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, 2000
/ / 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 13
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Part I: Financial Information
Item 1: Financial Statements
FIDELITY LEASING INCOME FUND VII, L.P.
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
September 30, December 31,
2000 1999
_____________ ____________
Cash and cash equivalents $2,882,156 $ 1,769,740
Accounts receivable 249,938 273,492
Due from related parties - 84,919
Equipment under operating leases
(net of accumulated depreciation
of $2,599,908 and $4,899,775,
respectively) 209,456 1,202,004
Net investment in direct financing leases 6,568,652 6,543,062
Equipment held for sale or lease 88,642 155,653
__________ ___________
Total assets $9,998,844 $10,028,870
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 23,530 $ 122,331
Security deposits 67,825 67,825
Accounts payable and
accrued expenses 45,406 49,370
Due to related parties 8,786 15,411
__________ ___________
Total liabilities 145,547 254,937
Partners' capital 9,853,297 9,773,933
__________ ___________
Total liabilities and
partners' capital $9,998,844 $10,028,870
========== ===========
The accompanying notes are an integral part of these financial statements.
2
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FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
____ ____ ____ ____
Income:
Rentals $236,100 $437,336 $ 936,173 $1,273,729
Earned income on direct
financing leases 134,736 111,864 402,663 260,947
Interest 22,806 53,065 66,753 120,674
Gain on sale of equipment,
net - 9,988 88,900 21,178
Other 21,368 10,971 49,581 14,976
________ ________ __________ __________
415,010 623,224 1,544,070 1,691,504
________ ________ __________ __________
Expenses:
Depreciation 167,857 367,566 727,134 1,129,587
Write-down of equipment
to net realizable value - - 6,267 104,051
General and administrative 23,011 30,218 75,266 102,414
General and administrative
to related party 41,957 46,157 119,541 171,681
Management fee to
related party 26,111 30,187 86,498 80,918
Loss on sale of equipment,
net 4,141 - - -
________ ________ __________ __________
263,077 474,128 1,014,706 1,588,651
________ ________ __________ __________
Net income $151,933 $149,096 $ 529,364 $ 102,853
======== ======== ========== ==========
Net income per equivalent
limited partnership unit $ 5.20 $ 5.74 $ 18.16 $ 3.39
======== ======== ========== ==========
Weighted average number of
equivalent limited
partnership units outstanding
during the period 28,925 28,695 28,859 28,974
======== ======== ========== ==========
The accompanying notes are an integral part of these financial statements.
3
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FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENT OF PARTNERS' CAPITAL
For the nine months ended September 30, 2000
(Unaudited)
General Limited Partners
Partner Units Amount Total
_______ _____ ______ _____
Balance, January 1, 2000 $(33,315) 65,389 $9,807,248 $9,773,933
Cash distributions (4,500) - (445,500) (450,000)
Net income 5,294 - 524,070 529,364
________ ______ _________ __________
Balance, September 30, 2000 $(32,521) 65,389 $9,885,818 $9,853,297
======== ====== ========== ==========
The accompanying notes are an integral part of these financial statements.
4
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FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2000 and 1999
(Unaudited)
2000 1999
____ ____
Cash flows from operating activities:
Net income $ 529,364 $ 102,853
__________ __________
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 727,134 1,129,587
Write-down of equipment to
net realizable value 6,267 104,051
Gain on sale of equipment, net (88,900) (21,178)
(Increase) decrease in accounts receivable 23,554 (49,496)
(Increase) decrease in due from related
parties 84,919 64,919
Increase (decrease) in lease rents paid
in advance (98,801) (5,764)
Increase (decrease) in accounts payable
and accrued expenses (3,964) (10,436)
Increase (decrease) in due to related
parties (6,625) (88,439)
__________ __________
643,584 1,123,244
__________ __________
Net cash provided by operating activities 1,172,948 1,226,097
__________ __________
Cash flows from investing activities:
Investment in direct financing leases (1,739,197) -
Proceeds from sale of equipment 355,033 48,942
Proceeds from direct financing leases, net
of earned income 1,773,632 897,931
__________ __________
Net cash provided by investing activities 389,468 946,873
__________ __________
Cash flows from financing activities:
Distributions (450,000) (500,000)
Redemptions of capital - (8,939)
__________ __________
Net cash used in financing activities (450,000) (508,939)
__________ __________
Increase in cash and cash equivalents 1,112,416 1,664,031
Cash and cash equivalents, beginning
of period 1,769,740 2,967,163
__________ __________
Cash and cash equivalents, end of period $2,882,156 $4,631,194
========== ==========
The accompanying notes are an integral part of these financial statements.
