<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
COMMISSION FILE NUMBER 0-17688
TCC EQUIPMENT INCOME FUND
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-3045888
(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 [ ]
<PAGE>
TCC Equipment Income Fund
(A CALIFORNIA LIMITED PARTNERSHIP)
QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED JUNE 30, 1995
TABLE OF CONTENTS
PAGE
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets - June 30, 1995 (unaudited) and December 31, 1994 3
Statements of Earnings for the six and three months
ended June 30, 1995 and 1994 (unaudited) ........................4
Statements of Partners' Capital for the six months
ended June 30, 1995 and 1994 (unaudited) .......................5
Statements of Cash Flows for the six months
ended June 30, 1995 and 1994 (unaudited) ........................6
Notes to Financial Statements (unaudited) .......................8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...................................12
<PAGE>
<TABLE>
TCC EQUIPMENT INCOME FUND
(a California limited partnership)
Balance Sheets
June 30, 1995 and December 31, 1994
<CAPTION>
1995 1994
---- ----
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $10,251,654 (1994: $9,656,249)
........................................ $ 16,678,655 16,810,863
Net investment in direct financing leases (note 6)
........................................ 895,995 1,018,419
Cash and cash equivalents (note 1)...... 408,590 192,155
Accounts receivable, net of allowance
for doubtful accounts of $589,522 (1994:
$620,537)............................... 1,748,174 1,686,100
Due from affiliates (note 4)............ 968,227 920,047
Prepaid expenses........................ 3,581 10,743
----- -----------
$ 20,703,222 20,638,327
=========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable..................... $ 124,173 135,417
Accrued liabilities.................. 251,369 273,846
Accrued damage protection plan costs (note 2) 139,273 145,061
Due to affiliates (note 4)........... 27,254 25,060
Equipment purchases payable.......... 191,663 4,663
----------- -----------
Total liabilities................ 733,732 584,047
----------- -----------
Partners' capital:
General partners..................... (36,061) (36,061)
Limited partners..................... 20,005,551 20,090,341
----------- ----------
Total partners' capital.......... 19,969,490 20,054,280
---------- ----------
Commitments (note 7)
$ 20,703,222 20,638,327
========== ==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF EARNINGS
For the six and three months ended June 30, 1995 and 1994
(unaudited)
<CAPTION>
Six months Three months Six months Three months
Ended Ended Ended Ended
June 30, 1995 June 30, 1995 June 30, 1994 June 30, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Rental Income............ $ 3,283,959 1,594,837 2,955,825 1,457,262
---------- ------------ ----------- -----------
Costs and expenses:
Direct container expenses 451,167 227,479 586,557 243,896
Bad debt expense...... 71,826 21,299 69,361 37,988
Depreciation ......... 945,486 477,857 1,000,327 495,397
Professional fees..... 21,840 11,538 16,196 5,827
Management fees to affiliates (note 4) 294,439 144,128 268,719 133,332
General and administrative costs 211,980 112,548 199,328 100,114
to affiliates (note 4)
Other general and administrative costs 42,383 23,315 24,010 13,280
----------- ------------ ----------- -----------
2,039,121 1,018,164 2,164,498 1,029,834
----------- ------------ ----------- -----------
Income from operations 1,244,838 576,673 791,327 427,428
----------- ------------ ----------- -----------
Other income (expense):
Interest income....... 5,915 3,114 9,396 4,625
Interest expense...... - - (11,315) (8,030)
Gain on sales of containers 81,699 31,780 81,507 20,033
----------- ------------ ----------- -----------
87,614 34,894 79,588 16,628
----------- ------------ ----------- -----------
Net earnings......... $ 1,332,452 611,567 870,915 444,056
=========== ============ =========== ===========
Allocation of net earnings:
General partners...... $ 14,133 7,437 12,102 6,144
Limited partners...... 1,318,319 604,130 858,813 437,912
----------- ------- ----------- -----------
$ 1,332,452 611,567 870,915 444,056
=========== ============ ========== ===========
Limited partners' per unit share
of net earnings....... $ 0.90 0.41 0.58 0.30
=========== ============ =========== ===========
Limited partners' per unit share
of distributions...... $ 0.95 0.50 0.81 0.41
=========== ============ =========== ===========
Weighted average number of limited
partnership units outstanding 1,472,529 1,472,529 1,474,554 1,474,554
=========== ============ =========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
TCC EQUIPMENT INCOME FUND
(a California limited partnership)
Statements of Partners' Capital
For the six months ended June 30, 1994 and 1995
(unaudited)
<CAPTION>
Partners' Capital
General Limited Total
-------- ----------- -----------
<S> <C> <C> <C>
