-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KQhdFo2hVmP4p2PZWI0mXB9GJPKc8JO4PgINn4TzVuM8oHwU46JwkmqE5kJOZkT+ 8j6NJGU2/DomQCPFONtNAQ== 0000846471-97-000001.txt : 19970328 0000846471-97-000001.hdr.sgml : 19970328 ACCESSION NUMBER: 0000846471-97-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY LEASING INCOME FUND VI LP CENTRAL INDEX KEY: 0000846471 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 232540929 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-18497 FILM NUMBER: 97565681 BUSINESS ADDRESS: STREET 1: 250 KING OF PRUSSIAN ROAD CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 610-964-71 MAIL ADDRESS: STREET 1: 250 KING OF PRUSSIA RD STREET 2: 250 KING OF PRUSSIA RD CITY: RADNOR STATE: PA ZIP: 19087 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required) For the year ended December 31, 1996 / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required) For the transition period from _______________ to ______________ Commission file number 0-18497 Fidelity Leasing Income Fund VI, L.P. _________________________________________________________________ (Exact name of registrant as specified in its charter) Delaware 23-2540929 _________________________________________________________________ (State of Organization) (I.R.S. Employer Identification No.) 7 E. Skippack Pike, Suite 275, Ambler, Pennsylvania 19002 _________________________________________________________________ (Address of principal executive offices) (Zip Code) (215) 619-2800 _________________________________________________________________ (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: Name of Each Exchange Title of Each Class on Which Registered None Not applicable Securities registered pursuant to Section 12 (g) of the Act: Limited Partnership Interests Title of Class Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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_____ The number of outstanding limited partnership units of the Registrant at December 31, 1996 is 75,294. There is no public market for these securities. The index of Exhibits is located on page 11. 1 PART I Item 1. BUSINESS Fidelity Leasing Income Fund VI, L.P. (the "Fund"), a Delaware limited partnership, was organized in 1989 and acquires equipment, primarily computer equipment, including printers, tape and disk storage devices, data communications equipment, computer terminals, technical workstations as well as networking equip- ment, which is leased to third parties on a short-term basis. The Fund's principal objective is to generate leasing revenues for distribution. The Fund manages the equipment, releasing or disposing of equipment as it comes off lease in order to achieve its principal objective. The Fund will not borrow funds to purchase equipment. The Fund generally acquires equipment subject to a lease. Purchases of equipment for lease are typically made through equipment leasing brokers, under a sale-leaseback arrangement directly from lessees owning equipment, from the manufacturer either pursuant to a purchase agreement relating to significant quantities of equipment or on an ad hoc basis to meet the needs of a particular lessee. The equipment leasing industry is highly competitive. The Fund competes with leasing companies, equipment manufacturers and distributors, and entities similar to the Fund (including similar programs sponsored by the General Partner), some of which have greater financial resources than the Fund and more experience in the equipment leasing business than the General Partner. Other leasing companies and equipment manufacturers and distributors may be in a position to offer equipment to prospective lessees on financial terms which are more favorable than those which the Fund can offer. They may also be in a position to offer trade- in-privileges, maintenance contracts and other services which the Fund may not be able to offer. Equipment manufacturers and distributors may offer to sell equipment on terms and conditions (such as liberal financing terms and exchange privileges) which will afford benefits to the purchaser similar to those obtained through leases. As a result of the advantages which certain of its competitors may have, the Fund may find it necessary to lease its equipment on a less favorable basis than certain of its competitors. The computer equipment industry is extremely competitive as well. Competitive factors include pricing, technological innovation and methods of financing. Certain manufacturer- lessors maintain advantages through patent protection, where applicable, and through product protection by the use of a policy which combines service and hardware benefits with payment for such benefits accomplished through a single periodic charge. A brief description of the types of equipment in which the Fund has invested as of December 31, 1996, together with information concerning the users of such equipment is contained in Item 2, following. The Fund does not have any employees. All persons who work on the Fund are employees of the General Partner. 