Item 1. Business
General Development of Business
ICON Cash Flow Partners, L.P., Series E (the "Partnership") was formed in November 1991 as a Delaware limited partnership. The Partnership commenced business operations on its initial closing date, July 6, 1992, with the admission of 13,574.17 limited partnership units. Between July 7, 1992 and December 31, 1992, 236,021.97 additional units were admitted and from January 1, 1993 to July 31, 1993 (the final closing date), 360,815.37 additional units were admitted bringing the final admission to 610,411.51 units totaling $61,041,151 in capital contributions. During 1994 the Partnership redeemed 728 limited partnership units, during 1995 the Partnership redeemed 45 limited partnership units, during 1996 the Partnership redeemed 193 limited partnership units and during 1997 the Partnership redeemed 1,000 units, leaving 608,445.51 units outstanding at December 31, 1997. The sole general partner is ICON Capital Corp. (the "General Partner").
The Partnership's Reinvestment Period will end on July 31, 1998. The Disposition Period will begin on August 1, 1998 and is expected to continue through February 1, 2001. During the Disposition Period the Partnership will distribute substantially all distributable cash from operations and sales to the partners and begin the orderly termination of its operations and affairs. The Partnership will not reinvest in any leased equipment during the Disposition Period.
Narrative Description of Business
The Partnership is an equipment leasing income fund. The principal investment objective of the Partnership is to obtain the maximum economic return from its investments for the benefit of its limited partners. To achieve this objective, the Partnership has and intends to continue to: (1) acquire a diversified portfolio of short-term, high-yield investments; (2) make monthly cash distributions to its limited partners from cash from operations, commencing with each limited partner's admission to the Partnership, continuing through the Reinvestment Period, which period will end no later than July 31, 1998; (3) re-invest substantially all undistributed cash from operations and cash from sales in additional equipment and financing transactions during the Reinvestment Period; and (4) sell the Partnership's investments and distribute the cash from sales of such investments to its limited partners within five to seven and one-half years of the final closing date. In addition to acquiring equipment and entering into leases, the Partnership also (1) acquires equipment already subject to leases originated by affiliates and non-affiliated lessors and (2) enters into financing transactions, which are (i) secured by the equipment financed and lease revenues therefrom (if any) and additional collateral as deemed necessary by the credit review committee of the General Partner and (ii) evidenced by the irrevocable obligation of the lessees.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
The equipment leasing industry is highly competitive. In initiating its leasing transactions, the Partnership competes with leasing companies, manufacturers that lease their products directly, equipment brokers and dealers and financial institutions, including commercial banks and insurance companies. Many competitors are larger than the Partnership and have access to more favorable financing.
The Partnership has no direct employees. The General Partner has full and exclusive discretion in management and control of the Partnership.
Lease and Financing Transactions
For the years ended December 31, 1997 and 1996, the Partnership purchased and leased or financed $23,112,295 and $20,226,129 of equipment, respectively, with a weighted average initial transaction term of 55 and 48 months, respectively, and invested $16,287,305 and $15,955 in joint ventures in 1997 and 1996, respectively. Included in the summary of equipment cost by category below is 100% of the equipment cost acquired by two joint ventures in which the Partnership has a 99% and 75% interest. The Partnership accounts for these investments by consolidating 100% of the assets and liabilities of the joint ventures and reflecting, as a liability, the related minority interests. At December 31, 1997, the weighted average initial transaction term of the portfolio was 27 months. A summary of the portfolio equipment cost by category held at December 31, 1997 and 1996 is as follows:
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
The Partnership has one lease which individually represents greater than 10% of the total portfolio equipment cost at December 31, 1997 and 1996. The lease is for a 1988 MD-83 passenger airplane. The aircraft is currently on lease with Aerovias de Mexico, S.A. de C.V. ("Aero Mexico") and the purchase price represents 22.4% of the total portfolio cost at December 31, 1997. The aircraft was previously on lease with Alaska Airlines, Inc. and the purchase price represented 16.9% of the total portfolio cost at December 31, 1996.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Item 2.
Item 2. Properties
The Partnership neither owns nor leases office space or equipment for the purpose of managing its day-to-day affairs. The General Partner has exclusive control over all aspects of the business of the Partnership, including providing any necessary office space. As such, the General Partner is compensated for services related to the management of the Partnership's business.
Item 3.
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of 1997.
PART II
Item 5.
Item 5. Market for the Registrant's Securities and Related Security Holder Matters
The Partnership's limited partnership interests are not publicly traded nor is there currently a market for the Partnership's limited partnership interests. It is unlikely that any such market will develop.
Number of Equity Security Holders Title of Class as of December 31, -------------- --------------------------------- 1997 1996 ---- ----
Limited partners 3,748 3,746 General Partner 1 1
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Item 6.
Item 6. Selected Consolidated Financial and Operating Data
The above selected consolidated financial data should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Item 7.
Item 7. General Partner's Discussion and Analysis of Financial Condition and Results of Operations
The Partnership's portfolio consisted of a net investment in finance leases, operating leases, financings and equity investment in joint ventures representing 46%, 31%, 20% and 3% of total investments at December 31, 1997, respectively, and 50%, 24%, 26% and less than 1% of total investments at December 31, 1996, respectively.
Results of Operations
Years Ended December 31, 1997 and 1996
For the years ended December 31, 1997 and 1996, the Partnership purchased and leased or financed equipment with an initial cost of $23,112,295 and $20,226,129, respectively, to 447 and 157 lessees or equipment users, respectively.
Revenues for the year ended December 31, 1997 were $7,611,293, representing a decrease of $2,237,923 or 23% from 1996. The decrease in revenues resulted primarily from a decrease in finance income of $1,227,017 or 27%, a decrease in net gain on sales or remarketing of equipment of $732,621 or 38%, a decrease in rental income of $697,397 or 26% and a decrease in leveraged leases of $200,517 or 100% from 1996. These decreases were partially offset by an increase in interest income and other of $518,440 or 125% and an increase in income from equity investment in joint ventures of $101,189. The overall decrease in finance income resulted from a decrease in the average size of the finance lease portfolio from 1996 to 1997. The decrease in net gain on sales or remarketing was due to a decrease in the number of leases maturing and the underlying equipment being sold or remarketed for which the proceeds received were in excess of the remaining carrying value. Rental income decreased from 1996 to 1997 due to reduced rentals as a result of the Partnerships' remarketing of aircraft formerly on lease to Alaska Airlines, Inc. The new lease is with Aerovias de Mexico, S.A. de C.V. ("Aero Mexico"). The decrease in leverage leases was due to the sale of all of the underlying equipment relating to the Partnership's investment in leverage leases during 1996. Interest income increased due to the Partnership's 1997 short-term loans to ICON Asset Acquisition and to ICON Cash Flow Partners, L.P., Series D resulting in increased interest income (See Note 9 Related Party Transaction for a discussion of these notes). Income from equity investment in joint ventures increased as a direct result of the Partnership's September 1997 contribution to ICON Receivables 1997-A LLC. This contribution consisted of equipment lease and finance receivables, residuals and cash totaling $16,287,305.
