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 September 30, 1995
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. 33-15551
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POLARIS AIRCRAFT INCOME FUND IV,
A California Limited Partnership
State of Organization: California
IRS Employer Identification No. 94-3039169
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 17 pages.
POLARIS AIRCRAFT INCOME FUND IV,
A California Limited Partnership
FORM 10-Q - For the Quarterly Period Ended September 30, 1995
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
a) Balance Sheets - September 30, 1995 and
December 31, 1994..................................................3
b) Statements of Operations - Three Months and
Nine Months Ended September 30, 1995 and 1994......................4
c) Statements of Changes in Partners' Capital
(Deficit) - Year Ended December 31, 1994
and Nine Months Ended September 30, 1995...........................5
d) Statements of Cash Flows - Nine Months
Ended September 30, 1995 and 1994..................................6
e) Notes to Financial Statements......................................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................11
Part II. Other Information
Item 1. Legal Proceedings.............................................14
Item 5. Other Information.............................................16
Item 6. Exhibits and Reports on Form 8-K..............................16
Signature..................................................................17
2
Part I. Financial Information
Item 1. Financial Statements
POLARIS AIRCRAFT INCOME FUND IV,
A California Limited Partnership
BALANCE SHEETS
(Unaudited)
September 30, December 31,
1995 1994
---- ----
ASSETS:
CASH AND CASH EQUIVALENTS $ 22,089,191 $ 18,152,875
RENT AND OTHER RECEIVABLES 2,229,265 1,941,568
NOTES RECEIVABLE, net of allowance
for credit losses of $1,933,922
in 1995 and $3,263,108 in 1994 3,734,283 5,862,206
AIRCRAFT at cost, net of accumulated
depreciation of $56,496,240 in 1995
and $49,947,066 in 1994 62,181,204 68,730,378
OTHER ASSETS, net of accumulated
amortization of $2,138,748 in 1995
and $2,105,937 in 1994 71,502 104,313
------------ ------------
$ 90,305,445 $ 94,791,340
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT):
PAYABLE TO AFFILIATES $ 177,400 $ 174,860
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 47,219 32,995
LESSEE SECURITY DEPOSITS 1,111,189 1,072,067
MAINTENANCE RESERVES 4,673,492 2,146,917
DEFERRED RENTAL INCOME -- 110,000
------------ ------------
Total Liabilities 6,009,300 3,536,839
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner (3,612,943) (3,543,265)
Limited Partners, 499,964 units
issued and outstanding 87,909,088 94,797,766
------------ ------------
Total Partners' Capital 84,296,145 91,254,501
------------ ------------
$ 90,305,445 $ 94,791,340
============ ============
The accompanying notes are an integral part of these statements.
3
POLARIS AIRCRAFT INCOME FUND IV,
A California Limited Partnership
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
REVENUES:
Rent from operating leases $ 2,963,924 $ 2,919,948 $ 9,260,336 $ 9,079,340
Interest 457,573 482,075 1,500,640 1,311,144
Net gain (loss) on sale of aircraft -- 245,937 -- (6,036,625)
------------ ------------ ------------ ------------
Total Revenues 3,421,497 3,647,960 10,760,976 4,353,859
------------ ------------ ------------ ------------
EXPENSES:
Depreciation and amortization 1,841,748 2,097,306 6,581,985 7,432,826
Management fees to general partner 148,196 145,997 463,017 453,967
Operating 4,640 1,440,085 51,574 3,170,992
Administration and other 70,319 57,605 206,839 196,858
------------ ------------ ------------ ------------
Total Expenses 2,064,903 3,740,993 7,303,415 11,254,643
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 1,356,594 $ (93,033) $ 3,457,561 $ (6,900,784)
============ ============ ============ ============
NET INCOME ALLOCATED
TO THE GENERAL PARTNER $ 326,012 $ 311,516 $ 971,914 $ 993,309
============ ============ ============ ============
NET INCOME (LOSS) ALLOCATED
TO LIMITED PARTNERS $ 1,030,582 $ (404,549) $ 2,485,647 $ (7,894,093)
============ ============ ============ ============
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 2.06 $ (0.81) $ 4.97 $ (15.79)
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
4
POLARIS AIRCRAFT INCOME FUND IV,
A California Limited Partnership
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Year Ended December 31, 1994 and
Nine Months Ended September 30, 1995
------------------------------------
General Limited
Partner Partners Total
------- -------- -----
Balance, December 31, 1993 $ (3,309,775) $ 117,899,531 $ 114,589,756
Net income (loss) 1,294,178 (9,352,755) (8,058,577)
Cash distributions to partners (1,527,668) (13,749,010) (15,276,678)
------------- ------------- -------------
Balance, December 31, 1994 (3,543,265) 94,797,766 91,254,501
Net income 971,914 2,485,647 3,457,561
Cash distributions to partners (1,041,592) (9,374,325) (10,415,917)
------------- ------------- -------------
Balance, September 30, 1995 $ (3,612,943) $ 87,909,088 $ 84,296,145
============= ============= =============
The accompanying notes are an integral part of these statements.
