<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 SEPTEMBER 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 ______
Commission file number 0-14440
IEA INCOME FUND VI,
(A CALIFORNIA LIMITED PARTNERSHIP)
(Exact name of registrant as specified in its charter)
California 94-2942941
(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 .
--- ---
<PAGE> 2
IEA INCOME FUND VI,
(A CALIFORNIA LIMITED PARTNERSHIP)
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1995 (unaudited) and December 31, 1994 2
Statements of Operations for the three and nine months ended September 30, 1995 and 1994 3
(unaudited)
Statements of Cash Flows for the nine months ended September 30, 1995 and 1994 4
(unaudited)
Notes to Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 8
Operations
PART II - OTHER INFORMATION
Item 6. Exhibit and Reports on Form 8-K 10
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of September
30, 1995 and December 31, 1994, statements of operations for the three
and nine months ended September 30, 1995 and 1994, and statements of
cash flows for the nine months ended September 30, 1995 and 1994.
<PAGE> 4
IEA INCOME FUND VI,
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
Assets
------
<S> <C> <C>
Current assets:
Cash, includes $344,741 at September 30, 1995 and $259,681
at December 31, 1994 in interest-bearing accounts $ 345,340 $ 269,503
Short-term investments 1,580,000 1,500,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 835,734 1,007,199
------------ ------------
Total current assets 2,761,074 2,776,702
------------ ------------
Container rental equipment, at cost 18,703,725 20,201,897
Less accumulated depreciation 10,482,931 10,560,772
------------ ------------
Net container rental equipment 8,220,794 9,641,125
------------ ------------
Net investment in direct financing lease -- 16,451
------------ ------------
$ 10,981,868 $ 12,434,278
============ ============
Partners' Capital
-----------------
Partners' capital (deficit):
General partners $ 2,285 $ (19,414)
Limited partners 10,979,583 12,453,692
------------ ------------
Total partners' capital 10,981,868 12,434,278
------------ ------------
$ 10,981,868 $ 12,434,278
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
IEA INCOME FUND VI,
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 3) $ 744,483 $ 694,263 $2,448,629 $2,433,592
Other operating expenses:
Depreciation 250,629 275,309 771,644 849,645
Other general and administrative expenses 1,143 19,606 45,493 59,238
---------- ---------- ---------- ----------
251,772 294,915 817,137 908,883
---------- ---------- ---------- ----------
Earnings from operations 492,711 399,348 1,631,492 1,524,709
Other income:
Interest income 26,816 22,796 85,641 54,358
Net gain on disposal of equipment 45,179 162,079 265,070 318,233
---------- ---------- ---------- ----------
71,995 184,875 350,711 372,591
---------- ---------- ---------- ----------
Net earnings $ 564,706 $ 584,223 $1,982,203 $1,897,300
========== ========== ========== ==========
Allocation of net earnings:
General partners $ 117,722 $ 124,673 $ 326,998 $ 312,502
Limited partners 446,984 459,550 1,655,205 1,584,798
---------- ---------- ---------- ----------
$ 564,706 $ 584,223 $1,982,203 $1,897,300
========== ========== ========== ==========
Limited partners' per unit share of net earnings $ 10 $ 10 $ 38 $ 36
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
IEA INCOME FUND VI,
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
September 30, September 30,
1995 1994
------------ -----------
<S> <C> <C>
Net cash provided by operating activities $ 2,723,245 $ 2,438,123
Cash flows provided by investing activities:
Proceeds from disposal of equipment 867,205 877,515
Cash flows used in financing activities:
Distribution to partners (3,434,613) (3,494,870)
----------- -----------
Net increase (decrease) in cash and cash equivalents 155,837 (179,232)
Cash and cash equivalents at January 1 1,769,503 2,013,284
----------- -----------
Cash and cash equivalents at September 30 $ 1,925,340 $ 1,834,052
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 7
IEA INCOME FUND VI,
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
IEA Income Fund VI, A California Limited Partnership (the
"Partnership") is a limited partnership organized under the laws of
the State of California on August 1, 1984 for the purpose of owning
and leasing marine cargo containers. The managing general partner is
Cronos Capital Corp. ("CCC"); the associate general partners include
four individuals. 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.
(Continued)
5
<PAGE> 8
IEA INCOME FUND VI,
(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 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, base management
fees payable, reimbursed administrative 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 September 30, 1995 and December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $336,372 at September 30, 1995 and $294,133
at December 31, 1994 $1,639,938 $1,838,648
Less:
Direct operating payables and accrued expenses 336,065 259,314
Damage protection reserve 172,626 285,686
Base management fees 129,438 145,923
Reimbursed administrative expenses 20,455 26,708
Incentive fees 145,620 113,818
---------- ----------
$ 835,734 $1,007,199
========== ==========
</TABLE>
6
<PAGE> 9
IEA INCOME FUND VI,
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(3) Net Lease Revenue
Net lease revenue is determined by deducting direct operating expenses,
management fees and reimbursed administrative expenses 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 nine-month periods ended
September 30, 1995 and 1994, was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Rental revenue $1,351,909 $1,467,580 $4,210,557 $4,414,627
Rental equipment
operating expenses 287,969 464,160 831,965 1,031,160
Base management fees 91,148 109,257 282,632 307,976
Incentive fees 145,619 113,817 413,424 374,928
Reimbursed administrative expenses 82,690 86,083 233,907 266,971
---------- ---------- ---------- ----------
$ 744,483 $ 694,263 $2,448,629 $2,433,592
========== ========== ========== ==========
</TABLE>
7
<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 September 30, 1995 and
December 31, 1994.
