TEXTAINER FINANCIAL SERVICES CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
August 13, 1999
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 III,
L.P. (the "Company") the Company's Quarterly Report on Form 10-Q for the Second
Quarter ended June 30, 1999.
This filing is being effected by direct transmission to the Commission's EDGAR
System.
Sincerely,
Nadine Forsman
Controller
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission file number 0-20140
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
A California Limited Partnership
(Exact name of Registrant as specified in its charter)
California 94-3121277
(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>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1999
Table of Contents
- ----------------------------------------------------------------------------------------------------------
Page
<S> <C>
Item 1. Financial Statements
Balance Sheets - June 30, 1999 (unaudited)
and December 31, 1998............................................................................. 3
Statements of Operations for the three and six months
ended June 30, 1999 and 1998 (unaudited).......................................................... 4
Statements of Partners' Capital for the six months
ended June 30, 1999 and 1998 (unaudited).......................................................... 5
Statements of Cash Flows for the six months
ended June 30, 1999 and 1998 (unaudited).......................................................... 6
Notes to Financial Statements (unaudited)......................................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................................... 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Balance Sheets
June 30, 1999 and December 31, 1998
(Amounts in thousands)
- ---------------------------------------------------------------------------------------------------------------
1999 1998
--------------- ---------------
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $40,994 (1998: $40,147) (note 4) $ 62,478 $ 65,872
Cash 1,869 3,455
Accounts receivable, net of allowance for doubtful
accounts of $654 (1998: $439) 3,718 4,185
Due from affiliates, net (note 2) 637 1,041
Prepaid expenses 9 26
--------------- ---------------
$ 68,711 $ 74,579
=============== ===============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 648 $ 502
Accrued liabilities 71 94
Accrued recovery costs 144 116
Accrued damage protection plan costs 399 291
Accrued maintenance and repair costs 87 69
Warranty claims 168 188
Deferred quarterly distribution 97 97
Container purchases payable 56 56
--------------- ---------------
Total liabilities 1,670 1,413
--------------- ---------------
Partners' capital:
General partners - -
Limited partners 67,041 73,166
--------------- ---------------
Total partners' capital 67,041 73,166
--------------- ---------------
$ 68,711 $ 74,579
=============== ===============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Statements of Operations
For the three and six months ended June 30, 1999 and 1998
(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, 1999 June 30, 1998 June 30, 1999 June 30, 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Rental income $ 3,607 $ 4,724 $ 7,473 $ 9,569
--------------- --------------- --------------- ---------------
Costs and expenses:
Direct container expenses 1,546 1,055 2,589 2,091
Bad debt expense (benefit) 57 (103) 230 (202)
Depreciation 1,578 1,674 3,154 3,369
Write-down of containers (note 4) 221 - 396 -
Professional fees 10 11 19 18
Management fees to affiliates (note 2) 359 451 736 868
General and administrative costs
to affiliates (note 2) 213 268 467 573
Other general and administrative costs 42 26 83 79
--------------- --------------- --------------- ---------------
4,026 3,382 7,674 6,796
--------------- --------------- --------------- ---------------
(Loss) income from operations (419) 1,342 (201) 2,773
--------------- --------------- --------------- ---------------
Other expense:
Interest income 42 28 89 43
Loss on sale of containers (480) (159) (737) (117)
--------------- --------------- --------------- ---------------
(438) (131) (648) (74)
--------------- --------------- --------------- ---------------
Net (loss) earnings $ (857) $ 1,211 $ (849) $ 2,699
=============== =============== =============== ===============
Allocation of net (loss) earnings (note 2):
General partners $ 53 $ 30 $ 53 $ 60
Limited partners (910) 1,181 (902) 2,639
--------------- --------------- --------------- ---------------
$ (857) $ 1,211 $ (849) $ 2,699
=============== =============== =============== ===============
Limited partners' per unit share
of net (loss) earnings $ (0.15) $ 0.19 $ (0.15) $ 0.43
=============== =============== =============== ===============
Limited partners' per unit share
of distributions $ 0.41 $ 0.46 $ 0.83 $ 0.93
=============== =============== =============== ===============
Weighted average number of limited
partnership units outstanding 6,136,934 6,168,527 6,136,934 6,168,527
=============== =============== =============== ===============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
For the six months ended June 30, 1999 and 1998
(Amounts in thousands)
(unaudited)
- ------------------------------------------------------------------------------------------------------
Partners' Capital
------------------------------------------------------------
General Limited Total
--------------- --------------- ---------------
<S> <C> <C> <C>
Balances at January 1, 1998 $ - $ 80,438 $ 80,438
Distributions (60) (5,706) (5,766)
Net earnings 60 2,639 2,699
--------------- --------------- ---------------
Balances at June 30, 1998 $ - $ 77,371 $ 77,371
=============== =============== ===============
Balances at January 1, 1999 $ - $ 73,166 $ 73,166
Distributions (53) (5,066) (5,119)
Redemptions (note 5) - (157) (157)
Net loss 53 (902) (849)
--------------- --------------- ---------------
Balances at June 30, 1999 $ - $ 67,041 $ 67,041
=============== =============== ===============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Statements of Cash Flows
For the six months ended June 30, 1999 and 1998
(Amounts in thousands)
(unaudited)
- ---------------------------------------------------------------------------------------------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) earnings $ (849) $ 2,699
