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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 2005
--------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from __________________to_________________
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 (IRS Employer Identification Number)
incorporation or organization)
100 Fifth Avenue, New York, New York 10011-1505
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(212) 418-4700
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ x] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). [ ] Yes [x] No
ICON Cash Flow Partners, L.P., Series D
Index
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements 3-9
Consolidated Balance Sheets at March 31, 2005 (Unaudited)
and December 31, 2004 3
Consolidated Statements of Operations for the three months ended
March 31, 2005 and 2004 (Unaudited) 4
Consolidated Statement of Changes in Partners' Equity for the three
months ended March 31, 2005 (Unaudited) 5
Consolidated Statements of Cash Flows for the three months ended March
31, 2005 and 2004 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7-9
Item 2. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations 10-16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits 18
Signatures 19
Certifications 20-23
2
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ICON Cash Flow Partners, L. P., Series D
(A Delaware Limited Partnership)
Consolidated Balance Sheets
ASSETS
(Unaudited)
March 31, December 31,
2005 2004
--------- -----------
Cash and cash equivalents $ 266,494 $ 404,288
------------- -----------
Investments in finance leases:
Minimum rents receivable 85,763 106,762
Unearned income (2,688) (4,677)
Allowance for doubtful accounts (25,000) (25,000)
--------------- -----------
Net investments in finance leases 58,075 77,085
-------------- -----------
Equipment held for sale 1,010,202 1,010,202
Investment in joint venture 6,048 8,053
-------------- -----------
Total assets $ 1,340,819 $ 1,499,628
============= ===========
LIABILITIES AND PARTNERS' EQUITY
Notes payable - recourse $ 1,106,165 $ 1,209,575
Security deposits, and other payables 14,634 16,520
--------------- -----------
Total liabilities 1,120,799 1,226,095
--------------- -----------
Commitments and contigencies
Partners' equity:
General Partner (342,396) (341,861)
Limited partners (399,118 units outstanding,
$100 per unit original issue price) 562,416 615,394
------------- -----------
Total partners' equity 220,020 273,533
------------- -----------
Total liabilities and partners' equity $ 1,340,819 $ 1,499,628
============== ===========
See accompanying notes to consolidated financial statements.
3
ICON Cash Flow Partners, L. P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Operations
Three Months Ended March 31,
(Unaudited)
2005 2004
---- -----
Revenue:
Rental income $ - $ 62,815
Finance income 1,989 49,628
Loss from investment in joint venture (2,005) (5,081)
Net loss on sales of equipment - (4,762)
Interest and other income 3,605 -
----------- ------------
Total revenue 3,589 102,600
----------- ------------
Expenses:
Interest 31,373 53,081
General and administrative 25,729 32,335
----------- ------------
Total expenses 57,102 85,416
----------- ------------
Net (loss) income $ (53,513) $ 17,184
=========== ============
Net (loss) income allocable to:
Limited partners $ (52,978) $ 17,012
General Partner (535) 172
----------- ------------
$ (53,513) $ 17,184
=========== ============
Weighted average number of limited partnership
units outstanding 399,118 399,118
=========== ============
Net (loss) income per weighted average limited
partnership unit $ (0.13) $ 0.04
=========== ============
See accompanying notes to consolidated financial statements.
4
ICON Cash Flow Partners, L. P., Series D
(A Delaware Limited Partnership)
Consolidated Statement of Changes in Partners' Equity
Three Months Ended March 31, 2005
(Unaudited)
Total
Limited General Partners'
Partners Partners Equity
-------- -------- ------
Balance, January 1, 2005 $ 615,394 $ (341,861) $ 273,533
Net Loss (52,978) (535) (53,513)
------------ ------------- ----------
Balance at March 31, 2005 $ 562,416 $ (342,396) $ 220,020
============ ============= ==========
See accompanying notes to consolidated financial statements.
