UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31,1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended March 31, 1996 Commission File No. 0-18368
AIRFUND International Limited Partnership
(Exact name of registrant as specified in its charter)
Massachusetts 04-3037350
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 North Washington Street, Boston, MA 02114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617)854-5800
(Former name, former address and former fiscal year, if changed since last
report.)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court 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 No
AIRFUND International Limited Partnership
FORM 10-Q
INDEX
<TABLE>
Page
PART I. FINANCIAL INFORMATION:
<CAPTION>
Item 1. Financial Statements
<S> <C>
Statement of Financial Position
at March 31, 1996 and December 31, 1995 3
Statement of Operations
for the three months ended March 31, 1996 and 1995 4
Statement of Cash Flows
for the three months ended March 31, 1996 and 1995 5
Notes to the Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II. OTHER INFORMATION:
Items 1 - 6 13
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
AIRFUND International Limited Partnership
STATEMENT OF FINANCIAL POSITION
March 31, 1996 and December 31, 1995
(Unaudited)
March 31, December 31,
1996 1995
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,203,610 $ 1,079,341
Contractual right for equipment -- 4,360,599
Rents receivable 107,657 562,594
Accounts receivable - affiliate -- 353,803
Equipment at cost, net of accumulated depreciation of
$23,507,288 and $22,741,547 at March 31, 1996
and December 31, 1995, respectively 23,528,966 10,532,269
--------------- ---------------
Total assets $ 24,840,233 $ 16,888,606
=============== =============
LIABILITIES AND PARTNERS' CAPITAL
Notes payable $ 13,226,486 $ 4,742,968
Accrued interest 70,310 63,568
Accrued liabilities 38,027 40,527
Accrued liabilities - affiliate 126,772 71,661
Deferred rental income -- 136,139
Cash distributions payable to partners -- 600,000
--------------- ----------------
Total liabilities 13,461,595 5,654,863
--------------- ----------------
Partners' capital (deficit):
General Partner (1,130,064) (1,137,309)
Limited Partnership Interests
(3,040,000 Units; initial purchase price of $25 each) 12,508,702 12,371,052
--------------- ----------------
Total partners' capital 11,378,638 11,233,743
--------------- ----------------
Total liabilities and partners' capital $ 24,840,233 $ 16,888,606
=============== =============
</TABLE>
<TABLE>
<CAPTION>
AIRFUND International Limited Partnership
STATEMENT OF OPERATIONS
for the three months ended March 31, 1996 and 1995
(Unaudited)
1996 1995
----------------- -----------
<S> <C> <C>
Income:
Lease revenue $ 980,071 $ 1,137,362
Interest income 144,924 14,115
--------------- ---------------
Total income 1,124,995 1,151,477
--------------- ---------------
Expenses:
Depreciation 765,741 723,401
Interest expense 100,108 --
Equipment management fees - affiliate 49,004 56,868
Operating expenses - affiliate 65,247 49,811
--------------- ---------------
Total expenses 980,100 830,080
--------------- ---------------
Net income $ 144,895 $ 321,397
=============== ===============
Net income
per limited partnership unit $ 0.05 $ 0.10
=============== ==================
Cash distribution declared
per limited partnership unit $ -- $ 0.31
=============== ==================
</TABLE>
<TABLE>
<CAPTION>
AIRFUND International Limited Partnership
STATEMENT OF CASH FLOWS
for the three months ended March 31, 1996 and 1995
(Unaudited)
1996 1995
----------------------------
<S> <C> <C>
Cash flows from (used in) operating activities:
Net income $ 144,895 $ 321,397
Adjustments to reconcile net income to net cash from operating activities:
Depreciation 765,741 723,401
Changes in assets and liabilities Decrease (increase) in:
rents receivable 454,937 --
accounts receivable - affiliate 353,803 (2,336)
Increase (decrease) in:
accrued interest 6,742 --
accrued liabilities (2,500) (33,688)
accrued liabilities - affiliate 55,111 137,069
deferred rental income (136,139) 263,160
--------------- ---------------
Net cash from operating activities 1,642,590 1,409,003
--------------- ---------------
Cash flows used in investing activities:
Purchase of equipment (240,726) --
--------------- ---------------
Net cash used in investing activities (240,726) --
--------------- ---------------
Cash flows used in financing activities:
Principal payments - note payable (677,595) --
Distributions paid (600,000) (1,000,000)
--------------- ---------------
Net cash used in financing activities (1,277,595) (1,000,000)
--------------- ---------------
Net increase in cash and cash equivalents 124,269 409,003
Cash and cash equivalents at beginning of period 1,079,341 1,067,046
--------------- ---------------
Cash and cash equivalents at end of period $ 1,203,610 $ 1,476,049
=============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 93,366 $ --
================ ====================
Supplemental disclosure of non-cash investing activities:
See Note 5 to the Financial Statements.
