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 period ended September 30, 1997
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-27912
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ICON Cash Flow Partners, L.P., Series E
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3635208
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
600 Mamaroneck Avenue, Harrison, New York 10528
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(Address of principal executive offices) (Zip code)
(914) 698-0600
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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.
[ x] Yes [ ] No
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Balance Sheets
(unaudited)
September 30, December 31,
1997 1996
Assets
Cash .................................... $ 11,307,412 $ 1,203,626
------------ ------------
Investment in finance leases
Minimum rents receivable ............. 16,102,388 31,294,210
Estimated unguaranteed residual values 7,483,868 11,769,952
Initial direct costs ................. 258,269 498,927
Unearned income ...................... (2,346,484) (4,515,040)
Allowance for doubtful accounts ...... (663,946) (844,709)
------------ ------------
20,834,095 38,203,340
Investment in operating leases
Equipment at cost .................... 18,053,706 20,771,628
Accumulated depreciation ............. (105,096) (2,388,850)
Initial direct costs ................. -- 81,600
------------ ------------
17,948,610 18,464,378
Investment in financings
Receivables due in installments ...... 6,767,329 23,057,131
Initial direct costs ................. 1,446 136,330
Unearned income ...................... (1,104,632) (3,699,855)
Allowance for doubtful accounts ...... (129,454) (263,231)
------------ ------------
5,534,689 19,230,375
Equity investment in joint ventures ..... 885,815 57,290
------------ ------------
Accounts receivable from affiliates, net 281,100 --
Other assets ............................ 178,414 775,161
------------ ------------
Total assets ............................ $ 56,970,135 $ 77,934,170
============ ============
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Balance Sheets (continued)
(unaudited)
<TABLE>
September 30, December 31,
1997 1996
Liabilities and Partners' Equity
<S> <C> <C>
Notes payable - non-recourse .............................. $ 26,854,208 $ 34,168,921
Note payable - warehouse line of credit ................... 2,684,035 --
Note payable - revolving credit facility .................. -- 13,000,000
Security deposits and deferred credits .................... 906,937 887,257
Minority interest in joint venture ........................ 809,800 45,724
Accounts payable - other .................................. 495,296 461,109
Accounts payable to General Partner ................... ... 119,947 106,642
Accounts payable - equipment .............................. -- 71,553
------------ ------------
31,870,223 48,741,206
Commitments and Contingencies
Partners' equity (deficiency)
General Partner ........................................ (269,320) (228,462)
Limited partners (609,246 and 609,446 units outstanding,
$100 per unit original issue price in 1997 and 1996,
respectively) ........................................ 25,369,232 29,421,426
------------ ------------
Total partners' equity .................................... 25,099,912 29,192,964
------------ ------------
Total liabilities and partners' equity .................... $ 56,970,135 $ 77,934,170
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Statements of Operations
(unaudited)
<TABLE>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
Revenue
<S> <C> <C> <C> <C>
Rental income ...................... $ 748,444 $ 677,193 $ 1,425,637 $ 2,031,579
Net gain on sales or
remarketing of equipment ......... 744,793 308,409 1,072,791 1,895,206
Finance income ..................... 657,485 1,104,665 2,742,315 3,390,232
Interest income and other .......... 237,462 101,545 764,667 325,541
Income (loss) from equity
investment in joint ventures ..... (93,588) 1,503 (89,342) 4,324
Income from leveraged leases ....... -- -- -- 200,517
----------- ----------- ----------- -----------
Total revenues ..................... 2,294,596 2,193,315 5,916,068 7,847,399
----------- ----------- ----------- -----------
Expenses
Interest ........................... 721,848 658,296 1,900,270 2,209,882
Management fees - General Partner .. 254,421 261,194 728,972 868,147
Administrative expense
reimbursement - General Partner . 131,647 129,815 380,549 425,208
Depreciation ....................... 105,095 265,428 370,523 796,284
Amortization of initial direct costs 96,200 293,159 421,606 772,400
General and administrative ......... 38,293 124,130 301,358 348,321
Minority interest in joint venture . 11,237 1,629 13,409 4,702
Provision for bad debts ............ -- 200,000 -- 400,000
----------- ----------- ----------- -----------
Total expenses ..................... 1,358,741 1,933,651 4,116,687 5,824,944
----------- ----------- ----------- -----------
Net income ............................ $ 935,855 $ 259,664 $ 1,799,381 $ 2,022,455
=========== =========== =========== ===========
Net income allocable to:
Limited partners ................... $ 926,496 $ 257,067 $ 1,781,387 $ 2,002,230
