Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2003
--------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 333-67638
----------------------------------------------------------
ICON Income Fund Nine, LLC
(Exact name of registrant as specified in its charter)
Delaware 13-4183234
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
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
September 30, December 31,
2003 2002
---- ----
(unaudited)
Assets
------
Cash and cash equivalents $ 19,963,564 $ 9,456,992
------------- --------------
Investment in finance leases
Minimum rents receivable 18,091,501 -
Estimated unguaranteed residual values 1,693,570 -
Initial direct costs, net 457,441 -
Unearned income (3,847,171) -
-------------- --------------
16,395,341 -
-------------- --------------
Investment in operating leases
Equipment, at cost 203,508,514 203,025,329
Accumulated depreciation (25,274,142) (7,651,465)
------------- --------------
178,234,372 195,373,864
============= ==============
Investment in unconsolidated joint ventures 3,891,815 3,367,129
Due from affiliates 243,215 36,994
Other assets 2,174,026 1,411,417
------------- --------------
Total assets $ 220,902,333 $ 209,646,396
============= ==============
Liabilities and Members' Equity
-------------------------------
Notes payable - non-recourse $ 139,104,459 $ 156,955,116
Due to Manager - 32,687
Due to Affiliates 108,678 -
Accounts payable and other liabilities 590,557 236,549
Deferred income 843,898 759,569
Minority interest in consolidated joint ventures 2,993,843 3,923,665
------------- --------------
Total liabilities 143,641,435 161,907,586
------------- --------------
Commitment and Contingencies
Members' equity
Manager (one share outstanding, $1,000 per share
original issue price) (95,799) (26,797)
Additional Members (99,099.230 and 57,929.604
shares outstanding, $1,000 per share original issue price) 77,356,697 47,765,607
------------- --------------
Total members' equity 77,260,898 47,738,810
------------- --------------
Total liabilities and members' equity $ 220,902,333 $ 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)
Three Months Nine Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
---- ---- ---- ----
Revenues
Rental income $ 8,503,755 $ 2,827,990 $ 25,798,352 $ 4,152,910
Finance income 329,321 - 361,600 -
Interest income and other 69,227 15,555 167,795 39,961
Income from investment in unconsolidated
joint ventures 48,323 35,089 135,168 77,098
Net loss on sale of equipment (75) - (17,851) -
------------- ------------- ------------- -------------
Total revenues 8,950,551 2,878,634 26,445,064 4,269,969
------------- ------------- ------------- -------------
Expenses
Depreciation and amortization 6,033,379 1,799,993 18,663,229 2,674,305
Interest 1,986,386 1,008,254 6,146,407 1,008,254
Management fee - Manager 542,547 173,223 1,449,118 259,045
Administrative fee
reimbursement - Manager 217,018 69,289 579,647 103,614
General and administrative 221,086 28,276 579,068 137,692
Minority interest in consolidated
joint ventures 61,153 9,547 101,175 230,345
Amortization of initial direct costs 42,993 - 47,630 -
------------- -------------- ------------- -------------
Total expenses 9,104,562 3,088,582 27,566,274 4,413,255
------------- -------------- ------------- -------------
Net loss $ (154,011) $ (209,948) $ (1,121,210) $ (143,286)
============= ============= ============= =============
Net loss allocable to:
Managing member $ (1,540) $ (2,099) $ (11,212) $ (1,433)
Additional members (152,471) (207,849) (1,109,998) (141,853)
============= ============= ============= ==============
$ (154,011) $ (209,948) $ (1,121,210) $ (143,286)
============= ============= ============= ==============
Weighted average number of additional
member shares outstanding 99,216 34,650 87,774 22,059
============= ============= ============= ==============
Net loss per weighted average
additional member shares $ (1.54) $ (6.00) $ (12.65) $ (6.43)
============= ============ ============= ==============
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 Nine Months Ended September 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
(41,828.870 shares) 41,828,870 - 41,828,870
Sales and offering expenses (4,799,971) - (4,799,971)
Cash distributions
to members $ 65.18 - (5,721,208) (57,790) (5,778,998)
Additional members' shares
redeemed (659.244 shares) (606,603) - (606,603)
Net loss (1,109,998) (11,212) (1,121,210)
--------------- ------------ --------------
Balance at
September 30, 2003 $ 77,356,697 $ (95,799) $ 77,260,898
=============== ============ ==============
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30,
(unaudited)
2003 2002
---- ----
Cash flows from operating activities:
Net loss $ (1,121,210) $ (143,286)
------------- -------------
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 18,663,229 2,674,305
Amortization of initial direct costs 47,630 -
Interest expense on non-recourse financing
paid directly by lessees 6,055,304 993,518
Minority interest in consolidated joint ventures 101,175 230,345
Rental income paid directly to lenders by lessees (24,017,855) (2,149,539)
Income from investment in unconsolidated joint ventures (135,168) (77,098)
Net loss on sale of equipment 17,851 -
Changes in operating assets and liabilities:
Non-financed receivable 946,400 -
Due from affiliates (206,221) (118,423)
Other assets (762,609) (569,310)
Due to Manager (32,687) 1,485,948
Due to Affiliates 108,678 -
Accounts payable and other liabilities 354,008 760,096
