<PAGE> 1
FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 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 (I.R.S. 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 / /
Documents Incorporated by Reference
The Limited Partnership Agreement of the Registrant included as Exhibit A to the
Prospectus as contained in Post-effective Amendment No. 2 to the Registrant's
Registration Statement, as filed with the Commission on November 30, 1988 as
supplemented by Supplement No. 6 filed with the Commission under Rule 424 (b)
(3) of the Securities Act of 1933 on October 16, 1989.
<PAGE> 2
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: May 12, 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:
<TABLE>
<CAPTION>
Date Signature Title
<S> <C> <C>
May 12, 1995 /s/Susan L. Fiddaman President
-------------------- (Principal Executive
Susan L. Fiddaman Officer) and Director
May 12, 1995 /s/John R. Rhodes Executive Vice President
-------------------- (Principal Financial and
John R. Rhodes Accounting Officer)
Secretary and Treasurer
</TABLE>
2
<PAGE> 3
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1995 (unaudited) and December 31, 1994 4
Statements of Earnings for the three months ended
March 31, 1995 and 1994 (unaudited) 5
Statements of Partners' Capital for the three months
ended March 31, 1995 and 1994 (unaudited) 6
Statements of Cash Flows for the three months
ended March 31, 1995 and 1994 (unaudited) 7
Notes to Financial Statements (unaudited) 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II - OTHER INFORMATION 14
</TABLE>
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
TCC EQUIPMENT INCOME FUND
(a California limited partnership)
BALANCE SHEETS
March 31, 1995 and December 31, 1994
<TABLE>
<CAPTION>
1995 1994
----------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Container rental equipment, net of accumulated
depreciation of $9,949,703 (1994: $9,656,249) $17,076,395 16,810,863
Net investment in direct financing leases (note 5) 959,780 1,018,419
Cash (note 1) 490,302 192,155
Accounts receivable, net of allowance
for doubtful accounts of $668,028 (1994: $620,537) 1,773,730 1,686,100
Due from affiliates (note 3) 936,549 920,047
Prepaid expenses 7,162 10,743
----------- ----------
$21,243,918 20,638,327
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 118,730 135,417
Accrued liabilities 393,829 418,907
Due to affiliates (note 3) 37,272 25,060
Equipment purchases payable 592,463 4,663
----------- ----------
Total liabilities 1,142,294 584,047
----------- ----------
Partners' capital:
General partners (36,061) (36,061)
Limited partners 20,137,685 20,090,341
----------- ----------
Total partners' capital 20,101,624 20,054,280
----------- ----------
Commitments (note 6)
$21,243,918 20,638,327
=========== ==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
TCC EQUIPMENT INCOME FUND
(a California limited partnership)
STATEMENTS OF EARNINGS
For the three months ended March 31, 1995 and 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
Rental income $ 1,689,122 1,498,563
Costs and expenses:
Direct container expenses 342,661 223,688
Bad debt provision 50,527 31,372
Depreciation and amortization 467,629 504,929
Professional fees 10,303 10,371
Management fees to affiliates (note 3) 150,312 135,387
General and administrative costs to affiliates (note 3) 99,432 99,214
Other general and administrative costs 19,066 10,730
----------- ---------
1,020,957 1,134,664
----------- ---------
Income from operations 668,165 363,899
----------- ---------
Other income (expense):
Interest income 2,801 4,771
Interest expense - (3,285)
Gain on sales of containers 49,919 61,474
----------- ---------
52,720 62,960
----------- ---------
Net earnings $ 720,885 426,859
=========== =========
Allocation of net earnings (note 3):
General partners $ 6,696 5,958
Limited partners 714,189 420,901
----------- ---------
$ 720,885 426,859
=========== =========
Limited partners' per unit share of net earnings $ 0.49 $ 0.29
====== ======
Limited partners' per unit share of distributions $ 0.45 $ 0.40
====== ======
Weighted average number of limited partnership
units outstanding 1,472,529 1,474,554
=========== =========
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
TCC EQUIPMENT INCOME FUND
(a California limited partnership)
STATEMENTS OF PARTNERS' CAPITAL
For the three months ended March 31, 1995 and 1994
(unaudited)
<TABLE>
<CAPTION>
PARTNERS' CAPITAL
--------------------------------------------
GENERAL LIMITED TOTAL
--------------------------------------------
<S> <C> <C> <C>
Balances at January 1, 1994 $ (36,061) 20,806,036 20,769,975
Distributions (5,958) (589,822) (595,780)
Net earnings 5,958 420,901 426,859
---------- ---------- ----------
Balances at March 31, 1994 (36,061) 20,637,115 20,601,054
========== ========== ==========
Balances at January 1, 1995 (36,061) 20,090,341 20,054,280
Distributions (6,696) (662,863) (669,559)
Redemptions (note 7) - (3,982) (3,982)
Net earnings 6,696 714,189 720,885
---------- ---------- ----------
Balances at March 31, 1995 $ (36,061) 20,137,685 20,101,624
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 7
TCC EQUIPMENT INCOME FUND
(a California limited partnership)
