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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the transition period from _____________________ to ________________________
Commission File Number 33-36376
---------------------------------------------------------
ICON Cash Flow Partners L.P. Six
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3723089
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 Mamaroneck Avenue, Harrison, New York 10528-1632
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 698-0600
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class Name of each exchange on
which registered
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests, filed, pending effectiveness
- --------------------------------------------------------------------------------
(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Page 1
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
TABLE OF CONTENTS
Item Page
PART I
1. Business 3-4
2. Properties 4
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 5
6. Selected Consolidated Financial and Operating Data 5-6
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 6-8
8. Consolidated Financial Statements and Supplementary Data 9-29
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 30
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 30-31
11. Executive Compensation 31
12. Security Ownership of Certain Beneficial Owners
and Management 32
13. Certain Relationships and Related Transactions 32
PART IV
14. Exhibits, Reports and Amendments 32
SIGNATURES 33
Page 2
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
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. 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 December 31, 1994, 111,166.37
additional units were admitted representing $11,116,637 of capital contributions
bringing the total admission to 127,704.10 units totaling $12,770,410 in capital
contributions. Between January 1, 1995 and November 8, 1995 (the final closing
date), 256,153.02 additional units were admitted, bringing the final admission
to 383,857.12 units totaling $38,385,712 in capital contributions. During 1995,
the Partnership redeemed 265 limited partnership units and during 1996, the
Partnership redeemed 728 limited partnership units leaving 382,864 limited
partnership units outstanding at December 31, 1996. The sole general partner is
ICON Capital Corp. (the "General Partner").
Narrative Description of Business
The Partnership is an equipment leasing fund. The principal objective of the
Partnership is to obtain the maximum economic return from its investments for
the benefit of its limited partners. To achieve this objective, the Partnership
intends to: (1) acquire a diversified portfolio of short-term, high-yield
investments; (2) make monthly cash distributions to its limited partners from
cash from operations, commencing with each limited partner's admission to the
Partnership, continuing through the reinvestment period, which period will end
no later than the eighth anniversary of the final closing date; (3) re-invest
substantially all undistributed cash from operations and cash from sales in
additional equipment and financing transactions during the reinvestment period;
and (4) sell the Partnership's investments and distribute the cash from sales of
such investments to its limited partners within five and one-half to eight and
one-half years of the final closing date. In addition to acquiring equipment and
entering into leases, the Partnership will (1) acquire equipment already subject
to leases originated by affiliates and non-affiliated lessors and (2) enter into
financing transactions, which are (i) secured by the equipment financed and
lease revenues therefrom (if any) and additional collateral as deemed necessary
by the credit review committee of the General Partner, and (ii) evidenced by the
irrevocable obligation of the lessees.
The equipment leasing industry is highly competitive. In initiating its
leasing transactions, the Partnership competes with leasing companies,
manufacturers that lease their products directly, equipment brokers and dealers
and financial institutions, including commercial banks and insurance companies.
Many competitors are larger than the Partnership and have access to more
favorable financing. Competitive factors in the equipment leasing business
primarily involve pricing and other financial arrangements, equipment
remarketing capabilities and servicing of lessees.
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
Page 3
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
Lease and Financing Transactions
For the years ended December 31, 1996 and 1995, the Partnership purchased
and leased or financed $45,524,755 and $100,227,485 of equipment, respectively,
with a weighted average initial transaction term of 44 and 36 months,
respectively. At December 31, 1996, the weighted average initial transaction
term of the portfolio was 45 months. A summary of the portfolio equipment cost
by category held at December 31, 1996 and 1995 is as follows:
December 31, 1996 December 31, 1995
--------------------------- ---------------------------
Category Cost Percent Cost Percent
Aircraft $ 38,967,559 32.5% $ 19,371,603 18.4%
Computer systems 21,569,899 17.9 17,507,061 16.6
Manufacturing & production 20,030,224 16.6 14,320,190 13.6
Printing 17,627,457 14.6 22,072,974 21.0
Telecommunications 14,206,442 11.8 1,970,243 1.9
Restaurant equipment 2,341,604 1.9 2,223,687 2.1
Furniture and fixtures 2,210,360 1.8 1,385,082 1.3
Medical 1,208,070 1.0 1,161,372 1.0
Retail systems 857,003 .7 894,020 .8
Material handling 396,668 .3 24,132,933 22.9
Video production 240,023 .3 94,324 .1
Automotive 105,571 .1 27,018 .1
Miscellaneous 639,015 .5 187,899 .1
-------------- ------- ------------- -------
$ 120,399,895 100.0% $ 105,348,406 100.0%
============== ===== ============= =====
The Partnership had two leases which individually represented greater than
10% of the total portfolio equipment cost at December 31, 1996. The leases are
for aircraft with Airbus Industrie and Alaska Airlines, Inc., and they
represented 16.3% and 16.1%, respectively, of the total portfolio equipment cost
at December 31, 1996.
Item 2. Properties
The Partnership neither owns nor leases office space or equipment for the
purpose of managing its day-to-day affairs. The General Partner has exclusive
control over all aspects of the business of the Partnership, including providing
any necessary office space. As such, the General Partner will be compensated for
services related to the management and administration of the Partnership's
business.
Page 4
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
PART II
Item 5. Market for the Registrant's Securities and Related Security
Holder Matters
The Partnership's limited partnership interest is not publicly traded nor is
there currently a market for the Partnership's limited partnership units. It is
unlikely that any such market will develop.
Number of Equity Security Holders
Title of Class as of December 31,
1996 1995
---- ----
Limited Partners 2,265 2,271
General Partner 1 1
Item 6. Selected Consolidated Financial and Operating Data
Year Ended December 31,
1996 1995 1994
Total revenue $ 9,576,756 $ 6,729,913 $ 203,858
============== ============ =============
Net income (loss) $ (366,967) $ 76,068 $ 70,890
============== ============ =============
Net income (loss) allocable to
limited partners $ (363,297) $ 75,307 $ 70,181
============== ============ =============
Net income (loss) allocable
to the General Partner $ (3,670) $ 761 $ 709
============== ============ =============
Weighted average limited
partnership units outstanding 383,196 260,453 31,755
============== ============ =============
Net income (loss) per weighted
average limited partnership unit$ (.95) $ .29 $ 2.21
============== ============ =============
Distributions to limited partners $ 4,119,354 $ 2,543,783 $ 311,335
============== ============ =============
Distribution to the General Partner $ 41,613 $ 25,694 $ 3,145
============== ============ =============
Page 5
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
December 31,
1996 1995 1994 1993
---- ---- ---- ----
Total assets $ 81,805,142 $103,090,950 $ 14,381,964 $ 417,328
============ ============ ============ ===========
Partners' equity $ 25,864,652 $ 30,446,813 $ 10,803,815 $ 2,000
============ ============ ============ ===========
No operating data is presented for 1993 since the Partnership commenced
operations on March 31, 1994, the initial closing date. The data presented for
1994 does not reflect a full year's operations.
The above selected consolidated financial data should be read in conjunction
with the consolidated financial statements and related notes appearing elsewhere
in this report.
Item 7. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership's portfolio consisted of net investments in finance leases,
operating leases, financings, leveraged leases and an equity investment in joint
venture of 65%, 23%, 9%, 3% and less than 1% of total investments at December
31, 1996, respectively, and 71%, 20%, 9%, 0% and less than 1% of total
investments at December 31, 1995, respectively.
