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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2004
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the transition period from _________________________ to ___________________
Commission File Number 333-67638
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ICON Income Fund Nine, LLC
- --------------------------------------------------------------------------------
(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 10011-1505
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(Address of principal executive offices) (Zip Code)
(212) 418-4700
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [x] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) [ ] Yes [x] No
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Condensed Consolidated Balance Sheets
(unaudited)
June 30, December 31,
2004 2003
---- ----
Assets
Cash and cash equivalents $ 9,766,402 $ 14,651,555
--------------- ----------------
Investment in finance leases
Minimum rents receivable 22,658,310 16,958,283
Estimated unguaranteed residual values 1,989,814 1,693,570
Initial direct costs, net 330,073 410,719
Unearned income (3,406,137) (3,462,258)
--------------- ----------------
21,572,060 15,600,314
--------------- ----------------
Investment in operating leases
Equipment, at cost 203,695,851 203,919,993
Accumulated depreciation (43,085,984) (31,186,896)
--------------- ----------------
160,609,867 172,733,097
--------------- ----------------
Investment in unconsolidated joint ventures 5,469,284 3,954,634
Investment in unguaranteed residual values 4,551,206 4,454,003
Due from affiliates, net 242,976 103,885
Due from Manager - 289,422
Other assets, net 1,656,941 1,118,267
--------------- ----------------
Total assets $ 203,868,736 $ 212,905,177
=============== ================
Liabilities and Members' Equity
Notes payable - non-recourse $ 129,789,097 $ 134,463,196
Due to affiliates, net 101,895
- -Accounts payable and other liabilities 576,864 476,253
Minority interest in consolidated joint ventures 2,489,363 2,811,859
-------------- ----------------
Total liabilities 132,957,219 137,751,308
-------------- ----------------
Commitment and Contingencies
Members' equity
Manager (one share outstanding, $1,000 per share
original issue price) (158,489) (115,985)
Additional Members (98,861.043 and 98,991.003
shares outstanding, $1,000 per share original issue price) 71,070,006 75,269,854
--------------- ---------------
Total members' equity 70,911,517 75,153,869
--------------- ---------------
Total liabilities and members' equity $ 203,868,736 $ 212,905,177
=============== ================
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,
2004 2003 2004 2003
---- ---- ---- ----
Revenues
Rental income $ 8,487,089 $ 8,608,236 $ 16,973,522 $ 17,294,597
Finance income 459,098 32,279 825,948 32,279
Income from investment in unconsolidated
joint ventures 96,100 50,446 175,766 86,845
Interest income and other 28,932 73,301 59,514 98,568
Net gain (loss) on sale of equipment 9,703 (17,776) 9,703 (17,776)
------------- ------------- ------------- ------------
Total revenues 9,080,922 8,746,486 18,044,453 17,494,513
------------- ------------- ------------- ------------
Expenses
Depreciation and amortization 6,021,339 6,218,855 12,145,971 12,634,487
Interest 1,797,490 2,048,894 3,545,196 4,160,021
Management fee - Manager 507,310 411,854 1,069,843 906,571
Administrative fee
reimbursement - Manager 320,811 164,742 545,824 362,629
General and administrative 189,202 247,700 376,929 357,982
Minority interest in consolidated
joint ventures 89,707 21,453 115,051 40,022
------------- ------------- -------------- -------------
Total expenses 8,925,859 9,113,498 17,798,814 18,461,712
------------- ------------- -------------- -------------
Net income (loss) $ 155,063 $ (367,012) $ 245,639 $ (967,199)
============= ============= ============= =============
Net income (loss) allocable to:
Managing member $ 1,551 $ (3,670) $ 2,457 $ (9,672)
Additional members 153,512 (363,342) 243,182 (957,527)
------------- ------------- ------------- -------------
$ 155,063 $ (367,012) $ 245,639 $ (967,199)
============= ============= ============= =============
Weighted average number of additional
member shares outstanding 98,867 96,511 98,902 82,302
============= ============= ============= =============
Net income (loss) per weighted average
additional member shares $ 1.55 $ (3.76) $ 2.46 $ (11.63)
============= ============== ============= =============
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, 2004
(unaudited)
Additional Members Distributions
Return of Investment Additional Managing
Capital Income Members Member Total
------- ------ ------- ------ -----
(Per weighted average share)
Balance at
January 1, 2004 $ 75,269,854 $ (115,985) $ 75,153,869
Cash distributions
to members $ 41.35 $ 2.46 (4,333,353) (44,961) (4,378,314)
Additional member shares
redeemed (129.96 shares) (109,677) - (109,677)
Net income 243,182 2,457 245,639
--------------- ------------ --------------
Balance at
June 30, 2004 $ 71,070,006 $ (158,489) $ 70,911,517
=============== ============= ==============
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)
2004 2003
---- ----
Cash flows from operating activities:
Net income (loss) $ 245,639 $ (967,199)
