<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
COMMISSION FILE NUMBER 0-19145
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-3097644
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
650 CALIFORNIA STREET, 16TH FLOOR
SAN FRANCISCO, CALIFORNIA 94108
(Address of Principal Executive Offices) (ZIP Code)
(415) 434-0551
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
<PAGE> 2
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
QUARTERLY REPORT ON FORM 10Q FOR THE
QUARTER ENDED MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ITEM 1. FINANCIAL STATEMENTS.
Balance Sheets - March 31, 1996 (unaudited) and December 31, 1995..... 3
Statements of Earnings for the three months ended
March 31, 1996 and 1995 (unaudited)................................... 4
Statements of Partners' Capital for the three months ended
March 31, 1996 and 1995 (unaudited)................................... 5
Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 (unaudited)............................. 6
Notes to Financial Statements (unaudited)............................. 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................. 12
</TABLE>
2
<PAGE> 3
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
1996 1995
----------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Container rental equipment, net of accumulated
depreciation of $23,876 (1995: $22,117) $ 101,354 102,147
Cash and cash equivalents (note 1) 1,692 1,293
Accounts receivable, net of allowance for
doubtful accounts of $1,273 (1995: $1,349) 5,644 6,191
Due from affiliates (note 4) 88 --
Organization costs, net of accumulated
amortization of $185 (1995: $173) 51 63
Prepaid expenses 31 46
--------- ---------
$ 108,860 109,740
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 572 457
Accrued liabilities 537 512
Accrued damage protection plan costs (note 2) 581 556
Due to affiliates (note 4) 47 940
Equipment purchases payable 1,307 349
--------- ---------
Total liabilities 3,044 2,814
--------- ---------
Partners' capital:
General partners -- --
Limited partners 105,816 106,926
--------- ---------
Total partners' capital 105,816 106,926
--------- ---------
Commitments (note 7)
$ 108,860 109,740
========= =========
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF EARNINGS
For the three months ended March 31, 1996 and 1995
(Dollar amounts in thousands except for per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Rental income $ 6,355 6,669
--------- ---------
Costs and expenses:
Direct container expenses 981 822
Bad debt provision 6 290
Depreciation and amortization 1,892 1,834
Professional fees 10 17
Management fees to affiliates (note 4) 591 611
General and administrative costs to affiliates (note 4) 404 427
Other general and administrative costs 63 75
--------- ---------
3,947 4,076
--------- ---------
Income from operations 2,408 2,593
--------- ---------
Other income:
Interest income 29 16
Gain on sales of equipment 112 99
--------- ---------
141 115
--------- ---------
Net earnings $ 2,549 2,708
========= =========
Allocation of net earnings (note 4):
General partners $ 38 33
Limited partners 2,511 2,675
--------- ---------
$ 2,549 2,708
========= =========
Limited partners' per unit share of net earnings $ 0.37 $ 0.39
====== ======
Limited partners' per unit share of distributions $ 0.52 $ 0.49
====== ======
Weighted average number of limited
partnership units outstanding 6,837,810 6,845,903
========= =========
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
For the three months ended March 31, 1996 and 1995
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
PARTNERS' CAPITAL
--------------------------------------
GENERAL LIMITED TOTAL
--------------------------------------
<S> <C> <C> <C>
Balances at January 1, 1995 $ - 109,574 109,574
Distributions (33) (3,309) (3,342)
Net earnings 33 2,675 2,708
------- ---------- -----------
Balances at March 31, 1995 $ -- 108,940 108,940
======= ========== ===========
Balances at January 1, 1996 $ -- 106,926 106,926
Distributions (38) (3,589) (3,627)
Redemptions (note 6) - (32) (32)
Net earnings 38 2,511 2,549
------- ---------- -----------
Balances at March 31, 1996 $ -- 105,816 105,816
======= ========== ===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1996 and 1995
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,549 2,708
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 1,880 1,822
(Decrease) increase in allowance for doubtful accounts (76) 250
Amortization of organization costs 12 12
Gain on sales of container rental equipment (112) (99)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 641 (431)
Decrease in due to affiliates, net (1,072) (273)
Increase in accounts payable
and accrued liabilities 142 15
Increase in damage protection plan cost 25 41
