<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 JUNE 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 .
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<TABLE>
<CAPTION>
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1996
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C> <C>
Balance Sheets - June 30, 1996 (unaudited) and December 31, 1995 4
Statements of Operations for the three and six months ended June 30, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the six months ended June 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
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of June 30,
1996 and December 31, 1995, statements of operations for the three and
six months ended June 30, 1996 and 1995, and statements of cash flows
for the six months ended June 30, 1996 and 1995.
3
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<TABLE>
<CAPTION>
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Assets
Current assets:
Cash, includes $60,530 at June 30, 1996 and $19,376
at December 31, 1995 in interest-bearing accounts $ 60,723 $ 19,586
Short-term investments 686,696 730,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 10,245 66,618
-------- --------
Total current assets 757,664 816,204
------- -------
$ 757,664 $ 816,204
======= =======
Liabilities and Partners' Capital
Current liabilities:
Accounts payable and accrued expenses $ 3,055 $ 6,943
--------- ---------
Total current liabilities 3,055 6,943
--------- ---------
Partners' capital:
General partners 581 1,127
Limited partners 754,028 808,134
------- -------
Total partners' capital 754,609 809,261
------- -------
$ 757,664 $ 816,204
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
4
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<TABLE>
<CAPTION>
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
---------------------------- -----------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 3) $ (12,472) $ 57,931 $ (12,997) $ 198,136
Other operating expenses:
Other general and administrative expenses 5,301 11,474 9,605 18,279
--------- --------- --------- ---------
Earnings (loss) from operations (17,773) 46,457 (22,602) 179,857
Other income (loss):
Interest income 9,126 4,862 18,456 9,849
Net gain on disposal of equipment -- 19,862 -- 52,464
--------- --------- --------- ---------
9,126 24,724 18,456 62,313
--------- --------- --------- ---------
Net earnings (loss) $ (8,647) $ 71,181 $ (4,146) $ 242,170
========= ========= ========= =========
Allocation of net earnings (loss):
General partners $ (86) $ 711 $ (41) $ 8,196
Limited partners (8,561) 70,470 (4,105) 233,974
--------- --------- --------- ---------
$ (8,647) $ 71,181 $ (4,146) $ 242,170
========= ========= ========= =========
Limited partners' per unit share
of net earnings (loss) $ (.43) $ 3.52 $ (.21) $ 11.70
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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<TABLE>
<CAPTION>
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
----------------------
June 30, June 30,
1996 1995
--------- ---------
<S> <C> <C>
Net cash provided by operating activities $ 32,056 $ 213,852
Cash flows provided by investing activities:
Proceeds from disposal of equipment 16,283 262,853
Cash flows used in financing activities:
Distribution to partners (50,506) (555,563)
------- -------
Net decrease in cash and cash equivalents (2,167) (78,858)
Cash and cash equivalents at January 1 749,586 403,411
------- -------
Cash and cash equivalents at June 30 $ 747,419 $ 324,553
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
6
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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
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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
June 30, 1996 and December 31, 1995 were as follows:
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<CAPTION>
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $98,167 at June 30, 1996 and $86,097
at December 31, 1995 $ 19,786 $ 77,559
Less:
Direct operating payables and accrued expenses 9,541 10,941
------- ------
$ 10,245 $ 66,618
====== ======
</TABLE>
(Continued)
8
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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
for the three and six-month periods ended June 30, 1996 and 1995, was
as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Rental revenue $ - $ 114,455 $ - $ 314,014
Rental equipment operating expenses 12,472 42,598 12,997 71,748
Base management fees - 13,926 - 44,130
-------- --------- ----------- --------
$(12,472) $ 57,931 $(12,997) $ 198,136
====== ======== ====== =======
</TABLE>
9
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
It is suggested that the following discussion be read in conjunction with the
Registrant's most recent annual report on Form 10-K.
1) Material changes in financial condition between June 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, focusing on the collection of its lease receivables
and payment of its direct operating payables and accrued expenses.
Accordingly, during the first six months of 1996, gross lease receivables,
net of doubtful accounts, declined $48,528 from December 31, 1995, while
direct operating payables and accrued expenses remained consistent. In
subsequent quarters, the Registrant will refrain 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 relating to its final liquidation and subsequent
dissolution. The Registrant anticipates that after the remaining net lease
receivables and liabilities are collected and discharged during 1996, or as
soon as practicable, the Registrant will undertake a final distribution to
its partners and proceed to cancel the Certificate of Limited Partnership.
The Partnership will then be terminated.
2) Material changes in the results of operations between the three and
six-month periods ended June 30, 1996 and the three and six-month periods
ended June 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 $8,647 and $4,146 during the three
and six-month periods ended June 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 $12,472 and $12,997 during the three and six-month
periods ended June 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. During the remaining period in the wind up phase of operations,
the Registrant expects to incur net losses, as certain other general and
administrative expenses including investor processing, tax, legal, and audit
expenses, should be in excess of any other income generated by the
Registrant.
10
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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<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 June 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
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
IEA MARINE CONTAINER FUND II
(A California Limited Partnership)
By Cronos Capital Corp.
The Managing General Partner
By /s/ JOHN KALLAS
----------------------------------------
John Kallas
Vice President, Chief Financial Officer
Principal Accounting Officer
Date: August 13, 1996
12
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<TABLE>
<CAPTION>
EXHIBIT INDEX
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 JUNE 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED JUNE 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 JUNE 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 747,419
<SECURITIES> 0
<RECEIVABLES> 10,245
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 757,664
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 757,664
<CURRENT-LIABILITIES> 3,055
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 754,609
<TOTAL-LIABILITY-AND-EQUITY> 757,664
<SALES> 0
<TOTAL-REVENUES> (12,997)
<CGS> 0
<TOTAL-COSTS> 9,605
<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> (4,146)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
