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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2003
--------------------------------------------------
[x ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 333-54011
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ICON Income Fund Eight A L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-4006824
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
100 Fifth Avenue, New York, New York 10011
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(212) 418-4700
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Registrant's telephone number, including area code
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
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). [ ] Yes [x] No
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Balance Sheets
June 30, December 31,
2003 2002
---- ----
(unaudited)
Assets
Cash and cash equivalents $ 603,551 $ 819,928
Investment in finance leases
Minimum rents receivable 12,831,508 17,200,391
Estimated unguaranteed residual values 27,419,233 28,560,807
Initial direct costs, net 345,070 446,683
Unearned income (5,302,349) (5,842,801)
Allowance for doubtful accounts (228,721) (228,721)
------------ ------------
35,064,741 40,136,359
------------ ------------
Investment in operating leases
Equipment, at cost 43,618,550 50,773,532
Accumulated depreciation (11,082,767) (9,214,386)
------------ ------------
32,535,783 41,559,146
------------ ------------
Equipment held for lease or sale, net 2,977,934 3,470,579
Investments in unguaranteed residual values 1,997,000 3,098,084
Investments in unconsolidated joint ventures 995,231 1,296,330
Other assets, net 510,133 827,728
------------ ------------
Total assets $ 74,684,373 $ 91,208,154
============ ============
(continued on next page)
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Balance Sheets - Continued
June 30, December 31,
2003 2002
---- ----
(unaudited)
Liabilities and Partners' Equity
Notes payable - non-recourse $ 44,322,777 $ 47,668,803
Note payable - recourse 3,584,547 3,805,871
Security deposits and other 581,054 1,715,310
Accounts payable - General Partner and affiliates 263,903 230,052
Minority interests in consolidated joint venture 133,790 126,739
------------ ------------
Total liabilities 48,886,071 53,546,775
------------ ------------
Commitments and Contingencies
Partners' equity (deficiency)
General Partner (392,208) (274,260)
Limited Partners (742,705.27 and 742,970.27 units
outstanding, $100 per unit original issue price) 26,190,510 37,935,639
------------ ------------
Total partners' equity 25,798,302 37,661,379
------------ -------------
Total liabilities and partners' equity $ 74,684,373 $ 91,208,154
============ ============
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
---- ---- ---- ----
Revenues
Rental income $ 1,574,463 $ 1,780,309 $ 3,148,926 $ 3,560,617
Finance income 736,567 1,158,582 1,460,450 2,397,021
Gain on sales of equipment - 78,834 391,620 78,834
Gain from investment in
unguaranteed residual values 226,158 - 226,158 -
(Loss) income from investment in
unconsolidated joint ventures (14,211) 100,932 (3,064) 128,688
Interest income and other - 580 10 28,183
------------- ------------- ------------- -------------
Total revenues 2,522,977 3,119,237 5,224,100 6,193,343
------------- ------------- ------------- -------------
Expenses
Provision for loss contingency (Note 3) 7,086,338 - 7,086,338 -
Interest 1,071,493 1,297,138 2,238,973 2,641,246
Depreciation 1,169,037 1,020,460 2,361,026 2,040,919
Management fees - General Partner 177,591 128,367 580,073 726,603
Administrative expense reimbursements -
General Partner 71,036 58,480 229,029 322,728
Amortization of initial direct costs 59,914 92,033 101,613 172,385
General and administrative expense 121,096 263,828 387,591 445,199
Minority interest in consolidated
joint venture 3,490 3,222 7,051 6,562
------------- ------------- ------------- -------------
Total expenses 9,759,995 2,863,528 12,991,694 6,355,642
------------- ------------- ------------- -------------
Net (loss) income $ (7,237,018) $ 255,709 $ (7,767,594) $ (162,299)
============= ============= ============= =============
Net (loss) income allocable to:
Limited Partners $ (7,164,648) $ 253,152 $ (7,689,918) $ (160,676)
General Partner (72,370) 2,557 (77,676) (1,623)
------------- ------------- ------------- -------------
$ (7,237,018) $ 255,709 $ (7,767,594) $ (162,299)
============= ============= ============= =============
Weighted average number of limited
partnership units outstanding 742,846 745,153 742,920 744,704
============= ============= ============= =============
Net (loss) income per weighted average
limited partnership unit $ (9.64) $ 0.34 $ (10.35) $ (0.22)
============ ============ ============ =============
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statement of Changes in Partners' Equity
