TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
May 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 March 31, 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 March 31, 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 March 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Item 1. Financial Statements
<S> <C>
Balance Sheets - March 31, 1997 (unaudited) and December 31, 1996................................ 3
Statements of Operations for the three months
ended March 31, 1997 and 1996 (unaudited)........................................................ 4
Statements of Partners' Capital (Deficit) for the three months
ended March 31, 1997 and 1996 (unaudited)........................................................ 5
Statements of Cash Flows for the three months
ended March 31, 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
March 31, 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 $2,429 (1996: $1,988) $ 27,045 27,414
Cash 1,715 1,051
Cash collateral deposit (note 5) - 991
Accounts receivable, net of allowance
for doubtful accounts of $44 (1996: $38) 1,892 1,033
Prepaid expenses 30 39
---------------- ---------------
$ 30,682 30,528
================ ===============
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable $ 140 111
Accrued liabilities 736 68
Accrued damage protection plan costs (note 2) 82 77
Due to affiliates, net (note 3) 2 37
Equipment purchases payable 34 24
Note payable to bank (note 5) - 8,780
---------------- ---------------
Total liabilities 994 9,097
---------------- ---------------
Partners' capital (deficit):
General partners (541) (499)
Limited partners 30,229 21,930
---------------- ---------------
Total partners' capital 29,688 21,431
---------------- ---------------
Commitments (note 7) $ 30,682 30,528
================ ===============
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California limited partnership)
Statements of Operations
For the three months ended March 31, 1997 and 1996
(Dollar amounts in thousands except for unit and per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
----------------- ------------------
<S> <C> <C>
Rental Income $ 1,299 749
----------------- ------------------
Costs and expenses:
Direct container expenses 250 89
Bad debt expense 6 1
Depreciation 444 357
Professional fees 10 21
Management fees to affiliates (note 3) 124 52
General administrative costs to affiliates (note 3) 91 75
Other general and administrative costs 13 7
----------------- ------------------
938 602
----------------- ------------------
Income from operations 361 147
----------------- ------------------
Other income (expense):
Interest expense, net (94) (451)
Gain on sale of equipment 30 -
----------------- ------------------
(64) (451)
----------------- ------------------
Net earnings (loss) $ 297 (304)
================= ==================
Allocation of net earnings (loss) (note 3):
General Partners $ 28 (304)
Limited Partners 269 -
----------------- ------------------
$ 297 (304)
================= ==================
Limited partners' per unit share of
net earnings $ 0.17 -
================= ==================
Limited partners' per unit share
of distributions $ 0.41 -
================= ==================
Weighted average number of limited
partnership units outstanding 1,548,842 5
================= ==================
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California limited partnership)
Statements of Partners' Capital (Deficit)
For the three months ended March 31, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Partners' Capital (Deficit)
-------------------------------------------------------
General Limited Total
----------- --------------- --------------
<S> <C> <C> <C>
Balances at January 1, 1996 $ (399) - (399)
Net loss (304) - (304)
----------- --------------- --------------
Balances at March 31, 1996 $ (703) - (703)
=========== =============== ==============
Balances at January 1, 1997 $ (499) 21,930 21,431
Proceeds from sale of limited partnership units - 9,520 9,520
Syndication and offering costs - (857) (857)
Distributions (70) (633) (703)
Net earnings 28 269 297
----------- --------------- --------------
Balances at March 31, 1997 $ (541) 30,229 29,688
=========== =============== ==============
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California limited partnership)
Statements of Cash Flows
For the three months ended March 31, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 297 (304)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 444 357
Increase in allowance for doubtful accounts 6 6
Gain on sale of equipment (30) -
Changes in assets and liabilities:
Increase in accounts receivable (282) (60)
Decrease in prepaid expenses 9 6
Increase (decrease) in accounts payable and
accrued liabilities 678 (59)
Increase (decrease) in accrued damage
protection plan costs 5 (12)
(Decrease) increase in due to affiliates, net (43) 1,622
-------------- --------------
Net cash provided by operating activities 1,084 1,556
-------------- --------------
Cash flows from investing activities:
Proceeds from sale of equipment 77 28
Equipment purchases (114) (3,092)
Cash collateral deposit 985 (422)
-------------- --------------
Net cash provided by (used in) investing
activities 948 (3,486)
-------------- --------------
Cash flows from financing activities:
Proceeds from sale of limited partnership units 8,937 -
Distributions to partners (674) -
Syndication and offering costs (857) -
(Repayments) borrowings under revolving credit line (8,780) 1,488
Borrowings from affiliates - 436
Cash collateral deposit 6 -
-------------- --------------
Net cash (used in) provided by financing
activities (1,368) 1,924
-------------- --------------
Net increase (decrease) in cash 664 (6)
Cash at beginning of period 1,051 77
-------------- --------------
Cash at end of period $ 1,715 71
============== ==============
Interest paid during the period $ 101 465
============== ==============
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California limited partnership)
Statements of Cash Flows--Continued
For the three months ended March 31, 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 and
distributions to partners which had not been paid or received by the Partnership
as of March 31, 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 three-month period
ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31 Dec. 31
1997 1996 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates................................................$ - 2 98 109
Equipment purchases payable...................................... 34 24 1,017 1,935
Proceeds from sale of limited partnership units included in:
Accounts receivable.............................................. 720 137 - -
Proceeds from sale of Equipment included in:
Due from affiliates.............................................. 1 1 14 28
Distributions to partners included in:
Due to affiliates................................................ 26 16 1 1
Accounts payable and accrued liabilities......................... 41 22 - -
</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
three-month period ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Equipment purchases recorded......................................................... $ 122 2,163
Equipment purchases paid............................................................. 114 3,092
Proceeds from sale of limited partnership units recorded............................. 9,520 -
Proceeds from sale of limited partnership units received............................. 8,937 -
Proceeds from sale of Equipment recorded............................................. 77 14
Proceeds from sale of Equipment received............................................. 77 28
Distributions to partners declared................................................... 703 -
Distributions to partners paid....................................................... 674 -
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California limited partnership)
Notes to Financial Statements
March 31, 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 March 31, 1997 and December 31, 1996, and the results
of its operations, changes in partners' capital (deficit), and cash
flows for the three-month periods ended March 31, 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.
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 March 31,
1997 and December 31, 1996, this reserve was equal to $82 and $77,
respectively.
Note 3. Acquisition of Equipment
During the three-month periods ended March 31, 1997 and 1996, the
Partnership purchased Equipment with a cost of $122 and $2,163,
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, is 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 $33 of incentive management
fees during the three-month period ended March 31, 1997. There were no
incentive management fees paid to the General Partners for the
three-month period ended March 31, 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 netted in the
amount due to affiliates at March 31, 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 $91 and $52 for the three-month
periods ended March 31, 1997 and 1996. 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. During the three-month period ended
March 31, 1997 and 1996 costs allocated to the Partnership for salaries
were $46 and $38, respectively and other general and administrative costs
were $45 and $37, 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 to the Partnership were $80 and $63 for
the three-month periods from March 31, 1997 and 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
$11 and $12 of these indirect costs to the Partnership during the
three-month periods ended March 31, 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 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 funds, all other organization,
offering and joint sales costs incurred by the General Partners or TSC.
As of March 31, 1997 and December 31, 1996, due to affiliates, net, are
comprised of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Due from affiliates:
Due from TSC....................................... $ 7 158
Due from TEM....................................... 31 -
----- ----
$ 38 158
===== ====
Due to affiliates:
Due to TEM......................................... $ - 172
Due to TL.......................................... 26 16
Due to TCC......................................... 14 -
Due to TSC......................................... - 7
----- ----
$ 40 195
===== ====
</TABLE>
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 were 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 three-month period ended March
31, 1997. During the three-month period ended March 31, 1996, the
Partnership incurred $42 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 March 31, 1997:
Year ended March 31:
1998.................................................. $ 741
1999.................................................. 39
2000.................................................. 10
---
Total minimum future rentals receivable............... $ 790
===
Note 6. 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. 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 60% of the net book value of Equipment plus the amount of the cash
collateral. At March 31, 1997, there were no borrowings outstanding.
Note 7. Commitments
At March 31, 1997, the Partnership has committed to purchase 150 new
containers at an approximate total purchase price of $318. 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 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 three-month periods ended March
31, 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 had received offering proceeds totaling $34,654
as of March 31, 1997.
The Managing General Partner decided to terminate the Partnership's Offering
effective April 30, 1997. The primary reason for this decision is the current
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 believes that some additional investment in containers
is warranted. Therefore, the Partnership intends to invest any available
offering proceeds in containers.
The Partnership has a short-term revolving credit facility (the Facility) with
an available limit of $25,000, which expires June 30, 1997, and is available for
Equipment purchases. 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
60% of the net book value of Equipment plus the amount of the cash collateral.
During the three months ended March 31, 1997, the Partnership paid down $8,780,
the entire outstanding balance on the Facility, and at March 31, 1997, had
$25,000 available under this Facility to finance Equipment purchases.
