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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1998
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the transition period from to
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Commission File Number 33-36376
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ICON Cash Flow Partners L.P. Six
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3723089
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 Mamaroneck Avenue, Harrison, New York 10528-1632
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 698-0600
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class Name of each exchange
on which registered
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests
- --------------------------------------------------------------------------------
(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
TABLE OF CONTENTS
Item Page
- ---- ----
PART I
1. Business 3-4
2. Properties 4
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 5
6. Selected Consolidated Financial and Operating Data 6
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 7-11
8. Consolidated Financial Statements and Supplementary Data 12-33
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 34
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 34-35
11. Executive Compensation 36
12. Security Ownership of Certain Beneficial Owners
and Management 36
13. Certain Relationships and Related Transactions 36
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 37
SIGNATURES 38
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
PART I
Item 1. Business
General Development of Business
ICON Cash Flow Partners L.P. Six (the "Partnership") was formed on July 8,
1993 as a Delaware limited partnership. The Partnership commenced business
operations on its initial closing date, March 31, 1994, with the admission of
16,537.73 limited partnership units at $100 per unit representing $1,653,773 of
capital contributions. Between April 1, 1994 and December 31, 1994, 111,166.37
additional units were admitted representing $11,116,637 of capital contributions
and from January 1, 1995 to November 8, 1995 (the final closing date),
256,153.02 additional units were admitted, bringing the final admission to
383,857.12 units totaling $38,385,712 in capital contributions. Between 1995 and
1997 the Partnership redeemed 3,179.00 limited partnership units. In 1998 the
Partnership redeemed 1,324.92 units leaving 379,353.20 limited partnership units
outstanding at December 31, 1998. The sole general partner is ICON Capital Corp.
(the "General Partner").
Narrative Description of Business
The Partnership is an equipment leasing fund. The principal 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 intends to: (1) acquire a diversified portfolio of short-term,
high-yield lease and financing transactions, (2) make monthly cash distributions
to its limited partners from cash from operations, commencing with each limited
partner's admission to the Partnership, continuing through the reinvestment
period, which period will end no later than November 2000; (3) re-invest
substantially all undistributed cash from operations and cash from sales in
additional equipment and financing transactions during the reinvestment period;
and (4) sell the Partnership's investments and distribute the cash from sales of
such investments to its limited partners within five to eight and one-half years
of November 1995.
The equipment leasing industry is highly competitive. In initiating its
leasing transactions, the Partnership competes 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.
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
Lease and Financing Transactions
For the years ended December 31, 1998 and 1997, the Partnership purchased
and leased or financed $6,901,428 and $2,129,099 of equipment, respectively,
with a weighted average initial transaction term of 33 and 58 months,
respectively. Included in the summary of equipment cost by category below is
100% of the equipment cost acquired by a joint venture in which the Partnership
has a 99% interest. The Partnership accounts for this investment by
consolidating 100% of the assets and liabilities of the joint ventures and
reflecting, as a liability, the related minority interest. The equipment
purchased by four other joint ventures in which the Partnership has a less than
50% interest are not included in this table. At December 31, 1998, the weighted
average initial transaction term of the portfolio was 49 months. A summary of
the portfolio equipment cost by category held at December 31, 1998 and 1997 is
as follows:
December 31, 1998 December 31, 1997
--------------------- ---------------------
Category Cost Percent Cost Percent
Aircraft ................. $19,100,646 27.1% $36,659,753 40.4%
Manufacturing & production 17,271,925 24.4 16,137,468 17.8
Telecommunications ....... 13,814,671 19.6 14,363,494 15.8
Computer systems ......... 10,579,442 15.0 16,694,856 18.4
Material handling ........ 4,084,138 5.8 315,222 .3
Printing ................. 1,376,438 2.0 2,127,113 2.3
Restaurant equipment ..... 1,290,238 1.8 1,272,845 1.4
Furniture and fixtures ... 910,706 1.3 1,092,758 1.3
Medical .................. 796,703 1.1 948,076 1.0
Construction ............. 702,731 1.0 -- --
Retail systems ........... 377,233 .5 693,753 .8
Video production ......... 130,023 .2 94,324 .1
Miscellaneous ............ 117,118 .2 341,988 .4
----------- ----- ----------- -----
$70,552,012 100.0% $90,741,650 100.0%
=========== ===== =========== =====
The Partnership has one lease which individually represents greater than
10% of the total portfolio equipment cost at December 31, 1998. The lease is
with Aerovias de Mexico, S.A. de C.V. ("Aero Mexico"); the underlying equipment
is an aircraft and the asset represented 27.1% of the total portfolio equipment
cost at December 31, 1998.
Item 2. Properties
The Partnership neither owns nor leases office space or equipment for the
purpose of managing its day-to-day affairs.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal proceedings.
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 1998.
PART II
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 units. It
is unlikely that any such market will develop.
Number of Equity Security Holders
Title of Class as of December 31,
-------------- ---------------------------------
1998 1997
---- ----
Limited Partners 2,269 2,260
General Partner 1 1
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
Item 6. Selected Consolidated Financial and Operating Data
Year Ended December 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Total revenue $ 6,162,370 $ 6,510,932 $ 9,576,756 $ 6,729,913 $ 203,858
============= ============== ============= ============= =============
Net income (loss) $ 467,639 $ 35,620 $ (366,967) $ 76,068 $ 70,890
============= ============== ============= ============= =============
Net income (loss) allocable to
limited partners $ 462,963 $ 35,264 $ (363,297) $ 75,307 $ 70,181
============= ============== ============= ============= =============
Net income (loss) allocable
to the General Partner $ 4,676 $ 356 $ (3,670) $ 761 $ 709
============= ============== ============= ============= =============
Weighted average limited
partnership units outstanding 379,984 381,687 383,196 260,453 31,755
============= ============== ============= ============= =============
Net income (loss) per weighted
average limited partnership unit $ 1.22 $ .09 $ (.95) $ .29 $ 2.21
============= ============= ============= ============= ============
Distributions to limited partners $ 4,085,189 $ 4,102,940 $ 4,119,354 $ 2,543,783 $ 311,335
============= ============== ============= ============= =============
Distributions to the General Partner $ 41,261 $ 41,444 $ 41,613 $ 25,694 $ 3,145
============= ============== ============= ============= =============
December 31,
------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Total assets $ 44,487,621 $ 54,837,228 $ 81,805,142 $ 103,090,950 $ 14,381,964
============== ============== ============== ============== ==============
Partners' equity $ 17,884,454 $ 21,605,338 $ 25,864,652 $ 30,446,813 $ 10,803,815
============== ============== ============== ============== ==============
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. Six
(A Delaware Limited Partnership)
December 31, 1998
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, an operating lease, financings, equity investments in joint ventures and
a leveraged lease representing 49%, 36%, 11%, 4%, and 0% of total investments at
December 31, 1998, respectively, and 55%, 33%, 4%, 4% and 4% of total
investments at December 31, 1997, respectively.
