Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[Fee Required]
For the fiscal year ended December 31, 2001
------------------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[Fee Required]
For the transition period from to
--------------------- ------------------------
Commission File Number 333-37504
---------------------------------------------------------
ICON Income Fund Eight B L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-4101114
- ---------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Fifth Avenue, 10th Floor, New York, New York 10011
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 418-4700
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class Name of each exchange on which registered
- ------------------------------ -----------------------------------------
- ------------------------------ -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
- --------------------------------------------------------------------------------
(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
TABLE OF CONTENTS
Item Page
PART I
1. Business 3
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 4
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 5
6. Selected Financial and Operating Data 5
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 6-11
8. Consolidated Financial Statements and Supplementary Data 12-31
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 32
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 32-33
11. Executive Compensation 33
12. Security Ownership of Certain Beneficial Owners
and Management 33-34
13. Certain Relationships and Related Transactions 34
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 34
SIGNATURES 35
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
PART I
Item 1. Business
General Development of Business
ICON Income Fund Eight B L.P. (the "Partnership"), was formed on February
7, 2000 as a Delaware limited partnership. The Partnership's maximum offering
was $75,000,000. The Partnership commenced business operations on its initial
closing date, June 14, 2000, with the admission of 15,815.51 limited partnership
units at $100 per unit representing $1,581,551 of capital contributions. Between
June 15, 2000 and October 17, 2001, 734,184.49 additional units were admitted
representing $73,418,449 of capital contributions. On October 17, 2001, the
Partnership had its final closing with a cumulative total of 750,000 units
admitted totaling $75,000,000 in capital contributions.
Segment Information
The Partnership has only one operating segment: the business of acquiring
equipment subject to leases with companies that the Partnership believes to be
creditworthy.
Narrative Description of Business
The Partnership is an equipment leasing income fund. The principal
objective of the Partnership is to obtain the maximum economic return from its
investments for the benefit of its limited partners. To achieve this objective,
the Partnership intends to: (1) acquire a diversified portfolio of low
obsolescence equipment having long economic useful lives and high residual
values; (2) make monthly cash distributions to its limited partners, commencing
with each limited partner's admission to the Partnership, continuing through the
Reinvestment Period, which period will end no later than the eighth anniversary
after the final closing date; (3) re-invest substantially all undistributed cash
from operations and cash from sales of equipment and financing transactions
during the Reinvestment Period; and (4) sell the Partnership's investments and
distribute the cash from sales of such investments to its limited partners after
the end of the Reinvestment Period.
The equipment leasing industry is highly competitive. When seeking its
leasing transactions for acquisition, the Partnership competes with leasing
companies, manufacturers that lease their products directly, equipment brokers
and dealers and financial institutions, including commercial banks and insurance
companies. Many competitors are larger than the Partnership and have greater
financial resources.
The Partnership had one lessee (BAE Systems PLC which accounted for 11% of
total revenue) that accounted for more than 10% of total revenue during the year
ended December 31, 2001.
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
Lease Transactions
During the year ended December 31, 2001, the Partnership purchased
equipment subject to leases for purchase prices aggregating $41,666,367
(including initial direct costs).
The acquisitions were as follows:
(i) An aircraft simulator acquired in the first quarter of 2001, leased to an
unaffiliated third party for a term scheduled to expire in March 2006, for
a purchase price of $13,232,105, of which $10,830,109 was provided by the
assumption of non-recourse debt and the balance of $2,401,996 provided from
available cash;
(ii) Retail signage equipment purchased in the second quarter of 2001 for
$4,250,000, subject to a lease with an unaffiliated third party, scheduled
to expire in June 2005. The purchase was paid for with cash;
(iii)An engine module, purchased in the second quarter of 2001, subject to a
lease with an unaffiliated third party, scheduled to expire in May 2008,
for a purchase price of $5,950,000, of which $1,911,210 was provided by the
assumption of non recourse debt with the balance of $4,038,790 paid for
with cash; and.
(iv) Retail photography development equipment, purchased throughout the year
with scheduled lease expirations ranging from May 2006 to January 2007, for
purchase prices aggregating $18,234,262, of which $17,552,542 was provided
by the assumption of non-recourse debt and the balance of $681,720 paid for
with cash.
Additionally, the Partnership invested $2,406,128 in an unguaranteed
residual and $2,100,000 ($400,000 of which was provided by a 8.5% recourse note)
for an option to purchase an aircraft. Finally, the Partnership had placed cash
totaling $13,723,196 in various escrow accounts for three transactions scheduled
to be completed in 2002. Two of the proposal transactions were cancelled and
$7,623,196 of the escrowed funds were returned to the Partnership.
Item 2. Properties
The Partnership neither owns nor leases office space or equipment for the
purpose of managing its day-to-day affairs.
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 2001.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters
The Partnership's limited partnership interests are not publicly traded nor
is there currently a market for the Partnership's limited partnership units. It
is unlikely that any such market will develop.
Number of Equity Security Holders
Title of Class as of December 31,
-------------- --------------------------------------
2001 2000
---- ----
Limited Partners 2,825 920
General Partner 1 1
Item 6. Selected Consolidated Financial and Operating Data
For the Period
February 7, 2000
Year ended (date of inception) to
December 31, 2001 December 31, 2000 (1)
----------------- ---------------------
Total revenue $ 20,231,996 $ 742,302
=============== =============
Net income $ 820,109 $ 291,236
=============== =============
Net income allocable to limited partners $ 811,908 $ 288,324
=============== =============
Net income allocable to the General Partner $ 8,201 $ 2,912
=============== =============
Weighted average limited partnership units outstanding 502,536 132,049
=============== =============
Net income per weighted average limited partnership unit $ 1.62 $ 2.18
============== =============
Distributions to limited partners $ 4,932,964 $ 536,708
=============== =============
Distributions to the General Partner $ 49,845 $ 5,228
=============== =============
December 31, 2001 December 31, 2000
Total assets $ 143,918,696 $ 88,108,178
================ ==============
Partners' equity $ 61,212,600 $ 18,764,181
================ ==============
(1) No data is presented for the periods prior to 2000 since the Partnership
commenced operations on February 7, 2000, the initial closing date. The
Partnership had its first admission of limited partners in June 2000 and
commenced its acquisition efforts at that time. As a result, revenue and
net income for 2000 does not reflect a full year's operations.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
Item 7. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------------------
ICON Income Fund Eight B L.P. (the "Partnership"), was formed on February
7, 2000 as a Delaware limited partnership. The Partnership's maximum offering
was $75,000,000. The Partnership commenced business operations on its initial
closing date, June 14, 2000, with the admission of 15,815.51 limited partnership
units at $100 per unit representing $1,581,551 of capital contributions. Between
June 15, 2000 and October 17, 2001, 734,184.49 additional units were admitted
representing $73,418,449 of capital contributions. On October 17, 2001, the
Partnership had its final closing with a cumulative total of 750,000 units
admitted totaling $75,000,000 in capital contributions.
Significant Accounting Policies and Management Estimates
Basis of Accounting and Presentation - The Partnership's records are
maintained on the accrual basis. The preparation of financial statements in
conformity with generally accepted accounting principles requires the General
Partner's management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the dates of the financial statements and
revenues and expenses during the reporting periods. Significant estimates
include the allowance for doubtful assets and unguaranteed residual values.
Management believes that the estimates and assumptions utilized in preparing its
financial statements are reasonable and prudent. Actual results could differ
from those estimates. In addition, management is required to disclose contingent
assets and contingent liabilities.