General Partner .................... 9,359 2,597 17,994 20,225
----------- ----------- ----------- -----------
$ 935,855 $ 259,664 $ 1,799,381 $ 2,022,455
=========== =========== =========== ===========
Weighted average number of limited
partnership units outstanding ...... 609,246 609,551 609,290 609,551
=========== =========== =========== ===========
Net income per weighted average
limited partnership unit ........... $ 1.52 $ .42 $ 2.92 $ 3.28
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Nine Months Ended September 30, 1997 and the
Years Ended December 31, 1996, 1995 and 1994
Limited Partner Distributions
<TABLE>
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 $ 48,112,323 $ (46,440) $48,065,883
Cash distributions
to partners $11.27 $ 2.48 (8,390,043) (78,582) (8,468,625)
Limited partnership
units redeemed
(728 units) (48,490) - (48,490)
Net income 1,511,824 15,271 1,527,095
------------ --------- -----------
Balance at
December 31, 1994 41,185,614 (109,751) 41,075,863
Cash distributions
to partners $10.17 $ 2.58 (7,773,082) (78,512) (7,851,594)
Limited partnership
units redeemed
(45 units) (2,370) - (2,370)
Net income 1,569,944 15,858 1,585,802
------------ --------- -----------
Balance at
December 31, 1995 34,980,106 (172,405) 34,807,701
Cash distribution
to partners $ 9.11 $ 3.64 (7,771,164) (78,496) (7,849,660)
Limited partnership
units redeemed
(193 units) (8,960) - (8,960)
Net income 2,221,444 22,439 2,243,883
------------ --------- -----------
Balance at
December 31, 1996 29,421,426 (228,462) 29,192,964
Cash distribution
to partners $ 6.64 $ 2.92 (5,826,343) (58,852) (5,885,195)
Limited partnership
units redeemed
(200 units) (7,238) - (7,238)
Net income 1,781,387 17,994 1,799,381
------------ --------- -----------
Balance at
September 30, 1997 $ 25,369,232 $(269,320) $25,099,912
============ ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30,
(unaudited)
<TABLE>
1997 1996
---- ----
Cash flows provided by operating activities:
<S> <C> <C>
Net income ..................................................... $ 1,799,381 $ 2,022,455
------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation ................................................ 370,523 796,284
Rental income - assigned operating lease receivables ........ (1,425,637) (677,193)
Finance income portion of receivables paid directly
to lenders by lessees .................................... (874,753) (1,456,812)
Amortization of initial direct costs ........................ 421,606 772,400
Net gain on sales or remarketing of equipment ............... (1,072,791) (1,895,206)
Interest expense on non-recourse financing paid
directly by lessees ...................................... 418,789 982,645
Interest expense accrued on debt ............................ 131,788 369,823
Collection of principal - non-financed receivables .......... 7,690,395 6,638,551
Income from leveraged leases, net ........................... -- (200,517)
Income (loss) from equity investment in joint ventures ...... 89,342 (4,324)
Distribution from investment in joint venture ............... 14,627,437 --
Changes in operating assets and liabilities:
Accounts receivable from affiliates, net ................. (281,100) --
Allowance for doubtful accounts .......................... (314,540) 364,718
Accounts payable to General Partner ...................... 13,305 36,935
Accounts payable - other ................................. 34,187 (1,069,996)
Security deposits and deferred credits ................... 19,680 (426,951)
Minority interest in joint venture ....................... 764,076 2,907
Other assets ............................................. 739,562 4,787,731
Other, net ............................................... (358,918) 224,902
------------ ------------
Total adjustments ...................................... 20,992,951 9,245,897
------------ ------------
Net cash provided by operating activities .............. 22,792,332 11,268,352
------------ ------------
Cash flows from investing activities:
Proceeds from sales of equipment ............................... 14,802,451 9,667,369
Equipment and receivables purchased ............................ (9,032,599) (15,018,876)
Investment in joint venture .................................... (2,250,000) --
Initial direct costs ........................................... -- (76,732)
------------ ------------
Net cash provided by investing activities .............. 3,519,852 (5,428,239)
------------ ------------
Cash flows from financing activities:
Loans to affiliates ............................................ (11,280,328) --
Principal payments received on affiliate notes ................. 11,280,328 --
Proceeds from revolving credit facility ........................ 4,400,000 8,780,000
Proceeds from warehouse line of credit ......................... 2,684,035 --
Principal payments on revolving credit facility ................ (17,400,000) (8,199,375)
Redemption of limited partnership units ........................ (7,238) (8,961)
Cash distributions to partners ................................. (5,885,195) (5,887,431)
Principal payments on secured financing ........................ -- (2,335,806)
------------ ------------
Net cash used in financing activities ....................... (16,208,398) (7,651,573)
