TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
August 13,1997
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
submitting herewith for filing on behalf of Textainer Equipment Income Fund VI,
L.P. (the "Company") the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Sincerely,
Nadine Forsman
Controller
<PAGE>
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 June 30, 1997
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>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California limited partnership)
Quarterly Report on Form 10Q for the
Quarter Ended June 30, 1997
TABLE OF CONTENTS
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Page
Item 1. Financial Statements
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Balance Sheets - June 30, 1997 (unaudited) and December 31, 1996................................. 3
Statements of Operations for the six and three months
ended June 30, 1997 and 1996 (unaudited)......................................................... 4
Statements of Partners' Capital (Deficit) for the six months
ended June 30, 1997 and 1996 (unaudited)......................................................... 5
Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 (unaudited)......................................................... 6
Notes to Financial Statements (unaudited)........................................................ 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................ 12
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Balance Sheets
June 30, 1997 and December 31, 1996
(Amounts in thousands)
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1997 1996
---------------- ---------------
(unaudited)
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Assets
Container rental equipment, net of accumulated
depreciation of $2,893 (1996: $1,988) $ 29,252 27,414
Cash 2,130 1,051
Cash collateral deposit (note 6) - 991
Accounts receivable, net of allowance
for doubtful accounts of $82 (1996: $38) 1,140 1,033
Due from affiliates (note 4) 68 158
Prepaid expenses 21 39
---------------- ---------------
$ 32,611 30,686
================ ===============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 201 111
Accrued liabilities 156 68
Accrued damage protection plan costs (note 2) 84 77
Due to affiliates (note 4) 38 195
Equipment purchases payable 957 24
Revolving credit facility (note 6) - 8,780
---------------- ---------------
Total liabilities 1,436 9,255
---------------- ---------------
Partners' capital:
General partners (603) (499)
Limited partners 31,778 21,930
---------------- ---------------
Total partners' capital 31,175 21,431
---------------- ---------------
Commitments (note 7)
$ 32,611 30,686
================ ===============
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Operations
For the six and three months ended June 30, 1997 and 1996
(Dollar amounts in thousands except for unit and per unit amounts)
(unaudited)
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Six months Three months Six months Three months
Ended Ended Ended Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
---------------- ----------------- ---------------- ----------------
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Rental income $ 2,608 1,309 1,641 892
---------------- ----------------- ---------------- ----------------
Costs and expenses:
Direct container expenses 539 289 229 140
Bad debt expense 44 38 2 1
Depreciation 911 467 738 381
Professional fees 20 10 28 7
Management fees to affiliates (note 4) 253 129 115 62
General and administrative costs
to affiliates (note 4) 185 94 151 76
Other general and administrative costs 29 16 13 7
---------------- ----------------- ---------------- ----------------
1,981 1,043 1,276 674
---------------- ----------------- ---------------- ----------------
Income from operations 627 266 365 218
---------------- ----------------- ---------------- ----------------
Other (expense) income:
Interest expense, net (110) (16) (925) (474)
Gain on sale of equipment 50 20 8 8
---------------- ----------------- ---------------- ----------------
(60) 4 (917) (466)
---------------- ----------------- ---------------- ----------------
Net earnings (loss) $ 567 270 (552) (248)
================ ================= ================ ================
Allocation of net earnings (loss) (note 4):
General Partners $ 54 26 (52) (24)
Limited Partners 513 244 (500) (224)
---------------- ----------------- ---------------- ----------------
$ 567 270 (552) (248)
================ ================= ================ ================
Limited partners' per unit share of
net earnings (loss) $ 0.31 0.13 (10.02) (4.49)
================ ================= ================ ================
Limited partners' per unit share
of distributions $ 0.87 0.43 - -
================ ================= ================ ================
Weighted average number of limited
partnership units outstanding 1,653,576 1,848,397 49,925 49,925
================ ================= ================ ================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
For the six months ended June 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
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Partners' Capital
-------------------------------------------------------
General Limited Total
----------- ---------------- --------------
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Balances at January 1, 1996 $ (399) - (399)