--------------- ----------------
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 12,145,971 12,634,487
Minority interest in consolidated joint ventures 115,051 40,022
Rental income paid directly to lenders by lessees (15,848,070) (15,362,699)
Finance income paid directly to lenders by lessees (110,777) -
Interest expense paid directly to lenders by lessees 3,509,226 3,763,913
Income from investment in unconsolidated joint ventures (175,766) (86,845)
Net (gain) loss on sale of equipment (9,703) 17,776
Changes in operating assets and liabilities:
Collection of principal - non-financed receivable 1,608,679 60,989
Due from affiliates 328,442 (165,273)
Other assets (276,819) (264,927)
Due to Manager - (32,687)
Due to Affiliates 101,894 102,000
Accounts payable and other liabilities 100,617 (112,090)
-------------- ---------------
Total adjustments 1,488,745 594,666
-------------- ---------------
Net cash provided by (used in) operating activities 1,734,384 (372,533)
-------------- ---------------
Cash flows from investing activities:
Proceeds from sales of equipment 40,042 74,358
Investment in finance leases (199,487) (10,457,398)
Investment in unconsolidated joint ventures (1,521,600) (389,518)
Investment in unguaranteed residual values, net (97,202) -
Distribution to minority interest in consolidated joint venture (353,299) (708,393)
-------------- ---------------
Net cash used in investing activities (2,131,546) (11,480,951)
-------------- ---------------
(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)
2004 2003
---- ----
Cash flows from financing activities:
Issuance of membership shares,
net of offering expenses - 37,028,899
Payment of non-recourse debt - (16,272)
Redemption of additional members shares (109,677) (477,291)
Cash distributions to members (4,378,314) (3,526,275)
--------------- ----------------
Net cash (used in) provided by financing activities (4,487,991) 33,009,061
--------------- ----------------
Net (decrease) increase in cash and cash equivalents (4,885,153) 21,155,577
Cash and cash equivalents at beginning of the period 14,651,555 9,456,992
--------------- ----------------
Cash and cash equivalents at end of the period $ 9,766,402 $ 30,612,569
=============== ================
(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, 2004 and 2003, non-cash activities
included the following:
2004 2003
---- ----
Principal and interest on direct finance receivables paid
directly to lenders by lessees $ 695,952 $ -
Rental income assigned, operating lease receivables 15,848,070 15,362,699
Deferred income on operating lease receivables paid
directly to lenders by lessees (389,121) (759,569)
Principal and interest paid directly to lenders by lessees (16,154,901) (14,603,130)
---------------- ---------------
$ - $ -
================ ===============
Non-cash portion of investment in finance lease $ 7,979,500 $ -
Non-recourse notes payable assumed in investment
in finance lease 7,979,500 -
---------------- --------------
$ - $ -
---------------- --------------
Debt assumed by lessee upon lease termination $ 7,924 $ 45,261
================ ===============
Interest expense:
Interest on non-recourse financing
paid directly to lenders by lessees $ 3,509,226 $ 3,763,913
Interest accretion on non-recourse financing - 339,729
Other interest paid 35,970 56,379
---------------- ---------------
Total interest expense $ 3,545,196 $ 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, 2004
(unaudited)
1. Basis of Presentation
The condensed consolidated financial statements of the ICON Income Fund
Nine, LLC (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 consolidated
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 2003 Annual Report on Form 10-K. Certain 2003 amounts have been
reclassified to conform to the 2004 presentation.
2. 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, 2004 and 2003 are as
follows:
2004 2003
---- ----
Organization and offering expenses $ - $ 626,083 Charged to members equity
Underwriting commissions - 834,777 Charged to members equity
Acquisition fees 5,985 304,584 Capitalized as part of
investment in finance leases
Acquisition fees 45,647 81,863 Capitalized as part of
investment in unconsolidated joint ventures
Management fees 1,069,843 906,571 Charged to operations
Administrative expense reimbursements 545,824 362,629 Charged to operations
-------------- --------------
$ 1,667,299 $ 3,116,507
============== ==============
As of June 30, 2004, the LLC had a net receivable of $242,976 from
affiliates, ICON Income Fund Eight A L.P. ("Fund Eight A"), ICON SPK-2023 LLC
("ICON SPK") and ICON Income Fund Ten, LLC ("Fund Ten"), for reinvestments,
reimbursements of fees paid on behalf of the affiliates and distributions for
investment in joint venture, respectively.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements - Continued
3. Joint Ventures
The LLC and its affiliates formed six joint ventures discussed below for
the purpose of acquiring and managing various assets. The LLC and its affiliates
have substantially identical investment objectives and participate on the same
terms and conditions. The LLC has the right of first refusal to purchase the
equipment, on a pro-rata basis, if any of the affiliates desire to sell their
interests in the equipment.
