Back to GetFilings.com
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 [Fee Required]
For the fiscal year ended December 31, 1996
------------------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
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 (I.R.S. Employer
incorporation or organization) Identification Number)
600 Mamaroneck Avenue, Harrison, New York 10528-1632
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 698-0600
------------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class Name of each exchange on
which registered
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests, filed, pending effectiveness
- --------------------------------------------------------------------------------
(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
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
Page 1
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
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 and Operating Data 5
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 6-9
8. Consolidated Financial Statements and Supplementary Data 10-26
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 27
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 27-28
11. Executive Compensation 28
12. Security Ownership of Certain Beneficial Owners
and Management 29
13. Certain Relationships and Related Transactions 29
PART IV
14. Exhibits, Reports and Amendments 29-30
SIGNATURES 31
Page 2
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
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
December 31, 1991, 121,932.48 additional units were admitted. Between January 1,
1992 and June 5, 1992 (the final closing date), 251,161.93 additional units were
admitted bringing the final admission to 400,000 units totaling $40,000,000 in
capital contributions. During 1994, the Partnership redeemed 767 limited
partnership units, during 1995 the Partnership redeemed 25 limited partnership
units, and during 1996 the Partnership redeemed 50 limited partnership units
leaving 399,158 units outstanding at December 31, 1996.
The sole general partner is ICON Capital Corp. (the "General Partner").
Narrative Description of Business
The Partnership is an equipment leasing income fund. The principal
investment objective of the Partnership is to obtain the maximum economic return
from its investments for the benefit of its limited partners. To achieve this
objective, the Partnership has and intends to continue to: (1) acquire a
diversified portfolio of short-term, high-yield investments; (2) make monthly
cash distributions to its limited partners from cash from operations, commencing
with each limited partner's admission to the Partnership, continuing through the
reinvestment period, which period will end no later than June 1997; (3)
re-invest substantially all undistributed cash from operations and cash from
sales in additional equipment and financing transactions during the reinvestment
period; and (4) sell the Partnership's investments and distribute the cash from
sales of such investments to its limited partners within five and one-half to
seven and one-half years of the final closing date. In addition to acquiring
equipment and entering into leases, the Partnership also (1) acquires equipment
already subject to leases originated by affiliates and non-affiliated lessors
and (2) enters into financing transactions, which are (i) secured by the
equipment financed and lease revenues therefrom (if any) and additional
collateral as deemed necessary by the credit review committee of the General
Partner, and (ii) evidenced by the irrevocable obligation of the lessees.
The equipment leasing industry is highly competitive. In initiating its
leasing transactions, the Partnership competes with leasing companies,
manufacturers that lease their products directly, equipment brokers and dealers
and financial institutions, including commercial banks and insurance companies.
Many competitors are larger than the Partnership and have access to more
favorable financing. Competitive factors in the equipment leasing business
primarily involve pricing and other financial arrangements, equipment
remarketing capabilities and servicing of lessees.
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
Page 3
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
Lease and Financing Transactions
For the years ended December 31, 1996 and 1995, the Partnership purchased
and leased or financed $18,880,251 and $20,761,206 of equipment, respectively,
with a weighted average initial transaction term of 68 and 39 months,
respectively. At December 31, 1996, the weighted average initial transaction
term of the portfolio was 42 months. A summary of the portfolio equipment cost
by category held at December 31, 1996 and 1995 is as follows:
December 31, 1996 December 31, 1995
----------------- -----------------
Category Cost Percent Cost Percent
Computer systems $ 15,319,902 30.0% $13,412,478 24.1%
Manufacturing & production 14,956,736 29.3 9,525,041 17.1
Aircraft 8,759,291 17.1 - -
Restaurant equipment 2,638,786 5.2 2,869,618 5.2
Medical 2,532,468 5.0 5,062,318 9.1
Retail systems 2,294,613 4.5 2,134,478 3.8
Office furniture & fixtures 2,157,432 4.1 1,635,449 2.9
Printing 860,003 1.7 1,345,282 2.4
Video production 535,353 1.0 324,294 .6
Telecommunications 526,390 1.0 1,226,342 2.2
Sanitation 41,842 .1 84,633 .2
Material handling 11,615 - 17,252,738 31.1
Miscellaneous 469,369 1.0 688,852 1.3
------------ ------ ----------- -------
$ 51,103,800 100.0% $55,561,523 100.0%
============ ===== =========== =====
The Partnership has one financing which individually represents greater than
10% of the total portfolio equipment cost at December 31, 1996. The financing is
secured by a 1986 McDonnell Douglas DC-10-30F aircraft, currently on lease to
Federal Express Corp. and the financing of the equipment represents 17.1% of the
total portfolio equipment cost at December 31, 1996. On January 29, 1997, the
Partnership's investment in the Federal Express Corp. lease was partially
retired to leave a remaining investment of 3% of the adjusted portfolio
equipment cost at December 31, 1996.
Item 2. Properties
The Partnership neither owns nor leases office space or equipment for the
purpose of managing its day-to-day affairs. The General Partner has exclusive
control over all aspects of the business of the Partnership, including providing
any necessary office space. As such, the General Partner will be compensated for
services related to the management and administration of the Partnership's
business.
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal proceedings.
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 1996.
Page 4
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
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 December 31,
1996 1995
---- ----
Limited partners 3,100 3,085
General Partner 1 1
Item 6. Selected Consolidated Financial and Operating Data
Years Ended December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total revenues $ 6,011,140 $ 5,202,055 $ 4,861,151 $ 6,614,221 $ 7,550,676
=========== ============ ============ ============ ============
Net income $ 2,540,333 $ 2,793,742 $ 1,620,241 $ 1,096,970 $ 861,184
=========== ============ ============ ============ ============
Net income allocable
to limited partners $ 2,514,930 $ 2,765,805 $ 1,604,039 $ 1,086,000 $ 852,572
=========== ============ ============ ============ ============
Net income allocable
to the General Partner $ 25,403 $ 27,937 $ 16,202 $ 10,970 $ 8,612
=========== ============ ============ ============ ============
Weighted average
limited partnership
units outstanding 399,179 399,229 399,703 400,000 333,945
=========== ============ ============ ============ ============
Net income per
weighted average
limited partnership unit $ 6.30 $ 6.93 $ 4.01 $ 2.72 $ 2.55
======= ======== ======= ========= ============================
Distributions to
limited partners $ 5,588,508 $ 5,589,207 $ 5,596,503 $ 5,600,000 $ 4,347,156
=========== ============ ============ ============ ============
Distributions to the
General Partner $ 56,450 $ 56,457 $ 56,530 $ 56,564 $ 43,911
=========== ============ ============ ============ ============
December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total assets $ 34,263,140 $ 40,529,733 $ 27,619,644 $ 41,137,343 $ 52,840,273
============ ============ ============ ============ ============
Partners' equity $ 16,374,660 $ 19,480,356 $ 22,333,042 $ 26,405,039 $ 30,964,633
============ ============ ============ ============ ============
The above selected consolidated financial and operating data should be read
in conjunction with the consolidated financial statements and related notes
appearing elsewhere in this report.
