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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 $ 250.00
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
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 Identification No.)
incorporation or organization)
444 Market Street, 15th Floor, San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 677-8990
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Not Applicable
------------------------------ -------------------------
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTERESTS
-----------------------------------------------------------
(Title of Class)
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 .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is not applicable.
Documents incorporated by Reference
PART I
Item 1 - Business Prospectus of IEA Income Fund IX, L.P. dated September 12, 1988 included as part of
Registration Statement on Form S-1 (No. 33-23321)
Certificate of Limited Partnership of IEA Income Fund IX, L.P., filed as Exhibit 3.4 to the
Registration Statement on Form S-1 (No. 33-23321)
PART II
Item 9 - Changes in and Dis- Current Report on Form 8-K of IEA Income Fund IX, L.P., filed February 7, 1997 and
agreements with April 14, 1997, respectively, and Amendment No. 1 to Current Report on Form 8-K
Accountants on filed February 26, 1997.
Accounting and
Financial Disclosure
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PART I
Item 1. Business
(a) General Development of Business
The Registrant is a California limited partnership formed on June 8,
1988 to engage in the business of leasing marine dry cargo containers to
unaffiliated third-party lessees. The Registrant was initially capitalized with
$100, and commenced offering its limited partnership interests to the public
during the week of September 12, 1988, pursuant to its Registration Statement on
Form S-1 (File No. 33-23321). The offering terminated on August 31, 1989.
The Registrant raised $16,996,100 in subscription proceeds. The following
table sets forth the use of said subscription proceeds:
Percentage of
Amount Gross Proceeds
------ --------------
Gross Subscription Proceeds $16,996,100 100.0%
Public Offering Expenses:
Underwriting Commissions $ 1,699,600 10.0%
Offering and Organization Expenses $ 434,497 2.6%
----------- ------
Total Public Offering Expenses $ 2,134,097 12.6%
----------- -----
Net Proceeds $14,862,003 87.4%
Acquisition Fees $ 145,536 0.8%
Working Capital Reserve $ 162,897 1.0%
----------- -----
Gross Proceeds Invested in Equipment $14,553,570 85.6%
=========== =====
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The general partner of the Registrant is Cronos Capital Corp. ("CCC"), a
wholly-owned subsidiary of Cronos Holdings/Investments (U.S.), Inc., a Delaware
corporation. Cronos Holdings/Investments (U.S.), Inc. is a wholly-owned
subsidiary of The Cronos Group, a Luxembourg company. These and other affiliated
companies are ultimately wholly-owned by The Cronos Group, a holding company
registered in Luxembourg ("the Holding Company") and are collectively referred
to as the "Group". The activities of the container division of the Group are
managed through the Group's subsidiary in the United Kingdom, Cronos Containers
Limited ("the Leasing Company"). The Leasing Company manages the leasing
operations of all equipment owned or managed by the Group on its own behalf or
on behalf of other third-party container owners, including all other programs
organized by CCC.
Pursuant to the Limited Partnership Agreement of the Registrant, all
authority to administer the business of the Registrant is vested in CCC. CCC has
entered into a Leasing Agent Agreement, whereby the Leasing Company has assumed
the responsibility for the container leasing activities of CCC's managed
programs.
For information concerning the containers acquired by the Registrant, see
Item 2, "Properties."
(b) Financial Information About Industry Segments
Inapplicable.
(c) Narrative Description of Business
(c)(1)(i) A marine cargo container is a reusable metal container designed for
the efficient carriage of cargo with a minimum of exposure to loss from damage
or theft. Containers are manufactured to conform to worldwide standards of
container dimensions and container ship fittings adopted by the International
Standards Organization ("ISO") in 1968. The standard container is either 20'
long x 8' wide x 8'6" high (one twenty-foot equivalent unit ("TEU"), the
standard unit of physical measurement in the container industry) or 40' long x
8' wide x 8'6" high (two TEU). Standardization of the construction, maintenance
and handling of containers allows containers to be picked up, dropped off,
stored and repaired effectively throughout the world. This standardization is
the foundation on which the container industry has developed.
Standard dry cargo containers are rectangular boxes with no moving parts,
other than doors, and are typically made of steel. They are constructed to carry
a wide variety of cargos ranging from heavy industrial raw materials to
lightweight finished goods. Specialized containers include, among others,
refrigerated containers for the transport of temperature-sensitive goods and
tank containers for the carriage of liquid cargo. Dry cargo containers
constitute approximately 87% of the worldwide container fleet. Refrigerated and
tank containers constitute approximately 6% of the worldwide container fleet,
with open-tops and other specialized containers constituting the remainder.
One of the primary benefits of containerization has been the ability of the
shipping industry to effectively lower freight rates due to the efficiencies
created by standardized intermodal containers. Containers can be handled much
more efficiently than loose cargo and are typically shipped via several modes of
transportation, including truck, railway and ship. Containers require loading
and unloading only once and remain sealed until arrival at the final
destination, significantly reducing transport time, labor and handling costs and
losses due to damage and theft. Efficient movement of containerized cargo
between ship and shore reduces the amount of time that a ship must spend in port
and reduces the transit time of freight moves.
The logistical advantages and reduced freight rates brought about by
containerization have been a major catalyst for world trade growth during the
last twenty-five years, which in turn has generated increased demand for
containerization. The world container fleet has grown from an estimated 270
thousand TEU in 1969 to 10 million TEU in 1996, and according to industry data,
growth of containerized shipping since 1987 has generally averaged two to three
times that of average GDP growth in industrialized countries.
The rapid growth of containerization began with the standardization of
equipment sizes by international agreement in the late 1960's. Initially
confined to the highly competitive trade routes among the industrialized
nations, containerization expanded into substantially all free-world trade
routes by the early 1970's.
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Throughout the decade of the 1970's, conversion from break bulk shipping
methods to containers gained momentum in an environment of generally robust
growth in world trade (except during the 1975-76 world-wide recession). Both
shipping lines and container leasing companies responded to this growing market
demand with major container purchases, while container manufacturers
substantially boosted production capacity.
During the early and mid-1980's, the container industry encountered
alternating periods of slow trade growth, creating excess container capacity,
followed by periods of economic recovery. From the late 1980s to 1991, the
container industry generally experienced a balance in supply and demand for
equipment. In 1992, companies embarked on ambitious container production
programs encouraged by positive economic forecasts and the profitability of the
industry in previous years. This produced an oversupply of containers as some of
the major world economies slipped into recession and ocean carriers and leasing
companies built up large container inventories. During 1993, container
purchasing declined, generally helping to reduce the oversupply of containers.
During 1994 and 1995, the world's major industrialized nations emerged from a
global economic recession. Consequently, excess equipment inventories that had
resulted from the sluggish growth in world trade during 1992 and 1993, as well
as increased production capacity, were absorbed. Since 1995, the container
industry's fleet grew from a size of approximately nine million TEU to
approximately ten million TEU, equivalent to a growth of almost 11%,
representing one of the industry's largest fleet expansions to date. The primary
factor driving demand during 1995 and 1996 has been the steady introduction of
new containership tonnage, which grew at a rate comparable to the container
industry's fleet. However, the growth in the container industry's fleet, as well
as containership tonnage, outpaced increases in worldwide containerized trade,
estimated to be approximately 8%-10% during 1995 and 6-7% during 1996. As a
result, a general surplus capacity arose, in both containership tonnage and
containers, contributing to the current recession that has impacted the
container leasing industry. Additionally, during 1995 and 1996, container prices
steadily declined to levels not seen in a decade, resulting in ocean carriers
purchasing boxes for their own account, further reducing the demand for leased
containers and since mid-1995, contributing to a decline in container
utilization and per-diem rental rates throughout the container leasing industry.
The Registrant believes that growth of containerization will continue in
subsequent years for the following reasons:
- Lower freight rates resulting from containerization are generating new
cargos that previously were not economical to export. Containerization
provides inexpensive, timely and secure transport to manufacturers
allowing them to take advantage of regional opportunities in technology or
labor, and to move products to different locations at various stages of
production;
- Intermodal traffic is expected to continue to grow, and industrialized
countries are continuing to improve intermodal infrastructure (i.e.,
railways, roads and ports);
- Shippers continue to demand transportation of cargo by containers rather
than break-bulk;
- Countries with rapidly-growing economies in emerging markets are
continuing to build new container port facilities that accommodate an
increased flow of containerized trade; and
- Recent trade agreements, such as the North American Free Trade Agreement
("NAFTA") and the General Agreement on Tariffs and Trade ("GATT"), should
further stimulate world trade, and, therefore containerized trade.
