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, 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>
September 30, December 31,
1999 1998
------------ -----------
Assets
<S> <C> <C>
Cash ....................................................... $ 1,241,307 $ 3,899,054
------------- -------------
Investment in finance leases
Minimum rents receivable ................................ 83,343,310 122,539,958
Estimated unguaranteed residual values .................. 76,430,289 77,403,065
Initial direct costs .................................... 2,369,816 3,943,900
Unearned income ......................................... (24,557,668) (39,516,143)
Allowance for doubtful accounts ......................... (1,067,610) (868,450)
------------- -------------
136,518,137 163,502,330
------------- -------------
Investment in estimated unguaranteed residual values ....... 31,718,541 31,718,541
------------- -------------
Net investment in leveraged leases ......................... 13,696,158 12,568,089
------------- -------------
Investment in financings
Receivables due in installments ......................... 2,166,754 2,357,992
Initial direct costs .................................... 3,794 5,169
Unearned income ......................................... (501,690) (620,501)
Allowance for doubtful accounts ......................... (9,611) (8,772)
------------- -------------
1,659,247 1,733,888
------------- -------------
Investments in unconsolidated joint ventures ............... 1,303,472 1,490,820
------------- -------------
Accounts receivable from General Partner and affiliates, net 257,242 --
------------- -------------
Other assets ............................................... 1,263,291 1,474,518
------------- -------------
Total assets ............................................... $ 187,657,395 $ 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>
September 30, December 31,
1999 1998
------------ -----------
Liabilities and Partners' Equity
<S> <C> <C>
Notes payable - non-recourse ......................... $ 82,365,904 $ 110,848,356
Notes payable - recourse ............................. 28,960,783 26,224,398
Accounts payable-equipment ........................... -- 501,318
Accounts payable - General Partner and affiliates, net -- 95,670
Security deposits, deferred credits and other payables 1,202,872 951,199
Minority interest in consolidated joint venture ...... 3,041,732 24,851
------------- -------------
115,571,291 138,645,792
------------- -------------
Commitments and Contingencies
Partners' equity (deficiency)
General Partner ................................... (136,653) (84,234)
Limited partners (990,397.72 and 996,469.18 units
outstanding, $100 per unit original
issue price) .................................... 72,222,757 77,825,682
------------- -------------
Total partners' equity .......................... 72,086,104 77,741,448
------------- -------------
Total liabilities and partners' equity ............... $ 187,657,395 $ 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 Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
Revenues
<S> <C> <C> <C> <C>
Finance income ...................... $ 3,941,337 $ 5,162,423 $14,228,803 $10,746,071
Income from leveraged leases, net ... 385,156 357,809 1,128,069 1,056,971
Income from investment
in unconsolidated joint ventures .. (52,767) (93,913) 112,369 161,466
Interest income and other ........... 2,763 121,510 15,171 289,022
Net gain (loss) on sales of equipment 6,889 130,533 115,428 138,620
----------- ----------- ----------- -----------
Total revenues ...................... 4,283,378 5,678,362 15,599,840 12,392,150
----------- ----------- ----------- -----------
Expenses
Interest ............................ 1,936,747 2,870,179 7,266,539 5,937,845
Management fees - General Partner ... 744,345 626,826 2,218,128 1,718,880
Amortization of initial direct costs 463,214 584,990 1,713,101 1,407,631
Administrative expense
reimbursements - General Partner .. 313,944 260,099 936,526 730,252
Provision for bad debts ............. -- 300,000 200,000 700,000
General and administrative .......... 107,156 112,396 400,555 337,791
Minority interest in joint venture .. 5,761 1,134 8,175 3,373
----------- ----------- ----------- -----------
Total expenses ...................... 3,571,167 4,755,624 12,743,024 10,835,772
----------- ----------- ----------- -----------
Net income ............................. $ 712,211 $ 922,738 $ 2,856,816 $ 1,556,378
=========== =========== =========== ===========
Net income allocable to:
Limited partners .................... $ 705,089 $ 913,511 $ 2,828,248 $ 1,540,814
General Partner ..................... 7,122 9,227 28,568 15,564
----------- ----------- ----------- -----------
$ 712,211 $ 922,738 $ 2,856,816 $ 1,556,378
=========== =========== =========== ===========
Weighted average number of limited
partnership units outstanding ....... 991,415 966,080 993,734 812,471
=========== =========== =========== ===========
Net income per weighted average
limited partnership unit ............ $ .71 $ .95 $ 2.85 $ 1.90
=========== =========== =========== ===========
</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, 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 $5.22 $2.85 (8,016,190) (80,987) (8,097,177)
Limited Partnership units
redeemed (6,071.46 units) (414,983) - (414,983)
Net income 2,828,248 28,568 2,856,816
----------- --------- -----------
Balance at September 30, 1999 $72,222,757 $(136,653) $72,086,104
=========== ========= ===========
</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>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................................... $ 2,856,816 $ 1,556,378
