-----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, TBLxWZXAFdX8HErmQtFgRx+ldL3zFA3wvUFm8OApXbEQ52hy7JAN1w9wQAO9fSdi 1lZsIPaQps/O6WjPVviI8g== 0000950149-96-001795.txt : 19961113 0000950149-96-001795.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950149-96-001795 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEA MARINE CONTAINER INCOME FUND V-B CENTRAL INDEX KEY: 0000727048 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 942911066 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13432 FILM NUMBER: 96658588 BUSINESS ADDRESS: STREET 1: 444 MARKET ST 15TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4156778990 10-Q 1 IEA MARINE CONTAINER FUND V(B) 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, 1996 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 0-13432 IEA MARINE CONTAINER INCOME FUND V(B) (Exact name of registrant as specified in its charter) California 94-2911066 (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 V(B) REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - September 30, 1996 (unaudited) and December 31, 1995 4 Statements of Operations for the three and nine months ended September 30, 1996 and 1995 (unaudited) 5 Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 (unaudited) 6 Notes to Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12 2 3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Presented herein are the Registrant's balance sheets as of September 30, 1996 and December 31, 1995, statements of operations for the three and nine months ended September 30, 1996 and 1995, and statements of cash flows for the nine months ended September 30, 1996 and 1995. 3 4 IEA MARINE CONTAINER INCOME FUND V(B) BALANCE SHEETS (UNAUDITED)
September 30, December 31, 1996 1995 ------------- ------------ Assets Current assets: Cash, includes $112,953 at September 30, 1996 and $175,244 at December 31, 1995 in interest-bearing accounts $ 113,151 $ 175,530 Short-term investments 450,796 350,000 Net lease receivables due from Leasing Company (notes 1 and 2) 218,603 277,071 ---------- ---------- Total current assets 782,550 802,601 ---------- ---------- Container rental equipment, at cost 3,453,083 5,425,149 Less accumulated depreciation 2,311,136 3,410,328 ---------- ---------- Net container rental equipment 1,141,947 2,014,821 ---------- ---------- $1,924,497 $2,817,422 ========== ========== Partners' Capital Partners' capital: General partners $ 1,713 $ 1,408 Limited partners 1,922,784 2,816,014 ---------- ---------- Total partners' capital 1,924,497 2,817,422 ---------- ---------- $1,924,497 $2,817,422 ========== ==========
The accompanying notes are an integral part of these statements. 4 5 IEA MARINE CONTAINER INCOME FUND V(B) STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended ---------------------------- ---------------------------- September 30, September 30, September 30, September 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Net lease revenue (notes 1 and 3) $119,370 $202,867 $365,105 $694,691 Other operating expenses: Depreciation 46,926 74,123 166,875 232,936 Other general and administrative expenses 7,762 4,309 21,299 26,636 -------- -------- -------- -------- 54,688 78,432 188,174 259,572 -------- -------- -------- -------- Earnings from operations 64,682 124,435 176,931 435,119 Other income: Interest income 9,978 7,543 24,803 24,467 Net gain on disposal of equipment 53,839 27,469 180,611 125,998 -------- -------- -------- -------- 63,817 35,012 205,414 150,465 -------- -------- -------- -------- Net earnings $128,499 $159,447 $382,345 $585,584 ======== ======== ======== ======== Allocation of net earnings: General partners $ 52,725 $ 35,888 $113,662 $103,201 Limited partners 75,774 123,559 268,683 482,383 -------- -------- -------- -------- $128,499 $159,447 $382,345 $585,584 ======== ======== ======== ======== Limited partners' per unit share of net earnings $ 4.42 $ 7.21 $ 15.68 $ 28.15 ======== ======== ======== ========
The accompanying notes are an integral part of these statements. 5 6 IEA MARINE CONTAINER INCOME FUND V(B) STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended -------------------------------- September 30, September 30, 1996 1995 ------------- ------------- Net cash provided by operating activities $ 452,259 $ 779,998 Cash flows provided by investing activities: Proceeds from disposal of equipment 861,429 386,486 Cash flows used in financing activities: Distribution to partners (1,275,271) (1,175,365) ----------- ----------- Net increase (decrease) in cash and cash equivalents 38,417 (8,881) Cash and cash equivalents at January 1 525,530 563,369 ----------- ----------- Cash and cash equivalents at September 30 $ 563,947 $ 554,488 =========== ===========
