TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
May 14, 1998
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, 1998.
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, 1998
Commission file number 0-22337
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, 1998
Table of Contents
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Page
Item 1. Financial Statements
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Balance Sheets - March 31, 1998 (unaudited) and December 31, 1997................................ 3
Statements of Earnings for the three months
ended March 31, 1998 and 1997 (unaudited)........................................................ 4
Statements of Partners' Capital for the three months
ended March 31, 1998 and 1997 (unaudited)........................................................ 5
Statements of Cash Flows for the three months
ended March 31, 1998 and 1997 (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, 1998 and December 31, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $4,393 (1997: $3,898) $ 28,912 $ 29,451
Cash 282 111
Accounts receivable, net of allowance
for doubtful accounts of $150 (1997: $97) 1,134 1,399
Prepaid expenses 58 56
---------------- ----------------
$ 30,386 $ 31,017
================ ================
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 149 $ 116
Accrued liabilities 80 95
Accrued recovery costs (note 2) 39 34
Accrued damage protection plan costs (note 3) 84 79
Due to affiliates, net (note 5) 25 223
Deferred quarterly distributions 56 58
---------------- ----------------
Total liabilities 433 605
---------------- ----------------
Partners' capital:
General partners (730) (682)
Limited partners 30,683 31,094
---------------- ----------------
Total partners' capital 29,953 30,412
---------------- ----------------
$ 30,386 $ 31,017
================ ================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Earnings
For the three months ended March 31, 1998 and 1997
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
<S> <C> <C>
Rental income $ 1,625 $ 1,299
---------------- ----------------
Costs and expenses:
Direct container expenses 348 250
Bad debt expense 53 6
Depreciation 500 444
Professional fees 9 10
Management fees to affiliates (note 5) 152 124
General administrative costs to affiliates (note 5) 102 91
Other general and administrative costs 13 13
---------------- ----------------
1,177 938
---------------- ----------------
Income from operations 448 361
---------------- ----------------
Other income (expense):
Interest income (expense), net 3 (94)
Gain on sale of containers 14 30
---------------- ----------------
17 (64)
---------------- ----------------
Net earnings $ 465 $ 297
================ ================
Allocation of net earnings (note 5):
General partners $ 44 $ 28
Limited partners 421 269
---------------- ----------------
$ 465 $ 297
================ ================
Limited partners' per unit share of
net earnings $ 0.23 $ 0.17
================ ================
Limited partners' per unit share
of distributions $ 0.45 $ 0.41
================ ================
Weighted average number of limited
partnership units outstanding 1,848,397 1,548,842
================ ================
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 three months ended March 31, 1998 and 1997
(Amounts in thousands)
(unaudited)
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<CAPTION>
Partners' Capital
---------------------------------------------------------
General Limited Total
----------- --------------- --------------
<S> <C> <C> <C>
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
=========== =============== ==============
Balances at January 1, 1998 $ (682) $ 31,094 $ 30,412
Distributions (92) (832) (924)
Net earnings 44 421 465
----------- --------------- --------------
Balances at March 31, 1998 $ (730) $ 30,683 $ 29,953
=========== =============== ==============
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 three months ended March 31, 1998 and 1997
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 465 $ 297
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 500 444
Increase in allowance for doubtful accounts 53 6
Gain on sale of containers (14) (30)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 212 (282)
(Increase) decrease in prepaid expenses (2) 9
Increase in accounts payable and accrued liabilities 18 6
Increase in accrued recovery costs 5 3
Increase in accrued damage protection plan costs 5 5
Decrease in due to affiliates, net (100) (43)
---------------- ---------------
Net cash provided by operating activities 1,142 415
---------------- ---------------
Cash flows from investing activities:
Proceeds from sale of containers 28 77
Container purchases (4) (114)
Cash collateral deposit - 985
---------------- ---------------
Net cash provided by investing activities 24 948
---------------- ---------------
Cash flows from financing activities:
Proceeds from sale of limited partnership units - 9,606
Distributions to partners (966) (674)
Syndication and offering costs - (857)
Repayments under revolving credit line - (8,780)
Repayments of borrowings from affiliates (29) -
Cash collateral deposit - 6
---------------- ---------------
Net cash used in financing activities (995) (699)
---------------- ---------------
Net increase in cash 171 664
Cash at beginning of period 111 1,051
---------------- ---------------
Cash at end of period $ 282 $ 1,715
================ ===============
Interest paid during the period $ 1 $ 113
================ ===============
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 three months ended March 31, 1998 and 1997
(Amounts in thousands)
(unaudited)
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of container purchases, proceeds from
sale of limited partnership units, proceeds from sale of containers and
distributions to partners which had not been paid or received by the Partnership
as of March 31, 1998 and 1997, and December 31, 1997 and 1996, 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
periods ended March 31, 1998 and 1997.
