<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, 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 SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1996 (unaudited) and December 31, 1995 4
Statements of Operations for the three and nine months ended September 30, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the nine months ended September 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 5. Other Materially Important Events 12
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
September 30, 1996 and December 31, 1995, statements of operations
for the three and nine months ended September 30, 1996 and 1995,
and statements of cash flows for the nine months ended September
30, 1996 and 1995.
3
<PAGE> 4
IEA INCOME FUND X, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
Assets
------
<S> <C> <C>
Current assets:
Cash, includes $165,164 at September 30, 1996 and $220,493
at December 31, 1995 in interest-bearing accounts $ 165,501 $ 220,683
Short-term investments 525,801 670,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 414,819 501,859
------------ ------------
Total current assets 1,106,121 1,392,542
------------ ------------
Container rental equipment, at cost 17,629,317 17,687,325
Less accumulated depreciation 6,280,263 5,553,346
------------ ------------
Net container rental equipment 11,349,054 12,133,979
------------ ------------
$ 12,455,175 $ 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 (2,882) (6,389)
Limited partners 12,458,057 13,465,972
------------ ------------
Total partners' capital 12,455,175 13,459,583
------------ ------------
$ 12,455,175 $ 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 Nine Months Ended
-------------------------------- -----------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 4) $ 422,304 $ 590,165 $ 1,295,796 $ 1,774,157
Other operating expenses:
Depreciation and amortization 256,910 394,700 771,210 961,934
Other general and administrative expenses 10,971 4,269 28,954 33,554
-------- -------- -------- --------
267,881 398,969 800,164 995,488
------- ------- -------- --------
Earnings from operations 154,423 191,196 495,632 778,669
Other income:
Interest income 9,998 10,978 31,444 34,608
Net gain on disposal of equipment 6,780 12,595 13,551 22,209
-------- -------- -------- --------
16,778 23,573 44,995 56,817
-------- -------- -------- --------
Net earnings $ 171,201 $ 214,769 $ 540,627 $ 835,486
======= ======= ======== ========
Allocation of net earnings:
General partner $ 24,510 $ 43,649 $ 78,309 $ 96,596
Limited partners 146,691 171,120 462,318 738,890
------- ------- -------- --------
$ 171,201 $ 214,769 $ 540,627 $ 835,486
======= ======= ======== ========
Limited partners' per unit share of net earnings $ 3.74 $ 4.37 $ 11.79 $ 18.85
======== ======== ======== ========
</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>
Nine Months Ended
-----------------------------
September 30, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 1,350,299 $ 1,876,868
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 129,359 73,812
Purchase of container rental equipment (127,622) (122,141)
Acquisition fees paid to general partner (6,382) (16,050)
----------- -----------
Net cash used in investing activities (4,645) (64,379)
----------- -----------
Cash flows used in financing activities:
Distribution to partners (1,545,035) (1,650,788)
----------- -----------
Net increase (decrease) in cash and cash equivalents (199,381) 161,701
Cash and cash equivalents at January 1 890,683 696,629
----------- -----------
Cash and cash equivalents at September 30 $ 691,302 $ 858,330
=========== ===========
</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 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.
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 September 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $123,373 at September 30, 1996 and $130,362 at
December 31, 1995 $676,797 $831,697
Less:
Direct operating payables and accrued expenses 125,709 150,461
Damage protection reserve 63,852 86,722
Base management fees 60,197 78,366
Reimbursed administrative expenses 12,220 14,289
-------- --------
$414,819 $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 nine-month periods
ended September 30, 1996 and 1995, was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Rental revenue $ 686,278 $ 915,870 $2,135,916 $2,600,903
Rental equipment operating expenses 175,581 212,480 571,320 506,058
Base management fees 47,072 58,614 144,412 175,052
Reimbursed administrative expenses 41,321 54,611 124,388 145,636
---------- ---------- ---------- ----------
$ 422,304 $ 590,165 $1,295,796 $1,774,157
========== ========== ========== ==========
</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 September 30, 1996 and
December 31, 1995.
