SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997
/ / 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: 0-19232
Fidelity Leasing Income Fund VII, L.P.
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 23-2581971
_______________________________________________________________________________
(State of organization) (I.R.S. Employer Identification No.)
7 E. Skippack Pike, Suite 275, Ambler, Pennsylvania 19002
_______________________________________________________________________________
(Address of principal executive offices) (Zip code)
(215) 619-2800
_______________________________________________________________________________
(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 regis-
trant was required to file such reports), and (2) has been subject to such fil-
ing requirements for the past 90 days.
Yes __X__ No _____
Page 1 of 12
Part I: Financial Information
Item 1: Financial Statements
FIDELITY LEASING INCOME FUND VII, L.P.
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
March 31, December 31,
1997 1996
___________ ____________
Cash and cash equivalents $ 3,975,974 $ 2,983,264
Accounts receivable 84,101 146,010
Due from related parties 67,304 48,254
Equipment under operating leases
(net of accumulated depreciation
of $11,673,733 and $11,958,429,
respectively) 6,643,011 7,704,003
Net investment in direct financing leases 26,786 29,334
Equipment held for sale or lease 87,358 30,168
___________ ___________
Total assets $10,884,534 $10,941,033
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 75,038 $ 98,834
Accounts payable and
accrued expenses 70,782 67,530
Due to related parties 8,061 19,620
___________ ___________
Total liabilities 153,881 185,984
Partners' capital 10,730,653 10,755,049
___________ ___________
Total liabilities and
partners' capital $10,884,534 $10,941,033
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
________ ________
Income:
Rentals $1,201,080 $1,247,330
Earned income on direct financing leases 626 848
Interest 42,690 28,943
Gain on sale of equipment, net 49,165 54,797
Other 1,810 1,138
__________ __________
1,295,371 1,333,056
__________ __________
Expenses:
Depreciation 998,376 961,385
Write-down of equipment to net
realizable value 10,625 145,938
General and administrative 19,825 36,558
General and administrative to related
party 60,824 66,930
Management fee to related party 60,117 62,269
__________ __________
1,149,767 1,273,080
__________ __________
Net income $ 145,604 $ 59,976
========== ==========
Net income per equivalent
limited partnership unit $ 4.68 $ 1.84
========== ==========
Weighted average number of
equivalent limited partnership
units outstanding during the period 30,771 31,573
========== ==========
The accompanying notes are an integral part of these financial statements.
3
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENT OF PARTNERS' CAPITAL
For the three months ended March 31, 1997
(Unaudited)
General Limited Partners
Partner Units Amount Total
_______ _____ ______ _____
Balance, January 1, 1997 $(30,264) 65,589 $10,785,313 $10,755,049
Cash distributions (1,700) - (168,300) (170,000)
Net income 1,500 - 144,104 145,604
________ ______ ___________ ___________
Balance, March 31, 1997 $(30,464) 65,589 $10,761,117 $10,730,653
======== ====== =========== ===========
The accompanying notes are an integral part of these financial statements.
4
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
________ ________
Cash flows from operating activities:
Net income $ 145,604 $ 59,976
__________ __________
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 998,376 961,385
Write-down of equipment to net
realizable value 10,625 145,938
Proceeds from direct financing leases, net
of earned income 2,548 2,325
Gain on sale of equipment, net (49,165) (54,797)
(Increase) decrease in accounts receivable 61,909 (100,561)
(Increase) decrease in interest receivable - 10,866
(Increase) decrease in due from related parties (19,050) 56,849
Increase (decrease) in lease rents paid
in advance (23,796) 31,844
Increase (decrease) in accounts payable and
accrued expenses 3,252 513,797
Increase (decrease) in due to related parties (11,559) 86,690
__________ __________
973,140 1,654,336
__________ __________
Net cash provided by operating activities 1,118,744 1,714,312
__________ __________
Cash flows from investing activities:
Acquisition of equipment (13,067) (173,002)
Proceeds from sale of equipment 57,033 93,273
__________ __________
Net cash provided by (used in)
investing activities 43,966 (79,729)
__________ __________
Cash flows from financing activities:
Redemptions of capital - (510,707)
Distributions (170,000) (120,000)
__________ __________
Net cash used in financing activities (170,000) (630,707)
__________ __________
Increase in cash and cash equivalents 992,710 1,003,876
Cash and cash equivalents, beginning
of period 2,983,264 2,199,456
__________ __________
Cash and cash equivalents, end of period $3,975,974 $3,203,332
========== ==========
The accompanying notes are an integral part of these financial statements.
5
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
The accompanying unaudited condensed financial statements have been prepared
by the Fund in accordance with Generally Accepted Accounting Principles,
pursuant to the rules and regulations of the Securities and Exchange Commis-
sion. In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Certain amounts on the 1996 financial statements have been
reclassified to conform to the presentation in 1997.
