<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
COMMISSION FILE NUMBER 33-99534
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-3220152
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
650 CALIFORNIA STREET, 16TH FLOOR
SAN FRANCISCO, CALIFORNIA 94108
(Address of Principal Executive Offices) (ZIP Code)
(415) 434-0551
(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 [X] NO [ ]
<PAGE> 2
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
QUARTERLY REPORT ON FORM 10Q FOR THE
QUARTER ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets - September 30, 1996 (unaudited) and December 31, 1995.......... 3
Statements of Operations for the nine and three months ended September
30, 1996 (unaudited) and the period from February 1, 1995
(inception) through December 31, 1995.......................................... 4
Statements of Partners' Capital (Deficit) for the nine months ended
September 30, 1996 (unaudited) and the period from February 1, 1995
(inception) through December 31, 1995.......................................... 5
Statements of Cash Flows for the nine months
ended September 30, 1996 (unaudited) and the period from February 1, 1995
(inception) through December 31, 1995.......................................... 6
Notes to Financial Statements (unaudited)...................................... 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.......................................................... 12
</TABLE>
2
<PAGE> 3
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
September 30, 1996 and December 31, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
1996 1995
------- ------
(unaudited)
<S> <C> <C>
ASSETS
Container rental equipment, net of accumulated
depreciation of $1,544 (1995: $429) $25,002 21,279
Cash 1,624 77
Cash collateral deposit (note 5) 1,774 2,306
Accounts receivable, net of allowance
for doubtful accounts of $28 (1995: $16) 933 525
Prepaid expenses 34 52
------- ------
$29,367 24,239
======= ======
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Accounts payable $ 95 65
Accrued liabilities 110 275
Due to affiliates, net (note 3) 407 1,081
Equipment purchases payable 1,604 1,935
Note payable to bank (note 5) 15,780 21,282
------- ------
Total liabilities 17,996 24,638
------- ------
Partners' capital (deficit):
General partners (464) (399)
Limited partners 11,835 --
------- ------
Total partners' capital (deficit) 11,371 (399)
------- ------
Commitments (note 6)
$29,367 24,239
======= ======
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
For the nine and three months ended September 30, 1996
and for the period from February 1, 1995 (inception) through December 31, 1995
(Dollar amounts in thousands except for unit and per unit amounts)
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS INCEPTION
ENDED ENDED THROUGH
SEPT. 30, 1996 SEPT. 30, 1996 DEC. 31, 1995
-------------- -------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Rental Income $ 2,644 1,003 732
-------- -------- ----
Costs and expenses:
Direct container expenses 402 173 181
Bad debt expense 7 5 16
Depreciation 1,117 379 429
Professional fees 31 3 7
Management fees to affiliates (note 3) 192 78 51
General administrative costs to affiliates (note 3) 218 67 94
Other general and administrative costs 24 10 15
-------- -------- ----
1,991 715 793
-------- -------- ----
Income (loss) from operations 653 288 (61)
-------- -------- ----
Other income (expense):
Interest expense, net (1,277) (353) (347)
Gain on sales of containers 20 13 8
-------- -------- ----
(1,257) (340) (339)
-------- -------- ----
Net loss $ (604) (52) (400)
======== ======== ====
Allocation of net loss (note 3):
General Partners $ (57) (5) (400)
Limited Partners (547) (47) --
-------- -------- ----
$ (604) (52) (400)
======== ======== ====
Limited partners' per unit share of
net loss $ (2.55) $ (0.11)
-------- --------
Limited partners' per unit share
of distributions $ 0.34 $ 0.16
-------- --------
Weighted average number of limited
partnership units outstanding 214,565 444,362 5
======== ======== ====
</TABLE>
See accompanying notes to financial statements
4
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TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the nine months ended September 30, 1996 (unaudited) and
for the period from February 1, 1995 (inception) through December 31, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
PARTNERS' CAPITAL (DEFICIT)
---------------------------------
GENERAL LIMITED TOTAL
------- ------- -----
<S> <C> <C> <C>
Proceeds from general partners' capital contribution $ 1 -- 1
Net loss (400) -- (400)
----- ------ ------
Balances at December 31, 1995 $(399) -- (399)
===== ====== ======
Balances at January 1, 1996 $(399) -- (399)
Distributions (8) (72) (80)
Proceeds from sale of limited partnership units -- 13,686 13,686
Syndication and offering costs -- (1,232) (1,232)
Net loss (57) (547) (604)
----- ------ ------
Balances at September 30, 1996 $(464) 11,835 11,371
===== ====== ======
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1996 and