5
ICON Cash Flow Partners, L. P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
Three Months Ended March 31,
(Unaudited)
Increase (decrease) in cash and cash equivalents 2005 2004
---- ----
Cash flows from operating activities
Net (loss) income $ (53,513) $ 17,184
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Rental income paid directly to lenders by lessees - (60,000)
Finance income (1,989) (49,628)
Interest expense on recourse financing paid directly
to lenders by lessees - 53,081
Net loss on sales of equipment - 4,762
Loss from investment in joint venture 2,005 5,081
Changes in operating assets and liabilities:
Collection of principal - non-financed receivables 20,999 582,228
Security deposits and other payables (1,886) (861)
---------- ----------
Net cash (used in) provided by operating activities (34,384) 551,847
---------- ---------
Cash flows used in financing activities:
Principal payments on notes payable - recourse (103,410) (554,228)
---------- ----------
Net decrease in cash and cash equivalents (137,794) (2,381)
Cash and cash equivalents, beginning of the period 404,288 44,342
---------- ---------
Cash and cash equivalents, end of the period $ 266,494 $ 41,961
========== =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 21,233 $ 53,081
========== =========
Supplemental disclosure of non-cash investing and financing activities:
Principal and interest on notes payable - recourse paid
directly to lenders by lessees $ - $ (60,000)
========== =========
Rental income from operating lease paid directly to
lender by lessee $ - $ 60,000
========== =========
See accompanying notes to consolidated financial statements.
6
ICON Cash Flow Partners, L.P., Series D
Notes To Consolidated Financial Statements
March 31, 2005
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements of ICON Cash Flow
Partners, L.P., Series D (the "Partnership") have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission for Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair presentation have
been included. These consolidated financial statements should be read together
with the consolidated financial statements and notes included in the
Partnership's 2004 Annual Report on Form 10-K. The results for the interim
period are not necessarily indicative of the results for the full year.
The consolidated financial statements include the accounts of the
Partnership and its majority owned subsidiary. All intercompany accounts and
transactions have been eliminated in consolidation. The Partnership accounts for
its interests in minority owned joint ventures under the equity method of
accounting. In such cases, the Partnership's original investments are recorded
at cost and adjusted for its share of earnings, losses and distributions. In
joint ventures where the Partnership's ownership interest is majority owned,
minority interest represents the minority venturer's proportionate share of
their equity in the joint venture. The minority interest is adjusted for the
minority venturer's share of the earnings or loss of the joint venture.
Certain reclassifications have been made to the accompanying consolidated
financial statements for the prior period to conform to the current
presentation.
(2) Organization
The Partnership was formed on February 21, 1991 as a Delaware limited
partnership. The Partnership is engaged in one business segment, the business of
acquiring equipment subject to leases. The Partnership is currently in the
process of selling its remaining assets in the ordinary course of business, a
time frame called the disposition period.
The Partnership's reinvestment period ended June 5, 1997 and the
Partnership commenced its disposition period at that time. During the
disposition period, the Partnership is distributing substantially all
distributable cash from operations and equipment sales to the partners and will
continue the orderly termination of its operations and affairs. The Partnership
will not invest in any additional finance or lease transactions during the
disposition period.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership's equipment leases and financing
transactions under the terms of a management agreement with the Partnership.
Additionally, the General Partner has a 1% ownership interest in the
Partnership.
7
ICON Cash Flow Partners, L.P., Series D
Notes To Consolidated Financial Statements
March 31, 2005
(Unaudited)
(2) Organization - continued
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.
(3) Joint Venture
The Partnership and its affiliates, entities managed and controlled by the
General Partner, formed one joint venture, discussed below, for the purpose of
acquiring and managing various assets. The Partnership and these affiliates have
substantially identical investment objectives and participate on the same terms
and conditions. The Partnership and the other joint venturers have a right of
first refusal to purchase the equipment, on a pro-rata basis, if any of the
other joint venturers desire to sell their interests in the equipment or joint
venture.
ICON Receivables 1997-A LLC
The Partnership and three 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
leases, finance receivables and residuals to ICON Receivables 1997-A LLC
("1997-A") for the purpose of securitizing their cash flow collections. At March
31, 2005, 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. The General Partner is in
the process of liquidating 1997-A.
