TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
August 13, 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 10Q for the Second
Quarter ended June 30, 1998.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Sincerely,
Nadine Forsman
Controller
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number 0-22337
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
A California Limited Partnership
(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, CA 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 [ ]
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TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Quarterly Report on Form 10Q for the
Quarter Ended June 30, 1998
Table of Contents
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Page
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Item 1. Financial Statements
Balance Sheets - June 30, 1998 (unaudited) and December 31, 1997.................................. 3
Statements of Earnings for the three and six months
ended June 30, 1998 and 1997 (unaudited).......................................................... 4
Statements of Partners' Capital for the six months
ended June 30, 1998 and 1997 (unaudited).......................................................... 5
Statements of Cash Flows for the six months
ended June 30, 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
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TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Balance Sheets
June 30, 1998 and December 31, 1997
(Amounts in thousands)
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1998 1997
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(unaudited)
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Assets
Container rental equipment, net of accumulated
depreciation of $4,887 (1997: $3,898) $ 28,387 $ 29,451
Cash 140 111
Accounts receivable, net of allowance
for doubtful accounts of $90 (1997: $97) 1,403 1,399
Prepaid expenses 40 56
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$ 29,970 $ 31,017
============= =============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 95 $ 116
Accrued liabilities 89 95
Accrued recovery costs (note 2) 46 34
Accrued damage protection plan costs (note 3) 82 79
Due to affiliates, net (note 5) 14 223
Deferred quarterly distributions 55 58
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Total liabilities 381 605
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Partners' capital:
General partners (768) (682)
Limited partners 30,357 31,094
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Total partners' capital 29,589 30,412
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$ 29,970 $ 31,017
============= =============
See accompanying notes to financial statements
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TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Earnings
For the three and six months ended June 30, 1998 and 1997
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Three months Three months Six months Six months
Ended Ended Ended Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
-------------- ------------- ------------- -------------
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Rental income $ 1,540 $ 1,309 $ 3,165 $ 2,608
-------------- ------------- ------------- -------------
Costs and expenses:
Direct container expenses 273 289 621 539
Bad debt (benefit) expense (60) 38 (7) 44
Depreciation 499 467 999 911
Professional fees 12 10 21 20
Management fees to affiliates (note 5) 146 129 298 253
General administrative costs to affiliates (note 5) 91 94 193 185
Other general and administrative costs 23 16 36 29
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984 1,043 2,161 1,981
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Income from operations 556 266 1,004 627
-------------- ------------- ------------- -------------
Other income (expense):
Interest income (expense), net 5 (16) 8 (110)
(Loss) gain on sale of containers (2) 20 12 50
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3 4 20 (60)
-------------- ------------- ------------- -------------
Net earnings $ 559 $ 270 $ 1,024 $ 567
============== ============= ============= =============
Allocation of net earnings (note 5):
General partners $ 53 $ 26 $ 97 $ 54
Limited partners 506 244 927 513
-------------- ------------- ------------- -------------
$ 559 $ 270 $ 1,024 $ 567
============== ============= ============= =============
Limited partners' per unit share of
net earnings $ 0.27 $ 0.13 $ 0.50 $ 0.31
============== ============= ============= =============
Limited partners' per unit share
of distributions $ 0.45 $ 0.43 $ 0.90 $ 0.87
============== ============= ============= =============
Weighted average number of limited
partnership units outstanding 1,848,397 1,848,397 1,848,397 1,653,576
============== ============= ============= =============
See accompanying notes to financial statements
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TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
For the six months ended June 30, 1998 and 1997
(Amounts in thousands)
(unaudited)
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Partners' Capital
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General Limited Total
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Balances at January 1, 1997 $ (499) $ 21,930 $ 21,431
Proceeds from sale of limited partnership units - 11,834 11,834
Syndication and offering costs - (1,065) (1,065)
Distributions (158) (1,434) (1,592)
Net earnings 54 513 567
------------- --------------- -------------
Balances at June 30, 1997 $ (603) $ 31,778 $ 31,175
============= =============== =============
Balances at January 1, 1998 $ (682) $ 31,094 $ 30,412
Distributions (183) (1,664) (1,847)
Net earnings 97 927 1,024
------------- --------------- -------------
Balances at June 30, 1998 $ (768) $ 30,357 $ 29,589
============= =============== =============
See accompanying notes to financial statements
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<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements of Cash Flows
For the six months ended June 30, 1998 and 1997
(Amounts in thousands)
(unaudited)
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1998 1997
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Cash flows from operating activities:
Net earnings $ 1,024 $ 567
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 999 911
(Decrease) increase in allowance for doubtful accounts (7) 44
Gain on sale of containers (12) (50)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 3 (288)
Decrease in prepaid expenses 16 18
(Decrease) increase in accounts payable and
accrued liabilities (27) 138
Increase in accrued recovery costs 12 7
