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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 September 30, 2003
--------------------------------------------------
[x ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 333-54011
----------------------------------------------------------
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
September 30, December 31,
2003 2002
---- ----
(unaudited)
Assets
------
Cash and cash equivalents $ 307,648 $ 819,928
------------ -------------
Investment in finance leases
Minimum rents receivable 11,295,324 17,200,391
Estimated unguaranteed residual values 26,686,729 28,560,807
Initial direct costs, net 296,743 446,683
Unearned income (4,404,391) (5,842,801)
Allowance for doubtful accounts (228,721) (228,721)
------------ -------------
33,645,684 40,136,359
------------ -------------
Investment in operating leases
Equipment, at cost 10,765,766 50,773,532
Accumulated depreciation (1,928,977) (9,214,386)
------------ -------------
8,836,789 41,559,146
------------ --------------
Equipment held for lease or sale, net 2,731,612 3,470,579
------------ -------------
Investments in unguaranteed residual values 1,997,000 3,098,084
------------ -------------
Investments in unconsolidated joint ventures 679,503 1,296,330
------------ -------------
Due from Affiliates, net 303,758 -
------------ -------------
Other assets, net 162,756 827,728
------------ -------------
Total assets $ 48,664,750 $ 91,208,154
============ =============
(continued on next page)
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Balance Sheets - Continued
September 30, December 31,
2003 2002
---- ----
(unaudited)
Liabilities and Partners' Equity
--------------------------------
Notes payable - non-recourse $ 19,396,754 $ 47,668,803
Note payable - recourse 3,584,547 3,805,871
Security deposits and other 494,585 1,715,310
Accounts payable - General Partner and affiliates, net 224,487 230,052
Minority interests in consolidated joint venture 137,536 126,739
------------ ------------
Total liabilities 23,837,909 53,546,775
------------ ------------
Commitments and Contingencies
Partners' equity (deficiency)
General Partner (402,346) (274,260)
Limited Partners (742,605.27 and 742,970.27 units
outstanding, $100 per unit original issue price) 25,229,187 37,935,639
------------ ------------
Total partners' equity 24,826,841 37,661,379
------------ ------------
Total liabilities and partners' equity $ 48,664,750 $ 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 Nine Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
---- ---- ---- ----
Revenues
Rental income $ 733,842 $ 1,780,308 $ 3,882,768 $ 5,340,925
Finance income 757,465 1,136,546 2,217,915 3,533,567
Gain on sales of equipment 284,205 - 675,825 78,834
Gain from investment in
unguaranteed residual values 340,410 - 566,568 -
(Loss) income from investment in
unconsolidated joint ventures (32,987) 44,051 (36,051) 172,739
Interest income and other 7 347 17 28,530
------------- ------------- ------------ ------------
Total revenues 2,082,942 2,961,252 7,307,042 9,154,595
------------- ------------- ----------- ------------
Expenses
Loss on lease termination (Note 3) 279,139 - 7,365,477 -
Interest 683,951 1,278,377 2,922,924 3,919,623
Depreciation 625,861 1,020,459 2,986,887 3,061,378
Management fees - General Partner 128,534 246,139 708,607 972,742
Administrative expense reimbursements -
General Partner 51,354 101,099 280,383 423,827
Amortization of initial direct costs 48,327 71,582 149,940 243,967
General and administrative 212,174 282,289 599,765 727,488
Minority interest in consolidated
joint venture 3,746 3,518 10,797 10,080
------------- ------------- ------------- -------------
Total expenses 2,033,086 3,003,463 15,024,780 9,359,105
------------- ------------- ------------- -------------
Net income (loss) $ 49,856 $ (42,211) $ (7,717,738) $ (204,510)
============= ============= ============= =============
Net income (loss) allocable to:
Limited Partners $ 49,357 $ (41,789) $ (7,640,561) $ (202,465)
General Partner 499 (422) (77,177) (2,045)
------------- ------------- ------------- -------------
$ 49,856 $ (42,211) $ (7,717,738) $ (204,510)
============= ============= ============= =============
Weighted average number of limited
partnership units outstanding 742,689 744,282 742,797 745,060
============= ============= ============= =============
Net income (loss) per weighted average
limited partnership unit $ 0.07 $ (.06) $ (10.28) $ (0.27)
============= ============= ============== =============
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 Nine Months Ended September 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 $ 6.78 $ - (5,039,979) (50,909) (5,090,888)
Limited partnership units
redeemed (365.00 units) (25,912) - (25,912)
Net loss (7,640,561) (77,177) (7,717,738)
--------------- ------------ --------------
Balance at
September 30, 2003 $ 25,229,187 $ (402,346) $ 24,826,841
=============== ============ ==============
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 Nine Months Ended September 30,
(unaudited)
2003 2002
---- ----
Cash flows from operating activities:
Net loss $ (7,717,738) $ (204,510)
------------ ------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Rental income paid directly to lender by lessee (3,712,768) (4,967,629)
Finance income portion of receivables paid directly