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 March 31, 1997, the Partnership's cash of $1,715 was
invested in money market accounts.
During the year ended December 31, 1996, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1996
through February 1997 in the amount of $633. These distributions represent a
return of 10.00% of original capital (measured on an annualized basis) on each
unit. On a GAAP basis $364 of these distributions was a return of capital. On a
cash basis all of these distributions were from operations. Beginning with the
cash distribution to limited partners for the month of April 1997, payable May,
1997, the Partnership will make distributions on an annualized rate of 9% on
each Unit. This reduction in the Partnership's distribution rate is a result of
the decline in market conditions which are discussed more fully below under
"Results of Operations".
At March 31 1997, the Partnership had committed to purchase 150 new containers
at an approximate total purchase price of $318. 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 retain the Equipment for its own
account.
For the three months ended March 31, 1997 and 1996, the Partnership had net cash
provided by operating activities of $1,084 and $1,556, respectively. The
decrease was primarily attributable to a decrease in due to affiliates, net and
an increase in accounts receivable from operations, offset in part by increases
in net income 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 increases
in accounts receivable from operations, net earnings and accounts payable and
accrued liabilities are primarily attributable to the increase in the average
fleet size in 1997 as compared to the same period in 1996.
Net cash provided by investing activities was $948 for the three months ended
March 31, 1997 as compared to net cash used in investing activities of $3,486
for the same period in 1996. Net cash provided by investing activities for the
three months ended March 31, 1997, included the return of restricted funds,
previously held as collateral for the Facility. 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 financing activities was $1,374 for the three month period
ended March 31, 1997 as compared to net cash provided by financing activities of
$1,924 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 three months ended March 31, 1997 and 1996 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 earnings of $297 and a net loss of $304 during the
three months ended March 31, 1997 and 1996, respectively. These financial
results include non-cash depreciation expenses of $444 and $357 for the
respective periods.
The Partnership's income (loss) 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 three months ended March 31, 1997 and
1996. 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 March 31, 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
Rental income and direct operating expenses are also affected by the lease
utilization percentages for the Equipment which were 82% and 69% on average
during the three months ended March 31, 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
three-month period ended March 31, 1997 and 1996.
The Partnership's income from operations for the three-month period ended March
31, 1997 was $361 on gross rental income of $1,299, compared to $147 on gross
rental income of $749 for the same period in 1996. The largest component of
total rental income is income from container rentals, which increased by $485 or
68%, 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 19%, average daily rental rates increased 10% and average
inventory increased 31%. 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 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. For the near
term, the General Partners do not foresee any changes in current market
conditions and caution that both utilization and lease rates could continue to
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 less
desirable locations (location income), income for handling and returning
containers and income from charges to lessees for a damage protection plan
(DPP). For the three-month period ended March 31, 1997, the total of these other
revenue items was $102, an increase of $65 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 $161 from
the three-month period ended March 31, 1996, to the same period in 1997. The
primary components of this increase were increases in storage, handling, DPP and
repositioning expenses. Bad debt expense increased $5 between periods and
depreciation expense increased by $87, or 24%, from the three-month period ended
March 31, 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 by $72 from the three months ended March 31, 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 $33, or 100% in line with the commencement of partner distributions
and the increase in partners' capital from the three-month period ended March
31, 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 21%, or $16, from
the three-month period ended March 31, 1996 to the same period in 1997,
primarily due to the increase in the average container fleet.
Other expense decreased $387 from the three-month period ended March 31, 1996 to
the same period in 1997, representing an decrease of $357 in interest expense
and an increase of $30 in gain on sale of equipment. Interest expense declined
primarily due to the decline in borrowings from the three-month period ended
March 31, 1996, to the equivalent period in 1997.
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 March 31, 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: May 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, May 14, 1997
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
____________________________ President (Principal Executive May 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: May 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, May 14, 1997
- ------------------------- (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/James E. Hoelter President (Principal Executive May 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 1,715
<SECURITIES> 0
<RECEIVABLES> 1,936
<ALLOWANCES> 44
<INVENTORY> 0
<CURRENT-ASSETS> 30
<PP&E> 29,474
<DEPRECIATION> 2,429
<TOTAL-ASSETS> 30,682
<CURRENT-LIABILITIES> 994
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,688
<TOTAL-LIABILITY-AND-EQUITY> 30,682
<SALES> 0
<TOTAL-REVENUES> 1,299
<CGS> 0
<TOTAL-COSTS> 938
<OTHER-EXPENSES> 64
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 297
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 297
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
