-----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, LzG8VuQsbdBYORFwAL7FZZnO2XXs89JZdM4bbTOmtvvWonl3YJjcAsc1jZxc2/vb Qwnfu2pxz9+SMHNU6XxcVA== 0000950149-96-001823.txt : 19961113 0000950149-96-001823.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950149-96-001823 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRONOS GLOBAL INCOME FUND XIV L P CENTRAL INDEX KEY: 0000891332 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 943163375 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23158 FILM NUMBER: 96659063 BUSINESS ADDRESS: STREET 1: 444 MARKET ST 15TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4156778990 10-Q 1 FORM 10-Q 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, 1996 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 0-23158 CRONOS GLOBAL INCOME FUND XIV, L.P. (Exact name of registrant as specified in its charter) California 94-3163375 (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 XIV, L.P. REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 TABLE OF CONTENTS
PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - September 30, 1996 (unaudited) and December 31, 1995 4 Statements of Operations for the three and nine months ended September 30, 1996 and 1995 (unaudited) 5 Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 (unaudited) 6 Notes to Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12
2 3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Presented herein are the Registrant's balance sheets as of September 30, 1996 and December 31, 1995, statements of operations for the three and nine months ended September 30, 1996 and 1995, and statements of cash flows for the nine months ended September 30, 1996 and 1995. 3 4 CRONOS GLOBAL INCOME FUND XIV, L.P. BALANCE SHEETS (UNAUDITED)
September 30, December 31, 1996 1995 ----------- ----------- Assets Current assets: Cash, includes $592,628 at September 30, 1996 and $467,304 at December 31, 1995 in interest-bearing accounts $ 593,087 $ 467,597 Short-term investments 1,001,752 1,451,742 Net lease receivables due from Leasing Company (notes 1 and 2) 1,153,736 1,121,032 ----------- ----------- Total current assets 2,748,575 3,040,371 ----------- ----------- Container rental equipment, at cost 52,928,400 53,145,814 Less accumulated depreciation 9,832,173 7,551,375 ----------- ----------- Net container rental equipment 43,096,227 45,594,439 ----------- ----------- Organizational costs, net 505,355 713,470 ----------- ----------- $46,350,157 $49,348,280 =========== =========== Liabilities and Partners' Capital Current liabilities: Due to general partner (notes 1 and 3) $ 91,040 $ 430,160 Due to manufacturer -- 122,400 ----------- ----------- Total current liabilities 91,040 552,560 ----------- ----------- Partners' capital: General partner 372 223 Limited partners 46,258,745 48,795,497 ----------- ----------- Total partners' capital 46,259,117 48,795,720 ----------- ----------- $46,350,157 $49,348,280 =========== ===========
The accompanying notes are an integral part of these statements. 4 5 CRONOS GLOBAL INCOME FUND XIV, L.P. STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended ------------------------------ ------------------------------ September 30, September 30, September 30, September 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Net lease revenue (notes 1 and 4) $1,603,150 $2,123,554 $5,170,080 $6,159,852 Other operating expenses: Depreciation and amortization 841,822 1,176,401 2,527,919 2,866,556 Other general and administrative expenses 25,585 13,852 70,239 74,989 ---------- ---------- ---------- ---------- 867,407 1,190,253 2,598,158 2,941,545 ---------- ---------- ---------- ---------- Earnings from operations 735,743 933,301 2,571,922 3,218,307 Other income: Interest income 20,879 21,853 64,101 61,704 Net gain on disposal of equipment 10,214 30,457 63,005 81,856 ---------- ---------- ---------- ---------- 31,093 52,310 127,106 143,560 ---------- ---------- ---------- ---------- Net earnings $ 766,836 $ 985,611 $2,699,028 $3,361,867 ========== ========== ========== ========== Allocation of net earnings: General partner $ 78,555 $ 104,599 $ 261,931 $ 284,843 Limited partners 688,281 881,012 2,437,097 3,077,024 ---------- ---------- ---------- ---------- $ 766,836 $ 985,611 $2,699,028 $3,361,867 ========== ========== ========== ========== Limited partners' per unit share of net earnings $ .23 $ .29 $ .82 $ 1.03 ========== ========== ========== ==========
The accompanying notes are an integral part of these statements. 5 6 CRONOS GLOBAL INCOME FUND XIV, L.P. STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended --------------------------------- September 30, September 30, 1996 1995 ------------- ------------- Net cash provided by operating activities $ 5,132,661 $ 6,696,837 Cash flows provided by (used in) investing activities: Proceeds from sale of container rental equipment 239,990 167,230 Purchase of container rental equipment (122,400) (62,370) Acquisition fees paid to general partner (339,120) (450,000) ----------- ----------- Net cash used in investing activities (221,530) (345,140) ----------- ----------- Cash flows used in financing activities: Distribution to partners (5,235,631) (5,340,344) ----------- ----------- Net increase (decrease) in cash and cash equivalents (324,500) 1,011,353 Cash and cash equivalents at January 1 1,919,339 760,312 ----------- ----------- Cash and cash equivalents at September 30 $ 1,594,839 $ 1,771,665 =========== ===========
