<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, 1998
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, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1998 (unaudited) and December 31, 1997 4
Statements of Operations for the three and nine months ended September 30, 1998 and 1997 (unaudited) 5
Statements of Cash Flows for the nine months ended September 30, 1998 and 1997 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II-- OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 3. Defaults Upon Senior Securities 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of September
30, 1998 and December 31, 1997, statements of operations for the
three and nine months ended September 30, 1998 and 1997, and
statements of cash flows for the nine months ended September 30,
1998 and 1997.
3
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CRONOS GLOBAL INCOME FUND XVI, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, includes $1,772,296 at September 30, 1998 and
$1,231,959 at December 31, 1997 in interest-bearing accounts $ 1,772,396 $ 1,232,159
Net lease receivables due from Leasing Company
(notes 1 and 2) 466,515 572,740
------------- -------------
Total current assets 2,238,911 1,804,899
------------- -------------
Container rental equipment, at cost 26,708,429 26,755,856
Less accumulated depreciation 3,609,166 2,442,049
------------- -------------
Net container rental equipment 23,099,263 24,313,807
------------- -------------
Organizational costs, net 143,125 180,594
------------- -------------
$ 25,481,299 $ 26,299,300
============= =============
Partners' Capital
Partners' capital (deficit):
General partner $ (4,264) $ (4,653)
Limited partners 25,485,563 26,303,953
------------- -------------
Total partners' capital 25,481,299 26,299,300
------------- -------------
$ 25,481,299 $ 26,299,300
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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CRONOS GLOBAL INCOME FUND XVI, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 3) $ 784,340 $ 845,974 $ 2,265,449 $ 2,277,885
Other operating expenses:
Depreciation and amortization 402,835 403,594 1,209,298 1,197,543
Other general and administrative expenses 16,334 15,785 47,231 48,546
------------- ------------- ------------- -------------
419,169 419,379 1,256,529 1,246,089
------------- ------------- ------------- -------------
Earnings from operations 365,171 426,595 1,008,920 1,031,796
Other income:
Interest income 22,525 14,152 58,827 56,875
Net gain on disposal of equipment 419 3,068 8,656 6,420
------------- ------------- ------------- -------------
22,944 17,220 67,483 63,295
------------- ------------- ------------- -------------
Net earnings $ 388,115 $ 443,815 $ 1,076,403 $ 1,095,091
============= ============= ============= =============
Allocation of net earnings:
General partner $ 29,554 $ 32,734 $ 95,106 $ 89,647
Limited partners 358,561 411,081 981,297 1,005,444
------------- ------------- ------------- -------------
$ 388,115 $ 443,815 $ 1,076,403 $ 1,095,091
============= ============= ============= =============
Limited partners' per unit share of net earnings $ 0.22 $ 0.41 $ 0.61 $ 1.00
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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CRONOS GLOBAL INCOME FUND XVI, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net cash provided by operating activities $ 2,356,442 $ 1,979,384
Cash flows provided by (used in) investing activities:
Proceeds from disposal of equipment 78,133 12,500
Purchase of container rental equipment -- (2,339,370)
Acquisition fees paid to general partner -- (117,116)
------------- -------------
Net cash provided by (used in) investing activities 78,133 (2,443,986)
------------- -------------
Cash flows provided by (used in) financing activities:
Capital contributions -- 1,931,060
Underwriting commissions -- (193,196)
Offering and organizational expenses -- (101,336)
Distribution to partners (1,894,338) (1,808,503)
------------- -------------
Net cash used in financing activities (1,894,338) (171,975)
------------- -------------
Net increase (decrease) in cash and cash equivalents 540,237 (636,577)
Cash and cash equivalents at January 1 1,232,159 1,755,884
------------- -------------
Cash and cash equivalents at September 30 $ 1,772,396 $ 1,119,307
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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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 terminated on December 27, 1997.
As of September 30, 1998, the Partnership owned and operated 3,835
twenty-foot, 1,046 forty-foot and 459 forty-foot high-cube marine
dry cargo containers, 90 twenty-foot and 299 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.
