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
For the fiscal year ended December 31, 2002
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File Number 333-54011
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ICON Income Fund Eight A L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-4006824
- --------------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Fifth Avenue, 10th Floor, New York, New York 10011
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 418-4700
----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) [ ] Yes [X] No
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last day of the registrant's most recently completed second fiscal quarter:
Not applicable. There is no established market for units of limited partnership
interest in the registrant.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
TABLE OF CONTENTS
Item Page
PART I
1. Business 3-4
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 4
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 4
6. Selected Financial and Operating Data 5
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 6-13
7A. Qualitative and Quantitative Disclosures About Market Risk 13
8. Consolidated Financial Statements and Supplementary Data 14-37
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 38
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 38-39
11. Executive Compensation 39
12. Security Ownership of Certain Beneficial Owners
and Management 39
13. Certain Relationships and Related Transactions 40
14. Controls and Procedures 40
PART IV
15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 40-41
SIGNATURES 42
Certifications 43-46
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
PART I
Item 1. Business
--------
General Development of Business
ICON Income Fund Eight A L.P. (the "Partnership"), was formed on July 9,
1997 as a Delaware limited partnership. The Partnership's maximum offering was
$75,000,000. The Partnership commenced business operations on its initial
closing date, October 14, 1998, with the admission of 12,000 limited partnership
units at $100 per unit representing $1,200,000 of capital contributions. Between
October 15, 1998 and May 17, 2000, the date of the Partnership's final closing,
737,965.04 additional units were admitted representing $73,796,504 of capital
contributions bringing the total admission to 749,965.04 units totaling
$74,996,504 in capital contributions. Between 2000 and 2002, the Partnership
redeemed 6,994.77 limited partnership units leaving 742,970.27 limited
partnership units outstanding at December 31, 2002. The sole General Partner is
ICON Capital Corp. (the "General Partner").
Segment Information
The Partnership has only one operating segment: the business of acquiring
and 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
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 low
obsolescence equipment having long lives and high residual values; (2) make
monthly cash distributions to its limited partners commencing with each limited
partner's admission to the Partnership, continuing through the reinvestment
period, which period will end no later than the eighth anniversary after the
final closing date; (3) re-invest substantially all undistributed cash from
operations and cash from sales of 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 after
the end of the reinvestment period.
The equipment leasing industry is highly competitive. When seeking its
leasing transactions for acquisition, 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 Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
Lease and Financing Transactions
During the years ended December 31, 2002 and 2001, the Partnership did not
purchase nor finance any additional equipment other than an upgrade one aircraft
subject to lease during 2001.
In 2000, the Partnership acquired a 2% interest in a joint venture ("ICON
Aircraft 24846, LLC") with two other affiliates acquiring the remaining joint
venture interests. The Partnership also acquired a 1% interest in a joint
venture ("ICON Cheyenne, LLC") with three other affiliates acquiring the
remaining joint venture interests.
The Partnership had five and three lessees who accounted for 10% or more of
total revenue during the years ended December 31, 2002 and 2001. During 2002,
the equipment leased to America West, Sky Airlines, The Boeing Company, BP Amoco
and Portland General Electric generated 13%, 23%, 21%, 10% and 21%,
respectively, of total revenue. During 2001, equipment leased to The Boeing
Company, Portland General Electric and Sky Airlines generated 20%, 19% and 15%,
respectively, of total revenue.
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. 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. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the year
ended 2002.
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,
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2002 2001
---- ----
Limited Partners 2,892 2,892
General Partner 1 1
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
Item 6. Selected Consolidated Financial and Operating Data
--------------------------------------------------
Year Ended December 31,
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2002 2001 2000 1999(1)
---- ---- ---- ----
Total revenue $ 11,200,364 $ 12,975,571 $ 14,229,916 $ 9,131,846
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Net (loss) income $ (1,196,680) $ (29,316) $ 102,001 $ 1,262,140
============= ============== ================ ===============
Net (loss) income allocable to
the limited partners $ (1,184,713) $ (29,023) $ 100,981 $ 1,249,519
============= ============== ================ ===============
Net (loss) income allocable to the
General Partner $ (11,967) $ (293) $ 1,020 $ 12,621
============= ============== ================ ===============
Weighted average limited partnership
units outstanding 744,600 746,378 710,779 337,936
============= ============== ================ ===============
Net (loss) income per weighted average
limited partnership unit $ (1.59) $ (.04) $ .14 $ 3.70
============ ============== =============== ===============
Distributions to limited partners $ 8,000,244 $ 8,022,337 $ 7,640,879 $ 3,632,817
============= ============== ================ ===============
Distributions to the General Partner $ 80,811 $ 81,039 $ 77,127 $ 37,282
============= ============== ================ ===============
December 31,
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2002 2001 2000 1999
---- ---- ---- ----
Total assets $ 91,208,154 $ 107,774,081 $ 130,291,422 $ 137,921,891
============= ============== ================ ===============
Partners' equity $ 37,661,379 $ 47,108,809 $ 55,293,693 $ 49,476,423
============= ============== ================ ===============
(1) No data is presented for periods prior to 1998 since the Partnership
commenced operations on October 14, 1998, the initial closing date. Revenue and
income in 1998 does not reflect a full year's operations.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
Item 7. General Partner's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
- ---------------------
The Partnership was formed on July 9, 1997 as a Delaware limited
partnership. The Partnership's maximum offering was $75,000,000. The Partnership
commenced business operations on its initial closing date, October 14, 1998,
with the admission of 12,000 limited partnership units at $100 per unit
representing $1,200,000 of capital contributions. Between October 15, 1998 and
May 17, 2000, the date of the Partnership's final closing, 737,965.04 additional
units were admitted representing $73,796,504 of capital contributions bringing
the total admission to 749,965.04 units totaling $74,996,504 in capital
contributions. Between 2000 and 2002, the Partnership redeemed 6,994.77 limited
partnership units leaving 742,970.27 limited partnership units outstanding at
December 31, 2002.
The Partnership's portfolio consists of net investments in finance leases,
investments in operating leases, equipment off-lease, investments in estimated
unguaranteed residual values and equity investments in unconsolidated joint
ventures, representing 44%, 46%, 4%, 3% and 1% of total assets at December 31,
2002, respectively, and 47%, 43%, 0%, 4% and 2% of total assets at December 31,
2001, respectively.
Forward-Looking Information - The following discussion and analysis should
be read in conjunction with the audited 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.
Critical Accounting Policies and Management Estimates
The policies discussed below are considered by the General Partner to be
critical to an understanding of the Partnership's 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
effects 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.
Basis of Accounting and Presentation - The Partnership's records are
maintained on the accrual basis. 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 dates of the financial
statements and revenues and expenses during the reporting periods. Significant
estimates include the allowance for doubtful accounts and unguaranteed residual
values. Management believes that the estimates and assumptions utilized in
preparing its financial statements are reasonable and prudent. In addition,
management is required to disclose contingent assets and contingent liabilities.
Actual results could differ from those estimates.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
Leases and Revenue Recognition - The Partnership accounts for owned
equipment leased to third parties as either finance leases or operating leases,
as appropriate. For finance leases, the Partnership records, at the inception of
the lease, the total minimum lease payments receivable, the estimated
unguaranteed residual values, the initial direct costs related to the leases and
the related unearned income. Unearned income represents the difference between
the sum of the minimum lease payments receivable plus the estimated unguaranteed
residual minus the cost of the leased equipment. Unearned income is recognized
as finance income over the terms of the related leases using the interest
method. For operating leases, equipment is recorded at cost and is depreciated
on the straight-line method over the lease terms to their estimated fair market
values at lease terminations and subject to the Partnership's impairment policy
discussed below. 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. Initial direct costs of finance leases are
capitalized and are amortized over the terms of the related leases using the
interest method. Initial direct costs of operating leases are capitalized and
depreciated using the straight-line method over the lease terms.
