types according to engine noise decibel levels. Stage 2
aircraft, which have the higher noise level, are no longer allowed to operate
from most civil airports in the United States as of December 31, 1999. Stage 3
aircraft meet current FAA requirements.
Effective November 6, 1990, Congress passed the Airport Noise and Capacity Act
of 1990 (the "Act") which required the development of a National Noise Policy.
On September 25, 1991, final regulations (the "Regulations") were announced and
became effective immediately. The Regulations provide, among other things,
phase-out and non-addition rules under which the number of Stage 2 aircraft
operated by domestic carriers were limited to 75% of 1990 base levels by the end
of 1994, with further reductions to 50% of 1990 base levels by the end of 1996,
25% of 1990 base levels by the end of 1998 and ultimately to 0% by December 31,
1999.
Several modification programs to hushkit or re-engine an aircraft to meet Stage
3 requirements have been announced, including programs for the B-727 series, the
B-737 and the DC-9 series. Hushkitting is a procedure for retrofitting existing
engines to comply with Stage 3 requirements. Re-engining is the replacement of
existing engines with technologically-advanced engines complying with Stage 3
requirements. The decision whether to hushkit or re-engine an aircraft will
depend upon a variety of factors, including, without limitation, the
differential effects of the two approaches on the operating costs of the
aircraft, the relative costs and feasibility of the two approaches and the
General Partners' assessment of the remaining useful life and fair market value
of the aircraft. Where available, hushkits currently can cost up to $3.0 million
per aircraft while the costs of re-engining programs are significantly higher.
No assurances are possible in respect to the actual cost which the Partnership
would be required to pay in order to effect a hushkit or re-engining
modification as now available or as may be developed in the future.
4
<PAGE>
Two of the five aircraft currently owned by the Partnership are Stage 3
compliant. Delta Airlines, pursuant to a lease extension, hushkitted the 737-200
on lease to Delta. The two aircraft previously leased to Eastwind and the
aircraft previously leased to Sun Pacific are not Stage 3 compliant.
Competition
- -----------
The aircraft leasing industry is competitive and the success of any lessor is
largely dependent upon the nature of the aircraft within its portfolio. The
Partnership competes with aircraft manufacturers, distributors, airlines,
leasing companies, financial institutions and other parties engaged in leasing,
managing, and marketing aircraft. Such competitors may lease or sell aircraft at
lower rates or prices than the Partnership and provide benefits, such as direct
maintenance crews, and support services which the Partnership cannot provide.
Competition may include certain affiliates of the General Partners.
The General Partners' ability to sell the aircraft owned by the Partnership is
dependent upon, among other factors: (a) general economic conditions and
economic conditions affecting the airline industry in particular; (b) the
current operating profile of the aircraft, encompassing the age of the aircraft
and the number of hours and cycles flown and compliance with all issued AD's, as
well as the general maintenance conditions of the aircraft; (c) the current
fleet plans of the major end-users of the aircraft type; (d) any costs required
to refurbish aircraft and to reconfigure aircraft to comply with all issued AD's
and to conform with similar aircraft within a potential purchaser's fleet; (e)
any cost required to conform the aircraft to future Stage 3 noise restrictions;
(f) the availability to the potential purchaser of other similar aircraft from
the Partnership's competition; and (g) the ability of the Managing General
Partner to effectively market the aircraft.
Employees
- ---------
The Partnership has no employees. The officers, directors and employees of the
General Partners and their affiliates perform services on behalf of the
Partnership. The General Partners are entitled to certain fees and reimbursement
of certain out-of-pocket expenses incurred in connection with the performance of
these management services. See Note 6 to the Financial Statements contained in
Item 8 - Financial Statements and Supplementary Data for a discussion of the
fees and reimbursable expenses paid to the General Partners and their
affiliates.
Item 2. Properties
Incorporated herein by reference to Item 1 - Business and Item 8 - Financial
Statements and Supplementary Data (Note 4 to the Financial Statements).
Item 3. Legal Proceedings
The Partnership's two 737-200 non-advanced aircraft were previously leased to
Eastwind. An affiliate of the Managing General Partner, along with two other
creditors, filed an involuntary petition for bankruptcy relief against Eastwind
in the United States Bankruptcy Court for the District of Delaware on September
29, 1999. The Partnership's two aircraft on lease to Eastwind have been returned
to the Partnership. As of the date of this document, the Bankruptcy Court has
not yet ordered an order for relief adjudicating Eastwind as a debtor under
Title 11 of the United States Code.
There are no other material pending legal proceedings to which the General
Partners or the Partnership is a party or to which its assets are subject.
5
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
On October 15, 1999, the Partnership mailed a Notice of Consent Solicitation and
Consent Solicitation Statement to unitholders whereby the General Partners
proposed the liquidation of the Partnership. The liquidation consists of: (1)
the sale of all of the Partnership's assets and the dissolution of the
Partnership pursuant to the proposed Liquidation Plan; (2) the amendment of the
Partnership Agreement to permit the engagement of the General Partners to market
and sell the assets of the Partnership for a fee pursuant to the terms of the
Joint Marketing Agreement, dated July 13, 1999, among each of the General
Partners and the Partnership; and (3) the grant of authority to the General
Partners to take any action necessary or incidental and consistent with the
Partnership Agreement, the Liquidation Plan and the Joint Marketing Agreement to
complete the foregoing on the terms described in the Consent Solicitation
Statement. The Consent Solicitation terminated at 5:00 p.m. on November 19,
1999. The Partnership received the required approval from the limited partner
units entitled to vote. The result of the voting was as follows:
<TABLE>
<CAPTION>
Number of Units Percentage
--------------- ----------
<S> <C> <C>
For 2,932,236 59.90%
Against 88,431 1.81%
Abstain 29,039 .59%
</TABLE>
The remaining units of the Partnership did not vote.
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and
Related Security Holders Matters
The Units represent the economic rights attributable to limited partnership
interests in the Partnership.
There is no established public trading market for the purchase and sale of
Units. As of December 31, 1999, the number of Unitholders was 6,418.
Per Unit cash distributions paid to the Limited Partners for the two years ended
December 31, 1999 are presented in the table below.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
1998 $ .212 $ .222 $ .144 $ .151 $ .729
1999 $ .299 $ .576* $ .108 $ .131 $ 1.114
<FN>
* Represents approximately $0.12 per Unit in cash distributions from operations
and approximately $0.46 per Unit in returns of capital as a result of the April
2, 1999 sale of one of the Partnership's B-727-200 non-advanced aircraft. See
Item 7 for a discussion of the Sale.
</FN>
</TABLE>
Future cash distributions will be determined on a quarterly basis after an
evaluation of the Partnership's current and expected financial position.
6
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
For the years ended December 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rental Revenues $ 4,021,832 $ 4,813,390 $ 5,037,980 $ 5,248,593 $ 4,837,439
Total Expenses 4,465,612 4,473,009 4,117,718 4,884,852 5,669,154
Net Income (Loss) 1,823,468 444,902 1,149,074 687,834 (170,290)
Net Income (Loss) per
Limited Partnership Unit(1) .19 .09 .23 .14 (0.03)
Total Assets 4,728,164 7,989,525 11,507,572 15,107,551 18,936,402
Partners' Capital 3,492,765 6,466,304 9,625,851 13,316,748 17,492,977
Net Cash Provided by
Operating Activities 2,727,602 4,012,891 5,212,862 4,150,326 4,282,201
Cash Distributions per Unit(1)(2) 1.114 .73 .98 .98 .87
- ------------------------------------------------------------------------------------------------------
<FN>
(1) 4,895,005 units outstanding
(2) Distribution amounts are reflected in the year for which they are declared.
The Partnership's fourth quarter cash distribution is usually paid in
February of the following year.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Liquidity and Capital Resources
The General Partners developed a plan to sell the Partnership's remaining
aircraft and subsequently terminate the Partnership pursuant to a Plan of
Liquidation and Dissolution dated November 20, 2000 (the "Liquidation Plan"). On
November 19, 1999, the Partnership received the required approval from the
limited partner units entitled to vote on the Liquidation Plan, and the General
Partners have begun to implement the Liquidation Plan by actively marketing the
aircraft for sale during the first quarter 2000, in accordance with the terms
approved by the unitholders. See Item 4 for a description of the Liquidation.
As a result of the approval of the Liquidation Plan, the Partnership has
designated its aircraft as assets held for sale and has ceased to record
depreciation expense related to those assets as of the date of approval. In
accordance with FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed Of, all of the Partnership's
aircraft are reported at the lower of carrying amount or fair value less costs
to sell.
