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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2003
--------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 333-37504
----------------------------------------------------------
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
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Balance Sheets
September 30, December 31,
2003 2002
---- ----
(unaudited)
Assets
------
Cash and cash equivalents $ 2,150,519 $ 8,499,026
------------- -------------
Investment in finance leases
Minimum rents receivable 19,183,209 24,504,820
Estimated unguaranteed residual values 2,194,842 2,711,893
Initial direct costs, net 275,834 457,189
Unearned income (2,586,490) (3,824,928)
------------- -------------
19,067,395 23,848,974
------------- -------------
Investment in operating leases
Equipment, at cost 193,034,566 166,325,943
Accumulated depreciation and amortization (35,433,057) (23,591,192)
------------- -------------
157,601,509 142,734,751
------------- -------------
Equipment held for sale or lease, net 611,669 1,211,669
------------- -------------
Investment in unconsolidated joint ventures 6,506,152 7,290,793
Due from affiliates 304,080 3,532
Investment in unguaranteed residual values 460,297 2,342,589
Investment in option 2,100,000 2,100,000
Other assets, net 1,240,891 1,377,413
------------- -------------
Total assets $ 190,042,512 $ 189,408,747
============= =============
(continued on next page)
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Balance Sheets - Continued
September 30, December 31,
2003 2002
---- ----
(unaudited)
Liabilities and Partners' Equity
--------------------------------
Notes payable - non-recourse $ 139,994,064 $ 133,231,339
Note payable - recourse 400,000 400,000
Due to affiliates 217,207 224,167
Deferred rental income 3,375,223 534,840
Security deposits and other liabilities 1,872,129 863,059
Minority interests in consolidated joint ventures 1,575,569 1,334,947
------------- -------------
Total liabilities 147,434,192 136,588,352
------------- -------------
Commitment and Contingencies
Partners' equity (deficit)
General Partner (226,482) (125,713)
Limited Partners (746,526.39 and 748,445.85 units outstanding,
$100 per unit original issue price) 42,834,802 52,946,108
------------- -------------
Total partners' equity 42,608,320 52,820,395
------------- -------------
Total liabilities and partners' equity $ 190,042,512 $ 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
(unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
---- ---- ---- ----
Revenues
Rental income $ 5,457,298 $ 5,634,449 $ 16,703,527 $ 16,452,664
Finance income 498,738 665,077 1,590,795 2,123,377
Net gain on sale of equipment 10,033 166,306 21,828 407,890
Income from investments in
unconsolidated joint ventures 107,035 48,190 246,356 310,997
Interest income and other 3,628 13,821 19,457 41,488
------------- ------------- ------------ ------------
Total revenues 6,076,732 6,527,843 18,581,963 19,336,416
------------- ------------- ------------ ------------
Expenses
Depreciation 4,697,297 3,686,757 13,313,166 10,663,674
Interest 1,881,472 1,988,314 5,633,365 5,376,706
Management fees - General Partner 503,790 532,732 1,698,373 1,667,406
Administrative expense
reimbursements - General Partner 229,672 244,209 785,107 747,887
General and administrative 1,123,846 115,022 1,631,431 414,059
Amortization of initial direct costs 56,989 70,410 181,354 221,727
Minority interest in consolidated
joint ventures (88,004) 36,852 (111,576) 177,381
------------- ------------- ------------- -------------
Total expenses 8,405,062 6,674,296 23,131,220 19,268,840
------------- ------------- ------------- -------------
Net (loss) income $ (2,328,330) $ (146,453) $ (4,549,257) $ 67,576
------------- ------------- -------------- -------------
Net (loss) income allocable to:
Limited Partners $ (2,305,047) $ (144,988) $ (4,503,764) $ 66,900
General Partner (23,283) (1,465) (45,493) 676
------------- ------------- ------------- -------------
$ (2,328,330) $ (146,453) $ (4,549,257) $ 67,576
============= ============= ============= =============
Weighted average number of limited
partnership units outstanding 746,526 749,496 747,525 749,765
============= ============= ============= =============
Net (loss) income per weighted average
limited partnership unit $ (3.09) $ (0.19) $ (6.03) $ 0.09
============ ============= ============ =============
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