5
POLARIS AIRCRAFT INCOME FUND IV,
A California Limited Partnership
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
-------------------------------
1995 1994
---- ----
OPERATING ACTIVITIES:
Net income (loss) $ 3,457,561 $ (6,900,784)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 6,581,985 7,432,826
Net loss on sale of aircraft -- 6,036,625
Changes in operating assets and liabilities:
Increase in rent and other receivables (287,697) (253,698)
Increase in other assets -- (104,884)
Increase in payable to affiliates 2,540 573,597
Increase in accounts payable
and accrued liabilities 14,224 987,527
Increase in lessee security deposits 39,122 571,335
Increase in maintenance reserves 2,526,575 1,163,134
Decrease in deferred rental income (110,000) --
------------ ------------
Net cash provided by operating activities 12,224,310 9,505,678
------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of aircraft -- 670,937
Increase in notes receivable -- (979,323)
Principal payments on notes receivable 2,127,923 1,133,971
------------ ------------
Net cash provided by investing activities 2,127,923 825,585
------------ ------------
FINANCING ACTIVITIES:
Cash distributions to partners (10,415,917) (11,804,706)
------------ ------------
Net cash used in financing activities (10,415,917) (11,804,706)
------------ ------------
CHANGES IN CASH AND CASH
EQUIVALENTS AND SHORT-TERM
INVESTMENTS 3,936,316 (1,473,443)
CASH AND CASH EQUIVALENTS AND
SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 18,152,875 20,474,194
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 22,089,191 $ 19,000,751
============ ============
The accompanying notes are an integral part of these statements.
6
POLARIS AIRCRAFT INCOME FUND IV,
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 IV'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, 1994, 1993, and
1992 included in the Partnership's 1994 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 end of each aircraft's economic life based on estimated residual
values obtained from an independent party which provides current and future
estimated aircraft values by aircraft type. For any downward adjustment in
estimated residual, or decrease in the projected remaining economic life, the
depreciation expense over the projected remaining life of the aircraft is
increased. If the projected net income generated from the lease (projected
rental revenue, net of management fees, less adjusted depreciation and an
allocation of estimated administrative expense) results in a net loss, that loss
will be recognized currently. Off-lease aircraft are carried at the lower of
depreciated cost or estimated net realizable value. A further adjustment is made
for those aircraft, if any, that require substantial maintenance work.
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 - The Partnership adopted Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for
Impairment of a Loan," and the related SFAS No. 118 as of January 1, 1995. SFAS
No. 114 and SFAS No. 118 require that certain impaired loans be measured based
on the present value of expected cash flows discounted at the loan's effective
interest rate; or, alternatively, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. The
Partnership had previously measured the allowance for credit losses using
methods similar to that prescribed in SFAS No. 114. As a result, no additional
provision was required by the adoption of this pronouncement. The Partnership
has recorded an allowance for credit losses equal to the full amount of the
following impaired loan as a result of issues regarding its collection due to
restrictions regarding the cash flow by the Bankruptcy Court. The Partnership
recognizes revenue on this loan only as payments are received.