to lenders by lessees (1,883,725) (3,053,806)
Depreciation 2,986,887 3,061,378
Interest expense on non-recourse financing paid
directly by lessees 2,462,868 3,603,024
Amortization of initial direct costs 149,940 243,967
Minority interest in consolidated joint venture 10,797 10,080
Loss on lease termination 7,365,477 -
Loss (income)from investments in unconsolidated joint venture 36,051 (172,739)
Gain on sales of equipment (675,825) (78,834)
Gain from sale of investment in unguaranteed residual values (566,568) -
Changes in operating assets and liabilities:
Non-financed receivables 251,145 1,596,213
Due from affiliates (303,758) 10,518
Other assets, net 664,972 551,255
Security deposits and other (1,220,725) (631,599)
Accounts payable - General Partner and affiliates, net (5,565) -
------------ ------------
Total adjustments 5,559,203 171,828
------------ ------------
Net cash used in operating activities (2,158,535) (32,682)
------------ ------------
Cash flows from investing activities:
Proceeds from sale of equipment 1,661,898 418,461
Proceeds from sale of investment in unguaranteed residual values 1,667,651 855,455
Distribution received from unconsolidated joint ventures 323,151 796,350
----------- ------------
Net cash provided by investing activities 3,652,700 2,070,266
----------- ------------
(continued on next page)
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Cash Flows - Continued
For the Nine Months Ended September 30,
(unaudited)
2003 2002
---- ----
Cash flows from financing activities:
Proceeds from note payable - non-recourse 3,684,718 -
Proceeds from note payable - recourse 2,025,000 3,405,871
Repayments of notes payable - non-recourse (353,039) -
Repayments of note payable - recourse (2,246,324) (1,819,912)
Cash distributions to partners (5,090,888) (6,068,416)
Redemption of limited partnership units (25,912) (155,612)
------------ -----------
Net cash used in financing activities (2,006,445) (4,638,069)
------------ ------------
Net decrease in cash and cash equivalents (512,280) (2,600,485)
Cash and cash equivalents at beginning of period 819,928 3,213,445
------------ -----------
Cash and cash equivalents at end of period $ 307,648 $ 612,960
============ ===========
(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 nine months ended September 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 $ 7,108,862 $ 7,528,569
Rental income assigned - operating lease receivables 3,712,768 4,967,629
Principal and interest on non-recourse financing paid
directly to lenders by lessees (10,821,630) (12,496,198)
------------- -------------
$ - $ -
============= =============
Notes payable - non-recourse relinquished
upon lease termination (Note 3) $ 23,244,966 $ -
============= =============
Interest paid directly to lenders by lessees pursuant
to non-recourse financing $ 2,462,868 $ 3,603,024
Other interest paid 460,056 316,599
------------- -------------
Total interest expense $ 2,922,924 $ 3,919,623
============= =============
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
September 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 nine months ended September 30, 2003 and 2002
were as follows:
2003 2002
---- ----
Management fees $ 708,607 $ 972,742 Charged to Operations
Administrative expense
reimbursements 280,383 423,827 Charged to Operations
---------- -----------
Total $ 988,990 $ 1,396,569
========== ===========
The Partnership and affiliates formed four joint ventures for the purpose
of acquiring and managing various assets. The Partnership is entitled to receive
from ICON Cash Flow Partners L.P. Six $295,152 of distribution that was received
on behalf of the Partnership from ICON/AIC Trust. (See Note 3 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. As a result, Sky Airlines became delinquent on its payment
obligations under the lease with the entity that owns the aircraft, ICON
Aircraft 23865 LLC a wholly-owned subsidiary of the Partnership. The lender on
the transaction delivered notice that an event of default existed as a result of
Sky Airlines failing to pay all amounts due under the lease on a timely basis.
Consequently, ICON Aircraft 23865 LLC notified Sky Airlines that it is in
default under the lease agreement and has made demand for payment in full. ICON
Aircraft 23865 LLC purchased the aircraft leased to Sky Airlines in conjunction
with ICON Aircraft 24231 LLC's (also a wholly-owned subsidiary of the
Partnership) purchase of an aircraft leased to Boeing Connexion. Both aircraft
were re-financed with a single lender and were cross-collateralized by the
non-recourse notes.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
The lender on the transaction exercised its right to repossess the aircraft
which was on lease to Sky Airlines, along with the aircraft which was on lease
to Boeing Connexion during the quarter ended September 30, 2003. While Boeing
Connexion was never in default, the cross-collateralization term of the loan
agreement, which was entered into at purchase date of the aircrafts, resulted in
both aircrafts being repossessed. As a result of the repossession of the two
aircraft the Partnership has relinquished $23,244,966 of related note payable -
non recourse and written-off its remaining net investment in operating leases of
$279,139, which resulted in a loss on termination of leases of $7,365,477, of
which $7,086,338 was recognized in the quarter ended June 30, 2003.
