UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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
June 30, December 31,
Assets 1995 1994
Aircraft, at adjusted cost $27,860,000 $28,843,000
Less-accumulated depreciation (7,440,372) (5,451,744)
20,419,628 23,391,256
Cash and cash equivalents 3,745,377 2,978,631
Restricted cash 1,047,475 1,047,475
Accounts receivable - 9,941
Loan receivable 225,056 260,975
Interest receivable 740 915
Total Assets $25,438,276 $27,689,193
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $344,231 $225,886
Distribution payable 1,155,678 1,288,932
Deferred revenue 160,833 160,833
Total Liabilities 1,660,742 1,675,651
Partners' Capital (Deficit):
General Partners (728,734) (706,374)
Limited Partners (4,837,505 units outstanding) 24,506,268 26,719,916
Total Partners' Capital 23,777,534 26,013,542
Total Liabilities and Partners' Capital $25,438,276 $27,689,193
Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1995
General Limited
Partners Partners Total
Balance at December 31, 1994 $(706,374) $26,719,916 $26,013,542
Net Income 345 34,166 34,511
Cash distributions (22,705) (2,247,814) (2,270,519)
Balance at June 30, 1995 $(728,734) $24,506,268 $23,777,534
Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
Rental $1,237,500 $1,500,000 $2,475,000 $2,554,667
Interest 64,590 23,667 123,401 55,802
Other 715 - 1,590 2,419
Gain on sale of aircraft 489,286 - 489,286 -
Total Income 1,792,091 1,523,667 3,089,277 2,612,888
Expenses
Depreciation 1,321,978 1,362,936 2,684,914 2,725,872
Management fees 114,792 125,641 228,805 225,258
General and administrative 39,414 40,503 86,690 108,567
Operating 15,961 8,857 54,357 42,978
Total Expenses 1,492,145 1,537,937 3,054,766 3,102,675
Net Income (Loss) $299,946 $(14,270) $34,511 $(489,787)
Net Income (Loss) Allocated:
To the General Partners $2,999 $(143) $345 $(4,898)
To the Limited Partners 296,947 (14,127) 34,166 (484,889)
$299,946 $(14,270) $34,511 $(489,787)
Per limited partnership unit
(4,837,505 outstanding) $ 0.06 $ 0.00 $ 0.01 $ (0.10)
Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income (loss) $34,511 $(489,787)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 2,684,914 2,725,872
Gain on sale of aircraft (489,286) -
Restricted cash - 1,052,525
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Accounts receivable 9,941 -
Interest receivable 175 8,798
Prepaid expenses - 22,074
Accounts payable and accrued expenses 118,345 50,204
Maintenance payable - (750,000)
Deferred revenue - 85,333
Net cash provided by operating activities 2,358,600 2,705,019
Cash Flows from Investing Activities:
Loan receivable 35,919 (295,433)
Proceeds from sale of aircraft 776,000 -
Net cash provided by (used for) investing activities 811,919 (295,433)
Cash Flows from Financing Activities:
Cash distributions (2,403,773) (1,915,636)
Net cash used for financing activities (2,403,773) (1,915,636)
Net increase in cash and cash equivalents 766,746 493,950
Cash and cash equivalents at beginning of period 2,978,631 1,104,004
Cash and cash equivalents at end of period $3,745,377 $1,597,954
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 June 30, 1995 and the results of operations for the three and
six months ended June 30, 1995 and 1994, cash flows for the six months ended
June 30, 1995 and 1994, and the statement of changes in partners' capital
(deficit) for the six months ended June 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).
In June 1995, the General Partners sold aircraft N64321 formerly on lease
with Trans World Airlines, Inc. ("TWA") for net 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.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
As of June 30, 1995, the Partnership had six of its seven 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 June 1995 for one of the two 727-200 non-advanced
aircraft which TWA returned to the Partnership in the fourth quarter of 1994.
The General Partners anticipate that the sale of the second aircraft will be
completed in the third quarter of 1995. At June 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 proceeds of $800,000
and the General Partners anticipate that a sale of the second aircraft will be
completed in the third quarter of 1995. The net proceeds from these sales will
be retained in the Partnership's cash reserves pending the completion of an
analysis of the cash needs for the Partnership's remaining aircraft.
In June 1995, TWA filed a pre-packaged reorganization plan under Chapter 11 of
the U.S. Bankruptcy Code. At a subsequent confirmation hearing held on August
2, 1995, the Bankruptcy Court confirmed the reorganization plan and TWA expects
to emerge from Chapter 11 bankruptcy no later than August 31, 1995. It is
presently unclear what impact, if any, this filing will have on the
Partnership. 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 the Partnership. To date, TWA has not given any indication to the
Partnership how long it will continue to lease the plane.