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Mar. 31 Dec. 31 Mar. 31 Dec. 31
1998 1997 1997 1996
------- ------- ------- -------
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Container purchases included in:
Due to affiliates................................................. $ - $ 1 $ - $ 2
Container purchases payable....................................... - - 34 24
Proceeds from sale of limited partnership units included in:
Accounts receivable............................................... - - 51 137
Proceeds from sale of containers included in:
Due from affiliates............................................... 41 13 1 1
Distributions to partners included in:
Due to affiliates................................................. 51 91 26 16
Deferred quarterly distributions.................................. 56 58 41 22
The following table summarizes the amounts of container purchases, sale of
limited partnership units, proceeds from sale of containers, 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, 1998 and 1997.
1998 1997
---- ----
Container purchases recorded................................................ $ 3 $ 122
Container purchases paid.................................................... 4 114
Proceeds from sale of limited partnership units recorded.................... - 9,520
Proceeds from sale of limited partnership units received.................... - 9,606
Proceeds from sale of containers recorded................................... 56 77
Proceeds from sale of containers received................................... 28 77
Distributions to partners declared.......................................... 924 703
Distributions to partners paid.............................................. 966 674
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(A California Limited Partnership)
Notes to Financial Statements
March 31, 1998
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
Note 1. General
Textainer Equipment Income Fund VI, L.P. (the Partnership), a California
Limited Partnership with a maximum life of 21 years, was founded in
1995. The Partnership owns and leases a fleet of intermodal marine cargo
containers which are leased 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, 1998 and December 31, 1997, and the results
of its operations, changes in partners' capital, and cash flows for the
three-month periods ended March 31, 1998 and 1997, 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, 1997 in the Annual Report filed on Form 10K.
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 not affecting net earnings have been made to
prior year amounts to conform with 1998 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 March 31, 1998 and December 31,
1997, the amounts accrued were $39 and $34, respectively.
Note 3. Damage Protection Plan
The Partnership offers a Damage Protection Plan (DPP) to lessees of its
containers. Under the terms of DPP, the Partnership earns additional
revenues on a daily basis and, in return, 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. DPP expenses are included
in direct container expenses on the Statements of Earnings and the
related reserve at March 31, 1998 and December 31, 1997 was $84 and $79,
respectively.
Note 4. Acquisition of Containers
During the three-month periods ended March 31, 1998 and 1997, the
Partnership purchased containers with a cost of $3 and $122,
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 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 containers outside the United
States on behalf of the Partnership. TCC, TEM, TL and TAS are
subsidiaries of Textainer Group Holdings Limited (TGH). 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 $38 and $33
of incentive management fees during the three-month periods ended March
31, 1998 and 1997, respectively. No equipment liquidation fees were
incurred in either period.
The container fleet 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 containers. 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, net at March 31, 1998 and December 31, 1997.
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 $114 and $91 for the three-month
periods ended March 31, 1998 and 1997. The container fleet 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 incurred and paid by TCC and TEM. Total general and
administrative costs allocated to the Partnership were $102 and $91 for
the three-month periods ended March 31, 1998 and 1997, respectively, of
which $49 and $46 were for salaries.
TEM allocates these general and administrative costs based on the ratio
of the Partnership's interest in the managed containers to the total
container fleet managed by TEM during the period. TCC allocates these
costs based on the ratio of the Partnership's containers to the total
container fleet of all limited partnerships managed by TCC. General and
administrative costs allocated to the Partnership by TEM were $93 and
$80 for the three-month periods ended March 31, 1998 and 1997,
respectively. TCC allocated $9 and $11 of general and administrative
costs to the Partnership during the same periods.
The General Partners or TAS may acquire containers in their own name and
hold title on a temporary basis for the purpose of facilitating the
acquisition of such containers for the Partnership. The containers 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.