The accompanying notes are an integral part of these statements. 6 7 CRONOS GLOBAL INCOME FUND XIV, L.P. NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies (a) Nature of Operations Cronos Global Income Fund XIV, L.P. (the "Partnership") is a limited partnership organized under the laws of the State of California on July 30, 1992, for the purpose of owning and leasing marine cargo containers. Cronos Capital Corp. ("CCC") is the general partner and, with its affiliate Cronos Containers Limited (the "Leasing Company"), manages and controls the business of the Partnership. (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. (c) Basis of Accounting The Partnership utilizes the accrual method of accounting. Revenue is recognized when earned. The Partnership has determined that for accounting purposes the Leasing Agent Agreement is a lease, and the receivables, payables, gross revenues and operating expenses attributable to the containers managed by the Leasing Company are, for accounting purposes, those of the Leasing Company and not of the Partnership. Consequently, the Partnership's balance sheets and statements of operations display the payments to be received by the Partnership from the Leasing Company as the Partnership's receivables and revenues. (Continued) 7 8 CRONOS GLOBAL INCOME FUND XIV, L.P. NOTES TO UNAUDITED FINANCIAL STATEMENTS (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. 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, the Leasing Company, 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, 1996 and December 31, 1995 were as follows:
September 30, December 31, 1996 1995 ---------- ---------- Lease receivables, net of doubtful accounts of $140,920 at September 30, 1996 and $215,113 at December 31, 1995 $2,236,371 $2,291,187 Less: Direct operating payables and accrued expenses 636,980 674,056 Damage protection reserve 215,275 224,272 Base management fees 187,955 223,709 Reimbursed administrative expenses 42,425 48,118 ---------- ---------- $1,153,736 $1,121,032 ========== ==========
(3) Due to General Partner The amounts due to CCC at September 30, 1996 and December 31, 1995 consist of acquisition fees. (Continued) 8 9 CRONOS GLOBAL INCOME FUND XIV, L.P. NOTES TO UNAUDITED FINANCIAL STATEMENTS (4) Net Lease Revenue Net lease revenue is determined by deducting direct operating expenses, management fees and reimbursed administrative expenses to CCC, the Leasing Company, 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 and nine-month periods ended September 30, 1996 and 1995 was as follows:
Three Months Ended Nine Months Ended ------------------------------ ------------------------------ September 30, September 30, September 30, September 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Rental revenue $2,381,314 $2,854,894 $7,426,993 $8,385,646 Rental equipment operating expenses 481,226 383,054 1,337,124 1,193,126 Base management fees 163,994 193,155 514,445 579,412 Reimbursed administrative expenses 132,944 155,131 405,344 453,256 ---------- ---------- ---------- ---------- $1,603,150 $2,123,554 $5,170,080 $6,159,852 ========== ========== ========== ==========
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, 1996 and December 31, 1995. At September 30, 1996, the Registrant had $1,594,839 in cash and cash equivalents, a decrease of $324,500 from the December 31, 1995 cash balances. During the first nine months of 1996, the Registrant expended $122,400 of cash generated from sales proceeds to purchase additional dry cargo containers. At September 30, 1996, the Registrant committed to purchase an additional 50 twenty-foot, 35 forty-foot, and 23 forty-foot high-cube dry cargo containers, replacing containers which have been lost or damaged beyond repair, at an aggregate manufacturer's invoice cost of $292,530. Approximately $293,000 in cash generated from equipment sales, reserved as part of the Registrant's September 30, 1996 cash balances, will be used to finance these purchases. Throughout the remainder of 1996, the Registrant may use cash generated from equipment sales to purchase and replace containers which have been lost or damaged beyond repair. Net lease receivables at September 30, 1996 increased when compared to December 31, 1995, as cash collections of outstanding receivables slowed. The Registrant's cash distribution from operations for the third quarter of 1996 was 9.50% (annualized) of the limited partners' original capital contribution, consistent with the second quarter of 1996. The statements contained in the following discussion are based on current expectations. These statements are forward looking and actual results may differ materially. Indicative of the cyclical nature of the container leasing business, containerized trade growth slowed in the last quarter of 1995, and excess inventories began to develop. This slowdown has resulted in reduced equipment utilization and lower per-diem rental rates in the container leasing industry during the first nine months of 1996. Accordingly, the Registrant's dry cargo container utilization rate declined from 85% at December 31, 1995, to 82% at September 