------------ ------------
Net increase (decrease) in cash ................................... 10,103,786 (1,811,460)
Cash at beginning of period ....................................... 1,203,626 5,826,646
------------ ------------
Cash at end of period ............................................. $ 11,307,412 $ 4,015,186
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (continued)
Supplemental Disclosures of Cash Flow Information
During the nine months ended September 30, 1997 and 1996, non-cash activities
included the following:
<TABLE>
1997 1996
---- ----
Principal and interest on direct finance receivables
<S> <C> <C>
paid directly to lenders by lessees .............................. $ 18,686,210 $ 8,875,299
Rental income assigned operating lease receivable ................... 1,425,637 677,193
Principal and interest on non-recourse financing
paid directly by lessees ......................................... (20,111,847) (9,552,492)
Decrease in investments in finance leases and
financings due to contribution to joint venture ................... 15,698,027 --
Increase in equity investment in joint venture ...................... (15,698,027) --
Decrease in investment in finance leases due to termination of leases -- 18,345
Decrease in notes payable - non-recourse due to termination of lease -- (18,345)
------------ ------------
$ $
============ ============
</TABLE>
Interest expense of $1,900,270 and $2,209,882 for the nine months ended
September 30, 1997 and 1996 consisted of: interest expense on non-recourse
financing accrued or paid directly by lenders to lessees of $418,789 and
$982,645, respectively, interest expense on revolving credit facility of
$603,449 and $826,547, respectively, and other interest of $878,032 and
$400,690, respectively.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
September 30, 1997
(unaudited)
1. Basis of Presentation
The consolidated financial statements of ICON Cash Flow Partners, L.P.,
Series E (the "Partnership") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC") and, in the
opinion of management, include all adjustments (consisting only of normal
recurring accruals) necessary for a fair statement of income for each period
shown. Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such SEC rules
and regulations. Management believes that the disclosures made are adequate to
make the information represented not misleading. The results for the interim
period are not necessarily indicative of the results for the full year. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes included in the Partnership's 1995
Annual Report on Form 10-K.
2. Redemption of Limited Partnership Units
The General Partner consented to the Partnership redeeming 200 limited
partnership units during the nine months ended September 30, 1997. The
redemption amount was calculated following the specified redemption formula as
per the Partnership agreement. Redeemed units have no voting rights and do not
share in distributions. The Partnership agreement limits the number of units
which can be redeemed in any one year and redeemed units may not be reissued.
Redeemed limited partnership units are accounted for as a reduction from
partners equity.
3. Investment in Joint Ventures
The Partnership Agreement allows the Partnership to invest in joint
ventures with other limited partnerships sponsored by the General Partner
provided that the investment objectives of the joint ventures are consistent
with that of the Partnership.
ICON Cash Flow LLC I
In September 1994 the Partnership and an affiliate, ICON Cash Flow
Partners L.P. Six ("L.P. Six"), formed a joint venture, ICON Cash Flow Partners,
L.L.C. I ("ICON Cash Flow LLC I"), for the purpose of acquiring and managing an
aircraft which was on lease to Alaska Airlines, Inc. The Partnership and L.P.
Six contributed 99% and 1% of the cash required for such acquisition,
respectively, to ICON Cash Flow LLC I. ICON Cash Flow LLC I acquired the
aircraft, assuming non-recourse debt and utilizing contributions received from
the Partnership and L.P. Six. The lease is an operating lease. Profits, losses,
excess cash and disposition proceeds are allocated 99% to the Partnership and 1%
to L.P. Six. The Partnership's consolidated financial statements include 100% of
the assets and liabilities of ICON Cash Flow LLC I. L.P. Six's investment in
ICON Cash Flow LLC I has been reflected as "Minority interest in joint venture."
The original lease term expired in April 1997. In June 1997 ICON Cash Flow LLC I
remarketed the aircraft (formally on lease to Alaska Airlines, Inc.). The
aircraft was leased to Aero Mexico. The new lease is an operating lease which
expires in October 2002.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Cash Flow LLC II
In March 1995 the Partnership and an affiliate, L.P. Six, formed ICON Cash
Flow Partners L.L.C. II, ("ICON Cash Flow LLC II"), for the purpose of acquiring
and managing an aircraft which was on lease to Alaska Airlines, Inc. The
Partnership and L.P. Six contributed 1% and 99% of the cash required for such
acquisition, respectively, to ICON Cash Flow LLC II. ICON Cash Flow LLC II
acquired the aircraft, assuming non-recourse debt and utilizing contributions
received from the Partnership and L.P. Six. The lease is an operating lease.
