<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, 1998
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 JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1998 (unaudited) and December 31, 1997 4
Statements of Operations for the three and six months ended June 30, 1998 and 1997 (unaudited) 5
Statements of Cash Flows for the six months ended June 30, 1998 and 1997 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 3. Defaults Upon Senior Securities 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of June 30,
1998 and December 31, 1997, statements of operations for the three and
six months ended June 30, 1998 and 1997, and statements of cash flows
for the six months ended June 30, 1998 and 1997.
3
<PAGE> 4
IEA INCOME FUND XII, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, includes $2,341,844 at June 30, 1998 and $1,883,189
at December 31, 1997 in interest-bearing accounts $ 2,341,944 $ 1,883,389
Net lease receivables due from Leasing Company
(notes 1 and 2) 888,697 1,094,453
------------ ------------
Total current assets 3,230,641 2,977,842
------------ ------------
Container rental equipment, at cost 62,929,298 63,162,608
Less accumulated depreciation 21,283,485 19,524,264
------------ ------------
Net container rental equipment 41,645,813 43,638,344
------------ ------------
$ 44,876,454 $ 46,616,186
============ ============
Liabilities and Partners' Capital
Current liabilities:
Accrued expenses $ 462,948 $ 462,948
------------ ------------
Total current liabilities 462,948 462,948
------------ ------------
Partners' capital (deficit):
General partner (43,133) (25,736)
Limited partners 44,456,639 46,178,974
------------ ------------
Total partners' capital 44,413,506 46,153,238
------------ ------------
$ 44,876,454 $ 46,616,186
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
IEA INCOME FUND XII, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 3) $ 1,390,908 $ 1,346,583 $ 2,780,862 $ 2,743,047
Other operating expenses:
Depreciation 920,906 972,388 1,842,132 1,958,963
Other general and administrative expenses 22,960 33,282 51,488 50,541
----------- ----------- ----------- -----------
943,866 1,005,670 1,893,620 2,009,504
----------- ----------- ----------- -----------
Earnings from operations 447,042 340,913 887,242 733,543
Other income (loss):
Interest income 30,228 21,096 57,694 48,201
Net gain (loss) on disposal of equipment (7,738) (626) (3,242) 8,702
----------- ----------- ----------- -----------
22,490 20,470 54,452 56,903
----------- ----------- ----------- -----------
Net earnings $ 469,532 $ 361,383 $ 941,694 $ 790,446
=========== =========== =========== ===========
Allocation of net earnings:
General partner $ 53,873 $ 62,171 $ 116,675 $ 139,804
Limited partners 415,659 299,212 825,019 650,642
----------- ----------- ----------- -----------
$ 469,532 $ 361,383 $ 941,694 $ 790,446
=========== =========== =========== ===========
Limited partners' per unit share of net earnings $ 0.11 $ 0.09 $ 0.23 $ 0.19
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
IEA INCOME FUND XII, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
June 30, June 30,
1998 1997
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 2,811,805 $ 2,931,817
Cash flows provided by (used in) investing activities:
Proceeds from disposal of equipment 328,176 83,509
Purchase of container rental equipment -- (374,111)
Acquisition fees paid to general partner -- (168,706)
----------- -----------
Net cash provided by (used in) investing activities 328,176 (459,308)
----------- -----------
Cash flows used in financing activities:
Distribution to partners (2,681,426) (3,082,099)
----------- -----------
Net increase (decrease) in cash and cash equivalents 458,555 (609,590)
Cash and cash equivalents at January 1 1,883,389 2,262,639
----------- -----------
Cash and cash equivalents at June 30 $ 2,341,944 $ 1,653,049
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial 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. The Partnership shall
continue until December 31, 2011, unless sooner terminated upon the
occurrence of certain events.
The Partnership commenced operations on January 31, 1992, when the
minimum subscription proceeds of $2,000,000 were obtained. As of June
30, 1998, the Partnership operated 9,275 twenty-foot, 5,263 forty-foot
and 208 forty-foot high-cube marine dry cargo containers, as well as
198 twenty-foot and 305 forty-foot marine refrigerated cargo
containers.