Increase in accrued damage protection plan costs 3 7
Decrease in due to affiliates, net (102) (71)
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Net cash provided by operating activities 1,909 1,283
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Cash flows from investing activities:
Proceeds from sale of containers 66 118
Container purchases (6) (1,894)
Cash collateral deposit - 991
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Net cash provided by (used in) investing activities 60 (785)
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Cash flows from financing activities:
Proceeds from sale of limited partnership units - 11,971
Distributions to partners (1,911) (1,545)
Syndication and offering costs - (1,065)
Repayments under revolving credit line - (8,780)
Repayments of borrowings from affiliates (29) -
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Net cash (used in) provided by financing activities (1,940) 581
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Net increase in cash 29 1,079
Cash at beginning of period 111 1,051
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Cash at end of period $ 140 $ 2,130
============= =============
Interest paid during the period $ 1 $ 130
============= =============
See accompanying notes to financial statements
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TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Statements Of Cash Flows--Continued
For the six months ended June 30, 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 June 30, 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 six-month periods
ended June 30, 1998 and 1997.
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Jun. 30 Dec. 31 Jun. 30 Dec. 31
1998 1997 1997 1996
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Container purchases included in:
Due to affiliates................................................. $ - $ 1 $ 3 $ 2
Container purchases payable....................................... - - 957 24
Proceeds from sale of limited partnership units included in:
Accounts receivable............................................... - - - 137
Proceeds from sale of containers included in:
Due from affiliates............................................... 29 13 12 1
Distributions to partners included in:
Due to affiliates................................................. 30 91 30 16
Deferred quarterly distributions.................................. 55 58 55 22
The following table summarizes the amounts of container purchases, proceeds from
the sale of limited partnership units, proceeds from sale of containers and
distributions to partners recorded by the Partnership and the amounts paid or
received as shown in the Statements of Cash Flows for the six-month periods
ended June 30, 1998 and 1997.
1998 1997
---- ----
Container purchases recorded................................................ $ 5 $ 2,828
Container purchases paid.................................................... 6 1,894
Proceeds from sale of limited partnership units recorded.................... - 11,834
Proceeds from sale of limited partnership units received.................... - 11,971
Proceeds from sale of containers recorded................................... 82 129
Proceeds from sale of containers received................................... 66 118
Distributions to partners declared.......................................... 1,847 1,592
Distributions to partners paid.............................................. 1,911 1,545
See accompanying notes to financial statements
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TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
(a California Limited Partnership)
Notes To Financial Statements
For the six months ended June 30, 1998 and 1997
(Amounts in thousands except for per unit amounts)
(unaudited)
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Note 1. General
Textainer Equipment Income Fund VI, L.P. (the Partnership), a California
limited partnership with a maximum life of 20 years, was formed in 1995.
The Partnership owns and leases a fleet of intermodal marine cargo
containers which are leased to international shipping lines.
The accompanying interim comparative financial statements have not been
audited by an independent public accountant. However, all adjustments
(which were only normal and recurring adjustments) which are, in the
opinion of management, necessary to fairly present the financial position
of the Partnership as of June 30, 1998 and December 31, 1997, and the
results of its operations, changes in partners' capital and cash flows for
the three- and six-month periods ended June 30, 1998 and 1997, have been
made.
The financial information presented herein should be read in conjunction
with the audited financial statements and other accompanying notes
included in the Partnership's annual 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 June 30, 1998 and December 31, 1997, the
amounts accrued were $46 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 in the Statements of Earnings, and at June 30,
1998 and December 31, 1997, the related reserve was $82 and $79,
respectively.
Note 4. Acquisition of Containers
During the six-month periods ended June 30, 1998 and 1997, the Partnership
purchased containers with a cost of $5 and $2,828, 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, net earnings or losses and
partnership distributions are 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 $77 of incentive
management fees during the three- and six-month periods ended June 30,
1998 and $38 and $71 of incentive management fees for the comparable
periods in 1997. 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 June 30, 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. For the three- and six-month periods ended June 30,
1998, these fees totaled $108 and $221, respectively, and for the three-
and six-month periods ended June 30, 1997 these fees totaled $91 and
$182, respectively. 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. For the three- and
six-month periods ended June 30, 1998, total general and administrative
costs allocated to the Partnership were $91 and $193, of which $39 and
$81, respectively, were for salaries. Total general and administrative
costs allocated to the Partnership for the three- and six-month periods
ended June 30, 1997 were $94 and $185, of which $53 and $101,
respectively, 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 $82 and
$175 for the three- and six-month periods ended June 30, 1998 and were
$81 and $160 for the comparable periods in 1997. TCC allocated $9 and $18
of general and administrative costs to the Partnership for the three- and
six-month periods ended June 30, 1998 and $13 and $25 for the comparable
periods in 1997.
