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 March 31, 2003
-------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 333-37504
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ICON Income Fund Eight B L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-4101114
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
100 Fifth Avenue, New York, New York 10011
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(Address of principal executive offices) (Zip code)
(212) 418-4700
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ x] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) [ ] Yes [ x ] No
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Balance Sheets
March 31, December 31,
2003 2002
---- ----
(Unaudited)
Assets
------
Cash and cash equivalents $ 3,770,533 $ 8,499,026
--------------- ---------------
Investments in finance leases
Minimum rents receivable 22,531,931 24,504,820
Estimated unguaranteed residual values 2,711,893 2,711,893
Initial direct costs 393,308 457,189
Unearned income (3,250,625) (3,824,928)
--------------- ---------------
22,386,507 23,848,974
--------------- ---------------
Investments in operating leases
Equipment, at cost 194,218,473 166,325,943
Accumulated depreciation and amortization (27,264,769) (23,591,192)
--------------- ---------------
166,953,704 142,734,751
Equipment held for sale or lease 1,211,669 1,211,669
--------------- ---------------
Investments in unconsolidated joint ventures 7,016,751 7,290,793
Due from affiliates 606,532 3,532
Investment in unguaranteed residual 2,332,484 2,342,589
Investment in option 2,100,000 2,100,000
Other assets, net 1,286,529 1,377,413
--------------- ---------------
Total assets $ 207,664,709 $ 189,408,747
=============== ===============
Liabilities and Partners' Equity
--------------------------------
Notes payable - non-recourse $ 148,325,388 $ 133,231,339
Note payable - recourse 400,000 400,000
Due to affiliates 891,489 224,167
Deferred rental income 4,526,076 534,840
Security deposits and other liabilities 1,541,972 863,059
Minority interests in joint ventures 1,715,961 1,334,947
--------------- ---------------
157,400,886 136,588,352
--------------- ---------------
Partners' equity (deficit)
General Partner (151,279) (125,713)
Limited Partners (748,445.85 units outstanding
$100 per unit original issue price) 50,415,102 52,946,108
--------------- ---------------
Total partners' equity 50,263,823 52,820,395
--------------- ---------------
Total liabilities and partners' equity $ 207,664,709 $ 189,408,747
=============== ===============
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Operations
For the Three Months Ended March 31,
(Unaudited)
2003 2002
---- ----
Revenues
Rental income $ 5,682,540 $ 5,011,804
Finance income 574,303 749,912
Net (loss) gain on sale of equipment (5,255) 95,526
Income from investments in unconsolidated
joint ventures 69,568 215,410
Interest income and other 13,844 10,319
----------- -----------
Total revenues 6,335,000 6,082,971
----------- -----------
Expenses
Depreciation 3,789,319 3,151,511
Interest 1,851,330 1,369,824
Management fees - General Partner 644,758 477,430
Administrative expense
reimbursements - General Partner 288,928 225,021
General and administrative 197,095 152,425
Amortization of initial direct costs 63,881 81,036
Minority interest expense 24,491 101,407
----------- -----------
Total expenses 6,859,802 5,558,654
----------- -----------
Net (loss) income $ (524,802) $ 524,317
=========== ===========
Net (loss) income allocable to:
Limited partners $ (519,554) $ 519,074
General Partner (5,248) 5,243
----------- -----------
$ (524,802) $ 524,317
=========== ===========
Weighted average number of limited
partnership units outstanding 748,446 750,000
=========== ===========
Net (loss) income per weighted average
limited partnership unit $ (0.69) $ 0.69
=========== ===========
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statement of Changes in Partners' Equity
For the Three Months Ended March 31, 2003
(Unaudited)
Limited Partner Distributions
-----------------------------
Return of Investment Limited General
Capital Income Partners Partner Total
------- ------ -------- ------- -----
(Per weighted average unit)
Balance at
January 1, 2003 $ 52,946,108 $ (125,713) $ 52,820,395
Cash distributions to partners $ 2.69 $ - (2,011,452) (20,318) (2,031,770)
Net loss (519,554) (5,248) (524,802)
------------ --------- ------------
Balance at
March 31, 2003 $ 50,415,102 $(151,279) $ 50,263,823