Nine Months Ended September 30, 2003
(unaudited)
Limited Partner Distributions
-----------------------------
Return of Investment Limited General
Capital Income Partners Partner Total
------- ------ -------- ------- -----
(Per weighted average unit)
Balance at
January 1, 2003 $ 52,946,108 $ (125,713) $ 52,820,395
Cash distributions to partners $ 7.32 $ - (5,472,294) (55,276) (5,527,570)
Limited partnership units
redeemed (1,919.46 units) (135,248) - (135,248)
Net loss (4,503,764) (45,493) (4,549,257)
---------------- ----------- ----------------
Balance at
September 30, 2003 $ 42,834,802 $ (226,482) $ 42,608,320
================= =========== ================
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
Nine Months Ended September 30,
(unaudited)
2003 2002
---- ----
Cash flows from operating activities:
Net (loss) income $ (4,549,257) $ 67,576
------------- -------------
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Finance income paid directly to lenders by lessees (841,707) (1,037,322)
Depreciation 13,313,166 10,663,674
Amortization of initial direct costs 181,354 221,727
Minority interest in consolidated joint venture (111,576) 177,381
Income from investments in joint ventures (246,356) (310,997)
Net gain on sale of equipment (21,828) (407,890)
Rental income paid directly to lender by lessees (16,158,540) (13,952,222)
Interest expense on non-recourse financing
paid directly to lender by lessees 4,707,878 4,973,860
Changes in operating assets and liabilities:
Collection of principal - non-financed receivables 2,068,755 1,066,645
Due from affiliates (300,548) 3,652,740
Other assets, net 136,522 1,706,692
Due to affiliates (6,960) 466,654
Deferred rental income (353,779) 835,884
Security deposits and other liabilities 1,009,070 (241,985)
------------- -------------
Total adjustments 3,375,451 7,814,841
------------- -------------
Net cash (used in) provided by operating activities (1,173,806) 7,882,417
------------- -------------
Cash flows used in investing activities:
Cash investment in operating leases (3,076,564) (4,250,000)
Investments in unconsolidated joint ventures - (7,610,259)
Receipt of cash held in escrow - 13,723,196
Distributions received from unconsolidated joint ventures 1,030,997 921,655
Proceeds from sale of unguaranteed residual values 1,882,292 63,539
Initial direct costs paid - (2,242,352)
Proceeds from the sale of equipment 681,899 2,174,602
------------ -------------
Net cash provided by investing activities 518,624 2,413,378
------------ -------------
(continued on next page)
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Cash Flows - Continued
Nine Months Ended September 30,
(unaudited)
2003 2002
---- ----
Cash flows from financing activities:
Minority interest contribution, net 352,198 (367,003)
Proceeds from non-recourse borrowings - 3,593,693
Cash distributions to partners (5,527,570) (6,106,933)
Redemption of limited partnership units (135,248) (115,103)
Repayment of non-recourse borrowings (382,705) -
Repayment of recourse borrowings
- (2,500,000)
------------- -------------
Net cash used in financing activities (5,693,325) (5,128,343)
------------- -------------
Net (decrease) increase in cash and cash equivalents (6,348,507) 5,167,452
Cash and cash equivalents at beginning of the period 8,499,026 5,684,652
------------- -------------
Cash and cash equivalents at end of the period $ 2,150,519 $ 10,852,104
============= =============
(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 nine months ended September 30, 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 paid
directly to lenders by lessees $ 2,420,526 $ 4,586,720
Rental income on operating lease receivables paid
directly to lenders by lessees 16,158,540 13,952,222
Deferred income on operating lease receivables paid
directly to lenders by lessees 3,194,162 -
Principal and interest paid directly to lenders by lessees (21,773,228) (18,538,942)
--------------- ----------------
$ - $ -
=============== ================
Interest paid directly to lenders by lessees
pursuant to non-recourse financings $ 4,707,878 $ 4,973,860
Other interest paid 925,487 402,846
--------------- ----------------
Total interest expense $ 5,633,365 $ 5,376,706
=============== ================
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
September 30, 2003
(unaudited)
1. Basis of Presentation
The condensed consolidated financial statements of 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.