(Continued)
7
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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, 1998 and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Lease receivables, net of doubtful accounts of $92,391
at September 30, 1998 and $61,992 at December 31, 1997 $ 871,269 $ 1,051,836
Less:
Direct operating payables and accrued expenses 262,621 326,518
Damage protection reserve 59,547 60,999
Base management fees 63,131 70,754
Reimbursed administrative expenses 19,455 20,825
------------- -------------
$ 466,515 $ 572,740
============= =============
</TABLE>
(Continued)
8
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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 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, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Rental revenue $ 1,067,906 $ 1,137,301 $ 3,205,067 $ 3,174,034
Less:
Rental equipment operating expenses 148,255 149,933 540,663 501,352
Base management fees 73,763 78,989 220,177 220,689
Reimbursed administrative expenses 61,548 62,405 178,778 174,108
------------- ------------- ------------- -------------
$ 784,340 $ 845,974 $ 2,265,449 $ 2,277,885
============= ============= ============= =============
</TABLE>
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, 1998 and
December 31, 1997.
At September 30, 1998, the Registrant had $1,772,396 in cash and cash
equivalents, an increase of $540,237 from the December 31, 1997 cash
balances. At September 30, 1998, the Registrant had approximately $98,000
in cash generated from equipment sales reserved as part of its cash
balances.
The Registrant's cash distribution from operations for the third quarter
of 1998 was 7.5% (annualized) of the limited partners' original capital
contribution, unchanged from the second quarter of 1998. These
distributions are directly related to the Registrant's results from
operations and may fluctuate accordingly.
During the third quarter of 1998, the economic troubles in Asia, as
evidenced by devalued currencies, restricted credit, and negative
economic growth, continued to impact the growth of containerized trade.
Significant trade imbalances, combined with a drop in trade volumes in
some locations, continued to challenge the container leasing industry,
with a corresponding effect on the Registrant's operating performance.
The devaluation of the Asian currencies has led to an increase in exports
from Asia, creating a strong demand for containers in that area of the
world. However, the devalued currencies, together with the effects of
restricted credit, have also reduced the demand in Asia for imports from
the West. This has resulted in lower demand for containers in Europe and
North America. In addition, turmoil in other financial markets, such as
Japan and Russia, threatens to spread to Latin America and other emerging
markets. As a result of these factors, the Registrant does not foresee
any significant change in market conditions in the near future. However,
in response to the current market conditions, the Registrant has been
repositioning containers from low to higher demand locations in order to
reduce its idle inventory. The Registrant will selectively continue to
reposition available equipment when it believes that the impact will have
a positive effect on its operations.
2) Material changes in the results of operations between the three and
nine-month periods ended September 30, 1998 and 1997.
Net lease revenue for the three and nine-month periods ended September
30, 1998 was $784,340 and $2,265,449, respectively, a decrease of 7% and
less than 1% from the respective three and nine-month periods in the
prior year. Gross rental revenue (a component of net lease revenue) for
the three and nine-month periods ended September 30, 1998 was $1,067,906
and $3,205,067, respectively, reflecting a decrease of 6% and an increase
of less than 1% from the respective three and nine-month periods in the
prior year. Dry container average per-diem rental rates for the three and
nine-month periods ended September 30, 1998 decreased 3% and 1%,
respectively, when compared to the same three and nine-month periods in
the prior year. Refrigerated container average per-diem rental rates for
the three and nine-month periods ended September 30, 1998 increased 1%
and decreased 1%, respectively, when compared to the same three and
nine-month periods in the prior year. Tank container average per-diem
rental rates for the three and nine-month periods ended September 30,
1998 declined 8% and 9%, respectively, when compared to the same periods
in the prior year.
10
<PAGE> 11
The Registrant's average fleet size and utilization rates for the three
and nine-month periods ended September 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average fleet size (measured in twenty-
foot equivalent units (TEU))
Dry cargo containers 6,845 6,862 6,848 6,749
Refrigerated containers 688 690 689 690
Tank containers 52 52 52 52
Average Utilization
Dry cargo containers 81% 88% 81% 84%
Refrigerated containers 98% 99% 98% 96%
Tank containers 84% 91% 86% 88%
</TABLE>
Rental equipment operating expenses were 14% and 17%, respectively, of
the Registrant's gross lease revenue during the three and nine-month
periods ended September 30, 1998, as compared to 13% and 16%,
respectively, during the same three and nine-month periods ended
September 30, 1997.
Year 2000
The Registrant relies upon the financial and operational systems provided
by the Leasing company and its affiliates, as well as the systems
provided by other independent third parties to service the three primary
areas of its business: investor processing/maintenance; container
leasing/asset tracking; and accounting finance. The Registrant has
received confirmation from its third-party investor
processing/maintenance vendor that their system is Year 2000 compliant.
