1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission file number 0-23886
CRONOS GLOBAL INCOME FUND XV, L.P.
(Exact name of registrant as specified in its charter)
California 94-3186624
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Front Street, 15th Floor, San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
(415) 677-8990
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]. No [ ].
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CRONOS GLOBAL INCOME FUND XV, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2001
TABLE OF CONTENTS
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 2001 (unaudited) and December 31, 2000 4
Statements of Operations for the three months ended March 31, 2001 and 2000 (unaudited) 5
Statements of Cash Flows for the three months ended March 31, 2001 and 2000 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of March 31,
2001 and December 31, 2000, statements of operations for the three
months ended March 31, 2001 and 2000, and statements of cash flows for
the three months ended March 31, 2001 and 2000.
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CRONOS GLOBAL INCOME FUND XV, L.P.
BALANCE SHEETS
March 31, December 31,
2001 2000
------------- ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents, includes $3,985,465 at March 31, 2001
and $3,966,004 at December 31, 2000 in interest-bearing accounts $ 4,091,719 $ 4,126,805
Net lease receivables due from Leasing Company
(notes 1 and 2) 1,451,719 1,376,889
------------- ------------
Total current assets 5,543,438 5,503,694
------------- ------------
Container rental equipment, at cost 124,006,454 124,174,507
Less accumulated depreciation 43,410,344 41,660,323
------------- ------------
Net container rental equipment 80,596,110 82,514,184
------------- ------------
Total assets $ 86,139,548 $ 88,017,878
============= ============
Partners' Capital
Partners' capital (deficit):
General partner $ (16,569) $ 684
Limited partners 86,156,117 88,017,194
------------- ------------
Total partners' capital $ 86,139,548 $ 88,017,878
============= ============
The accompanying notes are an integral part of these financial statements.
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CRONOS GLOBAL INCOME FUND XV, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
--------------------------------
March 31, March 31,
2001 2000
---------- ----------
Net lease revenue (notes 1 and 3) $2,319,072 $2,485,959
Other operating expenses:
Depreciation 1,808,904 1,810,339
Other general and administrative expenses 88,052 50,685
---------- ----------
1,896,956 1,861,024
---------- ----------
Income from operations 422,116 624,935
Other income:
Interest income 50,498 47,516
Net gain on disposal of equipment 1,545 12,891
---------- ----------
52,043 60,407
---------- ----------
Net income $ 474,159 $ 685,342
========== ==========
Allocation of net income:
General partner $ 100,370 $ 122,497
Limited partners 373,789 562,845
---------- ----------
$ 474,159 $ 685,342
========== ==========
Limited partners' per unit share of net income $ 0.05 $ 0.08
========== ==========
The accompanying notes are an integral part of these financial statements.
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CRONOS GLOBAL INCOME FUND XV, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
-----------------------------------
March 31, March 31,
2001 2000
----------- -----------
Net cash provided by operating activities $ 2,207,291 $ 3,271,540
Cash flows provided by investing activities:
Proceeds from disposal of equipment 110,112 105,898
Cash flows used in financing activities:
Distribution to partners (2,352,489) (2,572,054)
----------- -----------
Net (decrease) increase in cash and cash equivalents (35,086) 805,384
Cash and cash equivalents at January 1 4,126,805 3,214,151
----------- -----------
Cash and cash equivalents at March 31 $ 4,091,719 $ 4,019,535
=========== ===========
The accompanying notes are an integral part of these financial statements.
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CRONOS GLOBAL INCOME FUND XV, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
Cronos Global Income Fund XV, L.P. (the "Partnership") is a
limited partnership organized under the laws of the State of
California on August 26, 1993, for the purpose of owning and
leasing marine cargo containers, special purpose containers and
container related equipment worldwide to ocean carriers. To this
extent, the Partnership's operations are subject to the
fluctuations of world economic and political conditions. Such
factors may affect the pattern and levels of world trade. The
Partnership believes that the profitability of, and risks
associated with, leases to foreign customers is generally the
same as those of leases to domestic customers. The Partnership's
leases generally require all payments to be made in United
States currency.