For the Six Months Ended June 30, 2003
(unaudited)
Limited Partner Distributions
----------------------------
Return of Investment Limited General
Capital Income Partners Partner Total
------- ------ -------- ------- -----
(Per weighted average unit)
Balance at
January 1, 2003 $ 37,935,639 $ (274,260) $ 37,661,379
Cash distributions to partners $ 5.44 $ - (4,040,329) (40,272) (4,080,601)
Limited partnership units
redeemed (265.00 units) (14,882) - (14,882)
Net loss (7,689,918) (77,676) (7,767,594)
--------------- ------------ --------------
Balance at
June 30, 2003 $ 26,190,510 $ (392,208) $ 25,798,302
=============== ============ ==============
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30,
(unaudited)
2003 2002
---- ----
Cash flows from operating activities:
Net loss $ (7,767,594) $ (162,299)
------------ ------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Rental income paid directly to lender by lessee (3,004,043) (3,311,753)
Finance income portion of receivables paid directly
to lenders by lessees (1,269,808) (2,066,662)
Provision for loss contingency 7,086,338 -
Depreciation 2,361,026 2,040,919
Interest expense on non-recourse financing paid
directly by lessees 1,879,141 2,445,980
Amortization of initial direct costs 101,613 172,385
Minority interest in consolidated joint venture 7,051 6,562
Income from investments in unconsolidated joint venture 3,064 (128,688)
Gain on sales of equipment (391,620) (78,834)
Gain from sale of investment in unguaranteed residual values (226,158) -
Changes in operating assets and liabilities:
Non-financed receivables 245,894 740,883
Due from affiliates - (78,621)
Other assets, net 317,595 40,678
Security deposits and other (1,065,612) (90,006)
Accounts payable - General Partner and affiliates 33,851 46,810
------------ ------------
Total adjustments 6,078,332 (260,347)
------------ ------------
Net cash used in operating activities (1,689,262) (422,646)
------------ ------------
Cash flows from investing activities:
Proceeds from sale of equipment 807,620 418,461
Proceeds from sale of investment in unguaranteed residual values 1,327,242 191,567
Distribution received from unconsolidated joint ventures 323,151 472,294
------------ ------------
Net cash provided by investing activities 2,458,013 1,082,322
------------ ------------
(continued on next page)
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Cash Flows - Continued
For the Six Months Ended June 30,
(unaudited)
2003 2002
---- ----
Cash flows from financing activities:
Proceeds from note payable - non-recourse 3,684,718 2,405,871
Proceeds from note payable - recourse 2,025,000 -
Repayments of note payable - recourse (2,246,324) (1,819,912)
Repayments of notes payable - non-recourse (353,039) -
Cash distributions to partners (4,080,601) (4,046,976)
Redemption of limited partnership units (14,882) (67,059)
------------- ------------
Net cash used in financing activities (985,128) (3,528,076)
------------- ------------
Net decrease in cash and cash equivalents (216,377) (2,868,400)
Cash and cash equivalents at beginning of period 819,928 3,213,445
------------- ------------
Cash and cash equivalents at end of period $ 603,551 $ 345,045
============= ============
(continued on next page)
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Cash Flows - Continued
Supplemental Disclosure of Cash Flow Information
- -----------------------------------------------
For the six months ended June 30, 2003 and 2002, non-cash activities
included the following:
2003 2002
---- ----
Principal and interest on direct finance receivables
paid directly to lenders by lessees $ 5,153,803 $ 5,718,981
Rental income assigned - operating lease receivables 3,004,043 3,311,753
Principal and interest on non-recourse financing paid
directly to lenders by lessees (8,157,846) (9,030,734)
----------- -----------
$ - $ -
=========== ===========
Interest paid directly to lenders by lessees $ 1,879,141 $ 2,445,980
Other interest paid 359,832 195,266
----------- -----------
Total interest expense $ 2,238,973 $ 2,641,246
=========== ===========
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements
June 30, 2003
(unaudited)
1. Basis of Presentation
The condensed consolidated financial statements of ICON Income Fund Eight A
L.P. (the "Partnership") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC") and, in the
opinion of management, include all adjustments (consisting only of normal
recurring accruals) necessary for a fair statement of income for each period
shown. Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such SEC rules and regulations. Management
believes that the disclosures made are adequate to make the information
presented not misleading. The results for the interim period are not necessarily
indicative of the results for the full year. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes included in the Partnership's 2002 Annual Report
on Form 10-K.
