<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
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 0-23886
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CRONOS GLOBAL INCOME FUND XV, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 94-3186624
(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)
</TABLE>
(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 [ ]
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<PAGE> 2
CRONOS GLOBAL INCOME FUND XV, L.P.
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -- September 30, 1999 (unaudited) and
December 31, 1998........................................... 4
Statements of Operations for the three and nine months ended
September 30, 1999 and 1998 (unaudited)..................... 5
Statements of Cash Flows for the nine months ended September
30, 1999 and 1998 (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............................. 13
Item 5. Other Information........................................... 13
Item 6. Exhibits and Reports on Form 8-K............................ 14
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Presented herein are the Registrant's balance sheets as of September 30,
1999 and December 31, 1998, statements of operations for the three and nine
months ended September 30, 1999 and 1998, and statements of cash flows for the
nine months ended September 30, 1999 and 1998.
3
<PAGE> 4
CRONOS GLOBAL INCOME FUND XV, L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, includes $4,660,508 at
September 30, 1999 and $6,212,441 at December 31, 1998
in interest-bearing accounts........................... $ 4,660,608 $ 6,212,541
Net lease receivables due from Leasing Company (notes 1
and 2)................................................. 1,608,806 2,267,032
------------ ------------
Total current assets.............................. 6,269,414 8,479,573
------------ ------------
Container rental equipment, at cost......................... 123,935,264 123,593,353
Less accumulated depreciation............................. 32,851,257 27,539,807
------------ ------------
Net container rental equipment......................... 91,084,007 96,053,546
------------ ------------
Organizational costs, net................................... 449 35,161
------------ ------------
$ 97,353,870 $104,568,280
============ ============
PARTNERS' CAPITAL
Partners' capital (deficit):
General partner........................................... $ (33,522) $ 622
Limited partners.......................................... 97,387,392 104,567,658
------------ ------------
Total partners' capital........................... 97,353,870 104,568,280
------------ ------------
$ 97,353,870 $104,568,280
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
CRONOS GLOBAL INCOME FUND XV, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net lease revenue (notes 1 and 3)............ $2,399,013 $3,004,662 $7,478,814 $9,665,063
Other operating expenses:
Depreciation............................... 1,811,002 1,823,560 5,456,859 5,476,639
Other general and administrative
expenses................................ 46,685 53,347 136,075 138,963
---------- ---------- ---------- ----------
1,857,687 1,876,907 5,592,934 5,615,602
---------- ---------- ---------- ----------
Earnings from operations................ 541,326 1,127,755 1,885,880 4,049,461
Other income:
Interest income............................ 55,649 80,463 177,187 223,528
Net gain on disposal of equipment.......... 14,288 25,779 38,386 91,464
---------- ---------- ---------- ----------
69,937 106,242 215,573 314,992
---------- ---------- ---------- ----------
Net earnings............................ $ 611,263 $1,233,997 $2,101,453 $4,364,453
========== ========== ========== ==========
Allocation of net earnings:
General partner............................ $ 144,469 $ 155,332 $ 431,650 $ 466,014
Limited partners........................... 466,794 1,078,665 1,669,803 3,898,439
---------- ---------- ---------- ----------
$ 611,263 $1,233,997 $2,101,453 $4,364,453
========== ========== ========== ==========
Limited partners' per unit share of net
earnings................................... $ 0.06 $ 0.16 $ 0.23 $ 0.55
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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CRONOS GLOBAL INCOME FUND XV, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
<S> <C> <C>
Net cash provided by operating activities................... $ 8,196,199 $10,045,397
Cash flows provided by (used in) investing activities:
Proceeds from disposal of equipment....................... 374,167 378,385
Purchase of container rental equipment.................... (768,036) --
Acquisition fees paid to general partner.................. (38,402) --
----------- -----------
Net cash provided by (used in) investing activities.... (432,271) 378,385
----------- -----------
Cash flows used in financing activities:
Distribution to partners.................................. (9,315,861) (9,315,861)
----------- -----------
Net increase (decrease) in cash and cash equivalents........ (1,551,933) 1,107,921
Cash and cash equivalents at January 1...................... 6,212,541 4,789,501
----------- -----------
Cash and cash equivalents at September 30................... $ 4,660,608 $ 5,897,422
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
CRONOS GLOBAL INCOME FUND XV, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of Operations
Cronos Global Income Fund XV, L.P. (the "Partnership") is a limited
partnership organized under the laws of the State of California on August 26,
1993, 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 the business of the Partnership. The Partnership
shall continue until December 31, 2012, unless sooner terminated upon the
occurrence of certain events.
The Partnership commenced operations on February 22, 1994, 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). The Partnership offered 7,500,000 units of
limited partnership interest at $20 per unit or $150,000,000. The offering
terminated on December 15, 1995, at which time 7,151,569 limited partnership
units had been purchased.