Adjustments to reconcile net (loss) earnings to
net cash provided by operating activities:
Depreciation 3,154 3,369
Container write-down (note 4) 396 -
Increase (decrease) in allowance for doubtful accounts,
excluding write-off (note 6) 215 (288)
Loss on sale of containers 737 117
(Increase) decrease in assets:
Accounts receivable, excluding write-off (note 6) 306 861
Due from affiliates, net 206 (212)
Prepaid expenses 17 53
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 123 14
Accrued recovery costs 28 (42)
Accrued damage protection plan costs 108 (29)
Accrued maintenance and repair costs 18 38
Warranty claims (20) (20)
---------------- ----------------
Net cash provided by operating activities 4,439 6,560
---------------- ----------------
Cash flows from investing activities:
Proceeds from sale of containers 2,330 1,354
Container purchases (3,079) (484)
---------------- ----------------
Net cash (used in) provided by investing activities (749) 870
---------------- ----------------
Cash flows from financing activities:
Redemptions of limited partnership units (157) -
Distributions to partners (5,119) (5,765)
---------------- ----------------
Net cash used in financing activities (5,276) (5,765)
---------------- ----------------
Net (decrease) increase in cash (1,586) 1,665
Cash at beginning of period 3,455 370
---------------- ----------------
Cash at end of period $ 1,869 $ 2,035
================ ================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Statements Of Cash Flows--Continued
For the six months ended June 30, 1999 and 1998
(Amounts in thousands)
(unaudited)
- ----------------------------------------------------------------------------------------------------------
Supplemental Disclosures:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of container purchases, distributions
to partners, and proceeds from sale of containers which had not been paid or
received as of June 30, 1999 and 1998, and December 31, 1998 and 1997, 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, 1999 and 1998.
June 30 Dec. 31 June 30 Dec. 31
1999 1998 1998 1997
----------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
Container purchases included in:
Due to affiliates.............................. $ 21 $ 16 $ 7 $ 42
Container purchases payable.................... 56 56 455 365
Distributions to partners included in:
Due to affiliates.............................. 9 9 10 10
Deferred quarterly distribution................ 97 97 122 121
Proceeds from sale of containers included in:
Due from affiliates............................ 619 812 375 399
The following table summarizes the amounts of container purchases, distributions
to partners and proceeds from sale of containers 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, 1999 and 1998.
1999 1998
---- ----
Container purchases recorded...................................................... $ 3,084 $ 539
Container purchases paid.......................................................... 3,079 484
Distributions to partners declared................................................ 5,119 5,766
Distributions to partners paid.................................................... 5,119 5,765
Proceeds from sale of containers recorded......................................... 2,137 1,330
Proceeds from sale of containers received......................................... 2,330 1,354
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND III, L.P.
(a California Limited Partnership)
Notes To Financial Statements
For the three and six months ended June 30, 1999 and 1998
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
- --------------------------------------------------------------------------------
Note 1. General
Textainer Equipment Income Fund III, L.P. (the Partnership), a California
limited partnership with a maximum life of 20 years, was formed in 1990.
The Partnership owns a fleet of intermodal marine cargo containers, which
are leased to international shipping lines.
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, 1999 and December 31,
1998, and the results of its operations, changes in partners' capital and
cash flows for the three and six-month periods ended June 30, 1999 and
1998, 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, 1998, in the Annual Report filed on Form 10-K.
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 in order to conform to the 1999 financial statement
presentation.
Note 2. Transactions with Affiliates
Textainer Financial Services Corporation (TFS) is the managing general
partner of the Partnership and is a wholly-owned subsidiary of Textainer
Capital Corporation (TCC). Textainer Equipment Management Limited (TEM)
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 other limited partnerships. Prior
to its liquidation in October 1998, Textainer Acquisition Services Limited
(TAS), a former affiliate of the General Partners, performed services
related to the acquisition of containers outside the United States on
behalf of the Partnership. Effective November 1998, these services are
being performed by TEM. The General Partners manage and control the
affairs of the Partnership.
In accordance with the Partnership Agreement, sections 3.10 through 3.12,
net earnings or losses and distributions are generally allocated 1% to the
General Partners and 99% to the Limited Partners. If the allocation of
distributions exceeds the allocation of net earnings and creates a deficit
in the General Partners' aggregate capital account, the Partnership
Agreement provides for a special allocation of gross income equal to the
amount of the deficit.
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners, or TAS prior to its liquidation, an acquisition fee,
an equipment management fee, an incentive 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 $147 and $25 of container acquisition fees as a
component of container costs during the six-month periods ended June 30,
1999 and 1998. The Partnership incurred $107 and $213 of incentive
management fees during the three and six-month periods ended June 30, 1999
and $120 and $240 during the equivalent periods in 1998, respectively. No
equipment liquidation fees were incurred during these periods.
