<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
------ ------
Commission file number 0-18982
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 MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1996 (unaudited) and December 31, 1995 4
Statements of Operations for the three months ended March 31, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the three months ended March 31, 1996 and 1995 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 10
Operations
PART II - OTHER INFORMATION
Item 6. 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 March 31,
1996 and December 31, 1995, statements of operations for the three
months ended March 31, 1996 and 1995, and statements of cash flows for
the three months ended March 31, 1996 and 1995.
3
<PAGE> 4
IEA INCOME FUND X, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash, includes $262,201 at March 31, 1996 and $220,493
at December 31, 1995 in interest-bearing accounts $ 269,663 $ 220,683
Short-term investments 525,897 670,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 475,894 501,859
------------ ------------
Total current assets 1,271,454 1,392,542
------------ ------------
Container rental equipment, at cost 17,620,649 17,687,325
Less accumulated depreciation 5,788,713 5,553,346
------------ ------------
Net container rental equipment 11,831,936 12,133,979
------------ ------------
$ 13,103,390 $ 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 (8,345) (6,389)
Limited partners 13,111,735 13,465,972
------------ ------------
Total partners' capital 13,103,390 13,459,583
------------ ------------
$ 13,103,390 $ 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
--------------------
March 31, March 31,
1996 1995
-------- --------
<S> <C> <C>
Net lease revenue (notes 1 and 4) $465,267 $590,824
Other operating expenses:
Depreciation 257,454 283,298
Other general and administrative expenses 8,736 11,670
-------- --------
266,190 294,968
-------- --------
Earnings from operations 199,077 295,856
Other income:
Interest income 10,582 10,996
Net gain on disposal of equipment 1,606 1,966
-------- --------
12,188 12,962
-------- --------
Net earnings $211,265 $308,818
======== ========
Allocation of net earnings:
General partner $ 26,417 $ 22,601
Limited partners 184,848 286,217
-------- --------
$211,265 $308,818
======== ========
Limited partners' per unit share of net earnings $ 4.71 $ 7.30
======== ========
</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>
Three Months Ended
----------------------
March 31, March 31,
1996 1995
--------- ---------
<S> <C> <C>
Net cash provided by operating activities $ 494,671 $ 644,007
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 44,602 9,161
Purchase of container rental equipment (63,750) --
Acquisition fees paid to general partner (3,188) (16,050)
--------- ---------
Net cash used in investing activities (22,336) (6,889)
Cash flows used in financing activities:
Distribution to partners (567,458) (515,872)
--------- ---------
Net increase (decrease) in cash and cash equivalents (95,123) 121,246
Cash and cash equivalents at January 1 890,683 696,629
--------- ---------
Cash and cash equivalents at March 31 $ 795,560 $ 817,875
========= =========
</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.
(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.
(Continued)
7
<PAGE> 8
IEA INCOME FUND X, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires the Partnership to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reported period.
The interim financial statements presented herewith reflect all
adjustments of a normal recurring nature which are, in the opinion of
management, necessary to a fair statement of the financial condition
and results of operations for the interim periods presented.
(2) Net Lease Receivables Due from Leasing Company
Net lease receivables due from the Leasing Company are determined by
deducting direct operating payables and accrued expenses, base management
fees payable, and reimbursed administrative expenses payable to CCC, the
Leasing Company, and its affiliates from the rental billings payable by
the Leasing Company to the Partnership under operating leases to ocean
carriers for the containers owned by the Partnership. Net lease
receivables at March 31, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-------- --------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $140,484 at March 31, 1996 and $130,362
at December 31, 1995 $791,515 $831,697
Less:
Direct operating payables and accrued expenses 141,613 150,461
Damage protection reserve 92,776 86,722
Base management fees 68,163 78,366
Reimbursed administrative expenses 13,069 14,289
-------- --------
$475,894 $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-month periods ended March 31,
1996 and 1995, was as follows:
<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31, March 31,
1996 1995
-------- --------
<S> <C> <C>
Rental revenue $748,678 $818,033
Rental equipment operating expenses 190,126 124,158
Base management fees 50,527 58,000
Reimbursed administrative expenses 42,758 45,051
-------- --------
$465,267 $590,824
======== ========
</TABLE>
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
It is suggested that the following discussion be read in conjunction with the
Registrant's most recent annual report on Form 10-K.
