-----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, P4ggLOnYV00DBlxVg/FvaFTequ2U/fxlOHAZUZB+uvtysYW8Bg9XV1BI4ixDtElv LLn9ldBGNvG0+olJnfACww== 0000950149-99-001993.txt : 19991117 0000950149-99-001993.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950149-99-001993 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 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: SEC FILE NUMBER: 000-21518 FILM NUMBER: 99751634 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 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 0-21518 ------------------------ 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 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 XII, L.P. BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ ASSETS Current assets: Cash and cash equivalents, includes $1,868,389 at September 30, 1999 and $2,407,514 at December 31, 1998 in interest-bearing accounts.............................. $ 1,868,489 $ 2,407,614 Net lease receivables due from Leasing Company (notes 1 and 2)................................................. 183,124 656,520 ----------- ----------- Total current assets.............................. 2,051,613 3,064,134 ----------- ----------- Container rental equipment, at cost......................... 62,003,870 62,646,590 Less accumulated depreciation............................. 25,401,439 23,010,870 ----------- ----------- Net container rental equipment......................... 36,602,431 39,635,720 ----------- ----------- $38,654,044 $42,699,854 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accrued expenses.......................................... $ 416,624 $ 462,948 ----------- ----------- Total current liabilities......................... 416,624 462,948 ----------- ----------- Partners' capital (deficit): General partner........................................... (104,892) (64,897) Limited partners.......................................... 38,342,312 42,301,803 ----------- ----------- Total partners' capital........................... 38,237,420 42,236,906 ----------- ----------- $38,654,044 $42,699,854 =========== ===========
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 NINE MONTHS ENDED ----------------------------- ----------------------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 ------------- ------------- ------------- ------------- Net lease revenue (notes 1 and 3)............ $ 882,030 $1,252,615 $2,782,635 $4,033,477 Other operating expenses: Depreciation............................... 911,896 916,386 2,743,388 2,758,518 Other general and administrative expenses................................ 27,205 30,805 84,935 82,293 --------- ---------- ---------- ---------- 939,101 947,191 2,828,323 2,840,811 --------- ---------- ---------- ---------- Earnings (loss) from operations......... (57,071) 305,424 (45,688) 1,192,666 Other income (loss): Interest income............................ 22,389 30,802 69,963 88,496 Net loss on disposal of equipment.......... (74,144) (17,816) (152,768) (21,058) --------- ---------- ---------- ---------- (51,755) 12,986 (82,805) 67,438 --------- ---------- ---------- ---------- Net earnings (loss)..................... $(108,826) $ 318,410 $ (128,493) $1,260,104 ========= ========== ========== ========== Allocation of net earnings (loss): General partner............................ $ 45,761 $ 56,813 $ 141,727 $ 173,488 Limited partners........................... (154,587) 261,597 (270,220) 1,086,616 --------- ---------- ---------- ---------- $(108,826) $ 318,410 $ (128,493) $1,260,104 ========= ========== ========== ========== Limited partners' per unit share of net earnings (loss)............................ $ (0.05) $ 0.08 $ (0.08) $ 0.31 ========= ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 5 6 IEA INCOME FUND XII, L.P. STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED ------------------------------ SEPTEMBER 30, SEPTEMBER 30, 1999 1998 ------------- ------------- Net cash provided by operating activities................... $ 3,079,090 $ 4,008,452 Cash flows provided by (used in) investing activities: Proceeds from disposal of equipment....................... 462,087 385,590 Purchase of container rental equipment.................... (199,342) -- Acquisition fees paid to general partner.................. (9,967) -- ----------- ----------- Net cash provided by investing activities.............. 252,778 385,590 ----------- ----------- Cash flows used in financing activities: Distribution to partners.................................. (3,870,993) (4,022,139) ----------- ----------- Net increase (decrease) in cash and cash equivalents........ (539,125) 371,903 Cash and cash equivalents at January 1...................... 2,407,614 1,883,389 ----------- ----------- Cash and cash equivalents at September 30................... $ 1,868,489 $ 2,255,292 =========== ===========
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 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. 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. (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. 7 8 IEA INCOME FUND XII, L.P. NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 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 September 30, 1999 and December 31, 1998 were as follows:
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ Lease receivables, net of doubtful accounts of $194,100 at September 30, 1999 and $209,635 at December 31, 1998..... $1,406,931 $1,690,827 Less: Direct operating payables and accrued expenses............. 723,619 491,270 Damage protection reserve.................................. 223,070 237,855 Base management fees....................................... 245,537 271,288 Reimbursed administrative expenses......................... 31,581 33,894 ---------- ---------- $ 183,124 $ 656,520 ========== ==========