Leases - The Partnership accounts for owned equipment leased to third
parties as finance leases or operating leases, as appropriate. For finance
leases, the Partnership records, at the inception of the lease, the total
minimum lease payments receivable, the estimated unguaranteed residual values,
the initial direct costs related to the leases and the related unearned income.
Unearned income represents the difference between the sum of the minimum lease
payments receivable plus the estimated unguaranteed residual minus the cost of
the leased equipment. Unearned income is recognized as finance income over the
terms of the related leases following the interest method. For operating leases,
equipment is recorded at cost and is depreciated on the straight-line method
over the lease terms to their estimated fair market values at lease
terminations. Related lease rentals are recognized on the straight-line method
over the lease terms. Billed and uncollected operating lease receivables are
included in other assets. Initial direct costs of finance leases are capitalized
and are amortized over the terms of the related leases using the interest
method. Initial direct costs of operating leases are capitalized and depreciated
on the straight-line method over the lease terms.
Investments in Unguaranteed Residual Values - The partnership carries its
investments in the future estimated unguaranteed residual values of assets at
cost, which is equal to or less than market value, subject to the Partnership's
policy relating to impairments of residuals discussed below. Gains or losses
will be recognized upon the sale or disposition of the investments.
Investments in Options - The Partnership carries its investment in an
option to purchase equipment at cost, which is equal to or less than market
value, subject to the Partnership's policy relating to impairment discussed
below. Gain or loss will be recognized upon the sale or disposition of the
investment.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
Impairment of Estimated Residual Values - The Partnership's policy with
respect to impairment of estimated residual values is to review, on a periodic
basis, the carrying value of its residuals on an individual asset basis to
determine whether events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable and, therefore, an impairment loss
should be recognized. The events or changes in circumstances which generally
indicate that the residual value of an asset has been impaired are (i) the
estimated fair value of the underlying equipment is less than the Partnership's
carrying value or (ii) the lessee is experiencing financial difficulties and it
does not appear likely that the estimated proceeds from disposition of the asset
will be sufficient to satisfy the remaining obligation to the non-recourse
lender and the Partnership's residual position. Generally in the latter
situation, the residual position relates to equipment subject to third party
non-recourse notes payable where the lessee remits their rental payments
directly to the lender and the Partnership does not recover its residual until
the non-recourse note obligation is repaid in full.
The Partnership measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Partnership from re-lease or resale of the equipment. Generally,
third party appraisals, reviews of future cash flows and anticipated future cash
flows and detailed market analyses are used as the basis for measuring whether
an impairment loss should be recognized.
Allowance for Doubtful Accounts - The Partnership records a provision for
bad debts to provide for estimated credit losses in the portfolio. The allowance
for doubtful accounts is based on the ongoing analysis of delinquency trends,
loss experience and an assessment of overall credit risk. The Partnership's
write-off policy is based on an analysis of the aging of the Partnership's
portfolio, a review of the non-performing receivables and leases, and prior
collection experience. An account is fully reserved for or written off when the
analysis indicates that the probability of collection of the account is remote.
Partnership Activities During 2001
During the year ended December 31, 2001, the Partnership purchased
equipment subject to leases for purchase prices aggregating $41,666,367
(including initial direct costs).
The acquisitions were as follows:
(i) An aircraft simulator acquired in the first quarter of 2001, leased to an
unaffiliated third party for a term scheduled to expire in March 2006, for
a purchase price of $13,232,105, of which $10,830,109 was provided by the
assumption of non-recourse debt and the balance of $2,401,996 provided from
available cash;
(ii) Retail signage equipment purchased in the second quarter of 2001 for
$4,250,000, subject to a lease with an unaffiliated third party, scheduled
to expire in June 2005. The purchase was paid for with cash;
(iii)An engine module, purchased in the second quarter of 2001, subject to a
lease with an unaffiliated third party, scheduled to expire in May 2008,
for a purchase price of $5,950,000, of which $1,911,210 was provided by the
assumption of non recourse debt with the balance of $4,038,790 paid for
with cash; and
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
(iv) Retail photography development equipment, purchased throughout the year
with scheduled lease expirations ranging from May 2006 to January 2007, for
purchase prices aggregating $18,234,262, of which $17,552,542 was provided
by the assumption of non-recourse debt and the balance of $681,720 paid for
with cash.
Additionally, the Partnership invested $2,406,128 in an unguaranteed
residual and $2,100,000 ($400,000 of which was provided by a 8.5% recourse note)
for an option to purchase an aircraft. Finally, the Partnership had placed cash
totaling $13,723,196 in various escrow accounts for three transactions scheduled
to be completed in 2002. Two of the proposal transactions were cancelled and
$7,623,196 of the escrowed funds were returned to the Partnership.
Results of Operations for the Period Ended December 31, 2001 and 2000
The Partnership was formed on February 7, 2000 and commenced operations
upon the first admission of limited partners on June 14, 2000. Because the
Partnership began operations in June 2000, was raising additional capital
through the issuance of units until the offering was completed in October 2001,
and invested such proceeds in additional leased equipment throughout the 2001
year, the 2001 and 2000 operating results are not comparable. The results of
operations for 2001 and 2000 are consistent with the level of acquisition of
lease equipment completed and the terms of the leases and related borrowings.
Rental income (from operating leases) increased by $17,035,827, from
$164,361 in 2000 to $17,200,188 in 2001, attributable primarily to receiving a
full year of rent in 2001 on equipment purchased in the second half of 2000 for
total purchase prices of $76,284,645 (including initial direct costs) as well as
equipment acquired in 2001 for purchase prices totaling $19,744,804 (including
initial direct costs) partially offset by the sale of equipment in 2001 which
was originally acquired for $872,881.
Finance lease income increased by $1,812,235 from $521,406 in 2000 to
$2,333,641 in 2001. This was primarily attributable to the full year effect of
finance leases acquired in the third and fourth quarters of 2000. Additionally
during 2001 the Partnership acquired equipment subject to finance leases
totaling $18,234,162, on lease to Kmart, Inc. ("Kmart") (see item 7a, Liquidity
and Capital Resources for a discussion of Kmart's bankruptcy and its effect on
the Partnership). The Kmart leases began generating finance lease income in
2001.
During 2001, the Partnership recognized a gain on a sale of an investment
in a joint venture to an affiliate of $327,341 and gains on the sales of
equipment of $92,695.
During 2001, the Partnership recognized income from an investment in a
joint venture with an affiliate of $43,953. The Partnership made its investment
in the joint venture in 2001 and sold the investment in the joint venture late
in 2001 for a gain (see above).
Interest income was $234,178 in 2001 as compared to $56,535 in 2000 due to
an increase (primarily from the proceeds of the offering) of amounts available
for investment, partially offset by a decline in interest rates.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
Depreciation expense increased in 2001 by $11,568,595, from $111,940 in
2000 to $11,680,535 in 2001 due to the full year effect in 2001 of investments
in operating leases acquired in 2000 as well as the effect of investments in
operating leases completed in 2001.
Interest expense increased in 2001 by $4,886,339, from $123,815 in 2000 to
$5,010,154 in 2001 due principally to the increase in acquisition indebtedness.
During 2001, the Partnership incurred additional non-recourse indebtedness of
$30,293,861. This was partially offset by a reduction in the outstanding debt
under the variable rate line of credit from $7,000,000 at December 31, 2000 to
$2,500,000 at December 31, 2001, and a decline in interest rates under the line
of credit. Further the Partnership repaid non-recourse indebtedness by
$13,939,491 in 2001 in accordance with the related payment schedules.
