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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 $ 250.00
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________________ to __________________.
Commission file number 0-11163
IEA MARINE CONTAINER INCOME FUND IV
(A California Limited Partnership)
(Exact name of registrant as specified in its charter)
California 93-0798850
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
444 Market Street, 15th Floor, San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 677-8990
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- ----------------
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTERESTS
(Title of Class)
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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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is not applicable.
Documents incorporated by Reference
PART I
Item 1 - Business Prospectus of IEA Marine Container Income Fund IV, dated
January 18, 1982 included as part of Registration
Statement on Form S-1 (No. 2-75378)
Certificate of Limited Partnership of IEA Marine Container
Income Fund IV, filed as Exhibit 3.4 to the Registration
Statement on Form S-1 (No. 2-75378)
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PART I
Item 1. Business
(a) General Development of Business
The Registrant is a California limited partnership formed on November
25, 1981 to engage in the business of leasing marine dry cargo containers to
unaffiliated third-party lessees. The Registrant was initially capitalized
with $100, and commenced offering its limited partnership interests to the
public during the week of January 25, 1982, pursuant to its Registration
Statement on Form S-1 (File No. 2-75378). The offering terminated on December
31, 1982.
The Registrant raised $13,857,600 in subscription proceeds. The following
table sets forth the use of said subscription proceeds:
Percentage of
Amount Gross Proceeds
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Gross Subscription Proceeds $13,857,600 100.0%
Public Offering Expenses:
Underwriting Commissions $ 1,385,750 10.0%
Offering and Organization Expenses $ 297,480 2.1%
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Total Public Offering Expenses $ 1,683,230 12.1%
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Net Proceeds $12,174,370 87.9%
Acquisition Fees $ 632,170 4.6%
Working Capital Reserve $ 47,910 0.3%
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Gross Proceeds Invested in Equipment $11,494,290 83.0%
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______________________
On October 14, 1983, the Registrant borrowed $6,000,000 to finance the
purchase of additional containers. Additionally, on June 23, 1986, the
Registrant entered into a second agreement, whereby the Registrant borrowed
$5,494,000 to finance the purchase of additional containers. On August 31,
1990, the Registrant borrowed $4,100,000 to refinance the remaining balances of
the aforementioned loans. The loan was repaid in full on February 28, 1995.
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The managing general partner of the Registrant is Cronos Capital Corp.
("CCC"), a wholly-owned subsidiary of Cronos Holdings/Investments (U.S.), Inc.,
a Delaware corporation. Cronos Holdings/Investments (U.S.), Inc. is a
wholly-owned subsidiary of Cronos Investments B.V., a Dutch company. These and
other affiliated companies are ultimately wholly-owned by The Cronos Group, a
holding company registered in Luxembourg ("Holding Company") and are
collectively referred to as the "Group". The activities of the container
division of the Group are managed through the Group's subsidiary in the United
Kingdom, Cronos Containers Limited ("the Leasing Company"). The Leasing
Company manages the leasing operations of all equipment owned or managed by the
Group on its own behalf or on behalf of third-party container owners, including
all other programs organized by CCC. The associate general partner is Smith
Barney Shearson, Inc., a successor to The F&M Corporation.
Pursuant to the Limited Partnership Agreement of the Registrant, all
authority to administer the business of the Registrant is vested in CCC. CCC
has entered into a Leasing Agent Agreement, whereby the Leasing Company has the
responsibility for the container leasing activities of CCC's managed programs.
For information concerning the containers acquired by the Registrant, see
Item 2, "Properties."
(b) Financial Information About Industry Segments
Inapplicable.
(c) Narrative Description of Business
(c)(1)(i) A marine cargo container is a reusable metal container designed
for the efficient carriage of cargo with a minimum of exposure to loss from
damage or theft. Containers are manufactured to conform to worldwide standards
of container dimensions and container ship fittings adopted by the
International Standards Organization ("ISO") in 1968. The standard container
is either 20' long x 8' wide x 8'6" high (one twenty-foot equivalent unit
("TEU"), the standard unit of physical measurement in the container industry)
or 40' long x 8' wide x 8'6" high (two TEU). Standardization of the
construction, maintenance and handling of containers allows containers to be
picked up, dropped off, stored and repaired effectively throughout the world.
This standardization is the foundation on which the container industry has
developed.
Standard dry cargo containers are rectangular boxes with no moving parts,
other than doors, and are typically made of steel. They are constructed to
carry a wide variety of cargos ranging from heavy industrial raw materials to
light-weight finished goods. Specialized containers include, among others,
refrigerated containers for the transport of temperature-sensitive goods and
tank containers for the carriage of liquid cargo. Dry cargo containers
constitute approximately 85% of the worldwide container fleet. Refrigerated
and tank containers constitute approximately 7% of the worldwide container
fleet, with open-tops and other specialized containers constituting the
remainder.
One of the primary benefits of containerization has been the ability of the
shipping industry to effectively lower freight rates due to the efficiencies
created by standardized intermodal containers. Containers can be handled much
more efficiently than loose cargo and are typically shipped via several modes
of transportation, including truck, railway and ship. Containers require
loading and unloading only once and remain sealed until arrival at the final
destination, significantly reducing transport time, labor and handling costs
and losses due to damage and theft. Efficient movement of containerized cargo
between ship and shore reduces the amount of time that a ship must spend in
port and reduces the transit time of freight moves.
The logistical advantages and reduced freight rates brought about by
containerization have been a major catalyst for world trade growth during the
last twenty-five years, which in turn has generated increased demand for
containerization. The world container fleet has grown from an estimated
270,000 TEU in 1969 to 9,198,000 TEU at the end of 1995, and according to
recent industry data, growth of containerized shipping since 1987 has generally
averaged two to three times that of average GDP growth in industrialized
countries.
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The Registrant believes that growth of containerization will continue to
outpace GDP growth and the growth in world trade over the next five years for
the following reasons:
- Lower freight rates resulting from containerization are generating new
cargos that previously were not economical to export. Containerization
provides inexpensive, timely and secure transport to manufacturers
allowing them to take advantage of regional opportunities in technology
or labor, and to move products to different locations at various stages
of production;
- Intermodal traffic is expected to continue to grow, and industrialized
countries are continuing to improve intermodal infrastructure (i.e.,
railways, roads and ports);
- Shippers continue to demand transportation of cargo by containers rather
than break-bulk;
- Countries with rapidly-growing economies in emerging markets are
continuing to build new container port facilities that accommodate an
increased flow of containerized trade; and
- Recent trade agreements, such as the North American Free Trade Agreement
("NAFTA") and the General Agreement on Tariffs and Trade ("GATT"), should
further stimulate world trade, and, therefore containerized trade.
The container leasing industry has been a significant contributor to the
growth of containerization, and, in 1995, had an approximately 47% share of the
total world container fleet with ocean carriers holding most of the remainder.
To an ocean carrier, the primary benefits of leasing rather than owning
containers are the following:
- Reduced Capital Expenditures. Leasing is an attractive option to ocean
carriers because ownership of containers requires significant capital
expenditures. Carriers constantly evaluate their investment strategy,
with container purchasing competing directly with other expenditure
requirements, such as ship purchases, ship conversions and terminal
improvements. Container leasing allows ocean carriers to invest capital
in assets that are more central to their business.
- Improved Asset Management. Trade flow imbalances and seasonal demands
frequently leave ocean carriers with regional surpluses or shortages of
containers, requiring costly repositioning of empty containers. Leasing
companies help ocean carriers manage these trade imbalances by providing
the inventory to service demand, reducing the costs of maintaining local
inventories and minimizing repositioning expenses. By matching different
carriers' container needs, leasing companies can reduce their own risks
of container inventory imbalances and seasonality through a portfolio of
lessees as well as variations in lease terms.
