##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 Commission file number 0-21518
 IEA INCOME FUND XII, L.P.
  California
(State or other jurisdiction of 
incorporation or organization)
    
    94-3143940
(I.R.S. Employer
Identification No.)
 One Front Street, Suite 925, San Francisco, California
    
    94111(Address of principal executive offices)
    
    (Zip Code)
 
 þ o
  o o þ
 o þ




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##### Table of Contents



IEA INCOME FUND XII, L.P.
 Report on Form 10-Q for the Quarterly Period
Ended September 30, 2006
 TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATION
    
    
    3Item 1.
    
    Financial Statements
    
    
    3Condensed Balance Sheets  September 30, 2006 and December 31, 2005 (unaudited)
    
    
    4Condensed Statements of Operations for the three and nine months ended September 30, 2006 and 2005 (unaudited)
    
    
    5Condensed Statements of Cash Flows for the nine months ended September 30, 2006 and 2005 (unaudited)
    
    
    6Notes to Condensed Financial Statements (unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4.
    
    Controls and Procedures
    
    
    17PART II  OTHER INFORMATION
    
    
    18Item 1.
    
    Legal Proceedings
    
    
    18Item 1A.
    
    Risk Factors
    
    
    18Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3.
    
    Defaults Upon Senior Securities
    
    
    18Item 4.
    
    Submissions of Matters to a Vote of Securities Holders
    
    
    18Item 5.
    
    Other Information
    
    
    18Item 6.
    
    Exhibits
    
    
    18EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
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PART I  FINANCIAL INFORMATION
 
 Financial Statements
   3




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IEA INCOME FUND XII, L.P.
 
 Condensed Balance Sheets
 (Unaudited)
 September 30,
    
    
    December 31,2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents, includes $904,202 at September 30, 2006 and
$1,463,829 at December 31, 2005 in interest-bearing accounts
    
    $
    919,202
    
    
    $
    1,478,829Net lease and other receivables due from Leasing Company
    
    
    208,180
    
    
    
    305,183Total current assets
    
    
    1,127,382
    
    
    
    1,784,012Container rental equipment, at cost
    
    
    16,666,185
    
    
    
    21,441,062Less accumulated depreciation
    
    
    (13,591,115
    )
    
    
    (16,531,634
    )Net container rental equipment
    
    
    3,075,070
    
    
    
    4,909,428Total assets
    
    $
    4,202,452
    
    
    $
    6,693,440Partners CapitalPartners capital (deficit):General partner
    
    $
    (311,291
    )
    
    $
    (507,340
    )Limited partners
    
    
    4,513,743
    
    
    
    7,200,780Total partners capital
    
    $
    4,202,452
    
    
    $
    6,693,440
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IEA INCOME FUND XII, L.P.
 
 Condensed Statements of Operations
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net lease revenue
    
    $
    299,777
    
    
    $
    473,912
    
    
    $
    928,399
    
    
    $
    1,437,189Other operating income (expenses):Depreciation
    
    
    (265,193
    )
    
    
    (372,317
    )
    
    
    (871,497
    )
    
    
    (1,197,924
    )Other general and administrative expenses
    
    
    (50,344
    )
    
    
    (35,088
    )
    
    
    (133,058
    )
    
    
    (107,088
    )Net gain on disposal of equipment
    
    
    100,080
    
    
    
    39,569
    
    
    
    271,136
    
    
    
    104,993(215,457
    )
    
    
    (367,836
    )
    
    
    (733,419
    )
    
    
    (1,200,019
    )Income from operations
    
    
    84,320
    
    
    
    106,076
    
    
    
    194,980
    
    
    
    237,170Other income:Interest income
    
    
    12,631
    
    
    
    11,534
    
    
    
    38,580
    
    
    