Information as to the unaudited results of operations of 1997-A for the
three months ended March 31, 2005 and 2004 is summarized below:
Three Months Ended
March 31,
2005 2004
-------------- --------------
Net loss $ (11,256) $ (28,530)
============= =============
Partnership's share of net loss $ (2,005) $ (5,081)
============== =============
(4) Recent Accounting Pronouncements
On June 1, 2005 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 154 "Accounting Changes and Error
Corrections" ("SFAS 154") which replaces Accounting Principles Board Opinion No.
20, "Accounting Changes" ("APB 20") and SFAS No. 3, "Reporting Accounting
Changes in Interim Financial Statements," and changes the requirements for the
accounting for and reporting of a change in accounting principle. SFAS 154
requires retrospective application to prior periods' financial statements of a
voluntary change in accounting principle unless it is impracticable. APB 20
previously required that most voluntary changes in accounting principle be
recognized by including in net income of the period of the change the cumulative
effect of changing to the new accounting principle. The Partnership does not
expect the adoption of SFAS 154 to have an impact on its consolidated financial
position or results of operations.
8
ICON Cash Flow Partners, L.P., Series D
Notes To Consolidated Financial Statements
March 31, 2005
(Unaudited)
(4) Recent Accounting Pronouncements - continued
Management does not believe that any recently issued, but not yet effective
accounting pronouncements, if currently adopted, would have a material effect on
the accompanying consolidated financial statements.
9
Item 2. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
The following is a discussion of our results of operations and current
financial position. This discussion should be read together with our unaudited
consolidated financial statements and related notes included elsewhere in this
report and the audited consolidated financial statements and related notes
included in our Annual Report on Form 10-K for the year ended December 31, 2004.
As used in this quarterly report on Form 10-Q, references to "we," "us,"
"our" or similar terms include ICON Cash Flow Partners, L.P., Series D and its
consolidated subsidiary.
Forward-Looking Information - Certain statements within this Form 10-Q may
constitute forward-looking statements within the meaning 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. We believe 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. Any such forward-looking
statements are subject to risks and uncertainties and our future results of
operations could differ materially from historical results or current
expectations. Some of these risks are discussed in this report, and include,
without limitation, fluctuations in oil and gas prices; level of fleet additions
by competitors and industry overcapacity; changing customer demands for
aircraft; acts of terrorism; unsettled political conditions, war, civil unrest
and governmental actions, and environmental and labor laws. Our actual results
could differ materially from those anticipated by such forward-looking
statements due to a number of factors, some of which may be beyond our control,
including, without limitation:
o changes in our industry, interest rates or the general economy;
o the degree and nature of our competition;
o availability of qualified personnel;
o cash flows from operating activities may be less than our current level of
expenses and debt obligations;
o the financial condition of lessees; and
o lessee defaults.
Business Overview
We are an equipment leasing business formed on February 21, 1991, which
began active operations on August 23, 1991. We primarily engage in the business
of acquiring equipment subject to lease and, to a lesser degree, acquiring
ownership rights to items of leased equipment at lease expiration. Some of our
equipment leases were acquired for cash and provided current cash flow, which we
refer to as "income" leases. The majority of the purchase price of our other
equipment leases was financed, so these leases generated little or no current
cash flow because substantially all of the rental payments received from a
lessee were paid to a lender. For these "growth" leases, we anticipate that the
future value of the leased equipment will exceed the cash portion of the
purchase price paid for the equipment.
We invested most of the net proceeds from our offering in items of
equipment subject to a lease. After the net offering proceeds were invested,
additional investments were made with the cash generated from our initial
investments to the extent that cash was not needed for expenses, reserves and
distributions to investors. The investment in additional equipment in this
manner is called "reinvestment." After the "reinvestment period," we began
selling our assets in the ordinary course of business during a time frame called
the "disposition period." If we believe it would benefit investors to reinvest
our cash flow in equipment during the disposition period, we may do so, but we
will not incur any additional fees to the General Partner in connection with
such reinvestments. Since June 5, 1997 we have been in our disposition period,
wherein we are seeking to sell our assets in the ordinary course of business.