The Registrant does not expect a material increase in its vendor
servicing fee to reimburse Year 2000 costs. Container leasing/asset
tracking and accounting/finance services are provided to the Registrant
by CCC and its affiliate, Cronos Containers Limited (the "Leasing
Company"), pursuant to the respective Limited Partnership Agreement and
Leasing Agent Agreement. CCC and the Leasing Company have initiated a
program to prepare their systems and applications for the Year 2000.
Preliminary studies indicate that testing, conversion and upgrading of
system applications is expected to cost CCC and the Leasing Company less
than $500,000. Pursuant to the Limited Partnership Agreement, CCC or the
Leasing Company, may not seek reimbursement of data processing costs
associated with the Year 2000 program. The financial impact of making
these required system changes is not expected to be material to the
Registrant's financial position, results of operations or cash flows.
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.
11
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
12
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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 Registrant retained a new auditor, Moore Stephens, P.C. on April
10, 1997, as reported in its Current Report on Form 8-K, filed April
14, 1997.
In connection with its resignation, Arthur Andersen also prepared a
report pursuant to Section 10A(b)(2) of the Securities Exchange Act
of 1934 as amended, for filing by the Parent Company with the
Securities and Exchange Commission ("SEC") citing its inability to
obtain what it considered to be adequate responses to its inquiries
primarily regarding the payment of $1.5 million purportedly in
respect of professional fees relating to a proposed strategic
alliance. This sum was returned to the Parent Company in January
1997.
Following the report of Arthur Andersen, the SEC, on February 10,
1997, commenced a private investigation of the Parent Company for the
purpose of investigating the matters discussed in such report and
related matters. The SEC's investigation can result in several types
of civil or administrative sanctions against the Parent Company and
individuals associated with the Parent Company, including the
assessment of monetary penalties. Actions taken by the SEC do not
preclude additional actions by any other federal, civil or criminal
authorities or by other regulatory organizations or by third parties.
The SEC's investigation is continuing, and some of the Parent
Company's present and former officers and directors and others
associated with the Parent Company have given testimony. However, no
conclusion of any alleged wrongdoing by the Parent Company or any
individual has been communicated to the Parent Company by the SEC.
The Registrant does not believe that the focus of the SEC's
investigation is upon the Registrant or CCC. CCC is unable to predict
the outcome of the SEC's ongoing private investigation of the Parent
Company.
As reported in the Registrant's Current Report on Form 8-K, filed
with the SEC on May 21, 1998, the Parent Company reported that its
Chairman and CEO, Stefan M. Palatin, was suspended from his duties
pending the investigation of fraud charges against him by Austrian
government authorities. On June 8, 1998, the Parent Company's Board
of Directors removed Mr. Palatin as Managing Director and Chief
Executive Officer. Mr. Palatin resigned from the Board of Directors
of the Parent Company on July 6, 1998. Mr. Rudolf J. Weissenberger
has been appointed to replace Mr. Palatin as an executive director
and Chief Executive Officer. Also, on June 8, 1998, the Board
approved a proposal to add two independent directors to the Board.
The Board engaged legal counsel to provide legal advice and commence
legal action, if appropriate, against former officers or directors of
the Parent Company (including Mr. Palatin) if it is determined that
they engaged in any misfeasance or improper self-dealing.
Mr. Palatin had been a director of CCC; he resigned from his position
as director on April 23, 1998.
CCC further understands that Austrian authorities have initiated
investigations of persons in addition to Mr. Palatin, including Mr.
Weissenberger and Dr. Axel Friedberg. The investigations which remain
pending have not resulted in any action being taken against Mr.
Weissenberger, and he has informed the Parent Company that he
13
<PAGE> 14
does not believe that there is any basis for any action to be taken
against him. Dr. Friedberg has been a non-executive director of the
Parent Company since 1997. In August 1998, charges were presented
against Dr. Friedberg. Dr. Friedberg has denied any wrongdoing and,
on September 14, 1998, filed objections to the charges against him.
Item 3. Defaults Upon Senior Securities
See Item 5. Other Information.