Profits, losses, excess cash and disposition proceeds will be allocated 1% to
the Partnership and 99% to L.P. Six. The General Partner manages and controls
the business affairs of both the Partnership and L.P. Six. As a result of this
common control and the Partnership's ability to influence the activities of the
joint venture, the Partnership's investment in the joint venture is accounted
for under the equity method. In June 1997 ICON Cash Flow LLC II remarketed the
aircraft (formerly on lease to Alaska Airlines, Inc.). The aircraft was leased
to Aero Mexico. The new lease is an operating lease which expires in September
2002. Information as to the financial position and results of operations of ICON
Cash Flow LLC II at September 30, 1997 is summarized below:
September 30, 1997
Assets $ 17,029,715
==============
Liabilities $ 12,476,743
==============
Equity $ 4,552,972
==============
Nine Months Ended
September 30, 1997
Net income $ 636,869
==============
ICON Cash Flow LLC III
In December 1996 the Partnership and an affiliate, ICON Cash Flow Partners,
L.P. Seven ("L.P. Seven"), formed ICON Cash Flow Partners L.L.C. III ("ICON Cash
Flow LLC III"), for the purpose of acquiring and managing an aircraft currently
on lease to Continental Airlines, Inc. The Partnership and L.P. Seven
contributed 1% and 99% of the cash required for such acquisition, respectively,
to ICON Cash Flow LLC III. ICON Cash Flow LLC III acquired the aircraft,
assuming non-recourse debt and utilizing contributions received from the
Partnership and L.P. Seven. The lease is a leveraged lease. Profits, losses,
excess cash and disposition proceeds are allocated 1% to the Partnership and 99%
to L.P. Seven. The General Partner manages and controls the business affairs of
both the Partnership and L.P. Seven. As a result of this common control and the
Partnership's ability to
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
influence the activities of the joint venture, the Partnership's investment in
the joint venture is accounted for under the equity method. Information as to
the financial position and results of operations of ICON Cash Flow LLC III at
September 30, 1997 is summarized below:
September 30, 1997
Assets $ 10,345,423
==============
Liabilities $ 8,422,480
==============
Equity $ 1,922,943
==============
Nine Months Ended
September 30, 1997
Net income $ 327,474
==============
ICON Receivables 1997-A LLC
In March 1997 three affiliates of the Partnership, ICON Cash Flow
Partners, L.P., Series D ("Series D"), L.P. Six and L.P. Seven (collectively the
"1997-A Members"), contributed and assigned equipment lease and finance
receivables and residuals with a net book value of $4,874,857, $5,553,962 and
$5,465,238, respectively to ICON Receivables 1997-A LLC ("1997-A"), a special
purpose entity created for the purpose of originating new leases, managing
existing contributed assets and, eventually, securitizing its portfolio. In
order to fund the acquisition of new leases, 1997-A obtained a warehouse
borrowing facility from Prudential Securities Credit Corporation (the "1997-A
Facility"). Borrowings under the 1997-A Facility were based on the present value
of the new leases. Outstanding amounts under the 1997-A Facility bore interest
equal to Libor plus 1.5%.
On September 19, 1997 the Partnership and L.P. Six contributed and
assigned equipment lease and finance receivables and residuals with a net book
value of $15,698,027 and $5,346,909, respectively to 1997-A. The 1997-A Members
received a 31.19%, 17.81% 31.03% and 19.97% interest, respectively, in 1997-A
based on the present value of their related contributions.
On September 19, 1997, 1997-A securitized substantially all of its
equipment leases and finance receivables and residuals. The net proceeds from
the securitization totaled $47,140,183, of which $16,658,877 was used to pay
down the 1997-A Facility, and the remaining proceeds, after establishing
reserves for expenses, were distributed to the 1997-A Members based on their
respective interests. 1997-A became the beneficial owner of a trust. The trustee
for the trust is Texas Commerce Bank ("TCB"). In conjunction with this
securitization, the portfolio as well as the General Partner's servicing
capabilities were rated "AA" by Duff & Phelps and Fitch, both nationally
recognized rating
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
agencies. The General Partner, as servicer, is responsible for managing,
servicing, reporting on and administering the portfolio. 1997-A remits all
monies received from the portfolio to TCB. TCB is responsible for disbursing to
the noteholders their respective principal and interest and to 1997-A the excess
of cash collected over debt service from the portfolio. The 1997-A Members
receive their pro rata share of any excess cash on a monthly basis from 1997-A.