Consolidated Joint Ventures
The three joint ventures described below are owned 95%, 85% and 51%,
respectively, and are consolidated in the condensed consolidated financial
statements of the LLC.
The LLC's condensed consolidated financial statements include 100% of the
assets and liabilities, as well as 100% of the related revenues and expenses of
these ventures. Fund Eight B's interest is accounted for as minority interest in
consolidated joint ventures on the condensed consolidated balance sheets and
statements of operations.
ICON/Kenilworth LLC
-------------------
On September 30, 2002, the LLC and ICON Income Fund Eight B L.P. ("Fund
Eight B") formed ICON/Kenilworth LLC for the purpose of acquiring a natural
gas-fired 25MW co-generation facility for a purchase price of $8,410,000 in
cash, and the assumption of 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 on
lease with Energy Factors Kenilworth, Inc., and the lease originally expired in
July 2009. In addition, there was a total of $459,843 in acquisition fees paid
to the General Partner. The balance of the outstanding non-recourse debt secured
by this facility, at June 30, 2004, was $985,971.
The original lease term expired July 2004 and has been extended until 2009.
During the extension term, the rental payments will in part be a function of
natural gas prices. If natural gas prices are sustained at the current record
high levels, rental payments will be deferred until natural gas prices return to
previous levels. High natural gas prices, such as the current level, sustained
over the long term will directly affect the viability of the cogeneration
facility and may impede the LLC's ability to capitalize on its investment.
ICON Aircraft 46835 LLC
-----------------------
In December 2002, the LLC and Fund Eight B formed ICON Aircraft 46835, LLC
("ICON 46835") for the purpose of acquiring an investment in a McDonnell Douglas
DC-10-30F aircraft leased to Federal Express Corporation for a purchase price of
$25,291,593, which was funded with cash of $3,000,000 and non-recourse debt of
$22,291,593. The lender has a security interest in the aircraft and an
assignment of the rental payments under the lease. The lease is scheduled to
expire in March 2007, at which time the final lease payment of $2,708,000 will
be used to pay-off the then outstanding non-recourse debt of the equivalent
amount.
In addition, there was a total of $758,748 in acquisition fees paid to the
General Partner, of which the LLC's share was $644,936. The outstanding balance
of the non-recourse debt secured by this aircraft, at June 30, 2004 was
$15,309,546. The LLC and Fund Eight B have ownership interests of 85% and 15%,
respectively.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements - Continued
ICON SPK 2023-A, LLC
--------------------
During 2002, the LLC and Fund Eight B formed ICON SPK for the purpose of
acquiring a portfolio of leases for an aggregate purchase price of $7,750,000 in
cash. In addition, a total of $232,500 in acquisition fees was paid to the
Manager as part of the acquisition cost. The leases expire on various dates
through April 2008.
Unconsolidated Joint Ventures
The joint ventures described below are 50%, 26% 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 for $4,250,000 in
cash. The aircraft is subject to non-recourse debt provided by unaffiliated
lenders. As of June 30, 2004, there was $60,844,860 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 operations of D.A.L. in its financial
statements.
The LLC's original investment in ICON 126 was recorded at a cost of
$3,242,901, inclusive of related acquisition fees of $1,117,901 paid to the
General Partner.
Information as to the unaudited results of operations of ICON 126 as of
June 30, 2004, and 2003, is summarized below:
Six Months Ended Six Months Ended
June 30, 2004 June 30, 2003
------------- -------------
Net income $ 305,133 $ 198,598
=============== ==============
LLC's share of net income $ 152,566 $ 99,299
=============== ==============
ICON GeicJV
-----------
In March 2004, the LLC and an affiliate, ICON Income Fund Ten, LLC ("Fund
Ten"), formed a joint venture Partnership, ICON GeicJV, for the purpose of
acquiring and managing certain information technology equipment on lease to
GEICO through March 2007. The LLC and Fund Ten acquired interests of 26% and
74%, respectively, in ICON GeicJV. The LLC and Fund Nine have substantially
identical investment objectives and participate on the same terms and
conditions. Fund Ten has a right of first refusal to purchase the equipment, on
a pro-rata basis, if the LLC desires to sell its interest in the equipment. The
joint venture is majority owned and consolidated with Fund Ten.