- Increased Container Fleet Flexibility. Ocean carriers benefit from the
variety of lease types offered by leasing companies such as the master
lease, long-term and short-term lease and direct financing lease. These
various leases give ocean carriers flexibility in sizing their fleets
while minimizing capital costs. For example, master lease agreements
give ocean carriers the option of adjusting the size of their fleets,
with the flexibility to pick-up and drop-off containers at various
locations around the world.
Dry cargo containers are the most-commonly used type of container in the
shipping industry. Over 90% of the Registrant's dry cargo container fleet are
constructed of all Corten(R) steel (Corten(R) roofs, walls, doors and
undercarriage), a high-tensile steel yielding greater damage and corrosion
resistance than mild steel.
The Registrant's containers are leased primarily to ocean-going steamship
companies operating in major trade routes (see Item 1(d)). Most if not all of
the Registrant's marine dry cargo containers are leased pursuant to operating
leases, primarily master leases, where the containers are leased to the ocean
carrier on a daily basis for any desired length of time, with the flexibility
of picking up and dropping off containers at various agreed upon locations
around the world and, secondarily, term leases (1-5 years) and one-way or
round-trip leases.
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Master lease agreements. A master lease is designed to provide greater
flexibility by allowing customers to pick-up and drop-off containers where and
when needed, subject to restrictions and availability, on pre-agreed terms.
The commercial terms of master leases are generally negotiated annually.
Master leases also define the number of containers that may be returned within
each calendar month and the return locations and applicable drop-off charges.
Because of the increased flexibility they offer, master leases usually command
higher per-diem rates and generate more ancillary fees (including pick-up,
drop-off, handling and off-hire fees) than term leases.
Term lease agreements. Term lease agreements include short-term and
long-term leases. Long-term lease agreements define the number of containers
to be leased, the pick-up and drop-off locations, the applicable per-diem
rental rate for the duration of the lease and the early termination penalties
that may apply in the event of early redelivery. Ocean carriers use long-term
leases when they have a need for identified containers for a specified term.
Long-term leases usually are not terminated early by the customer and provide
the Registrant with stable and relatively predictable sources of revenue,
although per-diem rates and ancillary charges are lower under long-term leases
than under master lease agreements. Short-term lease agreements have a
duration of less than one year and include one-way, repositioning and
round-trip leases. They differ from master leases in that they define the
number and the term of containers to be leased. Ocean carriers use one-way
leases to manage trade imbalances (where more containerized cargo moves in one
direction than another) by picking up a container in one port and dropping it
off at another after one or more legs of a voyage. Except for direct financing
leases, lease rates typically are highest for short-term leases.
Under these leases, customers are responsible for paying all taxes and
service charges arising from container use, maintaining the containers in good
and safe operating condition while on lease and paying for repairs upon
redelivery, other than ordinary wear and tear. Some leases provide for a
"damage protection plan" whereby lessees, for an additional payment (which may
be in the form of a higher per-diem rate), are relieved of the responsibility
of paying some of the repair costs upon redelivery of the containers. The
Leasing Company has historically provided this service on a limited basis to
selected customers. Repairs provided under such plans are carried out by the
same depots, under the same procedures, as are repairs to containers not
covered by such plans. Customers also are required to insure leased containers
against physical damage and loss, and against third party liability for loss,
damage, bodily injury or death.
All containers are inspected and repaired when redelivered by a customer,
and customers are obligated to pay for all damage repair, excluding wear and
tear, according to standardized industry guidelines. Depots in major port
areas perform repair and maintenance which is verified by independent surveyors
or the Leasing Company's technical and operations staff.
Before any repair or refurbishment is authorized on older containers in the
Registrant's fleet, the Leasing Company's technical and operations staff
reviews the age, condition and type of container and its suitability for
continued leasing. The Leasing Company compares the cost of such repair or
refurbishment with the prevailing market resale price that might be obtained
for that container and makes the appropriate decision whether to repair or sell
the container.
The non-cancelable terms of the operating leases of the Registrant's
containers will not be sufficient to return to the Registrant as lessor the
purchase price of the equipment. In order to recover the original investment
in the equipment and achieve an adequate return thereon, it is necessary to
renew the lease, lease the equipment to another lessee at the end of the
initial lease term, or sell the equipment.
The Registrant estimates that a dry cargo or refrigerated container may be
used as a leased marine cargo container for a period ranging from 10 to 15
years. The Registrant disposes of used containers in a worldwide market for
used containers in which buyers include wholesalers, mini-storage operators,
construction companies and others. As the Registrant's fleet ages, a larger
proportion of its revenue will be derived from selling containers.
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Of the 3,660 twenty-foot and 2,668 forty-foot marine dry cargo containers
owned by the Registrant as of December 31, 1995, 2,995 twenty-foot (or 82%
thereof) and 2,229 forty-foot marine dry cargo containers (or 84% thereof) were
on lease. The following table sets forth the information on the lease terms
with respect to the containers on lease:
Number of
Containers
----------
20-Foot Dry Cargo Containers:
Term Leases 311
Master Leases 2,684
40-Foot Dry Cargo Containers:
Term Leases 380
Master Leases 1,849
The Leasing Company will make payments to the Registrant based upon rentals
collected from ocean carriers after deducting certain operating expenses
associated with the containers, such as the base management fee payable to CCC,
the costs of maintenance and repairs not performed by lessees, independent
agent fees and expenses, depot expenses for handling, inspection and storage,
and additional insurance.
The Registrant's sales and marketing operations are conducted through the
Leasing Company, in the United Kingdom, with support provided by area offices
and dedicated agents located in San Francisco, California; Iselin, New Jersey;
Windsor, England; Hamburg; Antwerp; Auckland; Genoa; Singapore; Hong Kong;
Sydney; Tokyo; Taipei; Seoul; Rio de Janeiro; and Shanghai. Each of the
Leasing Company's area offices and dedicated agents is staffed with local
people familiar with the customers and language of the region. The Leasing
Company's marketing directors have been employed in the container industry in
their respective regions for an average of 15 years, building direct personal
relationships with the local ocean carriers and locally based representatives
of other ocean carriers.
The Leasing Company also maintains agency relationships with over 20
independent agents around the world, who are generally paid a commission based
upon the amount of revenues they generate in the region or the number of
containers that are leased from their area on behalf of the Registrant. They
are located in jurisdictions where the volume of the Leasing Company's business
necessitates a presence in the area but is not sufficient to justify a
fully-functioning Leasing Company office or dedicated agent. These agents
provide marketing support to the area offices covering the region, together
with limited operational support.
In addition, the Leasing Company relies on the services of over 300
independently-owned and operated depots around the world to inspect, repair,
maintain and store containers while off-hire. The Leasing Company's area
offices authorize all container movements into and out of the depot and
supervise all repair and maintenance performed by the depot. The Leasing
Company's technical staff sets the standards for repair of its owned and
managed fleet throughout the world and monitors the quality of depot repair
work. The depots provide a vital link to the Leasing Company's operations, as
the redelivery of a container into a depot is the point at which the container
is off-hired from one customer and repaired in preparation for re-leasing to
the next, and the point when the Leasing Company's area offices report the
container's movements onto the Leasing Company's equipment tracking system.
The Leasing Company's computer system has the capability to accommodate future
developments, such as allowing depots access to record directly on the system
the on-hire and off-hire activity of containers delivered into the depot. It
also has the capability of verifying the terms of redelivery authorized by the
area offices. These functions are currently being performed by the
Leasing Company's area offices.
(c)(1)(ii) Inapplicable.
(c)(1)(iii) Inapplicable.