The Partnership's share of the proceeds from the securitization totaled
$14,625,488. The Partnership accounts for its investment in 1997-A under the
equity method of accounting. ThePartnership's original investment was recorded
at cost and is adjusted by its share of earnings, losses and distributions
thereafter.
Information as to the financial position and results of operations of
1997-A as of and for the nine months ended September 30, 1997 is summarized
below:
September 30, 1997
Assets $ 54,950,026
=============
Liabilities $ 49,150,356
=============
Equity $ 5,799,670
=============
Nine Months Ended
September 30, 1997
Net income $ 677,434
=============
ICON Receivables 1997-B LLC
In August 1997 the Partnership, L.P. Six and L.P. Seven (collectively, the
"1997-B Members") formed ICON Receivables 1997-B LLC ("1997-B"), for the purpose
of originating lease transactions and ultimately securitizing its portfolio. The
1997-B Members contributed $2,250,000 (75.00% interest), $250,000 (8.33%
interest) and $500,000 (16.67% interest), respectively to 1997-B. In order to
fund the acquisition of additional leases, 1997-B obtained a warehouse borrowing
facility from Prudential Securities Credit Corporation (the "1997-B Facility").
Borrowings under the 1997-B Facility are based on the present value of the new
leases, provided that in the aggregate, the amount outstanding cannot exceed
$13,000,000. Outstanding amounts under the 1997-B Facility bear interest equal
to Libor plus 1.5%. Collections of receivables from leases are used to pay down
the 1997-B Facility, however, in the event of a default, all of 1997-B's assets
are available to cure such default. The net proceeds from the expected
securitization of these assets will be used to pay-off the remaining 1997-B
Facility balance and the remaining proceeds will be distributed to the 1997-B
Members in accordance with their membership interests. The Partnership's
consolidated financial statements include 100% of the assets and liabilities of
1997-B, L.P. Six and L.P. Seven's investment in 1997-B has been reflected as
"Minority interest in joint venture."
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
4. Related Party Transactions
During the nine months ended September 30, 1997 and 1996, the Partnership
paid or accrued to the General Partner management fees of $728,972 and $868,147,
respectively, and administrative expense reimbursements of $380,549 and
$425,208, respectively, which were charged to operations.
During the nine months ended September 30, 1997 and 1996, the Partnership
paid or accrued to the General Partner acquisition fees of $0 and $76,732,
respectively.
Included in the Partnership's acquisitions for the year ended December 31,
1996 is a financing transaction in the amount of $5,690,161, which represents
the financing of free cash resulting from lease rental payments being greater
than debt payments on a leveraged lease. The financing is secured by the
underlying equipment, a 1983 Airbus A300B4-203 aircraft currently on lease to
A.I. Leasing II, Inc. Subsequent to this financing L.P. Six, an affiliate of the
Partnership, acquired the residual interest in the leveraged lease and assumed
the related outstanding non-recourse debt. In January, 1997 L.P. Six re-financed
the free cash portion of the leveraged lease with a third party. As a result of
this re-financing, the Partnership received proceeds of $5,792,043 and
terminated its interest in the leveraged lease.
On January 28, 1997, the Partnership lent $7,780,328 to ICON Asset
Acquisition LLC I, a joint venture limited liability corporation formed by ICON
Cash Flow Partners L.P., Series B (8.93% interest), ICON Cash Flow Partners
L.P., Series C (13.39% interest) and L.P. Six (77.68% interest), all affiliates
of the Partnership. The note was short term, bore interest at the rate of 8% and
was paid in full on August 31, 1997.
On June 5, 1997, the Partnership lent $3,500,000 to Series D, an affiliate
of the Partnership. The loan was in the form of a short-term note, bore interest
at the rate of 11% and was repaid, along with $26,370 in accrued interest, on
June 30, 1997.
See Note 3 for a discussion of the Partnership's related party investments
in joint ventures.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Item 2. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership's portfolio consisted of a net investment in finance
leases, operating leases, financings and equity investment in joint ventures
representing 47%, 39%, 12% and 2% of total investments at September 30, 1997,
respectively, and 51%, 25%, 24% and less than 1% of total investments at
September 30, 1996, respectively.
Results of Operations
Three Months Ended September 30, 1997 and 1996
For the three months ended September 30, 1997 and 1996, the Partnership
leased or financed equipment with an initial cost of $12,243,572 and $8,600,934,
respectively, to 0 and 76 lessees or equipment users, respectively.
Revenues for the three months ended September 30, 1997 were $2,294,596,
representing an increase of $101,281 or 5% from 1996. The increase in revenues
resulted primarily from an increase in net gain on sales or remarketing of
equipment of $436,384 or 141%, an increase in interest income and other of
$135,917 or 134% and an increase in rental income of $71,251 or 11% from 1996.
