<PAGE> 1
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 0-9736
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 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:
<TABLE>
<CAPTION>
Name of each exchange on
Title of each class which registered
------------------- ------------------------
<S> <C>
Not Applicable
</TABLE>
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 .
--- ---
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 Fund II, dated May 21,
1980 included as part of Registration Statement on Form S-1
(No. 2-67065)
Certificate of Limited Partnership of IEA Marine Container
Fund II, filed as Exhibit 3.4 to the Registration Statement
on Form S-1 (No. 2-67065)
<PAGE> 2
PART I
Item 1. Business
(a) General Development of Business
The Registrant is a California limited partnership formed on January 3,
1980 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 June 14, 1980, pursuant to its Registration Statement on Form
S-1 (File No. 2-67065). The offering terminated on February 4, 1981.
The Registrant raised $10,000,100 in subscription proceeds. The following
table sets forth the use of said subscription proceeds:
<TABLE>
<CAPTION>
Percentage of
Amount Gross Proceeds
----------- --------------
<S> <C> <C>
Gross Subscription Proceeds $10,000,100 100.0%
Public Offering Expenses:
Underwriting Commissions $ 1,000,000 10.0%
Offering and Organization Expenses $ 104,717 1.0%
----------- -----
Total Public Offering Expenses $ 1,104,717 11.0%
----------- -----
Net Proceeds $ 8,895,383 89.0%
Acquisition Fees $ 350,502 3.5%
Working Capital Reserve $ 88,877 0.9%
----------- -----
Gross Proceeds Invested in Equipment $ 8,456,004 84.6%
=========== =====
</TABLE>
On March 12, 1981, the Registrant borrowed $4,289,500 to finance the
purchase of additional containers. The loan was repaid in full on October 7,
1988.
2
<PAGE> 3
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 other 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.
3
<PAGE> 4
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.
During 1995, the Registrant's 16th year of operations, the Registrant's
remaining containers were disposed. As a result of the declining cash flows from
operations and sales proceeds, CCC and the Leasing Company determined that
disposing of the remaining containers would be in the best interest of the
limited partners. The Registrant's original fleet consisted of dry cargo
containers, the most-commonly used type in the shipping industry. Over 90% of
the Registrant's dry cargo container fleet was 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 were 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 were leased pursuant to
operating leases, primarily master leases, where the containers were 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.
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 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.
4
<PAGE> 5
Under these leases, customers were 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 provided for a
"damage protection plan" whereby lessees, for an additional payment (which may
have been in the form of a higher per-diem rate), were 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 were
carried out by the same depots, under the same procedures, as were repairs to
containers not covered by such plans. Customers also were required to insure
leased containers against physical damage and loss, and against third party
liability for loss, damage, bodily injury or death.
All containers were inspected and repaired when redelivered by a
customer, and customers were obligated to pay for all damage repair, excluding
wear and tear, according to standardized industry guidelines. Depots in major
port areas performed repair and maintenance which was verified by independent
surveyors or the Leasing Company's technical and operations staff.
Before any repair or refurbishment was authorized on containers in the
Registrant's fleet, the Leasing Company's technical and operations staff
reviewed the age, condition and type of container and its suitability for
continued leasing. The Leasing Company compared the cost of such repair or
refurbishment with the prevailing market resale price that was obtained for that
container and made the appropriate decision whether to repair or sell the
container.
The Leasing Company made 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,
certain expense reimbursements 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 were 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; 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 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.
5
<PAGE> 6
(c)(1)(ii) Inapplicable.
(c)(1)(iii) Inapplicable.
(c)(1)(iv) Inapplicable.
(c)(1)(v) The Registrant's containers were leased globally, therefore,
seasonal fluctuations were 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 $89,000 (0.9% of subscription proceeds raised). The Registrant
has reserved the remaining cash balances at December 31, 1995 from cash
distributions to its partners 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 practicable,
the Registrant will undertake a final distribution to its partners. The
Partnership will then be dissolved.
Amounts due under master leases were calculated at the end of each month
and billed approximately six to eight days thereafter. Amounts due under
short-term and long-term leases were set forth in the respective lease
agreements and were generally payable monthly. However, payment was normally
received within 45-100 days of receipt. Past due penalties were not customarily
collected from lessees, and accordingly were not generally levied by the Leasing
Company against lessees of the Registrant's containers.