The container leasing industry has been a significant contributor to the
growth of containerization, and, in 1996, had an approximately 46% share of the
total world container fleet with ocean carriers holding most of the remainder.
To an ocean carrier, the primary benefits of leasing rather than owning
containers are the following:
- Reduced Capital Expenditures. Leasing is an attractive option to ocean
carriers because ownership of containers requires significant capital
expenditures. Carriers constantly evaluate their investment strategy, with
container purchasing competing directly with other expenditure
requirements, such as ship purchases, ship conversions and terminal
improvements. Container leasing allows ocean carriers to invest capital in
assets that are more central to their business.
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- Improved Asset Management. Trade flow imbalances and seasonal demands
frequently leave ocean carriers with regional surpluses or shortages of
containers, requiring costly repositioning of empty containers. Leasing
companies help ocean carriers manage these trade imbalances by providing
the inventory to service demand, reducing the costs of maintaining local
inventories and minimizing repositioning expenses. By matching different
carriers' container needs, leasing companies can reduce their own risks of
container inventory imbalances and seasonality through a portfolio of
lessees as well as variations in lease terms.
- Increased Container Fleet Flexibility. Ocean carriers benefit from the
variety of lease types offered by leasing companies such as the master
lease, long-term and short-term lease and direct financing lease. These
various leases give ocean carriers flexibility in sizing their fleets
while minimizing capital costs. For example, master lease agreements give
ocean carriers the option of adjusting the size of their fleets, with the
flexibility to pick-up and drop-off containers at various locations around
the world.
Dry cargo containers are the most-commonly used type of container in the
shipping industry. The Registrant's dry cargo container fleet is constructed of
all Corten(R) steel (Corten(R) roofs, walls, doors and undercarriage), a
high-tensile steel yielding greater damage and corrosion resistance than mild
steel.
The Registrant's containers are leased primarily to ocean-going steamship
companies operating in major trade routes (see Item 1(d)). Most if not all of
the Registrant's marine dry cargo containers are leased pursuant to operating
leases, primarily master leases, where the containers are leased to the ocean
carrier on a daily basis for any desired length of time, with the flexibility of
picking up and dropping off containers at various agreed upon locations around
the world and, secondarily, term leases (1-5 years) and one-way or round-trip
leases.
Master lease agreements. A master lease is designed to provide greater
flexibility by allowing customers to pick-up and drop-off containers where and
when needed, subject to restrictions and availability, on pre-agreed terms. The
commercial terms of master leases are generally negotiated annually. Master
leases also define the number of containers that may be returned within each
calendar month and the return locations and applicable drop-off charges. Because
of the increased flexibility they offer, master leases usually command higher
per-diem rates and generate more ancillary fees (including pick-up, drop-off,
handling and off-hire fees) than term leases.
Term lease agreements. Term lease agreements include short-term and long-term
leases. Long-term lease agreements define the number of containers to be leased,
the pick-up and drop-off locations, the applicable per-diem rental rate for the
duration of the lease and the early termination penalties that may apply in the
event of early redelivery. Ocean carriers use long-term leases when they have a
need for identified containers for a specified term. Long-term leases usually
are not terminated early by the customer and provide the Registrant with stable
and relatively predictable sources of revenue, although per-diem rates and
ancillary charges are lower under long-term leases than under master lease
agreements. Short-term lease agreements have a duration of less than one year
and include one-way, repositioning and round-trip leases. They differ from
master leases in that they define the number and the term of containers to be
leased. Ocean carriers use one-way leases to manage trade imbalances (where more
containerized cargo moves in one direction than another) by picking up a
container in one port and dropping it off at another after one or more legs of a
voyage. Except for direct financing leases, lease rates typically are highest
for short-term leases.
Under these leases, customers are responsible for paying all taxes and
service charges arising from container use, maintaining the containers in good
and safe operating condition while on lease and paying for repairs upon
redelivery, other than ordinary wear and tear. Some leases provide for a "damage
protection plan" whereby lessees, for an additional payment (which may be in the
form of a higher per-diem rate), are relieved of the responsibility of paying
some of the repair costs upon redelivery of the containers. The Leasing Company
has historically provided this service on a limited basis to selected customers.
Repairs provided under such plans are carried out by the same depots, under the
same procedures, as are repairs to containers not covered by such plans.
Customers also are required to insure leased containers against physical damage
and loss, and against third party liability for loss, damage, bodily injury or
death.
All containers are inspected and repaired when redelivered by a customer, and
customers are obligated to pay for all damage repair, excluding wear and tear,
according to standardized industry guidelines. Depots in major port areas
perform repair and maintenance which is verified by independent surveyors or the
Leasing Company's technical and operations staff.
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6
Before any repair or refurbishment is authorized on older containers in the
Registrant's fleet, the Leasing Company's technical and operations staff reviews
the age, condition and type of container and its suitability for continued
leasing. The Leasing Company compares the cost of such repair or refurbishment
with the prevailing market resale price that might be obtained for that
container and makes the appropriate decision whether to repair or sell the
container.
The non-cancelable terms of the operating leases of the Registrant's
containers will not be sufficient to return to the Registrant as lessor the
purchase price of the equipment. In order to recover the original investment in
the equipment and achieve an adequate return thereon, it is necessary to renew
the lease, lease the equipment to another lessee at the end of the initial lease
term, or sell the equipment.
The Registrant estimates that a dry cargo container may be used as a leased
marine cargo container for a period ranging from 10 to 15 years. The Registrant
disposes of used containers in a worldwide market for used containers in which
buyers include wholesalers, mini-storage operators, construction companies and
others. As the Registrant's fleet ages, a larger proportion of its revenue will
be derived from selling its containers.
Of the 2,173 twenty-foot, 748 forty-foot and 1,510 forty-foot high-cube dry
cargo containers owned by the Registrant as of December 31, 1996, 1,568
twenty-foot (or 72% thereof), 554 forty-foot (or 74% thereof) and 1,299
forty-foot high- cube dry cargo containers (or 86% thereof) were on lease. The
following table sets forth the information on the lease terms with respect to
the containers on lease:
Number of
Containers
----------
20-Foot Dry Cargo Containers:
Term Leases 144
Master Leases 1,424
40-Foot Dry Cargo Containers:
Term Leases 54
Master Leases 500
40-Foot High-Cube Dry Cargo Containers:
Term Leases 83
Master Leases 1,216
The Leasing Company will make payments to the Registrant based upon rentals
collected from ocean carriers after deducting certain operating expenses
associated with the containers, such as the base management fee payable to CCC,
certain expense reimbursements to CCC, the costs of maintenance and repairs not
performed by lessees, independent agent fees and expenses, depot expenses for
handling, inspection and storage, and additional insurance.
The Registrant's sales and marketing operations are conducted through the
Leasing Company, in the United Kingdom, with support provided by area offices
and dedicated agents located in San Francisco, California; Iselin, New Jersey;
Windsor, England; Hamburg; Antwerp; Auckland; Genoa; Singapore; Hong Kong;
Sydney; Tokyo; Taipei; Seoul; Rio de Janeiro; and Shanghai. Each of the Leasing
Company's area offices and dedicated agents is staffed with local people
familiar with the customers and language of the region. The Leasing Company's
marketing directors have been employed in the container industry in their
respective regions for an average of 16 years, building direct personal
relationships with the local ocean carriers and locally based representatives of
other ocean carriers.
The Leasing Company also maintains agency relationships with over 40
independent agents around the world, who are generally paid a commission based
upon the amount of revenues they generate in the region or the number of
containers that are leased from their area on behalf of the Registrant. They are
located in jurisdictions where the volume of the Leasing Company's business
necessitates a presence in the area but is not sufficient to justify a
fully-functioning Leasing Company office or dedicated agent. These agents
provide marketing support to the area offices covering the region, together with
limited operational support.
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In addition, the Leasing Company relies on the services of over 350
independently-owned and operated depots around the world to inspect, repair,
maintain and store containers while off-hire. The Leasing Company's area offices
authorize all container movements into and out of the depot and supervise all
repair and maintenance performed by the depot. The Leasing Company's technical
staff sets the standards for repair of its owned and managed fleet throughout
the world and monitors the quality of depot repair work. The depots provide a
vital link to the Leasing Company's operations, as the redelivery of a container
into a depot is the point at which the container is off-hired from one customer
and repaired in preparation for re-leasing to the next, and the point when the
Leasing Company's area offices report the container's movements onto the Leasing
Company's equipment tracking system. The Leasing Company's computer system has
the capability to accommodate future developments, such as allowing depots
access to record directly on the system the on-hire and off-hire activity of
containers delivered into the depot. It also has the capability of verifying the
terms of redelivery authorized by the area offices. These functions are
currently being performed by the Leasing Company's area offices.
