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, 1999
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or
Transition Report Pursuant to Section 13 or 15(d) of
- ---------- the Securities Exchange Act of 1934
For the Transition period from to
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Commission File Number: 0-16838
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JETSTREAM II, L.P.
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Exact Name of Registrant as Specified in its Charter
Delaware 84-1068932
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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
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Address of Principal Executive Offices Zip code
(212) 526-3183
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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
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2
JETSTREAM II, L.P.
<TABLE>
<CAPTION>
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BALANCE SHEETS
At September 30, At December 31,
1999 1998
(unaudited) (audited)
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<S> <C> <C>
Assets
Aircraft, at cost $ 21,877,000 $ 26,877,000
Less accumulated depreciation (16,892,281) (18,937,193)
-------------------------------
4,984,719 7,939,807
Cash and cash equivalents 1,256,709 1,781,869
Accounts receivable 2,227 45,000
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Total Assets $ 6,243,655 $ 9,766,676
==================================================================================================
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 664,820 $ 280,044
Distribution payable 756,709 1,084,395
Deferred revenue 145,833 153,333
-------------------------------
Total Liabilities 1,567,362 1,517,772
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Partners' Capital (Deficit):
General Partners (695,008) (868,684)
Limited Partners (4,837,505 units outstanding) 5,371,301 9,117,588
-------------------------------
Total Partners' Capital 4,676,293 8,248,904
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Total Liabilities and Partners' Capital $ 6,243,655 $ 9,766,676
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
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STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
For the nine months ended September 30, 1999
General Limited
Partners Partners Total
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<S> <C> <C> <C>
Balance at December 31, 1998 $(868,684) $ 9,117,588 $ 8,248,904
Net income 212,580 923,529 1,136,109
Distributions (38,904) (4,669,816) (4,708,720)
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Balance at September 30, 1999 $(695,008) $ 5,371,301 $ 4,676,293
==================================================================================================
</TABLE>
See accompanying notes to the financial statements.
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3
JETSTREAM II, L.P.
<TABLE>
<CAPTION>
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STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Income
Rental $1,050,000 $1,230,000 $3,420,000 $3,690,000
Interest 29,784 23,652 86,108 74,066
Other 1,060 2,945 5,240 6,603
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Total Income 1,080,844 1,256,597 3,511,348 3,770,669
- --------------------------------------------------------------------------------------------------
Expenses
Depreciation 567,446 754,807 1,952,144 2,264,421
Management fees 99,106 105,955 318,108 329,193
General and administrative 189,140 63,441 307,438 187,450
Operating -- -- 800 1,324
----------------------------------------------------------
Total Expenses 855,692 924,203 2,578,490 2,782,388
Net income before gain
on sale of aircraft 225,152 332,394 932,858 988,281
Gain on sale of aircraft -- -- 203,251 --
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Net Income $ 225,152 $ 332,394 $1,136,109 $ 988,281
==================================================================================================
Net Income Allocated:
To the General Partners $ 2,252 $ 3,324 $ 212,580 $ 9,883
To the Limited Partners 222,900 329,070 923,529 978,398
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$ 225,152 $ 332,394 $1,136,109 $ 988,281
==================================================================================================
Per limited partnership unit
(4,837,505 outstanding) $ .05 $ .07 $ .19 $ .20
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</TABLE>
See accompanying notes to the financial statements.
<PAGE>
4
JETSTREAM II, L.P.
