TEXTAINER FINANCIAL SERVICES CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
November 12, 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 Third
Quarter ended September 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 September 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 September 30, 1999
Table of Contents
- -------------------------------------------------------------------------------------------------------------------
Page
<S> <C>
Item 1. Financial Statements
Balance Sheets - September 30, 1999 (unaudited)
and December 31, 1998............................................................................. 3
Statements of Operations for the three and nine months
ended September 30, 1999 and 1998 (unaudited)..................................................... 4
Statements of Partners' Capital for the nine months
ended September 30, 1999 and 1998 (unaudited)..................................................... 5
Statements of Cash Flows for the nine months
ended September 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
September 30, 1999 and December 31, 1998
(Amounts in thousands)
- ---------------------------------------------------------------------------------------------------------------
1999 1998
--------------- ---------------
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $40,889 (1998: $40,147) (note 4) $ 59,710 $ 65,872
Cash 2,198 3,455
Accounts receivable, net of allowance for doubtful
accounts of $722 (1998: $439) 3,821 4,185
Due from affiliates, net (note 2) 833 1,041
Prepaid expenses - 26
--------------- ---------------
$ 66,562 $ 74,579
=============== ===============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 527 $ 502
Accrued liabilities 185 94
Accrued recovery costs 156 116
Accrued damage protection plan costs 415 291
Accrued maintenance and repair costs 82 69
Warranty claims 159 188
Deferred quarterly distributions 97 97
Container purchases payable 258 56
--------------- ---------------
Total liabilities 1,879 1,413
--------------- ---------------
Partners' capital:
General partners - -
Limited partners 64,683 73,166
--------------- ---------------
Total partners' capital 64,683 73,166
--------------- ---------------
$ 66,562 $ 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 nine months ended September 30, 1999 and 1998
(Amounts in thousands except for unit and per unit amounts)
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Three months Three months Nine months Nine months
Ended Ended Ended Ended
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Rental income $ 3,820 $ 4,712 $ 11,293 $ 14,594
-------------- -------------- -------------- --------------
Costs and expenses:
Direct container expenses 1,124 1,031 3,713 3,435
Bad debt expense (benefit) 86 (9) 316 (211)
Depreciation 1,524 1,661 4,678 5,030
Write-down of containers (note 4) 147 - 543 -
Professional fees 33 10 52 28
Management fees to affiliates (note 2) 373 436 1,109 1,304
General and administrative costs to affiliates (note 2) 159 243 626 816
Other general and administrative costs 44 47 127 126
-------------- -------------- -------------- --------------
3,490 3,419 11,164 10,528
-------------- -------------- -------------- --------------
Income from operations 330 1,293 129 4,066
-------------- -------------- -------------- --------------
Other expense:
Interest income 30 35 119 78
Loss on sale of containers (160) (254) (897) (371)
-------------- -------------- -------------- --------------
(130) (219) (778) (293)
-------------- -------------- -------------- --------------
Net earnings (loss) $ 200 $ 1,074 $ (649) $ 3,773
============== ============== ============== ==============
Allocation of net earnings (loss) (note 2):
General partners $ 27 $ 28 $ 80 $ 88
Limited partners 173 1,046 (729) 3,685
-------------- -------------- -------------- --------------
$ 200 $ 1,074 $ (649) $ 3,773
============== ============== ============== ==============
Limited partners' per unit share
of net earnings (loss) $ 0.03 $ 0.17 $ (0.12) $ 0.60
============== ============== ============== ==============
Limited partners' per unit share
of distributions $ 0.41 $ 0.43 $ 1.24 $ 1.35
============== ============== ============== ==============
Weighted average number of limited
partnership units outstanding 6,136,934 6,160,989 6,136,934 6,167,522
============== ============== ============== ==============
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 nine months ended September 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 (88) (8,351) (8,439)
Redemptions - (80) (80)
Net earnings 88 3,685 3,773
--------------- --------------- ---------------
Balances at September 30, 1998 $ - $ 75,692 $ 75,692
=============== =============== ===============
Balances at January 1, 1999 $ - $ 73,166 $ 73,166
Distributions (80) (7,597) (7,677)
Redemptions (note 5) - (157) (157)
Net loss 80 (729) (649)
--------------- --------------- ---------------
Balances at September 30, 1999 $ - $ 64,683 $ 64,683
=============== =============== ===============
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 nine months ended September 30, 1999 and 1998
(Amounts in thousands)
(unaudited)
- ------------------------------------------------------------------------------------------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) earnings $ (649) $ 3,773
Adjustments to reconcile net (loss) earnings to
net cash provided by operating activities:
Depreciation 4,678 5,030
Container write-down (note 4) 543 -
Increase (decrease) in allowance for doubtful accounts,
excluding write-off (note 6) 283 (305)
Loss on sale of containers 897 371
(Increase) decrease in assets:
Accounts receivable, excluding write-off (note 6) 164 995
Due from affiliates, net 35 (271)
Prepaid expenses 26 154
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 116 37
