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, 2003
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
Securities registered pursuant to Section 12(b) and 12(g) of the Act: None
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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
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act). Yes No X
--- ---
Number of units outstanding on March 31, 2003 was 168,697.
This document consists of 16 pages.
POLARIS AIRCRAFT INCOME FUND I
FORM 10-Q - For the Quarterly Period Ended March 31, 2003
INDEX
Part I. Financial Information Page
Item 1. Financial Statements (Unaudited)
a) Condensed Balance Sheets - March 31, 2003 and
December 31, 2002...........................................3
b) Condensed Statements of Operations - Three Months
Ended March 31, 2003 and 2002...............................4
c) Condensed Statements of Changes in Partners' Capital
- Year Ended December 31, 2002
and Three Months Ended March 31, 2003.......................5
d) Condensed Statements of Cash Flows - Three Months
Ended March 31, 2003 and 2002...............................6
e) Notes to Condensed Financial Statements.....................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...........9
Item 4. Controls and Procedures.................................9
Part II. Other Information
Item 1. Legal Proceedings......................................11
Item 6. Exhibits and Reports on Form 8-K.......................11
Signature .......................................................12
Certifications Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.........................................................13
2
Part I. Financial Information
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Item 1. Financial Statements
POLARIS AIRCRAFT INCOME FUND I
CONDENSED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2003 2002
---- ----
ASSETS:
CASH AND CASH EQUIVALENTS $1,125,571 $1,112,318
---------- ----------
Total Assets $1,125,571 $1,112,318
========== ==========
LIABILITIES AND PARTNERS' CAPITAL:
PAYABLE TO AFFILIATES $ 37,330 $ 9,253
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 366,713 367,929
DEPOSIT 10,000 --
---------- ----------
Total Liabilities 414,043 377,182
---------- ----------
PARTNERS' CAPITAL:
General Partner 37,240 37,476
Limited Partners, 168,697 units
issued and outstanding 674,288 697,660
---------- ----------
Total Partners' Capital 711,528 735,136
---------- ----------
Total Liabilities and Partners' Capital $1,125,571 $1,112,318
========== ==========
The accompanying notes are an integral part of these
condensed statements.
3
POLARIS AIRCRAFT INCOME FUND I
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31
---------------------------
2003 2002
---- ----
REVENUES:
Interest $ 3,253 $ 6,372
-------- --------
Total Revenues 3,253 6,372
-------- --------
EXPENSES:
Administration and other 26,861 33,365
-------- --------
Total Expenses 26,861 33,365
-------- --------
NET LOSS $(23,608) $(26,993)
======== ========
NET INCOME (LOSS) ALLOCATED
TO THE GENERAL PARTNER $ (236) $ 6,040
======== ========
NET LOSS ALLOCATED TO
LIMITED PARTNERS $(23,372) $(33,033)
======== ========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (0.14) $ (0.20)
======== ========
The accompanying notes are an integral part of these
condensed statements.
4
POLARIS AIRCRAFT INCOME FUND I
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
Year Ended December 31, 2002 and
Three Months Ended March 31, 2003
---------------------------------
General Limited
Partner Partners Total
------- -------- -----
Balance, December 31, 2001 $ 134,953 $ 1,903,494 $ 2,038,447
Net income (loss) 19,696 (151,278) (131,582)
Cash distributions to partners (117,173) (1,054,556) (1,171,729)
----------- ----------- -----------
Balance, December 31, 2002 37,476 697,660 735,136
Net loss (236) (23,372) (23,608)
----------- ----------- -----------
Balance, March 31, 2003 $ 37,240 $ 674,288 $ 711,528
=========== =========== ===========
The accompanying notes are an integral part of these
condensed statements.
