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, 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, Pennsylvania 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)
June 30, December 31,
1998 1997
____________ ____________
Cash and cash equivalents $ 684,555 $ 3,185,012
Accounts receivable 75,054 440,830
Due from related parties 65,485 444,897
Equipment under operating leases
(net of accumulated depreciation
of $7,007,200 and $6,817,100,
respectively) 7,512,619 6,214,378
Net investment in direct financing leases 1,397,907 295,319
Equipment held for sale or lease 634,000 39,958
___________ ___________
Total assets $10,369,620 $10,620,394
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 132,409 $ 101,304
Accounts payable-equipment - 7,050
Accounts payable and
accrued expenses 54,432 100,885
Due to related parties 22,752 42,321
___________ ___________
Total liabilities 209,593 251,560
Partners' capital 10,160,027 10,368,834
___________ ___________
Total liabilities and
partners' capital $10,369,620 $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 Six Months Ended
June 30 June 30
1998 1997 1998 1997
____ ____ ____ ____
Income:
Rentals $ 927,732 $1,219,245 $1,957,114 $2,420,325
Earned income on direct
financing leases 14,095 568 19,621 1,194
Interest 19,922 49,345 45,364 92,035
Gain on sale of equipment,
net 25,404 30,300 26,320 79,465
Other 7,162 2,423 8,352 4,233
__________ __________ __________ __________
994,315 1,301,881 2,056,771 2,597,252
__________ __________ __________ __________
Expenses:
Depreciation 841,105 994,947 1,749,361 1,993,323
Write-down of equipment to
net realizable value 91,000 20,737 154,700 31,362
General and administrative 23,143 29,206 62,529 49,031
General and administrative
to related party 74,577 70,972 131,930 131,796
Management fee to
related party 41,368 61,026 87,058 121,143
__________ __________ __________ __________
1,071,193 1,176,888 2,185,578 2,326,655
__________ __________ __________ __________
Net income (loss) $ (76,878) $ 124,993 $ (128,807) $ 270,597
========== ========== ========== ==========
Net income (loss) per equivalent
limited partnership unit $ (2.56) $ 4.03 $ (4.28) $ 8.85
========== ========== ========== ==========
Weighted average number of
equivalent limited
partnership units outstand-
ing during the period 29,742 30,647 29,796 30,238
========== ========== ========== ==========
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, 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 (1,288) - (127,519) (128,807)
________ ______ ___________ ___________
Balance, June 30, 1998 $(32,752) 65,449 $10,192,779 $10,160,027
======== ====== =========== ===========
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, 1998 and 1997
(Unaudited)
1998 1997
____ ____
Cash flows from operating activities:
Net income (loss) $ (128,807) $ 270,597
__________ __________
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation 1,749,361 1,993,323
Write-down of equipment to net
realizable value 154,700 31,362
Proceeds from direct financing leases, net
of earned income 75,104 5,154
Gain on sale of equipment, net (26,320) (79,465)
(Increase) decrease in accounts receivable 365,776 93,116
(Increase) decrease in due from related parties 379,412 (7,978)
Increase (decrease) in lease rents paid
in advance 31,105 6,206
Increase (decrease) in accounts payable-
equipment (7,050) -
Increase (decrease) in accounts payable and
accrued expenses (46,453) (8,887)
Increase (decrease) in due to related parties (19,569) 20,477
__________ __________
2,656,066 2,053,308
__________ __________
Net cash provided by operating activities 2,527,259 2,323,905
__________ __________
Cash flows from investing activities:
Acquisition of equipment (3,927,849) (2,615,307)
Investment in direct financing leases (1,177,693) -
Proceeds from sale of equipment 157,826 89,196
__________ __________
Net cash used in investing activities (4,947,716) (2,526,111)
__________ __________
Cash flows from financing activities:
Distributions (80,000) (370,000)
__________ __________
Net cash used in financing activities (80,000) (370,000)
__________ __________
Decrease in cash and cash equivalents (2,500,457) (572,206)
Cash and cash equivalents, beginning
of period 3,185,012 2,983,264
__________ __________
Cash and cash equivalents, end of period $ 684,555 $2,411,058
========== ==========
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, 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 equipment under operating leases.
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 3 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, $154,700 and
$31,362 was charged to write-down of equipment to net realizable value for
the six months ended June 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 June 30, 1998 is as
follows:
Net minimum lease payments to be received $1,591,000
Less unearned income 193,000
Add expected future residuals -
__________
$1,398,000
==========
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, 1998 are as
follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ _________
1998 $1,594,000 $ 205,000
1999 2,522,000 410,000
2000 1,185,000 401,000
2001 - 269,000
2002 - 252,000
Thereafter - 54,000
__________ __________
$5,301,000 $1,591,000
========== ==========
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.