The General Partners received bids for several of the planes and recently signed
a letter of intent for the sale of the Partnership's 737-200 advanced aircraft.
A contract is currently being negotiated with the prospective purchaser and it
is anticipated that the plane will be sold during the second quarter of 2000.
However, there can be no assurance that the sale will close within this
timeframe, or that the Partnership will receive the estimated market values for
the remaining aircraft. In addition, the General Partners continue to market the
remaining aircraft. Once the aircraft are sold, the Partnership's liabilities
will be paid, the sales proceeds will be distributed to the Limited Partners and
the Partnership will cease to exist. Winding up the Partnership can be a complex
process which may depend on a number of factors, and some of these factors may
be beyond the General Partners' control.
As of December 31, 1999, two of the Partnership's remaining five aircraft were
on-lease. One aircraft was on-lease to Delta Air Lines, Inc. ("Delta") and one
aircraft was on-lease to Continental Airlines ("Continental"). The two aircraft
that were on-lease to Eastwind Airlines ("Eastwind") were returned to the
Partnership in October 1999 (see below). Two aircraft which were previously
leased to Trans World Airlines Inc. ("TWA") were leased to Sun Pacific
International, Inc. ("Sun Pacific") in 1998. However, as discussed below, one of
the aircraft was subsequently sold to an unaffiliated entity and Sun Pacific
ceased commercial operations in mid-April 1999.
The lease with Delta for the Partnership's 737-200 advanced aircraft was
scheduled to expire in September 1999. In accordance with the terms of the lease
agreement, Delta pays the Partnership a monthly lease rate of $80,000 through
September 1999. During the second quarter of 1999, Delta extended its lease for
two years through September 2001. This lease extension requires Delta to pay the
Partnership a monthly lease rate of $65,000 and to hushkit the plane, which was
completed prior to year-end 1999.
7
<PAGE>
Continental makes monthly lease payments of $180,000 for the Partnership's MD-80
Series aircraft. The lease with Continental was originally scheduled to expire
in March 1998. During the third quarter of 1999, Continental extended this lease
through September 2000, with the remaining terms of the lease unchanged.
The lease with Eastwind Airlines ("Eastwind") for the Partnership's two 737-200
non-advanced aircraft was scheduled to expire on November 30, 1999. In late
August 1999, the Partnership was notified that Eastwind had voluntarily ceased
commercial operations. The Partnership took possession of the aircraft and in
October 1999 sold the aircrafts' engines to an unaffiliated entity for $175,000.
The Partnership recognized a loss of $25,000 on this sale in 1999. After several
months of partial payments, Eastwind made its last payment to the Partnership in
June 1999, and is delinquent on rental payments and maintenance reserves
totaling $1,200,284 as of December 31, 1999.
On September 29, 1999, an affiliate of the Managing General Partner, along with
two other creditors, filed an involuntary petition for bankruptcy relief against
Eastwind in the United States Bankruptcy Court for the District of Delaware. As
of the date of this document, the Bankruptcy Court had not yet issued an order
for relief adjudicating Eastwind as a debtor under Title 11 of the United States
Code. The General Partners intend to pursue all viable remedies available to the
Partnership with respect to the collection of these delinquent payments subject
to the decisions of the Bankruptcy Court and the applicable provisions of the
U.S. Bankruptcy Code.
In September 1998, the Partnership entered into two lease agreements with Sun
Pacific for the two 727-200 non-advanced aircraft which were previously leased
to TWA. On April 2, 1999, the Partnership sold one of the aircraft to an
unaffiliated entity, Sport Hawk Chicago, Inc. (the "Buyer"), for a selling price
of approximately $2,629,000 and the lease with Sun Pacific for this plane was
terminated. The selling price was determined by arm's length negotiations
between the Partnership and the Buyer. On April 16, 1999, Sun Pacific ceased
commercial operations. The Partnership has notified Sun Pacific that they are in
default of their lease agreement with respect to the second plane due to their
failure to make the required rental payments to the Partnership. In addition,
the remaining plane requires C-checks and corrosion repair, for which $201,979
has been reserved at December 31, 1999. Once the required maintenance of the
remaining aircraft is complete, the General Partners will attempt to sell the
aircraft to another purchaser pursuant to the Liquidation Plan.
At December 31, 1999, the Partnership had unrestricted cash and cash equivalents
of $1,405,675, compared to $1,853,981 at December 31, 1998. The decrease is
primarily attributable to the lower cash from operations.
At December 31, 1999 and December 31, 1998, the Partnership had a rent
receivable balance net of allowance for doubtful accounts totaling $50,000. The
balance represents amounts owed by Eastwind in excess of the $1,150,284
allowance established by the Partnership, as discussed above.
Accounts payable and accrued expenses totaled $1,087,547 at December 31, 1999 as
compared to $635,127 at December 31, 1998. The increase is primarily
attributable to the accrual of management fees and the Sun Pacific C-checks.
On August 23, 1999, the Partnership paid a distribution to Unitholders of
$2,832,787 or approximately $.58 per Unit. Of this amount, $.12 per Unit
represented a distribution of cash flow from operations and $.46 per Unit
represented a distribution of net sale proceeds. On November 29, 1999, the
Partnership paid a distribution to Unitholders of $533,099 or approximately $.11
per Unit. As of December 31, 1999, the Partnership had a distribution payable to
Unitholders of $645,925 or approximately $.13 per Unit which was paid on March
6, 2000. Future cash distributions will be determined on a quarterly basis after
an evaluation of the Partnership's current and expected financial position.
Market Risk
Interest rate risk comprises the Partnership's principal market risk exposure.
The Partnership has no long-term debt and its aircraft are unencumbered by debt.
Accordingly, the Partnership's interest risk exposure is primarily limited to
interest earned on the Partnership's cash and cash equivalents, which are
invested at short-term rates. Such risk is not considered material to the
Partnership's operations.
8
<PAGE>
Results of Operations
1999 compared to 1998
- ---------------------
For the year ended December 31, 1999, the Partnership generated net income of
$1,823,468, compared to net income of $444,902 in fiscal 1998. The increase in
net income is primarily attributable to the net gain recognized on the sale of
the aircraft. Excluding this gain, Partnership operations resulted in loss of
$316,749 for the year ended December 31, 1999, compared with income of $444,902
in 1998. The change from income from operations in 1998 to loss from operations
in 1999 is primarily due to lower rental income in 1999 and higher general and
administrative expense in 1999 and lower depreciation expense in 1999.
Rental income for the year ended December 31, 1999 was $4,021,832, compared to
$4,813,390 in fiscal 1998. The decrease in rental income was primarily due to
the sale of the aircraft in April 1999.
Interest income for the year ended December 31, 1999 was $127,031, compared to
$104,393 in fiscal 1998. The increase is primarily attributable to higher
average cash balances resulting from the sale proceeds.
Depreciation expense totaled $2,613,051 for the year ended December 31, 1999
compared to $3,211,640 in fiscal 1998. The reduction is due to the aircraft
being depreciated to their salvage values in 1999.
General and administrative expenses totaled $614,966 for the year ended December
31, 1999, compared to $334,335 in fiscal 1998. The increase is primarily due to
an increase in legal and consulting fees related to the Liquidation Plan.
Operating expenses for the year ended December 31, 1999 totaled $329,555,
compared to $5,906 in fiscal 1998. The increase is due to the accrual to
Hamilton Aviation for C-checks and corrosion repair on the two 727-200
non-advanced aircraft previously leased to Sun Pacific.
Bad debt expense for the year ended December 31, 1999 totaled $616,832, compared
to $533,453 in fiscal 1998. Such amount represents the increase in the allowance
for delinquent rental payments and maintenance reserves under Eastwind's lease.
Management fees totaled $291,204 for the year ended December 31, 1999 compared
with $387,675 for the year ended December 31, 1998. The decrease primarily
reflects a reduction in rental revenue.
1998 compared to 1997
- ---------------------
For the year ended December 31, 1998, the Partnership generated net income in
the amount of $444,902, compared to net income of $1,149,074 in fiscal 1997. The
decrease in net income is primarily attributable to the establishment of an
allowance for doubtful accounts on Eastwind's receivable balance, and a decrease
in rental income as a result of the Partnership's two 727-200 aircraft being off
lease for several months during 1998. Such amounts were partially offset by a
decrease in operating expenses during 1998.
Rental income for the year ended December 31, 1998 was $4,813,390, compared to
$5,037,980 in fiscal 1997. The decrease in rental income is primarily a result
of the Partnership's two 727-200 aircraft being off lease following the
expiration of the leases with TWA in July and September. This decrease was
partially offset by an increase in rental income from the two aircraft leased by
Eastwind which were not operated on a daily basis for the first two months of
1997 because of maintenance-related issues, including the installation of a
hushkit on one aircraft.