Expenses for the year ended December 31, 1997 were $5,242,708, representing a decrease of $2,362,625 or 31% from 1996. The decrease in expenses resulted primarily from a decrease in provision for bad debts of $400,000 or 100%, a decrease in amortization of initial direct costs of $426,340 or 48%, a decrease in depreciation expense of $586,092 or 55%, a decrease in general and administrative expense of $237,588 or 39%, a decrease in management fees of $200,608 or 18%, a decrease in interest expense of $486,489 or 16% and a decrease in administrative expense reimbursements of $76,854 or 14%. These decreases were partially offset by an increase in minority interest in joint venture of $51,346 from 1996. As a result of an analysis of delinquency, an assessment of overall risk and a review of historical loss experience it was determined that no provision for bad debts was required for the twelve months ended December 31, 1997.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Amortization of initial direct costs, general and administrative expense, administrative expense reimbursement and management fees decreased due to a decrease in the average size of the portfolio from 1996 to 1997. Depreciation expense decreased due to the Partnership's reduced investment in operating leases. Interest expense decreased due to a decrease in the average debt outstanding from 1996 to 1997. The increase in minority interest in joint venture resulted from the Partnership's August 1997 investment in a joint venture.
Net income for the years ended December 31, 1997 and 1996 was $2,368,585 and $2,243,883, respectively. The net income per weighted average limited partnership unit was $3.85 and $3.64 for 1997 and 1996, respectively.
Results of Operations for the Years Ended December 31, 1996 and 1995
Revenues for the year ended December 31, 1996 were $9,849,216, representing a decrease of $2,331,649 or 19% from 1995. The decrease in revenues was primarily attributable to a decrease in income from leveraged leases, of $2,404,244 or 92%, a decrease in finance income of $244,575 or 5% and a decrease in interest income and other of $15,474 or 4% from 1995. The decrease in these revenues was partially offset by an increase in net gain on sales or remarketing of equipment of $331,649 or 21% from 1995. Income from leveraged leases decreased due to the sale of all of the underlying equipment relating to the Partnership's investment in leveraged leases. The overall decrease in finance income resulted from a decrease in the average size of the finance lease portfolio from 1995 to 1996. Interest income and other decreased due to a decrease in the average cash balance from 1995 to 1996. Net gain on sales or remarketing of equipment increased primarily as the result of the Partnership selling its investment in leveraged leases. The underlying equipment, which consisted of towboats and barges was sold for a net gain of $997,606.
Expenses for the year ended December 31, 1996 were $7,605,333, representing a decrease of $2,989,730 or 28% from 1995. The decrease in expenses was primarily attributable to a decrease in interest expense of $1,420,168 or 32%, a decrease in amortization of initial direct costs of $642,545 or 42%, a decrease in management fees of $476,233 or 30%, a decrease in administrative expense reimbursements of $221,668 or 28%, a decrease in provision for bad debts of $200,000 or 33% and a decrease in general and administrative expense of $30,069 or 5% from 1995. Interest expense decreased due to a decrease in the average debt outstanding from 1995 to 1996. The decrease in amortization of initial direct costs, management fees, administrative expense reimbursements and general and administrative fees resulted from a decrease in the average size of the portfolio from 1995 to 1996. Depreciation expense decreased due to the Partnership's reduced investment in operating leases. As a result of an analysis of delinquency, an assessment of overall risk and a review of historical loss experience, it was determined that a lesser provision for bad debts was required for the year ended December 31, 1996.
Net income for the years ended December 31, 1996 and 1995 was $2,243,883 and $1,585,802, respectively. The net income per weighted average limited partnership unit was $3.64 and $2.58 for 1996 and 1995, respectively.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Liquidity and Capital Resources
The Partnership's primary sources of funds in 1997, 1996 and 1995 were net cash provided by operations of $21,638,350, $13,210,339 and $8,768,414, respectively, proceeds from sales of equipment of $15,313,194, $10,358,637 and $7,419,261, respectively, and proceeds from a recourse debt of $20,765,451 in 1997 and proceeds from a revolving credit facility of $13,780,000 in 1996. These funds were used to purchase equipment, to fund cash distributions and to make payments on borrowings. The Partnership intends to continue to purchase additional equipment through the end of the Reinvestment Period and to fund cash distributions utilizing cash provided by operations and proceeds from expected sales of equipment.
In March 1997 three affiliates of the Partnership, ICON Cash Flow Partners, L.P., Series D ("Series D"), L.P. Six and L.P. Seven (collectively the "1997-A Members"), contributed and assigned equipment lease and finance receivables and residuals with a net book value of $4,805,767, $5,304,010 and $5,391,216 and cash of $125,000, $300,000 and $275,000, respectively to ICON Receivables 1997-A L.L.C. ("1997-A"), a special purpose entity created for the purpose of originating new leases, managing existing contributed assets and, eventually, securitizing its portfolio. In order to fund the acquisition of new leases, 1997-A obtained a warehouse borrowing facility from Prudential Securities Credit Corporation (the "1997-A Facility"). Borrowings under the 1997-A Facility were based on the present value of the new leases. Outstanding amounts under the 1997-A Facility bore interest equal to Libor plus 1.5%.
On September 19, 1997 the Partnership, L.P. Six and L.P. Seven contributed and assigned equipment lease and finance receivables and residuals with a net book value of $15,547,305, $5,225,794 and $0 and cash of $740,000, $300,000 and $484,244, respectively to 1997-A. The 1997-A Members received a 31.19%, 17.81% 31.03% and 19.97% interest, respectively, in 1997-A based on the present value of their related contributions.
