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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 March 31, 2004
--------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________________ to __________________________
Commission File Number 333-37504
ICON Income Fund Eight B L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-4101114
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
100 Fifth Avenue, New York, New York 10011
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(212) 418-4700
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ x] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act) [ ] Yes [ x ] No
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Balance Sheets
(unaudited)
March 31, December 31,
2004 2003
---- ----
Assets
-------
Cash and cash equivalents $ 2,361,558 $ 1,760,803
--------------- ---------------
Investments in finance leases
Minimum rents receivable 14,019,386 15,192,886
Estimated unguaranteed residual values 1,737,662 1,737,662
Initial direct costs, net 154,662 194,985
Unearned income (1,640,733) (1,974,924)
Allowance for doubtful accounts (411,742) -
--------------- ---------------
13,859,235 15,150,609
--------------- ---------------
Investments in operating leases
Equipment, at cost 146,695,597 148,112,061
Accumulated depreciation and amortization (34,021,378) (31,289,197)
--------------- ---------------
112,674,219 116,822,864
--------------- ---------------
Equipment held for sale or lease, net 35,761,800 36,741,848
--------------- ---------------
Investments in unconsolidated joint ventures 6,255,283 6,382,227
Due from affiliates 171,291 167,170
Investment in unguaranteed residual values 86,009 409,586
Investment in option 2,100,000 2,100,000
Other assets, net 1,268,887 1,212,013
--------------- ---------------
Total assets $ 174,538,282 $ 180,747,120
=============== ===============
Liabilities and Partners' Equity
--------------------------------
Notes payable - non-recourse $ 125,686,108 $ 132,938,722
Note payable - recourse 2,000,000 2,000,000
Due to General Partner and affiliates 92,172 98,203
Deferred rental income 4,367,881 1,255,076
Equipment sales advances 3,240,877 1,361,506
Security deposits and other liabilities 1,704,495 1,377,023
Minority interests in joint ventures 936,621 1,352,621
--------------- ----------------
138,028,154 140,383,151
--------------- ----------------
Partners' equity (deficit)
General Partner (285,907) (247,872)
Limited Partners (744,737.91 and 745,491.39 units outstanding
$100 per unit original issue price) 36,796,035 40,611,841
--------------- --------------
Total partners' equity 36,510,128 40,363,969
--------------- ---------------
Total liabilities and partners' equity $ 174,538,282 $ 180,747,120
=============== ===============
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)
2004 2003
---- ----
Revenues
Rental income $ 5,050,467 $ 5,682,540
Finance income 334,191 574,303
Net loss on sales of equipment (483,330) (5,255)
Income from investments in unconsolidated joint ventures 100,222 69,568
Interest income and other 16,989 13,844
------------- -------------
Total revenues 5,018,539 6,335,000
------------- -------------
Expenses
Depreciation 4,005,440 3,789,319
Interest 1,660,538 1,851,330
Management fees - General Partner 559,734 644,758
Administrative expense
reimbursements - General Partner 244,331 288,928
Aircraft maintenance 109,260 -
General and administrative 355,723 197,095
Amortization of initial direct costs 40,323 63,881
Minority interest (income) expense (70,632) 24,491
Provision for bad debts 411,742 -
------------- -------------
Total expenses 7,316,459 6,859,802
------------- -------------
Net loss $ (2,297,920) $ (524,802)
============= =============
Net loss allocable to:
Limited partners $ (2,274,941) $ (519,554)
General Partner (22,979) (5,248)
------------- -------------
$ (2,297,920) $ (524,802)
============= =============
Weighted average number of limited
partnership units outstanding 745,003 748,446
============= =============
Net loss per weighted average
limited partnership unit $ (3.05) $ (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, 2004
(Unaudited)
Limited Partner Distributions
-----------------------------
Return of Investment Limited General
Capital Income Partners Partner Total
------- ----- -------- ------- -----
(Per weighted average unit)
Balance at
January 1, 2004 $ 40,611,841 $ (247,872) $ 40,363,969
Limited partnership units
redeemed (753.48) (50,355) - (50,355)
Cash distributions to partners $ 2.00 $ - (1,490,510) (15,056) (1,505,566)
Net loss (2,274,941) (22,979) (2,297,920)
----------------- ----------- -------------
Balance at
March 31, 2004 $ 36,796,035 $ (285,907) $ 36,510,128
================= =========== =============
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)
2004 2003
---- ----
Cash flows from operating activities:
Net loss $ (2,297,920) $ (524,802)
------------- -------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Rental income paid directly to lenders by lessees (4,675,227) (5,500,878)
Finance income paid directly to lenders by lessees (227,871) (297,557)
Income from investments in joint ventures (100,222) (69,568)
Depreciation 4,005,440 3,789,319
Interest expense on non-recourse financing paid directly to lenders by lessees 1,309,081 1,724,914
Amortization of initial direct costs 40,323 63,881
Minority interest (income) expense (70,632) 24,491
Net loss on sales of equipment 483,330 5,255
Provision for bad debts 411,742 -
Changes in operating assets and liabilities:
Collection of principal - non-financed receivables 371,421 258,657
Due from affiliates, net (10,152) 64,322
Other assets, net (56,872) 90,884
Deferred rental income (34,250) (650,213)
Security deposits and other liabilities 327,472 678,913
------------- -----------
Total adjustments 1,773,583 182,420
------------- -----------
Net cash used in operating activities (524,337) (342,382)
------------- -----------
Cash flows from investing activities:
Investment in operating leases - (3,076,564)
Distributions received from unconsolidated joint ventures 227,166 343,610
Proceeds from sale of unguaranteed residual values 323,577 10,105
Distribution to minority interests in joint venture (356,990) (32,995)
Advances received for sale of equipment 2,387,260 -
Proceeds from the sales of equipment 100,000 94,308
------------- ------------
Net cash provided by (used in) investing activities 2,681,013 (2,661,536)
------------- ------------
(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)
2004 2003
---- ----
Cash flows from financing activities:
Minority interest contributions - 389,518
Cash distributions to partners (1,505,566) (2,031,770)
Redemption of partnership units (50,355) -
Payment of non-recourse borrowings - (82,323)
----------- -----------
Net cash used in financing activities (1,555,921) (1,724,575)
------------ ------------
Net increase (decrease) in cash and cash equivalents 600,755 (4,728,493)
Cash and cash equivalents at beginning of the period 1,760,803 8,499,026
----------- -----------
Cash and cash equivalents at end of the period $ 2,361,558 $ 3,770,533
=========== ===========
(continued on next page)
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Condensed Consolidated Statements of Cash Flows (Continued)
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
For the three months ended March 31, 2004 and 2003, non-cash activities
included the following:
2004 2003
---- ----
Value of equipment and receivables acquired in exchange
for debt $ - $ 24,211,080
Non-recourse notes payable and promissory
note assumed in purchase of equipment and receivables - (24,211,080)
-------------- ----------------
$ - $ -
============== ================
Principal and interest from direct finance receivables
paid directly to lenders by lessees $ 739,413 $ 617,295
Rental income from operating lease receivables paid 4,675,227 5,500,878
directly to lenders by lessees
Deferred income from operating lease receivables paid 3,147,055 4,641,449
directly to lenders by lessees
Principal and interest paid directly to lenders by lessees (8,561,695) (10,759,622)
--------------- ----------------
$ - $ -
=============== ================
Interest on non-recourse financings paid
directly to lenders by lessees $ 1,309,081 $ 1,724,914
Other interest paid or accrued 351,457 126,416
--------------- -----------------
Total interest expense $ 1,660,538 $ 1,851,330
=============== ================
Transfer of investment in operating leases,
net of accumulated depreciation,
to equipment held for sale or lease, net $ 35,761,800 $ 38,435,318
=============== ================
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, 2004
(Unaudited)
1. 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 2003 Annual Report on Form 10-K. Certain 2003 amounts were
reclassified to conform to the 2004 presentation.
2. 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 three months ended March 31, 2004 and 2003
were as follows:
2004 2003
---- ----
Acquisition fees $ - $ 736,766 Capitalized as part of investment
in operating leases
Management fees 559,734 644,758 Charged to operations
Administrative expense reimbursements 244,331 288,928 Charged to operations
------------- --------------
$ 804,065 $ 1,670,452
============= ===============
As a result of the General Partner's review of its results of operations
for its fiscal year ended March 31, 2004 , administrative expenses incurred by
the General Partner on behalf of the Partnership of $55,000 were identified as
having been incurred by the General Partner in the quarter ended December 31,
2003. Accordingly, this amount was subsequently charged to the Partnership in
the quarter ended March 31, 2004.
