TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
November 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 September 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 September 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 September 30, 1997
TABLE OF CONTENTS
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Page
<S> <C>
Item 1. Financial Statements
Balance Sheets - September 30, 1997 (unaudited) and December 31, 1996............................ 3
Statements of Operations for the nine and three months
ended September 30, 1997 and 1996 (unaudited).................................................... 4
Statements of Partners' Capital for the nine months
ended September 30, 1997 and 1996 (unaudited).................................................... 5
Statements of Cash Flows for the nine months
ended September 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
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Balance Sheets
September 30, 1997 and December 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
1997 1996
---------------- ---------------
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $3,400 (1996: $1,988) $29,967 $27,414
Cash 10 1,051
Cash collateral deposit (note 7) - 991
Accounts receivable, net of allowance
for doubtful accounts of $79 (1996: $38) 1,387 1,033
Prepaid expenses 13 39
---------------- ---------------
$31,377 $30,528
================ ===============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $152 $111
Accrued liabilities 84 28
Accrued recovery costs (note 2) 31 18
Accrued damage protection plan costs (note 3) 80 77
Due to affiliates (note 5) 172 37
Deferred quarterly distribution 59 22
Equipment purchases payable 26 24
Revolving credit facility (note 7) - 8,780
---------------- ---------------
Total liabilities 604 9,097
---------------- ---------------
Partners' capital:
General partners (645) (499)
Limited partners 31,418 21,930
---------------- ---------------
Total partners' capital 30,773 21,431
---------------- ---------------
$31,377 $30,528
================ ===============
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Operations
For the nine and three months ended September
30, 1997 and 1996 (Dollar amounts in thousands
except for unit and per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
Ended Ended Ended Ended
Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
------------------ ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Rental income $1,581 $1,003 $4,189 $2,644
------------------ ------------------ ----------------- ------------------
Costs and expenses:
Direct container expenses 310 173 849 402
Bad debt (benefit) expense (3) 5 41 7
Depreciation 510 379 1,421 1,117
Professional fees 12 3 32 31
Management fees to affiliates (note 5) 149 78 402 192
General and administrative costs to
affiliates (note 5) 86 67 271 218
Other general and administrative costs 20 10 49 24
------------------ ------------------ ----------------- ------------------
1,084 715 3,065 1,991
------------------ ------------------ ----------------- ------------------
Income from operations 497 288 1,124 653
------------------ ------------------ ----------------- ------------------
Other income (expense):
Interest income (expense), net 17 (353) (93) (1,277)
Gain on sale of equipment 7 13 57 20
------------------ ------------------ ----------------- ------------------
24 (340) (36) (1,257)
------------------ ------------------ ----------------- ------------------
Net earnings (loss) $521 ($52) $1,088 ($604)
================== ================== ================= ==================
Allocation of net earnings (loss) (note 5):
General Partners $49 ($5) $103 ($57)
Limited Partners 472 (47) 985 (547)
------------------ ------------------ ----------------- ------------------
$521 ($52) $1,088 ($604)
================== ================== ================= ==================
Limited partners' per unit share of
net earnings (loss) $ 0.26 ($0.11) $ 0.58 ($2.55)
================== ================== ================= ==================
Limited partners' per unit share
of distributions $ 0.45 $ 0.16 $ 1.33 $ 0.34
================== ================== ================= ==================
Weighted average number of limited
partnership units outstanding 1,848,397 444,362 1,706,519 214,565
================== ================== ================= ==================
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 nine months ended September 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Partners' Capital
-------------------------------------------------------
General Limited Total
----------- --------------- ---------------
<S> <C> <C> <C>
Balances at January 1, 1996 ($399) $0 ($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
=========== =============== ===============
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 (249) (2,266) (2,515)
Net earnings 103 985 1,088
----------- --------------- ---------------
Balances at September 30, 1997 ($645) $31,418 $30,773
=========== =============== ===============
