UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2003
--------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 333-67638
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ICON Income Fund Nine, LLC
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(Exact name of registrant as specified in its charter)
Delaware 13-4183234
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
100 Fifth Avenue, New York, New York 10011
(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 Nine, LLC
(A Delaware Limited Liability Company)
Condensed Consolidated Balance Sheets
June 30, December 31,
2003 2002
---- ----
(unaudited)
Assets
Cash and cash equivalents $ 30,612,569 $ 9,456,992
--------------- ----------------
Investment in finance leases
Minimum rents receivable 11,156,558 -
Estimated unguaranteed residual values 1,039,000 -
Initial direct costs, net 299,947 -
Unearned income (2,103,734) -
---------------- ----------------
10,391,771 -
---------------- ----------------
Investment in operating leases
Equipment, at cost 202,645,074 203,025,329
Accumulated depreciation (20,038,454) (7,651,465)
---------------- -----------------
182,606,620 195,373,864
---------------- -----------------
Investment in unconsolidated joint ventures 3,843,492 3,367,129
Due from affiliates 202,267 36,994
Other assets 1,676,344 1,411,417
--------------- ----------------
Total assets $ 229,333,063 $ 209,646,396
=============== ================
Liabilities and Members' Equity
Notes payable - non-recourse $ 146,054,366 $ 156,955,116
Due to Manager - 32,687
Due to Affiliates 102,000 -
Accounts payable and other liabilities 124,459 236,549
Deferred income - 759,569
Minority interest in consolidated joint ventures 3,255,294 3,923,665
--------------- ----------------
Total liabilities 149,536,119 161,907,586
--------------- ----------------
Commitment and Contingencies
Members' equity
Manager (one share outstanding, $1,000 per share
original issue price) (71,732) (26,797)
Additional Members (99,249.505 and 57,929.604
shares outstanding, $1,000 per share original issue price) 79,868,676 47,765,607
--------------- ----------------
Total members' equity 79,796,944 47,738,810
--------------- ----------------
Total liabilities and members' equity $ 229,333,063 $ 209,646,396
=============== ================
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
---- ---- ---- ----
Revenues
Rental income $ 8,608,236 $ 678,451 $ 17,294,597 $ 1,324,920
Finance income 32,279 - 32,279 -
Interest income and other 73,301 22,347 98,568 24,406
Income from investment in unconsolidated
joint ventures 50,446 38,514 86,845 42,009
Loss on sale of equipment (17,776) - (17,776) -
------------- ------------- ------------- -------------
Total revenues 8,746,486 739,312 17,494,513 1,391,335
------------- ------------- ------------- -------------
Expenses
Depreciation and amortization 6,214,218 655,642 12,629,850 874,312
Interest 2,048,894 - 4,160,021 -
Management fee - Manager 411,854 68,974 906,571 85,822
Administrative fee
reimbursement - Manager 164,742 27,586 362,629 34,325
General and administrative 247,700 72,440 357,982 109,416
Minority interest in consolidated
joint ventures 21,453 8,883 40,022 220,798
Amortization of initial direct costs 4,637 - 4,637 -
------------- ------------- ------------- -------------
Total expenses 9,113,498 833,525 18,461,712 1,324,673
------------- ------------- ------------- -------------
Net (loss) income $ (367,012) $ (94,213) $ (967,199) $ 66,662
============= ============= ============= =============
Net (loss) income allocable to:
Managing member $ (3,670) $ (942) $ (9,672) $ 667
Additional members (363,342) (93,271) (957,527) 65,995
------------- ------------- ------------- -------------
$ (367,012) $ (94,213) $ (967,199) $ 66,662
============= ============= ============= =============
Weighted average number of additional
member shares outstanding 96,511 21,865 82,302 15,764
============= ============= ============= =============
Net (loss) income per weighted average
additional member shares $ (3.76) $ (4.27) $ (11.63) $ 4.19
============ ============ ============= =============
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Condensed Consolidated Statement of Changes in Members' Equity
For the Six Months Ended June 30, 2003
(unaudited)
Additional Members Distributions
--------------------------------
Return of Investment Additional Managing
Capital Income Members Member Total
------- ------ ------- ------ -----
(Per weighted average share)
Balance at
January 1, 2003 $ 47,765,607 $ (26,797) $ 47,738,810
Proceeds from issuance of
additional member shares
(41,828.87 shares) 41,828,870 - 41,828,870
