Attached files

file filename
EX-31.2 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON INCOME FUND TEN LLCex31-2.htm
EX-31.1 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON INCOME FUND TEN LLCex31-1.htm
EXCEL - IDEA: XBRL DOCUMENT - ICON INCOME FUND TEN LLCFinancial_Report.xls
EX-32.1 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 396 OF THE SARBANES-OXLEY ACT OF 2002 - ICON INCOME FUND TEN LLCex32-1.htm
EX-32.3 - CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON INCOME FUND TEN LLCex32-3.htm
EX-32.2 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON INCOME FUND TEN LLCex32-2.htm
EX-31.3 - CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON INCOME FUND TEN LLCex31-3.htm

 

 

 

 



 

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

 

For the quarterly period ended

June 30, 2013

 

 

or

 

[  ]         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from

 

to

 

 

Commission_File_Number:

000-50654

 

 

ICON Income Fund Ten, LLC

(Exact name of registrant as specified in its charter)

 

Delaware

35-2193184

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

3 Park Avenue, 36th Floor, New York, New York

10016

(Address of principal executive offices)

(Zip Code)

 

(212) 418-4700

(Registrant's telephone number, including area code)

 

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.

 þ Yes    o 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).            

þ Yes    o 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 o    

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company þ

         

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

o Yes    þ No

 

Number of outstanding shares of limited liability company interests of the registrant on August 6, 2013 is 148,211.

 

 

 

 


 

 

 

ICON Income Fund Ten, LLC

Table of Contents

 

 

Page

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

Item 1.  Consolidated Financial Statements

 

 

 

 

    Consolidated Balance Sheets

1

 

 

 

Consolidated Statements of Comprehensive Income

2

 

 

 

Consolidated Statements of Changes in Equity

3

 

 

 

Consolidated Statements of Cash Flows

4

 

 

 

    Notes to Consolidated Financial Statements

5

 

 

 

Item 2. Manager's Discussion and Analysis of Financial Condition and Results of Operations

9

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

14

 

 

 

Item 4. Controls and Procedures

14

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1. Legal Proceedings

 

15

 

 

 

Item 1A. Risk Factors

 

15

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

15

 

 

 

Item 3. Defaults Upon Senior Securities

15

 

 

 

Item 4. Mine Safety Disclosures

15

 

 

 

Item 5. Other Information

 

15

 

 

 

Item 6. Exhibits

 

16

 

 

 

Signatures

 

17

 

 


 

 

 

 PART I – FINANCIAL INFORMATION

 

Item 1.  Consolidated Financial Statements

ICON Income Fund Ten, LLC

(A Delaware Limited Liability Company)

Consolidated Balance Sheets

  

  

  

  

  

June 30,

  

December 31,

  

  

  

  

2013 

  

2012 

  

  

  

  

(unaudited)

  

  

  

Assets

Current assets:

  

  

  

  

  

  

Cash and cash equivalents

$

 3,315,632 

  

$

1,805,049 

  

Current portion of net investment in finance leases

  

 15,770,015 

  

  

10,304,383 

  

Other current assets

  

4,131 

  

  

92,754 

  

  

  

Total current assets

  

19,089,778 

  

  

12,202,186 

Non-current assets:

  

  

  

  

  

  

Net investment in finance leases, less current portion

  

20,471,958 

  

  

29,726,814 

  

Investment in joint ventures

  

144,623 

  

  

710,564 

  

Other non-current assets

  

24,800 

  

  

24,800 

  

  

  

Total non-current assets

  

20,641,381 

  

  

30,462,178 

Total assets

$

39,731,159 

  

$

42,664,364 

  

  

  

  

Liabilities and Equity

Current liabilities:

  

  

  

  

  

  

Accrued expenses

$

276,856 

  

$

45,885 

  

Indemnification liability

  

349,674 

  

  

372,143 

  

Other current liabilities

  

13,481 

  

  

13,481 

  

  

  

Total liabilities

  

640,011 

  

  

431,509 

  

  

  

  

Commitments and contingencies (Note 6)

  

  

  

  

  

  

  

  

  

Equity:

  

  

  

  

  

  

Members’ equity:

  

  

  

  

  

  

  

Additional members

  

40,027,111 

  

  

43,138,938 

  

  

Manager

  

 (908,117) 

  

  

 (876,685) 

  

  

Accumulated other comprehensive loss

  

 (18,570) 

  

  

 (57,405) 

  

  

  

Total members’ equity

  

39,100,424 

  

  

42,204,848 

  

 Noncontrolling interests

  

 (9,276) 

  

  

28,007 

  

  

  

Total equity

  

39,091,148 

  

  

42,232,855 

Total liabilities and equity

$

39,731,159 

  

$

42,664,364 

  

See accompanying notes to consolidated financial statements.

