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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1997
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the transition period from to
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Commission File Number 33-36376
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ICON Cash Flow Partners L.P. Six
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(Exact name of registrant as specified in its charter)
Delaware 13-3723089
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 Mamaroneck Avenue, Harrison, New York 10528-1632
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 698-0600
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class Name of each exchange on which registered
- --------------------------------- ------------------------------------------
- --------------------------------- ------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests, filed, pending effectiveness
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(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
TABLE OF CONTENTS
Item Page
PART I
1. Business 3-4
2. Properties 4
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 5
6. Selected Consolidated Financial and Operating Data 5-6
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
8. Consolidated Financial Statements and Supplementary Data 11-34
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 35
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 35-36
11. Executive Compensation 37
12. Security Ownership of Certain Beneficial Owners
and Management 37
13. Certain Relationships and Related Transactions 37
PART IV
14. Exhibits, Reports and Amendments 38
SIGNATURES 39
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
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, during 1996, the
Partnership redeemed 728 limited partnership units and during 1997, the
Partnership redeemed 2,186 units leaving 380,678.12 limited partnership units
outstanding at December 31, 1997. 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 fifth 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 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.
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
Lease and Financing Transactions
For the years ended December 31, 1997 and 1996, the Partnership purchased
and leased or financed $2,129,099 and $45,524,755 of equipment, respectively,
with a weighted average initial transaction term of 58 and 44 months,
respectively. Included in the summary of equipment cost by category below is
100% of the equipment cost acquired by two joint ventures in which the
Partnership has a 99% and 75% interest. The Partnership accounts for these
investments by consolidating 100% of the assets and liabilities of the joint
ventures and reflecting, as a liability, the related minority interests. At
December 31, 1997, the weighted average initial transaction term of the
portfolio was 55 months. A summary of the portfolio equipment cost by category
held at December 31, 1997 and 1996 is as follows:
December 31, 1997 December 31, 1996
------------------------ -----------------------
Category Cost Percent Cost Percent
Aircraft ................. $ 36,659,753 40.4% $ 38,967,559 32.5%
Computer systems ......... 16,694,856 18.4 21,569,899 17.9
Manufacturing & production 16,137,468 17.8 20,030,224 16.6
Telecommunications ....... 14,363,494 15.8 14,206,442 11.8
Printing ................. 2,127,113 2.3 17,627,457 14.6
Restaurant equipment ..... 1,272,845 1.4 2,341,604 1.9
Furniture and fixtures ... 1,092,758 1.3 2,210,360 1.8
Medical .................. 948,076 1.0 1,208,070 1.0
Retail systems ........... 693,753 .8 857,003 .7
Miscellaneous ............ 341,988 .4 639,015 .5
Material handling ........ 315,222 .3 396,668 .3
Video production ......... 94,324 .1 240,023 .3
Automotive ............... -- -- 105,571 .1
------------ ----- ------------ -----
$ 90,741,650 100.0% $120,399,895 100.0%
============ ===== ============ =====
The Partnership had two leases which individually represented greater than
10% of the total portfolio equipment cost at December 31, 1997. The leases are
with Airbus Industrie and Aerovias de Mexico, S.A. de C.V. ("Aero Mexico"), the
underlying equipment is aircraft, and they represented 21.6% and 18.8%,
respectively, of the total portfolio equipment cost at December 31, 1997.
Item 2. Properties
The Partnership neither owns nor leases office space or equipment for the
purpose of managing its day-to-day affairs. The General Partner has exclusive
control over all aspects of the business of the Partnership, including providing
any necessary office space. As such, the General Partner will be compensated for
services related to the management and administration of the Partnership's
business.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 1997.
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,
-------------- ---------------------------------
1997 1996
---- ----
Limited Partners 2,260 2,265
General Partner 1 1
Item 6. Selected Consolidated Financial and Operating Data
Year Ended December 31,
-----------------------------------------------------------
1997 1996 1995 1994
---- ---- ---- ----
Total revenue $ 6,510,932 $ 9,576,756 $ 6,729,913 $ 203,858
============== ============= ============= =============
Net income (loss) $ 35,620 $ (366,967) $ 76,068 $ 70,890
============== ============= ============= =============
Net income (loss) allocable to
limited partners $ 35,264 $ (363,297) $ 75,307 $ 70,181
============== ============= ============= =============
Net income (loss) allocable
to the General Partner $ 356 $ (3,670) $ 761 $ 709
============== ============= ============= =============
Weighted average limited
partnership units outstanding 381,687 383,196 260,453 31,755
============== ============= ============= =============
Net income (loss) per weighted
average limited partnership unit $ .09 $ (.95) $ .29 $ 2.21
============= ============= ============= ============
Distributions to limited partners $ 4,102,940 $ 4,119,354 $ 2,543,783 $ 311,335
============== ============= ============= =============
Distribution to the General Partner $ 41,444 $ 41,613 $ 25,694 $ 3,145
============== ============= ============= =============
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
December 31,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Total assets $ 54,837,228 $ 81,805,142 $ 103,090,950 $ 14,381,964 $ 417,328
============== ============== ============== ============== =============
Partners' equity $ 21,605,338 $ 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.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
Item 7. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership's portfolio consisted of a net investment in finance
leases, operating leases, financings, equity investment in joint ventures and
leveraged leases of 55%, 33%, 4%, 4% and 4% of total investments at December 31,
1997, respectively, and 65%, 23%, 9%, less than 1% and 3% of total investments
at December 31, 1996, respectively.
Results of Operations
Years Ended December 31, 1997 and 1996
For the years ended December 31, 1997 and 1996, the Partnership
purchased and leased or financed equipment with an initial cost of $2,129,099
and $45,524,755, respectively, to 33 and 242 lessees or equipment users,
respectively.
