-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QItmrQfxIjs5TjL6rrwc9IX+Ozui/OueXRgIk3OKfTS0AFBl+uaZXqVpzx7pLdp5 JRxRMDAIPKdrUlSFoHOz9g== 0000950149-97-002034.txt : 19971111 0000950149-97-002034.hdr.sgml : 19971111 ACCESSION NUMBER: 0000950149-97-002034 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971110 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRONOS GLOBAL INCOME FUND XVI LP CENTRAL INDEX KEY: 0001002519 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 943230380 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27496 FILM NUMBER: 97711384 BUSINESS ADDRESS: STREET 1: 444 MARKET ST 15TH FLOOR STREET 2: C/O CRONOS CAPITAL CORP CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4156778990 MAIL ADDRESS: STREET 1: 444 MARKET ST 15TH FLOOR STREET 2: C/O CRONOS CAPITAL CORP CITY: SAN FRANCISCO STATE: CA ZIP: 94111 10-Q 1 CRONOS GLOBAL XVI 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 SEPTEMBER 30, 1997 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.) 444 Market 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 SEPTEMBER 30, 1997 TABLE OF CONTENTS
PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - September 30, 1997 (unaudited) and December 31, 1996 4 Statement of Operations for the three months ended September 30, 1997 and 1996, the nine months ended September 30, 1997 and for the period March 29, 1996 (commencement of operations) to September 30, 1996 (unaudited) 5 Statement of Cash Flows for the nine months ended September 30, 1997 and for the period March 29, 1996 (commencement of operations) to September 30, 1996 (unaudited) 6 Notes to Unaudited Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II - OTHER INFORMATION Item 5. Other Materially Important Events 14 Item 6. Exhibits and Reports on Form 8-K 15
2 3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Presented herein are the Registrant's balance sheets as of September 30, 1997 and December 31, 1996, statements of operations for the three months ended September 30, 1997 and 1996, the nine months ended September 30, 1997 and for the period March 29, 1996 (commencement of operations) to September 30, 1996, and statements of cash flows for the nine months ended September 30, 1997 and for the period March 29, 1996 (commencement of operations) to September 30, 1996. 3 4 CRONOS GLOBAL INCOME FUND XVI, L.P. BALANCE SHEETS (UNAUDITED)
September 30, December 31, Assets 1997 1996 ------------- ------------- Current assets: Cash and cash equivalents, includes $1,005,107 at September 30, 1997 and $1,755,486 at December 31, 1996 in interest-bearing accounts $ 1,119,307 $ 1,755,884 Net lease receivables due from Leasing Company (notes 1 and 2) 543,951 208,133 ------------- ------------- Total current assets 1,663,258 1,964,017 ------------- ------------- Container rental equipment, at cost 26,762,082 24,701,402 Less accumulated depreciation 2,051,507 894,114 ------------- ------------- Net container rental equipment 24,710,575 23,807,288 ------------- ------------- Organizational costs, net 193,084 229,005 ------------- ------------- $ 26,566,917 $ 26,000,310 ============= ============= Liabilities and Partners' Capital Current liabilities: Due to general partner (notes 1 and 3) $ -- $ 17,299 Container rental equipment purchases payable -- 341,486 ------------- ------------- Total current liabilities -- 358,785 ------------- ------------- Partners' capital (deficit): General partner (2,698) (1,820) Limited partners 26,569,615 25,643,345 ------------- ------------- Total partners' capital 26,566,917 25,641,525 ------------- ------------- $ 26,566,917 $ 26,000,310 ============= =============
The accompanying notes are an integral part of these financial statements. 4 5 CRONOS GLOBAL INCOME FUND XVI, L.P. STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended ------------------------------- Nine For the Period March 29, 1996 September 30, September 30, Months Ended (Commencement of Operations) 1997 1996 September 30, 1997 through September, 30, 1996 ------------ ------------ ------------------ ----------------------------- Net lease revenue (notes 1 and 4) $ 845,974 $ 474,803 $ 2,277,885 $ 685,769 Other operating expenses: Depreciation and amortization 403,594 408,993 1,197,543 591,295 Other general and administrative expenses 15,785 6,591 48,546 12,003 ------------ ------------ ------------ ------------ 419,379 415,484 1,246,089 603,298 ------------ ------------ ------------ ------------ Earnings from operations 426,595 59,219 1,031,796 82,471 Other income: Interest income 14,152 12,663 56,875 40,537 Net gain on disposal of equipment 3,068 -- 6,420 -- ------------ ------------ ------------ ------------ 17,220 12,663 63,295 40,537 ------------ ------------ ------------ ------------ Net earnings $ 443,815 $ 71,882 $ 1,095,091 $ 123,008 ============ ============ ============ ============ Allocation of net earnings: General partner $ 32,734 $ 10,025 $ 89,647 $ 11,796 Limited partners 411,081 61,857 1,005,444 111,212 ------------ ------------ ------------ ------------ $ 443,815 $ 71,882 $ 1,095,091 $ 123,008 ============ ============ ============ ============ Limited partners' per unit share of net earnings $ .41 $ .06 $ 1.00 $ .15 ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 5 6 CRONOS GLOBAL INCOME FUND XVI, L.P. STATEMENT OF CASH FLOWS (UNAUDITED)