------------ ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Finance income portion of receivables paid directly
to lenders by lessees ....................................... (12,451,110) (9,556,104)
Interest expense on non-recourse financing paid
directly by lessees ......................................... 6,832,671 5,869,659
Interest accrued on notes-payable-recourse .................... 149,170 --
Amortization of initial direct costs .......................... 1,713,101 1,407,631
Income from leveraged leases, net ............................. (1,128,069) (1,056,971)
Provision for bad debt ........................................ 200,000 700,000
Income from investments in unconsolidated joint venture ....... (112,369) (161,466)
Net gain on sales or remarketing of equipment ................. (115,428) (138,620)
Change in operating assets and liabilities:
Collection of principal - non-financed receivables ........ 2,090,957 836,694
Distributions received from unconsolidated joint ventures .. 443,565 518,804
Investments in unconsolidated joint ventures ............... (70,203) (383,960)
Other assets ............................................... 36,668 (322,493)
Security deposits, deferred credits and other payables ..... 251,673 4,212,386
Accounts payable to General Partner and affiliates, net .... (95,670) (28,150)
Accounts receivable from General Partner and affiliates, net (257,242) (2,097,438)
Minority interest in consolidated joint venture ............ 3,016,881 3,373
Other, net ................................................. (236,814) (671,136)
------------ ------------
Total adjustments ........................................ 267,781 (867,791)
------------ ------------
Net cash provided by operating activities ................... 3,124,597 688,587
------------ ------------
Cash flows from investing activities:
Equipment and receivables purchased .............................. (672,309) (24,563,083)
Initial direct costs ............................................. -- (2,727,349)
Proceeds from sale of equipment .................................. 1,222,327 1,328,835
------------ ------------
Net cash provided by (used in) investing activities ........ 550,018 (25,961,597)
------------ ------------
</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 Nine Months Ended September 30,
(unaudited)
<TABLE>
1999 1998
---- ----
Cash flows from financing activities:
<S> <C>
Issuance of limited partnership units ................... -- 37,932,759
Proceeds from recourse debt ............................. 5,000,000 2,181,892
Principal payments on notes payable - recourse .......... (2,412,785) (2,516,840)
Principal payments on notes payable - non-recourse ...... (407,417) (354,490)
Cash distributions to partners .......................... (8,097,177) (6,843,867)
Redemption of limited partnership units ................. (414,983) (3,586)
------------ ------------
Net cash (used in) provided by financing activities (6,332,362) 30,395,868
------------ ------------
Net (decrease) increase in cash ............................ (2,657,747) 5,122,858
Cash at beginning of period ................................ 3,899,054 4,516,385
------------ ------------
Cash at end of period ...................................... $ 1,241,307 $ 9,639,243
============ ============
</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, 1999 and 1998, non-cash activities
included the following:
<TABLE>
1999 1998
---- ----
<S> <C> <C>
Fair value of equipment and receivables purchased
for debt and payables ............................... $ (957,919) $(67,592,278)
Non-recourse notes payable assumed in purchase price ... 957,919 63,759,065
Accounts payable - equipment ........................... -- 3,833,213
Principal and interest on direct finance receivables
paid directly to lenders by lessees ................. 35,865,625 26,984,407
Principal and interest on non-recourse financing paid
directly to lenders by lessees ...................... (35,865,625) (26,984,407)
Decrease in investments in finance leases and financings
due to contribution to joint ventures ............... (73,545) (552,002)
Increase in equity investment in joint ventures ........ 73,545 552,002
------------ ------------
$ -- $ --
============ ============
</TABLE>
Interest expense of $7,266,539 and $5,937,845 for the nine months ended
September 30, 1999 and 1998 consisted of interest expense on non-recourse
financing paid or accrued directly to lenders by lessees of $6,832,672 and
$5,869,659, respectively, interest on notes payable - non-recourse of $95,120 in
1999, interest on notes payable - recourse of $338,747 in 1999 and other
interest of $68,186 in 1998.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
September 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 6,071.46
limited partnership units during the nine months ended September 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 nine months ended September 30, 1999 and 1998
were as follows:
1999 1998
---- ----
Underwriting commissions $ - $ 877,058 Charged to Equity
Organization and offering - 1,534,851 Charged to Equity
Acquisition fees - 2,727,349 Capitalized
Management fees 2,218,228 1,718,880 Charged to Operations
Administrative expense
reimbursements 936,526 730,252 Charged to Operations
---------- ----------
Total $3,154,754 $7,588,390
========== ==========
The Partnership has invested in five joint ventures with affiliates 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
The Partnership has ownership interests in two DC-10-30 aircraft subject to
leveraged leases with Continental Airlines, Inc. (through 2003) and Federal
Express (through 2004).
