<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, 2000
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)
<TABLE>
<S> <C>
California 94-3143940
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
One Front 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, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets (unaudited) - September 30, 2000 and December 31, 1999 4
Condensed Statements of Operations (unaudited) for the three and nine months ended
September 30, 2000 and 1999 5
Condensed Statements of Cash Flows (unaudited) for the nine months ended
September 30, 2000 and 1999 6
Notes to Condensed 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 11
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 condensed balance sheets as of
September 30, 2000 and December 31, 1999, condensed statements of
operations for the three and nine months ended September 30, 2000 and
1999, and condensed statements of cash flows for the nine months ended
September 30, 2000 and 1999.
3
<PAGE> 4
IEA INCOME FUND XII, L.P.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents, includes $1,448,593 at September 30,
2000 and $1,111,325 at December 31, 1999 in interest-bearing accounts $ 1,449,359 $ 1,111,425
Net lease receivables due from Leasing Company
(Notes 1 and 2) 238,428 585,156
------------ ------------
Total current assets 1,687,787 1,696,581
------------ ------------
Container rental equipment, at cost 60,605,888 61,857,061
Less accumulated depreciation 28,159,403 26,191,802
------------ ------------
Net container rental equipment 32,446,485 35,665,259
------------ ------------
Total assets $ 34,134,272 $ 37,361,840
============ ============
Liabilities and Partners' Capital
Current liabilities:
Accrued expenses $ 76,350 $ 254,500
------------ ------------
Partners' capital (deficit):
General partner (146,688) (116,193)
Limited partners 34,204,610 37,223,533
------------ ------------
Total partners' capital 34,057,922 37,107,340
------------ ------------
Total liabilities and partners' capital $ 34,134,272 $ 37,361,840
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
4
<PAGE> 5
IEA INCOME FUND XII, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net lease revenue (Notes 1 and 3) $ 1,108,294 $ 882,030 $ 3,173,258 $ 2,782,635
Other operating expenses:
Depreciation 894,484 911,896 2,703,653 2,743,388
Other general and administrative expenses 29,317 27,205 88,786 84,935
----------- ----------- ----------- -----------
923,801 939,101 2,792,439 2,828,323
----------- ----------- ----------- -----------
Income (loss) from operations 184,493 (57,071) 380,819 (45,688)
Other income (loss):
Interest income 15,587 22,389 43,797 69,963
Net loss on disposal of equipment (13,682) (74,144) (180,703) (152,768)
----------- ----------- ----------- -----------
1,905 (51,755) (136,906) (82,805)
----------- ----------- ----------- -----------
Net income (loss) $ 186,398 $ (108,826) $ 243,913 $ (128,493)
=========== =========== =========== ===========
Allocation of net income (loss):
General partner $ 38,850 $ 45,761 $ 115,243 $ 141,727
Limited partners 147,548 (154,587) 128,670 (270,220)
----------- ----------- ----------- -----------
$ 186,398 $ (108,826) $ 243,913 $ (128,493)
=========== =========== =========== ===========
Limited partners' per unit share of net
income (loss) $ 0.05 $ (0.05) $ 0.04 $ (0.08)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
5
<PAGE> 6
IEA INCOME FUND XII, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
September 30, September 30,
2000 1999
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 3,307,528 $ 3,079,090
Cash from investing activities:
Proceeds from disposal of equipment 323,736 462,087
Purchase of container rental equipment -- (199,342)
Acquisition fees paid to general partner -- (9,967)
----------- -----------
Net cash provided by investing activities 323,736 252,778
----------- -----------
Cash used in financing activities:
Distribution to Partners (3,293,330) (3,870,993)
----------- -----------
Net increase (decrease) in cash and cash equivalents 337,934 (539,125)
Cash and cash equivalents, beginning of period 1,111,425 2,407,614
----------- -----------
Cash and cash equivalents, end of period $ 1,449,359 $ 1,868,489
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
6
<PAGE> 7
IEA INCOME FUND XII, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(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 worldwide to ocean carriers. To this extent,
the Partnership's operations are subject to the fluctuations of
world economic and political conditions. Such factors may affect
the pattern and levels of world trade. The Partnership believes
that the profitability of, and risks associated with, leases to
foreign customers is generally the same as those of leases to
domestic customers. The Partnership's leases generally require
all payments to be made in United States currency.
