UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-16838
JETSTREAM II, L.P.
(Exact name of registrant as specified in its charter)
Delaware 84-1068932
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, New York, NY 10285
(Address of principal executive offices) (Zip code)
(212) 526-3237
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Balance Sheets
September 30, December 31,
Assets 1994 1993
Aircraft, at cost $28,843,000 $28,843,000
Less-accumulated depreciation (4,088,808) ----
24,754,192 28,843,000
Cash and cash equivalents 1,363,783 1,104,004
Restricted cash 2,587,174 3,639,699
Interest receivable 915 9,769
Loan receivable 278,406 ----
Prepaid expenses ---- 22,074
Total Assets $28,984,470 $33,618,546
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 246,215 $ 198,094
Maintenance payable ---- 750,000
Distribution payable 1,163,783 904,004
Deferred revenue 200,833 315,500
Total Liabilities 1,610,831 2,167,598
Partners' Capital (Deficit):
General Partners (692,773) (652,000)
Limited Partners (4,837,505 units outstanding) 28,066,412 32,102,948
Total Partners' Capital 27,373,639 31,450,948
Total Liabilities and Partners' Capital $28,984,470 $33,618,546
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1994 1993 1994 1993
Rental $1,500,000 $1,111,000 $4,054,667 $4,101,882
Interest 26,090 48,420 81,892 113,955
Other 3,300 ---- 5,719 ----
Total Income 1,529,390 1,159,420 4,142,278 4,215,837
Expenses
Depreciation
and amortization 1,362,936 1,495,095 4,088,808 4,485,285
Management fees 128,897 88,267 354,155 295,835
General and
administrative 48,872 50,106 157,439 153,348
Operating 2,838 41,222 45,816 60,052
Total Expenses 1,543,543 1,674,690 4,646,218 4,994,520
Net Loss $ (14,153) $ (515,270) $ (503,940) $ (778,683)
Net Loss Allocated:
To the General Partners $ (141) $ (5,153) $ (5,039) $ (7,787)
To the Limited Partners (14,012) (510,117) (498,901) (770,896)
$ (14,153) $ (515,270) $ (503,940) $ (778,683)
Per limited partnership unit
(4,837,505 outstanding) $(0.00) $(0.11) $(0.10) $(0.16)
Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1994
Limited General Total
Partners' Partners' Partners'
Capital (Deficit) Capital
Balance at December 31, 1993 $32,102,948 $ (652,000) $31,450,948
Net Loss (498,901) (5,039) (503,940)
Cash distributions (3,537,635) (35,734) (3,573,369)
Balance at September 30, 1994 $28,066,412 $ (692,773) $27,373,639
Statements of Cash Flows
For the nine months ended September 30, 1994 and 1993
Cash Flows from Operating Activities: 1994 1993
Net loss $ (503,940) $ (778,683)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 4,088,808 4,485,285
Restricted Cash 1,052,525 1,375,000
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Interest receivable 8,854 (2,157)
Prepaid expenses 22,074 (34,237)
Accounts payable and accrued expenses 48,121 (99,033)
Deferred revenue (114,667) (258,720)
Maintenance payable (750,000) ----
Net cash provided by operating activities 3,851,775 4,687,455
Cash Flows from Investing Activities:
Loan Receivable (278,406) ----
Net cash used for investing activities (278,406) ----
Cash Flows from Financing Activities:
Cash distributions (3,313,590) (6,075,075)
Net cash used for financing activities (3,313,590) (6,075,075)
Net increase (decrease) in cash and cash equivalents 259,779 (1,387,620)
Cash and cash equivalents at beginning of period 1,104,004 2,451,617
Cash and cash equivalents at end of period $ 1,363,783 $ 1,063,997
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1993 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments consisting of only
normal recurring accruals which are, in the opinion of management, necessary to
present a fair statement of financial position as of September 30, 1994 and the
results of operations, changes in partners' capital (deficit), and cash flows
for the nine months then ended. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
The following significant events have occurred subsequent to fiscal year 1993,
and material contingencies exist that require disclosure in this interim report
per Regulation S-X, Rule 10-01, Paragraph (a)(5).
(1) On February 9, 1994, Continental entered into a new lease agreement.
