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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 2000
------------------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the transition period from to
----------------------- ----------------------
Commission File Number 33-94458
---------------------------------------------------------
ICON Cash Flow Partners L.P. Seven
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3835387
- ------------------------------------ ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
111 Church Street, White Plains, New York 10601-1505
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 993-1700
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests
- --------------------------------------------------------------------------------
(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
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
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
TABLE OF CONTENTS
Item Page
PART I
1. Business 3-4
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 4
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 5
6. Selected Consolidated Financial and Operating Data 5
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 6-9
8. Financial Statements and Supplementary Data 10-33
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 34
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 34-35
11. Executive Compensation 36
12. Security Ownership of Certain Beneficial Owners
and Management 36
13. Certain Relationships and Related Transactions 36
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 37
SIGNATURES 38
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
PART I
Item 1. Business
General Development of Business
ICON Cash Flow Partners L.P. Seven (the "Partnership"), was formed on May
23, 1995 as a Delaware limited partnership. The Partnership's maximum offering
was $100,000,000. The Partnership commenced business operations on its initial
closing date, January 19, 1996 with the admission of 26,367.95 limited
partnership units at $100 per unit representing $2,636,795 of capital
contributions. From January 19, 1996 through September 16, 1998 (the final
closing date) 973,628.86 units were admitted representing $97,362,886 of capital
contributions. The Partnership redeemed 10,409 limited partnership units during
the years 1997 through 2000, leaving 989,588 limited partnership units
outstanding at December 31, 2000.
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
Segment Information
The Partnership has only one operating segment: the business of acquiring
equipment subject to leases with companies that the Partnership believes to be
creditworthy.
Narrative Description of Business
The Partnership is an equipment leasing income fund. The principal
objective of the Partnership is to obtain the maximum economic return from its
investments for the benefit of its limited partners. To achieve this objective,
the Partnership intends to: (1) acquire a diversified portfolio of low
obsolescence equipment having long lives and high residual values; (2) make
monthly cash distributions to its limited partners from cash from operations,
commencing with each limited partner's admission to the Partnership, continuing
through the Reinvestment Period, which period will end no later than the eighth
anniversary after the final closing date; (3) re-invest substantially all
undistributed cash from operations and cash from sales in additional equipment
and financing transactions during the Reinvestment Period; and (4) sell the
Partnership's investments and distribute the cash from sales of such investments
to its limited partners within twelve to thirty-six months after the end of the
Reinvestment Period.
The equipment leasing industry is highly competitive. In initiating its
leasing transactions, the Partnership competes with leasing companies,
manufacturers that lease their products directly, equipment brokers and dealers
and financial institutions, including commercial banks and insurance companies.
Many competitors are larger than the Partnership and have greater financial
resources.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
The Partnership had one lessee which accounted for 10% or more of total
revenue during the years ended December 31, 2000 and 1999, respectively. Supply
vessels leased to Seacor SMIT generated 24% and 25%, respectively, of total
revenue during the year ended December 31, 2000 and 1999, respectively.
Lease Transactions
For the year ended December 31, 2000 the Partnership purchased $14,725,828
of equipment. The equipment purchased in 2000 consists of the exercise of an
option to purchase an off shore oil drilling rig on lease to Rowan Companies,
Inc.
In 2000, the Partnership also acquired a 2% interest in a joint venture
("ICON Aircraft 24846, LLC") with two other affiliates acquiring the remaining
joint venture interests. The Partnership also acquired a 10.31% interest in a
joint venture ("ICON Cheyenne, LLC") with three other affiliates acquiring the
remaining joint venture interests. These joint venture investments are accounted
for under the equity method and the investment amounts are not included in the
$14,725,828 amount of equipment acquired described above.
The Partnership owned a portfolio of leased equipment with an original
equipment cost of $237,850,014 and $276,727,411 at December 31, 2000 and 1999,
respectively. These amounts do not include joint venture investments owned by
the Partnership which are not majority owned.
Item 2. Properties
----------
The Partnership neither owns nor leases office space or equipment for the
purpose of managing its day-to-day affairs.
Item 3. Legal Proceedings
-----------------
The Partnership is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of 2000.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters
-----------------------------------------------------------------------
The Partnership's limited partnership interests are not publicly traded nor
is there currently a market for the Partnership's limited partnership units. It
is unlikely that any such market will develop.
Number of Equity Security Holders
Title of Class as of December 31,
-------------- ---------------------------------
2000 1999
---- ----
Limited Partners 4,578 4,650
General Partner 1 1
Item 6. Selected Consolidated Financial and Operating Data
--------------------------------------------------
Years Ended December 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Total revenue ..................... $18,742,579 $19,572,257 $17,207,618 $9,749,244 $1,564,069
=========== =========== =========== ========== ==========
Net income ........................ $ 4,658,569 $ 3,514,436 $ 2,689,176 $2,649,580 $ 405,451
=========== =========== =========== ========== ==========
Net income allocable
to limited partners ............ $ 4,611,983 $ 3,479,291 $ 2,662,284 $2,623,084 $ 401,396
=========== =========== =========== ========== ==========
Net income allocable
to the General Partner ......... $ 46,586 $ 35,145 $ 26,892 $ 26,496 $ 4,055
=========== =========== =========== ========== ==========
Weighted average limited
partnership units outstanding .. 989,929 992,719 808,650 413,677 $ 156,222
=========== =========== =========== ========== ==========
Net income per weighted
average limited partnership unit $ 4.66 $ 3.50 $ 3.29 $ 6.34 $ 2.57
=========== =========== =========== ========== ==========
Distributions to limited partners . $10,641,411 $10,677,316 $ 8,692,479 $4,147,829 $1,361,099
=========== =========== =========== ========== ==========
Distributions to the
General Partner ................ $ 107,493 $ 107,872 $ 87,803 $ 41,125 $ 13,749
=========== =========== =========== ========== ==========
December 31,
--------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Total assets $146,965,750 $172,007,288 $216,387,240 $153,066,319 $48,486,070
============ ============ ============ ============ ===========
Partners' equity $ 63,916,992 $ 70,045,138 $ 77,741,448 $ 45,901,123 $22,865,854
============ ============ ============ ============ ===========
The above selected financial data should be read in conjunction with the
consolidated financial statements and related notes appearing elsewhere in this
report.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
Item 7. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
------------------------------------------------------------------------
ICON Cash Flow Partners L.P. Seven (the "Partnership"), was formed on May
23, 1995 as a Delaware limited partnership. The Partnership commenced business
operations on its initial closing date, January 19, 1996 with the admission of
26,367.95 limited partnership units at $100 per unit representing $2,636,795 of
capital contributions. From January 19, 1996 through September 16, 1998 (the
final closing date) 973,628.86 units were admitted representing $97,362,886 of
capital contributions. The Partnership redeemed 650, 6,232, 1,902 and 1,625
limited partnership units in 2000, 1999, 1998 and 1997, respectively, leaving
989,588 limited partnership units outstanding at December 31, 2000.
