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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, 1996
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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 33-44413
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ICON Cash Flow Partners, L.P., Series E
(Exact name of registrant as specified in its charter)
Delaware 13-3635208
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 Mamaroneck Avenue, Harrison, New York 10528-1632
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 698-0600
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class Name of each exchange on
which registered
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests, filed, pending effectiveness
- --------------------------------------------------------------------------------
(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Page 1
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
TABLE OF CONTENTS
Item Page
PART I
1. Business 3-4
2. Properties 5
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 7-10
8. Consolidated Financial Statements and Supplementary Data 11-29
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 30
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 30-31
11. Executive Compensation 31
12. Security Ownership of Certain Beneficial Owners
and Management 31-32
13. Certain Relationships and Related Transactions 32
PART IV
14. Exhibits, Reports and Amendments 33
SIGNATURES 34
Page 2
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
PART I
Item 1. Business
General Development of Business
ICON Cash Flow Partners, L.P., Series E (the "Partnership") was formed in
November 1991 as a Delaware limited partnership. The Partnership commenced
business operations on its initial closing date, July 6, 1992, with the
admission of 13,574.17 limited partnership units. Between July 7, 1992 and
December 31, 1992, 236,021.97 additional units were admitted and from January 1,
1993 to July 31, 1993 (the final closing date), 360,815.37 additional units were
admitted bringing the final admission to 610,411.51 units totaling $61,041,151
in capital contributions. During 1994, the Partnership redeemed 728 limited
partnership units, during 1995, the Partnership redeemed 45 limited partnership
units and during 1996, the Partnership redeemed 193 limited partnership units
leaving 609,446 units outstanding at December 31, 1996. The sole general partner
is ICON Capital Corp. (the "General Partner").
Narrative Description of Business
The Partnership is an equipment leasing income fund. The principal
investment objective of the Partnership is to obtain the maximum economic return
from its investments for the benefit of its limited partners. To achieve this
objective, the Partnership has and intends to continue to: (1) acquire a
diversified portfolio of short-term, high-yield investments; (2) make monthly
cash distributions to its limited partners from cash from operations, commencing
with each limited partner's admission to the Partnership, continuing through the
reinvestment period, which period will end no later than July 1998; (3)
re-invest substantially all undistributed cash from operations and cash from
sales in additional equipment and financing transactions during the reinvestment
period; and (4) sell the Partnership's investments and distribute the cash from
sales of such investments to its limited partners within five and one-half to
seven and one-half years of the final closing date. In addition to acquiring
equipment and entering into leases, the Partnership also (1) acquires equipment
already subject to leases originated by affiliates and non-affiliated lessors
and (2) enters into financing transactions, which are (i) secured by the
equipment financed and lease revenues therefrom (if any) and additional
collateral as deemed necessary by the credit review committee of the General
Partner and (ii) evidenced by the irrevocable obligation of the lessees.
The equipment leasing industry is highly competitive. In initiating its
leasing transactions, the Partnership competes with leasing companies,
manufacturers that lease their products directly, equipment brokers and dealers
and financial institutions, including commercial banks and insurance companies.
Many competitors are larger than the Partnership and have access to more
favorable financing. Competitive factors in the equipment leasing business
primarily involve pricing and other financial arrangements, equipment
remarketing capabilities and servicing of lessees.
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
Page 3
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
Lease and Financing Transactions
For the years ended December 31, 1996 and 1995, the Partnership purchased
and leased or financed $20,226,129 and $8,553,671 of equipment, respectively,
with a weighted average initial transaction term of 48 and 44 months,
respectively, invested $15,730, a 1% interest, in a joint venture with an
affiliate in 1996 and invested $30,550, a 1% interest, in a joint venture with
an affiliate in 1995. Included in the summary of equipment cost by category
below is 100% of the equipment cost acquired by a joint venture in which the
Partnership has a 99% interest. The Partnership accounts for this investment by
consolidating 100% of the assets and liabilities of the joint venture and
reflecting, as a liability, the related minority interest. At December 31, 1996,
the weighted average initial transaction term of the portfolio was 47 months. A
summary of the portfolio equipment cost by category held at December 31, 1996
and 1995 is as follows:
December 31, 1996 December 31, 1995
--------------------- ---------------------
Category Cost Percent Cost Percent
Aircraft $ 27,164,297 22.1% $ 20,771,628 15.3%
Manufacturing & production 25,574,377 20.9 23,673,471 17.4
Furniture and fixtures 13,803,478 11.3 13,076,284 9.6
Retail Systems 13,299,247 10.8 14,014,931 10.3
Restaurant equipment 11,013,259 9.0 11,613,145 8.6
Computer systems 10,271,332 8.4 12,777,207 9.4
Telecommunications 9,299,933 7.6 10,064,035 7.4
Material handling 4,457,982 3.6 15,240,811 11.2
Medical 3,089,824 2.5 4,029,062 3.0
Automotive 1,124,410 .9 5,883,381 4.3
Video Production 622,702 .5 407,392 .3
Printing 595,404 .5 681,853 .5
Audio 487,212 .4 - -
Office equipment 474,197 .4 689,801 .5
Construction 286,762 .2 293,397 .2
Transportation 223,867 .2 307,536 .2
Mining equipment 209,052 .2 765,303 .6
Copiers 159,043 .1 274,317 .2
Miscellaneous 447,000 .4 913,234 .8
------------- ----- ------------ -----
$ 122,655,010 100.0% $135,805,923 100.0%
============= ===== ============ =====
The Partnership has one lease which individually represents greater than 10%
of the total portfolio equipment cost at December 31, 1996 and 1995. The lease
is for one 1988 MD-83 passenger airplane with Alaska Air and the purchase price
of the equipment represents 16.9% and 15.3%, respectively, of the total
portfolio equipment cost at December 31, 1996 and 1995.
Page 4
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
Item 2. Properties
The Partnership neither owns nor leases office space or equipment for the
purpose of managing its day-to-day affairs. The General Partner has exclusive
control over all aspects of the business of the Partnership, including providing
any necessary office space. As such, the General Partner is compensated for
services related to the management of the Partnership's business.
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
PART II
Item 5. Market for the Registrant's Securities and Related Security
Holder Matters
The Partnership's limited partnership interests are not publicly traded nor
is there currently a market for the Partnership's limited partnership interests.
It is unlikely that any such market will develop.
