ITEM 1. BUSINESS
General
Pegasus Aircraft Partners II, L.P. (the “Partnership” or the “Registrant”) is a limited partnership organized under the laws of the State of Delaware on April 26, 1989. The general partners of the Partnership are Pegasus Aircraft Management Corporation, the Managing General Partner, a California corporation that is a wholly owned subsidiary of Pegasus Capital Corporation, and Air Transport Leasing, Inc., the Administrative General Partner, a Delaware corporation that is a wholly owned subsidiary of UBS Americas, Inc. UBS Americas is the successor to Paine Webber Group, Inc. (Pegasus Aircraft Management Corporation and Air Transport Leasing, Inc. are herein referred to as the “General Partners”).
On August 15, 1989, the Partnership commenced an offering of units of limited partnership interest (“Units”). The offering of the Units was terminated during the third quarter of 1990, when the total capitalization of the Partnership reached $145.1 million. The Partnership incurred $16,295,000 of commissions and other expenses in connection with the sale of these Units.
Although the Partnership was organized on April 26, 1989, the Partnership conducted no activities and recognized no revenues, profits or losses prior to September 20, 1989 at which time the Partnership commenced operations. During the period between September 21, 1989 and August 22, 1990, the Partnership acquired its portfolio of used commercial aircraft which were principally subject to triple net operating leases with domestic and foreign commercial air carriers.
In January 2006, the Partnership’s remaining two aircraft, the DC-9 and Boeing 727-200 freighter, were sold and the Partnership has entered the liquidation phase. During 2005, the Partnership had sold its McDonnell Douglas DC-10 freighter. Due to the age and number of aircraft of similar type available for lease and sale, the Partnership accepted payments from the former lessees of its equipment in lieu of the aircraft meeting the return conditions specified in the leases and the aircraft were being offered for sale in an “as-is, where is” condition. In 2002, the Partnership sold two of its Boeing 727-200s, its Airbus A-300, its Lockheed L-1011, its engines from the Boeing 727 formerly leased to Falcon Express and its 50% ownership for the Partnership (McDonnell Douglas MD-81). The net proceeds of the 2002 aircraft sales were generally utilized to pay off the Partnership’s debt.
Outlook for the Airline and Aircraft Leasing Industries
The airline industry continued to struggle in 2005 with high jet fuel prices, competition and a number of carriers operating under Chapter 11 of the U.S. Bankruptcy Code.
Given the age and maintenance status of the Partnership’s two remaining aircraft were sold in an “as-is, where-is” condition. The Partnership was competing in the used aircraft sales and parts segment of the market. Many used aircraft of a type similar to the Partnership’s aircraft are off-lease and are parked, available for sale, leases or part-out. A number of these aircraft are newer or are in a better maintenance status than that of the Partnership’s aircraft. Also, the number of carriers using this type of equipment has declined significantly.
Aircraft Portfolio
The following table describes the Partnership’s aircraft portfolio at December 31, 2005:
Cash distributions to partners declared in 2005 represented a significant portion of the Partnership’s assets and therefore significantly reduced the estimated net asset value per limited partnership Unit of $0.33 reported in the Partnership’s previous annual report on Form 10-K for the year ended December 31, 2004. Further, as the Limited Partnership Agreement requires that the final liquidating distribution to the Partners be based on the Unit holders’ respective tax capital account balances, rather than on the number of Units held, the General Partners believe that an estimated net asset value per Unit would no longer provide any material information to Unit holders, and no such revised value has been calculated or included in this report.
Competition
The aircraft leasing industry is highly competitive. There are many aircraft manufacturers, distributors, airlines and other operators, equipment managers, leasing companies, financial institutions and other parties engaged in leasing, managing or remarketing aircraft, many of which have significantly greater financial resources and greater experience than the Partnership. Many used aircraft of a type similar to the Partnership’s aircraft are off-lease and are parked, available for sale, leases or part-out. A number of these aircraft are newer or are in a better maintenance status than that of the Partnership’s aircraft. Also, the number of carriers using the type of equipment owned by the Partnership has declined significantly.
ITEM 1A.
ITEM 1A. RISK FACTORS
See the discussion in Item 7 under the caption “Risks and Uncertainties.”
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
Employees
The Partnership has no employees. The officers, directors and employees of the General Partners and their affiliates perform services on behalf of the Partnership. The General Partners are entitled to certain fees and reimbursements of certain out-of-pocket expenses incurred in connection with the performance of these management services. See Item 10 of this Report, “Directors and Executive Officers of the Registrant”, and Item 13 of this Report, “Certain Relationships and Related Transactions”, which are incorporated herein by reference.
ITEM 2.
ITEM 2. PROPERTIES
As discussed in Item 1 of this Report, “Business,” which is incorporated herein by reference, the two aircraft that the Partnership owned as of December 31, 2005 were sold in January 2006 and therefore the Partnership has no further physical properties and is liquidating.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNIT HOLDERS
No matters were submitted to a vote of the Limited Partners of the Partnership, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended December 31, 2005.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON PARTNERSHIP CAPITAL AND RELATED UNIT HOLDER MATTERS
There is no organized trading market for the purchase and sale of the Units and certain measures have been adopted and implemented to assure that no organized trading market will develop. Effective July 15, 2003, the Partnership halted third party transfers of units.
As of March 1, 2006, the number of Limited Partners of record was approximately 6,850.
The Partnership declared the following distributions to its Limited Partners out of cash flow received from operations during 2005 and 2004:
Total distributions to all partners for 2005 and 2004 were declared as follows (in thousands):
Distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital, or both. The portion of each cash distribution by a partnership, which exceeds its net income, may be deemed a return of capital. Based on the net income reported by the Partnership for the year ended December 31, 2005, the cash distributions paid to the partners, in the aggregate, for the year ended December 31, 2005 constituted an 89% return of capital. Also, based on the amount of cumulative net income reported by the Partnership for accounting purposes, approximately 88% of the cash distributions paid to the partners from the inception of the Partnership through December 31, 2005 constituted a return of capital.
