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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, 1998
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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
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(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
- --------------------------------------------------------------------------------
(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, 1998
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 5
6. Selected Consolidated Financial and Operating Data 6
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 7-11
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, Financial Statement Schedules and Reports on Form 8-K 35
SIGNATURES 36
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
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. 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 equipment
sales to the partners and begin the orderly termination of its operations and
affairs. The Partnership has not, and will not invest in any additional finance
or lease transactions during the disposition period. During the disposition
period, the Partnership expects to recover at a minimum, the carrying value of
its assets
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 leases
and financing transactions; (2) made monthly cash distributions to its limited
partners from cash from operations, commencing with each limited partner's
admission to the Partnership, (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.
The equipment leasing industry is highly competitive. In initiating its
leasing transactions the Partnership competed with leasing companies,
manufacturers that lease their products directly, equipment brokers and dealers
and financial institutions, including commercial banks and insurance companies.
Many competitors are larger than the Partnership and have greater financial
resources.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
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, 1998 and 1997, the Partnership purchased
and leased or financed $0 and $10,230,431 of equipment, respectively, with a
weighted average initial transaction term of 0 and 27 months, respectively. At
December 31, 1998, the weighted average initial transaction term of the
portfolio was 40 months. A summary of the portfolio equipment cost by category
held at December 31, 1998 and 1997 is as follows:
December 31, 1998 December 31, 1997
----------------- -----------------
Category Cost Percent Cost Percent
- -------- ---- ------- ---- -------
Manufacturing & production $10,442,728 33.3% $13,907,889 36.7%
Computer systems .......... 9,293,171 29.6 11,614,293 30.7
Aircraft .................. 7,802,583 24.9 7,802,583 20.6
Restaurant equipment ...... 1,638,121 5.2 1,705,999 4.5
Office furniture & fixtures 1,179,845 3.8 1,238,260 3.3
Telecommunications ........ 463,182 1.5 514,888 1.3
Medical ................... 161,068 .5 374,798 1.0
Printing .................. 107,306 .4 108,739 .3
Video production .......... 79,414 .3 100,134 .3
Retail systems ............ 42,493 .1 326,595 .9
Miscellaneous ............. 147,888 .4 178,994 .4
----------- ----- ----------- -----
$31,357,799 100.0% $37,873,172 100.0%
=========== ===== =========== =====
The Partnership has one lease which individually represented greater than
10% of the total portfolio equipment cost at December 31, 1998. The lease is
with U.S. Airways, Inc.. The underlying equipment for the lease are two
DeHavilland DHC-8-102 aircraft and the total equipment cost represented 21.7% of
the total portfolio equipment cost at December 31, 1998. The operating lease
expired in January 1999, at which time the Partnership extended the lease with
U.S Airways, Inc. The extension is for an indefinite term whereby either lessee
or lessor can terminate with 90 days prior notice.
Item 2. Properties
The Partnership neither owns nor leases office space or equipment for the
purpose of managing its day-to-day affairs.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
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 1998.
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,
- -------------- ---------------------------------
1998 1997
---- ----
Limited partners 3,060 3,100
General Partner 1 1
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
Item 6. Selected Consolidated Financial and Operating Data
Years Ended December 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Total revenues ......... $2,796,813 $3,537,411 $6,011,140 $5,202,055 $4,861,151
========== ========== ========== ========== ==========
Net income ............. $ 688,361 $ 676,730 $2,540,333 $2,793,742 $1,620,241
========== ========== ========== ========== ==========
Net income allocable
to limited partners .. $ 681,477 $ 669,963 $2,514,930 $2,765,805 $1,604,039
========== ========== ========== ========== ==========
Net income allocable
to the General Partner $ 6,884 $ 6,767 $ 25,403 $ 27,937 $ 16,202
========== ========== ========== ========== ==========
Weighted average
limited partnership
units outstanding .... 399,118 399,138 399,179 399,229 399,703
========== ========== ========== ========== ==========
Net income per
weighted average
limited partnership
unit ................. $ 1.71 $ 1.68 $ 6.30 $ 6.93 $ 4.01
========== ========== ========== ========== ==========
Distributions to
limited partners ..... $4,074,331 $7,882,867 $5,588,508 $5,589,207 $5,596,503
========== ========== ========== ========== ==========
Distributions to the
General Partner ...... $ 41,155 $ 79,648 $ 56,450 $ 56,457 $ 56,530
========== ========== ========== ========== ==========
December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Total assets $16,619,860 $22,999,478 $34,263,140 $40,529,733 $27,619,644
=========== =========== =========== =========== ===========
Partners' equity $ 5,661,384 $ 9,088,509 $16,374,660 $19,480,356 $22,333,042
=========== =========== =========== =========== ===========
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, 1998
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, an operating lease, an investment in financings and an equity investment
in a joint venture representing 46%, 36%, 12% and 6% of total investments at
December 31, 1998, respectively, and 57%, 28%, 10% and 5% of total investments
at December 31, 1997, respectively.