(c)(1)(iv) Inapplicable.
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(c)(1)(v) The Registrant's containers are leased globally, therefore,
seasonal fluctuations are minimal. Other economic and business factors to
which the transportation industry in general and the container leasing industry
in particular are subject, include inflation and fluctuations in general
business conditions and fluctuations in supply and demand for equipment
resulting from, among other things, obsolescence, changes in the methods or
economics of a particular mode of transportation or changes in governmental
regulations or safety standards.
(c)(1)(vi) The Registrant established an initial working capital reserve of
approximately $48,000 (0.3% of subscription proceeds raised). In addition, the
Registrant may reserve additional amounts from anticipated cash distributions
to the partners to meet working capital requirements.
Amounts due under master leases are calculated at the end of each month and
billed approximately six to eight days thereafter. Amounts due under
short-term and long-term leases are set forth in the respective lease
agreements and are generally payable monthly. However, payment is normally
received within 45-100 days of receipt. Past due penalties are not customarily
collected from lessees, and accordingly are not generally levied by the Leasing
Company against lessees of the Registrant's containers.
(c)(1)(vii) For the fiscal year ended December 31, 1995, no single lessee
accounted for 10% or more of the Registrant's rental income. The Registrant
does not believe that its ongoing business is dependent upon a single customer,
although the loss of one or more of its largest customers could have an adverse
effect upon its business.
(c)(1)(viii) Inapplicable.
(c)(1)(ix) Inapplicable.
(c)(1)(x) Competition among container leasing companies is based upon several
factors, including the location and availability of inventory, lease rates, the
type, quality and condition of the containers, the quality and flexibility of
the service offered and the confidence in and professional relationship with the
lessor. Other factors include the speed with which a leasing company can prepare
its containers for lease and the ease with which a lessee believes it can do
business with a lessor or its local area office. The Leasing Company believes
that it, on behalf of the Registrant, competes favorably on all of these
factors.
The Leasing Company, on behalf of the Registrant, competes with various
container leasing companies in the markets in which it conducts business,
including Genstar Container Corp., Transamerica Leasing, Triton Container
International Ltd., Trans Ocean Ltd., Textainer Corp. and others. In a series
of recent consolidations, one of the major leasing companies, as well as some
smaller ones, have been acquired by competitors. It is estimated that at the
end of 1995, the ten largest leasing companies (including the Leasing Company)
represented 94% of the global leased fleet. Genstar Container Corp. and
Transamerica Leasing, the two largest container leasing companies, had
approximately 50% of the worldwide leased container fleet at the end of 1995.
Some of the Leasing Company's competitors have greater financial resources than
the Leasing Company and may be more capable of offering lower per-diem rates on
a larger fleet. In the Leasing Company's experience, however, ocean carriers
will generally lease containers from more than one leasing company in order to
minimize dependence on a single supplier. In addition, not all container
leasing companies compete in the same market, as some supply only dry cargo
containers and not specialized containers, while others offer only long- term
leasing.
(c)(1)(xi) Inapplicable.
(c)(1)(xii) Inapplicable.
(c)(1)(xiii) The Registrant, as a limited partnership, is managed by CCC,
the managing general partner, and accordingly does not itself have any
employees. CCC has 27 employees, consisting of 5 officers, 4 other managers
and 18 clerical and staff personnel.
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(d) Financial Information About Foreign and Domestic Operations and Export
Sales
The Registrant's business is not divided between foreign or domestic
operations. The Registrant's business is the leasing of containers worldwide
to ocean-going steamship companies. To this extent the Registrant's operations
are subject to the fluctuations of worldwide economic and political conditions
that may affect the pattern and levels of world trade.
Rental income from leases to foreign customers constituted approximately 90%
of the Registrant's total rental income for the years 1995, 1994 and 1993. The
Registrant 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 Registrant's leases generally require all payments to
be made in United States currency.
Item 2. Properties
As of December 31, 1995, the Registrant owned 3,660 twenty-foot and 2,668
forty-foot marine dry cargo containers suitable for transporting of cargo by
rail, sea or highway. The Registrant's containers were originally acquired
from four container manufacturers located in Japan and Korea. The average age
and manufacturers' invoice cost of the containers in the Registrant's fleet as
of December 31, 1995 was as follows:
Estimated
Useful Life Average Age Average Cost
----------- ----------- ------------
20-Foot Dry Cargo Containers 10-15 years 13 years $ 1,791
40-Foot Dry Cargo Containers 10-15 years 11 years $ 2,613
Utilization by lessees of the Registrant's containers fluctuates over time
depending on the supply of and demand for containers in the Registrant's
inventory locations. During 1995, utilization averaged 87%.
During 1995, the Registrant disposed of 1,257 twenty-foot and 343 forty-foot
marine dry cargo containers at an average book gain of $459 per container.
Item 3. Legal Proceedings
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
(a) Market Information
(a)(1)(i) The Registrant's outstanding units of limited partnership
interests are not traded on any market nor does an established public trading
market exist for such purposes.
(a)(1)(ii) Inapplicable.
(a)(1)(iii) Inapplicable.
(a)(1)(iv) Inapplicable.
(a)(1)(v) Inapplicable.
(a)(2) Inapplicable.
(b) Holders
Number of Unit Holders
(b)(1) Title of Class as of December 31, 1995
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Units of limited partnership
interests 1,821
(c) Dividends
Inapplicable. For the distributions made by the Registrant to its limited
partners, see Item 6 below, "Selected Financial Data."
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Item 6. Selected Financial Data
Year Ended December 31,
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1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Net lease revenue $ 1,811,397 $ 2,560,605 $ 3,253,735 $ 3,857,885 $ 4,207,750
Net earnings $ 1,855,842 $ 2,064,766 $ 2,319,944 $ 2,675,479 $ 2,971,876
Net earnings per unit of
limited partnership interest $ 66.29 $ 73.75 $ 82.87 $ 95.57 $ 106.16
Cash distributions per unit of
limited partnership interest $ 145.31 $ 113.75 $ 105.00 $ 121.25 $ 127.50
At year-end:
Total assets $ 6,794,629 $ 9,282,439 $11,466,757 $13,038,645 $14,604,747
Long-term obligations $ -- $ -- $ 283,547 $ 1,344,421 $ 2,297,035
Partners' capital $ 6,794,629 $ 8,996,314 $10,110,113 $10,720,726 $11,423,649
- --------------------
Item 7. Management's Discussion and Analysis of Financial Condition and Result
of Operations
Liquidity and Capital Resources
At December 31, 1995, the Registrant had $1,486,819 in cash and cash
equivalents, a decrease of $421,377 and $623,949 from the December 31, 1994 and
1993 balances, respectively. Contributing to the decline in cash was the
Registrant's declining fleet size, as well as lower per-diem rental rates
during 1995.
During the Registrant's first 11 years of operations, its primary
objective was to generate cash flow from operations for distribution to its
limited partners. Aside from the initial working capital reserve retained from
the gross subscription proceeds (equal to approximately 0.3% of such proceeds),
the Registrant relied primarily on container rental receipts to meet this
objective as well as to finance current operating needs. No credit lines are
maintained to finance working capital. Commencing in 1992, the Registrant's
11th year of operations, the Registrant began focusing its attention on the
disposition of its fleet in accordance with another of its original investment
objectives, realizing the residual value of its containers after the expiration
of their economic useful lives, estimated to be between 10 to 15 years after
placement in leased service. During this phase, the Registrant began actively
disposing of its container fleet, while cash proceeds from equipment disposals,
in addition to cash from operations, provided the cash flow for distributions
to the limited partners. The decision to dispose of containers is influenced
by various factors including age, condition, suitability for continued leasing,
as well as the geographical location when disposed. Cash generated from sales
proceeds is expected to increase in subsequent periods as the number of
container disposals increase. Cash generated from sales proceeds totaled
$1,738,290, $1,516,869 and $557,540 for the years ended December 31, 1995, 1994
and 1993, respectively. Since December 31, 1994, CCC has monitored the
Registrant's fleet size and results of operations, and has reviewed various
alternatives and opportunities for selling the remaining containers. CCC
expects to continue monitoring these factors throughout the 1996 fiscal year.