    30,480Net income
    
    $
    96,951
    
    
    $
    117,610
    
    
    $
    233,560
    
    
    $
    267,650Allocation of net income (loss):General partner
    
    $
    100,048
    
    
    $
    62,929
    
    
    $
    270,760
    
    
    $
    181,069Limited partners
    
    
    (3,097
    )
    
    
    54,681
    
    
    
    (37,200
    )
    
    
    86,581$
    96,951
    
    
    $
    117,610
    
    
    $
    233,560
    
    
    $
    267,650Limited partners per unit share of net
income (loss)
    
    $
    
    
    
    $
    0.02
    
    
    $
    (0.01
    )
    
    $
    0.02
  5




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IEA INCOME FUND XII, L.P.
 
 Condensed Statements of Cash Flows
 (Unaudited)
 Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005Net cash provided by operating activities
    
    $
    880,703
    
    
    $
    1,271,993Cash flows from investing activities:Proceeds from sale of rental equipment
    
    
    1,265,875
    
    
    
    1,693,634Proceeds collected on sales-type lease receivable
    
    
    18,342
    
    
    
    58,294Net cash provided by investing activities
    
    
    1,284,217
    
    
    
    1,751,928Cash flows from financing activities:Distributions to general partner
    
    
    (74,711
    )
    
    
    (111,453
    )Distributions to limited partners
    
    
    (2,649,836
    )
    
    
    (3,513,590
    )Net cash used in financing activities
    
    
    (2,724,547
    )
    
    
    (3,625,043
    )Net decrease in cash and cash equivalents
    
    
    (559,627
    )
    
    
    (601,122
    )Cash and cash equivalents at the beginning of the period
    
    
    1,478,829
    
    
    
    2,122,594Cash and cash equivalents at the end of the period
    
    $
    919,202
    
    
    $
    1,521,472
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IEA INCOME FUND XII, L.P.
 
 Notes to Unaudited Condensed Financial Statements
 (1)
    
    Summary of Significant Accounting Policies
 (a)
    
    Nature of OperationsIEA Income Fund XII, L.P. (the Partnership) is a limited partnership organized under the
laws of the State of California on August 28, 1991 for the purpose of owning and leasing
marine cargo containers worldwide to ocean carriers. The Partnerships operations are
subject to the fluctuations of world economic and political conditions. The Partnership
believes that the profitability of, and risks associated with, leases to foreign customers
are generally the same as those of leases to domestic customers. The Partnerships leases
generally require all payments to be made in United States currency.Cronos Capital Corp. (CCC) is the general partner and, with its affiliate Cronos
Containers Limited (the Leasing Company), manages the business of the Partnership. CCC
and the Leasing Company also manage the container leasing business for other partnerships
affiliated with CCC.The Partnership commenced operations on January 31, 1992, when the minimum subscription
proceeds of $2,000,000 were obtained. The Partnership offered 3,750,000 units of limited
partnership interest at $20 per unit, or $75,000,000. The offering terminated on November
30, 1992, by which time 3,513,594 limited partnership units had been sold.The Partnership has commenced its 14th year of operations and is in its liquidation phase
wherein CCC is focusing its attention on the retirement of the remaining equipment in the
Partnerships container fleet. At September 30, 2006, approximately 29% of the original
equipment remained in the Partnerships fleet. CCC takes several factors into
consideration when examining options for the timing of the disposal of the containers.
These factors include the impact of a diminishing fleet size and current market conditions
on the level of gross lease revenue, and fixed operating costs relative to this revenue.
Parallel to these considerations is a projected increase in expenses for devoting
significant resources to the additional reporting and compliance requirements of Section
404 of the Sarbanes Oxley Act of 2002, which addresses a range of corporate governance,
disclosure, and accounting issues. These costs may include increased accounting and
administrative expenses for additional staffing and outside professional services by
accountants and consultants. These additional costs, depending on their materiality, may
reduce the Partnerships results from operations and therefore negatively affect future
distributions to the Limited Partners.(b)
    