(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. 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
7
<PAGE> 8
CRONOS GLOBAL INCOME FUND XV, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
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 period 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, 1999 and December 31,
1998 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Lease receivables, net of doubtful accounts of $932,649 at
September 30, 1999 and $812,601 at December 31, 1998..... $3,365,930 $4,152,599
Less:
Direct operating payables and accrued expenses............. 1,198,012 1,125,832
Damage protection reserve.................................. 214,531 352,089
Base management fees....................................... 274,399 326,781
Reimbursed administrative expenses......................... 70,182 80,865
---------- ----------
$1,608,806 $2,267,032
========== ==========
</TABLE>
(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, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Rental revenue (note 4)..................... $4,033,850 $5,058,009 $12,509,579 $15,131,624
Less:
Rental equipment operating expenses......... 1,162,528 1,411,755 3,513,051 3,551,484
Base management fees........................ 278,146 336,178 856,881 1,026,644
Reimbursed administrative expenses.......... 194,163 305,414 660,833 888,433
---------- ---------- ----------- -----------
$2,399,013 $3,004,662 $ 7,478,814 $ 9,665,063
========== ========== =========== ===========
</TABLE>
8
<PAGE> 9
CRONOS GLOBAL INCOME FUND XV, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
(4) OPERATING SEGMENT
The Financial Accounting Standards Board has issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
changes the way public business enterprises report financial and descriptive
information about reportable operating segments. An operating segment is a
component of an enterprise that engages in business activities from which it may
earn revenues and incur expenses, whose operating results are regularly reviewed
by the enterprise's chief operating decision maker to make decisions about
resources to be allocated to the segment and assess its performance, and about
which separate financial information is available. Management operates the
Partnership's container fleet as a homogenous unit and has determined, after
considering the requirements of SFAS No. 131, that as such it has a single
reportable operating segment.
The Partnership derives its revenues from owning and leasing marine cargo
containers. As of September 30, 1999, the Partnership operated 25,958
twenty-foot, 8,651 forty-foot and 1,806 forty-foot high-cube marine dry cargo
containers, as well as 458 twenty-foot and 99 forty-foot marine refrigerated
cargo containers and 225 twenty four thousand-liter tanks. A summary of gross
lease revenue, by product, for the three and nine-month periods ended September
30, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Dry cargo containers........................ $3,448,028 $4,281,927 $10,513,642 $12,901,093
Refrigerated containers..................... 403,910 529,353 1,438,181 1,498,610
Tank containers............................. 181,912 246,729 557,756 731,921
---------- ---------- ----------- -----------
Total............................. $4,033,850 $5,058,009 $12,509,579 $15,131,624
========== ========== =========== ===========
</TABLE>
Due to the Partnership's lack of information regarding the physical
location of its fleet of containers when on lease in the global shipping trade,
it is impracticable to provide the geographic area information required by SFAS
No. 131. Any attempt to separate "foreign" operations from "domestic" operations
would be dependent on definitions and assumptions that are so subjective as to
render the information meaningless and potentially misleading.
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, 1999 and
December 31, 1998.
At September 30, 1999, the Registrant had $4,660,608 in cash and cash
equivalents, a decrease of $1,551,933 from the December 31, 1998 cash balances.
During the first nine months of 1999, the Registrant expended $806,438 of cash
generated from equipment sales to purchase additional containers. At September
30, 1999, the Registrant had approximately $376,000 in cash generated from
equipment sales reserved as part of its cash balances. Throughout the remainder
of 1999, the Registrant expects to continue using cash generated from equipment
sales to purchase and replace containers which have been lost or damaged beyond
repair.
The Registrant's cash distribution from operations for the third quarter of
1999 was 7.50% (annualized) of the limited partners' original capital
contributions, a decline from the second quarter of 1999 distribution of 8.25%
(annualized). These distributions are directly related to the Registrant's
results from operations and may fluctuate accordingly.
As discussed in previous quarters, improving prospects in the Asia-Pacific
region have been the impetus for a recovery in containerized trade volumes.
Strong demand in North America has generated increases in transpacific volumes
from Asia, and imports into Asia are also improving as a result of economic
recovery in the region. As a result, container lease-outs from both North
America and Europe are showing signs of revival.
The General Partner previously reported that trade imbalances, which were
heightened by the Asian financial crisis, resulted in the necessity to
reposition off-hire equipment from low-demand drop-off locations in North
America and Europe to higher-demand areas in Asia. Such imbalances continue to
be widespread in the container leasing industry. In order to meet the stronger
demand in Asia, the General Partner will continue to reposition the Registrant's
idle equipment as warranted by market conditions. This repositioning will allow
us to better fulfill customer requirements, while at the same time reducing
costs associated with handling and storing off-hire or stockpiled equipment.