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.
2. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the six months ended June 30, 2003 and 2002 were
as follows:
2003 2002
---- ----
Management fees $ 580,073 $ 726,603 Charged to Operations
Administrative expense
reimbursements 229,029 322,728 Charged to Operations
----------- ------------
Total $ 809,102 $ 1,049,331
=========== ============
The Partnership and affiliates formed four joint ventures for the purpose
of acquiring and managing various assets. (See Note 4 for additional information
relating to the joint ventures).
3. Contingencies
Sky Airlines, a lessee of the Partnership, is a tour operator based in
Antalya, Turkey whose main business operation is flying tourists from Germany to
resorts in Turkey owned by an affiliate of Sky Airlines (who is also the
Guarantor of the Lease). Sky Airlines experienced service interruptions during
the conflict in Iraq. Subsequent to quarter-end, Sky Airlines became delinquent
on its payment obligations under the lease with the special purpose entity that
owns the aircraft, ICON Aircraft 23865 LLC, a wholly-owned subsidiary of the
Partnership. The lender on the transaction has delivered notice that an event of
default exists as a result of Sky Airlines failing to pay all amounts due under
the lease on a timely basis. Consequently, ICON Aircraft 23865 LLC has notified
Sky Airlines that it is in default under the lease agreement and has made demand
for payment in full. ICON Aircraft 23865 LLC has purchased the aircraft now on
lease to Sky Airlines in conjunction with ICON Aircraft 24231 LLC's (also a
wholly-owned subsidiary of the Partnership) purchase of an aircraft now on lease
to Boeing Connection. Both aircraft were re-financed with a single lender and
are cross-collateralized by the non-recourse notes. The lender has notified both
ICON Aircraft 23865 LLC and ICON Aircraft 24231 LLC of its intent to repossess
both of the aircraft. As a result of these uncertainties, the Partnership has
recorded a provision for a loss contingency for its remaining net book value,
net of the outstanding debt, of each aircraft. ICON Aircraft 23865 LLC., Sky
Airlines, the lender, and the Guarantor of Sky Airlines, are currently in
negotiations to resolve the outstanding payments.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
4. Consolidated Venture and Investments in Unconsolidated Joint Ventures
The Partnership and affiliates formed four ventures discussed below for the
purpose of acquiring and managing various assets. The Partnership and its
affiliates have identical investment objectives and participate on the same
terms and conditions. The Partnership has a right of first refusal to purchase
the equipment, on a pro-rata basis, if any of the affiliates desire to sell
their interests in the equipment.
Consolidated Venture
The venture described below is majority owned and is consolidated with the
Partnership:
ICON/Boardman Facility LLC
--------------------------
In December 1998, the Partnership and three affiliates, ICON Cash Flow
Partners, L.P., Series C ("Series C"), ICON Cash Flow Partners L.P. Six ("L.P.
Six") and ICON Cash Flow Partners L.P. Seven ("L.P. Seven") formed ICON/Boardman
Facility LLC ("ICON BF") for the purpose of acquiring a lease of a coal handling
facility with Portland General Electric, a utility company. The purchase price
totaled $27,421,810 and was funded with cash and non-recourse debt. The
Partnership's financial statements include 100% of the assets and liabilities
and 100% of the revenues and expenses of ICON BF. L.P. Six's and L.P. Seven's
interests in ICON BF have been reflected as minority interests in joint ventures
on the consolidated balance sheets and minority interest expense on the
consolidated statements of operations.
Investments In Unconsolidated Joint Ventures
The three joint ventures described below are less than 50% owned and are
accounted for following the equity method.
ICON/AIC Trust
--------------
In 1999, ICON/AIC Trust ("AIC Trust") was formed to own and manage a
portfolio of leases in England. The Partnership, L.P. Six and L.P. Seven own
43.73%, 25.51% and 30.76% interests in AIC Trust, respectively. The Partnership
accounts for its investment under the equity method of accounting.
On December 28, 2001, AIC Trust sold its remaining leases, subject to the
related debt, at a loss, for a note receivable of (pound)2,575,000 ($3,744,822
based upon the exchange rate at December 31, 2001) which is payable in six
installments through June 2004. The first two installments on the note of
(pound)475,000 each were collected in 2002, and the third installment of
(pound)450,000 was collected in the first quarter of 2003. As of June 30, 2003,
the gross amount due is (pound)1,175,000 ($1,919,913 based upon the exchange
rate at June 30, 2003).