Increase in prepaid expenses 15 17
------------ ------------
Net cash provided by operating activities 4,004 4,062
------------ ------------
Cash flows from investing activities:
Proceeds from sales of container rental equipment 439 924
Equipment purchases (404) (2,132)
------------ ------------
Net cash provided by (used in) investing activities 35 (1,208)
------------ ------------
Cash flows from financing activities:
Proceeds from sale of limited partnership units (32) --
Distributions to partners (3,608) (3,284)
------------ ------------
Net cash used in financing activities (3,640) (3,284)
------------ ------------
Net increase (decrease) in cash and cash equivalents 399 (430)
Cash and cash equivalents at beginning of period 1,293 1,547
------------ ------------
Cash and cash equivalents at end of period $ 1,692 $ 1,117
============ ============
Interest paid during the period $ -- $ --
============ ============
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 7
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS -- CONTINUED
For the three months ended March 31, 1996 and 1995
(Amounts in thousands)
(unaudited)
SUPPLEMENTAL DISCLOSURES:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of equipment purchases, distributions
to partners, and proceeds from sale of container rental equipment which had not
been paid or received by the Partnership as of March 31, 1996 and 1995, and
December 31, 1995 and 1994, resulting in differences in amounts recorded and
amounts of cash disbursed or received by the Partnership, as shown in the
Statements of Cash Flows for the three-month periods ended March 31, 1996 and
1995.
<TABLE>
<CAPTION>
Mar 31 Dec 31 Mar 31 Dec 31
1996 1995 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates ....................... $ 37 53 163 170
Equipment purchases payable ............. 1,307 349 894 1,190
Distributions to partners included in:
Due to affiliates ....................... 136 115 111 76
Accounts payable and accrued liabilities 232 234 239 216
Proceeds from sale of equipment included in:
Due from affiliates ..................... 274 360 -- 272
Accounts receivable ..................... 2 2 2 212
</TABLE>
The following summarizes the amounts of equipment purchases, distributions to
partners and proceeds from sale of container rental equipment recorded by the
Partnership and the amounts paid or received as shown in the Statements of Cash
Flows for the three-month periods ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Equipment purchases recorded.................................... $1,346 1,829
Equipment purchases paid........................................ 404 2,132
Distributions to partners declared.............................. 3,627 3,342
Distributions to partners paid.................................. 3,608 3,284
Proceeds from sale of container rental equipment recorded....... 353 442
Proceeds from sale of container rental equipment received....... 439 924
</TABLE>
See accompanying notes to financial statements
7
<PAGE> 8
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(Dollar amounts in thousands except for per unit amounts)
(unaudited)
NOTE 1. GENERAL
The accompanying interim comparative financial statements have not been
audited by an independent public accountant. However, all adjustments
(which were only normal and recurring adjustments), which are, in the
opinion of management, necessary to fairly present the financial position
of the Partnership as of March 31, 1996 and December 31, 1995, and the
results of its operations, changes in partners' capital, and cash flows for
the three-month periods ended March 31, 1996 and 1995, have been made.
The financial information presented herein should be read in conjunction
with the audited financial statements and the accompanying Notes included
in the Partnership's audited financial statements as of December 31, 1995.
For purposes of the Statements of Cash Flows, the Partnership considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Certain reclassifications of prior year amounts have been made in order to
conform with the 1996 financial statement presentation.
NOTE 2. DAMAGE PROTECTION PLAN
The Partnership offers a Damage Protection Plan (the Plan) to lessees of
its container rental equipment. Under the terms of the Plan, the
Partnership earns additional revenues on a daily basis and, as a result,
has agreed to bear certain repair costs. It is the Partnership's policy to
recognize revenue when earned and to provide a reserve sufficient to cover
the Partnership's obligation for estimated repair costs.
NOTE 3. ACQUISITION OF EQUIPMENT
During the three-month periods ended March 31, 1996 and 1995, the
Partnership purchased container rental equipment (the Equipment) with a
cost of $1,346 and $1,829, respectively.