The Partnership's container fleet 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
leasing operations; such cash is included in due from affiliates, net at
June 30, 1999 and December 31, 1998.
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. These fees
totaled $252 and $523 during the three and six-month periods ended June
30, 1999, respectively, and $331 and $628 for the comparable periods in
1998. The Partnership's container fleet is leased by TEM to third party
lessees on operating master leases, spot leases, term leases and direct
finance leases. The majority of the container fleet is leased under
operating master leases with limited terms and no purchase option.
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 TFS and TEM. General and
administrative costs allocated to the Partnership for the three and
six-month periods ended June 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
--------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Salaries $115 $138 $249 $286
Other 98 130 218 287
---- ---- ---- ----
Total general and
administrative costs $213 $268 $467 $573
==== ==== ==== ====
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. TFS allocates these
costs based on the ratio of the Partnership's containers to the total
container fleet of all limited partnerships managed by TFS. The General
Partners allocated the following general and administrative costs to the
Partnership for the three and six-month periods ended June 30, 1999 and
1998:
Three months Six months
ended June 30, ended June 30,
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
TEM $191 $241 $418 $519
TFS 22 27 49 54
---- ---- ---- ----
Total general and
administrative costs $213 $268 $467 $573
==== ==== ==== ====
</TABLE>
The General Partners 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. In addition, the General
Partners are entitled to an acquisition fee for any containers resold to
the Partnership.
At June 30, 1999 and December 31, 1998, due from affiliates, net is
comprised of:
1999 1998
----- -----
Due from affiliates:
Due from TEM................................... $ 685 $ 1,087
----- -----
Due to affiliates:
Due to TFS..................................... 41 37
Due to TCC..................................... 6 8
Due to TL...................................... 1 1
----- -----
48 46
----- -----
Due from affiliates, net $ 637 $ 1,041
===== =====
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 remittance of expenses
and fees described above and in the accrual and remittance of net rental
revenues and sales proceeds from TEM.
Note 3. Rentals Under Long-Term Operating Leases
The following are the future minimum rent receivables under cancelable
long-term operating leases at June 30, 1999. Although the leases are
generally cancelable with a penalty at the end of each twelve-month
period, the following schedule assumes that the leases will not be
terminated.
Year ending June 30:
2000............................................. $620
2001............................................. 64
2002............................................. 39
2003............................................. 38
2004............................................. 32
------
Total minimum future rentals receivable.......... $793
======
Note 4. Container Rental Equipment Write-Down
New container prices have been declining since 1995, and the cost of new
containers at year-end 1998 and during the first half of 1999 was
significantly less than the cost of containers purchased in prior years.
The Partnership evaluated the recoverability of the recorded amount of
container rental equipment at June 30, 1999 and December 31, 1998, and
determined that a reduction to the carrying value of the containers held
for continued use was not required, but that a write-down in value of
certain containers identified for sale was required. During the year ended
December 31, 1998 and the six-month period ended June 30, 1999, the
Partnership wrote-down the value of these containers to their estimated
fair value, which was based on recent sales prices.
At December 31, 1998, the Partnership recorded additional depreciation
expense of $349 to write down the value of 930 containers identified for
sale in low demand locations. During the six-month period ended June 30,
1999, the Partnership sold 574 of these previously written down containers
for a loss of $123 and recorded an additional depreciation expense of $396
to write down the value of 738 additional containers subsequently
identified for sale in these locations. The Partnership incurred losses on
the sale of containers previously written down as the actual sales prices
received during 1999 were lower than the estimates used for the
write-downs recorded in 1998, due to unexpected declines in container
sales prices.
If more containers in these or other low demand locations are subsequently
identified as available for sale or if container sales prices continue to
decline, the Partnership may incur additional write-downs on containers
and/or may incur losses on the sale of containers.
Note 5. Redemptions
The following redemptions were consummated by the Partnership during the
six-month period ended June 30, 1999:
<TABLE>
<CAPTION>
Units Average
Redeemed Redemption Price Amount Paid
-------- ---------------- -----------
<S> <C> <C> <C>
Inception through December 31, 1998 96,140 $14.05 $ 1,350
Quarter ended:
March 31, 1999............... 16,926 $ 9.27 157
------ -------
Partnership to date................ 113,066 $13.33 $ 1,507
======= =======
</TABLE>
There were no redemptions during the six-month period ended June 30, 1998.
The redemption price is fixed by formula.
Note 6. Accounts Receivable Write-Off
During the three-months ending March 31, 1998, the Partnership wrote-off
$680 of delinquent receivables from two lessees against which reserves
were recorded in 1994 and 1995.
