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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1997
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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
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ICON Cash Flow Partners, L.P., Series D
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3602979
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
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
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
TABLE OF CONTENTS
Item Page
PART I
1. Business 3-4
2. Properties 4
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 6
6. Selected Consolidated Financial and Operating Data 6-7
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
8. Consolidated Financial Statements and Supplementary Data 12-31
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 32
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 32-33
11. Executive Compensation 34
12. Security Ownership of Certain Beneficial Owners
and Management 34
13. Certain Relationships and Related Transactions 34
PART IV
14. Exhibits, Reports and Amendments 35
SIGNATURES 36
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
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. From 1994 through 1997, the Partnership redeemed 882
limited partnership units, leaving 399,118 units outstanding at December 31,
1997. The sole general partner is ICON Capital Corp.
(the "General Partner").
The Partnership's Reinvestment Period ended June 5, 1997. The Disposition
Period began on June 6, 1997 and is expected to continue through June 5, 2002.
During the Disposition Period the Partnership has, and will continue to
distribute substantially all distributable cash from operations and sales to the
partners and begin the orderly termination of its operations and affairs. The
Partnership has not, and will not reinvest in any leased equipment during the
Disposition Period.
Narrative Description of Business
The Partnership is an equipment leasing income fund. The principal
investment objective of the Partnership is to obtain the maximum economic return
from its investments for the benefit of its limited partners. To achieve this
objective, the Partnership has: (1) acquired a diversified portfolio of
short-term, high-yield investments; (2) made 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; (3) re-invested substantially all undistributed cash from operations and
cash from sales in additional equipment and financing transactions during the
reinvestment period; and (4) begun to sell the Partnership's investments and
distribute the cash from sales of such investments to its limited partners. In
addition to acquiring equipment and entering into leases, the Partnership also
(1) acquired equipment already subject to leases originated by affiliates and
non-affiliated lessors and (2) entered into financing transactions, which were
(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.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
Lease and Financing Transactions
For the years ended December 31, 1997 and 1996, the Partnership purchased
and leased or financed $10,230,431 and $18,880,251 of equipment, respectively,
with a weighted average initial transaction term of 27 and 68 months,
respectively. At December 31, 1997, the weighted average initial transaction
term of the portfolio was 43 months. A summary of the portfolio equipment cost
by category held at December 31, 1997 and 1996 is as follows:
December 31, 1997 December 31, 1996
----------------- -----------------
Category Cost Percent Cost Percent
Manufacturing & production ..... $13,907,889 36.7% $14,956,736 29.3%
Computer systems ............... 11,614,293 30.7 15,319,902 30.0
Aircraft ....................... 7,802,583 20.6 8,759,291 17.1
Restaurant equipment ........... 1,705,999 4.5 2,638,786 5.2
Office furniture & fixtures .... 1,238,260 3.3 2,157,432 4.1
Telecommunications ............. 514,888 1.4 526,390 1.0
Medical ........................ 374,798 1.0 2,532,468 5.0
Retail systems ................. 326,595 .9 2,294,613 4.5
Miscellaneous .................. 168,881 .3 469,369 1.0
Printing ....................... 108,739 .3 860,003 1.7
Video production ............... 100,134 .3 535,353 1.0
Sanitation ..................... 10,113 -- 41,842 .1
Material handling .............. -- -- 11,615 --
----------- ----- ----------- -----
$37,873,172 100.0% $51,103,800 100.0%
=========== ===== =========== =====
The Partnership has one lease which individually represents greater than
10% of the total portfolio equipment cost at December 31, 1997. The lease is
with U.S. Airways Incorporated and the underlying equipment are two DeHavilland
DHC-8-102 aircraft. The equipment cost represents 18% of the total portfolio
cost at December 31, 1997.
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.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
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 1997.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
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,
- -------------- ----------------------------------
1997 1996
---- ----
Limited partners 3,100 3,100
General Partner 1 1
Item 6. Selected Consolidated Financial and Operating Data
Years Ended December 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Total revenues ......... $ 3,537,411 $ 6,011,140 $ 5,202,055 $ 4,861,151 $6,614,221
=========== =========== =========== =========== ==========
Net income ............. $ 676,730 $ 2,540,333 $ 2,793,742 $ 1,620,241 $1,096,970
=========== =========== =========== =========== ==========
Net income allocable
to limited partners .. $ 669,963 $ 2,514,930 $ 2,765,805 $ 1,604,039 $1,086,000
=========== =========== =========== =========== ==========
Net income allocable
to the General Partner $ 6,767 $ 25,403 $ 27,937 $ 16,202 $ 10,970
=========== =========== =========== =========== ==========
Weighted average
limited partnership
units outstanding .... 399,138 399,179 399,229 399,703 400,000
=========== =========== =========== =========== ==========
Net income per
weighted average
limited partnership
unit ................. $ 1.68 $ 6.30 $ 6.93 $ 4.01 $ 2.72
=========== =========== =========== =========== ==========
Distributions to
limited partners ..... $ 7,882,867 $ 5,588,508 $ 5,589,207 $ 5,596,503 $5,600,000
=========== =========== =========== =========== ==========
Distributions to the
General Partner ...... $ 79,648 $ 56,450 $ 56,457 $ 56,530 $ 56,564
=========== =========== =========== =========== ==========
(continued on next page)
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
December 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Total assets ... $22,999,478 $34,263,140 $40,529,733 $27,619,644 $41,137,343
=========== =========== =========== =========== ===========
Partners' equity $ 9,088,509 $16,374,660 $19,480,356 $22,333,042 $26,405,039
=========== =========== =========== =========== ===========
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.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
Item 7. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership's portfolio consisted of a net investment in finance
leases, operating lease, investment in financings and equity investment in joint
venture representing 57%, 28%, 10% and 5% of total investments at December 31,
1997, respectively, and 64%, 0%, 36% and 0% of total investments at December 31,
1996, respectively.
