-----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, WheAGLZ0CVoJb/7CI1mL1qMLkO2Cp2gpYEHqEO456/p++wPyDa+Xj/xKAOjhpoCW +0W7/ofGxiL55w6gvN4SyA== 0000950149-99-001990.txt : 19991117 0000950149-99-001990.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950149-99-001990 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEA INCOME FUND VIII CENTRAL INDEX KEY: 0000821097 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943046886 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17942 FILM NUMBER: 99751616 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 THE PERIOD ENDED SEPTEMBER 30,1999 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, 1999 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 0-17942 ------------------------ IEA INCOME FUND VIII, (A CALIFORNIA LIMITED PARTNERSHIP) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 94-3046886 (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 VIII, (A CALIFORNIA LIMITED PARTNERSHIP) REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 TABLE OF CONTENTS
PAGE ---- PART I -- FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets -- September 30, 1999 (unaudited) and December 31, 1998........................................... 4 Statements of Operations for the three and nine months ended September 30, 1999 and 1998 (unaudited)..................... 5 Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 (unaudited)............................... 6 Notes to 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........................................................ 12 PART II -- OTHER INFORMATION Item 1. Legal Proceedings........................................... 13 Item 3. Defaults Upon Senior Securities............................. 13 Item 5. Other Information........................................... 13 Item 6. Exhibits and Reports on Form 8-K............................ 14
2 3 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Presented herein are the Registrant's balance sheets as of September 30, 1999 and December 31, 1998, statements of operations for the three and nine months ended September 30, 1999 and 1998, and statements of cash flows for the nine months ended September 30, 1999 and 1998. 3 4 IEA INCOME FUND VIII, (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ ASSETS Current assets: Cash and cash equivalents, includes $638,171 at September 30, 1999 and $543,682 at December 31, 1998 in interest-bearing accounts.............................. $ 638,271 $ 543,782 Net lease receivables due from Leasing Company (notes 1 and 2)................................................. 67,997 148,068 Due from general partner (note 3)......................... -- 142,660 ---------- ---------- Total current assets.............................. 706,268 834,510 ---------- ---------- Container rental equipment, at cost......................... 8,377,319 9,794,204 Less accumulated depreciation............................. 5,012,619 5,507,701 ---------- ---------- Net container rental equipment......................... 3,364,700 4,286,503 ---------- ---------- $4,070,968 $5,121,013 ========== ========== PARTNERS' CAPITAL Partners' capital (deficit): General partner........................................... $ (141,279) $ 4,649 Limited partners.......................................... 4,212,247 5,116,364 ---------- ---------- Total partners' capital........................... 4,070,968 5,121,013 ---------- ---------- $4,070,968 $5,121,013 ========== ==========
The accompanying notes are an integral part of these financial statements. 4 5 IEA INCOME FUND VIII, (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED ------------------------------ ------------------------------ SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 ------------- ------------- ------------- ------------- Net lease revenue (notes 1 and 4)...... $167,346 $264,115 $487,196 $827,365 Other operating expenses: Depreciation......................... 126,250 147,040 401,570 458,195 Other general and administrative expenses.......................... 7,791 12,425 26,378 32,046 -------- -------- -------- -------- 134,041 159,465 427,948 490,241 -------- -------- -------- -------- Earnings from operations.......... 33,305 104,650 59,248 337,124 Other income (loss): Interest income...................... 6,860 7,009 20,869 23,585 Net gain (loss) on disposal of equipment......................... (44,966) 17,073 32,376 76,819 -------- -------- -------- -------- (38,106) 24,082 53,245 100,404 -------- -------- -------- -------- Net earnings (loss)............... $ (4,801) $128,732 $112,493 $437,528 ======== ======== ======== ======== Allocation of net earnings (loss): General partner...................... $ 37,025 $ 94,707 $(30,065) $244,348 Limited partners..................... (41,826) 34,025 142,558 193,180 -------- -------- -------- -------- $ (4,801) $128,732 $112,493 $437,528 ======== ======== ======== ======== Limited partners' per unit share of net earnings (loss)...................... $ (1.95) $ 1.59 $ 6.63 $ 8.99 ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. 