<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 MARCH 31, 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 MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1996 (unaudited) and December 31, 1995 4
Statements of Operations for the three months ended March 31, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the three months ended March 31, 1996 and 1995 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 10
Operations
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 March 31,
1996 and December 31, 1995, statements of operations for the three
months ended March 31, 1996 and 1995, and statements of cash flows for
the three months ended March 31, 1996 and 1995.
3
<PAGE> 4
IEA INCOME FUND XI, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
Assets
------
Current assets:
Cash, includes $442,217 at March 31, 1996 and $295,315
at December 31, 1995 in interest-bearing accounts $ 448,413 $ 299,445
Short-term investments 1,351,823 1,725,139
Net lease receivables due from Leasing Company
(notes 1 and 2) 974,764 969,993
------------ ------------
Total current assets 2,775,000 2,994,577
------------ ------------
Container rental equipment, at cost 35,937,914 36,036,469
Less accumulated depreciation 9,654,928 9,156,748
------------ ------------
Net container rental equipment 26,282,986 26,879,721
------------ ------------
Organizational costs, net 131,109 166,270
------------ ------------
$ 29,189,095 $ 30,040,568
============ ============
Liabilities and Partners' Capital
---------------------------------
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 (22,478) (24,831)
Limited partners 29,136,573 29,883,299
------------ ------------
Total partners' capital 29,114,095 29,858,468
------------ ------------
$ 29,189,095 $ 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
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Net lease revenue (notes 1 and 4) $1,061,220 $1,230,459
Other operating expenses:
Depreciation 559,975 553,021
Other general and administrative expenses 16,727 22,318
---------- ----------
576,702 575,339
---------- ----------
Earnings from operations 484,518 655,120
Other income:
Interest income 24,555 27,309
Net gain on disposal of equipment 9,593 8,321
---------- ----------
34,148 35,630
---------- ----------
Net earnings $ 518,666 $ 690,750
========== ==========
Allocation of net earnings:
General partner $ 65,506 $ 59,351
Limited partners 453,160 631,399
---------- ----------
$ 518,666 $ 690,750
========== ==========
Limited partners' per unit share of net earnings $ .23 $ .32
========== ==========
</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>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 1,068,256 $ 1,393,925
Cash flows provided by (used in) investing activities:
Proceeds from disposal of equipment 77,535 41,291
Purchase of container rental equipment (102,000) --
Acquisition fees paid to general partner (5,100) (86,409)
----------- -----------
Net cash used in investing activities (29,565) (45,118)
----------- -----------
Cash flows used in financing activities:
Distribution to partners (1,263,039) (1,105,159)
----------- -----------
Net increase (decrease) in cash and cash equivalents (224,348) 243,648
Cash and cash equivalents at January 1 2,024,584 1,570,857
----------- -----------
Cash and cash equivalents at March 31 $ 1,800,236 $ 1,814,505
=========== ===========
</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 March 31, 1996 and December
31, 1995 were as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $210,600 at March 31, 1996 and $192,455
at December 31, 1995 $1,572,645 $1,619,922
Less:
Direct operating payables and accrued expenses 264,149 291,464
Damage protection reserve 163,914 165,172
Base management fees 141,502 163,004
Reimbursed administrative expenses 28,316 30,289
---------- ----------
$ 974,764 $ 969,993
========== ==========
</TABLE>
(3) Due to General Partner
The amounts due to CCC at December 31, 1995 consisted 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-month periods ended
March 31, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Rental revenue $1,597,425 $1,728,852
Rental equipment operating expenses 337,442 280,671
Base management fees 108,720 123,000
Reimbursed administrative expenses 90,043 94,722
---------- ----------
$1,061,220 $1,230,459
========== ==========
</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 March 31, 1996 and
December 31, 1995.
At March 31, 1996, the Registrant had $1,800,236 in cash and cash
equivalents, a decrease of $224,348 from the December 31, 1995 cash
balances. During the first quarter of 1996, the Registrant expended
$102,000 of cash generated from sales proceeds to pay for new dry cargo
containers accepted during the fourth quarter of 1995. At March 31, 1996,
the Registrant had approximately $143,000 in cash generated from equipment
sales reserved as part of its cash balances. Throughout the remainder of
1996, the Registrant will continue using cash generated from equipment
sales to purchase and replace containers which have been lost or damaged
beyond repair.
Net lease receivables at March 31, 1996 increased slightly when compared
to December 31, 1995, as two components of net lease receivables, direct
operating payables and base management fees, declined by $27,315 and
$21,502, respectively.
The Registrant's cash distribution from operations for the first quarter
of 1996 was 11% (annualized) of the limited partners' original capital
contribution, a decline from the fourth quarter 1995 distribution of 12%
(annualized). These distributions are directly related to the Registrant's
results from operations.
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 quarter of
1996. At March 31, 1996, container inventories remained at larger than
usual levels, resulting in a decline in the Registrant's average dry cargo
container utilization rate from 89% at December 31, 1995 to 82% at March
31, 1996. The average refrigerated container utilization rate declined
from 99% at December 31, 1995, to 95% at March 31, 1996. During the first
quarter 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. The Leasing Company expects the
Registrant to recognize the benefits of these efforts during the next few
quarters of 1996. However, base per-diem rental rates have recently become
subject to downward pressures within the container leasing market. A
reduction in per-diem rental rates, combined with current utilization
levels, could impact the Registrant's results from operations during the
remainder of 1996.
2) Material changes in the results of operations between the three-month
period ended March 31, 1996 and the three- month period ended March 31,
1995.
Net lease revenue for the first quarter of 1996 was $1,061,220, a decline
of approximately 14% from the first quarter of 1995. Gross rental revenue
(a component of net lease revenue) for the quarter ended March 31, 1996
was $1,597,425, reflecting a decline of 8% from the same three-month
period in 1995. During 1996, gross rental revenue was primarily impacted
by the Registrant's lower average dry cargo and refrigerated utilization
rates. Average dry cargo and refrigerated container per-diem rental rates
remained relatively stable when compared to the same period in the prior
year.
10
<PAGE> 11
The Registrant's average fleet size and utilization rates for the
three-month periods ended March 31, 1996 and March 31, 1995 were as
follows:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalent units (TEU))
Dry cargo containers 13,043 13,106
Refrigerated containers 200 200
Average Utilization
Dry cargo containers 82% 90%
Refrigerated containers 95% 99%
</TABLE>
Rental equipment operating expenses were 21% of the Registrant's gross
lease revenue during the three-month period ended March 31, 1996, as
compared to 16% during the three-month period ended March 31, 1995. This
increase was largely attributable to an increase in costs associated with
lower utilization levels, including handling, storage and repositioning.
The Registrant disposed of 20 twenty-foot and six forty-foot dry cargo
containers during the first quarter of 1996, as compared to 17 twenty-foot
and two forty-foot dry cargo containers during the same period 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
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>
(b) Report on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended March 31, 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: May 14, 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 MARCH 31, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 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 MARCH 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1800236
<SECURITIES> 0
<RECEIVABLES> 974764
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2775000
<PP&E> 35937914
<DEPRECIATION> 9654928
<TOTAL-ASSETS> 29189095
<CURRENT-LIABILITIES> 75000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29114095
<TOTAL-LIABILITY-AND-EQUITY> 29189095
<SALES> 0
<TOTAL-REVENUES> 1061220
<CGS> 0
<TOTAL-COSTS> 576702
<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> 518666
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
