FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(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, 2000
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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 _______________________
Commission file number 0-17712
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PEGASUS AIRCRAFT PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
DELAWARE 84-1099968
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(State of organization) (IRS Employer
Identification No.)
Four Embarcadero Center 35th Floor
San Francisco, California 94111
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(Address of principal (Zip Code)
executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (415) 434-3900
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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This document consists of 18 pages.
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PEGASUS AIRCRAFT PARTNERS, L.P.
QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER AND SIX MONTHS ENDED JUNE 30, 2000
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets - June 30, 2000 and December 31, 1999 3
Statements of Income for the three months
ended June 30, 2000 and 1999 4
Statements of Income for the six months
ended June 30, 2000 and 1999 5
Statements of Partners' Capital for the six
months ended June 30, 2000 and 1999 6
Statements of Cash Flows for the six
months ended June 30, 2000 and 1999 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signature 17
2
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PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. Financial Statements
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PEGASUS AIRCRAFT PARTNERS, L.P.
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BALANCE SHEETS -- JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
-----------------------------------------------------------------
2000 1999
---- ----
(in thousands, except unit data)
ASSETS
------
Cash and cash equivalents $ 1,406 $ 1,873
Rent and other receivables 467 476
Aircraft, net 20,307 24,573
Other assets 5 50
-------- --------
Total Assets $ 22,185 $ 26,972
======== ========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
Notes payable $ 11,050 $ 14,000
Accounts payable and accrued expenses 77 111
Payable to affiliates 821 491
Deferred rental income and deposits 523 1,185
Distributions payable to partners 1,212 1,616
Maintenance reserves payable 1,389 969
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Total Liabilities 15,072 18,372
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COMMITMENTS AND CONTINGENCIES (Notes 2 and 4)
PARTNERS' CAPITAL:
General Partners 74 (710)
Limited Partners (4,000,005 units issued and
outstanding in 2000 and 1999) 7,039 9,310
-------- --------
Total Partners' Capital 7,113 8,600
-------- --------
Total Liabilities and Partners' Capital $ 22,185 $ 26,972
======== ========
The accompanying notes are an integral part of these financial statements.
3
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PEGASUS AIRCRAFT PARTNERS, L.P.
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STATEMENTS OF INCOME
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FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
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(unaudited)
2000 1999
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(in thousands, except unit
data and per unit amounts)
REVENUE:
Rentals from operating leases $ 1,683 $ 2,055
Gain on sale of aircraft 1,611 --
Interest 13 15
Other 181 --
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3,488 2,070
---------- ----------
EXPENSES:
Depreciation and amortization 941 1,261
Write-downs 500 --
Management and re-lease fees 333 165
General and administrative 59 46
Interest 306 283
Direct lease 23 22
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2,162 1,777
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NET INCOME $ 1,326 $ 293
========== ==========
NET INCOME ALLOCATED:
To the General Partners $ 812 $ 3
To the Limited Partners 514 290
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$ 1,326 $ 293
========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .13 $ .07
========== ==========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS ISSUED AND
OUTSTANDING 4,000,005 4,000,005
========== ==========
The accompanying notes are an integral part of these financial statements.
4
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PEGASUS AIRCRAFT PARTNERS, L.P.
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STATEMENTS OF INCOME
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FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
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(unaudited)
2000 1999
---- ----
(in thousands, except unit
data and per unit amounts)
REVENUE:
Rentals from operating leases $ 3,695 $ 4,061
Gain on sale of aircraft 1,611 --
Interest 34 32
Other 181 --
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5,521 4,093
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EXPENSES:
Depreciation and amortization 2,278 2,523
Write-downs 500 --
Management and re-lease fees 487 328
General and administrative 117 101
Interest 669 511
Direct lease 45 47
Engine rental and other 84 --
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4,180 3,510
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NET INCOME $ 1,341 $ 583
========== ==========
NET INCOME ALLOCATED:
To the General Partners $ 812 $ 6
To the Limited Partners 529 577
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$ 1,341 $ 583
========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .13 $ .14
========== ==========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS ISSUED AND
OUTSTANDING 4,000,005 4,000,005
========== ==========
The accompanying notes are an integral part of these financial statements.
