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8-K - FORM 8K - ICON INCOME FUND NINE LLC | body.htm |
Exhibit 99.1
INCOME
FUND
NINE,
LLC
PORTFOLIO
OVERVIEW
FIRST
QUARTER
2010
Letter from the
CEOs As of May 21,
2010
Dear
investor in ICON Income Fund Nine, LLC:
We write
to briefly summarize our activity for the first quarter of 2010. A
more detailed analysis, which we encourage you to read, is contained in our Form
10-Q. Our Form 10-Q and our other quarterly, annual and current
reports are available in the Investor Relations section of our website,
www.iconcapital.com.
As of
March 31, 2010, Fund Nine was in its liquidation period. During the liquidation
period, distributions that are generated from net rental income and proceeds
from equipment sales generally fluctuate as remaining leases come to maturity or
equipment coming off lease is sold. Throughout the first quarter of
2010, we made distributions in the aggregate amount of $832,782.
As you
may already be aware, in March of 2009, Spansion, LLC (“Spansion”) filed for
bankruptcy in the United States Bankruptcy Court and shortly thereafter,
Spansion rejected two out of three of our leases with them. The
equipment subject to the two rejected leases was returned in June of
2009. On July 29, 2009, we sold the microprocessor manufacturing
device that was subject to the affirmed lease to Spansion for approximately
$585,000. On February 22, 2010, the United States Bankruptcy Court
approved our administrative expense claim in the amount of approximately $90,000
and our unsecured claim in the amount of approximately $269,000. On March 22,
2010, we sold the unsecured claim to a third party for approximately
$161,000. We are happy to report that we received a gross
cash-on-cash return of approximately 149% related to the Spansion
investment.
We also
currently own three roll-on-roll-off vehicle transportation vessels that are
bareboat chartered to Wilhelmsen Lines Shipowning AS, a subsidiary of Wilh.
Wilhelmsen ASA, a leading global maritime industry group. The
bareboat charters are set to expire in December 2013.
We invite
you to read through our portfolio overview on the pages that follow for a more
detailed explanation of the above described investments. As always,
thank you for entrusting ICON with your investment assets.
Sincerely,
Michael
A. Reisner
|
Mark
Gatto
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||
Co-President
and Co-Chief Executive Officer
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Co-President
and Co-Chief Executive Officer
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1
ICON
Income Fund Nine, LLC
First
Quarter 2010 Portfolio Overview
We are
pleased to present ICON Income Fund Nine, LLC’s (the “Fund”) Portfolio Overview
for the first quarter of 2010. References to “we,” “us” and “our” are
references to the Fund, and references to the “Manager” are references to the
manager of the Fund, ICON Capital Corp.
The
Fund
We raised
approximately $100,000,000 commencing with our initial offering on November 26,
2001 through the closing of the offering on April 30, 2003. During
the first quarter of 2010, we continued to operate in our liquidation
period.
Portfolio
Overview
Our
portfolio consists of investments that we have made directly, as well as those
that we have made with our affiliates. As of March 31, 2010, our
portfolio consisted primarily of the following investments.
·
|
We,
along with ICON Leasing Fund Eleven, LLC (“Fund Eleven”) and ICON Income
Fund Ten, LLC (“Fund Ten”), affiliates of our Manager, have ownership
interests of 14.40%, 13.26% and 72.34%, respectively, in a joint venture
that owns telecommunications equipment subject to a forty-eight month
lease with Global Crossing Telecommunications, Inc. Our interest was
acquired for approximately $2,000,000. The lease is scheduled
to expire on October 31, 2010.
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·
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Microprocessor
manufacturing device and semiconductor memory testing equipment leased to
Spansion, LLC (“Spansion”). The equipment was subject to three
leases. Two of those leases expired on March 31, 2008 and each
was renewed for a fifteen month period commencing on April 1,
2008. The third lease expired on June 30, 2009 and was extended
on a month-to-month basis effective July 1, 2009. On March 1,
2009, Spansion filed for bankruptcy in the United States Bankruptcy
Court. On March 12, 2009, Spansion rejected the two leases that
were renewed on April 1, 2008 and affirmed the third lease. The
equipment subject to the two rejected leases was returned on June 3,
2009. On July 29, 2009, we sold the microprocessor
manufacturing device that was subject to the affirmed lease to Spansion
for approximately $585,000. We received a gross cash-on-cash
return of approximately 149% in rental and sale proceeds related to this
investment. On February 22, 2010, the United States Bankruptcy
Court approved our administrative expense claim in the amount of
approximately $90,000 and our unsecured claim in the amount of
approximately $269,000. On March 22, 2010, we sold the unsecured claim to
a third party for approximately
$161,000.
