<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, 2000
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.)
One Front 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, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets (unaudited) - September 30, 2000 and December 31, 1999 4
Condensed Statements of Operations (unaudited) for the three and nine months ended
September 30, 2000 and 1999 5
Condensed Statements of Cash Flows (unaudited) for the nine months ended September 30,
2000 and 1999 6
Notes to Condensed Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's condensed balance sheets as of
September 30, 2000 and December 31, 1999, condensed statements of
operations for the three and nine months ended September 30, 2000 and
1999, and condensed statements of cash flows for the nine months ended
September 30, 2000 and 1999.
3
<PAGE> 4
IEA INCOME FUND VI,
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, includes $427,113 at September 30, 2000 and
$471,468 at December 31, 1999 in interest-bearing accounts $ 502,198 $ 471,568
Net lease receivables due from Leasing Company
(Notes 1 and 2) 4,911 87,904
---------- ----------
Total current assets 507,109 559,472
---------- ----------
Container rental equipment, at cost 4,110,746 5,218,975
Less accumulated depreciation 2,876,118 3,678,434
---------- ----------
Net container rental equipment 1,234,628 1,540,541
---------- ----------
Total assets $1,741,737 $2,100,013
========== ==========
Partners' Capital
Partners' capital:
General partners $ 3,036 $ 5,687
Limited partners 1,738,701 2,094,326
---------- ----------
Total partners' capital $1,741,737 $2,100,013
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE> 5
IEA INCOME FUND VI,
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net lease revenue (Notes 1 and 3) $ 122,566 $ 127,220 $ 329,617 $ 440,613
Other operating expenses:
Depreciation -- 30,038 -- 99,150
Other general and administrative expenses 17,823 11,690 49,533 39,101
--------- --------- --------- ---------
17,823 41,728 49,533 138,251
--------- --------- --------- ---------
Income from operations 104,743 85,492 280,084 302,362
Other income (loss):
Interest income 4,267 7,061 14,675 23,009
Net gain (loss) on disposal of (5,075) 26,449 9,787 140,271
--------- --------- --------- ---------
equipment
(808) 33,510 24,462 163,280
--------- --------- --------- ---------
Net income $ 103,935 $ 119,002 $ 304,546 $ 465,642
========= ========= ========= =========
Allocation of net income:
General partners $ 18,610 $ 33,568 $ 56,269 $ 107,149
Limited partners 85,325 85,434 248,277 358,493
--------- --------- --------- ---------
$ 103,935 $ 119,002 $ 304,546 $ 465,642
========= ========= ========= =========
Limited partners' per unit share of net income $ 1.94 $ 1.94 $ 5.65 $ 8.16
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
5
<PAGE> 6
IEA INCOME FUND VI,
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Net cash provided by operating activities $ 356,524 $ 483,646
Cash provided by investing activities:
Proceeds from disposal of equipment 336,928 631,302
Cash used in financing activities:
Distribution to Partners (662,822) (1,280,448)
----------- -----------
Net increase (decrease) in cash and cash equivalents 30,630 (165,500)
Cash and cash equivalents, beginning of period 471,568 786,433
----------- -----------
Cash and cash equivalents, end of period $ 502,198 $ 620,933
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
6
<PAGE> 7
IEA INCOME FUND VI,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(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 worldwide to ocean carriers. To this extent, the
Partnership's operations are subject to the fluctuations of world
economic and political conditions. Such factors may affect the pattern
and levels of world trade. The Partnership believes that the
profitability of, and risks associated with, leases to foreign customers
is generally the same as those of leases to domestic customers. The
Partnership's leases generally require all payments to be made in United
States currency.
The managing general partner is Cronos Capital Corp. ("CCC"); the
associate general partners are four individuals. CCC, with its affiliate
Cronos Containers Limited (the "Leasing Company"), manages the business
of the Partnership. CCC and the Leasing Company also manage the
container leasing business for other partnerships affiliated with the
managing general partner. The Partnership shall continue until December
31, 2006, unless sooner terminated upon the occurrence of certain
events.
The Partnership commenced operations on December 4, 1984, when the
minimum subscription proceeds of $1,000,000 were obtained. The
Partnership offered 60,000 units of limited partnership interest at $500
per unit, or $30,000,000. The offering terminated on October 11, 1985,
at which time 43,920 limited partnership units had been purchased.
(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 one 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 condensed financial statements.
(continued)
7
<PAGE> 8
IEA INCOME FUND VI,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(c) Basis of Accounting
The Partnership utilizes the accrual method of accounting. Net lease
revenue is recorded by the Partnership in each period based upon its
leasing agent agreement with the Leasing Company. Net lease revenue is
generally dependent upon operating lease rentals from operating lease
agreements between the Leasing Company and its various lessees, less
direct operating expenses and management fees due in respect of the
containers specified in each operating lease agreement.
(d) Depreciation of Containers
Container rental equipment is depreciated over a twelve-year life on a
straight-line basis to its estimated salvage value of 30%. As of
December 31, 1999, container rental equipment has been fully
depreciated.
