<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, 1995
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 0-19770
IEA INCOME FUND XI, L.P.
(Exact name of registrant as specified in its charter)
California 94-3122430
(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 XI, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1995 (unaudited) and December 31, 1994 2
Statements of Operations for the three and nine months ended September 30, 1995 and 1994 3
(unaudited)
Statements of Cash Flows for the nine months ended September 30, 1995 and 1994 4
(unaudited)
Notes to Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 7
Operations
PART II - OTHER INFORMATION
Item 6. Exhibit and Reports on Form 8-K 9
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of September
30, 1995 and December 31, 1994, statements of operations for the three
and nine months ended September 30, 1995 and 1994, and statements of
cash flows for the nine months ended September 30, 1995 and 1994.
<PAGE> 4
IEA INCOME FUND XI, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Assets
------
Current assets:
Cash, includes $428,730 at September 30, 1995 and $247,749
at December 31, 1994 in interest-bearing accounts $ 428,776 $ 258,118
Short-term investments 1,630,000 1,312,739
Net lease receivables due from Leasing Company
(notes 1 and 2) 1,007,339 1,276,240
------------ ------------
Total current assets 3,066,115 2,847,097
------------ ------------
Container rental equipment, at cost 36,018,134 36,194,456
Less accumulated depreciation 8,879,853 7,141,246
------------ ------------
Net container rental equipment 27,138,281 29,053,210
------------ ------------
Organization costs, net 201,432 306,917
------------ ------------
$ 30,405,828 $ 32,207,224
============ ============
Liabilities and Partners' Capital
---------------------------------
Current liabilities
Accrued expenses $ 75,000 $ 75,000
Due to general partner (notes 1 and 3) 88,767 347,994
------------ ------------
Total current liabilities 163,767 422,994
------------ ------------
Partners' capital (deficit):
General partner (27,992) (50,994)
Limited partners 30,270,053 31,835,224
------------ ------------
Total partners' capital 30,242,061 31,784,230
------------ ------------
$ 30,405,828 $ 32,207,224
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
IEA INCOME FUND XI, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ----------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 4) $1,247,731 $1,085,416 $3,739,047 $3,714,724
Other operating expenses:
Depreciation 786,311 561,810 1,901,154 1,687,382
Other general and administrative expenses 9,286 24,424 61,418 78,007
---------- ---------- ---------- ----------
795,597 586,234 1,962,572 1,765,389
---------- ---------- ---------- ----------
Earnings from operations 452,134 499,182 1,776,475 1,949,335
Other income:
Interest income 25,605 18,217 80,817 42,645
Net gain on disposal of equipment 19,845 758 38,811 25,514
---------- ---------- ---------- ----------
45,450 18,975 119,628 68,159
---------- ---------- ---------- ----------
Net earnings $ 497,584 $ 518,157 $1,896,103 $2,017,494
========== ========== ========== ==========
Allocation of net earnings:
General partner $ 72,338 $ 44,313 $ 194,916 $ 153,270
Limited partners 425,246 473,844 1,701,187 1,864,224
---------- ---------- ---------- ----------
$ 497,584 $ 518,157 $1,896,103 $2,017,494
========== ========== ========== ==========
Limited partners' per unit share of net earnings $ .21 $ .23 $ .85 $ .93
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
IEA INCOME FUND XI, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
September 30, September 30,
1995 1994
-----------------------------
<S> <C> <C>
Net cash provided by operating activities $ 4,039,904 $ 3,436,971
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 145,514 100,202
Purchase of container rental equipment -- (19,600)
Acquisition fees paid to general partner (259,227) (260,055)
----------- -----------
Net cash used in investing activities (113,713) (179,453)
----------- -----------
Cash flows used in financing activities:
Distribution to partners (3,438,272) (3,192,681)
----------- -----------
Net increase in cash and cash equivalents 487,919 64,837
Cash and cash equivalents at January 1 1,570,857 1,649,034
----------- -----------
Cash and cash equivalents at September 30 $ 2,058,776 $ 1,713,871
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 7
IEA INCOME FUND XI, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
IEA Income Fund XI, L.P. (the "Partnership") is a limited
partnership organized under the laws of the State of California on
July 30, 1990 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
The Partnership 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 and the Leasing Company. 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.
(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 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.
5
<PAGE> 8
IEA INCOME FUND XI, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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, 1995 and December 31, 1994 were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $172,819 at September 30, 1995 and $181,262
at December 31, 1994 $1,693,753 $1,892,212
Less:
Direct operating payables and accrued expenses 286,484 239,620
Damage protection reserve 198,117 164,467
Base management fees 174,545 179,226
Reimbursed administrative expenses 27,268 32,659
---------- ----------
$1,007,339 $1,276,240
========== ==========
</TABLE>
(3) Due to General Partner and its Affiliates
The amounts due to CCC and its affiliates at September 30, 1995 and
December 31, 1994 consist of acquisition fees.
(4) Net Lease Revenue
Net lease revenue is determined by deducting direct operating expenses,
management fees and reimbursed administrative expenses to CCC, the Leasing
Company, and its affiliates 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, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Rental revenue $1,829,564 $1,810,302 $5,364,711 $5,414,570
Rental equipment
operating expenses 350,787 478,028 958,877 1,005,532
Base management fees 120,640 143,586 365,398 387,585
Reimbursed administrative expenses 110,406 103,272 301,389 306,729
---------- ---------- ---------- ----------
$1,247,731 $1,085,416 $3,739,047 $3,714,724
========== ========== ========== ==========
</TABLE>
6
<PAGE> 9
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, 1995 and
December 31, 1994.
