Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
[x] Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For
the quarterly period ended
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September 30, 2009
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or
[ ] Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For
the transition period from
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to
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Commission_File_Number_
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333-153849
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ICON
Equipment and Corporate Infrastructure Fund Fourteen,
L.P.
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(Exact
name of registrant as specified in its
charter)
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Delaware
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26-3215092
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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100 Fifth Avenue, 4th Floor, New York, New York
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10011
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(Address
of principal executive offices)
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(Zip
code)
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(212) 418-4700
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Registrant's
telephone number, including area
code
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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.
Yes
[x] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).
[ ]
Yes [ ] No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,’’ ‘‘accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer [ ] Accelerated
filer [ ] Non-accelerated filer [x]
Smaller reporting company [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
[ ] Yes [x]
No
Number of
outstanding units of limited partnership interests of the registrant
on November 6, 2009 is 46,214.
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Table
of Contents
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(A
Delaware Limited Partnership)
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||||||||
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Consolidated
Balance Sheets
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||||||||
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Assets
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||||||||
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September
30,
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||||||||
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2009
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December
31,
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|||||||
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(unaudited)
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2008
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|||||||
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Cash
and cash equivalents
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$ | 1,669,441 | $ | 1,001 | ||||
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Leased
equipment at cost (less accumulated depreciation of $49,881 and $0,
respectively)
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11,940,895 | - | ||||||
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Investments
in joint ventures
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13,919,563 | - | ||||||
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Deferred
charges, net
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1,235,433 | - | ||||||
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Other
assets, net
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56,457 | - | ||||||
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Total
Assets
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$ | 28,821,789 | $ | 1,001 | ||||
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Liabilities
and Partners' Equity
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||||||||
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Liabilities:
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||||||||
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Deferred
revenue
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$ | 296,155 | $ | - | ||||
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Due
to General Partner and affiliates
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778,116 | - | ||||||
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Accrued
expenses and other current liabilities
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115,036 | - | ||||||
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Total
Liabilities
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1,189,307 | - | ||||||
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Commitments
and contingencies (Note 7)
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||||||||
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Partners'
(Deficit) Equity:
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||||||||
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General
Partner
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(14,361 | ) | 1 | |||||
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Limited
Partners
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27,646,843 | 1,000 | ||||||
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Total
Partners' Equity
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27,632,482 | 1,001 | ||||||
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Total
Liabilities and Partners' Equity
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$ | 28,821,789 | $ | 1,001 | ||||
See
accompanying notes to consolidated financial statements.
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(A
Delaware Limited Partnership)
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||||||||
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Consolidated
Statements of Operations
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||||||||
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(unaudited)
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||||||||
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Three Months Ended September 30,
2009
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Period from June 19, 2009 (Commencement of
Operations) through September 30, 2009
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|||||||
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Revenue:
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||||||||
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Rental
income
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$ | 109,328 | $ | 109,328 | ||||
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Income
from investments in joint ventures
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249,398 | 249,398 | ||||||
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Interest
and other income
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4,042 | 4,042 | ||||||
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Total
revenue
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362,768 | 362,768 | ||||||
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Expenses:
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||||||||
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Management
fees
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11,350 | 11,350 | ||||||
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Administrative
expense reimbursements
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777,776 | 1,196,142 | ||||||
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General
and administrative
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114,585 | 354,471 | ||||||
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Interest
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7,333 | 7,333 | ||||||
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Depreciation
and amortization
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58,214 | 58,214 | ||||||
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Total
expenses
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969,258 | 1,627,510 | ||||||
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Net
loss
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$ | (606,490 | ) | $ | (1,264,742 | ) | ||
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Net
loss allocable to:
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||||||||
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Limited
Partners
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$ | (600,426 | ) | $ | (1,252,095 | ) | ||
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General
Partner
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(6,064 | ) | (12,647 | ) | ||||
| $ | (606,490 | ) | $ | (1,264,742 | ) | |||
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Weighted
average number of limited
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||||||||
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partnership
interests outstanding
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17,423 | 15,813 | ||||||
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Net
loss per weighted average
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||||||||
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limited
partnership interest
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$ | (34.46 | ) | $ | (79.18 | ) | ||
See
accompanying notes to consolidated financial statements.
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(A
Delaware Limited Partnership)
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||||||||||||||||
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Consolidated
Statements of Changes in Partners' Equity
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||||||||||||||||
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(unaudited)
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||||||||||||||||
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Limited
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Total
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Partnership
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Limited
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Partners'
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||||||||||||||
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Interests
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Partners
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General Partner
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Equity
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Balance, June 19,
2009
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1 | $ | 1,000 | $ | 1 | $ | 1,001 | |||||||||
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Net
loss
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- | (651,669 | ) | (6,583 | ) | (658,252 | ) | |||||||||
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Redemption
of limited partnership interest
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(1 | ) | (1,000 | ) | - | (1,000 | ) | |||||||||
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Proceeds
from sale of limited partnership interests
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4,972 | 4,971,696 | - | 4,971,696 | ||||||||||||
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Sales
and offering expenses
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- | (541,090 | ) | - | (541,090 | ) | ||||||||||
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Cash
distributions to partners
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- | (2,434 | ) | (25 | ) | (2,459 | ) | |||||||||
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Balance, June 30,
2009
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4,972 | 3,776,503 | (6,607 | ) | 3,769,896 | |||||||||||
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Net
loss
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- | (600,426 | ) | (6,064 | ) | (606,490 | ) | |||||||||
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Proceeds
from sale of limited partnership interests
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27,590 | 27,573,344 | - | 27,573,344 | ||||||||||||
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Sales
and offering expenses
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- | (2,916,620 | ) | - | (2,916,620 | ) | ||||||||||
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Cash
distributions to partners
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- | (185,958 | ) | (1,690 | ) | (187,648 | ) | |||||||||
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Balance, September 30,
2009
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32,562 | $ | 27,646,843 | $ | (14,361 | ) | $ | 27,632,482 | ||||||||
See
accompanying notes to consolidated financial statements.
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(A
Delaware Limited Partnership)
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Consolidated
Statement of Cash Flows
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(unaudited)
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Period from June 19, 2009 (Commencement of
Operations) through September 30, 2009
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Cash
flows from operating activities:
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Net
loss
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$ | (1,264,742 | ) | |
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Adjustments
to reconcile net loss to net cash
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provided
by operating activities:
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Income
from investments in joint ventures
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(249,398 | ) | ||
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Depreciation
and amortization
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58,214 | |||
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Changes
in operating assets and liabilities:
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Other
assets
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(64,790 | ) | ||
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Deferred
revenue
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296,155 | |||
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Due
to General Partner and affiliates
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763,460 | |||
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Accrued
expenses and other liabilities
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27,160 | |||
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Distributions
from joint ventures
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249,398 | |||
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Net
cash used in operating activities
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(184,543 | ) | ||
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Cash
flows from investing activities:
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Purchase
of equipment
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(11,990,776 | ) | ||
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Investments
in joint ventures
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(14,436,203 | ) | ||
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Distributions
received from joint ventures in excess of profits
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516,640 | |||
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Net
cash used in investing activities
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(25,910,339 | ) | ||
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Cash
flows from financing activities:
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Sale
of limited partnership interests
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32,545,040 | |||
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Sales
and offering expenses paid
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(3,151,618 | ) | ||
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Deferred
charges
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(1,438,993 | ) | ||
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Cash
distributions to partners
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(190,107 | ) | ||
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Redemption
of limited partnership interest
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(1,000 | ) | ||
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Net
cash provided by financing activities
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27,763,322 | |||
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Net
increase in cash and cash equivalents
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1,668,440 | |||
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Cash
and cash equivalents, beginning of the period
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1,001 | |||
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Cash
and cash equivalents, end of the period
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$ | 1,669,441 | ||
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Supplemental
disclosure of non-cash investing and financing activities:
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||||
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Underwriting
fees due to ICON Securities
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$ | 700 | ||
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Organizational
and offering expenses due to Investment Manager
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$ | 14,656 | ||
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Sales
commissions due to third parties
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$ | 87,176 | ||
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Organizational
and offering expenses charged to equity
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$ | 218,216 | ||
See
accompanying notes to consolidated financial statements.