2. 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
750,000.00 units totaling $75,000,000 in capital contributions. Through
September 30, 2002 3,473.61 units have been redeemed, bringing the outstanding
units as of September 30, 2003 to 746,526.39. For the nine months ended
September 30, 2003, 1,919.46 units were redeemed.
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 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 September 30, 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 - 1,256,259 Capitalized as part of
investment in joint venture
Management fees 1,698,373 1,667,406 Charged to operations
Administrative expense reimbursements 785,107 747,887 Charged to operations
------------- --------------
$ 3,220,246 $ 5,913,904
============= ==============
4. Consolidated Ventures and Investments in Unconsolidated Joint Ventures
The Partnership and affiliates formed seven 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 ventures described below are majority owned and are consolidated
with the Partnership. The Partnership's condensed consolidated financial
statements include 100% of the assets and liabilities, as well as 100% of the
related revenues and expenses of these ventures. The interests of 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") and ICON Income Fund
Nine, LLC ("Fund Nine") in the related ventures, have been reflected as minority
interests in consolidated joint ventures on the condensed consolidated balance
sheets and condensed consolidated statements of operations.
ICON Cheyenne LLC
-----------------
In December 2000, the Partnership and three affiliates, ICON Cash Flow
Partners L.P. Six, L.P. Seven and 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 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 outstanding debt at September 30, 2003 was $2,007,229.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
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 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 General Partner is currently remarketing the
aircraft, during which time, ICON Aircraft 24846 is 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 outstanding debt at September 30, 2003 was $34,491,632.
ICON Aircraft 47820 LLC
-----------------------
In 2003, the Partnership and 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 $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, in ICON 47820. The outstanding
debt at September 30, 2003 was $18,862,363.
Investments in Unconsolidated Joint Ventures
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 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. The lenders have a security interest in the aircraft and
an assignment of the rentals under the lease. As of September 30, 2003, there
was $64,427,624 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 unaudited results of operations of ICON 126 for the
nine month periods ending September 30, 2003 and 2002 is summarized below:
Nine Months Ended Nine Months Ended
September 30, 2003 September 30, 2002
------------------ ------------------
Net income $ 290,362 $ 154,196
========= =========
Partnership's share of net income $ 145,181 $ 77,098
========= =========
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
ICON SPK 2023-A, LLC
--------------------
In early 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 through
April 2008.
The Partnership and Fund Nine have ownership interests of 49% and 51%,
respectively. 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.
Information as to the unaudited results of operations of ICON SPK for the
nine month periods ending September 30, 2003 and 2002 is summarized below:
Nine Months Ended Nine Months Ended
September 30, 2003 September 30, 2002
------------------ ------------------
Net income $ 145,033 $ 477,345
============= =============
Partnership's share of net income $ 71,066 $ 233,899
============= =============
Distributions $ 2,059,280 $ 1,880,929
============= =============
Partnership's share of distribution $ 1,009,047 $ 921,655
============= =============
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 $8,410,000 in cash, with an assumed non-recourse
debt of $6,918,091 consisting of a senior debt of $6,679,355 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. The outstanding debt
at September 30, 2003 was $3,757,037.
