<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, 1998
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 JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1998 (unaudited) and December 31, 1997 4
Statements of Operations for the three and six months ended
June 30, 1998 and 1997 (unaudited) 5
Statements of Cash Flows for the six months ended June 30, 1998 and 1997 (unaudited) 6
Notes to 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 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 3. Defaults Upon Senior Securities 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of June 30,
1998 and December 31, 1997, statements of operations for the three
and six months ended June 30, 1998 and 1997, and statements of cash
flows for the six months ended June 30, 1998 and 1997.
3
<PAGE> 4
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, includes $638,052 at June 30, 1998 and
$723,264 at December 31, 1997 in interest-bearing accounts $ 638,152 $ 723,464
Net lease receivables due from Leasing Company
(notes 1 and 2) 182,469 173,380
----------- -----------
Total current assets 820,621 896,844
----------- -----------
Container rental equipment, at cost 10,238,209 10,698,144
Less accumulated depreciation 5,475,139 5,430,138
----------- -----------
Net container rental equipment 4,763,070 5,268,006
----------- -----------
$ 5,583,691 $ 6,164,850
=========== ===========
Partners' Capital
Partners' capital:
General partner $ 2,885 $ 4,370
Limited partners 5,580,806 6,160,480
----------- -----------
Total partners' capital 5,583,691 6,164,850
----------- -----------
$ 5,583,691 $ 6,164,850
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------- ---------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 3) $271,628 $292,276 $563,250 $578,641
Other operating expenses:
Depreciation 155,981 163,131 311,155 328,600
Other general and administrative expenses 8,210 10,623 19,621 17,995
-------- -------- -------- --------
164,191 173,754 330,776 346,595
-------- -------- -------- --------
Earnings from operations 107,437 118,522 232,474 232,046
Other income:
Interest income 8,185 6,576 16,576 14,143
Net gain on disposal of equipment 30,591 11,972 59,746 49,481
-------- -------- -------- --------
38,776 18,548 76,322 63,624
-------- -------- -------- --------
Net earnings $146,213 $137,070 $308,796 $295,670
======== ======== ======== ========
Allocation of net earnings:
General partner $ 75,064 $ 31,076 $149,640 $ 66,873
Limited partners 71,149 105,994 159,156 228,797
-------- -------- -------- --------
$146,213 $137,070 $308,796 $295,670
======== ======== ======== ========
Limited partners' per unit share of net earnings $ 3.31 $ 4.94 $ 7.40 $ 10.65
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
June 30, June 30,
1998 1997
--------- ---------
<S> <C> <C>
Net cash provided by operating activities $ 501,318 $ 638,216
Cash flows provided by investing activities:
Proceeds from sale of rental equipment 303,324 191,606
Cash flows used in financing activities:
Distribution to partners (889,954) (868,684)
--------- ---------
Net decrease in cash and cash equivalents (85,312) (38,862)
Cash and cash equivalents at January 1 723,464 669,932
--------- ---------
Cash and cash equivalents at June 30 $ 638,152 $ 631,070
========= =========
</TABLE>
The accompanying notes are an integral part of these financial 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 the business of the Partnership. The
Partnership shall continue until December 31, 2008, unless sooner
terminated upon the occurrence of certain events.
The Partnership commenced operations on January 6, 1988, when the
minimum subscription proceeds of $1,000,000 were obtained. The
Partnership offered 40,000 units of limited partnership interest at
$500 per unit, or $20,000,000. The offering terminated on August 31,
1988, at which time 21,493 limited partnership units had been
purchased.
As of June 30, 1998, the Partnership operated 1,858 twenty-foot,
1,806 forty-foot and 106 forty-foot high-cube marine dry cargo
containers.
(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.
(Continued)
7
<PAGE> 8
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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) 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. 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.
