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, 1999
/ / 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 registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes __X__ No _____
Page 1 of 13
Part I: Financial Information
Item 1: Financial Statements
FIDELITY LEASING INCOME FUND VII, L.P.
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
March 31, December 31,
1999 1998
___________ ____________
Cash and cash equivalents $ 3,584,134 $ 2,967,163
Accounts receivable 64,563 69,610
Due from related parties 13,012 64,919
Equipment under operating leases
(net of accumulated depreciation
of $4,363,579 and $4,039,764,
respectively) 2,275,105 2,658,322
Net investment in direct financing leases 4,180,078 4,335,444
Equipment held for sale or lease 196,743 299,070
___________ ___________
Total assets $10,313,635 $10,394,528
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 186,245 $ 30,675
Security deposits 67,825 67,825
Accounts payable and
accrued expenses 75,201 63,769
Due to related parties 46,347 128,510
___________ ___________
Total liabilities 375,618 290,779
Partners' capital 9,938,017 10,103,749
___________ ___________
Total liabilities and
partners' capital $10,313,635 $10,394,528
=========== ===========
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, 1999 and 1998
(Unaudited)
1999 1998
________ ________
Income:
Rentals $ 404,113 $1,029,382
Earned income on direct financing leases 76,592 5,526
Interest 34,307 25,442
Gain on sale of equipment, net - 916
Other 2,438 1,190
__________ __________
517,450 1,062,456
__________ __________
Expenses:
Depreciation 381,718 908,256
Write-down of equipment to net
realizable value 30,700 63,700
General and administrative 36,158 39,386
General and administrative to related
party 55,323 57,353
Management fee to related party 24,661 45,690
Loss on sale of equipment, net 250 -
__________ __________
528,810 1,114,385
__________ __________
Net loss $ (11,360) $ (51,929)
========== ==========
Net loss per equivalent
limited partnership unit $ (0.38) $ (1.72)
========== ==========
Weighted average number of
equivalent limited partnership
units outstanding during the period 29,293 29,850
========== ==========
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, 1999
(Unaudited)
General Limited Partners
Partner Units Amount Total
_______ _____ ______ _____
Balance, January 1, 1999 $(33,315) 65,449 $10,137,064 $10,103,749
Redemption - (28) (4,372) (4,372)
Cash distributions (1,500) - (148,500) (150,000)
Net loss (114) - (11,246) (11,360)
________ ______ ___________ ___________
Balance, March 31, 1999 $(34,929) 65,421 $ 9,972,946 $ 9,938,017
======== ====== =========== ===========
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, 1999 and 1998
(Unaudited)
1999 1998
________ ________
Cash flows from operating activities:
Net loss $ (11,360) $ (51,929)
__________ __________
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation 381,718 908,256
Write-down of equipment to net
realizable value 30,700 63,700
Gain (loss) on sale of equipment, net 250 (916)
(Increase) decrease in accounts
receivable 5,047 165,230
(Increase) decrease in due from related
parties 51,907 311,494
Increase (decrease) in lease rents paid
in advance 155,570 63,766
Increase (decrease) in accounts payable -
equipment - (7,050)
Increase (decrease) in accounts payable
and accrued expenses 11,432 327,247
Increase (decrease) in due to related
parties (82,163) (42,199)
__________ __________
554,461 1,789,528
__________ __________
Net cash provided by operating activities 543,101 1,737,599
__________ __________
Cash flows from investing activities:
Acquisition of equipment - (3,097,961)
Proceeds from direct financing leases,
net of earned income 226,992 22,809
Proceeds from sale of equipment 1,250 102,550
__________ __________
Net cash provided by (used in)
investing activities 228,242 (2,972,602)
__________ __________
Cash flows from financing activities:
Redemptions of capital (4,372) -
Distributions (150,000) (80,000)
__________ __________
Net cash used in financing activities (154,372) (80,000)
__________ __________
Increase (decrease) in cash and
cash equivalents 616,971 (1,315,003)
Cash and cash equivalents, beginning
of period 2,967,163 3,185,012
__________ __________
Cash and cash equivalents, end of period $3,584,134 $1,870,009
========== ==========
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, 1999
(Unaudited)
The accompanying unaudited condensed financial statements have been pre-
pared by the Fund in accordance with Generally Accepted Accounting Prin-
ciples, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of Management, all adjustments (con-
sisting of normal recurring accruals) considered necessary for a fair
presentation have been included.
1. EQUIPMENT LEASED
Equipment on lease consists of 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 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 develop-
ments affecting the equipment and competitive factors in the market-
place 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, $30,700 and
$63,700 was charged to write-down of equipment to net realizable value
for the three months ended March 31, 1999 and 1998, respectively. Any
future losses are dependent upon unanticipated technological develop-
ments affecting the types of equipment in the portfolio 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 ag-
gregate future rentals and estimated unguaranteed residuals upon expi-
ration of the lease over the related equipment cost) over the life of
the lease using the interest method.
Unguaranteed residuals for direct financing leases represent the esti-
mated amounts recoverable at lease termination from lease extensions
or disposition of the equipment. The Fund reviews these residual
values quarterly. If the equipment's fair market value at lease expi-
ration is below estimated residual value, an adjustment is made.
