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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2003
-------------------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 33-40044
ICON Cash Flow Partners, L.P., Series D
(Exact name of registrant as specified in its charter)
Delaware 13-3602979
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
100 Fifth Avenue, 10th Floor, New York, New York 10011
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 418-4700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) [ ] Yes [X] No
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last day of the registrant's most recently completed second fiscal quarter:
Not applicable. There is no established market for units of limited partnership
interest in the registrant.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
TABLE OF CONTENTS
Item Page
PART I
1. Business 3-4
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 4
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 5
6. Selected Consolidated Financial Data 6
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 7-12
7A. Qualitative and Quantitative Disclosures About Market Risk 13
8. Consolidated Financial Statements 14-30
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 31
9A. Controls and Procedures 31
PART III
10. Directors and Executive Officers of the Registrant's General Partner 32-33
11. Executive Compensation 32
12. Security Ownership of Certain Beneficial Owners
and Management 32-33
13. Certain Relationships and Related Transactions 33
14. Principal Accounting Fees and Services 33
PART IV
15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 33-34
SIGNATURES 35
Certifications 36-39
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
PART I
Item 1. Business
--------
General Development of Business
ICON Cash Flow Partners, L.P., Series D (the "Partnership") was formed in
February 1991 as a Delaware limited partnership. The Partnership commenced
business operations on its initial closing date, September 13, 1991, with the
admission of 26,905.59 limited partnership units. Between September 14, 1991 and
June 5, 1992 (the final closing date), 373,094.41 additional units were admitted
bringing the total admissions to 400,000 units totaling $40,000,000 in capital
contributions. From 1994 through 2003, the Partnership redeemed 882 limited
partnership units leaving 399,118 units outstanding at December 31, 2003.
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.
The Partnership's reinvestment period ended June 5, 1997, and the
disposition period began on June 6, 1997. During the disposition period, the
Partnership has and will continue to distribute substantially all distributable
cash from operations and equipment sales to the partners and begin the orderly
termination of its operations and affairs. The Partnership has not and will not
invest in any additional new finance or lease transactions during the
disposition period. During the disposition period, the Partnership expects to
recover, at a minimum, the carrying value of its assets.
Segment Information
The Partnership has only one operating segment: the business of acquiring
and managing equipment subject to leases with companies that the Partnership
believes to be creditworthy.
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 partners. To achieve this objective
the Partnership has: (1) acquired a diversified portfolio of leases and
financing transactions; (2) made monthly cash distributions to its limited
partners commencing with each limited partner's admission to the Partnership,
(3) re-invested substantially all undistributed cash from operations and cash
from sales of equipment and financing transactions during the reinvestment
period; and (4) commenced the disposition period and begun to sell the
Partnership's investments and distribute the cash from sales of such investments
to its partners.
The equipment leasing industry is highly competitive. In initiating its
leasing transactions, the Partnership competed 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 greater financial
resources.
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
Lease and Financing Transactions
During the years ended December 31, 2003 and 2002, the Partnership did not
finance or purchase any new equipment. The Partnership had disposed of equipment
upon lease expirations in 2003, which resulted in a gain of $116,939.
The Partnership has one lessee which represents more than 10% of revenue,
the lease of a DeHaviland DHC-8-102 aircraft to U.S. Airways. Lease rentals were
$240,000 for 2003 and $582,931 for 2002. The carrying value of the aircraft
represented approximately 36.8% of the Partnership's assets at December 31, 2003
and 39.5% at December 31, 2002.
Item 2. Properties
----------
The Partnership neither owns nor leases office space or equipment for the
purpose of managing its day-to-day affairs.
Item 3. Legal Proceedings
-----------------
The Partnership, from time-to-time, in the ordinary course of business,
commences legal actions when necessary to protect or enforce the rights of the
Partnership. We are not a defendant party to any litigation and are not aware of
any pending or threatened litigation against the Partnership.
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 2003.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
PART II
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 February 29, 2004
- -------------- -----------------------
Limited Partners 3,078
General Partner 1
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
Item 6. Selected Consolidated Financial Data
------------------------------------
Year Ended December 31,
-----------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Total revenues $ 600,314 $ 1,594,108 $ 874,695 $ 2,200,367 $ 2,658,007
============= =============== ============== ============== ===============
Net (loss) income $ (18,781) $ 662,388 $ 284,772 $ 820,615 $ 823,675
============= =============== ============== ============== ===============
Net (loss) income
allocable to limited
partners $ (18,593) $ 655,764 $ 281,924 $ 812,409 $ 815,438
============= =============== ============== ============== ===============
Net (loss) income
allocable to the
General Partner $ (188) $ 6,624 $ 2,848 $ 8,206 $ 8,237
============= =============== ============== ============== ===============
Weighted average
limited partnership
units outstanding $ 399,118 399,118 399,118 399,118 399,118
============= =============== ============== ============== ===============
Net (loss) income per
weighted average
limited partnership
unit $ (0.05) $ 1.64 $ 0.71 $ 2.04 $ 2.04
============= =============== ============== ============== ===============
Distributions to
limited partners $ - $ - $ 588,646 $ 4,091,082 $ 2,461,219
============= =============== ============== ============== ===============
Distributions per
weighted average limited
partnership unit $ - $ - $ 1.47 $ 10.25 $ 6.17
============= =============== ============== ============== ===============
Distributions to the
General Partner $ - $ - $ 5,946 $ 41,323 $ 24,840
============= =============== ============== ============== ===============
December 31,
------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Total assets $ 3,013,421 $ 3,421,904 $ 3,847,550 $ 5,251,699 $ 11,621,332
============== =============== ============== ============== ===============
Notes Payable $ 1,934,027 $ 2,086,075 $ 2,526,940 $ 3,111,495 $ 5,175,985
============== =============== ============== ============== ===============
Partners' equity $ 1,020,997 $ 1,039,778 $ 377,390 $ 687,210 $ 3,999,000
============== =============== ============== ============== ===============
The selected financial data should be read in conjunction with the
consolidated financial statements and related notes included in Item 8 of this
report.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
Item 7. General Partner's Discussion and Analysis of Financial Condition
and Results of Operations
Forward-Looking Information - The following discussion and analysis should
be read in conjunction with the audited consolidated financial statements
included herein. Certain statements within this document may constitute
forward-looking statements made pursuant to the safe harbor provision of the
Private Securities Litigation Reform Act of 1995. These statements are
identified by words such as "anticipate," "believe," "estimate," "expects,"
"intend," "predict" or "project" and similar expressions. This information may
involve risks and uncertainties that could cause actual results to differ
materially from the forward-looking statements. Although the Partnership
believes that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected.
Overview - The results of operations reflect the risk factors outlined in
the Partnership's prospectus. Such risk factors include, but are not limited to,
the decline in the value of the Partnership's equipment, no guarantee of
profitability, the potential of lessee default, and economic factors such as
prevailing interest rates. These risk factors affect the Partnership's ability
to realize income, in that they increase the Partnership's expenses by way of
additional depreciation, impairment loss, and provision for bad debts. In
addition, as the Partnership liquidates its portfolio and leases expire the cash
flow will decrease.
Under the Operating Agreement of the Partnership, the term of the
Partnership is limited within the life-span of the leases remaining in the
portfolio during the liquidation period. Therefore, as the leases mature, the
expected revenue from the portfolio will decline. However, the Partnership's
expenses, while declining during the liquidation period will increase as a
percentage of lease revenue as certain expenses are fixed; thereby decreasing
the partnership's cash flow.