Accrued recovery costs 40 (17)
Accrued damage protection plan costs 124 (34)
Accrued maintenance and repair costs 13 70
Warranty claims (29) (30)
--------------- ---------------
Net cash provided by operating activities 6,241 9,773
--------------- ---------------
Cash flows from investing activities:
Proceeds from sale of containers 3,517 2,101
Container purchases (3,181) (912)
--------------- ---------------
Net cash provided by investing activities 336 1,189
--------------- ---------------
Cash flows from financing activities:
Redemptions of limited partnership units (157) (80)
Distributions to partners (7,677) (8,463)
--------------- ---------------
Net cash used in financing activities (7,834) (8,543)
--------------- ---------------
Net (decrease) increase in cash (1,257) 2,419
Cash at beginning of period 3,455 370
--------------- ---------------
Cash at end of period $ 2,198 $ 2,789
=============== ===============
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 nine months ended September 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 September 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
nine-month periods ended September 30, 1999 and 1998.
Sept. 30 Dec. 31 Sept. 30 Dec. 31
1999 1998 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Container purchases included in:
Due to affiliates.............................. $ - $ 16 $ - $ 42
Container purchases payable.................... 258 56 339 365
Distributions to partners included in:
Due to affiliates.............................. 9 9 9 10
Deferred quarterly distribution................ 97 97 98 121
Proceeds from sale of containers included in:
Due from affiliates............................ 623 812 430 399
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
nine-month periods ended September 30, 1999 and 1998.
1999 1998
---- ----
Container purchases recorded.................................................... $3,367 $ 844
Container purchases paid........................................................ 3,181 912
Distributions to partners declared.............................................. 7,677 8,439
Distributions to partners paid.................................................. 7,677 8,463
Proceeds from sale of containers recorded....................................... 3,328 2,132
Proceeds from sale of containers received....................................... 3,517 2,101
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 nine months ended September 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 September 30, 1999, and the
results of its operations, changes in partners' capital and cash flows for
the three and nine-month periods ended September 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 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 $160 and $40 of container acquisition fees as a
component of container costs during the nine-month periods ended September
30, 1999 and 1998, respectively. The Partnership incurred $107 and $320 of
incentive management fees during the three and nine-month periods ended
September 30, 1999 and $107 and $347 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
September 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 $266 and $789 during the three and nine-month periods ended
September 30, 1999, respectively, and $329 and $957 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
nine-month periods ended September 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended Sept. 30, ended Sept. 30,
--------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Salaries $ 93 $130 $342 $416
Other 66 113 284 400
--- --- --- ---
Total general and
administrative costs $159 $243 $626 $816
=== === === ===
</TABLE>
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 nine-month periods ended September 30, 1999
and 1998:
<TABLE>
<CAPTION>
Three months Nine months
ended Sept. 30, ended Sept. 30,
--------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
TEM $140 $220 $558 $739
TFS 19 23 68 77
--- --- --- ---
Total general and
administrative costs $159 $243 $626 $816
=== === === ===
</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 September 30, 1999 and December 31, 1998, due from affiliates, net is
comprised of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Due from affiliates:
Due from TEM....................... $ 892 $ 1,087
---- ------
Due to affiliates:
Due to TFS......................... 41 37
Due to TCC......................... 17 8
Due to TL.......................... 1 1
---- ------
59 46
---- ------
Due from affiliates, net $ 833 $ 1,041
==== ======
</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 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 September 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 September 30:
2000............................................. $1,140
2001............................................. 179
2002............................................. 172
2003............................................. 85
2004............................................. 45
-----
Total minimum future rentals receivable.......... $1,621
=====
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 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
September 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
nine-month period ended September 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 a write-down of $349 on 930
containers identified for sale in low demand locations. During the
nine-month period ended September 30, 1999, the Partnership recorded
additional write-downs of $543 on 1,064 containers subsequently identified
for sale in these locations and sold 1,206 previously written down
containers for a loss of $259. 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 and 1999, due to unexpected declines in container sales
prices.