Item 5. Other Information
In 1993, the Parent Company negotiated a credit facility
(hereinafter, the "Credit Facility") with several banks for the use
of the Parent Company and its affiliates, including CCC. At December
31, 1996, approximately $73,500,000 in principal indebtedness was
outstanding under the Credit Facility. As a party to the Credit
Facility, CCC is jointly and severally liable for the repayment of
all principal and interest owed under the Credit Facility. The
obligations of CCC, and the five other subsidiaries of the Parent
Company that are borrowers under the Credit Facility, are guaranteed
by the Parent Company.
Following negotiations in 1997 with the banks providing the Credit
Facility, an Amended and Restated Credit Agreement was executed in
June 1997, subject to various actions being taken by the Parent
Company and its subsidiaries, primarily relating to the provision of
additional collateral. This Agreement was further amended in July
1997 and the provisions of the Agreement and its Amendment converted
the facility to a term loan, payable in installments, with a final
maturity date of May 31, 1998. The terms of the Agreement and its
Amendment also provided for additional security over shares in the
subsidiary of the Parent Company that owns the head office of the
Parent Company's container leasing operations. They also provided for
the loans to the former Chairman of $5,900,000 and $3,700,000 to be
restructured as obligations of the former Chairman to another
subsidiary of the Parent Company (not CCC), together with the pledge
to this subsidiary company of 2,030,303 Common Shares beneficially
owned by him in the Parent Company as security for these loans. They
further provided for the assignment of these loans to the lending
banks, together with the pledge of 1,000,000 shares and the
assignment of the rights of the Parent Company in respect of the
other 1,030,303 shares. Additionally, CCC granted the lending banks a
security interest in the fees to which it is entitled for the
services it renders to the container leasing partnerships of which it
acts as general partner, including its fee income payable by the
Registrant. The Parent Company did not repay the Credit Facility at
the amended maturity date of May 31, 1998.
On June 30, 1998, the Parent Company entered into a third amendment
(the "Third Amendment") to the Credit Facility. The Third Amendment
became effective as of that date, subject to the satisfaction
thereafter of various conditions, including: the Parent Company must
deliver its audited financial statements for 1997 by a specified date
and; on or prior to July 30, 1998, the Parent Company must furnish
proof that any defaults under any other indebtedness have been waived
and must also furnish various legal opinions, officers' certificates
and other loan documentation. All of these conditions were fulfilled
by August 14, 1998. Under the Third Amendment, the remaining
principal amount of $36,800,000 will be amortized in varying monthly
amounts commencing on July 31, 1998 with $26,950,000 due on September
30, 1998 and a final maturity date of January 8, 1999. The Parent
Company did not repay the amount due on September 30, 1998. The
directors of the Parent Company currently are holding discussions
with the lenders to refinance or extend its debt that became due on
September 30, 1998.
The directors of the Parent Company also are pursuing alternative
sources of financing to meet the amended repayment obligations under
the Third Amendment. Failure to meet revised lending terms would
constitute an event of default with the lenders. The declaration of
an event of default would result in further defaults with other
lenders under loan agreement cross-default provisions. Should a
default of the term loans be enforced, the Parent Company and CCC may
be unable to continue as going concerns.
14
<PAGE> 15
CCC is currently in discussions with the management of the Parent
Company to provide assurance that the management of the container
leasing partnerships managed by CCC, including the Registrant, is not
disrupted pending a refinancing or reorganization of the indebtedness
of the Parent Company and its affiliates.
The Registrant is not a borrower under the Credit Facility, and
neither the containers nor the other assets of the Registrant have
been pledged as collateral under the Credit Facility.
CCC is unable to determine the impact, if any, these concerns may
have on the future operating results and financial condition of the
Registrant or CCC and the Leasing Company's ability to manage the
Registrant's fleet in subsequent periods.
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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, 1995
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, 1998.
- ---------
* 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)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRONOS GLOBAL INCOME FUND 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
Date: November 13, 1998
17
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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, 1995
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, 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)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1998 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 (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, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,772,396
<SECURITIES> 0
<RECEIVABLES> 466,515
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,238,911
<PP&E> 26,708,429
<DEPRECIATION> 3,609,166
<TOTAL-ASSETS> 25,481,299
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 25,481,299
<TOTAL-LIABILITY-AND-EQUITY> 25,481,299
<SALES> 0
<TOTAL-REVENUES> 2,265,449
<CGS> 0
<TOTAL-COSTS> 1,256,529
<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> 1,076,403
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