Balances at January 1, 1994........ $ (36,061) 20,806,036 20,769,975
Distributions...................... (12,102) (1,198,075) (1,210,177)
Net earnings....................... 12,102 858,813 870,915
------- ---------- ----------
Balances at June 30, 1994.......... $ (36,061) 20,466,774 20,430,713
======== ========== ==========
Balances at January 1, 1995........ $ (36,061) 20,090,341 20,054,280
Distributions...................... (14,133) (1,399,127) (1,413,260)
Redemptions (note 8)............... - (3,982) (3,982)
Net earnings....................... 14,133 1,318,319 1,332,452
------- ---------- ----------
Balances at June 30, 1995.......... $ (36,061) 20,005,551 19,969,490
======== ========== ==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1995 and 1994 (unaudited)
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings............................ 1,332,452 870,915
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation..................... 945,486 1,000,327
Decrease in allowance for doubtful accounts (31,015) 51,010
Gain on sale of rental equipment. (81,699) (81,507)
Changes in assets and liabilities:
Increase in accounts receivable .. (31,058) (61,249)
Increase in due from affiliates, net (3,766) (79,639)
Proceeds from principal payments .
on direct financing leases .... 124,252 116,353
Decrease in prepaid expenses ..... 7,162 6,081
Decrease in accounts payable and
accrued liabilities ........... (33,722) (55,636)
Decrease in accrued damage protection plan costs (5,787) (19,414)
---------- -----------
Net cash provided by operating activities 2,222,305 1,747,241
---------- ------------
Cash flows from investing activities:
Proceeds from sale of container rental equipment 350,830 412,150
Container purchases..................... (937,872) (887,190)
---------- -----------
Net cash used in investing activities (587,042) (475,040)
---------- -----------
Cash flows from financing activities:
Redemptions of limited partnership units (3,982) -
Distributions to partners............... (1,414,845) (1,222,142)
----------------------
Net cash used in financing activities (1,418,827) (1,222,142)
----------------------
Net increase in cash 216,435 50,059
Cash and cash equivalents at beginning of period 192,155 967,431
---------- ------------
Cash and cash equivalents at end of period. 408,590 1,017,490
========== ============
Interest paid during the period............ - 26,852
========== ============
See accompanying notes to financial statements
</TABLE>
<PAGE>
STATEMENTS OF CASH FLOWS-CONTINUED
For the six months ended June 30, 1994 and 1993
(unaudited)
SUPPLEMENTAL DISCLOSURES:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of equipment purchases, distributions
to partners, and proceeds from sale of container rental equipment which had not
been paid or received as of June 30, 1995 and 1994, and December 31, 1994 and
1993, 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, 1995 and 1994.
<TABLE>
<CAPTION>
June 30 Dec. 31 June 30 Dec. 31
1995 1994 1994 1993
------ ---- ---- ----
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates ......... $ 1,096 $ 11,591 $ 6,554 $ 3,788
Equipment purchases payable 191,663 4,663 602,163 225,190
Distributions to partners included in:
Due to affiliates ......... 2,677 4,262 10,430 22,395
Proceeds from sale of equipment included in:
Due from affiliates ....... 775 775 775 1,725
Accounts receivable ....... 198,418 168,279 155,777 146,863
</TABLE>
The following table summarizes the amounts of equipment purchases, distributions
to partners, and proceeds from sale of container rental equipment 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, 1995 and 1994.
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Equipment purchases recorded.................. $1,114,377 $1,266,929
Equipment purchases paid...................... 937,872 887,190
Distributions to partners declared............ 1,413,260 1,210,177
Distributions to partners paid................ 1,414,845 1,222,142
Proceeds from sale of container rental equipment recorded 380,969 420,114
Proceeds from sale of container rental equipment received 350,830 412,150
See accompanying notes to financial statements
</TABLE>
<PAGE>
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
NOTE 1.GENERAL
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, 1995 and December 31, 1994 and the results of its
operations, changes in partners' capital and cash flows for the six-month
periods ended June 30, 1995 and 1994 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, 1994.
For purposes of the Statement of Cash Flows, the Partnership considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Certain reclassifications of prior year amounts have been made in order to
conform with the 1995 financial statement presentation.
NOTE 2.DAMAGE PROTECTION PLAN
The Partnership offers a Damage Protection Plan (the Plan) to lessees of its
container rental 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 repair costs.
