<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 0-21518
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 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. 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 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 XII, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Assets
------
Current assets:
Cash, includes $649,859 at March 31, 1996 and $459,603
at December 31, 1995 in interest-bearing accounts $ 660,095 $ 459,786
Short-term investments 1,825,000 2,367,716
Net lease receivables due from Leasing Company
(notes 1 and 2) 1,349,966 1,300,391
------------ ------------
Total current assets 3,835,061 4,127,893
------------ ------------
Container rental equipment, at cost 63,290,704 63,426,137
Less accumulated depreciation 13,264,797 12,361,962
------------ ------------
Net container rental equipment 50,025,907 51,064,175
------------ ------------
Organizational costs, net 326,465 386,749
------------ ------------
$ 54,187,433 $ 55,578,817
============ ============
Liabilities and Partners' Capital
---------------------------------
Current liabilities
Accrued expenses $ 430,500 $ 430,500
Due to general partner (notes 1 and 3) 658,382 889,475
Due to manufacturer -- 221,850
------------ ------------
Total current liabilities 1,088,882 1,541,825
------------ ------------
Partners' capital (deficit):
General partner (45,272) (58,767)
Limited partners 53,143,823 54,095,759
------------ ------------
Total partners' capital 53,098,551 54,036,992
------------ ------------
$ 54,187,433 $ 55,578,817
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
IEA INCOME FUND XII, 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) $1,862,918 $2,148,943
Other operating expenses:
Depreciation 984,261 980,594
Other general and administrative expenses 23,397 30,038
---------- ----------
1,007,658 1,010,632
---------- ----------
Earnings from operations 855,260 1,138,311
Other income:
Interest income 32,449 36,560
Net gain on disposal of equipment 23,110 2,321
---------- ----------
55,559 38,881
---------- ----------
Net earnings $ 910,819 $1,177,192
========== ==========
Allocation of net earnings:
General partner $ 105,957 $ 88,040
Limited partners 804,862 1,089,152
---------- ----------
$ 910,819 $1,177,192
========== ==========
Limited partners' per unit share of net earnings $ .23 $ .31
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
IEA INCOME FUND XII, 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 $ 1,804,482 $ 2,174,018
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 155,314 40,487
Purchase of container rental equipment (221,850) --
Acquisition fees paid to general partner (231,093) --
----------- -----------
Net cash provided by (used in) investing activities (297,629) 40,487
----------- -----------
Cash flows used in financing activities:
Distribution to partners (1,849,260) (1,849,260)
----------- -----------
Net increase (decrease) in cash and cash equivalents (342,407) 365,245
Cash and cash equivalents at January 1 2,827,502 2,160,789
----------- -----------
Cash and cash equivalents at March 31 $ 2,485,095 $ 2,526,034
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
IEA INCOME FUND XII, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(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.
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.
(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.
(Continued)
7
<PAGE> 8
IEA INCOME FUND XII, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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 $371,114 at March 31, 1996 and $343,373
at December 31, 1995 $2,652,777 $2,675,630
Less:
Direct operating payables and accrued expenses 697,023 746,823
Damage protection reserve 249,788 241,172
Base management fees 306,385 334,219
Reimbursed administrative expenses 49,615 53,025
---------- ----------
$1,349,966 $1,300,391
========== ==========
</TABLE>
(3) Due to General Partner
The amounts due to CCC at March 31, 1996 and December 31, 1995
consist of acquisition fees.
(Continued)
8
<PAGE> 9
IEA INCOME FUND XII, 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 $2,816,426 $2,944,604
Rental equipment operating expenses 606,934 422,326
Base management fees 192,140 211,000
Reimbursed administrative expenses 154,434 162,335
---------- ----------
$1,862,918 $2,148,943
========== ==========
</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 $2,485,095 in cash and cash
equivalents, a decrease of $342,407 from the December 31, 1995 cash
balances. During the first quarter of 1996, the Registrant expended
$221,850 of cash generated from sales proceeds to pay for containers
accepted during the fourth quarter of 1995. At March 31, 1996, the
Registrant had approximately $212,000 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 when compared to
December 31, 1995, as cash collections of outstanding receivables slowed.
Additionally, a decline in direct operating payables and base management
fees of $49,800 and $27,834, respectively, also contributed to the
increase in net lease receivables.
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 dry
cargo container utilization rate from 89% at December 31, 1995 to 83% at
March 31, 1996. The Registrant's refrigerated container utilization rate
declined from 97% at December 31, 1995 to 91% 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 $1,862,918, a decline
of approximately 13% from the first quarter of 1995. Gross rental revenue
(a component of net lease revenue) for the quarter was $2,816,426, a
decline of 4% from the same period last year. During 1996, gross rental
revenue was primarily impacted by the Registrant's lower dry cargo and
refrigerated utilization rates. Average dry cargo container per-diem
rental rates declined approximately 2% when compared to the same period in
the prior year. Average refrigerated container per-diem rates declined
approximately 2% 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 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 20,317 20,395
Refrigerated containers 813 815
Average Utilization
Dry cargo containers 83% 90%
Refrigerated containers 91% 99%
</TABLE>
Rental equipment operating expenses were 22% of the Registrant's gross
lease revenue during the three-month period ended March 31, 1996, as
compared to 14% 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 24 twenty-foot, 15 forty-foot, and two
high-cube dry cargo containers during the first quarter of 1996, as
compared to 13 twenty-foot and four 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 2, 1991
3(b) Certificate of Limited Partnership of the Registrant **
10 Form of Leasing Agent Agreement with Cronos Containers Limited ***
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 March 31, 1996
- -----------------------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated December 2, 1991, included as part of Registration
Statement on Form S-1 (No. 33-42697)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement on
Form S-1 (No. 33-42697)
*** Incorporated by reference to Exhibit 10.2 to the Registration Statement on
Form S-1 (No. 33-42697)
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 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: 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 2, 1991
3(b) Certificate of Limited Partnership of the Registrant **
10 Form of Leasing Agent Agreement with 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 2, 1991, included as part of Registration
Statement on Form S-1 (No. 33-42697)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement on
Form S-1 (No. 33-42697)
*** Incorporated by reference to Exhibit 10.2 to the Registration Statement on
Form S-1 (No. 33-42697)
<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> 2485095
<SECURITIES> 0
<RECEIVABLES> 1349966
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3835061
<PP&E> 63290704
<DEPRECIATION> 13264797
<TOTAL-ASSETS> 54187433
<CURRENT-LIABILITIES> 1088882
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 53098551
<TOTAL-LIABILITY-AND-EQUITY> 54187433
<SALES> 54187433
<TOTAL-REVENUES> 0
<CGS> 1862918
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1007658
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 910819
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
