Item 1. Business
General Development of Business
ICON Cash Flow Partners, L.P., Series E (the "Partnership") was formed in November 1991 as a Delaware limited partnership. The Partnership commenced business operations on its initial closing date, July 6, 1992, with the admission of 13,574.17 limited partnership units. Between July 7, 1992 and December 31, 1992, 236,021.97 additional units were admitted and from January 1, 1993 to July 31, 1993 (the final closing date), 360,815.37 additional units were admitted bringing the final admission to 610,411.51 units totaling $61,041,151 in capital contributions. From 1994 through 1998, the Partnership redeemed 2,556 limited partnership units. The Partnership did not redeem limited partnership units in 1999 and 2000, leaving 607,855.51 limited partnership units outstanding at December 31, 2000. The sole general partner is ICON Capital Corp. (the "General Partner").
The Partnership's reinvestment period ended July 31, 1998. The disposition period began on August 1, 1998. During the disposition period the Partnership has and will continue to distribute substantially all distributable cash from operations and equipment sales to the partners and begin the orderly termination of its operations and affairs. The Partnership has not and will not invest in any additional finance or lease transactions during the disposition period. During the disposition period the Partnership expects to recover, at a minimum, the carrying value of its assets.
Segment Information
The Partnership has only one operating segment: the business of acquiring equipment subject to leases with companies that the Partnership believes to be creditworthy..
Narrative Description of Business
The Partnership is an equipment leasing income fund. The principal investment objective of the Partnership is to obtain the maximum economic return from its investments for the benefit of its limited partners. To achieve this objective, the Partnership has: (1) acquired a diversified portfolio of leases and financing transactions; (2) made monthly cash distributions to its limited partners from cash from operations, commencing with each limited partner's admission to the Partnership, (3) re-invested substantially all undistributed cash from operations and cash from sales in additional equipment and financing transactions during the reinvestment period; and (4) begun to sell the Partnership's investments and distribute the cash from sales of such investments to its limited partners.
The equipment leasing industry is highly competitive. In initiating its leasing transactions the Partnership competed with leasing companies, manufacturers that lease their products directly, equipment brokers and dealers and financial institutions, including commercial banks and insurance companies. Many competitors are larger than the Partnership and have greater financial resources.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
The Partnership has no direct employees. The General Partner has full and exclusive discretion in management and control of the Partnership.
Lease and Financing Transactions
For the years ended December 31, 2000 and 1999, the Partnership did not finance or purchase any new equipment. Included in the summary of equipment cost by category below is 100% of the equipment cost acquired by two joint ventures in which the Partnership has a 99% and 75% interest. The Partnership accounts for these investments by consolidating 100% of the assets and liabilities of the joint ventures and reflecting, as a liability, the related minority interests. The equipment purchased by three other joint ventures in which the Partnership has a less than 50% interest are not included in this table. A summary of the portfolio equipment cost by category held at December 31, 2000 and 1999 is as follows:
The Partnership has one lease which individually represents greater than 10% of the total portfolio equipment cost at December 31, 2000. The lease is with Aerovias de Mexico, S.A. de C.V. ("Aero Mexico"). The underlying equipment is an aircraft and the asset represented 23.2% of the total portfolio cost at December 31, 2000.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
Item 2.
Item 2. Properties ----------
The Partnership neither owns nor leases office space or equipment for the purpose of managing its day-to-day affairs.
Item 3.
Item 3. Legal Proceedings -----------------
The Partnership is not a party to any pending legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders ---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth quarter of 2000.
PART II
Item 5.
Item 5. Market for the Registrant's Securities and Related Security Holder Matters -----------------------------------------------------------------------
The Partnership's limited partnership interests are not publicly traded nor is there currently a market for the Partnership's limited partnership interests. It is unlikely that any such market will develop.
Number of Equity Security Holders Title of Class as of December 31, -------------- ---------------------------------
2000 1999 ---- ----
Limited partners 3,736 3,753 General Partner 1 1
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
Item 6.
Item 6. Selected Consolidated Financial and Operating Data
The above selected consolidated financial data should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
Item 7.
Item 7. General Partner's Discussion and Analysis of Financial Condition and Results of Operations ------------------------------------------------------------------------
The Partnership's portfolio consisted of a net investment in finance leases, financings, operating leases and equity investments in joint ventures representing 41%, 22%, 36% and 1% of total investments at December 31, 2000, respectively, and 48%, 25%, 26% and 1% of total investments at December 31, 1999, respectively. The Partnership did not finance or purchase any new equipment in 2000 or 1999.