Interest income for the year ended December 31, 1998 totaled $104,393, compared
to $129,090 for the corresponding period in 1997. The decrease is primarily due
to a decrease in the Partnership's invested cash balance during the 1998 period.
Other income totaled $128 for the year ended December 31, 1998, compared to
$99,722 for the year ended December 31, 1997. The decrease primarily represents
payment received from USAirways, Inc. ("USAir") during 1997 for the settlement
and release of claims relating to the lease and maintenance of the Boeing
737-200 aircraft, previously on lease with USAir.
Management fees totaled $387,675 for the year ended December 31, 1998 compared
with $447,868 for the year ended December 31, 1997. The decrease primarily
reflects lower management fees related to the aircraft currently on-lease to
Eastwind.
9
<PAGE>
General and Administrative expenses totaled $334,335 for the year ended December
31, 1998 compared with $230,295 in fiscal 1997. The increase is primarily due to
consulting and other professional fees related to the re-leasing of the aircraft
formerly leased to TWA, and to a lesser extent, higher partnership
administrative servicing costs.
Operating expenses for the year ended December 31, 1998 totaled $5,906, compared
to $227,905 for the 1997 period. The 1997 balance is primarily attributable to
non-recurring operating expenses associated with repair and maintenance work
completed on the two aircraft on-lease to Eastwind.
Bad debt expense for the year ended December 31, 1998 totaled $533,453, which
amount was used to establish an allowance for delinquent rental payments and
maintenance reserves due under Eastwind's leases.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Incorporated herein by reference to the information presented under "Market
Risk" of Item 7 of this Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by reference to the
Partnership's Annual Report to Unitholders for the year ended December 31, 1999
included in Exhibit 13 to this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Partnership
The Partnership has no officers or directors. The General Partners jointly
manage and control the affairs of the Partnership and have general
responsibility and authority in all matters affecting its business. Information
concerning the directors and executive officers of the General Partners are as
follows:
Jet Aircraft Leasing Inc.
-------------------------
Name Office
---- ------
Michael T. Marron Director, President and Chief Financial Officer
Rocco F. Andriola Director, Vice President
Certain officers and directors of Jet Aircraft Leasing, Inc. are now serving (or
in the past have served) as officers or directors of entities which act as
general partners of a number of limited partnerships which have sought
protection under the provisions of the Federal Bankruptcy Code. Those
partnerships sought the protection of the bankruptcy laws to protect the
partnerships' assets from loss through foreclosure.
Michael T. Marron, 36, is a Vice President of Lehman Brothers and has been a
member of the Diversified Asset Group since 1990 where he has actively
managed and restructured a diverse portfolio of syndicated limited
partnerships. Prior to joining Lehman Brothers, Mr. Marron was associated
with Peat Marwick Mitchell & Co. serving in both its audit and tax divisions
from 1985 to 1989. Mr. Marron received a B.S. degree from the State
University of New York at Albany and an M.B.A. degree from Columbia
University and is a Certified Public Accountant.
10
<PAGE>
Rocco F. Andriola, 41, is a Managing Director of Lehman Brothers in its
Diversified Asset Group and has held such position since October 1996. Mr.
Andriola also serves as the Director of Global Corporate Services for
Lehman. Since joining Lehman in 1986, Mr. Andriola has been involved in a
wide range of restructuring and asset management activities involving real
estate and other direct investment transactions. From June 1991 through
September 1996, Mr. Andriola held the position of Senior Vice President in
Lehman's Diversified Asset Group. From June 1989 through May 1991, Mr.
Andriola held the position of First Vice President in Lehman's Capital
Preservation and Restructuring Group. From 1986 to 1989, Mr. Andriola
served as a Vice President in the Corporate Transactions Group of Shearson
Lehman Brothers' office of the general counsel. Prior to joining Lehman,
Mr. Andriola practiced corporate and securities law at Donovan Leisure
Newton & Irvine in New York. Mr. Andriola received a B.A. from Fordham
University, a J.D. from New York University School of Law, and an LL.M in
Corporate Law from New York University's Graduate School of Law.
CIS Aircraft Partners, Inc.
---------------------------
Name Office
---- ------
Michael L. Rosen Director, President
Robin A. Konicek Vice President
Michael L. Rosen, 41, is Director, President and Chief Executive Officer of
Continental Information Systems Corporation, the parent holding company of CIS
Aircraft Partners, Inc. Mr. Rosen is also the controlling stockholder and since
June 1996, the Chief Executive Officer of Oscar Gruss & Son Incorporated, a
member firm of the New York Stock Exchange, Inc. Prior to 1996, Mr. Rosen
operated a variety of real estate development projects and multi-family rental
properties in which he still has interests.
Robin A. Konicek, 43, is a Vice President of CIS Aircraft Partners, Inc. and
is responsible for domestic and international aircraft marketing. She has
been active in the financing, trading and management of aircraft since
1982. Prior to joining CIS in 1986, Ms. Konicek was a Vice President of
Crocker Bank Airlines and Aerospace Group, with major responsibility for
developing the U.S. market. She holds an A.B. from Stanford University and
an M.B.A. from the University of California, Los Angeles.
Item 11. Executive Compensation
No compensation was paid by the Partnership to the officers and directors of the
General Partners. See Item 13 below for a description of the compensation and
fees paid to the General Partners and their affiliates by the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners
----------------------------------------------- As of the date hereof, no
person is known by the Partnership to be the beneficial owner of more than
five percent of the Units of the Partnership.
(b) Security ownership of management
-------------------------------- The Partnership has no directors or
officers, and neither of the General Partners of the Partnership owns any
Units. The Assignor Limited Partners for the Partnership, CIS Assignor
L.P.A., Inc. (an affiliate of CIS), owns 5 Units of the Partnership.
None of the directors or officers of the General Partners owned any Units
as of December 31, 1999.
(c) Changes in control
------------------ Other than as described herein, the Partnership knows of
no arrangements, the operation of the terms of which may at a subsequent
date result in a change in control of the Partnership.
11
<PAGE>
Item 13. Certain Relationships and Related Transactions.
The General Partners and their affiliates received or will receive certain types
of compensation, fees, or other distributions in connection with the operation
of the Partnership. The fees and compensation were not determined by, and may
not necessarily reflect, arm's length negotiations. In addition, pursuant to the
Liquidation Plan and a Joint Marketing Agreement, dated July 13, 1999 among CIS
Aircraft Partners, Inc., Jet Aircraft Leasing, Inc. and the Partnership, the
Partnership Agreement has been amended to provide for the payment to the General
Partners of a marketing and sales fee not to exceed 3% of the sales price of the
aircraft sold in the liquidation. None of the officers and directors of the
General Partners received any compensation from the Partnership. During 1999,
1998 and 1997, certain expenses incurred by an unaffiliated third party service
provider in servicing the Partnership, which were voluntarily absorbed by
affiliates of Jet Aircraft Leasing, Inc. in prior periods, were reimburseable to
Jet Aircraft Leasing Inc. and its affiliates. For additional information on fees
paid to the General Partners and affiliates, see Item 8 - Financial Statements
and Other Supplementary Data (Note 6 of the Notes to the Financial Statements).
12
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements:
Balance Sheets - December 31, 1999 and 1998 (1)
Statements of Partners' Capital (Deficit) - For the years
ended December 31, 1999, 1998 and 1997 (1)
Statements of Operations - For the years ended
December 31, 1999, 1998 and 1997 (1)
Statements of Cash Flows - For the years ended
December 31, 1999, 1998 and 1997 (1)
Notes to the Financial Statements (1)
Report of Independent Public Accountants (1)
(1) Incorporated by reference from the Partnership's Annual
Report to Unitholders for the year ended December 31, 1999.
2. Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts
3. Exhibits
(2) Plan of Liquidation and Dissolution of JetStream, LP. dated as
of November 20, 1999.
(3a) Amended and Restated Limited Partnership Agreement, dated
September 10, 1987 (Incorporated by reference to the
Partnership's Prospectus filed with the Commission on April 17,
1987, as amended.)
(3b) Amendment No. 1 to the Amended and Restated Limited Partnership
Agreement, dated November 20, 1999.
(4) Depositary Agreement (Incorporated by reference to Exhibit 4.5
to the Partnership's Registration Statement on Form S-1 filed
with the Commission on April 17, 1987.)
(10a) Escrow Agreement (Incorporated by reference to Exhibit 10.12 to
the Partnership's Registration Statement on Form S-1 filed with
the Commission on April 17, 1987.)
