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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
For the fiscal year ended December 31, 2004
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
Commission File Number 0-28136
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ICON Cash Flow Partners L.P. Six
(Exact name of registrant as specified in its charter)
Delaware 13-4006824
- -------------------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Fifth Avenue, 10th floor, New York, New York 10011
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 418-4700
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of limited
partnership interests
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 934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) [ ] Yes [X] No
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last day of the registrant's most recently completed second fiscal quarter:
Not applicable. There is no established market for the units of the registrant.
Table of Contents
Item
PART I
1. Business 3
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 4
PART II
5. Market for the Registrant's Securities and Related Security Holder Matters 5
6. Selected Financial Data 6
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 7-14
7A. Qualitative and Quantitative Disclosures About Market Risk 15
8. Financial Statements 16-35
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 36
9A. Controls and Procedures 36
9B. Other Information 36
PART III
10. Directors and Executive Officers of the Registrant's Manager 37-38
11. Executive Compensation 39
12. Security Ownership of Certain Beneficial Owners and Management 39
13. Certain Relationships and Related Transactions 39
14. Principal Accountant Fees and Services 39
PART IV
15. Exhibits, Financial Statement and Schedules 40
SIGNATURES 41
Certifications 42-45
2
PART I
Item 1. Business
General Development of Business
ICON Cash Flow Partners L.P. Six (the "Partnership") was formed on July 8,
1993 as a Delaware limited partnership. When used in this report, the terms "we"
"us" and "our" refers to the Partnership.
Our maximum offering was $120,000,000 and we commenced business operations
on our initial closing date, March 31, 1994, with the admission of 16,537.73
limited partnership units at $100 per unit representing $1,653,773 of capital
contributions. Between April 1, 1994 and November 8, 1995 (the final closing
date), 367,319.39 additional units were admitted representing $36,731,939 of
capital contributions bringing the total admission to 383,857.12 units
aggregating $38,385,712 in capital contributions. From 1995 through 2004, we
redeemed 6,098.65 limited partnership units leaving 377,758.47 limited
partnership units outstanding at December 31, 2004.
Our General Partner is ICON Capital Corp. (the "General Partner"), a
Connecticut corporation. The General Partner manages and controls the business
affairs of our equipment leases and financing transactions under the terms of a
management agreement.
Segment Information
We have only one operating segment: the business of owning equipment
subject to leases with companies that we believe to be creditworthy.
Narrative Description of Business
We are an equipment leasing income fund. Our principal investment objective
is to obtain the maximum economic return from our investments for the benefit of
our partners. To achieve this objective we have: (i) acquired a diversified
portfolio of leases and financing transactions; (ii) made monthly cash
distributions to our partners commencing with each partner's admission to the
Partnership, continuing through the reinvestment period, which ended on November
10, 2000, (iii) re-invested substantially all undistributed cash from operations
and cash from sales of equipment and financing transactions during the
reinvestment period; and (iv) are selling our investments and distributing the
cash from sales of such investments to our partners after the end of the
reinvestment period, which is the disposition period.
Our reinvestment period ended November 10, 2000, and the disposition period
began immediately thereafter. During the disposition period, we will continue to
distribute substantially all distributable cash from operations and equipment
sales to the partners and continue the orderly termination of our operations and
affairs. We have and will not invest in any additional finance or lease
transactions during the disposition period.
At December 31, 2004 and 2003, we had total assets of $9,751,921 and
$11,534,680, respectively. During the year ended December 31, 2004, our total
revenue was $1,077,843, which was derived from one lease which accounted for 97%
of our rental income. We incurred a net loss for the year ended December 31,
2004 of $998,444. For the year ended December 31, 2003, our total revenue was
$1,135,294, which was derived from two leases which accounted for 95% of our
rental income. We incurred a net loss for the year ended December 31, 2003 of
$3,109,672. For the year ended December 31, 2002, our total revenue was
$4,835,007 which was derived from two leases which accounted for 86% of our
rental income. We incurred net income for the year ended December 31, 2002 of
$114,894.
We have no direct employees. The General Partner has full and exclusive
control over our management and operations.
3
Our Competition
The equipment leasing industry is highly competitive. When seeking leasing
transactions for acquisition, we compete 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 us and have greater financial resources than we do.
Lease Transactions
For the years ended December 31, 2004, 2003 and 2002 we did not finance or
purchase any new equipment.
During January 2005 our lease, and the related non-recourse note payable,
for a McDonnell Douglas MD-83 Aircraft (the "Aircraft") with Aerovias de Mexico,
S.A. de C.V. ("Aeromexico") expired. The lessee has continued to operate the
Aircraft and has made monthly rental payments in accordance with the terms of
the expired lease. The lender has a security interest in the Aircraft and an
assignment of the rental payments under the lease so the payments being made by
the lessee are used to pay amounts due under the non-recourse note payable due
January 2005. We are currently negotiating to transfer title of the Aircraft to
the lender in payment of the balance of the outstanding non-recourse debt. The
outstanding balance of the non-recourse debt secured by this Aircraft was
$9,339,699 at December 31, 2004.
Available Information
Our Annual Reports on Form 10-K and our most recent Quarterly Reports on
Form 10-Q and amendments to those reports, if any, are available free of charge
on our internet website at http://www.iconcapital.com as soon as reasonably
practicable after such reports are electronically filed with or furnished to the
Securities and Exchange Commission. The information contained on our website is
not deemed to be part of this Annual Report on Form 10-K. This information is
also available on the Securities and Exchange Commission's website, at
http://www.sec.gov.
Item 2. Properties
We neither own nor lease office space or any other real property in our
business at the present time.
Item 3. Legal Proceedings
In the ordinary course of conducting our business, there may be certain
claims, suits, and complaints filed against us. In the opinion of management,
the outcome of such matters, if any, will not have a material impact on our
consolidated financial position or results of operations. No material legal
proceedings are currently pending against us or against any of our assets.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter 2004.
4
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters
Our limited partnership units are not publicly traded nor is there
currently a market for our limited partnership units. It is unlikely that any
such market will develop.
Number of Equity Security Holders
Title of Class as of March 15, 2005
- ------------------------------------ ---------------------------------
General Partner 1
Limited Partners 2,278
We do not, in the normal course of business, pay dividends. We do pay
monthly distributions to our partners beginning with their admission to the
Partnership through the termination of the reinvestment period, which was
November 10, 2000. For the years ended December 31, 2004, 2003 and 2002, we paid
distributions to our limited partners totaling $314,487, $2,417,343 and
$2,462,627, respectively. For the years ended December 31, 2004, 2003 and 2002,
we paid distributions to our general partner totaling $3,177, $24,418 and
$24,875, respectively.
Our reinvestment period ended November 10, 2000. During the disposition
period, we have 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. We have not and will not invest in
any additional new finance or lease transactions during the disposition period.
In order for National Association of Securities Dealers ("NASD") members
and their associated persons to have participated in the offering and sale of
interests in limited partnership units (the "Units") pursuant to the fourth
offering or to participate in any future offering of our Units, we are required
pursuant to NASD Rule 2710(c)(6) to disclose in each annual report distributed
to our limited partners a per unit estimated value of our Units, the method by
which we developed the estimated value and the date used to develop the
estimated value. In addition, our General Partner must prepare annual statements
of our estimated Unit values to assist fiduciaries of retirement plans subject
to the annual reporting requirements of the Employee Retirement Income Security
Act ("ERISA") in the preparation of their reports relating to an investment in
our Units. For these purposes, the estimated value of our Units is deemed to be
$0.94 per Unit at September 30, 2004.
This estimate was based on the amount of remaining undiscounted lease
payments on our existing leases, the booked estimated residual values of the
equipment held by us upon the termination of those leases and our cash on hand.
From this amount we then subtracted our total debt outstanding and then divided
that sum by the total number of Units outstanding. This valuation was based
solely on the General Partner's perception of market conditions and the types
and amounts of our assets. No independent valuation was sought. However, as set
forth below, there is no significant public trading market for our Units at this
time, and there can be no assurance that limited partners could receive $0.94
per Unit if such a market did exist and they sold their Units or that they will
be able to receive such amount for their Units in the future. The foregoing
valuation was performed solely for the ERISA and NASD purposes described above.
There is no market for our Units, and, accordingly, this value does not
represent an estimate of the amount a limited partner would receive if he were
to seek to sell his Units. Furthermore, there can be no assurance as to the
amount we may actually receive if and when we seek to liquidate our assets or
the amount of lease payments and equipment disposition proceeds we will actually
receive over our remaining term. Our limited partnership interests are not
publicly traded nor is there currently a market for our limited partnership
units. It is unlikely that any such market will develop.
5
Item 6. Selected Financial Data
The selected financial data should be read together with the consolidated
financial statements and related notes included in Item 8, Financial Statements
and Supplemental Data contained elsewhere in this report.
Year Ended December 31,
------------------------------------
2004 2003 2002 2001 2000
----- ---- ----- ---- ----
Total revenue $ 1,077,843 $ 1,135,294 $ 4,835,007 $ 4,724,024 $ 5,893,091
============= ============ =========== =========== ============
Net (loss) income (a) $ (998,444) $ (3,109,672) $ 114,894 $ (348,138) $ 2,289,451
============= ============ =========== =========== ============
Net (loss) income allocable
to limited partners (a) $ (988,460) $ (3,078,575) $ 113,745 $ (344,657) $ 2,266,556
============= ============ =========== =========== ============
Net (loss) income allocable
to general partner (a) $ (9,984) $ (31,097) $ 1,149 $ (3,481) $ 22,895
============= ============ =========== =========== ============
Weighted average number of limited
partnership units outstanding 377,758 377,790 378,278 378,288 378,383
============= ============ =========== =========== ============
Net (loss) income per weighted average
limited partnership unit (a) $ (2.62) $ (8.15) $ 0.30 $ (0.91) $ 5.99
============= ============ =========== =========== ============
Distributions to limited partners $ 314,487 $ 2,417,343 $ 2,462,627 $ 3,488,143 $ 3,858,906
============= ============ =========== =========== ============
Distributions per weighted average
limited partner unit $ 0.83 $ 6.40 $ 6.51 $ 9.22 $ 10.20
============= ============ =========== =========== ===========
Distributions to the general partner $ 3,177 $ 24,418 $ 24,875 $ 35,204 $ 38,995
============= ============ =========== =========== ===========
(a) During the year ended December 31, 2003 we recorded an impairment loss
provision of $1,500,000 or $3.75 per weighted average limited partnership unit.