The net investment in the leveraged leases as of September 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 805,173
Unearned income (8,837,016)
-----------
$13,696,158
===========
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 net investment is positive.
5. Investments in Joint Ventures
The Partnership has invested in five joint ventures with affiliates for
the purpose of acquiring and managing various assets.
AIC Trust
In July 1999, the Partnership and two affiliates, ICON Income Fund Eight A
L. P. ("Eight A") and ICON Cash Flow Partners L.P. Six ("L.P. Six") formed a
joint venture ("AIC Trust") for the purpose of managing a portfolio of lease
assets. Profit, losses, excess cash and disposition proceeds are allocated based
on the Partnership's interest in the venture. At September 30, 1999 the
Partnership had a 56.3% interest in the joint venture. The Partnership's
financial statements include 100% of the assets and liabilities of the joint
venture. Eight A and L.P. Six's investments in the joint venture have been
reflected as "Minority interest in joint venture."
ICON Boardman Funding L.L.C.
In December 1998 the Partnership and three affiliates, ICON Cash Flow
Partners, L.P., Series C ("Series C"), ICON Cash Flow Partners L.P. Six ("L.P.
Six") and 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 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.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
On March 30, 1999, ICON BF exercised its right to acquire L.P. Six's
investment in a portion of the rent receivable in excess of the senior debt
payments for $3,097,637 and simultaneously 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 nine months ended September 30, 1999 is summarized below:
September 30, 1999
------------------
Assets $26,362,449
===========
Liabilities $18,479,556
===========
Equity $ 7,882,893
===========
Partnership's share of equity $ 39,414
===========
Nine Months Ended
September 30, 1999
------------------
Net income $1,037,134
==========
Partnership's share of net income $ 5,186
==========
Distributions $4,546,230
==========
Partnership's share of distributions $ 22,731
==========
ICON Receivables 1997-B L.L.C.
In August 1997 the Partnership, ICON Cash Flow Partners, L.P., Series E
("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 (the "1997-B Warehouse Facility") from a lender. 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. The Partnerships interest in
1997-B is less than 50% and is accounted for using the equity method.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the financial position and results of operations of
1997-B as of and for the nine months ended September 30, 1999 is summarized
below:
September 30, 1999
------------------
Assets $31,270,536
===========
Liabilities $29,507,730
===========
Equity $ 1,762,806
===========
Partnership's share of equity $ 293,860
===========
Nine Months Ended
September 30, 1999
------------------
Net loss $ (30,394)
=========
Partnership's share of net income $ (5,067)
=========
Distributions $ 582,432
=========
Partnership's share of distributions $ 97,091
=========
ICON Receivables 1997-A L.L.C.
In March 1997 the Partnership, ICON Cash Flow Partners, L.P., Series D
("Series D"), and 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. The Partnerships interest in 1997-A is less than 50% and is
accounted for using the equity method.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the financial position and results of operations of
1997-A as of and for the nine months ended September 30, 1999 is summarized
below:
September 30, 1999
------------------
Assets $21,011,645
===========
Liabilities $16,870,651
===========
Equity $ 4,140,994
===========
Partnership's share of equity $ 970,198
===========
Nine Months Ended
September 30, 1999
------------------
Net income $ 562,160
==========
Partnership's share of net income $ 112,250
==========
Distributions $1,621,550
==========
Partnership's share of distributions $ 323,743
==========
ICON Cash Flow Partners L.L.C. III
On December 31, 1996, the Partnership and an affiliate, 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 lease is a leveraged lease and the lease term
expires in 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)
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 74%, 17%, 7%, 1% and
1% of total investments at September 30, 1999, respectively, and 81%, 12%, 5%,
1% and 1% of total investments at September 30, 1998, respectively.