Sales and offering expenses (4,799,971) - (4,799,971)
Cash distributions
to members $ 42.42 $ - (3,491,012) (35,263) (3,526,275)
Additional member shares
redeemed (508.969 shares) (477,291) - (477,291)
Net loss (957,527) (9,672) (967,199)
--------------- ------------ --------------
Balance at
June 30, 2003 $ 79,868,676 $ (71,732) $ 79,796,944
============== ============ ==============
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30
(unaudited)
2003 2002
---- ----
Cash flows from operating activities:
Net (loss) income $ (967,199) $ 66,662
------------- -------------
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Depreciation and amortization 12,629,850 874,312
Amortization of initial direct costs 4,637 -
Minority interest in consolidated joint ventures 40,022 220,798
Rental income paid directly to lenders by lessees (15,362,699) -
Interest expense paid directly to lenders by lessees 3,763,913 -
Income from investment in unconsolidated joint ventures (86,845) (42,009)
Loss on sale of equipment 17,776 -
Changes in operating assets and liabilities:
Non-financed receivable 60,989 -
Due from affiliates (165,273) -
Other assets (264,927) (2,221,606)
Due to Manager (32,687) 3,597
Due to Affiliates 102,000 -
Accounts payable and other liabilities (112,090) 79,481
Other - (2,533)
------------- -------------
Total adjustments 594,666 (1,087,960)
------------- -------------
Net cash used in operating activities (372,533) (1,021,298)
------------- -------------
Cash flows from investing activities:
Proceeds from sale of equipment 74,358 -
Investment in operating leases - (7,982,500)
Investment in finance leases (10,457,398) -
Investment in unconsolidated joint ventures (389,518) (3,242,901)
Distribution to minority interest in consolidated joint venture (708,393) -
Investment held in escrow - (10,448,500)
Cash received from escrow - 1,650,000
------------- -------------
Net cash used in investing activities (11,480,951) (20,023,901)
------------- -------------
(continued on next page)
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Condensed Consolidated Statement of Cash Flows - Continued
For the Six Months Ended June 30
(unaudited)
2003 2002
---- ----
Cash flows from financing activities:
Issuance of membership shares,
net of offering expenses 37,028,899 22,120,599
Minority interest contribution - 3,374,431
Payment of non-recourse debt (16,272) -
Redemption of additional members shares (477,291) -
Cash distributions to members (3,526,275) (526,833)
------------- ---------------
Net cash provided by financing activities 33,009,061 24,968,197
------------- ---------------
Net increase in cash and cash equivalents 21,155,577 3,922,998
Cash and cash equivalents at beginning of the period 9,456,992 804,640
------------- --------------
Cash and cash equivalents at end of the period $ 30,612,569 $ 4,727,638
============= ==============
(continued on next page)
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Condensed Consolidated Statements of Cash Flows - Continued
Supplemental Disclosure of Cash Flow Information
- ------------------------------------------------
For the six months ended June 30, 2003, non-cash activities included the
following:
2003
----
Rental income assigned operating lease receivables $ 15,362,699
Deferred income on operating lease receivables paid
directly to lenders by lessees (759,569)
Principal and interest paid directly to lenders by lessees (14,603,130)
----------------
$ -
================
Debt assumed by lessee upon lease termination $ 45,261
================
Interest expense:
Interest paid directly to lenders by lessees
pursuant to non-recourse financings $ 3,763,913
Interest acretion on non-recourse financing 339,729
Other interest paid 56,379
----------------
Total interest expense $ 4,160,021
================
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements
June 30, 2003
(unaudited)
1. Organization
ICON Income Fund Nine, LLC (the "LLC") was formed on July 11, 2001,
pursuant to the Amended and Restated Operating Agreement of ICON Income Fund
Nine, LLC ("Operating Agreement"). The LLC is a Delaware limited liability
company with an initial capitalization of $1,000 by ICON Capital Corp. (the
"Manager") for one member share. It was formed to acquire various types of
equipment subject to leases with third parties and to make related investments
in accordance with the provisions of the Operating Agreement. The LLC's maximum
offering was $100,000,000. The LLC commenced business operations on December 18,
2001, with the admission of members representing 1,249.91 additional members'
shares at $1,000 per share, aggregating $1,249,910 of capital contributions.
