UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended September 30, 1996
--------------------------------------------------------
[ ] 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 33-94458
-----------------------------------------------------
ICON Cash Flow Partners L.P. Seven
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3835387
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
600 Mamaroneck Avenue, Harrison, New York 10528-1632
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(914) 698-0600
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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.
[ x] Yes [ ] No
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Balance Sheets
(unaudited)
<TABLE>
<S> <C> <C>
September 30, December 31,
1996 1995
Assets
Cash $ 3,313,316 $ 2,000
Cash in escrow - 1,348,143
-------------- ---------------
3,313,316 1,350,143
-------------- ---------------
Investment in finance leases
Minimum rents receivable 6,931,381 -
Estimated unguaranteed residual values 1,582,873 -
Initial direct costs 190,593 -
Unearned income (1,179,783) -
-------------- ---------------
7,525,064 -
-------------- ---------------
Investment in financings
Receivables due in installments 7,748,665 -
Initial direct costs 181,458 -
Unearned income (1,541,299) -
-------------- ---------------
6,388,824 -
-------------- ---------------
Net investment in leveraged leases 7,229,208 -
Other assets 68,901 -
-------------- ---------------
Total assets $ 24,525,313 $ 1,350,143
============== ===============
Liabilities and Partners' Equity
Notes payable - non-recourse $ 6,355,383 $ -
Accounts payable - equipment 11,564 -
Accounts payable - other 210,679 -
Security deposits and deferred credits 2,184 -
Subscriptions pending admission - 1,348,143
-------------- ---------------
6,579,810 1,348,143
-------------- ---------------
Commitments and Contingencies
Partners' equity (deficiency)
General Partner (4,697) 1,000
Limited partners (214,927.52 and 0 units
outstanding, $100 per unit original
issue price in 1996 and 1995, respectively) 17,950,200 1,000
-------------- --------------
Total partners' equity 17,945,503 2,000
-------------- --------------
Total liabilities and partners' equity $ 24,525,313 $ 1,350,143
============== ===============
See accompanying notes to financial statements.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Statement of Operations
(unaudited)
<S> <C> <C>
For the Three For the Nine
Months Ended Months Ended
September 30, 1996 September 30, 1996
Revenues
Finance income $ 191,233 $ 383,865
Interest income and other 105,246 237,066
------------- ------------
Total revenues 296,479 620,931
------------- ------------
Expenses
Interest 77,675 206,360
Management fees - General Partner 31,763 76,294
Amortization of initial direct costs 34,195 74,175
Administrative expense
reimbursements - General Partner 16,975 37,145
General and administrative 9,581 31,371
------------- ------------
Total expenses 170,189 425,345
------------- ------------
Net income $ 126,290 $ 195,586
============= ============
Net income allocable to:
Limited partners $ 125,027 $ 193,630
General Partner 1,263 1,956
------------- ------------
$ 126,290 $ 195,586
============= ============
Weighted average number of limited
partnership units outstanding 118,537 118,537
============= ============
Net income per weighted average
limited partnership unit $ 1.05 $ 1.65
============= ============
See accompanying notes to financial statements.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Statement of Changes in Partners' Equity
For the Nine Months Ended September 30, 1996 and the
Period from May 23, 1995 (date of inception)
to December 31, 1995
(unaudited)
Limited Partner
Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted
average unit)
<S> <C> <C> <C> <C> <C>
Initial partners'
capital contribution
- May 23, 1995 $ 1,000 $ 1,000 $ 2,000
------------- --------- -------------
Balance at
December 31, 1995 1,000 1,000 2,000
Refund of initial
limited partners'
capital contribution (1,000) - (1,000)
Proceeds from issuance
of limited partnership
units (214,927.52 units) 21,492,752 - 21,492,752
Sales and
offering expenses (2,901,523) - (2,901,523)
Cash distributions
to partners $ 5.41 $ 1.63 (834,659) (7,653) (842,312)
Net income 193,630 1,956 195,586
------------- --------- -------------
Balance at
September 30, 1996 $ 17,950,200 $ (4,697) $ 17,945,503
============== ========= =============
See accompanying notes to financial statements.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
. Statement of Cash Flows