Deferred income 295,327 630,461
Other - (2,533)
---------------- ---------------
Total adjustments 1,435,062 3,857,770
---------------- ---------------
Net cash provided by operating activities 313,852 3,714,484
---------------- ---------------
Cash flows from investing activities:
Proceeds from sale of equipment 329,409 -
Investment in operating leases (2,001,011) (33,687,932)
Investment in finance leases (17,340,765) -
Investment in unconsolidated joint ventures (389,518) (3,242,901)
Cash received from escrow - 1,650,000
---------------- --------------
Net cash used in investing activities (19,401,885) (35,280,833)
---------------- --------------
(continued on next page)
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Condensed Consolidated Statement of Cash Flows - Continued
Nine Months Ended September 30,
(unaudited)
2003 2002
---- ----
Cash flows from financing activities:
Issuance of membership shares,
net of offering expenses 37,028,899 31,045,559
Minority interest contribution - 3,445,703
Distribution to minority interest in
consolidated joint venture (1,032,421) -
Repayment of non-recourse debt (16,272) -
Redemption of additional members shares (606,603) -
Cash distributions to members (5,778,998) (1,229,568)
------------- -------------
Net cash provided by financing activities 29,594,605 33,261,694
------------- -------------
Net increase in cash and cash equivalents 10,506,572 1,695,345
Cash and cash equivalents at beginning of the period 9,456,992 804,640
------------ ------------
Cash and cash equivalents at end of the period $ 19,963,564 $ 2,499,985
============ ============
(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 nine months ended September 30, 2003, non-cash activities included the
following:
2003 2002
---- ----
Rental income assigned to operating lease receivables $ 24,017,855 $ 2,149,539
Deferred income on operating lease receivables paid
directly to lenders by lessees (210,998) -
Principal and interest paid directly to lenders by lessees (23,806,857) (2,149,539)
------------- -------------
$ - $ -
============= =============
Fair value of equipment purchased for debt - $ 136,395,234
Non-recourse notes payable assumed in purchase price - (136,395,234)
------------- -------------
$ - $ -
============= =============
Debt assumed by lessee upon lease termination $ 82,832 $ -
============= =============
Interest paid directly to lenders by lessees
pursuant to non-recourse financings $ 6,055,304 $ 993,518
Other interest paid 91,103 14,736
------------- -------------
Total interest expense $ 6,146,407 $ 1,008,254
============= =============
See accompanying notes to condensed consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements
September 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 additional 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 nine months ending September 30, 2003, 41,828.87
additional shares were admitted into the LLC with aggregate proceeds of
$41,828,870 in capital contributions, and 659.244 shares were redeemed bringing
the total additional member shares at September 30, 2003 to 99,099.23 shares
aggregating $99,099,230 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 condensed consolidated 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 nine months ended September 30, 2003 and 2002
are as follows:
2003 2002
---- ----
Organization and offering expenses $ 626,083 $ 1,116,573 Charged to members equity
Underwriting commissions 834,777 714,679 Charged to members equity
Acquisition fees 58,282 4,983,005 Capitalized as part of investment
in operating leases
Acquisition fees 505,070 - 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 1,449,118 259,045 Charged to operations
Administrative expense reimbursements 579,647 103,614 Charged to operations
----------- -----------
$ 4,134,840 $ 8,294,817
=========== ===========
As of September 30, 2003, the LLC paid $891,247 to the Manager for
acquisition fees on consolidated transactions for which binding agreements exist
that are expected to be consummated during the fourth 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 and Operating Leases
During the quarter ended September 30, 2003, the LLC invested $8,884,378
(including acquisition fees) in equipment subject to leases with third parties.
The equipment consists of a Double Kraft Paper Forming Tubing Unit (second of
its kind on lease), and a High End Paper Converting Line, both on lease to
Wildwood Industries, Inc. This equipment was acquired for $2,185,660 in cash. In
addition, the LLC acquired additional semiconductor testing devices which are on
lease to Advance Micro Devices, Inc. for $4,697,707 in cash as well as fifty
Great Dane Trailers with Carrier Ultra Refrigeration units, which are on lease
to Conwell Corporation for $2,001,011. The leases expire between April 2004 and
April 2010, respectively. During the quarter ended June 30, 2003, the LLC had
invested $10,457,398 (including acquisition fees) in equipment subject to leases
with third parties.
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
September 30, 2003 was $3,757,037. 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 September 30, 2003, the outstanding balance was
$17,510,878. 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
--------------------
During 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 through April 2008. The LLC and Fund Eight B have ownership interests of
51% and 49% respectively. During the quarter ended September 30, 2003, the
venture sold equipment realizing a gain of $24,730.