10
Our current equipment portfolio, which we own directly, consists primarily
of the following:
Air Transportation Industry:
We have a 100% interest in a de Havilland DHC-8-102 aircraft (the
"Aircraft") which had been subject to a lease with US Airways, Inc. ("US
Airways"). The lease expired during October 2004. The Aircraft is held as
collateral against a recourse note payable. At March 31, 2005, the balance of
the note payable is $1,106,165.
US Airways realized that one of our Aircraft's engines was mistakenly
returned to Bombardier on a Bombardier DH-8 aircraft. Due to the costs and
logistics involved with having the engine returned from Bombardier, US Airways
agreed to exchange one of its own engines for our engine that was mistakenly
returned to Bombardier. We have agreed to this exchange.
In early March 2005, it appeared that the exchange for the missing engine
at December 31, 2004, could be finalized. However, on March 4, 2005, the
replacement engine we received from Bombardier failed a maintenance test
performed in compliance with the Federal Aviation Administration's Short Term
Storage Program. US Airways has proposed and we accepted another replacement
engine. The exchange resumed and this engine will be provided to us. Once
documented, an Order will be submitted to the United States Bankruptcy judge
requesting approval of the exchange of the engines. Upon approval, we will
recover our aircraft.
The General Partner is currently reviewing our options with respect to the
Aircraft. These options include finding another party to lease the Aircraft or
selling the Aircraft to a third party. The General Partner believes that the
current net book value of the Aircraft, at March 31, 2005, including the
anticipated maintenance upgrade required to continue its air worthiness, is less
than the amount anticipated in a sale or re-lease.
Restaurant and Brewing Equipment
We have a 100% interest in restaurant and brewing equipment that is subject
to a lease with Charlie and Jake's Bar-B-Q, Inc. The lease requires monthly
payments of $7,000. The lease expires during January 2006, at which time title
in the equipment will pass to Charlie and Jake's Bar-B-Q. The equipment was
purchased for $274,771, and there is no related debt at March 31, 2005.
Substantially all of our recurring operating revenues are generated from
the operations of the Charlie and Jake's Bar-B-Q lease. At March 31, 2005,
Charlie & Jake's is two months in arrears on their monthly lease payments. On a
monthly basis, we deduct the expenses related to the recurring operations of the
portfolio from such revenues and assess the amount of the remaining cash flows
that will be required to fund known re-leasing or disposition costs and
equipment management costs. Any residual operating cash flows are considered
available for distribution to our partners.
Economic and Industry Factors
Our results of operations continue to be impacted by a number of factors
influencing the United States of America's economy, as well as, the equipment
leasing industry some of which are discussed below.
11
United States Economy
The economy of the United States of America appears to be recovering, and
the leasing industry's outlook for the foreseeable future is encouraging. We
foresee an increase in capital spending by corporations through 2007 which
should increase the pool of available leases, and to that end, we believe there
will be more opportunities in this market. Nonetheless, a key obstacle still
facing the leasing industry is the continued low interest rate environment,
which reduces leasing volume inasmuch as customers are more prone to purchase
than lease. Other factors which may negatively affect the leasing industry are
the proposed legal and regulatory changes that may affect tax benefits of
leasing and the continued misperception by potential lessees, stemming from
Enron, WorldCom and others, that leasing should not play a central role as a
financing alternative. However, as economic growth continues and interest rates
inevitably begin to rise over time, we are optimistic that more lessees will
return to the marketplace.
Air Transportation Industry
The aircraft leasing industry has been on the downside of a business cycle
and continues to remain there. This has resulted in depressed sales prices for
assets such as our aircraft interests. It does not appear that the industry will
recover significantly in the very near future with the recent increases in the
price of gasoline and the fare wars within the air transportation industry,
although we are optimistic that a recovery will occur within two to three years
time. However, a further weakening of the industry could cause the proceeds
realized from the future sale of our aircraft to be even less than suggested by
recent appraisals.