Number of Equity Security Holders
Title of Class as of December 31,
1996 1995
---- ----
Limited partners 3,746 3,737
General Partner 1 1
Page 5
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
Item 6. Selected Consolidated Financial and Operating Data
Years Ended December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total revenues $ 9,849,216 $ 12,180,865 $ 11,574,281 $ 10,234,651 $ 490,347
============ ============= ============ ============= ==========
Net income $ 2,243,883 $ 1,585,802 $ 1,527,095 $ 1,499,573 $ 93,611
============ ============= ============ ============= ==========
Net income allocable
to limited partners $ 2,221,444 $ 1,569,944 $ 1,511,824 $ 1,484,577 $ 92,675
============ ============= ============ ============= ==========
Net income allocable
to the
General Partner $ 22,439 $ 15,858 $ 15,271 $ 14,996 $ 936
============ ============= ============ ============= ==========
Weighted average
limited partnership
units outstanding 609,503 609,650 610,080 489,966 112,552
============ ============= ============ ============= ==========
Net income per
weighted average limited
partnership unit $ 3.64 $ 2.58 $ 2.48 $ 3.03 $ .82
============ ============= ============ ============= ==========
Distributions to
limited partners $ 7,771,164 $ 7,773,082 $ 8,390,043 $ 5,796,799 $ 468,726
============ ============= ============ ============= ==========
Distributions to the
General Partner $ 78,496 $ 78,512 $ 78,582 $ 58,637 $ 4,735
============ ============= ============ ============= ==========
December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total assets $ 77,934,170 $ 95,508,881 $116,090,367 $106,951,054 $ 30,762,426
============= ============ ============ ============ =============
Partners' equity $ 29,192,964 $ 34,807,701 $ 41,075,863 $ 48,065,883 $ 21,211,216
============= ============ ============ ============ =============
Since the Partnership commenced operations on July 6, 1992, the initial
closing date, revenue and income for 1992 does not reflect a full year's
operations.
The above selected consolidated financial data should be read in conjunction
with the consolidated financial statements and related notes appearing elsewhere
in this report.
Page 6
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
Item 7. General Partner's Discussion and Analysis of Financial Condition
and Results of Operations
For the years ended December 31, 1996 and 1995, the Partnership leased or
financed equipment with initial costs of $20,226,129 and $8,553,671,
respectively, to 157 and 68 lessees or equipment users, respectively, invested
$15,955, a 1% interest, in a joint venture with an affiliate in 1996 and
invested $30,550, a 1% interest, in a joint venture with an affiliate in 1995.
The weighted average initial transaction term related to these transactions was
48 and 44 months, respectively. Included as equipment acquired for 1995 is 100%
of the equipment cost acquired by a joint venture in which the Partnership has a
99% interest. The Partnership accounts for this investment by consolidating 100%
of the assets and liabilities of the joint venture and reflecting, as a
liability, the related minority interest.
The Partnership's portfolio consisted of net investments in finance leases,
financings, operating leases, an equity investment in joint venture and
leveraged leases of 51%, 25%, 24%, less than 1% and 0% of total investment at
December 31, 1996, respectively and 60%, 7%, 23%, less than 1% and 10% of total
investment at December 31, 1995, respectively.
Results of Operations for the Years Ended December 31, 1996 and 1995
Revenues for the year ended December 31, 1996 were $9,849,216, representing
a decrease of $2,331,649 or 19% from 1995. The decrease in revenues was
primarily attributable to a decrease in income from leveraged leases, of
$2,404,244 or 92%, a decrease in finance income of $244,575 or 5% , and a
decrease in interest income and other of $15,474 or 4% from 1995. The decrease
in these revenues was partially offset by an increase in net gain on sales or
remarketing of equipment of $331,649 or 21% from 1995. Income from leveraged
leases decreased due to the sale of all of the underlying equipment relating to
the Partnership's investment in leveraged leases. The overall decrease in
finance income resulted from a decrease in the average size of the finance lease
portfolio from 1995 to 1996. Interest income and other decreased due to a
decrease in the average cash balance 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 $997,606.
Expenses for the year ended December 31, 1996 were $7,605,333, representing
a decrease of $2,989,730 or 28% from 1995. The decrease in expenses was
primarily attributable to a decrease in interest expense of $1,420,168 or 32%, a
decrease in amortization of initial direct costs of $642,545 or 42%, a decrease
in management fees of $476,233 or 30%, a decrease in administrative expense
reimbursements of $221,668 or 28%, a decrease in provision for bad debts of
$200,000 or 33% and a decrease in general and administrative expense of $30,069
or 5% from 1995. Interest expense decreased due to a decrease in the average
debt outstanding from 1995 to 1996. The decrease in amortization of initial
direct costs, management fees, administrative expense reimbursements and general
and administrative fees resulted from a decrease in the average size of the
portfolio from 1995 to 1996. Depreciation expense decreased due to the
Partnership's reduced investment in operating leases. As a result of an analysis
of delinquency, an assessment of overall risk and a review of historical loss
experience, it was determined that a lesser 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 $2,243,883 and
$1,585,802, respectively. The net income per weighted average limited
partnership unit was $3.64 and $2.58 for 1996 and 1995, respectively.
Page 7
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
Results of Operations for the Years Ended December 31, 1995 and 1994
Revenues for the year ended December 31, 1995 were $12,180,865, representing
an increase of $606,584 or 5% from 1994. The increase in revenues was primarily
attributable to an increase in rental income of $2,004,038, an increase in
income from leveraged leases of $1,770,363, an increase in net gain on sales or
remarketing of equipment of $982,365 and income from equity investment in joint
venture of $4,895 from 1994. The increase in these revenues was partially offset
by a decrease in finance income of $3,792,875 or 44% and a decrease in interest
income and other of $362,202 or 45%. Rental income increased due to the
Partnership's increased average investment in operating leases. The increase in
income from leveraged leases resulted from the accretion of the Partnership's
equity investment. Net gain on sales or remarketing of equipment increased due
to an increase in the number of leases maturing, and the underlying equipment
being sold or remarketed, for which the proceeds received were in excess of the
remaining carrying value of the equipment. The overall decrease in finance
income resulted from a decrease in the average size of the finance lease
portfolio from 1994 to 1995. Interest income and other decreased due to a
decrease in the average cash balance from 1994 to 1995.
Expenses for the year ended December 31, 1995 were $10,595,063, representing
an increase of $547,877 or 5% from 1994. The increase in expenses was primarily
attributable to an increase in depreciation expense of $772,234, an increase in
the provision for bad debts of $350,000, an increase in general and
administrative expense of $199,793 or 45%, an increase in management fees of
$49,060 or 3% and minority interest in joint venture of $5,438 from 1994. The
increase in these expenses was partially offset by a decrease in interest
expense of $491,248 or 10%, a decrease in amortization of initial direct costs
of $310,209 or 17% and a decrease in administrative expense reimbursements of
$27,191 or 3%. Depreciation expense increased due to an increase in the average
size of the operating lease portfolio from 1994 to 1995. As a result of an
analysis of delinquency, an assessment of overall risk and a review of
historical loss experience, it was determined that a greater provision for bad
debts was required for the year ended December 31, 1995. The increase in general
and administrative expense was due primarily to costs incurred relating to the
revolving credit facility. Interest expense decreased due to a decrease in the
average debt outstanding from 1994 to 1995. The decrease in amortization of
initial direct costs and administrative expense reimbursements resulted from a
decrease in the average size of the portfolio from 1994 to 1995. Management fees
remained relatively constant from 1994 to 1995.
Net income for the years ended December 31, 1995 and 1994 was $1,585,802 and
$1,527,059, respectively. The net income per weighted average limited
partnership unit was $2.58 and $2.48 for 1995 and 1994, respectively.
