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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, 2004
--------------------------------------------------
[x ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the transition period from __________________________ to __________________
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 10011-1505
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(212) 418-4700
- --------------------------------------------------------------------------------
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
(unaudited)
June 30, December 31,
2004 2003
---- ----
Assets
------
Cash and cash equivalents $ 675,710 $ 52,101
----------------- ----------------
Investment in finance leases
Minimum rents receivable 6,314,879 10,827,643
Estimated unguaranteed residual values 25,070,359 26,686,729
Initial direct costs, net 167,577 248,472
Unearned income (2,483,632) (3,697,612)
Allowance for doubtful accounts (228,721) (228,721)
----------------- ---------------
28,840,462 33,836,511
----------------- ---------------
Investment in operating leases
Equipment, at cost 10,765,766 10,765,766
Accumulated depreciation (2,708,033) (2,202,024)
----------------- ---------------
8,057,733 8,563,742
----------------- ---------------
Equipment held for lease or sale, net 2,218,890 2,505,332
Investments in unguaranteed residual values 1,997,000 1,997,000
Investment in option 419,672 -
Investments in unconsolidated joint ventures 1,342,644 693,023
Due from affiliates, net 195,529 295,386
Other assets, net 351,032 130,257
----------------- ----------------
Total assets $ 44,098,672 $ 48,073,352
================= ================
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Balance Sheets - Continued
(unaudited)
June 30, December 31,
2004 2003
---- ----
Liabilities and Partners' Equity
Notes payable - non-recourse $ 21,891,923 $ 19,174,180
Note payable - recourse - 4,184,547
Security deposits and other 543,039 731,628
Due to affiliates, net 374,317 236,822
Minority interest in consolidated joint venture 148,678 141,232
----------------- ----------------
Total liabilities 22,957,957 24,468,409
----------------- ----------------
Commitments and Contingencies
Partners' equity (deficiency)
General Partner (438,312) (414,398)
Limited Partners (739,781.242 and 742,308.870 units
outstanding, $100 per unit original issue price) 21,579,027 24,019,341
----------------- ----------------
Total partners' equity 21,140,715 23,604,943
----------------- ----------------
Total liabilities and partners' equity $ 44,098,672 $ 48,073,352
================= ================
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,
2004 2003 2004 2003
---- ---- ---- ----
Rental income $ 360,000 $ 1,574,463 $ 720,000 $ 3,148,926
Finance income 579,858 736,567 1,213,980 1,460,450
Net (loss) gain on sales of equipment - - (3,421) 391,620
Gain from investment in
unguaranteed residual values 45,259 226,158 82,324 226,158
Net loss from investment in
unconsolidated joint ventures (77,111) (14,211) (97,266) (3,064)
Interest income and other 2,074 - 12,819 10
------------- ------------- ------------ ------------
Total revenues 910,080 2,522,977 1,928,436 5,224,100
------------- ------------- ------------ -------------
Expenses
Provision for loss contingency - 7,086,338 - 7,086,338
Interest 419,575 1,071,493 818,315 2,238,973
Depreciation 253,004 1,169,037 752,331 2,361,026
Management fees - General Partner 25,309 177,591 315,592 580,073
Administrative expense reimbursements -
General Partner 28,005 71,036 129,976 229,029
Amortization of initial direct costs 51,443 59,914 94,572 101,613
General and administrative expense 121,898 121,096 189,494 387,591
Minority interest in consolidated
joint venture 3,654 3,490 7,446 7,051
------------- ------------- ------------- -------------
Total expenses 902,888 9,759,995 2,307,726 12,991,694
------------- ------------- ------------- -------------
Net income (loss) $ 7,192 $ (7,237,018) $ (379,290) $ (7,767,594)
============= ============= ============= =============
Net income (loss) allocable to:
Limited Partners $ 7,120 $ (7,164,648) $ (375,497) $ (7,689,918)
General Partner 72 (72,370) (3,793) (77,676)
------------- ------------- -------------- -------------
$ 7,192 $ (7,237,018) $ (379,290) $ (7,767,594)
============= ============= ============= =============