(2) Material changes in the results of operations between the three and
nine-month periods ended September 30, 1999 and 1998.
Net lease revenue for the three and nine-month periods ended September 30,
1999 was $2,399,013 and $7,478,814, respectively, a decrease of 20% and 23%,
respectively, from the same periods in the prior year. Gross rental revenue (a
component of net lease revenue) for the three and nine-month periods ended
September 30, 1999 was $4,033,850 and $12,509,579, respectively, reflecting a
decline of 20% and 17%, respectively, from the same periods in the prior year.
Gross lease revenue was primarily impacted by lower per-diem rental rates. Dry
cargo container average per-diem rental rates for the three and nine-month
periods ended September 30, 1999 declined 13% and 8%, respectively, when
compared to the same periods in the prior year. Refrigerated container average
per-diem rental rates for the three and nine-month periods ended September 30,
1999 declined 14% and 10%, 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, 1999 declined 8%
and 7%, 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, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average fleet size (measured in twenty-foot
equivalent units (TEU))
Dry cargo containers......................... 46,900 46,573 46,799 46,631
Refrigerated containers.................... 656 662 658 663
Tank containers............................ 225 226 226 227
Average Utilization
Dry cargo containers....................... 74% 78% 71% 80%
Refrigerated containers.................... 85% 96% 91% 91%
Tank containers............................ 72% 88% 73% 88%
</TABLE>
Rental equipment operating expenses were 29% and 28%, respectively, of the
Registrant's gross lease revenue during the three and nine-month periods ended
September 30, 1999, as compared to 28% and 23%, respectively, of the
Registrant's gross lease revenue during the three and nine-month periods ended
September 30, 1998. This increase was largely attributable to an increase in
costs associated with lower utilization, including handling, and storage.
The Registrant disposed of 44 twenty-foot, two forty-foot and seven
forty-foot high-cube marine dry containers during the third quarter of 1999, as
compared to 21 twenty-foot, eight forty-foot and two forty-foot high-cube marine
dry cargo containers, as well as one forty-foot refrigerated container and one
twenty-four thousand-liter tank container during the third quarter of 1998. The
decision to repair or dispose of a container is made when it is returned by a
lessee. This decision is influenced by various factors including the age,
condition, suitability for continued leasing, as well as the geographical
location of the container when disposed. These factors also influence the amount
of sales proceeds received and the related gain on container disposals.
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 Leasing Company's computer systems have undergone
modifications in order to render the systems ready for the Year 2000. The
Leasing Company has completed a detailed inventory of all software and hardware
systems and has identified all components that need to be modified. The Leasing
Company has completed all the necessary changes and testing in a dedicated Year
2000 environment. All compliant code was made live in August 1999. The Leasing
Company has contacted all of its critical business suppliers and has been
advised that their systems are Year 2000 compliant. The Leasing Company has also
confirmed the compliance of its suppliers' products through its own extensive
testing. Expenses associated with addressing Year 2000 issues are being
recognized as incurred. Management has not yet assessed the Year 2000 compliance
expense but does not anticipate the costs incurred to date or to be incurred in
the future by the Leasing Company and its affiliates to be in excess of
$500,000. None of the costs incurred with respect to Year 2000 compliance will
be borne by the Registrant. The Leasing Company believes it will be able to
resolve any major Year 2000 issues. The Leasing Company is aware of the
implications of a Year 2000 computer system failure and is currently in the
process of developing its contingency plans. While management believes the
possibility of a Year 2000 system failure to be remote, if the Leasing Company's
internal systems or those of its critical business suppliers fail, the Leasing
Company's consolidated financial position, liquidity or results of operations
may be adversely affected.
11
<PAGE> 12
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, including, without limitation, (a) the statements
in Management's Discussion and Analysis of Financial Condition and Results of
Operations concerning (i) preliminary indications that trade volumes from North
America and Europe to Asia may be increasing (ii) the Leasing Company's
expectation that its repositioning strategy will place container equipment in
higher demand locations and that it will improve utilization; (b) the statements
under Year 2000 concerning (i) the Leasing Company's belief that it will be able
to resolve any major year 2000 issues (ii) the Leasing Company's belief that the
possibility of a year 2000 failure is remote; and (c) the statements under Legal
Proceedings concerning the Parent Company's hope of settling the SEC
investigation by the end of 1999.