The Partnership's portfolio consisted of net investments in finance leases,
investments in estimated unguaranteed residual values, leveraged leases, equity
investments in joint ventures and financings representing 64%, 14%, 18%, 3% and
1% of total investments at December 31, 2000, respectively, and 70%, 20%, 6%, 3%
and 1% of total investments at December 31, 1999, respectively.
Results of Operations for the Years Ended December 31, 2000 and 1999
For the years ended December 31, 2000 and 1999, the Partnership purchased
equipment subject to lease with an initial cost of $14,725,828 and $677,632,
respectively, to one lessee each year.
Revenues for the years ended December 31, 2000 were $18,742,579,
representing a decrease of $829,678 from 1999. The decrease in revenues resulted
primarily from a decrease in finance income of $2,705,689, which was partially
offset primarily by increases in income from leveraged leases of $1,186,809,
gain on sales of equipment of $507,296, interest income and other of $161,079
and income from investments in joint ventures of $20,827. The decrease in
finance income resulted from a decrease in the average size of the finance lease
portfolio from 1999 to 2000. Income from leveraged leases increased due to an
additional leveraged lease investment made in the fourth quarter of 1999. Gain
on sales of equipment increased due primarily to the sale of two aircraft in
2000. Interest income and other increased primarily from an increase in the
average cash balance from 1999 to 2000. Income from investments in joint
ventures increased due to a higher level of earnings from the underlying joint
ventures in 2000 as compared to 1999.
Expenses for the year ended December 31, 2000 were $14,084,010 representing
a decrease of $1,973,811 from 1999. The decrease in expenses resulted primarily
from decreases in interest expense of $2,586,104 and amortization of initial
direct costs of $336,537. These decreases were partially offset primarily by
increases in general and administrative expenses of $327,929, management fees -
General Partner of $311,234, provision for bad debts of $200,000 and
administrative expense reimbursements- General Partner of $109,532. The decrease
in interest expense resulted from a decrease in the average
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
debt outstanding from 1999 to 2000. Amortization of initial direct costs
decreased as a result of the decrease in the average size of the finance lease
portfolio from 1999 to 2000. General and administrative expenses increased
primarily as a result of higher professional fees. Management fees - General
Partner and administrative expense reimbursements - General Partner increased
due to an increase in the amount of gross rent received in 2000 versus 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 $400,000 was required for the year ended December 31, 2000 compared
to $200,000 for 1999. Interest expense decreased as a result of a lower average
debt balance in 2000 compared to 1999.
Net income for the years ended December 31, 2000 and 1999 was $4,658,569
and $3,514,436, respectively. The net income per weighted average limited
partnership unit was $4.66 and $3.50 for 2000 and 1999, respectively.
Results of Operations for the Years Ended December 31, 1999 and 1998
For the years ended December 31, 1999 and 1998, the Partnership purchased
and leased or financed equipment with an initial cost of $677,632 and
$91,615,445, respectively, to 1 and 42 lessees or equipment users.
Revenues for the year ended December 31, 1999 were $19,572,257,
representing an increase of $2,364,639 from 1998. The increase in revenues
resulted primarily from an increase in finance income of $3,417,241. This
increase was partially offset by decreases in gain on sales of equipment of
$578,684, interest income and other of $323,806 and income from investments in
joint ventures of $162,014. The increase in finance income resulted from the
Partnership's owning and recognizing in 1999 finance income generated from an
interest in a lease portfolio acquired in the first half of 1999. In the fourth
quarter of 1999, this portfolio was contributed to a joint venture in which the
Partnership owns less that 50%, and which joint venture is now accounted for on
the equity method. Gain on sales of equipment decreased due to a decrease in the
number of leases maturing in which the underlying equipment was sold. The
decrease in interest income and other resulted primarily from a decrease in the
average cash balance from 1998 to 1999. Income from investments in joint
ventures decreased as a result of one of the underlying joint ventures' increase
in its provision for bad debts.
Expenses for the year ended December 31, 1999 were $16,057,821,
representing an increase of $1,539,379 from 1998. The increase in expenses
resulted primarily from increases in interest expense of $782,696, management
fees - General Partner of $729,817, amortization of initial direct costs of
$221,248, administrative expense reimbursements - General Partner of $153,512
and general and administrative expense of $151,722. These increases were
partially offset by a decrease in provision for bad debts of $500,000. Interest
expense increased as a result of an increase in the average debt outstanding
from 1998 to 1999, including the impact of the debt related to the acquired
lease portfolio discussed above, which was subsequently contributed to an equity
joint venture. Management fees - General Partner, and administrative expense
reimbursements - General Partner increased as a result of an
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
increase in the amount of cash rent collected in 1999 versus 1998. Amortization
of initial direct costs increased primarily as a result of an increase in the
average size of the finance lease portfolio from 1998 to 1999, including the
impact of the acquired portfolio discussed above. General and administrative
expenses increased as a result of higher professional fee levels in 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 year ended December 31, 1999 compared to
$700,000 for 1998.
Net income for the years ended December 31, 1999 and 1998 was $3,514,436
and $2,689,176, respectively. The net income per weighted average limited
partnership unit was $3.50 and $3.29 for 1999 and 1998, respectively, weighted
from the date each unit was admitted to the Partnership.
Liquidity and Capital Resources
The Partnership's primary sources of funds in 2000, 1999 and 1998 were
borrowings of $18,115,711 and $19,010,000 in 2000 and 1999, respectively,
issuance of limited partnership units, net of offering expenses of $37,395,017
in 1998, proceeds from sale of equipment of $4,516,096 in 2000, proceeds from
sale of interests in unconsolidated joint ventures of $4,750,000 and $4,903,647
in 1999 and 1998, respectively, and cash provided by operations of $1,101,450,
$953,335 and $1,026,416 in 2000, 1999 and 1998, respectively. These funds were
used to purchase equipment and pay cash distributions to partners. The
Partnership intends to purchase additional equipment and fund cash
distributions, utilizing cash from operations, proceeds from sale of equipment
and additional borrowings.
The Partnership's notes payable at December 31, 2000 and 1999 total
$81,889,191 and $100,544,315, respectively. These amounts consist of
$58,056,596, and $71,944,352 in non-recourse notes, respectively, and recourse
notes payable of $23,832,595 and $28,599,963. The recourse notes payable are
inclusive of amounts outstanding under the lines of credit discussed below.
The Partnership entered into a recourse line of credit agreement with a
lender in June 2000. The maximum amount available under the agreement is
$7,500,000. This line of credit is collateralized by certain receivables and
residuals and bears interest at the rate of prime plus one percent. At December
31, 2000 the Partnership had $4,464,858 outstanding under the Agreement.
The Partnership entered into a line of credit agreement (the "Facility")
with a lender in 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 Prime plus one half percent. At December 31, 2000 the
Partnership had $548,498 outstanding under the Facility.
Cash distributions to the limited partners for the years ended December 31,
2000 and 1999, which were paid monthly totaled $10,641,411 and $10,677,316,
respectively of which $4,611,983 and $3,479,291 was investment income and
$6,029,428 and $7,198,025 was a return of capital, respectively. The monthly
annualized cash distribution rate to limited partners for the years ended
December 31, 2000 and 1999 was 10.75% for each year, of which 4.66% and 3.50%
was investment income and 6.09% and 7.25% was a return of capital respectively.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
As of December 31, 2000, except as noted above, there were no known trends
or demands, commitments, events or uncertainties which are likely to have any
material effect on liquidity. As cash is realized from operations, sales of
equipment and borrowings, the Partnership will invest in equipment leases and
financings where it deems it to be prudent while retaining sufficient cash to
meet its reserve requirements and recurring obligations.