(e) Financial Statement Presentation
These condensed financial statements have been prepared without audit.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP") 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 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.
Actual results could differ from those estimates.
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. The results of
operations for such interim periods are not necessarily indicative of
the results to be expected for the full year.
(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 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,
2000 and December 31, 1999 were as follows:
(continued)
8
<PAGE> 9
IEA INCOME FUND VI,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(2) Net Lease Receivables Due from Leasing Company (continued)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Gross lease receivables $278,740 $307,763
Less:
Direct operating payables and accrued expenses 124,190 79,424
Damage protection reserve 27,615 25,417
Base management fees payable 54,319 57,191
Reimbursed administrative expenses 9,058 3,260
Allowance for doubtful accounts 36,888 29,461
Incentive fees 21,759 25,106
-------- --------
Net lease receivables $ 4,911 $ 87,904
======== ========
</TABLE>
(3) Net Lease Revenue
Net lease revenue is determined by deducting direct operating expenses, base
management and incentive fees and reimbursed administrative expenses 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 nine-month periods ended September 30, 2000 and
1999 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Rental revenue $173,199 $224,554 $555,731 $778,459
Less:
Rental equipment operating expenses 11,241 33,573 87,786 114,428
Base management fees 13,026 15,852 38,010 56,608
Reimbursed administrative expenses 4,608 9,413 30,021 37,929
Incentive fees 21,758 38,496 70,297 128,881
-------- -------- -------- --------
$122,566 $127,220 $329,617 $440,613
======== ======== ======== ========
</TABLE>
(4) Operating Segment
The Financial Accounting Standards Board has issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
changes the way public business enterprises report financial and descriptive
information about reportable operating segments. An operating segment is a
component of an enterprise that engages in business activities from which it
may earn revenues and incur expenses, whose operating results are regularly
reviewed by the enterprise's chief operating decision maker to make
decisions about resources to be allocated to the segment and assess its
performance, and about which separate financial information is available.
Management operates the Partnership's container fleet as a homogenous unit
and has determined, after considering the requirements of SFAS No. 131, that
as such it has a single reportable operating segment.
The Partnership derives revenues from dry cargo marine containers. As of
September 30, 2000, the Partnership operated 1,075 twenty-foot, 483
forty-foot and 36 forty-foot high-cube dry cargo marine containers.
Due to the Partnership's lack of information regarding the physical location
of its fleet of containers when on lease in the global shipping trade, it is
impracticable to provide the geographic area information required by SFAS
No. 131.
******
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 September 30, 2000 and
December 31, 1999.
During the first nine months of 2000, the Registrant disposed of 443
containers as part of its ongoing container operations. At September 30,
2000, 16% of the original equipment remained in the Registrant's fleet, as
compared to 21% at December 31, 1999, and was comprised of the following:
<TABLE>
<CAPTION>
40-Foot
20-Foot 40-Foot High-Cube
------- ------- ---------
<S> <C> <C> <C>
Containers on lease:
Term leases 87 39 6
Master leases 833 390 18
----- ----- -----
Subtotal 920 429 24
Containers off lease 155 54 12
----- ----- -----
Total container fleet 1,075 483 36
===== ===== =====
</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 5,027 82% 3,270 87% 39 52%
----- ----- ----- ----- ----- -----
Remaining fleet at September 30, 2000 1,075 18% 483 13% 36 48%
===== ===== ===== ===== ===== =====
</TABLE>
The Registrant's allowance for doubtful accounts increased from $29,461 at
December 31, 1999 to $36,888 at September 30, 2000. This increase was
attributable to the delinquent account receivable balances of approximately
16 lessees. The Leasing Company has either negotiated specific payment terms
with these lessees or is pursuing other alternatives to collect the
outstanding balances. In each instance, the Registrant believes it has
recorded appropriate allowance.
During the third quarter of 2000, distributions made from operations and
sales proceeds amounted to $210,898, reflecting distributions due to the
general and limited partners for the second quarter of 2000. Such
distributions decreased approximately 7% when compared with those issued in
the second quarter of 2000, reflecting distributions due for the first
quarter of 2000. The Registrant's continuing disposal of containers should
produce lower operating results and, consequently, lower distributions to
its partners in subsequent periods.
During the third quarter of 2000, growth in the volume of containerized
trade continued to improve. As a result, demand for leased equipment
strengthened in many locations, but most significantly throughout Asia. With
the growth in the volume of world trade, ocean carriers are committing their
capital to the purchase of additional containerships and turning to leasing
companies to supply them with the containers they need to meet their growing
freight requirements. The container leasing market has rebounded and
prospects have somewhat improved, but lease rates have remained at generally
the same low level as at the beginning of this year. At the same time,
inventories of idle equipment have been reduced in Europe, but there has
been no appreciable reduction in the U.S. The strong U.S. economy continued
to import more than it exported. This imbalance has had the effect of
further increasing idle container inventories, particularly on the U.S. East
Coast.
(continued)
10
<PAGE> 11
2) Material changes in the results of operations between the three and
nine-month periods ended September 30, 2000 and the three and nine-month
periods ended September 30, 1999.