6
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. EQUIPMENT LEASED (continued)
The net investment in direct financing leases as of March 31, 1999 is
as follows:
Minimum lease payments to be received $4,133,000
Unguaranteed residuals 694,000
Unearned rental income (486,000)
Unearned residual income (161,000)
__________
$4,180,000
==========
The future approximate minimum rentals to be received on noncancellable
operating and direct financing leases as of March 31, 1999 are as
follows:
Years Ending December 31 Operating Direct Financing
________________________ _________ ________________
1999 $1,129,000 $ 911,000
2000 639,000 1,205,000
2001 81,000 1,050,000
2002 26,000 918,000
2003 13,000 49,000
__________ __________
$1,888,000 $4,133,000
========== ==========
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 pay-
ments 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 connection with the disposition of equipment. The payment of this
sales fee is deferred until the Limited Partners have received cash
7
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. RELATED PARTY TRANSACTIONS (continued)
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. Fol-
lowing 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:
1999 1998
________ ________
Management fee $24,661 $45,690
Reimbursable costs 55,323 57,353
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, 1999 and December 31,
1998 represent monies due the Fund from the General Partner and/or other
affiliated funds for rentals and sales proceeds collected and not yet
remitted to the Fund.
Amounts due to related parties at March 31, 1999 and December 31, 1998
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. YEAR 2000 COMPLIANCE
Two of the three main software systems utilized to generate informa-
tion for the Fund are still in the testing phase. The third software
system should be Year 2000 capable by July 1999. The costs incurred
to complete the Year 2000 Compliance project are not expected to be
material to the net income of the Fund.
All suppliers for the Fund continue to complete their Year 2000
Compliance programs. It is not anticipated that the Fund will incur
any significant losses should any of its outside suppliers fail to
meet their Year 2000 Compliance deadlines.
8
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. CASH DISTRIBUTION
The General Partner declared and paid three cash distributions of
$50,000 each subsequent to March 31, 1999 for the months ended
January 31, February 28 and March 31, 1999 to all admitted partners
as of January 31, February 28 and March 31, 1999.
9
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 $517,450 and
$1,062,456 for the three months ended March 31, 1999 and 1998, respect-
tively. Rental income from the leasing of equipment accounted for 78%
and 97% of total revenues for the first quarter of 1999 and 1998, respec-
tively. The decrease in revenues was primarily attributable to a decrease
in rental income. Rental income decreased during 1999 by approximately
$645,000 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 $20,000 in rental income realized from equip-
ment purchases made since March 31, 1998. The decrease in total revenues,
however, was mitigated by an increase in earned income on direct financing
leases. The Fund invested in direct financing leases during 1998 which
generated $76,592 of earned income on direct financing leases for the first
quarter of 1999 compared to $5,526 for the first quarter of 1998.
Expenses were $528,810 and $1,114,385 during the three months ended
March 31, 1999 and 1998, respectively. Depreciation expense comprised
72% and 82% of total expenses during the first quarter of 1999 and 1998,
respectively. The decrease in expenses was primarily related to the de-
crease in depreciation expense due to equipment which came off lease or
terminated and sold. The decrease in management fee to related party also
accounted for the decrease in total expenses in 1999. This decrease was
partially attributable to the decrease in rental income earned on operating
leases. Additionally, the Fund invested in direct financing leases through-
out 1998 which meet the requirements of full pay-out leases for purposes of
calculating the management fee. The Fund pays a lower management fee of 2%
on full pay-out leases. Furthermore, the decrease in write-down of equip-
ment to net realizable value also contributed to the overall decrease in
expenses in 1999. Based upon the quarterly review of the recoverability
of the undepreciated cost of rental equipment, $30,700 and $63,700 was
charged to operations to write down equipment to its estimated net real-
izable value during the three months ended March 31, 1999 and 1998, re-
spectively. Any future losses are dependent upon unanticipated technolo-
gical developments affecting the types of equipment in the portfolio in
subsequent years.
For the three months ended March 31, 1999 and 1998, the Fund incurred
net losses of $11,360 and $51,929, respectively. The loss per equivalent
limited partnership unit, after loss allocated to the General Partner was
$0.38 and $1.72 based on a weighted average number of equivalent limited
partnership units outstanding of 29,293 and 29,850 for the three months
ended March 31, 1999 and 1998, respectively.
10
FIDELITY LEASING INCOME FUND VII, L.P.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
The Fund generated $401,308 and $919,111 of cash from operations, for
the purpose of determining cash available for distribution, during the
quarter ended March 31, 1999 and 1998, respectively. There were no cash
distributions paid to partners during the first quarter of 1999 and 1998
for the three months ended March 31, 1999 and 1998. Subsequent to March 31,
1999, 37% of the cash available from operations was paid to partners for the
first quarter of 1999. 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
The Fund is currently in the process of dissolution. As provided in
the Restated Limited Partnership Agreement, the assets of the Fund shall be
liquidated as promptly as is consistent with obtaining their fair value.
During this time, the Fund will continue to purchase equipment with cash
available from operations which was not distributed to partners in pre-
vious periods. The Fund did not purchase any equipment subject to opera-
ting leases during the first quarter of 1999. During the quarter ended
March 31, 1998, the Fund purchased $3,097,961 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.
11
Part II: Other Information
FIDELITY LEASING INCOME FUND VII, L.P.
March 31, 1999
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
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIDELITY LEASING INCOME FUND VII, L.P.
5-14-99 By: Freddie M. Kotek
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
5-14-99 By: Marianne T. Schuster
_______ ___________________________
Date Marianne T. Schuster
Vice President of
F.L. Partnership Management, Inc.
(Principal Financial Officer)
13
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,584,134
<SECURITIES> 0
<RECEIVABLES> 77,575
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,661,709
<PP&E> 6,835,427
<DEPRECIATION> 4,363,579
<TOTAL-ASSETS> 10,313,635
<CURRENT-LIABILITIES> 375,618
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,938,017
<TOTAL-LIABILITY-AND-EQUITY> 10,313,635
<SALES> 404,113
<TOTAL-REVENUES> 517,450
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 528,810
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,360)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,360)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,360)
<EPS-PRIMARY> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
