<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
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: 0-24464
THE CRONOS GROUP
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
LUXEMBOURG NOT APPLICABLE
(State or other Jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
</TABLE>
16, ALLEE MARCONI, BOITE POSTALE 260, L-2120 LUXEMBOURG
(Address of principal executive offices)(zip code)
Registrant's telephone number, including area codes:
(352) 453145
-------------------------
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 [ ]
THE NUMBER OF COMMON SHARES OUTSTANDING AS OF MAY 12, 2000:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
<S> <C>
Common 9,158,378
</TABLE>
<PAGE> 2
THE CRONOS GROUP
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I--FINANCIAL INFORMATION..................................................................................1
ITEM 1 -- FINANCIAL STATEMENTS..............................................................................1
Management Representation.................................................................................1
Consolidated Statements of Operations.....................................................................2
Consolidated Balance Sheets...............................................................................3
Consolidated Statements of Cash Flows.....................................................................4
Consolidated Statements of Shareholders' Equity...........................................................5
Notes to the Consolidated Financial Statements............................................................6
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............10
General..................................................................................................10
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999..........................11
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998..........................12
Liquidity and Capital Resources..........................................................................13
ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......................................13
PART II --OTHER INFORMATION...................................................................................14
ITEM 1 -- LEGAL PROCEEDINGS................................................................................14
ITEM 2 -- CHANGES IN SECURITIES AND USE OF PROCEEDS........................................................16
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES..................................................................16
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............................................16
ITEM 5 -- OTHER INFORMATION................................................................................16
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K.................................................................16
</TABLE>
<PAGE> 3
THE CRONOS GROUP
PART I--FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
Management Representation
The unaudited condensed consolidated interim financial statements
included herein have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
disclosures normally included in annual financial statements prepared in
accordance with accounting standards generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations.
These condensed consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company's latest Annual Report on Form 10-K.
This financial information reflects, in the opinion of management, all
adjustments necessary to present fairly, the results for the interim periods.
Such adjustments consist of only normal recurring adjustments. The results of
operations for such interim periods are not necessarily indicative of the
results to be expected for the full year.
1
<PAGE> 4
THE CRONOS GROUP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(US DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Gross lease revenue $ 34,146 $ 34,750
Commissions, fees and other income
- US Limited Partnerships 334 352
- Unrelated parties 955 1,272
Gain on sale of investment:
- gain on conversion of investment 1,502 --
- realized holding gain 1,579 --
-------- --------
TOTAL REVENUES 38,516 36,374
-------- --------
Direct operating expenses 7,521 8,064
Payments to container owners
- US Limited Partnerships 6,202 6,795
- Other container owners 10,977 9,877
Depreciation and amortization 3,960 4,398
Selling, general and administrative expenses 4,297 4,126
Interest expense 2,410 3,207
-------- --------
TOTAL EXPENSES 35,367 36,467
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES 3,149 (93)
Income taxes 305 --
-------- --------
NET INCOME (LOSS) 2,844 (93)
Other comprehensive income, net of tax -
Unrealized holding loss on available for sale securities (266) --
-------- --------
COMPREHENSIVE INCOME (LOSS) $ 2,578 $ (93)
======== ========
NET INCOME (LOSS) PER COMMON SHARE (BASIC AND DILUTED) $ 0.31 $ (0.01)
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 5
THE CRONOS GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
(US DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 7,711 $ 8,701
Amounts due from lessees (net) 29,183 26,739
Amounts receivable from container owners 15,661 9,147
New container equipment for resale 1,401 2,535
Net investment in direct finance leases 922 1,090
Investments 3,595 1,707
Container equipment (net) 133,821 137,547
Building and other equipment (net) 11,471 11,807
Intangible assets 13,228 13,405
Other assets including prepayments 21,188 19,189
--------- ---------
TOTAL ASSETS $ 238,181 $ 231,867
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Amounts payable to container owners $ 28,145 $ 26,620
Amounts payable to container manufacturers 7,681 3,609
Other amounts payable and accrued expenses 15,382 13,799
Debt and capital lease obligations 107,129 109,978
Current and deferred income taxes 7,124 7,058
Deferred income and unamortized acquisition fees 9,772 10,433
--------- ---------
TOTAL LIABILITIES 175,233 171,497
--------- ---------
SHAREHOLDERS' EQUITY
Common shares 18,317 18,317
Additional paid-in capital 49,928 49,928
Share subscriptions receivable (82) (82)
Accumulated other comprehensive income, net of tax 1,011 1,277
Accumulated deficit (6,226) (9,070)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 62,948 60,370
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 238,181 $ 231,867
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 6
THE CRONOS GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,513 $ 3,358
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,028 14,296
-------- --------
FINANCING ACTIVITIES:
Repayments of term debt and capital lease obligations (2,849) (19,680)
Cash deposits (restricted) (1,682) --
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (4,531) (19,680)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (990) (2,026)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,701 9,281
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,711 $ 7,255
======== ========
Supplementary disclosure of cash flow information:
Cash paid during the period for:
- - interest $ 1,884 $ 3,386
- - income taxes 255 188
Cash received during the period for:
- - interest 117 195
- - income taxes -- --
Non-cash investing and financing activities:
- - container equipment acquired under capital lease 1,163 --
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 7
THE CRONOS GROUP
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(US DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Unrestricted
Accumulated retained
Additional Share other Retained earnings Total
Common paid-in subscriptions comprehensive Earnings (accumulated shareholders'
shares capital receivable income Restricted deficit) equity
<S> <C> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED
MARCH 31, 2000
Balance, December 31, 1999 $ 18,317 $ 49,928 $ (82) $ 1,277 $ 1,832 $(10,902) $ 60,370
Net income 2,844 2,844
Change in unrealized
holding gain
on available for sale
securities, net of tax (266) (266)
-------- -------- -------- -------- -------- -------- --------
Balance,
March 31, 2000 $ 18,317 $ 49,928 $ (82) $ 1,011 $ 1,832 $ (8,058) $ 62,948
========= ======== ======== ======== ======== ======== ========
THREE MONTHS ENDED
MARCH 31, 1999
Balance, December 31, 1998 $ 17,717 $ 49,108 $ (123) $ 429 $ 1,772 $(12,816) $ 56,087
Net loss (93) (93)
-------- -------- -------- -------- -------- -------- --------
Balance,
March 31, 1999 $ 17,717 $ 49,108 $ (123) $ 429 $ 1,772 $(12,909) $ 55,994
======== ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 8
THE CRONOS GROUP
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. The condensed consolidated financial statements include the accounts of
The Cronos Group and its wholly-owned subsidiaries (the "Company"). All
material intercompany accounts and transactions have been eliminated.
