<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission file number 0-11163
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 X .
--- ---
<PAGE> 2
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1996 (unaudited) and December 31, 1995 4
Statements of Operations for the three and six months ended June 30, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (unaudited) 6
Notes to Financial Statements (unaudited) 7
tem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of June 30,
1996 and December 31, 1995, statements of operations for the three and
six months ended June 30, 1996 and 1995, and statements of cash flows
for the six months ended June 30, 1996 and 1995.
3
<PAGE> 4
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
Assets
------
<S> <C> <C>
Current assets:
Cash, includes $240,263 at June 30, 1996 and $236,559
at December 31, 1995 in interest-bearing accounts $ 240,366 $ 236,819
Short-term investments 1,652,037 1,250,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 1,095,416 747,402
----------- -----------
Total current assets 2,987,819 2,234,221
----------- -----------
Container rental equipment, at cost 10,324,603 14,203,296
Less accumulated depreciation 7,227,798 9,642,888
----------- -----------
Net container rental equipment 3,096,805 4,560,408
----------- -----------
$ 6,084,624 $ 6,794,629
=========== ===========
Liabilities and Partners' Capital
Partners' capital:
General partners $ 32,665 $ 35,782
Limited partners 6,051,959 6,758,847
----------- -----------
Total partners' capital 6,084,624 6,794,629
----------- -----------
$ 6,084,624 $ 6,794,629
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<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,
1996 1995 1996 1995
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 3) $250,603 $ 472,991 $ 586,968 $ 984,773
Other operating expenses:
Depreciation 134,991 189,935 292,689 388,987
Other general and administrative expenses 10,804 21,016 20,151 34,885
-------- ---------- ---------- ---------
145,795 210,951 312,840 423,872
-------- ---------- ---------- ---------
Earnings from operations 104,808 262,040 274,128 560,901
Other income (expense):
Interest income 23,192 27,298 42,274 53,385
Interest expense -- -- -- (5,156)
Net gain on disposal of equipment 541,677 145,787 789,255 296,921
-------- ---------- ---------- ---------
564,869 173,085 831,529 345,150
-------- ---------- ---------- ---------
Net earnings $669,677 $ 435,125 $1,105,657 $ 906,051
======== ========== ========== =========
Allocation of net earnings:
General partners $ 6,697 $ 4,351 $ 11,057 $ 9,061
Limited partners 662,980 430,774 1,094,600 896,990
-------- ---------- ---------- ---------
$669,677 $ 435,125 $1,105,657 $ 906,051
======== ========== ========== ---------
Limited partners' per unit share of net earnings $ 23.92 $ 15.54 $ 39.49 $ 32.36
======== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<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,
1996 1995
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 812,199 $ 1,294,379
Cash flows provided by investing activities:
Proceeds from disposal of equipment 1,409,045 824,495
Cash flows used in financing activities:
Principal payment of long-term debt -- (283,547)
Distribution to partners (1,815,661) (2,059,954)
----------- -----------
Net cash used in financing activities (1,815,661) (2,343,501)
----------- -----------
Net increase (decrease) in cash and cash equivalents 405,583 (224,627)
Cash and cash equivalents at January 1 1,486,820 1,908,196
----------- -----------
Cash and cash equivalents at June 30 $ 1,892,403 $ 1,683,569
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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.
The Partnership has determined that for accounting purposes the Leasing
Agent Agreement is a lease, and the receivables, payables, gross revenues
and operating expenses attributable to the containers managed by the
Leasing Company are, for accounting purposes, those of the Leasing Company
and not of the Partnership. Consequently, the Partnership's balance sheets
and statements of operations display the payments to be received by the
Partnership from the Leasing Company as the Partnership's receivables and
revenues.