Note 7. Readiness for Year 2000
Many computer systems may experience difficulty processing dates beyond
the year 1999; as a consequence, some computer hardware and software at
many companies will need to be modified or replaced prior to the year 2000
in order to remain functional. The Partnership relies on the financial and
operating systems provided by the General Partners; these systems include
both information technology systems as well as non-information technology
systems. There can be no assurance that issues related to the Year 2000
will not have a material impact on the financial condition, results of
operations or cash flows of the Partnership.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Amounts in thousands except for unit and per unit amounts)
- --------------------------------------------------------------------------------
The Financial Statements contain information, which will assist in evaluating
the financial condition of the Partnership as of and for the three and six-month
periods ended June 30, 1999 and 1998. Please refer to the Financial Statements
and Notes thereto in connection with the following discussion.
Liquidity and Capital Resources
From January 16, 1991 until May 4, 1992, the Partnership offered limited
partnership interests to the public. The Partnership received its minimum
subscription amount of $1,000 on February 11, 1991, and on May 4, 1992, the
Partnership's offering of limited partnership interests was closed at $125,000.
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. During the six-month period ended June 30, 1999,
the Partnership redeemed 16,926 units for a total dollar amount of $157. The
Partnership used excess cash to pay for the redeemed 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.
Limited Partners are currently receiving monthly cash distributions in an
annualized amount equal to 8.25% of their original investment. During the
six-month period ended June 30, 1999, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1998
through May 1999, in the amount of $5,066. On a cash basis, $4,439 of these
distributions was from operating activities and the remainder was from excess
cash. On a GAAP basis, all of these distributions were a return of capital.
At June 30, 1999, the Partnership had no commitments to purchase containers.
Net cash provided by operating activities for the six-month periods ending June
30, 1999 and 1998, was $4,439 and $6,560, respectively. The decrease of $2,121
was primarily attributable to the decrease in net earnings, adjusted for
non-cash transactions, and fluctuations in accounts receivable, excluding
write-offs, offset by fluctuations in due from affiliates, net. Net earnings,
adjusted for non-cash transactions, decreased primarily due to the decrease in
rental income and an increase in direct container expenses. These fluctuations
are discussed more fully in "Results of Operations". The decrease in accounts
receivable, excluding write-off, of $306 for the six-month period ended June 30,
1999 was primarily due to the decline in rental income. For the six-month period
ended June 30, 1998, accounts receivable, excluding write-off decreased $861
primarily due to a decrease in the average collection period of accounts
receivable and to the resolution of payment issues with one lessee. The
fluctuations in due from affiliates, net resulted from timing differences in the
payment of expenses and fees and the remittance of net rental revenues.
For the six-month period ending June 30, 1999, net cash used in investing
activities (the purchase and sale of containers) was $749 compared to net cash
provided by investing activities of $870 for the comparable period in 1998. The
difference of $1,619 was primarily due to the Partnership having purchased more
containers during the six-month period ended June 30, 1999 than during the
comparable period in 1998; however, the Partnership both sold and purchased more
containers during 1999 compared to 1998. The increase in container sales during
1999 was primarily due to the Partnership having sold containers located in low
demand locations as discussed in "Results of Operations". The Partnership also
sells containers when (i) a container reaches the end of its useful life and
(ii) an analysis indicates that the sale is warranted based on existing market
conditions and the container's age, location and condition. Until market
conditions improve, the Partnership plans to continue to sell certain containers
located in low demand locations and proceeds from container sales will fluctuate
based on the number of containers sold and the actual price received on the sale
of these and other containers.
Consistent with its investment objectives, the Partnership intends to continue
to reinvest available cash from operations and all or a significant amount of
the proceeds from container sales in additional containers. However, the number
of additional containers purchased may not equal the number of containers sold
as new container prices are likely to be greater than proceeds from container
sales. Market conditions have also had an adverse effect on the average amount
of sales proceeds recently realized from container sales. Additionally, these
market conditions are expected to continue to have an adverse effect on the
amount of cash provided by operations that is available for additional container
purchases, which has also resulted in lower than anticipated reinvestment in
containers. Market conditions are discussed more fully under "Results of
Operations".
Results of Operations
The Partnership's income (loss) 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, 1999 and
1998, 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:
1999 1998
---- ----
Beginning container fleet............... 29,237 31,342
Ending container fleet.................. 28,960 30,719
Average container fleet................. 29,099 31,031
The decline in the average container fleet of 6% from the six-month period ended
June 30, 1998 to the comparable period ended June 30, 1999 was due to the
Partnership having sold more containers than it purchased since June 30, 1998.
Although some of the sales proceeds were used to purchase additional containers,
fewer containers were bought than sold, resulting in a net decrease in the size
of the container fleet. As noted above, when containers are sold in the future,
sales proceeds are not likely to be sufficient to replace all of the containers
sold. This trend, which is expected to continue, has contributed to a slower
rate of reinvestment than had been expected by the General Partners. Other
factors related to this trend are discussed above in "Liquidity and Capital
Resources."
Rental income and direct container expenses are also affected by the average
utilization of the container fleet, which was 70% and 80% during the six-month
periods ended June 30, 1999 and 1998, respectively. This decline in utilization,
caused by lower demand, had a significant adverse effect on rental income as
discussed below. 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, 1999 and 1998.
