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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
For the fiscal year ended December 31, 2002
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 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
- -------------------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Fifth Avenue, 10th Floor, New York, New York 10011
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 418-4700
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) [ ] Yes [X] No
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last day of the registrant's most recently completed second fiscal quarter:
Not applicable. There is no established market for units of limited partnership
interest in the registrant.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
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 6-12
7A. Qualitative and Quantitative Disclosures About Market Risk 12
8. Financial Statements and Supplementary Data 13-42
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 43
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 43-44
11. Executive Compensation 44
12. Security Ownership of Certain Beneficial Owners
and Management 44
13. Certain Relationships and Related Transactions 44
14. Controls and Procedures 45
PART IV
15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 45-46
SIGNATURES 47
Certifications 48-52
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
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 additional units were admitted representing $97,362,886
of capital contributions bringing the total admission to 999,996.81 units
aggregating $99,999,681 in capital contributions. The Partnership redeemed
12,449 limited partnership units during the years 1997 through 2002, leaving
987,548 limited partnership units outstanding at December 31, 2002.
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 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 of 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 after
the end of the Reinvestment Period.
The equipment leasing industry is highly competitive. When seeking leasing
transactions for acquisition, 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.
The Partnership had leases which accounted for 10% or more of total revenue
for the years ended December 31, 2002 and 2001. For the year ended December 31,
2002, Federal Express, Seacor Smit and Seacor Marine accounted for 31%, 16% and
14%, respectively. For the year ended December 31, 2001, Federal Express, Seacor
Smit, Seacor Marine and Seacor Offshore accounted for 21%, 19%, 18% and 13%,
respectively.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
Lease and Financing Transactions
During the years ended December 31, 2002 and 2001 the Partnership did not
purchase any equipment. In 2001, a joint venture in which the Company is a 50%
limited partner, exercised an option to acquire a drilling rig and entered into
an operating lease for the rig. This joint venture investment is accounted for
under the equity method.
Also in 2000, the Partnership acquired a 2% interest in a joint venture
("ICON Aircraft 24846, LLC") with two other affiliates acquiring the remaining
joint venture interests. Additionally, the Partnership 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.
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 Company, from time-to-time, in the ordinary course of business,
commences legal actions when necessary to protect or enforce the rights of the
Partnership. We are not a defendant party to any litigation and are not aware of
any pending or threatened litigation against the Partnership.
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 2002.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
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,
2002 2001
---- ----
Limited Partners 4,605 4,598
General Partner 1 1
Item 6. Selected Consolidated Financial and Operating Data
Year Ended December 31,
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2002 2001 2000 1999 1998
Total revenue ..................... $ 8,326,025 $ 9,159,492 $ 14,713,736 $ 19,572,257 $ 17,207,618
Net (loss) income ................. $ (3,661,408) $ (1,477,016) $ 1,293,261 $ 3,514,436 $ 2,689,176
Net (loss) income allocable
to limited partners ............ $ (3,624,794) $ (1,462,246) $ 1,280,328 $ 3,479,291 $ 2,662,284
Net (loss) income allocable
to the General Partner ......... $ (36,614) $ (14,770) $ 12,933 $ 35,145 $ 26,892
Weighted average limited
partnership units outstanding .. 988,099 989,112 989,929 992,719 808,650
Net (loss) income per weighted
average limited partnership unit $ (3.67) $ (1.48) $ 1.29 $ 3.50 $ 3.29
Distributions to limited partners . $ 10,129,308 $ 10,632,716 $ 10,641,411 $ 10,677,316 $ 8,692,479
Distributions to the
General Partner ................ $ 102,316 $ 100,023 $ 107,493 $ 107,872 $ 87,803
December 31,
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2002 2001 2000 1999 1998
Total assets $ 90,134,303 $ 104,334,907 $ 130,936,301 $ 172,007,288 $ 216,387,240
Partners' equity $ 34,366,112 $ 48,294,920 $ 60,551,684 $ 70,045,138 $ 77,741,448
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
Item 7. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
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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 additional units
were admitted representing $97,362,886 of capital contributions bringing the
total admission to 999,996.81 units aggregating $99,999,681 in capital
contributions. The Partnership redeemed 12,449 limited partnership units during
the years 1997 through 2002, leaving 987,548 limited partnership units
outstanding at December 31, 2002.
The Partnership's portfolio consists of net investments in finance leases,
investments in estimated unguaranteed residual values, net investments in
leveraged leases, investments in operating leases, equipment held for sale or
lease and equity investments in unconsolidated joint ventures.
Forward-Looking Information - The following discussion and analysis should
be read in conjunction with the audited financial statements included herein.
Certain statements within this document may constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. These statements are identified by words such as
"anticipate," "believe," "estimate," "expects," "intend," "predict" or "project"
and similar expressions. This information may involve risks and uncertainties
that could cause actual results to differ materially from the forward-looking
statements. Although the Partnership believes that the expectations reflected in
such forward-looking statements are based on reasonable assumptions, such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected.
Critical Accounting Policies and Management Estimates
The policies discussed below are considered by the General Partner to be
critical to an understanding of the Partnership's financial statements because
their application places the most significant demands on the General Partner's
judgments, with financial reporting results relying on estimation about the
effects of matters that are inherently uncertain. Specific risks for these
critical accounting policies are described in the following paragraphs. For all
of these policies, the General Partner cautions that future events rarely
develop exactly as forecast, and the best estimates routinely require
adjustment.
Basis of Accounting and Presentation - The Partnership's records are
maintained on the accrual basis. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the dates of the financial
statements and revenues and expenses during the reporting periods. Significant
estimates include the allowance for doubtful accounts and unguaranteed residual
values. Management believes that the estimates and assumptions utilized in
preparing its financial statements are reasonable and prudent. In addition,
management is required to disclose contingent assets and contingent liabilities.