Proceeds from sale of limited partnership units - 2,371 2,371
Syndication and offering costs - (213) (213)
Net loss (52) (500) (552)
----------- ---------------- --------------
Balances at June 30, 1996 $ (451) 1,658 1,207
=========== ================ ==============
Balances at January 1, 1997 $ (499) 21,930 21,431
Proceeds from sale of limited partnership units - 11,834 11,834
Syndication and offering costs - (1,065) (1,065)
Distributions (158) (1,434) (1,592)
Net earnings 54 513 567
----------- ---------------- --------------
Balances at June 30, 1997 $ (603) 31,778 31,175
=========== ================ ==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Cash Flows
For the six months ended June 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
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1997 1996
-------------- ---------------
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Cash flows from operating activities:
Net earnings (loss) $ 567 (552)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation 911 738
Increase in allowance for doubtful accounts 44 7
Gain on sale of equipment (50) (8)
Changes in assets and liabilities:
Increase in accounts receivable (288) (174)
Decrease in prepaid expenses 18 12
Increase (decrease) in accounts payable and
accrued liabilities 145 (172)
Increase in accrued damage protection plan costs 7 3
(Decrease) increase in due to affiliates, net (71) 1,629
-------------- ---------------
Net cash provided by operating activities 1,283 1,483
-------------- ---------------
Cash flows from investing activities:
Proceeds from sale of equipment 118 44
Equipment purchases (1,894) (4,976)
Cash collateral deposit 991 (447)
-------------- ---------------
Net cash used in investing activities (785) (5,379)
-------------- ---------------
Cash flows from financing activities:
Proceeds from sale of limited partnership units 11,971 2,359
Distributions to partners (1,545) -
Syndication and offering costs (1,065) (225)
(Repayments) borrowings under revolving credit line (8,780) 3,498
Borrowings from affiliates - 436
-------------- ---------------
Net cash provided by financing activities 581 6,068
-------------- ---------------
Net increase in cash 1,079 2,172
Cash at beginning of period 1,051 77
-------------- ---------------
Cash at end of period $ 2,130 2,249
============== ===============
Interest paid during the period $ 130 1,021
============== ===============
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California limited partnership)
Statements of Cash Flows--Continued
For the six months ended June 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
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 June 30, 1997 and 1996, and December
31, 1996 and 1995, resulting in differences in amounts recorded and amounts of
cash disbursed or received by the Partnership, as shown in the Statements of
Cash Flows for the six-month periods ended June 30, 1997 and 1996.
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June 30 Dec. 31 June 30 Dec. 31
1997 1996 1996 1995
------- ------- ------- -------
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Equipment purchases included in:
Due to affiliates................................................$ 3 2 179 109
Equipment purchases payable...................................... 957 24 132 1,935
Proceeds from sale of limited partnership units included in:
Accounts receivable.............................................. - 137 12 -
Proceeds from sale of Equipment included in:
Due from affiliates.............................................. 12 1 9 28
Distributions to partners included in:
Due to affiliates................................................ 30 16 - -
Accounts payable and accrued liabilities......................... 55 22 - -
Syndication and offering costs included in:
Due from affiliates.............................................. - - 12 -
</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
six-month periods ended June 30, 1997 and 1996.
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1997 1996
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Equipment purchases recorded......................................................... $ 2,828 3,243
Equipment purchases paid............................................................. 1,894 4,976
Proceeds from sale of limited partnership units recorded............................. 11,834 2,371
Proceeds from sale of limited partnership units received............................. 11,971 2,359
Proceeds from sale of Equipment recorded............................................. 129 25
Proceeds from sale of Equipment received............................................. 118 44
Distributions to partners declared................................................... 1,592 -
Distributions to partners paid....................................................... 1,545 -
Syndication and offering costs recorded.............................................. 1,065 213
Syndication and offering costs paid.................................................. 1,065 225
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California limited partnership)
Notes to Financial Statements
June 30, 1997
(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 June 30, 1997 and December 31, 1996, and the results
of its operations, changes in partners' capital, and cash flows for the
six-month periods ended June 30, 1997 and 1996, 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, 1996.
