CRNS Cronos Grp. S A (MM)

The Cronos Group (Nasdaq:CRNS) ("Cronos" or the "Company") today reported net income of $3.5 million, or $0.44 per diluted share, for the quarter ended June 30, 2005, compared to $2.1 million, or $0.27 per diluted share, for the corresponding period in 2004. In addition, the Board of Directors declared a dividend of $0.07 per common share for the third quarter of 2005, payable October 14, 2005 to shareholders of record as of the close of business on September 23, 2005. Total revenues for the second quarter of 2005 were $38.2 million, compared to $34.0 million for the same period in the prior year. This increase reflects continued strong demand for leased containers as well as an increase in the size of the Company's container fleet during the period. Utilization of the Company's combined container fleet was 93% at June 30, 2005, compared to 92% for the comparable period in 2004. Net income for the second quarter of 2005 was strengthened by a $0.5 million gain recorded on the disposition of fixed assets, compared to $0.1 million for the second quarter of 2004. Net income for the six months ended June 30, 2005 was $7.1 million, or $0.90 per diluted share, compared to $2.9 million, or $0.37 per diluted share for the comparable period in the prior year. The increase in profitability can be attributed to strong demand for leased containers reflecting the continued high volume of global container trade; an increase in the Company's fleet size and the growth and profitability of the Company's Joint Venture Program. Total revenues for the first six months of 2005 were $74.7 million, compared to $68.1 million for the corresponding period in 2004. Total expenses for the six months ended June 30, 2005 were $68.1 million, compared to $65.8 million for the six months ended June 30, 2004. Net income for the first six months of 2005 included $2.1 million, or $0.27 per diluted share, of non-operating items comprising a gain of $1.3 million that was recorded on the receipt of amounts owed by a former chairman and CEO of the Company, and $0.8 million that was recognized on the recovery of an amount payable to a managed container program. On August 1, 2005, the Company completed the first phase of a funding restructuring program. This involved a series of transactions including the expansion of the maximum debt commitment to the Company's Joint Venture Program from $150 million to $300 million (reported by the Company in its 8-K report of June 15, 2005), the sale of approximately $74 million of Company owned assets to the Joint Venture Program and the reduction of the maximum debt commitment under the Company's revolving credit facility from $70 million to $45 million (reported by the Company in its 8-K report of August 1, 2005). The interest rate for the Company's revolving credit facility was reduced as a result of the restructuring by 25 basis points. The ultimate objective of the funding restructuring program is to securitize the indebtedness of the Joint Venture Program within one year. This should result in a further reduction in the cost of debt and allow the Company to be more competitive in bidding for leasing transactions. The sale of the container assets to the Joint Venture Program will allow the Program to achieve the minimum level of indebtedness required for a securitization within the target timeframe and has generated sufficient cash to allow the Company to fund the increased equity contributions required from the Company for the expansion of the Program. Although the Company will earn a fee for managing the equipment owned by the Joint Venture Program and is entitled to 50% of the net income generated by the Joint Venture Program, the sale of container assets to the Program will reduce the Company's net income in the short-term. It is estimated that the Company's net income for the third quarter of 2005 will decline by $0.3 million as a result of the sale. Over the longer-term, the securitization of the indebtedness of the Joint Venture Program should result in increased growth and profitability for the Company. While the Company expects the indebtedness of the Joint Venture Program to be securitized within one year, there can be no assurance that the Program's debt can be securitized or that the Program will achieve the expected interest cost savings. The Company's third quarter dividend of seven cents a share represents the Company's 12th consecutive quarterly dividend, and is one cent greater than the $0.06 dividend declared for the second quarter of 2005 and two cents greater than the $0.05 dividend declared for the fourth quarter of 2004 and