-----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, Te+aKBJ90VeYl70tPvGHTW2WnEypbkY1jL7AAekPrNOn4pwrV+NLiItPpLhZzUZe Zz0m2sz/2mMngp2BvrvBFg== 0000950149-95-000763.txt : 19951119 0000950149-95-000763.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950149-95-000763 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEA MARINE CONTAINER INCOME FUND III CENTRAL INDEX KEY: 0000350202 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 942717330 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10474 FILM NUMBER: 95590055 BUSINESS ADDRESS: STREET 1: 444 MARKET ST 15TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4156778990 MAIL ADDRESS: STREET 1: 444 MARKET ST 15TH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94111 10-Q 1 FORM 10-Q IEA MARINE CONTAINER INCOME FUND III 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____ Commission file number 0-10474 IEA MARINE CONTAINER INCOME FUND III (A CALIFORNIA LIMITED PARTNERSHIP) (Exact name of registrant as specified in its charter) California 94-2717330 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 444 Market Street, 15th Floor, San Francisco, California 94111 (Address of principal executive offices) (Zip Code) (415) 677-8990 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- 2 IEA MARINE CONTAINER INCOME FUND III (A CALIFORNIA LIMITED PARTNERSHIP) REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 TABLE OF CONTENTS
PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - September 30, 1995 (unaudited) and December 31, 1994 2 Statements of Operations for the three and nine months ended September 30, 1995 and 1994 3 (unaudited) Statements of Cash Flows for the nine months ended September 30, 1995 and 1994 4 (unaudited) Notes to Financial Statements (unaudited) 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of 7 Operations PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 9
3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Presented herein are the Registrant's balance sheets as of September 30, 1995 and December 31, 1994, statements of operations for the three and nine months ended September 30, 1995 and 1994, and statements of cash flows for the nine months ended September 30, 1995 and 1994. 4 IEA MARINE CONTAINER INCOME FUND III (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS (UNAUDITED)
September 30, December 31, 1995 1994 ------------- ------------ Assets ------ Current assets: Cash, includes $187,244 at September 30, 1995 and $182,194 at December 31, 1994 in interest-bearing accounts $ 187,560 $ 191,858 Short-term investments 730,000 925,000 Net lease receivables due from Leasing Company (notes 1 and 2) 395,190 447,404 ----------- ----------- Total current assets 1,312,750 1,564,262 ----------- ----------- Container rental equipment, at cost 7,400,816 9,670,148 Less accumulated depreciation 5,169,461 6,759,982 ----------- ----------- Net container rental equipment 2,231,355 2,910,166 ----------- ----------- $ 3,544,105 $ 4,474,428 =========== =========== Partners' Capital ----------------- Partners' capital (deficit): General partners $ 3,226 $ (6,730) Limited partners 3,540,879 4,481,158 ----------- ----------- Total partners' capital 3,544,105 4,474,428 ----------- ----------- $ 3,544,105 $ 4,474,428 =========== ===========
The accompanying notes are an integral part of these statements. 2 5 IEA MARINE CONTAINER INCOME FUND III (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended ------------------------------ ------------------------------ September 30, September 30, September 30, September 30, 1995 1994 1995 1994 ------------- ------------- ------------- ------------- Net lease revenue (notes 1 and 3) $ 220,910 $ 289,395 $ 838,974 $ 1,004,709 Other operating expenses: Depreciation - - - 187,076 Other general and administrative expenses 7,110 11,673 33,666 41,431 ----------- ----------- ----------- ----------- 7,110 11,673 33,666 228,507 ----------- ----------- ----------- ----------- Earnings from operations 213,800 277,722 805,308 776,202 Other income: Interest income 12,424 12,314 43,545 31,469 Net gain on disposal of equipment 122,814 120,489 341,024 255,350 ----------- ----------- ----------- ----------- 135,238 132,803 384,569 286,819 ----------- ----------- ----------- ----------- Net earnings $ 349,038 $ 410,525 $ 1,189,877 $ 1,063,021 =========== =========== =========== =========== Allocation of net earnings: General partners $ 15,071 $ 8,118 $ 30,142 $ 17,493 Limited partners 333,967 402,407 1,159,735 1,045,528 ----------- ----------- ----------- ----------- $ 349,038 $ 410,525 $ 1,189,877 $ 1,063,021 =========== =========== =========== =========== Limited partners' per unit share of net earnings $ 11 $ 14 $ 39 $ 35 =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 3 6 IEA MARINE CONTAINER INCOME FUND III (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended -------------------------------- September 30, September 30, 1995 1994 ------------- ------------- Net cash provided by operating activities $ 947,375 $ 927,833 Cash flows provided by investing activities: Proceeds from disposal of equipment 973,527 891,630 Cash flows used in financing activities: Distribution to partners (2,120,200) (1,966,883) ----------- ----------- Net decrease in cash and cash equivalents (199,298) (147,420) Cash and cash equivalents at January 1 1,116,858 1,340,939 ----------- ----------- Cash and cash equivalents at September 30 $ 917,560 $ 1,193,519 =========== ===========
