<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 0-17942
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
(Exact name of registrant as specified in its charter)
California 94-3046886
(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 VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION
<S> <C>
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 Operations 7
PART II - OTHER INFORMATION
Item 6. Exhibit 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 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 VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Assets
------
Current assets:
Cash, includes $243,737 at September 30, 1995 and $171,565
at December 31, 1994 in interest-bearing accounts $ 244,192 $ 181,017
Short-term investments 590,000 565,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 464,761 506,381
----------- ------------
Total current assets 1,298,953 1,252,398
----------- ------------
Container rental equipment, at cost 12,140,750 12,476,930
Less accumulated depreciation 4,641,705 4,245,029
----------- ------------
Net container rental equipment 7,499,045 8,231,901
----------- ------------
$ 8,797,998 $ 9,484,299
=========== ============
Liabilities and Partners' Capital
---------------------------------
Current liabilities
Due to general partner
(notes 1 and 3)
$ 7,952 $ 12,154
----------- ------------
Total current liabilities 7,952 12,154
----------- ------------
Due to general partner, net (note 3) -- 7,111
----------- ------------
Total liabilities 7,952 19,265
----------- ------------
Partners' capital (deficit):
General partner $ 1,197 $ (6,916)
Limited partners 8,788,849 9,471,950
----------- ------------
Total partners' capital 8,790,046 9,465,034
----------- ------------
$ 8,797,998 $ 9,484,299
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
IEA INCOME FUND VIII,
(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 4) $514,655 $ 531,109 $1,686,314 $1,685,591
Other operating expenses:
Depreciation 175,579 181,364 531,366 545,429
Other general and administrative expenses 1,894 11,180 29,268 33,373
-------- ---------- ---------- ----------
177,473 192,544 560,634 578,802
-------- ---------- ---------- ----------
Earnings from operations 337,182 338,565 1,125,680 1,106,789
Other income:
Interest income 11,509 7,577 36,012 20,685
Net gain on disposal of equipment 8,415 32,041 38,005 64,762
-------- ---------- ---------- ----------
19,924 39,618 74,017 85,447
-------- ---------- ---------- ----------
Net earnings $357,106 $ 378,183 $1,199,697 $1,192,236
======== ========== ========== ==========
Allocation of net earnings:
General partner $ 65,220 $ 58,036 $ 176,776 $ 153,130
Limited partners 291,886 320,147 1,022,921 1,039,106
-------- ---------- ---------- ----------
$357,106 $ 378,183 $1,199,697 $1,192,236
======== ========== ========== ==========
Limited partners' per unit share of net earnings $ 14 $ 15 $ 48 $ 48
======== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
IEA INCOME FUND VIII,
(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 $1,783,584 $ 1,573,524
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 190,590 60,336
Acquisition fees paid to general partner (11,314) (20,221)
---------- -----------
Net cash provided by investing activities 179,276 40,115
---------- -----------
Cash flows used in financing activities:
Distribution to partners (1,874,685) (1,898,008)
---------- -----------
Net increase (decrease) in cash and cash equivalents 88,175 (284,369)
Cash and cash equivalents at January 1 746,017 981,400
---------- -----------
Cash and cash equivalents at September 30 $ 834,192 $ 697,031
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 7
IEA INCOME FUND VIII,
(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 VIII, A California Limited Partnership (the
"Partnership") was organized under the laws of the State of California
on August 31, 1987 for the purpose of owning and leasing marine cargo
containers. Cronos Capital Corp. ("CCC") is the general partner and,
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 INCOME FUND VIII,
(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, base
management fees payable, and reimbursed administrative expenses 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 $126,868 at September 30, 1995 and $109,915
at December 31, 1994 $827,329 $855,929
Less:
Direct operating payables and accrued expenses 185,048 114,443
Damage protection reserve 85,190 137,410
Base management fees 80,150 82,030
Reimbursed administrative expenses 12,180 15,665
-------- --------
$464,761 $506,381
======== ========
</TABLE>
(3) Due to General Partner
The amounts due to CCC at September 30, 1995 and December 31, 1994
consist of acquisition fees.
(4) 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 $ 836,443 $ 843,112 $2,525,657 $2,431,218
Rental equipment operating expenses 215,497 196,825 526,996 425,662
Base management fees 55,495 64,648 170,621 170,197
Reimbursed administrative expenses 50,796 50,530 141,726 149,768
---------- ---------- ---------- ----------
$ 514,655 $ 531,109 $1,686,314 $1,685,591
========== ========== ========== ==========
</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 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 $67,166. The Registrant will
distribute these sales proceeds and $523,897 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 8% from December
31, 1994. Contributing to this decline was a 62% 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 38% 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 $514,655, a decline of 3%
over the third quarter of 1994. Gross rental revenue (a component of net
lease revenue) for the quarter was $836,443, as compared to $843,112 for the
same period last year. For the first nine months of 1995, net lease revenue
was $1,686,314, consistent with the first nine months of 1994. Gross rental
revenue increased 4% to $2,525,657 over the same nine-month period.
Gross rental revenue experience little change when compared with the same
three and nine-month periods in the prior year, as the Registrant continued
to recognize higher ancillary revenues, such as pick-up and drop-off
charges. These ancillary revenues helped to offset the effects of a
slightly lower fleet size and lower utilization rates. 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)) 6,933 7,155 6,996 7,173
Average Utilization 88% 90% 87% 89%
</TABLE>
7
<PAGE> 10
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 increased 9% and 24% during the three and
nine-month periods ended September 30, 1995, respectively, when compared to the
same periods in the prior year. These increases were attributable to expenses
typically associated with lower utilization rates, including repair and
maintenance, storage and handling, as well as those costs associated with the
recovery actions against the doubtful accounts of certain lessees, including
legal, container recovery expenses and the related provision for doubtful
accounts.
8
<PAGE> 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description Method of Filing
------ ----------- ----------------
27 Financial Data Schedule Filed with this Document
(b) There were no reports on Form 8-K during the three-month period
ended September 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 INCOME FUND VIII,
A California Limited Partnership
By Cronos Capital Corp.
The General Partner
By /s/ JOHN KALLAS
---------------------------------------
John Kallas
Vice President, Chief Financial Officer
Principal Accounting Officer
Date: November 13, 1995
10
<PAGE> 13
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
27 Financial Data Schedule
<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> 834,192
<SECURITIES> 0
<RECEIVABLES> 464,761
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,298,953
<PP&E> 12,140,750
<DEPRECIATION> 4,641,705
<TOTAL-ASSETS> 8,797,998
<CURRENT-LIABILITIES> 7,952
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 8,790,046
<TOTAL-LIABILITY-AND-EQUITY> 8,797,998
<SALES> 0
<TOTAL-REVENUES> 1,760,331
<CGS> 0
<TOTAL-COSTS> 560,634
<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> 1,199,697
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
