UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 No. 33-31810
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POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
State of Organization: California
IRS Employer Identification No. 94-3102632
201 Mission Street, 27th Floor, San Francisco, California 94105
Telephone - (415) 284-7400
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
This document consists of 13 pages.
<PAGE>
POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
FORM 10-Q - For the Quarterly Period Ended June 30, 1996
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
a) Balance Sheets - June 30, 1996 and
December 31, 1995............................................ 3
b) Statements of Income - Three and Six Months
Ended June 30, 1996 and 1995................................. 4
c) Statements of Changes in Partners' Capital -
Year Ended December 31, 1995 and
Six Months Ended June 30, 1996............................... 5
d) Statements of Cash Flows - Six Months
Ended June 30, 1996 and 1995................................. 6
e) Notes to Financial Statements................................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 10
Part II. Other Information
Item 1. Legal Proceedings........................................ 11
Item 6. Exhibits and Reports on Form 8-K......................... 12
Signature......................................................... 13
2
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1996 1995
----------- -----------
ASSETS:
CASH AND CASH EQUIVALENTS $ 3,494,720 $ 3,297,782
RENT AND INTEREST RECEIVABLE 406,311 467,025
AIRCRAFT, net of accumulated depreciation of
$14,267,494 in 1996 and $13,390,080 in 1995 15,171,706 16,049,120
----------- -----------
$19,072,737 $19,813,927
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
PAYABLE TO AFFILIATES $ 30,368 $ 26,362
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 11,929 34,797
SECURITY DEPOSITS 94,000 94,000
----------- -----------
Total Liabilities 136,297 155,159
----------- -----------
PARTNERS' CAPITAL:
General Partner 5,656 5,656
Limited Partners, 69,418 units
issued and outstanding 18,930,784 19,653,112
----------- -----------
Total Partners' Capital 18,936,440 19,658,768
----------- -----------
$19,072,737 $19,813,927
=========== ===========
The accompanying notes are an integral part of these statements.
3
<PAGE>
POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
REVENUES:
Rent from operating leases $ 434,643 $ 453,046 $ 869,286 $1,248,289
Interest 45,760 56,980 92,363 105,705
Gain on sale of aircraft 91,303 64,497 143,943 111,213
---------- ---------- ---------- ----------
Total Revenues 571,706 574,523 1,105,592 1,465,207
---------- ---------- ---------- ----------
EXPENSES:
Depreciation and amortization 438,707 474,318 877,414 948,637
Administration and other 24,142 29,506 37,111 48,495
---------- ---------- ---------- ----------
Total Expenses 462,849 503,824 914,525 997,132
---------- ---------- ---------- ----------
NET INCOME $ 108,857 $ 70,699 $ 191,067 $ 468,075
========== ========== ========== ==========
NET INCOME ALLOCATED TO
THE GENERAL PARTNER $ 22,835 $ 27,402 $ 45,670 $ 54,804
========== ========== ========== ==========
NET INCOME ALLOCATED
TO LIMITED PARTNERS $ 86,022 $ 43,297 $ 145,397 $ 413,271
========== ========== ========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 1.24 $ 0.62 $ 2.10 $ 5.95
========== ========== ========== ==========
The accompanying notes are an integral part of these statements.
4
<PAGE>
POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
Year Ended December 31, 1995 and
Six Months Ended June 30, 1996
------------------------------
General Limited
Partner Partners Total
-------- ----------- -----------
Balance, December 31, 1994 $ 5,656 $23,280,997 $23,286,653
Net income (loss) 105,040 (1,632,117) (1,527,077)
Cash distributions to partners (105,040) (1,995,768) (2,100,808)
-------- ----------- -----------
Balance, December 31, 1995 5,656 19,653,112 19,658,768
Net income 45,670 145,397 191,067
Cash distributions to partners (45,670) (867,725) (913,395)
-------- ----------- -----------
Balance, June 30, 1996 $ 5,656 $18,930,784 $18,936,440
======== =========== ===========
The accompanying notes are an integral part of these statements.