December 31,
-----------------------------
2004 2003 2002 2001 2000
----- ----- ---- ------ -----
Total assets $9,751,921 $11,534,680 $17,096,062 $26,589,619 $36,337,813
========== =========== =========== =========== ===========
Notes payable $9,339,699 $ 9,043,249 $ 9,190,418 $15,596,106 $21,194,679
========== =========== ========== =========== ===========
Partners' equity $ 220,456 $ 1,536,564 $ 7,089,371 $ 9,463,279 $13,334,764
========== =========== ========== =========== ===========
6
Item 7. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Information - Certain statements within this document may
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are identified by
words such as "anticipate," "believe," "estimate," "expects," "intend,"
"predict" or "project" and similar expressions. This information may involve
risks and uncertainties that could cause actual results to differ materially
from the forward-looking statements. We believe that the expectations reflected
in such forward-looking statements are based on reasonable assumptions. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Any such forward-looking
statements are subject to risks and uncertainties and our future results of
operations could differ materially from historical results or current
expectations. Some of these risks are discussed in this report, and include,
without limitation, fluctuations in oil and gas prices; level of fleet additions
by competitors and industry overcapacity; changing customer demands for
aircraft; acts of terrorism; unsettled political conditions, war, civil unrest
and governmental actions, and environmental and labor laws. Our actual results
could differ materially from those anticipated by such forward-looking
statements due to a number of factors, some of which may be beyond our control,
including, without limitation:
o changes in our industry, interest rates or the general economy;
o the degree and nature of our competition;
o availability of qualified personnel;
o cash flows from operating activities may be less than our current
level of expenses and debt obligations; o the financial condition of
lessees; and o lessee defaults.
a. Overview
We are an equipment leasing business formed on July 8, 1993 which began
active operations on November 12, 1993. We primarily engage in the business of
acquiring equipment subject to lease and, to a lesser degree, acquiring
ownership rights to items of leased equipment at lease expiration. Some of our
equipment leases were acquired for cash and provided current cash flow, which we
refer to as "income" leases. The majority of the purchase price of our other
equipment leases was borrowed, so these leases generated little or no current
cash flow because substantially all of the rental payments received from a
lessee were paid to a lender. For these "growth" leases, we anticipate that the
future value of the leased equipment will exceed the cash portion of the
purchase price paid for the equipment. We are currently in our disposition
period, wherein we are seeking to sell our assets in the ordinary course of
business.
Capital Resources and Liquidity
We invested most of the net proceeds from our offering in items of
equipment subject to a lease. After the net offering proceeds were invested,
additional investments were made with the cash generated from our initial
investments to the extent that the cash was not needed for expenses, reserves
and distributions to investors. The investment in additional equipment in this
manner is called "reinvestment." After the "reinvestment period," we began
selling our assets in the ordinary course of business during a time frame called
the "disposition period." If we believe it would benefit investors to reinvest
our cash flow in equipment during the disposition period, we may do so, but we
will not receive any additional fees in connection with such reinvestments.
Our current portfolio, which we own directly or through joint venture
investments with affiliates, consists primarily of the following:
Air Transportation Industry
o A 99% interest in one McDonnell Douglas MD-83 aircraft subject to
lease with Aerovias de Mexico, S.A. de C.V. ("Aeromexico") with the
base term expiring January 2005. The purchase price for the aircraft
was $18,878,699, consisting of our pro rata share of $3,055,000 of
cash and the assumption of our pro rata share of the $15,823,699 in
non-recourse debt.
Chemical Industry
o We have a 25% interest in a sodium chlorate production facility
subject to lease with EKA Chemicals, Inc. The lease will expire on
July 2006, at which time title in the equipment will pass to EKA
Chemicals, Inc. Our contribution to the purchase price was $1,402,960
of cash and $526,499 in non-recourse debt.
7
Substantially all of our recurring operating cash flows are generated from
the operations of the single-investor leases in our portfolio. On a monthly
basis, we deduct the expenses related to the recurring operations of the
portfolio from such revenues and assess the amount of the remaining cash flows
that will be required to fund known re-leasing costs and equipment management
costs. Any residual operating cash flows are considered available for
distribution to the investors and are paid monthly (up until the disposition
period).
Portfolio Activity
Aeromexico
The McDonnell Douglas MD-83 aircraft on lease to Aeromexico is subject to
non-recourse debt with FINOVA, bearing interest at 11.83% annually. Given the
current market for aircraft, the rent the lessee pays does not cover the loan
payments, resulting in negative principal amortization. The net effect is that
it is highly unlikely, given the debt and aircraft market, that we will be in a
position to realize residual proceeds on this aircraft. Accordingly, we are
currently discussing with FINOVA the possibility of selling the aircraft back to
FINOVA in satisfaction of the outstanding non-recourse debt balance.
Sodium Chlorate Production Facility
This facility is currently on a one dollar buy out lease to EKA Chemicals,
Inc. We expect to receive three more semi-annual rental payments during January
2005, July 2005 and January 2006 for a total of $558,750.
Portland Gas & Electric
We have a .5025% interest in a joint venture which owns a coal handling
facility on lease to Portland General Electric. This lease has been extended and
is currently scheduled to expire on January 23, 2010, at which time the lessee
has the option to renew for another 15 years. On May 6, 2004, the joint venture
refinanced the non-recourse debt related to this asset for $11,193,368 which is
due on January 23, 2010 and accrues interest at 3.65% per year. We received a
distribution of $36,406 from the excess proceeds of the renegotiated debt. We
are currently having negotiations with PGE for the purchase of the coal handling
facility from the joint venture and completion of the sale is anticipated during
2005.
Economic and Industry Factors
Our results continue to be impacted by a number of factors influencing the
United States of America's economy as well as the equipment leasing industry,
some of which are discussed below.
United States Economy
The economy of the United States of America appears to be recovering, and
the leasing industry's outlook for the foreseeable future is encouraging. We
foresee an increase in capital spending by corporations through 2007 which
should increase the pool of available leases, and to that end, we believe there
will be more opportunities in this market. Nonetheless, a key obstacle still
facing the leasing industry is the continued low interest rate environment,
which reduces leasing volume inasmuch as customers are more prone to purchase
than lease. Other factors which may negatively affect the leasing industry are
the proposed legal and regulatory changes that may affect tax benefits of
leasing and the continued misperception by potential lessees, stemming from
Enron, WorldCom and others, that leasing should not play a central role as a
financing alternative. However, as economic growth continues and interest rates
inevitably begin to rise over time, we are optimistic that more lessees will
return to the marketplace.
Chemical Manufacturing Industry
EKA Chemicals, Inc. is the world's largest producer of sodium chlorate,
which is an integral part of the bleaching process for wood pulp. EKA has nine
manufacturing plants throughout the United States of America as well as plants
in Brazil, Canada, Chile, Finland, France, Norway and Sweden. In general the
industries that use wood pulp; paper, paperboard and pulp products are expecting
the first half of 2005 to be positive and demand for these products to remain
strong throughout 2005.
8
Air Transportation Industry
The aircraft leasing industry has been on the downside of a business cycle
and continues to remain there. This has resulted in depressed sales prices for
assets such as our aircraft interests. It does not appear that the industry will
recover significantly in the very near future with the recent increases in the
price of gasoline and the fare wars within the air transportation industry. We
are optimistic that a recovery will occur within two to three years. However, a
further weakening of the industry could cause the proceeds realized from the
future sale of our aircraft to be even less than suggested by recent appraisals.
Critical Accounting Policies
An appreciation of our critical accounting policies is necessary to
understand our financial results. These policies may require the Manager to make
difficult and subjective judgments regarding uncertainties, and as a result,
such estimates may significantly impact our financial results. The precision of
these estimates and the likelihood of future changes depend on a number of
underlying variables and a range of possible outcomes. We applied our critical
accounting policies and estimation methods consistently in all periods
presented. We consider the following accounting policies to be critical to our
business:
o Lease classification and revenue recognition
o Asset impairments
o Depreciation
Lease Classification and Revenue Recognition
The equipment we lease to third parties is classified either as a finance
lease, a leveraged lease, or an operating lease, which is determined based upon
the terms of each lease. Initial direct costs are capitalized and amortized over
the term of the related lease for both a finance lease and a leveraged lease.
For an operating lease, the initial direct costs are included as a component of
the cost of the equipment and depreciated.
For finance leases, we record, at lease inception, the total minimum lease
payments receivable from the lessee, the estimated unguaranteed residual value
of the equipment at lease termination, the initial direct costs related to the
lease and the related unearned income. Unearned income represents the difference
between the sum of the minimum lease payments receivable plus the estimated
unguaranteed residual minus the cost of the leased equipment. Unearned income is
recognized as finance income ratably over the term of the lease.
For leveraged leases, we record, at lease inception, our net investment in
the equipment which consists of the minimum lease payments receivable, the
estimated unguaranteed residual value of the equipment at lease termination and
the initial direct costs related to the lease, net of the unearned income and
principal and interest on the related non-recourse debt. Unearned income is
recognized as income over the life of the lease at a constant rate of return on
the positive net investment.
For operating leases, income is recorded as rental income and is recognized
on the straight line method over the lease term.
Our General Partner has an Investment Committee that approves each new
equipment acquisition. As part of their process they determine the residual
value to be used once the acquisition has been approved. The factors considered
in determining the residual value include, but are not limited to, the
creditworthiness of the potential lessee, the type of equipment being
considered, how the equipment is integrated into the potential lessees business,
the length of the lease and industry in which the potential lessee operates.
Residual values are reviewed in accordance with our policy to review all
significant assets in our portfolio.