7
As discussed in Note 3, the modified leases with Continental Airlines, Inc.
(Continental) include an extended deferral of the dates when certain rental
payments are due the Partnership. The Partnership recorded a note receivable and
an allowance for credit losses equal to the total of the deferred rents, the net
of which is reflected in the accompanying balance sheets. The note receivable
and corresponding allowance for credit losses are reduced by the principal
portion of payments received. In addition, the Partnership recognizes rental
revenue and interest revenue in the period the deferred rental payments are
received. The deferred rents and corresponding allowance for credit losses were
$1,933,922 and $3,263,108 as of September 30, 1995 and December 31, 1994,
respectively.
2. Lease to American Trans Air, Inc. (ATA)
As discussed in the Form 10-K, the Partnership negotiated a seven-year lease
with ATA for two Boeing 727-200 Advanced aircraft formerly on lease to USAir,
Inc. The leases began in February and March 1993. ATA was not required to begin
making cash rental payments until January and February 1994, although rental
revenue is to be recognized over the entire lease term. The leases are renewable
for up to three one-year periods. ATA transferred to the Partnership two
unencumbered Boeing 727-100 aircraft as part of the lease transaction. The
Partnership sold both of these aircraft as discussed in the Form 10-K.
Under the ATA lease, the Partnership may be required to finance aircraft
hushkits for use on the aircraft at an estimated aggregate cost of approximately
$5.0 million, which will be partially recovered with interest through payments
from ATA over an extended lease term. The Partnership loaned $1,164,800 to ATA
in 1993 to finance the purchase by ATA of two spare engines. This loan is
reflected in notes receivable in the accompanying balance sheets. The
Partnership has received all scheduled principal and interest payments due under
the notes. The balances of the notes at September 30, 1995 and December 31, 1994
were $838,696 and $949,489, respectively.
3. Continental Lease Modification
As discussed in the Form 10-K, the Continental leases for the Partnership's five
McDonnell Douglas DC-9-30 aircraft and five Boeing 727-200 aircraft were
modified. The modified agreement specifies (i) extension of the leases for the
five Boeing 727-200s to April 1994 and for the five McDonnell Douglas DC-9-30
aircraft to June 1996; (ii) renegotiated rental rates averaging approximately
67% of the original lease rates; (iii) payment of ongoing rentals at the reduced
rates beginning in October 1991; (iv) payment of deferred rentals with interest
beginning in July 1992; and (v) payment by the Partnership of certain aircraft
modification and refurbishment costs, not to exceed approximately $4.9 million,
a portion of which will be recovered with interest through payments from
Continental over the extended lease term. The Partnership's share of such costs
may be capitalized and depreciated over the remaining lease terms. The
Partnership's balance sheets reflect the net reimbursable costs incurred of
$407,396 and $819,259 as of September 30, 1995 and December 31, 1994,
respectively, as notes receivable.
On January 26, 1995, Continental announced a number of actual and proposed
changes in its operations and financial situation. In connection with those
changes, Continental indicated that it was discussing with certain of its major
lenders modifications to existing debt amortization schedules to enhance the
airline's capital structure. Continental stated that during those discussions it
would not be making payments to such lenders and lessors otherwise required
under the current contracts. The Partnership is not engaged in any such
8
discussions with Continental at the present time, and Continental has made all
payments due to the Partnership on a current basis to date.
In early April 1995, Continental announced that it had successfully concluded
discussions with The Boeing Company, as well as its primary lender and the City
and County of Denver, that would provide Continental with approximately $370
million in cash deferrals and savings over the next two years, and that it had
reached a preliminary agreement with certain of its lessors for additional cash
deferrals.
