UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended September 30, 1998
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[ ] 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 Identification Number)
incorporation or organization)
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,
1998 1997
---- ----
Assets
<S> <C> <C>
Cash ............................................... $ 9,639,243 $ 4,516,385
------------- -------------
Investment in finance leases
Minimum rents receivable ........................ 132,335,474 89,824,617
Estimated unguaranteed residual values .......... 81,425,308 33,168,213
Initial direct costs ............................ 4,578,629 2,851,751
Unearned income ................................. (42,904,130) (23,581,783)
Allowance for doubtful accounts ................. (868,450) (155,000)
------------- -------------
174,566,831 102,107,798
Investment in estimated unguaranteed residual values 26,531,664 26,531,664
------------- -------------
Net investment in leveraged leases ................. 12,203,459 11,146,488
------------- -------------
Equity investment in joint ventures ................ 1,855,076 1,828,454
------------- -------------
Investment in financings
Receivables due in installments ................. 1,059,694 906,283
Initial direct costs ............................ 2,480 16,480
Unearned income ................................. (382,006) (197,918)
Allowance for doubtful accounts ................. (8,772) (22,222)
------------- -------------
671,396 702,623
------------- -------------
Accounts receivable from affiliates, net ........... 2,097,438 --
------------- -------------
Other assets ....................................... 1,368,523 1,046,030
------------- -------------
Total assets ....................................... $ 228,933,630 $ 147,879,442
============= =============
</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,
1998 1997
---- ----
Liabilities and Partners' Equity
<S> <C> <C>
Notes payable - non-recourse .......................... $ 132,313,716 $ 90,575,890
Note payable - recourse ............................... 9,740,052 10,075,000
Security deposits and deferred credits ................ 4,097,420 29,162
Accounts payable-equipment ............................ 3,833,213 1,011,196
Accounts payable ...................................... 382,714 238,586
Minority interest in joint venture .................... 23,708 20,335
Accounts payable to General Partner and affiliates, net -- 28,150
------------- -------------
150,390,823 101,978,319
Commitments and Contingencies
Partners' equity (deficiency)
General Partner .................................... (76,198) (23,323)
Limited partners (997,771.19 and 559,842.19 units
outstanding, $100 per unit original
issue price in 1998 and 1997, respectively) ...... 78,619,005 45,924,446
------------- -------------
Total partners' equity ........................... 78,542,807 45,901,123
------------- -------------
Total liabilities and partners' equity ................ $ 228,933,630 $ 147,879,442
============= =============
</TABLE>
See accompanying notes to unaudited 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,
1998 1997 1998 1997
---- ---- ---- ----
Revenues
<S> <C> <C> <C> <C>
Finance income ..................... $ 5,162,423 $ 1,343,030 $10,746,071 $ 3,763,236
Income from leveraged leases, net .. 357,809 224,370 1,056,971 976,683
Net gain on sales or remarketing
of equipment ..................... 130,533 -- 138,620 39,180
Interest income and other .......... 121,510 33,399 289,022 73,906
Income (loss) from equity investment
in joint ventures ................ (93,913) 129,224 161,466 283,957
----------- ----------- ----------- -----------
Total revenues ..................... 5,678,362 1,730,023 12,392,150 5,136,962
----------- ----------- ----------- -----------
Expenses
Interest ........................... 2,870,179 853,458 5,937,845 2,343,034
Management fees - General Partner .. 626,826 416,990 1,718,880 1,084,619
Amortization of initial direct costs 584,990 97,268 1,407,631 703,189
Provision for bad debts ............ 300,000 75,000 700,000 150,000
Administrative expense
reimbursements - General Partner . 260,099 175,262 730,252 463,634
General and administrative ......... 112,396 44,629 337,791 153,979
Minority interest in joint venture . 1,134 1,096 3,373 3,275
----------- ----------- ----------- -----------
Total expenses ..................... 4,755,624 1,663,703 10,835,772 4,901,730
----------- ----------- ----------- -----------
Net income ............................ $ 922,738 $ 66,320 $ 1,556,378 $ 235,232
=========== =========== =========== ===========
Net income allocable to:
Limited partners ................... $ 913,511 $ 65,657 $ 1,540,814 $ 232,880
General Partner .................... 9,227 663 15,564 2,352
----------- ----------- ----------- -----------
$ 922,738 $ 66,320 $ 1,556,378 $ 235,232
=========== =========== =========== ===========
Weighted average number of limited
partnership units outstanding ...... 966,080 450,393 812,471 377,934
=========== =========== =========== ===========
Net income per weighted average