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
Information as to the unaudited results of operations of AIC Trust for the
six months ended June 30, 2003 and 2002 and is summarized below:
For the Six Months For the Six Months
Ended June 30, 2003 Ended June 30, 2002
------------------- -------------------
Net income $ 21,313 $ 253,820
========= ===========
Partnership's share of net income $ 9,320 $ 110,996
========= ===========
Distributions $ 722,005 $ 1,032,763
========= ===========
Partnership's share of distributions $ 315,733 $ 451,628
========= ===========
ICON Aircraft 24846 LLC
------------------------
In 2000, the Partnership and two affiliates, L.P. Seven and ICON Income
Fund Eight B L.P. ("Fund Eight B"), formed ICON Aircraft 24846 LLC ("ICON
Aircraft 24846") for the purpose of acquiring an investment in a 767-300ER
aircraft leased to Scandinavian Airline Systems for a purchase price of
$44,515,416, which was funded with cash of $2,241,371 and non-recourse debt of
$42,274,045. The rents and the aircraft have been assigned to the unaffiliated
non-recourse lender. The lease expired in March 2003, at which time the balance
of the non-recourse debt outstanding was approximately $34,500,000. The
Partnership is currently remarketing the aircraft, during which time, the
Partnership is making interest only payments on the outstanding non-recourse
debt. The Partnership, L.P. Seven and Fund Eight B have ownership interests of
2.0%, 2.0% and 96.0%, respectively, in ICON Aircraft 24846. The outstanding debt
at June 30, 2003 was $34,491,632.
Information as to the results of operation of ICON Aircraft 24846 for the
six months ended June 30, 2003 and 2002 is summarized below:
For the Six Months For the Six Months
Ended June 30, 2003 Ended June 30, 2002
------------------- -------------------
Net (loss) income $ (685,814) $ 374,716
============= ============
Partnership's share of
net (loss) income $ (13,716) $ 7,494
============= ============
ICON Cheyenne LLC
-----------------
In December 2000, the Partnership and three affiliates, L.P. Six, L.P.
Seven and Fund Eight B formed ICON Cheyenne LLC ("ICON Cheyenne") for the
purpose of acquiring a portfolio of lease investments. The purchase price
totaled $29,705,716 and was funded with cash of $11,401,151 and the assumption
of non-recourse debt with an unaffiliated third party lender of $18,304,565. The
debt is structured to be amortized by the application to the debt of rentals due
under the various leases. The leases expire on various dates through September
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2003
2006. The Partnership, L.P. Six, L.P. Seven and Fund Eight B received a 1%, 1%,
10.31% and 87.69% interest, respectively, in ICON Cheyenne. The Partnership
accounts for this investment under the equity method of accounting. The
outstanding non-recourse debt at June 30, 2003 was $2,812,041.
Information as to the results of operation of ICON Cheyenne for the six
months ended June 30, 2003 and 2002 is summarized below:
For the Six Months For the Six Months
Ended June 30, 2003 Ended June 30, 2002
------------------- -------------------
Net income $ 132,537 $ 1,019,824
========== ===========
Partnership's share of net income $ 1,332 $ 10,198
========== ===========
Distributions $ 741,759 $ 2,066,547
========== ===========
Partnership's share of distributions $ 7,418 $ 20,666
========== ===========
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2003
Item 2. General Partner's Discussion and Analysis of Financial Condition
and Results of Operations
Forward-Looking Information - The following discussion and analysis should
be read in conjunction with the audited financial statements dated December 31,
2002. Certain statements within this document may constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. These statements are identified by words such as
"anticipate," "believe," "estimate," "expects," "intend," "predict" or "project"
and similar expressions. This information may involve risks and uncertainties
that could cause actual results to differ materially from the forward-looking
statements. Although the Partnership believes that the expectations reflected in
such forward-looking statements are based on reasonable assumptions, such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected.
Results of Operations for the Three Months Ended June 30, 2003 and 2002
For the three months ended June 30, 2003 and 2002, the Partnership did not
lease or finance any additional equipment.
Revenues for the quarter ended June 30, 2003 ("2003 Quarter") were
$2,522,977 representing a decrease of $596,260, or approximately 19%, as
compared to the quarter ended June 30, 2002 ("2002 Quarter"). The decrease in
revenues were caused primarily from decreases in finance income of $422,015,
rental income of $205,846 and gain on sale of equipment of $78,834. These
decreases were offset by a gain on investment in unguaranteed residual values of
$226,158 in the 2003 Quarter. In addition, income from investment in joint
ventures decreased by $115,143.