1

 


 

 

 

ICON Income Fund Ten, LLC

(A Delaware Limited Liability Company)

Consolidated Statements of Comprehensive Income

(unaudited)

  

  

  

  

Three Months Ended June 30,

  

Six Months Ended June 30,

  

  

  

2013 

  

2012 

  

2013 

  

2012 

Revenue and other income:

  

  

  

  

  

  

  

  

Rental income

$

 - 

  

$

 1,066 

  

$

 - 

  

$

 4,944 

  

Finance income

  

 1,530,175 

  

  

 1,700,401 

  

  

 3,139,456 

  

  

 3,375,293 

  

Loss from investment in joint ventures

  

 (233,098) 

  

  

 (342,323) 

  

  

 (604,776) 

  

  

 (755,688) 

  

Interest and other income

  

 (476) 

  

  

 10,063 

  

  

 20,239 

  

  

 24,142 

  

  

Total revenue and other income

  

 1,296,601 

  

  

 1,369,207 

  

  

 2,554,919 

  

  

 2,648,691 

Expenses:

  

  

  

  

  

  

  

  

  

  

  

  

Management fees

  

 - 

  

  

 114,605 

  

  

 - 

  

  

 224,216 

  

Administrative expense reimbursements

  

 - 

  

  

 174,310 

  

  

 - 

  

  

 273,488 

  

General and administrative

  

 407,139 

  

  

 282,504 

  

  

 659,615 

  

  

 594,967 

  

Depreciation and amortization

  

 - 

  

  

 - 

  

  

 - 

  

  

 590 

  

  

Total expenses

  

 407,139 

  

  

 571,419 

  

  

 659,615 

  

  

 1,093,261 

Net income

  

 889,462 

  

  

 797,788 

  

  

 1,895,304 

  

  

 1,555,430 

  

Less: net loss attributable to noncontrolling interests

  

 (37,017) 

  

  

 - 

  

  

 (37,283) 

  

  

 (490) 

Net income attributable to Fund Ten

  

 926,479 

  

  

 797,788 

  

  

 1,932,587 

  

  

 1,555,920 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Other comprehensive income:

  

  

  

  

  

  

  

  

  

  

  

  

Change in fair value of derivative financial instruments

  

 17,171 

  

  

 29,868 

  

  

 38,835 

  

  

 46,730 

  

Currency translation adjustments

  

 - 

  

  

 - 

  

  

 - 

  

  

 (1,151) 

  

  

Total other comprehensive income

  

 17,171 

  

  

 29,868 

  

  

 38,835 

  

  

 45,579 

Comprehensive income

  

 906,633 

  

  

 827,656 

  

  

 1,934,139 

  

  

 1,601,009 

  

Less: comprehensive loss attributable to

  

  

  

  

  

  

  

  

  

  

  

  

  

noncontrolling interests

  

 (37,017) 

  

  

 - 

  

  

 (37,283) 

  

  

 (490) 

Comprehensive income attributable to Fund Ten

 943,650 

  

$

 827,656 

  

$

 1,896,856 

  

$

 1,601,499 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Net income attributable to Fund Ten allocable to:

  

  

  

  

  

  

  

  

  

  

  

  

Additional members

$

 917,214 

  

$

 789,811 

  

$

 1,913,261 

  

$

 1,540,360 

  

Manager

  

 9,265 

  

  

 7,977 

  

  

 19,326 

  

  

 15,560 

  

$

 926,479 

  

$

 797,788 

  

$

 1,932,587 

  

$

 1,555,920 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Weighted average number of additional shares of limited

  

  

  

  

  

  

  

  

  

  

  

  

liability company interests outstanding

  

 148,211 

  

  

 148,211 

  

  

 148,211 

  

  

 148,211 

Net income attributable to Fund Ten per weighted average

  

  

  

  

  

  

  

  

  

  

  

  

additional share of limited liability company interests outstanding

$

 6.19 

  

$

 5.33 

  

$

 12.91 

  

$

 10.39 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

See accompanying notes to consolidated financial statements.

2

 


 

 

 

ICON Income Fund Ten, LLC

(A Delaware Limited Liability Company)

Consolidated Statements of Changes in Equity

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Members' Equity

  

  

  

  

Additional Shares of Limited Liability Company Interests

  

Additional Members

  

Manager

  

Accumulated Other Comprehensive (Loss) Income

  

Total Members' Equity

  

Noncontrolling Interests

  

Total Equity

Balance, December 31, 2012

 148,211 

  

$

 43,138,938 

  

$

 (876,685) 

  

$

 (57,405) 

  

$

 42,204,848 

  

$

 28,007 

  

$

 42,232,855 

  

Net income (loss)

 - 

  

  

 996,047 

  

  

 10,061 

  

  