5
<PAGE>
POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------
1996 1995
----------- -----------
OPERATING ACTIVITIES:
Net income $ 191,067 $ 468,075
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 877,414 948,637
Gain on sale of aircraft (143,943) (111,213)
Changes in operating assets and liabilities:
Decrease in rent and interest receivable 60,714 231,750
Increase (decrease) in payable to affiliates 4,006 (17,684)
Increase (decrease) in accounts payable
and accrued liabilities (22,868) 3,257
----------- -----------
Net cash provided by operating activities 966,390 1,522,822
----------- -----------
INVESTING ACTIVITIES:
Principal payments on finance sale of aircraft 143,943 111,213
----------- -----------
Net cash provided by investing activities 143,943 111,213
----------- -----------
FINANCING ACTIVITIES:
Cash distributions to partners (913,395) (1,096,074)
----------- -----------
Net cash used in financing activities (913,395) (1,096,074)
----------- -----------
CHANGES IN CASH AND CASH
EQUIVALENTS 196,938 537,961
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,297,782 2,695,546
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 3,494,720 $ 3,233,507
=========== ===========
The accompanying notes are an integral part of these statements.
6
<PAGE>
POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Principles and Policies
In the opinion of management, the financial statements presented herein include
all adjustments, consisting only of normal recurring items, necessary to
summarize fairly Polaris Aircraft Income Fund VI's (the Partnership's) financial
position and results of operations. The financial statements have been prepared
in accordance with the instructions of the Quarterly Report to the Securities
and Exchange Commission (SEC) Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto for the years ended December 31, 1995, 1994 and
1993, included in the Partnership's 1995 Annual Report to the SEC on Form 10-K
(Form 10-K).
Aircraft and Depreciation - The aircraft are recorded at cost, which includes
acquisition costs. Depreciation to an estimated residual value is computed using
the straight-line method over the estimated economic life of the aircraft which
was originally estimated to be 30 years from the date of manufacture.
Depreciation in the year of acquisition was calculated based upon the number of
days that the aircraft were in service.
The Partnership periodically reviews the estimated realizability of the residual
values at the projected end of each aircraft's economic life based on estimated
residual values obtained from independent parties which provide current and
future estimated aircraft values by aircraft type. For any downward adjustment
in estimated residual value or decrease in the projected remaining economic
life, the depreciation expense over the projected remaining economic life of the
aircraft is increased.
If the projected net cash flow for each aircraft (projected rental revenue, net
of management fees, less projected maintenance costs, if any, plus the estimated
residual value) is less than the carrying value of the aircraft, an impairment
loss is recognized. Pursuant to Statement of Financial Accounting Standards
(SFAS) No. 121, as discussed below, measurement of an impairment loss will be
based on the "fair value" of the asset as defined in the statement.
Capitalized Costs - Aircraft modification and maintenance costs which are
determined to increase the value or extend the useful life of the aircraft are
capitalized and amortized using the straight-line method over the estimated
useful life of the improvement. These costs are also subject to periodic
evaluation as discussed above.
Financial Accounting Pronouncements - SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments," requires the Partnership to disclose the fair
value of financial instruments. Cash and cash equivalents is stated at cost,
which approximates fair value. As discussed in Note 3, the carrying value of the
Partnership's note receivable from Empresa de Transporte Aereo del Peru S.A.
(Aeroperu) at June 30, 1996 and December 31, 1995 is zero due to a recorded
allowance for credit losses equal to the balance of the note. Aeroperu paid the
note in full in July 1996 as discussed in Note 5.
7
<PAGE>
The Partnership adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of January 1,
1996. This statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Partnership estimates that this pronouncement will
not have a material impact on the Partnership's financial position or results of
operation unless events or circumstances change that would cause the projected
net cash flows to be adjusted. No impairment loss was recognized by the
Partnership during the first two quarters of 1996.