As the Partnership is currently operating in its liquidation period, the
General Partner diligently monitors the portfolio for any trends that would
affect equipment values.
The Partnership - The Partnership's portfolio consisted of a net investment
in finance leases, investment in operating lease equipment, investment in
financings and an investment in an unconsolidated joint venture representing 0%,
37%, 61% and 1% of total investments at December 31, 2003, respectively, and 0%,
44%, 54% and 2% of total investments at December 31, 2002, respectively.
Results of Operations
- ---------------------
Years Ended December 31, 2003 and 2002
For the years ended December 31, 2003 and 2002, the Partnership did not
finance or purchase any new equipment.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
Revenues for the year ended December 31, 2003 ("2003 Period") were $600,314
representing a decrease of $993,794 from December 31, 2002 ("2002 Period"). The
decrease in revenues resulted primarily from decreases in rental income of
$538,803 in the 2003 Period as compared to the 2002 Period. Rental income
decreased due to the restructuring of the lease terms with US Airways ("US
Air"), the Partnership's largest investment. Lease rentals from US Air decreased
by 59%. The Partnership also had decreases in income from investment in
unconsolidated joint venture, and interest income and other of $43,443 and
$544,744 respectively. The Partnership experienced gain on sales of equipment of
$116,939 in the 2003 Period as compared to a loss of $8,001 in the 2002 Period.
The Partnership's major sale was the equipment leased to Champlain Cable Corp.,
from which the Partnership received proceeds of $141,956 for a gain of $116,591.
Expenses for the 2003 Period were $619,095 representing a decrease of
$312,625 from the 2002 Period. The decrease is primarily due to a decrease in
depreciation expense of $156,240, and no provision for bad debt in comparison to
the 2002 Period. Depreciation expense decreased due to the restructuring of the
US Air's lease terms effective January 3, 2003. The Partnership made no
provision for bad debt, as the current allowance is adequate to cover current
delinquencies with the view of future delinquency being remote. Interest expense
decreased by $31,852 as the outstanding debt balance reduced. General and
administrative expense increased due to legal fees incurred for the
restructuring of the US Air lease.
Net (loss) income for the 2003 Period and 2002 Period was $(18,781) and
$662,338, respectively. The net (loss) income per weighted average limited
partnership unit was $(0.05) and $1.64 for 2003 and 2002 Periods, respectively.
Years Ended December 31, 2002 and 2001
For the years ended December 31, 2002 and 2001 ("2000 period"), the
Partnership did not finance or purchase any new equipment.
Revenues for the year ended December 31, 2002 ("2002 Period") were
$1,594,108, representing an increase of $719,413 from December 31, 2001 ("2001
Period"). The increase in revenues resulted primarily from income from
investment in unconsolidated joint venture of $27,647 in the 2002 Period as
compared to losses of $491,869 in the 2001 Period, and an increase in interest
income and other of $498,553. The interest income and other for the 2002 Period
included a one-time adjustment due to a revised estimate of residual sharing
values of $513,174. Offsetting these increases were decreases in rental income
of $223,377, finance income of $62,422 and net losses from sales of equipment of
$8,001.
Rental income decreased due to a one-time settlement payment of $200,000
and recognition of approximately $244,000 of other lease settlements in the 2001
Period, which is offset by rents generated by the renewal of certain leases that
were reclassified from finance leases to operating leases in the 2002 Period.
Finance income decreased due to a decrease in the size of investments in the
finance lease portfolio from the 2001 Period to the 2002 Period. The gains from
investment in joint venture were primarily due to a reversal of the provision
for bad debt of $268,834 in the 2002 Period by an underlying joint venture, ICON
Receivables 1997-A LLC, as compared to recorded provisions for bad debt of
$1,825,000 in the 2001 Period.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
Expenses for the 2002 Period were $931,720, representing an increase of
$341,797 from the 2001 Period. The increase is primarily due to an increase of
the provision for bad debt of $390,831 and an increase of the depreciation of
$24,912. Offsetting these increases are decreases in interest of $58,313,
general and administration of $11,573, and amortization of initial direct costs
of $4,060. In the 2002 Period, the increase in the provision for bad debt is due
to the provision for US Airways rents of $201,000 offset by a reversal of the
provision for financing of $67,097 that was no longer deemed necessary. In the
2001 Period, there was a reversal of the provision for bad debt of $256,928. The
decrease in interest is due to a lower debt balance in the 2002 Period versus
the 2001 Period.
Net income for the 2002 Period and 2001 Period was $662,388 and $284,772,
respectively. The net income per weighted average limited partnership unit was
$1.64 and $0.71 for 2002 Period and 2001 Period, respectively.
Liquidity and Capital Resources
Net cash used in operating activities was $117,244 in the 2003 Period. The
Partnership's current sources of cash are proceeds being collected from one
financing lease at the rate of $7,000 per month plus certain month to month
renewal lease payments. In addition, proceeds from sale of equipment of $142,303
also attributed to the Partnership's sources of cash. The Partnership's cash
flow from operating activities may be less than the Partnership's current level
of expenses. To the extent that cash flow is insufficient to pay such expenses,
the Partnership may be required to sell assets prior to maturity or borrow
against future cash flows.
It is anticipated that cash distributions, if any, will not be significant
until the realization of proceeds from the sale or release of the US Air
aircraft and the maturity of the related financing as well as proceeds
anticipated from the investment in financing mentioned in the notes to the
consolidated financial statements under Related Party Transactions (Note 3 to
the consolidated financial statements). There were no cash distributions to the
limited partners for the 2003 Period.
The Partnership has the following contractual obligations as of December
31, 2003. This obligation arises mainly from the acquisition of equipment
subject to lease. Rental payments from the leases associated with this equipment
are assigned to paydown such obligations.
Payments Due By Period
1-2 Years
---------
Long-term obligation (Notes payable) $ 1,934,027
See Note 6 to the consolidated financial statements, Note Payable, as set
forth in Part II, Item 8, Consolidated Financial Statements.
The U.S. Air debt was restructured as of January 3, 2003 due to U.S. Air
filing for bankruptcy protection. This debt carries an interest rate of 11% and
had a maturity date of December 2003. Based upon US Air's request for lease
extension the Partnership is in negotiation with the lender to extend the loan
maturity date to match the lease extension. This debt is collateralized by the
underlying equipment with a net book value of $1,101,202 at December 31, 2003.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
The Partnership's reinvestment period ended June 5, 1997, and the
disposition period began on June 6, 1997. During the disposition period, the
Partnership has and will continue to distribute substantially all distributable
cash from operations and equipment sales to the partners and continue the
orderly termination of its operations and affairs. The Partnership has not and
will not invest in any additional finance or lease transactions during the
disposition period.
We do not consider the impact of inflation to be material in the analysis
of our overall operations.
Critical Accounting Policies and Management Estimates
The policies discussed below are considered by the General Partner to be
critical to an understanding of the Partnership's consolidated financial
statements because their application places the most significant demands on the
General Partner's judgments, with financial reporting results relying on
estimation about the effect of matters that are inherently uncertain. Specific
risks for these critical accounting policies are described in the following
paragraphs. For all of these policies, the General Partner cautions that future
events rarely develop exactly as forecast, and the best estimates routinely
require adjustment.