(c)(1)(vii) One lessee contributed approximately 13% of the rental
revenue earned during 1995. The remaining containers in the Registrant's fleet
were disposed of during 1995. Accordingly, the Registrant's container operations
ceased during the fourth quarter of 1995.
(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, competed
favorably on all of these factors.
The Leasing Company, on behalf of the Registrant, competed with various
container leasing companies in the markets in which it conducted 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.
6
<PAGE> 7
(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.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales
The Registrant's business was not divided between foreign and domestic
operations. The Registrant's business was the leasing of containers worldwide to
ocean-going steamship companies. To this extent, the Registrant's operations
were subject to the fluctuations of worldwide economic and political conditions
that affected 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 were generally the same as those of leases to
domestic customers. The Registrant's leases generally required all payments to
be made in United States currency.
Item 2. Properties
The Registrant's remaining 1,317 twenty-foot and 26 forty-foot marine dry
cargo containers were disposed of during 1995, at an average book gain of $94
per container. Of this amount, 895 containers were sold during the second
quarter of 1995, pursuant to an agreement with an unrelated party. The purchase
price of these 895 containers totaled $632,577, which equaled approximately 105%
of the containers' net book value.
Utilization by lessees of the Registrant's containers fluctuated over
time depending on the supply of and demand for containers in the Registrant's
inventory locations. During 1995, utilization averaged 65%.
Item 3. Legal Proceedings
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
7
<PAGE> 8
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
<TABLE>
<CAPTION>
Number of Unit Holders
(b)(1) Title of Class as of December 31, 1995
-------------- -----------------------
<S> <C>
Units of limited partnership
interests 1,188
</TABLE>
(c) Dividends
Inapplicable. For the distributions made by the Registrant to its limited
partners, see Item 6, "Selected Financial Data."
8
<PAGE> 9
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net lease revenue $199,398 $ 606,473 $ 844,321 $1,111,061 $1,573,406
Net earnings $329,129 $ 724,948 $ 926,739 $1,075,799 $1,617,189
Net earnings per unit of
limited partnership interest $ 15.60 $ 35.88 $ 45.58 $ 52.80 $ 79.43
Cash distributions per unit of
limited partnership interest $ 50.00 $ 71.25 $ 76.25 $ 102.50 $ 128.75
At year-end:
Total assets $809,261 $1,490,246 $2,204,708 $2,818,392 $3,813,320
Partners' capital $809,261 $1,490,246 $2,204,708 $2,818,392 $3,813,320
</TABLE>
- ---------------
Item 7. Management's Discussion and Analysis of Financial Condition and Result
of Operations
Liquidity and Capital Resources
During the Registrant's first ten years of operations, the Registrant's
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 0.9% 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 1990, the Registrant's
11th year of operations, the Registrant began to focus 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 remaining 1,343 containers of the Registrant's fleet
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, a component of net lease receivables. 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, thus terminating the Partnership. The
Partnership will then be dissolved. The Registrant has reserved the remaining
cash balances at December 31, 1995 from cash distributions to its partners, in
order to maintain sufficient cash reserves for expenses relating to its final
liquidation and subsequent dissolution.
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. Thereafter,
the distributions are allocated 50% to the general partners and 50% to the
limited partners. Distributions from sales proceeds are allocated 1% to the
general partners and 99% to the limited partners, as the limited partners have
received cumulative distributions equal to their capital contributions.
From inception through February 29, 1996, the Registrant has distributed
$13,592,294 in cash from operations and $5,300,054 in cash from sales proceeds
to its limited partners. This represents a total distribution of $18,892,348, or
189% of the Registrant's original limited partners' investment. Cash generated
from sales proceeds totaled $1,045,579, $692,659 and $546,688 for the years
ended December 31, 1995, 1994 and 1993, respectively, and represented
approximately 77%, 58% and 37% of the Registrant's cash generated from operating
and investing activities, respectively.
9
<PAGE> 10
Results of Operations
1995 - 1994
During 1995, the Registrant's 16th year of operations, the remaining
1,343 containers in the Registrant's fleet were disposed. Accordingly, the
Registrant's container operations ceased during the fourth quarter of 1995.
Approximately 38% of the Registrant's 1995 net earnings were from gain on
disposal of equipment, as compared to 18% for the year ended December 31, 1994.