Net lease revenue for the three and nine-month periods ended September 30,
2000 was $122,566 and $329,617, respectively, a decline of 4% and 25% from
the respective three and nine-month periods in the prior year. Net income
from the gain on disposal of equipment for the three-month period ended
September 30, 2000 was 0%, compared with 22% for the same period ended
September 30, 1999. Approximately 3% of the Registrant's net income for the
nine-month period ended September 30, 2000 was from gain on disposal of
equipment, as compared to 30% for the same nine-month period in the prior
year.
Gross rental revenue (a component of net lease revenue) for the three and
nine-month periods ended September 30, 2000 was $173,199 and $555,731,
respectively, reflecting a decline of 23% and 29% from the comparable three
and nine-month periods in 1999. Gross rental revenue was primarily impacted
by the Registrant's diminishing fleet size and a decline in per-diem rental
rates. Average per-diem rental rates decreased approximately 8% and 14%,
respectively, when compared to the same three and nine-month periods in the
prior year. The Registrant's average fleet size and utilization rates for
the three and nine-month periods ended September 30, 2000 and 1999 were as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average fleet size (measured in
twenty-foot equivalent units (TEU)) 2,170 2,972 2,396 3,262
Average utilization 88% 86% 88% 84%
</TABLE>
Rental equipment operating expenses were 6% and 16%, respectively, of the
Registrant's gross lease revenue during the three and nine-month periods
ended September 30, 2000, compared to 15% for both the three and nine-month
periods ended September 30, 1999. The large decrease for the three-month
period ended September 30, 2000 was attributable to the recovery of doubtful
accounts. The Registrant's declining fleet size and related operating
results also contributed to a decline in base management fees, reimbursed
administrative expenses and incentive fees.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On March 20, 2000, KM Investments, LLC, a California limited liability company
("KM") filed its complaint (the "Complaint") in the Superior Court for the
County of Los Angeles against CCC, as general partner of the Partnership,
alleging violation of the California Revised Limited Partnership Act, breach of
fiduciary duty, and unfair competition. KM claims to be an assignee of units of
limited partnership interests in the Partnership and six other California
limited partnerships (collectively, the "Cronos Partnerships") managed by CCC as
general partner. KM, which is in the business of making unregistered tender
offers for up to 4.9% of the outstanding interests in limited partnerships,
claims that CCC has wrongfully refused to provide KM with lists of the limited
partners of the Cronos Partnerships to enable KM to make unregistered tender
offers to the limited partners of the Cronos Partnerships.
KM asks for declaratory relief, damages according to proof, attorneys' fees,
costs, interest, a temporary restraining order and/or a preliminary injunction
barring CCC from giving limited partner lists to any other party before
delivering such lists to KM, punitive damages, and an order prohibiting CCC from
receiving reimbursement of its legal fees incurred in defending the action from
the Cronos Partnerships.
On April 24, 2000, CCC filed its demurrer to the Complaint and its motion to
strike those portions of the Complaint seeking punitive damages. By its
demurrer, CCC asserted that KM, as an assignee of units of the Cronos
Partnerships, is not entitled to review or receive a copy of the lists of the
limited partners of the Cronos Partnerships; that CCC has not breached any
fiduciary duty to KM; and that CCC has not engaged in unfair competition as
alleged by KM. CCC requested that the Court dismiss KM's Complaint.
On June 8, 2000, the Court heard CCC's demurrer, and sustained (i.e., granted)
it in its entirety, allowing KM thirty days to file an amended complaint. KM did
so on or about July 10, 2000, asserting the same causes of action as set forth
in its original complaint. On August 25, 2000, CCC filed its demurrer to KM's
First Amended Complaint and its motion to strike those portions of the First
Amended Complaint seeking punitive damages. On October 11, 2000, the Court heard
CCC's motions. It sustained CCC's demurrer to KM's fourth cause of action
seeking declaratory relief, but overruled (i.e., denied) CCC's demurrer to KM's
first three causes of action, on the ground that the evidence submitted by CCC
was not properly before the Court on CCC's demurrer to KM's First Amended
Complaint. At the same time, the Court granted CCC's motion to strike those
portions of KM's First Amended Complaint seeking punitive damages.
On October 20, 2000, CCC filed its answer to KM's First Amended Complaint,
denying the allegations thereof, denying that plaintiff is entitled to any
damages, and asserting various affirmative defenses. CCC believes that KM does
not have standing to inspect or receive lists of the limited partners of the
limited partnerships managed by CCC, and that CCC has meritorious defenses to
KM's First Amended Complaint.
12
<PAGE> 13
PART II - OTHER INFORMATION (CONT.)
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 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
September 30, 2000.
------------
* 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-1 (No. 2-92883)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-1 (No. 2-92883)
13
<PAGE> 14
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/ Dennis J. Tietz
------------------------------------
Dennis J. Tietz
President and Director of Cronos
Capital Corp. ("CCC")
Principal Executive Officer of CCC
Date: November 14, 2000
14
<PAGE> 15
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 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-1 (No. 2-92883)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-1 (No. 2-92883)