Critical Accounting Policies
An appreciation of our critical accounting policies is necessary to
understand our financial results. These policies may require the General Partner
to make difficult and subjective judgments regarding uncertainties, and as a
result, such estimates may significantly impact our financial results. The
precision of these estimates and the likelihood of future changes depend on a
number of underlying variables and a range of possible outcomes. We applied our
critical accounting policies and estimation methods consistently in all periods
presented. We consider the following accounting policies to be critical to our
business:
o Lease classification and revenue recognition
o Asset impairments
o Depreciation
Lease Classification and Revenue Recognition
The equipment we lease to third parties is classified either as a finance
lease, a leveraged lease, or an operating lease, which is determined based upon
the terms of each lease. Initial direct costs are capitalized and amortized over
the term of the related lease for both a finance lease and a leveraged lease.
For an operating lease, the initial direct costs are included as a component of
the cost of the equipment and depreciated.
For finance leases, we record, at lease inception, the total minimum lease
payments receivable from the lessee, the estimated unguaranteed residual value
of the equipment at lease termination, the initial direct costs related to the
lease 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 ratably over the term of the lease.
12
For leveraged leases, we record, at lease inception, our net investment in
the equipment which consists of the minimum lease payments receivable, the
estimated unguaranteed residual value of the equipment at lease termination and
the initial direct costs related to the lease, net of the unearned income and
principal and interest on the related non-recourse debt. Unearned income is
recognized as income over the life of the lease at a constant rate of return on
the positive net investment.
For operating leases, income is recorded as rental income and is recognized
on the straight line method over the lease term.
Our General Partner has an Investment Committee that approves each new
equipment acquisition. As part of the committee's process, it determines the
residual value to be used once the acquisition has been approved. The factors
considered in determining the residual value include, but are not limited to,
the creditworthiness of the potential lessee, the type of equipment being
considered, how the equipment is integrated into the potential lessees business,
the length of the lease and industry in which the potential lessee operates.
Residual values are reviewed for potential impairments in accordance with our
policy to review all significant assets in our portfolio.
Asset Impairments
The significant assets in our portfolio are periodically reviewed, at least
annually, by management, to determine whether events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. Management
uses qualified third party appraisers to assist in the review process. An
impairment loss will be recognized if the carrying amount of a long-lived asset
is not recoverable and exceeds its fair value. In such circumstances, we will
estimate the future cash flows (undiscounted and without interest charges)
expected to result from the use of the asset and its eventual disposition.
Future cash flows are the future cash inflows expected to be generated by an
asset less the future cash outflows expected to be necessary to obtain those
inflows. An impairment loss will be measured as the amount by which the carrying
amount of a long-lived asset exceeds its fair value.
The events or changes in circumstances which generally indicate that an
asset may be impaired are (i) the estimated fair value of the underlying
equipment is less than our carrying value or (ii) the lessee is experiencing
financial difficulties and it does not appear likely that the estimated proceeds
from the disposition of the asset will be sufficient to satisfy the remaining
obligation to the lender and our residual position in the asset. Generally, in
the latter situation, the residual position relates to equipment subject to
third party notes payable where the lessee remits their rental payments directly
to the lender and we do not recover our residual position until the note payable
is repaid in full.
Depreciation
We record depreciation expense on equipment classified as an operating
lease. In order to calculate depreciation, we first determine the depreciable
equipment cost, which is the cost less estimated salvage value. The estimated
salvage value is our estimate of the value of the equipment at lease
termination. The estimated residual value is reviewed annually, by management,
to determine whether an impairment charge may be required. Management uses
qualified third party appraisers to assist in the review process. Depreciation
expense is recorded ratably over the term of the related lease.
13
New Accounting Pronouncements
On June 1, 2005 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 154 "Accounting Changes and Error
Corrections" ("SFAS 154") which replaces Accounting Principles Board Opinion No.
