UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2001
Commission file number 1-9259
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
California 94-3008908
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(State of Organization) (I.R.S. Employer Identification No.)
555 California Street, 4th floor, San Francisco, CA 94104
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(Address of principal executive offices) (Zip Code)
(415) 765-1814
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(Registrant's telephone number, including area code)
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 such
filing requirements for the past 90 days. Yes X No
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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I N D E X
Page No.
Part I - Financial Information:
Item 1. Financial Statements
Balance Sheets --
March 31, 2001 and December 31, 2000...............................3
Statements of Income --
Three months ended March 31, 2001 and 2000.........................4
Statements of Cash Flows
Three months ended March 31, 2001 and 2000.........................5
Notes to Financial Statements........................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................7
Item 3. Quantitative and Qualitative Disclosures about Market Risk...........8
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K.....................................9
Signatures..........................................................10
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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BALANCE SHEETS
MARCH 31,
2001 DECEMBER 31,
(IN THOUSANDS EXCEPT UNIT DATA) (UNAUDITED) 2000
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ASSETS
Cash $ 390 $ 17
Finance leases - net 59,434 61,657
Prepaid expenses and other assets 133 162
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Total assets $ 59,957 $ 61,836
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LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Distribution payable to partners $ 1,775 $ 2,102
Accounts payable and accrued liabilities 367 468
Taxes payable 2 139
Long-term notes payable 7,530 7,992
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Total liabilities 9,674 10,701
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COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY
Limited partners (4,625,000 units outstanding) 49,780 50,624
General partner 503 511
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Total partners' equity 50,283 51,135
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Total liabilities and partners' equity $ 59,957 $ 61,836
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See NOTES TO CONDENSED FINANCIAL STATEMENTS
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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STATEMENTS OF INCOME
THREE MONTHS ENDED
(UNAUDITED; IN THOUSANDS MARCH 31,
EXCEPT PER UNIT AMOUNTS) 2001 2000
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REVENUES
Finance lease income $1,536 $1,771
Other income 14 0
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Total revenues 1,550 1,771
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EXPENSES
Interest 174 263
Management fee - general partner 146 153
Investor reporting 106 79
General and administrative 16 42
Tax on gross income 185 137
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Total expenses 627 674
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Net Income $ 923 $1,097
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Net Income Allocated To:
General Partner $ 9 $ 11
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Limited Partners $ 914 $1,086
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Net Income Per Limited Partnership Unit $ 0.20 $ 0.23
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See NOTES TO CONDENSED FINANCIAL STATEMENTS
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED; IN THOUSANDS) 2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 923 $ 1,097
Adjustments to reconcile net income to net cash provided
by operating activities:
(Decrease)/increase in accounts payable and accrued liabilities (101) 14
(Decrease/increase in taxes payable (137) 137
Decrease in prepaid expenses and other assets 29 29
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Net cash provided by operating activities 714 1,277
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CASH FLOWS FROM INVESTING ACTIVITIES
Rental receipts in excess of earned finance lease income 2,223 1,788
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Net cash provided by investing activities 2,223 1,788
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings/(repayments) under lines of credit, net 75 (783)
Repayment of long-term notes payable (537) (365)
Distributions paid to partners (2,102) (1,916)
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Net cash used by financing activities (2,564) (3,064)
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Increase in cash 373 1
Cash at beginning of period 17 2
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Cash at end of period $ 390 $ 3
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ADDITIONAL INFORMATION
Interest paid $ 101 $ 163
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See NOTES TO CONDENSED FINANCIAL STATEMENTS
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
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BASIS OF PRESENTATION - The accompanying unaudited financial statements
reflect all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of the Partnership's management, necessary for a
fair presentation of the financial position and results of operations for
the presented periods. The results of operations for such interim periods
are not necessarily indicative of results of operations for a full year.
The December 31, 2000 balance sheet included herein is taken from the
audited financial statements included in the Partnership's Annual Report
and incorporated by reference in the Form 10-K for the year ended December
31, 2000. The statements should be read in conjunction with the
Organization and Significant Accounting Policies and other notes to
financial statements included in the Partnership's Annual Report for the
year ended December 31, 2000.
2. NET INCOME PER LIMITED PARTNERSHIP UNIT
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Net Income Per Limited Partnership Unit is computed by dividing the net
income allocated to the Limited Partners by the weighted average of the
units outstanding (4,625,000).
3. INCOME TAXES
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In January 1998 the Partnership made an election to pay an annual federal
tax of 3.5% and a 1% California tax at the Partnership level of on its
applicable gross income beginning January 1, 1998. The election was made in
order to avoid a limitation on the public trading of the Partnership's
units.
