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 September 30, 1997
-----------------------------------------------------------
[ ] 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
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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
- --------------------------------------------------------------------------------
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)
Consolidated Balance Sheets
(unaudited)
<TABLE>
September 30, December 31,
1997 1996
Assets
<S> <C> <C>
Cash .............................................. $ 2,215,972 $ 698,301
------------- -------------
Investment in finance leases
Minimum rents receivable ....................... 63,343,517 15,894,245
Estimated unguaranteed residual values ......... 35,667,353 6,667,481
Initial direct costs ........................... 2,432,389 869,559
Unearned income ................................ (18,519,751) (3,515,258)
Allowance for doubtful account ................. (155,000) (65,000)
------------- -------------
82,768,508 19,851,027
Investment in estimated unguaranteed residual value 26,531,664 12,325,000
------------- -------------
Net investment in leveraged leases ................ 10,222,253 9,980,633
------------- -------------
Equity investment in joint ventures ............... 2,044,613 --
------------- -------------
Investment in financings
Receivables due in installments ................ 927,413 6,619,755
Initial direct costs ........................... 16,843 143,565
Unearned income ................................ (201,160) (1,271,152)
Allowance for doubtful account ................. (22,222) (10,000)
------------- -------------
720,874 5,482,168
Other assets ...................................... 778,708 148,941
------------- -------------
Total assets ...................................... $ 125,282,592 $ 48,486,070
============= =============
</TABLE>
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Balance Sheets
(unaudited)
<TABLE>
September 30, December 31,
1997 1996
Liabilities and Partners' Equity
<S> <C> <C>
Notes payable - non-recourse ........................ $ 63,005,173 $ 11,089,945
Note payable - recourse ............................. 23,044,164 12,225,000
Accounts payable - equipment ........................ 1,637,837 1,790,717
Accounts payable - General Partner and affiliate, net 415,743 438,297
Accounts payable - other ............................ 33,335 54,114
Minority interest in joint venture .................. 19,230 15,955
Security deposits and deferred credits .............. 17,674 6,188
------------- -------------
88,173,157 25,620,216
Commitments and Contingencies
Partners' equity (deficiency)
General Partner .................................. (34,433) (8,694)
Limited partners (470,085.34 and 275,540.47 units
outstanding, $100 per unit original
issue price in 1997 and 1996, respectively) .... 37,143,869 22,874,548
------------- -------------
Total partners' equity ......................... 37,109,436 22,865,854
------------- -------------
Total liabilities and partners' equity .............. $ 125,282,592 $ 48,486,070
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Operations
(unaudited)
<TABLE>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
Revenues
<S> <C> <C> <C> <C>
Finance income ..................... $1,414,310 $ 191,233 $3,834,516 $ 383,865
Income from leveraged leases, net .. 914,314 -- 1,666,627 --
Income from equity investment
in joint ventures ................ 129,224 -- 283,957 --
Interest income and other .......... 33,399 105,246 73,906 237,066
Net gain on sales or remarketing
of equipment ..................... -- -- 39,180 --
---------- ---------- ---------- ----------
Total revenues ..................... 2,491,247 296,479 5,898,186 620,931
---------- ---------- ---------- ----------
Expenses
Interest ........................... 1,413,016 77,675 2,902,592 206,360
Management fees - General Partner .. 416,990 31,763 1,084,619 76,294
Amortization of initial direct costs 298,935 34,195 904,856 74,175
Administrative expense
reimbursements - General Partner . 175,262 16,975 463,634 37,145
Provision for bad debts ............ 75,000 -- 150,000 --
General and administrative ......... 44,629 9,581 153,978 31,371
Minority interest in joint venture . 1,096 -- 3,275 --
---------- ---------- ---------- ----------
Total expenses ..................... 2,424,927 170,189 5,662,954 425,345
---------- ---------- ---------- ----------
Net income ............................ $ 66,320 $ 126,290 $ 235,232 $ 195,586
========== ========== ========== ==========
Net income allocable to:
Limited partners ................... $ 65,657 $ 125,027 $ 232,880 $ 193,630
General Partner .................... 663 1,263 2,352 1,956
---------- ---------- ---------- ----------
$ 66,320 $ 126,290 $ 235,232 $ 195,586
========== ========== ========== ==========
Weighted average number of limited
partnership units outstanding ...... 450,393 118,537 377,934 118,537
========== ========== ========== ==========
Net income per weighted average
limited partnership unit ........... $ .15 $ 1.05 $ .62 $ 1.63
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Nine Months Ended September 30, 1997, the
Year Ended December 31, 1996 and the Period from
May 23, 1995 (date of inception)
to December 31, 1995
(unaudited)
<TABLE>
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 (275,540.47 units) 27,554,047 - 27,554,047
Sales and offering expenses (3,719,796) - (3,719,796)
Cash distributions
