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 0-21518
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.)
One Front Street, 15th Floor, San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
(415) 677-8990
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
2
IEA INCOME FUND XII, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2001
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 2001 (unaudited) and December 31, 2000 4
Statements of Operations for the three months ended March 31, 2001 and 2000 (unaudited) 5
Statements of Cash Flows for the three months ended March 31, 2001 and 2000 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
2
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of March 31,
2001 and December 31, 2000, statements of operations for the three
months ended March 31, 2001 and 2000, and statements of cash flows for
the three months ended March 31, 2001 and 2000.
3
4
IEA INCOME FUND XII, L.P.
BALANCE SHEETS
March 31, December 31,
2001 2000
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents, includes $1,351,897 at March 31, 2001
and $1,287,792 at December 31, 2000 in interest-bearing accounts $ 1,455,856 $ 1,512,512
Net lease receivables due from Leasing Company
(notes 1 and 2) 444,643 517,461
------------ ------------
Total current assets 1,900,499 2,029,973
------------ ------------
Container rental equipment, at cost 59,514,044 59,984,866
Less accumulated depreciation 29,335,641 28,750,701
------------ ------------
Net container rental equipment 30,178,403 31,234,165
------------ ------------
Total assets $ 32,078,902 $ 33,264,138
============ ============
Partners' Capital
Partners' capital (deficit):
General partner (166,478) (154,625)
Limited partners 32,245,380 33,418,763
------------ ------------
Total partners' capital $ 32,078,902 $ 33,264,138
============ ============
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,
2001 2000
--------- ---------
Net lease revenue (notes 1 and 3) $ 913,111 $ 954,521
Other operating expenses:
Depreciation 871,884 905,763
Other general and administrative expenses 45,125 30,483
--------- ---------
917,009 936,246
--------- ---------
Income (loss) from operations (3,898) 18,275
Other income (loss):
Interest income 18,080 14,719
Net loss on disposal of equipment (93,287) (40,776)
--------- ---------
(75,207) (26,057)
--------- ---------
Net loss $ (79,105) $ (7,782)
========= =========
Allocation of net income (loss):
General partner $ 34,345 $ 38,756
Limited partners (113,450) (46,538)
--------- ---------
$ (79,105) $ (7,782)
========= =========
Limited partners' per unit share of net loss $ (0.03) $ (0.01)
========= =========
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,
2001 2000
----------- -----------
Net cash provided by operating activities $ 844,645 $ 1,195,206
Cash flows provided by investing activities:
Proceeds from disposal of equipment 204,830 76,656
Cash flows used in financing activities:
Distribution to partners (1,106,131) (1,222,253)
----------- -----------
Net (decrease) increase in cash and cash equivalents (56,656) 49,609
Cash and cash equivalents at January 1 1,512,512 1,111,425
----------- -----------
Cash and cash equivalents at March 31 $ 1,455,856 $ 1,161,034
=========== ===========
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 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, 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 sold.
(b) Leasing Company and Leasing Agent Agreement
The Partnership has entered into a Leasing Agent Agreement
whereby the Leasing Company has the responsibility to manage the
leasing operations of all equipment owned by the Partnership.
Pursuant to the Agreement, the Leasing Company is responsible
for leasing, managing and re-leasing the Partnership's
containers to ocean carriers, and has full discretion over which
ocean carriers and suppliers of goods and services it may deal
with. The Leasing Agent Agreement permits the Leasing Company to
use the containers owned by the Partnership, together with other
containers owned or managed by the Leasing Company and its
affiliates, as part of a single fleet operated without regard to
ownership. Since the Leasing Agent Agreement meets the
definition of an operating lease in Statement of Financial
Accounting Standards (SFAS) No. 13, it is accounted for as a
lease under which the Partnership is lessor and the Leasing
Company is lessee.
The Leasing Agent Agreement generally provides that the Leasing
Company will make payments to the Partnership based upon rentals
collected from ocean carriers after deducting direct operating
expenses and management fees to CCC and the Leasing Company. The
Leasing Company leases containers to ocean carriers, generally
under operating leases which are either master leases or term
leases (mostly one to five years). Master leases do not specify
the exact number of containers to be leased or the term that
each container will remain on hire but allow the ocean carrier
to pick up and drop off containers at various locations, and
rentals are based upon the number of containers used and the
applicable per-diem rate. Accordingly, rentals under master
leases are all variable and contingent upon the number of
containers used. Most containers are leased to ocean carriers
under master leases; leasing agreements with fixed payment terms
are not material to the financial statements. Since there are no
material minimum lease rentals, no disclosure of minimum lease
rentals is provided in these financial statements.