As of March 31, 1998 and December 31, 1997, due to affiliates, net, was
comprised of:
1998 1997
---- ----
Due from affiliates:
Due from TEM....................................... $ 173 $ -
---- -----
Due to affiliates:
Due to TEM......................................... - 82
Due to TL.......................................... 153 119
Due to TCC......................................... 45 22
---- -----
198 223
---- -----
Due to affiliates, net $ 25 $ 223
==== =====
Included in the amount due to TL at December 31, 1997 was $29 in loans
used to facilitate the purchase of containers. This amount was repaid in
full on March 31, 1998. There were no borrowings from affiliates
outstanding at March 31, 1998. All other 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 amounts due to General Partners which were outstanding for
more than one month, to the extent such balances relate to loans for
container purchases. Interest is charged at a rate not greater than the
General Partners' or affiliates' own cost of funds. The Partnership
incurred $1 of interest expense for the three-month period ended March
31, 1998. There was no interest expense incurred on amounts due to
General Partners for the three-month period ended March 31, 1997.
Note 6. Rentals under Operating Leases
The following are the future minimum rent receivables under cancelable
long-term operating leases at March 31, 1998. Although the leases are
generally cancelable at the end of each twelve-month period with a
penalty, the following schedule assumes that the leases will not be
terminated.
Year ended March 31:
1999.................................................. $ 711
2000.................................................. 45
2001.................................................. 14
2002.................................................. 2
2003.................................................. 1
---
Total minimum future rentals receivable............... $ 773
===
Note 7. Revolving Credit Line
The Partnership had a short-term revolving credit facility (the
Facility) with an available limit of $25,000, which was paid in full on
March 30, 1997 and expired June 30, 1997, which was used for container
purchases. 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.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(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, 1998 and 1997. Please refer to the Financial Statements and Notes thereto in
connection with the following discussion.
Liquidity and Capital Resources
From May 10, 1996 until April 30, 1997 the Partnership offered limited
partnership interests to the public. The Partnership received its minimum
subscription amount of $1,100 on June 17, 1996 and raised a total of $36,968
from the offering.
From time to time, the Partnership may redeem Units from limited partners for a
specified redemption value which is set by formula. Up to 2% of the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded, at the Managing General Partner's discretion. All redemptions
are subject to the Managing General Partner's good faith determination that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a corporation, (ii) impair the capital or operations of the Partnership, or
(iii) impair the ability of the Partnership to pay distributions in accordance
with its distribution policy. During the three-month period ended March 31, 1998
the Partnership did not redeem any units.
The Partnership invests working capital and cash flow from operations prior to
its distribution to the partners in short-term, liquid investments. The
Partnership's cash is affected by cash provided by or used in operating,
investing and financing activities. These activities are discussed in detail
below.
During the three-month period ended March 31, 1998, the Partnership declared
cash distributions to limited partners pertaining to the period from December
1997 through February 1998 in the amount of $832. These distributions represent
a return of 9% on original capital (measured on an annualized basis) on each
unit. On a cash basis all of these distributions were from operations. On a GAAP
basis $411 of these distributions was a return of capital the balance was from
net earnings.
Net cash provided by operating activities for the three-month periods ending
March 31, 1998 and 1997, was $1,142 and $415, respectively. The increase of
$727, or 175%, is primarily attributable to an increase in net earnings and a
decrease in accounts receivable of $168 and $212, respectively. Net earnings
increased 57% in the three-month period ending March 31, 1998 compared to the
comparable period in 1997, primarily due to the increase in total rental
revenue. The increase in rental revenue between periods was primarily due to
increases in average fleet size and utilization and a decrease in lease
incentives. These items are discussed more fully in "Results of Operations".
Accounts receivable decreased primarily due to a decrease in the average
collection period of accounts receivable.
For the three-month periods ending March 31, 1998 and 1997, cash provided by
investing activities (the purchase and sale of containers) was $24 and $948,
respectively. The decrease in net cash provided by investing activities of $924
is primarily due to the return of restricted funds of $985 in 1997, previously
held as collateral for the Partnership's credit facility. Recent container
purchases (reinvestment) have been lower than anticipated due to the adverse
effect of market conditions on cash available for reinvestment. Market
conditions are discussed more fully below under "Results of Operations".
At March 31, 1998, the Partnership had no commitments to purchase containers.
Net cash used in financing activities for the three-month periods ending March
31, 1998 and 1997, was $995 and $699, respectively. The increase was primarily
due to the increase in distributions to partners resulting from the increase in
partners capital and the decrease in proceeds from sale of limited partnership
units resulting from the close of the offering on April 30, 1997. The increase
was offset by a decrease in repayments under the revolving credit facility which
was paid in full March 30, 1997 and expired June 30, 1997.
During 1997, the Partnership borrowed $29 from a general partner to purchase
containers. It is the policy of the Partnership and the General Partners to
charge interest on borrowings from affiliates arising from the Partnership's
acquisition of containers which are outstanding for more than one month.
