-----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, Ud0VnCDhstBeQsqilsBoc5Ks+3WDyqVZA3tuzpGnHfNOXuw61dWSDXB6LEkuWPaQ huRohDtrjMZlDTnhJexsPg== 0000950149-97-001248.txt : 19970617 0000950149-97-001248.hdr.sgml : 19970617 ACCESSION NUMBER: 0000950149-97-001248 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970616 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEA INCOME FUND XII LP CENTRAL INDEX KEY: 0000879045 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943143940 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21518 FILM NUMBER: 97624502 BUSINESS ADDRESS: STREET 1: 444 MARKET ST 15TH FL CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4156778990 10-Q 1 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, 1997 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 0-21518 IEA INCOME FUND XII, L.P. (Exact name of registrant as specified in its charter) CALIFORNIA 94-3143940 (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 XII, L.P. REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 TABLE OF CONTENTS
PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - March 31, 1997 (unaudited) and December 31, 1996 4 Statements of Operations for the three months ended March 31, 1997 and 1996 (unaudited) 5 Statements of Cash Flows for the three months ended March 31, 1997 and 1996 (unaudited) 6 Notes to Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of 10 Operations PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13
2 3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Presented herein are the Registrant's balance Sheets as of March 31, 1997 and December 31, 1996, statements of operations for the three months ended March 31, 1997 and 1996, and statements of cash flows for the three months ended March 31, 1997 and 1996. 3 4 IEA INCOME FUND XII, L.P. BALANCE SHEETS (UNAUDITED)
March 31, December 31, 1997 1996 ---- ---- Assets ------ Current assets: Cash and cash equivalents, includes $1,721,474 at March 31, 1997 and $2,262,357 at December 31, 1996 in interest-bearing accounts $ 1,750,995 $ 2,262,639 Net lease receivables due from Leasing Company (notes 1 and 2) 1,097,401 1,217,996 ------------ ------------ Total current assets 2,848,396 3,480,635 ------------ ------------ Container rental equipment, at cost 63,500,454 63,140,873 Less accumulated depreciation 16,876,941 15,961,254 ------------ ------------ Net container rental equipment 46,623,513 47,179,619 ------------ ------------ Organizational costs, net 85,327 145,611 ------------ ------------ $ 49,557,236 $ 50,805,865 ============ ============ Liabilities and Partners' Capital --------------------------------- Current liabilities Accrued expenses $ 462,948 $ 462,948 Due to general partner (notes 1 and 3) 163,382 238,382 ------------ ------------ Total current liabilities 626,330 701,330 ------------ ------------ Partners' capital (deficit): General partner (27,930) (25,428) Limited partners 48,958,836 50,129,963 ------------ ------------ Total partners' capital 48,930,906 50,104,535 ------------ ------------ $ 49,557,236 $ 50,805,865 =========== ==========
The accompanying notes are an integral part of these financial statements. 4 5 IEA INCOME FUND XII, L.P. STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended --------------------------- March 31, March 31, 1997 1996 ----------- ----------- Net lease revenue (notes 1 and 4) $ 1,396,464 $1,862,918 Other operating expenses: Depreciation 986,575 984,261 Other general and administrative expenses 17,259 23,397 ----------- ---------- 1,003,834 1,007,658 ----------- ---------- Earnings from operations 392,630 855,260 Other income: Interest income 27,105 32,449 Net gain on disposal of equipment 9,328 23,110 ----------- ---------- 36,433 55,559 ----------- ---------- Net earnings $ 429,063 $ 910,819 =========== ========== Allocation of net earnings: General partner $ 77,633 $ 105,957 Limited partners 351,430 804,862 ----------- ---------- $ 429,063 $ 910,819 =========== ========== Limited partners' per unit share of net earnings $ .10 $ .23 =========== ==========
The accompanying notes are an integral part of these financial statements. 5 6 IEA INCOME FUND XII, L.P. STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended ---------------------------- March 31, March 31, 1997 1996 ------------------------------ Net cash provided by operating activities $ 1,508,214 $ 1,804,482 Cash flows provided by (used in) investing activities: Proceeds from sale of container rental equipment 50,651 155,314 Purchase of container rental equipment (374,111) (221,850) Acquisition fees paid to general partner (93,706) (231,093) ----------- ----------- Net cash used in investing activities (417,166) (297,629) ----------- ----------- Cash flows used in financing activities: Distribution to partners (1,602,692) (1,849,260) ----------- ----------- Net decrease in cash and cash equivalents (511,644) (342,407) Cash and cash equivalents at January 1 2,262,639 2,827,502 ----------- ----------- Cash and cash equivalents at March 31 $ 1,750,995 $ 2,485,095 =========== ===========