5
POLARIS AIRCRAFT INCOME FUND I
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31
2003 2002
---- ----
OPERATING ACTIVITIES:
Net Loss $ (23,608) $ (26,993)
Adjustments to reconcile net loss to
net cash provided (used) by operating
activities:
Changes in operating assets and liabilities:
Increase (decrease) in payable to
affiliates 28,077 (297)
Decrease in accounts payable and
accrued liabilities (1,216) (4,526)
Increase in deposits 10,000 --
----------- -----------
Net cash provided (used) by operating
activities 13,253 (31,816)
----------- -----------
FINANCING ACTIVITIES:
Cash distributions to partners -- (1,171,729)
----------- -----------
Net cash used in financing activities -- (1,171,729)
----------- -----------
CHANGES IN CASH AND CASH
EQUIVALENTS 13,253 (1,203,545)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,112,318 2,445,482
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,125,571 $ 1,241,937
=========== ===========
The accompanying notes are an integral part of these
condensed statements.
6
POLARIS AIRCRAFT INCOME FUND I
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and the Partnership
Polaris Aircraft Income Fund I (the Partnership) was formed on June 27, 1984 for
the purpose of acquiring and leasing aircraft. It will terminate no later than
December 2010. Upon organization, both the General Partner and the initial
Limited Partner contributed $500. The offering of Limited Partnership units
terminated on December 31, 1985, at which time the Partnership had sold 168,729
units of $500, representing $84,364,500. All unit holders were admitted to the
Partnership on or before January 1, 1986. During 2002, 32 units were abandoned.
At March 31, 2003, there were 168,697 units outstanding.
Polaris Investment Management Corporation (PIMC), the sole General Partner of
the Partnership (the General Partner), supervises the day-to-day operations of
the Partnership. PIMC is a wholly-owned subsidiary of Polaris Aircraft Leasing
Corporation (PALC). Polaris Holding Company (PHC) is the parent company of PALC.
General Electric Capital Corporation (GE Capital), an affiliate of General
Electric Company, owns 100% of PHC's outstanding common stock. PIMC has entered
into a services agreement dated as of July 1, 1994 with GE Capital Aviation
Services, Inc. (GECAS). Amounts paid and allocations to related parties are
described in Notes 3 and 4.
At March 31, 2003, the Partnership owned certain inventoried aircraft parts,
which includes one engine, out of its original portfolio of eleven aircraft.
These spare parts are carried at a book value of zero as of March 31, 2003. On
March 21, 2003, the Partnership signed a letter of intent to sell the spare
parts in inventory, including the engine, to Amtec Corporation for $52,500
subject to the purchaser inspecting the inventory and on April 22, 2003, the
sale was completed and payment was received. Given that the Partnership has
liquidated all of its assets, the General Partner intends to make a final
distribution and terminate the Partnership in June of 2003.
2. Accounting Principles and Policies
In the opinion of management, the condensed financial statements presented
herein include all adjustments, consisting only of normal recurring items,
necessary to summarize fairly 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. The condensed consolidated balance sheet at December
31, 2002 has been derived from the audited financial statements at that date but
does not include all of the information and note disclosures required by
accounting principles generally accepted in the United States (GAAP). These
statements should be read in conjunction with the financial statements and notes
thereto for the years ended December 31, 2002, 2001 and 2000 included in the
Partnership's 2002 Annual Report to the SEC on Form 10-K.
7
3. Related Parties
Under the Limited Partnership Agreement (the 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, 2003 March 31, 2003
-------------- --------------
Out-of-Pocket Operating Expense
Reimbursement $ -- $ --
Out-of-Pocket Administrative Expense
Reimbursement -- 37,330
------- -------
$ -- $37,330
======= =======
4. Partners' Capital
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.
5. Subsequent Events
Markair Settlement
On April 14, 2003, the Partnership received a payment in connection with the
Markair, Inc. Bankruptcy in the amount of $102,490. No further distributions are
expected to be made from the bankrupt estate to the Partnership.