limited partnership unit ........... $ .95 $ .15 $ 1.90 $ .62
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited 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, 1998, the Years Ended
December 31, 1997 and 1996 and the Period from May 23, 1995
(date of inception) to December 31, 1995
(unaudited)
<TABLE>
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
<S> <C> <C> <C> <C> <C>
Initial partners'
capital contribution
- May 23, 1995 .......... $ 1,000 $ 1,000 $ 2,000
------------ ------------ ------------
Balance at
December 31, 1995 ....... 1,000 1,000 2,000
Refund of initial
limited partners'
capital contribution .... (1,000) -- (1,000)
Proceeds from issuance
of limited partnership
units (275,540.47 units) 27,554,047 -- 27,554,047
Sales and
offering expenses ....... (3,719,796) -- (3,719,796)
Cash distributions
to partners ............. $ 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)
Statements of Changes in Partners' Equity (Continued)
For the Nine Months Ended September 30, 1998, the Years Ended
December 31, 1997 and 1996 and the Period from May 23, 1995
(date of inception) to December 31, 1995
(unaudited)
<TABLE>
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
Cash distributions
<S> <C> <C> <C> <C> <C>
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 (438,529.00 units) .. 43,852,900 -- 43,852,900
Sales and offering expenses .. (5,920,141) -- (5,920,141)
Cash distributions to partners $6.23 $1.83 (6,775,428) (68,439) (6,843,867)
Limited partnership units
redeemed (600 units) ...... (3,586) -- (3,586)
Net income ................... 1,540,814 15,564 1,556,378
------------ ------------ ------------
Balance at September 30, 1998 $ 78,619,005 $ (76,198) $ 78,542,807
============ ============ ============
</TABLE>
See accompanying notes to unaudited 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>
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income .................................................. $ 1,556,378 $ 235,232
------------ ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Finance income portion of receivables paid directly
to lenders by lessees .................................. (9,556,104) (3,494,021)
Amortization of initial direct costs ..................... 1,407,631 703,189
Net gain on sales or remarketing of equipment ............ (138,620) (39,180)
Interest expense on non-recourse financing paid
directly by lessees .................................... 5,869,659 2,162,685
Collection of principal - non-financed receivables ...... 836,694 486,039
Allowance for doubtful accounts .......................... 700,000 102,222
Distribution from equity investment in joint ventures .... 518,804 4,889,804
Income from equity investment in joint ventures .......... (161,466) (283,957)
Income from leveraged leases, net ........................ (1,056,971) (976,683)
Change in operating assets and liabilities:
Security deposits and deferred credits ................ 4,068,258 11,486
Accounts payable ...................................... 144,128 (20,778)
Minority interest in joint venture .................... 3,373 3,275
Accounts receivable from affiliates, net .............. (2,097,438) --
Other assets .......................................... (322,493) (629,768)
Accounts payable to General Partner and affiliates, net (28,150) (22,554)
Other, net ............................................ (671,136) (479,229)
------------ ------------
Total adjustments ................................... (483,831) 2,412,530
------------ ------------
Net cash provided by operating activities .............. 1,072,547 2,647,762
------------ ------------
Cash flows from investing activities:
Proceeds from sale of equipment ............................. 1,328,835 2,166,777
Equipment and receivables purchased ......................... (24,563,083) (12,601,899)
Initial direct costs ........................................ (2,727,349) (2,064,530)
Investment in joint ventures ................................ (383,960) (500,000)
------------ ------------
Net cash used in investing activities ................. (26,345,557) (12,999,652)
------------ ------------
</TABLE>
<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>
1998 1997
---- ----
Cash flows from financing activities:
<S> <C> <C>
Issuance of limited partnership units, net of offering expenses 37,932,759 16,828,246
Proceeds from recourse notes payable .......................... 2,181,892 --
Principal payments on notes payable - recourse ................ (2,516,840) (2,150,000)
Principal payments on non-recourse notes ...................... (354,490) --
Cash distributions to partners ................................ (6,843,867) (2,808,685)
Redeemed units ................................................ (3,586) --
Proceeds from affiliate loan .................................. -- 4,250,000
Principal payments on affiliate loan .......................... -- (4,250,000)
------------ ------------
Net cash provided by financing activities ............... 30,395,868 11,869,561
------------ ------------
Net increase in cash ............................................. 5,122,858 1,517,671