30, 1996. The Registrant's refrigerated container utilization rate declined from 95% at December 31, 1995, to 82% at September 30, 1996. During the first nine months of 1996, the Leasing Company implemented various marketing strategies, including but not limited to, offering incentives to shipping companies and repositioning containers to high demand locations in order to counter the market conditions. Ancillary revenues have fallen, and free-day incentives offered to the shipping lines have increased. In addition, rental equipment operating expenses of the Registrant have increased due to higher storage and handling costs associated with the off-hire fleet, and increased repositioning costs. These leasing market conditions are expected to adversely impact the Registrant's results from operations through the remainder of 1996 and into 1997. 2) Material changes in the results of operations between the three and nine- month periods ended September 30, 1996 and the three and nine-month periods ended September 30, 1995. Net lease revenue for the three and nine-month periods ended September 30, 1996 was $1,603,150 and $5,170,080, respectively, a decline of approximately 25% and 16% from the same periods in the prior year, respectively. Gross rental revenue (a component of net lease revenue) for the three and nine-month periods ended September 30, 1996 was $2,381,314 and $7,426,993, respectively, a decline of 17% and 11% from the same periods in the prior year, respectively. During 1996, gross rental revenue was primarily impacted by the Registrant's lower per-diem rental rates and utilization levels for both the dry cargo and refrigerated container fleets. Average dry cargo container per-diem rental rates for the three and nine-month periods ended September 30, 1996 declined approximately 6% and 4%, respectively, when compared to the same periods in the prior year, respectively. Average refrigerated container per-diem rental rates for the three and nine-month periods ended September 30, 1996 declined approximately 4% and 2%, respectively, when compared to the same periods in the prior year. 10 11 The Registrant's average fleet size and utilization rates for the three and nine-month periods ended September 30, 1996 and 1995 were as follows:
Three Months Ended Nine Months Ended ------------------------------ ------------------------------ September 30, September 30, September 30, September 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Average Fleet Size (measured in twenty-foot equivalent units (TEU)) Dry cargo containers 15,424 15,496 15,447 15,509 Refrigerated containers 1,151 1,155 1,153 1,157 Average Utilization Dry cargo containers 83% 89% 84% 90% Refrigerated containers 85% 99% 90% 99%
Rental equipment operating expenses were 20% and 18% of the Registrant's gross lease revenue during the three and nine-month periods ended September 30, 1996, respectively, as compared to 13% and 14% during the three and nine-month periods ended September 30, 1995, respectively. These increases were largely attributable to a decline in gross lease revenue resulting from lower utilization rates, lower per-diem rates, a downward trend in ancillary revenue, and an increase in free-day incentives offered to shipping companies. Costs associated with lower utilization levels, including handling, storage and repositioning also contributed to the increase in the rental equipment operating expenses, as a percentage of gross lease revenue. The Registrant's operating performance contributed to the decline in base management fees, when compared to the same periods in the prior year. 11 12 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 2, 1992 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) Report on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter ended September 30, 1996. - ---------------- * Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant dated December 2, 1992, included as part of Registration Statement on Form S-1 (No. 33-51810) ** Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (No. 33-51810) *** Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (No. 33-51810) 12 13 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 XIV, L.P. By Cronos Capital Corp. The General Partner By /s/ JOHN KALLAS ----------------------------------- John Kallas Vice President, Treasurer Principal Financial & Accounting Officer Date: November 11, 1996 13 14 EXHIBIT INDEX
Exhibit No. Description Method of Filing ------- ----------- ---------------- 3(a) Limited Partnership Agreement of the Registrant, amended and * restated as of December 2, 1992 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 2, 1992, included as part of Registration Statement on Form S-1 (No. 33-51810) ** Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (No. 33-51810) *** Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (No. 33-51810) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT SEPTEMBER 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 (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, 1996 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1,594,839 0 1,153,736 0 0 2,748,575 52,928,400 9,832,173 46,350,157 91,040 0 0 0 0 46,259,117 46,350,157 0 5,170,080 0 2,598,158 0 0 0 0 0 0 0 0 0 2,699,028 0 0
-----END PRIVACY-ENHANCED MESSAGE-----