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, 1996
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, 29th Floor,
New York, NY Attn: Andre Anderson 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 At June 30, At December 31,
1996 1995
Assets
Aircraft, at cost: $26,877,000 $26,877,000
Less accumulated depreciation (10,918,120) (8,937,504)
15,958,880 17,939,496
Cash and cash equivalents 4,444,715 4,282,580
Restricted cash 1,047,475 1,047,475
Loan receivable 148,839 187,729
Interest receivable 489 658
Total Assets $21,600,398 $23,457,938
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 249,502 $ 256,152
Distribution payable 1,174,017 1,011,882
Deferred revenue 153,333 153,333
Total Liabilities 1,576,852 1,421,367
Partners' Capital (Deficit):
General Partners (766,274) (746,143)
Limited Partners (4,837,505 units outstanding) 20,789,820 22,782,714
Total Partners' Capital 20,023,546 22,036,571
Total Liabilities and Partners' Capital $21,600,398 $23,457,938
Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1996
General Limited
Partners Partners Total
Balance at December 31, 1995 $(746,143) $22,782,714 $22,036,571
Net income 2,943 291,399 294,342
Cash distributions (23,074) (2,284,293) (2,307,367)
Balance at June 30, 1996 $(766,274) $20,789,820 $20,023,546
Statements of Operations
Three months Six Months
ended June 30, ended June 30,
1996 1995 1996 1995
Income
Rental $1,192,500 $1,237,500 $2,385,000 $2,475,000
Interest 74,281 64,590 149,778 123,401
Other 42,325 715 43,355 1,590
Total income 1,309,106 1,302,805 2,578,133 2,599,991
Expenses
Depreciation 990,308 1,321,978 1,980,616 2,684,914
Management fees 113,304 114,792 224,672 228,805
General and administrative 32,261 39,414 78,503 86,690
Operating --- 15,961 --- 54,357
Total expenses 1,135,873 1,492,145 2,283,791 3,054,766
Income (loss) from operations 173,233 (189,340) 294,342 (454,775)
Other Income
Gain on sale of aircraft --- 489,286 --- 489,286
Net Income $ 173,233 $ 299,946 $ 294,342 $ 34,511
Net Income Allocated:
To the General Partners $ 1,732 $ 2,999 $ 2,943 $ 345
To the Limited Partners 171,501 296,947 291,399 34,166
$ 173,233 $ 299,946 $ 294,342 $ 34,511
Per limited partnership unit
(4,837,505 outstanding) $.04 $.06 $.06 $.01
Statements of Cash Flows
For the six months ended June 30, 1996 1995
Cash Flows From Operating Activities
Net income $ 294,342 $ 34,511
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of aircraft --- (489,286)
Depreciation 1,980,616 2,684,914
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Accounts receivable --- 9,941
Interest receivable 169 175
Accounts payable and accrued expenses (6,650) 118,345
Net cash provided by operating activities 2,268,477 2,358,600
Cash Flows From Investing Activities
Loan receivable 38,890 35,919
Proceeds from sale of aircraft - net --- 776,000
Net cash provided by investing activities 38,890 811,919
Cash Flows From Financing Activities
Cash distributions (2,145,232) (2,403,773)
Net cash used for financing activities (2,145,232) (2,403,773)
Net increase in cash and cash equivalents 162,135 766,746
Cash and cash equivalents, beginning of period 4,282,580 2,978,631
Cash and cash equivalents, end of period $4,444,715 $3,745,377
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1995 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, 1996 and the results of operations for the three and
six months ended June 30, 1996 and 1995 and cash flows for the six months ended
June 30, 1996 and 1995 and the statement of changes in partners' capital
(deficit) for the six months ended June 30, 1996. Results of operations for the
period are not necessarily indicative of the results to be expected for the
full year.