The accompanying notes are an integral part of these financial statements. 6 7 IEA INCOME FUND XII, L.P. NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies (a) Nature of Operations IEA Income Fund XII, L.P. (the "Partnership") is a limited partnership organized under the laws of the State of California on August 28, 1991 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 and controls the business of the Partnership. The Partnership shall continue until December 31, 2011, unless sooner terminated upon the occurrence of certain events. The Partnership commenced operations on January 31, 1992, when the minimum subscription proceeds of $2,000,000 were obtained. As of March 31, 1997, the Partnership operated 9,359 twenty-foot, 5,319 forty-foot and 209 forty-foot high-cube marine dry cargo containers, as well as 199 twenty-foot and 306 forty-foot marine refrigerated cargo containers. The Partnership offered 3,750,000 units of limited partnership interest at $20 per unit, or $75,000,000. The offering terminated on November 30, 1992, at which time 3,513,594 limited partnership units had been purchased. (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 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. (Continued) 7 8 IEA INCOME FUND XII, 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 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, and reimbursed administrative expenses 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, 1997 and December 31, 1996 were as follows:
March 31, December 31, 1997 1996 ---- ---- Lease receivables, net of doubtful accounts of $308,148 at March 31, 1997 and $318,136 at December 31, 1996 $2,335,123 $2,377,329 Less: Direct operating payables and accrued expenses 746,126 634,032 Damage protection reserve 169,256 196,373 Base management fees 282,488 282,898 Reimbursed administrative expenses 39,852 46,030 ---------- ---------- $1,097,401 $1,217,996 ========= =========
(Continued) 8 9 IEA INCOME FUND XII, 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 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, 1997 and 1996 was as follows:
Three Months Ended ------------------ March 31, March 31, 1997 1996 ----------- ----------- Rental revenue $2,336,805 $2,816,426 Less: Rental equipment operating expenses 659,668 606,934 Base management fees 161,762 192,140 Reimbursed administrative expenses 118,911 154,434 ---------- ---------- $1,396,464 $1,862,918 ========== ==========
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, 1997 and December 31, 1996. At March 31, 1997, the Registrant had $1,750,995 in cash and cash equivalents, a decrease of $511,644 from the December 31, 1996 cash balances. During the first quarter of 1997, the Registrant expended $374,111 of cash generated from sales proceeds to pay for containers purchased from the general partner during the first quarter of 1997. At March 31, 1997, the Registrant had approximately $25,000 in cash generated from equipment sales reserved as part of its cash balances. Throughout the remainder of 1997, the Registrant expects to continue using cash generated from equipment sales to purchase and replace containers which have been lost or damaged beyond repair. Net lease receivables at March 31, 1997 declined 10% when compared to December 31, 1996. Contributing to this change was an increase in direct operating payables and accrued expenses, a component of net lease receivables. Direct operating payables and accrued expenses increased 17% from December 31, 1996 due to the increase in costs associated with lower utilization levels, including handling, storage and repositioning. The Registrant's cash distribution from operations for the first quarter of 1997 was 8.5% (annualized) of the limited partners' original capital contribution, a decline from 9.0% (annualized) for the fourth quarter of 1996. These distributions are directly related to the Registrant's results from operations and may fluctuate accordingly. During 1996, ocean carriers and other transport companies moved away from leasing containers outright, as declining container prices, favorable interest rates and the abundance of available capital resulted in ocean carriers and transport companies purchasing a larger share of equipment for their own account, reducing the demand for leased containers. Once the demand for leased containers began to fall, per-diem rental rates were also adversely affected. These conditions continued to exist throughout the first quarter of 1997, contributing to a decline in the Registrant's average dry cargo container utilization rate of 77% at December 31, 1996 to 76% at March 31, 1997. The Registrant's refrigerated container utilization rate was 86% at March 31, 1997, unchanged from December 31, 1996. The Leasing Company continues to implement various marketing strategies, including but not limited to, offering incentives to shipping companies, repositioning containers to high demand locations and focusing towards term leases and other leasing opportunities including the leasing of containers for local storage, in order to counter current leasing market conditions. These conditions are expected to continue throughout 1997, impacting the Registrant's liquidity and capital resources. 2) Material changes in the results of operations between the three-month period ended March 31, 1997 and the three-month period ended March 31, 1996. Net lease revenue for the first quarter of 1997 was $1,396,464, a decline of approximately 25% from the first quarter of 1996. Gross rental revenue (a component of net lease revenue) for the quarter ended March 31, 1997 was $2,336,805, reflecting a decline of 17% from the same three-month period in 1996. Gross rental revenue was primarily impacted by the sluggish market conditions that existed during 1996 and throughout the first quarter of 1997. These conditions contributed to lower average dry cargo and refrigerated utilization rates. Average dry cargo and refrigerated container per-diem rental rates for the three-month period ended March 31, 1997 declined 9% and 6%, respectively, when compared to the same period in the prior year. 10 11 The Registrant's average fleet size and utilization rates for the three-month periods ended March 31, 1997 and 1996 were as follows:
Three Months Ended --------------------------- March 31, March 31, 1997 1996 ----------------------------- Average Fleet Size (measured in twenty-foot equivalent units (TEU)) Dry cargo containers 20,299 20,317 Refrigerated containers 811 813 Average Utilization Dry cargo containers 76% 83% Refrigerated containers 85% 91%
