<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, 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 0-19770
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 JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Balance Sheets - June 30, 1996 (unaudited) and December 31, 1995 4
Statements of Operations for the three and six months ended June 30, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the six months ended June 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 6. Exhibit 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 June 30,
1996 and December 31, 1995, statements of operations for the three and
six months ended June 30, 1996 and 1995, and statements of cash flows
for the six months ended June 30, 1996 and 1995.
3
<PAGE> 4
IEA INCOME FUND XI, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ -------------
Assets
------
<S> <C> <C>
Current assets:
Cash, includes $242,570 at June 30, 1996 and $295,315
at December 31, 1995 in interest-bearing accounts $ 242,754 $ 299,445
Short-term investments 1,400,689 1,725,139
Net lease receivables due from Leasing Company
(notes 1 and 2) 908,599 969,993
------------ -------------
Total current assets 2,552,042 2,994,577
------------ -------------
Container rental equipment, at cost 35,909,301 36,036,469
Less accumulated depreciation 10,157,348 9,156,748
------------ -------------
Net container rental equipment 25,751,953 26,879,721
------------ -------------
Organization costs, net 95,947 166,270
------------ -------------
$ 28,399,942 $ 30,040,568
============ ==============
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Partners' Capital
---------------------------------
<S> <C> <C>
Current liabilities:
Accrued expenses $ 75,000 $ 75,000
Due to general partner (notes 1 and 3) - 5,100
Due to manufacturer - 102,000
------------ -------------
Total current liabilities 75,000 182,100
------------ -------------
Partners' capital (deficit):
General partner (37,075) (24,831)
Limited partners 28,362,017 29,883,299
------------ -------------
Total partners' capital 28,324,942 29,858,468
------------ -------------
$ 28,399,942 $ 30,040,568
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
IEA INCOME FUND XI, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ----------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 4) $ 961,977 $ 1,260,857 $ 2,023,197 $ 2,491,316
Other operating expenses:
Depreciation 559,047 561,822 1,119,022 1,114,843
Other general and administrative expenses 17,128 29,814 33,855 52,132
---------- ----------- ------------ ------------
576,175 591,636 1,152,877 1,166,975
---------- ----------- ------------ ------------
Earnings from operations 385,802 669,221 870,320 1,324,341
Other income:
Interest income 24,385 27,903 48,940 55,212
Net gain (loss) on disposal of equipment (6,470) 10,645 3,123 18,966
---------- ----------- ------------ ------------
17,915 38,548 52,063 74,178
---------- ----------- ------------ ------------
Net earnings $ 403,717 $ 707,769 $ 922,383 $ 1,398,519
========== =========== ============ ============
Allocation of net earnings:
General partner $ 45,047 $ 63,227 $ 110,553 $ 122,578
Limited partners 358,670 644,542 811,830 1,275,941
---------- ----------- ------------ ------------
$ 403,717 $ 707,769 $ 922,383 $ 1,398,519
========== =========== ============ ============
Limited partners' per unit share of net earnings $ .18 $ .32 $ .41 $ .64
========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
IEA INCOME FUND XI, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
June 30, June 30,
1996 1995
------------ ------------
<S> <C> <C>
Net cash provided by operating activities $ 2,032,678 $ 2,831,818
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 149,189 72,065
Purchases of container rental equipment (102,000) (51,975)
Acquisition fees paid to general partner (5,100) (175,417)
------------ ------------
Net cash provided by (used in) investing activities 42,089 (155,327)
------------ ------------
Cash flows used in financing activities:
Distribution to partners (2,455,908) (2,245,402)
------------ ------------
Net increase (decrease) in cash and cash equivalents (381,141) 431,089
Cash and cash equivalents at January 1 2,024,584 1,570,857
------------ ------------
Cash and cash equivalents at June 30 $ 1,643,443 $ 2,001,946
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
IEA INCOME FUND XI, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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.
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.
(Continued)
7
<PAGE> 8
IEA INCOME FUND XI, 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 June 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $211,668 at June 30, 1996 and $192,455 at
December 31, 1995 $ 1,540,990 $ 1,619,922
Less:
Direct operating payables and accrued expenses 322,139 291,464
Damage protection reserve 143,783 165,172
Base management fees 139,142 163,004
Reimbursed administrative expenses 27,327 30,289
------------ ------------
$ 908,599 $ 969,993
============ ============
</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 XI, 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, 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 six-month periods
ended June 30, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
Three months Ended Six Months Ended
--------------------------- ---------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Rental revenue $ 1,512,378 $ 1,806,295 $ 3,109,803 $ 3,535,147
Rental equipment operating expenses 362,016 327,419 699,458 608,090
Base management fees 104,093 121,758 212,813 244,758
Reimbursed administrative expenses 84,292 96,261 174,335 190,983
------------ ------------ ------------ ------------
$ 961,977 $ 1,260,857 $ 2,023,197 $ 2,491,316
============ ============ ============ ============
</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 June 30, 1996 and
December 31, 1995.
At June 30, 1996, the Registrant had $1,643,443 in cash and cash
equivalents, a decrease of $381,141 from the December 31, 1995 cash
balances. During the first six months of 1996, the Registrant expended
$102,000 of cash generated from sales proceeds to pay for containers
accepted during the fourth quarter of 1995. The Registrant has
committed to purchase an additional 27 forty-foot marine dry cargo
containers during the third quarter of 1996, at an aggregate
manufacturer's invoice cost of $108,030. These containers will be paid
for using cash generated from equipment sales and reserved as part of
its June 30, 1996 cash balances. Throughout the remainder of 1996, the
Registrant may use cash generated from equipment sales to purchase and
replace containers which have been lost or damaged beyond repair.