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the dates of the financial statements, and
revenues and expenses during the reporting periods. Significant estimates
include the allowance for bad debts and unguaranteed residual values. Management
believes that the estimates and assumptions utilized in preparing its financial
statements are reasonable and prudent. In addition, management is required to
disclose contingent assets and contingent liabilities. Actual results could
differ from those estimates.
Leases and Revenue Recognition - The Partnership accounts for owned
equipment leased to third parties as either finance leases or operating leases,
as appropriate. Initial direct costs of operating leases are capitalized and
amortized on the straight-line method over the lease terms. Initial direct costs
of finance leases are capitalized and are amortized over the terms of the
related leases using the interest method.
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.
For operating leases, equipment is recorded at cost and is depreciated on
the straight-line method over the lease term to its 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
are included in other assets.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
Impairment - Residual values of the Partnership's asset portfolio are
periodically reviewed to determine whether events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The events
or changes in circumstances which generally indicate that the residual value of
an asset may be 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.
An impairment loss is measured and recognized only if the estimated
undiscounted future cash flows of the asset are less than their net book value.
The estimated undiscounted future cash flows are the sum of the estimated
residual value of the asset at the end of the asset's expected holding period
and estimates of undiscounted future rents. The residual value assumes, among
other things, that the asset is utilized normally in an open, unrestricted and
stable market. Short-term fluctuations in the market place disregarded and it is
assumed that there is no necessity either to dispose of a significant number of
the assets simultaneously, if held in quantity, or to dispose of the asset
quickly. Impairment is measured as the difference between the fair value of the
assets and its carrying value on the measurement date.
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.
Credit Risk - Financial instruments that potentially subject the
Partnership to concentrations of credit risk include cash and cash equivalents,
direct finance lease receivables and accounts receivable. The Partnership places
its cash deposits and temporary cash investments with creditworthy, high quality
financial institutions. The concentration of such deposits and temporary cash
investments is not deemed to create a significant risk to the Partnership.
Accounts receivable represent amounts due from lessees in various industries,
related to equipment on operating and direct financing leases.
The Partnership records a provision for doubtful accounts to provide for
estimated credit losses in its 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.
Recent Accounting Pronouncements
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
embedded in other contracts, and for hedging activities under SFAS No. 133. The
Statement requires that contracts with comparable characteristics be accounted
for similarly and clarifies when a derivative contains a financing component
that warrants special reporting in the statement of cash flows. SFAS No. 149 is
effective for contracts entered into or modified after June 30, 2003, except in
certain circumstances, and for hedging relationships designated after June 30,
2003. The adoption of this standard did not have a material effect on the
Partnership's financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how an issuer classifies and measures in its
statements of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This Statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. For
nonpublic entities, the effective date of the provisions of SFAS No. 150 that
relate to mandatorily redeemable financial instruments has been deferred until
fiscal years that begin after December 31, 2003. The adoption of this standard
is not expected to have a material effect on the Partnership's financial
position or results of operations.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51. In December 2003, the FASB issued a
revision to FIN 46, or Revised Interpretation, to clarify some of the provisions
of FIN 46. FIN 46 provides guidance on how to identify a variable interest
entity, or VIE, and determine when the assets, liabilities, non-controlling
interests, and results of operations of a VIE must be included in a
Partnership's consolidated financial statements. A Partnership that holds
variable interests in an entity is required to consolidate the entity if the
Partnership's interest in the VIE is such that the Partnership will absorb a
majority of the VIE's expected losses and/or receive a majority of the entity's
expected residual returns, if any. VIE's created after January 31, 2003, but
prior to January 1, 2004, may be accounted for either based on the original
interpretation or the Revised Interpretations. However, the Revised
Interpretations must be applied no later than the first quarter of fiscal year
2004. VIE's created after January 1, 2004 must be accounted for under the
Revised Interpretations. There has been no material impact to the Partnership's
financial statements and there is no expected impact from the adoption of the
deferred provisions in the first quarter of fiscal year 2004.
The Partnership does not believe that any other recently issued, but not
yet effective, accounting standards will have a material effect on the
Partnership's financial position or results of operations.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
----------------------------------------------------------
The Partnership is exposed to certain market risks, including changes in
interest rates and the demand for equipment (and the related residuals) owned by
the Partnership and its investee. The Partnership believes its exposure to other
market risks are insignificant to both its financial position and results of
operations.
The Partnership manages its interest rate risk by obtaining fixed rate
debt. The fixed rate debt service obligation streams are generally matched by
fixed rate lease receivable streams generated by the Partnership's lease
investments.
The Partnership manages its exposure to equipment and residual risk by
monitoring the equipment leasing market and maximizing the re-marketing proceeds
received through re-leasing or sale of equipment.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
Item 8. Consolidated Financial Statements
---------------------------------
Index to Consolidated Financial Statements
Page Number
Independent Auditors' Reports 16-17
Consolidated Balance Sheets as of December 31, 2003 and 2002 18
Consolidated Statements of Operations for the Years Ended
December 31, 2003, 2002 and 2001 19
Consolidated Statement of Changes in Partners' Equity for the
Years Ended December 31, 2001, 2002 and 2003 20
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2003, 2002 and 2001 21-22
Notes to Consolidated Financial Statements 23-30
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 2003
(With Independent Auditors' Report Thereon)
The Partners
ICON Cash Flow Partners, L.P., Series D
INDEPENDENT AUDITOR'S REPORT
----------------------------
We have audited the accompanying consolidated balance sheets of ICON Cash Flow
Partners, L.P., Series D (a Delaware limited partnership) and subsidiaries as of
December 31, 2003 and 2002, and the related consolidated statements of
operations, changes in partners' equity, and cash flows for each of the two
years in the period ended December 31, 2003. 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 auditing standards generally accepted
in the United States of America. 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 D and subsidiaries as of December 31, 2003 and 2002, and
the results of their operations and their cash flows for each of the two years
in the period ended December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1, the Partnership's reinvestment period ended and its
disposition period began on June 6, 1997. During the disposition period the
Partnership will distribute substantially all distributable cash from operations
and equipment sales to the partners and begin the orderly termination of its
operations and affairs.
/s/ Hays & Company LLP
March 19, 2004
New York, New York
Independent Auditors' Report
----------------------------
The Partners
ICON Cash Flow Partners, L.P., Series D:
We have audited the accompanying consolidated statements of operations,
partners' equity, and cash flows of ICON Cash Flow Partners, L.P., Series D (a
Delaware limited partnership) for the year ended December 31, 2001. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
As discussed in Note 1, the Partnership's reinvestment period ended June 5,
1997. The disposition period began on June 6, 1997. During the disposition
period, the Partnership has, and will continue to distribute substantially all
distributable cash from operations and equipment sales to the partners and begin
the orderly termination of its operations and affairs.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects the results of the operations and the cash
flows of ICON Cash Flow Partners, L.P., Series D for the year ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States of America.