(10b) Joint Marketing Agreement, dated July 13, 1999 among CIS
Aircraft Partners, Inc., Jet Aircraft Leasing, Inc. and
JetStream, L.P.
(13) Annual Report to Unitholders for the year ended December 31,
1999.
(27) Financial Data Schedule
(b) The Partnership filed no current reports on Form 8-K during the last
quarter of the period covered by this Report.
On January 5, 2000, the Partnership filed a Current Report on Form 8-K
reporting the results of the Consent Solicitation to approve a Partnership
Liquidation Plan.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
JETSTREAM, L.P.
BY: Jet Aircraft Leasing Inc.
Administrative General Partner
Date: March 31, 2000 BY: /s/Michael T. Marron
----------------------------------
Name: Michael T. Marron
Title: Director, President and
Chief Financial Officer
BY: CIS Aircraft Partners, Inc.
Managing General Partner
Date: March 31, 2000 BY: /s/Michael L. Rosen
----------------------------------
Name: Michael L. Rosen
Title: Director and President
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
BY: CIS Aircraft Partners, Inc.
A General Partner
Date: March 31, 2000 BY: /s/Michael L. Rosen
----------------------------------
Name: Michael L. Rosen
Title: Director and President
Date: March 31, 2000 BY: /s/Robin A. Konicek
----------------------------------
Name: Robin A. Konicek
Title: Vice President
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
JET AIRCRAFT LEASING INC.
A General Partner
Date: March 31, 2000 BY: /s/Michael T. Marron
----------------------------------
Name: Michael T. Marron
Title: Director, President and
Chief Financial Officer
Date: March 31, 2000 BY: /s/Rocco F. Andriola
----------------------------------
Name: Rocco F. Andriola
Title: Director and Vice President
16
EXHIBIT 13
JetStream, L.P.
1999 Annual Report
<PAGE>
- --------------------------------------------------------------------------------
JETSTREAM, L.P.
- --------------------------------------------------------------------------------
JetStream, L.P. commenced operations in 1987 and was formed to
acquire used commercial aircraft subject to triple net operating
leases with commercial airlines. Since inception, limited
partners have received cash distributions totaling approximately
$18.16 per $20.00 Unit. The following table provides the
quarterly cash distributions per Unit paid by the Partnership for
the years ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Quarter Declared 1999 1998
--------------------------------------------
<S> <C> <C>
First Quarter $ .299 $ .212
Second Quarter .576 .222
Third Quarter .108 .144
Fourth Quarter .131 .151
------ ------
Total $1.114 $ .729
============================================
</TABLE>
Contents
1 Message to Investors
3 Financial Statements
6 Notes to the Financial Statements
11 Report of Independent Public Accountants
<PAGE>
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS
- --------------------------------------------------------------------------------
Presented for your review is the 1999 Annual Report for JetStream, L.P. (the
"Partnership"). This report includes an update on the status of the
Partnership's aircraft portfolio, including efforts to market the Partnership's
remaining planes, and highlights of the Partnership's financial results. Also
included are the Partnership's audited financial statements for the year ended
December 31, 1999.
Sales Update
As discussed in prior reports, in November 1999, the Partnership received the
required approval of more that 50% of the outstanding limited partner units to
proceed with the plan of liquidation and dissolution, pursuant to which the
remaining aircraft will be sold and the Partnership terminated (the "Liquidation
Plan"). In accordance with the Liquidation Plan, we began actively marketing the
aircraft for sale in January 2000. Bids have been received for several of the
planes, and we are pleased to report that a letter of intent for the sale of the
Partnership's 737-200 advanced aircraft was recently signed. A contract is
currently being negotiated with the prospective purchaser, and it is anticipated
that the plane will be sold during the second quarter of this year. However,
there can be no assurance that the sale will close within this time frame or
that the Partnership will be able to obtain the aircraft's appraised value in a
sale. In addition, we are continuing to market the remaining aircraft. Once the
planes are sold, the Partnership's liabilities will be paid, the sales proceeds
will be distributed to the Limited Partners, and the Partnership will be
terminated.
Portfolio Update
Following is an update on the status of the Partnership's remaining aircraft:
MD-80 Series Aircraft - Continental Airlines ("Continental") has exercised it
option to renew the lease for the Partnership's MD-80 Series aircraft through
September 2000. The lease requires Continental to make monthly payments of
$180,000.
737-200 Advanced Aircraft - The lease with Delta Air Lines ("Delta") for the
Partnership's 737-200 advanced aircraft has been extended through September
2001. The lease requires Delta to make monthly payments of $65,000. Delta was
also required to hushkit the plane, which was completed prior to year-end 1999.
727-200 Non-advanced Aircraft - As discussed in prior reports, in September
1998, the Partnership entered into two lease agreements with Sun Pacific for the
Partnership's two 727-200 non-advanced aircraft. One of the aircraft was sold on
April 2, 1999, and the lease with Sun Pacific for this plane was terminated. Sun
Pacific subsequently ceased commercial operations in mid-April 1999. The
Partnership notified Sun Pacific that they are in default of their lease
agreement with respect to the second plane due to their failure to make the
required rental payments to the Partnership. In addition, the Partnership has
reserved approximately $200,000 to complete C-checks and corrosion repair on
this aircraft. We will attempt to sell the plane to another carrier once the
maintenance work is completed.
737-200 Non-advanced Aircraft - In late August 1999, the Partnership was
notified that Eastwind Airlines ("Eastwind"), which leased the Partnership's two
737-200 non-advanced aircraft, had voluntarily ceased commercial operations. The
Partnership took possession of the aircraft and in October 1999 sold the
aircrafts' engines to an unaffiliated entity for $175,000. As discussed in
previous reports, Eastwind made its last payment to the Partnership in June 1999
and is delinquent on rental payments and maintenance reserves totaling
$1,200,284 as of December 31, 1999.
On September 29, 1999, an affiliate of the Managing General Partner, along with
two other creditors, filed an involuntary petition for bankruptcy relief against
Eastwind in the United States Bankruptcy Court for the District of Delaware. The
General Partners intend to pursue viable remedies available to the Partnership
with respect to the collection of these delinquent payments, subject to the
applicable provisions of the U.S. Bankruptcy Code.
1
<PAGE>
Financial Highlights
Provided below is a review of Partnership operations for the twelve months
ended December 31,
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------
<S> <C> <C>
Rental income $4,021,832 $4,813,390
Total expenses 4,465,612 4,473,009
Net income 1,823,468 444,902
Net cash provided by operating activities 2,727,602 4,012,891
- ------------------------------------------------------------------------
</TABLE>
o Rental income decreased primarily as a result of the Partnership not
receiving any rental income from the two 727-200 aircraft previously leased
to Sun Pacific and a decline in rental income from Eastwind.
o Overall, total expenses in 1999 were relatively unchanged from 1998.
However, operating expenses increased approximately $320,000 as a result of
C-checks and corrosion repairs on the aircraft previously leased to Sun
Pacific. The increase in operating expenses was offset by a decrease in
depreciation expense.
o Net income in 1999 includes the $2,140,217 gain on the sale of one of the
Partnership's 727-200 aircraft. Excluding this gain, the Partnership had a
net loss of $316,749 for 1999 primarily due to the decline in rental income.
o The decline in net cash provided by operating activities is primarily
attributable to the decrease in rental income.
Summary
We will update you on the status of our efforts to sell the Partnership's
aircraft in future correspondence. In the interim, questions regarding the
Partnership should be directed to your Financial Consultant or Partnership
Investor Services. All requests for a change of address should be submitted in
writing to the Partnership's administrative agent at P.O. Box 7090, Troy, MI
48007-7090. Partnership Investor Services can be reached at 617-342-4225, and
the Partnership's administrative agent can be reached at 248-637-7900.
Very truly yours,
Jet Aircraft Leasing Inc. CIS Aircraft Partners, Inc.