Cronos Capital Corp. ("CCC") is the general partner and, with
its affiliate Cronos Containers Limited (the "Leasing Company"),
manages the business of the Partnership. CCC and the Leasing
Company also manage the container leasing business for other
partnerships affiliated with the general partner. The
Partnership shall continue until December 31, 2012, unless
sooner terminated upon the occurrence of certain events.
The Partnership commenced operations on February 22, 1994, when
the minimum subscription proceeds of $2,000,000 were received
from over 100 subscribers (excluding from such count
Pennsylvania residents, the general partner, and all affiliates
of the general partner). The Partnership offered 7,500,000 units
of limited partnership interest at $20 per unit or $150,000,000.
The offering terminated on December 15, 1995, at which time
7,151,569 limited partnership units had been sold.
(b) Leasing Company and Leasing Agent Agreement
The Partnership has entered into a Leasing Agent Agreement
whereby the Leasing Company has the responsibility to manage the
leasing operations of all equipment owned by the Partnership.
Pursuant to the Agreement, the Leasing Company is responsible
for leasing, managing and re-leasing the Partnership's
containers to ocean carriers, and has full discretion over which
ocean carriers and suppliers of goods and services it may deal
with. The Leasing Agent Agreement permits the Leasing Company to
use the containers owned by the Partnership, together with other
containers owned or managed by the Leasing Company and its
affiliates, as part of a single fleet operated without regard to
ownership. Since the Leasing Agent Agreement meets the
definition of an operating lease in Statement of Financial
Accounting Standards (SFAS) No. 13, it is accounted for as a
lease under which the Partnership is lessor and the Leasing
Company is lessee.
The Leasing Agent Agreement generally provides that the Leasing
Company will make payments to the Partnership based upon rentals
collected from ocean carriers after deducting direct operating
expenses and management fees to CCC and the Leasing Company. The
Leasing Company leases containers to ocean carriers, generally
under operating leases which are either master leases or term
leases (mostly one to five years). Master leases do not specify
the exact number of containers to be leased or the term that
each container will remain on hire but allow the ocean carrier
to pick up and drop off containers at various locations, and
rentals are based upon the number of containers used and the
applicable per-diem rate. Accordingly, rentals under master
leases are all variable and contingent upon the number of
containers used. Most containers are leased to ocean carriers
under master leases; leasing agreements with fixed payment terms
are not material to the financial statements. Since there are no
material minimum lease rentals, no disclosure of minimum lease
rentals is provided in these financial statements.
(Continued)
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CRONOS GLOBAL INCOME FUND XV, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(c) Basis of Accounting
The Partnership utilizes the accrual method of accounting. Net
lease revenue is recorded by the Partnership in each period
based upon its leasing agent agreement with the Leasing Company.
Net lease revenue is generally dependent upon operating lease
rentals from operating lease agreements between the Leasing
Company and its various lessees, less direct operating expenses
and management fees due in respect of the containers specified
in each operating lease agreement.
(d) Financial Statement Presentation
These financial statements have been prepared without audit.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting procedures have been omitted. It is
suggested that these financial statements be read in conjunction
with the financial statements and accompanying notes in the
Partnership's latest annual report on Form 10-K.
The financial statements are prepared in conformity with
accounting principles generally accepted in the United States
(GAAP), which requires the Partnership to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reported period. Actual
results could differ from those estimates.
The interim financial statements presented herewith reflect all
adjustments of a normal recurring nature which are, in the
opinion of management, necessary to a fair statement of the
financial condition and results of operations for the interim
period presented. The results of operations for such interim
periods are not necessarily indicative of the results to be
expected for the full year.