Results of Operations
Years Ended December 31, 1997 and 1996
For the years ended December 31, 1997 and 1996, the Partnership purchased
and leased or financed equipment with an initial cost of $10,230,431 and
$18,880,251, respectively, to 72 and 83 lessees or equipment users,
respectively.
Revenues for the year ended December 31, 1997 were $3,537,411 representing
a decrease of $2,473,729 or 41% from 1996. The decrease in revenues was
attributable to a decrease in finance income of $1,224,032 or 41%, a decrease in
net gain on sales or remarketing of equipment of $1,938,977 or 81%, a decrease
in income from leverage leases of $369,511 or 100% and a decrease in interest
income and other of $98,396 or 41%. These decreases were partially offset by an
increase in rental income of $798,000 or 100% and an increase in income from
equity investment in joint venture of $359,187 or 100%. Finance income decreased
due to a decrease in the average size of the portfolio from 1996 to 1997. The
net gain on sales or remarketing of equipment decreased due to a decrease in the
number of leases maturing and the underlying equipment being sold or remarketed
for which proceeds received were in excess of carrying value. Income from
leverage leases decreased due to the sale of the leverage lease portfolio in
1996. Interest income and other decreased due to the decrease in the average
cash balance from 1996 to 1997. Rental income increased due to the Partnership's
$6,819,250 investment in an operating lease during 1997. Income from equity
investment in joint ventures increased as a direct result of the Partnership's
March 1997 contribution to ICON Receivables 1997-A LLC. The contribution
consisted of equipment lease and finance receivables, residuals and cash
totaling $4,930,767.
Expenses for the year ended December 31, 1997 were $2,860,681, representing
a decrease of $610,126 or 18% from 1996. The decrease in expenses was
attributable to a decrease in interest expense of $530,743 or 32%, a decrease in
amortization of initial direct cost of $251,354 or 41%, a decrease in general
and administrative expenses of $17,627 or 8%, a decrease in management fees of
$136,703 or 20% and a decrease in administrative expense reimbursement of
$30,116 or 10% from 1996. The decrease in interest expense resulted from a
decrease in the average debt outstanding from 1996 to 1997. These decreases were
partially offset by an increase of $356,417 in depreciation expense due to the
Partnership's 1997 $6,819,250 investment in an operating lease. Management fees,
amortization of initial direct costs and administrative expense reimbursements
decreased due to a decrease in the average size of the portfolio from 1996 to
1997. The decrease in general and administrative expenses was primarily due to a
decrease in legal fees from 1996 to 1997.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
Net income for the years ended December 31, 1997 and 1996 was $676,730 and
$2,540,333, respectively. The net income per weighted average limited
partnership unit was $1.68 and $6.30 for 1997 and 1996, respectively.
Results of Operations for the Years Ended December 31, 1996 and 1995
Revenues for the year ended December 31, 1996 were $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.
Liquidity and Capital Resources
The Partnership's primary sources of funds in 1997, 1996 and 1995 were net
cash provided by operations of $8,409,703, $1,621,624 and $2,756,354,
respectively, proceeds from sales of equipment of $9,741,651, $15,681,303 and
$6,776,544, respectively, proceeds of $2,700,000 in note payable - recourse
borrowings in 1997 and proceeds of $5,250,000 from a revolving credit facility
in 1996. These funds were used to purchase additional equipment, fund cash
distributions and make payments on borrowings.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
The Partnership's notes payable at December 31, 1997 and 1996 totaled
$11,936,296 and $17,470,845, respectively. These amounts consisted of $8,280,870
and $11,056,959 in non-recourse notes, respectively, which are being paid
directly to the lenders by the lessees, $432,976 and $898,927 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,
$1,195,311 and $2,128,538 in non-recourse - secured notes, respectively, which
are paid from proceeds from the lease portfolio that secured the financing and
recourse notes payable of $2,027,139 at December 31, 1997, which are paid from
available cash from operations.
The Partnership entered into a revolving credit agreement (the "Facility")
in October 1992. The Facility 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 and outstanding under the
Facility. The Facility had a final maturity date of January 31, 1997, at which
time 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 for $8,756,291. This transaction represents the
financing of free cash and first priority rights of the first $4,000,000 of
residual proceeds from the eventual sale of the equipment related to a leveraged
lease. The free cash results from lease rental payments being greater than the
debt payments. The financing is secured by the underlying equipment, a 1986
McDonnell Douglas DC-10-30F aircraft, currently on lease to Federal Express
Corp. In August 1996 ICON Cash Flow Partners L.P. Seven ("L.P. Seven"), an
affiliate of the Partnership, acquired the residual interest in the leveraged
lease and assumed the related outstanding non-recourse debt. In January 1997
L.P. Seven re-financed the free cash and $2,000,000 of its 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 investment.