4
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
September
30, 2009
(unaudited)
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(1)
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Organization
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ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P. (the “Partnership”)
was formed on August 20, 2008 as a Delaware limited partnership. The
Partnership is engaged in one business segment, the business of investing in
business-essential equipment and corporate infrastructure (collectively,
“Capital Assets”), including, but not limited to, Capital Assets that are
already subject to lease, Capital Assets that the Partnership purchases and
leases to domestic and global businesses, loans that are secured by Capital
Assets, and ownership rights to leased Capital Assets at lease
expiration. The Partnership will continue until December 31, 2020,
unless terminated sooner.
The
Partnership’s principal investment objective is to obtain the maximum economic
return from its investments for the benefit of its partners. To
achieve this objective, the Partnership: (i) acquires a diversified portfolio by
making investments in Capital Assets; (ii) makes monthly cash distributions, at
the Partnership’s general partner’s discretion, to its partners commencing the
month following each partner’s admission to the Partnership, continuing until
the end of the operating period; (iii) will reinvest substantially all
undistributed cash from operations and cash from sales of investments in Capital
Assets during the operating period; and (iv) will dispose of its investments and
distribute the excess cash from such dispositions to its partners beginning with
the commencement of the liquidation period.
The
general partner of the Partnership is ICON GP 14, LLC, a Delaware limited
liability company (the “General Partner”), which is a wholly-owned subsidiary of
ICON Capital Corp., a Delaware corporation (“ICON Capital”). The
General Partner manages and controls the business affairs of the Partnership,
including, but not limited to, the Capital Assets the Partnership invests in
pursuant to the terms of the Partnership’s limited partnership agreement (the
“Partnership Agreement”). Pursuant to the terms of an investment
management agreement, the General Partner has engaged ICON Capital as an
investment manager (the “Investment Manager”) to, among other things, facilitate
the acquisition and servicing of the Partnership’s
investments. Additionally, the General Partner has a 1% interest in
the profits, losses, cash distributions and liquidation proceeds of the
Partnership.
The
Partnership is currently in its offering period, which commenced on May 18, 2009
and is anticipated to end no later than May 2011. With the proceeds
from the limited partnership interests (“Interests”) sold, the Partnership
intends to invest in a diverse pool of Capital Assets and establish a cash
reserve in the amount of 0.50% of the gross offering proceeds. The
initial capitalization of the Partnership was $1,001, which consisted of $1 from
the General Partner and $1,000 from a limited partner, ICON Capital, which acts
as the Investment Manager of the Partnership. The Partnership is
offering Interests on a “best efforts” basis with the intention of raising up to
$418,000,000 of capital, consisting of 420,000 Interests, of which 20,000 have
been reserved for the Partnership’s distribution reinvestment plan (the “DRIP
Plan”). The DRIP Plan allows limited partners to purchase Interests
with distributions received from the Partnership and/or certain affiliates of
the Partnership. At any time prior to May 18, 2011, the Partnership
may, at its sole discretion, increase the offering to a maximum of up to
$618,000,000 of capital, consisting of 600,000 Interests, provided that the
offering period is not extended in connection with such change.
5
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
September
30, 2009
(unaudited)
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(1)
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Organization
- continued
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The
Partnership’s initial closing date was June 19, 2009 (the “Commencement of
Operations”), the date at which the Partnership had raised $1,200,000 and
limited partners were admitted. Upon the Commencement of Operations,
the Partnership returned the initial capital contribution of $1,000 to ICON
Capital. During the period from May 18, 2009 to September 30, 2009,
the Partnership sold 32,562 Interests to 1,076
limited partners, representing $32,545,040 of capital
contributions. Investors from the Commonwealth of Pennsylvania and
the State of Tennessee were not admitted until the Partnership raised total
equity in the amount of $20,000,000, which the Partnership achieved on August
27, 2009. Beginning with the Commencement of Operations, the
Partnership has paid or accrued sales commissions to third
parties. The Partnership has also paid or accrued various fees to the
General Partner and its affiliates. For the period from the
Commencement of Operations through September 30, 2009, the Partnership has paid
or accrued the following fees in connection with its offering of its
Interests: (i) sales commissions to third parties in the amount of
$2,267,467 and (ii) underwriting fees in the amount of $972,027 to ICON
Securities Corp., an affiliate of the General Partner and the dealer-manager of
the Partnership’s offering (“ICON Securities”). In addition, the
General Partner and its affiliates, on behalf of the Partnership, incurred
organizational and offering expenses in the amount of $1,453,649. For the period from the
Commencement of Operations through September 30, 2009, organizational and
offering expenses in the amount of $218,216 were recorded as a reduction of
partners’ equity.
Partners’
capital accounts are increased for their initial capital contribution plus their
proportionate share of earnings and decreased by their proportionate share of
losses and distributions. Profits, losses, cash distributions and liquidation
proceeds are allocated 99% to the limited partners and 1% to the General Partner
until the aggregate amount of cash distributions paid to limited partners equals
the sum of the limited partners’ aggregate capital contributions plus an 8%
cumulative annual return on their aggregate unreturned capital contributions,
compounded daily. After such time, distributions will be allocated
90% to the limited partners and 10% to the General Partner.
|
(2)
|
Summary
of Significant Accounting Policies
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Basis of
Presentation and Consolidation
The
accompanying consolidated financial statements of the Partnership have been
prepared in accordance with U.S. generally accepted accounting principles (“US
GAAP”) for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission for Quarterly Reports on
Form 10-Q. In the opinion of the General Partner, all adjustments
considered necessary for a fair presentation have been included. The
results for the interim period are not necessarily indicative of the results for
the full year. The General Partner has evaluated all subsequent
events through November 10, 2009, the date the consolidated financial statements
were issued.
The
consolidated financial statements include the accounts of the Partnership and
its majority-owned subsidiaries and other controlled entities. All
intercompany accounts and transactions have been eliminated in
consolidation. In joint ventures where the Partnership has majority
ownership, the financial condition and results of operations of the joint
venture are consolidated. Noncontrolling interest represents the
minority owner’s proportionate share of its equity in the joint
venture. The noncontrolling interest is adjusted for the minority
owner’s share of the earnings, losses, investments and distributions of the
joint venture.
6
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
September
30, 2009
(unaudited)
|
(2)
|
Summary
of Significant Accounting Policies -
continued
|
The
Partnership accounts for its noncontrolling interests in joint ventures where
the Partnership has influence over financial and operational matters, generally
50% or less ownership interest, 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. The Partnership accounts for investments in joint
ventures where the Partnership has virtually no influence over financial and
operational matters using the cost method of accounting. In such
cases, the Partnership’s original investments are recorded at cost and any
distributions received are recorded as revenue. All of the
Partnership’s investments in joint ventures are subject to its impairment review
policy.
Cash and
Cash Equivalents
Cash and
cash equivalents include 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 two financial
institutions and at times may exceed insured limits. The Partnership
has placed these funds in high quality institutions in order to minimize risk
relating to exceeding insured limits.