Cash at beginning of period ...................................... 4,516,385 698,301
------------ ------------
Cash at end of period ............................................ $ 9,639,243 $ 2,215,972
============ ============
</TABLE>
See accompanying notes to unaudited 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, 1998 and 1997, non-cash activities
included the following:
<TABLE>
1998 1997
---- ----
Fair value of equipment and receivables
<S> <C> <C>
purchased for debt and payables ......................... $(67,592,278) $(62,862,382)
Non-recourse notes payable assumed in
purchase price .......................................... 63,759,065 62,862,382
Accounts payable - equipment ............................... 3,833,213 --
Principal and interest on direct
finance receivables paid directly
to lenders by lessees ................................... 26,984,407 15,043,476
Principal and interest on non-recourse
financing paid directly to lenders
by lessees .............................................. (26,984,407) (15,043,476)
Decrease in investment in finance leases due to terminations 552,002 --
Decrease in notes payable non-recourse due to terminations . (552,002) --
Decrease in investments in finance leases and financings
due to contributions to joint venture ................... -- 6,150,460
Increase in equity investment in joint venture ............. -- (6,150,460)
------------ ------------
$ -- $ --
============ ============
</TABLE>
Interest expense of $5,937,845 and $2,343,034 for the nine months ended
September 30, 1998 and 1997 consisted of interest expense on non-recourse
financing paid or accrued directly to lenders by lessees of $5,869,659 and
$2,162,685, respectively, and other interest of $68,186 and $180,349,
respectively.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Unaudited Consolidated Financial Statements
September 30, 1998
1. Basis of Presentation
The financial statements of ICON Cash Flow Partners L.P. Seven (the
"Partnership") have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC") and, in the opinion of
management, include all adjustments (consisting only of normal recurring
accruals) necessary for a fair statement of income for each period shown.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such SEC rules and
regulations. Management believes that the disclosures made are adequate to make
the information presented 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 1997 Annual Report
on Form 10-K.
2. Redemption of Limited Partnership Units
The General Partner consented to the Partnership redeeming limited
partnership units during the nine months ended September 30, 1998. The
redemption amount was calculated following the specified redemption formula as
per 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, 1998 and 1997
were as follows:
1998 1997
---- ----
Underwriting commissions $ 877,058 $ 389,092 Charged to Equity
Organization and offering 1,534,851 680,910 Charged to Equity
Acquisition fees 2,727,349 2,064,530 Capitalized
Management fees 1,718,880 1,084,619 Charged to operations
Administrative expense
reimbursements 730,252 463,634 Charged to operations
------------ ------------
Total $ 7,588,390 $ 4,682,785
============ ============
The Partnership and affiliates formed three joint ventures for the purpose
of acquiring and managing various assets. (See Note 5 for additional information
relating to the joint ventures.)
4. Year 2000
The Partnership relies on computer information systems for its transaction
processing and for general data processing. 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, the program 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 parties 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
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Unaudited Consolidated Financial Statements - Continued
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.
5. Net Investment in Leveraged Leases
In August 1996 the Partnership acquired, subject to a leveraged lease, the
residual interest in an aircraft. The aircraft is a McDonnell Douglas DC-10-30F
currently on lease to Federal Express. The purchase price was $40,973,585,
consisting of $6,000,000 in cash and $34,973,585 in non-recourse debt.
In December 1996 the Partnership acquired, subject to a leveraged lease,
the residual interest in an aircraft. The aircraft is a 1976 McDonnell Douglas
DC-10-30 currently on lease to Continental Airlines. The purchase price was
$11,320,923, consisting of $2,104,262 in cash and $9,216,661 in non-recourse
debt.
The net investment in leveraged leases as of September 30, 1998 consisted of the
following:
Non-cancelable minimum rents receivable (net of
principal and interest on non-recourse debt) $ --
Estimated unguaranteed residual values ........ 24,818,001
Initial direct costs .......................... 1,038,956
Unearned income ............................... (13,653,498)
------------
$ 12,203,459
The non-cancelable rents are being paid directly to the lenders to satisfy
the principal and interest on the non-recourse debt assumed.
