UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-23886

CRONOS GLOBAL INCOME FUND XV, L.P.

(Exact name of registrant as specified in its charter)

California (State or other jurisdiction of incorporation or organization)		94-3186624 (I.R.S. Employer Identification No.)

One Front Street, Suite 925, San Francisco, California 94111
(Address of principal executive offices) (Zip Code)

(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 þ   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (17 C.F.R. §232.405 ) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o   No þ

 

 

CRONOS GLOBAL INCOME FUND XV, L.P.

Report on Form 10-Q for the Quarterly Period
Ended September 30, 2009

TABLE OF CONTENTS

				PAGE
PART I — FINANCIAL INFORMATION					1
Item 1.		Financial Statements			1
		Unaudited Condensed Balance Sheets as of September 30, 2009 and December 31, 2008			2
		Unaudited Condensed Statements of Income for the three and nine months ended September 30, 2009 and 2008			3
		Unaudited Condensed Statements of Cash Flows for the nine months ended September 30, 2009 and 2008			4
		Unaudited Notes to the Condensed Financial Statements			5
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations			11
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			16
Item 4.		Controls and Procedures			16
Item 4T.		Controls and Procedures			16
PART II — OTHER INFORMATION					17
Item 1.		Legal Proceedings			17
Item 1A.		Risk Factors			17
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			17
Item 3.		Defaults Upon Senior Securities			17
Item 4.		Submissions of Matters to a Vote of Security Holders			17
Item 5.		Other Information			17
Item 6.		Exhibits			17
EX-17.A
EX-31.1
EX-31.2
EX-32

PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements
		Presented herein are Cronos Global Income Fund XV, L.P.’s (the “Partnership”) condensed balance sheets as of September 30, 2009 and December 31, 2008, condensed statements of income for the three and nine months ended September 30, 2009 and 2008, and condensed statements of cash flows for the nine months ended September 30, 2009 and 2008 (collectively the “Financial Statements”), prepared by the Partnership without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in 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, although the Partnership believes that the disclosures are adequate to make the information presented not misleading. These Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2008. These Financial Statements reflect, in the opinion of the Partnership and Cronos Capital Corp., the general partner, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the results for the interim periods. The statements of income for such interim periods are not necessarily indicative of the results for the full year.
		The information in this Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the securities laws. These forward-looking statements reflect the current view of the Partnership with respect to future events and financial performance and are subject to a number of risks and uncertainties, many of which are beyond the Partnership’s control. All statements, other than statements of historical fact included in this report, including the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” regarding the Partnership’s strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of the Partnership are forward-looking statements. When used in this report, the words “would”, “believe”, “anticipate”, “intend”, “estimate”, “expect”, “project”, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. All forward-looking statements speak only as of the date of this report. The Partnership does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Although the Partnership believes that its plans, intentions and expectations reflected in or suggested by the forward-looking statements made in this report are reasonable, the Partnership can give no assurance that these plans, intentions or expectations will be achieved. Future economic and industry trends that could potentially impact revenues and profitability are difficult to predict.

CRONOS GLOBAL INCOME FUND XV, L.P.

Condensed Balance Sheets

(Unaudited)

		September 30,				December 31,
		2009				2008
Assets
Current assets:
Cash		$	1,998,574			$	2,520,880
Net lease receivables due from Leasing Agent			649,324				962,046
Sales-type lease receivable, due from Leasing Agent within one year, net			35,585				72,537
Direct finance lease receivable, due from Leasing Agent within one year, net			40,851				45,865
Total current assets			2,724,334				3,601,328
Sales-type lease receivable, due from Leasing Agent after one year, net			—				22,197
Direct finance lease receivable, due from Leasing Agent after one year, net			53,733				35,960
Container rental equipment, at cost			46,112,586				54,747,239
Less accumulated depreciation			(39,419,704	)			(44,645,126	)
Net container rental equipment			6,692,882				10,102,113
Total assets		$	9,470,949			$	13,761,598
Partners’ Capital
Partners’ capital:
General partner		$	10,019			$	10,481
Limited partners			9,460,930				13,751,117
Total partners’ capital		$	9,470,949			$	13,761,598

The accompanying notes are an integral part of these condensed financial statements.

CRONOS GLOBAL INCOME FUND XV, L.P.