At September 30, 1996, the Registrant had $691,302 in cash and cash
equivalents, a decrease of $199,381 from the December 31, 1995 cash
balances. During the first nine months of 1996, the Registrant expended
$127,622 of cash generated from sales proceeds to purchase additional
containers. Amounts generated from future equipment sales will no longer
be used to purchase and replace containers, and will be distributed to
its partners.
Net lease receivables at September 30, 1996 declined when compared to
December 31, 1995, primarily as a result of the Registrant's declining
operating results during the first nine months of 1996. Favorable
collections of the Registrant's lease receivables also contributed to
this decline, and enabled the Registrant's cash distribution from
operations and sales proceeds for the third quarter of 1996 to remain at
9% (annualized) of the limited partners' original capital contribution,
consistent with the distribution for the second quarter of 1996.
The statements contained in the following discussion are based on
current expectations. These statements are forward looking and actual
results may differ materially. Indicative of the cyclical nature of the
container leasing business, containerized trade growth slowed in the
last quarter of 1995, and excess inventories began to develop. This
slowdown has resulted in reduced equipment utilization and lower
per-diem rental rates in the container leasing industry during the first
nine months of 1996. Accordingly, the Registrant's utilization rate has
declined from an average of 88% at December 31, 1995 to 76% at September
30, 1996. Additionally, during the first nine 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
the market conditions. Ancillary revenues have fallen, and free-day
incentives offered to the shipping lines have increased. Rental
equipment operating expenses of the Registrant have increased due to
higher storage and handling costs associated with the off-hire fleet,
and increased repositioning costs. These leasing market conditions are
expected to adversely impact the Registrant's results of operations
through the remainder of 1996 and into 1997.
2) Material changes in the results of operations between the three and
nine-month periods ended September 30, 1996 and the three and nine-month
periods ended September 30, 1995.
Net lease revenue for the three and nine-month periods ended September
30, 1996 was $422,304 and $1,295,796, respectively, a decline of
approximately 28% and 27% from the same periods in the prior year,
respectively. Gross rental revenue (a component of net lease revenue)
for the three and nine-month periods ended September 30, 1996 was
$686,278 and $2,135,916, respectively, a decline of 25% and 18% 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 5% and 3%, when compared to the same three and nine-month
periods in the prior year, respectively.
10
<PAGE> 11
The Registrant's average fleet size and utilization rates for the three
and nine-month periods ended September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalent units (TEU)) 6,565 6,559 6,563 5,590
Average Utilization 78% 89% 80% 89%
</TABLE>
Rental equipment operating expenses were 26% and 27% of the Registrant's
gross lease revenue during the three and nine-month periods ended
September 30, 1996, respectively, as compared to 23% and 19% during the
three and nine-month periods ended September 30, 1995, respectively.
These increases were largely attributable to a decline in gross lease
revenue resulting from lower utilization rates, lower per-diem rates, a
downward trend in ancillary revenue, 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 fees,
when compared to the same periods in the prior year.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 5. Other Materially Important Events
Equipment Acquisitions
During the three-month period ended September 30, 1996, the
Registrant purchased 16 forty-foot dry cargo containers at an
average cost of $3,992 per container.
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
restated3as)of November 7, 1989 *
3(b) Certificate of Limited Partnership3of)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 September 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, Treasurer
Principal Financial & Accounting Officer
Date: November 11, 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
restated3as)of November 7, 1989 *
3(b) Certificate of Limited Partnership3of)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 SEPTEMBER 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED AS PART OF ITS
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD SEPTEMBER 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 691,302
<SECURITIES> 0
<RECEIVABLES> 414,819
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,106,121
<PP&E> 17,629,317
<DEPRECIATION> 6,280,263
<TOTAL-ASSETS> 12,455,175
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 12,455,175
<TOTAL-LIABILITY-AND-EQUITY> 12,455,175
<SALES> 0
<TOTAL-REVENUES> 1,295,796
<CGS> 0
<TOTAL-COSTS> 800,164
<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> 540,627
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