Actual results could differ from those estimates.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
Leases and Revenue Recognition - The Partnership accounts for owned
equipment leased to third parties as either finance leases, leveraged leases, or
operating 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. For
operating leases, equipment is recorded and depreciated on the straight-line
method over the lease term to their estimated fair market values at lease
terminations. Related lease rentals are recognized on the straight line method
over the lease terms. Billed and uncollected operating lease receivables are
included in other assets. Initial direct costs of finance leases and leveraged
leases are capitalized and are amortized over the terms of the related leases
using the interest method.
Allowance for Doubtful Accounts - The Partnership records a provision for
doubtful accounts to provide for estimated credit losses in its 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.
Equipment Held for Sale or Lease - The vessels that are held for sale or
lease are carried at cost less accumulated depreciation, subject to the
Partnership's impairment policy discussed below.
Investments in Estimated Unguaranteed Residual Values - The assets are
carried at cost (which is equal to or less than market value) subject to the
Partnership's policy relating to impairments of residuals discussed below, 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.
Impairment of Estimated Residual Values - Residual values represent the
estimated amount to be received at lease termination from the disposition of
leased equipment. Actual residuals realized could differ from the Partnership's
estimates. The Partnership's policy with respect to impairment of estimated
residual values under finance leases, leveraged leases, operating leases,
equipment held for sale or lease, and investments in unguaranteed residuals 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
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
situation, the residual position relates to equipment subject to third party
non-recourse notes payable where the lessee remits its rental payments directly
to the lender and the Partnership does not recover its residual until the
non-recourse note obligation is repaid in full. Fair value of equipment is
determined by using both internal and external equipment valuations. External
equipment valuations are obtained from reputable third party appraisers.
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 re-lease or sale of the equipment.
Results of Operations for the Years Ended December 31, 2002 and 2001
Revenues for the year ended December 31, 2002 were $8,326,025 as compared
to $9,159,492 for the year ended December 31, 2001 representing a decrease of
$833,467. The decrease in revenues resulted primarily from decreases in income
from leveraged leases of $1,528,696, finance income of $2,893,964 and rental
income of $827,620. The decrease in revenue was partially offset by increases in
income from investments in unconsolidated joint ventures of $2,006,568 and gain
on sales of equipment of $2,340,354. The decrease in income from leveraged
leases was due to a reduction in the estimated unguaranteed residual value of
$1,835,000 of one of the aircraft as a result of a recent appraisal which
indicated a lower value at lease termination than initially estimated. The
decrease in finance income resulted primarily from (1) a decrease in the average
size of the Partnership's lease portfolio; (2) certain leases which were renewed
and are generating lower levels of finance income during the respective renewal
terms; and (3) certain finance leases which came to term in 2002 and were either
(a) renewed in 2002 and classified as operating leases during their renewal
terms or (b) are currently off lease. The decrease in rental income from 2001
resulted from the rentals associated with equipment which was reclassified to
equipment held for sale or re-lease subsequent to 2001. The increase in income
from equity investment in joint ventures resulted primarily from a provision for
bad debts of $1,825,000 recorded by one of the ventures in 2001 which did not
occur in 2002. Gain on sale of equipment increased primarily due to a sale of
certain equipment which generated a gain of $2,686,609.
Expenses for the year ended December 31, 2002 were $11,987,433 as compared
to $10,636,508 for the year ended December 31, 2001, representing an increase of
$1,350,925. The increase in expenses was primarily attributable to increases in
depreciation expense of $2,185,030, an impairment of unguaranteed residual value
of $350,000, and general and administrative expenses of $547,358. The decrease
in expenses was partially offset by decreases in interest expense of $444,255,
management fees - General Partner of $983,113, administrative expense
reimbursements - General Partner of $241,735 and amortization of initial direct
costs of $523,246. The increase in depreciation expense was due principally to
depreciation associated with equipment reclassified from finance leases to
operating leases or equipment held for sale or lease subsequent in 2001. The
increase in loss on writedown of unguaranteed residual value was due to a
reduction in the estimated unguaranteed residual value of a direct finance lease
as a result of a management estimate which indicated a lower value at lease
termination than initially estimated. The principal reason for the increase in
general and administrative expenses was the storage and remarketing costs
associated with the off-lease vessels during 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 investment portfolio and the timing of rentals received. The
decrease in amortization of initial direct costs was due to a decrease in the
average size of the Partnership's lease portfolio and certain finance leases
which came to term in 2002.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
Net loss for the years ended December 31, 2002 and 2001 was $3,661,408 and
$1,477,016, respectively. The loss per weighted average limited partnership unit
outstanding was $3.67 and $1.48, for the years ended December 31, 2002 and 2001,
respectively.
Results of Operations for the Years Ended December 31, 2001 and 2000
Revenues for the year ended December 31, 2001 decreased by $5,554,244 from
$14,713,736 in 2000 to $9,159,492 in 2001. The decrease in revenues resulted
primarily from a decrease in finance income of $6,976,451, a decrease in income
from leveraged leases of $504,808, a decrease in interest income and other of
$123,742, a decrease in gain on sales of equipment of $251,342 and losses from
investments in joint ventures of $552,951, as compared to income from joint
ventures of $500,662 in 2000. The decreases in these components of revenue were
partially offset by an increase in rental income of $3,355,712 in 2001.
The decrease in finance income resulted from the continued collection of
minimum lease rentals reducing the investment balance outstanding on which such
revenues are based as well as the expiration of finance leases and financings.
Additionally, the leases of six vessels subject to finance leases which
accounted for $3,155,577 of finance lease income in 2000 and $643,030 of finance
lease income in 2001 expired in 2001 in accordance with their terms. Upon lease
termination of the finance leases, the vessels were released under short term
operating leases. Additionally, the finance leases of certain aircraft parts and
rotables expired during 2001. The equipment remained on lease on a month to
month basis and the finance lease residuals were converted to investments in
operating leases.