Cronos Capital Corp. ("CCC") is the general partner and, with
its affiliate Cronos Containers Limited (the "Leasing Company"),
manages the business of the Partnership. CCC and the Leasing
Company also manage the container leasing business for other
partnerships affiliated with the general partner. 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.
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 one 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 condensed financial statements.
(Continued)
7
<PAGE> 8
IEA INCOME FUND XII, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(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.
(d) Financial Statement Presentation
These condensed financial statements have been prepared without
audit. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
accounting principles generally accepted in The United States of
America ("GAAP") have been omitted. It is suggested that these
condensed 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 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. The results of operations for such interim
periods are not necessarily indicative of the results to be
expected for the full year.
(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 September 30, 2000 and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---------- ----------
<S> <C> <C>
Gross lease receivables $1,683,287 $1,676,207
Less:
Direct operating payables and accrued expenses 546,699 432,023
Damage protection reserve 192,572 189,163
Base management fees payable 263,076 271,648
Reimbursed administrative expenses 89,595 33,911
Equipment purchases payable 69,712 --
Allowance for doubtful accounts 283,205 164,306
---------- ----------
Net lease receivables $ 238,428 $ 585,156
========== ==========
</TABLE>
(Continued)
8
<PAGE> 9
IEA INCOME FUND XII, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(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 nine-month periods
ended September 30, 2000 and 1999 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental revenue $1,660,004 $1,596,370 $5,133,532 $5,065,891
Less:
Rental equipment operating expenses 370,231 513,911 1,318,177 1,637,155
Base management fees 114,444 110,284 347,428 349,252
Reimbursed administrative expenses 67,035 90,145 294,669 296,849
---------- ---------- ---------- ----------
$1,108,294 $ 882,030 $3,173,258 $2,782,635
========== ========== ========== ==========
</TABLE>
(4) Operating Segment
The Financial Accounting Standards Board has issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
which changes the way public business enterprises report financial and
descriptive information about reportable operating segments. An
operating segment is a component of an enterprise that engages in
business activities from which it may earn revenues and incur expenses,
whose operating results are regularly reviewed by the enterprise's chief
operating decision maker to make decisions about resources to be
allocated to the segment and assess its performance, and about which
separate financial information is available. Management operates the
Partnership's container fleet as a homogenous unit and has determined,
after considering the requirements of SFAS No. 131, that as such it has
a single reportable operating segment.
The Partnership derives its revenues from cargo marine containers. As of
September 30, 2000, the Partnership operated 8,984 twenty-foot, 5,077
forty-foot and 205 forty-foot high-cube dry cargo marine containers, as
well as 210 twenty-foot and 273 forty-foot refrigerated cargo marine
containers. A summary of gross lease revenue, by product, for the three
and nine-month periods ended September 30, 2000 and 1999 follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Dry cargo containers $1,358,437 $1,345,079 $4,161,338 $4,150,524
Refrigerated containers 301,567 251,291 972,194 915,367
---------- ---------- ---------- ----------
Total $1,660,004 $1,596,370 $5,133,532 $5,065,891
========== ========== ========== ==========
</TABLE>
Due to the Partnership's lack of information regarding the physical
location of its fleet of containers when on lease in the global shipping
trade, it is impracticable to provide the geographic area information
required by SFAS No. 131.
******
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 September 30, 2000 and
December 31, 1999.
At September 30, 2000, the Registrant had $1,449,359 in cash and cash
equivalents, an increase of $337,934 from the cash balances at December
31, 1999.
The Registrant's allowance for doubtful accounts increased from $164,306
at December 31, 1999 to $283,205 at September 30, 2000. This increase
was attributable to the delinquent account receivable balances of
approximately 17 lessees. The Leasing Company has either negotiated
specific payment terms with these lessees or is pursuing other
alternatives to collect the outstanding balances. In each instance, the
Registrant believes it has recorded appropriate allowance.