Results of Operations
Years Ended December 31, 1998 and 1997
For the years ended December 31, 1998 and 1997, the Partnership purchased
and leased or financed equipment with an initial cost of $0 and $10,230,431,
respectively, to 0 and 72 lessees or equipment users, respectively.
Revenues for the year ended December 31, 1998 were $2,796,813, representing
a decrease of $740,598 or 21% from 1997. The decrease in revenues was
attributable to a decrease in finance income of $716,557 or 40%, a decrease in
net gain on sales or remarketing of equipment of $268,886 or 59%, a decrease in
income from an equity investment in a joint venture of $172,022 or 48%, and a
decrease in interest income and other of $114,520 or 81%. These decreases were
partially offset by an increase in rental income of $531,387 or 67%. Finance
income decreased due to a decrease in the average size of the portfolio from
1997 to 1998. The decrease in net gain on sales or remarketing of equipment was
due to a decrease in the number of leases maturing in which the underlying
equipment was sold or remarketed and proceeds received were in excess of the
remaining carrying value of the equipment. The decrease in income from equity
investment in joint venture was due to a decrease in the average size of the
joint venture's portfolio from 1997 to 1998. The decrease in interest income and
other resulted from a decrease in the average cash balance from 1997 to 1998.
Rental income increased due to the Partnership's operating lease with U.S.
Airways, Inc. commencing in June 1997 and therefore, rental income for 1998
includes twelve months of rents compared to seven months in 1997.
Expenses for the year ended December 31, 1998 were $2,108,452, representing
a decrease of $752,229 or 26% from 1997. The decrease in expenses was
attributable to a decrease in interest expense of $338,658 or 30%, a decrease in
amortization of initial direct costs of $184,970 or 51%, a decrease in
management fees of $151,229 or 28%, a decrease in administrative expense
reimbursements of $53,671 or 20%, and a 1998 reduction of the allowance for
doubtful accounts of $400,000. These decreases in expenses were partially offset
by an increase in depreciation expense of $307,704 or 86%, and an increase in
general and administrative expense of $68,595 or 34%. The decrease in interest
expense resulted from a decrease in the average debt outstanding from 1997 to
1998. Amortization of initial direct costs, management fees, and administrative
expense reimbursements decreased due to a decrease in the average size of the
portfolio from 1997 to 1998. The reduction of the allowance for doubtful
accounts was a result of the ongoing analysis of delinquency trends and loss
experience, an assessment of overall credit risk and the decline in the
portfolio balance. Depreciation expense increased due to the Partnership's
operating lease with U.S. Airways, Inc. commencing in June 1997 and therefore
depreciation expense for 1998 includes twelve months of ownership compared to
seven months in 1997. The increase in general and administrative expenses was
due to an increase in legal fees incurred related to collection activities on
accounts previously written off.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
Net income for the years ended December 31, 1998 and 1997 was $688,361 and
$676,730, respectively. The net income per weighted average limited partnership
unit was $1.71 and $1.68 for 1998 and 1997, respectively.
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 leveraged 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 and an increase in income
from equity investment in joint venture of $359,187. 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
leveraged leases decreased due to the sale of the leveraged 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 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 costs 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. These decreases were partially offset by an increase
of $356,417 in depreciation expense due to the Partnership's 1997 investment in
an operating lease. The decrease in interest expense resulted from a decrease in
the average debt outstanding from 1996 to 1997. 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.
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.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
Liquidity and Capital Resources
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 equipment
sales to the partners and begin the orderly termination of its operations and
affairs. The Partnership has not, and will not invest in any additional finance
or lease transactions during the disposition period. During the disposition
period, the Partnership expects to recover at a minimum, the carrying value of
its assets
As a result of the Partnership's entering into the disposition period,
future monthly distributions are expected to fluctuate depending on the amount
of asset sale and re-lease proceeds received during that period.
The Partnership's primary sources of funds in 1998, 1997 and 1996 were net
cash provided by operations of $3,315,260, $8,284,703 and $1,621,624,
respectively, proceeds from sales of equipment of $1,394,199, $9,741,651 and
$15,681,303, 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 equipment in 1997, fund cash
distributions and make payments on borrowings.
The Partnership's notes payable at December 31, 1998 and 1997 totaled
$7,735,949 and $11,936,296, respectively, and consisted of $6,366,111 and
$8,713,846 in non-recourse notes, respectively, $499,037 and $1,195,311 in a
non-recourse - secured note, respectively, which is paid from proceeds from the
lease portfolio that secured the financing and a note payable of $870,801 and
$2,027,139, respectively, which is paid from available cash from operations.
