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, 1995
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.)
Attn: Andre Anderson, 3 World Financial Center,
29th Floor, 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 1995 1994
Aircraft, at adjusted cost $26,877,000 $28,843,000
Less-accumulated depreciation (7,820,316) (5,451,744)
19,056,684 23,391,256
Cash and cash equivalents 4,585,797 2,978,631
Restricted cash 1,047,475 1,047,475
Accounts receivable 0 9,941
Loan receivable 206,601 260,975
Interest receivable 680 915
Total Assets $24,897,237 $27,689,193
Liabilities and Partners' Capital
Liabilities:
Accounts payable and
accrued expenses $ 409,592 $ 225,886
Distribution payable 1,315,098 1,288,932
Deferred revenue 160,833 160,833
Total Liabilities 1,885,523 1,675,651
Partners' Capital (Deficit):
General Partners (736,393) (706,374)
Limited Partners
(4,837,505 units
outstanding) 23,748,107 26,719,916
Total Partners'
Capital 23,011,714 26,013,542
Total Liabilities
and Partners'
Capital $24,897,237 $27,689,193
Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1995
General Limited
Partners Partners Total
Balance at December 31, 1994 $ (706,374) $26,719,916 $26,013,542
Net Income 5,722 566,510 572,232
Cash distributions (35,741) (3,538,319) (3,574,060)
Balance at September 30, 1995 $ (736,393) $23,748,107 $23,011,714
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1995 1994 1995 1994
Rental $1,237,500 $1,500,000 $3,712,500 $4,054,667
Interest 77,545 26,090 200,946 81,892
Other 1,260 3,300 2,850 5,719
Gain on sale
of aircraft 593,730 0 1,083,016 0
Total Income 1,910,035 1,529,390 4,999,312 4,142,278
Expenses
Depreciation 1,199,104 1,362,936 3,884,018 4,088,808
Management fees 119,054 128,897 347,859 354,155
General and
administrative 41,435 48,872 128,125 157,439
Operating 12,721 2,838 67,078 45,816
Total Expenses 1,372,314 1,543,543 4,427,080 4,646,218
Net Income
(Loss) $ 537,721 $ (14,153) $ 572,232 $ (503,940)
Net Income
(Loss) Allocated:
To the General
Partners $ 5,377 $ (141) $ 5,722 $ (5,039)
To the Limited
Partners 532,344 (14,012) 566,510 (498,901)
$ 537,721 $ (14,153) $ 572,232 $ (503,940)
Per limited
partnership unit
(4,837,505
outstanding) $ 0.11 $ 0.00 $ 0.12 $ (0.10)
Statements of Cash Flows
For the nine months ended September 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income (loss) $ 572,232 $ (503,940)
Adjustments to reconcile
net income (loss) to net cash
provided by operating activities:
Depreciation 3,884,018 4,088,808
Gain on sale of aircraft (1,083,016) 0
Restricted cash 0 1,052,525
Increase (decrease) in cash
arising from changes
in operating assets and
liabilities:
Accounts receivable 9,941 0
Interest receivable 235 8,854
Prepaid expenses 0 22,074
Accounts payable and
accrued expenses 183,706 48,121
Maintenance payable 0 (750,000)
Deferred revenue 0 (114,667)
Net cash provided by
operating activities 3,567,116 3,851,775
Cash Flows from Investing Activities:
Loan receivable 54,374 (278,406)
Proceeds from sale of aircraft 1,533,570 0
Net cash provided by (used for)
investing activities 1,587,944 (278,406)
Cash Flows from Financing Activities:
Cash distributions (3,547,894) (3,313,590)
Net cash used for financing activities (3,547,894) (3,313,590)
Net increase in cash and
cash equivalents 1,607,166 259,779
Cash and cash equivalents
at beginning of period 2,978,631 1,104,004
Cash and cash equivalents
at end of period $ 4,585,797 $ 1,363,783
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1994 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of September 30, 1995 and the results of operations for the three
and nine months ended September 30, 1995 and 1994, cash flows for the nine
months ended September 30, 1995 and 1994, and the statement of changes in
partners' capital (deficit) for the nine months ended September 30, 1995.
Results of operations for the periods are not necessarily indicative of the
results to be expected for the full year.
The following significant events have occurred subsequent to fiscal year 1994,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
(1) In June 1995, the General Partners sold aircraft N64321
formerly on lease with Trans World Airlines, Inc. ("TWA") for net sales
proceeds of $776,000. The aircraft had a carrying value of $286,714 on the
date of sale resulting in a gain on sale of $489,286. In September 1995, the
General Partners sold aircraft N74317 formerly on lease with TWA for net
proceeds of $757,570. The aircraft had a carrying value of $163,840 on the
date of sale resulting in a gain on sale of $593,730.