Management fees - General Partner increased by $1,252,497 from $92,140 in
2000 to $1,344,637 in 2001. This increase is consistent with the increase in
lease payments on which such fees are based.
Administrative expense reimbursements - General Partner increased by
$535,540, from $37,441 in 2000 to $572,981 in 2001 and is consistent with the
Partnership's increased level of operations.
Amortization of initial direct costs increased $179,238, from $33,510 in
2000 to $212,748 in 2001 due the full year effect of amortizing such costs on
acquisitions completed.
General and administrative expenses increased in 2001 by $348,747, from
$51,576 in 2000 to $400,323 in 2001 which was consistent with the Partnership's
increased level of operations. The Partnership acquired equipment throughout the
second half of 2000 and throughout 2001.
Net income for 2001 was $820,109 as compared to $291,236 in 2000 and net
income per weighted average limited partnership unit was $1.62 in 2001 compared
to $2.18 in 2000.
Partnership Activities During 2000
Equipment purchased in 2000 subject to lease included the following:
(i) An aircraft acquired through a joint venture ("ICON Aircraft 24846, LLC")
with two affiliates in which the Partnership has a 96% ownership interest.
The aircraft was acquired for a purchase price of $44,515,416 (including
initial direct cost) which was funded $2,241,371 with cash and $42,274,045
with non-recourse financing;
(ii) Various equipment acquired by a joint venture with three affiliates ("ICON
Cheyenne, LLC") in which the Partnership has an 87.69% ownership interest.
The equipment was purchased for an aggregate purchase price of $29,705,716.
The purchase was funded $11,401,151 with cash and $18,304,565 with
non-recourse debt.
(iii)The Partnership also purchased a total of $10,772,690 of other equipment,
subject to leases with 3 lessees.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
Results of Operations for the Period Ended December 31, 2000
Revenues for the period were $742,302, representing finance income of
$521,406, rental income of $164,361 and interest income of $56,535. Expenses for
the period totaled $451,066, representing interest expense of $123,815,
depreciation expense of $111,940, management fees-General Partner of $92,140,
administrative expenses reimbursed to the general partner of $37,441 general and
administrative expenses of $51,576, and amortization of initial direct costs of
$33,510. Net income for the period was $291,236. The net income per weighted
average limited partnership unit was $2.18. These amounts were consistent with
the Partnership's level of operations in 2000.
Liquidity and Capital Resources
During 2001 and 2000, the Partnership's primary source of funds was from
the sale of limited partnership units pursuant to the Partnership's offering of
units, net of related expenses, of $46,611,119 and $19,013,881, respectively,
proceeds received from borrowings under a line of credit ($2,500,000 outstanding
at December 31, 2001) and the assumption of non-recourse indebtedness totaling
$30,293,861 in 2001 and $60,578,610 in 2000. The funds were used to acquire
equipment subject to leases for purchase prices aggregating $41,666,367 in 2001
and $84,993,822 in 2000.
Cash distributions to the limited partners for the years ended December 31,
2001 and 2000, which were paid on a monthly basis, aggregated $4,932,964 and
$536,708 respectively and represented an annualized cash distribution rate of
10.75%, in accordance with the investment objectives of the Partnership.
Distributions were calculated based on the number of days each investment unit
was in the Partnership. The cash distributions in the 2001 period were composed
$1.62 per weighted average limited Partnership unit of investment income and
$8.20 as a return of capital. The cash distributions in the 2000 period were
$2.18 per weighted average limited Partnership unit of investment income and
$1.88 return of capital.
As of December 31, 2001, 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, sales of equipment and
borrowings, the Partnership will continue to invest while retaining sufficient
cash to meet its reserve requirements and recurring obligations.
Limited partners who purchased units after June 7, 2001 and before August
18, 2001 have the right to require the Partnership to repurchase their units
within the one-year period following such purchase since certain information
contained in the prospectus used during this period was not as current as
required by the rules of the Securities and Exchange Commission. The repurchase
price would be equal to the offering price per unit less any distributions
received with respect to such units. 142,049.4793 units were sold during this
period resulting in gross offering proceeds of $14,204,947.93, which units
comprise 18.94% of all units that the Partnership sold. If a substantial number
of these limited partners choose to have their units repurchased and the
Partnership's available cash were less than the amount needed to repurchase the
units, the Partnership would have to sell equipment or borrow in order to fund
these repurchases. If the Partnership were not able to resell the repurchased
units, the Partnership's investments may be less diversified than they would
have been if the maximum offering were retained. There were no requests to
repurchase units through March 2002.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
New Accounting Pronouncement
Effective January 1, 2002, the Partnership adopted SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144).
This statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future net
cash flows expected to be generated by the asset. If the carrying amount of the
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. SFAS No. 144 requires companies to separately report
discontinued operations and extends that reporting to a component of an entity
that either has been disposed of (by sale, abandonment or in a distribution to
the owners) or classified as held for sale. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less the costs to
sell. The adoption of SFAS No. 144 did not have any effect on the Partnership's
financial position or results of operations as the provisions of SFAS No. 144
are similar to the Partnership's current policy for impairment review.
Item 7a. 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. Except as discussed below, the Partnership believes its
exposure to other market risks is insignificant to both its financial position
and results of operations.
Kmart, Inc., with whom the Partnership has five leases, filed for
bankruptcy in January 2002. The Partnership's finance leases with Kmart were
acquired during 2001 for prices aggregating $18,234,262, comprised of a total
cash investment of $681,720 and the assumption of $17,552,542 of non-recourse
debt. Through April 1, 2002, Kmart has made all scheduled rental payments. The
bankruptcy court has not ruled on the affirmation of the leases as of the date
of this report.
The Partnership manages its interest rate risk by obtaining fixed rate debt
for the majority of its borrowings. 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 also borrows funds under a $7,000,000 floating rate line of
credit which provides for interest at the lender's prime rate (4.75% at December
31, 2001) plus .5% 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 December 31, 2001 was $2,500,000 as compared
to $7,000,000 at December 31, 2000. Additionally, the non-recourse borrowing
associated with the ICON Aircraft 24846 LLC provides for interest, adjusted
quarterly, based upon Libor. The related lease payments are also adjustable
based upon Libor. The Partnership believes the risk associated with rising
interest rates is not significant.