Revenues for the year ended December 31, 1997 were $6,510,932,
representing a decrease of $3,065,824 or 32% from 1996. The decrease in revenues
was due to a decrease in finance income of $3,212,672 or 51%, a decrease in
rental income of $164,370 or 7%, a decrease in interest income and other of
$251,900 or 71% and a decrease in net gain on sales or remarketing of equipment
of $280,051 or 83% from 1996. These decreases were partially offset by an
increase in income from equity investment in joint venture of $459,665 and an
increase in income from leveraged leases of $383,504 from 1996. The decrease in
finance income resulted from the decrease in the average size of the finance
lease portfolio from 1996 to 1997. Rental income decreased from 1996 to 1997 due
to reduced rentals as a result of the Partnerships' remarketing of aircraft
formally on lease to Alaska Airlines, Inc. The new lease is with Aerovias de
Mexico, S.A. de C.V. ("Aero Mexico"). Interest income and other decreased due to
a decrease in the average cash balance and the reduction in late charges from
1996 to 1997. The net gain on sales or remarketing decreased due to a decrease
in the number of leases maturing, and the underlying equipment being sold or
remarketed. Income from equity investment in joint ventures increased as a
direct result of the Partnership's March and September 1997 contribution to ICON
Receivables 1997-A LLC. These contributions consisted of equipment lease and
finance receivables, residuals and cash totaling $11,129,804. Income from
leveraged leases increased due to the Partnership recognizing income for the
entire twelve month period as compared to three months in 1996
Expenses for the year ended December 31, 1997 were $6,475,312, representing
a decrease of $3,468,411 or 35% from 1996. The decrease in expenses was due to a
decrease in interest expense of $1,681,987 or 39%, a decrease in provision for
bad debt of $566,726 or 76%, a decrease of general and administrative expense of
$479,006 or 73% and a decrease in amortization of initial direct costs of
$278,321 or 21%, a decrease in management fees of $240,680 or 18%, a decrease in
depreciation expense of $103,374 or 12%, a decrease in administrative expense
reimbursements of $94,894 or 15% and a decrease in minority interest in joint
ventures of $23,423 or 75%. Interest expense decreased due to a decrease in the
average debt outstanding from 1996 to 1997. General and administrative,
amortization of initial direct costs, management fees, administrative expense
reimbursements and depreciation decreased due to a decrease in the average size
of the portfolio from 1996 to 1997 and as the result of the Partnership
contributing a portion of its portfolio to a joint venture. Minority interest in
joint venture
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
decreased as a result of the Partnership's acquisition of ICON Asset Acquisition
LLC's entire investment in leases during 1997. Based on an analysis of
delinquency, an assessment of overall risk and historical loss experience, it
was determined that a $183,274 provision for bad debt was required for the
twelve months ended December 31, 1997.
Net income (loss) for the years ended December 31, 1997 and 1996 was
$35,620 and ($366,967), respectively. The net income (loss) per weighted average
limited partnership unit was $.09 and ($.95), 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.
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.
Liquidity and Capital Resources
The Partnership's primary sources of funds for the years ended December 31,
1997, 1996 and 1995 were net cash provided by operations of $12,075,547,
$9,923,936 and $8,776,203, respectively, proceeds from sales of equipment of
$4,336,675, $8,684,744 and $1,016,007, respectively, proceeds received from
affiliated minority investors of $2,530,550 in 1995 and capital contributions,
net of offering expenses of
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
$22,157,234 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, 1997 and 1996 of
$31,187,487 and $51,135,949, respectively, as a result of borrowings secured by
equipment, and such amounts consisted of $28,811,864 and $38,641,653 in
non-recourse notes which are being paid directly to the lenders by the lessees,
respectively, $131,299 and $360,023 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, $2,244,324 and $4,159,247
in notes payable non-recourse securitized, which are being paid from proceeds
from the lease portfolio that secured the financing and $0 and $7,975,026,
respectively, in debt related to a warehouse line of credit, which was repaid
from proceeds from the lease portfolio that secured the line of credit.
Cash distributions to limited partners for the years ended December 31,
1997 and 1996, which were paid monthly, totaled $4,102,940 and $4,119,354,
respectively, of which $35,264 and $0 was investment income and $4,067,676 and
$4,119,354 was a return of capital, respectively. The monthly annualized cash
distribution rate to limited partners in 1997 and 1996 was 10.75%, of which .09%
and 0% was investment income and 10.66% and 10.75% was a return of capital,
respectively. The limited partner distribution per weighted average unit
outstanding in 1997 and 1996 was $10.75, of which $.09 and $0 was investment
income and $10.66 and $10.75 was a return of capital, respectively.
In March 1997 the Partnership, ICON Cash Flow Partners, L.P., Series D
("Series D"), and ICON Cash Flow Partners L.P. Seven ("L.P. Seven"), contributed
and assigned equipment lease and finance receivables and residuals with a net
book value of $5,304,010, $4,805,767 and $5,391,216 and cash of $300,000,
$125,000 and $275,000, respectively to ICON Receivables 1997-A LLC ("1997-A"), a
special purpose entity created for the purpose of originating new leases,
managing existing contributed assets and securitizing its portfolio. In order to
fund the acquisition of new leases, 1997-A obtained a warehouse borrowing
facility from Prudential Securities Credit Corporation (the "1997-A Facility").
Borrowings under the 1997-A Facility were based on the present value of the new
leases. Outstanding amounts under the 1997-A Facility bore interest equal to
Libor plus 1.5%.
On September 19, 1997 the Partnership, ICON Cash Flow Partners, L.P.,
Series E ("Series E") and L.P. Seven contributed and assigned equipment lease
and finance receivables and residuals with a net book value of $5,225,794,
$15,547,305 and $0 and cash of $300,000, $740,000 and $484,244, respectively to
1997-A. The Partnership, Series D, Series E and L.P. Seven (Collectively the
"1997-A members") received a 31.03%, 17.81%, 31.19% and 19.97% interest,
respectively, in 1997-A based on the present value of their related
contributions.
