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, 1995
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 2-86324
IEA MARINE CONTAINER INCOME FUND V(A)
(Exact name of registrant as specified in its charter)
California 94-2911062
(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 .
--- ---
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IEA MARINE CONTAINER INCOME FUND V(A)
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 1995
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1995 (unaudited) and December 31, 1994 2
Statements of Operations for the three and nine months ended September 30, 1995 and 1994 3
(unaudited)
Statements of Cash Flows for the nine months ended September 30, 1995 and 1994 4
(unaudited)
Notes to Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 7
Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of September
30, 1995 and December 31, 1994, statements of operations for the three
and nine months ended September 30, 1995, and 1994, and statements of
cash flows for the nine months ended September 30, 1995, and 1994.
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IEA MARINE CONTAINER INCOME FUND V(A)
BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1995 1994
------------- ------------
Assets
------
Current assets:
Cash, includes $74,380 at September 30, 1995 and $88,547
at December 31, 1994 in interest-bearing accounts $ 74,973 $ 97,755
Short-term investments 210,000 150,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 154,549 151,315
---------- ----------
Total current assets 439,522 399,070
---------- ----------
Container rental equipment, at cost 2,564,565 3,009,444
Less accumulated depreciation 1,582,245 1,754,402
---------- ----------
Net container rental equipment 982,320 1,255,042
---------- ----------
$1,421,842 $1,654,112
========== ==========
Partners' Capital
-----------------
Partners' capital:
General partners $ 1,187 $ 3,509
Limited partners 1,420,655 1,650,603
---------- ----------
Total partners' capital 1,421,842 1,654,112
---------- ----------
$1,421,842 $1,654,112
========== ==========
The accompanying notes are an integral part of these statements.
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IEA MARINE CONTAINER INCOME FUND V(A)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
Net lease revenue (notes 1 and 3) $96,059 $99,339 $344,672 $365,311
Other operating expenses:
Depreciation 33,108 39,734 104,857 122,853
Other general and administrative expenses 3,045 5,231 18,484 16,061
------- ------- -------- --------
36,153 44,965 123,341 138,914
------- ------- -------- --------
Earnings from operations 59,906 54,374 221,331 226,397
Other income:
Interest income 3,456 2,333 10,231 6,234
Net gain on disposal of equipment 16,340 15,272 77,152 48,084
------- ------- -------- --------
19,796 17,605 87,383 54,318
------- ------- -------- --------
Net earnings $79,702 $71,979 $308,714 $280,715
======= ======= ======== ========
Allocation of net earnings:
General partners $15,812 $14,378 $ 45,763 $ 41,578
Limited partners 63,890 57,601 262,951 239,137
======= ======= ======== ========
$79,702 $71,979 $308,714 $280,715
======= ======= ======== ========
Limited partners' per unit share of net
earnings $ 9 $ 8 $ 36 $ 33
======= ======= ======== ========
The accompanying notes are an integral part of these statements.
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IEA MARINE CONTAINER INCOME FUND V(A)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
------------------------------
September 30, September 30,
1995 1994
------------- -------------
Net cash provided by operating activities $ 363,806 $ 346,653
Cash flows provided by investing activities:
Proceeds from disposal of equipment 214,396 134,147
Cash flows used in financing activities:
Distribution to partners (540,984) (520,951)
--------- ---------
Net increase (decrease) in cash and cash equivalents 37,218 (40,151)
Cash and cash equivalents at January 1 247,755 293,108
--------- ---------
Cash and cash equivalents at September 30 $ 284,973 $ 252,957
========= =========
The accompanying notes are an integral part of these statements.
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IEA MARINE CONTAINER INCOME FUND V(A)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
IEA Marine Container Income Fund V(A) (the "Partnership") is a limited
partnership organized under the laws of the State of California on
August 8, 1983 for the purpose of owning and leasing marine cargo
containers. The managing general partner is Cronos Capital Corp.
("CCC"); the associate general partners include four individuals. CCC,
with its affiliate Cronos Containers Limited (the "Leasing Company"),
manages and controls the business of the Partnership.
(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 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. Revenue is
recognized when earned.
(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 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.
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IEA MARINE CONTAINER INCOME FUND V(A)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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, reimbursed administrative expenses and incentive fees
payable to CCC, the Leasing Company, 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, 1995 and December 31, 1994 were as
follows:
September 30, December 31,
1995 1994
------------- ------------
Lease receivables, net of doubtful accounts
of $60,504 at September 30, 1995 and $52,946
at December 31, 1994 $274,449 $282,897
Less:
Direct operating payables and accrued expenses 58,791 41,730
Damage protection reserve 18,411 46,156
Base management fees 17,797 21,824
Reimbursed administrative expenses 2,638 4,062
Incentive fees 22,263 17,810
-------- --------
$154,549 $151,315
======== ========
(3) Net Lease Revenue
Net lease revenue is determined by deducting direct operating expenses,
management fees and reimbursed administrative expenses to CCC and the
Leasing Company, 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, 1995 and 1994, was as follows:
Three Months Ended Nine Months Ended
----------------------------- ----------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
Rental revenue $192,071 $228,678 $613,150 $682,401
Rental equipment
operating expenses 49,949 80,005 129,451 169,935
Base management fees 12,190 16,844 40,707 47,766
Incentive fees 22,263 18,925 64,563 57,884
Reimbursed administrative expenses 11,610 13,565 33,757 41,505
-------- -------- -------- --------
$ 96,059 $ 99,339 $344,672 $365,311
======== ======== ======== ========
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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 September 30, 1995 and
December 31, 1994.