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.
At June 30, 1998 and December 31, 1997, due to affiliates, net is
comprised of:
1998 1997
---- ----
Due from affiliates:
Due from TEM................................... $ 33 $ -
---- ----
Due to affiliates:
Due to TEM..................................... - 82
Due to TCC..................................... 17 22
Due to TL...................................... 30 119
---- ----
47 223
---- ----
Due to affiliates, net $ 14 $ 223
==== ====
Included in the amounts due to TL at December 31, 1997 is $29 in loans
used to facilitate container purchases. This loan was repaid on 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
remittance of expenses and fees described above or in the accrual and
remittance of net rental revenues from TEM.
It is the policy of the Partnership and the General Partners to charge
interest on amounts due to the General Partners which are 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 on amounts due to the General Partners for
the three- and six-month periods ended June 30, 1998. There was no
interest expense incurred on amounts due to the General Partners for the
three- and six-month periods ended June 30, 1997.
Note 6. Rentals Under Operating Leases
The following are the future minimum rent receivables under cancelable
long-term operating leases at June 30, 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 ending June 30:
1999............................................. $ 521
2000............................................. 39
2001............................................. 7
2002............................................. 4
2003............................................. 3
----
Total minimum future rentals receivable.......... $ 574
====
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.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Amounts in thousands except for unit and per unit amounts)
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The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the three- and six-month periods
ended June 30, 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 redeems 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. Since inception, the Partnership has not redeemed
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 six-month period ended June 30, 1998, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1997
through May 1998, in the amount of $1,664. 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, $737 of these distributions was a return of capital and the balance was
from net earnings. Beginning with cash distributions to limited partners for the
month of July 1998, payable August 1998, the Partnership will make distributions
at an annualized rate of 8% on each unit. This reduction in the Partnership
distribution rate is a result of the current market conditions, which are
discussed in detail below.
At June 30, 1998, the Partnership had no commitments to purchase containers.
Net cash provided by operating activities for the six-month periods ending June
30, 1998 and 1997, was $1,909 and $1,283, respectively. The increase of $626, or
49%, is primarily attributable to an increase in net earnings and a decrease in
accounts receivable, offset by a decrease in accounts payable and accrued
liabilities. The increase in net earnings of $457, or 81%, resulted primarily
from an increase in rental revenue which increased due to increased fleet size
and utilization, and lower leasing incentives. These items are discussed more
fully in "Results of Operations." Accounts receivable decreased $3 in the
six-month period ended June 30, 1998 primarily due to a decrease in the average
collection period of accounts receivable and to the resolution of payment issues
with one lessee. The increase in accounts receivable of $288 in the equivalent
period in 1997 was primarily due to the increase in fleet size. The decrease in
accounts payable and accrued liabilities of $27 during the six-month period
ending June 30, 1998 compared to the increase of $138 for the same period in
1997 resulted from timing differences in the accrual and payment of expenses.
For the six-month period ending June 30, 1998, net cash provided by investing
activities (the purchase and sale of containers) was $60 compared to net cash
used in investing activities of $785 for the equivalent period in 1997. The
difference of $845 is primarily due to the Partnership having purchased more
containers during the six-month period ended June 30, 1997 than in the
comparable period in 1998 and due to the return of restricted funds of $991 in
1997, previously held as collateral for the Partnership's credit facility. The
General Partners believe that the difference in container purchases reflects
normal fluctuations in container sales and purchases. However, recent container
purchases (reinvestment) are currently lower than anticipated due to the adverse
effect of market conditions on cash available for reinvestment. Market
conditions are discussed more fully in "Results of Operations". Consistent with
its investment objectives, the Partnership intends to reinvest all or a
significant amount of proceeds from future container sales in additional
containers. However, due to the difference between sales proceeds and new
container prices, the number of additional containers purchased may not equal
the number of containers sold.
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 during the
six-month period ended June 30, 1998. The interest rate in effect at March 31,
1998 was 8.5%. The Partnership repaid the loan on March 31, 1998 with cash
provided by operations and proceeds from the sale of containers.