If more containers in these or other 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. The Partnership will continue to
evaluate the recoverability of the recorded amounts of container rental
equipment and cautions that a write-down of container rental equipment
and/or an increase in its depreciation rate may be required in future
periods.
Note 5. Redemptions
The following redemptions were consummated by the Partnership during the
nine-month period ended September 30, 1999:
<TABLE>
<CAPTION>
Units Average
Redeemed Redemption Price Amount Paid
-------- ---------------- -----------
<S> <C> <C> <C>
Inception through December 31, 1998 96,140 $14.04 $1,350
Nine-month period ended:
September 30, 1999........... 16,926 $ 9.27 157
------ -----
Partnership to date................ 113,066 $13.33 $1,507
======= =====
The redemption price is fixed by formula.
</TABLE>
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
nine-month periods ended September 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 nine-month period ended September 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
nine-month period ended September 30, 1999, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1998
through August 1999, in the amount of $7,597. On a cash basis, $6,241 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.
Beginning with cash distributions to limited partners for the month of October
1999, payable November 1999, the Partnership will make distributions at an
annualized rate of 7% on each unit. This reduction is the result of current
market conditions, which are discussed in detail below.
At September 30, 1999, the Partnership had no commitments to purchase
containers.
Net cash provided by operating activities for the nine-month periods ending
September 30, 1999 and 1998, was $6,241 and $9,773, respectively. The decrease
of $3,532 was primarily attributable to the decrease in net earnings, adjusted
for non-cash transactions, and the smaller decrease in accounts receivable,
excluding write-off, offset by the fluctuation in due from affiliates, net. Net
earnings, adjusted for non-cash transactions, decreased primarily due to the
decrease in rental income which is discussed more fully in "Results of
Operations". The decrease in accounts receivable, excluding write off, for the
nine-month period ended September 30, 1999 was primarily due to the decrease in
rental income. For the comparable period in 1998, accounts receivable, excluding
write off, decreased primarily due to a decrease in the average collection
period of accounts receivable and to the resolution of payment issues with one
lessee. Fluctuations in due from affiliates, net result from timing differences
in the payment of expenses and fees and the remittance of net rental revenues.
For the nine-month period ending September 30, 1999 and 1998, net cash provided
by investing activities (the purchase and sale of containers) was $336 and
$1,189, respectively. The decrease of $853 was primarily due to the Partnership
purchasing more containers, offset by the Partnership selling more containers
during the nine-month period ended September 30, 1999 than during the comparable
period in 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". Until market conditions improve, the
Partnership plans to continue to sell certain containers located in low demand
locations. The Partnership also sells containers when (i) a container reaches
the end of its useful life or (ii) an analysis indicates that the sale is
warranted based on existing market conditions and the container's age, location
and condition. Proceeds from container sales will fluctuate based on the number
of containers sold and the actual price received on the sale.
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 is not likely to equal the number of
containers sold as new container prices are likely to be greater than proceeds
from container sales. Market conditions have had an adverse effect on the
average sales proceeds recently realized from container sales and have
contributed to a lower than anticipated rate of reinvestment. 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 contributed to a lower than anticipated
reinvestment in containers. Market conditions are discussed more fully under
"Results of Operations". A slower rate of reinvestment will, over time, affect
the size of the Partnership's container fleet.
Results of Operations
The Partnership's income from operations, which consists primarily of rental
income, container depreciation, direct container expenses, management fees, and
reimbursement of administrative expenses was directly related to the size of the
container fleet during the nine-month periods ended September 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.................. 28,145 30,285
Average container fleet................. 28,691 30,814
The decline in the average container fleet of 7% from the nine-month period
ended September 30, 1998 to the comparable period ended September 30, 1999 was
due to the Partnership having sold more containers than it purchased since
September 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 79% during the nine-month
periods ended September 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
nine-month periods ended September 30, 1999 and 1998.
