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 July 31, 1993 (the final closing date), 596,837.34 additional units were admitted bringing the total admissions to 610,411.51 units totaling $61,041,151 in capital contributions. From 1994 through 2003, the Partnership redeemed 2,556 limited partnership units leaving 607,855.51 limited partnership units outstanding at December 31, 2003.
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.
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 managing 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 commencing with each limited partner's admission to the Partnership, (3) re-invested substantially all undistributed cash from operations and cash from sales of 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. When seeking its leasing transactions for acquisition, 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. Because the reinvestment period of the Partnership has ended, it will no longer be competing for acquisitions. However, competition and supply and demand may affect the Partnership's ability to optimize value upon the sale of its equipment.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
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, 2003 and 2002, the Partnership did not finance or purchase any new equipment.
The lease of an aircraft to Aerovias de Mexico, S.A. de C.V. ("Aeromexico") represents more than 10% of the Partnership's revenue for the year ended December 31, 2003. The carrying value of the Aeromexico aircraft represented approximately 68.7% of the Partnership's assets at December 31, 2003.
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 Company, from time-to-time, in the ordinary course of business, commences legal actions when necessary to protect or enforce the rights of the Partnership. We are not a defendant party to any litigation and are not aware of any pending or threatened litigation against the Partnership.
Item 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 2003.
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 February 29, 2004 -------------- -----------------------
Limited Partners 3,714 General Partner 1
The Partnership made distributions to the limited partners totaling $1,621,978 and $2,594,024 for the years 2003 and 2002, respectively. For the three months ended March 30, 2004, the Partnership has made distributions to the limited partners totaling $140,317.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
Item 6.
Item 6. Selected Consolidated Financial Data ------------------------------------
The selected financial data should be read in conjunction with the consolidated financial statements and related notes included in Item 8 of this report.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
Item 7.
Item 7. General Partner's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information - The following discussion and analysis should be read in conjunction with the audited consolidated financial statements included herein. Certain statements within this document may constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are identified by words such as "anticipate," "believe," "estimate," "expects," "intend," "predict" or "project" and similar expressions. This information may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Although the Partnership believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
Overview - The results of operations for the year ended December 31, 2003 reflect the risk factors outlined in the Partnership's prospectus. Such risk factors include, but are not limited to, the decline in the value of the Partnership's equipment, no guarantee of profitability, the potential of lessee default, and economic factors such as prevailing interest rates. These risk factors affect the Partnership's ability to realize income, in that they increase the Partnership's expenses by way of additional depreciation, impairment loss, and provision for bad debt. In addition, as the Partnership liquidates the portfolio and leases expire, the cash flow will decrease.
Under the Operating Agreement of the Partnership, the term of the Partnership is limited to the life-span of the leases remaining in the portfolio during the liquidation period. Therefore, as the leases mature, the expected revenue from the portfolio will decline. However, the Partnership's expenses, while declining during the liquidation period will increase as a percentage of lease revenue as certain expenses are fixed; thereby decreasing the partnership's cash flow.
As the Partnership is currently operating in its liquidation period, the General Partner diligently monitors the portfolio for any trends that would affect equipment values.
The Partnership - The Partnership's portfolio consisted of a net investment in finance leases, financings, operating leases, equipment held for sale or lease and equity investments in joint ventures representing 14%, 7%, 69%, 9% and 1% of total investments at December 31, 2003, respectively, and 24%, 8%, 67%, 0% and 1% of total investments at December 31, 2002, respectively. The Partnership did not finance or purchase any new equipment in 2003, 2002 and 2001.
Results of Operations - ---------------------
Years Ended December 31, 2003 and 2002
Revenues for the year ended December 31, 2003 were $2,172,265, representing a decrease of $3,681,473 or 62.9% from 2002. The decrease in revenues was partially caused by reduced interest income and other. Interest income and other decreased $1,956,542 primarily due to a $2,017,763 residual sharing adjustment in 2002 which did not occur in 2003. Rental income also decreased by $1,462,298, which resulted from the extension agreement for the Aeromexico lease at reduced rentals. Finance income also decreased by $449,570, due to the reduction in the average size of the finance lease portfolio. Income from investments in unconsolidated joint ventures also decreased by $136,649, from income of $49,797 in 2002 to a loss of $86,852 in 2003. These decreases were partially offset by an increase in the gain on sales of equipment category of $323,586, from a loss of $14,300 in 2002 to a gain of $309,286 in 2003.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
Expenses for the year ended December 31, 2003 were $5,064,685, representing an increase of $1,512,595 or 42.6% from 2002. The increase in expenses was primarily due to a charge of $1,500,000 for an impairment loss on the Aeromexico aircraft. Offsetting this increase were decreases in most other major categories of expense. Interest expense decreased by $268,097 due to a reduction in the average debt outstanding from 2002 to 2003. Management fees and administrative expense reimbursements decreased by $146,195 and $65,931, respectively, as a result of the reduction in the average size of the Partnership's lease portfolio. Minority interest expense also decreased by $172,257 to income of $119,656 due to losses in the consolidated joint ventures.