After the sale of the Partnership’s off-lease DC-10 freighter in 2005, the Partnership had remaining two off-lease aircraft and therefore did not generate any cash flow from operations. The Partnership sold the remaining two aircraft in an “as-is, where-is” condition in January 2006. With the sale of the final aircraft, the Partnership will continue to hold its funds in an interest bearing money-market account and is expected to make a final liquidating distribution, prior to April 30, 2006, based on Unit holders’ respective tax capital account balances in accordance with the Partnership Agreement.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Partnership was derived from the audited financial statements for the indicated periods. The information set forth below should be read in conjunction with the Partnership’s Financial Statements and Notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Items 8 and 7, respectively, of this Report on
Form 10-K.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the “Selected Financial Data” and the Financial Statements of the Partnership and the Notes thereto. This report may contain, in addition to historical information, forward-looking statements that include risks and other uncertainties. The Partnership’s actual results may differ materially from those anticipated in these forward-looking statements. Factors that might cause such a difference include those discussed below, as well as general economic and business conditions, competition and other factors discussed elsewhere in this report. The Partnership undertakes no obligation to release publicly any revisions to the forward-looking statements, if any, to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated or unanticipated events.
Liquidity and Capital Resources
After the sale of the DC-10, the Partnership owned and managed one commercial passenger aircraft and one freighter aircraft, both of which were off-lease in 2005. As a result of the sale of the remaining aircraft in January 2006, the Partnership has begun to liquidate pursuant to the Partnership Agreement. With the sale of the final aircraft, the Partnership will continue to hold its funds in an interest bearing money-market account until final distribution.
The Partnership invests working capital and cash flow from operations prior to its distributions to the partners in a fund that invests in short-term, highly liquid investments. At December 31, 2005, the Partnership’s unrestricted cash and cash equivalents of $1,417,000 were primarily invested in such a fund. This amount was $1,308,000 less than the Partnership’s unrestricted cash and cash equivalents at December 31, 2004 of $2,725,000. This decrease in unrestricted cash was primarily attributable to cash used for a cash distribution to partners, operating activities and payment of previously accrued payables and a $300,000 cash bond (deposit receivable) placed with the Federal court in Miami (see discussion below).
Net cash used in operating activities was $718,000, $721,000 and $371,000 in 2005, 2004, and 2003, respectively. In the aggregate, for this three-year period, net cash used in operating activities totaled $1.8 million. The $718,000 of cash used in operating activities in 2005 is comprised of a net income, adjusted for changes in assets and liabilities, as discussed below.
During October 2005, the Partnership deposited $300,000 with the 11th Circuit Court of Miami-Dade County for use as a cash bond in connection with a lawsuit filed on behalf of the Partnership against an engine shop to recover a Partnership JT8D-7B jet engine that was placed with the shop for repair, but which the shop would not return after repairs were apparently completed. As a result of the $300,000 cash deposit, the court authorized the sheriff of Miami-Dade County to recover physical possession of the engine for the Partnership. On November 14, 2005, the engine was shipped to the location of the Partnership’s off-lease aircraft in Tucson, Arizona. In January 2006, the 11th Circuit Court of Miami-Dade County dismissed this case and the $300,000 deposit was returned to the Partnership in February 2006.
Prepaid expenses increased by $10,000, or 67%, from $15,000 at December 31, 2004 to $25,000 at December 31, 2005, primarily due to premium refunds to be received for insurance premiums paid through November 2005 related to the aircraft sold during the year ended December 31, 2005. The insurance premium credit adjustments were higher in 2005, as compared to 2004, as there were no aircraft sales in 2004.
Accounts payable and accrued expenses decreased by $15,000, or 8%, from $181,000 at December 31, 2004 to $166,000 at December 31, 2005, primarily due to payments of obligations accrued at December 31, 2004.
Payables to affiliates decreased by $253,000, or 47%, from $535,000 at December 31, 2004 to $282,000 at December 31, 2005, due to the non cash conversion of $238,000 of previously accrued management fees to the General Partners to capital contributions and a $15,000 payment of accrued reimbursable expenses payable to the Administrative General Partner.
Partnership capital was $369,000 at December 31, 2005, a decrease of $2,030,000 or 85% from $2,399,000 at December 31, 2004, due to distributions of $2,565,000, partially offset by net income of $283,000 and General Partners’ capital contributions of $252,000 during 2005. The distributions were the result of $0.20 and $0.15 per Partnership Unit distributions declared by the Administrative General Partner on March 24, 2005 to investors of record as of April 1, 2005 and December 30, 2005 to investors of record as of January 2, 2006, respectively. These distributions represent a significant portion of the Partnership’s assets and therefore significantly reduce the estimated net asset value per limited partnership Unit of $0.33 reported in the Partnership’s previous annual report on Form 10-K for the year ended December 31, 2004. Further, as the Limited Partnership Agreement requires that the final liquidating distribution to the Partners be based on the Unit holders’ respective tax capital account balances, rather than on the number of Units held, the General Partners believe that an estimated net asset value per Unit would no longer provide any material information to Unit holders, and no such revised value has been calculated or included in this report. The additional General Partners’ capital contributions resulted from the contribution of management fee liabilities due to the General Partners’ of $238,000 and of the General Partners’ share of distributions payable totaling $15,000.
Results of Operations
The Partnership’s 2005 revenue was the result of a gain on sale of aircraft, interest income from cash and cash equivalents deposited in money market accounts and proceeds of $9,000 representing a distribution from a former lessee’s bankrupt estate. Due to the off lease status of the Partnership’s two remaining aircraft in 2005 and three off-lease aircraft in 2004 and 2003, there was no revenue generated from the leasing of the Partnership’s aircraft in the 2005 Period or the comparable 2004 and 2003 Periods. The Partnership’s 2004 revenue was principally the result of interest income from cash and cash equivalents deposited in money market accounts.