Cash distributions to the limited partners in 1997, 1996 and 1995, which
were paid monthly, totaled $7,882,867, $5,588,508 and $5,589,207, respectively,
of which $669,963, $2,514,930 and $2,765,805 was investment income and
$7,212,904, $3,073,578 and $2,823,402 was a return of capital, respectively. The
monthly annualized cash distribution rate to limited partners in 1997, 1996 and
1995 was 19.75%, 14.00% and 14.00%, of which 1.68%, 6.30% and 6.93% was
investment income and 18.07%, 7.70% and 7.07% 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 1997, 1996 and 1995 was $19.75, $14.00 and $14.00, of which
$1.68, $6.30 and $6.93 was investment income and $18.07, $7.70 and $7.07 was a
return of capital, respectively.
As a result of the Partnership's entering into the Disposition Phase,
future monthly distributions could, and are expected to fluctuate depending on
the amount of asset sale and re-lease proceeds received during that period.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
In March 1997 the Partnership, ICON Cash Flow Partners L.P. Six ("L.P.
Six"), and L.P. Seven, contributed and assigned equipment lease and finance
receivables and residuals with a net book value of $4,805,767, $5,304,010 and
$5,391,216, and cash of $125,000, $300,000 and $275,000, respectively to ICON
Receivables 1997-A LLC ("1997-A"), a special purpose entity created for the
purpose of originating new leases, managing existing contributed assets and
securitizing its portfolio. In order to fund the acquisition of new leases,
1997-A obtained a warehouse borrowing facility from Prudential Securities Credit
Corporation (the "1997-A Facility"). Borrowings under the 1997-A Facility were
based on the present value of the new leases. Outstanding amounts under the
1997-A Facility bore interest equal to Libor plus 1.5%.
On September 19, 1997 ICON Cash Flow Partners, L.P., Series E ("Series
E"), L.P. Six and L.P. Seven contributed and assigned equipment lease and
finance receivables and residuals with a net book value of $15,547,305,
$5,225,794 and $0, and cash of $740,000, $300,000 and $484,244, respectively to
1997-A. The Partnership, Series E, L.P. Six and L.P. Seven (collectively the
"1997-A Members") received a 17.81%, 31.19% 31.03% and 19.97% interest,
respectively, in 1997-A based on the present value of their related
contributions.
On September 19, 1997, 1997-A securitized substantially all of its
equipment leases and finance receivables and residuals. The net proceeds from
the securitization totaled $47,140,183, of which $16,658,877 was used to pay
down the 1997-A Facility, and the remaining proceeds, after establishing
reserves for expenses, were distributed to the 1997-A Members based on their
respective interests. 1997-A became the beneficial owner of a trust. The trustee
for the trust is Texas Commerce Bank ("TCB"). In conjunction with this
securitization, the portfolio as well as the General Partner's servicing
capabilities were rated "AA" by Duff & Phelps and Fitch, both nationally
recognized rating agencies. The General Partner, as servicer, is responsible for
managing, servicing, reporting on and administering the portfolio. 1997-A remits
all monies received from the portfolio to TCB. TCB is responsible for disbursing
to the noteholders their respective principal and interest and to 1997-A the
excess of cash collected over debt service from the portfolio. The 1997-A
Members receive their pro rata share of any excess cash on a monthly basis from
1997-A. The Partnership's share of the net proceeds from the securitization
totaled $3,962,495. The 1997-A Members may receive, in accordance with their
membership interests, additional proceeds if 1997-A generates excess cash (cash
after payment of debt and expenses).
The Partnership's Reinvestment Period ended June 5, 1997. The Disposition
Period began on June 6, 1997 and is expected to continue through June 5, 2002.
During the Disposition Period the Partnership has, and will continue to
distribute substantially all distributable cash from operations and sales to the
partners and begin the orderly termination of its operations and affairs. The
Partnership has not, and will not reinvest in any leased equipment during the
Disposition Period.
