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, 1997
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 I.R.S. Employer
of 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 March 31, At December 31,
1997 1996
Assets
Aircraft, at cost $26,877,000 $26,877,000
Less accumulated depreciation (13,653,542) (12,898,735)
13,223,458 13,978,265
Cash and cash equivalents 1,798,385 1,791,426
Restricted cash 297,475 297,475
Loan receivable 87,541 108,403
Interest receivable 307 368
Total Assets $15,407,166 $16,175,937
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 352,792 $ 352,999
Distribution payable 1,286,722 1,079,616
Deferred revenue 153,333 153,333
Total Liabilities 1,792,847 1,585,948
Partners' Capital (Deficit):
General Partners (815,029) (805,273)
Limited Partners
(4,837,505 units outstanding) 14,429,348 15,395,262
Total Partners' Capital 13,614,319 14,589,989
Total Liabilities and Partners' Capital $15,407,166 $16,175,937
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
For the three months ended March 31, 1997
General Limited
Partners Partners Total
Balance at December 31, 1996 $(805,273) $15,395,262 $14,589,989
Net income 3,111 307,941 311,052
Cash distributions (12,867) (1,273,855) (1,286,722)
Balance at March 31, 1997 $(815,029) $14,429,348 $13,614,319
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1997 1996
Income
Rental $1,192,500 $1,192,500
Interest 28,572 75,497
Other 1,600 1,030
Total Income 1,222,672 1,269,027
Expenses
Depreciation 754,807 990,308
Management fees 109,302 111,368
General and administrative 47,511 46,242
Total Expenses 911,620 1,147,918
Net Income $ 311,052 $ 121,109
Net Income Allocated:
To the General Partners $ 3,111 $ 1,211
To the Limited Partners 307,941 119,898
$ 311,052 $ 121,109
Per limited partnership unit
(4,837,505 outstanding) $.06 $.02
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities
Net income $ 311,052 $ 121,109
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 754,807 990,308
Increase in cash arising from changes
in operating assets and liabilities:
Interest receivable 61 67
Accounts payable and accrued expenses (207) 2,579
Net cash provided by operating activities 1,065,713 1,114,063
Cash Flows From Investing Activities
Loan receivable 20,862 19,287
Net cash provided by investing activities 20,862 19,287
Cash Flows From Financing Activities
Cash distributions (1,079,616) (1,011,882)
Net cash used for financing activities (1,079,616) (1,011,882)
Net increase in cash and cash equivalents 6,959 121,468
Cash and cash equivalents, beginning of period 1,791,426 4,282,580
Cash and cash equivalents, end of period $1,798,385 $4,404,048
NOTES TO THE FINANCIAL STATEMENTS
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1996 audited financial statements within Form 10-K.
The unaudited financial statements include all normal and reoccurring
adjustments which are, in the opinion of management, necessary to present a
fair statement of financial position as of March 31, 1997 and the results of
operations and cash flows for the three months ended March 31, 1997 and 1996
and the statement of partners' capital (deficit) for the three months ended
March 31, 1997. 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 1996, which
requires 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, 1997, JetStream II, L.P. (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 of March 31, 1997,
all airlines to which the Partnership had aircraft on-lease were current on
their lease obligations.
The leases for the Partnership's three DC-9-30 aircraft expire in January 2007
(two aircraft) and April 2007 (one aircraft). Northwest pays the Partnership a
monthly lease rate of $35,000 per aircraft. As part of the agreement to extend
these leases, Northwest agreed to hushkit each aircraft prior to December 31,
1999. The hushkits will bring the engines into compliance with Stage 3 noise
requirements -- thereby allowing the aircraft to continue to be operated in the
United States after December 31, 1999. In exchange for agreeing to fund the
costs of the hushkits, Northwest 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 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.
TWA continues to lease the Partnership's remaining 727-200 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.
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
March 31, 1997, Continental had made principal payments on the loan totalling
$214,984. Payments made on this loan are the reason for the decrease in the
Partnership's loan receivable balance, which totalled $87,541 at March 31, 1997
as compared to $108,403 at December 31, 1996. Continental makes monthly lease
payments to the Partnership of $180,000. The lease with Continental expires in
March 1998.
At March 31, 1997, the Partnership had unrestricted cash and cash equivalents
of $1,798,385, largely unchanged from $1,791,426 at December 31, 1996. The
Partnership's restricted cash balance of $297,475 remained unchanged from
December 31, 1996. The Partnership's restricted cash is comprised of the
balance of modification work financing committed to Continental in accordance
with the 1994 lease agreement.
On February 11, 1997, the Partnership paid a distribution to the Unitholders
for the period from October 1, 1996 to December 31, 1996 in the amount of
$1,068,820, or approximately $.22 per Unit. At March 31, 1997, the Partnership
had a distribution payable to Unitholders of $1,273,855, or approximately $.26
per Unit. Such amount reflects the 1997 first quarter distribution which was
funded from cash flow from operations. This distribution will be paid on May
16, 1997.
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
it 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 three months ended March
31, 1997 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 1997 consisted primarily of
interest income.
For the three months ended March 31, 1997, the Partnership generated net income
of $311,052, compared to net income of $121,109 for the corresponding period in
1996. The increase in net income is primarily attributable to a decrease in
depreciation expense recorded by the Partnership as a result of the extended
depreciable life of the three DC-9-30 aircraft on-lease to Northwest.
Rental income for the three months ended March 31, 1997 was $1,192,500,
unchanged from the corresponding period in 1996.
Interest income for the three months ended March 31, 1997 was $28,572, compared
to $75,497 for the corresponding period in 1996. The decrease is primarily
attributable to a decrease in the Partnership's invested cash balance during
the 1997 period.
Depreciation expense for the three months ended March 31, 1997 totalled
$754,807, compared to $990,308 for the corresponding period in 1996. The
decrease is primarily attributable to the lease agreement signed by Northwest
in the third quarter of 1996 extending the depreciable life of each aircraft
for a period of ten years.
General and administrative expenses totalled $47,511 for the three months ended
March 31, 1997, as compared to $46,242 for the corresponding period in 1996.
During the 1997 period, certain expenses incurred by an unaffiliated third
party service provider in servicing the Partnership, which were voluntarily
absorbed by affiliates of Jet Aircraft Leasing Inc. in prior periods, were
reimbursed to Jet Aircraft Leasing Inc. and its affiliates.
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 March 31, 1997.
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: May 14, 1997 BY: /s/ Moshe Braver
Name: Moshe Braver
Title: Director and President
Date: May 14, 1997 BY: /s/ John Stanley
Name: John Stanley
Title: Vice President and
Chief Financial Officer
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<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
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