(2) The leases with Northwest for the Partnership's three DC-9-30
aircraft were previously scheduled to expire on January 1, 1996 (two aircraft)
and April 21, 1996 (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.
(3) Delta gave notice to the Partnership in early April 1995 that
it would exercise an option under the current lease agreement to terminate the
lease for the Partnership's 737-200 advanced aircraft on November 30, 1995.
However, an agreement was reached with Delta in November 1995 to amend and
extend the current lease until September 30, 1999 at a monthly lease rate of
$80,000. While this rate represents a decline from the prior lease rate of
$95,000 per month, it is in line with prevailing market rates. Under the terms
of the amended lease, Delta does not have the option of returning the aircraft
prior to the new expiration date as it did under the previous lease agreement.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
As of September 30, 1995, the Partnership had all six of its aircraft on-lease.
Three aircraft were on-lease to Northwest Airlines, Inc. ("Northwest"), one
aircraft was on-lease to Delta Air Lines, Inc. ("Delta"), one aircraft was
on-lease to Continental Airlines, Inc. ("Continental") and one aircraft was
on-lease to Trans World Airlines ("TWA"). As discussed below, the General
Partners completed a sale in September 1995 of one of the two 727-200
non-advanced aircraft which TWA returned to the Partnership in the fourth
quarter of 1994. The other aircraft was sold in June 1995. At September 30,
1995, all airlines to which the Partnership had aircraft on-lease were current
on their lease obligations. The Partnership is faced with an extremely
competitive environment in the aircraft leasing industry which has had a
material negative 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
extended and as new leases have been executed.
The General Partners had been attempting to re-lease two of the Partnership's
727-200 Stage 2 non-advanced aircraft, which were returned by TWA subsequent to
their respective lease expirations in the fourth quarter of 1994. However, in
light of the extremely competitive and deteriorated operating environment,
particularly for older Stage 2 aircraft, such efforts were unsuccessful.
Accordingly, one of the aircraft was sold in June 1995 for net sales proceeds
of $776,000 and the second was sold in September 1995 for net sales proceeds of
$757,570. The net proceeds from these sales are being retained in the
Partnership's cash reserves pending the completion of an analysis of the cash
needs for the Partnership's remaining aircraft. TWA continues to lease the
Partnership's remaining 727-200 Stage 2 non-advanced plane on a month-to-month
basis and remains current on its lease payments. To date, TWA has not given
any indication to the Partnership as to how long it will continue to lease the
plane.
Delta gave notice to the Partnership in early April 1995 that it would exercise
an option under the current lease agreement to terminate the lease for the
Partnership's 737-200 advanced aircraft on November 30, 1995. However, an
agreement was reached with Delta in November 1995 to amend and extend the
current lease until September 30, 1999 at a monthly lease rate of $80,000.
While this rate represents a decline from the prior lease rate of $95,000 per
month, it is in line with prevailing market rates. Under the terms of the
amended lease, Delta does not have the option of returning the aircraft prior
to the new expiration date as it did under the previous lease agreement.
The leases with Northwest for the Partnership's three DC-9-30 aircraft were
previously scheduled to expire on January 1, 1996 (two aircraft) and April 21,
1996 (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.
At September 30, 1995, the Partnership had unrestricted cash and cash
equivalents of $4,585,797, compared to $2,978,631 at December 31, 1994. The
$1,607,166 increase in unrestricted cash and cash equivalents is primarily
attributable to the proceeds received from the sale of the two 727-200
non-advanced aircraft in June 1995 and September 1995 as discussed above. The
Partnership's restricted cash balance at September 30, 1995 of $1,047,475
remained unchanged from December 31, 1994. 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) $297,475 which represents the balance of modification
work financing committed to Continental in accordance with the 1994 lease
agreement.
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. As of
September 30, 1995, Continental had made principal payments on the loan
totalling $95,924. Principal payments made on the loan by Continental during
the first nine months of 1995, totalling $54,374, are the reason for the
decrease in the Partnership's loan receivable balance, which totalled $206,601
at September 30, 1995, compared to $260,975 at December 31, 1994. Continental
makes monthly lease payments to the Partnership of $180,000.
Accounts payable and accrued expenses totalled $409,592 at September 30, 1995,
compared to $225,886 at December 31, 1994. The increase is primarily
attributable to management and re-leasing fees earned by the General Partners
which were unpaid as of September 30, 1995, and a sales fee earned by a General
Partner as a result of the June 1995 and September 1995 sales of the two
727-200 aircraft formerly on-lease to TWA.