Net (loss) income for the years ended December 31, 2003 and 2002 was $(2,892,420) and $2,301,648, respectively. The net income (loss) per weighted average limited partnership unit was $(4.71) and $3.75 for 2003 and 2002, respectively.
Years Ended December 31, 2002 and 2001
Revenues for the year ended December 31, 2002 were $5,853,738, representing an increase of $465,806 or 8.6% from 2001. The increase in revenues resulted primarily from an increase in interest income and other. Interest income and other increased $2,251,228 primarily due to a $2,017,763 one-time adjustment for a revised estimate of residual sharing values. Income from unconsolidated joint ventures also increased by $366,660. This increase resulted primarily from the reversal of a provision for bad debts of $268,834 in 2002 by an underlying joint venture, ICON Receivables 1997-A LLC, as compared to a provision for bad debts of $1,825,000 being recorded by this venture in 2001. Offsetting these increases was a decrease in finance income of $2,007,890. Finance income decreased due to the reduction in the average size of the finance lease portfolio.
Expenses for the year ended December 31, 2002 were $3,552,090, representing a decline of $3,231,166 or 47.6% from 2001. The decline in expenses resulted primarily from a reduction in the provision for bad debts or $2,862,304. As a result of an analysis of delinquencies, an assessment of overall risk and a review of historical loss experience, the allowance was adjusted downward by $700,000 in 2002. Additionally, interest expense decreased by $904,293 in 2002. The decrease in interest expense resulted from a decrease in the average debt outstanding from 2001 to 2002. In addition, management fees decreased by $182,449 and administrative expense reimbursements decreased by $145,465. Both were a result of the reduction in the average size of the finance lease portfolio. These decreases were partially offset by an increase in depreciation expense of $428,839. The increase in depreciation was due to a change in estimate (reduction) of a residual value of an aircraft in the fourth quarter of 2001 as well as the depreciation on equipment that was reclassified from a finance lease to an operating lease. Additionally, minority interest expense increased by $513,588. This increase resulted from an overall increase in income in one of the Partnership's consolidated joint ventures.
Net income (loss) for the years ended December 31, 2002 and 2001 was $2,301,648 and $(1,395,324) respectively. The net income (loss) per weighted average limited partnership unit was $3.75 and $(2.27) for 2002 and 2001, respectively.
Liquidity and Capital Resources
The Partnership's primary sources of liquidity in 2003, 2002 and 2001 was net cash provided by operating activities of $1,616,579, $5,255,183 and $8,300,201, respectively, and proceeds from sales of equipment of $484,966, $2,394,019 and $738,728, respectively. These funds, as well as funds held in reserve by the Partnership, were used to pay cash distributions to partners of $1,638,361, $2,620,226 and $1,369,947 in 2003, 2002 and 2001, respectively, and debt repayments of $1,132,717, $5,597,034 and $7,335,811 in 2003, 2002 and 2001, respectively.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
The Partnership's cash flow from operating activities may be less than the Partnership's current level of expenses. To the extent that cash flow is insufficient to pay such expenses, the Partnership may be required to sell assets prior to maturity or borrow against future cash flows.
The Partnership's non-recourse debt balance of $9,565,050, of which $9,383,441 is secured by the aircraft on lease to Aeromexico, matured in January 2004. Although the maturity date has passed, the Partnership has been negotiating with the lender to extend the maturity date to that of the lease expiration date of January 2005.
The Partnership has the following contractual obligation as of December 31, 2003. This obligation arises mainly from the acquisition of equipment subject to lease. Rental payments from the leases associated with this equipment are assigned to paydown such obligations.
Payments Due By Period 1-2 years ---------
Long-term obligation (notes payable) $ 9,565,050
See Note 6 to the consolidated financial statements, as set forth in Part II, Item 8, for information regarding non-recourse debt.
The Partnership's reinvestment period ended July 31, 1998. The disposition period began August 1, 1998, at which time the Partnership began the orderly termination of its operations and affairs. During the disposition period, the Partnership has and will continue to distribute substantially all distributable cash from operations and equipment sales to the partners. The Partnership has not and will not invest in any additional finance or lease transactions during the disposition period. Because the Partnership is in 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.