Risks and
Uncertainties
In the
normal course of business, the Partnership is exposed to two significant types
of economic risk: credit and market. Credit risk is the risk of a
lessee, borrower or other counterparty’s inability or unwillingness to make
contractually required payments. Concentrations of credit risk with
respect to lessees, borrowers or other counterparties are dispersed across
different industry segments within the United States of America and throughout
the world. Although the Partnership does not currently foresee a
concentrated credit risk associated with its lessees, borrowers or other
counterparties, contractual payments are dependent upon the financial stability
of the industry segments in which such counterparties operate.
Market
risk reflects the change in the value of debt instruments and credit
facilities due to changes in interest rate spreads or other market factors.
The Partnership believes that the carrying value of its investments is
reasonable, taking into consideration these risks, along with estimated
collateral values, payment history and other relevant information.
Leased
Equipment at Cost
Investments
in leased equipment are stated at cost less accumulated
depreciation. Leased equipment is depreciated on a straight-line
basis over the lease term, which generally ranges from 3 to 8 years, to the
asset’s residual value.
The
Investment Manager has an investment committee that approves each new equipment
lease and other financing transaction. As part of its process, the
investment committee determines the residual value, if any, to be used once the
investment has been approved. The factors considered in determining
the residual value include, but are not limited to, the creditworthiness of the
potential lessee, the type of equipment considered, how the equipment is
integrated into the potential lessee’s business, the length of the lease and the
industry in which the potential lessee operates. Residual values are
reviewed for impairment in accordance with the Partnership’s impairment review
policy.
7
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
September
30, 2009
(unaudited)
|
(2)
|
Summary
of Significant Accounting Policies -
continued
|
The
residual value assumes, among other things, that the asset is utilized normally
in an open, unrestricted and stable market. Short-term fluctuations in the
marketplace are disregarded and it is assumed that there is no necessity either
to dispose of a significant number of the assets, if held in quantity,
simultaneously or to dispose of the asset quickly. The residual value
is calculated using information from various external sources, such as trade
publications, auction data, equipment dealers, wholesalers and industry experts,
as well as inspection of the physical asset and other economic
indicators.
Deferred
Charges
Pursuant to the Partnership Agreement,
the costs of organizing the Partnership and offering the Interests are
capitalized by the Partnership and amortized over the estimated offering period,
generally two years from the effective date of the offering. The
unamortized balance of these costs is reflected on the consolidated balance
sheets as deferred charges, net.
Revenue
Recognition
The
Partnership provides financing to third parties, generally in the form of leases
and loans. Additionally, the Partnership may make loans to borrowers
secured by Capital Assets. With respect to leases of Capital Assets, each lease
is classified as either a finance lease or an operating lease, which is based
upon the terms of the lease. Loans are typically classified as notes
receivable.
For
finance leases and notes receivable, the Partnership records finance and
interest income, respectively, on the consolidated statements of operations
using the effective interest rate method, which results in a constant rate of
return over the lease or loan term, as applicable. For operating
leases, rental income is recognized on a straight-line basis over the lease
term. Billed operating lease receivables are included in accounts
receivable until collected. Deferred revenue is the difference
between the timing of the receivables billed and the income recognized on a
straight-line basis.
The
recognition of revenue may be suspended when deemed appropriate by the General
Partner, in accordance with the Partnership’s policy on doubtful
accounts.
Notes
Receivable
Notes
receivable are reported on the consolidated balance sheets at the outstanding
principal balance net of any unamortized deferred fees, premiums or discounts on
purchased loans. Costs on originated loans are reported as other
assets. Unearned income, discounts and premiums are amortized using
the effective interest method. Interest receivable resulting from the
unpaid principal is reported separately from the outstanding
balance.
8
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
September
30, 2009
(unaudited)
|
(2)
|
Summary
of Significant Accounting Policies -
continued
|
Initial
Direct Costs
Initial
direct costs associated with operating leases are capitalized as a component of
the cost of the equipment and depreciated. Initial direct costs
associated with finance leases and notes receivable are amortized using the
effective interest rate method. Costs related to leases or other
financing transactions that are not consummated are expensed in the period
negotiations terminate.
Acquisition
Fees
The
Partnership pays acquisition fees to the Investment Manager equal to 2.5% of the
total purchase price paid by or on behalf of the Partnership for each of the
Partnership’s investments, including, but not limited to, the cash paid,
indebtedness incurred or assumed, plus all fees and expenses incurred in
connection therewith (the “Purchase Price”). These fees are
capitalized and included in the cost of the investment.
Income
Taxes
The
Partnership is taxed as a partnership for federal and State income tax
purposes. 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 tax of the partners.
Per
Interest Data
Net
income (loss) per Interest is based upon the weighted average number of
Interests outstanding during the applicable period.
Interest
Redemption
The
Partnership may, at its discretion, redeem Interests from a limited number of
its limited partners, as provided for in the Partnership
Agreement. The redemption price for any Interests approved for
redemption is based upon a formula, as provided in the Partnership
Agreement. Limited partners are required to hold their Interests for
at least one year before redemptions will be permitted.
Use of
Estimates
The
preparation of financial statements in conformity with US GAAP requires the
General Partner to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities as of the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant estimates primarily include the determination of
allowance for doubtful accounts, depreciation and amortization, impairment
losses, estimated useful lives and residual values. Actual results
could differ from those estimates.
9
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
September
30, 2009
(unaudited)
|
(2)
|
Summary
of Significant Accounting Policies -
continued
|
Recently
Adopted Accounting Pronouncements
During
the quarter ended June 30, 2009, the Partnership adopted the accounting
pronouncement regarding the general standards of accounting for, and disclosure
of, events that occur after the balance sheet date but before the financial
statements are issued. This pronouncement was effective prospectively
for interim and annual reporting periods ending after June 15,
2009. The adoption of this accounting pronouncement did not have a
significant impact on the Partnership’s consolidated financial
statements.
During
the quarter ended September 30, 2009, the Partnership adopted Accounting
Standards Codification 105, “Generally Accepted Accounting Principles,” which
establishes the Financial Accounting Standards Board Accounting Standards
Codification (the “Codification”), which supersedes all existing accounting
standard documents and will become the single source of authoritative
non-governmental US GAAP. All other accounting literature not
included in the Codification will be considered
non-authoritative. This accounting standard is effective for interim
and annual periods ending after September 15, 2009. The Partnership
has conformed its consolidated financial statements and related notes to the new
Codification for the quarter ended September 30, 2009.
|
(3)
|
Leased
Equipment at Cost
|
On July 31, 2009, the Partnership,
through its wholly-owned subsidiary, ICON Exopack, LLC (“ICON Exopack”),
purchased a 3-layer blown film extrusion line from Exopack, LLC (“Exopack”) for
the purchase price of approximately $2,713,000. Simultaneously with
the purchase of the equipment, ICON Exopack entered into a lease with
Exopack. The lease is for a period of 60 months commencing on August
1, 2009. On September 30, 2009, ICON Exopack purchased an eight color
48” – 52” flexographic printing press from Exopack for the purchase price of
approximately $3,662,000. Simultaneously with that purchase, ICON
Exopack entered into a second schedule to the lease with
Exopack. That lease is for a period of 60 months commencing on
October 1, 2009. The obligations of Exopack are guaranteed by its
parent company, Exopack Holding Corp. The Partnership paid aggregate
acquisition fees to the Investment Manager in the amount of approximately
$159,000 in connection with these transactions.
On September 30, 2009, the Partnership,
through its wholly-owned subsidiary, ICON Global Crossing VI, LLC (“ICON Global
Crossing VI”), purchased telecommunications equipment for the purchase price of
approximately $5,323,000. Simultaneously with the purchase, ICON
Global Crossing VI leased the equipment to Global Crossing Telecommunications,
Inc. (“Global Crossing”). The lease is for a period of 36 months
commencing on October 1, 2009. The Partnership paid an acquisition
fee to the Investment Manager in the amount of approximately $133,000 in
connection with this transaction.
