UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
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 September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
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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 High Ridge Road, Stamford, Connecticut 06927
Telephone - (203) 357-3776
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 12 pages.
<PAGE>
POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
FORM 10-Q - For the Quarterly Period Ended September 30, 1998
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
a) Balance Sheets - September 30, 1998 and
December 31, 1997...........................................3
b) Statements of Operations - Three and Nine Months
Ended September 30, 1998 and 1997...........................4
c) Statements of Changes in Partners' Capital -
Year Ended December 31, 1997 and
Nine Months Ended September 30, 1998........................5
d) Statements of Cash Flows - Nine Months
Ended September 30, 1998 and 1997...........................6
e) Notes to Financial Statements...............................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...........8
Part II. Other Information
Item 1. Legal Proceedings......................................10
Item 6. Exhibits and Reports on Form 8-K.......................10
Signature .......................................................11
2
<PAGE>
Part 1. Financial Information
-----------------------------
Item 1. Financial Statements
POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
BALANCE SHEETS
(Unaudited)
September 30, December 31,
1998 1997
---- ----
ASSETS:
CASH AND CASH EQUIVALENTS $940,434 $978,794
-------- --------
$940,434 $978,794
======== ========
LIABILITIES AND PARTNERS' CAPITAL:
PAYABLE TO AFFILIATES $ 55,865 $ 29,116
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 20,138 21,269
-------- --------
Total Liabilities 76,003 50,385
-------- --------
PARTNERS' CAPITAL:
General Partner 5,016 5,656
Limited Partners, 69,418 units
issued and outstanding 859,415 922,753
-------- --------
Total Partners' Capital 864,431 928,409
-------- --------
$940,434 $978,794
======== ========
The accompanying notes are an integral part of these statements.
3
<PAGE>
POLARIS AIRCRAFT INCOME FUND VI,
A California Limited Partnership
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Rent from operating leases $ -- $ -- $ -- $ 804,405
Interest and other 12,954 34,228 39,017 136,805
Gain on sale of aircraft -- -- -- 642,181
---------- ---------- ---------- ----------
Total Revenues 12,954 34,228 39,017 1,583,391
---------- ---------- ---------- ----------
EXPENSES:
Depreciation and amortization -- -- -- 257,643
Operating 18,353 -- 48,872 --
Administration and other 13,578 22,508 54,123 66,745
---------- ---------- ---------- ----------
Total Expenses 31,931 22,508 102,995 324,388
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (18,977) $ 11,720 $ (63,978) $1,259,003
========== ========== ========== ==========
NET INCOME (LOSS) ALLOCATED TO
THE GENERAL PARTNER $ (190) $ 461,264 $ (640) $ 506,934
========== ========== ========== ==========
NET INCOME (LOSS) ALLOCATED
TO LIMITED PARTNERS $ (18,787) $ (449,544) $ (63,338) $ 752,069
========== ========== ========== ==========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ (0.27) $ (6.48) $ (0.91) $ 10.83
========== ========== ========== ==========
</TABLE>
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, 1997 and
Nine Months Ended September 30, 1998
------------------------------------
General Limited
Partner Partners Total
------- -------- -----
Balance, December 31, 1996 $ 5,656 $ 9,821,575 $ 9,827,231
Net income 506,934 732,926 1,239,860
Cash distributions to partners (506,934) (9,631,748) (10,138,682)
------------ ------------ ------------
Balance, December 31, 1997 5,656 922,753 928,409
Net loss (640) (63,338) (63,978)
------------ ------------ ------------
Balance, September 30, 1998 $ 5,016 $ 859,415 $ 864,431
============ ============ ============
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)
Nine Months Ended September 30,
-------------------------------
1998 1997
---- ----
OPERATING ACTIVITIES:
Net income (loss) $ (63,978) $ 1,259,003
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization -- 257,643
Gain on sale of aircraft -- (642,181)
Changes in operating assets and
liabilities:
Increase in rent and interest
receivable -- (12,143)
Increase in payable to affiliates 26,749 14,457
Decrease in accounts payable
and accrued liabilities (1,131) (40,183)
Decrease in security deposits -- (75,000)
------------ ------------
Net cash provided by (used in)
operating activities (38,360) 761,596
------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of aircraft -- 7,195,959
Payments to Purchaser related to sale of
aircraft -- (369,762)
------------ ------------
Net cash provided by investing
activities -- 6,826,197
------------ ------------
FINANCING ACTIVITIES:
Cash distributions to partners -- (10,138,682)
------------ ------------
Net cash used in financing
activities -- (10,138,682)
------------ ------------
CHANGES IN CASH AND CASH
EQUIVALENTS (38,360) (2,550,889)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 978,794 3,566,009
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 940,434 $ 1,015,120
============ ============
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 (GAAP). These statements should be read in conjunction with the
financial statements and notes thereto for the years ended December 31, 1997,
1996 and 1995, included in the Partnership's 1997 Annual Report to the SEC on
Form 10-K.