Results of Operations
Years Ended December 31, 2000 and 1999
Revenues for the year ended December 31, 2000 were $6,532,679, representing a decrease of $3,671,006 from 1999. The decrease in revenues resulted primarily from a decrease in finance income of $2,762,490, a decrease in gain on sales of equipment of $647,268 and a loss from investments in unconsolidated joint ventures of $194,006 in 2000 versus income from investments in unconsolidated joint ventures of $48,211 in 1999. Finance income decreased due to the decrease in the average size of the finance lease portfolio. The decrease in gain on sales of equipment resulted from a decrease in the amount of equipment sold where the proceeds received were in excess of the remaining carrying value. The loss from investments in unconsolidated joint ventures in 2000 resulted primarily from a provision for bad debts of $850,000 being recorded in 2000 by an underlying joint venture, ICON Receivables 1997-A LLC, with no provision for bad debts being required to be recorded by this venture in 1999.
Expenses for the year ended December 31, 2000 were $6,136,249, representing a decrease of $1,824,926 from 1999. The decrease in expenses resulted primarily from decreases in interest expense of $1,099,333, provision for bad debts of $500,000, management fees of $180,768 and administrative expense reimbursements - - General Partner of $80,923. These decreases were partially offset by increases in minority interest expense in consolidated joint ventures of $32,424 and general and administrative expense of $36,767.
Interest expense decreased due to a decrease in the average debt outstanding from 1999 to 2000. The decrease in the provision for bad debts was the result of determinations made of the level of reserves required during the 1999 and 2000 periods, respectively. These determinations were the result of the Partnership's ongoing analysis of delinquency trends, loss experience and an assessment of overall credit risk. Management fees and administrative expense reimbursements - General Partner decreased due to the decrease in the average size of the portfolio from 1999 to 2000. The increase in minority interest expense in consolidated joint ventures resulted from increased earnings levels within the Partnership's two consolidated joint ventures. General and administrative expenses increased primarily as a result of higher professional fees incurred in 2000.
Net income for the years ended December 31, 2000 and 1999 was $396,430 and $2,242,510, respectively. The net income per weighted average limited partnership unit was $.65 and $3.65 for 2000 and 1999, respectively.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
Years Ended December 31, 1999 and 1998
Revenues for the year ended December 31, 1999 were $10,203,685, representing an increase of $116,018 from 1998. The increase in revenues resulted primarily from an increase in finance income of $463,085 and an increase in gain on sales of equipment of $248,841. The increases were partially offset by a decrease in interest income and other of $317,254 and a decrease in income from equity investments in joint ventures of $290,954. The net gain on sales of equipment increased due to an increase in the number of leases maturing in which the underlying equipment was sold. The decrease in interest income and other was due primarily to decreased average levels of debt outstanding in 1999 versus 1998.
Expenses for the year ended December 31, 1999 were $7,961,175, representing a decrease of $1,078,786 from 1998. The decrease in expenses resulted primarily from decreases in interest expense of $389,060, provision for bad debts of $275,089, management fees of $278,814, administrative expense reimbursements of $117,474 and in amortization of initial direct costs of $202,107. These decreases were partially offset by increases in general and administrative expense of $127,122, depreciation expense of $41,708 and minority interest expense in joint ventures of $14,928.
Interest expense decreased due to a decrease in the average debt outstanding from 1998 to 1999. As a result of the ongoing analysis of delinquency trends, loss experience and an assessment of overall credit risk, the Partnership recorded provisions for bad debts of $1,000,000 and $1,275,089 for 1999 and 1998. Management fees and administrative expense reimbursements decreased due to a decrease in the average size of the portfolio from 1998 to 1999. Amortization of initial direct costs decreased due to a decrease in the average size of the portfolio subject to initial direct costs from 1998 to 1999.
Net income for the years ended December 31, 1999 and 1998 was $2,242,510 and $1,047,706, respectively. The net income per weighted average limited partnership unit was $3.65 and $1.71 for 1999 and 1998, respectively.
Liquidity and Capital Resources
The Partnership's reinvestment period ended July 31, 1998. The disposition period began on August 1, 1998. During the disposition period the Partnership has and will continue to distribute substantially all distributable cash from operations and equipment sales to the partners and begin the orderly termination of its operations and affairs. The Partnership has not and will not invest in any additional finance or lease transactions during the disposition period. During the disposition period the Partnership expects to recover, at a minimum, the carrying value of its assets.
As a result of the Partnership's entering into the disposition period, future monthly distributions are expected to fluctuate depending on the amount of asset sale and re-lease proceeds received during that period.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
The Partnership's primary sources of funds in 2000, 1999 and 1998 were net cash provided by operations of $9,359,980, $11,671,010 and $12,745,950, respectively, proceeds from sales of equipment of $2,159,942, $3,776,513 and $2,476,110, respectively, proceeds from non-recourse notes payable of $11,943,528 in 2000 and proceeds from a warehouse line of credit of $20,703,918 and from securitization debt of $41,175,000 in 1998. These funds were used to purchase equipment in 1998, and to provide for cash distributions and debt repayments in 1998, 1999 and 2000.