The Partnership also incurred certain general and administrative expenses in connection with the operations of the Partnership. General and administrative expenses consist primarily of investor reporting expenses, transfer agent and audit fees, and the cost of accounting services.
2005 as compared to 2004
The Partnership recognized net income of $283,000 for the year ended December 31, 2005 (“2005 Period”) as compared to a $341,000 net loss for the year ended December 31, 2004 (“2004 Period”). The Partnership’s increased net income for the 2005 Period as compared to the 2004 Period, is due to a gain on sale of aircraft, partially offset by somewhat higher direct lease and general and administrative expenses, as discussed below.
During the 2005 Period, the Partnership recognized a gain on sale of aircraft of $661,000 as a result of the sale of its DC 10 freighter aircraft and engines, which had a net carrying value of $200,000, for total cash proceeds of $861,000. There were no sales of aircraft during the 2004 Period.
General and administrative expenses increased by $42,000 or 16%, from $267,000 for the 2004 Period to $309,000 for the 2005 Period. This increase was partly due to increases in accrued liabilities or expenses related to investor reporting, transfer agent and audit fees during the 2005 Period as compared to the 2004 Period. The increase also was partly due to higher legal expenses related to certain public reporting matters and a lawsuit filed on behalf of the Partnership in the 2005 Period, as compared to the 2004 Period. In an attempt to reduce the level of general and administrative expense while the final aircraft were being sold, the Partnership engaged an attorney to submit to the U.S. Securities and Exchange Commission (“SEC”) a request for an SEC “no-action” letter which, if successful, would have had the effect of relieving the Partnership from the obligation of filing further periodic reports with the SEC and would have resulted in a reduction of accounting and outside auditor fees. The SEC indicated their inclination to decline the request because the Partnership continues to own aircraft and, as the Partnership would still require a year-end audit, the SEC did not believe there would be sufficient cost saving to justify granting the relief. Based on this SEC response, the no-action request was withdrawn. Additionally, the Partnership incurred legal and court fees related to a lawsuit filed in October 2005 to recover possession of one its JT8D-7B jet engines (see Note 5 also).
Direct lease expenses increased by $22,000 or 21%, from $104,000 for the 2004 Period, to $126,000 for the 2005 Period. This increase was primarily due to higher aircraft storage and maintenance costs during the 2005 Period as compared to the 2004 Period.
2004 as compared to 2003
The Partnership’s net loss was $341,000 for the year ended December 31, 2004 (“2004 Period”) as compared to $67,000 net loss for the year ended December 31, 2003 (“2003 Period”).
The Partnership’s higher net loss for the 2004 Period, as compared to the 2003 Period, is primarily due to lower revenues in the 2004 Period, compared to the 2003 Period. The Partnership had a gain from an aircraft insurance settlement in the 2003 Period, with no corresponding amount in the 2004 Period.
Gain on aircraft from insurance proceeds decreased by $819,000, from $819,000 for the 2003 Period to $0 for the 2004 Period, due to the proceeds received from insurance compensation for hail damage to the McDonnell Douglas DC-9 formerly leased to Aeromexico (see Note 4 also).
Write down of aircraft decreased by $515,000, or 100%, from $515,000 for the 2003 Period to $0 for the 2004 Period. During the 2003 Period, the carrying values of the three aircraft owned by the Partnership were reduced by a total of $515,000 to reflect management’s estimate of the market value for these types of aircraft and the price management was negotiating to sell the aircraft for, as the remaining assets of the Partnership are being liquidated.
Direct lease expenses decreased by 31%, or $47,000, from $151,000 for the 2003 Period to $104,000 for the 2004 Period. This decrease was due primarily to lower aircraft storage and maintenance costs in the 2004 Period as compared to the 2003 Period.
Inflation and Changing Prices
As jet fuel costs are a major component of the cost of operating an aircraft, periods of high fuel prices, as experienced in 2005, have negatively impacted the passenger airline and air freight industries. As the last Partnership aircraft were sold in January 2006 and the Partnership will make a liquidating distribution in the next 90 days, inflation, will have no impact.
Risks and Uncertainties
The events of September 11, 2001 had a negative impact on the US economy and the passenger airlines, including increases in airline costs such as insurance and security, and a significant decline in passenger demand for air travel. Due to the conversion of its aircraft to freighter configurations, the Partnership is more reliant on the air freight industry than the passenger airlines industry. Certain prohibitions on passenger planes carrying cargo have increased cargo for the fully dedicated air freight business. While general world economic activity has recently increased, higher jet fuel prices have significantly strained the operating finances of airlines and air freight operators. The age and maintenance status of the Partnership’s aircraft made the equipment potentially attractive to more thinly capitalized operators and used parts firms, thereby making the sale of the aircraft more uncertain.
Sarbanes-Oxley Act
On July 30, 2002, the Sarbanes-Oxley Act of 2002 (the “Act”) was enacted. Section 302 of the Act required the Securities Exchange Commission to adopt final rules that became effective on August 29, 2002, under which the principal executive officer and the principal financial officer, or persons providing similar functions, of an issuer each must certify the information contained in the issuer’s quarterly and annual reports. Section 302 also requires these officers to certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of the issuer’s internal controls, they have made certain disclosures to the issuer’s auditors and the audit committee of the board of directors about the issuer’s internal controls; and they have included information in the issuer’s quarterly and annual reports about their evaluation and whether there have been significant changes in the issuer’s internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PEGASUS AIRCRAFT PARTNERS II, L.P.