For the Period March 29, 1996, Nine Months Ended (Commencement of Operations) September 30, 1997 through September 30, 1996 ------------------ ------------------------------ Net cash provided by operating activities $ 1,979,384 $ 456,296 Cash flows provided by (used in) investing activities: Proceeds from sale of container rental equipment 12,500 -- Purchase of container rental equipment (2,339,370) (20,212,460) Acquisition fees paid to general partner (117,116) (1,010,623) ------------ ------------ Net cash used in investing activities (2,443,986) (21,223,083) ------------ ------------ Cash flows provided by (used in) financing activities: Capital contributions 1,931,060 25,509,480 Underwriting commissions (193,196) (2,550,858) Offering and organizational expenses (101,336) (1,122,938) Distribution to partners (1,808,503) (263,888) ------------ ------------ Net cash provided by (used in) financing activities (171,975) 21,571,796 ------------ ------------ Net increase (decrease) in cash and cash equivalents (636,577) 805,009 Cash and cash equivalents at January 1 1,755,884 100 ------------ ------------ Cash and cash equivalents at September 30 $ 1,119,307 $ 805,109 ============ ============
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. Cronos Capital Corp. ("CCC") is the general partner and, with its affiliate Cronos Containers Limited (the "Leasing Company"), manages and controls the business of the Partnership. 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 terminates on December 27, 1997. As of September 30, 1997, the Partnership operated 3,842 twenty-foot, 1,048 forty-foot and 459 forty-foot high-cube marine dry cargo containers, 90 twenty-foot and 300 forty-foot refrigerated containers, and 52 twenty four thousand-liter tanks. (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 two 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. 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 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 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. (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 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 September 30, 1997 and December 31, 1996 were as follows:
September 30, December 31, 1997 1996 ------------ ------------ Lease receivables, net of doubtful accounts of $22,100 at September 30, 1997 and $7,329 at December 31, 1996 $1,092,598 $ 755,259 Less: Direct operating payables and accrued expenses 317,058 302,271 Damage protection reserve 48,113 17,860 Base management fees 140,807 124,420 Reimbursed administrative expenses 42,669 102,575 ---------- ---------- $ 543,951 $ 208,133 ========== ==========
8 9 CRONOS GLOBAL INCOME FUND XVI, L.P. NOTES TO UNAUDITED FINANCIAL STATEMENTS (3) Due to General Partner The amounts due to CCC and its affiliates at December 31, 1996 consist of acquisition fees. (4) 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 billed by the Leasing Company under operating leases to ocean carriers for the containers owned by the Partnership. Net lease revenue for the three months ended September 30, 1997 and 1996, the nine months ended September 30, 1997 and the period March 29, 1996 (commencement of operations) through September 30, 1996 were as follows:
Three Months Ended Nine ------------------------------- Months Ended For the Period March 29, 1996 September 30, September 30, September 30, (Commencement of Operations) 1997 1996 1997 through September 30, 1996 ------------ ------------ ------------ ------------------------------ Rental revenue $ 1,137,301 $ 702,215 $ 3,174,034 $ 1,037,710 Less: Rental equipment operating expenses 149,933 140,061 501,352 223,262 Base management fees 78,989 48,783 220,689 71,846 Reimbursed administrative expenses 62,405 38,568 174,108 56,833 ------------ ------------ ------------ ------------ $ 845,974 $ 474,803 $ 2,277,885 $ 685,769 ============ ============ ============ ============
(5) Container Rental Equipment Purchases As of September 30, 1997, the Partnership had purchased the following types of container rental equipment:
Purchased from Purchased Container Total Equipment Type from CCC Manufacturers Purchased -------------- -------- ------------- --------- Dry Cargo Containers: Twenty-foot - 3,853 3,853 Forty-foot - 1,050 1,050 Forty-foot high-cube - 460 460 Refrigerated Cargo Containers: Twenty-foot - 90 90 Forty-foot high-cube - 300 300 Tank Containers: 24,000-liter - 52 52
The aggregate purchase price (excluding acquisition fees) of the equipment acquired by the Partnership through September 30, 1997 was $25,524,394. The aggregate equipment had been acquired from third-party container manufacturers located in South Korea, India, the People's Republic of China, Thailand and the United Kingdom. 9 10 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 September 30, 1997 and December 31, 1996. The Registrant 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. The Registrant was initially capitalized with $100 and commenced offering its limited partnership interests to the public subsequent to December 28, 1995, pursuant to its Registration Statement on Form S-1 (File No. 33-98290). The Registrant commenced operations on March 29, 1996. On February 3, 1997, Cronos Capital Corp. ("CCC"), the general partner, suspended the offer and sale of units in the Registrant. Information concerning the suspended offer and sale of units in the Registrant is incorporated by reference to the discussion in the Supplement dated February 6, 1997 to the Registration Statement on Form S-1, dated December 28, 1995 as supplemented December 27, 1996. The offering terminates December 27, 1997. For the period December 28, 1995 through February 3, 1997, the Registrant raised $31,993,340 in subscription proceeds. The following table sets forth the use of said subscription proceeds as of September 30, 1997.
Percentage of Amount Gross Proceeds ------ -------------- Gross Subscription Proceeds $31,993,340 100.0% Public Offering Expenses: Underwriting Commissions 3,199,334 10.0% Offering and Organizational Expenses 1,482,369 4.6% ----------- ------- Total Public Offering Expenses 4,681,703 14.6% ----------- ------- Net Proceeds 27,311,637 85.4% Acquisition Fees 1,276,220 4.0% Working Capital Reserve 319,933 1.0% Unexpended Proceeds 191,090 0.6% ----------- ------- Gross Proceeds Invested in Equipment $25,524,394 79.8% =========== =======
The Registrant's cash balances as of September 30, 1997 included proceeds of the offering, together with interest earned thereon, and amounts reserved as working capital. 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 Registrant. During the Registrant's first year of operations, the general partner and its affiliates agreed to defer the deduction of all base management fees and reimbursable administrative expenses from the leasing receivables due to the Registrant. Deferral of these fees ceased during the second quarter of 1997. At September 30, 1997, these deferred fees and expenses totaled $158,000. 10 11 The Registrant may rely upon financing to purchase a portion of its equipment. The amount of long-term borrowing secured by the Registrant will not exceed 20% of the aggregate purchase price of the Registrant's equipment. Once the Registrant completes its acquisition of equipment, the Registrant intends to maintain an ongoing reserve approximately equal to the greater of 1% of gross proceeds, or $100,000, to meet anticipated expenses of managing the equipment. The level of reserves will vary from time to time depending upon market conditions and the anticipated needs of the Registrant. The Registrant will not reinvest its revenues for the purchase of additional equipment. Pending expenditure for operations or distribution to the partners, these amounts may be invested in short-term, liquid investments. 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, reducing their need for leased containers. Once the demand for leased containers began to fall, per-diem rental rates were also adversely affected. Since the beginning of 1997, the container leasing industry has experienced a modest recovery as indicated by an upward trend in container utilization. The impact of this trend on the utilization rates of the Registrant has been mixed. The Registrant's dry container utilization rate increased from 80% at December 31, 1996 to 88% at September 30, 1997, while refrigerated container utilization rates increased from 77% at December 31, 1996 to 99% at September 30, 1997. Tank container utilization also increased from 88% at December 31, 1996 to 90% at September 30, 1997. Increasing cargo volumes and continuing equipment imbalances within the container fleets of shipping lines and transport companies have re-established a need for these companies to replenish their leased fleets during 1997. Although there has been an improvement in container utilization rates, per-diem