However, the Registrant will continue disposing its containers as opportunities
arise. The Registrant's continuing efforts to dispose of the remaining fleet
should produce lower operating results and, consequently, lower distributions
to its partners in subsequent periods.
The Registrant's allowance for doubtful accounts increased from $230,408 in
1994 to $302,643 in 1995. The Leasing Company has either negotiated specific
payment terms or is pursuing other alternatives in an attempt to collect the
outstanding receivable balances. During 1995, the Leasing Company concentrated
on improving the credit quality of its customer portfolio. The Registrant
expects to benefit from the improvement in the credit quality of this customer
portfolio, as the allowance for doubtful accounts and related expenses should
decline in subsequent periods.
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The final payment of principal and interest on the Registrant's debt was
paid in February 1995. As a result, the additional cash generated subsequent
to the debt repayment, as well as excess working capital, were distributed to
the Registrant's partners, resulting in an increase in cash distributions and
incentive fees during 1995.
Distributions from operations are allocated 1% to the general partners and
99% to the limited partners, until the limited partners have received a
cumulative return of 12% per annum on their adjusted capital contributions.
Thereafter, the distributions are allocated 50% to the general partners and 50%
to the limited partners. This sharing arrangement has been in place since this
threshold was reached during 1989. Distributions from operations to the
general partners in excess of 1% of distributable cash are considered to be
incentive fees and are compensation to the general partners.
From inception through February 29, 1996, the Registrant has distributed
$28,239,001 in cash from operations and $5,109,702 in cash from sales proceeds
to its limited partners. This represents a total distribution of $33,348,703,
or 241% of the Registrant's original limited partners' investment.
Distributions to the partners are determined and paid quarterly, based
primarily on each quarter's cash flow from operations and cash generated from
container sales. Quarterly distributions are also affected by periodic
increases or decreases to working capital reserves, as deemed appropriate by
the managing general partner.
The container leasing market generally softened during the fourth quarter of
1995 and has remained so during the early months of 1996. Demand for leased
containers remains stable in some areas of the world; however, sluggish
activity in other markets, particularly in Southeast Asia, has resulted in an
increase in container inventories. The current market conditions cannot be
attributed to any one factor; rather, a series of factors, in combination, have
resulted in a slowdown in leasing activity. Some of the contributing factors
are: a slowdown in some European economies, as well as in some Far East
exporting countries; increased efficiencies in the shipping industry through
the formation of alliances between shipping lines; and a prolonged seasonal
slowdown in container demand during the holiday season. Although some further
softening in market conditions may be anticipated, the volume of world trade
continues to grow and the long-term outlook is a positive one.
Results of Operations
1995 - 1994
In 1995, the Registrant's operations were impacted by its declining fleet
size, increasingly competitive market conditions, including, but not limited
to, the container leasing market's resistance to higher per-diem rental rates,
an expanding supply of containers within the container industry, as well as the
shipping industry's trend towards consolidation. The Registrant's net lease
revenue is determined by deducting direct operating expenses, management fees
and reimbursed administrative expenses, from rental revenues billed by the
Leasing Company from the leasing of the Registrant's containers. The
Registrant's net lease revenue is directly related to the size of its fleet and
the utilization and per-diem rental rates of the equipment owned by the
Registrant. Net lease revenue declined by approximately 29%, when compared to
1994. The Registrant expects net lease revenue to decline in subsequent
periods as it continues to dispose of its remaining fleet.
Utilization rates increased slightly from an average of 86% during 1994 to
an average of 87% during 1995. However, a 1% decline in average per-diem
rental rates and a declining fleet size, contributed to a 14% and 24% decline
in gross rental revenue and rental equipment operating expenses, respectively.
During 1995, the Registrant's average fleet size (as measured in twenty-foot
equivalent units ("TEU")) was 9,951 TEU, as compared to 11,821 TEU in 1994.
11
12
At December 31, 1995, 59% of the original equipment remained in the
Registrant's fleet, and was comprised of the following:
20-Foot 40-Foot
------------- -------------
Containers on lease:
Term leases 311 380
Master lease 2,684 1,849
----- -----
Subtotal 2,995 2,229
Containers off lease 665 439
------ -----
Total container fleet 3,660 2,668
===== =====
20-Foot 40-Foot
---------------- -----------------
Units % Units %
----- ----- ----- ------
Total purchases 7,097 100% 3,647 100%
Less disposals 3,437 48% 979 27%
----- ---- ------ ----
Remaining fleet at December 31, 1995 3,660 52% 2,668 73%
===== ==== ===== ====
The Registrant disposed of 1,257 twenty-foot and 343 forty-foot marine dry
cargo containers during 1995, as compared to 1,053 twenty-foot and 335
forty-foot marine dry cargo containers during 1994. As a result, approximately
40% of the Registrant's net earnings for 1995 were from gain on disposal of
equipment, as compared to 23% for 1994. 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.
The Registrant's aging and declining fleet contributed to a 17% decline in
depreciation expense during 1995. The Registrant's base management fee, a
fixed fee based on the size of the Registrant's fleet declined by $174,826 , or
approximately 17%, during 1995. The extinguishment of the Registrant's debt
during the first quarter of 1995 contributed to an increase in incentive fees,
which are performance-based fees subject to the operating results of the fleet
and cash generated and distributed from operations. These management fees are
expected to decline in subsequent periods as the Registrant's disposal
activities continue.
1994 - 1993
The container leasing industry began to benefit from a global economic
recovery during the latter half of 1994, experiencing an improvement in
conditions that existed during 1993, including an upward trend in utilization
rates, a reduction in container inventories, and a stabilization of declining
per-diem rental rates during the fourth quarter of 1994. However, the age and
condition of the Registrant's fleet, combined with the effects of a declining
fleet size and lower average per-diem rental rates during 1994, resulted in a
reduction of net lease revenue by approximately 21%, when compared to 1993.
The Registrant's average per-diem rental rates during 1994 were 5% lower than
1993 levels. Utilization averaged 86% during 1994, the same as the average
rate experienced during 1993.
12
13
At December 31, 1994, the Registrant's fleet was comprised of the following:
20-Foot 40-Foot
------------- ------------
Containers on lease:
Term leases 630 558
Master lease 3,605 2,106
----- -----
Subtotal 4,235 2,664
Containers off lease 682 347
------ -----
Total container fleet 4,917 3,011
===== =====
20-Foot 40-Foot
----------------- -----------------
Units % Units %
----- ------ ----- ------
Total purchases 7,097 100% 3,647 100%
Less disposals 2,180 31% 636 17%
----- ---- ----- ----
Remaining fleet at December 31, 1994 4,917 69% 3,011 83%
===== ==== ===== ====
During 1994, the Registrant continued to focus on its initial objectives,
and disposed of 1,053 twenty-foot and 335 forty-foot dry cargo containers, as
compared to disposals of 515 twenty-foot and 158 forty-foot dry cargo
containers during 1993. By the end of 1994, the Registrant had disposed of 26%
of its original fleet. As a result, approximately 23% of the Registrant's net
earnings were from gains on disposal of equipment, as compared to 11% during
the prior year.