No significant events have occurred subsequent to fiscal year 1995, which
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 June 30, 1996, 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"). At June 30, 1996, 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 in recent years, thereby impacting the lease rates obtained
by the Partnership as leases for the aircraft have been extended and as new
leases have been executed.
During the first quarter of 1996, the Partnership reached an agreement in
principle with Northwest to extend the current leases for the Partnership's
three DC-9-30 non-advanced aircraft for a term of 10 years from the scheduled
lease expiration dates in January 1997 (one aircraft) and April 1997 (two
aircraft). Northwest will continue to pay the Partnership a monthly lease rate
of $35,000 per aircraft. In accordance with the anticipated lease extensions,
each of the aircraft will be hushkitted, which entails upgrading the current
engines to comply with Stage 3 noise requirements. This will enable the
aircraft to continue to fly in the United States beyond December 31, 1999 --
the phase- out date for all Stage 2 commercial aircraft. Northwest has agreed
to fund the cost of hushkitting and, in turn, will be entitled to 50% of the
proceeds from the sale of the aircraft at the end of the leases. The General
Partners believe that the proposed lease extensions and hushkitting of the
engines will in all likelihood increase the value of the aircraft and will
present the Partnership with more viable sales opportunities for the aircraft
in the future. The General Partners currently anticipate that the agreement
with Northwest will be finalized by the end of the third quarter of 1996.
TWA continues to lease the Partnership's remaining 727-200 Stage 2 non-advanced
aircraft on a month-to-month basis and remains current on its monthly lease
payments of $32,500. To date, TWA has not given any indication to the
Partnership as to how long it will continue to lease the aircraft. Once the
aircraft is returned to the Partnership, the General Partners believe that it
will be very difficult to re-lease it to another airline.
The lease with Delta for the Partnership's 737-200 advanced aircraft expires in
September 1999. In accordance with the terms of the lease agreement, Delta
pays the Partnership a monthly lease rate of $80,000.
At June 30, 1996, the Partnership had unrestricted cash and cash equivalents of
$4,444,715, compared to $4,282,580 at December 31, 1995. The $162,135 increase
is primarily due to cash flow from operations during the first and second
quarters of 1996 exceeding the 1995 fourth quarter distribution paid to the
partners on February 2, 1996 and the 1996 first quarter distribution paid to
the partners on May 10, 1996. The Partnership's restricted cash balance of
$1,047,475 remained unchanged from December 31, 1995. The Partnership's
restricted cash is comprised of: (i) $750,000 which is to be used in connection
with performing various airworthiness directives on the Partnership's three
DC-9-30 aircraft currently on-lease to Northwest, 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 term of the lease, plus 4.25 percent. As of
June 30, 1996, Continental had made principal payments on the loan totalling
$153,686. Payments made on this loan are the reason for the decrease in the
Partnership's loan receivable balance, which totalled $148,839 at June 30, 1996
as compared to $187,729 at December 31, 1995. Continental makes monthly lease
payments to the Partnership of $180,000. On May 10, 1996, the Partnership paid
a distribution to the Unitholders for the period from January 1, 1996 to March
31, 1996 in the amount of $1,122,017, or approximately $.23 per Unit. At June
30, 1996, the Partnership had a distribution payable to Unitholders of
$1,162,276, or approximately $.24 per Unit. Such amount reflects the 1996
second quarter distribution which was funded from cash flow from operations.
This distribution was subsequently paid on August 7, 1996.
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 future distribution will be reduced if TWA
terminates the lease for the Partnership's 727-200 non-advanced aircraft which
is currently being leased from the Partnership on a month-to-month basis.
Results of Operations
Substantially all of the Partnership's revenue for the six months ended June
30, 1996 was generated from the leasing of the Partnership's aircraft to
commercial air carriers under triple net operating leases.