for the period from February 1, 1995 (inception) through December 31, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
1996 1995
----------- -------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (604) (400)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation 1,117 429
Increase in allowance for doubtful accounts 12 16
Gain on sales of container rental equipment (20) (8)
Changes in assets and liabilities:
Increase in accounts receivable (297) (541)
Decrease (increase) in prepaid expenses 18 (52)
(Decrease) increase in accounts payable and
accrued liabilities (145) 341
Increase (decrease) in due to affiliates, net 1,601 (1,395)
------- -------
Net cash provided by (used in) operating activities 1,682 (1,610)
------- -------
Cash flows from investing activities:
Proceeds from sales of container rental equipment 94 --
Container purchases (5,137) (19,683)
Cash collateral deposit 532 (2,306)
------- -------
Net cash used in investing activities (4,511) (21,989)
------- -------
Cash flows from financing activities:
General partners' capital contribution -- 1
Distributions to partners (62) --
Proceeds from sales of limited partnership units 13,563 --
Syndication and offering costs (1,230) --
(Repayments) borrowings under revolving credit line (5,502) 21,282
(Repayments) borrowings from affiliates (2,393) 2,393
------- -------
Net cash provided by financing activities 4,376 23,676
------- -------
Net increase in cash 1,547 77
Cash at beginning of period 77 --
------- -------
Cash at end of period $ 1,624 77
======= =======
Interest paid during the period $ 1,589 133
======= =======
</TABLE>
See accompanying notes to financial statements
6
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TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS--CONTINUED
For the nine months ended September 30, 1996 (unaudited) and the period from
February 1,1995 (inception) through December 31, 1995
(Amounts in thousands)
SUPPLEMENTAL DISCLOSURES:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of equipment purchases, proceeds from
sale of limited partnership units, proceeds from sale of Equipment,
distributions to partners, and syndication and offering costs which had not been
paid or received by the Partnership as of September 30, 1996 and December 31,
1995, resulting in differences in amounts recorded and amounts paid or received
by the Partnership, as shown in the Statements of Cash Flows for the nine-month
period ended September 30, 1996 and the period from February 1,1995 (inception)
through December 31, 1995.
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1996 1995
-------- -------
<S> <C> <C>
Equipment purchases included in:
Due to affiliates.............................................. $ 192 109
Equipment purchases payable.................................... 1,604 1,935
Proceeds from sale of limited partnership units included in:
Accounts receivable............................................ 123 --
Proceeds from sale of equipment included in:
Due from affiliates............................................ 3 28
Distributions to partners included in:
Due to affiliates.............................................. 9 1
Accounts payable and accrued liabilities....................... 10 --
Syndication and offering costs included in:
Due to affiliates.............................................. 2 --
</TABLE>
The following table summarizes the amounts of equipment purchases, sale of
limited partnership units, proceeds from sale of Equipment, distributions to
partners, and syndication and offering costs recorded by the Partnership and the
amounts paid or received as shown in the Statements of Cash Flows for the
nine-month period ended September 30, 1996 and the period from February 1, 1995
(inception) through December 31, 1995.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Equipment purchases recorded ........................... $ 4,889 21,727
Equipment purchases paid ............................... 5,137 19,683
Proceeds from sale of limited partnership units
recorded.............................................. 13,686 --
Proceeds from sale of limited partnership units
received.............................................. 13,563 --
Proceeds from sale of Equipment recorded ............... 69 28
Proceeds from sale of Equipment received ............... 94 --
Distributions to partners declared ..................... 80 --
Distributions to partners paid ......................... 62 --
Syndication and offering costs recorded ................ 1,232 --
Syndication and offering costs paid .................... 1,230 --
</TABLE>
See accompanying notes to financial statements
7
<PAGE> 8
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Dollar amounts in thousands except for unit and per unit amounts)
(unaudited)
NOTE 1. GENERAL
Textainer Equipment Income Fund VI, L.P. (the Partnership) is a
California Limited Partnership founded in 1995. The Partnership owns and
leases a fleet of intermodal marine cargo container equipment (the
Equipment) to international shipping lines.