10
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
September
30, 2009
(unaudited)
|
(4)
|
Investments
in Joint Ventures
|
On June
26, 2009, the Partnership and ICON Leasing Fund Twelve, LLC, an entity managed
by the Investment Manager (“Fund Twelve”), entered into a joint venture, ICON
Atlas, LLC (“ICON Atlas”), for the purpose of investing in eight new Ariel
natural gas compressors (the “Gas Compressors”) from AG Equipment Co.
(“AG”). On June 26, 2009, ICON Atlas purchased four of the Gas
Compressors from AG for approximately $4,270,000. Simultaneously with the
purchase, ICON Atlas entered into a lease with Atlas Pipeline Mid-Continent, LLC
(“APMC”), an affiliate of Atlas Pipeline Partners, L.P. (“APP”). As
of June 30, 2009, the Partnership had no economic interest in ICON
Atlas.
On August
17, 2009, ICON Atlas purchased the four additional Gas Compressors from AG for
approximately $7,028,000. Simultaneously with that purchase, ICON
Atlas entered into a second schedule to the lease with APMC. The
lease for both schedules is for a period of 48 months and expires on August
31, 2013. The obligations of APMC are guaranteed by its parent
company, APP. As of September 30, 2009, the Partnership contributed
approximately $5,084,000 to ICON Atlas, after which the Partnership’s and Fund
Twelve’s ownership interests in ICON Atlas were 45% and 55%,
respectively. The Partnership paid an acquisition fee to the
Investment Manager in the amount of approximately $127,000 in connection with
this transaction.
On June
29, 2009, the Partnership and Fund Twelve entered into a joint venture, ICON
ION, LLC (“ICON ION”), for the purpose of making secured term loans (the “ION
Loans”) in the aggregate amount of $20,000,000 to ARAM Rentals Corporation, a
Canadian bankruptcy remote Nova Scotia unlimited liability company (“ARC”) and
ARAM Seismic Rentals Inc., a U.S. bankruptcy remote Texas corporation (“ASR,”
together with ARC, collectively referred to as the “ARAM
Borrowers”). On that date, ICON ION funded the first tranche of the
ION Loans in the amounts of $8,825,000 and $3,675,000 to ARC and ASR,
respectively. As of June 30, 2009, the Partnership had no
economic interest in ICON ION. On July 20, 2009, ICON ION funded
the second tranche of the ION Loans to ARC in the amount of
$7,500,000.
The ARAM
Borrowers are wholly-owned subsidiaries of ION Geophysical Corporation, a
Delaware corporation (“ION”). The ION Loans are secured by (i) a
first priority security interest in all of the ARAM analog seismic system
equipment owned by the ARAM Borrowers and (ii) a pledge of all of the equity
interests in the ARAM Borrowers. In addition, ION guaranteed all
obligations of the ARAM Borrowers under the ION Loans. Interest
accrues at the rate of 15% per year and the ION Loans are payable monthly in
arrears for a period of 60 months beginning on August 1, 2009. As of
September 30, 2009, the Partnership contributed $9,000,000 to ICON ION, after
which the Partnership’s and Fund Twelve’s ownership interests in ICON ION were
45% and 55%, respectively. The Partnership paid an acquisition fee to
the Investment Manager in the amount of $225,000 in connection with this
transaction.
Information
as to the results of operations of ICON ION is summarized below:
|
Period from June 29, 2009 through September 30,
2009
|
||||
|
Revenue
|
$ | 759,891 | ||
|
Net
income
|
$ | 715,327 | ||
|
Partnership's
share of net income
|
$ | 156,631 | ||
11
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
September
30, 2009
(unaudited)
|
(4)
|
Investments
in Joint Ventures - continued
|
The
ultimate ownership of both ICON Atlas and ICON ION was intended to be such that
the Partnership and Fund Twelve would have ownership interests equal to 45% and
55%, respectively, which was achieved in each case on or prior to September 1,
2009. All capital contributions to either joint venture by the
Partnership and related distributions to Fund Twelve were effectuated so that
the aggregate amount of capital contributed by the Partnership did not exceed
the aggregate amount of capital contributed by Fund Twelve, adjusted for any
income received and expenses paid or incurred by the respective joint venture
and any compensation that the General Partner and any of its affiliates were
otherwise entitled to receive pursuant to the Partnership
Agreement. Neither the General Partner nor any of its affiliates
realized any benefit, other than compensation for its services, if any,
permitted by the Partnership Agreement as a result of these
transactions.
|
(5)
|
Revolving
Line of Credit, Recourse
|
Certain
affiliates of the Partnership, entities sponsored and organized by the
Investment Manager, ICON Income Fund Eight B L.P. (“Fund Eight B”), ICON Income
Fund Nine, LLC (“Fund Nine”), ICON Income Fund Ten, LLC (“Fund Ten”), ICON
Leasing Fund Eleven, LLC (“Fund Eleven”) and Fund Twelve, are parties to a
Commercial Loan Agreement, as amended (the “Loan Agreement”), with California
Bank & Trust (“CB&T”). The Partnership (collectively with
Fund Eight B, Fund Nine, Fund Ten, Fund Eleven and Fund Twelve, the “ICON
Borrowers”) was added as a borrower under the Loan Agreement on August 12,
2009.
The Loan
Agreement provides for a revolving line of credit of up to $30,000,000 pursuant
to a senior secured revolving loan facility (the “Facility”), which is secured
by all assets of the ICON Borrowers not subject to a first priority lien, as
defined in the Loan Agreement. Each of the ICON Borrowers is jointly and
severally liable for all amounts borrowed under the Facility. At September 30,
2009, no amounts were accrued related to the Partnership’s joint and several
obligations under the Facility. Amounts available under the Facility are subject
to a borrowing base that is determined, subject to certain limitations, on the
present value of the future receivables under certain lease agreements and loans
in which the ICON Borrowers have a beneficial interest.
The
Facility expires on June 30, 2011 and the ICON Borrowers may request a one year
extension to the revolving line of credit within 390 days of the then-current
expiration date, but CB&T has no obligation to extend. The interest rate for
general advances under the Facility is CB&T’s prime rate and the interest
rate on up to five separate advances that are permitted to be made under the
Facility is the rate at which U.S. dollar deposits can be acquired by CB&T
in the London Interbank Eurocurrency Market plus 2.5% per year, provided that
neither interest rate is permitted to be less than 4.0% per year. The interest
rate at September 30, 2009 was 4.0%. In addition, the ICON Borrowers
are obligated to pay a quarterly commitment fee of 0.50% on unused commitments
under the Facility.
12
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
September
30, 2009
(unaudited)
|
(5)
|
Revolving
Line of Credit, Recourse -
continued
|
The ICON
Borrowers are also parties to a Contribution Agreement (the “Contribution
Agreement”), pursuant to which the ICON Borrowers agreed to certain restrictions
on the amounts and terms of their respective borrowings under the Facility in
order to minimize the risk that an ICON Borrower would be unable to repay its
portion of the outstanding obligations under the Facility at any
time. The Contribution Agreement also provides that, in the event
that an ICON Borrower pays an amount under the Contribution Agreement in excess
of its share of the total obligations under the Facility, whether by reason of
an event of default or otherwise, the other ICON Borrowers will immediately make
a contribution payment to such ICON Borrower in such amount that the aggregate
amount paid by each ICON Borrower reflects its allocable share of the aggregate
obligations under the Facility. The ICON Borrowers’ obligations to
each other under the Contribution Agreement are collateralized by a subordinate
lien on the assets of each ICON Borrower.