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. In
October 1998 the Partnership borrowed an additional $750,000, bringing the total
non-recourse debt relating to this transaction to $3,950,000. The note bears
interest at 10.34%. The operating lease expired in January 1999, at which time
the Partnership extended both the lease and the related debt. The lease
extension is for an indefinite term whereby either lessee or lessor can
terminate with 90 days prior notice. The related non-recourse debt is due upon
final lease termination.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
In August 1996 the Partnership acquired a financing transaction for
$8,756,291. The financing represented the free cash interest and first priority
rights to $4,000,000 of future residual proceeds relating to a leveraged lease
owned by an affiliate, L.P. Seven. L.P. Seven acquired, subject to the leveraged
lease, the residual interest in an aircraft on lease to Federal Express Corp.
The aircraft is a 1986 McDonnell Douglas DC-10-30F, and the lease expires in
July 2004. In January 1997 the Partnership refinanced all of its free cash
interest and $2,000,000 of its residual position to a third party. The
Partnership's remaining investment consists of the first priority rights to
$2,000,000 of future residual proceeds relating to the leveraged lease.
In March 1997 the Partnership, ICON Cash Flow Partners L.P. Six ("L.P.
Six"), and ICON Cash Flow Partners L.P. Seven ("L.P. Seven"), contributed and
assigned equipment lease and finance receivables and residuals to ICON
Receivables 1997-A LLC ("1997-A"), a special purpose entity created for the
purpose of originating leases, managing existing contributed assets and
securitizing its portfolio. In September 1997 ICON Cash Flow Partners, L.P.,
Series E ("Series E"), L.P. Six and L.P. Seven contributed and assigned
additional equipment lease and finance receivables and residuals to 1997-A. The
Partnership, Series E, L.P. Six and L.P. Seven 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. In September 1997, 1997-A securitized substantially all
of its equipment leases and finance receivables and residuals. 1997-A became the
beneficial owner of a trust. The Partnership's original investment was recorded
at cost and is adjusted by its share of earnings, losses and distributions
thereafter.
Cash distributions to the limited partners in 1998, 1997 and 1996, which
were paid monthly, totaled $4,074,331, $7,882,867 and $5,588,508, respectively,
of which $681,477, $669,963, and $2,514,930 was investment income and
$3,392,854, $7,212,904 and $3,073,578 was a return of capital, respectively. The
monthly annualized cash distribution rate to limited partners in 1998, 1997 and
1996 was 10.21%, 19.75% and 14.00%, respectively, of which 1.71%, 1.68% and
6.30% was investment income and 8.50%, 18.07% and 7.70% 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 1998, 1997 and 1996 was $10.21, $19.75 and $14.00, respectively,
of which $1.71, $1.68 and $6.30 was investment income and $8.50, $18.07 and
$7.70 was a return of capital, respectively.
As of December 31, 1998, except as noted above, there were no known trends
or demands, commitments, events or uncertainties which are likely to have a
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.
Year 2000 Issue
The Year 2000 issue arose because many existing computer programs have been
written using two digits rather than four to define the applicable year. As a
result, programs could interpret dates ending in "00" as the year 1900 rather
than the year 2000. In certain cases, such errors could result in system
failures or miscalculations that disrupt the operation of the affected
businesses.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
The Partnership uses computer information systems provided by the General
Partner and has no computer information systems of its own. The software related
to the General Partner's primary computer information systems are provided by
third party vendors. The General Partner has formally communicated with these
vendors and has received assurance that their programs are Year 2000 compliant.
In addition, the General Partner has gathered information about the Year 2000
readiness of significant vendors and third-party servicers and continues to
monitor developments in this area. All of the General Partner's peripheral
computer technologies, such as its network operating system and third party
software applications, including payroll and electronic banking have been
evaluated and have been found to be Year 2000 compliant. The ultimate impact of
the Year 2000 issue on the Partnership will depend to a great extent on the
manner in which the issue is addressed by the Partnership's lessees. Each of the
Partnership's lessees will have a material self interest in resolving any Year
2000 issue, however, non-compliance on the part of a lessee could result in lost
or delayed revenues to the Partnership. The effect of this risk to the
Partnership is not determinable.
The General Partner is responsible for costs relating to the assessment and
development of its Year 2000 compliance remediation plan, as well as the testing
of the hardware and software owned or licensed for its personal computers. The
General Partner's costs incurred to date and expected future costs are not
material.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
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, 1998 and 1997 15-16
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996 17
Consolidated Statements of Changes in Partners' Equity for the
Years Ended December 31, 1998, 1997 and 1996 18
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 19-21
Notes to Consolidated Financial Statements 22-31
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1998
(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,
1998 and 1997, 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, 1998. 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.