For the years ended December 31, 1996 and 1995, the Partnership leased or
financed equipment with initial costs of $45,524,755 and $100,227,485,
respectively, to 242 and 1,343 lessees or equipment users, respectively. The
weighted average initial transaction term for each year was 44 and 36 months,
respectively.
Results of Operations for the Years Ended December 31, 1996 and 1995
Revenues for the year ended December 31, 1996 were $9,576,756, representing
an increase of $2,846,843 from 1995. The increase in revenues was attributable
to an increase in finance income of $2,087,116 or 49%, an increase in rental
income of $402,101 or 20%, an increase in net gain on sales or remarketing of
equipment of $230,941, an increase in income from leveraged leases of $139,810
and an increase in income from equity investment in joint venture of $954 or
17%. The increase in finance income, income from leveraged leases and rental
income resulted from the increase in the average size of the finance and
operating lease portfolios from 1995 to 1996. The net gain on sales or
remarketing of equipment increased due to an increase in the number of leases
maturing, and the underlying equipment being sold or remarketed, for which the
proceeds received were in excess of the remaining carrying value of the
equipment.
Expenses for the year ended December 31, 1996 were $9,943,723, representing
an increase of $3,289,878 from 1995. The increase in expenses was attributable
to an increase in interest expense of $1,326,911 or 44%, an increase in
management fees of $637,298 or 92%, an increase in amortization of initial
direct costs of $521,823 or 63%, an increase in general and administrative
expense of $297,235 or 83%, an increase in administrative expense reimbursements
of $260,805 or 68%, an increase in depreciation expense of $212,162 or 33% and
an increase in provision for bad debts of $180,000 or 32% from 1995. Interest
expense increased due to an increase in the average debt outstanding from 1995
to 1996. Amortization of initial direct costs, management fees, administrative
expense reimbursements and general and administrative expense increased due to
an increase in the average size of the portfolio. The increase in depreciation
expense resulted from the Partnership's increased investment in operating
leases. A provision for bad debts of $750,000 was required for the year ended
December 31, 1996 as a result of an analysis of delinquency, an assessment of
credit risk and a review of historical loss experience.
Page 6
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
Net (loss) income for the years ended December 31, 1996 and 1995 was
($366,967) and $76,068, respectively. The net (loss) income per weighted average
limited partnership unit outstanding was ($.95) and $.29 for 1996 and 1995,
respectively.
Results of Operations for the Years Ended December 31, 1995 and 1994
The Partnership's portfolio consisted of a net investment in finance leases,
operating leases, financings and an equity investment in joint venture of 71%,
20%, 9% and less than 1% of total investments at December 31, 1995,
respectively, and 84%, 0%, 16% and less than 1% of total investments at December
31, 1994, respectively.
For the years ended December 31, 1995 and 1994, the Partnership leased or
financed equipment with initial costs of $100,227,485 and $6,938,961,
respectively, to 1,343 and 50 lessees or equipment users, respectively. The
weighted average initial transaction term for each year was 36 and 52 months,
respectively.
The Partnership commenced operations on March 31, 1994. Although a
comparison of results of operations and liquidity and capital resources is
presented for the years ended December 31, 1995 and 1994, the comparison is
predicated on the fact that the Partnership's related 1994 activity was minimal.
Revenues for the year ended December 31, 1995 were $6,729,913, representing
an increase of $6,526,055 from 1994. The increase in revenues was attributable
to an increase in finance income of $4,141,392, an increase in rental income of
$2,010,504, an increase in interest income and other of $262,205, an increase in
net gain on sales or remarketing of equipment of $107,733 and income from equity
investment in joint venture of $4,221. The increase in finance and rental income
resulted from the increase in the average size of the finance and operating
lease portfolios from 1994 to 1995. Interest income and other increased due to
an increase in the average cash balance from 1994 to 1995. The net gain on sales
or remarketing of equipment increased due to an increase in the number of leases
maturing, and the underlying equipment being sold or remarketed, for which the
proceeds received were in excess of the remaining carrying value of the
equipment.
Expenses for the year ended December 31, 1995 were $6,653,845, representing
an increase of $6,520,877 from 1994. The increase in expenses was attributable
to an increase in interest expense of $3,001,491, an increase in amortization of
initial direct costs of $815,406, an increase in management fees of $687,269, an
increase in depreciation expense of $636,487, an increase in the provision for
bad debts of $506,500, an increase in administrative expense reimbursements of
$374,599, an increase in general and administrative expense of $321,356 and
minority interest in joint venture of $177,769. Interest expense increased due
to an increase in the average debt outstanding from 1994 to 1995. Amortization
of initial direct costs, management fees, administrative expense reimbursements
and general and administrative expense increased due to an increase in the
average size of the portfolio. The increase in depreciation expense resulted
from the Partnership's increased investment in operating leases. A provision for
bad debts of $570,000 was required for the year ended December 31, 1995 as a
result of an analysis of delinquency, an assessment of credit risk and a review
of historical loss experience.
Net income for the years ended December 31, 1995 and 1994 was $76,068 and
$70,890, respectively. The net income per weighted average limited partnership
unit outstanding was $.29 and $2.21 for 1995 and 1994, respectively.
Page 7
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
Liquidity and Capital Resources
The Partnership's primary sources of funds for the years ended December 31,
1996, 1995 and 1994 were capital contributions, net of offering expenses, of $0,
$22,157,234 and $11,046,405 from limited partners, respectively, net cash
provided by operations of $9,923,936, $8,776,203 and $439,913, respectively,
proceeds from sales of equipment of $8,684,744 and $1,016,807 in 1996 and 1995,
respectively and proceeds received from affiliated minority investors of
$2,530,550 in 1995. These funds were used to purchase equipment, to fund cash
distributions and to make payments on borrowings. The Partnership intends to
continue to purchase additional equipment and to fund cash distributions
utilizing cash provided by operations and proceeds from sales of equipment.
The Partnership had notes payable at December 31, 1996 and 1995 of
$51,135,949 and $60,349,224, respectively, as a result of borrowings secured by
equipment, and such amounts consisted of $38,641,653 and $44,820,178 in
non-recourse notes which are being paid directly to the lenders by the lessees,
respectively, $360,023 and $345,822 in non-recourse residual value notes,
respectively, which will be paid to the extent proceeds are available in excess
of the Partnership's estimated unguaranteed residuals, $7,975,026 and
$15,183,224, respectively, in non-recourse notes related to a securitization of
certain Partnership assets and $4,159,247 in notes payable non-recourse as it
relates to a secured financing in 1996.
Cash distributions to limited partners for the years ended December 31, 1996
and 1995, which were paid monthly, totaled $4,119,354 and $2,543,783,
respectively, of which $0 and $75,307 was investment income and $4,119,354 and
$2,468,476 was a return of capital, respectively. The monthly annualized cash
distribution rate to limited partners was 10.75% in 1996, of which 0% was
investment income and 10.75% was a return of capital. The limited partner
distribution per weighted average unit outstanding in 1996 and 1995 was $10.75
and $9.77, of which $0 and $.29 was investment income and $10.75 and $9.48 was a
return of capital, respectively.