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 rental rates of the equipment
owned by the Registrant. Net lease revenue declined by approximately 67%, when
compared to 1994. Gross rental revenue and rental equipment operating expenses,
components of net lease revenue, declined 63% and 32%, respectively, when
compared to the prior year. These declines were primarily attributable to the
disposal of the Registrant's fleet. Rental equipment operating expenses
consisted of, but were not limited to, costs associated with the recovery
actions against the doubtful accounts of certain lessees, including legal and
container recovery expenses, as well as the provision for doubtful accounts.
The Registrant's average utilization and per-diem rental rates fluctuated
throughout the year. Utilization averaged 65% during 1995, as compared to 83%
during 1994. The Registrant's average per-diem rental rates during 1995
increased approximately 6% when compared to the prior year. However, this
fluctuation can be directly attributed to the disposal of the Registrant's
fleet. The Registrant's average fleet size (as measured in twenty-foot
equivalent units ("TEU")) during 1995, was 788 TEU, as compared to 1994's
average of 1,718 TEU.
During the remaining period in the wind up phase of operations, the
Registrant expects to incur net losses, as certain other and general
administrative expenses including investor processing, tax, legal and audit
expenses, should be in excess of any other income generated by the Registrant.
The Registrant has increased its cash reserves in anticipation of these expected
losses.
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 efforts to dispose of the
remaining fleet, and lower average per-diem rental rates during 1994, resulted
in a reduction of net lease revenue by approximately 28%, when compared to 1993.
The Registrant's average per-diem rental rates during 1994 were 5% lower than
1993 levels. Utilization averaged 83% during 1994, a decline from the average
rate of 84% experienced during 1993.
The Registrant continued the disposal of its fleet during 1994, disposing
of 681 twenty-foot and 21 forty-foot dry cargo containers, as compared to
disposals of 655 twenty-foot and 26 forty-foot dry cargo containers during 1993.
By the end of 1994, the Registrant had disposed of 76% of its original fleet.
Factors such as age, condition and geographical location influenced the amount
of sales proceeds received and the related gain on container disposals. During
1994, approximately 18% of the Registrant's net earnings were from gains on
disposal of equipment, as compared to 15% during the prior year.
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<PAGE> 11
At December 31, 1994, the Registrant's fleet was comprised of the following:
<TABLE>
<CAPTION>
20-Foot 40-Foot
------- -------
<S> <C> <C>
Containers on lease:
Term leases 190 -
Master lease 918 23
----- --
Subtotal 1,108 23
Containers off lease 209 3
----- --
Total container fleet 1,317 26
===== ==
<CAPTION>
20-Foot 40-Foot
---------------- ----------------
Units % Units %
----- --- ----- ---
<S> <C> <C> <C> <C>
Total purchases 5,297 100% 250 100%
Less disposals 3,980 75% 224 90%
----- --- --- ---
Remaining fleet at December 31, 1994 1,317 25% 26 10%
===== === === ===
</TABLE>
The Registrant's fleet became fully depreciated during 1993 and
accordingly no depreciation expense was recognized during 1994. The Leasing
Company made 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 the managing general
partner, 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. During 1994, these rental equipment direct
operating expenses and base management fees declined, directly as a result of
the diminishing fleet size.
