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 March 31, 1999
-----------------------------------------------------------
[ ] 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
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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)
Consolidated Balance Sheets
(unaudited)
<TABLE>
March 31, December 31,
1999 1998
Assets
<S> <C> <C>
Cash ....................................................... $ 2,333,130 $ 3,899,054
------------- -------------
Investment in finance leases
Minimum rents receivable ................................ 112,696,783 122,539,958
Estimated unguaranteed residual values .................. 76,928,724 77,403,065
Initial direct costs .................................... 3,574,738 3,943,900
Unearned income ......................................... (35,704,890) (39,516,143)
Allowance for doubtful accounts ......................... (1,067,610) (868,450)
------------- -------------
156,427,745 163,502,330
------------- -------------
Investment in estimated unguaranteed residual values ....... 31,718,541 31,718,541
------------- -------------
Net investment in leveraged leases ......................... 12,937,475 12,568,089
------------- -------------
Investment in financings
Receivables due in installments ......................... 2,400,433 2,357,992
Initial direct costs .................................... 4,401 5,169
Unearned income ......................................... (602,744) (620,501)
Allowance for doubtful accounts ......................... (9,611) (8,772)
------------- -------------
1,792,479 1,733,888
------------- -------------
Investments in unconsolidated joint ventures ............... 1,480,087 1,490,820
------------- -------------
Accounts receivable from General Partner and affiliates, net 227,563 --
------------- -------------
Other assets ............................................... 1,436,170 1,474,518
------------- -------------
Total assets ............................................... $ 208,353,190 $ 216,387,240
============= =============
</TABLE>
(continued on next page)
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Balance Sheets (Continued)
(unaudited)
<TABLE>
March 31, December 31,
1999 1998
Liabilities and Partners' Equity
<S> <C> <C>
Notes payable - non-recourse ......................... $ 103,802,572 $ 110,848,356
Note payable - recourse .............................. 27,023,072 26,224,398
Accounts payable-equipment ........................... -- 501,318
Accounts payable - General Partner and affiliates, net -- 95,670
Security deposits, deferred credits and other payables 1,222,048 951,199
Minority interest in consolidated joint venture ...... 34,756 24,851
------------- -------------
132,082,448 138,645,792
------------- -------------
Commitments and Contingencies
Partners' equity (deficiency)
General Partner ................................... (98,810) (84,234)
Limited partners (996,269.18 and 996,469.18 units
outstanding, $100 per unit original
issue price in 1999 and 1998, respectively) ..... 76,369,552 77,825,682
------------- -------------
Total partners' equity .......................... 76,270,742 77,741,448
------------- -------------
Total liabilities and partners' equity ............... $ 208,353,190 $ 216,387,240
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Three Months Ended March 31,
(unaudited)
<TABLE>
1999 1998
---- ----
Revenues
<S> <C> <C>
Finance income ......................................... $3,984,131 $2,564,902
Income from leveraged leases, net ...................... 369,386 344,909
Income from investments in unconsolidated joint ventures 125,869 93,533
Interest income and other .............................. 8,597 92,819
Net gain on sales or remarketing of equipment .......... 176,579 --
---------- ----------
Total revenues ......................................... 4,664,562 3,096,163
---------- ----------
Expenses
Interest ............................................... 1,801,892 1,531,238
Management fees - General Partner ...................... 603,424 478,301
Amortization of initial direct costs ................... 436,376 423,326
Administrative expense
reimbursements - General Partner ..................... 257,859 207,548
Provision for bad debts ................................ 200,000 150,000
General and administrative ............................. 116,196 57,235
Minority interest expense in consolidated joint venture 1,199 1,116
---------- ----------
Total expenses ......................................... 3,416,946 2,848,764
---------- ----------
Net income ................................................ $1,247,616 $ 247,399
========== ==========
Net income allocable to:
Limited partners ....................................... $1,235,140 $ 244,925
General Partner ........................................ 12,476 2,474
---------- ----------
$1,247,616 $ 247,399
========== ==========
Weighted average number of limited
partnership units outstanding .......................... 996,400 680,272
========== ==========
Net income per weighted average
limited partnership unit ............................... $ 1.24 $ .36
========== ==========
</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 Three Months Ended March 31, 1999 and
the Years Ended December 31, 1998, 1997 and 1996
(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>
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 $ 8.18 $ 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 (285,927.35 units) 28,592,735 - 28,592,735
Sales and
offering expenses (3,862,277) - (3,862,277)
Limited partnership units
redeemed (1,625.63 units) (155,815) - (155,815)
</TABLE>
(continued on next page)
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity (Continued)
For the Three Months Ended March 31, 1999 and
the Years Ended December 31, 1998, 1997 and 1996
