<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 MARCH 31, 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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IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1996 (unaudited) and December 31, 1995 4
Statements of Operations for the three months ended March 31, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the three months ended March 31, 1996 and 1995 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 10
Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Forms 8-K during the period 11
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of March 31,
1996 and December 31, 1995, statements of operations for the three
months ended March 31, 1996 and 1995, and statements of cash flows for
the three months ended March 31, 1996 and 1995.
3
<PAGE> 4
IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
Assets
------
<S> <C> <C>
Current assets:
Cash, includes $68,905 at March 31, 1996 and $19,376
at December 31, 1995 in interest-bearing accounts $ 69,319 $ 19,586
Short-term investments 653,792 730,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 40,146 59,675
-------- --------
Total current assets 763,257 809,261
-------- --------
$763,257 $809,261
======== ========
Partners' Capital
-----------------
Partners' capital:
General partners $ 667 $ 1,127
Limited partners 762,590 808,134
-------- --------
Total partners' capital 763,257 809,261
-------- --------
$763,257 $809,261
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
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IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Net lease revenue (expense) (notes 1 and 3) $ (525) $140,205
Other operating expenses:
Other general and administrative expenses 4,303 6,805
--------- --------
Earnings (loss) from operations (4,828) 133,400
Other income:
Interest income 9,330 4,987
Net gain on disposal of equipment -- 32,602
--------- --------
9,330 37,589
--------- --------
Net earnings $ 4,502 $170,989
========= ========
Allocation of net earnings:
General partners $ 45 $ 7,485
Limited partners 4,457 163,504
--------- --------
$ 4,502 $170,989
========= ========
Limited partners' per unit share of net earnings $ 0.22 $ 8.18
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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IEA MARINE CONTAINER FUND II
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 16,215 $ 96,965
Cash flows provided by investing activities:
Proceeds from disposal of equipment 7,816 157,957
Cash flows used in financing activities:
Distribution to partners (50,506) (303,033)
--------- ---------
Net decrease in cash and cash equivalents (26,475) (48,111)
Cash and cash equivalents at January 1 749,586 403,411
--------- ---------
Cash and cash equivalents at March 31 $ 723,111 $ 355,300
========= =========
</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 has entered into a Leasing Agent Agreement whereby the
Leasing Company has the responsibility to manage the leasing
operations of all equipment owned by the Partnership. Pursuant to the
Agreement, the Leasing Company is responsible for leasing, managing
and re-leasing the Partnership's containers to ocean carriers and has
full discretion over which ocean carriers and suppliers of goods and
services it may deal with. The Leasing Agent Agreement permits the
Leasing Company to use the containers owned by the Partnership,
together with other containers owned or managed by the Leasing Company
and its affiliates, as part of a single fleet operated without regard
to ownership. Since the Leasing Agent Agreement meets the definition
of an operating lease in Statement of Financial Accounting Standards
(SFAS) No. 13, it is accounted for as a lease under which the
Partnership is lessor and the Leasing Company is lessee.
The Leasing Agent Agreement generally provides that the Leasing
Company will make payments to the Partnership based upon rentals
collected from ocean carriers after deducting direct operating
expenses and management fees to CCC. The Leasing Company leases
containers to ocean carriers, generally under operating leases which
are either master leases or term leases (mostly two to five years).
Master leases do not specify the exact number of containers to be
leased or the term that each container will remain on hire but allow
the ocean carrier to pick up and drop off containers at various
locations; rentals are based upon the number of containers used and
the applicable per-diem rate. Accordingly, rentals under master leases
are all variable and contingent upon the number of containers used.
Most containers are leased to ocean carriers under master leases;
leasing agreements with fixed payment terms are not material to the
financial statements. Since there are no material minimum lease
rentals, no disclosure of minimum lease rentals is provided in these
financial statements.
(c) Basis of Accounting
The Partnership utilizes the accrual method of accounting. Revenue is
recognized when earned.
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.
(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 March
31, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $87,282 at March 31, 1996 and $86,097
at December 31, 1995 $57,323 $77,559
Less:
Direct operating payables and accrued expenses 17,177 17,884
Damage protection reserve -- --
------- -------
$40,146 $59,675
======= =======
</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-month periods ended March 31, 1996 and 1995, was
as follows:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Rental revenue $ -- $199,559
Rental equipment operating expenses 525 29,150
Base management fees -- 30,204
--------- --------
$ (525) $140,205
========= ========
</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 March 31, 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, at March 31,
1996, gross lease receivables, net of doubtful accounts, declined
$20,236 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
dissolved.
2) Material changes in the results of operations between the three-month
period ended March 31, 1996 and the three-month period ended March 31,
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 net earnings of
$4,502 during the first quarter of 1996, as interest income, the
Registrant's sole source of income, was in excess of other general and
administrative expenses. 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
<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 March 31, 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, Chief Financial Officer
Principal Accounting Officer
Date: May 14, 1996
12
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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 MARCH 31, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 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 MARCH 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 723111
<SECURITIES> 0
<RECEIVABLES> 40146
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 763257
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 763257
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 763257
<TOTAL-LIABILITY-AND-EQUITY> 763257
<SALES> 0
<TOTAL-REVENUES> (525)
<CGS> 0
<TOTAL-COSTS> 4304
<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> 4502
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