For the Nine Months Ended September 30,
(unaudited)
<S> <C>
1996
Cash flows from operating activities:
Net income $ 195,586
--------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Finance income portion of
receivables paid directly
to lenders by lessees (254,839)
Amortization of initial direct costs 74,175
Interest expense on non-recourse
financing paid directly by lessees 202,765
Collection of principal
- non-financed receivables 245,605
Change in operating assets and liabilities:
Accounts payable - other 210,679
Security deposits and deferred credits 2,184
Other assets (68,901)
Other, net (34,121)
--------------
Total adjustments 377,547
Net cash provided by operating activities 573,133
--------------
Cash flows from investing activities:
Equipment and receivables purchased (13,334,301)
Initial direct costs (1,675,433)
Net cash used in investing activities (15,009,734)
--------------
Cash flows from financing activities:
Issuance of limited partnership units,
net of offering expenses 18,591,229
Refund of initial limited partners'
capital contribution (1,000)
Cash distributions to partners (842,312)
Net cash provided by financing activities 17,747,917
--------------
Net increase in cash 3,311,316
Cash at beginning of period 2,000
Cash at end of period $ 3,313,316
==============
See accompanying notes to financial statements.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
. Consolidated Statements of Cash Flows (continued)
Supplemental Disclosure of Cash Flow Information
For the three months ended September 30, 1996 and 1995, non-cash activities
included the following:
1996 1995
---- ----
<S> <C> <C>
Fair value of equipment and receivables
purchased for debt and payables $ (42,477,028) $ -
Non-recourse notes payable assumed in
purchase price 42,465,464 -
Accounts payable - equipment 11,564 -
Principal and interest on direct
finance receivables paid directly
to lenders by lessees 1,339,261 -
Principal and interest on non-recourse
financing paid directly to lenders
by lessees (1,339,261) -
--------------- ----------
$ - $ -
=============== ==========
</TABLE>
Interest expense of $206,360 for the nine months ended September 30, 1996
consisted of interest expense on non-recourse financing paid or accrued directly
to lenders by lessees of $202,765 and other interest of $3,595.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements
September 30, 1996
(unaudited)
1. Organization
ICON Cash Flow Partners L.P. Seven (the "Partnership") was formed on May 23,
1995 as a Delaware limited partnership with an initial capitalization of $2,000.
The Partnership is offering limited partnership units on a "best efforts" basis
to the general public with the intention of raising capital of between
$1,200,000 and $100,000,000. It was formed to acquire various types of
equipment, to lease such equipment to third parties and, to a lesser degree, to
enter into secured financing transactions. As of December 31, 1995,
subscriptions had been received for 13,481.43 units at $100 per unit, or
$1,348,143. The Partnership commenced business operations on its initial closing
date, January 19, 1996, with the admission of 26,367.95 limited partnership
units at $100 per unit representing $2,636,795.17 of capital contributions.
Through September 30, 1996 188,559.57 additional units were subscribed to,
bringing the total units and capital subscriptions to 214,927.52 and $21,492,752
respectively, at that date.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner will manage and
control the business affairs of the Partnership's equipment, leases and
financing transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, will receive an
underwriting commission on the gross proceeds from sales of all units. The total
underwriting compensation to be paid by the Partnership, including underwriting
commissions, sales commissions, incentive fees, public offering expense
reimbursements and due diligence activities will be limited to 13 1/2% of the
gross proceeds received from the sale of the units.
Profits, losses, cash distributions and disposition proceeds will be allocated
99% to the limited partners and 1% to the General Partner until each limited
partner has received cash distributions and disposition proceeds sufficient to
reduce its adjusted capital contribution account to zero and receive, in
addition, other distributions and allocations which would provide a 10% per
annum cumulative return, compounded daily, on its outstanding adjusted capital
contribution account. After such time, the distributions will be allocated 90%
to the limited partners and 10% to the General Partner.