Item 8. Financial Statements and Supplementary Data
11
<PAGE> 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Partners
IEA Marine Container Fund II
(A California Limited Partnership):
We have audited the accompanying balance sheets of IEA Marine Container Fund II
(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 Fund II (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
12
<PAGE> 13
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Current assets:
Cash, includes $19,376 in 1995 and $90,037
in 1994 in interest-bearing accounts $ 19,586 $ 102,780
Short-term investments (note 2) 730,000 300,631
Net lease receivables due from Leasing Company
(notes 1 and 3) 59,675 176,348
-------- ----------
Total current assets 809,261 579,759
-------- ----------
Container rental equipment, at cost - 3,022,318
Less accumulated depreciation - 2,111,831
-------- ----------
Net container rental equipment - 910,487
-------- ----------
$809,261 $1,490,246
======== ==========
Partners' Capital
-----------------
Partners' capital (deficit) (note 7):
General partners $ 1,127 $ (5,833)
Limited partners 808,134 1,496,079
-------- ----------
Total partners' capital 809,261 1,490,246
-------- ----------
$809,261 $1,490,246
======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE> 14
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net lease revenue (notes 1 and 5) $199,398 $606,473 $844,321
Other operating expenses:
Depreciation (note 1) - - 47,973
Other general and administrative expenses 28,743 29,664 26,487
-------- -------- --------
28,743 29,664 74,460
-------- -------- --------
Earnings from operations 170,655 576,809 769,861
Other income:
Interest income 31,870 18,325 19,580
Net gain on disposal of equipment 126,604 129,814 137,298
-------- -------- --------
158,474 148,139 156,878
-------- -------- --------
Net earnings $329,129 $724,948 $926,739
======== ======== ========
Allocation of net earnings:
General Partners $ 17,063 $ 7,249 $ 15,212
Limited Partners 312,066 717,699 911,527
-------- -------- --------
$329,129 $724,948 $926,739
======== ======== ========
Limited partners' per unit share of net earnings $ 15.60 $ 35.88 $ 45.58
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
14
<PAGE> 15
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Limited
Partners General
(note 7) Partners Total
-------- -------- -----
<S> <C> <C> <C>
Balances at January 1, 1993 $ 2,816,884 $ 1,508 $ 2,818,392
Net earnings 911,527 15,212 926,739
Cash distributions (1,525,016) (15,407) (1,540,423)
----------- -------- ----------
Balances at December 31, 1993 2,203,395 1,313 2,204,708
Net earnings 717,699 7,249 724,948
Cash distributions (1,425,015) (14,395) (1,439,410)
----------- -------- -----------
Balances at December 31, 1994 1,496,079 (5,833) 1,490,246
Net earnings 312,066 17,063 329,129
Cash distributions (1,000,011) (10,103) (1,010,114)
----------- -------- -----------
Balances at December 31, 1995 $ 808,134 $ 1,127 $ 809,261
=========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE> 16
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 329,129 $ 724,948 $ 926,739
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation - - 47,973
Net gain on disposal of equipment (126,604) (129,814) (137,298)
Decrease (increase) in net lease receivables
due from Leasing Company 108,185 (94,460) 83,966
----------- ----------- -----------
Total adjustments (18,419) (224,274) (5,359)
----------- ----------- -----------
Net cash provided by operating activities 310,710 500,674 921,380
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from disposal of equipment 1,045,579 692,659 546,688
----------- ----------- -----------
Cash flows used in financing activities:
Distributions to partners (1,010,114) (1,439,410) (1,540,423)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 346,175 (246,077) (72,355)
Cash and cash equivalents at beginning at year 403,411 649,488 721,843
----------- ----------- -----------
Cash and cash equivalents at end of year $ 749,586 $ 403,411 $ 649,488
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE> 17
IEA MARINE CONTAINER FUND II
(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 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 dry 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 July 11, 1980, when the
minimum subscription proceeds of $500,000 were obtained. The
Partnership offered 20,000 units of limited partnership interest at
$500 per unit, or $10,000,000. The offering terminated on February
4, 1981, at which time 20,000 limited partnership units had been
purchased.
During 1995, the Partnership's 16th year of operations, the
remaining containers in the Partnership's fleet were disposed. The
Partnership anticipates that after the remaining net lease
receivables and liabilities are collected and discharged during
1996, or as soon as practicable, the Partnership will undertake a
final distribution to its partners. The Partnership will then be
dissolved.
(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 has 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 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 Registrant'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.
17
<PAGE> 18
IEA MARINE CONTAINER FUND II
(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. Cash generated from operations are
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.
Distributions of proceeds from container sales are also made
quarterly; first to the limited partners until they 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.
(e) Rental Equipment - Depreciation
Rental equipment was depreciated over a twelve-year life on a
straight-line basis to its estimated salvage value.
(f) 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 $2,035,368.
(g) Foreign Operations
The Partnership's business was not divided between foreign or
domestic operations. The Partnership's business was the leasing of
containers worldwide to ocean-going steamship companies and did 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 have been
dependent on definitions and assumptions that were so subjective as
to render the information meaningless and potentially misleading.
18
<PAGE> 19
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(h) Financial Statement Presentation
The Partnership has determined that for accounting purposes the
Leasing Agent Agreement has been 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 were carried at cost which approximates market
value. Short-term investments with an original maturity of less than three
months are considered cash equivalents.
