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, 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, 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,
1999 1998
_____________ ____________
Cash and cash equivalents $4,631,194 $ 2,967,163
Accounts receivable 119,106 69,610
Due from related parties - 64,919
Equipment under operating leases
(net of accumulated depreciation
of $4,929,036 and $6,095,173,
respectively) 1,527,235 2,658,322
Net investment in direct financing leases 3,509,140 4,335,444
Equipment held for sale or lease 97,128 299,070
__________ ___________
Total assets $9,883,803 $10,394,528
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 24,911 $ 30,675
Security deposits 67,825 67,825
Accounts payable and
accrued expenses 53,333 63,769
Due to related parties 40,071 128,510
__________ ___________
Total liabilities 186,140 290,779
Partners' capital 9,697,663 10,103,749
__________ ___________
Total liabilities and
partners' capital $9,883,803 $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 Nine Months Ended
September 30 September 30
1999 1998 1999 1998
____ ____ ____ ____
Income:
Rentals $437,336 $ 846,086 $1,273,729 $2,803,200
Earned income on direct
financing leases 111,864 31,024 260,947 50,645
Interest 53,065 11,376 120,674 56,740
Gain on sale of equipment,
net 9,988 76,500 21,178 102,820
Other 10,971 3,930 14,976 12,282
________ __________ __________ __________
623,224 968,916 1,691,504 3,025,687
________ __________ __________ __________
Expenses:
Depreciation 367,566 755,176 1,129,587 2,504,537
Write-down of equipment
to net realizable value - 158,116 104,051 312,816
General and administrative 30,218 28,848 102,414 91,377
General and administrative
to related party 46,157 59,362 171,681 191,292
Management fee to
related party 30,187 38,628 80,918 125,686
________ __________ __________ __________
474,128 1,040,130 1,588,651 3,225,708
________ __________ __________ __________
Net income (loss) $149,096 $ (71,214) $ 102,853 $ (200,021)
======== ========== ========== ==========
Net income (loss) per equivalent
limited partnership unit $ 5.74 $ (2.38) $ 3.39 $ (6.66)
======== ========== ========== ==========
Weighted average number of
equivalent limited
partnership units outstanding
during the period 28,695 29,603 28,974 29,732
======== ========== ========== ==========
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, 1999
(Unaudited)
General Limited Partners
Partner Units Amount Total
_______ _____ ______ _____
Balance, January 1, 1999 $(33,315) 65,449 $10,137,064 $10,103,749
Cash distributions (5,000) - (495,000) (500,000)
Redemptions - (60) (8,939) (8,939)
Net income 4,500 - 98,353 102,853
________ ______ ___________ ___________
Balance, September 30, 1999 $(33,815) 65,389 $ 9,731,478 $ 9,697,663
======== ====== =========== ===========
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, 1999 and 1998
(Unaudited)
1999 1998
____ ____
Cash flows from operating activities:
Net income (loss) $ 102,853 $ (200,021)
__________ __________
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 1,129,587 2,504,537
Write-down of equipment to
net realizable value 104,051 312,816
Gain on sale of equipment, net (21,178) (102,820)
(Increase) decrease in accounts receivable (49,496) 405,150
(Increase) decrease in due from related
parties 64,919 414,573
Increase (decrease) in lease rents paid
in advance (5,764) (18,800)
Increase (decrease) in accounts payable -
equipment - (7,050)
Increase (decrease) in accounts payable
and accrued expenses (10,436) (51,253)
Increase (decrease) in due to related
parties (88,439) (30,189)
__________ __________
1,123,244 3,426,964
__________ __________
Net cash provided by operating activities 1,226,097 3,226,963
__________ __________
Cash flows from investing activities:
Acquisition of equipment - (3,936,282)
Investment in direct financing leases - (1,934,591)
Proceeds from sale of equipment 48,942 404,090
Proceeds from direct financing leases, net
of earned income 897,931 177,593
__________ __________
Net cash provided by (used in) investing
activities 946,873 (5,289,190)
__________ __________
Cash flows from financing activities:
Distributions (500,000) (80,000)
Redemptions of capital (8,939) -
__________ __________
Net cash used in financing activities (508,939) (80,000)
__________ __________
Increase (decrease) in cash and
cash equivalents 1,664,031 (2,142,247)
Cash and cash equivalents, beginning
of period 2,967,163 3,185,012
__________ __________
Cash and cash equivalents, end of period $4,631,194 $1,042,765
========== ==========
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, 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
reclassified to conform to the presentation in 1999.
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. 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 $312,816 was charged to write-down
of equipment to net realizable value for the nine months ended September
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 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, 1999 is
as follows:
Net minimum lease payments to be received $3,332,000
Unguaranteed residuals 649,000
Unearned rental income (341,000)
Unearned residual income (131,000)
__________
$3,509,000
==========
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, 1999 are
as follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ _________
1999 $ 422,000 $ 290,000
2000 639,000 1,149,000
2001 81,000 995,000
2002 26,000 863,000
2003 13,000 35,000
__________ __________
$1,181,000 $3,332,000
========== ==========
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 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 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 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, 1999 and 1998:
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
____ ____ ____ ____
Management fee $30,187 $38,628 $ 80,918 $125,686
Reimbursable costs 46,157 59,362 171,681 191,292
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, 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 re-
mitted to the Fund.
Amounts due to related parties at September 30, 1999 and December 31, 1998
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. 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.
