<PAGE> 1
FUND 9
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission file number 0-18169
IEA INCOME FUND IX, L.P.
(Exact name of registrant as specified in its charter)
California 94-3069954
(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 IX, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1996 (unaudited) and December 31, 1995 4
Statements of Operations for the three and six months ended June 30, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of June 30,
1996 and December 31, 1995, statements of operations for the three and
six months ended June 30, 1996 and 1995, and statements of cash flows
for the six months ended June 30, 1996 and 1995.
3
<PAGE> 4
IEA INCOME FUND IX, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Assets
------
Current assets:
Cash, includes $143,568 at June 30, 1996 and $234,018
at December 31, 1995 in interest-bearing accounts $ 143,672 $ 234,242
Short-term investments 827,059 875,436
Net lease receivables due from Leasing Company
(notes 1 and 2) 632,869 589,878
----------- -----------
Total current assets 1,603,600 1,699,556
----------- -----------
Container rental equipment, at cost 16,724,244 17,104,812
Less accumulated depreciation 6,447,308 6,110,733
----------- -----------
Net container rental equipment 10,276,936 10,994,079
----------- -----------
$11,880,536 $12,693,635
=========== ===========
Liabilities and Partners' Capital
Current liabilities:
Due to general partner and its affiliates (notes 1 and 3) $ 7,383 $ 17,981
----------- -----------
Partners' capital (deficit):
General partner (17,624) 166
Limited partners 11,890,777 12,675,488
----------- -----------
Total partners' capital 11,873,153 12,675,654
----------- -----------
$11,880,536 $12,693,635
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
IEA INCOME FUND IX, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- -----------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 4) $441,029 $691,769 $1,008,642 $1,354,538
Other operating expenses:
Depreciation 245,975 251,555 494,726 504,708
Other general and administrative expenses 8,857 18,591 17,491 30,239
-------- -------- ---------- ----------
254,832 270,146 512,217 534,947
-------- -------- ---------- ----------
Earnings from operations 186,197 421,623 496,425 819,591
Other income:
Interest income 13,557 17,666 27,662 33,259
Net gain (loss) on disposal of equipment (26,098) 4,849 (9,864) 12,254
-------- -------- ---------- ----------
(12,541) 22,515 17,798 45,513
-------- -------- ---------- ----------
Net earnings $173,656 $444,138 $ 514,223 $ 865,104
======== ======== ========== ==========
Allocation of net earnings:
General partner $ 11,644 $ 33,627 $ 45,471 $ 70,214
Limited partners 162,012 410,511 468,752 794,890
-------- -------- ---------- ----------
$173,656 $444,138 $ 514,223 $ 865,104
======== ======== ========== ==========
Limited partners' per unit share of net earnings $ 4.77 $ 12.08 $ 13.79 $ 23.38
======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
IEA INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
______________________________
June 30, June 30,
1996 1995
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 1,086,817 $ 1,511,603
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 101,559 34,377
Acquisition fees paid to general partner (10,598) (13,764)
----------- -----------
Net cash provided by investing activities 90,961 20,613
----------- -----------
Cash flows used in financing activities:
Distribution to partners (1,316,724) (1,382,910)
----------- -----------
Net increase (decrease) in cash and cash equivalents (138,946) 149,306
Cash and cash equivalents at January 1 1,109,677 1,025,586
----------- -----------
Cash and cash equivalents at June 30 $ 970,731 $ 1,174,892
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
IEA INCOME FUND IX, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
IEA Income Fund IX, L.P. (the "Partnership") is a limited partnership
organized under the laws of the State of California on June 8, 1988
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 IX, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(d) Financial Statement Presentation
These financial statements have been prepared without audit. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
procedures have been omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and
accompanying notes in the Partnership's latest annual report on Form
10-K.
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires the Partnership to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reported period.
The interim financial statements presented herewith reflect all
adjustments of a normal recurring nature which are, in the opinion of
management, necessary to a fair statement of the financial condition
and results of operations for the interim periods presented.