During the first nine months of 1995, the Registrant's cash balances
increased by $487,919 to $2,058,776, allowing the Registrant to increase
its cash distributions from operations for the third time during 1995.
This distribution, payable in November 1995, increased from 11.5%
(annualized) to 12.0% (annualized) of the limited partners' original
capital contribution. During the first nine months of 1995, the
Registrant's collection of outstanding lease receivables and sales
proceeds has been favorable, contributing to the aforementioned increase
in cash and cash equivalents, and to a $268,901 decline in net lease
receivables due from the Leasing Company. Additionally, direct operating
payables and accrued expenses, a component of net lease receivables,
increased $46,864. This increase was comprised of a $6,195 increase in
accrued operating expenses and a $40,669 increase in deferred revenue from
advance billings to container lessees. The reserve for container repairs
covered under the damage protection plan increased $33,650 as a result of
an increase in the number of containers covered by the plan. The amount
due to the General Partner declined $259,227 as the Registrant continued
to make payments to the General Partner for acquisition fees deferred
during the build-up phase of the Registrant's fleet and operations. The
Registrant expects all deferred acquisition fees due to the General
Partner to be paid by the fourth quarter of 1995.
During the first nine months of 1995, the Registrant acquired 21 new
twenty-foot dry cargo containers at an aggregate manufacturers' invoice
cost of $51,975, replacing containers which had been lost or damaged
beyond repair. The Registrant's cash balances at September 30, 1995
include additional sales proceeds from equipment disposals in the amount
of approximately $104,000. The Registrant expects to use these sales
proceeds during the fourth quarter of 1995 to purchase additional
containers as replacements for lost or damaged containers.
2) Material changes in the results of operations between the three and
nine-month periods ended September 30, 1995 and the three and nine-month
periods ended September 30, 1994.
Net lease revenue for the third quarter of 1995 was $1,247,731, an
increase of 15% over the third quarter of 1994. Gross rental revenue (a
component of net lease revenue) for the quarter was $1,829,564 as compared
to $1,810,302 for the same period last year. For the first nine months of
1995, net lease revenue was $3,739,047, consistent with the first nine
months of 1994. Gross rental revenue declined slightly to $5,364,711 over
the same nine-month period.
Gross rental revenue experienced little change when compared with the same
three and nine-month periods in the prior year, as the Registrant
continued to recognize higher ancillary revenues, such as pick-up and
drop-off charges. These ancillary revenues helped to offset the effects of
a slightly lower fleet size and lower utilization rates. However,
competitive pressures within the container leasing market, as well as the
Leasing Company's efforts to improve the credit quality of its customer
portfolio, combined to create a resistance to higher average dry cargo
container per-diem rental rates. Accordingly, these rates remained
relatively stable when compared to the same periods in the prior year. The
Registrant expects to gain long-term benefits from the improvement in the
credit quality of this customer portfolio, as the allowance for doubtful
accounts and related expenses should decline. However, average
refrigerated container per-diem rental rates declined approximately 4% and
6% from the three and nine-month periods ended September 30, 1994,
respectively, as many of the term leases originally entered into during
the Registrant's initial year of operations have since been renewed at
lower, current market rates.
7
<PAGE> 10
The Registrant's average fleet size and utilization rates for the three
and nine-month periods ended September 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalents (TEU))
Dry cargo containers 13,063 13,092 13,090 13,107
Refrigerated containers 200 200 200 200
Average Utilization
Dry cargo containers 89% 91% 90% 89%
Refrigerated containers 99% 99% 99% 99%
</TABLE>
During the third quarter of 1995, the container leasing market began to
experience the effects of increasingly competitive market conditions,
including, but not limited to, a resistance to higher per-diem rental
rates, slightly lower utilization rates resulting from an expanding supply
of marine cargo containers within the container industry, and the economic
condition of the shipping industry, which has experienced a current trend
toward consolidation. Accordingly, the Registrant expects a stable
container leasing market during the remainder of 1995 and first half of
1996.
Declines in the provision for repairs covered by the damage protection
plan, and the provision for doubtful accounts, were contributing factors
to a decline in rental equipment operating expenses of 27% and 5%, when
compared to the same three and nine-month periods ended September 30,
1994, respectively.
8
<PAGE> 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Number Description Method of Filing
------ ----------- ----------------
<S> <C> <C>
27 Financial Data Schedule Filed with this Document
</TABLE>
(b) There were no reports on Form 8-K during the three-month period
ended September 30, 1995.
9
<PAGE> 12
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 XI, L.P.
By Cronos Capital Corp.
The General Partner
By /s/ JOHN KALLAS
---------------------------------------
John Kallas
Vice President, Chief Financial Officer
Principal Accounting Officer
Date: November 13, 1995
10
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRHE BALANCE
SHEET AT SEPTEMBER 30, 1995 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 (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 SEPTEMBER 30, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,058,776
<SECURITIES> 0
<RECEIVABLES> 1,007,339
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,066,115
<PP&E> 36,018,134
<DEPRECIATION> 8,879,853
<TOTAL-ASSETS> 30,405,828
<CURRENT-LIABILITIES> 163,767
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 30,242,061
<TOTAL-LIABILITY-AND-EQUITY> 30,405,828
<SALES> 0
<TOTAL-REVENUES> 3,858,675
<CGS> 0
<TOTAL-COSTS> 1,962,572
<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> 1,896,103
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