Results of Operations for the Three Months Ended September 30, 1999 and 1998
For the three months ended September 30, 1999 the Partnership did not
enter into any new leases or financing agreements. For the three months ended
September 30, 1998 the Partnership leased or financed additional equipment with
an initial cost of $9,260,343 to 5 lessees or equipment users.
Revenues for the three months ended September 30, 1999 were $4,283,378,
representing a decrease of $1,394,984 or 24.6% from 1998. The decrease in
revenues resulted primarily from a decrease in finance income of $1,221,086 or
23.7%, a decrease in interest income and other of $118,747 or 97.7%, and a
decrease in gain on sales of equipment to $6,889 in 1999 compared to a gain on
sales or remarketing of equipment of $130,533 in 1998 These decreases were
partially offset by a decrease in loss from investment in unconsolidated joint
ventures of $41,146 or 43.8% and an increase in income from leveraged leases net
of $27,347 or 7.6%. The decrease in finance income resulted from a decrease in
the average size of the finance lease portfolio from 1998 to 1999. 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. The net gain on sales or remarketing of equipment resulted from
equipment being sold or remarketed for which proceeds received were greater than
the remaining carrying value; the decrease in net gain is attributable to less
sales activity during the period. Based on an analysis of delinquency,
assessment of overall risk and a review of historical loss experience ICON
Receivables 1997-B L.L.C. ("1997-B") recorded a loss provision of $900,000 for
the quarter ended September 30, 1999 and ICON Receivables 1997-A L.L.C.
("1997-A") recorded a loss provision for the quarter ended September 30, 1998 of
$600,000. As a result the Partnership had a loss from investment in
unconsolidated joint ventures for the third quarter 1999 and 1998. Income from
leveraged leases increased due to an increase in the net investment in leveraged
leases.
Expenses for the three months ended September 30, 1999 were $3,571,167,
representing a decrease of $1,184,457 or 24.9% from 1998. The decrease in
expenses resulted primarily from a decrease in interest expense of $933,432 or
32.5%, a decrease in amortization of initial direct costs of $121,776 or 20.8%,
a decrease in the provision for bad debts of $300,000 and a decrease in general
and administrative expense of $5,240 or 4.7%. These decreases were partially
offset by an increase in management fees of $117,519 or 18.7%, an increase in
administrative expense reimbursements of $53,845 or 20.7% and an increase in
minority interest in consolidated joint venture of $4,627 or 408.0%. Interest
expense decreased as a result of a decrease in the average debt outstanding from
1998 to 1999. Amortization of initial direct costs and general and
administrative expense decreased due to a decrease in the average size of the
finance lease portfolio from 1998 to 1999. Management fees and administrative
expense reimbursements increased as a result of the Partnership recording third
quarter fees on one of its finance lease portfolios in the fourth quarter of
1998. The increase in minority interest in consolidated joint venture was
principally due to the addition of a joint venture in July 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 September 30,
1999 compared to a $300,000 provision for the three months ended September 30,
1998.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Net income for the three months ended September 30, 1999 and 1998 was
$712,211 and $922,738, respectively. The net income per weighted average limited
partnership unit was $.71 and $.95, respectively.
Results of Operations for the Nine Months Ended September 30, 1999 and 1998
For the nine months ended September 30, 1999 and 1998 the Partnership
leased or financed additional equipment with an initial cost of $171,941 and
$90,911,644, respectively, to 1 and 150 lessees or equipment users.
Revenues for the nine months ended September 30, 1999 were $15,599,840,
representing an increase of $3,207,690 or 25.9% from 1998. The increase in
revenues resulted primarily from an increase in finance income of $3,482,732 or
32.4% and an increase in income from leveraged leases net of $71,098 or 6.7%.