(2) Net Lease Receivables Due from Leasing Company
Net lease receivables due from the Leasing Company are determined by
deducting direct operating payables and accrued expenses, base management
fees payable, 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 June
30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $247,762 at June 30, 1996 and $138,066
at December 31, 1995 $905,130 $944,386
Less:
Direct operating payables and accrued expenses 112,959 148,076
Damage protection reserve 82,158 108,033
Base management fees 63,375 82,254
Reimbursed administrative expenses 13,769 16,145
-------- --------
$632,869 $589,878
======== ========
</TABLE>
(3) Due to General Partner
The amounts due to CCC at June 30, 1996 and December 31, 1995 consist of
acquisition fees.
(Continued)
8
<PAGE> 9
IEA INCOME FUND IX, L.P.
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 and six- month periods ended
June 30, 1996 and 1995, was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Rental revenue $788,590 $949,890 $1,630,637 $1,867,698
Rental equipment operating expenses 259,508 146,210 433,470 290,175
Base management fees 47,173 63,357 103,833 127,357
Reimbursed administrative expenses 40,880 48,554 84,692 95,628
-------- -------- ---------- ----------
$441,029 $691,769 $1,008,642 $1,354,538
======== ======== ========== ==========
</TABLE>
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
It is suggested that the following discussion be read in conjunction with the
Registrant's most recent annual report on Form 10-K.
1) Material changes in financial condition between June 30, 1996 and December
31, 1995.
During the first six months of 1996, the Registrant disposed of 100
containers as part of its ongoing operations, contributing to the change in
the Registrant's financial condition. At June 30, 1996, 94% of the
original equipment remained in the Registrant's fleet, as compared to 96%
at December 31, 1995, comprised as follows:
<TABLE>
<CAPTION>
40-Foot
20-Foot 40-Foot High-Cube
------- ------- ---------
<S> <C> <C> <C>
Containers on lease:
Term leases 131 48 78
Master lease 1,580 544 1,234
----- --- -----
Subtotal 1,711 592 1,312
Containers off lease 480 161 215
----- --- -----
Total container fleet 2,191 753 1,527
===== === =====
</TABLE>
<TABLE>
<CAPTION>
40-Foot
20-Foot 40-Foot High-Cube
-------------- -------------- --------------
Units % Units % Units %
----- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Total purchases 2,327 100% 799 100% 1,653 100%
Less disposals 136 6% 46 6% 126 8%
----- --- --- --- ----- ---
Remaining fleet at June 30, 1996 2,191 94% 753 94% 1,527 92%
===== === === === ===== ===
</TABLE>
Net lease receivables at June 30, 1996 increased when compared to the December
31, 1995 balance, as cash collections of outstanding lease receivables slowed.
The decline in fleet size and its operating performance also contributed to the
increase in net lease receivables, as direct operating payables, reimbursed
administrative expenses payable, base management and incentive fees payable
declined.
During the second quarter of 1996, distributions from operations and sales
proceeds amounted to $613,635, reflecting distributions to the general and
limited partners for the first quarter of 1996. This represents a decline from
the $703,089 distributed during the first quarter of 1996, reflecting
distributions for the fourth quarter of 1995. Additional container disposals
should contribute to lower operating results and, consequently, lower
distributions from operations to its partners in subsequent periods. However,
sales proceeds distributed to its partners may fluctuate in subsequent periods,
reflecting the level of container disposals.
The statements contained in the following discussion are based on current
expectations. These statements are forward looking and actual results may
differ materially. The container leasing market generally softened during the
fourth quarter of 1995 and has remained so during the first six months of 1996.
At June 30, 1996, container inventories remained at larger-than-usual levels,
resulting in a decline in the Registrant's utilization rates from 87% at
December 31, 1995 to 82% at June 30, 1996. Base per-diem rates have become
subject to downward pressures arising from a soft container leasing market.