2 Item 2. PROPERTIES The following schedules detail the type and aggregate purchase price of the various types of equipment acquired and leased by the Fund as of December 31, 1996, along with the percentage of total equipment represented by each type of equipment, a breakdown of equipment usage by industrial classification and the average initial term of leases: Purchase Price Percentage of Type of Equipment Acquired of Equipment Total Equipment Communication Controllers $ 816,204 5.27% Disk Storage Systems 6,364,230 41.07 Network Communications 68,879 0.44 Printers 959,898 6.19 Tape Storage Systems 1,663,602 10.73 Terminals, Work Stations and Display Stations 5,549,423 35.81 Other 75,596 0.49 ___________ ______ Totals $15,497,832 100.00% =========== ====== Breakdown of Equipment Usage By Industrial Classification Purchase Price Percentage of Type of Business of Equipment Total Equipment Computer/Data Processing $ 421,828 2.72% Diversified Financial/Insurance 7,049,792 45.49 Manufacturing/Refining 3,684,364 23.77 Retailing/Consumer Goods 3,315,934 21.40 Telephone/Telecommunications 1,025,914 6.62 ___________ ______ Totals $15,497,832 100.00% =========== ====== Average Initial Term of Leases (in months): 34 All of the above equipment is currently leased under operating leases. Item 3. LEGAL PROCEEDINGS Not applicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 3 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS (a) The Fund's limited partnership units are not publicly traded. There is no market for the Fund's limited partnership units and it is unlikely that any will develop. (b) Number of Equity Security Holders: Number of Partners Title of Class as of December 31, 1996 Limited Partnership Interests 2,661 General Partnership Interest 1 Item 6. SELECTED FINANCIAL DATA
For the Years Ended December 31, 1996 1995 1994 1993 1992 Total Income $4,740,607 $6,094,886 $6,442,059 $ 9,658,742 $10,026,031 Net Income 169,828 597,297 457,015 1,244,058 89,596 Distributions to Partners 668,800 4,343,818 5,063,003 6,697,405 5,500,267 Net Income per Equivalent Limited Partnership Unit 5.49 15.94 9.35 21.24 .50 Weighted Average Number of Equivalent Limited Partnership Units Outstanding During the Period 29,822 35,186 43,506 55,444 68,991
December 31, 1996 1995 1994 1993 1992 Total Assets $9,435,898 $10,458,128 $15,155,942 $20,022,169 $26,104,262 Equipment under Operating Leases and Equipment Held for Sale or Lease (Net) 5,973,803 6,252,018 6,251,331 10,669,609 17,390,167 Net Investment in Direct Financing Leases 503,093 687,606 969,434 1,143,180 - Limited Partnership Units 75,294 79,156 80,537 82,626 87,387 Limited Partners 2,661 2,745 2,780 2,828 2,961
4 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Fidelity Leasing Income Fund VI, L.P. had revenues of $4,740,607, $6,094,886 and $6,442,059 for the years ended December 31, 1996, 1995 and 1994, respectively. Rental income from the leasing of computer peripheral equipment accounted for 85%, 84% and 93% of total income in 1996, 1995 and 1994, respectively. The decrease in total revenues in 1996 and 1995 is primarily attributable to the decrease in rental income. In 1996, rental income decreased by approximately $2,244,000 due to renewals of leases at lower rates and lease terminations or sales of equipment. This decrease, however, was mitigated by an increase of $1,141,000 in rental income generated from equipment purchased in 1996 as well as rental income realized on 1995 equipment purchases for which a full year of rent was earned in 1996 and only a partial year was earned in 1995. Rental income decreased in 1995 by approximately $1,519,000 because of equipment which came off lease and was re-leased at lower rental rates or sold. This decrease was reduced by an increase of $682,000 in rental income generated from equipment purchased in 1995 as well as rental income generated from 1994 equipment purchases for which a full year of rental income was earned in 1995 and only a partial year was earned in 1994. The Fund recognized a net gain on sale of equipment of $513,405 in 1996 as compared to $559,213 in 1995 and a loss on sale of equipment of $48,733 in 1994 which also accounts for the decrease in total revenues in 1996 and reduced the overall decrease in revenues in 1995. In addition, interest income decreased in 1996 and 1995 because of lower cash balances available for investment by the Fund and, in 1996, lower interest rates earned on short-term investments. Expenses were $4,570,779, $5,497,589 and $5,985,044 for the years ended December 31, 1996, 1995 and 1994, respectively. Depreciation and amortization comprised 76%, 71% and 84% of total expenses in 1996, 1995 and 1994, respectively. The decrease in expenses in 1996 and 1995 was partially attributable to the decrease in depreciation expense due to equipment which came off lease, terminated or was sold. Additionally, the decrease in the write-down of equipment to net realizable value in 1996 also contributed to the overall decrease in total expenses in 1996. The increase