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted since (1) the information required is disclosed in the financial statements and notes thereto; (2) schedules are not required under the related instructions; or (3) the schedules are inapplicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Pegasus Aircraft Partners II, L.P.:
In our opinion, the accompanying balance sheets and the related statements of income (loss) and comprehensive income (loss), of partners’ capital and of cash flows present fairly, in all material respects, the financial position of Pegasus Aircraft Partners II, L.P. (the “Partnership”) at December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Los Angeles, California
February 15, 2006
PEGASUS AIRCRAFT PARTNERS II, L.P.
BALANCE SHEETS
DECEMBER 31, 2005 AND 2004
ASSETS
The accompanying notes are an integral part of these financial statements.
PEGASUS AIRCRAFT PARTNERS II, L.P.
STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003
The accompanying notes are an integral part of these financial statements.
PEGASUS AIRCRAFT PARTNERS II, L.P.
STATEMENTS OF PARTNERS’ CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003
The accompanying notes are an integral part of these financial statements.
PEGASUS AIRCRAFT PARTNERS II, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003
The accompanying notes are an integral part of these financial statements.
PEGASUS AIRCRAFT PARTNERS II, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
1. Significant Accounting Policies
Basis of Presentation. Pegasus Aircraft Partners II, L.P. (the “Partnership”), a Delaware limited partnership, maintains its accounting records and prepares financial statements on the accrual basis of accounting. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant assumptions and estimates relate to useful life and recoverability of the aircraft. Actual results could differ from such estimates. Certain reclassifications of prior year numbers have been made to be consistent with current year presentation.
The Partnership sold its remaining two aircraft in an “as-is, where-is” condition. With the sale of the final aircraft, the Partnership will continue to hold its funds in an interest bearing money-market account. A final distribution of the funds, net of intervening expenses and any other liabilities, is anticipated to be made within 90 days of the final aircraft sale. The carrying values of the Partnership’s remaining assets and liabilities, based on the Partnership’s accounting policies, approximate a liquidation basis of accounting.
Cash and Cash Equivalents. The Partnership invests funds not immediately required for operations or distributions in short term, highly liquid investments until such time as the funds are required to meet its obligations. The short term, highly liquid investments are recorded at cost, which approximates fair market value. For purposes of the balance sheets and the statements of cash flows, the Partnership considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Aircraft and Depreciation. The aircraft are recorded at expected liquidation value. Depreciation has been suspended since the aircraft are not in service.
Income Taxes. No provision for income taxes has been made in the financial statements since such taxes are the responsibility of the individual partners rather than the Partnership.
Net Income or Loss Per Limited Partnership Unit. The net income or loss per limited partnership unit is computed by dividing the net income or loss allocated to the Limited Partners by the weighted average number of Units outstanding during the year.
2. Organization of the Partnership
The Partnership was formed on April 26, 1989 for the purpose of acquiring, leasing and ultimately selling used commercial aircraft. The Managing General Partner of the Partnership is Pegasus Aircraft Management Corporation, a wholly owned subsidiary of Pegasus Capital Corporation, and the Administrative General Partner is Air Transport Leasing, Inc., a wholly owned subsidiary of UBS Americas, Inc. UBS Americas is the successor to Paine Webber Group, Inc. (collectively, the “General Partners”).
Although the Partnership is in liquidation pursuant to the Partnership Agreement, the Partnership would otherwise be required to dissolve and distribute all of its assets no later than December 31, 2007. The net proceeds from the sales of the remaining aircraft in January 2006 will be distributed in accordance with the Partnership Agreement (see Note 10).
Upon formation of the Partnership, the General Partners each contributed $500 to the capital of the Partnership. An additional 7,255,000 units of limited partnership interest (“Units”) were then sold at a price of $20 per Unit with the Partnership receiving gross offering proceeds of $145,100,000.
Title to the aircraft owned by the Partnership is held by non-affiliated trustees of trusts of which the Partnership is the beneficiary. The purpose of this method of holding title is to satisfy certain registration requirements of the Federal Aviation Administration.
3. Partnership Allocations
The Partnership Agreement provides that cash flow from operations be distributed on a quarterly basis at the General Partners’ discretion, 99% to the Limited Partners and 1% to the General Partners. Cash flow is defined in the Partnership Agreement as including cash receipts from operations and interest income earned, less expenses incurred and paid in connection with the ownership and operation of the aircraft. Depreciation and amortization expenses are not deducted from cash receipts in determining cash flow. Distributable proceeds from sales of aircraft upon liquidation of the Partnership will be distributed in accordance with the partners’ capital accounts after all allocations of income and losses.
Income and losses generally will be allocated 99% to the Limited Partners and 1% to the General Partners. Upon the sale of aircraft, gain generally will be allocated, first, to the General Partners in an amount equal to the difference between their capital contributions and 1.01% of the aggregate capital contributions of the Limited Partners, and then, 99% to the Limited Partners, and 1% to the General Partners.
4. Aircraft
Net Investment in Aircraft
The Partnership’s net investment in aircraft as of December 31, 2005 and 2004 consisted of the following (in thousands):
DC-9 Aircraft. The aircraft was damaged during a hailstorm early in the year 2002. The Partnership filed an insurance claim and on September 30, 2003, the Partnership received insurance proceeds of $819,421 as compensation for the hail damage to this aircraft. Because the decision was made not to repair the aircraft to its pre-damage condition, the Partnership recognized the proceeds as revenue and wrote down the aircraft’s carrying value by an additional $225,000 during the year ended December 31, 2003. The Partnership retained ownership of the aircraft and the airframe and engines.
On December 9, 2005 a Letter of Intent was signed to purchase the Partnership’s DC-9 airframe and engines for $200,000 on an “as-is, where-is” basis, and the Partnership received a deposit of $20,000. The sale of this aircraft was completed in January 2006 (see Note 10).
