UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended June 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
(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
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>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
PART I - FINANCIAL INFORMATION
The following statements of ICON Cash Flow Partners L.P. Seven (the
"Partnership") have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC") and, in the opinion of
management, include all adjustments (consisting only of normal recurring
accruals) necessary for a fair statement of income for each period shown.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such SEC rules and regulations.
Management believes that the disclosures made are adequate to make the
information represented not misleading. The results for the interim period are
not necessarily indicative of the results for the full year. These financial
statements should be read in conjunction with the financial statements and notes
included in the Partnership's 1995 Annual Report on Form 10-K.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
June 30, 1996
General Partner'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 June 30, 1996, 136,133.60 additional units were subscribed to, bringing
the total units and capital subscriptions to 162,501.55 and $16,250,155,
respectively, at that date.
The Partnership's portfolio consisted of a net investment in finance
leases and financings representing 77% and 23% of total investments at June 30,
1996.
For the six months ended June 30, 1996, the Partnership leased or financed
equipment with an initial cost of $10,856,638 to 75 lessees or equipment users.
The weighted average initial transaction term was 36 months.
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 Six Months Ended June 30, 1996
Net income for the six months ended June 30, 1996 was $69,296. The net
income per weighted average limited partnership unit was $.82 for 1996.
Liquidity and Capital Resources
The Partnership's primary sources of funds for the six months ended June
30, 1996 were capital contributions, net of offering expenses, of $14,056,383
from limited partners and cash provided by operations of $368,123. 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 six months ended June
30, 1996, which were paid monthly, totaled $307,857, of which $68,603 was
investment income and $239,254 was a return of capital. The limited partner
distribution per weighted average unit outstanding for the six months ended June
30, 1996 was $3.67, of which $.82 was investment income and $2.85 was a return
of capital.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
June 30, 1996
General Partner's Discussion and Analysis of
Financial Condition and Results of Operations
As of June 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)
Balance Sheets
(unaudited)
June 30, December 31,
1996 1995
Assets
Cash $ 12,123,457 $ 2,000
Cash in escrow - 1,348,143
------------ --------------
12,123,457 1,350,143
Investment in finance leases
Minimum rents receivable 7,827,125 -
Estimated unguaranteed residual values 1,324,408 -
Initial direct costs 215,943 -
Unearned income (1,376,465) -
------------ --------------
7,991,011 -
Investment in financings
Receivables due in installments 2,934,258 -
Initial direct costs 69,778 -
Unearned income (574,475) -
------------ --------------
2,429,561 -
Other assets 98,560 -
------------ --------------
Total assets $ 22,642,589 $ 1,350,143
============ ==============
Liabilities and Partners' Equity
Notes payable - non-recourse $ 6,223,280 $ -
Accounts payable to General Partner
and affiliates, net 239,569 -
Accounts payable - equipment 2,253,763 -
Accounts payable - other 108,082 -
Security deposits and deferred credits 2,183 -
Subscriptions pending admission - 1,348,143
------------ --------------
8,826,877 1,348,143
Commitments and Contingencies
Partners' equity (deficiency)
General Partner (1,417) 1,000
Limited partners (162,501.55 and 0 units
outstanding, $100 per unit original
issue price in 1996 and 1995, respectively) 13,817,129 1,000
------------- --------------
Total partners' equity 13,815,712 2,000
------------ --------------
Total liabilities and partners' equity $ 22,642,589 $ 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)
For the Three For the Six
Months Ended Months Ended
June 30, 1996 June 30, 1996
Revenues
Finance income $ 143,282 $ 192,632
Interest income and other 106,035 131,820
----------- ----------
Total revenues 249,317 324,452
----------- ----------
Expenses
Interest 93,788 128,685
Management fees - General Partner 31,095 44,531
Amortization of initial direct costs 30,743 39,980
General and administrative 16,982 21,790
Administrative expense
reimbursements - General Partner 14,272 20,170
----------- ----------
Total expenses 186,880 255,156
----------- ----------
Net income $ 62,437 $ 69,296
=========== ==========
Net income allocable to:
Limited partners $ 61,813 $ 68,603
General Partner 624 693
----------- ----------
$ 62,437 $ 69,296
=========== ==========
Weighted average number of limited