Liquidity and Capital Resources
The Partnership's primary sources of funds in 1996, 1995 and 1994 were net
cash provided by operations of $13,210,339, $8,768,414 and $17,597,929,
respectively, proceeds from sales of equipment of $10,358,637, $7,419,261 and
$6,492,842, respectively, and proceeds from a revolving credit facility of
$13,780,000 and $7,400,000 in 1996 and 1995, respectively. These funds were used
to purchase equipment, to fund cash distributions and to make payments on
borrowings. The Partnership intends to continue to purchase additional equipment
and to fund cash distributions utilizing cash provided by operations, proceeds
from expected sales of equipment and additional borrowings from its revolving
credit facility.
Page 8
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
The Partnership had notes payable at December 31, 1996 and 1995 of
$47,168,921 and $56,142,025, respectively, as a result of borrowings secured by
equipment. These amounts consisted of $29,300,493 and $39,948,198 in
non-recourse notes which are being paid directly to the lenders by the lessees,
respectively, $4,868,428 and $4,467,663 in non-recourse residual value notes,
respectively, which will be paid to the extent proceeds are available in excess
of the Partnership's estimated unguaranteed residuals and $4,326,164 in
non-recourse - securitization notes in 1995.
The Partnership entered into a revolving credit agreement (the "Facility")
in December 1994, which was amended in 1995 and 1996. The maximum amount
available under the Facility is $25,000,000, and at December 31, 1996, the
Partnership had $16,541,834 available for borrowing under the Facility, of which
$13,000,000 was outstanding.
On December 13, 1996, the Partnership exercised its early termination option
by paying $1,886,874 to retire the balance of the notes payable, non-recourse,
securitization. The Partnership was able to fund this from lower rate borrowing
capability it achieves from its revolving credit facility.
On December 31, 1996, the Partnership and an affiliate, ICON Cash Flow
Partners, L.P. Seven ("L.P. Seven"), formed ICON Cash Flow Partners L.L.C. III
("ICON Cash Flow LLC III"), for the purpose of acquiring and managing an
aircraft currently on lease to Continental Airlines, Inc. The aircraft is a 1976
McDonnell Douglas DC-10-30. The Partnership and L.P. Seven contributed $15,955
(1%) and $1,579,514 (99%) of the cash required for such acquisition,
respectively, to ICON Cash Flow LLC III. ICON Cash Flow LLC III acquired the
aircraft, assuming $9,309,759 in non-recourse debt and utilizing contributions
received from the Partnership and L.P. Seven. The purchase price of the
transaction totaled $10,905,228. The lease is a leveraged lease and the lease
term expires in April 2003. Profits, losses, excess cash and disposition
proceeds are allocated 1% to the Partnership and 99% to L.P. Seven. The
Partnership's investment in ICON Cash Flow LLC III has been reflected as "Equity
investment in joint venture."
Included in the Partnership's acquisitions for the year ended December 31,
1996 is a financing transaction in the amount of $5,690,161. This represents the
financing of excess cash, or free cash, which results from lease rental payments
being greater than senior debt payments on a leveraged lease. The financing is
secured by the underlying equipment, a 1983 Airbus A300B4-203 aircraft,
currently on lease to A.I. Leasing II, Inc. Subsequent to this financing, ICON
Cash Flow Partners L.P. Six ("L.P. Six"), an affiliate of the Partnership,
acquired the residual, or equity, interest in the leveraged lease, and assumed
the related outstanding non-recourse senior and junior debt. On January 29,
1997, L.P. Six re-financed the free cash portion of the leveraged lease with a
third party. As a result of this re-financing, the Partnership received proceeds
of $5,792,043 and terminated its interest in the leveraged lease.
On January 28, 1997, the Partnership lent $7,780,328 to ICON Asset
Acquisition, a joint venture limited liability corporation formed by ICON Cash
Flow Partners L.P., Series B (8.93% interest), ICON Cash Flow Partners L.P.,
Series C (13.39% interest) and ICON Cash Flow Partners L.P. Six (77.68%
interest), all affiliates of the Partnership. This is a short term note, which
bears interest at the rate of 8%, which is the Partnership's approximate cost of
funds, and is expected to be paid in full by June 30, 1997.
Page 9
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
Cash distributions to the limited partners for the years ended December 31,
1996, 1995 and 1994, which were paid monthly, totaled $7,771,164, $7,773,082 and
$8,390,043, respectively of which $2,221,444, $1,569,944 and $1,511,824 was
investment income and $5,549,720, $6,203,138 and $6,878,219 was a return of
capital, respectively. The monthly annualized cash distribution rate to limited
partners for the years ended December 31, 1996, 1995 and 1994 was 12.75%, 12.75%
and 13.75%, of which 3.64%, 2.58% and 2.48% was investment income and 9.11%,
10.17% and 11.27% was a return of capital, respectively, calculated as a
percentage of each partners' initial capital contribution. The distribution rate
for 1994 was affected by the Partnership paying a one-time additional
distribution equal to 1% of each limited partners' capital contribution on April
1, 1994. The limited partner distribution per weighted average unit outstanding
for the years ended December 31, 1996, 1995 and 1994 was $12.75, $12.75 and
$13.75, of which $3.64, $2.58 and $2.48 was investment income and $9.11, $10.17
and $11.27 was a return of capital, respectively.
As of December 31, 1996, except as noted above, there were no known trends
or demands, commitments, events or uncertainties which are likely to have any
material effect on liquidity. As cash is realized from operations, sales of
equipment, and borrowings, the Partnership will continue to invest in equipment
leases and financings where it deems it to be prudent while retaining sufficient
cash to meet its reserve requirements and recurring obligations as they become
due.
Accounting Developments
In June 1996 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125
establishes, among other things, criteria for determining whether a transfer of
financial assets is a sale or a secured borrowing effective for all transfers
occurring after December 31, 1996. The adoption of SFAS No. 125 is not expected
to have a material impact on the Partnership's net income, partners' equity or
total assets.