Condensed Statements of Income

(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,				September 30,				September 30,				September 30,
		2009				2008				2009				2008
Net lease revenue from Leasing Agent		$	426,091			$	1,008,504			$	1,741,488			$	3,090,808
Other operating (expenses) income:
Depreciation			(523,213	)			(944,933	)			(1,965,138	)			(2,929,948	)
Other general and administrative expenses			(81,873	)			(78,399	)			(205,641	)			(256,266	)
Net gain on disposal of equipment			400,680				290,805				1,144,934				990,034
			(204,406	)			(732,527	)			(1,025,845	)			(2,196,180	)
Income from operations			221,685				275,977				715,643				894,628
Other income:
Interest income			—				3,124				—				17,841
Net income		$	221,685			$	279,101			$	715,643			$	912,469
Allocation of net income:
General partner		$	43,982			$	64,636			$	148,723			$	196,687
Limited partners			177,703				214,465				566,920				715,782
		$	221,685			$	279,101			$	715,643			$	912,469
Limited partners’ per unit share of net income		$	0.02			$	0.03			$	0.08			$	0.10

The accompanying notes are an integral part of these condensed financial statements.

CRONOS GLOBAL INCOME FUND XV, L.P.

Condensed Statements of Cash Flows

(Unaudited)

		Nine Months Ended
		September 30,				September 30,
		2009				2008
Net cash provided by operating activities		$	1,760,554			$	3,095,938
Cash flows from investing activities:
Proceeds from sale of container rental equipment			2,723,432				2,767,461
Cash flows from financing activities:
Distributions to general partner			(149,184	)			(194,472	)
Distributions to limited partners			(4,857,108	)			(6,078,832	)
Net cash used in financing activities			(5,006,292	)			(6,273,304	)
Net decrease in cash			(522,306	)			(409,905	)
Cash at the beginning of the period			2,520,880				3,080,880
Cash at the end of the period		$	1,998,574			$	2,670,975

The accompanying notes are an integral part of these condensed financial statements.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed 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 dry and specialized marine cargo containers to ocean carriers. 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, Cronos Capital Corp. (“CCC”), the general partner, and all affiliates of CCC). The Partnership offered 7,500,000 units of limited partnership interest at $20 per unit, equal to $150,000,000 in total. The offering terminated on December 15, 1995, at which time 7,151,569 limited partnership units had been sold.
			CCC and its affiliate, Cronos Containers Limited (the “Leasing Agent”), manage the business of the Partnership. CCC and the Leasing Agent also manage the container leasing business for other partnerships affiliated with CCC.
			In March 2009, the Partnership commenced its 16th year of operations and continued its liquidation phase wherein CCC focuses its attention on the retirement of the remaining equipment in the Partnership’s container fleet. At September 30, 2009, approximately 38% of the original equipment remained in the Partnership’s fleet. CCC will take several factors into consideration when examining options for the timing of the disposal of the containers. These factors include the level of gross lease revenue generated by the diminishing fleet, the level of costs relative to this revenue, projected disposal proceeds on the disposition of the Partnership’s containers, overall market conditions and any foreseeable changes in other general and administrative expenses.
			The Partnership’s operations are subject to economic, political and business risks inherent in a business environment. The Partnership believes that the profitability of, and risks associated with, leases to foreign customers is generally the same as those to domestic customers. The Partnership’s leases generally require all payments to be made in United States dollars.
	(b)		Leasing Agent
			The Partnership and the Leasing Agent have entered into an agreement (the “Leasing Agent Agreement”) whereby the Leasing Agent manages the leasing operations for all equipment owned by the Partnership. In addition to responsibility for leasing and re-leasing the equipment to ocean carriers, the Leasing Agent disposes of the containers at the end of their useful economic life 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 Agent to use the containers owned by the Partnership, together with other containers owned or managed by the Leasing Agent and its affiliates, as part of a single fleet operated without regard to ownership. The Leasing Agent Agreement generally provides that the Leasing Agent will make payments to the Partnership based upon rentals collected from ocean carriers after deducting direct operating expenses and management fees due both to CCC and the Leasing Agent.
			The Leasing Agent leases containers to ocean carriers, generally under operating leases which are either master leases or term leases (mostly one to five years) and occasionally under sales-type leases and direct finance leases.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