NOTE 4. TRANSACTIONS WITH AFFILIATES
Textainer Financial Services Corporation (TFS) is the managing general
partner of the Partnership. TFS 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. Textainer Acquisition
Services Limited (TAS) is an affiliate of the General Partners which
performs services relative to the acquisition of Equipment outside the
United States on behalf of the Partnership. TCC Securities Corporation
(TSC), a licensed broker and dealer in securities and an affiliate of the
General Partners, was the managing sales agent for the offering of Units
for sale.
In accordance with the Partnership Agreement, net earnings or losses,
syndication and offering costs and partnership distributions are allocated
1% to the General Partners and 99% to the limited partners with the
exception of gross income, as defined in the Partnership agreement. Gross
income is allocated to the General Partners to the extent that their
partners' capital accounts' show a deficit.
8
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TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners, or TAS, an incentive management fee, an acquisition
fee, an equipment management fee and an equipment liquidation fee. These
fees are for various services provided in connection with the
administration and management of the Partnership. The Partnership
capitalized $19 and $101 of equipment acquisition fees as part of Equipment
costs for the three-month periods ended March 31, 1996 and 1995
respectively, and $151 and $144 of incentive management fees in the
three-month periods ended March 31, 1996 and 1995, respectively. No
equipment liquidation fees were incurred in either period.
The Partnership's Equipment is managed by TEM. In its role as manager, TEM
has authority to acquire, hold, manage, lease, sell and dispose of the
partnership's Equipment. Additionally, TEM holds, for payment of direct
operating expenses, a reserve of cash that has been collected from
container leasing operations; such cash is included in the amount due from
affiliates at March 31, 1996.
Subject to certain reductions, TEM receives a monthly equipment management
fee equal to 7% of gross lease revenues attributable to operating leases
and 2% of gross lease revenues attributable to full payout net leases. For
the three-month periods ended March 31, 1996 and 1995, these fees totaled
$439 and $467, respectively. The Partnership's Equipment is leased by TEM
to third party lessees on operating master leases, spot leases and term
leases. The majority of the Equipment is leased under operating leases with
limited terms and no purchase option.
Certain indirect general and administrative costs incurred in performing
administrative services necessary to the operation of the Partnership are
borne by TEM and are allocated to the Partnership based on the ratio of the
Partnership's interest in managed Equipment to the total Equipment managed
by TEM. Indirect general and administrative costs allocated to the
Partnership were $330 and $352, respectively, for the three-month periods
ended March 31, 1996 and 1995.
TFS also incurred general and administrative costs of $74 and $75 during
the three-month periods ended March 31, 1996 and 1995, respectively, which
were reimbursed by the Partnership.
The General Partners or TAS may acquire Equipment in their own name and
hold title on a temporary basis for the purpose of facilitating the
acquisition of such Equipment for the Partnership. The Equipment may then
be resold to the Partnership on an all-cash basis at a price equal to the
actual cost, as defined in the Partnership Agreement. In addition, the
General Partners or TAS are entitled to an acquisition fee for any
Equipment resold to the Partnership.
9
<PAGE> 10
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
At March 31, 1996 and December 31, 1995, due from and to affiliates are
comprised of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Due from affiliates:
Due from TEM............................. $ 84 --
Due from TFS............................. 4 --
------ -----
$ 88 --
====== =====
Due to affiliates:
Due to TFS............................... $ -- 86
Due to TGH............................... 1 1
Due to TAS............................... 19 31
Due to TCC............................... 12 16
Due to TEM............................... - 795
Due to TL................................ 15 11
----- -----
$ 47 940
===== =====
</TABLE>
These amounts receivable from and payable to affiliates were incurred in
the ordinary course of business between the Partnership and its affiliates
and represent timing differences in the accrual and payment of expenses and
fees described above or in the accrual and collection of net rental
revenues from TEM.
It is the policy of the Partnership and the General Partners to charge
interest on intercompany balances which are outstanding for more than one
month to the extent such balances relate to loans for equipment purchases.
Interest is charged to the Partnership at the Prime Rate plus certain
margins depending on TGH's leverage ratio. There was no interest charged on
intercompany balances for the three-month periods ended March 31, 1996 and
1995.