Page 10
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page Number
Independent Auditors' Report 13
Consolidated Balance Sheets as of December 31, 1996 and 1995 14
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 15
Consolidated Statements of Changes in Partners' Equity for the
Years Ended December 31, 1996, 1995 and 1994 16
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 17-18
Notes to Consolidated Financial Statements 19-29
Page 11
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1996
(With Independent Auditors' Report Thereon)
Page 12
INDEPENDENT AUDITORS' REPORT
The Partners
ICON Cash Flow Partners, L.P., Series E:
We have audited the accompanying consolidated balance sheets of ICON Cash Flow
Partners, L.P., Series E (a Delaware limited partnership) as of December 31,
1996 and 1995, and the related consolidated statements of operations, changes in
partners' equity and cash flows for each of the years in the three-year period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Cash Flow
Partners, L.P., Series E as of December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
March 7, 1997
New York, New York
Page 13
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
1996 1995
---- ----
Assets
Cash $ 1,203,626 $ 5,826,646
------------ ------------
Investment in finance leases
Minimum rents receivable 31,294,210 44,696,273
Estimated unguaranteed residual values 11,769,952 12,388,734
Initial direct costs 498,927 1,046,622
Unearned income (4,515,040) (6,988,215)
Allowance for doubtful accounts (844,709) (783,475)
------------ ------------
38,203,340 50,359,939
Investment in financings
Receivables due in installments 23,057,131 10,027,184
Initial direct costs 136,330 54,798
Unearned income (3,699,855) (1,496,344)
Allowance for doubtful accounts (263,231) (354,969)
------------ ------------
19,230,375 8,230,669
Investment in operating leases
Equipment, at cost 20,771,628 20,771,628
Initial direct costs 81,600 408,000
Accumulated depreciation (2,388,850) (1,327,139)
------------ ------------
18,464,378 19,852,489
Net investment in leveraged leases - 5,971,629
------------- ------------
Other assets 775,161 5,232,064
------------ ------------
Equity investment in joint venture 57,290 35,445
------------ ------------
Total assets $ 77,934,170 $ 95,508,881
============ ============
Liabilities and Partners' Equity
Notes payable - non-recourse $ 34,168,921 $ 44,415,861
Note payable - revolving credit facility 13,000,000 7,400,000
Security deposits and deferred credits 887,257 1,071,729
Accounts payable - other 461,109 1,559,564
Accounts payable to General Partner and
affiliates, net 106,642 -
Accounts payable - equipment 71,553 1,886,138
Minority interest in consolidated joint venture 45,724 41,724
Note payable - non-recourse - securitization - 4,326,164
------------- ------------
48,741,206 60,701,180
Commitments and contingencies
Partners' equity (deficiency)
General Partner (228,462) (172,405)
Limited partners (609,446 and 609,639
units outstanding, $100 per unit original
issue price in 1996 and 1995, respectively) 29,421,426 34,980,106
------------ ------------
Total partners' equity 29,192,964 34,807,701
------------ ------------
Total liabilities and partners' equity $ 77,934,170 $ 95,508,881
============ ============
See accompanying notes to consolidated financial statements.
Page 14
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31,
1996 1995 1994
---- ---- ----
Revenues
Finance income $4,577,306 $ 4,821,881 $ 8,614,756
Rental income 2,708,772 2,708,772 704,734
Net gain on sales or remarketing
of equipment 1,942,041 1,610,392 628,027
Interest income and other 414,690 430,164 792,366
Income from leveraged leases, net 200,517 2,604,761 834,398
Income from equity investment in joint venture 5,890 4,895 -
-------- ----------- ----------
Total revenues 9,849,216 12,180,865 11,574,281
---------- ----------- -----------
Expenses
Interest 2,957,534 4,377,702 4,868,950
Management fees - General Partner 1,120,336 1,596,569 1,547,509
Depreciation 1,061,711 1,061,712 289,478
Amortization of initial direct costs 887,960 1,530,505 1,840,714
General and administrative 608,293 638,362 438,569
Administrative expense reimbursements
- General Partner 563,107 784,775 811,966
Provision for bad debts 400,000 600,000 250,000
Minority interest in joint venture 6,392 5,438 -
---------- ----------- ----------
Total expenses 7,605,333 10,595,063 10,047,186
---------- ----------- -----------
Net income $2,243,883 $ 1,585,802 $ 1,527,095
========== =========== ===========
Net income allocable to:
Limited partners $2,221,444 $ 1,569,944 $ 1,511,824
General Partner 22,439 15,858 15,271
---------- ----------- -----------
$2,243,883 $ 1,585,802 1,527,095
========== =========== ===========
Weighted average number of limited
partnership units outstanding 609,503 609,650 610,080
========== =========== ===========
Net income per weighted average
limited partnership unit $ 3.64 $ 2.58 $ 2.48
========== =========== ===========
See accompanying notes to consolidated financial statements.
Page 15
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 1996, 1995 and 1994
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
Balance at December 31, 1993 $ 48,112,323 $ (46,440) $ 48,065,883
Cash distributions to partners $11.27 $ 2.48 (8,390,043) (78,582) (8,468,625)
Limited partnership units redeemed
(728 units) (48,490) - (48,490)
Net income 1,511,824 15,271 1,527,095
------------- --------- ------------
Balance at December 31, 1994 41,185,614 (109,751) 41,075,863
Cash distributions to partners $10.17 $ 2.58 (7,773,082) (78,512) (7,851,594)
Limited partnership units redeemed
(45 units) (2,370) - (2,370)
Net income 1,569,944 15,858 1,585,802
------------- --------- ------------
Balance at December 31, 1995 34,980,106 (172,405) 34,807,701
Cash distribution to partners $ 9.11 $ 3.64 (7,771,164) (78,496) (7,849,660)
Limited partnership units redeemed
(193 units) (8,960) - (8,960)
Net income 2,221,444 22,439 2,243,883
------------- --------- ------------
Balance at December 31, 1996 $ 29,421,426 $(228,462) $ 29,192,964
============= ========= ============
See accompanying notes to consolidated financial statements.
Page 16
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31,
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $ 2,243,883 $ 1,585,802 $ 1,527,095
----------- ----------- ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,061,711 1,061,712 289,478
Allowance for doubtful accounts 487,729 664,668 (699,424)
Rental income-assigned operating lease receivables(2,708,772) (2,484,675) (27,542)
Finance income portion of receivables paid directly
to lenders by lessees (1,841,636) (3,019,036) (3,527,840)
Amortization of initial direct costs 887,960 1,530,505 1,840,714
Net gain on sales or remarketing of equipment (1,942,041) (1,610,392) (628,027)
Interest expense on non-recourse financing
paid directly by lessees 2,119,196 3,327,109 3,027,291
Interest expense accrued on recourse debt 369,823 185,702 161,953
Collection of principal - non-financed receivables 8,825,469 13,144,862 17,215,689
Collection of principal - leveraged leases - 158,817 310,360
Income from leveraged leases, net (200,517) (2,604,761) (834,398)
Income from equity investment in joint venture (5,890) (4,895) -
Change in operating assets and liabilities:
Other assets 4,456,903 (4,164,324) (581,703)
Security deposits and deferred credits (184,472) 356,467 (104,231)
Accounts payable - other (1,098,455) 756,589 (207,749)
Accounts payable to General Partner
and affiliates, net 106,642 (228,947) (351,414)
Minority interest in joint venture 4,000 3,045 -
Other, net (628,806) 110,166 187,677
----------- ----------- ------------
Total adjustments 10,966,456 7,182,612 16,070,834
----------- ----------- ------------
Net cash provided by operating activities 13,210,339 8,768,414 17,597,929
----------- ----------- ------------
Cash flows from investing activities:
Proceeds from sales of equipment 10,358,637 7,419,261 6,492,842
Equipment and receivables purchased (21,495,108) (9,562,564) (18,337,732)
Initial direct costs (80,408) (83,106) (2,286,564)
Investment in joint venture (15,955) (30,550) -
----------- ----------- -----------
Net cash used in investing activities (11,232,834) (2,256,959) (14,131,454)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from revolving credit facility 13,780,000 7,400,000 -
Principal payments on secured financing (12,521,905) (6,988,383) (11,595,747)
Cash distributions to partners (7,849,660) (7,851,594) (8,468,625)
Redemption of limited partnership units (8,960) (2,370) (48,490)
Principal payments on non-recourse debt
leveraged lease - - (776,182)
----------- ----------- ------------
Net cash used in financing activities (6,600,525) (7,442,347) (20,889,044)
----------- ----------- ------------
Net decrease in cash (4,623,020) (930,892) (17,422,569)
Cash at beginning of year 5,826,646 6,757,538 24,180,107
----------- ----------- ------------
Cash at end of year $ 1,203,626 $ 5,826,646 $ 6,757,538
=========== =========== ============
See accompanying notes to consolidated financial statements.