The aircrafts were the sole assets owned by ICON Aircraft 23865 LLC and
ICON Aircraft 24231 LLC, both wholly-owned subsidiaries of the Partnership.
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 condensed consolidated balance sheets and minority interest expense on
the condensed 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 September 30,
2003, the gross amount due is (pound)725,000 ($1,231,815 based upon the exchange
rate at September 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
nine months ended September 30, 2003 and 2002 and is summarized below:
Nine Months Nine Months
Ended September 30, 2003 Ended September 30, 2002
------------------------ ------------------------
Net income $ 32,151 $ 340,534
=========== ===========
Partnership's share of net income $ 14,060 $ 148,915
=========== ===========
Distributions $ 1,396,948 $ 1,752,886
=========== ===========
Partnership's share of distributions $ 610,885 $ 766,537
=========== ===========
Approximately $295,152 of the Partnership's share of distribution is a
receivable from L.P. Six, and is included in the caption "Due from Affiliates,
net" on the accompanying condensed consolidated balance sheet.
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 September 30, 2003 was $34,491,632.
Information as to the results of operation of ICON Aircraft 24846 for the
nine months ended September 30, 2003 and 2002 is summarized below:
Nine Months Nine Months
Ended September 30, 2003 Ended September 30, 2002
------------------------ ------------------------
Net (loss) income $ (2,499,071) $ 562,075
============= ============
Partnership's share of
net (loss) income $ (49,981) $ 11,241
============= ============
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
2006. The Partnership, L.P. Six, L.P. Seven and Fund Eight B received a 1%, 1%,
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
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 September 30, 2003 was $2,007,229.
Information as to the results of operation of ICON Cheyenne for the nine
months ended September 30, 2003 and 2002 is summarized below:
Nine Months Nine Months
Ended September 30, 2003 Ended September 30, 2002
------------------------ ------------------------
Net (loss) income $ (12,994) $ 1,258,307
=============== ==============
Partnership's share of net (loss) income $ (130) $ 12,583
=============== ==============
Distributions $ 741,759 $ 2,981,327
=============== ==============
Partnership's share of distributions $ 7,418 $ 29,813
=============== ==============
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
September 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 September 30, 2003 and 2002
For the three months ended September 30, 2003 and 2002, the Partnership did
not lease or finance any additional equipment.
Revenues for the quarter ended September 30, 2003 ("2003 Quarter") were
$2,082,942 representing a decrease of $878,310, or approximately 30%, as
compared to the quarter ended September 30, 2002 ("2002 Quarter"). The decrease
in revenues were caused primarily from decreases in rental income of $1,046,466,
and finance income of $379,081. In addition, income from investment in joint
ventures decreased by $77,031. These decreases were offset by a gain on
investment in unguaranteed residual values of $340,410 and a gain on sales of
equipment of $284,205 in 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 resale 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 Connexion effective
May 2002, and the subsequent termination of this lease along with the operating
lease with Sky Airlines.
The decrease in finance income is due to the reduction in the size of the
Partnership's portfolio of leases from the 2002 Quarter to the 2003 Quarter. 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, along with equipment pertaining to leases
with Petsmart, Inc. and E-Trade, Inc. were sold, and gains of $675,825
recognized.
The Partnership realized a gain on sale of equipment associated with its
investment in the Summit Portfolio. In 2000, the Partnership invested $2,526,696
in acquisition of a portfolio of residual values interests. During the 2003
Quarter, the Partnership had recovered all of its invested capital and therefore
recognized a gain of $340,410. Separately, the Partnership sold equipment in an
early buy-out transaction to E-Trade, Inc. and realized a gain of $284,205.
Expenses for the 2003 Quarter were $2,033,086 representing a decrease of
$970,377, as compared to 2002 Quarter. The decrease in expenses resulted
primarily from decreases in interest expense of $594,426, depreciation expense
of $394,598, management fees - general partner of $117,605, and general and
administrative expenses of $70,115. The decrease in interest expense resulted
from the decline in the average level of non-recourse debt outstanding.
Depreciation expense declined due to the early termination of two operating
leases (Note 3). Management fees - general partner and general and
administrative expenses declined due to the reduction in the size of the
Partnership's portfolio.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
September 30, 2003
Net income (loss) for the 2003 Quarter and 2002 Quarter was $49,856 and
$(42,211), respectively. The net income (loss) per weighted average limited
partnership unit was $.07 and $(.06) for the 2003 Quarter and 2002 Quarter,
respectively.