During the year ended December 31, 2002, additional members representing
56,679.694 additional shares were admitted into the LLC with aggregate gross
proceeds of $56,679,694, bringing the total admissions at December 31, 2002 to
57,929.604 shares aggregating $57,929,604 in capital contributions through
December 31, 2002 (exclusive of the Manager's interest as a member). During the
six months ending June 30, 2003, 41,828.87 additional shares were admitted into
the LLC with aggregate proceeds of $41,828,870 in capital contributions, and
508.969 shares were redeemed bringing the total additional member shares at June
30, 2003 to 99,249.505 shares aggregating $99,249,505 in capital contributions.
The Manager of the LLC is ICON Capital Corp. (the "Manager"), a Connecticut
Corporation. The Manager manages and controls the business affairs of the LLC's
equipment, leases and financing transactions under a management agreement with
the LLC.
2. Basis of Presentation
The financial statements of the LLC 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 consolidated financial statements and notes included in the
LLC's 2002 Annual Report on Form 10-K. Certain 2002 amounts have been
reclassified to conform to the 2003 presentation.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements - Continued
3. Related Party Transactions
Fees and expenses paid or accrued by the LLC to the Manager or its
affiliates directly or on behalf of joint ventures in which the company has an
interest were as follows for the six months ended June 30, 2003 and 2002 are as
follows:
2003 2002
---- ----
Organization and offering expenses $ 626,083 $ 856,956 Charged to members equity
Underwriting commissions 834,777 510,439 Charged to members equity
Acquisition fees - 232,500 Capitalized as part of investment
in operating leases
Acquisition fees 304,584 - Capitalized as part of investment
in finance leases
Acquisition fees 81,863 1,117,901 Capitalized as part of investment
in unconsolidated joint ventures
Management fees 906,571 85,822 Charged to operations
Administrative expense reimbursements 362,629 34,325 Charged to operations
-------------- --------------
$ 3,116,507 $ 2,837,943
============== ==============
As of June 30, 2003, the LLC paid $331,245 to the Manager for acquisition
fees on consolidated transactions for which binding agreements exist that are
expected to be consummated during the third quarter 2003. These amounts are not
included in the table above. These amounts are recorded under the caption Other
Assets on the accompanying condensed balance sheet.
4. Investment in Finance Leases
During the quarter ended June 30, 2003, the LLC invested $10,457,398
(including acquisition fees) in equipment subject to leases with third parties.
The equipment consists of a Double Kraft Paper Forming Tubing Unit, on lease to
Wildwood Industries, Inc.; nine pieces of automated manufacturing equipment on
lease to Metaldyne Corporation; and silicon wafer production devices, on lease
to Advanced Micro Devices, Inc. The equipment was acquired for $1,350,000,
$2,411,555 and $6,391,258 respectively, in cash. The leases mature between
February 2007 and December 2009.
