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, 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 June 30, At December 31,
1997 1996
Assets
Aircraft, at cost: $ 26,877,000 $ 26,877,000
Less accumulated depreciation (14,408,349) (12,898,735)
12,468,651 13,978,265
Cash and cash equivalents 1,460,422 1,791,426
Restricted cash 297,475 297,475
Loan receivable 66,296 108,403
Interest receivable 218 368
Total Assets $ 14,293,062 $ 16,175,937
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 220,901 $ 352,999
Distribution payable 1,060,423 1,079,616
Deferred revenue 153,333 153,333
Total Liabilities 1,434,657 1,585,948
Partners' Capital (Deficit):
General Partners (822,588) (805,273)
Limited Partners
(4,837,505 units outstanding) 13,680,993 15,395,262
Total Partners' Capital 12,858,405 14,589,989
Total Liabilities and Partners' Capital $ 14,293,062 $ 16,175,937
Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1997
General Limited
Partners Partners Total
Balance at December 31, 1996 $ (805,273) $ 15,395,262 $ 14,589,989
Net income 6,156 609,405 615,561
Cash distributions (23,471) (2,323,674) (2,347,145)
Balance at June 30, 1997 $ (822,588) $ 13,680,993 $ 12,858,405
Statements of Operations Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
Income
Rental $ 1,192,500 $1,192,500 $ 2,385,000 $ 2,385,000
Interest 30,386 74,281 58,958 149,778
Other 435 42,325 2,035 43,355
Total Income 1,223,321 1,309,106 2,445,993 2,578,133
Expenses
Depreciation 754,807 990,308 1,509,614 1,980,616
Management fees 105,371 113,304 214,673 224,672
General and administrative 58,634 32,261 106,145 78,503
Total Expenses 918,812 1,135,873 1,830,432 2,283,791
Net Income $ 304,509 $ 173,233 $ 615,561 $ 294,342
Net Income Allocated:
To the General Partners $ 3,045 $ 1,732 $ 6,156 $ 2,943
To the Limited Partners 301,464 171,501 609,405 291,399
$ 304,509 $ 173,233 $ 615,561 $ 294,342
Per limited partnership unit
(4,837,505 outstanding) $.06 $.04 $.13 $.06
Statements of Cash Flows
For the six months ended June 30, 1997 1996
Cash Flows From Operating Activities
Net income $ 615,561 $ 294,342
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,509,614 1,980,616
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Interest receivable 150 169
Accounts payable and accrued expenses (132,098) (6,650)
Net cash provided by operating activities 1,993,227 2,268,477
Cash Flows From Investing Activities
Loan receivable 42,107 38,890
Net cash provided by investing activities 42,107 38,890
Cash Flows From Financing Activities
Cash distributions (2,366,338) (2,145,232)
Net cash used for financing activities (2,366,338) (2,145,232)
Net increase (decrease) in cash and cash equivalents (331,004) 162,135
Cash and cash equivalents, beginning of period 1,791,426 4,282,580
Cash and cash equivalents, end of period $ 1,460,422 $ 4,444,715
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 June 30, 1997 and the results of
operations for the three and six months ended June 30, 1997 and 1996, cash
flows for the six months ended June 30, 1997 and 1996 and the statement of
partners' capital (deficit) for the six months ended June 30, 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
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, 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 June 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.
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 this aircraft. Once the
aircraft is returned to the Partnership, we believe that it will be 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
June 30, 1997, Continental had made principal payments on the loan totaling
$236,229. Payments made on this loan are the reason for the decrease in the
Partnership's loan receivable balance, which totaled $66,296 at June 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 expires in
March 1998.
At June 30, 1997, the Partnership had unrestricted cash and cash equivalents of
$1,460,422, a decrease from $1,791,426 at December 31, 1996. The $331,004
decrease is primarily attributable to the payments of the 1996 fourth quarter
distribution on February 11, 1997 and the 1997 first quarter distribution on
May 16, 1997 to the partners of the Partnership, which, together, exceeded cash
flow from operations during the first six 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 payable and accrued expenses totaled $220,901 as of June 30, 1997,
compared to $352,999 as of December 31, 1996. The decrease is primarily
attributable to the timing of management fee payments.
On May 16, 1997, the Partnership paid a distribution to the Unitholders for the
period from January 1, 1997 to March 31, 1997 in the amount of $1,273,855, or
approximately $.26 per Unit. At June 30, 1997, the Partnership had a
distribution payable to Unitholders of $1,049,819 or approximately $.22 per
Unit. Such amount reflects the 1997 second quarter distribution which was
funded from cash flow from operations. This distribution will be paid on or
about August 18, 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 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, 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 second quarter of 1997 consisted primarily of
interest income.
For the three and six months ended June 30, 1997, the Partnership generated net
income of $304,509 and $615,561, respectively, compared to net income of
$173,233 and $294,342 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 six months ended June 30, 1997 was $1,192,500
and $2,385,000, respectively, unchanged from the corresponding periods in 1996.
Interest income for the three and six months ended June 30, 1997 was $30,386
and $58,958, respectively, compared to $74,281 and $149,778 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
the 1997 period.
Other income for the three and six months ended June 30, 1997 totaled $435 and
$2,035, respectively, compared to $42,325 and $43,355 for the corresponding
period in 1996. The decreases for both periods are 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. 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, 1997 totaled
$754,807 and $1,509,614, respectively, compared to $990,308 and $1,980,616 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 $58,634 and $106,145 for the three
and six months ended June 30, 1997, respectively, as compared to $32,261 and
$78,503 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 June 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: August 14, 1997 BY: /s/ John D. Stanley
Name: John D. Stanley
Director and President
Date: August 14, 1997 BY: /s/ Moshe Braver
Name: Moshe Braver
Vice President and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-END> June-30-1997
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<RECEIVABLES> 66,514
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