Delta gave notice to the Partnership in early April 1995 that it is exercising
an option under the current lease agreement to terminate the lease for the
Partnership's 737-200 advanced aircraft in November 1995. While the General
Partners are hopeful that a replacement lessee can be found for this aircraft,
there can be no assurance that such efforts will be successful. In the event
the aircraft is re-leased, it will likely be at a lower rate than the current
monthly lease rate of $95,000.
The leases with Northwest for the Partnership's three DC-9-30 aircraft are
scheduled to expire on January 31, 1996 (two aircraft) and April 21, 1996 (one
aircraft). While the General Partners have recently commenced discussions with
Northwest in an effort to negotiate lease extensions, there can be no
assurances that any of the expiring leases will be extended.
At June 30, 1995, the Partnership had unrestricted cash and cash equivalents of
$3,745,377, compared to $2,978,631 at December 31, 1994. The $766,746 increase
in cash and cash equivalents is attributable to the proceeds received from the
sale of the 727-200 non-advanced aircraft in June 1995, as discussed above.
The Partnership's restricted cash balance at June 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
June 30, 1995, Continental had made principal payments on the loan totalling
$77,469. Principal payments made on the loan by Continental during the first
and second quarters of 1995, totalling $35,919, are the primary reason for the
decrease in the Partnership's loan receivable balance, which totalled $225,056
at June 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 $344,231 at June 30, 1995,
compared to $225,886 at December 31, 1994. The increase is primarily
attributable to an initial deposit of $100,000 made to the Partnership by the
purchaser of the 727-200 non-advanced plane which is expected to be sold in the
third quarter of 1995.
On May 4, 1995, the Partnership paid a distribution to the Unitholders for the
period from January 1, 1995 to March 31, 1995, in the amount of $1,103,693, or
approximately $.23 per Unit. At June 30, 1995, the Partnership had a
distribution payable to Unitholders of $1,144,121, or approximately $.24 per
Unit. This amount reflects the 1995 second quarter cash distribution which was
funded from cash flow from operations. This distribution was subsequently paid
on August 3, 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.
Distributions will be further impacted if efforts to re-lease the Partnership's
737-200 advanced aircraft are unsuccessful subsequent to the expiration of the
current lease with Delta in November 1995, and if efforts to negotiate lease
extensions with Northwest are unsuccessful prior to the expiration of the
current leases for the Partnership's three DC-9-30 aircraft in January 1996 and
April 1996, respectively.
Results of Operations
Substantially all of the Partnership's revenue for the six months ended June
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 sale of the 727-200 non-advanced plane in June 1995.
For the three and six months ended June 30, 1995, the Partnership reported net
income of $299,946 and $34,511, respectively, as compared to net losses of
$14,270 and $489,787, respectively, for the corresponding periods in 1994. The
increases are primarily attributable to a gain on the June 1995 sale of the
727-200 non-advanced plane totalling $489,286, partially offset by a decrease
in rental income.
Rental income for the three and six months ended June 30, 1995 totalled
$1,237,500 and $2,475,000, respectively, as compared to $1,500,000 and
$2,554,667, respectively, for the corresponding periods in 1994. The decreases
are primarily due to the fourth quarter 1994 lease expirations of the 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 six months ended June 30, 1995 was $64,590
and $123,401, respectively, as compared to $23,667 and $55,802, respectively,
for the corresponding 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.
General and administrative expenses for the three and six months ended June 30,
1995 totalled $39,414 and $86,690, respectively, compared to $40,503 and
$108,567, respectively, for the corresponding periods in 1994. The decrease
for the six month period is 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 six months ended June 30, 1995 were
$15,961 and $54,357, respectively, as compared to $8,857 and $42,978,
respectively, for the corresponding 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 - None
(b) Reports on Form 8-K - No reports on
Form 8-K were filed during the
quarter ended June 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: August 14, 1995
BY: /s/ Moshe Braver
Name: Moshe Braver
Title: Director and President
Date: August 14, 1995
BY: /s/ John Stanley
Name: John Stanley
Title: Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,792,852
<SECURITIES> 000
<RECEIVABLES> 225,796
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 5,018,648
<PP&E> 27,860,000
<DEPRECIATION> (7,440,372)
<TOTAL-ASSETS> 25,438,276
<CURRENT-LIABILITIES> 1,660,742
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 23,777,534
<TOTAL-LIABILITY-AND-EQUITY> 25,438,276
<SALES> 000
<TOTAL-REVENUES> 3,089,277
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 3,054,766
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 34,511
<INCOME-TAX> 000
<INCOME-CONTINUING> 34,511
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 34,511
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 000
</TABLE>