On September 19, 1997, 1997-A securitized substantially all of its equipment leases and finance receivables and residuals. The net proceeds from the securitization totaled $47,140,183, of which $16,658,877 was used to pay down the 1997-A Facility, and the remaining proceeds, after establishing reserves for expenses, were distributed to the 1997-A Members based on their respective interests. The Partnership's share of the proceeds from the securitization, after paying off the revolving credit facility, totaled $14,625,488. 1997-A became the beneficial owner of a trust. The trustee for the trust is Texas Commerce Bank ("TCB"). In conjunction with this securitization, the portfolio as well as the General Partner's servicing capabilities were rated "AA" by Duff & Phelps and Fitch, both nationally recognized rating agencies. The General Partner, as servicer, is responsible for managing, servicing, reporting on and administering the portfolio. 1997-A remits all monies received from the portfolio to TCB. TCB is responsible for disbursing to the noteholders their respective principal and interest and to 1997-A the excess of cash collected over debt service from the portfolio. The 1997-A Members receive their pro rata share of any excess cash on a monthly basis from 1997-A. The Partnership accounts for its investment in 1997-A under the equity method of accounting. The Partnership's original investment was recorded at cost and is adjusted by its share of earnings, losses and distributions thereafter.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
In August 1997 the Partnership, L.P. Six and L.P. Seven (collectively, the "1997-B Members") formed ICON Receivables 1997-B L.L.C. ("1997-B"), for the purpose of originating lease transactions and ultimately securitizing its portfolio. The 1997-B Members contributed $2,250,000 (75.00% interest), $250,000 (8.33% interest) and $500,000 (16.67% interest), respectively to 1997-B. In order to fund the acquisition of additional leases, 1997-B obtained a warehouse borrowing facility from Prudential Securities Credit Corporation (the "1997-B Warehouse Facility"). Borrowings under the 1997-B Warehouse Facility are based on the present value of the new leases. Outstanding amounts under the 1997-B Warehouse Facility bear interest equal to Libor plus 1.5%. Collections of receivables from leases are used to pay down the 1997-B Warehouse Facility, however, in the event of a default, all of 1997-B's assets are available to cure such default. The net proceeds from the expected securitization of these assets will be used to pay-off the remaining 1997-B Warehouse Facility balance and the remaining proceeds will be distributed to the 1997-B Members in accordance with their membership interests. After securitization, the 1997-B Members may receive, in accordance with their membership interests, additional proceeds if 1997-B generates excess cash (cash after payment of debt and expenses).
The Partnership had notes payable at December 31, 1997 and 1996 of $41,272,934 and $47,168,921, respectively, as a result of borrowings secured by equipment. These amounts consisted of $21,575,994 and $29,300,493 in non-recourse notes which are being paid directly to the lenders by the lessees, respectively, and $3,596,070 and $4,868,428 in non-recourse residual value notes, respectively, which will be paid to the extent proceeds are available in excess of the Partnership's estimated unguaranteed residuals and $16,100,870 outstanding under the 1997-B Warehouse Facility at December 31, 1997.
The Partnership entered into a revolving credit agreement (the "Facility") in December 1995. The Facility was amended in 1996 and again in 1997. The maximum amount available under the Facility was $25,000,000 and at December 31, 1996 the Partnership had $13,000,000 outstanding. In September 1997 the Partnership paid the outstanding balance and terminated the agreement.
On December 31, 1996, the Partnership and an affiliate, ICON Cash Flow Partners, L.P. Seven ("L.P. Seven"), formed ICON Cash Flow Partners L.L.C. III ("ICON Cash Flow LLC III"), for the purpose of acquiring and managing an aircraft currently on lease to Continental Airlines, Inc. The aircraft is a 1976 McDonnell Douglas DC-10-30 and cost $10,905,228. The lease is a leveraged lease and the lease term expires in April 2003. Profits, losses, excess cash and disposition proceeds are allocated 1% to the Partnership and 99% to L.P. Seven. The Partnership's investment in ICON Cash Flow LLC III has been reflected as "Equity investment in joint venture."
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
On January 28, 1997, the Partnership lent $7,780,328 to ICON Asset Acquisition L.L.C. I, a joint venture limited liability corporation formed by ICON Cash Flow Partners L.P., Series B (8.93% interest), ICON Cash Flow Partners L.P., Series C (13.39% interest) and ICON Cash Flow Partners L.P. Six (77.68% interest), all affiliates of the Partnership. The note was short term, bore interest at the rate of 11% and was paid in full on August 31, 1997. The interest rate charged on the loan approximated market rates at that time.
On June 5, 1997, the Partnership lent $3,500,000 to ICON Cash Flow Partners, L.P., Series D, an affiliate of the Partnership. The loan was in the form of a short-term note, bore interest at the rate of 11% and was repaid, along with $26,370 in accrued interest, on June 30, 1997. The interest rate charged on the loan approximated market rates at that time.
Cash distributions to the limited partners for the years ended December 31, 1997, 1996 and 1995, which were paid monthly, totaled $7,768,316, $7,771,164 and $7,773,082, respectively of which $2,344,899, $2,221,444 and $1,569,944 was investment income and $5,423,417, $5,549,720, and $6,203,138 was a return of capital, respectively. The monthly annualized cash distribution rate to limited partners for the years ended December 31, 1997, 1996 and 1995 was 12.75%, of which 3.85%, 3.64% and 2.58% was investment income and 8.90%, 9.11%, and 10.17% was a return of capital, respectively, calculated as a percentage of each partners' initial capital contribution. The limited partner distribution per weighted average unit outstanding for the years ended December 31, 1997, 1996 and 1995 was $12.75, of which $3.85, $3.64 and $2.58 was investment income and $8.90, $9.11 and $10.17 was a return of capital, respectively.
As of December 31, 1997, except as noted above, there were no known trends or demands, commitments, events or uncertainties which are likely to have any material effect on liquidity. During the Reinvestment Period, as cash is realized from operations, sales of equipment, and borrowings, the Partnership will continue to invest in equipment leases and financings where it deems it to be prudent while retaining sufficient cash to meet its reserve requirements and recurring obligations as they become due.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Item 8.
