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 0-27496
CRONOS GLOBAL INCOME FUND XVI, L.P.
(Exact name of registrant as specified in its charter)
California 94-3230380
(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 [ ].
2
CRONOS GLOBAL INCOME FUND XVI, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2001
TABLE OF CONTENTS
PAGE
----
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 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
2
3
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.
3
4
CRONOS GLOBAL INCOME FUND XVI, L.P.
BALANCE SHEETS
March 31, December 31,
2001 2000
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents, includes $1,148,502 at March 31, 2001
and $1,132,938 at December 31, 2000 in interest-bearing accounts $ 1,173,819 $ 1,379,619
Net lease receivables due from Leasing Company
(notes 1 and 2) 280,472 262,463
------------ ------------
Total current assets 1,454,291 1,642,082
------------ ------------
Container rental equipment, at cost 31,831,794 31,851,392
Less accumulated depreciation 7,798,150 7,337,421
------------ ------------
Net container rental equipment 24,033,644 24,513,971
------------ ------------
Other assets 863,422 868,082
------------ ------------
Total assets $ 26,351,357 $ 27,024,135
============ ============
Liabilities and partners' capital
Current liabilities:
Interest payable $ 26,000 $ 35,000
Current portion of equipment debt 840,600 840,600
------------ ------------
Total current liabilities 866,600 875,600
Equipment debt less current portion 3,572,550 3,782,700
------------ ------------
Total liabilities 4,439,150 4,658,300
------------ ------------
Partners' capital (deficit):
General partner (29,269) (25,351)
Limited partners 21,941,476 22,391,186
------------ ------------
Total partners' capital 21,912,207 22,365,835
------------ ------------
Total liabilities and partners' capital $ 26,351,357 $ 27,024,135
============ ============
The accompanying notes are an integral part of these financial statements.
4
5
CRONOS GLOBAL INCOME FUND XVI, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
-------------------------------
March 31, March 31,
2001 2000
--------- ---------
Net lease revenue (notes 1 and 3) $ 791,993 $ 810,544
Other operating expenses:
Depreciation 470,289 413,423
Other general and administrative expenses 30,642 20,468
--------- ---------
500,931 433,891
--------- ---------
Income from operations 291,062 376,653
Other income (loss):
Interest income 17,475 23,255
Interest expense (89,245) --
Net gain (loss) on disposal of equipment 625 (351)
--------- ---------
(71,145) 22,904
--------- ---------
Net income $ 219,917 $ 399,557
========= =========
Allocation of net income:
General partner $ 29,760 $ 30,941
Limited partners 190,157 368,616
--------- ---------
$ 219,917 $ 399,557
========= =========
Limited partners' per unit share of net income $ 0.12 $ 0.23
========= =========
The accompanying notes are an integral part of these financial statements.
5
6
CRONOS GLOBAL INCOME FUND XVI, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
-----------------------------------
March 31, March 31,
2001 2000
----------- -----------
Net cash provided by operating activities $ 656,154 $ 43,541
Cash flows provided by (used in) investing activities:
Proceeds from disposal of equipment 21,741 17,727
Purchase of container rental equipment -- (3,305,600)
----------- -----------
21,741 (3,287,873)
----------- -----------
Cash flows (used in) provided by financing activities:
Proceeds from the issuance of term debt -- 3,305,600
Repayment of term debt (210,150) --
Distribution to partners (673,545) (673,544)
----------- -----------
(883,695) 2,632,056
----------- -----------
Net decrease in cash and cash equivalents (205,800) (612,276)
Cash and cash equivalents at January 1 1,379,619 1,987,885
----------- -----------
Cash and cash equivalents at March 31 $ 1,173,819 $ 1,375,609
=========== ===========
The accompanying notes are an integral part of these financial statements.
6
7
CRONOS GLOBAL INCOME FUND XVI, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
Cronos Global Income Fund XVI, L.P. (the "Partnership") is a
limited partnership organized under the laws of the State of
California on September 1, 1995, 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, 2015, unless
sooner terminated upon the occurrence of certain events.
The Partnership commenced operations on March 29, 1996, 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). On February 3, 1997, CCC suspended the offer
and sale of units in the Partnership. The offering terminated on
December 27, 1997.
(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)
7
8
CRONOS GLOBAL INCOME FUND XVI, 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) requires the Partnership to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reported period. Actual
results could differ from those estimates.
The interim financial statements presented herewith reflect all
adjustments of a normal recurring nature which are, in the
opinion of management, necessary to a fair statement of the
financial condition and results of operations for the interim
periods presented. The results of operations for such interim
periods are not necessarily indicative of the results to be
expected for the full year.