General Partner General Partner
Michael T. Marron Michael L. Rosen
President President
March 31, 2000
2
<PAGE>
JETSTREAM, L.P.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
BALANCE SHEETS
At December 31, At December 31,
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Aircraft, at cost: $ -- $ 25,987,000
Less accumulated depreciation -- (19,901,456)
------------------------------
-- 6,085,544
Aircraft held for sale 3,272,489 --
Cash and cash equivalents 1,405,675 1,853,981
Rent receivable (net of allowance for doubtful
accounts of $1,150,284 in 1999) 50,000 50,000
- -------------------------------------------------------------------------------------
Total Assets $ 4,728,164 $ 7,989,525
=====================================================================================
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 1,145,297 $ 635,127
Distribution payable 645,925 748,094
Deferred revenue 90,000 90,000
Security deposit 50,000 50,000
------------------------------
Total Liabilities 1,931,222 1,523,221
------------------------------
Partners' Capital (Deficit):
General Partners (56,357) (912,047)
Limited Partners (4,895,005 units outstanding) 2,853,299 7,378,351
------------------------------
Total Partners' Capital 2,796,942 6,466,304
- -------------------------------------------------------------------------------------
Total Liabilities and Partners' Capital $ 4,728,164 $ 7,989,525
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the years ended December 31, 1999, 1998, and 1997
General Limited
Partners Partners Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1996 $(843,544) $14,160,292 $13,316,748
Net income 11,491 1,137,583 1,149,074
Distributions (48,399) (4,791,572) (4,839,971)
- -------------------------------------------------------------------------------------
Balance at December 31, 1997 (880,452) 10,506,303 9,625,851
Net income 4,449 440,453 444,902
Distributions (36,044) (3,568,405) (3,604,449)
- -------------------------------------------------------------------------------------
Balance at December 31, 1998 (912,047) 7,378,351 6,466,304
Net income 897,984 925,484 1,823,468
Distributions (42,294) (5,450,536) (5,492,830)
- -------------------------------------------------------------------------------------
Balance at December 31, 1999 $ (56,357) $ 2,853,299 $2,796,942
=====================================================================================
</TABLE>
See accompanying notes to the financial statements 3
<PAGE>
JETSTREAM, L.P.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the years ended December 31,
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income
Rental $ 4,021,832 $ 4,813,390 $ 5,037,980
Interest 127,031 104,393 129,090
Other -- 128 99,722
-------------------------------------------
Total Income 4,148,863 4,917,911 5,266,792
- ----------------------------------------------------------------------------------------------
Expenses
Depreciation 2,613,055 3,211,640 3,211,650
Management fees (Note 6) 291,204 387,675 447,868
General and administrative 614,966 334,335 230,295
Operating 329,555 5,906 227,905
Bad debts 616,832 533,453 --
-------------------------------------------
Total Expenses 4,465,612 4,473,009 4,117,718
- ----------------------------------------------------------------------------------------------
(Loss) Income from Operations (316,749) 444,902 1,149,074
- ----------------------------------------------------------------------------------------------
Other Income
Gain on sale of aircraft and engine (Note 4) 2,140,217 -- --
- ----------------------------------------------------------------------------------------------
Net Income $ 1,823,468 $ 444,902 $ 1,149,074
==============================================================================================
Net Income Allocated:
To the General Partners $ 897,984 $ 4,449 $ 11,491
To the Limited Partners 925,484 440,453 1,137,583
- ----------------------------------------------------------------------------------------------
$ 1,823,468 $ 444,902 $ 1,149,074
==============================================================================================
Per limited partnership unit
(4,895,005 outstanding) $ 0.19 $ 0.09 $ 0.23
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the financial statements 4
<PAGE>
JETSTREAM, L.P.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
For the years ended December 31,
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Income $ 1,823,468 $ 444,902 $ 1,149,074
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,613,055 3,211,640 3,211,650
Bad debts 616,832 533,453 --
Gain on sale of aircraft and engine (2,140,217) -- --
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash -- -- 321,797
Rent receivable (616,832) (504,400) 524,258
Interest receivable -- -- 327
Accounts payable and accrued expenses 431,296 327,296 5,756
-------------------------------------------
Net cash provided by operating activities 2,727,602 4,012,891 5,212,862
- ----------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Loan receivable -- -- 99,688
Proceeds from sale of aircraft and engine 2,419,091 -- --
-------------------------------------------
Net cash provided by investing activities 2,419,091 -- 99,688
- ----------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Cash distributions (5,594,999) (4,290,245) (4,754,809)
-------------------------------------------
Net cash used for financing activities (5,594,999) (4,290,245) (4,754,809)
- ----------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (448,306) (277,354) 557,741
Cash and cash equivalents, beginning of year 1,853,981 2,131,335 1,573,594
-------------------------------------------
Cash and cash equivalents, end of year $ 1,405,675 $ 1,853,981 $ 2,131,335
==============================================================================================
Supplemental Disclosure of Noncash Operating Activities
In connection with the sale of the aircraft, accrued resale fees in the amount of $78,874 has
reduced the gain on the sale of the aircraft
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the financial statements 5
<PAGE>
JETSTREAM, L.P.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
1. Organization
JetStream, L.P. (the "Partnership"), a Delaware limited partnership, was
formed on April 16, 1987 for the purpose of acquiring and leasing used
commercial aircraft. The Managing General Partner of the Partnership is CIS
Aircraft Partners, Inc. ("CAP"), a third-tier, wholly owned subsidiary of
Continental Information Systems Corporation. The Administrative General
Partner is Jet Aircraft Leasing Inc. ("JAL"), formerly Hutton Aircraft
Leasing, Inc., an affiliate of Lehman Brothers Inc.
Upon formation of the Partnership, the General Partners each contributed $500
and the initial Limited Partner contributed $100 for five limited partner units.
An additional 4,895,000 limited partnership depositary units were then sold at a
price of $20.00 per unit. The Partnership had a closing for these additional
units on October 28, 1987 and received gross offering proceeds of $97,900,000.
The General Partners are implementing, and the Limited Partners have approved, a
plan to sell the Partnership's remaining aircraft and subsequently terminate the
Partnership pursuant to a Plan of Liquidation and Dissolution dated November 20,
1999 (the "Liquidation Plan"). The Liquidation Plan consists of: (1) the sale of
all of the Partnership's assets and the dissolution of the Partnership pursuant
to the proposed Liquidation Plan; (2) the amendment of the Partnership Agreement
to permit the engagement of the General Partners to market and sell the assets
of the Partnership for a fee pursuant to the terms of the Joint Marketing
Agreement, dated July 13, 1999, among each of the General Partners and the
Partnership and (3) the grant of authority to the General Partners to take any
action necessary or incidental and consistent with the Partnership Agreement,
the Liquidation Plan and the Joint Marketing Agreement to complete the
foregoing. The Liquidation Plan required the approval of more than 50% of the
limited partner units entitled to vote. A consent solicitation statement
requesting such approval was forwarded to investors on October 15, 1999. On
November 19, 1999, the Partnership received the required approval from the
unitholders, and the General Partners have begun to implement the Liquidation
Plan by actively marketing the aircraft for sale during the first quarter 2000,
on the terms described in the consent solicitation statement. Once the aircraft
are sold and the Partnership's actual and contingent liabilities have been paid
or reserved for, the sales proceeds will be distributed to the Limited Partners
and the Partnership will be terminated. If the unitholders had not approved the
Liquidation Plan, according to the Partnership's Amended and Restated
Partnership Agreement dated September 10, 1987, the Partnership would be
required to dissolve and distribute all of its assets no later than December 31,
2027.
As a result of the approval of the Liquidation Plan, the Partnership has
designated its aircraft as assets held-for-sale. In accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment
of Long-Lived Assets and Assets to be Disposed Of, all of the Partnership's
aircraft are reported at the lower of carrying amount or fair value less costs
to sell. No charge was recorded as a result of the designation of the aircraft
as assets held-for-sale. In addition, the Partnership has ceased to record
depreciation related to those assets as of November 19, 1999.
Title to the aircraft owned by the Partnership is held by nonaffiliated trusts,
of which the Partnership is the beneficiary. The purpose of this method of
holding title is to satisfy certain registration requirements of the Federal
Aviation Administration.
6
<PAGE>
JETSTREAM, L.P.
2. Significant Accounting Policies
Basis of Accounting The accompanying financial statements have been prepared on
the accrual basis of accounting in accordance with generally accepted accounting
principles. Revenues are recognized as earned and expenses are recorded as
obligations are incurred.
Aircraft and Depreciation The aircraft were recorded at cost, which includes
acquisition costs. Through December 31, 1993, depreciation to an estimated
salvage value of 10% was computed using the straight-line method over an
estimated average economic life of twelve years for all aircraft owned by the
Partnership. Beginning in 1994, depreciation was computed using the
straight-line method over an estimated remaining economic life of two to six
years for all aircraft owned by the Partnership.
Improvements to aircraft required to comply with regulatory requirements will be
capitalized when incurred and depreciated over the useful life of the
improvement.
In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and Assets to be Disposed Of, the Partnership has ceased to record
depreciation related to those assets as of November 19, 1999.