The accompanying notes are an integral part of these statements. 4 7 IEA MARINE CONTAINER INCOME FUND III (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS SEPTEMBER 30, 1995 AND DECEMBER 31, 1994 (1) Summary of Significant Accounting Policies (a) Nature of Operations IEA Marine Container Income Fund III (A California Limited Partnership) (the "Partnership") was organized under the laws of the State of California on January 3, 1980 for the purpose of owning and leasing marine cargo containers. The managing general partner is Cronos Capital Corp. ("CCC"); the associate general partner is Smith Barney Shearson, Inc. CCC, with its affiliate Cronos Containers Limited (the "Leasing Company"), manages and controls the business of the Partnership. (b) Leasing Company and Leasing Agent Agreement Pursuant to the Limited Partnership Agreement of the Partnership, all authority to administer the business of the Partnership is vested in CCC. CCC has entered into a Leasing Agent Agreement whereby the Leasing Company has the responsibility to manage the leasing operations of all equipment owned by the Partnership. Pursuant to the Agreement, the Leasing Company is responsible for leasing, managing and re-leasing the Partnership's containers to ocean carriers and has full discretion over which ocean carriers and suppliers of goods and services it may deal with. The Leasing Agent Agreement permits the Leasing Company to use the containers owned by the Partnership, together with other containers owned or managed by the Leasing Company and its affiliates, as part of a single fleet operated without regard to ownership. Since the Leasing Agent Agreement meets the definition of an operating lease in Statement of Financial Accounting Standards (SFAS) No. 13, it is accounted for as a lease under which the Partnership is lessor and the Leasing Company is lessee. The Leasing Agent Agreement generally provides that the Leasing Company will make payments to the Partnership based upon rentals collected from ocean carriers after deducting direct operating expenses and management fees to CCC. The Leasing Company leases containers to ocean carriers, generally under operating leases which are either master leases or term leases (mostly two to five years). Master leases do not specify the exact number of containers to be leased or the term that each container will remain on hire but allow the ocean carrier to pick up and drop off containers at various locations; rentals are based upon the number of containers used and the applicable per-diem rate. Accordingly, rentals under master leases are all variable and contingent upon the number of containers used. Most containers are leased to ocean carriers under master leases; leasing agreements with fixed payment terms are not material to the financial statements. Since there are no material minimum lease rentals, no disclosure of minimum lease rentals is provided in these financial statements. (c) Basis of Accounting The Partnership utilizes the accrual method of accounting. Revenue is recognized when earned. (d) Financial Statement Presentation These financial statements have been prepared without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting procedures have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and accompanying notes in the Partnership's latest annual report on Form 10-K. The interim financial statements presented herewith reflect all adjustments of a normal recurring nature which are, in the opinion of management, necessary to a fair statement of the financial condition and results of operations for the interim periods presented. 5 8 IEA MARINE CONTAINER INCOME FUND III (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS (2) Net Lease Receivables Due from Leasing Company Net lease receivables due from the Leasing Company are determined by deducting direct operating payables and accrued expenses, base management fees and incentive fees payable to CCC, the Leasing Company, and its affiliates from the rental billings payable by the Leasing Company to the Partnership under operating leases to ocean carriers for the containers owned by the Partnership. Net lease receivables at September 30, 1995 and December 31, 1994 were as follows:
September 30, December 31, 1995 1994 ------------- ------------ Lease receivables, net of doubtful accounts of $189,179 at September 30, 1995 and $162,142 at December 31, 1994 $ 750,328 $ 916,605 Less: Direct operating payables and accrued expenses 229,067 280,020 Damage protection reserve 84,446 141,556 Incentive fees 41,625 47,625 ---------- ---------- $ 395,190 $ 447,404 ========== ==========
(3) Net Lease Revenue Net lease revenue is determined by deducting direct operating expenses and management fees to CCC and the Leasing Company, from the rental revenue billed by the Leasing Company under operating leases to ocean carriers for the containers owned by the Partnership. Net lease revenue for the three and nine-month periods ended September 30, 1995 and 1994, was as follows:
Three Months Ended Nine Months Ended ------------------------------ ------------------------------ September 30, September 30, September 30, September 30, 1995 1994 1995 1994 ------------- ------------- ------------- ------------- Rental revenue $ 472,996 $ 649,760 $ 1,555,488 $ 2,038,341 Rental equipment operating expenses 130,906 243,929 360,018 543,584 Base management fees 79,555 116,436 260,871 370,422 Incentive fees 41,625 - 95,625 119,626 ----------- ----------- ----------- ------------ $ 220,910 $ 289,395 $ 838,974 $ 1,004,709 =========== =========== =========== ============
