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, 1998
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
Virginia 84-1068932
State or Other Jurisdiction I.R.S. Employer Identification No.
of Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3183
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 ____
<PAGE>
2
<TABLE>
BALANCE SHEETS
<CAPTION>
At September 30, At December 31,
1998 1997
--------------- --------------
<S> <C> <C>
Assets
Aircraft, at cost $ 26,877,000 $ 26,877,000
Less accumulated depreciation (18,182,384) (15,917,963)
------------ ------------
8,694,616 10,959,037
Cash and cash equivalents 1,811,551 1,810,843
Accounts receivable 45,000 45,000
------------ ------------
Total Assets $ 10,551,167 $ 12,814,880
============ ============
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 284,188 $ 328,819
Distribution payable 1,077,531 1,113,369
Deferred revenue 153,333 153,333
------------ ------------
Total Liabilities 1,515,052 1,595,521
------------ ------------
Partners' Capital (Deficit):
General Partners (860,812) (838,980)
Limited Partners (4,837,505 units
outstanding) 9,896,927 12,058,339
------------ ------------
Total Partners' Capital 9,036,115 11,219,359
------------ ------------
Total Liabilities and
Partners' Capital $ 10,551,167 $ 12,814,880
============ ============
</TABLE>
<TABLE>
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
For the nine months ended September 30, 1998
<CAPTION>
General Limited
Partners Partners Total
--------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1997 $(838,980) $12,058,339 $11,219,359
Net income 9,883 978,398 988,281
Cash distributions (31,715) (3,139,810) (3,171,525)
--------- ----------- -----------
Balance at September 30, 1998 $(860,812) $ 9,896,927 $ 9,036,115
========= =========== ===========
</TABLE>
<PAGE>
3
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income
Rental $1,230,000 $1,192,500 $3,690,000 $3,577,500
Interest 23,652 26,483 74,066 85,441
Other 2,945 4,660 6,603 6,695
---------- ---------- ---------- ----------
Total Income 1,256,597 1,223,643 3,770,669 3,669,636
---------- ---------- ---------- ----------
Expenses
Depreciation 754,807 754,807 2,264,421 2,264,421
Management fees 105,955 109,891 329,193 324,564
General and
administrative 63,441 55,123 187,450 161,268
Operating -- -- 1,324 --
---------- ---------- ---------- ----------
Total Expenses 924,203 919,821 2,782,388 2,750,253
---------- ---------- ---------- ----------
Net Income $ 332,394 $ 303,822 $ 988,281 $ 919,383
========== ========== ========== ==========
Net Income Allocated:
To the General Partners $ 3,324 $ 3,038 $ 9,883 $ 9,194
To the Limited Partners 329,070 300,784 978,398 910,189
---------- ---------- ---------- ----------
$ 332,394 $ 303,822 $ 988,281 $ 919,383
========== ========== ========== ==========
Per limited partnership
unit (4,837,505
outstanding) $ .07 $ .06 $ .20 $ .19
----- ----- ----- -----
</TABLE>
<TABLE>
STATEMENTS OF CASH FLOWS
For the nine months ended September 30,
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 988,281 $ 919,383
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,264,421 2,264,421
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Accounts receivable -- (44,753)
Interest receivable -- 368
Accounts payable and accrued expenses (44,631) (106,233)
----------- -----------
Net cash provided by operating activities 3,208,071 3,033,186
----------- -----------
Cash Flows From Investing Activities:
Loan receivable -- 108,403
----------- -----------
Net cash provided by investing activities -- 108,403
----------- -----------
Cash Flows From Financing Activities:
Cash distributions (3,207,363) (3,426,760)
----------- -----------
Net cash used for financing activities (3,207,363) (3,426,760)
----------- -----------
Net increase (decrease) in cash
and cash equivalents 708 (285,171)
Cash and cash equivalents, beginning of period 1,810,843 1,791,426
----------- -----------
Cash and cash equivalents, end of period $ 1,811,551 $ 1,506,255
=========== ===========
</TABLE>
<PAGE>
4
NOTES TO THE FINANCIAL STATEMENTS
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1997 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 September 30, 1998 and the results of
operations for the three and nine months ended September 30, 1998 and 1997, cash
flows for the nine months ended September 30, 1998 and 1997 and the statement of
partners' capital (deficit) for the nine months ended September 30, 1998.