9
Asset Impairments
The significant assets in our asset portfolio are periodically reviewed, at
least annually, by management, to determine whether events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. Management uses qualified third party appraisers to assist in the
review process. An impairment loss shall be recognized only if the carrying
amount of a long-lived asset is not recoverable and exceeds its fair value. In
such circumstances, we will estimate the future cash flows (undiscounted and
without interest charges) expected to result from the use of the asset and its
eventual disposition. Future cash flows are the future cash inflows expected to
be generated by an asset less the future outflows expected to be necessary to
obtain those inflows. An impairment loss shall be measured as the amount by
which the carrying amount of a long-lived asset exceeds its fair value.
The events or changes in circumstances which generally indicate that an
asset may be impaired are (i) the estimated fair value of the underlying
equipment is less than our carrying value or (ii) the lessee is experiencing
financial difficulties and it does not appear likely that the estimated proceeds
from the disposition of the asset will be sufficient to satisfy the remaining
obligation to the non-recourse lender and our residual position in the asset.
Generally in the latter situation, the residual position relates to equipment
subject to third party notes payable non-recourse where the lessee remits their
rental payments directly to the lender and we do not recover our residual
position until the note payable non-recourse is repaid in full.
Depreciation
We record depreciation expense on equipment classified as an operating
lease. In order to calculate depreciation, we first determine the depreciable
equipment cost, which is the cost less estimated residual value. The estimated
residual value is our estimate of the value of the equipment at lease
termination. The estimated residual value is reviewed annually, by management,
to determine whether an impairment charge may be required. Management uses
qualified third party appraisers to assist in the review process. Depreciation
expense is recorded ratably over the term of the related lease.
New Accounting Pronouncements
During December 2004, the FASB issued SFAS No. 153 "Exchanges of
Nonmonetary Assets--an amendment of APB Opinion No. 29" ("SFAS 153"). SFAS 153
is based on the principle that exchanges of nonmonetary assets should be
measured based on the fair value of the assets exchanged. The guidance in
Opinion 29, however, included certain exceptions to that principle. This
Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges
of similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. SFAS 153
is effective for nonmonetary exchanges occurring in fiscal periods beginning
after June 15, 2005. We do not expect the adoption of SFAS 153 to have an impact
on our financial position or results of operations.
Management does not believe that any recently issued, but not yet effective
accounting pronouncements, if currently adopted, would have a material effect on
the accompanying consolidated financial statements.
10
b. Results of Operations for the Years Ended December 31, 2004 ("2004") and 2003
("2003")
Revenue for 2004 and 2003 are summarized as follows:
Years Ended December 31,
2004 2003 Change
---- ---- ------
Total revenue $ 1,077,843 $ 1,135,294 $ (57,451)
=============== =============== ==============
Rental income $ 926,002 $ 1,076,686 $ (150,684)
Finance income $ 39,307 $ 43,095 $ (3,788)
Net gain (loss) on sales of equipment $ (121,565) $ (263,552) $ 141,987
Income (loss) from investments in joint ventures $ 40,567 $ (74,009) $ 114,576
Interest income $ 9,386 $ 55 $ 9,331
Other income $ 184,146 $ 353,019 $ (168,873)
Revenues for 2004 decreased by $57,451, or 5%, as compared to 2003. The
decrease in rental income was due to equipment on lease to National Steel,
previously held as investments in operating leases, which was sold at the end of
2003. During 2004, we terminated leases and incurred a smaller loss on sales of
equipment than when we did in 2003. The increase in income (loss) from
investments in joint ventures is due primarily to the dissolution of our
investment in AIC Trust. Other income for the year ended December 31, 2004 of
$184,146 relates to management's revised estimate that certain liabilities
relating to previously terminated leases were no longer valid at December 31,
2004. Other income for the year ended December 31, 2003 of $353,019, is
comprised of the following; $160,883 of a residual note payable that was written
down to our estimate of the current balance due, $136,283 relating to a legal
settlement for a lease, which was terminated in December 2002, and $55,903
relating to our revised estimated that certain liabilities relating to
previously terminated leases were no longer valid at December 31, 2003.
Expenses for 2004 and 2003 are summarized as follows:
Years Ended December 31,
------------------------------------------------
2004 2003 Change
----- ---- -------
Total expenses $ 2,076,287 $ 4,244,966 $ (2,168,679)
================ ================= ===============
Depreciation $ 715,005 $ 1,430,010 $ (715,005)
Impairment loss provision $ - $ 1,500,000 $ (1,500,000)
Interest $ 1,196,450 $ 1,105,218 $ 91,232
General and administrative $ 125,609 $ 298,305 $ (172,696)
Management fees - General Partner $ 35,156 $ 106,843 $ (71,687)
Administrative expense reimbursements -
General Partner $ 14,130 $ 39,635 $ (25,505)
Amortization of initial direct costs $ - $ 706 $ (706)
Reversal of provision for bad debts $ - $ (204,018) $ 204,018
Minority interest $ (10,063) $ (31,733) $ 21,670
Expenses for 2004 decreased by $2,168,679, or 51%, over 2003. The decrease
in expenses is a result of overall reduced fund activity. The decrease in
depreciation is due to management's decision to discontinue depreciation on the
Aeromexico aircraft at July 1, 2004 due to the value of the aircraft
approximating its fair value at that time. The decrease in impairment loss is
due to an impairment charge on the Aeromexico aircraft in 2003 which was not
deemed necessary in 2004. The decrease in general and administrative expenses
was primarily due to a reduction in professional fees due to the above mentioned
reduction in fund activity. The provision for bad debts reversal in 2003 was due
to management's review of the allowance for doubtful accounts and the conclusion
that the allowance was overstated at that time. No such reversal was deemed
necessary in 2004.
Net Loss
As a result of the foregoing factors, net loss in 2004 and 2003 was
$998,444 and $3,109,672, respectively. The net loss per weighted average number
of limited partnership units outstanding was $2.62 and $8.15 for 2004 and 2003,
respectively.
11
c. Results of Operations for the Years Ended December 31, 2003 ("2003") and 2002
("2002")
Revenue for 2003 and 2002 are summarized as follows:
Years Ended December 31,
--------------------------------------------
2003 2002 Change
------ ----- -------
Total revenue $ 1,135,294 $ 4,835,007 $ (3,699,713)
=================== ================== ===============
Rental income $ 1,076,686 $ 3,093,545 $ (2,016,859)
Finance income $ 43,095 $ 446,985 $ (403,890)
Net gain (loss) on sales of equipment $ (263,552) $ 1,153,371 $ (1,416,923)
Income (loss) from investments in joint ventures $ (74,009) $ 139,346 $ (213,355)
Interest income $ 55 $ 1,760 $ (1,705)
Other income $ 353,019 $ - $ 353,019
Revenues for 2003 decreased by $3,699,713, or 77%, as compared to 2002. The
decrease in rental income was due primarily to the expiration of operating
leases and the subsequent sale of the underlying equipment. Finance income
decreased due to the reduction in the average size of the finance lease
portfolio. Net gain (loss) on sales of equipment decreased from a gain to a
loss. Income (loss) from investments in joint ventures decreased from income to
a loss. Other income increased due to both a one-time adjustment for a revised
estimate of residual notes outstanding and a loss recovery on a terminated
lease, for which there were no corresponding amounts in 2002.
Expenses for 2003 and 2002 are summarized as follows:
Years Ended December 31,
---------------------------------
2003 2002 Change
---- ---- ------
Total expenses $ 4,244,966 $ 4,720,113 $ (475,147)
===================== ================ ==================
Depreciation $ 1,430,010 $ 2,073,803 $ (643,793)
Impairment loss provision $ 1,500,000 $ - $ 1,500,000
Interest $ 1,105,218 $ 1,604,884 $ (499,666)
General and administrative $ 298,305 $ 577,829 $ (279,524)
Management fees - General Partner $ 106,843 $ 320,138 $ (213,295)
Administrative expense reimbursements -
General Partner $ 39,635 $ 142,061 $ (102,426)
Amortization of initial direct costs $ 706 $ 4,857 $ (4,151)
Reversal of provision for bad debts $ (204,018) $ - $ (204,018)
Minority interest $ (31,733) $ (3,459) $ (28,274)
Expenses for 2003 decreased by $475,147, or 10%, over 2002. The decrease in
depreciation was due to the expiration of operating leases and the subsequent
sale of the underlying equipment. The increase in impairment loss is due to an
impairment charge on the Aeromexico aircraft in 2003 which was not deemed
necessary in 2002. The decrease in interest is due to a reduction in the average
debt outstanding from 2002 to 2003. The decrease in general and administrative
expenses was primarily due to a reduction in professional fees. The decreases in
management fees - General Partner and administrative expense reimbursements -
General Partner were a result of the reduction in the average size of the
Partnership's lease portfolio. The provision for bad debts decreased due to
management's review of the allowance for doubtful accounts and the conclusion
that the allowance was overstated at that time. No such reversal was deemed
necessary in 2002.
Net Loss
As a result of the foregoing factors, net (loss) income in 2003 and 2002
was $(3,109,672) and $114,894, respectively. The net (loss) income per weighted
average number of limited partnership units outstanding was $(8.15) and $.30 for
2003 and 2002, respectively.
12
d. Liquidity and Capital Resources
Sources of Cash
We believe that with the cash we have currently available, from cash being
generated from our leases, distributions from our joint ventures and sales
proceeds, we have sufficient cash to continue our operations into the
foreseeable future. We satisfied our payable to affiliates with rental payments
and expect to satisfy other obligations and pay other expenses with future
rental payments and sales proceeds.
Our primary source of funds in 2004 and 2003 was from distributions
received from joint ventures of $452,140 and $379,779, respectively. In 2003, we
also realized proceeds of $953,841 from sales of equipment.
Our primary cash outflows were cash distributions to partners. We made
distributions to limited partners for the years ended December 31, 2004, 2003
and 2002 of $314,487, $2,417,343 and $2,462,627, respectively. We made
distributions to the General Partner for the years ended December 31, 2004, 2003
and 2002 of $3,177, $24,418, and $24,875, respectively.