On August 3, 1995, the Partnership paid a distribution to the Unitholders for
the period from April 1, 1995 to June 30, 1995, in the amount of $1,144,121, or
approximately $.24 per Unit. At September 30, 1995, the Partnership had a
distribution payable to Unitholders of $1,290,506 or approximately $.27 per
Unit. This amount reflects the 1995 third quarter cash distribution which was
funded from cash flow from operations. This distribution was subsequently paid
on November 2, 1995.
Future cash distributions will be determined on a quarterly basis after an
evaluation of the Partnership's current and expected financial position. The
level of cash available for distribution will be further reduced once TWA
terminates the lease for the Partnership's remaining 727-200 aircraft.
Results of Operations
Substantially all of the Partnership's revenue for the nine months ended
September 30, 1995 was generated from the leasing of the Partnership's aircraft
to commercial air carriers under triple net operating leases and, to a lesser
extent, the sales of the 727-200 non-advanced planes in June 1995 and September
1995.
For the three and nine months ended September 30, 1995, the Partnership
reported net income of $537,721 and $572,232, respectively, as compared to net
losses of $14,153 and $503,940, respectively, for the corresponding periods in
1994. The increase for the three-month period is primarily attributable to a
gain on the September 1995 sale of a 727-200 non-advanced plane totalling
$593,730. The increase for the nine-month period is primarily attributable to
the gains on the sale of two aircraft in June and September 1995, respectively,
which together, totalled $1,083,016. The increases for both periods were
partially offset by decreases in rental income.
Rental income for the three and nine months ended September 30, 1995 totalled
$1,237,500 and $3,712,500, respectively, as compared to $1,500,000 and
$4,054,667 for the respective periods in 1994. The decreases are primarily due
to the fourth quarter 1994 lease expirations and subsequent sale of two 727-200
non-advanced aircraft, formerly on-lease with TWA, partially offset by the
lease agreement with Continental, which became effective on March 15, 1994.
Interest income for the three and nine months ended September 30, 1995 was
$77,545 and $200,946, respectively, as compared to $26,090 and $81,892 for the
respective periods in 1994. The increases are due to an increase in the
Partnership's invested cash balance, higher interest rates and interest income
earned on the loan to Continental.
Depreciation expense for the three and nine months ended September 30, 1995 was
$1,199,104 and $3,884,018, respectively, as compared to $1,362,936 and
$4,088,808 for the respective periods in 1994. The decreases are primarily
attributable to the sales of the two 727-200 non-advanced aircraft in June 1995
and September 1995.
Management fees for the three and nine months ended September 30, 1995 totalled
$119,054 and $347,859, respectively, as compared to $128,897 and $354,155 for
the respective periods in 1994. Management fees are based on rental income and
operating revenue. The decreases are primarily attributable to a decrease in
rental income during the 1995 periods, as discussed above.
General and administrative expenses for the three and nine months ended
September 30, 1995 totalled $41,435 and $128,125, respectively, compared to
$48,872 and $157,439 for the respective periods in 1994. The decreases are
primarily attributable to legal expenses which were incurred in the first
quarter of 1994 in connection with the new lease agreement with Continental.
Operating expenses for the three and nine months ended September 30, 1995 were
$12,721 and $67,078, respectively, as compared to $2,838 and $45,816 for the
respective periods in 1994. The increases are attributable to storage and
maintenance costs which were incurred as a result of the idle status of the two
727-200 non-advanced aircraft which were returned to the Partnership by TWA
subsequent to their respective lease expirations in the fourth quarter of 1994.
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended September 30, 1995
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, 1995
BY: /s/ Moshe Braver
Name: Moshe Braver
Title: Director and President
Date: November 14, 1995
BY: /s/ John Stanley
Name: John Stanley
Title: Vice President and
Chief Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,633,272
<SECURITIES> 000
<RECEIVABLES> 207,281
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 5,840,553
<PP&E> 26,877,000
<DEPRECIATION> (7,820,316)
<TOTAL-ASSETS> 24,897,237
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<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 23,011,714
<TOTAL-LIABILITY-AND-EQUITY> 24,897,237
<SALES> 000
<TOTAL-REVENUES> 4,999,312
<CGS> 000
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<OTHER-EXPENSES> 4,427,080
<LOSS-PROVISION> 000
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<INCOME-PRETAX> 572,232
<INCOME-TAX> 000
<INCOME-CONTINUING> 572,232
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 572,232
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