(3) 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 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;
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $86,097 in 1995 and $77,495 in 1994 $77,559 $334,722
Less:
Direct operating payables and accrued expenses 17,884 97,214
Damage protection reserve (note 4) - 61,160
------- --------
$59,675 $176,348
======= ========
</TABLE>
(4) Damage Protection Plan
The Leasing Company offered a repair service to several lessees of the
Partnership's containers, whereby the lessee paid an additional rental fee
for the convenience of having the Partnership incur the repair expense for
its containers damaged while on lease. This revenue was recorded when
earned according to the terms of the rental contract. A reserve was
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 3). The Partnership was not responsible in the event
repair costs exceeded predetermined limits, or for repairs that were
required for damages not defined by the damage protection plan agreement.
19
<PAGE> 20
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(5) 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:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Rental revenue (note 8) $327,210 $879,931 $1,371,937
Rental equipment operating expenses 78,930 116,200 306,873
Base management fees (note 6) 48,882 157,258 220,743
-------- -------- ----------
$199,398 $606,473 $ 844,321
======== ======== ==========
</TABLE>
(6) Compensation to Managing General Partner
Compensation paid by the Partnership to CCC consisted solely of base
management fees. Base management fees were 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.
(7) 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
$650,007, $575,006, and $575,007, 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 $40, $75 and $110, respectively. This is calculated by
dividing the limited partners' capital at the end of the year by 20,000,
the total number of limited partnership units.
(8) Major Lessees
One lessee contributed approximately 13% of the Partnership's rental
revenue earned during 1995. No single lessee contributed more than 10% of
the rental revenue earned in 1994 and 1993.
20
<PAGE> 21
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Inapplicable.
21
<PAGE> 22
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:
<TABLE>
<CAPTION>
Name Office
--------------------- ----------------------------------------------------
<S> <C>
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 Officer
Laurence P. Sargent Director
Stefan M. Palatin Director
A. Darrell Ponniah Director
</TABLE>
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.
22
<PAGE> 23
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:
<TABLE>
<CAPTION>
Name Office
--------------------- ----------------------------------------------------
<S> <C>
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
</TABLE>
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.
23
<PAGE> 24
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.
24
<PAGE> 25
Item 11. Executive Compensation
The Registrant paid 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 which are 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.
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 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.
<TABLE>
<CAPTION>
Cash Fees and
Name Description Distributions
---- ----------- -------------
<S> <C> <C>
1) CCC Base management fees - equal to $0.25 per $48,882
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 $ 2,828
any quarter prior to receipt of the incentive
Smith Barney management fee pursuant to Section 6.1 of
Shearson, Inc. the Limited Partnership Agreement $ 707
3) CCC Interest in Fund - 1% of sales proceeds for $ 5,910
any quarter pursuant to Section 4.5 of
Smith Barney the Limited Partnership Agreement
Shearson, Inc. $ 658
</TABLE>
25
<PAGE> 26
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. With the exception of Dennis J. Tietz, President and a
director of CCC, no other director or officer owns any units of limited
partnership interest of the Registrant. Mr. Tietz owns 10 units, representing
0.05% of the total amount of units outstanding.
(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.
26
<PAGE> 27
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1. Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
The following financial statements of the Registrant are included in Part II, Item 8:
Report of Independent Public Accountants............................................... 12
Balance sheets - December 31, 1995 and 1994............................................ 13
Statements of operations - for the years ended
December 31, 1995, 1994 and 1993................................................ 14
Statements of partners' capital - for the years ended
December 31, 1995, 1994 and 1993................................................ 15
Statements of cash flows - for the years ended
December 31, 1995, 1994 and 1993................................................ 16
Notes to financial statements.......................................................... 17
</TABLE>
All other schedules are omitted as the information is not required or the
information is included in the financial statements or notes thereto.
27
<PAGE> 28
(a)3. 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
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
quarter ended December 31, 1995
</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)
28
<PAGE> 29
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 FUND II
(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:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/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
</TABLE>
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.
<PAGE> 30
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 DECEMBER 31, 1995 AND THE STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS INCLUDED AS PART OF ITS ANNUAL REPORT ON FORM 10-K FOR THE
PERIOD DECEMBER 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 749,586
<SECURITIES> 0
<RECEIVABLES> 59,675
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 809,261
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 809,261
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 809,261
<TOTAL-LIABILITY-AND-EQUITY> 809,261
<SALES> 0
<TOTAL-REVENUES> 357,872
<CGS> 0
<TOTAL-COSTS> 28,743
<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> 329,129
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