The purchase price of the equipment was $5,852,197, which was funded
entirely with cash. The LLC paid $1,521,600 to fund its pro-rata share of the
purchase price.
Information as to the unaudited results of operations of ICON GeicJV as of
June 30, 2004 is summarized below:
Six Months Ended
June 30, 2004
-------------
Net income $ 42,670
===============
LLC's share of net income $ 11,094
===============
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements - Continued
ICON Aircraft 47820 LLC
-----------------------
In 2003, the LLC and Fund Eight B L.P. formed ICON Aircraft 47820 LLC
("ICON 47820") for the purpose of acquiring an investment in a McDonnell Douglas
DC10-30F aircraft leased to Federal Express Corporation for a purchase price of
$27,287,644, which was funded with cash of $3,076,564 and non-recourse debt of
$24,211,080. In addition, there was a total of $818,629 in acquisition fees paid
to the General Partner of which the LLC's share was $81,863. The lender has a
security interest in the aircraft and an assignment of the rental payments under
the lease. The lease is scheduled to expire in March 2007, at which time the
final lease payment of $2,916,523 will be used to pay-off the then outstanding
non-recourse debt of the equivalent amount. The outstanding balance of the
non-recourse debt secured by this aircraft, as of June 30, 2004, was
$16,490,735.
The LLC and Fund Eight B have ownership interests of 10% and 90%,
respectively, in ICON 47820.
Information as to the unaudited results of operations of ICON 47820 as of
June 30, 2003 is summarized below:
Six Months Ended Six Months Ended
June 30, 2004 June 30, 2003
------------- -------------
Net income (loss) $ 121,051 $ 124,544
=============== =============
LLC's share of net income (loss) $ 12,106 $ (12,454)
=============== =============
4. Investments In Consolidated Subsidiaries
The following subsidiaries' assets, liabilities, income and expenses are
consolidated on the LLC's condensed consolidated balance sheets and condensed
consolidated statements of operations.
ICON Aircraft 128 LLC
---------------------
In 2002, the LLC formed ICON Aircraft 128 LLC ("ICON Aircraft 128") for the
purpose of acquiring 53% (with an option to acquire the remaining 47%) of the
outstanding stock in HXO Aircraft Leasing Limited ("HXO"), a Cayman Islands
registered company, which owns, through an Owner Trust, an Airbus A340-313X
aircraft 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 as a result of the acquisition. Subsequent to the original acquisition,
ICON Aircraft 128 exercised its option and acquired the remaining 47% interest
from HXO for $2,028,000 in cash and paid additional acquisition fees of $30,840
to the Manager.
The aircraft owned by HXO is subject to non-recourse debt to unaffiliated
lenders. As of June 30, 2004, there was a balance of $55,084,599 outstanding on
this non-recourse debt.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Condensed Consolidated Financial Statements - Continued
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 the assumption of
non-recourse debt in the amount of $4,439,334 subject to two separate leases as
follows:
(i) 324 railcars were on lease to Texas Genco LP, of which the LLC sold
twelve of the railcars to the lessee based upon an early termination provision
due to damages since inception to June 30, 2004. The lenders have a security
interest in the railcars and have been assigned the rental payments under the
lease. The lease is scheduled to expire in 2007 at which time the balance of the
non-recourse debt will be approximately $1,603,000. In addition, a total of
$132,727 in acquisition fees was paid to the Manager as part of the acquisition.
As of June 30, 2004, there was a balance of $2,685,788 outstanding on this
non-recourse debt.
(ii) 110 railcars were on lease to Trinity Rail Management, Inc. The lender
has a security interest in the railcars and has been assigned the rental
payments under the lease. The lease is scheduled to expire in 2010 at which time
the balance of the non-recourse debt will be approximately $387,000. In
addition, a total of $37,290 in acquisition fees was paid to the Manager as part
of the acquisition. As of June 30, 2004, there was a balance of $1,004,821
outstanding on this non-recourse debt. Subsequent to the acquisition, the LLC
was refunded $14,630, which was recorded as a reduction to the acquisition cost
of the equipment purchased.