============ ========= ============
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31,
(Unaudited)
2003 2002
---- ----
Cash flows from operating activities:
Net (loss) income $ (524,802) $ 524,317
------------ ------------
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Finance income paid directly to lender by lessees (297,557) (749,912)
Depreciation 3,789,319 3,151,511
Amortization of initial direct costs 63,881 81,036
Minority interest expense 24,491 101,407
Income from investments in joint ventures (69,568) (215,410)
Net loss (gain) on sale of equipment 5,255 (95,526)
Rental income paid directly to lender by lessees (5,500,878) (4,552,157)
Interest expense on non-recourse financing
paid directly by lessees 1,724,914 1,333,586
Other, principally amortization of rental income -- (828,552)
Changes in operating assets and liabilities:
Collection of principle - non-financed receivables 258,657 594,196
Other assets, net 90,884 1,613,618
Due to affiliates 667,322 --
Due from affiliates (603,000) 347,025
Security deposits and other liabilities 678,913 32,026
Deferred rental income (650,213) 2,083,098
------------ ------------
Total adjustments 182,420 2,895,946
------------ ------------
Net cash (used in) provided by operating activities (342,382) 3,420,263
------------ ------------
Cash flows used in investing activities:
Investment in operating leases (3,076,564) (4,250,000)
Investments in joint ventures -- (7,040,401)
Cash held in escrow -- 13,723,196
Distribution received from unconsolidated joint venture 343,610 --
Proceeds from sale of unguaranteed residual 10,105 --
Distribution to minority interest in consolidated joint venture (32,995) --
Initial direct costs paid -- (2,242,352)
Proceeds from the sale of equipment 94,308 529,577
------------ ------------
Net cash (used in) provided by investing activities (2,661,536) 720,020
------------ ------------
(continued on next page)
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Cash Flows - Continued
For the Three Months Ended March 31,
(Unaudited)
2003 2002
---- ----
Cash flows from financing activities:
Minority interest contribution 389,518 --
Payment of note payable - line of credit -- (2,500,000)
Cash distributions to partners (2,031,770) (2,035,637)
Payment of non-recourse borrowings (82,323) --
----------- -----------
Net cash used in financing activities (1,724,575) (4,535,637)
----------- -----------
Net decrease in cash and cash equivalents (4,728,493) (395,354)
Cash and cash equivalents at beginning of the period 8,499,026 5,684,652
----------- -----------
Cash and cash equivalents at end of the period $ 3,770,533 $ 5,289,298
=========== ===========
(continued on next page)
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Cash Flows (continued)
Supplemental Disclosure of Cash Flow Information
- ------------------------------------------------
For the three months ended March 31, 2003 and 2002, non-cash activities
included the following:
2003 2002
---- ----
Value of equipment and receivables acquired in exchange
for debt $ 24,211,080 $ 70,495,058
Non-recourse notes payable and promissory
note assumed in purchase of equipment and receivables (24,211,080) (70,495,058)
--------------- ----------------
$ -- $ --
=============== ================
Principal and interest on direct finance receivables $ 617,295 $ 1,848,817
paid directly to lenders by lessees
Rental income on operating lease receivables paid 5,500,878 4,552,157
directly to lenders by lessees
Deferred income on operating lease receivables paid 4,641,449 --
directly to lenders by lessees
Principal and interest paid directly to lenders by lessees (10,759,622) (6,400,974)
--------------- ----------------
$ -- $ --
=============== ================
Interest paid directly to lenders by lessees pursuant to
non-recourse financings $ 1,724,914 $ 1,333,586
Other interest paid 126,416 36,238
--------------- ----------------
Total interest expense $ 1,851,330 $ 1,369,824
=============== ================
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements
March 31, 2003
(Unaudited)
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, 2002 (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 Partnership redeemed
1,554.15 units during 2002, leaving 748,445.85 limited partnership units
outstanding at March 31, 2003.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership's equipment, leases and financing
transactions under a management agreement with the Partnership.