The Partnership and Fund Nine have ownership interests of 5% and 95%,
respectively. 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 unaudited results of operations of ICON/Kenilworth
LLC for the nine months ending September 30, 2003 is summarized below:
Nine Months Ended
September 30, 2003
==================
Net income $ 615,300
===========
Partnership's share of net income $ 30,765
===========
Distributions $ 439,000
===========
Partnership's share of distribution $ 21,950
===========
ICON Aircraft 46835, LLC
------------------------
In December 2002, the Partnership and Fund Nine formed ICON Aircraft 46835,
LLC ("ICON 46835") 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 $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 outstanding debt at September 30, 2003 was
$17,510,878.
The Partnership and Fund Nine have ownership interests of 15% and 85%,
respectively. 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.
Information as to the unaudited results of operations of ICON 46835 for the
nine months ending September 30, 2003 is summarized below:
Nine Months Ended
September 30, 2003
------------------
Net loss $ (4,373)
===========
Partnership's share of net loss $ (656)
===========
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 $4,250,000 in cash. The aircraft owned by A.A.L. is
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
subject to non-recourse debt provided by unaffiliated lenders. The lenders have
a security interest in the aircraft and an assignment of the rentals under the
lease. The fair value of the aircraft was approximately $75 million at the date
of acquisition and the principal balance of the debt was approximately $70.5
million at such date. ICON 123 consolidates the financial position and results
of operations of A.A.L. in its financial statements. The assets and liabilities
and results of operations of ICON 123 are consolidated in the Partnership's
condensed consolidated financial statements. Outstanding debt as of September
30, 2003 was $64,194,818.
6. Contingencies
(a) Kmart
-----
Kmart, Inc., ("Kmart") with whom the Partnership has five finance 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 November 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 September 30, 2003.
(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 September 30, 2003 was $2,786,851
net of payments received. Management has determined that an allowance for
doubtful accounts is unnecessary at September 30, 2003.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
September 30, 2003
Item 2. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Information - The following discussion and analysis should
be read in conjunction with the audited financial statements dated December 31,
2002. Certain statements within this document may constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. These statements are identified by words such as
"anticipate," "believe," "estimate," "expects," "intend," "predict" or "project"
and similar expressions. This information may involve risks and uncertainties
that could cause actual results to differ materially from the forward-looking
statements. Although the Partnership believes that the expectations reflected in
such forward-looking statements are based on reasonable assumptions, such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected.
Results of Operations for the Three Months Ended September 30, 2003 and 2002
Revenues for the three months ended September 30, 2003 (the "2003 Quarter")
were $6,076,732 representing a decrease of $451,111 from the three months ended
September 30, 2002 (the "2002 Quarter"). The decrease in revenue resulted from
decreases in rental income of $177,151, finance income of $166,339, a decrease
in net gain on sale of equipment of $156,273 and a decrease in interest income
and other of $10,193. The decrease in revenues was partially offset by income
from investment in joint venture of $58,845. During the 2003 Quarter the
Partnership sold equipment from the ICON Cheyenne, LLC ("ICON Cheyenne")
portfolio for total proceeds of $417,669.
Rental income decreased due to a decrease in the average size of ICON
Cheyenne's portfolio, due to leases in the portfolio maturing subsequent to the
2002 Quarter and the related equipment being sold. These decreases more than
offset the increase in the Partnership's other portfolios during the 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 $8,405,062 representing an increase of
$1,730,766 over the 2002 Quarter. Depreciation expense increased by $1,010,540,
due to the additional investments in operating leases made subsequent to the
2002 Quarter. General and administrative expenses increased $1,008,824 due to
the additional investments in operating leases made subsequent to the 2002
Quarter and maintenance expense associated with one of the Partnership's
consolidated joint ventures. The increase in expenses was partially offset by
decreases in interest expense of $106,842 due to a decrease in the average debt
outstanding from 2002 to 2003, primarily in the Cheyenne portfolio and the
Partnership's investment in finance leases. Management fees - General Partner
decreased by $28,942 and administrative expense reimbursements - General Partner
decreased by $14,537. The decrease in management fees - General Partner and
administrative expense reimbursements - General Partner was consistent with
decreases in rentals (including operating leases, finances leases and through
joint ventures) on which such fees are based. Minority interest in consolidated
joint ventures decreased by $124,856 and amortization of initial direct costs
decreased by $13,421.