</TABLE>
AIRFUND International Limited Partnership
Notes to the Financial Statements
March 31, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing Form
10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not include
all information and footnote disclosures required under generally accepted
accounting principles for complete financial statements and, accordingly, the
accompanying financial statements should be read in conjunction with the
footnotes presented in the 1995 Annual Report. Except as disclosed herein, there
has been no material change to the information presented in the footnotes to the
1995 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at March 31, 1996 and December 31, 1995 and results of operations for
the three month periods ended March 31, 1996 and 1995 have been made and are
reflected.
NOTE 2 - CASH
The Partnership invests excess cash with large institutional banks in
reverse repurchase agreements with overnight maturities. The reverse
repurchase agreements are secured by U.S. Treasury Bills or interests in
U. S. Governments securities.
NOTE 3 - REVENUE RECOGNITION
Rents are payable to the Partnership monthly and quarterly and no
significant amounts are calculated on factors other than the passage of time.
All leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. Future minimum rents of
$12,115,102 are due as follows:
For the year ending March 31, 1997 $ 4,335,986
1998 3,368,638
1999 3,368,638
2000 1,041,840
---------------
Total $ 12,115,102
In September 1995, the Partnership transferred its ownership interest in a
Boeing 747-SP-21 commercial jet aircraft (the "United Aircraft") to the existing
lessee, United Air Lines, Inc., pursuant to the rules for a like-kind exchange
transaction for income tax reporting purposes (See Note 5 herein). In November
1995, the Partnership partially replaced the United Aircraft with a 43.41%
interest in three Boeing 737-2H4 aircraft leased to Southwest Airlines, Inc.(the
"Southwest Aircraft"). The Partnership will receive approximately $1,250,000 of
rental revenue in each of the years in the period ending March 31, 1999, and
approximately $1,042,000 in the year ending March 31, 2000, pursuant to the
Southwest Aircraft lease agreement.
Additionally, in March 1996, the Partnership completed the replacement of
the United Aircraft with a 49.17% interest in two McDonnell-Douglas MD-82
Aircraft leased by Finnair OY (the "Finnair Aircraft"). The Partnership will
receive approximately $2,118,000 of rental revenue in each of the years in the
period ending March 31, 1999, pursuant to the Finnair Aircraft lease agreement.
AIRFUND International Limited Partnership
Notes to the Financial Statements
(Continued)
NOTE 4 - RELATED PARTY TRANSACTIONS
All operating expenses incurred by the Partnership are paid by American
Finance Group ("AFG") on behalf of the Partnership and AFG is reimbursed at its
actual cost for such expenditures. Fees and other costs incurred during each of
the three month periods ended March 31, 1996 and 1995, which were paid or
accrued by the Partnership to AFG or its Affiliates, are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ --------
<S> <C> <C>
Equipment management fees $ 49,004 $ 56,868
Administrative charges 5,250 3,000
Reimbursable operating expenses
due to third parties 59,997 46,811
---------- ---------
Total $ 114,251 $ 106,679
========= =========
</TABLE>
<TABLE>
<CAPTION>
NOTE 5 - EQUIPMENT
The following is a summary of equipment owned by the Partnership at March
31, 1996. In the opinion of AFG, the acquisition cost of the equipment did not
exceed its fair market value.