7
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. RELATED PARTY TRANSACTIONS (Continued)
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, 1998 and 1997:
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
____ ____ ____ ____
Management fee $41,368 $61,026 $ 87,058 $121,143
Reimbursable costs 74,577 70,972 131,930 131,796
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, 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 June 30, 1998 and December 31, 1997
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
There were no cash distributions made to partners for the three months
ended June 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 $994,315 and
$1,301,881 for the three months ended June 30, 1998 and 1997, respectively,
and $2,056,771 and $2,597,252 for the six months ended June 30, 1998 and 1997,
respectively. Rental income from the leasing of equipment accounted
for 93% and 94% of total revenues for the second quarter of 1998 and 1997,
respectively and 95% and 93% of total revenues for the six months ended
June 30,1998 and 1997, respectively. The decrease in revenues is primarily
attributable to a decrease in rental income. In 1998, rental income decreased
by approximately $1,232,000 because of equipment which came off lease and was
re-leased at lower rental rates or sold. This decrease, however, was mitigated
by an increase of approximately $769,000 of rental income realized from
equipment purchases made since June 30, 1997 as well as rental income
recognized on 1997 equipment purchases for which a full six months of rents was
earned in 1998 and only a portion of the six months was earned in 1997.
Additionally, the Fund had a net gain on sale of equipment of $26,320 for the
six months ended June 30, 1998 compared to a net gain of $79,465 for the same
period in 1997 which also accounts for the decrease in total revenues in the
current year. Furthermore, interest income decreased because of lower cash
balances available for investment by the Fund in 1998. This decrease also
contributed to the overall decrease in revenues in 1998.
Expenses were $1,071,193 and $1,176,888 for the three months ended June 30,
1998 and 1997, respectively, and $2,185,578 and $2,326,655 for the six
months ended June 30, 1998 and 1997, respectively. Depreciation expense
comprised 79% and 85% of total expenses during the quarter ended June 30, 1998
and 1997, respectively and 80% and 86% of total expenses during the six months
ended June 30, 1998 and 1997, respectively. The decrease in expenses is
primarily related to the decrease in depreciation expense resulting from
equipment which came off lease or terminated and sold since June 1997.
Management fee to related party also decreased proportionate to the decrease in
rental income which also accounts for the decrease in total expenses in 1998.
However, the increase in write down of equipment to net realizable value
reduced the overall decrease in expenses in 1998. Based upon the quarterly
review of the recoverability of the undepreciated cost of rental equipment,
$154,700 and $31,362 was charged to operations to write down equipment to its
estimated net realizable value during the six months ended June 30, 1998 and
1997, respectively. Any future losses are dependent upon unanticipated
technological developments affecting the computer equipment industry in
subsequent years.
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's net income (loss) was ($76,878) and $124,993 for the three
months ended June 30, 1998 and 1997, respectively, and ($128,807) and $270,597
for the six months ended June 30, 1998 and 1997, respectively. The earnings
(loss) per equivalent limited partnership unit, after earnings (loss) allocated
to the General Partner, were ($2.56) and $4.03 based on a weighted average
number of equivalent limited partnership units outstanding of 29,742 and 30,647
for the three months ended June 30, 1998 and 1997, respectively. The earnings
(loss) per equivalent limited partnership unit, after earnings (loss) allocated
to the General Partner, were ($4.28) and $8.85 based on a weighted average
number of equivalent limited partnership units outstanding of 29,796 and 30,238
for the six months ended June 30, 1998 and 1997, respectively.
The Fund generated $829,823 and $1,110,377 of cash from operations, for
the purpose of determining cash available for distribution, for the quarter
ended June 30, 1998 and 1997, respectively. For the six months ended June 30,
1998 and 1997, the Fund generated $1,748,934 and $2,215,817 of cash from
operations. 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 six 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 June 30, 1997, the Fund distributed
9% of cash available from operations during the quarter and 5% of this amount
subsequent to June 30, 1997. For the six months ended June 30, 1997, the Fund
distributed 11% of cash available from operations during the period and 2% of
this amount subsequent to June 30, 1997.
ANALYSIS OF FINANCIAL CONDITION
During the six months ended June 30, 1998 and 1997, the Fund purchased
equipment of $3,927,849 and $2,615,307, respectively. The Fund also invested
$1,177,693 in direct financing leases during the six months ended June 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 months
period.
10
Part II: Other Information
FIDELITY LEASING INCOME FUND VII, L.P.
June 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.
8-14-98 By: Freddie M. Kotek
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
8-14-98 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.
8- -98 By:
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
8- -98 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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 684,555
<SECURITIES> 0
<RECEIVABLES> 140,539
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 825,094
<PP&E> 15,153,819
<DEPRECIATION> 7,007,200
<TOTAL-ASSETS> 10,369,620
<CURRENT-LIABILITIES> 209,593
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,160,027
<TOTAL-LIABILITY-AND-EQUITY> 10,369,620
<SALES> 1,957,114
<TOTAL-REVENUES> 2,056,771
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,185,578
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (128,807)
<INCOME-TAX> 0
<INCOME-CONTINUING> (128,807)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,807)
<EPS-PRIMARY> (4.28)
<EPS-DILUTED> (4.28)
</TABLE>