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements Page Number
Independent Auditors' Report 15
Consolidated Balance Sheets as of December 31, 1997 and 1996 16-17
Consolidated Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995 18
Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 1997, 1996 and 1995 19
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 20-22
Notes to Consolidated Financial Statements 23-36
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1997
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Partners ICON Cash Flow Partners, L.P., Series E:
We have audited the accompanying consolidated balance sheets of ICON Cash Flow Partners, L.P., Series E (a Delaware limited partnership) as of December 31, 1997 and 1996, and the related consolidated statements of operations, changes in partners' equity and cash flows for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. 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 disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ICON Cash Flow Partners, L.P., Series E as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP --------------------------------- KPMG Peat Marwick LLP
March 27, 1998 New York, New York
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
1997 1996 ---- ----
Assets
Cash .................................... $ 9,460,337 $ 1,203,626 ------------ ------------
Investment in finance leases Minimum rents receivable ............. 21,979,203 31,294,210 Estimated unguaranteed residual values 7,380,296 11,769,952 Initial direct costs ................. 225,158 498,927 Unearned income ...................... (3,811,419) (4,515,040) Allowance for doubtful accounts ...... (553,114) (844,709) ------------ ------------ 25,220,124 38,203,340
Investment in operating leases Equipment at cost .................... 20,707,984 20,771,628 Accumulated depreciation ............. (2,864,469) (2,388,850) Initial direct costs ................. -- 81,600 ------------ ------------ 17,843,515 18,464,378
Investment in financings Receivables due in installments ...... 13,732,305 23,708,131 Initial direct costs ................. 1,117 136,330 Unearned income ...................... (2,563,681) (3,699,855) Allowance for doubtful accounts ...... (102,532) (263,231) ------------ ------------ 11,067,209 19,881,375
Equity investment in joint ventures ..... 1,612,915 57,290 ------------ ------------
Accounts receivable from affiliates, net 7,104 --
Other assets ............................ 1,705,813 124,161 ------------ ------------
Total assets ............................ $ 66,917,017 $ 77,934,170 ============ ============
(continued on next page)
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Balance Sheets (continued)
(unaudited)
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31,
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 1997, 1996 and 1995
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31,
(continued on next page)
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (continued)
For the Years Ended December 31,
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Statements of Cash Flows (Continued)
Supplemental Disclosures of Cash Flow Information
Interest expense of $2,471,045, $2,957,534 and $4,377,702 for the years ended December 31, 1997, 1996 and 1995 consisted of: interest expense on non-recourse financing accrued or paid directly to lenders by lessees of $1,443,747, $2,307,348 and $3,512,811, respectively, interest on revolving credit facility of $866,922, $369,577 and $112,560 respectively, interest on the warehouse facility of $160,376, $0 and $0 respectively, other interest of $0, $37,212 and $13,889 respectively, and non-recourse securitization interest of $0, $243,397 and $738,442 respectively.
During the years ended December 31, 1997, 1996 and 1995, non-cash activities included the following:
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1997
1. Organization
ICON Cash Flow Partners, L.P., Series E (the "Partnership") was formed on November 7, 1991 as a Delaware limited partnership with an initial capitalization of $2,000. It was formed to acquire various types of equipment, to lease such equipment to third parties and, to a lesser degree, to enter into secured financing transactions. The Partnership's offering period commenced on June 5, 1992 and by its final closing on July 31, 1993, 610,411.51 units had been admitted into the Partnership with aggregate gross proceeds of $61,041,151. During 1994, the Partnership redeemed 728 limited partnership units, during 1995 the Partnership redeemed 45 limited partnership units, during 1996, the Partnership redeemed 193 limited partnership units and during 1997, the Partnership redeemed 1,000 limited partnership units leaving 608,445.51 limited partnership units outstanding at December 31, 1997.
The Partnership's Reinvestment Period will end on July 31, 1998. The Disposition Period will begin on August 1, 1998 and is expected to continue through February 1, 2001. During the Disposition Period the Partnership will distribute substantially all distributable cash from operations and sales to the partners and begin the orderly termination of its operations and affairs. The Partnership will not reinvest in any leased equipment during the Disposition Period.
The General Partner of the Partnership is ICON Capital Corp. (the "General Partner"), a Connecticut corporation. The General Partner manages and controls the business affairs of the Partnership's equipment leases and financing transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, received an underwriting commission on the gross proceeds from sales of all units. The total underwriting compensation paid by the Partnership, including underwriting commissions, sales commissions, incentive fees, public offering expense reimbursements and due diligence activities was limited to 13 1/2% of the gross proceeds received from the sale of the units. Such offering costs aggregated $8,240,555 (including $3,362,551 paid to the General Partner or its affiliates) and were charged directly to limited partners' equity.
Profits, losses, cash distributions and disposition proceeds are allocated 99% to the limited partners and 1% to the General Partner until each limited partner has received cash distributions and disposition proceeds sufficient to reduce its adjusted capital contribution account to zero and receive, in addition, other distributions and allocations which would provide a 10% per annum cumulative return, compounded daily, on its outstanding adjusted capital contribution account. After such time, the distributions will be allocated 90% to the limited partners and 10% to the General Partner.
2. Significant Accounting Policies
Basis of Accounting and Presentation - The Partnership's records are maintained on the accrual basis. 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Certain reclassifications have been made to prior years' statements to conform to the 1997 presentation.
Leases - The Partnership accounts for owned equipment leased to third parties as finance leases, leveraged leases or operating leases. For finance leases, the Partnership records, at the inception of the lease, the total minimum lease payments receivable, the estimated unguaranteed residual values, the initial direct costs related to the leases and the related unearned income. Unearned income represents the difference between the sum of the minimum lease payments receivable plus the estimated unguaranteed residual minus the cost of the leased equipment. Unearned income is recognized as finance income over the terms of the related leases using the interest method. The Partnership's net investment in leveraged leases consists of minimum lease payments receivable, the estimated unguaranteed residual values and the initial direct costs related to the leases, net of the unearned income and principal and interest on the related non-recourse debt. Unearned income is recognized as income from leveraged leases over the life of the lease at a constant rate of return on the positive net investment. For operating leases, equipment is recorded at cost and is depreciated on the straight-line method over the lease terms to their estimated fair market values at lease terminations. Related lease rentals are recognized on the straight-line method over the lease terms. Billed and uncollected operating lease receivables, net of allowance for doubtful accounts, are included in other assets. Initial direct costs of finance leases and leveraged leases are capitalized and are amortized over the terms of the related leases using the interest method. Initial direct costs of operating leases are capitalized and amortized on the straight-line method over the lease terms. The Partnership's leases have terms ranging from two to eight years. Each lease is expected to provide aggregate contractual rents that, along with residual proceeds, return the Partnership's cost of its investments along with investment income.
Investment in Financings - Investment in financings represent the gross receivables due from the financing of equipment plus the initial direct costs related thereto less the related unearned income. The unearned income is recognized as finance income, and the initial direct costs are amortized, over the terms of the receivables using the interest method. Financing transactions are supported by a written promissory note evidencing the obligation of the user to repay the principal, together with interest, which will be sufficient to return the Partnership's full cost associated with such financing transaction, together with some investment income. Furthermore, the repayment obligation is collateralized by a security interest in the tangible or intangible personal property.