			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 charged and recognized based upon the number of containers used and the applicable per-diem rate. Accordingly, rentals under master leases are variable and contingent upon the number of containers used.
			Term leases are for a fixed quantity of containers for a fixed period of time, typically varying from three to five years. In most cases, containers cannot be returned prior to the expiration of the lease. Term lease agreements may contain early termination penalties that apply in the event of early redelivery. Term leases provide greater revenue stability to the lessor, usually at lower lease rates than master leases. Ocean carriers use term leases to lower their operating costs when they have a need for an identified number of containers for a specified term. Rentals under term leases are charged and recognized based upon the number of containers leased, the applicable per-diem rate and the length of the lease, irrespective of the number of days which the customer actually uses the containers.
			Sales-type leases and direct finance leases are long-term in nature, usually ranging from three to seven years, and require relatively low levels of customer service. They ordinarily require fixed payments over a defined period and provide customers with an option to purchase the subject containers at the end of the lease term. Per-diem rates include an element of repayment of capital and therefore are usually higher than rates charged under either term or master leases.
	(c)		Basis of Presentation
			The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information, and with the instructions issued by the Securities and Exchange Commission (“SEC”) regarding the completion of Form 10-Q, and Article 10 of Regulation S-X also issued by the SEC.
			Accordingly, they do not include all of the information and footnotes required by US GAAP for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2009. For further information, refer to the financial statements and footnotes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2008.
	(d)		Use of Estimates in Interim Financial Statements
			The preparation of interim financial statements, in conformity with US GAAP and the SEC regulations for interim reporting, 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. The most significant estimates are those relating to the carrying value of equipment, including estimates relating to depreciable lives, residual values and asset impairments, and those relating to the allowance for doubtful accounts. Actual results could differ from those estimates.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

	(e)		Container Rental Equipment
			Container rental equipment is depreciated over a 15-year life using the straight-line basis to a residual value of 10% of the original equipment cost. CCC evaluates the period of depreciation and residual values to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
			In accordance with Accounting Standards Codification (the “Codification” or “ASC”) 360-10-35 — “Accounting for the Impairment or Disposal of Long-Lived Assets”, container rental equipment is considered to be impaired if the carrying value of the asset exceeds the expected future cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets are written down to fair value. An analysis projecting future cash flows from container rental equipment operations is prepared when indicators, such as material changes in market conditions, are present. Indicators of a potential impairment include a sustained decrease in utilization or operating profitability, or indications of technological obsolescence. The primary variables utilized in the analysis are current and projected utilization rates, per-diem rental rates, direct operating expenses, fleet size, container disposal proceeds and the timing of container disposals. Additionally, the Partnership evaluates future cash flows and potential impairment for its entire fleet rather than for container type or each individual container. As a result, future losses could result for individual container dispositions due to various factors, including age, condition, suitability for continued leasing, as well as the geographical location of containers when disposed. There were no impairment charges recorded against the carrying value of container rental equipment for the nine-month periods ended September 30, 2009 and 2008.
	(f)		Allocation of Net Income or Loss, Partnership Distributions and Partners’ Capital
			Net income or loss has been allocated between the general and limited partners in accordance with the Partnership Agreement. The Partnership Agreement generally provides that CCC shall at all times maintain at least a 1% interest in each item of income or loss, including the gain arising from the sale of containers. The Partnership Agreement further provides that the gain arising from the sale of containers be allocated first to the partners with capital account deficit balances in an amount sufficient to eliminate any deficit capital account balance. Thereafter, the Partnership’s gains arising from the sale of containers are allocated to the partners in accordance with their share of sale proceeds distributed. The Partnership Agreement also provides for income (excluding the gain arising from the sale of containers) for any period, be allocated to CCC in an amount equal to that portion of CCC’s distributions in excess of 1% of the total distributions made to both CCC and the limited partners of the Partnership for such period, as well as other allocation adjustments.
			Actual cash distributions differ from the allocations of net income or loss between the general and limited partners as presented in these financial statements. Partnership distributions are paid to the partners (general and limited) from distributable cash from operations, allocated 95% to the limited partners and 5% to CCC. Distributions of sales proceeds are allocated 99% to the limited partners and 1% to CCC. The allocations remain in effect until such time as the limited partners have received from the Partnership aggregate distributions in an amount equal to their capital contributions plus an 8% cumulative, compounded (daily), annual return on their adjusted capital contributions. Thereafter, all Partnership distributions will be allocated 85% to the limited partners and 15% to CCC. Cash distributions from operations to CCC in excess of 5% of distributable cash will be considered an incentive fee and will be recorded as compensation to CCC, with the remaining distributions from operations charged to partners’ capital.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

