<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 0-21518
IEA INCOME FUND XII, L.P.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3143940
(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 XII, 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. Exhibits 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 XII, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Assets
------
Current assets:
Cash, includes $665,667 at September 30, 1995 and $475,530
at December 31, 1994 in interest-bearing accounts $ 666,049 $ 485,789
Short-term investments 2,130,000 1,675,000
Net lease receivables due from Leasing Company
(notes 1 and 2) 1,392,094 1,417,270
------------- -------------
Total current assets 4,188,143 3,578,059
------------- -------------
Container rental equipment, at cost 63,358,177 63,648,667
Less accumulated depreciation 11,867,687 8,761,517
------------- -------------
Net container rental equipment 51,490,490 54,887,150
------------- -------------
Organizational costs, net 447,034 627,887
------------- -------------
$ 56,125,667 $ 59,093,096
============= =============
Liabilities and Partners' Capital
---------------------------------
Current liabilities
Accrued expenses $ 430,500 $ 446,500
Due to general partner (notes 1 and 3) 1,253,382 1,975,382
------------- -------------
Total current liabilities 1,683,882 2,421,882
------------- -------------
Partners' capital (deficit):
General partner (33,002) (55,052)
Limited partners 54,474,787 56,726,266
------------- -------------
Total partners' capital 54,441,785 56,671,214
------------- -------------
$ 56,125,667 $ 59,093,096
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
IEA INCOME FUND XII, 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) $ 2,249,891 $ 2,125,176 $ 6,599,072 $ 6,458,798
Other operating expenses:
Depreciation 1,382,410 987,294 3,350,393 2,963,647
Other general and administrative expenses 11,864 35,275 82,698 110,690
------------ ------------ ------------ ------------
1,394,274 1,022,569 3,433,091 3,074,337
------------ ------------ ------------ ------------
Earnings from operations 855,617 1,102,607 3,165,981 3,384,461
Other income:
Interest income 34,582 26,129 107,577 58,455
Net gain on disposal of equipment 32,049 8,581 44,792 54,552
------------ ------------ ------------ ------------
66,631 34,710 152,369 113,007
------------ ------------ ------------ ------------
Net earnings $ 922,248 $ 1,137,317 $ 3,318,350 $ 3,497,468
============ ============ ============ ============
Allocation of net earnings:
General partner $ 114,922 $ 82,551 $ 299,439 $ 276,463
Limited partners 807,326 1,054,766 3,018,911 3,221,005
------------ ------------ ------------ ------------
$ 922,248 $ 1,137,317 $ 3,318,350 $ 3,497,468
============ ============ ============ ============
Limited partners' per unit share of net earnings $ .23 $ .30 $ .86 $ .92
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
IEA INCOME FUND XII, 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 $ 6,718,473 $ 5,988,303
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 246,338 142,497
Purchase of container rental equipment (59,771) (19,600)
Acquisition fees paid to general partner (722,000) (454,552)
------------ -----------
Net cash used in investing activities (535,433) (331,655)
------------ -----------
Cash flows used in financing activities:
Distribution to partners (5,547,780) (5,547,780)
------------ -----------
Net increase in cash and cash equivalents 635,260 108,868
Cash and cash equivalents at January 1 2,160,789 2,200,279
------------ -----------
Cash and cash equivalents at September 30 $ 2,796,049 $ 2,309,147
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 7
IEA INCOME FUND XII, 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 XII, L.P. (the "Partnership") is a limited partnership
organized under the laws of the State of California on August 28, 1991
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.
(Continued)
5
<PAGE> 8
IEA INCOME FUND XII, 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 $312,953 at September 30, 1995 and $261,827
at December 31, 1994 $ 2,759,789 $ 3,020,391
Less:
Direct operating payables and accrued expenses 756,192 677,781
Damage protection reserve 247,994 179,328
Base management fees 347,813 578,169
Reimbursed administrative expenses 15,696 167,843
------------ ------------
$ 1,392,094 $ 1,417,270
============ ============
</TABLE>
(3) Due to General Partner
The amounts due to CCC 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 $ 3,138,632 $ 3,115,543 $ 9,200,276 $ 9,059,327
Rental equipment
operating expenses 486,440 632,356 1,454,049 1,481,217
Base management fees 212,659 179,384 629,980 590,279
Reimbursed administrative expenses 189,642 178,627 517,175 529,033
------------ ------------ ------------ ------------
$ 2,249,891 $ 2,125,176 $ 6,599,072 $ 6,458,798
============ ============ ============ ============
</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 $635,260 to $2,796,049. Additionally, 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 $25,176 decline in net lease receivables due from the
Leasing Company. Direct operating payables and accrued expenses, a
component of net lease receivables, increased $78,411. This increase
results from a $60,393 increase in accrued operating expenses and an
$18,018 increase in deferred revenue from advance billings to container
lessees. The reserve for container repairs covered under the damage
protection plan increased $68,666 as a result of an increase in the number
of containers covered by the plan. The amount due to the General Partner
declined $722,000, 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.
During the first nine months of 1995, the Registrant acquired 23 new
twenty-foot dry cargo containers at an aggregate manufacturers' invoice
cost of $56,925, 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 $205,000. The Registrant will use these sales proceeds in
subsequent periods 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 $2,249,891, an increase
of 6% over the third quarter of 1994. Gross rental revenue (a component of
net lease revenue) for the quarter was $3,138,632, as compared to
$3,115,543 for the same period last year. For the first nine months of
1995, net lease revenue was $6,599,072, an increase of 2% when compared to
the first nine months of 1994. Gross rental revenue increased 2% to
$9,200,276 over the same nine-month period.
Gross rental revenue increased slightly when compared to 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 smaller
fleet size and stable 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 3% when compared to the same the three
and nine-month periods ended September 30, 1994, 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 20,340 20,368 20,379 20,381
Refrigerated containers 815 815 815 815
Average Utilization
Dry cargo containers 89% 91% 90% 90%
Refrigerated containers 95% 99% 98% 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
declines in rental equipment operating expenses of 23% and 2%, 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 XII, 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 THE 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> 2,796,049
<SECURITIES> 0
<RECEIVABLES> 1,392,094
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,188,143
<PP&E> 63,358,177
<DEPRECIATION> 11,867,687
<TOTAL-ASSETS> 56,125,667
<CURRENT-LIABILITIES> 1,683,882
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 54,441,785
<TOTAL-LIABILITY-AND-EQUITY> 56,125,667
<SALES> 0
<TOTAL-REVENUES> 6,751,441
<CGS> 0
<TOTAL-COSTS> 3,433,091
<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> 3,318,350
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
