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, 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 of
Incorporation or Organization I.R.S. Employer 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 September 30, At December31,
1997 1996
Assets
Aircraft, at cost: $ 26,877,000 $ 26,877,000
Less accumulated depreciation (15,163,156) (12,898,735)
11,713,844 13,978,265
Cash and cash equivalents 1,506,255 1,791,426
Restricted cash 297,475 297,475
Loan receivable _ 108,403
Interest receivable _ 368
Accounts receivable 44,753 _
Total Assets $ 13,562,327 $ 16,175,937
Liabilities and Partners' Capital
Liabilities:
Accounts payable and
accrued expenses $ 246,766 $ 352,999
Distribution payable 1,106,256 1,079,616
Deferred revenue 153,333 153,333
Total Liabilities 1,506,355 1,585,948
Partners' Capital (Deficit):
General Partners (830,613) (805,273)
Limited Partners
(4,837,505 units outstanding) 12,886,585 15,395,262
Total Partners' Capital 12,055,972 14,589,989
Total Liabilities and
Partners' Capital $ 13,562,327 $ 16,175,937
Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1997
General Limited
Partners Partners Total
Balance at December 31, 1996 $ (805,273) $ 15,395,262 $ 14,589,989
Net income 9,194 910,189 919,383
Cash distributions (34,534) (3,418,866) (3,453,400)
Balance at September 30, 1997 $ (830,613) $ 12,886,585 $ 12,055,972
Statements of Operations Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
Income
Rental $ 1,192,500 $ 1,192,500 $ 3,577,500 $ 3,577,500
Interest 26,483 74,179 85,441 223,957
Other 4,660 880 6,695 44,235
Total Income 1,223,643 1,267,559 3,669,636 3,845,692
Expenses
Depreciation 754,807 990,308 2,264,421 2,970,924
Management fees 109,891 111,130 324,564 335,802
General and administrative 55,123 50,295 161,268 128,798
Total Expenses 919,821 1,151,733 2,750,253 3,435,524
Net Income $ 303,822 $ 115,826 $ 919,383 $ 410,168
Net Income Allocated:
To the General Partners $ 3,038 $ 1,159 $ 9,194 $ 4,102
To the Limited Partners 300,784 114,667 910,189 406,066
$ 303,822 $ 115,826 $ 919,383 $ 410,168
Per limited partnership unit
(4,837,505 outstanding) $.06 $.02 $.19 $.08
Statements of Cash Flows
For the nine months ended September 30, 1997 1996
Cash Flows From Operating Activities
Net income $ 919,383 $ 410,168
Adjustments to reconcile net income to net cash
provided by operating activities:
Restricted cash _ 750,000
Depreciation 2,264,421 2,970,924
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Interest receivable 368 235
Accounts receivable (44,753) _
Accounts payable and accrued expenses (106,233) (8,684)
Net cash provided by operating activities 3,033,186 4,122,643
Cash Flows From Investing Activities
Loan receivable 108,403 58,892
Net cash provided by investing activities 108,403 58,892
Cash Flows From Financing Activities
Cash distributions (3,426,760) (3,319,249)
Net cash used for financing activities (3,426,760) (3,319,249)
Net increase (decrease) in cash
and cash equivalents (285,171) 862,286
Cash and cash equivalents,
beginning of period 1,791,426 4,282,580
Cash and cash equivalents, end of period $ 1,506,255 $ 5,144,866
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 recurring adjustments
which are, in the opinion of management, necessary to present a fair statement
of financial position as of September 30, 1997 and the results of operations
for the three and nine months ended September 30, 1997 and 1996 and cash flows
for the nine months ended September 30, 1997 and 1996 and the statement of
partners' capital (deficit) for the nine months ended September 30, 1997.
Results of operations for the period are not necessarily indicative of the
results to be expected for the full year.
The following significant event has occurred subsequent to fiscal year 1996
which requires disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5).
The lease with Continental Airlines ("Continental") for the Partnership's
MD-80 Series aircraft was previously scheduled to expire in March 1998.
However, in September 1997, the Partnership reached an agreement with
Continental to extend the lease through March 1999, with the remaining terms
of the lease unchanged. Continental makes monthly lease payments to the
Partnership of $180,000.
As of October 30, 1997 the Partnership's lease with TWA was terminated. TWA
paid the Partnership a monthly lease rate of $32,500. The General Partners
are currently in the process of negotiating with a new lessee. While the
terms of the new lease are not yet finalized, it is not expected to have a
material impact on the Partnership's operations. This transaction is expected
take place within the fourth quarter.