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 nine months ended September 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $1,088 ($604)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation 1,421 1,117
Increase in allowance for doubtful accounts 41 12
Gain on sale of equipment (57) (20)
Changes in assets and liabilities:
Increase in accounts receivable (532) (297)
Decrease in prepaid expenses 26 18
Increase (decrease) in accounts payable and
accrued liabilities 97 (158)
Increase in accrued recovery costs 13 -
Increase in accrued damage protection plan costs 3 13
Increase in due to affiliates, net 120 1,601
---------------- ----------------
Net cash provided by operating activities 2,220 1,682
---------------- ----------------
Cash flows from investing activities:
Proceeds from sale of equipment 176 94
Equipment purchases (4,090) (5,137)
Cash collateral deposit 991 532
---------------- ----------------
Net cash used in investing activities (2,923) (4,511)
---------------- ----------------
Cash flows from financing activities:
Proceeds from sale of limited partnership units 11,971 13,563
Distributions to partners (2,464) (62)
Syndication and offering costs (1,065) (1,230)
(Repayments) borrowings under revolving credit line (8,780) (5,502)
(Repayments) borrowings from affiliates - (2,393)
---------------- ----------------
Net cash (used in) provided by financing activities (338) 4,376
---------------- ----------------
Net (decrease) increase in cash (1,041) 1,547
Cash at beginning of period 1,051 77
---------------- ----------------
Cash at end of period $10 $1,624
================ ================
Interest paid during the period $0 $1,589
================ ================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California Limited Partnership)
Statements of Cash Flows--Continued
For the nine months ended September 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of Equipment purchases, proceeds from
sale of limited partnership units, proceeds from sale of Equipment,
distributions to partners and syndication and offering costs which had not been
paid or received by the Partnership as of September 30, 1997 and 1996, and
December 31, 1996 and 1995, resulting in differences in amounts recorded and
amounts of cash disbursed or received by the Partnership, as shown in the
Statements of Cash Flows for the nine-month periods ended September 30, 1997 and
1996.
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Sept. 30 Dec. 31 Sept. 30 Dec. 31
1997 1996 1996 1995
------- ------- -------- -------
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates....................................................$ - $ 2 $ 192 $ 109
Equipment purchases payable.......................................... 26 24 1,604 1,935
Proceeds from sale of limited partnership units included in:
Accounts receivable.................................................. - 137 123 -
Proceeds from sale of Equipment included in:
Due (to) from affiliates............................................. (2) 1 3 28
Distributions to partners included in:
Due to affiliates.................................................... 30 16 9 1
Accounts payable and accrued liabilities............................. 59 22 10 -
Syndication and offering costs included in:
Due from 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 periods ended September 30, 1997 and 1996.
<TABLE>
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1997 1996
---- ----
<S> <C> <C>
Equipment purchases recorded......................................................... $ 4,090 $ 4,889
Equipment purchases paid............................................................. 4,090 5,137
Proceeds from sale of limited partnership units recorded............................. 11,834 13,686
Proceeds from sale of limited partnership units received............................. 11,971 13,563
Proceeds from sale of Equipment recorded............................................. 173 69
Proceeds from sale of Equipment received............................................. 176 94
Distributions to partners declared................................................... 2,515 80
Distributions to partners paid....................................................... 2,464 62
Syndication and offering costs recorded.............................................. 1,065 1,232
Syndication and offering costs paid.................................................. 1,065 1,230
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California Limited Partnership)
Notes to Financial Statements
September 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 containers (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, 1997 and December 31, 1996, and the
results of its operations, changes in partners' capital, and cash flows
for the nine-month periods ended September 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. Recovery Costs
The Partnership accrues an estimate for recovery costs as a result of
defaults under its leases that it expects to incur, which are in excess
of estimated insurance proceeds. At September 30, 1997 and December 31,
1996, the amounts accrued were $31 and $18, respectively.