Weighted average number of limited
partnership units outstanding 739,900 742,846 740,367 742,920
============= ============= ============= =============
Net income (loss) per weighted average
limited partnership unit $ .01 $ (9.64) $ (.51) $ (10.35)
============= ============= ============= =============
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, 2004
(unaudited)
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
------- ------ -------- ------- -----
(Per weighted average unit)
Balance at
January 1, 2004 $ 24,019,341 $ (414,398) $ 23,604,943
Cash distributions to partners $ 2.63 $ - (1,942,451) (20,121) (1,962,572)
Limited partnership units
redeemed (2,527.628 units) (122,366) - (122,366)
Net loss (375,497) (3,793) (379,290)
-------------- ------------ ---------------
Balance at
June 30, 2004 $ 21,579,027 $ (438,312) $ 21,140,715
=============== ============ ==============
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)
2004 2003
---- ----
Net loss $ (379,290) $ (7,767,594)
Adjustments to reconcile net loss to
---------------- ----------------
net cash used in operating activities:
Rental income paid directly to lender by lessee (720,000) (3,004,043)
Finance income portion of receivables paid directly
to lenders by lessees (1,025,131) (1,269,808)
Provision for loss contingency - 7,086,338
Depreciation 752,331 2,361,026
Interest expense on non-recourse financing paid
directly to lenders by lessees 678,092 1,879,141
Amortization of initial direct costs 94,572 101,613
Minority interest in consolidated joint venture 7,446 7,051
Net loss from investments in unconsolidated joint venture 97,266 3,064
Net loss (gain) on sales of equipment 3,421 (391,620)
Gain from investment in unguaranteed residual values (82,324) (226,158)
Changes in operating assets and liabilities:
Collection of principal - non-financed receivables 175,786 245,894
Due to/from affiliates, net 244,265 33,851
Other assets, net (275,692) 317,595
Security deposits and other (163,749) (1,065,612)
-------------- -------------
Total adjustments (213,717) 6,078,332
-------------- -------------
Net cash used in operating activities (593,007) (1,689,262)
-------------- -------------
Cash flows from investing activities:
Proceeds from sales of equipment 1,194,307 807,620
Proceeds from investment in unguaranteed residual values 82,324 1,327,242
Distribution received from unconsolidated joint ventures 341,690 323,151
Investment in option (419,672) -
Investment in joint venture (1,027,199) -
-------------- ------------
Net cash provided by investing activities 171,450 2,458,013
-------------- -------------
(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)
2004 2003
---- -----
Cash flows from financing activities:
Proceeds from note payable - non-recourse 11,193,368 3,684,718
Proceeds from note payable - recourse 1,390,000 2,025,000
Repayments of note payable - recourse (5,574,547) (2,246,324)
Repayments of notes payable - non-recourse (3,878,717) (353,039)
Cash distributions to partners (1,962,572) (4,080,601)
Redemption of limited partnership units (122,366) (14,882)
---------------- ---------------
Net cash provided by (used in) financing activities 1,045,166 (985,128)
---------------- ---------------
Net increase (decrease) in cash and cash equivalents 623,609 (216,377)
Cash and cash equivalents at beginning of period 52,101 819,928
---------------- ---------------
Cash and cash equivalents at end of period $ 675,710 $ 603,551
---------------- ---------------
(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, 2004 and 2003, non-cash activities
included the following:
2004 2003
---- ----
Principal and interest on direct finance receivables
paid directly to lenders by lessees $ 4,555,000 $ 5,153,803
Rental income paid directly to lenders by lessees 720,000 3,004,043
Principal and interest on non-recourse financing paid
directly to lenders by lessees (5,275,000) (8,157,846)
---------------- ---------------
$ - $ -
================ ===============
Interest paid directly to lenders by lessees $ 678,092 $ 1,879,141
Other interest paid 140,223 359,832
---------------- ---------------
Total interest expense $ 818,315 $ 2,238,973
================ ===============
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, 2004
(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 2003 Annual Report
on Form 10-K.