During the first six months of 1996, the Leasing Company implemented various
marketing strategies, including but not limited to, offering incentives to
shipping companies and repositioning containers to high demand locations in
order to counter these market conditions. Accordingly, ancillary per-diems have
fluctuated, favoring a downward trend, while free-day incentives offered to
shipping companies have risen. Currently, there are no visible signs of
improvements in the leasing market and hence further downward pressure on rental
rates can be expected in the ensuing quarters. As a result, these leasing
markets conditions, combined with the Registrant's disposal of containers, will
continue to impact the Registrant's results from operations during the remainder
of 1996.
10
<PAGE> 11
2) Material changes in the results of operations between the three and
six-month periods ended June 30, 1996 and the three and six-month periods
ended June 30, 1995.
Net lease revenue for the three and six-month periods ended June 30, 1996
was $441,029, and $1,008,642, respectively, a decline of 36% and 26% from
the same three and six-month periods in the prior year, respectively. Gross
rental revenue (a component of net lease revenue) for the three and
six-month periods ended June 30, 1996 was $788,590 and $1,630,637,
respectively, reflecting a decline of 17% and 13% from the same three and
six-month periods in 1995, respectively. During 1996, gross rental revenue
was primarily impacted by the Registrant's lower per-diem rental rates and
utilization levels. Average per-diem rental rates decreased approximately
4% and 3%, when compared to the same three and six-month periods in the
prior year, respectively, as they became subject to the downward pressures
of an increasingly soft container leasing market. The Registrant's average
fleet size and utilization rates for the three and six-month periods ended
June 30, 1996 and June 30, 1995 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- ---------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalent units (TEU)) 6,812 6,972 6,856 6,987
Average Utilization 81% 91% 82% 91%
</TABLE>
The Registrant's declining fleet size contributed to a 2% decline in
depreciation expense in each of the three and six-month periods ended June 30,
1996, respectively, when compared to the same three and six-month periods in the
prior year, respectively. Rental equipment operating expenses were 33% and 27%
of the Registrant's gross lease revenue during the three and six-month periods
ended June 30, 1996, respectively, as compared to 15% and 16% during the three
and six-month periods ended June 30, 1995, respectively. This increase was
largely attributable to a decline in gross lease revenue resulting from lower
per-diem rates, a downward trend in ancillary per-diems, and an increase in
free-day incentives offered to shipping companies. Costs associated with lower
utilization levels, including handling, storage and repositioning also
contributed to the increase in the rental equipment operating expenses, as a
percentage of gross lease revenue. The Registrant's diminishing fleet size and
related operating performance contributed to the decline in base management and
incentive fees, when compared to the same periods in the prior year.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
3(a) Limited Partnership Agreement of the Registrant, *
amended and restated as of September 12, 1988
3(b) Certificate of Limited Partnership of the Registrant **
27 Financial Data Schedule Filed with this document
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended June 30, 1996
- -------------------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated September 12, 1988, included as part of Registration
Statement on Form S-1 (No. 33-23321)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-1 (No. 33-23321)
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 IX, L.P.
By Cronos Capital Corp.
The General Partner
By
/s/ JOHN KALLAS
---------------------------------------
John Kallas
Vice President, Chief Financial Officer
Principal Accounting Officer
Date: August 13, 1996
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
3(a) Limited Partnership Agreement of the Registrant, amended and *
restated as of September 12, 1988
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 September 12, 1988, included as part of Registration
Statement on Form S-1 (No. 33-23321)
** Incorporated by reference to Exhibit 3.4 to the Registration Statement on
Form S-1 (No. 33-23321)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED AS PART OF ITS
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD JUNE 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 970,731
<SECURITIES> 0
<RECEIVABLES> 632,869
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,603,600
<PP&E> 16,724,244
<DEPRECIATION> 6,447,308
<TOTAL-ASSETS> 11,880,536
<CURRENT-LIABILITIES> 7,383
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,873,153
<TOTAL-LIABILITY-AND-EQUITY> 11,880,536
<SALES> 0
<TOTAL-REVENUES> 1,008,642
<CGS> 0
<TOTAL-COSTS> 512,217
<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> 514,223
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
