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, 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
- --------------------------------------------------------------------------------
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>
June 30, December 31,
1999 1998
Assets
<S> <C> <C>
Cash ....................................................... $ 1,125,540 $ 3,899,054
------------- -------------
Investment in finance leases
Minimum rents receivable ................................ 93,634,345 122,539,958
Estimated unguaranteed residual values .................. 76,445,076 77,403,065
Initial direct costs .................................... 2,763,911 3,943,900
Unearned income ......................................... (28,452,342) (39,516,143)
Allowance for doubtful accounts ......................... (1,067,610) (868,450)
------------- -------------
143,323,380 163,502,330
Investment in estimated unguaranteed residual values ....... 31,718,541 31,718,541
------------- -------------
Net investment in leveraged leases ......................... 13,311,001 12,568,089
------------- -------------
Investment in financings
Receivables due in installments ......................... 2,270,737 2,357,992
Initial direct costs .................................... 4,086 5,169
Unearned income ......................................... (548,353) (620,501)
Allowance for doubtful accounts ......................... (9,611) (8,772)
------------- -------------
1,716,859 1,733,888
Investments in unconsolidated joint ventures ............... 1,438,696 1,490,820
------------- -------------
Accounts receivable from General Partner and affiliates, net 202,897 --
Other assets ............................................... 1,381,711 1,474,518
------------- -------------
Total assets ............................................... $ 194,218,625 $ 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>
June 30, December 31,
1999 1998
Liabilities and Partners' Equity
<S> <C> <C>
Notes payable - non-recourse ......................... $ 89,852,771 $ 110,848,356
Notes payable - recourse ............................. 29,072,788 26,224,398
Accounts payable-equipment ........................... -- 501,318
Accounts payable - General Partner and affiliates, net -- 95,670
Security deposits, deferred credits and other payables 1,097,260 951,199
Minority interest in consolidated joint venture ...... 35,971 24,851
------------- -------------
120,058,790 138,645,792
Commitments and Contingencies
Partners' equity (deficiency)
General Partner ................................... (116,862) (84,234)
Limited partners (991,812.97 and 996,469.18 units
outstanding, $100 per unit original
issue price) .................................... 74,276,697 77,825,682
------------- -------------
Total partners' equity .......................... 74,159,835 77,741,448
------------- -------------
Total liabilities and partners' equity ............... $ 194,218,625 $ 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
(unaudited)
<TABLE>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
Revenues
<S> <C> <C> <C> <C>
Finance income ........................ $ 6,303,335 $ 3,018,746 $10,287,466 $ 5,583,648
Income from leveraged leases, net ..... 373,527 354,253 742,913 699,162
Income from equity investment
in joint ventures ................... 39,266 161,846 165,135 255,379
Interest income and other ............. 3,812 74,693 12,409 167,512
Net gain (loss) on sales or remarketing
of equipment ........................ (68,040) 8,087 108,539 8,087
----------- ----------- ----------- -----------
Total revenues ........................ 6,651,900 3,617,625 11,316,462 6,713,788
----------- ----------- ----------- -----------
Expenses
Interest .............................. 3,527,900 1,536,428 5,329,792 3,067,666
Management fees - General Partner ..... 870,359 613,753 1,473,783 1,092,054
Amortization of initial direct costs .. 813,511 399,314 1,249,887 822,640
Administrative expense
reimbursements - General Partner .... 364,723 262,604 622,582 470,152
Provision for bad debts ............... -- 250,000 200,000 400,000
General and administrative ............ 177,203 168,161 293,399 225,396
Minority interest in joint venture .... 1,215 1,124 2,414 2,240
----------- ----------- ----------- -----------
Total expenses ........................ 5,754,911 3,231,384 9,171,857 6,080,148
----------- ----------- ----------- -----------
Net income ............................... $ 896,989 $ 386,241 $ 2,144,605 $ 633,640
=========== =========== =========== ===========
Net income allocable to:
Limited partners ...................... $ 888,019 $ 382,379 $ 2,123,159 $ 627,304
General Partner ....................... 8,970 3,862 21,446 6,336
----------- ----------- ----------- -----------