(c)(1)(ii) Inapplicable.
(c)(1)(iii) Inapplicable.
(c)(1)(iv) Inapplicable.
(c)(1)(v) The Registrant's containers are leased globally, therefore,
seasonal fluctuations are minimal. Other economic and business factors to which
the transportation industry in general and the container leasing industry in
particular are subject, include inflation and fluctuations in general business
conditions and fluctuations in supply and demand for equipment resulting from,
among other things, obsolescence, changes in the methods or economics of a
particular mode of transportation or changes in governmental regulations or
safety standards.
(c)(1)(vi) The Registrant established an initial working capital reserve of
approximately $163,000 (approximately 1% of subscription proceeds raised). In
addition, the Registrant may reserve additional amounts from anticipated cash
distributions to the partners to meet working capital requirements.
Amounts due under master leases are calculated at the end of each month and
billed approximately six to eight days thereafter. Amounts due under short-term
and long-term leases are set forth in the respective lease agreements and are
generally payable monthly. However, payment is normally received within 45-100
days of receipt. Past due penalties are not customarily collected from lessees,
and accordingly are not generally levied by the Leasing Company against lessees
of the Registrant's containers.
(c)(1)(vii) For the fiscal year ended December 31, 1996, no single lessee
accounted for 10% or more of the Registrant's rental income. The Registrant does
not believe that its ongoing business is dependent upon a single customer,
although the loss of one or more of its largest customers could have an adverse
effect upon its business.
(c)(1)(viii) Inapplicable.
(c)(1)(ix) Inapplicable.
(c)(1)(x) Competition among container leasing companies is based upon several
factors, including the location and availability of inventory, lease rates, the
type, quality and condition of the containers, the quality and flexibility of
the service offered and the confidence in and professional relationship with the
lessor. Other factors include the speed with which a leasing company can prepare
its containers for lease and the ease with which a lessee believes it can do
business with a lessor or its local area office. The Leasing Company believes
that it, on behalf of the Registrant, competes favorably on all of these
factors.
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The Leasing Company, on behalf of the Registrant, competes with various
container leasing companies in the markets in which it conducts business,
including Genstar Container Corp., Transamerica Leasing, Triton Container
International Ltd., Textainer Corp. and others. In a series of recent
consolidations, one of the major leasing companies, as well as some smaller
ones, have been acquired by competitors. It is estimated that at the end of
1996, the ten largest leasing companies (including the Leasing Company)
represented 93% of the global leased fleet. Genstar Container Corp. and
Transamerica Leasing, the two largest container leasing companies, had
approximately 47% of the worldwide leased container fleet at the end of 1996.
Some of the Leasing Company's competitors have greater financial resources than
the Leasing Company and may be more capable of offering lower per-diem rates on
a larger fleet. In the Leasing Company's experience, however, ocean carriers
will generally lease containers from more than one leasing company in order to
minimize dependence on a single supplier. In addition, not all container leasing
companies compete in the same market, as some supply only dry cargo containers
and not specialized containers, while others offer only long-term leasing.
(c)(1)(xi) Inapplicable.
(c)(1)(xii) Inapplicable.
(c)(1)(xiii) The Registrant, as a limited partnership, is managed by CCC, the
general partner, and accordingly does not itself have any employees. CCC has 27
employees, consisting of 4 officers, 5 other managers and 18 clerical and staff
personnel.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
The Registrant's business is not divided between foreign or domestic
operations. The Registrant's business is the leasing of containers worldwide to
ocean-going steamship companies. To this extent, the Registrant's operations are
subject to the fluctuations of worldwide economic and political conditions that
may affect the pattern and levels of world trade.
Rental income from leases to foreign customers exceeded 90% of the
Registrant's total rental income for the years 1996, 1995 and 1994. The
Registrant 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 Registrant's leases generally require all payments to be made in
United States currency.
Item 2. Properties
As of December 31, 1996, the Registrant owned 2,173 twenty-foot, 748
forty-foot and 1,510 forty-foot high-cube marine dry cargo containers suitable
for transporting cargo by rail, sea or highway. All but 200 twenty-foot and 400
forty-foot high-cube dry cargo containers were originally acquired from
container manufacturers located in Korea, India and Taiwan.
Pursuant to undertakings made in its Registration Statement No. 33-23321,
Section 4.3 and 7.2(j) of the Partnership Agreement in the Registration
Statement No. 33-23321, the Registrant purchased 200 used twenty-foot and 400
used forty-foot high-cube marine dry cargo containers from the general partner
in 1989. These containers were originally purchased by the general partner
during the fourth quarter of 1988 from a Korean manufacturer. The average useful
life and manufacturers' invoice cost of the Registrant's fleet as of December
31, 1996 was as follows:
Estimated
Useful Life Average Age Average Cost
----------- ----------- ------------
20-Foot Dry Cargo Containers 10-15 years 7 years $2,872
40-Foot Dry Cargo Containers 10-15 years 7 years $4,328
40-Foot High-Cube Dry Cargo Containers 10-15 years 8 years $4,705
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Utilization by lessees of the Registrant's containers fluctuates over time
depending on the supply of and demand for containers in the Registrant's
inventory locations. During 1996, utilization averaged 81%.
During 1996, the Registrant disposed of 53 twenty-foot, 17 forty-foot and 70
forty-foot high-cube marine dry cargo containers at an average book gain of $70
per container.
Item 3. Legal Proceedings
As reported by the Registrant in its Current Report on Form 8-K, filed with
the SEC on February 7, 1997, as amended February 26, 1997, on February 3, 1997,
Arthur Andersen, London, England, resigned as auditors of the Holding Company
(The Cronos Group). In its letter of resignation, Arthur Andersen states that it
was unable to obtain adequate information in response to inquiries it had made
in connection with its audit of the Holding Company for the year ended December
31, 1996. In connection with its resignation, Arthur Andersen also prepared a
report pursuant to the provisions of Section 10A(b)(2) of the Securities
Exchange Act of 1934, as amended, for filing by the Holding Company with the
SEC.
Following the report of Arthur Andersen, the SEC, on February 10, 1997,
commenced a private investigation of the Holding Company for the purpose of
investigating the matters discussed in such report and related matters. CCC does
not believe that the focus of the SEC's investigation is upon the Registrant or
CCC. CCC is unable at this time to predict the outcome of the SEC's private
investigation of the Holding Company.
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
(a) Market Information
(a)(1)(i) The Registrant's outstanding units of limited partnership
interests are not traded on any market nor does an established public trading
market exist for such purposes.
(a)(1)(ii) Inapplicable.
(a)(1)(iii) Inapplicable.
(a)(1)(iv) Inapplicable.
(a)(1)(v) Inapplicable.
(a)(2) Inapplicable.
(b) Holders
Number of Unit Holders
(b)(1) Title of Class as of December 31, 1996
-------------- -----------------------
Units of limited partnership
interests 1,731
(c) Dividends
Inapplicable. For the distributions made by the Registrant to its limited
partners, see Item 6 below, "Selected Financial Data."
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Item 6. Selected Financial Data
Year Ended December 31,
-------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Net lease revenue $ 2,036,698 $ 2,599,513 $ 2,566,074 $ 2,550,709 $ 3,188,602
Net earnings $ 1,084,193 $ 1,657,599 $ 1,563,483 $ 1,484,601 $ 2,131,474
Net earnings per unit of
limited partnership interest $ 28.61 $ 44.39 $ 42.64 $ 39.43 $ 59.60
Cash distributions per unit of
limited partnership interest $ 72.19 $ 80.63 $ 71.25 $ 65.00 $ 60.00
At year-end:
Total assets $11,189,085 $ 12,693,635 $13,938,924 $14,947,181 $ 15,933,535
Long-term obligations $ - $ - $ 17,981 $ 41,426 $ 65,965
Partners' capital $11,189,085 $ 12,675,654 $13,897,497 $14,879,816 $ 15,719,188
...........................
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At December 31, 1996, the Registrant had $936,081 in cash and cash
equivalents, a decrease of $173,597 and $89,505 from the December 31, 1995 and
1994 balances, respectively. Contributing to the decline in cash was the
Registrant's declining operating results.
The Registrant's primary objective is to generate cash from operations for
distribution to its limited partners. Aside from the initial working capital
reserve retained from gross subscription proceeds (equal to approximately 1% of
such proceeds), the Registrant relies primarily on container rental receipts to
meet this objective as well as to finance current operating needs. No credit
lines are maintained to finance working capital.