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.
Certain reclassifications of prior year amounts have been made in order
to conform with the 1997 financial statement presentation.
Note 2. Damage Protection Plan
The Partnership offers a Damage Protection Plan (the Plan) to lessees of
its Equipment. Under the terms of the Plan, the Partnership earns
additional revenues on a daily basis and, as a result, has agreed to
bear certain repair costs. It is the Partnership's policy to recognize
revenue when earned and to provide a reserve sufficient to cover the
Partnership's obligation for estimated future repair costs. At June 30,
1997 and December 31, 1996, this reserve was equal to $84 and $77,
respectively.
Note 3. Acquisition of Equipment
During the six-month periods ended June 30, 1997 and 1996, the
Partnership purchased Equipment with a cost of $2,828 and $3,243,
respectively.
Note 4. 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, was the Managing Sales agent for the
offering of units for sale. The General Partners manage and control the
affairs of the Partnership.
In accordance with the Partnership Agreement, and subject to special
allocations described therein, net earnings or losses and partnership
distributions are generally allocated 9.5% to the General Partners and
90.5% to the Limited Partners. Items of income and gain are specially
allocated to the General Partners to the extent their capital accounts'
show a deficit.
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 $71 and $ 38 of incentive
management fees during the six- and three-month periods ended June 30,
1997. There were no incentive management fees paid to the General
Partners for the six- and three-month periods ended June 30, 1996. No
equipment liquidation fees were incurred in either period.
The Equipment of the Partnership is managed by TEM. In its role as
manager, TEM has authority to acquire, hold, manage, lease, sell and
dispose of the Partnership's Equipment. Additionally, TEM holds, for the
payment of direct operating expenses, a reserve of cash that has been
collected from container leasing operations; such cash is included in the
amount due from and due to affiliates at June 30, 1997 and December 31,
1996.
Subject to certain reductions, TEM receives a monthly Equipment
management fee equal to 7% of gross lease revenues attributable to
operating leases and 2% of gross lease revenues attributable to full
payout net leases. These fees totaled $182 and $91 for the six- and
three-month periods ended June 30, 1997 and $115 and $62 for the
comparable periods in 1996, respectively. The Equipment is leased by TEM
to third-party lessees on operating master leases, spot leases and term
leases. The majority are operating master leases with limited terms and
no purchase options.
Certain indirect general and administrative costs such as salaries,
employee benefits, taxes and insurance, are incurred in performing
administrative services necessary to the operation of the Partnership.
These costs are borne by TCC and TEM. Costs allocated to the Partnership
for salaries were $101 and $53 during the six- and three-month periods
ended June 30, 1997 and $74, and $36 for the comparable periods in 1996,
respectively. Other general and administrative costs allocated were $84
and $41 for the six- and three-month periods ended June 30, 1997 and $77
and $40 for the comparable periods in 1996, respectively. TEM allocates
these costs based on the ratio of the Partnership's interest in managed
Equipment to the total Equipment managed by TEM during the period.
Indirect general and administrative costs allocated by TEM to the
Partnership were $160 and $81 for the six- and three-month periods from
June 30, 1997 and $130, and $67 for the comparable periods in 1996,
respectively.
TCC allocates indirect general and administrative costs to the
Partnership based on the ratio of the Partnership's Equipment to the
total Equipment of all limited partnerships managed by TCC. TCC allocated
$25 and $13 of these indirect costs to the Partnership during the six-
and three-month periods ended June 30, 1997 and $21 and $9 for the
comparable periods in 1996, 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 paid 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
paid commissions to independent participating broker/dealers who
participated in the offering. The amount of the managing sales agent fee
and the broker/dealers' commissions were determined by the volume of
units sold to each investor by the broker/dealers. The General Partners
or TSC have paid, out of their own corporate funds, all other
organization, offering and joint sales costs incurred by the General
Partners or TSC.