ICON Trianon LLC, ICON Trinidad LLC, 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 part of
the acquisition. As of June 30, 2004, there was a balance of $47,335,955 on this
non-recourse debt.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2004
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 and notes dated
December 31, 2003 included in the LLC's annual report on Form 10-K. Certain
statements within this document may constitute forward-looking statements made
pursuant to the safe harbor provision of the Private Securities Litigation
Reform Act of 1995. These statements are identified by words such as
"anticipate," "believe," "estimate," "expects," "intend," "predict" or "project"
and similar expressions. The LLC believes that the expectations reflected in
such forward-looking statements are based on reasonable assumptions. Any such
forward-looking statements are subject to risks and uncertainties and the LLC's
future results of operations could differ materially from historical results or
current expectations. Some of these risks are discussed in this report, and
include, without limitation, fluctuations in oil and gas prices; level of fleet
additions by competitors and industry overcapacity; changes in capital spending
by customers in the cargo delivery industry; changing customer demands for
vessel and aircraft; acts of terrorism; unsettled political conditions, war,
civil unrest and governmental actions, especially in higher risk countries of
operations, foreign currency fluctuations; and environmental and labor laws. The
LLC's actual results could differ materially from those anticipated by such
forward-looking statements due to a number of factors, some of which may be
beyond the LLC's control, including, without limitation:
o changes in our industry, interest rates or the general economy;
o the degree and nature of our competition;
o availability of qualified personnel;
o cash flows from operating activities may be less than the LLC's current
level of expenses;
o the financial condition of lessees; and
o lessee defaults.
a. Overview
The LLC is an equipment leasing business formed on July 10, 2001 and which
began active operations on December 18, 2001. The LLC primarily engages in the
business of acquiring equipment subject to leases and, to a lesser degree,
acquiring ownership rights to items of leased equipment at lease expiration. The
LLC is currently in its "reinvestment" phase, wherein the LLC seeks to purchase
equipment from time to time through April, 2008. After the "reinvestment
period", LLC will then begin to sell its assets in the ordinary course of
business during a time frame called the "disposition period". If we believe it
would benefit investors to reinvest LLC's cash flow in equipment during the
liquidation period, the LLC may do so, but the Manager will not receive any
additional fees in connection with such reinvestments.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2004
The LLC's equipment current portfolio, which is held directly or through
investments in joint ventures, consists primarily of:
o An 85% interest in a McDonnell Douglas DC-10-30F aircraft, on lease with
Federal Express Corporation with an expiration date of March 31, 2007. This
aircraft lease may be renewed for up to five years thereafter. The LLC's
contribution of the purchase price was $2,550,000 in cash and its pro rata share
of the $22,291,593 in non-recourse debt.
o A 10% interest in a McDonnell Douglas DC-10-30F aircraft, on lease with
Federal Express Corporation with an expiration date of March 31, 2007. This
aircraft lease may be renewed for up to five years thereafter. The LLC's
contribution of the purchase price was $307,655 in cash and its pro rata
share of the $24,211,080 in non-recourse debt.
o Various manufacturing equipment on lease with Metaldyne Corporation with an
expiration date of December 31, 2009. The equipment was purchased for
$2,411,556 in cash.
o A Double Kraft Paper Forming Tubing unit equipment on lease with Wildwood
Industries, Inc. with an expiration date of February 28, 2007. The
equipment was purchased for $1,350,000 in cash.
o Microprocessor manufacturing devices on lease with Advance Micro Devices,
Inc. with an expiration of June 30, 2007. The equipment was purchased for
$6,391,258 in cash.
o Semiconductor memory testing equipment on lease with Advance Micro Devices,
Inc. with an expiration of July 1, 2007. The equipment was purchased for
$4,560,881 in cash.
o A High-End Paper Converting Line and an Inline Tri-fold Finishing System on
lease with Wildwood Industries, Inc. with an expiration of August 31, 2008.
The equipment was purchased for $957,000 in cash.
o Fifty Great Dane Trailers with Carrier Ultra Refrigeration Units on lease
with Conwell Corporation, a wholly-owned subsidiary of Frozen Foods Express
Industries, Inc., with an expiration date of April 30, 2010. The equipment
was purchased for $1,942,729 in cash.
o A 100% interest in a portfolio of unguaranteed residual values of
miscellaneous equipment on lease to companies in the United Kingdom. The
investment cost was a cash contribution of $3,322,542 with the underlying
equipment having debt associated of $34,390,025.
o A 51% interest in a portfolio of leases acquired through a joint venture
(ICON SPK 2023-A LLC), with an affiliate. The investment cost for the LLC
was $3,952,500.
o A 50% interest in an Airbus A 340-313X aircraft, on lease to Cathay Pacific
with an expiration date of March 1, 2006. The purchase price of the
equipment was $4,250,000 in cash, and non-recourse debt of $70,276,734.
o A 100% interest Airbus A340-313X aircraft, on lease to Cathay Pacific with
an expiration date of May 1, 2006. The purchase price of the equipment was
$4,500,000 in cash and non-recourse debt of $64,791,445.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2004
o A 95% interest in a 25 MW co-generation facility on lease to Schering
Plough with an expiration date of June 19, 2009. The lessee has options to
extend the lease for as long as ten years thereafter. The LLC's equipment
cost was $7,989,500 in cash and $6,918,091 in non-recourse debt.
