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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, 2003

OR

o   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 0-18169

IEA INCOME FUND IX, L.P.
(Exact name of registrant as specified in its charter)

     
California   94-3069954
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

One Front Street, Suite 925, 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 o.

 


TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets — June 30, 2003 (unaudited) and December 31, 2002
Statements of Operations for the three and six months ended June 30, 2003 and 2002 (unaudited)
Statements of Cash Flows for the six months ended June 30, 2003 and 2002 (unaudited)
Notes to Financial Statements (unaudited)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II — OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit 31.1
Exhibit 31.2
Exhibit 32


Table of Contents

IEA INCOME FUND IX, L.P.

Report on Form 10-Q for the Quarterly Period
Ended June 30, 2003

TABLE OF CONTENTS

             
        PAGE  
PART I — FINANCIAL INFORMATION
       
 
 
Item 1. Financial Statements
       
 
   
Balance Sheets — June 30, 2003 (unaudited) and December 31, 2002
    4  
 
   
Statements of Operations for the three and six months ended June 30, 2003 and 2002 (unaudited)
    5  
 
   
Statements of Cash Flows for the six months ended June 30, 2003 and 2002 (unaudited)
    6  
 
   
Notes to Financial Statements (unaudited)
    7  
 
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
    11  
 
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
    14  
 
 
Item 4. Controls and Procedures
    15  
 
PART II — OTHER INFORMATION
       
 
 
Item 6. Exhibits and Reports on Form 8-K
    16  

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PART I — FINANCIAL INFORMATION

Item 1.   Financial Statements
 
    Presented herein are the Registrant’s balance sheets as of June 30, 2003 and December 31, 2002, statements of operations for the three and six months ended June 30, 2003 and 2002, and statements of cash flows for the six months ended June 30, 2003 and 2002.

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IEA INCOME FUND IX, L.P.

Balance Sheets

(Unaudited)

                         
            June 30,     December 31,  
            2003     2002  
           
   
 
       
Assets
               
Current assets:
               
 
Cash and cash equivalents, includes $281,289 at June 30, 2003 and $302,037 at December 31, 2002 in interest-bearing accounts
  $ 323,158     $ 359,487  
 
Net lease receivables due from Leasing Company (notes 1 and 2)
    889        
 
 
 
   
 
     
Total current assets
    324,047       359,487  
 
 
 
   
 
Container rental equipment, at cost
    5,512,709       6,124,220  
 
Less accumulated depreciation
    (4,313,815 )     (4,598,633 )
 
 
 
   
 
   
Net container rental equipment
    1,198,894       1,525,587  
 
 
 
   
 
     
Total assets
  $ 1,522,941     $ 1,885,074  
 
 
 
   
 
       
Liabilities and Partners’ Capital
               
Current liabilities
               
   
Net lease payables due to Leasing Company (notes 1 and 2)
  $     $ 5,978  
 
 
 
   
 
     
Total liabilities
          5,978  
 
 
 
   
 
Partners’ capital (deficit):
               
 
General partner
    (119,133 )     (116,401 )
 
Limited partners
    1,642,074       1,995,497  
 
 
 
   
 
     
Total partners’ capital
    1,522,941       1,879,096  
 
 
 
   
 
     
Total liabilities and partners’ capital
  $ 1,522,941     $ 1,885,074  
 
 
 
   
 

The accompanying notes are in integral part of these financial statements.

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IEA INCOME FUND IX, L.P.

Statements of Operations

(Unaudited)

                                     
        Three Months Ended     Six Months Ended  
       
   
 
        June 30,     June 30,     June 30,     June 30,  
        2003     2002     2003     2002  
       
   
   
   
 
Net lease revenue (notes 1 and 3)
  $ 80,967     $ 99,435     $ 156,915     $ 202,615  
Other operating expenses:
                               
 
Depreciation
    95,836       127,865       197,063       270,965  
 
Other general and administrative expenses
    12,441       14,153       28,026       28,408  
 
Net (gain) loss on disposal of equipment
    (2,946 )     74,135       (6,259 )     110,137  
 
 
   
   
   
 
   
(Loss) income from operations
    (24,364 )     (116,718 )     (61,915 )     (206,895 )
Other income:
                               
 
Interest income
    395       1,415       886       2,978  
 
 
   
   
   
 
   
Net loss
  $ (23,969 )   $ (115,303 )   $ (61,029 )   $ (203,917 )
 
 
   
   
   
 
Allocation of net (loss) income:
                               
 
General partner
  $ 2,677     $ (1,153 )   $ 5,587     $ (2,039 )
 
Limited partners
    (26,646 )     (114,150 )     (66,616 )     (201,878 )
 
 
   
   
   
 
 
  $ (23,969 )   $ (115,303 )   $ (61,029 )   $ (203,917 )
 
 
   
   
   
 
Limited partners’ per unit share of net loss
  $ (0.78 )   $ (3.36 )   $ (1.96 )   $ (5.94 )
 
 
   
   
   
 

The accompanying notes are in integral part of these financial statements.