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, 2004 and 2003,
respectively, were as follows:
2004 2003
---- ----
Management fees $ 315,592 $ 580,073 Charged to Operations
Administrative expense
reimbursements 129,976 229,029 Charged to Operations
------------ -------------
Total $ 445,568 $ 809,102
============ =============
For the six months ended June 30, 2004, the Partnership had a net
receivable of $195,529 due from affiliates, primarily resulting from its share
of distributions and rental payments received by affiliates on behalf of the
Partnership. The Partnership also had a net payable of $374,317 due to
affiliates for rental payments received by the Partnership on behalf of such
affiliates.
3. Joint Ventures
The Partnership and its affiliates formed five joint ventures discussed
below for the purpose of acquiring and managing various assets. The Partnership
and its affiliates have substantially 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 joint venture described below is majority owned and is consolidated
with the Partnership.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
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
(0.5025%) and L.P. Seven's (0.5025%) 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. The outstanding balance of the non-recourse debt secured by this
equipment at June 30, 2004, was $11,255,873. The non-recourse debt associated
with this equipment was refinanced on May 6, 2004 at an interest rate of 3.65%
maturing on January 23, 2010. The lender is assigned the rental payments.
The Partnership is currently in negotiations with Portland General Electric
about PGE possibly purchasing the coal handling facility from the Partnership,
either at the end of the current lease term, or at the end of the extension term
in January 2010.
Unconsolidated Joint Ventures
The four joint ventures described below are less than 50% owned and are
accounted for following the equity method, whereby the Partnership's original
investment was recorded at cost and is adjusted by its share of earnings, losses
and distributions of the joint venture.
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.
On December 28, 2001, AIC Trust sold its remaining leases, subject to the
related debt, in exchange, for a note receivable of (Pound)2,575,000 ($3,744,822
based upon the exchange rate at December 31, 2001) which was payable in six
installments through June 2004. As of June 30, 2004, the remaining amount due
was (Pound)375,000 ($679,718 converted at the exchange rate at June 30, 2004),
as AIC Trust collected (Pound)375,000 in the first quarter. In July 2004, the
final installment on the note was collected.
Information as to the unaudited results of operations of AIC Trust for the
six months ended June 30, 2004 and 2003 and is summarized below:
For the Six Months For the Six Months
Ended June 30, 2004 Ended June 30, 2003
------------------- -------------------
Net income $ 7,700 $ 21,313
=============== ================
Partnership's share of net income $ 3,367 $ 9,320
=============== ================
Distributions $ 683,603 $ 722,005
=============== ================
Partnership's share of distributions $ 298,940 $ 315,733
=============== ================
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
ICON Aircraft 24846 LLC
-----------------------
During 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 Boeing 767-300
ER aircraft on lease at that time to Scandinavian Airline Systems ("SAS"). The
purchase price of $44,515,416 was funded with cash of $2,241,371 and the
assumption of non-recourse debt in the amount of $42,274,045. The lenders have a
security interest in the aircraft. The lease with SAS expired in March 2003, at
which time the outstanding balance of the non-recourse debt secured by this
asset was approximately $34,500,000. The Partnership has been making
contributions toward interest only payments on the outstanding non-recourse debt
during the remarketing of the aircraft by the General Partner. 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 General Partner had determined that it was in its best interest to sell
the Boeing 767-300ER aircraft, manufacturer's serial number 24846, to BTM
Capital Corp., the lender, for an amount equal to the outstanding debt balance.
The decision to sell the aircraft was based, in part, on the following factors:
1) The aircraft's current fair market value was between $24,000,000 and
$27,000,000, and the balance of the outstanding debt was $34,500,000.
2) Any new lease for the aircraft would have required the Partnership to
contribute an additional $850,000 in equity (at minimum) in order to
reconfigure the aircraft and/or upgrade the engines.
3) If the Partnership were to continue to remarket the aircraft, the lender
would have required interest only payments of $100,000/month until the
aircraft was placed with a new lessee.
The sale of the aircraft took place on July 29, 2004. ICON Aircraft 24846
realized a loss of $601,788 and recorded an impairment in the second quarter.