(Continued)
7
<PAGE> 8
IEA MARINE CONTAINER INCOME FUND IV
(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 incentive fees
payable to CCC, the Leasing Company, and its affiliates from the rental
billings payable by the Leasing Company to the Partnership under operating
leases to ocean carriers for the containers owned by the Partnership. Net
lease receivables at June 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $393,624 at June 30, 1996 and $302,643 at
December 31, 1995 $1,627,431 $1,332,907
Less:
Direct operating payables and accrued expenses 245,369 288,975
Damage protection reserve 109,069 120,737
Incentive fees 177,577 175,793
---------- ----------
$1,095,416 $ 747,402
========== ==========
</TABLE>
(Continued)
8
<PAGE> 9
IEA MARINE CONTAINER INCOME FUND IV
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(3) Net Lease Revenue
Net lease revenue is determined by deducting direct operating expenses and
management fees to CCC and the Leasing Company, from the rental revenue
billed by the Leasing Company under operating leases to ocean carriers for
the containers owned by the Partnership. Net lease revenue for the three
and six-month periods ended June 30, 1996 and 1995, was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- ---------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental revenue $805,582 $1,264,449 $1,760,252 $2,506,719
Rental equipment operating expenses 219,777 264,939 440,275 490,169
Base management fees 157,625 206,071 337,061 436,264
Incentive fees 177,577 320,448 395,948 595,513
-------- ---------- ---------- ----------
$250,603 $ 472,991 $ 586,968 $ 984,773
======== ========== ========== ==========
</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 June 30, 1996 and December
31, 1995.
As discussed in the Registrant's report for the year ended December 31,
1995, the Registrant entered 1996 with a view towards accelerating the
disposition of its container fleet. A lack of viable options during the
first six months of 1996 resulted in the Registrant's continued disposal
of containers as part of its ongoing operations. Accordingly, 1,768
containers were disposed during the first six months of 1996, contributing
to an increase in cash generated from sales proceeds and, accordingly, the
related cash balances. At June 30, 1996, 42% of the original equipment
remained in the Registrant's fleet, as compared to 59% at December 31,
1995, comprised as follows:
<TABLE>
<CAPTION>
20-Foot 40-Foot
------- -------
<S> <C> <C>
Containers on lease:
Term leases 265 203
Master lease 1,944 1,377
----- -----
Subtotal 2,209 1,580
Containers off lease 314 457
------ ------
Total container fleet 2,523 2,037
===== =====
</TABLE>
<TABLE>
<CAPTION>
20-Foot 40-Foot
---------------- -----------------------
Units % Units %
------ ----- ----- ----
<S> <C> <C> <C> <C>
Total purchases 7,097 100% 3,647 100%
Less disposals 4,574 64% 1,610 44%
----- ---- ----- ----
Remaining fleet at June 30, 1996 2,523 36% 2,037 56%
===== ==== ===== ====
</TABLE>
Net lease receivables at June 30, 1996 increased when compared to December
31, 1995, as cash collections of outstanding receivables slowed and
receivables related to the sale of containers increased. The diminishing
fleet size, and its related operating performance, also contributed to the
decline in direct operating payables and damage protection reserve.
During the second quarter of 1996, distributions from operations and sales
proceeds amounted to $864,088, reflecting distributions to the general and
limited partners for the first quarter of 1996. This represents a decline
from the $951,573 distributed during the first quarter of 1996, reflecting
distributions for the fourth quarter of 1995. The Registrant's efforts to
dispose of the remaining fleet should produce lower operating results and,
consequently, lower distributions from operations to its partners in
subsequent periods. However, sales proceeds distributed to its partners
may fluctuate in subsequent periods, reflecting the level of container
disposals.
10
<PAGE> 11
The statements contained in the following discussion are based on current
expectations. These statements are forward looking and actual results may
differ materially. The container leasing market generally softened during
the fourth quarter of 1995 and has remained so during the first six months
of 1996. At June 30, 1996, container inventories remained at
larger-than-usual levels, resulting in a decline in the Registrant's
utilization rate from 87% at December 31, 1995 to 83% at June 30, 1996.