As of June 30, 1997 and December 31, 1996, due to affiliates is comprised
of:
1997 1996
Due from affiliates:
Due from TSC....................................... $ - 158
Due from TEM....................................... 68 -
----- -----
$ 68 158
==== ====
Due to affiliates:
Due to TEM......................................... $ - 172
Due to TL.......................................... 30 16
Due to TCC......................................... 8 -
Due to TSC......................................... - 7
----- -----
$ 38 195
==== ====
These amounts receivable from and payable to affiliates 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 remittance of net
rental revenues by TEM.
It is the policy of the Partnership and the General Partners to charge
interest on intercompany balances which are outstanding for more than one
month, to the extent such balances relate to loans for Equipment
purchases. Interest is charged at a rate not greater than the General
Partners' or affiliates' own cost of funds. There was no interest expense
incurred on intercompany balances for the six- and three-month periods
ended June 30, 1997. During the six- and three-month periods ended June
30, 1996, the Partnership incurred $128 and $72 in interest charged by
the General Partners.
Note 5. Rentals under Operating Leases
The following is a schedule by year of minimum future rentals receivable
on noncancelable operating leases as of June 30, 1997:
Year ended June 30:
1998.................................................. $ 667
1999.................................................. 35
2000.................................................. 8
-----
Total minimum future rentals receivable............... $ 710
===
Note 6. Revolving Credit Line
The Partnership had a short-term credit line of $25,000 which was used
for Equipment purchases. Balances borrowed under this credit facility
bore interest at either the Prime Rate plus .25%, or LIBOR plus 1.75%,
and were secured by all assets of the Partnership. The Partnership paid
a commitment fee of 1/2% per annum on the unused portion of the
facility. This credit line was paid in full on March 30, 1997 and
expired on June 30, 1997.
Note 7. Commitments
At June 30, 1997, the Partnership has committed to purchase 600 new
containers at an approximate total purchase price of $1,257. These
commitments were made to TAS, which, as the contracting party, has in
turn committed to purchase this Equipment on behalf of the Partnership.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Dollar amounts in thousands)
The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the six- and three-month periods
ended June 30, 1997 and 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 terminated the offering on April 30, 1997 at
$36,968.
The Managing General Partner decided to terminate the Partnership's Offering
effective April 30, 1997 primarily due to the decrease in demand for leased
containers and the associated decline in lease rates and utilization. The
decline in demand for leased containers, the Partnership's principal business,
is described more fully below under "Results of Operations".
The decline in demand for leased containers has been accompanied by a drop in
the purchase price of new containers. Due to this drop in container prices, the
Managing General Partner believed that additional investment in containers was
warranted and has invested available offering proceeds in containers.
The Partnership had a short-term revolving credit facility (the Facility) with
an available limit of $25,000 which expired June 30, 1997. On March 30, 1997
this credit line was paid in full by the Partnership from offering proceeds.
Balances borrowed under the Facility bore interest at either the Prime Rate plus
.25%, or LIBOR plus 1.75%, and were secured by all assets of the Partnership.
The Partnership paid 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, was
payable quarterly in arrears.
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 June 30, 1997, the Partnership's cash of $2,130 was
invested in money market accounts.
During the six-month period ended June 30, 1997, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1996
through May 1997 in the amount of $1,434. These distributions represent a return
of 10% of original capital (measured on an annualized basis) on each unit from
December 1996 through March 1997 and 9% of original capital (measured on an
annualized basis) on each unit from April 1997 through June 1997. On a GAAP
basis $921 of these distributions was a return of capital and the balance was
from net earnings. On a cash basis, $1,283 of these distributions was from
operations and the balance was from reserves.
At June 30, 1997, the Partnership had committed to purchase 600 new containers
at an approximate total purchase price of $1,257. The Partnership expects to
fund the purchase of the Equipment with its cash on hand. In the event the
Partnership decides not to purchase the Equipment, one of the General Partners
or an affiliate of the General Partners will acquire the Equipment for its own
account.
For the six months ended June 30, 1997 and 1996, the Partnership had net cash
provided by operating activities of $1,283 and $1,483, respectively. The
decrease was primarily attributable to a decrease in due to affiliates, net
offset by increases in net earnings and accounts payable and accrued
liabilities. Due to affiliates, net, decreased due to timing differences in the
accrual and payment of expenses and fees or in the accrual and remittance of net
rental revenues. The increase in net earnings is primarily attributable to the
increase in the average fleet size in 1997 as compared to the same period in
1996. The increase in accounts payable and accrued liabilities is due to timing
differences in the accrual and payment of expenses and fees and the increase in
the average fleet size.
