<PAGE> 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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
------ ------
Commission file number 0-9736
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
(Exact name of registrant as specified in its charter)
California 94-2671761
(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 .
--- ---
<PAGE> 2
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1996 (unaudited) and
December 31, 1995 4
Statements of Operations for the three and nine months
ended September 30, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Forms 8-K during the period 11
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of September
30, 1996 and December 31, 1995, statements of operations for the three
and nine months ended September 30, 1996 and 1995, and statements of
cash flows for the nine months ended September 30, 1996 and 1995.
3
<PAGE> 4
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Assets
Current assets:
Cash, includes $34,821 at September 30, 1996 and $19,376
at December 31, 1995 in interest-bearing accounts $ 36,820 $ 19,586
Short-term investments 716,858 730,000
Net lease receivables due from Leasing Company
(notes 1 and 2) -- 66,618
-------- --------
Total current assets 753,678 816,204
-------- --------
$753,678 $816,204
======== ========
Liabilities and Partners' Capital
Current liabilities:
Accounts payable and accrued expenses $ 32,825 $ 6,943
-------- --------
Total current liabilities 32,825 6,943
-------- --------
Partners' capital:
General partners 243 1,127
Limited partners 720,610 808,134
-------- --------
Total partners' capital 720,853 809,261
-------- --------
$753,678 $816,204
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net lease revenue (expense) (notes 1 and 3) $ (25,309) $ (4,351) $ (38,306) $ 193,784
Other operating expenses:
Other general and administrative expenses 17,870 4,816 27,475 23,095
--------- --------- --------- ---------
Earnings (loss) from operations (43,179) (9,167) (65,781) 170,689
Other income:
Interest income 9,423 10,700 27,879 20,549
Net gain on disposal of equipment -- 71,847 -- 124,311
--------- --------- --------- ---------
9,423 82,547 27,879 144,860
--------- --------- --------- ---------
Net earnings (loss) $ (33,756) $ 73,380 $ (37,902) $ 315,549
========= ========= ========= =========
Allocation of net earnings (loss):
General partners $ (338) $ 6,842 $ (379) $ 15,038
Limited partners (33,418) 66,538 (37,523) 300,511
--------- --------- --------- ---------
$ (33,756) $ 73,380 $ (37,902) $ 315,549
========= ========= ========= =========
Limited partners' per unit share
of net earnings (loss) $ (1.67) $ 3.33 $ (1.88) $ 15.03
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
September 30, September 30,
1996 1995
------------- -------------
<S> <C> <C>
Net cash provided by operating activities $ 25,644 $ 276,609
Cash flows provided by investing activities:
Proceeds from disposal of equipment 28,547 1,008,734
Cash flows used in financing activities:
Distribution to partners (50,506) (808,091)
----------- -----------
Net increase in cash and cash equivalents 3,685 477,252
Cash and cash equivalents at January 1 749,586 403,411
----------- -----------
Cash and cash equivalents at September 30 $ 753,271 $ 880,663
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
IEA Marine Container Fund II (A California Limited Partnership) (the
"Partnership") was organized under the laws of the State of California
on January 3, 1980 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.
(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 entered into a Leasing Agent Agreement whereby the Leasing
Company had the responsibility to manage the leasing operations of all
equipment owned by the Partnership. Pursuant to the Agreement, the
Leasing Company was responsible for leasing, managing and re-leasing
the Partnership's containers to ocean carriers and had full discretion
over which ocean carriers and suppliers of goods and services it dealt
with. The Leasing Agent Agreement permitted 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 has
been accounted for as a lease under which the Partnership is lessor
and the Leasing Company is the lessee.
The Leasing Agent Agreement generally provided that the Leasing
Company 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 of the
Partnership's containers were 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.
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 statements of operations display the
payments to be received by the Partnership from the Leasing Company as
the Partnership's receivables and revenues.
(Continued)
7
<PAGE> 8
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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 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.
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.
For comparative purposes, prior year's accounts payable and accrued
expenses have been reclassified to conform to the current year
presentation.