(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>
Cash distributions
to partners $ 4.41 $ 6.34 (4,147,829) (41,125) (4,188,954)
Net income 2,623,084 26,496 2,649,580
----------- -------- -----------
Balance at
December 31, 1997 45,924,446 (23,323) 45,901,123
Proceeds from issuance
of limited partnership
units (438,528.99 units) 43,852,899 - 43,852,899
Sales and offering expenses (5,917,882) - (5,917,882)
Limited partnership units
redeemed (1,902 units) (3,586) - (3,586)
Cash distributions to partners $ 7.46 $ 3.29 (8,692,479) (87,803) (8,780,282)
Net income 2,662,284 26,892 2,689,176
----------- -------- -----------
Balance at
December 31, 1998 77,825,682 (84,234) 77,741,448
Cash distributions to partners $ 1.45 $ 1.24 (2,678,115) (27,052) (2,705,167)
Limited Partnership units
redeemed (200 units) (13,155) - (13,155)
Net income 1,235,140 12,476 1,247,616
----------- -------- -----------
Balance at March 31, 1999 $76,369,552 $(98,810) $76,270,742
=========== ======== ===========
</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 Three Months Ended March 31,
(unaudited)
<TABLE>
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income ....................................................... $ 1,247,616 $ 247,399
------------ ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Finance income portion of receivables paid directly
to lenders by lessees ....................................... (3,350,056) (2,457,589)
Interest expense on non-recourse financing paid
directly by lessees ......................................... 1,718,846 1,531,238
Interest accrued on notes-payable-recourse .................... 48,674 --
Amortization of initial direct costs .......................... 436,376 423,326
Income from leveraged leases, net ............................. (369,386) (344,909)
Provision for bad debt ........................................ 200,000 150,000
Income from investments in unconsolidated joint venture ....... (125,869) (93,533)
Net gain on sales or remarketing of equipment ................. (176,579) --
Change in operating assets and liabilities:
Collection of principal - non-financed receivables ........ 896,711 55,479
Distributions received from unconsolidated joint ventures .. 172,132 113,243
Investments in unconsolidated joint ventures ............... (35,430) (63,653)
Other assets ............................................... (28,051) 245,642
Security deposits, deferred credits and other payables ..... 270,849 300,186
Accounts payable to General Partner and affiliates, net .... (95,670) (28,150)
Accounts receivable from General Partner and affiliates, net (227,563) --
Minority interest in consolidated joint venture ............ 9,905 1,116
Other, net ................................................. (321,271) (50,240)
------------ ------------
Total adjustments ........................................ (976,382) (217,844)
------------ ------------
Net cash provided by operating activities ................... 271,234 29,555
------------ ------------
Cash flows from investing activities:
Equipment and receivables purchased .............................. (504,740) (9,131,425)
Initial direct costs ............................................. -- (1,581,719)
Proceeds from sale of equipment .................................. 769,046 --
------------ ------------
Net cash provided by (used in) investing activities ........ 264,306 (10,713,144)
------------ ------------
</TABLE>
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
For the Three Months Ended March 31,
(unaudited)
<TABLE>
1999 1998
---- ----
Cash flows from financing activities:
<S> <C> <C>
Issuance of limited partnership units, net of offering expenses -- 14,530,069
Proceeds from recourse debt ................................... 3,000,000 --
Principal payments on notes payable - recourse ................ (2,250,000) --
Principle payments on notes payable - non-recourse ............ (133,142) --
Cash distributions to partners ................................ (2,705,167) (1,874,212)
Redemption of limited partnership units ....................... (13,155) --
------------ ------------
Net cash provided by (used in) financing activities ..... (2,101,464) 12,655,857
------------ ------------
Net increase (decrease) in cash .................................. (1,565,924) 1,972,268
Cash at beginning of period ...................................... 3,899,054 4,516,385
------------ ------------
Cash at end of period ............................................ $ 2,333,130 $ 6,488,653
============ ============
</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 three months ended March 31, 1999 and 1998, non-cash activities
included the following:
1999 1998
---- ----
Fair value of equipment and receivables
purchased for debt and payables .... $ -- $(38,313,411)
Non-recourse notes payable assumed in
purchase price ..................... -- 36,628,091
Accounts payable - equipment .......... -- 1,685,320
Principal and interest on direct
finance receivables paid directly
to lenders by lessees .............. 8,631,488 7,223,016
Principal and interest on non-recourse
financing paid directly to lenders
by lessees ......................... (8,631,488) (7,223,016)
------------ ------------
$ -- $ --
============ ============
Interest expense of $1,801,892 and $1,531,238 for the three months ended
March 31, 1999 and 1998 consisted of interest expense on non-recourse financing
paid or accrued directly to lenders by lessees of $1,718,846 and $1,531,238,
respectively, interest on notes payable-recourse of $48,674 and $0,
respectively, and other interest of $34,372 and $0, respectively.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
March 31, 1999
(unaudited)
1. Basis of Presentation
The consolidated 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 1998
Annual Report on Form 10-K.