Item 7a. Qualitative and Quantitative Disclosures About Market Risk
The Partnership is exposed to certain market risks, including changes in
interest rates. The Partnership believes its exposure to other market risks are
insignificant to both its financial position and results of operations.
The Partnership manages its interest rate risk by obtaining fixed rate
debt. The fixed rate debt service obligation streams are generally matched by
fixed rate lease receivable streams generated by the Partnership's lease
investments.
The Partnership borrows funds under two floating rate lines of credit and
is therefore exposed to interest rate risk until the floating rate lines of
credit are repaid. The Partnership's borrowings under floating rate lines of
credit as of December 31, 2000 was $5,013,356. The Partnership believes the risk
associated with rising interest rates under these lines are immaterial.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
Item 8. Consolidated Financial Statements and Supplementary Data
--------------------------------------------------------
Index to Consolidated Financial Statements
Page Number
Independent Auditors' Report 12
Consolidated Balance Sheets as of
December 31, 2000 and 1999 13-14
Consolidated Statements of Operations
for the Years Ended December 31, 2000, 1999 and 1998 15
Consolidated Statements of Changes in Partners'
Equity for the Years Ended December 31, 2000, 1999 and 1998 16
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998 17-19
Notes to Consolidated Financial Statements 20-33
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 2000
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Partners
ICON Cash Flow Partners L.P. Seven:
We have audited the accompanying consolidated balance sheets of ICON Cash Flow
Partners L.P. Seven (a Delaware limited partnership) as of December 31, 2000 and
1999, and the related statements of operations, changes in partners' equity, and
cash flows for each of the years in the three year period ended December 31,
2000. These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Cash Flow
Partners L.P. Seven as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the years in the three year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
--------------------------------------------
KPMG LLP
March 28, 2001
New York, New York
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
2000 1999
---- ----
Assets
Cash ................................................ $ 5,083,906 $ 4,688,025
------------- -------------
Investment in finance leases
Minimum rents receivable ......................... 42,346,689 54,878,965
Estimated unguaranteed residual values ........... 64,929,338 67,880,746
Initial direct costs ............................. 296,890 1,604,755
Unearned income .................................. (16,198,661) (17,093,326)
Allowance for doubtful accounts .................. (1,467,610) (1,067,610)
------------- -------------
89,906,646 106,203,530
Investments in estimated unguaranteed residual values 19,393,541 31,718,541
------------- -------------
Net investment in leveraged leases .................. 25,175,398 22,555,086
------------- -------------
Investments in joint ventures ....................... 4,504,314 3,292,324
------------- -------------
Investment in financings
Receivables due in installments .................. 1,003,883 2,062,546
Initial direct costs ............................. 2,706 3,528
Unearned income .................................. (177,836) (457,150)
Allowance for doubtful accounts .................. (9,611) (9,611)
------------- -------------
819,142 1,599,313
Other assets ........................................ 2,082,803 1,950,469
------------- -------------
Total assets ........................................ $ 146,965,750 $ 172,007,288
============= =============
(continued on next page)
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Balance Sheets (Continued)
December 31,
2000 1999
---- ----
Liabilities and Partners' Equity
Notes payable - non-recourse ......................... $ 58,056,596 $ 71,944,352
Note payable - recourse .............................. 23,832,595 28,599,963
Accounts payable - General Partner and affiliates .... 59,122 101,333
Security deposits, deferred credits and other payables 1,056,953 1,278,045
Minority interest in joint venture ................... 43,492 38,457
------------- -------------
83,048,758 101,962,150
Commitments and Contingencies
Partners' equity (deficiency)
General Partner ................................... (217,868) (156,961)
Limited partners (989,588 and 990,238 units
outstanding, $100 per unit original issue price) 64,134,860 70,202,099
------------- -------------
Total partners' equity .......................... 63,916,992 70,045,138
------------- -------------
Total liabilities and partners' equity ............... $ 146,965,750 $ 172,007,288
============= =============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31,
2000 1999 1998
---- ---- ----
Revenues
Finance income .......................... $15,199,445 $17,905,134 $14,487,893
Income from leveraged leases ............ 2,620,312 1,433,503 1,421,601
Gain on sales of equipment .............. 622,723 115,427 694,111
Income from investments in joint ventures 106,487 85,660 247,674
Interest income and other ............... 193,612 32,533 356,339
----------- ----------- -----------
Total revenues .......................... 18,742,579 19,572,257 17,207,618
----------- ----------- -----------
Expenses
Interest ................................ 6,246,907 8,833,011 8,050,315
Management fees - General Partner ....... 3,378,163 3,066,929 2,337,112
Amortization of initial direct costs .... 1,814,617 2,151,154 1,929,906
Administrative expense
reimbursements - General Partner ...... 1,268,398 1,158,866 1,005,354
Provision for bad debts ................. 400,000 200,000 700,000
General and administrative expense ...... 970,890 642,961 491,239
Minority interest expense ............... 5,035 4,900 4,516
----------- ----------- -----------
Total expenses .......................... 14,084,010 16,057,821 14,518,442
----------- ----------- -----------
Net income ................................. $ 4,658,569 $ 3,514,436 $ 2,689,176
=========== =========== ===========
Net income allocable to:
Limited partners ........................ $ 4,611,983 $ 3,479,291 $ 2,662,284
General Partner ......................... 46,586 35,145 26,892
----------- ----------- -----------
$ 4,658,569 $ 3,514,436 $ 2,689,176
=========== =========== ===========
Weighted average number of limited
partnership units outstanding ........... 989,929 992,719 808,650
=========== =========== ===========
Net income per weighted average
limited partnership unit ................ $ 4.66 $ 3.50 $ 3.29
=========== =========== ===========
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 2000, 1999 and 1998
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
------- ------ -------- ------- -----
(Per weighted average unit)
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
Limited partnership units
redeemed (6,232 units) (425,558) - (425,558)
Cash distributions to partners $ 7.25 $ 3.50 (10,677,316) (107,872) 10,785,188)
Net income 3,479,291 35,145 3,514,436
------------ --------- -----------
Balance at
December 31, 1999 70,202,099 (156,961) 70,045,138
Limited partnership units
redeemed (650 units) (37,811) - (37,811)
Cash distributions to partners $ 6.09 $ 4.66 (10,641,411) (107,493) 10,748,904)
Net income 4,611,983 46,586 4,658,569
------------ --------- -----------
Balance at
December 31, 2000 $ 64,134,860 $(217,868) $63,916,992
============ ========= ===========
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31,
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net income ............................................... $ 4,658,569 $ 3,514,436 $ 2,689,176
------------ ------------ ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on sales of equipment ............................. (622,723) (115,427) (694,111)
Finance income portion of receivables
paid directly to lenders by lessees .................. (8,501,090) (14,357,847) (12,717,263)
Amortization of initial direct costs ................... 1,814,617 1,651,154 1,929,906
Interest accrued on notes payable recourse ............. -- 201,036 --
