<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 0-18982
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.)
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 X, 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 - 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
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 X, 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 $459,621 at September 30, 2000 and
$356,206 at December 31, 1999 in interest-bearing accounts $ 647,692 $ 356,306
Net lease receivables due from Leasing Company
(Notes 1 and 2) 171,403 177,496
------------ ------------
Total current assets 819,095 533,802
------------ ------------
Container rental equipment, at cost 13,646,368 15,457,224
Less accumulated depreciation 8,006,224 8,409,983
------------ ------------
Net container rental equipment 5,640,144 7,047,241
------------ ------------
Total assets $ 6,459,239 $ 7,581,043
============ ============
Partners' Capital
Partners' capital (deficit):
General partner $ (57,479) $ (45,189)
Limited partners 6,516,718 7,626,232
------------ ------------
Total partners' capital $ 6,459,239 $ 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 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) $ 293,539 $ 245,958 $ 800,669 $ 749,546
Other operating expenses:
Depreciation 210,429 241,380 648,338 712,822
Other general and administrative expenses 13,829 9,882 45,537 32,727
--------- --------- --------- ---------
224,258 251,262 693,875 745,549
--------- --------- --------- ---------
Income (loss) from operations 69,281 (5,304) 106,794 3,997
Other income (loss):
Interest income 4,530 5,508 13,694 19,176
Net loss on disposal of equipment (116,411) (4,515) (223,578) (106,012)
--------- --------- --------- ---------
(111,881) 993 (209,884) (86,836)
--------- --------- --------- ---------
Net loss $ (42,600) $ (4,311) $(103,090) $ (82,839)
========= ========= ========= =========
Allocation of net loss:
General partner $ 9,932 $ 12,337 $ 27,342 $ 38,377
Limited partners (52,532) (16,648) (130,432) (121,216)
--------- --------- --------- ---------
$ (42,600) $ (4,311) $(103,090) $ (82,839)
========= ========= ========= =========
Limited partners' per unit share of net loss $ (1.34) $ (0.42) $ (3.33) $ (3.09)
========= ========= ========= =========
</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>
Nine Months Ended
---------------------------------
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Net cash provided by operating activities $ 885,970 $ 826,559
Cash provided by investing activities:
Proceeds from sale of container rental equipment 424,130 347,825
Cash used in financing activities:
Distribution to Partners (1,018,714) (1,326,674)
----------- -----------
Net increase (decrease) in cash and cash equivalents 291,386 (152,290)
Cash and cash equivalents, beginning of period 356,306 653,851
----------- -----------
Cash and cash equivalents, end of period $ 647,692 $ 501,561
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
6
<PAGE> 7
IEA INCOME FUND X, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(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.
(Continued)
7
<PAGE> 8
IEA INCOME FUND X, 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 $622,473 $518,979
Less:
Direct operating payables and accrued expenses 222,224 154,207
Damage protection reserve 65,774 72,336
Base management fees payable 46,474 51,184
Reimbursed administrative expenses 22,150 8,958
Allowance for doubtful accounts 94,448 54,798
-------- --------
Net lease receivables $171,403 $177,496
======== ========
</TABLE>
(Continued)
8
<PAGE> 9
IEA INCOME FUND X, 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 $ 406,950 $ 418,537 $1,278,706 $1,303,706
Less:
Rental equipment operating expenses 72,895 121,075 322,042 388,640
Base management fees 28,724 29,064 85,526 90,019
Reimbursed administrative expenses 11,792 22,440 70,469 75,501
---------- ---------- ---------- ----------
$ 293,539 $ 245,958 $ 800,669 $ 749,546
========== ========== ========== ==========
</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 3,189 twenty-foot, 870
forty-foot and 77 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 553
containers as part of its ongoing container operations. At September 30,
2000, 79% 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 318 173 18
Master leases 2,264 504 44
----- ----- -----
Subtotal 2,582 677 62
Containers off lease 607 193 15
----- ----- -----
Total container fleet 3,189 870 77
===== ===== =====
</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 811 20% 280 24% 23 23%
----- ----- ----- ----- ----- -----
Remaining fleet at September 30, 2000 3,189 80% 870 76% 77 77%
===== ===== ===== ===== ===== =====
</TABLE>
At September 30, 2000, the Registrant had $647,692 in cash and cash
equivalents, an increase of $291,386 from the cash balances at December 31,
1999.
The Registrant's allowance for doubtful accounts increased from $54,798 at
December 31, 1999 to $94,448 at September 30, 2000. This increase was
attributable to the delinquent account receivable balances of approximately
16 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.
The Registrant disposed of 226 twenty-foot and 52 forty-foot dry cargo
marine containers, as well as six forty-foot high cube dry cargo marine
container during the third quarter of 2000, as compared to 25 twenty-foot
and 15 forty-foot dry cargo marine containers during the same period in the
prior year. These disposals resulted in a loss of $223,578 for the third
quarter of 2000, as compared to a loss of $106,012 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.
(Continued)
10
<PAGE> 11
The Registrant's cash distribution from operations for the third quarter of
2000 was 4.50% (annualized) of the limited partners' original capital
contribution, unchanged from the second 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
third quarter of 2000 was 4.00% (annualized) of the limited partners'
original capital contribution, an increase of 1.50% from the second quarter
of 2000. Sales proceeds distributed to its partners may fluctuate in
subsequent periods, reflecting the level of container disposals.
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 $293,539 and $800,669, respectively, an increase of 19% and 7%,
respectively, 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 $406,950 and $1,278,706,
respectively, a decrease of 3% and 2% from the respective three and
nine-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 nine-month periods ended
September 30, 2000 declined 2% and 7%, respectively, when compared to the
same 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- 5,208 5,860 5,484 5,973
foot equivalent units (TEU))
Average Utilization 81% 76% 80% 72%
</TABLE>
The age and declining size of the Registrant's fleet contributed to
reductions in depreciation expense of 13% and 9%, respectively, when
compared to the respective three and nine-month periods in the prior year.
Rental equipment operating expenses during the three and nine-month periods
ended September 30, 2000 were 18% and 25%, respectively, of the Registrant's
gross lease revenue, as compared to 29% and 30%, respectively, during the
same 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. 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
September 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: November 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)