			Upon dissolution, the assets of the Partnership will be sold and the proceeds thereof distributed as follows: (i) all of the Partnership’s debts and liabilities to persons other than CCC or the limited partners shall be paid and discharged; (ii) all of the Partnership’s debts and liabilities to CCC and the limited partners shall be paid and discharged; and (iii) the balance of such proceeds shall be distributed to CCC and the limited partners in accordance with the positive balances of CCC and the limited partners’ capital accounts. CCC shall contribute to the Partnership, if necessary, an amount equal to the lesser of the deficit balance in its capital account at the time of such liquidation, or 1.01% of the excess of the Limited Partners’ capital distribution to the Partnership over the capital contributions previously made to the Partnership by CCC, after giving effect to the allocation of income or loss arising from the liquidation of the Partnership’s assets.
	(g)		Recent Accounting Pronouncements
			In June 2009, the FASB issued Statement No. 168 — “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162”. The FASB Accounting Standards Codification (the “Codification” or “ASC”) will be the single source of authoritative non-governmental U.S. generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in SFAS 168. All other accounting literature not included in the Codification is non-authoritative.

(2)

Net Lease Receivables Due from Leasing Agent

		Net lease receivables due from Leasing Agent at September 30, 2009 and December 31, 2008 comprised:

		September 30,				December 31,
		2009				2008
Gross lease receivables		$	1,287,702			$	1,573,056
Less:
Direct operating expenses payable			450,531				350,154
Base management fees payable			43,947				67,054
Reimbursed administrative expenses payable			16,931				17,032
Allowance for doubtful accounts			126,969				176,770
Net lease receivables due from Leasing Agent		$	649,324			$	962,046

Included within the amount of gross lease receivables are $405,298 and $584,864 in respect of amounts owed by the Leasing Agent in relation to the disposal of containers for the nine months ended September 30, 2009 and the year ended December 31, 2008, respectively.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

(3)

Net Lease Revenue

		Net lease revenue for the three and nine-month periods ended September 30, 2009 and 2008 were as follows:

		Three Months Ended								Nine Months Ended
		September 30,				September 30,				September 30,				September 30,
		2009				2008				2009				2008
Gross lease revenue		$	782,318			$	1,265,294			$	2,802,618			$	3,956,437
Interest income from sales-type and direct finance leases			14,658				8,836				36,496				32,380
Less:
Direct operating expenses			267,328				119,084				748,049				410,696
Base management fees			53,269				87,945				192,315				277,006
Reimbursed administrative expenses
Salaries			38,120				44,379				118,371				159,317
Other payroll related expenses			3,135				3,747				11,130				16,373
General and administrative expenses			9,033				10,471				27,761				34,617
			370,885				265,626				1,097,626				898,009
Net lease revenue		$	426,091			$	1,008,504			$	1,741,488			$	3,090,808

(4)

Operating Segment

		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 to assess its performance, and about which separate financial information is available. CCC and the Leasing Agent operate the Partnership’s container fleet as a homogenous unit and have determined that as such, it has a single reportable operating segment.
		A summary of gross lease revenue earned by each Partnership container type for the periods ended September 30, 2009 and 2008 follows:

		Three Months Ended								Nine Months Ended
		September 30,				September 30,				September 30,				September 30,
		2009				2008				2009				2008
Dry cargo containers		$	639,184			$	1,074,641			$	2,356,508			$	3,326,622
Refrigerated containers			11,963				48,471				50,693				201,160
Tank containers			131,171				142,182				395,417				428,655
Total		$	782,318			$	1,265,294			$	2,802,618			$	3,956,437

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, the Partnership believes that it does not possess discernible geographic reporting segments as defined in ASC 280-10-05 — “Segment Reporting”.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

(5)

Limited Partners’ Capital

		Cash distributions made to the limited partners for the nine-month periods ended September 30, 2009 and 2008 were as follows:

		Nine Months Ended
		September 30,				September 30,
		2009				2008
Cash Distribution from Operations		$	2,354,058			$	3,128,811
Cash Distribution from Sales Proceeds			2,503,050				2,950,021
Total Cash Distributions		$	4,857,108			$	6,078,832

These distributions are used in determining “Adjusted Capital Contributions” as defined by the Partnership Agreement.