5
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PEGASUS AIRCRAFT PARTNERS, L.P.
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STATEMENTS OF PARTNERS' CAPITAL
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FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
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(unaudited)
General Limited
Partners Partners Total
-------- -------- -----
(dollar amounts in thousands)
Balance, January 1, 2000 $ (710) $ 9,310 $ 8,600
Net income 812 529 1,341
Distributions declared to partners (28) (2,800) (2,828)
-------- -------- --------
Balance, June 30, 2000 $ 74 $ 7,039 $ 7,113
======== ======== ========
Balance, January 1, 1999 $ (653) $ 14,913 $ 14,260
Net income 6 577 583
Distributions declared to partners (32) (3,200) (3,232)
-------- -------- --------
Balance, June 30, 1999 $ (679) $ 12,290 $ 11,611
======== ======== ========
The accompanying notes are an integral part of these financial statements.
6
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PEGASUS AIRCRAFT PARTNERS, L.P.
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STATEMENTS OF CASH FLOWS
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FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
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(unaudited)
2000 1999
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(dollar amounts in thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,341 $ 583
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,278 2,523
Gain on sale of aircraft (1,611) --
Write-downs 500 --
Change in assets and liabilities:
Rent and other receivables 9 --
Other assets 45 9
Accounts payable and accrued expenses (34) (24)
Payable to affiliates 330 177
Accrued interest payable -- 89
Deferred rental income and deposits (662) 180
Maintenance reserves payable 420 205
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Net cash provided by operating activities 2,616 3,742
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized aircraft improvements (1,261) (3,407)
Proceeds from sale of aircraft 4,360 --
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Net cash provided by (used) in investing
activities 3,099 (3,407)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (3,232) (3,232)
Proceeds from notes payable -- 4,000
Repayment of notes payable (2,950) --
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Net cash provided by (used in) financing
activities (6,182) 768
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (467) 1,103
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,873 2,129
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,406 $ 3,232
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 666 $ 415
The accompanying notes are an integral part of these financial statements.
7
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PEGASUS AIRCRAFT PARTNERS, L.P.
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 2000
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(unaudited)
1. General
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the General Partners, all adjustments
necessary for a fair presentation have been included. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. The most significant
assumptions and estimates relate to useful life and recoverability of the
aircraft values. Actual results could differ from such estimates. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-K for the year ended December 31,
1999. (Operating results for the three and six month periods ended June 30, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.)
2. Aircraft
The Partnership's net investment in aircraft as of June 30, 2000 and
December 31, 1999 consisted of the following (in thousands):
2000 1999
---- ----
Aircraft on operating leases, at cost $ 59,100 $ 88,716
Less: Accumulated depreciation (38,031) (54,659)
Write-downs (3,178) (5,811)
Net lease settlement proceeds accounted for as
cost recovery -- (3,673)
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$ 17,891 $ 24,573
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Aircraft held for lease, at cost $ 11,915 $ --
Less: Accumulated depreciation (6,365) --
Write-downs (3,134) --
-------- --------
2,416 --
-------- --------
Aircraft, net $ 20,307 $ 24,573
======== ========
Kitty Hawk Aircargo, Inc. ("Kitty Hawk"). The Boeing 727-200 Advanced
aircraft formerly leased to Continental was hushkitted, converted to a freighter
and delivered to Kitty Hawk in August, 1999. Kitty Hawk is a Dallas, Texas based
operator of more than 100 freighter aircraft. The lease agreement provides for
84 months rent at $117,800 per month. Kitty Hawk has provided a security deposit
of $236,000 and is obligated to fund maintenance reserves, in the aggregate, at
a rate of $375 per flight hour. Compliance with the recently issued AD relating
to freighter conversions was performed in conjunction with the conversion. The
Partnership invested approximately $4.4 million in hushkitting, a C-check and
the cargo conversion.
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During the six months ended June 30, 2000, the Partnership invested
approximately $1.3 million with respect to the overhaul of two engines for the
Boeing 727-200 aircraft leased to Kitty Hawk. While these engines were being
overhauled, the Partnership leased two other engines from an affiliate of the
Managing General Partner. One of the overhauled engines was re-installed on the
aircraft and the leased engine removed and returned to the Affiliate. The
Partnership exchanged with the Managing General Partner's affiliate, the second
overhauled engine for the other leased engine.