4. Sale of Aircraft to Continental
The leases of five Boeing 727-200 aircraft to Continental expired on April 30,
1994 as discussed in Note 3. In May 1994, the Partnership sold these aircraft to
Continental for an aggregate sales price of $5,032,865. The Partnership agreed
to accept payment of the sales price in 29 monthly installments of $192,500,
with interest at a rate of 9.5% per annum. The Partnership recorded a note
receivable for the sales price and recognized a loss on sale of $6,707,562 in
the second quarter of 1994. The Partnership has received all scheduled payments
due under the note. The note receivable balance at September 30, 1995 and
December 31, 1994 was $2,193,793 and $3,706,458, respectively.
5. Viscount Air Services, Inc. (Viscount) Restructuring
As discussed in the Form 10-K, in July 1994 the Partnership entered into an
agreement with Viscount to defer certain rents due the Partnership which
aggregate $600,000; to extend a line of credit to Viscount for a total of
$387,000 to be used primarily for maintenance expenses relating to the
Partnership's aircraft; and which gives the Partnership the option to acquire
approximately 1.86% of the issued and outstanding shares of Viscount stock as of
July 26, 1994 for an option price of approximately $279,000.
The deferred rents are being repaid by Viscount with interest at a rate of 6%
per annum over the remaining terms of the leases. The deferred rents were
recognized as revenue in the period earned. Payments on the deferred rents are
current, and at present, the Partnership considers these deferred rents to be
collectible. The unpaid balances of the deferred rents, which are reflected as
rents receivable in the September 30, 1995 and December 31, 1994 balance sheets,
were $526,005 and $450,000, respectively. The line of credit, which was advanced
to Viscount in full during 1994, is being repaid by Viscount over a 30-month
period, beginning in January 1995, with interest at a rate of 11.53% per annum.
The line of credit balances, which are reflected as notes receivable in the
September 30, 1995 and December 31, 1994 balance sheets, were $294,398 and
$387,000, respectively.
Viscount is presently past due on certain rent payments due the Partnership in
April and May 1995. The past due payments aggregate $200,000 and are included in
rents receivable in the September 30, 1995 balance sheet. The Partnership
considers these past due amounts to be collectible. At the present time, the
Partnership is continuing its discussions with Viscount to restructure certain
of Viscount's financial obligations to the Partnership, which would require
Viscount to remain current on its existing monthly obligations and permit a
deferral of the past- due portion of the April and May 1995 obligations. In the
interim, beginning in June 1995, Viscount has undertaken to pay in full, by the
end of each month, the current month's obligations by making partial periodic
payments during that month. Viscount is presently current on these periodic
payments. Any failure by Viscount to perform its financial obligations with the
Partnership will have an adverse effect on the Partnership's financial position.
9
6. 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
September 30, 1995 September 30, 1995
------------------ ------------------
Aircraft Management Fees $156,498 $111,050
Out-of-Pocket Administrative Expense
Reimbursement 34,192 66,350
Out-of-Pocket Operating and
Remarketing Expense Reimbursement 50,176 --
-------- --------
$240,866 $177,400
======== ========
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Polaris Aircraft Income Fund IV (the Partnership) owns a portfolio of 13 used
commercial jet aircraft out of its original portfolio of 33 aircraft. The
portfolio includes five DC-9-30 aircraft leased to Continental Airlines, Inc.
(Continental); two Boeing 727-200 Advanced aircraft leased to American Trans
Air, Inc. (ATA); two Boeing 737-200 Advanced aircraft leased to GB Airways
Limited (GB Airways); two Boeing 737-200 Advanced aircraft leased to TBG Airways
Limited (TBG Airways); and two Boeing 737-200 aircraft leased to Viscount Air
Services, Inc. (Viscount). Out of an original portfolio of 33 aircraft, one
Boeing 727-100 Freighter, formerly leased to Emery Aircraft Leasing Corporation
(Emery), was declared a casualty loss due to an accident in 1991, fourteen
Boeing 727-100 Freighters were sold to Emery in 1993, and five Boeing 727-200
aircraft were sold to Continental in May 1994. As discussed in the Partnership's
1994 Annual Report to the Securities and Exchange Commission on Form 10-K (Form
10-K), in 1993, ATA transferred to the Partnership two Boeing 727-100 aircraft
as part of the ATA lease transaction. One of these Boeing 727-100 aircraft was
sold in February 1994 and the second Boeing 727-100 aircraft was sold in August
1994.