On September 19, 1997, 1997-A securitized substantially all of its
equipment leases and finance receivables and residuals. The net proceeds from
the securitization totaled $47,140,183, of which $16,658,877 was used to pay
down the 1997-A Facility, and the remaining proceeds, after establishing
reserves for expenses, were distributed to the 1997-A Members based on their
respective interests. 1997-A became the beneficial owner of a trust. The trustee
for the trust is Texas Commerce Bank ("TCB"). In conjunction with this
securitization, the portfolio as well as the General Partner's servicing
capabilities
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
were rated "AA" by Duff & Phelps and Fitch, both nationally recognized rating
agencies. The General Partner, as servicer, is responsible for managing,
servicing, reporting on and administering the portfolio. 1997-A remits all
monies received from the portfolio to TCB. TCB is responsible for disbursing to
the noteholders their respective principal and interest and to 1997-A the excess
of cash collected over debt service from the portfolio. The 1997-A Members
receive their pro rata share of any excess cash on a monthly basis from 1997-A.
The Partnership's share of the net proceeds from the securitization totaled
$9,543,757. The Partnership accounts for its investment in 1997-A under the
equity method of accounting. The Partnership's original investment was recorded
at cost and is adjusted by its share of earnings, losses and distributions
thereafter.
In August 1997 the Partnership, Series E and L.P. Seven (collectively, the
"1997-B Members") formed ICON Receivables 1997-B LLC ("1997-B"), for the purpose
of originating lease transactions and ultimately securitizing its portfolio. The
1997-B Members contributed $250,000 (8.33% interest), $2,250,000 (75.00%
interest) and $500,000 (16.67% interest), respectively to 1997-B. In order to
fund the acquisition of additional leases, 1997-B obtained a warehouse borrowing
facility from Prudential Securities Credit Corporation (the "1997-B Facility").
Borrowings under the 1997-B Facility are based on the present value of the new
leases. Outstanding amounts under the 1997-B Facility bear interest equal to
Libor plus 1.5%. Collections of receivables from leases are used to pay down the
1997-B Facility, however, in the event of a default, all of 1997-B'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 1997-B
Facility balance and the remaining proceeds will be distributed to the 1997-B
Members in accordance with their membership interests. After securitization, the
1997-B Members may receive, in accordance with their membership interests,
additional proceeds if 1997-B generates execess cash (cash after payment of debt
and expenses).
As of December 31, 1997, 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 closings of limited
partnership units, operations, sales of equipment and borrowings, the
Partnership will 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.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page Number
Independent Auditors' Report 13
Consolidated Balance Sheets as of December 31, 1997 and 1996 14-15
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995 16
Consolidated Statements of Changes in Partners' Equity
for the Years Ended December 31, 1997, 1996 and 1995 17-18
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 19-21
Notes to Consolidated Financial Statements 12-34
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1997
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Partners
ICON Cash Flow Partners L.P. 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, 1997 and
1996, and the related consolidated statements of operations, changes in
partners' equity and cash flows for each of the years in the three-year period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Cash Flow
Partners L.P. Six as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
----------------------------------
KPMG Peat Marwick LLP
March 27, 1998
New York, New York
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
1997 1996
---- ----
Assets
Cash .................................... $ 4,000,250 $ 4,821,624
------------ ------------
Investment in finance leases
Minimum rents receivable ............. 20,412,591 45,645,436
Estimated unguaranteed residual values 10,714,403 11,924,455
Initial direct costs ................. 826,251 1,624,309
Unearned income ...................... (4,216,807) (9,073,073)
Allowance for doubtful accounts ...... (110,120) (485,627)
------------ ------------
27,626,318 49,635,500
Investment in operating leases
Equipment, at cost ................... 19,100,646 19,371,603
Accumulated depreciation ............. (2,230,411) (1,485,136)
Initial direct costs ................. -- 47,945
------------ ------------
16,870,235 17,934,412
Investment in financings
Receivables due in installments ...... 2,029,854 7,737,022
Initial direct costs ................. 21,918 138,928
Unearned income ...................... (186,139) (1,165,426)
Allowance for doubtful accounts ...... (5,823) (13,198)
------------ ------------
1,859,810 6,697,326
------------ ------------
Equity investment in joint ventures ..... 2,178,419 45,724
------------ ------------
Investment in leveraged lease, net ...... 1,845,641 2,086,672
------------ ------------
Other assets ............................ 456,555 583,884
------------ ------------
Total assets ............................ $ 54,837,228 $ 81,805,142
============ ============
(continued on next page)
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Balance Sheets (continued)
(unaudited)
1997 1996
---- ----
Liabilities and Partners' Equity
Note payable - non-recourse - secured financing $ 2,244,324 $ 4,159,247
Notes payable - non-recourse ................... 28,943,163 39,001,676
Note payable - warehouse line of credit ........ -- 7,975,026
Security deposits and deferred credits ......... 1,756,094 2,929,380
Accounts payable - other ....................... 189,835 753,769
Accounts payable - General Partner ............. 51,323 --
Minority interest in joint venture ............. 47,151 877,893
Accounts payable - equipment ................... -- 243,499
------------ ------------
33,231,890 55,940,490
Commitments and Contingencies
Partners' equity (deficiency)
General Partner ............................. (112,740) (71,652)
Limited partners (380,678 and 382,864
units outstanding, $100 per unit original
issue price in 1997 and 1996, respectively) 21,718,078 25,936,304
------------ ------------
Total partners' equity .................... 21,605,338 25,864,652
------------ ------------
