<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission file number 0-18169
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.)
One Front Street, 15th Floor, San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
(415) 677-8990
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]. No [ ].
<PAGE> 2
IEA INCOME FUND IX, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets (unaudited) - September 30, 2000 and December 31, 1999 4
Condensed Statements of Operations (unaudited) for the three and nine months ended
September 30, 2000 and 1999 5
Condensed Statements of Cash Flows (unaudited) for the nine months ended September 30,
2000 and 1999 6
Notes to Condensed Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's condensed balance sheets as of
September 30, 2000 and December 31, 1999, condensed statements of
operations for the three and nine months ended September 30, 2000 and
1999, and condensed statements of cash flows for the nine months ended
September 30, 2000 and 1999.
3
<PAGE> 4
IEA INCOME FUND IX, L.P.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, includes $665,896 at September 30, 2000
and $492,580 at December 31, 1999 in interest-bearing accounts $ 667,774 $ 492,680
Net lease receivables due from Leasing Company
(Notes 1 and 2) 115,513 184,713
------------ ------------
Total current assets 783,287 677,393
------------ ------------
Container rental equipment, at cost 11,233,876 12,927,344
Less accumulated depreciation 6,994,636 7,529,966
------------ ------------
Net container rental equipment 4,239,240 5,397,378
------------ ------------
Total assets $ 5,022,527 $ 6,074,771
============ ============
Partners' Capital
Partners' capital (deficit):
General partner $ (66,629) $ (56,106)
Limited partners 5,089,156 6,130,877
------------ ------------
Total partners' capital $ 5,022,527 $ 6,074,771
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE> 5
IEA INCOME FUND IX, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ -------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net lease revenue (Notes 1 and 3) $ 269,581 $ 287,550 $ 720,181 $ 886,342
Other operating expenses:
Depreciation 166,983 193,834 527,418 605,292
Other general and administrative expenses 14,594 9,338 45,850 31,618
--------- --------- --------- ---------
181,577 203,172 573,268 636,910
--------- --------- --------- ---------
Income from operations 88,004 84,378 146,913 249,432
Other income (loss):
Interest income 6,033 6,936 19,033 22,734
Net loss on disposal of equipment (42,805) (105,519) (114,935) (172,479)
--------- --------- --------- ---------
(36,772) (98,583) (95,902) (149,745)
--------- --------- --------- ---------
Net income (loss) $ 51,232 $ (14,205) $ 51,011 $ 99,687
========= ========= ========= =========
Allocation of net income (loss):
General partner $ 9,457 $ 11,934 $ 30,476 $ 45,276
Limited partners 41,775 (26,139) 20,535 54,411
--------- --------- --------- ---------
$ 51,232 $ (14,205) $ 51,011 $ 99,687
========= ========= ========= =========
Limited partners' per unit share of net income (loss) $ 1.22 $ (0.77) $ 0.60 $ 1.60
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
5
<PAGE> 6
IEA INCOME FUND IX, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Net cash provided by operating activities $ 874,228 $ 985,104
Cash provided by investing activities:
Proceeds from sale of container rental equipment 404,121 379,906
Cash used in financing activities:
Distribution to Partners (1,103,255) (1,471,798)
----------- -----------
Net increase (decrease) in cash and cash equivalents 175,094 (106,788)
Cash and cash equivalents, beginning of period 492,680 780,429
----------- -----------
Cash and cash equivalents, end of period $ 667,774 $ 673,641
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
6
<PAGE> 7
IEA INCOME FUND IX, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(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 worldwide to
ocean carriers. To this extent, the Partnership's operations are subject
to the fluctuations of world economic and political conditions. Such
factors may affect the pattern and levels of world trade. The
Partnership believes that the profitability of, and risks associated
with, leases to foreign customers is generally the same as those of
leases to domestic customers. The Partnership's leases generally require
all payments to be made in United States currency.
Cronos Capital Corp. ("CCC") is the general partner and, with its
affiliate Cronos Containers Limited (the "Leasing Company"), manages the
business of the Partnership. CCC and the Leasing Company also manage the
container leasing business for other partnerships affiliated with the
general partner. The Partnership shall continue until December 31, 2009,
unless sooner terminated upon the occurrence of certain events.
The Partnership commenced operations on December 5, 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 September 11, 1989,
at which time 33,992 limited partnership units had been purchased.