These increases were partially offset by a decrease in finance income of
$447,180 or 40% and a decrease in income from equity investment in joint venture
of $95,091. The increase in net gain on sales or remarketing of equipment was
due to an increase in the number of leases maturing and the underlying equipment
being sold or remarketed, for which the proceeds received were in excess of the
remaining carrying value of the equipment. Interest income and other increased
due to an increase in the average cash balance from 1996 to 1997. Rental income
increased due to an increase in the average size of the operating portfolio from
1996 to 1997. Finance income decreased due to a decrease in the average size of
the finance portfolio from 1996 to 1997. The decrease in income from equity
investment in joint venture resulted from a decrease in the average size of the
portfolio under investment.
Expenses for the three months ended September 30, 1997 were $1,358,741,
representing a decrease of $574,910 or 30% from 1996. The decrease in expenses
resulted primarily from a decrease in provision for bad debts of $200,000 or
100%, a decrease in amortization of initial direct costs of $196,959 or 67%, a
decrease in depreciation expense of $160,333 or 60%, a decrease in general and
administrative expense of $85,837 or 69% and a decrease in management fees of
$6,773 or 3% from 1996. These decreases were partially offset by an increase in
interest expense of $63,552 or 10%, an increase in minority interest in joint
venture of $9,608 and an increase in administrative fees of $1,832 or 1% from
1996. As a result of an analysis of delinquency, an assessment of overall risk
and a review of historical loss experience it was determined that no provision
for bad debts was required for the nine months ended September 30, 1997.
Amortization of initial direct costs, general and administrative expense and
management fees decreased due to a decrease in the average size of the portfolio
from 1996 to 1997. Depreciation expense decreased due to the Partnership's
reduced investment in operating leases. The increase in income from equity
investment in joint venture resulted from an increase in the average size of the
portfolio under investment. Interest expense increased due to an increase in the
average debt outstanding from 1996 to 1997.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Net income for the three months ended September 30, 1997 and 1996 was
$935,855 and $259,664, respectively. The net income per weighted average limited
partnership unit was $1.52 and $.42 for 1997 and 1996, respectively.
Nine Months Ended September 30, 1997 and 1996
For the nine months ended September 30, 1997 and 1996, the Partnership
leased or financed equipment with an initial cost of $29,316,817 and
$13,280,357, respectively, to 54 and 150 lessees or equipment users,
respectively. The weighted average initial transaction term relating to these
transactions was 51 and 53 months.
Revenues for the nine months ended September 30, 1997 were $5,916,068,
representing a decrease of $1,931,331 or 25% from 1996. The decrease in revenues
resulted primarily from a decrease in net gain on sales or remarketing of
equipment of $822,415 or 43%, a decrease in finance income of $647,917 or 19%, a
decrease in rental income of $605,942 or 30%, a decrease in income from
leveraged leases of $200,517 or 100% and a decrease in equity investment in
joint venture of $93,666 from 1996. These decreases were partially offset by an
increase in interest income and other of $439,126 or 135%. Net gain on sales or
remarketing of equipment decreased in comparison to the prior year gain of
$997,606, which resulted from the Partnership's sale of its investment in
leveraged leases at that time. Finance income and income from leveraged leases
decreased due to a decrease in the average size of the finance and leveraged
lease portfolios from 1996 to 1997. Rental income decreased due to the
Partnership's reduced investment in operating leases. The decrease in income
from equity investment in joint venture resulted from a decrease in the average
size of the portfolio under investment. Interest income and other increased due
to an increase in the average cash balance from 1996 to 1997.
Expenses for the nine months ended September 30, 1997 were $4,116,687,
representing a decrease of $1,708,257 or 29% from 1996. The decrease in expenses
resulted primarily from a decrease in depreciation expense of $425,761 or 53%, a
decrease in provision for bad debts of $400,000 or 100%, a decrease in
amortization of initial direct costs of $350,794 or 45%, a decrease in interest
expense of $309,612 or 14%, a decrease in management fees of $139,175 or 16%, a
decrease in general and administrative expense of $46,963 or 13% and a decrease
in administrative expense reimbursements of $44,659 or 11% from 1996. These
decreases were partially offset by an increase in minority interest in joint
venture of $8,707. Depreciation expense decreased due to the Partnership's
reduced investment in operating leases. As a result of an analysis of
delinquency, an assessment of overall risk and a review of historical loss
experience, it was determined that no provision for bad debts was required for
the nine months ended September 30, 1997. Amortization of initial direct costs,
management fees, general and administrative expense and administrative expense
reimbursements decreased due to a decrease in the average size of the portfolio
from 1996 to 1997. Interest expense decreased due to a decrease in the average
debt outstanding from 1996 to 1997. The increase in income from minority
interest in joint venture resulted from an increase in the average size of the
portfolio under investment.