Boeing 727-200 Advanced Aircraft Freighter. On December 13, 2005, a Letter of Intent was signed to purchase the Partnership’s Boeing 727-200 aircraft and engines for $200,000 on an “as-is, where-is” basis, and the Partnership received a deposit of $20,000 . The sale of this aircraft was completed in January 2006 (see Note 10).
DC-10-10 Freighter. The Partnership wrote down the aircraft’s carrying value by an additional $200,000 during the year ended December 31, 2003 to its estimated realizable value. On May 13, 2005, the Partnership sold its DC 10-10 freighter aircraft and engines, which had a net carrying value of $200,000, for total cash proceeds of $861,000.
General. In the sale of its aircraft, the Partnership was essentially competing in the market for used aircraft and aircraft parts. After September 11, 2001, a large number of aircraft of a similar type to that of the Partnership’s aircraft were removed from service and are being offered for sale. The Partnership sold its remaining two aircraft in January 2006 (see Note 10).
5. Deposit Receivable
During October 2005, the Partnership deposited $300,000 with the 11th Circuit Court of Miami-Dade County for use as a cash bond in connection with a lawsuit filed on behalf of the Partnership against an engine shop to recover a Partnership JT8D-7B jet engine that was placed with the engine shop for repair, but which the shop would not return after repairs were apparently completed. The court authorized the sheriff of Miami-Dade County to recover physical possession of the engine and on November 14, 2005 the engine was shipped to the location of the Partnership’s off-lease aircraft in Tucson, Arizona. As of December 31, 2005, the Partnership has recognized approximately $10,300 in legal fees and court costs associated with this case, which are included in general and administrative expenses. In January 2006, the 11th Circuit Court of Miami-Dade County dismissed this case filed on behalf of the Partnership and the $300,000 deposit was returned in February 2006 (see Note 10). As a result of the dismissal of this case and return of the deposit in 2006, the Partnership will not incur any material additional fees and costs associated with this matter beyond those already recognized at December 31, 2005.
6. Transactions with Affiliates
The Management fee, Incentive fee and Re-lease fee payable to the General Partners are subordinated to the Limited Partners receiving an 8% annual, non-cumulative return based upon Unreturned Capital Contribution, as Unreturned Capital Contribution is defined in the Partnership Agreement. Based on anticipated future revenues, the Partnership has not accrued Management, Incentive Management and Re-Lease Fees during 2005, 2004 and 2003, and does not expect to accrue fees in future quarters. During the year ended December 31, 2005, $238,000 in previously accrued fees, which were due to the General Partners, was contributed to the General Partners’ capital account. The General Partners’ $15,000 share of the April 2005 distribution was likewise contributed to their capital account.
Management Fees. The General Partners are entitled to a quarterly subordinated Base Management fee in an amount generally equal to 1.5% of gross aircraft rentals. Of this amount, 1.0% is payable to the Managing General Partner and 0.5% is payable to the Administrative General Partner.
Incentive Management Fees. The General Partners also are entitled to a quarterly subordinated Incentive Management fee, in an amount equal to 4.5% of quarterly cash flow and sales proceeds (net of resale fees), of which 2.5% is payable to the Managing General Partner and 2.0% is payable to the Administrative General Partner.
Re-lease Fee. The General Partners are entitled to a quarterly subordinated fee for re-leasing aircraft or renewing a lease in an amount equal to 3.5% of the gross rentals from such re-lease or renewal for each quarter for which such payment is received. Of this amount, 2.5% is payable to the Managing General Partner and 1.0% is payable to the Administrative General Partner.
As part of a class action settlement agreement, an affiliate of the Administrative General Partner has agreed to pay to members of the class, fees and distributions remitted to it by the Administrative General Partner.
Reimbursable Expenses. The General Partners are entitled to reimbursement of certain expenses paid on behalf of the Partnership, which are incurred in connection with the administration and management of the Partnership. There was no such reimbursable expenses in each of the years ended December 31, 2005, 2004, and 2003. The continued absence of reimbursable expenses is due to the subcontracting of certain accounting services, the cost of which is included in general and administrative expenses. Previously accrued reimbursable expenses of $15,000 were paid to the Administrative General Partner in 2005.
7. Reconciliation to Income Tax Method of Accounting
The following is a reconciliation of the net income (loss) as shown in the accompanying financial statements to the taxable loss reported for federal income tax purposes (in thousands):
The following is a reconciliation of the amount of the Partnership’s total Partnership capital as shown in the accompanying financial statements to the tax bases of the Partnership’s net assets (in thousands):
8. Fair Value of Financial Instruments
SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value of certain financial instruments, whether or not reported in the balance sheet. Where quoted market prices are unavailable the values are based on estimates using present value or other valuation techniques. The results are significantly affected by the assumptions used including the discount rate and estimates of future cash flows. In addition, because SFAS No. 107 excludes certain assets such as leased aircraft owned by the Partnership, the aggregate fair value amounts discussed below do not purport to represent and should not be considered representative of the underlying market value of the Partnership.
The methods and assumptions used to estimate the fair value of each class of the financial instruments are described below.
Cash and cash equivalents and other receivables. For these balances, carrying value approximates fair value due to their short-term nature.
Accounts payable and accrued expense and payable to affiliates. For these balances carrying value approximates fair value due to their short-term nature.
9. Selected Quarterly Financial Data (unaudited)
The following is a summary of the quarterly results of operations for the years ended December 31, 2005 and 2004 (in thousands, except per unit amounts):
10. Subsequent Events
On January 5, 2006, the Partnership’s DC-9 airframe and engines were sold for total cash proceeds of $200,000.
On January 26, 2006, the Partnership’s Boeing 727 aircraft was sold for total cash proceeds of $200,000
On January 17, 2006 the Partnership made a distribution of cash to Limited Partners totaling $1,088,250, which had been declared on December 30, 2005 to investors of record as of January 2, 2006.