<S> <C> <C>
Lease
Term Equipment
Equipment Type (Months) at Cost
Two McDonnell-Douglas MD-82 (Finnair) 36 $13,762,438
One Boeing 727-200 (Northwest) 18 9,520,359
One Boeing 727-200 (Northwest) 18 9,520,359
One Lockheed L-1011-50 (Cathay) 3 7,877,225
Three Boeing 737-2H4 (Southwest) 49 6,355,873
-------------
Total equipment cost 47,036,254
Accumulated depreciation (23,507,288)
Equipment, net of accumulated depreciation $23,528,966
</TABLE>
The cost of the Lockheed L-1011-50 aircraft, the three Boeing 737-2H4
aircraft and the two McDonnell-Douglas MD-82 aircraft represent proportionate
ownership interests. The remaining interests are owned by other affiliated
partnerships sponsored by AFG. All Partnerships individually report, in
proportion to their respective ownership interests, their respective shares of
assets, liabilities, revenues, and expenses associated with the aircraft.
In September 1995, the Partnership transferred its 76.8% interest in the
United Aircraft, pursuant to the rules for a like-kind exchange for income tax
reporting purposes (See Note 3 herein). In November 1995, the Partnership
partially replaced the United Aircraft with a 43.41% interest in the Southwest
Aircraft, at an aggregate cost of $6,355,873. To acquire the interests in the
Southwest Aircraft, the Partnership obtained financing of $4,742,968 from a
third-party lender and utilized $1,612,905 of the cash consideration received
from the transfer of the United Aircraft. The remaining ownership interest of
56.59% in the Southwest Aircraft is held by affiliated equipment leasing
programs sponsored by AFG.
Additionally, in March 1996, the Partnership completed the replacement of
the United Aircraft with a 49.17% ownership interest in the Finnair Aircraft at
a total cost to the Partnership of $13,762,438. To acquire the ownership
interest in the Finnair Aircraft, the Partnership paid $4,601,325 in cash and
obtained financing of $9,161,113 from a third-party lender. The remaining
ownership interests of 50.83% in the Finnair Aircraft are held by affiliated
equipment leasing programs sponsored by AFG.
Effective January 1, 1996, the Partnership adopted Financial Accounting
Standards Board Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Statement 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. Adoption of this statement did not have a material impact on the financial
statements of the Partnership.
NOTE 6 - NOTES PAYABLE
Notes payable at March 31, 1996 consisted of installment notes payable to
banks of $13,226,486. All of the installment notes are non-recourse, with
interest rates ranging between 8.65% and 8.76% and are collateralized by the
equipment and assignment of the related lease payments. All of the notes were
originated in connection with the Southwest Aircraft and the Finnair Aircraft.
The installment notes related to the Southwest Aircraft will be fully amortized
by noncancellable rents. The Partnership has a balloon payment obligation at the
expiration of the primary lease term related to the Finnair Aircraft. The
carrying amount of notes payable approximates fair value at March 31, 1996.
The annual maturities of the installment notes payable are as follows:
For the year ending March 31, 1997 $ 2,498,138
1998 2,511,885
1999 2,740,688
2000 5,475,775
-------------
Total $ 13,226,486
NOTE 7 - SUBSEQUENT EVENT
Pursuant to its agreements with PLM International, Inc., referred to in
Note 7 of the Partnership's 1995 financial statements, American Finance Group
agreed to change its name and logo, except where they are used in connection
with the Partnership and other affiliated investment programs. For all other
purposes, American Finance Group will operate as Equis Financial Group effective
April 2, 1996
<PAGE>
AIRFUND International Limited Partnership
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Three months ended March 31, 1996 compared to the three months ended March 31,
1995:
Overview
As an equipment leasing partnership, the Partnership was organized to
acquire and lease a portfolio of commercial jet aircraft subject to lease
agreements with third parties. Upon its inception in 1989, the Partnership
purchased three commercial jet aircraft and a proportionate interest in a fourth
aircraft which were leased by major carriers engaged in passenger
transportation. Initially, each aircraft generated rental revenues pursuant to
primary-term lease agreements. In 1991, one of the Partnership's original
aircraft was sold to a third party and a portion of the sale proceeds was
reinvested in a proportionate interest in another aircraft. In 1995, the
Partnership transferred its ownership interest in the fourth aircraft to the
existing lessee, United Air Lines, Inc., in exchange for proportionate interests
in three aircraft leased to Southwest Airlines, Inc., pursuant to lease
agreements which expire in 1999. During the first quarter of 1996, the
Partnership completed the replacement of the United Aircraft with proportionate
interests in two aircraft leased to Finnair OY, pursuant to lease agreements
which also expire in 1999. The Partnership continues to own a proportionate
interest in one aircraft and a complete interest in two other aircraft held in
its original portfolio, all of which are being leased pursuant to renewal lease
agreements which will expire in 1996. Upon expiration of the renewal lease
agreements, each aircraft will be re-leased or sold depending on prevailing
market conditions and the assessment of such conditions by AFG to obtain the
most advantageous economic benefit. Ultimately, all aircraft will be sold and
the net proceeds will be distributed to the Partners, after all liabilities and
obligations of the Partnership have been satisfied.