Total liabilities and partners' equity ......... $ 54,837,228 $ 81,805,142
============ ============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31,
1997 1996 1995
---- ---- ----
Revenues
Finance income .............................. $ 3,114,227 $ 6,326,899 $ 4,239,783
Rental income ............................... 2,248,235 2,412,605 2,010,504
Income from leveraged lease, net ............ 523,314 139,810 --
Income from equity investment in
joint ventures ............................ 466,057 6,392 5,438
Interest income and other ................... 100,576 352,476 366,455
Net gain on sales or remarketing of equipment 58,523 338,574 107,733
----------- ----------- -----------
Total revenues .............................. 6,510,932 9,576,756 6,729,913
----------- ----------- -----------
Expenses
Interest .................................... 2,648,557 4,330,544 3,003,633
Management fees - General Partner ........... 1,092,714 1,333,394 696,096
Amortization of initial direct costs ........ 1,071,656 1,349,977 828,154
Depreciation ................................ 745,275 848,649 636,487
Administrative expense reimbursements
- General Partner ......................... 547,382 642,276 381,471
Provision for bad debts ..................... 183,274 750,000 570,000
General and administrative .................. 178,464 657,470 360,235
Minority interest in joint venture .......... 7,990 31,413 177,769
----------- ----------- -----------
Total expenses .............................. 6,475,312 9,943,723 6,653,845
----------- ----------- -----------
Net income (loss) .............................. $ 35,620 $ (366,967) $ 76,068
=========== =========== ===========
Net income (loss) allocable to:
Limited partners ............................ 35,264 $ (363,297) $ 75,307
General Partner ............................. 356 (3,670) 761
----------- ----------- -----------
$ 35,620 $ (366,967) $ 76,068
=========== =========== ===========
Weighted average number of limited
partnership units outstanding ............... 381,687 383,196 260,453
=========== =========== ===========
Net income (loss) per weighted average
limited partnership unit .................... $ .09 $ (.95) $ .29
=========== =========== ===========
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 1997, 1996 and 1995
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
Balance at
December 31, 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
(continued on next page)
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, 1997, 1996 and 1995
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
Cash distributions
to partners $ 10.66 $ .09 (4,102,940) (41,444) (4,144,384)
Limited partnership units
redeemed (2,186 units) (150,550) - (150,550)
Net loss 35,264 356 35,620
----------- --------- -----------
Balance at
December 31, 1997 $21,718,078 $(112,740) $21,605,338
=========== ========= ===========
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 35,620 $ (366,967) $ 76,068
----------- ------------ ------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 745,275 848,649 636,487
Rental income - assigned operating lease receivables (2,248,235) (2,412,605) (2,010,504)
Finance income portion of receivables paid directly
to lenders by lessees (2,544,328) (3,542,098) (1,217,732)
Amortization of initial direct costs 1,071,656 1,349,977 828,154
Allowance for doubtful accounts (382,882) 793,905 596,582
Net gain on sales or remarketing of equipment (58,523) (338,574) (107,733)
Income from equity investment in joint ventures (466,057) (6,392) (5,438)
Distribution from investment in joint ventures 9,742,849 - 2,392
Interest expense on non-recourse financing
paid directly by lessees 2,408,565 3,123,670 1,829,401
Interest expense accrued on non-recourse debt - - 21,618
Collection of principal - non-financed receivables 6,608,028 9,296,801 8,756,121
Income from leveraged lease, net (523,314) (139,810) -
Change in operating assets and liabilities:
Other assets 2,012 300,775 (689,040)
Security deposits and deferred credits (1,173,286) 2,678,612 249,843
Minority interest in joint venture (830,742) (1,001,736) (650,921)
Accounts payable - other (563,934) 305,351 332,840
Accounts payable to General Partner
and affiliates, net 69,191 (1,037,286) 157,144
End of lease settlement proceeds 270,957 - -
Other, net (87,305) 71,664 (29,079)
----------- ------------ ------------
Total adjustments 12,039,927 10,290,903 8,700,135
----------- ------------ ------------
Net cash provided by operating activities 12,075,547 9,923,936 8,776,203
----------- ------------ ------------
Cash flows from investing activities:
Equipment and receivables purchased (2,198,713) (16,511,707) (43,366,758)
Proceeds from sales of equipment 4,336,675 8,684,744 1,016,807
Investment in joint ventures (850,000) - -
Initial direct costs - (2,164,341) (2,117,000)
----------- ------------ ------------
Net cash provided by (used in)
investing activities 1,287,962 (9,991,304) (44,466,951)
----------- ------------ ------------
(continued on next page)
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows - Continued
1997 1996 1995
---- ---- ----
Cash flows from financing activities:
Proceeds from recourse debt and
non-recourse securitized debt ....................... -- 5,941,893 33,151,416
Principal payments on warehouse line of credit and
recourse debt and non-recourse
securitized debt .................................... (9,889,949) (8,990,845) (17,968,192)
Proceeds received from affiliate loan ................. 7,780,328 -- --
Principal payments on affiliate loan .................. (7,780,328) -- --
Cash distributions to partners ........................ (4,144,384) (4,160,967) (2,569,477)
Redemption of limited partnership units ............... (150,550) (54,227) (20,827)
Proceeds from discounting receivables ................. -- 3,171,188 --
Issuance of limited partnership units,
net of offering expenses ............................ -- -- 22,157,234
Proceeds received from affiliated minority
interest investors .................................. -- -- 2,530,550
------------ ------------ ------------
Net cash provided by (used in) financing activities (14,184,883) (4,092,958) 37,280,704
------------ ------------ ------------
Net increase (decrease) in cash .......................... (821,374) (4,160,326) 1,589,956
Cash at beginning of year ................................ 4,821,624 8,981,950 7,391,994
------------ ------------ ------------
Cash at end of year ...................................... $ 4,000,250 $ 4,821,624 $ 8,981,950
============ ============ ============
See accompanying notes to consolidated financial statements.