Cash distributions to the limited partners for the years ended December 31, 2000, 1999 and 1998 totaled $3,672,173, $4,381,933 and $7,755,553, respectively of which $392,466, $2,220,085 and $1,037,229 was investment income and $3,279,707, $2,161,848 and $6,718,324 was a return of capital, respectively.
As of December 31, 2000, except as noted above, 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 and sales of equipment, the Partnership will distribute substantially all available cash, after retaining sufficient cash to meet its reserve requirements and recurring obligations.
Item 7a.
Item 7a. Qualitative and Quantitative Disclosures About Market Risk
The Partnership is exposed to certain market risks, including changes in interest rates. The Partnership believes its exposure to other market risks, including commodity risk and equity price risk, are insignificant to both its financial position and results of operations.
The Partnership manages its interest rate risk by obtaining fixed rate debt. The fixed rate debt service obligation streams are generally matched by fixed rate lease receivable streams generated by the Partnership's lease investments.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
Item 8.
Item 8. Consolidated Financial Statements and Supplementary Data --------------------------------------------------------
Index to Consolidated Financial Statements Page Number
Independent Auditors' Report 12
Consolidated Balance Sheets as of December 31, 2000 and 1999 13
Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998 14
Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 2000, 1999 and 1998 15
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 16-18
Notes to Consolidated Financial Statements 19-29
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 2000
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Partners ICON Cash Flow Partners, L.P., Series E:
We have audited the accompanying consolidated balance sheets of ICON Cash Flow Partners, L.P., Series E (a Delaware limited partnership) as of December 31, 2000 and 1999, and the related consolidated statements of operations, changes in partners' equity and cash flows for each of the years in the three-year period ended December 31, 2000. These consolidated financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the Unites States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1, the Partnership's reinvestment period ended July 31, 1998. The disposition period began on August 1, 1998. During the disposition period the Partnership has and will continue to distribute substantially all distributable cash from operations and equipment sales to the partners and begin the orderly termination of its operations and affairs.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ICON Cash Flow Partners, L.P., Series E as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.
/s/ KPMG LLP ------------------------------------- KPMG LLP
March 28, 2001 New York, New York
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
See accompanying notes to consolidated financial statements
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31,
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 2000, 1999 and 1998
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31,
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (continued)
For the Years Ended December 31,
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Statements of Cash Flows (Continued)
Supplemental Disclosures of Cash Flow Information
Interest expense of $3,007,236, $4,106,569 and $4,495,629 for the years ended December 31, 2000, 1999 and 1998 consisted of: interest expense on non-recourse financing accrued or paid directly to lenders by lessees of $1,750,991, $2,165,742 and $2,484,621, respectively; and other interest of $1,256,245, $1,940,827 and $2,011,008, respectively.
For the years ended December 31, 2000, 1999 and 1998, non-cash activities included the following:
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 2000
1. Organization
ICON Cash Flow Partners, L.P., Series E (the "Partnership") was formed on November 7, 1991 as a Delaware limited partnership with an initial capitalization of $2,000. It was formed to acquire various types of equipment, to lease such equipment to third parties and, to a lesser degree, to enter into secured financing transactions. The Partnership's offering period commenced on June 5, 1992 and by its final closing on July 31, 1993, 610,411.51 units had been admitted into the Partnership with aggregate gross proceeds of $61,041,151. From 1994 through 1998, the Partnership redeemed 2,556 limited partnership units. The Partnership did not redeem limited partnership units in 1999 and 2000 leaving 607,855.51 limited partnership units outstanding.
The Partnership's reinvestment period ended July 31, 1998. The disposition period began on August 1, 1998. During the disposition period the Partnership has and will continue to distribute substantially all distributable cash from operations and equipment sales to the partners and begin the orderly termination of its operations and affairs. The Partnership has not and will not invest in any additional finance or lease transactions during the disposition period. During the disposition period, the Partnership expects to recover, at a minimum, the carrying value of its assets.
The General Partner of the Partnership is ICON Capital Corp. (the "General Partner"), a Connecticut corporation. The General Partner manages and controls the business affairs of the Partnership's equipment leases and financing transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, received an underwriting commission on the gross proceeds from sales of all units. The total underwriting compensation paid by the Partnership, including underwriting commissions, sales commissions, incentive fees, public offering expense reimbursements and due diligence activities was limited to 13 1/2% of the gross proceeds received from the sale of the units. Such offering costs aggregated $8,240,555 (including $3,362,551 paid to the General Partner or its affiliates) and were charged directly to limited partners' equity.