5 6 IEA INCOME FUND VIII, (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED ------------------------------ SEPTEMBER 30, SEPTEMBER 30, 1999 1998 ------------- ------------- Net cash provided by operating activities................... $ 614,256 $ 759,425 Cash flows provided by investing activities: Proceeds from sale of rental equipment.................... 500,112 412,659 Cash flows from (used in) financing activities: Repayment of excess-distribution to general partner....... 142,660 -- Distribution to partners.................................. (1,162,539) (1,360,118) ----------- ----------- Net cash used in financing activities..................... (1,019,879) (1,360,118) ----------- ----------- Net increase (decrease) in cash and cash equivalents........ 94,489 (188,034) Cash and cash equivalents at January 1...................... 543,782 723,464 ----------- ----------- Cash and cash equivalents at September 30................... $ 638,271 $ 535,430 =========== ===========
The accompanying notes are an integral part of these financial statements. 6 7 IEA INCOME FUND VIII, (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Nature of Operations IEA Income Fund VIII, A California Limited Partnership (the "Partnership") was organized under the laws of the State of California on August 31, 1987 for the purpose of owning and leasing marine cargo containers. Cronos Capital Corp. ("CCC") is the general partner and, with its affiliate Cronos Containers Limited (the "Leasing Company"), manages the business of the Partnership. The Partnership shall continue until December 31, 2008, unless sooner terminated upon the occurrence of certain events. The Partnership commenced operations on January 6, 1988, when the minimum subscription proceeds of $1,000,000 were obtained. The Partnership offered 40,000 units of limited partnership interest at $500 per unit, or $20,000,000. The offering terminated on August 31, 1988, at which time 21,493 limited partnership units had been purchased. As of September 30, 1999, the Partnership owned and operated 1,561 twenty-foot, 1,418 forty-foot and 81 forty-foot high-cube marine dry cargo containers. (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. 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. 7 8 IEA INCOME FUND VIII, (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED) (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. 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 September 30, 1999 and December 31, 1998 were as follows:
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ Lease receivables, net of doubtful accounts of $55,673 at September 30, 1999 and $63,213 at December 31, 1998...... $356,524 $449,861 Less: Direct operating payables and accrued expenses............. 134,825 138,341 Damage protection reserve.................................. 52,045 60,071 Base management fees....................................... 56,047 58,164 Reimbursed administrative expenses......................... 5,310 8,276 Incentive fees............................................. 40,300 36,941 -------- -------- $ 67,997 $148,068 ======== ========
(3) DUE FROM GENERAL PARTNER During 1998, CCC received excess-distributions of $142,660. CCC repaid the excess-distribution amount in March 1999. (4) 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 8 9 IEA INCOME FUND VIII, (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 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, 1999 and 1998 was as follows:
THREE MONTHS ENDED NINE MONTHS ENDED ----------------------------- ----------------------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 ------------- ------------- ------------- ------------- Rental revenue (note 5)...................... $332,309 $490,568 $1,038,962 $1,504,413 Less: Rental equipment operating expenses.......... 85,714 123,615 293,363 350,387 Base management fees......................... 24,134 34,945 80,995 105,027 Reimbursed administrative expenses........... 14,815 30,952 58,188 92,340 Incentive fees............................... 40,300 36,941 119,220 129,294 -------- -------- ---------- ---------- $167,346 $264,115 $ 487,196 $ 827,365 ======== ======== ========== ==========
(5) 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 its revenues from owning and leasing marine cargo containers. As of September 30, 1999, the Partnership operated 1,561 twenty-foot, 1,418 forty-foot and 81 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. Any attempt to separate "foreign" operations from "domestic" operations would be dependent on definitions and assumptions that are so subjective as to render the information meaningless and potentially misleading. 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, 1999 and December 31, 1998. During the first nine months of 1999, the Registrant disposed of 540 containers as part of its ongoing operations. At September 30, 1999, 64% of the original equipment remained in the Registrant's fleet, as compared to 75% at December 31, 1998, and was comprised of the following:
40-FOOT 20-FOOT 40-FOOT HIGH-CUBE ------- ------- --------- Containers on lease: Term leases............................................ 137 213 19 Master leases........................................ 1,030 862 45 ----- ----- -- Subtotal.......................................... 1,167 1,075 64 Containers off lease................................... 394 343 17 ----- ----- -- Total container fleet........................ 1,561 1,418 81 ===== ===== ==
40-FOOT 20-FOOT 40-FOOT HIGH-CUBE ----------- ----------- ----------- UNITS % UNITS % UNITS % ----- --- ----- --- ----- --- Total purchases............................... 2,244 100% 2,396 100% 150 100% Less disposals................................ 683 30% 978 41% 69 46% ----- --- ----- --- --- --- Remaining fleet at September 30, 1999......... 1,561 70% 1,418 59% 81 54% ===== === ===== === === ===
The Registrant's operating performance contributed to a 54% decrease in net lease receivables at September 30, 1999 when compared to December 31, 1998. During the third quarter of 1999, distributions from operations and sales proceeds amounted to $415,032, reflecting distributions to the general and limited partners for the second quarter of 1999. This remained unchanged from the second quarter of 1999, reflecting distributions for the first quarter of 1999. In 1994, pursuant to Section 6.1(b) and (c) of the Partnership Agreement, the allocation of distributions from operations among the general partner and limited partners was adjusted to 10% and 90%, respectively. With the payment of the distribution for the third quarter of 1997, the limited partners received aggregate distributions in an amount equal to their adjusted capital contributions plus a 10% cumulative, annual return on their adjusted capital contributions. Thereafter, all distributions were allocated 20% to the general partner and 80% to the limited partners, pursuant to Sections 6.1(b) and (c) of the Partnership Agreement. Cash distributions from operations to the general partner in excess of 10% of distributable cash will be considered an incentive fee and compensation to the general partner. As discussed in previous quarters, improving prospects in the Asia-Pacific region have been the impetus for a recovery in containerized trade volumes. Strong demand in North America has generated increases in transpacific volumes from Asia, and imports into Asia are also improving as a result of economic recovery in the region. As a result, container lease-outs from both North America and Europe are showing signs of revival. The General Partner previously reported that trade imbalances, which were heightened by the Asian financial crisis, resulted in the necessity to reposition off-hire equipment from low-demand drop-off locations in North America and Europe to higher-demand areas in Asia. Such imbalances continue to be widespread in the container leasing industry. In order to meet the stronger demand in Asia, the General Partner will continue to reposition the Registrant's idle equipment as warranted by market conditions. This repositioning will allow us to better fulfill customer requirements, while at the same time reducing costs associated with handling and storing off-hire or stockpiled equipment. 10 11 (2) Material changes in the results of operations between the three and nine-month periods ended September 30, 1999 and the three and nine-month periods ended September 30, 1998. Net lease revenue for the three and nine-month periods ended September 30, 1999 was $167,346 and $487,196, respectively, a decrease of 37% and 41% from the respective three and nine-month periods in the prior year. Approximately 29% of the Registrant's net earnings for the nine-month period ended September 30, 1999 were from gain on disposal of equipment, as compared to 18% for the same nine-month period in the prior year. As the Registrant's disposals increase in subsequent periods, net gain on disposals should contribute significantly to the Registrant's net earnings and may fluctuate depending on the level of container disposals. Gross rental revenue (a component of net lease revenue) for the three and nine-month periods ended September 30, 1999 was $332,309 and $1,038,962, respectively, reflecting a decline of 32% and 31% from the same respective three and nine-month periods in 1998. During 1999, gross rental revenue was impacted by the Registrant's slightly smaller fleet size and lower per-diem rental rates. Average per-diem rental rates decreased approximately 17% and 10%, respectively, when compared to the same three and nine-month periods in the prior year. The Registrant's average fleet size and utilization rates for the three and nine-month periods ended September 30, 1999 and 1998 were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED ------------------------------ ------------------------------ SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 ------------- ------------- ------------- ------------- Average fleet size (measured in twenty-foot equivalent units (TEU))............................... 4,743 5,582 5,025 5,750 Average Utilization.................... 76% 77% 73% 78%