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, 1997, 1996 and 1995 non-cash activities
included the following:
1997 1996 1995
---- ---- ----
Decrease in investment in finance leases and
financings due to contribution to joint venture $ 10,625,730 $ -- $ --
Increase in equity investment in joint venture ... (10,625,730) -- --
Principal and interest on finance receivables
paid directly to lenders by lessees ............ 9,689,813 13,819,924 4,585,638
Rental income - assigned operating
lease receivables .............................. 2,248,235 2,412,065 2,010,504
Principal and interest on non-recourse financing
paid directly by lessees ....................... (11,938,048) (16,231,989) (6,596,142)
Decrease in investment in finance leases
due to terminations ............................ 715,745 -- --
Decrease in notes payable non-recourse due
to terminations ................................ (715,745) -- --
Non-recourse notes payable assumed in
purchase price ................................. 186,715 36,569,439 48,476,665
Accounts payable-equipment ....................... -- -- 8,678,812
Fair value of equipment and receivables purchased
for debt and payables .......................... (186,715) (36,569,439) (57,155,477)
------------ ------------ ------------
$ -- $ -- $ --
============ ============ ============
Interest expense of $2,648,557, $4,330,544 and $3,003,633 for the years
ended December 31, 1997, 1996 and 1995 consisted of: interest expense on
non-recourse financing accrued or paid directly to lenders by lessees of
$2,408,565, $3,123,670 and $1,851,019, respectively, interest expense on
warehouse line of credit and non-recourse secured debt accrued or paid of
$232,325, $1,133,394 and $1,112,732, respectively, and other interest of $7,667,
$73,480 and $39,882, respectively.
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1997
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, during 1996, the Partnership redeemed 728 limited partnership units and
during 1997, the Partnership redeemed 2,186 units leaving 380,678.12 limited
partnership units outstanding at December 31, 1997.
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.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Leases - The Partnership accounts for owned equipment leased to third
parties as finance leases, leveraged leases or operating leases. For finance
leases, the Partnership records, at the inception of the lease, the total
minimum lease payments receivable, the estimated unguaranteed residual values,
the initial direct costs related to the leases and the related unearned income.
Unearned income represents the difference between the sum of the minimum lease
payments receivable plus the estimated unguaranteed residual minus the cost of
the leased equipment. Unearned income is recognized as finance income over the
terms of the related leases using the interest method. The Partnership's net
investment in leveraged leases consists of minimum lease payments receivable,
the estimated unguaranteed residual values and the initial direct costs related
to the leases, net of the unearned income and principal and interest on the
related non-recourse debt. Unearned income is recognized as income from
leveraged leases over the life of the lease at a constant rate of return on the
positive net investment. For operating leases, equipment is recorded at cost and
is depreciated on the straight-line method over the lease terms to their
estimated fair market values at lease terminations. Related lease rentals are
recognized on the straight-line method over the lease terms. Billed and
uncollected operating lease receivables, net of allowance for doubtful accounts,
are included in other assets. Initial direct costs of finance leases and
leverage leases are capitalized and are amortized over the terms of the related
leases using the interest method. Initial direct costs of operating leases are
capitalized and amortized on the straight-line method over the lease terms. The
Partnership's leases have terms ranging from two to five years. Each lease is
expected to provide aggregate contractual rents that, along with residual
proceeds, return the Partnership's cost of its investments along with investment
income.
Investment in Financings - Investment in financings represent the gross
receivables due from the financing of equipment plus the initial direct costs
related thereto less the related unearned income. The unearned income is
recognized as finance income, and the initial direct costs are amortized, over
the terms of the receivables using the interest method. Financing transactions
are supported by a written promissory note evidencing the obligation of the user
to repay the principal, together with interest, which will be sufficient to
return the Partnership's full cost associated with such financing transaction,
together with some investment income. Furthermore, the repayment obligation is
collateralized by a security interest in the tangible or intangible personal
property.
Disclosures About Fair Value of Financial Instruments - Statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value
of Financial Instruments" requires disclosures about the fair value of financial
instruments. Fair value information with respect to the Company's assets and
liabilities is not provided because (i) SFAS No. 107 does not require
disclosures about the fair value of lease arrangements and (ii) the carrying
value of financial assets, other than lease related investments, and certain
other liabilities 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 Ventures - The Partnership accounts for its
equity investment in joint ventures 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.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Redemption of Limited Partnership Units - The General Partner consented to
the Partnership redeeming 728 limited partnership units during 1996 and 2,186
limited partnership units during 1997. 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.
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.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Consolidation - The consolidated financial statements include the accounts
of the Partnership, its wholly owned subsidiary, ICON Six Corp. 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.
New Accounting Pronouncement - In June 1996 the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 125 establishes, among other things,
criteria for determining whether a transfer of financial assets is a sale or a
secured borrowing. The adoption of SFAS No. 125 is not expected to have a
material impact on the Partnership's net income, partners' equity or total
assets.
3. Net Investment in Leveraged Lease
In September 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, which is on lease to Airbus Industrie and has a remaining lease
term of five 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 $5,590,161.
The net investment in the leveraged lease as of December 31, 1997 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 399,399
Unearned income (2,553,758)
------------
$ 1,845,641
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.