Page 5
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
Item 7. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership's portfolio consisted of a net investment in finance leases,
leveraged leases, financings and operating leases representing 64%,0%, 36% and
0% of total investments at December 31, 1996, respectively, and 63%, 31%, 6% and
less than 1% of total investments at December 31, 1995, respectively.
For the years ended December 31, 1996 and 1995, the Partnership leased or
financed equipment with initial costs of $18,880,251 and $20,671,206,
respectively, to 83 and 68 lessees or equipment users, respectively. The
weighted average initial transaction term for each year was 68 and 39 months,
respectively.
Results of Operations for the Years Ended December 31, 1996 and 1995
Revenues for the year ended December 31, 1996 were $6,011,140, representing
an increase of $809,085 or 16% from 1995. The increase in revenues was primarily
attributable to an increase in finance income of $1,418,596 or 89%, an increase
in net gain on sales or remarketing of equipment of $460,350 or 24% from 1995
and an increase in interest income and other of $69,254 or 41% from 1995. The
increase in revenues was partially offset by a decrease in income from leveraged
leases of $1,139,115 or 76%. Finance income increased due to an increase in the
average size of the portfolio from 1995 to 1996. Net gain on sales or
remarketing of equipment increased primarily as the result of the Partnership
selling its investment in leveraged leases. The underlying equipment, which
consisted of towboats and barges, was sold for a net gain of $1,891,802. The
increase in interest income and other resulted from an increase in the average
cash balance from 1995 to 1996. Income from leveraged leases decreased due to
the sale of all of the underlying equipment relating to the Partnership's
investment in leveraged leases.
Expenses for the year ended December 31, 1996 were $3,470,807, representing
an increase of $1,062,494 or 44% from 1995. The increase in expenses was
primarily attributable to an increase in the interest expense of $1,030,741, an
increase in amortization of initial direct cost of $103,014 or 20% an increase
in management fees of $90,480 or 15% and an increase in administrative fees of
$44,544 or 17% from 1995. Results were also affected by a decrease in provision
for bad debts of $150,000 or 100% and a decrease in general and administrative
of $56,285 or 21% from 1995. Management fees, administrative expense
reimbursements and amortization of initial direct costs increased due to an
increase in the average size of the portfolio from 1995 to 1996. The increase in
interest expense resulted from an increase in the average debt outstanding from
1995 to 1996. As a result of an analysis of delinquency, an assessment of
overall risk and historical loss experience, it was determined that no provision
for bad debts was required for the year ended December 31, 1996.
Net income for the years ended December 31, 1996 and 1995 was $2,540,333 and
$2,793,742, respectively. The net income per weighted average limited
partnership unit was $6.30 and $6.93 for 1996 and 1995, respectively.
Results of Operations for the Years Ended December 31, 1995 and 1994
Revenues for the year ended December 31, 1995 were $5,202,055, representing
an increase of $340,904 or 7% from 1994. The increase in revenues was primarily
attributable to an increase in net gain on sales or remarketing of equipment of
$731,503 or 61% and an increase in interest income and other of $51,700 or 43%
from 1995. The increase in revenues was partially offset by a decrease in
finance income of $338,297 or 18%, a decrease in income from leveraged leases of
$97,220 or 6% and a decrease in rental income of $6,782 or 100%. Net gain on
sales or remarketing of equipment increased due to an increase in the number of
leases
Page 6
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
maturing, and the underlying equipment being sold or remarketed, for which the
proceeds received were in excess of the remaining carrying value of the
equipment. The increase in interest income and other resulted from an increase
in the average cash balance from 1994 to 1995. Finance income decreased due to
the decrease in the average size of the portfolio from 1994 to 1995. In April
and July 1995, the Partnership sold the underlying equipment relating to two of
its leveraged leases. The sales resulted in gains on termination. Although
income from leveraged leases would be expected to increase due to the accretion
of the Partnership's equity investment, income from leveraged leases decreased
due the decrease in the leveraged lease portfolio from 1994 to 1995. Rental
income decreased due to the Partnership's reduced investment in operating
leases.
Expenses for the year ended December 31, 1995 were $2,408,313, representing
a decrease of $832,597 or 26% from 1994. The decrease in expenses was primarily
attributable to a decrease in the provision for bad debts of $325,000 or 68%, a
decrease in management fees of $183,945 or 24% and a decrease in general and
administrative expense of $138,992 or 34% from 1994. Results were also affected
by a decrease in administrative expense reimbursements of $80,466 or 24%, a
decrease in amortization of initial direct costs of $69,030 or 12%, a decrease
in interest expense of $30,997 or 5% and a decrease in depreciation expense of
$4,167 or 100% from 1994. As a result of an analysis of delinquency, an
assessment of overall risk and historical loss experience, it was determined
that a lesser provision for bad debts was required for the year ended December
31, 1995. Management fees, general and administrative expense, administrative
expense reimbursements and amortization of initial direct costs decreased due to
a decrease in the average size of the portfolio from 1994 to 1995. The decrease
in interest expense resulted from a decrease in the size of the average debt
outstanding from 1994 to 1995. Depreciation expense decreased due to the
Partnership's reduced investment in operating leases.
Net income for the years ended December 31, 1995 and 1994 was $2,793,742 and
$1,620,241, respectively. The net income per weighted average limited
partnership unit was $6.93 and $4.01 for 1995 and 1994, respectively.
Liquidity and Capital Resources
The Partnership's primary sources of funds in 1996, 1995 and 1994 were net
cash provided by operations of $1,621,624, $2,756,354 and $1,969,172,
respectively, proceeds from sales of equipment of $15,681,303, $6,776,544 and
$9,054,589, respectively, net proceeds of $3,386,421 in borrowings from a
revolving credit agreement in 1996 and proceeds of $4,148,838 from the issuance
of notes under a securitized arrangement in 1995. These funds were used to
purchase additional equipment, to fund cash distributions and to make payments
on borrowings. The Partnership intends to continue to purchase additional
equipment and to fund cash distributions utilizing cash provided by operations
and proceeds from sales of equipment.
The Partnership had notes payable at December 31, 1996 and 1995 of
$17,470,845 and $18,047,692, respectively, as a result of borrowings secured by
equipment. These amounts consisted of $11,056,959 and $13,033,160 in
non-recourse notes, respectively, which are being paid directly to the lenders
by the lessees, $898,927 and $887,056 in non-recourse residual value notes,
respectively, which will be paid to the extent proceeds are available in excess
of the Partnership's estimated unguaranteed residuals and $2,128,538 and
$4,127,476 in non-recourse - securitized notes, respectively.