Provision for bad debts ................................ 400,000 200,000 700,000
Interest expense on non-recourse
financings paid directly by lessees .................. 5,296,031 8,216,602 7,701,737
Income from leveraged leases ........................... (2,620,312) (1,433,503) (1,421,601)
Income from investments in joint ventures .............. (106,487) (85,660) (247,674)
Minority interest expense .............................. 5,035 4,900 4,516
Changes in operating assets and liabilities:
Other assets ......................................... (132,334) (475,952) 104,423
Distributions received from joint ventures ........... 114,784 570,896 1,076,141
Account payable to General Partner and affiliates .... (42,211) 5,663 67,520
Collection of principal
- non-financed receivables ......................... 1,058,663 2,746,932 1,095,505
Minority interest in joint venture ................... -- 13,606 --
Security deposits, deferred credits and other payables (221,092) 326,846 683,451
Other ................................................ (70) (30,347) 54,690
------------ ------------ ------------
Total adjustments .................................. (3,557,189) (2,561,101) (1,662,760)
------------ ------------ ------------
Net cash provided by operating activities ............ 1,101,380 953,335 1,026,416
------------ ------------ ------------
Cash flows from investing activities:
Equipment purchased ...................................... -- (677,632) (29,291,730)
Proceeds from sale of interests in unconsolidated
joint venture .......................................... -- 4,750,000 4,903,647
Proceeds from sale of investment in consolidated
joint venture .......................................... 2,250,000 -- --
Reacquisition of minority interest
in consolidated joint venture .......................... (2,362,500) -- --
Investments in joint ventures ............................ (1,220,286) (108,364) (490,834)
Proceeds from the sale of equipment ...................... 4,516,096 -- --
Initial direct costs ..................................... -- -- (3,268,593)
Investment in leveraged leases ........................... -- (8,553,492) --
------------ ------------ ------------
Net cash provided (used by) investing activities ..... 3,183,310 (4,589,488) (28,147,510)
------------ ------------ ------------
(continued on next page)
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (continued)
For the Years Ended December 31,
2000 1999 1998
---- ---- ----
Cash flows from financing activities:
Issuance of limited partnership units,
net of offering expenses ............................ -- -- 37,935,017
Proceeds from non-recourse debt ....................... 12,377,316 14,010,000 --
Principal payments on notes payable - non-recourse .... (712,042) (548,659) (397,386)
Proceeds from recourse debt - line of credit .......... 5,738,395 5,000,000 --
Principal payments on notes payable - recourse ........ (10,505,763) (2,825,471) (2,250,000)
Cash distributions to partners ........................ (10,748,904) (10,785,188) (8,780,282)
Redeemed units ........................................ (37,811) (425,558) (3,586)
------------ ------------ ------------
Net cash (used in) provided by financing activities (3,888,809) 4,425,124 26,503,763
------------ ------------ ------------
Net increase (decrease) in cash .......................... 395,881 788,971 (617,331)
Cash at beginning of year ................................ 4,688,025 3,899,054 4,516,385
------------ ------------ ------------
Cash at end of year ...................................... $ 5,083,906 $ 4,688,025 $ 3,899,054
============ ============ ============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Statements of Cash Flows (continued)
Supplemental Disclosure of Cash Flow Information
Interest expense of $6,246,907, $8,833,011 and $8,050,315 for the years
ended December 31, 2000, 1999 and 1998 consisted of: interest expense on
non-recourse financings paid or accrued to lenders by lessees of $5,296,031,
$8,216,602 and $7,701,737, respectively, and other interest of $950,876,
$616,409 and $348,578, respectively.
For the years ended December 31, 2000, 1999 and 1998, non-cash activities
included the following:
2000 1999 1998
---- ---- ----
Finance leases acquired for debt and
investment in unguaranteed residual ................. $ 14,725,828 $ -- $ 63,334,912
Non-recourse and recourse notes payable
assumed in purchase price ........................... (2,400,828) -- (62,833,594)
Investment in unguaranteed residual .................... (12,325,000)
Accounts payable - equipment ........................... -- -- (501,318)
Principal and interest on
finance receivables paid directly
to lenders by lessees ............................... 33,249,889 29,448,407 35,688,131
Principal and interest on non-recourse
financings paid directly to lenders
by lessees .......................................... (33,249,889) (29,448,407) (35,688,131)
Decrease in investment in finance leases due
to terminations ..................................... -- (552,002) (1,208,183)
Decrease in notes payable non-recourse
due to terminations ................................. -- 552,002 1,208,183
Decrease in investments in finance leases and
financings due to contribution to
unconsolidated joint ventures ....................... -- (25,605,165) --
Decrease in notes payable non-recourse related to leases
contributed to joint venture ........................ -- 19,299,854 --
Increase in investments in
unconsolidated joint ventures ....................... -- 6,305,311 --
------------ ------------ ------------
$ -- $ -- $ --
============ ============ ============
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements
December 31, 2000
1. Organization
ICON Cash Flow Partners L.P. Seven (the "Partnership"), was formed on May
23, 1995 as a Delaware limited partnership. The Partnership's maximum offering
was $100,000,000. The Partnership commenced business operations on its initial
closing date, January 19, 1996 with the admission of 26,367.95 limited
partnership units at $100 per unit representing $2,636,795 of capital
contributions. From January 19, 1996 through September 16, 1998 (the final
closing date) 973,628.86 units were admitted representing $97,362,886 of capital
contributions. The Partnership redeemed 650, 6,232, 1,902 and 1,625 partnership
units in 2000, 1999, 1998 and 1997, respectively, leaving 989,588 limited
partnership units outstanding at December 31, 2000.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership's equipment, leases and financing
transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, received an
underwriting commission on the gross proceeds from sales of all units. The total
underwriting compensation paid by the Partnership, including underwriting
commissions, sales commissions, incentive fees, public offering expense
reimbursements and due diligence activities is limited to 13 1/2% of the gross
proceeds received from the sale of the units. Such offering expenses aggregated
$13,499,957, including $5,499,981 paid to the General Partner or its affiliates,
and such costs were charged directly to limited partners' equity.
Profits, losses, cash distributions and disposition proceeds will be
allocated 99% to the limited partners and 1% to the General Partner until each
limited partner has received cash distributions and disposition proceeds
sufficient to reduce its adjusted capital contribution account to zero and
receive, in addition, other distributions and allocations which would provide a
10% per annum cumulative return, compounded daily, on its outstanding adjusted
capital contribution account. After such time, the distributions will be
allocated 90% to the limited partners and 10% to the General Partner.
2. Significant Accounting Policies
Basis of Accounting and Presentation - The Partnership's records are
maintained on the accrual basis. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Certain 1999 amounts have been reclassified to conform to the presentation
used for 2000.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
Consolidation - The consolidated financial statements include the accounts
of the Partnership and its majority owned subsidiary, ICON Cash Flow Partners
L.L.C. III. All inter-company accounts and transactions have been eliminated.