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·
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Vacuum
bag manufacturing equipment subject to various leases with Wildwood
Industries, Inc. (“Wildwood”). We originally purchased the
equipment for approximately $3,472,000. On August 31, 2008 and
September 30, 2008, two leases with Wildwood expired and each was renewed
for a twelve month period commencing on September 1, 2008 and October 1,
2008, respectively. On March 5, 2009, an involuntary petition
under Chapter 11 of the United States Bankruptcy Code was filed against
Wildwood by three of Wildwood’s creditors in United States Bankruptcy
Court. On September 18, 2009, the involuntary petition under Chapter 11 of
the United States Bankruptcy Code was converted to a Chapter 7 case by the
United States Bankruptcy Court Trustee. We do not expect to
receive any further proceeds from Wildwood. We received a gross
cash-on-cash return of approximately 147% in rental proceeds related to
this investment.
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·
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Fifty
Great Dane refrigerated trailers subject to lease with Conwell
Corporation, a wholly-owned subsidiary of Frozen Foods Express Industries,
Inc. The equipment was purchased for approximately
$1,962,000. The lease expired in April 2010 and was extended on
a month-to-month basis.
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·
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Two
Airbus A340-313X aircraft (B-HXO and B-HXN) leased to Cathay Pacific
Airways Limited (“Cathay”). We own all of the interests in the
entity that owns B-HXO and have a 50% interest in B-HXN through a joint
venture with ICON Income Fund Eight B L.P. (“Fund Eight B”), an entity
also managed by our Manager. The combined purchase price of the
interests in both aircraft was approximately $106,333,000, comprised of
approximately $6,403,000 in cash and a non-recourse loan in the amount of
approximately $99,930,000. The original lease for the first
aircraft (B-HXO) was due to expire on June 12, 2006, but was extended
until December 1, 2011. The original lease for the second
aircraft (B-HXN) was due to expire on March 27, 2006, but was extended
until July 1, 2011. In connection with both lease extensions,
the outstanding debt attributable to each aircraft was
refinanced. The new loans are scheduled to mature concurrently
with the lease expiration dates for each
aircraft.
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2
·
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One
Aframax 98,640 DWT (deadweight tonnage) product tanker – the M/T Samar
Spirit (the “Samar Spirit”). The purchase price of the Samar
Spirit was approximately $40,250,000, comprised of approximately
$16,868,000 in cash and a non-recourse loan in the amount of approximately
$23,382,000. Simultaneously with the purchase of the Samar
Spirit, the vessel was bareboat chartered back to an affiliate of Teekay
Corporation for a period of forty-eight months and the bareboat charter is
scheduled to expire in July 2011.
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·
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Three
roll-on-roll-off vehicle transportation vessels bareboat chartered to
Wilhelmsen Lines Shipowning AS. We, through our wholly-owned
subsidiaries, purchased the M/V Trianon, the M/V Trinidad and the M/V
Tancred for approximately $74,020,000, comprised of approximately
$9,690,000 in cash and a non-recourse loan in the amount of approximately
$64,330,000. The bareboat charters for all three vessels were
extended through December 2013. In connection with the bareboat
charter extensions, the outstanding debt attributable to each vessel was
refinanced. The bareboat charter payments will completely repay
the principal loan balances associated with each vessel before the end of
the bareboat charters. The refinancing generated $22,043,000 in
cash proceeds. The charter extensions will result in aggregate
excess cash totaling approximately $2,000,000 to
$5,000,000.