The Partnership's loss from operations for the six-month period ending June 30,
1999 was $201 on rental income of $7,473, compared to income from operations of
$2,773 on rental income of $9,569 for the comparable period in 1998. The
decrease in rental income of $2,096, or 22%, from the six-month period ended
June 30, 1998 to the comparable period in 1999 was attributable to decreases in
container rental income and other rental income. Income from container rentals,
the major component of total revenue, decreased $1,801, or 21%, due to the
decreases in the average on-hire utilization of 13%, average container fleet of
6% and average rental rates of 4%. Rental income was also adversely affected by
the increase in leasing incentives; however, the decline in utilization, which
is discussed below, had the most significant adverse effect on rental income.
The decline in average utilization from the six-month period ended June 30, 1998
to the equivalent period in 1999 was primarily due to lower demand for leased
containers. Demand decreased primarily due to (i) shipping lines continuing to
purchase rather than lease containers as a result of historically low new
container prices and low interest rates and (ii) the growth of the trade
imbalance in Asia. Rental rates have also declined as shipping lines continued
to negotiate lower rates as a result of this lower demand and the historically
low container prices.
The trade imbalance has resulted in the continuing build-up of containers in
lower demand locations. The General Partners have continued their efforts to
reposition newer containers to higher demand locations in an effort to improve
utilization and alleviate container build-up. The Partnership continued to incur
increased direct container expenses in 1999 as a result of this repositioning.
For the near-term, the General Partners plan to monitor market conditions to
determine whether additional repositioning efforts are required. However,
currently there are no significant repositioning efforts planned.
The Partnership also plans to continue to sell certain containers located in
lower demand locations. The decision to sell these containers is based on the
current expectation that the economic benefit of selling these containers and
using the related sales proceeds to purchase new containers in high demand
locations is greater than the economic benefit of continuing to own these
containers. The majority of the containers sold during 1998 and 1999 were older
containers as the expected economic benefit of continuing to own these
containers was significantly less than that of newer containers primarily due to
their shorter remaining marine life and shipping lines' preference for leasing
newer containers.
Because of the decision to sell certain containers during 1998 and 1999, the
Partnership wrote down the value of these specifically identified containers to
their estimated fair value, which was based on recent sales prices. Due to
unanticipated declines in container sales prices, the actual sales prices
received on these containers during 1999 were lower than the estimates used for
the write-down recorded in 1998 and the first quarter of 1999, resulting in the
Partnership incurring losses upon the sale of these containers. The Partnership
recorded additional write-downs during the second quarter of 1999 on certain
containers, which were identified as meeting the same criteria for sale. Until
market conditions improve, the Partnership may incur further write-downs and/or
losses on the sale of such containers. Should the decline in economic value of
continuing to own such containers turn out to be permanent, the Partnership may
be required to increase its depreciation rate for or write-down the value of
container rental equipment.
For the near term, the General Partners do not foresee material changes in
existing market conditions and caution that both utilization and lease rates
could further decline, 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 related
to leasing and returning containers (handling income) and income from charges to
lessees for a Damage Protection Plan (DPP). For the six-month period ended June
30, 1999, the total of these other rental income items was $758, a decrease of
$295 from the equivalent period in 1998. Other income decreased primarily due to
decreases in location and handling income of $226 and $81, respectively.
Location income decreased primarily due to an increase in credits given to
lessees for picking up containers from certain locations. Handling income
decreased primarily due to a decrease in the average handling price charged per
container during the six-month period ended June 30, 1999 compared to the
equivalent period in 1998.
Direct container expenses increased $498, or 24%, from the six-month period
ending June 30, 1998 to the equivalent period in 1999, primarily due to
increases in storage and DPP expenses of $291 and $210, respectively. Storage
expense increased due to the decrease in average utilization noted above and due
to an increase in the average storage cost per container. DPP expense increased
primarily due to increases in the average DPP cost per container and in the
number of containers carrying DPP in the six-month period ended June 30, 1999
compared to the equivalent period in 1998.
Bad debt expense increased from a benefit of $202 for the six-month period ended
June 30, 1998 to an expense of $230 for the comparable period in 1999. The
effect of insurance proceeds received during the six-month period ended June 30,
1998 relating to certain receivables against which reserves had been recorded in
1994 and 1995 as well as the resolution of payment issues with one lessee during
1998 were primarily responsible for the lower cost in 1998 and, therefore, the
fluctuation in bad debt expense between the periods.
Depreciation expense decreased $215, or 6%, from the six-month period ended June
30, 1998 to the comparable period in 1999 due to the decrease in fleet size.
New container prices have been declining since 1995, and the cost of new
containers at year-end 1998 and during the first half of 1999, was significantly
less than the cost of containers purchased in prior years. The Partnership
evaluated the recoverability of the recorded amount of container rental
equipment at June 30, 1999 and December 31, 1998, and determined that a
reduction to the carrying value of the containers held for continued use was not
required, but that a write-down in value of certain containers identified for
sale was required. During the year ended December 31, 1998 and the six-month
period ended June 30, 1999, the Partnership wrote-down the value of these
containers to their estimated fair value, which was based on recent sales
prices.