On March 11, 1997, the Partnership and two affiliates, ICON Cash Flow
Partners, L.P., Series D and ICON Cash Flow Partners L.P. Seven, (collectively
"the Members"), contributed and assigned $6,712,631, $8,671,773 and $6,582,150,
respectively, in equipment lease and finance receivables and residuals to ICON
Receivables 1997-A LLC ("1997-A"), a special purpose entity created by the
Members. The Members received a 29.8%, 40.8% and 29.4% interest, respectively,
in 1997-A based on the present value of their related contributions. 1997-A was
formed for the purpose of originating new leases, managing existing contributed
assets and, eventually, securitizing its portfolio. In order to fund the
acquisition of new leases, 1997-A obtained a warehouse borrowing facility from
Prudential Securities Credit Corporation (the "Facility"). Borrowings under the
Facility are based on the present value of the new leases, provided that in the
aggregate, the amount outstanding cannot exceed $20,000,000. Outstanding amounts
under the Facility bear interest equal to Libor plus 1.5%. Collections of
receivables from new leases are used to pay down the Facility, however, in the
event of a default, all of 1997-A's assets are available to cure such default.
The net proceeds from the expected securitization of these assets will be used
to pay-off the remaining Facility balance and any remaining proceeds will be
distributed to the Members in accordance with their membership interests. The
Partnership will account for its investment in 1997-A under the equity method.
The investment in 1997-A will be increased or decreased by its share of profit
or losses and decreased by any distributions received by 1997-A.
As of December 31, 1996, except as noted above, there were no known trends
or demands, commitments, events or uncertainties which are likely to have any
material effect on liquidity. As cash is realized from closing of limited
partnership units, operations, sales of equipment and borrowings, the
Partnership will continue to invest in equipment leases and financings where it
deems it to be prudent while retaining sufficient cash to meet its reserve
requirements and recurring obligations as they become due.
Page 8
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page Number
Independent Auditors' Report 11
Consolidated Balance Sheets as of December 31, 1996
and 1995 12
Consolidated Statements of Operations for the Years
Ended December 31, 1996, 1995 and 1994 13
Consolidated Statements of Changes in Partners'
Equity for the Years Ended December 31, 1996,
1995 and 1994 14-15
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994 16-18
Notes to Consolidated Financial Statements 19-27
Page 9
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1996
(With Independent Auditors' Report Thereon)
Page 10
INDEPENDENT AUDITORS' REPORT
The Partners
ICON Cash Flow Partners L.P. Six:
We have audited the accompanying consolidated balance sheets of ICON Cash Flow
Partners L.P. Six (a Delaware limited partnership) as of December 31, 1996 and
1995, and the related consolidated statements of operations, changes in
partners' equity and cash flows for each of the years in the three-year period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Cash Flow
Partners L.P. Six as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
March 7, 1997
New York, New York
Page 11
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
1996 1995
---- ----
Assets
Cash $ 4,821,624 $ 8,981,950
------------ ------------
Investment in finance leases
Minimum rents receivable 45,645,436 65,040,140
Estimated unguaranteed residual values 11,924,455 12,881,418
Initial direct costs 1,624,309 1,674,324
Unearned income (9,073,073) (12,707,193)
Allowance for doubtful accounts (485,627) (361,941)
------------ ------------
49,635,500 66,526,748
Investment in operating leases
Equipment, at cost 19,371,603 19,371,603
Initial direct costs 47,945 335,613
Accumulated depreciation (1,485,136) (636,487)
------------ ------------
17,934,412 19,070,729
Investment in financings
Receivables due in installments 7,737,022 8,649,392
Initial direct costs 138,928 182,965
Unearned income (1,165,426) (1,204,544)
Allowance for doubtful accounts (13,198) (43,200)
------------ ------------
6,697,326 7,584,613
Investment in leveraged lease 2,086,672 -
------------ -----------
Other assets 583,884 885,346
------------ ------------
Equity investment in joint venture 45,724 41,564
------------ ------------
Total assets $ 81,805,142 $103,090,950
============ ============
Liabilities and Partners' Equity
Notes payable - non-recourse $ 39,001,676 $ 45,166,000
Note payable - non-recourse - securitized 12,134,273 15,183,224
Security deposits and deferred credits 2,929,380 250,768
Minority interest in joint venture 877,893 1,879,629
Accounts payable - other 753,769 448,418
Accounts payable - equipment 243,499 8,678,812
Accounts payable to General Partner
and affiliates, net - 1,037,286
------------ ------------
55,940,490 72,644,137
Commitments and contingencies
Partners' equity (deficiency)
General Partner (71,652) (26,369)
Limited partners (382,864 and 383,592 units
outstanding, $100 per unit original issue price
in 1996 and 1995, respectively) 25,936,304 30,473,182
------------ ------------
Total partners' equity 25,864,652 30,446,813
------------ ------------
Total liabilities and partners' equity $ 81,805,142 $103,090,950
============ ============
See accompanying notes to consolidated financial statements.
Page 12
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Revenues
Finance income $ 6,326,899 $ 4,239,783 $ 98,391
Rental income 2,412,605 2,010,504 -
Interest income and other 352,476 366,455 104,250
Net gain on sales or remarketing of equipment 338,574 107,733 -
Income from leveraged lease, net 139,810 - -
Income from equity investment in
joint venture 6,392 5,438 1,217
------------ ------------ ----------
Total revenues 9,576,756 6,729,913 203,858
------------ ------------ ------------
Expenses
Interest 4,330,544 3,003,633 2,142
Amortization of initial direct costs 1,349,977 828,154 12,748
Management fees - General Partner 1,333,394 696,096 8,827
Depreciation 848,649 636,487 -
Provision for bad debts 750,000 570,000 63,500
General and administrative 657,470 360,235 38,879
Administrative expense reimbursements
- General Partner 642,276 381,471 6,872
Minority interest in joint venture 31,413 177,769 -
------------ ------------ ---------
Total expenses 9,943,723 6,653,845 132,968
------------ ------------ ------------
Net income (loss) $ (366,967) $ 76,068 $ 70,890
============ ============ ===========
Net income (loss) allocable to:
Limited partners $ (363,297) $ 75,307 $ 70,181
General Partner (3,670) 761 709
------------ ------------ ----------
$ (366,967) $ 76,068 $ 70,890
============ ============ ===========
Weighted average number of limited
partnership units outstanding 383,196 260,453 31,755
============ ============ ===========
Net income (loss) per weighted average
limited partnership unit $ (.95) $ .29 $ 2.21
============ ============ ==========
See accompanying notes to consolidated financial statements.
Page 13
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 1996, 1995 and 1994
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
Balance at
December 31, 1993 1,000 1,000 2,000
Refund of initial
limited partners'
capital contribution (1,000) - (1,000)
Proceeds from issuance
of limited partnership
units (127,704.10 units) 12,770,410 - 12,770,410
Sales and offering expenses (1,724,005) - (1,724,005)
Cash distributions
to partners $ 7.59 $ 2.21 (311,335) (3,145) (314,480)
Net income 70,181 709 70,890
------------ --------- ------------
Balance at
December 31, 1994 10,805,251 (1,436) 10,803,815
Proceeds from issuance
of limited partnership
units (256,153.02 units) 25,615,302 - 25,615,302
Sales and offering expenses (3,458,068) - (3,458,068)
Cash distributions
to partners $ 9.48 $ .29 (2,543,783) (25,694) (2,569,477)
Limited partnership units
redeemed (265 units) (20,827) - (20,827)
Net income 75,307 761 76,068
------------ --------- ------------
Balance at
December 31, 1995 30,473,182 (26,369) 30,446,813
Page 14
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity (continued)
For the Years Ended December 31, 1996, 1995 and 1994
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
Cash distributions
to partners $ 10.75 $ - (4,119,354) (41,613) (4,160,967)
Limited partnership units
redeemed (728 units) (54,227) - (54,227)
Net loss (363,297) (3,670) (366,967)
------------ --------- ------------
Balance at
December 31, 1996 $ 25,936,304 $ (71,652) $ 25,864,652
============ ========= ============
See accompanying notes to consolidated financial statements.