in this expense in 1995, however, reduced the amount of the decrease in total expenses from 1994. Currently, the Fund's practice is to review the recoverability of its undepreciated costs of rental equipment quarterly. The Fund's policy, as part of this review, is to analyze such factors as releasing of equipment, technological developments and information provided in third party publications. In 1996, 1995 and 1994, approximately $419,000, $877,000 and $242,000, respectively, was charged to write- down of equipment to net realizable value. In accordance with Generally Accepted Accounting Principles, the Fund writes down its rental equipment to its estimated net realizable value when the amounts are reasonably estimated and only recognizes gains upon actual sale of its rental equipment. Any future losses are dependent upon unanticipated technological developments affecting the computer equipment industry in subsequent years. Furthermore, general and administrative expenses to related party decreased in 1996 and increased in 1995 because of the fluctuation in general and 5 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results of Operations (Continued) administrative expenses incurred to the General Partner during these years which affected the overall decrease in total expenses in 1996 and 1995. The decrease in management fee to related party, resulting from the decrease in rental income in 1996 and 1995, also contributed to the decrease in overall expenses during these years. The Fund's net income was $169,828, $597,297 and $457,015 for the years ended December 31, 1996, 1995 and 1994, respectively. The earnings per equivalent limited partnership unit, after earnings allocated to the General Partner, were $5.49, $15.94 and $9.35 for the years ended December 31, 1996, 1995 and 1994, respectively. The weighted average number of equivalent limited partnership units outstanding were 29,822, 35,186 and 43,506 for 1996, 1995 and 1994, respectively. The Fund generated funds from operations, for the purpose of determining cash available for distribution, of $3,568,697, $4,803,454 and $5,746,894 and distributed 15%, 73% and 73% of these amounts to partners in 1996, 1995 and 1994, respectively, and 2%, 3% and 15% of these amounts to partners in January and February 1997, 1996 and 1995, respectively. For financial statement purposes, the Fund records cash distributions to partners on a cash basis in the period in which they are paid. During the fourth quarter of 1995, the General Partner revised its policy regarding cash distributions so that the distribu- tions more accurately reflect the net income of the Fund over the most recent twelve months. Analysis of Financial Condition The Fund continues to purchase computer equipment for lease with cash available from operations which is not distributed to partners. During the years ended December 31, 1996, 1995 and 1994, the Fund purchased $3,934,480, $5,430,211 and $1,983,990 respectively, of equipment. Subsequent to December 31, 1996, the Fund purchased $2,024,611 of equipment subject to an operating lease with an initial lease term of 36 months. The cash position of the Fund is reviewed daily and cash is invested on a short-term basis. The Fund's cash from operations is expected to continue to be adequate to cover all operating expenses and contingencies during the next fiscal year. 6 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this Item is submitted as a separate section of this report commencing on page F-1. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 7 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT In February 1996, the Board of Directors resolved to change the name of the General Partner from Fidelity Leasing Corporation to F.L. Partnership Management, Inc. (FLPMI). F.L. Partnership Management, Inc. is a wholly owned subsidiary of Resource Leasing, Inc., a wholly owned subsidiary of Resource America, Inc. The Directors and Executive Officers of FLPMI are: FREDDIE M. KOTEK, age 40, Chairman of the Board of Directors, President, and Chief Executive Officer of FLPMI since September 1995 and Senior Vice President of Resource America, Inc. since 1995. President of Resource Leasing, Inc. since September 1995. Executive Vice President of Resource Properties, Inc. (a wholly owned subsidiary of Resource America, Inc.) since 1993. Senior Vice President and Chief Financial Officer of Paine Webber Properties from 1990 to 1991. MICHAEL L. STAINES, age 47, Director and Secretary of FLPMI since September 1995 and Senior Vice President and Secretary of Resource America, Inc. since 1989. SCOTT F. SCHAEFFER, age 34, Director of FLPMI since September 1995 and Senior Vice President of Resource America, Inc. since 1995. Vice President-Real Estate of Resource America, Inc. and President of Resource Properties, Inc. (a wholly owned subsidiary of Resource America, Inc.) since 1992. Vice President of the Dover Group, Ltd. (a real estate investment company) from 1985 to 1992. Others: STEPHEN P. CASO, age 41, Vice President and General Counsel of FLPMI since 1992. MARIANNE T. SCHUSTER, age 38, Vice President and Controller of FLPMI since 1984. KRISTIN L. CHRISTMAN, age 29, Portfolio Manager of FLPMI since December 1995 and Equipment Brokerage Manager since 1993. 