The decrease in finance income was due to the reduction in the size of the
Partnership's portfolio of leases from the 2002 Quarter to the 2003 Quarter. The
decrease in rental income is primarily due to reclassing an operating lease
(Sabena Technics, SA) to equipment held for lease or sale during the fourth
quarter of 2002, and therefore no revenues were recognized for the 2003 Quarter.
In addition, the decrease in rental income is due to the restructuring of the
rental payments for an operating lease with Boeing effective May 2002.
The Partnership realized a gain on sale of equipment associated with its
investment in the Summit Portfolio. In 2000, the Partnership had invested
$2,526,696 in the portfolio, with an interest in residual values. During the
2003 Quarter, the Partnership had recovered its invested capital and recognized
a gain of $226,158.
Expenses for the 2003 Quarter were $9,759,995 representing an increase of
$6,896,467, as compared to 2002 Quarter. The increase in expenses resulted
primarily from a provision for loss contingency of $7,086,338 as described in
Note 3 of the condensed consolidated financial statements and an increase in
depreciation of $148,577. The increase in depreciation expense was due to
additional depreciation on the equipment held for lease or resale during the
2003 Quarter. These increases were offset by decreases in interest expense of
$225,645, general and administrative expense of $142,732, and amortization of
initial direct cost of $32,119. Interest expense reduced due to the decline in
the average non-recourse debt. General and administrative expense reduced due to
the reduction in the size of the Partnership's portfolio.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2003
Net (loss) income for the 2003 Quarter and 2002 Quarter was $(7,237,018)
and $255,709, respectively. The net (loss) income per weighted average limited
partnership unit was $(9.64) and $0.34 for the 2003 Quarter and 2002 Quarter,
respectively.
Results of Operations for the Six Months Ended June 30, 2003 and 2002
For the six months ended June 30, 2003 and 2002, the Partnership did not
lease or finance any additional equipment.
Revenues for the six months ended June 30, 2003 ("2003 Period") were
$5,224,100 representing a decrease of $969,243, or approximately 16%, as
compared to the six months ended June 30, 2002 ("2002 Period"). The decrease in
revenues resulted primarily from decreases in finance income of $936,571, rental
income of $411,691 and interest income and other of $28,173. These decreases
were offset by an increase in gain on sale of equipment of $312,786 and gain on
investment in unguaranteed residual values of $226,158 in the 2003 Period. In
addition, income from investment in joint ventures decreased by $131,752.
The decrease in finance income is due to the reduction in the size of the
Partnership's portfolio of leases from the 2002 Period to the 2003 Period. The
primary reasons for such reduction were, a finance lease with Keystone Great
Lakes, Inc. that was renewed for an additional five years ending 2008 with such
payments buying down the residual and the equipment pertaining to a lease with
Petsmart, Inc. that was sold, and a gain of $391,620 recognized.
The decrease in rental income is primarily due to reclassing an operating
lease (Sabena Technics, SA) to equipment held for lease or resale during the
fourth quarter of 2002, and therefore no revenues were recognized for the 2003
Period. In addition, the decrease in rental income is due to the restructuring
of the rental payments for an operating lease with Boeing effective May 2002.
Expenses for the 2003 Period were $12,991,694 representing an increase of
$6,636,052, as compared to 2002 Period. The increases in expenses resulted
primarily from a provision for loss contingency of $7,086,338 as described in
Note 3 of the condensed consolidated financial statements and an increase in
depreciation expense of $320,107. Depreciation expense increased due to
additional depreciation on the equipment held for lease or resale. These
increases are partially offset by decreases in interest expense of $402,273,
management fees - General Partner of $146,530, administrative expense
reimbursements - General Partner of $93,699, and amortization of initial direct
cost of $70,772. Interest expense reduced due to the decline in the average
non-recourse debt. General and administrative expense reduced due to the
reduction in the size of the Partnership's portfolio.
Net loss for the 2003 Period and 2002 Period was $7,767,594 and $162,299,
respectively. The net loss per weighted average limited partnership unit was
$10.35 and $0.22 for the 2003 Period and 2002 Period, respectively.
