<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, 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)
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, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - March 31, 2000 and December 31, 1999 (unaudited) 4
Condensed Statements of Operations for the three months ended March 31, 2000 and 1999 (unaudited) 5
Condensed Statements of Cash Flows for the three months ended March 31, 2000 and 1999 (unaudited) 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
March 31, 2000 and December 31, 1999, condensed statements of
operations for the three months ended March 31, 2000 and 1999, and
condensed statements of cash flows for the three months ended March 31,
2000 and 1999.
3
<PAGE> 4
IEA INCOME FUND XII, L.P.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, includes $1,160,889 at March 31, 2000
and $1,111,325 at December 31, 1999 in interest-bearing accounts $ 1,161,034 $ 1,111,425
Net lease receivables due from Leasing Company
(notes 1 and 2) 291,211 585,156
------------ ------------
Total current assets 1,452,245 1,696,581
------------ ------------
Container rental equipment, at cost 61,594,143 61,857,061
Less accumulated depreciation 26,940,034 26,191,802
------------ ------------
Net container rental equipment 34,654,109 35,665,259
------------ ------------
Total assets $ 36,106,354 $ 37,361,840
============ ============
Liabilities and Partners' Capital
Current liabilities:
Accrued expenses $ 229,050 $ 254,500
------------ ------------
Partners' capital (deficit):
General partner (128,494) (116,193)
Limited partners 36,005,798 37,223,533
------------ ------------
Total partners' capital 35,877,304 37,107,340
------------ ------------
Total liabilities and partners' capital $ 36,106,354 $ 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
-----------------------------
March 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
Net lease revenue (notes 1 and 3) $ 954,521 $ 1,093,475
Other operating expenses:
Depreciation 905,763 915,896
Other general and administrative expenses 30,483 32,951
----------- -----------
936,246 948,847
----------- -----------
Income from operations 18,275 144,628
Other income (loss):
Interest income 14,719 23,953
Net loss on disposal of equipment (40,776) (92,685)
----------- -----------
(26,057) (68,732)
----------- -----------
Net income (loss) $ (7,782) $ 75,896
=========== ===========
Allocation of net income (loss):
General partner $ 38,756 $ 48,547
Limited partners (46,538) 27,349
----------- -----------
$ (7,782) $ 75,896
=========== ===========
Limited partners' per unit share of net income (loss) $ (0.01) $ 0.01
=========== ===========
</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>
Three Months Ended
-----------------------------
March 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 1,195,206 $ 1,087,115
Cash flows provided by (used in) investing activities:
Proceeds from disposal of equipment 76,656 154,371
Purchase of container rental equipment -- (199,342)
Acquisition fees paid to general partner -- (9,967)
----------- -----------
Net cash provided by (used in) investing activities 76,656 (54,938)
----------- -----------
Cash flows used in financing activities:
Distribution to partners (1,222,253) (1,290,450)
----------- -----------
Net increase (decrease) in cash and cash equivalents 49,609 (258,273)
Cash and cash equivalents at January 1 1,111,425 2,407,614
----------- -----------
Cash and cash equivalents at March 31 $ 1,161,034 $ 2,149,341
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
6
<PAGE> 7
IEA INCOME FUND XII, L.P.
NOTES TO UNAUDITED CONDENSED 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 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.
7
<PAGE> 8
IEA INCOME FUND XII, L.P.
NOTES TO UNAUDITED CONDENSED 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.
(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 generally accepted
accounting procedures 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 accounting
principles generally accepted in the United States (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 March 31, 2000 and
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Gross lease receivables $ 1,709,487 $ 1,676,207
Less:
Direct operating payables and accrued expenses 682,789 432,023
Damage protection reserve 181,060 189,163
Base management fees payable 244,819 271,648
Reimbursed administrative expenses 69,837 33,911
Allowance for doubtful accounts 239,771 164,306
------------- -------------
Net lease receivables $ 291,211 $ 585,156
============= =============
</TABLE>
8
<PAGE> 9
IEA INCOME FUND XII, L.P.
NOTES TO UNAUDITED CONDENSED 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-month periods ended March 31,
2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, March 31,
2000 1999
------------- -------------
<S> <C> <C>
Rental revenue (note 4) $ 1,759,088 $ 1,862,426
Less:
Rental equipment operating expenses 565,073 537,698
Base management fees 115,990 128,266
Reimbursed administrative expenses 123,504 102,987
------------- -------------
$ 954,521 $ 1,093,475
============= =============
</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 marine cargo containers. As of
March 31, 2000, the Partnership operated 9,174 twenty-foot, 5,142
forty-foot and 204 forty-foot high-cube marine dry cargo containers, as
well as 195 twenty-foot and 289 forty-foot marine refrigerated cargo
containers. A summary of gross lease revenue, by product, for the
three-month periods ended March 31, 2000 and 1999 follows:
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
March 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
Dry cargo containers $ 1,422,865 $ 1,489,917
Refrigerated containers 336,223 372,509
----------- -----------
Total $ 1,759,088 $ 1,862,426
=========== ===========
</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 March 31, 2000 and December
31, 1999.
