-----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, Rx8J6D3kKGjawD2okg7jKKkZ0RmfGEuY3wMyJLoOUXOSgkADNqXzaPuwU2JpXKUl LQx6FMYoIYrAA/KBPsFPCg== 0000950149-00-001139.txt : 20000516 0000950149-00-001139.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950149-00-001139 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEA INCOME FUND VI CENTRAL INDEX KEY: 0000774482 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 942942941 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14440 FILM NUMBER: 630935 BUSINESS ADDRESS: STREET 1: 444 MARKET ST 15TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4156778990 10-Q 1 QUARTERLY REPORT FOR PERIOD ENDED MARCH 31, 2000 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 MARCH 31, 2000 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 MARCH 31, 2000 TABLE OF CONTENTS
PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets - March 31, 2000 and December 31, 1999 (unaudited) 4 Condensed Statements of Operations for the three months ended March 31, 2000 and 1999 (unaudited) 5 Condensed Statements of Cash Flows for the three months ended March 31, 2000 and 1999 (unaudited) 6 Notes to Condensed Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 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 condensed balance sheets as of March 31, 2000 and December 31, 1999, condensed statements of operations for the three months ended March 31, 2000 and 1999, and condensed statements of cash flows for the three months ended March 31, 2000 and 1999. 3 4 IEA INCOME FUND VI, A CALIFORNIA LIMITED PARTNERSHIP CONDENSED BALANCE SHEETS (UNAUDITED)
March 31, December 31, 2000 1999 ---------- ----------- Assets Current assets: Cash and cash equivalents, includes $481,725 at March 31, 2000 and $471,468 at December 31, 1999 in interest-bearing accounts $ 481,019 $ 471,568 Net lease receivables due from Leasing Company (notes 1 and 2) 49,219 87,904 ---------- ---------- Total current assets 530,238 559,472 ---------- ---------- Container rental equipment, at cost 4,830,742 5,218,975 Less accumulated depreciation 3,380,463 3,678,434 ---------- ---------- Net container rental equipment 1,450,279 1,540,541 ---------- ---------- Total assets $1,980,517 $2,100,013 ========== ========== Partners' Capital Partners' capital: General partners $ 4,492 $ 5,687 Limited partners 1,976,025 2,094,326 ---------- ---------- Total partners' capital $1,980,517 $2,100,013 ========== ==========
The accompanying notes are an integral part of these condensed financial statements. 4 5 IEA INCOME FUND VI, A CALIFORNIA LIMITED PARTNERSHIP CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended ------------------------- March 31, March 31, 2000 1999 --------- --------- Net lease revenue (notes 1 and 3) $ 101,186 $ 171,000 Other operating expenses: Depreciation -- 33,142 Other general and administrative expenses 16,197 17,527 --------- --------- 16,197 50,669 --------- --------- Income from operations 84,989 120,331 Other income: Interest income 5,203 8,173 Net gain on disposal of equipment 16,274 53,623 --------- --------- 21,477 61,796 --------- --------- Net income $ 106,466 $ 182,127 ========= ========= Allocation of net income: General partners $ 18,891 $ 38,661 Limited partners 87,575 143,466 --------- --------- $ 106,466 $ 182,127 ========= ========= Limited partners' per unit share of net income $ 1.99 $ 3.27 ========= =========
The accompanying notes are an integral part of these condensed financial statements. 5 6 IEA INCOME FUND VI, A CALIFORNIA LIMITED PARTNERSHIP CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended -------------------------- March 31, March 31, 2000 1999 --------- --------- Net cash provided by operating activities $ 125,434 $ 155,057 Cash flows provided by investing activities: Proceeds from disposal of equipment 109,979 246,637 Cash flows used in financing activities: Distribution to partners (225,962) (466,987) --------- --------- Net increase (decrease) in cash and cash equivalents 9,451 (65,293) Cash and cash equivalents at January 1 471,568 786,433 --------- --------- Cash and cash equivalents at March 31 $ 481,019 $ 721,140 ========= =========
The accompanying notes are an integral part of these condensed financial statements. 6 7 IEA INCOME FUND VI, A CALIFORNIA LIMITED PARTNERSHIP NOTES TO UNAUDITED CONDENSED 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 worldwide to ocean carriers. To this extent, the Partnership's operations are subject to the fluctuations of world economic and political conditions. Such factors may affect the pattern and levels of world trade. The Partnership believes that the profitability of, and risks associated with, leases to foreign customers is generally the same as those of leases to domestic customers. The Partnership's leases generally require all payments to be made in United States currency. The managing general partner is Cronos Capital Corp. ("CCC"); the associate general partners are four individuals. CCC, with its affiliate Cronos Containers Limited (the "Leasing Company"), manages the business of the Partnership. CCC and the Leasing Company also manage the container leasing business for other partnerships affiliated with the managing general partner. The Partnership shall continue until December 31, 2006, unless sooner terminated upon the occurrence of certain events. The Partnership commenced operations on December 4, 1984, when the minimum subscription proceeds of $1,000,000 were obtained. The Partnership offered 60,000 units of limited partnership interest at $500 per unit, or $30,000,000. The offering terminated on October 11, 1985, at which time 43,920 limited partnership units had been purchased. (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 one 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 condensed financial statements. 