Rental equipment operating expenses were 28% of the Registrant's gross lease revenue during the three-month period ended March 31, 1997, as compared to 22% during the three-month period ended March 31, 1996. This increase was largely attributable to an increase in costs associated with lower utilization levels, including handling, storage and repositioning. The Registrant disposed of four twenty-foot and five forty-foot dry cargo containers during the first quarter of 1997, as compared to 24 twenty-foot, 15 forty-foot and two high-cube dry cargo containers during the same period in the prior year. As reported in the Registrant's Current Report on Form 8-K and Amendment No. 1 to Current Report on Form 8-K, filed with the Commission on February 7, 1997 and February 26, 1997, respectively, Arthur Andersen, London, England, resigned as auditors of The Cronos Group, a Luxembourg Corporation headquartered in Orchard Lea, England (the "Parent Company"), on February 3, 1997. The Parent Company is the indirect corporate parent of Cronos Capital Corp., the General Partner of the Registrant. In its letter of resignation to the Parent Company, Arthur Andersen states that it resigned as auditors of the Parent Company and all other entities affiliated with the Parent Company. While its letter of resignation was not addressed to the General Partner or the Registrant, Arthur Andersen confirmed to the General Partner that its resignation as auditors of the entities referred to in its letter of resignation included its resignation as auditors of Cronos Capital Corp. and the Registrant. The Registrant does not, at this time, have sufficient information to determine the impact, if any, that the concerns expressed by Arthur Andersen in its letter of resignation may have on the future operating results and financial condition of the Registrant or the Leasing Company's ability to manage the Registrant's fleet in subsequent periods. However, the General Partner of the Registrant 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 report on the financial statements of Cronos Capital Corp. and the Registrant, for either of the past two years, has not contained an adverse opinion or a disclaimer of opinion, nor was any such report qualified or modified as to uncertainty, audit scope, or accounting principles. During the Registrant's two most recent fiscal years and the subsequent interim period preceding Arthur Andersen's resignation, there have been no disagreements between Cronos Capital Corp. or the Registrant and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. Due to the nature and timing of Arthur Andersen's resignation, the Parent Company and General Partner were unable to name a successor auditor on behalf of the Registrant until it retained Moore Stephens, P.C. ("Moore Stephens") on April 10, 1997, as reported in the Registrant's Current Report on Form 8-K, filed April 14, 1997. 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. 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 in the above discussion of the marine container leasing business under Item 2., Management's Discussion and Analysis of Financial Condition and Results of Operations; and those detailed from time to time in the filings of Registrant with the Securities and Exchange Commission. 12 13 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 2, 1991 3(b) Certificate of Limited Partnership of the Registrant ** 10 Form of Leasing Agent Agreement with Cronos Containers Limited *** 27 Financial Data Schedule Filed with this document
(b) Reports on Form 8-K The Registrant filed a Report on Form 8-K, dated February 7, 1997 and Amendment No. 1 to Report on Form 8-K dated February 26, 1997, reporting the resignation of the Registrant's certifying accountant. The Registrant filed a Report on Form 8-K, April 14, 1997, reporting the appointment of the Registrant's successor certifying accountant. - -------------- * Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant dated December 2, 1991, included as part of Registration Statement on Form S-1 (No. 33-42697) ** Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (No. 33-42697) *** Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (No. 33-42697) 12 14 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 XII, L.P. By Cronos Capital Corp. The General Partner By /s/ JOHN KALLAS -------------------------------------- John Kallas Vice President, Treasurer Principal Finance & Accounting Officer Date: June 16, 1997 13 15 EXHIBIT INDEX
Exhibit No. Description Method of Filing - ------- ----------- ---------------- 3(a) Limited Partnership Agreement of the Registrant, amended and * restated as of December 2, 1991 3(b) Certificate of Limited Partnership of the Registrant ** 10 Form of Leasing Agent Agreement with Cronos Containers Limited *** 27 Financial Data Schedule Filed with this document
- ------------- * Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant dated December 2, 1991, included as part of Registration Statement on Form S-1 (No. 33-42697) ** Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (No. 33-42697) *** Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (No. 33-42697) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT MARCH 31, 1997 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 (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, 1997 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1,750,995 0 1,097,401 0 0 2,848,396 63,500,454 16,876,941 49,557,236 626,330 0 0 0 0 48,930,906 49,557,236 0 1,396,464 0 1,003,834 0 0 0 0 0 0 0 0 0 429,063 0 0
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