(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 June 30, 1998 and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
Lease receivables, net of doubtful accounts of $30,152
at June 30, 1998 and $50,296 at December 31, 1997 $483,051 $526,063
Less:
Direct operating payables and accrued expenses 134,485 182,723
Damage protection reserve 50,749 61,923
Base management fees 59,546 51,339
Reimbursed administrative expenses 8,786 9,682
Incentive fees 47,016 47,016
-------- --------
$182,469 $173,380
======== ========
</TABLE>
(Continued)
8
<PAGE> 9
IEA INCOME FUND VIII,
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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 six-month periods ended
June 30, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental revenue $ 495,406 $ 529,584 $1,013,845 $1,063,398
Less:
Rental equipment operating expenses 117,458 164,127 226,772 343,340
Base management fees 33,990 36,355 70,082 73,573
Reimbursed administrative expenses 25,314 29,591 61,388 60,609
Incentive fees 47,016 7,235 92,353 7,235
---------- ---------- ---------- ----------
$ 271,628 $ 292,276 $ 563,250 $ 578,641
========== ========== ========== ==========
</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, 1998 and
December 31, 1997.
During the first six months of 1998, the Registrant disposed of 170
containers as part of its ongoing operations. At June 30, 1998, 79% of
the original equipment remained in the Registrant's fleet, as compared to
82% at December 31, 1997, 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 138 158 16
Master leases 1,338 1,218 74
----- ----- -----
Subtotal 1,476 1,376 90
Containers off lease 382 430 16
----- ----- -----
Total container fleet 1,858 1,806 106
===== ===== =====
</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 386 17% 590 25% 44 29%
----- ----- ----- ----- ----- -----
Remaining fleet at June 30, 1998 1,858 83% 1,806 75% 106 71%
===== ===== ===== ===== ===== =====
</TABLE>
The Registrant's operating performance contributed to a 5% increase in
net lease receivables at June 30, 1998 when compared to December 31,
1997. During the second quarter of 1998, distributions from operations
and sales proceeds amounted to $437,514, reflecting distributions to the
general and limited partners for the first quarter of 1998. This
represents a decrease from the $452,440 distributed during the first
quarter of 1998, reflecting distributions for the fourth quarter of 1997.
In 1994, pursuant to Section 6.1(b) and (c) of the Partnership Agreement,
the allocation of distributions from operations among the general partner
and limited partners was adjusted to 10% and 90%, respectively. With the
payment of the distribution for the third quarter of 1997, the limited
partners received aggregate distributions in an amount equal to their
adjusted capital contributions plus a 10% cumulative, annual return on
their adjusted capital contributions. Thereafter, all distributions were
allocated 20% to the general partner and 80% to the limited partners,
pursuant to Sections 6.1(b) and (c) of the Partnership Agreement. Cash
distributions from operations to the general partner in excess of 10% of
distributable cash will be considered an incentive fee and compensation
to the general partner.
10
<PAGE> 11
Imbalances and reductions in trade volumes, fueled by the economic crisis
in Asia, continue to affect the container leasing market and Partnership
operations. Containerships leaving Asia are operating at full capacity.
Yet, on the return eastbound trip they are going back to Asia with only a
fraction of their holds utilized. This results in a shortage of
containers available for exporting cargo from Asia and a surplus of
containers in locations of low demand. As a consequence of this
imbalance, container leasing companies are repositioning empty containers
from low-demand locations back to Asian ports in order to keep equipment
at the source of cargo and, at the same time, reduce the effects of
additional depot charges for idle equipment and lost revenue. While there
is a cost incurred when repositioning an empty container, revenue is lost
while it is in transit. In spite of these market pressures, strong trade
with other parts of the world is compensating for the imbalances with
Asia. There is renewed demand for leased containers in locations such as
Mexico, Canada, China, and areas of Europe where trade volumes of
containerized goods are prospering. In light of the current market
conditions, the Registrant's focus remains centered on strategic planning
in order to reduce equipment imbalances and on improving collections to
maximize returns.