$ 896,989 $ 386,241 $ 2,144,605 $ 633,640
=========== =========== =========== ===========
Weighted average number of limited
partnership units outstanding ......... 993,444 813,275 994,914 747,141
=========== =========== =========== ===========
Net income per weighted average
limited partnership unit .............. $ .89 $ .47 $ 2.13 $ .84
=========== =========== =========== ===========
</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 Six Months Ended June 30, 1999 and
the Year Ended December 31, 1998
(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, 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 $ 3.25 $ 2.13 (5,351,807) (54,074) (5,405,881)
Limited Partnership units
redeemed (4,656.22 units) (320,337) - (320,337)
Net income 2,123,159 21,446 2,144,605
------------ --------- -----------
Balance at June 30, 1999 $ 74,276,697 $(116,862) $74,159,835
============ ========== ===========
</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 Six Months Ended June 30,
(unaudited)
<TABLE>
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income ....................................................... $ 2,144,605 $ 633,640
------------ ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Finance income portion of receivables paid directly
to lenders by lessees ....................................... (9,067,164) (4,730,591)
Interest expense on non-recourse financing paid
directly by lessees ......................................... 5,083,310 3,038,992
Interest accrued on notes-payable-recourse .................... 98,390 --
Amortization of initial direct costs .......................... 1,249,887 822,640
Income from leveraged leases, net ............................. (742,913) (699,162)
Provision for bad debt ........................................ 200,000 400,000
Income from investments in unconsolidated joint venture ....... (165,135) (255,379)
Net gain on sales or remarketing of equipment ................. (108,539) (8,087)
Change in operating assets and liabilities:
Collection of principal - non-financed receivables ........ 1,391,291 300,489
Distributions received from unconsolidated joint ventures .. 339,846 163,156
Investments in unconsolidated joint ventures ............... (59,455) (341,131)
Other assets ............................................... (13,308) (61,070)
Security deposits, deferred credits and other payables ..... 146,061 248,239
Accounts payable to General Partner and affiliates, net .... (95,670) (28,150)
Accounts receivable from General Partner and affiliates, net (202,897) (259,265)
Minority interest in consolidated joint venture ............ 11,120 2,240
Other, net ................................................. (279,613) (104,980)
------------ ------------
Total adjustments ........................................ (2,214,789) (1,512,059)
------------ ------------
Net cash used by operating activities ....................... (70,184) (878,419)
------------ ------------
Cash flows from investing activities:
Equipment and receivables purchased .............................. (672,309) (18,583,362)
Initial direct costs ............................................. -- (2,730,941)
Proceeds from sale of equipment .................................. 1,214,127 65,963
------------ ------------
Net cash provided by (used in) investing activities ........ 541,818 (21,248,340)
------------ ------------
</TABLE>
(continued on next page)
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
For the Six Months Ended June 30,
(unaudited)
<TABLE>
1999 1998
---- ----
Cash flows from financing activities:
<S> <C> <C>
Issuance of limited partnership units, net of offering expenses -- 25,810,449
Proceeds from recourse debt ................................... 5,000,000 --
Proceeds from notes payable - non-recourse .................... -- 2,181,892
Principal payments on notes payable - recourse ................ (2,250,000) (2,250,000)
Principal payments on notes payable - non-recourse ............ (268,930) (493,328)
Cash distributions to partners ................................ (5,405,881) (4,326,056)
Redemption of limited partnership units ....................... (320,337) (47,610)
------------ ------------
Net cash provided by (used in) financing activities ..... (3,245,148) 20,875,347
------------ ------------
Net decrease in cash ............................................. (2,773,514) (1,251,412)
Cash at beginning of period ...................................... 3,899,054 4,516,385
------------ ------------
Cash at end of period ............................................ $ 1,125,540 $ 3,264,973
============ ============
</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 six months ended June 30, 1999 and 1998, non-cash activities
included the following:
<TABLE>
1999 1998