For the quarter ended March 31, 2004, the Partnership had a receivable of
$171,291 due from affiliates, primarily resulting from its share of
distributions and rental payments received by affiliates on behalf of the
Partnership. The Partnership also had a payable of $92,172 due to the General
Partner and affiliates for administrative expense reimbursements and rental
payments received on behalf of the affiliates.
3. 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 Joint Ventures
The three joint ventures described below are majority owned and are
consolidated with the Partnership.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
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. The purchase price consisted of cash of
$11,401,151 and the assumption of non-recourse debt of $18,304,565. The
non-recourse debt is structured so as to be amortized with rentals due under the
leases. The leases expire on various dates through September 2006. The
Partnership, L.P. Seven, L.P. Six and Fund Eight A have ownership interests of
87.69%, 10.31%, 1.0% and 1.0%, respectively, in ICON Cheyenne. The outstanding
non-recourse debt at March 31, 2004 was $1,081,435.
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 Boeing 767-300ER aircraft originally leased to
Scandinavian Airline Systems ("SAS") for a purchase price of $44,515,416. The
purchase price was funded with cash of $2,241,371 and the assumption of
non-recourse debt of $42,274,045. The lender has a security interest in the
aircraft. The lease with SAS expired in March 2003, at which time the balance of
the non-recourse debt outstanding was approximately $34,500,000. The Partnership
has been making contributions toward interest only payments on the outstanding
non-recourse debt, during the remarketing of the aircraft by the General Partner
(See Note 5). 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 non-recourse debt at March 31, 2004 was $34,491,632.
The Partnership paid, on behalf of ICON Aircraft 24846 maintenance fees of
$109,260 for the aircraft owned by ICON Aircraft 24846, LLC.
In the quarter ended March 31, 2004, the Partnership reclassified the
Boeing 767-300ER aircraft held in the consolidated joint venture ICON Aircraft
24846 from an investment in operating lease to equipment held for sale or lease.
The cost of the aircraft was $44,515,415 and the accumulated depreciation was
$8,753,615 for a net value of $35,761,800 at March 31, 2004. The aircraft will
continue to be evaluated for impairments during the remarketing efforts of the
General Partner. The current net book value is below the estimated fair market
value of the aircraft.
ICON Aircraft 47820 LLC
-----------------------
In 2003, the Partnership and 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 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. In addition, there was a total of $818,629 in acquisition
fees paid to the General Partner of which the Partnership's share was $736,766.
The lenders have a security interest in the aircraft and an assignment of the
rental payments under the lease. 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 $2,916,523. The outstanding non-recourse debt as of March 31,
2004 was $16,326,065.
The Partnership and Fund Nine have ownership interests of 90% and 10%,
respectively, in ICON 47820.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
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 is subject to non-recourse debt provided by unaffiliated
lenders. As of March 31, 2004, there was $61,078,946 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, paid to the
General Partner.
Information as to the unaudited results of its operations for the three
months ended March 31, 2004 and 2003 is summarized below:
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2003
-------------- --------------
Net income $ 149,756 $ 101,999
============== ==============
Partnership's share of net income $ 74,878 $ 50,999
============== ==============
ICON SPK 2023-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 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.
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 its operations for the three
months ended March 31, 2004 and 2003 is summarized below:
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2003
-------------- --------------
Net income $ 13,853 $ 25,870
============== ===============
Partnership's share of net income $ 6,788 $ 12,676
============== ===============
Distributions $ 459,270 $ 678,847
============== ===============
Partnership's share of distributions $ 225,043 $ 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 $8,410,000 in cash, and 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 March 31, 2004 was $1,946,594
The original lease term expires in July 2004. The lessee has entered into a
lease extension until 2009. During the extension term, the rental payment is in
part a function of natural gas prices. If natural gas prices are sustained at
the current record high levels, rental payments will be deferred until natural
gas prices return to previous levels. High natural gas prices, such as the
current level, sustained over the long term will directly affect the viability
of the cogeneration facility and may impede the LLC's ability to capitalize on
its investment.