<TABLE>
<CAPTION>
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STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended September 30,
1999 1998
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<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,136,109 $ 988,281
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of aircraft (203,251) --
Depreciation 1,952,144 2,264,421
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Accounts receivable 42,773 --
Accounts payable and accrued expenses 347,471 (44,631)
Deferred revenue (7,500) --
--------------------------
Net cash provided by operating activities 3,267,746 3,208,071
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Cash Flows From Investing Activities:
Cash received from sale of aircraft 1,243,500 --
--------------------------
Net cash provided by investing activities 1,243,500 --
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Cash Flows From Financing Activities:
Cash distributions (5,036,406) (3,207,363)
--------------------------
Net cash used for financing activities (5,036,406) (3,207,363)
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Net increase (decrease) in cash and cash equivalents (525,160) 708
Cash and cash equivalents, beginning of period 1,781,869 1,810,843
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Cash and cash equivalents, end of period $ 1,256,709 $ 1,811,551
==================================================================================================
Supplemental Disclosure of Noncash Operating Activities
In connection with the sale of the aircraft, accrued resale fees in the amount of $37,305 has
decreased the gain on the sale of the aircraft.
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</TABLE>
See accompanying notes to the financial statements.
<PAGE>
5
JETSTREAM II, L.P.
NOTES TO THE FINANCIAL STATEMENTS
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1998 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, 1999 and the results of operations for
the three and nine months ended September 30, 1999 and 1998, cash flows for the
nine months ended September 30, 1999 and 1998 and the statement of partners'
capital (deficit) for the three and nine months ended September 30, 1999.
Results of operations for the period are not necessarily indicative of the
results to be expected for the full year.
The following significant event occurred subsequent to fiscal year 1998, which
requires disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
The General Partners have developed a plan to sell the Partnership's remaining
aircraft and subsequently terminate the Partnership (the "Liquidation Plan").
Such Liquidation Plan requires the approval of more than 50% of the limited
partner units entitled to vote. A consent solicitation statement requesting such
approval was forwarded to investors on October 15, 1999.
On April 30, 1999, the Partnership sold one of its B-727-200 non-advanced
aircraft to an unaffiliated entity, SportHawk International, Inc. ("SportHawk")
for a selling price of $1,243,000 and the Partnership recognized a gain of
$203,251. The selling price was determined pursuant to a lease negotiated with
the buyer, which exercised its option to purchase the aircraft. As a result of
the sale, the Partnership paid a special cash distribution of $.26 per unit on
August 31, 1999 representing a distribution of net sale proceeds.
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6
JETSTREAM II, L.P.
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
The General Partners have developed a plan to sell the Partnership's remaining
aircraft and subsequently terminate the Partnership (the "Liquidation Plan").
Such Liquidation Plan requires the approval of more than 50% of the limited
partner units entitled to vote. A consent solicitation statement requesting such
approval was forwarded to investors on October 15, 1999.
As of September 30, 1999, the Partnership had all five 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"), and one aircraft was
on-lease to Continental Airlines, Inc. ("Continental"). As discussed below, the
aircraft which was leased to Boeing Capital Corporation ("BCC") was sold on
April 30, 1999.
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 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 BCC, which subleased the aircraft to SportHawk. BCC paid the Partnership a
monthly lease rate of $45,000. The primary term of the BCC lease was scheduled
to expire on October 31, 1999. Pursuant to the terms of the lease, on April 30,
1999 SportHawk exercised its option to purchase the aircraft for a selling price
of approximately $1,243,000 and the Partnership recognized a gain of $203,251.
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 through September 1999. During
the second quarter of 1999, Delta extended its lease through September 30, 2001.
This lease extension requires Delta to pay the Partnership a monthly lease rate
of $65,000 and to hushkit the plane.
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 this lease through September 2000, with the remaining terms
of the lease unchanged.
At September 30, 1999, the Partnership had unrestricted cash and cash
equivalents of $1,256,709, compared to $1,781,869 at December 31, 1998. The
decrease is due to the distributions paid to the partners.
On August 31, 1999, the Partnership paid a distribution to Unitholders of
$2,300,164, or approximately $.48 per Unit. Of this amount, $.22 per Unit
represents a distribution of cash flow from operations and $.26 per Unit
represents a distribution of net sale proceeds. At September 30, 1999 the
Partnership had a distribution payable to Unitholders of $756,709 or
approximately $.16 per Unit, which will be paid in November 1999. Future cash
distributions will be determined on a quarterly basis after an evaluation of the
Partnership's current and expected financial position.
