1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 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
COMMISSION FILE NUMBER: 0-19216
JETFLEET AIRCRAFT, L.P.
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction
of incorporation or organization)
94-3087300
(I.R.S. Employer Identification Number)
1440 CHAPIN AVENUE, SUITE 310
BURLINGAME, CALIFORNIA
(Address of principal executive office)
94010
(Zip Code)
Registrant's telephone number, including area code: (415) 696-3900
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days. X Yes No
On November 14, 1996, 296,069 Limited Partnership Units were outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JetFleet Aircraft, L.P.
Balance Sheets
ASSETS
September 30, December 31,
1996 1995
(Unaudited)
Current assets:
Cash $ 83,995 $ 96,184
Lease payments receivable 180,000 180,000
Receivable from affiliates - 45,856
------------- ------------
Total current assets 263,995 322,040
Aircraft under operating leases and
aircraft held for operating leases,
net of accumulated depreciation
of $3,794,970 in 1996
and $3,014,002 in 1995 2,588,667 3,369,635
Lease payments receivable 30,000 165,000
Organization costs, net of accumulated
amortization of $66,400 in 1996 and
$64,966 in 1995 214 1,649
------------- ------------
$ 2,882,876 $ 3,858,324
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $ 1,167 $ 28,109
Accrued maintenance costs - 58,984
Payable to affiliates 30,280 45,000
Prepaid rents 11,113 -
Unearned interest income 22,869 45,417
------------- -----------
Total current liabilities 65,429 177,510
Unearned interest income 510 14,674
------------- -----------
Total liabilities 65,939 192,184
Partners' capital 2,816,937 3,666,140
------------- -----------
$ 2,882,876 $ 3,858,324
============= ===========
<FN>
See accompanying notes.
JetFleet Aircraft, L.P.
Statements of Operations
(Unaudited)
For the Nine Months For the Three Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
Revenues:
Rental income $ 436,708 $ 426,625 $ 160,386 $ 149,788
Interest income 36,916 56,872 10,532 17,379
----------- ----------- ----------- -----------
473,624 483,497 170,918 167,167
Costs and expenses:
Amortization of
organization costs 1,435 6,676 405 1,727
General and
administrative 90,024 47,570 28,408 15,008
Maintenance costs 35,000 32,006 - -
Depreciation of
aircraft 780,968 780,968 260,323 260,323
----------- ----------- ----------- -----------
907,427 867,220 289,136 277,058
----------- ----------- ----------- -----------
Net loss $ ( 433,803) $ ( 383,723) $ ( 118,218) $ ( 109,891)
============ =========== =========== ===========
Allocation of net loss:
General partners $ ( 4,338) $ ( 3,838) $ ( 1,182) $ ( 1,099)
Limited partners ( 429,465) ( 379,885) ( 117,036) ( 108,792)
----------- ----------- ----------- ----------
$ ( 433,803) $ ( 383,723) $ ( 118,218) $( 109,891)
=========== =========== =========== ==========
Per Limited
Partnership Unit $ ( 1.45) $ ( 1.28) $ ( 0.40) $ ( 0.37)
=========== =========== =========== ==========
Limited Partnership
Units outstanding 296,069 296,069 296,069 296,069
=========== =========== =========== ==========
<FN>
See accompanying notes.
JetFleet Aircraft, L.P.
Statements of Cash Flows
(Unaudited)
For the Nine Months
Ended September 30,
1996 1995
Net cash provided by operating activities $ 268,211 $ 290,508
Investing activities-
Payments received on capital lease 135,000 105,000
Financing activities -
Distributions ( 415,400) ( 365,149)
----------- ----------
Net (decrease) / increase in cash ( 12,189) 30,359
Cash, beginning of period 96,184 117,027
----------- -----------
Cash, end of period $ 83,995 $ 147,386
=========== ===========
<FN>
See accompanying notes.
JetFleet Aircraft, L.P.
Notes to Financial Statements
September 30, 1996
(Unaudited)
1. Basis of Presentation
JetFleet Aircraft, L.P. ("JetFleet"), a California limited partnership,
was formed on February 16, 1989 and commenced operations in November 1989.
The accompanying unaudited financial statements reflect all adjustments
(consisting of only normal recurring accruals) which are, in the opinion of
CMA Capital Group, the Corporate General Partner, necessary for a fair
presentation of the financial results for such periods. The results of
operations for such periods are not necessarily indicative of results of
operations for a full year. The statements should be read in conjunction with
the Summary of Significant Accounting Policies and other notes to financial
statements included in JetFleet's Annual Report on Form 10-K for the year
ended December 31, 1995.
