<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, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
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Commission file number 0-11163
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
(Exact name of registrant as specified in its charter)
California 93-0798850
(State or other jurisdiction of (I.R.S. Employer
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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<PAGE> 2
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1995 (unaudited) and December 31, 1994 2
Statements of Operations for the three and six months ended June 30, 1995 and 1994 (unaudited) 3
Statements of Cash Flows for the six months ended June 30, 1995 and 1994 (unaudited) 4
Notes to Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of
June 30, 1995 and December 31, 1994, statements of operations for the
three and six months ended June 30, 1995 and 1994, and statements of
cash flows for the six months ended June 30, 1995 and 1994.
<PAGE> 4
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
Assets
------
<S> <C> <C>
Current assets:
Cash, includes $347,096 at June 30, 1995 and $246,731
at December 31, 1994 in interest-bearing accounts $ 364,538 $ 258,196
Short-term investments 1,319,031 1,650,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 731,230 1,075,455
----------- -----------
Total current assets 2,414,799 2,983,651
----------- -----------
Container rental equipment, at cost 15,863,949 17,372,943
Less accumulated depreciation 10,436,337 11,074,433
----------- -----------
Net container rental equipment 5,427,612 6,298,510
----------- -----------
Other assets, net - 278
----------- -----------
$ 7,842,411 $ 9,282,439
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Current liabilities:
Current portion of equipment debt $ - $ 283,547
Interest payable - 2,578
----------- -----------
Total current liabilities - 286,125
----------- -----------
Partners' capital:
General partners 40,488 47,386
Limited partners 7,801,923 8,948,928
----------- -----------
Total partners' capital 7,842,411 8,996,314
----------- -----------
$ 7,842,411 $ 9,282,439
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 3) $472,991 $736,860 $984,773 $1,434,450
Other operating expenses:
Depreciation 189,935 227,503 388,987 463,057
Other general and administrative expenses 21,016 24,911 34,885 38,423
-------- -------- -------- ----------
210,951 252,414 423,872 501,480
-------- -------- -------- ----------
Earnings from operations 262,040 484,446 560,901 932,970
Other income (expense):
Interest income 27,298 18,124 53,385 33,588
Interest expense - (27,347) (5,156) (61,701)
Net gain on disposal of equipment 145,787 116,140 296,921 217,346
-------- -------- -------- ----------
173,085 106,917 345,150 189,233
-------- -------- -------- ----------
Net earnings $435,125 $591,363 $906,051 $1,122,203
======== ======== ======== ==========
Allocation of net earnings:
General partners $ 4,351 $ 5,913 $ 9,061 $ 11,222
Limited partners 430,774 585,450 896,990 1,110,981
-------- -------- -------- ----------
$435,125 $591,363 $906,051 $1,122,203
======== ======== ======== ==========
Limited partners' per unit share of net earnings $ 15 $ 21 $ 32 $ 40
======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
June 30, June 30,
1995 1994
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 1,294,379 $ 1,319,379
Cash flows provided by investing activities:
Proceeds from disposal of equipment 824,495 588,207
Cash flows used in financing activities:
Principal payment of long-term debt (283,547) (516,167)
Distribution to partners (2,059,954) (1,360,564)
----------- -----------
Net cash used in financing activities (2,343,501) (1,876,731)
----------- -----------
Net increase (decrease) in cash and cash equivalents (224,627) 30,855
Cash and cash equivalents at January 1 1,908,196 2,110,768
----------- -----------
Cash and cash equivalents at June 30 $ 1,683,569 $ 2,141,623
=========== ===========
Supplemental disclosure for cash flow information:
Cash paid during the period for:
Interest $ - $ 29,725
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 7
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1995 AND DECEMBER 31, 1994
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
IEA Marine Container Income Fund IV (A California Limited
Partnership) (the "Partnership") was organized under the laws of the
State of California on November 25, 1981 for the purpose of owning
and leasing marine cargo containers. The managing general partner is
Cronos Capital Corp. ("CCC"); the associate general partner is Smith
Barney Shearson, Inc. CCC, with its affiliate Cronos Containers
Limited (the "Leasing Company"), manages and controls the
business of the Partnership.
(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.
(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 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.