Disclosures About Fair Value of Financial Instruments - Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments" requires disclosures about the fair value of financial instruments. Fair value information with respect to the Company's assets and liabilities is not provided because (i) SFAS No. 107 does not require disclosures about the fair value of lease arrangements and (ii) the carrying value of financial assets, other than lease related investments, and liabilities approximates market value.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Equity Investment in Joint Ventures - The Partnership accounts for its equity investments in joint ventures under the equity method of accounting. Therefore, the Partnership's original investments were recorded at cost and adjusted by its share of earnings, losses and distributions thereafter.
Redemption of Limited Partnership Units - The General Partner consented to the partnership redeeming 728 limited partnership units during 1994, 45 limited partnership units during 1995, 193 limited partnership units during 1996 and during 1997, the partnership redeemed 1,000 units. The redemption amount was calculated following the specific redemption formula in accordance with the Partnership agreement. Redeemed units have no voting rights and do not share in distributions. The partnership agreement limits the number of units which can be redeemed in any one year and redeemed units may not be reissued. Redeemed limited partnership units are accounted for as a deduction from partners' equity.
Allowance for Doubtful Accounts - The Partnership records a provision for bad debts to provide for estimated credit losses in the portfolio. The allowance for doubtful accounts is based on an analysis of delinquency, an assessment of overall risk and a review of historical loss experience. The Partnership's write-off policy is based on an analysis of the aging of the Partnership's portfolio, a review of the non-performing receivables and leases, and prior collection experience. An account is fully reserved for or written off when the analysis indicates that the probability of collection of the account is remote.
Impairment of Estimated Residual Values - In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which is effective beginning in 1996.
The Partnership's policy with respect to impairment of estimated residual values is to review, on a quarterly basis, the carrying value of its residuals on an individual asset basis to determine whether events or changes in circumstances indicate that the carrying value of an asset may not be recoverable and, therefore, an impairment loss should be recognized. The events or changes in circumstances which generally indicate that the residual value of an asset has been impaired are (i) the estimated fair value of the underlying equipment is less than the Partnership's carrying value or (ii) the lessee is experiencing financial difficulties and it does not appear likely that the estimated proceeds from disposition of the asset will be sufficient to satisfy the remaining obligation to the non-recourse lender and the Partnership's residual position. Generally in the latter situation, the residual position relates to equipment subject to third party non-recourse notes payable where the lessee remits their rental payments directly to the lender and the Partnership does not recover its residual until the non-recourse note obligation is repaid in full.
The Partnership measures its impairment loss as the amount by which the carrying amount of the residual value exceeds the estimated proceeds to be received by the Partnership from release or resale of the equipment. Generally, quoted market prices are used as the basis for measuring whether an impairment loss should be recognized.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
As a result, the Partnership's policy with respect to measurement and recognition of an impairment loss associated with estimated residual values is consistent with the requirements of SFAS No. 121 and, therefore, the Partnership's adoption of this Statement in the first quarter of 1996 had no material effect on the financial statements.
Minority Interest in Consolidated Joint Venture - The Partnership and an affiliate, ICON Cash Flow Partners L.P. Six ("ICON Cash Flow Six") contributed 99% and 1%, respectively, to a joint venture. The Partnership's consolidated financial statements include 100% of the assets and liabilities of the joint venture. ICON Cash Flow Six's investment in the joint venture has been reflected as "minority interest in joint venture." (See Note 7 - Investment in Joint Ventures).
Consolidation - The consolidated financial statements include the accounts of the Partnership, its wholly owned subsidiary, ICON E Corp. and ICON Cash Flow Partners L.L.C. I. All inter-company accounts and transactions have been eliminated.
Income Taxes - No provision for income taxes has been made as the liability for such taxes is that of each of the partners rather than the Partnership.
New Accounting Pronouncements - In June 1996 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125 establishes, among other things, criteria for determining whether a transfer of financial assets is a sale or a secured borrowing. The adoption of SFAS No. 125 did not have a material impact on the Partnership's net income, partners' equity or total assets.
3. Receivables Due in Installments
Non-cancelable minimum annual amounts due on finance leases and financings are as follows:
Finance Year Leases Financings Total
1998 $ 10,259,400 $ 4,237,699 $ 14,497,099 1999 5,034,716 3,914,134 8,948,850 2000 3,334,696 2,651,416 5,986,112 2001 2,061,502 1,803,997 3,865,499 2002 1,255,521 1,122,929 2,378,450 Thereafter 33,368 2,130 35,498 --------------- ------------- ------------- $ 21,979,203 $ 13,732,305 $ 35,711,508 =============== ============= =============
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
4. Investment in Operating Leases
The investment in operating leases at December 31, 1997, 1996 and 1995 consisted of the following:
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
5. Allowance for Doubtful Accounts
The Allowance for Doubtful Accounts for investments in finance leases, financings and operating leases consisted of the following:
6. Investment in Joint Ventures
The Partnership Agreement allows the Partnership to invest in joint ventures with other limited partnerships sponsored by the General Partner provided that the investment objectives of the joint ventures are consistent with that of the Partnership.
ICON Cash Flow L.L.C. I
In September 1994 the Partnership and an affiliate, ICON Cash Flow Partners L.P. Six ("L.P. Six"), formed a joint venture, ICON Cash Flow Partners, L.L.C. I ("ICON Cash Flow LLC I"), for the purpose of acquiring and managing an aircraft which was on lease to Alaska Airlines, Inc. The Partnership and L.P. Six contributed 99% and 1% of the cash required for such acquisition, respectively, to ICON Cash Flow LLC I. ICON Cash Flow LLC I acquired the aircraft, assuming non-recourse debt and utilizing contributions received from the Partnership and L.P. Six. The lease is an operating lease. Profits, losses, excess cash and disposition proceeds are allocated 99% to the Partnership and 1% to L.P. Six. The Partnership's consolidated financial statements include 100% of
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
the assets and liabilities of ICON Cash Flow LLC I. L.P. Six's investment in ICON Cash Flow LLC I has been reflected as "Minority interest in joint venture." The original lease term expired in April 1997 and Alaska Airline, Inc. returned the aircraft. In June 1997 ICON Cash Flow LLC I released the aircraft (formally on lease to Alaska Airlines, Inc.). The aircraft was leased to Aero Mexico. The new lease is an operating lease which expires in October 2002. Rental income decreased from 1996 to 1997 due to reduced rentals as a result of the Partnerships' remarketing of aircraft formally on lease to Alaska Airlines, Inc. The new lease is with Aero Mexico. The rents from the lease are paid directly to the non-recourse debt holder.
