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ICON INCOME FUND TEN LLC - 10-Q - Managing Trustee's Discussion and Analysis of Financial Condition and Results of Operations

August 7, 2014

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, 2013. 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 Liquidating Trust 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 of 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 and finance program in which the capital our beneficial owners 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 asset. For these leases, we anticipated that the future value of the leased equipment would exceed the cash portion of the purchase price.

Our Managing Trustee 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.

The Liquidating Trust is governed by a Liquidating Trust Agreement that appointed our Manager as Managing Trustee of the Liquidating Trust. The Liquidating Trust's assets include an investment in ICON Containership I, LLC and an investment in ICON Containership II, LLC. These investments, as well as all other assets and liabilities of the LLC were transferred to the Liquidating Trust on December 31, 2013 in order to reduce expenses and to maximize potential distributions to beneficial owners. On December 31, 2013, all shares of the LLC's limited liability company interests were exchanged for an equal number of beneficial interests (the "Interests") in the Liquidating Trust.

The financial condition and results of operations of the LLC are presented as those of the Liquidating Trust back to the beginning of the earliest period presented.

Recent Significant Transactions

We did not engage in any significant transactions since December 31, 2013.

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Recent Accounting Pronouncements

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will become effective for us on January 1, 2017. We are currently in the process of evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements. We do not believe any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our consolidated financial statements.

Results of Operations for the Three Months Ended June 30, 2014 (the "2014 Quarter") and 2013 (the "2013 Quarter")

Revenue and other income for the 2014 Quarter and the 2013 Quarter is summarized as follows: Three Months Ended June 30, 2014 2013 Change Finance income $ 916,636$ 1,530,175$ (613,539) Loss from investment in joint ventures - (233,098) 233,098 Interest and other loss (9,585) (476) (9,109) Total revenue and other income $ 907,051$ 1,296,601$ (389,550)



Total revenue and other income for the 2014 Quarter decreased $389,550, or 30.0%, as compared to the 2013 Quarter. The decrease in finance income was primarily due to the normal lifecycle of our bareboat charters with ZIM Israel Navigation Co. Ltd. ("ZIM"). The decrease was partially offset by losses no longer incurred in the 2014 Quarter from our investment in joint ventures as a result of the termination of their operations following the sale of vessels by ICON Eagle Corona Holdings, LLC and ICON Eagle Carina Holdings, LLC after the 2013 Quarter.

Expenses for the 2014 Quarter and the 2013 Quarter are summarized as follows:

Three Months Ended June 30, 2014 2013 Change General and administrative $ 135,633$ 407,139$ (271,506) Total expenses $ 135,633$ 407,139$ (271,506)



Total expenses for the 2014 Quarter decreased $271,506, or 66.7%, as compared to the 2013 Quarter. The decrease in general and administrative expenses was primarily due to the continued reduction of expenses as a result of being in our liquidation period and sales tax expense recorded in the 2013 Quarter with no corresponding expense in the 2014 Quarter.

Net Income Attributable to Fund Ten Liquidating Trust

As a result of the foregoing factors, net income attributable to us for the 2014 Quarter and the 2013 Quarter was $790,204 and $926,479, respectively. Net income attributable to us per weighted average additional Interest outstanding for the 2014 Quarter and the 2013 Quarter was $5.28 and $6.19, respectively.

Results of Operations for the Six Months Ended June 30, 2014 (the "2014 Period") and 2013 (the "2013 Period")

Revenue and other income for the 2014 Period and the 2013 Period is summarized as follows:

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Table of contents Six Months Ended June 30, 2014 2013 Change Finance income $ 2,026,512$ 3,139,456$ (1,112,944) Income (loss) from investment in joint ventures 1,379 (604,776) 606,155 Interest and other (loss) income (12,594) 20,239 (32,833) Total revenue and other income $ 2,015,297$ 2,554,919$ (539,622)



Total revenue and other income for the 2014 Period decreased $539,622, or 21.1%, as compared to the 2013 Period. The decrease in finance income was primarily due to the normal lifecycle of our bareboat charters with ZIM. The decrease was partially offset by losses no longer incurred in the 2014 Period from our investment in joint ventures as a result of the termination of their operations following the sale of vessels by ICON Eagle Corona Holdings, LLC and ICON Eagle Carina Holdings, LLC after the 2013 Period.