 - 

  

  

 1,006,108 

  

  

 (266) 

  

  

 1,005,842 

  

Change in fair value of derivative financial instruments

 - 

  

  

 - 

  

  

 - 

  

  

 21,664 

  

  

 21,664 

  

  

 - 

  

  

 21,664 

  

Cash distributions

 - 

  

  

 (2,500,044) 

  

  

 (25,253) 

  

  

 - 

  

  

 (2,525,297) 

  

  

 - 

  

  

 (2,525,297) 

Balance, March 31, 2013 (unaudited)

 148,211 

  

  

 41,634,941 

  

  

 (891,877) 

  

  

 (35,741) 

  

  

 40,707,323 

  

  

 27,741 

  

  

 40,735,064 

  

Net income (loss)

 - 

  

  

 917,214 

  

  

 9,265 

  

  

 - 

  

  

 926,479 

  

  

 (37,017) 

  

  

 889,462 

  

Change in fair value of derivative financial instruments

 - 

  

  

 - 

  

  

 - 

  

  

 17,171 

  

  

 17,171 

  

  

 - 

  

  

 17,171 

  

Cash distributions

 - 

  

  

 (2,525,044) 

  

  

 (25,505) 

  

  

 - 

  

  

 (2,550,549) 

  

  

 - 

  

  

 (2,550,549) 

Balance, June 30, 2013 (unaudited)

 148,211 

  

$

 40,027,111 

  

$

 (908,117) 

  

$

 (18,570) 

  

$

 39,100,424 

  

$

 (9,276) 

  

$

 39,091,148 

  

  

  

See accompanying notes to consolidated financial statements.

3

 


 

 

 

ICON Income Fund Ten, LLC

(A Delaware Limited Liability Company)

Consolidated Statements of Cash Flows

(unaudited)

  

  

Six Months Ended June 30,

  

  

2013 

  

  

2012 

Cash flows from operating activities:

  

  

  

  

  

  

Net income

$

1,895,304  

  

$

1,555,430  

  

Adjustments to reconcile net income to net cash provided by operating activities:

  

  

  

  

  

  

  

Finance income

  

(3,139,456)

  

  

(3,375,293)

  

  

Loss from investment in joint ventures

  

604,776  

  

  

755,688  

  

  

Depreciation and amortization

  

 - 

  

  

590  

  

  

Interest and other income

  

(22,469)

  

  

 - 

  

Changes in operating assets and liabilities:

  

  

  

  

  

  

  

Collection of finance leases

  

6,928,680  

  

  

2,158,884  

  

  

Other assets, net

  

88,623  

  

  

24,478  

  

  

Due to Manager and affiliates, net

  

 - 

  

  

(23,637)

  

  

Accrued expenses

  

230,971  

  

  

(67,642)

  

  

Other current liabilities

  

 - 

  

  

1,561  

Net cash provided by operating activities

  

6,586,429  

  

  

1,030,059  

Cash flows from investing activities:

  

  

  

  

  

  

Investment in joint ventures

  

 - 

  

  

(55,532)

  

Principal received on notes receivable

  

 - 

  

  

446,499  

Net cash provided by investing activities

  

 - 

  

  

390,967  

Cash flows from financing activities:

  

  

Cash distributions to members

  

(5,075,846)

  

  

(6,414,196)

Net cash used in financing activities

  

 (5,075,846) 

  

  

(6,414,196)

Net increase (decrease) in cash and cash equivalents

  

1,510,583  

  

  

(4,993,170)

Cash and cash equivalents, beginning of period

  

1,805,049  

  

  

6,171,596  

Cash and cash equivalents, end of period

$

3,315,632  

  

$

1,178,426  

  

See accompanying notes to consolidated financial statements.

4

 


 

ICON Income Fund Ten, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

 

 

(1)        Basis of Presentation and Consolidation

The accompanying consolidated financial statements of ICON Income Fund Ten, LLC (the “LLC”) have been prepared in accordance with U.S. generally accepted accounting principles 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 manager of the LLC, ICON Capital, LLC, a Delaware limited liability company formerly known as ICON Capital Corp. (the “Manager”), all adjustments, which are of a normal recurring nature, considered necessary for a fair presentation have been included.  These consolidated financial statements should be read together with the consolidated financial statements and notes included in the LLC’s Annual Report on Form 10-K for the year ended December 31, 2012.  The results for the interim period are not necessarily indicative of the results for the full year.

 

Credit Quality of Finance Leases and Credit Loss Reserve

The Manager weighs all credit decisions based on a combination of external credit ratings as well as internal credit evaluations of all borrowers. A borrower’s credit is analyzed using those credit ratings as well as the borrower’s financial statements and other financial data deemed relevant.

