<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 JUNE 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 0-18982
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, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - June 30, 2000 and December 31, 1999 (unaudited) 4
Condensed Statements of Operations for the three and six months ended June 30, 2000 and 1999 (unaudited) 5
Condensed Statements of Cash Flows for the six months ended June 30, 2000 and 1999 (unaudited) 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 - FINANCIAL 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 condensed balance sheets as of
June 30, 2000 and December 31, 1999, condensed statements of
operations for the three and six months ended June 30, 2000 and
1999, and condensed statements of cash flows for the six months
ended June 30, 2000 and 1999.
19
<PAGE> 4
IEA INCOME FUND X, L.P.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------- -------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents, includes $414,984 at June 30, 2000 and
$356,206 at December 31, 1999 in interest-bearing accounts $ 472,580 $ 356,306
Net lease receivables due from Leasing Company
(notes 1 and 2) 150,586 177,496
------------- -------------
Total current assets 623,166 533,802
------------- -------------
Container rental equipment, at cost 14,575,043 15,457,224
Less accumulated depreciation 8,340,471 8,409,983
------------- -------------
Net container rental equipment 6,234,572 7,047,241
------------- -------------
Total assets $ 6,857,738 $ 7,581,043
============= =============
Partners' Capital
Partners' capital (deficit):
General partner $ (53,494) $ (45,189)
Limited partners 6,911,232 7,626,232
------------- -------------
Total partners' capital $ 6,857,738 $ 7,581,043
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE> 5
IEA INCOME FUND X, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 3) $ 263,594 $ 227,987 $ 507,130 $ 503,588
Other operating expenses:
Depreciation 216,105 233,687 437,909 471,442
Other general and administrative expenses 18,184 8,269 31,708 22,845
--------- --------- --------- ---------
234,289 241,956 469,617 494,287
--------- --------- --------- ---------
Income (loss) from operations 29,305 (13,969) 37,513 9,301
Other income (loss):
Interest income 5,311 6,650 9,164 13,668
Net loss on disposal of equipment (56,581) (17,579) (107,167) (101,497)
--------- --------- --------- ---------
(51,270) (10,929) (98,003) (87,829)
--------- --------- --------- ---------
Net loss $ (21,965) $ (24,898) $ (60,490) $ (78,528)
========= ========= ========= =========
Allocation of net (loss):
General partner $ 8,500 $ 14,021 $ 17,410 $ 26,040
Limited partners (30,465) (38,919) (77,900) (104,568)
--------- --------- --------- ---------
$ (21,965) $ (24,898) $ (60,490) $ (78,528)
========= ========= ========= =========
Limited partners' per unit share of net loss $ (0.78) $ (1.00) $ (1.99) $ (2.67)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
5
<PAGE> 6
IEA INCOME FUND X, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
June 30, June 30,
2000 1999
--------- ---------
<S> <C> <C>
Net cash provided by operating activities $ 553,948 $ 558,357
Cash provided by investing activities:
Proceeds from sale of container rental equipment 225,141 260,481
Cash used in financing activities:
Distribution to partners (662,815) (905,770)
--------- ---------
Net increase (decrease) in cash and cash equivalents 116,274 (86,932)
Cash and cash equivalents at January 1 356,306 653,851
--------- ---------
Cash and cash equivalents at June 30 $ 472,580 $ 566,919
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
6
<PAGE> 7
IEA INCOME FUND X, L.P.
NOTES TO UNAUDITED CONDENSED 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
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, 2010, unless sooner terminated upon the
occurrence of certain events.
The Partnership commenced operations on January 17, 1990, 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 October
30, 1990, at which time 39,206 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.
7
<PAGE> 8
IEA INCOME FUND X, L.P.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(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
generally accepted accounting procedures 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
accounting principles generally accepted in the United States (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 June 30,
2000 and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Gross lease receivables $ 575,477 $ 518,979
Less:
Direct operating payables and accrued expenses 183,646 154,207
Damage protection reserve 70,082 72,336
Base management fees payable 45,989 51,184
Reimbursed administrative expenses 25,108 8,958
Allowance for doubtful accounts 100,066 54,798
------------- -------------
Net lease receivables $ 150,586 $ 177,496
============= =============
</TABLE>
8 (Continued)
<PAGE> 9
IEA INCOME FUND X, L.P.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(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 six-month periods ended June 30, 2000 and 1999
was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Rental revenue (note 4) $433,998 $422,429 $871,756 $885,169
Less:
Rental equipment operating expenses 113,650 138,962 249,147 267,565
Base management fees 28,767 28,784 56,802 60,955
Reimbursed administrative expenses 27,987 26,696 58,677 53,061
-------- -------- -------- --------
$263,594 $227,987 $507,130 $503,588
======== ======== ======== ========
</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 June 30, 2000, the Partnership operated 3,415 twenty-foot, 922
forty-foot and 83 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 June 30, 2000 and
December 31, 1999.