    Leasing Company and Leasing Agent AgreementA Leasing Agent Agreement exists between the Partnership and the Leasing Company,
whereby the Leasing Company has the responsibility to manage the leasing operations of all
equipment owned by the Partnership. Pursuant to the Agreement, the Leasing Company is
responsible for leasing, managing and re-leasing the Partnerships containers to ocean
carriers and has full discretion over which ocean carriers and suppliers of goods and
services it may deal with. The Leasing Agent Agreement permits the Leasing Company to use
the containers owned by the Partnership, together with other containers owned or managed by
the Leasing Company and its affiliates, as part of a single fleet operated without regard
to ownership. Since the Leasing Agent Agreement meets the definition of an operating lease
in Statement of Financial Accounting Standards (SFAS) No. 13, it is accounted for as a
lease under which the Partnership is lessor and the Leasing Company is lessee.The Leasing Agent Agreement generally provides that the Leasing Company will make
payments to the Partnership based upon rentals collected from ocean carriers after
deducting direct operating expenses and management fees to CCC and the Leasing Company.
The Leasing Company leases containers to ocean carriers, under operating leases which are
either master leases or term leases (mostly one to five years) and sales-type leases.
Master leases do not specify the exact number of containers to be leased or the term that
each container will remain on hire but allow the ocean carrier to pick up and drop off
containers at various locations, and rentals are based upon the number of containers used
and the applicable per-diem rate.
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IEA INCOME FUND XII, L.P.
 Notes to Unaudited Condensed Financial Statements
 (b)
    
    Leasing Company and Leasing Agent Agreement (continued)Accordingly, rentals under master leases are all variable and contingent upon the
number of containers used. Sales-type leases have fixed payment terms and provide the
lessee with a purchase option. The net investment in sales-type leases represents a
receivable due from the Leasing Company, net of unearned income. Unearned income, when
recognized, is reflected in the Partnerships statements of operations, providing a
constant return on capital over the lease term. Unearned income is recorded as part of the
net lease receivable due from the Leasing Company.(c)
    
    Basis of AccountingThe Partnership utilizes the accrual method of accounting. Net lease revenue is
recorded by the Partnership in each period based upon its leasing agent agreement with the
Leasing Company. Net lease revenue is generally dependent upon operating lease rentals
from operating lease agreements between the Leasing Company and its various lessees, less
direct operating expenses and management fees due in respect of the containers specified in
each operating lease agreement.(d)
    
    Use of EstimatesThe financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America (GAAP), which require the Partnership to
make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.The most significant estimates included within the financial statements are the container
rental equipment estimated useful lives and residual values, and the estimate of future
cash flows from container rental equipment operations. These estimates are used to
determine the carrying value of container rental equipment in accordance with SFAS No. 144.
Considerable judgment is required in estimating future cash flows from container rental
equipment operations. Accordingly, the estimates may not be indicative of the amounts that
may be realized in future periods. As additional information becomes available in
subsequent periods, recognition of an impairment of the container rental equipment carrying
values may be necessary based upon changes in market and economic conditions.(e)
    
    Container Rental EquipmentContainer rental equipment is depreciated over a 15-year period using the straight-line
basis to its salvage value, estimated to be 10% of its original equipment cost.
Depreciation policies are also evaluated to determine whether subsequent events and
circumstances warrant revised estimates of useful lives.In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, container rental equipment is considered to be impaired if the carrying value of
the asset exceeds the expected future cash flows from related operations (undiscounted and
without interest charges). If impairment is deemed to exist, the assets are written down
to fair value. An analysis projecting future cash flows from container rental equipment
operations is prepared annually, or upon material changes in market conditions. Current
and projected utilization rates, per-diem rental rates, direct operating expenses, fleet
size and container disposals are the primary variables utilized by the analysis.
Additionally, the Partnership evaluates future cash flows and potential impairment by
container type rather than for each individual container, and as a result, future losses
could result for individual container dispositions due to various factors, including age,
condition, suitability for continued leasing, as well as the geographical location of
containers when disposed. There were no impairment charges to the carrying value of
container rental equipment for the three and nine-month periods ended September 30, 2006
and 2005.
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IEA INCOME FUND XII, L.P.
 Notes to Unaudited Condensed Financial Statements
 (f)
    