NOTE 3.ACQUISITION OF EQUIPMENT
During the six-month periods ended June 30, 1995 and 1994, the Partnership
purchased container rental equipment (the "Equipment") with a cost of
$1,114,377 and $1,266,929, respectively.
NOTE 4.TRANSACTIONS WITH AFFILIATES
Textainer Financial Services Corporation (TFS) is the managing general
partner of the Partnership (prior to its name change on April 4, 1994, TFS
was known as Textainer Capital Corporation). Textainer Equipment Management
Limited (TEM) (prior to being redomiciled on December 20, 1994, TEM was known
as Textainer Equipment Management N.V.) and Textainer Limited (TL) are
associate general partners of the Partnership. The managing general partner
and the associate general partners are collectively referred to as the
General Partners and are commonly owned by Textainer Group Holdings Limited
(TGH). The General Partners also act in this capacity for three other
limited partnerships as of June 30, 1995. 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 Securities Corporation (TSC), a licensed broker and
dealer in securities and an affiliate of the General Partners, was the
managing sales agent for the offering of Units for sale.
In accordance with the Partnership Agreement, net earnings or losses,
syndication and offering costs and partnership distributions are allocated 1%
to the general partners and 99% to the limited partners, with the exception
of gains on sales of containers. Such gains are allocated to the General
Partners to the extent that their partners' capital accounts' deficits exceed
the portion of syndication and offering costs allocated to them. On
termination of the Partnership, the General Partners shall be allocated gross
income equal to their allocations of syndication and offering costs.
As part of the operation of the Partnership, the Partnership is to pay to the
General Partners or an affiliate an incentive management fee, an acquisition
fee, an equipment management fee and an equipment liquidation fee. These
fees are for various services provided in connection with the administration
and management of the Partnership. The Partnership capitalized $44,161 and
$31,878 of equipment acquisition fees as part of container costs during the
six-month periods ended June 30, 1995 and 1994, respectively. The
Partnership incurred $61,975 and $51,976 of incentive management fees during
the six-month periods ended June 30, 1995 and 1994 and $30,988 and $26,376 of
incentive management fees during the three-month periods ended June 30, 1995
and 1994. No equipment liquidation fees were incurred during the first six-
month periods of 1995 or 1994.
The Partnership's Equipment is managed by TEM. In its role as manager, TEM
has authority to acquire, hold, manage, lease, sell and dispose of the
Partnership's Equipment. Additionally, TEM holds, for the payment of direct
operating expenses, a reserve of cash that has been collected from leasing
operations; such cash is included in due from affiliates, net at June 30,
1995 and 1994. In addition, TEM has entered into an agreement with its 100%-
owned subsidiary Textainer Storage Services (TSS) to manage storage
containers. At June 30, 1995, the Partnership owned storage containers with
an original cost of $30,418. Subject to certain reductions, TEM receives a
monthly equipment management fee equal to 7% of gross revenues attributable
to operating leases and 2% of gross revenues attributable to full payout net
leases. For the six and three-month periods ended June 30, 1995 and 1994,
these fees totaled $232,464, $113,140, $216,743, and 106,956, respectively.
Such fees are either retained by TEM or the fees allocable to TSS, if any,
are passed through to TSS by TEM for services rendered. The Partnership's
Equipment is leased by TEM and TSS to third party lessees on operating master
leases, spot leases and term leases. The majority of the Equipment is leased
under operating leases with limited terms and no purchase option. There are
eight direct financing leases at June 30, 1995 (note 5).
Certain indirect general and administrative costs incurred in performing
administrative services necessary to the operation of the Partnership are
borne by TEM and TSS and are allocated to the Partnership based on the ratio
of the Partnership's interest in managed Equipment to the total equipment
managed by TEM and TSS for the period. Indirect general and administrative
costs allocated to the Partnership were $178,939, $95,262, $166,901 and
$82,318 for the six and three-month periods ended June 30, 1995 and 1994,
respectively.
TFS also incurred general and administrative costs of $33,041, $17,286,
$32,427 and $17,796 during the six and three-month periods ended June 30,
1995 and 1994, respectively, which were reimbursed by the Partnership.
The General Partners 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. In addition, the General Partners or
an affiliate are entitled to an acquisition fee for any Equipment resold to
the Partnership.
