-----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, FwB7390+qRb6+l9bSVBXOmkFUbD2dM0cGXyom4n4H7TfwuQeyuLKMHtY5oXLSkEr W/MzpewmOIpvtEtsTeoQPw== 0000950149-01-500728.txt : 20010516 0000950149-01-500728.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950149-01-500728 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEA INCOME FUND XI LP CENTRAL INDEX KEY: 0000867640 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943122430 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19770 FILM NUMBER: 1636009 BUSINESS ADDRESS: STREET 1: 444 MARKET ST 15TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4156778990 10-Q 1 f72493de10-q.txt IEA INCOME FUND XI, L.P. FORM 10-Q 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, 2001 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 0-19770 IEA INCOME FUND XI, L.P. (Exact name of registrant as specified in its charter) California 94-3122430 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Front 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 XI, L.P. REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001 TABLE OF CONTENTS
PAGE ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - March 31, 2001 (unaudited) and December 31, 2000 4 Statements of Operations for the three months ended March 31, 2001 and 2000 (unaudited) 5 Statements of Cash Flows for the three months ended March 31, 2001 and 2000 (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 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 balance sheets as of March 31, 2001 and December 31, 2000, statements of operations for the three months ended March 31, 2001 and 2000, and statements of cash flows for the three months ended March 31, 2001 and 2000. 3 4 IEA INCOME FUND XI, L.P. BALANCE SHEETS
March 31, December 31, 2001 2000 ------------ ------------ (Unaudited) Assets Current assets: Cash and cash equivalents, includes $1,319,737 at March 31, 2001 and $1,547,214 at December 31, 2000 in interest-bearing accounts $ 1,397,225 $ 1,630,791 Net lease receivables due from Leasing Company (notes 1 and 2) 398,323 449,073 ------------ ------------ Total current assets 1,795,548 2,079,864 ------------ ------------ Container rental equipment, at cost 26,916,905 28,418,646 Less accumulated depreciation 14,853,619 15,286,554 ------------ ------------ Net container rental equipment 12,063,286 13,132,092 ------------ ------------ Total assets $ 13,858,834 $ 15,211,956 ============ ============ Partners' Capital Partners' capital (deficit): General partner (131,581) (118,052) Limited partners 13,990,415 15,330,008 ------------ ------------ Total partners' capital $ 13,858,834 $ 15,211,956 ============ ============
The accompanying notes are an integral part of these financial statements. 4 5 IEA INCOME FUND XI, L.P. STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended ------------------------------- March 31, March 31, 2001 2000 --------- --------- Net lease revenue (notes 1 and 3) $ 467,669 $ 555,242 Other operating expenses: Depreciation 400,045 480,747 Other general and administrative expenses 29,611 21,740 --------- --------- 429,656 502,487 --------- --------- Income from operations 38,013 52,755 Other income (loss): Interest income 18,602 17,826 Net loss on disposal of equipment (260,635) (60,057) --------- --------- (242,033) (42,231) --------- --------- Net income (loss) $(204,020) $ 10,524 ========= ========= Allocation of net income (loss): General partner $ 19,010 $ 22,911 Limited partners (223,030) (12,387) --------- --------- $(204,020) $ 10,524 ========= ========= Limited partners' per unit share of net income (loss) $ (0.11) $ (0.01) ========= =========
The accompanying notes are an integral part of these financial statements. 5 6 IEA INCOME FUND XI, L.P. STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended ----------------------------------- March 31, March 31, 2001 2000 ----------- ----------- Net cash provided by operating activities $ 492,782 $ 747,502 Cash flows provided by investing activities: Proceeds from disposal of equipment 422,754 115,636 Cash flows used in financing activities: Distribution to partners (1,149,102) (831,042) ----------- ----------- Net (decrease) increase in cash and cash equivalents (233,566) 32,096 Cash and cash equivalents at January 1 1,630,791 1,310,050 ----------- ----------- Cash and cash equivalents at March 31 $ 1,397,225 $ 1,342,146 =========== ===========
The accompanying notes are an integral part of these financial statements. 6 7 IEA INCOME FUND XI, L.P. NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies (a) Nature of Operations IEA Income Fund XI, L.P. (the "Partnership") is a limited partnership organized under the laws of the State of California on July 30, 1990 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. Cronos Capital Corp. ("CCC") is the general partner and, 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 general partner. The Partnership shall continue until December 31, 2010, unless sooner terminated upon the occurrence of certain events. The Partnership commenced operations on January 31, 1991, when the minimum subscription proceeds of $1,000,000 were obtained. The Partnership offered 2,000,000 units of limited partnership interest at $20 per unit, or $40,000,000. The offering terminated on November 30, 1991, at which time 1,999,812 limited partnership units had been sold. (b) Leasing Company and Leasing Agent Agreement The Partnership 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 and the Leasing Company. 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, and 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. (Continued) 7 8 IEA INCOME FUND XI, L.P. NOTES TO UNAUDITED 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) 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 financial statements are prepared in conformity with accounting principles generally accepted in the United States (GAAP), which 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. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year. (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, and reimbursed administrative expenses payable to CCC and its affiliates from the rental billings earned by the Leasing Company under operating leases to ocean carriers for the containers owned by the Partnership. Net lease receivables at March 31, 2001 and December 31, 2000 were as follows:
March 31, December 31, 2001 2000 -------- ------------ Gross lease receivables $967,219 $1,088,249 Less: Direct operating payables and accrued expenses 284,612 309,601 Damage protection reserve 54,257 79,711 Base management fees payable 76,754 91,232 Reimbursed administrative expenses 29,904 38,618 Allowance for doubtful accounts 123,369 120,014 -------- ---------- Net lease receivables $398,323 $ 449,073 ======== ==========
(Continued) 8 9 IEA INCOME FUND XI, L.P. NOTES TO UNAUDITED FINANCIAL STATEMENTS (3) Net Lease Revenue Net lease revenue is determined by deducting direct operating expenses, base management fees and reimbursed administrative expenses to CCC and its affiliates from the rental revenue earned by the Leasing Company under operating leases to ocean carriers for the containers owned by the Partnership. Net lease revenue for each of the three-month periods ended March 31, 2001 and 2000 was as follows:
Three Months Ended ---------------------------- March 31, March 31, 2001 2000 -------- -------- Rental revenue $727,031 $975,042 Less: Rental equipment operating expenses 171,469 289,395 Base management fees 50,649 62,643 Reimbursed administrative expenses 37,244 67,762 -------- -------- $467,669 $555,242 ======== ========
(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 its revenues from leasing marine cargo containers. As of March 31, 2001, the Partnership operated 4,359 twenty-foot, 2,434 forty-foot and 155 forty-foot high-cube marine dry cargo containers, as well as 102 twenty-foot and 47 forty-foot marine refrigerated cargo containers. A summary of gross lease revenue, by product, for each of the three-month periods ended March 31, 2001 and 2000 follows:
Three Months Ended ---------------------------- March 31, March 31, 2001 2000 -------- -------- Dry cargo containers $661,058 $896,211 Refrigerated containers 65,973 78,831 -------- -------- Total $727,031 $975,042 ======== ========
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, 2001 and December 31, 2000. At March 31, 2001, the Registrant had $1,397,225 in cash and cash equivalents, a decrease of $233,566 from the cash balances at December 31, 2000. Contributing to this decline was the Registrants' results from operations, impacted by a declining fleet size and conditions created by the slowdown in the global economy. During the first three months of 2001, the Registrant disposed of 467 containers as part of its ongoing container operations. At March 31, 2001, 70% of the original equipment remained in the Registrant's fleet, as compared to 75% at December 31, 2000, and was comprised of the following:
Dry Cargo Refrigerated Containers Containers --------------------------------- ----------------- 40-Foot 20-Foot 40-Foot High-Cube 20-Foot 40-Foot ------- ------- --------- ------- ------- Containers on lease: Master lease 2,857 1,240 78 61 11 Term lease (1-5 years) 600 502 49 9 -- ----- ----- --- --- -- Subtotal 3,457 1,742 127 70 11 Containers off lease 902 692 28 32 36 ----- ----- --- --- -- Total container fleet 4,359 2,434 155 102 47 ===== ===== === === ==
Dry Cargo Refrigerated Containers Containers ----------------------------------------------------------- --------------------------------- 40-Foot 20-Foot 40-Foot High-Cube 20-Foot 40-Foot ----------------- --------------- --------------- -------------- -------------- Units % Units % Units % Units % Units % ----- --- ----- --- ----- --- ----- --- ----- --- Total purchases 6,411 100% 3,342 100% 200 100% 103 100% 50 100% Less disposals 2,052 32% 908 27% 45 23% 1 1% 3 6% ----- --- ----- --- --- --- --- --- -- --- 4,359 68% 2,434 73% 155 77% 102 99% 47 94% ===== === ===== === === === === === == ===
The Registrant's operating performance contributed to a 11% decrease in net lease receivables at March 31, 2001 when compared to December 31, 2000. The decrease is primarily due to an 11% decrease in gross lease receivables. During the first quarter of 2001, distributions from operations and sales proceeds amounted to $1,116,561. This represents an increase from the $1,033,236 distributed during the fourth quarter of 2000. The increase in distributions was a result of favorable cash collections of outstanding receivables and an increase in container sales proceeds generated during the fourth quarter of 2000. The Registrant's continuing disposal of containers should produce lower operating results and, consequently, lower distributions to its partners in subsequent periods. Sales proceeds distributed to its partners may fluctuate in subsequent periods, reflecting the level of container disposals. (Continued) 10 11 2) Material changes in the results of operations between the three-month period ended March 31, 2001 and the three-month period ended March 31, 2000. In the first quarter of 2001, the worldwide demand for containers was significantly impacted by the slowdown in the global economy. These conditions are reflected in the decline of the Registrant's