1. EQUIPMENT LEASED
Equipment on lease consists primarily of computer equipment under operating
leases. The lessees have agreements with the manufacturer of the
equipment to provide maintenance for the leased equipment. The Fund's
operating leases are for initial lease terms of 11 to 60 months. Generally,
operating leases will not recover all of the undepreciated cost and related
expenses of its rental equipment during the initial lease terms and the
Fund is prepared to remarket the equipment in future years. Fund policy is
to review quarterly the expected economic life of its rental equipment in
order to determine the recoverability of its undepreciated cost. Recent
and anticipated technological developments affecting computer equipment and
competitive factors in the marketplace are considered among other things,
as part of this review. In accordance with Generally Accepted Accounting
Principles, the Fund writes down its rental equipment to its estimated net
realizable value when the amounts are reasonably estimated and only
recognizes gains upon actual sale of its rental equipment. As a result,
$10,625 and $145,938 was charged to write-down of equipment to net
realizable value for the three months ended March 31, 1997 and 1996,
respectively. Any future losses are dependent upon unanticipated
technological developments affecting the computer equipment industry in
subsequent years.
The Fund also has equipment leased under the direct financing method in
accordance with Statement of Financial Accounting Standards No. 13. This
method provides for recognition of income (the excess of the aggregate
future rentals and estimated additional amounts recoverable upon expiration
of the lease over the related equipment cost) over the life of the lease
using the interest method.
The net investment in direct financing leases as of March 31, 1997 is as
follows:
Net minimum lease payments to be received $30,000
Less unearned income 3,000
Add expected future residuals -
_______
$27,000
=======
6
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. EQUIPMENT LEASED (CONTINUED)
The future approximate minimum rentals to be received on noncancellable
operating leases and direct financing leases as of March 31, 1997 are as
follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ _________
1997 $2,777,000 $10,000
1998 1,874,000 13,000
1999 902,000 7,000
2000 112,000 -
__________ _______
$5,665,000 $30,000
========== =======
Subsequent to March 31, 1997, the Fund purchased $593,583 of equipment
subject to an operating lease with an initial lease term of 36 months. The
future approximate minimum rentals to be received on this noncancellable
operating lease are $142,178 in 1997, $186,124 in 1998, $186,124 in 1999
and $46,531 in 2000.
2. RELATED PARTY TRANSACTIONS
The General Partner receives 5% or 2% of rental payments on equipment under
operating leases and full pay-out leases, respectively, for administrative
and management services performed on behalf of the Fund. Full pay-out
leases are noncancellable leases for which the rental payments during the
initial term are at least sufficient to recover the purchase price of the
equipment, including acquisition fees. This management fee is paid monthly
only if and when the Limited Partners have received distributions for the
period from January 1, 1991 through the end of the most recent quarter
equal to a return for such period at a rate of 12% per year on the
aggregate amount paid for their units.
The General Partner may also receive up to 3% of the proceeds from the sale
of the Fund's equipment for services and activities to be performed in con-
nection with the disposition of equipment. The payment of this sales fee
is deferred until the Limited Partners have received cash distributions
equal to the purchase price of their units plus a 12% cumulative compounded
Priority Return. Based on current estimates, it is not expected that the
Fund will be required to pay this sales fee to the General Partner.
Additionally, the General Partner and its parent company are reimbursed by
the Fund for certain costs of services and materials used by or for the
Fund except those items covered by the above-mentioned fees. Following is
a summary of fees and costs of services and materials charged by the
General Partner or its parent company during the three months ended
March 31:
1997 1996
________ ________
Management fee $60,117 $62,269
Reimbursable costs 60,824 66,930
7
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. RELATED PARTY TRANSACTIONS (CONTINUED)
The Fund maintains its checking and investment accounts in Jefferson Bank,
a subsidiary of JeffBanks, Inc., in which the Chairman of Resource America,
Inc. serves as a director.
Amounts due from related parties at March 31, 1997 and December 31, 1996
represent monies due the Fund from the General Partner and/or other
affiliated funds for rentals and sales proceeds collected and not yet re-
mitted to the Fund.
Amounts due to related parties at March 31, 1997 and December 31, 1996
represent monies due to the General Partner and/or its parent company for
the fees and costs mentioned above, as well as, rentals and sales proceeds
collected by the Fund on behalf of other affiliated funds.
3. CASH DISTRIBUTION
The General Partner declared and paid a cash distribution of $50,000 in
both April and May 1997 for the months ended February 28 and March 31,
1997, to all admitted partners as of February 28 and March 31, 1997.
8
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Fidelity Leasing Income Fund VII, L.P. had revenues of $1,295,371 and
$1,333,056 for the three months ended March 31, 1997 and 1996, respectively.
