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, 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)
June 30, December 31,
1999 1998
____________ ____________
Cash and cash equivalents $3,872,833 $ 2,967,163
Accounts receivable 65,331 69,610
Due from related parties 46,819 64,919
Equipment under operating leases (net
of accumulated depreciation of
$4,596,866 and $4,039,764, respectively) 1,894,802 2,658,322
Net investment in direct financing leases 3,948,985 4,335,444
Equipment held for sale or lease 123,392 299,070
__________ ___________
Total assets $9,952,162 $10,394,528
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 115,347 $ 30,675
Security deposits 67,825 67,825
Accounts payable and
accrued expenses 57,040 63,769
Due to related parties 8,816 128,510
__________ ___________
Total liabilities 249,028 290,779
Partners' capital 9,703,134 10,103,749
__________ ___________
Total liabilities and
partners' capital $9,952,162 $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
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
____ ____ ____ ____
Income:
Rentals $432,280 $ 927,732 $ 836,393 $1,957,114
Earned income on direct
financing leases 72,491 14,095 149,083 19,621
Interest 33,302 19,922 67,609 45,364
Gain on sale of equipment,
net 11,440 25,404 11,190 26,320
Other 1,567 7,162 4,005 8,352
________ __________ __________ __________
551,080 994,315 1,068,280 2,056,771
________ __________ __________ __________
Expenses:
Depreciation 380,303 841,105 762,021 1,749,361
Write-down of equipment to
net realizable value 73,351 91,000 104,051 154,700
General and administrative 36,038 23,143 72,196 62,529
General and administrative
to related party 70,201 74,577 125,524 131,930
Management fee to
related party 26,070 41,368 50,731 87,058
________ __________ __________ __________
585,963 1,071,193 1,114,523 2,185,578
________ __________ __________ __________
Net income (loss) $(34,883) $ (76,878) $ (46,243) $(128,807)
======== ========== ========== ==========
Net income (loss) per equivalent
limited partnership unit $ (1.19) $ (2.56) $ (1.57) $ (4.28)
======== ========== ========== ==========
Weighted average number of
equivalent limited
partnership units outstand-
ing during the period 28,934 29,742 29,114 29,796
======== ========== ========== ==========
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, 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 (3,500) - (346,500) (350,000)
Net loss (462) - (45,781) (46,243)
________ ______ ___________ ___________
Balance, June 30, 1999 $(37,277) 65,421 $ 9,740,411 $ 9,703,134
======== ====== =========== ===========
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, 1999 and 1998
(Unaudited)
1999 1998
____ ____
Cash flows from operating activities:
Net loss $ (46,243) $ (128,807)
__________ __________
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 762,021 1,749,361
Write-down of equipment to net
realizable value 104,051 154,700
Gain on sale of equipment, net (11,190) (26,320)
(Increase) decrease in accounts receivable 4,279 365,776
(Increase) decrease in due from related
parties 18,100 379,412
Increase (decrease) in lease rents paid
in advance 84,672 31,105
Increase (decrease) in accounts payable-
equipment - (7,050)
Increase (decrease) in accounts payable
and accrued expenses (6,729) (46,453)
Increase (decrease) in due to related
parties (119,694) (19,569)
__________ __________
835,510 2,580,962
__________ __________
Net cash provided by operating activities 789,267 2,452,155
__________ __________
Cash flows from investing activities:
Acquisition of equipment - (3,927,849)
Investment in direct financing leases - (1,177,693)
Proceeds from sale of equipment 12,690 157,826
Proceeds from direct financing leases,
net of earned income 458,085 75,104
__________ __________
Net cash provided by (used in)
investing activities 470,775 (4,872,612)
__________ __________
Cash flows from financing activities:
Distributions (350,000) (80,000)
Redemptions of capital (4,372) -
__________ __________
Net cash used in financing activities (354,372) (80,000)
__________ __________
Increase (decrease) in cash and
cash equivalents 905,670 (2,500,457)
Cash and cash equivalents, beginning
of period 2,967,163 3,185,012
__________ __________
Cash and cash equivalents, end of period $3,872,833 $ 684,555
========== ==========
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, 1999
(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 1998 financial statements have been reclass-
ified to conform to the presentation of 1999.
1. EQUIPMENT LEASED
Equipment on lease consists 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 the 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, $104,051 and
$154,700 was charged to write-down of equipment to net realizable value
for the six months ended June 30, 1999 and 1998, respectively. Any
future losses are dependent upon unanticipated technological developments
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 aggregate
future rentals and estimated unguaranteed residuals upon expiration 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
estimated amounts recoverable at lease termination from lease exten-
sions or disposition of the equipment. The Fund reviews these resi-
dual values quarterly. If the equipment's fair market value is below
the 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 June 30, 1999 is as
follows:
Minimum lease payments to be received $3,829,000
Unguaranteed residuals 694,000
Unearned rental income (423,000)
Unearned residual income (151,000)
__________
$3,949,000
==========
The future approximate minimum rentals to be received on noncancellable
operating and direct financing leases as of June 30, 1999 are as follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ __________
1999 $ 765,000 $ 607,000
2000 639,000 1,205,000
2001 81,000 1,050,000
2002 26,000 918,000
2003 13,000 49,000
__________ __________
$1,524,000 $3,829,000
========== ==========
2. RELATED PARTY TRANSACTIONS
The General Partner receives 5% or 2% of rental payments from 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 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 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 com-
pounded 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, 1999 and 1998:
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
____ ____ ____ ____
Management fee $26,070 $41,368 $ 50,731 $ 87,058
Reimbursable costs 70,201 74,577 125,524 131,930
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, 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 June 30, 1999 and December 31, 1998
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. YEAR 2000 COMPLIANCE
All of the main software systems utilized to generate information for
the Fund are now Year 2000 compliant and in the testing phase. 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 a cash distribution of $50,000 in
June 1999 for the month ended April 30, 1999 to all admitted partners as
of April 30, 1999. The General Partner declared and paid two cash dis-
tributions of $50,000 each subsequent to June 30, 1999 for the months
ended May 31 and June 30, 1999 to all admitted partners as of May 31 and
June 30, 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 $551,080 and
$994,315 for the three months ended June 30, 1999 and 1998, respectively,
and $1,068,280 and $2,056,771 for the six months ended June 30, 1999 and
1998, respectively. Rental income from the leasing of equipment accounted
for 78% and 93% of total revenues for the second quarter of 1999 and 1998,
respectively and 78% and 95% of total revenues for the six months ended June
30, 1999 and 1998, respectively. The decrease in revenues was primarily
attributable to a decrease in rental income. In 1999, rental income decreased
by approximately $1,145,000 because of equipment which came off lease and was
re-leased at lower rental rates or sold. This decrease, however, was miti-
gated by an increase of approximately #24,000 of rental income realized from
equipment purchases made sine June 30, 1998 as well as rental income recog-
nized on 1998 equipment purchases of which a full six months of rents was
earned in 1999 and only a portion of the six months was earned in 1998.