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IEA INCOME FUND IX, L.P.

Statements of Cash Flows

(Unaudited)

                   
      Six Months Ended  
     
 
      June 30,     June 30,  
      2003     2002  
     
   
 
Net cash provided by operating activities
  $ 121,497     $ 194,350  
Cash flows provided by investing activities:
               
 
Proceeds from sale of container rental equipment
    137,300       327,979  
Cash flows used in financing activities:
               
 
Distribution to partners
    (295,126 )     (525,875 )
 
 
   
 
Net decrease in cash and cash equivalents
    (36,329 )     (3,546 )
Cash and cash equivalents at January 1
    359,487       492,681  
 
 
   
 
Cash and cash equivalents at June 30
  $ 323,158     $ 489,135  
 
 
   
 

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The accompanying notes are in integral part of these financial statements.

IEA INCOME FUND IX, L.P.

Notes to Unaudited Financial Statements

(1)   Summary of Significant Accounting Policies

  (a)   Nature of Operations
 
      IEA Income Fund IX, L.P. (the “Partnership”) is a limited partnership organized under the laws of the State of California on September 8, 1988 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 CCC. The Partnership shall continue until December 31, 2009, unless sooner terminated upon the occurrence of certain events.
 
      The Partnership commenced operations on December 5, 1988, when the minimum subscription proceeds of $1,000,000 were obtained. The Partnership offered 40,000 units of limited partnership interest at $500 per unit, or $20,000,000. The offering terminated on September 11, 1989, at which time 33,992 limited partnership units had been sold.
 
  (b)   Leasing Company and Leasing Agent Agreement
 
      Pursuant to the Limited Partnership Agreement of the Partnership, all authority to administer the business of the Partnership is vested in CCC. A Leasing Agent Agreement exists between CCC and the Leasing Company, 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. 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, and 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.

Continued

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IEA INCOME FUND IX, L.P.

Notes to Unaudited 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)   Container Rental Equipment
 
      In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” container rental equipment is considered to be impaired if the carrying value of the asset exceeds the expected future cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets are written down to fair value. An analysis is prepared each quarter projecting future cash flows from container rental equipment operations. Current and projected utilization rates, per-diem rental rates, direct operating expenses, fleet size and container disposals are the primary variables utilized by the analysis. Additionally, the Partnership evaluates future cash flows and potential impairment by container type rather than for each individual container, and as a result, future losses could result for individual container dispositions due to various factors, including age, condition, suitability for continued leasing, as well as the geographical location of containers when disposed. There were no impairment charges to the carrying value of container rental equipment for the six-month periods ended June 30, 2003 and 2002.
 
      Depreciation policies are also evaluated to determine whether subsequent events and circumstances warrant revised estimates of useful lives. Container rental equipment is depreciated using the straight-line basis.
 
  (e)   Use of Estimates
 
      The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which 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 most significant estimates included within the financial statements are the container rental equipment estimated useful lives and residual values, and the estimate of future cash flows from container rental equipment operations, used to determine the adequacy of the carrying value of container rental equipment in accordance with SFAS No. 144. Considerable judgement is required in estimating future cash flows from container rental equipment operations. Accordingly, the estimates may not be indicative of the amounts that may be realized in future periods. As additional information becomes available in subsequent periods, reserves for the impairment of the container rental equipment carrying values may be necessary based upon changes in market and economic conditions.

Continued

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IEA INCOME FUND IX, L.P.

Notes to Unaudited Financial Statements

  (f)   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 accounting principles generally accepted in the United States of America (GAAP)have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and accompanying notes in the Partnership’s latest annual report on Form 10-K.
 