For the years ended December 31, 2004, 2003, and 2002, we had cash flows
provided by (used in) operations of $203,117, $447,350 and $(510,914),
respectively. For additional information, please refer to our consolidated
statements of cash flows located in Item 8, Financial Statements and
Supplementary Data.
Financings and Borrowings
At December 31, 2004, we are a party to non-recourse debt. The lender has a
security interest in equipment relating to the non-recourse debt and an
assignment of the rental payments under the lease. If the lessee were to default
on the non-recourse debt the equipment would be returned to the lender in
extinguishment of the non-recourse debt. For a discussion of the aggregate
maturities of our non- recourse debt refer to Note 5 in our consolidated
financial statements located in Item 8, Financial Statements and Supplementary
Data.
We have not made any recourse borrowings, and we do not plan to rely on
financing to meet our current cash needs.
Distributions
Our reinvestment period ended on November 10, 2000, and the disposition
period commenced. During the disposition period we will distribute substantially
all distributable cash from operations and equipment sales to the partners and
will continue the orderly termination of our operations and affairs. We have not
and will not invest in any additional finance or lease transactions during the
disposition period. As a result of our entering into the disposition period,
future monthly distributions are expected to fluctuate depending on the amount
of asset sale and re-lease proceeds generated during the period.
We do not, in the normal course of business, pay dividends. We do pay monthly
distributions to our partners beginning with their admission to the Partnership
through the termination of the reinvestment period, which was November 10, 2000.
For the years ended December 31, 2004 and 2003, we paid distributions to our
limited partners totaling $314,487 and $2,417,343, respectively. For the years
ended December 31, 2004 and 2003, we paid distributions to our general partner
totaling $3,177 and $24,418, respectively.
13
Commitments
At December 31, 2004 we are a party to non-recourse debt that expired
during January 2005. The lender has a security interest in the Aircraft and an
assignment of the rental payments under the lease. Payments are being made by
the lessee directly to the lender on the non-recourse debt that was due January
2005. We are currently negotiating to transfer title of the Aircraft to the
lender for the outstanding balance of the non-recourse debt. At December 31,
2004 we had an outstanding balance of $9,339,699.
Risks and Uncertainties
At December 31, 2004, except as noted above in the Overview section and
listed below, and to the best of our knowledge, there were no known trends or
demands, commitments, events or uncertainties which are likely to have a
material effect on our liquidity.
Set forth below and elsewhere in this report and in other documents we file
with the Securities and Exchange Commission are risks and uncertainties that
could cause our actual results to differ materially from the results
contemplated by the forward-looking statements contained in this report and
other periodic statements we make, including but not limited to, the following:
o The market for aircraft is currently depressed due to an overabundance
of aircraft on the market resulting from the overall downturn in the
aviation industry following the events of September 11, 2001. While
the market for these aircraft is cyclical, there can be no assurance
that the market will recover. Failure of the market to recover
significantly may result in our inability to realize our investment in
the residuals of the aircraft in our portfolio.
o Our operations are subject to the jurisdiction of a number of federal
agencies, including the Federal Aviation Administration. New
regulatory rulings may negatively impact our financial results and the
economic value of our assets.
e. Inflation and Interest Rates
The potential effects of inflation on us are difficult to predict. If the
general economy experiences significant rates of inflation, however, it could
affect us in a number of ways. We do not currently have or expect to have rent
escalation clauses tied to inflation in our leases. The anticipated residual
values to be realized upon the sale or re-lease of equipment upon lease
terminations (and thus the overall cash flow from our leases) may be expected to
increase with inflation as the cost of similar new and used equipment increases.
14
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
We, like most other companies, are exposed to certain market risks, which
includes changes in interest rates and the demand for equipment (and the related
residuals) owned by us. We believe to the best of our knowledge that our
exposure to other market risks, including foreign currency exchange rate risk,
commodity risk and equity price risk, are insignificant, at this time, to both
our financial position and our results of operations.
In general, we manage our exposure to interest rate risk by obtaining fixed
rate debt. The fixed rate debt is structured so as to match the cash flows
required to service the debt to the payment streams under fixed rate
receivables. The payments under leases are assigned to the lenders in
satisfaction of the debt. We may finance leases with a floating interest rate
and we are therefore exposed to interest rate risk until fixed rate financing is
arranged.
15
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Report of Independent Registered Public Accounting Firm 17
Consolidated Balance Sheets at December 31, 2004 and 2003 18-19
Consolidated Statements of Operations for the Years Ended
December 31, 2004, 2003 and 2002 20
Consolidated Statement of Changes in Partners' Equity for the Years Ended
December 31, 2002, 2003 and 2004 21
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2004, 2003 and 2002 22-23
Notes to Consolidated Financial Statements 24-35
16
The Partners
ICON Cash Flow Partners L.P. Six
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying consolidated balance sheets of ICON Cash Flow
Partners L.P. Six (a Delaware limited partnership) and subsidiaries as of
December 31, 2004 and 2003 and the related consolidated statements of
operations, changes in partners' equity and cash flows for each of the three
years in the period ended December 31, 2004. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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. Six and subsidiaries as of December 31, 2004 and 2003 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2004 in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1, the Partnership's reinvestment period ended November 11,
2000 and its disposition period commenced. During the disposition period the
Partnership will distribute substantially all distributable cash from operations
and equipment sales to the partners and begin the orderly termination of its
operations and affairs.
/s/ Hays & Company LLP
March 12, 2005
New York, New York
17
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
ASSETS
2004 2003
----- -----
Cash and cash equivalents $ 34,167 $ 44,339
-------------- --------------
Investments in finance leases:
Minimum rents receivable 563,313 383,486
Estimated unguaranteed residual values - 649,909
Unearned income (2,967) (9,700)
Allowance for doubtful accounts - (93,679)
--------------- ---------------
Net investment in finance leases 560,346 930,016
--------------- --------------
Investments in operating leases:
Equipment, at cost 17,714,798 17,886,854
Accumulated depreciation (8,668,859) (8,049,110)
---------------- --------------
Net investments in operating leases 9,045,939 9,837,744
--------------- --------------
Investments in joint ventures 86,524 595,464
Other assets, net 24,945 127,117
--------------- --------------
Total assets $ 9,751,921 $ 11,534,680
=============== ==============
See accompanying notes to consolidated financial statements.
18
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
LIABILITIES AND PARTNERS' EQUITY
2004 2003
----- -----
Note payable - non-recourse and accrued interest $ 9,339,699 $ 9,043,249
Security deposits and deferred credits 7,337 161,243
Accounts payable and accrued expenses 7,613 242,988
Due to affiliates, net 150,000 513,757
Minority interest 26,816 36,879
-------------- ---------------
Total liabilities 9,531,465 9,998,116
-------------- ---------------
Commitments and Contingencies
Partners' equity:
General Partner (325,480) (312,319)
Limited Partners (377,758.47 units outstanding,
$100 per share original issue price) 545,936 1,848,883
-------------- ----------------
Total partners' equity 220,456 1,536,564
-------------- ----------------
Total liabilities and partners' equity $ 9,751,921 $ 11,534,680
============== ===============
See accompanying notes to consolidated financial statements.
19
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Operations
Years Ended December 31,
2004 2003 2002
------ ----- -----
Revenue:
Rental income $ 926,002 $ 1,076,686 $ 3,093,545
Finance income 39,307 43,095 446,985
Net (loss) gain on sales of equipment (121,565) (263,552) 1,153,371
Income (loss) from investments in joint ventures 40,567 (74,009) 139,346
Interest income 9,386 55 1,760
Other income 184,146 353,019 -
------------------- ----------------- --------------
Total revenue 1,077,843 1,135,294 4,835,007
-------------------- ---------------- ---------------
Expenses:
Depreciation 715,005 1,430,010 2,073,803
Impairment loss provision - 1,500,000 -
Interest 1,196,450 1,105,218 1,604,884
General and administrative 125,609 298,305 577,829
Management fees - General Partner 35,156 106,843 320,138
Administrative expense reimbursements - General partner 14,130 39,635 142,061
Amortization of initial direct costs - 706 4,857
Reversal of provision for bad debts - (204,018) -
Minority interest (10,063) (31,733) (3,459)
--------------------- ----------------- ----------------
Total expenses 2,076,287 4,244,966 4,720,113
==================== ================ ===============
Net (loss) income $ (998,444) $ (3,109,672) $ 114,894
==================== ================ ==============
Net (loss) income allocable to:
Limited partners $ (988,460) $ (3,078,575) $ 113,745
General Partner (9,984) (31,097) 1,149
--------------------- ----------------- ---------------
$ (998,444) $ (3,109,672) $ 114,894
==================== ================ ===============
Weighted average number of
limited partnership units outstanding 377,758 377,790 378,278
=================== ================ ===============
Net (loss) income per weighted average
limited partnership unit $ (2.62) $ (8.15) $ 0.30
=================== ================ ===============
See accompanying notes to consolidated financial statements.
20
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statement of Changes in Partners' Equity
Years Ended December 31, 2002, 2003 and 2004
Limited Partner Distributions
(Per weighted average unit) Total
Return of Investment Limited General Partners'
Capital Income Partners Partner Equity
------- ------ -------- ------- ------
Balance at January 1, 2002 $ 9,696,357 $ (233,078) $ 9,463,279
Limited partnership units
redeemed (30 units) (1,300) - (1,300)
Cash distributions to partners $ 6.21 $ 0.30 (2,462,627) (24,875) (2,487,502)
Net income 113,745 1,149 114,894
-------------- ---------- -----------------
Balance, December 31, 2002 7,346,175 (256,804) 7,089,371
Limited partnership units
redeemed (500 units) (1,374) - (1,374)
Cash distributions to partners $ 6.40 $ - (2,417,343) (24,418) (2,441,761)
Net loss (3,078,575) (31,097) (3,109,672)
--------------- ----------- ------------------
Balance, December 31, 2003 1,848,883 (312,319) 1,536,564
Cash distributions to partners $ 0.83 $ - (314,487) (3,177) (317,664)
Net loss (988,460) (9,984) (998,444)
---------------- ----------- ------------------
Balance, December 31, 2004 $ 545,936 $ (325,480) $ 220,456
=============== =========== =================
See accompanying notes to consolidated financial statements.