The Partnership offered 3,750,000 units of limited partnership
interest at $20 per unit, or $75,000,000. The offering terminated on
November 30, 1992, at which time 3,513,594 limited partnership units
had been purchased.
(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. Net lease
revenue is recorded by the Partnership in each period based upon its
leasing agent agreement with the Leasing Company. Net lease revenue is
generally dependent upon operating lease rentals from operating lease
agreements between the Leasing Company and its various lessees, less
direct operating expenses and management fees due in respect of the
containers specified in each operating lease agreement.
(Continued)
7
<PAGE> 8
IEA INCOME FUND XII, 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. Actual results could
differ from those estimates.
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 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,
1998 and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- ----------
<S> <C> <C>
Lease receivables, net of doubtful accounts of $66,415
at June 30, 1998 and $126,327 at December 31, 1997 $1,877,083 $2,117,313
Less:
Direct operating payables and accrued expenses 523,424 512,846
Damage protection reserve 138,142 179,744
Base management fees 289,008 289,537
Reimbursed administrative expenses 37,812 40,733
---------- ----------
$ 888,697 $1,094,453
========== ==========
</TABLE>
(Continued)
8
<PAGE> 9
IEA INCOME FUND XII, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(3) Net Lease Revenue
Net lease revenue is determined by deducting direct operating expenses,
base management fees and reimbursed administrative expenses to CCC 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, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental revenue $2,137,908 $2,276,081 $4,317,266 $4,612,886
Less:
Rental equipment operating expenses 489,908 652,195 977,628 1,311,863
Base management fees 144,690 156,321 294,592 318,083
Reimbursed administrative expenses 112,402 120,982 264,184 239,893
---------- ---------- ---------- ----------
$1,390,908 $1,346,583 $2,780,862 $2,743,047
========== ========== ========== ==========
</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, 1998 and December
31, 1997.
At June 30, 1998, the Registrant had $2,341,944 in cash and cash
equivalents, an increase of $458,555 from the December 31, 1997 cash
balances. At June 30, 1998, the Registrant had approximately $465,000 in
cash generated from equipment sales reserved as part of its cash balances.
Throughout the remainder of 1998, the Registrant expects to continue using
cash generated from equipment sales to purchase and replace containers
which have been lost or damaged beyond repair.
The Registrant's operating performance contributed to a 19% decline in net
lease receivables at June 30, 1998 when compared to December 31, 1997. The
Registrant's cash distribution from operations for the second quarter of
1998 was 7.25% (annualized) of the limited partners' original capital
contributions, unchanged from the first quarter of 1998. These
distributions are directly related to the Registrant's results from
operations and may fluctuate accordingly.
Imbalances and reductions in trade volumes, fueled by the economic crisis
in Asia, continue to affect the container leasing market and Partnership
operations. Containerships leaving Asia are operating at full capacity.
Yet, on the return eastbound trip they are going back to Asia with only a
fraction of their holds utilized. This results in a shortage of containers
available for exporting cargo from Asia and a surplus of containers in
locations of low demand. As a consequence of this imbalance, container
leasing companies are repositioning empty containers from low-demand
locations back to Asian ports in order to keep equipment at the source of
cargo and, at the same time, reduce the effects of additional depot
charges for idle equipment and lost revenue. While there is a cost
incurred when repositioning an empty container, revenue is lost while it
is in transit. In spite of these market pressures, strong trade with other
parts of the world is compensating for the imbalances with Asia. There is
renewed demand for leased containers in locations such as Mexico, Canada,
China, and areas of Europe where trade volumes of containerized goods are
prospering. In light of the current market conditions, the Registrant's
focus remains centered on strategic planning in order to reduce equipment
imbalances and on improving collections to maximize returns.