2. Basis of Presentation
The condensed consolidated financial statements of ICON Income Fund Eight B
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 results for each period
shown. Certain information and footnote disclosures normally included in
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 periods are not necessarily indicative of the results for the full
year. These condensed consolidated financial statements should be read in
conjunction with the financial statements and notes included in the
Partnership's 2002 Annual Report on Form 10-K.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
3. Related Party Transactions
Fees and expenses paid or accrued by the Partnership to the General Partner
or its affiliates directly or on behalf of joint ventures in which the
Partnership has an interest for the period ended March 31, 2003 and 2002 were as
follows:
2003 2002
---- ----
Acquisition fees $ 736,766 $ 2,242,352 Capitalized as part of investment
in operating leases
Acquisition fees - 1,117,901 Capitalized as part of
investment in joint venture
Acquisition fees - 113,925 Capitalized as part of other assets
Management fees 644,758 477,430 Charged to operations
Administrative expense reimbursements 288,928 225,021 Charged to operations
------------- --------------
$ 1,670,452 $ 4,176,629
============= ==============
During the period ended March 31, 2003, the Partnership accrued $736,766 of
acquisition fees with respect to its 90% investment in ICON Aircraft 47820 LLC.
This amount is included under the caption investment in operating leases.
4. Consolidated Ventures and Investments in Unconsolidated Joint Ventures
The Partnership and its affiliates formed seven 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.
Consolidated Ventures
The three 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 lender
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
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
interests of 87.69%, 10.31%, 1.0% and 1.0%, respectively, in ICON Cheyenne. The
Partnership's consolidated financial 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 ICON Income
Fund Eight A L.P. ("Fund Eight A"), formed ICON Aircraft 24846 LLC ("ICON
Aircraft 24846") for the purpose of acquiring an investment in a 767-300 ER
aircraft leased to Scandinavian Airline Systems for a purchase price of
$44,515,416, which was funded with cash of $2,241,371 and non-recourse debt of
$42,274,045. The rents and the aircraft have been assigned to the unaffiliated
non-recourse lender. The lease expired in March 2003, at which time the balance
of the non-recourse debt outstanding was approximately $34,500,000. The
Partnership is currently remarketing the aircraft, during which time, the
Partnership will be making interest only payments on the outstanding
non-recourse debt. 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.
ICON Aircraft 47820 LLC
-----------------------
In 2003, the Partnership and ICON Income Fund Nine LLC ("Fund Nine") formed
ICON Aircraft 47820 LLC ("ICON 47820") for the purpose of acquiring an
investment in a McDonnell Douglas DC10-30F aircraft leased to Federal Express
through March 2007. The aircraft was acquired for a purchase price of
$27,287,644, which was funded with cash of $3,076,564 and non-recourse debt of
the $24,211,080. The rents and the aircraft have been assigned to the
non-recourse lender. The Partnership and Fund Nine have ownership interests of
90% and 10%, respectively. The Partnership's consolidated financial statements
include 100% of the assets and liabilities of ICON 47820 as well as 100% of the
related revenues and expenses. Fund Nine's interest in ICON 47820 have been
reflected as minority interests in joint ventures on the consolidated balance
sheets and minority interest expense on the consolidated statements of
operations.
Investments in Unconsolidated Joint Ventures
The Partnership and its affiliates formed four 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 four joint ventures described below are 50%, 49%, 5% and 15% owned by
the Partnership and are accounted for under the equity method.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
ICON Aircraft 126 LLC
---------------------
In early 2002, the Partnership and Fund Nine formed ICON Aircraft 126 LLC
("ICON 126") for the purpose of acquiring all of the outstanding shares of Delta
Aircraft Leasing Limited ("D.A.L."), a Cayman Islands registered company, which
owns, through an Owner Trust, an Airbus A340-313X aircraft which is on lease to
Cathay Pacific through March 2006. The stock was acquired for $4,250,000 in
cash. The aircraft owned by D.A.L. is subject to non-recourse debt provided by
unaffiliated lenders. As of March 31, 2003, there was $66,240,465 outstanding
under the non-recourse debt.