Equipment Held for Lease or Sale - The off-lease rotables are carried at
cost, less accumulated depreciation, subject to the Partnership's impairment
policy discussed below.
Investments in Unguaranteed Residual Values - The Partnership carries its
investments in the future estimated unguaranteed residuals of assets at cost,
which is equal to or less than market value, subject to the Partnership's policy
relating to impairments of residuals discussed below. Gains or losses will be
recognized upon the sale or disposition of the investments.
Impairment of Estimated Residual Values - The Partnership's policy with
respect to impairment of estimated residual values is to review, on a periodic
basis, the carrying value of its residuals on an individual asset basis to
determine whether events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable and, therefore, an impairment loss
should be recognized. The events or changes in circumstances which generally
indicate that the residual value of an asset has been impaired are (i) the
estimated fair value of the underlying equipment is less than the Partnership's
carrying value or (ii) the lessee is experiencing financial difficulties and it
does not appear likely that the estimated proceeds from disposition of the asset
will be sufficient to satisfy the remaining obligation to the non-recourse
lender and the Partnership's residual position. Generally in the latter
situation, the residual position relates to equipment subject to third party
non-recourse notes payable where the lessee remits their rental payments
directly to the lender and the Partnership does not recover its residual until
the non-recourse note obligation is repaid in full.
The Partnership measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Partnership from re-lease or sale of the equipment. Generally,
third party appraisals, reviews of future cash flows and anticipated future cash
flows and detailed market analyses are used as the basis for measuring whether
an impairment loss should be recognized.
Allowance for Doubtful Accounts - The Partnership records a provision for
bad debts to provide for estimated credit losses in its portfolio. The allowance
for doubtful accounts is based on the ongoing analysis of delinquency trends,
loss experience and an assessment of overall credit risk. The Partnership's
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
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.
Results of Operations for the Years Ended December 31, 2002 and 2001
Finance lease income decreased by $2,498,092, or approximately 35%, in 2002
as compared to 2001, due to the continued collection of the related finance
lease receivables, which reduced the investments on which such income is based.
In addition, two leases with one lessee were terminated due to bankruptcy
filings by the lessees during the fourth quarter, as well as the expiration of
five leases in accordance with their scheduled terms. The equipment related to
expired leases was sold in 2002 for gains totaling $272,423. The terminated
leases due to bankruptcy filings resulted in a loss of $656,279, as the
Partnership received no proceeds.
Rental income (from operating leases) increased by $1,403,303, or
approximately 26%, in 2002 as compared to 2001, attributable to earning a full
year of rent in 2002 on the reclassified leases (from finance leases during
2001).
During 2002, the Partnership recognized an overall loss on the sale of
equipment of $404,710, as compared to gains on the sale of equipment in 2001 of
$288,060.
During 2002, the Partnership recognized a net income from investments in
joint ventures of $122,305, as compared to a net loss from such ventures of
$1,146,543 in 2001. The principal reason for the Partnership's loss in 2001 was
its $1,174,769 share of the loss of approximately $2,700,000 recognized by
ICON/AIC Trust ("AIC Trust") (a joint venture in which the Partnership's has a
43.73% interest). AIC Trust's loss was primarily the result of the sale of all
of its leased equipment portfolio at the end of December 2001 for a price which
was less than its carrying value. This was partially offset by income generated
by two other joint ventures in 2001.
Interest income and other was $28,904 in 2002 as compared to $65,490 in
2001. The decrease was attributable to a reduction in cash available for
investment in 2002 as well as a reduction in interest rates.
Interest expense decreased by $1,098,423, or approximately 17%, in 2002 as
compared to 2001, due primarily to the repayment of non-recourse indebtedness by
the application of lease payments in accordance with the repayment schedules,
and partially offset by the interest associated with an increase in recourse
debt.
Depreciation increased by $1,287,504, or approximately 47%, in 2002 as
compared to 2001, due to the full year effect in 2002 of the reclassification of
two aircraft previously accounted for as financing leases to investments in
operating leases in the fourth quarter of 2001.
Management fees - General Partner decreased by $774,272, or approximately
41%, in 2002 as compared to 2001, which was consistent with the change in lease
payments on which such fees are based.
Administrative expense reimbursements - General Partner decreased by
$276,582, or approximately 36%, in 2002 as compared to 2001, which was
consistent with the Partnership's level of operations.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
Amortization of initial direct costs decreased by $369,820, or
approximately 53%, in 2002 as compared to 2001, due principally to the continued
reduction of the amortizable balance of initial direct costs and the method
(interest method) used to calculate amortization of initial direct costs on
finance leases.
General and administrative expenses increased by $328,823, or approximately
54%, in 2002 as compared to 2001, due primarily to amortized legal fees,
appraisal and inspection costs that were capitalized under the balance sheet
caption "Other Assets" at leases inception.
Based upon its review of receivables and the credit quality of the
Partnership's lessees, there was a provision for doubtful accounts recorded of
$300,000 in 2002. The Partnership did not record a provision for doubtful
accounts in 2001.
The net loss for the Partnership was $1,196,680 ($1.59) per weighted
average limited Partnership unit) in 2002 as compared to net income of $29,316
($.04) per weighted average limited Partnership unit) in 2001. The reduction in
finance income, the loss from sale of equipment, the provision for doubtful
accounts, the increase in general and administrative expenses and the increase
in depreciation expenses, which reduced net income in 2002 as compared 2001, was
partially offset by the increase in rental income, the increase in income from
joint ventures, the reduction in interest expense, the reduction of amortization
of initial direct costs and the reduction of management fees and administrative
fees-reimbursements.
Results of Operations for the Period Ended December 31, 2001 and 2000
Finance lease income decreased by $1,826,177, or approximately 20%, in 2001
as compared to 2000, due to the continued collection of the related finance
lease receivables, which reduced the investments on which such income is based,
the reclassification of two restructured aircraft leases from financing leases
to operating leases in the fourth quarter of 2001, as well as the expiration in
2001 of two leases in accordance with their scheduled terms. The related
equipment was sold in 2001 for gains totaling $288,060.
Rental income (from operating leases) increased by $626,780, or
approximately 13%, in 2001 as compared to 2000, attributable to earning a full
year of rent in 2001 on equipment purchased during 2000, as well as the rent
generated in the fourth quarter of 2001 by the restructured leases of the two
aircraft discussed above.
During 2001, the Partnership recognized a gain on sale of an option to
acquire an unguaranteed residual of $1,219,910 and gains on the sale of
equipment of $288,060. No similar amounts were recognized in 2000.
During 2001, the Partnership recognized a net loss from investments in
joint ventures of $1,146,543 as compared to net income from investments in joint
ventures of $231,909 in 2000. The principal reason for the Partnership's loss in
2001 was its $1,174,769 share of the loss of approximately $2,700,000 recognized
by AIC Trust (a joint venture in which the Partnership has a 43.73% interest).
AIC Trust's loss was primarily the result of the sale of all of its leased
equipment portfolio at the end of December 2001 for a price which was less than
its carrying value. This was partially offset by income generated by two other
joint ventures in 2001. The AIC Trust generated income of $529,585 in 2000, of
which $231,587 was the Partnership's share.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
Interest income and other was $65,490 in 2001 as compared to $249,956 in
2000. The decrease was attributable to a reduction in cash available for
investment in 2001 (due to the continued acquisition of leased equipment during
2000) as well as a reduction in interest rates.