As of December 31, 1997, 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 and sales of equipment,
the Partnership will distribute substantially all available cash after retaining
sufficient cash to meet its reserve requirements and recurring obligations as
they become due.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page Number
Independent Auditors' Report 14
Consolidated Balance Sheets as of December 31, 1997 and 1996 15-16
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995 17
Consolidated Statements of Changes in Partners' Equity for the
Years Ended December 31, 1997, 1996 and 1995 18
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 19-20
Notes to Consolidated Financial Statements 22-31
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1997
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Partners
ICON Cash Flow Partners, L.P., Series 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,
1997 and 1996, and the related consolidated statements of operations, changes in
partners' equity, and cash flows for each of the years in the three-year period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Cash Flow
Partners, L.P., Series D as of December 31, 1997 and 1996, and the results of
its operations and its cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLC
---------------------------
KPMG Peat Marwick LLC
March ___, 1998
New York, New York
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
1997 1996
---- ----
Assets
Cash .................................................. $ 1,154,378 $ 413,845
------------ ------------
Investment in finance leases
Minimum rents receivable ........................... 8,243,812 16,784,360
Estimated unguaranteed residual values ............. 5,916,727 7,587,992
Initial direct costs ............................... 131,110 484,908
Unearned income .................................... (1,442,524) (2,955,625)
Allowance for doubtful accounts .................... (568,285) (651,546)
------------ ------------
12,280,840 21,250,089
Investment in operating lease equipment, at cost ...... 6,819,250 --
Accumulated depreciation .............................. (356,417) --
------------ ------------
6,462,833 --
------------ ------------
Investment in financings
Receivables due in installments .................... 3,397,740 15,510,321
Initial direct costs ............................... 12,344 93,060
Unearned income .................................... (1,137,678) (3,086,270)
Allowance for doubtful accounts .................... (456,206) (252,223)
------------ ------------
1,816,200 12,264,888
Equity investment in joint venture .................... 1,155,072 --
------------ ------------
Other assets .......................................... 130,155 334,318
------------ ------------
Total assets .......................................... $ 22,999,478 $ 34,263,140
============ ============
Liabilities and Partners' Equity
Note payable - recourse ............................... $ 2,027,139 $ --
Note payable - non-recourse - secured ............. 1,195,311 2,128,538
Notes payable - non-recourse .......................... 8,713,846 11,955,886
Note payable revolving credit facility ................ -- 3,386,421
Accounts payable to General Partner and affiliates, net 164,151 18,406
Accounts payable - other .............................. 43,136 129,647
Security deposits and deferred credits ................ 1,767,386 269,582
------------ ------------
13,910,969 17,888,480
(continued on next page)
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Balance Sheets (Continued)
December 31,
1997 1996
---- ----
Commitments and Contingencies
Partners' equity (deficiency)
General Partner ........................................ (253,733) (180,852)
Limited partners (399,118 and 399,158 units outstanding,
$100 per unit original issue price ................... 9,342,242 16,555,512
------------ ------------
Total partners' equity .................................... 9,088,509 16,374,660
------------ ------------
Total liabilities and partners' equity .................... $ 22,999,478 $ 34,263,140
============ ============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31,
1997 1996 1995
---- ---- ----
Revenues
Finance income ............................... $1,785,803 $3,009,835 $1,591,239
Net gain on sales or remarketing of
equipment .................................. 452,706 2,391,683 1,931,333
Income from leveraged leases, net ............ -- 369,511 1,508,626
Interest income and other .................... 141,715 240,111 170,857
Rental income ................................ 798,000 -- --
Income from equity investment in joint venture 359,187 -- --
---------- ---------- ----------
Total revenues ............................... 3,537,411 6,011,140 5,202,055
---------- ---------- ----------
Expenses
Interest ..................................... 1,121,197 1,651,940 621,199
Management fees - General Partner ............ 548,400 685,103 594,623
Amortization of initial direct costs ......... 363,087 614,441 511,427
Administrative expense reimbursements
- General Partner .......................... 271,829 301,945 257,401
General and administrative ................... 199,751 217,378 273,663
Provision for bad debts ...................... -- -- 150,000
Depreciation ................................. 356,417 -- --
---------- ---------- ----------
Total expenses ............................... 2,860,681 3,470,807 2,408,313
---------- ---------- ----------
Net income ...................................... $ 676,730 $2,540,333 $2,793,742
========== ========== ==========
Net income allocable to:
Limited partners ............................. 669,963 $2,514,930 $2,765,805
General Partner .............................. 6,767 25,403 27,937
---------- ---------- ----------
$ 676,730 $2,540,333 $2,793,742
========== ========== ==========
Weighted average number of limited
partnership units outstanding ................ 399,138 399,179 399,229
========== ========== ==========
Net income per weighted average
limited partnership unit ..................... $ 1.68 $ 6.30 $ 6.93
========== ========== ==========
See accompanying notes to consolidated financial statements.