---- ----
Fair value of equipment and receivables purchased
<S> <C> <C>
for debt and payables ............................... $ (957,919) $(64,079,135)
Non-recourse notes payable assumed in purchase price ... 957,919 64,030,448
Accounts payable - equipment ........................... 48,687
Principal and interest on direct finance receivables
paid directly to lenders by lessees ................. 26,767,884 15,421,865
Principal and interest on non-recourse financing paid
directly to lenders by lessees ...................... (26,767,884) (15,421,865)
Decrease in investments in finance leases and financings
due to contribution to joint ventures ............... (63,032) --
Increase in equity investment in joint ventures ........ 63,032 --
------------ ------------
$ -- $ --
============ ============
</TABLE>
Interest expense of $5,329,792 and $3,067,666 for the six months ended
June 30, 1999 and 1998 consisted of interest expense on non-recourse financing
paid or accrued directly to lenders by lessees of $5,083,310 and $3,038,992,
respectively, interest on notes payable - non-recourse of $66,096 in 1999,
interest on notes payable - recourse of $180,386 in 1999 and other interest of
$28,674 in 1998.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
June 30, 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 4,656.22
limited partnership units during the six months ended June 30, 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 six months ended June 30, 1999 and 1998 were
as follows:
1999 1998
---- ----
Underwriting commissions $ - $ 596,773 Charged to Equity
Organization and offering - 1,044,353 Charged to Equity
Acquisition fees - 2,852,838 Capitalized
Management fees 1,473,783 1,092,054 Charged to Operations
Administrative expense
reimbursements 622,582 470,152 Charged to Operations
---------- ----------
Total $2,096,365 $6,056,170
========== ==========
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 an ownership interest in an
aircraft, subject to a leveraged 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 June 30, 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 862,980
Unearned income (9,279,980)
------------
$ 13,311,001
============
Unearned income is recognized from leveraged leases over the lives of the
leases at a constant rate of return based on the positive net investment in the
leases in years such investments are 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. (see Note 4). 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. 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 six months ended June 30, 1999 is summarized below:
June 30, 1999
Assets $23,781,936
===========
Liabilities $19,546,193
===========
Equity $ 4,235,743
===========
Partnership's share of equity $ 989,115
===========
Six Months Ended
June 30, 1999
Net income $ 331,975
===========
Partnership's share of net income $ 66,292
===========
Distributions $ 1,192,722
===========
Partnership's share of distributions $ 238,127
===========
<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 six months ended June 30, 1999 is summarized below:
June 30, 1999
Assets $ 34,538,412
============
Liabilities $(32,067,782)
============
Equity $ 2,470,630
============
Partnership's share of equity $ 411,854
============
Six Months Ended
June 30, 1999
Net income $ 571,948
============
Partnership's share of net income $ 95,344
============
Distributions $ 473,835
============
Partnership's share of distributions $ 78,988
============
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 and for the six months ended June 30, 1999 is summarized below:
June 30, 1999
Assets $26,061,621
===========
Liabilities $18,516,096
===========
Equity $ 7,545,525
===========
Partnership's share of equity $ 37,728
===========
Six Months Ended
June 30, 1999
Net income $ 699,768
============
Partnership's share of net income $ 3,499
============
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 75%, 16%, 7%, 1% and
1% of total investments at June 30, 1999, respectively, and 81%, 12%, 5%, 1% and
1% of total investments at June 30, 1998, respectively.
Results of Operations for the Three Months Ended June 30, 1999 and 1998
For the three months ended June 30, 1999 and 1998 the Partnership leased
or financed additional equipment with an initial cost of $171,941 and
$35,217,661, respectively, to 1 and 146 lessees or equipment users. At June 30,
1999 the weighted average remaining transaction term of the portfolio was 21
months.
Revenues for the three months ended June 30, 1999 were $6,651,900,
representing an increase of $3,034,275 or 83.9% from 1998. The increase in
revenues resulted primarily from an increase in finance income of $3,284,589 or
108.8% and an increase in income from leveraged leases net of $19,274 or 5.4%.