The agreement between Continental and the Partnership provides for Continental
to lease the plane for a term of four years. Effective March 15, 1994,
Continental shall pay $180,000 per month in advance. In addition, the
Partnership made a one-time payment of $750,000 in March 1994 to perform
various maintenance work on the plane. Also, the Partnership has agreed to
provide up to $600,000 of financing to Continental to perform modification work
on the aircraft including advanced avionics, interior furnishings and exterior
paint. The modification financing is repayable over the life of the lease at
an interest rate of 8% per annum for advances made before February 1, 1996, and
with respect to advances made after February 1, 1996, a rate per annum equal to
the yield to maturity of United States Treasury Notes having a maturity closest
to the remaining term of the lease, plus 4.25 percent. On June 7, 1994, the
Partnership made its first advance to Continental in the amount of $302,525.
(2) The current lease agreement with Delta for the Partnership's 737-200
advanced aircraft was scheduled to expire in December 1994. However, in early
May 1994, Delta exercised its option to extend the lease for a term of two
years from the previous expiration date, with the remaining terms of the lease
unchanged.
(3) The lease agreements with TWA for the Partnership's three 727-200
aircraft were scheduled to expire on September 30, 1994 (two aircraft) and
October 31, 1994 (one aircraft). TWA agreed to extend the lease on one of the
aircraft to April 30, 1995. Thereafter, TWA may continue to lease the aircraft
on a month to month basis. The leases for the two remaining aircraft were
extended on a short-term basis. One of the leases expired on October 31, 1994
and the aircraft was recently returned to the Partnership. TWA will also
return the third aircraft soon after the expiration of its lease in
mid-December 1994. Each of the recent lease extensions with TWA were at a
monthly lease rate of $32,500 per aircraft, representing a decline from the
prior monthly rate of $40,000 per aircraft.
Part I, Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations
Liquidity and Capital Resources
As of September 30, 1994, the Partnership had all of its eight aircraft on
lease. There were three aircraft on lease to Northwest Airlines, Inc.
("Northwest"), three aircraft on lease to Trans World Airlines Inc. ("TWA"),
one aircraft on lease to Delta Air Lines, Inc. ("Delta") and one aircraft on
lease to Continental Airlines ("Continental"). At September 30, 1994, all
airlines were current on their lease obligations. The lease agreements with
TWA for the Partnership's three 727-200 aircraft were scheduled to expire on
September 30, 1994 (two aircraft) and October 31, 1994 (one aircraft). TWA
agreed to extend the lease on one of the aircraft to April 30, 1995.
Thereafter, TWA may continue to lease the aircraft on a month to month basis.
The leases for the two remaining aircraft were extended on a short-term basis.
One of the leases expired on October 31, 1994 and the aircraft was recently
returned to the Partnership. TWA will also return the third aircraft soon
after the expiration of its lease in mid-December 1994. Each of the recent
lease extensions with TWA were at a monthly lease rate of $32,500 per aircraft,
representing a decline from the prior monthly rate of $40,000 per aircraft.
The General Partners are currently exploring the potential of re-leasing the
idle 727-200 aircraft with another airline and will also seek to re-lease the
aircraft which will be returned to the Partnership in December 1994. In the
event that such efforts are unsuccessful, the General Partners will pursue a
sale of both aircraft.
The leases with Northwest for the Partnership's three DC-9-30 aircraft were
previously scheduled to expire on January 31, 1995 (two aircraft) and April 21,
1995 (one aircraft). The General Partners recently reached an agreement with
Northwest to extend each of the leases for a term of one year. Under the terms
of the extensions, Northwest will continue to make monthly lease payments to
the Partnership of $35,000 per aircraft.
Pursuant to the terms of the lease agreement executed with Continental in
February 1994, the Partnership agreed to provide up to $600,000 of financing to
the airline to perform modification work on the Partnership's MD-80 Series
aircraft, including advanced avionics, interior furnishings and exterior paint.
On June 7, 1994, the Partnership made its first advance to Continental in the
amount of $302,525. The modification financing is repayable over the life of
the lease at an interest rate of 8% per annum for advances made before February
1, 1996, and, with respect to advances made after February 1, 1996, a rate per
annum equal to the yield to maturity of United States Treasury Notes having a
maturity closest to the remaining terms of the lease, plus 4.25 percent.
The Partnership is faced with a competitive and weakened environment in the
aircraft leasing industry which has had an immediate and material impact on the
business of the Partnership. In particular, the large oversupply of aircraft
available for lease has resulted in significant reductions in market lease
rates thereby impacting the lease rates obtained by the Partnership as leases
for the aircraft have been either renewed or extended.