7 8 IEA INCOME FUND VI, A CALIFORNIA LIMITED PARTNERSHIP NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (c) Basis of Accounting The Partnership utilizes the accrual method of accounting. Net lease revenue is recorded by the Partnership in each period based upon its leasing agent agreement with the Leasing Company. Net lease revenue is generally dependent upon operating lease rentals from operating lease agreements between the Leasing Company and its various lessees, less direct operating expenses and management fees due in respect of the containers specified in each operating lease agreement. (d) Depreciation of Containers Container rental equipment is depreciated over a twelve-year life on a straight-line basis to its estimated salvage value of 30%. As of the year ended December 31, 1999, container rental equipment has been fully depreciated. (e) Financial Statement Presentation These condensed 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 condensed 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 accounting principles generally accepted in the United States (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. Actual results could differ from those estimates. 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 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 March 31, 2000 and December 31, 1999 were as follows:
March 31, December 31, 2000 1999 ------------- ------------- Gross lease receivables $ 334,374 $ 307,763 Less: Direct operating payables and accrued expenses 130,252 79,424 Damage protection reserve 24,623 25,417 Base management fees payable 53,075 57,191 Reimbursed administrative expenses 6,792 3,260 Allowance for doubtful accounts 40,285 29,461 Incentive fees 30,128 25,106 ------------- ------------- Net lease receivables $ 49,219 $ 87,904 ============= =============
8 9 IEA INCOME FUND VI, A CALIFORNIA LIMITED PARTNERSHIP NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (3) Net Lease Revenue Net lease revenue is determined by deducting direct operating expenses, base management and incentive fees and reimbursed administrative expenses 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-month periods ended March 31, 2000 and 1999 was as follows:
Three Months Ended ------------------------- March 31, March 31, 2000 1999 --------- --------- Rental revenue (note 4) $ 198,858 $ 304,955 Less: Rental equipment operating expenses 41,420 50,117 Base management fees 12,984 21,799 Incentive fees 30,128 46,866 Reimbursed administrative expenses 13,140 15,173 --------- --------- $ 101,186 $ 171,000 ========= =========
(4) Operating Segment The Financial Accounting Standards Board has issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which changes the way public business enterprises report financial and descriptive information about reportable operating segments. An operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and about which separate financial information is available. Management operates the Partnership's container fleet as a homogenous unit and has determined, after considering the requirements of SFAS No. 131, that as such it has a single reportable operating segment. The Partnership derives revenues from marine dry cargo containers. As of March 31, 2000, the Partnership operated 1,279 twenty-foot, 559 forty-foot and 43 forty-foot high-cube marine dry cargo containers. Due to the Partnership's lack of information regarding the physical location of its fleet of containers when on lease in the global shipping trade, it is impracticable to provide the geographic area information required by SFAS No. 131. ****** 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 March 31, 2000 and December 31, 1999. During the first quarter of 2000, the Registrant continued disposing of containers as part of its ongoing container operations. Accordingly, 156 containers were disposed during the first quarter of 2000, contributing to a decline in the Registrant's operating results. At March 31, 2000, 19% of the original equipment remained in the Registrant's fleet, as compared to 21% at December 31, 1999, and was comprised of the following:
40-Foot 20-Foot 40-Foot High-Cube ------------ ------------ ------------ Containers on lease: Term leases 97 43 6 Master leases 994 457 23 ------------ ------------ ------------ Subtotal 1,091 500 29 Containers off lease 188 59 14 ------------ ------------ ------------ Total container fleet 1,279 559 43 ============ ============ ============
40-Foot 20-Foot 40-Foot High-Cube ---------------- ---------------- ---------------- Units % Units % Units % ----- ----- ----- ----- ----- ----- Total purchases 6,102 100% 3,753 100% 75 100% Less disposals 4,823 79% 3,194 85% 32 43% ----- ----- ----- ----- ----- ----- Remaining fleet at March 31, 2000 1,279 21% 559 15% 43 57% ===== ===== ===== ===== ===== =====