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Unguaranteed
Residual Interests
·
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We
entered into an agreement with Summit Asset Management Limited to acquire
a 90% interest in the unguaranteed residual values of a portfolio of
equipment on lease with various United Kingdom lessees for approximately
$4,454,000. The majority of the portfolio is comprised of manufacturing
and technology equipment, including laptops, desktops and
printers. All of the leases expire at various dates through
December 2016. For the three months ended March 31, 2010, we
did not receive residual proceeds from the sale of equipment; however, we
expect to receive approximately $390,000 - $520,000 in additional residual
proceeds through the expiration of this
portfolio.
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Revolving
Line of Credit
We and
certain entities managed by our Manager, Fund Eight B, Fund Ten, Fund Eleven,
ICON Leasing Fund Twelve, LLC and ICON Equipment and Corporate Infrastructure
Fund Fourteen, L.P. (collectively, the “Borrowers”), are parties to a Commercial
Loan Agreement, as amended (the “Loan Agreement”), with California Bank &
Trust. 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 Borrowers not subject to a
first priority lien. The Facility expires on June 30,
2011. The interest rate at March 31, 2010 was
4.0%. Aggregate borrowings by all Borrowers under the Facility
amounted to $700,000 at March 31 2010, none of which was attributable to the
Fund.
Transactions
with Related Parties
Our
Manager performs certain services relating to the management of our equipment
leasing and financing activities. Such services include, but are not
limited to, the collection of lease payments from the lessees of the equipment,
re-leasing services in connection with equipment which is off-lease, inspections
of the equipment, liaising with and general supervision of lessees to ensure
that the equipment is being properly operated and maintained, monitoring
performance by the lessees of their obligations under the leases and the payment
of operating expenses.
Administrative
expense reimbursements are costs incurred by our Manager or its affiliates that
are necessary to our operations. These costs include our Manager’s and its
affiliates’ legal, accounting, investor relations and operations personnel, as
well as professional fees and other costs that are charged to us based upon the
percentage of time such personnel dedicate to us. Excluded are salaries
and related costs, office rent, travel expenses and other administrative costs
incurred by individuals with a controlling interest in our Manager.
3
Our
Manager also has a 1% interest in our profits, losses, cash distributions and
liquidation proceeds. We paid distributions to our Manager in the
amount of $8,328 for the three months ended March 31,
2010. Additionally, our Manager’s interest in our net income for the
three months ended March 31, 2010 was $17,101.
Effective
April 1, 2008 and May 1, 2008, our Manager waived its rights to all future
administrative expense reimbursements and management fees,
respectively. For the three months ended March 31, 2010, our Manager
waived $99,253 of administrative expense reimbursements and management
fees.
Your
participation in the Fund is greatly appreciated.
We
are committed to protecting the privacy of our investors in compliance with all
applicable laws. Please be advised that, unless required by a regulatory
authority such as FINRA or ordered by a court of competent jurisdiction, we will
not share any of your personally identifiable information with any third
party.
4
ICON
Income Fund Nine, LLC
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(A
Delaware Limited Liability Company)
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Consolidated
Balance Sheets
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Assets
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||||||||
March
31,
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2010
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December
31,
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(unaudited)
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2009
|
|||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
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$ | 1,074,985 | $ | 1,033,840 | ||||
Current
portion of net investment in finance leases
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5,377,704 | 5,367,587 | ||||||
Assets
held for sale
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- | 140,000 | ||||||
Total
current assets
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6,452,689 | 6,541,427 | ||||||
Non-current
assets:
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||||||||
Net
investment in finance leases, less current portion
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16,654,931 | 17,987,288 | ||||||
Leased
equipment at cost (less accumulated depreciation of
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||||||||
$17,831,148
and $16,513,937, respectively)
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72,831,122 | 74,148,333 | ||||||
Investments
in joint ventures
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1,812,927 | 1,926,926 | ||||||
Investment
