<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 JUNE 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 .
--- ---
<PAGE> 2
CRONOS GLOBAL INCOME FUND XIV, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1996 (unaudited) and December 31, 1995 4
Statements of Operations for the three and six months ended June 30, 1996 and 1995 (unaudited) 5
Statements of Cash Flows for the six months ended June 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
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Presented herein are the Registrant's balance sheets as of June 30,
1996 and December 31, 1995, statements of operations for the three and
six months ended June 30, 1996 and 1995, and statements of cash flows
for the six months ended June 30, 1996 and 1995.
3
<PAGE> 4
CRONOS GLOBAL INCOME FUND XIV, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
Assets
<S> <C> <C>
Current assets:
Cash, includes $451,031 at June 30, 1996 and $467,304
at December 31, 1995 in interest-bearing accounts $ 451,448 $ 467,597
Short-term investments 976,044 1,451,742
Net lease receivables due from Leasing Company
(notes 1 and 2) 1,308,851 1,121,032
----------- -----------
Total current assets 2,736,343 3,040,371
----------- -----------
Container rental equipment, at cost 53,007,643 53,145,814
Less accumulated depreciation 9,073,702 7,551,375
----------- -----------
Net container rental equipment 43,933,941 45,594,439
----------- -----------
Organizational costs, net 574,726 713,470
----------- -----------
$47,245,010 $49,348,280
=========== ===========
Liabilities and Partners' Capital
Current liabilities:
Due to general partner (notes 1 and 3) $ 182,040 $ 430,160
Due to manufacturer -- 122,400
----------- -----------
Total current liabilities 182,040 552,560
----------- -----------
Partners' capital:
General partner 351 223
Limited partners 47,062,619 48,795,497
----------- -----------
Total partners' capital 47,062,970 48,795,720
----------- -----------
$47,245,010 $49,348,280
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
CRONOS GLOBAL INCOME FUND XIV, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 4) $ 1,796,352 $ 2,079,837 $ 3,566,930 $ 4,036,298
Other operating expenses:
Depreciation 842,545 844,907 1,686,097 1,690,155
Other general and administrative expenses 22,016 33,338 44,654 61,137
------------ ------------ ------------ ------------
864,561 878,245 1,730,751 1,751,292
------------ ------------ ------------ ------------
Earnings from operations 931,791 1,201,592 1,836,179 2,285,006
Other income:
Interest income 22,049 22,172 43,222 39,851
Net gain on disposal of equipment 10,693 34,659 52,791 51,399
------------ ------------ ------------ ------------
32,742 56,831 96,013 91,250
------------ ------------ ------------ ------------
Net earnings $ 964,533 $ 1,258,423 $ 1,932,192 $ 2,376,256
============ ============ ============ ============
Allocation of net earnings:
General partner $ 89,030 $ 84,430 $ 183,376 $ 180,244
Limited partners 875,503 1,173,993 1,748,816 2,196,012
------------ ------------ ------------ ------------
$ 964,533 $ 1,258,423 $ 1,932,192 $ 2,376,256
============ ============ ============ ============
Limited partners' per unit share of net earnings $ .30 $ .40 $ .59 $ .74
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
CRONOS GLOBAL INCOME FUND XIV, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
June 30, June 30,
1996 1995
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 3,421,060 $ 4,649,948
Cash flows provided by (used in) investing activities:
Proceeds from sale of container rental equipment 180,555 82,122
Purchase of container rental equipment (122,400) (59,400)
Acquisition fees paid to general partner (306,120) (302,970)
----------- -----------
Net cash used in investing activities (247,965) (280,248)
----------- -----------
Cash flows used in financing activities:
Distributions to partners (3,664,942) (3,481,694)
----------- -----------
Net increase (decrease) in cash and cash equivalents (491,847) 888,006
Cash and cash equivalents at January 1 1,919,339 760,312
----------- -----------
Cash and cash equivalents at June 30 $ 1,427,492 $ 1,648,318
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 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
<PAGE> 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 June
30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts
of $190,890 at June 30, 1996 and $215,113 at
December 31, 1995 $2,473,324 $2,291,187
Less:
Direct operating payables and accrued expenses 694,525 674,056
Damage protection reserve 222,660 224,272
Base management fees 201,996 223,709
Reimbursed administrative expenses 45,292 48,118
---------- ----------
$1,308,851 $1,121,032
========== ==========
</TABLE>
(3) Due to General Partner
The amounts due to CCC at June 30, 1996 and December 31, 1995 consist of
acquisition fees.