Net loss for the three months ended September 30, 2003 and 2002 was
$2,328,330 and $146,453, respectively. The net loss per weighted average limited
partnership unit outstanding was $3.09 and $0.19 for 2003 and 2002,
respectively.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
September 30, 2003
Results of Operations for the Nine Months Ended September 30, 2003 and 2002
Revenues for the nine months ended September 30, 2003 (the "2003 Period")
were $18,581,963 representing a decrease of $754,453 from the Period ended
September 30, 2002 (the "2002 Period"). The decrease in revenue resulted from
decreases in finance income of $532,582, income from investment in joint venture
of $64,641, interest income and other of $22,031 and a decrease in net gain on
sale of equipment of $386,062. The decreases in revenues were partially offset
by an increase in rental income of $250,863. During the 2003 Period, the
Partnership sold equipment from the ICON Cheyenne portfolio for total proceeds
of $681,899.
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. Rental income increased due to the additional investments in
operating leases made subsequent to the 2002 Period.
Expenses for the 2003 Period were $23,131,220 representing an increase of
$3,862,380 over the 2002 Period. Depreciation expense increased by $2,649,492,
interest expense increased by $256,659 and general administrative expenses
increased by $1,217,372 due to the additional investments in operating leases
made subsequent to the 2002 Period and maintenance expense associated with one
of the Partnership's consolidated joint ventures. Management fees - General
Partner increased by $30,967 and administrative expense reimbursements - General
Partner increased by $37,220 in the 2003 Period as compared to the 2002 Period.
The increase in management fees was consistent with increases in rentals
(including operating leases, finance 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 in consolidated joint ventures decreased by
$288,957 and amortization of initial direct costs decreased by $40,373.
Net (loss) income for the nine months ended September 30, 2003 and 2002 was
$(4,549,257) and $67,576, respectively. The net (loss) income per weighted
average limited partnership unit outstanding was $(6.03) and $0.09 for 2003 and
2002, respectively.
Liquidity and Capital Resources
The Partnership's primary sources of funds for the nine months ended
September 30, 2003 was proceeds from the sale of unguaranteed residual value of
$1,882,292, proceeds from the sale of equipment of $681,899 and distributions
received from unconsolidated joint venture of $1,030,997.
Such funds were utilized for investments in leases and joint ventures, with
related costs aggregating $3,076,564, (including initial direct costs
(acquisition fees) of $736,766), and cash to make cash distributions to partners
of $5,527,570. As cash is realized from operations and with proceeds from
additional borrowings, the Partnership will continue to invest in equipment
leases and financings where it deems it to be prudent while retaining sufficient
cash to meet its reserve requirements and recurring obligations.
During the quarter ended September 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, 5.00% at
September 30, 2003) and all borrowings are to be jointly and severally
collateralized by the present values of rents receivable and equipment owned by
all of the Initial Funds sharing in the joint line of credit. On December 12,
2002, the agreement was amended to admit ICON Income Fund Nine, LLC,
collectively along with the Initial Funds (the "Funds"), as a borrower sharing
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
September 30, 2003
the $17,500,000 joint line of credit agreement. The Funds have entered into a
Contribution Agreement, dated as of May 30, 2002, as amended December 12, 2002,
pursuant to which the Funds have agreed to restrictions on the amount and the
terms of their respective borrowings under the line of credit in order to
minimize the risk that a Fund would not be able to repay its allocable portion
of the outstanding revolving loan obligation at any time, including restrictions
on any Fund borrowing in excess of the lesser of (A) an amount each Fund could
reasonably expect to repay in one year out of its projected free cash flow, or
(B) the greater of (i) the Borrowing Base (as defined in the line of credit
agreement) as applied to such Fund, and (ii) 50% of the net worth of such Fund.