Interest expense decreased by $1,081,456, or approximately 15% in 2001, as
compared to 2000, due principally to the repayment of non-recourse indebtedness
by the application of lease payments in accordance with the repayment schedules,
partially offset by the interest associated with additional non-recourse
borrowings secured by an aircraft leased to The Boeing Company. In addition the
reduction is attributable to the reduction in the variable rate recourse debt
outstanding, as well as the reduction in interest rates on such recourse debt in
2001 as compared to 2000.
Depreciation increased by $82,749, or approximately 3%, in 2001 as compared
to 2000, due to the full year effect in 2001 of investments in operating leases
acquired in 2000, as well as the reclassification of two aircraft previously
accounted for as financing leases to investments in operating leases in the
fourth quarter of 2001. This was partially offset by the fact that no
depreciation was recognized in 2001 on an aircraft for the period that it was
off-lease. Depreciation resumed when the aircraft was released.
Management fees - General Partner increased by $65,750, or approximately
4%, in 2001 as compared to 2000, which was consistent with the change in lease
payments on which such fees are based.
Administrative expense reimbursements - General Partner increased by
$13,642, or approximately 2%, in 2001 as compared to 2000, which was consistent
with the Partnership's level of operations.
Amortization of initial direct costs decreased by $117,345, or
approximately 14%, in 2001 as compared to 2000, due principally to the continued
reduction of the amortizable balance of initial direct costs and the method
(interest method) used to calculate amortization of initial direct costs on
finance leases.
General and administrative expenses increased by $111,005, or approximately
22%, in 2001 as compared to 2000, due principally to an increase in legal fees,
appraisal and inspection costs.
Based upon its review of receivables and the credit quality of the
Partnership's lessees, there was no provision for doubtful accounts recorded in
2001. The Partnership recorded a provision for doubtful accounts of $200,000 in
2000.
The net loss for the Partnership in 2001 was $29,316 ($(.04) per weighted
average limited partnership unit) as compared to net income of $102,001 ($.14
per weighted average limited partnership unit) in 2000. The reduction in finance
income, the loss from investments in joint ventures and the increase in
management fees, administrative expense reimbursements and general and
administrative expenses, which reduced net income in 2001 as compared to 2000,
was partially offset by the increase in rental income, the gains on sale of
investments in unguaranteed residuals and equipment, the reduction in interest
expense, the reduction of amortization of initial direct costs and the reduction
in provision for doubtful accounts.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
Liquidity and Capital Resources
The Partnership's primary sources of liquidity in 2002 were borrowings of
$3,805,871, proceeds from sale of investment of unguaranteed residual values of
$1,186,863, proceeds from sales of equipment of $1,144,010, distributions
received from unconsolidated joint ventures of $811,996 and cash provided by
operating activities of $728,405. Distributions to partners aggregated
$8,081,055, and the Partnership repaid recourse debt of $1,819,912. As a result
of this activity of the Partnership's liquidity was reduced.
During the quarter ended June 30, 2002, the Partnership entered into a
$17,500,000 joint and several line of credit agreement dated as of May 30, 2002
shared with L.P. Seven and Fund Eight B (the "Initial Funds"), with Comerica
Bank as lender. Under the terms of the agreement, the Partnership may borrow at
a rate equal to the Comerica Bank base rate plus 1% (together, 5.25% at December
31, 2002) and all borrowings are to be jointly and severally collateralized by
the present values of rents receivable and equipment owned by all of the Initial
Funds sharing in the joint line of credit. On December 12, 2002, the agreement
was amended to admit ICON Income Fund Nine, LLC, collectively along with the
Initial Funds (the "Funds"), as a borrower sharing the $17,500,000 joint line of
credit agreement. The Funds have entered into a Contribution Agreement, dated as
of May 30, 2002, as amended December 12, 2002, pursuant to which the Funds have
agreed to restrictions on the amount and the terms of their respective
borrowings under the line of credit in order to minimize the risk that a Fund
would not be able to repay its allocable portion of the outstanding revolving
loan obligation at any time, including restrictions on any Fund borrowing in
excess of the lesser of (A) an amount each Fund could reasonably expect to repay
in one year out of its projected free cash flow, or (B) the greater of (i) the
Borrowing Base (as defined in the line of credit agreement) as applied to such
Fund, and (ii) 50% of the net worth of such Fund. The Contribution Agreement
provides that, in the event a Fund pays an amount under the agreement in excess
of its allocable share of the obligation under the agreement whether by reason
of an Event of Default or otherwise, the other Funds will immediately make a
contribution payment to such Fund in such amount that the aggregate amount paid
by each Fund reflects its allocable share of the aggregate obligations under the
agreement. The Funds' obligations to each other under the Contribution Agreement
are collateralized by a subordinate lien on the assets of each participating
Fund. The expiration date of this line of credit is May 31, 2003. The
Partnership violated a financial covenant at December 31, 2002 creating an Event
of Default. The bank granted a waiver to the Partnership with respect to this
Event of Default. As of December 31, 2002, there were no borrowings by the
Partnership under the line. Aggregate borrowing by all Funds under the line of
credit agreement aggregated $9,731,310 on December 31, 2002.
Besides proceeds from the new line of credit, the Partnership's primary
source of funds for 2002 was cash provided by investing activities of
$3,142,869.
The Partnership repaid $1,819,912 of its recourse notes payable-old line of
credit during 2002 with proceeds from the newly established line of credit with
Comerica Bank. Because the Partnership paid distributions to partners totaling
$8,081,055, its liquidity was reduced.
Cash distributions to limited partners for 2002 and 2001, which were paid
monthly, totaled $8,000,244 and $8,022,337, respectively.
The Partnership has an investment in excess of $24 million in equipment on
lease to Portland General Electric ("PGE"), a utility company, which is a wholly
owned subsidiary of Enron Corporation ("Enron").
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
In the fourth quarter of 2001, Enron Corporation filed for Chapter 11
bankruptcy protection. PGE has not filed for bankruptcy protection. PGE is
current on its lease payments at the date of this report. Management is
continually monitoring the Enron proceedings to the extent that it could, in the
future, impact the Partnership's investment.
In 2000, the Partnership acquired aircraft rotables for a total cost of
$1,961,000, subject to a lease with Sabena Technics SA a subsidiary of Sabena
Airlines SA. In November 2001 Sabena Airlines SA, the parent of Sabena Technics
SA, filed for bankruptcy protection in Belgium. Sabena Technics SA did not file
for bankruptcy protection. During the fourth quarter 2002, Sabena Technics SA
returned all leased equipment with no outstanding balance as of December 31,
2002.
Regus Business Center Corp. ("Regus"), with whom the Partnership has
eighteen leases, filed for Chapter 11 bankruptcy protection in the United States
of America on January 14, 2003. The Partnership's finance leases with Regus were
acquired in December 1999 of costs aggregating $4,861,629, and the total lease
receivable is $1,544,686 as of December 31, 2002. Regus has not paid January or
February rents for 2003, and management is currently negotiating an amended
lease agreement whereby Regus will commence making payments on March 15, 2003
continuing for forty eight months at a new reduced rental rate.
As of December 31, 2002, there were no known trends or demands,
commitments, events or uncertainties, which are likely to have any material
effect on liquidity. As cash is realized from operations and additional
borrowings, the 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.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS No. 143") which is effective for fiscal
years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The Partnership
does not expect that the adoption of SFAS No. 143 will have a material impact on
its financial position, results of operations or cash flows.