Liquidity and Capital Resources
The Partnership's primary sources of funds in the 2003 Period were proceeds
from a non-recourse note payable of $3,684,718, proceeds from recourse debt of
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2003
$2,025,000, proceeds from sale of investment of unguaranteed residual values of
$1,327,242, proceeds from sales of equipment of $807,620 and distributions
received from unconsolidated joint ventures of $323,151 offset by cash used in
operating activities of $1,689,262, distributions to partners aggregated
$4,080,601, and the Partnership repaid recourse and non-recourse debt of
$2,246,324, and $353,039, respectively. As a result of these activities, the
Partnership's liquidity was reduced.
During the quarter ended June 30, 2002, the Partnership entered into a
$17,500,000 joint and several line of credit agreement dated as of May 30, 2002
shared with L.P. Seven and Fund Eight B (the "Initial Funds"), with Comerica
Bank as lender. Under the terms of the agreement, the Partnership may borrow at
a rate equal to the Comerica Bank base rate plus 1% (together, 5.00% at June 30,
2003) and all borrowings are to be jointly and severally collateralized by the
present values of rents receivable and equipment owned by all of the Initial
Funds sharing in the joint line of credit. On December 12, 2002, the agreement
was amended to admit ICON Income Fund Nine, LLC, collectively along with the
Initial Funds (the "Funds"), as a borrower sharing the $17,500,000 joint line of
credit agreement. The Funds have entered into a Contribution Agreement, dated as
of May 30, 2002, as amended December 12, 2002, pursuant to which the Funds have
agreed to restrictions on the amount and the terms of their respective
borrowings under the line of credit in order to minimize the risk that a Fund
would not be able to repay its allocable portion of the outstanding revolving
loan obligation at any time, including restrictions on any Fund borrowing in
excess of the lesser of (A) an amount each Fund could reasonably expect to repay
in one year out of its projected free cash flow, or (B) the greater of (i) the
Borrowing Base (as defined in the line of credit agreement) as applied to such
Fund, and (ii) 50% of the net worth of such Fund. The Contribution Agreement
provides that, in the event a Fund pays an amount under the agreement in excess
of its allocable share of the obligation under the agreement whether by reason
of an Event of Default or otherwise, the other Funds will immediately make a
contribution payment to such Fund in such amount that the aggregate amount paid
by each Fund reflects its allocable share of the aggregate obligations under the
agreement. The Funds' obligations to each other under the Contribution Agreement
are collateralized by a subordinate lien on the assets of each participating
Fund. The line of credit which had expired on May 31, 2003 is in the process of
being extended for twelve additional months. The Partnership violated a
financial covenant at December 31, 2002 creating an Event of Default. The bank
granted a waiver to the Partnership with respect to this Event of Default. As of
June 30, 2003, there were borrowings of $3,584,547 by the Partnership under the
line of credit. Aggregate borrowing by all Funds under the line of credit
agreement aggregated $10,199,986 on June 30, 2003.
Cash distributions to limited partners for the 2003 Period and the 2002
Period, which were paid monthly, totaled $4,040,329 and $4,006,505,
respectively.
Regus Business Center Corp. ("Regus"), with whom the Partnership has an
equipment lease, filed for Chapter 11 bankruptcy protection on January 14, 2003.
The Partnership's finance leases with Regus were acquired in December 1999 for
$4,861,629. Regus did not pay rent in January or February, 2003. The Partnership
has negotiated new lease terms with Regus and restructured the lease effective
March 15, 2003 whereby the lease, originally scheduled to expire on December 29,
2003 has been extended to expire March 2007 but at a new reduced rental rate. As
of December 31, 2002 the contractual rent receivable under the Regus lease was
$1,544,686. Giving effect to the lease restructuring, the contractual rent
receivable under the Regus lease as of June 30, 2003 was $2,679,481, net of
payments received.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2003
Sky Airlines, a lessee of the Partnership, is a tour operator based in
Antalya, Turkey whose main business operation is flying tourists from Germany to
resorts in Turkey owned by an affiliate of Sky Airlines (who is also the
Guarantor of the Lease). Sky Airlines experienced service interruptions during
the conflict in Iraq. Subsequent to quarter-end, Sky Airlines became delinquent
on its payment obligations under the lease with the special purpose entity that
owns the aircraft, ICON Aircraft 23865 LLC, a wholly-owned subsidiary of the
Partnership. The lender on the transaction has delivered notice that an event of
default exists as a result of Sky Airlines failing to pay all amounts due under
the lease on a timely basis. Consequently, ICON Aircraft 23865 LLC has notified
Sky Airlines that it is in default under the lease agreement and has made demand
for payment in full. ICON Aircraft 23865 LLC has purchased the aircraft now on
lease to Sky Airlines in conjunction with ICON Aircraft 24231 LLC's (also a
wholly-owned subsidiary of the Partnership) purchase of an aircraft now on lease
to Boeing Connection. Both aircraft were re-financed with a single lender and
are cross-collateralized by the non-recourse notes. The lender has notified both
ICON Aircraft 23865 LLC and ICON Aircraft 24231 LLC of its intent to repossess
both of the aircraft. As a result of these uncertainties, the Partnership has
recorded a provision for a loss contingency for its remaining net book value,
net of the outstanding debt, of each aircraft. ICON Aircraft 23865 LLC., Sky
Airlines, the lender, and the Guarantor of Sky Airlines, are currently in
negotiations to resolve the outstanding payments.