Results of Operations for the Nine Months Ended September 30, 2003 and 2002
For the nine months ended September 30, 2003 and 2002, the Partnership did
not lease or finance any additional equipment.
Revenues for the nine months ended September 30, 2003 ("2003 Period") were
$7,307,042 representing a decrease of $1,847,553, or approximately 20%, as
compared to the nine months ended September 30, 2002 ("2002 Period"). The
decrease in revenues resulted primarily from a decrease in rental income of
$1,458,157, a decrease in finance income of $1,315,652, and a decrease in income
from investment in unconsolidated joint ventures of $208,790. These decreases
were offset by an increase in gain on sale of equipment of $596,991 and gain on
investment in unguaranteed residual values of $566,568 in the 2003 Period.
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 Connexion effective
May 2002, and the subsequent termination of this lease along with the operating
lease with Sky Airlines.
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, along with equipment pertaining to leases
with Petsmart, Inc. and E-Trade, Inc. were sold, and gains of $675,825
recognized.
Expenses for the 2003 Period were $15,024,780 representing an increase of
$5,665,675 as compared to 2002 Period. The increases in expenses resulted
primarily from a loss on lease termination of $7,365,477 as described in Note 3
of the condensed consolidated financial statements. This was partially offset by
decreases in interest expense of $996,699, management fees - General Partner of
$264,135, administrative expense reimbursements - General Partner of $143,444,
general and administrative expense of $127,723, amortization of initial direct
cost of $94,027, and depreciation expense of $74,491. Interest expense reduced
due to the decline in the average non-recourse debt. Management fees - general
partner, administrative expense reimbursements - general partner, and general
and administrative expense reduced due to the reduction in the size of the
Partnership's portfolio and level of operation. Depreciation expense decreased
due to the termination of the operating leases with Sky Airlines and Boeing
Connexion.
Net loss for the 2003 Period and 2002 Period was $7,717,738 and $204,510,
respectively. The net loss per weighted average limited partnership unit was
$10.28 and $0.27 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
$2,025,000, proceeds from sale of investment of unguaranteed residual values of
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
September 30, 2003
$1,667,651, proceeds from sales of equipment of $1,661,898 and distributions
received from unconsolidated joint ventures of $323,151 offset by cash used in
operating activities of $2,158,535, distributions to partners aggregated
$5,090,888, 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
September 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 was extended for twelve
additional months expiring May 31, 2004. 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 September
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 at September 30, 2003.
Cash distributions to limited partners for the 2003 Period and the 2002
Period, which were paid monthly, totaled $5,039,979 and $6,007,732,
respectively.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
September 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. As a result, Sky Airlines became delinquent on its payment
obligations under the lease with the entity that owns the aircraft, ICON
Aircraft 23865 LLC a wholly-owned subsidiary of the Partnership. The lender on
the transaction delivered notice that an event of default existed as a result of
Sky Airlines failing to pay all amounts due under the lease on a timely basis.
Consequently, ICON Aircraft 23865 LLC notified Sky Airlines that it is in
default under the lease agreement and has made demand for payment in full. ICON
Aircraft 23865 LLC purchased the aircraft leased to Sky Airlines in conjunction
with ICON Aircraft 24231 LLC's (also a wholly-owned subsidiary of the
Partnership) purchase of an aircraft leased to Boeing Connexion. Both aircraft
were re-financed with a single lender and were cross-collateralized by the
non-recourse notes.
The lender on the transaction exercised its right to repossess the aircraft
which was on lease to Sky Airlines, along with the aircraft which was on lease
to Boeing Connexion during the quarter ended September 30, 2003. While Boeing
Connexion was never in default, the cross-collateralization term of the loan
agreement, which was entered into at purchase date of the aircrafts, resulted in
both aircrafts being repossessed. As a result of the repossession of the two
aircraft the Partnership has relinquished $23,244,966 of related note payable -
non recourse and written-off its remaining net investment in operating leases of
$279,139, which resulted in a loss on termination of leases of $7,365,477, of
which $7,086,338 was recognized in the quarter ended June 30, 2003.
The aircraft were the sole assets owned by ICON Aircraft 23865 LLC and ICON
Aircraft 24231 LLC, both wholly-owned subsidiaries of the Partnership.
As of September 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 September 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.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
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 September 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
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)
September 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 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
32.1 Certification of Chairman and Chief Executive Officer.
32.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer.
33.1 Certification of Chairman and Chief Executive Officer pursuant to 18
U.S.C. (Section)1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
33.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer pursuant to 18 U.S.C. (Section)1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
September 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.
November 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 32.1
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: November 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 32.2
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: November 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)
September 30, 2003
EXHIBIT 33.1
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 September 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: November 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)
September 30, 2003
EXHIBIT 33.2
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 September 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: November 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.