Expenses for the 2014 Period and the 2013 Period are summarized as follows:

Six Months Ended June 30, 2014 2013 Change General and administrative $ 196,732$ 659,615$ (462,883) Total expenses $ 196,732$ 659,615$ (462,883)



Total expenses for the 2014 Period decreased $462,883, or 70.2%, as compared to the 2013 Period. The decrease in general and administrative expenses was primarily due to the continued reduction of expenses as a result of being in our liquidation period and the reimbursement by our former lessee of certain sales taxes accrued in prior quarters.

Net (Loss) Income Attributable to Noncontrolling Interests

Net (loss) income attributable to noncontrolling interests increased by $55,912, from a net loss of $37,283 for the 2013 Period to net income of $18,629 for the 2014 Period. The increase was primarily attributable to accrued sales taxes in the 2013 Period.

Net Income Attributable to Fund Ten Liquidating Trust

As a result of the foregoing factors, net income attributable to us for the 2014 Period and the 2013 Period was $1,799,936 and $1,932,587, respectively. Net income attributable to us per weighted average additional Interest outstanding for the 2014 Period and the 2013 Period was $12.02 and $12.91, respectively.

Financial Condition



This section discusses the major balance sheet variances at June 30, 2014 compared to December 31, 2013.

Total Assets



Total assets decreased $10,821,243, from $36,695,835 at December 31, 2013 to $25,874,592 at June 30, 2014. The decrease was primarily due to distributions paid to our beneficial owners.

Current Assets



Current assets decreased $8,952,008, from $22,146,899 at December 31, 2013 to $13,194,891 at June 30, 2014. The decrease was primarily due to distributions paid to our beneficial owners, partially offset by the change in current and long-term portions of net investment in finance leases based on payments due to us for the next twelve months.

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Equity decreased $10,807,795, from $36,104,884 at December 31, 2013 to $25,297,089 at June 30, 2014. The decrease was primarily the result of distributions paid to our beneficial owners, partially offset by net income in the 2014 Period.

Liquidity and Capital Resources

Summary

At June 30, 2014 and December 31, 2013, we had cash and cash equivalents of $5,259,176 and $6,966,884, respectively. During our liquidation period, which we commenced on May 1, 2010, our main sources of cash are the collection of income pursuant to our finance leases and proceeds from sales of assets held directly by us or indirectly by our joint ventures and our main use of cash is distributions to our beneficial owners.

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.

During the liquidation period, cash generated by our investing activities has become a more significant source of liquidity as we sell assets or let them mature in the ordinary course of business. 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 beneficial owners, 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 $4,332,223, from $6,586,429 in the 2013 Period to $10,918,652 in the 2014 Period. The increase was primarily due to the scheduled increase in bareboat charter receipts and the continued reduction of expenses paid in the 2014 Period as a result of being in our liquidation period.

Investing Activities



We did not conduct any investing activities during the 2014 Period and 2013 Period.

Financing Activities



Cash used in financing activities increased $7,550,514, from $5,075,846 in the 2013 Period to $12,626,360 in the 2014 Period. The increase was due to an increase in distributions paid to our beneficial owners in the 2014 Period.

Distributions

We, at our Managing Trustee's discretion, paid monthly distributions to beneficial owners starting with the first month after each additional beneficial owner's admission following the commencement of our operations through the end of our operating period, which was on April 30, 2010. Distributions paid 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 finance and other income from our investments. We paid distributions to our Managing Trustee and additional beneficial owners of $126,264 and $12,500,096, respectively, during the 2014 Period.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

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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 Managing Trustee 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.


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Source: Edgar Glimpses


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