Income from leveraged leases decreased in 2001 primarily due to a
write-down in the fourth quarter of 2001 of the estimated residual of one of the
aircraft under lease. Gain on sales of equipment decreased due primarily to the
gains recorded on the sale of two aircraft in 2000. There were no similar sales
in 2001. Rental income increased by $3,355,712, of which $2,711,700 was
generated by the six vessels discussed above, which were previously leased under
finance leases which expired in 2001, and were released under short term
operating leases during 2001. However, in the fourth quarter of 2001, five of
the vessels were returned to the Partnership and were off lease at December 31,
2001. Additionally, the Partnership earned rental income of $644,012 on the
month to month leases of aircraft parts and rotables. However, the lessee began
returning the aircraft rotables and parts in early 2002 and all of the equipment
is expected to be returned by the end of the summer of 2002. Such equipment is
being remarketed in 2002. The Partnership had an aggregate loss from its
investments in joint ventures of ($552,951) in 2001 as compared to income from
joint ventures of $500,662 in 2000.
Expenses for the year ended December 31, 2001 were $10,636,508 representing
a decrease of $2,783,967 from 2000. The decrease in expenses resulted primarily
from decreases in interest expense of $1,623,475, amortization of initial direct
costs of $906,759, management fees - General Partner of $1,419,408 and a
decrease of administrative expense reimbursements - General Partner of $606,879.
Additionally, the Company recorded a reversal of a provision for bad debts of
$500,000 in 2001 as compared to a provision for bad debts of $400,000 in 2000.
The decreases were partly offset by the increase in depreciation expense of
$2,584,622 due to the reclassification of the six vessels and the
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
aircraft parts and rotables discussed above from finance leases to operating
leases, an increase in general and administrative expenses of $49,015, and an
increase in minority interest expense of $38,917. The decrease in interest
expense was due primarily to the decrease in the average debt outstanding during
2001 as compared to 2000. Amortization of initial direct costs decreased as a
result of the decrease in the average size of the finance lease portfolio from
2000 to 2001. Management fees - General Partner decreased due to the decrease in
the amount of gross rent (which is the basis of such fee) received in 2001 as
compared to 2000.
Net (loss) income for the years ended December 31, 2001 and 2000 was
$(1,477,016) and $1,293,261, respectively. The net (loss) income per weighted
average limited partnership unit was $(1.48) and $1.29 for 2001 and 2000,
respectively. The primary reasons for the decline in net income in 2001 was the
decrease in finance income and losses from unconsolidated joint ventures as
described above.
Liquidity and Capital Resources
The Partnership's primary source of liquidity in 2002 were borrowings of
$10,800,439, proceeds from the sale of equipment of $6,184,106 and distributions
received from unconsolidated joint ventures of $1,288,983. Distributions to
partners aggregated $10,231,624, and the Partnership repaid recourse debt of
$5,120,036 and non-recourse debt of $250,000. As a result of this activity the
Partnership's liquidity was reduced.
The Partnership's notes payable at December 31, 2002 totaled $54,894,665.
These amounts consisted of $27,186,863 of non-recourse notes and $27,707,802 of
recourse notes payable. $21,328,461 of the recourse notes are secured by the
investments in three aircraft residuals with an aggregate carrying value at
$20,811,758 at December 31, 2002. The recourse notes payable also include
amounts outstanding under the lines of credit discussed below. The non-recourse
notes are secured by, and are payable from the proceeds of sale or lease of,
various aircraft and vessels.
During the quarter ended June 30, 2002, the Partnership entered into a
$17,500,000 joint and several line of credit agreement dated as of May 30, 2002
shared with Fund Eight A and Fund Eight B (the "Initial Funds"), with Comerica
Bank as lender. Under the terms of the agreement, the Partnership may borrow at
a rate equal to the Comerica Bank base rate plus 1% (together, 5.25% at December
31, 2002) and all borrowings are to be jointly and severally collateralized by
the present values of rents receivable and equipment owned by all of the Initial
Funds sharing in the joint line of credit. On December 12, 2002, the agreement
was amended to admit ICON Income Fund Nine, LLC, collectively along with the
Initial Funds (the "Funds"), as a borrower sharing the $17,500,000 joint line of
credit agreement. The Funds have entered into a Contribution Agreement, dated as
of May 30, 2002, as amended December 12, 2002, pursuant to which the Funds have
agreed to restrictions on the amount and the terms of their respective
borrowings under the line of credit in order to minimize the risk that a Fund
would not be able to repay its allocable portion of the outstanding revolving
loan obligation at any time, including restrictions on any Fund borrowing in
excess of the lesser of (A) an amount each Fund could reasonably expect to repay
in one year out of its projected free cash flow, or (B) the greater of (i) the
Borrowing Base (as defined in the line of credit agreement) as applied to such
Fund, and (ii) 50% of the net worth of such Fund. The Contribution Agreement
provides that, in the event a Fund pays an amount under the agreement in excess
of its allocable share of the obligation under the agreement whether by
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
reason of an Event of Default or otherwise, the other Funds will immediately
make a contribution payment to such Fund in such amount that the aggregate
amount paid by each Fund reflects its allocable share of the aggregate
obligations under the agreement. The Funds' obligations to each other under the
Contribution Agreement are collateralized by a subordinate lien on the assets of
each participating Fund. The expiration date of this line of credit is May 31,
2003. The Partnership violated a financial covenant at December 31, 2002
creating an Event of Default. The bank granted a waiver to the Partnership with
respect to this Event of Default. As of December 31, 2002, there were no
borrowings by the Partnership under the line. Aggregate borrowing by all Funds
under the line of credit agreement aggregated $9,731,310 on December 31, 2002.
The Partnership entered into a $5,000,000 line of credit agreement (the
"Facility") with a bank in 1998 which is secured by certain receivables and
residuals and accrues interest at prime (4.75% at December 31, 2002) plus one
half percent. At December 31, 2002, the Partnership had $453,901 outstanding
under the Facility. The Facility originally expires in December 2002 and is
renewable on a bi-annual basis. The Partnership did not exercise its renewal
option and paid the line off in full in February 2003.
Cash distributions to the limited partners for the years ended December 31,
2002 and 2001, which were paid monthly, totaled $10,129,308 and $10,632,716,
respectively, which was a return of capital. The monthly annualized cash
distribution rate to limited partners for the years ended December 31, 2002 and
2001 was 10.25% and 10.75% respectively, which was a return of capital.
As of December 31, 2002, 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.