Effective January 1, 2002, the Partnership adopted SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144"). This statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future net
cash flows expected to be generated by the asset. If the carrying amount of the
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. SFAS No. 144 requires companies to separately report
discontinued operations and extends that reporting to a component of an entity
that either has been disposed of (by sale, abandonment or in a distribution to
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
the owners) or classified as held for sale. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less the costs to
sell. The adoption of SFAS No. 144 did not have any effect on the Partnership's
financial position or results of operations as the provisions of SFAS No. 144
are similar to the Partnership's current policy for impairment review.
Effective January 1, 2002, the Partnership adopted SFAS No. 145, "Recession
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS No. 145"). SFAS No. 145 amends SFAS No. 13
Accounting for Leases to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. The provisions of the Statement related to
Statement No. 13 were effective for transactions occurring after May 15, 2002,
the adoption of which did not have a material effect on the Partnership's
financial statements.
On July 30, 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS No. 146"). The standard
replaced Emerging Issues Task Force (EITF) issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)" and requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. Examples of costs covered by the standard include lease termination costs
and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. SFAS
No. 146 is effective prospectively to exit or disposal activities initiated
after December 31, 2002. The impact on the Partnership's financial statement
from the application of this standard is dependent on any exit or disposal
activities in 2003.
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.
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 described 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.
Additionally, the Partnership borrows funds under a floating rate line of
credit and is therefore exposed to interest rate risk until the floating rate
line of credit is repaid. The Partnership's aggregate borrowings under the
floating rate line of credit as of December 31, 2002 was $3,805,871 as compared
to $1,819,912 at December 31, 2001. The Partnership believes the risk associated
with rising interest rates under this line is not significant.
The Partnership manages its exposure to equipment and residual risk by
monitoring the market and maximizing re-marketing proceeds received through
re-lease or sale of equipment.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
December 31, 2002
Item 8. Consolidated Financial Statements and Supplementary Data
--------------------------------------------------------
Index to Financial Statements
Page Number
Independent Auditors' Reports 16-17
Consolidated Balance Sheets as of December 31, 2002 and 2001 18
Consolidated Statements of Operations for the
Years Ended December 31, 2002, 2001 and 2000 19
Consolidated Statements of Changes in Partners' Equity for the
Years Ended December 31, 2002, 2001 and 2000 20
Consolidated Statements of Cash Flows for the
Years Ended December 31, 2002, 2001 and 2000 21-23
Notes to Consolidated Financial Statements 24-37
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 2002
(With Independent Auditor's Report Thereon)
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Partners
ICON Income Fund Eight A L.P.:
We have audited the accompanying consolidated balance sheet of ICON Income Fund
Eight A L.P. (a Delaware limited partnership) as of December 31, 2002, and the
related consolidated statements of operations, changes in partners' equity, and
cash flows for the year then ended. 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Income Fund
Eight A L.P. as of December 31, 2002 and the results of its operations and its
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Hays & Company LLP
----------------------
Hays & Company LLP
March 13, 2003
New York, New York
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Partners
ICON Income Fund Eight A L.P.:
We have audited the accompanying consolidated balance sheet of ICON Income Fund
Eight A L.P., (a Delaware limited partnership) as of December 31, 2001, and the
related consolidated statements of operations, changes in partners' equity, and
cash flows for each of the years in the two year period 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 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 Income Fund
Eight A L.P. as of December 31, 2001, and the results of its operations and its
cash flows for each of the years in the two year period ended December 31, 2001
in conformity with accounting principles generally accepted in the United States
of America.
/s/ KPMG LLP
-------------
KPMG LLP
April 15, 2002
New York, New York
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
2002 2001
---- ----
Assets
Cash and cash equivalents $ 819,928 $ 3,213,445
---------------- ---------------
Investment in finance leases
Minimum rents receivable 17,200,391 27,530,587
Estimated unguaranteed residual values 28,560,807 32,985,468
Initial direct costs, net 446,683 780,194
Unearned income (5,842,801) (10,522,087)
Allowance for doubtful accounts (228,721) (585,000)
---------------- ---------------
40,136,359 50,189,162
Investment in operating leases
Equipment, at cost 50,773,532 52,734,532
Accumulated depreciation (9,214,386) (5,969,663)
---------------- ---------------
41,559,146 46,764,869
Equipment held for lease or sale 3,470,579 -
---------------- ---------------
Investments in unguaranteed residual values 3,098,084 4,284,947
---------------- ---------------
Investments in unconsolidated joint ventures 1,296,330 1,870,740
---------------- ---------------
Other assets, net 827,728 1,450,918
---------------- ---------------
Total assets $ 91,208,154 $ 107,774,081
================ ===============
Liabilities and Partners' Equity
Notes payable - non-recourse $ 47,668,803 $ 57,687,654
Note payable - recourse 3,805,871 1,819,912
Security deposits and other 1,715,310 1,044,468
Accounts payable - General Partner and affiliate 230,052 -
Minority interests in joint venture 126,739 113,238
---------------- ---------------
53,546,775 60,665,272
Commitments and Contingencies
Partners' equity (deficiency)
General Partner (274,260) (181,482)
Limited partners (742,970.27 and 745,863.89 units
outstanding, $100 per unit original issue price) 37,935,639 47,290,291
---------------- ---------------
Total partners' equity 37,661,379 47,108,809
---------------- ---------------
Total liabilities and partners' equity $ 91,208,154 $ 107,774,081
================ ===============
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31,
2002 2001 2000
---- ---- ----
Revenues
Rental income $ 6,790,022 $ 5,386,719 $ 4,759,939
Finance income 4,663,843 7,161,935 8,988,112
Income (loss) from investments in
unconsolidated joint ventures 122,305 (1,146,543) 231,909
Net (loss) gain on sales of equipment (404,710) 288,060 -
Gain on sale of option to acquire an
unguaranteed residual - 1,219,910 -
Interest income and other 28,904 65,490 249,956
------------- ------------- --------------
Total revenues 11,200,364 12,975,571 14,229,916
------------- ------------- --------------
Expenses
Interest 5,181,248 6,279,671 7,361,127
Depreciation 4,016,556 2,729,052 2,646,303
Management fees - General Partner 1,128,431 1,902,703 1,836,953
General and administrative expense 936,992 608,169 497,164
Administrative expense
reimbursements - General Partner 488,133 764,715 751,073
Amortization of initial direct costs 332,183 702,003 819,348
Minority interest expense 13,501 18,574 15,947
Provision for doubtful accounts 300,000 - 200,000
------------- ------------- --------------
Total expenses 12,397,044 13,004,887 14,127,915
------------- ------------- --------------
Net (loss) income $ (1,196,680) $ (29,316) $ 102,001
============= ============= ==============
Net (loss) income allocable to:
Limited partners $ (1,184,713) $ (29,023) $ 100,981
General Partner (11,967) (293) 1,020
------------- ------------- --------------
$ (1,196,680) $ (29,316) $ 102,001
============= ============= ==============
Weighted average number of limited
partnership units outstanding 744,600 746,378 710,779
============= ============= ==============
Net (loss) income per weighted average
limited partnership unit $ (1.59) $ (.04) $ .14
============ ============= =============