Cash distributions from operations are allocated 5% to the general partner
and 95% to the limited partners. Distributions of sale proceeds are allocated 1%
to the general partner and 99% to the limited partners. This sharing arrangement
will remain in place until the limited partners receive aggregate distributions
in an amount equal to their capital contributions, plus a 10% cumulative,
compounded (daily), annual return on their adjusted capital contributions.
Thereafter, all distributions will be allocated 15% to the general partner and
85% to the limited partners, pursuant to Section 6.1(b) of the Partnership
Agreement. Cash distribution from operations to the general partner in excess of
5% of distributable cash will be considered an incentive fee and compensation to
the general partner.
From inception through February 28, 1997, the Registrant has distributed
$16,396,507 in cash from operations and $584,239 in cash from sales proceeds to
its limited partners. This represents total distributions of $16,980,746, or
approximately 99% of the Registrant's original limited partners' investment.
Distributions to partners are determined and paid quarterly, based primarily on
each quarter's cash flow from operations and cash generated from container
sales. Quarterly distributions are also affected by periodic increases or
decreases to working capital reserves, as deemed appropriate by the general
partner. Additional container disposals, combined with current leasing market
conditions, may contribute to lower operating results and consequently, lower
distributions from operations to its partners in subsequent periods. However,
sales proceeds distributed to its partners may fluctuate in subsequent periods,
reflecting the level of container disposals.
11
12
Indicative of the cyclical nature of the container leasing business, the
container lease market has followed a general downward trend since mid-1995.
This downturn can be attributed to a fall in growth of containerized export
trade from key markets in Asia and the impact resulting from a build-up of
surplus containers at former high-demand locations. Leasing companies purchased
record amounts of containers in 1994 and 1995, while purchasing a smaller number
than ocean carriers and transport companies in 1996. During 1996, ocean carriers
and other transport companies moved away from leasing containers outright, as
declining container prices, favorable interest rates and the abundance of
available capital resulted in ocean carriers and transport companies purchasing
a larger share of equipment for their own account. This situation has
characterized the latest industry downturn. These leasing market conditions are
expected to continue throughout 1997, impacting the Registrant's liquidity and
capital resources.
Results of Operations
1996 - 1995
A fall in growth of containerized export trade from key Asian markets
contributed to the container leasing market's downward trend during 1996. Also
contributing to the sluggish container leasing market conditions were declining
container prices, favorable interest rates and an abundance of available capital
which resulted in ocean carriers and transport companies purchasing a larger
share of containers for their own account, reducing the demand for leased
containers. Once the demand for leased containers began to fall, per-diem rental
rates were also adversely affected. In order to counter these market conditions,
the Leasing Company implemented various marketing strategies during 1996,
including but not limited to, offering incentives to shipping companies,
repositioning containers to high demand locations and focusing towards term
leases and other leasing opportunities, including the leasing of containers for
local storage.
As the leasing industry's equipment moved into surplus, ocean carriers and
transport companies became increasingly selective about the age and condition of
containers taken on-hire. Many have adopted a policy of only leasing containers
of a certain age or less. It has been the Registrant's experience that in
periods of weak demand, many lessees insist on equipment three to five years of
age. Such criteria currently serves as a barrier to older equipment being taken
on-hire, including those within the Registrant's fleet and contributed to the
decline in the Registrant's results of operations. 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 and is directly related
to the size, utilization and per-diem rental rates of the Registrant's fleet.
Accordingly, net lease revenue declined by approximately 22%, when compared to
1995. The Registrant expects net lease revenue to decline in subsequent periods
as the current container leasing market conditions continue.
During 1996, utilization averaged 81%, as compared with 89% in the prior
year, while the Registrant's average fleet size (as measured in twenty-foot
equivalent units ("TEU")) declined from 6,963 TEU in 1995 to 6,785 TEU in 1996.
These declines, combined with a 4% reduction in average per-diem rental rates,
contributed to a 17% decline in gross rental revenue. Rental equipment operating
expenses, when measured as a percentage of rental revenue, increased due to
higher storage and handling costs associated with lower equipment utilization
and increased repositioning costs.
12
13
At December 31, 1996, 93% of the original equipment remained in the
Registrant's fleet, and was comprised of the following:
40-Foot
20-Foot 40-Foot High-Cube
---------- --------- -----------
Containers on lease:
Term leases 144 54 83
Master lease 1,424 500 1,216
----- --- -----
Subtotal 1,568 554 1,299
Containers off lease 605 194 211
----- --- -----
Total container fleet 2,173 748 1,510
===== === =====
40-Foot
20-Foot 40-Foot High-Cube
-------------- -------------- -------------
Units % Units % Units %
----- ----- ----- ----- ----- -----
Total purchases 2,327 100% 799 100% 1,653 100%
Less disposals 154 7% 51 6% 143 9%
----- ----- ----- ----- ----- -----
Remaining fleet at December 31, 1996 2,173 93% 748 94% 1,510 91%
===== ===== ===== ===== ===== =====
The Registrant disposed of 53 twenty-foot, 17 forty-foot and 70 forty-foot
high-cube marine dry cargo containers during 1996, as compared to 48
twenty-foot, 10 forty-foot and 14 forty-foot high-cube marine dry cargo
containers during 1995. Approximately 1% of the Registrant's net earnings for
1996 were from gain on disposal of equipment, as compared to 2% for 1995. 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.
The Registrant's slightly smaller fleet size contributed to a 3% decline in
depreciation expense during 1996. A reduction in the Registrant's average fleet
size and its related operating performance contributed to a decline in base
management fees of $40,219, or approximately 16% during 1996.
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 Parent Company is the indirect corporate parent of Cronos Capital Corp.,
the General Partner of the Registrant. In its letter of resignation to the
Parent Company, Arthur Andersen states that it resigned as auditors of the
Parent Company and all other entities affiliated with the Parent Company. While
its letter of resignation was not addressed to the General Partner of the
Registrant, Arthur Andersen confirmed to the General Partner that its
resignation as auditors of the entities referred to in its letter of resignation
included its resignation as auditors of Cronos Capital Corp. and the Registrant.
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.
The Registrant does not, at this time, have sufficient information to
respond to the concerns raised by Arthur Andersen with respect to its 1996 audit
of the Parent Company or the impact, if any, these concerns may have on the
future operating results and financial condition of the Registrant or the
General Partner's and Leasing Company's ability to manage the Registrant's
business and fleet in subsequent periods. However, the General Partner of the
Registrant does not believe, based upon the information currently available to
it, that Arthur Andersen's resignation was triggered by any concern over the
accounting policies and procedures followed by the Registrant.
13
14
Arthur Andersen's report on the financial statements of Cronos Capital Corp.
and the Registrant, for either of the past two years, has not contained an
adverse opinion or a disclaimer of opinion, nor was any such report qualified or
modified as to uncertainty, audit scope, or accounting principles.
During the Registrant's two most recent fiscal years and the subsequent
interim period preceding Arthur Andersen's resignation, there have been no
disagreements between Cronos Capital Corp. or the Registrant and Arthur Andersen
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
1995 - 1994
In 1995, the Registrant's operations were impacted by its declining fleet
size, increasingly competitive market conditions, including, but not limited to,
the container leasing market's resistance to higher per-diem rental rates, an
expanding supply of containers within the container industry, as well as
increased efficiencies in the shipping industry.
Utilization rates declined slightly from an average of 92% during 1994, to an
average of 89% during 1995, while the Registrant's average fleet size (as
measured in twenty-foot equivalent units ("TEU")) declined from 7,041 TEU in
1994, to 6,963 TEU in 1995. At the same time, per-diem rental rates declined by
less than 1% from 1994 levels. Despite these declines, gross rental revenue, a
component of net lease revenue, increased from $3,678,506 in 1994, to $3,716,863
in 1995. The impact on gross rental revenue arising from the decline in the
average fleet size, utilization and per-diem rental rates, was offset by a 41%
increase in ancillary revenue. Ancillary revenue, which contributed to
approximately 13% and 9% of the Registrant's total gross rental revenue in 1995
and 1994, respectively, was comprised of pick-up, drop-off , handling and
off-hire charges, as well as lease incentives such as drop-off and pick-up
credits. Rental equipment operating expenses, when measured as a percentage of
rental revenue, increased slightly due to higher storage and handling costs
associated with lower equipment utilization.