2) Material changes in the results of operations between the three and
six-month periods ended June 30, 1998 and the three and six-month periods
ended June 30, 1997.
Net lease revenue for the three and six-month periods ended June 30, 1998
was $271,628 and $563,250, respectively, a decrease of 7% and 3% from the
respective three and six-month periods in the prior year. Approximately
21% and 19%, respectively, of the Registrant's net earnings for the three
and six-month periods ended June 30, 1998 were from gain on disposal of
equipment, as compared to 9% and 17%, respectively, for the same three
and six-month periods in the prior year. As the Registrant's disposals
increase in subsequent periods, net gain on disposal should contribute
significantly to the Registrant's net earnings and may fluctuate
depending on the level of container disposals.
Gross rental revenue (a component of net lease revenue) for the three and
six-month periods ended June 30, 1998 was $495,406 and $1,013,845,
respectively, reflecting a decline of 6% and 5%, respectively, from the
same three and six-month periods in 1997. During 1998, gross rental
revenue was impacted by the Registrant's slightly smaller fleet size and
lower per-diem rental rates. Average per-diem rental rates decreased
approximately 4% and 6%, respectively, when compared to the same three
and six-month periods in the prior year. The Registrant's average fleet
size and utilization rates for the three and six-month periods ended June
30, 1998 and June 30, 1997 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Average fleet size (measured in twenty-foot
equivalent units (TEU)) 5,724 6,324 5,821 6,393
Average Utilization 79% 73% 79% 72%
</TABLE>
The Registrant's aging and declining fleet size contributed to a
respective 4% and 5% decline in depreciation expense when compared to the
same three and six-month periods in the prior year. Rental equipment
operating expenses were 24% and 22%, respectively, of the Registrant's
gross lease revenue during the three and six-month periods ended June 30,
1998, as compared to 31% and 32%, respectively, of the Registrant's gross
lease revenue during the three and six-month periods ended June 30, 1997.
11
<PAGE> 12
Year 2000
The Registrant relies upon the financial and operational systems provided
by the Leasing company and its affiliates, as well as the systems
provided by other independent third parties to service the three primary
areas of its business: investor processing/maintenance; container
leasing/asset tracking; and accounting finance. The Registrant has
received confirmation from its third-party investor
processing/maintenance vendor that their system is Year 2000 compliant.
The Registrant does not expect a material increase in its vendor
servicing fee to reimburse Year 2000 costs. Container leasing/asset
tracking and accounting/finance services are provided to the Registrant
by CCC and its affiliate, Cronos Containers Limited (the "Leasing
Company"), pursuant to the respective Limited Partnership Agreement and
Leasing Agent Agreement. CCC and the Leasing Company have initiated a
program to prepare their systems and applications for the Year 2000.
Preliminary studies indicate that testing, conversion and upgrading of
system applications is expected to cost CCC and the Leasing Company less
than $500,000. Pursuant to the Limited Partnership Agreement, CCC or the
Leasing Company, may not seek reimbursement of data processing costs
associated with the Year 2000 program. The financial impact of making
these required system changes is not expected to be material to the
Registrant's financial position, results of operations or cash flows.
Cautionary Statement
This Quarterly Report on Form 10-Q contains statements relating to future
results of the Registrant, including certain projections and business
trends, that are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Actual results may differ
materially from those projected as a result of certain risks and
uncertainties, including but not limited to changes in: economic
conditions; trade policies; demand for and market acceptance of leased
marine cargo containers; competitive utilization and per-diem rental rate
pressures; as well as other risks and uncertainties, including but not
limited to those described in the above discussion of the marine
container leasing business under Item 2., Management's Discussion and
Analysis of Financial Condition and Results of Operations; and those
detailed from time to time in the filings of Registrant with the
Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As reported in the Registrant's Current Report on Form 8-K and
Amendment No. 1 to Current Report on Form 8-K, filed with the
Commission on February 7, 1997 and February 26, 1997, respectively,
Arthur Andersen, London, England, resigned as auditors of the Cronos
Group, a Luxembourg corporation headquartered in Orchard Lea, England
(the "Parent Company"), on February 3, 1997.