Interest is charged to the Partnership at a rate not greater than the General
Partners' own cost of funds. The Partnership paid $1 of interest expense during
the three-month period ended March 31, 1998. The interest rate in effect at
December 31, 1997 was 8.5%. The Partnership repaid the loan in full on March 31,
1998 with cash provided by operations.
Results of Operations
The Partnership's income from operations, which consists primarily of rental
income, container depreciation, direct container expenses, management fees, and
reimbursement of administrative expenses was directly related to the size of the
container fleet during each of the three-month periods ended March 31, 1998 and
1997, as well as certain other factors as discussed below. The following is a
summary of the size of the container fleet (in units) available for lease during
those periods:
1998 1997
---- ----
Opening container fleet............. 10,728 9,099
Closing container fleet............. 10,712 9,083
Average container fleet............. 10,720 9,091
The growth in the average container fleet of 18% between the three-month periods
ended March 31, 1998 and 1997, was due to the buildup of the Partnership's
portfolio as the initial gross proceeds from the offering were invested.
Rental income and direct container expenses are also affected by the utilization
of the container fleet, which averaged 85% and 82% during the three-month
periods ended March 31, 1998 and 1997, respectively. In addition, rental income
is affected by daily rental rates and leasing incentives.
The following is a comparative analysis of the results of operation for the
three-month periods ended March 31, 1998 and 1997.
The Partnership's income from operations for the three-month periods ending
March 31, 1998 and 1997 was $448 and $361, respectively, on rental income of
$1,625 and $1,299, respectively. The increase in rental income of $326, or 25%,
from the three-month period ended 1997 to the comparable period in 1998 was
attributable to the increase in income from container rentals and other rental
income. Income from container rentals, the major component of total revenue,
increased $191, or 16%, from the three-month period ending March 31, 1997 to the
same period in 1998. This increase was primarily due to the increase in the
average container fleet available for lease of 18%, the increase in average
utilization of 4%, and the decrease in average lease incentives of 29%, offset
by the decrease in average rental rates of 5%. The increase in other rental
income is discussed below.
Container utilization and rental rates declined during 1996 and 1997 for the
fleet managed by Textainer Equipment Management Limited (TEM) primarily due to
decreased demand for leased containers and increased competition. The decrease
in demand for leased containers resulted from changes in the business of
shipping line customers consisting primarily of (i) over-capacity resulting from
the 1995 and 1996 additions of new, larger ships to the existing container ship
fleet at a rate in excess of the growth rate in containerized cargo trade; (ii)
shipping line alliances and other operational consolidations that have allowed
shipping lines to operate with fewer containers; and (iii) shipping lines
reducing their ratio of leased versus owned containers by purchasing containers.
This decreased demand, along with the entry of new leasing company competitors
offering low container rental rates to shipping lines, resulted in downward
pressure on rental rates, and also caused leasing companies to offer higher
leasing incentives and other discounts to shipping lines. Rental rates were also
adversely affected by a drop in the purchase price of new containers which
resulted in additional downward pressure on rental rates.
Utilization increased during the second and third quarters of 1997 and began
declining again during the fourth quarter of 1997 and into the first quarter of
1998. Despite these declines, utilization for the first quarter of 1998 was
greater than the average first quarter 1997 utilization and greater than the
average utilization for the year ended December 31, 1997. Rental rates
stabilized during the later half of the first quarter of 1998 and, overall, were
comparable to fourth quarter 1997 rental rates. Leasing incentives reached a
high during mid 1997, began declining during the second half of 1997, and have
stabilized during the first quarter of 1998. The improvement in utilization and
the stabilization in rental rates and leasing incentives are primarily due to
increased demand in Asia. The weakening of many Asian currencies resulted in a
significant increase in exports which has created a strong demand for containers
in Asia. The General Partners believe that market conditions have stabilized and
may be slowly improving; however, for the near term, the General Partners do not
foresee any material changes in existing market conditions and caution that both
utilization and lease rates could decline again, adversely affecting the
Partnership's operating results.
Substantially all of the Partnership's rental income was generated from the
leasing of containers under short-term operating leases.
The balance of other rental income consists of other lease-related items,
primarily income from charges to lessees for picking up containers from surplus
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 ending March 31, 1998, the total of these
other rental income items was $237, an increase of $135 from the equivalent
period in 1997. The primary component of this increase was an increase in
location income of $117. Location income increased primarily due to the
inclusion of certain credits received during 1997 and 1998 which had previously
been applied against repositioning expense and also due to an increase in the
average drop-off charge per container and a decrease in credits given to lessees
to pick up containers from certain locations.