The Partnership accounts for its interests in less than 50% owned joint ventures
under the equity method of accounting. In such cases, the Partnership's original
investments are recorded at cost and adjusted for its share of earnings, losses
and distributions thereafter.
Leases - The Partnership accounts for owned equipment leased to third
parties as finance leases or leveraged leases, as appropriate. For finance
leases, the Partnership records, at the inception of the lease, the total
minimum lease payments receivable, the estimated unguaranteed residual values,
the initial direct costs related to the leases and the related unearned income.
Unearned income represents the difference between the sum of the minimum lease
payments receivable plus the estimated unguaranteed residual minus the cost of
the leased equipment. Unearned income is recognized as finance income over the
terms of the related leases using the interest method. The Partnership's net
investment in leveraged leases consists of minimum lease payments receivable,
the estimated unguaranteed residual values and the initial direct costs related
to the leases, net of the unearned income and principal and interest on the
related non-recourse debt. Unearned income is recognized as income from
leveraged leases over the life of the lease at a constant rate of return on the
positive net investment. Initial direct costs of finance leases and leverage
leases are capitalized and are amortized over the terms of the related leases
using the interest method. Each lease is expected to provide aggregate
contractual rents that, along with residual proceeds, return the Partnership's
cost of its investments along with investment income.
Investments in Estimated Unguaranteed Residual Values - In December 1996,
the Partnership purchased an option to acquire an interest in a drilling rig.
The Partnership exercised its option in 2000 and became the 50% owner of the
future estimated unguaranteed residual. The Partnership has presented its
investment in the drilling rig and the underlying renewal lease with Rowan
Companies, Inc. as an investment in finance lease on the December 31, 2000
balance sheet. In July 1997, the Partnership purchased options to acquire the
interests in three Boeing 737-300 aircraft. The Partnership exercised its
options and became the owner of the future estimated unguaranteed residuals. The
assets are carried at cost (which is at least equal to or less than market
value) until sale of the equipment, at which time a gain or loss will be
recognized on each transaction. No income will be recognized until the
underlying equipment is sold. (See Note 4 for discussion of investments in
estimated unguaranteed residual values).
Investments in Financings - Investment in financings represent the gross
receivables due from the financing of equipment plus the initial direct costs
related thereto less the related unearned income. The unearned income is
recognized as finance income, and the initial direct costs are amortized, over
the terms of the receivables using the interest method. Financing transactions
are supported by a written promissory note evidencing the obligation of the user
to repay the principal, together with interest, which will be sufficient to
return the Partnership's full cost associated with such financing transaction,
together with some investment income. Furthermore, the repayment obligation is
collateralized by a security interest in the tangible or intangible personal
property.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
Disclosures About Fair Value of Financial Instruments - Statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value
of Financial Instruments" requires disclosures about the fair value of financial
instruments, except for lease related instruments. Separate disclosure of fair
value information as of December 31, 2000 and 1999 with respect to the Company's
assets and liabilities is not provided because (i) SFAS No. 107 does not require
disclosures about the fair value of lease arrangements and (ii) the carrying
value of financial assets, other than lease related investments, and certain
payables approximates market value and (iii) fair value information concerning
certain non-recourse debt obligations is not practicable to estimate without
incurring excessive costs to obtain all the information that would be necessary
to derive a market rate.
Allowance for Doubtful Accounts - The Partnership records a provision for
bad debts to provide for estimated credit losses in the portfolio. The allowance
for doubtful accounts is based on an analysis of delinquency, an assessment of
overall risk and a review of historical loss experience. The Partnership's
write-off policy is based on an analysis of the aging of the Partnership's
portfolio, a review of the non-performing receivables and leases, and prior
collection experience. An account is fully reserved for or written off when the
analysis indicates that the probability of collection of the account is remote.
Impairment of Estimated Residual Values - The Partnership's policy with
respect to impairment of estimated residual values is to review, on a periodic
basis, the carrying value of its residuals on an individual asset basis to
determine whether events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable and, therefore, an impairment loss
should be recognized. The events or changes in circumstances which generally
indicate that the residual value of an asset has been impaired are (i) the
estimated fair value of the underlying equipment is less than the Partnership's
carrying value or (ii) the lessee is experiencing financial difficulties and it
does not appear likely that the estimated proceeds from disposition of the asset
will be sufficient to satisfy the remaining obligation to the non-recourse
lender and the Partnership's residual position. Generally in the latter
situation, the residual position relates to equipment subject to third party
non-recourse notes payable where the lessee remits their rental payments
directly to the lender and the Partnership does not recover its residual until
the non-recourse note obligation is repaid in full.
The Partnership measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Partnership from release or resale of the equipment. Generally,
quoted market prices are used as the basis for measuring whether an impairment
loss should be recognized.
Income Taxes - No provision for income taxes has been made as the liability
for such taxes is that of each of the partners rather than the Partnership.
New Accounting Pronouncement - Effective January 1, 2001, the Partnership
adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended. The adoption of SFAS No. 133 did not have any effect on
the Partnership's financial position or results of operations.
3. Investments in Joint Ventures
The Partnership and affiliates formed seven joint ventures for the purpose
of acquiring and managing various assets.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
The joint venture described below is majority owned and is consolidated
with the Partnership.
ICON Cash Flow Partners L.L.C. III
On December 31, 1996, the Partnership and an affiliate, ICON Cash Flow
Partners, L.P., Series E ("Series E") formed ICON Cash Flow Partners L.L.C. III
("ICON Cash Flow LLC III"), for the purpose of acquiring and managing an
aircraft currently on lease to Continental Airlines, Inc. The aircraft is a 1976
McDonnell Douglas DC-10-30 and cost $11,429,751. The lease is a leveraged lease
and the lease term expires in March 2003 (see Note 6). 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."