As discussed in Note 1, 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 equipment sales to the partners and begin the orderly termination of its
operations and affairs.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Cash Flow
Partners, L.P., Series D as of December 31, 1998 and 1997, and the results of
its operations and its cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ KPMG LLC
---------------------------------------
KPMG LLC
March 12, 1999
New York, New York
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
1998 1997
---- ----
Assets
Cash ....................................................... $ 645,739 $ 1,154,378
------------ ------------
Investment in finance leases
Minimum rents receivable ................................ 3,257,332 8,243,812
Estimated unguaranteed residual values .................. 4,784,614 5,916,727
Initial direct costs .................................... 42,566 131,110
Unearned income ......................................... (621,676) (1,442,524)
Allowance for doubtful accounts ......................... (246,450) (568,285)
------------ ------------
7,216,386 12,280,840
Investment in operating lease equipment, at cost ........... 6,819,250 6,819,250
Accumulated depreciation ................................... (1,020,538) (356,417)
------------ ------------
5,798,712 6,462,833
Investment in financings
Receivables due in installments ......................... 3,079,170 3,397,740
Initial direct costs .................................... 1,418 12,344
Unearned income ......................................... (1,045,785) (1,137,678)
Allowance for doubtful accounts ......................... (140,766) (456,206)
------------ ------------
1,894,037 1,816,200
Equity investment in joint venture ......................... 979,346 1,155,072
------------ ------------
Accounts receivable from General Partner and affiliates, net 20,122 --
------------ ------------
Other assets ............................................... 65,518 130,155
------------ ------------
Total assets ............................................... $ 16,619,860 $ 22,999,478
============ ============
(continued on next page)
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Balance Sheets (Continued)
December 31,
1998 1997
---- ----
Liabilities and Partners' Equity
Note payable .......................................... $ 870,801 $ 2,027,139
Note payable - non-recourse - secured financing ....... 499,037 1,195,311
Notes payable - non-recourse .......................... 6,366,111 8,713,846
Accounts payable to General Partner and affiliates, net -- 164,151
Security deposits, deferred credits and other payables 3,222,527 1,810,522
------------ ------------
10,958,476 13,910,969
Commitments and Contingencies
Partners' equity (deficiency)
General Partner .................................... (288,004) (253,733)
Limited partners (399,118 units outstanding,
$100 per unit original issue price ............... 5,949,388 9,342,242
------------ ------------
Total partners' equity ................................ 5,661,384 9,088,509
------------ ------------
Total liabilities and partners' equity ................ $ 16,619,860 $ 22,999,478
============ ============
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,
1998 1997 1996
---- ---- ----
Revenues
Rental income ................................ $ 1,329,387 $ 798,000 $ --
Finance income ............................... 1,069,246 1,785,803 3,009,835
Income from equity investment in joint venture 187,165 359,187 --
Net gain on sales or remarketing of
equipment .................................. 183,820 452,706 2,391,683
Interest income and other .................... 27,195 141,715 240,111
Income from leveraged leases, net ............ -- -- 369,511
----------- ----------- -----------
Total revenues ............................... 2,796,813 3,537,411 6,011,140
----------- ----------- -----------
Expenses
Interest ..................................... 782,539 1,121,197 1,651,940
Depreciation ................................. 664,121 356,417 --
Management fees - General Partner ............ 397,171 548,400 685,103
General and administrative ................... 268,346 199,751 217,378
Administrative expense reimbursements
- General Partner .......................... 218,158 271,829 301,945
Amortization of initial direct costs ......... 178,117 363,087 614,441
Reversal of allowance for doubtful accounts .. (400,000) -- --
----------- ----------- -----------
Total expenses ............................... 2,108,452 2,860,681 3,470,807
----------- ----------- -----------
Net income ...................................... $ 688,361 $ 676,730 $ 2,540,333
=========== =========== ===========
Net income allocable to:
Limited partners ............................. 681,477 669,963 $ 2,514,930
General Partner .............................. 6,884 6,767 25,403
----------- ----------- -----------
$ 688,361 $ 676,730 $ 2,540,333
=========== =========== ===========
Weighted average number of limited
partnership units outstanding ................ 399,118 399,138 399,179
=========== =========== ===========
Net income per weighted average
limited partnership unit ..................... $ 1.71 $ 1.68 $ 6.30
=========== =========== ===========
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, 1998, 1997 and 1996
Limited Partner Distributions
-----------------------------
Return of Investment Limited General
Capital Income Partners Partner Total
--------- ---------- -------- ------- -----
(Per weighted average unit)
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
Cash distributions
to partners $ 8.50 $1.71 (4,074,331) (41,155) (4,115,486)
Net income 681,477 6,884 688,361
----------- --------- -----------
Balance at
December 31, 1998 $ 5,949,388 $(288,004) $ 5,661,384
=========== ========= ===========
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,