8 Item 11. EXECUTIVE COMPENSATION The following table sets forth information relating to the aggregate compensation earned by the General Partner of the Fund during the year ended December 31, 1996: Name of Individual or Capacities in Number in Group Which Served Compensation F.L. Partnership Management, Inc. General Partner $206,765(1) ======== (1) This amount does not include the General Partner's share of cash distributions made to all partners. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) As of December 31, 1996, there was no person or group known to the Fund that owned more than 5% of the Fund's outstanding securities either beneficially or of record. (b) In 1989, the General Partner contributed $1,000 to the capital of the Fund but it does not own any of the Fund's outstanding securities. No individual director or officer of F.L. Partnership Management, Inc. nor such directors or officers as a group, owns more than one percent of the Fund's outstanding securities. The General Partner owns a general partnership interest which entitles it to receive 1% of cash distributions until the Limited Partners have received an amount equal to the purchase price of their Units plus a 12% compounded Priority Return; thereafter 10%. The General Partner will also share in net income equal to the greater of its cash distributions or 1% of net income or to the extent there are losses, 1% of such losses. (c) There are no arrangements known to the Fund that would, at any subsequent date, result in a change in control of the Fund. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the year ended December 31, 1996, the Fund was charged $206,765 of management fees by the General Partner. The General Partner will continue to receive 5% or 2% of rental payments on equipment under operating leases and full pay-out leases, respectively, for administrative and management services performed on behalf of the Fund. Full pay-out leases are noncancellable leases for which rental payments during the initial term are at least sufficient to recover the purchase price of the equipment, including acquisition fees. This management fee is paid monthly only if and when the Limited 9 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued) Partners have received distributions for the period from January 1, 1990 through the end of the most recent quarter equal to a return for such period at a rate of 12% per year on the aggregate amount paid for their units. The General Partner may also receive up to 3% of the proceeds from the sale of the Fund's equipment for services and activities to be performed in connection with the disposition of equipment. The payment of this sales fee is deferred until the Limited Partners have received cash distributions equal to the purchase price of their units plus a 12% cumulative compounded Priority Return. Based on current estimates, it is not expected that the Fund will be required to pay this sales fee to the General Partner. As a result, $269,982 of sales fee accrued by the Fund in prior periods was recognized into income as part of the net gain on sale of equipment during the year ended December 31, 1996. The General Partner also receives 1% of cash distributions until the Limited Partners have received an amount equal to the purchase price of their Units plus a 12% compounded Priority Return. Thereafter, the General Partner will receive 10% of cash distributions. During the year ended December 31, 1996, the General Partner received $6,688 of cash distributions. The Fund incurred $260,883 of reimbursable costs to the General Partner and its parent company for services and materials provided in connection with the administration of the Fund during 1996. 10 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) and (2). The response to this portion of Item 14 is submitted as a separate section of this report commencing on page F-1. (a) (3) and (c) Exhibits (numbered in accordance with Item 601 of Regulation S-K) Exhibit Numbers Description Page Number 3(a) & (4) Amended and Restated Agreement * of Limited Partnership (9) not applicable (10) not applicable (11) not applicable (12) not applicable (13) not applicable (18) not applicable (19) not applicable (22) not applicable (23) not applicable (24) not applicable (25) not applicable (28) not applicable * Incorporated by reference. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. FIDELITY LEASING INCOME FUND VI, L.P. A Delaware limited partnership By: F.L. PARTNERSHIP MANAGEMENT, INC. Freddie M. Kotek By: __________________________ Freddie M. Kotek, Chairman and President Dated March 26, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons, on behalf of the Registrant and in the capacities and on the date indicated: Signature Title Date Freddie M. Kotek ___________________________ Chairman of the Board of Directors 3-26-97 Freddie M. Kotek and President of F.L. Partnership Management, Inc. (Principal Executive Officer) Michael L. Staines ___________________________ Director of F.L. Partnership 3-26-97 Michael L. Staines Management, Inc. Marianne T. Schuster ___________________________ Vice President and Controller 3-26-97 Marianne T. Schuster of F.L. Partnership Management, Inc. (Principal Financial Officer) 12 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Pages Report of Independent Certified Public Accountants F-2 Balance Sheets as of December 31, 1996 and 1995 F-3 Statements of Operations for the years ended F-4 December 31, 1996, 1995 and 1994 Statements of Partners' Capital for the years F-5 ended December 31, 1996, 1995 and 1994 Statements of Cash Flows for the years ended F-6 December 31, 1996, 1995 and 1994 Notes to Financial Statements F-7 - F-12 All schedules have been omitted because the required information is not applicable or is included in the Financial Statements or Notes thereto. F-1 Report of Independent Certified Public Accountants The Partners Fidelity Leasing Income Fund VI, L.P. We have audited the accompanying balance sheets of Fidelity Leasing Income Fund VI, L.P. as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' capital and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 financial statements referred to above present fairly, in all material respects, the financial position of Fidelity Leasing Income Fund VI, L.P. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Grant Thornton, LLP Philadelphia, Pennsylvania February 10, 1997 F-2 FIDELITY LEASING INCOME FUND VI, L.P. BALANCE SHEETS ASSETS
December 31, 1996 1995 Cash and cash equivalents $2,783,827 $ 2,920,100 Investment securities held to maturity - 499,740 Accounts receivable 33,835 33,021 Interest receivable - 13,376 Due from related parties 141,340 52,267 Equipment under operating leases (net of accumulated depreciation of $9,529,793 and $13,650,877, respectively) 5,968,039 6,242,594 Net investment in direct financing leases 503,093 687,606 Equipment held for sale or lease 5,764 9,424 __________ ___________ Total assets $9,435,898 $10,458,128 ========== =========== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Lease rents paid in advance $ 284,933 $ 87,814 Accounts payable - equipment 19,788 - Accounts payable and accrued expenses 55,307 74,688 Due to related parties 41,183 288,153 __________ ___________ Total liabilities 401,211 450,655 Partners' capital 9,034,687 10,007,473 __________ ___________ Total liabilities and partners' capital $9,435,898 $10,458,128 ========== ===========
The accompanying notes are an integral part of these financial statements. F-3 FIDELITY LEASING INCOME FUND VI, L.P. STATEMENTS OF OPERATIONS
For the years ended December 31, 1996 1995 1994 Income: Rentals $4,047,597 $5,150,170 $5,987,027 Earned income on direct financing leases 53,395 78,814 95,212 Interest 116,695 292,400 353,956 Gain on sale of equipment, net 513,405 559,213 - Other 9,515 14,289 5,864 __________ __________ __________ 4,740,607 6,094,886 6,442,059 __________ __________ __________ Expenses: Depreciation and amortization 3,493,500 3,888,155 4,999,097 Write-down of equipment to net realizable value 418,774 877,215 242,049 General and administrative 190,857 107,497 163,078 General and administrative to related party 260,883 364,237 232,828 Management fee to related party 206,765 260,485 299,259 Loss on sale of equipment, net - - 48,733 __________ __________ __________ 4,570,779 5,497,589 5,985,044 __________ __________ __________ Net income $ 169,828 $ 597,297 $ 457,015 ========== ========== ========== Net income per equivalent limited partnership unit $ 5.49 $ 15.94 $ 9.35 ========== ========== ========== Weighted average number of equivalent limited partnership units outstanding during the year 29,822 35,186 43,506 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-4 FIDELITY LEASING INCOME FUND VI, L.P. STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1996, 1995 and 1994 General Limited Partners Partner Units Amount Total _______ __________________ _____ Balance, January 1, 1994 $ 9,600 82,626 $19,002,535 $19,012,135 Redemptions - (2,089) (448,699) (448,699) Cash distributions (50,629) - (5,012,374) (5,063,003) Net income 50,409 - 406,606 457,015 _______ ______ ___________ ___________ Balance, December 31, 1994 9,380 80,537 13,948,068 13,957,448 Redemptions - (1,381) (203,454) (203,454) Cash distributions (43,433) - (4,300,385) (4,343,818) Net income 36,491 - 560,806 597,297 _______ ______ ___________ ___________ Balance, December 31, 1995 2,438 79,156 10,005,035 10,007,473 Redemptions - (3,862) (473,814) (473,814) Cash distributions (6,688) - (662,112) (668,800) Net income 6,000 - 163,828 169,828 _______ ______ ___________ ___________ Balance, December 31, 1996 $ 1,750 75,294 $ 9,032,937 $ 9,034,687 ======= ====== =========== ===========