5. Consolidated Joint Ventures and Investments in Unconsolidated Joint
Ventures
The LLC and an affiliate, ICON Income Fund Eight B L.P. ("Fund Eight B")
formed five ventures discussed below for the purpose of acquiring and managing
various assets. The LLC and Fund Eight B have identical investment objectives
and participate on the same terms and conditions. The LLC has a right of first
refusal to purchase the equipment, on a pro-rata basis, if Fund Eight B desires
to sell its interests in the equipment.
Consolidated Ventures
The three ventures described below are majority owned and are consolidated
with the LLC. The LLC's 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 Fund Eight B in the related ventures, have been
reflected as minority interests in consolidated joint ventures in the
accompanying condensed consolidated balance sheets and statements of operations.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements - Continued
ICON/Kenilworth LLC
-------------------
On September 30, 2002, the LLC and Fund Eight B formed ICON/Kenilworth LCC
for the purpose of acquiring a natural gas-fired 25 mw 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 Manager. The outstanding debt at June
30, 2003 was $4,575,697.
The LLC and Fund Eight B have ownership interests of 95% and 5%,
respectively.
ICON Aircraft 46835 LLC
-----------------------
In 2002, the LLC and Fund Eight B formed ICON Aircraft 46835 LLC for the
purpose of acquiring an investment in a McDonnell Douglas DC-10-30F aircraft
leased to Federal Express through March 2007. The aircraft was acquired for a
purchase price of $25,291,593, which was funded with cash of $3,000,000 and
non-recourse debt of $22,291,593. The rents and the aircraft have been assigned
to the non-recourse lender. The lease is scheduled to expire in March 2007, at
which time the balance of the non-recourse debt outstanding is scheduled to be
approximately $2,708,000. At June 30, 2003, the outstanding balance was
$20,018,802. In addition, there was a total of $758,748 in acquisition fees paid
to the Manager. The LLC and Fund Eight B have ownership interests of 85% and
15%, respectively.
ICON SPK 2023-A, LLC
--------------------
In the quarter ended March 31, 2002, the LLC and Fund Eight B, formed ICON
SPK 2023-A, LLC for the purpose of acquiring a portfolio of leases for an
aggregate purchase price of $7,750,000 plus $232,500 of acquisition fees paid to
the Manager. The purchase was funded with cash. The leases expire on various
dates commencing April 2003 through April 2008. The LLC and Fund Eight B have
ownership interests of 51% and 49% respectively. During the quarter ended June
30, 2003, the venture sold equipment realizing a gain of $14,470.
Investment in Unconsolidated Joint Ventures
The joint ventures described below are 50% and 10% owned respectively, and
are accounted for following the equity method.
ICON Aircraft 126, LLC
----------------------
In early 2002, the LLC and Fund Eight B 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 as of March 4, 2002
for a total purchase price of $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 June 30, 2003, there was $65,188,372 outstanding under the
non-recourse debt. The LLC and Fund Eight B each own a 50% interest in ICON 126.
ICON 126 consolidates the financial position and results of operations of D.A.L.
in its consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements - Continued
The LLC's original investment in ICON Aircraft 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 Aircraft 126
as of June 30, 2003 is summarized below:
Six Months Ended Six Months Ended
June 30, 2003 June 30, 2002
------------- -------------
Net income $ 198,598 $ 84,017
============= ==============
LLC's share of net income $ 99,299 $ 42,009
============= ==============
ICON Aircraft 47820 LLC
-----------------------
In 2003, the LLC and Fund Eight B formed ICON Aircraft 47820 LLC ("ICON
47820") for the purpose of acquiring an investment in a McDonnell Douglas
DC-10-30F 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 lease is scheduled to expire in
March 2007. As of June 30, 2003, there was $21,564,187 outstanding under the
non-recourse debt.
The LLC and Fund Eight B own a 10% and 90% interest, respectively, in ICON
47820. Fund Eight B consolidates the financial position and results of
operations of ICON Aircraft 47820 in its consolidated financial statements.