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 2002, 2001 and 2000
Limited Partner Distributions
-----------------------------
Return of Investment Limited General
Capital Income Partners Partner Total
------- ------ -------- ------- -----
(Per weighted average unit)
Balance at January 1, 2000 $ 49,500,466 $ (24,043) $ 49,476,423
Proceeds from issuance of limited partnership
units (154,770.46 units) 15,477,046 - 15,477,046
Sales and offering expenses (1,765,140) - (1,765,140)
Cash distributions to partners $ 10.61 $ .14 (7,640,879) (77,127) (7,718,006)
Limited partnership units
redeemed (3,221.15 units) (278,631) - (278,631)
Net income 100,981 1,020 102,001
--------------- ------------ --------------
Balance at December 31, 2000 55,393,843 (100,150) 55,293,693
Cash distributions to partners $ 10.75 $ - (8,022,337) (81,039) (8,103,376)
Limited partnership units
redeemed (880 units) (52,192) - (52,192)
Net loss (29,023) (293) (29,316)
--------------- ------------ --------------
Balance at December 31, 2001 47,290,291 (181,482) 47,108,809
Cash distributions to partners $ 10.74 $ - (8,000,244) (80,811) (8,081,055)
Limited partnership units
redeemed (2,893.62 units) (169,695) - (169,695)
Net loss (1,184,713) (11,967) (1,196,680)
--------------- ------------ --------------
Balance at December 31, 2002 $ 37,935,639 $ (274,260) $ 37,661,379
=============== ============ ==============
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31,
2002 2001 2000
---- ---- ----
Cash flows from operating activities:
Net (loss) income $ (1,196,680) $ (29,316) $ 102,001
--------------- -------------- ---------------
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Rental income paid directly to lenders by lessees (6,375,250) (4,972,825) (4,603,249)
Finance income portion of receivables paid directly
to lenders by lessees (4,081,646) (5,563,502) (6,614,810)
Interest expense on non-recourse financing paid
directly by lessees 4,747,596 5,522,977 6,686,835
Depreciation expense 4,016,556 2,729,052 2,646,303
Loss (gain) of sales of equipment 404,710 (288,060) -
Amortization of initial direct costs 332,183 702,003 819,348
Provision for doubtful accounts 300,000 - 200,000
Minority interest expense 13,501 18,574 15,947
(Income) loss from investments in
unconsolidated joint ventures (122,305) 1,146,543 (231,909)
Gain on sale of investment in unguaranteed residual - (1,219,910) -
Changes in operating assets and liabilities:
Collection of principal - non-financed receivables 1,280,938 5,598,071 4,073,479
Security deposits and others 670,842 (153,286) 675,498
Other assets, net 623,189 190,747 (78,613)
Accounts payable to General Partner
and affiliates, net 114,771 (537,085) 537,085
Other - - 241,558
--------------- --------------- ----------------
Total adjustments 1,925,085 3,173,299 4,367,472
--------------- -------------- ---------------
Net cash provided by operating activities 728,405 3,143,983 4,469,473
--------------- -------------- ---------------
Cash flows from investing activities:
Proceeds from the sale of investment
of unguaranteed residual values 1,186,863 2,608,659 -
Proceeds from the sales of equipment 1,144,010 3,664,324 -
Distributions received from unconsolidated joint ventures 811,996 362,587 -
Equipment purchased - (1,280,666) (2,255,107)
Initial direct costs paid - - (181,214)
Investments in unconsolidated joint ventures - - (158,832)
Investments in unguaranteed residual values - - (4,523,696)
Acquisition of minority interest in
consolidated joint venture - (55,804) -
--------------- -------------- ---------------
Net cash provided by (used in) investing activities 3,142,869 5,299,100 (7,118,849)
--------------- -------------- ---------------
(continued on next page)
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31,
2002 2001 2000
---- ---- ----
Cash flows from financing activities:
Proceeds from notes payable - recourse 3,805,871 - -
Redemption of limited partnership units (169,695) (52,192) (278,631)
Repayment of notes payable - recourse (1,819,912) (1,774,113) (1,405,974)
Cash distributions to partners (8,081,055) (8,103,376) (7,718,006)
Issuance of limited partnership units,
net of offering expenses - - 13,711,906
Proceeds from non-recourse borrowing - 3,004,674 -
Repayment of non-recourse debt - (1,510,523) (3,676,055)
--------------- -------------- ---------------
Net cash (used in) provided by financing activities (6,264,791) (8,435,530) 633,240
--------------- -------------- ---------------
Net (decrease) increase in cash and cash equivalents (2,393,517) 7,553 (2,016,136)
Cash and cash equivalents at beginning of the year 3,213,445 3,205,892 5,222,028
--------------- -------------- ---------------
Cash and cash equivalents at end of year $ 819,928 $ 3,213,445 $ 3,205,892
=============== ============== ===============
(continued on next page)
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
Supplemental Disclosure of Cash Flow Information
During the years ended December 31, 2002, 2001 and 2000, non-cash
activities included the following:
2002 2001 2000
---- ---- ----
Fair value of equipment and receivables
purchased for debt $ - $ - $ (2,880,250)
Non-recourse notes payable assumed in purchase price - - 2,880,250
Principal and interest on direct finance receivables
paid directly to lenders by lessees 8,391,197 13,877,218 14,558,076
Rental income-assigned - operating lease receivables
paid directly to lenders by lessees 6,375,250 4,972,825 4,603,249
Principal and interest on non-recourse financing
paid directly to lenders by lessees (14,766,447) (18,850,043) (19,161,325)
---------------- --------------- ----------------
$ - $ - $ -
================ =============== ================
Interest paid directly to
non-recourse lenders by lessees $ 4,747,596 $ 5,522,977 $ 6,686,835
Other interest paid 433,652 756,694 674,292
---------------- --------------- ----------------
Total interest expense $ 5,181,248 $ 6,279,671 $ 7,361,127
================ =============== ================
2002 2001 2000
---- ---- ----
Reclassification of a finance lease
to equipment held for lease or sale $ 2,281,412 $ - $ -
Reclassification of an operating lease
to equipment held for lease or sale 1,189,167 - -
Reclassification of finance leases upon lease
restructurings to operating leases - 10,765,766 -
---------------- --------------- ---------------
$ 3,470,579 $ 10,765,766 $ -
================ ============== ==================
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2002, 2001 and 2000
1. Organization
ICON Income Fund Eight A L.P. (the "Partnership"), was formed on July 9,
1997 as a Delaware limited partnership. The Partnership's maximum offering was
$75,000,000. The Partnership commenced business operations on its initial
closing date, October 14, 1998, with the admission of 12,000 limited partnership
units at $100 per unit representing $1,200,000 of capital contributions. Between
October 15, 1998 and May 17, 2000, the date of the Partnership's final closing,
737,965.04 additional units were admitted representing $73,796,504 of capital
contributions bringing the total admission to 749,965.04 units totaling
$74,996,504 in capital contributions. Between 2000 and 2002, the Partnership
redeemed 6,994.77 limited partnership units leaving 742,970.27 limited
partnership units outstanding at December 31, 2002.
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
General Partner received organization and offering expenses from the gross
proceeds of such sales. The total underwriting compensation paid by the
Partnership, including underwriting commissions, sales commissions, incentive
fees, public offering expense reimbursements and due diligence activities was
limited to 13.5% of gross proceeds up to $25,000,000, 12.5% of gross proceeds
from $25,000,001 to $50,000,000 and 11.5% of gross proceeds from $50,000,001 to
$75,000,000. Such offering expenses aggregated $9,363,039 (including $537,217
paid to the General Partner or its affiliates in 2000) (see Note 9) and were
charged directly to limited partners' equity. No such amounts were paid in 2002
or 2001.
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 an 8% per
annum cumulative return 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 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 dates of the financial
statements and revenues and expenses during the reporting periods. Significant
estimates include the allowance for doubtful accounts and unguaranteed residual
values. Management believes that the estimates and assumptions utilized in
preparing its financial statements are reasonable and prudent. In addition,
management is required to disclose contingent assets and contingent liabilities.
Actual results could differ from those estimates.
ICON Income Fund Eight A L.P.