The accompanying interim financial statements have not been audited by
an independent public accountant. However, all adjustments (which were
only normal and recurring adjustments), which are, in the opinion of
management, necessary to fairly present the financial position of the
Partnership as of September 30, 1996 and December 31, 1995, and the
results of its operations, changes in partners' capital (deficit), and
cash flows for the nine- and three-month periods ended September 30,
1996 and eleven-month period ended December 31, 1995, have been made.
The financial information presented herein should be read in conjunction
with the audited financial statements and the accompanying Notes
included in the Partnership's audited financial statements as of
December 31, 1995.
Certain estimates and assumptions were made by the Partnership's
management that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE 2. ACQUISITION OF EQUIPMENT
During the nine-month period ended September 30, 1996 and the period
from February 1, 1995 (inception) through December 31, 1995, the
Partnership purchased Equipment with a cost of $4,889 and $21,727,
respectively.
NOTE 3. TRANSACTIONS WITH AFFILIATES
Textainer Capital Corporation (TCC) is the Managing General Partner, and
Textainer Equipment Management Limited (TEM) and Textainer Limited (TL)
are the Associate General Partners of the Partnership. The Managing
General Partner and Associate General Partners are collectively referred
to as the General Partners. The General Partners manage and control the
affairs of the Partnership. The General Partners also act in this
capacity for other limited partnerships. Textainer Acquisition Services
Limited (TAS) is an affiliate of the General Partners which performs
services relative to the acquisition of Equipment outside the United
States on behalf of the Partnership. TCC, TEM, TL and TAS are
subsidiaries of Textainer Group Holdings Limited (TGH). TCC Securities
Corporation (TSC), a licensed broker and dealer in securities and an
affiliate of the General Partners, is the Managing Sales agent for the
offering of units for sale. The General Partners manage and control the
affairs of the Partnership.
8
<PAGE> 9
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
In accordance with the Partnership Agreement, the net earnings or losses
and partnership distributions are generally allocated 90.5% to the
limited partners and 9.5% to the General Partners. Notwithstanding the
above, in accordance with the Partnership Agreement, substantially all of
the net losses for the period from February 1, 1995 (inception) through
December 31, 1995 have been specially allocated to the General Partners.
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners an incentive management fee, an equipment management
fee and an equipment liquidation fee, as well as reimbursing the General
Partners for certain administrative costs. These fees are for various
services provided in connection with the administration and management of
the Partnership. The Partnership incurred $7 of incentive management fees
during both the nine- and three-month periods ended September 30, 1996.
No incentive management fees were incurred during the period from
February 1, 1995 (inception) through December 31, 1995. No equipment
liquidation fees were incurred during the first nine-month period of
1996, or the period from February 1, 1995 (inception) through December
31, 1995.
The Equipment of the Partnership is managed by TEM. TEM has authority to
acquire, hold, manage, lease, sell and dispose of the Equipment.
Additionally, TEM holds, for the payment of direct operating expenses, a
reserve of cash that has been collected from Equipment leasing
operations; such cash is netted in the amount due to affiliates at
September 30, 1996 and December 31, 1995.
Subject to certain reductions, TEM receives a monthly Equipment
management fee equal to 7% of gross revenues attributable to operating
leases and 2% of gross revenues attributable to full payout net leases.
These fees totaled $185 and $71 for the nine- and three-month periods
ended September 30, 1996 and $51 for the period from February 1, 1995
(inception) through December 31, 1995. The Equipment is leased by TEM to
third-party lessees on operating master leases, spot leases and term
leases. The majority are operating leases with limited terms and no
purchase options.