The Partnership and Fund Nine each own a 50% interest in ICON 126. ICON 126
consolidates the financial position and results of operations of D.A.L. in its
financial statements.
The Partnership's original investment in ICON 126 was recorded at a cost of
$3,242,901, inclusive of related acquisition fees of $1,117,901.
Information as to the financial position of ICON 126 as of March 31, 2003
and December 31, 2002 and results of its operations for the three months ended
March 31, 2003 and 2002 is summarized below:
March 31, 2003 December 31, 2002
-------------- -----------------
Assets $ 73,373,368 $ 74,332,428
=============== =================
Liabilities $ 66,536,111 $ 67,598,170
=============== =================
Equity $ 6,836,257 $ 6,734,258
=============== =================
Partnership's share of equity $ 3,418,128 $ 3,367,129
=============== =================
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
-------------- --------------
Net income $ 101,999 $ 6,990
=============== ===============
Partnership's share of net income $ 50,999 $ 3,495
=============== ================
ICON SPK2023-A, LLC
-------------------
In the quarter ended March 31, 2002, the Partnership and Fund Nine formed
ICON SPK 2023-A, LLC ("ICON SPK") for the purpose of acquiring a portfolio of
leases for an aggregate purchase price of $7,750,000 in cash. The leases expire
on various dates commencing April 2003 through April 2008.
The Partnership and Fund Nine have ownership interests of 49% and 51%,
respectively. The Partnership accounts for its investment using the equity
method. The Partnership's original investment was recorded at a cost of
$3,797,500 and is adjusted for its share of earnings, losses, and distributions
thereafter.
In June 2002, the Partnership paid ICON SPK $113,925 for its pro-rata share
of acquisition fees.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
Information as to the financial position of ICON SPK as of March 31, 2003
and December 31, 2002 and results of its operations for the three months ended
March 31, 2003 and 2002 is summarized below:
March 31, 2003 December 31, 2002
Assets $ 5,812,261 $ 6,452,790
=============== ===============
Liabilities $ 534,616 $ 522,168
=============== ===============
Equity $ 5,277,645 $ 5,930,622
=============== ===============
Partnership's share of equity $ 2,586,045 $ 2,906,004
=============== ===============
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
-------------- --------------
Net income $ 25,870 $ 432,479
=============== ===============
Partnership's share of net income $ 12,676 $ 211,915
=============== ===============
Distributions $ 678,847 $ -
=============== ===============
Partnership's share of distributions $ 332,635 $ -
=============== ===============
ICON/Kenilworth LLC
-------------------
On September 30, 2002, the Partnership and Fund Nine formed ICON/Kenilworth
LLC for the purpose of acquiring a natural gas-fired 25MW co-generation facility
for a total purchase price of $8,630,000 in cash, with an assumed non-recourse
debt of $7,658,892, consisting of a senior debt of $7,420,156 and a junior debt
of $238,736. The facility is subject to a lease with Energy Factors Kenilworth,
Inc., and the lease expires in July 2004. In addition, there was a total of
$459,843 in acquisition fees paid to the General Partner.
Subsequent to the closing of the acquisition, the purchase price was
adjusted by the following amounts. The cash amount was reduced to $8,410,000 and
the non-recourse debt was reduced to $6,918,091, with an adjustment of $740,801
to the senior debt.