At December 31, 1998, the Partnership recorded additional depreciation expense
of $349 to write down the value of 930 containers identified for sale in low
demand locations. During the six-month period ended June 30, 1999, the
Partnership sold 574 of these previously written down containers for a loss of
$123 and recorded an additional depreciation expense of $396 to write down the
value of 738 additional containers subsequently identified for sale in these
locations. The Partnership incurred losses on the sale of containers previously
written down as the actual sales prices received during 1999 were lower than the
estimates used for the write-down recorded in 1998, due to unexpected declines
in container sales prices.
If more containers in these or other low demand locations are subsequently
identified as available for sale or if container sales prices continue to
decline, the Partnership may incur additional write-downs on containers and/or
may incur losses on the sale of containers.
Management fees to affiliates decreased $132, or 15%, from the six-month period
ended June 30, 1998 to the comparable period in 1999, due to decreases in
equipment and incentive management fees. The decrease in equipment management
fees resulted primarily from the decrease in rental income, upon which the
management fee is primarily based, and these fees were approximately 7% of
rental income for the six-month period ended June 30, 1999. Equipment management
fees for the six-month period ended June 30, 1998 were only 6% of rental income
due to an adjustment resulting from the write-off of receivables for two
lessees. Incentive management fees, which are based on the Partnership's limited
and general partner distributions and partners' capital, decreased primarily due
to the decrease in the limited partner distribution percentage from 9.25% to
8.25%, effective July 1, 1998.
General and administrative costs to affiliates decreased $106, or 18%, from the
six-month period ended June 30, 1998 to the comparable period in 1999 primarily
due to a decrease in the allocation of overhead costs from TEM as the
Partnership represented a smaller portion of the total fleet managed by TEM.
Other expense increased $574 from the six-month period ended June 30, 1998 to
the comparable period in 1999 due to the increase of loss on sale of containers
of $620, offset by an increase in interest income of $46. The loss on sale of
containers recorded in 1999 was due to the Partnership having sold containers
with higher book values and at lower average sales prices per container than the
comparable period in 1998 and due to the loss recorded on the sale of containers
previously written down as discussed above.
Net earnings per limited partnership unit decreased from earnings of $0.43 for
the six-month period ending June 30, 1998 to a loss of $0.15 for the same period
in 1999. This decrease reflected the decrease in net earnings allocated to
limited partners from earnings of $2,639 to a loss of $902, respectively. The
allocation of net earnings (loss) included a special allocation of gross income
to the General Partners made in accordance with the Partnership Agreement.
The following is a comparative analysis of the results of operations for the
three-month periods ended June 30, 1999 and 1998.
The Partnership's loss from operations for the three-month period ending June
30, 1999 was $419 on rental income of $3,607, compared to income from operations
of $1,342 on rental income of $4,724 for the comparable period in 1998. The
decrease in rental income of $1,117, or 24%, from the three-month period ended
June 30, 1998 to the comparable period in 1999 was attributable to decreases in
container rental income and other rental income. Income from container rentals
decreased $962, or 23%, due to the decreases in the average on-hire utilization
of 13%, average container fleet of 5%, and average rental rates of 4%. Leasing
incentives also increased; however, the decline in utilization had the most
significant adverse effect on rental income.
For the three-month period ended June 30, 1999, other rental income was $321, a
decrease of $155 from the equivalent period in 1998. Other income decreased
primarily due to a decrease in location income of $140. Location income
decreased due to an increase in credits given to lessees for picking up
containers from certain locations.
Direct container expenses increased $491, or 47% from the three-month period
ending June 30, 1998 to the equivalent period in 1999, primarily due to the
increases in DPP, repositioning and storage expenses of $207, $174 and $145,
respectively. DPP expense increased primarily due to a higher average DPP cost
per container and to a greater number of containers covered by DPP during the
three-month period ended June 30, 1999 compared to the same period in 1998.
Repositioning expense increased due to an increase in the number of containers
repositioned and due to a higher average repositioning cost per container
primarily due to the efforts noted above. Storage expense increased due to the
decrease in average utilization noted above and due to an increase in the
average storage cost per container.
Bad debt expense increased from a benefit of $103 for the three-month period
ended June 30, 1998 to an expense of $57 for the comparable period in 1999. The
resolution of payment issues with one lessee during 1998 and lower 1998 reserve
requirements were primarily responsible for the lower cost in 1998 and,
therefore, the fluctuation in bad debt expense between the periods.
Depreciation expense decreased $96, or 6%, from the three-month period ended
June 30, 1998 to the comparable period in 1999 primarily due to the decrease in
fleet size.
During the three-month period ended June 30, 1999, the Partnership sold 199
previously written down containers for a loss of $14 and recorded an additional
depreciation expense of $221 to write down the value of 182 additional
containers subsequently identified for sale in certain low demand locations.
Management fees to affiliates decreased $92, or 20%, from the three-month period
ended June 30, 1998 to the comparable period in 1999, due to decreases in
equipment and incentive management fees. The decrease in equipment management
fees resulted primarily from the decrease in rental income. Incentive management
fees decreased primarily due to the decrease in the limited partner distribution
percentage from 9.25% to 8.25%, effective July 1, 1998.