These increases were partially offset by a decrease in interest income and other
of $70,881 or 94.9%, a decrease in income from equity investment in
unconsolidated joint ventures of $122,580 or 75.7% and a loss on sales or
remarketing of equipment of $68,040 in 1999 compared to a gain on sales or
remarketing of equipment of $8,087 in 1998. The increase in finance income
resulted from an increase in the average size of the finance lease portfolio
from 1998 to 1999. Income from leveraged leases increased due to an increase in
the net investment in leveraged leases. The net loss on sales or remarketing of
equipment resulted from equipment being sold or remarketed for which proceeds
received were less than the remaining carrying value. 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. As a result of an analysis of delinquency, assessment of overall risk and
a review of historical loss experience ICON Receivables 1997-A L.L.C. ("1997-A")
recorded a loss provision of $270,000 for the three months ended June 30, 1999
which resulted in a decrease for the Partnership in income from equity
investment in unconsolidated joint ventures.
Expenses for the three months ended June 30, 1999 were $5,754,911,
representing an increase of $2,523,527 or 78.1% from 1998. The increase in
expenses resulted primarily from an increase in interest expense of $1,991,472
or 129.6%, an increase in amortization of initial direct costs of $414,197 or
103.7%, an increase in management fees of $256,606 or 41.8%, an increase in
administrative expense reimbursements of $102,119 or 38.9%, an increase in
general and administrative expense of $9,042 or 5.4% and an increase in minority
interest in consolidated joint venture of $91 or 8.1%. These increases were
partially offset by a decrease in the provision for bad debts of $250,000.
Interest expense increased as a result of an increase in the average debt
outstanding from 1998 to 1999. Amortization of initial direct costs, management
fees, administrative expense reimbursements and general and administrative
expense increased due to an increase in the average size of the finance lease
portfolio from 1998 to 1999. The increase in minority interest in consolidated
joint venture was due to an increase in the net income of the underlying joint
venture from 1998 to 1999. As a result of an analysis of delinquency, assessment
of overall risk and a review of historical loss experience the Partnership
determined that no additional provision for bad debt was required for the three
months ending June 30, 1999 compared to a $250,000 provision for the three
months ended June 30, 1998.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Net income for the three months ended June 30, 1999 and 1998 was $896,989
and $386,241, respectively. The net income per weighted average limited
partnership unit was $.89 and $.47, respectively.
Results of Operations for the Six Months Ended June 30, 1999 and 1998
For the six months ended June 30, 1999 and 1998 the Partnership leased or
financed additional equipment with an initial cost of $171,941 and $81,651,301,
respectively, to 1 and 150 lessees or equipment users. At June 30, 1999 the
weighted average remaining transaction term of the portfolio was 21 months.
Revenues for the six months ended June 30, 1999 were $11,316,462,
representing an increase of $4,602,674 or 68.6% from 1998. The increase in
revenues resulted primarily from an increase in finance income of $4,703,818 or
84.2%, an increase in net gain on sales or remarketing of equipment of $100,452
or 1,242.1% and an increase in income from leveraged leases net of $43,751 or
6.3%. These increases were partially offset by a decrease in interest income and
other of $155,103 or 92.6% and a decrease in income from equity investment in
unconsolidated joint ventures of $90,244 or 35.3%. The increase in finance
income resulted from an increase in the average size of the finance lease
portfolio from 1998 to 1999. The increase in net gain on sales of remarketing of
equipment resulted from an increase in the number of leases maturing and the
underlying equipment being sold or remarketed for which proceeds received were
in excess of the remaining carrying value. Income from leveraged leases
increased due to an increase in the net investment in leveraged leases. The
decrease in interest income was due to a decrease in the average cash balances
from 1998 to 1999. As a result of an analysis of delinquency, assessment of
overall risk and a review of historical loss experience ICON Receivables 1997-A
L.L.C. ("1997-A") recorded a loss provision of $270,000 for the three months
ended June 30, 1999 which resulted in a decrease for the Partnership in income
from equity investment in unconsolidated joint ventures for the six months ended
June 30, 1999.