5
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FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(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 in part 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 21 to 58 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, $6,267 and $104,051 was charged to write-
down of equipment to net realizable value for the nine months ended
September 30, 2000 and 1999, respectively. Any future losses are de-
pendent 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 Fund's direct financing leases are for
initial lease terms ranging from 29 to 60 months.
Unguaranteed residuals for direct financing leases represent the estimated
amounts recoverable at lease termination from lease extensions or disposi-
tion of the equipment. The Fund reviews these residual values quarterly.
If the equipment's fair market value is below the estimated residual value,
an adjustment is made.
6
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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 September 30, 2000 is
as follows:
Net minimum lease payments to be received $6,168,000
Unguaranteed residuals 1,102,000
Unearned rental income (539,000)
Unearned residual income (162,000)
__________
$6,569,000
==========
The future approximate minimum rentals to be received on noncancellable
operating leases and direct financing leases as of September 30, 2000 are
as follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ _________
2000 $ 91,000 $ 786,000
2001 90,000 3,017,000
2002 28,000 2,059,000
2003 13,000 254,000
2004 - 52,000
________ __________
$222,000 $6,168,000
======== ==========
Subsequent to September 30, 2000, the Fund invested in approximately
$1,631,000 of direct financing leases with initial lease terms of 2 to
40 months. The future approximate minimum rentals to be received on these
noncancellable direct financing leases are $131,000 in 2000, $585,000 in
2001, $578,000 in 2002, $475,000 in 2003 and $138,000 in 2004.
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.
7
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FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. RELATED PARTY TRANSACTIONS (Continued)
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, 2000 and 1999:
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
____ ____ ____ ____
Management fee $26,111 $30,187 $ 86,498 $ 80,918
Reimbursable costs 41,957 46,157 119,541 171,681
The amount due from related parties at December 31, 1999 represents
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 September 30, 2000 and December 31,
1999 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
The General Partner declared and paid three cash distributions of $50,000
each subsequent to September 30, 2000 for the months ended July 31,
August 31 and September 30, 2000 to all admitted partners as of July 31,
August 31 and September 30, 2000.
8
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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 $415,010 and
$623,224 for the three months ended September 30, 2000 and 1999, respec-
tively, and $1,544,070 and $1,691,504 for the nine months ended September 30,
2000 and 1999, respectively. Rental income from the leasing of equipment
accounted for 57% and 70% of total revenues for the third quarter of
2000 and 1999, respectively and 61% and 75% for the nine months ended
September 30, 2000 and 1999, respectively. The decrease in revenues was
primarily attributable to the decrease in rental income. Rental income
decreased during 2000 by approximately $338,000 because of equipment that
came off lease and was sold. Additionally, interest income decreased during
the nine months ended September 30, 2000 because of lower cash balances
available for investment by the Fund during this period. The decrease in
this account also accounted for the overall decrease in revenues in 2000.
However, the increase in earned income on direct financing leases served to
mitigate the overall decrease in revenues during the nine months ended
September 30, 2000. The Fund invested in two direct financing leases in
the last quarter of 1999 and the second quarter of 2000 that contributed to
the increase in this account from $261,000 during the nine months ended
September 30, 1999 to $403,000 during the nine months ended September 30,
2000. The Fund also recorded a net gain on sale of equipment of $88,900 for
the nine months ended September 30, 2000 compared to $21,178 for the same
period in 1999. The increase in this account also lowered the overall de-
crease in revenues in 2000. Furthermore, the increase in other income re-
duced the amount of the decrease in total revenues in 2000. Other income
increased from approximately $15,000 during the first nine months of 1999 to
$50,000 during the first nine months of 2000 because of late fees collected
on delinquent rents and transfer fees recognized on investor account transfers.