20, "Accounting Changes" ("APB 20") and SFAS No. 3, "Reporting Accounting
Changes in Interim Financial Statements," and changes the requirements for the
accounting for and reporting of a change in accounting principle. SFAS 154
requires retrospective application to prior periods' financial statements of a
voluntary change in accounting principle unless it is impracticable. APB 20
previously required that most voluntary changes in accounting principle be
recognized by including in net income of the period of the change the cumulative
effect of changing to the new accounting principle.
Management does not believe that any recently issued, but not yet effective
accounting pronouncements, if currently adopted, would have a material effect on
the accompanying consolidated financial statements.
Results of Operations for the three months ended March 31, 2005 (the "2005
Quarter") and 2004 (the "2004 Quarter")
Since June 5, 1997, we have been in our disposition period and are in the
process of selling our assets in the ordinary course of business. At March 31,
2005, we have few remaining assets. As such, rental income and finance income
will decrease over time as will expenses related to our assets, such as
depreciation. Additionally, interest expense should decrease as we reach the
expiration of leases that were financed and we fully repay the debt. Currently
we are paying the interest expense relating to the U.S. Airways aircraft which
is off-lease at March 31, 2005. Since we are in the process of selling our
remaining assets, we will be recording gains and losses on the sales of
equipment.
Revenues for the 2005 Quarter and the 2004 Quarter are summarized as
follows:
Three Months Ended March 31,
----------------------------
2005 2004 Change
---- ---- ------
Total revenue $ 3,589 $ 102,600 $ (99,011)
----------- --------- -----------
Rental income - 62,815 (62,815)
Finance income 1,989 49,628 (47,639)
Loss from investments in joint ventures (2,005) (5,081) 3,076
Net loss on sales of equipment - (4,762) 4,762
Interest and other income 3,605 - 3,605
Total revenue for the 2005 Quarter decreased by $99,011 or 96.5% as
compared to the 2004 Quarter. As discussed above, we are in our disposition
period and have few remaining assets. The decrease in both rental income and
finance income is a result of the US Airways bankruptcy in September 2004 and
the expiration of the Federal Express lease in June 2004, respectively.
14
Expenses for the 2005 Quarter and the 2004 Quarter are summarized as
follows:
Three Months Ended March 31,
-----------------------------
2005 2004 Change
---- ---- ------
Total expenses $ 57,102 $ 85,416 $ (28,314)
---------- ---------- -----------
Interest 31,373 53,081 (21,708)
General and administrative 25,729 32,335 (6,606)
Total expenses for the 2005 Quarter decreased by $28,314 or 33.1% as
compared to 2004 Quarter. As discussed above, we are in our disposition period
and have few remaining leases. Because of this, our expenses have been reduced
substantially. The decrease in interest expense is related to the decrease in
the principal balance of the remaining recourse debt.
Net Loss
As a result of the foregoing factors, net (loss) income in the 2005 Quarter
and the 2004 Quarter were ($53,513) and $17,184, respectively. The net loss per
weighted average number of limited partnership units outstanding was ($.13) and
$.04, for the 2005 and 2004 Quarter respectively.
Liquidity and Capital Resources
Sources of Cash
We believe that with the cash we have currently available and from the cash
being generated from our lease, we have sufficient cash to continue our limited
operations through our liquidation period, which we believe should end in
another six to twelve months. Net cash used by operating activities was
approximately $34,000 for 2005 Quarter as compared to cash provided by operating
activities of approximately $552,000 for the 2004 Quarter.
Our cash flow from operating activities may be less than our current level
of expenses. To the extent our cash flow is insufficient to pay such expenses,
we may be required to sell assets prior to maturity or borrow against future
cash flows. Our primary source of cash outflow is for the repayment of our
recourse debt.
Financings and Recourse Borrowings
At March 31, 2005, we are party to recourse debt that expires during
December 2006 with monthly principal and interest payments of $45,244 and
accrues interest at 11.0% per year. We are currently making the required monthly
payments. At March 31, 2005, the remaining balance was $1,106,165.