(Continued)
5
<PAGE> 8
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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 incentive
fees payable to CCC and its affiliates from the rental billings payable by
the Leasing Company to the Partnership under operating leases to ocean
carriers for the containers owned by the Partnership. Net lease
receivables at June 30, 1995 and December 31, 1994 were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $282,394 at June 30, 1995 and $230,408 at
December 31, 1994 $1,575,143 $1,773,027
Less:
Direct operating payables and accrued expenses 350,961 276,411
Damage protection reserve 172,504 232,013
Incentive fees 320,448 189,148
---------- ----------
$ 731,230 $1,075,455
========== ==========
</TABLE>
(3) 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 three and six-month periods
ended June 30, 1995 and 1994, were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental revenue $1,264,449 $1,403,307 $2,506,719 $2,804,153
Rental equipment
operating expenses 264,939 306,039 490,169 558,222
Base management fees 206,071 263,413 436,264 522,913
Incentive fees 320,448 96,995 595,513 288,568
---------- ---------- ---------- ----------
$ 472,991 $ 736,860 $ 984,773 $1,434,450
========== ========== ========== ==========
</TABLE>
6
<PAGE> 9
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, 1995 and December
31, 1994.
The Registrant disposed of 806 containers during the six-month period
ended June 30, 1995, in accordance with one of its original investment
objectives - to realize the residual value of its containers after the
expiration of their economic useful lives. The Registrant anticipates its
operating results and distributions from operations to decline in
subsequent periods as a result of its container sales.
The diminishing fleet size and the related results from operations
contributed to the reduction in cash and cash equivalents, as well as net
lease receivables due from the Leasing Company. The Registrant
extinguished the remaining balance of its equipment debt during the first
quarter of 1995.
The Registrant's cash balances at June 30, 1995 included sales proceeds
from equipment disposals in the amount of $346,440. The Registrant will
distribute these sales proceeds and $606,270 of cash from operations
during the third quarter of 1995, representing distributions to its
limited partners for the second quarter of 1995.
2) Material changes in the results of operations between the three and
six-month periods ended June 30, 1995 and the three and six-month periods
ended June 30, 1994.
During the three-month period ended June 30, 1995, the container leasing
market remained consistent with market conditions that existed during the
three-month period ended March 31, 1995. The Registrant continued to
experience the ability to charge higher ancillary revenues, such as
pick-up fees, and reduce incentives offered to ocean carriers. However,
the Registrant remains cautious about any further improvement in market
conditions during the remainder of 1995.
The benefits of the improved market conditions experienced during the
three and six-month periods ended June 30, 1995, as compared to the same
periods in 1994, were partially offset by the effect of the Leasing
Company's efforts to improve the credit quality of its customer portfolio.
In many cases, lessees who maintain a strong credit history may command
favorable lease terms including lower per-diem rental rates. Accordingly,
average per-diem rental rates remained steady as compared to the same
three and six-month periods in 1994, while an increasing proportion of the
lessees within its portfolio shifted to larger, high credit quality
lessees. The Registrant expects to gain long term benefits from the
improvement in the credit quality of its customers, as the allowance for
doubtful accounts and related expenses should decline
The Registrant's average fleet size and utilization rates for the three
and six-month periods ended June 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- -----------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalents (TEU)) 10,092 12,212 10,442 12,343
Average Utilization 89% 85% 88% 84%
</TABLE>
7
<PAGE> 10
The declining fleet size and higher utilization rates contributed to a
$41,100 and $68,053 decline in rental equipment operating expenses during
the three and six-month periods ended June 30, 1995, respectively.
Accordingly, base management fees also declined. The extinguishment of
the Registrant's equipment debt during the first quarter of 1995
contributed to an increase in cash generated from operations and,
accordingly, an increase in incentive management fees.
Approximately 34% and 33% of the Registrant's net earnings for the three
and six-month periods ended June 30, 1995, respectively, were from gain on
disposal of equipment, as compared to 20% and 19% for the same three and
six-month periods in the prior year, respectively. As the Registrant
accelerates the disposal of its containers in subsequent periods, net
gains on disposals will contribute significantly to the Registrant's net
earnings.
8
<PAGE> 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) There were no reports on Form 8-K during the three-month period
ended June 30, 1995.
9
<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 INCOME FUND IV
(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 10, 1995
10
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AT JUNE 30, 1995 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR
THE SIX MONTHS ENDED JUNE 30, 1995 (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 ENDED JUNE 30, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,683,569
<SECURITIES> 0
<RECEIVABLES> 731,230
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,414,799
<PP&E> 15,863,949
<DEPRECIATION> 10,436,337
<TOTAL-ASSETS> 7,842,411
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 7,842,411
<TOTAL-LIABILITY-AND-EQUITY> 7,842,411
<SALES> 0
<TOTAL-REVENUES> 1,335,079
<CGS> 0
<TOTAL-COSTS> 423,872
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,156
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 906,051
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