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1995 and 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 720,885 426,859
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 467,629 504,929
Increase in allowance for doubtful accounts 47,491 31,174
Gain on sale of containers (49,919) (61,474)
Proceeds from principal payments on direct financing leases 60,468 59,880
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (135,116) 95,663
Increase in due from affiliates (9,013) (46,804)
Decrease in prepaid expenses 3,581 3,040
Decrease in accounts payable and
accrued liabilities (41,768) (17,244)
----------- -------
Net cash provided by operating activities 1,064,238 996,023
----------- -------
Cash flows from investing activities:
Proceeds from sale of container rental equipment 184,275 219,094
Container purchases (278,151) (688,298)
----------- -------
Net cash used in investing activities (93,876) (469,204)
----------- -------
Cash flows from financing activities:
Redemptions of limited partnership units (3,982)
Distributions to partners (668,233) (617,199)
----------- -------
Net cash used in financing activities (672,215) (617,199)
----------- -------
Net increase (decrease) in cash 298,147 (90,380)
Cash at beginning of period 192,155 967,431
----------- -------
Cash at end of period $ 490,302 877,051
=========== =======
Interest paid during the period $ - 3,285
=========== =======
</TABLE>
See accompanying notes to financial statements
7
<PAGE> 8
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS-CONTINUED
For the three months ended March 31, 1995 and 1994
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 by the
Partnership as of March 31, 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 three-month periods ended
March 31, 1995 and 1994.
<TABLE>
<CAPTION>
MAR. 31, DEC. 31, MAR. 31, DEC. 31
1995 1994 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates......................... $ 27,915 11,591 30,089 3,788
Accounts payable and accrued liabilities 592,463 4,663 42,385 225,190
Distributions to partners included in:
Due to affiliates......................... 5,588 4,262 976 22,395
Proceeds from sale of equipment included in:
Due from affiliates....................... 775 775 115,282 146,862
Accounts receivable....................... 181,206 168,279 1,725 1,725
</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 three-month periods ended March 31, 1995 and
1994.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Equipment purchases recorded................................... $882,275 531,794
Equipment purchases paid....................................... 278,151 688,298
Distributions to partners declared............................. 669,559 595,780
Distributions to partners paid................................. 668,233 617,199
Proceeds from sale of container
rental equipment recorded.................................... 197,202 187,514
Proceeds from sale of container
rental equipment received.................................... 184,275 219,094
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
Unaudited)
Note 1. General
The accompanying unaudited interim comparative financial statements have not
been audited by an independent public accountant. However, all adjustments
(including normal recurring adjustments) which are, in the opinion of
management, necessary to fairly present the financial position of the
Partnership as of March 31, 1995 and December 31, 1994 and the results of its
operations, changes in partners' capital and cash flows for the three-month
periods ended March 31, 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. Acquisition of Equipment
During the three-month periods ended March 31, 1995 and 1994, the Partnership
purchased container rental equipment (the "Equipment") with a cost of
$882,275 and $531,794, respectively.
Note 3. 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 March 31, 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 (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 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 $14,023 and
$25,324 of equipment acquisition fees as part of container costs during the
three-month periods ended March 31, 1995 and 1994, respectively. The
Partnership
9
<PAGE> 10
incurred $30,988 and $25,600 of incentive management fees during the three-
month periods ended March 31, 1995 and 1994. No equipment liquidation fees
were incurred during the first three-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. In addition, TEM has entered into an agreement with
its 100%-owned subsidiary Textainer Storage Services (TSS) to manage storage
containers. As of March 31, 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 lease
revenues attributable to operating leases and 2% of gross lease revenues
attributable to full payout net leases. Such fee is either retained by TEM
or the fee allocable to TSS, if any, is passed through by TEM for services
rendered. For the three-month periods ended March 31, 1995 and 1994, these
fees totaled $119,324 and $109,787, respectively. 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 March 31, 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 $83,677 and $84,583 for the three-
month periods ended March 31, 1995 and 1994, respectively.