      The interim financial statements presented herewith reflect all adjustments of a normal recurring nature which are, in the opinion of management, necessary to a fair statement of the financial condition and results of operations for the interim periods presented. 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 (Payables) Due from (to) Leasing Company
 
    Net lease receivables (payables) due from (to) 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 earned by the Leasing Company under operating leases to ocean carriers for the containers owned by the Partnership, as well as proceeds earned from container disposals. Net lease receivables (payables) at June 30, 2003 and December 31, 2002 were as follows:

                 
    June 30,     December 31,  
    2003     2002  
   
   
 
Gross lease receivables
  $ 132,872     $ 145,368  
Less:
               
Direct operating payables and accrued expenses
    84,690       97,831  
Damage protection reserve
          1,607  
Base management fees payable
    24,930       31,411  
Reimbursed administrative expenses
    2,544       2,867  
 
 
   
 
Allowance for doubtful accounts
    19,819       17,630  
 
 
   
 
Net lease receivables (payables)
  $ 889     $ (5,978 )
 
 
   
 

Continued

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IEA INCOME FUND IX, 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 from the rental revenue earned 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, 2003 and 2002 was as follows:

                                 
    Three Months Ended     Six Months Ended  
   
   
 
    June 30,     June 30,     June 30,     June 30,  
    2003     2002     2003     2002  
   
   
   
   
 
Rental revenue (note 4)
  $ 111,364     $ 152,756     $ 228,628     $ 336,187  
Less:
                               
Rental equipment operating expenses
    18,078       33,156       46,216       89,749  
Base management fees
    4,806       10,682       9,922       23,535  
Reimbursed administrative expenses
    7,513       9,483       15,575       20,288  
 
 
   
   
   
 
Net lease revenue
  $ 80,967     $ 99,435     $ 156,915     $ 202,615  
 
 
   
   
   
 

(4)   Operating Segment
 
    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 that as such it has a single reportable operating segment.
 
    The Partnership derives its revenues from leasing marine dry cargo containers. As of June 30, 2003, the Partnership operated 721 twenty-foot, 311 forty-foot and 439 forty-foot high-cube marine dry cargo containers.
 
    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 geographic area information.

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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.

General

Pursuant to the Limited Partnership Agreement of the Registrant, all authority to administer the business of the Registrant is vested in CCC. A Leasing Agent Agreement exists between CCC and the Leasing Company, whereby the Leasing Company has the responsibility to manage the leasing operations of all equipment owned by the Registrant. Pursuant to the Agreement, the Leasing Company is responsible for leasing, managing and re-leasing the Registrant’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 Registrant, 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. At June 30, 2003, 31% of the original equipment remained in the Registrant’s fleet, as compared to 34% at December 31, 2002. The following chart summarizes the composition of the Registrant’s fleet (based on container type) at June 30, 2003.

                             
                        40-Foot  
        20-Foot     40-Foot     High-Cube  
       
   
   
 
Containers on lease:
                       
 
Term leases
    459       173       125  
 
Master leases
    205       64       230  
 
 
   
   
 
   
Subtotal
    664       237       355  
Containers off lease
    57       74       84  
 
 
   
   
 
 
Total container fleet
    721       311       439  
 
 
   
   
 
                                                   
                                      40-Foot  
      20-Foot     40-Foot     High-Cube  
     
   
   
 
      Units     %     Units     %     Units     %  
     
   
   
   
   
   
 
Total purchases
    2,327       100 %     799       100 %     1,653       100 %
 
Less disposals
    1,606       69 %     488       61 %     1,214       73 %
 
 
   
   
   
   
   
 
Remaining fleet at June 30, 2003
    721       31 %     311       39 %     439       27 %
 
 
   
   
   
   
   
 

The favorable market conditions that existed at the end of 2002 continued through the first six months of 2003, allowing the Registrant to maintain a high level of utilization for its containers. At June 30, 2003, the Registrant’s utilization measured 84% as compared to 81% at December 31, 2002.

Commencing with the later half of 2002 and continuing through the first six months of 2003, the demand for leased containers by the global container shipping industry has contributed to reducing off-hire inventories primarily in Asia, and to a lesser extent Europe and North America. In many parts of Asia and particularly in the south eastern ports, the demand for cargo containers continued to exceed available supplies. The continued strong demand for leased containers is primarily attributable to a favorable shipping market during 2003, combined with shipping lines purchasing fewer containers for their own account due to recent operating losses and requirements to deploy capital within other parts of their business. As a result, shipping lines have strategically made the decision to employ leased containers to meet their container requirements. However, in response to a favorable shipping market, there are indications of an increased willingness by the shipping lines to purchase and finance the acquisition of new containers at higher levels in the near future, which may impact the demand for leased containers.