6. Investment in Joint Ventures
The Partnership Agreement allows the Partnership to invest in joint
ventures with other limited partnerships sponsored by the General Partner
provided that the investment objectives of the joint ventures are consistent
with that of the Partnership.
ICON Cash Flow L.L.C. III
In December 1996, the Partnership and an affiliate, ICON Cash Flow
Partners, L.P., Series E ("Series E") formed ICON Cash Flow Partners L.L.C. III
("ICON LLC III"), for the purpose of acquiring and managing an aircraft. The
Partnership and Series E contributed 99% and 1% of the cash received for such
acquisitions, respectively, to ICON Cash Flow LLC III. The Partnership's
consolidated financial statements include 100% of the assets and liabilities of
ICON Cash Flow L.L.C. III, while Series E's minority interest has been reflected
as a liability on the consolidated balance sheets.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Unaudited Consolidated Financial Statements - Continued
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 new leases, managing existing contributed assets and,
eventually, securitizing its portfolio.
In September 1997 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 (collectively the "1997-A Members")
received a 19.97%, 17.81%, 31.19% and 31.03% interest, respectively, in 1997-A
based on the present value of their related contributions.
Information as to the unaudited financial position and results of operations of
1997-A as of and for the nine months ended September 30, 1998 is summarized
below:
September 30, 1998
Assets ...................................................... $37,097,268
===========
Liabilities ................................................. $31,058,715
===========
Equity ...................................................... $ 5,229,748
===========
Nine Months Ended
September 30, 1998
Net income .................................................. $ 808,805
===========
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 created for the
purpose of originating leases and securitizing its portfolio. The Partnership,
Series E and L.P. Six (collectively the "1997-B members") contributed $500,100,
$2,250,000 and $249,900 to 1997-B on August 19, 1997 and received a 16.67%,
75.00% and 8.38% interest, respectively, in 1997-B based on their contributions.
On July 30, 1998, ICON Holdings Corp. ("Holdings"), the parent of the General
Partner and 1997-B completed an equipment lease securitization. The
securitization is comprised of two senior notes, issued from ICON Equipment
Lease Trust 1998 S-1 (Holdings) and ICON Equipment Lease Trust 1998 S-2
(1997-B). The net proceeds from the securitization totaled $40,806,901, of which
$30,850,936 was used to pay down 1997-B's warehouse line of credit, and the
remaining proceeds, after establishing reserves for expenses, were
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Unaudited Consolidated Financial Statements - Continued
distributed to the 1997-B Members based on their respective interests. In
connection with the securitization, 1997-B became the beneficial owner of a
trust. The trustee for the trust is Manufacturers and Traders Trust Company
("M&T"). In conjunction with this securitization, the portfolio as well as the
General Partner's servicing capabilities were rated by Duff & Phelps and Fitch
IBCA, both nationally recognized rating agencies. The General Partner, as
servicer, is responsible for managing, servicing, reporting on and administering
the portfolio. 1997-B remits all monies received from the portfolio to M&T. M&T
is responsible for disbursing to the noteholders their respective principal and
interest (91.5% of projected cash flows) and to 1997-B the excess of cash
collected over debt service (8.5% of projected cash flows after any write-offs)
from the portfolio. The 1997-B Members receive their pro rata share of any
excess cash on a monthly basis from 1997-B. The Partnership's share of the net
proceeds from the securitization totaled $333,400.
Information as to the unaudited financial position and results of operations of
1997-B at September 30, 1998 is summarized below:
September 30, 1998
Assets ..................................................... $43,328,524
===========
Liabilities ................................................ $40,559,157
===========
Equity ..................................................... $ 2,969,367
===========
Nine Months Ended
September 30, 1998
Net income ................................................ $ 834
===========
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
September 30, 1998
Item 2. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership was formed on May 23, 1995 as a Delaware limited
partnership and commenced business operations on its initial closing date,
January 19, 1996, with the admission of 26,367.95 limited partnership units at
$100 per unit representing $2,636,795.17 of capital contributions. Between
January 19, 1996 and December 31, 1996, 249,172.52 units were admitted
representing $24,917,252 of capital contributions. In 1997, 285,927.35 units
were admitted representing $28,592,735 of capital contributions while 1,625.63
units were redeemed. From January 1, 1998 to September 16, 1998 (the final
closing date), 438,529.00 units were admitted representing $43,852,900 of
capital contributions while 600 units were redeemed, bringing the total units
and capital subscriptions to 997,771.19 and $99,777,119, respectively.
