<PAGE> 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 .
<PAGE> 2
CRONOS GLOBAL INCOME FUND XVI, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
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
</TABLE>
2
<PAGE> 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
<PAGE> 4
CRONOS GLOBAL INCOME FUND XVI, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1997 1996
------------- -------------
<S> <C> <C>
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
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
CRONOS GLOBAL INCOME FUND XVI, L.P.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
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
------------ ------------ ------------------ -----------------------------
<S> <C> <C> <C> <C>
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
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
CRONOS GLOBAL INCOME FUND XVI, L.P.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period March 29, 1996,
Nine Months Ended (Commencement of Operations)
September 30, 1997 through September 30, 1996
------------------ ------------------------------
<S> <C> <C>
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
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
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
========== ==========
</TABLE>
8
<PAGE> 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:
<TABLE>
<CAPTION>
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
------------ ------------ ------------ ------------------------------
<S> <C> <C> <C> <C>
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
============ ============ ============ ============
</TABLE>
(5) Container Rental Equipment Purchases
As of September 30, 1997, the Partnership had purchased the following
types of container rental equipment:
<TABLE>
<CAPTION>
Purchased from
Purchased Container Total
Equipment Type from CCC Manufacturers Purchased
-------------- -------- ------------- ---------
<S> <C> <C> <C>
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
</TABLE>
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
<PAGE> 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.
<TABLE>
<CAPTION>
Percentage of
Amount Gross Proceeds
------ --------------
<S> <C> <C>
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%
=========== =======
</TABLE>
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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
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
------------- ------------- ------------------ -----------------------------
<S> <C> <C> <C> <C>
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%
</TABLE>
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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Purchased from Registrant's
Purchased Container Total Average Cost
Equipment Type from CCC Manufacturers Purchased Per Container
-------------- --------- -------------- --------- -------------
<S> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE> 15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
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
</TABLE>
(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
<PAGE> 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
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
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
</TABLE>
- ----------
* 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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-01-1997
<CASH> 1,119,307
<SECURITIES> 0
<RECEIVABLES> 543,951
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,663,258
<PP&E> 26,762,082
<DEPRECIATION> 2,051,507
<TOTAL-ASSETS> 26,566,917
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,566,917
<TOTAL-LIABILITY-AND-EQUITY> 26,566,917
<SALES> 0
<TOTAL-REVENUES> 2,277,885
<CGS> 0
<TOTAL-COSTS> 1,246,089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,095,091
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