to partners $6.14 $2.57 (1,361,099) (13,749) (1,374,848)
Net income 401,396 4,055 405,451
----------- -------- -----------
Balance at
December 31, 1996 22,874,548 (8,694) 22,865,854
Proceeds from issuance of
limited partnership units
(194,545.89 units) 19,454,589 - 19,454,589
Sales and offering expenses (2,626,343) - (2,626,343)
Limited partnership units
redeemed (102.71 units) (11,211) - (11,211)
Cash distributions
to partners $5.68 $ .49 (2,780,594) (28,091) (2,808,685)
Net income 232,880 2,352 235,232
----------- -------- -----------
Balance at
September 30, 1997 $37,143,869 $(34,433) $37,109,436
=========== ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30,
(unaudited)
<TABLE>
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income .................................................... $ 235,232 $ 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 .................................... (3,565,301) (254,839)
Amortization of initial direct costs ....................... 904,856 74,175
Gain on sale of equipment .................................. (39,180) --
Interest expense on non-recourse financing paid
directly by lessees ...................................... 2,722,243 202,765
Collection of principal - non-financed receivables ........ 486,039 245,605
Allowance for doubtful accounts ............................ 102,222 --
Distribution from equity investment in joint venture ....... 4,889,804 --
Income from equity investment in joint venture ............. (283,957) --
Income from leveraged leases, net .......................... (1,666,627) --
Change in operating assets and liabilities:
Accounts payable - General Partner and affiliates, net .. (22,554)
Accounts payable - other ................................ (20,778) 210,679
Security deposits and deferred credits .................. 11,486 2,184
Minority interest in joint venture ...................... 3,275 --
Other assets ............................................ (629,768) (68,901)
Other, net .............................................. (479,230) (34,121)
------------ ------------
Total adjustments ..................................... 2,412,530 377,547
------------ ------------
Net cash provided by operating activities ................ 2,647,762 573,133
------------ ------------
Cash flows from investing activities:
Equipment and receivables purchased ........................... (12,601,899) (13,334,301)
Initial direct costs .......................................... (2,064,530) (1,675,433)
Investment in joint venture ................................... (500,000) --
Proceeds from sale of equipment ............................... 2,166,777 --
------------ ------------
Net cash used in investing activities ................... (12,999,652) (15,009,734)
------------ ------------
Cash flows from financing activities:
Issuance of limited partnership units, net of offering expenses 16,828,246 18,591,229
Proceeds from note payable affiliate .......................... 4,250,000 --
Principal payments on loans from affiliate .................... (4,250,000) --
Principal payments on notes payable - recourse ................ (2,150,000) --
Cash distributions to partners ................................ (2,808,685) (842,312)
Refund of initial limited partners' capital contribution ...... -- (1,000)
------------ ------------
Net cash provided by financing activities ............... 11,869,561 17,747,917
------------ ------------
Net increase in cash ............................................. 1,517,671 3,311,316
Cash at beginning of period ...................................... 698,301 2,000
------------ ------------
Cash at end of period ............................................ $ 2,215,972 $ 3,313,316
============ ============
</TABLE>
See accompanying notes to consolidated 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 nine months ended September 30, 1997 and 1996, non-cash activities
included the following:
<TABLE>
1997 1996
---- ----
Fair value of equipment and receivables
<S> <C> <C>
purchased for debt and payables ..................... $(62,862,382) $(42,477,028)
Non-recourse notes payable assumed in
purchase price ...................................... 62,862,382 42,465,464
Accounts payable - equipment ........................... -- 11,564
Principal and interest on direct
finance receivables paid directly
to lenders by lessees ............................... 15,043,476 1,339,261
Principal and interest on non-recourse
financing paid directly to lenders
by lessees .......................................... (15,043,476) (1,339,261)
Decrease in investments in finance leases and financings
due to contributions to joint venture ............... 6,150,460 --
Increase in equity investment in joint venture ......... (6,150,460) --
------------ ------------
$ -- $ --
============ ============
</TABLE>
Interest expense of $2,902,592 and $206,360 for the nine months ended
September 30, 1997 and 1996 consisted of interest expense on non-recourse
financing paid or accrued directly to lenders by lessees of $2,722,243 and
$202,765, respectively, and other interest of $180,349 and $3,595 respectively.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
September 30, 1996
(unaudited)
1. Basis of Presentation
The financial 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 consolidated
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
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes included in the Partnership's 1996
Annual Report on Form 10-K.