The accompanying notes are an integral part of these statements. 6 7 IEA MARINE CONTAINER INCOME FUND V(B) NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies (a) Nature of Operations IEA Marine Container Income Fund V(B) (the "Partnership") is a limited partnership organized under the laws of the State of California on August 8, 1983 for the purpose of owning and leasing marine cargo containers. The managing general partner is Cronos Capital Corp. ("CCC"); the associate general partners include four individuals. 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. The Partnership has determined that for accounting purposes the Leasing Agent Agreement is a lease, and the receivables, payables, gross revenues and operating expenses attributable to the containers managed by the Leasing Company are, for accounting purposes, those of the Leasing Company and not of the Partnership. Consequently, the Partnership's balance sheets and statements of operations display the payments to be received by the Partnership from the Leasing Company as the Partnership's receivables and revenues. (Continued) 7 8 IEA MARINE CONTAINER INCOME FUND V(B) NOTES TO UNAUDITED FINANCIAL STATEMENTS (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 preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires the Partnership to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. 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. (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 payable, reimbursed administrative expenses 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, 1996 and December 31, 1995 were as follows:
September 30, December 31, 1996 1995 ------------- ------------ Lease receivables, net of doubtful accounts of $115,680 at September 30, 1996 and $106,894 at December 31, 1995 $ 375,624 $ 499,036 Less: Direct operating payables and accrued expenses 57,026 114,433 Damage protection reserve 36,426 31,523 Base management fees 15,349 30,150 Reimbursed administrative expenses 3,817 6,028 Incentive fees 44,403 39,831 ---------- ----------- $ 218,603 $ 277,071 ========== ===========
(Continued) 8 9 IEA MARINE CONTAINER INCOME FUND V(B) NOTES TO UNAUDITED FINANCIAL STATEMENTS (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, 1996 and 1995, was as follows:
Three Months Ended Nine Months Ended ----------------------------- ----------------------------- September 30, September 30, September 30, September 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Rental revenue $ 224,568 $ 397,564 $ 797,305 $ 1,249,950 Rental equipment operating expenses 33,385 106,954 189,820 274,807 Base management fees 15,744 24,945 52,852 83,006 Incentive fees 44,403 38,526 146,269 127,331 Reimbursed administrative expenses 11,666 24,272 43,259 70,115 ---------- ---------- ---------- ------------ $ 119,370 $ 202,867 $ 365,105 $ 694,691 ========== ========== ========== ============
9 10 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, 1996 and December 31, 1995. During the first nine months of 1996, the Registrant continued disposing of containers as part of its ongoing operations. Accordingly, 890 containers were disposed, contributing to an increase in cash generated from sales proceeds, and accordingly, the related cash balances. At September 30, 1996, 38% of the original equipment remained in the Registrant's fleet, as compared to 62% at December 31, 1995, comprised as follows:
40-Foot 20-Foot 40-Foot High-Cube ------- ------- --------- Containers on lease: Term leases 70 14 10 Master lease 813 217 113 --- --- --- Subtotal 883 231 123 Containers off lease 101 26 12 --- --- --- Total container fleet 984 257 135 === === ===
40-Foot 20-Foot 40-Foot High-Cube -------------- ------------ ------------ Units % Units % Units % ----- --- ----- --- ----- --- Total purchases 2,761 100% 719 100% 150 100% Less disposals 1,777 64% 462 64% 15 10% ----- --- --- --- --- --- Remaining fleet at September 30, 1996 984 36% 257 36% 135 90% ===== === === === === ===
Net lease receivables at September 30, 1996 declined when compared to December 31, 1995. Contributing to this decline were favorable collections of the Registrant's lease receivables, a diminishing fleet size, and its related operating performance. During the third quarter of 1996, distributions from operations and sales proceeds amount to $587,682, reflecting distributions to the general and limited partners for the second quarter of 1996. This represents an increase from the $329,102 distributed during the second quarter of 1996, reflecting increased distributions of sales proceeds for the second quarter of 1996. The Registrant's disposal activity should produce lower operating results and, consequently, lower distributions from operations to its partners in subsequent periods. However, sales proceeds distributed to its partners may fluctuate in subsequent periods, reflecting the level of container disposals. The statements contained in the following discussion are based on current expectations. These statements are forward looking and actual results may differ materially. Indicative of the cyclical nature of the container leasing business, containerized trade slowed in the last quarter of 1995, and excess inventories began to develop. This slowdown has resulted in reduced equipment utilization and lower per-diem rental rates in the container leasing industry during the first nine months of 1996. However, as a result of the Registrant's policy of disposing off-hire containers, utilization at September 30, 1996 averaged 90%, an increase from the average utilization rate of 87% at December 31, 1995. Additionally, during the first nine months of 1996, the Leasing Company implemented various marketing strategies, including but not limited to, offering incentives to shipping companies and repositioning containers to high demand locations in order to counter the market conditions. Ancillary revenues have fallen, and free-day incentives offered to the shipping lines have increased. As a result, these leasing market conditions, combined with the Registrant's disposal of containers, are expected to adversely impact the Registrant's results from operations through the remainder of 1996 and into 1997. 