The LLC's original investment in ICON 47820 was recorded at a cost of
$389,518, inclusive of related acquisition fees of $81,863. Information as to
the unaudited results of operations of ICON 47820 as of June 30, 2003 is
summarized below:
Six Months Ended
June 30, 2003
-------------
Net loss $ 124,544
=============
LLC's share of net loss $ 12,454
=============
5. Investments In Wholly-Owned Subsidiaries
The following subsidiaries' assets, liabilities, income and expenses are
consolidated with the LLC's condensed consolidated balance sheets and statements
of operations.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements - Continued
ICON Aircraft 128, LLC
- ----------------------
In the quarter ended September 30, 2002, the LLC formed ICON Aircraft 128,
LLC ("ICON Aircraft 128") for the purpose of acquiring 53% (with options to
acquire the remaining 47%) of the outstanding shares of HXO Aircraft Leasing
Limited ("HXO"), an unaffiliated Cayman Islands registered company, which owns,
through an Owner Trust, an Airbus A340-300ER aircraft which is on lease to
Cathay Pacific through June 2006. The stock was acquired for $2,250,000 in cash.
The LLC also paid $2,041,243 in acquisition fees to the Manager.
Subsequent to September 30, 2002, ICON Aircraft 128 exercised its options
and acquired the remaining 47% interest from HXO for $2,028,000 in cash and
incurred additional acquisition fees of $30,840 paid to the Manager. As of June
30, 2003, ICON Aircraft 128 continues to own 100% of the investment.
The aircraft owned by HXO is subject to non-recourse debt to unaffiliated
lenders. As of June 30, 2003, there was $60,059,449 outstanding under the
non-recourse debt. ICON Aircraft 128 consolidates the financial position and
results of operations of HXO in its consolidated financial statements.
ICON Railcar I LLC
-----------------
In November 2002, the LLC formed ICON Railcar I LLC for the purpose of
acquiring a total of 434 coal gondola railcars for a total purchase price of
$5,667,220, which was funded with cash of $1,227,886 and non-recourse debt of
$4,439,334 subject to two separate leases as follows:
(i) 324 railcars were leased to Texas Genco LP which were acquired for a
purchase price of $4,424,220, which was funded with cash of $1,101,429
and non-recourse debt of $3,322,791. The rents and railcars have been
assigned to the non-recourse lender. The lease is scheduled to expire
in March 2007 with a remarketing period which extends to June 2007 at
which time the balance of the non-recourse debt is scheduled to be
approximately $1,603,000. In addition, there was a total of $132,727
in acquisition fees paid to the Manager. As of June 30, 2003, there
was $3,135,286 outstanding under the non-recourse debt. During the
quarter ended June 30, 2003, the LLC sold six of the railcars to the
lessee based upon an early termination provision due to damages. The
LLC recognized a loss of $32,246.