Net income for the nine months ended September 30, 1997 and 1996 was
$1,798,187 and $2,022,455, respectively. The net income per weighted average
limited partnership unit was $2.92 and $3.28 for 1997 and 1996, respectively.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
Liquidity and Capital Resources
The Partnership's primary sources of funds for the nine months ended
September 30, 1997 and 1996 were net cash provided by operations of $22,792,332
and $11,268,352, respectively, proceeds from sales of equipment of $14,802,451
and $9,667,369, respectively, proceeds from the revolving credit facility of
$4,400,000 and $8,780,000, respectively, and proceeds from the warehouse line of
credit of $2,684,035 in 1997. These funds were used to purchase equipment, fund
cash distributions and make payments on borrowings. The Partnership intends to
continue to purchase additional equipment and to fund cash distributions
utilizing cash provided by operations and proceeds from sales of equipment.
Cash distributions to limited partners for the nine months ended September
30, 1997 and 1996, which were paid monthly, totaled $5,826,343 and $5,828,554,
respectively, of which $1,781,387 and $2,002,230 was investment income and
$4,044,956 and $3,826,324 was a return of capital, respectively. The monthly
annualized cash distribution rate to limited partners was 12.75% for 1997 and
1996, of which 3.90% and 4.38% was investment income and 8.85% and 8.37% was a
return of capital, respectively, calculated as a percentage of each partner's
initial capital contribution. The limited partner distribution per weighted
average unit outstanding for the nine months ended September 30, 1997 and 1996
was $9.56, of which $2.92 and $3.28 was investment income and $6.64 and $6.28
was a return of capital, respectively.
In March 1997 three affiliates of the Partnership, ICON Cash Flow
Partners, L.P., Series D ("Series D"), L.P. Six and L.P. Seven (collectively the
"1997-A Members"), contributed and assigned equipment lease and finance
receivables and residuals with a net book value of $4,874,857, $5,553,962 and
$5,465,238, respectively to ICON Receivables 1997-A LLC ("1997-A"), a special
purpose entity created for the purpose of originating new leases, managing
existing contributed assets and, eventually, securitizing its portfolio. In
order to fund the acquisition of new leases, 1997-A obtained a warehouse
borrowing facility from Prudential Securities Credit Corporation (the "1997-A
Facility"). Borrowings under the 1997-A Facility were based on the present value
of the new leases. Outstanding amounts under the 1997-A Facility bore interest
equal to Libor plus 1.5%.
On September 19, 1997 the Partnership and L.P. Six contributed and
assigned equipment lease and finance receivables and residuals with a net book
value of $15,698,027 and $5,346,909, respectively to 1997-A. The 1997-A Members
received a 31.19%, 17.81% 31.03% and 19.97% interest, respectively, in 1997-A
based on the present value of their related contributions.
On September 19, 1997, 1997-A securitized substantially all of its equipment
leases and finance receivables and residuals. The net proceeds from the
securitization totaled $47,140,183, of which $16,658,877 was used to pay down
the 1997-A Facility, and the remaining proceeds, after establishing reserves for
expenses, were distributed to the 1997-A Members based on their respective
interests. 1997-A became the beneficial owner of a trust. The trustee for the
trust is Texas Commerce Bank ("TCB"). In conjunction with this securitization,
the portfolio as well as the General Partner's servicing capabilities were rated
"AA" by Duff & Phelps and Fitch, both nationally recognized rating agencies. The
General Partner, as servicer, is responsible for managing, servicing, reporting
on and administering the portfolio. 1997-A remits all monies received from the
portfolio to TCB. TCB is
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
responsible for disbursing to the noteholders their respective principal and
interest and to 1997-A the excess of cash collected over debt service from the
portfolio. The Partnership's share of the proceeds from the securitization
totaled $14,625,488. The Partnership accounts for its investment in 1997-A under
the equity method of accounting. The 1997-A Members receive their pro rata share
of any excess cash on a monthly basis from 1997-A. The Partnership's original
investment was recorded at cost and is adjusted by its share of earnings, losses
and distributions thereafter.
