CRNS Cronos Grp. S A (MM)

The Cronos Group (Nasdaq:CRNS) today reported net income of $2.2 million, or $0.27 per diluted share, for the quarter ended September 30, 2005, compared to $2.0 million, or $0.26 per diluted share, for the corresponding period in 2004. Net income for the third quarter of 2005 was impacted by a one-time after-tax expense of $0.7 million, or $0.09 per diluted share, related to the restructuring of the Company's sales and marketing divisions. On November 11, 2005, the Cronos Board of Directors declared a dividend of $0.07 per share, payable on January 10, 2006 for the fourth quarter of 2005 to shareholders of record as of the close of business on December 22, 2005, and a dividend of $0.07 per share payable on April 13, 2006 for the first quarter of 2006 to shareholders of record as of the close of business on March 23, 2006. The Board of Directors also authorized the repurchase of $1 million of outstanding common shares, both in the open market and through privately-negotiated transactions, pursuant to the terms of the Company's shareholder-approved common share repurchase program. Total revenues for the third quarter of 2005 were $36.7 million, compared to $35.3 million for the same period in the prior year. Total expenses for the three months ended September 30, 2005 were $35.5 million, compared to $33.9 million for the corresponding period in 2004. Net income for the nine months ended September 30, 2005 was $9.3 million, or $1.17 per diluted share, compared to $4.9 million, or $0.63 per diluted share for the comparable period in the prior year. Net income for the nine months ended September 30, 2005 included 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. Total revenues for the first nine months of 2005 were $111.4 million, compared to $103.4 million for the corresponding period in 2004. Total expenses for the nine months ended September 30, 2005 were $103.6 million, compared to $99.7 million for the nine months ended September 30, 2004. Dennis J Tietz, Chairman and CEO of Cronos, stated, "We have been able to achieve strong financial results so far in 2005 by maintaining high utilizations across all of our product types, increasing the size of our Joint Venture Program and Group funding facilities, and improving the profitability of our Managed Container Programs. "Demand for leased containers remains strong, although it has moderated somewhat from the levels experienced in 2004. Utilization of the Company's combined container fleet averaged 93% for the first nine months of 2005, compared to 91% for the same period in 2004. "Through September 30 this year, we've added over $93 million of new equipment to our container fleet and have ordered an additional $41 million of new equipment for delivery in the fourth quarter. "In the second quarter this year, we doubled the size of our Joint Venture debt facility with the intention of securitizing this debt within the next year. In the third quarter, we sold $74 million of container equipment to our Joint Venture Program and increased the pace of new container purchases into that program. Although the sale has had the short term effect of reducing after-tax earnings in the third quarter by $0.2 million, in the longer term, we believe the expansion of the Joint Venture will allow us to achieve increased levels of growth and profitability. "Additionally, in the third quarter we restructured our sales and marketing divisions, consolidating from three to two regions. As noted above, this reduced third quarter earnings by $0.09 per diluted share. The new structure will permit us to react more rapidly to our customers, reduce our overhead, and will improve profitability going forward." Cronos is one of the world's leading lessors of intermodal containers, owning and managing a fleet of over 442,000 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 Nine Months Ended Ended September 30, September 30, 2005 2004 2005 2004 -------- -------- -------- -------- Gross lease revenue $35,007 $33,780 $103,480 $96,795 Equipment trading revenue 260 658 2,210 4,032 Commissions, fees and other income: - Related parties 209 264 614 714 - Unrelated parties 1,187 646 3,737 1,870 - Gain on settlement of litigation - - 1,333 - -------- -------- -------- -------- Total revenues 36,663 35,348 111,374 103,411 -------- -------- -------- -------- Direct operating expenses 4,264 4,218 13,504 16,177 Payments to Managed Container Programs: - Related parties 11,381 8,360 27,816 22,595 - Unrelated parties 9,177 9,626 27,281 26,543 Equipment trading expenses 227 614 1,978 3,413 Depreciation and amortization 3,293 4,634 12,463 13,599 Selling, general and administrative expenses 5,635 5,070 16,337 13,648 Interest expense 1,562 1,365 4,937 3,713 Recovery of amount payable to Managed Container Program - - (703) - -------- -------- -------- -------- Total expenses 35,539 33,887 103,613 99,688 -------- -------- -------- -------- Income before income taxes and equity in earnings of affiliate 1,124 1,461 7,761 3,723 Income taxes (169) (276) (1,154) (868) Equity in earnings of unconsolidated affiliate 1,238 851 2,692 2,040 -------- -------- -------- -------- Net income 2,193 2,036 9,299 4,895 ======== ======== ========= ======== Basic net income per common share $0.30 $0.28 $1.26 $0.67 ======== ======== ========= ======== Diluted net income per common share $0.27 $0.26 $1.17 $0.63 ======== ======== ========= ======== The Cronos Group Condensed Unaudited Consolidated Balance Sheets (US dollar amounts in thousands) September 30, December 31, 2005 2004 ------------- ------------- Assets Cash and cash equivalents $17,009 $17,579 Restricted cash 250 1,489 Amounts due from lessees, net 28,151 25,136 Amounts receivable from Managed Container Programs 2,904 3,386 New container equipment for resale 18,839 17,116 Net investment in direct financing leases 13,276 7,382 Investments in unconsolidated affiliates 28,609 15,364 Container equipment, net 105,585 166,584 Other equipment, net 1,179 963 Goodwill, net 11,038 11,038 Other intangible assets, net 392 533 Related party loan receivable - 1,280 Other assets 3,166 3,899 ------------- ------------- Total assets $230,398 $271,749 ============= ============= Liabilities and shareholders' equity Amounts payable to Managed Container Programs $27,246 $22,034 Amounts payable to container manufacturers 37,306 27,838 Direct operating expense payables and accruals 4,972 5,592 Other amounts payable and accrued expenses 6,398 8,810 Debt and capital lease obligations 63,937 127,953 Current and deferred income taxes 3,608 3,238 Deferred income and unamortized acquisition fees 6,912 5,925 ------------- ------------- Total liabilities 150,379 201,390 ------------- ------------- Shareholders' equity Common shares issued (7,547,668; 7,381,349 shares) 15,096 14,763 Additional paid-in capital 44,717 45,358 Common shares held in treasury (112,000 shares) (297) (297) Accumulated other comprehensive income 899 230 Restricted retained earnings 1,832 1,832 Retained earnings 17,772 8,473 ------------- ------------- Total shareholders' equity 80,019 70,359 ------------- ------------- Total liabilities and shareholders' equity $230,398 $271,749 ============= ============= *T