-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, T4LRMrTS0DZsfPn8A5DdWCIvM1UQOTtuySKYdVPGfLuSMQhKvDqXy+ReYBNdkTyA Gri9pVtPOvt8rN65xm9tgQ== 0000950149-95-000485.txt : 19950814 0000950149-95-000485.hdr.sgml : 19950814 ACCESSION NUMBER: 0000950149-95-000485 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 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: 95561240 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 FOR THE PERIOD ENDING 6/30/95. 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 JUNE 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 JUNE 30, 1995 TABLE OF CONTENTS
PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - June 30, 1995 (unaudited) and December 31, 1994 2 Statements of Operations for the three and six months ended June 30, 1995 and 1994 3 (unaudited) Statements of Cash Flows for the six months ended June 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 June 30, 1995 and December 31, 1994, statements of operations for the three and six months ended June 30, 1995 and 1994, and statements of cash flows for the six months ended June 30, 1995 and 1994. 4 IEA MARINE CONTAINER INCOME FUND III (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS (UNAUDITED)
June 30, December 31, 1995 1994 ---------- ------------ Assets ------ Current assets: Cash, includes $173,814 at June 30, 1995 and $182,194 at December 31, 1994 in interest-bearing accounts $ 187,428 $ 191,858 Short-term investments 752,205 925,000 Net lease receivables due from Leasing Company (notes 1 and 2) 439,200 447,404 ---------- ---------- Total current assets 1,378,833 1,564,262 ---------- ---------- Container rental equipment, at cost 8,167,830 9,670,148 Less accumulated depreciation 5,707,982 6,759,982 ---------- ---------- Net container rental equipment 2,459,848 2,910,166 ---------- ---------- $3,838,681 $4,474,428 ========== ========== Partners' Capital ----------------- Partners' capital (deficit): General partners $ (5,735) $ (6,730) Limited partners 3,844,416 4,481,158 ---------- ---------- Total partners' capital 3,838,681 4,474,428 ---------- ---------- $3,838,681 $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 Six Months Ended -------------------- --------------------- June 30, June 30, June 30, June 30, 1995 1994 1995 1994 -------- -------- -------- -------- Net lease revenue (notes 1 and 3) $300,715 $362,987 $618,064 $715,314 Other operating expenses: Depreciation - 86,140 - 187,076 Other general and administrative expenses 15,935 17,987 26,556 29,758 -------- -------- -------- -------- 15,935 104,127 26,556 216,834 -------- -------- -------- -------- Earnings from operations 284,780 258,860 591,508 498,480 Other income: Interest income 16,066 9,897 31,121 19,155 Net gain on disposal of equipment 129,060 70,121 218,210 134,861 -------- -------- -------- -------- 145,126 80,018 249,331 154,016 -------- -------- -------- -------- Net earnings $429,906 $338,878 $840,839 $652,496 ======== ======== ======== ======== Allocation of net earnings: General partners $ 4,299 $ 5,398 $ 15,071 $ 9,375 Limited partners 425,607 333,480 825,768 643,121 -------- -------- -------- -------- $429,906 $338,878 $840,839 $652,496 ======== ======== ======== ======== Limited partners' per unit share of net earnings $ 15 $ 11 $ 28 $ 21 ======== ======== ======== ========
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)
Six Months Ended ---------------------------- June 30, June 30, 1995 1994 ----------- ----------- Net cash provided by operating activities $ 644,342 $ 623,949 Cash flows provided by investing activities: Proceeds from disposal of equipment 655,019 469,420 Cash flows used in financing activities: Distribution to partners (1,476,586) (1,247,424) ----------- ----------- Net decrease in cash and cash equivalents (177,225) (154,055) Cash and cash equivalents at January 1 1,116,858 1,340,939 ----------- ----------- Cash and cash equivalents at June 30 $ 939,633 $ 1,186,884 =========== ===========
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 JUNE 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. (Continued) 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 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 June 30, 1995 and December 31, 1994 were as follows:
June 30, December 31, 1995 1994 -------- ------------ Lease receivables, net of doubtful accounts of $193,146 at June 30, 1995 and $162,142 at December 31, 1994 $834,525 $916,605 Less: Direct operating payables and accrued expenses 265,418 280,020 Damage protection reserve 97,282 141,556 Incentive fees 32,625 47,625 -------- -------- $439,200 $447,404 ======== ========
(3) Net Lease Revenue Net lease revenue is determined by deducting direct operating expenses and management fees to CCC 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 six-month periods ended June 30, 1995 and 1994, were as follows:
Three Months Ended Six Months Ended --------------------- ----------------------- June 30, June 30, June 30, June 30, 1995 1994 1995 1994 -------- -------- ---------- ---------- Rental revenue $533,443 $662,224 $1,082,492 $1,388,581 Rental equipment operating expenses 116,846 145,751 229,112 299,655 Base management fees 83,257 124,986 181,316 253,986 Incentive fees 32,625 28,500 54,000 119,626 -------- -------- ---------- ---------- $300,715 $362,987 $ 618,064 $ 715,314 ======== ======== ========== ==========
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 June 30, 1995 and December 31, 1994. The Registrant disposed of 699 containers during the six-month period ended June 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. While the Managing General Partner begins to study various alternatives for selling the remaining containers within the Registrant's fleet, the Registrant will continue disposing its containers as opportunities arise. The continuing efforts to dispose of the remaining fleet should produce lower operating results and related distributions to its partners in subsequent periods. The diminishing fleet size and the results from operations contributed to the reduction in cash, short term investments and net lease receivables due from the Leasing Company. The Registrant's cash balances at June 30, 1995 included sales proceeds from equipment disposals in the amount of $300,002. The Registrant will distribute these sales proceeds and $337,502 of cash from operations during the third quarter of 1995, representing distributions to its limited partners for the second quarter of 1995. 2) Material changes in the results of operations between the three and six-month periods ended June 30, 1995 and the three and six-month periods ended June 30, 1994. During the three-month period ended June 30, 1995, the container leasing market remained consistent with market conditions that existed during the three-month period ended March 31, 1995. The Registrant continued to experience the ability to charge higher ancillary revenues, such as pick-up fees, and reduce incentives offered to ocean carriers. However, the Registrant remains cautious about any further improvement in market conditions during the remainder of 1995. The benefits of the improved market conditions experienced during the three and six-month periods ended June 30, 1995, as compared to the same periods in 1994, were partially offset by the effect of the Leasing Company's efforts to improve the credit quality of its customer portfolio. In many cases, lessees who maintain a strong credit history may command favorable lease terms including lower per-diem rental rates. Accordingly, average per-diem rental rates remained steady as compared to the same three and six-month periods in 1994, while an increasing proportion of the lessees within its portfolio shifted to larger, high credit quality lessees. The Registrant expects to gain long term benefits from the improvement in the credit quality of its customers, as the allowance for doubtful accounts and related expenses should decline. The Registrant's average fleet size and utilization rates for the three and six-month periods ended June 30, 1995 and 1994 were as follows:
Three Months Ended Six Months Ended -------------------- -------------------- June 30, June 30, June 30, June 30, 1995 1994 1995 1994 -------- -------- -------- -------- Average Fleet Size (measured in twenty-foot equivalents (TEU)) 3,853 5,626 4,139 5,734 Average Utilization 87% 82% 86% 82%
7 10 The Registrant's fleet became fully depreciated during 1994, and accordingly, the Registrant did not recognize depreciation expense during the three and six-month periods ended June 30, 1995. The reduction in depreciation expense contributed to a $91,028 and $188,343 increase in net earnings over the same three and six-month periods in the prior year, respectively. The declining fleet size and higher utilization rates contributed to a $28,905 and $70,543 decline in rental equipment operating expenses during the three and six-month periods ended June 30, 1995, respectively. Accordingly, base management fees and incentive fees also declined. Approximately 30% and 26% of the Registrant's net earnings for the three and six-month periods ended June 30, 1995, respectively, were from gain on disposal of equipment, as compared to 21% for the same three and six-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 27 - Financial Data Schedule (b) There were no reports on Form 8-K during the three-month period ended June 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: August 10, 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 JUNE 30, 1995 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 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 ENDED JUNE 30, 1995. 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 939,633 0 439,200 0 0 1,378,833 8,167,830 5,707,982 3,838,681 0 0 0 0 0 3,838,681 3,838,681 0 867,395 0 26,556 0 0 0 0 0 0 0 0 0 840,839 0 0
-----END PRIVACY-ENHANCED MESSAGE-----