Expenses were $263,077 and $474,128 for the three months ended Septem-
ber 30, 2000 and 1999, respectively, and $1,014,706 and $1,588,651 for the
nine months ended September 30, 2000 and 1999, respectively. Depreciation
expense comprised 64% and 78% of total expenses for the third quarter of 2000
and 1999, respectively and 72% and 71% of total expenses for the nine months
ended September 30, 2000 and 1999, respectively. The decrease in expenses in
2000 is primarily related to the decrease in depreciation expense because of
equipment that came off lease and was sold since September 1999. 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 $6,267
for the nine months ended September 30, 2000 compared to $104,051 for the nine
months ended September 30, 1999. The decrease in this account also accounted
for the overall decrease in expenses in 2000. Any future losses are dependent
upon unanticipated technological developments affecting the types of equipment
in the portfolio in subsequent years. General and administrative expense to
related party also decreased during the nine months ended September 30, 2000
9
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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)
compared to the same period in 1999 because of a decrease in expenses charged
by the General Partner or its parent company for services and materials
provided to the Fund. Furthermore, general and administrative expense
decreased during the first nine months of 2000 as a result of the decrease
in equipment remarketing and refurbishing expenses as well as other expenses
incurred to operate the Fund on a daily basis. The decrease in these accounts
also contributed to the decrease in total expenses in the current period.
The Fund's net income was $151,933 and $149,096 for the three months
ended September 30, 2000 and 1999, respectively, and $529,364 and $102,853
for the nine months ended September 30, 2000 and 1999, respectively. The
earnings per equivalent limited partnership unit, after earnings allocated
to the General Partner, were $5.20 and $5.74 based on a weighted average number
of equivalent limited partnership units outstanding of 28,925 and 28,695 for
the three months ended September 30, 2000 and 1999, respectively. The earnings
per equivalent limited partnership unit, after earnings allocated to the
General Partner, were $18.16 and $3.39 based on a weighted average number of
equivalent limited partnership units outstanding of 28,859 and 28,974 for the
nine months ended September 30, 2000 and 1999, respectively.
The Fund generated $323,931 and $506,674 of cash from operations, for the
purpose of determining cash available for distribution, for the quarter ended
September 30, 2000 and 1999, respectively. The Fund paid three cash distri-
butions of $50,000 each subsequent to September 30, 2000 for the three months
ended September 30, 2000. The Fund paid one cash distribution of $50,000 in
September 1999 for July 1999 and two cash distributions of $50,000 each
subsequent to September 30, 1999 for the months of August and September 1999.
For the nine months ended September 30, 2000 and 1999, the Fund generated
$1,173,865 and $1,315,313 of cash from operations for the purpose of deter-
mining cash available for distribution. The General Partner declared cash
distributions totaling $450,000 for both the nine months ended September 30,
2000 and 1999. The Fund paid six cash distributions of $50,000 each during
the first nine months of 2000 and three cash distributions of $50,000 each
subsequent to September 30, 2000. The Fund paid seven cash distributions of
$50,000 each during the first nine months of 1999 and two cash distributions
of $50,000 each subsequent to September 30, 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 liqui-
dated as promptly as is consistent with obtaining their fair value. During
this time, the Fund will continue to look for opportunities to purchase equip-
10
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FIDELITY LEASING INCOME FUND VII, L.P.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
ANALYSIS OF FINANCIAL CONDITION (Continued)
ment under operating leases or invest in direct financing leases with cash
available from operations which was not distributed to partners in previous
periods. During the nine months ended September 30, 2000, the Fund invested
$1,739,197 in direct financing leases.
Subsequent to September 30, 2000, the Fund invested in approximately
$1,631,000 of direct financing leases with initial lease terms of 2 to 40
months.
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
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Part II: Other Information
FIDELITY LEASING INCOME FUND VII, L.P.
September 30, 2000
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
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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.
11-13-00 By: Freddie M. Kotek
________ _____________________________
Date Freddie M. Kotek
President of F.L. Partnership Management, Inc.
(Principal Operating Officer)
11-13-00 By: Marianne T. Schuster
________ ____________________________
Date Marianne T. Schuster
Vice President of F.L. Partnership Management, Inc.
(Principal Financial Officer)
13
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