The Company's accounting records are maintained in United States dollars
and the condensed consolidated financial statements are prepared in
accordance with accounting standards generally accepted in the United
States of America.
2. Operating segment data
Condensed segment information is provided in the tables below:
<TABLE>
<CAPTION>
Other
US Limited container Owned
Partnerships owners containers Total
<S> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 2000
Gross lease revenue $ 11,206 $ 15,093 $ 7,847 $ 34,146
Operating profit before indirect items 2,261 1,630 983 4,874
Operating profit 788 181 214 1,183
Segment assets 19,265 27,618 145,576 192,459
THREE MONTHS ENDED MARCH 31, 1999
Gross lease revenue $ 11,795 $ 14,240 $ 8,715 $ 34,750
Operating profit before indirect items 2,366 1,610 542 4,518
Operating profit (loss) 771 143 (411) 503
Segment assets 22,337 20,965 165,928 209,230
</TABLE>
Reconciliation of operating profit for reportable segments to income (loss)
before income taxes:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Operating profit $ 1,183 $ 503
Gain on sale of investment 3,081 --
Selling, general and administrative expenses (937) (425)
Amortization of intangibles (178) (171)
------- -------
Income (loss) before income taxes $ 3,149 $ (93)
------- -------
</TABLE>
6
<PAGE> 9
THE CRONOS GROUP
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. Earnings per common share (US dollar amounts in thousands, except per
share amounts)
The components of basic and diluted net income (loss) per share were as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Net income (loss) available for common shareholders $ 2,844 $ (93)
----------- -----------
Average outstanding shares of common stock 9,158,378 8,858,378
Dilutive effect of:
- - Executive officer common share options 62,269 --
- - Warrants 40,245 --
- - 1999 stock option plan 20,612 --
----------- -----------
Common stock and common stock equivalents 9,281,504 8,858,378
----------- -----------
Basic and diluted net income (loss) per share $ 0.31 $ (0.01)
=========== ===========
</TABLE>
4. Amounts receivable from container owners
Amounts receivable from container owners include amounts due from
related parties of $6.2 million and $5.9 million at March 31, 2000 and December
31, 1999, respectively.
5. Investments in related parties
Investments in related parties comprise general partnership
investments and further limited partnership investments in ten sponsored funds.
These general and limited partner investments are accounted for on the equity
method. The subsidiary of the Company that acts as a general partner maintains
insurance for bodily injury, death and property damage for which a partnership
may be liable, and may be contingently liable for uninsured obligations of the
partnerships.
The investment in US Limited Partnerships was $0.1 million and
$0.03 million at March 31, 2000 and December 31, 1999, respectively.
6. Container equipment
Container equipment is net of accumulated depreciation of $69.5
million and $67.6 million at March 31, 2000 and December 31, 1999, respectively.
7. Amounts payable to container owners
Amounts payable to container owners include amounts payable to
related parties of $13.2 million and $12.3 million at March 31, 2000 and
December 31, 1999, respectively.
7
<PAGE> 10
THE CRONOS GROUP
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8. Debt and capital lease obligations
Debt and capital lease obligations include amounts due within
twelve months of $16.4 million and $16.6 million at March 31, 2000 and December
31, 1999, respectively.
9. Commitments and contingencies (to be read in conjunction with Note 16 to
the 1999 Consolidated Financial Statements)
i. Contingencies - Austrian allegations
Since 1983, a subsidiary of the Company has managed containers
for Austrian investment entities sponsored by companies owned or controlled by
Contrin Holding S.A., a Luxembourg holding company ("Contrin"), and for Contrin
itself.
The Company is in a dispute with Contrin over $2.6 million that
Contrin claims was remitted to the Company in 1994 for the purchase of
containers, but that the Company asserts that it did not receive. The Company's
former Chairman, Stefan M. Palatin, purportedly acknowledged in 1995 the receipt
of the $2.6 million for the purchase of containers, but the monies were not
deposited into a Company account. Prior to Contrin's allegation that the former
Chairman of the Company had acknowledged receipt of the $2.6 million, the
Company's current management had not been aware of the Chairman's purported
acknowledgement. In addition, the Company has determined that a distribution of
$0.4 million to third party Contrin investors was paid by the Company in
December 1994 into the same bank account into which the $2.6 million was
apparently deposited.