Results of Operations
For the three months ended March 31, 1996, the Partnership recognized lease
revenue $980,071 compared to $1,137,362 for the same period in 1995. The
decrease in lease revenue from 1995 to 1996 reflects the effects of a temporary
decline in aircraft lease revenues associated with the Partnership's aircraft
exchange (discussed below) which was concluded late in the first quarter of
1996. As a result of this exchange, the Partnership replaced its ownership
interest in a Boeing 747-SP, having aggregate quarterly lease revenues of
$495,360, with interests in five other aircraft (three Boeing 737 aircraft
leased by Southwest Airlines, Inc. and two McDonnell Douglas MD-82 aircraft
leased by Finnair OY) having aggregate quarterly lease revenues of $845,665. The
Finnair Aircraft was exchanged into the Partnership on March 25, 1996.
Accordingly, the first quarter of 1996 reflected only a portion of the rents
ultimately anticipated from the like-kind exchange. Lease revenue in the
near-term will increase due to the completion of the like-kind exchange.
Thereafter, the level of lease revenue will decline due to the expiration of
renewal lease terms described herein.
The Partnership's two lease agreements with Northwest Airlines, Inc.
("Northwest") were renewed for a period of twelve months commencing May 1, 1994.
Subsequently, Northwest extended the renewal period for an additional twelve
months through April 30, 1996. Rents due under the initial twelve month renewals
generated aggregate monthly revenue of $124,000 per month compared to $120,000
per month for the second twelve month renewals. Northwest has opted to extend
these leases for an additional six months until October 31, 1996 at an aggregate
of $120,000 per month. It is anticipated that both of these aircraft will be
returned to the Partnership upon the expiration of these lease extensions.
The Partnership's original lease agreement with Cathay Pacific Airways,
Ltd ("Cathay") provided for semi-annual rent adjustments based on the six month
London Inter-bank Offered Rate ("LIBOR"). Accordingly, rents generated from this
lease fluctuated in relation to the prevailing LIBOR rate on a semi-annual
basis. The Partnership's renewal lease agreement with Cathay (having an adjusted
semi-annual rent of $535,802) expired on February 14, 1996 and was extended
until April 11, 1996. Subsequent to this extension, Cathay will lease the
aircraft at a fixed rate until June 30, 1996. The fixed extension agreement will
generate approximately $127,000 in renewal revenue for the Partnership. This
aircraft is expected to be returned by Cathay upon the expiration of the
extension agreement.
The Partnership holds a proportionate ownership interest in the Cathay,
Southwest and Finnair Aircraft, discussed above. The remaining interests are
owned by other affiliated partnerships sponsored by AFG. All partnerships
individually report, in proportion to their respective ownership interests,
their respective shares of assets, liabilities, revenues and expenses associated
with the aircraft. (See Note 5 to the financial statements.)
The Partnership typically earns interest income from temporary investments
of rental receipts in short-term instruments. For the three months ended March
31, 1996, the Partnership earned interest income of $144,924 compared to $14,115
for the same period in 1995. The increase in interest income in 1996 compared to
1995 is a result of interest of $130,268 earned on cash held in a
special-purpose escrow account in connection with the like-kind exchange
transactions, discussed above.
In September 1995, the Partnership transferred its 76.8% ownership interest
in the United Aircraft, pursuant to the rules for a like-kind exchange for
income tax reporting purposes (See Notes 3 and 5 to the financial statements).
In November 1995, the Partnership partially replaced the United Aircraft
with a 43.41% ownership interest in the Southwest Aircraft, at an aggregate
cost of $6,355,873. To acquire the interest in the Southwest Aircraft, the
Partnership obtained financing of $4,742,968 from a third-party lender
and utilized $1,612,905 of the cash consideration received from the transfer
of the United Aircraft. The remaining ownership interest of 56.59% in the
Southwest Aircraft is held by affiliated equipment leasing programs sponsored by
AFG.