21
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
Years Ended December 31,
2004 2003 2002
---- ----- ----
Cash flows from operating activities:
Net (loss) income $ (998,444) $ (3,109,672) $ 114,894
Adjustments to reconcile net (loss) income to
net cash provided by (used in) operating activities:
Rental income paid directly to lenders by lessees (900,000) (900,000) (2,914,890)
Finance income portion of receivables
paid directly to lenders by lessees - - (402,157)
Interest expense on non-recourse financing
paid directly to lenders by lessees 1,196,450 1,059,417 1,475,740
Depreciation 715,005 1,430,010 2,073,803
Impairment loss provision - 1,500,000 -
Amortization of initial direct costs and loan fees - 46,507 134,001
Reversal of provision for bad debts - (204,018) -
Net loss (gain) on sales of equipment 121,565 263,552 (1,153,371)
(Income) loss from investments in joint ventures (40,567) 74,009 (139,346)
Minority interest (10,063) (31,733) (3,459)
Changes in operating assets and liabilities:
Collection of principal - non-financed receivables 365,767 360,299 258,437
Other assets, net (4,847) 123,332 126,476
Security deposits and deferred credits (8,148) (193,016) 47,265
Accounts payable and accrued expenses (222,609) (3,211) (41,122)
Due to affiliates, net (10,992) 3,854 (87,674)
Other - 28,020 489
------------------ -------------- ----------------
Net cash provided by (used in) operating activities 203,117 447,350 (510,914)
------------------- -------------- -----------------
Cash flows from investing activities:
Proceeds from sales of equipment 5,000 953,841 2,309,673
Distributions received from investments in joint ventures 452,140 379,779 508,966
------------------- -------------- ----------------
Net cash provided by investing activities 457,140 1,333,620 2,818,639
-------------------- --------------- ------------------
Cash flows from financing activities:
(Repayments to) proceeds from affiliates (352,765) 502,765 -
Cash distributions to partners (317,664) (2,441,761) (2,487,502)
Redemption of limited partnership units - (1,374) (1,300)
------------------- ---------------- ------------------
Net cash used in financing activities (670,429) (1,940,370) (2,488,802)
-------------------- ---------------- ------------------
Net decrease in cash and cash equivalents (10,172) (159,400) (181,077)
Cash and cash equivalents, beginning of the year 44,339 203,739 384,816
------------------- --------------- -----------------
Cash and cash equivalents, end of the year $ 34,167 $ 44,339 $ 203,739
=================== ============== ================
See accompanying notes to consolidated financial statements.
22
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
Years Ended December 31,
2004 2003 2002
---- ----- ----
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ - $ - $ -
=================== ================ ============
Supplemental disclosure of non-cash investing and financing activities:
Principal and interest from finance leases
paid directly to lender by lessee $ - $ 306,586 $ 4,966,538
=================== ================ ============
Rental income from operating leases
paid directly to lender by lessee $ 900,000 $ 900,000 $ 2,914,890
=================== ================ ============
Principal and interest on non-recourse financing
paid directly to lender by lessee $ 900,000 $ 1,206,586 $ 7,881,428
==================== ================ ============
See accompanying notes to consolidated financial statements.
23
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(1) Organization
ICON Cash Flow Partners L.P. Six (the "Partnership") was formed on July 8,
1993 as a Delaware limited partnership. The Partnership is engaged in one
business segment, the business of acquiring equipment subject to leases.
The principal objective of the Partnership is to obtain the maximum
economic return from its investments for the benefit of its partners. To achieve
this objective, the Partnership: (i) acquired a diversified portfolio of leases
and financing transactions; (ii) made monthly cash distributions to its partners
commencing with each partner's admission to the Partnership, continuing through
the reinvestment period, which ended on November 10, 2000; (iii) re-invested
substantially all undistributed cash from operations and cash from sales of
equipment and financing transactions during the reinvestment period; and (iv) is
selling the Partnership's investments and is distributing the cash from sales of
such investments to its partners during the disposition period.
The Partnership's reinvestment period ended November 10, 2000 and the
Partnership commenced its disposition period. During the disposition period the
Partnership is distributing substantially all distributable cash from operations
and equipment sales to the partners and will continue the orderly termination of
its operations and affairs. The Partnership will not invest in any additional
finance or lease transactions during the disposition period.
The Partnership's maximum offering was $120,000,000. The Partnership
commenced business operations on its initial closing date, March 31, 1994, with
the admission of 16,537.73 limited partnership units at $100 per unit
representing $1,653,773 of capital contributions. Between April 1, 1994 and
November 8, 1995 (the final closing date), 367,319.39 additional units were
admitted, bringing the total admissions to 383,857.12 units aggregating
$38,385,712 in capital contributions. Between 1995 and 2004 the Partnership
redeemed 6,098.65 limited partnership units resulting in 377,758.47 limited
partnership units outstanding at December 31, 2004.
The General Partner is a Connecticut corporation. The General Partner
manages and controls the business affairs of the Partnership's equipment leases
and financing transactions under the terms of a management agreement with the
Partnership. Additionally, the General Partner has a 1% ownership interest in
the Partnership.
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 their outstanding adjusted capital contribution
account. After such time, the distributions will be allocated 90% to the limited
partners and 10% to the General Partner.
24
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(2) Summary of Significant Accounting Policies
Consolidation and Minority Interest
The consolidated financial statements include the accounts of the
Partnership and its majority owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation. The Partnership accounts for
its interests in minority owned joint ventures under the equity method of
accounting. In such cases, the Partnership's original investments are recorded
at cost and adjusted for its share of earnings, losses and distributions. In
joint ventures where the Partnership's ownership interest is majority owned,
minority interest represents the minority venturer's proportionate share of
their equity in the joint venture. The minority interest is adjusted for the
minority venturer's share of the earnings or loss of the joint venture.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and highly liquid
investments with original maturity dates of three months or less.
Concentration of Credit Risk
Concentrations of credit risk with respect to lessees are dispersed across
different industry segments within the United States of America and throughout
the world; accordingly the Partnership is exposed to business and economic risk.
Although the Partnership does not currently foresee a concentrated credit risk
associated with these lessees, lease payments are dependent upon the financial
stability of the segments in which they operate.
Allowance for Doubtful Accounts
The Partnership estimates collectibility of receivables by analyzing
historical bad debts, lessee concentrations and credit worthiness and current
economic trends when evaluating the adequacy of the allowance for doubtful
accounts. The Partnership records an allowance for doubtful accounts when the
analysis indicates that the probability of full collection is unlikely.
Investment in Operating Leases
Operating leases are stated at cost less accumulated depreciation.
Depreciation is being provided for using the straight-line method over the term
of the related equipment lease to its estimated residual value at lease end.
Upon final disposition of the equipment, the cost and related accumulated
depreciation will be removed from the accounts and the resulting profit or loss
will be reflected in the consolidated statement of operations. Revenues from
operating leases are recognized on a straight line basis over the lives of the
related leases.
25
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(2) Summary of Significant Accounting Policies - continued
Asset Impairments
The Partnership's asset portfolio is periodically reviewed, at least
annually, to determine whether events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. An impairment loss will
be recognized only if the carrying amount of a long-lived asset is not
recoverable and exceeds its fair value. In such circumstances, the Partnership
will estimate the future cash flows (undiscounted and without interest charges)
expected to result from the use of the asset and its eventual disposition.
Future cash flows are the future cash inflows expected to be generated by an
asset less the future outflows expected to be necessary to obtain those inflows.
An impairment provision will be measured as the amount by which the carrying
amount of a long-lived asset exceeds its fair value.
The events or changes in circumstances which generally indicate that an
asset may be impaired are (i) the estimated fair value of the underlying
equipment is less than its carrying value or (ii) the lessee is experiencing
financial difficulties and it does not appear likely that the estimated proceeds
from the disposition of the asset will be sufficient to satisfy the remaining
obligation to the lender and our residual position in the asset. Generally in
the latter situation, the residual position relates to equipment subject to
third party notes payable where the lessee remits their rental payments directly
to the lender and we do not recover our residual position until the note payable
is repaid in full.
Equipment Held for Sale or Lease
Equipment held for sale or lease is recorded at the lower of cost or market
value expected to be realized upon sale and consists of equipment previously
leased to end users which has been returned to the Partnership following lease
expiration.
Redemption of Limited Partnership Units
The Partnership may, at its discretion, redeem units from a limited number
of its limited partners, in any one year, as defined in the partnership
agreement. The redemption amounts are calculated following the specified
redemption formula in accordance with the partnership agreement. Redeemed units
have no voting rights and do not share in distributions. Redeemed limited
partnership units are accounted for as a deduction from partners' equity.
Per Unit Data
Net income and distributions per unit are based upon the weighted average
number of units outstanding during the period.
Revenue Recognition
The Partnership leases equipment to third parties which may be classified
as either a finance lease or an operating lease, which is determined based upon
the terms of each lease. Initial direct costs are capitalized and amortized over
the term of the related lease for a finance lease. For an operating lease, the
initial direct costs are included as a component of the cost of the equipment
and depreciated.
26
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(2) Summary of Significant Accounting Policies - continued
For finance leases, the Partnership records, at lease inception, the total
minimum lease payments receivable from the lessee, the estimated unguaranteed
residual value of the equipment at lease termination, the initial direct costs
related to the lease and the related unearned income. Unearned income represents
the difference between the sum of the minimum lease payments receivable plus the
estimated unguaranteed residual minus the cost of the leased equipment. Unearned
income is recognized as finance income over the term of the lease using the
effective interest rate method.
For operating leases, rental income is recognized on the straight line
method over the lease term. Billed and uncollected operating lease receivables
are included in other assets. Deferred income is the difference between the
timing of the cash payments and the income recognized on a straight line basis.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures
About Fair Values of Financial Instruments," requires disclosures about the fair
value of financial instruments, except for lease related assets and liabilities.