2. Redemption of Limited Partnership Units
The General Partner consented to the Partnership redeeming 200 limited
partnership units during the three months ended March 31, 1999. The redemption
amount was calculated following the redemption formula specified in the
Partnership Agreement. Redeemed units have no voting rights and do not share in
distributions. The Partnership Agreement limits the number of units which can be
redeemed in any one year and redeemed units may not be reissued. Redeemed
limited partnership units are accounted for as a reduction from partners'
equity.
3. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the three months ended March 31, 1999 and 1998
were as follows:
1999 1998
---- ----
Underwriting commissions $ - $ 335,955 Charged to Equity
Organization and offering - 587,922 Charged to Equity
Acquisition fees - 1,423,345 Capitalized
Management fees 603,424 478,301 Charged to Operations
Administrative expense
reimbursements 257,859 207,548 Charged to Operations
-------- ----------
Total $861,283 $3,033,071
======== ==========
The Partnership and affiliates formed four joint ventures for the purpose
of acquiring and managing various assets. (See Note 5 for additional information
relating to the joint ventures.)
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
4. Net Investment in Leveraged Leases
In August 1996, the Partnership acquired, subject to a leveraged lease, the
residual interest in an aircraft on lease with Federal Express. The aircraft is
a McDonnell Douglas DC-10-30F built in 1986, and the lease expires in July 2004.
The purchase price was $40,973,585.
In December 1996, the Partnership and an affiliate (see Note 5) acquired,
subject to a leveraged lease, an aircraft on lease with Continental Airlines,
Inc. The aircraft is a McDonnell Douglas DC-10-30 built in 1976, and the lease
expires in March 2003. The purchase price was $11,429,751.
The net investment in the leveraged leases as of March 31, 1999 consisted of the
following:
Non-cancelable minimum rents receivable (net of
principal and interest on non-recourse debt) $ 910,000
Estimated unguaranteed residual values ........ 20,818,001
Initial direct costs .......................... 919,987
Unearned income ............................... (9,710,513)
------------
$ 12,937,475
============
Unearned income is recognized from leveraged leases over the life of the
lease at a constant rate of return based on the positive net investment in the
lease in years such investment is positive.
5. Investments in Joint Ventures
The Partnership and affiliates formed four joint ventures for the purpose
of acquiring and managing various assets.
The joint venture described below is majority owned and is consolidated
with the Partnership.
ICON Cash Flow Partners L.L.C. III
On December 31, 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 and cost $11,429,751. The lease is a leveraged lease
and the lease term expires in March 2003 (see Note 4). 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."
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The three joint ventures described below are less than 50% owned and are
accounted for following the equity method.
ICON Receivables 1997-A L.L.C.
In March 1997 the Partnership, ICON Cash Flow Partners, L.P., Series D
("Series D"), and ICON Cash Flow Partners L.P. Six ("L.P. Six"), contributed and
assigned equipment lease and finance receivables and residuals to ICON
Receivables 1997-A L.L.C. ("1997-A"), a special purpose entity created for the
purpose of originating leases, managing existing contributed assets and
securitizing its portfolio. In September 1997 the Partnership, Series E and L.P.
Six contributed and assigned additional equipment lease and finance receivables
and residuals to 1997-A. The Partnership, Series D, Series E and L.P. Six
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. In September 1997,
1997-A securitized substantially all of its equipment leases and finance
receivables and residuals. 1997-A became the beneficial owner of a trust. 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 three months ended March 31, 1999 is summarized below:
March 31, 1999
Assets $ 27,759,198
===============
Liabilities $ 23,176,757
===============
Equity $ 4,582,441
===============
Partnership's share of equity $ 1,059,308
===============
Three Months Ended
March 31, 1999
Net income $ 315,487
===============
Partnership's share of net income $ 62,987
===============
Distributions $ 508,872
===============
Partnership's share of distributions $ 101,596
===============
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
ICON Receivables 1997-B L.L.C.