Results of Operations
Years Ended December 31, 1998 and 1997
For the years ended December 31, 1998 and 1997, the Partnership purchased
and leased or financed equipment with an initial cost of $3,100,320 and
$2,129,099, respectively, to 11 and 33 lessees or equipment users, respectively.
Revenues for the year ended December 31, 1998 were $6,162,370, representing
a decrease of $348,562 or 5% from 1997. The decrease in revenues was due to a
decrease in finance income of $958,314 or 31%, a decrease in income from
leveraged leases of $309,473 or 59% and a decrease in income from equity
investments in joint ventures of $112,916 or 24% from 1997. These decreases were
partially offset by an increase in net gain on sales or remarketing of equipment
of $776,525, an increase in rental income of $187,751 or 8%, and an increase in
interest income and other of $67,865 or 67% from 1997. The decrease in finance
income resulted from the decrease in the average size of the finance lease
portfolio from 1997 to 1998. Income from the leveraged lease decreased due to
the Partnership's 1998 termination of its lease with Airbus Industrie
("Airbus"). Income from the equity investments in joint ventures decreased as a
result of one of the underlying joint venture's increasing its provision for bad
debts. In December 1998, the Partnership entered into a new joint venture,
however, there were no revenues generated from such joint venture in 1998. The
net gain on sales or remarketing of equipment increased due primarily to the
gain on termination of the Airbus lease. The Partnership's operating lease with
Alaska Air terminated in April 1997 and the asset was subsequently leased to
Aero Mexico at a greater contractual rental rate, and as a result, rental income
increased from 1997 to 1998. Interest income and other increased due to an
increase in the average cash balance, and an increase in late charges from 1997
to 1998.
Expenses for the year ended December 31, 1998 were $5,694,731, representing
a decrease of $780,581 or 12% from 1997. The decrease in expenses was due to a
decrease in interest expense of $483,670 or 18%, a decrease in amortization of
initial direct costs of $177,703 or 17%, a decrease in provision for bad debts
of $130,277 or 71%, a decrease in management fees of $123,168 or 11%, a decrease
in administrative expense reimbursements of $61,991 or 11%, a decrease in
depreciation expense of $8,482 or 1%, and a decrease in minority interest in
joint venture of $1,240 or 16%. These decreases were partially offset by an
increase in general and administrative expense of $205,950 or 115%. Interest
expense decreased due to a decrease in the average debt outstanding from 1997 to
1998. Amortization of initial direct costs, management fees and administrative
expense reimbursements decreased due to a decrease in the average size of the
portfolio from 1997 to 1998. The decrease in depreciation expense resulted from
the Partnership's restructuring of its operating lease when it leased the
aircraft to Aero Mexico. Minority interest in joint venture decreased due to the
Partnership's September
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
1997 purchase of the minority interests relating to ICON Asset Acquisition LLC.
As a result of the ongoing analysis of delinquency trends and loss experience,
and an assessment of overall credit risk, the Partnership determined that a
provision of $52,997 for bad debt was required for the year ended December 31,
1998. The increase in general and administrative expenses was primarily related
to an increase in legal expense which included the accelerated write off of
capitalized legal fees related to the Partnership's termination of its lease
with Airbus.
Net income for the years ended December 31, 1998 and 1997 was $467,639 and
$35,620, respectively. The net income per weighted average limited partnership
unit was $1.22 and $.09 for 1998 and 1997, respectively.
Years Ended December 31, 1997 and 1996
For the years ended December 31, 1997 and 1996, the Partnership purchased
and leased or financed equipment with an initial cost of $2,129,099 and
$45,524,755, respectively, to 33 and 242 lessees or equipment users,
respectively.
Revenues for the year ended December 31, 1997 were $6,510,932, representing
a decrease of $3,065,824 or 32% from 1996. The decrease in revenues was due to a
decrease in finance income of $3,212,672 or 51%, a decrease in rental income of
$164,370 or 7%, a decrease in interest income and other of $251,900 or 71% and a
decrease in net gain on sales or remarketing of equipment of $280,051 or 83%
from 1996. These decreases were partially offset by an increase in income from
equity investment in joint ventures of $459,665 and an increase in income from
the leveraged lease of $383,504 from 1996. The decrease in finance income
resulted from the decrease in the average size of the finance lease portfolio
from 1996 to 1997. The Partnership's operating lease with Alaska Air terminated
in April 1997. The asset was subsequently leased to Aero Mexico in June 1997.
Although contractual rents under the new Aero Mexico lease are greater than
contractual rents under the Alaska Air lease, rental income decreased due to
1997 rental income representing nine months of contractual rents versus a full
year of contractual rents in 1996. Interest income and other decreased due to a
decrease in the average cash balance and a reduction in late charges from 1996
to 1997. The net gain on sales or remarketing decreased due to a decrease in the
number of leases maturing, and the underlying equipment being sold or remarketed
for which proceeds received were in excess of carrying value. Income from equity
investment in joint ventures increased as a direct result of the Partnership's
March and September 1997 contribution to ICON Receivables 1997-A LLC. These
contributions consisted of equipment lease and finance receivables, residuals
and cash totaling $11,129,804. Income from leveraged leases increased due to the
Partnership earning income for the entire twelve month period in 1997 as
compared to three months in 1996.
Expenses for the year ended December 31, 1997 were $6,475,312, representing
a decrease of $3,468,411 or 35% from 1996. The decrease in expenses was due to a
decrease in interest expense of $1,681,987 or 39%, a decrease in provision for
bad debt of $566,726 or 76%, a decrease of general and administrative expense of
$479,006 or 73%, a decrease in amortization of initial direct costs of $278,321
or 21%, a decrease in management fees of $240,680 or 18%, a decrease in
depreciation expense of $103,374 or 12%, a decrease in administrative expense
reimbursements of $94,894 or 15% and a decrease in minority interest in the
joint venture of $23,423 or 75%. Interest expense decreased due to a decrease in
the average debt outstanding from 1996 to 1997. General and administrative
expenses, amortization of
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
initial direct costs, management fees, administrative expense reimbursements and
depreciation decreased due to a decrease in the average size of the portfolio
from 1996 to 1997 and as the result of the Partnership contributing a portion of
its portfolio to a joint venture. The minority interest in joint venture
decreased as a result of the Partnership's acquisition of ICON Asset Acquisition
LLC's entire investment in leases during 1997. As a result of the ongoing
analysis of delinquency trends and loss experience, and an assessment of overall
credit risk, the Partnership determined that a provision of $183,274 for bad
debt was required for the year ended December 31, 1997.