In August 1997 the Partnership, L.P. Six and L.P. Seven (collectively, the
"1997-B Members") formed ICON Receivables 1997-B LLC ("1997-B"), for the purpose
of originating lease transactions and ultimately securitizing its portfolio. The
1997-B Members contributed $2,250,000 (75.00% interest), $250,000 (8.33%
interest) and $500,000 (16.67% interest), respectively to 1997-B. In order to
fund the acquisition of additional leases, 1997-B obtained a warehouse borrowing
facility from Prudential Securities Credit Corporation (the "1997-B Facility").
Borrowings under the 1997-B Facility are based on the present value of the new
leases, provided that in the aggregate, the amount outstanding cannot exceed
$13,000,000. Outstanding amounts under the 1997-B Facility bear interest equal
to Libor plus 1.5%. Collections of receivables from leases are used to pay down
the 1997-B Facility, however, in the event of a default, all of 1997-B's assets
are available to cure such default. The net proceeds from the expected
securitization of these assets will be used to pay-off the remaining 1997-B
Facility balance and the remaining proceeds will be distributed to the 1997-B
Members in accordance with their membership interests. The Partnership's
consolidated financial statements include 100% of the assets and liabilities of
1997-B, L.P. Six and L.P. Seven's investment in 1997-B has been reflected as
"Minority interest in joint venture."
Included in the Partnership's acquisitions for the year ended December 31,
1996 is a financing transaction in the amount of $5,690,161, which represents
the financing of free cash, resulting from lease rental payments being greater
than debt payments on a leveraged lease. The financing is secured by the
underlying equipment, a 1983 Airbus A300B4-203 aircraft currently on lease to
A.I. Leasing II, Inc. Subsequent to this financing ICON Cash Flow Partners L.P.
Six ("L.P. Six"), an affiliate of the Partnership, acquired the residual
interest in the leveraged lease and assumed the related outstanding non-recourse
debt. In January 1997 L.P. Six re-financed the free cash portion of the
leveraged lease with a third party. As a result of this re-financing, the
Partnership received proceeds of $5,792,043 and terminated its interest in the
leveraged lease.
On January 28, 1997, the Partnership lent $7,780,328 to ICON Asset
Acquisition, a joint venture limited liability corporation formed by ICON Cash
Flow Partners L.P., Series B (8.93% interest), ICON Cash Flow Partners L.P.,
Series C (13.39% interest) and ICON Cash Flow Partners L.P. Six (77.68%
interest), all affiliates of the Partnership. The note was short term, bore
interest at the rate of 8%, (the Partnership's approximate cost of funds) and
was paid in full on September 19, 1997.
On June 5, 1997, the Partnership lent $3,500,000 to Series D, a affiliate
of the Partnership. The loan was in the form of a short-term note, bore interest
at the rate of 11% and was paid in full on June 30, 1997.
As of September 30, 1997, except as noted above, there were no known
trends or demands, commitments, events or uncertainties which are likely to have
any material effect on liquidity. As cash is realized from operations, sales of
equipment and borrowings, the Partnership will invest in equipment leases and
financings where it deems it to be prudent while retaining sufficient cash to
meet its reserve requirements and recurring obligations as they become due.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter ended
September 30, 1997.
<PAGE>
ICON Cash Flow Partners, L.P., Series E
(A Delaware Limited Partnership)
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 Cash Flow Partners, L.P., Series E
File No. 33-44413 (Registrant)
By its General Partner,
ICON Capital Corp.
November 14, 1997 /s/ Gary N. Silverhardt
- ----------------- ---------------------------------------------
Date Gary N. Silverhardt
Chief Financial Officer
(Principal financial and account officer of
the General Partner of the Registrant)
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000881788
<NAME> ICON Cash Flow Partners, L.P., Series E
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 11,307,412
<SECURITIES> 0
<RECEIVABLES> 27,162,184
<ALLOWANCES> 793,400
<INVENTORY> 165,425
<CURRENT-ASSETS> * 0
<PP&E> 18,053,706
<DEPRECIATION> 105,096
<TOTAL-ASSETS> 56,970,135
<CURRENT-LIABILITIES> ** 0
<BONDS> 29,538,243
0
0
<COMMON> 0
<OTHER-SE> 25,099,912
<TOTAL-LIABILITY-AND-EQUITY> 56,970,135
<SALES> 5,916,068
<TOTAL-REVENUES> 5,916,068
<CGS> 805,538
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,410,879
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,900,270
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,799,381
<EPS-PRIMARY> 2.92
<EPS-DILUTED> 2.92
<FN>
* The Partnership has an unclassified balance sheet in its financial
statements due to the nature of its industry. A value of "0" was used for
current assets and liabilities.
** The Partnership has an unclassified balance sheet in its financial
statements due to the nature of its industry. A value of "0" was used for
current assets and liabilities.
</FN>
</TABLE>
