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: June 30, 2002
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)
| LUXEMBOURG | NOT APPLICABLE | |
| (State or other Jurisdiction of incorporation or organization) | (I.R.S Employer Identification No.) |
16, ALLÉE 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 Aug 9, 2002:
| Class | Number of Shares Outstanding | |
|
|
||
| Common | 7,364,580 |
The Cronos Group
TABLE OF CONTENTS
| PART I — FINANCIAL INFORMATION |
1
|
|||
| ITEM 1 — FINANCIAL STATEMENTS |
1
|
|||
| Management Representation |
1
|
|||
| Condensed Consolidated Statements of Income |
2
|
|||
| Condensed Consolidated Balance Sheets |
3
|
|||
| Condensed Consolidated Statements of Cash Flows |
4
|
|||
| Consolidated Statements of Shareholders’ Equity |
5
|
|||
| Notes to the Condensed Consolidated Financial Statements |
6
|
|||
| ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
13
|
|||
| General |
13
|
|||
| Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001 |
14
|
|||
| Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001 |
16
|
|||
| Liquidity and Capital Resources |
18
|
|||
| ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
19
|
|||
| PART II — OTHER INFORMATION |
20
|
|||
| ITEM 1 — LEGAL PROCEEDINGS |
20
|
|||
| ITEM 2 — CHANGES IN SECURITIES AND USE OF PROCEEDS |
21
|
|||
| ITEM 3 — DEFAULTS UPON SENIOR SECURITIES |
21
|
|||
| ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
21
|
|||
| ITEM 5 — OTHER INFORMATION |
23
|
|||
| ITEM 6 — EXHIBITS AND REPORTS ON FORM 8-K |
23
|
|||
The Cronos Group
PART I — FINANCIAL INFORMATION
Item 1 — Financial Statements
Management Representation
Unless the context indicates otherwise, the “Company” means The Cronos Group and, where appropriate, includes its subsidiaries and predecessors, while “Cronos” or the “Group” means The Cronos Group together with its subsidiaries and predecessors.
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 principles 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
The Cronos Group
Condensed Consolidated Statements of Income
(US dollar amounts in thousands, except per share amounts)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||
Gross lease revenue |
$ | 27,925 | $ | 30,087 | $ | 56,254 | $ | 61,566 | ||||||||
Equipment trading revenue |
197 | — | 581 | — | ||||||||||||
Commissions, fees and other income: |
||||||||||||||||
- US Limited Partnerships |
309 | 333 | 620 | 666 | ||||||||||||
- unrelated parties |
977 | 1,375 | 1,945 | 2,287 | ||||||||||||
Realized holding gain on sale of investment |
— | — | — | 301 | ||||||||||||
Total revenues |
29,408 | 31,795 | 59,400 | 64,820 | ||||||||||||
Direct operating expenses |
7,217 | 7,930 | 14,974 | 14,550 | ||||||||||||
Payments to managed container owners: |
||||||||||||||||
- US Limited Partnerships |
4,079 | 4,747 | 8,034 | 10,502 | ||||||||||||
- Other managed container owners |
8,781 | 9,475 | 17,607 | 19,738 | ||||||||||||
Equipment trading expenses |
151 | — | 518 | — | ||||||||||||
Depreciation and amortization |
3,889 | 4,022 | 7,738 | 8,078 | ||||||||||||
Selling, general and administrative expenses |
3,404 | 3,366 | 6,770 | 6,834 | ||||||||||||
Interest expense |
1,659 | 2,202 | 3,303 | 4,394 | ||||||||||||
Income from recovery of related party loans |
— | (6,000 | ) | — | (6,000 | ) | ||||||||||
Impairment losses |
— | 4,000 | — | 4,000 | ||||||||||||
Total expenses |
29,180 | 29,742 | 58,944 | 62,096 | ||||||||||||
Income before income taxes |
228 | 2,053 | 456 | 2,724 | ||||||||||||
Income taxes (benefit) provision |
(2,365 | ) | 45 | (2,325 | ) | 122 | ||||||||||
Net income |
2,593 | 2,008 | 2,781 | 2,602 | ||||||||||||
Other comprehensive income: |
||||||||||||||||
- unrealised holding loss arising during the period on
available for sale securities |
— | — | — | (294 | ) | |||||||||||
- reclassification adjustment |
— | — | — | (150 | ) | |||||||||||
Comprehensive income |
2,593 | 2,008 | 2,781 | 2,158 | ||||||||||||
Basic and diluted net income per common share |
$ | 0.35 | $ | 0.25 | $ | 0.38 | $ | 0.30 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
The Cronos Group
Condensed Consolidated Balance Sheets
(US dollar amounts in thousands, except per share amounts)
(unaudited)
| June 30, | December 31, | |||||||
| 2002 | 2001 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 5,025 | $ | 4,914 | ||||
Amounts due from lessees (net) |
24,819 | 22,825 | ||||||
Amounts receivable from container owners |
8,137 | 8,675 | ||||||
New container equipment for resale |
7,055 | 1,463 | ||||||
Net investment in direct financing leases |
7,729 | 7,306 | ||||||
Container equipment (net) |
151,242 | 150,440 | ||||||
Other equipment (net) |
493 | 375 | ||||||
Restricted cash |
493 | 452 | ||||||
Goodwill |
11,039 | 11,039 | ||||||
Other intangible assets |
1,002 | 1,096 | ||||||
Other assets including prepayments |
17,370 | 17,234 | ||||||
Total assets |
$ | 234,404 | $ | 225,819 | ||||
Liabilities and shareholders’ equity |
||||||||
Amounts payable to container owners |
$ | 19,462 | $ | 16,889 | ||||
Amounts payable to container manufacturers |