Expenses for the six months ended June 30, 1999 were $9,171,857,
representing an increase of $3,091,709 or 50.8% from 1998. The increase in
expenses resulted primarily from an increase in interest expense of $2,262,126
or 73.7%, an increase in amortization of initial direct costs of $427,247 or
51.9%, an increase in the management fees of $381,729 or 35.0%, an increase in
administrative expense reimbursements of $152,430 or 32.4%, an increase in
general and administrative of $68,003 or 30.2%, and an increase in minority
interest in consolidated joint venture of $174 or 7.8%. These increases were
partially offset by a decrease in the provision for bad debts of $200,000.
Interest expense increased as a result of an increase in the average debt
outstanding from 1998 to 1999. Amortization of initial direct costs, management
fees, administrative expense reimbursements and general and administrative
expense increased due to an increase in the average size of the finance lease
portfolio from 1998 to 1999. The increase in minority interest in consolidated
joint venture was due to an increase in the net income of the underlying joint
venture from 1998 to 1999. As a result of an analysis of delinquency, assessment
of overall risk and a review of historical loss experience the Partnership
determined that a provision for bad debt of $200,000 was required for the six
months ending June 30, 1999 compared to a $400,000 provision for the three
months ended June 30, 1998. .
Net income for the six months ended June 30, 1999 and 1998 was $2,144,605
and $633,640, respectively. The net income per weighted average limited
partnership unit was $2.13 and $.84, respectively.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Liquidity and Capital Resources
The Partnership's primary sources of funds for the six months ended June
30, 1999 and 1998 were capital contributions from limited partners, net of
offering expenses, of $25,810,449 in 1998, proceeds from sales of equipment of
$1,214,127 and $65,963, respectively, proceeds from recourse debt of $5,000,000
in 1999 and proceeds from non-recourse notes payable of $2,181,892 in 1998.
These funds were used to make payments on borrowings, fund cash distributions,
and in 1998, to purchase equipment. The Partnership intends to fund cash
distributions utilizing cash provided by operations and to purchase additional
equipment utilizing proceeds from sales of equipment and borrowings.
Cash distributions to limited partners for the six months ended June 30,
1999 and 1998, which were paid monthly, totaled $5,351,807 and $4,289,724,
respectively, of which $2,123,159 and $627,304 was investment income and
$3,228,648 and $3,662,420 was a return of capital, respectively. The monthly
annualized cash distributions rate to limited partners was 10.75% for 1999 and
1998 of which 4.26% and 1.57% was investment income and 6.49% and 9.18% was a
return of capital, respectively. The limited partner distribution per weighted
average unit outstanding for the six months ended June 30, 1999 and 1998 was
$5.38, of which $2.13 and $.79 was investment income and $3.25 and $4.59 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. On May 28, 1999 the Facility was
amended and restated removing Eight A as co-borrower on the Facility. At June
30, 1999 the Partnership had $5,000,000 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 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.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
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 June 30, 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
June 30, 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.
August 12, 1999 /s/ Patricia A. Walsh
- --------------- -----------------------------------------
Date Patricia A. Walsh
Vice President and Controller
(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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,125,540
<SECURITIES> 0
<RECEIVABLES> 96,815,082
<ALLOWANCES> 1,077,221
<INVENTORY> 0
<CURRENT-ASSETS> * 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 194,218,625
<CURRENT-LIABILITIES> ** 0
<BONDS> 118,925,559
0
0
<COMMON> 0
<OTHER-SE> 74,159,835
<TOTAL-LIABILITY-AND-EQUITY> 194,218,625
<SALES> 11,304,053
<TOTAL-REVENUES> 11,316,462
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,642,065
<LOSS-PROVISION> 200,000
<INTEREST-EXPENSE> 5,329,792
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,144,605
<EPS-BASIC> 2.13
<EPS-DILUTED> 2.13
<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>