In December 1997, further to legal and other consultations, the
Company recorded an accrual of $3.4 million relating to the alleged transfer of
$2.6 million, the related interest, plus the estimated settlement costs of this
and other claims by Contrin. The Company is unable to predict the outcome of the
dispute.
During 1999 and in the first quarter of 2000, the Company paid
legal fees totaling $0.3 million relating to the settlement costs referred to
above. Such fees were charged against the $3.4 million accrual thereby reducing
the liability to $3.1 million at March 31, 2000.
As the outcome of these items may be dependent on future legal
action, management is unable to determine the date on which the matter will be
resolved. The Company is consulting with legal counsel and is disputing the
claim.
8
<PAGE> 11
THE CRONOS GROUP
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Commitments and contingencies (continued)
i. Contingencies - Austrian allegations (continued)
Contrin investors have also made claims with respect to alleged
transactions between third parties and companies alleged to be connected to Mr.
Palatin, including Transocean Equipment Manufacturing and Trading Limited
("TOEMT"), involving the purchase and sale of containers in a manner designed to
secure a tax mitigation advantage to those third parties. It is alleged that
sums remain owing to the third parties by one or more of these companies in
connection with the pre-arranged trading in containers. Current management of
the Company believes that the Group was not involved in these transactions, that
the Company had no access to the records of the alleged transactions and, so far
as the Company has managed the containers, the Company has acted in accordance
with instructions from authorized representatives of the third parties.
Management considers that prudent provision has been made in the
financial statements for the matters noted above. There is a reasonable
possibility that a material change could occur with respect to these commitments
and contingencies within one year of the date of these financial statements. In
such an event, management estimates that possible losses could exceed the amount
accrued by $1 million.
ii. Contingencies - TOEMT
TOEMT, which is currently in liquidation in the United Kingdom,
has been separately registered in the same name in both the United Kingdom and
the Isle of Man. The Company has recently become aware that more than one
creditor of TOEMT may claim an interest in the distributions made by the Company
with respect to the containers owned by TOEMT. At the present time, the Company
has insufficient information to evaluate the competing claims or to determine
whether the Company may have any liability to the competing creditors for the
prior distributions made with respect to the TOEMT containers.
9
<PAGE> 12
THE CRONOS GROUP
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company generates revenues by leasing to ocean carriers marine
containers that are owned either by third-party container owners or by the
Company itself. These leases, which generate most of the Company's revenues, are
generally operating leases.
The following chart summarizes the composition of the Cronos fleet
(based on original equipment cost) at March 31 for each of the periods
indicated:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
US Public Limited Partnerships 33% 34%
Other Container Owners 45% 43%
Owned Containers 22% 23%
---------- ----------
Total 100% 100%
========== ==========
</TABLE>
All containers, whether owned or managed, are operated as part of a
single fleet. The Company has discretion over which ocean carriers, container
manufacturers and suppliers of goods and services it deals with. Since the
Company's agreements with the Managed Container Owners meet the definition of
leases in Statement of Financial Accounting Standards No. 13, they are accounted
for in the Company's financial statements as leases under which the container
owners are lessors and the Company is lessee. The agreements with container
owners generally provide that the Company will make payments to the container
owners based upon the rentals collected from ocean carriers after deducting
direct operating expenses and the Company's management fee. The majority of
payments to container owners are therefore dependent upon the leasing of the
containers by the Company to ocean carriers and the collection of lease rentals.
Minimum lease payments on the agreements which have fixed payment terms are
presented in Note 13 to the Company's 1999 Consolidated Financial Statements.
For the quarter ended March 31, 2000, over 88% of payments to container owners
represented agreements under the terms of which the amount due to the container
owner was calculated as a percentage of the rentals collected from the ocean
carriers after deducting the direct operating expenses paid by the Company.
The following chart summarizes the composition of the Cronos fleet (in
thousands, based on TEU), by equipment type, at March 31 for each of the periods
indicated:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Dry cargo 352.0 335.3
Refrigerated 13.4 14.6
Cellular palletwide containers ("CPCs") 3.1 2.4
Roll-Trailer 2.2 2.2
Tank 2.0 2.0
Other Dry Freight Specials 2.8 2.5
---------- ----------
Total fleet 375.5 359.0
========== ==========
</TABLE>
10
<PAGE> 13
THE CRONOS GROUP
The short-term objective of the Company is to improve utilization by
taking advantage of improving market conditions and stronger demand for leased
containers. To achieve this objective the Company offers greater leasing
incentives and repositions equipment to higher-demand locations. While this
short-term strategy may increase repositioning expenses, it may also reduce
those expenses related to storing off-hire containers. These measures will also
provide the longer-term advantage of placing the containers where the demand is
greatest.
The following chart summarizes the combined utilization of the Cronos
fleet (based on approximate original equipment cost) at the dates indicated:
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
<S> <C> <C>
Utilization 80.1% 72.6%
</TABLE>
Over the course of the last twelve months, the Company's combined per
diem rate fell by approximately 13% from the combined rate at March 31, 1999.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH
31, 1999
Operating profit for the three months ended March 31, 2000, was $1.2
million compared to $0.5 million for the corresponding period of 1999. A $0.6
million reduction in income from both the owned and managed fleet together with
a $0.2 million decrease in commissions, fees and other operating income, were
more than offset by lower indirect allocations of selling, general and
administrative expenses of $0.3 million, lower interest expense of $0.8 million
and lower depreciation expense of $0.4 million.
Gross lease revenue of $34.1 million in the three months ended March 31,
2000, was $0.6 million, or 1.7%, lower than in the corresponding period of 1999.