The Contribution Agreement provides that, in the event a Fund pays an amount
under the agreement in excess of its allocable share of the obligation under the
agreement whether by reason of an Event of Default or otherwise, the other Funds
will immediately make a contribution payment to such Fund in such amount that
the aggregate amount paid by each Fund reflects its allocable share of the
aggregate obligations under the agreement. The Funds' obligations to each other
under the Contribution Agreement are collateralized by a subordinate lien on the
assets of each participating Fund. The line of credit was extended for twelve
additional months expiring May 31, 2004. The Partnership violated a financial
covenant at December 31, 2002 creating an Event of Default. The bank granted a
waiver to the Partnership with respect to this Event of Default. As of September
30, 2003, there were no borrowings by the Partnership under the line. Aggregate
borrowing by all Funds under the line of credit agreement aggregated $10,199,986
on September 30, 2003.
Cash distributions to limited partners for the 2003 Period and 2002 Period,
which were paid monthly, totaled $5,472,294 and $6,045,863, respectively.
Kmart, Inc., with whom the Partnership has five finance 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 August 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.
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 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 September 30, 2003 was
$2,786,851, net of payments received.
As of September 30, 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.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
September 30, 2003
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 may borrow funds under a floating rate line of credit and
therefore may be exposed to interest rate risk until the floating rate line of
credit is repaid. The Partnership had no borrowings outstanding under the
floating rate line of credit as of September 30, 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 as of the quarter ended September 30, 2003. As
used herein, the term "disclosure controls and procedures" has the meaning given
to the term by Rule 13a-14 under the Securities Exchange Act of 1934, as amended
("Exchange Act"), and includes the controls and other procedures of the
Partnership that are designed to ensure that information required to be
disclosed by the Partnership in the reports that it files with the SEC under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. As part of their evaluation,
Messrs. Clarke and Martin conferred with the finance and accounting staff of ICC
and the finance and accounting staff of ICON Holdings Corp., the parent of ICC.
Based upon their evaluation, Messrs. Clarke and Martin have concluded that the
Partnership's disclosure controls and procedures provide reasonable assurance
that the information required to be disclosed by the Partnership in this report
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms applicable to the preparation of this
report.
There have been no significant changes in the Partnership's internal
controls or in other factors that could significantly affect the Partnership's
internal controls subsequent to the evaluation described above conducted by
ICC's principal executive and financial officers.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership
PART II - OTHER INFORMATION
- ---------------------------
Item 1 - Legal Proceedings
The Partnership, from time-to-time, in the ordinary course of business,
commences legal actions when necessary to protect or enforce the rights of the
Partnership. We are not a defendant party to any litigation and are not aware of
any pending or threatened litigation against the Partnership.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
32.1 Certification of Chairman and Chief Executive Officer
32.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer.
33.1 Certification of Chairman and Chief Executive Officer pursuant to 18
U.S.C. (Section)1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
33.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer pursuant to 18 U.S.C. (Section)1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
ICON Income Fund Eight 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.
November 14, 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
---------------------
EXHIBIT 32.1
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this quarterly report of ICON Income Fund Eight B L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Dated: November 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
---------------------
EXHIBIT 32.2
I, Thomas W. Martin, certify that:
1. I have reviewed this quarterly report of ICON Income Fund Eight B L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Dated: November 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)
September 30, 2003
EXHIBIT 33.1
I, Beaufort J.B. Clarke, Chairman and Chief Executive Officer of ICON
Capital Corp, the sole General Partner of ICON Income Fund Eight 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 September 30, 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: November 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)
September 30, 2003
EXHIBIT 33.2
I, Thomas W. Martin, Executive Vice President (Principal Financial and
Accounting Officer) of ICON Capital Corp, the sole General Partner of ICON
Income Fund Eight 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 September 30,
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: November 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.