(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, and base
management 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, 1996 and December 31,
1995 were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $nil at September 30, 1996 and $86,097
at December 31, 1995 $ -- $77,559
Less:
Direct operating payables and accrued expenses -- 10,941
------ -------
$ -- $66,618
====== =======
</TABLE>
(Continued)
8
<PAGE> 9
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(3) Net Lease Revenue
Net lease revenue is determined by deducting direct operating expenses and
management fees 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 (expense) for
the three and nine-month periods ended September 30, 1996 and 1995, was as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Rental revenue $ -- $ 10,865 $ -- $ 324,878
Rental equipment operating expenses 25,309 13,017 38,306 84,765
Base management fees -- 2,199 -- 46,329
--------- --------- --------- ---------
$ (25,309) $ (4,351) $ (38,306) $ 193,784
========= ========= ========= =========
</TABLE>
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
It is suggested that the following discussion be read in conjunction with the
Registrant's most recent annual report on Form 10-K.
1) Material changes in financial condition between September 30, 1996 and
December 31, 1995.
As discussed in the Registrant's report for the year ended December 31,
1995, the Registrant's remaining containers were disposed of during 1995.
The Registrant is currently in the final phase of the liquidation and wind
up stage of operations. During this phase, the Registrant refrained from
distributing cash generated from operations and sales proceeds to its
partners, reserving all excess cash as part of its working capital in order
to maintain sufficient cash reserves for expenses related to its final
liquidation and subsequent dissolution. During the first nine months of
1996, the Registrant focused on the collection of its lease receivables and
payment of its direct operating payables and accrued expenses. At September
30, 1996, the remaining gross lease receivables were deemed to be
uncollectible and accordingly, charged against the existing allowance for
doubtful accounts. Additionally, at September 30, 1996, the Registrant
accrued for the remaining costs associated with the termination of the
Partnership, including, but not limited to, accounting, tax, and legal
fees. The Registrant anticipates that during the fourth quarter of 1996 it
will discharge the remaining direct operating payables and accrued
expenses, undertake a final distribution to its partners, cancel the
Certificate of Limited Partnership and terminate the Partnership.
2) Material changes in the results of operations between the three and
nine-month periods ended September 30, 1996 and the three and nine-month
periods ended September 30, 1995.
At the beginning of 1995, the Registrant had 1,343 containers remaining in
its fleet. These containers were disposed of during 1995. Accordingly, the
Registrant's container operations ceased during the fourth quarter of 1995.
The Registrant experienced a net loss of $33,756 and $37,902 during the
three and nine-month periods ended September 30, 1996, respectively, as
interest income, the Registrant's sole source of income, was in excess of
other general and administrative expenses. Rental equipment operating
expenses, a component of net lease revenue, were $25,309 and $38,306 during
the three and nine-month periods ended September 30, 1996, respectively.
These amounts consisted of costs associated with the recovery actions
against the doubtful accounts of certain lessees, including legal expenses
and the provision for doubtful accounts. General and administrative
expenses included investor processing, tax, legal, and audit expenses.
10
<PAGE> 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
3(a) Limited Partnership Agreement of the Registrant, amended and *
restated as of May 20, 1980
3(b) Certificate of Limited Partnership of the Registrant **
27 Financial Data Schedule Filed with this document
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended September 30, 1996
- ----------
* Incorporated by reference to the Prospectus of the Registrant dated May 21,
1980, included as part of Registration Statement on Form S-1 (No. 2-67065)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-1 (No. 2-67065)
11
<PAGE> 12
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 FUND II
(A California Limited Partnership)
By Cronos Capital Corp.
The Managing General Partner
By /s/ JOHN KALLAS
----------------------------------------
John Kallas
Vice President, Treasurer
Principal Financial & Accounting Officer
Date: November 11, 1996
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
3(a) Limited Partnership Agreement of the Registrant, amended and *
restated as of May 20, 1980
3(b) Certificate of Limited Partnership of the Registrant **
27 Financial Data Schedule Filed with this document
</TABLE>
- ----------
* Incorporated by reference to the Prospectus of the Registrant dated May 21,
1980, included as part of Registration Statement on Form S-1 (No. 2-67065)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-1 (No. 2-67065)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED AS PART OF ITS
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD SEPTEMBER 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 753,678
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 753,678
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 753,678
<CURRENT-LIABILITIES> 32,825
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 720,853
<TOTAL-LIABILITY-AND-EQUITY> 753,678
<SALES> 0
<TOTAL-REVENUES> (38,306)
<CGS> 0
<TOTAL-COSTS> 27,475
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,902)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