The six 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. The Partnership's
contributions amounted to $5,391,216 in assigned leases and $275,000 of cash in
1997, $105,719 of cash in 1998 and $43,597 of cash and $73,545 of assigned
leases in 1999. 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.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
Information as to the financial position and results of operations of
1997-A as of and for the year ended December 31, 2000 and 1999 is summarized
below:
December 31, 2000 December 31, 1999
Assets $ 9,002,519 $ 17,967,741
=============== =============
Liabilities $ 6,848,927 $ 14,701,353
=============== =============
Equity $ 2,153,592 $ 3,266,388
=============== =============
Partnership's share of equity $ 581,197 $ 803,353
=============== =============
Year Ended Year Ended
December 31, 2000 December 31, 1999
Net income (loss) $ (661,929) $ 108,923
=============== =============
Partnership's share of net
(loss) income $ (132,140) $ 21,761
=============== =============
Distributions $ 450,867 $ 2,171,133
=============== =============
Partnership's share of distributions $ 90,016 $ 433,467
=============== =============
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. The Partnership's cash contributions amounted
to $500,000 in 1997, $328,155 in 1998 and $60,656 in 1999. 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.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
Information as to the financial position and results of operations of
1997-B as of and for the year ended December 31, 2000 and 1999 is summarized
below:
December 31, 2000 December 31, 1999
----------------- -----------------
Assets $ 18,324,933 $ 29,975,710
================ ===============
Liabilities $ 16,068,825 $ 27,991,447
================ ===============
Equity $ 2,256,108 $ 1,984,263
================ ===============
Partnership's share of equity $ 376,094 $ 330,777
================ ===============
Year Ended Year Ended
December 31, 2000 December 31, 1999
----------------- -----------------
Net income $ 420,423 $ 293,193
================ ===============
Partnership's share of net income $ 70,085 $ 48,875
================ ===============
Distributions $ 148,578 $ 688,051
================ ===============
Partnership's share of distributions $ 24,768 $ 114,698
================ ===============
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. ("Fund 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 Fund 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. The
Partnership invested $4,111 in 1999. Simultaneously with the acquisition of the
Portland General Electric lease by ICON BF, the rent in excess of the senior
debt payments was acquired by L.P. Six for $3,801,108. On March 30, 1999 ICON BF
acquired L.P. Six's interest in 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. ICON BF received $7,643,867 from the
financings. There was no gain or loss recorded on this transaction. The proceeds
from the financing were then distributed to the members of ICON BF.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
Information as to the financial position of ICON BF as of is summarized
below:
December 31, 2000 December 31, 1999
----------------- -----------------
Assets $ 22,744,551 $ 27,740,665
=============== ================
Liabilities $ 12,819,987 $ 18,880,079
=============== ================
Equity $ 9,924,564 $ 8,860,586
=============== ================
Partnership's share of equity $ 49,618 $ 44,298
=============== ================
Year Ended Year Ended
December 31, 2000 December 31, 1999
----------------- -----------------
Net income $ 1,063,978 $ 1,191,629
=============== ================
Partnership's share of net income $ 5,320 $ 5,958
=============== ================
Distributions $ - $ 4,546,230
=============== ================
Partnership's share of distribution $ - $ 22,731
=============== ================
AIC Trust
The Partnership acquired a portfolio of equipment leases and in 1999
contributed such leases, subject to related debt, with a book value of
$6,854,830 to a wholly owned trust ("AIC Trust"). Subsequently, the Partnership
sold interests in this trust at various dates in 1999 to Fund Eight A, an
affiliate of the Partnership, for $3,000,000 and to L.P. Six, an affiliate of
the Partnership, for $1,750,000 at book value, which approximated fair market
value at the dates of sale. The Partnership recognized no gain or loss on the
sales of these interests to either Fund Eight A or to L.P. Six.
As a result of the sales of these interests, as of December 31, 1999 L.P.
Six and Fund Eight A owned interests aggregating 25.51% and 43.73% in the trust
with the Partnership owning a 30.76% interest at that date. The trust is
operated as a joint venture. Profits, losses, excess cash and disposition
proceeds are allocated based upon the Partnerships' percentage ownership
interests in the venture during the respective periods the Partnerships held
such interests. Once the Partnership's interest in AIC Trust was reduced below
50%, the investment in AIC Trust was no longer consolidated and the Partnership
began accounting for its investment under the equity method of accounting.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
Information as to the financial position and results of operations of the
venture as of and for the year ended December 31, 2000 and as of December 31,
1999 and from the period of inception to December 31, 1999 is summarized below:
December 31, 2000 December 31, 1999
----------------- -----------------
Assets $ 16,677,641 $ 22,058,522
=============== ================
Liabilities $ 9,311,356 $ 15,221,822
=============== ================
Equity $ 7,366,285 $ 6,836,700
=============== ================
Partnership's share of equity $ 2,276,797 $ 2,113,897
=============== ================
Dates of
Investments by
For the Year Ended Other Funds Through
December 31, 2000 December 31, 1999
----------------- -----------------
Net income $ 529,585 $ 18,130
=============== ================
Partnership's share of income $ 162,900 $ 9,067
=============== ================
ICON Aircraft 24846, LLC
In 2000, the Partnership and two affiliates, Fund Eight A and ICON Income
Fund Eight B L.P. ("Fund Eight B") formed ICON Aircraft 24846, LLC ("ICON
Aircraft") for the purpose of acquiring an investment in an aircraft with a
purchase price of $44,515,416, which was funded with cash and non-recourse debt
assumed in the purchase price. This aircraft is subject to lease with the
Scandinavian Airlines System. The Partnership has a 2% interest, with Fund Eight
A and Fund Eight B having 2% and 96% interests, respectively. The Partnership
accounts for its investment under the equity method of accounting.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
Information as to the financial position and results of operations of the
joint venture as of an for the period of investment through December 31, 2000 is
summarized below:
December 31, 2000
Assets $ 44,450,734
===============
Liabilities $ 42,193,269
===============
Equity $ 2,257,465
===============
Partnership's share of equity $ 45,149
===============
Period of Investment
Through
December 31, 2000
Net income $ 16,100
===============
Partnership's share of income $ 322
===============
ICON Cheyenne LLC
In 2000, the Partnership and three affiliates, L.P. Six, Fund Eight A and
Fund Eight B formed ICON Cheyenne LLC ("ICON Cheyenne") for the purpose of
acquiring a portfolio of lease investments. The purchase price totaled
$29,705,716 and was funded with cash and non-recourse debt assumed. The
Partnership, L.P. Six, Fund Eight A and Fund Eight B received a 10.31%, 1%, 1%
and 87.69% interest, respectively, in ICON Cheyenne. The Partnership accounts
for its investment under the equity method of accounting.
Information as to the financial position and results of operations of the
venture as of December 31, 2000 and for the period of investment through
December 31, 2000 is summarized below:
December 31, 2000
Assets $ 29,705,716
===============
Liabilities $ 18,304,565
===============
Equity $ 11,401,151
===============
Partnership's share of equity $ 1,175,459
===============
Period of Investment
Through
December 31, 2000
Net income $ -
===============
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
4. Investments in Estimated Unguaranteed Residual Values
In July 1997, the Partnership purchased options to acquire the 100%
residual interests in three Boeing 737-300 aircraft, currently on lease with
Continental Airlines. The Partnership subsequently exercised its options and
became the 100% owner of the future estimated unguaranteed residuals. The
residual investments cost $19,393,541 and the leases for each aircraft expire in
August, October and November 2003.
In December 1996, the Partnership purchased for $12,325,000 a 50% share of
an option to acquire the 100% interest in a drilling rig, then on lease to Rowan
Companies, Inc.
In March 2000, the Partnership formed a joint venture with an affiliate,
L.P. Six, for the purpose of owning the 50% share of the option to acquire the
residual interest in the drilling rig. The Partnership contributed its
investment in the option to the joint venture ("Rowan Joint Venture").
Simultaneously, the Partnership sold an interest in the joint venture to L.P.
Six for $2,250,000. This transaction was recorded at cost, which approximated
fair market value. The Partnership recognized no gain or loss on the sale of
this interest to L.P. Six. L.P. Six had the right to put its interest in the
joint venture back to the Partnership at any time on or after September 15, 2000
for 110% of the purchase price. The Partnership had the right to repurchase the
interest in the joint venture from L.P. Six at any time prior to September 15,
2000 for an amount equal to 105% of L.P. Six's purchase price, which right it
exercised in the third quarter 2000.