2. Net Investment in Leveraged Leases
On August 20, 1996 the partnership acquired, subject to a leveraged lease,
the residual interest in an aircraft. The aircraft is a McDonnell Douglas
DC-10-30F currently on lease to Federal Express. 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 of $8,756,291.
On December 31, 1996 the Partnership acquired, subject to a leveraged
lease, the residual interest in an aircraft. The aircraft is a 1976 McDonnell
Douglas DC-10-30 currently on lease to Continental Airlines. The purchase price
was $11,320,923, consisting of $2,104,262 in cash and the assumption of
non-recourse senior debt of $9,216,661.
The net investment in leveraged leases as of September 30, 1997 consisted of the
following:
Non-cancelable minimum rents receivable (net of
principal and interest on non-recourse debt) $ 9,964,073
Estimated unguaranteed residual values ........ 24,818,000
Initial direct costs .......................... 1,282,722
Unearned income ............................... (25,842,542)
------------
$ 10,222,253
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.
Unearned income is recognized from leveraged leases over the life of the
lease at a constant rate of return on the positive net investment.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Prior to the acquisition of the Federal Express transaction, 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 ("Series D"),
(i.e., the junior debt). On January 29, 1997, the Partnership refinanced a
portion of the junior debt with a third party.
3. Investment in Joint Venture
The Partnership Agreement allows the Partnership to invest in joint
ventures with other limited partnerships sponsored by the General Partner
provided that the investment objectives of the joint ventures are consistent
with that of the Partnership.
ICON Cash flow LLC III
In December 1996, the Partnership and an affiliate, ICON Cash Flow
Partners, L.P. Series E ("Series E") formed ICON Cash Flow Partners L.L.C. III
(?ICON Cash Flow LLC III?), for the purpose of acquiring and managing an
aircraft currently on lease to Continental Airlines, Inc. The aircraft is a 1976
McDonnell Douglas DC-10-30. The Partnership and Series E contributed $1,579,514
(99%) and $15,955 (1%) of the cash required for such acquisition, respectively,
to ICON Cash Flow LLC III. ICON Cash Flow LLC III acquired the aircraft,
assuming $9,309,759 in non-recourse debt and utilizing contributions received
from the Partnership and Series E. The purchase price of the transaction totaled
$10,905,228. The lease is a leveraged lease and the lease term expires in March
2003. Profits, losses, excess cash and disposition proceeds are allocated 99% to
the Partnership and 1% to Series E. The Partnership's financial statements
include 100% of the assets and liabilities of ICON Cash Flow LLC III. Series E's
investment in ICON Cash Flow LLC III has been reflected as "Minority interest in
joint venture."