2. Lease to American Trans Air, Inc. (ATA)
As discussed in the Form 10-K, under the ATA lease, the Partnership may be
required to finance an aircraft hushkit for use on the aircraft at an estimated
cost of approximately $2.6 million, which would be partially recovered with
interest through payments from ATA over an extended lease term.
3. Sale to Aeroperu
In August 1993, the Partnership negotiated a sale to Aeroperu for the Boeing
727-100 aircraft that was transferred to the Partnership under the ATA lease as
discussed in the Form 10-K. The Partnership agreed to accept payment of the
sales price of approximately $578,000 in 36 monthly installments of $19,000,
with interest at a rate of 12% per annum. The Partnership recorded a note
receivable and an allowance for credit losses equal to the discounted sale
price. Gain on sale of aircraft is recognized as payments are received. During
the three and six months ended June 30, 1996, the Partnership received principal
and interest payments due from Aeroperu totaling $95,000 and $152,000,
respectively, of which $91,302 and $143,943 was recorded as gain on sale in the
statement of operations for the three and six months ended June 30, 1996,
respectively. The note receivable and corresponding allowance for credit losses
are reduced by the principal portion of payments received. The balances of the
note receivable and corresponding allowance for credit losses were $18,812 and
$162,755 as of June 30, 1996 and December 31, 1995, respectively. The remaining
balance of the security deposit posted by Aeroperu was applied to the last
installment due from Aeroperu, as discussed in Note 5.
4. Related Parties
Under the Limited Partnership Agreement, the Partnership paid or agreed to pay
the following amounts for the current quarter to the general partner, Polaris
Investment Management Corporation, in connection with services rendered or
payments made on behalf of the Partnership:
Payments for
Three Months Ended Payable at
June 30, 1996 June 30, 1996
------------- -------------
Out-of-Pocket Administrative and
Operating Expense Reimbursement $ 20,632 $ 30,368
Management fees payable to the general partner are subordinated each year to
receipt by unit holders of distributions equaling a 10% per annum,
non-compounded return on adjusted capital contributions, as defined in the
Partnership Agreement. Based on the subordination provisions, no management fee
expense was recognized or paid during the quarter ended June 30, 1996.
8
<PAGE>
5. Subsequent Event
In July 1996, the Partnership received the final payment due from Aeroperu for
the sale of one Boeing 727-100 aircraft as discussed in Note 3.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Polaris Aircraft Income Fund VI (the Partnership) owns one Boeing 737-200
Advanced aircraft leased to British Airways Plc (British Airways) and one Boeing
727-200 Advanced aircraft leased to American Trans Air, Inc. (ATA). The
Partnership sold one Boeing 727-100 aircraft that ATA transferred to the
Partnership as part of the ATA lease transaction in April 1993, to Empresa de
Transporte Aereo del Peru S.A. (Aeroperu). Aeroperu completed its payment
obligations to the Partnership in July 1996.
Partnership Operations
The Partnership recorded net income of $108,857, or $1.24 per limited
partnership unit, for the three months ended June 30, 1996, compared to net
income of $70,699, or $0.62 per unit, for the same period in 1995. The
Partnership recorded net income of $191,067, or $2.10 per limited partnership
unit, for the six months ended June 30, 1996, compared to net income of
$468,075, or $5.95 per unit, for the same period in 1995. Year to date operating
results reflect substantially lower rental revenues as compared to the same
period in 1995.
As discussed in the Partnership's 1995 Annual Report to the Securities and
Exchange Commission on Form 10-K (Form 10-K), the Partnership negotiated a lease
extension with British Airways for three years from April 1995 until March 1998
at the then current fair market rental rate, which was approximately 40% of the
prior rate. The Partnership recognized a reduction in rental revenue beginning
in the second quarter of 1995 which negatively impacted the Partnership's
operating results.