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, 1997, 1996 and 1995
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
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
Cash distributions
to partners $18.07 $1.68 (7,882,867) (79,648) (7,962,515)
Limited partnership
units redeemed
(40 units) (366) - (366)
Net income 669,963 6,767 676,730
----------- --------- -----------
Balance at
December 31, 1997 $ 9,342,242 $(253,733) $ 9,088,509
=========== ========= ===========
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31,
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net income ............................................ $ 676,730 $ 2,540,333 $ 2,793,742
------------ ------------ ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Allowance for doubtful accounts ..................... 120,722 100,170 235,916
Finance income portion of receivables paid
directly to lenders by lessees .................... (843,479) (1,554,592) (776,205)
Amortization of initial direct costs ................ 363,087 614,441 511,427
Net gain on sales or remarketing of equipment ....... (452,706) (2,391,683) (1,931,333)
Interest expense on non-recourse financing
paid directly by lessees .......................... 618,936 1,200,696 539,259
Interest expense accrued on non-recourse debt ....... 4,202 11,871 35,286
Collection of principal - non-financed receivables .. 1,791,373 1,726,064 2,469,314
Collection of principal - leveraged leases .......... -- 207,683 429,383
Income from leveraged leases, net ................... -- (369,511) (1,508,626)
Depreciation ........................................ 356,417 -- --
Income from equity investment in joint venture ...... (359,187) -- --
Distributions from equity investment in joint venture 4,134,882 -- --
Change in operating assets and liabilities:
Accounts payable to General Partner and
affiliates, net ................................. 145,745 (97,006) 103,268
Accounts payable - other .......................... (86,511) (156,530) (27,978)
Security deposits and deferred credits ............ 1,497,804 209,245 (129,065)
Other, net ........................................ 441,688 (419,557) 11,966
------------ ------------ ------------
Total adjustments ............................... 7,732,973 (918,709) (37,388)
------------ ------------ ------------
Net cash provided by operating activities ......... 8,409,703 1,621,624 2,756,354
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sales of equipment ...................... 9,741,651 15,681,303 6,776,544
Equipment and receivables purchased ................... (7,030,431) (15,977,478) (5,675,075)
Investment in joint venture ........................... (125,000) -- --
Initial direct costs .................................. -- (404,957) (756,658)
------------ ------------ ------------
Net cash provided by (used in) investing activities 2,586,220 (701,132) 344,811
------------ ------------ ------------
(continued on next page)
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31,
1997 1996 1995
---- ---- ----
Cash flows from financing activities:
Cash distributions to partners ................. (7,962,515) (5,644,958) (5,645,664)
Proceeds from note payable - recourse .......... 2,700,000 -- --
Principal payments on note payable - recourse .. (672,861) -- --
Principal payments on non-recourse - secured
financing and non-recourse debt............... (933,227) (1,998,938) (776,692)
Proceeds from notes payable non-recourse
-secured financing ........................... -- -- 4,148,838
Proceeds from revolving credit facility,
net of repayments ........ -- 3,386,421 --
Principal payments on revolving credit facility (3,386,421) -- --
Redemption of limited partnership units ........ (366) (1,071) (764)
------------ ------------ ------------
Net cash used in financing activities ...... (10,255,390) (4,258,546) (2,274,282)
------------ ------------ ------------
Net increase (decrease) in cash ................ 740,533 (3,338,054) 826,883
Cash at beginning of year ......................... 413,845 3,751,899 2,925,016
------------ ------------ ------------
Cash at end of year ............................... $ 1,154,378 $ 413,845 $ 3,751,899
============ ============ ============
See accompanying notes to consolidated financial statements.
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 $1,121,197, $1,651,940 and $621,199 for the years ended
December 31, 1997, 1996 and 1995 consisted of: interest expense on non-recourse
financing accrued or paid directly to lenders by lessees of $811,948, $1,275,475
and $574,545, respectively, and other interest of $309,249, $376,465 and
$46,654, respectively.
During the years ended December 31, 1997, 1996 and 1995, non-cash activities
included the following:
1997 1996 1995
---- ---- ----
Principal and interest on finance receivables
paid directly to lender by lessees ............ $ 6,218,813 $ 8,606,303 $ 6,942,951
Principal and interest on non-recourse financing
paid directly by lessees ...................... (6,218,813) (8,606,303) (6,942,951)
Decrease in investments in finance leases and
financings due to contribution in joint venture (4,805,767) -- --
Increase in equity investment in joint venture ..... 4,805,767 -- --
Non-recourse notes payable assumed in
purchase price - finance and operating leases . 3,200,000 5,429,406 13,579,698
Accounts payable - equipment ....................... -- 2,539,759
Fair value of equipment and receivables
purchased for debt and payables ............... (3,200,000) (5,429,406) (16,119,457)
Decrease in investment in finance leases due
to termination of leases ...................... 1,035,175 3,869,025 812,097
Decrease in notes payable - non-recourse due to
termination of leases ......................... (1,035,175) (3,841,797) (299,817)
Decrease in security deposits and deferred credits . -- (27,228) (512,280)
------------ ------------ ------------
$ -- $ -- $ --
============ ============ ============
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1997
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, during 1996 the
Partnership redeemed 50 limited partnership units, and during 1997 the
Partnership redeemed 40 units, leaving 399,118 limited partnership units
outstanding at December 31, 1997.
The Partnership's Reinvestment Period ended June 5, 1997. The Disposition
Period began on June 6, 1997 and is expected to continue through June 5, 2002.
During the Disposition Period the Partnership has, and will continue to
distribute substantially all distributable cash from operations and sales to the
partners and begin the orderly termination of its operations and affairs. The
Partnership has not, and will not reinvest in any leased equipment during the
Disposition Period.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership's equipment leases and financing
transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, received an
underwriting commission on the gross proceeds from sales of all units. The total
underwriting compensation paid by the Partnership, including underwriting
commissions, sales commissions, incentive fees, public offering expense
reimbursements and due diligence activities was limited to 13 1/2% of the gross
proceeds received from the sale of the units. Such offering costs aggregated
$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.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Leases - The Partnership accounts for owned equipment leased to third
parties as finance leases, leveraged leases or operating leases. For finance
leases, the Partnership records, at the inception of the lease, the total
minimum lease payments receivable, the estimated unguaranteed residual values,
the initial direct costs related to the leases and the related unearned income.