Direct container expenses increased $98, or 39%, for the three-month period
ending March 31, 1998 compared to the equivalent period in 1997. The increase in
direct container expenses was primarily due to increases in repositioning,
handling and DPP expenses of $65, $11 and $9, respectively. Repositioning
expense increased primarily due to the removal of certain credits from
repositioning costs to other rental income as discussed above. Handling expense
increased due to increased container movement between the two periods and the
increase in fleet size. DPP expense increased due to a greater number of
containers requiring repair, offset by a lower average repair cost per
container.
The bad debt expense increased $47 from the three month period ended March 31,
1997 to the comparable period in 1998, primarily due to the increase in rental
income.
Depreciation expense increased $56, or 13%, between the three-month periods
ending March 31, 1997 and 1998 due to the increase in average fleet size.
Management fees to affiliates increased $28, or 23%, from the three-month period
ended March 31, 1997 to the comparable period in 1998. This increase was due to
an increase in equipment management fees of $23, or 25%, and an increase in
incentive management fees of $5, or 15%. Subject to certain reductions,
equipment management fees are based on gross revenue and were approximately 7%
of gross revenue for both periods. Incentive management fees which are based
primarily on the Partnership's limited and general partner distributions and
partners capital increased due to the increase in total partners capital and was
offset by the decrease in the limited partners distribution rate from 10% to 9%
in April 1997.
General and administrative costs to affiliates increased $11, or 12%, from the
three-month period ending March 31, 1997 to the comparable period ending in
1998, primarily due to an increase in overhead costs allocated by TEM.
Other income provided $17 of additional income for the three-month period ending
March 31, 1998, an increase of $81 compared to the equivalent period in 1997.
The increase was primarily due to a decrease in interest expense net of $97,
offset by the decrease in gain on sale of equipment of $16. The decrease in
interest expense, net was primarily due to the Partnership paying the credit
facility in full on March 30, 1997.
For the three-month periods ending March 31, 1997 and 1998, net earnings per
limited partnership unit increased from $0.17 to $0.23, respectively, reflecting
the increase in net earnings allocated to limited partners from $269 to $421 for
the same periods.
Many computer systems may experience difficulty processing dates beyond the year
1999 and, as such, some computer hardware and software will need to be modified
prior to the year 2000 to remain functional. Certain of the Partnership's and
General Partner's core internal systems that have recently been implemented are
year 2000 compliant. The remaining core internal systems are scheduled to be
revised to be year 2000 compliant by the end of 1998. Based on its initial
evaluation, the Partnership and the General Partners do not believe that the
cost of remedial actions relating to these systems will have a material adverse
effect on the Partnership's results of operations and financial condition.
Additionally, the Partnership and the General Partners are also completing a
preliminary assessment of year 2000 issues not related to its core systems,
including issues surrounding systems that interface with external third parties.
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 containers. The Partnership's business risk in its foreign
operations lies with the creditworthiness of the lessees, and the Partnership's
ability to keep the containers under lease, rather than the geographic location
of the containers or the domicile of the lessees. The containers are generally
operated on the international high seas rather than on domestic waterways. The
containers are subject to the risk of war or other political, economic or social
occurrence where the containers are used, which may result in the loss of
containers, 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, 1998 which would result in such a risk
materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning containers after they come off-lease, the risk of an
uninsured loss, increases in maintenance expenses or other costs of operating
the containers, 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 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, 1998
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, 1998
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
____________________________ President (Principal Executive May 14, 1998
Philip K. Brewer Officer)
</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, 1998
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, 1998
____________________________ (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/ Philip K. Brewer President (Principal Executive May 14, 1998
____________________________ Officer)
Philip K. Brewer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Textainer Equipment Income Fund VI, L.P. 10Q
</LEGEND>
<CIK> 0001003638
<NAME> Textainer Equipment Income Fund VI, L.P.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 282
<SECURITIES> 0
<RECEIVABLES> 1,284
<ALLOWANCES> 150
<INVENTORY> 0
<CURRENT-ASSETS> 58
<PP&E> 33,305
<DEPRECIATION> 4,393
<TOTAL-ASSETS> 30,386
<CURRENT-LIABILITIES> 433
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,953
<TOTAL-LIABILITY-AND-EQUITY> 30,386
<SALES> 0
<TOTAL-REVENUES> 1,625
<CGS> 0
<TOTAL-COSTS> 1,177
<OTHER-EXPENSES> (17)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 465
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 465
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