1998 1997 1996
---- ---- ----
Cash flows provided by operating activities:
Net income ............................................ $ 688,361 $ 676,730 $ 2,540,333
------------ ------------ ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Finance income portion of receivables paid
directly to lenders by lessees .................... (362,177) (843,479) (1,554,592)
Rental income paid directly to lenders by lessees ... (330,880) (193,012) --
Amortization of initial direct costs ................ 178,117 363,087 614,441
Net gain on sales or remarketing of equipment ....... (183,820) (452,706) (2,391,683)
Interest expense on non-recourse financing
paid directly by lessees .......................... 581,922 811,948 1,200,696
Interest expense accrued on non-recourse
securitized debt .................................. 1,455 4,202 11,871
Income from leveraged leases, net ................... -- -- (369,511)
Depreciation ........................................ 664,121 356,417 --
Income from equity investment in joint venture ...... (187,165) (359,187) --
Changes in operating assets and liabilities:
Collection of principal - non-financed receivables 1,467,879 1,791,373 1,726,064
Collection of principal - leveraged leases ........ -- -- 207,683
Distributions from joint venture .................. 412,671 4,134,882 --
Allowance for doubtful accounts ................... (637,275) 120,722 100,170
Investment in joint venture ....................... (49,780) (125,000) --
Accounts payable to General Partner and
affiliates, net ................................. (164,151) 145,745 (97,006)
Security deposits, deferred credits
and other payables .............................. 1,147,809 1,411,293 52,715
Other, net ........................................ 88,173 441,688 (419,557)
------------ ------------ ------------
Total adjustments ............................... 2,626,899 7,607,973 (918,709)
------------ ------------ ------------
Net cash provided by operating activities ......... 3,315,260 8,284,703 1,621,624
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sales of equipment ...................... 1,394,199 9,741,651 15,681,303
Equipment and receivables purchased ................... -- (7,030,431) (15,977,478)
Initial direct costs .................................. -- -- (404,957)
------------ ------------ ------------
Net cash provided by (used in) investing activities 1,394,199 2,711,220 (701,132)
------------ ------------ ------------
(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,
1998 1997 1996
---- ---- ----
Cash flows from financing activities:
Cash distributions to partners ............... (4,115,486) (7,962,515) (5,644,958)
Proceeds from notes payable - non-recourse ... 750,000 -- --
Proceeds from note payable ................... -- 2,700,000 --
Principal payments on note payable ........... (1,156,338) (672,861) --
Principal payments on non-recourse - secured
financing .................................. (696,274) (933,227) (1,998,938)
Proceeds from revolving line of credit ....... -- -- 5,250,000
Principal payments on revolving line of credit -- (3,386,421) (1,863,579)
Redemption of limited partnership units ...... -- (366) (1,071)
------------ ------------ ------------
Net cash used in financing activities .... (5,218,098) (10,255,390) (4,258,546)
------------ ------------ ------------
Net (decrease) increase in cash .............. (508,639) 740,533 (3,338,054)
Cash at beginning of year ....................... 1,154,378 413,845 3,751,899
------------ ------------ ------------
Cash at end of year ............................. $ 645,739 $ 1,154,378 $ 413,845
============ ============ ============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
Supplemental Disclosures of Cash Flow Information
Interest expense of $782,539, $1,121,197 and $1,651,940 for the years ended
December 31, 1998, 1997 and 1996 consisted of: interest expense on non-recourse
financing accrued or paid directly to lenders by lessees of $581,922, $811,948
and $1,200,696, respectively, and other interest of $200,617, $309,249 and
$451,244, respectively.
During the years ended December 31, 1998, 1997 and 1996, non-cash activities
included the following:
1998 1997 1996
---- ---- ----
Principal and interest on finance receivables
paid directly to lender by lessees ............ $ 2,971,276 $ 6,025,801 $ 8,606,303
Rental income assigned operating lease receivable .. 330,880 193,012 --
Principal and interest on non-recourse financing
paid directly by lessees ...................... (3,302,156) (6,218,813) (8,606,303)
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
Fair value of equipment and receivables
purchased for debt ............................ -- (3,200,000) (5,429,406)
Decrease in investment in finance leases due
to termination of leases ...................... -- 1,035,175 3,869,025
Decrease in notes payable - non-recourse due to
termination of leases ......................... -- (1,035,175) (3,841,797)
Decrease in security deposits and deferred credits . -- (27,228)
----------- ----------- -----------
$ -- $ -- $ --
=========== =========== ===========
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1998
1. Organization
ICON Cash Flow Partners, L.P., Series D (the "Partnership") was formed on
February 21, 1991 as a Delaware limited partnership with an initial
capitalization of $2,000. It was formed to acquire various types of equipment,
to lease such equipment to third parties and, to a lesser degree, to enter into
secured financing transactions. The Partnership's offering period commenced on
August 23, 1991 and by its final closing on June 5, 1992, 400,000 units had been
admitted into the Partnership with aggregate gross proceeds of $40,000,000. From
1994 through 1997, the Partnership redeemed 882 limited partnership units
leaving 399,118 limited partnership units outstanding at December 31, 1998.