o Three car and truck carrying vessels on bareboat charter to Wilhelmsen
Lines with an expiration date of September 22, 2008. The equipment was
purchased for $9,690,060 in cash and non-recourse debt in the amount of
$64,329,764.
o 312 railcars on lease to Texas Genco LP, with an expiration date of March
31, 2007. The equipment was purchased for $1,101,429 in cash and $3,322,791
in non-recourse debt.
o 110 railcars on lease to Trinity Rail Management, Inc., with an expiration
date of April 30, 2010. The equipment was purchased for $126,457 in cash
and $1,116,543 in non-recourse debt.
o NCR/Teradata computer equipment and corresponding parts on lease to
Merk-Medco Managed Care LLC. The purchase price was $3,035,805, which
consisted of $74,044 in cash and the assumption of the remaining
outstanding non-recourse debt of $2,961,761. The lease expires on December
1, 2006. NCR/Teradata computer equipment and corresponding parts (Medco 2)
on lease to Merk-Medco Managed Care LLC ("Medco"). The purchase price was
$1,751,109, which consisted of $42,710 in cash and the assumption of the
remaining outstanding non-recourse debt of $1,708,399. The lease expires on
December 1, 2006.
o Various computer equipment consisting of DMX hard drives, Brocade 12000
Directors w/ 128 usable ports and associated hardware on lease to Yamaha
Motor Corporation, U.S.A. ("Yamaha"). The purchase price was $3,392,074,
which consisted of an equity contribution of $82,734 and, the assumption of
the remaining outstanding non-recourse debt of $3,309,340. The purchase
date was March 31, 2004 with the terms of the lease starting on April 1,
2004 and expiring on December 1, 2007.
Substantially all of our recurring operating cash flows are generated from
the operations of the single-investor leases in the LLC's portfolio. On a
monthly basis, we deduct the expenses related to the recurring operations of the
portfolio from such revenues and assess the amount of the remaining cash flows
that will be required to fund known re-leasing costs and equipment management
costs. Any residual operating cash flows are considered available for
distribution to the investors and are paid monthly (up until the liquidation
period.
Industry Factors
Our results continue to be impacted by a number of factors influencing the
equipment leasing industry.
General Economic Conditions
The U.S. economy appears to be recovering, and we believe that the leasing
industry's outlook for the foreseeable future is encouraging. Many experts
foresee an increase in capital spending by corporations through 2007 which
should increase the pool of available secondary market leases, and to that end,
the LLC is seeing more opportunities in this market. Nonetheless, a key obstacle
still facing the leasing industry is the continued low interest rate
environment, which reduces leasing volume inasmuch as customers are more prone
to purchase than lease. Other factors which may negatively affect the leasing
industry are the proposed legal and regulatory changes that may affect tax
benefits of leasing and the continued misperception by many potential lessees,
stemming from Enron, WorldCom and others, that leasing should not play a central
role as a financing alternative. However, as economic growth continues and
interest rates inevitably begin to rise over time, more lessees will return to
the marketplace.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2004
Further Deterioration of the Air Travel Industry.
The aircraft leasing industry is currently in on the downside of a business
cycle, and this has resulted in depressed sales prices for assets such as the
LLC's aircraft. It does not appear that the industry will recover significantly
in the very near future, although the LLC is optimistic that within two to three
years, there will be a full recovery. However, a further weakening of the
industry could cause the proceeds realized from the future sale of the LLC's
aircraft, engines, and flight simulator to be even less than suggested by recent
appraisals.
b. Results of Operations for the Three Months Ended June 2004, and 2003
Revenues
Revenues for the quarter ended June 30, 2004 ("2004 Quarter") were
$9,080,922, representing an increase of $334,436 from the quarter ended June 30,
2003 ("2003 Quarter"). The increase in revenues resulted from investment in
finance leases and income from investment in unconsolidated joint ventures. The
LLC generated finance income of $459,098 for the 2004 Quarter representing an
increase of $426,819 over the 2003 Quarter. Income from investments in
unconsolidated joint ventures increased as the additional investment in ICON
GeicJV generated income of $11,094, in addition to increases from ICON 126 of
$29,388. Rental income decreased by $121,147 in 2004 due to terminations since
the 2003 Quarter, partially offsetting the increase in revenue. Interest income
and other also decreased as the LLC had less cash on deposit, due to utilization
of funds for investment.