 

As the LLC’s finance leases are limited in number, the Manager is able to estimate the credit loss reserve based on a detailed analysis of each lease as opposed to using portfolio-based metrics and credit loss reserve. Leases are analyzed quarterly and categorized as either performing or non-performing based on payment history. If a lease becomes non-performing due to a borrower’s missed scheduled payments or failed financial covenants, the Manager analyzes whether a credit loss reserve should be established or whether the lease should be restructured. Material events would be specifically disclosed in the discussion of each lease held.

 

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires an entity to disclose information about the amounts reclassified out of accumulated other comprehensive income, by component, on the respective line items of net income. The adoption of ASU 2013-02 became effective for the LLC on January 1, 2013 and did not have a material effect on the consolidated financial statements.

 

(2)         Net Investment in Finance Leases 

Net investment in finance leases consisted of the following:

  

  

  

June 30,

  

December 31,

  

  

  

2013 

  

2012 

  

Minimum rents receivable

$

38,343,723 

  

$

45,272,403 

  

Estimated residual values

  

7,300,000 

  

  

7,300,000 

  

Unearned income

  

(9,401,750)

  

  

(12,541,206)

  

  

Net investment in finance leases

  

36,241,973 

  

  

40,031,197 

  

Less: current portion of net investment in finance leases

  

15,770,015 

  

  

10,304,383 

  

  

Net investment in finance leases, less current portion

$

20,471,958 

  

$

29,726,814 

5

 


 

ICON Income Fund Ten, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

 

 

(3)        Investment in Joint Ventures

 

ICON Eagle Carina Holdings, LLC

On December 18, 2008, ICON Eagle Carina Holdings, LLC, a Marshall Islands limited liability company owned 35.7% by the LLC and 64.3% by ICON Leasing Fund Twelve, LLC, an entity also managed by the Manager, purchased an aframax product tanker, the Eagle Carina, for $39,010,000, of which $27,000,000 was financed with non-recourse debt. The Eagle Carina is subject to an 84-month bareboat charter with AET, Inc. Limited that expires on November 14, 2013.

 

Subsequent to December 31, 2012, several potential counterparties with whom the Manager was discussing re-leasing opportunities for the Eagle Carina terminated negotiations, which was an indicator that the Eagle Carina’s carrying value may be impaired. The joint venture updated the estimates of the forecasted future cash flows and performed impairment testing. As a result, the joint venture recognized an impairment loss of approximately $314,000 for the six months ended June 30, 2013, of which the LLC’s share was approximately $112,000.

 

Information as to the results of operations of ICON Eagle Carina Holdings is summarized below:

 

  

  

Three Months Ended June 30,

  

Six Months Ended June 30,

  

  

2013 

  

2012 

  

2013 

  

2012 

  

Revenue

$

1,486,493 

  

$

1,486,493 

  

$

2,972,986 

  

$

2,972,986 

  

Net loss

$

(626,593)

  

$

(435,835)

  

$

(1,385,575)

  

$

(893,313)

  

LLC’s share of net loss

$

(223,694)

  

$

(155,593)

  

$

(494,650)

  

$

(318,913)

  

  

  

  

  

  

  

  

  

  

  

  

  

 

(4)        Transactions with Related Parties 

The LLC paid distributions to the Manager of $25,505 and $50,758 for the three and six months ended June 30, 2013, respectively. The LLC paid distributions to the Manager of $8,586 and $64,142 for the three and six months ended June 30, 2012, respectively. Additionally, the Manager’s interest in the net income attributable to the LLC was $9,265 and $19,326 for the three and six months ended June 30, 2013, respectively. The Manager’s interest in the net income attributable to the LLC was $7,977 and $15,560 for the three and six months ended June 30, 2012, respectively.

 

During the three months ended June 30, 2013, the Manager suspended the collection of management fees and administrative expense reimbursements of approximately $228,000 and $61,000, respectively. During the six months ended June 30, 2013, the Manager suspended the collection of management fees and administrative expense reimbursements of approximately $453,000 and $130,000, respectively.

 

Fees and other expenses paid or accrued by the LLC to the Manager or its affiliates were as follows:

 

  

  

  

  

  

  

  

Three Months Ended

  

Six Months Ended

  

  

  

June 30,

  

June 30,

  

 Entity

  

 Capacity

  

 Description

  

2013 

  

2012 

  

2013 

  

2012 

  

ICON Capital, LLC

  

Manager

  

Management fees (1)

  

$

 - 

  

$

114,605 

  

$

 - 

  

$

224,216 

  

ICON Capital, LLC

  

Manager

  

Administrative expense reimbursements (1)

  

  

 - 

  

  

 174,310 

  

  

 - 

  

  

 273,488 

  

  

  

$

 - 

  

$

288,915 

  

$

 - 

  

$

497,704 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(1)  Amount charged directly to operations.