Page 7
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
The Partnership entered into a revolving credit agreement (the "Facility")
in October 1992, which was amended in March 1996. The maximum amount available
under the Facility was $5,000,000, and at December 31, 1996, the Partnership had
$3,386,421 available for borrowing under the Facility, all of which was
outstanding at year end. The facility had a final maturity date of January 31,
1997, on which date the Partnership paid the outstanding balance and terminated
the agreement.
Included in the Partnership's acquisitions for the year ended December 31,
1996 is a financing transaction in the amount of $8,756,291. This represents the
financing of excess cash, or free cash, which results from lease rental payments
being greater than senior debt payments on a leveraged lease and first priority
rights of the first $4 million of residual proceeds from the sale of the
aircraft. The financing is secured by the underlying equipment, a 1986 McDonnell
Douglas DC-10-30F aircraft, currently on lease to Federal Express Corp.
Subsequent to this financing, ICON Cash Flow Partners L.P. Seven ("L.P. Seven"),
an affiliate of the Partnership, acquired the residual, or equity, interest in
the leveraged lease, and assumed the related outstanding non-recourse senior and
junior debt.
On January 29, 1997, L.P. Seven re-financed the free cash and $2 million of
its position against the aircraft's residual position with a third party. As a
result of this re-financing, the Partnership received proceeds of $7,221,452 and
reduced its interest in the net investment to $1,201,090.
Cash distributions to the limited partners in 1996, 1995 and 1994, which
were paid monthly, totaled $5,588,508, $5,589,207 and $5,596,503, respectively,
of which $2,514,930, $2,765,805 and $1,604,039 was investment income and
$3,073,578, $2,823,402 and $3,992,464 was a return of capital, respectively. The
monthly annualized cash distribution rate to limited partners in 1996, 1995 and
1994 was 14.00%, of which 6.30%, 6.93% and 4.01% was investment income and
7.70%, 7.07% and 9.99% was a return of capital, respectively, calculated as a
percentage of each limited partner's initial capital contribution. The limited
partner distribution per weighted average unit outstanding in 1996, 1995 and
1994 was $14.00, of which $6.30, $6.93 and $4.01 was investment income and
$7.70, $7.07 and $9.99 was a return of capital, respectively.
On March 11, 1997, the Partnership and two affiliates, ICON Cash Flow
Partners L.P. Six and ICON Cash Flow Partners L.P. Seven, (collectively "the
Members"), contributed and assigned $8,671,773, $6,712,631 and $6,582,150,
respectively, in equipment lease and finance receivables and residuals to ICON
Receivables 1997-A LLC ("1997-A"), a special purpose entity created by the
Members. The Members received a 40.8%, 29.8% and 29.4% interest, respectively,
in 1997-A based on the present value of their related contributions. 1997-A was
formed for the purpose of originating new leases, managing existing contributed
assets and, eventually, securitizing its portfolio. In order to fund the
acquisition of new leases, 1997-A obtained a warehouse borrowing facility from
Prudential Securities Credit Corporation (the "Facility"). Borrowings under the
Facility are based on the present value of the new leases, provided that in the
aggregate, the amount outstanding cannot exceed $20,000,000. Outstanding amounts
under the Facility bear interest equal to Libor plus 1.5%. Collections of
receivables from new leases are used to pay down the Facility, however, in the
event of a default, all of 1997-A's assets are available to cure such default.
The net proceeds from the expected securitization of these assets will be used
to pay-off the remaining Facility balance and any remaining proceeds will be
distributed to the Members in accordance with their membership interests. The
Partnership will account for its investment in 1997-A under the equity method.
The investment in 1997-A will be increased or decreased by its share of profit
or losses and decreased by any distributions received by 1997-A.
Page 8
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
As of December 31, 1996, there were no known trends or demands, commitments,
events or uncertainties which are likely to have any material effect on
liquidity. As cash is realized from operations, sales of equipment and
borrowings, the Partnership will continue to invest in equipment leases and
financings where it deems it to be prudent while retaining sufficient cash to
meet its reserve requirements and recurring obligations as they become due.
New Accounting Pronouncement
In June 1996 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125
establishes, among other things, criteria for determining whether a transfer of
financial assets is a sale or a secured borrowing effective for all transfers
occurring after December 31, 1996. The adoption of SFAS No. 125 is not expected
to have a material impact on the Partnership's net income, partners' equity or
total assets.
Page 9
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page Number
Independent Auditors' Report 12
Consolidated Balance Sheets as of December 31, 1996 and 1995 13
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 14
Consolidated Statements of Changes in Partners' Equity for the
Years Ended December 31, 1996, 1995 and 1994 15
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 16-17
Notes to Consolidated Financial Statements 18-26
Page 10
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1996
(With Independent Auditors' Report Thereon)
Page 11
INDEPENDENT AUDITORS' REPORT
The Partners
ICON Cash Flow Partners, L.P., Series D:
We have audited the accompanying consolidated balance sheets of ICON Cash Flow
Partners, L.P., Series D (a Delaware limited partnership) as of December 31,
1996 and 1995, and the related consolidated statements of operations, changes in
partners' equity, and cash flows for each of the years in the three-year period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Cash Flow
Partners, L.P., Series D as of December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
March 7, 1997
New York, New York
Page 12
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
1996 1995
---- ----
Assets
Cash $ 413,845 $ 3,751,899
------------ ------------
Investment in finance leases
Minimum rents receivable 16,784,360 21,479,681
Estimated unguaranteed residual values 7,587,992 5,016,355
Initial direct costs 484,908 693,692
Unearned income (2,955,625) (3,297,674)
Allowance for doubtful accounts (651,546) (766,111)
------------ ------------
21,250,089 23,125,943
Investment in financings
Receivables due in installments 15,510,321 2,581,130
Initial direct costs 93,060 59,537
Unearned income (3,086,270) (401,680)
Allowance for doubtful accounts (252,223) (202,260)
------------ ------------
12,264,888 2,036,727
Net investment in leveraged leases - 11,577,913
------------ ------------
Investment in operating leases
Equipment, at cost - 14,095
Initial direct costs - 24
Accumulated depreciation - (12,305)
------------ ------------
- 1,814
------------ ------------
Other assets 334,318 35,437
------------ ------------
Total assets $ 34,263,140 $ 40,529,733
============ ============
Liabilities and Partners' Equity
Notes payable - non-recourse $ 11,955,886 $ 13,920,216
Note payable - revolving credit facility 3,386,421 -
Note payable - non-recourse - securitized 2,128,538 4,127,476
Accounts payable - other 129,647 286,177
Accounts payable to General Partner
and affiliates, net 18,406 115,412
Security deposits and deferred credits 269,582 60,337
Accounts payable - equipment - 2,539,759
------------ ------------
17,888,480 21,049,377
Commitments and Contingencies
Partners' equity (deficiency)
General Partner (180,852) (149,805)
Limited partners (399,158 and 399,208 units
outstanding, $100 per unit original issue
price in 1996 and 1995, respectively) 16,555,512 19,630,161
Total partners' equity 16,374,660 19,480,356
------------ ------------
Total liabilities and partners' equity $ 34,263,140 $ 40,529,733
============ ============
See accompanying notes to consolidated financial statements.