Depreciation expense declined as a result of the aging and declining size of
the Registrant's fleet. Rental equipment direct operating expenses increased
during 1994 as a result of increased turnover activity which contributed to
higher storage and handling expenses. Additionally, the provision for doubtful
accounts increased from $63,475 in 1993 to $234,313 in 1994. These increases
combined to offset the benefit received from a decline in repair and
maintenance costs. The Registrant's base management fee is a fixed fee based
on the size of the Registrant's fleet. This management fee declined by
$101,973, or approximately 9%, during 1994. Incentive fees declined $275,072,
or approximately 33%, from 1993.
Interest expense declined as the Registrant's existing debt continued to be
repaid. At December 31, 1994, one quarterly installment of principal and
interest remained to be paid.
Item 8. Financial Statements and Supplementary Data
13
14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Partners
IEA Marine Container Income Fund IV
(A California Limited Partnership):
We have audited the accompanying balance sheets of IEA Marine Container Income
Fund IV (A California Limited Partnership) as of December 31, 1995 and 1994 and
the related statements of operations, partners' capital and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IEA Marine Container Income
Fund IV (A California Limited Partnership) as of December 31, 1995 and 1994,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
San Francisco, California,
March 15, 1996
14
15
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
Assets 1995 1994
---- ----
Current assets:
Cash, includes $236,559 in 1995 and $246,731
in 1994 in interest-bearing accounts $ 236,819 $ 258,196
Short-term investments (note 2) 1,250,000 1,650,000
Net lease receivables due from Leasing Company
(notes 1 and 4) 747,402 1,075,455
----------- -----------
Total current assets 2,234,221 2,983,651
----------- -----------
Container rental equipment, at cost 14,203,296 17,372,943
Less accumulated depreciation 9,642,888 11,074,433
----------- -----------
Net container rental equipment 4,560,408 6,298,510
----------- -----------
Other assets, net (note 3) -- 278
----------- -----------
$ 6,794,629 $ 9,282,439
=========== ===========
Liabilities and Partners' Capital
Current liabilities:
Current portion of equipment debt (note 6) $ -- $ 283,547
Interest payable (note 6) -- 2,578
----------- -----------
Total current liabilities -- 286,125
----------- -----------
Partners' capital (note 9):
General partners 35,782 47,386
Limited partners 6,758,847 8,948,928
----------- -----------
Total partners' capital 6,794,629 8,996,314
----------- -----------
$ 6,794,629 $ 9,282,439
=========== ===========
The accompanying notes are an integral part of these statements.
15
16
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
---- ---- ----
Net lease revenue (notes 1 and 7) $ 1,811,397 $ 2,560,605 $ 3,253,735
Other operating expenses:
Depreciation and amortization (notes 1 and 3) 740,116 893,749 999,588
Other general and administrative expenses 45,371 69,374 47,785
----------- ----------- -----------
785,487 963,123 1,047,373
----------- ----------- -----------
Earnings from operations 1,025,910 1,597,482 2,206,362
Other income (expense):
Interest income 100,313 77,528 62,131
Interest expense (5,156) (94,601) (203,846)
Net gain on disposal of equipment 734,775 484,357 255,297
----------- ----------- -----------
829,932 467,284 113,582
----------- ----------- -----------
Net earnings $ 1,855,842 $ 2,064,766 $ 2,319,944
=========== =========== ===========
Allocation of net earnings:
General partners $ 18,558 $ 20,648 $ 23,200
Limited partners 1,837,284 2,044,118 2,296,744
----------- ----------- -----------
$ 1,855,842 $ 2,064,766 $ 2,319,944
=========== =========== ===========
Limited partners' per unit share of net earnings $ 66.29 $ 73.75 $ 82.87
=========== =========== ===========
The accompanying notes are an integral part of these statements.
16
17
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Limited
Partners General
(note 9) Partners Total
-------- -------- -----
Balances at January 1, 1993 $10,670,766 $ 49,960 $10,720,726
Net earnings 2,296,744 23,200 2,319,944
Cash distributions (2,910,096) (20,461) (2,930,557)
----------- -------- -----------
Balances at December 31, 1993 10,057,414 52,699 10,110,113
Net earnings 2,044,118 20,648 2,064,766
Cash distributions (3,152,604) (25,961) (3,178,565)
----------- -------- -----------
Balances at December 31, 1994 8,948,928 47,386 8,996,314
Net earnings 1,837,284 18,558 1,855,842
Cash distributions (4,027,365) (30,162) (4,057,527)
----------- -------- -----------
Balances at December 31, 1995 $ 6,758,847 $ 35,782 $ 6,794,629
=========== ======== ===========
The accompanying notes are an integral part of these statements.
17
18
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net earnings $ 1,855,842 $ 2,064,766 $ 2,319,944
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 740,116 893,749 999,588
Net gain on disposal of equipment (734,775) (484,357) (255,297)
Decrease in net lease receivables due from
Leasing Company 322,525 55,486 55,097
Decrease in interest payable (2,578) (9,645) (8,661)
----------- ----------- -----------
Total adjustments 325,288 455,233 790,727
----------- ----------- -----------
Net cash provided by operating activities 2,181,130 2,519,999 3,110,671
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from disposal of equipment 1,738,290 1,516,869 557,540
----------- ----------- -----------
Cash flows used in financing activities:
Principal payment of long-term debt (283,270) (1,060,875) (952,614)
Distributions to partners (4,057,527) (3,178,565) (2,930,557)
----------- ----------- -----------
Net cash used in financing activities (4,340,797) (4,239,440) (3,883,171)
----------- ----------- -----------
Net decrease in cash and cash equivalents (421,377) (202,572) (214,960)
Cash and cash equivalents at beginning at year 1,908,196 2,110,768 2,325,728
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,486,819 $ 1,908,196 $ 2,110,768
=========== =========== ===========
Supplemental disclosures for cash flow information:
Cash paid during the year for:
Interest $ 7,734 $ 104,246 $ 212,507
=========== =========== ===========
The accompanying notes are an integral part of these statements.
18
19
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
IEA Marine Container Income Fund IV (A California Limited
Partnership) (the "Partnership") was organized under the laws of the
State of California on November 25, 1981 for the purpose of owning
and leasing marine cargo containers. The managing general partner
is Cronos Capital Corp. ("CCC"); the associate general partner is
Smith Barney Shearson, Inc. CCC, with its affiliate Cronos
Containers Limited (the "Leasing Company"), manages and controls the
business of the Partnership.
The Partnership commenced operations on March 19, 1982, 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 December
31, 1982, at which time 27,715 limited partnership units had been
purchased.
As of December 31, 1995, the Partnership owned and operated 3,660
twenty-foot and 2,668 forty-foot marine dry cargo containers.
(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; 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.
19
20
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(c) Basis of Accounting
The Partnership utilizes the accrual method of accounting. Revenue is
recorded when earned.
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.
(d) Allocation of Net Earnings and Partnership Distributions
Net earnings have been allocated between general and limited partners
in accordance with the Partnership Agreement.
Actual cash distributions differ from the allocations of net
earnings between the general and limited partners as presented in
these financial statements. Partnership distributions are based on
"distributable cash" and are paid to the general and limited
partners on a quarterly basis, in accordance with the provisions of
the Partnership Agreement. Distributions from operations are
allocated 1% to the general partners and 99% to the limited partners
until the limited partners have received a 3% cumulative quarterly
return on their adjusted capital contributions and thereafter 50% to
the limited partners and 50% to the general partners. In addition,
proceeds from container sales are also made quarterly; first to the
limited partners until they have received distributions equal to
their capital contributions; thereafter 99% to the limited partners
and 1% to the general partners until the limited partners have
received cumulative distributions equal to 8% per annum on their
adjusted capital contributions and thereafter 75% to the limited
partners and 25% to the general partners.