The Registrant retained a new auditor, Moore Stephens, P.C. on April
10, 1997, as reported in its Current Report on Form 8-K, filed April
14, 1997.
In connection with its resignation, Arthur Andersen also prepared a
report pursuant to Section 10A(b)(2) of the Securities Exchange Act
of 1934 as amended, for filing by the Parent Company with the
Securities and Exchange Commission ("SEC") citing its inability to
obtain what it considered to be adequate responses to its inquiries
primarily regarding the payment of $1.5 million purportedly in
respect of professional fees relating to a proposed strategic
alliance. This sum was returned to the Parent Company in January
1997.
Following the report of Arthur Andersen, the SEC, on February 10,
1997, commenced a private investigation of the Parent Company for the
purpose of investigating the matters discussed in such report and
related matters. The SEC's investigation can result in several types
of civil or administrative sanctions against the Parent Company and
individuals associated with the Parent Company, including the
assessment of monetary penalties. Actions taken by the SEC do not
preclude additional actions by any other federal, civil or criminal
authorities or by other regulatory organizations or by third parties.
The SEC's investigation is continuing, and some of the Parent
Company's present and former officers and directors and others
associated with the Parent Company have given testimony. However, no
conclusion of any alleged wrongdoing by the Parent Company or any
individual has been communicated to the Parent Company by the SEC.
The Registrant does not believe that the focus of the SEC's
investigation is upon the Registrant or CCC. CCC is unable to predict
the outcome of the SEC's ongoing private investigation of the Parent
Company.
As reported in the Registrant's Current Report on Form 8-K, filed
with the SEC on May 21, 1998, the Parent Company reported that its
Chairman and CEO, Stefan M. Palatin, was suspended from his duties
pending the investigation of fraud charges against him by Austrian
government authorities. On June 8, 1998, the Parent Company's Board
of Directors removed Mr. Palatin as Managing Director and Chief
Executive Officer. Mr. Palatin resigned from the Board of Directors
of the Parent Company on July 6, 1998. Mr. Rudolf J. Weissenberger
has been appointed to replace Mr. Palatin as an executive director
and Chief Executive Officer. Also, on June 8, 1998, the Board
approved a proposal to add two independent directors to the Board.
The Board engaged legal counsel to provide legal advice and commence
legal action, if appropriate, against former officers or directors of
the Parent Company (including Mr. Palatin) if it is determined that
they engaged in any misfeasance or improper self-dealing.
Mr. Palatin had been a director of CCC; he resigned from his position
as director on April 23, 1998.
CCC further understands that Austrian authorities have initiated
investigations of persons in addition to Mr. Palatin, including Mr.
Weissenberger and Dr. Axel Friedberg. Dr. Friedberg has been a
non-executive director of the Parent Company since 1997. Such
investigations, which are still pending, have not resulted in any
action being taken against Messrs. Weissenberger or Friedberg, and
each has informed the Parent Company that they do not believe that
there is any basis for any action to be taken against them.
13
<PAGE> 14
Item 3. Defaults Upon Senior Securities
See Item 5. Other Information.
Item 5. Other Information
In 1993, the Parent Company negotiated a credit facility
(hereinafter, the "Credit Facility") with several banks for the use
of the Parent Company and its affiliates, including CCC. At December
31, 1996, approximately $73,500,000 in principal indebtedness was
outstanding under the Credit Facility. As a party to the Credit
Facility, CCC is jointly and severally liable for the repayment of
all principal and interest owed under the Credit Facility. The
obligations of CCC, and the five other subsidiaries of the Parent
Company that are borrowers under the Credit Facility, are guaranteed
by the Parent Company.