The accompanying notes are an integral part of these financial statements. F-5 FIDELITY LEASING INCOME FUND VI, L.P. STATEMENTS OF CASH FLOWS For the years ended December 31, 1996 1995 1994 Cash flows from operating activities: Net income $ 169,828 $ 597,297 $ 457,015 __________ __________ ___________ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,493,500 3,888,155 4,999,097 Write-down of equipment to net realizable value 418,774 877,215 242,049 Proceeds from direct financing leases, net of earned income 184,513 281,828 173,746 (Gain) loss on sale of equipment net (513,405) (559,213) 48,733 (Increase) decrease in due from related parties (89,073) (25,216) 286,254 Increase (decrease) in lease rents paid in advance 197,119 (130,386) (132,754) Increase (decrease) in accounts payable- equipment 19,788 (518,100) 518,100 Increase (decrease) in due to related parties (246,970) (10,227) (173,363) Increase (decrease) in other, net ( 6,819) 28,485 36,855 __________ __________ __________ 3,457,427 3,832,541 5,998,717 __________ __________ __________ Net cash provided by operating activities 3,627,255 4,429,838 6,455,732 __________ __________ __________ Cash flows from investing activities: Acquisition of equipment (3,934,480) (5,430,211) (1,983,990) Purchase of investment securities held to maturity - (749,993) (5,429,915) Maturity of investment securities held to maturity 499,740 2,485,354 5,176,491 Proceeds from sale of equipment 813,826 1,223,367 1,113,889 __________ __________ __________ Net cash used in investing activities (2,620,914) (2,471,483) (1,123,525) __________ __________ __________ Cash flows from financing activities: Distributions (668,800) (4,343,818) (5,063,003) Redemptions of capital (473,814) (203,454) (448,699) __________ __________ __________ Net cash used in financing activities (1,142,614) (4,547,272) (5,511,702) __________ __________ __________ Decrease in cash and cash equivalents (136,273) (2,588,917) (179,495) Cash and cash equivalents, beginning of year 2,920,100 5,509,017 5,688,512 __________ __________ __________ Cash and cash equivalents, end of year $2,783,827 $2,920,100 $5,509,017 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-6 FIDELITY LEASING INCOME FUND VI, L.P. NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND NATURE OF BUSINESS Fidelity Leasing Income Fund VI, L.P. (the "Fund") was formed in January 1989. The General Partner of the Fund is F.L. Partnership Management, Inc. ("FLPMI") which is a wholly owned subsidiary of Resource Leasing Inc., a wholly owned subsidiary of Resource America, Inc. The Fund is managed by the General Partner. The Fund's limited partnership interests are not publicly traded. There is no market for the Fund's limited partnership interests and it is unlikely that any will develop. The Fund acquires computer equipment, including printers, tape and disk storage devices, data communications equipment, computer terminals, technical workstations as well as networking equipment, which is leased to third parties throughout the United States on a short-term basis. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Investment Securities Held to Maturity The Fund adopted Statement of Financial Accounting Standard (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities" on January 1, 1994. This new standard requires investments in securities to be classified in one of three categories: held to maturity, trading and available for sale. Debt securities that the Fund has the positive intent and ability to hold to maturity are classified as held to maturity and are reported at amortized cost. As the Fund does not engage in security trading, the balance, if any, of its debt securities and equity securities are classified as available for sale. Net unrealized gains and losses for securities available for sale are required to be recognized as a separate component of partners' capital and excluded from the determination of net income. The Fund adopted this new standard for the year ended December 31, 1994 with no resulting financial statement impact on the Fund. Concentration of Credit Risk Financial instruments which potentially subject the Fund to concentrations of credit risk consist principally of temporary cash investments. The Fund places its temporary investments in bank repurchase agreements. Concentrations of credit risk with respect to accounts receivables are limited due to the dispersion of the Fund's lessees over different industries and geographies. Impairment of Long-Lived Assets Effective January 1, 1996, the Fund adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." This new standard provides guidance on when to recognize and how to measure impairment losses of long-lived assets and how to value long-lived assets to be disposed of. The adoption of SFAS No. 121 had no impact on the net income of the Fund. F-7 FIDELITY LEASING INCOME FUND VI, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Equipment Held for Sale or Lease Equipment held for sale or lease is carried at its estimated net realizable value. Use of Estimates In preparing financial statements in conformity with Generally