In August 1997 the Partnership, Series E and L.P. Six formed ICON
Receivables 1997-B L.L.C. ("1997-B"), a special purpose entity formed for the
purpose of originating leases and securitizing its portfolio. The Partnership,
Series E and L.P. Six contributed cash and received a 16.67%, 75.00% and 8.33%
interest, respectively, in 1997-B. In order to fund the acquisition of leases,
1997-B obtained a warehouse borrowing facility from Prudential Securities Credit
Corporation (the "1997-B Warehouse Facility"). In October 1998, 1997-B completed
an equipment securitization. The net proceeds from the securitization of these
assets were used to pay-off the remaining 1997-B Warehouse Facility balance and
any remaining proceeds were distributed to the 1997-B members in accordance with
their membership interests. 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-B as of and for the three months ended March 31, 1999 is summarized below:
March 31, 1999
Assets $ 37,443,824
===============
Liabilities $ 35,136,630
===============
Equity $ 2,307,194
===============
Partnership's share of equity $ 384,609
===============
Three Months Ended
March 31, 1999
Net income $ 365,571
===============
Partnership's share of net income $ 60,941
===============
Distributions $ 286,775
===============
Partnership's share of distributions $ 47,805
===============
ICON Boardman Funding L.L.C.
In December 1998 the Partnership and three affiliates, ICON Cash Flow
Partners, L.P., Series C ("Series C"), L.P. Six and ICON Income Fund Eight A
L.P. ("Eight A") formed ICON Boardman Funding L.L.C. ("ICON BF"), for the
purpose of acquiring a lease with Portland General Electric. The purchase price
totaled $27,421,810, and was funded with cash and non-recourse debt assumed in
the purchase price. The Partnership, Series C, L.P. Six, and Eight A received a
.5%, .5%, .5% and 98.5% interest, respectively, in ICON BF. The Partnership's
original investment was recorded at cost
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
of $56,960 and is adjusted by its share of earnings, losses and distributions,
thereafter. Simultaneously with the acquisition of the Portland General Electric
lease by ICON BF, a portion of the rent receivable in excess of the senior debt
payments was acquired by L.P. Six from ICON BF for $3,801,108.
On March 30, 1999, ICON BF acquired L.P. Six's investment in a portion of
the rent in excess of the senior debt payments for $3,097,637 and financed, with
a third party, all of the rent receivable in excess of the senior debt payments.
There was no gain or loss to L.P. Six on this transaction. ICON BF received
$7,643,867 from the financing. The proceeds from the financing, net of the
purchase of L.P. Six's investment, were distributed to the members of ICON BF in
accordance with their ownership interests.
Information as to the financial position and results of operations of ICON
BF as of March 31, 1999 is summarized below:
March 31, 1999
Assets $ 25,365,163
===============
Liabilities $ 18,131,166
===============
Equity $ 7,233,997
===============
Partnership's share of equity $ 36,170
===============
Three Months Ended
March 31, 1999
Net income $ 388,238
===============
Partnership's share of net income $ 1,941
===============
Distributions $ 4,546,230
===============
Partnership's share of distributions $ 22,731
===============
<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
The Partnership's portfolio consisted of a net investment in finance
leases, estimated unguaranteed residual values, leveraged leases, financings and
investments in unconsolidated joint ventures, representing 77%, 15%, 6%, 1% and
1% of total investments at March 31, 1999, respectively, and 77%, 14%, 7%, 1%
and 1% of total investments at March 31, 1998, respectively.
Results of Operations for the Three Months Ended March 31, 1999 and 1998
For the three months ended March 31, 1999 the Partnership did not enter
into any new leases or financing agreements. For the three months ended March
31, 1998, the Partnership leased or financed additional equipment with an
initial cost of $47,444,836 to 6 lessees or equipment users. At March 31, 1999
the weighted average remaining transaction term of the portfolio was 28 months.