(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 subsidiary, ICON/Boardman Facility LLC
("ICON BF"). All inter-company accounts and transactions have been eliminated in
consolidation. The Partnership accounts for its interests in 50% or less 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 either finance leases or operating leases,
as appropriate. For finance leases, the Partnership records, at the inception of
the lease, the total minimum lease payments receivable, the estimated
unguaranteed residual values, the initial direct costs related to the leases and
the related unearned income. Unearned income represents the difference between
the sum of the minimum lease payments receivable plus the estimated unguaranteed
residual minus the cost of the leased equipment. Unearned income is recognized
as finance income over the terms of the related leases using the interest
method. For operating leases, equipment is recorded at cost and is depreciated
on the straight-line method over the lease terms to their estimated fair market
values at lease terminations and 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. Initial direct costs of finance leases are capitalized and are amortized
over the terms of the related leases using the interest method. Initial direct
costs of operating leases are capitalized and depreciated on the straight-line
method over the lease terms.
Equipment Held for Lease or Sale - The off-lease rotables are carried at
cost, less accumulated depreciation, subject to the Partnership's impairment
policy.
Investments in Estimated Unguaranteed Residual Values - The Partnership
carries its investments in the future estimated unguaranteed residual values of
assets at cost, which is equal to or less than market value, subject to the
Partnership's policy relating to impairments of residuals. Gains or losses are
recognized upon the sale or disposition of the investments.
Impairment of Residual Values - The Partnership's policy with respect to
impairment of estimated residual values is to review, on a periodic basis, the
carrying value of its residuals on an individual asset basis to determine
whether events or changes in circumstances indicate that the carrying value of
an asset may not be recoverable and, therefore, an impairment loss should be
recognized. The events or changes in circumstances which generally indicate that
the residual value of an asset has been impaired are (i) the estimated fair
value of the underlying equipment is less than the Partnership's carrying value
or (ii) the lessee is experiencing financial difficulties and it does not appear
likely that the estimated proceeds from disposition of the asset will be
sufficient to satisfy the remaining obligation to the non-recourse lender and
the Partnership's residual position. Generally in the latter situation, the
residual position relates to equipment subject to third party non-recourse notes
payable where the lessee remits their rental payments directly to the lender and
the Partnership does not recover its residual until the non-recourse note
obligation is repaid in full.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
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 re-lease or sale of the equipment. Generally,
third party appraisals, reviews of future cash flows and anticipated future cash
flows and detailed market analyses are used as the basis for measuring whether
an impairment loss should be recognized.
Allowance for Doubtful Accounts - The Partnership records a provision for
bad debts to provide for estimated credit losses in its portfolio. The allowance
for doubtful accounts is based on the ongoing analysis of delinquency trends,
loss experience and an assessment of overall credit risk. The Partnership's
write-off policy is based on an analysis of the aging of the Partnership's
portfolio, a review of the non-performing receivables and leases, and prior
collection experience. An account is fully reserved or written off when the
analysis indicates that the probability of collection of the account is remote.
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, 2002 and 2001
with respect to the Partnership'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.
Redemption of Limited Partnership Units - The General Partner consented to
the Partnership redeeming 2,893.62 limited partnership units during 2002 and 880
units in 2001. The redemption amounts are calculated following the specified
redemption formula in accordance with the Partnership agreement. Redeemed
limited partnership 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 limited partnership units may not be
reissued. Redeemed limited partnership units are accounted for as a deduction
from partners' equity.
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 used in 2002.
New Accounting Pronouncements - In June 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143")
which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. The Partnership does not expect that the adoption of SFAS No. 143 will
have a material impact on its financial position, results of operations or cash
flows.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Effective January 1, 2002, the Partnership adopted SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144"). This statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future net
cash flows expected to be generated by the asset. If the carrying amount of the
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. SFAS No. 144 requires companies to separately report
discontinued operations and extends that reporting to a component of an entity
that either has been disposed of (by sale, abandonment or in a distribution to
the owners) or classified as held for sale. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less the costs to
sell. The adoption of SFAS No. 144 did not have any effect on the Partnership's
financial position or results of operations as the provisions of SFAS No. 144
are similar to the Partnership's current policy for impairment review.
Effective January 1, 2002, the Partnership adopted SFAS No. 145, "Recession
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS No. 145"). SFAS No. 145 amends SFAS No. 13
Accounting for Leases to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. The provisions of the Statement related to
Statement No. 13 were effective for transactions occurring after May 15, 2002,
the adoption of which did not have a material effect on the Partnership's
financial statements.
On July 30, 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS No. 146"). The standard
replaced Emerging Issues Task Force (EITF) issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)" and requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. Examples of costs covered by the standard include lease termination costs
and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. SFAS
No. 146 is effective prospectively to exit or disposal activities initiated
after December 31, 2002. The impact on the Partnership's financial statement
from the application of this standard is dependent on any exit or disposal
activities in 2003.
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. Consolidated Ventures and Investments in Unconsolidated Joint Ventures
The Partnership and its affiliates formed four joint ventures discussed
below 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 interests in the equipment.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Consolidated Ventures
The joint venture described below is majority owned and is consolidated
with the Partnership.
ICON/Boardman Facility LLC
--------------------------
In December 1998, the Partnership and three affiliates, ICON Cash Flow
Partners, L.P., Series C ("Series C"), ICON Cash Flow Partners L.P. Six ("L.P.
Six") and ICON Cash Flow Partners L.P. Seven, ("L.P. Seven") formed
ICON/Boardman Facility LLC ("ICON BF"), for the purpose of acquiring a lease of
a coal handling facility with Portland General Electric, a utility company. The
purchase price totaled $27,421,810 and was funded with cash and non-recourse
debt. The Partnership, Series C, L.P. Six, and L.P. Seven received a 98.5%, .5%,
..5% and .5% interest, respectively, in ICON BF.
In 2001 the joint venturers in ICON BF acquired Series C's interest in
accordance with their proportionate shares of ICON BF, at an aggregate cost of
$56,370, which represented Series C's carrying value of the investment. The
Partnership's share of the purchase price was $55,803. The remaining venturers'
shares in ICON BF at December 31, 2002 were 98.995%, .5025%, and .5025% for the
Partnership, L.P. Six, and L.P. Seven, respectively.
The Partnership's financial statements include 100% of the assets and
liabilities and 100% of the revenues and expenses of ICON BF. L.P. Six's and
L.P. Seven's interests in ICON BF have been reflected as minority interests in
joint ventures on the consolidated balance sheets and minority interest expense
on the consolidated statements of operations.
Portland General Electric ("PGE") is a wholly owned subsidiary of Enron
Corporation ("Enron"), which filed for Chapter 11 bankruptcy protection in
December 2001. PGE has not filed a petition for bankruptcy protection. While
Enron owns all of PGE's outstanding common stock, PGE is a separate legal
entity, owns its assets and is responsible for its own day-to-day operations.
PGE continues to make its lease payments and is current through March 2003.
Management is continually monitoring the Enron proceedings to the extent that it
could, in the future, impact the Partnership's investment.
Investment in Unconsolidated Joint Ventures
The three joint ventures described below are less than 50% owned and are
accounted for following the equity method.
ICON/AIC Trust
--------------
In 1999, ICON/AIC Trust ("AIC Trust") was formed to own and manage a
portfolio of leases in England. The Partnership, L.P. Six and L.P. Seven own
43.73%, 25.51% and 30.76% interests in AIC Trust, respectively. The Partnership
accounts for its investment in AIC Trust under the equity method of accounting.