Aggregate borrowings by all ICON
Borrowers under the Facility amounted to $7,625,000 at September 30,
2009. The Partnership had no borrowings outstanding under the
Facility as of such date. The balances of $365,000 and $7,260,000
were borrowed by Fund Eight B and Fund Eleven,
respectively. Subsequent to September 30, 2009, Fund Eight B and Fund
Eleven repaid $150,000 and $5,000,000, respectively, which reduced Fund Eight
B’s and Fund Eleven’s outstanding loan balances to $215,000 and $2,260,000,
respectively.
Pursuant
to the Loan Agreement, the ICON Borrowers are required to comply with certain
covenants. At September 30, 2009, the ICON Borrowers were in
compliance with all covenants.
|
(6)
|
Transactions
with Related Parties
|
The
Partnership has entered into certain agreements with the General Partner, the
Investment Manager and ICON Securities, whereby the Partnership pays certain
fees and reimbursements to these parties. ICON Securities is entitled
to receive a 3% underwriting fee from the gross proceeds from sales of the
Partnership’s Interests.
The
Partnership pays the Investment Manager (i) an annual management fee, payable
monthly, equal to 3.5% of the gross periodic payments due and paid from the
Partnership’s investments and (ii) acquisition fees, through the end of the
operating period, equal to 2.5% of the Purchase Price of each investment the
Partnership makes in Capital Assets.
In addition, the Partnership reimburses
the General Partner and its affiliates for organizational and offering expenses
incurred in connection with the Partnership’s organization and
offering. The reimbursement of these expenses will be capped at the
lesser of 1.44% of the gross offering proceeds (assuming all of the Interests
are sold in the offering) and the actual fees and expenses incurred by the
General Partner and its affiliates. Accordingly, the General Partner
and its affiliates may ultimately be reimbursed for less than the actual costs
and expenses incurred. These costs may include, but are not limited
to, legal, accounting, printing, advertising, administrative, investor relations
and promotional expenses for registering, offering and distributing the
Partnership’s Interests to the public. The General Partner also has a
1% interest in the Partnership’s profits, losses, cash distributions and
liquidation proceeds.
13
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
September
30, 2009
(unaudited)
|
(6)
|
Transactions
with Related Parties -
continued
|
The
General Partner and its affiliates also perform certain services relating to the
management of the Partnership’s portfolio. Such services include, but
are not limited to, credit analysis and underwriting, receivables management,
portfolio management, accounting, financial and tax reporting, and remarketing
and marketing services.
In
addition, the General Partner and its affiliates are reimbursed for
administrative expenses incurred in connection with the Partnership’s
operations. Administrative expense reimbursements are costs incurred
by the General Partner or its affiliates that are necessary to the Partnership’s
operations. These costs include the General Partner’s and its affiliates’
legal, accounting, investor relations and operations personnel costs, as well as
professional fees and other costs that are charged to the Partnership based upon
the percentage of time such personnel dedicate to the Partnership.
Excluded are salaries and related costs, travel expenses and other
administrative costs incurred by individuals with a controlling interest in the
General Partner.
Fees and
other expenses paid or accrued by the Partnership to the General Partner or its
affiliates were as follows:
|
Entity
|
Capacity
|
Description
|
Three Months Ended September 30,
2009
|
Period from the Commencement of Operations through
September 30, 2009
|
||||||||
|
ICON
Capital Corp.
|
Investment
Manager
|
Organizational
and offering
|
||||||||||
|
expense
reimbursements (1)
|
$ | 396,417 | $ | 1,453,649 | ||||||||
|
ICON
Securities Corp.
|
Dealer-Manager
|
Underwriting
fees (2)
|
822,915 | 972,027 | ||||||||
|
ICON
Capital Corp.
|
Investment
Manager
|
Acquisition
fees (3)
|
292,458 | 292,458 | ||||||||
|
ICON
Capital Corp.
|
Investment
Manager
|
Management
fees (4)
|
11,350 | 11,350 | ||||||||
|
ICON
Capital Corp.
|
Investment
Manager
|
Administrative
expense
|
||||||||||
|
reimbursements
(4)
|
777,776 | 1,196,142 | ||||||||||
| $ | 2,300,916 | $ | 3,925,626 | |||||||||
|
(1) Amount
capitalized and charged to partners' equity.
|
||||||||||||
|
(2) Amount
charged directly to partners' equity.
|
||||||||||||
|
(3) Amount
capitalized and amortized to operations.
|
||||||||||||
|
(4) Amount
charged directly to operations.
|
||||||||||||
At September 30, 2009, the Partnership
had a net payable of $778,116 due to the General
Partner and its affiliates that primarily consisted of administrative expense
reimbursements in the amount of approximately $778,000.
From
October 1, 2009 to November 6,
2009, the Partnership raised an additional $13,612,488
in capital contributions and has paid or accrued underwriting fees to ICON
Securities in the amount of $400,026.
|
(7)
|
Commitments
and Contingencies
|
At the
time the Partnership acquires or divests of an interest in Capital Assets, the
Partnership may, under very limited circumstances, agree to indemnify the seller
or buyer for specific contingent liabilities. The General Partner
believes that any liability that may arise as a result of any such
indemnification obligations will not have a material adverse effect on the
Partnership’s consolidated financial condition taken as a whole.
The
following is a discussion of our current financial position and results of
operations. This discussion should be read together with our Prospectus, dated
May 18, 2009, contained in our Registration Statement on Form S-1, as
amended. This discussion should also be read in conjunction with the
disclosures below regarding “Forward-Looking Statements” and the “Risk Factors”
set forth in Item 1A of Part II of this Quarterly Report on Form
10-Q.
As used
in this Quarterly Report on Form 10-Q, references to “we,” “us,” “our” or
similar terms include ICON Equipment and Corporate Infrastructure Fund Fourteen,
L.P. and its consolidated subsidiaries.
Forward-Looking
Statements
Certain
statements within this Quarterly Report on Form 10-Q may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (“PSLRA”). These statements are being
made pursuant to the PSLRA, with the intention of obtaining the benefits of the
“safe harbor” provisions of the PSLRA, and, other than as required by law, we
assume no obligation to update or supplement such
statements. Forward-looking statements are those that do not relate
solely to historical fact. They include, but are not limited to, any
statement that may predict, forecast, indicate or imply future results,
performance, achievements or events. You can identify these
statements by the use of words such as “may,” “will,” “could,” “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “predict,” “continue,” “further,”
“seek,” “plan,” or “project” and variations of these words or comparable words
or phrases of similar meaning. These forward-looking statements
reflect our current beliefs and expectations with respect to future events and
are based on assumptions and are subject to risks and uncertainties and other
factors outside our control that may cause actual results to differ materially
from those projected. We undertake no obligation to update publicly
or review any forward-looking statement, whether as a result of new information,
future developments or otherwise.
Overview
We
operate as an equipment leasing and financing fund in which the capital our
partners invest is pooled together to make investments in Capital Assets, pay
fees and establish a small reserve. We commenced active operations on
June 19, 2009. We will use a substantial portion of the proceeds from
the sale of our Interests to invest in Capital Assets, including, but not
limited to, Capital Assets that are already subject to lease, Capital Assets
that we purchase and lease to domestic and global businesses, loans that are
secured by Capital Assets, and ownership rights to leased Capital Assets at
lease expiration. After these proceeds have been invested, it is
anticipated that additional investments will be made with the cash generated
from our initial investments to the extent that cash is not needed for our
expenses, reserves and distributions to limited partners. The
investment in additional Capital Assets in this manner is called
“reinvestment.” We anticipate investing and reinvesting in Capital
Assets from time to time for five years from the date we complete the
offering. This time frame is called the “operating period” and may be
extended, at our General Partner’s discretion, for up to an additional three
years. After the operating period, we will then sell our assets in
the ordinary course of business, during a time frame called the “liquidation
period.”