The Registrant's allowance for doubtful accounts increased from $29,461 at December 31, 1999 to $40,285 at March 31, 2000. This increase was attributable to the delinquent account receivable balances of approximately 12 lessees. The Leasing Company has either negotiated specific payment terms with these lessees or is pursuing other alternatives to collect the outstanding balances. In each instance, the Registrant believes it has provided sufficient reserves for all doubtful accounts. During the first quarter of 2000, distributions from operations and sales proceeds amounted to $225,962, reflecting distributions to the general and limited partners for the fourth quarter of 1999. This represents a decrease from the $346,474 distributed during the fourth quarter of 1999, reflecting distributions for the third quarter of 1999. The decrease in distributions is attributable to a decrease in sales proceeds distributed to its partners. The Registrant's continuing disposal of containers should produce lower operating results and, consequently, lower distributions to its partners in subsequent periods. 10 11 In order to take advantage of improving market conditions and stronger demand for leased containers, the Registrant undertook a strategy that was aimed at significantly reducing its inventory of idle equipment in some low-demand locations while, at the same time, fulfilling lessee container requirements. As part of this strategy, the Registrant offered leasing incentives to several lessees for picking up off-hire equipment from the Registrant's higher inventory areas. This not only resulted in stronger utilization of the Registrant's equipment, but it also significantly lowered Partnership expenses related to storage and handling. 2) Material changes in the results of operations between the three-month period ended March 31, 2000 and the three-month period ended March 31, 1999. Net lease revenue for the three-month period ended March 31, 2000 was $101,186, a decline of 41% from the same three-month period in the prior year. Approximately 15% of the Registrant's net income for the three-month period ended March 31, 2000 was from gain on disposal of equipment, as compared to 29% for the same three-month period in the prior year. As the Registrant's disposals increase in subsequent periods, net gain on disposal should contribute significantly to the Registrant's net income and may fluctuate depending on the level of container disposals. Gross rental revenue (a component of net lease revenue) for the three-month period ended March 31, 2000 was $198,858, reflecting a decline of 35% from the comparable three-month period in 1999. Gross rental revenue was primarily impacted by the Registrant's diminishing fleet size and a decline in per-diem rental rates. Average per-diem rental rates decreased approximately 17% when compared to the same three-month period in the prior year. The Registrant's average fleet size and utilization rates for the three-month periods ended March 31, 2000 and March 31, 1999 were as follows:
Three Months Ended ------------------------- March 31, March 31, 2000 1999 --------- --------- Average fleet size (measured in twenty-foot equivalent units (TEU)) 2,602 3,569 Average utilization 86% 83%
Rental equipment operating expenses were 21% of the Registrant's gross lease revenue during the three-month period ended March 31, 2000, as compared to 16% during the three-month period ended March 31, 1999. The Registrant's declining fleet size and related operating results also contributed to a decline in base management fees, reimbursed administrative expenses and incentive fees. YEAR 2000 The Registrant relies upon the financial and operational systems provided by the Leasing Company and its affiliates, as well as the systems provided by other independent third parties to service the three primary areas of its business: investor processing/maintenance; container leasing/asset tracking; and accounting/finance. Neither the Registrant nor the Leasing Company experienced nor do they currently anticipate any material adverse effects on the Registrant's business, results of operations or financial condition as a result of Year 2000 issues involving internal use systems, third party products or any of their software products. Costs incurred in preparing for Year 2000 issues were expensed as incurred. Neither the Registrant nor the Leasing Company anticipate any additional material costs in connection with Year 2000 uncertainties. Pursuant to the Limited Partnership Agreement, CCC or the Leasing Company, may not seek reimbursement of data processing costs associated with the Year 2000 program. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. 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 March 31, 2000. - ------------ * 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-1 (No. 2-92883) ** Incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 (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/ Dennis J. Tietz -------------------------------------- Dennis J. Tietz President and Director of Cronos Capital Corp. ("CCC") Principal Executive Officer of CCC Date: May 15, 2000 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-1 (No. 2-92883) ** Incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 (No. 2-92883) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT MARCH 31, 2000 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 (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 MARCH 31, 2000. 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 481,019 0 49,219 0 0 530,238 4,830,742 3,380,463 1,980,517 0 0 0 0 0 1,980,517 1,980,517 0 101,186 0 16,197 0 0 0 0 0 0 0 0 0 106,466 0 0
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