Liquidity and Cash Distributions
Liquidity -The Partnership continues to receive all lease payments on a current
basis. The ATA lease specifies that the Partnership may be required to finance
an aircraft hushkit at an estimated cost of approximately $2.6 million, which
would be partially recovered with interest through payments from ATA over an
extended lease term. The Partnership's cash reserves are being retained to
finance a portion of the cost that may be incurred under the lease with ATA and
to cover other potential cash requirements.
Cash Distributions - Cash distributions to limited partners during the three
months ended June 30, 1996 and 1995 were $433,863, or $6.25 per limited
partnership unit and $520,635 or $7.50 per unit, respectively. Cash
distributions to limited partners during the six months ended June 30, 1996 and
1995 were $867,725, or $12.50 per limited partnership unit and $1,041,270 or
$15.00 per unit, respectively. The timing and amount of future cash
distributions will depend upon the Partnership's future cash requirements and
the receipt of rental payments from British Airways and ATA.
10
<PAGE>
Part II. Other Information
---------------------------
Item 1. Legal Proceedings
As discussed in Item 3 of Part I of Polaris Aircraft Income Fund VI's (the
Partnership) 1995 Annual Report to the Securities and Exchange Commission (SEC)
on Form 10-K (Form 10-K) and in Item 1 of Part II of the Partnership's Quarterly
Report to the SEC on Form 10-Q (Form 10-Q) for the period ended March 31, 1996,
there are a number of pending legal actions or proceedings involving the
Partnership. There have been no material developments with respect to any such
actions or proceedings during the period covered by this report.
Other Proceedings - Item 10 in Part III of the Partnership's 1995 Form 10-K and
Item 1 in Part II of the Partnership's Form 10-Q for the period ended March 31,
1996 discuss certain actions which have been filed against Polaris Investment
Management Corporation and others in connection with the sale of interests in
the Partnership and the management of the Partnership. With the exception of
Novak, et al v. Polaris Holding Company, et al, (which has been dismissed, as
discussed in Item 10 of the Partnership's 1995 Form 10-K) where the Partnership
was named as a defendant for procedural purposes, the Partnership is not a party
to these actions. Except as discussed below, there have been no material
developments with respect to any of the actions described therein during the
period covered by this report.
Bishop v. Kidder Peabody & Co., Incorporated et al. - On June 18, 1996,
defendants filed a motion to transfer venue from Sacramento to San Francisco
County. The Court subsequently denied the motion.
Weisl et al. v. Polaris Holding Company et al. - On April 25, 1996, the
Appellate Division for the First Department affirmed the trial court's order
which had dismissed most of plaintiffs' claims.
In re Prudential Securities Inc. Limited Partnerships Litigation - On June 5,
1996, the Court certified a class with respect to claims against Polaris Holding
Company, one of its former officers, Polaris Aircraft Leasing Corporation,
Polaris Investment Management Corporation, and Polaris Securities Corporation.
The class is comprised of all investors who purchased securities in any of
Polaris Aircraft Income Funds I through VI during the period from January 1985
until January 29, 1991, regardless of which brokerage firm the investor
purchased from. Excepted from the class are those investors who settled in the
SEC/Prudential settlement or otherwise opted for arbitration pursuant to the
settlement and any investor who has previously released the Polaris defendants
through any other settlement. On June 10, 1996, the Court issued an opinion
denying summary judgment to Polaris on plaintiffs' Section 1964(c) and (d) RICO
claims and state causes of action, and granting summary judgment to Polaris on
plaintiffs' 1964(a) RICO claims and the New Jersey State RICO claims. On August
5, 1996, the Court signed an order providing for notice to be given to the class
members. The case has been set for trial on November 11, 1996.
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
None
b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter for
which this report is filed.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of section 13 or 15(d) 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.
POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
(Registrant)
By: Polaris Investment
Management Corporation,
General Partner
August 8, 1996 By: /S/Marc A. Meiches
- -------------------------------- --------------------------------
Marc A. Meiches
Chief Financial Officer
(principal financial officer and
principal accounting officer of
Polaris Investment Management
Corporation, General Partner of
the Registrant)
13
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