In January 2006, the 11th Circuit Court of Miami-Dade County dismissed the case filed on behalf of the Partnership as described in footnote 5 above. On February 1, 2006 the Partnership received the $300,000 in funds, which had been on deposit with the Miami Court.
With the sale of the two remaining aircraft in January 2006, the Partnership has begun to liquidate pursuant to the Partnership Agreement. The remaining funds are in an interest-bearing account and will be disbursed, net of any liabilities that may arise. It is the current intention of the General Partners, subject to no other contingencies arising, to distribute the balance of remaining cash available pursuant to the Partnership Agreement within three months. The Partnership’s termination is anticipated to occur no later than April 30, 2006.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements with accountants with respect to accounting or financial disclosure issues during 2005, 2004, and 2003.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
The President and Chairman of the Board of Pegasus Aircraft Management Corporation and the President of Air Transport Leasing, Inc. (collectively, the “Certifying Officers”) have evaluated the effectiveness of the Partnership’s disclosure controls and procedures as of the end of the period covered by this report. These disclosure controls and procedures are those controls and procedures which are designed to insure that all the information required to be disclosed by the Partnership in all its periodic reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported, within the time periods specified by the Commission and that the information is communicated to the President and Chairman of the Board of Pegasus Aircraft Management Corporation and the President of Air Transport Leasing, Inc. on a timely basis.
The Certifying Officers concluded, based on such evaluation, that the Partnership’s disclosure controls and procedures were suitable and effective for the Partnership as of the end of the period covered by this report, taking into consideration the size and nature of the Partnership’s business and operations. No significant deficiencies or material weaknesses in the controls or procedures were detected, so no corrective actions needed to be taken.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no officers and directors. The General Partners jointly manage and control the affairs of the Partnership and have general responsibility and authority in all matters affecting its business. Richard L. Funk resigned as Senior Vice President, Technical of Pegasus Aircraft Management Corporation as of January 15, 2001, and Ervin Bach assumed the position on the same day. Information concerning the directors and executive officers of the General Partners is as follows:
Pegasus Aircraft Management Corporation
Name
Positions Held
Richard S. Wiley
President and Chairman of the Board
Carol L. Chase
Executive Vice President, General Counsel and Secretary
Richard M. Oster
Senior Vice President, Chief Financial Officer
Ervin Bach
Senior Vice President, Technical
Richard S. Wiley, age 52, is President and Chairman of the Board of the Managing General Partner and Pegasus Capital Corporation (“PCC”), which was formed in 1988. Prior to forming Pegasus Capital Corporation, Mr. Wiley was a Vice President of CIS Corporation (“CIS”), a wholly owned subsidiary of Continental Information Systems Corporation (“Continental”) for the period 1986 to 1988. Mr. Wiley originated aircraft transactions throughout the world and sold aircraft to third-party investors. From 1985 to 1986, Mr. Wiley worked as Treasurer of Caterpillar Capital Company in San Diego, California. From 1983 to 1985, he served as Managing General Partner and President of RAM Financial Corporation in Houston, Texas, an equipment leasing venture capital company. Prior to joining RAM, he worked for GATX Leasing Corporation as a District Manager from 1980 to 1983. Mr. Wiley received a BS degree from the Indiana University School of Business and an MBA from the University of California, Los Angeles.
Carol L. Chase, Esq., age 53, is an Executive Vice President, General Counsel and Secretary of the Managing General Partner and Pegasus Capital Corporation. She is responsible for providing legal counsel for all aspects of capital equipment leasing, financing and placement. Prior to joining Pegasus, from 1987 to 1988, Ms. Chase was Senior Corporate Counsel at CIS where she provided legal counsel for transactions involving aircraft and related equipment. From 1981 to 1987, Ms. Chase was legal counsel at Transamerica Airlines where she was responsible for the legal negotiation and documentation for the purchase, sale, lease and finance of aircraft and aircraft-related equipment. Ms. Chase received a BA degree from California State University, Hayward and a J.D. degree from the University of California, Davis. She is a member of the State Bar of California, the American Bar Association, and the American Corporate Counsel Association.
Richard M. Oster, age 54, is Chief Financial Officer, Senior Vice President Administration of Pegasus Aircraft Management Corporation (PAMC). Mr. Oster is primarily responsible within the Pegasus companies for all corporate-wide Finance and Administration functions that include all financial reporting, planning and analysis, accounting, information systems, human resources and other administrative functions. Prior to joining Pegasus, Mr. Oster served as Senior Vice President and Chief Financial Officer of Crowley Maritime Corporation; and prior to that, as Senior Vice President and Chief Financial Officer of Inchcape Shipping Services. Mr. Oster is a CPA and holds a B.S. in Business Administration from the University of North Carolina and a M.B.A. from the Rutgers Graduate School of Business.
Ervin Bach, 44, is Senior Vice President, Technical of the Managing General Partner and Pegasus Capital Corporation. Mr. Bach has been employed in various technical capacities with affiliates of the Managing General Partner since 1996. From 1994 to 1996 he was Manager of Structures for Hamilton Aviation, Tucson and he has held the same position with Lockheed Aeromod, Tucson from 1993 to 1994. From 1989 to 1993, Mr. Bach held various positions with the Evergreen Air Center, Marana, Arizona, the last being Manager of Engineering. During 1991, Mr. Bach was employed for seven months as a structural mechanic with Trans World Airlines in Kansas City. Mr. Bach was with the United States Air Force from 1982 to 1989, rising to the rank of Staff Sergeant with the responsibility of maintaining the mission worthiness of 13 electronic combat C-130’s. Mr. Bach holds an Airframe and Power Plant license and attended USAF technical and leadership schools. Mr. Bach attended Pima Community College during 1990-91.
Air Transport Leasing, Inc.