(Continued)
8
<PAGE> 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 six-month periods ended
June 30, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental revenue $2,496,120 $2,852,615 $5,045,679 $5,530,752
Rental equipment operating expenses 391,893 430,122 855,898 810,072
Base management fees 176,007 191,257 350,451 386,257
Reimbursed administrative expenses 131,868 151,399 272,400 298,125
---------- ---------- ---------- ----------
$1,796,352 $2,079,837 $3,566,930 $4,036,298
========== ========== ========== ==========
</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 June 30, 1996 and December
31, 1995.
At June 30, 1996, the Registrant had $1,427,492 in cash and cash
equivalents, a decrease of $491,847 from the December 31, 1995 cash
balances. During the first six months of 1996, the Registrant expended
$122,400 of cash generated from sales proceeds to pay for containers
accepted during the fourth quarter of 1995. At June 30, 1996, the Registrant
had approximately $234,000 in cash generated from equipment sales reserved
as part of its cash balances. 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 June 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 second quarter of
1996 was 9.50% (annualized) of the limited partners' original capital
contribution, a decline from the first quarter 1996 distribution of 11%
(annualized).
The statements contained in the following discussion are based on current
expectations. These statements are forward looking and actual results may
differ materially. The container leasing market generally softened during
the fourth quarter of 1995 and has remained so during the first six months
of 1996. At June 30, 1996, container inventories remained at
larger-than-usual levels, resulting in a decline in the average utilization
rate for the Registrant's dry cargo containers from 85% at December 31,
1995, to 84% at June 30, 1996. The average utilization rate for the
Registrant's refrigerated container fleet declined from 95% at December 31,
1995, to 90% at June 30, 1996. Base per-diem rates have become subject to
downward pressures arising from a soft container leasing market. During the
first six 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 these market conditions. Accordingly, ancillary per-diems have
fluctuated, favoring a downward trend, while free-day incentives offered to
shipping companies have risen. Currently, there are no visible signs of
improvements in the leasing market and hence further downward pressure on
rental rates can be expected in the ensuing quarters. As a result, these
leasing markets conditions will continue to impact the Registrant's results
from operations during the remainder of 1996.
2) Material changes in the results of operations between the three and
six-month periods ended June 30, 1996 and the three and six-month periods
ended June 30, 1995.
Net lease revenue for the three and six-month periods ended June 30, 1996
was $1,796,352 and $3,566,930, respectively, a decline of approximately 14%
and 12% from the same periods in the prior year, respectively. Gross rental
revenue (a component of net lease revenue) for the three and six-month
periods ended June 30, 1996 was $2,496,120 and $5,045,679, respectively, a
decline of 12% and 9% 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 six-month periods ended June 30, 1996
declined approximately 5% and 3%, respectively, when compared to the same
periods in the prior year, respectively. Average refrigerated container
per-diem rental rates for the three and six-month periods ended June 30,
1996 were consistent with those in the same three and six-month periods of
the prior year.
10
<PAGE> 11
The Registrant's average fleet size and utilization rates for the three and
six-month periods ended June 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Average Fleet Size (measured in
twenty-foot equivalent units (TEU))
Dry cargo containers 15,445 15,520 15,458 15,515
Refrigerated cargo containers 1,153 1,156 1,153 1,158
Average Utilization
Dry cargo containers 84% 91% 84% 90%
Refrigerated cargo containers 92% 99% 92% 99%
</TABLE>
Rental equipment operating expenses were 16% and 17% of the Registrant's gross
lease revenue during the three and six-month periods ended June 30, 1996,
respectively, as compared to 15% in each of the three and six-month periods
ended June 30, 1995, respectively. This increase was largely attributable to a
decline in gross lease revenue resulting from lower per-diem rates, a downward
trend in ancillary per-diems, 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
<PAGE> 12
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 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
</TABLE>
(b) Report on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter ended
June 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
<PAGE> 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, Chief Financial Officer
Principal Accounting Officer
Date: August 13, 1996
13
<PAGE> 14
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 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
</TABLE>
- ----------------
* 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)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED JUNE 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 JUNE 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,427,492
<SECURITIES> 0
<RECEIVABLES> 1,308,851
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,736,343
<PP&E> 53,007,643
<DEPRECIATION> 9,073,702
<TOTAL-ASSETS> 47,245,010
<CURRENT-LIABILITIES> 182,040
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 47,062,970
<TOTAL-LIABILITY-AND-EQUITY> 47,245,010
<SALES> 0
<TOTAL-REVENUES> 3,566,930
<CGS> 0
<TOTAL-COSTS> 1,730,751
<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> 1,932,192
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