NOTE 5. RENTALS UNDER OPERATING LEASES
The following is a schedule by year of minimum future rentals receivable on
noncancelable operating leases as of March 31, 1996:
<TABLE>
<CAPTION>
Year ending March 31:
<S> <C>
1997............................................. $1,908
1998............................................. 202
1999............................................. 56
2000............................................. 23
2001............................................. 3
------
Total minimum future rentals receivable.......... $2,192
======
</TABLE>
10
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TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. REDEMPTIONS
The following redemption offerings were consummated by the Partnership
during the three-month period ended March 31, 1996 and the year ended
December 31, 1995:
<TABLE>
<CAPTION>
AVERAGE
REDEMPTION
UNITS REDEEMED PRICE AMOUNT PAID
-------------- ----- -----------
<S> <C> <C> <C>
Quarter ended:
Sept. 30,1995 .......................... 6,025 $15.70 $ 95
----- ----
BALANCE AT DECEMBER 31, 1995 ............... 6,025 $15.70 95
Quarter ended:
March 31, 1996.......................... 2,068 $15.60 32
----- ----
BALANCE AT MARCH 31, 1996 .................. 8,093 $15.67 $127
===== ====
</TABLE>
The redemption price is fixed by formula and varies depending on the length
of time the units are outstanding.
NOTE 7. COMMITMENTS
At March 31, 1996, the Partnership has committed to purchase 350 containers
at an approximate total purchase price of $926 which includes acquisition
fees of $44. These commitments were made to TAS which, as the contracting
party, has in turn committed to purchase this equipment on behalf of the
Partnership.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollar amounts in thousands except for per unit amounts)
The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the three-month periods ended March
31, 1996 and 1995. Please refer to the Financial Statements and Notes thereto in
connection with the following discussion.
LIQUIDITY AND CAPITAL RESOURCES
From April 30, 1992 until April 30, 1994 the Partnership was involved in the
offering of limited partnership interests to the public. On April 30, 1994 the
Partnership had received a total subscription amount of $136,918.
The Partnership has set up a program whereby limited partners may redeem units
for a specified redemption value. The redemption price is set by formula and
varies depending on length of time units are outstanding. Up to 2% of the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded at the Managing General Partner's discretion. All redemptions
are subject to the Managing General Partner's good faith determination that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a corporation, (ii) impair the capital or operations of the Partnership, or
(iii) impair the ability of the Partnership to pay distributions in accordance
with its distribution policy. For the quarter ended March 31, 1996, the
Partnership redeemed 2,068 units for a total of $32, and, during the year ended
December 31, 1995, the Partnership redeemed 6,025 units for a total of $95.
The Partnership invests working capital and cash flow from operations prior to
its distribution or reinvestment in additional equipment in short-term, highly
liquid investments. It is the policy of the Partnership to maintain a minimum
working capital reserve in an amount which is the lesser of (i) 1% of capital
contributions or (ii) $100. At March 31, 1996, the Partnership's cash of $1,692
was primarily invested in a market-rate account.
During the quarter ended March 31, 1996, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1995
through February 1996, in the amount of $3,589. These distributions represent
10.5% of original capital (measured on an annualized basis) on each unit. Of
these distributions, on a GAAP basis, $1,078 was a return of capital and the
balance was from net earnings. On a cash basis, all of these distributions were
from operations.
At March 31, 1996, the Partnership had committed to purchase 350 containers at
an approximate total purchase price of $926, which includes acquisition fees of
$44. At March 31, 1996, the Partnership had cash of $1,692 to meet these
commitments. In the event the Partnership decides not to purchase the equipment,
one of the General Partners or its affiliates will retain the equipment for its
own account.
For the quarter ended March 31, 1996, the Partnership had net cash provided by
operating activities of $4,004, compared with $4,062 for the same period in
1995. This decrease was primarily attributable to a decline in net earnings
resulting from lower utilization. Net earnings decreased by 6% in 1996 from 1995
primarily due to a decrease in rental income and an increase in direct container
expenses, excluding bad debt. With respect to accounts receivable, the average
collection period for accounts receivable from operations improved from 114 days
for the quarter ended March 31, 1995 to 99 days for the comparable period in
1996. In 1994, the Partnership experienced a deterioration in the payment
performance of two of its lessees. These lessees have cooperated in returning
the Equipment, and the returned Equipment was substantially re-leased to other
customers during 1995. In the latter part of 1995, the accounts receivable from
one of these lessees were resolved. These factors, in conjunction with a partial
resolution of payment problems in the first quarter of 1996 with the other
lessee, were the primary causes
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for the improvement in the average collection period. The Partnership is
continuing its efforts to conclude resolution of the remainder of these payment
problems in 1996.