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 September 30, 2003, there was $64,427,624 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 September 30, 2003 is summarized below:
Nine Months Ended Nine Months Ended
September 30, 2003 September 30, 2002
------------------ ------------------
Net income $ 290,362 $ 154,196
=========== ===========
LLC's share of net income $ 145,181 $ 77,098
=========== ===========
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 September 30, 2003, there was $18,862,365 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 September 30, 2003 is
summarized below:
Nine Months Ended
September 30, 2003
------------------
Net loss $ (100,136)
============
LLC's share of net loss $ (10,013)
============
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
September 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 September 30, 2003, there was $58,833,505 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 $3,172,213. 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 September 30, 2003, there was $3,172,213
outstanding under the non-recourse debt. During the quarter ended September
30, 2003, the LLC sold five of the railcars to the lessee based upon an
early termination provision due to damages. The LLC recognized a loss of
$24,805.
(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 September 30, 2003, there was $1,062,587
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
September 30, 2003, there was $54,768,239 outstanding under the non-recourse
debt.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
September 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 September 30, 2003 and 2002
Revenues for the quarter ended September 30, 2003 (the "2003 Quarter") were
$8,950,551 representing an increase of $6,071,917 over the quarter ended
September 30, 2002 (the "2002 Quarter"). The increase in revenue resulted
primarily from the additional investments in joint ventures, subsidiaries and
leases subsequent to the 2002 Quarter. Rental income, interest income and joint
venture income all increased due to these additional investments made subsequent
to the 2002 Quarter.
Expenses for the 2003 Quarter were $9,104,562 representing an increase of
$6,015,980 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 $4,233,386 due to the
additional investments in operating leases made subsequent to the 2002 Quarter.
Interest expense increased by $978,132 due to the additional debt used to
acquire investments in operating leases subsequent to the 2002 Quarter.
Management fee - Manager increased by $369,324 and administrative fee
reimbursement - Manager increased by $147,729 in the 2003 Quarter as compared to
the 2002 Quarter. The increase in management fees was consistent with increases
in rentals (including financing leases, 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 $51,606, and general and
administrative expenses increased by $192,810 in the 2003 Quarter as compared to
the 2002 Quarter.
Net loss for the 2003 Quarter and the 2002 Quarter was $154,011 and
$209,948, respectively. The net loss per weighted average additional member
shares outstanding for the 2003 Quarter and the 2002 Quarter was $1.54 and
$6.00, respectively.
Results of Operations for the Nine Months Ended September 30, 2003 and 2002
Revenues for the nine months ended September 30, 2003 (the "2003 Period")
were $26,445,064 representing an increase of $22,175,095 over the nine months
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
September 30, 2003
ended September 30, 2002 (the "2002 Period"). The increase in revenue resulted
primarily from the additional investments in joint ventures subsidiaries and
leases. Rental income, interest income and joint venture income all increased
due to these additional investments in operating leases made subsequent to the
2002 Period.
Expenses for the 2003 Period were $27,566,274 representing an increase of
$23,153,019 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 $15,988,924 due to the
additional investments in operating leases made subsequent to the 2002 Period.
Interest expense increased by $5,138,153 due to the additional debt used to
acquire investments in operating leases made subsequent to the 2002 Period.
Management fee - Manager increased by $1,190,073 and administrative fee
reimbursement - Manager increased by $476,033 in the 2003 Period as compared to
the 2002 Period. The increase in management fees was consistent with increases
in rentals (including financing leases, 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 $129,170, and general and
administrative expenses increased by $441,376 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 for the 2003 Period and the 2002 Period was $1,121,210 and
$143,286, respectively. The net loss per weighted average additional member
shares outstanding for the 2003 Period and the 2002 Period was $12.65 and $6.43,
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 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 nine months ended September 30,
2003 was capital contributions, net of offering expenses, of $37,028,899 and
proceeds from the sale of equipment of $329,409. Cash was utilized, in part, for
investment in finance leases of $17,340,765, an operating lease of $2,001,011,
by cash distributions to members of $5,778,998, distributions to the minority
interest holder of $1,032,421 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.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
September 30, 2003
and ICON Cash Flow Partners L.P. Seven (the "Initial Funds"), with 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 September
30, 2003) and all borrowings are to be jointly and severally collateralized by
the present values of rents receivable and equipment owned by all of the Initial
Funds sharing in the joint line of credit. On December 12, 2002, the agreement
was amended to admit 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
was extended for twelve additional months expiring May 31, 2004. 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 September 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 September 30, 2003.
Cash distributions to additional members for the 2003 Period and 2002
Period, which were paid monthly, totaled $5,721,208 and $1,217,273,
respectively.
As of September 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)
September 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 September 30, 2003. As used herein, the term
"disclosure controls and procedures" has the meaning given to the term by Rule
13a-14 under the Securities Exchange Act of 1934, as amended ("Exchange Act"),
and includes the controls and other procedures of the 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
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 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.
November 14, 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 32.1
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: November 14, 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 32.2
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: November 14, 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)
September 30, 2003
EXHIBIT 33.1
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 September 30, 2003
(the "Periodic Report") which this statement accompanies fully complies
with the requirements of Section 13(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78m) and
(2) information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of
ICON Income Fund Nine, LLC.
Dated: November 14, 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)
September 30, 2003
EXHIBIT 33.2
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 September 30, 2003
(the "Periodic Report") which this statement accompanies fully complies
with the requirements of Section 13(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78m) and
(2) information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of
ICON Income Fund Nine, LLC.
Dated: November 14, 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