in unguaranteed residual values
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752,113 | 752,113 | ||||||
Other
non-current assets, net
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1,454,412 | 1,544,590 | ||||||
Total
non-current assets
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93,505,505 | 96,359,250 | ||||||
Total
Assets
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$ | 99,958,194 | $ | 102,900,677 | ||||
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Liabilities
and Members' Equity
|
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Current
liabilities:
|
||||||||
Current
portion of non-recourse long-term debt
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$ | 15,245,084 | $ | 15,262,908 | ||||
Interest
rate swap contracts
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1,966,288 | 2,054,841 | ||||||
Deferred
revenue
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613,781 | 1,124,734 | ||||||
Due
to Manager and affiliate
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13,281 | - | ||||||
Accrued
expenses and other current liabilities
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321,042 | 321,910 | ||||||
Total
current liabilities
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18,159,476 | 18,764,393 | ||||||
Non-current
liabilities:
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||||||||
Non-recourse
long-term debt, less current portion
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43,831,914 | 47,174,190 | ||||||
Total
Liabilities
|
61,991,390 | 65,938,583 | ||||||
Commitments
and contingencies
|
||||||||
Members'
Equity:
|
||||||||
Additional
Members
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40,323,406 | 39,454,895 | ||||||
Manager
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(462,297 | ) | (471,070 | ) | ||||
Accumulated
other comprehensive loss
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(1,894,305 | ) | (2,021,731 | ) | ||||
Total
Members' Equity
|
37,966,804 | 36,962,094 | ||||||
Total
Liabilities and Members' Equity
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$ | 99,958,194 | $ | 102,900,677 |
5
ICON
Income Fund Nine, LLC
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(A
Delaware Limited Liability Company)
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Consolidated
Statements of Operations
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||||||||
(unaudited)
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Three Months Ended March
31,
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2010
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2009
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Revenue:
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Rental
income
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$ | 3,220,494 | $ | 3,572,329 | ||||
Finance
income
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1,004,635 | 1,251,311 | ||||||
Income
from investments in joint ventures
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27,258 | 23,779 | ||||||
Net
(loss) gain on sales of equipment and unguaranteed residual
values
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(1,205 | ) | 40,180 | |||||
Interest
and other income
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154,063 | 1,995 | ||||||
Total
revenue
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4,405,245 | 4,889,594 | ||||||
Expenses:
|
||||||||
General
and administrative
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185,653 | 278,745 | ||||||
Interest
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1,150,057 | 1,386,205 | ||||||
Depreciation
and amortization
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1,359,469 | 1,373,523 | ||||||
Total
expenses
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2,695,179 | 3,038,473 | ||||||
Net
income
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$ | 1,710,066 | $ | 1,851,121 | ||||
Net
income allocable to:
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Additional
Members
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$ | 1,692,965 | $ | 1,832,610 | ||||
Manager
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17,101 | 18,511 | ||||||
$ | 1,710,066 | $ | 1,851,121 | |||||
Weighted
average number of additional shares
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||||||||
of
limited liability company interests outstanding
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97,955 | 97,955 | ||||||
Net
income per weighted average additional share
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of
limited liability company interests outstanding
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$ | 17.28 | $ | 18.71 |
6
ICON
Income Fund Nine, LLC
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(A
Delaware Limited Liability Company)
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Consolidated
Statement of Changes in Members' Equity
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Accumulated
|
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Additional
Member
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Additional
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Other
Comprehensive
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Total Members' |