As of December 31, 2003 there were no known trends or demands, commitments, events or uncertainties apart from those mentioned above which are likely to have any material effect on liquidity. As cash is realized from operations and additional borrowings, the Partnership will continue to invest in equipment leases and financings where it deems it to be prudent while retaining sufficient cash to meet its reserve requirements and recurring obligations.
We do not consider the impact of inflation to be material in the analysis of our overall operations.
Significant Accounting Policies
The policies discussed below are considered by the General Partner to be critical to an understanding of the Partnership's consolidated financial statements because their application places the most significant demands on the General Partner's judgments, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, the General Partner cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 periods. Significant estimates primarily include the allowance for doubtful accounts and unguaranteed residual values. In addition, management is required to disclose contingent assets and contingent liabilities. Actual results could differ from those estimates.
Leases and Revenue Recognition - The Partnership accounts for owned equipment leased to third parties as finance leases, leveraged leases, or operating leases, as appropriate. Initial direct costs are capitalized and are amortized over the terms of the related leases using the interest method.
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 and depreciated on the straight-line method over the lease term to its estimated residual value at lease termination and is subject to the Partnership's impairment policy. Related lease rentals are recognized on the straight line method over the lease terms. Billed and uncollected operating lease receivables are included in other assets.
Credit Risk - Financial instruments that potentially subject the Partnership to concentrations of credit risk include cash and cash equivalents, direct finance lease receivables and accounts receivable. The Partnership places its cash deposits and temporary cash investments with creditworthy, high quality financial institutions. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Partnership. Accounts receivable represent amounts due from lessees in various industries, related to equipment on operating and direct financing leases.
The Partnership records a provision for doubtful accounts to provide for estimated credit losses in its portfolio. The allowance for doubtful accounts is based on an analysis of delinquency, an assessment of overall risk and a review of historical loss experience. 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 - Residual values of the Partnership's asset portfolio are periodically reviewed to determine whether events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The events or changes in circumstances which generally indicate that the residual value of an asset may be 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.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset's expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets simultaneously, if held in quantity, or to dispose of the asset quickly. Impairment is measured as the difference between the fair value of the assets and its carrying value on the measurement date.
Recent Accounting Pronouncements
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. The Statement requires that contracts with comparable characteristics be accounted for similarly and clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except in certain circumstances, and for hedging relationships designated after June 30, 2003. The adoption of this standard did not have a material effect on the Partnership's financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures in its statements of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. For nonpublic entities, the effective date of the provisions of SFAS No. 150 that relate to mandatorily redeemable financial instruments has been deferred until fiscal years that begin after December 31, 2003. The adoption of this standard is not expected to have a material effect on the Partnership's financial position or results of operations.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. In December 2003, the FASB issued a revision to FIN 46, or Revised Interpretation, to clarify some of the provisions of FIN 46. FIN 46 provides guidance on how to identify a variable interest entity, or VIE, and determine when the assets, liabilities, non-controlling interests, and results of operations of a VIE must be included in a partnership's consolidated financial statements. A partnership that holds variable interests in an entity is required to consolidate the entity if the partnership's interest in the VIE is such that the partnership will absorb a majority of the VIE's expected losses and/or receive a majority of the entity's expected residual returns, if any. VIE's created after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on the original interpretation or the Revised Interpretations. However, the Revised Interpretations must be applied no later than the first quarter of fiscal year 2004. VIE's created after January 1, 2004 must be accounted for under the Revised Interpretations. There has been no material impact to the Partnership's financial statements and there is no expected impact from the adoption of the deferred provisions in the first quarter of fiscal year 2004.
The Partnership does not believe that any other recently issued, but not yet effective, accounting standards will have a material effect on the Partnership's financial position or results of operations.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
Item 7A.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk ----------------------------------------------------------
The Partnership is exposed to certain market risks, including changes in interest rates and the demand for equipment (and the related residuals) owned by the Partnership and its investees. Except as discussed below, the Partnership believes its exposure to other market risks 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.
The Partnership manages its exposure to equipment and residual risk by monitoring the equipment leasing market and maximizing the re-marketing proceeds received through re-leasing or sale of equipment.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
Item 8.
Item 8. Consolidated Financial Statements ---------------------------------
Index to Consolidated Financial Statements Page Number -----------
Independent Auditors' Reports 14-15
Consolidated Balance Sheets as of December 31, 2003 and 2002 16
Consolidated Statements of Operations for the Years Ended December 31, 2003, 2002 and 2001 17
Consolidated Statement of Changes in Partners' Equity for the Years Ended December 31, 2001, 2002 and 2003 18
Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001 19-20
Notes to Consolidated Financial Statements 21-32
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 2003
(With Independent Auditors' Report Thereon)
The Partners ICON Cash Flow Partners, L.P., Series E
INDEPENDENT AUDITOR'S REPORT ----------------------------
We have audited the accompanying consolidated balance sheets of ICON Cash Flow Partners, L.P., Series E (a Delaware limited partnership) and subsidiaries as of December 31, 2003 and 2002 and the related consolidated statements of operations, changes in partners' equity and cash flows for each of the two years in the period ended December 31, 2003. 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 United 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.