Clifford B. Wattley, age 56, is President and a Director of the Administrative General Partner. Upon the resignation of Timothy F. Kelly, discussed below, Mr. Wattley assumed the positions of Chief Financial Officer and Chief Accounting Officer. Mr. Wattley is a Corporate Vice President with UBS Financial Services, Inc. having joined the firm in 1986. He also was employed previously by Paine, Webber, Jackson & Curtis from 1979 to 1980. From 1986 to 1992, Mr. Wattley participated in PaineWebber’s Principal Transactions Group. Since 1992, Mr. Wattley has been a member of the Private Investment Department. He holds a Bachelor of Science degree in engineering from Columbia University and a Masters in Business Administration from Harvard University.
Timothy F. Kelly, resigned as Vice President, Secretary, Treasurer, Chief Financial and Accounting Officer and a Director of the Administrative General Partner effective March 2005.
Section 16 (a) Beneficial Ownership Reporting Compliance
Based solely on a review of Forms 3, 4 and 5, the Partnership is not aware of any failures to file reports of beneficial ownership required to be filed during or for the year ended December 31, 2005.
Code of Ethics
The Partnership has not adopted a specific code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions. The Partnership is in its liquidation stage, has limited assets and operations and will liquidate and terminate in the near future. The Managing General Partner and Administrative General Partner did not deem it necessary or appropriate under these circumstances to expend Partnership resources to enact such a code of ethics.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
No compensation was paid by the Partnership to the officers and directors of the General Partners. See Item 13 of this Report, “Certain Relationships and Related Transactions”, which is incorporated herein by reference, for a description of the compensation and fees paid to the General Partners and their affiliates by the Partnership during 2005.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNIT HOLDER MATTERS
(a)
As of the date hereof, no person is known by the Partnership to be the beneficial owner of more than 5% of the Units of the Partnership. The Partnership has no directors or officers, and neither of the General Partners of the Partnership owns any Units. The Assignor Limited Partner for the Partnership, Pegasus Assignor L.P.A., Inc. (an affiliate of the Managing General Partner), owns 5 Units. Additionally, ATL Inc., an affiliate of the Administrative General Partner owns approximately 112,916 units.
The names and addresses of the General Partners are as follows:
Managing General Partner:
Pegasus Aircraft Management Corporation
Four Embarcadero Center, 35th Floor
San Francisco, CA 94111
Administrative General Partner:
Air Transport Leasing, Inc.
1285 Avenue of the Americas, 37th Floor
New York, NY 10019
The General Partners, collectively, have a 1% interest in each item of the Partnership’s income, gains, losses, deductions, credits and distributions.
(b)
The following table sets forth the number of Units beneficially owned by directors of the General Partners and by all directors and officers of such corporations as a group as of March 1, 2006.
(c)
The Partnership knows of no arrangements, the operation of the terms of which may at a subsequent date result in a change in control of the Partnership.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partners and their affiliates have received or will receive certain types of compensation, fees, or other distributions in connection with the operations of the Partnership. The fees and compensation were determined in accordance with the applicable provisions of the Partnership Agreement.
The Management Fee, Incentive Fee and Re-lease Fee payable to the General partners are subordinated to the Limited partners receiving an 8% annual, non-cumulative return based upon Unreturned Capital Contribution, as Unreturned Capital Contribution is defined in the Partnership Agreement. As the Partnership had not achieved this level of distribution since 2000, fees were being accrued but not paid. Based upon Preferred Return as determined pursuant to the Partnership Agreement and the estimated value of the Partnership’s remaining assets, a determination was made to reverse the fees accrued but unpaid to the General partners for fiscal years 2000 through the first quarter of 2002. In June 2002, fees previously accrued of $2,330,000 were taken into revenue with a corresponding reduction in Payable to Affiliates. In addition, based on anticipated future revenues, the Partnership does not expect to accrue Management and re-lease fees in future quarters.
As described below, there were no fees paid or payable to the General Partners and their affiliates for the year 2005.
Base Management Fee. The General Partners are entitled to receive a quarterly subordinated base management fee in an amount generally equal to 1.5% of gross aircraft rentals, net of re-lease fees paid. Of this amount, 1.0% is payable to the Managing General Partner and 0.5% is payable to the Administrative General Partner. Management Fees of $17,000 were accrued for the three months ended March 31, 2002 and this accrual was reversed at June 30, 2002.
Incentive Management Fee. The General Partners are entitled to receive a quarterly subordinated incentive management fee, in an amount equal to 4.5% of quarterly cash flow and sales proceeds (net of resale fees), of which 2.5% is payable to the Managing General Partner and 2.0% is payable to the Administrative General Partner. Incentive Management Fees of $113,000 were accrued for the three months ended March 31, 2002 and this accrual was reversed at June 30, 2002.
Re-lease Fee. The General Partners are entitled to receive a quarterly subordinated fee for re-leasing aircraft or renewing a lease in an amount equal to 3.5% of the gross rentals from such re-lease or renewal for each quarter for which such payment is received. Of this amount, 2.5% is payable to the Managing General Partner and 1.0% is payable to the Administrative General Partner. Re-lease Fees of $42,000 were accrued for the three months ended March 31, 2002 and this accrual was reversed at June 30, 2002.
Reimbursable Expenses. The General Partners are entitled to reimbursement of certain expenses paid on behalf of the Partnership which are incurred in connection with the administration and management of the Partnership. There were no such reimbursable expenses during 2005, 2004 and 2003. As discussed in Note 6 to the Financial Statements, reimbursable expenses remained $0 due to the subcontracting of certain accounting services, and their cost is included in general and administrative expenses.
Other. In 2002, the Partnership purchased certain equipment and parts, which was in the amount of $49,000, for two Partnership aircraft from a company in which the Director and President of the Managing General Partner had an ownership interest. Also, until March 2002, the Partnership paid $70,000 to a licensed maintenance facility affiliated with the Managing General Partner for the storage of and work performed on certain aircraft.