The Partnership manages its exposure to equipment and residual risk by
monitoring the market and maximizing re-marketing proceeds through either
re-leasing or sale of equipment.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Financial Statements
Page Number
Independent Auditors' Report 14
Consolidated Balance Sheets as of
December 31, 2001 and 2000 15
Consolidated Statements of Operations for the
Year Ended December 31, 2001 and for the Period
February 7, 2000 (date of inception) to December 31, 2000 16
Consolidated Statements of Changes in Partners' Equity
for the Year Ended December 31, 2001 and for the
Period February 7, 2000 (date of inception) to
December 31, 2000 17
Consolidated Statements of Cash Flows for the
Year Ended December 31, 2001 and for the Period
February 7, 2000 (date of inception) to December 31, 2000 18-20
Notes to Consolidated Financial Statements 21-31
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 2001
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Partners
ICON Income Fund Eight B L.P.:
We have audited the accompanying consolidated balance sheets of ICON Income Fund
Eight B L.P. (a Delaware limited partnership) as of December 31, 2001 and 2000,
and the related consolidated statements of operations, changes in partners'
equity, and cash flows for the year ended December 31, 2001 and for the period
from February 7, 2000 (date of inception) to December 31, 2000. These
consolidated financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Income Fund
Eight B L.P. as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for the year ended December 31, 2001 and for the period from
February 7, 2000 (date of inception) to December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
--------------------------------------------
KPMG LLP
April 15, 2002
New York, New York
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
2001 2000
---- ----
Assets
Cash and cash equivalents $ 5,684,652 $ 1,315,706
------------- ------------
Investments in finance leases
Minimum rents receivable 32,769,190 11,631,296
Estimated unguaranteed residual values 2,711,893 1,233,991
Initial direct costs 746,106 289,670
Unearned income (6,568,703) (2,998,971)
------------- ------------
29,658,486 10,155,986
Investments in operating leases:
Equipment, at cost 95,156,568 76,284,645
Accumulated depreciation (11,456,484) (111,940)
------------- ------------
83,700,084 76,172,705
Cash held in escrow 13,723,196 -
Investment in unguaranteed residual 2,406,128 -
Investment in option 2,100,000 -
Due from affiliates 3,730,884 -
Other assets 2,915,266 463,781
------------- ------------
Total assets $ 143,918,696 $ 88,108,178
============= ============
Liabilities and Partners' Equity
Notes payable, non-recourse $ 76,852,204 $ 60,497,834
Notes payable, recourse 2,900,000 7,000,000
Security deposits and other,
including accrued interest 1,269,603 352,383
Minority interests in joint ventures 1,684,289 1,493,780
------------- ------------
82,706,096 69,343,997
Partners' equity (deficiency)
General Partner (42,960) (1,316)
Limited Partners (750,000 and
219,813.65 units outstanding, $100
per unit original issue price) 61,255,560 18,765,497
------------- ------------
Total partners' equity 61,212,600 18,764,181
------------- ------------
Total liabilities and partners' equity $ 143,918,696 $ 88,108,178
============= ============
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Year Ended December 31, 2001 and for the Period from
February 7, 2000 (date of inception) to December 31, 2000
2001 2000
---- ----
Revenues
Rental income $17,200,188 $ 164,361
Finance income 2,333,641 521,406
Gain from sale of investment in joint
venture to an affiliate 327,341 -
Interest income and other 234,178 56,535
Gains on sales of equipment 92,695 -
Income from investment in joint venture 43,953 -
----------- ----------
Total revenues 20,231,996 742,302
----------- ----------
Expenses
Depreciation 11,680,535 111,940
Interest 5,010,154 123,815
Management fees - General Partner 1,344,637 92,140
Administrative expense
reimbursements - General Partner 572,981 37,441
General and administrative 400,323 51,576
Amortization of initial direct costs 212,748 33,510
Minority interest expense 190,509 644
----------- ----------
Total expenses 19,411,887 451,066
----------- ----------
Net income $ 820,109 $ 291,236
=========== ==========
Net income allocable to:
Limited partners $ 811,908 $ 288,324
General partner 8,201 2,912
----------- ----------
$ 820,109 $ 291,236
=========== ==========
Weighted average number of limited
partnership units outstanding 502,536 132,049
=========== ==========
Net income per weighted average
limited partnership unit $ 1.62 $ 2.18
=========== ==========
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Year Ended December 31, 2001 and for the Period from
February 7, 2000 (date of inception) to December 31, 2000
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
Initial partners'
capital contribution $ 1,000 $ 1,000 $ 2,000
Refund of initial
limited partners'
capital contribution (1,000) - (1,000)
Proceeds from issuance
of limited partnership
units (219,813.65 units) 21,981,365 - 21,981,365
Sales and offering expenses (2,967,484) - (2,967,484)
Cash distributions to partners $1.88 $ 2.18 (536,708) (5,228) (541,936)
Net income 288,324 2,912 291,236
------------ ------------ --------------
Balance at
December 31, 2000 18,765,497 (1,316) 18,764,181
Proceeds from issuance
of limited partnership
units (530,186.35 units) 53,018,635 - 53,018,635
Sales and offering expenses (6,407,516) - (6,407,516)
Cash distributions to partners $8.20 $ 1.62 (4,932,964) (49,845) (4,982,809)
Net income 811,908 8,201 820,109
------------ ------------ --------------
Balance at
December 31, 2001 $ 61,255,560 $ (42,960) $ 61,212,600
============ ============ ==============
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Year Ended December 31, 2001 and for the Period from
February 7, 2000 (date of inception) to December 31, 2000
2001 2000
---- ----
Cash flows from operating activities:
Net income $ 820,109 $ 291,236
------------ ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Finance income paid directly to lenders by lessees (732,737) --
Depreciation 11,680,535 111,940
Amortization of initial direct costs 212,748 33,510
Minority interest expense 190,509 644
Gain from sale of investment in joint venture (327,341) --
Income from investment in joint venture (43,953) --
Gains on sales of equipment (92,695) --
Rental income paid directly to lender by lessees (16,181,472) --
Interest expense on non-recourse financing
paid directly by lessees 4,620,569 --
Changes in operating assets and liabilities:
Collection of principal - non-financed receivables 3,148,917 906,374
Other assets (214,459) (463,781)
Due from affiliates (86,183) --
Security deposits and including accrued interest 917,220 352,383
------------ ------------
Total adjustments 3,091,658 941,070
------------ ------------
Net cash provided by operating activities 3,911,767 1,232,306
------------ ------------
Cash flows used in investing activities:
Proceeds from sale of equipment 629,514 --
Cash in escrow (13,723,196) --
Equipment purchased (11,372,506) (24,415,212)
Investment in option (1,700,000) --
Investment in joint venture (3,273,407) --
Investment in unguaranteed residual (2,406,128) --
Initial direct costs (1,239,802) (2,386,693)
Prepaid initial direct costs included in other assets (2,237,025) --
------------ ------------
Net cash used in investing activities (35,322,550) (26,801,905)
------------ ------------
(continued on next page)
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows - Continued
For the Year Ended December 31, 2001 and for the Period from
February 7, 2000 (date of inception) to December 31, 2000
2001 2000
---- ----
Cash flows from financing activities:
Issuance of limited partnership units,
net of offering expenses 46,611,119 19,013,881
Initial partners capital contributions -- 2,000
Refund initial limited partner contribution -- (1,000)
Proceeds from notes payable - recourse 2,500,000 7,000,000
Payment of notes payable - recourse (7,000,000) --
Payment of non-recourse borrowings (1,348,581) (80,776)
Cash distributions to partners (4,982,809) (541,936)
Minority interests in consolidated joint ventures -- 1,493,136
------------ ------------
Net cash provided by financing activities 35,779,729 26,885,305
------------ ------------
Net increase in cash and cash equivalents 4,368,946 1,315,706
Cash and cash equivalents at beginning of the period 1,315,706 --
------------ ------------
Cash and cash equivalents at end of year $ 5,684,652 $ 1,315,706
============ ============
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (continued)
Supplemental Disclosure of Cash Flow Information
For the periods ended December 31, 2001 and 2000 non-cash activities
included the following:
2001 2000
------------ ------------
Fair value of equipment and receivables and option to
Purchase aircraft for debt $ 30,693,861 $ 60,578,610
Non-recourse notes payable and promissory
note assumed in purchase prices (30,693,861) (60,578,610)
------------ ------------
$ - $ -
============ ============
Principal and interest on direct finance receivables
paid directly to lenders by lessees $ 1,030,007 $ -
Rental income on operating lease receivables paid 16,181,472 -
directly to lenders by lessees
Principal and interest paid directly to lenders by lessees
paid annually to lenders by lessees (17,211,479) -
------------ ------------
$ - $ -
============ ============
Interest paid directly to lenders by lessees pursuant to
non-recourse financings $ 4,620,569 $ -
Other interest 322,875 123,815
------------ ------------
Total interest paid $ 4,943,444 $ 123,815
============ ============
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 2001
1. Organization
ICON Income Fund Eight B L.P. (the "Partnership") was formed on February 7,
2000 as a Delaware limited partnership with an initial capitalization of $2,000.
