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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended March 31, 2002
-----------------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------------------ ---------------------
Commission File Number 33-94458
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ICON Cash Flow Partners L.P. Seven
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3835387
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
100 Fifth Avenue New York, New York 10011
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(212) 418-4700
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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.
[ ] Yes [ X ] No
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Balance Sheets
(unaudited)
March 31, December 31,
2002 2001
---- ----
Assets
Cash $ 37,283 $ 2,333,871
------------- -------------
Investment in finance leases
Minimum rents receivable 6,934,930 8,506,468
Estimated unguaranteed residual values 14,519,001 14,587,490
Initial direct costs 124,815 196,525
Unearned income (627,262) (1,043,118)
Allowance for doubtful accounts (915,985) (915,985)
------------- -------------
20,035,499 21,331,380
------------- -------------
Investment in operating leases
Equipment at cost 9,678,415 9,678,415
Accumulated depreciation (1,228,956) (895,169)
------------- -------------
8,449,459 8,783,246
------------- -------------
Equipment held for sale or lease, net 18,098,546 18,769,730
------------- -------------
Net investment in leveraged leases 27,881,070 27,290,900
------------- -------------
Investment in estimated unguaranteed residual values 20,811,758 20,811,758
------------- -------------
Investments in unconsolidated joint ventures 3,176,171 3,114,325
------------- -------------
Other assets 1,844,905 1,899,697
------------- -------------
Total assets $ 100,334,691 $ 104,334,907
============= =============
(continued on next page)
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Balance Sheets (Continued)
(unaudited)
March 31, December 31,
2002 2001
---- ----
Liabilities and Partners' Equity
Notes payable - non-recourse $ 28,950,362 $ 29,698,082
Notes payable - recourse 22,608,645 21,286,774
Accounts payable - General Partner
and affiliates 2,849,518 3,895,849
Security deposits, deferred credits
and other payables 1,397,419 1,110,828
Minority interest in consolidated
joint ventures 49,671 48,454
------------- -------------
55,855,615 56,039,987
============= =============
Partners' equity (deficiency)
General Partner (404,436) (366,314)
Limited partners (988,360 and 988,649
units outstanding,
$100 per unit original issue price) 44,883,512 48,661,234
------------- -------------
Total partners' equity 44,479,076 48,294,920
------------- -------------
Total liabilities and partners' equity $ 100,334,691 $ 104,334,907
============= =============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Three Months Ended March 31,
(unaudited)
2002 2001
---- ----
Revenues (restated)
Finance income $ 457,069 $ 1,589,012
Rental income 285,096 186,000
Income from leveraged leases 590,170 552,119
Gain on sales of equipment 8,138 5,310
Income from investments in
unconsolidated joint ventures 368,117 282,398
Interest income and other 38,894 9,764
----------- -----------
Total revenues 1,747,484 2,624,603
----------- -----------
Expenses
Depreciation expense 1,004,971 108,072
Interest 743,113 1,049,349
General and administrative 277,220 174,378
Management fees - General Partner 504,403 833,053
Administrative expense reimbursements-
General Partner 211,344 343,226
Amortization of initial direct costs 131,710 182,887
Minority interest expense 1,217 1,250
----------- -----------
Total expenses 2,873,978 2,692,215
----------- -----------
Net loss $(1,126,494) $ (67,612)
=========== ===========
Net loss allocable to:
Limited partners $(1,115,229) $ (66,936)
General Partner (11,265) (676)
----------- -----------
$(1,126,494) $ (67,612)
=========== ===========
Weighted average number of limited
partnership units outstanding 988,505 989,413
=========== ===========
Net loss per weighted average
limited partnership unit $ (1.13) $ (.07)
=========== ===========
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 Three Months Ended March 31, 2002 and
the Year Ended December 31, 2001
(unaudited)
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
------- ------ -------- ------- -----
(Per weighted average unit)
Balance at
December 31, 2000 $ 60,803,205 $ (251,521) $ 60,551,684
Limited partnership units
redeemed (939 units) (47,009) - (47,009)