Page 15
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ (366,967) $ 76,068 $ 70,890
---------- ----------- ---------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 848,649 636,487 -
Rental income - assigned operating lease receivables (2,412,605) (2,010,504) -
Finance income portion of receivables paid directly
to lenders by lessees (3,542,098) (1,217,732) -
Amortization of initial direct costs 1,349,977 828,154 12,748
Allowance for doubtful accounts 793,905 596,582 63,500
Net gain on sales or remarketing of equipment (338,574) (107,733) -
Income from equity investment in joint venture (6,392) (5,438) (1,217)
Distribution from investment in joint venture - 2,392 -
Interest expense on non-recourse financing
paid directly by lessees 3,123,670 1,829,401 -
Interest expense accrued on non-recourse debt - 21,618 -
Collection of principal - non-financed receivables 9,296,801 8,756,121 156,790
Income from leveraged lease, net (139,810) - -
Change in operating assets and liabilities:
Other assets 300,775 (689,040) (31,000)
Security deposits and deferred credits 2,678,612 249,843 925
Minority interest in joint ventures (1,001,736) (650,921) -
Accounts payable - other 305,351 332,840 115,578
Accounts payable to General Partner and affiliates, net(1,037,286) 157,144 87,613
Other, net 71,664 (29,079) (35,914)
---------- ----------- ---------
Total adjustments 10,290,903 8,700,135 369,023
---------- ----------- ---------
Net cash provided by operating activities 9,923,936 8,776,203 439,913
---------- ----------- ---------
Cash flows from investing activities:
Proceeds from sales of equipment 8,684,744 1,016,807 -
Initial direct costs (2,164,341) (2,117,000) (209,299)
Equipment and receivables purchased (16,511,707) (43,366,758) (3,534,083)
Investment in joint venture - - (37,462)
---------- ----------- ---------
Net cash used in investing activities (9,991,304) (44,466,951) (3,780,844)
---------- ----------- ----------
Cash flows from financing activities:
Proceeds from recourse debt and non-recourse securitized debt5,941,893 33,151,416 -
Proceeds from discounting receivables 3,171,188 - -
Principal payments on recourse debt and non-recourse
securitized debt (8,990,845) (17,968,192) -
Cash distributions to partners (4,160,967) (2,569,477) (314,480)
Redemption of limited partnership units (54,227) (20,827) -
Page 16
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows - Continued
1996 1995 1994
---- ---- ----
Issuance of limited partnership units,
net of offering expenses - 22,157,234 11,046,405
Proceeds received from affiliated minority
interest investors - 2,530,550 -
Refund of initial limited partner's capital contribution - - (1,000)
------------ ------------ ------------
Net cash provided by (used in) financing activities (4,092,958) 37,280,704 10,730,925
------------ ------------ ------------
Net increase (decrease) in cash (4,160,326) 1,589,956 7,389,994
Cash at beginning of year 8,981,950 7,391,994 2,000
------------ ------------ ------------
Cash at end of year $ 4,821,624 $ 8,981,950 $ 7,391,994
============ ============ ============
See accompanying notes to consolidated financial statements.
Page 17
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Statements of Cash Flows (Continued)
Supplemental Disclosures of Cash Flow Information
For the years ended December 31, 1996, 1995 and 1994 non-cash activities
included the following:
1996 1995 1994
---- ---- ----
Non-recourse notes payable assumed in purchase price $ 36,569,439 $ 48,476,665 $ 3,285,477
Accounts payable-equipment - 8,678,812 -
Fair value of equipment and receivables purchased
for debt and payables (36,569,439) (57,l55,477) (3,285,477)
Principal and interest on finance receivables
paid directly to lenders by lessees 13,819,924 4,585,638 -
Rental income - assigned operating lease receivables 2,412,065 2,010,504 -
Principal and interest on non-recourse financing
paid directly by lessees (16,231,989) (6,596,142) -
------------- ------------ -------------
$ - $ - $ -
============= ============ =============
Interest expense of $4,330,544, $3,003,633 and $2,142 for the years ended
December 31, 1996, 1995 and 1994 consisted of: interest expense on non-recourse
financing accrued or paid directly to lenders by lessees of $3,149,069,
$1,851,019 and $0, respectively, interest expense on non-recourse secured
financing accrued or paid of $1,133,394, $1,112,732 and $0, respectively, and
other interest of $48,081, $39,882 and $2,142, respectively.
See accompanying notes to consolidated financial statements.
Page 18
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1996
1. Organization
ICON Cash Flow Partners L.P. Six (the "Partnership") was formed on July 8,
1993 as a Delaware limited partnership with an initial capitalization of $2,000.
It was formed to acquire various types of equipment, to lease such equipment to
third parties and, to a lesser degree, to enter into secured financing
transactions. The Partnership commenced business operations on its initial
closing date, March 31, 1994 and by its final closing in 1995, 383,857.12 units
had been admitted into the Partnership with aggregate gross proceeds of
$38,385,712. During 1995, the Partnership redeemed 265 limited partnership units
and during 1996, the Partnership redeemed 728 limited partnership units leaving
382,864 limited partnership units outstanding at December 31, 1996.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership's equipment leases and financing
transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, received an
underwriting commission on the gross proceeds of sales of all units. The total
underwriting compensation paid by the Partnership, including underwriting
commissions, sales commissions, incentive fees, public offering expense
reimbursements and due diligence activities is limited to 13 1/2% of the gross
proceeds received from the sale of the units. Such offering expenses aggregated
$5,182,073 (including $2,111,214 paid to the General Partner or its affiliates),
and were charged directly to limited partners' equity.
Profits, losses, cash distributions and disposition proceeds will be
allocated 99% to the limited partners and 1% to the General Partner until each
limited partner has received cash distributions and disposition proceeds
sufficient to reduce its adjusted capital contribution account to zero and
receive, in addition, other distributions and allocations which would provide a
10% per annum cumulative return, compounded daily, on its outstanding adjusted
capital contribution account. After such time, the distributions will be
allocated 90% to the limited partners and 10% to the General Partner.
2. Significant Accounting Policies
Basis of Accounting and Presentation - The Partnership's records are
maintained on the accrual basis. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Leases - The Partnership accounts for owned equipment leased to third
parties as finance leases, leveraged leases or operating leases. For finance
leases, the Partnership records, at the inception of the lease, the total
minimum lease payments receivable, the estimated unguaranteed residual values,
the initial direct costs related to the leases and the related unearned income.
Unearned income represents the difference between the sum of the minimum lease
payments receivable plus the estimated unguaranteed residual minus the cost of
the leased equipment. Unearned income is recognized as finance income over the
terms of the related leases using the interest method. The Partnership's net
investment in leveraged leases consists of minimum lease payments receivable,
the estimated unguaranteed residual values and the initial direct costs related
to the leases, net of the unearned income and principal and interest on the
Page 19
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
related non-recourse debt. Unearned income is recognized as income from
leveraged leases over the life of the lease at a constant rate of return on the
positive net investment. For operating leases, equipment is recorded at cost and
is depreciated on the straight-line method over the lease terms to their
estimated fair market values at lease terminations. Related lease rentals are
recognized on the straight-line method over the lease terms. Billed and
uncollected operating lease receivables, net of allowance for doubtful accounts,
are included in other assets. Initial direct costs of finance leases and
leverage leases are capitalized and are amortized over the terms of the related
leases using the interest method. Initial direct costs of operating leases are
capitalized and amortized on the straight-line method over the lease terms. The
Partnership's leases have terms ranging from two to five years. Each lease is
expected to provide aggregate contractual rents that, along with residual
proceeds, return the Partnership's cost of its investments along with investment
income.