Separate disclosure of fair value information at December 31, 2004 and 2003 with
respect to the Partnership's assets and liabilities is not separately provided
since (i) SFAS No. 107 does not require fair value disclosures of lease
arrangements and (ii) the carrying value of financial assets, other than lease
related investments, and the recorded value of payables approximates market
value. The Partnership's notes payable - non-recourse approximates fair value at
December 31, 2004 due to its near term maturity.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting period. Significant estimates primarily include
the allowance for doubtful accounts and unguaranteed residual values. In
addition, management is required to disclose contingent assets and contingent
liabilities. Actual results could differ from those estimates.
Recent Accounting Pronouncements
During December 2004, the FASB issued SFAS No. 153 "Exchanges of
Nonmonetary Assets--an amendment of APB Opinion No. 29" ("SFAS 153"). SFAS 153
is based on the principle that exchanges of nonmonetary assets should be
measured based on the fair value of the assets exchanged. The guidance in
Opinion 29, however, included certain exceptions to that principle. This
Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges
of similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. SFAS 153
is effective for nonmonetary exchanges occurring in fiscal periods beginning
after June 15, 2005. We do not expect the adoption of SFAS 153 to have an impact
on our financial position or results of operations.
27
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(2) Summary of Significant Accounting Policies - continued
Management does not believe that any recently issued, but not yet effective
accounting pronouncements, if currently adopted, would have a material effect on
the accompanying consolidated financial statements.
Reclassifications
Certain reclassifications have been made to the accompanying consolidated
financial statements for the year ended December 31, 2003 to conform to the
current period presentation.
(3) Joint Ventures
The Partnership and its affiliates, entities also managed by the General
Partner, formed seven joint ventures, discussed below, for the purpose of
acquiring and managing various assets. The Partnership and these affiliates have
substantially identical investment objectives and participate on the same terms
and conditions. The Partnership and the other joint venturers have a right of
first refusal to purchase the equipment, on a pro-rata basis, if any of the
other joint venturers desire to sell their interests in the equipment or joint
venture.
The joint venture described below is majority owned and consolidated with
the Partnership.
ICON Cash Flow Partners L.L.C. II
The Partnership and an affiliate, ICON Cash Flow Partners, L.P., Series E
("Series E"), formed ICON Cash Flow Partners L.L.C. II ("LLC II") for the
purpose of acquiring and managing a McDonnell Douglas MD-83 Aircraft (the
"Aircraft"). The Aircraft was leased to Aerovias de Mexico, S.A. de C.V.
("Aeromexico") for $75,000 per month. This lease expired during January 2005.
The lessee continues to operate the Aircraft and is making monthly rental
payments in accordance with the terms of the expired lease. The General Partner
is having discussions with the lender to transfer title of the Aircraft to the
lender for the outstanding balance of the non-recourse debt. The Partnership and
Series E acquired interests of 99% and 1%, respectively, in LLC II. LLC II
acquired the Aircraft by assuming certain non-recourse debt and utilizing cash
received from the Partnership and Series E. The outstanding balance of the
non-recourse debt secured by this Aircraft was $9,339,699 at December 31, 2004.
The six joint ventures described below are minority owned by the
Partnership and are accounted for under the equity method, whereby the
Partnership's original investment was recorded at cost and is adjusted by its
share of earnings, losses and distributions of the joint ventures.
ICON Cash Flow Partners L.L.C.I
The Partnership and an affiliate, Series E, formed a joint venture, ICON
Cash Flow Partners L.L.C. I ("ICON LLC") for the purpose of acquiring and
managing a McDonnell Douglas MD-83 Aircraft (the "Aircraft"). The Aircraft was
leased to Aeromexico for $75,000 per month. This lease expired during January
2005. The lessee continues to operate the Aircraft and is making monthly rental
payments in accordance with the terms of the expired lease. The General Partner
is having discussions with the lender to transfer title of the Aircraft to the
lender for the non-recourse debt. The Partnership and Series E acquired
interests of 1% and 99%, respectively, in ICON LLC.
28
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(3) Joint Ventures - continued
Information as to the financial position and results of operations of
ICON LLC at December 31, 2004 and 2003 and for the years ended December 31,
2004 and 2003 are summarized below:
December 31,
2004 2003
------------- -------------
Assets $ 12,213,311 $ 13,422,558
============= =============
Liabilities $ 9,712,310 $ 9,433,146
============= =============
Equity $ 2,501,001 $ 3,989,412
============= =============
Partnership's share of equity $ 25,010 $ 39,894
============= =============
Years Ended December 31,
2004 2003
------------- -------------
Net loss $ (1,488,406) $ (3,427,854)
============= =============
Partnership's share of net loss $ (14,884) $ (34,279)
============= =============
ICON Receivables 1997-A LLC
The Partnership and three affiliates, ICON Cash Flow Partners, L.P., Series
D ("Series D"), Series E, and ICON Cash Flow Partners L.P. Seven ("L.P. Seven")
contributed and assigned equipment leases, finance receivables and residuals to
ICON Receivables 1997-A LLC ("1997-A") for the purpose of securitizing their
cash flow collections. At December 31, 2004, the Partnership, Series D, Series E
and L.P. Seven own, 31.03%, 17.81%, 31.19%, and 19.97%, respectively, in 1997-A.
At December 31, 2004, 1997-A's operations have been liquidated as the note
holders have been fully repaid for their investment in 1997-A and the remaining
receivables relating to the securitizations totaling $345,152, due from an
affiliate of the General Partner relating to lease receivables, were written-off
as uncollectible. The remaining cash is being reserved to pay for potential
property tax; sales tax and other liabilities, if any.
Information as to the financial position and results of operations of
1997-A at December 31, 2004 and 2003 and for the years ended December 31, 2004
and 2003 are summarized below:
December 31,
2004 2003
------------- -------------
Assets $ 107,229 $ 810,802
============= =============
Liabilities $ 62,005 $ 595,106
============= =============
Equity $ 45,224 $ 215,696
============= =============
Partnership's share of equity $ 14,022 $ 66,930
============= =============
Years Ended December 31,
2004 2003
------------- -------------
Net loss $ (170,469) $ (88,676)
============= =============
Partnership's share of net loss $ (52,905) $ (27,516)
============= =============
29
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(3) Joint Ventures - continued
ICON Receivables 1997-B L.L.C.
The Partnership and two affiliates, Series E and L.P. Seven, formed ICON
Receivables 1997-B L.L.C. ("1997-B") contributed and assigned equipment leases,
finance receivables and residuals or to 1997-B for the purpose of securitizing
their cash flow collections. The Partnership, Series E and L.P. Seven each
contributed cash, equipment leases and residuals to 1997-B and own 8.33%, 75.00%
and 16.67% interests, respectively, in 1997-B.
At December 31, 2004, 1997-B's operations have been liquidated as the note
holders have been repaid for most of their investment in 1997-B. The remaining
cash is being reserved to pay for potential property tax; sales tax and other
liabilities, if any.
Information as to the financial position and results of operations of
1997-B at December 31, 2004 and 2003 and for the years ended December 31, 2004
and 2003 are summarized below:
December 31,
2004 2003
------------- -------------
Assets $ 38,558 $ 1,756,597
============= =============
Liabilities $ 38,558 $ 1,681,931
============= =============
Equity $ - $ 74,666
============= =============
Partnership's share of equity $ - $ 6,219
============= =============
Years Ended December 31,
2004 2003
------------- -------------
Net income (loss) $ 131,462 $ (341,507)
============= ============
Partnership's share of net income (loss) $ 10,952 $ (28,447)
============= =============
Distributions $ 206,128 $ -
============= =============
Partnership's share of distributions $ 17,170 $ -
============= =============
ICON/Boardman Facility LLC
The Partnership and two affiliates, L.P. Seven and ICON Income Fund Eight A
L.P. ("Fund Eight A"), formed ICON/Boardman Facility LLC ("ICON BF") for the
purpose of acquiring a coal handling facility on lease with Portland General
Electric ("PGE"), a utility company. Prior to September 24, 2004, the
Partnership, L.P. Seven and Fund Eight A owned interests of .5025%, .5025% and
98.995% interests, respectively, in ICON BF. Effective September 24, 2004, L.P.
Seven assigned its .5025% interest to Fund Eight A in exchange for $65,325.
The General Partner is currently in negotiations with PGE for their
purchase of the coal handling facility from ICON BF. The sale is expected to be
completed during 2005 with PGE acquiring ownership of the coal handling
facility.
30
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(3) Joint Ventures - continued
Information as to the financial position and results of operations of ICON
BF at December 31, 2004 and 2003 and for the years ended December 31, 2004 and
2003 are summarized below:
December 31,
2004 2003
------------- -------------
Assets $ 19,193,175 $ 21,366,282
============= =============
Liabilities $ 10,904,912 $ 7,314,376
============= =============
Equity $ 8,288,263 $ 14,051,906
============= =============
Partnership's share of equity $ 41,649 $ 70,611
============= =============
Years Ended December 31,
2004 2003
------------- -------------
Net income $ 1,481,386 $ 1,442,100
============= =============
Partnership's share of net income $ 7,444 $ 7,247
============= =============
Distributions $ 7,245,027 $ -
============= =============
Partnership's share of distributions $ 36,406 $ -
============= =============
ICON/AIC Trust
The Partnership and two affiliates, L.P. Seven and Fund Eight A, formed
ICON/AIC Trust ("AIC Trust") for the purpose of owning and managing a portfolio
of leases for equipment located in England. On December 28, 2001, AIC Trust sold
its remaining leases, subject to the related debt, in exchange for a note
receivable of (pound)2,575,000 ($3,744,822 converted at the exchange rate in
effect at December 31, 2001) which was payable in six installments through June
2004. In July 2004, the final installment on the note was collected and
distributed. On September 30, 2004, AIC Trust was dissolved. The Partnership,
L.P. Seven and Fund Eight A owned a 25.51%, 30.76% and 43.73% interest,
respectively, in AIC Trust.