Cash distributions to partners $ 10.75 $ - (10,632,716) (100,023) (10,732,739)
Net loss (1,462,246) (14,770) (1,477,016)
------------- ---------- ------------
Balance at
December 31, 2001 48,661,234 (366,314) 48,294,920
Limited partnership units
redeemed (289 units) (13,275) - (13,275)
Cash distributions to partners $ 2.68 $ - (2,649,218) (26,857) (2,676,075)
Net loss (1,115,229) (11,265) (1,126,494)
------------- ---------- ------------
Balance at
March 31, 2002 $ 44,883,512 $ (404,436) $ 44,479,076
============= ========== ============
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 Three Months Ended March 31,
(unaudited)
2002 2001
---- ----
restated
Cash flows from operating activities:
Net loss $(1,126,494) $ (67,612)
----------- -----------
Adjustments to reconcile net loss to
net cash used in operating activities:
Finance income portion of receivables
paid directly to lenders by lessees (278,563) (2,159,652)
Rental income paid directly to lender
by lessee (285,096) --
Interest expense on non-recourse
financing paid directly by lessees
and interest accreted 390,786 850,778
Amortization of initial direct costs 131,710 182,887
Depreciation expense 1,004,971 108,072
Income from leveraged leases (590,170) (552,119)
Income from investments in unconsolidated
joint ventures (368,117) (282,398)
Gains on sales of equipment (8,138) (5,310)
Minority interest expense 1,217 1,250
Changes in operating assets and liabilities (1,709) 667,876
----------- -----------
Total adjustments (3,109) (1,188,616)
----------- -----------
Net cash used in operating activities (1,129,603) (1,256,228)
----------- -----------
Cash flows from investing activities:
Proceeds from sales of equipment 62,146 729,930
Distributions received from unconsolidated
joint ventures 306,366 --
----------- -----------
Net cash provided by investing activities 368,512 729,930
----------- -----------
(continued on next page)
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
For the Three Months Ended March 31,
(unaudited)
2002 2001
---- ----
Cash flows from financing activities:
Cash distributions to partners (2,676,075) (2,685,664)
Proceeds from notes payable -
recourse debt 1,200,000 --
Principal payments on notes payable -
recourse debt (46,147) (406,934)
Redemption of limited partnership units (13,275) (16,908)
Proceeds from notes payable - non recourse -- 2,111,726
----------- -----------
Net cash used in financing activities (1,535,497) (997,780)
----------- -----------
Net decrease in cash and cash equivalents (2,296,588) (1,524,078)
Cash and cash equivalents at beginning
of period 2,333,871 5,083,906
----------- -----------
Cash and cash equivalents at end of period $ 37,283 $ 3,559,828
=========== ===========
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
Supplemental Disclosure of Cash Flow Information
For the three months ended March 31, 2002 and 2001, non-cash activities
included the following:
2002 2001
---- ----
Principal and interest on
direct finance receivables paid
directly to lenders by lessees $ 853,410 $ 7,731,824
Rental income assigned operating
lease receivables 285,096 --
Principal and interest on non-recourse
financing paid directly to
lenders by lessees (1,138,506) (7,731,824)
----------- -----------
$ - $ -
=========== ===========
Interest expense of $743,113 and $1,049,349 for the three months ended
March 31, 2002 and 2001 consisted of interest expense on non-recourse financing
paid or accrued directly to lenders by lessees of $390,786 and $850,778,
respectively, and interest on notes payable-recourse of $352,327 and $198,571,
respectively.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
March 31, 2002
(unaudited)
1. Basis of Presentation
The consolidated financial statements of ICON Cash Flow Partners L.P. Seven
(the "Partnership") have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC") and, in the opinion of
management, include all adjustments (consisting only of normal recurring
accruals) necessary for a fair statement of results for each period shown.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to such SEC rules and regulations. Management believes that the disclosures made
are adequate to make the information represented not misleading. The results for
the interim period are not necessarily indicative of the results for the full
year. These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes included in the Partnership's
2001 Annual Report on Form 10-K. Certain items have been reclassified to conform
with the 2002 presentation. As discussed in note 3, the results of operations
for the three months ended March 31, 2001 have been restated.