The Partnership and Fund Nine have ownership interests of 5% and 95%,
respectively. The Partnership accounts for the investment following the equity
method. The Partnership's original investment was recorded at a cost of
$443,492, inclusive of related acquisition fees of $22,992 and is adjusted for
its share of earnings, losses and distributions thereafter.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
Information as to the financial position of ICON/Kenilworth LLC as of March
31, 2003 and December 31, 2002 and results of its operations for the three
months ended March 31, 2003 and 2002 is summarized below:
March 31, 2003 December 31, 2002
-------------- -----------------
Assets $ 14,194,036 $ 15,157,182
=============== ================
Liabilities $ 5,176,271 $ 6,109,365
=============== ================
Equity $ 9,017,765 $ 9,047,817
=============== ================
Partnership's share of equity $ 450,888 $ 452,391
=============== ================
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
-------------- --------------
Net income $ 189,444 $ -
=============== =================
Partnership's share of net income $ 9,472 $ -
=============== =================
Distributions $ 219,496 $ -
=============== =================
Partnership's share of distributions $ 10,975 $ -
=============== =================
ICON Aircraft 46835, LLC
------------------------
In 2002, the Partnership and Fund Nine formed ICON Aircraft 46835, LLC
("ICON 46835") for the purpose of acquiring an investment in a McDonnell Douglas
DC-10-30F aircraft leased to Federal Express through March 2007. The aircraft
was acquired for a purchase price of $25,291,593, which was funded with cash of
$3,000,000 and non-recourse debt of $22,291,593. The rents and the aircraft have
been assigned to the non-recourse lender. The lease is scheduled to expire in
March 2007, at which time the balance of the non-recourse debt outstanding is
scheduled to be approximately $2,708,000. In addition, there was a total of
$758,748 in acquisition fees paid to the General Partner of which the
Partnership's share was $113,812.
The Partnership and Fund Nine have ownership interests of 15% and 85%,
respectively. The Partnership accounts for the investment following the equity
method. The Partnership's original investment was recorded at a cost of $450,000
inclusive of related acquisition fees of $113,812 and is adjusted for its share
of earnings, losses, and distributions thereafter.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
Information as to the financial position of ICON 46835 as of March 31, 2003
and December 31, 2002 and results of its operations for the three months ended
March 31, 2003 and 2002 is summarized below:
March 31, 2003 December 31, 2002
-------------- -----------------
Assets $ 24,840,326 $ 26,071,518
=============== ================
Liabilities $ 21,095,726 $ 22,303,057
=============== ================
Equity $ 3,744,600 $ 3,768,461
=============== ================
Partnership's share of equity $ 561,690 $ 565,269
=============== ================
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
-------------- --------------
Net loss $ (23,861) $ -
=============== ================
Partnership's share of net loss $ (3,579) $ -
=============== ================
5. Investment In Wholly-Owned Subsidiary
In early 2002, the Partnership formed ICON Aircraft 123, LLC ("ICON 123")
as a wholly owned subsidiary for the purpose of acquiring all of the outstanding
shares of Alpha Aircraft Leasing Limited ("A.A.L."), a Cayman Islands registered
company, which owns, through an Owner Trust, an Airbus A340-313X aircraft which
is on lease to Cathay Pacific through March 2006. The stock was acquired in the
first quarter of 2002 for a total purchase price of $4,250,000 in cash. The
aircraft owned by A.A.L. is subject to non-recourse debt provided by
unaffiliated lenders. The fair value of the aircraft was approximately $75
million at the date of acquisition and the fair value of the debt was
approximately $70.5 million at such date. ICON 123 consolidates the financial
position and operations of A.A.L. in its financial statements. The assets and
liabilities of ICON 123 are consolidated with the Partnership.
6. Contingencies
(a) Kmart
-----
Kmart, Inc., ("Kmart") with whom the Partnership has five leases, filed for
Chapter 11 bankruptcy protection in January 2002. The Partnership's finance
leases with Kmart were acquired during 2001 for $18,234,262, comprised of a
total cash investment of $681,720 and the assumption of $17,552,542 of non
recourse debt. Through May 1, 2003, 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. Management has deemed an allowance for doubtful
accounts unnecessary at March 31, 2003.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
(b) Regus
-----
Regus Business Center Corp. ("Regus"), with whom the Partnership has an
equipment lease, filed for Chapter 11 bankruptcy protection on January 14, 2003.