Kitty Hawk, Inc. (the parent company of Kitty Hawk Aircargo, Inc.)
issued a press release on April 11, 2000 disclosing a potential major write-down
in the value of its fleet of L-1011's, lack of compliance with certain debt
covenants which may require the expenditure of $35 million to cure, an inability
to meet a May 15th interest payment on senior secured notes and the fact that
their auditor's opinion will include a going-concern modification. Kitty Hawk
filed for protection under Chapter 11 of the U.S. Bankruptcy Code on May 1,
2000, but, with Bankruptcy Court approval, has made all payments due to the
Partnership as of June 30, 2000.
Trans World Airlines, Inc. ("TWA"). The Boeing 747-100 was sold to TWA
in April 2000 for $4.36 million. Three hundred, sixty thousand dollars
($360,000) of the sale price was offset against the TWA deposit of a similar
amount held by the Partnership. Proceeds of the sale were used to pay down $2.95
million of debt and $1.05 million was retained for working capital purposes. The
General Partners negotiated the sale of the Boeing 747-100, as the aircraft
would have soon required a heavy maintenance check and the leasing market for
such an aircraft is very limited. TWA has also agreed to a six month extension
of the lease at the existing lease rate for the Partnership's MD-82.
Sky Trek International Airlines, Inc. ("Sky Trek"). Sky Trek, d.b.a.
Discovery Airlines, had leased a hushkitted Boeing 727-200 at the lease rate of
$95,000 per month, plus maintenance reserves. Due to arrearages in rent and
maintenance reserve payments, Sky Trek was placed on non-accrual status
beginning October 1, 1998. In mid-April, Sky Trek agreed with the Federal
Aviation Administration to a suspension of operations due to problems with its
maintenance and training programs and personnel qualifications. Given the
grounding of Sky Trek's fleet, the company was not generating any revenues.
On May 1, 2000, the Partnership and Sky Trek agreed to a termination of
the lease on the Boeing 727-200 aircraft in order to obtain possession of the
aircraft in an orderly manner. The aircraft is currently located at a
maintenance facility which is partially owned by an affiliate of the Managing
General Partner. The aircraft currently requires a C-check. The General Partners
are evaluating the options with respect to the remarketing of the aircraft and
its engines. The Partnership wrote down the carrying value of this aircraft by
$500,000, in the quarter ended June 30, 2000, to approximate current market
value.
Sky Trek filed for protection under Chapter 11 of the U.S. Bankruptcy
Code on May 12, 2000 and its bankruptcy filing was recently converted to a
Chapter 7 liquidation. For the period January 1, 2000 through May 1, 2000, Sky
Trek owed approximately $380,000 in rent and $168,000 in maintenance reserves.
For the period January 1, 2000 through May 1, 2000, Sky Trek paid approximately
$159,000 in rent and $99,000 in maintenance reserves. During the quarter ended
9
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June 30, 2000, Sky Trek's $190,000 security deposit was applied against its
$190,000 rent receivable.
3. Transactions With Affiliates
Base Management Fees: The General Partners are entitled to receive a
quarterly subordinated base management fee in an amount generally equal to 1.5%
of gross aircraft rentals, net of re-lease fees paid. Of this amount, 1.0% is
payable to the Managing General Partner and 0.5% is payable to the
Administrative General Partner. The General Partners earned a total of $25,000
and $55,000 of base management fees during the quarter and six months ended June
30, 2000, respectively.
Incentive Management Fees: The General Partners also are entitled to
receive a quarterly subordinated incentive management fee in an amount equal to
4.5% of quarterly cash flow and sales proceeds (net of resale fees). Of this
amount, 2.5% is payable to the Managing General Partner and 2.0% is payable to
the Administrative General Partner. The General Partners earned a total of
$260,000 and $324,000 of incentive management fees during the quarter and six
months ended June 30, 2000, respectively.
Re-lease Fees: The General Partners are entitled to receive a quarterly
subordinated fee for re-leasing aircraft or renewing a lease in an amount equal
to 3.5% of the gross rentals from such re-lease or renewal for each quarter for
which such payment is made. Of this amount, 2.5% is payable to the Managing
General Partner and 1.0% is payable to the Administrative General Partner. The
General Partners earned a total of $48,000 and $108,000 of re-lease fees during
the quarter and six months ended June 30, 2000, respectively.