The limited partners’ per unit share of capital was $1.32 at September 30, 2009 and $1.92 at December 31, 2008, respectively. This is calculated by dividing the limited partners’ capital at the end of September 30, 2009 and December 31, 2008 by 7,151,569, the total number of outstanding limited partnership units.

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion of the Partnership’s historical financial condition and results of operations should be read in conjunction with the Partnership’s December 31, 2008 Annual Report on Form 10-K and the financial statements and the notes thereto appearing elsewhere in this report.

Results of Operations

Partnership Overview

     Pursuant to the Limited Partnership Agreement of the Partnership, all authority to administer the business of the Partnership is vested with CCC. A Leasing Agent Agreement exists between the Partnership and the Leasing Agent, whereby the Partnership contracted with the Leasing Agent to manage the leasing operations for all equipment owned by the Partnership. In addition to responsibility for leasing and re-leasing the equipment to ocean carriers, the Leasing Agent disposes of the containers at the end of their useful economic life. The Leasing Agent has full discretion over which ocean carriers and suppliers of goods and services it may deal with. The Leasing Agent Agreement permits the Leasing Agent to use the containers owned by the Partnership, together with other containers owned or managed by the Leasing Agent and its affiliates, as part of a single fleet operated without regard to ownership.

     All of the revenue generated by the Partnership comes from the leasing and sale of marine dry cargo, refrigerated and tank containers. The primary component of the Partnership’s results of operations is net lease revenue. Net lease revenue is determined by deducting direct operating expenses, management fees and reimbursed administrative expenses from the gross lease revenues that are generated from the leasing of the Partnership’s containers. Gross lease revenue is directly related to the size, utilization and per-diem rental rates of the Partnership’s fleet. Direct operating expenses are direct costs associated with the Partnership’s containers and may be categorized as follows:

	•		Activity-related expenses, including agent costs and depot costs such as repairs, maintenance and handling;
	•		Inventory-related expenses for off-hire containers, comprising storage and repositioning costs. These costs are sensitive to the quantity of off hire containers as well as the frequency at which containers are re-delivered and the frequency and size of repositioning moves undertaken; and
	•		Legal and other expenses, including legal costs related to the recovery of containers and doubtful accounts, insurance and provisions for doubtful accounts.

     The following table summarizes the composition of the Partnership’s operating lease fleet based on container type, and is measured in twenty foot equivalent units (TEUs) at September 30, 2009:

		Dry Cargo				Refrigerated				Tank
		Containers				Containers				Containers				Total
Container on lease:
Master lease			10,540				10				63				10,613
Term lease
Short term1			945				10				39				994
Long term2			4,600				8				33				4,641
			5,545				18				72				5,635
Subtotal			16,085				28				135				16,248
Containers off-hire			2,202				17				57				2,276
Total container fleet			18,287				45				192				18,524

     At September 30, 2009, approximately 38% of the original equipment remained in the Partnership’s operating fleet, compared to approximately 43% at December 31, 2008. The following table details the proportion of the operating lease fleet remaining by product type, and is measured in TEUs:

		Dry Cargo								Refrigerated
		Containers								Containers								Tank Containers								Total
		TEU				%				TEU				%				TEU				%				TEU				%
Total purchases			48,306				100	%			663				100	%			229				100	%			49,198				100	%
Less disposals			30,019				62	%			618				93	%			37				16	%			30,674				62	%
Remaining fleet at September 30, 2009			18,287				38	%			45				7	%			192				84	%			18,524				38	%

Market & Industry Overview

     One of the primary effects of the decline in global trade levels on the container leasing industry has been the pace at which leased containers have been redelivered by shipping lines as they have attempted to correct the over-supply of equipment in their container fleets. This resulting decline in utilization of the Partnership fleet has led to an increase in inventory and activity related expenses. Although there are signs that the rate of decline in utilization leveled off in the third quarter of 2009, the overall market still reflects the underlying uncertainty in the global economy.