  

  

  

  

  

  

  

  

  

  

  

  

6

 


 

ICON Income Fund Ten, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

 

 

(5)         Derivative Financial Instruments

The LLC may enter into derivative financial instruments for purposes of hedging specific financial exposures, including movements in foreign currency exchange rates and changes in interest rates on its non-recourse long-term debt. The LLC enters into these instruments only for hedging underlying exposures. The LLC does not hold or issue derivative financial instruments for purposes other than hedging, except for warrants, which are not hedges. Certain derivatives may not meet the established criteria to be designated as qualifying accounting hedges, even though the LLC believes that these are effective economic hedges.

 

The LLC recognizes all derivative financial instruments as either assets or liabilities on the consolidated balance sheets and measures those instruments at fair value. Changes in the fair value of such instruments are recognized immediately in earnings unless certain criteria are met. These criteria demonstrate that the derivative is expected to be highly effective at offsetting changes in the fair value or expected cash flows of the underlying exposure at both the inception of the hedging relationship and on an ongoing basis and include an evaluation of the counterparty risk and the impact, if any, on the effectiveness of the derivative. If these criteria are met, which the LLC must document and assess at inception and on an ongoing basis, the LLC recognizes the changes in fair value of such instruments in accumulated other comprehensive income (loss) (“AOCI”), a component of equity on the consolidated balance sheets. Changes in the fair value of the ineffective portion of all derivatives are recognized immediately in earnings.

 

            Interest Rate Risk

The LLC’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements on its variable non-recourse debt. The LLC’s strategy to accomplish these objectives is to match the projected future cash flows with the underlying debt service. Interest rate swaps designated as cash flow hedges involve the receipt of floating-rate interest payments from a counterparty in exchange for the LLC making fixed-rate interest payments over the life of the agreements without exchange of the underlying notional amount.

 

Counterparty Risk

The LLC manages exposure to possible defaults on derivative financial instruments by monitoring the concentration of risk that the LLC has with any individual bank and through the use of minimum credit quality standards for all counterparties. The LLC does not require collateral or other security in relation to derivative financial instruments. Since it is the LLC’s policy to enter into derivative contracts only with banks of internationally acknowledged standing, the LLC considers the counterparty risk to be remote.

 

            Designated Derivatives

 

As of June 30, 2013, the LLC has interests through joint ventures in two floating-to-fixed interest rate swaps relating to ICON Eagle Corona Holdings, LLC and ICON Eagle Carina Holdings designated and qualifying as cash flow hedges with an aggregate notional amount of $9,211,375.  These interest rate swaps mature on November 14, 2013.

 

For these derivatives, the joint ventures record their interest in the gain or loss from the effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges in AOCI and such gain or loss is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings and is recorded as a component of loss from investment in joint ventures. During the three and six months ended June 30, 2013 and 2012, the joint ventures recorded no hedge ineffectiveness in earnings.

 

During the twelve months ending June 30, 2014, the LLC estimates that approximately $18,600 will be reclassified from AOCI to loss from investment in joint ventures.

 

The table below presents the effect of the LLC’s share of the joint ventures’ derivative financial instruments designated as cash flow hedging instruments on the consolidated statements of comprehensive income for the three and six months ended June 30, 2013 and 2012:

 

7

 


 

ICON Income Fund Ten, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

 

 

  

Period 

  

Derivatives Designated as Hedging Instruments 

  

Amount of Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion) 

  

Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) 

  

Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) 

  

Three Months Ended June 30, 2013

  

Interest rate swaps 

  

 (875) 

  

Loss from investment in joint ventures 

  

 (18,046) 

  

  

  

  

  

  

  

  

  

  

  

  

  

Six Months Ended June 30, 2013

  

Interest rate swaps 

  

 (1,568) 

  

Loss from investment in joint ventures 

  

 (40,403) 

  

  

  

  

  

  

  

  

  

  

  

  

  

Three Months Ended June 30, 2012

  

Interest rate swaps 

  

 (2,773) 

  

Loss from investment in joint ventures 

  

 (32,641) 

  

  

  

  

  

  

  

  

  

  

  

  

  

Six Months Ended June 30, 2012

  

Interest rate swaps 

  

 (22,793) 

  

Loss from investment in joint ventures 

  

 (69,523) 

 

At June 30, 2013 and December 31, 2012, the total unrealized loss recorded to AOCI related to the joint ventures’ interest in the change in fair value of interest rate swaps was $18,570 and $57,405, respectively.

 

(6)         Commitments and Contingencies

At the time the LLC acquires or divests of its interest in an equipment lease or other financing transaction, the LLC may, under very limited circumstances, agree to indemnify the seller or buyer for specific contingent liabilities. The Manager believes that any liability of the LLC that may arise as a result of any such indemnification obligations will not have a material adverse effect on the consolidated financial condition or results of operations of the LLC taken as a whole.