2. Redemption of Limited Partnership Units
There were 289 limited partnership units redeemed during the three months
ended March 31, 2002. Redemption amounts are calculated following the redemption
formula specified in the Partnership Agreement. Redeemed units have no voting
rights and do not share in distributions. The Partnership Agreement limits the
number of units which can be redeemed in any one year and redeemed units may not
be reissued. Redeemed limited partnership units are accounted for as a reduction
from partners' equity.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
3. Restatements
In connection with a change in accounting personnel in 2002, the new
accounting personnel identified errors in key reconciliations and accounting
records as of and for the year ended December 31, 2001. As a result, management
performed a detailed review of the Partnership's accounting practices and
processes relating to all of its complex lease transactions. Upon completion of
this review, management determined that during 2001, three leases with a single
lessee and the related lease remittances had been misclassified when each lease
was renewed; in another situation, a lease was included in the financial
statements when it had no economic value. Adjustments to correct these errors
have been made in the books and records of the Partnership and the financial
statements have been restated to reflect the proper accounting for such leases.
The following summarizes the impact on the statement of operations of such
adjustments for the quarter ended March 31, 2001:
For the three months ended March 31, 2001
Originally
Reported Adjustments Restated
Finance income $ 2,503,192 $ (367,389) $2,135,803
Rental income $ - $ 186,000 $ 186,000
Depreciation expense $ - $ 108,072 $ 108,072
Net income (loss) $ 221,849 $ (289,461) $ (67,612)
Net income (loss) allocable to:
Limited partners $ 219,631 $ (286,567) $ (66,936)
General Partner $ 2,218 $ (2,894) $ (676)
Net income (loss) per weighted average
limited partnership unit $ .22 $ (.29) $ (.07)
The restatement adjustments reflected above are as follows: (1) the
reclassification of revenue from one finance lease aggregating $186,000, with
respect to a single lessee, from finance income to rental income due to the fact
that this finance lease came to term in January 2001, but was extended on a
month to month basis, and the recording of depreciation expense of $108,072
related thereto; (2) the reversal of $122,000 of uncollected late charge income,
which had been improperly recorded as finance income; and (3) the reversal of
$59,389 of finance income related to the booked residual of a finance lease
which had been inappropriately recognized after the lease was terminated.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
In addition, in the restated financial statements, the Partnership
reclassified a finance lease to an investment in joint venture as described in
note 6 to the consolidated financial statements. Though the reclassification had
no impact on the reported net income (loss) for the three months ended March 31,
2001, the impact of such reclassification on the statement of operations for the
quarter ended March 31, 2001 was as follows:
Restated
Amounts Reclassification Reclassified
Finance income $ 2,135,803 $ (546,791) $ 1,589,012
Income from investments in
joint ventures $ 43,409 $ 238,989 $ 282,398
Interest income and other income $ 22,074 $ (12,310) $ 9,764
Interest expense $ 1,381,311 $ (331,962) $ 1,049,349
Amortization of initial direct costs $ 171,036 $ 11,851 $ 182,887
Net loss $ (67,612) $ - $ (67,612)
4. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the three months ended March 31, 2002 and 2001
were as follows:
2002 2001
---- ----
Management fees $ 504,403 $ 833,053 Charged to Operations
Administrative expense
reimbursements 211,344 343,226 Charged to Operations
---------- -----------
Total $ 715,747 $ 1,176,279
========== ===========
The Partnership has formed eight joint ventures with affiliates for the
purpose of acquiring and managing various assets. (See Note 6 for additional
information relating to the joint ventures.)