/s/KPMG LLP
April 15, 2002
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31, 2003 and 2002
2003 2002
Assets
Cash and cash equivalents $ 44,342 $ 116,095
------------ ------------
Investment in finance leases
Minimum rents receivable 1,071 4,082
------------ ------------
Investment in operating leases
Equipment at cost 3,384,869 3,459,597
Accumulated depreciation (2,274,667) (2,059,577)
------------ ------------
1,110,202 1,400,020
------------ ------------
Investment in financings
Receivables due in installments 1,956,917 2,048,816
Unearned income (111,491) (304,051)
Allowance for doubtful accounts (26,032) (25,000)
------------ ------------
1,819,394 1,719,765
Investment in unconsolidated joint venture 38,412 54,208
------------ ------------
Other assets, net - 127,734
------------ ------------
Total assets $ 3,013,421 $ 3,421,904
------------ ------------
Liabilities and Partners' Equity
Notes payable - non-recourse $ 1,934,027 $ 2,086,075
Due to affiliates, net 49,486 137,153
Deferred credits and other payables 8,911 158,898
------------ ------------
Total liabilities 1,992,424 2,382,126
------------ ------------
Commitments and Contingencies
Partners' equity (deficiency)
General Partner (334,386) (334,198)
Limited partners (399,118 units outstanding,
$100 per unit original issue price) 1,355,383 1,373,976
------------ ------------
Total partners' equity 1,020,997 1,039,778
------------ ------------
Total liabilities and partners' equity $ 3,013,421 $ 3,421,904
------------ ------------
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31, 2003, 2002 and 2001
2003 2002 2001
Revenues
Rental income $ 284,045 $ 822,848 $ 1,046,225
Finance income 192,560 184,301 246,723
(Loss) income from investment
in unconsolidated joint venture (15,796) 27,647 (491,869)
Net (loss) gain on sales of equipment 116,939 (8,001) 4,856
Interest income and other 22,566 567,313 68,760
------------- ------------- -------------
Total revenues 600,314 1,594,108 874,695
------------- ------------- -------------
Expenses
Depreciation expense 252,456 408,696 383,784
Interest 213,428 245,280 303,593
General and administrative expense 153,211 143,386 154,959
Amortization of initial direct costs - 455 4,515
Provision for (reversal of) bad debts - 133,903 (256,928)
------------- ------------- -------------
Total expenses 619,095 931,720 589,923
------------- ------------- -------------
Net (loss) income $ (18,781) $ 662,388 $ 284,772
============= ============= =============
Net (loss) income allocable to:
Limited partners $ (18,593) $ 655,764 $ 281,924
General Partner (188) 6,624 2,848
------------- ------------- -------------
$ (18,781) $ 662,388 $ 284,772
============== ============= =============
Weighted average number of limited
partnership units outstanding 399,118 399,118 399,118
=============== ============= =============
Net (loss) income per weighted average
limited partnership unit $ (0.05) $ 1.64 $ 0.71
=============== ============= =============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statement of Changes in Partners' Equity
For the Years Ended December 31, 2001, 2002 and 2003
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
Balance at
January 1, 2001 $ 1,024,934 $ (337,724) $ 687,210
Cash distributions
to partners $ 0.76 $ 0.71 (588,646) (5,946) (594,592)
Net income 281,924 2,848 284,772
------------- ------------- -------------
Balance at
December 31, 2001 718,212 (340,822) 377,390
Net income 655,764 6,624 662,388
------------- ------------- --------------
Balance at
December 31, 2002 1,373,976 (334,198) 1,039,778
Net loss (18,593) (188) (18,781)
------------- ------------- --------------
Balance at
December 31, 2003 $ 1,355,383 $ (334,386) $ 1,020,997
============= ============= ==============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2003, 2002 and 2001
2003 2002 2001
Cash flows from operating activities:
Net (loss) income $ (18,781) $ 662,388 $ 284,772
------------- ------------- -------------
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Rental income paid directly to lenders by lessees (268,664) (388,591) (582,931)
Finance income portion of receivables paid
directly to lenders by lessees - (156,684) (246,723)
Depreciation expense 252,456 408,696 383,784
Provision for (reversal of) bad debts - 133,903 (256,928)
Interest expense on non-recourse financing
paid directly to lenders by lessees 213,428 127,330 301,551
Net (loss) gain on sales of equipment (116,939) 8,001 (4,856)
Amortization of initial direct costs - 455 4,515
Loss (income) from investment in
unconsolidated joint venture 15,796 (27,647) 491,869
Changes in operating assets and liabilities:
Collection of receivables (85,653) 370,078 175,928
Other assets, net 128,767 (270,682) 36,998
Due to affiliates, net (87,667) - 2,004
Deferred credits and other payables (149,987) (647,619) (438,611)
Other - - (90,359)
------------- ----------- -------------
Total adjustments (98,463) (442,760) (223,759)
------------- ----------- -------------
Net cash (used in) provided by operating activities (117,244) 219,628 61,013
------------- ----------- -------------
Cash flows from investing activities:
Proceeds from sales of equipment 142,303 1,494 527,845
------------- ----------- -------------
Cash flows from financing activities:
Principal payments on note payable - non-recourse (96,812) (179,154) (72,717)
Cash distributions to partners - - (594,592)
-------------- ----------- -------------
Net cash used in financing activities (96,812) (179,154) (667,309)
-------------- ----------- -------------
Net (decrease) increase in cash and cash equivalents (71,753) 41,968 (78,451)
Cash and cash equivalents at beginning of year 116,095 74,127 152,578
-------------- ----------- --------------
Cash and cash equivalents at end of year $ 44,342 $ 116,095 $ 74,127
============= ============= =============
(continued on next page)
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31, 2003, 2002 and 2001
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
During the years ended December 31, 2003, 2002 and 2001, non-cash
activities included the following:
2003 2002 2001
---- ---- ----
Principal and interest on finance receivables
paid directly to lenders by lessees $ - $ - $ 303,625
Rental income paid directly to lenders by lessees 268,664 388,591 582,931
Principal and interest on non-recourse financing
paid directly to lenders by lessees (268,664) (388,591) (886,556)
------------- ------------- -------------
$ - $ - $ -
============= ============= =============
Interest expense on non-recourse debt paid directly
to lenders by lessees $ 213,428 $ 127,330 $ 301,551
Interest expense on non-recourse debt paid by the
Partnership - 117,950 -
Other interest paid - - 2,042
------------- ------------- -------------
Total interest expense $ 213,428 $ 245,280 $ 303,593
============= ============= =============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2003, 2002 and 2001
1. Organization
ICON Cash Flow Partners, L.P., Series D (the "Partnership") was formed on
February 21, 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
August 23, 1991 and by its final closing on June 5, 1992, 400,000 units had been
admitted into the Partnership with aggregate gross proceeds of $40,000,000. From
1994 through 2003, the Partnership redeemed 882 limited partnership units
leaving 399,118 limited partnership units outstanding at December 31, 2003.
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 partners. To achieve this objective
the Partnership has: (1) acquired a diversified portfolio of leases and
financing transactions; (2) made monthly cash distributions to its limited
partners commencing with each limited partner's admission to the Partnership,
(3) re-invested substantially all undistributed cash from operations and cash
from sales of equipment and financing transactions during the reinvestment
period; and (4) commenced the disposition period and begun to sell the
Partnership's investments and distribute the cash from sales of such investments
to its partners.
The Partnership's reinvestment period ended, and its disposition period
began on June 6, 1997. During the disposition period, the Partnership will
continue to distribute substantially all distributable cash from operations and
equipment sales to the partners and begin the orderly termination of its
operations and affairs. The Partnership will not invest in any additional
finance or lease transactions during the disposition period. During the
disposition period, the Partnership expects to recover, at a minimum, the
carrying value of its assets.
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.