ICON Receivables 1997-A LLC
In March 1997 the Partnership, Series D, ICON Cash Flow Partners L.P. Six
("L.P. Six") and contributed and assigned equipment lease and finance
receivables and residuals with a net book value of $5,465,238, $4,874,857 and
$5,553,962, respectively to ICON Receivables 1997-A LLC ("1997-A"), a special
purpose entity created for the purpose of originating new leases, managing
existing contributed assets and, eventually, securitizing its portfolio. In
order to fund the acquisition of new leases, 1997-A obtained a warehouse
borrowing facility from Prudential Securities Credit Corporation (the "1997-A
Facility"). Borrowings under the 1997-A Facility were based on the present value
of the new leases. Outstanding amounts under the 1997-A Facility bore interest
equal to Libor plus 1.5%.
On September 19, 1997 Series E and L.P. Six contributed and assigned
equipment lease and finance receivables and residuals with a net book value of
$15,698,027 and $5,346,909, respectively to 1997-A. The Partnership, Series D,
Series E and L.P. Six (collectively the "1997-A Members") received a 19.97%,
17.81% 31.19% and 31.03% interest, respectively, in 1997-A based on the present
value of their related contributions.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
On September 19, 1997, 1997-A securitized substantially all of its
equipment leases and finance receivables and residuals. The net proceeds from
the securitization totaled $47,140,183, of which $16,658,877 was used to pay
down the 1997-A Facility, and the remaining proceeds, after establishing
reserves for expenses, were distributed to the 1997-A Members based on their
respective interests. 1997-A became the beneficial owner of a trust. The trustee
for the trust is Texas Commerce Bank ("TCB"). In conjunction with this
securitization, the portfolio as well as the General Partner's servicing
capabilities were rated "AA" by Duff & Phelps and Fitch, both nationally
recognized rating agencies. The General Partner, as servicer, is responsible for
managing, servicing, reporting on and administering the portfolio. 1997-A remits
all monies received from the portfolio to TCB. TCB is responsible for disbursing
to the noteholders their respective principal and interest and to 1997-A the
excess of cash collected over debt service from the portfolio. The 1997-A
Members received their pro rata share of any excess cash on a monthly basis from
1997-A. The Partnership's share of the net proceeds from the securitization
totaled $4,889,804. The Partnership used these proceeds to payoff the $4,250,000
note payable to 1997-A.The Partnership accounts for its investment in 1997-A
under the equity method of accounting. The Partnership's original investment was
recorded at cost and is adjusted by its share of earnings, losses and
distributions thereafter.
Information as to the financial position and results of operations of
1997-A as of and for the nine months ended September 30, 1997 is summarized
below:
September 30, 1997
Assets $ 54,950,026
============
Liabilities $ 49,150,356
============
Equity $ 5,799,670
============
Nine Months Ended
September 30, 1997
Net income $ 677,434
============
ICON Receivables 1997-B LLC
In August 1997 the Partnership, Series E and L.P. Six (collectively, the
"1997-B Members") formed ICON Receivables 1997-B LLC ("1997-B"), for the purpose
of originating lease transactions and ultimately securitizing its portfolio. The
1997-B Members contributed $500,000 (16.67% interest), $250,000 (8.33% interest)
and $2,250,000 (75.00% interest), respectively to 1997-B. In order to fund the
acquisition of additional leases, 1997-B obtained a warehouse borrowing facility
from Prudential Securities Credit Corporation (the "1997-B Facility").
Borrowings under the 1997-B Facility are based on the present value of the new
leases, provided that in the aggregate, the amount outstanding cannot exceed
$13,000,000. Outstanding amounts under the 1997-B Facility bear interest equal
to Libor plus 1.5%. Collections of receivables from leases are used to pay down
the 1997-B Facility, however, in the event of a default, all of 1997-B's assets
are available to cure such default. The net proceeds from
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
the expected securitization of these assets will be used to pay-off the
remaining 1997-B Facility balance and the remaining proceeds will be distributed
to the 1997-B Members in accordance with their membership interests. The
Partnership accounts for its investment in 1997-B under the equity method of
accounting. The Partnership's original investment was recorded at cost and is
adjusted by its share of earnings, losses and distribution thereafter.