5. Net Investment in Leveraged Leases
The Partnership has ownership interests in two DC-10-30 aircraft subject to
leveraged leases with Continental Airlines, Inc. (through March 2003) and
Federal Express (through July 2004).
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The net investment in the leveraged leases as of March 31, 2002 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 22,700,000
Initial direct costs 298,202
Unearned income (5,119,859)
--------------
$ 27,881,070
==============
Unearned income is recognized from leveraged leases over the lives of the
leases at a constant rate of return based on the positive net investment in the
lease in the years such investment is positive. There are no deferred tax
liabilities arising from the Partnership's leveraged lease investments since all
taxes are recognized at the individual partner level rather than at the
Partnership level.
6. Consolidated Ventures and Investments in Unconsolidated Joint Ventures
The Partnership and affiliates are parties to eight ventures discussed
below for the purpose of acquiring and managing various assets.
Consolidated Venture
The 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 5). 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 and 100% of the revenue and expenses 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 on the consolidated balance sheets and minority
interest expense on the consolidated statements of operations.
Investments in Unconsolidated Joint Ventures
The seven joint ventures described below are 50% or less owned and are
accounted for under the equity method.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Receivables 1997-A L.L.C.
In March 1997, the Partnership and affiliates, ICON Cash Flow Partners L.P.
Six ("L.P. Six") and ICON Cash Flow Partners L.P. Series D ("Series D")
contributed and assigned equipment lease and finance receivables and residuals
to ICON Receivables 1997-A L.L.C. ("1997-A"). In September 1997, Series E, L.P.
Six and the Partnership contributed and assigned additional equipment lease and
finance receivables and residuals to 1997-A. As of March 31, 2002, the
Partnership, Series E, L.P. Six and Series D own 19.97%, 31.19%, 31.03% and
17.81% interests, respectively, in 1997-A. The Partnership accounts for its
interest in 1997-A under the equity method of accounting.
Information as to the unaudited financial position of 1997-A as of March
31, 2002 and December 31, 2001 and the results of its operations for the three
months ended March 31, 2002 and 2001 is summarized below:
March 31, 2002 December 31, 2001
-------------- -----------------
Assets $ 1,128,972 $ 1,856,582
=============== ===============
Liabilities $ 1,002,930 $ 1,707,445
=============== ===============
Equity $ 126,042 $ 149,137
=============== ===============
Partnership's share of equity $ 25,172 $ 29,783
=============== ===============
Three Months Ended Three Months Ended
March 31, 2002 March 31, 2001
-------------- --------------
Net loss $ (23,095) $ (49,144)
=============== ===============
Partnership's share of net loss $ (4,611) $ (9,812)
=============== ===============
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"). The Partnership, Series E and L.P. Six
each contributed cash, equipment leases and residuals and received a 16.67%,
75.00% and 8.33% interest, respectively, in 1997-B. The Partnership accounts for
its investment in 1997-B under the equity method of accounting.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the unaudited financial position of 1997-B as of March
31, 2002 and December 31, 2001 and the results of its operations for the three
months ended March 31, 2002 and 2001 is summarized below:
March 31, 2002 December 31, 2001
-------------- -----------------
Assets $ 6,176,875 $ 8,265,689
============= =============
Liabilities $ 5,753,995 $ 7,876,692
============= =============
Equity $ 422,880 $ 388,997
============= =============
Partnership's share of equity $ 70,494 $ 64,847
============= =============
Three Months Ended Three Months Ended
March 31, 2002 March 31, 2001
-------------- --------------
Net income (loss) $ 33,883 $ (124,293)
============= =============
Partnership's share of net
income (loss) $ 5,647 $ (20,720)
============= =============
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 for a coal handling facility with Portland General
Electric, a utility company. The purchase price totaled $27,421,810, and was
funded with cash and non-recourse debt. 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 accounts for its investment in ICON BF under the equity
method of accounting.