At September 30, 1994, the Partnership had cash and cash equivalents of
$1,363,783 as compared to $1,104,004 at December 31, 1993. The $259,779
increase in cash and cash equivalents is mainly attributable to cash generated
from operations being in excess of the payment of cash distributions. The
Partnership's restricted cash totalled $2,587,174 at September 30, 1994,
compared to $3,639,699 at December 31, 1993. The $1,052,525 decrease is due
to: (i) a $750,000 payment to Continental in February 1994; and (ii) the
$302,525 loan to Continental on June 7, 1994, in accordance with their new
lease agreement. The Partnership's restricted cash is comprised of: (i)
$750,000 which is to be used in connection with performing various
airworthiness directives mandated by the Federal Aviation Administration, and
(ii) $1,837,174 and $2,889,699 of aircraft maintenance reserves at September
30, 1994 and December 31, 1993, respectively. At December 31, 1993, $750,000
of the aircraft maintenance reserves were also reflected as a liability under
"maintenance payable".
On July 29, 1994, the Partnership paid distributions to the Unitholders for the
period from April 1, 1994 to June 30, 1994, in the amount of $1,397,954 or
approximately $.29 per Unit. At September 30, 1994, the Partnership had
distributions payable in the amount of $1,163,783 or approximately $.24 per
Unit. This amount reflects the 1994 third quarter cash distribution which was
funded from cash flow from operations. This distribution was subsequently paid
on November 2, 1994. Future cash distributions will be determined on a
quarterly basis after an evaluation of the Partnership's current and expected
financial position.
At September 30, 1994, deferred revenue totalled $200,833 as compared to
$315,500 at December 31, 1993. The decrease is attributable to the timing of
lease payments made to the Partnership by TWA.
Results of Operations
Substantially all of the Partnership's revenue was generated from the leasing
of the Partnership's aircraft to commercial air carriers under triple net
operating leases. The balance of the Partnership's revenue consisted mainly of
interest income.
For the three and nine months ended September 30, 1994, the Partnership
reported a net loss of $14,153 and $503,940, respectively, as compared to a net
loss of $515,270 and $778,683, respectively, for the corresponding periods in
1993. The decreases in the Partnership's net loss are primarily attributable to
the re-leasing of the Partnership's MD-80 Series aircraft to Continental
airlines and a decrease in depreciation and amortization.
Rental income for the three and nine months ended September 30, 1994, was
$1,500,000 and $4,054,667, respectively, as compared to $1,111,000 and
$4,101,882, respectively, for the corresponding periods in 1993. The increase
for the three month period is the result of Continental re-leasing the MD-80
Series aircraft. The decrease in the nine month period is the result of TWA
and Northwest paying lower rental rates pursuant to the airlines' amended lease
agreements. The decrease is partially offset by the new lease agreement with
Continental.
Interest income for the three and nine months ended September 30, 1994, was
$26,090 and $81,892, respectively, as compared to $48,420 and $113,955
respectively, for the corresponding periods in 1993. The decreases are due to
lower cash balances maintained by the Partnership during the first nine months
of 1994, as compared to the same period in 1993. This decrease is partially
offset by interest income earned on the financing provided to Continental.
Depreciation and amortization for the three and nine months ended September 30,
1994 was $1,362,936 and $4,088,808, respectively, as compared to $1,495,095 and
$4,485,285, respectively, for the corresponding periods in 1993. The decreases
are due to the write-down of the value of the Partnership's aircraft in
December 1993.
Management fees for the three and nine months ended September 30, 1994, were
$128,897 and $354,155, respectively, as compared to $88,267 and $295,835,
respectively, for the corresponding periods in 1993. Management fees are based
on rental income and operating cash flow. The increases for the three and nine
month periods are primarily the result of the recent lease agreement with
Continental.
Operating expenses for the three and nine months ended September 30, 1994, were
$2,838 and $45,816, respectively, as compared to $41,222 and $60,052,
respectively, for the corresponding periods in 1993. The differences are due
to the timing of billing of costs associated with the MD-80 Series aircraft as
it was put in storage in May 1993 and later re-leased to Continental in March
1994. The 1993 costs were mainly for insurance, storage and maintenance, while
the 1994 costs also include consulting and documentation to prepare the
aircraft for re-leasing.
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during the quarter ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JETSTREAM II, L.P.
BY: JET AIRCRAFT LEASING INC.
Administrative General Partner
Date: November 14, 1994 BY: /s/ Moshe Braver
Name: Moshe Braver
Title: Director and President
Date: November 14, 1994
BY: /s/ Daniel M. Palmier
Name: Daniel M. Palmier
Title: Vice President and
Chief Financial Officer
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 3,950,957
<SECURITIES> 000
<RECEIVABLES> 279,321
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