Net income (loss) for the years ended December 31, 1997 and 1996 was
$35,620 and ($366,967), respectively. The net income (loss) per weighted average
limited partnership unit was $.09 and ($.95), respectively.
Liquidity and Capital Resources
The Partnership's primary sources of funds for the years ended December 31,
1998, 1997 and 1996 were net cash (used in) provided by operations of
$3,543,778, $11,225,547 and $9,923,936 and proceeds from sales of equipment of
$4,473,161, $4,336,675 and $8,684,744, respectively. These funds were used to
invest in joint ventures, purchase equipment, make payments on borrowings and
fund cash distributions. The Partnership intends to purchase additional
equipment and fund cash distributions, utilizing cash from operations, proceeds
from sales of equipment and additional borrowings.
The Partnership's notes payable at December 31, 1998 and 1997 totaled
$23,379,315 and $31,187,487, respectively, and consisted of $22,360,201 and
$28,811,864 in non-recourse notes, respectively, which are being paid directly
to the lenders by the lessees, $131,299 and $131,299 in non-recourse residual
value notes, respectively, which will be paid to the extent proceeds are
available in excess of the Partnership's estimated unguaranteed residuals and
$887,815 and $2,244,324 in non-recourse secured notes, respectively, which will
be paid from proceeds from the lease portfolio that secures the financing.
In March 1997 the Partnership, ICON Cash Flow Partners, L.P., Series D
("Series D"), and ICON Cash Flow Partners L.P. Seven ("L.P. Seven"), contributed
and assigned equipment lease and finance receivables and residuals to ICON
Receivables 1997-A LLC ("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, ICON Cash Flow
Partners, L.P., Series E ("Series E") and L.P. Seven contributed and assigned
additional equipment lease and finance receivables and residuals to 1997-A. The
Partnership, Series D, Series E and L.P. Seven received a 31.03%, 17.81% 31.19%
and 19.97% interest, respectively, in 1997-A based on the present value of their
related contributions. 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.
In August 1997 the Partnership, Series E and L.P. Seven formed ICON
Receivables 1997-B LLC ("1997-B"), a special purpose entity formed for the
purpose of originating leases and securitizing its portfolio. The Partnership,
Series E and L.P. Seven contributed $250,000 (8.33% interest), $2,250,000
(75.00% 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
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
Credit Corporation (the "1997-B Warehouse Facility"). 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 original
investment was recorded at cost and is adjusted by its share of earnings, losses
and distributions thereafter.
In December 1998 the Partnership and three affiliates, ICON Cash Flow
Partners, L.P., Series C ("Series C"), L.P. Seven and ICON Income Fund Eight A
L.P. ("Eight A") formed ICON Boardman Funding LLC ("ICON BF"), for the purpose
of acquiring a lease with Portland General Electric. The purchase price totaled
$27,421,810, and was funded with cash and non-recourse debt assumed in the
purchase price. The Partnership, Series C, L.P. Seven and Eight A received a
.5%, .5%, .5% and 98.5% interest, respectively, in ICON BF. The Partnership's
original investment was recorded at cost of $56,960 and will be adjusted by its
share of earnings, losses and distributions, thereafter. Simultaneously with the
acquisition of the Portland General Electric lease by ICON BF, the rent in
excess of the senior debt payments was acquired by the Partnership for
$3,801,108.
Cash distributions to limited partners for the years ended December 31,
1998 and 1997, which were paid monthly, totaled $4,085,189 and $4,102,940,
respectively, of which $462,963 and $35,264 was investment income and $3,622,226
and $4,067,676 was a return of capital, respectively. The monthly annualized
cash distribution rate to limited partners in 1998 and 1997 was 10.75%, of which
1.22% and .09% was investment income and 9.53% and 10.66% was a return of
capital, respectively. The limited partner distribution per weighted average
unit outstanding in 1998 and 1997 was $10.75, of which $1.22 and $.09 was
investment income and $9.53 and $10.66 was a return of capital, respectively.
As of December 31, 1998, except as noted above, there were no known trends
or demands, commitments, events or uncertainties which are likely to have any
material effect on liquidity. As cash is realized operations, sales of equipment
and borrowings, the Partnership will 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.
Year 2000 Issue
The Year 2000 issue arose because many existing computer programs have been
written using two digits rather than four to define the applicable year. As a
result, programs could interpret dates ending in "00" as the year 1900 rather
than the year 2000. In certain cases, such errors could result in system
failures or miscalculations that disrupt the operation of the affected
businesses.
The Partnership uses computer information systems provided by the General
Partner and has no computer information systems of its own. The software related
to the General Partner's primary computer information systems are provided by
third party vendors. The General Partner has formally communicated with these
vendors and has received assurance that their programs are Year 2000 compliant.
In addition, the General Partner has gathered information about the Year 2000
readiness of significant vendors and third-party servicers and continues to
monitor developments in this area. All of the General Partner's peripheral
computer technologies, such as its network operating system and third
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
party software applications, including payroll and electronic banking have been
evaluated and have been found to be Year 2000 compliant. The ultimate impact of
the Year 2000 issue on the Partnership will depend to a great extent on the
manner in which the issue is addressed by the Partnership's lessees. Each of the
Partnership's lessees will have a material self interest in resolving any Year
2000 issue, however, non-compliance on the part of a lessee could result in lost
or delayed revenues to the Partnership. The effect of this risk to the
Partnership is not determinable.