Amounts not used to purchase and replace containers may be distributed
to its partners.
Net lease receivables at June 30, 1996 declined when compared to
December 31, 1995, primarily as a result of the Registrant's declining
operating results during the first six months of 1996. The Registrant's
cash distribution from operations for the second quarter of 1996 was
9.25% (annualized) of the limited partners' original capital
contribution, a decline from the first quarter 1996 distribution of 11%
(annualized).
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 six months of 1996. At June 30, 1996, container inventories
remained at larger-than-usual levels, resulting in a decline in the
average utilization rate for the Registrant's dry cargo containers from
85% at December 31, 1995, to 79% at June 30, 1996. The average
utilization rate for the Registrant's refrigerated container fleet
declined from 97% at December 31, 1995, to 95% at June 30, 1996. Base
per-diem rates have become subject to downward pressures arising from a
soft container leasing market. During the first six 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
these market conditions. Accordingly, ancillary per-diems have
fluctuated, favoring a downward trend, while free-day incentives
offered to shipping companies have risen. Currently, there are no
visible signs of improvements in the leasing market and hence further
downward pressure on rental rates can be expected in the ensuing
quarters. As a result, these leasing markets conditions will continue
to impact the Registrant's results from operations during the remainder
of 1996.
2) Material changes in the results of operations between the three and
six-month periods ended June 30, 1996 and the three and six-month
periods ended June 30, 1995.
Net lease revenue for the three and six-month periods ended June 30,
1996 was $961,977 and $2,023,197, respectively, a decline of
approximately 24% and 19% from the same periods in the prior year,
respectively. Gross rental revenue (a component of net lease revenue)
for the three and six-month periods ended June 30, 1996 was $1,512,378
and $3,109,803, respectively, a decline of 16% and 12% from the same
periods in the prior year, respectively. During 1996, gross rental
revenue was primarily impacted by the Registrant's lower per-diem
rental rates and utilization levels for both the dry cargo and
refrigerated container fleets. Average dry cargo container per-diem
rental rates for the three and six-month periods ended June 30, 1996
declined approximately 4% and 3%, respectively, when compared to the
same periods in the prior year. Average refrigerated container per-diem
rental rates for the three and six-month periods ended June 30, 1996
remained unchanged from the same periods in the prior year.
10
<PAGE> 11
The Registrant's average fleet size and utilization rates for the three and
six-month periods ended June 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ---------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalent units (TEU))
Dry cargo containers 13,016 13,092 13,030 13,102
Refrigerated cargo containers 200 200 200 200
Average Utilization
Dry cargo containers 80% 90% 81% 90%
Refrigerated cargo containers 95% 97% 95% 98%
</TABLE>
Rental equipment operating expenses were 24% and 22% of the Registrant's gross
lease revenue during the three and six-month periods ended June 30, 1996,
respectively, as compared to 18% and 17% during the three and six-month periods
ended June 30, 1995, respectively. This increase was largely attributable to a
decline in gross lease revenue resulting from lower per-diem rates, a downward
trend in ancillary per-diems, 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
Registrant's operating performance 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 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 December 14, 1990
Certificate of Limited Partnership of the Registrant **
10(a) Form of Leasing Agent Agreement with LPI Leasing Partners ***
International N.V.
10(b) Assignment of Leasing Agent Agreement dated January 1, 1992 between ****
the Registrant, CCC (formerly Intermodal Equipment Associates),
Cronos Containers N.V. (formerly LPI Leasing Partners International
N.V.) and Cronos Containers Limited
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 June 30, 1996.
- ----------------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated December 14, 1990, included as part of Registration
Statement on Form S-1 (No. 33-36701)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement
on Form S-1 (No. 33-36701)
*** Incorporated by reference to Exhibit 10.2 to the Registration Statement
on Form S-1 (No. 33-36701)
**** Incorporated by reference to Exhibit 10(b) to the Report on Form 10-K
for the fiscal year ended December 31, 1995.
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 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: August 13, 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 December 14, 1990
3(B) Certificate of Limited Partnership of the Registrant **
10(a) Form of Leasing Agent Agreement with LPI Leasing Partners ***
International N.V.
10(b) Assignment of Leasing Agent Agreement dated January 1, 1992 between ****
the Registrant, CCC (formerly Intermodal Equipment Associates),
Cronos Containers N.V. (formerly LPI Leasing Partners International
N.V.) and Cronos Containers Limited
27 Financial Data Schedule Filed with this document
</TABLE>
- ----------------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated December 14, 1990, included as part of Registration
Statement on Form S-1 (No. 33-36701)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement
on Form S-1 (No. 33-36701)
*** Incorporated by reference to Exhibit 10.2 to the Registration Statement
on Form S-1 (No. 33-36701)
**** Incorporated by reference to Exhibit 10(b) to the Report on Form 10-K
for the fiscal year ended December 31, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1996 (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 JUNE 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,643,443
<SECURITIES> 0
<RECEIVABLES> 908,599
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,552,042
<PP&E> 35,909,301
<DEPRECIATION> 10,157,348
<TOTAL-ASSETS> 28,399,942
<CURRENT-LIABILITIES> 75,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,324,942
<TOTAL-LIABILITY-AND-EQUITY> 28,399,942
<SALES> 0
<TOTAL-REVENUES> 2,023,197
<CGS> 0
<TOTAL-COSTS> 1,152,877
<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> 922,383
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