first quarter of 2005. Cronos is one of the world's leading lessors of intermodal containers, owning and managing a fleet of over 443,000 TEU (twenty-foot equivalent units). The diversified Cronos fleet of dry cargo, refrigerated and other specialized containers is leased to a customer base of over 450 ocean carriers and transport operators around the world. Cronos provides container-leasing services through an integrated network of offices using state-of-the-art information technology. This release discusses certain forward-looking matters that involve risks and uncertainties that could cause actual results to vary materially from estimates. Risks and uncertainties include, among other things, changes in international operations, exchange rate risks, changes in market conditions for the Company's container lease operations and the Company's ability to provide innovative and cost-effective solutions. For further discussion of the risk factors attendant to an investment in the Company's Common shares, see the Business section in Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2004, which was filed with the SEC on March 22, 2005. This press release and other information concerning Cronos can be viewed on Cronos' website at www.cronos.com -0- *T The Cronos Group Condensed Unaudited Consolidated Statements of Income (US dollar amounts in thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 --------- -------- -------- -------- Gross lease revenue $34,469 $32,112 $68,473 $63,015 Equipment trading revenue 1,815 798 1,950 3,374 Commissions, fees and other income: - Related parties 218 227 405 450 - Unrelated parties 1,675 890 2,550 1,224 - Gain on settlement of litigation - - 1,333 - --------- -------- -------- -------- Total revenues 38,177 34,027 74,711 68,063 --------- -------- -------- -------- Direct operating expenses 4,688 4,951 9,240 11,959 Payments to Managed Container Programs: - Related parties 8,247 7,745 16,435 14,235 - Unrelated parties 9,035 8,965 18,104 16,917 Equipment trading expenses 1,624 503 1,751 2,799 Depreciation and amortization 4,578 4,671 9,170 8,965 Selling, general and administrative expenses 4,909 4,336 10,702 8,578 Interest expense 1,854 1,194 3,375 2,348 Recovery of amount payable to Managed Container Program - - (703) - --------- -------- -------- -------- Total expenses 34,935 32,365 68,074 65,801 --------- -------- -------- -------- Income before income taxes and equity in earnings of affiliate 3,242 1,662 6,637 2,262 Income taxes (476) (249) (985) (592) Equity in earnings of unconsolidated affiliate 711 657 1,454 1,189 --------- -------- -------- -------- Net income 3,477 2,070 7,106 2,859 ========= ======== ======== ======== Basic net income per common share $0.47 $0.29 $0.97 $0.39 ========= ======== ======== ======== Diluted net income per common share $0.44 $0.27 $0.90 $0.37 ========= ======== ======== ======== The Cronos Group Condensed Unaudited Consolidated Balance Sheets (US dollar amounts in thousands) June 30, December 31, 2005 2004 Assets Cash and cash equivalents $15,170 $17,579 Restricted cash 1,125 1,489 Amounts due from lessees, net 26,536 25,136 Amounts receivable from Managed Container Programs 3,247 3,386 New container equipment for resale 11,917 17,116 Net investment in direct financing leases 11,271 7,382 Investments in unconsolidated affiliates 18,906 15,364 Container equipment, net 163,669 166,584 Other equipment, net 985 963 Goodwill, net 11,038 11,038 Other intangible assets, net 439 533 Related party loan receivable - 1,280 Other assets 3,914 3,899 ----------- ------------- Total assets $268,217 $271,749 =========== ============= Liabilities and shareholders' equity Amounts payable to Managed Container Programs $24,042 $22,034 Amounts payable to container manufacturers 18,631 27,838 Direct operating expense payables and accruals 4,828 5,592 Other amounts payable and accrued expenses 5,073 8,810 Debt and capital lease obligations 126,858 127,953 Current and deferred income taxes 3,657 3,238 Deferred income and unamortized acquisition fees 7,372 5,925 ----------- ------------- Total liabilities 190,461 201,390 ----------- ------------- Shareholders' equity Common shares issued (7,501,377; 7,381,349 shares) 15,003 14,763 Additional paid-in capital 45,223 45,358 Common shares held in treasury (112,000 shares) (297) (297) Accumulated other comprehensive income 416 230 Restricted retained earnings 1,832 1,832 Retained earnings 15,579 8,473 ----------- ------------- Total shareholders' equity 77,756 70,359 ----------- ------------- Total liabilities and shareholders' equity $268,217 $271,749 =========== ============= *T