Information as to the unaudited results of operation of ICON Aircraft 24846
for the six months ended June 30, 2004 and 2003 is summarized below:
For the Six Months For the Six Months
Ended June 30, 2004 Ended June 30, 2003
------------------- -------------------
Net loss $ (2,515,567) $ (685,814)
================ ===============
Partnership's share of
net loss $ (50,311) $ (13,716)
================ ===============
Contributions $ 577,021 $ -
================ ===============
Partnership's share of
contributions $ 11,540 $ -
================ ===============
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
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 leases for an aggregate purchase price of
$29,705,716. The purchase price consisted of cash of $11,401,151 and the
assumption of non-recourse debt of $18,304,565. The non-recourse debt is
structured so as to be amortized with rentals due under the leases. The leases
expire on various dates through September 2006. The Partnership, L.P. Seven,
L.P. Six and Fund Eight B have ownership interests of 1.0%, 10.31%, 1.0% and
87.69%, respectively, in ICON Cheyenne. The outstanding non-recourse debt
balance at June 30, 2004, was $727,584.
Information as to the unaudited results of operation of ICON Cheyenne for
the six months ended June 30, 2004 and 2003 is summarized below:
For the Six Months For the Six Months
Ended June 30, 2004 Ended June 30, 2003
------------------- -------------------
Net (loss) income $ (371,961) $ 132,537
================ ===============
Partnership's share of net (loss) income $ (3,720) $ 1,332
================ ===============
Distributions $ 4,275,001 $ 741,759
================ ===============
Partnership's share of distributions $ 42,750 $ 7,418
================ ===============
ICON Aircraft 46837, LLC
------------------------
During March 2004, the Partnership and an affiliate, ICON Income Fund Ten
LLC ("Fund Ten"), formed ICON Aircraft 46837, LLC ("ICON Aircraft 46837") for
the purpose of acquiring and managing a McDonnell Douglas DC-10-30F aircraft on
lease with Federal Express Corporation through March 2007. The purchase price of
the aircraft totaled $21,489,374, which was funded with cash of $3,566,226, the
assumption of other liabilities of $12,500, and non-recourse debt of
$17,672,027. The debt has an interest rate of 4% and matures in March 2007. The
lenders have a security interest in the aircraft and have been assigned the
rental payments under the lease. Legal fees of $36,050 were also paid and
capitalized as part of the cost of the aircraft. Subsequent to closing, an
additional $202,571 in bank fees and legal expenses were paid and capitalized as
part of the cost of the aircraft.
The Partnership and Fund Ten have ownership interests of 28.6% and 71.4%,
respectively, in ICON Aircraft 46837. The outstanding balance of the
non-recourse debt secured by this aircraft was $15,216,101 at June 30, 2004.
The Partnership also paid Fund Ten $10,000 for an option to acquire from
Fund Ten 61.4% of its share in ICON Aircraft 46837. If the Partnership exercises
this option, the Partnership will own a 90% interest in ICON Aircraft 46837. The
exercise price of the option is $2,130,604 and expires on September 30, 2004.
The Partnership paid a total of $573,770 in acquisition fees to the General
Partner relating to this transaction which includes a fee of $409,672 related to
the option which was charged in accordance with the partnership agreement.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
Information as to the unaudited results of operation of ICON Aircraft 46837
for the six months ended June 30, 2004 is summarized below:
For the Six Months
Ended June 30, 2004
-------------------
Net loss $ (162,948)
===============
Partnership's share of net loss $ (46,602)
===============
Contributions $ 3,722,347
===============
Partnership's share of contributions $ 1,066,110
===============
4. Equipment sales
The Partnership sold its remaining interest in equipment that was on lease
to Rental Service Inc. during the first quarter of 2004. The leases with Rental
Services, Inc. expired in the first quarter, at which time the Partnership had
residual interests in the equipment of $1,170,400 on an equity investment of
$573,694. The lessee purchased the equipment for $1,166,979 resulting in a net
loss of $3,421.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
Item 2. Manager'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 and notes included
in the Partnership's annual report on Form 10-K dated December 31, 2003. Certain
statements within this document may constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements are identified by words such as "anticipate," "believe," "estimate,"
"expects," "intend," "predict" or "project" and similar expressions. The
Partnership believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions. Any such forward-looking
statements are subject to risks and uncertainties and the Partnership's future
results of operations could differ materially from historical results or current
expectations. Some of these risks are discussed in this report, and include,
without limitation, fluctuations in oil and gas prices; changes in capital
spending by lessees; changing customer demands for aircraft; acts of terrorism;
unsettled political conditions, war, civil unrest and governmental actions,
especially in higher risk countries of operations; foreign currency
fluctuations; and environmental and labor laws. The Partnership's actual results
could differ materially from those anticipated by such forward-looking
statements due to a number of factors, some of which may be beyond the
Partnership's control, including, without limitation:
o changes in our industry, interest rates or the general economy;
o the degree and nature of our competition;
o availability of qualified personnel;
o the financial condition of lessees;
o cash flows from operating activities may be less than the Partnership's
current level of expenses;
o the financial condition of lessees; and
o lessee defaults.
