-----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, P6HcyNzet/A3jpGxpnSPryJDHo7vz4hJtvmhWrHk0/O7VFiQQuUfmv7ejLecG3bj nPisOXclFtEdkdP/Ju2lKQ== 0000950149-96-001813.txt : 19961113 0000950149-96-001813.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950149-96-001813 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 INCOME FUND VI CENTRAL INDEX KEY: 0000774482 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 942942941 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14440 FILM NUMBER: 96658852 BUSINESS ADDRESS: STREET 1: 444 MARKET ST 15TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4156778990 10-Q 1 FORM 10-Q FOR PERIOD ENDING SEPTEMBER 30, 1996 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 0-14440 IEA INCOME FUND VI, (A CALIFORNIA LIMITED PARTNERSHIP) (Exact name of registrant as specified in its charter) California 94-2942941 (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 INCOME FUND VI, (A CALIFORNIA LIMITED PARTNERSHIP) 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. Exhibit 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 INCOME FUND VI, (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS (UNAUDITED)
September 30, December 31, 1996 1995 ---- ---- Assets Current assets: Cash, includes $311,146 at September 30, 1996 and $248,436 at December 31, 1995 in interest-bearing accounts $ 311,355 $ 248,584 Short-term investments 1,252,387 1,480,000 Net lease receivables due from Leasing Company (notes 1 and 2) 559,669 738,452 ----------- ----------- Total current assets 2,123,411 2,467,036 ----------- ----------- Container rental equipment, at cost 15,454,149 18,110,826 Less accumulated depreciation 9,427,805 10,368,490 ----------- ----------- Net container rental equipment 6,026,344 7,742,336 ----------- ----------- $ 8,149,755 $10,209,372 =========== =========== Partners' Capital Partners' capital: General partners $ 12,453 $ 23,938 Limited partners 8,137,302 10,185,434 ----------- ----------- Total partners' capital 8,149,755 10,209,372 ----------- ----------- $ 8,149,755 $10,209,372 =========== ===========
The accompanying notes are an integral part of these statements. 4 5 IEA INCOME FUND VI, (A CALIFORNIA LIMITED PARTNERSHIP) 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) $456,480 $ 744,483 $1,496,572 $2,448,629 Other operating expenses: Depreciation 210,537 250,629 669,413 771,644 Other general and administrative expenses 13,072 1,143 35,431 45,493 -------- ---------- ---------- ---------- 223,609 251,772 704,844 817,137 -------- ---------- ---------- ---------- Earnings from operations 232,871 492,711 791,728 1,631,492 Other income: Interest income 23,514 26,816 67,254 85,641 Net gain on disposal of equipment 141,768 45,179 395,502 265,070 -------- ---------- ---------- ---------- 165,282 71,995 462,756 350,711 -------- ---------- ---------- ---------- Net earnings $398,153 $ 564,706 $1,254,484 $1,982,203 ======== ========== ========== ========== Allocation of net earnings: General partners $101,033 $ 117,722 $ 283,102 $ 326,998 Limited partners 297,120 446,984 971,382 1,655,205 -------- ---------- ---------- ---------- $398,153 $ 564,706 $1,254,484 $1,982,203 ======== ========== ========== ========== Limited partners' per unit share of net earnings $ 6.77 $ 10.18 $ 22.12 $ 37.69 ======== ========== ========== ==========
The accompanying notes are an integral part of these statements. 5 6 IEA INCOME FUND VI, (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended ----------------- September 30, September 30, 1996 1995 ---- ---- Net cash provided by operating activities $ 1,718,999 $ 2,723,245 Cash flows provided by investing activities: Proceeds from disposal of equipment 1,430,260 867,205 Cash flows used in financing activities: Distribution to partners (3,314,101) (3,434,613) ----------- ----------- Net increase (decrease) in cash and cash equivalents (164,842) 155,837 Cash and cash equivalents at January 1 1,728,584 1,769,503 ----------- ----------- Cash and cash equivalents at September 30 $ 1,563,742 $ 1,925,340 =========== ===========
The accompanying notes are an integral part of these statements. 6 7 IEA INCOME FUND VI, (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies (a) Nature of Operations IEA Income Fund VI, A California Limited Partnership (the "Partnership") is a limited partnership organized under the laws of the State of California on August 1, 1984 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 INCOME FUND VI, (A CALIFORNIA LIMITED PARTNERSHIP) 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 $369,939 at September 30, 1996 and $355,354 at December 31, 1995 $1,168,868 $1,534,063 Less: Direct operating payables and accrued expenses 264,121 351,094 Damage protection reserve 133,975 172,605 Base management fees 76,245 118,275 Reimbursed administrative expenses 16,019 21,408 Incentive fees 118,839 132,229 ---------- ---------- $ 559,669 $ 738,452 ========== ==========