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.
Information as to the unaudited results of its operations for the three
months ended March 31, 2004 and 2003 is summarized below:
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2003
-------------- --------------
Net income $ 271,585 $ 189,444
=============== ================
Partnership's share of net income $ 13,579 $ 9,472
=============== =================
Distributions $ 42,466 $ 219,496
=============== ================
Partnership's share of distributions $ 2,123 $ 10,975
=============== =================
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 DC-10-30F aircraft leased to Federal Express 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 lender has a security interest in the aircraft and an
assignment of the rental payments under the lease. 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.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Condensed Consolidated Financial Statements - Continued
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 its operations for the three
months ended March 31, 2004 and 2003 is summarized below:
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2003
-------------- --------------
Net loss $ 33,183 $ (23,861)
============== ==============
Partnership's share of net income (loss) $ 4,977 $ (3,579)
============== ==============
4. Allowance for Doubtful Accounts
During the quarter ended March 31, 2004, the Partnership established a
provision for doubtful accounts of $411,742 for Kmart, Inc., based upon Kmart's
failure to make monthly payments for the quarter on one of the five leases the
Partnership has with the lessee. In current proceedings in the U.S. Bankruptcy
Court, Kmart is attempting to reject the lease. At March 31, 2004, the
non-recourse debt associated with the equipment was $3,398,406 and the related
gross receivable was $3,810,148. The Partnership is monitoring the proceedings,
as the lender of the non-recourse debt is contesting the rejection of the lease.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2004
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 and notes dated
December 31, 2003 included in the Partnership's annual report on Form 10-K.
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, 2004 and 2003
Revenues for the quarter ended March 31, 2004 (the "2004 Quarter") were
$5,018,539 representing a decrease of $1,316,461 from the quarter ended March
31, 2003 (the "2003 Quarter"). The decrease in revenue resulted primarily from a
decrease in rental income of $632,073, a decrease in finance income of $240,112,
and an increase in net loss on sale of equipment of $478,075. 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.
The decrease in rental income resulted from expiration of leases on which
rentals are based. Net loss on sale of equipment increased due to the sale of
equipment from the portfolio of leases held by the ICON Cheyenne which generated
net losses. These decreases were offset by an increase in income from
investments in unconsolidated joint venture.
Expenses for the 2004 Quarter were $7,316,459 representing an increase of
$456,657 over the 2003 Quarter. The primary reasons for the increase in expenses
were that depreciation expense increased by $216,121 due to additional
investments in operating leases made subsequent to the 2003 Quarter. Aircraft
maintenance of $109,260 due to maintenance expense associated with the Boeing
767-300ER aircraft that was previously leased to Scandinavian Airline Systems
(See Note 3 of the condensed consolidated financial statements). General and
administrative expenses increased by $158,628 due to increases in taxes
associated with equipment on lease. A provision for bad debts of $411,742 was
recorded for one of the Partnership's investment in finance leases, while no
provision was required for the 2003 quarter. The increase in expenses were
partially offset by a decrease in interest expense of $190,792 due to the
overall decrease in the average size of the lease portfolio in the ICON Cheyenne
joint venture in the 2004 Quarter as compared to the 2003 Quarter. Decreases in
Management fees - General Partner of $99,597, administrative expense
reimbursements - General Partner of $44,597 and amortization of initial direct
costs of $23,558 were the result of a decrease in the average size of the
finance and operating lease portfolios due to lease terminations or expiration
of leases. An increase in minority interest (income) expense of $95,123 was due
to losses incurred in two of the Partnership's consolidated joint ventures.
Net loss for the quarters ended March 31, 2004 and 2003 was $2,297,920 and
$524,802, respectively. The net loss per weighted average limited partnership
unit outstanding was $3.05 and $0.69 for, the quarters ended March 31, 2004 and
2003, respectively.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2004
Liquidity and Capital Resources
The Partnership's primary source of funds for the three months ended March
31, 2004 were cash proceeds associated with equipment sold and advances received
and for the sale of equipment of $2,487,260, proceeds from the sale of
unguaranteed residuals of $323,577, and distributions received from
unconsolidated joint ventures of $227,166. Distributions to partners aggregated
$1,505,566. As a result of this activity, the Partnership's liquidity was
increased during the 2004 Quarter over the corresponding quarter March 31, 2003.