At December 31, 1995, 96% of the original equipment remained in the
Registrant's fleet, and was comprised of the following:
40-Foot
20-Foot 40-Foot High-Cube
------- ------- ---------
Containers on lease:
Term leases 132 46 73
Master lease 1,708 600 1,288
----- --- -----
Subtotal 1,840 646 1,361
Containers off lease 386 119 219
----- --- -----
Total container fleet 2,226 765 1,580
===== === =====
40-Foot
20-Foot 40-Foot High-Cube
------------- ------------- -------------
Units % Units % Units %
----- --- ----- --- ----- ---
Total purchases 2,327 100% 799 100% 1,653 100%
Less disposals 101 4% 34 4% 73 4%
----- --- ----- --- ----- ---
Remaining fleet at December 31, 1995 2,226 96% 765 96% 1,580 96%
===== === ===== === ===== ===
The Registrant disposed of 48 twenty-foot, 10 forty-foot and 14 forty-foot
high-cube marine dry cargo containers during 1995, as compared to 23
twenty-foot, nine forty-foot and 19 forty-foot high-cube marine dry cargo
containers during 1994. Approximately 2% of the Registrant's net earnings for
1995 were from gain on disposal of equipment, as compared to 3% for 1994.
14
15
The Registrant's slightly smaller fleet size contributed to a 1% decline in
depreciation expense during 1995. Base management fees declined by $9,250, or
approximately 10% during 1995.
Cautionary Statement
This Annual Report on Form 10-K 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 7., Management's Discussion and
Analysis of Financial Condition and Results of Operations; and those detailed
from time to time in the filings of the Registrant with the Securities and
Exchange Commission.
Item 8. Financial Statements and Supplementary Data
15
16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Partners
IEA Income Fund IX, L.P.:
We have audited the accompanying balance sheet of IEA Income Fund IX, L.P., as
of December 31, 1996, and the related statements of operations, partners'
capital, and cash flows for the year then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IEA Income Fund IX, L.P. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule 1, for the year ended December 31, 1996, is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
Moore Stephens, P.C.
Certified Public Accountants
New York, New York,
June 6, 1997
16
17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Partners
IEA Income Fund IX, L.P.:
We have audited the accompanying balance sheet of IEA Income Fund IX, L.P. as of
December 31, 1995, and the related statements of operations, partners' capital
and cash flows for each of the two years in the period ended December 31, 1995.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IEA Income Fund IX, L.P. as of
December 31, 1995, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule 1 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. This information has been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
San Francisco, California,
March 15, 1996
17
18
IEA INCOME FUND IX, L.P.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
Assets 1996 1995
------ ---- ----
Current assets:
Cash and cash equivalents, includes $935,733 in 1996
and $1,109,454 in 1995 in interest-bearing
accounts (note 2) $ 936,081 $ 1,109,678
Net lease receivables due from Leasing Company
(notes 1 and 4) 543,250 589,878
------------ ------------
Total current assets 1,479,331 1,699,556
------------ ------------
Container rental equipment, at cost 16,577,611 17,104,812
Less accumulated depreciation 6,867,857 6,110,733
------------ ------------
Net container rental equipment 9,709,754 10,994,079
------------ ------------
$ 11,189,085 $ 12,693,635
============ ============
Liabilities and Partners' Capital
Current liabilities:
Due to general partner (notes 1 and 5) $ -- $ 17,981
------------ ------------
Total current liabilities -- 17,981
------------ ------------
Total liabilities -- 17,981
------------ ------------
Partners' capital (deficit):
General partner (4,963) 166
Limited partners (note 9) 11,194,048 12,675,488
------------ ------------
Total partners' capital 11,189,085 12,675,654
------------ ------------
$ 11,189,085 $ 12,693,635
============ ============
The accompanying notes are an integral part of these financial statements.
18
19
IEA INCOME FUND IX, L.P.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Net lease revenue (note 7) $2,036,698 $2,599,513 $2,566,074
Other operating expenses:
Depreciation and amortization (notes 1 and 3) 980,495 1,005,274 1,044,783
Other general and administrative expenses 34,007 40,832 47,945
---------- ---------- ----------
1,014,502 1,046,106 1,092,728
---------- ---------- ----------
Earnings from operations 1,022,196 1,553,407 1,473,346
Other income:
Interest income 52,162 65,224 36,383
Gain on disposal of equipment 9,835 38,968 53,754
---------- ---------- ----------
61,997 104,192 90,137
---------- ---------- ----------
Net earnings $1,084,193 $1,657,599 $1,563,483
========== ========== ==========
Allocation of net earnings:
General partner $ 111,821 $ 148,765 $ 114,034
Limited partners 972,372 1,508,834 1,449,449
---------- ---------- ----------
$1,084,193 $1,657,599 $1,563,483
========== ========== ==========
Limited partners' per unit share of net earnings $ 28.61 $ 44.39 $ 42.64
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
19
20
IEA INCOME FUND IX, L.P.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Limited
Partners General
(Note 9) Partner Total
------------ ------------ ------------
Balances at December 31, 1993 $ 14,879,771 $ 45 $ 14,879,816
Net earnings 1,449,449 114,034 1,563,483
Cash distributions (2,421,945) (123,857) (2,545,802)
------------ ------------ ------------
Balances at December 31, 1994 13,907,275 (9,778) 13,897,497
Net earnings 1,508,834 148,765 1,657,599
Cash distributions (2,740,621) (138,821) (2,879,442)
------------ ------------ ------------
Balances at December 31, 1995 12,675,488 166 12,675,654
Net earnings 972,372 111,821 1,084,193
Cash distributions (2,453,812) (116,950) (2,570,762)
------------ ------------ ------------
Balances at December 31, 1996 $ 11,194,048 $ (4,963) $ 11,189,085
============ ============ ============
The accompanying notes are an integral part of these financial statements.
20
21
IEA INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net earnings $ 1,084,193 $ 1,657,599 $ 1,563,483
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 980,495 1,005,274 1,044,783
Net gain on disposal of equipment (9,835) (38,968) (53,754)
Decrease (increase) in net lease
receivables due from Leasing Company 49,241 246,076 (63,118)
----------- ----------- -----------
Total adjustments 1,019,901 1,212,382 927,911
----------- ----------- -----------
Net cash provided by operating activities 2,104,094 2,869,981 2,491,394
----------- ----------- -----------
Cash flows from (used in) investing activities:
Proceeds from sale of container rental equipment 310,703 116,999 118,876
Acquisition fees paid to general partner (17,632) (23,446) (25,939)
----------- ----------- -----------
Net cash provided by (used in)
investing activities 293,071 93,553 92,937
----------- ----------- -----------
Cash flows used in financing activities:
Distributions to partners (2,570,762) (2,879,442) (2,545,802)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (173,597) 84,092 38,529
Cash and cash equivalents at beginning at year 1,109,678 1,025,586 987,057
----------- ----------- -----------
Cash and cash equivalents at end of year $ 936,081 $ 1,109,678 $ 1,025,586
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
21
22
IEA INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(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 June 8, 1988 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 the business
of the Partnership. 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
purchased.
As of December 31, 1996, the Partnership operated 2,173 twenty-foot,
748 forty-foot and 1,510 forty-foot high-cube marine dry cargo
containers.
(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. CCC 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. 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 financial statements.
22
23
IEA INCOME FUND IX, L.P.
NOTES TO 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.
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 reporting period. Actual results could
differ from those estimates.
(d) Allocation of Net Earnings and Partnership Distributions
Net earnings have been allocated between general and limited partners
in accordance with the Partnership Agreement.
Actual cash distributions differ from the allocations of net earnings
between the general and limited partners as presented in these
financial statements. Partnership distributions are based on
"distributable cash" and are paid to the general and limited partners
on a quarterly basis, in accordance with the provisions of the
Partnership Agreement. Partnership distributions from operations are
allocated 95% to the limited partners and 5% to the general partner.
Sales proceeds are allocated 99% to the limited partners and 1% to the
general partner. These allocations remain in effect until such time as
the limited partners have received from the Partnership aggregate
distributions in an amount equal to their capital contributions plus a
10% cumulative, compounded (daily), annual return on their adjusted
capital contributions. Thereafter, all Partnership distributions will
be allocated 85% to the limited partners and 15% to the general
partner. Cash distribution from operations to the general partner in
excess of 5% of distributable cash will be considered an incentive fee
and compensation to the general partner.
(e) Acquisition Fees
Pursuant to Article IV Section 4.2 of the Partnership Agreement,
acquisition fees paid to the general partner are based on 5% of the
equipment purchase price. These fees are capitalized and included in
the cost of the rental equipment. The fees are payable in five equal
annual installments commencing in the year of purchase.