(Continued)
7
8
IEA INCOME FUND 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 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 $1,405,524 $1,601,580
Less:
Direct operating payables and accrued expenses 407,473 428,702
Damage protection reserve 85,543 138,819
Base management fees payable 242,422 268,241
Reimbursed administrative expenses 60,369 76,784
Allowance for doubtful accounts 165,074 171,573
---------- ----------
Net lease receivables $ 444,643 $ 517,461
========== ==========
(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 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 were as follows:
Three Months Ended
--------------------------------
March 31, March 31,
2001 2000
---------- ----------
Rental revenue (note 4) $1,451,896 $1,759,088
Less:
Rental equipment operating expenses 359,532 565,073
Base management fees 100,426 115,990
Reimbursed administrative expenses 78,827 123,504
---------- ----------
$ 913,111 $ 954,521
========== ==========
(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 8,747
twenty-foot, 5,011 forty-foot and 203 forty-foot high-cube marine dry
cargo containers, as well as 236 twenty-foot and 266 forty-foot marine
refrigerated cargo containers. A summary of gross lease revenue, by
product, for the three-month periods ended March 31, 2001 and 2000
follows:
Three Months Ended
--------------------------------
March 31, March 31,
2001 2000
---------- ----------
Dry cargo containers $1,188,227 $1,422,865
Refrigerated containers 263,669 336,223
---------- ----------
Total $1,451,896 $1,759,088
========== ==========
Due to the Partnership's lack of information regarding the physical
location of its fleet of containers when on lease in the global shipping
trade, it is impracticable to provide the geographic area information
required by SFAS No. 131.
******
9
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
It is suggested that the following discussion be read in conjunction with the
Registrant's most recent annual report on Form 10-K.
1) Material changes in financial condition between March 31, 2001 and
December 31, 2000.
At March 31, 2001, the Registrant had $1,455,856 in cash and cash
equivalents, an increase of $56,656 from the cash balances at December
31, 2000. Contributing to this change was the Registrants' efforts to
increase its working capital reserves. This increase was partially
offset by the Registrants' results from operations, impacted by a
declining fleet size and conditions created by the slowdown in the
global economy.
The Registrant's operating performance contributed to a 14% decline in
net lease receivables at March 31, 2001 when compared to December 31,
2000. The decrease is primarily due to a 12% decrease in gross lease
receivables, a component of net lease receivables.
During the first quarter of 2001, distributions from operations and
sales proceeds amounted to $1,059,933. This represents an increase from
the $980,878 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.
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
$913,111, a decline of 4% 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 $1,451,896, reflecting a decline of 17%
from the same period in the prior year. Gross lease revenue was
primarily impacted by lower per-diem rental rates and a decrease in
utilization rates. Average dry cargo container per-diem rental rates for
the three-month period ended March 31, 2001 declined approximately 1%
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 approximately 4% when compared to the same period in
the prior year.
The Registrant's average fleet size and utilization rates for each of
the three-month periods ended March 31, 2001 and 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 19,295 19,938
Refrigerated containers 761 775
Average utilization
Dry cargo containers 69% 74%
Refrigerated containers 72% 84%
(Continued)
10
11
Rental equipment operating expenses were 25% of the Registrant's gross
lease revenue during the three-month period ended March 31, 2001, as
compared to 32% during the three-month period ended March 31, 2000. The
decrease was primarily due to the $103,679 reduction in the provision
for doubtful accounts and related expenses, as well as reductions in
repair and maintenance, and repositioning expenses of $97,721. These
decreases were partially offset by an increase in storage of $24,993,
which typically increase with a reduction in utilization. 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 141 twenty-foot and 34 forty-foot dry cargo
containers during the first quarter of 2001, compared to 57 twenty-foot,
28 forty-foot and one forty-foot high-cube marine dry cargo containers
during the same period in the prior year. These disposals resulted in a
loss of $93,287 for the first quarter of 2001, as compared to a loss of
$40,776 for the same period in the prior year. The Registrant believes
that the net losses on container disposals in the first quarters of 2001
and 2000 were a result of various factors including the age, condition,
suitability for continued leasing, as well as the geographical location
of the containers when disposed. These factors will continue to
influence the decision to repair or dispose of a container when it is
returned by a lessee, as well as the amount of sales proceeds received
and the related gain or loss on container disposals. The level of the
Registrant's container disposals in subsequent periods will also
contribute to fluctuations in the net gain or loss on disposals. As a
result of current market conditions, the Registrant will monitor the
carrying value of its containers to determine if they have been
permanently impaired.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
11
12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description Method of Filing
------- ----------- ----------------
3(a) Limited Partnership Agreement of the *
Registrant, amended and restated as of December
2, 1991
3(b) Certificate of Limited Partnership of the **
Registrant
10 Form of Leasing Agent Agreement with 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 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
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
IEA INCOME FUND 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/ John Kallas
-------------------------------------
John Kallas
Chief Financial Officer and Director
of Cronos Capital Corp. ("CCC")
Principal Financial and Accounting
Officer of CCC
Date: May 15, 2001
13
14
EXHIBIT INDEX
Exhibit
No. Description Method of Filing
------- ----------- ----------------
3(a) Limited Partnership Agreement of the *
Registrant, amended and restated as of December
2, 1991
3(b) Certificate of Limited Partnership of the **
Registrant
10 Form of Leasing Agent Agreement with Cronos ***
Containers Limited
- ----------
* 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)