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 on its outstanding adjusted capital contribution
account. After such time, the distributions would be allocated 90% to the
limited partners and 10% to the General Partner.
2. Significant Accounting Policies
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Significant estimates
primarily include the allowance for doubtful accounts and unguaranteed residual
values. In addition, management is required to disclose contingent assets and
contingent liabilities. Actual results could differ from those estimates.
Consolidation - The consolidated financial statements include the accounts
of the Partnership and its wholly owned subsidiary. All inter-company accounts
and transactions have been eliminated in consolidation. The Partnership accounts
for its interest in its 50% or less owned joint venture under the equity method
of accounting. In such case, the Partnership's original investment is recorded
at cost and adjusted for its share of earnings, losses and distributions
thereafter.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Cash and Cash Equivalents - Cash and cash equivalents are defined as cash
in banks and highly liquid investments with original maturity dates of three
months or less. The Partnership's cash and cash equivalents are held principally
at one financial institution and at times may exceed insured limits.
Leases and Revenue Recognition - The Partnership accounts for owned
equipment leased to third parties as either finance leases, or operating leases,
as appropriate. Initial direct costs of finance 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.
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.
For operating leases, equipment is recorded and depreciated on the
straight-line method over the lease term to its estimated fair market value at
lease termination. Related lease rentals are recognized on the straight line
method over the lease terms. Billed and uncollected operating lease receivables
are included in other assets.
Investment in Financings - Investment in financings represent the gross
receivables due from the financing of equipment plus the initial direct costs
less the related unearned income. The unearned income is recognized as finance
income over the terms of the receivables using the interest method.
Impairment - Residual values of the Partnership's asset portfolio are
periodically reviewed to determine whether events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The events
or changes in circumstances which generally indicate that the residual value of
an asset may be 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.
An impairment loss is measured and recognized only if the estimated
undiscounted future cash flows of the asset are less than their net book value.
The estimated undiscounted future cash flows are the sum of the estimated
residual value of the asset at the end of the asset's expected holding period
and estimates of undiscounted future rents. The residual value assumes, among
other things, that the asset is utilized normally in an open, unrestricted and
stable market. Short-term fluctuations in the market place disregarded and it is
assumed that there is no necessity either to dispose of a significant number of
the assets simultaneously, if held in quantity, or to dispose of the asset
quickly. Impairment is measured as the difference between the fair value of the
assets and its carrying value on the measurement date.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Credit Risk - Financial instruments that potentially subject the
Partnership to concentrations of credit risk include cash and cash equivalents,
direct finance lease receivables and accounts receivable. The Partnership places
its cash deposits and temporary cash investments with creditworthy, high quality
financial institutions. The concentration of such deposits and temporary cash
investments is not deemed to create a significant risk to the Partnership.
Accounts receivable represent amounts due from lessees in various industries,
related to equipment on operating, finance and, direct financing leases.
The Partnership records a provision for doubtful accounts to provide for
estimated credit losses in its 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.
Fair Value of Financial Instruments - Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures About Fair Values of Financial
Instruments," requires disclosures about the fair value of financial
instruments, except for lease related assets and liabilities. Separate
disclosure of fair value information as of December 31, 2003 and 2002 with
respect to the Partnership's assets and liabilities is not separately provided
since (i) SFAS No. 107 does not require fair value disclosures of lease
arrangements and (ii) the carrying value of financial assets, other than lease
related investments, and the recorded value of payables approximates market
value.
Income Taxes - No provision for income taxes has been recorded since the
liability for such taxes are that of each of the partners rather than the
Partnership. The Partnership's income tax returns are subject to examination by
the federal and state taxing authorities, and changes, if any, could adjust the
individual income taxes of the partners.
Reclassifications - Certain items from prior years have been reclassified
to conform to the presentation used in 2003.
Recent Accounting Pronouncements In April 2003, the FASB issued SFAS No.
149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. The Statement requires
that contracts with comparable characteristics be accounted for similarly and
clarifies when a derivative contains a financing component that warrants special
reporting in the statement of cash flows. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003, except in certain
circumstances, and for hedging relationships designated after June 30, 2003. The
adoption of this standard did not have a material effect on the Partnership's
financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how an issuer classifies and measures in its
statements of financial position certain financial instruments with
characteristics of both liabilities and equity. It
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances) because that financial
instrument embodies an obligation of the issuer. This Statement is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatorily redeemable financial instruments of nonpublic
entities. For nonpublic entities, the effective date of the provisions of SFAS
No. 150 that relate to mandatorily redeemable financial instruments has been
deferred until fiscal years that begin after December 31, 2003. The adoption of
this standard is not expected to have a material effect on the Partnership's
financial position or results of operations.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51. In December 2003, the FASB issued a
revision to FIN 46, or Revised Interpretation, to clarify some of the provisions
of FIN 46. FIN 46 provides guidance on how to identify a variable interest
entity, or VIE, and determine when the assets, liabilities, non-controlling
interests, and results of operations of a VIE must be included in a company's
consolidated financial statements. A company that holds variable interests in an
entity is required to consolidate the entity if the company's interest in the
VIE is such that the company will absorb a majority of the VIE's expected losses
and/or receive a majority of the entity's expected residual returns, if any.
VIE's created after January 31, 2003, but prior to January 1, 2004, may be
accounted for either based on the original interpretation or the Revised
Interpretations. However, the Revised Interpretations must be applied no later
than the first quarter of fiscal year 2004. VIE's created after January 1, 2004
must be accounted for under the Revised Interpretations. There has been no
material impact to the Partnership's financial statements and there is no
expected impact from the adoption of the deferred provisions in the first
quarter of fiscal year 2004.
The Partnership does not believe that any other recently issued, but not
yet effective, accounting standards will have a material effect on the
Partnership's financial position or results of operations.
3. Unconsolidated Joint Venture
The Partnership and its affiliates formed a joint venture for the purpose
of acquiring and managing various assets. The Partnership and its affiliates
have identical investment objectives and participate on the same terms and
conditions. The affiliates are entities that are managed and controlled by the
General Partner. The Partnership has a right of first refusal to purchase the
equipment, on a pro-rata basis, if any of the affiliates desire to sell their
interest in the equipment.
ICON Receivables 1997-A LLC
---------------------------
In March and September 1997 the Partnership, and affiliates, ICON Cash Flow
Partners L.P. Series E ("Series E"), ICON Cash Flow Partners L.P. Six ("L.P.
Six"), and ICON Cash Flow Partners L.P. Seven ("L.P. Seven") contributed and
assigned equipment lease and finance receivables and residuals to ICON
Receivables 1997-A LLC ("1997-A") for the purpose of securitizing their cash
flow collections. As of December 31, 2003, the Partnership, Series E, L.P. Six
and L.P. Seven own 17.81%, 31.19%, 31.03% and 19.97% interests, respectively, in
1997-A.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the financial position and results of operations of
1997-A as of and for the years ended December 31, 2003 and 2002 is summarized
below:
December 31, 2003 December 31, 2002
----------------- -----------------
Assets $ 810,802 $ 694,761
================ ===============
Liabilities $ 595,106 $ 390,389
================ ===============
Equity $ 215,696 $ 304,372
================ ===============
Partnership's share of equity $ 38,412 $ 54,208
================ ===============
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
----------------- -----------------
Net (loss) income $ (88,676) $ 155,235
================ ===============
Partnership's share of net (loss) income $ (15,796) $ 27,647
================ ===============
4. Receivables Due in Installments
Non-cancelable minimum annual amounts due on finance leases and financings
as of December 31, 2003 are as follows:
Year Ending Finance
December 31, Leases Financings Total
----------- ------ ---------- -----
2004 $ 1,071 $ 1,869,829 $ 1,870,900
2005 - 87,088 87,088
--------------- ---------------- --------------
$ 1,071 $ 1,956,917 $ 1,957,988
=============== ================ ==============
Included in Financings is $1,750,000 due from an affiliate as discussed in Note
7.