We will
seek to make investments in Capital Assets that we believe will provide our
investors with a satisfactory rate of return on their investment from (a)
current cash flow generated by the payment of rent in the case of leases and
principal and/or interest in the case of secured loans, (b) deferred cash flow
from the realization of the value of the Capital Assets or interests therein at
the maturity of the investment or the exercise of an option to purchase Capital
Assets or (c) a combination of both.
With
respect to (a) above, we will seek to make investments in Capital Assets subject
to lease and in secured loans with lessees and borrowers, respectively, that we
believe to be creditworthy based on such lessees’ and borrowers’ financial
position, business, industry, and the underlying value of the Capital
Assets. In our opinion, this increases the probability that all of
the scheduled rental or loan payments, as applicable, will be paid when
due. In the case of leases where there is significant current cash
flow generated during the primary term of the lease and the value of the Capital
Assets at the end of the term will be minimal or is not considered a primary
reason for making the investment, the rental payments due under the lease are
expected to be, in the aggregate, sufficient to provide a return of and a return
on the purchase price of the leased Capital Assets. In the case of
secured loans, the principal and interest payments due under the loan are
expected to provide a return of and a return on the amount we lend to
borrowers.
With
respect to (b) above, we will seek to make investments in Capital Assets subject
to operating leases and leveraged leases, interests or options to purchase
interests in the residual value of Capital Assets, and other investments in
Capital Assets that we expect will generate enough net proceeds from either the
sale or re-lease of such Capital Assets, as applicable, to provide a
satisfactory rate of return. In the case of these types of
investments, we will seek to make investments in Capital Assets that decline in
value at a slow rate due to the long economic life of such assets. In
the case of operating leases (leases where there is limited cash flow during the
primary term of the lease and the value of the Capital Assets at the end of the
term was the primary reason for making the investment), most, if not all, of the
return of and return on that investment will generally be realized upon the sale
or re-lease of the Capital Assets. In the case of leveraged leases
(leases where a substantial portion of the cash flow and potentially a portion
of the residual value has been pledged to a lender on a non-recourse basis and
the value will be realized upon the sale or re-lease of the Capital Assets), the
rental income received in cash will be less than the purchase price of the
Capital Assets because we will structure these transactions to utilize some or
all of the lease rental payments to reduce the amount of non-recourse
indebtedness used to acquire such assets. In our experience, the residual value
may provide a return of and a return on the purchase price of the equipment even
if all rental payments received during the initial term were paid to a
lender.
In some
cases with respect to the above investments, we may acquire equity interests, as
well as warrants or other rights to acquire equity interests in the borrower or
lessee, which may increase our expected return on our investment.
Our
General Partner manages and controls our business affairs, including, but not
limited to, our investments in Capital Assets, under the terms of our
Partnership Agreement. Our Investment Manager, an affiliate of our
General Partner, will originate and service our investments. Our
Investment Manager also sponsored and manages seven other equipment leasing and
finance funds.
Recent
Significant Transactions
We
entered into the following recent significant transactions from the Commencement
of Operations through September 30, 2009:
|
·
|
On
June 26, 2009, we and Fund Twelve entered into a joint venture, ICON
Atlas, for the purpose of investing in eight new Gas Compressors from
AG. On June 26, 2009, ICON Atlas purchased four of the Gas
Compressors from AG for approximately $4,270,000. Simultaneously with the
purchase, ICON Atlas entered into a lease with APMC, an affiliate of
APP. As of June 30, 2009, we had no economic
interest in ICON Atlas.
|
|
|
On
August 17, 2009, ICON Atlas purchased the four additional Gas Compressors
from AG for approximately $7,028,000. Simultaneously with that
purchase, ICON Atlas entered into a second schedule to the lease with
APMC. The lease for both schedules is for a period of 48
months and expires on August 31, 2013. The obligations of APMC
are guaranteed by its parent company, APP. As of September 30,
2009, we contributed approximately $5,084,000 to ICON Atlas, after which
our and Fund Twelve’s ownership interests in ICON Atlas were 45% and 55%,
respectively. We paid an acquisition fee to our Investment
Manager in the amount of approximately $127,000 in connection with this
transaction.
|
|
·
|
On
June 29, 2009, we and Fund Twelve entered into a joint venture, ICON ION,
for the purpose of making the ION Loans in the aggregate amount of
$20,000,000 to ARC and ASR. On that date, ICON ION funded the
first tranche of the ION Loans in the amounts of $8,825,000 and $3,675,000
to ARC and ASR, respectively. As of June 30, 2009, we had
no economic interest in ICON ION. On July 20, 2009, ICON
ION funded the second tranche of the ION Loans to ARC in the amount of
$7,500,000.
|
|
|
The
ARAM Borrowers are wholly-owned subsidiaries of ION. The ION
Loans are secured by (i) a first priority security interest in all of the
ARAM analog seismic system equipment owned by the ARAM Borrowers and (ii)
a pledge of all of the equity interests in the ARAM
Borrowers. In addition, ION guaranteed all obligations of the
ARAM Borrowers under the ION Loans. Interest accrues at
the rate of 15% per year and the ION Loans are payable monthly in arrears
for a period of 60 months beginning on August 1, 2009. As of
September 30, 2009, we contributed $9,000,000 to ICON ION, after which our
and Fund Twelve’s ownership interests in ICON ION were 45% and 55%,
respectively. We paid an acquisition fee to our Investment
Manager in the amount of $225,000 in connection with this
transaction.
|
The
ultimate ownership of both ICON Atlas and ICON ION was intended to be such that
we and Fund Twelve would have ownership interests equal to 45% and 55%,
respectively, which was achieved in each case on or prior to September 1,
2009. All capital contributions to either joint venture by us and
related distributions to Fund Twelve were effectuated so that the aggregate
amount of capital contributed by us did not exceed the aggregate amount of
capital contributed by Fund Twelve, adjusted for any income received and
expenses paid or incurred by the respective joint venture and any compensation
that our General Partner and any of its affiliates were otherwise entitled to
receive pursuant to the Partnership Agreement. Neither our General
Partner nor any of its affiliates realized any benefit, other than compensation
for its services, if any, permitted by the Partnership Agreement as a result of
this transaction.
|
·
|
On
July 31, 2009, we, through our wholly-owned subsidiary, ICON Exopack,
purchased a 3-layer blown film extrusion line from Exopack for the
purchase price of approximately $2,713,000. Simultaneously with
the purchase of the equipment, ICON Exopack entered into a lease with
Exopack. The lease is for a period of 60 months commencing on
August 1, 2009. On September 30, 2009, ICON Exopack purchased
an eight color 48” – 52” flexographic printing press from Exopack for the
purchase price of approximately $3,662,000. Simultaneously with
that purchase, ICON Exopack entered into a second schedule to the lease
with Exopack. That lease is for a period of 60 months
commencing on October 1, 2009. The obligations of Exopack are
guaranteed by its parent company, Exopack Holding Corp. We paid
aggregate acquisition fees to our Investment Manager in the amount of
approximately $159,000 in connection with these
transactions.
|
|
·
|
On
September 30, 2009, we, through our wholly-owned subsidiary, ICON Global
Crossing VI, purchased telecommunications equipment for the purchase price
of approximately $5,323,000. Simultaneously with the purchase,
ICON Global Crossing VI leased the equipment to Global
Crossing. The lease is for a period of 36 months commencing on
October 1, 2009. The Partnership paid an acquisition fee to the
Investment Manager in the amount of approximately $133,000 in connection
with this transaction.
|
Other
Recent Accounting Pronouncements
There are
no recent accounting pronouncements that are expected to have a significant
impact on our consolidated financial statements as of September 30,
2009. See Note 2 to our consolidated financial statements for a
discussion of accounting pronouncements that we have recently
adopted.