Profits, losses, cash distributions and disposition proceeds are allocated 99% to the limited partners and 1% to the General Partner until each limited partner has received cash distributions and disposition proceeds sufficient to reduce its adjusted capital contribution account to zero and receive, in addition, other distributions and allocations which would provide a 10% per annum cumulative return, compounded daily, on its outstanding adjusted capital contribution account. After such time, the distributions will be allocated 90% to the limited partners and 10% to the General Partner.
2. Significant Accounting Policies
Basis of Accounting and Presentation - The Partnership's records are maintained on the accrual basis. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. In addition, management is required to disclose contingent assets and liabilities.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Consolidation - The consolidated financial statements include the accounts of the Partnership and its majority owned subsidiaries, ICON E Corp., ICON Cash Flow Partners L.L.C. I ("ICON Cash Flow LLC I") and ICON Receivables 1997-B L.L.C. ("1997-B"). All inter-company accounts and transactions have been eliminated. The Partnership accounts for its interests in less than 50% owned joint ventures under the equity method of accounting. In such cases, the Partnership's original investments are recorded at cost and adjusted for its share of earnings, losses and distributions thereafter.
Leases - The Partnership accounts for owned equipment leased to third parties as finance leases or operating leases, as appropriate. For finance leases, the Partnership records, at the inception of the lease, the total minimum lease payments receivable, the estimated unguaranteed residual values, the initial direct costs related to the leases and the related unearned income. Unearned income represents the difference between the sum of the minimum lease payments receivable plus the estimated unguaranteed residual minus the cost of the leased equipment. Unearned income is recognized as finance income over the terms of the related leases using the interest method. For operating leases, equipment is recorded at cost and is depreciated on the straight-line method over the lease terms to their estimated fair market values at lease terminations. Related lease rentals are recognized on the straight-line method over the lease terms. Billed and uncollected operating lease receivables, net of allowance for doubtful accounts, are included in other assets. Initial direct costs of finance leases are capitalized and are amortized over the terms of the related leases using the interest method. Initial direct costs of operating leases are capitalized and amortized on the straight-line method over the lease terms. The Partnership's leases have terms ranging from two to eight years. Each lease is expected to provide aggregate contractual rents that, along with residual proceeds, return the Partnership's cost of its investments along with investment income.
Investment in Financings - Investment in financings represent the gross receivables due from the financing of equipment plus the initial direct costs related thereto less the related unearned income. The unearned income is recognized as finance income, and the initial direct costs are amortized, over the terms of the receivables using the interest method. Financing transactions are supported by a written promissory note evidencing the obligation of the user to repay the principal, together with interest, which will be sufficient to return the Partnership's full cost associated with such financing transaction, together with some investment income. Furthermore, the repayment obligation is collateralized by a security interest in the tangible or intangible personal property.
Disclosures About Fair Value of Financial Instruments - Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments" requires disclosures about the fair value of financial instruments. Separate disclosure of fair value information as of December 31, 2000 and 1999 with respect to the Company's assets and liabilities is not provided because (i) SFAS No. 107 does not require disclosures about the fair value of lease arrangements, (ii) the carrying value of financial assets, other than lease related investments, and payables approximates market value and (iii) fair value information concerning non-recourse debt obligations is not practicable to estimate without incurring excessive costs to obtain all the information that would be necessary to derive a market interest rate.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Allowance for Doubtful Accounts - The Partnership records a provision for bad debts to provide for estimated credit losses in the portfolio. The allowance for doubtful accounts is based on the ongoing analysis of delinquency trends, loss experience and an assessment of overall credit risk. The Partnership's write-off policy is based on an analysis of the aging of the Partnership's portfolio, a review of the non-performing receivables and leases, and prior collection experience. An account is fully reserved for or written off when the analysis indicates that the probability of collection of the account is remote.
Impairment of Estimated Residual Values - The Partnership's policy with respect to impairment of estimated residual values is to review, on a periodic basis, the carrying value of its residuals on an individual asset basis to determine whether events or changes in circumstances indicate that the carrying value of an asset may not be recoverable and, therefore, an impairment loss should be recognized. The events or changes in circumstances which generally indicate that the residual value of an asset has been impaired are (i) the estimated fair value of the underlying equipment is less than the Partnership's carrying value or (ii) the lessee is experiencing financial difficulties and it does not appear likely that the estimated proceeds from disposition of the asset will be sufficient to satisfy the remaining obligation to the non-recourse lender and the Partnership's residual position. Generally in the latter situation, the residual position relates to equipment subject to third party non-recourse notes payable where the lessee remits their rental payments directly to the lender and the Partnership does not recover its residual until the non-recourse note obligation is repaid in full.