Partnership Interest. The General Partners received distributions of $26,000, $0 and $31,000 as their allocable share of distributable cash flow for 2005, 2004 and 2003, respectively. Pursuant to the Partnership Agreement, one percent of the Partnership’s net income of $290,000 and net loss of $341,000 and $67,000 for 2005, 2004 and 2003, respectively, was allocated to the General Partners.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees - During the year ended December 31, 2005 and 2004, the Partnership was billed $63,000 and $53,000, respectively, by its independent registered public accounting firm PricewaterhouseCoopers LLP. Audit fees for 2005 and 2004 were for professional services provided for the quarterly review of the financial statements in the Partnership’s Form 10-Q and the annual audit of the financial statements in the Partnership’s Form 10-K.
Tax Fees - For each of the years ended December 31, 2005 and 2004, the Partnership was billed $12,500 by PricewaterhouseCoopers LLP for the review of federal and state partnership tax returns.
The board of directors of each of the General Partners function as the audit committee in the absence of an actual designated audit committee. All engagements for audit and non-audit services to be performed for the Partnership by the Partnership’s independent registered public accounting firm must be approved in advance by each General Partner’s board of directors, and all such services described above were so approved.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1.
Financial Statements: (Incorporated by reference to Item 8 of this Report, “Financial Statements and Supplementary Data”).
(b) No reports on Form 8-K were filed by the Registrant during the quarter for which this report is filed.
(c) Exhibits required to be filed.
(d)
Stipulation and Order, dated June 19, 1991, among Continental Airlines, Inc., New York Airlines, Inc., Bay Air Lease I, Cirrus Capital Corporation of Florida, Bay Air Lease III, Meridian Trust Company, as Owner Trustee, IAL Aircraft Acquisitions, Inc., Pegasus Aircraft Partners II, L.P., Pegasus Capital Corporation, IAL Aviation Resources, Inc., Aircraft Leasing, Inc., Pegasus Aircraft Partners, L.P., Gilman Financial Services, Inc. and First Security Bank of Utah, as Owner Trustee concerning various aircraft and aircraft engines. Filed as Exhibit 19.1(a) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1991.*
(e)
Agreed Order, dated July 3, 1991, in connection with approval of Stipulation and Order, dated June 19, 1991, among Continental Airlines, Inc., New York Airlines, Inc., Bay Air Lease I, Cirrus Capital Corporation of Florida, Bay Air Lease III, Meridian Trust Company, as Owner Trustee, IAL Aircraft Acquisitions, Inc., Pegasus Aircraft Partners II, L.P., Pegasus Capital Corporation, IAL Aviation Resources, Inc., Aircraft Leasing, Inc., Pegasus Aircraft Partners, L.P., Gilman Financial Services, Inc. and First Security Bank of Utah, as Owner Trustee concerning various aircraft and aircraft engines. Filed as Exhibit 19.1(b) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1991.*
(f)
Supplemental Stipulation and Order, dated December 30, 1992, among Continental Airlines, Inc., Bay Air Lease I, Cirrus Capital Corporation of Florida, Bay Air Lease III, Aviation Assets I, Aviation Assets II, Aviation Assets III, Aviation Assets IV, IAL Aircraft Acquisitions, Inc., Pegasus Aircraft Partners II, L.P., Pegasus Capital Corporation, IAL Aviation Resources, Inc., Pegasus Aircraft Partners, L.P., Gilman Financial Services, and First Security Bank of Utah, as Owner Trustee concerning various aircraft and aircraft engines. Filed as Exhibit 10.8(f) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992.*
(g)
Lease Termination Agreement dated November 15, 1995 between and among Continental Airlines, Inc., First Security Bank of Utah, N.A., Pegasus Aircraft Management, Inc. and Air Transport Leasing, Inc.
(h)
Supplement to Lease Termination Agreement between and among Continental Airlines, Inc., First Security Bank of Utah, N.A., Pegasus Aircraft Management, Inc. and Air Transport Leasing, Inc.
10.9
Prospectus of Registrant, dated as of July 11, 1989. Filed as Exhibit 2 of the Registrant’s Form 8-K filed for the Event occurring on September 20, 1989.*
10.10 (a)
Loan Agreement, dated June 10, 1992, between Pegasus Aircraft Partners II, L.P. and Philadelphia National Bank, Incorporated, as CoreStates Bank, N.A. Filed as Exhibit 10.3(a) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.*
(b)
Promissory Note, dated June 10, 1992, made by Pegasus Aircraft Partners II, L.P. in favor of Philadelphia National Bank, Incorporated, as CoreStates Bank, N.A. Filed as Exhibit 10.3(b) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.*
(c)
Assignment of Collateral, dated as of June 10, 1992, between Pegasus Aircraft Partners II, L.P. and Philadelphia National Bank, Incorporated, as CoreStates Bank, N.A. Filed as Exhibit 10.3(c) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.*
(d)
Security Agreement and Assignment of Lease, dated as of June 10, 1992, between First Security Bank of Utah, National Association as Owner Trustee and Philadelphia National Bank, Incorporated, as CoreStates Bank, N.A. Filed as Exhibit 10.3(d) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.*
31.1
Rule 13a-14(a)/15d-14(a) Certification.
31.2
Rule 13a-14(a)/15d-14(a) Certification.
32.1
Section 1350 Certification.
32.2
Section 1350 Certification.
SIGNATURES
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.
Dated: March 16, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 16, 2006.
Signature
Title
/s/ Richard S. Wiley
President and Chairman of the Board of
Richard S. Wiley
Pegasus Aircraft Management Corporation
/s/ Clifford B. Wattley
President, Director, Chief Financial and
Clifford B. Wattley
Accounting Officer of Air Transport Leasing, Inc.