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 and subsidiaries as of December 31, 2003 and 2002 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1, the Partnership's reinvestment period ended July 31, 1998 and its disposition period commenced. During the disposition period the Partnership will distribute substantially all distributable cash from operations and equipment sales to the partners and begin the orderly termination of its operations and affairs.
/s/ Hays & Company LLP
March 19, 2004 New York, New York
Independent Auditors' Report ----------------------------
The Partners ICON Cash Flow Partners, L.P., Series E:
We have audited the accompanying consolidated statements of operations, partners' equity, and cash flows of ICON Cash Flow Partners, L.P., Series E (a Delaware limited partnership) for the year ended December 31, 2001. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted in the United 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 audit provides 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 results of the operations and the cash flows of ICON Cash Flow Partners, L.P., Series E for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.
/s/KPMG LLP April 15, 2002
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31, 2003 and 2002
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, 2003, 2002 and 2001
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Consolidated Statement of Changes in Partners' Equity
For the Years Ended December 31, 2001, 2002 and 2003
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, 2003, 2002 and 2001
(continued on next page)
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Statements of Cash Flows (continued)
For the Years Ended December 31, 2003, 2002 and 2001
Supplemental Disclosures of Cash Flow Information - -------------------------------------------------
For the years ended December 31, 2003, 2002 and 2001, non-cash activities included the following:
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2003, 2002 and 2001
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 by the General Partner. 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 2003, the Partnership redeemed 2,556 limited partnership units resulting in 607,855.51 limited partnership units outstanding at December 31, 2003.
The Partnership's reinvestment period ended July 31, 1998 and the Partnership commenced its disposition period. During the disposition period the Partnership will distribute substantially all distributable cash from operations and equipment sales to the partners and continue the orderly termination of its operations and affairs. The Partnership will not invest in any additional finance or lease transactions during the disposition period.
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 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 commencing with each limited partner's admission to the Partnership, (3) re-invested substantially all undistributed cash from operations and cash from sales of equipment and financing transactions during the reinvestment period; and (4) commenced the disposition period and begun to sell the Partnership's investments and distribute the cash from sales of such investments to its partners.
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.
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
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates primarily include the allowance for doubtful accounts and unguaranteed residual values. In addition, management is required to disclose contingent assets and contingent liabilities. Actual results could differ from those estimates.
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 Cash Flow Partners L.L.C. I ("ICON Cash Flow LLC I") and ICON Receivables 1997-B LLC ("1997-B"). All inter-company accounts and transactions have been eliminated in consolidation. 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.
Cash and Cash Equivalents - Cash and cash equivalents are defined as cash in banks and highly liquid investments with original maturity dates of three months or less. The Partnership's cash and cash equivalents are held principally at one financial institution and at times may exceed insured limits.
Leases and Revenue Recognition - The Partnership accounts for owned equipment leased to third parties as finance leases, or operating leases, as appropriate. Initial direct costs are capitalized and are amortized over the terms of the related leases using the interest or straight-line method, 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 and depreciated on the straight-line method over the lease term to its estimated residual value at lease termination and is subject to the Partnership's impairment review policy. Related lease rentals are recognized on the straight line method over the lease terms. Billed and uncollected operating lease receivables are included in other assets.
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.
Credit Risk - Financial instruments that potentially subject the Partnership to concentrations of credit risk include cash and cash equivalents, direct finance lease receivables and accounts receivable. The Partnership places its cash deposits and temporary cash investments with creditworthy, high quality financial institutions. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Partnership. Accounts receivable represent amounts due from lessees in various industries, related to equipment on operating and direct financing leases.
The Partnership records a provision for doubtful accounts to provide for estimated credit losses in its portfolio. The allowance for doubtful accounts is based on an analysis of delinquency, an assessment of overall risk and a review of historical loss experience. 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.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Impairment - Residual values of the Partnership's asset portfolio are periodically reviewed to determine whether events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The events or changes in circumstances which generally indicate that the residual value of an asset may be 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.
An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset's expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets simultaneously, if held in quantity, or to dispose of the asset quickly. Impairment is measured as the difference between the fair value of the assets and its carrying value on the measurement date.
Fair Value of Financial Instruments - Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures About Fair Values of Financial Instruments," requires disclosures about the fair value of financial instruments, except for lease related assets and liabilities. Separate disclosure of fair value information as of December 31, 2003 and 2002 with respect to the Partnership's assets and liabilities is not separately provided since (i) SFAS No. 107 does not require fair value disclosures of lease arrangements and (ii) the carrying value of financial assets, other than lease related investments, and the recorded value of payables approximates market value.