Note 3. Damage Protection Plan
The Partnership offers a Damage Protection Plan (DPP) to lessees of its
Equipment. Under the terms of DPP, 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 September 30, 1997 and
December 31, 1996, this reserve was equal to $80 and $77, respectively.
Note 4. Acquisition of Equipment
During the nine-month periods ended September 30, 1997 and 1996, the
Partnership purchased Equipment with a cost of $4,090 and $4,889,
respectively.
Note 5. 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 reimburse 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 $109 and $38 of
incentive management fees during the nine- and three-month periods ended
September 30, 1997 and $7 of incentive management fees the nine- and
three-month periods ended September 30, 1996. No equipment liquidation
fees were incurred in either period.
The Partnership's Equipment 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 to
affiliates at September 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 $293 and $111 for the nine- and
three-month periods ended September 30, 1997 and $185 and $71 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. Total general and administrative
costs allocated to the Partnership were $271 and $86 for the nine-month
and three-month periods ended September 30, 1997 of which $149 and $50,
respectively were for salaries. For the nine- and three-month periods
ended September 30, 1996 total general and administrative costs allocated
to the Partnership were $218 and $67, of which $111 and $39, respectively
were for salaries.
TEM allocates these general and administrative costs based on the ratio
of the Partnership's interest in managed Equipment to the total Equipment
managed by TEM during the period. 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. General and administrative costs allocated
by TEM to the Partnership were $238, $78, $189, and $59 for the nine- and
three-month periods ended September 30, 1997 and 1996, respectively. TCC
allocated $33, $8, $29 and $8 of general and administrative costs to the
Partnership during the nine- and three-month periods ended September 30,
1997 and 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.
At September 30, 1997 and December 31, 1996, due to affiliates is
comprised of:
1997 1996
---- ----
Due to affiliates:
Due to TEM......................................... $ 137 $ 172
Due to TL.......................................... 30 16
Due to TCC......................................... 5 -
Due from TSC....................................... - (151)
------ -----
$ 172 $ 37
====== =======
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 nine- and three-month periods
ended September 30, 1997 and 1996.
Note 6. Rentals under Operating Leases
The following is a schedule by year of minimum future rentals receivable
on noncancelable operating leases at September 30, 1997:
Year ended September 30:
1998.................................................. $ 499
1999.................................................. 48
2000.................................................. 18
-----
Total minimum future rentals receivable............... $ 565
====
Note 7. 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.
<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 nine-month periods ended
September 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 in funds raised.
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, 1997, the Partnership's cash significantly decreased from the balance at
December 31, 1996, primarily due to the timing of Equipment purchases. The
Partnership purchased $4.1 million of Equipment during the nine-month period
ended September 30, 1997 of which $2.2 million was purchased in the third
quarter. The Partnership's cash is also affected by cash provided by or used in
operating and financing activities. These activities are discussed in detail
below.
During the nine-month period ended September 30, 1997, the Partnership declared
cash distributions to limited partners pertaining to the period from December
1996 through August 1997 in the amount of $2,266. 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 August 1997. On a
GAAP basis, $1,281 of these distributions was a return of capital and the
balance was from net earnings. On a cash basis, $2,220 of these distributions
was from operations and the balance ($46) was from reserves.
For the nine months ended September 30, 1997 and 1996, the Partnership had net
cash provided by operating activities of $2,220 and $1,682, respectively. This
increase was primarily attributable to an increase in net earnings offset by an
increase in due to affiliates, net. The increase in net earnings is primarily
attributable to the increases in the average fleet size and utilization
percentages in 1997 compared to the same period in 1996. Due to affiliates, net,
increased due to timing differences in the accrual and payment of expenses and
fees or in the accrual and remittance of net rental revenues.
Net cash used in investing activities for the nine-month period ended September
30, 1997 was $2,923 compared to $4,511 for the equivalent period in 1996.