The Partnership then exercised its option to acquire the 50% interest in
the equipment at an additional cost of $2,400,828. At such time, the
Partnership's share of the final lease payment due under the lease was
$2,400,828 and the final payment due on related debt was $2,400,828. At the
lease expiration date, the lease with Rowan was renewed for seven and one half
years; the Partnership's share of the semi-annual lease payments during the
renewal term are $1,308,745 per payment. At December 31, 2000, the Rowan
transaction is included on the balance as a finance lease.
5. Net Investment in Leveraged Leases
In August 1996, the Partnership acquired, subject to a leveraged lease, an
interest in an aircraft on lease with Federal Express. The aircraft is a
McDonnell Douglas DC-10-30F built in 1986, and the lease expires in July 2004.
The purchase price was $40,973,585.
In December 1996, the Partnership and an affiliate (see Note 3) 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.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
The net investment in the leveraged leases as of December 31, 2000
consisted of the following:
Non-cancelable minimum rents receivable (net of
principal and interest on non-recourse debt) ....... $ 10,002,727
Estimated unguaranteed residual values ............... 22,875,000
Initial direct costs ................................. 521,204
Unearned income ...................................... (8,223,533)
------------
$ 25,175,398
Unearned income is recognized from leveraged leases over the life of the
lease at a constant rate of return based on the positive net investment in the
lease in years such investment is positive.
Non-cancelable minimum rents receivable relating to the leveraged leases at
December 31, 2000 are $27,473,435 while the related principal and interest on
non-recourse debt is $17,470,708 at December 31, 2000. Such amounts are due as
follows:
Rents Due Debt Payments
--------- -------------
2001 $ 7,742,359 $ 7,742,359
2002 7,742,359 7,742,359
2003 6,178,357 1,985,990
2004 5,810,360 --
----------- -----------
$27,473,435 $17,470,708
=========== ===========
6. Receivables Due in Installments
Non-cancelable minimum annual amounts due on finance leases and financings
are as follows:
Finance
Year Leases Financings Total
2001 $15,518,977 $ 367,629 $15,886,606
2002 7,239,511 323,187 7,562,698
2003 4,827,528 298,614 5,126,142
2004 4,762,568 14,453 4,777,021
2005 3,454,382 -- 3,454,382
Thereafter 6,543,723 -- 6,543,723
----------- ----------- -----------
$42,346,689 $ 1,003,883 $43,350,572
=========== =========== ===========
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
7. Allowance for Doubtful Accounts
The allowance for doubtful accounts related to the investments in finance
leases and financings consisted of the following:
Finance
Leases Financings Total
Balance at December 31, 1997 $ 155,000 $ 22,221 $ 177,221
Provision for bad debts .... 713,450 (13,450) 700,000
---------- ---------- ----------
Balance at December 31, 1998 868,450 8,771 877,221
Provision for bad debts .... 199,160 840 200,000
---------- ---------- ----------
Balance at December 31, 1999 1,067,610 9,611 1,077,221
Provision for bad debts .... 400,000 -- 400,000
---------- ---------- ----------
Balance at December 31, 2000 $1,467,610 $ 9,611 $1,477,221
========== ========== ==========
8. Notes Payable
Notes payable consists of non-recourse notes payable of $58,056,596 (of
which $48,476,596 is being paid directly to the lenders by the lessees and
$9,580,000 which will be paid only from lease residual proceeds realized) and
recourse notes payable of $23,832,595 of which $18,819,239 relate to the
Partnership's investment in estimated unguaranteed residual values (see Note 4)
and $5,013,356 relates to the line of credit agreements discussed below. The
non-recourse and recourse notes secured by aircraft bear interest at rates
ranging from 6.5% to 9.4% and mature as follows:
Notes Payable Note Payable
Year Non-Recourse Recourse Total
2001 $19,016,325 $ 5,251,502 $24,267,827
2002 12,161,951 259,196 12,421,147
2003 9,403,487 18,321,897 27,725,384
2004 7,743,015 -- 7,743,015
2005 3,188,095 -- 3,188,095
Thereafter 6,543,723 -- 6,543,723
----------- ----------- -----------
$58,056,596 $23,832,595 $81,889,191
=========== =========== ===========
The Partnership entered into a recourse line of credit agreement (the
"Agreement") with a lender in June 2000, which expires in June 2001. The maximum
amount available under the line is $7,500,000. The Agreement is secured by
eligible receivables and residuals and bears interest at the rate of prime plus
one percent. At December 31, 2000 the Partnership had $4,464,858 outstanding
under the Agreement.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
The Partnership entered into a line of credit agreement (the "Facility")
with a lender in 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 Prime plus one half percent. At December 31, 2000, the
Partnership had $548,498 outstanding under the Facility.
The Partnership borrowed $14,010,000 in 1999 and used a portion of the
proceeds to prepay $8,553,492 of leveraged lease debt related to the Federal
Express lease (see Note 5) with the remaining proceeds being utilized for
general partnership purposes. This debt matures in 2004 and is included in notes
payable non-recourse.
9. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the years ended December 31, 2000, 1999 and 1998
were as follows:
Charged to Charged to
Equity Capitalized Operations
Underwriting commissions ............ $ 877,058 $ -- $ --
Organization and offering expenses .. 1,534,851 -- --
Acquisition fees .................... -- 3,268,593 --
Management fees ..................... -- -- 2,337,112
Administrative expense reimbursements -- -- 1,005,354
---------- ---------- ----------
Year ended December 31, 1998 ........ $2,411,909 $3,268,593 $3,342,466
========== ========== ==========
Management fees ..................... -- -- 3,066,929
Administrative expense reimbursements -- -- 1,158,866
---------- ---------- ----------
Year ended December 31, 1999 ........ $ -- $ -- $4,225,795
========== ========== ==========
Management fees ..................... $ -- $ -- $3,378,163
Acquisition fees .................... -- 495,732 --
Administrative expense reimbursements -- -- 1,268,398
---------- ---------- ----------
Year ended December 31, 2000 ........ $ -- $ 495,732 $4,646,561
========== ========== ==========
The Partnership and affiliates formed eight joint ventures for the purpose
of acquiring and managing various assets. (See Notes 3 and 4 for additional
information relating to the joint ventures.)
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
11. Tax Information (Unaudited)
The following table reconciles net income for financial reporting purposes
to (loss) income for federal income tax purposes for the year ended December 31,
2000:
2000 1999 1998
---- ---- ----
Net income per financial statements $ 4,658,569 $ 3,514,436 $ 2,689,176
Differences due to:
Direct finance leases ........... 23,809,930 18,112,472 20,348,042
Depreciation .................... (36,903,785) (34,162,751) (30,292,366)
Provision for losses ............ 400,000 200,000 700,000
Loss (gain) on sale of equipment 1,020,325 (905,600) 309,189
Other ........................... (213,838) 5,487,465 739,462
------------ ------------ ------------
Partnership (loss) for
federal income tax purposes ...... $ (7,228,799) $ (7,753,978) $ (5,506,497)
============ ============ ============
As of December 31, 2000, the partners' capital accounts included in the
financial statements totaled $63,916,992 compared to the partners' capital
accounts for federal income tax purposes of $45,530,939 (unaudited). The
difference arises primarily from commissions reported as a reduction in the
partners' capital accounts for financial reporting purposes but not for federal
income tax purposes, and temporary differences related to direct finance leases,
depreciation and provision for losses.