Certain indirect general and administrative costs incurred in performing
administrative services necessary to the operation of the Partnership are
borne by TEM and allocated to the Partnership based on the ratio of the
Partnership's interest in managed Equipment to the total equipment
managed by TEM. Indirect general and administrative costs allocated to
the Partnership were $189 and $59 for the nine- and three-month periods
ended September 30, 1996 and $77 for the period from February 1, 1995
(inception) through December 31, 1995, respectively.
TCC, in its capacity as managing general partner, also incurred general
and administrative costs of $29 and $8 for the nine- and three-month
period ended September 30, 1996 and $17 for the period from February 1,
1995 (inception) through December 31, 1995, respectively.
The General Partners or TAS may acquire Equipment in their own name and
hold title on a temporary basis for the purpose of facilitating the
acquisition of such Equipment for the Partnership. The Equipment may then
be resold to the Partnership on an all-cash basis at a price equal to the
actual cost, as defined in the Partnership Agreement.
The Partnership pays a managing sales agent fee to TSC of up to 9% of the
gross proceeds from the sale of limited partnership units, from which TSC
pays commissions to independent participating broker/dealers who
participate in the offering. The amount of the managing sales agent fee
and the broker/dealers' commissions are determined by the volume of units
sold to each investor by the broker/dealers. The General Partners or TSC
will pay, out of their own corporate
9
<PAGE> 10
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
funds, all other organization, offering and joint sales costs incurred
by the General Partners or TSC.
As of September 30, 1996 and December 31, 1995, due to affiliates, net,
are comprised of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Due to TEM .......... $347 171
Due (from) to TL .... (25) 890
Due to TCC and TSC... 85 20
---- -----
$407 1,081
==== =====
</TABLE>
These amounts payable to TEM, TCC and TSC were incurred in the ordinary
course of business between the Partnership and its affiliates and
represent timing differences in the accrual and payment of expenses and
fees described above or the accrual and collection of net rental revenues
by TEM. The amounts payable to TL at December 31, 1995 include $2,393
which was used to facilitate Equipment purchases and make cash collateral
deposits required under the revolving credit facility (note 5).
It is the policy of the Partnership and the General Partners to charge
interest on intercompany balances which were outstanding for more than
one month to the extent such balances relate to loans for Equipment
purchases. Interest is charged to the Partnership based on the Prime Rate
or London Interbank Offered Rate (LIBOR) plus certain margins based on
TGH's leverage ratio. There was no interest charged on intercompany
balances for the nine- and three-month periods ending September 30, 1996.
During the period from February 1, 1995 (inception) through December 31,
1995, the Partnership incurred $31 in interest charged by the General
Partners and their affiliates.
NOTE 4. RENTALS UNDER OPERATING LEASES
The following is a schedule by year of minimum future rentals receivable
on noncancelable operating leases as of September 30, 1996:
<TABLE>
<CAPTION>
Year ended September 30:
<S> <C>
1997 ...................................... $429
1998 ...................................... 78
1999 ...................................... 24
----
Total minimum future rentals receivable ... $531
====
</TABLE>
NOTE 5. REVOLVING CREDIT LINE
The Partnership has a short-term revolving credit facility (the
Facility) with an available limit of $25,000 expiring June 30, 1997,
which is available for Equipment purchases. Until such time as the
Partnership has raised a minimum of $25,000 from the sale of Limited
Partnership interests (the Guarantee Period), TGH and TL (the
Guarantors) have guaranteed the outstanding principal and interest under
the Facility. Balances borrowed under the Facility bear interest at
either the Prime Rate (8.25% at September 30, 1996) plus .25%, or LIBOR
plus 1.75%, and are secured by
10
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TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
all assets of the Partnership. The Partnership pays a commitment fee of
1/2% per annum on the unused portion of the Facility. This fee, as well
as the interest on any amounts borrowed, is payable quarterly in
arrears. Should the Facility not be renewed upon its expiration, it may,
at the Partnership's option, be converted to a four-year term loan, with
interest at either the Prime Rate plus 2.25%, or LIBOR plus 3.25%. The
Partnership can borrow an amount up to the sum of 90% of the net book
value of Equipment purchased plus the amount of the cash collateral
deposit maintained during the Guarantee Period. After the guarantee has
been terminated, the Partnership can borrow an amount up to the sum of
60% of the net book value of Equipment plus the amount of the cash
collateral deposit maintained.