(Continued)

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The favorable shipping market conditions have also resulted in the shipping lines’ diminishing discrimination against leasing older containers, a condition that exists during periods of surplus container supply. The slowdown and uneven recovery in the global economy during the 2001-2002 period led to reduced levels of capital available for new container investment. The lower levels of new container production during 2001 and the first half of 2002 addressed, to some extent, the problems of container over-supply created by the higher levels of new container production achieved during 1999 and 2000. A favorable 2003 shipping market, combined with the current shortfall of containers, is expected to result in an increase in the production of new containers during 2003, in comparison to 2002 and 2001 production levels. However, new container production is expected to remain below the record container production levels achieved during 2000. The ultimate impact of the industry’s increase in new container production on the Registrant’s operations is not immediately known, however, new container availability may reduce the demand for the Registrant’s older containers.

Although favorable market conditions for container lessors currently exists, the uncertainty over the financial strength of the shipping industry remains a concern. Current conditions appear to favor the larger more established shipping lines, which have witnessed strong recoveries in their performance. The Registrant, CCC and the Leasing Company continue to remain cautious, as some shipping lines reported operating losses during 2002, while others have recently become insolvent during the first half of 2003. The financial impact of such losses for these shipping lines may eventually influence the demand for leased containers as some shipping lines may experience additional financial difficulties, consolidate or become insolvent. Although the ultimate outcome, as well as its impact on the container leasing industry and the Registrant’s results of operations, is unknown, CCC, on behalf of the Registrant, will work closely with the Leasing Company to monitor outstanding receivables, collections, and credit exposure to various existing and new customers.

Lastly, wide-ranging concerns remain regarding recovery of the world’s major economies, performance of global stock markets, geopolitical concerns arising from uncertainties within the Middle East and Asia, as well as the recent increase in new container production, all of which may temper the current demand for leased containers.

The Registrant’s average fleet size and utilization rates for the three and six-months periods ended June 30, 2003 and 2002 were as follows:

                                 
    Three Months Ended     Six Months Ended  
   
   
 
    June 30,     June 30,     June 30,     June 30,  
    2003     2002     2003     2002  
   
   
   
   
 
Average fleet size (measured in twenty-foot equivalent units (TEU))
    2,282       3,035       2,347       3,224  
Average Utilization
    83 %     76 %     83 %     74 %

Since the beginning of 2002, the combined per-diem rate for the Registrant’s fleet of dry cargo containers declined by approximately 22%. Most of this decline occurred in the first six months of 2002 and is attributable to three main factors:

  1.   Per-diem rental rates decreased in correlation with the reduction of new container prices and interest rate levels;
 
  2.   The Leasing Company converted lease agreements with certain shipping lines from master to long-term lease, providing greater revenue stability but at lower lease rates than those earned under master leases; and,
 
  3.   The Leasing Company initiated new long-term leases for older equipment resulting in lower per-diem rates, while significantly reducing off-hire container inventory levels.

Although per-diem rental rates have declined over the last 18 months to their current levels, slight increases in new container prices and an increase in demand for leased containers have resulted in the stabilization of per-diem rental rates since the second half of 2002. A significant improvement in lease per-diem rates is not expected until new container prices increase to much higher levels.

The primary component of the Registrant’s results of operations is net lease revenue. Net lease revenue is determined by deducting direct operating expenses, management fees and reimbursed administrative expenses, from rental revenues billed by the Leasing Company from the leasing of the Registrant’s containers. Net lease revenue is directly related to the size, utilization and per-diem rental rates of the Registrant’s fleet.

(Continued)

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Three Months Ended June 30, 2003 Compared to the Three Months Ended June 30, 2002

Net lease revenue of $80,967 for the three months ended June 30, 2003 was $18,468 lower than in the corresponding period of 2002. The decrease was due to a $41,392 decline in gross rental revenue (a component of net lease revenue) from the same period in 2002. Gross rental revenue was impacted by the Registrant’s smaller fleet size and lower per-diem rental rates. Other components of net lease revenue, including reimbursed administrative expenses, rental equipment operating expenses and management fees, were lower by a combined $22,924 when compared to the corresponding period in 2002, partially offsetting the decline in gross lease revenue. Contributing to the decline in rental equipment operating expenses were decreases in handling, repositioning and storage expenses, partially offset by an increase in the provision for doubtful accounts.

