<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 0-14440
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 JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
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
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 6. Exhibit 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 INCOME FUND VI,
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -----------
Assets
<S> <C> <C>
Current assets:
Cash, includes $204,153 at June 30, 1996 and $248,436
at December 31, 1995 in interest-bearing accounts $ 204,320 $ 248,584
Short-term investments 1,402,712 1,480,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 679,880 738,452
----------- -----------
Total current assets 2,286,912 2,467,036
----------- -----------
Container rental equipment, at cost 16,312,526 18,110,826
Less accumulated depreciation 9,733,093 10,368,490
----------- -----------
Net container rental equipment 6,579,433 7,742,336
----------- -----------
$ 8,866,345 $10,209,372
=========== ===========
Partners' Capital
Partners' capital:
General partners $ 10,508 $ 23,938
Limited partners 8,855,837 10,185,434
----------- -----------
Total partners' capital 8,866,345 10,209,372
----------- -----------
$ 8,866,345 $10,209,372
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
IEA INCOME FUND VI,
(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) $ 441,729 $ 853,273 $1,040,092 $1,704,146
Other operating expenses:
Depreciation 223,479 256,983 458,876 521,015
Other general and administrative expenses 11,734 28,395 22,359 44,350
---------- ---------- ---------- ----------
235,213 285,378 481,235 565,365
---------- ---------- ---------- ----------
Earnings from operations 206,516 567,895 558,857 1,138,781
Other income:
Interest income 22,328 31,215 43,740 58,825
Net gain on disposal of equipment 92,489 63,237 253,734 219,891
---------- ---------- ---------- ----------
114,817 94,452 297,474 278,716
---------- ---------- ---------- ----------
Net earnings $ 321,333 $ 662,347 $ 856,331 $1,417,497
========== ========== ========== ==========
Allocation of net earnings:
General partners $ 82,836 $ 101,693 $ 182,069 $ 209,276
Limited partners 238,497 560,654 674,262 1,208,221
---------- ---------- ---------- ----------
$ 321,333 $ 662,347 $ 856,331 $1,417,497
========== ========== ========== ==========
Limited partners' per unit share of net earnings $ 5.43 $ 12.77 $ 15.35 $ 27.51
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
IEA INCOME FUND VI,
(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 $ 1,205,563 $ 1,837,189
Cash flows provided by investing activities:
Proceeds from disposal of equipment 872,243 551,306
Cash flows used in financing activities:
Distribution to partners (2,199,358) (2,229,485)
----------- -----------
Net increase (decrease) in cash and cash equivalents (121,552) 159,010
Cash and cash equivalents at January 1 1,728,584 1,769,503
----------- -----------
Cash and cash equivalents at June 30 $ 1,607,032 $ 1,928,513
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
IEA INCOME FUND VI,
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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.
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.
7
<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 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, 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 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 $204,153 at June 30, 1996 and $355,354 at
December 31, 1995 $1,337,164 $1,534,063
Less:
Direct operating payables and accrued expenses 290,018 351,094
Damage protection reserve 138,250 172,605
Base management fees 87,554 118,275
Reimbursed administrative expenses 17,602 21,408
Incentive fees 123,860 132,229
---------- ----------
$ 679,880 $ 738,452
========== ==========
</TABLE>
8
<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 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 $ 973,738 $1,456,067 $2,102,525 $2,858,648
Rental equipment operating expenses 289,377 279,017 566,334 543,996
Base management fees 62,941 94,484 140,055 191,484
Incentive fees 123,860 153,988 236,004 267,805
Reimbursed administrative expenses 55,831 75,305 120,040 151,217
---------- ---------- ---------- ----------
$ 441,729 $ 853,273 $1,040,092 $1,704,146
========== ========== ========== ==========
</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.
During the first six months of 1996, the Registrant continued disposing of
containers as part of its ongoing operations. Accordingly, 790 containers
were disposed, contributing to a decline in the Registrant's operating
results. At June 30, 1996, 68% of the original equipment remained in the
Registrant's fleet, as compared to 76% at December 31, 1995, comprised as
follows:
<TABLE>
<CAPTION>
40-Foot
20-Foot 40-Foot High-Cube
------- ------- ---------
<S> <C> <C> <C>
Containers on lease:
Term leases 270 125 3
Master lease 3,051 1,740 53
----- ----- -----
Subtotal 3,321 1,865 56
Containers off lease 1,001 499 13
----- ----- -----
Total container fleet 4,322 2,364 69
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
40-Foot
20-Foot 40-Foot High-Cube
----------------- ----------------- -----------------
Units % Units % Units %
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Total purchases 6,102 100% 3,753 100% 75 100%
Less disposals 1,780 29% 1,389 37% 6 8%
----- ----- ----- ----- ----- -----
Remaining fleet at June 30, 1996 4,322 71% 2,364 63% 69 92%
===== ===== ===== ===== ===== =====
</TABLE>
Net lease receivables at June 30, 1996, declined when compared to December
31, 1995, as the Registrant's diminishing fleet size and related operating
performance contributed to a decline in gross lease receivables. The
decline in gross lease receivables offset the benefits from lower direct
operating payables, damage protection reserve, reimbursed administrative
expenses payable, base management and incentive fees payable.
During the second quarter of 1996, distributions from operations and sales
proceeds amounted to $1,009,294 reflecting distributions to the general
and limited partners for the first quarter of 1996. This represents a
decline from $1,190,064 during the first quarter of 1996, reflecting
distributions for the fourth quarter of 1995. The Registrant's continuing
disposal activity 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 88% at December 31, 1995 to 79% 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 $441,729, and $1,040,092, respectively, a decline of 48% and 39% from
the same three and six-month periods in the prior year, respectively.
Approximately 29% and 30% 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 10% and 16% for the same three and
six-month periods in the prior year, respectively. As the Registrant's
disposals increase 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 $973,738, and $2,102,525,
respectively, reflecting a decline of 33% and 26% 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 and
lower utilization levels. Average per-diem rental rates decreased
approximately 4% and 3%, 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)) 9,422 11,067 9,746 11,348
Average Utilization 79% 88% 79% 90%
</TABLE>
The Registrant's aging and declining fleet size contributed to a 13% and
12% decline in depreciation expense when compared to the same three and
six-month periods in the prior year, respectively. Rental equipment
operating expenses were 30% and 27% of the Registrant's gross lease
revenue during the three and six-month periods ended June 30, 1996,
respectively, as compared to 19% during each of the three and six-month
periods ended June 30, 1995, respectively. This increase was 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 diminishing 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>
3(a) Limited Partnership Agreement of the Registrant, amended
and restated as of October 11, 1984 *
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 October 12, 1984, included as part of Registration
Statement on Form S-11 (No. 2-92883)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-11 (No. 2-92883)
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 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: August 13, 1996
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
--- ----------- ----------------
<S> <C>
3(a) Limited Partnership Agreement of the Registrant, amended and
restated as of October 11, 1984 *
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 October 12, 1984, included as part of Registration
Statement on Form S-11 (No. 2-92883)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-11 (No. 2-92883)
<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> 1,607,032
<SECURITIES> 0
<RECEIVABLES> 679,880
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,286,912
<PP&E> 16,312,526
<DEPRECIATION> 9,733,093
<TOTAL-ASSETS> 8,866,345
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,866,345
<TOTAL-LIABILITY-AND-EQUITY> 8,866,345
<SALES> 0
<TOTAL-REVENUES> 1,040,092
<CGS> 0
<TOTAL-COSTS> 481,235
<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> 856,331
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