Unearned income represents the difference between the sum of the minimum lease
payments receivable plus the estimated unguaranteed residual minus the cost of
the leased equipment. Unearned income is recognized as finance income over the
terms of the related leases using the interest method. The Partnership's net
investment in leveraged leases consists of minimum lease payments receivable,
the estimated unguaranteed residual values and the initial direct costs related
to the leases, net of the unearned income and principal and interest on the
related non-recourse debt. Unearned income is recognized as income from
leveraged leases over the life of the lease at a constant rate of return on the
positive net investment. For operating leases, equipment is recorded at cost and
is depreciated on the straight-line method over the lease terms to their
estimated fair market values at lease terminations. Related lease rentals are
recognized on the straight-line method over the lease terms. Billed and
uncollected operating lease receivables, net of allowance for doubtful accounts,
are included in other assets. Initial direct costs of finance leases and
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. Fair value information with respect to the Company's assets and
liabilities is not provided because (i) SFAS No. 107 does
not require disclosures about the fair value of lease arrangements, (ii) the
carrying value of financial assets other than lease related investments and
liabilities approximates market value and (iii) fair value information
concerning certain recourse and 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.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Redemption of Limited Partnership Units - The General Partner consented to
the Partnership redeeming 25 limited partnership units during 1996 and 50
limited partnership units during 1997. 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.
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.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Consolidation - The consolidated financial statements include the accounts
of the Partnership and its wholly owned subsidiary, ICON D Corp. All
inter-company accounts and transactions have been eliminated.
Income Taxes - No provision for income taxes has been made as the liability
for such taxes is that of each of the partners rather than the Partnership.
New Accounting 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. 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.
3. Net Investment in Leveraged Leases
The Partnership acquired a portfolio of 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. On April 23, 1996 the Partnership
sold its remaining beneficial interest in the trust which owned the towboats and
barges. 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.
4. Receivables Due in Installments
Non-cancelable minimum annual amounts due on finance leases, and financings
as of December 31, 1997 are as follows:
Finance
Year Leases Financings Total
1998 $ 5,173,163 $ 578,681 $ 5,751,844
1999 1,959,800 397,229 2,357,029
2000 814,972 240,522 1,055,494
2001 286,627 167,955 454,582
2002 9,250 13,353 22,603
Thereafter - 2,000,000 2,000,000
------------ ----------- ------------
$ 8,243,812 $ 3,397,740 $ 11,641,552
============ =========== ============
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
5. Investment in Operating Leases
In June 1997 the Partnership acquired two DeHaviland DHC-8-102 aircraft
currently on lease to U.S. Airways, Inc. The purchase price totaled $6,819,250
and was funded with $3,619,250 of cash and $3,200,000 in non-recourse debt. The
lease is an operating lease and expires in January 1999. The note bears interest
at 10.34% and is interest only through January 1999. The principal balance is
due in January 1999.
The investment in operating leases at December 31, 1997, 1996 and 1995
consisted of the following:
1997 1996 1995
---- ---- ----
Equipment cost, beginning of year ......... $ -- $ 14,095 $ 41,564
Equipment purchases ....................... 6,819,250 -- --
Equipment sold ............................ -- (14,095) (27,469)
----------- ----------- -----------
Equipment cost, end of year ............... 6,819,250 -- 14,095
----------- ----------- -----------
Accumulated depreciation, beginning of year -- (12,305) (38,526)
Depreciation .............................. (356,417) -- --
Equipment sold ............................ -- 12,305 26,221
----------- ----------- -----------
Accumulated depreciation, end of year ..... (356,417) -- (12,305)
----------- ----------- -----------
Initial direct costs, net of accumulated
amortization, end of year .............. -- -- 24
----------- ----------- -----------
Investment in operating leases, end of year $ 6,462,833 $ -- $ 1,814
=========== =========== ===========
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, 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
Accounts written-off .......... (92,545) (74,931) -- (167,476)
Recovery on accounts previously
written-off ................. 9,284 222,476 -- 231,760
Transfer within accounts ...... -- 56,438 -- 56,438
----------- ----------- ----------- -----------
Balance at December 31, 1997 ....... $ 568,285 $ 456,206 $ -- $ 1,024,491
=========== =========== =========== ===========
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
7. Notes Payable
On May 30, 1997, the Partnership borrowed $2,700,000 from a bank pursuant
to a four year term loan agreement. The loan agreement grants a security
interest in certain Partnership payments and collateral for a specified group of
leases and financing transactions. The note bears interest at 9.25% and is
payable in consecutive monthly installments. In addition, the loan agreement
contains restrictive covenants which include the maintenance of minimum tangible
net worth and of certain financial ratios. The Partnership was in compliance
with the related covenants at December 31, 1997. The Partnership had $2,027,139
outstanding under the loan at December 31, 1997.
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 specified group of leases and financing transactions.
The loan bears interest at a fixed rate of 8.02%, and is payable from receivable
proceeds from the portfolio that has secured it. The Partnership had $1,195,311
outstanding under the loan at December 31, 1997.
The Partnership entered into a secured revolving credit agreement (the
"Facility") in October 1992. The Facility 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. At
December 31, 1996, the Partnership had $3,386,421 available for borrowing and
outstanding under the Facility. The Facility had a final maturity date of
January 31, 1997, at which time the Partnership paid the outstanding balance and
terminated the agreement.
In June 1997 the Partnership acquired two DeHaviland DHC-8-102 aircraft
currently on lease to U.S. Airways, Inc. The purchase price totaled $6,819,250
and was funded with $3,619,250 of cash and $3,200,000 in non-recourse debt. The
lease is an operating lease and expires in January 1999. The note bears interest
at 10.34% and is interest only through January 1999. The principal balance is
due in January 1999.