The General Partner is responsible for costs relating to the assessment and
development of its Year 2000 compliance remediation plan, as well as the testing
of the hardware and software owned or licensed for its personal computers. The
General Partner's costs incurred to date and expected future costs are not
material.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page Number
-----------
Independent Auditors' Report 14
Consolidated Balance Sheets as of December 31, 1998 and 1997 15-16
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996 17
Consolidated Statements of Changes in Partners'
Equity for the Years Ended
December 31, 1998, 1997 and 1996 18
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 19-21
Notes to Consolidated Financial Statements 22-33
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1998
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Partners
ICON Cash Flow Partners L.P. Six:
We have audited the accompanying consolidated balance sheets of ICON Cash Flow
Partners L.P. Six (a Delaware limited partnership) as of December 31, 1998 and
1997, 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, 1998. 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 generally accepted auditing
standards. 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. Six as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
-----------------------------------
KPMG LLP
March 12, 1999
New York, New York
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
1998 1997
---- ----
Assets
Cash ....................................... $ 125,260 $ 4,000,250
------------ ------------
Investment in finance leases
Minimum rents receivable ................ 13,507,407 20,412,591
Estimated unguaranteed residual values .. 11,238,451 10,714,403
Initial direct costs .................... 275,189 826,251
Unearned income ......................... (3,371,116) (4,216,807)
Allowance for doubtful accounts ......... (231,149) (110,120)
------------ ------------
21,418,782 27,626,318
Investment in operating leases
Equipment, at cost ...................... 19,100,646 19,100,646
Accumulated depreciation ................ (2,967,204) (2,230,411)
------------ ------------
16,133,442 16,870,235
Investment in financings
Receivables due in installments ......... 5,431,790 2,029,854
Initial direct costs .................... 4,917 21,918
Unearned income ......................... (761,705) (186,139)
Allowance for doubtful accounts ......... (49,913) (5,823)
------------ ------------
4,625,089 1,859,810
------------ ------------
Investments in unconsolidated joint ventures 1,803,243 2,142,619
------------ ------------
Investment in leveraged lease, net ......... -- 1,845,641
------------ ------------
Other assets ............................... 381,805 492,355
------------ ------------
Total assets ............................... $ 44,487,621 $ 54,837,228
============ ============
(continued on next page)
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Balance Sheets (continued)
(unaudited)
1998 1997
---- ----
Liabilities and Partners' Equity
Note payable - non-recourse - secured financing ....... $ 887,815 $ 2,244,324
Notes payable - non-recourse .......................... 22,491,500 28,943,163
Security deposits and deferred credits ................ 2,571,642 1,756,094
Accounts payable - other .............................. 177,397 189,835
Accounts payable to General Partner and affiliates, net 425,089 51,323
Minority interest in consolidated joint venture ....... 49,724 47,151
------------ ------------
26,603,167 33,231,890
Commitments and Contingencies
Partners' equity (deficiency)
General Partner .................................... (149,325) (112,740)
Limited partners (379,353.20 and 380,678.12
units outstanding, $100 per unit original
issue price in 1998 and 1997, respectively) ...... 18,033,779 21,718,078
------------ ------------
Total partners' equity ........................... 17,884,454 21,605,338
------------ ------------
Total liabilities and partners' equity ................ $ 44,487,621 $ 54,837,228
============ ============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31,
1998 1997 1996
---- ---- ----
Revenues
Rental income ......................................... $ 2,435,986 $ 2,248,235 $ 2,412,605
Finance income ........................................ 2,155,913 3,114,227 6,326,899
Net gain on sales or remarketing of equipment ......... 835,048 58,523 338,574
Income from leveraged lease, net ...................... 213,841 523,314 139,810
Income from investments in
unconsolidated joint ventures ....................... 353,141 466,057 6,392
Interest income and other ............................. 168,441 100,576 352,476
----------- ----------- -----------
Total revenues ........................................ 6,162,370 6,510,932 9,576,756
----------- ----------- -----------
Expenses
Interest .............................................. 2,164,887 2,648,557 4,330,544
Management fees - General Partner ..................... 969,546 1,092,714 1,333,394
Amortization of initial direct costs .................. 893,953 1,071,656 1,349,977
Depreciation .......................................... 736,793 745,275 848,649
Administrative expense reimbursements
- General Partner ................................... 485,391 547,382 642,276
General and administrative ............................ 384,414 178,464 657,470
Provision for bad debts ............................... 52,997 183,274 750,000
Minority interest expense in consolidated joint venture 6,750 7,990 31,413
----------- ----------- -----------
Total expenses ........................................ 5,694,731 6,475,312 9,943,723
----------- ----------- -----------
Net income (loss) ........................................ $ 467,639 $ 35,620 $ (366,967)
=========== =========== ===========
Net income (loss) allocable to:
Limited partners ...................................... $ 462,963 $ 35,264 $ (363,297)
General Partner ....................................... 4,676 356 (3,670)
----------- ----------- -----------
$ 467,639 $ 35,620 $ (366,967)
=========== =========== ===========
Weighted average number of limited
partnership units outstanding ......................... 379,984 381,687 383,196
=========== =========== ===========
Net income (loss) per weighted average
limited partnership unit .............................. $ 1.22 $ .09 $ (.95)
=========== =========== ===========
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 1998, 1997 and 1996
Limited Partner Distributions
-----------------------------
Return of Investment Limited General
Capital Income Partners Partner Total
--------- ---------- -------- ------- -----
(Per weighted average unit)
Balance at
December 31, 1995 $ 30,473,182 $ (26,369) $30,446,813
Cash distributions
to partners $10.75 $ - (4,119,354) (41,613) (4,160,967)
Limited partnership units
redeemed (728.00 units) (54,227) - (54,227)
Net loss (363,297) (3,670) (366,967)
------------ --------- -----------
Balance at
December 31, 1996 25,936,304 (71,652) 25,864,652
Cash distributions
to partners $10.66 $ .09 (4,102,940) (41,444) (4,144,384)
Limited partnership units
redeemed (2,186.00 units) (150,550) - (150,550)
Net income 35,264 356 35,620
------------ --------- -----------
Balance at
December 31, 1997 21,718,078 (112,740) 21,605,338
-
Cash distributions
to partners $ 9.53 $1.22 (4,085,189) (41,261) (4,126,450)
Limited partnership units
redeemed (1,324.92 units) (62,073) - (62,073)
Net income 462,963 4,676 467,639
------------ --------- -----------
Balance at
December 31, 1998 $ 18,033,779 $(149,325) $17,884,454
============ ========= ===========
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Cash flows from operating activities:
Net income (loss) ....................................... $ 467,639 $ 35,620 $ (366,967)
------------ ------------ ------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation .......................................... 736,793 745,275 848,649
Rental income - paid directly to lenders by lessees ... (2,435,986) (2,248,235) (2,412,605)
Finance income portion of receivables paid directly
to lenders by lessees ............................... (1,721,166) (2,544,328) (3,542,098)