2. Aircraft Under Operating Leases
deHavilland Aircraft
JetFleet owns a 24.37% undivided interest in a deHavilland DHC-7-103
aircraft, serial number 72 ("S/N 72") and a 95.90% undivided interest in a
deHavilland DHC-7-102 aircraft, serial number 57 ("S/N 57"). The remaining
undivided interests in these two aircraft are owned by the seller and JetFleet
Aircraft II, L.P. ("JetFleet II "), a California limited partnership and an
affiliate of JetFleet (collectively, the "Co-Owners").
S/N 57 was subject to a triple net lease with Johnson Controls World
Services, Inc. ("JCWS") for a two year term, renewable in one year increments
for an aggregate period of eight years. JCWS operated S/N 57 under an eight
year contract, which commenced in 1986, with the United States Army for use in
the Marshall Islands at the site of the Army's deep space research center
where missile guidance systems are tested.
During 1994, the lease with JCWS for S/N 57 was extended through
September 30, 1995, at reduced rent of $46,000 per month, of which JetFleet's
share was $44,114. A new contract with the United States Army commenced on
February 15, 1995 for a term of two years with three two-year renewal options.
The contract was awarded to Range Systems Engineering, a subsidiary of
Raytheon Service Company ("Raytheon"). JetFleet's management anticipates
that the lease will continue for as long as the underlying government contract
continues, although there is no contractual requirement to this effect.
During 1995 the lease was extended through September 30, 1996. An agreement
recently has been reached to extend the lease for S/N 57 through September 30,
1998 at a reduced rental rate of $38,500 per month, of which JetFleet's share
is $36,922, with an option to extend the term for two additional years.
JetFleet Aircraft, L.P.
Notes to Financial Statements
September 30, 1996
(Unaudited)
2. Aircraft Under Operating Leases (continued)
S/N 72, which, at the time of purchase, was subject to the same contract
with JCWS as S/N 57, was returned by JCWS during June 1993. In August 1993,
S/N 72 was leased to Eclipse Airlines. Upon its return from Eclipse, S/N 72
was leased to The AGES Group, L.P. ("AGES") for the period December 22, 1993
through September 1, 1994 at a monthly rental rate of $38,800. Upon its
return by AGES, S/N 72 underwent certain scheduled maintenance and other
repair work.
On March 31, 1995, S/N 72 was leased to the National Airline Commission
of Papua New Guinea (trading as Air Niugini) ("Air Niugini") for a term of six
months at a monthly rental rate of $35,000 to be paid to the Co-Owners based
upon their pro rata ownership of the aircraft. Air Niugini paid a security
deposit of $105,000. The lease was subsequently extended until October 31,
1995. JetFleet collected a total of $53,060 in monthly lease payments from
Air Niugini during the term of the lease. In addition, Air Niugini paid
JetFleet its pro-rata share of maintenance costs of $31,710. Upon its return
by Air Niugini, S/N 72 underwent certain scheduled maintenance and other
repair work.
On April 25, 1996, S/N 72 was leased to Air Tindi Limited ("Air Tindi")
for a term of thirty-six months at a monthly rental rate of $47,500 to be paid
to the Co-Owners based upon their pro rata ownership of the aircraft. Air
Tindi has provided a letter of credit in the amount of $142,000 which serves
as a security deposit under the lease. In addition, Air Tindi pays JetFleet
its pro-rata share of maintenance costs of $265.00 per hour of usage, which
amount is to be applied for scheduled overhauls and inspections. Air Tindi is
a regional airline headquartered in Yellowknife, Northwest Territories, Canada
and provides charter and regularly scheduled flights throughout the Northwest
Territories.
3. Investment in Capital Lease
McDonnell Douglas DC-9-32 Aircraft
JetFleet owns a 50.00% interest in a McDonnell Douglas DC-9-32, serial
number 47236 (the "DC-9"). The remaining 50.00% interest is owned by JetFleet
II . The DC-9 is leased back to the seller, Interglobal, Inc. for thirty-six
months at a monthly rate of $30,000 (the "DC-9 Lease"), of which JetFleet is
entitled to $15,000. The DC-9 is currently sub-leased to and being operated
by Aero California S.A. de CV. As part of the sale and leaseback described
above, Interglobal, Inc. assigned its rights under the sublease to the
Co-Owners. JetFleet's investment in the DC-9 is being accounted for as a
capital lease. JetFleet recorded $10,530 and $36,710 of interest income
attributable to the DC-9 Lease during the three months and nine months ended
September 30, 1996, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
At the end of the third quarter of 1996, JetFleet had cash balances of
$83,995. This amount was held for the distribution made to the Unitholders in
October 1996 and to pay accrued expenses.