Additionally, in March 1996, the Partnership completed the replacement of
the United Aircraft with a 49.17% ownership interest in the Finnair Aircraft at
a total cost to the Partnership of $13,762,438. To acquire the ownership
interest in the Finnair Aircraft, the Partnership paid $4,601,325 in cash and
obtained financing of $9,161,113 from a third-party lender. The remaining
ownership interests of 50.83% in the Finnair Aircraft are held by affiliated
equipment leasing programs sponsored by AFG.
During the three months ended March 31, 1996, the Partnership incurred
interest expense of $100,108. Interest expense resulted from financing obtained
from third-party lenders in connection with the Southwest Aircraft and the
Finnair Aircraft, described above. In the near-term, interest expense is
expected to increase as the financing of the Finnair Aircraft occurred on March
25, 1996 and therefore interest related to the Finnair debt was only incurred
from that date through the end of the quarter. Thereafter, interest expense will
decline as the principal balance of notes payable is reduced through the
application of rent receipts to outstanding debt.
Management fees were 5% of lease revenue during each of the periods ended
March 31, 1996 and 1995 and will not change as a percentage of lease revenue in
future periods.
Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as insurance,
printing, distribution and remarketing expenses. Collectively, operating
expenses represented 6.7% of lease revenue during the three months ended March
31, 1996, compared to 4.4% for the same period in 1995. The increase in
operating expenses from 1995 to 1996 was due primarily to legal expenses
incurred in connection with the like-kind exchange transactions, discussed
above. The amount of future operating expenses cannot be predicted with
certainty; however, such expenses are usually higher during the acquisition and
liquidation phases of a partnership. Other fluctuations will occur in relation
to the volume and timing of aircraft remarketing activities. Depreciation
expense was $765,741 for the three months ended March 31, 1996, compared to
$723,401 for the same period in 1995.
The ultimate realization of residual value for any aircraft will be
dependent upon many factors, including AFG's ability to sell and re-lease the
aircraft. Changes in market conditions, industry trends, technological advances,
and other events could converge to enhance or detract from asset values at any
given time. Accordingly, AFG will attempt to monitor changes in the airline
industry in order to identify opportunities which may be advantageous to the
Partnership and which will maximize total cash returns for each aircraft.
The total economic value realized upon final disposition of each aircraft
is comprised of all primary lease term revenues generated from that aircraft,
together with its residual value. The latter consists of cash proceeds realized
upon the aircraft's sale in addition to all other cash receipts obtained from
renting the aircraft under re-lease or renewal lease agreements. Consequently,
the amount of any future gain or loss reported in the financial statements may
not necessarily be indicative of the total residual value the Partnership
achieved from leasing the aircraft.
Liquidity and Capital Resources and Discussion of Cash Flows
The Partnership by its nature is a limited life entity which was
established for specific purposes described in the preceding "Overview". As an
equipment leasing program, the Partnership's principal operating activities
derive from aircraft rental transactions. Accordingly, the Partnership's
principal source of cash from operations is provided by the collection of
periodic rents. These cash inflows are used to satisfy debt service obligations
associated with leveraged leases, and to pay management fees and operating
costs. Operating activities generated net cash inflows of $1,642,590 and
$1,409,003 for the three months ended March 31, 1996 and 1995, respectively. The
expiration of the Partnership's current lease agreements will cause a decline in
the Partnership's future lease revenue and corresponding sources of operating
cash. This will be offset by rents generated in connection with the Southwest
Aircraft and the Finnair Aircraft. Overall, expenses associated with rental
activities, such as management fees, and net cash flow from operating activities
will decline as the Partnership remarkets its aircraft. Ultimately, the
Partnership will dispose of all aircraft under lease. This will occur
principally through sale transactions whereby each aircraft will be sold to the
existing lessee or to a third party. Generally, this will occur upon expiration
of each aircraft's primary or renewal/re-lease term.
Cash expended for equipment acquisitions is reported under investing
activities on the accompanying Statement of Cash Flows. The Partnership expended
$240,726 in cash in connection with the like-kind exchange transactions referred
to above. There were no equipment acquisitions during the same period in 1995.
