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 March 31, 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.)
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
March 31, December 31,
Assets 1995 1994
Aircraft, at adjusted cost $28,843,000 $28,843,000
Less-accumulated depreciation (6,814,680) (5,451,744)
22,028,320 23,391,256
Cash and cash equivalents 2,804,540 2,978,631
Restricted cash 1,047,475 1,047,475
Accounts receivable --- 9,941
Loan receivable 243,143 260,975
Interest receivable 852 915
Total Assets $26,124,330 $27,689,193
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 215,390 $ 225,886
Distribution payable 1,114,841 1,288,932
Deferred revenue 160,833 160,833
Total Liabilities 1,491,064 1,675,651
Partners' Capital (Deficit):
General Partners (720,176) (706,374)
Limited Partners
(4,837,505 units outstanding) 25,353,442 26,719,916
Total Partners' Capital 24,633,266 26,013,542
Total Liabilities and Partners' Capital $26,124,330 $27,689,193
See accompanying notes to the financial statements.
Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1995
General Limited
Partners Partners Total
Balance at December 31, 1994 $ (706,374) $26,719,916 $26,013,542
Net Loss (2,654) (262,781) (265,435)
Cash distributions (11,148) (1,103,693) (1,114,841)
Balance at March 31, 1995 $ (720,176) $25,353,442 $24,633,266
See accompanying notes to the financial statements.
Statements of Operations
For the three months ended March 31, 1995 and 1994
Income 1995 1994
Rental $1,237,500 $1,054,667
Other 875 2,419
Interest 58,811 32,135
Total Income 1,297,186 1,089,221
Expenses
Depreciation 1,362,936 1,362,936
Management fees 114,013 99,617
General and administrative 47,276 68,064
Operating 38,396 34,121
Total Expenses 1,562,621 1,564,738
Net Loss $ (265,435) $ (475,517)
Net Loss Allocated:
To the General Partners $ (2,654) $ (4,755)
To the Limited Partners (262,781) (470,762)
$ (265,435) $ (475,517)
Per limited partnership unit
(4,837,505 outstanding) $(0.05) $(0.10)
See accompanying notes to the financial statements.
Statements of Cash Flows
For the three months ended March 31, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net loss $ (265,435) $ (475,517)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 1,362,936 1,362,936
Restricted cash --- 750,000
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Accounts receivable 9,941 ---
Interest receivable 63 (4,861)
Prepaid expenses --- 15,583
Accounts payable and accrued expenses (10,496) 28,158
Maintenance payable --- (750,000)
Deferred revenue --- 85,333
Net cash provided by operating activities 1,097,009 1,011,632
Cash Flows from Investing Activities:
Loan receivable 17,832 ---
Net cash provided by investing activities 17,832 ---
Cash Flows from Financing Activities:
Cash distributions (1,288,932) (904,004)
Net cash used for financing activities (1,288,932) (904,004)
Net increase (decrease) in cash and cash equivalents (174,091) 107,628
Cash and cash equivalents at beginning of period 2,978,631 1,104,004
Cash and cash equivalents at end of period $ 2,804,540 $ 1,211,632
See accompanying notes to the financial statements.
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 March 31, 1995 and the results of operations and cash flows for
the three months ended March 31, 1995 and 1994 and the statement of changes in
partners' capital (deficit) for the three months ended March 31, 1995. Results
of operations for the periods are not necessarily indicative of the results to
be expected for the full year.
No significant events have occurred subsequent to fiscal year 1994, and no
material contingencies exist that require disclosure in this interim report per
Regulation S-X, Rule 10-01, Paragraph (a)(5).
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
As of March 31, 1995, the Partnership had six of its eight aircraft on lease.
Three aircraft were on-lease to Northwest Airlines, Inc. ("Northwest"), one
aircraft on-lease to Delta Air Lines, Inc. ("Delta"), one aircraft on-lease to
Continental Airlines, Inc. ("Continental") and one aircraft was on-lease to
Trans World Airlines ("TWA"). At March 31, 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 either renewed or extended.
The Partnership currently has two 727-200 Stage 2 non-advanced aircraft in
storage, which were returned by TWA subsequent to their lease expirations in
October 1994 and December 1994, respectively. The lease for the Partnership's
third 727-200 aircraft, which was originally scheduled to expire on April 30,
1995, was extended by TWA on a month-to-month basis, with the monthly lease
rate of $32,500 remaining unchanged. To date, TWA has not given any indication
to the Partnership as to how long it will continue to lease the aircraft. The
General Partners have explored the potential of re-leasing the Partnership's
idle aircraft with other airlines. However, in light of the extremely
competitive operating environment in the aircraft leasing industry,
particularly for Stage 2 aircraft, such efforts have to date been unsuccessful.