During the quarter, JetFleet's primary sources of liquidity were cash
flows from leasing operations and capital lease payments. JetFleet's
liquidity will vary in the future, increasing to the extent cash flows from
operations exceed expenses, and decreasing as distributions are made to the
Unitholders and to the extent expenses exceed cash flows from leases.
JetFleet uses substantially all its operating cash flow to make cash
distributions to its Unitholders. Since JetFleet's leases are triple net
leases (the lessee pays operating and maintenance expenses, insurance and
taxes), JetFleet does not anticipate that it will incur significant operating
expenses in connection with ownership of its aircraft as long as they remain
on lease. However, JetFleet has incurred repair costs in 1996 for S/N 72
which are $35,000 in excess of the amounts collected from lessees. These
repair costs are the result of maintenance performed to enhance the aircraft's
marketability.
JetFleet currently has available adequate reserves to meet its immediate
cash requirements.
Since May 1995, JetFleet has made distributions at an annualized rate of
4%, as compared to 3% from January through April 1995, primarily because S/N
72 was on lease from April through October 1995. As discussed above, S/N 72
was delivered to Air Tindi on April 25, 1996 under a thirty-six month lease.
1996 versus 1995
Cash flows from operations decreased by approximately $22,000 primarily
due to an increase in net loss and decreases in trade payables, accrued
maintenance and unearned interest income which were only partially offset by a
net decrease in receivables from affiliates, prepaid rents and amortization of
organization costs.
Cash flows from investing activities increased approximately $30,000 in
1996 primarily because the capital lease for the DC-9, entered into in
December, 1994, included an initial prepayment provision requiring three
monthly payments in advance (December 1994 and January and February 1995).
In 1996 and 1995, there were no financing sources of cash. Cash
distributions to Unitholders increased by approximately $50,000, or by $0.17
per Limited Partnership Unit outstanding. The increased distributions to
Unitholders resulted from distributing the cash received in excess of
operating expenses from S/N 72 during its on-lease periods during 1995 and
1996.
Results of Operations
JetFleet recorded net losses of ($433,803) and ($383,723) or ($1.45) and
($1.28) per Limited Partnership Unit outstanding for the nine months ended
September 30, 1996 and 1995, respectively, and ($118,218) and ($109,891) or
($0.40) and ($0.37) per Limited Partnership Unit outstanding for the three
months ended September 30, 1996 and 1995, respectively. The increased loss
for the nine month period in 1996 relative to 1995 was primarily a result of
the increase of approximately $42,000 in general and administrative costs as
well as a decrease of approximately $20,000 in income recognized from the
capital lease for the DC-9 which were partially offset by an increase of
$10,000 in rental income. The $9,000 increase in net loss for the three month
period in 1996 versus 1995 was primarily due to a $13,000 increase general and
administrative expenses and a $7,000 decrease in interest income recognized
from the capital lease which were only partially offset by an increase of
$11,000 in rental income.
1996 versus 1995
Rental income was $10,000 higher during the nine month period in 1996
versus 1995 and $11,000 higher during the three month period in 1996 versus
1995 due to the increased monthly rent received from S/N 72 during 1996.
Interest income from the capital lease for the DC-9 was $20,000 lower during
the nine month period in 1996 versus 1995 and $7,000 lower during the three
month period in 1996 versus 1995 due to the decreasing lease payments
receivable.
There was no change in depreciation from 1995 to 1996.
There was no accrual or payment of the base management, incentive
management or re-lease fees for 1996 or 1995 as the annualized rate of
distributions in those years did not meet the Preferred Return as defined in
the Prospectus.
General and administrative expenses increased approximately $42,000 and
$13,000 for the nine month and three month periods, respectively, of 1996
versus 1995, due to increased costs associated with the ongoing management of
JetFleet's portfolio as well as the increased costs of administering
investor-related inquiries. As mentioned above, JetFleet has incurred repair
costs in 1996 for S/N 72 which are $35,000 in excess of the amounts collected
from lessees, an increase of approximately $3,000 from 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on November 14, 1996.
JETFLEET AIRCRAFT, L.P.
By: CMA Capital Group,
Managing General Partner
By: /s/ Neal D. Crispin
Neal D. Crispin
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons in the capacities indicated on
November 14, 1996.
Signature Title
- ---------------------- ------------------------------------
/s/ Neal D. Crispin Chief Executive and Chief Financial
- ----------------------
Neal D. Crispin Officer and Chairman of the Board of
Directors of the Managing General
Partner
/s/ Richard D. Koehler Executive Vice President and
- ----------------------
Richard D. Koehler Director of the Managing General
Partner
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EXHIBIT INDEX
Exhibit No. Description Page No.
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EX-27 Financial Data Schedule