At June 30, 1995 and December 31, 1994, due from and to affiliates are
comprised of:
1995 1994
---- ----
Due from affiliates:
Due from TEM and TSS .... $ 968,227 920,047
========== =========
Due to affiliates:
Due to TL ............... $ 248 1,038
Due to TCC .............. 8,514 6,928
Due to TAS .............. 52 -
Due to TFS .............. 18,440 17,094
---------- ---------
$ 27,254 25,060
====== ======
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 in the accrual and collection of net rental revenues from
TEM and TSS. Previously, it was the policy of the Partnership and the General
Partners to charge interest on intercompany balances which are outstanding
for more than one month. Interest was charged at the prime rate plus 0.25%.
As of July 1994, this policy was changed so that the Partnership is not
charged interest on intercompany balances except for loans for equipment
purchases. The Partnership incurred interest expense of $3,704 and $418,
respectively, on intercompany balances payable to TFS and TAS during the six
and three months ended June 30, 1994. There was no interest expense incurred
for the six- and three-month periods ended June 30, 1995 .
NOTE 5.RENTALS UNDER OPERATING LEASES
The following is a schedule by year of minimum future rentals receivable on
noncancelable operating leases as of June 30, 1995:
Year ending June 30:
1996 .............................. $637,686
1997 .............................. 148,467
1998 .............................. 6,035
--------
Total minimum future rentals $792,188
receivable -------
NOTE 6.DIRECT FINANCING LEASES
The components of the net investment in direct financing leases as of June
30, 1995 are as follows:
Future minimum lease payments receivable $1,088,406
Residual value ............... 5,032
Less: unearned income ....... (197,443)
--------
Net investment in direct financing leases $ 895,995
=======
The following is a schedule by year of minimum lease payments receivable
under the eight direct financing leases as of June 30, 1995:
Year ending June 30:
1996 .......................... $393,544
1997 .......................... 383,256
1998 .......................... 311,606
---------
Total minimum lease payments receivable .$1,088,406
=========
Rental income for the six and three-month periods ended June 30, 1995 and
1994 includes $71,808, $34,799, $89,462 and $44,005, respectively, of income
from direct financing leases.
NOTE 7.COMMITMENTS
At June 30, 1995, the Partnership has committed to purchase 100 containers at
an approximate total purchase price of $423,308 which includes acquisition
fees of $20,158. These commitments were made to TAS which, as the
contracting party, has in turn committed to purchase these containers on
behalf of the Partnership. The Partnership expects to fund the purchase of
these containers with cash on hand and with cash flow from operations.
NOTE 8.REDEMPTIONS
An initial redemption offering was consummated on June 24, 1994, wherein the
Partnership paid $13,511 for the redemption of 1,525 units. The redemption
price is fixed by formula and varies depending on the length of time the
units have been outstanding. The approximate redemption prices ranged
between $6.35 and $9.50 per unit. A second redemption offering was
consummated on October 31, 1994 with no units redeemed. A third redemption
offering was consummated on February 3, 1995 wherein the Partnership paid
$3,982 for the redemption of 500 units at an average cost of $8 per unit.
The total number of units redeemed since the inception of the redemption
program is 2,025, at a total cost of $17,493.
NOTE 9.SUBSEQUENT EVENT
In August 1995, the Partnership finalized an agreement for the sale of its
storage container fleet (TSS) to a third party investor. The proceeds from
the sale will be approximately $19,918 compared to the Partnership's cost
basis in the equipment which is approximately $15,557. The resulting gain
from the sale is expected to be approximately $4,361. The Partnership plans
to invest the proceeds from the sale into marine container rental equipment.
This sale is not reflected on the financial statements for the six-month
period ended June 30, 1995.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On October 26, 1989, the Partnership's offering of limited partnership interests
was closed at $29,491,080.
The Partnership has set up a program whereby limited partners may redeem units
for a specified redemption value. The redemption price is set by formula and
varies depending on the length of time units have been outstanding. 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 1994, the
Partnership paid $13,511 for the redemption of 1,525 units. During 1995, the
Partnership has paid $3,982 for the redemption of 500 units.
The Partnership invests working capital and cash flow from operations prior to
its distribution or reinvestment in additional equipment in short-term, highly
liquid investments. It is the policy of the Partnership to maintain a minimum
working capital reserve in an amount which is the lesser of (i) 1% of capital
contributions or (ii) $100,000.
At June 30, 1995, the Partnership's cash of $408,590 was primarily invested in a
market-rate account.