TFS also incurred general and administrative costs of $15,755 and $14,631
during the three-month periods ended March 31, 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 are
entitled to an acquisition fee for any Equipment resold to the Partnership.
At March 31, 1995 and December 31, 1994, due from and to affiliates are
comprised of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Due from affiliates:
Due from TEM and TSS .......................... $936,549 920,047
======== =======
Due to affiliates:
Due to TL ..................................... $ 1,707 1,038
Due to TCC .................................... 6,899 6,928
Due to TAS .................................... 12,680 -
Due to TFS .................................... 15,986 17,094
-------- -------
$ 37,272 25,060
======== =======
</TABLE>
These amounts receivable from and payable to affiliates were incurred in the
ordinary course of business between the Partnership and its affiliates and
represent timing differences in the accrual and payment of expenses and fees
described above or in the accrual and collection of net rental revenues from
TEM and TSS. It is the policy of the Partnership and the General Partners to
charge interest on intercompany balances which are outstanding for more than
one month. Interest was charged at the Prime Rate plus .25%. As of July
1994, this policy was changed so that the Partnership is not charged interest
on intercompany balances except for loans on equipment purchases. The
Partnership incurred interest expense of $0 and $3,285, respectively, on
intercompany balances payable to TFS and TAS during the three months ended
March 31, 1995 and 1994.
10
<PAGE> 11
Note 4. Rentals Under Operating Leases
The following is a schedule by year of minimum future rentals receivable on
noncancelable operating leases as of March 31, 1995:
<TABLE>
<CAPTION>
Year ending March 31:
<S> <C>
1996......................................... $387,388
1997......................................... 36,576
1998......................................... 12,005
--------
Total minimum future rentals receivable $435,969
========
</TABLE>
Note 5. Direct Financing Leases
The components of the net investment in direct financing lease as of March
31, 1995 are as follows:
<TABLE>
<S> <C>
Future minimum lease payments receivable.............. $1,186,988
Residual value........................................ 5,033
Less: unearned income................................ (232,241)
----------
Net investment in direct financing leases $ 959,780
==========
</TABLE>
The following is a schedule by year of minimum lease payments receivable
under the eight direct financing leases as of March 31, 1995:
<TABLE>
<CAPTION>
Year ending March 31:
<S> <C>
1996....................................... $ 394,657
1997....................................... 386,571
1998....................................... 374,565
1999....................................... 31,195
----------
Total minimum lease payments receivable $1,186,988
==========
</TABLE>
Rental income for the three-month periods ended March 31, 1995 and 1994
includes $37,009 and $45,458, respectively, of income from direct financing
leases.
Note 6. Commitments
At March 31, 1995, the Partnership has committed to purchase eight containers
at an approximate total purchase price of $33,264 which includes acquisition
fees of $1,584. These commitments were made to TAS which, as the contracting
party, has in turn committed to purchase this equipment on behalf of the
Partnership. The Partnership has sufficient capital at March 31, 1995 to
satisfy these commitments.
Note 7. 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 are 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.
11
<PAGE> 12
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. On February 3, 1995,
the Partnership 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. At March 31, 1995, the Partnership's cash of $490,302 was
primarily invested in a market-rate account.
During the three-month period ended March 31, 1995, the Partnership declared
cash distributions to limited partners pertaining to the fourth quarter of 1994
in the amount of $662,863. These distributions represent a 9% annualized return
of each unit. These distributions were made solely from net earnings and do not
represent a return of capital.
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.
On December 9, 1992, the Partnership was granted a short-term revolving credit
line of $2,000,000 which was available for equipment purchases. This credit
line was terminated by the Partnership on July 26, 1994.
At March 31, 1995, the Partnership had committed to purchase eight containers at
an approximate total price of $33,264 which includes acquisition fees of $1,584.
At March 31, 1995, the Partnership had cash on hand of $490,302 to meet these
commitments. In the event the Partnership decides not to purchase the
equipment, one of the General Partners will retain the equipment for its own
account.