In 2001 the other joint venturers in ICON BF acquired Series C's interest
in accordance with their proportionate shares of ICON BF, at an aggregate cost
of $56,370, which represented Series C's carrying value of the investment. The
Partnership's share of the purchase price was $283. The remaining venturers'
shares in ICON BF at March 31, 2002 were .5025%, .5025%, and 98.995% for the
Partnership, L.P. Six, and Fund Eight A, respectively.
Portland General Electric ("PGE") is a wholly owned subsidiary of Enron
Corporation ("Enron"), which filed for Chapter 11 bankruptcy protection. PGE has
not filed for bankruptcy. While Enron owns all of PGE's outstanding common
stock, PGE has its own legal entity, owns its assets and is responsible for its
own day-to-day operations. PGE continues to make its lease payments and is
current through July 2002.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the unaudited financial position of ICON BF as of March
31, 2002 and December 31, 2001 and the results of its operations for the three
months ended March 31, 2002 and 2001 is summarized below:
March 31, 2002 December 31, 2001
-------------- -----------------
Assets $ 21,717,502 $ 24,855,375
================ ===============
Liabilities $ 10,118,822 $ 13,588,934
================ ===============
Equity $ 11,598,680 $ 11,266,441
================ ===============
Partnership's share of equity $ 58,284 $ 56,614
================ ===============
Three Months Ended Three Months Ended
March 31, 2002 March 31, 2001
-------------- --------------
Net income $ 332,239 $ 310,871
================ ===============
Partnership's share of net income $ 1,670 $ 1,554
================ ===============
AIC Trust
In 1999, ICON/AIC Trust ("AIC Trust") was formed to own and manage a
portfolio of leases in England. The Partnership, L.P. Six and Fund Eight A own
30.76%, 25.51% and 43.73% interests in AIC Trust, respectively. The Partnership
accounts for its investment under the equity method of accounting.
On December 28, 2001, AIC Trust sold its remaining leases, subject to the
related debt, at a loss for a note receivable of (pound)2,575,000 ($3,744,822
based upon the exchange rate at December 31, 2001) which is payable in six
installments through June 2004. The first installment on the note was collected
in January 2002. As of March 31, 2002, the gross amount due is (pound)2,100,000
($2,911,580 on a discounted basis based upon the exchange rate at March 31,
2002).
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the unaudited financial position of AIC Trust as of March
31, 2002 and December 31, 2001 and the results of its operations for the three
months ended March 31, 2002 and 2001 is summarized below:
March 31, 2002 December 31, 2001
-------------- -----------------
Assets $ 2,948,354 $ 3,849,439
=============== =============
Liabilities $ 57,447 $ -
=============== =============
Equity $ 2,890,907 $ 3,849,439
=============== =============
Partnership's share of equity $ 889,242 $ 1,184,087
=============== =============
Three Months Ended Three Months Ended
March 31, 2002 March 31, 2001
-------------- --------------
Net income $ 37,457 $ 131,431
=============== =============
Partnership's share of net
income $ 11,521 $ 40,442
=============== =============
Distributions $ 995,989 $ -
=============== =============
Partnership's share of
distributions $ 306,366 $ -
=============== =============
ICON Cheyenne LLC
In December 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 leases for an aggregate purchase price of
$29,705,716, which was paid for with cash of $11,401,151 and the assumption of
non-recourse debt with an unaffiliated third party lender of $18,304,565. The
debt is structured to be amortized by the application to the debt of rentals due