Lease per diems increased by $0.3 million due to a larger fleet size. A $0.9
million decrease in ancillary revenues was primarily due to a $0.5 million
reduction in drop-off charges, which reflects the improvement in the leasing
market, and a $0.2 million increase in on-hire incentives.
Commissions, fees and other income for the three months ended March 31,
2000, of $1.3 million were $0.3 million, or 20.6%, lower than in the first
quarter of 1999 due to reductions of $0.1 million each in finance lease income,
acquisition fees and investment income.
Gain on sale of investment of $3.1 million in the first quarter of 2000
represents the receipt of cash and shares that had been held pending
post-closing reports and adjustments related to the Agreement and Plan of Merger
between Transamerica Corporation and Trans Ocean Limited in 1996.
Direct operating expenses of $7.5 million in the first three months of
2000 were $0.5 million, or 6.7%, lower than in the corresponding period of 1999.
An increase of $0.8 million in charges for legal expenses and doubtful accounts
was more than offset by a $0.8 million decrease in activity-related costs and a
$0.5 million decrease in inventory-related costs due to a smaller off-hire
fleet.
Payments to container owners of $17.2 million during the three months
ended March 31, 2000, were $0.5 million, or 3%, higher when compared to the
corresponding period in 1999. Payments to US Limited Partnerships of $6.2
million in the first quarter of 2000 were $0.6 million lower than in the same
period of 1999 due primarily to a smaller dry cargo container fleet. Payments to
Other Container Owners were $11 million during the three months ended March 31,
2000, an increase of $1.1 million, or 11.1%, when compared to the same period of
1999 due to a larger fleet size. The increase in the fleet size was due to
transactions involving the sale of equipment from the Owned to the Other
Container Owner segment during the first half of 1999 together with new
container production in the second half of 1999 and in the first quarter of
2000.
11
<PAGE> 14
THE CRONOS GROUP
Depreciation and amortization decreased by $0.4 million, or 10%, in the
three months to March 31, 2000, to $4.0 million. This was primarily due to
container sales from the Owned to the Other Container Owner segment during 1999.
Selling, general and administrative expenses increased to $4.3 million
in the first quarter of 2000 from $4.1 million in the corresponding period of
1999, an increase of $0.2 million or 4.1%. Reductions in manpower expense of
$0.4 million were more than offset by a $0.2 million increase in professional
service and other costs and by $0.4 million of non-recurring legal costs.
Interest expense of $2.4 million for the three months ended March 31,
2000, decreased by $0.8 million, or 24.9%, when compared to the corresponding
period in 1999. This decrease is due to a reduced debt balance together with a
lower average interest rate reflecting the effect of debt refinancing during
1999.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH
31, 1998
Operating profit of $0.5 million in the first quarter of 1999 was $0.2
million higher than in the corresponding period of 1998. Reductions in selling,
general and administrative expenses, interest expense and depreciation expense
more than offset reduced income from both the owned and managed container
fleets.
Gross lease revenue of $34.8 million in the first quarter of 1999 was
$5.8 million, or 14.3%, lower than in the corresponding prior year period due to
the combined effect of reduced utilization and per-diem rates, which represented
approximately $4.9 million of the decrease, together with a smaller fleet size
that accounted for approximately $0.9 million of the reduction.
Commissions, fees and other income of $1.6 million in the three months
ended March 31, 1999 were almost unchanged from the corresponding period in
1998. Increased income, primarily from specialized container products, was
partially offset by reduced fees from the disposal of containers and lower
finance lease income.
Direct operating expenses were $8.1 million in the first quarter of
1999, a decrease of $0.6 million, or 7.4%, compared to the corresponding quarter
in 1998. Increased storage and repositioning costs of $0.8 million, reflecting a
larger off-hire fleet, were more than offset by a $1.3 million reduction in
charges related to doubtful accounts.
Payments to container owners decreased to $16.7 million in the three
months ended March 31, 1999, a decrease of $2.8 million, or 14.4%, compared to
the corresponding period in 1998.
Payments to US Limited Partnerships decreased by $1.9 million to $6.8
million, a 21.5% decrease compared to the first quarter of 1998. The decline in
net lease revenue for this segment was caused by lower average utilization and
per-diem rates as well as a smaller container fleet. The size of the US Limited
Partnership fleet declined from 137,009 TEU at March 31, 1998, to 127,902 TEU at
March 31, 1999 as a result of the disposal of older container equipment,
including sales of equipment to the Other Container Owner segment.
Payments to Other Container Owners were $9.9 million in the first
quarter of 1999, a decrease of $0.9 million, or 8.6%, compared to the same
period of 1998 as lower average utilization and per-diem rates more than offset
a larger average fleet size. The increase in the average fleet size was due to
transactions involving the sale of equipment from the Owned to the Other
Container Owner segment in the first quarter of 1999.
Depreciation and amortization decreased by $0.2 million, or 5.0%, in the
first three months of 1999 to $4.4 million due to container sales from the Owned
to the Other Container Owner segment in the three months ended March 31, 1999.
12
<PAGE> 15
THE CRONOS GROUP
Selling, general and administrative expenses decreased to $4.1 million
for the three months ended March 31, 1999 from $5.4 million for the three months
ended March 31, 1998, a decrease of $1.2 million or 23.0%. The decrease was due
to reductions of $0.7 million in manpower and manpower related costs together
with lower costs associated with information technology, professional services
and communications.