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 equipment
sales to the partners and begin the orderly termination of its operations and
affairs. The Partnership has not, and will not invest in any additional finance
or lease transactions during the disposition period. During the disposition
period, the Partnership expects to recover, at a minimum, the carrying value of
its assets.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership's equipment leases and financing
transactions under a management agreement with the Partnership.
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 on its outstanding adjusted capital contribution
account. After such time, the distributions would be allocated 90% to the
limited partners and 10% to the General Partner.
2. Significant Accounting Policies
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 the General
Partner's management to make estimates and assumptions that affect the reported
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
amounts of assets and liabilities at the date of the financial statements, and
revenues and expenses during the reporting period. Actual results could differ
from those estimates. In addition, management is required to disclose contingent
assets and liabilities.
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. The Partnership
accounts for its interest in a less than 50% owned joint venture under the
equity method of accounting. In such cases, the Partnership's original
investments are recorded at cost and adjusted for its share of earnings, losses
and distributions thereafter.
Leases - The Partnership accounts for owned equipment leased to third
parties as finance leases or operating leases, as appropriate. For finance
leases, the Partnership records, at the inception of the lease, the total
minimum lease payments receivable, the estimated unguaranteed residual values,
the initial direct costs related to the leases and the related unearned income.
Unearned income represents the difference between the sum of the minimum lease
payments receivable plus the estimated unguaranteed residual minus the cost of
the leased equipment. Unearned income is recognized as finance income over the
terms of the related leases using the interest method. For operating leases,
equipment is recorded at cost and is depreciated on the straight-line method
over the lease 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 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. Separate disclosure of fair value information as of December 31,
1998 and 1997 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 payables 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.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
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.
In 1998, the Partnership reversed $400,000 of amounts previously included in the
allowance for doubtful accounts.
Impairment of Estimated Residual Values - In March 1995, the Financial
Accounting Standards Board ("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.
Income Taxes - No provision for income taxes has been made as the liability
for such taxes is that of each of the partners rather than the Partnership.
New Accounting Pronouncements - In June 1998 the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires that an entity recognize all derivative instruments as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
SFAS No. 133 is effective for all quarters of fiscal years beginning after June
15, 1999. The adoption of SFAS No. 133 is not expected to have a material effect
on the Partnership's net income, partners' equity or total assets.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
3. Investment in Joint Venture
The Partnership and affiliates formed a joint venture for the purpose of
acquiring and managing various assets.
ICON Receivables 1997-A L.L.C.
In March 1997 the Partnership, ICON Cash Flow Partners L.P. Six ("L.P.
Six"), and ICON Cash Flow Partners L.P. Seven ("L.P. Seven"), contributed and
assigned equipment lease and finance receivables and residuals to ICON
Receivables 1997-A L.L.C. ("1997-A"), a special purpose entity created for the
purpose of originating leases, managing existing contributed assets and
securitizing its portfolio. In September 1997 ICON Cash Flow Partners, L.P.,
Series E ("Series E"), L.P. Six and L.P. Seven contributed and assigned
additional equipment lease and finance receivables and residuals to 1997-A. The
Partnership, Series E, L.P. Six and L.P. Seven 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. The Partnership's contributions amounted to $4,805,767 in
assigned leases and $125,000 of cash in 1997 and $49,780 of cash in 1998. In
September 1997, 1997-A securitized substantially all of its equipment leases and
finance receivables and residuals. 1997-A became the beneficial owner of a
trust. The Partnership's original investment was recorded at cost and is
adjusted by its share of earnings, losses and distributions thereafter.
Information as to the financial position and results of operations of
1997-A as of and for the year ended December 31, 1998 and 1997 is summarized
below:
December 31, 1998 December 31, 1997
Assets $31,845,710 $50,911,005
=========== ===========
Liabilities $27,065,004 $45,143,569
=========== ===========
Equity $ 4,780,706 $ 5,767,436
=========== ===========
Partnership's share of equity $ 979,346 $ 1,155,072
=========== ===========
Year Ended Year Ended
December 31, 1998 December 31, 1997
Net income $ 1,050,957 $ 1,298,430
=========== ===========
Partnership's share of net income $ 187,165 $ 359,187
=========== ===========
Distributions to partners $ 2,367,147 $33,965,442
=========== ===========
Partnership's share of distributions $ 412,671 $ 4,134,882
=========== ===========
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, 1998 are as follows:
Finance
Year Leases Financings Total
---- ------- ---------- -----
1999 $1,937,646 $ 347,260 $2,284,906
2000 787,432 215,851 1,003,283
2001 319,365 170,283 489,648
2002 63,250 90,687 153,937
2003 149,639 84,000 233,639
Thereafter -- 2,171,089 2,171,089
---------- ---------- ----------
$3,257,332 $3,079,170 $6,336,502
========== ========== ==========
5. Investment in Operating Lease
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. In
October 1998 the Partnership borrowed an additional $750,000, bringing the total
non-recourse debt relating to this transaction to $3,950,000 (see Note 7). The
note bears interest at 10.34%. The operating lease expired in January 1999, at
which time the Partnership extended the lease with U.S Airways, Inc. The lease
extension is for an indefinite term whereby either lessee or lessor can
terminate with 90 days prior notice.