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 the six-month periods ended June 30, 1998 and 1997, as
well as certain other factors as discussed below. The following is a summary of
the container fleet (in units) available for lease during those periods:
1998 1997
---- ----
Opening container fleet................. 10,728 9,099
Closing container fleet................. 10,703 10,211
Average container fleet................. 10,716 9,655
The growth in the average container fleet of 11% from the six-month period ended
June 30, 1997 to the same period in 1998, was primarily 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 was 85% and 82% on average during the six-month
periods ended June 30, 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 operations for the
six-month periods ended June 30, 1998 and 1997.
The Partnership's income from operations for the six-month periods ending June
30, 1998 and 1997 was $1,004 and $627, respectively, on rental income of $3,165
and $2,608, respectively. The increase in rental income of $557, or 21%, from
the six-month period ended June 30, 1997 to the comparable period in 1998 was
primarily attributable to an increase in container rentals, the major component
of total revenue, which increased $362, or 15%. This increase was primarily due
to an increase in containers available for lease (average fleet) of 11%, an
increase in average on-hire (utilization) percentage of 4%, a decrease in
leasing incentives of 60%, and was offset by a decrease in average rental rates
of 4%.
Container utilization and rental rates declined during 1996 and 1997 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 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.
Average utilization for the three- and six-month periods ended June 30, 1998 was
greater than the average utilization for the comparable periods in 1997. Despite
the improvement in average utilization from the prior year, utilization has been
slowly declining over the last six months. Rental rates have also been declining
and average rental rates for the six-month period ended June 30, 1998 are lower
than average rental rates for the same period in 1997. These decreases were
offset by decreased leasing incentives during the six-month period ended June
30, 1998 compared to the same period in 1997. The improvement in utilization
over the prior year and the overall improvement in leasing incentives is
primarily due to increased demand in Asia. The weakening of many Asian
currencies resulted in a significant increase in exports from Asia, which has
created a strong demand for containers in certain locations. However, the
weakening of these currencies has also lowered demand in Asia for imports from
North America and Europe resulting in a lower demand for containers in these
areas. For the near term, the General Partners do not foresee material changes
in existing market conditions and caution that both utilization and rental rates
could continue declining, adversely affecting the Partnership's operating
results.
Substantially all of the Partnership's rental income was generated from the
leasing of the Partnership's 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 dropping off containers in surplus
locations less credits granted to lessees for leasing containers from surplus
locations (location income), income from charges to lessees for handling and
returning containers and income from charges to lessees for a Damage Protection
Plan (DPP). For the six-month period ended June 30, 1998, the total of these
other rental income items was $369, an increase of $195 from the equivalent
period in 1997. The primary component of this increase was an increase in
location income of $202. Location income increased due to a decrease in credits
given to lessees for picking up containers from certain locations and due to the
inclusion of certain credits received during 1997 and 1998 which had been
previously applied against repositioning expense.
Direct container expenses increased $82, or 15%, from the six-month period ended
June 30, 1997 to the equivalent period in 1998 primarily due to an increase in
repositioning expense of $85. Repositioning expense increased due to the removal
of certain credits from repositioning costs to other rental income as discussed
above.
Bad debt expense decreased from an expense of $44 for the six-month period ended
June 30, 1997 to a benefit of $7 for the comparable period ending June 30, 1998.
The benefit recorded in 1998 was primarily due to the resolution of payment
issues with one lessee.
Depreciation expense increased $88, or 10% from the six-month period ended June
30, 1997 to the same period in 1998 primarily due to the 11% increase in average
fleet size.
Management fees to affiliates increased $45, or 18%, from the six-month period
ended June 30, 1997 to the equivalent period in 1998, due to increases in
equipment management fees of $39 and incentive management fees of $6. Equipment
management fees, which are based on gross revenue increased proportionately with
the increase in rental income and were 7% of gross revenue for both periods.
Incentive management fees, which are based 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 $8, or 4%, from the
six-month period ended June 30, 1997 to the comparable period ending in 1998 due
to an increase in overhead costs allocated by TEM.
Other income provided $20 of additional income for the six-month period ending
June 30, 1998, an increase of $80, compared to the equivalent period in 1997.
The increase was due to a decrease in interest expense, net of $118, offset by
the decrease in gain on sale of equipment of $38. The decrease in interest
expense, net was primarily due to the Partnership paying the credit facility in
full on March 30, 1997.