General and administrative costs to affiliates decreased $55, or 21%, from the
three-month period ended June 30, 1998 to the comparable period in 1999
primarily due to a decrease in the allocation of overhead costs from TEM.
Other expense increased $307, or 234%, from the three-month period ended June
30, 1998 to the comparable period in 1999. The increase was primarily due to the
increase in loss on sale of containers resulting primarily from the Partnership
having sold containers with higher book values at lower average sales prices.
Net earnings per limited partnership unit decreased from earnings of $0.19 for
the three-month period ending June 30, 1998 to a loss of $0.15 for the same
period in 1999, reflecting the decrease in net earnings allocated to limited
partners from earnings of $1,181 to a loss of $910, respectively. The allocation
of net earnings (loss) included a special allocation of gross income to the
General Partners made in accordance with the Partnership Agreement.
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, 1999, 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.
Readiness for Year 2000
Many computer systems may experience difficulty processing dates beyond the year
1999; as a consequence, some computer hardware and software at many companies
will need to be modified or replaced prior to the year 2000 in order to remain
functional. The Partnership relies on the financial and operating systems
provided by the General Partners; these systems include both information
technology (IT) systems as well as non-information technology (non-IT) systems.
For IT and non-IT systems developed by independent third parties
(externally-developed) the General Partners have obtained representations from
their vendors and suppliers that these systems are Year 2000 compliant and have
internally tested mission critical systems as operational. The General Partners
have reviewed all internally-developed IT and non-IT systems for Year 2000
issues and identified certain of these systems which required revision. The
General Partners have completed the revision and testing of these identified
systems, and these revised systems are now operational.
The cost of the revisions and testing relating to these systems was incurred by
TEM and a portion of the cost was allocated to the Partnership as part of
general and administrative costs allocated from TEM during 1998. While Year 2000
remediation costs were not specifically identified, it is estimated that total
Year 2000 related expenses included in allocated overhead from TEM were less
than $25. The Partnership and the General Partners do not anticipate incurring
significant additional remediation costs related to the Year 2000 issue in 1999.
There has been no material effect on the Partnership's financial condition and
results of operations as a result of TEM's delay in routine systems projects as
a result of Year 2000 remediation.
As noted above, Year 2000 compliance testing was undertaken by the General
Partners on both externally- and internally-developed systems. Standard
transactions were processed under simulated operating conditions for dates
crossing over January 1, 2000 as well as for other critical dates such as
February 29, 2000. In the standard business scenarios tested, the identified
systems appeared to function correctly. Under nonstandard conditions or
unforeseen scenarios, the results may be different. Therefore, these tests,
regardless of how carefully they were conducted, cannot guarantee that the
General Partners' systems will function without error in the Year 2000 and
beyond. If these systems are not operational in the Year 2000, the General
Partners have determined that they can operate manually for approximately two to
three months while correcting the system problems before experiencing material
adverse effects on the Partnership's and the General Partners' business and
results of operations. However, shifting portions of the daily operations to
manual processes may result in time delays and increased processing costs.
Additionally, the Partnership and General Partners may not be able to provide
lessees with timely and pertinent information, which may negatively affect
customer relations and lead to the potential loss of lessees, even though the
immediate monetary consequences of this would be limited by the standard
Partnership lease agreements between the lessees and the Partnership.
The Partnership and the General Partners are also continuing their assessment of
Year 2000 issues with third parties, comprised of lessees, manufacturers,
depots, and other vendors and suppliers, with whom the Partnership and the
General Partners have a material business relationship (Third Parties).
Non-compliance by other Third Parties is not expected to have a material effect
on the Partnership's results of operations and financial condition. The General
Partners have sent letters to the Partnership's lessees and other Third Parties
requesting representations on their Year 2000 readiness. The General Partners
have received responses to 90% of these letters with all but seven respondents
representing that they are or will be Year 2000 compliant. The General Partners
are continuing to follow up with non-respondents and will continue to identify
additional Third Parties whose Year 2000 readiness should be assessed.
Non-compliance by these seven respondents and by the remaining non-respondents
is not expected to have a material adverse effect on the Partnership's
operations or financial condition.
Nevertheless, the Partnership and the General Partners believe that they are
likely to encounter Year 2000 problems with certain Third Parties, particularly
those with significant operations within countries that are not actively
promoting correction of Year 2000 issues. Possible consequences of Year 2000
non-compliance among Third Parties include, but are not limited to, (i) TEM's
inability to provide service to certain areas of the world, (ii) delays in
container movement, (iii) payment and collection difficulties, and (iv)
invoicing errors due to late reporting of transactions. These types of problems
could result in additional operating costs and loss of lessee business. As
discussed above, the General Partners are prepared to shift portions of their
daily operations to manual processes in the event of Third Party non-compliance.