    Allocation of Net Income or Loss, Partnership Distributions and Partners Capital
AccountsNet income or loss has been allocated between the general and limited partners in
accordance with the Partnership Agreement. The Partnership Agreement generally provides
that CCC shall at all times maintain at least a 1% interest in each item of income or loss,
including the gain arising from the sale of containers. The Partnership Agreement further
provides that the gain arising from the sale of containers be allocated first to the
partners with capital account deficit balances in an amount sufficient to eliminate any
deficit capital account balance. Thereafter, the Partnerships gains arising from the sale
of containers are allocated to the partners in accordance with their share of sale proceeds
distributed. The Partnership Agreement also provides for income (excluding the gain
arising from the sale of containers) for any period be allocated to CCC in an amount equal
to that portion of CCCs distributions in excess of 1% of the total distributions made to
both CCC and the limited partners of the Partnership for such period, as well as other
allocation adjustments.Actual cash distributions differ from the allocations of net income or loss between the
general and limited partners as presented in these financial statements. Partnership
distributions are paid to its partners (general and limited) from distributable cash from
operations, allocated 95% to the limited partners and 5% to CCC. Distributions of sales
proceeds are allocated 99% to the limited partners and 1% to CCC. The 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 CCC. Cash distributions from operations to CCC in excess of 5% of distributable
cash will be considered an incentive fee and will be recorded as compensation to CCC, with
the remaining distributions from operations charged to partners capital.Upon dissolution, the assets of the Partnership will be sold and the proceeds thereof
distributed as follows: (i) all of the Partnerships debts and liabilities to person other
than CCC or the limited partners shall be paid and discharged; (ii) all of the
Partnerships debts and liabilities to CCC and the limited partners shall be paid and
discharged; and (iii) the balance of such proceeds shall be distributed to CCC and the
limited partners in accordance with the positive capital account balances of CCC and the
limited partners. CCC shall contribute to the Partnership, if necessary, an amount equal
to the lesser of the deficit balance in its capital account at the time of such
liquidation, or 1.01% of the excess of the Limited Partners capital contribution to the
Partnership over the capital contributions previously made to the Partnership by CCC, after
giving effect to the allocation of income or loss arising from the liquidation of the
Partnerships assets.(g)
    
    Financial Statement PresentationThese financial statements have been prepared without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States of America (GAAP) have been
condensed or omitted pursuant to such rules and regulations, although the Partnership
believes that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in conjunction with
the financial statements and accompanying notes in the Partnerships December 31, 2005
Annual Report on Form 10-K.The interim financial statements presented herewith reflect, in the opinion of management,
all adjustments of a normal recurring necessary to present fairly the results for the
interim periods presented. The results of operations for such interim periods are not
necessarily indicative of the results to be expected for the full year.
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IEA INCOME FUND XII, L.P.
 Notes to Unaudited Condensed Financial Statements
 (2)
    
    Net Lease and Other Receivables Due from Leasing CompanyNet lease and other 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 earned by
the Leasing Company under operating leases and sales-type leases to ocean carriers for the
containers owned by the Partnership as well as proceeds earned from container disposals. Net
lease and other receivables at September 30, 2006 and December 31, 2005 were as follows:
 September 30,
    
    
    December 31,2006
    
    
    2005Gross lease and other receivables
    
    $
    539,836
    
    
    $
    733,378Sales-type lease receivable (net of unearned income)
    
    
    
    
    
    
    18,342539,836
    
    
    
    751,720Less:Direct operating payables and accrued expenses
    
    
    153,925
    
    
    