Non-cancelable minimum annual amounts receivable relating to the leveraged
lease at December 31, 1997 are $19,879,531 and are due as follows:
1998 $ 3,454,474
1999 3,516,692
2000 3,581,504
2001 3,649,761
2002 3,746,496
Thereafter 1,930,604
--------------
$ 19,879,531
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Principal and interest on non-recourse debt assumed in the purchase of the
leveraged leases is $19,879,531 at December 31, 1997 and matures as follows:
1998 $ 3,454,474
1999 3,516,691
2000 3,581,501
2001 3,649,761
2002 3,746,495
Thereafter 1,930,609
--------------
$ 19,879,531
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 ("Series 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. On February 17, 1995, ICON Asset
Acquisition LLC purchased an existing portfolio of leases. The purchase price of
the portfolio totaled $27,854,266, and the underlying equipment consists of
graphic arts and printing equipment. On September 5, 1995, ICON Asset
Acquisition LLC securitized substantially all of its portfolio and became the
beneficial owner of a trust and the Prudential Insurance Company of America
("Prudential") the lender to the trust. On January 28, 1997, ICON Asset
Acquisition LLC re-financed its outstanding $7,780,000 obligation to Prudential
with proceeds it received from a loan from Series E, an affiliate of the
Partnership. The Partnership's consolidated financial statements included 100%
of the accounts of ICON Asset Acquisition LLC with the affiliates' share
reflected as "Minority interests in joint ventures."
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
On September 19, 1997 the Partnership purchased, from Series B and C,
their investment in ICON Asset Acquisition LLC. Series B and C's investments
were purchased at book value, which approximated market value at that time. ICON
Asset Acquisition LLC became a 100% owned subsidiary of the Partnership. ICON
Asset Acquisition LLC paid its obligation ($4,730,328) to Series E on September
19, 1997. The Partnership transferred all of ICON Asset Acquisition LLC's assets
to its own account and dissolved ICON Asset Acquisition LLC in the fourth
quarter 1997.
ICON Cash Flow LLC I
In September 1994 the Partnership and an affiliate, 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 which was on lease to Alaska
Airlines, Inc. The Partnership and Series E contributed 1% and 99% of the cash
required for such acquisition, respectively, to ICON Cash Flow LLC I. ICON Cash
Flow LLC I acquired the aircraft, assuming non-recourse debt and utilizing
contributions received from the Partnership and Series E. The lease was an
operating lease. Profits, losses, excess cash and disposition proceeds are
allocated 1% to the Partnership and 99% to Series E. The Partnership's
investment in the joint venture is accounted for under the equity method. The
original lease term expired in April 1997 and Alaska Airlines, Inc. returned the
aircraft. In June 1997 ICON Cash Flow LLC I released the aircraft (formally on
lease to Alaska Airlines, Inc.). The aircraft was leased to Aero Mexico. The new
lease is an operating lease which expires in October 2002. The rents from the
lease are paid directly to the non-recourse debt holder.
Information as to the financial position and results of operations of ICON
Cash Flow LLC I as of and for the year ended December 31, 1997 is summarized
below:
December 31, 1997
Assets $ 16,870,235
================
Liabilities $ 12,155,143
================
Equity $ 4,715,092
================
Year Ended
December 31, 1997
Net income $ 744,474
================
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Cash Flow LLC II
In March 1995 the Partnership and an affiliate, 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 which was on lease to Alaska
Airlines, Inc. The Partnership and Series E contributed 99% and 1% of the cash
required for such acquisition, respectively, to ICON Cash Flow LLC II. ICON Cash
Flow LLC II acquired the aircraft, assuming non-recourse debt and utilizing
contributions received from the Partnership and Series E. The lease was an
operating lease. Profits, losses, excess cash and disposition proceeds were
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." The original lease term expired in April 1997 and Alaska
Airlines, Inc. returned the aircraft. In June 1997 ICON Cash Flow LLC II
remarketed the aircraft (formally on lease to Alaska Airlines, Inc.). The
aircraft was leased to Aero Mexico. The new lease is an operating lease which
expires in September 2002.
ICON Receivables 1997-A LLC
In March 1997 the Partnership, ICON Cash Flow Partners, L.P., Series D
("Series D"), and ICON Cash Flow Partners L.P. Seven ("L.P. Seven"), contributed
and assigned equipment lease and finance receivables and residuals with a net
book value of $5,304,010, $4,805,767 and $5,391,216 and cash of $300,000,
$125,000 and $275,000, respectively to ICON Receivables 1997-A LLC ("1997-A"), a
special purpose entity created for the purpose of originating new leases,
managing existing contributed assets and, eventually, securitizing its
portfolio. To fund the acquisition of new leases, 1997-A obtained a warehouse
borrowing facility from Prudential Securities Credit Corporation (the "1997-A
Facility"). Borrowings under the 1997-A Facility were based on the present value
of the new leases. Outstanding amounts under the 1997-A Facility bore interest
equal to Libor plus 1.5%.
On September 19, 1997 the Partnership, Series E and L.P. Seven contributed
and assigned equipment lease and finance receivables and residuals with a net
book value of $5,225,794, $15,547,305 and $0 and cash of $300,000, $740,000 and
$484,244, respectively to 1997-A. The Partnership, Series D, Series E and L.P.
Seven (collectively the "1997-A Members") received a 31.03%, 17.81% 31.19% and
19.97% interest, respectively, in 1997-A based on the present value of their
related contributions.
On September 19, 1997, 1997-A securitized substantially all of its
equipment leases and finance receivables and residuals. The net proceeds from
the securitization totaled $47,140,183, of which $16,658,877 was used to pay
down the 1997-A Facility, and the remaining proceeds, after establishing
reserves for expenses, were distributed to the 1997-A Members based on their
respective interests. The Partnership's share of the gross proceeds from the
securitization totaled $9,543,757. 1997-A became the beneficial owner of a
trust. The trustee for the trust is Texas Commerce Bank ("TCB"). In conjunction
with this securitization, the portfolio as well as the General Partner's
servicing capabilities were rated "AA" by Duff & Phelps and Fitch, both
nationally recognized rating agencies. The General Partner, as servicer, is
responsible for managing, servicing, reporting on and administering the
portfolio. 1997-A remits all monies received from the portfolio to TCB. TCB is
responsible for disbursing to the noteholders their respective principal and
interest and to 1997-A the excess of cash collected over debt service from the
portfolio. The 1997-A Members receive their pro rata share of any excess cash on
a monthly basis from 1997-A. The Partnership accounts for its investment in
1997-A under the equity method of accounting. The Partnership's original
investment was recorded at cost and is adjusted by its share of earnings, losses
and distributions thereafter.