Net cash used in investing activities for the six-month period ended June 30,
1997 was $785 compared to $5,379 for the same period in 1996. Equipment
purchases decreased between periods primarily due to the Partnership utilizing
available cash for the repayment of the credit facility during 1997. Net cash
used in investing activities for the six-months ended June 30, 1997, included
the return of restricted funds of $991, previously held as collateral for the
Facility.
Net cash provided by financing activities was $581 for the six month period
ended June 30, 1997 as compared to $6,068 for the same period in 1996. The
decrease in net cash provided by financing activities was primarily due to the
repayment of the Facility and payments made for distributions to partners and
syndication and offering costs. The decrease was offset by the receipt of
proceeds from the sales of limited partnership units.
Results of Operations
Because the Partnership has only recently been formed, the results of its
operations for the six and three months ended June 30, 1997 and 1996 are not
representative of the results expected after the completion of the purchase of
the initial portfolio of Equipment. The Partnership sustained net earnings of
$567 and a net loss of $552 during the six months ended June 30, 1997 and 1996,
respectively. These financial results include non-cash depreciation expenses
of $911 and $738 for the respective periods.
The Partnership's income from 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 six months ended June 30, 1997 and 1996. The
following is a summary of the size of the Equipment fleet (in units) at the end
of each quarter during period from February 1, 1995 (inception) through June 30,
1997.
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
December 31, 1996............. 9,099
March 31, 1997................ 9,083
June 30, 1997................ 10,211
Rental income and direct operating expenses are also affected by the lease
utilization percentages for the Equipment which were 82% and 73% on average
during the six months ended June 30, 1997 and 1996, respectively. Lease
utilization percentages tend to increase gradually during the initial purchase
and lease-up phase of the Partnership's container fleet. Carefully managed
additions of Equipment and the time required to lease the added Equipment
contribute to the lease utilization percentage growth. In addition, rental
income is affected by daily rental rates.
The following is a comparative analysis of the results of operation for the six
month periods ended June 30, 1997 and 1996.
The Partnership's income from operations for the six month period ended June 30,
1997 was $627 on gross rental income of $2,608, compared to $365 on gross rental
income of $1,641 for the same period in 1996. The largest component of total
rental income is income from container rentals, which increased by $859 or 55%,
from 1996 to 1997. Income from container rentals is largely dependent upon three
factors: equipment available for lease (average inventory), average on-hire
(utilization) percentage and average daily rental rates. Average utilization
increased 13%, average daily rental rates were unchanged and average inventory
increased 36%. Despite these increases, though, general demand for leased
containers has declined, as described below.
Container utilization began to decline in late 1995 and that decline persisted
throughout 1996 and into the first quarter of 1997. The General Partners believe
that this decrease in demand for leased containers is the result of adverse
changes in the business of its shipping line customers. These changes consist
principally of: (i) a general slowdown in the growth of world containerized
cargo trade, particularly in the Asia-North America and Asia-Europe trade
routes; (ii) over-capacity resulting from the 1996 and 1997 additions of new,
larger ships to the existing container ship fleet at a rate in excess of the
growth rate in containerized cargo trade; and (iii) shipping line alliances and
other operational consolidations that have allowed shipping lines to operate
with fewer containers, thereby decreasing the demand for leased containers. The
container ship over-capacity in particular led to lower shipping rates,
resulting in shipping lines' need to reduce operating costs. The drive to reduce
costs, coupled with the availability of inexpensive financing and lower
container prices, encouraged shipping lines to purchase, rather than lease, a
greater number of new containers in 1996 than in previous years. All of these
factors have led to downward pressure on container lease rates, a decline in
utilization of leased containers, and an increase in leasing incentives and
other discounts being granted to shipping lines by container lessors, further
eroding Partnership profitability. The decline in demand for leased containers
has been accompanied by a drop in the purchase price of new containers.