Accepted Accounting Principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Organization Costs Organization costs were amortized over a five year period. Accounting for Leases The Fund's leasing operations consist primarily of operating leases whereby the cost of the leased equipment is recorded as an asset and depreciated on a straight-line basis over its estimated useful life, up to six years. Acquisition fees associated with lease placements are allocated to equipment when purchased and depreciated as part of equipment cost. Rental income consists primarily of monthly periodic rentals due under the terms of the leases plus deferred revenue recognized. Generally, during the remaining terms of existing operating leases, the Fund will not recover all of the undepreciated cost and related expenses of its rental equipment and is prepared to remarket the equipment in future years. Upon sale or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is reflected in income. The Fund does have direct financing leases, as well. Under the direct financing method, income (the excess of the aggregate future rentals and estimated additional amounts recoverable upon expiration of the lease over the related equipment cost) is recognized over the life of the lease using the interest method. Income Taxes Federal and State income tax regulations provide that taxes on the income or benefits from losses of the Fund are reportable by the partners in their individual income tax returns. Accordingly, no provision for such taxes has been made in the accompanying financial statements. F-8 FIDELITY LEASING INCOME FUND VI, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Statements of Cash Flows For purposes of the statements of cash flows, the Fund considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Net Income per Equivalent Limited Partnership Unit Net income per equivalent limited partnership unit is computed by dividing net income allocated to limited partners by the weighted average number of equivalent limited partnership units outstanding during the year. The weighted average number of equivalent units outstanding during the year is computed based on the weighted average monthly limited partners' capital account balances, converted into equivalent units at $500 per unit. Significant Fourth Quarter Adjustments Currently, the Fund's practice is to review the recoverability of its undepreciated costs of rental equipment quarterly. The Fund's policy, as part of this review, is to analyze such factors as releasing of equipment, technological developments and information provided in third party publications. Based upon this review, the Fund recorded an adjustment of approximately $109,000, $574,000 and $42,000 or $3.66, $16.31 and $0.97 per equivalent limited partnership unit to write down its rental equipment in the fourth quarter of 1996, 1995 and 1994, respectively. 3. ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS Cash distributions, if any, are made monthly as follows: 99% to the Limited Partners and 1% to the General Partner, until the Limited Partners have received an amount equal to the purchase price of their Units, plus a 12% compounded Priority Return (an amount equal to 12% compounded annually on the portion of the purchase price not previously distributed); thereafter, 90% to the Limited Partners and 10% to the General Partner. Net Losses are allocated 99% to the Limited Partners and 1% to the General Partner. The General Partner is allocated Net Income equal to its cash distributions, but not less than 1% of Net Income, with the balance allocated to the Limited Partners. Net Income (Losses) allocated to the Limited Partners are allocated to individual limited partners based on the ratio of the daily weighted average partner's net capital account balance (after deducting related commission expense) to the total daily weighted average of the Limited Partners' net capital account balances. F-9 FIDELITY LEASING INCOME FUND VI, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 4. EQUIPMENT LEASED Equipment on lease consists primarily of computer equipment under operating leases. A majority of the equipment was manufactured by IBM. The lessees have agreements with the manufacturer to provide maintenance for the leased equipment. The Fund's operating leases are for initial lease terms of 12 to 60 months. In accordance with Generally Accepted Accounting Principles, the Fund writes down its rental equipment to its estimated net realizable value when the amounts are reasonably estimated and only recognizes gains upon actual sale of its rental equipment. As a result, in 1996, 1995 and 1994, approximately $419,000, $877,000 and $242,000, respectively was charged to write down of equipment to net realizable value. Any future losses are dependent upon unanticipated technological developments affecting the computer equipment industry in subsequent years. During the year ended December 31, 1996, the Fund leased equipment under the direct financing method in accordance with SFAS No. 