It was primarily formed to acquire various types of equipment subject to lease
with third parties. The Partnership's maximum offering was $75,000,000. The
Partnership commenced business operations on its initial closing date, June 14,
2000, with the admission of limited partners representing 15,815.51 limited
partnership units at the offering price of $100 per unit aggregating $1,581,551
of capital contributions. As of October 17, 2001 (the final closing date),
734,184.49 additional units had been admitted into the Partnership with
aggregate gross proceeds of $73,418,449 bringing the total admission to 750,000
units totaling $75,000,000 in capital contributions.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership's equipment, leases and financing
transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, received an
underwriting commission from the gross proceeds from sales of all units. The
General Partner received organization and offering expenses from the gross
proceeds of such sales The total underwriting compensation paid by the
Partnership, including underwriting commissions, sales commissions, incentive
fees, public offering expense reimbursements and due diligence activities was
limited to 13.5% of gross proceeds up to $25,000,000, 12.5% of gross proceeds
from $25,000,001 to $50,000,000 and 11.5% of gross proceeds from $50,000,001 to
$75,000,000. Such offering expenses aggregated $9,375,000, including $2,166,025
and $1,208,975 paid to the General Partner or its affiliates in 2001 and 2000,
respectively (see Note 10) and were charged directly to limited partners'
equity.
Profits, losses, cash distributions and disposition proceeds will be
allocated 99% to the limited partners and 1% to the General Partner until each
limited partner has received cash distributions and disposition proceeds
sufficient to reduce its adjusted capital contribution account to zero and
receive, in addition, other distributions and allocations which would provide an
8% per annum cumulative return on its outstanding adjusted capital contribution
account. After such time, the distributions will be allocated 90% to the limited
partners and 10% to the General Partner.
2. Significant Accounting Policies
Basis of Accounting and Presentation - The Partnership's records are
maintained on the accrual basis. The preparation of financial statements in
conformity with generally accepted accounting principles requires the General
Partner's management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the dates of the financial statements and
revenues and expenses during the reporting periods. Significant estimates
include the allowance for doubtful assets and unguaranteed residual values.
Management believes that the estimates and assumptions utilized in preparing its
financial statements are reasonable and prudent. Actual results could differ
from those estimates. In addition, management is required to disclose contingent
assets and contingent liabilities.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Consolidation - The consolidated financial statements include the accounts
of the Partnership and its majority owned subsidiaries. All inter-company
accounts and transactions have been eliminated.
Cash and Cash Equivalents - Cash and cash equivalents are defined as cash
in banks and highly liquid investments with original maturity dates of three
months or less.
Leases - The Partnership accounts for owned equipment leased to third
parties as finance leases or operating leases, as appropriate. For finance
leases, the Partnership records, at the inception of the lease, the total
minimum lease payments receivable, the estimated unguaranteed residual values,
the initial direct costs related to the leases and the related unearned income.
Unearned income represents the difference between the sum of the minimum lease
payments receivable plus the estimated unguaranteed residual minus the cost of
the leased equipment. Unearned income is recognized as finance income over the
terms of the related leases following the interest method. For operating leases,
equipment is recorded at cost and is depreciated on the straight-line method
over the lease terms to their estimated fair market values at lease
terminations. Related lease rentals are recognized on the straight-line method
over the lease terms. Billed and uncollected operating lease receivables are
included in other assets. Initial direct costs of finance leases are capitalized
and are amortized over the terms of the related leases using the interest
method. Initial direct costs of operating leases are capitalized and amortized
on the straight-line method over the lease terms.
Investments in Unguaranteed Residual Values - The Partnership carries its
investments in the future estimated unguaranteed residual values of assets at
cost, which is equal to or less than market value, subject to the Partnership's
policy relating to impairments of residuals discussed below. Gains or losses
will be recognized upon the sale or disposition of the investment.
Investments in Options - The Partnership carries its investment in an
option to purchase equipment at cost, which is equal to or less than market
value, subject to the Partnership's policy relating to impairment discussed
below. Gain or loss will be recognized upon the sale or disposition of the
investment.
Impairment of Estimated Residual Values - The Partnership's policy with
respect to impairment of estimated residual values is to review, on a periodic
basis, the carrying value of its residuals on an individual asset basis to
determine whether events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable and, therefore, an impairment loss
should be recognized. The events or changes in circumstances which generally
indicate that the residual value of an asset has been impaired are (i) the
estimated fair value of the underlying equipment is less than the Partnership's
carrying value or (ii) the lessee is experiencing financial difficulties and it
does not appear likely that the estimated proceeds from disposition of the asset
will be sufficient to satisfy the remaining obligation to the non-recourse
lender and the Partnership's residual position. Generally in the latter
situation, the residual position relates to equipment subject to third party
non-recourse notes payable where the lessee remits their rental payments
directly to the lender and the Partnership does not recover its residual until
the non-recourse note obligation is repaid in full.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The Partnership measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Partnership from re-lease or resale of the equipment. Generally,
third party appraisals, reviews of future cash flows and anticipated future cash
flows and detailed market analyses are used as the basis for measuring whether
an impairment loss should be recognized.
Allowance for Doubtful Accounts - The Partnership records a provision for
bad debts to provide for estimated credit losses in the portfolio. The allowance
for doubtful accounts is based on the ongoing analysis of delinquency trends,
loss experience and an assessment of overall credit risk. The Partnership's
write-off policy is based on an analysis of the aging of the Partnership's
portfolio, a review of the non-performing receivables and leases, and prior
collection experience. An account is fully reserved for or written off when the
analysis indicates that the probability of collection of the account is remote.
Disclosures About Fair Value of Financial Instruments - Statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value
of Financial Instruments" requires disclosures about the fair value of financial
instruments. Separate disclosure of fair value information as of December 31,
2001 and 2000 with respect to the Company's assets and liabilities is not
provided because (i) SFAS No. 107 does not require disclosures about the fair
value of lease arrangements and (ii) the carrying value of financial assets,
other than lease related investments, and certain other payables approximates
market value and (iii) fair value information concerning certain non-recourse
debt obligations is not practicable to estimate without incurring excessive
costs to obtain all the information that would be necessary to derive a market
interest rate.
Income Taxes - No provision for income taxes has been made as the liability
for such taxes is that of each of the partners rather than the Partnership.
New Accounting Pronouncement - Effective January 1, 2002, the Partnership
adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" (SFAS No. 144). This statement requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to the future net cash flows expected to be generated by the asset. If
the carrying amount of the asset exceeds its estimated future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of
the asset exceeds the fair value of the asset. SFAS No. 144 requires companies
to separately report discontinued operations and extends that reporting to a
component of an entity that either has been disposed of (by sale, abandonment or
in a distribution to the owners) or classified as held for sale. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
the costs to sell. The adoption of SFAS No. 144 did not have any effect on the
Partnership's financial position or results of operations as the provisions of
SFAS No. 144 are similar to the Partnership's current policy for impairment
review.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
3. Joint Ventures
The Partnership and affiliates formed five joint 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.