Depreciation expense of $95,836 for the three-month period ended June 30, 2003 was $32,029 lower than the same period in 2002, a result of the Registrant’s declining fleet size.

Other general and administrative expenses were $12,441 for the three-month period ended June 30, 2003, a decrease of $1,712 or 12% when compared to the corresponding period in 2002. Contributing to this decrease was a reduction of professional fees.

Net gain (loss) on disposal of equipment was a result of the Registrant disposing of 75 containers during the three-month period ended June 30, 2003, as compared to 226 containers during the same period in 2002. These disposals resulted in a net gain of $2,946 for the three-month period ended June 30, 2003, as compared to a net loss of $74,135 for the three-month period ended June 30, 2002. The Registrant believes that the net gain on container disposals in the three-month period ended June 30, 2003 was a result of various factors including the volume of disposed containers, age, condition, suitability for continued leasing, as well as the geographical location of the containers when disposed. These factors will continue to influence the decision to repair or dispose of a container when it is returned by a lessee, as well as the amount of sales proceeds received and the related gain or loss on container disposals. The level of the Registrant’s container disposals in subsequent periods will also contribute to fluctuations in the net gain or loss on disposals. There were no reductions to the carrying value of container rental equipment during the three-month periods ended June 30, 2003 and 2002.

Six Months Ended June 30, 2003 Compared to the Six Months Ended June 30, 2002

Net lease revenue of $156,915 for the six months ended June 30, 2003 was $45,700 lower than in the corresponding period of 2002. The decrease was primarily due to a $107,559 decline in gross rental revenue (a component of net lease revenue) from the same period in 2002. Gross rental revenue was impacted by the Registrant’s smaller fleet size, lower per-diem rental rates and a lower average utilization rate for the six-month period ended June 30, 2003. Other components of net lease revenue, including reimbursed administrative expenses and management fees, were lower by a combined $61,859 when compared to the corresponding period in 2002, partially offsetting the decline in gross lease revenue. Contributing to the decline in rental equipment operating expenses were decreases in handling, repositioning and storage costs. Such costs were partially offset by an increase in the provision for doubtful accounts.

Depreciation expense of $197,063 for the six-month period ended June 30, 2003 was $73,902 lower than the same period in 2002, a result of the Registrant’s declining fleet size.

Other general and administrative expenses were $28,026 for the six-month period ended June 30, 2003, a decrease of $382 or 1% when compared to the corresponding period in 2002.

Net gain (loss) on disposal of equipment was a result of the Registrant disposing of 158 containers during the six-month period ended June 30, 2003, as compared to 412 containers during the same period in 2002. These disposals resulted in a gain of $6,259 for the six-month period ended June 30, 2002, as compared to a loss of $110,137 for the six-month period ended June 30, 2002. There were no reductions to the carrying value of container rental equipment during the six-month periods ended June 30, 2003 and 2002.

Liquidity and Capital Resources

Cash from Operating Activities: Net cash provided by operating activities was $121,497 and $194,350 during the first six months of 2003 and 2002, respectively, primarily generated from the billing and collection of net lease revenue.

(Continued)

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Cash from Investing Activities: Net cash provided by investing activities during the six-month periods ending June 30 2003 and 2002, included sales proceeds generated from the sale of rental equipment of $137,300 and $327,979 respectively.

Cash from Financing Activities: Net cash used in financing activities was $295,126 during the first six months of 2003 compared to $525,875 in the corresponding period of 2002. These amounts represent distributions to the Registrant’s general and limited partners. The Registrant’s continuing container disposals, as well as current market conditions, should produce lower operating results and, consequently, lower distributions to its partners in subsequent periods. Sales proceeds distributed to its partners may fluctuate in subsequent periods, reflecting the level of container disposals.

Capital Resources

Aside from the initial working capital reserve retained from the gross subscription proceeds (equal to approximately 1% of such proceeds), the Registrant relied primarily on container rental receipts and proceeds from container sales to generate distributions to its general and limited partners, as well as to finance current operating needs. No credit lines are maintained to finance working capital.

Critical Accounting Policies

Container equipment — depreciable lives: Container rental equipment is depreciated over a useful life of 15 years to a residual value of 10%. The Registrant re-evaluates the period of amortization and residual values to determine whether subsequent events and circumstances warrant revised estimates of useful lives and residual values.