Page 13
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31,
1996 1995 1994
---- ---- ----
Revenues
Finance income $ 3,009,835 $ 1,591,239 $ 1,929,536
Net gain on sales or remarketing of
equipment 2,391,683 1,931,333 1,199,830
Income from leveraged leases, net 369,511 1,508,626 1,605,846
Interest income and other 240,111 170,857 119,157
Rental income - - 6,782
----------- ---------- -----------
Total revenues 6,011,140 5,202,055 4,861,151
----------- ----------- -----------
Expenses
Interest 1,651,940 621,199 652,196
Management fees - General Partner 685,103 594,623 778,568
Amortization of initial direct costs 614,441 511,427 580,457
Administrative expense reimbursements
- General Partner 301,945 257,401 337,867
General and administrative 217,378 273,663 412,655
Provision for bad debts - 150,000 475,000
Depreciation - - 4,167
----------- ----------- -----------
Total expenses 3,470,807 2,408,313 3,240,910
----------- ----------- -----------
Net income $ 2,540,333 $ 2,793,742 $ 1,620,241
=========== =========== ===========
Net income allocable to:
Limited partners $ 2,514,930 $ 2,765,805 $ 1,604,039
General Partner 25,403 27,937 16,202
----------- ----------- -----------
$ 2,540,333 $ 2,793,742 $ 1,620,241
=========== =========== ===========
Weighted average number of limited
partnership units outstanding 399,179 399,229 399,703
=========== =========== ===========
Net income per weighted average
limited partnership unit $ 6.30 $ 6.93 $ 4.01
=========== =========== ===========
See accompanying notes to consolidated financial statements.
Page 14
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 1996, 1995 and 1994
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
Balance at December 31, 1993 $ 26,485,996 $ (80,957) $26,405,039
Cash distributions to partners $ 9.99 $ 4.01 (5,596,503) (56,530) (5,653,033)
Limited partnership units redeemed
(767 units) (39,205) - (39,205)
Net income 1,604,039 16,202 1,620,241
------------ ---------- -----------
Balance at December 31, 1994 22,454,327 (121,285) 22,333,042
Cash distributions to partners $ 7.07 $ 6.93 (5,589,207) (56,457) (5,645,664)
Limited partnership units redeemed
(25 units) (764) - (764)
Net income 2,765,805 27,937 2,793,742
------------ ---------- -----------
Balance at December 31, 1995 19,630,161 (149,805) 19,480,356
Cash distributions to partners $ 7.70 $ 6.30 (5,588,508) (56,450) (5,644,958)
Limited partnership units redeemed
(50 units) (1,071) - (1,071)
Net income 2,514,930 25,403 2,540,333
------------ ---------- -----------
Balance at December 31, 1996 $ 16,555,512 $ (180,852) $16,374,660
============ ========== ===========
See accompanying notes to consolidated financial statements.
Page 15
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31,
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $ 2,540,333 $ 2,793,742 $1,620,241
----------- ----------- ----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Allowance for doubtful accounts 100,170 235,916 242,288
Finance income portion of receivables paid
directly to lenders by lessees (1,554,592) (776,205) (979,761)
Amortization of initial direct costs 614,441 511,427 580,457
Net gain on sales or remarketing of equipment (2,391,683) (1,931,333) (1,199,830)
Interest expense on non-recourse financing
paid directly by lessees 1,200,696 539,259 576,447
Interest expense accrued on non-recourse debt 11,871 35,286 54,022
Collection of principal - non-financed receivables 1,726,064 2,469,314 3,603,914
Collection of principal - leveraged leases 207,683 429,383 486,672
Income from leveraged leases, net (369,511) (1,508,626) (1,605,846)
Depreciation - - 4,167
Change in operating assets and liabilities:
Accounts payable to General Partner and
affiliates, net (97,006) 103,268 (90,385)
Accounts payable - other (156,530) (27,978) 39,821
Security deposits and deferred credits 209,245 (129,065) (1,750,823)
Other, net (419,557) 11,966 387,788
----------- ----------- ----------
Total adjustments (918,709) (37,388) 348,931
----------- ----------- ----------
Net cash provided by operating activities 1,621,624 2,756,354 1,969,172
----------- ----------- ----------
Cash flows from investing activities:
Proceeds from sales of equipment 15,681,303 6,776,544 9,054,589
Equipment and receivables purchased (15,977,478) (5,675,075) (3,762,700)
Initial direct costs (404,957) (756,658) (145,727)
----------- ----------- ----------
Net cash provided by (used in) investing activities (701,132) 344,811 5,146,162
---------- ----------- ----------
Cash flows from financing activities:
Proceeds from revolving credit facility 5,250,000 - -
Cash distributions to partners (5,644,958) (5,645,664) (5,653,033)
Principal payments on non-recourse securitized
and non-recourse debt (1,998,938) (776,692) (430,000)
Principal payments on revolving credit facility (1,863,579) - -
Redemption of limited partnership units (1,071) (764) (39,205)
Proceeds from notes payable non-recourse
-securitized - 4,148,838 -
----------- ----------- ----------
Net cash used in financing activities (4,258,546) (2,274,282) (6,122,238)
----------- ----------- ----------
Net decrease in cash (3,338,054) 826,883 993,096
Cash at beginning of year 3,751,899 2,925,016 1,931,920
----------- ----------- ----------
Cash at end of year $ 413,845 $ 3,751,899 $2,925,016
=========== =========== ==========
See accompanying notes to consolidated financial statements.
Page 16
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Statements of Cash Flows (Continued)
Supplemental Disclosures of Cash Flow Information
Interest expense of $1,651,940, $621,199 and $652,196 for the years ended
December 31, 1996, 1995 and 1994 consisted of: interest expense on non-recourse
financing accrued or paid directly to lenders by lessees of $1,275,475, $574,545
and $630,469, respectively, and other interest of $376,465, $46,654 and $21,727,
respectively.