<PAGE>
7
JETSTREAM II, L.P.
Results of Operations
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Substantially all of the Partnership's revenue for the three and nine months
ended September 30, 1999 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 1999 consisted
of interest and other income.
For the three and nine months ended September 30, 1999, the Partnership
generated net income of $225,152 and $1,136,109, compared to net income of
$332,394 and $988,281 for the corresponding period in 1998. Net income for the
1999 period includes a gain on sale of aircraft in the amount of $203,251.
Excluding this gain, Partnership operations resulted in income before gain on
sale of aircraft of $225,152 and $932,858 for the three and nine months ended
September 30, 1999, respectively, compared with income before gain on sale of
aircraft of $332,394 and $988,281 for the corresponding periods in 1998.
Rental income for the three and nine months ended September 30, 1999 was
$1,050,000 and $3,420,000, compared to rental income of $1,230,000 and
$3,690,000 for the corresponding period in 1998. The decrease was attributed to
the sale of the aircraft to SportHawk on April 30, 1999.
Interest income for the three and nine months ended September 30, 1999 was
$29,784 and $86,108, compared to $23,652 and $74,066 for the corresponding
period in 1998. The increase is primarily attributable to an increase in the
Partnership's average cash balances during the 1999 period resulting from the
cash received on the sale of the aircraft.
General and administrative expenses for the three and nine months ended
September 30, 1999 and 1998 totaled $189,140 and $307,438, respectively,
compared to $63,441 and $187,450 for the corresponding period in 1998. The
increase is primarily due to higher partnership administrative servicing costs,
and legal costs incurred in connection with the consent solicitation statement.
Part II Other Information
Items 1-3 Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders.
On October 15, 1999, the Partnership mailed a Notice of Consent
Solicitation and Consent Solicitation Statement to unitholders
whereby the General Partners proposed the liquidation of the
Partnership. The liquidation consists of: (1) the sale of all of the
Partnership's assets and the dissolution of the Partnership pursuant
to the proposed Plan of Liquidation and Dissolution; (2) the
amendment of the Partnership Agreement to permit the engagement of
the General Partners to market and sell the assets of the
Partnership for a fee pursuant to the terms of the Joint Marketing
Agreement, dated July 13, 1999, among each of the General Partners
and the Partnership; and (3) the grant of authority to the General
Partners to take any action necessary or incidental and consistent
with the Partnership Agreement, the Plan of Liquidation and
Dissolution and the Joint Marketing Agreement to complete the
foregoing on the terms described in the consent solicitation
statement. The Consent Solicitation is expected to terminate at 5:00
p.m. on November 19, 1999, unless the General Partners extend such
time in their sole discretion.
Item 5 Not applicable.
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8
JETSTREAM II, L.P.
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, 1999.
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9
JETSTREAM II, L.P.
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 15, 1999 BY: /s/Michael T. Marron
--------------------------------
Name: Michael T. Marron
Title: Director, President, and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<CASH> 1,256,709
<SECURITIES> 000
<RECEIVABLES> 2,227
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 1,258,936
<PP&E> 21,877,000
<DEPRECIATION> 16,892,281
<TOTAL-ASSETS> 6,243,655
<CURRENT-LIABILITIES> 1,567,362
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 4,676,293
<TOTAL-LIABILITY-AND-EQUITY> 6,243,655
<SALES> 3,420,000
<TOTAL-REVENUES> 3,511,348
<CGS> 000
<TOTAL-COSTS> 2,578,490
<OTHER-EXPENSES> 000
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 932,858
<INCOME-TAX> 000
<INCOME-CONTINUING> 932,858
<DISCONTINUED> 000
<EXTRAORDINARY> 203,251
<CHANGES> 000
<NET-INCOME> 1,136,109
<EPS-BASIC> .19
<EPS-DILUTED> .19
</TABLE>