Following negotiations in 1997 with the banks providing the Credit
Facility, an Amended and Restated Credit Agreement was executed in
June 1997, subject to various actions being taken by the Parent
Company and its subsidiaries, primarily relating to the provision of
additional collateral. This Agreement was further amended in July
1997 and the provisions of the Agreement and its Amendment converted
the facility to a term loan, payable in installments, with a final
maturity date of May 31, 1998. The terms of the Agreement and its
Amendment also provided for additional security over shares in the
subsidiary of the Parent Company that owns the head office of the
Parent Company's container leasing operations. They also provided for
the loans to the former Chairman of $5,900,000 and $3,700,000 to be
restructured as obligations of the former Chairman to another
subsidiary of the Parent Company (not CCC), together with the pledge
to this subsidiary company of 2,030,303 Common Shares beneficially
owned by him in the Parent Company as security for these loans. They
further provided for the assignment of these loans to the lending
banks, together with the pledge of 1,000,000 shares and the
assignment of the rights of the Parent Company in respect of the
other 1,030,303 shares. Additionally, CCC granted the lending banks a
security interest in the fees to which it is entitled for the
services it renders to the container leasing partnerships of which it
acts as general partner, including its fee income payable by the
Registrant. The Parent Company did not repay the Credit Facility at
the amended maturity date of May 31, 1998.
On June 30, 1998, the Parent Company entered into a third amendment
(the "Third Amendment") to the Credit Facility. The Third Amendment
became effective as of that date, subject to the satisfaction
thereafter of various conditions, including: the Parent Company must
deliver its audited financial statements for 1997 by a specified date
and; on or prior to July 30, 1998, the Parent Company must furnish
proof that any defaults under any other indebtedness have been waived
and must also furnish various legal opinions, officers' certificates
and other loan documentation. Under the Third Amendment, the
remaining principal amount of $36,800,000 will be amortized in
varying monthly amounts commencing on July 31, 1998 with $26,950,000
due on September 30 and a final maturity date of January 8, 1999. All
of these conditions will be fulfilled by August 14, 1998.
The directors of the Parent Company are pursuing alternative sources
of financing to meet the amended repayment obligations under the
Third Amendment. Failure to meet revised lending terms would
constitute an event of default with the lenders. The declaration of
an event of default would result in further defaults with other
lenders under loan agreement cross-default provisions. Should a
default of the term loans be enforced, the Parent Company and CCC may
be unable to continue as going concerns.
CCC is currently in discussions with the management of the Parent
Company to provide assurance that the management of the container
leasing partnerships managed by CCC, including the Registrant, is not
disrupted pending a refinancing or reorganization of the indebtedness
of the Parent Company and its affiliates.
14
<PAGE> 15
The Registrant is not a borrower under the Credit Facility, and
neither the containers nor the other assets of the Registrant have
been pledged as collateral under the Credit Facility.
CCC is unable to determine the impact, if any, these concerns may
have on the future operating results and financial condition of the
Registrant or CCC and the Leasing Company's ability to manage the
Registrant's fleet in subsequent periods.
15
<PAGE> 16
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
On May 21, 1998, the Registrant filed a Report on Form 8-K reporting
changes on the board of directors of the Parent Company.
- ------------------
* 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)
16
<PAGE> 17
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/ Dennis J. Tietz
------------------------------------
Dennis J. Tietz
President and Director of Cronos
Capital Corp. ("CCC")
Principal Executive Officer of CCC
Date: August 14, 1998
17
<PAGE> 18
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 JUNE 30, 1998 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1998 (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, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 638,152
<SECURITIES> 0
<RECEIVABLES> 182,469
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 820,621
<PP&E> 10,238,209
<DEPRECIATION> 5,475,139
<TOTAL-ASSETS> 5,583,691
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,583,691
<TOTAL-LIABILITY-AND-EQUITY> 5,583,691
<SALES> 0
<TOTAL-REVENUES> 563,250
<CGS> 0
<TOTAL-COSTS> 330,776
<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> 308,796
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