(ii) 110 railcars were leased to Trinity Rail Management, Inc., which were
acquired for a purchase price of $1,243,000, which was funded with
cash of $126,457 and non-recourse debt of $1,116,543. The rents and
railcars have been assigned to the non-recourse lender. The lease is
scheduled to expire in April 2010 with a remarketing period which
extends to July 2010 at which time the balance of the non-recourse
debt is scheduled to be approximately $387,000. In addition, there was
a total of $37,290 in acquisition fees paid to the Manager. As of June
30, 2003, there was $1,080,949 outstanding under the non-recourse
debt. Subsequent to the acquisition, the LLC was refunded $14,630 in
cash, which was recorded as a reduction to the acquisition cost of the
equipment purchased.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements - Continued
ICON Trianon LLC, ICON Trinidad LLC, and ICON Tancred LLC
---------------------------------------------------------
During the third quarter of 2002, the LLC formed ICON Trianon LLC, ICON
Trinidad LLC and ICON Tancred LLC (collectively known as "Wilhelmsen") for the
purpose of acquiring three car and truck carrying vessels, for $9,690,060 in
cash and the assumption of non-recourse debt of $64,329,764. The vessels are
subject to lease with Wilhelmsen Lines Shipowning, a wholly-owned subsidiary of
Wallenius Wilhelmsen Lines ASA, and the leases expire in December 2008. In
addition, the LLC paid $2,220,595 in acquisition fees to the Manager. As of June
30, 2003, there was $57,184,185 outstanding under the non-recourse debt.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2003
Item 2. Manager's Discussion and Analysis of Financial Condition and Results of
Operations
Forward-Looking Information - The following discussion and analysis should
be read in conjunction with the audited financial statements 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 LLC 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 June 30, 2003 and 2002
Revenues for the quarter ended June 30, 2003 (the "2003 Quarter") were
$8,746,486 representing an increase of $8,007,174 over the quarter ended June
30, 2002 (the "2002 Quarter"). The increase in revenue resulted primarily from
the additional investments in three joint ventures and three subsidiaries
subsequent to the 2002 Quarter as compared to a total of two joint ventures at
the end of the 2002 Quarter. Rental income, interest income and joint venture
income all increased due to these additional investments in operating leases
made subsequent to the 2002 Quarter. In addition, the LLC also invested in three
finance leases, generating finance income of $32,279.
Expenses for the 2003 Quarter were $9,113,498 representing an increase of
$8,279,973 over the 2002 Quarter. The increase resulted from the additional
expenses directly related to the new acquisitions subsequent to the 2002 Quarter
as compared to the two joint ventures in the 2002 Quarter. The increase in the
size of the LLC's lease portfolio and overall growth in size of the operations
of the LLC from the 2002 Quarter is consistent with the LLC's increasing level
of operations.
Depreciation and amortization expense increased by $5,558,576 due to the
additional investments in operating leases made subsequent to the 2002 Quarter.
Interest expense increased by $2,048,894 due to the additional debt used to
acquire investments in operating leases subsequent to the 2002 Quarter.
Management fee - Manager increased by $342,880 and administrative fee
reimbursement - Manager increased by $137,156 in the 2003 Quarter as compared to
the 2002 Quarter. The increase in management fees was consistent with increases
in rentals (including operating leases and through joint ventures) on which such
fees are dependent. The increase in administrative fees was consistent with the
increase in operating activities of the LLC. Minority interest in consolidated
joint ventures increased by $12,570, and general and administrative expenses
increased by $175,260 in the 2003 Quarter as compared to the 2002 Quarter.
Net loss for the 2003 Quarter and the 2002 Quarter was $367,012 and
$94,213, respectively. The net loss per weighted average additional member
shares outstanding for the 2003 Quarter and the 2002 Quarter was $3.76 and
$4.27, respectively.
Results of Operations for the Six Months Ended June 30, 2003 and 2002
Revenues for the six months ended June 30, 2003 (the "2003 Period") were
$17,494,513 representing an increase of $16,103,178 over the six months ended
June 30, 2002 (the "2002 Period"). The increase in revenue resulted primarily
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2003
from the additional investments in three joint ventures and three subsidiaries.
Rental income, interest income and joint venture income all increased due to
these additional investments in operating leases made subsequent to the 2002
Period. The LLC also invested in three finance leases in the 2003 Period
generating finance income.
Expenses for the 2003 Period were $18,461,712 representing an increase of
$17,137,039 over the 2002 Period. The increase resulted from the additional
expenses directly related to the new acquisitions made subsequent to the 2002
Period. The increase in the size of the LLC's lease portfolio and overall growth
in size of the operations of the LLC from the 2002 Period is consistent with the
LLC's increasing level of operations.
Depreciation and amortization expense increased by $11,755,538 due to the
additional investments in operating leases made subsequent to the 2002 Period.
Interest expense increased by $4,160,021 due to the additional debt used to
acquire investments in operating leases made subsequent to the 2002 Period.