At September 30, 1996, the Partnership had borrowed $15,780 under this
Facility to finance Equipment purchases and maintained restricted cash
collateral deposits of $1,774. The cash collateral is held in a
market-rate (4.40% at September 30, 1996), interest-bearing checking
account. The account is restricted in use and pledged as collateral for
the Facility. Subsequent to September 30, 1996, $3,000 was repaid under
this Facility.
Substantially all of the Partnership's borrowings are currently bearing
interest based on the thirty-day LIBOR rate plus 1.75%. The applicable
thirty-day LIBOR rate as of October 30, 1996 was 5.375%.
NOTE 6. COMMITMENTS
At September 30, 1996, the Partnership has committed to purchase 150
containers at an approximate total purchase price of $510. These
commitments were made to TAS, which, as the contracting party, has in
turn committed to purchase this Equipment on behalf of the Partnership.
11
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Dollar amounts in thousands except for unit and per unit amounts)
The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the nine and three-month periods
ended September 30, 1996. Please refer to the Financial Statements and Notes
thereto in connection with the following discussion.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership began its offering of limited partnership interests to the
public on May 10, 1996. The Partnership received its minimum subscription amount
of $1,100 on June 17, 1996 and had received offering proceeds totaling $13,686
as of September 30, 1996.
The Partnership has a short-term revolving credit facility (the Facility) with
an available limit of $25,000 expiring June 30, 1997, which is available for
Equipment purchases. Until such time as the Partnership has raised a minimum of
$25,000 from the sale of Limited Partnership interests (the Guarantee Period),
TGH and TL (the Guarantors) have guaranteed the outstanding principal and
interest under the Facility. Balances borrowed under the Facility bear interest
at either the Prime Rate plus .25%, or LIBOR plus 1.75%, and are secured by all
assets of the Partnership. The Partnership pays a commitment fee of 1/2% per
annum on the unused portion of the Facility. This fee, as well as the interest
on any amounts borrowed, is payable quarterly in arrears. Should the Facility
not be renewed upon its expiration, it may, at the Partnership's option, be
converted to a four-year term loan, with interest at either the Prime Rate plus
2.25%, or LIBOR plus 3.25%. The Partnership can borrow an amount up to the sum
of 90% of the net book value of Equipment purchased plus the amount of the cash
collateral deposit maintained during the Guarantee Period. After the guarantee
has been terminated, the Partnership can borrow an amount up to the sum of 60%
of the net book value of Equipment plus the amount of the cash collateral
deposit maintained.
On or before termination of its offering of limited partnership interests to the
public, the Partnership intends to use available offering proceeds to repay the
outstanding balance under the Facility. In the event that the Partnership cannot
repay the Facility upon the offering termination, TL or an affiliate will, at
the Partnership's request, repay part of the outstanding balance and, in
exchange, the Partnership will sell a portion of its Equipment to TL or its
affiliate (or to a third party located by TL). The original purchase price of
the Equipment sold will be equal to the amount of the Facility repaid by TL or
its affiliate. The net sales price for this Equipment will be the Partnership's
purchase price for such Equipment reduced by any net revenues (that is,
Equipment's pro-rata share of revenues and expenses, including management fees
and interest) realized by the Partnership with respect to such Equipment. (See
"Risk Factors: Operating Risks" in the Prospectus.)
At September 30, 1996, the Partnership had borrowed $15,780 under this Facility
to finance Equipment purchases and maintained restricted cash collateral
deposits of $1,774. The cash collateral is held in a market-rate (4.40% at
September 30, 1996), interest-bearing checking account. The account is
restricted in use and pledged as collateral for the Facility. Subsequent to
September 30, 1996, $3,000 was repaid under this Facility.