The Partnership's finance leases with Regus were acquired in July 2000 for
$5,303,089. Regus did not pay rent in January or February, 2003. The
Partnership, has negotiated new lease terms with Regus and restructured the
lease effective March 15, 2003 whereby the lease, originally scheduled to expire
on July 31, 2004 has been extended to expire March 2007 at a new reduced rental
rate. As of December 31, 2002 the contractual rent receivable under the Regus
lease was $2,734,738. Giving effect to the lease restructuring, the contractual
rent receivable under the Regus lease as of March 31, 2003 was $3,262,656,
therefore management has determined that an allowance for doubtful accounts is
unnecessary at this time.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2003
Item 2: General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Information - The following discussion and analysis should
be read in conjunction with the audited financial statements dated December 31,
2002. Certain statements within this document may constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. These statements are identified by words such as
"anticipate," "believe," "estimate," "expects," "intend," "predict" or "project"
and similar expressions. This information may involve risks and uncertainties
that could cause actual results to differ materially from the forward-looking
statements. Although the Partnership believes that the expectations reflected in
such forward-looking statements are based on reasonable assumptions, such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected.
Results of Operations for the Three Months Ended March 31, 2003 and 2002
Revenues for the quarter ended March 31, 2003 (the "2003 Quarter") were
$6,335,000 representing an increase of $252,029 over the quarter ended March 31,
2002 (the "2002 Quarter"). The increase in revenue resulted from increases in
rental income of $670,736 and an increase in interest income and other of
$3,525. The increases in revenues were partially offset by decreases in finance
income of $175,609, income from investment in joint venture of $145,842 and a
loss on sale of equipment of $5,255 as compared with a gain on sale of equipment
of $95,526 in the 2002 Quarter. During the 2003 Quarter the Partnership sold
equipment from the ICON Cheyenne portfolio for total proceeds of $94,308.
Rental income increased due to the additional investments in operating
leases made subsequent to the 2002 Quarter. The decrease in finance income
resulted from the continued collection of minimum lease rentals reducing the
investment balance outstanding on which such revenues are based.
Expenses for the 2003 Quarter were $6,859,802 representing an increase of
$1,301,148 over the 2002 Quarter. The increase in expenses resulted from the
increase in the size of the Partnership's lease portfolio, an increase in the
Partnership's borrowing levels and overall growth in size of the operations of
the Partnership from the 2002 Quarter which is consistent with the Partnership's
level of operations.
Depreciation expense increased by $637,808, due to the additional
investments in operating leases made subsequent to the 2002 Quarter. Interest
expense increased by $481,506 due to the additional debt used to acquire
investments in operating leases subsequent to the 2002 Quarter. Management fees
- - General Partner increased by $167,328 and administrative expense
reimbursements - General Partner increased by $63,907 in the 2003 Quarter as
compared to the 2002 Quarter. The increase in management fees was consistent
with increases in rentals (including operating leases, finances leases and
through joint ventures) on which such fees are based. The increase in
administrative expense reimbursements - General Partner was consistent with the
increase in operating activities of the Partnership. Minority interest expense
decreased by $76,916, amortization of initial direct costs decreased by $17,155
and general and administrative expenses increased by $44,670 in the 2003 Quarter
as compared to the 2002 Quarter.
Net (loss) income for the quarter ended March 31, 2003 and 2002 was
($524,802) and $524,317, respectively. The net (loss) income per weighted
average limited partnership unit outstanding was ($.69) and $.69 for 2003 and
2002, respectively.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2003
Liquidity and Capital Resources
The Partnership's primary source of funds for the three months ended March
31, 2003 were proceeds from the sale of equipment of $94,308 and unguaranteed
residuals of $10,105, minority interest contribution of $389,518 and
distributions received from unconsolidated joint ventures of $343,610.
Distributions to partners aggregated $2,031,770 and the Partnership invested in
an operating lease for $3,076,564. As a result of this activity, the
Partnership's liquidity was reduced during the 2003 Quarter. As cash is realized
from operations the Partnership will continue to invest in equipment leases and
financings where it deems it to be prudent while retaining sufficient cash to
meet its reserve requirements and recurring obligations.
