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 March 31, 2000
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. 2-91762
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POLARIS AIRCRAFT INCOME FUND I
State of Organization: California
IRS Employer Identification No. 94-2938977
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.
POLARIS AIRCRAFT INCOME FUND I
FORM 10-Q - For the Quarterly Period Ended March 31, 2000
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
a) Balance Sheets - March 31, 2000 and
December 31, 1999...........................................3
b) Statements of Operations - Three Months Ended
March 31, 2000 and 1999.....................................4
c) Statements of Changes in Partners' Capital
- Year Ended December 31, 1999
and Three Months Ended March 31, 2000.......................5
d) Statements of Cash Flows - Three Months
Ended March 31, 2000 and 1999...............................6
e) Notes to Financial Statements...............................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...........9
Part II. Other Information
Item 1. Legal Proceedings......................................10
Item 6. Exhibits and Reports on Form 8-K.......................10
Signature .......................................................11
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Part 1. Financial Information
-----------------------------
Item 1. Financial Statements
POLARIS AIRCRAFT INCOME FUND I
BALANCE SHEETS
(Unaudited)
March 31, December 31,
2000 1999
---- ----
ASSETS:
CASH AND CASH EQUIVALENTS $3,508,360 $4,190,421
RENT AND OTHER RECEIVABLES, net of allowance
for credit losses of $30,365 in 1999 -- 30,000
AIRCRAFT ENGINES, net of accumulated depreciation
of $93,750 in 2000 and $90,000 in 1999 866,250 870,000
---------- ----------
Total Assets $4,374,610 $5,090,421
========== ==========
LIABILITIES AND PARTNERS' CAPITAL:
PAYABLE TO AFFILIATES $ 9,952 $ 11,216
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 362,380 374,689
SECURITY DEPOSITS 45,000 45,000
MAINTENANCE RESERVES 1,774,168 1,704,715
---------- ----------
Total Liabilities 2,191,500 2,135,620
---------- ----------
PARTNERS' CAPITAL:
General Partner 136,407 222,894
Limited Partners, 168,729 units
issued and outstanding 2,046,703 2,731,907
---------- ----------
Total Partners' Capital 2,183,110 2,954,801
---------- ----------
Total Liabilities and Partners' Capital $4,374,610 $5,090,421
========== ==========
The accompanying notes are an integral part of these statements.
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POLARIS AIRCRAFT INCOME FUND I
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
----------------------------
2000 1999
---- ----
REVENUES:
Rent from operating leases $ 90,000 $ 90,000
Gain on sale of aircraft inventory -- 196,858
Interest 50,634 50,561
Lessee settlement (Note 4) 61,513 --
-------- --------
Total Revenues 202,147 337,419
-------- --------
EXPENSES:
Depreciation 3,750 3,750
Management fees to general partner 4,500 4,500
Administration and other 28,205 25,784
-------- --------
Total Expenses 36,455 34,034
-------- --------
NET INCOME $165,692 $303,385
======== ========
NET INCOME ALLOCATED
TO THE GENERAL PARTNER $ 7,251 $ 3,034
======== ========
NET INCOME ALLOCATED TO
LIMITED PARTNERS $158,441 $300,351
======== ========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 0.94 $ 1.78
======== ========
The accompanying notes are an integral part of these statements.
4
POLARIS AIRCRAFT INCOME FUND I
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
Year Ended December 31, 1999 and
Three Months Ended March 31, 2000
---------------------------------
General Limited
Partner Partners Total
------- -------- -----
Balance, December 31, 1998 $ 493,422 $ 4,626,641 $ 5,120,063
Net income 6,000 594,019 600,019
Cash distributions to partners (276,528) (2,488,753) (2,765,281)
----------- ----------- -----------
Balance, December 31, 1999 222,894 2,731,907 2,954,801
Net income 7,251 158,441 165,692
Cash distributions to partners (93,738) (843,645) (937,383)
----------- ----------- -----------
Balance, March 31, 2000 $ 136,407 $ 2,046,703 $ 2,183,110
=========== =========== ===========
The accompanying notes are an integral part of these statements.