Accounting for Impairment It is the Partnership's policy to review the carrying
value of its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying value of such assets may not be
recoverable. For long-lived assets used in operations, measurement of impairment
loss is based on undiscounted cash flows. For assets held for sale, measurement
of the impairment loss is based on the fair value of the asset. Generally fair
value will be determined through independent appraisals of such assets. No
impairment adjustments have been made as a result of this review process during
1999 and 1998.
Cash Equivalents Cash equivalents consist of highly liquid short-term
investments with original maturities of three months or less from the date of
issuance. The carrying amount approximates fair value because of the short
maturity of these instruments.
Concentration of Credit Risk Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash in
excess of the financial institutions' insurance limits. The Partnership invests
available cash with high credit quality financial institutions.
Operating Leases The aircraft leases are accounted for as operating leases.
Lease revenues, including payments for maintenance and power-by-the-hour
charges, are recognized over the terms of the related leases. Some of the
Partnership's operating leases require rental payments to be paid in advance.
Rental payments received in advance are deferred and then recognized as income
when earned.
Income Taxes No provision for income taxes has been made in the accompanying
financial statements since such taxes are the responsibility of individual
partners rather than the Partnership (Note 8).
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. Partnership Allocations
The Amended and Restated Limited Partnership Agreement ("Agreement")
substantially provides for the following:
7
<PAGE>
JETSTREAM, L.P.
Cash Distributions Cash flow from operations as defined in the Agreement, at
the discretion of the General Partners, will be distributed on a quarterly
basis, with 99% to the Limited Partners and 1% to the General Partners.
Distributable proceeds from sales of aircraft in liquidation of the Partnership
will be distributed in accordance with the partners' capital accounts after all
allocations of income and losses.
Allocation of Income and Losses Generally, income and losses for any year are
allocated 99% to the Limited Partners and 1% to the General Partners. Gains on
sale of aircraft shall first be allocated to the General Partners until they
have been allocated an amount of gain equal to the lesser of their respective
deficit account balances or 1.01% of all capital contributions by Limited
Partners. Any additional gain recognized by the Partnership upon the sale of
aircraft shall be allocated 99% to the Limited Partners and 1% to the General
Partners.
Dissolution of Partnership If, upon dissolution of the Partnership, the General
Partners have a negative capital account, they shall contribute capital equal to
the lesser of their respective capital deficit account balances or 1.01% of all
capital contributed by the Limited Partners.
4. Aircraft under Operating Leases
Certain of the Partnerships' aircraft leases are triple net operating leases,
requiring the lessees to pay substantially all expenses associated with the
aircraft during the term of the leases, as described below:
737-200 Advanced Aircraft On November 2, 1987, the Partnership acquired a
Boeing 737-200 advanced aircraft for a total purchase price of $15,222,609. This
aircraft is subject to an operating lease with Delta Air Lines, Inc. ("Delta").
In June 1992, the General Partners and Delta agreed to amend and extend the
original lease agreement. In November 1995, another agreement was reached to
amend and extend the lease until September 30, 1999 at a monthly lease rate of
$80,000. During the second quarter of 1999, Delta extended its lease for two
years through September 2001. This lease extension requires Delta to pay the
Partnership a monthly lease rate of $65,000 and to hushkit the plane, which was
completed prior to year end 1999.
MD-80 Series Aircraft On October 29, 1987, the Partnership acquired a McDonnell
Douglas MD-80 Series aircraft for a total purchase price of $27,396,997. This
aircraft was subject to an operating lease with Continental Airlines, Inc., the
term of which expired on April 28, 1993. Subsequent to the expiration date,
Continental returned the aircraft to the Partnership. On February 9, 1994, the
Partnership entered into a new lease agreement with Continental. The agreement
provided for Continental to lease the plane for a term of four years and pay
$180,000 per month in advance, effective March 15, 1994. The lease was
previously scheduled to expire in March 1998. However, in September 1997, the
Partnership reached an agreement with Continental to extend the lease through
March 1999 and in October 1998, Continental exercised its second option to renew
this lease through March 2000. During the third quarter of 1999, Continental
extended its lease through September 30, 2000, with the remaining terms of the
lease unchanged.
737-200 Non-Advanced Aircraft On October 30, 1987, the Partnership acquired
three Boeing 737-200 non-advanced aircraft for a total purchase price of
$22,805,997. One of the aircraft was sold in February 1994. The remaining two
aircraft are subject to lease agreements ("Agreements") with Eastwind Airlines,
Inc. ("Eastwind"), which were entered into on July 12, 1995. The Agreements
provided for Eastwind to lease the aircraft for a term of four years. Effective
November 15, 1995, Eastwind was required to pay $35,000 per aircraft per month
in advance. In addition, Eastwind was required to pay maintenance charges
effective August 1, 1995 based on flight hours or flight cycles. Maintenance
charges were $80 per airframe flight hour for scheduled "Q" checks and $7.50 per
flight hour for scheduled landing gear overhaul. Eastwind paid to the
Partnership a security deposit of $25,000 per aircraft. In late August 1999, the
Partnership was notified that Eastwind had voluntarily ceased commercial
operations. The Partnership took possession of the aircraft and in October 1999
sold the aircrafts' engines to an unaffiliated entity for $175,000. The
Partnership recognized a loss of $25,000 on this sale in 1999. After several
months of partial payments, Eastwind made its last payment to the Partnership in
June 1999 and is delinquent on rental payments and maintenance reserves totaling
$1,200,284 as of December 31, 1999.
8
<PAGE>
JETSTREAM, L.P.
On September 29, 1999, an affiliate of the Managing General Partner, along with
two other creditors, filed an involuntary petition for bankruptcy relief against
Eastwind in the United States Bankruptcy Court for the District of Delaware. As
of the date of this document, the Bankruptcy Court had not yet issued an order
for relief adjudicating Eastwind as a debtor under Title 11 of the United States
Code. The General Partners intend to pursue all viable remedies available to the
Partnership with respect to the collection of these delinquent payments subject
to the decisions of the Bankruptcy Court and the applicable provisions of the
U.S. Bankruptcy Code.
727-200 Non-Advanced Aircraft On November 2, 1987, the Partnership acquired
three Boeing 727-200 non-advanced aircraft for a total purchase price of
$16,345,497. These aircraft were subject to operating leases with Trans World
Airlines, Inc. ("TWA"). One of the aircraft was returned to the Partnership in
December 1994 and sold in June 1995. After the original lease expiration in
April 1995, TWA leased the other two aircraft on a month-to-month basis at
$32,500 per month per aircraft paid in advance. TWA terminated its leases on
these aircraft and returned one plane in July 1998 and another in September
1998. In accordance with the lease agreement, TWA was to have performed certain
required maintenance prior to returning the aircraft. In lieu of having TWA
perform this maintenance, the Partnership agreed to receive payments of $360,656
and $360,792 for each respective aircraft from TWA, plus a commitment from TWA
for up to an additional $200,000 per aircraft, if supported by legitimate
maintenance costs.
In September 1998, the Partnership entered into two lease agreements with Sun
Pacific for the two aircraft which were previously leased to TWA. On April 2,
1999, the Partnership sold one of the aircraft to an unaffiliated entity, Sport
Hawk Chicago, Inc. (the "Buyer"), for a selling price of approximately
$2,629,000 and the lease with Sun Pacific for this plane was terminated. The
selling price was determined by arm's-length negotiations between the
Partnership and the Buyer. On April 16, 1999, Sun Pacific ceased commercial
operations. The Partnership has notified Sun Pacific that they are in default of
their lease agreement with respect to the second plane due to their failure to
make the required rental payments to the Partnership. In addition, the remaining
plane requires C-checks and corrosion repair, for which $201,979 has been
reserved at December 31, 1999. Once the required maintenance of the remaining
aircraft is complete, the General Partners will attempt to sell the aircraft to
another carrier pursuant to the Liquidation Plan.
Revenues from each of the airlines as a percentage of the Partnership's total
rental revenues are as follows:
<TABLE>
<CAPTION>
Percent of Rental Revenues
---------------------------------------------------
Airline 1999 1998 1997
---------------------------------------------------
<S> <C> <C> <C>
Eastwind 17.0% 25.6% 15.5%
Delta 24.7 19.9 20.8
TWA -- 9.6 16.9
Continental 58.3 44.9 46.8
---------------------------------------------------
</TABLE>
The following is a schedule, by year, of future minimum rental income under all
leases as of December 31, 1998.
<TABLE>
<CAPTION>
Year Amount
---------------------------------------------------
<S> <C>
2000 $2,400,000
2001 585,000
---------------------------------------------------
Total $2,985,000
===================================================
</TABLE>
The above schedule of future minimum rental income is based on the existing
terms of the leases and does not include the rental income that may result from
the renewal of existing leases or the re-leasing of the aircraft, if any.