Interest expense of $3.2 million for the three months ended March 31,
1999 was $1.0 million lower, or 24.4%, compared to the same period a year ago
due primarily to a reduction in the average debt balance from $170.0 million to
$140.1 million between the first quarters of 1998 and 1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash from Operating Activities: Net cash provided by operating
activities was $2.5 million and $3.4 million during the first quarter of 2000
and 1999, respectively. The net cash generated in 2000 reflected earnings from
operations which was partly offset by a $2.4 million increase in amounts due
from lessees. The net cash generated in 1999 reflected earnings from operations
together with the release of $4.9 million of deposits of which $2.7 million was
utilized to make payments to third party container owners.
Cash from Investing Activities: Net cash provided by investing
activities was $1 million in the first quarter of 2000 reflecting the receipt of
$1 million of funds that had been held in an escrow account together with $0.2
million in proceeds from the sale of container equipment which were partly
offset by $0.2 million in container acquisitions. Net cash provided by investing
activities was $14.3 million in the first three months of 1999 reflecting sales
of container equipment to third party container owners.
Cash from Financing Activities: Net cash used in financing activities
was $4.5 million during the first quarter of 2000 compared to $19.7 million for
the corresponding period of 1999. In the first quarter of 2000, the Company
repaid $2.8 million of debt and capital lease obligations and placed $1.7 on
deposit in a restricted cash account in accordance with the terms of a loan
agreement. In the first three months of 1999, repayments of debt and capital
lease obligations included $14.9 million of short-term debt repayments that were
generated from proceeds of container equipment sales.
CAPITAL RESOURCES
The Company has placed orders with container manufacturers totaling
$21.7 million at March 31, 2000. These orders relate to containers to be
purchased for managed container owners or to be financed by the Company using
debt funding.
ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk: Outstanding borrowings are subject to interest rate
risk. Approximately 70% of total borrowings had floating interest rates at March
31, 2000, and December 31, 1999, respectively.
Exchange rate risk: Substantially all of the Company's revenues are
billed and paid in US dollars and a significant portion of costs are billed and
paid in US dollars. Of the remaining costs, the majority are individually small,
unpredictable and incurred in various denominations and thus are not suitable
for cost effective hedging. From time to time, Cronos hedges a portion of the
expenses that are predictable and are principally in UK pounds sterling. In
addition, the majority of the Company's container purchases are paid for in US
dollars.
As exchange rates are outside of the control of the Company, there can
be no assurance that such fluctuations will not adversely effect its results of
operations and financial condition.
13
<PAGE> 16
THE CRONOS GROUP
PART II --OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
DISPUTE WITH THE CONTRIN GROUP
The Company manages containers for investment entities sponsored by or
affiliated with Contrin Holding S.A., a Luxembourg holding company (collectively
"Contrin"). Approximately 2% (measured by TEUs) of the fleet of managed
containers is owned by members of the Contrin Group. The Company is in a dispute
with Contrin over funds that Contrin claims to have remitted to Cronos for the
purchase of containers. Contrin claims that in 1994 it transmitted $2.6 million
to Cronos for the purchase of containers. The Company believes that these funds
were not received by the Company but were diverted to an account in the name of
and/or controlled by a former chairman of the Company, Stefan M. Palatin, and
that this was known or should have been known by Contrin. The Company also
believes that the bank that received the funds is at fault. Contrin's counsel
has advised the Company that Contrin will institute proceedings for the recovery
of the $2.6 million against Cronos, together with accrued interest. The Company
is unable to predict the outcome of the dispute.
THE SEC'S NOVEMBER 15, 1999 CEASE-AND-DESIST ORDER
On November 15, 1999, the Company consented to the entry by the SEC of
an administrative cease-and-desist order (the "Order"). Without admitting or
denying the findings made by the SEC in the Order, the Company agreed to cease
and desist from committing or causing any future violation of certain antifraud,
reporting, record keeping, and internal control provisions of the Federal
securities laws. The SEC's investigation of the Company began in February 1997
and was triggered by the actions of Mr. Palatin. Cronos' Board removed Mr.
Palatin as CEO in May 1998 and, in July 1998, Mr. Palatin resigned from the
Board. While Mr. Palatin is no longer an officer or director of the Company, he
continues to control approximately 20% of the outstanding common shares of the
Company.
The SEC made certain findings by its Order. The Company neither admitted
nor denied the findings made by the SEC. The SEC found that Cronos, under the
domination and control of Mr. Palatin, misrepresented, through affirmative
misstatements and omissions in its public statements and filings with the SEC,
transactions it had with Mr. Palatin for the period from December 1995 through
1997, including:
That Mr. Palatin had intercepted payments between Cronos and one of its
major customers (which Mr. Palatin also controlled);
That Cronos paid Mr. Palatin several million dollars in 1994 before
Cronos first sold its shares of Common Stock to the public;
That Mr. Palatin had sold shares in Cronos' initial public offering
through another entity that he controlled;
That Cronos paid additional monies to Mr. Palatin shortly after the 1995
offering;
That Mr. Palatin did not own certain collateral that he pledged to
secure loans he owed to Cronos; and
That Cronos systematically fired or demoted employees and directors who
challenged or questioned Mr. Palatin's transactions or the disclosures of the
Company related thereto.
14
<PAGE> 17
THE CRONOS GROUP
While the Order did not impose any fine or penalty against Cronos, the
Company is unable to predict what impact, if any, it will have on its future
business or whether it will lead to future litigation involving Cronos. Under
the Order, the Company has designated an agent for service of process with
respect to any proceeding instituted by the SEC to enforce the Order or with
respect to any future investigation of the Company by the SEC. In addition, the
entry of the Order precludes the Company and persons acting on its behalf from
relying upon certain protections accorded to forward-looking statements by the
Securities Act of 1933 and the Securities Exchange Act of 1934 until November
14, 2002.