These increases were partially offset by a decrease in interest income and other
of $273,851 or 94.8%, a decrease in income from investment in unconsolidated
joint venture of $49,097 or 30.4% and a decrease in net gain on sales or
remarketing of equipment of $23,192 or 16.7%. 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 decrease in interest income was due
to a decrease in the average cash balances from 1998 to 1999. The decrease in
net gain on sales of remarketing of equipment resulted from a decrease 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.
Based on an analysis of delinquency, assessment of overall risk and a review of
historical loss experience ICON Receivables 1997-B L.L.C. ("(1997-B") recorded a
loss provision of $900,000 for the nine months ended September 30, 1999 compared
to a loss provision recorded by ICON Receivables 1997-A L.L.C. ("1997-A") of
$600,000 for the nine months ended September 30, 1998, resulting in a decrease
for the Partnership in income from investment in unconsolidated joint ventures
from 1998 to 1999.
Expenses for the nine months ended September 30, 1999 were $12,743,024,
representing an increase of $1,907,252 or 17.6% from 1998. The increase in
expenses resulted primarily from an increase in interest expense of $1,328,694
or 22.4%, an increase in amortization of initial direct costs of $305,470 or
21.7%, an increase in the management fees of $499,248 or 29.0%, an increase in
administrative expense reimbursements of $206,274 or 28.2%, an increase in
general and administrative of $62,764 or 18.6%, and an increase in minority
interest in consolidated joint venture of $4,802 or 142.4%. These increases were
partially offset by a decrease in the provision for bad debts of $500,000 or
71.4%. 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 nine
months ending September 30, 1999 compared to a $700,000 provision for the nine
months ended September 30, 1998. .
Net income for the nine months ended September 30, 1999 and 1998 was
$2,856,816 and $1,556,378, respectively. The net income per weighted average
limited partnership unit was $2.85 and $1.90, 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 nine months ended
September 30, 1999 and 1998 were capital contributions from limited partners,
net of offering expenses, of $0 in 1999 and $37,932,759 in 1998, net cash
provided by operations of $3,124,597 and $688,587, respectively, proceeds from
sales of equipment of $1,222,327 and $1,328,835, respectively, and proceeds from
borrowings of $5,000,000 in 1999 and $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 nine months ended September
30, 1999 and 1998, which were paid monthly, totaled $8,016,190 and $6,775,428,
respectively, of which $2,828,248 and $1,540,814 was investment income and
$5,187,942 and $5,234,614 was a return of capital, respectively. The monthly
annualized cash distributions rate to limited partners was 10.75% for 1999 and
1998 of which 3.79% and 2.44% was investment income and 6.96% and 8.31% was a
return of capital, respectively. The limited partner distribution per weighted
average unit outstanding for the nine months ended September 30, 1999 and 1998
was $8.07 and $8.06, respectively, of which $2.85 and $1.83 was investment
income and $5.22 and $6.23 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. In May 1999 the Facility was amended and restated removing
Eight A as co-borrower on the Facility. 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
September 30, 1999 the Partnership had $5,000,000 outstanding under the
Facility.
In July 1999 the Partnership, Eight A and ICON Cash Flow Partners L.P. Six
("L.P. Six") formed a joint venture, ("AIC Trust") for the purpose of managing a
portfolio of leases contributed by the Partnership. Proceeds of $3,000,000 were
realized by the Partnership as a result of this joint venture.
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 exercised its right to acquire L.P. Six's
investment in a portion of the rent receivable in excess of the senior debt
payments for $3,097,637 and simultaneously 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.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
As of September 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
September 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.
November 12, 1999 /s/ Thomas W. Martin
- ----------------- ------------------------------------------------
Date Thomas W. Martin
Executive Vice President
(Principal financial and accounting 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-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,241,307
<SECURITIES> 0
<RECEIVABLES> 86,420,064
<ALLOWANCES> 1,077,221
<INVENTORY> 0
<CURRENT-ASSETS> * 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 187,657,395
<CURRENT-LIABILITIES> ** 0
<BONDS> 111,326,687
0
0
<COMMON> 0
<OTHER-SE> 72,086,104
<TOTAL-LIABILITY-AND-EQUITY> 187,657,395
<SALES> 15,584,669
<TOTAL-REVENUES> 15,599,840
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,276,485
<LOSS-PROVISION> 200,000
<INTEREST-EXPENSE> 7,266,539
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,856,816
<EPS-BASIC> 2.85
<EPS-DILUTED> 2.85
<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>