Payment of the above fees is subordinated to the limited partners
receiving an 8% annual non-cumulative return based upon original contributed
capital (as defined and adjusted per the Partnership agreement). Fees not paid
on a current basis are accrued. Pursuant to the terms of the Partnership
Agreement, the General Partner's Capital Accounts were allocated $807,000 of the
gain due to the sale of the Boeing 747-100 aircraft. Since 1996, as part of a
class action settlement, an affiliate of the Administrative General Partner
places fees and distributions remitted to it by the Administrative General
Partner into an account for the benefit of the class action members.
Accountable General and Administrative Expenses: The General Partners
are entitled to reimbursement of certain expenses paid on behalf of the
Partnership which are incurred in connection with the administration and
management of the Partnership. There were no reimbursable expenses, during the
three and six months ended June 30, 2000, payable to the Administrative General
Partner.
During the six months ended June 30, 2000, the Partnership paid an
affiliate of the Managing General Partner $84,000 for the lease of two JT8D-9A
engines for the Boeing 727-200 aircraft on lease to Kitty Hawk. Additionally,
the Partnership paid $3,000 to a maintenance facility that is affiliated with
the Managing General Partner.
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4. Notes Payable
In February 1999, the Partnership's lender agreed to increase its
commitment from $10 million to $14.5 million and the interest rate increased
from 1.25% to 1.5% over prime, all of which was due in April 2000. Subject to
the completion of the sale of the Boeing 747 to TWA and the pay down in debt,
the current lender agreed to a six month extension to the loan. The outstanding
balance under this line of credit at June 30, 2000 was $11.05 million and the
interest rate was 11%. Although the current lender agreed to extend the term of
its facility by six months, the Partnership will need to obtain a replacement
lender. If unable to obtain a replacement lender, future distributions to the
partners may need to be reduced or eliminated in order to retire debt and the
Partnership may also need to sell assets. Also, while the current loan requires
interest only payments, a replacement lender may require amortization of
principal, which will reduce cash available for distribution.
11
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations
---------------------
This report may contain, in addition to historical information,
Forward-Looking Statements that include risks and other uncertainties. The
Partnership's actual results may differ materially from those anticipated in
these Forward-Looking Statements. Factors that might cause such a difference
include those discussed below, as well as general economic and business
conditions, competition and other factors discussed elsewhere in this report.
The Partnership undertakes no obligation to release publicly any revisions to
these Forward-Looking Statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of anticipated or unanticipated events.
Liquidity and Capital Resources
-------------------------------
The Partnership owns and manages a diversified portfolio of commercial
aircraft and makes quarterly distributions to the partners of net cash flow
generated by operations in the current and/or prior quarters. In certain
situations, the Partnership may retain cash flow from operations to finance
authorized capital expenditures.
The Partnership invests working capital and cash flow from operations
prior to its distribution to the partners in short-term, highly liquid
investments or a fund that invests in such instruments. At June 30, 2000, the
Partnership's unrestricted cash and cash equivalents of $1,406,000 was primarily
invested in such a fund. This amount was $467,000 less than the Partnership's
unrestricted cash and cash equivalents at December 31, 1999 of $1,873,000. This
decrease in unrestricted cash was attributable to the amount by which cash
distributions to partners, repayments of notes payable and capitalized aircraft
improvements exceeded cash generated by operating activities and sales proceeds
during the six months ended June 30, 2000.
In April 2000, the Partnership sold one Boeing 747-100 to its former
lessee, TWA, for total consideration of $4,360,000. As part of the sale, the
Partnership retained deposits received from TWA, aggregating $360,000, which had
been held by the Partnership, applying them towards the sales price for this
aircraft. As a result, the Partnership recognized a net gain of $1,611,000 on
the sale of this aircraft during the second quarter 2000.