COLLECTION OF PALATIN NOTES
In October 1999, the Company brought an action against Mr. Palatin, in
the Supreme Court of the State of New York (Case No. 604963/99), for payment of
the remaining balances due under two promissory notes, both dated July 14, 1997,
by and between a subsidiary of the Company, as payee ("Payee"), and Mr. Palatin,
as payor.
On February 8, 2000, the Supreme Court of the State of New York entered
its default judgment against Mr. Palatin. Pursuant to the judgment, the Payee is
to recover from Mr. Palatin $6.2 million, plus interest at 9% per annum from
June 21, 1999 to February 8, 2000 in the amount of $0.4 million, for a total
recovery of $6.6 million.
The Payee currently is pursuing execution of the judgment against Mr.
Palatin's beneficial ownership of the Common Shares of the Company. According to
filings made with the SEC by the shareholder of Klamath Enterprises S.A.
("Klamath"), Mr. Palatin is the beneficial owner of the 1,793,798 outstanding
shares of Common Stock of the Company owned of record by Klamath. On February
28, 2000, the Payee obtained a preliminary injunction order from the Superior
Court of the Commonwealth of Massachusetts against Mr. Palatin and against the
Company's transfer agent, EquiServe Limited Partnership, preliminarily enjoining
them from selling, transferring, assigning, or otherwise encumbering, disposing
of, or diminishing the value of the Common Shares of the Company held of record
by Klamath.
The Company is also pursuing an attachment order in the Swiss courts
against the individual the Company believes is the record owner of the
outstanding shares of Klamath, precluding him from transferring the shares of
Klamath or the Common Shares of the Company owned by Klamath.
The objective of the Company is to satisfy the judgment obtained by the
Payee against Mr. Palatin by a transfer of Common Shares beneficially owned in
the Company by Mr. Palatin to the Payee or by a liquidation of the shares in an
amount sufficient to fully discharge the judgment. The Company is unable to
predict at the present time whether it will succeed in achieving its objectives.
SPECIAL LITIGATION COMMITTEE
In July 1998, the Board of Directors of the Company established a
Special Litigation Committee ("Committee") of the Board to examine the
relationships between Mr. Palatin and Contrin, Barton Holding Ltd. ("Barton")
which was the former preferred shareholder, and affiliated persons. The
Committee also investigated transactions between the Company and its present and
former officers and directors since January 1, 1995, to determine whether
improper self-dealing occurred between the Company and such persons. The
Committee completed its investigation and issued its report on March 31, 2000.
Among the Committee's conclusions and recommendations are the following:
That the Company should vigorously pursue collection of the Palatin
Notes (discussed above), and should seek to satisfy the judgement obtained
against Mr. Palatin by foreclosing on the shares of Common Stock of the Company
held beneficially by Mr. Palatin;
15
<PAGE> 18
THE CRONOS GROUP
That the Company should vigorously defend any proceeding brought by
Contrin in pursuit of its claim of $2.6 million against the Company (see
"Dispute with Contrin Group" above) and, if any such proceeding is instituted by
Contrin, that the Company should seek indemnification against responsible third
parties, and assert against one or more of such third parties claims for damages
the Company has against them;
That the Company reject the claim of Dr. Axel Friedberg, a former
outside director of the Company, for the balance due of $0.1 million on his
statement for legal services purportedly rendered to the Company for the period
from November 30, 1997 through December 31, 1998; and
That the Board of Directors of the Company reconfirm its
interested-party statement of policies to govern interested-party transactions
between the Company and all directors, officers, and employees of the Company
and its subsidiaries.
ITEM 2 -- CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5 -- OTHER INFORMATION
Not applicable
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
<S> <C>
10.1 Employment Agreement by and between Cronos Containers S.r.l. and
Nico Sciacovelli dated April 7, 2000.
27.1 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
Not applicable.
16
<PAGE> 19
THE CRONOS GROUP
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.
THE CRONOS GROUP
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
By /s/ P J Younger Director, Executive Vice President, May 12, 2000
Peter J. Younger Chief Financial Officer
and Chief Accounting Officer
(Principal Financial and Accounting Officer)
</TABLE>
17
<PAGE> 20
THE CRONOS GROUP
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Exhibit Page
- ------ ------- ----
<S> <C> <C>
10.1 Employment Agreement by and between Cronos Containers S.r.l. and Nico
Sciacovelli dated April 7, 2000 19
27 Financial Data Schedule 26
</TABLE>
18
<PAGE> 1
Exhibit 10.1
THIS IS A MEMORANDUM of the terms of a contract made on 1 December 1999 and lays
down, according to Italian Law, all the conditions which regulate the employment
relationship between :-
CRONOS CONTAINERS S.R.L a company incorporated in Italy and whose registered
office is at Genova, T.Galimberti 7 ("the Company") and
MR NICO SCIACOVELLI of Via Niccolini, n.75/3, 16166, Genova Italy ("the
Executive").
1 OBJECT AND STARTING DATE
1.1 The Executive was appointed as Vice President of Europe and the
Company. In such position he is responsible for all container
leasing marketing and administration for Europe, Middle East,
Africa and India.
1.2 The Executive will be considered as a Dirigente, in accordance
with Italian Law.