Investment in Financings - Investment in financings represent the gross
receivables due from the financing of equipment plus the initial direct costs
related thereto less the related unearned income. The unearned income is
recognized as finance income, and the initial direct costs are amortized, over
the terms of the receivables using the interest method. Financing transactions
are supported by a written promissory note evidencing the obligation of the user
to repay the principal, together with interest, which will be sufficient to
return the Partnership's full cost associated with such financing transaction,
together with some investment income. Furthermore, the repayment obligation is
collateralized by a security interest in the tangible or intangible personal
property.
Disclosures About Fair Value of Financial Instruments - Statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value
of Financial Instruments" requires disclosures about the fair value of financial
instruments. The fair value of certain debt obligations are disclosed in Note 8
to the consolidated financial statements. Fair value information with respect to
the Company's assets and certain non-recourse notes payable is not provided
because (i) SFAS No. 107 does not require disclosures about the fair value of
lease arrangements, (ii) the carrying value of financial assets other than lease
related investments approximates market value and (iii) fair value information
concerning certain non-recourse debt obligations is not practicable to estimate
without incurring excessive costs to obtain all the information that would be
necessary to derive a market interest rate on a lease by lease basis.
Equity Investment in Joint Venture - The Partnership accounts for its equity
investment in joint venture under the equity method of accounting. Therefore,
the Partnership's original investment was recorded at cost and is adjusted by
its share of earnings, losses and distributions thereafter.
Redemption of Limited Partnership Units - The General Partner consented to
the Partnership redeeming 265 limited partnership units during 1995 and 728
limited partnership units during 1996. The redemption amount was calculated
following the specified redemption formula in accordance with the Partnership
agreement. Redeemed units have no voting rights and do not share in
distributions. The Partnership agreement limits the number of units which can be
redeemed in any one year and redeemed units may not be reissued. Redeemed
limited partnership units are accounted for as a deduction from partners equity.
Allowance for Doubtful Accounts - The Partnership records a provision for
bad debts to provide for estimated credit losses in the portfolio. The allowance
for doubtful accounts is based on an analysis of delinquency, an assessment of
overall risk and a review of historical loss experience. The Partnership's
write-off policy is based on an analysis of the aging of the Partnership's
portfolio, a review of the non-performing receivables and leases, and prior
collection experience. An account is fully reserved for or written off when the
analysis indicates that the probability of collection of the account is remote.
Impairment of Estimated Residual Values - In March 1995, the Financial
Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which is
effective beginning in 1996.
Page 20
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The Partnership's existing policy with respect to impairment of estimated
residual values is to review, on a quarterly basis, the carrying value of its
residuals on an individual asset basis to determine whether events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable and, therefore, an impairment loss should be recognized. The events
or changes in circumstances which generally indicate that the residual value of
an asset has been impaired are (i) the estimated fair value of the underlying
equipment is less than the Partnership's carrying value or (ii) the lessee is
experiencing financial difficulties and it does not appear likely that the
estimated proceeds from disposition of the asset will be sufficient to satisfy
the remaining obligation to the non-recourse lender and the Partnership's
residual position. Generally in the latter situation, the residual position
relates to equipment subject to third party non-recourse notes payable where the
lessee remits their rental payments directly to the lender and the Partnership
does not recover its residual until the non-recourse note obligation is repaid
in full.
The Partnership measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Partnership from release or resale of the equipment. Generally,
quoted market prices are used as the basis for measuring whether an impairment
loss should be recognized.
As a result, the Partnership's policy with respect to measurement and
recognition of an impairment loss associated with estimated residual values is
consistent with the requirements of SFAS No. 121 and, therefore, the
Partnership's adoption of this Statement in the first quarter of 1996 had no
material effect on the financial statements.
Consolidation - The consolidated financial statements include the accounts
of the Partnership, its wholly owned subsidiary, ICON Six Corp., ICON Asset
Acquisition L.L.C. I and ICON Cash Flow L.L.C. II. All intercompany accounts and
transactions have been eliminated.
Income Taxes - No provision for income taxes has been made as the liability
for such taxes is that of each of the partners rather than the Partnership.
3. Net Investment in Leveraged Lease
During the year ended December 31, 1996, the partnership acquired, subject
to a leveraged lease, the residual interest in an aircraft. The aircraft is an
Airbus A-300B4-203, built in 1983. It is on lease with Airbus Industrie and has
a remaining lease term of six and one half years. The purchase price was
$19,595,956 consisting of $1,409,839 in cash and the assumption of non-recourse
senior debt of $12,495,956 and non-recourse junior debt ("junior debt") of
$5,690,161.
The net investment in the leveraged lease as of December 31, 1996 consisted of
the following:
Non-cancelable minimum rents receivable (net of principal and
interest on non-recourse debt) $ -
Estimated unguaranteed residual values 4,000,000
Initial direct costs 537,023
Unearned income (2,450,351)
----------
$2,086,672
Unearned income is recognized from the leveraged lease over the life of the
lease at a constant rate of return on the positive net investment.
Page 21
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Non-cancelable minimum annual amounts receivable relating to the leveraged
lease at December 31, 1996 are $23,274,651 and are due as follows:
1997 $ 3,395,120
1998 3,454,474
1999 3,516,692
2000 3,581,504
2001 3,649,761
Thereafter 5,677,100
------------
$ 23,274,651
The non-cancelable rents are being paid directly to the lenders by the
lessees to satisfy the principal and interest on the non-recourse debt assumed.
Prior to the acquisition, the free cash flow, the rent in excess of the
senior debt payments, was financed by an affiliated partnership, ICON Cash Flow
Partners, L.P., Series E, (i.e., the junior debt). On January 29, 1997, the
Partnership re-financed the junior debt with a third party.
4. Investment in Joint Ventures
The Partnership Agreement allows the Partnership to invest in joint
ventures with other limited partnerships sponsored by the General Partner
provided that the investment objectives of the joint ventures are consistent
with that of the Partnership.
ICON Asset Acquisition LLC
On February 3, 1995, the Partnership and two affiliates, ICON Cash Flow
Partners, L.P., Series B ("Series B"), and ICON Cash Flow Partners, L.P., Series
C ("Series C") formed ICON Asset Acquisition L.L.C. I ("ICON Asset Acquisition
LLC") as a special purpose limited liability company. ICON Asset Acquisition LLC
was formed for the purpose of acquiring, managing and securitizing a portfolio
of leases. The Partnership, Series B and Series C contributed $8,700,000 (77.68%
interest), $1,000,000 (8.93% interest) and $1,500,000 (13.39% interest),
respectively, to ICON Asset Acquisition LLC. ICON Asset Acquisition LLC
established a warehouse line of credit with ContiTrade Services Corp. with a
maximum amount available of $20,000,000.
On February 17, 1995, ICON Asset Acquisition LLC purchased 975 finance
leases from an existing portfolio from First Sierra Financial, Inc. utilizing
$16,273,793 of proceeds from the warehouse line (See Consolidated Statements of
Cash Flows - Proceeds from recourse debt - Financing activities), $10,857,427 in
cash contributions received from the Partnership and affiliates and $723,046 in
cash adjustments at closing, relating primarily to rents received by the seller
from lessees prior to closing and for the benefit of ICON Asset Acquisition LLC.