(f) Container Rental Equipment
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long
-Lived Assets to Be Disposed Of." The Statement requires that
long-lived assets and certain identifiable intangibles to be held and
used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not
be fully recoverable. The Partnership adopted SFAS No. 121 during 1996.
In accordance with SFAS 121, container rental equipment is carried at
the lower of the container rental equipment's original equipment cost,
including capitalized acquisition fees, or the estimated recoverable
value of such equipment. There were no reductions to the carrying value
of container rental equipment during 1996.
23
24
IEA INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS
(f) Container Rental Equipment - (Continued)
Container rental equipment is depreciated over a twelve-year life on a
straight line basis to its salvage value, estimated to be 30%.
(g) Amortization
The Partnership's organization costs are being amortized over 60 months
on a straight-line basis.
(h) Income Taxes
The Partnership is not subject to income taxes, consequently no
provision for income taxes has been made. The Partnership files an
annual information tax return, prepared on the accrual basis of
accounting.
(i) Foreign Operations
The Partnership's business is not divided between foreign or domestic
operations. The Partnership's business is the leasing of containers
worldwide to ocean-going steamship companies and does not fit the
definition of reportable foreign operations within Financial Accounting
Standards Board Statement No. 14 "Financial Reporting for Segments of a
Business Enterprise." Any attempt to separate "foreign" operations from
"domestic" operations would be dependent on definitions and assumptions
that are so subjective as to render the information meaningless and
potentially misleading.
(j) Financial Statement Presentation
The Partnership has determined that for accounting purposes the Leasing
Agent Agreement is a lease, and the receivables, payables, gross
revenues and operating expenses attributable to the containers managed
by the Leasing Company are, for accounting purposes, those of the
Leasing Company and not of the Partnership. Consequently, the
Partnership's balance sheets and statements of operations display the
payments to be received by the Partnership from the Leasing Company as
the Partnership's receivables and revenues.
(2) Cash and Cash Equivalents
Cash equivalents include highly liquid investments with a maturity of three
months or less on their acquisition date. Accordingly, cash equivalents are
carried at cost which approximates fair value. The Partnership maintains
its cash and cash equivalents in accounts which, at times, may exceed
federally insured limits. The Partnership has not experienced any losses in
such accounts and believes it is not exposed to any significant credit
risk. The Partnership places its cash equivalents in investment grade,
short term debt instruments and limits the amount of credit exposure to any
one commercial issuer.
(3) Organization Costs
The Partnership incurred $434,497 in offering and organizational costs
during its offering period. These costs were fully amortized during 1994.
24
25
IEA INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS
(4) 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 December 31, 1996 and
December 31, 1995 were as follows:
December 31, December 31,
1996 1995
-------- --------
Lease receivables, net of doubtful accounts
of $124,324 in 1996 and $138,066 in 1995 $767,166 $944,386
Less:
Direct operating payables and accrued expenses 79,541 148,076
Damage protection reserve (note 6) 73,502 108,033
Base management fees 57,795 82,254
Reimbursed administrative expenses 13,078 16,145
-------- --------
$543,250 $589,878
======== ========
(5) Due to General Partner
The amounts due to CCC and its affiliates at December 31, 1995 consisted of
acquisition fees.
(6) Damage Protection Plan
The Leasing Company offers a repair service to several lessees of the
Partnership's containers, whereby the lessee pays an additional rental fee
for the convenience of having the Partnership incur the repair expense for
containers damaged while on lease. This fee is recorded as revenue when
earned according to the terms of the rental contract. A reserve has been
established to provide for the estimated costs incurred by this service.
This reserve is a component of net lease receivables due from the Leasing
Company (see note 4). The Partnership is not responsible in the event
repair costs exceed predetermined limits, or for repairs that are required
for damages not defined by the damage protection plan agreement.
(7) 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 billed by the Leasing Company under operating leases to
ocean carriers for the containers owned by the Partnership. Net lease
revenue for the years ended December 31, 1996, 1995 and 1994, was as
follows:
1996 1995 1994
---- ---- ----
Rental revenue (note 11) $3,102,611 $3,716,863 $3,678,506
Less:
Rental equipment operating expenses 698,393 675,813 646,275
Base management fees (note 8) 207,541 247,760 266,668
Reimbursed administrative expenses (note 8) 159,979 193,777 199,489
--------- ---------- ----------
$2,036,698 $2,599,513 $2,566,074
========= ========== ==========
25
26
IEA INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS
(8) Compensation to General Partner
Base management fees are equal to 7% of gross lease revenues attributable
to operating leases pursuant to Section 4.4 of the Partnership Agreement.
Reimbursed administrative expenses are equal to the costs expended by CCC
and its affiliates for services necessary to the prudent operation of the
Partnership pursuant to Section 4.5 of the Partnership Agreement. The
following compensation was paid or will be paid by the Partnership to CCC:
1996 1995 1994
---- ---- ----
Base management fees $207,541 $247,760 $266,668
Reimbursed administrative expenses 159,979 193,777 199,489
-------- -------- --------
$367,520 $441,537 $466,157
======== ======== ========
(9) Limited Partners' Capital
The limited partners' per unit share of capital at December 31, 1996, 1995
and 1994 was $329, $373 and $409, respectively. This is calculated by
dividing the limited partners' capital at the end of the year by 33,992,
the total number of limited partnership units.
(10) Income Taxes
The reconciliation of net earnings as reported in the statement of
operations and as would be reported for federal tax purposes for the years
ended December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994
---- ---- ----
Net earnings per statement of operations $ 1,084,193 $ 1,657,599 $ 1,563,483
Depreciation for income tax purposes (in excess of) less than
depreciation for financial statement purposes 554,906 (682,650) (1,874,618)
Gain on disposition of assets for tax purposes in excess
of gain on disposition for financial statement purposes 298,218 115,699 88,811
Amortization expense for tax purposes less than
amortization for financial statement purposes -- -- 29,563
Bad debt expense for tax purposes (in excess of) less than
bad debt expense for financial statement purposes (13,742) 38,670 (50,603)
----------- ----------- -----------
Net earnings (loss) for federal tax purposes $ 1,923,575 $ 1,129,318 $ (243,364)
=========== =========== ===========
At December 31, 1996, the tax basis of total partners' capital was $4,240,436.
(11) Major Lessees
No single lessee contributed more than 10% of the rental revenue earned
during 1996, 1995 and 1994. 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 operating lease
agreements generally require all payments to be made in United States
currency. The Partnership's operations are subject to the fluctuations of
worldwide economic and political conditions that may affect the pattern and
levels of world trade.
26
27
IEA INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS
(12) Subsequent Events
As reported in the Partnership'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 (the "Holding Company")
on February 3, 1997.
The Cronos Group is the indirect corporate parent of CCC. In its letter of
resignation to The Cronos Group, Arthur Andersen states that it resigned as
auditors of The Cronos Group and all other entities affiliated with The
Cronos Group. While its letter of resignation was not addressed to CCC,
Arthur Andersen confirmed to CCC that its resignation as auditors of the
entities referred to in its letter of resignation included its resignation
as auditors of CCC and the Partnership. In its letter of resignation,
Arthur Andersen states that it was unable to obtain adequate information in
response to inquiries it had made in connection with its audit of the
Holding Company for the year ended December 31, 1996.
The Partnership does not, at this time, have sufficient information to
determine the impact, if any, that the concerns expressed by Arthur
Andersen in its letter of resignation may have on the future operating
results and financial condition of the Partnership or the Leasing Company's
ability to manage the Partnership's fleet in subsequent periods. However,
CCC does not believe, based upon the information currently available to it,
that Arthur Andersen's resignation was triggered by any concern over the
accounting policies and procedures followed by the Partnership.
Arthur Andersen's report on the financial statements of CCC and the
Partnership, for the previous two years, has not contained an adverse
opinion or a disclaimer of opinion, nor was any such report qualified or
modified as to uncertainty, audit scope, or accounting principles.
During the Partnership's previous two fiscal years and the subsequent
interim period preceding Arthur Andersen's resignation, there have been no
disagreements between CCC or the Partnership and Arthur Andersen on any
matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
The Partnership 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 the provisions of Section 10A(b)(2) of the Securities Exchange
Act of 1934, as amended, for filing by the Holding Company with the
Securities and Exchange Commission (the "SEC"). Following the report of
Arthur Andersen, the SEC, on February 10, 1997, commenced a private
investigation of the Holding Company for the purpose of investigating the
matters discussed in such report and related matters. The Partnership does
not believe that the focus of the SEC's investigation is upon the
Partnership or CCC. CCC is unable to predict the outcome of the SEC's
private investigation of the Holding Company.