During the first six months of 2000, the Registrant disposed of 269
containers as part of its ongoing container operations. At June 30, 2000,
84% of the original equipment remained in the Registrant's fleet, as
compared to 89% 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 328 186 19
Master leases 2,433 531 44
------- ------- -------
Subtotal 2,761 717 63
Containers off lease 654 205 20
------- ------- -------
Total container fleet 3,415 922 83
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
40-Foot
20-Foot 40-Foot High-Cube
---------------- ---------------- -----------------
Units % Units % Units %
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Total purchases 4,000 100% 1,150 100% 100 100%
Less disposals 585 15% 228 20% 17 17%
----- ----- ----- ----- ----- -----
Remaining fleet at June 30, 2000 3,415 85% 922 80% 83 83%
===== ===== ===== ===== ===== =====
</TABLE>
At June 30, 2000, the Registrant had $472,580 in cash and cash
equivalents, an increase of $116,274 from the cash balances at December
31, 1999.
The Registrant's allowance for doubtful accounts increased from $54,798
at December 31, 1999 to $100,066 at June 30, 2000. This increase was
attributable to the delinquent account receivable balances of
approximately 11 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 provided sufficient reserves for all doubtful
accounts.
The Registrant disposed of 111 twenty-foot and 26 forty-foot dry cargo
marine containers, as well as one forty-foot high cube dry cargo marine
container during the second quarter of 2000, as compared to 82
twenty-foot and 23 forty-foot dry cargo marine containers during the same
period in the prior year. These disposals resulted in a loss of $56,581
for the second quarter of 2000, as compared to a loss of $17,579 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.
10 (Continued)
<PAGE> 11
The Registrant's cash distribution from operations for the second quarter
of 2000 was 4.50% (annualized) of the limited partners' original capital
contribution, unchanged from the first quarter of 2000. These
distributions are directly related to the Registrant's results from
operations and may fluctuate accordingly. The cash distribution from
sales proceeds for the second quarter of 2000 was 2.50% (annualized) of
the limited partners' original capital contribution, an increase of 0.50%
from the first quarter of 2000. Sales proceeds distributed to its
partners may fluctuate in subsequent periods, reflecting the level of
container disposals.
The growth in the volume of world trade, a rise in exports to the Far
East, and the global effects of a strong U.S. economy have resulted in
improved market conditions for the container leasing industry. As a
result of these and other factors, including repositioning initiatives
implemented earlier in the year, utilization of the Registrant's fleet of
containers has exhibited steady improvement in recent months. In
addition, new container prices, as well as interest rates, have been
rising from historically low levels. During such times, ocean carriers
tend to reduce their capital spending to supplement their owned fleets of
containers in favor of leasing. The pressure on per diem rates has
impacted the Registrant's revenues, but there has been some rate
stabilization in recent months. The Registrant will continue to take
advantage of improving market conditions by repositioning equipment to
locations of greatest demand as well as seeking out leasing opportunities
that will strengthen utilization and enhance the performance of the
fleet.
2) Material changes in the results of operations between the three and
six-month periods ended June 30, 2000 and the three and six-month periods
ended June 30, 1999.
Net lease revenue for the three and six-month periods ended June 30, 2000
was $263,594 and $507,130, respectively, an increase of 16% and 1%,
respectively, from the same three and six-month periods in the prior
year. Gross rental revenue (a component of net lease revenue) for the
three and six-month periods ended June 30, 2000 was $433,998 and
$871,756, respectively, an increase of 3% and a decrease of 2% from the
respective three and six-month periods in the prior year. Gross rental
revenue was primarily impacted by higher utilization levels and lower
per-diem rental rates. Average per-diem rental rates for the three and
six-month periods ended June 30, 2000 declined 5% and 9%, respectively,
when compared to the same periods in the prior year. The Registrant's
average fleet size and utilization rates for the three and six-month
periods ended June 30, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Average fleet size (measured in twenty-foot equivalent
units (TEU)) 5,491 5,954 5,602 6,026
Average Utilization 81% 71% 80% 71%
</TABLE>
The age and declining size of the Registrant's fleet contributed to
reductions in depreciation expense of 8% and 7%, respectively, when
compared to the respective three and six-month periods in the prior year.
Rental equipment operating expenses during the three and six-month
periods ended June 30, 2000 were 26% and 29%, respectively, of the
Registrant's gross lease revenue, as compared to 33% and 30%,
respectively, during the same three and six-month periods ended June 30,
1999. The Registrant's declining fleet size and related operating results
contributed to a decline in base management fees.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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 June 30, 2000.
------------------
* 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/ Dennis J. Tietz
-----------------------------------------
Dennis J. Tietz
President and Director of Cronos Capital
Corp. ("CCC")
Principal Executive Officer of CCC
Date: August 14, 2000
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)