6 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations It is suggested that the following discussion be read in conjunction with the Registrant's most recent annual report on Form 10-K. 1) Material changes in financial condition between September 30, 1995 and December 31, 1994. The Registrant disposed of 1,013 containers, an amount approximately equal to 12% of its original fleet size, during the nine-month period ended September 30, 1995, in accordance with one of its original investment objectives - to realize the residual value of its containers after the expiration of their economic useful lives. The diminishing fleet size and its effect on operations contributed to the reductions in cash, short-term investments and net lease receivables due from the Leasing Company. Since December 31, 1994, the Managing General Partner has monitored the Registrant's fleet size and results of operations, as well as various alternatives and opportunities for selling the remaining containers. The Managing General Partner expects to continue monitoring these factors throughout the 1996 fiscal year. However, during this period, the Registrant will continue disposing its containers as opportunities arise. The Registrant's continuing efforts to dispose of the remaining fleet should produce lower operating results and, consequently, lower distributions to its partners in subsequent periods. At September 30, 1995, the Registrant's fleet consisted of 3,010 containers, an amount approximately equal to 37% of its original fleet size. The Registrant's cash balances at September 30, 1995 included sales proceeds from equipment disposals in the amount of $318,752. The Registrant will distribute these sales proceeds and $337,502 of cash from operations during the fourth quarter of 1995, representing distributions to its limited partners for the third quarter of 1995. 2) Material changes in the results of operations between the three and nine-month periods ended September 30, 1995 and the three and nine-month periods ended September 30, 1994. Net lease revenue for the third quarter of 1995 was $220,910, a decrease of 24% over the third quarter of 1994. Gross rental revenue (a component of net lease revenue) for the quarter was $472,996, a decline of 27% from the same period last year. For the first nine months of 1995, net lease revenue was $838,974, a decline of 16% from the first nine months of 1994. Gross rental revenue declined 24% to $1,555,488, over the same nine-month period. Gross rental revenue for the third quarter and first nine months of 1995 was primarily affected by the Registrant's diminishing fleet size. Utilization rates increased from those levels experienced during the same periods in the prior year. However, competitive pressures within the container leasing market, as well as the Leasing Company's efforts to improve the credit quality of its customer portfolio, combined to create a resistance to higher per-diem rental rates. Accordingly, average per-diem rental rates remained relatively stable when compared to the same periods in the prior year. The Registrant expects to gain long-term benefits from the improvement in the credit quality of this customer portfolio, as the allowance for doubtful accounts and related expenses should decline. The Registrant's average fleet size and utilization rates for the three and nine-month periods ended September 30, 1995 and 1994 were as follows:
Three Months Ended Nine Months Ended ------------------------------ ------------------------------ September 30, September 30, September 30, September 30, 1995 1994 1995 1994 ------------- ------------- ------------- ------------- Average Fleet Size (measured in twenty-foot equivalents (TEU)) 3,519 5,228 3,953 5,565 Average Utilization 87% 82% 87% 82%
7 10 During the third quarter of 1995, the container leasing market began to experience the effects of increasingly competitive market conditions, including, but not limited to, a resistance to higher per-diem rental rates, slightly lower utilization rates resulting from an expanding supply of marine cargo containers within the container industry, and the economic condition of the shipping industry, which has experienced a current trend toward consolidation. Accordingly, the Registrant expects a stable container leasing market during the remainder of 1995 and first half of 1996. The Registrant's fleet became fully depreciated during 1994, and accordingly, the Registrant did not recognize depreciation expense during the three and nine-month periods ended September 30, 1995. The declining fleet size and higher utilization rates contributed to a $113,023 and $183,566 decline in rental equipment operating expenses during the three and nine-month periods ended September 30, 1995, respectively. Accordingly, base management fees also declined. Incentive fees increased $41,625 over the same three-month period in the prior year, as a result of the Registrant's favorable collection of outstanding lease receivables and sales proceeds. Incentive fees are a performance-based incentive fee, and are subject to the operating results of the Registrant's fleet and cash generated and distributed from operations. Approximately 35% and 29% of the Registrant's net earnings for the three and nine-month periods ended September 30, 1995, respectively, were from gain on disposal of equipment, as compared to 29% and 24% for the same three and nine-month periods in the prior year. As the Registrant accelerates the disposal of its containers in subsequent periods, net gain on disposal will contribute significantly to the Registrant's net earnings. 8 11 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
Number Description Method of Filing ------ ----------- ---------------- 27 Financial Data Schedule Filed with this Document
(b) There were no reports on Form 8-K during the three-month period ended September 30, 1995. 9 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. IEA MARINE CONTAINER INCOME FUND III (A California Limited Partnership) By Cronos Capital Corp. The Managing General Partner By /s/ JOHN KALLAS --------------------------------------- John Kallas Vice President, Chief Financial Officer Principal Accounting Officer Date: November 13, 1995 10 13 EXHIBIT INDEX
Exhibit No. Description ------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT SEPTEMBER 30, 1995(UNAUDITED) THE STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED AS PART OF ITS QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD SEPTEMBER 30, 1995 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 917,560 0 395,190 0 0 1,312,750 7,400,816 5,169,461 3,544,105 0 0 0 0 0 3,544,105 3,544,105 0 1,223,543 0 33,666 0 0 0 0 0 0 0 0 0 1,189,877 0 0
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