a. Overview
The Partnership is an equipment leasing business formed on February 7, 2000
and began active operations on June 14, 2000. The Partnership primarily engages
in the business of acquiring equipment subject to leases. After the net offering
proceeds were invested, additional investments will be made with the cash
generated from the Partnership's initial investments to the extent that cash is
not needed for Partnership expenses, reserves and distributions to investors.
The investment in additional equipment in this manner is called "reinvestment."
We are currently operating in our "reinvestment period". After the "reinvestment
period", the Partnership will then sell its assets in the ordinary course of
business during a time frame called the "liquidation period". If we believe it
would benefit investors to reinvest the Partnership's cash flow in equipment
during the liquidation period, the Partnership may do so, but we will not
receive any additional fees in connection with any such reinvestments.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
The Partnership's current equipment portfolio, which is held directly by
the Partnership or through joint venture investments with affiliates, consists
substantially of:
o One (1) tugboat ("M/V MICHIGAN") bearing official number 650770 and one (1)
oil barge ("GREAT LAKES") bearing official number 650771 on lease to
Keystone Great Lakes, whose obligations are ultimately guaranteed by BP
Amoco Plc. The purchase price was $12,922,568, of which the cash
contribution of the Partnership was $5,628,144. The lease is scheduled to
expire on January 1, 2008.
o A 98.995% interest in equipment used in a coal handling facility on lease
to Portland General Electric. The purchase price of the equipment was
$27,421,810, of which the equity contribution was $15,193,097, and assumed
non-recourse debt was $12,228,713. The lease has been extended and is
currently scheduled to expire on January 23, 2010, at which time the lessee
has the option to renew for another 15 years. The Partnership is currently
in negotiations with Portland General Electric about PGE possibly
purchasing the coal handling facility from the Partnership, either at the
end of the current lease term, or at the end of the extension term in
January 2010.
o A 28.6% interest in a 1979 McDonnell Douglas DC-10-30F aircraft on lease to
Federal Express Corporation with an expiration of March 2007. The purchase
price of the aircraft was $3,566,226 in cash and $17,672,027 in
non-recourse debt.
o Tekion Modular Furniture on lease to E*Trade Group, Inc. The purchase price
consisted of an equity contribution of $117,001 in cash and assumption of
$1,147,125 in non-recourse debt. The base term of the lease is scheduled to
expire on May 31, 2005.
o Boeing 737-200 aircraft on lease to America West Corporation. The total
aggregate purchase price was $6,569,234 consisting of $1,534,547 in cash
and the assumption of non-recourse debt in the amount of $5,034,687. The
lease is scheduled to expire on December 31, 2005.
o Boeing model 737-200 aircraft on lease to America West Corporation. The
total aggregate purchase price was $6,650,000 consisting of a cash
contribution of $1,615,313 and the assumption of non-recourse debt in the
amount of $5,034,687. The lease is scheduled to expire on January 14, 2006.
o Various furniture, computers and telephone systems on lease to Regus
Business Centre Corp. The aggregate purchase price of the equipment was
$4,861,629. The original term of the lease was for 48 months and was
scheduled to expire on November 10, 2003. This lease was renewed with the
renewal period extending the lease termination date to February 28, 2007.
o Various aircraft rotables that were originally on lease to Sabena Belgian
World Airways. The aggregate purchase price of the parts was $2,978,345.