At March 31, 2000, the Registrant had $1,161,034 in cash and cash
equivalents, an increase of $49,609 from the cash balances at December 31,
1999.
The Registrant's allowance for doubtful accounts increased from $164,306 at
December 31, 1999 to $239,771 at March 31, 2000. This increase was
attributable to the delinquent account receivable balances of approximately
12 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
provided sufficient reserves for all doubtful accounts.
The Registrant's operating performance contributed to a 50% decline in net
lease receivables at March 31, 2000 when compared to December 31, 1999. The
Registrant's cash distribution from operations for the first quarter of
2000 was 5.0% (annualized) of the limited partners' original capital
contributions, unchanged from the fourth quarter of 1999. These
distributions are directly related to the Registrant's results from
operations and may fluctuate accordingly. The cash distribution from sales
proceeds for the first quarter of 2000 was 0.25% (annualized) of the
limited partners' original capital contribution, a decline from the 1.50%
(annualized) in the fourth quarter of 1999. Sales proceeds to its partners
may fluctuate in subsequent periods, reflecting the level of container
disposals.
In order to take advantage of improving market conditions and stronger
demand for leased containers, the Registrant undertook a strategy that was
aimed at significantly reducing its inventory of idle equipment in some
low-demand locations while, at the same time, fulfilling lessee container
requirements. As part of this strategy, the Registrant offered leasing
incentives to several lessees for picking up off-hire equipment from the
Registrant's higher inventory areas. This not only resulted in stronger
utilization of the Registrant's equipment, but it also significantly
lowered Partnership expenses related to storage and handling.
2) Material changes in the results of operations between the three-month
period ended March 31, 2000 and the three-month period ended March 31,
1999.
Net lease revenue for the three-month period ended March 31, 2000 was
$954,521, a decline of 13% from the same period in the prior year. Gross
rental revenue (a component of net lease revenue) for the three-month
period ended March 31, 2000 was $1,759,088, reflecting a decline of 6% from
the same period in the prior year. Gross lease revenue was primarily
impacted by lower per-diem rental rates. Average dry cargo container
per-diem rental rates for the three-month period ended March 31, 2000
declined approximately 12%, when compared to the same period in the prior
year. Average refrigerated container per-diem rental rates for the
three-month period ended March 31, 2000 declined approximately 14%, 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, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
Average fleet size (measured in twenty-foot
equivalent units (TEU))
Dry cargo containers 19,938 20,135
Refrigerated containers 775 807
Average utilization
Dry cargo containers 74% 66%
Refrigerated containers 84% 69%
</TABLE>
Rental equipment operating expenses were 32% of the Registrant's gross
lease revenue during the three-month period ended March 31, 2000, as
compared to 29% during the three-month period ended March 31, 1999. The
Registrant's operating results contributed to a 10% decline in base
management fees when compared to the same period in the prior year.
The Registrant disposed of 57 twenty-foot, 28 forty-foot and one forty-foot
high-cube marine dry cargo containers, as well as one forty-foot
refrigerated cargo container during the first quarter of 2000, compared to
56 twenty-foot, 34 forty-foot and one forty-foot high-cube 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 or loss 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. Neither the Registrant nor the Leasing
Company experienced nor do they currently anticipate any material adverse
effects on the Registrant's business, results of operations or financial
condition as a result of Year 2000 issues involving internal use systems,
third party products or any of their software products. Costs incurred in
preparing for Year 2000 issues were expensed as incurred. Neither the
Registrant nor the Leasing Company anticipate any additional material costs
in connection with Year 2000 uncertainties. 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.
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 March 31, 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: May 15, 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)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT MARCH 31, 2000 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 2000 (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, 2000
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,161,034
<SECURITIES> 0
<RECEIVABLES> 291,211
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,452,245
<PP&E> 61,594,143
<DEPRECIATION> 26,940,034
<TOTAL-ASSETS> 36,106,354
<CURRENT-LIABILITIES> 229,050
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,877,304
<TOTAL-LIABILITY-AND-EQUITY> 36,106,354
<SALES> 0
<TOTAL-REVENUES> 954,521
<CGS> 0
<TOTAL-COSTS> 936,246
<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> (7,782)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
