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 June 30, 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.)
7004 W. Butler Pike, 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)
June 30, December 31,
1997 1996
____________ ____________
Cash and cash equivalents $ 2,411,058 $2,983,264
Accounts receivable 52,894 146,010
Due from related parties 56,232 48,254
Equipment under operating leases
(net of accumulated depreciation
of $12,465,963 and $11,958,429,
respectively) 6,229,813 7,704,003
Net investment in direct financing leases 24,180 29,334
Equipment held for sale or lease 2,085,249 30,168
___________ ___________
Total assets $10,859,426 $10,941,033
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 105,040 $ 98,834
Accounts payable and
accrued expenses 58,643 67,530
Due to related parties 40,097 19,620
___________ ___________
Total liabilities 203,780 185,984
Partners' capital 10,655,646 10,755,049
___________ ___________
Total liabilities and
partners' capital $10,859,426 $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
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
____ ____ ____ ____
Income:
Rentals $1,219,245 $1,203,656 $2,420,325 $2,450,986
Earned income on direct
financing leases 568 795 1,194 1,643
Interest 49,345 59,215 92,035 88,158
Gain on sale of equipment,
net 30,300 234,195 79,465 288,992
Other 2,423 2,384 4,233 3,522
__________ __________ __________ __________
1,301,881 1,500,245 2,597,252 2,833,301
__________ __________ __________ __________
Expenses:
Depreciation 994,947 931,098 1,993,323 1,892,483
Write-down of equipment to
net realizable value 20,737 133,455 31,362 279,393
General and administrative 29,206 32,912 49,031 69,469
General and administrative
to related party 70,972 74,713 131,796 141,644
Management fee to
related party 61,026 60,246 121,143 122,515
__________ __________ __________ __________
1,176,888 1,232,424 2,326,655 2,505,504
__________ __________ __________ __________
Net income $ 124,993 $ 267,821 $ 270,597 $ 327,797
========== ========== ========== ==========
Net income per equivalent
limited partnership unit $ 4.03 $ 8.65 $ 8.85 $ 10.41
========== ========== ========== ==========
Weighted average number of
equivalent limited
partnership units outstand-
ing during the period 30,647 30,739 30,238 31,156
========== ========== ========== ==========
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 six months ended June 30, 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 (3,700) - (366,300) (370,000)
Net income 3,000 - 267,597 270,597
________ ______ ___________ ___________
Balance, June 30, 1997 $(30,964) 65,589 $10,686,610 $10,655,646
======== ====== =========== ===========
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 six months ended June 30, 1997 and 1996
(Unaudited)
1997 1996
____ ____
Cash flows from operating activities:
Net income $ 270,597 $ 327,797
__________ __________
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 1,993,323 1,892,483
Write-down of equipment to net
realizable value 31,362 279,393
Proceeds from direct financing leases, net
of earned income 5,154 4,704
Gain on sale of equipment, net (79,465) (288,992)
(Increase) decrease in accounts receivable 93,116 1,248
(Increase) decrease in interest receivable - (21,938)
(Increase) decrease in due from related parties (7,978) (40,517)
Increase (decrease) in lease rents paid
in advance 6,206 44,647
Increase (decrease) in accounts payable and
accrued expenses (8,887) 85,997
Increase (decrease) in due to related parties 20,477 (199,856)
__________ __________
2,053,308 1,757,169
__________ __________
Net cash provided by operating activities 2,323,905 2,084,966
__________ __________
Cash flows from investing activities:
Acquisition of equipment (2,615,307) (299,957)
Maturity of investment securities held
to maturity - 499,740
Proceeds from sale of equipment 89,196 338,560
__________ __________
Net cash provided by (used in)
investing activities (2,526,111) 538,343
__________ __________
Cash flows from financing activities:
Redemptions of capital - (510,707)
Distributions (370,000) (300,000)
__________ __________
Net cash used in financing activities (370,000) (810,707)
__________ __________
Increase (decrease)in cash and cash
equivalents (572,206) 1,812,602
Cash and cash equivalents, beginning
of period 2,983,264 2,199,456
__________ __________
Cash and cash equivalents, end of period $2,411,058 $4,012,058
========== ==========
The accompanying notes are an integral part of these financial statements.
5
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 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. A majority of the equipment was manufactured by IBM. The lessees
have agreements with the manufacturer 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, $31,362 and $279,393 was charged to
write-down of equipment to net realizable value for the six months ended
June 30, 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 June 30, 1997 is as
follows:
Net minimum lease payments to be received $26,000
Less unearned income 2,000
Add expected future residuals -
_______
$24,000
=======
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 June 30, 1997 are as
follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ _________
1997 $1,737,000 $ 6,000
1998 2,061,000 13,000
1999 1,046,000 7,000
2000 158,000 -
__________ _______
$5,002,000 $26,000
========== =======
2. RELATED PARTY TRANSACTIONS
The General Partner receives 5% or 2% of gross rental payments from equip-
ment 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
due during the initial term of the lease 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 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 and six months ended
June 30, 1997 and 1996:
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
____ ____ ____ ____
Management fee $61,026 $60,246 $121,143 $122,515
Reimbursable costs 70,972 74,713 131,796 141,644
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 June 30, 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 June 30, 1997 and December 31, 1996
represent monies due to the General Partner for the fees and costs men-
tioned 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 a cash distribution of $50,000 subsequent to
June 30 1997 for the month ended June 30, 1997, to all admitted partners as
of June 30, 1997.