under the various term leases. The leases expire on various dates through
September 2006. The Partnership, L.P. Six, Fund Eight A and Fund Eight B have
ownership interests of 10.31%, 1.0%, 1.0% and 87.69%, respectively, in ICON
Cheyenne. 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 Consolidated Financial Statements - Continued
Information as to the unaudited financial position of ICON Cheyenne as of
March 31, 2002 and December 31, 2001 and the results of its operations for the
three months ended March 31, 2002 and 2001 is summarized below:
March 31, 2002 December 31, 2001
-------------- -----------------
Assets $ 23,100,496 $ 23,869,671
=============== ==============
Liabilities $ 9,613,438 $ 11,145,506
=============== ==============
Equity $ 13,487,058 $ 12,724,165
=============== ==============
Partnership's share
of equity $ 1,390,515 $ 1,311,861
=============== ==============
Three Months Ended Three Months Ended
March 31, 2002 March 31, 2001
-------------- --------------
Net income $ 762,893 $ 286,784
=============== =============
Partnership's share of
net income $ 78,654 $ 29,567
=============== =============
ICON Aircraft 24846, LLC
In 2000, the Partnership and two affiliates, Fund Eight A and Fund Eight B,
formed ICON Aircraft 24846 for the purpose of acquiring an investment in an
aircraft leased to a commercial airline for a purchase price of $44,515,416,
which was funded with cash of $2,241,371 and non-recourse debt of the
$42,274,045. The rents and the aircraft have been assigned to the non-recourse
lender. The lease is scheduled to expire in March 2003, at which time the
balance of the non-recourse debt outstanding is scheduled to be approximately
$34,500,000. The Partnership, Fund Eight A and Fund Eight B have ownership
interests of 2.0%, 2.0% and 96.0%, respectively, in ICON Aircraft 24846. 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 Consolidated Financial Statements - Continued
Information as to the unaudited financial position of ICON Aircraft as of
March 31, 2002 and December 31, 2001 and the results of its operations for the
three months ended March 31, 2002 and 2001 is summarized below:
March 31, 2002 December 31, 2001
-------------- -----------------
Assets $ 41,284,791 $ 41,952,008
=============== ==============
Liabilities $ 38,090,534 $ 38,945,109
=============== ==============
Equity $ 3,194,257 $ 3,006,899
=============== ==============
Partnership's share of equity $ 63,885 $ 60,138
=============== ==============
Three Months Ended Three Months Ended
March 31, 2002 March 31, 2001
-------------- --------------
Net income $ 187,358 $ 118,868
=============== ==============
Partnership's share of net income $ 3,747 $ 2,378
=============== ==============
North Sea (Connecticut) Limited Partnership
In 2000, a joint venture, North Sea (Connecticut) Limited Partnership
(North Sea), in which the Partnership is a 50% Class C limited partner,
exercised its option to acquire a drilling rig and leased the rig to the
operator. The lease was then discounted on a non recourse basis at a bank and
the proceeds were used to pay for the exercise of the option, with the excess
loan proceeds of $20,002,567 distributed to the joint venturers ($10,001,284
represented the Partnership's 50% share). The other joint venturers are not
affiliates. In 2000, the Partnership originally reflected its pro rata share of
the lease and related debt on its balance sheet. However, in the fourth quarter
of 2001, upon subsequent review, the transaction was reclassified as an
investment in a joint venture. Amounts in the March 31, 2001 statement of
operations have been reclassified to reflect the current period's presentation.
Neither the net income recorded in the 2001 quarter nor the amount of equity
recorded at March 31, 2001 was affected by the reclassification.