While the Partnership has received some offers to lease these aircraft, a
suitable lessee has not yet been located. Accordingly, the General Partners
are exploring opportunities to sell these aircraft.
In addition to the potential expiration of the remaining lease with TWA, 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 to re-lease the aircraft 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 were
previously scheduled to expire on January 31, 1995 (two aircraft) and April 21,
1995 (one aircraft). During the fourth quarter of 1994, the Partnership
reached an agreement with Northwest to extend each of the leases for a term of
one year. Under the terms of the extensions, Northwest continues 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. As of
March 31, 1995, Continental had made principal payments on the loan totalling
$59,382. Continental makes monthly lease payments to the Partnership of
$180,000.
At March 31, 1995, the Partnership had cash and cash equivalents of $2,804,540
as compared to $2,978,631 at December 31, 1994. The $174,091 decrease in cash
and cash equivalents is attributable to the fourth quarter 1994 distribution
paid in the first quarter of 1995 exceeding first quarter 1995 cash flow from
operations. The Partnership's restricted cash balance at March 31, 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.
On February 2, 1995, the Partnership paid a distribution to the Unitholders for
the period from October 1, 1994 to December 31, 1994 in the amount of
$1,276,043, or approximately $.26 per Unit. At March 31, 1995, the Partnership
had a distribution payable to Unitholders of $1,103,693, or approximately $.23
per Unit. This amount reflects the 1995 first quarter cash distribution which
was funded from cash flow from operations. This distribution was subsequently
paid on May 4, 1995.
Future cash distributions will be determined on a quarterly basis after an
evaluation of the Partnership's current and expected financial position. The
idle status of the two aircraft previously on-lease to TWA has had a negative
impact on the Partnership's cash flow and, consequently, the level of cash
available for distribution to Unitholders. The level of cash available for
distribution will be further reduced once TWA terminates the lease for the
Partnership's remaining 727-200 aircraft and, 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.
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 during the first
quarter of 1995 consisted primarily of interest income.
For the three months ended March 31, 1995, the Partnership reported a net loss
of $265,435 as compared to a net loss of $475,517 for the corresponding period
in 1994. The decrease in net loss is primarily attributable to higher rental
income as a result of the re-leasing of the Partnership's MD-80 Series aircraft
to Continental in March 1994.
Rental income for the three months ended March 31, 1995 was $1,237,500, as
compared to $1,054,667 for the corresponding period in 1994. The increase is
due to the new lease agreement with Continental effective March 15, 1994,
partially offset by TWA's return of two of the Partnership's 727-200 in the
fourth quarter of 1994.
Interest income for the three months ended March 31, 1995 was $58,811, as
compared to $32,135 for the corresponding period in 1994. The increase is due
to higher interest rates and to interest received from Continental for the
balance outstanding on their loan.
Other income for the three months ended March 31, 1995 was $875 as compared to
$2,419 for the corresponding period in 1994. The 1995 balance consists of
transfer fee income. The 1994 balance consists of income received from B. F.
Goodrich for the rental of the MD-80 Series aircraft, while the aircraft was in
storage, to test emergency evacuation systems.
Management fees for the three months ended March 31, 1995 were $114,013, as
compared to $99,617 for the corresponding period in 1994. Management fees are
based on rental income and operating cash flow. The increase is attributable
to the higher rental income due mainly to the new lease agreement with
Continental.
General and administrative expenses for the three months ended March 31, 1995
were $47,276, as compared to $68,064 for the corresponding period in 1994. The
decrease is due mainly to lower legal expenses. Substantial legal expenses
were incurred in 1994 in connection with the new lease agreement with
Continental.
Operating expenses for the three months ended March 31, 1995 were $38,396, as
compared to $34,121 for the corresponding period in 1994. The 1995 balance
consists of insurance costs, storage and maintenance fees, and consulting and
inspection fees for the two aircraft that came off-lease from TWA in the fourth
quarter of 1994. The 1994 balance consists of insurance, storage and
maintenance costs incurred as a result of the idle status of the MD-80 Series
aircraft through mid-March 1994, and costs to re-deliver the aircraft to
Continental.
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 March 31, 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: May 12, 1995
BY: /s/ Moshe Braver
Name: Moshe Braver
Title: Director and President
Date: May 12, 1995 BY: /s/ John Stanley
Name: John Stanley
Title: Vice President and
Chief Financial Officer
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