During the quarter ended June 30, 2002, the Partnership entered into a
$17,500,000 joint and several line of credit agreement dated as of May 30, 2002
shared with L.P. Seven and Fund Eight A (the "Initial Funds"), with Comerica
Bank as lender. Under the terms of the agreement, the Partnership may borrow at
a rate equal to the Comerica Bank base rate plus 1% (together, 5.25% at March
31, 2003) and all borrowings are to be jointly and severally collateralized by
the present values of rents receivable and equipment owned by all of the Initial
Funds sharing in the joint line of credit. On December 12, 2002, the agreement
was amended to admit ICON Income Fund Nine, LLC, collectively along with the
Initial Funds (the "Funds"), as a borrower sharing the $17,500,000 joint line of
credit agreement. The Funds have entered into a Contribution Agreement, dated as
of May 30, 2002, as amended December 12, 2002, pursuant to which the Funds have
agreed to restrictions on the amount and the terms of their respective
borrowings under the line of credit in order to minimize the risk that a Fund
would not be able to repay its allocable portion of the outstanding revolving
loan obligation at any time, including restrictions on any Fund borrowing in
excess of the lesser of (A) an amount each Fund could reasonably expect to repay
in one year out of its projected free cash flow, or (B) the greater of (i) the
Borrowing Base (as defined in the line of credit agreement) as applied to such
Fund, and (ii) 50% of the net worth of such Fund. The Contribution Agreement
provides that, in the event a Fund pays an amount under the agreement in excess
of its allocable share of the obligation under the agreement whether by reason
of an Event of Default or otherwise, the other Funds will immediately make a
contribution payment to such Fund in such amount that the aggregate amount paid
by each Fund reflects its allocable share of the aggregate obligations under the
agreement. The Funds' obligations to each other under the Contribution Agreement
are collateralized by a subordinate lien on the assets of each participating
Fund. The expiration date of this line of credit is May 31, 2003. The
Partnership violated a financial covenant at December 31, 2002 creating an Event
of Default. The bank granted a waiver to the Partnership with respect to this
Event of Default. As of March 31, 2003, there were no borrowings by the
Partnership under the line. Aggregate borrowing by all Funds under the line of
credit agreement aggregated $7,484,986 on March 31, 2003.
Cash distributions to limited partners for the 2003 Quarter and 2002
Quarter, which were paid monthly, totaled $2,011,452 and $2,015,281,
respectively.
Kmart, Inc., with whom the Partnership has five leases, filed bankruptcy in
January 2002. The Partnership's finance leases with Kmart were acquired during
2001 for prices aggregating $18,234,262, comprised of a cash investment of
$681,720 and the assumption of $17,552,542 of non-recourse debt. Through May 1,
2003, 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. Management
has deemed an allowance for doubtful accounts unnecessary at March 31, 2003.
Regus Business Center Corp. ("Regus"), with whom the Partnership has an
equipment lease, filed for Chapter 11 bankruptcy protection on January 14, 2003.
The Partnership's finance leases with Regus were acquired in July 2000 for
$5,303,089. Regus did not pay rent in January or February, 2003. The
Partnership, has
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2003
negotiated new lease terms with Regus and restructured the lease effective March
15, 2003 whereby the lease, originally scheduled to expire on July 31, 2004 has
been extended to expire March 2007 but at a new reduced rental rate. As of
December 31, 2002 the contractual rent receivable under the Regus lease was
$2,734,738. Giving effect to the lease restructuring, the contractual rent
receivable under the Regus lease as of March 31, 2003 was $3,262,656.
As of March 31, 2003, except as noted above, there were no known trends or
demands, commitments, events or uncertainties which are likely to have any
material effect on liquidity. As cash is realized from operations, sales of
equipment and borrowings, the Partnership will invest in equipment leases and
financings where it deems to be prudent while retaining sufficient cash to meet
its reserve requirements and recurring obligations.
We do not consider the impact of inflation to be material in the analysis of our
overall operations.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
The Partnership is exposed to certain market risks, including changes in
interest rates. The Partnership believes its exposure to other market risks are
insignificant to both its financial position and results of operations.