Notes payable consists of the following: (1) notes payable-recourse, which
are payable by the Partnership from available cash from operations, (2) notes
payable-non-recourse-secured financing, which are payable by the Partnership
from a specified group of lease and financing transactions and (3) notes
payable-non-recourse, which are 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
Notes Payable Non-Recourse Notes Payable
Recourse Secured Financing Non-Recourse Total
1998 $ 1,156,338 $ 757,496 $ 4,350,771 $ 6,264,605
1999 592,631 373,091 3,278,663 4,244,385
2000 205,076 64,724 717,740 987,540
2001 73,094 - 236,674 309,768
2002 - - 129,998 129,998
-------------- -------------- -------------- --------------
$ 2,027,139 $ 1,195,311 $ 8,713,846 $ 11,936,296
============== ============== ============== ==============
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Included in notes payable non-recourse above are $432,976 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.
8. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the years ended December 31, 1997, 1996 and 1995
are as follows:
Charged to
Capitalized Operations
Acquisition fees .................... $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
======== ========
Acquisition fees .................... $ -- $ --
Management fees ..................... -- 548,400
Administrative expense reimbursements -- 271,829
-------- --------
Year ended December 31, 1997 ........ $ -- $820,229
======== ========
Included in the Partnership's acquisitions for the year ended December 31,
1996 is a financing transaction for $8,756,291. This transaction represents the
financing of free cash and first priority rights of the first $4,000,000 of
residual proceeds from the eventual sale of the equipment related to a leveraged
lease. The free cash results from lease rental payments being greater than the
debt payments. The financing is secured by the underlying equipment, a 1986
McDonnell Douglas DC-10-30F aircraft, currently on lease to Federal Express
Corp. In August 1996 L.P. Seven, an affiliate of the Partnership, acquired the
residual interest in the leveraged lease and assumed the related outstanding
non-recourse debt. In January 1997 L.P. Seven re-financed the free cash and
$2,000,000 of its 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 investment.
In March 1997 the Partnership, ICON Cash Flow Partners L.P. Six ("L.P.
Six"), and L.P. Seven, contributed and assigned equipment lease and finance
receivables and residuals with a net book value of $4,805,767, $5,304,010 and
$5,391,216, and cash of $125,000, $300,000 and $275,000, respectively to ICON
Receivables 1997-A LLC ("1997-A"), a special purpose entity created for the
purpose of originating new leases, managing existing contributed assets and
securitizing its portfolio. In order to fund the acquisition of new leases,
1997-A obtained a warehouse borrowing facility from Prudential Securities Credit
Corporation (the "1997-A Facility"). Borrowings under the 1997-A Facility were
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
based on the present value of the new leases. Outstanding amounts under the
1997-A Facility bore interest equal to Libor plus 1.5%.
On September 19, 1997 ICON Cash Flow Partners, L.P., Series E ("Series
E"), L.P. Six and L.P. Seven contributed and assigned equipment lease and
finance receivables and residuals with a net book value of $15,547,305,
$5,225,794 and $0, and cash of $740,000, $300,000 and $484,244, respectively to
1997-A. The Partnership, Series E, L.P. Six and L.P. Seven (collectively the
"1997-A Members") received a 17.81%, 31.19% 31.03% and 19.97% interest,
respectively, in 1997-A based on the present value of their related
contributions.
On September 19, 1997, 1997-A securitized substantially all of its
equipment leases and finance receivables and residuals. The net proceeds from
the securitization totaled $47,140,183, of which $16,658,877 was used to pay
down the 1997-A Facility, and the remaining proceeds, after establishing
reserves for expenses, were distributed to the 1997-A Members based on their
respective interests. 1997-A became the beneficial owner of a trust. The trustee
for the trust is Texas Commerce Bank ("TCB"). In conjunction with this
securitization, the portfolio as well as the General Partner's servicing
capabilities were rated "AA" by Duff & Phelps and Fitch, both nationally
recognized rating agencies. The General Partner, as servicer, is responsible for
managing, servicing, reporting on and administering the portfolio. 1997-A remits
all monies received from the portfolio to TCB. TCB is responsible for disbursing
to the noteholders their respective principal and interest and to 1997-A the
excess of cash collected over debt service from the portfolio. The 1997-A
Members receive their pro rata share of any excess cash on a monthly basis from
1997-A. The Partnership's share of the net proceeds from the securitization
totaled $3,352,789. The Partnership's original investment was
recorded at cost and is adjusted by its share of earnings, losses and
distributions thereafter.
9. Security Deposits and Deferred Credits
Security deposits and deferred credits at December 31, 1997 and 1996
include $22,610 and $39,751, respectively, of proceeds received on residuals
which will be applied upon final remarketing of the related equipment.
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, 1997,
there was no federal tax liability for ICON D Corp.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
11. Commitments and Contingencies
The Partnership has entered into remarketing and residual sharing
agreements with third parties. In connection therewith, remarketing or residual
proceeds received in excess of specified amounts will be shared with these third
parties based on specified formulas. For the years ended December 31, 1997, 1996
and 1995, the Partnership paid $366,466, $266,469, $141,391, respectively, to
third parties as their share under the agreements.