    199,406Damage protection reserve
    
    
    23,570
    
    
    
    68,340Base management fees payable
    
    
    1,947
    
    
    
    820Reimbursed administrative expenses
    
    
    6,041
    
    
    
    11,667Allowance for doubtful accounts
    
    
    146,173
    
    
    
    166,304331,656
    
    
    
    446,537Net lease and other receivables
    
    $
    208,180
    
    
    $
    305,183
 On December 1, 2004, the Leasing Company, on behalf of the Partnership, amended a term lease
agreement with one lessee to include a bargain purchase option in exchange for the lessees
continued lease of these older containers and their eventual sale. As a result of the
amendment, the Partnership reclassified the term lease agreement as a sales-type lease,
recorded a sales-type lease receivable and recognized the sale of 532 on-hire containers that
were subject to the amended term lease agreement. The sales-type lease expired on March 31,
2006, at which time the lessee exercised its bargain purchase option to acquire the containers
subject to the sales-type lease.
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IEA INCOME FUND XII, L.P.
 Notes to Unaudited Condensed Financial Statements
 (3)
    
    Net Lease RevenueNet lease revenue is determined by deducting direct operating expenses, base management
fees and reimbursed administrative expenses to CCC and its affiliates from the rental revenue
earned by the Leasing Company under operating leases to ocean carriers for the containers owned
by the Partnership. Net lease revenue for the three and nine-month periods ended September 30,
2006 and 2005 were as follows:
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Rental revenue
    
    $
    348,598
    
    
    $
    603,911
    
    
    $
    1,194,736
    
    
    $
    1,924,134Interest income from sales-type lease
    
    
    
    
    
    
    769
    
    
    
    185
    
    
    
    3,190348,598
    
    
    
    604,680
    
    
    
    1,194,921
    
    
    
    1,927,324Less:Rental equipment operating expenses
    
    
    4,262
    
    
    
    55,378
    
    
    
    106,614
    
    
    
    237,054Base management fees
    
    
    25,647
    
    
    
    43,285
    
    
    
    85,031
    
    
    
    136,107Reimbursed administrative expensesSalaries
    
    
    13,965
    
    
    
    23,971
    
    
    
    54,044
    
    
    
    84,368Other payroll related expenses
    
    
    962
    
    
    
    2,163
    
    
    
    6,827
    
    
    
    11,558General and administrative expenses
    
    
    3,985
    
    
    
    5,971
    
    
    
    14,006
    
    
    
    21,048Total reimbursed administrative
expenses
    
    
    18,912
    
    
    
    32,105
    
    
    
    74,877
    
    
    
    116,97448,821
    
    
    
    130,768
    
    
    
    266,522
    
    
    
    490,135Net lease revenue
    
    $
    299,777
    
    
    $
    473,912
    
    
    $
    928,399
    
    
    $
    1,437,189
 (4)
    
    Operating SegmentAn operating segment is a component of an enterprise that engages in business activities from
which it may earn revenues and incur expenses, whose operating results are regularly reviewed
by the enterprises chief operating decision maker to make decisions about resources to be
allocated to the segment and assess its performance, and about which separate financial
information is available. Management operates the Partnerships container fleet as a
homogenous unit and have, therefore, determined that the Partnership has a single reportable
operating segment.The Partnership derives revenues from marine dry cargo and refrigerated containers used by its
customers in global trade routes. As of September 30, 2006, the Partnership operated 2,998
twenty-foot, 1,433 forty-foot and 72 forty-foot high-cube marine dry cargo containers, as well
as 76 twenty-foot and six forty-foot marine refrigerated containers. A summary of gross lease
revenue earned by the Leasing Company on behalf of the Partnership, by product, for the three
and nine-month periods ended September 30, 2006 and 2005 follows:
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Dry cargo containers
    