2. New Accounting Pronouncement
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which is
effective beginning in 1996.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements (continued)
The Partnership's existing policy with respect to impairment of estimated
residual values is to review, on a quarterly basis, the carrying value of its
residuals on an individual asset basis to determine whether events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable and, therefore, an impairment loss should be recognized. The events
or changes in circumstances which generally indicate that the residual value of
an asset has been impaired are (i) the estimated fair value of the underlying
equipment is less than the Partnership's carrying value or (ii) the lessee is
experiencing financial difficulties and it does not appear likely that the
estimated proceeds from disposition of the asset will be sufficient to satisfy
the remaining obligation to the non-recourse lender and the Partnership's
residual position. Generally in the latter situation, the residual position
relates to equipment subject to third party non-recourse notes payable where the
lessee remits their rental payments directly to the lender and the Partnership
does not recover its residual until the non-recourse note obligation is repaid
in full.
The Partnership measures its impairment loss as the amount by which the carrying
amount of the residual value exceeds the estimated proceeds to be received by
the Partnership from release or resale of the equipment. Generally, quoted
market prices are used as the basis for measuring whether an impairment loss
should be recognized.
As a result, the Partnership's policy with respect to measurement and
recognition of an impairment loss associated with estimated residual values is
consistent with the requirements of SFAS No. 121 and, therefore, the
Partnership's adoption of this Statement in the first quarter of 1996 had no
material effect on the financial statements.
3. Net Investment in Leveraged Lease
During the quarter ended September 30, 1996, the partnership acquired, subject
to a leveraged lease, the residual interest in an aircraft. The aircraft is a
McDonnell Douglas DC10-30F, built in 1986. It is on lease with Federal Express
and has a remaining lease term of eight years. The purchase price was
$40,973,585 consisting of $6,000,000 in cash and the assumption of non-recourse
senior debt of $26,217,294 and non-recourse junior debt ("junior debt") of
$8,756,291.
The net investment in the leveraged leases as of September 30, 1996 consisted of
the following:
Non-cancelable minimum rents receivable (net of
principal and interest on non-recourse debt) ....... $ 11,509,293
Estimated unguaranteed residual values ............... 20,243,000
Initial direct costs ................................. 1,229,208
Unearned income ...................................... (25,752,293)
$ 7,229,208
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Unearned income is recognized from the leveraged lease over the life of the
lease at a constant rate of return on the positive net investment.
Non-cancelable minimum annual amounts receivable relating to the leveraged lease
at September 30,1996 are $46,482,878 and are due as follows: $0 for the year
ended December 31, 1996 and $5,810,360 for the years ended December 31, 1997,
1998, 1999, 2000, 2001, 2002, 2003 and 2004, respectively.
The non-cancelable rents are being paid directly to the lenders by the lessees
to satisfy the principal and interest on the non-recourse debt assumed.
Prior to the acquisition, the free cash flow, the rent in excess of the senior
debt payments, was financed by an affiliated partnership, ICON Cash Flow
Partners, L.P., Series D, (i.e., the junior debt). The Partnership intends to
re-finance the junior debt with a third party.
4. Significant Accounting Policies
Basis of Accounting and Presentation - The Partnership's records are maintained
on the accrual basis. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Leases - The Partnership accounts for owned equipment leased to third parties as
finance leases. For finance leases, the Partnership records, at the inception of
the lease, the total minimum lease payments receivable, the estimated
unguaranteed residual values, the initial direct costs related to the leases and
the related unearned income. Unearned income represents the difference between
the sum of the minimum lease payments receivable plus the estimated unguaranteed
residual minus the cost of the leased equipment. Unearned income is recognized
as finance income over the terms of the related leases using the interest
method. Initial direct costs of finance leases are capitalized and are amortized
over the terms of the related leases using the interest method. The
Partnership's net investment in a leveraged lease consists of minimum lease
payments receivable, the estimated unguaranteed residual value and the initial
direct costs related to the lease, net of the unearned income and principal and
interest on the related non-recourse debt. Unearned income is recognized from
the leveraged lease over the life of the lease at a constant rate of return on
the positive net investment. The Partnership's leases have terms ranging from
two to seven years. Each lease is expected to provide aggregate contractual
rents that, along with residual proceeds, return the Partnership's cost of its
investment along with investment income.