Income Taxes - No provision for income taxes has been recorded since the liability for such taxes is that of each of the partners rather than the Partnership. The Partnership's income tax returns are subject to examination by the federal and state taxing authorities, and changes, if any, could adjust the individual income taxes of the partners.
Reclassifications - Certain items from prior years have been reclassified to conform to the presentation in 2003.
Recent Accounting Pronouncements - In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. The Statement requires that contracts with comparable characteristics be accounted for similarly and clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except in certain circumstances, and for hedging relationships designated after June 30, 2003. The adoption of this standard did not have a material effect on the Partnership's financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures in its
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
statements of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. For nonpublic entities, the effective date of the provisions of SFAS No. 150 that relate to mandatorily redeemable financial instruments has been deferred until fiscal years that begin after December 31, 2003. The adoption of this standard is not expected to have a material effect on the Partnership's financial position or results of operations.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. In December 2003, the FASB issued a revision to FIN 46, or Revised Interpretation, to clarify some of the provisions of FIN 46. FIN 46 provides guidance on how to identify a variable interest entity, or VIE, and determine when the assets, liabilities, non-controlling interests, and results of operations of a VIE must be included in a partnership's consolidated financial statements. A partnership that holds variable interests in an entity is required to consolidate the entity if the partnership's interest in the VIE is such that the partnership will absorb a majority of the VIE's expected losses and/or receive a majority of the entity's expected residual returns, if any. VIE's created after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on the original interpretation or the Revised Interpretations. However, the Revised Interpretations must be applied no later than the first quarter of fiscal year 2004. VIE's created after January 1, 2004 must be accounted for under the Revised Interpretations. There has been no material impact to the Partnership's financial statements and there is no expected impact from the adoption of the deferred provisions in the first quarter of fiscal year 2004.
The Partnership does not believe that any other recently issued, but not yet effective, accounting standards will have a material effect on the Partnership's financial position or results of operations.
3. Joint Ventures
The Partnership and its affiliates formed five joint ventures for the purpose of acquiring and managing various assets. The Partnership and its affiliates have identical investment objectives and participate on the same terms and conditions. The Partnership has a right of first refusal to purchase the equipment, on a pro-rata basis, if any of the affiliates desire to sell their interest in the equipment.
Consolidated Joint Ventures
The two joint ventures described below are majority owned and are consolidated with the Partnership.
ICON Cash Flow Partners L.L.C. ------------------------------
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, for the purpose of acquiring and managing an aircraft on lease with a U.S. based commercial airline. The Partnership and L.P. Six acquired interests of 99% and 1%, respectively, in ICON Cash Flow LLC. In 1997, upon the scheduled termination of the lease, the aircraft was remarketed to Aerovias de Mexico, S.A. de C.V. ("Aeromexico") under a lease that originally expired in October 2002. At that time, an extension agreement was entered into with Aeromexico which provided for an initial 15 month rental at $75,000 per month. At the end of the 15 month
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
renewal period, Aeromexico had the option to renew for two additional twelve-month periods at similar monthly rental rates. Aeromexico has exercised its first right to renew and the lease expiration was extended to January 2005. ICON Cash Flow LLC acquired the aircraft, assuming non-recourse debt and utilizing cash received from the Partnership and L.P. Six. Profits, losses, excess cash and disposition proceeds of the joint venture are allocated 99% to the Partnership and 1% to L.P. Six. The Partnership's consolidated financial statements include 100% of the assets, liabilities, revenues and expenses of ICON Cash Flow LLC. L.P. Six's investment in ICON Cash Flow LLC is reflected as minority interest in joint venture on the Partnership's consolidated balance sheets and as minority interest (income) expense on its consolidated statements of operations.
ICON Receivables 1997-B LLC ---------------------------
In August 1997, the Partnership and its affiliates, L.P. Six and ICON Cash Flow Partners L.P. Seven ("L.P. Seven"), formed 1997-B for the purpose of securitizing the cash flow collections from a portfolio of leases. The Partnership, L.P. Six and L.P. Seven each contributed cash, equipment leases and residuals and received a 75.00%, 8.33% and 16.67% interest, respectively, in 1997-B.
The Partnership's consolidated financial statements include 100% of the assets and liabilities and revenues and expenses of 1997-B. L.P. Six and L.P. Seven's investments in 1997-B have been recorded as minority interests in consolidated joint ventures on the consolidated balance sheets and statements of operations.