Although TWA had a cash position of $194 million at June 30, 2000 and
reported a slightly narrower loss during the second quarter of 2000, versus the
prior year's quarter, given TWA's historical financial difficulties, its ongoing
financial losses are of concern. A default or deferral of lease payments on the
part of TWA, or Kitty Hawk, or any other lessee, may affect quarterly
distributions. TWA accounted for 38% of the Partnership's lease revenue during
the first six months of 2000. Kitty Hawk was current on all payments due to the
Partnership as of June 30, 2000, but filed for Chapter 11 bankruptcy protection
on May 1, 2000.
Other assets decreased by $45,000 from $50,000 at December 31, 1999 to
$5,000 at June 30, 2000, due to a decrease in prepaid expenses.
Notes payable decreased by $2,950,000, from $14,000,000 at December 31,
1999 to $11,050,000 at June 30, 2000, due to the pay down of debt from the
proceeds of the aircraft sale to TWA, as discussed above.
12
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Deferred rental income and deposits decreased by $662,000, from
$1,185,000 at December 31, 1999 to $523,000 at June 30, 2000. This decrease was
due to the application of security deposits and deferred rents from TWA towards
the aircraft sale, as discussed above, and the application of the Sky Trek
deposit against its rent receivable.
Payable to affiliates increased by $330,000, from $491,000 at December
31, 1999 to $821,000 at June 30, 2000, due to additional management fees that
have been accrued but not yet paid.
Maintenance reserves payable increased by $420,000, from $969,000 at
December 31, 1999 to $1,389,000 at June 30, 2000, primarily due to the receipt
of payments from lessees during the six months ended June 30, 2000.
During the six months ended June 30, 2000, the Partnership paid cash
distributions pertaining to the first quarter of 2000 and the last quarter of
1999. The quarterly distributions represented an annualized rate equal to 8% of
contributed capital ($.40 per Unit). The distribution for the second quarter of
2000 was paid in July, 2000 at an annualized rate of 6% of contributed capital
($.30 per Unit). The $0.30 per Unit is a decrease from the $0.40 per Unit
distributions paid for the first quarter 2000. With the sale of the Boeing 747
to TWA and the off-lease status of the Boeing 727-200 previously leased to Sky
Trek, the Partnership is generating less cash on an operating basis which has
necessitated the reduction in the distribution. A replacement lender will likely
require debt amortization, which will further reduce future cash available for
distribution. As has historically been the case, the amount of future cash
distributions will be determined on a quarterly basis after an evaluation of the
Partnership's operating results and its current and expected financial position.
Distributions may be characterized for tax, accounting and economic
purposes as a return of capital, a return on capital, or both. The portion of
each cash distribution by a partnership which exceeds its net income for the
fiscal period may be deemed a return of capital. Based on the amount of net
income reported by the Partnership for accounting purposes (which included
revenue resulting from the sale of the Boeing 747-100 aircraft in the 2nd
quarter 2000), no portion of the cash distributions declared for the quarter
ended June 30, 2000, constituted a return of capital. Also, based on the amount
of net income reported by the Partnership for accounting purposes, approximately
73% of the cash distributions paid to the partners from inception of the
Partnership through June 30, 2000 constituted a return of capital. However, the
total actual return on capital over the Partnership's life can only be
determined at the termination of the Partnership after all cash flows, including
proceeds from the sale of the aircraft, have been realized.
In February 1999, the Partnership's lender agreed to increase its
commitment from $10 million to $14.5 million and the interest rate increased
from 1.25% to 1.5% over prime, all of which was due in April 2000. Subject to
the completion of the sale of the Boeing 747 to TWA and the pay down in debt,
the current lender agreed to a six month extension to the loan. The outstanding
balance under this line of credit at June 30, 2000 was $11.05 million and the
interest rate was 11%. Although the current lender agreed to extend the term of
its facility by six months, the Partnership will need to obtain a replacement
lender. If unable to obtain a replacement lender, future distributions to the
partners may need to be further reduced or eliminated in order to retire debt
and the Partnership may also need to sell assets. The Limited Partnership
Agreement permits the Partnership to borrow up to 35% (or $28,000,000) of the
original offering proceeds for improvements, enhancement or maintenance of
aircraft.
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With the exception of the Boeing 727-200 formerly leased to Sky Trek,
the Partnership's aircraft are subject to leases with remaining terms of at
least 11 months.
During the six months ended June 30, 2000, the Partnership invested
approximately $1.3 million with respect to the overhaul of two engines for the
Boeing 727-200 aircraft leased to Kitty Hawk.