The Registrant's cash balances at September 30, 1995 included sales
proceeds from equipment disposals in the amount of $260,776. The
Registrant will distribute these sales proceeds and $878,404 of cash
from operations during the fourth quarter of 1995, representing
distributions to its limited partners for the third quarter of 1995.
Net lease receivables due from the Leasing Company declined 17% from
December 31, 1994. Contributing to this decline was a 30% increase in
direct operating payables and accrued expenses, arising from an
increase in deferred revenue from advance billings to container
lessees. During the first nine months of 1995, the reserve for
container repairs covered by the damage protection plan was impacted
by a reduction in the number of containers covered under the plan,
resulting in a 40% decline, partially offsetting the increase in
direct operating payables and accrued expenses.
2) Material changes in the results of operations between the three and
nine-month periods ended September 30, 1995 and the three and
nine-month periods ended September 30, 1994.
Net lease revenue for the third quarter of 1995 was $744,483, an
increase of 7% over the third quarter of 1994. Gross rental revenue (a
component of net lease revenue) for the quarter was $1,351,909, a
decline of 8% from the same period last year. For the first nine
months of 1995, net lease revenue was $2,448,629 as compared to
$2,433,592 for the first nine months of 1994. Gross rental revenue
declined 5% to $4,210,557 over the same nine-month period.
Gross rental revenue for the third quarter and first nine months of
1995 was primarily affected by the Registrant's diminishing fleet
size. During the third quarter of 1995, utilization rates were
constant with those experienced in the same quarter in the prior year,
while average utilization rates for the nine-month period ending 1995
were higher than the average utilization for the same nine-month
period in the prior year. However, competitive pressures within the
container leasing market, as well as the Leasing Company's efforts to
improve the credit quality of its customer portfolio, combined to
create a resistance to higher per-diem rental rates. Accordingly,
average per-diem rental rates remained relatively stable when
compared to the same periods in the prior year. The Registrant
expects to gain long-term benefits from the improvement in the
credit quality of this customer portfolio, as the allowance for
doubtful accounts and related expenses should decline.
The Registrant's average fleet size and utilization rates for the
three and nine-month periods ended September 30, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalents (TEU)) 10,780 12,043 11,177 12,391
Average Utilization 87% 87% 89% 87%
</TABLE>
8
<PAGE> 11
During the third quarter of 1995, the container leasing market began to
experience the effects of increasingly competitive market conditions,
including, but not limited to, a resistance to higher per-diem rental
rates, slightly lower utilization rates resulting from an expanding supply
of marine cargo containers within the container industry, and the economic
condition of the shipping industry, which has experienced a current trend
toward consolidation. Accordingly, the Registrant expects a stable
container leasing market during the remainder of 1995 and first half of
1996.
Rental equipment operating expenses declined 38% and 19% during the three
and nine-month periods ended September 30, 1995, respectively, when
compared to the same periods in the prior year. The declining fleet size
was a contributing factor to the declines in base management fees and
reimbursed administrative expenses. Incentive fees, which are based on the
operating performance of the fleet and sales proceeds, are incurred only
after the limited partners receive an 8% cumulative, compounded (daily),
annual return on their Adjusted Capital Contribution. A rise in container
disposals contributed to an increase in these fees of approximately 28%
and 10%, respectively, when compared to the same three and nine-month
periods in 1994.
Approximately 8% and 13% of the Registrant's net earnings for the three
and nine-month periods ended September 30, 1995, respectively, were from
gain on disposal of equipment, as compared to 28% and 17%, respectively,
for the same three and nine-month periods in the prior year. 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.
9
<PAGE> 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Number Description Method of Filing
------ ----------- ----------------
<S> <C> <C>
27 Financial Data Schedule Filed with this Document
</TABLE>
(b) There were no reports on Form 8-K during the three-month period
ended September 30, 1995.
10
<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 INCOME FUND VI,
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: November 13, 1995
11
<PAGE> 14
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 SEPTEMBER 30, 1995 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 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 SEPTEMBER 30, 1995
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,925,340
<SECURITIES> 0
<RECEIVABLES> 835,734
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,761,074
<PP&E> 18,703,725
<DEPRECIATION> 10,482,931
<TOTAL-ASSETS> 10,981,868
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 10,981,868
<TOTAL-LIABILITY-AND-EQUITY> 10,981,868
<SALES> 0
<TOTAL-REVENUES> 2,799,340
<CGS> 0
<TOTAL-COSTS> 817,137
<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> 1,982,203
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