Unconsolidated 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 on lease with a U.S. based commercial airline. The Partnership and L.P. Six acquired interests of 1% and 99%, respectively, in ICON Cash Flow LLC II. In 1997, upon the scheduled termination of the lease, the aircraft was remarketed to Aeromexico under a lease that expired in November 2002. At that time, an extension agreement was entered into with Aeromexico which provided for an initial 15 month rental at $75,000 per month. At the end of the 15 month renewal period, Aeromexico had the option to renew for two additional twelve-month periods at similar monthly rental rates. Aeromexio has exercised its first right to renew and the lease expiration was extended to January 2005. ICON Cash Flow LLC II acquired the aircraft, assuming non-recourse debt and utilizing cash received from the Partnership and L.P. Six. Profits, losses, excess cash and disposition proceeds are allocated 1% to the Partnership and 99% to L.P. Six. The outstanding non-recourse debt at December 31, 2003 was $9,043,249.
Information as to the financial position and results of operations of ICON Cash Flow LLC II as of and for the years ended December 31, 2003 and 2002 is summarized below:
December 31, 2003 December 31, 2002 ----------------- -----------------
Assets $ 12,736,517 $ 15,750,363 =============== ===============
Liabilities $ 9,091,902 $ 8,932,485 =============== ===============
Equity $ 3,644,615 $ 6,817,878 =============== ===============
Partnership's share of equity $ 36,446 $ 68,179 =============== ===============
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership) Notes to Consolidated Financial Statements - Continued
For the Year Ended For the Year Ended December 31, 2003 December 31, 2002 ----------------- -----------------
Net loss $ (3,173,263) $ (345,864) =============== ===============
Partnership's share of net loss $ (31,733) $ (3,459) =============== ===============
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 which was on lease to Continental Airlines, Inc. The aircraft is a 1976 McDonnell Douglas DC-10-30 with an original cost of $11,429,751. The original lease, which was accounted for as a leveraged lease, expired on April 30, 2003. Effective May 1, 2003, the aircraft was re-leased to World Airlines, Inc. on a power-by-the-hour basis. 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.
Information as to the financial position and results of operations of ICON Cash Flow LLC III as of the years ended December 31, 2003 and 2002 is summarized below:
December 31, 2003 December 31, 2002 ----------------- -----------------
Assets $ 2,287,230 $ 5,337,603 =============== ===============
Liabilities $ - $ - =============== ================
Equity $ 2,287,230 $ 5,337,603 =============== ===============
Partnership's share of equity $ 22,872 $ 53,376 =============== ===============
For the Year Ended For the Year Ended December 31, 2003 December 31, 2002 ----------------- -----------------
Net (loss) income $ (2,746,103) $ 483,785 =============== ===============
Partnership's share of net (loss) income $ (27,461) $ 4,838 =============== ===============
Distributions $ 304,270 $ - =============== ===============
Partnership's share of distributions $ 3,043 $ - =============== ===============
ICON Receivables 1997-A LLC - ---------------------------
In March and September 1997, the Partnership and affiliates, 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 LLC ("1997-A") for the purpose of securitizing the cash flow collections from a portfolio of leases. As of December 31, 2003, the Partnership, Series D, L.P. Six and L.P. Seven own 31.19%, 17.81%, 31.03% and 19.97% interests, respectively, in 1997-A.
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 1997-A as of and for the years ended December 31, 2003 and 2002 is summarized below:
December 31, 2003 December 31, 2002 ---------------- -----------------
Assets $ 810,802 $ 694,761 =============== ===============
Liabilities $ 595,106 $ 390,389 =============== ===============
Equity $ 215,696 $ 304,372 =============== ===============
Partnership's share of equity $ 67,276 $ 94,934 =============== ===============
For the Year Ended For the Year Ended December 31, 2003 December 31, 2002 ----------------- -----------------
Net (loss) income $ (88,676) $ 155,235 =============== ===============
Partnership's share of net (loss) income $ (27,658) $ 48,418 =============== ===============
4. Receivables Due in Installments
Non-cancelable minimum amounts due on finance leases and financings are as follows:
Year Ending Finance December 31, Leases Financings Total ------------ ------ ---------- -----
2004 $ 1,441,265 $ 2,446,433 $ 3,887,698 2005 24,847 - 24,847 ---------------- ------------- ------------
$ 1,466,112 $ 2,446,433 $ 3,912,545 ================ ============= =============
During 2003, equipment recorded as a finance lease with a net book value of $1,489,239 was reclassified to equipment held for sale.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The allowance for doubtful accounts related to the investments in finance leases and financings consisted of the following:
5. Investment in Operating Leases
The investment in operating leases at December 31, 2003, 2002 and 2001 consisted of the following:
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
During 2003 the Partnership reduced the salvage value on the Aeromexico aircraft. An impairment loss of $1,500,000 was recorded as a result of an appraisal which indicated a lower fair market value at lease termination than initially estimated.