(2) Net Lease Receivables Due from Leasing Company
Net lease receivables due from the Leasing Company are determined by
deducting direct operating payables and accrued expenses, base
management fees payable, and reimbursed administrative expenses payable
to CCC and its affiliates from the rental billings 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 $865,487 $879,378
Less:
Direct operating payables and accrued expenses 323,216 307,566
Damage protection reserve 70,717 99,909
Base management fees payable 110,143 119,286
Reimbursed administrative expenses 38,926 49,538
Allowance for doubtful accounts 42,013 40,616
-------- --------
Net lease receivables $280,472 $262,463
======== ========
(Continued)
8
9
CRONOS GLOBAL INCOME FUND XVI, 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 was as follows:
Three Months Ended
--------------------------------
March 31, March 31,
2001 2000
---------- ----------
Rental revenue (note 4) $1,105,738 $1,123,818
Less:
Rental equipment operating expenses 186,310 175,068
Base management fees 76,669 77,503
Reimbursed administrative expenses 50,766 60,703
---------- ----------
$ 791,993 $ 810,544
========== ==========
(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 4,489
twenty-foot, 1,490 forty-foot and 1,747 forty-foot high-cube marine dry
cargo containers, 89 twenty-foot and 299 forty-foot refrigerated cargo
containers, and 52 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 $ 725,607 $ 737,971
Refrigerated containers 345,451 345,220
Tank containers 34,680 40,627
---------- ----------
Total $1,105,738 $1,123,818
========== ==========
Due to the Partnership's lack of information regarding the physical
location of its fleet of containers when on lease in the global shipping
trade, it is impracticable to provide the geographic area information
required by SFAS No. 131.
9
10
CRONOS GLOBAL INCOME FUND XVI, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(5) Equipment Debt
As of March 31, 2001, the Partnership's existing term loan debt was
$4,413,150 plus estimated accrued interest of $26,000. On March 30,
2000, the Partnership borrowed $5,043,600 under a term loan for the
purpose of acquiring additional equipment. The loan will be repaid in 21
remaining equal quarterly installments plus interest, through May 31,
2006. Interest accrues at the rate of 1.75% above the LIBOR rate which
is calculated on the first day of each quarterly interest period. Over
the life of the loan, the interest rates ranged from 7.88% to 8.58%. The
loan is secured by containers owned by the Partnership, as well as, any
income generated in connection with the containers including lease
revenue and sales proceeds. A restricted deposit of $750,000 is held in
an account with the lender as additional collateral.
As of March 31, 2001, the estimated fair value of the term loan debt was
$4,111,044. The fair value of the term loan has been calculated using
the market rates prevailing at April 30, 2001.
******
10
11
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 $1,173,819 in cash and cash
equivalents, a decrease of $205,800 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.
During the first quarter of 2001, cash from operations equivalent to
$210,150 was used to repay principal on the Registrant's existing term
loan debt. In addition to a restricted deposit of $750,000 held in an
account with the lender as additional collateral, the Registrant has
increased its working capital reserves by approximately $300,000,
equivalent to one quarter's principal and interest payment.
The Registrant's operating performance contributed to a 7% increase in
net lease receivables at March 31, 2001 when compared to December 31,
2000. The increase is primarily due to a decrease in reimbursable
administrative expenses and the provision for damage protection reserve,
partially offset by an increase in direct operating payables and accrued
expenses.
The Registrant's cash distribution from operations for the first quarter
of 2001 was 8% (annualized) of the limited partners' original capital
contributions, unchanged from 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
periods 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.
Net lease revenue for the three-month period ended March 31, 2001 was
$791,993, a decrease of approximately 2% from the same three-month
period in the prior year. Gross rental revenue (a component of net lease
revenue) for the three-month period ended March 31, 2001 was $1,105,738,
reflecting a decrease of 2% from the same three-month period in the
prior year. Dry cargo container average per-diem rental rates for the
three-month period ended March 31, 2001 declined approximately 3% when
compared to the same three-month period in the prior year. Refrigerated
container average per-diem rental rates for the three-month period ended
March 31, 2001 remained unchanged when compared to the same period in
the prior year. Tank container average per-diem rental rates for the
three-month period ended March 31, 2001 declined 7% when compared to the
same period in the prior year.
(Continued)
11
12
The Registrant's average fleet size and utilization rates for the
three-month periods ended March 31, 2001 and 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 10,966 6,815
Refrigerated containers 687 687
Tank containers 52 52
Average utilization
Dry cargo containers 76.3% 80.5%
Refrigerated containers 96.9% 95.6%
Tank containers 66.3% 75.2%
Rental equipment operating expenses were 17% of the Registrant's gross
lease revenue during the three-month period ended March 31, 2001, as
compared to 16% during the same three-month period ended March 31, 2000.
This increase was largely attributable to an increase in handling and
storage costs associated with fluctuating utilization levels,
substantially offset by the decreases in repair and maintenance expense
and the provision for doubtful accounts. Interest expense of $89,245 was
incurred in the first quarter of 2001 related to the Registrant's term
loan obtained during 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
12
13
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 28, 1995
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 28, 1995, included as part of Registration
Statement on Form S-1 (No. 33-98290)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement
on Form S-1 (No. 33-98290)
*** Incorporated by reference to Exhibit 10.2 to the Registration Statement
on Form S-1 (No. 33-98290)
13
14
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 XVI, 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
14
15
EXHIBIT INDEX
Exhibit
No. Description Method of Filing
------- ----------- ----------------
3(a) Limited Partnership Agreement of the Registrant, *
amended and restated as of December 28, 1995
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 28, 1995, included as part of Registration
Statement on Form S-1 (No. 33-98290)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement
on Form S-1 (No. 33-98290)
*** Incorporated by reference to Exhibit 10.2 to the Registration Statement
on Form S-1 (No. 33-98290)