The Partnership's portfolio consisted of a net investment in finance
leases, estimated unguaranteed residual values, leveraged leases, equity
investment in joint ventures and financings representing 81%, 12%, 5%, 1% and 1%
of total investments at September 30, 1998, respectively and 71%, 13%, 10%, 5%
and 1% at September 30, 1997, respectively.
Results of Operations
Three Months Ended September 30, 1998 and 1997
For the three months ended September 30, 1998 and 1997 the Partnership
leased or financed equipment with an initial cost of $9,260,343 and $12,121,225,
respectively to 5 and 6 lessees or equipment users respectively.
Revenue for the three months ended September 30, 1998 were $5,678,362,
representing an increase of $3,948,339 or 228% from 1997. The increase in
revenues resulted primarily from an increase in finance income of $3,819,393 or
284%, an increase in income from leveraged leases of $133,439 or 59%, an
increase in net gain on sales or remarketing of equipment of $130,533 and an
increase in interest income and other of $88,111 or 264%. These increases were
partially offset by a decrease in income from equity investment in joint
ventures of $223,137 or 173% from 1997. The increase in finance income resulted
from the increase in the average size of the portfolio from 1997 to 1998. Income
from leveraged leases increased due to the Partnership's increased investment in
leveraged lease transactions. The net gain on sale or remarketing of equipment
increased due primarily to gains on early terminations. Interest income and
other increased due primarily to an increase in average cash balance from 1997
to 1998. Income from equity investment in joint ventures decreased due to
1997-B's increase in provision for bad debts from 1997 to 1998.
Expenses for the three months ended September 30, 1998 were $4,755,624,
representing an increase of $3,091,921 or 185% from 1997. The increase in
expenses was due to an increase in interest expense of $2,016,721 or 236%, an
increase in amortization of initial direct costs of $487,722, an increase in
provision of bad debts of $225,000, an increase in management fees of $209,836
or 50%, an increase in administrative expense reimbursements of $84,837 or 48%,
an increase in general and administrative expense of $67,767 and an increase in
minority interest in joint venture of $38. Interest expense
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
September 30, 1998
increased due to an increase in average debt outstanding from 1997 to 1998.
Amortization of initial direct costs, management fees, administrative expense
reimbursement and general and administrative expense increased due to an
increase in the average size of the portfolio from 1997 to 1998. As a result of
a growth in receivables, an analysis of delinquency, an assessment of overall
risk and a review of historical loss experience, it was determined that a
$300,000 provision for bad debts was required for the three months ended
September 30. 1998.
Net income for the three months ended September 30, 1998 and 1997 was
$922,738 and $66,320, respectively. The net income per weighted average limited
partnership unit was $.95 and $.15, respectively.
Nine Months Ended September 30, 1998 and 1997
For the nine months ended September 30, 1998 and 1997 the Partnership
leased or financed equipment with an initial cost of $90,911,644 and
$56,130,601, respectively to 150 and 21 lessees or equipment users respectively.
The weighed average initial transaction term for each period was 54 and 51
months respectively.
Revenues for the nine months ended September 30, 1998 were $12,392,150,
representing an increase of $7,255,188 or 141% from 1997. The increase in
revenues resulted from an increase in financing income of $6,982,835, an
increase in interest income and other of $215,116, an increase in net gain on
sales or remarketing of equipment of $99,440 and an increase in income from
leveraged leases of $80,288 or 8%. These increases were partially offset by a
decrease in income from equity investment in joint ventures of $122,491 or 43%
from 1997. The increase in finance income resulted from the increase in the
average size of the portfolio from 1997 to 1998. Interest income and other
increased primarily as a result of the increase in the average cash balance from
1997 to 1998. The net gain on sales or remarketing of equipment increased due
primarily to gains on early terminations. Income from leveraged leases increased
due to the Partnership's increased investment in leveraged leases. Income from
equity investment in joint ventures decreased due to 1997-B's increase in
provision for bad debts from 1997 to 1998.