rental rates continue to remain under pressure as a result of the following factors: start-up leasing companies offering new containers and low rental rates in an effort to break into the leasing market; established leasing companies reducing rates to very low levels; and a continuing oversupply of containers. The recent volatility of the Hong Kong and other Asian financial markets and its impact on trade, shipping, and container leasing, especially intra-Asia and Asia-Europe routes, has yet to be determined. While these conditions could impact the Registrant's financial condition and operating performance through the remainder of 1997 and first half of 1998, the Registrant is well positioned to take advantage of further improvements in the container leasing market. 2) Material changes in the results of operations between the three-month periods ended September 30, 1997 and 1996, the nine-month period ended September 30, 1997 and the period March 29, 1996 (commencement of operations) to September 30, 1996. Net lease revenue for the three and nine-month periods ended September 30, 1997 was $845,974 and $2,277,885, respectively, an increase of approximately 44% and 70% from the same three month period in the prior year and the period March 29, 1996 (commencement of operations) to September 30, 1996, respectively. Gross rental revenue (a component of net lease revenue) for the three and nine-month periods ended September 30, 1997 was $1,137,301 and $3,174,034, respectively, reflecting an increase of 62% and 206% from the same three month period in the prior year and the period March 29, 1996 (commencement of operations) to September 30, 1996, respectively. During 1997, gross lease revenue was primarily impacted by an increase in fleet size and utilization rates. The average dry container per-diem rental rate for the three and nine-month periods ended September 30, 1997 declined 4% when compared to the same three month period in the prior year and the period March 29, 1996 (commencement of operations) to September 30, 1996. Average refrigerated container per-diem rental rates for the three month period ended September 30, 1997 declined 11%, when compared to the same period in the prior year. While, average refrigerated container per-diem rental rates for the nine month period ended September 30, 1997 remained unchanged when compared to the period March 29, 1996 (commencement of operations) to September 30, 1996. Average tank container per-diem rental rates for the three month period ended September 30, 1997 decreased 6% when compared to the same period in the prior year. However, average tank container per-diem rental rate for the nine month period ended September 30, 1997 increased 28% when compared to the period March 29, 1996 (commencement of operations) to September 30, 1996. 11 12 The Registrant's average fleet size and utilization rates for the three-month periods ended September 30, 1997 and 1996, the nine-month period ended September 30, 1997 and the period March 29, 1996 (commencement of operations) to September 30, 1996 were as follows:
Three Months Ended -------------------------------- Nine For the Period March 29, 1996 September 30, September 30, Months Ended (Commencement of Operations) 1997 1996 September 30, 1997 through September 30, 1996 ------------- ------------- ------------------ ----------------------------- Average Fleet Size (measured in twenty-foot equivalent units (TEU)) Dry cargo containers 6,862 6,522 6,749 4,324 Refrigerated cargo containers 690 623 690 386 Tank containers 52 58 52 45 Average Utilization Dry cargo containers 88% 62% 84% 49% Refrigerated cargo containers 99% 67% 96% 65% Tank containers 91% 71% 88% 51%
Rental equipment operating expenses were 13% and 16% of the Registrant's gross lease revenue during the three and nine-month periods ended September 30, 1997, respectively, as compared to 20% and 22% during the three month period ended September 30, 1996, and for the period March 29, 1996 (commencement of operations) to September 30, 1996, respectively. These decreases were largely attributable to a reduction in costs associated with higher utilization levels, including storage, handling and repositioning. Direct operating expenses also include agent fees and insurance premiums, as well as provisions for doubtful accounts and repair costs for containers covered under damage protection clauses. Direct operating costs are affected by the quantity of off-hire containers as well as the frequency at which the containers are redelivered. 