With respect to manufacturers, vendors and other suppliers, the General Partners
would also attempt to find alternate sources for goods and services. With
respect to depots and agents who handle, inspect or repair containers, if the
majority of the computer systems and networks of TEM are operational, the
General Partners believe that they will be able to compensate manually for these
Third Parties' failures (e.g., one field office performing data entry for
another, communication with depots conducted without computers), by using
temporary personnel at additional cost. Although costs will be incurred to pay
for the temporary personnel, the Partnership and the General Partners do not
expect these costs to be material to the Partnership. With respect to lessees'
non-compliance, the General Partners would compensate for communications
failures manually. If a lessee's noncompliance is broad enough to disrupt
significantly the operations of its shipping business, the resulting loss of
revenue could result in the lessee renting fewer containers. The Partnership and
the General Partners are unable to estimate the financial impact of these
problems, but to the extent that lessees' problems result in weakening demand
for containers, the Partnership's results of operations would likely be
adversely affected. If Year 2000 problems result in delays in collections,
either because of the additional time required to communicate with lessees or
because of lessees' loss of revenues, the Partnership's cash flow could be
affected and distributions to general and limited partners could be reduced. The
Partnership and the General Partners believe that these risks are inherent in
the industry and are not specific to the Partnership or General Partners.
Forward Looking Statements and Other Risk Factors Relating to the Year 2000
The foregoing analysis of Year 2000 issues includes forward-looking statements
and predictions about possible or future events, results of operations and
financial condition. As such, this analysis may prove to be inaccurate, because
of the assumptions made by the Partnership and the General Partners or the
actual development of future events. No assurance can be given that any of these
forward-looking statements and predictions will ultimately prove to be correct
or even substantially correct. Some of the risks relating to Year 2000
compliance are described above. In addition, in analyzing Year 2000 issues, the
Partnership and the General Partners have assumed that the infrastructure of the
United States and most other countries, including ports and customs, remains
intact. If the infrastructure of one or more countries were to fail, the
resulting business disruption would likely have an adverse effect on the
Partnership and the General Partners. The Partnership and General Partners are
unable to determine a reasonably likely worst case scenario in the event of an
infrastructure failure or failures.
Various other risks and uncertainties could also affect the Partnership and
could affect the Year 2000 analysis, causing the effect on the Partnership to be
more severe than discussed above. These risks and uncertainties include, but are
not limited to, the following. The Partnerships' and the General Partners' Year
2000 compliance testing cannot guarantee that all computer systems will function
without error beyond the Year 2000. Tests were only conducted of normal business
scenarios, and no independent verification or testing was used. Risks also exist
with respect to Year 2000 compliance by Third Parties, such as the risk that an
external party, who may have no relationship to the Partnership or General
Partners, but who has a significant relationship with one or more Third Parties,
may have a system failure that adversely affects the Partnership's ability to
conduct its business. While the Partnership and the General Partners are
attempting to identify such external parties, no assurance can be given that
they will be able to do so. Furthermore, Third Parties with direct relationships
with the Partnership, whose systems have been identified as likely to be Year
2000 compliant, may suffer a breakdown due to unforeseen circumstances. It is
also possible that the representations and warranties collected in good faith by
the General Partners from these Third Parties regarding their compliance with
Year 2000 issues may be incorrect, as the information collected was not
independently verified by the General Partners. Finally, it should be noted that
the foregoing discussion of Year 2000 issues assumes that to the extent the
General Partners' systems fail, either because of unforeseen complications or
because of Third Parties' failure, switching to manual operations will allow the
Partnership to continue to conduct its business. While the Partnership and the
General Partners believe this assumption to be reasonable, if it is incorrect,
the Partnership's results of operations would likely be adversely affected.
<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 III, L.P.
A California Limited Partnership
By Textainer Financial Services Corporation
The Managing General Partner
By _______________________________
John R. Rhodes
Executive Vice President
Date: August 13, 1999
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>
Signature Title Date
<S> <C> <C>
________________________ Executive Vice President, August 13, 1999
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
________________________ President (Principal Executive August 13, 1999
John A. Maccarone 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 III, L.P.
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: August 13, 1999
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>
Signature Title Date
<S> <C> <C>
/s/John R. Rhodes Executive Vice President, August 13, 1999
________________________ (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/John A. Maccarone President (Principal Executive August 13, 1999
________________________ Officer)
John A. Maccarone
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
2nd Quarter 1999 10Q
</LEGEND>
<CIK> 0000866888
<NAME> Textainer Equipment Income Fund III
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,869
<SECURITIES> 0
<RECEIVABLES> 5,009
<ALLOWANCES> 654
<INVENTORY> 0
<CURRENT-ASSETS> 9
<PP&E> 103,472
<DEPRECIATION> 40,994
<TOTAL-ASSETS> 68,711
<CURRENT-LIABILITIES> 1,670
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 67,041
<TOTAL-LIABILITY-AND-EQUITY> 68,711
<SALES> 0
<TOTAL-REVENUES> 7,473
<CGS> 0
<TOTAL-COSTS> 7,674
<OTHER-EXPENSES> 648
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (849)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (849)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