2) Material changes in the results of operations between the three and
six-month periods ended June 30, 1998 and the three and six-month periods
ended June 30, 1997.
Net lease revenue for the three and six-month periods ended June 30, 1998
was $1,390,908 and $2,780,862, respectively, an increase of 3% and 1%,
respectively, from the same periods in the prior year. Gross rental
revenue (a component of net lease revenue) for the three and six-month
periods ended June 30, 1998 was $2,137,908 and $4,317,266, respectively,
reflecting a decline of 6% from the same respective periods in the prior
year. Gross lease revenue was primarily impacted by lower per-diem rental
rates and utilization levels. Average dry cargo container per-diem rental
rates for the three and six-month periods ended June 30, 1998 declined
approximately 7% and 9%, respectively, when compared to 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, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average fleet size (measured in twenty-foot
equivalent units (TEU))
Dry cargo containers 20,230 20,391 20,257 20,331
Refrigerated containers 808 811 809 811
Average Utilization
Dry cargo containers 78% 78% 78% 77%
Refrigerated containers 84% 83% 85% 84%
</TABLE>
Rental equipment operating expenses were 23% of the Registrant's gross
lease revenue during both the three and six-month periods ended June 30,
1998, as compared to 29% and 28%, respectively, of the Registrant's gross
lease revenue during the three and six-month periods ended June 30, 1997.
This decline was largely attributable to a decrease in costs associated
with slightly higher utilization levels, including handling and storage.
The Registrant disposed of 18 twenty-foot and nine forty-foot marine dry
cargo containers during the second quarter of 1998, as compared to 10
twenty-foot and 12 forty-foot marine dry cargo containers during the same
period in the prior year. The decision to repair or dispose of a container
is made when it is returned by a lessee. This decision is influenced by
various factors including the age, condition, suitability for continued
leasing, as well as the geographical location of the container when
disposed. These factors also influence the amount of sales proceeds
received and the related gain on container disposals.
Year 2000
The Registrant relies upon the financial and operational systems provided
by the Leasing company and its affiliates, as well as the systems provided
by other independent third parties to service the three primary areas of
its business: investor processing/maintenance; container leasing/asset
tracking; and accounting finance. The Registrant has received confirmation
from its third-party investor processing/maintenance vendor that their
system is Year 2000 compliant. The Registrant does not expect a material
increase in its vendor servicing fee to reimburse Year 2000 costs.
Container leasing/asset tracking and accounting/finance services are
provided to the Registrant by CCC and its affiliate, Cronos Containers
Limited (the "Leasing Company"), pursuant to the respective Limited
Partnership Agreement and Leasing Agent Agreement. CCC and the Leasing
Company have initiated a program to prepare their systems and applications
for the Year 2000. Preliminary studies indicate that testing, conversion
and upgrading of system applications is expected to cost CCC and the
Leasing Company less than $500,000. Pursuant to the Limited Partnership
Agreement, CCC or the Leasing Company, may not seek reimbursement of data
processing costs associated with the Year 2000 program. The financial
impact of making these required system changes is not expected to be
material to the Registrant's financial position, results of operations or
cash flows.
11
<PAGE> 12
Cautionary Statement
This Quarterly Report on Form 10-Q contains statements relating to future
results of the Registrant, including certain projections and business
trends, that are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Actual results may differ
materially from those projected as a result of certain risks and
uncertainties, including but not limited to changes in: economic
conditions; trade policies; demand for and market acceptance of leased
marine cargo containers; competitive utilization and per-diem rental rate
pressures; as well as other risks and uncertainties, including but not
limited to those described in the above discussion of the marine container
leasing business under Item 2., Management's Discussion and Analysis of
Financial Condition and Results of Operations; and those detailed from
time to time in the filings of Registrant with the Securities and Exchange
Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As reported in the Registrant's Current Report on Form 8-K and
Amendment No. 1 to Current Report on Form 8-K, filed with the
Commission on February 7, 1997 and February 26, 1997, respectively,
Arthur Andersen, London, England, resigned as auditors of the Cronos
Group, a Luxembourg corporation headquartered in Orchard Lea, England
(the "Parent Company"), on February 3, 1997.