During the six-month period ended June 30, 1995, the Partnership declared cash
distributions to limited partners pertaining to the fourth quarter of 1994 and
the first quarter of 1995 in the amount of $1,399,127. The distributions
pertaining to the fourth quarter of 1994 and the first quarter of 1995 represent
a 9% and 10% annualized return on each unit, respectively. On a cash basis, all
of those distributions are from operations. On a GAAP basis, $80,808 of these
distributions were a return of capital and the balance was from net earnings.
At June 30, 1995, the Partnership had committed to purchase 100 containers at an
approximate total price of $423,308 which includes acquisition fees of $20,158.
At June 30, 1995, the Partnership had cash on hand of $408,590 and expected to
fund the remaining amount owed with cash flow from operations in excess of
distributions. In the event the Partnership decides not to purchase the
equipment, one of the General Partners will retain the equipment for its own
account.
For the six months ended June 30, 1995, the Partnership had net cash provided by
operating activities of $2,222,305 compared with net cash provided by operating
activities of $1,747,241 for the six months ended June 30, 1994. This increase
was primarily attributable to an increase in rental revenue of 11% and a
decrease in direct container expenses of 20%. Rental revenue increased due to
higher utilization rates and average fleet size. Direct container expenses
decreased mainly due to decreases in storage and maintenance and repair costs as
a result of higher utilization.
Net cash used in investing activities (the purchase and sale of rental
equipment) for the six months ended June 30, 1995 was $587,042 compared with net
cash used in investing activities of $475,050 for six months ended June 30,
1994. This difference is due to the fact that the Partnership bought more
equipment than it sold in the six month periods ended June, 30, 1995 and 1994.
RESULTS OF OPERATIONS
The Partnership's income from operations, which consists of rental revenue,
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, 1995 and 1994.
The following is a summary of the size of the container fleet (in units)
available for lease during those periods:
1995 1994
---- ----
Opening inventory ........ 8,245 8,140
Closing inventory ........ 8,334 8,018
Average .................. 8,290 8,079
Rental revenue and direct container expenses are also affected by lease
utilization percentages for the Equipment which were 91% and 87% on average
during the six-month periods ended June 30, 1995 and 1994, respectively. The
following is a comparative analysis of the results of operations for the six-
and three-month periods ended June 30, 1995 and 1994.
The Partnership's income from operations for the six-month periods ended June
30, 1995 and 1994 was $1,244,838 and $791,327, respectively, on gross rental
revenues of $3,283,959 and $2,955,825, respectively. The increase in total
revenue of $328,134 or 11% from the six-month period ended June 30, 1994 to the
equivalent period in 1995 was primarily attributable to rental income, the major
component of total rental revenue, which increased by $213,383 or 8.2%, from
1994 to 1995. Rental income is largely dependent upon three factors: equipment
available for lease (average inventory), average on-hire (utilization)
percentage and average daily rental rates. Average inventory increased by 2.6%,
average utilization increased by four percentage points, and average daily
rental rates decreased 2% from the six-month period ended June 30, 1994 to the
six-month period ended June 30, 1995.
Substantially all of the Partnership's rental revenue was generated from the
leasing of the Partnership's Equipment under short-term operating leases. There
were eight direct financing leases at June 30, 1995 (note 6).
The balance of total revenue consisted of other lease-related items, primarily
income from charges to the lessees for handling and returning containers less
credits granted to the lessees for leasing containers from less desirable
locations. For the six-month period ended June 30, 1995, the total of these
other revenue items increased by $114,752 or 3.2% over the equivalent period in
1994. The primary cause of the increase in other revenue was location income
which increased by $121,554 from the six-month period ended June 30, 1994 to the
six-month period ended June 30, 1995. The increase in location income is
largely due to three factors: higher demand, drop-off charges on recovery
accounts, and pickup charges on new units.
Direct container expenses, excluding bad debt expense, decreased by $135,391, or
23%, from the six-month period ended June 30, 1994 to the equivalent period in
1995. The primary components of this decrease were costs incurred for storage
(which decreased by $72,319 between the two periods), maintenance and repair
costs (which decreased by $42,631 between periods), costs incurred for the
repositioning of containers (which decreased by $25,781 between periods), and
expenses accrued under a damage protection plan (which decreased by $15,845
between periods). Storage costs declined due to higher utilization rates in the
first six months of 1995 compared to the same period in 1994. Maintenance and
repair costs decreased due to fewer units being returned which required repairs
during the six-month period ending June 30, 1995 compared to the equivalent
period in 1994 and a lower average cost to repair units in the first six months
of 1995 compared to the same period in 1994. Repositioning costs decreased due
to the decline in the number of units requiring repositioning.