27
28
Schedule 1
----------
IEA INCOME FUND IX, L.P.
SCHEDULE OF REIMBURSED ADMINISTRATIVE EXPENSES
PURSUANT TO ARTICLE IV SECTION 4.5
OF THE PARTNERSHIP AGREEMENT
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Salaries $ 76,293 $ 98,542 $ 93,442
Other payroll related expenses 13,223 15,221 26,226
General and administrative expenses 70,463 80,014 79,821
-------- -------- --------
Total reimbursed administrative expenses $159,979 $193,777 $199,489
======== ======== ========
See report of independent public accountants
28
29
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Registrant's discussion regarding the resignation of its certifying
accountant is included in the Registrant's Report on Form 8-K, dated February 3,
1997 and filed February 7, 1997 and Amendment No. 1 to the Registrant's Report
on Form 8-K, dated February 3, 1997 and filed February 26, 1997, incorporated
herein by reference.
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.
29
30
PART III
Item 10. Directors and Executive Officers of the Registrant
The Registrant, as such, has no officers or directors, but is managed by CCC,
the general partner. The officers and directors of CCC at June 4, 1997, are as
follows:
Name Office
- -------------------------- --------------------------------------------------
Dennis J. Tietz President, Chief Executive Officer and Director
John P. McDonald Vice President/Sales
Elinor Wexler Vice President/Administration and Secretary
John Kallas Vice President/Treasurer, Principal Finance and
Accounting Officer
Laurence P. Sargent Director
Stefan M. Palatin Director
DENNIS J. TIETZ Mr. Tietz, 44, as President and Chief Executive Officer, is
responsible for the general management of CCC. From 1986 until August 1992, Mr.
Tietz was responsible for the organization, marketing and after-market support
of CCC's investment programs. Mr. Tietz is also President and a director of
Cronos Securities Corp. Mr. Tietz was a regional manager for CCC, responsible
for various container leasing activities in the U.S. and Europe from 1981 to
1986. Prior to joining CCC in December 1981, Mr. Tietz was employed by Trans
Ocean Leasing Corporation as Regional Manager based in Houston, with
responsibility for all leasing and operational activities in the U.S. Gulf.
Mr. Tietz holds a B.S. degree in Business Administration from San Jose State
University and is a Registered Securities Principal with the NASD.
JOHN P. MCDONALD Mr. McDonald, 35, was elected Vice President - National
Sales Manager of CCC in August 1992, with responsibility for marketing CCC's
investment programs. Since 1988, Mr. McDonald had been Regional Marketing
Manager for the Southwestern U.S. From 1983 to 1988, Mr. McDonald held a number
of container leasing positions with CCC, the most recent of which was as Area
Manager for Belgium and the Netherlands, based in Antwerp.
Mr. McDonald holds a B.S. degree in Business Administration from Bryant
College, Rhode Island. Mr. McDonald is also a Vice President of Cronos
Securities Corp.
ELINOR A. WEXLER Ms. Wexler, 48, was elected Vice President - Administration
and Secretary of CCC in August 1992. Ms. Wexler has been employed by the General
Partner since 1987, and is responsible for investor services, compliance and
securities registration. From 1983 to 1987, Ms. Wexler was Manager of Investor
Services for The Robert A. McNeil Corporation, a real estate syndication
company, in San Mateo, California. From 1971 to 1983, Ms. Wexler held various
positions, including securities trader and international research editor, with
Nikko Securities Co., International, based in San Francisco.
Ms. Wexler attended the University of Oregon, Portland State University and
the Hebrew University of Jerusalem, Israel. Ms. Wexler is also Vice President
and Secretary of Cronos Securities Corp. and a Registered Principal with the
NASD.
JOHN KALLAS Mr. Kallas, 34, was elected Vice President/Treasurer,
Principal Finance and Accounting Officer of CCC in December 1993 and is directly
responsible for CCC's accounting operations and reporting activities. Mr. Kallas
has held various accounting positions since joining CCC in 1989, including
Controller, Director of Accounting and Corporate Accounting Manager. From 1985
to 1989, Mr. Kallas was an accountant with KPMG Peat Marwick, San Francisco,
California.
Mr. Kallas holds a B.S. degree in Business Administration from the University
of San Francisco and is a certified public accountant. Mr. Kallas is also
Treasurer of Cronos Securities Corp.
30
31
LAURENCE P. SARGENT Mr. Sargent, 67, joined the Board of Directors of CCC
in 1991. Mr. Sargent was a founder of Leasing Partners International ("LPI") and
served as its Managing Director from 1983 until 1991. From 1977 to 1983, Mr.
Sargent held a number of positions with Trans Ocean Leasing Corporation, the
last of which was as a director of its refrigerated container leasing
activities. From 1971 to 1977, Mr. Sargent was employed by SSI Container
Corporation (later Itel Container International), ultimately serving as Vice
President / Far East. Prior to that, Mr. Sargent was a Vice President of Pacific
Intermountain Express, a major U.S. motor carrier, responsible for its bulk
container division. Mr. Sargent holds a B.A. degree from Stanford University.
Mr. Sargent also serves as a director of the Institute of International
Container Lessors ("IICL"), an industry trade association. Mr. Sargent is also a
director of Cronos Securities Corp.
Mr. Sargent retired as Deputy Chairman of the Group as of January 1, 1996. He
will remain a director of CCC, The Cronos Group, as well as other various
subsidiaries of The Cronos Group.
STEFAN M. PALATIN Mr. Palatin, 43, joined the Board of Directors of CCC in
January 1993. Mr. Palatin is Chairman and CEO of The Cronos Group, and was a
founder of LPI in 1983. From 1980 to 1991, Mr. Palatin was an executive director
of the Contrin Group, which has provided financing to the container leasing
industry, as well as other business ventures, and has sponsored limited
partnerships organized in Austria. From 1977 to 1980, Mr. Palatin was a
consultant to a number of companies in Austria, including Contrin. From 1973 to
1977, Mr. Palatin was a sales manager for Generali AG, the largest insurance
group in Austria.
Mr. Palatin, who is based in Austria, holds a Doctorate in Business
Administration from the University of Economics and World Trade in Vienna. Mr.
Palatin is also a director of The Cronos Group.
The key management personnel of the Leasing Company at June 4, 1997, were as
follows:
Name Title
- -------------------------- -------------------------------------------------
Steve Brocato President
Peter J. Younger Vice President/Chief Financial Officer
John M. Foy Vice President/Americas
Nico Sciacovelli Vice President/Europe, Middle East and Africa
Harris H. T. Ho Vice President/Asia Pacific
David Heather Vice President/Technical Services
John C. Kirby Vice President/Operations
J. Gordon Steel Vice President/Tank Container Division
STEVE BROCATO Mr. Brocato, 44, was elected President of the Leasing Company's
container division in June 1997, replacing Mr. Nigel J. Stribley, and is based
in the United Kingdom. Mr. Brocato has held various positions since joining
Cronos including, Vice president - Corporate Affairs and Director of Marketing -
Refrigerated Containers for Cronos in North and South America. Prior to joining
Cronos, Mr. Brocato was a Vice President for ICCU Containers from 1983 to 1985
and was responsible for dry cargo container marketing and operations for the
Americas. From 1981 to 1983, he was regional manager for Trans Ocean leasing
Ltd.
PETER J. YOUNGER Mr. Younger, 40, was elected Chief Financial Officer of
The Cronos Group in March, 1997, replacing Mr. A. Darrell Ponniah, and is based
in the United Kingdom. Mr. Younger was appointed Vice President and Controller
of Cronos in 1991. He joined IEA in 1987 and served as Director of Accounting
and the Vice President and Controller, based in San Francisco. Prior to 1987,
Mr. Younger was a certified public accountant and a principal with the
accounting firm of Johnson, Glaze and Co. in Salem, Oregon. Mr. Younger holds a
B.S. degree in Business Administration from Western Baptist College.
31
32
JOHN M. FOY Mr. Foy, 51, is directly responsible for the Leasing Company's
lease marketing and operations in North America, Central America, and South
America, and is based in San Francisco. From 1985 to 1993, Mr. Foy was Vice
President/Pacific with responsibility for dry cargo container lease marketing
and operations in the Pacific Basin. From 1977 to 1985 Mr. Foy was Vice
President of Marketing for Nautilus Leasing Services in San Francisco with
responsibility for worldwide leasing activities. From 1974 to 1977, Mr. Foy was
Regional Manager for Flexi-Van Leasing, a container lessor, with responsibility
for container leasing activities in the Western United States. Mr. Foy holds a
B.A. degree in Political Science from University of the Pacific, and a Bachelor
of Foreign Trade from Thunderbird Graduate School of International Management.