Expenses for the nine months ended September 30, 1998 were $10,835,772,
representing an increase of $5,934,042 or 121% from 1997. The increase in
expenses was due to the increase in interest expense of $3,594,811, an increase
in amortization of initial direct costs of $704,441 or 100%, an increase in
management fees of $634,261 or 58%, an increase in provision for bad debt of
$550,000, an increase in administrative expense reimbursements of $266,618 or
58%, an increase in general and administrative expense of $183,812 and an
increase in minority interest in joint venture of $98. Interest expense
increased due to an increase in the average debt outstanding from 1997 to 1998.
Management fees, amortization of initial direct costs, administrative expense
reimbursement and general and administrative expenses increased due to an
increase in the average size of the portfolio from 1997 to 1998. As a result of
a growth in receivables, an analysis of delinquency, an assessment of overall
risk and a review of historical loss experience, it was determined that a
$550,000 and $75,000 provision for bad debts was required for the nine months
ended September 30, 1998 and 1997, respectively.
<PAGE>
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
September 30, 1998
Net income for the nine months ended September 30, 1998 and 1997 was
$1,556,378 and $235,232, respectively. The net income per weighed average
limited partnership unit was $1.90 and $.62, respectively.
Liquidity and Capital Resources
The Partnership's primary sources of funds for the nine months ended
September 30, 1998 and 1997 were capital contributions, net of offering
expenses, of $37,932,759 and $16,828,246, respectively, proceeds from sales of
equipment of $1,328,835 and $2,166,777, respectively, and cash provided by
operations of $1,072,547 and $2,647,762, respectively. These funds were used to
make payments on borrowings, fund cash distributions and to purchase equipment.
The Partnership intends to purchase additional equipment and fund cash
distributions utilizing capital contributions, cash provided by operations,
proceeds from sales of equipment and borrowings.
Cash distributions to limited partners for the nine months ended September
30, 1998 and 1997, which were paid monthly, totaled $6,775,428 and $1,685,232,
respectively, of which $1,540,814 and $232,880 was investment income and
$5,234,614 and $1,452,352 was a return of capital, respectively. The monthly
annualized cash distribution rate to limited partners was 10.75% for 1998 and
1997, of which 2.44% and 1.5% was investment income and 8.31% and 9.25% was a
return of capital respectively, calculated as a percentage of each partner's
initial capital contribution. The limited partner distribution per weighted
average unit outstanding for the nine months ended September 30, 1998 and 1997
was $8.06, of which $1.83 and $1.11 was investment income and $6.23 and $6.95
was a return of capital, respectively.
The Partnership relies on computer information systems for its transaction
processing and for general data processing. 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, the program 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 parties 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.
As of September 30, 1998, except as noted above, there were no known trends
or demands, commitments, events or uncertainties which are likely to have any
material effect on liquidity. As cash is realized from capital contributions,
operations, sales of equipment and borrowings, the Partnership will invest in
equipment leases and financings and fund cash distributions where it deems it to
be prudent while retaining sufficient cash to meet its reserve requirements and
recurring obligations as they become due.
<PAGE>
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter ended
September 30, 1998.
<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.
February 18, 1999 /s/ Kevin F. Redmond
- ---------------------- --------------------------------------------------
Date Kevin F. Redmond
Vice President and Chief Financial Officer
(Principal financial and account officer
of the General Partner of the Registrant)
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000947986
<NAME> ICON Cash Flow Partners L.P. Seven
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 9,639,243
<SECURITIES> 0
<RECEIVABLES> 140,757,051
<ALLOWANCES> 877,222
<INVENTORY> 0
<CURRENT-ASSETS> * 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 228,933,630
<CURRENT-LIABILITIES> ** 0
<BONDS> 142,053,768
0
0
<COMMON> 0
<OTHER-SE> 78,542,807
<TOTAL-LIABILITY-AND-EQUITY> 228,933,630
<SALES> 12,103,128
<TOTAL-REVENUES> 12,392,150
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,197,927
<LOSS-PROVISION> 700,000
<INTEREST-EXPENSE> 5,937,845
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,556,378
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
<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>