The Registrant's aging and diminishing fleet contributed to a decrease of 14% and 12%, respectively, in depreciation expense when compared to the same three and nine-month periods in the prior year. Rental equipment operating expenses were 26% and 28%, respectively, of the Registrant's gross lease revenue during the three and nine-month periods ended September 30, 1999, as compared to 25% and 23%, respectively, of the Registrant's gross lease revenue during the three and nine-month periods ended September 30, 1998. 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. The Leasing Company's computer systems have undergone modifications in order to render the systems ready for the Year 2000. The Leasing Company has completed a detailed inventory of all software and hardware systems and has identified all components that need to be modified. The Leasing Company has completed all the necessary changes and testing in a dedicated Year 2000 environment. All compliant code was made live in August 1999. The Leasing Company has contacted all of its critical business suppliers and has been advised that their systems are Year 2000 compliant. The Leasing Company has also confirmed the compliance of its suppliers' products through its own extensive testing. Expenses associated with addressing Year 2000 issues are being recognized as incurred. Management has not yet assessed the Year 2000 compliance expense but does not anticipate the costs incurred to date or to be incurred in the future by the Leasing Company and its affiliates to be in excess of $500,000. None of the costs incurred with respect to Year 2000 compliance will be borne by the Registrant. The Leasing Company believes it will be able to resolve any major Year 2000 issues. The Leasing Company is aware of the implications of a Year 2000 computer system failure and is currently in the process of developing its contingency plans. While management believes the possibility of a Year 2000 system failure to be remote, if the Leasing Company's internal systems or those of its critical business suppliers fail, the Leasing Company's consolidated financial position, liquidity or results of operations may be adversely affected. 11 12 CAUTIONARY STATEMENT This Quarterly Report on Form 10-Q contains statements relating to future results of the Registrant including certain projections and business trends, that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, including, without limitation, (a) the statements in Management's Discussion and Analysis of Financial Condition and Results of Operations concerning (i) preliminary indications that trade volumes from North America and Europe to Asia may be increasing (ii) the Leasing Company's expectation that its repositioning strategy will place container equipment in higher demand locations and that it will improve utilization; (b) the statements under Year 2000 concerning (i) the Leasing Company's belief that it will be able to resolve any major year 2000 issues (ii) the Leasing Company's belief that the possibility of a year 2000 failure is remote; and (c) the statements under Legal Proceedings concerning the Parent Company's hope of settling the SEC investigation by the end of 1999. Forward-looking statements are based upon management's current expectations and beliefs concerning future developments and their potential effects upon the Registrant. There can be no assurance that future developments will be in accordance with management's expectations or that the effect of future developments on the Registrant will be those anticipated by management. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including, but not limited to, changes in: economic conditions; trade policies; demand for and market acceptance of leased marine cargo containers; competitive utilization and per-diem rental rate pressures as well as other risks and uncertainties, including, but not limited to, those described under Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations in the discussion of the marine container leasing business; Item 3, Quantitative and Qualitative Disclosures about Market Risk and under Part II -- Item 1, Legal Proceedings and Item 5, Other Information and those risks and uncertainties detailed from time to time in the filings of the Registrant with the Securities and Exchange Commission. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 12 13 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As the Registrant has previously reported, in February 1997, its former outside auditors, Arthur Andersen LLP ("Arthur Andersen"), resigned as auditors to The Cronos Group (the "Parent Company"), its subsidiaries, and all other entities affiliated with the Parent Company, including the Registrant. The Parent Company is the indirect corporate parent of CCC, the managing general partner of the Registrant. CCC does not believe, based upon the information currently available to it, that Arthur Andersen's resignation was triggered by any concern over the accounting policies and procedures followed by the Registrant. Arthur Andersen's reports on the financial statements of CCC and the Registrant, for years preceding 1996, had not contained an adverse opinion or a disclaimer of opinion, nor were any such reports qualified or modified as to uncertainty, audit scope, or accounting principles. During the Registrant's fiscal year ended December 31, 1995, and the subsequent interim period preceding Arthur Andersen's resignation, there were no disagreements between CCC or the Registrant and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. In connection with its resignation, Arthur Andersen prepared a report pursuant to Section 10A of the Securities Exchange Act of 1934, as amended, for filing by the Parent Company with the Securities and Exchange Commission ("SEC"). As a result of the Arthur Andersen report, the SEC commenced an investigation of the Parent Company on February 10, 1997. The purpose of the investigation has been to determine whether the Parent Company and persons associated with the Parent Company violated the federal securities laws administered by the SEC. The Registrant does not believe that the focus of the SEC's investigation is upon the Registrant or CCC. Current management of the Parent Company has been in discussions with the staff of the SEC with a view to settling the investigation. The Parent Company is hopeful of reaching a settlement of the investigation by the end of 1999. ITEM 3. DEFAULTS UPON SENIOR SECURITIES See Item 5. Other Information. ITEM 5. OTHER INFORMATION In 1993, the Parent Company negotiated a credit facility with several banks for the use by the Parent Company and its subsidiaries, including CCC. At December 31, 1998, approximately $33,110,000 in principal indebtedness was outstanding under that credit facility (none of which had been borrowed by the Registrant). As a party to that credit facility, CCC was jointly and severally liable for the repayment of all principal and interest owed under the credit facility. On August 2, 1999, all outstanding amounts under the credit facility were repaid through the establishment of a new credit facility with two financial institutions. CCC is not a party to the new loan agreement. The Parent Company has guaranteed up to $10 million of amounts borrowed under the new credit facility and, as partial security for this guarantee, the Parent Company has pledged all of the capital stock held by it in Cronos Holding/Investments (U.S.), Inc., a Delaware corporation that, in turn, owns all of the outstanding capital stock of CCC. The Registrant is not a borrower under the new credit facility established by the Parent Company, and neither the containers nor the other assets of the Registrant have been pledged as collateral under the new credit facility. 13 14 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 13, 1987 3(b) Certificate of Limited Partnership of the Registrant ** 27 Financial Data Schedule Filed with this document
(b) Reports on Form 8-K On August 20, 1999 and August 23, 1999, the Registrant filed a Report on Form 8-K and a Report on Form 8-K/A, respectively, reporting the change in the Registrant's independent auditors. - --------------- * Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant dated October 13, 1987, included as part of Registration Statement on Form S-1 (No. 33-16984) ** Incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 (No. 33-16984) 14 15 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 VIII (A California Limited Partnership) By Cronos Capital Corp. The General Partner By /s/ DENNIS J. TIETZ ------------------------------------ Dennis J. Tietz President and Director of Cronos Capital Corp. ("CCC") Principal Executive Officer of CCC By /s/ PETER J. YOUNGER ------------------------------------ Peter J. Younger Chief Financial Officer and Treasurer of Cronos Capital Corp. ("CCC") Date: November 12, 1999 15 16 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION METHOD OF FILING - ------- ----------- ------------------------ 3(a) Limited Partnership Agreement of the Registrant, amended * and restated as of October 13, 1987 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 13, 1987, included as part of Registration Statement on Form S-1 (No. 33-16984) ** Incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 (No. 33-16984) 16 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT SEPTEMBER 30, 1999 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 (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, 1999. 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 638,271 0 67,997 0 0 706,268 8,377,319 5,012,619 4,070,968 0 0 0 0 0 4,070,968 4,070,968 0 487,196 0 427,948 0 0 0 0 0 0 0 0 0 112,493 0 0
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