As described in Results of Operations, the Partnership obtained long-term
financing in connection with the like-kind exchange transactions involving the
Southwest Aircraft and the Finnair Aircraft. The corresponding note agreements
are recourse only to the specific equipment financed and to the minimum rental
payments contracted to be received during the debt amortization period. As
rental payments are collected, a portion or all of the rental payment will be
used to repay principal and interest. The Partnership has balloon payment
obligations at the expiration of the primary lease term related to the Finnair
Aircraft.
Cash distributions paid to the Recognized Owners consist of both a return
of and a return on capital. To the extent that cash distributions consist of
Cash From Sales or Refinancings, substantially all of such cash distributions
should be viewed as a return of capital. Cash distributions do not represent and
are not indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, and the residual value realized for each aircraft
at its disposal date. Future market conditions, technological changes, the
ability of AFG to manage and remarket the aircraft, and many other events and
circumstances, could enhance or detract from individual asset yields and the
collective performance of the Partnership's aircraft portfolio. As a result of
anticipated expenditures related to the remarketing of aircraft, discussed
below, the Partnership did not declare a cash distribution for the three month
period ended March 31, 1996. It is anticipated that the resumption and amount
of future distributions will be dependent upon the timing and extent of cash
payments required to refurbish and/or remarket the Partnership's aircraft.
The future liquidity of the Partnership will be greatly dependent upon
the collection of contractual rents and the outcome of residual activities. The
General Partner anticipates that cash proceeds resulting from these sources will
satisfy the Partnership's future expense obligations. However, the amount of
cash available for distribution in future periods is expected to fluctuate
widely as the General Partner attempts to remarket the Partnership's aircraft
and possibly upgrade certain aircraft to meet the standards of potential
successor lessees. The like-kind exchange, involving the United, Southwest and
Finnair Aircraft, was undertaken, in part, to mitigate the Partnership's
economic risk resulting from the United Aircraft being returned to the
Partnership upon its lease expiration in April 1996 and remaining off-lease for
an extended period. The exchange enabled the Partnership to replace a
specialized aircraft with other aircraft which are used more widely in the
industry and also to significantly extend its rental stream with two
creditworthy lessees.
The return of the Cathay and two Northwest aircraft, upon expiration of
the current lease agreements (June 1996 and October 1996, respectively), will
present additional demands on the Partnership's cash position, depending upon
upgrades or refurbishments which may be necessary to remarket the aircraft.
Accordingly, the General Partner has reserved a portion of the Partnership's
cash for such purposes. Over time, aircraft disposals and other remarketing
events will cause the Partnership's net cash from operating activities to
diminish. The General Partner will continue to suspend quarterly cash
distributions until completion of the Partnership's pending remarketing
requirements.
<TABLE>
<CAPTION>
AIRFUND International Limited Partnership
FORM 10-Q
PART II. OTHER INFORMATION
<S> <C>
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6(a). Exhibits
Response: None
Item 6(b). Reports on Form 8-K
Response: None
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity and
on the date indicated.
AIRFUND International Limited Partnership
By: AFG Aircraft Management Corporation, a
Massachusetts corporation and the
General Partner of the Registrant.
By: ls/ Michael J. Butterfield
Michael J. Butterfield
Treasurer of AFG Aircraft Management
Corporation
(Duly Authorized Officer and
Principal Accounting Officer)
Date: May 15, 1996
By: ls/ Gary Romano
Gary M. Romano
Clerk of AFG Aircraft Management
Corporation
(Duly Authorized Officer and
Principal Financial Officer)
Date: May 15, 1996
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,203,610
<SECURITIES> 0
<RECEIVABLES> 107,657
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,311,267
<PP&E> 47,036,254
<DEPRECIATION> 23,507,288
<TOTAL-ASSETS> 24,840,233
<CURRENT-LIABILITIES> 235,109
<BONDS> 13,226,486
<COMMON> 0
0
0
<OTHER-SE> 11,378,638
<TOTAL-LIABILITY-AND-EQUITY> 24,840,233
<SALES> 980,071
<TOTAL-REVENUES> 1,124,995
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 879,992
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,108
<INCOME-PRETAX> 144,895
<INCOME-TAX> 0
<INCOME-CONTINUING> 144,895
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,895
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