1) Material changes in financial condition between March 31, 1996 and
December 31, 1995.
At March 31, 1996, the Registrant had $795,560 in cash and cash
equivalents, a decrease of $95,123 from the December 31, 1995 cash
balances. During the first quarter of 1996, the Registrant expended
$63,750 of cash generated from sales proceeds to pay for containers
accepted during the fourth quarter of 1995. At March 31, 1996, the
Registrant had approximately $76,000 in cash generated from equipment
sales reserved as part of its cash balances. Throughout the remainder of
1996, the Registrant will continue using cash generated from equipment
sales to purchase and replace containers which have been lost or damaged
beyond repair.
Net lease receivables at March 31, 1996 declined when compared to December
31, 1995, primarily as a result of the Registrant's declining operating
results during the first quarter of 1996. The Registrant's cash
distribution from operations for the first quarter of 1996 was 10%
(annualized) of the limited partners' original capital contribution, a
decline from the fourth quarter 1995 distribution of 11% (annualized).
These distributions were also directly related to the Registrant's results
from operations.
The statements contained in the following discussion are based on current
expectations. These statements are forward looking and actual results may
differ materially. The container leasing market generally softened during
the fourth quarter of 1995 and has remained so during the first quarter of
1996. At March 31, 1996, container inventories remained at
larger-than-usual levels, resulting in a decline in the Registrant's
utilization rate from 88% at December 31, 1995 to 81% at March 31, 1996.
During the first quarter of 1996, the Leasing Company implemented various
marketing strategies, including but not limited to, offering incentives to
shipping companies and repositioning containers to high demand locations
in order to counter these market conditions. The Leasing Company expects
the Registrant to recognize the benefits of these efforts during the next
few quarters of 1996. However, base per-diem rental rates have recently
become subject to downward pressures within the container leasing market.
A reduction in per-diem rental rates, combined with current utilization
levels, could impact the Registrant's results from operations during the
remainder of 1996.
2) Material changes in the results of operations between the three-month
period ended March 31, 1996 and the three-month period ended March 31,
1995.
Net lease revenue for the first quarter of 1996 was $465,267, a decline of
approximately 21% from the first quarter of 1995. Gross rental revenue (a
component of net lease revenue) for the quarter was $748,678, a decline of
8% from the same period last year. During 1996, gross rental revenue was
primarily impacted by the Registrant's lower utilization rates. Average
per-diem rental rates remained relatively stable when compared to the same
period in the prior year.
The Registrant's average fleet size and utilization rates for the
three-month periods ended March 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
--------- --------
<S> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalent units (TEU)) 6,571 6,578
Average Utilization 81% 90%
</TABLE>
10
<PAGE> 11
Rental equipment operating expenses were 25% of the Registrant's gross
lease revenue during the three-month period ended March 31, 1996, as
compared to 15% during the three-month period ended March 31, 1995. This
increase was largely attributable to an increase in costs associated with
lower inventory levels, including handling, storage and repositioning.
The Registrant disposed of 21 twenty-foot and two forty-foot containers
during the first quarter of 1996, as compared to five twenty-foot and two
forty-foot containers during the same period 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) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended March 31, 1996
- ---------------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated 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: May 14, 1996
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
3(a) Limited Partnership Agreement of the Registrant, amended and *
restated as of 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 MARCH 31, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED AS PART OF ITS
QAURTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 795,560
<SECURITIES> 0
<RECEIVABLES> 475,894
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,271,454
<PP&E> 17,620,649
<DEPRECIATION> 5,788,713
<TOTAL-ASSETS> 13,103,390
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,103,390
<TOTAL-LIABILITY-AND-EQUITY> 13,103,390
<SALES> 0
<TOTAL-REVENUES> 465,267
<CGS> 0
<TOTAL-COSTS> 266,190
<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> 211,265
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
