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, 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, 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 12
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Part I: Financial Information
Item 1: Financial Statements
FIDELITY LEASING INCOME FUND VII, L.P.
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
June 30, December 31,
2000 1999
____________ ____________
Cash and cash equivalents $ 2,400,102 $ 1,769,740
Accounts receivable 593,698 273,492
Due from related parties 260 84,919
Equipment under operating leases (net
of accumulated depreciation of
$2,797,467 and $4,899,775, respectively) 377,313 1,202,004
Net investment in direct financing leases 6,506,613 6,543,062
Equipment held for sale or lease 162,263 155,653
___________ ___________
Total assets $10,040,249 $10,028,870
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 50,211 $ 122,331
Security deposits 67,825 67,825
Accounts payable and
accrued expenses 57,622 49,370
Due to related parties 13,227 15,411
___________ ___________
Total liabilities 188,885 254,937
Partners' capital 9,851,364 9,773,933
___________ ___________
Total liabilities and
partners' capital $10,040,249 $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 Six Months Ended
June 30 June 30
2000 1999 2000 1999
____ ____ ____ ____
Income:
Rentals $299,539 $432,280 $ 700,073 $ 836,393
Earned income on direct
financing leases 143,194 72,491 267,927 149,083
Interest 19,216 33,302 43,947 67,609
Gain on sale of equipment,
net 38,093 11,440 93,041 11,190
Other 17,876 1,567 28,213 4,005
________ ________ __________ __________
517,918 551,080 1,133,201 1,068,280
________ ________ __________ __________
Expenses:
Depreciation 242,350 380,303 559,277 762,021
Write-down of equipment to
net realizable value - 73,351 6,267 104,051
General and administrative 14,077 36,038 52,255 72,196
General and administrative
to related party 37,015 70,201 77,584 125,524
Management fee to
related party 29,497 26,070 60,387 50,731
________ ________ __________ __________
322,939 585,963 755,770 1,114,523
________ ________ __________ __________
Net income (loss) $194,979 $(34,883) $ 377,431 $ (46,243)
======== ======== ========== ==========
Net income (loss) per equivalent
limited partnership unit $ 6.69 $ (1.19) $ 12.96 $ (1.57)
======== ======== ========== ==========
Weighted average number of
equivalent limited
partnership units outstanding
during the period 28,854 28,934 28,826 29,114
======== ======== ========== ==========
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 six months ended June 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 (3,000) - (297,000) (300,000)
Net Income 3,774 - 373,657 377,431
________ ______ __________ __________
Balance, June 30, 2000 $(32,541) 65,389 $9,883,905 $9,851,364
======== ====== ========== ==========
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 six months ended June 30, 2000 and 1999
(Unaudited)
2000 1999
____ ____
Cash flows from operating activities:
Net income (loss) $ 377,431 $ (46,243)
__________ __________
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation 559,277 762,021
Write-down of equipment to net
realizable value 6,267 104,051
Gain on sale of equipment, net (93,041) (11,190)
(Increase) decrease in accounts receivable (320,206) 4,279
(Increase) decrease in due from related
parties 84,659 18,100
Increase (decrease) in lease rents paid
in advance (72,120) 84,672
Increase (decrease) in accounts payable
and accrued expenses 8,252 (6,729)
Increase (decrease) in due to related
parties (2,184) (119,694)
__________ __________
170,904 835,510
__________ __________
Net cash provided by operating activities 548,335 789,267
__________ __________
Cash flows from investing activities:
Investment in direct financing leases (1,111,394) -
Proceeds from sale of equipment 345,578 12,690
Proceeds from direct financing leases,
net of earned income 1,147,843 458,085
__________ __________
Net cash provided by investing activities 382,027 470,775
__________ __________
Cash flows from financing activities:
Distributions (300,000) (350,000)
Redemptions of capital - (4,372)
__________ __________
Net cash used in financing activities (300,000) (354,372)
__________ __________
Increase in cash and cash equivalents 630,362 905,670
Cash and cash equivalents, beginning
of period 1,769,740 2,967,163
__________ __________
Cash and cash equivalents, end of period $2,400,102 $3,872,833
========== ==========
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
June 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 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 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, $6,267 and
$104,051 was charged to write-down of equipment to net realizable value
for the six months ended June 30, 2000 and 1999, 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. 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 June 30, 2000 is as
follows:
Minimum lease payments to be received $6,116,000
Unguaranteed residuals 1,096,000
Unearned rental income (526,000)
Unearned residual income (179,000)
__________
$6,507,000
==========
The future approximate minimum rentals to be received on noncancellable
operating and direct financing leases as of June 30, 2000 are as follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ __________
2000 $199,000 $1,466,000
2001 90,000 2,786,000
2002 28,000 1,829,000
2003 13,000 35,000
________ __________
$330,000 $6,116,000
======== ==========
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-
7
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FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. RELATED PARTY TRANSACTIONS (Continued)
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.