partnership units outstanding 83,994 83,994
=========== ==========
Net income per weighted average
limited partnership unit $ .74 $ .82
=========== ==========
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 Six Months Ended June 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)
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 (162,501.55 units) 16,250,155 - 16,250,155
Sales and
offering expenses (2,193,772) - (2,193,772)
Cash distributions
to partners $2.85 $ .82 (307,857) (3,110) (310,967)
Net income 68,603 693 69,296
------------ ------- -----------
Balance at
June 30, 1996 $ 13,817,129 $(1,417) $13,815,712
============ ======= ===========
See accompanying notes to financial statements.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
. Statement of Cash Flows
For the Six Months Ended June 30,
(unaudited)
1996
Cash flows from operating activities:
Net income $ 69,296
------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Finance income portion of
receivables paid directly
to lenders by lessees (159,364)
Amortization of initial direct costs 39,980
Interest expense on non-recourse
financing paid directly by lessees 127,955
Collection of principal
- non-financed receivables 52,972
Change in operating assets and liabilities:
Accounts payable to General Partner
and affiliates, net 239,569
Accounts payable - other 108,082
Security deposits and deferred credits 2,183
Other assets (98,560)
Other, net (13,990)
------------
Total adjustments 298,827
Net cash provided by operating activities 368,123
---------
Cash flows from investing activities:
Equipment and receivables purchased (1,665,324)
Initial direct costs (325,758)
Net cash used in investing activities (1,991,082)
------------
Cash flows from financing activities:
Issuance of limited partnership units,
net of offering expenses 14,056,383
Refund of initial limited partners'
capital contribution (1,000)
Cash distributions to partners (310,967)
Net cash provided by financing activities 13,744,416
------------
Net increase in cash 12,121,457
Cash at beginning of period 2,000
Cash at end of period $ 12,123,457
============
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 June 30, 1996 and 1995, non-cash activities
included the following:
1996 1995
Fair value of equipment and receivables
purchased for debt and payables $ (9,176,980) $ -
Non-recourse notes payable assumed in
purchase price 6,923,217 -
Accounts payable - equipment 2,253,763 -
Principal and interest on direct
finance receivables paid directly
to lenders by lessees 827,892 -
Principal and interest on non-recourse
financing paid directly to lenders
by lessees (827,892) -
------------ -----------
$ - $ -
============ ===========
Interest expense of $128,685 for the six months ended June 30, 1996
consisted of interest expense on non-recourse financing paid or accrued directly
to lenders by lessees of $127,955 and other interest of $730.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements
June 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 June 30, 1996 136,133.60 additional units were subscribed to, bringing
the total units and capital subscriptions to 162,501.55 and $16,250,155
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. 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 leases have terms ranging from two to five
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.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements (continued)
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
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 June 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.
4. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the six months ended June 30, 1996 were as
follows:
1996
Underwriting commissions $ 325,003 Charged to Equity
Organization and offering 568,755 Charged to Equity
Acquisition fees 325,758 Capitalized
Management fees 44,531 Charged to operations
Administrative expense
reimbursements 20,170 Charged to operations
Total $1,284,217
==========
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
PART II
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Reports and Amendments
The Partnership did not file any Reports or Amendments for the six months ended
June 30, 1996
<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.
August 13, 1996 Charles Duggan
Date -------------------------------------------
Charles Duggan
Executive Vice President and 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 12,123,457
<SECURITIES> 0
<RECEIVABLES> 10,519,132
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> * 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,642,589
<CURRENT-LIABILITIES> ** 0
<BONDS> 6,223,280
0
0
<COMMON> 0
<OTHER-SE> 13,815,712
<TOTAL-LIABILITY-AND-EQUITY> 22,642,589
<SALES> 324,452
<TOTAL-REVENUES> 324,452
<CGS> 39,980
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 86,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128,685
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,296
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.82
<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>
