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 September 30, 1998
/ / 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.)
3 North Columbus Boulevard, Philadelphia, PA 19106
_______________________________________________________________________________
(Address of principal executive offices) (Zip code)
(215) 574-1636
_______________________________________________________________________________
(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)
September 30, December 31,
1998 1997
_____________ ____________
Cash and cash equivalents $ 1,042,765 $ 3,185,012
Accounts receivable 35,680 440,830
Due from related parties 30,324 444,897
Equipment under operating leases
(net of accumulated depreciation
of $6,095,173 and $6,817,100,
respectively) 6,478,393 6,214,378
Net investment in direct financing leases 2,052,316 295,319
Equipment held for sale or lease 593,603 39,958
___________ __________
Total assets $10,233,081 $10,620,394
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 82,504 $ 101,304
Accounts payable - equipment - 7,050
Accounts payable and
accrued expenses 49,632 100,885
Due to related parties 12,132 42,321
___________ ___________
Total liabilities 144,268 251,560
Partners' capital 10,088,813 10,368,834
___________ ___________
Total liabilities and
partners' capital $10,233,081 $10,620,394
=========== ===========
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 Nine Months Ended
September 30 September 30
1998 1997 1998 1997
____ ____ ____ ____
Income:
Rentals $ 846,086 $1,243,191 $2,803,200 $3,663,516
Earned income on direct
financing leases 31,024 508 50,645 1,702
Interest 11,376 36,574 56,740 128,609
Gain on sale of equipment,
net 76,500 - 102,820 54,255
Other 3,930 3,634 12,282 7,867
__________ __________ __________ __________
968,916 1,283,907 3,025,687 3,855,949
__________ __________ __________ __________
Expenses:
Depreciation 755,176 1,007,871 2,504,537 3,001,194
Write-down of equipment
to net realizable value 158,116 14,039 312,816 45,401
General and administrative 28,848 28,515 91,377 77,546
General and administrative
to related party 59,362 42,340 191,292 174,136
Management fee to
related party 38,628 62,223 125,686 183,366
Loss on sale of equipment,
net - 25,210 - -
__________ __________ __________ __________
1,040,130 1,180,198 3,225,708 3,481,643
__________ __________ __________ __________
Net income (loss) $ (71,214) $ 103,709 $ (200,021) $ 374,306
========== ========== ========== ==========
Net income (loss) per equivalent
limited partnership unit $ (2.38) $ 3.34 $ (6.66) $ 12.18
========== ========== ========== ==========
Weighted average number of
equivalent limited
partnership units outstanding
during the period 29,603 30,667 29,732 30,381
========== ========== ========= ==========
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 nine months ended September 30, 1998
(Unaudited)
General Limited Partners
Partner Units Amount Total
_______ _____ ______ _____
Balance, January 1, 1998 $(30,664) 65,449 $10,399,498 $10,368,834
Cash distributions (800) - (79,200) (80,000)
Net loss (2,000) - (198,021) (200,021)
________ ______ ___________ ___________
Balance, September 30, 1998 $(33,464) 65,449 $10,122,277 $10,088,813
======== ====== =========== ===========
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 nine months ended September 30, 1998 and 1997
(Unaudited)
1998 1997
____ ____
Cash flows from operating activities:
Net income (loss) $ (200,021) $ 374,306
__________ _________
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 2,504,537 3,001,194
Write-down of equipment to
net realizable value 312,816 45,401
Proceeds from direct financing leases, net
of earned income 177,593 7,819
Gain on sale of equipment, net (102,820) (54,255)
(Increase) decrease in accounts receivable 405,150 (58,872)
(Increase) decrease in due from related
parties 414,573 7,289
Increase (decrease) in lease rents paid
in advance (18,800) 1,755
Increase (decrease) in accounts payable -
equipment (7,050) -
Increase (decrease) in accounts payable
and accrued expenses (51,253) 9,664
Increase (decrease) in due to related
parties (30,189) (13,683)
_________ __________
3,604,557 2,946,312
_________ __________
Net cash provided by operating activities 3,404,536 3,320,618
_________ _________
Cash flows from investing activities:
Acquisition of equipment (3,936,282) (2,643,930)
Investment in direct financing leases (1,934,591) -
Proceeds from sale of equipment 404,090 246,287
_________ __________
Net cash used in investing activities (5,466,783) (2,397,643)
_________ __________
Cash flows from financing activities:
Distributions (80,000) (470,000)
_________ __________
Net cash used in financing activities (80,000) (470,000)
_________ __________
Increase (decrease) in cash and
cash equivalents (2,142,247) 452,975
Cash and cash equivalents, beginning
of period 3,185,012 2,983,264
__________ __________
Cash and cash equivalents, end of period $1,042,765 $3,436,239
========== ==========
The accompanying notes are an integral part of these financial statements.
5
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(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.
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 24 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, $312,816 and $45,401 was charged to write-down of
equipment to net realizable value for the nine months ended September 30,
1998 and 1997, 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 September 30, 1998 is
as follows:
Net minimum lease payments to be received $2,354,000
Less unearned income 302,000
Add expected future residuals -
__________
$2,052,000
==========
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 September 30, 1998 are
as follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ _________
1998 $ 812,000 $ 149,000
1999 2,616,000 596,000
2000 1,298,000 596,000
2001 740,000 455,000
Thereafter 756,000 558,000
__________ __________
$6,222,000 $2,354,000
========== ==========
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 nine months
ended September 30, 1998 and 1997:
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
____ ____ ____ ____
Management fee $38,628 $62,223 $125,686 $183,366
Reimbursable costs 59,362 42,340 191,292 174,136
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 September 30, 1998 and December 31,
1997 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 September 30, 1998 and December 31, 1997
represent monies due to the General Partner 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
There were no cash distributions made to partners for the three months
ended September 30, 1998.