The lease with Aeromexico (as discussed in Note 3) accounted for approximately 58% of the Partnership's rental and finance income during the year ended December 31, 2003.
Non-cancelable minimum rental amounts due on operating leases are as follows:
Year Ending December 31, Amount ------------ ------
2004 $ 900,000 2005 75,000 --------------- $ 975,000 ===============
6. Notes Payable
The non-recourse notes payable consist of:
(i) At December 31, 2003 and 2002, notes payable totaling $158,749 and $1,245,283, respectively, bearing interest at 6.19% per annum and payable from receivables related to the portfolio of leases that secure the debt, and
(ii) At December 31, 2003 and 2002, $9,406,301 and $10,107,227, respectively, of other non-recourse notes bearing interest at rates ranging from 7.48% to 11.83%, of which $9,383,441 and $9,186,243, respectively, is secured by the aircraft on lease with Aeromexico. The note matured in January 2004 and the Partnership is currently negotiating an extension of the maturity date through the extended lease term of January 2005.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
7. 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, 2001, 2002 and 2003 are as follows:
Charged to Operations ----------
Management fees $ 537,237 Administrative expense reimbursements 339,737 -------------
Year ended December 31, 2001 $ 876,974 =============
Management fees $ 354,788 Administrative expense reimbursements 194,272 -------------
Year ended December 31, 2002 $ 549,060 =============
Management fees $ 208,593 Administrative expense reimbursements 128,341 -------------
Year ended December 31, 2003 $ 336,934 =============
In accordance with the terms of the Management Agreement, the Partnership pays the General Partner management fees based on a percentage of rentals received either directly by the Partnership or through joint ventures (ranging from 1% to 7%). In addition, the General Partner is reimbursed for administrative expenses incurred by it in connection with the Partnership's operations.
At December 31, 2003 amounts due to General Partner and affiliates of $594,982 consisted of approximately $43,000 due to the General Partner for management fees and administrative expense reimbursements and approximately $551,982 due to affiliates that relates to rents received on behalf of such affiliates. . At December 31, 2002, there were no liabilities to the General Partner and amounts due to affiliates was $529,572.
The Partnership has investments in five joint ventures with other partnerships sponsored by the General Partner.
8. Interest income and other
Interest income and other was $398,275, $2,354,817, and $103,589, respectively, for the years ended December 31, 2003, 2002 and 2001. This category captures bank interest as well as any other miscellaneous income. For the year ended December 31, 2003 miscellaneous income included, in part, a $198,241 revised estimate of residual sharing values as well as revised estimates of other liabilities. For the year ended December 31, 2002 miscellaneous income included a $2,017,763 revised estimate of residual sharing values.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
9. Tax Information (Unaudited)
The following table reconciles net (loss) income for financial statement reporting purposes to loss for federal income tax reporting purposes for the years ended December 31:
As of December 31, 2003, the partners' capital accounts for financial statement reporting purposes totaled $3,764,925 compared to the partners' capital accounts for federal income tax reporting purposes of $4,572,065 (unaudited). The difference arises primarily from sales expenses and commissions reported as a reduction in the partners' capital for financial statement reporting purposes but not for federal income tax reporting purposes, offset by temporary differences related to direct finance leases, depreciation and amortization, recovery for losses and gain (loss) on sales of equipment.
10. Selected Quarterly Financial Data (Unaudited)
The following table is a summary of selected financial data by quarter for the years ended December 31, 2003 and 2002:
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
(1) In the fourth quarter of 2003 the Partnership recorded an impairment of $1,500,000 based upon a recent appraisal of the Aeromexico aircraft.
(2) In the third quarter of 2002 the Partnership reversed the provision for bad debts by $700,000.
(3) In the fourth quarter of 2002 the Partnership recorded a one-time adjustment of $2,017,763, due to a revised estimate of residual sharing values, which is captured in the category interest income and other.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
The information required by Item 304 of Regulation S-K was filed as part of the Partnership's Form 8-K filed on February 5, 2003.
Item 9A.
Item 9A. Control and Procedures ----------------------
The Partnership carried out an evaluation, under the supervision and with the participation of management of ICON Capital Corp., the Manager of the Partnership, including the Chief Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures as of the end of the period covered by this report pursuant to the Securities Exchange Act of 1934. Based upon the evaluation, the Chief Executive Officer and the Principal Financial Officer concluded that the Partnership's disclosure controls and procedures were effective.
There were no significant changes in the Partnership's internal control over financial reporting during the Partnership's fourth fiscal quarter that have materially affected, or are likely to materially affect, the Partnership's internal control over financial reporting.