4. CASH DISTRIBUTION
The General Partner declared and paid a cash distribution of $50,000 in
September 1999 for the month ended July 31, 1999 to all admitted partners
as of July 31, 1999. The General Partner declared and paid two cash
distributions of $50,000 each subsequent to September 30, 1999 for the
months ended August 31 and September 30, 1999 to all admitted partners as
of August 31 and September 30, 1999.
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 $623,224 and
$968,916 for the three months ended September 30, 1999 and 1998, respec-
tively, and $1,691,504 and $3,025,687 for the nine months ended September 30,
1999 and 1998, respectively. Rental income from the leasing of equipment
accounted for 70% and 87% of total revenues for the third quarter of
1999 and 1998, respectively and 75% and 93% for the nine months ended
September 30, 1999 and 1998, respectively. The decrease in revenues was
primarily attributable to the decrease in rental income. Rental income
decreased during 1999 by approximately $1,558,000 because of equipment that
came off lease and was re-leased at lower rental rates or sold. This decrease,
however, was reduced by an increase of approximately $29,000 of rental income
realized from equipment purchases made since September 30, 1998 as well as
rental income earned on 1998 equipment purchases for which a full nine months
was earned in 1999 and only a portion of the nine months was earned in 1998.
Additionally, the Fund recorded a net gain on sale of equipment of $21,178 for
the nine months ended September 30, 1999 compared to $102,820 for the same
period in 1998. The decrease in this account also contributed to the decrease
in total revenues in 1999. The overall decrease in 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
$260,947 of earned income for the first nine months of 1999 compared to
$50,645 for the same period in 1998. Interest income also increased during
1999 because of larger cash balances available for investment by the Fund.
This increase, likewise, served to lower the overall decrease in revenues
in 1999.
Expenses were $474,128 and $1,040,130 for the three months ended September
30, 1999 and 1998, respectively, and $1,588,651 and $3,225,708 for the nine
months ended September 30, 1999 and 1998, respectively. Depreciation expense
comprised 78% and 73% of total expenses for the third quarter of 1999 and 1998,
respectively and 71% and 78% of total expenses for the nine months ended
September 30, 1999 and 1998, respectively. The decrease in expenses in 1999 is
primarily related to the decrease in depreciation expense because of equipment
that came off lease or terminated and sold since September 1998. Additionally,
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 $104,051
for the nine months ended September 30, 1999 compared to $312,816 for the nine
months ended September 30, 1998. The decrease in this account also accounted
for the overall decrease in expenses in 1999. Any future losses are dependent
upon unanticipated technological developments affecting the types of equipment
in the portfolio in subsequent years. Furthermore, management fee to related
party decreased in 1999 which contributed to the decrease in total expenses.
The decrease in this account was partially related to the decrease in rental
income earned by the Fund on operating leases. The Fund also paid a lower
management fee of 2% to the General Partner on full pay-out leases. Many of
the leases purchased throughout 1998 were direct financing leases that meet the
requirements of full pay-out leases for the purpose of calculating management
fees.
The Fund's net income (loss) was $149,096 and ($71,214) for the three
months ended September 30, 1999 and 1998, respectively, and $102,853 and
($200,021) for the nine months ended September 30, 1999 and 1998, respectively.
The earnings (loss) per equivalent limited partnership unit, after earnings
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)
(loss) allocated to the General Partner, were $5.74 and ($2.38) based on a
weighted average number of equivalent limited partnership units outstanding of
28,695 and 29,603 for the three months ended September 30, 1999 and 1998,
respectively. The earnings (loss) per equivalent limited partnership unit,
after earnings (loss) allocated to the General Partner, were $3.39 and ($6.66)
based on a weighted average number of equivalent limited partnership units
outstanding of 28,974 and 29,732 for the nine months ended September 30, 1999
and 1998, respectively.
The Fund generated $506,674 and $765,578 of cash from operations, for the
purpose of determining cash available for distribution for the quarter ended
September 30, 1999 and 1998, respectively. The Fund distributed 10% of the
cash available from operations for the quarter ended September 30, 1999 to
partners during the third quarter of 1999 and 20% of this amount subsequent
to September 30, 1999. For the nine months ended September 30, 1999 and 1998,
the Fund generated $1,315,313 and $2,514,512 of cash from operations,
respectively. The Fund distributed 27% of the cash available from operations
for the first nine months of 1999 during the nine months ended September 30,
1999 and 8% of this amount subsequent to September 30, 1999. There were no
cash distributions paid to partners for the first nine months of 1998.
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 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 which 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 nine months of 1999. During
the nine months ended September 30, 1998, the Fund purchased $3,936,282 of
equipment for lease under operating leases and invested $1,934,591 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.
10
Part II: Other Information
FIDELITY LEASING INCOME FUND VII, L.P.
September 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
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.
11-11-99 By: Freddie M. Kotek
________ _____________________________
Date Freddie M. Kotek
President of F.L. Partnership Management, Inc.
(Principal Operating Officer)
11-11-99 By: Marianne T. Schuster
________ ____________________________
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-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,631,194
<SECURITIES> 0
<RECEIVABLES> 119,106
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,750,300
<PP&E> 6,553,399
<DEPRECIATION> 4,929,036
<TOTAL-ASSETS> 9,883,803
<CURRENT-LIABILITIES> 186,140
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,697,663
<TOTAL-LIABILITY-AND-EQUITY> 9,883,803
<SALES> 1,273,729
<TOTAL-REVENUES> 1,691,504
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,588,651
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 102,853
<INCOME-TAX> 0
<INCOME-CONTINUING> 102,853
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102,853
<EPS-BASIC> 3.39
<EPS-DILUTED> 3.39
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