8
FIDELITY LEASING INCOME FUND VII, L.P.
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 $1,301,881 and
$1,500,245 for the three months ended June 30, 1997 and 1996, respectively,
and $2,597,252 and $2,833,301 for the six months ended June 30, 1997 and 1996,
respectively. Rental income from the leasing of computer equipment accounted
for 94% and 80% of total revenues for the second quarter of 1997 and 1996,
respectively and 93% and 87% of total revenues for the six months ended
June 30,1997 and 1996, respectively. The decrease in revenues is primarily
attributable to a decrease in the net gain on sale of equipment in 1997.
The Fund recognized a net gain on sale of equipment of $79,465 during the first
six months of 1997 as compared to a net gain of $288,992 during the first six
months of 1996. Additionally, the decrease in rental income in 1997
contributed to the overall decrease in revenues between 1997 and 1996. Rental
income decreased during 1997 by approximately $669,000 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 $638,000 of
rental income realized from equipment purchases made since June 30, 1996.
Expenses were $1,176,888 and $1,232,424 for the three months ended June 30,
1997 and 1996, respectively, and $2,326,655 and $2,505,504 for the six
months ended June 30, 1997 and 1996, respectively. Depreciation comprised 85%
and 76% of total expenses during the quarter ended June 30, 1997 and 1996,
respectively and 86% and 76% of total expenses during the six months ended June
30, 1997 and 1996, respectively. The decrease in expenses is primarily
related to the decrease in the write-down of equipment to net realizable value
in 1997. Based upon the quarterly review of the recoverability of the
undepreciated cost of rental equipment, $31,362 and $279,393 was charged
to operations to write down equipment to its estimated net realizable value
during the six months ended June 30, 1997 and 1996, respectively. Any future
losses are dependent upon unanticipated technological developments affecting
the computer equipment industry in subsequent years. The amount of the overall
decrease in expenses in 1997 was mitigated by the increase in depreciation
expense in the first six months of 1997 as compared to the same period in 1996
resulting from equipment purchases made since June 30, 1996.
The Fund's net income was $124,993 and $267,821 for the three
months ended June 30, 1997 and 1996, respectively, and $270,597 and $327,797
for the six months ended June 30, 1997 and 1996, respectively. The earnings
per equivalent limited partnership unit, after earnings allocated to the
General Partner, were $4.03 and $8.65 based on a weighted average number of
equivalent limited partnership units outstanding of 30,647 and 30,739 for the
three months ended June 30, 1997 and 1996, respectively. The earnings per
equivalent limited partnership unit, after earnings allocated to the General
Partner, were $8.85 and $10.41 based on a weighted average number of equivalent
limited partnership units outstanding of 30,238 and 31,156 for the six months
ended June 30, 1997 and 1996, respectively.
9
FIDELITY LEASING INCOME FUND VII, L.P.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
The Fund generated $1,110,377 and $1,098,179 of cash from operations, for
the purpose of determining cash available for distribution, for the quarter
ended June 30, 1997 and 1996, respectively and distributed 9% and 11% of
these amounts to partners during the second quarter of 1997 and 1996, respec-
tively and 5% to partners subsequent to both June 30, 1997 and 1996.
For the six months ended June 30, 1997 and 1996, the Fund generated $2,215,817
and $2,210,681 of cash from operations and distributed 11% and 14% of these
amounts to partners during the six months ended June 30, 1997 and 1996,
respectively and 2% and 3% of these amounts to partners subsequent to June 30,
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.
ANALYSIS OF FINANCIAL CONDITION
During the six months ended June 30, 1997 and 1996, the Fund purchased
equipment of $2,615,307 and $299,957, respectively. The Fund will continue
to purchase equipment with cash available from operations which is not
distributed to partners.
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.
June 30, 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: EX-27
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.
8-13-97 By: Freddie M. Kotek
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
8-13-97 By: Marianne T. Schuster
_______ ___________________________
Date Marianne T. Schuster
Vice President of
F.L. Partnership Management, Inc.
(Principal Financial Officer)
12
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.
_______ By:
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
_______ By:
_______ ___________________________
Date Marianne T. Schuster
Vice President of
F.L. Partnership Management, Inc.
(Principal Financial Officer)
12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,411,058
<SECURITIES> 0
<RECEIVABLES> 109,126
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,520,184
<PP&E> 20,781,025
<DEPRECIATION> 12,465,963
<TOTAL-ASSETS> 10,859,426
<CURRENT-LIABILITIES> 203,780
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,655,646
<TOTAL-LIABILITY-AND-EQUITY> 10,859,426
<SALES> 2,420,325
<TOTAL-REVENUES> 2,597,252
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,326,655
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 270,597
<INCOME-TAX> 0
<INCOME-CONTINUING> 270,597
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 270,597
<EPS-PRIMARY> 8.85
<EPS-DILUTED> 8.85
</TABLE>