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POLARIS AIRCRAFT INCOME FUND I
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
----------------------------
2000 1999
---- ----
OPERATING ACTIVITIES:
Net income $ 165,692 $ 303,385
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 3,750 3,750
Gain on sale of aircraft inventory -- (196,858)
Changes in operating assets and liabilities:
Decrease in rent and other receivable 30,000 58,154
Increase (decrease) in payable to
affiliates (1,264) 8,418
Decrease in accounts payable and
accrued liabilities (12,309) (18,360)
Increase in maintenance reserves 69,453 93,198
----------- -----------
Net cash provided by operating
activities 255,322 251,687
----------- -----------
FINANCING ACTIVITIES:
Cash distributions to partners (937,383) (2,765,281)
----------- -----------
Net cash used in financing activities (937,383) (2,765,281)
----------- -----------
CHANGES IN CASH AND CASH
EQUIVALENTS (682,061) (2,513,594)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 4,190,421 6,418,582
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 3,508,360 $ 3,904,988
=========== ===========
The accompanying notes are an integral part of these statements.
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POLARIS AIRCRAFT INCOME FUND I
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 I'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, 1999,
1998 and 1997 included in the Partnership's 1999 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
Three Months Ended Payable at
March 31, 2000 March 31, 2000
-------------- --------------
Aircraft Management Fees $ 4,500 $ 3,018
Out-of-Pocket Administrative Expense
Reimbursement 41,426 6,934
------- -------
$45,926 $ 9,952
======= =======
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.
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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.
4. CanAir Bankruptcy Settlement
On February 15, 2000, the Partnership received $61,513 in connection with the
CanAir Bankruptcy Settlement, which is comprised of amounts received for rents,
maintenance reserve obligations and accrued interest. A portion of the proceeds
was treated as a recovery of previously reserved rents receivable. The allowance
for credit losses of $30,365 was reversed and is included in "Lessee Settlement"
in the statement of operations.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
At March 31, 2000, Polaris Aircraft Income Fund I (the Partnership) owned three
JT8D-9A engines and certain inventoried aircraft parts, which includes one
engine, out of its original portfolio of eleven aircraft. The three JT8D-9A
engines are leased to Royal Aviation Inc. and Royal Cargo, Inc. (Royal
Aviation).
Partnership Operations
The Partnership recorded net income of $165,692, or $.94 per limited partnership
unit, for the three months ended March 31, 2000, compared to net income of
$303,385, or $1.78 per unit for the same period in 1999. The decline in
operating results during the first quarter of 2000, as compared to the same
period in 1999, was primarily the result of gains on the sale of aircraft
inventory in 1999 of $196,858 offset by a settlement in the CanAir bankruptcy
proceedings in February 2000, of which the Partnership received $61,513.
Liquidity and Cash Distributions
Liquidity - The Partnership receives maintenance reserve payments from Royal
Aviation 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 or engines, as specified in the leases. Maintenance reserve balances
remaining at the termination of the lease, if any, may be used by the
Partnership to offset future maintenance expenses or recognized as revenue. The
net maintenance reserve balance was $1,774,168 as of March 31, 2000.
Polaris Investment Management Corporation, the general partner, has determined
that the Partnership maintain cash reserves as a prudent measure to insure that
the Partnership has available funds in the event that the engines presently on
lease to Royal Aviation require remarketing and for other contingencies,
including expenses of the Partnership. The Partnership's cash reserves will be
monitored and may be revised from time to time as further information becomes
available in the future.
Cash Distributions - Cash distributions to limited partners during the three
months ended March 31, 2000 and 1999 were $843,645, or $5.00 per limited
partnership unit and $2,488,753, or $14.75 per unit, respectively. The timing
and amount of future cash distributions to partners are not yet known and will
depend upon the Partnership's future cash requirements, including the receipt of
rental payments from Royal Aviation.
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Part II. Other Information
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Item 1. Legal Proceedings
As discussed in Item 3 of Part I of Polaris Aircraft Income Fund I's (the
Partnership) 1999 Annual Report to the Securities and Exchange Commission (SEC)
on Form 10-K (Form 10-K), there are several 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 1999 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. 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.
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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 I
A California Limited Partnership
(Registrant)
By: Polaris Investment
Management Corporation,
General Partner
May 11, 2000 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)
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