The two joint ventures described below are majority owned and are
consolidated with the partnership.
ICON Cheyenne LLC
- -----------------
In December 2000, the Partnership and three affiliates, ICON Cash Flow
Partners L.P. Six ("L.P. Six"), ICON Cash Flow Partners L.P. Seven ("L.P.
Seven") and ICON Income Fund Eight A L.P. ("Fund Eight A") formed ICON Cheyenne
LLC ("ICON Cheyenne") for the purpose of acquiring a portfolio of leases for an
aggregate purchase price of $29,705,716, which was paid with cash of $11,401,151
and the assumption of non-recourse debt with an unaffiliated third party lenders
of $18,304,565. The debt is structured to be amortized from 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. Seven, L.P. Six and Fund
Eight A have ownership interests of 87.69%, 10.31%, 1.0% and 1.0%, respectively,
in ICON Cheyenne. The Partnership's consolidated financed statements include
100% of the assets and liabilities as well as 100% of the related revenues and
expenses of ICON Cheyenne. The interests of L.P. Seven, L.P. Six and Fund Eight
A in ICON Cheyenne have been reflected as minority interests in joint ventures
on the consolidated balance sheets and minority interest expense on the
consolidated statements of operations.
ICON Aircraft 24846, LLC
- ------------------------
In 2000, the Partnership and two affiliates, L.P. Seven and Fund Eight A
formed ICON Aircraft 24846 LLC ("ICON Aircraft 24846") for the purpose of
acquiring an investment in an aircraft leased to a commercial airline for a
purchase price of $44,515,416, which was funded with cash of $2,241,371 and
non-recourse debt of the $42,274,045. The rents and the aircraft have been
assigned to the non-recourse lender. The lease is scheduled to expire in March
2003, at which time the balance of the non-recourse debt outstanding is
scheduled to be approximately $34,500,000. The Partnership, L.P. Seven and Fund
Eight A have ownership interests of 96.0%, 2.0% and 2.0%, respectively, in ICON
Aircraft 24846. The Partnership's consolidated financial statements include 100%
of the assets and liabilities of ICON Aircraft 24846 as well as 100% of the
related revenues and expenses. L.P. Seven and Fund Eight A's interest in ICON
Aircraft 24846 have been reflected as minority interests in joint ventures on
the consolidated balance sheets and minority interest expense on the
consolidated statements of operations.
The three joint ventures described below were less than 50% owned and were
accounted for following the equity method.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Seacor Joint Ventures
- ---------------------
On July 13, 2001, the Partnership and L.P. Seven formed three joint
ventures known as "ICON/Janson Graham LLC," ICON/Pearl Graham LLC" and "ICON
Amanda Graham LLC", the three of which are referred to collectively as the
"Seacor Joint Ventures". L.P. Seven contributed three offshore supply vessels
(one to each of the Seacor Joint Ventures) with a net book value and approximate
market value of $7,595,271, and the Partnership contributed $3,273,407 in cash
into the Seacor Joint Ventures. The Partnership and L.P. Seven received 30.12%
and 69.88% ownership interests, respectively, in each of the Seacor Joint
Ventures as a result of these contributions.
The Partnership had the right during the first year of the Seacor Joint
Ventures to sell any of its three joint venture interests to L.P. Seven at a
price equal to 110% of its outstanding investment balance for any vessel that
did not generate rental revenue for a three month period. All three vessels were
off-lease for part of the third quarter and the entire fourth quarter of 2001.
On December 31, 2001 the Partnership exercised its right and sold its interests
in the Seacor Joint Ventures back to L.P. Seven for $3,644,701 representing 110%
of its outstanding investment balance which amount is included in due from
affiliate on the balance sheet as of December 31, 2001. The Partnership
recognized $327,341 as a gain on sale of joint venture investment and $43,953 as
its share of income from the joint venture during 2001.
4. Cash Held In Escrow
Cash held in escrow at December 31, 2001 is composed of the following:
(i) $4,323,196 representing a purchase deposit to acquire a Boeing 757-200 ER
subject to lease. The proposed acquisition was
cancelled in 2002 and the deposit was returned to the Partnership;
(ii) $3,300,000 placed with an unaffiliated third party to fund an acquisition
scheduled to close in the first quarter of 2002. The transaction was
cancelled in 2002 and the deposit was returned to the Partnership; and
(iii)$6,100,000 deposited with an unaffiliated third party to be utilized to
make a 78.71% investment in a joint venture with an affiliated partnership,
ICON Income Fund Nine, LLC (Fund Nine). The joint venture was capitalized
in 2002 and consummated a purchase of leased equipment in February 2002.
Additionally, at the time of consummation, the Partnership sold an
additional 29.71% of the joint venture to Fund Nine for $2,302,525 bringing
its ownership percentage down to 49%. No gain or loss was recognized on the
sale.
5. Investments in Unguaranteed Residual Values
In the year ended December 31, 2001, the Partnership acquired residual
interests in a portfolio of technology and other equipment leases for
$2,406,128. Leases in this portfolio have expiration dates ranging from March
2003 through March 2005.
The investment is carried at cost until sale of the equipment, at which
time a gain or loss will be recognized on each transaction, however, until the
equipment is sold, the investment will be subject to the Partnership's policy
relating to impairment of residuals, as disclosed in Note 2.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
6. Investment in Option
In the fourth quarter of 2001, the Partnership invested $2,100,000
(including $900,000 in acquisition fees paid to the General Partner) for an
option, which expires in 2012, to purchase a Boeing 737-524 aircraft on lease to
a United States based commercial airline. The purchase price of the option
includes an 8.5% $400,000 promissory note which matures in May 2012. The
exercise price of the option decreases periodically according to a predetermined
schedule over the term of the option from $30 million in 2001 to $9 million in
2012.
7. Receivables Due in Installments
Non-cancelable minimum annual amounts receivable on finance leases are as
follows:
Year
2002 $ 8,702,627
2003 8,773,388
2004 7,607,103
2005 4,766,432
2006 2,919,640
----------------
$ 32,769,190
Included in the above table are scheduled payments of $20,098,297 with
respect to equipment on lease to Kmart, Inc. (See Notes 9 and 11)
8. Investment in Operating Leases
In the fourth quarter of 2000, the Partnership, through a consolidated
joint venture, ICON Aircraft 24846, acquired an aircraft leased to a commercial
airline for a purchase price of $44,515,416, which amount was funded with
$2,241,371 of cash and $42,274,045 in floating rate non-recourse notes payable.
The lease, which expires in March 2003, provides for rental payment amounts to
match the non-recourse floating rate debt obligation secured by the lease and
the aircraft (see Note 9) until March 2003, at which time the balance of the
related non-recourse debt outstanding is scheduled to be approximately
$34,500,000. Also in the fourth quarter of 2000, the Partnership acquired,
through ICON Cheyenne, a portfolio of various types of equipment leased to 33
lessees. The purchase price of this portfolio totaled $29,705,716 of which
$11,401,151 was provided in cash and $18,304,565 was provided in non-recourse
debt.