Management fee - Manager increased by $820,749 and administrative fee
reimbursement - Manager increased by $328,304 in the 2003 Period as compared to
the 2002 Period. The increase in management fees was consistent with increases
in rentals (including operating leases and through joint ventures) on which such
fees are dependent. The increase in administrative fees was consistent with the
increase in operating activities of the LLC. Minority interest in consolidated
joint ventures decreased by $180,776, and general and administrative expenses
increased by $248,566 in the 2003 Quarter as compared to the 2002 Period.
Minority interest expense decreased due to losses and reduced income experienced
by the joint ventures.
Net (loss) income for the 2003 Period and the 2002 Period was $(967,199)
and $66,662, respectively. The net (loss) income per weighted average additional
member shares outstanding for the 2003 Period and the 2002 Period was $(11.63)
and $4.19, respectively.
Liquidity and Capital Resources
On April 30, 2003, the LLC had its final closing with a cumulative total of
99,743.474 units admitted totaling $99,743,474.23 in capital contributions.
Cumulative sales and offering expenses incurred in connection with these capital
contributions was $12,212,092.
As cash is realized from operations, the LLC 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.
The LLC's primary source of funds for the six months ended June 30, 2003
was capital contributions, net of offering expenses, of $41,828,870. Cash was
utilized, in part, for investment in finance leases of $10,457,398 by cash
distributions to members of $3,526,275, distributions to the minority interest
holder of $708,393 and investment in a joint venture of $389,518. Further, the
LLC intends to reinvest cash generated from operations and sales in excess of
its distribution objectives and reserve requirements in additional leased
equipment.
During the quarter ended June 30, 2002, certain affiliated funds entered
into a $17,500,000 joint and several line of credit agreement dated as of May
30, 2002. They were ICON Income Fund Eight A L.P., ICON Income Fund Eight B L.P.
and ICON Cash Flow Partners L.P. Seven (the "Initial Funds"), with June 30, 2003
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Comerica Bank as lender. Under the terms of the agreement, the Initial Funds may
borrow at a rate equal to the Comerica Bank base rate plus 1% (together, 5.00%
at June 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 the LLC, collectively along with the
Initial Funds (the "Funds"), as a borrower sharing the $17,500,000 joint line of
credit agreement. The Funds have entered into a Contribution Agreement, dated as
of May 30, 2002, as amended December 12, 2002, pursuant to which the Funds have
agreed to restrictions on the amount and the terms of their respective
borrowings under the line of credit in order to minimize the risk that a Fund
would not be able to repay its allocable portion of the outstanding revolving
loan obligation at any time, including restrictions on any Fund borrowing in
excess of the lesser of (A) an amount each Fund could reasonably expect to repay
in one year out of its projected free cash flow, or (B) the greater of (i) the
Borrowing Base (as defined in the line of credit agreement) as applied to such
Fund, and (ii) 50% of the net worth of such Fund. The Contribution Agreement
provides that, in the event a Fund pays an amount under the agreement in excess
of its allocable share of the obligation under the agreement whether by reason
of an Event of Default or otherwise, the other Funds will immediately make a
contribution payment to such Fund in such amount that the aggregate amount paid
by each Fund reflects its allocable share of the aggregate obligations under the
agreement. The Funds' obligations to each other under the Contribution Agreement
are collateralized by a subordinate lien on the assets of each participating
Fund. The line of credit which had expired on May 31, 2003 is in the process of
being extended for twelve additional months. The LLC violated a financial
covenant at December 31, 2002 creating an Event of Default. The bank granted a
waiver to the LLC with respect to this Event of Default. As of June 30, 2003,
there were no borrowings by the LLC under the line. Aggregate borrowing by all
Funds under the line of credit agreement aggregated $10,199,986 on June 30,
2003.
Cash distributions to additional members for the 2003 Period and 2002
Period, which were paid monthly, totaled $3,491,012 and $521,564, respectively.
As of June 30, 2003, 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 and additional borrowings, the
LLC 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.