The Registrant retained a new auditor, Moore Stephens, P.C. on April
10, 1997, as reported in its Current Report on Form 8-K, filed April
14, 1997.
In connection with its resignation, Arthur Andersen also prepared a
report pursuant to Section 10A(b)(2) of the Securities Exchange Act of
1934 as amended, for filing by the Parent Company with the Securities
and Exchange Commission ("SEC") citing its inability to obtain what it
considered to be adequate responses to its inquiries primarily
regarding the payment of $1.5 million purportedly in respect of
professional fees relating to a proposed strategic alliance. This sum
was returned to the Parent Company in January 1997.
Following the report of Arthur Andersen, the SEC, on February 10, 1997,
commenced a private investigation of the Parent Company for the purpose
of investigating the matters discussed in such report and related
matters. The SEC's investigation can result in several types of civil
or administrative sanctions against the Parent Company and individuals
associated with the Parent Company, including the assessment of
monetary penalties. Actions taken by the SEC do not preclude additional
actions by any other federal, civil or criminal authorities or by other
regulatory organizations or by third parties.
The SEC's investigation is continuing, and some of the Parent Company's
present and former officers and directors and others associated with
the Parent Company have given testimony. However, no conclusion of any
alleged wrongdoing by the Parent Company or any individual has been
communicated to the Parent Company by the SEC.
The Registrant does not believe that the focus of the SEC's
investigation is upon the Registrant or CCC. CCC is unable to predict
the outcome of the SEC's ongoing private investigation of the Parent
Company.
As reported in the Registrant's Current Report on Form 8-K, filed with
the SEC on May 21, 1998, the Parent Company reported that its Chairman
and CEO, Stefan M. Palatin, was suspended from his duties pending the
investigation of fraud charges against him by Austrian government
authorities. On June 8, 1998, the Parent Company's Board of Directors
removed Mr. Palatin as Managing Director and Chief Executive Officer.
Mr. Palatin resigned from the Board of Directors of the Parent Company
on July 6, 1998. Mr. Rudolf J. Weissenberger has been appointed to
replace Mr. Palatin as an executive director and Chief Executive
Officer. Also, on June 8, 1998, the Board approved a proposal to add
two independent directors to the Board. The Board engaged legal counsel
to provide legal advice and commence legal action, if appropriate,
against former officers or directors of the Parent Company (including
Mr. Palatin) if it is determined that they engaged in any misfeasance
or improper self-dealing.
Mr. Palatin had been a director of CCC; he resigned from his position
as director on April 23, 1998.
CCC further understands that Austrian authorities have initiated
investigations of persons in addition to Mr. Palatin, including Mr.
Weissenberger and Dr. Axel Friedberg. Dr. Friedberg has been a
non-executive director of the Parent Company since 1997. Such
investigations, which are still pending, have not resulted in any
action being taken against Messrs. Weissenberger or Friedberg, and each
has informed the Parent Company that they do not believe that there is
any basis for any action to be taken against them.
13
<PAGE> 14
Item 3. Defaults Upon Senior Securities
See Item 5. Other Information.
Item 5. Other Information
In 1993, the Parent Company negotiated a credit facility (hereinafter,
the "Credit Facility") with several banks for the use of the Parent
Company and its affiliates, including CCC. At December 31, 1996,
approximately $73,500,000 in principal indebtedness was outstanding
under the Credit Facility. As a party to the Credit Facility, CCC is
jointly and severally liable for the repayment of all principal and
interest owed under the Credit Facility. The obligations of CCC, and
the five other subsidiaries of the Parent Company that are borrowers
under the Credit Facility, are guaranteed by the Parent Company.