The purchase price of the portfolio totaled $27,854,266 (See Consolidated
Statements of Cash Flows - Included in Equipment and receivables purchased -
Investing activities) and the underlying equipment consists of graphic arts and
printing equipment. The terms of the leases in this portfolio range from 12 to
72 months. ICON Asset Acquisition LLC acquired lease contracts which were less
than 60 days delinquent, and, which met the Partnership's overall credit
underwriting criteria. The purchase price of the portfolio was determined by
discounting the future contractual cash flows. All such leases are net leases
and are reported and accounted for as finance leases. The Partnership's
consolidated financial statements include 100% of the accounts of ICON Asset
Acquisition LLC with the affiliates' share reflected as "Minority interests in
joint ventures."
Page 22
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
On September 5, 1995, ICON Asset Acquisition LLC securitized substantially
all of its portfolio. Proceeds from the securitization were used to pay down its
existing line of credit and excess proceeds were returned to the Partnership
based on its pro rata interest. ICON Asset Acquisition LLC became the beneficial
owner of a trust and the Prudential Insurance Company of America ("Prudential")
is treated as the lender to the trust. The trustee for the trust is Texas
Commerce Bank ("TCB"). In conjunction with this securitization the portfolio as
well as the General Partner's servicing capabilities were rated "A" by Duff &
Phelps, a nationally recognized rating agency. The General Partner, as servicer,
is responsible for managing, servicing, reporting on and administering the
portfolio. All monies received from the portfolio are remitted to TCB. TCB is
responsible for disbursing to Prudential its respective principal and interest
and to ICON Asset Acquisition LLC the excess of cash collected over debt service
from the portfolio. ICON Asset Acquisition LLC accounts for this investment as
an investment in finance leases and financings. Prudential's investment in the
trust is accounted for as non-recourse debt on ICON Asset Acquisition LLC's
books and records. All monies received and remitted to TCB from the securitized
portfolio are accounted for as a reduction in related finance lease and
financing receivables and all amounts paid to Prudential by TCB are accounted
for as a reduction of non-recourse debt.
On January 28, 1997, the Partnership borrowed $7,780,328 from ICON Cash
Flow Partners L.P., Series E, an affiliate of the Partnership. This is a short
term note, which bears interest at the rate of 11% and is expected to be paid in
full by May 31, 1997. The Partnership used the proceeds from the note to retire
the outstanding balance on its note payable non-recourse securitization with
TCB.
ICON Cash Flow LLC I
On September 21, 1994, the Partnership and an affiliate, ICON Cash Flow
Partners, L.P., Series E ("Series E"), formed a joint venture, ICON Cash Flow
Partners L.L.C. I ("ICON Cash Flow LLC I"), for the purpose of acquiring and
managing an aircraft currently on lease to Alaska Airlines, Inc. The aircraft is
a 1988 McDonnell Douglas MD- 83. The Partnership and Series E contributed
$37,682 (1%) and $3,730,493 (99%) of the cash required for such acquisition,
respectively, to ICON Cash Flow LLC I. ICON Cash Flow LLC I acquired the
aircraft, assuming $17,003,454 in non-recourse debt and the contributions
received from the Partnership and Series E. The purchase price of the
transaction totaled $20,771,628. The lease is an operating lease and the lease
term expires in March 1997. Profits, losses, excess cash and disposition
proceeds are allocated 1% to the Partnership and 99% to Series E. The
Partnership's 1% investment in ICON Cash Flow LLC I, which is accounted for
under the equity method, totaled $41,564 at December 31, 1996 and has been
reflected as "Equity investment in joint venture." The General Partner manages
and controls the business affairs of both the Partnership and Series E. As a
result of this common control and the Partnership's ability to influence the
activities of the joint venture, the Partnership's investment in the joint
venture is accounted for under the equity method. Information as to the
financial position and results of operations of ICON Cash Flow LLC I as of and
for the years ended December 31, 1996 and 1995 are summarized below:
December 31, 1996 December 31, 1995
Assets $ 18,442,590 $19,683,740
============ ===========
Liabilities $ 13,870,214 $15,272,065
============ ===========
Equity $ 4,572,376 $ 4,411,675
============ ===========
Year Ended Year Ended
December 31, 1996 December 31, 1995
Net income $ 639,200 $ 543,781
=========== ==========
Page 23
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Cash Flow LLC II
On March 31, 1995, the Partnership and an affiliate, ICON Cash Flow
Partners, L.P., Series E ("Series E"), formed a joint venture, ICON Cash Flow
Partners L.L.C. II ("ICON Cash Flow LLC II"), for the purpose of acquiring and
managing an aircraft currently on lease to Alaska Airlines, Inc. The aircraft is
a 1987 McDonnell Douglas MD-83. The Partnership and Series E contributed
$3,024,450 (99%) and $30,550 (1%) (See Consolidated Statements of Cash Flows -
Included in Proceeds from minority interest investors - Financing activities) of
the cash required for such acquisition, respectively, to ICON Cash Flow LLC II.
ICON Cash Flow LLC II acquired the aircraft, assuming $16,315,997 in
non-recourse debt (See Supplemental Disclosures of Cash Flow Information
Included in Non-recourse notes payable assumed in purchase price) and the
contributions received from the Partnership and Series E. The purchase price of
the transaction totaled $19,371,603. The cash portion of the purchase price
($3,055,000) is included in the Consolidated Statements of Cash Flows -
Equipment and receivables purchased Investing activities. The lease is an
operating lease and the lease term expires in March 1997. Profits, losses,
excess cash and disposition proceeds are allocated 99% to the Partnership and 1%
to Series E. The Partnership's consolidated financial statements include 100% of
ICON Cash Flow LLC II. Series E's investment in ICON Cash Flow LLC II has been
reflected as "Minority interest in joint venture."
5. Receivables Due in Installments
Non-cancelable minimum annual amounts due on finance leases, and financings
are as follows:
Finance
Year Leases Financings Total
1997 $ 18,680,227 $ 2,778,240 $ 21,458,467
1998 12,504,819 2,266,560 14,771,379
1999 7,787,382 1,537,970 9,325,352
2000 5,234,755 790,959 6,025,714
2001 1,158,168 363,293 1,521,461
Thereafter 280,085 - 280,085
------------ ----------- -------------
$ 45,645,436 $ 7,737,022 $ 53,382,458
============ =========== =============
Page 24
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
6. Investment in Operating Leases
The investment in operating leases at December 31, 1996 and 1995 consisted
of the following:
1996 1995
---- ----
Equipment cost, beginning of year $ 19,371,603 $ -
Equipment purchased - 19,371,603
Equipment sold - -
----------- ------------
Equipment cost, end of year 19,371,603 19,371,603
------------ ------------
Accumulated depreciation,
beginning of year (636,487) -
Depreciation (848,649) (636,487)
Equipment sold - -
----------- ------------
Accumulated depreciation, end of year (1,485,136) (636,487)
------------ ------------
Initial direct costs, net of accumulated
amortization, end of year 47,945 335,613
------------ ------------
Investment in operating leases, end of year $ 17,934,412 $ 19,070,729
============ ============
Page 25
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
7. Allowance for Doubtful Accounts
The allowance for doubtful accounts related to the investments in finance
leases and financings consisted of the following:
Finance
Leases Financings Total
Balance at December 31, 1993 $ - $ - $ -
Charged to operations 41,300 22,200 63,500
----------- ----------- ----------
Balance at December 31, 1994 41,300 22,200 63,500
Charged to operations 549,000 21,000 570,000
Accounts written-off (254,911) - (254,911)
Recoveries on accounts
previously written-off 26,552 - 26,552
----------- ----------- ----------
Balance at December 31, 1995 361,941 43,200 405,141
Accounts written-off (424,699) (275,522) (700,221)
Recoveries on accounts
previously written-off 43,905 - 43,905
Provision 750,000 - 750,000
Transfer within accounts (245,520) 245,520 -
----------- ----------- ----------
Balance at December 31, 1996 $ 485,627 $ 13,198 $ 498,825
=========== =========== ==========
8. Notes Payable
On January 29, 1996, the Partnership borrowed $5,941,893 by pledging lease
receivables and granting a security interest in the related collateral, or
equipment, of a specific group of leases and financing transactions. The
borrowing was recorded as a non-recourse note payable (securitized), bears
interest at a fixed rate of 7.58%, and is payable only from receivable proceeds
from the portfolio that has secured it.