We do not consider the impact of inflation to be material in the analysis
of our overall operations.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS No. 143") which is effective for fiscal
years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The Partnership
does not expect that the adoption of SFAS No. 143 will have a material impact on
its financial position, results of operations or cash flows.
Effective January 1, 2002, the Partnership adopted SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144"). This statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future net
cash flows expected to be generated by the asset. If the carrying amount of the
asset exceeds its estimated future cash flows, an impairment charge is
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. SFAS No. 144 requires companies to separately report
discontinued operations and extends that reporting to a component of an entity
that either has been disposed of (by sale, abandonment or in a distribution to
the owners) or classified as held for sale. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less the costs to
sell. The adoption of SFAS No. 144 did not have any effect on the Partnership's
financial position or results of operations as the provisions of SFAS No. 144
are similar to the Partnership's current policy for impairment review.
Effective January 1, 2002, the Partnership adopted SFAS No. 145, "Recession
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS No. 145"). SFAS No. 145 amends SFAS No. 13
Accounting for Leases to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. The provisions of the Statement related to
Statement No. 13 were effective for transactions occurring after May 15, 2002,
the adoption of which did not have a material effect on the Partnership's
financial statements.
On July 30, 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS No. 146"). The standard
replaced Emerging Issues Task Force (EITF) issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)" and requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. Examples of costs covered by the standard include lease termination costs
and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. SFAS
No. 146 is effective prospectively to exit or disposal activities initiated
after December 31, 2002. The impact on the Partnership's financial statement
from the application of this standard is dependent on any exit or disposal
activities in 2003.
The Partnership does not believe that any other recently issued but not yet
effective accounting standards will have a material effect on the Partnership's
financial position or results of operations.
Item 7A. 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 residuals) 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 fixed rate debt service obligation streams are
generally matched by fixed rate lease receivables streams generated by the
Partnership's lease investments.
The Partnership also 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 aggregate borrowings under the floating
rate lines of credit as of December 31, 2002 was $6,379,341. The Partnership
believes the risk associated with rising interest rates under these lines are
not significant.
The Partnership manages its exposure to equipment and residual risk by
monitoring the equipment leasing market and maximizing remarketing proceeds
through either releasing or sale of equipment.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2002
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page Number
Independent Auditors' Reports 15-16
Consolidated Balance Sheets as of December 31, 2002 and 2001 17-18
Consolidated Statements of Operations for the Years Ended
December 31, 2002,2001 and 2000 19
Consolidated Statements of Changes in Partners' Equity for
the Years EndedDecember 31, 2002, 2001 and 2000 20
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2002, 2001 and 2000 21-23
Notes to Consolidated Financial Statements 24-42
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 2002
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITOR'S REPORT
The Partners
ICON Cash Flow Partners L.P. Seven:
We have audited the accompanying consolidated balance sheet of ICON Cash Flow
Partners L.P. Seven (a Delaware limited partnership) as of December 31, 2002 and
the related consolidated statements of operations, changes in partners' equity
and cash flows for the year then ended. 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
audit.
We conducted our audit 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 audit provides 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, 2002 and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
/s/ Hays & Company LLP
------------------------------------
Hays & Company LLP
March 19, 2003
New York, New York
INDEPENDENT AUDITOR'S REPORT
The Partners
ICON Cash Flow Partners L.P. Seven:
We have audited the accompanying consolidated balance sheet of ICON Cash Flow
Partners L.P. Seven (a Delaware limited partnership) as of December 31, 2001 and
the related consolidated statements of operations, changes in partners' equity,
and cash flows for each of the years in the two year period ended December 31,
2001. 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, 2001 and the results of its operations
and its cash flows for each of the years in the two year period ended December
31, 2001, in conformity with accounting principles generally accepted in the
United States of America.
/s/ KPMG LLP
-------------------------------------
KPMG LLP
May 20, 2002 except for Note 6 which is as of July 25, 2002 New York, New York
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
2002 2001
---- ----
Assets
Cash and cash equivalents $ 1,257,947 $ 2,333,871
------------- -------------
Investment in finance leases and financings
Minimum rents receivable 2,252,134 8,506,468
Estimated unguaranteed residual values 1,717,816 14,587,490
Initial direct costs, net 36,455 196,525
Unearned income (137,106) (1,043,118)
Allowance for doubtful accounts (289,301) (915,985)
------------- -------------
3,579,998 21,331,380
Net investment in leveraged leases 27,877,708 27,290,900
------------- -------------
Equipment held for sale or lease, net 19,343,546 18,769,730
------------- -------------
Investment in operating leases
Equipment at cost 14,195,791 9,678,415
Accumulated depreciation (1,703,583) (895,169)
------------- -------------
12,492,208 8,783,246
Investments in estimated unguaranteed residual values 20,811,758 20,811,758
------------- -------------
Investments in unconsolidated joint ventures 3,360,145 3,114,325
------------- -------------
Due from General Partner and affiliates 161,458 --
------------- -------------
Other assets, net 1,249,535 1,899,697
------------- -------------
Total assets $ 90,134,303 $ 104,334,907
============= =============
(continued on next page)
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Balance Sheets (Continued)
December 31,
2002 2001
---- ----
Liabilities and Partners' Equity
Notes payable - non-recourse $ 27,186,863 $ 29,698,082
Note payable - recourse 27,707,802 21,286,774
Due to General Partner and affiliates 155,542 3,895,849
Security deposits, deferred credits and other payables 664,692 1,110,828
Minority interest in joint ventures 53,292 48,454
------------- -------------
Total liabilities 55,768,191 56,039,987
------------- -------------
Commitments and Contingencies
Partners' equity (deficiency)
General Partner (505,244) (366,314)
Limited partners (987,548 and 988,649 units
outstanding, $100 per unit original issue price) 34,871,356 48,661,234
------------- -------------
Total partners' equity 34,366,112 48,294,920
------------- -------------