(2) Net Lease Receivables Due from Leasing Company
Net lease receivables due from the Leasing Company are determined by
deducting direct operating payables and accrued expenses, base
management fees payable, and reimbursed administrative expenses payable
to CCC and its affiliates from the rental billings earned by the Leasing
Company under operating leases to ocean carriers for the containers
owned by the Partnership. Net lease receivables at March 31, 2001 and
December 31, 2000 were as follows:
March 31, December 31,
2001 2000
---------- ------------
Gross lease receivables $3,371,563 $3,555,903
Less:
Direct operating payables and accrued expenses 927,078 988,524
Damage protection reserve 225,917 353,669
Base management fees 279,204 325,402
Reimbursed administrative expenses 139,926 175,266
Allowance for doubtful accounts 347,719 336,153
---------- ----------
Net lease receivables $1,451,719 $1,376,889
========== ==========
(Continued)
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CRONOS GLOBAL INCOME FUND XV, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(3) Net Lease Revenue
Net lease revenue is determined by deducting direct operating expenses,
base management fees and reimbursed administrative expenses to CCC 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 each of the three-month periods ended
March 31, 2001 and 2000 were as follows:
Three Months Ended
--------------------------------
March 31, March 31,
2001 2000
---------- ----------
Rental revenue (note 4) $3,638,390 $4,178,609
Less:
Rental equipment operating expenses 883,023 1,137,686
Base management fees 251,084 274,991
Reimbursed administrative expenses 185,211 279,973
---------- ----------
$2,319,072 $2,485,959
========== ==========
(4) Operating Segment
The Financial Accounting Standards Board has issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
which changes the way public business enterprises report financial and
descriptive information about reportable operating segments. An
operating segment is a component of an enterprise that engages in
business activities from which it may earn revenues and incur expenses,
whose operating results are regularly reviewed by the enterprise's chief
operating decision maker to make decisions about resources to be
allocated to the segment and assess its performance, and about which
separate financial information is available. Management operates the
Partnership's container fleet as a homogenous unit and has determined,
after considering the requirements of SFAS No. 131, that as such it has
a single reportable operating segment.
The Partnership derives its revenues from leasing marine cargo
containers. As of March 31, 2001, the Partnership operated 25,688
twenty-foot, 8,593 forty-foot and 2,127 forty-foot high-cube marine dry
cargo containers, 462 twenty-foot and 99 forty-foot high-cube
refrigerated cargo containers, and 225 twenty-four thousand-liter tanks.
A summary of gross lease revenue, by product, for each of the
three-month periods ended March 31, 2001 and 2000 follows:
Three Months Ended
--------------------------------
March 31, March 31,
2001 2000
---------- ----------
Dry cargo containers $3,063,970 $3,523,058
Refrigerated containers 420,934 474,996
Tank containers 153,486 180,555
---------- ----------
Total $3,638,390 $4,178,609
========== ==========
Due to the Partnership's lack of information regarding the physical
location of its fleet of containers when on lease in the global shipping
trade, it is impracticable to provide the geographic area information
required by SFAS No. 131.
******
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
It is suggested that the following discussion be read in conjunction with the
Registrant's most recent annual report on Form 10-K.
1) Material changes in financial condition between March 31, 2001 and
December 31, 2000.
At March 31, 2001, the Registrant had $4,091,719 in cash and cash
equivalents, a decrease of $35,086 from the cash balances at December
31, 2000. Contributing to this decline was the Registrants' results from
operations, which were impacted by conditions created by the slowdown in
the global economy. At March 31, 2001, the Registrant had approximately
$135,000 in cash generated from equipment sales reserved as part of its
cash balances. Throughout the remainder of 2001, the Registrant expects
to continue using cash generated from equipment sales to purchase and
replace containers that have been lost or damaged beyond repair.
The Registrant's operating performance contributed to a 5% decline in
net lease receivables at March 31, 2001 when compared to December 31,
2000. The decrease is primarily due to a 5% decrease in gross lease
receivables, a component of net lease receivables.
The Registrant's cash distribution from operations for the first quarter
of 2001 was 6.2% (annualized) of the limited partners' original capital
contributions, a decrease of 0.1% compared to the fourth quarter of
2000. These distributions are directly related to the Registrant's
results from operations and may fluctuate accordingly.
2) Material changes in the results of operations between the three-month
period ended March 31, 2001 and 2000.
In the first quarter of 2001, the worldwide demand for containers was
significantly impacted by the slowdown in the global economy. These
conditions are reflected in the decline of the Registrant's utilization
and per-diem rental rates from December 31, 2000 levels. The Leasing
Company has implemented a number of marketing initiatives which are
designed to target identified leasing opportunities and enhance
inventory management.