The Registrant's cash distribution from operations for the third quarter
of 2000 was 5.0% (annualized) of the limited partners' original capital
contributions, unchanged from the second quarter of 2000. These
distributions are directly related to the Registrant's results from
operations and may fluctuate accordingly. The cash distribution from
sales proceeds for the third quarter of 2000 was 0.75% (annualized) of
the limited partners' original capital contributions, also unchanged
from the second quarter of 2000. Sales proceeds to its partners may
fluctuate in subsequent periods, reflecting the level of container
disposals. Distributions for the general and limited partners are
calculated based upon the Partnership Agreement.
During the third quarter of 2000, growth in the volume of containerized
trade continued to improve. As a result, demand for leased equipment
strengthened in many locations, but most significantly throughout Asia.
With the growth in the volume of world trade, ocean carriers are
committing their capital to the purchase of additional containerships
and turning to leasing companies to supply them with the containers they
need to meet their growing freight requirements. The container leasing
market has rebounded and prospects have somewhat improved, but lease
rates have remained at generally the same low level as at the beginning
of this year. At the same time, inventories of idle equipment have been
reduced in Europe, but there has been no appreciable reduction in the
U.S. The strong U.S. economy continued to import more than it exported.
This imbalance has had the effect of further increasing idle container
inventories, particularly on the U.S. East Coast.
2) Material changes in the results of operations between the three and
nine-month periods ended September 30, 2000 and the three and nine-month
periods ended September 30, 1999.
Net lease revenue for the three and nine-month periods ended September
30, 2000 was $1,108,294 and $3,173,258, respectively, an increase of 26%
and 14%, from the same respective periods in the prior year. Gross
rental revenue (a component of net lease revenue) for the three and
nine-month periods ended September 30, 2000 was $1,660,004 and
$5,133,532, respectively, reflecting an increase of 4% and 1%,
respectively, from the same three and nine-month periods in the prior
year. Gross lease revenue was primarily impacted by higher utilization
levels and lower per-diem rental rates. Average dry cargo container
per-diem rental rates for the three and nine-month periods ended
September 30, 2000 declined approximately 3% and 8%, respectively, when
compared to the same periods in the prior year. Average refrigerated
container per-diem rental rates for the three and nine-month periods
ended September 30, 2000 increased 4% and decreased 6%, respectively,
when compared to the same periods in the prior year.
(Continued)
10
<PAGE> 11
The Registrant's average fleet size and utilization rates for the three
and nine-month periods ended September 30, 2000 and 1999 were as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Average fleet size (measured in
twenty-foot equivalent units
(TEU))
Dry cargo containers 19,620 20,038 19,797 20,090
Refrigerated containers 761 797 771 802
Average Utilization
Dry cargo containers 76% 71% 75% 68%
Refrigerated containers 79% 64% 83% 67%
</TABLE>
The Registrant's declining fleet size contributed to reductions in
depreciation expense of 2% and 1%, respectively, for the three and
nine-month periods ended September 30, 2000 when compared to the same
three and nine-month periods in the prior year. Rental equipment
operating expenses, as a percent of the Registrant's gross lease
revenue, were 22% and 26%, respectively, during the three and nine-month
periods ended September 30, 2000, as compared to 32% during both the
three and nine-month periods ended September 30, 1999. The large
decrease for the three-month period ended September 30, 2000 was
attributable to the recovery of doubtful accounts.
The Registrant disposed of 117 twenty-foot and 33 forty-foot dry cargo
marine containers, as well as five forty-foot refrigerated cargo
containers during the third quarter of 2000, compared to 23 twenty-foot
and 12 forty-foot dry cargo marine containers, as well as eight
forty-foot refrigerated cargo containers during the same period in the
prior year. These disposals resulted in a loss of $180,703 for the third
quarter of 2000, as compared to a loss of $152,768 for the same period
in the prior year. The Registrant does not believe that the carrying
amount of its containers has been permanently impaired or that events or
changes in circumstances have indicated that the carrying amount of its
containers may not be fully recoverable. The Registrant believes that
the loss on container disposals was a result of various factors
including the age, condition, suitability for continued leasing, as well
as the geographical location of the containers when disposed. These
factors will continue to influence the amount of sales proceeds received
and the related gain or loss on container disposals, which may fluctuate
in subsequent periods.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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 September 30, 2000.
----------
* 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/ Dennis J. Tietz
----------------------------------------
Dennis J. Tietz
President and Director of Cronos Capital
Corp. ("CCC")
Principal Executive Officer of CCC
Date: November 14, 2000
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)