(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 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 4)................ $1,596,370 $2,183,010 $5,065,891 $6,500,276 Less: Rental equipment operating expenses.... 513,911 646,410 1,637,155 1,624,038 Base management fees................... 110,284 147,356 349,252 441,948 Reimbursed administrative expenses..... 90,145 136,629 296,849 400,813 ---------- ---------- ---------- ---------- $ 882,030 $1,252,615 $2,782,635 $4,033,477 ========== ========== ========== ==========
(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 8 9 IEA INCOME FUND XII, L.P. NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 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 9,245 twenty-foot, 5,180 forty-foot and 205 forty-foot high-cube marine dry cargo containers, as well as 195 twenty-foot and 297 forty-foot marine refrigerated cargo containers. A summary of gross lease revenue, by product, 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 ------------- ------------- ------------- ------------- Dry cargo containers................... $1,345,079 $1,790,566 $4,150,524 $5,277,799 Refrigerated containers................ 251,291 392,444 915,367 1,222,477 ---------- ---------- ---------- ---------- Total........................ $1,596,370 $2,183,010 $5,065,891 $6,500,276 ========== ========== ========== ==========
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. At September 30, 1999, the Registrant had $1,868,489 in cash and cash equivalents, a decrease of $539,125 from the December 31, 1998 cash balances. The Registrant's operating performance contributed to a 72% decline in net lease receivables at September 30, 1999 when compared to December 31, 1998. The Registrant's cash distribution from operations for the third quarter of 1999 was 5.75% (annualized) of the limited partners' original capital contributions, a decline from the second quarter of 1999 distribution of 6.00% (annualized). These distributions are directly related to the Registrant's results from operations and may fluctuate accordingly. 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. (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 $882,030 and $2,782,635, respectively, a decrease of 30% and 31% respectively, from the same periods in the prior year. Gross rental revenue (a component of net lease revenue) for the three and nine-month periods ended September 30, 1999 was $1,596,370 and $5,065,891, respectively, reflecting a decline of 27% and 22%, respectively, from the same periods in the prior year. Gross lease revenue was primarily impacted by lower per-diem rental rates and utilization levels. Average dry cargo container per-diem rental rates for the three and nine-month periods ended September 30, 1999 declined approximately 13% and 8%, respectively, when compared to the same periods in the prior year. Refrigerated container average per-diem rental rates for the three and nine-month periods ended September 30, 1999 declined 19% and 12%, respectively, when compared to the same 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)) Dry cargo containers....................... 20,038 20,189 20,090 20,361 Refrigerated containers.................... 797 808 802 808 Average Utilization Dry cargo containers....................... 71% 75% 68% 82% Refrigerated containers.................... 64% 77% 67% 84%
10 11 Rental equipment operating expenses were 32% of the Registrant's gross lease revenue during both the three and nine-month periods ended September 30, 1999, as compared to 30% and 25%, respectively, of the Registrant's gross lease revenue during the three and nine-month periods ended September 30, 1998. This increase was largely attributable to an increase in costs associated with slightly lower utilization levels, including handling and storage. The Registrant disposed of 23 twenty-foot and 12 forty-foot marine dry cargo containers as well as eight forty-foot marine refrigerated cargo containers during the third quarter of 1999, as compared to 14 twenty-foot, 13 forty-foot, and one forty-foot high-cube marine dry cargo containers during the same period in the prior year. The decision to repair or dispose of a container is made when it is returned by a lessee. This decision is influenced by various factors including the age, condition, suitability for continued leasing, as well as the geographical location of the container when disposed. These factors also influence the amount of sales proceeds received and the related gain on container disposals. 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. 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 11 12 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 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 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 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) 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 XII, 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/ 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 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) 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 1,868,489 0 183,124 0 0 2,051,613 62,003,870 25,401,439 38,654,044 416,624 0 0 0 0 38,237,420 38,654,044 0 2,782,635 0 2,828,323 0 0 0 0 0 0 0 0 0 (128,493) 0 0
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