Cash payments from operations to the general partners in excess of
1% of distributable cash are considered to be incentive fees (as
defined by the Partnership Agreement) and are compensation to the
general partners. Incentive fees are charged to expense in the
period incurred.
(e) Rental Equipment - Depreciation
Rental equipment is depreciated over a twelve-year life on a
straight-line basis to its estimated salvage value.
(f) Amortization
Loan origination fees were amortized over the term of the loan.
(g) Income Taxes
The Partnership is not subject to income taxes, consequently no
provision for income taxes has been made. The Partnership files an
annual information tax return, prepared on the accrual basis of
accounting. At December 31, 1995, the tax basis of total partners'
capital was $4,548,955.
20
21
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(h) Foreign Operations
The Partnership's business is not divided between foreign or
domestic operations. The Partnership's business is the leasing of
containers worldwide to ocean-going steamship companies and does not
fit the definition of reportable foreign operations within Financial
Accounting Standards Board Statement No. 14 "Financial Reporting for
Segments of a Business Enterprise." 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.
(i) Financial Statement Presentation
The Partnership has determined that for accounting purposes the
Leasing Agent Agreement is a lease, and the receivables, payables,
gross revenues and operating expenses attributable to the containers
managed by the Leasing Company are, for accounting purposes, those
of the Leasing Company and not of the Partnership. Consequently,
the Partnership's balance sheets and statement of operations display
the payments to be received by the Partnership from the Leasing
Company as the Partnership's receivables and revenues.
(2) Short-term Investments
Short-term investments are carried at cost which approximates market
value. Short-term investments with an original maturity of less than three
months are considered cash equivalents.
(3) Other Assets
Loan origination fees of $54,940 were incurred during 1986. These fees
were fully amortized by 1990. Additional loan origination fees of $5,000
were incurred during 1990. Total loan fees charged to costs and expenses
for each of the years ended December 31, 1995, 1994 and 1993 were $278,
$1,111 and $1,111, respectively.
(4) 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, and incentive
fees 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 December 31, 1995 and December 31, 1994 were as follows:
December 31, December 31,
1995 1994
------------ ------------
Lease receivables, net of doubtful accounts
of $302,643 in 1995 and $230,408 in 1994 $1,332,907 $1,773,027
Less:
Direct operating payables and accrued expenses 288,975 276,411
Damage protection reserve (note 5) 120,737 232,013
Incentive fees 175,793 189,148
---------- ----------
$ 747,402 $1,075,455
========== ==========
21
22
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(5) Damage Protection Plan
The Leasing Company offers a repair service to several lessees of the
Partnership's containers, whereby the lessee pays an additional rental fee
for the convenience of having the Partnership incur the repair expense for
containers damaged while on lease. This revenue is recorded when earned
according to the terms of the rental contract. A reserve has been
established to provide for the estimated costs incurred by this service.
This reserve is a component of net lease receivables due from the Leasing
Company (see note 4). The Partnership is not responsible in the event
repair costs exceed predetermined limits, or for repairs that are required
for damages not defined by the damage protection plan agreement.
(6) Equipment Debt
On August 31, 1990, the Partnership entered into an agreement with a bank
to borrow $4,100,000 and refinance the outstanding balances of its existing
notes. The note was repaid on February 28, 1995. Interest accrued at a
fixed rate of 10.91% per annum.
(7) Net Lease Revenue
Net lease revenue is determined by deducting direct operating expenses and
management fees to CCC 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 years ended December 31,
1995, 1994 and 1993, was as follows:
1995 1994 1993
---- ---- ----
Rental revenue (note 10) $4,745,194 $5,482,891 $6,540,987
Rental equipment operating expenses 1,035,647 1,366,060 1,353,981
Base management fees (note 8) 830,940 1,005,766 1,107,739
Incentive fees (note 8) 1,067,210 550,460 825,532
---------- ---------- ----------
$1,811,397 $2,560,605 $3,253,735
========== ========== ==========
(8) Compensation to Managing General Partner
Base management fees are equal to $0.25 per day per twenty-foot and $0.43
per day per forty-foot container owned by the Partnership pursuant to
Section 4.3 of the Partnership Agreement. Incentive management fees are
equal to 50% of the remaining distributable cash from operations after a
cumulative return to the limited partners of 12% per annum of their
adjusted capital contributions pursuant to Section 4.4 of the Partnership
Agreement.
22
23
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(9) Limited Partners' Capital
Cash distributions made to the limited partners during 1995, 1994 and 1993
included distributions of proceeds from equipment sales in the amount of
$1,740,861, $1,143,252, and $519,660, respectively. These distributions
are treated as a reduction of "Adjusted Capital Contributions" as defined
by the Partnership Agreement.
The limited partners' per unit share of capital at December 31, 1995, 1994
and 1993 was $244, $323, and $363, respectively. This is calculated by
dividing the limited partners' capital at the end of the year by 27,715,
the total number of limited partnership units.
(10) Major Lessees
No single lessee contributed more than 10% of the rental revenue earned
during 1995, 1994 and 1993.
23
24
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Inapplicable.
24
25
PART III
Item 10. Directors and Executive Officers of the Registrant
The Registrant, as such, has no officers or directors, but is managed by
CCC, the managing general partner. The officers and directors of CCC at
January 31, 1996, are as follows:
Name Office
------------------- -----------------------------------------------
Dennis J. Tietz President, Chief Executive Officer and Director
John P. McDonald Vice President/Sales
Elinor Wexler Vice President/Administration and Secretary
John Kallas Vice President/Treasurer and Chief Financial
Laurence P. Sargent Director
Stefan M. Palatin Director
A. Darrell Ponniah Director
DENNIS J. TIETZ Mr. Tietz, 43, as President and Chief Executive Officer,
is responsible for the general management of CCC. From 1986 until August 1992,
Mr. Tietz was responsible for the organization, marketing and after-market
support of CCC's investment programs. Mr. Tietz is also President and a
director of Cronos Securities Corp. and a director of The Cronos Group. Mr.
Tietz was a regional manager for CCC, responsible for various container leasing
activities in the U.S. and Europe from 1981 to 1986. Prior to joining CCC in
December 1981, Mr. Tietz was employed by Trans Ocean Leasing Corporation as
Regional Manager based in Houston, with responsibility for all leasing and
operational activities in the U.S. Gulf.
Mr. Tietz holds a B.S. degree in Business Administration from San Jose State
University and is a Registered Securities Principal with the NASD.
JOHN P. MCDONALD Mr. McDonald, 34, was elected Vice President - National
Sales Manager of CCC in August 1992, with responsibility for marketing CCC's
investment programs. Since 1988, Mr. McDonald had been Regional Marketing
Manager for the Southwestern U.S. From 1983 to 1988, Mr. McDonald held a
number of container leasing positions with CCC, the most recent of which was as
Area Manager for Belgium and the Netherlands, based in Antwerp.
Mr. McDonald holds a B.S. degree in Business Administration from Bryant
College, Rhode Island. Mr. McDonald is also a Vice President of Cronos
Securities Corp.
ELINOR A. WEXLER Ms. Wexler, 47, was elected Vice President -
Administration and Secretary of CCC in August 1992. Ms. Wexler has been
employed by the General Partner since 1987, and is responsible for investor
services, compliance and securities registration. From 1983 to 1987, Ms.
Wexler was Manager of Investor Services for The Robert A. McNeil Corporation, a
real estate syndication company, in San Mateo, California. From 1971 to 1983,
Ms. Wexler held various positions, including securities trader and
international research editor, with Nikko Securities Co., International, based
in San Francisco.