The Partnership's principal lessees, shipping lines, are currently anticipating
over-capacity, due to the delivery of new ships. This over-capacity may cause
shipping lines to reduce freight rates, which could affect the profitability of
their business, resulting in the possibility of delays in the remittance of
rental payments, pressure on container rental rates, and, in extreme cases,
bankruptcy of some shipping lines. As discussed more fully below under "Results
of Operations", utilization rates have reflected a lower demand for containers,
and this over-capacity could also further affect these rates.
Net cash provided by investing activities (the purchase and sale of rental
equipment) for the quarter ended March 31, 1996 was $35 compared to a net cash
used in investing activities of $1,208 for the same period in 1995. This
difference is primarily due to the fact that, on a cash basis, the Partnership
purchased more equipment in 1995 (because of an increased in availability of
proceeds from the sale of a trailer fleet that were received in 1994) than in
the same period in 1996. In addition, the Partnership has certain used equipment
in its portfolio and expects to sell this equipment periodically when it reaches
the end of its useful marine life. Consistent with its investment objectives,
the Partnership intends to reinvest all or a significant amount of proceeds from
future equipment sales in additional equipment.
RESULTS OF OPERATIONS
The Partnership's operations, which consist of rental income, container
depreciation, direct container expenses, management fees, and reimbursement of
administrative expenses were directly related to the size of the container fleet
(inventory) during the three-month periods ended March 31, 1996 and 1995, as
well as certain other factors as discussed below. The following is a summary of
the size of the container fleet (in units) available for lease during those
periods:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Opening Inventory.......... 36,297 35,232
Closing Inventory.......... 36,373 35,451
Average.................... 36,335 35,342
</TABLE>
The average container fleet increased by 3% from the three-month period ended
March 31, 1995 to the same period in 1996. Average inventory increased primarily
due to reinvestment of proceeds during 1995 from the sale of the Partnership's
trailer fleet in 1994.
Rental income and direct container expenses are also affected by the lease
utilization percentages for the Equipment which were 86% and 93% on average
during the quarter ended March 31, 1996 and 1995, respectively. In addition,
rental income is affected by daily rental rates.
The following paragraphs provide comparative analysis of the results of
operations for the quarters ended March 31, 1996 and 1995.
The Partnership's income from operations for the quarter ended March 31, 1996
was $2,408 on gross rental income of $6,355 compared to $2,593 on gross rental
income of $6,669 for the quarter ended March 31, 1995. The decrease in total
rental income from the quarter ended March 31, 1995 to the equivalent period in
1996 was primarily attributable to income from container rentals, the major
component of total rental income, which decreased by $155, or 3%. Income from
container rentals is largely dependent upon three factors: equipment available
for lease (average inventory), average on-hire (utilization) percentages, and
average daily rental rates. Average inventory increased by 3%, average
utilization decreased by seven percentage points and average daily rental rates
decreased by .1%.
Utilization began to decrease in the last quarter of 1995 and continued to
decline for all Equipment types owned by the Partnership in the first quarter of
1996. The General Partners believe that this softening in
13
<PAGE> 14
demand has been due, in part, to a slow-down in activity in the Asia-North
America trade route as well as seasonal factors. Additionally, as noted above,
the Partnership's principal lessees, shipping lines, are currently anticipating
further over-capacity, which may adversely affect rental payments and/or rates
and utilization. Rental rates have also been restrained by quantity rate
discounts granted to the Partnership's larger container lessees.
Substantially all of the Partnership's rental income was generated from the
leasing of the Partnership's equipment under short-term operating leases.
The balance of rental income consisted of other lease-related items, primarily
income from charges to the lessees for pick-up of containers from prime
locations less credits granted to lessees for leasing containers from less
desirable locations (location income), income for handling and returning
containers, and income from charges to the lessees for a damage protection plan.