Gross rental revenue (a component of net lease revenue) for the
three-month period ended March 31, 2001 was $3,638,390, reflecting a
decline of 13% from the same period in the prior year. Gross lease
revenue was primarily impacted by lower per-diem rental rates and a
decrease in utilization rates. Dry cargo container average per-diem
rental rates for the three-month period ended March 31, 2001 declined 4%
when compared to the same period in the prior year. Refrigerated
container average per-diem rental rates for the three-month period ended
March 31, 2001 increased 1% when compared to the same three-month period
in the prior year. Tank container average per-diem rental rates for the
three-month period ended March 31, 2001 declined 9% when compared to the
same period in the prior year.
(Continued)
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The Registrant's average fleet size and utilization rates for the
three-month periods ended March 31, 2001 and March 31, 2000 were as
follows:
Three Months Ended
-----------------------------
March 31, March 31,
2001 2000
-------- --------
Average fleet size (measured in twenty-foot
equivalent units (TEU))
Dry cargo containers 47,169 46,803
Refrigerated containers 660 660
Tank containers 225 226
Average utilization
Dry cargo containers 69.2% 76.5%
Refrigerated containers 91.9% 96.5%
Tank containers 77.2% 78.0%
Rental equipment operating expenses were 24% of the Registrant's gross
lease revenue during the three-month period ended March 31, 2001, as
compared to 27% during the same three-month period ended March 31, 2000.
The decrease was primarily due to the $143,381 reduction in the
provision for doubtful accounts and related expenses, as well as a
reduction of $150,581 in repair and maintenance expenses. These
decreases were partially offset by a $109,056 increase in storage costs,
which typically increase with a reduction in equipment utilization. The
Registrant's operating results contributed to a decline in base
management fees when compared to the same period in the prior year.
The Registrant disposed of 36 twenty-foot, 15 forty-foot and five
forty-foot high-cube marine dry cargo containers during the first
quarter of 2001, as compared to 45 twenty-foot, 10 forty-foot and three
forty-foot high-cube marine dry cargo containers during the first
quarter of 2000. 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. The level of the Registrant's container disposals in
subsequent periods will also contribute to fluctuations in the net gain
or loss on disposals. As a result of current market conditions, the
Registrant will monitor the carrying value of its containers to
determine if they have been permanently impaired.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description Method of Filing
------- ----------- ----------------
3(a) Limited Partnership Agreement of the Registrant, *
amended and restated as of December 15, 1993
3(b) Certificate of Limited Partnership of the **
Registrant
10 Form of Leasing Agent Agreement with Cronos ***
Containers Limited
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended March 31, 2001.
- ----------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated December 17, 1993, included as part of Registration
Statement on Form S-1 (No. 33-69356)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement
on Form S-1 (No. 33-69356)
*** Incorporated by reference to Exhibit 10.2 to the Registration Statement
on Form S-1 (No. 33-69356)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRONOS GLOBAL INCOME FUND XV, L.P.
By Cronos Capital Corp.
The General Partner
By /s/ Dennis J. Tietz
-------------------------------------
Dennis J. Tietz
President and Director of Cronos
Capital Corp. ("CCC")
Principal Executive Officer of CCC
By /s/ John Kallas
-------------------------------------
John Kallas
Chief Financial Officer and Director
of Cronos Capital Corp. ("CCC")
Principal Financial and Accounting
Officer of CCC
Date: May 15, 2001
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EXHIBIT INDEX
Exhibit
No. Description Method of Filing
------- ----------- ----------------
3(a) Limited Partnership Agreement of the Registrant, *
amended and restated as of December 15, 1993
3(b) Certificate of Limited Partnership of the **
Registrant
10 Form of Leasing Agent Agreement with Cronos ***
Containers Limited
- ----------
* Incorporated by reference to Exhibit "A" to the Prospectus of the
Registrant dated December 17, 1993, included as part of Registration
Statement on Form S-1 (No. 33-69356)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement
on Form S-1 (No. 33-69356)
*** Incorporated by reference to Exhibit 10.2 to the Registration Statement
on Form S-1 (No. 33-69356)