The Partnership measures its impairment loss as the amount by which the carrying amount of the residual value exceeds the estimated proceeds to be received by the Partnership from release or resale of the equipment. Generally, quoted market prices are used as the basis for measuring whether an impairment loss should be recognized.
Income Taxes - No provision for income taxes has been made as the liability for such taxes is that of each of the partners rather than the Partnership.
New Accounting Pronouncement - Effective January 1, 2001, the Partnership adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. The adoption of SFAS No. 133 did not have any effect on the Partnership's financial position or results of operations.
3. Investments in Joint Ventures
The Partnership and affiliates formed five joint ventures for the purpose of acquiring and managing various assets.
The two joint ventures described below are majority owned and are consolidated with the Partnership.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Cash Flow Partners L.L.C. I
In September 1994 the Partnership and an affiliate, ICON Cash Flow Partners L.P. Six ("L.P. Six"), formed a joint venture, ICON Cash Flow LLC I, for the purpose of acquiring and managing an aircraft which was on lease to Alaska Airlines, Inc. The Partnership and L.P. Six contributed 99% and 1% of the cash required for such acquisition, respectively, to ICON Cash Flow LLC I. ICON Cash Flow LLC I acquired the aircraft, assuming non-recourse debt and utilizing contributions received from the Partnership and L.P. Six. The lease is an operating lease. Profits, losses, excess cash and disposition proceeds are allocated 99% to the Partnership and 1% to L.P. Six. The Partnership's consolidated financial statements include 100% of the assets and liabilities of ICON Cash Flow LLC I. L.P. Six's investment in ICON Cash Flow LLC I has been reflected as "Minority interest in joint venture." The original lease term expired in April 1997 and Alaska Airlines, Inc. returned the aircraft. In June 1997 ICON Cash Flow LLC I released the aircraft to Aero Mexico. The new lease is an operating lease which expires in October 2002.
ICON Receivables 1997-B L.L.C.
In August 1997 the Partnership, L.P. Six and ICON Cash Flow Partners L.P. Seven ("L.P. Seven") formed 1997-B, a special purpose entity formed for the purpose of originating leases and securitizing its portfolio. The Partnership, L.P. Six and L.P. Seven contributed $2,250,000 (75.00% interest), $250,000 (8.33% interest) and $500,000 (16.67% interest), respectively to 1997-B. In order to fund the acquisition of leases, 1997-B obtained a warehouse borrowing facility from Prudential Securities Credit Corporation. In October 1998, 1997-B completed an equipment securitization. The net proceeds from the securitization of these assets were used to pay-off the remaining 1997-B warehouse facility balance and any remaining proceeds were distributed to the 1997-B members in accordance with their membership interests. The Partnership's consolidated financial statements include 100% of the assets and liabilities of 1997-B. L.P. Six and L.P. Seven's interests in 1997-B have been reflected as "minority interests in consolidated joint ventures."
The three joint ventures described below are less than 50% owned and are accounted for following the equity method.
ICON Cash Flow Partners L.L.C. II
In March 1995 the Partnership and an affiliate, L.P. Six, formed ICON Cash Flow Partners L.L.C. II, ("ICON Cash Flow LLC II"), for the purpose of acquiring and managing an aircraft which was on lease to Alaska Airlines, Inc. The Partnership and L.P. Six contributed 1% and 99% of the cash required for such acquisition, respectively, to ICON Cash Flow LLC II. ICON Cash Flow LLC II acquired the aircraft, assuming non-recourse debt and utilizing contributions received from the Partnership and L.P. Six. The lease is an operating lease. Profits, losses, excess cash and disposition proceeds are allocated 1% to the Partnership and 99% to L.P. Six. The Partnership's investment in the joint venture is accounted for under the equity method. The original lease term expired in April 1997 and Alaska Airlines, Inc. returned the aircraft. In June 1997 ICON Cash Flow LLC II released the aircraft to Aero Mexico. The new lease is an operating lease which expires in September 2002.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the financial position and results of operations of ICON Cash Flow LLC II is summarized below:
December 31, 2000 December 31, 1999 ----------------- -----------------
Assets $ 17,715,748 $ 15,508,243 =============== ===============
Liabilities $ 11,075,944 $ 9,602,143 =============== ===============
Equity $ 6,639,804 $ 5,906,100 =============== ===============
Partnership's share of equity $ 66,398 $ 59,061 =============== ===============
Net income $ 733,704 $ 933,664 =============== ===============
Partnership's share of net income $ 7,337 $ 9,337 =============== ===============
ICON Cash Flow Partners L.L.C. III
In December 1996 the Partnership and an affiliate, L.P. Seven, formed ICON Cash Flow Partners L.L.C. III ("ICON Cash Flow LLC III"), for the purpose of acquiring and managing an aircraft currently on lease to Continental Airlines, Inc. The Partnership and L.P. Seven contributed 1% and 99% of the cash required for such acquisition, respectively, to ICON Cash Flow LLC III. ICON Cash Flow LLC III acquired the aircraft, assuming non-recourse debt and utilizing contributions received from the Partnership and L.P. Seven. Profits, losses, excess cash and disposition proceeds are allocated 1% to the Partnership and 99% to L.P. Seven. The Partnership's investment in the joint venture is accounted for under the equity method.