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 LLC is exposed to certain market risks, including changes in interest
rates and the demand for equipment (and the related residuals) owned by the LLC
and its investee. Except as described below, the LLC believes its exposure to
other market risks are insignificant to both its financial position and results
of operations.
The LLC manages its interest rate risk by obtaining fixed rate debt either
directly or through its joint ventures. The fixed rate debt service obligations
are matched with fixed rate lease receivable stream generated by the leases.
The LLC manages its exposure to equipment and residual risk by monitoring
the market and maximizing remarketing proceeds received through re-lease or sale
of equipment.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2003
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
Manager of the LLC, have evaluated the disclosure controls and procedures of the
LLC as of the quarter ended June 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 LLC that are designed to ensure that
information required to be disclosed by the LLC 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 the Manager. Based upon their evaluation, Messrs. Clarke
and Martin have concluded that the LLC's disclosure controls and procedures
provide reasonable assurance that the information required to be disclosed by
the LLC in this report is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms applicable to the
preparation of this report.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
PART II - OTHER INFORMATION
- ---------------------------
Item 1 - Legal Proceedings
- --------------------------
The LLC, from time-to-time, in the ordinary course of business, commences
legal actions when necessary to protect or enforce the rights of the LLC. We are
not a defendant party to any litigation and are not aware of any pending or
threatened litigation against the LLC.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
99.1 Certification of Chairman and Chief Executive Officer.
99.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer.
99.3 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.
99.4 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 Nine, LLC
(A Delaware Limited Liability Company)
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 Nine, LLC
File No. 333-67638(Registrant)
By its Manager,
ICON Capital Corp.
August 13, 2003 /s/ Thomas W. Martin
- ------------------------- ----------------------------------------------
Date Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
ICON Capital Corp.
Manager of ICON Income Fund Nine, LLC
Certifications - 10-Q
EXHIBIT 99.1
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this quarterly report of ICON Income Fund Nine, LLC;
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 LLC'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 LLC,
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 LLC'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 LLC's internal control over
financial reporting that occurred during the LLC's most recent fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, the LLC's internal control over financial
reporting; and
5. The LLC's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
LLC's auditors and the audit committee of the LLC'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 LLC'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 LLC's internal control
over financial reporting.
Dated: August 13, 2003
/s/ Beaufort J.B. Clarke
- -----------------------------
Beaufort J. B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
Manager of ICON Income Fund Nine, LLC
Certifications - 10-Q
EXHIBIT 99.2
I, Thomas W. Martin, certify that:
1. I have reviewed this quarterly report of ICON Income Fund Nine, LLC;
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 LLC as of, and for, the periods presented in this report;
4. The LLC'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 LLC 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 LLC,
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 LLC'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 LLC's internal control over
financial reporting that occurred during the LLC's most recent fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, the LLC's internal control over financial
reporting; and
5. The LLC's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
LLC's auditors and the audit committee of the LLC'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 LLC'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 LLC's internal control
over financial reporting.
Dated: August 13, 2003
/s/ Thomas W. Martin
- ----------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
ICON Capital Corp.
Manager of ICON Income Fund Nine, LLC
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2003
EXHIBIT 99.3
I, Beaufort J.B. Clarke, Chairman and Chief Executive Officer of ICON
Capital Corp, the Manager of ICON Income Fund Nine, LLC, 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 June 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 Nine, LLC.
Dated: August 13, 2003
/s/ Beaufort J.B. Clarke
--------------------------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
Manager of ICON Income Fund Nine, LLC
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2003
EXHIBIT 99.4
I, Thomas W. Martin, Executive Vice President (Principal Financial and
Accounting Officer) of ICON Capital Corp, the Manager of ICON Income Fund Nine,
LLC, 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 June 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 Nine, LLC.
Dated: August 13, 2003
/s/ Thomas W. Martin
--------------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
ICON Capital Corp.
Manager of ICON Income Fund Nine, LLC