Revenues for the three months ended March 31, 1999 were $4,664,562
representing an increase of $1,568,399 or 51% from 1998. The increase in
revenues resulted from an increase in finance income of $1,419,229 or 55%, a net
gain on sales or remarketing of equipment of $176,579, an increase in income
from leveraged leases of $24,477 or 7% and an increase in income from
investments in unconsolidated joint ventures of $32,336 or 35%. These increases
were partially offset by a decrease in interest income and other of $84,222 or
91%. The increase in finance income was a result of an increase in the average
size of the finance lease portfolio from 1998 to 1999. The net gain on sales of
remarketing of equipment was due to the sales of equipment for which proceeds
received were in excess of the remaining carrying value. There were no sales of
equipment in the first quarter 1998. The increase in income from equity
investment in joint ventures was due to an increase in the average size of the
finance lease portfolio of one of the underlying joint ventures, ICON
Receivables 1997-B. Income from leveraged leases increased due to an increase in
the net investment in leveraged leases. The decrease in interest income and
other was primarily due to a decrease in interest income which resulted from a
decrease in the size of the average cash balance from 1998 to 1999.
Expenses for the three months ended March 31, 1999 were $3,416,946,
representing an increase of $568,182 or 20% from 1998. The increase in expenses
resulted from an increase in interest expense of $270,654 or 18%, an increase in
provision for bad debts of $50,000, an increase in the management fees of
$125,123 or 26%, an increase in administrative expense reimbursements of $50,311
or 24%, an increase in general and administrative of $58,961 or 103%, an
increase in amortization of initial direct costs of $13,050 or 3% and an
increase in minority interest in joint venture of $83 or 7%. The increases in
management fees, administrative expense reimbursements and amortization of
initial direct costs were a result of an increase in the average size of the
finance lease portfolio from 1998 to 1999. The increase in general and
administrative expense was primarily due to an increase in legal and other
professional fees and an increase in printing and postage costs. Interest
expense increased due to an increase in the average debt outstanding from 1998
to 1999. Minority interest expense increased due to an increase in net income of
the underlying joint venture. As a result of an analysis of delinquency,
assessment of overall risk and a review of historical loss experience the
Partnership determined that an additional provision for bad debt of $200,000 was
required for the three months ending March 31, 1999.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Net income for the three months ended March 31, 1999 and 1998 was
$1,247,616 and $247,399, respectively. The net income per weighted average
limited partnership unit was $1.24 and $.36, respectively.
Liquidity and Capital Resources
The Partnership's primary sources of funds for the three months ended March
31, 1999 and 1998 were capital contributions from limited partners, net of
offering expenses, of $0 and $14,530,069, respectively, net cash provided by
operations of $271,233 and $29,555, respectively, proceeds from sales of
equipment of $769,046 in 1999 and proceeds from recourse debt of $3,000,000 in
1999. These funds were used to make payments on borrowings, fund cash
distributions, and in 1998, to purchase equipment. The Partnership intends to
purchase additional equipment and fund cash distributions utilizing cash
provided by operations, proceeds from sales of equipment and borrowings.
Cash distributions to limited partners for the three months ended March 31,
1999 and 1998, which were paid monthly, totaled $2,678,115 and $1,858,176,
respectively, of which $1,235,140 and $244,925 was investment income and
$1,442,975 and $1,613,251 was a return of capital, respectively. The monthly
annualized cash distributions rate to limited partners was 10.75% of which 4.96%
and 1.42% was investment income and 5.79% and 9.33% was a return of capital,
respectively. The limited partner distribution per weighted average unit
outstanding for the three months ended March 31, 1999 and 1998 was $2.69, of
which $1.24 and $.35 was investment income and $1.45 and $2.34 was a return of
capital, respectively.
The Partnership and an affiliate, ICON Income Fund Eight A L.P. ("Eight A")
entered into a joint line of credit agreement (the "Facility") with a lender in
December 1998. The maximum amount available under the Facility is $5,000,000.
The Facility is secured by eligible receivables and residuals and bears interest
at the rate of Prime plus one half percent. At March 31, 1999 the Partnership
and Eight A had $3,000,000 and $0, respectively, outstanding under the Facility.