10 11 2) Material changes in the results of operations between the three and nine-month periods ended September 30, 1996 and the three and nine-month periods ended September 30, 1995. Net lease revenue for the three and nine-month periods ended September 30, 1996 was $119,370 and $365,105, respectively, a decline of 41% and 47% from the same three and nine-month periods in the prior year, respectively. Approximately 42% and 47% of the Registrant's net earnings for the three and nine-month periods ended September 30, 1996, respectively, were from gain on disposal of equipment, as compared to 17% and 22% for the same three and nine-month periods in the prior year, respectively. As the Registrant continues the disposal of its containers in subsequent periods, net gain on disposal should contribute significantly to the Registrant's net earnings. Gross rental revenue (a component of net lease revenue) for the three and nine-month periods ended September 30, 1996 was $224,568, and $797,305, respectively, reflecting a decline of 44% and 36% from the same three and nine-month periods in 1995, respectively. During 1996, gross rental revenue was primarily impacted by the Registrant's diminishing fleet size. Average per-diem rental rates decreased approximately 4% and 3%, when compared to the same three and nine-month periods in the prior year, respectively, as they became subject to the downward pressures of an increasingly soft container leasing market. The Registrant's average fleet size and utilization rates for the three and nine-month periods ended September 30, 1996 and September 30, 1995 were as follows:
Three Months Ended Nine Months Ended ------------------------------ ----------------------------- September 30, September 30, September 30, September 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Average Fleet Size (measured in twenty-foot equivalent units (TEU)) 1,850 3,055 2,230 3,248 Average Utilization 91% 87% 86% 88%
The Registrant's aging and declining fleet size contributed to a 37% and 28% decline in depreciation expense when compared to the same three and nine-month periods in the prior year, respectively. Rental equipment operating expenses were 15% and 27% of the Registrant's gross lease revenue for the three-month periods ended September 30, 1996 and 1995, respectively. This decline was primarily attributable to a reduction in the provision for doubtful accounts and the costs associated with the recovery actions against the doubtful accounts of certain lessees. However, rental equipment operating expenses were 24% and 22% of the Registrant's gross lease revenue for the nine-month periods ended September 30, 1996 and 1995, respectively. This increase was largely attributable to a decline in gross lease revenue resulting from lower utilization rates, lower per-diem rates, a downward trend in ancillary revenue, and an increase in free-day incentives offered to shipping companies. Costs associated with lower utilization levels, including storage, handling, and repositioning, also contributed to the increase in rental equipment operating expenses, as a percentage of gross lease revenue. The Registrant's declining fleet size and related operating performance contributed to the decline in base management fees, when compared to the same periods in the prior year. Incentive fees, which are based on both the operating performance of the fleet and sales proceeds, increased by 15% when compared with each of the three and nine-month periods in the prior year, respectively. 11 12 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
Exhibit No. Description Method of Filing ------- ----------- ---------------- 3(a) Limited Partnership Agreement of the Registrant, * amended and restated as of October 27, 1983 3(b) Certificate of Limited Partnership of the Registrant ** 27 Financial Data Schedule Filed with this document
(b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter ended September 30, 1996 - ---------- * Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant dated October 28, 1983, included as part of Registration Statement on Form S-1 (No. 2-86324) ** Incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 (No. 2-86324) 12 13 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 V(B) By Cronos Capital Corp. The Managing General Partner By /s/ JOHN KALLAS ---------------------------------------- John Kallas Vice President, Treasurer Principal Financial & Accounting Officer Date: November 11, 1996 13 14 EXHIBIT INDEX
Exhibit No. Description Method of Filing - ------- ----------- ---------------- 3(a) Limited Partnership Agreement of the Registrant, amended and * restated as of October 27, 1983 3(b) Certificate of Limited Partnership of the Registrant ** 27 Financial Data Schedule Filed with this document
- ---------- * Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant dated October 28, 1983, included as part of Registration Statement on Form S-1 (No. 2-86324) ** Incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 (No. 2-86324) EX-27 2 FDS FOR IEA MARINE CONTAINER FUND V(B)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT SEPTEMBER 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 (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, 1996 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 563,947 0 218,603 0 0 782,550 3,453,083 2,311,136 1,924,497 0 0 0 0 0 1,924,497 1,924,497 0 365,105 0 188,174 0 0 0 0 0 0 0 0 0 382,345 0 0
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