Page 17
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Statements of Cash Flows (Continued)
Supplemental Disclosures of Cash Flow Information
Interest expense of $2,957,534, $4,377,702 and $4,868,950 for the years ended
December 31, 1996, 1995 and 1994 consisted of: interest expense on non-recourse
financing accrued or paid directly to lenders by lessees of $2,307,348,
$3,512,811 and $3,189,244, respectively; non-recourse securitization interest of
$243,397, $738,442 and $1,641,031 respectively; recourse interest of $369,577,
$112,560 and $38,675 respectively, and other interest of $37,212, $13,889 and $0
respectively.
During the years ended December 31, 1996, 1995 and 1994, non-cash activities
included the following:
1996 1995 1994
---- ---- ----
Non-recourse notes payable assumed in
purchase price - finance and operating lea$ - $ 3,027,906 $ 41,488,619
Accounts payable - equipment - 1,141,768 7,249,042
Fair value of equipment and receivables
purchased for debt and payables - (4,169,674) (48,737,661)
Principal and interest on finance receivables
paid directly to lender by lessees 10,204,662 19,394,364 13,594,900
Rental Income
- assigned operating lease receivables 677,193 2,484,675 27,542
Principal and interest on non-recourse financing
paid directly by lessees (10,881,855) (21,879,039) (13,622,442)
Decrease in investment in finance leases due
to terminations 3,370,870 755,449 159,605
Decrease in notes payable-non-recourse due to
terminations (3,370,870) (755,449) (159,605)
------------ ------------ ------------
$ - $ - $ -
============ ============ ==========
Page 18
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1996
1. Organization
ICON Cash Flow Partners, L.P., Series E (the "Partnership") was formed on
November 7, 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
June 5, 1992 and by its final closing on July 31, 1993, 610,411.51 units had
been admitted into the Partnership with aggregate gross proceeds of $61,041,151.
During 1994, the Partnership redeemed 728 limited partnership units, during 1995
the Partnership redeemed 45 limited partnership units and during 1996, the
Partnership redeemed 193 limited partnership units leaving 609,446 limited
partnership units outstanding at December 31, 1996.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership's equipment leases and financing
transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, received an
underwriting commission on the gross proceeds from sales of all units. The total
underwriting compensation paid by the Partnership, including underwriting
commissions, sales commissions, incentive fees, public offering expense
reimbursements and due diligence activities was limited to 13 1/2% of the gross
proceeds received from the sale of the units. Such offering costs aggregated
$8,240,555 (including $3,362,551 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.
Certain reclassifications have been made to prior years' statements to
conform to the 1996 presentation.
Leases - The Partnership accounts for owned equipment leased to third
parties as finance leases, leveraged leases or operating leases. For finance
leases, the Partnership records, at the inception of the lease, the total
minimum lease payments receivable, the estimated unguaranteed residual values,
the initial direct costs related to the leases and the related unearned income.
Unearned income represents the difference between the sum of the minimum lease
payments receivable plus the estimated unguaranteed residual minus the cost of
the leased equipment. Unearned income is recognized as finance income over the
terms of the related leases using the interest method. The Partnership's net
investment in leveraged leases consists of minimum lease payments receivable,
the estimated unguaranteed residual
Page 19
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
values and the initial direct costs related to the leases, net of the unearned
income and principal and interest on the related non-recourse debt. Unearned
income is recognized as income from leveraged leases over the life of the lease
at a constant rate of return on the positive net investment. For operating
leases, equipment is recorded at cost and is depreciated on the straight-line
method over the lease terms to their estimated fair market values at lease
terminations. Related lease rentals are recognized on the straight-line method
over the lease terms. Billed and uncollected operating lease receivables, net of
allowance for doubtful accounts, are included in other assets. Initial direct
costs of finance leases and leveraged 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 eight 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.
Securitization - In March and May 1993 the Partnership purchased, utilizing
the proceeds of non-recourse debt from Sun Life Insurance Company of America
("Sun"), two portfolios consisting of leases and financings (the "Portfolio")
from Southern New England Telephone Credit Corp. The purchase price of the
Portfolio totaled $50,121,864. On May 14, 1993 the Portfolio was securitized
whereby the Partnership became the beneficial owner of a trust and Sun the
lender to the trust. The trustee for the trust is Texas Commerce Bank ("TCB").
In conjunction with this, the Portfolio as well as the General Partner's
servicing capabilities were rated "A" by Duff & Phelps, a nationally recognized
rating agency. The General Partner, as servicer, is responsible for managing,
servicing, reporting on and administering the Portfolio. The Partnership remits
all monies received from the Portfolio to TCB. TCB is responsible for disbursing
to Sun its respective principal and interest and to the Partnership the excess
of cash collected over debt service from the Portfolio. The Partnership accounts
for this investment as an investment in finance leases and financings. Sun's
loan to the trust is accounted for as non-recourse debt on the Partnership's
financial statements. All monies received and remitted to TCB from the Portfolio
are accounted for as a reduction in related finance lease and financing
receivables and all amounts paid to Sun by TCB are accounted for as a reduction
of non-recourse debt. On December 13, 1996, the Partnership exercised its early
termination option by paying $1,886,874 to retire the balance of the Sun note.
Investment in Financings - Investment in financings represent the gross
receivables due from the financing of equipment plus the initial direct costs
related thereto less the related unearned income. The unearned income is
recognized as finance income, and the initial direct costs are amortized, over
the terms of the receivables using the interest method. Financing transactions
are supported by a written promissory note evidencing the obligation of the user
to repay the principal, together with interest, which will be sufficient to
return the Partnership's full cost associated with such financing transaction,
together with some investment income. Furthermore, the repayment obligation is
collateralized by a security interest in the tangible or intangible personal
property.
Disclosures About Fair Value of Financial Instruments - Statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value
of Financial Instruments" requires disclosures about the fair value of financial
instruments. The fair value of certain debt obligations are disclosed in Note 8
to the consolidated financial statements. Fair value information with respect to
the Company's assets and certain non-recourse notes payable is not provided
because (i) SFAS No. 107 does not require disclosures about the fair value of
lease arrangements, (ii) the carrying value of financial assets other than lease
related investments approximates market value and (iii) fair value information
concerning certain non-recourse debt obligations is not practicable to estimate
without incurring excessive costs to obtain all the information that would be
necessary to derive a market interest rate on a lease by lease basis.