Substantially all of the Partnership's borrowings are currently bearing interest
based on the thirty-day LIBOR rate plus 1.75%. The applicable thirty-day LIBOR
rate as of October 30, 1996 was 5.375%.
Amounts payable to TL at December 31, 1995 include $2,393 which was used to
facilitate Equipment purchases and make cash collateral deposits required under
the revolving credit facility. At September 30, 1996 this amount had been paid
off and no amounts were owed to TL for Equipment purchases or cash collateral
deposits.
12
<PAGE> 13
The Partnership's policy is to maintain minimum working capital reserves in an
amount equal to 1% of aggregate offering proceeds during the offering period and
until proceeds received in the offering (less reserves) are invested in
Equipment. Thereafter, working capital reserves may be established at such
levels as the Managing General Partner deems necessary to serve the best
interest of the Partnership, but in no event less than the lesser of (i) 1% of
aggregate offering proceeds, or (ii) $100. (See "Business of the Partnership:
Reserves" in the Prospectus.) The Partnership invests working capital and cash
flow from operations prior to its distribution to the Partners in short-term,
liquid investments. At September 30, 1996, the Partnership's cash of $1,624 was
primarily invested in money market accounts.
During the nine-month period ended September 30, 1996, the Partnership declared
cash distributions to limited partners pertaining to the period from July 1996
through August 1996 in the amount of $72. These distributions represent a return
of 10.00% of original capital (measured on an annualized basis) on each unit. On
a GAAP basis all of these distributions were a return of capital. On a cash
basis all of these distributions were from operations.
For the nine-month period ended September 30, 1996, the Partnership had net cash
provided by operating activities of $1,682. For the period from February 1, 1995
(inception) through December 31, 1995, net cash used in operating activities
totaled $1,610. These amounts reflect the Partnership's commencement of
operations, including the receipt of rental revenues and payment of expenses as
the Equipment fleet grows. Additionally, net cash from operations was impacted
by amounts due to and from affiliates, which reflect timing differences in the
accrual and payment of net rental revenues, fees and other expenses to or from
TEM and affiliates. Net cash used in investing activities for the same periods
were $4,511 and $21,989, respectively which primarily reflects the amounts the
Partnership has invested in Equipment during these periods.
While it is expected that net cash from operating activities will continue to
improve during the initial purchase and lease-up phase of the Partnership, such
improvement may be tempered by current lower than average utilization and rental
rates for Equipment and by the fact that the Partnership's principal lessees,
shipping lines, are currently experiencing over-capacity, in part due to the
delivery of new, large capacity ships. This over-capacity has caused shipping
lines to reduce freight rates and has affected the profitability of their
business, resulting in the need to reduce costs. This is producing downward
pressure on lease rates. Delays in the remittance of rental payments, and in
extreme cases, bankruptcy of some shipping lines may occur if profitability
continues to erode. As noted above and discussed more fully below under "Results
of Operations", utilization rates have reflected a lower demand for containers,
and this over-capacity could also further affect utilization.
At September 30, 1996, the Partnership had committed to purchase 150 containers
at an approximate total price of $510. In the event the Partnership decides not
to purchase the Equipment, one of the General Partners or its affiliates will
purchase the Equipment for its own account.
RESULTS OF OPERATIONS
Because the Partnership has only recently been formed, the results of its
operations for the nine-month period ended September 30, 1996 and for the period
from February 1, 1995 (inception) through December 31, 1995 are not
representative of the results expected after the discontinuation of the Offering
and the completion of the purchase of the initial portfolio of Equipment. The
Partnership sustained net losses of $604 and $400 during the nine-month period
ended September 30, 1996 and the period from February 1, 1995 (inception)
through December 31, 1995, respectively. These financial results include
non-cash depreciation expenses of $1,117 and $429 for the respective periods.
The Partnership sustained a loss of $52 for the three-month period ended
September 30, 1996 which includes non-cash depreciation expense of $379.