8

 


 

 

 

Item 2.  Manager's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our current financial position and results of operations. This discussion should be read together with our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2012.  This discussion should also be read in conjunction with the disclosures below regarding “Forward-Looking Statements.”

 

As used in this Quarterly Report on Form 10-Q, references to “we,” “us,” “our” or similar terms include ICON Income Fund Ten, LLC 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,” “would,” “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. They 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 operated as an equipment leasing program in which the capital our members invested was pooled together to make investments, pay fees and establish a small reserve. We primarily engaged in the business of purchasing equipment and leasing or servicing it to third parties, equipment financing, acquiring equipment subject to lease and, to a lesser degree, acquiring ownership rights to items of leased equipment at lease expiration. Some of our equipment leases were acquired for cash and were expected to provide current cash flow, which we refer to as “income” leases. For our other equipment leases, we financed the majority of the purchase price through borrowings from third parties. We refer to these leases as “growth” leases. These growth leases generated little or no current cash flow because substantially all of the rental payments received from the lessee were used to service the indebtedness associated with acquiring or financing the lease. For these leases, we anticipated that the future value of the leased equipment would exceed the cash portion of the purchase price.

 

Our Manager manages and controls our business affairs, including, but not limited to, our equipment leases and other financing transactions.

 

Effective April 30, 2010, we completed our operating period. On May 1, 2010, we commenced our liquidation period, during which we have sold and will continue to sell our assets and/or let our investments mature in the ordinary course of business. If our Manager believes it would benefit our members to reinvest the proceeds received from investments in additional investments during the liquidation period, our Manager may do so. Our Manager will not receive any acquisition fees on equipment purchased during the liquidation period.

 

Recent Accounting Pronouncements

We do not believe any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our consolidated financial statements.

 

9

 


 

 

 

 

Results of Operations for the Three Months Ended June 30, 2013 (the “2013 Quarter”) and 2012 (the “2012 Quarter”)

Revenue and other income for the 2013 Quarter and the 2012 Quarter is summarized as follows:

 

  

  

  

Three Months Ended June 30,

  

  

  

  

  

2013 

  

2012 

  

Change

  

Rental income

$

 - 

  

$

 1,066 

  

$

 (1,066) 

  

Finance income

  

 1,530,175 

  

  

 1,700,401 

  

  

 (170,226) 

  

Loss from investment in joint ventures

  

 (233,098) 

  

  

 (342,323) 

  

  

 109,225 

  

Interest and other income

  

 (476) 

  

  

 10,063 

  

  

 (10,539) 

  

  

Total revenue and other income

$

1,296,601 

  

$

1,369,207 

  

$

(72,606)

 

Total revenue and other income for the 2013 Quarter decreased $72,606, or 5.3%, as compared to the 2012 Quarter. The decrease in finance income was primarily due to the normal lifecycle of our bareboat charters with ZIM Israel Navigation Co. Ltd. This was partially offset by a smaller loss from investment in joint ventures in the 2013 Quarter as compared to the 2012 Quarter since we are no longer required to record our share of one joint venture’s losses after the investment has been reduced to zero.

 

Expenses for the 2013 Quarter and the 2012 Quarter are summarized as follows:

 

  

  

  

Three Months Ended June 30,

  

  

  

  

  

2013 

  

2012 

  

Change

  

Management fees

$

 - 

  

$

 114,605 

  

$

 (114,605) 

  

Administrative expense reimbursements

  

 - 

  

  

 174,310 

  

 (174,310) 

  

General and administrative

  

 407,139 

  

  

 282,504 

  

 124,635 

  

  

Total expenses

$

 407,139 

  

$

 571,419 

  

$

 (164,280) 

 

Total expenses for the 2013 Quarter decreased $164,280, or 28.7%, as compared to the 2012 Quarter. The decrease in total expenses was primarily due to our Manager’s suspended collection of management fees and administrative expense reimbursements, partially offset by an increase in general and administrative expenses due to accrued sales taxes.

 

Net Loss Attributable to Noncontrolling Interests

Net loss attributable to noncontrolling interests increased $37,017 from $0 for the 2012 Quarter to $37,017 for the 2013 Quarter. The increase was primarily attributable to accrued sales taxes.

 

Net Income Attributable to Fund Ten

As a result of the foregoing factors, net income attributable to us for the 2013 Quarter and the 2012 Quarter was $926,479 and $797,788, respectively. Net income attributable to us per weighted average additional share of limited liability company interests (“Share”) outstanding for the 2013 Quarter and the 2012 Quarter was $6.19 and $5.33, respectively.