In the first quarter of 2001, the Partnership acquired an aircraft
simulator leased to an unaffiliated third party for a purchase price of
$13,232,105, subject to a lease. Rental payment amounts under this lease are
paid directly to the lender who is secured by this lease and the related
equipment. In the second quarter of 2001, the Partnership acquired aircraft
engine modules, which are leased to a commercial airline, for a purchase price
$5,950,000, $1,911,210 of which was provided by a non-recourse note.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The investment in operating leases at December 31, 2001 and 2000 consisted
of the following:
2001 2000
---- ----
Equipment cost, beginning of year $ 76,284,645 $ --
Equipment acquisitions 19,182,105 74,221,132
Initial direct costs 562,699 2,063,513
Equipment dispositions (872,881)
------------ ------------
Equipment cost, end of year 95,156,568 76,284,645
------------ ------------
Accumulated depreciation, beginning of year (111,940) --
Accumulated depreciation on
equipment dispositions 335,991 --
Depreciation expense (11,680,535) (111,940)
------------ ------------
Accumulated depreciation, end of year (11,456,484) (111,940)
------------ ------------
Investments in operating leases, end of year $ 83,700,084 $ 76,172,705
============ ============
Non-cancelable minimum annual amounts receivable on operating leases are as
follows:
Year
2002 $ 15,888,468
2003 8,745,210
2004 4,603,922
2005 3,894,131
2006 727,224
Thereafter 1,026,194
------------
$ 34,885,149
9. Notes Payable
Notes payable non-recourse consists of $38,945,064 attributable to ICON
Aircraft 24846, $10,223,768 attributable to ICON Cheyenne, $16,767,338
attributable to the Kmart leases (see Notes 7 and 11) and $10,916,034
attributable to other acquisitions. The ICON Aircraft 24846 note carries a
floating interest rate of Libor plus 2.25%; the related lease rate adjusts on a
similar basis. The ICON Cheyenne notes carries fixed interest rates ranging from
5.52% to 10.05% and the remaining notes carry fixed interest rates ranging from
6.27% to 10.00%. Of the $27,683,372 non-recourse debt discussed above, debt of
$1,911,210 requires payments of interest only to June 2004, followed by four
years where there are no interest payments due until maturity.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
Notes payable also includes a recourse note under a line of credit and a
promissory note. The Partnership originally entered into a $7,000,000 recourse
line of credit agreement with an unaffiliated lender in November 2000, expiring
November 2001, at which time it was extended until August 2002. The maximum
amount available under the line is $7,000,000. This line of credit is
collateralized by receivables and residuals and bears interest at the lender's
prime rate (4.75% at December 31, 2001) plus one half of 1%. At December 31,
2001, the Partnership had $2,500,000 outstanding under this line of credit.
Additionally, upon investing in the option to purchase an aircraft (see Note 6),
the Partnership assumed recourse debt of $400,000, which bears interest at the
rate of 8.5% per annum and matures in May 2012 (or earlier if the option is
exercised earlier).
The notes payable mature as follows:
Notes Payable Note Payable -
Year Non-Recourse Line of Credit Promissory Note Total
- ---- ------------ -------------- --------------- -----
2002 $ 13,625,530 $ 2,500,000 $ - $16,125,530
2003 44,485,461 - - 44,485,461
2004 7,113,770 - - 7,113,770
2005 6,789,131 - - 6,789,131
2006 2,927,102 - - 2,927,102
Thereafter 1,911,210 - 400,000 2,311,210
------------ ----------- --------- -----------
$ 76,852,204 $ 2,500,000 $ 400,000 $79,752,204
============ =========== ========= ===========
10. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the period ended December 31, 2001 and 2000, were
as follows:
2001 2000
---- ----
Organization and
offering expenses $ 1,105,652 $ 769,348 Charged to equity
Underwriting commissions 1,060,373 439,627 Charged to equity
Acquisition fees 3,122,207 2,386,693 Capitalized
Management fees 1,344,637 92,140 Charged to operations
Administrative expense
reimbursements 572,981 37,441 Charged to operations
----------- -----------
$ 7,205,850 $ 3,725,249
=========== ===========
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
In accordance with the Management Agreement, the Partnership pays the
General Partner acquisition fees of 3% of equipment value acquired, as defined.
Additionally the General Partner is entitled to management fees based upon lease
rentals (ranging from 1% to 7% depending upon the lease structure). In addition,
the General Partner is reimbursed for expenses incurred in connection with the
Partnership's operations (See note 1 for information relating to organization
and offering expenses and underwriting commissions).
In December 2001 the Partnership entered into three agreements to purchase
lease investments directly or through joint ventures (see Note 4). Prepaid
acquisition fees totaling $2,237,025 were paid to General Partner in the fourth
quarter of 2001 with respect to the three proposed acquisitions, which amounts
were included in the caption Other assets on the December 31, 2001 consolidated
balance sheet. Two of the purchase agreements representing acquisition fees of
$2,123,100 were cancelled and the acquisition fees paid to the General Partner
were returned. The above table does not include the prepaid acquisition fees.
11. Contingencies
(a) Unit repurchases
Limited partners who purchased units after June 7, 2001 and before August
18, 2001 have the right to require the Partnership to repurchase their units
within a one-year period following such purchase since certain information
contained in the Partnership's prospectus used during this period was not as
current as required by the rules of the Securities and Exchange Commission. The
repurchase price would be equal to the offering price per unit less any
distributions received with respect to such units. 142,049.4793 units were sold
during this period resulting in gross offering proceeds of $14,204,947.93 which
units comprise 18.94% of all units that the Partnership sold. If a substantial
number of these limited partners choose to have their units repurchased and the
Partnership's available cash were less than the amount needed to repurchase the
units, the Partnership would have to sell equipment or borrow in order to fund
these repurchases. If the Partnership was unable to sell the repurchased units,
the Partnership's cash available for investment and reinvestment in additional
equipment will be reduced which could impact the Partnership's ability to
purchase additional leased equipment. There were no units repurchased through
March 2002.
(b) Kmart
Kmart, Inc., with whom the Partnership has five leases, filed for
bankruptcy in January 2002. The Partnership's finance leases with Kmart were
acquired during 2001 for a cost aggregating $18,234,262, comprised of a total
cash investment of $681,720 and the assumption of $17,552,542 of non recourse
debt. Through April 1, 2002, Kmart has made all scheduled rental payments. The
bankruptcy court has not ruled on the affirmation of the leases as of the date
of this report.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
12. Tax Information (Unaudited)
The following table reconciles net income for financial statement reporting
purposes to income for federal income tax purposes for the period ended December
31, 2001 and 2000:
2001 2000
---- ----
Net income for financial statement
reporting purposes $ 820,109 $ 291,236
Temporary differences due to:
Direct finance leases 3,191,450 1,160,940
Depreciation (5,717,920) (1,212,261)
Tax loss from joint venture (3,652,921) -
Rent - consolidated joint venture (6,052,762) -
Interest expense - consolidated joint venture 2,629,810 83,585
Other (341,012) (337,779)
----------- -----------
Partnership loss for federal income
tax reporting purposes $(9,123,246) $ (14,279)
=========== ===========
As of December 31, 2001, the partners' capital accounts included in the
financial statements totaled $61,212,600 compared to the partners' capital
accounts for federal income tax purposes of $60,337,463 (unaudited). The
difference arises primarily from temporary differences between net income for
financial statement reporting purposes and net loss for federal income tax
purposes, such as accelerated depreciation for tax purposes and the difference
in the tax and financial statements treatment of finance leases, partially
offset by commissions reported as a reduction in the partners' capital accounts
for financial statement reporting purposes but not for federal income tax
reporting purposes.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
13. Quarterly Financial Data (Unaudited)
The following table is a summary of financial data by quarter for the year
ended December 31, 2001 and the period from the Partnership's inception on
February 7, 2000 through December 31, 2000:
For the Quarters Ended (1)
------------------------------------------------------------
March 31 June 30, September 30, December 31,
-------- ------- ------------ -----------
2001
Revenues $4,557,329 $5,096,340 $5,294,812 $5,283,515
========== ========== ========== ==========
Net income allocable to
limited partners $ 12,880 $ 161,882 $ 5,692 $ 631,454(2)
========== ========== ========== ==========
Net income per weighted
average limited partnership unit $ 0.05 $ 0.45 $ 0.01 $ 1.11
========= ========= ========== ==========
2000
Revenues $ - $ 11,746 $ 220,432 $ 510,124
========== ========== ========== ==========
Net income allocable to
limited partners $ - $ 11,629 $ 95,964 $ 180,731
========== ========== ========== ==========
Net income per weighted
average limited partnership unit $ - $ 0.62 $ 1.33 $ 0.23
========== ========= ========== ==========
(1) The Partnership's date of inception was February 7, 2000, but operations
did not begin until June 14, 2000, its initial closing date.