Total liabilities and partners' equity $ 90,134,303 $ 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 Years Ended December 31,
2002 2001 2000
---- ---- ----
Revenues
Rental income $ 2,528,092 $ 3,355,712 $ --
Finance income 906,012 3,799,976 10,776,427
Income from leveraged leases 586,808 2,115,504 2,620,312
Net gain on sales of equipment and investments 2,711,735 371,381 622,723
Income (loss) from investments
in unconsolidated joint ventures 1,453,617 (552,951) 500,662
Interest income and other 139,761 69,870 193,612
------------ ------------ ------------
Total revenues 8,326,025 9,159,492 14,713,736
------------ ------------ ------------
Expenses
Interest 3,515,642 3,959,897 5,583,372
Depreciation expense 4,769,652 2,584,622 --
Management fees - General Partner 975,642 1,958,755 3,378,163
General and administrative expense 1,567,263 1,019,905 970,890
Administrative expense
reimbursements - General Partner 419,784 661,519 1,268,398
Amortization of initial direct costs 384,612 907,858 1,814,617
Impairment - unguaranteed residual value 350,000 -- --
Minority interest expense 4,838 43,952 5,035
(Reversal of) provision for bad debts -- (500,000) 400,000
------------ ------------ ------------
Total expenses 11,987,433 10,636,508 13,420,475
------------ ------------ ------------
Net (loss) income $ (3,661,408) $ (1,477,016) $ 1,293,261
============ ============ ============
Net (loss) income allocable to:
Limited partners $ (3,624,794) $ (1,462,246) $ 1,280,328
General Partner (36,614) (14,770) 12,933
------------ ------------ ------------
$ (3,661,408) $ (1,477,016) $ 1,293,261
============ ============ ============
Weighted average number of limited
partnership units outstanding 988,099 989,112 989,929
============ ============ ============
Net (loss) income per weighted average
limited partnership unit $ (3.67) $ (1.48) $ 1.29
============ ============ ============
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, 2002, 2001 and 2000
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
Balance at
January 1, 2000 $ 70,202,099 $ (156,961) $ 70,045,138
Limited partnership units
redeemed (650 units) (37,811) - (37,811)
Cash distributions to partners $ 9.46 $ 1.29 (10,641,411) (107,493) (10,748,904)
(per weighted average unit
amounts
Net income 1,280,328 12,933 1,293,261
---------------- ------------- ---------------
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 (1,101 units) (35,776) - (35,776)
Cash distributions to partners $ 10.25 $ - (10,129,308) (102,316) (10,231,624)
Net loss (3,624,794) (36,614) (3,661,408)
---------------- -------------- ----------------
Balance at
December 31, 2002 $ 34,871,356 $ (505,244) $ 34,366,112
================ ============== ===============
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,
2002 2001 2000
---- ---- ----
Cash flows from operating activities:
Net (loss) income $ (3,661,408) $ (1,477,016) $ 1,293,261
---------------- -------------- ---------------
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Net gain on sales of equipment and investments (2,711,735) (371,381) (622,723)
Finance income portion of receivables
paid directly to lenders by lessees (568,035) (3,127,075) (7,443,380)
Rental income paid directly to lender by lessee (2,528,092) (2,711,700) -
Amortization of initial direct costs 384,612 907,858 1,814,617
Depreciation expense 4,769,652 2,584,622 -
(Reversal of) provision for bad debts - (500,000) 400,000
Impairment - unguaranteed residual values 350,000 - -
Interest expense on non-recourse
financings paid directly by lessees and
interest accreted 2,536,757 3,810,182 4,632,496
Income from leveraged leases (586,808) (2,115,504) (2,620,312)
(Income) loss from investments in
unconsolidated joint ventures (1,453,617) 552,951 (500,662)
Minority interest expense 4,838 43,952 5,035
Changes in operating assets and liabilities (248,180) 5,259,689 4,028,264
---------------- -------------- ---------------
Total adjustments (50,608) 4,333,594 (306,665)
--------------- -------------- ---------------
Net cash (used in) provided by operating activities (3,712,016) 2,856,578 986,596
--------------- -------------- ---------------
Cash flows from investing activities:
Proceeds from the sales of equipment 6,184,106 7,771,021 4,516,096
Proceeds from sale of minority interests
in consolidated ventures - 3,273,407 2,250,000
Distributions received from unconsolidated joint ventures 1,288,983 255,047 10,116,067
Investments in unconsolidated joint ventures - (283) (1,220,286)
Repurchase of minority interest
in consolidated venture - - (2,362,500)
--------------- -------------- ---------------
Net cash provided by investing activities 7,473,089 11,299,192 13,299,377
--------------- -------------- ---------------
(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,
2002 2001 2000
---- ---- ----
Cash flows from financing activities:
Proceeds from non-recourse debt - 2,111,726 2,376,033
Principal payments on notes payable - non-recourse (250,000) (3,868,718) (712,042)
Proceeds from note payable - recourse 10,800,439 - 5,738,395
Principal payments on notes payable - recourse (5,120,036) (4,369,065) (10,505,763)
Cash distributions to partners (10,231,624) (10,732,739) (10,748,904)
Redemption of limited partnership units (35,776) (47,009) (37,811)
---------------- -------------- ---------------
Net cash used in financing activities (4,836,997) (16,905,805) (13,890,092)
---------------- -------------- ---------------
Net (decrease) increase in cash and cash equivalents (1,075,924) (2,750,035) 395,881
Cash and cash equivalents at beginning of year 2,333,871 5,083,906 4,688,025
--------------- -------------- ---------------
Cash and cash equivalents at end of year $ 1,257,947 $ 2,333,871 $ 5,083,906
=============== ============== ===============
(continued on next page)
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Statements of Cash Flows(continued)
Supplemental Disclosure of Cash Flow Information
During the years ended December 31, 2002, 2001 and 2000, non-cash
activities included the following:
2002 2001 2000
---- ---- ----
Principal and interest on
finance receivables paid directly
to lenders by lessees $ 2,269,884 $ 12,831,791 $ 30,849,889
Rental income assigned - operating lease receivable 2,528,092 2,711,700 -
Principal and interest on non-recourse
financings paid directly to lenders
by lessees (4,797,976) (15,543,491) (30,849,889)
---------------- ---------------- -----------------
$ - $ - $ -
================ ================ =================
2002 2001 2000
---- ---- ----
Transfer of investment in finance leases
to investments in operating leases $ 9,647,253 $ 30,137,598 $ -
================ ================ ================
Transfer of investment in operating leases, net of
accumulated depreciation, to equipment held for
sale or lease $ 3,258,314 $ 18,769,730 $ -
================ ================ =================
2002 2001 2000
---- ---- ----
Interest paid directly to lenders by lessees
pursuant to non-recourse financings $ 2,536,757 $ 3,810,182 $ 4,632,496
Interest expense on recourse notes - paid 978,885 149,715 950,876
---------------- ---------------- ----------------
Total interest expense $ 3,515,642 $ 3,959,897 $ 5,583,372
================ ================ ================
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements
For the Years Ended December 31, 2002, 2001 and 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 additional units were admitted representing $97,362,886
of capital contributions bringing the total admission to 999,996.81 units
aggregating $99,999,681 in capital contributions. The Partnership redeemed
12,449 limited partnership units during the years 1997 through 2002, leaving
987,548 limited partnership units outstanding at December 31, 2002.