ICON Cash Flow L.L.C. II
In March 1995 the Partnership and an affiliate, L.P. Six, formed ICON Cash Flow Partners L.L.C. II, ("ICON Cash Flow LLC II"), for the purpose of acquiring and managing an aircraft which was on lease to Alaska Airlines, Inc. The Partnership and L.P. Six contributed 1% and 99% of the cash required for such acquisition, respectively, to ICON Cash Flow LLC II. ICON Cash Flow LLC II acquired the aircraft, assuming non-recourse debt and utilizing contributions received from the Partnership and L.P. Six. The lease is an operating lease. Profits, losses, excess cash and disposition proceeds will be allocated 1% to the Partnership and 99% to L.P. Six. The Partnership's investment in the joint venture is accounted for under the equity method. The original lease term expired in April 1997 and Alaska Airlines, Inc. returned the aircraft. In June 1997 ICON Cash Flow LLC II released the aircraft (formerly on lease to Alaska Airlines, Inc.). The aircraft was leased to Aero Mexico. The new lease is an operating lease which expires in September 2002.
Information as to the financial position and results of operations of ICON LLC II as of and for the year ended December 31, 1997 and 1996 are summarized below:
December 31, 1997 December 31, 1996
Assets $ 16,870,235 $ 17,886,467 ============== ===============
Liabilities $ 12,155,143 $ 13,752,949 ============== ===============
Equity $ 4,715,092 $ 4,133,518 ============== ===============
Year Ended Period Ended December 31, 1997 December 31, 1996
Net income $ 798,989 $ 589,022 ============== ===============
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Cash Flow L.L.C. III
In December 1996 the Partnership and an affiliate, ICON Cash Flow Partners, L.P. Seven ("L.P. Seven"), formed ICON Cash Flow Partners L.L.C. III ("ICON Cash Flow LLC III"), for the purpose of acquiring and managing an aircraft currently on lease to Continental Airlines, Inc. The Partnership and L.P. Seven contributed 1% and 99% of the cash required for such acquisition, respectively, to ICON Cash Flow LLC III. ICON Cash Flow LLC III acquired the aircraft, assuming non-recourse debt and utilizing contributions received from the Partnership and L.P. Seven. The lease is a leveraged lease. Profits, losses, excess cash and disposition proceeds are allocated 1% to the Partnership and 99% to L.P. Seven. The Partnership's investment in the joint venture is accounted for under the equity method.
Information as to the financial position and results of operations of ICON LLC III at December 31, 1997 and 1996 is summarized below:
December 31, 1997 December 31, 1996
Assets $ 14,602,998 $ 16,534,998 ============== ===============
Liabilities $ 12,569,490 $ 14,939,525 ============== ===============
Equity $ 2,033,508 $ 1,595,473 ============== ===============
Year Ended Year Ended December 31, 1997 December 31, 1996
Net income $ 438,039 $ - ============== ==============
ICON Receivables 1997-A L.L.C.
In March 1997 three affiliates of the Partnership, ICON Cash Flow Partners, L.P., Series D ("Series D"), L.P. Six and L.P. Seven (collectively the "1997-A Members"), contributed and assigned equipment lease and finance receivables and residuals with a net book value of $4,805,767, $5,304,010 and $5,391,216 and cash of $125,000, $300,000 and $275,000, respectively to ICON Receivables 1997-A L.L.C. ("1997-A"), a special purpose entity created for the purpose of originating new leases, managing existing contributed assets and, eventually, securitizing its portfolio. To fund the acquisition of new leases, 1997-A obtained a warehouse borrowing facility from Prudential Securities Credit Corporation (the "1997-A Facility"). Borrowings under the 1997-A Facility were based on the present value of the new leases. Outstanding amounts under the 1997-A Facility bore interest equal to Libor plus 1.5%.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
On September 19, 1997 the Partnership, L.P. Six and L.P. Seven contributed and assigned equipment lease and finance receivables and residuals with a net book value of $15,547,305, $5,225,794 and $0 and cash of $740,000, $300,000 and $484,244, respectively to 1997-A. The Partnership, Series D, L.P. Six and L.P. Seven received a 31.19%, 17.81% 31.03% and 19.97% interest, respectively, in 1997-A based on the present value of their related contributions.
On September 19, 1997, 1997-A securitized substantially all of its equipment leases and finance receivables and residuals. The net proceeds from the securitization totaled $47,140,183, of which $16,658,877 was used to pay down the 1997-A Facility, and the remaining proceeds, after establishing reserves for expenses, were distributed to the 1997-A Members based on their respective interests. The Partnership's share of the proceeds from the securitization, after paying off the revolving credit facility, totaled $14,625,488. 1997-A became the beneficial owner of a trust. The trustee for the trust is Texas Commerce Bank ("TCB"). In conjunction with this securitization, the portfolio as well as the General Partner's servicing capabilities were rated "AA" by Duff & Phelps and Fitch, both nationally recognized rating agencies. The General Partner, as servicer, is responsible for managing, servicing, reporting on and administering the portfolio. 1997-A remits all monies received from the portfolio to TCB. TCB is responsible for disbursing to the noteholders their respective principal and interest and to 1997-A the excess of cash collected over debt service from the portfolio. The 1997-A Members receive their pro rata share of any excess cash on a monthly basis from 1997-A. The Partnership accounts for its investment in 1997-A under the equity method of accounting. The Partnership's original investment was recorded at cost and is adjusted by its share of earnings, losses and distributions thereafter.
Information as to the financial position and results of operations of 1997-A as of and for the year ended December 31, 1997 is summarized below:
December 31, 1997
Assets $ 50,911,005 =================
Liabilities $ 45,143,569 =================
Equity $ 5,767,436 =================
Year Ended December 31, 1997
Net income $ 1,298,430 =================
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Receivables 1997-B L.L.C.
In August 1997 the Partnership, L.P. Six and L.P. Seven (collectively, the "1997-B Members") formed ICON Receivables 1997-B L.L.C. ("1997-B"), for the purpose of originating lease transactions and ultimately securitizing its portfolio. The 1997-B Members contributed $2,250,000 (75.00% interest), $250,000 (8.33% interest) and $500,000 (16.67% interest), respectively to 1997-B. In order to fund the acquisition of additional leases, 1997-B obtained a warehouse borrowing facility from Prudential Securities Credit Corporation (the "1997-B Facility"), as described in more detail in Note 7. The net proceeds from the expected securitization of these assets will be used to pay-off the remaining 1997-B Warehouse Facility balance and any remaining proceeds will be distributed to the 1997-B Members in accordance with their membership interests. After securitization, the 1997-B Members may receive, in accordance with their membership interests, additional proceeds if 1997-B generates excess cash (cash after payment of debt and expenses). The Partnership's consolidated financial statements includes 100% of 1997-B. L.P. Six and L.P. Seven's investment in 1997-B has been reflected as "Minority interest in joint ventures."