     Shipping lines continue to experience challenging operating conditions. The deterioration in the financial condition of the Partnership’s customers since the beginning of the current economic crisis means that there is a risk that the size and number of customer defaults may increase. The Leasing Agent maintains insurance to protect against customer defaults and customer payments are monitored continually for deterioration and risk of default. However, if a major customer defaulted and ceased trading, the net lease revenue of the Partnership would decline and it could potentially incur additional losses for receivables and containers not recovered to the extent that the losses exceeded the insurance cover available.

     In recent years, the strong leasing environment meant that there was a limited supply of containers available for sale into the secondary market, contributing to sale prices reaching historically high levels. As a result of the global economic down-turn, the availability of containers for sale into the secondary markets has increased and there has been a decrease in container sales prices toward longer-term average historical levels. In 2009, the average proceeds realized per dry container was approximately 20% lower than in the first nine months of 2008. Future proceeds and the volume of containers disposed will be highly dependent on factors such as the performance of the container leasing market, regional economics, currency stability, new equipment prices and the volume of new equipment entering the market place.

     The Partnership’s average fleet size and utilization rates for the nine-month periods ended September 30, 2009 and 2008 were as follows:

		Nine Months Ended
		September 30,				September 30,
		2009				2008
Fleet size (measured in TEUs)
Dry cargo containers			20,196				24,429
Refrigerated containers			58				236
Tank containers			193				196
Utilization rates for combined fleet
Average for the period			88	%			97	%
Position at end of period			87	%			98	%

Three Months Ended September 30, 2009, Compared to the Three Months Ended September 30, 2008

Overview

     Net income for the three months ended September 30, 2009, was $221,685, a decrease of $57,416, or 21%, when compared to the corresponding period in the prior year. The primary changes between the two periods included the impact of:

	•		a 20% reduction in the size of the container fleet (measured in TEUs) as equipment that was redelivered by customers was sold;
	•		a decline in the levels of net lease revenues, resulting from the combined effect of a reduction in the size of the fleet, lower utilization and lease per-diem levels and increased direct operating expenses; and,
	•		a decrease in depreciation expense as a result of the declining fleet size.

Analysis & Discussion

     Net lease revenue decreased $582,413, or 58%, in the third quarter of 2009 when compared to the corresponding period of 2008. The decline was primarily due to:

	•		a $482,976 reduction in gross lease revenue, of which approximately 42% was attributable to reduction in the size of the Partnership’s fleet size and 58% was attributable to the combined effect of lower utilization rates and lower dry cargo container per-diem rental rates; and,
	•		a $148,244 increase in direct operating expenses as both activity-related and inventory-related expenses increased in line with the increase in the level of containers off-hired by the shipping lines. The volume of containers off-hired in the period was 72% higher than in the corresponding period in 2008.

     Depreciation expense decreased $421,720, or 45%, compared to the corresponding period in 2008. This was a direct result of the decline of the size of the Partnership’s fleet.

     Other general and administrative expenses were $81,873 for the three-month period ended September 30, 2009, an increase of $3,474, or 4%, when compared to the same period in 2008. This change was attributable to higher audit fees and fees associated with banking services.

     Net gains on disposal of equipment for the three months ended September 30, 2009 were $400,680, an increase of $109,875, or 38%, when compared to the corresponding period of 2008. The Partnership disposed of 944 containers, compared to 633 containers during the same three-month period in 2008. The increase in the net gain was due to the higher volume of container units disposed, offset by the decline in the lower average proceeds per container unit.

Nine Months Ended September 30, 2009, Compared to the Nine Months Ended September 30, 2008

Overview

     Net income for the nine months ended September 30, 2009, was $715,643, a decrease of $196,826, or 22%, when compared to the corresponding period in the prior year. The primary changes between the two periods included the impact of:

	•		a 18% reduction in the size of the container fleet (measured in TEUs) as equipment that was redelivered by customers was sold;
	•		a decline in the levels of net lease revenues, resulting from the combined effect of the reduction in the size of the fleet, lower utilization and lease per-diem levels, and increased direct operating expenses; and,
	•		a decrease in depreciation expense as a result of the declining fleet size.