The Allowance for doubtful accounts relating to the investments in finance
leases, financings and operating leases consisted of the following:
Finance Operating
Leases Financings Leases Total
Balance at January 1, 2001 $ 256,928 $ 92,097 $ - $ 349,025
Reversal of prior provisions (256,928) - - (256,928)
------------- ------------ ------------ -------------
Balance at December 31, 2001 - 92,097 - 92,097
Provision for (reversal of)
doubtful accounts - (67,097) 201,000 133,903
------------- ------------ ------------- --------------
Balance at December 31, 2002 - 25,000 201,000 226,000
Write-off recovery - 1,032 - 1,032
Write-off - - (201,000) (201,000)
------------- ------------- ------------- --------------
Balance at December 31, 2003 $ - $ 26,032 $ - $ 26,032
============= ============= ============= ==============
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
5. Investment in Operating Leases
A DeHavilland DHC-8-102 aircraft with a carrying value of $1,110,202 at
December 31, 2003, is on lease to U.S. Airways ("US Air") which originally
expired in November 2003 and was extended for an additional eleven months
through October 2004 at monthly rentals of $20,000. The aircraft is subject to
non-recourse financing, and the rental payments are remitted directly by US Air
to the lender to repay the loan balance and interest. The outstanding
non-recourse debt was $1,934,027 at December 31, 2003.
During the year ended December 31, 2003, the Partnership sold equipment
which was on lease to Champlain Cable Corp. for gross proceeds of $141,956 which
resulted in a net gain of $116,591.
The investment in operating leases at December 31, 2003, 2002 and 2001 were
as follows:
2003 2002 2001
Equipment at cost, beginning of year $ 3,459,597 $ 3,384,869 3,384,869
Reclassification of finance lease to operating lease - 74,728 -
Dispositions (74,728) - -
------------- ------------- ---------------
Equipment at cost, end of year 3,384,869 3,459,597 3,384,869
------------- ------------- ---------------
Accumulated depreciation, beginning of year (2,059,577) (1,650,881) (1,267,097)
Depreciation expense (252,456) (408,696) (383,784)
Dispositions 37,366 - -
------------- -------------- ---------------
Accumulated depreciation, end of year (2,274,667) (2,059,577) (1,650,881)
------------- ------------- ----------------
Investment in operating leases, end of year $ 1,110,202 $ 1,400,020 $ 1,733,988
============= ============= ===============
6. Notes Payable
In 2000, the Partnership refinanced its outstanding debt relating to its
DeHavilland DHC-8-102 aircraft and borrowed an additional $2,000,000 under a
recourse note ("2000 recourse Note"). This debt was restructured on January 3,
2003 due to the Chapter 11 filing of U.S. Air. This note bears interest at 11%
per annum and had an original maturity date of December 2003. Based upon US
Air's request for an extension of its lease terms with the Partnership, the
General Partner is in negotiation with the lender to extend the loan maturity
date to match the lease extension. This debt is collateralized by the underlying
equipment with a net book value of $1,101,202 at December 31, 2003. The
outstanding balance at December 31, 2003 and 2002 was $1,934,027 and $2,086,075,
respectively.
7. Related Party Transactions
In accordance with the terms of the Management Agreement, the Partnership
is required to pay the General Partner management fees based on a percentage of
rentals received either directly by the Partnership or through its joint venture
(ranging from 1% to 7%). In addition, the General Partner is reimbursed for
expenses incurred by it in connection with the Partnership's operations.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
No management fees or administrative expense reimbursements were made to
the General Partner during the years ended December 31, 2003, 2002 and 2001 due
to the General Partners voluntary decision to waive its right to such fees and
expense reimbursements effective July 1, 2000.
The Partnership owed a net amount of $49,486 to affiliates at December 31,
2003. This amount is non-interest bearing, and is to be repaid during 2004.
In 1997, the Partnership financed a portion of the free cash flow relating to
a leveraged lease transaction of an affiliate, L.P. Seven. The lease
expires in July of 2004. During 2002, L.P. Seven prepaid $250,000 of the
financing to the Partnership. The balance at December 2003 of $1,750,000 is
included under the caption "Investment in Financings."
8. Tax Information (Unaudited)
The following reconciles net (loss) income for financial statement
reporting purposes to (loss) income for federal income tax purposes for the
years ended December 31:
2003 2002 2001
---- ---- ----
Net (loss) income for financial statement reporting purposes $ (18,781) $ 662,388 $ 284,772
Differences due to:
Direct finance leases - - 246,723
Depreciation and amortization 3,101 87,156 (225,783)
Provision for doubtful accounts (201,000) 133,903 (256,928)
(Loss) gain on sale of equipment 25,017 (3,104) 312,147
Other (312,167) (467,762) (339,262)
------------- ------------- -------------
Partnership (loss) income for
federal income tax reporting purposes $ (503,830) $ 412,581 $ 21,669
============= ============= =============
As of December 31, 2003, the partners' capital accounts for financial
statement reporting purposes amounted to $1,020,997 compared to the partners'
capital accounts for federal income tax purposes of $6,801,578 (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 reporting purposes and temporary differences related to direct finance
leases, depreciation and provision for gains and losses.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
9. Selected Quarterly Financial Data (Unaudited)
The following table is a summary of selected financial data by quarter for
the years ended December 31, 2003 and 2002:
For the Quarter Ended
---------------------
March 31, June 30, September 30, December 31,
2003
Revenues $ 131,886 $ 137,381 $ 224,988 $ 106,059
============= ============= ============= =============
Net (loss) income allocable to
limited partners $ (37,925) $ (7,934) $ 56,561 $ (29,295)
============= ============= ============= =============
Net (loss) income per weighted
average limited partnership unit $ (.10) $ (0.02) $ 0.14 $ (0.07)
============= ============= ============= =============
2002
Revenues $ 297,506 $ 308,171 $ 246,086 $ 742,345
============= ============= ============= =============
Net income (loss) allocable to
limited partners $ 87,313 $ 80,523 $ (45,345) $ 533,273(1)
============= ============= ============= =============
Net income (loss) per weighted
average limited partnership unit $ 0.21 $ 0.20 $ (0.11) $ 1.34
============= ============= ============= =============
(1) The fourth quarter of 2002 includes a one-time adjustment of $513,174
shown under the caption "Interest income and other," due to a revised estimated
amount of residual sharing values.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The information required by Item 304 of Regulation S-K was filed as part of
the Partnership's 2002 Reports on Form 8-K filed on February 5, 2003.
Item 9a. Control and Procedures
----------------------
The Partnership carried out an evaluation, under the supervision and with
the participation of management of ICON Capital Corp., the General Partner of
the Partnership, including the Principal Executive Officer and the Principal
Financial Officer, of the effectiveness of the design and operation of the
Partnership's disclosure controls and procedures as of the end of the period
covered by this report pursuant to the Securities Exchange Act of 1934. Based
upon the evaluation, the Principal Executive Officer and the Principal Financial
Officer concluded that the Partnership's disclosure controls and procedures were
effective.