Base per-diem rates have become subject to downward pressures arising from
a soft container leasing market. During the first six months of 1996, the
Leasing Company implemented various marketing strategies, including but
not limited to, offering incentives to shipping companies and
repositioning containers to high demand locations in order to counter
these market conditions. Accordingly, ancillary per-diems have fluctuated,
favoring a downward trend, while free-day incentives offered to shipping
companies have risen. Currently, there are no visible signs of
improvements in the leasing market and hence further downward pressure on
rental rates can be expected in the ensuing quarters. As a result, these
leasing markets conditions, combined with the Registrant's disposal of
containers, will continue to impact the Registrant's results from
operations during the remainder of 1996.
2) Material changes in the results of operations between the three and
six-month periods ended June 30, 1996 and the three and six-month periods
ended June 30, 1995.
Net lease revenue for the three and six-month periods ended June 30, 1996
was $250,603 and $586,968, respectively, a decline of 47% and 40% from the
same three and six-month periods in the prior year, respectively.
Approximately 81% and 71% of the Registrant's net earnings for the three
and six-month periods ended June 30, 1996, respectively, were from gain on
disposal of equipment, as compared to 34% and 33% 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 gain
on disposal will contribute significantly to the Registrant's net
earnings.
Gross rental revenue (a component of net lease revenue) for the three and
six-month periods ended June 30, 1996 was $805,582, and $1,760,252,
respectively, reflecting a decline of 36% and 30% from the same three and
six-month periods in 1995, respectively. During 1996, gross rental revenue
was primarily impacted by the Registrant's diminishing fleet size. Average
per-diem rental rates decreased approximately 3% and 1%, when compared to
the same three and six-month periods in the prior year, respectively, as
they became subject to the downward pressures of an increasingly soft
container leasing market. The Registrant's average fleet size and
utilization rates for the three and six-month periods ended June 30, 1996
and June 30, 1995 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- ---------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalent units (TEU)) 7,282 10,092 7,903 10,442
Average Utilization 84% 89% 83% 88%
</TABLE>
Rental equipment operating expenses were 27% and 25% of the Registrant's
gross lease revenue during the three and six-month periods ended June 30,
1996, respectively, as compared to 21% and 20% during the three and
six-month periods ended June 30, 1995, respectively. These increases were
largely attributable to a decline in gross lease revenue resulting from
lower per-diem rates, a downward trend in ancillary per-diems, and an
increase in free-day incentives offered to shipping companies. Costs
associated with lower utilization levels, including handling, storage and
repositioning, also contributed to the increase in the rental equipment
operating expenses, as a percentage of gross lease revenue. The
Registrant's declining fleet size and related operating performance
contributed to the decline in base management and incentive fees, when
compared to the same periods in the prior year.
11
<PAGE> 12
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 January 15, 1982
3(b) Certificate of Limited Partnership of the Registrant **
27 Financial Data Schedule Filed with this document
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended June 30, 1996
__________
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated January 18, 1982, included as part of Registration
Statement on Form S-1 (No. 2-75378)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement on
Form S-1 (No. 2-75378)
12
<PAGE> 13
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 13, 1996
13
<PAGE> 14
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 January 15, 1982
3(b) Certificate of Limited Partnership of the Registrant **
27 Financial Data Schedule Filed with this document
</TABLE>
__________
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated January 18, 1982, included as part of Registration
Statement on Form S-1 (No. 2-75378)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement on
Form S-1 (No. 2-75378)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED AS PART OF ITS
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD JUNE 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,892,403
<SECURITIES> 0
<RECEIVABLES> 1,095,416
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,987,819
<PP&E> 10,324,603
<DEPRECIATION> 7,227,798
<TOTAL-ASSETS> 6,084,624
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,084,624
<TOTAL-LIABILITY-AND-EQUITY> 6,084,624
<SALES> 0
<TOTAL-REVENUES> 586,968
<CGS> 0
<TOTAL-COSTS> 312,840
<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> 1,105,657
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