Rental income from the leasing of computer peripheral equipment accounted for
93% and 94% of total revenues for the first quarter of 1997 and 1996,
respectively. The decrease in revenues is primarily attributable to a decrease
in rental income. Rental income decreased during 1997 by approximately
$340,000 because of equipment which came off lease and was re-leased at lower
rental rates or sold. This decrease, however, was reduced by an increase of
approximately $294,000 in rental income realized from equipment purchases made
since March 31, 1996 as well as rental income recognized on 1996 equipment
purchases for which a full three months of rent was earned in 1997 and only a
portion of the three months was earned in 1996. The Fund recognized a
net gain on sale of equipment of $49,165 during the first quarter of 1997 as
compared to a net gain on sale of equipment of $54,797 for the first quarter of
1996 which attributed to the overall decrease in total revenues in 1997, as
well. The overall decrease in revenues was mitigated by the increase in
interest income in 1997 as compared to 1996 because of higher interest rates
earned on invested cash and larger cash balances invested by the Fund.
Expenses were $1,149,767 and $1,273,080 during the three months ended
March 31, 1997 and 1996, respectively. Depreciation comprised 87% and 76% of
total expenses during the first quarter of 1997 and 1996, respectively. The
decrease in expenses is primarily related to the decrease in write-down of
equipment to net realizable value. Based upon the quarterly review of the
recoverability of the undepreciated cost of rental equipment, $10,625 and
$145,938 was charged to operations to write down equipment to its estimated net
realizable value during the three months ended March 31, 1997 and 1996,
respectively. Any future losses are dependent upon unanticipated
technological developments affecting the computer equipment industry in
subsequent years. Depreciation expense increased in the first quarter of 1997
in comparison to the first quarter of 1996 because of equipment purchases made
since March 1996, which lowered the overall decrease in total expenses in 1997.
For the three months ended March 31, 1997 and 1996, the Fund had net income
of $145,604 and $59,976, respectively. The earnings per equivalent limited
partnership unit, after earnings allocated to the General Partner were $4.68
and $1.84 based on a weighted average number of equivalent limited partnership
units outstanding of 30,771 and 31,573 for the three months ended March 31,
1997 and 1996, respectively.
The Fund generated $1,105,440 and $1,112,502 of funds from operations, for
the purpose of determining cash available for distribution, during the quarter
ended March 31, 1997 and 1996, respectively and distributed 4% and 11% of
these amounts to partners during the first quarter of 1997 and 1996, respec-
tively and 9% and 5% of these amounts to partners subsequent to the first
quarter of 1997 and 1996, respectively. For financial statement purposes, the
Fund records cash distributions to partners on a cash basis in the period in
which they are paid.
9
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
ANALYSIS OF FINANCIAL CONDITION
During the quarter ended March 31, 1997 and 1996, the Fund purchased
$13,067 and $173,002, respectively of equipment. The Fund will continue to
purchase equipment with cash available from operations which is not distributed
to partners.
Subsequent to March 31, 1997, the Fund purchased $593,583 of equipment for
lease.
The cash position of the Fund is reviewed daily and cash is invested on a
short-term basis.
The Fund's cash from operations is expected to continue to be adequate to
cover all operating expenses and contingencies during the next twelve month
period.
10
Part II: Other Information
FIDELITY LEASING INCOME FUND VII, L.P.
March 31, 1997
Item 1. Legal Proceedings: Inapplicable.
Item 2. Changes in Securities: Inapplicable.
Item 3. Defaults Upon Senior Securities: Inapplicable.
Item 4. Submission of Matters to a Vote of Securities Holders: Inapplicable.
Item 5. Other Information: Inapplicable.
Item 6. Exhibits and Reports on Form 8-K:
a) Exhibits: None
b) Reports on Form 8-K: None
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the regis-
trant has duly caused this report to be signed on its behalf by the under-
signed, thereunto duly authorized.
FIDELITY LEASING INCOME FUND VII, L.P.
5-14-97 By: Freddie M. Kotek
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
5-14-97 By: Marianne T. Schuster
_______ ___________________________
Date Marianne T. Schuster
Vice President of
F.L. Partnership Management, Inc.
(Principal Financial Officer)
12
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,975,974
<SECURITIES> 0
<RECEIVABLES> 151,405
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,127,379
<PP&E> 18,404,102
<DEPRECIATION> 11,673,733
<TOTAL-ASSETS> 10,884,534
<CURRENT-LIABILITIES> 153,881
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,730,653
<TOTAL-LIABILITY-AND-EQUITY> 10,884,534
<SALES> 1,201,080
<TOTAL-REVENUES> 1,295,371
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,149,767
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 145,604
<INCOME-TAX> 0
<INCOME-CONTINUING> 145,604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145,604
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