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 or 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. Following Arthur Andersen's resignation, the Parent Company subsequently received notification from the Securities and Exchange Commission that it was conducting a private investigation of the Parent Company regarding the events and circumstances leading to Arthur Andersen's resignation. The results of this investigation are still pending. Accordingly, the Registrant does not, at this time, have sufficient information to determine the impact, if any, that the Securities and Exchange Commission investigation of the Parent Company and the concerns expressed by Arthur Andersen in its letter of resignation may have on the future operating results and financial condition of the Registrant or the Leasing Company's ability to manage the Registrant's 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. 12 13 Arthur Andersen's report on the financial statements of Cronos Capital Corp. and the Registrant, for either of 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 Registrant's previous two 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. The Registrant retained a new auditor, Moore Stephens, P.C. ("Moore Stephens") on April 10, 1997, as reported in the Registrant's Current Report on Form 8-K, filed April 14, 1997. The President of the Leasing Company, a subsidiary of the Parent Company, along with two marketing Vice Presidents, resigned in June 1997. These vacancies were filled by qualified, long-time employees who average over 15 years of experience in the container leasing industry, therefore providing continuity in the management of the Leasing Company. The Registrant and general partner do not believe these changes will have a material impact on the future operating results and financial condition of the Registrant. Cautionary Statement This Quarterly Report on Form 10-Q 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 2., Management's Discussion and Analysis of Financial Condition and Results of Operations; and those detailed from time to time in the filings of Registrant with the Securities and Exchange Commission. 13 14 PART II - OTHER INFORMATION Item 5. Other Materially Important Events Equipment Acquisitions Pursuant to its undertakings made in its Registration Statement No. 33-98290, Section 7.2 (h) of the Partnership Agreement, the Registrant had purchased the following types of equipment as of September 30, 1997:
Purchased from Registrant's Purchased Container Total Average Cost Equipment Type from CCC Manufacturers Purchased Per Container -------------- --------- -------------- --------- ------------- Dry Cargo Containers: Twenty-foot - 3,853 3,853 $ 2,369 Forty-foot - 1,050 1,050 $ 3,520 Forty-foot high-cube - 460 460 $ 3,878 Refrigerated Cargo Containers: Twenty-foot - 90 90 $21,108 Forty-foot high-cube - 300 300 $25,655 Tank Containers: 24,000-liter - 52 52 $25,394
The aggregate purchase price (excluding acquisition fees) of the equipment acquired by the Registrant through September 30, 1997 was $25,524,394. The aggregate equipment had been acquired from third-party container manufacturers located in South Korea, India, the People's Republic of China, Thailand and the United Kingdom. 14 15 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, 1996 3(b) Certificate of Limited Partnership of the Registrant ** 10 Form of Leasing Agent Agreement with Cronos Containers *** Limited 27 Financial Data Schedule Filed with this document
(b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter ended September 30, 1997. - ---------- * Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant dated December 28, 1996, 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) 15 16 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/ JOHN KALLAS ------------------------------------ John Kallas Vice President, Treasurer Principal Finance & Accounting Officer Date: November 10, 1997 16 17 EXHIBIT INDEX
Exhibit No. Description Method of Filing ------- ----------- ---------------- 3(a) Limited Partnership Agreement of the Registrant, * amended and restated as of December 28, 1996 3(b) Certificate of Limited Partnership of the Registrant ** 10 Form of Leasing Agent Agreement with Cronos Containers *** Limited 27 Financial Data Schedule Filed with this document
- ---------- * Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant dated December 28, 1996, 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) 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT SEPTEMBER 30, 1997 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED AS PART OF ITS QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD SEPTEMBER 30, 1997 9-MOS DEC-31-1997 JAN-01-1997 SEP-01-1997 1,119,307 0 543,951 0 0 1,663,258 26,762,082 2,051,507 26,566,917 0 0 0 0 0 26,566,917 26,566,917 0 2,277,885 0 1,246,089 0 0 0 0 0 0 0 0 0 1,095,091 0 0
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