The equipment is currently off lease and being remarketed. Various aircraft
rotables that were originally on lease to Sabena Oman. The aggregate
purchase price of the parts was $1,961,000. The equipment is currently off
lease and being remarketed.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
o
o A 50 % portion of the residual value and the right to acquire the balance
of an offshore drilling rig, the Cecil Provine. The Partnership purchased
the option for $1,997,000 in cash. The Cecil Provine is on a bareboat
charter to Rowan Companies, Inc. through December 2008.
Substantially all of our recurring operating cash flows are generated from
the operations of the single-investor leases in the Partnership's portfolio. On
a monthly basis, we deduct the expenses related to the recurring operations of
the portfolio from such revenues and assess the amount of the remaining cash
flows that will be required to fund known re-leasing costs and equipment
management costs. Any residual operating cash flows are considered available for
distribution to the investors and are paid monthly (up until the liquidation
period).
Industry Factors
Our results continue to be impacted by a number of factors influencing the
equipment leasing industry.
Further Deterioration of the Air Travel Industry.
The aircraft leasing industry is currently experiencing a recession, and
this has resulted in depressed sales prices for assets such as the Partnership's
aircraft on lease to America West and the aircraft rotables which are currently
being remarketed. A further weakening of the industry could cause the proceeds
realized from the sale of these assets to be even less than suggested by recent
appraisals.
Inability to Remarket Assets.
If current equipment lessees choose not to renew their leases or purchase
the equipment at lease expiry, the Partnership will need to remarket the
equipment, which could be difficult. There is no assurance that the Partnership
will be able to locate a willing buyer or lessee, or if one is located, that the
buyer or lessee will pay a price for the asset at least equal to the carrying
value.
b. Results of Operations for the Three Months Ended June 30, 2004 and 2003
Revenues
Revenues for the three months ended June 30, 2004 (the "2004 Quarter") were
$910,080, representing a decrease of $1,612,897. This decrease in revenues
resulted primarily from a decrease in rental income of $1,214,463, a decrease in
finance income of $156,709, a decrease in gain from investment in unguaranteed
residuals of $180,899 and an increase in loss from investment in unconsolidated
joint venture of $62,900.
Rental income decreased primarily from the termination of the leases with
Boeing Connexion and Sky Airlines as the equipment was returned to the lenders
of the non-recourse debt associated with the equipment subsequent to June 30,
2003, (the "2003 Quarter"). Finance income reduced due to the maturing of
leases. The Partnership's loss from its investment in unconsolidated joint
ventures was due primarily to losses for the quarter from ICON Aircraft 24846
LLC, ("ICON Aircraft 24846") of $31,133 and ICON Aircraft 46837 LLC ("ICON
Aircraft 46837") of $46,602, respectively.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
Expenses
Expenses for the 2004 Quarter were $902,888 representing a decrease of
$8,857,107 from the 2003 Quarter. This decrease in expenses resulted primarily
from a decrease in provision for loss contingency of $7,086,338, a decreases in
interest expense of $651,918, a decrease in depreciation expense of $916,033, a
decrease in management fees - General Partner $152,282, a decrease in
administrative expense reimbursement - General Partner of $43,031. Interest
expense decreased primarily from the relinquishment of the non-recourse debt
associated with the Boeing Connexion and Sky Airlines transactions in the third
quarter 2003. Depreciation expense also reduced primarily from the termination
of leases with Boeing Connexion and Sky Airlines. General and administrative
expense and management fees - General Partner reduced due to the reduction in
the level of activities of the Partnership's operation.