Results of Operations
---------------------
The Partnership's net income was $1,341,000 for the six months ended
June 30, 2000 (the "2000 Period") and $1,326,000 for the quarter ended June 30,
2000 (the "2000 Quarter") as compared to $583,000 for the six months ended June
30, 1999 (the "1999 Period") and $293,000 for the quarter ended June 30, 1999
(the "1999 Quarter").
The increase in the Partnership's net income for the 2000 Period
resulted primarily from the gain on sale of the Boeing 747-100 (as discussed in
Note 2 to the unaudited Financial Statements). This increase was partially
offset by a decrease in rental revenue and the write-down of the 727-200
aircraft previously leased to Sky Trek, as discussed below.
Rental revenue decreased by $366,000 and $372,000, or 9% and 18%,
respectively, for the 2000 Period and 2000 Quarter, due primarily to the
decrease in rental revenue from the Boeing 747-100 aircraft sold to TWA on April
7, 2000, as discussed in Note 2 to the unaudited financial statements.
Additionally, there was a decrease in rental revenue with respect to the Sky
Trek aircraft, which was placed on non-accrual status beginning in the third
quarter of 1998 and was returned during the second quarter of 2000. Partially
offsetting these decreases was an increase in revenues with respect to the
aircraft on lease to Kitty Hawk (off-lease during the first half of 1999).
The Partnership recognized other income of $181,000 during the 2000
Period, from a return condition settlement payment from Continental Airlines,
Inc. relating to the aircraft on lease to Kitty Hawk.
The Partnership recognized a gain of $1,611,000 on sale of the Boeing
747-100 aircraft to TWA during April, 2000, as discussed in Note 2 to the
unaudited Financial Statements.
Depreciation and amortization decreased by $245,000 and $320,000, or
10% and 25%, respectively, in the 2000 Period and the 2000 Quarter, as compared
to the 1999 Period and 1999 Quarter, primarily due to the sale of the Boeing
747-100 aircraft to TWA during April, 2000, as discussed in Note 2 to the
unaudited Financial Statements.
The Partnership provided a write-down aggregating $500,000, to reduce
the carrying value to an approximation of market value for the 727-200 aircraft
previously leased to Sky Trek, at June 30, 2000. There were no write-downs
during the 1999 Period.
Management and re-lease fees payable to the General Partners for the
2000 Period and 2000 Quarter increased $159,000 and $168,000, or 48% and 102%,
respectively, in comparison to the 1999 Period and 1999 Quarter, which was
primarily attributable to sales proceeds of $4.36 million, from the sale of the
Boeing 747-100 aircraft to TWA during April, 2000, as discussed in Note 2 to the
unaudited Financial Statements, which serves separately as the basis for certain
fees.
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General and administrative expense increased by $16,000 and $13,000, or
16% and 28%, respectively, in the 2000 Period and the 2000 Quarter, as compared
to the 1999 Period and 1999 Quarter, which was primarily due to increases in
outside audit and legal fees, partially offset by decreases in transfer agent
and investor report fees.
Interest expense increased by $158,000 and $23,000, or 31% and 8%,
respectively, in the 2000 Period and 2000 Quarter, as compared to the 1999
Period and 1999 Quarter, due to an increase in borrowings to fund capitalized
aircraft improvements, which was partially repaid during the 2000 quarter.
Engine rental expense was $84,000 during the 2000 Period, due to the
Partnership temporarily renting two JT8D-9A engines, from an affiliate of the
Managing General Partner, for the aircraft leased to Kitty Hawk. There was no
corresponding expense during the 1999 Period.
15
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PART II. OTHER INFORMATION
--------------------------
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits and reports to be filed: none
27. Financial Data Schedule (in electronic format only).
(b) The Partnership did not file any reports on Form 8-K during the
second quarter of the fiscal year ending December 31, 2000.
16
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SIGNATURE
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.
Pegasus Aircraft Partners, L.P.
(Registrant)
By: Air Transport Leasing, Inc.
Administrative General Partner
Date: August 10, 2000 By: /s/ CARMINE FUSCO
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Carmine Fusco
Vice President, Secretary, Treasurer and
Chief Financial and Accounting Officer
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