1.2.1 The Executive accepts that the Company may at its
discretion direct him to perform other duties or tasks
not within the scope of his normal duties and the
Executive agrees to perform such duties or undertake
such tasks as if they were specifically required under
this agreement provided performance of any such duties
or tasks by the Executive shall not affect the
Executive's right to the remuneration provided for under
this agreement, as provided by Art. 2103 of the Civil
Code.
2 DUTIES OF THE EXECUTIVE
2.1 The Executive must behave in a manner suitable to the duties
inherent in the explanation of the tasks assigned to him and
shall during the period of this agreement:
2.1.1 devote the whole of his time, attention and ability to
the duties of his appointment;
2.1.2 faithfully and diligently perform those duties and
exercise such powers consistent with them which are from
time to time assigned to or vested in him;
2.1.3 obey all lawful and reasonable directions of the Board
of Directors;
2.1.4 use his best endeavours to promote the interests of the
Company and its Group Companies;
2.1.5 keep the Chief Executive Officer and Chairman of the
Board of Directors of Cronos Group promptly and fully
informed (in writing if so requested) of his conduct or
the
19
<PAGE> 2
business or affairs of the Company and its Group
Companies and provide such explanations as they may
require;
2.1.6 not at any time make untrue or misleading statements
relating to the Company or any Group Company.
2.2 In compliance with the duty of loyalty provided in art. 2105 of
the Civil Code the Executive is forbidden to conduct himself in
a way which may, through its nature or through its possible
consequences, result in a situation contrasting with the duties
connected to his placement in the Company and which may give
rise to a conflict of interest.
2.3 In particular, the Executive is forbidden, without previous and
express authorisation from the Company, to accept money or any
other benefits, from suppliers and from clients or from any
person external to the Company for all the duration of the
employment relationship. Only gifts of small value, received in
ordinary situations, are excluded from the above. Gifts of small
value are defined as those with an average consumer price of not
more than Lit. 100.000.
2.4 Consequently, all gifts or tips of a value greater than that
indicated received by the Executive should be considered as the
Company's property, and must be handed over to the Executive's
immediate superior, who will freely decide their destination.
3 CONFIDENTIALITY
3.1 The Executive acknowledges that during is employment with the
Company he will have access to and will be entrusted with
confidential information and trade secrets relating to the
business of the Company, and their customers and suppliers.
3.2 The Executive will not during the term of the appointment
(otherwise than in the proper performance of his duties and then
only to those who need to know confidential information) or
thereafter (except with the written consent of the Chief
Executive Officer or Chairman or as required by law):
3.2.1 divulge or communicate Confidential Information to any
person (including any representative of the press or
broadcasting or other media);
3.2.2 cause or facilitate any unauthorised disclosure through
any failure by him to exercise all due care and
diligence;
3.2.3 the Executive will use all reasonable endeavours to
prevent the publication or disclosures of any
Confidential Information. These restrictions will not
apply to
20
<PAGE> 3
Confidential Information which, after the appointment
has been terminated, has become available to the public
generally otherwise than through unauthorised
disclosure, or is disclosed in any legal proceedings.
4 EXCLUSIVITY OF SERVICES
4.1 It is forbidden for the Executive to enter into any other
employment relationship involving any type of work, in any form
(subordinate employment, autonomous employment, collaboration,
participation) even if it is not in competition with the
Company, except with the previous and express authorisation of
the Directors of the Company.
4.2 The violation of this clause constitutes a just cause for the
withdrawal from the employment relationship.
5 PLACE OF WORK AND RESIDENCE
5.1 The place of will be in Genova. The Company reserves the right
to modify this place of work with the consent of the Executive
as provided in Art. 2103 of the Civil Code.
5.2 The Executive will, according to the needs of the Company,
travel both in Italy and abroad for business purposes. The
special economic treatment received by the Executive compensates
for this obligation.
6 PAY
6.1 As salary and as compensation for any obligations provided in
this contract, the Executive will receive a total gross annual
salary equal to Lit 345,701.314 payable in fourteen equal
monthly instalments in arrears at the end of each calendar month
and one on the 15th of December and one on 15th June. The salary
shall be deemed to include any fees receivable by the Executive
as a Director of the Company or of any other company or
unincorporated body in which he holds office as nominee or
representative of the Company.
6.2 The monthly salary will be paid at the end of each calendar
month to a bank account designated by the Executive.
6.3 The Executive shall be entitled to participate in the Company's
discretionary bonus programme in accordance with its terms and
conditions and which pays a discretionary bonus based on Company
and personal performance. The entitlement to participate in the
Company's discretionary bonus programme will cease on
termination of employment.
21
<PAGE> 4
6.4 The economic treatment as provided hereinabove has been
determined, in its entirety, taking into account the particular
characteristics of the employment relationship and its
particular, favourable conditions. It is paid in anticipation of
any possible future economic rise, which could derive from any
source, and is fully comprehensive. It substitutes any different
treatment, and excludes any item or institute of a remunerative
or integrative nature foreseen by any of the regulating sources
of the employment relationship. The economic treatment absorbs
any economic rise provided by any source, even if it is provided
by particular institutions and even if it has a retrospective
effect.
6.5 On the termination of this Agreement the Executive will receive
TFR as provided by art. 2120 Italian Civil Code.
7 EXPENSES
7.1 The Company shall reimburse to the Executive on a monthly basis
travelling, hotel, entertainment and other expenses reasonably
incurred by him in the proper performance of his duties subject
to the production to the Company of such vouchers or other
evidence of actual payment of the expenses as the Company may
reasonably require.
7.2 Where the Company issues a company sponsored credit or charge
card to the Executive he shall use such card only for expenses
reimbursable under clause 7.1 above, and shall return it to the
Company forthwith on the termination of his employment.