The Partnership has guaranteed an amount between the stipulated loss value
provided for in the financing and the loan balance. The maximum amount for which
the Partnership is contingently liable at March 31, 2002 under such guarantee
was approximately $137,999.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the unaudited financial position of North Sea as of March
31, 2002 and December 31, 2001 and the results of its operations for the three
months ended March 31, 2002 and 2001 is summarized below:
March 31, 2002 December 31, 2001
-------------- -----------------
Assets $ 9,694,438 $ 11,169,465
================ ================
Liabilities $ 23,432,278 $ 25,450,283
================ ================
Partners' deficit $ (13,737,840) $ (14,280,818)
================ ================
Partnership's share of equity $ 678,579 $ 407,090
================ ================
Three Months Ended Three Months Ended
March 31, 2002 March 31, 2001
-------------- --------------
Net income $ 542,978 $ 477,978
================ ================
Partnership's share of net income $ 271,489 $ 238,989
================ ================
7. Subsequent Event
During the quarter ended June 30, 2002, the Partnership entered into a
$17,500,000 joint line of credit agreement, shared with Fund Eight A and Fund
Eight B, with Comerica Bank as lender, replacing its prior $7,500,000 line of
credit agreement. The Partnership borrowed $7,775,439 under the new agreement
and used $3,175,439 to pay off its outstanding borrowings under its prior line
of credit and $3,644,700 to repay to Fund Eight B the amount due for the
repurchase in December 2001 of a joint venture interest. Under the terms of the
new agreement, the Partnership may borrow at a rate equal to the Comerica Bank
base rate plus 1% (5.75% at June 30, 2002) and all borrowings are to be
collateralized by the present values of rents receivable and residuals. The
expiration date of the new line of credit agreement is May 31, 2003.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Item 2: General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
The financial statements for 2001 have been restated and reclassified as
explained in Note 3 of Notes to Consolidated Financial Statements. The General
Partner's discussion and analysis below compare the 2002 results to the restated
and reclassified 2001 results.
Results of Operations for the Three Months Ended March 31, 2002 and 2001
Revenues for the three months ended March 31, 2002 ("2002 Quarter") were
$1,747,484 as compared to $2,624,603 in the quarter ended March 31, 2001 ("2001
Quarter") representing a decrease of $877,119. The decrease in revenues resulted
primarily from a decrease in finance income of $1,131,943. The decrease in
finance income was partially offset by increases in rental income of $99,096,
income from leveraged leases of $38,051, income from investments in
unconsolidated joint ventures of $85,719 and gain on sales of equipment of
$2,828. The decrease in finance income resulted primarily from (1) a decrease in
the average size of the Partnership's lease portfolio, (2) certain leases were
renewed and are generating lower levels of finance income during the respective
renewal terms and (3) certain finance leases came to term in 2001 and were
reclassified as operating leases during their renewal terms. The increase in
income from leveraged leases is consistent with the increase in the investment
in leverage leases on which such income is based. The rental income in the 2002
Quarter resulted from the rentals associated with equipment which was
reclassified to operating leases subsequent to the 2001 Quarter.
Expenses for the 2002 Quarter were $2,873,978 as compared to $2,692,215 in
the 2001 Quarter, representing an increase of $181,763. The increase in expenses
was primarily attributable to an increase in depreciation expense of $896,899,
due primarily to equipment being reclassified from finance leases to operating
leases subsequent to the 2001 Quarter, and an increase in general and
administrative expenses of $102,842. The principal reason for the increase in
general and administrative expenses was the storage and insurance costs
associated with off-lease vessels during the 2002 Quarter. The increase in
expenses were partially offset by a decrease in interest expense of $306,236, a
decrease in management fees - General Partner of $328,650, a decrease in
administrative expense reimbursements - General Partner of $131,882, and a
decrease in amortization of initial direct costs of $51,177. Interest expense
decreased due to a decrease in the average debt outstanding from 2001 to 2002.
The decreases in management fees - General Partner and administrative expense
reimbursement - General Partner resulted from the overall decrease in the
average size of the Partnership's lease portfolio. The decrease in amortization
of initial direct costs resulted from the decrease in the average size of the
lease portfolio.