Information as to the financial position and results of operations of ICON Cash Flow LLC III is summarized below:
December 31, 2000 December 31, 1999
Assets $ 7,451,970 $ 9,240,416 ============== ===============
Liabilities $ 3,094,323 $ 5,394,669 ============== ===============
Equity $ 4,357,647 $ 3,845,747 ============== ===============
Partnership's share of equity $ 43,576 $ 38,457 ============== ===============
Net income $ 511,900 $ 489,968 ============== ===============
Partnership's share of net income $ 5,119 $ 4,900 ============== ===============
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Receivables 1997-A L.L.C.
In March 1997 three affiliates of the Partnership, ICON Cash Flow Partners, L.P., Series D ("Series D"), L.P. Six and L.P. Seven, contributed and assigned equipment lease and finance receivables and residuals to ICON Receivables 1997-A L.L.C.("1997-A"), a special purpose entity created for the purpose of originating leases, managing existing contributed assets and securitizing its portfolio. In September 1997 the Partnership, L.P. Six and L.P. Seven contributed and assigned additional equipment lease and finance receivables and residuals to 1997-A. The Partnership, Series D, L.P. Six and L.P. Seven received a 31.19%, 17.81%, 31.03% and 19.97% interest, respectively, in 1997-A based on the present value of their related contributions. The Partnership's contributions amounted to $15,547,305 in assigned leases and $740,000 of cash in 1997, $87,185 of cash in 1998 and $84,535 of cash and $98,474 in assigned leases in 1999. In September 1997, 1997-A securitized substantially all of its equipment leases and finance receivables and residuals. 1997-A became the beneficial owner of a trust. The Partnership's original investment was recorded at cost and is adjusted by its share of earnings, losses and distributions thereafter.
Information as to the financial position and results of operations of 1997-A is summarized below:
December 31, 2000 December 31, 1999
Assets $ 9,002,519 $ 17,967,441 =============== ===============
Liabilities $ 6,848,927 $ 14,701,053 =============== ===============
Equity $ 2,153,592 $ 3,266,388 =============== ===============
Partnership's share of equity $ 373,581 $ 720,673 =============== ===============
Net (loss) income $ (661,929) $ 108,923 =============== ===============
Partnership's share of net (loss) income $ (206,462) $ 33,974 =============== ===============
Distributions $ 450,867 $ 2,171,133 =============== ===============
Partnership's share of distributions $ 140,630 $ 677,198 =============== ===============
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
4. Receivables Due in Installments
Non-cancelable minimum annual amounts receivable on finance leases and financings are as follows:
Finance Year Leases Financings Total
2001 $ 7,857,368 $11,907,064 $19,764,432 2002 4,337,165 -- 4,337,165 2003 1,472,858 -- 1,472,858 2004 21,278 -- 21,278 ----------- ----------- ----------- $13,688,669 $11,907,064 $25,595,733 =========== =========== ===========
5. Investment in Operating Lease
The investment in operating lease at December 31, 2000, 1999 and 1998 consisted of the following:
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
6. Allowance for Doubtful Accounts
The Allowance for Doubtful Accounts related to the investments in finance leases, financings and operating lease consisted of the following:
7. Notes Payable
As discussed in Note 3, in order to fund the acquisition of additional leases, 1997-B obtained a warehouse borrowing facility from Prudential Securities Credit Corporation. In October 1998, 1997-B completed an equipment securitization resulting in net proceeds of $41,175,000. These proceeds were used to pay-off $36,804,788 outstanding under the 1997-B warehouse line of credit. The remaining proceeds were distributed to the 1997-B members in accordance with their membership interests. The new securitized debt bears interest at a fixed rate of 6.19% and is payable from receivables related to the portfolio that secures the debt. At December 31, 2000, there was $14,318,259 outstanding under the notes payable-securitized debt.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Notes payable, bearing interest at rates ranging from 5.2% to 16.5%, mature as follows:
Notes Payable Notes Payable Year Securitized Debt Non-Recourse
2001 $ 7,360,608 $ 3,587,261 2002 5,213,886 1,600,191 2003 1,575,793 12,578,986 2004 167,972 32,143 ----------- -----------
$14,318,259 $17,798,581 =========== ===========
Included in notes payable - non-recourse above is $1,224,266 in notes payable due to various third parties in conjunction with the purchase and assignment of lease transactions as they relate to residual sharing agreements. The notes are payable only to the extent certain residuals are realized.
8. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General Partner or its affiliates for the years ended December 31, 2000, 1999 and 1998 are as follows:
Charged to Operations
Management fees $1,207,760 Administrative expense reimbursements 657,327 ----------
Year ended December 31, 1998 $1,865,087 ==========
Management fees $ 928,946 Administrative expense reimbursements 539,853 ----------
Year ended December 31, 1999 $1,468,799 ==========
Management fees $ 748,178 Administration expense reimbursements 458,930 ----------
Year ended December 31, 2000 $1,207,108 ==========
The Partnership has investments in five joint ventures with other partnerships sponsored by the General Partner. See Note 3 for additional information relating to the joint ventures.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
9. Security Deposits, Deferred Credits and Other Payables
Security deposits, deferred credits and other payables at December 31, 2000 and 1999 include $1,211,859 and $1,000,000, respectively, of proceeds received on residuals, which will be applied upon final remarketing of the related equipment.
10. Subsidiary
In December 1994, the Partnership formed a wholly owned subsidiary, ICON E Corp., a Massachusetts corporation formed for the purpose of managing equipment under lease located in the state of Massachusetts. Massachusetts partnerships are taxed on personal property at a higher rate than corporations, and therefore, to mitigate such excess property tax, certain leases are being managed by ICON E Corp., a corporation. The Partnership's consolidated financial statements include 100% of the accounts of ICON E Corp. As of December 31, 2000, there was no federal tax liability for ICON E Corp.
11. Commitments and Contingencies
The Partnership has entered into remarketing and residual sharing agreements with third parties. In connection therewith, remarketing or residual proceeds received in excess of specified amounts will be shared with these third parties based on specified formulas. For the years ended December 31, 2000, 1999 and 1998, the Partnership paid $0, $70,842 and $1,701 to third parties as their share of the proceeds.
12. Tax Information (Unaudited)
The following reconciles net income for financial reporting purposes to income for federal income tax purposes for the years ended December 31:
2000 1999 1998 ---- ---- ----
Net income per financial statements $ 396,430 $ 2,242,510 $ 1,047,706
Differences due to: Direct finance leases 2,938,653 4,842,466 5,618,432 Depreciation (4,142,464) (5,719,775) (7,028,534) Provision for losses 478,812 (40,171) (33,272) Loss on sale of equipment (1,171,655) (392,115) 2,971,331 Other 1,375,963 (135,838) (887,487) ----------- ----------- -----------
Partnership income (loss) for federal income tax purposes $ (124,261) $ 797,077 $ 1,688,176 =========== =========== ===========
As of December 31, 2000, the partners' capital accounts included in the financial statements totaled $11,379,555 compared to the partners' capital accounts for federal income tax purposes of $18,462,366 (unaudited). The difference arises primarily from commissions reported as a reduction in the partners' capital for financial reporting purposes but not for federal income tax purposes, and temporary differences related to direct finance leases, depreciation and provision for losses.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
13. Quarterly Financial Data (Unaudited)
The following table is a summary of financial data by quarter for the years ended December 31, 2000 and 1999:
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ---------------------------------------------------------------------- None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant's General Partner --------------------------------------------------------------------
The General Partner, a Connecticut corporation, was formed in 1985. The General Partner's principal offices are located at 111 Church Street, White Plains, New York 10601-1505, and its telephone number is (914) 993-1700. The officers of the General Partner have extensive experience with transactions involving the acquisition, leasing, financing and disposition of equipment, including acquiring and disposing of equipment subject to leases and full financing transactions.
The manager of the Registrant's business is the General Partner. The General Partner is engaged in a broad range of equipment leasing and financing activities. Through its sales representatives and through various broker relationships throughout the United States, the General Partner offers a broad range of equipment leasing services.
The General Partner is performing or causing to be performed certain functions relating to the management of the equipment of the Partnership. Such services include the collection of lease payments from the lessees of the equipment, re-leasing services in connection with equipment which is off-lease, inspections of the equipment, liaison with and general supervision of lessees to assure that the equipment is being properly operated and maintained, monitoring performance by the lessees of their obligations under the leases and the payment of operating expenses.