Investment in Financings - Investment in financings represent the gross
receivables due from the financing of equipment plus the initial direct costs
related thereto less the related unearned income. The unearned income is
recognized as finance income and the initial direct costs are amortized over the
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
terms of the receivables using the interest method. Financing transactions are
supported by a written promissory note evidencing the obligation of the user to
repay the principal, together with interest, which will be sufficient to return
the Partnership's full cost associated with such financing transaction, together
with some investment income. Furthermore, the repayment obligation is
collateralized by a security interest in the tangible or intangible personal
property.
Impairment of Estimated Residual Values - The Partnership's policy is to review
the carrying value of its residuals on a quarterly basis and write down a
residual if it has been determined to be impaired. Impairment generally occurs
for one of two reasons: (1) when the recoverable value of the underlying
equipment falls below the Partnership's carrying value or (2) when the primary
security holder has foreclosed on the underlying equipment in order to satisfy
the remaining lease obligation and the amount of proceeds received by the
primary security holder in excess of such obligation is not sufficient to
recover the Partnership's residual position. Generally in such cases, the
residuals would relate to equipment for which non-recourse notes payable were
outstanding. In these cases the lessees pay their rents directly to the third
party lender and the Partnership would not realize any cash flow until the
lessees have satisfied the initial note obligations and the equipment is
remarketed.
Disclosures About Fair Value of Financial Instruments - Statement of Financial
Accounting Standards No. 107 ("SFAS No. 107"), "Disclosures about Fair Value of
Financial Instruments" requires disclosures about the fair value of financial
instruments. The fair value of receivables and non-recourse notes payable
approximates the carrying value at September 30, 1996. SFAS No. 107 does not
require disclosures about the fair value of lease arrangements.
Income Taxes - No provision for income taxes has been made as the liability for
such taxes is that of each of the partners rather than the Partnership.
5. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the nine months ended September 30, 1996 were as
follows:
1996
Underwriting commissions .......... $ 429,855 Charged to Equity
Organization and offering ......... 752,246 Charged to Equity
Acquisition fees .................. 1,675,433 Capitalized
Management fees ................... 76,294 Charged to operations
Administrative expense
reimbursements ................... 37,145 Charged to operations
Total ............................. $2,970,973
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
ICON Cash Flow Partners L.P. Seven (the "Partnership") was formed on May 23,
1995 as a Delaware limited partnership with an initial capitalization of $2,000.
The Partnership is offering limited partnership units on a "best efforts" basis
to the general public with the intention of raising capital of between
$1,200,000 and $100,000,000. It was formed to acquire various types of
equipment, to lease such equipment to third parties and, to a lesser degree, to
enter into secured financing transactions. As of December 31, 1995,
subscriptions had been received for 13,481.43 units at $100 per unit, or
$1,348,143. The Partnership commenced business operations on its initial closing
date, January 19, 1996, with the admission of 26,367.95 limited partnership
units at $100 per unit representing $2,636,795.17 of capital contributions.
Through September 30, 1996, 188,559.57 additional units were subscribed to,
bringing the total units and capital subscriptions to 214,927.52 and
$21,492,752, respectively, at that date.
The Partnership's portfolio consisted of a net investment in finance leases,
leveraged leases and financings representing 36%, 34% and 30% of total
investments at September 30, 1996.