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
General Partner received organization and offering expenses from the gross
proceeds of such sales. The total underwriting compensation paid by the
Partnership, including underwriting commissions, sales commissions, incentive
fees, public offering expense reimbursements and due diligence activities was
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 are 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 accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Significant
estimates include the allowance for doubtful accounts and unguaranteed residual
values. Management believes that the estimates and assumptions utilized in
preparing its financial statements are reasonable and prudent. In addition,
management is required to disclose contingent assets and contingent liabilities.
Actual results could differ from those estimates.
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 subsidiaries. All inter-company
accounts and transactions have been eliminated in consolidation. The Partnership
accounts for its interests in 50% or less 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.
Cash and Cash Equivalents - Cash and cash equivalents are defined as cash
in banks and highly liquid investments with original maturity dates of three
months or less. The Partnership's cash and cash equivalents are held principally
at one financial institution and at times may exceed insured limits.
Leases and Revenue Recognition - The Partnership accounts for owned
equipment leased to third parties as finance leases, leveraged leases, or
operating 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. For
operating leases, equipment is recorded and depreciated on the straight-line
method over the lease term to their estimated fair market values at lease
terminations and is subject to the Partnership's impairment policy. Related
lease rentals are recognized on the straight line method over the lease terms.
Billed and uncollected operating lease receivables are included in other assets.
Initial direct costs of finance leases and leveraged leases are capitalized and
are amortized over the terms of the related leases using the interest method.
Allowance for Doubtful Accounts - The Partnership records a provision for
doubtful accounts to provide for estimated credit losses in its 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 or written off
when the analysis indicates that the probability of collection of the account is
remote.
Equipment Held for Sale Or Lease - As of December 31, 2002, the Partnership
had aircraft parts and rotables that come off lease in 2002 and five vessels
that came off lease in 2001. This equipment is recorded at original equipment
cost less accumulated depreciation, and is subject to the Partnership's
impairment policy.
Investments in Estimated Unguaranteed Residual Values - The Partnership
carries its investments in the future estimated unguaranteed residual values of
assets at cost, which is equal to or less than market value, subject to the
Partnership's policy relating to impairments of residuals. Gains or losses are
recognized upon the sale or disposition of the investments.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
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.
Page 43
Last printed 03/31/03 3:49 PM
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 re-lease or sale of the equipment.
Fair Value of Financial Instruments - Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures About Fair Values 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, 2002 and 2001 with respect to the
Partnership's assets and liabilities is not provided because (i) SFAS No. 107
does not require disclosures about the fair value of lease arrangements, (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 recourse and 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.
Redemption of Limited Partnership Units - The General Partner consented to
the Partnership redeeming 650 units during 2000, 939 units in 2001 and 1,101
units in 2002. The redemption amounts are calculated following the specified
redemption formula in accordance with 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 deduction from partners' equity.
Income Taxes - No provision for income taxes has been recorded since the
liability for such taxes is that of each of the partners rather than the
Partnership. The Partnership's income tax returns are subject to examination by
the federal and state taxing authorities, and changes, if any could adjust the
individual income tax of the partners.
Reclassifications - Certain items from prior years have been reclassified
to conform with the 2002 classifications.
New Accounting Pronouncements - In June 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143")
which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143
addresses financial accounting and reporting for obligations associated with the
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
retirement of tangible long-lived assets and the associated asset
retirement costs. The Partnership does not expect that the adoption of SFAS No.
143 will have a material impact on its financial position, results or operation
or cash flows.
Effective January 1, 2002, the Partnership adopted SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144"). This statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future net
cash flows expected to be generated by the asset. If the carrying amount of the
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. SFAS No. 144 requires companies to separately report
discontinued operations and extends that reporting to a component of an entity
that either has been disposed of (by sale, abandonment or in a distribution to
the owners) or classified as held for sale. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less the costs to
sell. The adoption of SFAS No. 144 did not have any effect on the Partnership's
financial position or results of operations as the provisions of SFAS No. 144
are similar to the Partnership's current policy for impairment review.
Effective January 1, 2002, the Partnership adopted SFAS No. 145, "Recession
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS No. 145"). SFAS No. 145 amends SFAS No. 13
Accounting for Leases to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. The provisions of the Statement related to
Statement No. 13 were effective for transactions occurring after May 15, 2002,
the adoption of which did not have a material effect on the Partnership's
financial statements.
On July 30, 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS No. 146"). The standard
replaced Emerging Issues Task Force (EITF) issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)" and requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. Examples of costs covered by the standard include lease termination costs
and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. SFAS
No. 146 is effective prospectively to exit or disposal activities initiated
after December 31, 2002. The impact on the Partnership's financial statement
from the application of this standard is dependent on any exit or disposal
activities in 2003.
The Partnership does not believe that any other recently issued but not yet
effective accounting standards will have a material effect on the Partnership's
financial position or results of operation.