Amortization of initial direct costs .................. 893,953 1,071,656 1,349,977
Net gain on sales or remarketing of equipment ......... (835,048) (58,523) (338,574)
Income from investments in
unconsolidated joint ventures ....................... (353,141) (466,057) (6,392)
Interest expense on non-recourse financing
paid directly by lessees ............................ 2,041,550 2,408,565 3,123,670
Income from leveraged lease, net ...................... (213,841) (523,314) (139,810)
Minority interest expense in consolidated joint venture 6,750 7,990 31,413
Changes in operating assets and liabilities:
Allowance for doubtful accounts ..................... 165,119 (382,882) 793,905
Distributions received from
unconsolidated joint ventures ..................... 1,000,802 9,742,849 --
Investments in unconsolidated joint ventures ........ (307,714) (850,000) --
Collection of principal - non-financed receivables .. 2,274,995 7,126,659 9,296,801
Other assets ........................................ 49,231 2,012 300,775
Security deposits and deferred credits .............. 815,548 (1,173,286) 2,678,612
Minority interest in consolidated joint venture ..... (4,177) (838,732) (1,033,149)
Accounts payable - other ............................ (40,470) (563,934) 305,351
Accounts payable to General Partner
and affiliates, net ............................... 373,766 69,191 (1,037,286)
Other, net .......................................... 629,175 (87,305) 71,664
------------ ------------ ------------
Total adjustments ................................. 3,076,139 11,189,927 10,290,903
------------ ------------ ------------
Net cash (used in) provided by operating activities . 3,543,778 11,225,547 9,923,936
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sales of equipment ........................ 4,473,161 4,336,675 8,684,744
Equipment and receivables purchased ..................... (6,346,897) (2,198,713) (16,511,707)
Initial direct costs .................................... -- -- (2,164,341)
------------ ------------ ------------
Net cash provided by (used in) investing activities . (1,873,736) 2,137,962 (9,991,304)
------------ ------------ ------------
(continued on next page)
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows - Continued
1998 1997 1996
---- ---- ----
Cash flows from financing activities:
Cash distributions to partners ..................... (4,126,450) (4,144,384) (4,160,967)
Principal payments on non-recourse secured financing (1,356,509) (9,889,949) (8,990,845)
Redemption of limited partnership units ............ (62,073) (150,550) (54,227)
Proceeds from non-recourse securitized debt ........ -- -- 5,941,893
Proceeds from note payable - affiliate loan ........ -- 7,780,328 --
Principal payments on note payable - affiliate ..... -- (7,780,328) --
Proceeds from discounting receivables .............. -- -- 3,171,188
------------ ------------ ------------
Net cash used in financing activities .......... (5,545,032) (14,184,883) (4,092,958)
------------ ------------ ------------
Net decrease in cash .................................. (3,874,990) (821,374) (4,160,326)
Cash at beginning of year ............................. 4,000,250 4,821,624 8,981,950
------------ ------------ ------------
Cash at end of year ................................... $ 125,260 $ 4,000,250 $ 4,821,624
============ ============ ============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Statements of Cash Flows (Continued)
Supplemental Disclosures of Cash Flow Information
Interest expense of $2,164,887, $2,648,557 and $4,330,544 for the years
ended December 31, 1998, 1997 and 1996 consisted of: interest expense on
non-recourse financing accrued or paid directly to lenders by lessees of
$2,041,550, $2,408,565 and $3,123,670, respectively, interest expense on
recourse secured financing of $123,337, $232,325 and $1,133,394, respectively,
and other interest of $0, $7,667 and $73,480, respectively.
For the years ended December 31, 1998, 1997 and 1996 non-cash activities
included the following:
1998 1997 1996
---- ---- ----
Principal and interest on direct finance receivables
paid directly to lenders by lessees .............. $ 6,583,726 $ 9,689,813 $ 13,819,924
Rental income - assigned operating
lease receivables ................................ 2,435,986 2,248,235 2,412,065
Principal and interest on non-recourse financing
paid directly to lenders by lessees .............. (9,019,712) (11,938,048) (16,231,989)
Fair value of equipment and receivables purchased
for debt and payables ............................ (554,531) (186,715) (36,569,439)
Non-recourse notes payable assumed in
purchase price ................................... 526,499 186,715 36,569,439
Accounts payable-equipment ......................... 28,032 -- --
Decrease in investment in finance leases and
financings due to contribution to
unconsolidated joint venture .................... -- 10,625,730 --
Increase in investments in
unconsolidated joint ventures ................... -- (10,625,730) --
Decrease in investment in finance leases
due to terminations .............................. -- 715,745 --
Decrease in notes payable non-recourse due
to terminations .................................. -- (715,745) --
------------ ------------ ------------
$ -- $ -- $ --
============ ============ ============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1998
1. Organization
ICON Cash Flow Partners L.P. Six (the "Partnership") was formed on July 8,
1993 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 commenced business operations on its initial
closing date, March 31, 1994 and by its final closing in 1995, 383,857.12 units
had been admitted into the Partnership with aggregate gross proceeds of
$38,385,712. Between 1995 and 1997 the Partnership redeemed 3,179.00 limited
partnership units. In 1998 the Partnership redeemed 1,324.92 units leaving
379,353.20 limited partnership units outstanding at December 31, 1998.
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 is limited to 13 1/2% of the gross
proceeds received from the sale of the units. Such offering expenses aggregated
$5,182,071 (including $2,111,214 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 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.
Certain reclassifications have been made to prior year's statements to
conform to the 1998 presentation.
ICON Cash Flow Partners L.P. Six
(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 Six Corp. and ICON
Cash Flow L.L.C. II. 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, leveraged 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. The
Partnership's net investment in leveraged leases consists of minimum lease
payments receivable, the estimated unguaranteed residual values and the initial
direct costs related to the leases, net of the unearned income and principal and
interest on the related non-recourse debt. Unearned income is recognized as
income from leveraged leases over the life of the lease at a constant rate of
return on the positive net investment. 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
and leveraged 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 five 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,
1998 and 1997 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 and (ii) the carrying value of financial assets,
other than lease related investments, and certain other payables approximates
market value and (iii) fair value information concerning certain 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. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Redemption of Limited Partnership Units - The General Partner consented to
the Partnership redeeming 728.00 limited partnership units during 1996, 2,186.00
limited partnership units during 1997, and 1,324.92 units during 1998. The
redemption amount was calculated following the specified redemption formula in
accordance with the Partnership agreement. Redeemed units have no voting rights
and do not share in distributions. The Partnership agreement limits the number
of units which can be redeemed in any one year and redeemed units may not be
reissued. Redeemed limited partnership units are accounted for as a deduction
from partners' equity.