9
<PAGE>
JETSTREAM, L.P.
5. Distributions
Distributions declared aggregated $5,492,830 (approximately $1.11 per Unit),
$3,604,449 (approximately $.73 per Unit) and $4,839,971 (approximately $.98 per
Unit) for the years ended December 31, 1999, 1998 and 1997, respectively. As of
December 31, 1999, the Partnership had declared a distribution of $645,925, of
which $639,466 (approximately $.13 per Unit) was paid to the Limited Partners
and $6,459 was paid to the General Partners on March 6, 2000.
6. Transactions with Affiliates
Base Management Fee The General Partners receive a quarterly fee subordinated
to the Limited Partners receiving their Preferred Return as defined in the
Agreement in an amount equal to 1.5% of gross aircraft rentals. Of this amount,
1.0% is payable to CAP and .5% is payable to JAL.
Incentive Management Fee CAP receives a quarterly fee of 4.5% of quarterly cash
flow subordinated to the Limited Partners receiving their Preferred Return.
Re-lease Fee The General Partners receive a quarterly fee subordinated to the
Limited Partners receiving their Preferred Return, for re-leasing aircraft or
renewing a lease in an amount equal to 3.5% of the gross rentals from such
re-lease or renewal for each quarter for which such payment is made. Of this
amount, 2.5% is payable to CAP and 1.0% is payable to JAL.
Resale Fee CAP receives a subordinated fee with respect to each aircraft sold
by the Partnership in an amount equal to the lesser of (i) 3% of the contract
sales price of the aircraft or (ii) an amount that is competitive with fees
charged by nonaffiliates rendering comparable services. Such fees will be
reduced (but not below zero) for any resale fees or commissions payable to third
parties. The resale fee is subordinate to the Limited Partners receiving a
priority return equal to their original capital contribution plus their
preferred return. No resale fees were paid during 1999, 1998 and 1997.
Non-Subordinated Aircraft Marketing and Sale Fee Pursuant to the Liquidation
Plan, an Amendment to the Partnership Agreement and the Joint Marketing
Agreement, CAP will receive a fee of 2% and JAL will receive a fee of 1% on the
contract sales price of each aircraft.
During 1999 the unitholders did not receive their Preferred Returns. Therefore
these management fees have not been paid. The following is a summary of amounts
earned by the General Partners and their affiliates during the years ended
December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Unpaid at Earned
December 31, ------------------------------
1999 1999 1998 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Base Management Fee $109,013 $ 49,287 $ 59,725 $ 62,872
Incentive Management Fee 306,276 122,742 183,534 232,684
Re-lease Fee 263,591 119,175 144,416 152,312
Resale Fee 132,432 78,874 -- --
----------------------------------------------------------------------
$811,312 $370,078 $387,675 $447,868
=========================================
</TABLE>
10
<PAGE>
JETSTREAM, L.P.
7. Reconciliation of Difference between Net Income in the Financial
Statements (Accrual Basis - Generally Accepted Accounting Principles) and
Net Income in the Partnership's Tax Return
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income, as reported $1,823,468 $ 444,902 $1,149,074
Adjustments--
Gain on sale of asset 103,874 -- --
Allowance for doubtful accounts 616,831 533,453 (70,000)
Depreciation differential between the Modified
Accelerated Cost Recovery System and
depreciation for financial reporting
purposes 2,294,305 2,635,913 1,856,804
Amortization -- -- (6,361)
------------------------------------------
Total adjustments 3,015,010 3,169,366 1,780,443
- ----------------------------------------------------------------------------------------------
Net income, per Partnership's tax return $4,838,478 $3,614,268 $2,929,517
-----------------------------------------
The net income determined on the income tax
basis is allocated to the partners as follows:
Limited partners (4,895,005 units) $3,944,433 $3,578,125 $2,900,222
General partners 894,045 36,143 29,295
------------------------------------------
4,838,478 $3,614,268 $2,929,517
------------------------------------------
Taxable income per limited partner unit $ 0.81 $ 0.73 $ 0.59
- ----------------------------------------------------------------------------------------------
</TABLE>
As of December 31, 1999, the tax basis of total assets and total liabilities was
$13,630,221 and $2,033,842, respectively.
8. Contingencies
There may be costs associated with the process of marketing and selling the
remaining aircraft owned by the Partnership and winding up the Partnership. In
negotiating the sale of the aircraft now owned by the Partnership, the
Partnership may be required to bear some or all of the costs of compliance with
future Airworthiness Directives ("ADs") or ADs that have been issued but which
did not mandate action during the previous lessee's lease term or in respect of
which the previous lessee failed to comply. ADs are Federal Aviation
Administration mandates requiring the airline to perform a specific maintenance
task within a specified period of time. The aggregate effect on the Partnership
of compliance with these standards is not determinable at this time and will
depend upon a variety of factors including, but not limited to, the state of the
commercial aircraft market, the extent of the AD, the availability of capable
repair facilities and the effect, if any, that such compliance may have on the
service lives of the affected aircraft. As described above, the cost to the
Partnership of such compliance may be reduced to the extent that current or
future lessees of the Partnership's aircraft effect such modifications under the
terms of the current or future operating leases.
9. Subsequent Event
In accordance with the Partnership's Liquidation Plan, the General Partners
began marketing the aircraft for sale during the first quarter of 2000. Bids
were received for several of the planes and on February 28, 2000 the Managing
General Partner signed a letter of intent for the sale of the Partnership's
737-200 advanced aircraft. A contract is currently being negotiated with the
prospective purchaser and it is anticipated that the plane will be sold during
the second quarter of this year. However, there can be no assurance that the
sale will close within this timeframe. In addition, the General Partners
continue to market the remaining aircraft. Once the aircraft are sold and the
Partnership's actual and contingent liabilities have been paid or reserved for,
the sales proceeds will be distributed to the Limited Partners and the
Partnership will be terminated.
11
<PAGE>
JETSTREAM, L.P.
Schedule II Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End of
of Year Expenses Year
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1998 $ -- $533,452 $ 533,452
Year ended December 31, 1999 533,452 616,832 1,150,284
- ----------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Partners of JetStream, L.P.:
We have audited the accompanying balance sheets of JetStream, L.P. (a Delaware
limited partnership) as of December 31, 1999 and 1998 and the related statements
of income, partners' capital (deficit) and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As described in Note 1 to the
financial statements, a qualifying majority of the limited partner units have
voted to approve a plan to liquidate the Partnership. As a result, the General
Partners commenced implementation of the plan to sell the Partnership's
remaining aircraft and subsequently terminate the Partnership.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of JetStream, L.P. as of December
31, 1999 and 1998 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Item 14 is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 18, 2000, except with respect
to the matter discussed in Note 9, as
to which the date is February 28, 2000
13
EXHIBIT 2
Plan of Liquidation and Dissolution
of
JetStream, L.P.
<PAGE>
PLAN OF LIQUIDATION AND DISSOLUTION
of
JETSTREAM, L.P.
This Plan of Liquidation and Dissolution (the "Plan") dated as of
November 20, 1999 of JetStream, L.P. (the "Partnership"), a limited partnership
organized and existing under the Delaware Revised Uniform Limited Partnership
Act (the "Delaware Act"), is for the purpose of effecting the complete
liquidation and dissolution of the Partnership in accordance with the laws of
the State of Delaware.
1. Intention of the General Partners. CIS Aircraft Partners, Inc., as
the Managing General Partner, and Jet Aircraft Leasing, Inc., as the
Administrative General Partner (collectively, the "General Partners"), believe
that the liquidation and dissolution (the "Liquidation") of the Partnership at
this time is in the best interest of the Partnership and the unitholders, as the
beneficial owners of the limited partnership interests of the Partnership (the
"Unitholders"). Therefore, the General Partners have submitted this Plan to the
Unitholders for their consent to liquidate and dissolve the Partnership in
accordance with Section 8.1.(a)(v) of the Limited Partnership Agreement of the
Partnership dated October 16, 1987 (the "Partnership Agreement").
2. Effectiveness. The Plan shall be effective upon the approval
hereof by the affirmative vote of Unitholders owning more than 50% of the
outstanding units of the Partnership as required by the Partnership Agreement.
Until such time as the Unitholders approve this Plan, the General Partners shall
not take and shall not cause the Partnership to take, any of the actions, and
shall not do or cause the Partnership to do, any of the things provided herein.
3. Dissolution. Upon the execution of this Plan by CIS
Assignor L.P.A., Inc., as Assignor Limited Partner of the Partnership on
behalf of the Unitholders, the Partnership is and shall be dissolved,
without any further action by or on behalf of the Partnership, the
Unitholders or the General Partners.