As of June 30, 2003, there were no known trends or demands, commitments,
events or uncertainties, which are likely to have any material effect on
liquidity. As cash is realized from operations and additional 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.
We do not consider the impact of inflation to be material in the analysis
of our overall operations.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
The Partnership is exposed to certain market risks, including changes in
interest rates. The Partnership believes its exposure to other market risks are
insignificant to both its financial position and results of operations.
The Partnership manages its interest rate risk by obtaining fixed rate
debt. The fixed rate debt service obligation streams are generally matched by
fixed rate lease receivable streams generated by the Partnership's lease
investments.
The Partnership borrows funds under a floating rate line of credit and is
therefore exposed to interest rate risk until the floating rate line of credit
is repaid. The Partnership's borrowings under the floating rate line of credit
as of June 30, 2003 was $3,584,547. The Partnership believes the risk associated
with rising interest rates under this line is not significant.
The Partnership manages its exposure to equipment and residual risk by
monitoring the market and maximizing re-marketing proceeds received through
re-lease or sale of equipment.
Item 4. Controls and Procedures
Beaufort J.B. Clarke and Thomas W. Martin, the Principal Executive and
Principal Financial Officers, respectively, of ICON Capital Corp. ("ICC"), the
General Partner of the Partnership, have evaluated the disclosure controls and
procedures of the Partnership as of the quarter ended June 30, 2003. As used
herein, the term "disclosure controls and procedures" has the meaning given to
the term by Rule 13a-14 under the Securities Exchange Act of 1934, as amended
("Exchange Act"), and includes the controls and other procedures of the
Partnership that are designed to ensure that information required to be
disclosed by the Partnership in the reports that it files with the SEC under the
Exchange Act is recorded, processed, summarized and reported within the time
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2003
periods specified in the SEC's rules and forms. As part of their evaluation,
Messrs. Clarke and Martin conferred with the finance and accounting staff of ICC
and the finance and accounting staff of ICON Holdings Corp., the parent of ICC.
Based upon their evaluation, Messrs. Clarke and Martin have concluded that the
Partnership's disclosure controls and procedures provide reasonable assurance
that the information required to be disclosed by the Partnership in this report
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms applicable to the preparation of this
report.
There have been no significant changes in the Partnership's internal
controls or in other factors that could significantly affect the Partnership's
internal controls subsequent to the evaluation described above conducted by
ICC's principal executive and financial officers.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2003
PART II - OTHER INFORMATION
- ---------------------------
Item 1 - Legal Proceedings
- --------------------------
The Partnership, from time-to-time, in the ordinary course of business,
commences legal actions when necessary to protect or enforce the rights of the
Partnership. We are not a defendant party to any litigation and are not aware of
any pending or threatened litigation against the Partnership.