Distributions
Our reinvestment period ended June 5, 1997, and the disposition period
commenced. During the disposition period, we will distribute substantially all
distributable cash from operations and equipment sales to the partners and will
continue the orderly termination of our operations and affairs. We have not and
will not invest in any additional finance or equipment lease transactions during
the disposition period. As a result of our entering into the disposition period,
future distributions are expected to fluctuate depending on the amount of asset
sales and re-lease proceeds generated during the period.
We do not, in the normal course of business, pay dividends. We paid monthly
distributions to our partners beginning with their admission to the Partnership
through the termination of the reinvestment period, which was June 5, 1997. For
the three months ended March 31, 2005 and 2004, we did not make any
distributions to our limited partners or the general partner.
15
Commitments
At March 31, 2005, we have a commitment regarding one note payable which
expires during December 2006 with a balloon payment of approximately $297,000.
This note payable accrues interest at 11.0% per annum. The Partnership is
currently making the monthly debt service payments required under the note. At
March 31, 2005, the outstanding principal balance of the note payable was
$1,106,165.
Risks and Uncertainties
At March 31, 2005, except as noted above in the Business Overview section
and listed below in the Risk Factors section we believe there were no known
trends or demands, commitments, events or uncertainties which are likely to have
a material effect on our liquidity.
Set forth below and elsewhere in this report and in other documents we file
with the Securities and Exchange Commission are risks and uncertainties that
could cause our actual results to differ materially from the results
contemplated by the forward-looking statements contained in this report and
other periodic statements we make, including, but not limited to, the following:
o The de Havilland DHC-8-102 aircraft is powered by twin-turbo propeller
engines and, as such, is being replaced in the market by faster, more
efficient, regional jets. Accordingly, we may have difficulty remarketing
the Aircraft for an amount sufficient to satisfy our outstanding loan
obligations.
o Our operations are subject to the jurisdiction of a number of federal
agencies, including the Federal Aviation Administration. New regulatory
rulings may negatively impact our financial results and the economic value
of our assets.
Inflation and Interest Rates
The potential effects of inflation on us are difficult to predict. If the
general economy experiences significant rates of inflation, however, it could
affect us in a number of ways. We do not currently have or expect to have rent
escalation clauses tied to inflation in our leases. The anticipated residual
values to be realized upon the sale or re-lease of equipment upon lease
terminations (and thus the overall cash flow from our leases) may be expected to
increase with inflation as the cost of similar new and used equipment increases.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
We, like most other companies, are exposed to certain market risks, which
includes changes in interest rates and the demand for equipment (and the related
residuals) owned by us. We believe that our exposure to other market risks,
including foreign currency exchange rate risk, commodity risk and equity price
risk, are insignificant at this time to both our financial position and our
results of operations.
In general, we manage our exposure to interest rate risk by obtaining fixed
rate debt. The fixed rate debt is structured so as to match the cash flows
required to service the debt to the payment streams under fixed rate lease
receivables. The payments under the leases are assigned to the lenders in
satisfaction of the debt. We may finance leases with a floating interest rate
and we are therefore exposed to interest rate risk until fixed rate financing is
arranged.
16
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
We carried out an evaluation, under the supervision and with the
participation of management of ICON Capital Corp., our General Partner,
including the Chief Executive Officer and the Principal Financial and Accounting
Officer, of the effectiveness of the design and operation of our 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,
except as noted below, the Chief Executive Officer and the Principal Financial
and Accounting Officer concluded that our disclosure controls and procedures
were effective.
While evaluating our disclosure controls and procedures we recognized that
greater internal controls were needed to aid in a more efficient closing of our
financial statements, thereby requiring additional skilled accounting staff.
Towards the end of the third quarter of 2004, the Company hired a new senior
vice president of accounting and the Company is in the process of seeking
additional accounting staff in order to better effectuate the Company's internal
controls. We will continue to evaluate our disclosure controls and procedures to
determine their effectiveness and adequacy and will take the steps necessary, in
our opinion, to ensure the adequacy of the Company's disclosure controls and
procedures.