12. Quarterly Financial Data (Unaudited)
The following table is a summary of financial data by quarter for the years
ended December 31, 2000 and 1999:
For the Quarters Ended
--------------------------------------------------------
March 31, June 30, September 30, December 31,
-------- ------- ------------ -----------
2000
Revenues .................... $4,760,082 $5,188,013 $5,633,804 $3,160,680
========== ========== ========== ==========
Net income allocable to
limited partners .......... $ 996,463 $1,475,474 $1,733,815 $ 406,231
========== ========== ========== ==========
Net income per weighted
average limited partnership unit $ 1.01 $ 1.49 $ 1.75 $ .46
========== ========== ========== ==========
1999
Revenues .................... $4,664,562 $6,651,900 $4,283,378 $3,972,417
========== ========== ========== ==========
Net income allocable to
limited partners .......... $1,235,140 $ 888,019 $ 705,089 $ 651,043
========== ========== ========== ==========
Net income per weighted
average limited partnership unit $ 1.24 $ 0.89 $ 0.71 $ 0.66
========== ========== ========== ==========
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
----------------------------------------------------------------------
None
PART III
Item 10. Directors and Executive Officers of the Registrant's General Partner
--------------------------------------------------------------------
The General Partner, a Connecticut corporation, was formed in 1985. The
General Partner's principal offices are located at 111 Church Street, White
Plains, New York 10601-1505, and its telephone number is (914) 993-1700. The
officers of the General Partner have extensive experience with transactions
involving the acquisition, leasing, financing and disposition of equipment,
including acquiring and disposing of equipment subject to leases and full
financing transactions.
The manager of the Partnership's business is the General Partner. The
General Partner is engaged in a broad range of equipment leasing and financing
activities. Through its sales representatives and through various broker
relationships throughout the United States, the General Partner offers a broad
range of equipment leasing services.
The General Partner will perform certain functions relating to the
management of the equipment of the Partnership. Such services include the
collection of lease payments from the lessees of the equipment, re-leasing
services in connection with equipment which is off-lease, inspections of the
equipment, liaison with and general supervision of lessees to assure that the
equipment is being properly operated and maintained, monitoring performance by
the lessees of their obligations under the leases and the payment of operating
expenses.
The officers and directors of the General Partner are as follows:
Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Paul B. Weiss President and Director
Thomas W. Martin Executive Vice President and Director
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
Item 10. Continued
Beaufort J. B. Clarke, age 55, has been Chairman, Chief Executive Officer
and Director of the General Partner since 1996. Prior to his present position,
Mr. Clarke was founder and the President and Chief Executive Officer of Griffin
Equity Partners, Inc. Mr. Clarke formerly was an attorney with Shearman and
Sterling and has over 20 years of senior management experience in the United
States leasing industry.
Paul B. Weiss, age 40, is President and Director of the General Partner.
Mr. Weiss has been exclusively engaged in lease acquisitions since 1988 from his
affiliations with the General Partner since 1996, Griffin Equity Partners (as
Executive Vice President from 1993-1996); Gemini Financial Holdings (as Senior
Vice President-Portfolio Acquisitions from 1991-1993) and Pegasus Capital
Corporation (as Vice President-Portfolio Acquisitions from 1988-1991). He was
previously an investment banker and a commercial banker.
Thomas W. Martin, age 47, has been Executive Vice President of the General
Partner since 1996. Prior to his present position, Mr. Martin was the Executive
Vice President and Chief Financial Officer of Griffin Equity Partners, Inc.
(1993-1996), Gemini Financial Holdings (as Senior Vice President from 1992-1993)
and Chancellor Corporation (as Vice President-Syndications from 1985-1992). Mr.
Martin has 17 years of senior management experience in the leasing business.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
Item 11. Executive Compensation
----------------------
The Partnership has no directors or officers. The General Partner and its
affiliates were paid or accrued the following compensation and reimbursement for
costs and expenses for the years ended December, 31, 2000, 1999 and 1998.
Entity Capacity Type of Compensation 2000 1999 1998
------ -------- -------------------- ---- ---- ----
ICON Capital Corp. General Partner Organization and
offering expenses $ -- $ -- $1,534,851
ICON Capital Corp. Manager Acquisition fees -- -- 3,268,593
ICON Securities Corp. Dealer-Manager Underwriting
commissions -- -- 877,058
ICON Capital Corp. General Partner Management fees 3,378,163 3,066,929 2,337,112
ICON Capital Corp. General Partner Administrative expense
reimbursements 1,268,398 1,158,866 1,005,354
---------- ---------- ----------
$4,646,561 $4,225,795 $9,022,968
========== ========== ==========
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
(a) The Partnership is a limited partnership and therefore does not have voting
shares of stock. No person of record owns, or is known by the Partnership
to own beneficially, more than 5% of any class of securities of the
Partnership.
(b) As of March 29, 2001, Directors and Officers of the General Partner do not
own any equity securities of the Partnership.
(c) The General Partner owns the equity securities of the Partnership set forth
in the following table:
Title Percent
of Class Amount Beneficially Owned of Class
-------- ------------------------- --------
General Partner Represents initially a 1% and potentially a 100%
Interest 10% interest in the Partnership's income, gain
and loss deductions.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
See Item 11 for a discussion of the Partnership's related party
transactions. See Note 3 for a discussion of the Partnership's related party
investments in joint ventures.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedule - None.
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set
forth therein is included in the Financial Statements or Notes thereto.
3. Exhibits - The following exhibits are incorporated herein by reference:
(i) Form of Dealer-Manager Agreement (Incorporated by reference to
Exhibit 1.1 to Amendment No. 3 to Form S-1 Registration Statement
No. 33-94458 filed with the Securities and Exchange Commission on
November 9, 1995)
(ii) Form of Selling Dealer Agreement (Incorporated by reference to
Exhibit 1.2 to Amendment No. 3 to Form S-1 Registration Statement
No. 33-94458 filed with the Securities and Exchange Commission on
November 9, 1995)
(iii)Amended and Restated Agreement of Limited Partnership
(Incorporated herein by reference to Exhibit A to Amendment No. 3
to Form S-1 Registration Statement No. 33-94458 filed with the
Securities and Exchange Commission on November 9, 1995)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter
ended December 31, 2000.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2000
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership 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.
Date: March 28, 2001 /s/ Beaufort J.B. Clarke
-----------------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole General Partner of the Registrant
Date: March 28, 2001 /s/ Beaufort J.B. Clarke
----------------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Date: March 28, 2001 /s/ Paul B. Weiss
----------------------------------------------
Paul B. Weiss
President and Director
Date: March 28, 2001 /s/ Thomas W. Martin
----------------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrant Which have not Registered Securities Pursuant to
Section 12 of the Act
No annual report or proxy material has been sent to security holders. An annual
report will be sent to the limited partners and a copy will be forwarded to the
Commission.