Results
of Operations for the Three Months Ended September 30, 2009 (the “2009
Quarter”)
We are
currently in our offering period. The minimum offering of $1,200,000
was achieved on June 19, 2009, the Commencement of Operations, and from the
Commencement of Operations through September 30, 2009, we raised total equity of
$32,545,040. Investors from the Commonwealth of Pennsylvania and the
State of Tennessee were not admitted until we raised total equity in the amount
of $20,000,000, which we achieved on August 27, 2009. With the net
proceeds from our offering, we will invest in Capital Assets. As our
investments mature, we may sell the Capital Assets and reinvest the proceeds in
additional Capital Assets.
Revenue
for the 2009 Quarter and the period from the Commencement of Operations through
September 30, 2009 (the “2009 Period”) are summarized as follows:
|
Three Months Ended September 30,
2009
|
Period from the Commencement of Operations through
September 30, 2009
|
|||||||
|
Rental
income
|
$ | 109,328 | $ | 109,328 | ||||
|
Income
from investments in joint ventures
|
249,398 | 249,398 | ||||||
|
Interest
and other income
|
4,042 | 4,042 | ||||||
|
Total
revenue
|
$ | 362,768 | $ | 362,768 | ||||
Total
revenue for the 2009 Quarter was $362,768, which was primarily due to the income
recognized from our investments in the ICON Atlas and ICON ION joint
ventures. In addition, we recognized rental income of approximately
$109,000 from our leases with Exopack and Global Crossing.
Expenses
for the 2009 Quarter and the 2009 Period are summarized as follows:
|
Three Months Ended September 30,
2009
|
Period from the Commencement of Operations through
September 30, 2009
|
|||||||
|
Management
fees
|
$ | 11,350 | $ | 11,350 | ||||
|
Administrative
expense reimbursements
|
777,776 | 1,196,142 | ||||||
|
General
and administrative
|
114,585 | 354,471 | ||||||
|
Interest
|
7,333 | 7,333 | ||||||
|
Depreciation
and amortization
|
58,214 | 58,214 | ||||||
|
Total
expenses
|
$ | 969,258 | $ | 1,627,510 | ||||
Total
expenses for the 2009 Quarter were $969,258, which were comprised primarily of
administrative expense reimbursements to our Investment Manager in the amount of
approximately $778,000. Administrative expense reimbursements are
costs incurred by our General Partner and its affiliates that are necessary to
our operations. These costs include our General Partner’s and its
affiliates’ legal, accounting, investor relations and operations personnel
costs, as well as professional fees and other costs that are charged to us based
upon the percentage of time such personnel dedicate to us. During the
2009 Quarter, we also incurred professional fees of approximately $107,000 and
recorded depreciation expense of approximately $50,000 related to our leases
with Exopack and Global Crossing.
Net
Loss
As a
result of the foregoing factors, the net loss for the 2009 Quarter was
$606,490. The net loss per weighted average limited partnership
interest for the 2009 Quarter was $34.46.
Results
of Operations for the 2009 Period
Total
revenue for the 2009 Period was $362,768. We did not recognize any
revenue for the period from the Commencement of Operations through June 30,
2009.
Total
expenses for the 2009 Period were $1,627,510, which were comprised primarily of
administrative expense reimbursements to our Investment Manager in the amount of
approximately $1,196,000. In addition, during the 2009 Period, we
incurred professional fees of approximately $347,000 and recorded depreciation
expense of approximately $50,000 related to our leases with Exopack and Global
Crossing.
Net
Loss
As a
result of the foregoing factors, the net loss for the 2009 Period was
$1,264,742. The net loss per weighted average limited partnership
interest for the 2009 Period was $79.18.
Liquidity
and Capital Resources
Cash
Flows Summary
At
September 30, 2009, we had cash and cash equivalents of
$1,669,441. During our offering period, our main source of cash will
be from financing activities and our main use of cash will be in investing
activities.
Cash and
cash equivalents include cash in banks and highly liquid investments with
original maturity dates of three months or less. Our cash and cash
equivalents are held principally at two financial institutions and at times may
exceed insured limits. We have placed these funds in high quality
institutions in order to minimize risk relating to exceeding insured
limits.
In addition, pursuant to the terms of
our offering, we will establish a reserve in the amount of 0.5% of the gross
offering proceeds.
Cash
Flows
The
following table sets forth summary cash flow data:
|
Period from the Commencement of Operations through
September 30, 2009
|
||||
|
Net
cash (used in) provided by:
|
||||
|
Operating
activities
|
$ | (184,543 | ) | |
|
Investing
activities
|
(25,910,339 | ) | ||
|
Financing
activities
|
27,763,322 | |||
|
Net
increase in cash and cash equivalents
|
$ | 1,668,440 | ||
Note:
See the Consolidated Statement of Cash Flows included in “Item 1. Consolidated
Financial Statements” of this Quarterly Report on Form 10-Q for additional
information.
Sources
and Uses of Cash
We are
offering our Interests on a “best efforts” basis with the current intention of
raising up to $418,000,000. As additional Interests are sold, we will
experience a relative increase in liquidity as cash is received and then a
relative decrease in liquidity as cash is expended to make
investments.
For the
period from the Commencement of Operations through September 30, 2009, we sold
32,562 Interests, representing $32,545,040 of capital
contributions. We admitted 1,076 limited partners. For the
period from the Commencement of Operations through September 30, 2009, we have
paid or accrued sales commissions to third parties of $2,267,467 and
underwriting commissions to ICON Securities of $972,027. In addition,
organization and offering expenses of $1,453,649 were paid or incurred by us,
our General Partner or its affiliates during this period.
We will
use the net proceeds of the offering to invest in Capital Assets located in
North America, Europe and other developed markets, including those in Asia,
South America and elsewhere. We will seek to acquire a portfolio of
Capital Assets that is comprised of both (a) transactions that provide current
cash flow in the form of rental payments (in the case of leases) and payments of
principal and/or interest (in the case of secured loans) and (b) transactions
that generate deferred cash flow from realizing the value of the Capital Assets
or interests therein at the maturity of the investment or exercise of an option
to purchase Capital Assets, or (c) a combination of both.
Sources
of Liquidity
Cash
generated from our financing activities will be our most significant source of
liquidity during our offering period. We believe that cash generated
from our financing activities, as well as the expected results of our
operations, will be sufficient to finance our liquidity requirements for the
foreseeable future, including distributions to our partners, general and
administrative expenses, new investment opportunities, management fees and
administrative expense reimbursements. In addition, our revolving
line of credit had $22,375,000 available as of September 30, 2009 (see Note 5 to
our consolidated financial statements) for additional working capital needs or
new investment opportunities. Our ability to generate cash in the
future is subject to general economic, financial, competitive, regulatory and
other factors that affect us and our lessees’ and borrowers’ businesses that are
beyond our control.
Distributions
We, at
our General Partner’s discretion, pay monthly distributions to each of our
partners beginning with the first month after each such partner’s admission and
continue to pay such distributions until the termination of our operating
period. We paid distributions to our General Partner and limited
partners in the amount of $1,715 and $188,392, respectively, for the 2009
Period.