The investment in operating leases at December 31, 1998, 1997 and 1996
consisted of the following:
1998 1997 1996
---- ---- ----
Equipment cost, beginning of year ......... $ 6,819,250 $ -- $ 14,095
Equipment purchases ....................... -- 6,819,250 --
Equipment sold ............................ -- -- (14,095)
----------- ----------- -----------
Equipment cost, end of year ............... 6,819,250 6,819,250 --
----------- ----------- -----------
Accumulated depreciation, beginning of year (356,417) -- (12,305)
Depreciation .............................. (664,121) (356,417) --
Equipment sold ............................ -- -- 12,305
----------- ----------- -----------
Accumulated depreciation, end of year ..... (1,020,538) (356,417) --
----------- ----------- -----------
Investment in operating leases, end of year $ 5,798,712 $ 6,462,833 $ --
=========== =========== ===========
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 lease consisted of the following:
Finance Operating
Leases Financings Leases Total
------- ---------- --------- -----
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 ................. 9,284 278,914 -- 231,760
----------- ----------- ----------- -----------
Balance at December 31, 1997 ....... 568,285 456,206 -- 1,024,491
Accounts written-off .......... (209,007) (47,034) -- (256,041)
Recovery on accounts previously
written-off ................. 18,766 -- -- 18,766
Reversal of allowance for
doubtful accounts ........... (131,594) (268,406) -- (400,000)
----------- ----------- ----------- -----------
Balance at December 31, 1998 ....... $ 246,450 $ 140,766 $ -- $ 387,216
=========== =========== =========== ===========
7. Notes Payable
In May 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
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, 1998. The Partnership had $870,801 outstanding
relating to this note payable at December 31, 1998.
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 (described herein as notes payable - non-recourse - secured financing)
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 $499,037 outstanding
under the note at December 31, 1998.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
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 the Partnership assumed $3,200,000 in non-recourse debt (described herein as
notes payable - non-recourse). In October 1998 the Partnership borrowed an
additional $750,000, bringing the total non-recourse debt relating to this
transaction to $3,950,000. The note bears interest at 10.34%. The operating
lease expired in January 1999, at which time the Partnership extended the lease
with U.S Airways, Inc. The extension is for an indefinite term whereby either
lessee or lessor can terminate with 90 days prior notice.
Included in notes payable non-recourse is $168,780 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 notes are payable only to the extent certain residuals are realized.
These notes bear interest at rates ranging from 5.2% to 12% and mature as
follows:
Note Payable
Non-Recourse Notes Payable
Note Payable Secured Financing Non-Recourse Total
------------ ----------------- ------------ -----
1999 $ 592,631 $ 434,313 $5,356,213 $6,383,157
2000 205,076 64,724 663,439 933,239
2001 73,094 -- 216,461 289,555
2002 -- -- 129,998 129,998
---------- ---------- ---------- ----------
$ 870,801 $ 499,037 $6,366,111 $7,735,949
========== ========== ========== ==========
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, 1998, 1997 and 1996
are as follows:
Charged to
Capitalized Operations
Acquisition fees .................... $404,957 $ --
Management fees ..................... -- 685,103
Administrative expense reimbursements -- 301,945
-------- --------
Year ended December 31, 1996 ........ $404,957 $987,048
======== ========
Management fees ..................... $ -- $548,400
Administrative expense reimbursements -- 271,829
-------- --------
Year ended December 31, 1997 ........ $ -- $820,229
======== ========
Management fees ..................... $ -- $397,171
Administrative expense reimbursements -- 218,158
-------- --------
Year ended December 31, 1998 ........ $ -- $615,329
======== ========
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
In August 1996 the Partnership acquired a financing transaction for
$8,756,291. The financing represented the free cash interest and first priority
rights to $4,000,000 of future residual proceeds relating to a leveraged lease
owned by an affiliate, L.P. Seven. L.P. Seven acquired, subject to the leveraged
lease, the residual interest in an aircraft on lease to Federal Express Corp.
The aircraft is a 1986 McDonnell Douglas DC-10-30F, and the lease expires in
July 2004. In January 1997 the Partnership refinanced all of its free cash
interest and $2,000,000 of its residual position to a third party. The
Partnership's remaining investment consists of the first priority rights to
$2,000,000 of future residual proceeds relating to the leveraged lease.