NICO SCIACOVELLI Mr. Sciacovelli, 47, was elected Vice President - Europe,
Middle East and Africa in June 1997, replacing Mr. Geoffrey Mornard. Mr.
Sciacovelli is directly responsible for the Leasing Company's lease marketing
and operations in Europe, the Middle East and Africa and is based in Italy.
Since joining Cronos in 1983, Mr. Sciacovelli served as Area Director and Area
Manager for Southern Europe. Prior to joining Cronos, Mr. Sciacovelli was a
Sales Manager at Interpool Ltd.
HARRIS H. T. HO Mr. Ho, 39, was elected Vice President - Asia Pacific in
June 1997, replacing Mr. Danny Wong. Mr. Ho is directly responsible for the
Leasing Company's lease marketing and operations in Asia, Australia and the
Indian sub-continent and is based in Hong Kong. Since joining Cronos in 1990,
Mr. Ho served as Area Director, Hong Kong and China. Prior to joining Cronos,
Mr. Ho was a Manager at Sea Containers Pacific Ltd and Sea Containers Hong Kong
Limited from 1981 to 1990, responsible for container marketing within Asia. From
1978 to 1981, Mr. Ho was Senior Equipment Controller for Hong Kong Container
Line. Mr. Ho holds a Diploma of Management Studies in Marketing from The Hong
Kong Polytechnic and The Hong Kong Management Association.
DAVID HEATHER Mr. Heather, 49, is responsible for all technical and
engineering activities of the fleet managed by the Leasing Company. Mr. Heather
was Technical Director for LPI, based in the United Kingdom, from 1986 to 1991.
From 1980 to 1986, Mr. Heather was employed by ABC Containerline NV as Technical
Manager with technical responsibility for the shipping line's fleet of dry
cargo, refrigerated and other specialized container equipment. From 1974 to
1980, Mr. Heather was Technical Supervisor for ACT Services Ltd., a shipping
line, with responsibility for technical activities related to refrigerated
containers. Mr. Heather holds a Marine Engineering Certificate from Riversdale
Marine Technical College in England.
JOHN C. KIRBY Mr. Kirby, 43, is responsible for container purchasing,
contract and billing administration, container repairs and leasing-related
systems, and is based in the United Kingdom. Mr. Kirby joined CCC in 1985 as
European Technical Manager and advanced to Director of European Operations in
1986, a position he held with CCC, and later the Leasing Company, until his
promotion to Vice President/Operations of the Leasing Company in 1992. From 1982
to 1985, Mr. Kirby was employed by CLOU Containers, a container leasing company,
as Technical Manager based in Hamburg, Germany. Mr. Kirby acquired a
professional engineering qualification from the Mid-Essex Technical College in
England.
J. GORDON STEEL Mr. Steel, 64, is directly responsible for the overall lease
marketing activity for the Leasing Company's Tank Container Division. From 1990
to 1992, Mr. Steel held the position of Director/General Manager for Tiphook
Container's Tank Division. From 1977 to 1990, Mr. Steel held various managerial
positions, involving manufacturing and transportation of hazardous materials,
with Laporte Industries and ICI, major chemical distribution companies. Mr.
Steel is a qualified Chemical Engineer and attended the Associate Royal
Technical College in Scotland.
32
33
Item 11. Executive Compensation
The Registrant pays a management fee and will reimburse the general partner
for various administrative expenses.
The Registrant also makes quarterly distributions to its partners (general
and limited) from distributable cash from operations (allocated 95% to the
limited partners and 5% to the general partner). Sales proceeds are allocated
99% to the limited partners and 1% to the general partner. These allocations
remain in effect until such time as the limited partners have received from the
Registrant aggregate distributions in an amount equal to their capital
contributions plus a 10% cumulative, compounded (daily), annual return on their
adjusted capital contributions. Thereafter, all Partnership distributions will
be allocated 85% to the limited partners and 15% to the general partner.
The Registrant does not pay or reimburse CCC or its affiliates for any
remuneration payable by them to their executive officers, directors or any other
controlling persons. However, the Registrant does reimburse the general partner
for certain services pursuant to Section 4.5 of the Partnership Agreement. These
services include but are not limited to (i) salaries and related salary expenses
for services which could be performed directly for the Registrant by independent
parties, such as legal, accounting, transfer agent, data processing, operations,
communications, duplicating and other such services; and, (ii) performing
administrative services necessary to the prudent operations of the Registrant.
The following table sets forth the fees the Registrant paid (on a cash basis)
to CCC for the year ended December 31, 1996.
Cash Fees and
Name Description Distributions
---- ----------- -------------
1) CCC Acquisition fee - equal to 5% of the purchase $ 17,632
price of containers acquired by the Registrant
pursuant to Section 4.2 of the Limited
Partnership Agreement
2) CCC Base management fees - equal to 7% of gross $ 231,999
lease revenues attributable to operating
leases pursuant to Section 4.4 of the
Limited Partnership Agreement
3) CCC Reimbursed administrative expenses - equal to $ 163,045
the costs expended by CCC and its affiliates for
services necessary to the prudent operation of
the Registrant pursuant to Section 4.5 of the
Limited Partnership Agreement
4) CCC Interest in Fund - 5% of distributions of $ 116,950
distributable cash for any quarter pursuant
to Section 6.1 of the Limited Partnership
Agreement
33
34
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
There is no person or "group" of persons known to the management of CCC to be
the beneficial owner of more than five percent of the outstanding units of
limited partnership interests of the Registrant.
(b) Security Ownership of Management
The Registrant has no directors or officers. It is managed by CCC. CCC
owns 163.2 units, representing 0.48% of the total amount of units outstanding.
(c) Changes in Control
Inapplicable.
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others
The Registrant's only transactions with management and other related parties
during 1996 were limited to those fees paid or amounts committed to be paid (on
an annual basis) to CCC, the general partner. See Item 11, "Executive
Compensation," herein.
(b) Certain Business Relationships
Inapplicable.
(c) Indebtedness of Management
Inapplicable.
(d) Transactions with Promoters
Inapplicable.
34
35
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1. Financial Statements
Page
----
The following financial statements of the Registrant are included
in Part II, Item 8:
Reports of Independent Public Accountants............................ 16, 17
Balance sheets - December 31, 1996 and 1995.......................... 18
Statements of operations - for the years ended
December 31, 1996, 1995 and 1994.................................. 19
Statements of partners' capital - for the years ended
December 31, 1996, 1995 and 1994.................................. 20
Statements of cash flows - for the years ended
December 31, 1996, 1995 and 1994.................................. 21
Notes to financial statements........................................ 22
Schedule of Reimbursed Administrative Expenses....................... 28
All other schedules are omitted as the information is not required or the
information is included in the financial statements or notes thereto.
35
36
(a)3. 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 **
27 Financial Data Schedule Filed with this document
(b) Reports on Form 8-K
The Registrant filed a Report on Form 8-K, February 7, 1997 and
Amendment No. 1 to Report on Form 8-K, February 26, 1997, reporting
the resignation of the Registrant's certifying accountant.
The Registrant filed a Report on Form 8-K, April 14, 1997,
reporting the appointment of the Registrant's successor certifying
accountant.
- -----------------
* 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)
36
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ JOHN KALLAS
-----------------------------------------
John Kallas
Vice President/Treasurer
Principal Finance and Accounting Officer
Date: June 16, 1997
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Cronos
Capital Corp., the general partner of the Registrant, in the capacities and on
the dates indicated:
Signature Title Date
--------- ----- ----
/s/ DENNIS J. TIETZ President and Director of June 16, 1997
- ----------------------------------------- Cronos Capital Corp.
Dennis J. Tietz ("CCC") (Principal Executive
Officer of CCC)
/s/ JOHN KALLAS Vice June 16, 1997
- ----------------------------------------- President/Treasurer(Principal
John Kallas Finance and Accounting
Officer of CCC)
/s/ LAURENCE P. SARGENT Director of CCC June 16, 1997
- -----------------------------------------
Laurence P. Sargent
SUPPLEMENTAL INFORMATION
The Registrant's annual report will be furnished to its limited partners on
or about July 18, 1997. Copies of the annual report will be concurrently
furnished to the Commission for information purposes only, and shall not be
deemed to be filed with the Commission.
38
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 **
27 Financial Data Schedule 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)