<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 MARCH 31, 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 0-17942
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 MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1996 (unaudited) and December 31, 1995 4
Statements of Operations for the three months ended March 31, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the three months ended March 31, 1996 and 1995 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 10
Operations
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 March 31,
1996 and December 31, 1995, statements of operations for the three
months ended March 31, 1996 and 1995, and statements of cash flows for
the three months ended March 31, 1996 and 1995.
3
<PAGE> 4
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
Assets
------
Current assets:
Cash, includes $244,805 at March 31, 1996 and $151,831
at December 31, 1995 in interest-bearing accounts $ 255,196 $ 152,012
Short-term investments 475,829 655,627
Net lease receivables due from Leasing Company
(notes 1 and 2) 436,186 425,492
----------- -----------
Total current assets 1,167,211 1,233,131
----------- -----------
Container rental equipment, at cost 12,011,539 12,088,535
Less accumulated depreciation 4,932,411 4,792,590
----------- -----------
Net container rental equipment 7,079,128 7,295,945
----------- -----------
$ 8,246,339 $ 8,529,076
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Current liabilities:
Due to general partner
(notes 1 and 3) $ 1,080 $ 7,111
----------- -----------
Partners' capital:
General partner 1,857 3,171
Limited partners 8,243,402 8,518,794
----------- -----------
Total partners' capital 8,245,259 8,521,965
----------- -----------
$ 8,246,339 $ 8,529,076
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Net lease revenue (notes 1 and 4) $456,311 $568,820
Other operating expenses:
Depreciation 174,777 178,877
Other general and administrative expenses 6,518 10,970
-------- --------
181,295 189,847
-------- --------
Earnings from operations 275,016 378,973
Other income:
Interest income 9,734 11,549
Net gain on disposal of equipment 36,324 16,737
-------- --------
46,058 28,286
-------- --------
Net earnings $321,074 $407,259
======== ========
Allocation of net earnings:
General partner $ 52,419 $ 56,448
Limited partners 268,655 350,811
-------- --------
$321,074 $407,259
======== ========
Limited partners' per unit share of net earnings $ 12.50 $ 16.32
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 471,316 $ 618,440
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 55,881 83,911
Acquisition fees paid to general partner (6,031) (6,033)
--------- ---------
49,850 77,878
--------- ---------
Cash flows used in financing activities:
Distribution to partners (597,780) (561,212)
--------- ---------
Net increase (decrease) in cash and cash equivalents (76,614) 135,106
Cash and cash equivalents at January 1 807,639 746,017
--------- ---------
Cash and cash equivalents at March 31 $ 731,025 $ 881,123
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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.
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 INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(d) Financial Statement Presentation - (Continued)
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, 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 March
31, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $145,982 at March 31, 1996 and $136,750
at December 31, 1995 $757,144 $773,483
Less:
Direct operating payables and accrued expenses 166,768 166,803
Damage protection reserve 78,286 92,138
Base management fees 63,206 75,211
Reimbursed administrative expenses 12,698 13,839
-------- --------
$436,186 $425,492
======== ========
</TABLE>
(3) Due to General Partner
The amounts due to CCC at March 31, 1996 and December 31, 1995 consist of
acquisition fees.
(Continued)
8
<PAGE> 9
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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-month periods ended March 31,
1996 and 1995, was as follows:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Rental revenue $737,442 $820,447
Rental equipment operating expenses 189,957 148,503
Base management fees 49,439 58,000
Reimbursed administrative expenses 41,735 45,124
-------- --------
$456,311 $568,820
======== ========
</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 March 31, 1996 and
December 31, 1995.