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.
From time to time the Partnership will invest in industries, equipment, or
geopolitical regions that may be subject to outside influences that may affect
the Partnership's investments. While these factors are considered when the
investments are made, unforeseen events such as those that occurred on September
11, 2001 can have far-reaching, and unpredictable adverse consequences. The
following is a discussion of some assets that may fall into this category.
Aircraft: The Partnership is the lessor of several aircraft leased
throughout the world. The value of the aircraft is subject to the fluctuations
of the airline industry, which are greatly influenced by a number of factors
including, but not limited to, the global economy, fuel prices, political
instability, terrorist activity, and epidemics such as SARS. The Fund is also
the lessor of aircraft rotables and an engine; the value of these assets are
tied directly to the state of the aircraft market.
Kmart-lessee: The Partnership is the lessor of 210 Noritsu Optical/Digital
photo processing mini-labs located at Kmart retail locations throughout the
country.
On January 22, 2002, Kmart and its affiliate debtors filed a voluntary
petition in the United States Bankruptcy Court for the Eastern District of
Illinois seeking relief under Chapter 11 of Title 11 of U.S.C., 11 U.S.C.
(Section)101, et seq as amended.
The Partnership was one of multiple lessors that financed mini-labs. Kmart
neither affirmed nor rejected any of the leases for this equipment in their
current form. Instead, Kmart attempted to invoke a provision within the lease
agreements that allegedly allows Kmart to substitute like equipment on each
schedule even if the equipment is encumbered. Kmart's plan was to substitute
equipment among the various schedules, regardless of lessor/lender, and to
affirm or reject each newly defined schedule.
On January 24, 2003 Kmart filed its Joint Plan of Reorganization. The plan,
which excluded any of the schedules of the mini-labs, was confirmed and Kmart
emerged from Bankruptcy on May 5, 2003. The court maintained special
jurisdiction over the mini-lab leases. Kmart and the lessors/lenders each filed
motions for summary judgment supporting their respective positions.
Subsequently, the court rejected each of the motions and has ordered the parties
go to trial. As of March 31, 2004, several lenders and lessors including the
Partnership have retained counsel to attempt to resolve the matter.
While the Partnership expects to prevail in this matter, there is no
certainty of the outcome and therefore the Partnership may be adversely affected
by an unfavorable decision of the Bankruptcy Court. The Partnership in its 2003
annual report on Form 10K, had indicated that Kmart was current on payments
through March 2004. This statement was made as a result of having not received
notice from any lenders of a payment default.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2004
On May 30, 2002, the Partnership entered into a $17,500,000 joint and
several line of credit agreement shared with L.P. Seven and Fund Eight A L.P.
(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 March 31, 2004) 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 Fund Nine,
collectively along with the Initial Funds (the "Funds"), as a borrower sharing
the $17,500,000 joint line of credit agreement. The Funds have entered into a
Contribution Agreement, dated as of May 30, 2002, as amended December 12, 2002,
pursuant to which the Funds have agreed to restrictions on the amount and the
terms of their respective borrowings under the line of credit in order to
minimize the risk that a Fund would not be able to repay its allocable portion
of the outstanding revolving loan obligation at any time, including restrictions
on any Fund borrowing in excess of the lesser of (A) an amount each Fund could
reasonably expect to repay in one year out of its projected free cash flow, or
(B) the greater of (i) the Borrowing Base (as defined in the line of credit
agreement) as applied to such Fund, and (ii) 50% of the net worth of such Fund.
The Contribution Agreement provides that, in the event a Fund pays an amount
under the agreement in excess of its allocable share of the obligation under the
agreement whether by reason of an Event of Default or otherwise, the other Funds
will immediately make a contribution payment to such Fund in such amount that
the aggregate amount paid by each Fund reflects its allocable share of the
aggregate obligations under the agreement.
The Funds' obligations to each other under the Contribution Agreement are
collateralized by a subordinate lien on the assets of each participating Fund.