Ms. Wexler attended the University of Oregon, Portland State University and
the Hebrew University of Jerusalem, Israel. Ms. Wexler is also Vice President
and Secretary of Cronos Securities Corp. and a Registered Principal with the
NASD.
JOHN KALLAS Mr. Kallas, 33, was elected Vice President/Treasurer and
Chief Financial Officer of CCC in December 1993 and is directly responsible for
CCC's accounting operations and reporting activities. Mr. Kallas has held
various accounting positions since joining CCC in 1989, including Controller,
Director of Accounting and Corporate Accounting Manager. From 1985 to 1989,
Mr. Kallas was an accountant with KPMG Peat Marwick, San Francisco,
California.
Mr. Kallas holds a B.S. degree in Business Administration from the
University of San Francisco and is a certified public accountant. Mr. Kallas
is also Treasurer of Cronos Securities Corp.
25
26
LAURENCE P. SARGENT Mr. Sargent, 66, joined the Board of Directors of
CCC in 1991. Mr. Sargent was a founder of Leasing Partners International
("LPI") and served as its Managing Director from 1983 until 1991. From 1977 to
1983, Mr. Sargent held a number of positions with Trans Ocean Leasing
Corporation, the last of which was as a director of its refrigerated container
leasing activities. From 1971 to 1977, Mr. Sargent was employed by SSI
Container Corporation (later Itel Container International), ultimately serving
as Vice President / Far East. Prior to that, Mr. Sargent was a Vice President
of Pacific Intermountain Express, a major U.S. motor carrier, responsible for
its bulk container division. Mr. Sargent holds a B.A. degree from Stanford
University. Mr. Sargent also serves as a director of the Institute of
International Container Lessors ("IICL"), an industry trade association. Mr.
Sargent is also a director of Cronos Securities Corp.
Mr. Sargent retired as Deputy Chairman of the Group as of January 1, 1996.
He will remain a director of CCC, The Cronos Group, as well as other various
subsidiaries of The Cronos Group.
STEFAN M. PALATIN Mr. Palatin, 42, joined the Board of Directors of CCC
in January 1993. Mr. Palatin is Chairman and CEO of The Cronos Group, and was
a founder of LPI in 1983. From 1980 to 1991, Mr. Palatin was an executive
director of the Contrin Group, which has provided financing to the container
leasing industry, as well as other business ventures, and has sponsored limited
partnerships organized in Austria. From 1977 to 1980, Mr. Palatin was a
consultant to a number of companies in Austria, including Contrin. From 1973
to 1977, Mr. Palatin was a sales manager for Generali AG, the largest insurance
group in Austria.
Mr. Palatin, who is based in Austria, holds a Doctorate in Business
Administration from the University of Economics and World Trade in Vienna. Mr.
Palatin is also a director of The Cronos Group.
A. DARRELL PONNIAH Mr. Ponniah, 46, was elected to the Board of
Directors of CCC in January 1993. Mr. Ponniah is Chief Financial Officer of
The Cronos Group and is based in the United Kingdom. Prior to joining Cronos
in 1991, Mr. Ponniah was employed by the Barclays Bank Group and served as
Chief Operating Officer of Barclays European Equipment Finance. From 1973 to
1988, Mr. Ponniah was employed by Rank Xerox, the European-based subsidiary of
Xerox Corporation of the U.S.A., in a number of positions, the most recent of
which was as Group Controller and Chief Financial Officer of the International
Equipment Financing Division of Rank Xerox Limited.
Mr. Ponniah is an honors graduate of Manchester University in England and
holds post graduate degrees in operational research from Brunel University and
in Business Administration from the Manchester Business School. Mr. Ponniah is
also a director of The Cronos Group and Cronos Securities Corp.
The key management personnel of the Leasing Company at January 31, 1996,
were as follows:
Name Title
------------------- ---------------------------------------------
Nigel J. Stribley President
John M. Foy Vice President/Americas
Geoffrey J. Mornard Vice President/Europe, Middle East and Africa
Danny Wong Vice President/Asia Pacific
David Heather Vice President/Technical Services
John C. Kirby Vice President/Operations
J. Gordon Steel Vice President/Tank Container Division
NIGEL J. STRIBLEY Mr. Stribley, 42, has been responsible for the general
management of the Leasing Company since September 1991. From 1985 to 1991, Mr.
Stribley was a director of LPI, based in the United Kingdom and responsible for
worldwide lease marketing and operations of refrigerated containers. From 1978
to 1985, Mr. Stribley was employed by Sea Containers Limited, London, where he
was involved in refrigerated container leasing, ultimately as Manager of
Refrigerated Containers with responsibility for world-wide activities. From
1975 to 1978, Mr. Stribley was employed by Sealand Containerships, Ltd., the
United Kingdom subsidiary of a major U.S. container shipping company, as a
management trainee and later as Operations Manager and a Container Terminal
Manager.
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Mr. Stribley holds a BA degree with honors from Bristol University in
England. Mr. Stribley is a director of The Cronos Group.
JOHN M. FOY Mr. Foy, 50, is directly responsible for the Leasing
Company's lease marketing and operations in North America, Central America, and
South America, and is based in San Francisco. From 1985 to 1993, Mr. Foy was
Vice President/Pacific with responsibility for dry cargo container lease
marketing and operations in the Pacific Basin. From 1977 to 1985 Mr. Foy was
Vice President of Marketing for Nautilus Leasing Services in San Francisco with
responsibility for worldwide leasing activities. From 1974 to 1977, Mr. Foy
was Regional Manager for Flexi-Van Leasing, a container lessor, with
responsibility for container leasing activities in the Western United States.
Mr. Foy holds a B.A. degree in Political Science from University of the
Pacific, and a Bachelor of Foreign Trade from Thunderbird Graduate School of
International Management.
GEOFFREY J. MORNARD Mr. Mornard, 36, is directly responsible for the
Leasing Company's lease marketing and operations in Europe, the Middle East and
Africa. From 1991 to 1993, Mr. Mornard was Director of Marketing for
refrigerated containers in Australia and New Zealand. From 1989 to 1991, Mr.
Mornard held the same position with LPI. From 1979 to 1989, Mr. Mornard was
employed by Cooltainer Services, Ltd., a refrigerated container carrier
company, initially as Melbourne Branch Manager, later as Sydney Branch Manager,
and ultimately as Australian Trade Manager, responsible for marketing and
operations of all container traffic to and from Australia.
DANNY WONG Mr. Wong, 42, is responsible for the Leasing Company's lease
marketing and operations in Asia, Australia and the Indian sub-continent, and
is based in Singapore. From 1991 to 1993, Mr. Wong was Vice
President/Refrigerated Containers, responsible for the marketing of
refrigerated containers worldwide for the Leasing Company. From 1988 to 1991,
Mr. Wong was employed by LPI, as Director of Marketing for the Far East and
Southeast Asia based in Singapore. From 1987 to 1988, Mr. Wong was a district
manager in Singapore covering leasing activities in Southeast Asia for Gelco
CTI, a major container leasing company. From 1979 to 1987, Mr. Wong was
employed by Flexi-Van Leasing in Singapore as a sales manager and later as
Regional Manager for Southeast Asia and the Indian sub-continent. Mr. Wong
holds a Diploma in Marketing Management from the Singapore Institute of
Management.
DAVID HEATHER Mr. Heather, 48, is responsible for all technical and
engineering activities of the fleet managed by the Leasing Company. Mr.
Heather was Technical Director for LPI, based in the United Kingdom, from 1986
to 1991. From 1980 to 1986, Mr. Heather was employed by ABC Containerline NV
as Technical Manager with technical responsibility for the shipping line's
fleet of dry cargo, refrigerated and other specialized container equipment.