During the second quarter of 1997, there was a slight improvement in market
conditions as utilization improved and continues to improve into the third
quarter of 1997. Despite the improving utilization, for the near term, the
General Partners do not foresee material changes in current market conditions
and caution that both utilization and lease rates could decline, adversely
affecting the Partnership's operating results.
Substantially all of the Partnership's rental income was generated from the
leasing of the Equipment under short-term operating leases. The balance of
rental income consists of other lease-related items, primarily income from
charges to the lessees for pick-up of containers from prime locations less
credits granted to lessees for leasing containers from surplus locations
(location income), income for handling and returning containers and income from
charges to lessees for a damage protection plan (DPP). For the six month period
ended June 30, 1997, the total of these other revenue items was $174, an
increase of $108 compared to the equivalent period in 1996. The increase is
primarily due to the increase in fleet size.
Direct operating expenses, excluding bad debt expense, increased by $310 from
the six month period ended June 30, 1996, to the same period in 1997. The
primary components of this increase were increases in storage, handling, DPP and
repositioning expenses. These increases were primarily due to the increase in
fleet size.
Bad debt expense increased $42 between periods and depreciation expense
increased by $173, or 23%, from the six month periods ended June 30, 1996 to the
same period in 1997. These increases are primarily due to the increase in the
Partnership's average fleet size between periods.
Management fees increased $138 from the six months ended June 30, 1996 to the
equivalent period in 1997 due to increases in incentive and equipment management
fees. Incentive management fees, which are based on the Partnership's limited
and general partner distribution percentage and partners' capital, increased
$71, or 100% in line with the commencement of partner distributions and the
increase in partners' capital from the six month period ended June 30, 1996 to
the equivalent period in 1997. Equipment management fees increased
proportionally with the increase in rental income and were 7% of gross revenue
for both periods.
General and administrative costs to affiliates increased by 23%, or $34, from
the six month period ended June 30, 1996 to the same period in 1997, primarily
due to the increase in the average container fleet.
Other expense decreased $857 from the six month period ended June 30, 1996 to
the same period in 1997, representing a decrease of $815 in interest expense and
an increase of $42 in gain on sale of equipment. Interest expense declined
primarily due to the decline in borrowings from the six month period ended June
30, 1996, to the equivalent period in 1997.
A comparative analysis of the results of operations for the three months ended
June 30, 1997 and 1996 was performed and the comparison indicated that changes
in all financial items were directly related to the increase in the size of the
container fleet.
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 at profitable rates, 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 June 30, 1997 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, industry trends and/or general
business and economic cycles on the Partnership's operations. See "Risk Factors"
in the Partnership's Prospectus, as supplemented, for additional information on
risks of the Partnership's business.
<PAGE>
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____________________________
John R. Rhodes
Executive Vice President
Date: August 14, 1997
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>
____________________________ Executive Vice President, August 14, 1997
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
____________________________ President (Principal Executive August 14, 1997
James E. Hoelter Officer) and Director
</TABLE>
<PAGE>
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: August 14, 1997
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/John R. Rhodes Executive Vice President, August 14, 1997
- ------------------------- (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/James E. Hoelter President (Principal Executive August 14, 1997
- ----------------------- Officer) and Director
James E. Hoelter
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Textainer Equipment Income Fund VI, LP
</LEGEND>
<CIK> 0001003638
<NAME> Textainer Equipment Income Fund VI, LP
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,130
<SECURITIES> 0
<RECEIVABLES> 1,290
<ALLOWANCES> 82
<INVENTORY> 0
<CURRENT-ASSETS> 21
<PP&E> 32,145
<DEPRECIATION> 2,893
<TOTAL-ASSETS> 32,611
<CURRENT-LIABILITIES> 1,436
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 31,175
<TOTAL-LIABILITY-AND-EQUITY> 32,611
<SALES> 0
<TOTAL-REVENUES> 2,608
<CGS> 0
<TOTAL-COSTS> 1,981
<OTHER-EXPENSES> 60
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 567
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 567
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