Item 3 - Defaults Upon Senior Securities
- ----------------------------------------
Sky Airlines, a lessee of the Partnership, is a tour operator based in
Antalya, Turkey whose main business operation is flying tourists from Germany to
resorts in Turkey owned by an affiliate of Sky Airlines (who is also the
Guarantor of the Lease). Sky Airlines experienced service interruptions during
the conflict in Iraq. Subsequent to quarter-end, Sky Airlines became delinquent
on its payment obligations under the lease with the special purpose entity that
owns the aircraft, ICON Aircraft 23865 LLC, a wholly-owned subsidiary of the
Partnership. The lender on the transaction has delivered notice that an event of
default exists as a result of Sky Airlines failing to pay all amounts due under
the lease on a timely basis. Consequently, ICON Aircraft 23865 LLC has notified
Sky Airlines that it is in default under the lease agreement and has made demand
for payment in full. ICON Aircraft 23865 LLC has purchased the aircraft now on
lease to Sky Airlines in conjunction with ICON Aircraft 24231 LLC's (also a
wholly-owned subsidiary of the Partnership) purchase of an aircraft now on lease
to Boeing Connection. Both aircraft were re-financed with a single lender and
are cross-collateralized by the non-recourse notes. The lender has notified both
ICON Aircraft 23865 LLC and ICON Aircraft 24231 LLC of its intent to repossess
both of the aircraft. As a result of these uncertainties, the Partnership has
recorded a provision for a loss contingency for its remaining net book value,
net of the outstanding debt, of each aircraft. ICON Aircraft 23865 LLC., Sky
Airlines, the lender, and the Guarantor of Sky Airlines, are currently in
negotiations to resolve the outstanding payments.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
99.1 Certification of Chairman and Chief Executive Officer.
99.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer.
99.3 Certification of Chairman and Chief Executive Officer pursuant to 18
U.S.C. (Section)1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.4 Certification of Executive Vice President and Principal Financial and
Accounting Officer pursuant to 18 U.S.C. (Section)1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ICON Income Fund Eight A L.P.
File No. 333-54011 (Registrant)
By its General Partner,
ICON Capital Corp.
August 13, 2003 /s/ Thomas W. Martin
- --------------------------- ----------------------------------------
Date Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer
of the General Partner of the Partnership)
Certifications - 10-Q
EXHIBIT 99.1
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this quarterly report of ICON Income Fund Eight A L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Partnership as of, and for, the periods presented in this report;
4. The Partnership's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the Partnership and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Partnership, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the Partnership's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Partnership's internal
control over financial reporting that occurred during the
Partnership's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Partnership's
internal control over financial reporting; and
5. The Partnership's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the Partnership's auditors and the audit committee of the Partnership's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Partnerships ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Partnership's internal
control over financial reporting.
Dated: August 13, 2003
/s/ Beaufort J.B. Clarke
- ------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
sole General Partner of ICON Income Fund Eight A L.P.
Certifications - 10-Q
EXHIBIT 99.2
I, Thomas W. Martin, certify that:
1. I have reviewed this quarterly report of ICON Income Fund Eight A L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Partnership as of, and for, the periods presented in this report;
4. The Partnership's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the Partnership and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Partnership, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the Partnership's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Partnership's internal
control over financial reporting that occurred during the
Partnership's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Partnership's
internal control over financial reporting; and
5. The Partnership's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the Partnership's auditors and the audit committee of the Partnership's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Partnership's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Partnership's internal
control over financial reporting.
Dated: August 13, 2003
/s/ Thomas W. Martin
- ----------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
of the General Partner of the Partnership)
ICON Capital Corp.
sole General Partner of ICON Income Fund Eight A L.P.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2003
EXHIBIT 99.3
I, Beaufort J.B. Clarke, Chairman and Chief Executive Officer of ICON
Capital Corp., the sole General Partner of ICON Income Fund Eight A L.P.,
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the period ended June 30, 2003
(the "Quarterly Report") which this statement accompanies fully
complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m) and
(2) information contained in the Quarterly Report fairly presents, in all
material respects, the financial condition and results of operations
of ICON Income Fund Eight A L.P.
Dated: August 13, 2003
/s/ Beaufort J.B. Clarke
-----------------------------------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
sole General Partner of ICON Income Fund Eight A L.P.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2003
EXHIBIT 99.4
I, Thomas W. Martin, Executive Vice President (Principal Financial and
Accounting Officer) of ICON Capital Corp., the sole General Partner of ICON
Income Fund Eight A L.P., certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the period ended June 30, 2003 (the
"Quarterly Report") which this statement accompanies fully complies with
the requirements of Section 13(a) of the Securities Exchange Act of 1934
(15 U.S.C. 78m) and
(2) information contained in the Quarterly Report fairly presents, in all
material respects, the financial condition and results of operations of
ICON Income Fund Eight A L.P.
Dated: August 13, 2003
/s/ Thomas W. Martin
----------------------------------------------------
Thomas W. Martin
Executive Vice President (Principal
Financial and Accounting Officer)
ICON Capital Corp.
sole General Partner of ICON Income Fund Eight A L.P.