<PAGE> 1
FUND 10
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 0-18982
IEA INCOME FUND X, L.P.
(Exact name of registrant as specified in its charter)
California 94-3098648
(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 X, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
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 X, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Assets
------
Current assets:
Cash, includes $136,433 at June 30, 1996 and $220,493
at December 31, 1995 in interest-bearing accounts $ 136,557 $ 220,683
Short-term investments 601,276 670,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 439,561 501,859
----------- -----------
Total current assets 1,177,394 1,392,542
----------- -----------
Container rental equipment, at cost 17,603,998 17,687,325
Less accumulated depreciation 6,035,713 5,553,346
----------- -----------
Net container rental equipment 11,568,285 12,133,979
----------- -----------
$12,745,679 $13,526,521
Liabilities and Partners' Capital
---------------------------------
Current liabilities:
Due to general partner (notes 1 and 3) $ - $ 3,188
Due to manufacturer - 63,750
----------- -----------
Total current liabilities - 66,938
----------- -----------
Partners' capital (deficit):
General partner (6,757) (6,389)
Limited partners 12,752,436 13,465,972
----------- -----------
Total partners' capital 12,745,679 13,459,583
----------- -----------
$12,745,679 $13,526,521
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
IEA INCOME FUND X, 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) $408,225 $593,168 $873,492 $1,183,992
Other operating expenses:
Depreciation 256,846 283,936 514,300 567,234
Other general and administrative expenses 9,247 17,615 17,983 29,285
-------- -------- -------- ----------
266,093 301,551 532,283 596,519
-------- -------- -------- ----------
Earnings from operations 142,132 291,617 341,209 587,473
Other income:
Interest income 10,864 12,634 21,446 23,630
Net gain on disposal of equipment 5,165 7,648 6,771 9,614
-------- -------- -------- ----------
16,029 20,282 28,217 33,244
-------- -------- -------- ----------
Net earnings $158,161 $311,899 $369,426 $ 620,717
======== ======== ======== ==========
Allocation of net earnings:
General partner $ 27,382 $ 30,346 $ 53,799 $ 52,947
Limited partners 130,779 281,553 315,627 567,770
-------- -------- -------- ----------
$158,161 $311,899 $369,426 $ 620,717
======== ======== ======== ==========
Limited partners' per unit share of net earnings $ 3.34 $ 7.18 $ 8.05 $ 14.48
======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
IEA INCOME FUND X, 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 $ 911,209 $ 1,293,059
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 86,209 40,962
Purchase of container rental equipment (63,750) (116,325)
Acquisition fees paid to general partner (3,188) (21,866)
----------- -----------
Net cash provided by (used in) investing activities 19,271 (97,229)
----------- -----------
Cash flows used in financing activities:
Distribution to partners (1,083,330) (1,083,330)
----------- -----------
Net increase (decrease) in cash and cash equivalents (152,850) 112,500
Cash and cash equivalents at January 1 890,683 696,629
----------- -----------
Cash and cash equivalents at June 30 $ 737,833 $ 809,129
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
IEA INCOME FUND X, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
IEA Income Fund X, L.P. (the "Partnership") is a limited partnership
organized under the laws of the State of California on July 18, 1989
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 statement
(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 X, 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 $156,876 at June 30, 1996 and $130,362 at
December 31, 1995 $734,230 $831,697
Less:
Direct operating payables and accrued expenses 143,188 150,461
Damage protection reserve 73,608 86,722
Base management fees 65,197 78,366
Reimbursed administrative expenses 12,676 14,289
-------- --------
$439,561 $501,859
======== ========
</TABLE>
(3) Due to General Partner
The amount due to CCC at December 31, 1995 consists of acquisition fees.
(Continued)
8
<PAGE> 9
IEA INCOME FUND X, 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 $700,960 $867,000 $1,449,638 $1,685,033
Rental equipment operating expenses 205,613 169,420 395,739 293,578
Base management fees 46,813 58,438 97,340 116,438
Reimbursed administrative expenses 40,309 45,974 83,067 91,025
-------- -------- ---------- ----------
$408,225 $593,168 $ 873,492 $1,183,992
======== ======== ========== ==========
</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.
At June 30, 1996, the Registrant had $737,833 in cash and cash
equivalents, a decrease of $152,850 from the December 31, 1995 cash
balances. During the first six months of 1996, the Registrant expended
$63,750 of cash generated from sales proceeds to pay for containers
accepted during the fourth quarter of 1995. The Registrant has committed
to purchase an additional 16 forty-foot marine dry-cargo containers during
the third quarter of 1996, at an aggregate manufacturer's invoice cost of
$66,080. These containers will be paid for using cash generated from
equipment sales and reserved as part of its June 30, 1996 cash balances.
Throughout the remainder of 1996, the Registrant may use cash generated
from equipment sales to purchase and replace containers which have been
lost or damaged beyond repair. Amounts not used to purchase and replace
containers will be distributed to its partners.
Net lease receivables at June 30, 1996 declined when compared to December
31, 1995, primarily as a result of the Registrant's declining operating
results during the first six months of 1996. The Registrant's cash
distribution from operations and sales proceeds for the second quarter of
1996 was 9% (annualized) of the limited partners' original capital
contribution, a decline from the first quarter 1996 distribution of 10%
(annualized).
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 rate from 88% at December 31, 1995 to 80% 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 $408,225 and $873,492, respectively, a decline of approximately 31%
and 26% from the same 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 $700,960 and $1,449,638,
respectively, a decline of 19% and 14% from the same periods in the prior
year, respectively. During 1996, gross rental revenue was primarily
impacted by the Registrant's lower utilization and per-diem rental rates.
Average per-diem rental rates declined approximately 4% and 3%, when
compared to the same three and six-month periods in the prior year,
respectively.
The Registrant's average fleet size and utilization rates for the three
and six-month periods ended June 30, 1996 and 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)) 6,554 6,605 6,563 6,590
Average Utilization 79% 90% 80% 90%
</TABLE>
The Registrant's declining fleet size contributed to a 10% and 9% decline
in depreciation expense when compared to the same three and six-month
periods in the prior year, respectively. Rental equipment operating
expenses were 29% and 27% of the Registrant's gross lease revenue during
the three and six-month periods ended June 30, 1996, respectively, as
compared to 20% and 17% 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 operating performance of the
Registrant's fleet 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 November 7, 1989
3(b) Certificate of Limited Partnership of the Registrant **
27 Financial Data Schedule Filed with this document
</TABLE>
(b) Report 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 November 7, 1989, included as part of Registration
Statement on Form S-1 (No. 33-30245)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement on
Form S-1 (No. 33-30245)
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 X, 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 November 7, 1989
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 November 7, 1989, included as part of Registration
Statement on Form S-1 (No. 33-30245)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement on
Form S-1 (No. 33-30245)
<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> 737,833
<SECURITIES> 0
<RECEIVABLES> 439,561
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,177,394
<PP&E> 17,603,998
<DEPRECIATION> 6,035,713
<TOTAL-ASSETS> 12,745,679
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 12,745,679
<TOTAL-LIABILITY-AND-EQUITY> 12,745,679
<SALES> 0
<TOTAL-REVENUES> 873,492
<CGS> 0
<TOTAL-COSTS> 532,283
<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> 369,426
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