Expenses
Expenses for the 2004 Quarter were $8,925,859, representing a decrease of
$187,639 over the 2003 Quarter. The decrease resulted primarily from reduction
in depreciation and amortization expenses of $197,516, a decrease of $251,404 in
interest expenses and a decrease in general and administrative expenses of
$58,498. The decrease in depreciation and amortization are directly related to
the termination of investments in operating leases subsequent to the 2003
Quarter. Interest expense decreased due to the reduction in the average
outstanding debt balances, while general and administrative expenses reduced due
to lesser outsourcing activities since the 2003 Quarter. Offsetting the
decreases were increases in management fees - Manager of $95,456, administration
fee reimbursement - Manager of $156,069, and minority interest in consolidated
joint ventures of $68,254. These increases resulted from the increase in the
size of the LLC's lease portfolio and overall growth in the size of its
operations.
Net Income/Loss of the LLC
As a result of the foregoing factors, net income (loss) for the 2004
Quarter and the 2003 Quarter was $155,063 and $(367,012), respectively. The net
income (loss) per weighted average additional member shares outstanding for the
2004 Quarter and the 2003 Quarter was $1.55 and $(3.76), respectively.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2004
c. Results of Operations for the Six Months Ended June 2004, and 2003
Revenues
Revenues for the period ended June 30, 2004 ("2004 Period") were
$18,044,453, representing an increase of $549,940 from the Period ended June 30,
2003 ("2003 Period"). The increase in revenues resulted primarily from
additional investment in finance leases and unconsolidated joint ventures. The
LLC generated finance income of $825,948 for the 2004 Period representing an
increase of $793,669 over the 2003 Period. Income from investments in
unconsolidated joint ventures increased by $88,921 as the additional investment
in ICON GeicJV generated income of $11,094, in addition to increases from ICON
126 of $53,267. Rental income decreased by $321,075 due to terminations since
the 2003 Period, partially offsetting the increase in revenue. Interest income
and other also decreased as the LLC had less cash on deposit.
Expenses
Expenses for the 2004 Period were $17,798,814 representing a decrease of
$662,898 over the 2003 Period. The decrease resulted primarily from reduction in
depreciation and amortization expenses of $488,516 and a decrease of $614,825 in
interest expenses. The decrease in depreciation and amortization are directly
related to the termination of investments in operating leases subsequent to the
2003 Period. Interest expense decreased due to the reduction in the average
outstanding debt balances. Offsetting the decreases were increases in management
fees - Manager of $163,272, general and administrative expenses of $18,947,
administration fee reimbursement - Manager of $183,195, and minority interest in
consolidated joint ventures of $75,029. These increases resulted from the
increase in size of the LLC's lease portfolio and overall growth in the size of
its operations.
Net Income/Loss of the LLC
As a result of the foregoing factors, net income (loss) for the 2004 Period
and the 2003 Period was $245,639 and $(967,199), respectively. The net income
(loss) per weighted average additional member shares outstanding for the 2004
Quarter and the 2003 Quarter was $2.46 and $(11.63), respectively.
d. Liquidity and Capital Resources
Cash Requirements
The LLC has sufficient funds necessary to maintain current operations and
to continue to invest in business essential assets subject to lease. The LLC is
currently focused on increasing cash flow through acquisition of more "income"
leases.
Sources of Cash
Operations
For the six months ended June 30, 2004, the LLC's primary source of
liquidity was from operating activities of $1,734,384. These funds, as well as
funds held in reserve by the LLC, were used primarily in investing activities.
Equipment subject to finance leases were purchased for $199,487 and an
investment in an unconsolidated joint venture of $1,521,600. The LLC also
recognized additional investment of $97,202 in the residual interest of the
Summit portfolio attained in the first quarter and made distribution to minority
interest of $353,299. The LLC is expected to continue acquiring equipment
subject to lease, and also make other types of related investments.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2004
Financings and Recourse Borrowings
The LLC, along with certain of its affiliates -- ICON Cash Flow Partners
L.P. Seven, ICON Income Fund Eight A and ICON Income Fund Eight B -- are parties
to a Loan and Security Agreement dated May 30, 2002, as amended (the "Loan
Agreement") between themselves and Comerica Bank (the "Bank"). Certain financial
covenants under the Loan Agreement were violated during 2003 and were
subsequently cured. The Bank has waived any defaults that might have resulted
there from.
The line of credit was extended to expire December 31, 2004. As of June 30,
2004, the LLC had no outstanding balance under the line. Aggregate borrowings by
all funds under the line of credit agreement amounted to $8,615,439 on June 30,
2004.
Distributions
The LLC made cash distributions to members of $4,378,314 during the six
months ended June 30, 2004. A majority of such distributions are reflected as a
return of capital.