utilization and per-diem rates from December 31, 2000 levels. The Leasing Company has implemented a number of marketing initiatives which are designed to target identified leasing opportunities and enhance inventory management. Net lease revenue for the three-month period ended March 31, 2001 was $467,669, a decrease of approximately 16% from the same period in the prior year. Gross rental revenue (a component of net lease revenue) for the three-month period ended March 31, 2001 was $727,031, reflecting a decline of 25% from the same period in the prior year. Gross rental revenue was impacted by the Registrant's smaller fleet size and lower per-diem rental rates. Average dry cargo container per-diem rental rates for the three-month period ended March 31, 2001 declined 5% when compared to the same period in the prior year. Average refrigerated container per-diem rental rates for the three-month period ended March 31, 2001 declined 3% when compared to the same period in the prior year. The Registrant's average fleet size and utilization rates for the three-month periods ended March 31, 2001 and March 31, 2000 were as follows:
Three Months Ended --------------------------- March 31, March 31, 2001 2000 --------- --------- Average fleet size (measured in twenty-foot equivalent units (TEU)) Dry cargo containers 9,841 11,932 Refrigerated containers 197 197 Average utilization Dry cargo containers 78% 77% Refrigerated containers 55% 58%
Depreciation expense declined 17% when compared to the same three-month period in the prior year. Rental equipment operating expenses were 24% of the Registrant's gross lease revenue during the three-month period ended March 31, 2001 compared to 30% during the three-month period ended March 31, 2000. The decrease is primarily due to the $60,963 reduction in the provision for doubtful accounts, as well as a $18,539 reduction in storage costs. The Registrant's operating results contributed to a decline in base management fees when compared to the same period in the prior year. The Registrant disposed of 356 twenty-foot, 105 forty-foot and five forty-foot high-cube marine dry cargo containers, as well as one twenty-foot refrigerated cargo container during the first quarter of 2001, as compared to 130 twenty-foot, 64 forty-foot and two forty-foot high-cube marine dry cargo containers during the same period in the prior year. These disposals resulted in a loss of $260,635 for the first quarter of 2001, as compared to a loss of $60,057 for the same period in the prior year. The Registrant believes that the net losses on container disposals in the first quarters of 2001 and 2000 were a result of various factors including the age, condition, suitability for continued leasing, as well as the geographical location of the containers when disposed. These factors will continue to influence the decision to repair or dispose of a container when it is returned by a lessee, as well as the amount of sales proceeds received and the related gain or loss on container disposals. The level of the Registrant's container disposals in subsequent periods will also contribute to fluctuations in the net gain or loss on disposals. As a result of current market conditions, the Registrant will monitor the carrying value of its containers to determine if they have been permanently impaired. 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 December 14, 1990 3(b) Certificate of Limited Partnership of the ** Registrant 10(a) Form of Leasing Agent Agreement with LPI Leasing *** Partners International N.V. 10(b) Assignment of Leasing Agent Agreement dated **** January 1, 1992 between the Registrant, CCC (formerly Intermodal Equipment Associates), Cronos Containers N.V. (formerly LPI Leasing Partners International N.V.) and Cronos Containers Limited
(b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter ended March 31, 2001. - ---------- * Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant dated December 14, 1990, included as part of Registration Statement on Form S-1 (No. 33-36701) ** Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (No. 33-36701) *** Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (No. 33-36701) **** Incorporated by reference to Exhibit 10(b) to the Report on Form 10-K for the fiscal year ended December 31, 1999. 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 XI, L.P. 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/ John Kallas ------------------------------------- John Kallas Chief Financial Officer and Director of Cronos Capital Corp. ("CCC") Principal Financial and Accounting Officer of CCC Date: May 15, 2001 13 14 EXHIBIT INDEX
Exhibit No. Description Method of Filing ------- ----------- ---------------- 3(a) Limited Partnership Agreement of the Registrant, * amended and restated as of December 14, 1990 3(b) Certificate of Limited Partnership of the ** Registrant 10(a) Form of Leasing Agent Agreement with LPI Leasing *** Partners International N.V. 10(b) Assignment of Leasing Agent Agreement dated **** January 1, 1992 between the Registrant, CCC (formerly Intermodal Equipment Associates), Cronos Containers N.V. (formerly LPI Leasing Partners International N.V.) and Cronos Containers Limited
- ---------- * Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant dated December 14, 1990, included as part of Registration Statement on Form S-1 (No. 33-36701) ** Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (No. 33-36701) *** Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (No. 33-36701) **** Incorporated by reference to Exhibit 10(b) to the Report on Form 10-K for the fiscal year ended December 31, 1999. -----END PRIVACY-ENHANCED MESSAGE-----