Equity Investment in Joint Venture - The Partnership accounts for its
equity investment in joint venture under the equity method of accounting.
Therefore, the Partnership's original investment was recorded at cost and is
adjusted by its share of earnings, losses and distributions thereafter.
Page 20
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Redemption of Limited Partnership Units - The General Partner consented to
the partnership redeeming 728 limited partnership units during 1994, 45 limited
partnership units during 1995 and 193 limited partnership units during 1996. The
redemption amount was calculated following the specific redemption formula in
accordance with the Partnership agreement. Redeemed units have no voting rights
and do not share in distributions. The Partnership agreement limits the number
of units which can be redeemed in any one year and redeemed units may not be
reissued. Redeemed limited partnership units are accounted for as a deduction
from 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 Financial
Accounting Standards Board 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.
Minority Interest in Consolidated Joint Venture - The Partnership and an
affiliate, ICON Cash Flow Partners L.P. Six ("ICON Cash Flow Six") contributed
99% and 1%, respectively, to a joint venture. The Partnership's consolidated
financial statements include 100% of the assets and liabilities of the joint
venture. ICON Cash Flow Six's investment in the joint venture has been reflected
as "minority interest in joint venture." (See Note 7 - Investment in Joint
Ventures).
Consolidation - The consolidated financial statements include the accounts
of the Partnership, its wholly owned subsidiary, ICON E Corp. and ICON Cash Flow
LLC I. All intercompany accounts and transactions have been eliminated.
Income Taxes - No provision for income taxes has been made as the liability
for such taxes is that of each of the partners rather than the Partnership.
Page 21
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
3. Net Investment in Leveraged Leases
The Partnership initially acquired leveraged leases costing $13,515,883 in
October 1992. These leases were with Indiana and Michigan Power Company and the
underlying equipment consisted of towboats and barges. In November 1994, the
Partnership acquired an additional leveraged lease costing $3,988,644. The
additional lease was with USX Corporation and the underlying equipment consisted
of annealing furnace bases.
On June 30, 1995, 180 days prior to the USX lease expiration, USX elected to
exercise their fair market value purchase option. The sale price was $4,379,000,
which resulted in a net gain of $685,337 after paying expenses related to the
sale and $775,384 relating to a residual sharing agreement. The sale proceeds
were received on January 5, 1996, and therefore are included in other assets as
of December 31, 1995.
On April 23, 1996 the Partnership sold its beneficial interest in the trust
which owned the towboats and barges that were on lease to Indiana and Michigan
Power Company. The sale price was $7,216,689 and resulted in a gain of $996,706
after paying expenses related to the sale, retiring non-recourse debt of
$3,339,108 and paying residual sharing fees of $121,679.
The net investment in the leveraged leases as of December 31, 1995 consisted
of the following:
1995
Non-cancelable minimum rents receivable (net of principal and
interest on non-recourse debt) $ 360,884
Estimated unguaranteed residual values 7,482,908
Initial direct costs 144,091
Unearned income (2,016,254)
----------
$5,971,629
4. Receivables Due in Installments
Non-cancelable minimum annual amounts due on finance leases, financings and
operating leases are as follows:
Finance Operating
Year Leases Financings Leases Total
1997 $ 17,797,591 $ 7,248,136 $ 750,000 $ 25,795,727
1998 8,673,704 5,587,926 - 14,261,630
1999 3,355,450 4,492,463 - 7,847,913
2000 974,296 3,417,423 - 4,391,719
2001 493,169 2,202,517 - 2,695,686
Thereafter - 108,666 - 108,666
------------ ----------- ----------- ------------
$ 31,294,210 $23,057,131 $ 750,000 $ 55,101,341
============ =========== =========== ============
Page 22
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
5. Investment in Operating Leases
The investment in operating leases at December 31, 1996, 1995 and 1994
consisted of the following:
1996 1995 1994
---- ---- ----
Equipment cost, beginning of year .................... $ 20,771,628 $ 20,823,657 $ 52,029
Equipment purchased .................................. -- -- 20,771,628
Equipment sold ....................................... -- (52,029) --
------------ ------------ ------------
Equipment cost, end of year .......................... 20,771,628 20,771,628 20,823,657
------------ ------------ ------------
Accumulated depreciation,
beginning of year .................................. (1,327,139) (307,515) (18,037)
Depreciation ......................................... (1,061,711) (1,061,712) (289,478)
Equipment sold ....................................... -- 42,088 --
------------ ------------
Accumulated depreciation, end of year ................ (2,388,850) (1,327,139) (307,515)
------------ ------------ ------------
Initial direct costs, net of accumulated
amortization, end of year .......................... 81,600 408,000 734,400
------------ ------------ ------------
Investment in operating leases, end of year $ 18,464,378 $ 19,852,489 $ 21,250,542
============ ============ ============
Page 23
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
6. Allowance for Doubtful Accounts
The Allowance for Doubtful Accounts for investments in finance leases,
financings and operating leases consisted of the following:
Finance Operating
Leases Financings Leases Total
Balance at December 31, 1993 $1,917,431 $ 99,750 $ 2,000 $2,019,181
Charged to operations 100,000 12,000 138,000 250,000
Accounts written off (951,769) (45,919) - (997,688)
Recovery on accounts previously
written off 48,217 47 - 48,264
Transfer within accounts (66,743) 68,126 (1,383) -
---------- --------- --------- --------
Balance at December 31, 1994 1,047,136 134,004 138,617 1,319,757
Charged to operations 326,000 254,000 20,000 600,000
Accounts written off (646,730) (40,728) - (687,458)
Recovery on accounts previously
written off 57,069 7,693 - 64,762
---------- --------- --------- ----------
Balance at December 31, 1995 783,475 354,969 158,617 1,297,061
Charged to operations 380,000 20,000 - 400,000
Accounts written off (400,494) (117,739) - (518,233)
Recovery on accounts previously
Written off 81,728 6,001 - 87,729
---------- --------- --------- ----------
Balance at December 31, 1996 $ 844,709 $ 263,231 $ 158,617 $1,266,557
========== ========= ========= ==========
7. Investment in Joint Ventures
The Partnership Agreement allows the Partnership to invest in joint ventures
with other limited partnerships sponsored by the General Partner provided that
the investment objectives of the joint ventures are consistent with that of the
Partnership.