Following negotiations in 1997 with the banks providing the Credit
Facility, an Amended and Restated Credit Agreement was executed in June
1997, subject to various actions being taken by the Parent Company and
its subsidiaries, primarily relating to the provision of additional
collateral. This Agreement was further amended in July 1997 and the
provisions of the Agreement and its Amendment converted the facility to
a term loan, payable in installments, with a final maturity date of May
31, 1998. The terms of the Agreement and its Amendment also provided
for additional security over shares in the subsidiary of the Parent
Company that owns the head office of the Parent Company's container
leasing operations. They also provided for the loans to the former
Chairman of $5,900,000 and $3,700,000 to be restructured as obligations
of the former Chairman to another subsidiary of the Parent Company (not
CCC), together with the pledge to this subsidiary company of 2,030,303
Common Shares beneficially owned by him in the Parent Company as
security for these loans. They further provided for the assignment of
these loans to the lending banks, together with the pledge of 1,000,000
shares and the assignment of the rights of the Parent Company in
respect of the other 1,030,303 shares. Additionally, CCC granted the
lending banks a security interest in the fees to which it is entitled
for the services it renders to the container leasing partnerships of
which it acts as general partner, including its fee income payable by
the Registrant. The Parent Company did not repay the Credit Facility at
the amended maturity date of May 31, 1998.
On June 30, 1998, the Parent Company entered into a third amendment
(the "Third Amendment") to the Credit Facility. The Third Amendment
became effective as of that date, subject to the satisfaction
thereafter of various conditions, including: the Parent Company must
deliver its audited financial statements for 1997 by a specified date
and; on or prior to July 30, 1998, the Parent Company must furnish
proof that any defaults under any other indebtedness have been waived
and must also furnish various legal opinions, officers' certificates
and other loan documentation. Under the Third Amendment, the remaining
principal amount of $36,800,000 will be amortized in varying monthly
amounts commencing on July 31, 1998 with $26,950,000 due on September
30 and a final maturity date of January 8, 1999. All of these
conditions will be fulfilled by August 14, 1998.
The directors of the Parent Company are pursuing alternative sources of
financing to meet the amended repayment obligations under the Third
Amendment. Failure to meet revised lending terms would constitute an
event of default with the lenders. The declaration of an event of
default would result in further defaults with other lenders under loan
agreement cross-default provisions. Should a default of the term loans
be enforced, the Parent Company and CCC may be unable to continue as
going concerns.
CCC is currently in discussions with the management of the Parent
Company to provide assurance that the management of the container
leasing partnerships managed by CCC, including the Registrant, is not
disrupted pending a refinancing or reorganization of the indebtedness
of the Parent Company and its affiliates.
14
<PAGE> 15
The Registrant is not a borrower under the Credit Facility, and neither
the containers nor the other assets of the Registrant have been pledged
as collateral under the Credit Facility.
CCC is unable to determine the impact, if any, these concerns may have
on the future operating results and financial condition of the
Registrant or CCC and the Leasing Company's ability to manage the
Registrant's fleet in subsequent periods.
15
<PAGE> 16
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
On May 21, 1998, the Registrant filed a Report on Form 8-K reporting
changes on the board of directors of the Parent Company.
- ----------------
* 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)
16
<PAGE> 17
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/ Dennis J. Tietz
----------------------------------
Dennis J. Tietz
President and Director of Cronos
Capital Corp. ("CCC")
Principal Executive Officer of CCC
Date: August 14, 1998
17
<PAGE> 18
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 JUNE 30, 1998 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1998 (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, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,341,944
<SECURITIES> 0
<RECEIVABLES> 888,697
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,230,641
<PP&E> 62,929,298
<DEPRECIATION> 21,283,485
<TOTAL-ASSETS> 44,876,454
<CURRENT-LIABILITIES> 462,948
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 44,413,506
<TOTAL-LIABILITY-AND-EQUITY> 44,876,454
<SALES> 0
<TOTAL-REVENUES> 2,780,862
<CGS> 0
<TOTAL-COSTS> 1,893,620
<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> 941,694
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