Net loss for the 2002 Quarter and the 2001 Quarter was $1,126,494 and
$67,612, respectively. The net loss per weighted average limited partnership
unit outstanding was $1.13 and $.07, for the 2002 Quarter and the 2001 Quarter,
respectively.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
March 31, 2002
Liquidity and Capital Resources
During the three months ended March 31, 2002, the Partnership used cash in
operating activities of $1,129,603 and paid distributions to partners of
$2,676,075. The Partnership also borrowed $1,200,000 under one of its lines of
credit during the quarter and received a $306,366 distribution from an
unconsolidated joint venture. Because the Partnership's uses of cash exceeded
its sources of cash during the quarter, its liquidity was reduced. The
Partnership currently owns five vessels which are off lease. The Partnership's
ability to continue making cash distributions at the current rate is dependent
on the Partnership's ability to remarket or sell assets coming off lease.
During the quarter ended June 30, 2002, the Partnership entered into a
$17,500,000 joint line of credit agreement, shared with Fund Eight A and Fund
Eight B, with Comerica Bank as lender, replacing its prior $7,500,000 line of
credit agreement. The Partnership initially borrowed $7,775,439 under the new
agreement and used $3,175,439 to pay off its outstanding borrowings under its
prior line of credit and $3,644,700 to repay to Fund Eight B the amount due for
the repurchase in December 2001 of a joint venture interest. Under the terms of
the new agreement, the Partnership may borrow at a rate equal to the Comerica
Bank base rate plus 1% (5.75% at June 30, 2002) and all borrowings are to be
collateralized by the present values of rents receivable and residuals. The
expiration date of the new line of credit agreement is May 31, 2003.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
The Partnership is exposed to certain market risks, including changes in
interest rates and the demand for equipment (and the related residual) owned by
the Partnership and its investees. Except as described below, 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
for most of its obligations.
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 borrowing under the floating rate lines of
credit as of March 31, 2002 aggregated $1,798,144. In the second quarter of
2002, the Partnership borrowed $7,775,439 under its new line of credit agreement
with Comerica Bank and repaid the balance outstanding under its old line. The
new line of credit agreement also has a floating interest rate. The Partnership
believes the risk associated with rising interest rates under its lines is not
significant.
The Partnership manages its exposure to equipment and residual risk by
monitoring the market and maximizing remarketing proceeds through either
releasing or sales of equipment.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter ended
March 31, 2002.
Exhibits
99.1 Certification of Chairman and Chief Executive Officer pursuant to 18
U.S.C.ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer pursuant to 18 U.S.C.ss.1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ICON Cash Flow Partners L. P. Seven
File No. 33-94458 (Registrant)
By its General Partner,
ICON Capital Corp.
August 28, 2002 /s/ Thomas W. Martin
- ------------------------------- -------------------------------------------
Date Thomas W. Martin
Executive Vice President
(Principal financial and accounting officer
of the General Partner of the Registrant)
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
EXHIBIT 99-1
I, Beaufort J.B. Clarke, Chairman and Chief Executive Officer of ICON
Capital Corp, the sole General Partner of ICON Cash Flow Partners L.P. Seven,
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the period ended March 31, 2002 (the
"Periodic Report") which this statement accompanies fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78m) and
(2) information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of
ICON Cash Flow Partners L.P. Seven.
Dated: August 28, 2002
/s/ Beaufort J.B. Clarke
------------------------------------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
sole General Partner of ICON Cash Flow Partners L.P. Seven.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
EXHIBIT 99-2
I, Thomas W. Martin, Executive Vice President (Principal Financial and
Accounting Officer) of ICON Capital Corp, the sole General Partner of ICON Cash
Flow Partners L.P. Seven, certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the period ended March 31, 2002 (the
"Periodic Report") which this statement accompanies fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78m) and
(2) information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of
ICON Cash Flow Partners L.P. Seven.
Dated: August 28, 2002
/s/ Thomas W. Martin
-------------------------------------------------------
Thomas W. Martin
Executive Vice President (Principal
Financial and Accounting Officer)
ICON Capital Corp.
sole General Partner of ICON Cash Flow Partners L.P. Seven.