In March 1997 the Partnership, Series D and L.P. Six, contributed and
assigned equipment lease and finance receivables and residuals to 1997-A, a
special purpose entity created for the purpose of originating leases, managing
existing contributed assets and securitizing its portfolio. In September 1997
the Partnership, Series E and L.P. Six contributed and assigned additional
equipment lease and finance receivables and residuals to 1997-A. The
Partnership, Series D, Series E and L.P. Six 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. In September 1997, 1997-A securitized substantially all
of its equipment leases and finance receivables and residuals. 1997-A became the
beneficial owner of a trust. 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 formed 1997-B, a
special purpose entity formed for the purpose of originating leases and
securitizing its portfolio. The Partnership, Series E and L.P. Six contributed
$500,000 (16.67% interest), $2,250,000 (75.00% interest) and $250,000 (8.33%
interest), respectively to 1997-B. In order to fund the acquisition of leases,
1997-B obtained a warehouse borrowing facility from Prudential Securities Credit
Corporation (the "1997-B Warehouse Facility"). In October 1998, 1997-B completed
an equipment securitization. The net proceeds from
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
the securitization of these assets were used to pay-off the remaining 1997-B
Warehouse Facility balance and any remaining proceeds were distributed to the
1997-B members in accordance with their membership interests. The Partnership's
original investment was recorded at cost and is adjusted by its share of
earnings, losses and distributions thereafter.
In December 1998 the Partnership and three affiliates, Series C, L.P. Six
and Eight A formed ICON Boardman Funding LLC, for the purpose of acquiring a
lease with Portland General Electric. The purchase price totaled $27,421,810,
and was funded with cash and non-recourse debt assumed in the purchase price.
The Partnership, Series C, L.P. Six and Eight A received a .5%, .5%, .5% and
98.5% interest, respectively, in the joint venture. The Partnership's original
investment was recorded at cost and is adjusted by its share of earnings, losses
and distributions, thereafter. Simultaneously with the acquisition of the
Portland General Electric lease by ICON BF, a portion of the rent receivable in
excess of the senior debt payments was acquired by L.P. Six from ICON BF for
$3,801,108.
On March 30, 1999, ICON BF acquired L.P. Six's investment in a portion of
the rent in excess of the senior debt payments for $3,097,637 and financed, with
a third party, all of the rent receivable in excess of the senior debt payments.
There was no gain or loss to L.P. Six on this transaction. ICON BF received
$7,643,867 from the financing. The proceeds from the financing, net of the
purchase of L.P. Six's investment, were distributed to the members of ICON BF in
accordance with their ownership interests.
As of March 31, 1999 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.
Year 2000 Issue
The Year 2000 issue arose because many existing computer programs have been
written using two digits rather than four to define the applicable year. As a
result, programs could interpret dates ending in "00" as the year 1900 rather
than the year 2000. In certain cases, such errors could result in system
failures or miscalculations that disrupt the operation of the affected
businesses.
The Partnership uses computer information systems provided by the General
Partner and has no computer information systems of its own. The software related
to the General Partner's primary computer information systems are provided by
third party vendors. The General Partner has formally communicated with these
vendors and has received assurance that their programs are Year 2000 compliant.
In addition, the General Partner has gathered information about the Year 2000
readiness of significant vendors and third-party servicers and continues to
monitor developments in this area. All of the General Partner's peripheral
computer technologies, such as its network operating system and third party
software applications, including payroll and electronic banking have been
evaluated and have been found to be Year 2000 compliant. The ultimate impact of
the Year 2000 issue on the Partnership will depend to a great extent on the
manner in which the issue is addressed by the Partnership's lessees. Each of the
Partnership's lessees will have a material self interest in resolving any Year
2000 issue, however, non-compliance on the part of a lessee could result in lost
or delayed revenues to the Partnership. The effect of this risk to the
Partnership is not determinable.
The General Partner is responsible for costs relating to the assessment and
development of its Year 2000 compliance remediation plan, as well as the testing
of the hardware and software owned or licensed for its personal computers. The
General Partner's costs incurred to date and expected future costs are not
material.
<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
March 31, 1999.
<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.
May 14, 1999 /s/ Kevin F. Redmond
- ------------ ------------------------------------------
Date Kevin F. Redmond
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,333,130
<SECURITIES> 0
<RECEIVABLES> 116,007,216
<ALLOWANCES> 1,077,221
<INVENTORY> 0
<CURRENT-ASSETS> * 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 208,353,190
<CURRENT-LIABILITIES> ** 0
<BONDS> 130,825,644
0
0
<COMMON> 0
<OTHER-SE> 76,270,742
<TOTAL-LIABILITY-AND-EQUITY> 208,353,190
<SALES> 4,655,965
<TOTAL-REVENUES> 4,664,562
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,415,054
<LOSS-PROVISION> 200,000
<INTEREST-EXPENSE> 1,801,892
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,247,616
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
<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>