Additionally, the Fund had a net gain on sale of equipment of $11,190 for the
six months ended June 30, 1999 compared to a net gain of $26,320 for the same
period in 1998 which also accounts for the decrease in total revenues in the
current year. 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 and late 1997 which generated $149,083 of
earned income on direct financing leases for the first six months of 1999 com-
pared to $19,621 for the same period in 1998. Interest income also increased
during 1999 because of larger cash balances available for investment by the
the Fund. This increase, likewise, served to lower the overall decrease in
revenues in 1999.
Expenses were $585,963 and $1,071,193 for the three months ended June 30,
1999 and 1998, respectively, and $1,114,523 and $2,185,578 for the six
months ended June 30, 1999 and 1998, respectively. Depreciation expense
comprised 65% and 79% of total expenses during the quarter ended June 30,
1999 and 1998, respectively and 68% and 80% of total expenses during the six
months ended June 30, 1999 and 1998, respectively. The decrease in expenses
was primarily related to the decrease in depreciation expense resulting from
equipment which came off lease or terminated and sold since June 1998.
Management fee to related party also decreased proportionate to the decrease
in rental income which also accounts for the decrease in total expenses in
1999. Furthermore, the decrease in write down of equipment to net realizable
value contributed to the overall decrease in expenses in 1999. Based upon
the quarterly review of the recoverability of the undepreciated cost of
rental equipment, $104,051 and $154,700 was charged to operations to write
down equipment to its estimated net realizable value during the six months
ended June 30, 1999 and 1998, respectively. Any future losses are dependent
upon unanticipated technological developments affecting the types of equip-
ment in the portfolio in subsequent years.
10
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 $34,883 and $76,878 for the three months
ended June 30, 1999 and 1998, respectively, and $46,243 and $128,807 for the
six months ended June 30, 1999 and 1998, respectively. The loss per equiva-
lent limited partnership unit, after loss allocated to the General Partner,
was $1.19 and $2.56 based on a weighted average number of equivalent limited
partnership units outstanding of 28,934 and 29,742 for the three months ended
June 30, 1999 and 1998, respectively. The loss per equivalent limited part-
nership unit, after loss allocated to the General Partner, was $1.57 and $4.28
based on a weighted average number of equivalent limited partnership units
outstanding of 29,114 and 29,796 for the six months ended June 30, 1999 and
1998, respectively.
The Fund generated $407,331 and $829,823 of cash from operations, for
the purpose of determining cash available for distribution, during the quarter
ended June 30, 1999 and 1998, respectively. The Fund distributed 12% of the
cash available from operations for the quarter ended June 30, 1999 to the
partners during the second quarter of 1999 and 25% of this amount subsequent
to June 30, 1999. For the six months ended June 30, 1999 and 1998, the Fund
generated $808,639 and $1,748,934 of cash from operations. The Fund distri-
buted 25% of the cash available from operations for these six months in 1999
during the first six months of 1999 and 12% of this amount subsequent to June
30, 1999. There were no cash distributions made to partners for the first six
months of 1998. For financial statement purposes, the Fund records cash dis-
tributions 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 liqui-
dated 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 that was not distributed to partners in previous periods.
The Fund did not purchase any equipment subject to operating leases or invest
in any direct financing leases during the first six months of 1999. During
the six months ended June 30, 1999, the Fund purchased $3,927,849 of equipment
for lease under operating leases and invested $1,177,693 in direct financing
leases.
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.
June 30, 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 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.
8-12-99 By: Freddie M. Kotek
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
8-12-99 By: Marianne T. Schuster
_______ ___________________________
Date Marianne T. Schuster
Vice President of
F.L. Partnership Management, Inc.
(Principal Financial Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,872,833
<SECURITIES> 0
<RECEIVABLES> 112,150
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,984,983
<PP&E> 6,615,060
<DEPRECIATION> 4,596,866
<TOTAL-ASSETS> 9,952,162
<CURRENT-LIABILITIES> 249,028
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,703,134
<TOTAL-LIABILITY-AND-EQUITY> 9,952,162
<SALES> 836,393
<TOTAL-REVENUES> 1,068,280
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,114,523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (46,243)
<INCOME-TAX> 0
<INCOME-CONTINUING> (46,243)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46,423)
<EPS-BASIC> (1.57)
<EPS-DILUTED> (1.57)
</TABLE>