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 100 Fifth Avenue, New York, New York 10011, and its telephone number is (212) 418-4700. 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.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
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
Beaufort J.B. Clarke, age 57, 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 43, 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 50, 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 19 years of senior management experience in the leasing business.
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, 2003, 2002 and 2001.
In accordance with the terms of the Management Agreement, the Partnership pays the General Partner management fees based on a percentage of rentals received either directly by the Partnership or through joint ventures (ranging from 1% to 7%). In addition, the General Partner is reimbursed for expenses incurred by it in connection with the Partnership's operations. The General Partner also owns a 1% interest in the profits and distributions of the Partnership.
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.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
(b) As of March 30, 2004, 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 Amount Beneficially Percent of Class 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.
Item 13.
Item 13. Certain Relationships and Related Transactions ----------------------------------------------
See Item 11 for a discussion of the Partnership's related party transactions.
See Notes 3 and 7 to the consolidated financial statements for a discussion of the Partnership's related party transactions.
Item 14.
Item 14. Principal Accounting Fees and Services
2003 2002 Description ---- ---- -----------
Audit fees $ 24,000 $ - Audit and review Audit related fees - - Tax fees 1,000 - Tax compliance All other fees - - ----------- -------- Total $ 25,000 $ - =========== ========
PART IV
Item 15.
Item 15. 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 the information required to be set forth therein is included in the consolidated financial statements or notes thereto.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
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)
(iv) Unconsolidated Joint Venture Financial Statements ICON Receivables 1997-A LLC - as of and for the years ended December 31, 2002 and 2001
(b) Reports on Form 8-K
None
(c) Exhibits
31.1 Rule 13a-14(a)/15d-14(a) certifications
31.2 Rule 13a-14(a)/15d-14(a) certifications
32.1 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.
32.2 Certification of Executive Vice President and Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
ICON Cash Flow Partners, L.P., Series E (A Delaware Limited Partnership)
December 31, 2003
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 30, 2004 /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 30, 2004 /s/ Beaufort J.B. Clarke --------------------------------- Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Date: March 30, 2004 /s/ Paul B. Weiss --------------------------------- Paul B. Weiss President and Director
Date: March 30, 2004 /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.
Exhibit 31.1
Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-K ---------------------
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Cash Flow Partners L.P. Series E;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the board of directors of the Corporate Manager (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control, are reasonably likely to materially affect the Partnership ability to record, process, summarize and report financial information and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting any corrective actions with regard to significant deficiencies and material weaknesses.
Dated: March 30, 2004
/s/ Beaufort J.B. Clarke - ----------------------------- Beaufort J. B. Clarke Chairman and Chief Executive Officer ICON Capital Corp. sole General Partner of ICON Cash Flow Partners L.P. Series E
Exhibit 31.2
Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-K ---------------------
I, Thomas W. Martin, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Cash Flow Partners L.P. Series E;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the board of directors of the Corporate Manager (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control, are reasonably likely to materially affect the Partnership ability to record, process, summarize and report financial information and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting any corrective actions with regard to significant deficiencies and material weaknesses.
Dated: March 30, 2004
/s/ Thomas W. Martin - ---------------------------------------- Thomas W. Martin Executive Vice President (Principal Financial and Accounting Officer of the General Partner of the Registrant) ICON Capital Corp. sole General Partner of ICON Cash Flow Partners L.P. Series E
EXHIBIT 32.1
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
I, Beaufort J.B. Clarke, Chairman and Chief Executive Officer of ICON Capital Corp., the sole General Partner of ICON Cash Flow Partners L.P. Series E, in connection with the Annual Report of ICON Cash Flow Partners L.P. Series E. (the "Partnership") on Form 10-K for the year ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Annual Report") certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
(1) the Annual Report 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 Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership
Dated: March 30, 2004
/s/ Beaufort J.B. Clarke ------------------------------------------------------- Beaufort J.B. Clarke Chairman and Chief Executive Officer ICON Capital Corp. sole General Partner of ICON Cash Flow Partners L.P. Series E
EXHIBIT 32.2
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
I, Thomas W. Martin, Executive Vice President (Principal Financial and Accounting Officer) of ICON Capital Corp., the sole General Partner of ICON Cash Flow Partners L.P. Series E, in connection with the Annual Report of ICON Cash Flow Partners L.P. Series E. (the "Partnership") on Form 10-K for the year ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Annual Report") certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
(1) the Annual Report 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 Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership
Dated: March 30, 2004
/s/ Thomas W. Martin ------------------------------------------------------- Thomas W. Martin Executive Vice President (Principal Financial and Accounting Officer) ICON Capital Corp. sole General Partner of ICON Cash Flow Partners, L.P., Series E