Page 26
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Notes payable non-recourse consists of the following: (1) notes payable
non-recourse, which is being paid directly to the lenders by the lessees and (2)
notes payable non-recourse securitized, which is being paid down from
collections on receivables from lease transactions. These notes bear interest at
rates ranging from 5.18% to 10.75% and mature as follows:
Notes Payable
Non-Recourse Notes Payable
Securitized Non-Recourse Total
1997 $ 5,657,341 $ 23,393,502 $ 29,050,843
1998 3,790,903 6,468,746 10,259,649
1999 1,868,374 4,078,428 5,946,802
2000 692,330 3,768,137 4,460,467
2001 125,325 750,471 875,796
Thereafter - 542,392 542,392
------------- -------------- -------------
$ 12,134,273 $ 39,001,676 $ 51,135,949
============= ============== =============
Included in the above are $360,023 in notes payable non-recourse due to
various third parties in conjunction with the purchase and assignment of lease
transactions. The notes are payable only to the extent residual values are
realized which are estimated to occur as follows: $329,902, $8,803 and $21,318
in 1997, 1998 and 1999, respectively.
The fair value of the notes payable non-recourse securitized approximates
the carrying value recorded in the consolidated financial statements.
9. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the years ended December 31, 1996, 1995 and 1994
are as follows:
Charged to Charged to
Equity Capitalized Operations
Organization and offering $ 446,964 $ - $ -
Underwriting commissions 255,408 - -
Acquisition fees - 209,299 -
Management fees - - 8,827
Administrative expense reimbursements - - 6,872
----------- ---------- ----------
Year ended December 31, 1994 $ 702,372 $ 209,299 $ 15,699
=========== ========== ==========
Organization and offering 896,536 - -
Underwriting commissions 512,306 - -
Acquisition fees - 2,819,689 -
Management fees - - 696,096
Administrative expense reimbursements - - 381,471
----------- ---------- ----------
Year ended December 31, 1995 $ 1,408,842 $2,819,689 $1,077,567
=========== ========== ==========
Acquisition fees - 1,361,045 -
Management fees - - 1,333,394
Administrative expense reimbursements - - 642,276
----------- ---------- ----------
Year ended December 31, 1996 $ - $1,361,045 $1,975,670
=========== ========== ==========
Page 27
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The Partnership has investments in three joint ventures with other
Partnerships sponsored by the General Partner (See Note 2 for additional
information relating to the joint ventures).
Prior to the Partnership acquiring its investment in leveraged leases (see
Note 3), the related free cash flow, or the rent in excess of the senior debt
payments (i.e., the junior debt), was financed by ICON Cash Flow Partners, L.P.,
Series E, an affiliate of the Partnership. On January 29, 1997, the Partnership
re-financed the junior debt with an unrelated third party.
10. Subsidiary
On December 27, 1994, the Partnership formed a wholly owned subsidiary, ICON
Six Corp. , a Massachusetts corporation, formed for the purpose of managing
equipment under lease located in the state of Massachusetts. Massachusetts
partnerships are taxed on personal property at a higher rate than corporations,
and therefore, to mitigate such excess property tax, certain leases are being
managed by ICON Six Corp, a corporation. The Partnership's consolidated
financial statements include 100% of the accounts of ICON Six Corp. As of
December 31, 1996, there was no federal tax liability for ICON Six Corp.
11. Commitments and Contingencies
On March 11, 1997, the Partnership and two affiliates, ICON Cash Flow
Partners, L.P., Series D and ICON Cash Flow Partners L.P. Seven, (collectively
"the Members"), contributed and assigned $6,712,631, $8,671,773 and $6,582,150,
respectively, in equipment lease and finance receivables and residuals to ICON
Receivables 1997-A LLC ("1997-A"), a special purpose entity created by the
Members. The Members received a 29.8%, 40.8% and 29.4% interest, respectively,
in 1997-A based on the present value of their related contributions. 1997-A was
formed for the purpose of originating new leases, managing existing contributed
assets and, eventually, securitizing its portfolio. In order to fund the
acquisition of new leases, 1997-A obtained a warehouse borrowing facility from
Prudential Securities Credit Corporation (the "Facility"). Borrowings under the
Facility are based on the present value of the new leases, provided that in the
aggregate, the amount outstanding cannot exceed $20,000,000. Outstanding amounts
under the Facility bear interest equal to Libor plus 1.5%. Collections of
receivables from new leases are used to pay down the Facility, however, in the
event of a default, all of 1997-A's assets are available to cure such default.
The net proceeds from the expected securitization of these assets will be used
to pay-off the remaining Facility balance and the remaining proceeds will be
distributed to the Members in accordance with their membership interests. The
Partnership will account for its investment in 1997-A under the equity method.
The investment in 1997-A will be increased or decreased by its share of profit
or losses and decreased by any distributions received by 1997-A.
The Partnership has entered into remarketing and residual sharing agreements
with third parties. In connection therewith, remarketing or residual proceeds
received in excess of specified amounts will be shared with these third parties
based on specified formulas. As of December 31, 1996 and 1995, respectively, the
Partnership has not made any payments pursuant to such agreements.
Page 28
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
12. Tax Information (Unaudited)
The following table reconciles net income for financial reporting purposes
to income for federal income tax purposes for the years ended December 31:
1996 1995 1994
---- ---- ----
Net income (loss) per financial statements $ (366,967) $ 76,068 $ 70,890
Differences due to:
Direct finance leases 6,193,772 4,517,101 77,839
Depreciation (2,375,964) (2,493,537) (144,449)
Provision for losses 40,999 20,000 63,500
Loss on sale of equipment (3,118,755) (12,645) (91)
Other (947,139) 132,765 3,344
----------- ---------- -----------
Partnership income (loss) for
federal income tax purposes $ (574,054) $2,239,752 $ 71,033
=========== ========== ===========
As of December 31, 1996, the partners' capital accounts included in the
financial statements totaled $25,864,652 compared to the partners' capital
accounts for federal income tax purposes of $33,013,774 (unaudited). The
difference arises primarily from commissions reported as a reduction in the
partners' capital accounts for financial reporting purposes but not for federal
income tax purposes, and temporary differences related to direct finance leases,
depreciation and provision for losses.