For the three and six months ended June 30, 1996, the Partnership generated net
income of $173,233 and $294,342, respectively, compared to net income of
$299,946 and $34,511 for the corresponding periods in 1995. The decrease for
the three month period is primarily attributable to a $489,286 gain recognized
during the second quarter of 1995 as a result of the June 1995 sale of one of
the 727-200 non-advanced aircraft formerly on- lease to TWA. No such gain was
recognized in the second quarter of 1996. Excluding the gain on sale of
aircraft, the Partnership recorded a loss from operations for the three months
ended June 30, 1995 totalling $189,340, compared to income from operations of
$173,233 for the corresponding period in 1996. The increase in net income
(excluding the aforementioned gain on the June 1995 sale of the 727-200
aircraft formerly on-lease to TWA) for both the three and six month periods is
primarily attributable to a decrease in depreciation expense.
Rental income for the three and six months ended June 30, 1996 was $1,192,500
and $2,385,000, respectively, compared to $1,237,500 and $2,475,000 for the
corresponding periods in 1995. The slight decrease for both periods is
primarily due to the reduction in the monthly lease rate paid by Delta in
accordance with the lease extension for the Partnership's 737-200 advanced
aircraft executed in November 1995.
Interest income for the three and six months ended June 30, 1996 was $74,281
and $149,778, respectively, compared to $64,590 and $123,401 for the
corresponding periods in 1995. The increases for both periods are primarily
attributable to an increase in the Partnership's invested cash balance during
the 1996 periods.
Other income for the three and six months ended June 30, 1996 totalled $42,325
and $43,355, respectively, compared to $715 and $1,590 for the corresponding
periods in 1995. The increase for both periods is primarily attributable to a
payment received by the Partnership as settlement of an administrative claim by
the Partnership against Pan American World Airways, Inc. ("Pan Am") which was
filed in Bankruptcy Court in 1992. The Partnership was seeking to recover
certain rent and maintenance costs associated with Pan Am's failure to comply
with the return provisions of its lease. The case was settled during the
second quarter of 1996.
Depreciation expense for the three and six months ended June 30, 1996 totalled
$990,308 and $1,980,616, respectively, compared to $1,321,978 and $2,684,914
for the corresponding periods in 1995. The decreases for both periods are
primarily attributable to the sales of the two 727-200 non-advanced aircraft in
June 1995 and September 1995 formerly on-lease to TWA and one of the
Partnership's aircraft being fully depreciated in 1995.
General and administrative expenses for the three and six months ended June 30,
1996 totalled $32,261 and $78,503, respectively, compared to $39,414 and
$86,690 for the corresponding periods in 1995. The decrease for both periods
is primarily attributable to lower salary reimbursement and other
administrative costs.
Operating expenses for the three and six months ended June 30, 1996 totalled
$0, compared to $15,961 and $54,357 for the corresponding periods in 1995. The
balances in the 1995 periods are primarily attributable to storage and
maintenance costs which were incurred as a result of the idle status of the two
727-200 non-advanced aircraft during 1995 which were returned to the
Partnership by TWA subsequent to their respective lease expirations in the
fourth quarter of 1994. The aircraft were subsequently sold in June 1995 and
September 1995.
Part II Other Information
Item 1 Legal Proceedings
The Partnership filed an administrative claim against Pan Am in
Bankruptcy Court as a result of Pan Am's return of the
Partnership's aircraft in November 1991. The aircraft was
subsequently sold in February 1992. The Partnership was seeking
to recover certain rent and maintenance costs associated with
Pan Am's failure to comply with the return provisions of its
lease. The case was settled in the second quarter of 1996. The
Partnership received $40,860 as settlement of this claim in
April 1996.
Items 2-5 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 June 30, 1996.
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.
General Partner
Date: August 13, 1996 BY: /s/ Moshe Braver
Name: Moshe Braver
Director and President
Date: August 13, 1996 BY: /s/ John Stanley
Name: John Stanley
Vice President and
Chief Financial Officer
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<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 4,444,715
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<RECEIVABLES> 149,328
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