During the years ended December 31, 1996, 1995 and 1994, non-cash activities
included the following:
1996 1995 1994
---- ---- ----
Principal and interest on finance receivables
paid directly to lender by lessees $ 8,606,303 $ 6,942,951 $ 8,265,958
Principal and interest on non-recourse financing
paid directly by lessees (8,606,303) (6,942,951) (8,265,958)
Non-recourse notes payable assumed in
purchase price - finance and operating leases 5,429,406 13,579,698 (217,368)
Accounts payable - equipment - 2,539,759 -
Fair value of equipment and receivables
purchased for debt and payables (5,429,406) (16,119,457) 217,368
Decrease in investment in finance leases due
to termination of leases 3,869,025 812,097 1,985,605
Decrease in notes payable - non-recourse due to
termination of leases (3,841,797) (299,817) (1,985,605)
Decrease in security deposits and deferred credits (27,228) (512,280) -
----------- ------------ ------------
$ - $ - $ -
=========== ============ ============
Page 17
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1996
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.
During 1994, the Partnership redeemed 767 limited partnership units, during 1995
the Partnership redeemed 25 limited partnership units and during 1996 the
Partnership redeemed 50 limited partnership units leaving 399,158 limited
partnership units outstanding at December 31, 1996.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership's equipment leases and financing
transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, received an
underwriting commission on the gross proceeds from sales of all units. The total
underwriting compensation paid by the Partnership, including underwriting
commissions, sales commissions, incentive fees, public offering expense
reimbursements and due diligence activities was limited to 13 1/2% of the gross
proceeds received from the sale of the units. Such offering costs aggregated
$5,400,000, (including $2,207,188 paid to the General Partner or its
affiliates), and were charged directly to limited partners' equity.
Profits, losses, cash distributions and disposition proceeds are allocated
99% to the limited partners and 1% to the General Partner until each limited
partner has received cash distributions and disposition proceeds sufficient to
reduce its adjusted capital contribution account to zero and receive, in
addition, other distributions and allocations which would provide a 10% per
annum cumulative return, compounded daily, on its outstanding adjusted capital
contribution account. After such time, the distributions will be allocated 90%
to the limited partners and 10% to the General Partner.
2. Significant Accounting Policies
Basis of Accounting and Presentation - The Partnership's records are
maintained on the accrual basis. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Leases - The Partnership accounts for owned equipment leased to third
parties as finance leases, leveraged leases or operating leases. For finance
leases, the Partnership records, at the inception of the lease, the total
minimum lease payments receivable, the estimated unguaranteed residual values,
the initial direct costs related to the leases and the related unearned income.
Unearned income represents the difference between the sum of the minimum lease
payments receivable plus the estimated unguaranteed residual minus the cost of
the leased equipment. Unearned income is recognized as finance income over the
terms of the related leases using the interest method. The Partnership's net
investment in leveraged leases consists of minimum lease payments receivable,
the estimated unguaranteed residual
Page 18
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
values and the initial direct costs related to the leases, net of the unearned
income and principal and interest on the related non-recourse debt. Unearned
income is recognized as income from leveraged leases over the life of the lease
at a constant rate of return on the positive net investment. For operating
leases, equipment is recorded at cost and is depreciated on the straight-line
method over the lease terms to their estimated fair market values at lease
terminations. Related lease rentals are recognized on the straight-line method
over the lease terms. Billed and uncollected operating lease receivables, net of
allowance for doubtful accounts, are included in other assets. Initial direct
costs of finance leases and leverage leases are capitalized and are amortized
over the terms of the related leases using the interest method. Initial direct
costs of operating leases are capitalized and amortized on the straight-line
method over the lease terms. The Partnership's leases have terms ranging from
two to five years. Each lease is expected to provide aggregate contractual rents
that, along with residual proceeds, return the Partnership's cost of its
investments along with investment income.
Investment in Financings - Investment in financings represent the gross
receivables due from the financing of equipment plus the initial direct costs
related thereto less the related unearned income. The unearned income is
recognized as finance income, and the initial direct costs are amortized, over
the terms of the receivables using the interest method. Financing transactions
are supported by a written promissory note evidencing the obligation of the user
to repay the principal, together with interest, which will be sufficient to
return the Partnership's full cost associated with such financing transaction,
together with some investment income. Furthermore, the repayment obligation is
collateralized by a security interest in the tangible or intangible personal
property.
Disclosures About Fair Value of Financial Instruments - Statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value
of Financial Instruments" requires disclosures about the fair value of financial
instruments. The fair value of certain debt obligations are disclosed in Note 7
to the consolidated financial statements. Fair value information with respect to
the Company's assets and certain non-recourse notes payable is not provided
because (i) SFAS No. 107 does not require disclosures about the fair value of
lease arrangements, (ii) the carrying value of financial assets other than lease
related investments approximates market value and (iii) fair value information
concerning certain non-recourse debt obligations is not practicable to estimate
without incurring excessive costs to obtain all the information that would be
necessary to derive a market interest rate on a lease by lease basis.
Redemption of Limited Partnership Units - The General Partner consented to
the Partnership redeeming 25 limited partnership units during 1995 and 50
limited partnership units during 1996. The redemption amount was calculated
following the specific redemption formula in accordance with the Partnership
agreement. Redeemed units have no voting rights and do not share in
distributions. The Partnership agreement limits the number of units which can be
redeemed in any one year and redeemed units may not be reissued. Redeemed
limited partnership units are accounted for as a reduction of partners equity.
Allowance for Doubtful Accounts - The Partnership records a provision for
bad debts to provide for estimated credit losses in the portfolio. The allowance
for doubtful accounts is based on an analysis of delinquency, an assessment of
overall risk and a review of historical loss experience. The Partnership's
write-off policy is based on an analysis of the aging of the Partnership's
portfolio, a review of the non-performing receivables and leases, and prior
collection experience. An account is fully reserved for or written off when the
analysis indicates that the probability of collection of the account is remote.
Impairment of Estimated Residual Values - In March 1995, the FASB issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which is effective beginning in 1996.
Page 19
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The Partnership's policy with respect to impairment of estimated residual
values is to review, on a quarterly basis, the carrying value of its residuals
on an individual asset basis to determine whether events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable and, therefore, an impairment loss should be recognized. The events
or changes in circumstances which generally indicate that the residual value of
an asset has been impaired are (i) the estimated fair value of the underlying
equipment is less than the Partnership's carrying value or (ii) the lessee is
experiencing financial difficulties and it does not appear likely that the
estimated proceeds from disposition of the asset will be sufficient to satisfy
the remaining obligation to the non-recourse lender and the Partnership's
residual position. Generally in the latter situation, the residual position
relates to equipment subject to third party non-recourse notes payable where the
lessee remits their rental payments directly to the lender and the Partnership
does not recover its residual until the non-recourse note obligation is repaid
in full.
The Partnership measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Partnership from release or resale of the equipment. Generally,
quoted market prices are used as the basis for measuring whether an impairment
loss should be recognized.
