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 0-18169
IEA INCOME FUND IX, L.P.
(Exact name of registrant as specified in its charter)
California 94-3069954
(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 [ ].
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IEA INCOME FUND IX, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2001
TABLE OF CONTENTS
PAGE
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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
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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.
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IEA INCOME FUND IX, L.P.
BALANCE SHEETS
March 31, December 31,
2001 2000
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents, includes $549,310 at March 31, 2001
and $640,874 at December 31, 2000 in interest-bearing accounts $ 585,027 $ 741,214
Net lease receivables due from Leasing Company
(notes 1 and 2) 97,340 98,958
------------ ------------
Total current assets 682,367 840,172
------------ ------------
Container rental equipment, at cost 10,127,216 10,630,601
Less accumulated depreciation 6,529,866 6,746,246
------------ ------------
Net container rental equipment 3,597,350 3,884,355
------------ ------------
Total assets $ 4,279,717 $ 4,724,527
============ ============
Partners' Capital
Partners' capital (deficit):
General partner $ (74,056) $ (69,608)
Limited partners 4,353,773 4,794,135
------------ ------------
Total partners' capital $ 4,279,717 $ 4,724,527
============ ============
The accompanying notes are an integral part of these financial statements.
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IEA INCOME FUND IX, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
------------------------------
March 31, March 31,
2001 2000
--------- ---------
Net lease revenue (notes 1 and 3) $ 223,726 $ 230,703
Other operating expenses:
Depreciation 118,984 184,159
Other general and administrative expenses 21,489 13,225
--------- ---------
140,473 197,384
--------- ---------
Income from operations 83,253 33,319
Other income (loss):
Interest income 7,964 6,214
Net loss on disposal of equipment (31,610) (37,319)
--------- ---------
(23,646) (31,105)
--------- ---------
Net income $ 59,607 $ 2,214
========= =========
Allocation of net income (loss):
General partner $ 11,331 $ 9,415
Limited partners 48,276 (7,201)
--------- ---------
$ 59,607 $ 2,214
========= =========
Limited partners' per unit share of net income (loss) $ 1.42 $ (0.21)
========= =========
The accompanying notes are an integral part of these financial statements.
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IEA INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
------------------------------
March 31, March 31,
2001 2000
--------- ---------
Net cash provided by operating activities $ 227,479 $ 330,376
Cash flows provided by investing activities:
Proceeds from sale of container rental equipment 120,751 107,714
Cash flows used in financing activities:
Distribution to partners (504,417) (320,653)
--------- ---------
Net (decrease) increase in cash and cash equivalents (156,187) 117,437
Cash and cash equivalents at January 1 741,214 492,680
--------- ---------
Cash and cash equivalents at March 31 $ 585,027 $ 610,117
========= =========
The accompanying notes are an integral part of these financial statements.
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IEA INCOME FUND IX, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
IEA Income Fund IX, L.P. (the "Partnership") is a limited
partnership organized under the laws of the State of California
on June 8, 1988 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, 2009, unless
sooner terminated upon the occurrence of certain events.
The Partnership commenced operations on December 5, 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 September 11, 1989, at which time 33,992 limited
partnership units had been sold.
(b) Leasing Company and Leasing Agent Agreement
Pursuant to the Limited Partnership Agreement of the
Partnership, all authority to administer the business of the
Partnership is vested in CCC. CCC has entered into a Leasing
Agent Agreement whereby the Leasing Company has the
responsibility to manage the leasing operations of all equipment
owned by the Partnership. Pursuant to the Agreement, the Leasing
Company is responsible for leasing, managing and re-leasing the
Partnership's containers to ocean carriers, and has full
discretion over which ocean carriers and suppliers of goods and
services it may deal with. The Leasing Agent Agreement permits
the Leasing Company to use the containers owned by the
Partnership, together with other containers owned or managed by
the Leasing Company and its affiliates, as part of a single
fleet operated without regard to ownership. Since the Leasing
Agent Agreement meets the definition of an operating lease in
Statement of Financial Accounting Standards (SFAS) No. 13, it is
accounted for as a lease under which the Partnership is lessor
and the Leasing Company is lessee.