Part I, Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
As of September 30, 1997, JetStream II, L.P. (the "Partnership") had all six of
its aircraft on-lease. Three aircraft were onlease to Northwest Airlines, Inc.
("Northwest"), one aircraft was on-lease to Delta Air Lines, Inc. ("Delta"),
one aircraft was onlease to Continental Airlines, Inc. ("Continental") and one
aircraft was on-lease to Trans World Airlines ("TWA"). As of September 30,
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 August 1996
agreement to extend these leases, Northwest agreed to hushkit each aircraft
prior to December 31, 1999. In exchange for funding the costs of the hushkits,
Northwest will be entitled to 50% of the proceeds from the sale of the
aircraft. 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.
As of October 30, 1997 the Partnership's lease with TWA was terminated. TWA
paid the Partnership a monthly lease rate of $32,500. The General Partners are
currently in the process of negotiating with a new lessee. While the terms of
the new lease are not yet finalized, it is not expected to have a material
impact on the Partnership's operations. This transaction is expected take
place within the fourth quarter.
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. During
the third quarter of 1997, Continental paid off the remaining balance of the
loan, which had totaled $108,403 as of July 1, 1997. Payments made on this
loan during 1997 are the reason for the decrease in the Partnership's loan
receivable balance, which totaled $0 at September 30, 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 was previously scheduled
to expire in March 1998. However, in September 1997, the Partnership reached
an agreement with Continental to extend the lease through March 1999, with the
remaining terms of the lease unchanged.
At September 30, 1997, the Partnership had unrestricted cash and cash
equivalents of $1,506,255, a decrease from $1,791,426 at December 31, 1996. The
$285,171 decrease is primarily attributable to the payments of the 1996 fourth
quarter distribution on February 11, 1997, the 1997 first quarter distribution
on May 16, 1997, and the 1997 second quarter distribution on August 18, 1997 to
the partners of the Partnership, which, together, exceeded cash flow from
operations during the first nine months of 1997. 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.
Accounts receivable totaled $44,753 as of September 30, 1997, compared to $0 as
of December 31, 1996. The increase is primarily attributable to the loan
pay-off from Continental. Such amount was subsequently paid to the Partnership
in October 1997.
Accounts payable and accrued expenses totaled $246,766 as of September 30,
1997, compared to $352,999 as of December 31, 1996. The decrease is primarily
attributable to the timing of management fee payments.
On August 18, 1997, the Partnership paid a distribution to the Unitholders for
the period from April 1, 1997 to June 30, 1997 in the amount of $1,049,819, or
approximately $.22 per Unit. At September 30, 1997, the Partnership had a
distribution payable to Unitholders of $1,106,256 or approximately $.23 per
Unit. Such amount reflects the 1997 third quarter distribution which was funded
from cash flow from operations. This distribution will be paid on November 14,
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 may be reduced if the
Partnership is unable to find a new lessee for TWA's lease for the
Partnership's 727- 200 nonadvanced aircraft which was terminated on October 30,
1997.
Results of Operations
Substantially all of the Partnership's revenue for the nine months ended
September 30, 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 third quarter of 1997 consisted primarily
of interest income.
For the three and nine months ended September 30, 1997, the Partnership
generated net income of $303,822 and $919,383, respectively, compared to net
income of $115,826 and $410,168 for the corresponding periods in 1996. The
increases in net income for both periods are 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 and nine months ended September 30, 1997 was
$1,192,500 and $3,577,500, respectively, unchanged from the corresponding
periods in 1996.
Interest income for the three and nine months ended September 30, 1997 was
$26,483 and $85,441, respectively, compared to $74,179 and $223,957 for the
corresponding periods in 1996. The decreases for both periods are primarily
attributable to a decrease in the Partnership's invested cash balance during
1997.
Other income for the three and nine months ended September 30, 1997 totaled
$4,660 and $6,695, respectively, compared to $880 and $44,235 for the
corresponding periods in 1996. The increase for the three-month period is
primarily attributable to the receipt of transfer fee income. The decrease for
the nine-month period is primarily attributable to a $41,508 payment received
by the Partnership in the second quarter of 1996 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 nine months ended September 30, 1997
totaled $754,807 and $2,264,421, respectively, compared to $990,308 and
$2,970,924 for the corresponding periods in 1996. The decreases for both
periods are 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 totaled $55,123 and $161,268 for the three
and nine months ended September 30, 1997, respectively, as compared to $50,295
and $128,798 for the corresponding periods in 1996. During the 1997 periods,
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 reimbursable 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 September 30, 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: November 13, 1997 BY: /s/ Jeffrey C. Carter
Name: Jeffrey C. Carter
Director, President
and Chief Financial
Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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