As a result, the Partnership's policy with respect to measurement and
recognition of an impairment loss associated with estimated residual values is
consistent with the requirements of SFAS No. 121 and, therefore, the
Partnership's adoption of this Statement in the first quarter of 1996 had no
material effect on the financial statements.
Consolidation - The consolidated financial statements include the accounts
of the Partnership and its wholly owned subsidiary, ICON D Corp. All
intercompany accounts and transactions have been eliminated.
Income Taxes - No provision for income taxes has been made as the liability
for such taxes is that of each of the partners rather than the Partnership.
3. Net Investment in Leveraged Leases
The Partnership acquired leveraged leases for $21,005,500 in October 1992.
The leases were with Ohio Power Company and the underlying equipment consisted
of towboats and barges. In April 1995, the Partnership sold a towboat for a
sales price of $1,750,000. This sale resulted in a net gain of $348,724 after
paying expenses related to the sale, retiring non-recourse debt of $407,823, and
paying residual sharing fees of $110,420. In July 1995, the Partnership sold an
additional towboat for a sales price of $2,142,000. This sale resulted in a net
gain of $790,711 after paying expenses related to the sale, retiring
non-recourse debt of $393,792, and paying residual sharing fees of $124,118. On
April 23, 1996 the Partnership sold its remaining beneficial interest in the
trust which owned the towboats and barges for a sale price of $13,686,983. This
sale resulted in a net gain of $1,891,802 after paying expenses related to the
sale, retiring non-recourse debt of $3,841,797, and paying residual sharing fees
of $230,773.
The net investment in the leveraged leases as of December 31, 1996 and 1995
consisted of the following:
1996 1995
---- ----
Minimum rents receivable (net of principal and
interest on non-recourse debt) $ - $ 623,050
Estimated unguaranteed residual value - 12,756,788
Initial direct costs - 134,397
Unearned income - (1,936,322)
------------ -------------
$ - $ 11,577,913
============ =============
Page 20
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
4. Receivables Due in Installments
Non-cancelable minimum annual amounts due on finance leases and financings
as of December 31, 1996 are as follows:
Finance
Year Leases Financings Total
1997 $ 8,713,123 $ 2,558,438 $ 11,271,561
1998 4,813,681 1,528,027 6,341,708
1999 2,023,327 750,807 2,774,134
2000 923,078 494,912 1,417,990
2001 311,151 169,963 481,114
Thereafter - 10,008,174 10,008,174
------------ ----------- ------------
$ 16,784,360 $15,510,321 $ 32,294,681
============ =========== ============
5. Investment in Operating Leases
The investment in operating leases at December 31, 1996, 1995 and 1994
consisted of the following:
1996 1995 1994
---- ---- ----
Equipment cost, beginning of year $ 14,095 $ 41,564 $ 6,711,966
Equipment sold (14,095) (27,469) (6,670,402)
----------- ------------ ------------
Equipment cost, end of year - 14,095 41,564
----------- ------------ ------------
Accumulated depreciation, beginning of year (12,305) (38,526) (4,417,742)
Depreciation - - (4,167)
Equipment sold 12,305 26,221 4,383,383
----------- ------------ ------------
Accumulated depreciation, end of year - (12,305) (38,526)
----------- ------------ ------------
Initial direct costs, net of accumulated
amortization, end of year - 24 24
----------- ------------ ------------
Investment in operating leases, end of year $ - $ 1,814 $ 3,062
=========== ============ ============
Page 21
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
6. Allowance for Doubtful Accounts
The allowance for doubtful accounts related to the investments in finance
leases, financings and operating leases consisted of the following:
Finance Operating
Leases Financings Leases Total
Balance at December 31, 1993 $ 601,718 $ 34,169 $ 51,319 $687,206
Charged to operations 438,024 20,000 16,976 475,000
Accounts written-off (353,234) (18,435) (2,026) (373,695)
Recovery on accounts previously
written-off 72,415 68,569 - 140,984
Transfer within accounts 103,436 (38,607) (64,829) -
--------- --------- --------- --------
Balance at December 31, 1994 862,359 65,696 1,440 929,495
Charged to operations 117,000 33,620 (620) 150,000
Accounts written-off (233,655) (25,719) - (259,374)
Recovery on accounts previously
written-off 20,407 128,663 - 149,070
--------- --------- --------- --------
Balance at December 31, 1995 766,111 202,260 820 969,191
Accounts written-off (126,417) (39,066) (109) (165,592)
Recovery on accounts previously
written-off 11,141 89,029 - 100,170
Transfer within accounts 711 - (711) -
--------- --------- --------- --------
Balance at December 31, 1996 $ 651,546 $ 252,223 $ - $903,769
========= ========= ========= ========
7. Notes Payable
The Partnership entered into a secured revolving credit agreement (the
"Facility") in October 1992, which was amended in March 1996. The maximum amount
available under the Facility was $5,000,000. The Facility was secured by an
assignment of eligible receivables and the underlying equipment and allowed the
Partnership to borrow based on eligible, unencumbered receivables. The
Partnership calculated, on a monthly basis, the maximum amount borrowable under
the Facility. In the event that the current borrowable amount was less than the
prior month's balance outstanding, the Partnership was required to pay down the
Facility for the reduction in the borrowable limit. Interest was payable at
prime (8.25% at December 31, 1996) plus .5%. The Facility required the
Partnership, among other things, to meet certain objectives with respect to
financial ratios. At December 31, 1996, 1995 and 1994, the Partnership was in
compliance with the covenants required by the Facility. The Partnership had, as
of December 31, 1996, $3,386,421 available for borrowing under the Facility, all
of which was outstanding at year end.
The Facility had a final maturity date of January 31, 1997, on which date
the Partnership paid the outstanding balance and terminated the agreement.
Page 22
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
In December 1995, the Partnership borrowed $4,148,838 by pledging lease
receivables and granting a security interest in the underlying equipment and
receivables relating to a securitized specified group of leases and financing
transactions. The borrowing is recorded as a non-recourse note payable, bears
interest at a fixed rate of 8.02%, and is payable only from receivable proceeds
from the portfolio that has secured it.
Notes payable non-recourse consists of the following: (1) notes payable
non-recourse securitized, which is being paid directly to the Partnership from
lease transactions and (2) notes payable non-recourse, which is being paid
directly to the lenders by the lessees. These notes bear interest at rates
ranging from 5.2% to 12% and mature as follows:
Notes Payable
Non-Recourse Notes Payable
Securitized Non-Recourse Total
1997 $ 987,860 $ 7,079,195 $ 8,067,055
1998 702,863 2,931,330 3,634,193
1999 373,091 937,463 1,310,554
2000 64,724 663,439 728,163
2001 - 214,461 214,461
Thereafter - 129,998 129,998
------------ ------------ ------------
$ 2,128,538 $ 11,955,886 $ 14,084,424
============ ============ ============
Included in the above are $898,927 in notes payable non-recourse due to
various third parties in conjunction with the purchase and assignment of lease
transactions as they relate to residual sharing agreements. The interest rates
on these notes range from 8% to 12% and are payable only to the extent certain
residuals are realized, which are estimated to occur in 1997.