Forward-looking statements are based upon management's current expectations
and beliefs concerning future developments and their potential effects upon the
Registrant. There can be no assurance that future developments will be in
accordance with management's expectations or that the effect of future
developments on the Registrant will be those anticipated by management. 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 under Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations in the discussion of the marine container
leasing business; Item 3, Quantitative and Qualitative Disclosures about Market
Risk and under Part II -- Item 1, Legal Proceedings and Item 5, Other
Information and those risks and uncertainties detailed from time to time in the
filings of the Registrant with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
12
<PAGE> 13
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As the Registrant has previously reported, in February 1997, its former
outside auditors, Arthur Andersen LLP ("Arthur Andersen"), resigned as auditors
to The Cronos Group (the "Parent Company"), its subsidiaries, and all other
entities affiliated with the Parent Company, including the Registrant. The
Parent Company is the indirect corporate parent of CCC, the managing general
partner of the Registrant. CCC 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.
Arthur Andersen's reports on the financial statements of CCC and the
Registrant, for years preceding 1996, had not contained an adverse opinion or a
disclaimer of opinion, nor were any such reports qualified or modified as to
uncertainty, audit scope, or accounting principles.
During the Registrant's fiscal year ended December 31, 1995, and the
subsequent interim period preceding Arthur Andersen's resignation, there were no
disagreements between CCC or the Registrant and Arthur Andersen on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure.
In connection with its resignation, Arthur Andersen prepared a report
pursuant to Section 10A of the Securities Exchange Act of 1934, as amended, for
filing by the Parent Company with the Securities and Exchange Commission
("SEC"). As a result of the Arthur Andersen report, the SEC commenced an
investigation of the Parent Company on February 10, 1997. The purpose of the
investigation has been to determine whether the Parent Company and persons
associated with the Parent Company violated the federal securities laws
administered by the SEC. The Registrant does not believe that the focus of the
SEC's investigation is upon the Registrant or CCC.
Current management of the Parent Company has been in discussions with the
staff of the SEC with a view to settling the investigation. The Parent Company
is hopeful of reaching a settlement of the investigation by the end of 1999.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
See Item 5. Other Information.
ITEM 5. OTHER INFORMATION
In 1993, the Parent Company negotiated a credit facility with several banks
for the use by the Parent Company and its subsidiaries, including CCC. At
December 31, 1998, approximately $33,110,000 in principal indebtedness was
outstanding under that credit facility (none of which had been borrowed by the
Registrant). As a party to that credit facility, CCC was jointly and severally
liable for the repayment of all principal and interest owed under the credit
facility. On August 2, 1999, all outstanding amounts under the credit facility
were repaid through the establishment of a new credit facility with two
financial institutions. CCC is not a party to the new loan agreement. The Parent
Company has guaranteed up to $10 million of amounts borrowed under the new
credit facility and, as partial security for this guarantee, the Parent Company
has pledged all of the capital stock held by it in Cronos Holding/Investments
(U.S.), Inc., a Delaware corporation that, in turn, owns all of the outstanding
capital stock of CCC.
The Registrant is not a borrower under the new credit facility established
by the Parent Company, and neither the containers nor the other assets of the
Registrant have been pledged as collateral under the new credit facility.
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
------- ----------- ------------------------
<C> <S> <C>
3(a) Limited Partnership Agreement of the Registrant, *
amended and restated as of December 15, 1993
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
On August 20, 1999 and August 23, 1999, the Registrant filed a Report on
Form 8-K and a Report on Form 8-K/A, respectively, reporting the change in the
Registrant's independent auditors.
- ---------------
* Incorporated by reference to Exhibit "A" to the Prospectus of the Registrant
dated December 17, 1993, included as part of Registration Statement on Form
S-1 (No. 33-69356)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement on
Form S-1 (No. 33-69356)
*** Incorporated by reference to Exhibit 10.2 to the Registration Statement on
Form S-1 (No. 33-69356)
14
<PAGE> 15
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 XV, 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
By /s/ PETER J. YOUNGER
------------------------------------
Peter J. Younger
Chief Financial Officer and
Treasurer of
Cronos Capital Corp. ("CCC")
Date: November 12, 1999
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ----------- ------------------------
<C> <S> <C>
3(a) Limited Partnership Agreement of the Registrant, amended *
and restated as of December 15, 1993
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 17, 1993, included as part of Registration Statement on Form
S-1 (No. 33-69356)
** Incorporated by reference to Exhibit 3.2 to the Registration Statement on
Form S-1 (No. 33-69356)
*** Incorporated by reference to Exhibit 10.2 to the Registration Statement on
Form S-1 (No. 33-69356)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1999 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 (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, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,660,608
<SECURITIES> 0
<RECEIVABLES> 1,608,806
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,269,414
<PP&E> 123,935,264
<DEPRECIATION> 32,851,257
<TOTAL-ASSETS> 97,353,870
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 97,353,870
<TOTAL-LIABILITY-AND-EQUITY> 97,353,870
<SALES> 0
<TOTAL-REVENUES> 7,478,814
<CGS> 0
<TOTAL-COSTS> 5,592,934
<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> 2,101,453
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