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 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 of Estimated Residual Values - In March 1995, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
which is effective beginning in 1996.
The Partnership's policy with respect to impairment of estimated residual
values is to review, on a quarterly 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.
As a result, the Partnership's policy with respect to measurement and
recognition of an impairment loss associated with estimated residual values is
consistent with the requirements of SFAS No. 121 and, therefore, the
Partnership's adoption of this Statement in the first quarter of 1996 had no
material effect on the financial statements.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
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 Pronouncements - In June 1998 the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires that an entity recognize all derivative instruments as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
SFAS No. 133 is effective for all quarters of fiscal years beginning after June
15, 1999. The adoption of SFAS No. 133 is not expected to have a material effect
on the Partnership's net income, partners' equity or total assets.
3. Net Investment in Leveraged Lease
In September 1996 the Partnership acquired, subject to a leveraged lease,
the beneficial interest in an aircraft. The aircraft was an Airbus A-300B4-203
on lease to Airbus Industrie through 2003. The purchase price of the asset was
$19,595,956 and consisted of $1,409,839 in cash, plus the assumption of
non-recourse senior debt and non-recourse junior debt. The junior debt
represents cash receivable under the lease in excess of debt service obligation
to the senior lender.
In December 1998 the Partnership sold its beneficial interest in the
aircraft to Airbus Industrie. The proceeds from the sale totaled $20,834,705 and
were used to pay off the senior debt, the junior debt and a third party under a
residual sharing agreement. The remaining proceeds ($2,647,482 in cash) were
retained by the Partnership. The Partnership recognized an $884,876 gain on the
sale of the beneficial interest.
4. Investments in Joint Ventures
The Partnership and affiliates formed six joint ventures for the purpose
of acquiring and managing various assets.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The former joint venture described below became 100% owned by the
Partnership in 1997, was dissolved and the assets of the joint venture are
included with the Partnership's assets.
ICON Asset Acquisition L.L.C. I
In February 1995 the Partnership and two affiliates, ICON Cash Flow
Partners, L.P., Series B ("Series B"), and ICON Cash Flow Partners, L.P., Series
C ("Series C") formed ICON Asset Acquisition L.L.C. I ("ICON Asset Acquisition
LLC") as a special purpose limited liability company. ICON Asset Acquisition LLC
was formed for the purpose of acquiring, managing and securitizing a portfolio
of leases. The Partnership, Series B and Series C contributed $8,700,000 (77.68%
interest), $1,000,000 (8.93% interest) and $1,500,000 (13.39% interest),
respectively, to ICON Asset Acquisition LLC. On February 17, 1995, ICON Asset
Acquisition LLC purchased an existing portfolio of leases, securitized
substantially all of its portfolio and became the beneficial owner of a trust.
In September 1997 the Partnership purchased, from Series B and C, their
investment in ICON Asset Acquisition LLC. Series B and C's investments were
purchased at book value, which approximated market value at that time. ICON
Asset Acquisition LLC became a 100% owned subsidiary of the Partnership. The
Partnership transferred all of ICON Asset Acquisition LLC's assets to its own
account and dissolved ICON Asset Acquisition LLC in the fourth quarter 1997.
The joint venture described below is majority owned and is consolidated
with the Partnership.
ICON Cash Flow Partners L.L.C. II
In March 1995 the Partnership and an affiliate, ICON Cash Flow Partners,
L.P., Series E ("Series E"), formed a joint venture, 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
Series E contributed 99% and 1% 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 Series E. The lease is an operating lease. Profits, losses,
excess cash and disposition proceeds are allocated 99% to the Partnership and 1%
to Series E. The Partnership's consolidated financial statements include 100% of
ICON Cash Flow LLC II. Series E's investment in ICON Cash Flow LLC II 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 II released the aircraft to Aero Mexico. The new lease
is an operating lease which expires in September 2002.
The four joint ventures described below are less than 50% owned and are
accounted for following the equity method.
ICON Cash Flow Partners L.L.C. I
In September 1994 the Partnership and an affiliate, Series E, formed a
joint venture, ICON Cash Flow Partners L.L.C. I ("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 Series E contributed 1% and 99% 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 Series E. The lease is an
operating lease. Profits, losses, excess cash and
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
disposition proceeds are allocated 1% to the Partnership and 99% to Series E.
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 I released
the aircraft to Aero Mexico. The new lease is an operating lease which expires
in October 2002.
Information as to the financial position and results of operations of ICON
Cash Flow LLC I as of and for the year ended December 31, 1998 and 1997 is
summarized below:
December 31, 1998 December 31, 1997
Assets $ 17,298,011 $ 16,870,235
================ ===============
Liabilities $ 11,719,626 $ 12,155,143
================ ===============
Equity $ 5,578,385 $ 4,715,092
================ ===============
Partnership's share of equity $ 55,784 $ 47,151
================ ===============
Year Ended Year Ended
December 31, 1998 December 31, 1997
Net income $ 806,232 $ 744,474
================ ===============
Partnership's share of net income $ 8,062 $ 7,445
================ ===============
ICON Receivables 1997-A L.L.C.
In March 1997 the Partnership, ICON Cash Flow Partners, L.P., Series D
("Series D"), and ICON Cash Flow Partners L.P. Seven ("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 securitizing
its portfolio. In September 1997 the Partnership, Series E and L.P. Seven
contributed and assigned additional equipment lease and finance receivables and
residuals to 1997-A. The Partnership, Series D, Series E and L.P. Seven received
a 31.03%, 17.81% 31.19% and 19.97% interest, respectively, in 1997-A based on
the present value of their related contributions. The Partnership's
contributions amounted to $10,529,804 in assigned leases and $600,000 of cash in
1997, and $86,776 of cash in 1998. 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 accounts for its
investment in 1997-A under the equity method of accounting. The Partnership's
original investment was recorded at cost and is adjusted by its share of
earnings, losses and distributions thereafter.
ICON Cash Flow Partners L. P. Six
(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 year ended December 31, 1998 and 1997 is summarized
below:
December 31, 1998 December 31, 1997
----------------- -----------------
Assets $ 31,845,710 $ 50,911,005
================ ===============
Liabilities $ 27,065,004 $ 45,143,569
================ ===============
Equity $ 4,780,706 $ 5,767,436
================ ===============
Partnership's share of equity $ 1,522,578 $ 1,828,810
================ ===============
Year Ended Year Ended
December 31, 1998 December 31, 1997
Net income $ 1,050,957 $ 1,298,430
================ ===============
Partnership's share of net income $ 326,165 $ 441,854
================ ===============
Distributions $ 2,367,147 $ 33,965,442
================ ===============
Partnership's share of distributions $ 719,173 $ 9,742,849
================ ===============
ICON Receivables 1997-B L.L.C.
