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 [ ].
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IEA INCOME FUND XI, 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 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.
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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.
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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.
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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)
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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)
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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.
******
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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 $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)
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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
$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.
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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 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.
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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 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
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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 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.