ICON Cash Flow LLC I
On September 21, 1994, the Partnership and an affiliate, ICON Cash Flow
Partners, L.P. Six ("L.P. Six") formed a joint venture, ICON Cash Flow Partners
L.L.C. I ("ICON Cash Flow LLC I"), for the purpose of acquiring and managing an
aircraft currently on lease to Alaska Airlines, Inc. The aircraft is a 1988
McDonnell Douglas MD-83. The Partnership and L.P. Six contributed $3,730,493
(99%) and $37,682 (1%) of the cash required for such acquisition, respectively,
to ICON Cash Flow LLC I. ICON Cash Flow LLC I acquired the aircraft, assuming
$17,003,454 in non-recourse debt and utilizing contributions received from the
Partnership and L.P. Six. The purchase price of the transaction totaled
$20,771,628. The lease is an operating lease and the lease term expires in March
1997. Profits, losses, excess cash and disposition proceeds are allocated 99% to
the Partnership and 1% to L.P. Six. The Partnership's consolidated financial
statements include 100% of the assets and liabilities of ICON Cash Flow LLC I.
L.P. Six's investment in ICON LLC I has been reflected as "Minority interest in
joint venture."
Page 24
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Cash Flow LLC II
On March 31, 1995, the Partnership and an affiliate, L.P. Six, formed ICON
Cash Flow Partners L.L.C. II ("ICON Cash Flow LLC II"), for the purpose of
acquiring and managing an aircraft currently on lease to Alaska Airlines, Inc.
The aircraft is a 1987 McDonnell Douglas MD-83. The Partnership and L.P. Six
contributed $30,550 (1%) and $3,024,450 (99%) of the cash required for such
acquisition, respectively, to ICON Cash Flow LLC II. ICON Cash Flow LLC II
acquired the aircraft, assuming $16,315,997 in non-recourse debt and utilizing
contributions received from the Partnership and L.P. Six. The purchase price of
the transaction totaled $19,370,997. The lease is an operating lease and the
lease term expires in March 1997. Profits, losses, excess cash and disposition
proceeds are allocated 1% to the Partnership and 99% to L.P. Six. The
Partnership's 1% investment in ICON Cash Flow LLC II, which is accounted for
under the equity method, totaled $35,445 at December 31, 1995 and has been
reflected as "Equity investment in joint venture." The General Partner manages
and controls the business affairs of both the Partnership and L.P. Six. As a
result of this common control and the Partnership's ability to influence the
activities of the joint venture, the Partnership's investment in the joint
venture is accounted for under the equity method. Information as to the
financial position and results of operations of ICON LLC II as of and for the
year ended December 31, 1996 and the period ended December 31, 1995 are
summarized below:
December 31, 1996 December 31, 1995
Assets $ 17,886,467 $ 18,735,116
============ ============
Liabilities $ 13,752,949 $ 15,190,621
============ ============
Equity $ 4,133,518 $ 3,544,495
============ ============
Year Ended Period Ended
December 31, 1996 December 31, 1995
Net income $ 589,022 $ 489,496
============ ============
ICON Cash Flow LLC III
On December 31, 1996, the Partnership and an affiliate, ICON Cash Flow
Partners, L.P. Seven ("L.P. Seven"), formed ICON Cash Flow Partners L.L.C. III
("ICON Cash Flow LLC III"), for the purpose of acquiring and managing an
aircraft currently on lease to Continental Airlines, Inc. The aircraft is a 1976
McDonnell Douglas DC-10- 30. The Partnership and L.P. Seven contributed $15,955
(1%) and $1,579,514 (99%) of the cash required for such acquisition,
respectively, to ICON Cash Flow LLC III. ICON Cash Flow LLC III acquired the
aircraft, assuming $9,309,759 in non-recourse debt and utilizing contributions
received from the Partnership and L.P. Seven. The purchase price of the
transaction totaled $10,905,228. The lease is a leveraged lease and the lease
term expires in April 2003. Profits, losses, excess cash and disposition
proceeds are allocated 1% to the Partnership and 99% to L.P. Seven. The
Partnership's investment in ICON Cash Flow LLC III has been reflected as "Equity
investment in joint venture." The General Partner manages and controls the
business affairs of both the Partnership and L.P. Seven. As
Page 25
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
a result of this common control and the Partnership's ability to influence
the activities of the joint venture, the Partnership's investment in the joint
venture is accounted for under the equity method. Information as to the
financial position and results of operations of ICON LLC III at December 31,
1996 is summarized below:
December 31, 1996
Assets $16,534,998
Liabilities $14,939,525
Equity $ 1,595,473
===========
Period Ended
December 31, 1996
Net income $ -
==========
8. Notes Payable
The Partnership entered into a revolving credit agreement (the "Facility")
in October 1992, which was amended in January 1995. The maximum amount available
under the Facility is $25,000,000. The Facility is secured by an assignment of
eligible receivables and the underlying equipment. The Facility allows the
Partnership to borrow based on eligible, unencumbered receivables. The
Partnership calculates, on a monthly basis, the maximum amount borrowable under
the Facility. In the event that the current borrowable amount is less than the
prior month's balance outstanding, the Partnership is required to pay down the
Facility for the reduction in the borrowable limit. Interest is payable at Libor
plus 2% on even increments of $1,000,000 outstanding and at prime (8.25% at
December 31, 1996) plus .25% on all other amounts outstanding.
The facility requires the Partnership, among other things, to meet certain
objectives with respect to financial ratios. At December 31, 1996, 1995 and
1994, the Partnership was in compliance with the covenants required by the
Facility. As of December 31, 1996 and 1995, $16,541,834 and $10,250,261 were
available for borrowing under the Facility, of which $13,000,000 and $7,400,000
was outstanding, respectively.
Notes payable non-recourse, bearing interest at rates ranging from 5.2% to
16.5%, mature as follows:
Notes Payable
Year Non-Recourse
1997 $ 28,192,336
1998 4,422,529
1999 1,545,952
2000 8,104
-------------
$ 34,168,921
Included in the above are $4,868,428 in notes payable non-recourse due to
various third parties in conjunction with the purchase and assignment of lease
transactions. The notes are payable only to the extent residual values are
realized which are estimated to occur as follows: $3,720,350, $394,721 and
$753,357 in 1997, 1998 and 1999, respectively.
Page 26
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
9. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the years ended December 31, 1996, 1995 and 1994
are as follows:
Charged to
Capitalized Operations
Acquisition fees $ 2,286,564 $ -
Management fees - 1,547,509
Administrative expense reimbursements - 811,966
----------- -----------
Year ended December 31, 1994 $ 2,286,564 $ 2,359,475
=========== ===========
Acquisition fees $ 83,106 $ -
Management fees - 1,596,569
Administrative expense reimbursements - 784,775
----------- -----------
Year ended December 31, 1995 $ 83,106 $ 2,381,344
=========== ===========
Acquisition fees $ 80,408 $ -
Management fees - 1,120,336
Administrative expense reimbursements - 563,107
----------- -----------
Year ended December 31, 1996 $ 80,408 $ 1,683,443
=========== ===========
The Partnership and an affiliate, L.P. Six, formed two joint ventures, ICON
Cash Flow LLC I and ICON Cash Flow LLC II (See Note 7 - Investment in Joint
Ventures).
The Partnership and an affiliate, L.P. Seven, formed a joint venture, ICON
Cash Flow LLC III (See Note 7 Investment in Joint Ventures).