Net Income/Loss of the Partnership
As a result of the foregoing factors, net income (loss) for the 2004
Quarter and 2003 Quarter was $7,192 and $(7,237,018), respectively. The net
income (loss) per weighted average limited partnership unit was $.01 and $(9.64)
for the 2004 Quarter and 2003 Quarter, respectively.
c. Results of Operations for the Six Months Ended June 30, 2004 and 2003
Revenues
Revenues for the six months ended June 30, 2004 (the "2004 Period") were
$1,928,436, representing a decrease of $3,295,664 from the six months ended June
30, 2003 (the "2003 Period"). This decrease in revenue resulted primarily from a
decrease in rental income of $2,428,926, decrease in finance income of $246,470,
decrease in gain from investment in unguaranteed residuals of $143,834, decrease
in gain on sale of equipment of $395,041, and an increase in loss from
investment in unconsolidated joint venture of $94,202.
Rental income decreased primarily form the termination of leases with
Boeing Connexion and Sky Airlines in the third quarter 2003, due to the
equipment being turned over to the lender of the non-recourse debt that was
associated with the equipment. The Partnership did not realize a gain from sale
of equipment in comparison to the 2003 Quarter, as the booked residual value of
the equipment sold in 2004 was much greater than that sold in 2003. Finance
income reduced due to the maturing of leases. The Partnership experienced a loss
from its investment in unconsolidated joint ventures due primarily to its
investment in ICON Aircraft 24846 and ICON Aircraft 46837 which both returned a
net loss of $50,311 and $46,602, respectively.
Expenses
Expenses for the 2004 Period were $2,307,726 representing a decrease of
$10,683,968 compared to the 2003 Period. This decrease in expenses resulted
primarily from a decrease in the provision for loss contingency of $7,086,338 in
interest expense of $1,420,658, decrease in depreciation expense of $1,608,695,
decrease in management fees - General Partner of $264,481, decrease in
administrative expense reimbursement - General Partner of $99,053, and an
overall decrease in general and administrative expenses of $198,097. Interest
expense decreased primarily from the relinquishment of the non-recourse debt
associated with the Boeing Connexion and Sky Airlines transactions. Depreciation
expense also reduced primarily from the termination of leases with Boeing
Connexion and Sky Airlines. General and administrative expense and management
fees - General Partner reduced due to the reduction in the level of activities
of the Partnership's operation.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
Net Income/Loss of the Partnership
As a result of the foregoing factors, net loss for the 2004 Period and 2003
Period was $(379,290) and $(7,767,594), respectively. The net loss per weighted
average limited partnership unit was $.51 and $10.35 for the 2004 Period and
2003 Period, respectively.
d. Liquidity and Capital Resources
Cash Requirements
The Partnership has sufficient funds necessary to maintain current
operations and to continue to invest in business essential assets subject to
lease.
Sources of Cash
The Partnership's primary sources of liquidity in the 2004 Period were
proceeds from financing activities whereby the Partnership received net proceeds
of $7,314,461 from the refinancing of Portland General Electric (PGE)
non-recourse debt, proceeds from sales of equipment of $1,194,307, proceeds from
sale of investment of unguaranteed residual values of $82,324, and distributions
received from unconsolidated joint ventures of $341,690 offset by cash used in
operating activities of $593,007, distributions to partners aggregating
$1,962,572. As a result of this activity, the Partnership's liquidity increased
over the 2003 Period, as cash used in operating and financing activities reduced
by $1,096,255 and $2,030,293, respectively.
Financings and Recourse Borrowings
The Partnership paid its outstanding balance of recourse debt of $5,574,547
to Comerica Bank from proceeds received from the refinancing of the PGE
non-recourse debt.
The Partnership, along with certain of its affiliates -- ICON Cash Flow
Partners L.P. Seven, ICON Income Fund Eight B and ICON Income Fund Nine LLC --
are parties to a Loan and Security Agreement dated May 30, 2002, as amended (the
"Loan Agreement") between themselves and Comerica Bank (the "Bank"). Certain
financial covenants under the Loan Agreement were violated during 2003 and were
subsequently cured. The Bank has waived any defaults that might have resulted
there from.
The line of credit was extended to expire December 31, 2004. As of June 30,
2004, the LLC had no outstanding balance under the line. Aggregate borrowings by
all funds under the line of credit agreement aggregated $8,615,439 on June 30,
2004.