The line of credit was extended for twelve additional months expiring December
31, 2004. As of March 31, 2004, the Partnership had $2,000,000 outstanding under
the line. Aggregate borrowing by all Funds under the line of credit agreement
aggregated $14,039,986 on March 31, 2004.
Cash distributions to limited partners for the 2004 Quarter and 2003
Quarter, which were paid monthly, totaled $1,490,510 and $2,011,452,
respectively.
The Partnership paid on behalf of ICON Aircraft 24846, LLC, maintenance fee
of $109,260 for the sole aircraft owned by ICON Aircraft 24846, LLC. The
aircraft was on lease to Scandinavian Airlines Systems through March 2003. The
Partnership is currently negotiating with another airline with whom affiliates
of the Partnership have been conducting business.
In the quarter ended March 31, 2004, the Partnership reclassified a Boeing
767-300ER aircraft held in the consolidated joint venture ICON Aircraft 24846
from an investment in operating lease to equipment held for sale or lease. The
cost of the aircraft was $44,515,415 and the accumulated depreciation was
$8,753,615 for a net value of $35,761,800 at March 31, 2004. The aircraft will
continue to be evaluated during the remarketing efforts of the General Partner.
The current net value is below the fair market value of the aircraft.
As of March 31, 2004, except as noted above, and to the best of our
knowledge, 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.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2004
Item 3. Qualitative and Quantitative Disclosures About Market Risk
The Partnership is exposed to certain market risks, including changes in
interest rates and the demand for equipment (and the related residuals) owned by
the Partnership and its investors.
The Partnership manages its interest rate risk by obtaining fixed rate
debt. The fixed rate debt service obligation streams are generally matched by
fixed rate lease receivable streams generated by the Partnership's lease
investments.
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 $2,000,000 outstanding under the floating rate
line of credit as of March 31, 2004.
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
The Partnership carried out an evaluation, under the supervision and with
the participation of management of ICON Capital Corp., the Manager of the
Partnership, including the Principal Executive Officer and the Principal
Financial Officer, of the effectiveness of the design and operation of the
Partnership's disclosure controls and procedures as of the end of the period
covered by this report pursuant to the Securities Exchange Act of 1934. Based
upon the evaluation, the Principal Executive Officer and the Principal Financial
Officer concluded that the Partnership's disclosure controls and procedures were
effective.
There were no significant changes in the Partnership's internal control
over financial reporting during the Partnership's first quarter that have
materially affected, or are likely to materially affect, the Partnership's
internal control over financial reporting.
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 3 - Defaults Upon Senior Securities
During the quarter ended March 31, 2004, the Partnership established a
provision for doubtful accounts of $411,742 for Kmart, Inc., based upon Kmart's
failure to make monthly payments for the quarter on one of the five leases the
Partnership has with the lessee. In current proceedings in the U.S. Bankruptcy
Court, Kmart is attempting to reject the lease. At March 31, 2004, the
non-recourse debt associated with the equipment was $3,398,406 and the related
gross receivable was $3,810,148. The Partnership is monitoring proceedings, as
the lender of the non-recourse debt is contesting the rejection of the lease.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(b) Reports on Form 8-K
None
(c) 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.
May 18, 2004 /s/ Thomas W. Martin
----------------------- ----------------------------------------
Date Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer of the
General Partner of the Registrant)
Exhibit 32.1
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-Q
---------------------
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICON Income Fund
Eight 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-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this quarterly report based on
such evaluation; and
c) 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;
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.
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the Corporate
Manager (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the Partnership ability to record, process, summarize and
report financial information and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
Dated: May 18, 2004
/s/ Beaufort J.B. Clarke
- -----------------------------
Beaufort J. B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
sole General Partner of ICON Income Fund Eight B L.P.
Exhibit 32.2
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-Q
---------------------
I, Thomas W. Martin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICON Income Fund
Eight 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-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this quarterly report based on
such evaluation; and
c) 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;
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.
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the Corporate
Manager (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the Partnership ability to record, process, summarize and
report financial information and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
Dated: May 18, 2004
/s/ Thomas W. Martin
- ----------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
ICON Capital Corp.
sole General Partner of ICON Income Fund Eight B L.P.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
March 31, 2004
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 March 31, 2004 (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 18, 2004
/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, 2004
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 March 31, 2004 (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 18, 2004
/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.