(2) The fourth quarter of 2001 included approximately $327,000 of gain from the
sale of a joint venture interest to an affiliate (See note 3).
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
-----------------------------------------------------------------------
None
PART III
Item 10. Directors and Executive Officers of the Registrant's General Partner
The General Partner, a Connecticut corporation, was formed in 1985. The
General Partner's principal offices are located at 100 Fifth Avenue, New York,
New York 10011, and its telephone number is (212) 418-4700. The officers of the
General Partner have extensive experience with transactions involving the
acquisition, leasing, financing and disposition of equipment, including
acquiring and disposing of equipment subject to leases and full financing
transactions.
The manager of the Partnership's business is the General Partner. The
General Partner is engaged in a broad range of equipment leasing and financing
activities. Through its sales representatives and through various broker
relationships throughout the United States, the General Partner offers a broad
range of equipment leasing services.
The General Partner performs certain functions relating to the management
of the equipment of the Partnership. Such services include the collection of
lease payments from the lessees of the equipment, re-leasing services in
connection with equipment which is off-lease, inspections of the equipment,
liaison with and general supervision of lessees to assure that the equipment is
being properly operated and maintained, monitoring performance by the lessees of
their obligations under the leases and the payment of operating expenses.
The officers and directors of the General Partner are as follows:
Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Paul B. Weiss President and Director
Thomas W. Martin Executive Vice President and Director
Beaufort J. B. Clarke, age 55, has been Chairman, Chief Executive Officer
and Director of the General Partner since 1996. Prior to his present position,
Mr. Clarke was founder and the President and Chief Executive Officer of Griffin
Equity Partners, Inc. Mr. Clarke was an attorney with Shearman and Sterling and
has over 20 years of senior management experience in the United States leasing
industry.
Paul B. Weiss, age 41, is President and Director of the General Partner.
Mr. Weiss has been exclusively engaged in lease acquisitions since 1988 from his
affiliations with the General Partner since 1996, Griffin Equity Partners (as
Executive Vice President from 1993-1996); Gemini Financial Holdings (as Senior
Vice President-Portfolio Acquisitions from 1991-1993) and Pegasus Capital
Corporation (as Vice President-Portfolio Acquisitions from 1988-1991). He was
previously an investment banker and a commercial banker.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
Thomas W. Martin, age 48, has been Executive Vice President of the General
Partner since 1996. Prior to his present position, Mr. Martin was the Executive
Vice President and Chief Financial Officer of Griffin Equity Partners, Inc.
(1993-1996), Gemini Financial Holdings (as Senior Vice President from 1992-1993)
and Chancellor Corporation (as Vice President-Syndications from 1985-1992). Mr.
Martin has 17 years of senior management experience in the leasing business.
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner and its
affiliates were paid or accrued the following compensation and reimbursement for
costs and expenses for the period ended December, 31, 2001.
Entity Capacity Type of Compensation 2001 2000
------ -------- -------------------- ---- ----
ICON Capital Corp. General Partner Organization and
offering expenses $1,105,652 $ 769,348
ICON Securities Corp. Dealer-Manager Underwriting
commissions 1,060,373 439,627
ICON Capital Corp. Manager Acquisition fees 3,122,207 2,386,693
ICON Capital Corp. General Partner Management fees 1,344,637 92,140
ICON Capital Corp. General Partner Administrative expense
reimbursements 572,981 37,441
---------- ----------
$7,205,850 $3,725,249
========== ==========
In December 2001 the Partnership entered into three agreements to purchase
agreements to purchase lease investments directly on the joint ventures (see
Note 4, Cash Held in Escrow). Acquisition fees totaling $2,237,025 were paid to
General Partners in the fourth quarter of 2001 with respect to these
acquisitions, which amounts were included in the caption Other assets on the
December 31, 2001 consolidated balance sheet. Two of the purchase agreements
representing acquisition fees of $2,123,100 were never consummated and the
acquisition fees paid to the general partner were returned. The above table does
not include the acquisition fees refunded in 2002.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The Partnership is a limited partnership and therefore does not have voting
shares of stock. No person of record owns, or is known by the Partnership
to own beneficially, more than 5% of any class of securities of the
Partnership.
(b) As of March 31, 2001, Directors and Officers of the General Partner do not
own any equity securities of the Partnership.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
(c) The General Partner owns the equity securities of the Partnership set forth
in the following table:
Title Amount Beneficially Percent
of Class Owned of Class
-------- ---------------------------------------------- --------
General Partner Represents initially a 1% and potentially a 100%
Interest 10% interest in the Partnership's income, gain
and loss deductions.
Item 13. Certain Relationships and Related Transactions
None other than those disclosed in Item 11 herein and in note 3, 4 and 10
to the Financial Statements.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedule - None.
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set
forth therein is included in the Financial Statements or Notes
thereto.
3. Exhibits - The following exhibits are incorporated herein by reference:
(i) Amended and Restated Agreement of Limited Partnership
(Incorporated by reference to Exhibit 4.1 to Post-Effective
Amendment No. 6 to Form S-1 Registration Statement No. 333-54001
filed with the Securities and Exchange Commission on May 19,
2000).
(ii) Certificate of Limited Partnership of the Partnership
(Incorporated herein by reference to Exhibit 4.3 to
Post-Effective Amendment No. 6 Form S-1 Registration Statement
No. 333-54001 filed with the Securities and Exchange Commission
on May 19, 2000.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter
ended December 31, 2001.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2001
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ICON Income Fund Eight B L.P.
File No. 333-37504 (Registrant)
By its General Partner, ICON Capital Corp.
Date: April 15, 2002 /s/ Beaufort J.B. Clarke
----------------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole General Partner of the Registrant
Date: April 15, 2002 /s/ Beaufort J.B. Clarke
----------------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Date: April 15, 2002 /s/ Paul B. Weiss
----------------------------------------------
Paul B. Weiss
President and Director
Date: April 15, 2002 /s/ Thomas W. Martin
----------------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrant Which have not Registered Securities Pursuant to
Section 12 of the Act
- --------------------------------------------------------------------------------
No annual report or proxy material has been sent to security holders. An annual
report will be sent to the limited partners and a copy will be forwarded to the
Commission.