Information as to the financial position and results of operations of
1997-B as of and for the nine months ended September 30, 1997 is summarized
below:
September 30, 1997
Assets $ 5,788,006
=============
Liabilities $ 2,756,456
=============
Equity $ 3,031,550
=============
Nine Months Ended
September 30, 1997
Net income $ 31,550
=============
4. 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, 1997 and 1996
were as follows:
<TABLE>
1997 1996
---- ----
<S> <C> <C> <C>
Underwriting commissions $ 389,092 $ 429,855 Charged to Equity
Organization and offering 680,910 752,246 Charged to Equity
Acquisition fees 2,064,530 1,675,433 Capitalized
Management fees 1,084,619 76,294 Charged to operations
Administrative expense
reimbursements 463,634 37,142 Charged to operations
------------ ------------
Total $ 4,682,785 $ 2,970,973
============ ============
</TABLE>
On December 31, 1996, the Partnership and an affiliate formed a joint
venture for the purpose of acquiring and managing an aircraft. (See Note 3 for
additional information relating to the joint venture.)
On March 11, 1997, the Partnership borrowed $4,250,000 from 1997-A , an
affiliate of the Partnership (see Note 3). The note is a short term note, bears
interest at Libor plus 1.5% and was paid from the Partnership's share of
securitization proceeds September 1997.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Item 2. 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. 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, 1997, 443,717.39
additional units were admitted, bringing the total units and capital
subscriptions to 470,085.34 and $47,008,534, respectively.
The Partnership's portfolio consisted of a net investment in
finance leases, estimated unguaranteed residual value, leveraged leases, equity
investment in joint venture and financings representing 68%, 22%, 8%, 2% and
less than 1% of total investments at September 30, 1997, respectively and 41%,
26%, 21%, 0% and 12% at September 30, 1996, respectively.
Results of Operations
Three Months Ended September 30, 1997 and 1996
For the three months ended September 30, 1996 the Partnership
leased or financed equipment with an initial cost of $44,991,096 to 50 lessees
or equipment users.
Revenue for the three months ended September 30, 1997 were
$2,491,247, representing an increase of $2,194,768 from 1996. The increase in
revenues resulted primarily from an increase in finance income of $1,223,077, an
increase in income from leveraged leases of $914,314 or 100% and an increase in
income from equity investment in joint venture of $129,224 or 100%. These
increases were partially offset by a decrease in interest income and other of
$71,847 or 68% from 1996. The increase in finance income resulted from an
increase in the average size of the portfolio from 1996 to 1997. Income from
leveraged leases increased due to the Partnership's increased investment in
leverage lease transactions. Income from equity investment in joint venture
increased due to an increase in the average size of the portfolio under
investment. Interest income and other decreased due to a decrease in the average
cash balance from 1996 to 1997.
Expenses for the three months ended September 30, 1997 were
$2,424,927, representing an increase of $2,254,738 from 1996. The increase in
expenses resulted primarily from an increase in interest expense of $1,335,341,
an increase in management fees of $385,227, an increase in amortization of
initial direct costs of $264,740, an increase in administrative expense
reimbursements of $158,287, an increase in provision for bad debt of $75,000 or
100%, an increase in general and administrative expense of $35,048 and an
increase in minority interest in joint venture of $1,096. Interest expense
increased due to an increase in the average debt outstanding from 1996 to 1997.
Management fees, amortization of initial direct costs, administrative expense
reimbursements and general and administrative expense increased due to an
increase in the average size of the portfolio from 1996 to 1997. As a result of
an analysis of delinquency, an assessment of overall risk and a review of
historical loss experience, it was determined that a greater provision for bad
debts of $75,000 was required for the three months ended September 30, 1997.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Net income for the three months ended September 30, 1997 and 1996
was $66,320 and $126,290, respectively. The net income per weighted average
limited partnership unit was $.15 and $1.05, respectively.
Nine Months Ended September 30, 1997 and 1996
For the nine months ended September 30, 1997 and 1996 the
Partnership leased or financed equipment with an initial cost of $51,527,713 and
$55,847,778, respectively to 21 and 125 lessees or equipment users respectively.