7. Notes Payable
As discussed in Note 6, in order to fund the acquisition of additional leases, 1997-B obtained a warehouse borrowing facility from Prudential Securities Credit Corporation. Borrowings under the 1997-B Warehouse Facility are based on the present value of the new leases. Outstanding amounts under the 1997-B Warehouse Facility bear interest equal to Libor plus 1.5%. Collections of receivables from leases are used to pay down the 1997-B Warehouse Facility, however, in the event of a default, all of 1997-B's assets are available to cure such default. The net proceeds from the expected securitization of these assets will be used to pay-off the remaining 1997-B Warehouse Facility balance and the remaining proceeds will be distributed to the 1997-B Members in accordance with their membership interests. At December 31, 1997, $16,100,870 was outstanding under the 1997-B Warehouse Facility.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Notes payable, bearing interest at rates ranging from 5.2% to 16.5%, mature as follows:
Notes Payable Note Payable Year Non-Recourse Warehouse Facility Total
1998 $ 24,371,365 $ 16,100,870 $ 40,472,235 1999 792,595 - 792,595 2000 8,104 - 8,104 -------------- -------------- ---------------
$ 25,172,064 $ 16,100,870 $ 41,272,934 ============== ============== ===============
Included in the above are $3,596,070 in notes payable non-recourse due to various third parties in conjunction with the purchase and assignment of lease transactions. The notes are payable only to the extent residual values are realized which are estimated to occur as follows: $3,330,391 and $265,679 in 1998 and 1999, respectively.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
8. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General Partner or its affiliates for the years ended December 31, 1997, 1996 and 1995 are as follows: Charged to Capitalized Operations
Acquisition fees .................... $ 83,106 $ -- Management fees ..................... -- 1,596,569 Administrative expense reimbursements -- 784,775 ---------- ----------
Year ended December 31, 1995 ........ $ 83,106 $2,381,344 ========== ==========
Acquisition fees .................... $ 80,408 $ -- Management fees ..................... -- 1,120,336 Administrative expense reimbursements -- 563,107 ---------- ----------
Year ended December 31, 1996 ........ $ 80,408 $1,683,443 ========== ==========
Acquisition fees .................... $ -- $ -- Management fees ..................... -- 919,728 Administration expense reimbursements -- 486,253 ---------- ----------
Year ended December 31, 1997 ........ $ -- $1,405,981 ========== ==========
The Partnership has investments in five joint ventures with other Partnerships sponsored by the General Partner. See Note 6 for additional information relating to the joint ventures.
On January 28, 1997, the Partnership lent $7,780,328 to ICON Asset Acquisition L.L.C. I, a joint venture limited liability corporation formed by ICON Cash Flow Partners L.P., Series B (8.93% interest), ICON Cash Flow Partners L.P., Series C (13.39% interest) and ICON Cash Flow Partners L.P. Six (77.68% interest), all affiliates of the Partnership. The note was short term, bore interest at the rate of 11% and was paid in full on August 31, 1997. The interest rate charged on the loan approximated market rates at that time.
On June 5, 1997, the Partnership lent $3,500,000 to ICON Cash Flow Partners, L.P., Series D, an affiliate of the Partnership. The loan was in the form of a short-term note, bore interest at the rate of 11% and was repaid, along with $26,370 in accrued interest, on June 30, 1997. The interest rate charged on the loan approximated market rates at that time.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Included in the Partnership's acquisitions for the year ended December 31, 1996 is a financing transaction in the amount of $5,690,161. This represents the financings of excess cash, or free cash, which results from lease rental payments being greater than senior debt payments on a leveraged lease. The financing is secured by the underlying equipment, a 1983 Airbus A300B4-203 aircraft, currently on lease to A.I. Leasing II, Inc. Subsequent to this financing, L.P. Six, an affiliate of the Partnership, acquired the residual, or equity, interest in the leveraged lease, and assumed the related outstanding non-recourse senior and junior debt. On January 29, 1997, L.P. Six re-financed the free cash portion of the leveraged lease with a third party. As a result of this re-financing, the Partnership received proceeds of $5,792,043 and terminated its interest in the leveraged lease.
9. Commitments and Contingencies
The Partnership has entered into remarketing and residual sharing agreements with third parties. In connection therewith, remarketing or residual proceeds received in excess of specified amounts will be shared with these third parties based on specified formulas. For the years ended December 31, 1997, 1996 and 1995, the Partnership paid or accrued $67,895, $194,174 and $755,384 to third parties as their share under the agreements.
10. Subsidiary
On December 27, 1994, the Partnership formed a wholly owned subsidiary, ICON E Corp., a Massachusetts corporation formed for the purpose of managing equipment under lease located in the state of Massachusetts. Massachusetts partnerships are taxed on personal property at a higher rate than corporations, and therefore, to mitigate such excess property tax, certain leases are being managed by ICON E Corp., a corporation. The Partnership's consolidated financial statements include 100% of the accounts of ICON E Corp. As of December 31, 1997, there was no federal tax liability for ICON E Corp.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
11. Tax Information (Unaudited)
The following reconciles net income for financial reporting purposes to income for federal income tax purposes for the years ended December 31:
As of December 31, 1997, the partners' capital accounts included in the financial statements totaled $23,689,694 compared to the partners' capital accounts for federal income tax purposes of $28,375,318 (unaudited). The difference arises primarily from commissions reported as a reduction in the partners' capital for financial reporting purposes but not for federal income tax purposes, and temporary differences related to direct finance leases, depreciation and provision for losses.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant's General Partner
The General Partner, a Connecticut corporation, was formed in 1985. The General Partner's principal offices are located at 600 Mamaroneck Avenue, Harrison, New York 10528-1632, and its telephone number is (914) 698-0600. The officers of the General Partner have extensive experience with transactions involving the acquisition, leasing, financing and disposition of equipment, including acquiring and disposing of equipment subject to operating leases and full payout leases.
The manager of the Registrant's business is the General Partner. The General Partner is engaged in a broad range of equipment leasing and financing activities. Through its sales representatives and through various broker relationships throughout the United States, the General Partner offers a broad range of equipment leasing services, including tax-oriented leasing and financing. In addition, the General Partner offers financial consulting and placement services for which fees are earned as a result of successful placements of various secured financings and mortgages.