Uncertainties
As of June 30, 2004, except as noted above in the Overview section and
listed below in the Risk Factors section, and to the best of our knowledge,
there were no known trends or demands, commitments, events or uncertainties
which are likely to have a material effect on liquidity. As cash is realized
from operations, or borrowings, the LLC will continue to invest in transactions,
while retaining sufficient cash to meet its reserve requirements and recurring
obligations.
Risk Factors
Set forth below and elsewhere in this report and in other documents we file
with the Securities and Exchange Commission are risks and uncertainties that
could cause our actual results to differ materially from the results
contemplated by the forward-looking statements contained in this report and
other periodic statements we make, including but not limited to, the following:
o Natural Gas Prices are high, which significantly affects the value of the
co-generation facility. Rental payments are in part a function of natural
gas prices. If natural gas prices are sustained at their current high
levels, rental payments will be deferred until prices return to their
previous levels. High natural gas prices will also affect the viability of
the cogeneration plant and may impede the LLC's ability to realize on its
investment.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
June 30, 2004
e. Inflation and Interest Rates
The potential effects of inflation on the LLC are difficult to predict. If
the general economy experiences significant rates of inflation, however, it
could affect the LLC in a number of ways. The cost of equipment acquisitions
could increase with inflation and revenues from existing leases would not
generally increase with inflation, as the LLC does not currently have or expect
to have rent escalation clauses tied to inflation in its leases. Nevertheless,
the anticipated residual values to be realized upon the sale or re-lease of
equipment upon lease terminations (and thus the overall cash flow from the LLC's
leases) may be expected to increase with inflation as the cost of similar new
and used equipment increases
If interest rates increase significantly, the lease rates that the LLC can
obtain on future leases may be expected to increase as the cost of capital is a
significant factor in the pricing of lease financing. Leases already in place,
for the most part, would not be affected by changes in interest rates.
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 investors.
The LLC manages its interest rate risk by obtaining fixed rate debt either
directly or through its joint ventures. The fixed rate debt service obligation
streams are generally matched by fixed rents receivable by the LLC's lease
investments.
The LLC attempts to manage its exposure to equipment and residual risk by
monitoring the market and maximizing re-marketing proceeds received through
re-lease or sale of equipment.
Item 4. Controls and Procedures
The LLC carried out an evaluation, under the supervision and with the
participation of management of ICON Capital Corp., the Manager of the LLC,
including the Chief Executive Officer and the Principal Financial and Accounting
Officer, of the effectiveness of the design and operation of the LLC's
disclosure controls and procedures as of the end of the period covered by this
report pursuant to the Securities Exchange Act of 1934. Based upon the
evaluation, the Chief Executive Officer and the Principal Financial and
Accounting Officer concluded that the LLC's disclosure controls and procedures
were effective.
There were no significant changes in the LLC's internal control over
financial reporting during the LLC's second quarter that have materially
affected, or are likely to materially affect, the LLC's internal control over
financial reporting.
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 pending 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.
(b) Report on Form 8-K - None
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
By its Manager,
ICON Capital Corp.
August 16, 2004 /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
Exhibit 32.1
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-Q
---------------------
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICON Income Fund
Nine, LLC (the "LLC");
2. Based on my knowledge, this quarterly report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the condensed consolidated financial statements and
other financial information included in this quarterly report, fairly
present in all material respects the consolidated financial condition,
results of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying 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)) for the registrant and we
have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this quarterly report based on
such evaluation; and
c) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the Manager (or
persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the registrant's ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
Dated: August 16, 2004
/s/ Beaufort J.B. Clarke
- -----------------------------
Beaufort J. B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
Manager of ICON Income Fund Nine, LLC
Exhibit 32.2
Principal Financial Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-Q
---------------------
I, Thomas W. Martin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICON Income Fund
Nine, LLC (the "LLC");
2. Based on my knowledge, this quarterly report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the condensed consolidated financial statements and
other financial information included in this quarterly report, fairly
present in all material respects the consolidated financial condition,
results of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying 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)) for the registrant and we
have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this quarterly report based on
such evaluation; and
c) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the Manager (or
persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the registrant's ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
Dated: August 16, 2004
/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, 2004
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 (18 U.S.C. 1350), that, to the
best of my knowledge and belief:
(1) the Quarterly Report on Form 10-Q for the period ended June 30, 2004
(the "Periodic Report") which this statement accompanies fully
complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) the 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 16, 2004
/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, 2004
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 (18
U.S.C. 1350), that, to the best of my knowledge:
(1) the Quarterly Report on Form 10-Q for the period ended June 30, 2004 (the
"Periodic Report") which this statement accompanies fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m); and
(2) the 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 16, 2004
/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