Partnership Operations
The Partnership recorded net income of $1,356,594, or $2.06 per limited
partnership unit, for the three months ended September 30, 1995, compared to a
net loss of $93,033, or $0.81 per unit, for the same period in 1994. The
Partnership recorded net income of $3,457,561, or $4.97 per limited partnership
unit, for the nine months ended September 30, 1995, compared to a net loss of
$6,900,784, or $15.79 per unit, for the same period in 1994. The 1994 net losses
were primarily attributable to the loss of $6,707,562 recorded in the second
quarter of 1994 on the sale of five Boeing 727-200 aircraft to Continental, as
discussed in the 1994 Form 10-K, combined with increased operating expenses. The
improved operating results in the three and nine months ended September 30, 1995
as compared to the same periods of 1994 is due primarily to a significant
decrease in operating and depreciation expenses in 1995.
Partially offsetting the loss on sale of $6,707,562 in the first quarter of 1994
was a gain of $425,000 recognized on the sale of one Boeing 727-100 aircraft to
Total Aerospace Services, Inc. in the same period and a gain of $245,937
recognized on the sale of one Boeing 727-100 aircraft to Sunrise Partners in the
third quarter of 1994. No aircraft sales were concluded in the first three
quarters of 1995.
During the first three quarters of 1994, the Partnership incurred maintenance
and remarketing costs necessary to remarket the two Boeing 737-200 aircraft and
four Boeing 737-200 Advanced aircraft, formerly on lease to Britannia Airways
Limited, to GB Airways, TBG Airways and Viscount. Maintenance expenses
recognized during the three and nine months ended September 30, 1995 were
minimal in comparison.
Further impacting the improved operating results in the nine months ended
September 30, 1995, as compared to the same period of 1994, was a decrease in
depreciation expense in 1995. No depreciation expense was recorded for 1995 for
the five Boeing 727-200 aircraft sold to Continental in May 1994.
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
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
11
recoverable. This Statement will be adopted by the Partnership as of January 1,
1996 and will be applied prospectively. Management is gathering information and
evaluating the requirements of the Statement, but has not determined the impact
of its application on the Partnership's financial position or results of
operations.
Liquidity and Cash Distributions
Liquidity - As discussed in the Form 10-K and in Note 5 to the financial
statements, the Partnership entered into an agreement with Viscount in July 1994
under which it agreed to defer certain rents due the Partnership on two
aircraft. These deferred rents, which aggregate $600,000, are being repaid by
Viscount with interest over the remaining lease terms. The deferred rents were
recognized as revenue in the period earned. Payments on the deferred rents are
current, and at present, the Partnership considers these deferred rents to be
collectible. The agreement with Viscount also stipulates that the Partnership
advance Viscount up to $387,000, primarily for maintenance expenses incurred by
Viscount relating to the Partnership's aircraft. In accordance with the
agreement, the Partnership advanced Viscount $387,000 during 1994 which is being
repaid by Viscount with interest over a 30-month period beginning in January
1995.
Viscount is presently past due on certain rent payments due the Partnership in
April and May 1995. The past due payments aggregate $200,000 and are included in
rents receivable in the September 30, 1995 balance sheet. The Partnership
considers these past due amounts to be collectible. At the present time, the
Partnership is continuing its discussions with Viscount to restructure certain
of Viscount's financial obligations to the Partnership, which would require
Viscount to remain current on its existing monthly obligations and permit a
deferral of the past- due portion of the April and May 1995 obligations. In the
interim, beginning in June 1995, Viscount has undertaken to pay in full, by the
end of each month, the current month's obligations by making partial periodic
payments during that month. Viscount is presently current on these periodic
payments. Any failure by Viscount to perform its financial obligations with the
Partnership will have an adverse effect on the Partnership's financial position.