The officers and directors of the General Partner are as follows:
Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Paul B. Weiss President and Director
Thomas W. Martin Executive Vice President and Director
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
Beaufort J. B. Clarke, age 55, has been Chairman, Chief Executive Officer and Director of the General Partner since 1996. Prior to his present position, Mr. Clarke was founder and the President and Chief Executive Officer of Griffin Equity Partners, Inc. Mr. Clarke formerly was an attorney with Shearman and Sterling and has over 20 years of senior management experience in the United States leasing industry.
Paul B. Weiss, age 40, is President and Director of the General Partner. Mr. Weiss has been exclusively engaged in lease acquisitions since 1988 from his affiliations with the General Partner since 1996, Griffin Equity Partners (as Executive Vice President from 1993-1996); Gemini Financial Holdings (as Senior Vice President-Portfolio Acquisitions from 1991-1993) and Pegasus Capital Corporation (as Vice President-Portfolio Acquisitions from 1988-1991). He was previously an investment banker and a commercial banker.
Thomas W. Martin, age 47, has been Executive Vice President of the General Partner since 1996. Prior to his present position, Mr. Martin was the Executive Vice President and Chief Financial Officer of Griffin Equity Partners, Inc. (1993-1996), Gemini Financial Holdings (as Senior Vice President from 1992-1993) and Chancellor Corporation (as Vice President-Syndications from 1985-1992). Mr. Martin has 17 years of senior management experience in the leasing business.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
Item 11.
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner and its affiliates were paid or accrued the following compensation and reimbursement for costs and expenses for the years ended December 31, 2000, 1999 and 1998.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management --------------------------------------------------------------
(a) The registrant is a limited partnership and therefore does not have voting shares of stock. No person of record owns, or is known by the Partnership to own beneficially, more than 5% of any class of securities of the Partnership.
(b) As of March 19, 2001, Directors and Officers of the General Partner do not own any equity securities of the Partnership.
(c) The General Partner owns the equity securities of the Partnership set forth in the following table:
Title Percent of Class Amount Beneficially Owned of Class
General Partner Represents initially a 1% and potentially a 100% Interest 10% interest in the Partnership's income, gain and loss deductions.
Profits, losses, cash distributions and disposition proceeds are allocated 99% to the limited partners and 1% to the General Partner until each investor has received cash distributions and disposition proceeds sufficient to reduce its adjusted capital contribution account to zero and receive, in addition, other distributions and allocations which would provide a 10% per annum cumulative return, compounded daily, on the outstanding adjusted capital contribution account. After such time, the distributions will be allocated 90% to the limited partners and 10% to the General Partner.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
Item 13.
Item 13. Certain Relationships and Related Transactions ----------------------------------------------
See Item 11 for a discussion of the Partnership's reimbursable management fees and administrative expenses.
See Note 3 for a discussion of the Partnership's related party investments in joint ventures.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ---------------------------------------------------------------
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedule - None.
Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Financial Statements or Notes thereto.
3. Exhibits - The following exhibits are incorporated herein by reference:
(i) Form of Dealer-Manager Agreement (Incorporated by reference to Exhibit 1.1 to Amendment No. 2 to Form S-1 Registration Statement No. 33-44413 filed with the Securities and Exchange Commission on June 4, 1992)
(ii) Form of Selling Dealer Agreement (Incorporated by reference to Exhibit 1.2 to Amendment No. 2 to Form S-1 Registration Statement No. 33-44413 filed with the Securities and Exchange Commission on June 4, 1992)
(iii)Amended and Restated Agreement of Limited Partnership (Incorporated herein by reference to Exhibit A to Amendment No. 2 to Form S-1 Registration Statement No. 33-44413 filed with the Securities and Exchange Commission on June 4, 1992)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter ended December 31, 2000.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2000
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 CASH FLOW PARTNERS, L.P., Series E File No. 33-44413 (Registrant) By its General Partner, ICON Capital Corp.
Date: March 28, 2001 /s/ Beaufort J.B. Clarke ----------------------------------------------- Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.
ICON Capital Corp. sole General Partner of the Registrant
Date: March 28, 2001 /s/ Beaufort J.B. Clarke --- ------------------------------------------ Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Date: March 28, 2001 /s/ Paul B. Weiss ---------------------------------------------- Paul B. Weiss President and Director
Date: March 28, 2001 /s/ Thomas W. Martin ---------------------------------------------- Thomas W. Martin Executive Vice President (Principal Financial and Accounting Officer)
Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrant Which have not Registered Securities Pursuant to Section 12 of the Act
No annual report or proxy material has been sent to security holders. An annual report will be sent to the limited partners and a copy will be forwarded to the Commission.