ICON Cash Flow Partners L. P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements (continued)
Information as to the financial position and results of operations of
1997-A as of and for the year ended December 31, 1997 is summarized below:
December 31, 1997
Assets $ 50,911,005
=================
Liabilities $ 45,143,569
=================
Equity $ 5,767,436
=================
Year Ended
December 31, 1997
Net income $ 1,298,430
=================
ICON Receivables 1997-B LLC
In August 1997 the Partnership, Series E and L.P. Seven (collectively, the
"1997-B Members") formed ICON Receivables 1997-B LLC ("1997-B"), for the purpose
of originating lease transactions and ultimately securitizing its portfolio. The
1997-B Members contributed $250,000 (8.33% interest), $2,250,000 (75.00%
interest) and $500,000 (16.67% interest), respectively to 1997-B. In order to
fund the acquisition of additional leases, 1997-B obtained a warehouse borrowing
facility from Prudential Securities Credit Corporation (the "1997-B Warehouse
Facility") as described in more detail in Note 8. The net proceeds from the
expected securitization of these assets will be used to pay-off the remaining
1997-B Warehouse Facility balance and any remaining proceeds will be distributed
to the 1997-B Members in accordance with their membership interests. After
securitization, the 1997-B Members may receive, in accordance with their
membership interests, additional proceeds if 1997-B generates execess cash (cash
after payment of debt and expenses).
Information as to the financial position and results of operations of
1997-B as of and for the year ended December 31, 1997 is summarized below:
December 31, 1997
Assets $ 18,209,360
==============
Liabilities $ 15,008,185
==============
Equity $ 3,201,175
==============
Year Ended
December 31, 1997
Net income $ 201,175
==============
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
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 $ 9,102,346 $ 1,179,032 $ 10,281,378
1998 5,879,544 698,611 6,578,155
1999 4,203,868 152,211 4,356,079
2000 920,808 - 920,808
2001 306,025 - 306,025
Thereafter - - -
---------------- -------------- ---------------
$ 20,412,591 $ 2,029,854 $ 22,442,445
================ ============== ===============
6. Investment in Operating Leases
The investment in operating leases at December 31, 1997 and 1996 consisted
of the following:
1997 1996 1995
---- ---- ----
Equipment cost, beginning of year ......... $ 19,371,603 $ 19,371,603 $ --
End of lease settlement proceeds .......... (270,957) -- --
Equipment purchased ....................... -- -- 19,371,603
------------ ------------ ------------
Equipment cost, end of year ............... 19,100,646 19,371,603 19,371,603
------------ ------------ ------------
Accumulated depreciation,
beginning of year ....................... (1,485,136) (636,487) --
Depreciation .............................. (745,275) (848,649) (636,487)
Accumulated depreciation, end of year ..... (2,230,411) (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 $ 16,870,235 $ 17,934,412 $ 19,070,729
============ ============ ============
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The investment in operating leases consists of one asset owned by ICON
Cash Flow LLC I, a joint venture owned by the Partnership and Series E. In June
1997 ICON Cash Flow LLC II released the aircraft (formally on lease to Alaska
Airlines, Inc.). The aircraft was leased to Aero Mexico. The new lease is an
operating lease which expires in September 2002. See Note 6 for additional
information relating to the joint venture.
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, 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
Accounts written-off (468,020) (107,375) (575,395)
Recoveries on accounts
previously written-off 9,239 - 9,239
Provision 83,274 100,000 183,274
--------- --------- ---------
Balance at December 31, 1997 $ 110,120 $ 5,823 $ 115,943
========= ========= =========
8. Notes Payable
In January 1996, the Partnership borrowed $5,941,893 by pledging lease
receivables and granting a security interest in the underlying equipment and
receivables relating to a specific group of leases and financing transactions.
The non-recourse notes payable-secured financing bears interest at a fixed rate
of 7.58%, and is payable from receivable proceeds of the portfolio that secures
it. The Partnership had $2,244,324 outstanding under the loan at December 31,
1997.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Notes payable 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-secured financing, which is being paid down from collections on
lease receivable transactions. These notes bear interest at rates ranging from
5.18% to 10.75% and mature as follows:
Notes Payable
Notes Payable Non-Recourse
Non-Recourse Secured Financing Total
1998 $17,224,508 $1,872,097 $19,096,605
1999 4,606,817 372,227 4,979,044
2000 4,342,893 - 4,342,893
2001 1,172,919 - 1,172,919
2002 1,206,980 - 1,206,980
Thereafter 389,046 - 389,046
----------- ---------- -----------
$28,943,163 $2,244,324 $31,187,487
=========== ========== ===========
Included in the above are $158,224 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: $140,163 and $18,061 in 1998
and 1999, respectively.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
9. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the years ended December 31, 1997, 1996 and 1995
are as follows:
Charged to
Equity Capitalized Operations
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
========== ========== ==========
Management fees ..................... -- -- 1,092,714
Administrative expense reimbursements -- -- 547,382
---------- ---------- ----------
Year ended December 31, 1997 ........ $ -- $ -- $1,640,096
========== ========== ==========
The Partnership has investments in four joint ventures with other
Partnerships sponsored by the General Partner (See Note 4 for additional
information relating to the joint ventures).
Prior to the Partnership acquiring its investment in a leveraged lease (see
Note 3), the related free cash flow, or the rent in excess of the senior debt
payments (the junior debt), was financed by Series E, an affiliate of the
Partnership. On January 29, 1997, the Partnership re-financed the junior debt
with an unrelated third party.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
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, 1997, there was no federal tax liability for ICON Six Corp.