RESULTS OF OPERATIONS
The Partnership's operations, which consist of rental revenue, container
depreciation, direct container expenses, management fees, and reimbursement of
administrative expenses were directly related to the size of the container fleet
during the three-month periods ended March 31, 1995 and 1994. The following is
a summary of the size of the container fleet (in units) available for lease
during those periods:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Opening inventory...................... 8,245 8,140
Closing inventory...................... 8,400 8,107
Average................................ 8,323 8,124
</TABLE>
Rental revenue and direct container expenses are also affected by lease
utilization percentages for the Equipment which were 91% and 85% on average
during the three-month periods ended March 31, 1995 and 1994, respectively. In
addition, rental revenue is affected by daily rental rates. The following is a
comparative analysis of the results of operations for the three-month periods
ended March 31, 1995 and 1994.
The Partnership's income from operations for the three-month periods ended March
31, 1995 and 1994 was $668,163 and $363,899, respectively, on gross rental
revenues of $1,689,122 and $1,498,563, respectively. The increase in total
revenue of $190,560 or 12.7% from the three-month period ended March 31, 1994 to
the equivalent period in 1995 was primarily attributable to rental income, the
major component of total rental revenue, which increased by $103,816 or 8%, 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
12
<PAGE> 13
rates. Average inventory increased 2.4%, average utilization increased by six
percentage points, and average daily rental rates increased 5% from the
three-month period ended March 31, 1994 to the three-month period ended March
31, 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 March 31, 1995 (note 5).
The balance of total rental revenues consisted of other lease-related items,
primarily income from charges to the lessees for handling and returning
containers less credits granted to the lessees when a container is leased out.
For the three-month period ended March 31, 1995, the total of these other
revenue items increased by $86,743 or 4.8% over the equivalent period in 1994.
Direct container expenses, excluding a provision for bad debt expense, decreased
by $118,974, or 35%, from the three-month period ended March 31, 1995 to the
equivalent period in 1994. The primary components of this net decrease were
costs incurred for storage costs (which decreased by $40,980 between periods),
handling costs (which decreased by $9,806 between periods), maintenance and
repair costs (which decreased by $59,849 between periods) and costs incurred for
the repositioning of containers (which decreased by $22,312 between periods).
Storage expenses declined due to higher utilization rates in the first three
months of 1995 compared to the same period of 1994. The decrease in maintenance
and repair costs resulted from a lower number of units returned requiring
repairs during the three-month period ending March 31, 1995 than for the
equivalent period in 1994 and a lower average cost to repair units in the first
three months of 1995 compared to the same period in 1994.
Provision for bad debt expense increased by $19,155 in the three-month period
ending March 31, 1994 compared to the same period in 1995 due to higher specific
reserve requirements for certain lessees.
Depreciation expense decreased by $37,300, or 7%, from the three months ended
March 31, 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 $14,925 higher in the first three-month
period of 1995 than in the first three-month period of 1994 due to an increase
in incentive management fee resulting from a higher distribution rate. The
distribution rate has increased from 8.25% in the first quarter of 1994, to
10.00% for the three months ended March 31, 1995. Management fees as a percent
of gross revenue were 8.9% for the three-month period ended March 31, 1995
compared to 9% for the same period in 1994. Equipment management fees were 7%
of revenue for both three-month periods and incentive management fees were 1.8%
of revenue for the three-month period ended March 31, 1995 and 1.7% of revenue
for the three-month period ended March 31, 1994.
General and administrative costs reimbursed to affiliates decreased as a
percentage of total rental revenue from 6.6% for the first three months of 1994
to 5.9% (an 11% decrease) in the same period in 1995. This decrease was
primarily due to a decline in the amount of overhead costs allocated by TEM
during these periods.
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.
Once the Equipment is on-hire with a lessee, the Partnership has no way of
knowing its location. 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
March 31, 1995 which would result in the materialization of such risk.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Neither the Registrant nor the Managing General Partner is
subject to any legal proceedings.
Item 2. Changes in Securities.
Not Applicable.
Item 3. Defaults upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The Registrant did not submit any matters to a vote of security
holders during the first three months of 1995.
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
There were no reports on Form 8-K for the three months ended
March 31, 1995.
<PAGE> 15
Exhibit Index
Ex. 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
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