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, 2000 and 1999:
Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
____ ____ ____ ____
Management fee $29,497 $26,070 $60,387 $ 50,731
Reimbursable costs 37,015 70,201 77,584 125,524
Amounts due from related parties at June 30, 2000 and December 31, 1999
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, 2000 and December 31, 1999
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
The General Partner declared and paid three cash distributions of
$50,000 each subsequent to June 30, 2000 for the months ended April 30,
May 31 and June 30, 2000 to all admitted partners as of April 30, May 31
and June 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 $517,918 and
$551,080 for the three months ended June 30, 2000 and 1999, respectively,
and $1,133,201 and $1,068,280 for the six months ended June 30, 2000 and
1999, respectively. Rental income from the leasing of equipment accounted
for 58% and 78% of total revenues for the second quarter of 2000 and 1999,
respectively and 62% and 78% of total revenues for the six months ended June
30, 2000 and 1999, respectively. The increase in revenues was primarily
attributable to an increase in earned income on direct financing leases. The
Fund invested in two direct financing leases in the last quarter of 1999 and
the second quarter of 2000 that accounted for the increase in this account
from $149,000 during the six months ended June 30, 1999 to $268,000 during the
six months ended June 30, 2000. Additionally, the Fund recognized $93,041 in
net gain on sale of equipment during the first six months of 2000 compared to
$11,190 during the first six months of 1999. The increase in this account
also contributed to the increase in total revenues in 2000. However, the
overall increase in revenues was reduced by the decrease in rental income in
the first six months of 2000. Rental income decreased during the six months
ended June 30, 2000 because of equipment that came off lease and was sold
since the second quarter of 1999.
Expenses were $322,939 and $585,963 for the three months ended June 30,
2000 and 1999, respectively, and $755,770 and $1,114,523 for the six
months ended June 30, 2000 and 1999, respectively. Depreciation expense
comprised 75% and 65% of total expenses during the quarter ended June 30,
2000 and 1999, respectively and 74% and 68% of total expenses during the six
months ended June 30, 2000 and 1999, respectively. The decrease in expenses
was primarily related to the decrease in depreciation expense resulting from
equipment that came off lease or terminated and was sold since June 1999.
Additionally, the decrease in write-down of equipment to net realizable
value contributed to the overall decrease in expenses in 2000. Based upon
the quarterly review of the recoverability of the undepreciated cost of
rental equipment, $6,267 and $104,051 was charged to operations to write
down equipment to its estimated net realizable value during the six months
ended June 30, 2000 and 1999, respectively. Any future losses are dependent
upon unanticipated technological developments affecting the types of equip-
ment in the portfolio in subsequent years. Furthermore, general and admin-
istrative expense to related party decreased during the six months ended
June 30, 2000 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. The decrease in this account also contrib-
uted to the overall decrease in expenses during the first six months of 2000.
The Fund's net income (loss) was $194,979 and ($34,883) for the three
months ended June 30, 2000 and 1999, respectively, and $377,431 and ($46,243)
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)
for the six months ended June 30, 2000 and 1999, respectively. The income
(loss) per equivalent limited partnership unit was $6.69 and ($1.19) based on
a weighted average number of equivalent limited partnership units outstanding
of 28,854 and 28,934 for the three months ended June 30, 2000 and 1999, re-
spectively. The income (loss) per equivalent limited partnership unit, after
income (loss) allocated to the General Partner, was $12.96 and ($1.57) based
on a weighted average number of equivalent limited partnership units out-
standing of 28,826 and 29,114 for the six months ended June 30, 2000 and
1999, respectively.
The Fund generated $399,236 and $407,331 of cash from operations, for
the purpose of determining cash available for distribution, during the quarter
ended June 30, 2000 and 1999, respectively. The Fund made three cash distri-
butions of $50,000 each subsequent to June 30, 2000 for the three months ended
June 30, 2000. The Fund made one cash distribution of $50,000 in June 1999 for
April 1999 and two cash distributions of $50,000 each subsequent to June 30,
1999 for the months of May and June 1999. For the six months ended June 30,
2000 and 1999, the Fund generated $849,934 and $808,639 of cash from opera-
tions, for the purpose of determining cash available for distribution. The
General Partner declared cash distributions totaling $300,000 for each of the
six months ended June 30, 2000 and 1999. The Fund paid three cash distri-
butions of $50,000 each during the first six months of 2000 and three cash
distributions of $50,000 each subsequent to June 30, 2000. The Fund paid four
cash distributions of $50,000 each during the first six months of 1999 and two
cash distributions of $50,000 each subsequent to June 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 purchase equipment with cash available
from operations that was not distributed to partners in previous periods.
During the six months ended June 30, 2000, the Fund made no purchases of
equipment subject to operating leases. However, the Fund invested $1,111,394
in direct financing leases during the six months ended June 30, 2000.
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
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Part II: Other Information
FIDELITY LEASING INCOME FUND VII, L.P.
June 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
11
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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.
8-10-00 By: Freddie M. Kotek
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
8-10-00 By: Marianne T. Schuster
_______ ___________________________
Date Marianne T. Schuster
Vice President of
F.L. Partnership Management, Inc.
(Principal Financial Officer)
12
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