    $
    301,752
    
    
    $
    518,810
    
    
    $
    1,041,779
    
    
    $
    1,650,694Refrigerated containers
    
    
    46,846
    
    
    
    85,870
    
    
    
    153,142
    
    
    
    276,630Total
    
    $
    348,598
    
    
    $
    604,680
    
    
    $
    1,194,921
    
    
    $
    1,927,324
 Due to the Partnerships lack of information regarding the physical location of its fleet of
containers when on lease in the global shipping trade, the Partnership believes that it does
not possess discernible geographic reporting segments as defined in SFAS No. 131 (SFAS 131),
Disclosures about Segments of an Enterprise and Related Information.
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Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Market Overview
      12




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Results of Operations
   
    
    Activity-related expenses, including agent and depot costs such as repairs,
maintenance and handling.
    
    Inventory-related expenses for off-hire containers, comprising storage and
repositioning costs. These costs are sensitive to the quantity of off-hire containers
as well as the frequency at which containers are re-delivered.
    
    Legal and other expenses, including legal costs related to the recovery of containers
and doubtful accounts, insurance and provisions for doubtful accounts.
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Dry Cargo Containers
    
    
    Refrigerated Containers40-Foot
    
    
    
    
    
    
    40-Foot20-Foot
    
    
    40-Foot
    
    
    High-Cube
    
    
    20-Foot
    
    
    High-CubeContainers on lease:Master lease
    
    
    1,693
    
    
    
    671
    
    
    
    53
    
    
    
    58
    
    
    
    6Term leaseShort term1
    
    
    1,038
    
    
    
    628
    
    
    
    19
    
    
    
    8
    
    
    
    Long term2
    
    
    161
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    Subtotal
    
    
    2,892
    
    
    
    1,348
    
    
    
    72
    
    
    
    66
    
    
    
    6Containers off lease
    
    
    106
    
    
    
    85
    
    
    
    
    
    
    
    10
    
    
    
    Total container fleet
    
    
    2,998
    
    
    
    1,433
    
    
    
    72
    
    
    
    76
    
    
    
    6
 
 1.
    
    Short term leases represent term leases that are either scheduled for renegotiation or that
may expire on or before September 2007.2.
    
    Long term leases represent term leases, the majority of which will expire between October
2007 and December 2010. Dry Cargo
    
    
    RefrigeratedContainers
    
    
    Containers40-Foot20-Foot
    
    
    40-Foot
    
    
    High-Cube
    
    
    20-Foot
    
    
    40-FootUnits
    
    
    %
    
    
    Units
    
    
    %
    
    
    Units
    
    
    %
    
    
    Units
    
    
    %
    
    
    Units
    
    
    %Total purchases
    
    
    9,743
    
    
    
    100
    %
    
    
    5,426
    
    
    
    100
    %
    
    
    213
    
    
    
    100
    %
    
    
    248
    
    
    
    100
    %
    
    
    309
    
    
    
    100
    %Less disposals
    
    
    6,745
    
    
    
    69
    %
    
    
    3,993
    
    
    
    74
    %
    
    
    141
    
    
    
    66
    %
    
    
    172
    
    
    
    69
    %
    
    
    303
    
    
    
    98
    %Remaining fleet at
September 30, 2006
    
    
    2,998
    
    
    
    31
    %
    
    
    1,433
    
    
    
    26
    %
    
    
    72
    
    
    
    34
    %
    
    
    76
    
    
    
    31
    %
    
    
    6
    
    
    
    2
    %
 Three Months Ended September 30, 2006 Compared to the Three Months Ended September 30, 2005
 Net lease revenue
 Three Months EndedSeptember 30,
    
    September 30,2006
    
    2005Fleet size (measured in twenty-foot equivalent units (TEU))Dry cargo containers
    
    
    6,210
    
    
    
    9,119Refrigerated containers
    
    
    90
    
    
    