9. Security Deposits, Deferred Credits and Other Payables
Security deposits, deferred credits and other payables at December 31,
1998 and December 31, 1997 include $2,097,485 and $632,213, respectively, of
proceeds received on residuals which will be applied upon final remarketing of
the related equipment.
10. Subsidiary
In December 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, 1998,
there was no federal tax liability for ICON D Corp.
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 third
parties based on specified formulas. For the years ended December 31, 1998, 1997
and 1996, the Partnership paid $116,400, $366,466 and $266,469, respectively, to
third parties as their share of the proceeds.
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:
1998 1997 1996
---- ---- ----
Net income per financial statements $ 688,361 $ 676,730 $ 2,540,333
Differences due to:
Direct finance leases .......... 3,337,161 5,998,911 3,115,234
Depreciation and amortization .. (3,431,801) (4,339,289) (129,832)
Provision for losses ........... 162,724 138,489 (156,596)
Loss on sale of equipment ...... (349,203) 631,921 (2,336,699)
Other .......................... (320,877) 376,745 64,867
----------- ----------- -----------
Partnership income for
federal income tax purposes .... $ 86,365 $ 3,483,507 $ 3,097,307
=========== =========== ===========
As of December 31, 1998, the partners' capital accounts included in the
financial statements totaled $5,661,384 compared to the partners' capital
accounts for federal income tax purposes of $19,482,007 (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, 1998
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 leases and full
financing transactions.
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.
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, re-leasing services in connection with equipment which is off-lease,
inspections of the equipment, liaison with and general supervision of lessees to
assure that the equipment is being properly operated and maintained, monitoring
performance by the lessees of their obligations under the leases and the payment
of operating expenses.
The officers and directors of the General Partner are as follows:
Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Paul B. Weiss President and Director
Thomas W. Martin Executive Vice President and Director
Kevin F. Redmond Chief Financial Officer
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
Beaufort J. B. Clarke, age 53, is Chairman, 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.
Paul B. Weiss, age 38, is President and Director 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). He was previously an investment banker and a commercial banker
Thomas W. Martin, age 45, is Executive Vice President of the General
Partner and Director or 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 14 years of senior management experience in
the leasing business.
Kevin F. Redmond, age 36, is Chief Financial Officer of both the General
Partner and the Dealer-Manager. Prior to his present position, Mr. Redmond was
Vice President and Controller of the General Partner, Manager of Accounting at
NationsCredit Corp. and Audit Manager with the accounting firm of Deloitte &
Touche.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
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, 1998, 1997 and 1996.
Type of
Entity Capacity Compensation 1998 1997 1996
------ -------- ------------ ---- ---- ----
ICON Capital Corp. Manager Acquisition fees $ - $ - $ 404,957
ICON Capital Corp. General Partner Management fees 397,171 548,400 685,103
ICON Capital Corp. General Partner Administrative expense
reimbursements 218,158 271,829 301,945
-------- -------- ----------
$615,329 $820,229 $1,392,005
======== ======== ==========
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 15, 1999, 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 Percent
of Class Amount Beneficially 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
See Item 11 for a discussion of the Partnership's related party
transactions. See Note 3 for a discussion of the Partnership's related party
investment in joint venture.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
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:
(a) 1. Financial Statements - See accompanying index to financial statements,
Item 8.
2. Exhibits - The following exhibits are incorporated herein by references:
(i) Form of Dealer-Manager Agreement (Incorporated by reference to
Exhibit 1.1 to Form S-1 Registration Statement No. 33-40044 filed
with the Securities and Exchange Commission on April 18, 1991)
(ii) Form of Selling Dealer Agreement (Incorporated by reference to
Exhibit 1.2 to Form S-1 Registration Statement No. 33-40044 filed
with the Securities and Exchange Commission on April 18, 1991)
(iii)Amended and Restated Agreement of Limited Partnership
(Incorporated herein by reference to Exhibit A to Amendment No. 4
to Form S-1 Registration Statement No. 33-40044 filed with the
Securities and Exchange Commission on August 14, 1991)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter ended
December 31, 1998.
ICON Cash Flow Partners, L.P., Series D
(A Delaware Limited Partnership)
December 31, 1998
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 30, 1999 /s/ Beaufort J.B. Clarke
------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole General Partner of the Registrant
Date: March 30, 1999 /s/ Beaufort J.B. Clarke
---------------------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Date: March 30, 1999 /s/ Paul B. Weiss
---------------------------------------------------
Paul B. Weiss
President and Director
Date: March 30, 1999 /s/ Kevin F. Redmond
---------------------------------------------------
Kevin F. Redmond
Chief Financial Officer
(Principal Financial and Account 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.