The General Partner is performing or causing to be performed certain functions relating to the management of the equipment of the Partnership. Such services include the collection of lease payments from the lessees of the equipment, releasing services in connection with equipment which is off-lease, inspections of the equipment, liaison with and general supervision of lessees to assure that the equipment is being properly operated and maintained, supervision of maintenance being performed by third parties, monitoring performance by the lessees of their obligations under the leases and the payment of operating expenses.
The officers and directors of the General Partner are as follows:
Beaufort J.B. Clarke President, Chief Executive Officer and Director
Thomas W. Martin Executive Vice President and Director
Paul B. Weiss Executive Vice President
Gary N. Silverhardt Senior Vice President and Chief Financial Officer
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Beaufort J. B. Clarke, age 51, is President, Chief Executive Officer and Director of both the General Partner and ICON Securities Corp. (the "Dealer-Manager"). Prior to his present position, Mr. Clarke was founder and the President and Chief Executive Officer of Griffin Equity Partners, Inc. Mr. Clarke formerly was an attorney with Shearman and Sterling and has over 20 years of senior management experience in the United States leasing industry.
Thomas W. Martin, age 43, is Executive Vice President of both the General Partner and the Dealer-Manager. Prior to his present position, Mr. Martin was the Executive Vice President and Chief Financial Officer of Griffin Equity Partners, Inc. Mr. Martin has over 12 years of senior management experience in the leasing business, particularly in the area of syndication.
Paul B. Weiss, age 37, is Executive Vice President of the General Partner. Mr. Weiss has been exclusively engaged in lease portfolio acquisitions since 1988 from his affiliations with Griffin Equity Partners (as Executive Vice President and co-founder in 1993); Gemini Financial Holdings (as Senior Vice President-Portfolio Acquisitions and a member of the executive committee from 1991-1993) and Pegasus Capital Corporation (as Vice President-Portfolio Acquisitions).
Gary N. Silverhardt, age 37, is Senior Vice President and Chief Financial Officer of the General Partner. He joined the General Partner in 1989. Prior to joining the General Partner, Mr. Silverhardt was previously employed by Coopers & Lybrand from 1985 to 1989, most recently as an Audit Supervisor. Prior to 1985, Mr. Silverhardt was employed by Katz, Schneeberg & Co. from 1983 to 1985. Mr. Silverhardt received a B.S. degree from the State University of New York at New Paltz in 1983 and is a Certified Public Accountant.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Item 11.
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner and its affiliates were paid or accrued the following compensation and reimbursement for costs and expenses for the years ended December 31, 1997, 1996 and 1995.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The registrant is a limited partnership and therefore does not have voting shares of stock. No person of record owns, or is known by the Partnership to own beneficially, more than 5% of any class of securities of the Partnership.
(b) As of March 7, 1997, Directors and Officers of the General Partner do not own any equity securities of the Partnership.
(c) The General Partner owns the equity securities of the Partnership set forth in the following table:
Title Amount Beneficially Percent of Class Owned of Class - --------------- ---------------------------------------------- -------- General Partner Represents initially a 1% and potentially a 100% Interest 10% interest in the Partnership's income, gain and loss deductions.
Profits, losses, cash distributions and disposition proceeds are allocated 99% to the limited partners and 1% to the General Partner until each investor has received cash distributions and disposition proceeds sufficient to reduce its adjusted capital contribution account to zero and receive, in addition, other distributions and allocations which would provide a 10% per annum cumulative return, compounded daily, on the outstanding adjusted capital contribution account. After such time, the distributions will be allocated 90% to the limited partners and 10% to the General Partner.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
Item 13.
Item 13. Certain Relationships and Related Transactions
On January 28, 1997, the Partnership lent $7,780,328 to ICON Asset Acquisition LLC I, a joint venture limited liability corporation formed by ICON Cash Flow Partners L.P., Series B (8.93% interest), ICON Cash Flow Partners, L.P., Series C (13.39% interest) and L.P. Six (77.68% interest), all affiliates of the Partnership. The note was short term, bore interest at the rate of 8% and was paid in full on August 31, 1997.
On June 5, 1997, the Partnership lent $3,500,000 to Series D, an affiliate of the Partnership. The loan was in the form of a short-term note, bore interest at the rate of 11% and was repaid, along with $26,370 in accrued interest, on June 30, 1997.
See Item 18 for a discussion of the Partnership's reimbursable management fees and administrative expenses.
See Note 6 for a discussion of the Partnership's related party investments in joint ventures.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedule - None.
Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Financial Statements or Notes thereto.
3. Exhibits - The following exhibits are incorporated herein by reference:
(i) Amended and Restated Agreement of Limited Partnership (Incorporated by reference to Exhibit A to Amendment No. 2 to Form S-1 Registration Statement No. 2-99858 filed with the Securities and Exchange Commission on December 12, 1986).
(ii) Certificate of Limited Partnership of the Partnership (Incorporated herein by reference to Exhibit 3.01 to Form S-1 Registration Statement No. 2-99858 filed with the Securities and Exchange Commission on August 23, 1985 and to Exhibit 3.01 to Amendment No. 1 to Form S-1 Registration Statement No. 2-99858 filed with the Securities and Exchange Commission on August 27, 1986).
(iii)Form of Management Agreement between the Partnership and Crossgate Leasing, Inc. (Incorporated herein by reference to Exhibit 10.01 to Amendment No. 1 to Form S-1 Registration Statement No. 2-99858 filed with the Securities and Exchange Commission on August 27, 1986).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter ended December 31, 1997.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 1997
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.
ICON CASH FLOW PARTNERS, L.P., Series E File No. 33-44413 (Registrant) By its General Partner, ICON Capital Corp.
Date: March 31, 1998 /s/ Beaufort J.B. Clarke ------------------------------------------------- Beaufort J.B. Clarke President, Chief Executive Officer and Director
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 capacity and on the dates indicated.
ICON Capital Corp. sole General Partner of the Registrant
Date: March 31, 1998 /s/ Beaufort J.B. Clarke ------------------------------------------------- Beaufort J.B. Clarke President, Chief Executive Officer and Director
Date: March 31, 1998 /s/ Thomas W. Martin ------------------------------------------------- Thomas W. Martin Executive Vice President and Director
Date: March 31, 1998 /s/ Gary N. Silverhardt ------------------------------------------------- Gary N. Silverhardt Senior Vice President and Chief Financial Officer
Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrant Which have not Registered Securities Pursuant to Section 12 of the Act
No annual report or proxy material has been sent to security holders. An annual report will be sent to the limited partners and a copy will be forwarded to the Commission.