(b) Leasing Company and Leasing Agent Agreement
Pursuant to the Limited Partnership Agreement of the Partnership, all
authority to administer the business of the Partnership is vested in
CCC. CCC has entered into a Leasing Agent Agreement whereby the Leasing
Company has the responsibility to manage the leasing operations of all
equipment owned by the Partnership. Pursuant to the Agreement, the
Leasing Company is responsible for leasing, managing and re-leasing the
Partnership's containers to ocean carriers, and has full discretion over
which ocean carriers and suppliers of goods and services it may deal
with. The Leasing Agent Agreement permits the Leasing Company to use the
containers owned by the Partnership, together with other containers
owned or managed by the Leasing Company and its affiliates, as part of a
single fleet operated without regard to ownership. Since the Leasing
Agent Agreement meets the definition of an operating lease in Statement
of Financial Accounting Standards (SFAS) No. 13, it is accounted for as
a lease under which the Partnership is lessor and the Leasing Company is
lessee.
The Leasing Agent Agreement generally provides that the Leasing Company
will make payments to the Partnership based upon rentals collected from
ocean carriers after deducting direct operating expenses and management
fees to CCC. The Leasing Company leases containers to ocean carriers,
generally under operating leases which are either master leases or term
leases (mostly one to five years). Master leases do not specify the
exact number of containers to be leased or the term that each container
will remain on hire but allow the ocean carrier to pick up and drop off
containers at various locations; rentals are based upon the number of
containers used and the applicable per-diem rate. Accordingly, rentals
under master leases are all variable and contingent upon the number of
containers used. Most containers are leased to ocean carriers under
master leases; leasing agreements with fixed payment terms are not
material to the financial statements. Since there are no material
minimum lease rentals, no disclosure of minimum lease rentals is
provided in these condensed financial statements.
(Continued)
7
<PAGE> 8
IEA INCOME FUND IX, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(c) Basis of Accounting
The Partnership utilizes the accrual method of accounting. Net lease
revenue is recorded by the Partnership in each period based upon its
leasing agent agreement with the Leasing Company. Net lease revenue is
generally dependent upon operating lease rentals from operating lease
agreements between the Leasing Company and its various lessees, less
direct operating expenses and management fees due in respect of the
containers specified in each operating lease agreement.
(d) Financial Statement Presentation
These condensed financial statements have been prepared without audit.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in The United States of America ("GAAP") have been
omitted. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and accompanying notes
in the Partnership's latest annual report on Form 10-K.
The preparation of financial statements in conformity with GAAP requires
the Partnership to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
The interim financial statements presented herewith reflect all
adjustments of a normal recurring nature which are, in the opinion of
management, necessary to a fair statement of the financial condition and
results of operations for the interim periods presented. The results of
operations for such interim periods are not necessarily indicative of
the results to be expected for the full year.
(2) Net Lease Receivables Due from Leasing Company
Net lease receivables due from the Leasing Company are determined by
deducting direct operating payables and accrued expenses, base management
fees payable, and reimbursed administrative expenses payable to CCC and its
affiliates from the rental billings payable by the Leasing Company to the
Partnership under operating leases to ocean carriers for the containers
owned by the Partnership. Net lease receivables at September 30, 2000 and
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Gross lease receivables $520,899 $526,631
Less:
Direct operating payables and accrued expenses 194,695 164,098
Damage protection reserve 35,998 44,497
Base management fees payable 54,267 58,250
Reimbursed administrative expenses 18,204 6,673
Allowance for doubtful accounts 102,222 68,400
-------- --------
Net lease receivables $115,513 $184,713
======== ========
</TABLE>
(Continued)
8
<PAGE> 9
IEA INCOME FUND IX, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(3) Net Lease Revenue
Net lease revenue is determined by deducting direct operating expenses, base
management fees and reimbursed administrative expenses to CCC from the
rental revenue billed by the Leasing Company under operating leases to ocean
carriers for the containers owned by the Partnership. Net lease revenue for
the three and nine-month periods ended September 30, 2000 and 1999 was as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Rental revenue $ 360,147 $ 415,184 $1,121,431 $1,322,474
Less:
Rental equipment operating expenses 55,340 80,286 266,284 270,348
Base management fees 24,827 29,626 73,676 99,586
Reimbursed administrative expenses 10,399 17,722 61,290 66,198
---------- ---------- ---------- ----------
$ 269,581 $ 287,550 $ 720,181 $ 886,342
========== ========== ========== ==========
</TABLE>
(4) Operating Segment
The Financial Accounting Standards Board has issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
changes the way public business enterprises report financial and descriptive
information about reportable operating segments. An operating segment is a
component of an enterprise that engages in business activities from which it
may earn revenues and incur expenses, whose operating results are regularly
reviewed by the enterprise's chief operating decision maker to make
decisions about resources to be allocated to the segment and assess its
performance, and about which separate financial information is available.