(Continued) 8 9 IEA INCOME FUND VI, (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS (3) Net Lease Revenue Net lease revenue is determined by deducting direct operating expenses, management fees and reimbursed administrative expenses 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 $919,334 $1,351,909 $3,021,859 $4,210,557 Rental equipment operating expenses 226,207 287,969 792,541 831,965 Base management fees 63,855 91,148 203,910 282,632 Incentive fees 118,839 145,619 354,843 413,424 Reimbursed administrative expenses 53,953 82,690 173,993 233,907 -------- ---------- ---------- ---------- $456,480 $ 744,483 $1,496,572 $2,448,629 ======== ========== ========== ==========
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, 1,150 containers were disposed, contributing to a decline in the Registrant's operating results. At September 30, 1996, 64% of the original equipment remained in the Registrant's fleet, as compared to 76% at December 31, 1995, comprised as follows:
40-Foot 20-Foot 40-Foot High-Cube ------- ------- --------- Containers on lease: Term leases 205 127 4 Master lease 2,848 1,616 56 ----- ----- -- Subtotal 3,053 1,743 60 Containers off lease 1,074 456 9 ----- ----- -- Total container fleet 4,127 2,199 69 ===== ===== ==
40-Foot 20-Foot 40-Foot High-Cube ------- ------- --------- Units % Units % Units % ----- - ----- - ----- - Total purchases 6,102 100% 3,753 100% 75 100% Less disposals 1,975 32% 1,554 41% 6 8% ----- --- ----- --- -- --- Remaining fleet at September 30, 1996 4,127 68% 2,199 59% 69 92% ===== === ===== === == ===
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 amounted to $1,114,743, reflecting distributions to the general and limited partners for the second quarter of 1996. This represents an increase from $1,009,294 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. 10 11 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. Accordingly, the Registrant's utilization rate has declined from an average of 88% at December 31, 1995 to an average of 77% at September 30, 1996. 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. In addition, rental equipment operating expenses of the Registrant have increased due to higher storage and handling costs associated with the off-hire fleet, and increased repositioning costs. As a result, these leasing market conditions, combined with the Registrant's disposal of containers, are expected to adversely impact the results from operations through the remainder of 1996 and into 1997. 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 $456,480 and $1,496,572, respectively, a decline of 39% from the same three and nine-month periods in the prior year, respectively. Approximately 36% and 32% 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 8% and 13% for the same three and nine-month periods in the prior year, respectively. As the Registrant's disposals increase in subsequent periods, net gain on disposal will 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 $919,334, and $3,021,859, respectively, reflecting a decline of 32% and 28% from the same three and nine-month periods in 1995. During 1996, gross rental revenue was primarily impacted by the Registrant's diminishing fleet size and lower utilization levels. Average per-diem rental rates decreased approximately 5% 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)) 8,846 10,780 9,446 11,177 Average Utilization 78% 87% 79% 89%
The Registrant's aging and declining fleet size contributed to a 16% and 13% decline in depreciation expense when compared to the same three and nine-month periods in the prior year, respectively. Rental equipment operating expenses were 25% and 26% of the Registrant's gross lease revenue during the three and nine-month periods ended September 30, 1996, respectively, as compared to 21% and 20% when compared to the same three and nine-month periods ended September 30, 1995, respectively. These increases were 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 handling, storage and repositioning also contributed to the increase in the rental equipment operating expenses, as a percentage of gross lease revenue. The Registrant's diminishing fleet size and related operating performance contributed to the decline in base management and incentive fees, when compared to the same periods in the prior year. 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 11, 1984 * 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 12, 1984, included as part of Registration Statement on Form S-11 (No. 2-92883) ** Incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-11 (No. 2-92883) 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 INCOME FUND VI, A California Limited Partnership 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 11, 1984 * 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 12, 1984, included as part of Registration Statement on Form S-11 (No. 2-92883) ** Incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-11 (No. 2-92883) EX-27 2 FINANCIAL DATA SCHEDULE
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 1,563,742 0 559,669 0 0 2,123,411 15,454,149 9,427,805 8,149,755 0 0 0 0 0 8,149,755 8,149,755 0 1,496,572 0 704,844 0 0 0 0 0 0 0 0 0 1,254,484 0 0
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