Distributions
The Partnership made cash distributions to limited partners of $1,962,572
during the six months ended June 30, 2004. Such distributions are reflected as a
return of capital, as the Partnership recorded a loss for the six months.
Uncertainties
As of June 30, 2004, except as noted above in the Overview section and
listed below in the Risk Factors section, and to the best of our knowledge,
there were no known trends or demands, commitments, events or uncertainties
which are likely to have a material effect on liquidity. As cash is realized
from operations or borrowings, the Partnership will continue to invest in
transactions, while retaining sufficient cash to meet its reserve requirements
and recurring obligations.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
e. Inflation and Interest Rates
The potential effects of inflation on the Partnership are difficult to
predict. If the general economy experiences significant rates of inflation,
however, it could affect the Partnership in a number of ways. The cost of
equipment acquisitions could increase with inflation and revenues from existing
leases would not generally increase with inflation, as the Partnership does not
currently have or expect to have rent escalation clauses tied to inflation in
its leases. Nevertheless, the anticipated residual values to be realized upon
the sale or re-lease of equipment upon lease terminations (and thus the overall
cash flow from the Partnership's leases) may be expected to increase with
inflation as the cost of similar new and used equipment increases.
If interest rates increase significantly, the lease rates that the
Partnership can obtain on future leases may be expected to increase as the cost
of capital is a significant factor in the pricing of lease financing. Leases
already in place, for the most part, would not be affected by changes in
interest rates.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
The Partnership is exposed to certain market risks, including changes in
interest rates and the demand for equipment (and the related residuals) owned by
the Partnership and its investors.
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.
Additionally, 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 aggregate borrowings under the
floating rate line of credit as of June 30, 2004 were $0 as compared to
$4,184,547 at December 31, 2003. The Partnership believes the risk associated
with rising interest rates under this line is not significant.
The Partnership attempts to manage 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
The Partnership carried out an evaluation, under the supervision and with
the participation of management of ICON Capital Corp., the General Partner of
the Partnership, including the Chief Executive Officer and the Principal
Financial and Accounting Officer, of the effectiveness of the design and
operation of the Partnership's disclosure controls and procedures as of the end
of the period covered by this report pursuant to the Securities Exchange Act of
1934. Based upon the evaluation, the Chief Executive Officer and the Principal
Financial and Accounting Officer concluded that the Partnership's disclosure
controls and procedures were effective.
There were no significant changes in the Partnership's internal control
over financial reporting during the Partnership's second quarter that have
materially affected, or are likely to materially affect, the Partnership's
internal control over financial reporting.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
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 pending 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.
(b) Reports on Form 8-K - None
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
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.
By its General Partner,
ICON Capital Corp.
August 16, 2004 /s/ Thomas W. Martin
- ------------------------- -------------------------------
Date Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer
of the General Partner of the Partnership)
Exhibit 32.1
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-Q
---------------------
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICON Income Fund
Eight A L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the condensed consolidated financial statements and
other financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4. The registrant'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)) for the registrant and we
have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this quarterly report based on
such evaluation; and
c) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the General Partner
(or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the registrant's ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
Dated: August 16, 2004
/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.
Exhibit 32.2
Principal Financial Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-Q
---------------------
I, Thomas W. Martin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICON Income Fund
Eight A L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the condensed consolidated financial statements and
other financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4. The registrant'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)) for the registrant and we
have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this quarterly report based on
such evaluation; and
c) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the General Partner
(or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the registrant's ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
Dated: August 16, 2004
/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.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
June 30, 2004
Exhibit 32.1
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 (18 U.S.C.
1350), that, to the best of my knowledge and belief:
(1) the Quarterly Report on Form 10-Q for the period ended June 30, 2004 (the
"Quarterly Report") which this statement accompanies fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (15 U.S.C. 78m); and
(2) the information contained in the 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 16, 2004
/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, 2004
Exhibit 32.2
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 (18 U.S.C. 1350), that, to the best of my knowledge and belief:
(1) the Quarterly Report on Form 10-Q for the period ended June 30, 2004 (the
"Quarterly Report") which this statement accompanies fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (15 U.S.C. 78m); and
(2) the information contained in the 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 16, 2004
/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.