From 1974 to 1980, Mr. Heather was Technical Supervisor for ACT Services Ltd.,
a shipping line, with responsibility for technical activities related to
refrigerated containers. Mr. Heather holds a Marine Engineering Certificate
from Riversdale Marine Technical College in England.
JOHN C. KIRBY Mr. Kirby, 42, is responsible for container purchasing,
contract and billing administration, container repairs and leasing-related
systems, and is based in the United Kingdom. Mr. Kirby joined CCC in 1985 as
European Technical Manager and advanced to Director of European Operations in
1986, a position he held with CCC, and later the Leasing Company, until his
promotion to Vice President/Operations of the Leasing Company in 1992. From
1982 to 1985, Mr. Kirby was employed by CLOU Containers a container leasing
company, as Technical Manager based in Hamburg, Germany. Mr. Kirby acquired a
professional engineering qualification from the Mid-Essex Technical College in
England.
J. GORDON STEEL Mr. Steel, 63, is directly responsible for the overall
lease marketing activity for the Leasing Company's Tank Container Division.
From 1990 to 1992, Mr. Steel held the position of Director/General Manager for
Tiphook Container's Tank Division. From 1977 to 1990, Mr. Steel held various
managerial positions, involving manufacturing and transportation of hazardous
materials, with Laporte Industries and ICI, major chemical distribution
companies. Mr. Steel is a qualified Chemical Engineer and attended the
Associate Royal Technical College in Scotland.
27
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Item 11. Executive Compensation
The Registrant pays a base management fee to the managing general partner as
set forth in the table below.
The Registrant also makes quarterly distributions to its partners (general
and limited) from cash generated from operations, allocated 1% thereof to the
general partners and 99% thereof to the limited partners until the limited
partners have received a 3% cumulative quarterly return on their adjusted
capital contributions and thereafter 50% to the limited partners and 50% to the
general partners. In addition, proceeds from container sales are also made
quarterly; first to the limited partners until the limited partners have
received cumulative distributions equal to their capital contributions;
thereafter, 99% to the limited partners and 1% to the general partners until
the limited partners have received cumulative distributions equal to 8% per
annum on their adjusted capital contributions and, thereafter, 75% to the
limited partners and 25% to the general partners. (See the Limited Partnership
Agreement for a complete discussion of the sharing arrangement for the sale
proceeds.)
The Registrant does not pay or reimburse CCC or the associate general
partner for any remuneration payable by them to their officers, directors or
employees. All remuneration payable by CCC to its officers, directors and
employees, and all of CCC's corporate overhead incurred in connection with the
operation of the Registrant, is borne by CCC from the fees payable to it by the
Registrant and from other income earned by CCC.
The following table sets forth the fees the Registrant paid (on a cash
basis) to CCC and Smith Barney Shearson, Inc., the associate general partner of
the Registrant, for the fiscal year 1995.
Cash Fees and
Name Description Distributions
---- ----------- ---------------
1) CCC Base management fees - equal to $0.25 per $ 830,940
day per 20-foot container and $0.43 per
day per 40-foot container owned by the
Registrant pursuant to Section 4.3 of the
Limited Partnership Agreement
2) CCC Interest in Fund - 1% of distributable cash for $ 12,284
any quarter prior to receipt of the incentive
management fee pursuant to Section 4.6 of
the Limited Partnership Agreement
3) CCC Interest in Fund - 1% of sales proceeds for $ 15,825
any quarter pursuant to Section 4.5 of
Smith Barney the Limited Partnership Agreement
Shearson, Inc. $ 1,759
4) CCC Incentive management fee - 50% of the $ 1,080,859
remaining distributable cash from operations
after a cumulative return to the Limited
Partners of 12% per annum of their adjusted
capital contributions pursuant to Section 4.4
of the Limited Partnership Agreement
28
29
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
There is no person or "group" of persons known to the management of CCC, the
managing general partner of the Registrant, to be the beneficial owner of more
than five percent of the outstanding units of limited partnership interests of
the Registrant.
(b) Security Ownership of Management
The Registrant has no directors or officers. It is managed by CCC, the
managing general partner. Ownership of units of limited partnership interests
of the Registrant by CCC, its officers and/or directors of CCC is as follows:
Number Percent of
Name of Beneficial Owner of Units All Units
------------------------ -------- -----------
Laurence P. Sargent 22.0 .079%
Dennis J. Tietz 40.0 .144%
Elinor Wexler 5.0 .018%
John P. McDonald 46.0 .166%
Cronos Capital Corp. 134.0 .484%
----- -----
Officers, Directors and CCC as a Group 247.0 .891%
===== =====
(c) Changes in Control
Inapplicable.
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others
The Registrant's only transactions with management and other related parties
during 1995 were limited to those fees paid or amounts committed to be paid (on
an annual basis) to CCC, the managing general partner, and Smith Barney
Shearson, Inc., the associate general partner. See Item 11, "Executive
Compensation," herein.
(b) Certain Business Relationships
Inapplicable.
(c) Indebtedness of Management
Inapplicable.
(d) Transactions with Promoters
Inapplicable.
29
30
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1. Financial Statements
Page
----
The following financial statements of the Registrant are included in Part II, Item 8:
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . 14
Balance sheets - December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . 15
Statements of operations - for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . 16
Statements of partners' capital - for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . 17
Statements of cash flows - for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . 18
Notes to financial statements . . . . . . . . . . . . . . . . . . . . . . . . 19
All other schedules are omitted as the information is not required or the
information is included in the financial statements or notes thereto.
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31
(a)3. Exhibits
Exhibit
No. Description Method of Filing
- --------- ----------- ----------------
3(a) Limited Partnership Agreement of the Registrant, amended and *
restated as of January 15, 1982
3(b) Certificate of Limited Partnership of the Registrant **
27 Financial Data Schedule Filed with this document
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
quarter ended December 31, 1995
- -------------------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated January 18, 1982, included as part of Registration
Statement on Form S-1 (No. 2-75378)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement on
Form S-1 (No. 2-75378)
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32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 IV
(A California Limited Partnership)
By Cronos Capital Corp.
The Managing General Partner
By /s/ John Kallas
----------------------------------------------------
John Kallas
Vice President/Treasurer and Chief Financial Officer
Principal Accounting Officer
Date: March 28, 1996
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Cronos
Capital Corp., the managing general partner of the Registrant, in the
capacities and on the dates indicated:
Signature Title Date
/s/ Dennis J. Tietz President and Director of March 28, 1996
- ------------------------------ Cronos Capital Corp.
Dennis J. Tietz ("CCC") (Principal Executive
Officer of CCC)
/s/ John Kallas Vice President/Treasurer and March 28, 1996
- ------------------------------ Chief Financial Officer
John Kallas (Principal Accounting Officer
of CCC)
/s/ Laurence P. Sargent Director of CCC March 28, 1996
- ------------------------------
Laurence P. Sargent
/s/ A. Darrell Ponniah Director of CCC March 28, 1996
- ------------------------------
A. Darrell Ponniah
SUPPLEMENTAL INFORMATION
The Registrant's annual report will be furnished to its limited partners on
or about April 30, 1996. Copies of the annual report will be concurrently
furnished to the Commission for information purposes only, and shall not be
deemed to be filed with the Commission.
33
EXHIBIT INDEX
Exhibit
No. Description Method of Filing
- --------- ----------- ----------------
3(a) Limited Partnership Agreement of the Registrant, amended and *
restated as of January 15, 1982
3(b) Certificate of Limited Partnership of the Registrant **
27 Financial Data Schedule Filed with this document
- --------------------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated January 18,1982, included as part of Registration
Statement on Form S-1 (No. 2-75378)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-1 (No. 2-75378)