3. Consolidated Ventures and Investments in Unconsolidated Joint Ventures
The Partnership and its affiliates formed nine ventures discussed below for
the purpose of acquiring and managing various assets. The Partnership and its
affiliates have identical investment objectives and participate on the same
terms and conditions. The Partnership has a right of first refusal to purchase
the equipment, on a pro-rata basis, if any of the affiliates desire to sell
their interests in the equipment.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
Consolidated Ventures
The ventures described below are majority owned and are consolidated with
the Partnership.
ICON Cash Flow Partners L.L.C. III
In December 1996, the Partnership and an affiliate, ICON Cash Flow
Partners, L.P., Series E ("Series E") formed ICON Cash Flow Partners L.L.C. III
("ICON Cash Flow L.L.C. 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 L.L.C. III.
Series E's investment in ICON Cash Flow L.L.C. 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.
Seacor Joint Ventures
On July 13, 2001, the Partnership and an affiliate, ICON Cash Flow Partners
L.P. Eight B ("Fund Eight B"), formed three joint ventures known as "ICON/Janson
Graham LLC," ICON/Pearl Graham LLC" and "ICON Amanda Graham LLC", the three of
which are referred to collectively as the "Seacor Joint Ventures". The
Partnership contributed three offshore supply vessels with a net book and
approximate market value of $7,595,271, and Fund Eight B contributed $3,723,407
in cash into the Seacor Joint Ventures. The Partnership and Fund Eight B
received 69.88% and 30.12% ownership interests, respectively, in the Seacor
Joint Ventures as a result of these contributions.
Fund Eight B had the right during the first year of the Seacor Joint
Ventures to sell any of the three interests back to the Partnership at a price
equal to 110% of its outstanding investment balance for any vessel that did not
generate rental revenue for a three month period. All three vessels were
off-lease for part of the third quarter and all of the fourth quarter of 2001.
On December 31, 2001, Fund Eight B exercised its right and sold its interest in
the Seacor Joint Ventures back to the Partnership for the aggregate price of
$3,644,700, which amount is included on the balance sheet as of December 31,
2001 under the caption Due to General Partner and affiliates.
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 Receivables 1997-A LLC
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 LLC ("1997-A"). In September 1997, the
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
Partnership, Series E and L.P. Six contributed and assigned additional equipment
lease and finance receivables and residuals to 1997-A. As of December 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
investment in 1997-A under the equity method of accounting.
Information as to the financial position and results of operations of
1997-A as of and for the years ended December 31, 2002 and 2001 is summarized
below:
December 31, 2002 December 31, 2001
Assets $ 694,761 $ 1,856,582
=============== =============
Liabilities $ 390,389 $ 1,707,445
=============== =============
Equity $ 304,372 $ 149,137
=============== =============
Partnership's share of equity $ 60,784 $ 29,783
=============== =============
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
Net income (loss) $ 155,235 $ (2,004,455)
=============== =============
Partnership's share of net income (loss) $ 31,001 $ (551,414)
=============== =============
1997-A reversed a provision for bad debts of $268,834 for the year ended
December 31, 2002 and recorded a provision for bad debts of $1,825,000 for the
year ended December 31, 2001.
ICON Receivables 1997-B LLC
In August 1997, the Partnership and affiliates, Series E and L.P. Six,
formed ICON Receivables 1997-B LLC ("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 Financial Statements - Continued
Information as to the financial position and results of operations of
1997-B as of and for the years ended December 31, 2002 and 2001 is summarized
below:
December 31, 2002 December 31, 2001
Assets $ 3,241,761 $ 8,265,689
=============== =============
Liabilities $ 2,825,588 $ 7,876,692
=============== =============
Equity $ 416,173 $ 388,997
=============== =============
Partnership's share of equity $ 69,377 $ 64,847
=============== =============
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
Net income (loss) $ 223,402 $ (1,867,111)
=============== =============
Partnership's share of net income (loss) $ 37,241 $ (311,247)
=============== =============
Distributions $ 196,226 $ -
=============== =============
Partnership's share of distributions $ 32,711 $ -
=============== =============
1997-B recorded a provision for bad debts of $2,162,304 during the year
ended December 31, 2001.
ICON/Boardman Facility LLC
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 /Facility LLC ("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 December 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 in
December 2001. PGE has not filed for bankruptcy. While Enron owns all of PGE's
outstanding common stock, PGE is a separate 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 March 2003.
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 ICON
BF as of and for the years ended December 31, 2002 and 2001 is summarized below:
December 31, 2002 December 31, 2001
----------------- -----------------
Assets $ 23,193,438 $ 24,855,375
=============== ================
Liabilities $ 10,583,632 $ 13,588,934
=============== ================
Equity $ 12,609,806 $ 11,266,441
=============== ================
Partnership's share of equity $ 63,364 $ 56,614
=============== ================
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
----------------- -----------------
Net income $ 1,343,365 $ 1,341,877
=============== ================
Partnership's share of net income $ 6,750 $ 6,713
=============== ================
ICON/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
43.73%, 25.51% and 30.76% interests in AIC Trust, respectively. The Partnership
accounts for its investment in AIC Trust 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 two installments on the note of
(pound)475,000 each were collected in 2002. As of December 31, 2002, the
remaining amount due is (pound)1,625,000 ($2,572,522 on a discounted basis based
upon the exchange rate at December 31, 2002).