For the Nine months ended September 30, 1996, the Partnership leased or financed
equipment with an initial cost of $55,847,778 to 125 lessees or equipment users.
The weighted average initial transaction term was 44 months. Included in this is
the acquisition of the residual interest in an aircraft, subject to a leveraged
lease. The aircraft is a McDonnell Douglas DC10-30F, built in 1986. It is on
lease with Federal Express and has a remaining lease term of eight years. The
purchase price was $40,973,585 consisting of a $6,000,000 in cash and the
assumption of non-recourse senior debt of $26,217,294 and non-recourse junior
debt ("junior debt") of $8,756,291. Prior to the acquisition, the free cash
flow, the rent in excess of the senior debt payments, was financed by an
affiliated partnership, ICON Cash Flow Partners, L.P., Series D, (i.e., the
junior debt). The Partnership intends to re-finance the junior debt with a third
party. This transaction has had no impact on the results of operations for the
period ended September 30, 1996.
The Partnership commenced operations on January 19, 1996, therefore a comparison
of results of operations and liquidity and capital resources to prior periods is
not possible.
Results of Operations for the Nine Months Ended September 30, 1996
Net income for the Nine months ended September 30, 1996 was $195,586. The net
income per weighted average limited partnership unit was $1.65 for 1996.
Liquidity and Capital Resources
The Partnership's primary sources of funds for the nine months ended September
30, 1996 were capital contributions, net of offering expenses, of
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
$18,591,229 from limited partners and cash provided by operations of $573,133.
These funds were used to fund cash distributions and to purchase equipment. The
Partnership intends to continue to purchase equipment and to fund cash
distributions utilizing funds from capital contributions and cash provided by
operations.
Cash distributions to the limited partners for the nine months ended September
30, 1996, which were paid monthly, totaled $834,659, of which $193,630 was
investment income and $641,029 was a return of capital. The limited partner
distribution per weighted average unit outstanding for the Nine months ended
September 30, 1996 was $7.04, of which $1.63 was investment income and $5.41 was
a return of capital.
As of September 30, 1996, except as noted above, there were no known trends or
demands, commitments, events or uncertainties which are likely to have any
material effect on liquidity. As cash is realized from operations, sales of
equipment and borrowings, the Partnership will invest in equipment leases and
financings where it deems it to be prudent while retaining sufficient cash to
meet its reserve requirements and recurring obligations as they become due.
New Accounting Pronouncement
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which is
effective beginning in 1996. The new standard is similar to the Partnership's
existing accounting policies relating to the impairment of estimated residual
values. As a result, adoption of SFAS No. 121 in the first quarter of 1996 had
no impact on the Partnership's financial statements.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
Form 8-K was filed September 4, 1996, Item 1, Change in Control of Registrant.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
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.
ICON Cash Flow Partners L. P. Seven
File No. 33-94458 (Registrant)
By its General Partner,
ICON Capital Corp.
December 24, 1996 Gary N. Silverhardt
- ----------------- ----------------------------------
Date Gary N. Silverhardt
Chief Financial Officer
(Principal financial and account
officer of the General Partner
of the Registrant)
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000947986
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 3,313,316
<SECURITIES> 0
<RECEIVABLES> 56,185,582
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> * 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 59,498,898
<CURRENT-LIABILITIES> ** 0
<BONDS> 41,328,968
0
0
<COMMON> 0
<OTHER-SE> 17,945,503
<TOTAL-LIABILITY-AND-EQUITY> 59,498,898
<SALES> 620,931
<TOTAL-REVENUES> 620,931
<CGS> 74,175
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 144,810
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 206,360
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 195,586
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.63
<FN>
* The Partnership has an unclassified balance sheet in its financial
statements due to the nature of its industry. A value of "0" was used for
current assets and liabilities.
** The Partnership has an unclassified balance sheet in its financial
statements due to the nature of its industry. A value of "0" was used for
current assets and liabilities.
</FN>
</TABLE>