As described in Item 7 of the Form 10-K, the Continental leases provide for
payment by the Partnership of the costs of certain maintenance work,
Airworthiness Directive compliance, aircraft modification and refurbishment
costs, a portion of which will be recovered with interest through payments from
Continental over the lease terms. The balance of the costs that the Partnership
is currently obligated to pay or finance is approximately $2.3 million.
As described in the Form 10-K, the ATA lease specifies that the Partnership may
finance certain aircraft hushkits at an estimated aggregate cost of
approximately $5.0 million, which will be partially recovered with interest
through payments from ATA over an extended lease term.
The Partnership receives maintenance reserve payments from certain of its
lessees that may be reimbursed to the lessee or applied against certain costs
incurred by the Partnership for maintenance work performed on the Partnership's
aircraft, as specified in the leases. Maintenance reserve balances, if any,
remaining at the termination of the lease may be used by the Partnership to
offset future maintenance expenses or recognized as revenue. The net maintenance
reserve balances aggregate $4,673,492 as of September 30, 1995.
The Partnership's cash reserves are being retained to finance a portion of the
costs that may be incurred under the leases with Continental and ATA and to
cover other potential cash requirements.
12
Cash Distributions - Cash distributions to limited partners during the three
months ended September 30, 1995 and 1994 were $3,124,775, or $6.25 per limited
partnership unit for both periods. Cash distributions to limited partners during
the nine months ended September 30, 1995 and 1994 were $9,374,325 or $18.75 per
limited partnership unit and $10,624,235 or $21.25 per unit, respectively. The
timing and amount of future cash distributions will depend upon the
Partnership's future cash requirements, the receipt of payments from Continental
for the sale of the five Boeing 727-200 aircraft, the receipt of modification
financing payments from Continental, the receipt of rental payments from
Continental, ATA, GB Airways, TBG Airways and Viscount, and the receipt of
deferred rental payments and financing payments from Viscount.
13
Part II. Other Information
Item 1. Legal Proceedings
As discussed in Item 3 of Part I of Polaris Aircraft Income Fund IV's (the
Partnership) 1994 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
Reports to the SEC on Form 10-Q for the period ended March 31, 1995 and the
period ended June 30, 1995, respectively, 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.
Reuben Riskind, et al. v. Prudential Securities, Inc., et al. - Prudential
Securities, Inc. has reached a settlement with the plaintiffs. The trial of the
claims of one plaintiff, Robert W. Wilson, against Polaris Aircraft Income Funds
I - VI, their general partner Polaris Investment Management Corporation and
various affiliates of Polaris Investment Management Corporation, including
General Electric Capital Corporation, was commenced on July 10, 1995. On July
26, 1995, the jury returned a verdict in favor of the defendants on all counts.
Subsequent to this verdict, all of the remaining defendants (with the exception
of Prudential Securities, Inc. which had previously settled) entered into a
settlement with the plaintiffs.
Adams, et al. v. Prudential Securities, Inc., et al. - The Judicial Panel has
transferred the action to the Multi-District Litigation filed in the United
States District Court for the Southern District of New York, which is described
in Item 10 of Part III of the Partnership's 1994 Form 10-K.
Scott v. Prudential Securities, Inc. et al. - On or around August 15, 1995, a
complaint entitled Mary C. Scott v. Prudential Securities Inc. et al. was filed
in the Court of Common Pleas, County of Summit, Ohio. The complaint names as
defendants Prudential Securities Inc., the Partnership, Polaris Aircraft Income
Fund II, Polaris Aircraft Income Fund III, Polaris Aircraft Income Fund VI,
P-Bache/A.G. Spanos Genesis Income Partners LP 1, Prudential-Bache Properties,
Inc., A.G. Spanos Residential Partners - 86, Polaris Securities Corporation and
Robert Bryan Fitzpatrick. Plaintiff alleges claims of fraud and violation of
Ohio securities law arising out of the public offerings of the Partnership,
Polaris Aircraft Income Fund II, Polaris Aircraft Income Fund III, Polaris
Aircraft Income Fund VI, and P-Bache/A.G. Spanos Genesis Income Partners LP 1.