The Partnership's income from operations for the nine-month periods ended
September 30, 1999 and 1998 was $129 and $4,066 on rental income of $11,293 and
$14,594. The decrease in rental income of $3,301, or 23%, from the nine-month
period ended September 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
$2,675, or 21%, due to the decreases in the average on-hire utilization of 11%,
average container fleet of 7% and average rental rates of 4%. Rental income was
also adversely affected by an 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 three and nine-month periods ended
September 30, 1998 to the equivalent periods 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 with Asia. Rental rates have also declined as shipping
lines continue to negotiate lower rates as a result of this lower demand and the
historically low container prices.
The trade imbalance has been the primary cause of the continuing build-up of
containers in lower demand locations. The General Partners have continued to
reposition newer containers to higher demand locations in an effort to improve
utilization and alleviate container build-up. Partially as a result of this
effort, utilization has remained comparable during the first three quarters of
1999 and has been steadily increasing since August 1999. However, as a result of
the repositioning effort, the Partnership continued to incur increased direct
container expenses in 1999. For the near-term, the General Partners plan to
continue this repositioning effort.
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-downs recorded in 1998 and 1999, resulting in the Partnership
incurring losses upon the sale of these containers. The Partnership recorded
additional write-downs during 1999 on previously written down containers and on
certain other 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 utilization, lease rates and
container sale prices 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 nine-month period ended
September 30, 1999, the total of these other rental income items was $1,295, a
decrease of $626 from the equivalent period in 1998. Other rental income
decreased primarily due to decreases in location and handling income of $583 and
$87, respectively. Location income decreased primarily due to an increase in
credits given to lessees for picking up containers from certain locations and a
decrease in charges to lessees for dropping off containers in certain locations.
Handling income decreased primarily due to a decrease in the average handling
price charged per container during the nine-month period ended September 30,
1999 compared to the equivalent period in 1998. The decline in the average
container fleet also contributed to these declines.
Direct container expenses increased $278, or 8%, from the nine-month period
ending September 30, 1998 to the equivalent period in 1999, primarily due to
increases in storage and DPP expenses of $397 and $299, respectively, offset by
a decrease in repositioning expense of $205. 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
increases in the number of containers carrying DPP, and due to increases in the
average DPP cost per container in the nine-month period ended September 30, 1999
compared to the equivalent period in 1998. Repositioning expense decreased
primarily due to a decrease in the number of containers repositioned.
Bad debt expense increased from a benefit of $211 for the nine-month period
ended September 30, 1998 to an expense of $316 for the comparable period in
1999. The effect of insurance proceeds received during the nine-month period
ended September 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 benefit in 1998
and, therefore, the increase in bad debt expense between the periods.
Depreciation expense decreased $352, or 7%, from the nine-month period ended
September 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 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 September
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 nine-month period ended
September 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 a write-down of $349 on 930
containers identified for sale in low demand locations. During the nine-month
period ended September 30, 1999, the Partnership recorded additional write-downs
of $543 on 1,064 containers subsequently identified for sale in these locations
and sold 1,206 previously written down containers for a loss of $259. 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 and 1999, due to unexpected declines in
container sales prices.
If more containers in these or other 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 $195, or 15%, from the nine-month period
ended September 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 both periods. 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 $190, or 23%, from the
nine-month period ended September 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 $485 from the nine-month period ended September 30, 1998
to the comparable period in 1999 primarily due to the increase of loss on sale
of containers of $526. The loss on sale of containers recorded in the nine-month
period ended September 30, 1999 was primarily due to the Partnership selling
containers in low demand locations at lower average sales prices as discussed
above and due to the loss recorded on the sale of containers previously written
down.
Net earnings per limited partnership unit decreased from earnings of $0.60 for
the nine-month period ending September 30, 1998 to a loss of $0.12 for the same
period in 1999. This decrease reflected the decrease in net earnings allocated
to limited partners from earnings of $3,685 to a loss of $729, 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 September 30, 1999 and 1998.