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 1997, which
require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
<PAGE>
5
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
As of September 30, 1998, 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 Boeing Capital
Corporation ("BCC"), one aircraft was on-lease to Delta Air Lines, Inc.
("Delta"), and one aircraft was on-lease to Continental Airlines, Inc.
("Continental").
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 cost of the hushkits, Northwest
will be entitled to 50% of the proceeds from the eventual 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.
The lease for the Partnership's B-727-200 with TWA was terminated on October 30,
1997. TWA had been leasing the aircraft on a month-to-month basis at a monthly
lease rate of $32,500. Commencing November 1, 1997, the aircraft was re-leased
to Boeing Capital Corporation ("BCC"), which subleases the aircraft to SportHawk
International, Inc. BCC pays the Partnership a monthly lease rate of $45,000.
The primary term of the BCC lease expires on October 31, 1999.
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.
Continental makes monthly lease payments to the Partnership of $180,000. The
lease with Continental was originally scheduled to expire in March 1998.
Continental extended its lease to March 1999 and in October 1998, exercised its
second option to renew this lease through March 2000, with the remaining terms
of the lease unchanged.
At September 30, 1998, the Partnership had unrestricted cash and cash
equivalents of $1,811,551, largely unchanged from $1,810,843 at December 31,
1997.
On August 4, 1998, the Partnership paid a distribution to the Unitholders for
the period from April 1, 1998 to June 30, 1998 in the amount of $1,069,334, or
approximately $.22 per Unit. At September 30, 1998, the Partnership had a
distribution payable of $1,077,531, or approximately $.22 per Unit. Such amount
reflects the 1998 third quarter distribution which was funded from cash flow
from operations. This distribution was paid on November 6, 1998. Future cash
distributions will be determined on a quarterly basis after an evaluation of the
Partnership's current and expected financial position.
<PAGE>
6
Results of Operations
Substantially all of the Partnership's revenue for the nine months ended
September 30, 1998 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 1998 consisted of interest and
other income.
For the three and nine months ended September 30, 1998, the Partnership
generated net income of $332,394 and $988,281, respectively, compared to net
income of $303,822 and $919,383 for the corresponding periods in 1997. The
increase in net income is primarily attributable to higher rental income,
partially offset by an increase in management fees and an increase in general
and administrative expenses.
Rental income for the three and nine months ended September 30, 1998 was
$1,230,000 and $3,690,000, respectively, compared to $1,192,500 and $3,577,500
for the corresponding periods in 1997. The increase is primarily a result of a
higher lease rate paid for the 727-200 non-advanced aircraft in comparison to
1997.
Interest income for the three and nine months ended September 30, 1998 was
$23,652 and $74,066, respectively, compared to $26,483 and $85,441 for the
corresponding periods in 1997. The decrease is primarily attributable to a
decrease in the Partnership's average cash balances during the 1998 period.
General and administrative expenses for the three and nine months ended
September 30, 1998 totaled $63,441 and $187,450, respectively, compared to
$55,123 and $161,268 for the corresponding periods in 1997. The increase is
primarily attributable to higher professional and administrative expenses.
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, 1998.
<PAGE>
7
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: November 16, 1998 BY: /s/Michael T. Marron
Michael T. Marron
Director, President, and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Sep-30-1998
<CASH> 1,811,551
<SECURITIES> 000
<RECEIVABLES> 45,000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 1,856,551
<PP&E> 26,877,000
<DEPRECIATION> 18,182,384
<TOTAL-ASSETS> 10,551,167
<CURRENT-LIABILITIES> 1,515,052
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 9,036,115
<TOTAL-LIABILITY-AND-EQUITY> 10,551,167
<SALES> 000
<TOTAL-REVENUES> 3,770,669
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 2,782,388
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 988,281
<INCOME-TAX> 000
<INCOME-CONTINUING> 988,281
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 988,281
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