During the first quarter of 1996, the Registrant disposed of 27 containers
as part of its ongoing operations, contributing to the changes in the
Registrant's financial condition. At March 31, 1996, 93% of the original
equipment remained in the Registrant's fleet, as compared to 94% at
December 31, 1995, 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 136 211 10
Master lease 1,469 1,495 112
----- ----- ---
Subtotal 1,605 1,706 122
Containers off lease 474 528 20
----- ----- ---
Total container fleet 2,079 2,234 142
===== ===== ===
</TABLE>
<TABLE>
<CAPTION>
40-Foot
20-Foot 40-Foot High Cube
------- ------- ---------
Units % Units % Units %
----- - ----- - ----- -
<S> <C> <C> <C> <C> <C> <C>
Total purchases 2,244 100% 2,396 100% 150 100%
Less disposals 165 7% 162 7% 8 5%
----- --- ----- --- --- ---
Remaining fleet at March 31, 1996 2,079 93% 2,234 93% 142 95%
===== === ===== === === ===
</TABLE>
Net lease receivables at March 31, 1996 increased when compared to
December 31, 1995, as cash collections of outstanding receivables slowed.
A slightly smaller fleet size and the related operating results also
contributed to the increase in net lease receivables, as the damage
protection reserve, reimbursed administrative expenses payable, and base
management fees payable declined.
During the first quarter of 1996, distributions from operations and sales
proceeds amounted to $597,780, reflecting distributions to the general and
limited partners for the fourth quarter of 1995. This represents a decline
from the $649,274 distributed during the fourth quarter of 1995,
reflecting distributions for the third quarter of 1995. The Registrant's
efforts to dispose of the remaining fleet should produce lower operating
results and, consequently, lower distributions to its partners in
subsequent periods.
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 quarter of
1996. At March 31, 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 79% at March 31, 1996. During the first
quarter 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. The Leasing Company expects the
Registrant to recognize the benefits of these efforts during the next few
quarters of 1996. However, base per-diem rental rates have recently become
subject to downward pressures within the container leasing market. A
reduction in per-diem rental rates, combined with current utilization
levels, could impact the Registrant's results from operations during the
remainder of 1996.
10
<PAGE> 11
2) Material changes in the results of operations between the three-month
period ended March 31, 1996 and the three- month period ended March 31,
1995.
Net lease revenue for the first quarter of 1996 was $456,311, a decline of
approximately 20% from the first quarter of 1995. Approximately 11% of the
Registrant's net earnings for the three-month period ended March 31, 1996,
were from gain on disposal of equipment, as compared to 4% for the same
three-month period in the prior year. As the Registrant's container
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 quarter
was $737,442, a decline of 10% from the same period last year. During
1996, gross rental revenue was primarily impacted by the Registrant's
lower utilization levels. Average per-diem rental rates remained
relatively stable when compared to the same period in the prior year. The
Registrant's average fleet size and utilization rates for the three-month
periods ended March 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalent units (TEU)) 6,856 7,055
Average Utilization 79% 87%
</TABLE>
The Registrant's aging and declining fleet size contributed to a 2%
decline in depreciation expense when compared to the same period in the
prior year. Rental equipment operating expenses were 26% of the
Registrant's gross lease revenue during the three-month period ended March
31, 1996, as compared to 18% during the three-month period ended March 31,
1995. This increase was largely attributable to an increase in costs
associated with lower utilization levels, including handling, storage and
repositioning.
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 October 13, 1987
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 March 31, 1996
- --------------------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated October 13, 1987, included as part of Registration
Statement on Form S-1 (No. 33-16984)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-1 (No. 33-16984)
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 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: May 14, 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 October 13, 1987
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 13, 1987, included as part of Registration
Statement on Form S-1 (No. 33-16984)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-1 (No. 33-16984)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT MARCH 31, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 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 MARCH 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 731025
<SECURITIES> 0
<RECEIVABLES> 436186
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1167211
<PP&E> 12011539
<DEPRECIATION> 4932411
<TOTAL-ASSETS> 8246339
<CURRENT-LIABILITIES> 1080
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8245259
<TOTAL-LIABILITY-AND-EQUITY> 5246339
<SALES> 0
<TOTAL-REVENUES> 456311
<CGS> 0
<TOTAL-COSTS> 181295
<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> 321074
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