11. Commitments and Contingencies
The Partnership has entered into remarketing and residual sharing
agreements with third parties. In connection therewith, remarketing or residual
proceeds received in excess of specified amounts will be shared with these third
parties based on specified formulas. As of December 31, 1997 the Partnership has
not made any payments pursuant to such agreements.
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:
1997 1996 1995
---- ---- ----
Net income (loss) per financial statements $ 35,620 $ (366,967) $ 76,068
Differences due to:
Direct finance leases .................. 5,863,979 6,193,772 4,517,101
Depreciation ........................... (8,004,823) (2,375,964) (2,493,537)
Provision for losses ................... (8,554) 40,999 20,000
Loss on sale of equipment .............. 50,639 (3,118,755) (12,645)
Other .................................. 908,774 (947,139) 132,765
----------- ----------- -----------
Partnership income (loss) for
federal income tax purposes ............. $(1,154,365) $ (574,054) $ 2,239,752
=========== =========== ===========
As of December 31, 1997, the partners' capital accounts included in the
financial statements totaled $21,605,338 compared to the partners' capital
accounts for federal income tax purposes of $27,495,488 (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.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
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 Senior Vice President and Chief Financial Officer
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
Beaufort J. B. Clarke, age 51, is President, Chief Executive Officer and
Director of both the General Partner and ICON Securities Corp. (the
"Dealer-Manager"). Prior to his present position, Mr. Clarke was founder and the
President and Chief Executive Officer of Griffin Equity Partners, Inc. Mr.
Clarke formerly was an attorney with Shearman and Sterling and has over 21 years
of senior management experience in the United States leasing industry.
Thomas W. Martin, age 43, is Executive Vice President of both the General
Partner and the Dealer-Manager. Prior to his present position, Mr. Martin was
the Executive Vice President and Chief Financial Officer of Griffin Equity
Partners, Inc. Mr. Martin has over 13 years of senior management experience in
the leasing business, particularly in the area of syndication.
Paul B. Weiss, age 37, is Executive Vice President of the General Partner.
Mr. Weiss has been exclusively engaged in lease portfolio acquisitions since
1988 from his affiliations with Griffin Equity Partners (as Executive Vice
President and co-founder in 1993); Gemini Financial Holdings (as Senior Vice
President-Portfolio Acquisitions and a member of the executive committee from
1991-1993) and Pegasus Capital Corporation (as Vice President-Portfolio
Acquisitions).
Gary N. Silverhardt, age 37, is Senior Vice President and Chief Financial
Officer of the General Partner. He joined the General Partner in 1989. Prior to
joining the General Partner, Mr. Silverhardt was previously employed by Coopers
& Lybrand from 1985 to 1989, most recently as an Audit Supervisor. Prior to
1985, Mr. Silverhardt was employed by Katz, Schneeberg & Co. from 1983 to 1985.
Mr. Silverhardt received a B.S. degree from the State University of New York at
New Paltz in 1983 and is a Certified Public Accountant.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner and its
affiliates were paid or accrued the following compensation and reimbursement for
costs and expenses for the years ended December, 31, 1997, 1996 and 1995.
Type of
Entity Capacity Compensation 1997 1996 1995
------ -------- ------------ ---- ---- ----
ICON Capital Corp. General Partner Organization and
offering expenses $ - $ - $ 896,536
ICON Capital Corp. Manager Acquisition fees - 1,361,045 2,819,689
ICON Capital Corp. General Partner Management fees 1,092,714 1,333,394 696,096
ICON Securities Corp. Dealer-Manager Underwriting
commissions - - 512,306
ICON Capital Corp. General Partner Admin. expense
reimbursements 547,382 642,276 381,471
---------- ---------- ----------
$1,640,096 $3,336,715 $5,306,098
========== ========== ==========
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 31, 1998, 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.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedule - None.
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Financial Statements or Notes thereto.
3. Exhibits - The following exhibits are incorporated herein by reference:
(i) Amended and Restated Agreement of Limited Partnership (Incorporated by
reference to Exhibit A to Amendment No. 2 to Form S-1 Registration
Statement No. 2-99858 filed with the Securities and Exchange
Commission on December 12, 1986).
(ii) Certificate of Limited Partnership of the Partnership (Incorporated
herein by reference to Exhibit 3.01 to Form S-1 Registration Statement
No. 2-99858 filed with the Securities and Exchange Commission on
August 23, 1985 and to Exhibit 3.01 to Amendment No. 1 to Form S-1
Registration Statement No. 2-99858 filed with the Securities and
Exchange Commission on August 27, 1986).
(iii)Form of Management Agreement between the Partnership and Crossgate
Leasing, Inc. (Incorporated herein by reference to Exhibit 10.01 to
Amendment No. 1 to Form S-1 Registration Statement No. 2-99858 filed
with the Securities and Exchange Commission on August 27, 1986).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter ended
December 31, 1997.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the 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 31, 1998 /s/ Beaufort J.B. Clarke
-------------------------------------------------
Beaufort J.B. Clarke
President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole General Partner of the Registrant
Date: March 31, 1998 /s/ Beaufort J.B. Clarke
-------------------------------------------------
Beaufort J.B. Clarke
President, Chief Executive Officer and Director
Date: March 31, 1998 /s/ Thomas W. Martin
-------------------------------------------------
Thomas W. Martin
Executive Vice President and Director
Date: March 31, 1998 /s/ Gary N. Silverhardt
-------------------------------------------------
Gary N. Silverhardt
Senior Vice President and Chief Financial Officer
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrant Which have not Registered Securities Pursuant to
Section 12 of the Act
No annual report or proxy material has been sent to security holders. An annual
report will be sent to the limited partners and a copy will be forwarded to the
Commission.