In August 1997 the Partnership, Series E and L.P. Seven formed ICON
Receivables 1997-B L.L.C. ("1997-B"), for the purpose of originating leases and
securitizing its portfolio. The Partnership, Series E and L.P. Seven contributed
cash and received an 8.33%, 75.00% and 16.67% interest, respectively, in 1997-B.
The Partnership's cash contributions amounted to $250,000 in 1997 and $163,978
in 1998. In order to fund the acquisition of leases, 1997-B obtained a warehouse
borrowing facility from Prudential Securities Credit Corporation (the "1997-B
Warehouse Facility"). 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 accounts for its investment in
1997-B under the equity method of accounting. The Partnership's original
investment was recorded at cost and is adjusted by its share of earnings, losses
and distributions thereafter.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the financial position and results of operations of
1997-B as of and for the year ended December 31, 1998 and 1997 is summarized
below:
December 31, 1998 December 31, 1997
----------------- -----------------
Assets $ 39,665,292 $ 18,209,360
=============== ===============
Liabilities $ 37,649,430 $ 15,008,185
=============== ===============
Equity $ 2,015,862 $ 3,201,175
=============== ===============
Partnership's share of equity $ 167,921 $ 266,658
=============== ===============
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------- -----------------
Net income $ 227,057 $ 201,175
=============== ===============
Partnership's share of net income $ 18,914 $ 16,758
=============== ===============
Distributions $ 3,380,904 $ -
=============== ===============
Partnership's share of distributions $ 281,629 $ -
=============== ===============
ICON Boardman Funding L.L.C.
In December 1998 the Partnership and three affiliates, Series C, L.P. Seven
and ICON Income Fund Eight A L.P. ("Eight A") formed ICON Boardman Funding
L.L.C. ("ICON BF"), for the purpose of acquiring a lease with Portland General
Electric. The purchase price totaled $27,421,810, and was funded with cash and
non-recourse debt assumed in the purchase price. The Partnership, L.P. Six, L.P.
Seven and Eight A received a .5%, .5%, .5% and 98.5% interest, respectively, in
ICON BF. The Partnership's original investment was recorded at cost of
$56,960 and will be adjusted by its share of earnings, losses and distributions,
thereafter. Simultaneously with the acquisition of the Portland General Electric
lease by ICON BF, the rent in excess of the senior debt payments was acquired by
the Partnership for $3,801,108.
Information as to the financial position of ICON BF as of December 31, 1998
is summarized below:
December 31, 1998
Assets $ 23,620,702
===============
Liabilities $ 12,228,713
===============
Equity $ 11,391,989
===============
Partnership's share of equity $ 56,960
===============
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
There was no income statement impact of the joint venture in 1998 as the
joint venture was formed at the end of the year.
5. Receivables Due in Installments
Non-cancelable minimum annual amounts due on finance leases and financings
are as follows:
Finance
Year Leases Financings Total
---- ------ ---------- -----
1999 $ 7,394,930 $ 1,511,544 $ 8,906,474
2000 4,476,283 1,274,933 5,751,216
2001 1,152,141 1,456,701 2,608,842
2002 484,053 1,180,037 1,664,090
Thereafter -- 8,575 8,575
----------- ----------- -----------
$13,507,407 $ 5,431,790 $18,939,197
=========== =========== ===========
6. Investment in Operating Leases
The investment in operating lease at December 31, 1998, 1997 and 1996
consisted of the following:
1998 1997 1996
---- ---- ----
Equipment cost, beginning of year ........ $ 19,100,646 $ 19,371,603 $ 19,371,603
End of lease settlement proceeds ......... -- (270,957) --
------------ ------------ ------------
Equipment cost, end of year .............. 19,100,646 19,100,646 19,371,603
------------ ------------ ------------
Accumulated depreciation,
beginning of year ...................... (2,230,411) (1,485,136) (636,487)
Depreciation ............................. (736,793) (745,275) (848,649)
------------ ------------ ------------
Accumulated depreciation, end of year .... (2,967,204) (2,230,411) (1,485,136)
------------ ------------ ------------
Initial direct costs, net of accumulated
amortization, end of year .............. -- -- 47,945
------------ ------------ ------------
Investment in operating lease, end of year $ 16,133,442 $ 16,870,235 $ 17,934,412
============ ============ ============
The investment in an operating lease consists of one asset owned by ICON
Cash Flow LLC II, a joint venture owned by the Partnership and Series E. In June
1997 ICON Cash Flow LLC II released the aircraft (formally on lease to Alaska
Airlines, Inc.) to Aero Mexico. The new lease is an operating lease which
expires in September 2002. (See Note 4 for additional information relating to
the joint venture.)
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
7. Allowance for Doubtful Accounts
The allowance for doubtful accounts related to the investments in finance
leases and financings consisted of the following:
Finance
Leases Financings Total
------- ---------- -----
Balance at December 31, 1995 $ 361,941 $ 43,200 $ 405,141
Accounts written-off ... (424,699) (275,522) (700,221)
Recoveries on accounts
previously written-off 43,905 -- 43,905
Provision .............. 504,480 245,520 750,000
--------- --------- ---------
Balance at December 31, 1996 485,627 13,198 498,825
Accounts written-off ... (468,020) (107,375) (575,395)
Recoveries on accounts
previously written-off 9,239 -- 9,239
Provision .............. 83,274 100,000 183,274
--------- --------- ---------
Balance at December 31, 1997 110,120 5,823 115,943
Accounts written-off ... (16,454) (61,448) (77,902)
Recoveries on accounts
previously written-off 165,724 24,300 190,024
Provision .............. 11,919 41,078 52,997
--------- --------- ---------
Balance at December 31, 1998 $ 271,309 $ 9,753 $ 281,062
========= ========= =========
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
8. Notes Payable
Notes payable consists of the following: (1) notes payable non-recourse,
which is being paid directly to the lenders by the lessees and (2) notes payable
non-recourse-secured financing, which is being paid from collections on lease
receivable transactions. These notes bear interest at rates ranging from 5.18%
to 10.75% and mature as follows:
Notes Payable
Notes Payable Non-Recourse
Non-Recourse Secured Financing Total
------------ ----------------- -----
1999 $ 6,703,635 $ 769,190 $ 7,472,825
2000 6,213,925 118,625 6,332,550
2001 2,827,772 -- 2,827,772
2002 6,728,142 -- 6,728,142
2003 18,026 -- 18,026
----------- ----------- -----------
$22,491,500 $ 887,815 $23,379,315
=========== =========== ===========
Included in the above are $131,299 in notes payable non-recourse due to
various third parties in conjunction with the purchase and assignment of lease
transactions. The notes are payable only to the extent residual values are
realized. The realization of these residuals is expected to occur in 1999.