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:
1997 1996 1995
---- ---- ----
Net income per financial statements $ 676,730 $ 2,540,333 $ 2,793,742
Differences due to:
Direct finance leases 5,998,911 3,115,234 7,820,221
Depreciation and amortization (4,339,289) (129,832) (5,819,098)
Provision for losses 138,489 (156,596) (6,182)
Loss on sale of equipment 631,921 (2,336,699) (3,190,163)
Other 376,745 64,867 42,805
---------- ----------- -----------
Partnership income for
federal income tax purposes $3,483,507 $ 3,097,307 $ 1,641,325
========== =========== ===========
As of December 31, 1997, the partners' capital accounts included in the
financial statements totaled $9,088,509 compared to the partners' capital
accounts for federal income tax purposes of $23,969,195 (unaudited). The
difference arises primarily from commissions reported as a reduction in the
partners' capital for financial reporting purposes but not for federal income
tax purposes, and temporary differences related to direct finance leases,
depreciation and provision for losses.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1996
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 Senior Vice President and Chief Financial Officer
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
Beaufort J. B. Clarke, age 51, is President, Chief Executive Officer and
Director of both the General Partner and ICON Securities Corp. (the
"Dealer-Manager"). Prior to his present position, Mr. Clarke was founder and the
President and Chief Executive Officer of Griffin Equity Partners, Inc. Mr.
Clarke formerly was an attorney with Shearman and Sterling and has over 20 years
of senior management experience in the United States leasing industry.
Thomas W. Martin, age 43, is Executive Vice President of both the General
Partner and the Dealer-Manager. Prior to his present position, Mr. Martin was
the Executive Vice President and Chief Financial Officer of Griffin Equity
Partners, Inc. Mr. Martin has over 12 years of senior management experience in
the leasing business, particularly in the area of syndication.
Paul B. Weiss, age 37, is Executive Vice President of the General Partner.
Mr. Weiss has been exclusively engaged in lease portfolio acquisitions since
1988 from his affiliations with Griffin Equity Partners (as Executive Vice
President and co-founder in 1993); Gemini Financial Holdings (as Senior Vice
President-Portfolio Acquisitions and a member of the executive committee from
1991-1993) and Pegasus Capital Corporation (as Vice President-Portfolio
Acquisitions).
Gary N. Silverhardt, age 37, is Senior Vice President and Chief Financial
Officer of the General Partner. He joined the General Partner in 1989. Prior to
joining the General Partner, Mr. Silverhardt was previously employed by Coopers
& Lybrand from 1985 to 1989, most recently as an Audit Supervisor. Prior to
1985, Mr. Silverhardt was employed by Katz, Schneeberg & Co. from 1983 to 1985.
Mr. Silverhardt received a B.S. degree from the State University of New York at
New Paltz in 1983 and is a Certified Public Accountant.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner and its
affiliates were paid or accrued the following compensation and reimbursement for
costs and expenses for the years ended December 31, 1997, 1996 and 1995.
Type of
Entity Capacity Compensation 1997 1996 1995
------ -------- ------------ ---- ---- ----
ICON Capital Corp. Manager Acquisition fees $ - $ 404,957 $ 818,397
ICON Capital Corp. General Partner Management fees 548,400 685,103 594,623
ICON Capital Corp. General Partner Administrative exp.
reimbursements 271,829 301,945 257,401
-------- ---------- ----------
$820,229 $1,392,005 $1,670,421
======== ========== ==========
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.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
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).
(ii) Certificate of Limited Partnership of the Partnership
(Incorporated herein by reference to Exhibit 3.01 to Form S-1
Registration Statement No. 2-99858 filed with the Securities and
Exchange Commission on August 23, 1985 and to Exhibit 3.01 to
Amendment No. 1 to Form S-1 Registration Statement No. 2-99858
filed with the Securities and Exchange Commission on August 27,
1986).
(iii)Form of Management Agreement between the Partnership and
Crossgate Leasing, Inc. (Incorporated herein by reference to
Exhibit 10.01 to Amendment No. 1 to Form S-1 Registration
Statement No. 2-99858 filed with the Securities and Exchange
Commission on August 27, 1986).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter ended
December 31, 1997.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ICON CASH FLOW PARTNERS, L.P., Series D
File No. 33-40044 (Registrant)
By its General Partner, ICON Capital Corp.
Date: March 31, 1998 /s/ Beaufort J.B. Clarke
--------------------------------------------------
Beaufort J.B. Clarke
President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole General Partner of the Registrant
Date: March 31, 1998 /s/ Beaufort J.B. Clarke
--------------------------------------------------
Beaufort J.B. Clarke
President, Chief Executive Officer and Director
Date: March 31, 1998 /s/ Thomas W. Martin
--------------------------------------------------
Thomas W. Martin
Executive Vice President and Director
Date: March 31, 1998 /s/ Gary N. Silverhardt
--------------------------------------------------
Gary N. Silverhardt
Senior Vice President and Chief Financial Officer
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrant Which have not Registered Securities Pursuant to
Section 12 of the Act
No annual report or proxy material has been sent to security holders. An annual
report will be sent to the limited partners and a copy will be forwarded to the
Commission.