Analysis & Discussion

     Net lease revenue declined $1,349,320, or 44%, in the nine month period ended September 30, 2009 when compared to the corresponding period of 2008. The decline was primarily due to:

	•		a $1,153,819 reduction in gross lease revenue, of which approximately 47% was attributable to reduction in the size of the Partnership’s fleet size and 53% was attributable to the combined effect of lower utilization rates and lower dry cargo container per-diem rental rates;
	•		a $337,353 increase in direct operating expenses as both activity-related and inventory-related expenses increased in line with the level of containers off-hired by the shipping lines. A total of 1,511 containers were off-hired in the nine months to September 30, 2009 compared to 327 in the corresponding period in 2008.

     Depreciation expense decreased $964,810, or 33%, when compared to the corresponding period in 2008. This was a direct result of the decline in the size of the Partnership’s fleet.

     Other general and administrative expenses amounted to $205,641 for the nine-month period ended September 30, 2009, a decrease of $50,625, or 20%, when compared to the same period in 2008. This change was mainly attributable to lower fees paid for third-party investor administrative services.

     Net gains on disposal of equipment for the nine months ended September 30, 2009 were $1,144,934, an increase of $154,900, or 16%, compared to the corresponding period of 2008. In 2009, the Partnership disposed of 2,690 containers, compared to 2,166 containers during the same nine-month period in 2008. The increase in the net gain was due in part to the higher volume of containers disposed, although average proceeds per container were lower when compared to the corresponding period in 2008.

Liquidity and Capital Resources

     During the Partnership’s first ten years of operations, the Partnership’s primary objective was to generate cash flows from operations for distribution to its limited partners. The Partnership relied primarily on container rental receipts to meet this objective. No credit lines are maintained to finance working capital. Commencing in 2005, the Partnership’s 11th year of operations, the Partnership began to focus its attention on the disposition of its fleet in accordance with another of its original investment objectives, realizing the residual value of its containers after the expiration of their economic useful lives, estimated to be 15 years after placement in leased service.

     In March 2009, the Partnership commenced its 16th year of operations and continued its liquidation phase. At September 30, 2009, approximately 38% of the original equipment remained in the Partnership’s fleet. CCC will take several factors into consideration when examining options for the timing of the disposal of the containers. These factors include the level of gross lease revenue generated by the diminishing fleet, the level of costs relative to this revenue, projected disposal proceeds on the disposition of the Partnership’s containers, overall market conditions and any foreseeable changes in other general and administrative expenses. Upon the liquidation of CCC’s interest in the Partnership, CCC shall contribute to the Partnership, if necessary, an amount equal to the lesser of the deficit balance in its capital account at the time of such liquidation, or 1.01% of the excess of the limited partners’ capital contributions to the Partnership over the capital contributions previously made to the Partnership by CCC, after giving effect to the allocation of income or loss arising from the liquidation of the Partnership’s assets.

     Distributions are paid monthly, based primarily on each quarter’s cash flow from operations. Monthly distributions are also affected by periodic increases or decreases to working capital reserves, as deemed appropriate by CCC. Cash distributions from operations are allocated 5% to CCC and 95% to the limited partners. Distributions of sales proceeds are allocated 1% to CCC and 99% to the limited partners. This sharing arrangement will remain in place until the limited partners have received aggregate distributions in an amount equal to their capital contributions plus an 8% cumulative, compounded (daily) annual return on their adjusted capital contributions. Thereafter, all distributions will be allocated 15% to CCC and 85% to the limited partners, pursuant to Section 6.1(b) of the Partnership’s Partnership Agreement.

     At September 30, 2009, the Partnership had $1,998,574 in cash, a decrease of $522,306 from cash balances at December 31, 2008. As of September 30, 2009, the Partnership held its cash on deposit in an operating bank account. The Partnership will review its investment strategy for cash balances on a periodic basis but for the immediate future it will hold all available balances on deposit in operating bank accounts.

     Cash from Operating Activities: Net cash provided by operating activities, primarily generated by net lease revenue receipts, was $1,760,554 for the nine months ended September 30, 2009, compared to $3,095,938 for the same nine-month period in 2008, a decline of 43%. This reduction is due to the combined effect of the depressed leasing market and a reduced fleet size.