    178Average utilization ratesDry cargo containers
    
    
    96
    %
    
    
    96
    %Refrigerated containers
    
    
    82
    %
    
    
    82
    %
 Depreciation expense
 Other general and administrative expenses
 14




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##### Table of Contents



Net gain on disposal of equipment
  Nine Months Ended September 30, 2006 Compared to the Nine Months Ended September 30, 2005
 Net lease revenue
 Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005Fleet size (measured in twenty-foot equivalent units (TEU))Dry cargo containers
    
    
    7,034
    
    
    
    9,778Refrigerated containers
    
    
    103
    
    
    
    210Average utilization ratesDry cargo containers
    
    
    93
    %
    
    
    96
    %Refrigerated containers
    
    
    80
    %
    
    
    84
    %
 Depreciation expense
 Other general and administrative expenses
 Net gain on disposal of equipment
 15




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##### Table of Contents



Liquidity and Capital Resources
     Cash from Operating Activities
 Cash from Investing Activities
 Cash from Financing Activities
 16




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##### Table of Contents



Critical Accounting Policies
  
    
    Container equipment  depreciable lives
    
    Container equipment  valuation
    
    Allowance for doubtful accounts
  Inflation
  
 Quantitative and Qualitative Disclosures about Market Risk
 Exchange rate risk:
 
 Controls and Procedures
   17




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##### Table of Contents



PART II  OTHER INFORMATION
 
   
   
   
   
   
   
   ExhibitNo.
    
    Description
    
    Method of Filing3(a)
    
    Limited Partnership Agreement, amended and
restated as of December 2, 1991
    
    *3(b)
    
    Certificate of Limited Partnership
    
    **10
    
    Form of Leasing Agent Agreement with
Cronos Containers Limited
    
    ***31.1
    
    Rule 13a-14 Certification
    
    Filed with this document31.2
    
    Rule 13a-14 Certification
    
    Filed with this document32
    
    Section 1350 Certification
    
    Filed with this document
****
 
 *
    
    Incorporated by reference to Exhibit A to the Prospectus of the Partnership dated December 2,
1991, included as part of Registration Statement on Form S-1 (No. 33-42697)**
    
    Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (No.
33-42697)***
    
    Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (No.
33-42697)****
    
    This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as
required by Section 906, is not to be deemed filed with the Commission or subject to the
rules and regulations promulgated by the Commission under the Securities Exchange Act of 1934,
as amended, or to the liabilities of Section 18 of said Act. 18




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##### Table of Contents



SIGNATURES
  IEA INCOME FUND XII, L.P.By
    
    Cronos Capital Corp.The General PartnerBy
    
    /s/ Dennis J. TietzDennis J. TietzPresident and Director of Cronos Capital Corp. (CCC)Principal Executive Officer of CCCBy
    
    /s/ John KallasJohn KallasChief Financial Officer andDirector of Cronos Capital Corp. (CCC)Principal Financial and Accounting Officer of CCC
  19




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description
    
    Method of Filing3(a)
    
    Limited Partnership Agreement, amended and
restated as of December 2, 1991
    
    *3(b)
    
    Certificate of Limited Partnership
    
    **10
    
    Form of Leasing Agent Agreement with
Cronos Containers Limited
    
    ***31.1
    
    Rule 13a-14 Certification
    
    Filed with this document31.2
    
    Rule 13a-14 Certification
    
    Filed with this document32
    
    Section 1350 Certification
    
    Filed with this document
****
 
 *
    
    Incorporated by reference to Exhibit A to the Prospectus of the Partnership dated December
2, 1991, included as part of Registration Statement on Form S-1 (No. 33-42697)**
    
    Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (No.
33-42697)***
    
    Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (No.
33-42697)****
    
    This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as
required by Section 906, is not deemed to be filed with the Commission or subject to the
rules and regulations promulgated by the Commission under the Securities Exchange Act of 1934,
as amended, or to the liabilities of Section 18 of said Act.