Sale of Assets
On April 22, 2003, the Partnership completed the sale of the spare parts
inventory, including the remaining engine, to Amtec Corporation for $52,500. All
payments have been received.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Business Overview
At March 31, 2003, Polaris Aircraft Income Fund I (the Partnership) owned
certain inventoried aircraft parts, which includes one engine, out of its
original portfolio of eleven aircraft. These spare parts are carried at a book
value of zero as of March 31, 2003. On March 21, 2003, the Partnership signed a
letter of intent to sell the spare parts in inventory, including the engine, to
Amtec Corporation for $52,500 subject to the purchaser inspecting the inventory
and on April 22, 2003, the sale was completed and payment was received. Given
that the Partnership has liquidated all of its assets, the General Partner
intends to make a final distribution and terminate the Partnership in June of
2003.
Partnership Operations
The Partnership recorded a net loss of $23,608, or $0.14 per limited partnership
unit, for the three months ended March 31, 2003, compared to net loss of
$26,993, or $0.20 per unit for the same period in 2002. The improvement in
operating results was primarily due to a decrease in Administration and other
expenses partially offset by a decrease in interest income.
Interest income decreased during the three months ended March 31, 2003, as
compared to the same period in 2002 primarily due to lower interest rates and a
decrease in the average cash reserves primarily due to distributions during
2002.
Administration and other expenses decreased primarily due to decreases in
printing and postage costs partially offset by increases in legal fees and
auditing fees.
Liquidity and Cash Distributions
Liquidity - 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 for winding up the affairs of
the Partnership and for other contingencies.
Cash Distributions - There were no cash distributions to the Limited Partners
during the three months ended March 31, 2003. Cash distributions to Limited
Partners during the three months ended March 31, 2002 were $1,054,556. Cash
distributions per Limited Partnership unit for the three months ended March 31,
2002 were $6.25. The amount of the final cash distribution to partners is not
yet known. With the sale of the Partnership's remaining inventory of spare
parts, as discussed above, the General Partner intends to make such final
distribution and terminate the Partnership in June of 2003.
Item 4. Controls and Procedures
PIMC management, including the Chief Executive Officer and Chief Financial
Officer, have conducted an evaluation of the effectiveness of disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
9
that the disclosure controls and procedures are effective in ensuring that all
material information required to be filed in this quarterly report has been made
known to them in a timely fashion. There have been no significant changes in
internal controls, or in factors that could significantly affect internal
controls, subsequent to the date the Chief Executive Officer and Chief Financial
Officer completed their evaluation.
10
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) 2002 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. 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 or subsequent thereto. No material legal
proceedings are currently pending against the Partnership or against any of its
assets. The following is a discussion of legal matters involving the
Partnership, but which do not represent claims against the Partnership or its
assets.
Markair, Inc. (Markair) Bankruptcy - On April 14, 2003, the Partnership received
a payment in connection with this matter in the amount of One Hundred Two
Thousand Four Hundred Eighty Nine Dollars and Sixty Five Cents ($102,489.65). No
further distributions are expected to be made from the bankrupt estate to the
Partnership.
Other Proceedings - Item 10 in Part III of the Partnership's 2002 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 or
subsequent thereto.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
99.1 Certification of President.
99.2 Certification of Chief Financial Officer.
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.
11
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 14, 2003 By: /S/Stephen E. Yost
----------------------- -------------------
Stephen E. Yost, Chief Financial Officer
12
POLARIS AIRCRAFT INCOME FUND I
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, William R. Carpenter, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Polaris Aircraft Income
Fund I;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to
us by others, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 14, 2003
By: Polaris Investment Management Corporation,
General Partner
/s/ William R. Carpenter
- ------------------------
William R. Carpenter
President
CERTIFICATION
- -------------
I, Stephen E. Yost, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Polaris Aircraft Income
Fund I;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to
us by others, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 14, 2003
By: Polaris Investment Management Corporation,
General Partner
/s/ Stephen E. Yost
- -------------------
Stephen E. Yost
Chief Financial Officer