The Partnership's income from operations for the three-month periods ended
September 30, 1999 and 1998 was $330 and $1,293, respectively, on rental income
of $3,820 and $4,712, respectively. The decrease in rental income of $892, or
19%, from the three-month period ended September 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 $875, or 21%, due
to the decreases in the average on-hire utilization of 9%, average container
fleet of 7%, and average rental rates of 6%. Leasing incentives also increased;
however, the decline in utilization had the most significant adverse effect on
rental income.
For the three-month period ended September 30, 1999, other rental income was
$537, a decrease of $17 from the equivalent period in 1998. The decrease was
primarily due to a decrease in location income of $44, partially offset by an
increase in DPP income of $33. Location income decreased primarily due to a
decrease in charges to lessees for dropping off containers in certain locations.
DPP income increased due to an increase in the number of containers carrying
DPP, offset by a lower average DPP price per container.
Direct container expenses increased $93, or 9% from the three-month period
ending September 30, 1998 to the equivalent period in 1999, primarily due to the
increases in storage and DPP expenses of $106 and $89, respectively, offset by a
decrease in repositioning expense of $42. 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 a
higher average DPP cost per container and to a greater number of containers
covered by DPP. Repositioning expense decreased due to a decrease in the number
of containers repositioned during the three-month period ended September 30,
1999 compared to the same period in 1998.
Bad debt expense increased from a benefit of $9 for the three-month period ended
September 30, 1998 to an expense of $86 for the comparable period in 1999. The
benefit recorded in 1998 was primarily due to lower reserve requirements.
Depreciation expense decreased $137, or 8%, from the three-month period ended
September 30, 1998 to the comparable period in 1999 primarily due to the
decrease in fleet size. During the three-month period ended September 30, 1999,
the Partnership recorded a write-down of $147 relating to certain containers
identified for sale as discussed above.
Management fees to affiliates decreased $63, or 14%, from the three-month period
ended September 30, 1998 to the comparable period in 1999, due to the decrease
in equipment management fees which resulted from the decrease in rental income.
General and administrative costs to affiliates decreased $84, or 35%, from the
three-month period ended September 30, 1998 to the comparable period in 1999
primarily due to a decrease in the allocation of overhead costs from TEM.
Other expense decreased $89, or 41%, from the three-month period ended September
30, 1998 to the comparable period in 1999 primarily due to the decrease in loss
on sale of containers of $94. This decrease was primarily due to the Partnership
selling more containers previously reserved for during the three-month period
ended September 30, 1999.
Net earnings per limited partnership unit decreased from $0.17 to $0.03 from the
three-month period ending September 30, 1998 to the comparable period in 1999,
reflecting the decrease in net earnings allocated to limited partners from
$1,046 to $173, respectively. The allocation of net earnings 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 September 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). 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. Non-compliance by other third
parties is not expected to have a material effect on the Partnership's results
of operations and 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 _______________________________
Ernest J. Furtado
Senior Vice President
Date: November 12, 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>
________________________ Senior Vice President, November 12, 1999
Ernest J. Furtado (Principal Financial and
Accounting Officer) and
Secretary
________________________ President (Principal Executive November 12, 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/Ernest J. Furtado
_______________________________
Ernest J. Furtado
Senior Vice President
Date: November 12, 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/Ernest J. Furtado Senior Vice President, November 12, 1999
- ---------------------------- (Principal Financial and
Ernest J. Furtado Accounting Officer) and
Secretary
/s/John A. Maccarone President (Principal Executive November 12, 1999
- ----------------------- Officer)
John A. Maccarone
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
3rd Quarter 1999 10Q
</LEGEND>
<CIK> 0000866888
<NAME> Textainer Equipment Income Fund III
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,198
<SECURITIES> 0
<RECEIVABLES> 5,376
<ALLOWANCES> 722
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 100,599
<DEPRECIATION> 40,889
<TOTAL-ASSETS> 66,562
<CURRENT-LIABILITIES> 1,879
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 64,683
<TOTAL-LIABILITY-AND-EQUITY> 66,562
<SALES> 0
<TOTAL-REVENUES> 11,293
<CGS> 0
<TOTAL-COSTS> 11,164
<OTHER-EXPENSES> 778
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (649)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (649)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