The fair value of the notes payable non-recourse securitized approximates
their carrying value.
Page 23
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
8. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the years ended December 31, 1996, 1995 and 1994
are as follows:
Charged to
Capitalized Operations
Acquisition fees $ 145,727 $ -
Management fees - 778,568
Administrative expense reimbursements - 337,867
----------- -----------
Year ended December 31, 1994 $ 145,727 $ 1,116,435
=========== ===========
Acquisition fees $ 818,397 $ -
Management fees - 594,623
Administrative expense reimbursements - 257,401
----------- -----------
Year ended December 31, 1995 $ 818,397 $ 852,024
=========== ===========
Acquisition fees $ 404,957 $ -
Management fees - 685,103
Administrative expense reimbursements - 301,945
----------- -----------
Year ended December 31, 1996 $ 404,957 $ 987,048
=========== ===========
Included in the Partnership's acquisitions for the year ended December 31,
1996 is a financing transaction in the amount of $8,756,291. This represents the
financing of excess cash, or free cash, which results from lease rental payments
being greater than senior debt payments on a leveraged lease. The financing is
secured by the underlying equipment, a 1986 McDonnell Douglas DC-10-30F
aircraft, currently on lease to Federal Express Corp. Subsequent to this
financing, ICON Cash Flow Partners L.P. Seven ("L.P. Seven"), an affiliate of
the Partnership, acquired the residual, or equity, interest in the leveraged
lease, and assumed the related outstanding non-recourse senior and junior debt.
On January 29, 1997, L.P. Seven re-financed the free cash and $2 million of
its position against the aircraft's residual position with a third party. As a
result of this re-financing, the Partnership received proceeds of $7,221,452 and
reduced its interest in the net investment to $1,201,090.
9. Security Deposits and Deferred Credits
Security deposits and deferred credits at December 31, 1996 and 1995
include $39,751 and $3,010, respectively, of proceeds received on residuals
which will be applied upon final remarketing of the related equipment.
Page 24
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
10. Subsidiary
On December 27, 1994, the Partnership formed a wholly owned subsidiary, ICON
D Corp., a Massachusetts corporation, formed for the purpose of managing
equipment under lease located in the state of Massachusetts. Massachusetts
partnerships are taxed for personal property at a higher rate than corporations,
and therefore, to mitigate such excess property tax, certain leases are being
managed by ICON D Corp, a corporation. The Partnership's consolidated financial
statements include 100% of the accounts of ICON D Corp. As of December 31, 1996,
there was no federal tax liability for ICON D Corp.
11. Commitments and Contingencies
On March 11, 1997, the Partnership and two affiliates, ICON Cash Flow
Partners L.P. Six and ICON Cash Flow Partners L.P. Seven, (collectively "the
Members"), contributed and assigned $8,671,773, $6,712,631 and $6,582,150,
respectively, in equipment lease and finance receivables and residuals to ICON
Receivables 1997-A LLC ("1997-A"), a special purpose entity created by the
Members. The Members received a 40.8%, 29.8% and 29.4% interest, respectively,
in 1997-A based on the present value of their related contributions. 1997-A was
formed for the purpose of originating new leases, managing existing contributed
assets and, eventually, securitizing its portfolio. In order to fund the
acquisition of new leases, 1997-A obtained a warehouse borrowing facility from
Prudential Securities Credit Corporation (the "Facility"). Borrowings under the
Facility are based on the present value of the new leases, provided that in the
aggregate, the amount outstanding cannot exceed $20,000,000. Outstanding amounts
under the Facility bear interest equal to Libor plus 1.5%. Collections of
receivables from new leases are used to pay down the Facility, however, in the
event of a default, all of 1997-A's assets are available to cure such default.
The net proceeds from the expected securitization of these assets will be used
to pay-off the remaining Facility balance and the remaining proceeds will be
distributed to the Members in accordance with their membership interests. The
Partnership will account for its investment in 1997-A under the equity method.
The investment in 1997-A will be increased or decreased by its share of profit
or losses and decreased by any distributions received by 1997-A.
The Partnership has entered into remarketing and residual sharing agreements
with third parties. In connection therewith, remarketing or residual proceeds
received in excess of specified amounts will be shared with these third parties
based on specified formulas. For the years ended December 31, 1996, 1995 and
1994, the Partnership paid $266,469, $141,391 and $544,214, respectively, to
third parties as their share under the agreements.
Page 25
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
12. Tax Information (Unaudited)
The following reconciles net income for financial reporting purposes to
income for federal income tax purposes for the years ended December 31:
1996 1995 1994
---- ---- ----
Net income per financial statements $ 2,540,333 $ 2,793,742 $ 1,620,241
Differences due to:
Direct finance leases 3,115,234 7,820,221 10,700,947
Depreciation and amortization (129,832) (5,819,098) (7,891,702)
Provision for losses (156,596) (6,182) (43,039)
Loss on sale of equipment (2,336,699) (3,190,163) (1,867,535)
Other 64,867 42,805 93,515
----------- ------------- -------------
Partnership income for
federal income tax purposes $ 3,097,307 $ 1,641,325 $ 2,612,427
=========== ============= =============
As of December 31, 1996, the partners' capital accounts included in the
financial statements totaled $16,374,660 compared to the partners' capital
accounts for federal income tax purposes of $27,990,143 (unaudited). The
difference arises primarily from commissions reported as a reduction in the
partners' capital for financial reporting purposes but not for federal income
tax purposes, and temporary differences related to direct finance leases,
depreciation and provision for losses.
Page 26
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1995
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
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 600 Mamaroneck Avenue,
Harrison, New York 10528-1632, and its telephone number is (914) 698-0600. The
officers of the General Partner have extensive experience with transactions
involving the acquisition, leasing, financing and disposition of equipment,
including acquiring and disposing of equipment subject to operating leases and
full payout leases.
The manager of the Registrant's business is the General Partner. The General
Partner is engaged in a broad range of equipment leasing and financing
activities. Through its sales representatives and through various broker
relationships throughout the United States, the General Partner offers a broad
range of equipment leasing services, including tax-oriented leasing and
financing. In addition, the General Partner offers financial consulting and
placement services for which fees are earned as a result of successful
placements of various secured financings and mortgages.