Commitments
and Contingencies and Off-Balance Sheet Transactions
Commitments
and Contingencies
At the
time we acquire or divest of an interest in Capital Assets, we may, under very
limited circumstances, agree to indemnify the seller or buyer for specific
contingent liabilities. Our General Partner believes that any
liability that may arise as a result of any such indemnification obligations
will not have a material adverse effect on our consolidated financial
condition taken as a whole.
Off-Balance
Sheet Transactions
None.
There are
no material changes to the disclosure related to these items since the filing of
our Prospectus, dated May 18, 2009, contained in our Registration Statement on
Form S-1, as amended.
Evaluation of disclosure controls
and procedures
In
connection with the preparation of this Quarterly Report on Form 10-Q for the
quarter ended September 30, 2009, as well as the financial statements for our
General Partner, our General Partner carried out an evaluation, under the
supervision and with the participation of the management of our General Partner,
including its Co-Chief Executive Officers and the Chief Financial Officer, of
the effectiveness of the design and operation of our General Partner’s
disclosure controls and procedures as of the end of the period covered by this
Report pursuant to the Securities Exchange Act of 1934. Based on the
foregoing evaluation, the Co-Chief Executive Officers and the Chief Financial
Officer concluded that our General Partner’s disclosure controls and procedures
were effective.
In
designing and evaluating our General Partner’s disclosure controls and
procedures, our General Partner recognized that disclosure controls and
procedures, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the disclosure
controls and procedures are met. Our General Partner’s disclosure
controls and procedures have been designed to meet reasonable assurance
standards. Disclosure controls and procedures cannot detect or prevent all error
and fraud. Some inherent limitations in disclosure controls and procedures
include costs of implementation, faulty decision-making, simple error and
mistake. Additionally, controls can be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the controls. The design of any system of controls is based, in part, upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
anticipated and unanticipated future conditions. Over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with
established policies or procedures.
Evaluation of internal control over
financial reporting
There
have been no changes in our internal control over financial reporting during the
three months ended September 30, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
In the
ordinary course of conducting our business, there may be certain claims, suits
and complaints filed against us. In the opinion of management, the
outcome of such matters, if any, will not have a material impact on our
financial position or results of operations. We are not aware of any
material legal proceedings that are currently pending against us or against any
of our assets.
There
have been no material changes from the risk factors disclosed in our Prospectus,
dated May 18, 2009, contained in our Registration Statement on Form S-1, as
amended.
Our
Registration Statement on Form S-1, as amended, was declared effective by the
Securities and Exchange Commission on May 18, 2009 (SEC File No.
333-153849). Our offering period commenced on May 18, 2009 and is
anticipated to end no later than May 2011. From May 18, 2009 through
September 30, 2009, we received capital contributions in the amount of
$32,545,040. For the period from the Commencement of Operations
through September 30, 2009, we have paid or accrued sales commissions to
unrelated third parties of $2,267,467 and underwriting commissions to ICON
Securities of $972,027. In addition, organizational and offering
expenses in the amount of $1,453,649 were paid or incurred by us, our General
Partner or its affiliates during this period. Net offering proceeds
to us after deducting the expenses described were $27,851,897.
From
October 1, 2009 through November 6, 2009, we received additional capital
contributions in the amount of $13,612,488. For
the period from October 1, 2009 through November 6, 2009, we have paid or
accrued sales commissions to unrelated third parties of $928,218
and underwriting commissions to ICON Securities of $400,026. In
addition, organizational and offering expenses in the amount of $123,555
were paid or incurred by us, our General Partner or its affiliates during this
period. Net offering proceeds to us after deducting the expenses
described were $12,160,764.
See the
disclosure under “Recent Significant Transactions” in Item 2 of Part I for a
discussion of the investments that we have made with our net offering
proceeds.
Not
applicable.
No
matters were submitted to a vote of security holders during the quarter ended
September 30, 2009.
Not
applicable.
|
3.1
|
Certificate
of Limited Partnership of Registrant (Incorporated by reference to
Exhibit 3.1 to Registrant’s Registration Statement on Form S-1
filed with the SEC on October 3, 2008 (File No.
333-153849)).
|
|
4.1
|
Limited
Partnership Agreement of Registrant (Incorporated by reference to
Exhibit A to Registrant’s Prospectus filed with the SEC on May
18, 2009 (File No.
333-153849)).
|
|
10.1
|
Investment
Management Agreement, by and between ICON Equipment and Corporate
Infrastructure Fund Fourteen, L.P. and ICON Capital Corp., dated as of May
18, 2009 (Incorporated by reference to Exhibit 10.1 to Registrant’s
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2009, filed August 13,
2009).
|
|
10.2
|
Commercial
Loan Agreement, by and between California Bank & Trust and ICON Income
Fund Eight B L.P., ICON Income Fund Nine, LLC, ICON Income Fund Ten,
LLC and ICON Leasing Fund Eleven, LLC, dated as of August 31, 2005
(Incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2009, filed
August 13, 2009).
|
|
10.3
|
Loan
Modification Agreement, by and between California Bank & Trust and
ICON Income Fund Eight B L.P., ICON Income Fund Nine, LLC, ICON
Income Fund Ten, LLC and ICON Leasing Fund Eleven, LLC, dated as of
December 26, 2006 (Incorporated by reference to Exhibit 10.3 to
Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2009, filed August 13,
2009).
|
| 10.4 |
Loan
Modification Agreement, by and between California Bank & Trust and
ICON Income Fund Eight B L.P., ICON Income Fund Nine, LLC, ICON
Income Fund Ten, LLC, ICON Leasing Fund Eleven, LLC and ICON Leasing Fund
Twelve, LLC, dated as of June 20, 2007 (Incorporated by reference to
Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2009, filed August 13,
2009).
|
| 10.5 |
Third
Loan Modification Agreement, by and between California Bank &
Trust and ICON Income Fund Eight B L.P., ICON Income Fund Nine, LLC,
ICON Income Fund Ten, LLC, ICON Leasing Fund Eleven, LLC and ICON Leasing
Fund Twelve, LLC, dated as of May 1, 2008 (Incorporated by reference to
Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2009, filed August 13,
2009).
|
| 10.6 |
Fourth
Loan Modification Agreement, by and between California Bank & Trust
and ICON Income Fund Eight B L.P., ICON Income Fund Nine, LLC, ICON Income
Fund Ten, LLC, ICON Leasing Fund Eleven, LLC, ICON Leasing Fund Twelve,
LLC and ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P.,
dated as of August 12, 2009 (Incorporated by reference to Exhibit 10.6 to
Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2009, filed August 13, 2009).
|
| 31.1 | Rule 13a-14(a)/15d-14(a). Certification of Co-Chief Executive Officer. |
| 31.2 | Rule 13a-14(a)/15d-14(a). Certification of Co-Chief Executive Officer. |
| 31.3 | Rule 13a-14(a)/15d-14(a). Certification of Chief Financial Officer. |
| 32.1 | Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 | Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.3 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(Registrant)
By: ICON
GP 14, LLC
(General Partner of the
Registrant)
November 10,
2009
|
By:
/s/ Mark
Gatto
|
|
Mark
Gatto
|
|
Co-Chief
Executive Officer and Co-President
(Co-Principal
Executive Officer)
|
November
10, 2009
|
By: /s/
Michael A. Reisner
|
|
Michael
A. Reisner
|
|
Co-Chief
Executive Officer and Co-President
(Co-Principal
Executive Officer)
|
November
10, 2009
|
By:
/s/ Anthony J.
Branca
|
|
Anthony
J. Branca
|
|
Chief
Financial Officer
(Principal
Accounting and Financial
Officer)
|
|
25
|