4. Winding Up. Upon the dissolution of the Partnership, the General
Partners, as liquidators for the Partnership, shall sell all of the assets of
the Partnership pursuant to the Joint Marketing Agreement, dated as of July 13,
1999, by and among each of the General Partners and the Partnership and shall
apply the funds of the Partnership (including the proceeds of the sale of any
other assets of the Partnership) to (i) the payment of the expenses of the sale
of the assets of the Partnership, and the winding up, liquidation and
termination of the Partnership; (ii) the expenses of preparation, filing and
distribution of financial statements, tax returns, reports required under the
Securities Exchange Act of 1934 (the "Exchange Act") and reports to Unitholders,
including fees and expenses of accountants and lawyers; (iii) the payment of all
income, sales, use, franchise, gross receipts, ad valorem, personal property and
other taxes, imports, duties and governmental charges payable by the Partnership
with respect to its income or operations through the time of its termination
("Taxes"), including Taxes with respect to the sale of the Partnership's assets;
and (iv) the creation of reserves for any of the foregoing.
<PAGE>
5. Liquidation. All assets and funds of the Partnership remaining
after the payments provided for by paragraph 4, and any amounts reserved by the
General Partners pursuant to clause (i) of paragraph 4 and determined by the
General Partners to be in excess of the amounts required therefor, shall be
distributed by the General Partners as follows: (i) to pay or make provision to
pay all creditors of the Partnership, including Limited Partners and Unitholders
in their capacity as creditors of the Partnership, if applicable; (ii) pay or
make provision to pay the General Partners for any loans or advances made by
either of them to the Partnership; (iii) pay the Unitholders the amount of their
respective capital accounts on the date of distribution (the "Liquidating
Distributions"); (iv) pay the General Partners the amounts of their respective
adjusted capital accounts; and (v) pay the General Partners any accrued but
unpaid fees, all in accordance with Section 8.2 of the Partnership Agreement.
6. Cancellation of Interests in the Partnership. Liquidating
Distributions shall be made in complete cancellation of all of the
Unitholders' interests in the Partnership.
7. Reports and Filings. In connection with the Liquidation and
winding up of the Partnership, the General Partners shall cause to be executed
and timely filed (i) with the office of the Secretary of State of Delaware, a
Certificate of Cancellation canceling the Partnership's Certificate of Limited
Partnership; (ii) with the Internal Revenue Service, all returns, reports,
documents, certificates and other information required under the Internal
Revenue Code of 1986, as amended, or applicable Treasury Department rules or
regulations; (iii) with the appropriate authorities in any other tax
jurisdiction, all returns, reports, documents, certificates and other
information required under the laws of such jurisdictions; (iv) with the
Securities Exchange Commission, any reports required under the Exchange Act,
including a Form 15 terminating the registration of the Partnership under the
Exchange Act; and (v) all reports required to be delivered to the Unitholders in
accordance with Article IX of the Partnership Agreement.
8. Other Acts. The General Partners shall take, or cause the
Partnership to take, such other acts and deeds and shall do, or cause the
Partnership to do, such other things, as are necessary or appropriate in
connection with the dissolution, winding up and Liquidation of the Partnership,
the termination of the responsibilities and liabilities of the Partnership under
applicable law, and the termination of the existence of the Partnership.
9. Counterparts. This plan may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have made and executed this
Plan as of the date first written above.
CIS AIRCRAFT PARTNERS, INC.
as Managing General Partner
of JetStream, L.P.
/s/ Michael Rosen
-------------------------------------------
By: Michael Rosen
Title: President
JET AIRCRAFT LEASING, INC.
as Administrative General Partner
of JetStream, L.P.
/s/ Michael Marron
-------------------------------------------
By: Michael Marron
Title: President
CIS ASSIGNOR L.P.A., INC.
as Assignor Limited Partner of
JetStream, L.P. on behalf of the Unitholders
/s/ Michael Rosen
-------------------------------------------
By: Michael Rosen
Title: President
EXHIBIT 3(b)
Amendment
To The Amended and Restated
Limited Partnership Agreement of
JetStream, L.P.
<PAGE>
AMENDMENT
TO THE AMENDED AND RESTATED
Limited Partnership Agreement of
JETSTREAM, L.P.
THIS AMENDMENT TO THE Amended and Restated Limited Partnership Agreement,
dated September 10, 1987 (the "Partnership Agreement"), of JETSTREAM, L.P. (the
"Partnership"), is dated as of November 20, 1999, is entered into by and among
CIS Aircraft Partners, Inc., a Delaware corporation, as Managing General
Partner, Jet Aircraft Leasing, Inc., a Delaware corporation, as Administrative
General Partner (and together with the Managing General Partner, the "General
Partners") , and each of the General Partners as attorneys-in-fact for any
Limited Partners (other than the Assignor Limited Partner), and CIS Assignor
L.P.A., Inc., a Delaware corporation, as Assignor Limited Partner and as
attorney in-fact for Unitholders of the Partnership. Terms not defined herein
shall have the meanings ascribed to them in the Partnership Agreement.
WHEREAS, the General Partners have received the requisite consent of the
Limited Partners and Unitholders of the Partnership for (1) the sale of all of
the Partnership's assets and the dissolution of the Partnership pursuant to the
Plan of Liquidation and Dissolution, dated November 20, 1999; (2) the amendment
of the Partnership Agreement to permit the engagement of the General Partners to
market and sell the assets of the Partnership for a fee pursuant to the terms of
the Joint Marketing Agreement, dated July 13, 1999, among each of the General
Partners and the Partnership; and (3) the grant of authority to the General
Partners to take any action necessary or incidental and consistent with the
Partnership Agreement, the Plan of Liquidation and Dissolution and the Joint
Marketing Agreement to complete the foregoing on the terms described in the
consent solicitation statement dated October 15, 1999;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree to amend the Partnership Agreement as
follows:
Item 1.
------ Section 5.9(e) of the Partnership Agreement is hereby amended and
restated to read in its entirety as follows:
(e) The Managing General Partner and the Administrative General
Partner shall receive a non-subordinated aircraft marketing and
sales fee in connection with the liquidation of the Partnership
as set forth in the Joint Marketing Agreement, dated July 13,
1999, among the Managing General Partner, the Administrative
General Partner and the Partnership.
Item 2.
------ The amendment herein will take effect as of the date of this
Amendment.
<PAGE>
IN WITNESS WHEREOF, CIS Aircraft Partners, Inc., as the Managing
General Partner, and Jet Aircraft Leasing, Inc., as the Administrative
General Partner, and as attorney-in-fact for each and all of the Limited
Partners (excluding the Assignor Limited Partner), and CIS Assignor L.P.A.,
Inc., as the Assignor Limited Partner and as attorney-in-fact for each of
the Unitholders, have executed this Amendment as of the date first above
written.
MANAGING GENERAL PARTNER,
CIS Aircraft Partners, Inc.
By: /s/ Michael Rosen
-----------------------------------------
Michael Rosen, President
ADMINISTRATIVE GENERAL PARTNER,
Jet Aircraft Leasing, Inc.
By: /s/ Michael Marron
-----------------------------------------
Michael Marron, President
ASSIGNOR LIMITED PARTNER,
CIS Assignor L.P.A., Inc.
By: /s/ Michael Rosen
-----------------------------------------
Michael Rosen, President
LIMITED PARTNERS (other than the Assignor
Limited Partner)
By: CIS AIRCRAFT PARTNERS, INC., as
attorney-in-fact for the Limited Partners
By: /s/ Michael Rosen
-----------------------------------------
Michael Rosen, President
By: JET AIRCRAFT LEASING INC., as
attorney-in-fact for the Limited Partners
By: /s/ Michael Marron
-----------------------------------------
Michael Marron, President
UNITHOLDERS
By: CIS Assignor L.P.A., Inc.
as attorney-in-fact for the Unitholders
By: /s/ Michael Rosen
-----------------------------------------
Michael Rosen, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Dec-31-1999
<CASH> 1,405,675
<SECURITIES> 000
<RECEIVABLES> 50,000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 3,272,489
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 4,728,164
<CURRENT-LIABILITIES> 1,931,222
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 2,796,942
<TOTAL-LIABILITY-AND-EQUITY> 4,728,164
<SALES> 000
<TOTAL-REVENUES> 6,289,080
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 4,465,612
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 1,823,468
<INCOME-TAX> 000
<INCOME-CONTINUING> 1,823,468
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 1,823,468
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.19
</TABLE>