The weighted average initial transaction term for each year was 51 and 44 months
respectively.
Revenues for the nine months ended September 30, 1997 were
$5,898,186, representing an increase of $5,277,255 from 1996. The increase in
revenues resulted from an increase in finance income of $3,450,651, an increase
in income from leveraged lease of $1,666,627 or 100%, an increase in income from
equity investment in joint venture of $283,957 or 100% and an increase in net
gain on sales or remarketing of equipment of $39,180 or 100%. These increases
were partially offset by a decrease in interest income and other of $163,160 or
69% from 1996. The increase in finance income resulted from the increase in the
average size of the portfolio from 1996 to 1997. Income from leveraged leases,
and income from equity investment in joint venture increased due to the
Partnership's increased investment in these types of transactions. The net gain
on sales or remarketing of equipment increased due to the early termination of a
financing transaction. Interest income and other decreased due to a decrease in
the average cash balance from 1996 to 1997.
Expenses for the nine months ended September 30, 1997 were
$5,662,954, representing an increase of $5,237,609 from 1996. The increase in
expenses was due to an increase in interest expense of $2,696,232, an increase
in management fees of $1,008,325, an increase in amortization of initial direct
costs of $830,681, an increase in administrative expense reimbursements of
$426,489, an increase in provision for bad debt of $150,000 or 100%, an increase
in general and administrative expense of $122,608 and an increase in minority
interest in joint venture of $3,275 or 100%. Interest expense increased due to
an increase in the average debt outstanding from 1996 to 1997. Management fees,
amortization of initial direct costs, administrative expense reimbursement and
general and administrative expense increased due to an increase in the average
size of the portfolio from 1996 to 1997. As a result of an analysis of
delinquency, an assessment of overall risk and a review of historical loss
experience, it was determined that a $150,000 provision for bad debts was
required for the nine months ended September 30, 1997.
Net income for the nine months ended September 30, 1997 and 1996
was $235,232 and $195,586, respectively. The net income per weighted average
limited partnership unit was $.62 and $1.63, respectively.
Liquidity and Capital Resources
The Partnership's primary sources of funds for the nine months
ended September 30, 1997 and 1996 were capital contributions, net of offering
expenses, of $16,828,246 and $18,591,229, from limited partners, respectively,
net cash provided by operations of $4,122,847 and $573,133, respectively,
proceeds from sale of equipment of $2,041,692 in 1997 and proceeds from
affiliate note of $4,250,000 in 1997. These funds were used to make payments on
borrowings, fund cash distributions and to purchase equipment. The Partnership
intends to purchase additional equipment and fund cash distributions utilizing
capital contributions cash provided by operations, proceeds from sales of
equipment and borrowings.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Cash distributions to limited partners for the nine months ended
September 30, 1997 and 1996, which were paid monthly, totaled $2,780,594 and
$834,659, respectively, of which $232,880 and $193,630 was investment income and
$2,547,714 and $641,029 was a return of capital, respectively. The monthly
annualized cash distribution rate to limited partners was 22.1% and 21.2% for
1996 and 1997, of which 1.85% and 4.92% was investment income and 20.25% and
16.28% was a return of capital respectively, calculated as a percentage of each
partner's initial capital contribution. The limited partner distribution per
weighted average unit outstanding for the nine months ended September 30, 1997
and 1996 was $6.17 and $7.04, respectively, of which $.49 and $1.63 was
investment income and $5.68 and $5.41 was a return of capital, respectively.
In March 1997 the Partnership, Series D, ICON Cash Flow Partners L.P. Six
("L.P. Six") and contributed and assigned equipment lease and finance
receivables and residuals with a net book value of $5,465,238, $4,874,857 and
$5,553,962, respectively to ICON Receivables 1997-A LLC ("1997-A"), a special
purpose entity created for the purpose of originating new leases, managing
existing contributed assets and, eventually, securitizing its portfolio. In
order to fund the acquisition of new leases, 1997-A obtained a warehouse
borrowing facility from Prudential Securities Credit Corporation (the "1997-A
Facility"). Borrowings under the 1997-A Facility were based on the present value
of the new leases. Outstanding amounts under the 1997-A Facility bore interest
equal to Libor plus 1.5%.