The Partnership recognized an additional $107,519 of foreign currency
translation gains from this transaction which is included in income from
investments in joint ventures in the accompanying statements of operations.
Information as to the financial position and results of operations of ICON
BF at December 31, 2004 and 2003 and for the years ended December 31, 2004 and
2003 are summarized below:
December 31,
2004 2003
------------- -------------
Assets $ - $ 1,330,632
============= =============
Liabilities $ - $ -
============= =============
Equity $ - $ 1,330,632
============= =============
Partnership's share of equity $ - $ 339,444
============= =============
Years Ended December 31,
2004 2003
------------- -------------
Net income $ 7,700 $ 37,009
============= =============
Partnership's share of net income $ 1,964 $ 9,441
============= =============
Distributions $ 1,378,141 $ 1,396,948
============= =============
Partnership's share of distributions $ 351,564 $ 356,361
============= =============
31
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(3) Joint Ventures - continued
ICON Cheyenne LLC
The Partnership and three affiliates, L.P. Seven, Fund Eight A and ICON
Income Fund Eight B L.P. ("Fund Eight B") formed ICON Cheyenne LLC ("ICON
Cheyenne") for the purpose of acquiring and managing a portfolio of leases. At
December 31, 2004, the Partnership, L.P. Seven, Fund Eight A and Fund Eight B
had ownership interests of 1.0%, 1.27%, 1.0% and 96.73%, respectively, in ICON
Cheyenne.
The outstanding balance of the non-recourse debt secured by these assets,
at December 31, 2004 was $397,850. The leases expire on various dates through
September 2006.
Information as to the financial position and results of operations of ICON
Cheyenne at December 31, 2004 and 2003 and for the years ended December 31, 2004
and 2003 are summarized below:
December 31,
2004 2003
------------- -------------
Assets $ 1,241,215 $ 10,440,643
============= =============
Liabilities $ 656,923 $ 3,204,090
============= =============
Equity $ 584,292 $ 7,236,553
============= =============
Partnership's share of equity $ 5,843 $ 72,366
============= =============
Years Ended December 31,
2004 2003
------------- -------------
Net loss $ (1,952,262) $ (45,540)
============= =============
Partnership's share of net loss $ (19,523) $ (455)
============= =============
Distributions $ 4,700,001 $ 2,341,759
============= =============
Partnership's share of distributions $ 47,000 $ 23,418
============= =============
(4) Investments in Operating Leases
Investments in operating leases, which now consists solely of the aircraft
owned by LLC II, is summarized as follows at December 31:
2004 2003 2002
------------- ------------- -------------
Equipment, beginning of year $ 19,386,854 $ 21,965,262 $ 22,051,594
Equipment dispositions (172,056) (2,578,408) (86,332)
------------ ------------- --------------
Equipment, end of year 19,214,798 19,386,854 21,965,262
------------ ------------- -------------
Impairment, beginning of year (1,500,000) - -
Impairment loss provision - (1,500,000) -
------------ ------------ -------------
Impairment, end of year (1,500,000) (1,500,000) -
------------ ------------ -------------
Equipment at cost, end of year 17,714,798 17,886,854 21,965,262
------------ ------------ -------------
32
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(4) Investments in Operating Leases - continued
Accumulated depreciation, beginning of year (8,049,110) (7,876,081) (5,831,958)
Accumulated depreciation on equipment
dispositions 95,256 1,256,981 29,680
Depreciation expense (715,005) (1,430,010) (2,073,803)
------------ ------------- ------------
Accumulated depreciation, end of year (8,668,859) (8,049,110) (7,876,081)
------------ ------------- ------------
Net investment in operating leases, end of year $ 9,045,939 $ 9,837,744 $ 14,089,181
============= ============= =============
During 2003, LLC II recorded an impairment loss provision on the Aeromexico
aircraft of $1,500,000. This impairment loss provision was a result of an
appraisal which indicated a lower fair market value at lease termination than
initially estimated.
(5) Note Payable - Non Recourse
At December 31, 2004 and 2003, the Partnership had an outstanding note
payable - non-recourse of $9,339,699 and $9,043,249, respectively. Interest is
accrued at 11.83% per annum and the note is secured by the Aircraft on lease
with Aeromexico.
The note matured in January 2005. As discussed in Note 3, the lender has a
security interest in the Aircraft and an assignment of the rental payments under
the lease. Payments are being made by the lessee to the lender on the note
payable non-recourse. The General Partner is currently negotiating to transfer
title of the Aircraft to the lender in satisfaction of the outstanding
non-recourse debt balance.
(6) Income Taxes (Unaudited)
No provision for income taxes has been recorded since the liability for
such taxes is that of each of the individual partners rather than the
Partnership. The Partnership's income tax returns are subject to examination by
the Federal and state taxing authorities, and changes, if any, could adjust the
individual income tax of the members.
At December 31, 2004 and 2003, the partners' equity accounts included in
the consolidated financial statements totaled $220,456 and $1,536,564,
respectively. The partners' capital for Federal income tax purposes at December
31, 2004 and 2003 totaled $(3,165,713) and $(2,787,845) (unaudited),
respectively. The difference arises primarily from sales expenses reported as a
reduction in the partners' capital accounts for financial reporting purposes but
not for Federal income tax reporting purposes, and differences in depreciation
and amortization between financial reporting purposes and Federal income tax
purposes.
33
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(6) Income Taxes (Unaudited) - continued
The following table reconciles net (loss) income for financial statement
reporting purposes to the loss for Federal income tax purposes as follows:
Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------- ------------- -------------
Net (loss) income per consolidated
financial statements $ (998,444) $ (3,109,672) $ 114,894
Differences due to:
Direct finance leases - - (432,017)
Depreciation and amortization 672,423 2,644,958 1,311,741
Recovery for losses - (2,581,637) -
Gain on sale of equipment 552,326 711,185 50,505
Other (286,508) (1,886,080) 438,863
------------- ------------ --------------
Net (loss) income for Federal
income tax purposes $ (60,203) $ (4,221,246) $ 1,483,986
============= ============ =============
(7) Transactions with Related Parties
In accordance with the terms of the Management Agreement, the Partnership
pays the General Partner management fees ranging from 1% to 7% based on a
percentage of the rentals received either directly by the Partnership or through
joint ventures. In addition, the General Partner is reimbursed for
administrative expenses incurred in connection with the Partnership's
operations. Effective for the period from July 1, 2004 through December 31,
2004, the General Partner voluntarily decided to waive its right to management
fees and administrative expense reimbursements.
Fees and other expenses charged to operations by the Partnership to the
General Partner or its affiliates for the years ended December 31, 2004, 2003
and 2002, respectively, were as follows:
Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------- ------------- -------------
Management fees $ 35,156 $ 106,843 $ 320,138
Administrative expense reimbursements 14,130 39,635 142,061
------------- ------------- -------------
Total $ 49,286 $ 146,478 $ 462,199
============= ============= =============
At December 31, 2004, the Partnership had a net payable of $150,000 due to
L.P. Seven which related to distributions received from AIC Trust on behalf of
L.P. Seven. This amount was repaid in January 2005.
(8) Concentration Risks
The Partnership's cash and cash equivalents are held principally at one
financial institution and at times may exceed insured limits. The Partnership
has placed these funds in a high quality institution in order to minimize the
risk.
The Partnership had one lease for the years ended December 31, 2004, 2003
and 2002 that represents approximately 97%, 84% and 71%, respectively, of the
Partnership's rental income.
34
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes To Consolidated Financial Statements
December 31, 2004 and 2003
(9) Other Income
Other income for the year ended December 31, 2004 of $184,146 relates to
management's revised estimate that certain liabilities relating to previously
terminated leases were no longer valid at December 31, 2004.
Other income for the year ended December 31, 2003 of $353,019, is comprised
of the following; $160,883 of a residual note payable that was written down to
managements estimate of the current balance due, $136,283 relating to a legal
settlement for a lease, which was terminated in December 2002, and $55,903
relating to managements revised estimated that certain liabilities relating to
previously terminated leases were no longer valid at December 31, 2003.
(10) Selected Quarterly Financial Data (Unaudited)
The following table is a summary of selected financial data, by quarter,
for the years ended December 31, 2004 and 2003:
Quarters Ended in 2004
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
Revenue $ 251,608 $ 313,144 $ 289,710 $ 223,381
============ =============== ============ ===========
Net (loss) income allocable
to limited partners $ (532,724) $ (374,496) $ 1,556 $ (82,796)
============ ============== ============ ===========
Net (loss) income per weighted average
limited partnership unit $ (1.41) $ (0.99) $ 0.01 $ (0.23)
============= ============== ============ ===========
Quarters Ended in 2003
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
Revenue $ 287,352 $ 340,438 $ 264,795 $ 242,709
============ ============== =========== =============
Net loss allocable to limited partners $ (559,688) $ (380,737) $ (239,447) $ (1,898,703)
============= =============== =========== =============
Net loss per weighted average
limited partnership unit $ (1.48) $ (1.01) $ (0.63) $ (5.03)
============= =============== =========== =============
35
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
During the year ended December 31, 2004 we had no disagreements with our
accountants on any matters of accounting or financial reporting.
Item 9a. Controls and Procedures
We carried out an evaluation, under the supervision and with the
participation of management of ICON Capital Corp., the General Partner of the
Partnership, including the Principal Executive Officer and the Principal
Financial Officer, of the effectiveness of the design and operation of the
Partnership's disclosure controls and procedures as of the end of the period
covered by this report pursuant to the Securities Exchange Act of 1934. Based
upon the evaluation, the Principal Executive Officer and the Principal Financial
Officer concluded that the Partnership's disclosure controls and procedures were
effective.
There were no significant changes in our internal control over financial
reporting during our fourth fiscal quarter that have materially affected, or are
likely to materially affect, our internal control over financial reporting.
36
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 100 Fifth Avenue, 10th Floor,
New York, New York 10011, and its telephone number is (212) 418-4700. 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 our 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 performs 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.