On December 28, 2001, AIC Trust sold its remaining leases, subject to the
related debt, at a loss, for a note receivable of (pound)2,575,000 ($3,744,822
based upon the exchange rate at December 31, 2001) which is payable in six
installments through June 2004. The first two installments on the note of
(pound)475,000 each were collected in 2002. As of December 31, 2002, the
remaining amount due is (pound)1,625,000 ($2,572,522 on a discounted basis based
upon the exchange rate at December 31, 2002).
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the financial position and results of operations of AIC
Trust as of and for the years ended December 31, 2002 and 2001 is summarized
below:
December 31, 2002 December 31, 2001
----------------- -----------------
Assets $ 2,572,522 $ 3,849,439
=============== ================
Liabilities $ - $ -
=============== ================
Equity $ 2,572,522 $ 3,849,439
=============== ================
Partnership's share of equity $ 1,124,964 $ 1,683,360
=============== ================
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
----------------- -----------------
Net income (loss) $ 212,349 $ (2,687,696)
=============== ================
Partnership's share of
net income (loss) $ 92,860 $ (1,174,769)
=============== ================
Distributions $ 1,752,885 $ 829,150
=============== ================
Partnership's share of distributions $ 766,537 $ 362,587
=============== ================
ICON Aircraft 24846 LLC
-----------------------
In 2000, the Partnership and two affiliates, L.P. Seven and ICON Income
Fund Eight B L.P. ("Fund Eight B"), formed ICON Aircraft 24846 LLC ("ICON
Aircraft 24846") for the purpose of acquiring an investment in a 767-300 ER
aircraft leased to Scandinavian Airline Systems for a purchase price of
$44,515,416, which was funded with cash of $2,241,371 and non-recourse debt of
$42,274,045. The rents and the aircraft have been assigned to the unaffiliated
non-recourse lender. The lease is scheduled to expire in March 2003, at which
time the balance of the non-recourse debt outstanding is scheduled to be
approximately $34,500,000. The Partnership is currently negotiating a lease
payment agreement with another overseas based airline. Upon termination of
current lease, the aircraft will first be upgraded before re-leasing. The
Partnership, L.P. Seven and Fund Eight B have ownership interests of 2.0%, 2.0%
and 96.0%, respectively, in ICON Aircraft 24846. The Partnership accounts for
its investment under the equity method of accounting.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the financial position and results of operations of ICON
Aircraft 24846 as of and for the years ended December 31, 2002 and 2001 is
summarized below:
December 31, 2002 December 31, 2001
----------------- -----------------
Assets $ 39,175,547 $ 41,952,008
=============== ================
Liabilities $ 35,419,214 $ 38,945,109
=============== ================
Equity $ 3,756,333 $ 3,006,899
=============== ================
Partnership's share of equity $ 75,127 $ 60,138
=============== ================
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
----------------- -----------------
Net income $ 749,434 $ 749,435
=============== ================
Partnership's share of net income $ 14,989 $ 14,989
=============== ================
ICON Cheyenne LLC
-----------------
In December 2000, the Partnership and three affiliates, L.P. Six, L.P.
Seven and Fund Eight B formed ICON Cheyenne LLC ("ICON Cheyenne") for the
purpose of acquiring a portfolio of leases for an aggregate purchase price of
$29,705,716, which was paid for with cash of $11,401,151 and the assumption of
non-recourse debt with an unaffiliated third party lender of $18,304,565. The
debt is structured to be amortized by the application to the debt of rentals due
under the various leases. The leases expire on various dates through September
2006. The Partnership, L.P. Seven, L.P. Six and Fund Eight B have ownership
interests of 1.0%, 10.31%, 1.0% and 87.69%, respectively, in ICON Cheyenne. The
Partnership accounts for its investment under the equity method of accounting.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the financial position and results of operations of ICON
Cheyenne as of and for the years ended December 31, 2002 and 2001 is summarized
below:
December 31, 2002 December 31, 2001
----------------- -----------------
Assets $ 14,765,333 $ 23,869,671
=============== ================
Liabilities $ 5,141,481 $ 11,145,506
=============== ================
Equity $ 9,623,852 $ 12,724,165
=============== ================
Partnership's share of equity $ 96,239 $ 127,242
=============== ================
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
----------------- -----------------
Net income $ 1,445,607 $ 1,323,014
=============== ================
Partnership's share of net income $ 14,456 $ 13,237
=============== ================
Distributions $ 4,545,920 $ -
=============== ================
Partnership's share of distributions $ 45,459 $ -
=============== ================
4. Finance Lease Receivables
The Partnership has an investment in excess of $24 million in equipment on
lease to Portland General Electric ("PGE"), a utility company, which is a wholly
owned subsidiary of Enron Corporation ("Enron"). In the fourth quarter of 2001,
Enron Corporation filed for Chapter 11 bankruptcy protection. PGE has not filed
for bankruptcy protection. PGE is current on its lease payments at the date of
this report. Management is continually monitoring the Enron proceedings to the
extent that it could, in the future, impact the Partnership's investment.
Regus Business Center Corp. ("Regus"), with whom the Partnership has
eighteen leases, filed for Chapter 11 bankruptcy protection in the United States
of America on January 14, 2003. The Partnership's finance leases with Regus were
acquired in December 1999 of costs aggregating $4,861,629, and the total lease
receivable is $1,544,686 as of December 31, 2002. Regus has not paid January or
February rents for 2003, and management is currently negotiating an amended
lease agreement whereby Regus will commence making payments on March 15, 2003
continuing for forty eight months at a new reduced rental rate.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Non-cancelable minimum annual amounts due on finance leases are as follows:
Years ending December 31,
2003 $ 8,168,893
2004 5,321,969
2005 3,709,529
----------------
$ 17,200,391
================
5. Investment in Operating Leases
In 1999, the Partnership acquired two Boeing 737-400 aircraft for an
aggregate cost of $37,600,000 plus initial direct costs of $1,071,600. One
aircraft is currently on lease to Boeing through May 2003. The other aircraft is
leased to Sky Airlines through April 2005. This aircraft, like the one currently
on lease to Boeing, had been leased to KLM Dutch Airlines ("KLM") at the date of
purchase. During 2001, after the return of the aircraft from KLM and prior to
the delivery of the aircraft to Sky Airlines, the Partnership expended
$1,280,666 to upgrade the aircraft.
In 2000, the Partnership acquired aircraft rotables for a total cost of
$1,961,000 subject to a lease with Sabena Technics SA, a subsidiary of Sabena
Airlines SA. Sabena Airlines SA, the parent company of Sabena Technics SA, filed
for bankruptcy protection in Belgium in November 2001. Sabena Technics SA has
not filed for bankruptcy protection. During the fourth quarter 2002, Sabena
Technics SA returned all leased equipment to the Partnership with no outstanding
balance due from them as of December 31, 2002.
Effective October 1, 2001, the Partnership restructured two finance leases
with a United States based commercial airline covering two 737-200 HK aircraft.