13. This method provides for recognition of income (the excess of the aggregate future rentals and estimated additional amounts recoverable upon expiration of the lease over the related equipment cost) over the life of the lease using the interest method. The net investment in direct financing leases as of December 31, 1996 is as follows: Net minimum lease payments to be received $556,000 Less unearned income 53,000 Add expected future residuals - ________ $503,000 ======== The future approximate minimum rentals to be received on noncancellable operating and direct financing leases as of December 31 are as follows: Direct Operating Financing 1997 $3,213,000 $238,000 1998 1,412,000 238,000 1999 738,000 80,000 __________ ________ $5,363,000 $556,000 ========== ======== Subsequent to December 31, 1996, the Fund purchased $2,024,611 of equipment subject to an operating lease with an initial lease term of 36 months. The future approximate minimum rentals to be received on this noncancellable operating lease are $738,286, $681,495 and $624,704 in 1997, 1998 and 1999, respectively. F-10 FIDELITY LEASING INCOME FUND VI, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 5. RELATED PARTY TRANSACTIONS The General Partner receives 5% or 2% of rental payments on equipment under operating leases and full pay-out leases, respectively, for administrative and management services performed on behalf of the Fund. Full pay-out leases are noncancellable leases for which rental payments during the initial term are at least sufficient to recover the purchase price of the equipment, including acquisition fees. This management fee is paid monthly only if and when the Limited Partners have received distributions for the period from January 1, 1990 through the end of the most recent quarter equal to a return for such period at a rate of 12% per year on the aggregate amount paid for their units. The General Partner may also receive up to 3% of the proceeds from the sale of the Fund's equipment for services and activities to be performed in connection with the disposition of equipment. The payment of this sales fee is deferred until the Limited Partners have received cash distributions equal to the purchase price of their units plus a 12% cumulative compounded Priority Return. Based on current estimates, it is not expected that the Fund will be required to pay this sales fee to the General Partner. As a result, $269,982 of sales fee accrued by the Fund in prior periods was recognized into income as part of the net gain on sale of equipment during the year ended December 31, 1996. Additionally, the General Partner and its parent company are reimbursed by the Fund for certain costs of services and materials used by or for the Fund except those items covered by the above-mentioned fees. Following is a summary of fees and costs charged by the General Partner or its parent company during the years ended December 31: 1996 1995 1994 Management fee $206,765 $260,485 $299,259 Reimbursable costs 260,883 364,237 232,828 During 1996, the Fund maintained its checking and investment accounts in Jefferson Bank, a subsidiary of JeffBanks, Inc., in which the Chairman of Resource America, Inc. serves as a director. Amounts due from related parties at December 31, 1996 and 1995 represent monies due to the Fund from the General Partner and/or other affiliated funds for rentals and sales proceeds collected and not yet remitted the Fund. Amounts due to related parties at December 31, 1996 and 1995 represent monies due to the General Partner for the fees and costs mentioned above, as well as, rentals and sales proceeds collected by the Fund on behalf of other affiliated funds. F-11 FIDELITY LEASING INCOME FUND VI, L.P. NOTES TO FINANCIAL STATEMENTS (Continued) 6. MAJOR CUSTOMERS For the year ended December 31, 1996, two customers accounted for approximately 12% and 11% of the Fund's rental income. For the year ended December 31, 1995, one customer generated approximately 17% of the Fund's rental income. For the year ended December 31, 1994, one customer accounted for approximately 14% of the Fund's rental income. 7. CASH DISTRIBUTIONS Below is a summary of the cash distributions paid to partners during the years ended December 31: For the Quarter Ended 1996 1995 1994
March $218,800 $1,256,951 $1,287,311 June 150,000 1,242,919 1,260,857 September 150,000 1,240,099 1,257,735 December 150,000 603,849 1,257,100 ________ __________ __________ $668,800 $4,343,818 $5,063,003 ======== ========== ==========
In addition, the General Partner declared a cash distribution of $50,000 in January 1997 and $25,000 in February 1997 for the months ended November 30 and December 31, 1996, respectively to all admitted partners as of November 30 and December 31, 1996. F-12 EX-27 2
5 12-MOS DEC-31-1996 DEC-31-1996 2,783,827 0 175,175 0 0 2,959,002 15,503,596 9,529,793 9,435,898 401,211 0 0 0 0 9,034,687 9,435,898 4,047,597 4,740,607 0 0 4,570,779 0 0 169,828 0 169,828 0 0 0 169,828 5.49 5.49
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