8 COMPANY CAR
8.1 The Company will provide the Executive with a car which can be
used for the carrying out of the tasks described in this
contract as well a for private use.
8.2 The value stipulated in relation to the possible private use of
the car is determined as 30% of 15.000 kilometres, as determined
in the A.C.I tables. Consequently, the Executive will be
invoiced monthly for a sum, inclusive of I.V.A., which will be
taken from his payment sheet and will be up-dated periodically
in accordance with the A.C.I. tables.
8.3 The Company will pay all expenses related to the car, whether
they are fixed amounts (depreciation, tax, insurance, etc), or
variable amounts (petrol, oil, tyres, etc). Each time the
Executive purchases petrol he must accurately make a record of
the amount spent, which must include the signature of the
retailer.
8.4 If the Executive does not keep a record as provided in clause
8.3 his expenses will not be reimbursed.
22
<PAGE> 5
8.5 The Executive is responsible for the adequate preservation of
the car and for its periodic maintenance, in order to keep it
running perfectly efficiently.
9 INSURANCE BENEFIT
9.1 The Executive shall be entitled to participate at the Company's
expense in the Company's Life Insurance Scheme and Permanent
Health Insurance Scheme and in the Company's private medical
expenses insurance scheme for himself, his spouse and dependent
children subject always to the rules of such schemes details of
which are available from the Human Resources Department.
10 HOLIDAYS
10.1 The Executive is entitled to an annual holiday period of 30
working days paid holiday each year (which runs from 1st January
to 31st December) to be taken at such time or times as are
agreed with the Board.
10.2 On the termination of his appointment for whatever reason, the
Executive shall either be entitled to pay in lieu of outstanding
holiday entitlement. The basis for payment shall be 1/260 x of
the Executive's monthly basic salary for each day.
11 SICKNESS OR INJURY
11.1 If the Executive is absent because of sickness (including mental
disorder) or injury he shall report this fact forthwith to the
Human Resources Department of Cronos Containers Limited and if
the Executive is so prevented for seven or more consecutive days
he shall provide a medical practitioner's statement on the
eighth day and weekly thereafter so that the whole period of
absence is certified by doctors statements. Immediately
following his return to work after a period of absence the
Executive shall complete a self-certification form available
from the said Human Resources Department detailing the reasons
for his absence.
11.2 In the case of an interruption of services due to sickness or
injury the Executive has the right to keep his job for a period
of 12 months. In this period the Executive has the right to his
full remuneration.
11.3 Protected period of sickness as provided in clause 11.2 applies
not only to one continuous period of sickness but also to a
series of periods of sickness of any duration. In case of a
series of periods of sickness the protected period will be
considered in relation to all illnesses in the 3 years preceding
the date of dismissal.
23
<PAGE> 6
11.4 In the case of interruption of services for injury incurred
during working hours the Executive has the right to keep his job
and his full remuneration until he has recovered but for no
longer than 30 months.
12 DURATION AND WITHDRAWAL
12.1 This contract commenced on 1 December 1999 and shall continue
except in the case of good cause until 30 November 2001 ("the
Fixed Term"). If at the end of the Fixed Term the contract is
not renewed the contract shall nevertheless continue on the same
terms and conditions save the Company may terminate the
Executive's employment by giving the Executive 12 months written
notice and the Executive may terminate his employment by giving
the company 4 months written notice.
12.2 The Company may terminate this contract with immediate effect as
provided by Art. 2119 of the Civil Code. In the event of a
termination without good cause the Executive will be entitled to
be paid an amount equal to the Executive's annual basic salary
under this Agreement for the balance of the term of this
Agreement as set out in 12.1 above.
13 FINAL PROVISIONS
13.1 This agreement supersedes and extinguishes any prior agreements,
contracts, arrangements, undertakings or practices between the
parties.
Please return a copy of this contract signed and dated by you to indicate your
acceptance and also your approval of the clauses shown below.
Cronos Containers S.r.L.
/s/ Dennis J Tietz
Dennis Tietz
/s/ Peter J Younger
Peter Younger
24
<PAGE> 7
The Executive confirms his approval, both specifically and as regards the
provisions of art. 1341 of the Civil Code, of the following clauses; 2 Duties;
3) Confidentiality; 4) Exclusivity of services; 6) Pay; 12) Duration and
withdrawal.
/s/ Nico Sciacovelli
Nico Sciacovelli
Dated the April 7, 2000
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT MARCH 31, 2000, AND THE CONSOLIDATED INCOME
STATEMENT FOR THE THREE MONTHS ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,711
<SECURITIES> 3,517
<RECEIVABLES> 33,716
<ALLOWANCES> 4,533
<INVENTORY> 1,401
<CURRENT-ASSETS> 65,314
<PP&E> 226,710
<DEPRECIATION> 81,418
<TOTAL-ASSETS> 238,181
<CURRENT-LIABILITIES> 72,339
<BONDS> 107,129
0
0
<COMMON> 18,317
<OTHER-SE> 44,631
<TOTAL-LIABILITY-AND-EQUITY> 238,181
<SALES> 34,146
<TOTAL-REVENUES> 38,516
<CGS> 0
<TOTAL-COSTS> 24,700
<OTHER-EXPENSES> 8,257
<LOSS-PROVISION> 973
<INTEREST-EXPENSE> 2,410
<INCOME-PRETAX> 3,149
<INCOME-TAX> 305
<INCOME-CONTINUING> 2,844
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,844
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.31
</TABLE>