11,252 | 12,888 | ||||||
Other amounts payable and accrued expenses |
12,305 | 13,020 | ||||||
Debt and capital lease obligations |
116,641 | 107,920 | ||||||
Current and deferred income taxes |
4,488 | 6,912 | ||||||
Deferred income and unamortized acquisition fees |
5,996 | 6,711 | ||||||
Total liabilities |
170,144 | 164,340 | ||||||
Shareholders’ equity |
||||||||
Common shares |
14,729 | 18,317 | ||||||
Additional paid-in capital |
47,434 | 49,846 | ||||||
Common shares held in treasury (1,793,798 shares) |
— | (6,000 | ) | |||||
Restricted retained earnings |
1,832 | 1,832 | ||||||
Retained earnings (accumulated deficit) |
265 | (2,516 | ) | |||||
Total shareholders’ equity |
64,260 | 61,479 | ||||||
Total liabilities and shareholders’ equity |
$ | 234,404 | $ | 225,819 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
The Cronos Group
Condensed Consolidated Statements of Cash Flows
(US dollar amounts in thousands, except per share amounts)
(Unaudited)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2002 | 2001 | |||||||
Net cash provided by operating activities |
$ | 1,294 | $ | 13,175 | ||||
Cash flows from investing activities |
||||||||
Purchase of container equipment |
(5,919 | ) | (16,828 | ) | ||||
Purchase of property and other equipment |
(205 | ) | — | |||||
Investment in direct financing lease equipment |
(1,028 | ) | — | |||||
Proceeds from sales of container and other equipment |
1,335 | 3,326 | ||||||
Proceeds from sale of investment |
— | 484 | ||||||
Net cash used in investing activities |
(5,817 | ) | (13,018 | ) | ||||
Cash flows from financing activities |
||||||||
Proceeds from issuance of term debt |
15,407 | 9,039 | ||||||
Repayments of term debt and capital lease obligations |
(10,732 | ) | (11,502 | ) | ||||
Cash deposits (restricted) |
(41 | ) | 79 | |||||
Net cash provided by (used in) financing activities |
4,634 | (2,384 | ) | |||||
Net increase (decrease) in cash and cash equivalents |
111 | (2,227 | ) | |||||
Cash and cash equivalents at beginning of period |
4,914 | 6,601 | ||||||
Cash and cash equivalents at end of period |
$ | 5,025 | $ | 4,374 | ||||
Supplementary disclosure of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
- interest |
$ | 2,789 | $ | 4,611 | ||||
- income taxes |
208 | 220 | ||||||
Cash received during the period for: |
||||||||
- interest |
27 | 341 | ||||||
- income taxes |
107 | 19 | ||||||
Non-cash activities: |
||||||||
- container equipment acquired under capital lease |
3,930 | 2,002 | ||||||
- direct financing lease equipment acquired under capital lease |
116 | — | ||||||
- other fixed assets acquired under capital lease |
— | 276 | ||||||
- recovery of related party loans |
— | 6,000 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
The Cronos Group
Condensed Consolidated Statements of Shareholders’ Equity
(US dollar amounts in thousands, except per share amounts)
(Unaudited)
Six Months Ended June 30, 2002
| Retained | ||||||||||||||||||||||||
| Additional | Common | Restricted | earnings | Total | ||||||||||||||||||||
| Common | paid-in | shares held | retained | (accumulated | shareholders’ | |||||||||||||||||||
| shares | capital | in treasury | earnings | deficit) | equity | |||||||||||||||||||
Balance, December 31, 2001 |
$ | 18,317 | $ | 49,846 | $ | (6,000 | ) | $ | 1,832 | $ | (2,516 | ) | $ | 61,479 | ||||||||||
Net income |
2,781 | 2,781 | ||||||||||||||||||||||
Retirement and
cancellation of
treasury shares |
(3,588 | ) | (2,412 | ) | 6,000 | — | ||||||||||||||||||
Balance, June 30, 2002 |
$ | 14,729 | $ | 47,434 | $ | — | $ | 1,832 | $ | 265 | $ | 64,260 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
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 subsidiaries. All material intercompany accounts and transactions have been eliminated. | |
| 2. | Operating segment data |
Condensed segment information is provided in the tables below:
| Other | ||||||||||||||||
| Managed | ||||||||||||||||
| US Limited | Container | Owned | ||||||||||||||
| Partnerships | Owners | Containers | Total | |||||||||||||
Three months ended June 30, 2002 |
||||||||||||||||
Gross lease revenue |
$ | 7,002 | $ | 12,502 | $ | 8,421 | $ | 27,925 | ||||||||
Operating profit before indirect items |
1,034 | 155 | 2,500 | 3,689 | ||||||||||||
Operating profit (loss) |
28 | (1,002 | ) | 1,721 | 747 | |||||||||||
Segment assets at end of period |
10,217 | 15,599 | 173,659 | 199,475 | ||||||||||||
Three months ended June 30, 2001 |
||||||||||||||||
Gross lease revenue |
$ | 8,494 | $ | 13,735 | $ | 7,858 | $ | 30,087 | ||||||||
Operating profit (loss) before indirect items |
1,651 | 589 | (2,572 | ) | (332 | ) | ||||||||||
Operating profit (loss) |
478 | (633 | ) | (3,272 | ) | (3,427 | ) | |||||||||
Segment assets at end of period |
11,347 | 16,411 | 153,428 | 181,186 | ||||||||||||
Six months ended June 30, 2002 |
||||||||||||||||
Gross lease revenue |
$ | 14,352 | $ | 25,198 | $ | 16,704 | $ | 56,254 | ||||||||
Operating profit before indirect items |
2,413 | 329 | 4,613 | 7,355 | ||||||||||||
Operating profit (loss) |
349 | </ | ||||||||||||||