The Partnership manages its interest rate risk by obtaining fixed rate
debt. The fixed rate debt service obligation streams are generally matched by
fixed rate lease receivable streams generated by the Partnership's lease
investments.
The Partnership borrows funds under a floating rate line of credit and is
therefore exposed to interest rate risk until the floating rate line of credit
is repaid. The Partnership's had no borrowings outstanding under the floating
rate line of credit as of March 31, 2003.
The Partnership manages its exposure to equipment and residual risk by
monitoring the market and maximizing re-marketing proceeds received through
re-lease or sale of equipment.
Item 4. Controls and Procedures
Beaufort J.B. Clarke and Thomas W. Martin, the Principal Executive and
Principal Financial Officers, respectively, of ICON Capital Corp. ("ICC"), the
General Partner of the Partnership, have evaluated the disclosure controls and
procedures of the Partnership within 90 days prior to the filing of this
quarterly report. As used herein, the term "disclosure controls and procedures"
has the meaning given to the term by Rule 13a-14 under the Securities Exchange
Act of 1934, as amended ("Exchange Act"), and includes the controls and other
procedures of the Partnership that are designed to ensure that information
required to be disclosed by the Partnership in the reports that it files with
the SEC under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms. As part of their
evaluation, Messrs. Clarke and Martin conferred with the finance and accounting
staff of ICC and the finance and accounting staff of ICON Holdings Corp., the
parent of ICC. Based upon their evaluation, Messrs. Clarke and Martin have
concluded that the Partnership's disclosure controls and procedures provide
reasonable assurance that the information required to be disclosed by the
Partnership in this report is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms applicable to the
preparation of this report.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2003
There have been no significant changes in the Partnership's internal
controls or in other factors that could significantly affect the Partnership's
internal controls subsequent to the evaluation described above conducted by
ICC's principal executive and financial officers.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership
PART II - OTHER INFORMATION
Item 1- Legal Proceedings
- -------------------------
The Company, from time-to-time, in the ordinary course of business, commences
legal actions when necessary to protect or enforce the rights of the
Partnership. We are not a defendant party to any litigation and are not aware of
any pending or threatened litigation against the Partnership
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(b) Reports on Form 8-K
Form 8-K filed on February 5, 2003
Item 4. Changes in Registrant's Certifying Accountant
(c) Exhibits
99.1 Certification of Chairman and Chief Executive Officer pursuant to 18
U.S.C.ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer pursuant to 18 U.S.C.ss.1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
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 B L.P.
File No. 333-37504(Registrant)
By its General Partner,
ICON Capital Corp.
May 12, 2003 /s/ Thomas W. Martin
- -------------------- ------------------------------
Date Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting
Officer of the General Partner of the Registrant)
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 B 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 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 officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; 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; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: May 14, 2003
/s/ Beaufort J.B. Clarke
- -----------------------------
Beaufort J. B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
General Partner of ICON Income Fund Eight B L.P.
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 B 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 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 officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; 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; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: May 14, 2003
/s/ Thomas W. Martin
- ----------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer
of the General Partner of the Registrant)
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2003
EXHIBIT 99-1
I, Beaufort J.B. Clarke, Chairman and Chief Executive Officer of ICON
Capital Corp, the sole General Partner of ICON Income Fund Eight B L.P.,
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the period ended March 31, 2003
(the "Periodic Report") which this statement accompanies fully
complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m) and
(2) information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations
of ICON Income Fund Eight B L.P.
Dated: May 14, 2003
/s/ Beaufort J.B. Clarke
--------------------------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
General Partner of ICON Income Fund Eight B L.P.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2003
EXHIBIT 99-2
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 B L.P., certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the period ended March 31, 2003
(the "Periodic Report") which this statement accompanies fully
complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m) and
(2) information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations
of ICON Income Fund Eight B L.P.
Dated: May 14, 2003
/s/ Thomas W. Martin
-----------------------------------------------
Thomas W. Martin
Executive Vice President (Principal
Financial and Accounting Officer)
ICON Capital Corp.
General Partner of ICON Income Fund Eight B L.P.