Plaintiff seeks compensatory damages, general, consequential and incidental
damages, punitive damages, rescission, costs, attorneys' fees and other and
further relief as the Court deems just and proper. On September 15, 1995,
defendants removed this action to the United States District Court, Eastern
District of Ohio. On September 18, 1995, defendants sought the transfer of this
action to the Multi-District Litigation and sought a stay of all proceedings by
the district court, which stay was granted on September 25, 1995. The Judicial
Panel conditionally transferred this action to the Multi-District Litigation on
October 13, 1995.
Other Proceedings - Item 10 in Part III of the Partnership's 1994 Form 10-K
discusses 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, where the Partnership is named
as a defendant, the Partnership is not a party to these actions. In Novak, a
derivative action, the Partnership is named as a defendant for procedural
purposes, but the plaintiffs in such lawsuit do not seek an award from the
Partnership. Except as described below, there have been no material developments
with respect to any of the actions described therein during the period covered
by this report.
14
Bashein, et al. v. Kidder, Peabody & Company Inc., et al. - On October 2, 1995,
the Court denied the defendants' motion to dismiss.
B & L Industries, Inc., et al. v. Polaris Holding Company, et al. - On October
2, 1995, defendants moved to dismiss the complaint.
Harrison v. General Electric Company, et al. - On or around September 27, 1995,
a complaint entitled Martha J. Harrison v. General Electric Company, et al., was
filed in the Civil District Court for the Parish of Orleans, State of Louisiana.
The complaint names as defendants General Electric Company and Prudential
Securities Incorporated. Plaintiff alleges claims of tort, breach of fiduciary
duty in tort, contract and quasi-contract, violation of sections of the
Louisiana Blue Sky Law and violation of the Louisiana Civil Code concerning the
inducement and solicitation of purchases arising out of the public offering of
the Partnership. Plaintiff seeks compensatory damages, attorney's fees,
interest, costs and general relief. The Partnership is not named as a defendant
in this action.
In re: Prudential Securities Limited Partnerships (Multi-District Litigation) -
Prudential Securities, Inc. on behalf of itself and its affiliates has made an
Offer of Settlement. A class has been certified for purposes of the Prudential
Settlement and notice to the class has been sent. Any questions concerning
Prudential's Offer of Settlement should be directed to 1-800- 327-3664, or write
to the Claims Administrator at:
Prudential Securities Limited Partnerships
Litigation Claims Administrator
P.O. Box 9388
Garden City, New York 11530-9388
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Item 5. Other Information
Directors and Officers
James F. Walsh resigned as Chief Financial Officer of Polaris Investment
Management Corporation (PIMC) effective October 9, 1995. Marc A. Meiches, 42,
has assumed the position of Chief Financial Officer of PIMC effective October 9,
1995. Mr. Meiches presently holds the position of Executive Vice President and
Chief Financial Officer of General Electric Capital Aviation Services, Inc.
(GECAS). Prior to joining GECAS, Mr. Meiches has been with General Electric
Company (GE) and its subsidiaries since 1978. Since 1992, Mr. Meiches held the
position of Vice President of the General Electric Capital Corporation Audit
Staff. Between 1987 and 1992, Mr. Meiches held Manager of Finance positions for
GE Re-entry Systems, GE Government Communications Systems and the GE Astro-Space
Division.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
27. Financial Data Schedules (Filed electronically 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.
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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 IV,
A California Limited Partnership
(Registrant)
By: Polaris Investment
Management Corporation,
General Partner
November 9, 1995 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)
17