Page 29
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant's General Partner
The General Partner, a Connecticut corporation, was formed in 1985. The
General Partner's principal offices are located at 600 Mamaroneck Avenue,
Harrison, New York 10528-1632, and its telephone number is (914) 698-0600. The
officers of the General Partner have extensive experience with transactions
involving the acquisition, leasing, financing and disposition of equipment,
including acquiring and disposing of equipment subject to operating leases and
full payout leases.
The manager of the Partnership's business is the General Partner. The
General Partner is engaged in a broad range of equipment leasing and financing
activities. Through its sales representatives and through various broker
relationships throughout the United States, the General Partner offers a broad
range of equipment leasing services, including tax-oriented leasing and
financing. In addition, the General Partner offers financial consulting and
placement services for which fees are earned as a result of successful
placements of various secured financings and mortgages.
The General Partner will perform certain functions relating to the
management of the equipment of the Partnership. Such services include the
collection of lease payments from the lessees of the equipment, releasing
services in connection with equipment which is off-lease, inspections of the
equipment, liaison with and general supervision of lessees to assure that the
equipment is being properly operated and maintained, supervision of maintenance
being performed by third parties, monitoring performance by the lessees of their
obligations under the leases and the payment of operating expenses.
The officers and directors of the General Partner are as follows:
Beaufort J.B. Clarke President, Chief Executive Officer and Director
Thomas W. Martin Executive Vice President and Director
Paul B. Weiss Executive Vice President
Gary N. Silverhardt Vice President and Chief Financial Officer
Neil A. Roberts Director
Tim Spring Director
Beaufort J. B. Clarke, age 50, is President, Chief Executive Officer and
Director of both the General Partner and ICON Securities Corp. (the
"Dealer-Manager"). Prior to his present position, Mr. Clarke was founder and the
President and Chief Executive Officer of Griffin Equity Partners, Inc. Mr.
Clarke formerly was an attorney with Shearman and Sterling and has over 20 years
of senior management experience in the United States leasing industry.
Page 30
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
Thomas W. Martin, age 42, is Executive Vice President of both the General
Partner and the Dealer-Manager. Prior to his present position, Mr. Martin was
the Executive Vice President and Chief Financial Officer of Griffin Equity
Partners, Inc. Mr. Martin has over 12 years of senior management experience in
the leasing business, particularly in the area of syndication.
Paul B. Weiss, age 36, is Executive Vice President of the General Partner.
Mr. Weiss has been exclusively engaged in lease portfolio acquisitions since
1988 from his affiliations with Griffin Equity Partners (as Executive Vice
President and co-founder in 1993); Gemini Financial Holdings (as Senior Vice
President-Portfolio Acquisitions and a member of the executive committee from
1991-1993) and Pegasus Capital Corporation (as Vice President-Portfolio
Acquisitions).
Gary N. Silverhardt, age 36, is Vice President and Chief Financial Officer
of the General Partner. He joined the General Partner in 1989. Prior to joining
the General Partner, Mr. Silverhardt was previously employed by Coopers &
Lybrand from 1985 to 1989, most recently as an Audit Supervisor. Prior to 1985,
Mr. Silverhardt was employed by Katz, Schneeberg & Co. from 1983 to 1985. Mr.
Silverhardt received a B.S. degree from the State University of New York at New
Paltz in 1983 and is a Certified Public Accountant.
Neil A. Roberts, age 47, has been the Managing Director of Summit Asset
Management Limited, a subsidiary of The Summit Group PLC, since 1991. Mr.
Roberts has over 25 years of experience in the leasing and finance business,
including positions with Kleinwort Benson Group, the United Kingdom subsidiary
of Hongkong and Shanghai Banking Corporation and Chemical Bank.
Timothy R. Spring, age 39, Commercial Director of Summit Asset Management
Limited, a subsidiary of The Summit Group PLC, since 1991. Mr. Spring has over
13 years of leasing experience in the United Kingdom. He was formerly Lease
Commercial Director at Kleinwort Benson Group, the United Kingdom subsidiary of
Hongkong and Shanghai Banking Corporation and Chemical Bank.
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner and its
affiliates were paid or accrued the following compensation and reimbursement for
costs and expenses for the years ended December, 31, 1996, 1995 and 1994.
Entity Capacity Type of Compensation 1996 1995 1994
------ -------- -------------------- ---- ---- ----
ICON Capital Corp. General Partner Organization and offering
expenses $ - $ 896,536 $ 446,964
ICON Capital Corp. Manager Acquisition fees 1,361,045 2,819,689 209,299
ICON Capital Corp. General Partner Management fees 1,333,394 696,096 8,827
ICON Securities Corp. Dealer-Manager Underwriting commissions - 512,306 255,408
ICON Capital Corp. General Partner Administrative expense
reimbursements 642,276 381,471 6,872
----------- ----------- ---------
$ 3,336,715 $ 5,306,098 $ 927,370
=========== =========== =========
Page 31
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The Partnership is a limited partnership and therefore does not have voting
shares of stock. No person of record owns, or is known by the Partnership to
own beneficially, more than 5% of any class of securities of the
Partnership.
(b) As of March 7, 1997, Directors and Officers of the General Partner do not
own any equity securities of the Partnership.
(c) The General Partner owns the equity securities of the Partnership set forth
in the following table:
Title Amount Beneficially Percent
of Class Owned of Class
General Partner Represents initially a 1% and potentially a 100%
Interest 10% interest in the Partnership's income,
gain and loss deductions.
Item 13. Certain Relationships and Related Transactions
None other than those disclosed in Item 11 herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedule - None.
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set
forth therein is included in the Financial Statements or Notes thereto.
3. Exhibits - The following exhibits are incorporated herein by reference:
(i) Amended and Restated Agreement of Limited Partnership (Incorporated by
reference to Exhibit A to Amendment No. 2 to Form S-1 Registration
Statement No. 2-99858 filed with the Securities and Exchange
Commission on December 12, 1986).
(ii) Certificate of Limited Partnership of the Partnership (Incorporated
herein by reference to Exhibit 3.01 to Form S-1 Registration Statement
No. 2-99858 filed with the Securities and Exchange Commission on
August 23, 1985 and to Exhibit 3.01 to Amendment No. 1 to Form S-1
Registration Statement No. 2-99858 filed with the Securities and
Exchange Commission on August 27, 1986).
(iii)Form of Management Agreement between the Partnership and Crossgate
Leasing, Inc. (Incorporated herein by reference to Exhibit 10.01 to
Amendment No. 1 to Form S-1 Registration Statement No. 2-99858 filed
with the Securities and Exchange Commission on August 27, 1986).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter
ended December 31, 1996.
Page 32
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1996
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the 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. 33-36376 (Registrant)
By its General Partner, ICON Capital Corp.
Date: March 28, 1997 Beaufort J.B. Clarke
---------------------------------------------
Beaufort J.B. Clarke
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole General Partner of the Registrant
Date: March 28, 1997 Beaufort J.B. Clarke
---------------------------------------------
Beaufort J.B. Clarke
President, Chief Executive Officer
and Director
Date: March 28, 1997 Thomas W. Martin
---------------------------------------------
Thomas W. Martin
Executive Vice President and Director
Date: March 28, 1997 Gary N. Silverhardt
---------------------------------------------
Gary N. Silverhardt
Vice President and Chief Financial Officer
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrant Which have not Registered Securities
Pursuant to Section 12 of the Act
No annual report or proxy material has been sent to security holders. An annual
report will be sent to the limited partners and a copy will be forwarded to the
Commission.
Page 33