There were no significant changes in the Partnership's internal control
over financial reporting during the Partnership's fourth fiscal quarter that
have materially affected, or are likely to materially affect, the Partnership's
internal control over financial reporting.
PART III
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 100 Fifth Avenue, New York,
New York 10011, and its telephone number is (212) 418-4700. 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 leases and full financing
transactions.
The manager of the Partnership'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.
The General Partner performs 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, re-leasing 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, monitoring performance by the lessees of
their obligations under the leases and the payment of operating expenses.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
The officers and directors of the General Partner are as follows:
Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Paul B. Weiss President and Director
Thomas W. Martin Executive Vice President and Director
Beaufort J. B. Clarke, age 57, has been Chairman, Chief Executive Officer
and Director of the General Partner since 1996. 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.
Paul B. Weiss, age 43, is President and Director of the General Partner.
Mr. Weiss has been exclusively engaged in lease acquisitions since 1988 from his
affiliations with the General Partner since 1996, Griffin Equity Partners (as
Executive Vice President from 1993-1996); Gemini Financial Holdings (as Senior
Vice President-Portfolio Acquisitions from 1991-1993) and Pegasus Capital
Corporation (as Vice President-Portfolio Acquisitions from 1988-1991). He was
previously an investment banker and a commercial banker.
Thomas W. Martin, age 50, has been Executive Vice President of the General
Partner since 1996. Prior to his present position, Mr. Martin was the Executive
Vice President and Chief Financial Officer of Griffin Equity Partners, Inc.
(1993-1996), Gemini Financial Holdings (as Senior Vice President from 1992-1993)
and Chancellor Corporation (as Vice President-Syndications from 1985-1992). Mr.
Martin has 17 years of senior management experience in the leasing business.
Item 11. Executive Compensation
----------------------
There were no payments or accrued compensation and reimbursement expenses
to the General Partner or its affiliates for the years ended December 31, 2003,
2002 and 2001. The General Partner also has a 1% interest in the profits and
distributions of the Partnership.
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 28, 2004, 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.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
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.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
None other than those disclosed in Item 11 herein.
Item 14. Principal Accountant Fees and Services
--------------------------------------
2003 2002 Description
---- ----
Audit fees $ 13,500 $ - Audit and review
Audit related fees -
Tax fees 600 - Tax compliance
All other fees - -
------------- -------------
Total 14,100 -
============= =============
PART IV
Item 15. 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) Form of Dealer-Manager Agreement (Incorporated by reference to
Exhibit 1.1 to Form S-1 Registration Statement No. 33-40044 filed
with the Securities and Exchange Commission on April 18, 1991).
(ii) Form of Selling Dealer Agreement (Incorporated by reference to
Exhibit 1.2 to Form S-1 Registration Statement No. 33-40044 filed
with the Securities and Exchange Commission on April 18, 1991).
(iii)Amended and Restated Agreement of Limited Partnership
(Incorporated herein by reference to Exhibit A to Amendment No. 4
to Form S-1 Registration Statement No. 33-40044 filed with the
Securities and Exchange Commission on August 14, 1991).
(b) Reports on Form 8-K
Form 8-K filed on February 5, 2003
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
Item 4. Changes in Registrant's Certifying Accountant
Exhibits
31.1 Rule 13a-14(a)/15d-14(a) certifications
31.2 Rule 13a-14(a)/15d-14(a) certifications
32.1 Certification of Chairman and Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Executive Vice President and Principal Financial
and Accounting Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(d) Unconsolidated Joint Venture Financial Statements ICON
Receivables 1997-A LLC - as of and for the years ended December
31, 2003 and 2002
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 2003
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 D
File No. 33-40044 (Registrant)
By its General Partner, ICON Capital Corp.
Date: March 28, 2004 /s/ Beaufort J.B. Clarke
------------------------------------
Beaufort J.B. Clarke
Chairman, 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 28, 2004 /s/ Beaufort J.B. Clarke
-------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Date: March 28, 2004 /s/ Paul B. Weiss
-------------------------------------
Paul B. Weiss
President and Director
Date: March 28, 2004 /s/ Thomas W. Martin
-------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting 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.
Exhibit 31.1
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-K
---------------------
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Cash Flow Partners
L.P. Series D;
2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a. designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this annual report based on such
evaluation; and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the Corporate
Manager (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the Partnership ability to record, process, summarize and
report financial information and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting
Dated: March 30, 2004
/s/ Beaufort J.B. Clarke
- -----------------------------
Beaufort J. B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
sole General Partner of ICON Cash Flow Partners L.P. Series D
Exhibit 31.2
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-K
---------------------
I, Thomas W. Martin, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Cash Flow Partners
L.P. Series D;
2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this annual report based on such
evaluation; and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the board of directors of
the Corporate Manager (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control, are reasonably likely to
materially affect the Partnership ability to record, process,
summarize and report financial information and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls over financial reporting any corrective actions
with regard to significant deficiencies and material weaknesses.
Dated: March 30, 2004
/s/ Thomas W. Martin
- ----------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer
of the General Partner of the Registrant)
ICON Capital Corp.
sole General Partner of ICON Cash Flow Partners L.P. Series D
EXHIBIT 32.1
Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350)
I, Beaufort J.B. Clarke, Chairman and Chief Executive Officer of ICON
Capital Corp., the sole General Partner of ICON Cash Flow Partners L.P. Series
D, in connection with the Annual Report of ICON Cash Flow Partners L.P. Series
D. (the "Partnership") on Form 10-K for the year ended December 31, 2003, as
filed with the Securities and Exchange Commission on the date hereof (the
"Annual Report") certify, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge and belief:
(1) the Annual Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) the information contained in the Annual Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership
Dated: March 30, 2004
/s/ Beaufort J.B. Clarke
-------------------------------------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
sole General Partner of ICON Cash Flow Partners L.P. Series D
EXHIBIT 32.2
Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350)
I, Thomas W. Martin, Executive Vice President (Principal Financial and
Accounting Officer) of ICON Capital Corp., the sole General Partner of ICON Cash
Flow Partners L.P. Series D, in connection with the Annual Report of ICON Cash
Flow Partners L.P. Series D. (the "Partnership") on Form 10-K for the year ended
December 31, 2003, as filed with the Securities and Exchange Commission on the
date hereof (the "Annual Report") certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
(1) the Annual Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) the information contained in the Annual Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership
Dated: March 30, 2004
/s/ Thomas W. Martin
-------------------------------------------------------
Thomas W. Martin
Executive Vice President (Principal
Financial and Accounting Officer)
ICON Capital Corp.
sole General Partner of ICON Cash Flow Partners, L.P., Series D
ICON Receivables 1997-A LLC
Financial Statements
For the Years Ended December 31, 2003 and 2002
(With Independent Auditor's Report Thereon)
INDEPENDENT AUDITOR'S REPORT
The Members
ICON Receivables 1997-A LLC
We have audited the accompanying balance sheets of ICON Receivables 1997-A LLC
as of December 31, 2003 and 2002, and the related statements of operations,
changes in members' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 financial statements referred to above present fairly, in
all material respects, the financial position of ICON Receivables 1997-A LLC as
of December 31 2003 and 2002, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1, the Company is winding down its portfolio and will
distribute available cash to its members when all assets are liquidated and all
obligations are paid.