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AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
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The Partnership presently has three long-term debt facilities. At March 31,
2001, the following amounts were outstanding: $4.0 million on a 7.4%
non-recourse note collateralized by one aircraft leased to FedEx; $1.7 million
on a 9.35% non-recourse note collateralized by one aircraft on lease to Trans
World Airlines (since April 10, 2001 on lease to American Airlines); and $1.8
million on a long-term variable rate revolving loan facility guaranteed by the
Partnership and collateralized by two aircraft on lease to US Airways. At March
31, 2001 approximately $2.5 million remains available under the revolving loan
facility.
At March 31, 2001, long-term borrowings of $7.5 million represented 6.2 % of the
original cost of the aircraft presently owned by the Partnership, including
capital expenditures for upgrades. The terms of the Limited Partnership
Agreement permit debt to be at a level not exceeding 50% of such cost.
Cash distributions paid in the first three months of 2001 were $0.45 per limited
partnership unit, representing the regular 2000 fourth-quarter cash
distribution.
In March 2001, the Partnership declared a first-quarter 2001 cash distribution
of $0.38 per unit totaling $1,775,252 and payable on May 15, 2001 to unitholders
of record on March 30, 2001. Since this distribution was in excess of earnings,
Partnership equity declined to $50.3 million at March 31, 2001, and limited
partner equity per unit declined to $10.76. The portion of the distribution in
excess of net income constitutes a return of capital.
RESULTS OF OPERATIONS
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The Partnership earned $923,000 in the first quarter ended March 31, 2001, a
decrease of $174,000 or 16% from the 2000 first-quarter earnings of $1,097,000.
First-quarter revenues were $1,550,000, compared with last year's first-quarter
revenues of $1,771,000.
The revenue reduction in the first three months of 2001 is primarily due to the
scheduled decline in finance lease income as the net investment in finance
leases continued to decline. Although revenues declined, cash receipts remained
about the same, largely reflecting rental receipts in excess of earned finance
lease income.
Expenses for the first three months of 2001 were $627,000, a decrease of $47,000
from $674,000 for the comparable 2000 period. The decline in expenses is
primarily due to lower interest expense in 2001 as a result of the Partnership's
reduced debt balances from $8,943,000 as of March 31, 2000 to $7,530,000 as of
March 31, 2001. Lower interest expense was partially offset by higher tax
expenses.
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PORTFOLIO
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As of March 31, 2001 the Partnership's portfolio consisted entirely of Stage III
aircraft; six are MD 82s and one is a 727-200 FH. Stage III aircraft meet the
FAA noise compliance regulations for aircraft operated in the continental United
States after December 31, 1999.
On January 10, 2001 TWA (the lessee of one of the MD-82 aircraft) filed for
bankruptcy under Chapter 11 of the Bankruptcy Code. TWA was initially delinquent
on its December 2000 and January and February 2001 rent payments, but later
brought the rent current. On April 9, 2001 the Partnership entered into an
agreement with American Airlines completing the assumption by American Airlines
of the TWA aircraft lease, subject to a reduced monthly rent, and an extension
of the lease expiration date from 2002 to 2009.
On September 30, 2001, the leases with US Airways for five aircraft in the
Partnership's aircraft portfolio expire. Since US Airways did not exercise its
renewal option, the Partnership will market the aircraft to others for either
sale or a new lease. While these MD-82 aircraft are comparable to the aircraft
recently leased to American Airlines, the market for commercial aircraft is
influenced by a number of factors, including the supply and demand for aircraft
and economic conditions. Consequently, at this point we cannot precisely
determine the values we will receive from a sale or a new lease of these
aircraft, though we remain committed to our objective of maximizing the value
from the aircraft portfolio.
FORWARD-LOOKING STATEMENTS
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The information set forth in this quarterly report contains certain
forward-looking statements, which reflect the current view of the partnership
with respect to future events and financial performance. The words, "expect",
"intend", "believe", "anticipate", "likely" and "will" and similar expressions
generally identify forward-looking statements. These statements are subject to
certain risks and uncertainties, which could cause actual results and events to
differ materially from those anticipated in the forward-looking statements.
Factors that could cause the partnership's actual results to differ from current
expectations include, among others, changes in the aircraft or aircraft leasing
market, economic downturn in the airline industry, default by lessees under
leases causing the partnership to incur uncontemplated expenses or not to
receive rental income as and when expected, changes in interest rates and
legislative or regulatory changes that adversely affect the value of aircraft.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The General Partner believes there has been no material change in the
Partnership's exposure to market risk from that discussed in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 2000.
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PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
10.52 Assumption and Lease Agreement dated as of February 27,
2001, as amended, among the Registrant, First Security Bank
National Association, as Owner Trustee, and American Airlines,
Inc.
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended March 31, 2001.
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SIGNATURES
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Pursuant to the requirements 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.
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
By: Airlease Management Services, Inc.
General Partner
May 09, 2001 By: /s/ DAVID B. GEBLER
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Date David B. Gebler
Chairman, Chief Executive Officer
and President
May 09, 2001 By: /s/ ROBERT A. KEYES
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Date Robert A. Keyes
Chief Financial Officer
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