Bad debt expense increased by $2,465 from the six-month period ending June 30,
1994 to the same period in 1995.
Depreciation expense decreased by $54,841, or 5%, from the six-month period
ended June 30, 1994 to the same period in 1995. This decrease is primarily
attributable to a previous purchase of used equipment which has now been fully
depreciated.
Management fees to affiliates were $25,721 higher in the first six-month period
of 1995 than in the first six-month period of 1994 due to an increase in
incentive management fees resulting from a higher distribution rate. Management
fees as a percent of gross revenue were 9% for the six-month period ended June
30, 1995 compared to 9.1% of gross revenue for the same period in 1994.
Equipment management fees were 7% of gross revenue for both six-month periods
and incentive management fees were 1.9% of gross revenue for the six-month
period ended June 30, 1995 and 1.7% of gross revenue for the six-month period
ended June 30, 1994.
General and administrative costs increased by $12,652. This increase was
primarily the result of an increase in overhead costs allocable to the
Partnership due to the larger fleet size.
Other income (expense) includes a gain on sales of equipment of $81,699 for the
six-month period ended June 30, 1995 compared to a gain of $81,507 for the six-
month period ended June 30, 1994. Interest income decreased by $3,481 from the
six-month period ended June 30, 1994 to the comparable period in 1995. Interest
expense decreased by $11,315 from the six-month period ended June 30, 1994 to
the six-month period ended June 30, 1995, due to repayment of the credit
facility.
Rental income, not including other income, increased from $1,296,027 for the
three months ended June 30, 1994 to $1,405,594 for the same period ended June
30, 1995. The increase was due to an increase in utilization from 86% for the
three months ended June 30, 1994 to 90% for the same period in 1995 and an
increase in average inventory of 4%. Storage costs, part of direct container
expenses, decreased by $31,340 from the three months ended June 30, 1994 to the
equivalent period in 1995 due to the increase in utilization. Bad debt expense
decreased by $16,689 from the three-month period ended June 30, 1994 to the same
period in 1995. Net earnings increased from $444,056 for the three-month period
ended June 30, 1994 to $611,567 for the three-month period ended June 30, 1995
for the reasons noted above. There was a gain of $31,780 on equipment sales for
the three-month period ended June 30, 1995 compared to a gain of $20,033 for the
same period in 1994. Interest expense decreased by $8,030 from the three months
ended June 30, 1994 to the equivalent period in 1995 due to the repayment of the
credit facility.
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 that 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 rather than the
geographic location of the Equipment or the domicile of the lessees. The
Partnership's containers are generally operated on the international high seas
rather than on the domestic waterways. The Partnership's Equipment is subject
to the risk of war or other political, economic or social occurrence where the
Equipment is used, which may result in the loss of Equipment, which, in turn,
may have a material impact on the Partnership's results of operations and
financial condition. The General Partners are not aware of any conditions as of
June 30, 1995 which would result in the materialization of such risk.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TCC EQUIPMENT INCOME FUND
A California Limited Partnership
By Textainer Financial Services Corporation
The Managing General Partner
By /s/John R. Rhodes
-----------------------------
John R. Rhodes
Executive Vice President
Date: December 6, 1995
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 Financial
Services Corporation, the Managing General Partner of the Registrant, in the
capacities and on the dates indicated:
Signature Title Date
/s/Susan L. Fiddaman President (Principal
- ----------------------
Susan L. Fiddaman Executive Officer) December 6, 1995
and Director
/s/John R. Rhodes Executive Vice President, December 6, 1995
- ----------------------
John R. Rhodes (Principal Financial and
Accounting Officer),
Secretary and Treasurer
<PAGE>
Exhibit Index
EX. 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> Jun-30-1995
<CASH> 408,590
<SECURITIES> 0
<RECEIVABLES> 4,201,918
<ALLOWANCES> (589,222)
<INVENTORY> 0
<CURRENT-ASSETS> 3,581
<PP&E> 26,930,309
<DEPRECIATION> 10,251,654
<TOTAL-ASSETS> 20,703,222
<CURRENT-LIABILITIES> 733,732
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 19,969,490
<TOTAL-LIABILITY-AND-EQUITY>20,703,222
<SALES> 0
<TOTAL-REVENUES> 3,283,959
<CGS> 0
<TOTAL-COSTS> 2,039,121
<OTHER-EXPENSES> 87,614
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,332,452
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