The Registrant's cash balances at September 30, 1995 included sales
proceeds from equipment disposals in the amount of $63,894. The Registrant
will distribute these sales proceeds and $118,661 of cash from operations
during the fourth quarter of 1995, representing distributions to its
limited partners for the third quarter of 1995.
Net lease receivables due from the Leasing Company increased approximately
2% from December 31, 1994. This increase was attributable to a 60% decline
in the reserve for container repairs covered by the damage protection
plan, a component of net lease receivables. During the first nine months
of 1995, this reserve was impacted by the Registrant's declining fleet
size and a decrease in the number of containers covered by the plan.
2) Material changes in the results of operations between the three and
nine-month periods ended September 30, 1995 and the three and nine-month
periods ended September 30, 1994.
Net lease revenue for the third quarter of 1995 was $96,059, a decline of
3% over the third quarter of 1994. Gross rental revenue (a component of
net lease revenue) for the quarter was $192,071, a decrease of 16% from
the same period last year. For the first nine months of 1995, net lease
revenue was $344,672, a decline of 6% from the first nine months of 1994.
Gross rental revenue declined 10% to $613,150 over the same nine-month
period.
Gross rental revenue for the third quarter and first nine months of 1995
was primarily affected by the Registrant's diminishing fleet size. During
the third quarter of 1995, utilization rates were consistent with those
experienced in the same quarter in the prior year, while average
utilization rates for the nine-month period ending 1995 were higher than
the average utilization rates experienced during the same nine-month period
in 1994. However, competitive pressures within the container leasing
market, as well as the Leasing Company's efforts to improve the credit
quality of its customer portfolio, combined to create a resistance to
higher per-diem rental rates. Accordingly, average per-diem rental rates
remained relatively stable when compared to the same periods in the prior
year. The Registrant expects to gain long-term benefits from the
improvement in the credit quality of this customer portfolio, as the
allowance for doubtful accounts and related expenses should decline.
The Registrant's average fleet size and utilization rates for the three
and nine-month periods ended September 30, 1995 and 1994 were as follows:
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
Average Fleet Size (measured in
twenty-foot equivalents (TEU)) 1,476 1,821 1,587 1,867
Average Utilization 86% 86% 87% 85%
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During the third quarter of 1995, the container leasing market began to
experience the effects of increasingly competitive market conditions,
including, but not limited to, a resistance to higher per-diem rental
rates, slightly lower utilization rates resulting from an expanding supply
of marine cargo containers within the container industry, and the economic
condition of the shipping industry, which has experienced a current trend
toward consolidation. Accordingly, the Registrant expects a stable
container leasing market during the remainder of 1995 and first half of
1996.
Rental equipment operating expenses for the Registrant's smaller operating
fleet declined 38% and 24% during the three and nine-month periods ended
September 30, 1995, respectively, as compared to the same periods in the
prior year. The decreased fleet size was also a contributing factor to the
declines in base management fees and reimbursed administrative expenses.
Incentive fees, which are based on the operating performance of the fleet
and sales proceeds, are incurred only after the limited partners receive
an 8% cumulative, compounded (daily), annual return on their Adjusted
Capital Contribution. The rise in container disposals contributed to an
increase in these fees of approximately 18% and 12%, respectively, when
compared to the same three and nine-month periods in 1994.
Approximately 21% and 25% of the Registrant's net earnings for the three
and nine-month periods ended September 30, 1995, respectively, were from
gain on disposal of equipment, as compared to 21% and 17% for the same
three and nine-month periods in the prior year. As the Registrant
accelerates the disposal of its containers in subsequent periods, net gain
on disposal will contribute significantly to the Registrant's net
earnings.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description Method of Filing
------ ----------- ----------------
27 Financial Data Schedule Filed with this Document
(b) There were no reports on Form 8-K during the three-month period
ended September 30, 1995.
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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 MARINE CONTAINER INCOME FUND V(A)
By Cronos Capital Corp.
The Managing General Partner
By /s/ JOHN KALLAS
---------------------------------------
John Kallas
Vice President, Chief Financial Officer
Principal Accounting Officer
Date: November 13, 1995
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EXHIBIT INDEX
Exhibit
No. Description
------- -----------
27 Financial Data Schedule