|||||||||||||||||
Shares
|
Members
|
Manager
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Loss
|
Equity
|
||||||||||||||||
Balance,
December 31, 2009
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97,955 | $ | 39,454,895 | $ | (471,070 | ) | $ | (2,021,731 | ) | $ | 36,962,094 | |||||||||
Net
income
|
- | 1,692,965 | 17,101 | - | 1,710,066 | |||||||||||||||
Change
in valuation of interest rate swap contracts
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- | - | - | 127,426 | 127,426 | |||||||||||||||
Comprehensive
income
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1,837,492 | |||||||||||||||||||
Cash
distributions
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- | (824,454 | ) | (8,328 | ) | - | (832,782 | ) | ||||||||||||
Balance,
March 31, 2010 (unaudited)
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97,955 | $ | 40,323,406 | $ | (462,297 | ) | $ | (1,894,305 | ) | $ | 37,966,804 |
7
ICON
Income Fund Nine, LLC
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||||||||
(A
Delaware Limited Liability Company)
|
||||||||
Consolidated
Statements of Cash Flows
|
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(unaudited)
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Three Months Ended March
31,
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2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
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Net
income
|
$ | 1,710,066 | $ | 1,851,121 | ||||
Adjustments
to reconcile net income to net cash
|
||||||||
provided
by operating activities:
|
||||||||
Rental
income paid directly to lenders by lessees
|
(2,638,000 | ) | (2,638,000 | ) | ||||
Finance
income
|
(1,004,635 | ) | (1,251,311 | ) | ||||
Income
from investments in joint ventures
|
(27,258 | ) | (23,779 | ) | ||||
Net
loss (gain) on sale of equipment and unguaranteed residual
values
|
1,205 | (40,180 | ) | |||||
Depreciation
and amortization
|
1,359,469 | 1,373,523 | ||||||
Interest
expense on non-recourse financing paid directly
|
||||||||
to
lenders by lessees
|
1,105,448 | 1,245,274 | ||||||
Interest
expense from amortization of debt financing costs
|
44,297 | 53,516 | ||||||
Change
in fair value of interest rate swap contracts
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- | (5,336 | ) | |||||
Changes
in operating assets and liabilities:
|
||||||||
Collection
of finance leases
|
597,795 | 560,385 | ||||||
Other
assets, net
|
3,623 | (115,549 | ) | |||||
Deferred
revenue
|
(510,953 | ) | (516,764 | ) | ||||
Due
to Manager and affiliates
|
13,281 | - | ||||||
Accrued
expenses and other current liabilities
|
(12,668 | ) | (78,246 | ) | ||||
Distributions
from joint ventures
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40,132 | 42,779 | ||||||
Net
cash provided by operating activities
|
681,802 | 457,433 | ||||||
Cash
flows from investing activities:
|
||||||||
Proceeds
from sales of equipment
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91,000 | 154,341 | ||||||
Distributions
received from joint ventures in excess of profits
|
101,125 | 98,478 | ||||||
Net
cash provided by investing activities
|
192,125 | 252,819 | ||||||
Cash
flows from financing activities:
|
||||||||
Cash
distributions to members
|
(832,782 | ) | (455,136 | ) | ||||
Net
cash used in financing activities
|
(832,782 | ) | (455,136 | ) | ||||
Net
increase in cash and cash equivalents
|
41,145 | 255,116 | ||||||
Cash
and cash equivalents, beginning of the period
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1,033,840 | 779,544 | ||||||
Cash
and cash equivalents, end of the period
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$ | 1,074,985 | $ | 1,034,660 |
8
ICON
Income Fund Nine, LLC
|
|||
(A
Delaware Limited Liability Company)
|
|||
Consolidated
Statements of Cash Flows
|
|||
(unaudited)
|
|||
|
Three Months Ended March
31,
|
2010 |
2009
|
|||||||
Supplemental
disclosure of non-cash investing and financing activities:
|
||||||||
Principal
and interest on non-recourse long-term debt paid directly to lenders by
lessees
|
$ | 4,367,080 | $ | 4,461,850 |
9
Forward-Looking Information –
Certain statements within this document 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,”
“continue,” “further,” “plan,” “seek,” “intend,” “predict” 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.
Additional
Required Disclosure
To
fulfill our promises to you we are required to make the following disclosures
when applicable:
A
detailed financial report on SEC Form 10-Q or 10-K (whichever is applicable) is
available to you. It is typically filed either 45 or 90 days after
the end of a quarter or year, respectively. Usually this means a
filing will occur on or around March 31, May 15, August 15, and November 15 of
each year. It contains financial statements and detailed sources and
uses of cash plus explanatory notes. You are always entitled to these
reports. Please access them by:
·
|
Visiting
www.iconcapital.com
|
or
·
|
Visiting
www.sec.gov
|
or
·
|
Writing
us at: Angie Seenauth c/o ICON Capital Corp., 120 Fifth Avenue,
8th
Floor, New York, NY 10011
|
We do not
distribute these reports to you directly in order to keep our expenses down as
the cost of mailing this report to all investors is
significant. Nevertheless, the reports are immediately available upon
your request.
10 |