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 AIC
Trust as of and for the years ended December 31, 2002 and 2001 is summarized
below:
December 31, 2002 December 31, 2001
----------------- -----------------
Assets $ 2,572,522 $ 3,849,439
=============== ================
Liabilities $ - $ -
=============== ================
Equity $ 2,572,522 $ 3,849,439
=============== ================
Partnership's share of equity $ 791,308 $ 1,184,087
=============== ================
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
----------------- -----------------
Net income (loss) $ 212,349 $ (2,687,696)
=============== ================
Partnership's share of net income (loss) $ 65,319 $ (837,663)
=============== ================
Distributions $ 1,752,885 $ 829,150
=============== ================
Partnership's share of distributions $ 539,188 $ 255,047
=============== ================
ICON Aircraft 24846 LLC
In 2000, the Partnership and two affiliates, Fund Eight A and Fund Eight B,
formed ICON Aircraft 24846 LLC ("ICON Aircraft 24846") for the purpose of
acquiring an investment in a 767-300 ER aircraft leased to Scandinavian Airlines
Systems for a purchase price of $44,515,416, which was funded with cash of
$2,241,371 and non-recourse debt of $42,274,045. The rents and the aircraft have
been assigned to the unaffiliated 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 is
currently negotiating a lease payment agreement with another overseas based
airline. Upon termination of current lease, the aircraft will first be upgraded
before re-leasing. 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 Financial Statements - Continued
Information as to the financial position and results of operations of ICON
Aircraft 24846 as of and for the years ended December 31, 2002 and 2001 is
summarized below:
December 31, 2002 December 31, 2001
Assets $ 39,175,547 $ 41,952,008
================ ===============
Liabilities $ 35,419,214 $ 38,945,109
================ ===============
Equity $ 3,756,333 $ 3,006,899
================ ===============
Partnership's share of equity $ 75,126 $ 60,138
================ ===============
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
----------------- -----------------
Net income $ 749,434 $ 749,435
================ ===============
Partnership's share of net income $ 14,988 $ 14,989
================ ===============
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 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 Financial Statements - Continued
Information as to the financial position and results of operations of ICON
Cheyenne as of and for the years ended December 31, 2002 and 2001 is summarized
below:
December 31, 2002 December 31, 2001
Assets $ 14,765,333 $ 23,869,671
================ ===============
Liabilities $ 5,141,481 $ 11,145,506
================ ===============
Equity $ 9,623,852 $ 12,724,165
================ ===============
Partnership's share of equity $ 992,219 $ 1,311,861
================ ===============
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
----------------- -----------------
Net income $ 1,445,607 $ 1,323,014
================ ===============
Partnership's share of income $ 149,042 $ 136,402
================ ===============
Distributions $ 4,545,920 $ -
================ ===============
Partnership's share
of distributions $ 468,684 $ -
================ ===============
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 of the Partnership. The Partnership originally reflected its pro rata
share of the lease and related debt on its balance sheet. During 2002, the
investment was reclassified as an investment in a joint venture in the
accompanying consolidated financial statements. Amounts recorded in the prior
year's financial statements have been reclassified to reflect the current year's
presentation. The reclassification did not have any effect on the Partnership's
consolidated financial condition or results of operations.
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 December 31, 2002 under this guarantee
was approximately $120,000.
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 North
Sea as of and for the years ended December 31, 2002 and 2001 is summarized
below:
December 31, 2002 December 31, 2001
Assets $ 10,504,336 $ 11,169,465
================ ================
Liabilities $ 22,983,403 $ 25,450,283
================ ================
Partners' equity (deficit) $ (12,479,067) $ (14,280,818)
================= ================
Partnership's share of equity (1) $ 1,307,967 $ 407,091
================ ================
For the Year Ended For the Year Ended
December 31, 2002 December 31, 2001
Net income $ 2,298,551 $ 2,028,400
================ ================
Partnership's share of net income $ 1,149,276 $ 1,014,200
================ ================
Distributions $ 496,800 $ -
================ ================
Partnership's share of distributions $ 248,400 $ -
================ ================
(1) The Partnership has positive capital due to the fact that prior years'
distributions were overly allotted to the co-venturer.
In March 2000, the Partnership had formed a joint venture for the purpose
of owning the investment in North Sea, the Partnership contributed its
investment to the joint venture. Simultaneously, L.P. Six acquired an interest
in this joint venture for $2,250,000. No gain or loss was recognized by the
Partnership at that time. 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. As a result, the Partnership recognized
a loss on the repurchase of its investment of $112,500.
4. Investments in Estimated Unguaranteed Residual Values
In July 1997, the Partnership entered into an option to acquire the
residual interests in three Boeing 737-300 aircraft currently on lease to
Continental Airlines. The Partnership subsequently exercised its options and
became the owner of the future estimated unguaranteed residuals. The residual
investments cost $20,811,758 and the leases for each aircraft expire in the
fourth quarter of 2003.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
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. Effective April 1, 2003 the aircraft will be leased to a
new lessee, World Airways, Inc. The purchase price was $11,429,751.
The net investment in the leveraged leases as of December 31, 2002 and
2001 consisted of the following:
2002 2001
---- ----
Non-cancelable minimum rents receivable (net of
principal and interest on non-recourse debt) $ 10,002,727 $ 10,002,727
Estimated unguaranteed residual values 20,865,000 22,700,000
Initial direct costs 181,010 335,456
Unearned income (3,171,029) (5,747,283)
--------------- ----------------
$ 27,877,708 $ 27,290,900
=============== ================
During 2002, the Company reduced the estimated unguaranteed residual value
of one of the aircraft and recorded an impairment provision of $1,835,000 as a
result of a recent appraisal which indicated a lower value at lease termination
than initially estimated. The impairment provision has been reflected net in
income from leveraged leases.
Non-cancelable minimum rents receivable and debt payments relating to the
leveraged leases at December 31, 2002 are $11,988,717 while the related
principal and interest on non-recourse debt is $1,985,990 at December 31, 2002.
Such amounts are due as follows:
Year Ending
December 31, Rents Due Debt Payments
----------- --------- -------------
2003 $ 6,178,357 $ 1,985,990
2004 5,810,360 -
---------------- ----------------
$ 11,988,717 $ 1,985,990
================ ================
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
6. Investment in Operating Leases
The investment in operating leases at December 31, 2002 and 2001 consisted
of the following:
2002 2001
---- ----
Equipment cost, beginning of the year $ 9,678,415 $ -
Transfer of investment in finance leases
to operating leases 9,647,253 30,137,598
Transfer of operating lease equipment to equipment
held for sale or lease (5,129,877) (20,459,183)
----------------- ----------------
Equipment cost, end of year 14,195,791 9,678,415
---------------- ----------------
Accumulated depreciation, beginning of year (895,169) -
Depreciation expense