On September 19, 1997 Series E and L.P. Six contributed and assigned
equipment lease and finance receivables and residuals with a net book value of
$15,698,027 and $5,346,909, respectively to 1997-A. The Partnership, Series D,
Series E and L.P. Six (collectively the "1997-A Members") received a 19.97%,
17.81% 31.19% and 31.03% interest, respectively, in 1997-A based on the present
value of their related contributions.
On September 19, 1997, 1997-A securitized substantially all of its
equipment leases and finance receivables and residuals. The net proceeds from
the securitization totaled $47,140,183, of which $16,658,877 was used to pay
down the 1997-A Facility, and the remaining proceeds, after establishing
reserves for expenses, were distributed to the 1997-A Members based on their
respective interests. 1997-A became the beneficial owner of a trust. The trustee
for the trust is Texas Commerce Bank ("TCB"). In conjunction with this
securitization, the portfolio as well as the General Partner's servicing
capabilities were rated "AA" by Duff & Phelps and Fitch, both nationally
recognized rating agencies. The General Partner, as servicer, is responsible for
managing, servicing, reporting on and administering the portfolio. 1997-A remits
all monies received from the portfolio to TCB. TCB is responsible for disbursing
to the noteholders their respective principal and interest and to 1997-A the
excess of cash collected over debt service from the portfolio. The Partnership's
share of the net proceeds from the securitization totaled $4,889,804. The
Partnership used these proceeds to payoff the $4,250,000 note payable to 1997-A.
The Partnership accounts for its investment in 1997-A under the equity method of
accounting. The Partnership's original investment was recorded at cost and is
adjusted by its share of earnings, losses and distributions thereafter.
In August 1997 the Partnership, Series E and L.P. Six (collectively, the
"1997-B Members") formed ICON Receivables 1997-B LLC ("1997-B"), for the purpose
of originating lease transactions and ultimately securitizing its portfolio. The
1997-B Members contributed $500,000 (16.67% interest), $250,000 (8.33% interest)
and $2,250,000 (75.00% interest), respectively to 1997-B. In order to fund the
acquisition of additional leases, 1997-B obtained a warehouse borrowing facility
from Prudential Securities Credit Corporation (the "1997-B Facility").
Borrowings under the 1997-B Facility are based on the present value of the new
leases, provided that in the aggregate, the amount outstanding cannot
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
exceed $13,000,000. Outstanding amounts under the 1997-B Facility bear interest
equal to Libor plus 1.5%. Collections of receivables from leases are used to pay
down the 1997-B Facility, however, in the event of a default, all of 1997-B's
assets are available to cure such default. The net proceeds from the expected
securitization of these assets will be used to pay-off the remaining 1997-B
Facility balance and the remaining proceeds will be distributed to the 1997-B
Members in accordance with their membership interests. The Partnership accounts
for its investment in 1997-B under the equity method of accounting. The
Partnership's original investment was recorded at cost and is adjusted by its
share of earnings, losses and distribution thereafter.
As of September 30, 1997, 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.
<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
No reports on Form 8-K were filed by the Partnership during the quarter ended
September 30, 1997.
<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.
November 14, 1997 /s/ 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
<NAME> ICON Cash Flow Partners L.P. Seven
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,215,972
<SECURITIES> 0
<RECEIVABLES> 161,381,783
<ALLOWANCES> 177,222
<INVENTORY> 155,742
<CURRENT-ASSETS> * 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 125,282,592
<CURRENT-LIABILITIES> ** 0
<BONDS> 44,829,895
0
0
<COMMON> 0
<OTHER-SE> 37,109,436
<TOTAL-LIABILITY-AND-EQUITY> 125,282,592
<SALES> 5,898,186
<TOTAL-REVENUES> 5,898,186
<CGS> 908,131
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,702,231
<LOSS-PROVISION> 150,000
<INTEREST-EXPENSE> 2,902,592
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 235,232
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.62
<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>