 

Results of Operations for the Six Months Ended June 30, 2013  (the “2013 Period”) and 2012 (the “2012 Period”)

Revenue and other income for the 2013 Period and the 2012 Period is summarized as follows:

 

  

  

  

Six Months Ended June 30,

  

  

  

  

  

2013 

  

2012 

  

Change

  

Rental income 

$

 - 

  

$

 4,944 

  

$

 (4,944) 

  

Finance income

  

 3,139,456 

  

  

 3,375,293 

  

  

 (235,837) 

  

Loss from investment in joint ventures

  

 (604,776) 

  

  

 (755,688) 

  

 150,912 

  

Interest and other income

  

 20,239 

  

  

 24,142 

  

  

 (3,903) 

  

  

Total revenue and other income

$

2,554,919 

  

$

2,648,691 

  

$

(93,772)

 

 

Total revenue and other income for the 2013 Period decreased $93,772, or 3.5%, as compared to the 2012 Period.  The decrease was primarily due to the normal lifecycle of our bareboat charters with ZIM Israel Navigation Co. Ltd. This was

10

 


 

 

 

partially offset by a smaller loss from investment in joint ventures in the 2013 Period as compared to the 2012 Period since we are no longer required to record our share of one joint venture’s losses after the investment has been reduced to zero.

 

Expenses for the 2013 Period and the 2012 Period are summarized as follows:

 

  

  

  

Six Months Ended June 30,

  

  

  

  

  

2013 

  

2012 

  

Change

  

Management fees

$

 - 

  

$

 224,216 

  

$

 (224,216) 

  

Administrative expense reimbursements

  

 - 

  

  

 273,488 

  

  

 (273,488) 

  

General and administrative

  

 659,615 

  

  

 594,967 

  

 64,648 

  

Depreciation and amortization

  

 - 

  

  

 590 

  

 (590) 

  

  

Total expenses

$

659,615 

  

$

1,093,261 

  

$

(433,646)

 

Total expenses for the 2013 Period decreased $433,646, or 39.7%, as compared to the 2012 Period. The decrease was primarily due to our Manager’s suspended collection of management fees and administrative expense reimbursements.

 

Net Loss Attributable to Noncontrolling Interests

Net loss attributable to noncontrolling interests increased $36,793 from $490 for the 2012 Period to $37,283 for the 2013 Period. The increase was primarily attributable to accrued sales taxes.

 

Net Income Attributable to Fund Ten

As a result of the foregoing factors, net income attributable to us for the 2013 Period and the 2012 Period was $1,932,587  and $1,555,920, respectively. Net income attributable to us per weighted average additional Share outstanding for the 2013 Period and the 2012 Period was $12.91 and $10.39, respectively.  

 

Financial Condition

This section discusses the major balance sheet variances at June 30, 2013 compared to December 31, 2012.

 

Total Assets

Total assets decreased $2,933,205, from $42,664,364 at December 31, 2012 to $39,731,159 at June 30, 2013.  The decrease was primarily due to cash distributions made to our members and the loss from investment in joint ventures during the 2013 Period. The decrease was partially offset by the recognition of finance income.

 

Current Assets

Current assets increased $6,887,592, from $12,202,186 at December 31, 2012 to $19,089,778 at June 30, 2013. The increase was primarily due to the increase in the current portion of the net investment in finance leases resulting from the scheduled change in charter payments due pursuant to the bareboat charters on our two vessels. The increase was partially offset by cash distributions made to our members in the 2013 Period

 

Current Liabilities

Current liabilities increased $208,502, from $431,509 at December 31, 2012 to $640,011 at June 30, 2013. The increase was primarily due to accrued sales taxes.

 

Equity

Equity decreased $3,141,707, from $42,232,855 at December 31, 2012 to $39,091,148 at June 30, 2013.   The decrease  was primarily the result of cash distributions paid to our members, which were partially offset by net income in the 2013 Period.

11

 


 

 

 

Liquidity and Capital Resources

Summary

At June 30, 2013 and December 31, 2012, we had cash and cash equivalents of $3,315,632 and $1,805,049, respectively.  During our liquidation period, which we commenced on May 1, 2010, our main sources of cash are the collection of rental payments pursuant to our non-leveraged finance leases and proceeds from sales of equipment and our main use of cash is distributions to our members.

 

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 one financial institution and at times may exceed insured limits.  We have placed these funds in a high quality institution in order to minimize risk relating to exceeding insured limits.

 

We believe that cash generated from the expected results of our operations will be sufficient to finance our liquidity requirements for the foreseeable future, including distributions to our members, general and administrative expense, management fees and administrative expense reimbursements. We anticipate that our liquidity requirements for the remaining life of the fund will be financed by the expected results of our operations, as well as cash received from our investments at maturity.

 

We anticipate being able to meet our liquidity requirements into the foreseeable future. However, 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.