Included in the Partnership's acquisitions for the year ended December 31,
1996 is a financing transaction in the amount of $5,690,161. This represents the
financings of excess cash, or free cash, which results from lease rental
payments being greater than senior debt payments on a leveraged lease. The
financing is secured by the underlying equipment, a 1983 Airbus A300B4-203
aircraft, currently on lease to A.I. Leasing II, Inc. Subsequent to this
financing, ICON Cash Flow Partners L.P. Six ("L.P. Six"), an affiliate of the
Partnership, acquired the residual, or equity, interest in the leveraged lease,
and assumed the related outstanding non-recourse senior and junior debt. On
January 29, 1997, L.P. Six re-financed the free cash portion of the leveraged
lease with a third party. As a result of this re-financing, the Partnership
received proceeds of $5,792,043 and terminated its interest in the leveraged
lease.
10. 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, 1996, 1995 and
1994, the Partnership paid or accrued $194,174, $755,384 and $5,237 to third
parties as their share under the agreements.
Page 27
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
11. Subsidiary
On December 27, 1994, the Partnership formed a wholly owned subsidiary, ICON
E Corp., a Massachusetts corporation formed for the purpose of managing
equipment under lease located in the state of Massachusetts. Massachusetts
partnerships are taxed on personal property at a higher rate than corporations,
and therefore, to mitigate such excess property tax, certain leases are being
managed by ICON E Corp., a corporation. The Partnership's consolidated financial
statements include 100% of the accounts of ICON E Corp. As of December 31, 1996,
there was no federal tax liability for ICON E Corp.
12. Tax Information (Unaudited)
The following reconciles net income for financial reporting purposes to
income for federal income tax purposes for the years ended December 31:
1996 1995 1994
---- ---- ----
Net income per financial statements $ 2,243,883 $ 1,585,802 $ 1,527,095
Differences due to:
Direct finance leases 179,872 15,920,211 16,804,329
Depreciation (3,277,088) (13,696,564) (14,638,167)
Provision for losses (30,505) (108,590) (718,083)
Loss on sale of equipment (2,116,223) (1,655,891) (909,591)
Other (279,948) (344,585) 727,446
----------- ------------- -------------
Partnership income (loss) for
federal income tax purposes $(3,280,009) $ 1,700,383 $ 2,793,029
=========== ============= =============
As of December 31, 1996, the partners' capital accounts included in the
financial statements totaled $29,192,964 compared to the partners' capital
accounts for federal income tax purposes of $35,222,335 (unaudited). The
difference arises primarily from commissions reported as a reduction in the
partners' capital for financial reporting purposes but not for federal income
tax purposes, and temporary differences related to direct finance leases,
depreciation and provision for losses.
Page 28
ICON Cash Flow Partners, L.P., Series E
(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 Vice President and Chief Financial Officer
Neil A. Roberts Director
Tim Spring Director
Beaufort J. B. Clarke, age 50, is President, Chief Executive Officer and
Director of both the General Partner and ICON Securities Corp. (the
"Dealer-Manager"). Prior to his present position, Mr. Clarke was founder and the
President and Chief Executive Officer of Griffin Equity Partners, Inc. Mr.
Clarke formerly was an attorney with Shearman and Sterling and has over 20 years
of senior management experience in the United States leasing industry.
Thomas W. Martin, age 42, is Executive Vice President of both the General
Partner and the Dealer-Manager. Prior to his present position, Mr. Martin was
the Executive Vice President and Chief Financial Officer of Griffin Equity
Partners, Inc. Mr. Martin has over 12 years of senior management experience in
the leasing business, particularly in the area of syndication.
Page 29
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
Paul B. Weiss, age 36, is Executive Vice President of the General Partner.
Mr. Weiss has been exclusively engaged in lease portfolio acquisitions since
1988 from his affiliations with Griffin Equity Partners (as Executive Vice
President and co-founder in 1993); Gemini Financial Holdings (as Senior Vice
President-Portfolio Acquisitions and a member of the executive committee from
1991-1993) and Pegasus Capital Corporation (as Vice President-Portfolio
Acquisitions).
Gary N. Silverhardt, age 36, is Vice President and Chief Financial Officer
of the General Partner. He joined the General Partner in 1989. Prior to joining
the General Partner, Mr. Silverhardt was previously employed by Coopers &
Lybrand from 1985 to 1989, most recently as an Audit Supervisor. Prior to 1985,
Mr. Silverhardt was employed by Katz, Schneeberg & Co. from 1983 to 1985. Mr.
Silverhardt received a B.S. degree from the State University of New York at New
Paltz in 1983 and is a Certified Public Accountant.
Neil A. Roberts, age 47, has been the Managing Director of Summit Asset
Management Limited, a subsidiary of The Summit Group PLC, since 1991. Mr.
Roberts has over 25 years of experience in the leasing and finance business,
including positions with Kleinwort Benson Group, the United Kingdom subsidiary
of Hongkong and Shanghai Banking Corporation and Chemical Bank.
Timothy R. Spring, age 39, Commercial Director of Summit Asset Management
Limited, a subsidiary of The Summit Group PLC, since 1991. Mr. Spring has over
13 years of leasing experience in the United Kingdom. He was formerly Lease
Commercial Director at Kleinwort Benson Group, the United Kingdom subsidiary of
Hongkong and Shanghai Banking Corporation and Chemical Bank.
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner and its
affiliates were paid or accrued the following compensation and reimbursement for
costs and expenses for the years ended December 31, 1996, 1995 and 1994.
Entity Capacity Type of Compensation 1996 1995 1994
------ -------- -------------------- ---- ---- ----
ICON Capital Corp. General Partner Management fees 1,120,336 1,596,569 1,547,509
ICON Capital Corp. General Partner Administrative expense
reimbursements 563,107 784,775 811,966
ICON Capital Corp. Manager Acquisition fees 80,408 83,106 2,286,564
------------- ----------- -----------
$ 1,815,789 $ 2,464,450 $ 4,646,039
============= =========== ===========
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.
Page 30
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
(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.
Page 31
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
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, 1996.
Page 32
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
December 31, 1996
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ICON CASH FLOW PARTNERS, L.P., Series E
File No. 33-44413 (Registrant)
By its General Partner, ICON Capital Corp.
Date: March 28, 1997 Beaufort J.B. Clarke
---------------------------------------------
Beaufort J.B. Clarke
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole General Partner of the Registrant
Date: March 28, 1997 Beaufort J.B. Clarke
---------------------------------------------
Beaufort J.B. Clarke
President, Chief Executive Officer
and Director
Date: March 28, 1997 Thomas W. Martin
---------------------------------------------
Thomas W. Martin
Executive Vice President and Director
Date: March 28, 1997 Gary N. Silverhardt
---------------------------------------------
Gary N. Silverhardt
Vice President and Chief Financial Officer
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrant Which have not Registered Securities
Pursuant to Section 12 of the Act.
No annual report or proxy material has been sent to security holders. An annual
report will be sent to the limited partners and a copy will be forwarded to the
Commission.
Page 33