     Cash from Investing Activities: Net cash provided by investing activities was $2,723,432 during the nine months ended September 30, 2009, compared to $2,767,461 in the corresponding period of 2008. These amounts represent sales proceeds generated from the sale of container rental equipment.

     Cash from Financing Activities: Net cash used in financing activities was $5,006,292 for the nine months ended September 30, 2009, compared to $6,273,304 for the corresponding period in 2008. These amounts represent distributions to the Partnership’s general and limited partners. The Partnership’s continuing container disposals should produce lower operating results, and consequently, lower distributions to its partners in subsequent periods.

Critical Accounting Policies

     The Partnership’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. The Partnership has identified three significant policies that require the Partnership to make subjective and / or complex judgments about matters that are inherently uncertain. These policies include the following:

	•		Container equipment — depreciable lives and residual values.
	•		Container equipment — recoverability and valuation in accordance with ASC 360-10-35 — “Accounting for the Impairment or Disposal of Long Lived Assets”.
	•		Allowance for doubtful accounts.

     The Partnership, in consultation with its audit committee, has reviewed and approved these significant accounting policies which are further described in the Partnership’s December 31, 2008 Annual Report on Form 10-K.

Inflation

     The Partnership believes inflation has not had a material adverse effect on the results of its operations.

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

     Exchange rate risk: Substantially all of the Partnership’s revenues are billed and paid in US dollars and a significant portion of costs are billed and paid in US dollars. Of the non-US dollar direct operating expenses, the majority are individually small, unpredictable and incurred in various denominations. Thus, the Leasing Agent has determined such amounts are not suitable for cost effective hedging. As exchange rates are outside of the control of the Partnership and Leasing Agent, there can be no assurance that such fluctuations will not adversely affect the Partnership’s results of operations and financial condition. The Partnership believes it does not have significant exposure to other forms of market risk.

     Credit risk: The Leasing Agent sets maximum credit limits for all of the Partnership’s customers, limiting the number of containers leased to each according to established credit criteria. The Leasing Agent continually tracks its credit exposure to each customer. The Leasing Agent’s credit committee meets quarterly to analyze the performance of the Partnership’s customers and to recommend actions to be taken in order to minimize credit risks. The Leasing Agent uses specialist third party credit information services and reports prepared by local staff to assess credit quality.

Item 4.		Controls and Procedures

     See Item 4T.

Item 4T.		Controls and Procedures

     The principal executive and principal financial officers of CCC have evaluated the disclosure controls and procedures of the Partnership as of the end of the period covered by this report. Based upon their evaluation, the principal executive and principal financial officers of CCC have concluded that the Partnership’s disclosure controls and procedures were effective.

PART II — OTHER INFORMATION

Item 1.		Legal Proceedings

     Not applicable.

Item 1A.		Risk Factors

     There are no material changes from the risk factors as disclosed under Item 1A of Part I in the Partnership’s December 31, 2008 report on Form 10-K.

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

     Not applicable.

Item 3.		Defaults Upon Senior Securities

     Not applicable.

Item 4.		Submissions of Matters to a Vote of Security Holders

     Not applicable.

Item 5.		Other Information

     Appointment and Confirmation of Officers and Audit Committee of CCC. See Exhibit 17A.

Item 6.		Exhibits

(a)

Exhibits

Exhibit
No.		Description		Method of Filing
3(a)		Limited Partnership Agreement, amended and restated as of December 15, 1993		*
3(b)		Certificate of Limited Partnership		**
10		Form of Leasing Agent Agreement with Cronos Containers Limited		***
17A		Appointment and Confirmation of Officers and Audit Committee of CCC		Filed with this document
31.1		Rule 13a-14 Certification		Filed with this document
31.2		Rule 13a-14 Certification		Filed with this document
32		Section 1350 Certification		Filed with this document ****

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 6, 2009

EXHIBT INDEX

Exhibit
No..		Description		Method of Filing
3(a)		Limited Partnership Agreement, amended and restated as of December 15, 1993		*
3(b)		Certificate of Limited Partnership		**
10		Form of Leasing Agent Agreement with Cronos Containers Limited		***
17A		Appointment and Confirmation of Officers and Audit Committee of CCC		Filed with this document
31.1		Rule 13a-14 Certification		Filed with this document
31.2		Rule 13a-14 Certification		Filed with this document
32		Section 1350 Certification		Filed with this document ****