Equipment purchases decreased between periods primarily due to the Partnership
utilizing available cash for the repayment of the credit facility during the
first three months of 1997. Net cash used in investing activities for the nine
months ended September 30, 1997 included the return of restricted funds of $991,
previously held as collateral for the Partnership's Credit Facility.
Net cash used in financing activities was $338 for the nine month period ended
September 30, 1997, compared to net cash provided by financing activity of
$4,376 for the comparable period in 1996. The decrease in net cash provided by
financing activities was primarily due to the repayment of the Credit Facility
and an increase in distributions to partners. 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 nine months ended September 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
$1,088 and a net loss of $604 during the nine months ended September 30, 1997
and 1996, respectively. These financial results include non-cash depreciation
expenses of $1,421 and $1,117 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 nine months ended September 30, 1997 and 1996.
The following is a summary of the size of the container fleet (in units) at the
end of each quarter during the period from February 1, 1995 (inception) through
September 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
September 30, 1997............ 10,741
Rental income and direct operating expenses are also affected by the lease
utilization percentages for the Equipment, which averaged 84% and 76% during the
nine months ended September 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, which have increased as discussed below.
The following is a comparative analysis of the results of operation for the
nine-month periods ended September 30, 1997 and 1996.
The Partnership's income from operations for the nine-month period ended
September 30, 1997 was $1,124 on gross rental income of $4,189, compared to $653
on gross rental income of $2,644 for the same period in 1996. The largest
component of total rental income is income from container rentals, which
increased by $1,338 or 52%, 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 11%, average daily rental rates increased
2% and average inventory increased 34%. 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 and third quarters there was an improvement in utilization,
however lease rates declined and leasing incentives remained high due to high
levels of off-lease inventory in low demand locations. The General Partners do
not foresee material changes in current market conditions and caution that both
utilization and lease rates could decline further, and leasing incentives could
remain high, adversely affecting the Partnership's 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 higher demand 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 nine-month period
ended September 30, 1997, the total of these other income items was $287, an
increase of $207 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 $447 from
the nine-month period ended September 30, 1996, compared to the same period in
1997. The primary components of this increase were increases in storage,
repositioning and handling expenses which were primarily due to the increase in
fleet size.
Bad debt expense increased $34 between periods and depreciation expense
increased by $304, or 27%, from the nine-month period ended September 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 to affiliates increased $210 from the nine months ended
September 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 $102 in conjunction with the commencement of
partner distributions and the increase in partners' capital from the nine-month
period ended September 30, 1996 to the comparable 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 24%, or $53, from
the nine-month period ended September 30, 1996 to the comparable period in 1997,
primarily due to the increase in the container fleet.
Other expenses decreased $1,221 from the nine-month period ended September 30,
1996 to the equivalent period in 1997, representing a decrease of $1,184 in
interest expense, net, and an increase of $37 in gain on sale of Equipment.
Interest expense declined primarily due to the decline in borrowings from the
nine-month period ended September 30, 1996, to the equivalent period in 1997.
A comparative analysis of the results of operations for the three months ended
September 30, 1997 and 1996 indicates 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
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, 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: November 13, 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, November 13, 1997
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
- --------------------------------------------- President (Principal Executive November 13, 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: November 13, 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> <C>
/s/John R. Rhodes Executive Vice President, November 13, 1997
- ------------------------------------------- (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/James E. Hoelter President (Principal Executive November 13, 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 Incoem Fund VI, LP
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 10
<SECURITIES> 0
<RECEIVABLES> 1,466
<ALLOWANCES> 79
<INVENTORY> 0
<CURRENT-ASSETS> 13
<PP&E> 33,367
<DEPRECIATION> 3,400
<TOTAL-ASSETS> 31,377
<CURRENT-LIABILITIES> 604
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,773
<TOTAL-LIABILITY-AND-EQUITY> 31,377
<SALES> 0
<TOTAL-REVENUES> 4,189
<CGS> 0
<TOTAL-COSTS> 3,065
<OTHER-EXPENSES> 36
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,088
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,088
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