Management operates the Partnership's container fleet as a homogenous unit
and has determined, after considering the requirements of SFAS No. 131, that
as such it has a single reportable operating segment.
The Partnership derives its revenues from dry cargo marine containers. As of
September 30, 2000, the Partnership operated 1,491 twenty-foot, 541
forty-foot and 1,971 forty-foot high-cube dry cargo marine containers.
Due to the Partnership's lack of information regarding the physical location
of its fleet of containers when on lease in the global shipping trade, it is
impracticable to provide the geographic area information required by SFAS
No. 131.
******
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
It is suggested that the following discussion be read in conjunction with the
Registrant's most recent annual report on Form 10-K.
1) Material changes in financial condition between September 30, 2000 and
December 31, 1999.
During the first nine months of 2000, the Registrant disposed of 460
containers as part of its ongoing container operations. At September 30,
2000, 63% of the original equipment remained in the Registrant's fleet, as
compared to 72% at December 31, 1999, and was comprised of the following:
<TABLE>
<CAPTION>
40-Foot
20-Foot 40-Foot High-Cube
------- ------- ---------
<S> <C> <C> <C>
Containers on lease:
Term leases 134 94 189
Master leases 1,071 338 618
----- ----- -----
Subtotal 1,205 432 807
Containers off lease 286 109 164
----- ----- -----
Total container fleet 1,491 541 971
===== ===== =====
</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 836 36% 258 32% 682 41%
----- ----- ----- ----- ----- -----
Remaining fleet at September 30, 2000 1,491 64% 541 68% 971 59%
===== ===== ===== ===== ===== =====
</TABLE>
The Registrant disposed of 106 twenty-foot and 24 forty-foot dry cargo
marine containers, as well as 56 forty-foot high cube dry cargo marine
container during the third quarter of 2000, as compared to 102 twenty-foot
and 17 forty-foot dry cargo marine containers, as well as 15 forty-foot high
cube dry cargo marine containers during the same period in the prior year.
These disposals resulted in a loss of $114,935 for the third quarter of
2000, as compared to a loss of $172,479 for the same period in the prior
year. The Registrant does not believe that the carrying amount of its
containers has been permanently impaired or that events or changes in
circumstances have indicated that the carrying amount of its containers may
not be fully recoverable. The Registrant believes that the loss on container
disposals was a result of various factors including the age, condition,
suitability for continued leasing, as well as the geographical location of
the containers when disposed. These factors will continue to influence the
amount of sales proceeds received and the related gain or loss on container
disposals, which may fluctuate in subsequent periods.
The Registrant's allowance for doubtful accounts increased from $68,400 at
December 31, 1999 to $102,222 at September 30, 2000. This increase was
attributable to the delinquent account receivable balances of approximately
17 lessees. The Leasing Company has either negotiated specific payment terms
with these lessees or is pursuing other alternatives to collect the
outstanding balances. In each instance, the Registrant believes it has
recorded appropriate allowance.
During the third quarter of 2000, distributions issued from operations and
sales proceeds amounted to $384,581, reflecting distributions due to the
general and limited partners for the second quarter of 2000. This represents
a decrease from the $398,021 issued during the second quarter of 2000,
reflecting distributions due for the first quarter of 2000. The Registrant's
continuing disposal of containers should produce lower operating results
and, consequently, lower distributions to its partners in subsequent
periods. Sales proceeds distributed to its partners may fluctuate in
subsequent periods, reflecting the level of container disposals.
(Continued)
10
<PAGE> 11
During the third quarter of 2000, growth in the volume of containerized
trade continued to improve. As a result, demand for leased equipment
strengthened in many locations, but most significantly throughout Asia. With
the growth in the volume of world trade, ocean carriers are committing their
capital to the purchase of additional containerships and turning to leasing
companies to supply them with the containers they need to meet their growing
freight requirements. The container leasing market has rebounded and
prospects have somewhat improved, but lease rates have remained at generally
the same low level as at the beginning of this year. At the same time,
inventories of idle equipment have been reduced in Europe, but there has
been no appreciable reduction in the U.S. The strong U.S. economy continued
to import more than it exported. This imbalance has had the effect of
further increasing idle container inventories, particularly on the U.S. East
Coast.
2) Material changes in the results of operations between the three and
nine-month periods ended September 30, 2000 and the three and nine-month
periods ended September 30, 1999.