/s/Hays & Company LLP
March 19, 2004
New York, New York
ICON Receivables 1997-A LLC
Balance Sheets
December 31, 2003 and 2002
Assets 2003 2002
Cash $ 127,130 $ 64,889
Investment in finance leases
Minimum rents receivable 732,566 684,130
Estimated unguaranteed residual values 169,186 169,186
Unearned income (65,049) (76,362)
Allowance for doubtful accounts (526,183) (492,234)
310,520 284,720
Due from related party 373,152 345,152
Total assets $ 810,802 $ 694,761
Liabilities and Members' Equity
Deferred credits $ 283,709 $ 131,340
Security deposits and other payables 311,397 259,049
Total liabilities 595,106 390,389
Commitments and Contingencies
Members' equity 215,696 304,372
Total liabilities and members' equity $ 810,802 $ 694,761
See accompanying notes to financial statements.
ICON Receivables 1997-A LLC
Statements of Operations
For the Years Ended December 31, 2003 and 2002
2003 2002
Revenue
Finance income $ 4,044 $ 49,798
Interest income and other 3,162 5,342
Net gain (loss) on sale of investments 3,010 (12,763)
Total revenues 10,216 42,377
Expenses
General and administrative expenses 98,892 119,347
Interest expense - 36,629
(Reversal of) provision for doubtful accounts - (268,834)
Total expenses 98,892 (112,858)
Net (loss) income $ (88,676) $ 155,235
See accompanying notes to financial statements.
ICON Receivables 1997-A LLC
Statement of Changes in Members' Equity
For the Years Ended December 31, 2002 and 2003
Balance at January 1, 2002 $ 149,137
Net income 155,235
Balance at December 31, 2002 304,372
Net loss (88,676)
Balance at December 31, 2003 $ 215,696
See accompanying notes to financial statements.
ICON Receivables 1997-A LLC
Statements of Cash Flows
For the Years Ended December 31, 2003 and 2002
2003 2002
Cash flows from operating activities:
Net (loss) income $ (88,676) $ 155,235
Adjustments to reconcile net (loss) income to
net cash provided by (used in) operating activities:
Net (gain) loss on sale of investments (3,010) 12,763
(Reversal of) provision for doubtful accounts - (268,834)
Changes in operating assets and liabilities:
Other assets (28,000) (106,530)
Deferred credit 152,369 -
Security deposits, and other payables 52,348 (159,326)
Collection of principals (38,770) 238,748
Total adjustments 134,937 (283,179)
Net cash provided by (used in) operating activities 46,261 (127,944)
Cash flows from investing activities:
Proceeds from the sale of investments 15,980 676,823
Net cash provided by investing activities 15,980 676,823
Cash flows from financing activities:
Principal payments on notes payable non-recourse - (1,157,730)
Net cash used in financing activities - (1,157,730)
Net increase (decrease) in cash 62,241 (608,851)
Cash at beginning of year 64,889 673,740
Cash at end of year $ 127,130 $ 64,889
Supplemental Cash Flow Information
Interest paid $ - $ 36,629
See accompanying notes to financial statements.
ICON Receivables 1997-A LLC
Notes to Financial Statements
For the Years Ended December 31, 2003 and 2002
1. Organization
ICON Receivables 1997-A LLC (the "Company"), was formed and commenced
business operations in 1997. In 1997, ICON Cash Flow Partners L.P., Series D
("Series D"), ICON Cash Flow Partners, L.P., Series E ("Series E"), ICON Cash
Flow Partners L.P. Six ("L.P. Six") and ICON Cash Flow Partners L.P. Seven
("L.P. Seven") contributed and assigned equipment leases and finance receivables
and residuals to the Company. The financial statements reflect the Company's
management of such contributed assets. Since its formation, the Company has not
entered into any new transactions other than owning and managing the assets
contributed for the benefit of the members. The Company is managed by the
General Partner of each of the Company's members. The Company is winding down
its portfolio and will distribute available cash to its members when all assets
are liquidated and all obligations are paid.
2. Significant Accounting Policies
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the dates of the financial statements and
revenues and expenses during the reporting periods. Significant estimates
primarily include the allowance for doubtful accounts and unguaranteed residual
values. In addition, management is required to disclose contingent assets and
contingent liabilities. Actual results could differ from those estimates.
Leases and Revenue Recognition - The Company accounts for owned equipment
leased to third parties as finance leases.
For finance leases, the Company 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.
Credit Risk - Financial instruments that potentially subject the Company to
concentrations of credit risk include cash and cash equivalents and direct
finance lease receivables. The Company places its cash deposits and temporary
cash investments with creditworthy, high quality financial institutions. The
concentration of such deposits and temporary cash investments is not deemed to
create a significant risk to the Company.
The Company records a provision for doubtful accounts to provide for
estimated credit losses in its 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 Company's write-off policy is based on an
analysis of the aging of the Company'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.
ICON Receivables 1997-A LLC
Notes to Financial Statements - Continued
For the Years Ended December 31, 2003 and 2002
Income Taxes - No provision for income taxes has been recorded since the
liability for such taxes is the responsibility of the members rather than the
Company. The Company's income tax returns are subject to examination by the
federal and state taxing authorities, and changes, if any could adjust the
individual income taxes of the members.
Impairment - Residual values of the Company's asset portfolio are
periodically reviewed to determine whether events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The events
or changes in circumstances which generally indicate that the residual value of
an asset may be impaired are (i) the estimated fair value of the underlying
equipment is less than the Company'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 Company'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 Company does not
recover its residual until the non-recourse note obligation is repaid in full.
An impairment loss is measured and recognized only if the estimated
undiscounted future cash flows of the asset are less than their net book value.
The estimated undiscounted future cash flows are the sum of the estimated
residual value of the asset at the end of the asset's expected holding period
and estimates of undiscounted future rents. The residual value assumes, among
other things, that the asset is utilized normally in an open, unrestricted and
stable market. Short-term fluctuations in the market place disregarded and it is
assumed that there is no necessity either to dispose of a significant number of
the assets, if held in quantity, simultaneously or to dispose of the asset
quickly. Impairment is measured as the difference between the fair value of the
assets and its carrying value on the measurement date.
3. Finance Lease Receivables
All of the Company's minimum finance receivables are scheduled to become
due during the year ending December 31, 2004.
Deferred credits include amounts received by the Company from lessees as
advance renewal rents and prepaid deposits on lease terminations.
The allowance for doubtful accounts related to the investments in finance
leases and financings consisted of the following:
Finance
Leases Financings Total
Balance at January 1, 2002 $ 2,174,224 $ - $ 2,174,224
Accounts written-off (1,413,156) - (1,413,156)
Reversal of provision for doubtful accounts (268,834) - (268,834)
Balance at December 31, 2002 492,234 - 492,234
Recoveries 33,949 - 33,949
Balance at December 31, 2003 $ 526,183 $ - $ 526,183
ICON Receivables 1997-A LLC
Notes to Financial Statements - Continued
For the Years Ended December 31, 2003 and 2002
4. Due from related party
Due from related party includes amounts due from affiliates of $373,152,
and $345,152 at December 31, 2003 and 2002, respectively, which represent
amounts collected by an affiliate on the Company's behalf.