2. 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 the
Three Months Ended Payable at
September 30, 1998 September 30, 1998
------------------ ------------------
Out-of-Pocket Administrative and
Operating Expense Reimbursement $22,869 $55,865
3. Partners' Capital
The Partnership Agreement (the Agreement) stipulates different methods by which
revenue, income and loss from operations and gain or loss on the sale of
aircraft are to be allocated to the general partner and the limited partners.
Such allocations are made using income or loss calculated under GAAP for book
purposes, which varies from income or loss calculated for tax purposes.
Cash available for distributions, including the proceeds from the sale of
aircraft, is distributed 10% to the general partner and 90% to the limited
partners.
The different methods of allocating items of income, loss and cash available for
distribution combined with the calculation of items of income and loss for book
and tax purposes result in book basis capital accounts that may vary
significantly from tax basis capital accounts. The ultimate liquidation and
distribution of remaining cash will be based on the tax basis capital accounts
following liquidation, in accordance with the Agreement.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
As discussed below under "Liquidity and Cash Distributions," Polaris Investment
Management Corporation (PIMC or the General Partner), is in the process of
winding up the business of Polaris Aircraft Income Fund VI (the Partnership).
During 1997, the Partnership sold its remaining portfolio of 2 used aircraft to
Triton Aviation Services VI LLC (Triton).
Partnership Operations
The Partnership recorded a net loss of $18,977, or $0.27 per limited partnership
unit, for the three months ended September 30, 1998, compared to net income of
$11,720, or an allocated net loss of $6.48 per unit, for the same period in
1997. The Partnership recorded a net loss of $63,978, or $0.91 per limited
partnership unit, for the nine months ended September 30, 1998, compared to net
income of $1,259,003, or $10.83 per unit, for the same period in 1997.
Current year operating results declined substantially, compared to the same
periods in 1997, due to the sale of the Partnership's remaining aircraft in
1997, as discussed above. The variance in net income per limited partnership
unit will differ from the variance of total net income from period to period due
to the methods by which income or loss from operations and gain or loss on the
sale of aircraft are allocated in accordance with the partnership agreement.
Operating expenses increased during the three and nine months ended September
30, 1998 as compared to the same periods in 1997, due to an increase in legal
expenses related to the sale of the remaining aircraft.
Administrative expenses decreased during the three and nine months ended
September 30, 1998 as compared to the same periods in 1997, primarily due to
decreases in consulting fees and printing and postage costs.
Liquidity and Cash Distributions
Liquidity - As previously discussed, the Partnership sold its remaining aircraft
during 1997. Polaris Investment Management Corporation, the general partner, has
determined that the Partnership maintain cash reserves as a prudent measure to
ensure that the Partnership has available sufficient funds to satisfy
anticipated contingencies and expenses in connection with winding up its
business.
Cash Distributions - The Partnership is now in the process of winding up its
business. With the exception of reserves maintained for anticipated expenses and
costs of winding up, the Partnership distributed all of its available cash
during 1997. Consequently, the timing and amount of future cash distributions,
if any, are not yet known and will depend upon whether the Partnership's
reserves exceed its actual expenses and contingencies in winding up and on the
time required to complete the winding up process.
Impact of the Year 2000 Issue
The inability of business processes to continue to function correctly after the
beginning of the Year 2000 could have serious adverse effects on companies and
entities throughout the world. As previously discussed, the Partnership is
currently in the process of winding up its business and has no assets other than
cash and cash equivalent securities held as reserves against the anticipated
8
<PAGE>
expenses of winding up and dissolution. Accordingly, the Partnership's exposure
to the Year 2000 problem arises not in the context of its own operations, but
rather in the context of the compliance or non-compliance by third-party vendors
to the Partnership with their respective Year 2000 assessment and remediation
obligations.