The Leasing Agent Agreement generally provides that the Leasing
Company will make payments to the Partnership based upon rentals
collected from ocean carriers after deducting direct operating
expenses and management fees to CCC. The Leasing Company leases
containers to ocean carriers, generally under operating leases
which are either master leases or term leases (mostly one to
five years). Master leases do not specify the exact number of
containers to be leased or the term that each container will
remain on hire but allow the ocean carrier to pick up and drop
off containers at various locations, 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)
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IEA INCOME FUND IX, 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 $397,769 $423,070
Less:
Direct operating payables and accrued expenses 147,673 165,794
Damage protection reserve 26,575 29,287
Base management fees payable 51,683 51,032
Reimbursed administrative expenses 11,905 15,014
Allowance for doubtful accounts 62,593 62,985
-------- --------
Net lease receivables $ 97,340 $ 98,958
======== ========
(Continued)
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IEA INCOME FUND IX, 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 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 $307,010 $391,729
Less:
Rental equipment operating expenses 47,483 109,641
Base management fees 21,429 25,137
Reimbursed administrative expenses 14,372 26,248
-------- --------
$223,726 $230,703
======== ========
(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 dry cargo
containers. As of March 31, 2001, the Partnership operated 1,302
twenty-foot, 501 forty-foot and 890 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.
******
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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 $585,027 in cash and cash
equivalents, a decrease of $156,187 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 144
containers as part of its ongoing container operations. At March 31,
2001, 56% of the original equipment remained in the Registrant's fleet,
as compared to 59% at December 31, 2000, and was comprised of the
following:
40-Foot
20-Foot 40-Foot High-Cube
------- ------- ---------
Containers on lease:
Term leases 162 116 204
Master leases 847 241 491
----- --- ---
Subtotal 1,009 357 695
Containers off lease 293 144 195
----- --- ---
Total container fleet 1,302 501 890
===== === ===
40-Foot
20-Foot 40-Foot High-Cube
----------------- ---------------- -----------------
Units % Units % Units %
----- --- ----- --- ----- ---
Total purchases 2,327 100% 799 100% 1,653 100%
Less disposals 1,025 44% 298 38% 763 47%
----- --- --- --- ----- ---
Remaining fleet at March 31, 2001 1,302 56% 501 62% 890 53%
===== === === === ===== ===
During the first quarter of 2001, distributions from operations and
sales proceeds amounted to $488,638, reflecting distributions to the
general and limited partners for the fourth quarter of 2000. This
represents an increase from the $350,544 distributed during the fourth
quarter of 2000, reflecting distributions for the third 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)
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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
$223,726, a decline of approximately 3% from the same three-month period
in the prior year. Gross rental revenue (a component of net lease
revenue) for the three-month period ended March 31, 2001 was $307,010, a
decline of 22% from the same three-month period in 2000. Gross rental
revenue was primarily impacted by a smaller fleet size and lower
per-diem rental rates. Average per-diem rental rates for the three-month
period ended March 31, 2001 declined 4% when compared to the same
three-month period in the prior year. The Registrant's average fleet
size and utilization rates for the three-month periods ended March 31,
2001 and 2000 were as follows:
Three Months Ended
---------------------------
March 31, March 31,
2000 1999
--------- ---------
Average fleet size (measured in twenty-foot
equivalent units (TEU)) 4,188 5,102
Average utilization 79% 79%
Depreciation expense declined 35% when compared to the same three-month
period in the prior year. Rental equipment operating expenses were 15%
of the Registrant's gross lease revenue during the three-month period
ended March 31, 2001, as compared to 28% during the three-month period
ended March 31, 2000, primarily due to the $29,212 reduction in the
provision for doubtful accounts, and the reduction in fleet size, which
contributed to a decline in storage and handling expenses, agent fees,
and recovery costs totaling $19,703. In addition, the Registrant's
declining fleet size and related operating results contributed to a
decline in base management and reimbursable administrative fees.
The Registrant disposed of 144 containers during the first quarter of
2001, as compared to 141 containers during the first quarter of 2000.
These disposals resulted in a loss of $31,610 for the first quarter of
2001, as compared to a loss of $37,319 for the first quarter of 2000.
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.
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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 September 12, 1988
3(b) Certificate of Limited Partnership of the **
Registrant
(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 September 12, 1988, included as part of Registration
Statement on Form S-1 (No. 33-23321)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement
on Form S-1 (No. 33-23321)
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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 IX, 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
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EXHIBIT INDEX
Exhibit
No. Description Method of Filing
------- ----------- ----------------
3(a) Limited Partnership Agreement of the Registrant, *
amended and restated as of September 12, 1988
3(b) Certificate of Limited Partnership of the **
Registrant
- ----------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated September 12, 1988, included as part of Registration
Statement on Form S-1 (No. 33-23321)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement
on Form S-1 (No. 33-23321)