Net earnings per limited partnership unit increased from $0.31 to $0.50 from the
six-month period ending June 30, 1997 to the equivalent period in 1998,
reflecting the increase in net earnings allocated to limited partners from $513
to $927, for the same periods.
The following is a comparative analysis of the results of operations for the
three-month periods ended June 30, 1998 and 1997.
The Partnership's income from operations for the three-month periods ending June
30, 1998 and 1997 was $556 and $266, respectively, on rental income of $1,540
and $1,309, respectively. The increase in rental income of $231, or 18%, from
the three-month period ended June 30, 1997 to the comparable period in 1998 was
primarily attributable to an increase in income from container rentals. Income
from container rentals increased $171, or 14%, primarily due to an increase in
average fleet size of 11%, an increase in average utilization percentage of 3%,
and a decrease in leasing incentives of 67%, offset by a decrease in average
rental rates of 4%.
The balance of other rental income for the three-month period ended June 30,
1998 was $132, an increase of $60 from the comparable period in 1997. The
primary component of this increase was an increase in location income of $85,
offset by a decrease in handling income of $29. Location income increased due to
a decrease in credits given to lessees for picking up containers from certain
locations. Handling income decreased to due to a decrease in the average
handling price charged per container and a decrease in container movement.
Direct container expenses decreased $16, or 6%, from the three-month period
ending June 30, 1997 compared to the equivalent period in 1998. The decrease in
direct container expenses was primarily due to a decrease in handling expense
and an increase in repositioning expense. Handling expense decreased primarily
due to the decrease in container movement. Repositioning expense increased
primarily due to an increase in the repositioning cost per container and was
offset by a decrease in the number of containers repositioned.
Bad debt expense decreased from an expense of $38 for the three-month period
ended June 30, 1997 to a benefit of $60 for the comparable period in 1998. The
benefit recorded in 1998 was primarily due to the resolution of a payment issue
with one lessee and due to lower reserve requirements.
Depreciation expense increased $32, or 7%, from the three-month period ended
June 30, 1997 to the same period in 1998 primarily due to the increase in
average fleet size.
Management fees to affiliates increased $17, or 13%, from the three-month period
ended June 30, 1997 to the comparable period in 1998, due to an increase in
equipment management fees which increased proportionately with the increase in
gross revenue.
General and administrative costs to affiliates decreased $3 or 3%, from the
three-month period ended June 30, 1997 to the comparable period in 1998 due to a
decrease in overhead costs allocated by TCC.
Other income decreased $1 from the three-month period ending June 30, 1997 to
the equivalent period in 1998, due to a decrease in interest expense offset by a
decrease in gain on sale of containers.
Net earnings per limited partnership unit increased from $0.13 to $0.27 from the
three-month period ending June 30, 1997 to the same period in 1998, reflecting
the increase in net earnings allocated to limited partners from $244 to $506,
respectively.
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 General Partners and
the Partnership's core internal systems where Year 2000 issues have been
identified are currently being revised. 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 continuing their assessment of Year
2000 issues not related to their core systems, including issues surrounding
systems that interface with external third parties. If external third party
systems are not Year 2000 compliant, those external third parties may have
difficulty conducting ordinary operations, which could have an adverse affect on
the General Partners and the Partnership.
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 its 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 June 30, 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 the Partnership's business.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEXTAINER EQUIPMENT INCOME FUND VI, L.P.
A California Limited Partnership
By Textainer Capital Corporation
The Managing General Partner
By _______________________________
John R. Rhodes
Executive Vice President
Date: August 13, 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> <C>
________________________ Executive Vice President, August 13, 1998
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
________________________ President (Principal Executive August 13, 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: August 13, 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> <C>
/s/John R. Rhodes Executive Vice President, August 13, 1998
- ------------------------- (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/Philip K. Brewer President (Principal Executive August 13, 1998
- --------------------------- Officer)
Philip K. Brewer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Textainer Equipment Income Fund VI, LP
</LEGEND>
<CIK> 0001003638
<NAME> Textainer Equipment Income Fund VI, LP
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 140
<SECURITIES> 0
<RECEIVABLES> 1,493
<ALLOWANCES> 90
<INVENTORY> 0
<CURRENT-ASSETS> 40
<PP&E> 33,274
<DEPRECIATION> 4,887
<TOTAL-ASSETS> 29,970
<CURRENT-LIABILITIES> 381
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,589
<TOTAL-LIABILITY-AND-EQUITY> 29,970
<SALES> 0
<TOTAL-REVENUES> 3,165
<CGS> 0
<TOTAL-COSTS> 2,161
<OTHER-EXPENSES> (20)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,024
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,024
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