Net lease revenue for the three and nine-month periods ended September 30,
2000 was $269,581 and $720,181, respectively, a decline of approximately 6%
and 19% from the same three and nine-month periods in the prior year. Gross
rental revenue (a component of net lease revenue) for the three and
nine-month periods ended September 30, 2000 was $360,147 and $1,121,431,
respectively, a decline of 13% and 15% from the same three and nine-month
periods in 1999. Gross rental revenue was primarily impacted by a smaller
fleet size and lower per-diem rental rates. Average per-diem rental rates
for the three and nine-month periods ended September 30, 2000 declined 4%
and 10%, respectively, when compared to the same three and nine-month
periods in the prior year. The Registrant's average fleet size and
utilization rates for the three and nine-month periods ended September 30,
2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ---------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average fleet size (measured in
twenty-foot equivalent units (TEU)) 4,599 5,366 4,875 5,541
Average Utilization 82% 78% 81% 78%
</TABLE>
The Registrant's declining fleet size contributed to a decline of 14% and
13%, respectively, in depreciation expense when compared to the same three
and nine-month periods in the prior year. Rental equipment operating
expenses were 15% and 24%, respectively, of the Registrant's gross lease
revenue during the three and nine-month periods ended September 30, 2000, as
compared to 19% and 20%, respectively, during the three and nine-month
periods ended September 30, 1999. The large decrease for the three-month
period ended September 30, 2000 was attributable to the recovery of doubtful
accounts.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On March 20, 2000, KM Investments, LLC, a California limited liability company
("KM") filed its complaint (the "Complaint") in the Superior Court for the
County of Los Angeles against CCC, as general partner of the Partnership,
alleging violation of the California Revised Limited Partnership Act, breach of
fiduciary duty, and unfair competition. KM claims to be an assignee of units of
limited partnership interests in the Partnership and six other California
limited partnerships (collectively, the "Cronos Partnerships") managed by CCC as
general partner. KM, which is in the business of making unregistered tender
offers for up to 4.9% of the outstanding interests in limited partnerships,
claims that CCC has wrongfully refused to provide KM with lists of the limited
partners of the Cronos Partnerships to enable KM to make unregistered tender
offers to the limited partners of the Cronos Partnerships.
KM asks for declaratory relief, damages according to proof, attorneys' fees,
costs, interest, a temporary restraining order and/or a preliminary injunction
barring CCC from giving limited partner lists to any other party before
delivering such lists to KM, punitive damages, and an order prohibiting CCC from
receiving reimbursement of its legal fees incurred in defending the action from
the Cronos Partnerships.
On April 24, 2000, CCC filed its demurrer to the Complaint and its motion to
strike those portions of the Complaint seeking punitive damages. By its
demurrer, CCC asserted that KM, as an assignee of units of the Cronos
Partnerships, is not entitled to review or receive a copy of the lists of the
limited partners of the Cronos Partnerships; that CCC has not breached any
fiduciary duty to KM; and that CCC has not engaged in unfair competition as
alleged by KM. CCC requested that the Court dismiss KM's Complaint.
On June 8, 2000, the Court heard CCC's demurrer, and sustained (i.e., granted)
it in its entirety, allowing KM thirty days to file an amended complaint. KM did
so on or about July 10, 2000, asserting the same causes of action as set forth
in its original complaint. On August 25, 2000, CCC filed its demurrer to KM's
First Amended Complaint and its motion to strike those portions of the First
Amended Complaint seeking punitive damages. On October 11, 2000, the Court heard
CCC's motions. It sustained CCC's demurrer to KM's fourth cause of action
seeking declaratory relief, but overruled (i.e., denied) CCC's demurrer to KM's
first three causes of action, on the ground that the evidence submitted by CCC
was not properly before the Court on CCC's demurrer to KM's First Amended
Complaint. At the same time, the Court granted CCC's motion to strike those
portions of KM's First Amended Complaint seeking punitive damages.
On October 20, 2000, CCC filed its answer to KM's First Amended Complaint,
denying the allegations thereof, denying that plaintiff is entitled to any
damages, and asserting various affirmative defenses. CCC believes that KM does
not have standing to inspect or receive lists of the limited partners of the
limited partnerships managed by CCC, and that CCC has meritorious defenses to
KM's First Amended Complaint.
12
<PAGE> 13
PART II - OTHER INFORMATION (CONT.)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
3(a) Limited Partnership Agreement of the Registrant, *
amended and restated as of 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
September 30, 2000.
-------------
* 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)
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
IEA INCOME FUND IX, L.P.
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: November 14, 2000
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
3(a) Limited Partnership Agreement of the Registrant, *
amended and restated as of 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)