 

Cash Flows

Operating Activities

Cash provided by operating activities increased $5,556,370, from $1,030,059 in the 2012 Period to $6,586,429 in the 2013 Period.  The increase was primarily due to the scheduled increase in bareboat charter receipts and the continued reduction of expenses paid in the 2013 Period as compared to the 2012 Period as a result of being in our liquidation period.

 

Investing Activities

Cash provided by investing activities decreased $390,967, from $390,967 in the 2012 Period to $0 in the 2013 Period. The decrease was primarily due to the absence of principal received on notes receivable as a result of Northern Capital Associates XIV, L.P. satisfying its obligations during the 2012 Period.

 

Financing Activities

Cash used in financing activities decreased $1,338,350, from $6,414,196 in the 2012 Period to $5,075,846 in the 2013 Period. The change was due to a decrease in the amount of cash distributed to our members in the 2013 Period as compared to the 2012 Period.

 

Distributions

We, at our Manager’s discretion, paid monthly distributions to our members starting with the first month after each additional member’s admission following the commencement of our operations through the end of our operating period, which was on April 30, 2010. Distributions made during our liquidation period will vary, depending on the timing of the sale of our assets and/or the maturity of our investments and our receipt of rental and other income from our investments. We paid distributions to our Manager and additional members of $50,758 and $5,025,088, respectively, during the 2013 Period

12

 


 

 

 

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At the time we acquire or divest our interest in an equipment lease or other financing transaction, we may, under very limited circumstances, agree to indemnify the seller or buyer for specific contingent liabilities. Our Manager believes that any liability of ours that may arise as a result of any such indemnification obligations will not have a material adverse effect on our consolidated financial condition or results of operations taken as a whole.

 

Off-Balance Sheet Transactions

None.

13

 


 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk  

Smaller reporting companies are not required to provide the information required by this item.

 

Item 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures  

In connection with the preparation of this Quarterly Report on Form 10-Q for the three months ended June 30, 2013, our Manager carried out an evaluation, under the supervision and with the participation of the management of our Manager, including its Co-Chief Executive Officers and the Principal Financial and Accounting Officer, of the effectiveness of the design and operation of our Manager’s disclosure controls and procedures as of the end of the period covered by this report pursuant to the Securities Exchange Act of 1934, as amended. Based on the foregoing evaluation, the Co-Chief Executive Officers and the Principal Financial and Accounting Officer concluded that our Manager’s disclosure controls and procedures were effective.

 

In designing and evaluating our Manager’s disclosure controls and procedures, our Manager 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 Manager’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 June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

14

 


 

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

In the ordinary course of conducting our business, we may be subject to certain claims, suits, and complaints filed against us.  In our Manager’s opinion, the outcome of such matters, if any, will not have a material impact on our consolidated 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.  

 

Item 1A. Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

We did not sell or redeem any Shares during the three months ended June 30, 2013.

 

Item 3. Defaults Upon Senior Securities

                    Not applicable.

 

Item 4. Mine Safety Disclosures

                    Not applicable.

 

Item 5. Other Information

                    Not applicable.

15

 


 

 

 

 

Item 6.  Exhibits

3.1      Certificate of Formation of Registrant (Incorporated by reference to Exhibit 3.1 to Registrant’s Registration Statement on Form S-1 filed with the SEC on February 28, 2003 (File No. 333-103503)).

 

4.1      Amended and Restated Operating Agreement of Registrant (Incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No. 3 to Registrant’s Registration Statement on Form S-1 filed with the SEC on June 2, 2003 (File No. 333-103503)).

 

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 Principal Financial and Accounting Officer.

 

32.1    Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. §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. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.3    Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS*       XBRL Instance Document.

 

101.SCH*     XBRL Taxonomy Extension Schema Document.

 

101.CAL*     XBRL Taxonomy Extension Calculation Linkbase Document.

 

101.DEF*      XBRL Taxonomy Extension Definition Linkbase Document.

 

101.LAB*     XBRL Taxonomy Extension Labels Linkbase Document.

 

101.PRE*      XBRL Taxonomy Extension Presentation Linkbase Document.

 

* XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

16

 


 

 

 

SIGNATURES

 

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

ICON Income Fund Ten, LLC

(Registrant)

 

By: ICON Capital, LLC

      (Manager of the Registrant)

 

August 8, 2013

 

By: /s/ Michael A. Reisner

Michael A. Reisner

Co-Chief Executive Officer and Co-President

(Co-Principal Executive Officer)

 

By: /s/ Mark Gatto

Mark Gatto

Co-Chief Executive Officer and Co-President

(Co-Principal Executive Officer)

 

By: /s/ Nicholas A. Sinigaglia

Nicholas A. Sinigaglia

Managing Director

(Principal Financial and Accounting Officer)

 

 

17