The carrying value of these aircraft aggregated $10,765,766 as of October 1,
2001. The restructured leases expire in 2005. In connection with the
restructuring, the airline issued to the Partnership $2 million face value,
7.5%, paid in kind convertible notes maturing in 2009. As there is currently no
market value for these notes, the notes have been given a zero value. Any future
increase in value of the notes will be reflected as unrealized gain included in
other comprehensive income until such notes are sold at which time a realized
gain would be recognized.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The investment in operating leases at December 31, 2002 and 2001 consisted
of the following:
2002 2001
---- ----
Equipment cost, beginning of year $ 52,734,532 $ 40,688,100
Cost to upgrade aircraft - 1,280,666
Transfer from finance leases - 10,765,766
Transfer to equipment held for lease or sale (1,961,000) -
---------------- ----------------
Equipment cost, end of year 50,773,532 52,734,532
---------------- ----------------
Accumulated depreciation, beginning of year (5,969,663) (3,240,611)
Depreciation expense (4,016,556) (2,729,052)
Transfer to equipment held for lease or sale 771,833 -
---------------- ----------------
Accumulated depreciation, end of year (9,214,386) (5,969,663)
---------------- ----------------
Investment in operating leases, end of year $ 41,559,146 $ 46,764,869
================ ================
Non-cancelable minimum annual rental amounts due on operating leases are as
follows:
Year ending December 31,
2003 $ 5,053,200
2004 4,116,000
2005 2,109,000
----------------
$ 11,278,200
================
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
6. Allowance for Doubtful Accounts
The allowance for doubtful accounts consisted of the following:
Amount
Balance at January 1, 2000 $ 385,000
Provision for bad debts 200,000
-------------
Balance at December 31, 2000 585,000
-------------
Balance at December 31, 2001 585,000
-------------
Provision for bad debts 300,000
Writeoffs (656,279)
-------------
Balance at December 31, 2002 $ 228,721
=============
7. Investments in Unguaranteed Residual Values
During the year ended December 31, 2001, the Partnership invested
$1,997,000 to acquire an interest in the residual value of an off-shore oil
drilling rig subject to lease with an unaffiliated third party, and $2,526,696
for a residual interest related to a portfolio of technology and other equipment
leases with various lessees in the United Kingdom. During 2002 and 2001, the
Partnership received $1,186,863 and $238,749, respectively, related to the sale
of equipment from the portfolio of technology and other equipment leased to
lessees in the United Kingdom. These amounts were recorded as a recovery of
investment, with no gain or loss recognized. During 1999, the Partnership
purchased an option to acquire an interest in an aircraft subject to lease with
a United States based commercial airline for $1,150,000. The Partnership sold
this option in the second quarter 2001 for $2,369,910 and realized a gain of
$1,219,910 on the sale.
8. Notes Payable
Notes payable consists of notes payable non-recourse, which are being paid
directly to the lenders by the lessees, and a recourse note payable under a line
of credit. The non-recourse notes bear interest at rates ranging from 7.49% to
10.0%.
During the quarter ended June 30, 2002, the Partnership entered into a
$17,500,000 joint and several line of credit agreement dated as of May 30, 2002
shared with L.P. Seven and Fund Eight B (the "Initial Funds"), with Comerica
Bank as lender. Under the terms of the agreement, the Partnership may borrow at
a rate equal to the Comerica Bank base rate plus 1% (together, 5.25% at December
31, 2002) and all borrowings are to be jointly and severally collateralized by
the present values of rents receivable and equipment owned by all of the Initial
Funds sharing in the joint line of credit. On December 12, 2002, the agreement
was amended to admit ICON Income Fund Nine, LLC, collectively along with the
Initial Funds (the "Funds"), as a borrower sharing the $17,500,000 joint line of
credit agreement. The Funds
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
have entered into a Contribution Agreement, dated as of May 30, 2002, as amended
December 12, 2002, pursuant to which the Funds have agreed to restrictions on
the amount and the terms of their respective borrowings under the line of credit
in order to minimize the risk that a Fund would not be able to repay its
allocable portion of the outstanding revolving loan obligation at any time,
including restrictions on any Fund borrowing in excess of the lesser of (A) an
amount each Fund could reasonably expect to repay in one year out of its
projected free cash flow, or (B) the greater of (i) the Borrowing Base (as
defined in the line of credit agreement) as applied to such Fund, and (ii) 50%
of the net worth of such Fund. The Contribution Agreement provides that, in the
event a Fund pays an amount under the agreement in excess of its allocable share
of the obligation under the agreement whether by reason of an Event of Default
or otherwise, the other Funds will immediately make a contribution payment to
such Fund in such amount that the aggregate amount paid by each Fund reflects
its allocable share of the aggregate obligations under the agreement. The Funds'
obligations to each other under the Contribution Agreement are collateralized by
a subordinate lien on the assets of each participating Fund. The expiration date
of this line of credit is May 31, 2003. The Partnership violated a financial
covenant at December 31, 2002 creating an Event of Default. The bank granted a
waiver to the Partnership with respect to this Event of Default. As of December
31, 2002, there were no borrowings by the Partnership under the line. Aggregate
borrowing by all Funds under the line of credit agreement aggregated $9,731,310
on December 31, 2002.
The above notes mature as follows:
Notes Payable Note Payable
Year Non-Recourse Recourse Total
2003 $ 25,002,030 $ 3,805,871 $ 28,807,901
2004 7,774,115 - 7,774,115
2005 12,022,450 - 12,022,450
2006 2,870,208 - 2,870,208
---------------- -------------- --------------
$ 47,668,803 $ 3,805,871 $ 51,474,674
================ ============== ==============
9. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates were as follows for the period ended December 31,:
2002 2001 2000
---- ---- ----
Organization and
offering expenses $ - $ - $ 230,236 Charged to equity
Underwriting commissions - - 306,981 Charged to equity
Acquisition fees - - 2,149,370 Capitalized
Management fees 1,128,431 1,902,703 1,836,953 Charged to operations
Administrative expense
reimbursements 488,133 764,715 751,073 Charged to operations
------------- ------------- -------------
$ 1,616,564 $ 2,667,418 $ 5,274,613
============= ============= =============
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
In accordance with the Management Agreement, the Partnership pays the
General Partner acquisition fees of 3%, based on equipment value acquired, as
defined, and management fees based on a percentage of rentals received (ranging
from 1% to 7%). In addition, the General Partner is reimbursed for expenses
incurred by it in connection with the Partnership's operations. (See Note 1 for
information relating to organization and offering expenses and underwriting
commissions).
The Partnership has investments in four joint ventures with other
partnerships sponsored by the General Partner. (See Note 3 for additional
information relating to the joint ventures).
10. Tax Information (Unaudited)
The following table reconciles net (loss) income for financial statement
reporting purposes to net loss for federal income tax purposes for the years
ended December 31, 2002, 2001 and 2000:
2002 2001 2000
---- ---- ----
Net (loss) income for financial statement
reporting purposes $ (1,196,680) $ (29,316) $ 102,001
Temporary differences due to:
Direct finance leases 3,245,792 10,105,194 8,988,112
Interest expense 871,925 (710,659) (1,060,868)
Provision for doubtful accounts 300,000 - (200,000)
Loss on sales of equipment (1,976,835) (2,608,101) -
Depreciation (5,972,900) (12,292,786) (17,135,716)
Other 550,335 (1,428,868) (1,155,319)
--------------- --------------- ---------------
Net loss for federal income tax reporting purposes $ (4,178,363) $ (6,964,536) $ (10,461,790)
=============== =============== ===============
As of December 31, 2002, the partners' capital accounts included for
financial statement reporting purposes totaled $37,661,379 compared to the
partners' capital accounts for federal income tax purposes of $18,275,613
(unaudited). The difference arises primarily from temporary differences caused
principally by accelerated depreciation for tax purposes, partially offset by
(i) provisions for losses for financial statement reporting purposes but not for
tax reporting purposes, (ii) the differences between financial reporting and tax
reporting of finance leases and (iii) sales commissions and expenses from the
offering that are reported as a reduction in the partners' capital accounts for
financial statement reporting purposes but not for federal income tax reporting
purposes.
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
11. Quarterly Financial Data (Unaudited)
The following table is a summary of financial data by quarter for the years
ended December 31, 2002 and 2001:
For the Quarter Ended
---------------------
March 31, June 30, September 30, December 31,
-------- ------- ------------ -----------
2002
Revenues $ 3,074,106 $ 3,119,237 $ 2,961,252 $ 2,045,769
============= ============= =====