As discussed in prior filings with the Securities and Exchange Commission, the
General Partner has engaged GE Capital Aviation Services, Inc. ("GECAS") to
provide certain management services to the Partnership. Both the General Partner
and GECAS are wholly-owned subsidiaries (either direct or indirect) of General
Electric Capital Corporation ("GECC"). All of the Partnership's operational
functions are handled either by the General Partner and GECAS or by third
parties (as discussed in the following paragraphs), and the Partnership has no
information systems of its own.
GECC and GECAS have undertaken a global effort to identify and mitigate Year
2000 issues in their information systems, products and services, facilities and
suppliers as well as to assess the extent to which Year 2000 issues will impact
their customers. Each business has a Year 2000 leader who oversees a
multi-functional remediation project team responsible for applying a Six Sigma
quality approach in four phases: (1) define/measure -- identify and inventory
possible sources of Year 2000 issues; (2) analyze -- determine the nature and
extent of Year 2000 issues and develop project plans to address those issues;
(3) improve -- execute project plans and perform a majority of the testing; and
(4) control -- complete testing, continue monitoring readiness and complete
necessary contingency plans. The progress of this program is monitored at each
business, and company-wide reviews with senior management are conducted monthly.
GECC and GECAS management plan to have completed the first three phases of the
program for a substantial majority of mission-critical systems by the end of
1998 and to have nearly all significant information systems, products and
services, facilities and suppliers in the control phase of the program by
mid-1999.
Due to the limited nature of the Partnership's operations, the only third-party
vendors to the Partnership are those providing the Partnership with services
such as accounting, auditing, banking and investor services. GECAS intends to
apply the same standards in determining the Year 2000 capabilities of the
Partnership's third-party vendors as GECAS will apply with respect to its
outside vendors pursuant to its internal Year 2000 program.
The scope of the global Year 2000 effort encompasses many thousands of
applications and computer programs; products and services; facilities and
facilities-related equipment; suppliers; and, customers. The Partnership, like
all business operations, is also dependent on the Year 2000 readiness of
infrastructure suppliers in areas such as utility, communications,
transportation and other services. In this environment, there will likely be
instances of failure that could cause disruption in business processes or that
could affect vendors' ability to provide services without interruption. The
likelihood and effects of failures in infrastructure systems, over which the
Partnership has no control, cannot be estimated. However, aside from the impact
of any such possible failures, the General Partner does not believe that
occurrences of Year 2000 failures will have a material adverse effect on the
financial position, results of operations or liquidity of the Partnership.
To date, the Partnership has not incurred any Year 2000 expenditures nor does it
expect to incur any material costs in the future. However, the activities
involved in the Year 2000 effort necessarily involve estimates and projections
of activities and resources that will be required in the future. These estimates
and projections could change as work progresses.
9
<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) 1997 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 periods ended March 31, 1998
and June 30, 1998, there are a number of pending legal actions or proceedings
involving the Partnership. Except as described below, there have been no
material developments with respect to any such actions or proceedings during the
period covered by this report.
Ron Wallace v. Polaris Investment Management Corporation, et al. - On November
9, 1998, defendants, acting through their counsel, entered into a settlement
agreement with plaintiffs and with the plaintiff in a related action,
Accelerated High Yield Income Fund v. Polaris Investment Management Corporation,
et al. The settlement is subject to final approval by the Court. The settlement
agreement does not provide for any payments to be made to the Partnership. A
settlement notice setting forth the terms of the settlement will be mailed to
the last known address of each unitholder of the Partnership by November 20,
1998. On November 10, 1998, the Court preliminarily approved the settlement. A
hearing to determine whether the settlement should be finally approved by the
Court is scheduled for December 22, 1998.
Other Proceedings - Item 10 in Part III of the Partnership's 1997 Form 10-K and
Item 1 in Part II of the Partnership's Form 10-Q for the periods ended March 31,
1998 and June 30, 1998 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. The
Partnership is not a party to these actions. There have been no material
developments with respect to any of the actions described therein during the
period covered by this report.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
27. Financial Data Schedule (in electronic format only).
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.
10
<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
November 16, 1998 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)
11
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<ARTICLE>5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 940434
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 940434
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 864431
<TOTAL-LIABILITY-AND-EQUITY> 940434
<SALES> 0
<TOTAL-REVENUES> 39017
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 102995
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (63978)
<INCOME-TAX> 0
<INCOME-CONTINUING> (63978)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63978)
<EPS-PRIMARY> (0.91)
<EPS-DILUTED> 0
</TABLE>