For the quarter ended March 31, 1996, the total of these other revenue items was
$608, a decrease of $159 over the equivalent period in 1995. The primary
component of this net decrease was a decline in location income (which decreased
by $134). The decline in location income is mainly due to a decrease in drop-off
charges to lessees for Equipment at less desirable locations, which primarily
resulted from drop-off charges to a specific lessee in the first quarter of 1995
that did not re-occur in the same period in 1996, as well as an increase in
credits given to lessees for pick-up of Equipment from less desirable locations,
which was largely driven by decreased demand.
Direct container expenses, excluding bad debt expense, increased by $159 or 19%
from the quarter ended March 31, 1995 to the same period in 1996. The primary
components of this increase were costs incurred for storage (which increased by
$155 between periods). Storage costs increased due to lower utilization.
Bad debt expense decreased from $290 in the first quarter of 1995 to $6 in the
same period of 1996. The decrease was primarily due to a reduction in reserve
requirements for a specific lessee as a result of a partial resolution of
payment problems with that lessee during the quarter, as noted above.
Depreciation and amortization expenses increased by $58 or 3% from the quarter
ended March 31, 1995 to the same period in 1996, reflecting the increase in the
Partnership's average fleet size of 3% between periods.
Management fees to affiliates, which are based primarily on rental income, were
$20 or 3% lower in the quarter ended March 31, 1996 as compared to the same
period in 1995. This decrease was due to a 5% decrease in rental income. These
fees were 9.3% and 9.2% of rental income for the quarter ended March 31, 1996
and 1995, respectively. Base management fees were 7% of gross revenue for both
periods.
General and administrative costs to affiliates decreased by 5%, or $23. The
decrease is the result of a decline in allocable overhead from TEM.
Other income provided $141 of additional income for the quarter ended March 31,
1996, representing an increase of $26, or 22% over the equivalent period in
1995. The increase was primarily attributable to a $13 increase in interest
income and a $13 increase in gains from sales of equipment.
Net earnings per limited partnership unit decreased from $0.39 for the quarter
ended March 31, 1995 to $0.37 for the quarter ended March 31, 1996, reflecting
the decrease in net earnings from $2,708 for the quarter ended March 31, 1995 to
$2,549 for the same period in 1996.
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 Equipment. The
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<PAGE> 15
Partnership's business risk in its foreign operations lies with the
creditworthiness of the lessees, and the Partnership's ability to keep the
equipment under lease, rather than the geographic location of the Equipment or
the domicile of the lessees. The Partnership's containers are generally operated
on the international high seas rather than on the domestic waterways. The
Partnership's Equipment is subject to the risk of war or other political,
economic or social occurrence where the Equipment is used, which may result in
the loss of Equipment, which, in turn, may have a material impact on the
Partnership's results of operations and financial condition. The General
Partners are not aware of any conditions as of March 31, 1996 which would result
in such risk materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning equipment after it comes off-lease, the risk of an
uninsured loss, increases in maintenance expenses or other costs of operating
the Partnership's equipment, and the effect of demand for world trade and/or
general business and economic cycles on the Partnership's operations.
15
<PAGE> 16
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 IV, 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: May 10, 1996
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/ James E. Hoelter President (Principal Executive May 10, 1996
- - ------------------------------- Officer) and Director
James E. Hoelter
/s/ John R. Rhodes Executive Vice President May 10, 1996
- - ------------------------------- (Principal Financial and
John R. Rhodes Accounting Officer),
Secretary and Treasurer
</TABLE>
16
<PAGE> 17
EXHIBIT INDEX
Exhibit No.
- - -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000882288
<NAME> TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,692
<SECURITIES> 0
<RECEIVABLES> 7,005
<ALLOWANCES> 1,273
<INVENTORY> 0
<CURRENT-ASSETS> 82
<PP&E> 125,230
<DEPRECIATION> 23,876
<TOTAL-ASSETS> 108,860
<CURRENT-LIABILITIES> 3,044
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 105,816
<TOTAL-LIABILITY-AND-EQUITY> 108,860
<SALES> 0
<TOTAL-REVENUES> 6,355
<CGS> 0
<TOTAL-COSTS> 3,947
<OTHER-EXPENSES> (141)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,549
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,549
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