13
<PAGE> 14
The Partnership's operations, which consist of rental revenue, Equipment
depreciation, direct operating expenses, management fees, interest, and
reimbursement of administrative expenses were directly related to the size of
the Equipment fleet during the nine-month period ended September 30, 1996 and
the period from February 1, 1995 (inception) to December 31, 1995. The following
is a summary of the size of the Equipment fleet (in units) at the end of each
quarter during the period from February 1, 1995 (inception) through September
30, 1996.
<TABLE>
<S> <C>
June 30, 1995 ......... 198
September 30, 1995 .... 3,995
December 31, 1995 ..... 6,614
March 31, 1996 ........ 7,239
June 30, 1996 ......... 7,596
September 30, 1996 .... 8,143
</TABLE>
Rental income and direct operating expenses are also affected by the lease
utilization percentages for the Equipment which were 76% and 57% on average
during the nine-month period ended September 30, 1996 and the period from June
1995 to December 1995, respectively; utilization as of September 30, 1996 was
81%. Lease utilization percentages tend to increase gradually during the initial
purchase and lease-up phase of the Partnership. Carefully managed additions of
Equipment, and the time required to lease the added Equipment contribute to the
lease utilization percentage growth. Nevertheless, the factors discussed above
may adversely affect utilization rates in the future.
The Partnership's results of operations may be affected by other economic
factors. For the fleet managed by TEM, utilization began to decrease in the last
quarter of 1995 and has continued to decline in the first three quarters of
1996. The General Partners believe that this softening in demand has been due,
in part, to a slow-down in activity in the Asia-North America trade route.
Additionally, as noted above, the Partnership's principal lessees, shipping
lines, are currently experiencing over-capacity, which may adversely affect
rental payments and/or rates and utilization which is likely affecting rental
rates. Rental rates have also been restrained by quantity rate discounts granted
to the Partnership's larger Equipment lessees.
Although substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations, virtually all of this income
is denominated in United States dollars. The Partnership's customers are
international shipping lines which transport goods on international trade
routes. The domicile of the lessee is not indicative of where the lessee is
transporting the Equipment. The Partnership's business risk in its foreign
operations lies with the creditworthiness of the lessees, and the Partnership's
ability to keep the Equipment under lease, rather than the geographic location
of the Equipment or the domicile of the lessees. The Equipment is generally
operated on the international high seas rather than on the domestic waterways.
The Equipment is subject to the risk of war or other political, economic or
social occurrence where the Equipment is used, which may result in the loss of
Equipment, which, in turn, may have a material impact on the Partnership's
results of operations and financial condition. The General Partners are not
aware of any conditions as of September 30, 1996 which would result in such risk
materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning Equipment after it comes off-lease, the risk of an
uninsured loss, increases in maintenance expenses or other costs of operating
the Equipment, and the effect of world trade and/or general business and
economic cycles on the Partnership's operations. (See "Risk Factors: Business
Risks" in the Prospectus.)
14
<PAGE> 15
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.
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California Limited Partnership)
By Textainer Capital Corporation
The Managing General Partner
By /s/John R. Rhodes
----------------------------------------
John R. Rhodes
Executive Vice President
Date: November 14, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Capital
Corporation, the Managing General Partner of the Registrant, in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/James E. Hoelter President (Principal Executive November 14, 1996
- ---------------------- Officer) and Director
James E. Hoelter
/s/John R. Rhodes Executive Vice President, November 14, 1996
- ---------------------- (Principal Financial and
John R. Rhodes Accounting Officer)
Secretary and Treasurer
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-01-1996
<EXCHANGE-RATE> 1
<CASH> 3,398
<SECURITIES> 0
<RECEIVABLES> 961
<ALLOWANCES> 28
<INVENTORY> 0
<CURRENT-ASSETS> 34
<PP&E> 26,546
<DEPRECIATION> 1,544
<TOTAL-ASSETS> 29,367
<CURRENT-LIABILITIES> 17,996
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,371
<TOTAL-LIABILITY-AND-EQUITY> 29,367
<SALES> 0
<TOTAL-REVENUES> 1,003
<CGS> 0
<TOTAL-COSTS> 715
<OTHER-EXPENSES> 340
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (52)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