The General Partner is performing or causing to be performed certain
functions relating to the management of the equipment of the Partnership. Such
services include the collection of lease payments from the lessees of the
equipment, releasing services in connection with equipment which is off-lease,
inspections of the equipment, liaison with and general supervision of lessees to
assure that the equipment is being properly operated and maintained, supervision
of maintenance being performed by third parties, monitoring performance by the
lessees of their obligations under the leases and the payment of operating
expenses.
The officers and directors of the General Partner are as follows:
Beaufort J.B. Clarke President, Chief Executive Officer and Director
Thomas W. Martin Executive Vice President and Director
Paul B. Weiss Executive Vice President
Gary N. Silverhardt Vice President and Chief Financial Officer
Neil A. Roberts Director
Tim Spring Director
Beaufort J. B. Clarke, age 50, is President, Chief Executive Officer and
Director of both the General Partner and ICON Securities Corp. (the
"Dealer-Manager"). Prior to his present position, Mr. Clarke was founder and the
President and Chief Executive Officer of Griffin Equity Partners, Inc. Mr.
Clarke formerly was an attorney with Shearman and Sterling and has over 20 years
of senior management experience in the United States leasing industry.
Page 27
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
Thomas W. Martin, age 42, is Executive Vice President of both the General
Partner and the Dealer-Manager. Prior to his present position, Mr. Martin was
the Executive Vice President and Chief Financial Officer of Griffin Equity
Partners, Inc. Mr. Martin has over 12 years of senior management experience in
the leasing business, particularly in the area of syndication.
Paul B. Weiss, age 36, is Executive Vice President of the General Partner.
Mr. Weiss has been exclusively engaged in lease portfolio acquisitions since
1988 from his affiliations with Griffin Equity Partners (as Executive Vice
President and co-founder in 1993); Gemini Financial Holdings (as Senior Vice
President-Portfolio Acquisitions and a member of the executive committee from
1991-1993) and Pegasus Capital Corporation (as Vice President-Portfolio
Acquisitions).
Gary N. Silverhardt, age 36, is Vice President and Chief Financial Officer
of the General Partner. He joined the General Partner in 1989. Prior to joining
the General Partner, Mr. Silverhardt was previously employed by Coopers &
Lybrand from 1985 to 1989, most recently as an Audit Supervisor. Prior to 1985,
Mr. Silverhardt was employed by Katz, Schneeberg & Co. from 1983 to 1985. Mr.
Silverhardt received a B.S. degree from the State University of New York at New
Paltz in 1983 and is a Certified Public Accountant.
Neil A. Roberts, age 47, has been the Managing Director of Summit Asset
Management Limited, a subsidiary of The Summit Group PLC, since 1991. Mr.
Roberts has over 25 years of experience in the leasing and finance business,
including positions with Kleinwort Benson Group, the United Kingdom subsidiary
of Hongkong and Shanghai Banking Corporation and Chemical Bank.
Timothy R. Spring, age 39, Commercial Director of Summit Asset Management
Limited, a subsidiary of The Summit Group PLC, since 1991. Mr. Spring has over
13 years of leasing experience in the United Kingdom. He was formerly Lease
Commercial Director at Kleinwort Benson Group, the United Kingdom subsidiary of
Hongkong and Shanghai Banking Corporation and Chemical Bank.
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner and its
affiliates were paid or accrued the following compensation and reimbursement for
costs and expenses for the years ended December 31, 1996, 1995 and 1994.
Entity Capacity Type of Compensation 1996 1995 1994
------ -------- -------------------- ---- ---- ----
ICON Capital Corp. Manager Acquisition fees $ 404,957 $ 818,397 $ 145,727
ICON Capital Corp. General Partner Management fees 685,103 594,623 778,568
ICON Capital Corp. General Partner Administrative expense
reimbursements 301,945 257,401 337,867
---------- ---------- -----------
$1,392,005 $1,670,421 $ 1,262,162
========== ========== ===========
Page 28
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The registrant is a limited partnership and therefore does not have voting
shares of stock. No person of record owns, or is known by the Partnership to
own beneficially, more than 5% of any class of securities of the
Partnership.
(b) As of March 7, 1997, Directors and Officers of the General Partner do not
own any equity securities of the Partnership.
(c) The General Partner owns the equity securities of the Partnership set forth
in the following table:
Title Amount Beneficially Percent
of Class Owned of Class
General Partner Represents initially a 1% and potentially a 100%
Interest 10% interest in the Partnership's income, gain
and loss deductions.
Profits, losses, cash distributions and disposition proceeds are allocated
99% to the limited partners and 1% to the General Partner until each investor
has received cash distributions and disposition proceeds sufficient to reduce
its adjusted capital contribution account to zero and receive, in addition,
other distributions and allocations which would provide a 10% per annum
cumulative return, compounded daily, on the outstanding adjusted capital
contribution account. After such time, the distributions will be allocated 90%
to the limited partners and 10% to the General Partner.
Item 13. Certain Relationships and Related Transactions
None other than those disclosed in Item 11 herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedule - None.
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set
forth therein is included in the Financial Statements or Notes thereto.
3. Exhibits - The following exhibits are incorporated herein by reference:
(i) Amended and Restated Agreement of Limited Partnership (Incorporated by
reference to Exhibit A to Amendment No. 2 to Form S-1 Registration
Statement No. 2-99858 filed with the Securities and Exchange
Commission on December 12, 1986).
Page 29
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
(ii) Certificate of Limited Partnership of the Partnership (Incorporated
herein by reference to Exhibit 3.01 to Form S-1 Registration Statement
No. 2-99858 filed with the Securities and Exchange Commission on
August 23, 1985 and to Exhibit 3.01 to Amendment No. 1 to Form S-1
Registration Statement No. 2-99858 filed with the Securities and
Exchange Commission on August 27, 1986).
(iii)Form of Management Agreement between the Partnership and Crossgate
Leasing, Inc. (Incorporated herein by reference to Exhibit 10.01 to
Amendment No. 1 to Form S-1 Registration Statement No. 2-99858 filed
with the Securities and Exchange Commission on August 27, 1986).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter
ended December 31, 1996.
Page 30
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
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, 1997 Beaufort J.B. Clarke
---------------------------------------------
Beaufort J.B. Clarke
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole General Partner of the Registrant
Date: March 28, 1997 Beaufort J.B. Clarke
---------------------------------------------
Beaufort J.B. Clarke
President, Chief Executive Officer
and Director
Date: March 28, 1997 Thomas W. Martin
---------------------------------------------
Thomas W. Martin
Executive Vice President and Director
Date: March 28, 1997 Gary N. Silverhardt
---------------------------------------------
Gary N. Silverhardt
Vice President and Chief Financial Officer
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrant Which have not Registered Securities
Pursuant to Section 12 of the Act
No annual report or proxy material has been sent to security holders. An annual
report will be sent to the limited partners and a copy will be forwarded to the
Commission.
Page 31