9. 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, 1998, 1997 and 1996
are as follows:
Charged to
Capitalized Operations
----------- ----------
Acquisition fees .................... $1,361,045 $ --
Management fees ..................... -- 1,333,394
Administrative expense reimbursements -- 642,276
---------- ----------
Year ended December 31, 1996 ........ $1,361,045 $1,975,670
========== ==========
Management fees ..................... -- 1,092,714
Administrative expense reimbursements -- 547,382
---------- ----------
Year ended December 31, 1997 ........ $ -- $1,640,096
========== ==========
Management fees ..................... -- 969,546
Administrative expense reimbursements -- 485,391
---------- ----------
Year ended December 31, 1998 ........ $ -- $1,454,937
========== ==========
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The Partnership has investments in five joint ventures with other
Partnerships sponsored by the General Partner (See Note 4 for additional
information relating to the joint ventures).
10. Subsidiary
In December 1994 the Partnership formed a wholly owned subsidiary, ICON Six
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 Six Corp, a corporation. The Partnership's consolidated
financial statements include 100% of the accounts of ICON Six Corp. As of
December 31, 1998, there was no federal tax liability for ICON Six Corp.
11. Commitments and Contingencies
The Partnership 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 parties based
on specified formulas. For the year ended December 31, 1998, the Partnership has
not made any payments pursuant to such agreements.
12. Tax Information (Unaudited)
The following table reconciles net income for financial reporting purposes
to income for federal income tax purposes for the years ended December 31:
1998 1997 1996
---- ---- ----
Net income (loss) per financial statements $ 467,639 $ 35,620 $ (366,967)
Differences due to:
Direct finance leases .................. 8,548,014 5,863,979 6,193,772
Depreciation ........................... (7,834,138) (8,004,823) (2,375,964)
Provision for losses ................... (8,554) (8,554) 40,999
Loss on sale of equipment .............. 50,639 50,639 (3,118,755)
Other .................................. (4,839,645) 908,774 (947,139)
----------- ----------- -----------
Partnership income (loss) for
federal income tax purposes ............. $(3,616,045) $(1,154,365) $ (574,054)
=========== =========== ===========
As of December 31, 1998, the partners' capital accounts included in the
financial statements totaled $17,884,454 compared to the partners' capital
accounts for federal income tax purposes of $19,039,349 (unaudited). The
difference arises primarily from commissions reported as a reduction in the
partners' capital accounts 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. Six
(A Delaware Limited Partnership)
December 31, 1998
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
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 600 Mamaroneck Avenue,
Harrison, New York 10528-1632, and its telephone number is (914) 698-0600. 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 Partnership'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 will perform 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
Kevin F. Redmond Chief Financial Officer
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
Beaufort J. B. Clarke, age 53, is Chairman, Chief Executive Officer and
Director of both the General Partner and ICON Securities Corp. (the
"Dealer-Manager"). 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 38, is President and Director of the General Partner.
Mr. Weiss has been exclusively engaged in lease portfolio acquisitions since
1988 from his affiliations with Griffin Equity Partners (as Executive Vice
President and co-founder in 1993); Gemini Financial Holdings (as Senior Vice
President-Portfolio Acquisitions and a member of the executive committee from
1991-1993) and Pegasus Capital Corporation (as Vice President-Portfolio
Acquisitions). He was previously an investment banker and a commercial banker.
Thomas W. Martin, age 45, is Executive Vice President of the General
Partner and Director of the Dealer-Manager. Prior to his present position, Mr.
Martin was the Executive Vice President and Chief Financial Officer of Griffin
Equity Partners, Inc. Mr. Martin has 14 years of senior management experience in
the leasing business.
Kevin F. Redmond, age 36, is Chief Financial Officer of both the General
Partner and the Dealer-Manager. Prior to his present position, Mr. Redmond was
Vice President and Controller of the General Partner, Manager of Accounting at
NationsCredit Corp. and Audit Manager with the accounting firm of Deloitte &
Touche.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
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, 1998, 1997 and 1996.
Type of
Entity Capacity Compensation 1998 1997 1996
------ -------- ------------ ---- ---- ----
ICON Capital Corp. Manager Acquisition fees $ - $ - $1,361,045
ICON Capital Corp. General Partner Management fees 969,546 1,092,714 1,333,394
ICON Capital Corp. General Partner Admin. expense
reimbursements 485,391 547,382 642,276
---------- ---------- ----------
$1,454,937 $1,640,096 $3,336,715
========== ========== ==========
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The Partnership 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 15, 1999, 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.
Item 13. Certain Relationships and Related Transactions
See Item 11 for a discussion of the Partnership's related party
transactions.
See Note 4 for a discussion of the Partnership's related party investments
in joint ventures.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
PART IV
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. 1 to Form S-1 Registration Statement No. 33-36376
filed with the Securities and Exchange Commission on November 9, 1993)
(ii) Form of Selling Dealer Agreement (Incorporated by reference to Exhibit
1.2 to Amendment No. 1 to Form S-1 Registration Statement No. 33-36376
filed with the Securities and Exchange Commission on November 9, 1993)
(iii)Amended and Restated Agreement of Limited Partnership (Incorporated
herein by reference to Exhibit A to Amendment No. 1 to Form S-1
Registration Statement No. 33-36376 filed with the Securities and
Exchange Commission on November 9, 1993)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter ended
December 31, 1998.
ICON Cash Flow Partners L.P. Six
(A Delaware Limited Partnership)
December 31, 1998
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ICON CASH FLOW PARTNERS L.P. Six
File No. 33-36376 (Registrant)
By its General Partner, ICON Capital Corp.
Date: March 31, 1999 /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 31, 1999 /s/ Beaufort J.B. Clarke
------------------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Date: March 31, 1999 /s/ Paul B. Weiss
------------------------------------------------
Paul B. Weiss
President and Director
Date: March 31, 1999 /s/ Kevin F. Redmond
------------------------------------------------
Kevin F. Redmond
Chief Financial Officer
(Principal Financial and Account 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.