Container equipment — valuation: The Registrant reviews container rental equipment when changes in circumstances require consideration as to whether the carrying value of the equipment has become impaired, pursuant to guidance established in SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Registrant considers assets to be impaired if the carrying value of the asset exceeds the future projected cash flows from related operations (undiscounted and without interest charges). When impairment is deemed to exist, the assets are written down to fair value or projected discounted cash flows from related operations. The Registrant periodically evaluates future cash flows and potential impairment of its fleet by container type rather than for each individual container. Therefore, future losses could result for individual container dispositions due to various factors including age, condition, suitability for continued leasing, as well as geographic location of the containers where disposed. Considerable judgment is required in estimating future cash flows from container rental equipment operations. Accordingly, the estimates may not be indicative of the amounts that may be realized in future periods. As additional information becomes available in subsequent periods, reserves for the impairment of the container rental equipment carrying values may be necessary based upon changes in market and economic conditions.

Inflation

The Registrant believes inflation has not had a material adverse effect on the results of its operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Exchange rate risk: Substantially all of the Registrant’s revenues are billed and paid in US dollars and a significant portion of costs are billed and paid in US dollars. The Leasing Company believes that the proportion of US dollar revenues may decrease in future years, reflecting a more diversified customer base and lease portfolios. Of the remaining costs, the majority are individually small, unpredictable and incurred in various denominations and thus are not suitable for cost effective hedging.

The Leasing Company may hedge a portion of the expenses that are predictable and are principally in UK pounds sterling. As exchange rates are outside of the control of the Registrant and Leasing Company, there can be no assurance that such fluctuations will not adversely affect its results of operations and financial condition.

(Continued)

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Item 4. Controls and Procedures

The principal executive and principal financial officers of CCC have evaluated the disclosure controls and procedures of the Registrant within 90 days prior to the filing of this quarterly report. As used herein, the term “disclosure controls and procedures” has the meaning given to the term by Rule 13a-14 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), and includes the controls and other procedures of the Registrant that are designed to ensure that information required to be disclosed by the Registrant in the reports that it files with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon their evaluation, the principal executive and principal financial officers of CCC have concluded that the Registrant’s disclosure controls and procedures provide reasonable assurance that the information required to be disclosed by the Registrant in this report is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms applicable to the preparation of this report.

There have been no significant changes in the Registrant’s internal controls or in other factors that could significantly affect the Registrant’s internal controls subsequent to the evaluation described above conducted by CCC’s principal executive and financial officers.

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PART II — OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)   Exhibits

         
Exhibit        
No.   Description   Method of Filing

 
 
3(a)   Limited Partnership Agreement of the Registrant, amended and restated as of September 12, 1988   *
         
3(b)   Certificate of Limited Partnership of the Registrant   **
         
31.1   Rule 13a-14 certifications   Filed with this document
         
31.2   Rule 13a-14 certifications   Filed with this document
         
32   Section 1350 certifications   Filed with this document
***

(b)   Reports on Form 8-K
 
    No reports on Form 8-K were filed by the Registrant during the quarter ended June 30, 2003.


*   Incorporated by reference to Exhibit “A” to the Prospectus of the Registrant dated September 12, 1988, included as part of Registration Statement on Form S-1 (No. 33-23321)
 
**   Incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 (No. 33-23321)
 
***   This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as required by Section 906, is not deemed to be “filed” with the Commission or subject to the rules and regulations promulgated by the Commission under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of said Act.

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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 IX, 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
 
    By   /s/ John Kallas

John Kallas
Chief Financial Officer and
Director of Cronos Capital Corp. (“CCC”)
Principal Financial and Accounting Officer of CCC
 
Date: August 12, 2003        

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EXHIBIT INDEX

         
Exhibit        
No.   Description   Method of Filing

 
 
3(a)   Limited Partnership Agreement of the Registrant, amended and restated as of September 12, 1988   *
         
3(b)   Certificate of Limited Partnership of the Registrant   **
         
31.1   Rule 13a-14 certifications   Filed with this document
         
31.2   Rule 13a-14 certifications   Filed with this document
         
32   Section 1350 certifications   Filed with this document
***


*   Incorporated by reference to Exhibit “A” to the Prospectus of the Registrant dated September 12, 1988, included as part of Registration Statement on Form S-1 (No. 33-23321)
 
**   Incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 (No. 33-23321)
 
***   This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as required by Section 906, is not deemed to be “filed” with the Commission or subject to the rules and regulations promulgated by the Commission under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of said Act.