Our officers and directors are:
Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Paul B. Weiss President and Director
Thomas W. Martin Executive Vice President, Chief Financial Officer
and Director
Michael A. Reisner Senior Vice President and General Counsel
Sean E. Hoel Senior Vice President
Beaufort J. B. Clarke, 58, has been our Chairman, Chief Executive Officer
and Director since August of 1996. He was our President from August of 1996
until December 31, 1998. Prior to his present positions, Mr. Clarke was founder,
President and Chief Executive Officer of Griffin Equity Partners, Inc. (a
purchaser of equipment leasing portfolios) from October 1993 through August
1996. Prior to that, Mr. Clarke was President of Gemini Financial Holdings, Inc.
(an equipment leasing company) from June 1990 through September 1993.
Previously, Mr. Clarke was a Vice President of AT&T Systems Leasing. Mr. Clarke
formerly was an attorney with Shearman and Sterling. Mr. Clarke received a B.A.
degree from the George Washington University and a J.D. degree from the
University of South Carolina. Mr. Clarke has been in the equipment leasing
business, as a business person and lawyer, since 1979.
Paul B. Weiss, 44, has been our President and Director since January 1,
1999. Mr. Weiss was our Director and Executive Vice President responsible for
lease acquisitions from November of 1996 until December 31, 1998. Mr. Weiss
served as Executive Vice President and co-founder of Griffin Equity Partners,
Inc. from October of 1993 through November of 1996. Prior to that, Mr. Weiss was
Senior Vice President of Gemini Financial Holdings, Inc. from 1991 to 1993 and
Vice President of Pegasus Capital Corporation (an equipment leasing company)
from 1988 through 1991. Mr. Weiss received a B.A. in Economics from Connecticut
College. Mr. Weiss has been in the equipment leasing business since 1988.
Thomas W. Martin, 51, has been our Executive Vice President, Chief
Financial Officer and Director (and Director, President and Chief Financial
Officer of the dealer-manager as well) since August of 1996. Mr. Martin was the
Executive Vice President, Chief Financial Officer and a co-founder of Griffin
Equity Partners, Inc. from October 1993 to August 1996. Prior to that, Mr.
Martin was Senior Vice President of Gemini Financial Holdings, Inc. from April
1992 to October 1993 and he held the position of Vice President at Chancellor
Corporation (an equipment leasing company) for 7 years. Mr. Martin received a
B.S. degree from the University of New Hampshire. Mr. Martin has been in the
equipment leasing business since 1983.
Michael A. Reisner, Esq., 34, has been our Senior Vice President and
General Counsel since January 2004. Mr. Reisner was our Vice President and
Associate General Counsel from March 2001 until December 2003. Previously, from
1996 to 2001, Mr. Reisner was an attorney with Brodsky Altman & McMahon, LLP in
New York, concentrating on commercial transactions. Mr. Reisner received a J.D.
from New York Law School and a B.A. from the University of Vermont.
Sean E. Hoel, 35, has been our Senior Vice President since June 1999. Mr.
Hoel is responsible for the acquisition of equipment subject to lease. Mr. Hoel
has a Masters Degree in Finance from Seattle University, preceded by Law School
at the University of Oslo, a B.A. in Finance at the University of Wyoming, as
well as three years of military service as a naval officer.
37
Code of Ethics
The General Partner, on our behalf, has adopted a code of ethics for its
Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer.
The Code of Ethics is available free of charge by requesting it in writing from
our General Partner. The General Partner's address is 100 Fifth Avenue, 10th
Floor, New York, New York 10011.
38
Item 11. Executive Compensation
We have 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, 2004, 2003 and 2002.
Entity Capacity Compensation 2004 2003 2002
- ------------------ --------------- -------------------- ----------- ----------- -----------
ICON Capital Corp. General Partner Management fees $ 35,156 $ 106,843 $ 320,138
=========== =========== ===========
ICON Capital Corp. General Partner Administrative fees $ 14,130 $ 39,635 $ 142,061
=========== =========== ===========
The General Partner also has a 1% interest in our profits and
distributions. We paid distributions to the General Partner of $3,177, $24,418
and $24,875, respectively, for the years ended December 31, 2004, 2003 and 2002.
Additionally, the General Partner's interest in our net (loss) income was
$(9,984), $(31,097) and $1,149, respectively, for the years ended December 31,
2004, 2003 and 2002.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) We are a limited partnership and therefore do not have voting shares
of stock. No person of record owns, or is known by us to own
beneficially, more than 5% of any class of our securities.
(b) As of March 31, 2005, Directors and Officers of the General Partner do
not own any of our equity securities.
(c) The General Partner owns our equity securities, as follows; a General
Partner Interest which represents initially a 1% and potentially a 10%
interest in our income, gain and losses. The General Partner owns 100%
of the General Partner Interest.
Item 13. Certain Relationships and Related Transactions
See Item 11 for a discussion of our related party transactions. See Notes 3
and 7 to our consolidated financial statements for a discussion of our related
party activity and investments in joint ventures.
Item 14. Principal Accountant Fees and Services
During the years ended December 31, 2004 and 2003 our auditors provided
audit services relating to our annual report on Form 10-K and our quarterly
reports on Form 10-Q. Additionally, our auditors provided other services in the
form of tax compliance work. Their fees are shown in the table below:
2004 2003
------------- -------------
Audit fees $ 27,000 $ 24,000
Audit related fees - -
Tax fees (for compliance) 18,400 638
------------- -------------
$ 45,400 $ 24,638
============= =============
39
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedules - 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 consolidated financial statements or notes thereto.
3. Exhibits - The
following exhibits are incorporated herein by reference:
(i) Form of Dealer-Manager Agreement (Incorporated by reference to Exhibit 1.1
to Amendment No. 1 to Form S-1 Registration Statement No. 33-36376 filed with
the Securities and Exchange Commission on November 9, 1993)
(ii) Form of Selling Dealer Agreement (Incorporated by reference to Exhibit 1.2
to Amendment No. 1 to Form S-1 Registration Statement No. 33-36376 filed with
the Securities and Exchange Commission on November 9, 1993) (iii) Amended and
Restated Agreement of Limited Partnership (Incorporated herein by reference to
Exhibit A to Amendment No. 1 to Form S-1 Registration Statement No. 33-36376
filed with the Securities and Exchange Commission on November 9, 1993)
(iv) Unconsolidated Joint Venture Financial Statements for ICON Receivables 97-A
LLC - at and for the year ended December 31, 2002; ICON/AIC Trust - at and for
the year ended December 31, 2002 and ICON Cheyenne LLC - at and for the year
ended December 31, 2002 incorporated herein by reference to the Form 10-K No.
0-28136.
(v) On December 31, 2004, Jeremiah Silkowski, resigned from his position of
Senior Vice President of ICON Capital Corp., the Company's general partner, so
that he may pursue other opportunities (incorporated by reference to Current
Report on Form 8-K, dated January 6, 2005).
(c) Exhibits
31.1 Rule 13a-14(a)/15d-14(a) certifications
31.2 Rule 13a-14(a)/15d-14(a) certifications
32.1 Certification of Chairman and Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. 32.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. ICON Cash Flow Partners
L.P. Six File No. 0-28136 (Registrant) By its General Partner, ICON Capital
Corp.
Date: April 15, 2005 /s/ Beaufort J.B. Clarke
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole General Partner of the Registrant
Date: April 15, 2005 /s/ Beaufort J.B. Clarke
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Date: April 15, 2005 /s/ Paul B. Weiss
Paul B. Weiss
President and Director
Date: April 15, 2005 /s/ Thomas W. Martin
Thomas W. Martin
Executive Vice President and Director
(Principal Financial and Accounting 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.
41
Exhibit 31.1
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) I, Beaufort J.B. Clarke, certify
that:
1. I have reviewed this annual report on Form 10-K of ICON Cash Flow Partners
L.P. Six;
2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of
the period covered by this annual report based on such evaluation; and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the board of directors of the Corporate Manager (or
persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially affect
the Partnership's ability to record, process, summarize and report
financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls
over financial reporting.
Dated: April 15, 2005
/s/ Beaufort J.B. Clarke
- -----------------------------
Beaufort J. B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
Manager of ICON Cash Flow Partners L.P. Six
42
Exhibit 31.2
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) I, Thomas W. Martin, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Cash Flow Partners
L.P. Six;
2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of
the period covered by this annual report based on such evaluation; and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the board of directors of the Corporate Manager (or
persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially affect
the Partnership's ability to record, process, summarize and report
financial information and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls
over financial reporting.
Dated: April 15, 2005
/s/ Thomas W. Martin
- ----------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
ICON Capital Corp.
Manager of ICON Cash Flow Partners L.P. Six
43
Exhibit 32.1
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) I, Beaufort J.B. Clarke, Chairman
and Chief Executive Officer of ICON Capital Corp, the General Partner, in
connection with the Annual Report of ICON Cash Flow Partners L.P. Six (the
"Partnership") on Form 10-K for the year ended December 31, 2004, as filed with
the Securities and Exchange Commission on the date hereof (the "Annual Report")
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the
best of my knowledge and belief:
(1) the Annual Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) the information contained in the Annual Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership. Dated: April 15, 2005
/s/ Beaufort J.B. Clarke
------------------------------------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
Manager of ICON Cash Flow Partners L.P. Six
44
Exhibit 32.2
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) I, Thomas W. Martin, Executive Vice
President (Principal Financial and Accounting Officer) of ICON Capital Corp, the
General Partner, in connection with the Annual Report of ICON Cash Flow Partners
L.P. Six (the "Partnership") on Form 10-K for the year ended December 31, 2004,
as filed with the Securities and Exchange Commission on the date hereof (the
"Annual Report") certify, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge and belief:
(1) the Annual Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) the information contained in the Annual Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership. Dated: April 15, 2005
/s/ Thomas W. Martin
-------------------------------------------------------
Thomas W. Martin
Executive Vice President (Principal
Financial and Accounting Officer)
ICON Capital Corp.
Manager of ICON Cash Flow Partners L.P. Six
45