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 $968,916 and
$1,283,907 for the three months ended September 30, 1998 and 1997, respec-
tively, and $3,025,687 and $3,855,949 for the nine months ended September 30,
1998 and 1997, respectively. Rental income from the leasing of equipment
accounted for 87% and 97% of total revenues for the third quarter of
1998 and 1997, respectively and 93% and 95% for the nine months ended
September 30, 1998 and 1997, respectively. The decrease in revenues is
primarily attributable to the decrease in rental income. Rental income
decreased during 1998 by approximately $1,855,000 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 $995,000 of rental income
realized from equipment purchases made since September 30, 1997 as well as
rental income earned on 1997 equipment purchases for which a full nine months
was earned in 1998 and only a portion of the nine months was earned in 1997.
Additionally, the decrease in interest income caused by lower cash balances
available for investment by the Fund also contributed to the decrease in total
revenues. However, during the nine months ended September 30, 1998, the Fund
recognized $102,820 of net gain on sale of equipment compared to $54,255 of
net gain on sale of equipment for the same period in 1997. Furthermore, in
1998, the Fund invested in approximately $1,935,000 of direct financing leases
which increased the earned income on direct financing leases in 1998. These
increases in revenues mitigated the overall decrease in revenues from 1997.
Expenses were $1,040,130 and $1,180,198 for the three months ended Septem-
ber 30, 1998 and 1997, respectively, and $3,225,708 and $3,481,643 for the nine
months ended September 30, 1998 and 1997, respectively. Depreciation expense
comprised 73% and 85% of total expenses for the third quarter of 1998 and 1997,
respectively and 78% and 86% of total expenses for the nine months ended
September 30, 1998 and 1997, respectively. The decrease in expenses in 1998 is
primarily related to the decrease in depreciation expense because of equipment
which came off lease or terminated and sold since September 1997.
Additionally, the management fee to related party decreased in proportion
to the decrease in rental income in 1998 which also accounts for the overall
decrease in expenses. However, based upon the quarterly review of the
undepreciated cost of rental equipment, the Fund incurred a write-down of
equipment to net realizable value of $312,816 for the nine months ended
September 30, 1998 compared to $45,401 for the nine months ended
September 30, 1997. The increase in this account lowered the overall
decrease in expenses in 1998. Any future losses are dependent upon
unanticipated technological developments affecting the computer equipment
industry in subsequent years.
The Fund's net income (loss) was ($71,214) and $103,709 for the three
months ended September 30, 1998 and 1997, respectively, and ($200,021) and
$374,306 for the nine months ended September 30, 1998 and 1997, respectively.
The earnings (loss) per equivalent limited partnership unit, after earnings
(loss) allocated to the General Partner, were ($2.38) and $3.34 based on a
weighted average number of equivalent limited partnership units outstanding of
29,603 and 30,667 for the three months ended September 30, 1998 and 1997,
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 earnings (loss) per equivalent limited partnership unit, after earnings
(loss) allocated to the General Partner, were ($6.66) and $12.18 based on a
weighted average number of equivalent limited partnership units outstanding of
29,732 and 30,381 for the nine months ended September 30, 1998 and 1997,
respectively.
The Fund generated $765,578 and $1,150,829 of cash from operations,
for the purpose of determining cash available for distribution for the quarter
ended September 30, 1998 and 1997, respectively. For the nine months ended
September 30, 1998 and 1997, the Fund generated $2,514,512 and $3,366,646 of
cash from operations, respectively. It is the Fund's policy to make cash
distributions in accordance with the net income earned by the Fund. There were
no cash distributions made to partners for the first nine months of 1998.
However, $80,000 of cash distributions were paid during the first quarter of
1998 for the months of October and November of 1997. For financial statement
purposes, the Fund records cash distributions to partners on a cash basis in
the period in which they are paid. For the three months ended September 30,
1997, the Fund distributed 4% of cash available from operations during the
quarter and 8% subsequent to September 30, 1997. For the nine months ended
September 30, 1997, the Fund distributed 10% of cash available from operations
during the period and 3% of this amount subsequent to September 30, 1997.
ANALYSIS OF FINANCIAL CONDITION
During the nine months ended September 30, 1998 and 1997, the Fund
purchased $3,936,282 and $2,643,930, respectively, of equipment. The Fund also
invested $1,934,591 in direct financing leases during the nine months ended
September 30, 1998. 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.
September 30, 1998
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.
By: Freddie M. Kotek
_____________________________
11-9-98 Freddie M. Kotek
_______ President of F.L. Partnership Management, Inc.
Date (Principal Operating Officer)
By: Marianne T. Schuster
11-9-98 ____________________________
_______ Marianne T. Schuster
Date 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.
_____________________________
Date Freddie M. Kotek
President of F.L. Partnership Management, Inc.
(Principal Operating Officer)
_____________________________
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,042,765
<SECURITIES> 0
<RECEIVABLES> 66,004
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,108,769
<PP&E> 13,167,169
<DEPRECIATION> 6,095,173
<TOTAL-ASSETS> 10,233,081
<CURRENT-LIABILITIES> 144,268
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,088,813
<TOTAL-LIABILITY-AND-EQUITY> 10,233,081
<SALES> 2,803,200
<TOTAL-REVENUES> 3,025,687
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,225,708
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (200,021)
<INCOME-TAX> 0
<INCOME-CONTINUING> (200,021)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (200,021)
<EPS-PRIMARY> (6.66)
<EPS-DILUTED> (6.66)
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