In designing and evaluating our disclosure controls and procedures, we
recognized that disclosure controls and procedures, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the disclosure controls and procedures are met. Our disclosure
controls and procedures have been designed to meet reasonable assurance
standards. Disclosure controls and procedures cannot detect or prevent all error
and fraud. Some inherent limitations in disclosure controls and procedures
include costs of implementation, faulty decision-making, simple error and
mistake. Additionally, controls can be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the controls. The design of any system of controls is based, in part, upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
anticipated and unanticipated future conditions. Over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with
established policies or procedures.
Our General Partner's Chief Executive Officer and Principal Financial and
Accounting Officer have determined that no weakness in disclosure controls and
procedures had any material effect on the accuracy and completeness of the
Company's financial reporting and disclosure included in this report.
17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of conducting our business, there may be certain
claims, suits, and complaints filed against us. In the opinion of management,
the outcome of such matters, if any, will not have a material impact on our
consolidated financial position or results of operations. No material legal
proceedings are currently pending against us or against any of our assets.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Default Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the first
quarter 2005.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
31.1 Certification of Chairman and Chief Executive Officer.
31.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer.
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.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership 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 (Registrant) By its General Partner, ICON Capital Corp.
Date: June 28, 2005 /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.
General Partner of the Registrant
Date: June 28, 2005 /s/ Beaufort J.B. Clarke
-----------------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Date: June 28, 2005 /s/ Thomas W. Martin
-----------------------------------------------
Thomas W. Martin
Executive Vice President and Director
(Principal Financial and Accounting Officer)
19
Exhibit 31.1 Principal Executive Officer Certification Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICON Cash Flow
Partners, L.P., Series D;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements and other financial
information included in this 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 report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
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 General Partner
(or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control which are reasonably likely to materially
affect the registrant's 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
control over financial reporting.
Dated: June 28, 2005
/s/ Beaufort J.B. Clarke
- -----------------------------
Beaufort J. B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
General Partner of ICON Cash Flow Partners, L.P., Series D
20
Exhibit 31.2
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
I, Thomas W. Martin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICON Cash Flow
Partners L.P. Series D;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements and other financial
information included in this 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 report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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 report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer 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 General Partner
(or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control which are reasonably likely to
materially affect the registrant's 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
control over financial reporting.
Dated: June 28, 2005
/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.
General Partner of ICON Cash Flow Partners L.P. Series D
21
Exhibit 32.1
Principal Executive Officer Certification 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 General Partner, in connection with the Quarterly Report of ICON Cash
Flow Partners L.P. Series D (the "Partnership") on Form 10-Q for the quarterly
period ended March 31, 2005, as filed with the Securities and Exchange
Commission on the date hereof (the "Periodic Report") certify, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) the Periodic Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership.
Dated: June 28, 2005
/s/ Beaufort J.B. Clarke
------------------------------------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
General Partner of ICON Cash Flow Partners L.P. Series D
A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.
The information contained in this Exhibit 32.1 is being furnished and shall not
be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act
of 1934, as amended, or otherwise subject to the liabilities of that section.
The information contained in this Exhibit 32.1 shall not be incorporated by
reference into any registration statement or other document pursuant to the
Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference to this
Exhibit 32.1 in such filing.
22
Exhibit 32.2
Principal Executive Officer Certification 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 General Partner, in connection
with the Quarterly Report of ICON Cash Flow Partners L.P. Series D (the
"Partnership") on Form 10-Q for the quarterly period ended March 31, 2005, as
filed with the Securities and Exchange Commission on the date hereof (the
"Periodic Report") certify, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge:
(1) the Periodic Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership.
Dated: June 28, 2005
/s/ Thomas W. Martin
- -------------------------------------------------------
Thomas W. Martin
Executive Vice President (Principal
Financial and Accounting Officer)
ICON Capital Corp.
General Partner of ICON Cash Flow Partners L.P. Series D
A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.
The information contained in this Exhibit 32.2 is being furnished and shall not
be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act
of 1934, as amended, or otherwise subject to the liabilities of that section.
The information contained in this Exhibit 32.2 shall not be incorporated by
reference into any registration statement or other document pursuant to the
Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference to this
Exhibit 32.2 in such filing.
23