<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 JUNE 30, 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, 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> 2
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
QUARTERLY REPORT ON FORM 10Q FOR THE
QUARTER ENDED JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets - June 30, 1996 (unaudited) and December 31, 1995 . . . . . . . . . . . . . . . 3
Statements of Earnings for the six and three months
ended June 30, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Partners' Capital for the six months
ended June 30, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Cash Flows for the six months
ended June 30, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
2
<PAGE> 3
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
June 30, 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 $25,637 (1995: $22,117) $ 99,468 102,147
Cash and cash equivalents (note 1) 518 1,293
Accounts receivable, net of allowance for
doubtful accounts of $1,368 (1995: $1,349) 5,516 6,191
Due from affiliates (note 4) 305 0
Organization costs, net of accumulated
amortization of $197 (1995: $173) 39 63
Prepaid expenses 16 46
-------- --------
$105,862 109,740
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 615 457
Accrued liabilities 438 511
Accrued damage protection plan costs (note 2) 567 556
Due to affiliates (note 4) 177 941
Equipment purchases payable 0 349
-------- --------
Total liabilities 1,797 2,814
-------- --------
Partners' capital:
General partners - -
Limited partners 104,065 106,926
-------- --------
Total partners' capital 104,065 106,926
-------- --------
$105,862 109,740
======== ========
</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 six and three months ended June 30, 1996 and 1995
(Dollar amounts in thousands except for per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS SIX MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1996 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1995
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Rental income $12,216 5,861 13,378 6,709
------- ------ ------ ------
Costs and expenses:
Direct container expenses 2,000 1,019 1,601 779
Bad debt provision 115 109 299 8
Depreciation and amortization 3,806 1,913 3,687 1,853
Professional fees 17 8 37 20
Management fees to affiliates (note 4) 1,151 560 1,225 614
General and administrative costs
to affiliates (note 4) 744 340 903 475
Other general and administrative costs 164 101 167 93
------- ------ ------ ------
7,997 4,050 7,919 3,842
------- ------ ------ ------
Income from operations 4,219 1,811 5,459 2,867
------- ------ ------ ------
Other income:
Interest income 47 18 32 17
Gain on sales of equipment 161 49 140 40
------- ------ ------ ------
208 67 172 57
------- ------ ------ ------
Net earnings $ 4,427 1,878 5,631 2,924
======= ====== ====== ======
Allocation of net earnings (note 4):
General partners $ 76 38 68 35
Limited partners 4,351 1,840 5,563 2,889
------- ------ ------ ------
$ 4,427 1,878 5,631 2,924
======= ====== ====== ======
Limited partners' per unit share
of net earnings $ 0.64 $0.27 $0.81 $0.42
======= ====== ====== ======
Limited partners' per unit share
of distributions $ 1.05 $0.53 $0.98 $0.50
======= ====== ====== ======
Weighted average number of limited
partnership units outstanding 6,834,810 6,837,810 6,845,903 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 six months ended June 30, 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 (68) (6,732) (6,800)
Net earnings 68 5,563 5,631
---- -------- --------
Balances at June 30, 1995 $ - 108,405 108,405
==== ======== ========
Balances at January 1, 1996 $ - 106,926 106,926
Distributions (76) (7,180) (7,256)
Redemptions (note 6) - (32) (32)
Net earnings 76 4,351 4,427
---- -------- --------
Balances at June 30, 1996 $ - 104,065 104,065
==== ======== ========
</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 six months ended June 30, 1996 and 1995
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,427 5,632
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 3,782 3,664
Increase in allowance for doubtful accounts 19 50
Amortization of organization costs 24 23
Gain on sales of container rental equipment (161) (140)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 673 (23)
(Increase) decrease in due from affiliates, net (1,338) 959
Increase in accounts payable and accrued liabilities 87 54
Increase in damage protection plan costs 11 41
Decrease in prepaid expenses 30 33
------- -------
Net cash provided by operating activities 7,554 10,293
------- -------
Cash flows from investing activities:
Proceeds from sales of container rental equipment 824 935
Equipment purchases (1,935) (4,514)
------- -------
Net cash used in investing activities (1,111) (3,579)
------- -------
Cash flows from financing activities:
Redemptions (32) -
Distributions to partners (7,186) (6,837)
------- -------
Net cash used in financing activities (7,218) (6,837)
------- -------
Net decrease in cash and cash equivalents (775) (123)
Cash and cash equivalents at beginning of period 1,293 1,547
------- -------
Cash and cash equivalents at end of period $ 518 1,424
======= =======
</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 six months ended June 30, 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 Equipment which had not
been paid or received as of June 30, 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 six-month periods ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
June 30, Dec. 31, June 30, Dec. 31,
1996 1995 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates . . . . . . . . . . . . . . $139 53 10 170
Accounts Payable . . . . . . . . . . . . . . - - 3 -
Equipment purchases payable . . . . . . . . - 349 1,597 1,190
Distributions to partners included in:
Due to affiliates . . . . . . . . . . . . . 187 115 22 76
Accounts payable and accrued liabilities . . 232 234 232 216
Proceeds from sale of Equipment included in:
Due from affiliates . . . . . . . . . . . . 249 360 403 272
Accounts receivable . . . . . . . . . . . . - 2 - 212
</TABLE>
The following table summarizes the amounts of equipment purchases,
distributions to partners, and proceeds from sale of Equipment recorded by the
Partnership and the amounts paid or received as shown in the Statements of Cash
Flows for the six-month periods ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Equipment purchases recorded . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,672 4,763
Equipment purchases paid . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,935 4,513
Distributions to partners declared . . . . . . . . . . . . . . . . . . . . . . 7,256 6,800
Distributions to partners paid . . . . . . . . . . . . . . . . . . . . . . . . 7,186 6,838
Proceeds from sale of Equipment recorded . . . . . . . . . . . . . . . . . . . 711 854
Proceeds from sale of Equipment received . . . . . . . . . . . . . . . . . . . 824 935
</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
June 30, 1996
(Dollar amounts in thousands except for per unit amounts)
(Unaudited)
NOTE 1. GENERAL
Textainer Equipment Income Fund IV (the Partnership) is a California
Limited Partnership formed in 1991. The Partnership owns and leases a
fleet of intermodal marine cargo container equipment (the Equipment) to
international shipping lines.
The accompanying interim comparative financial statements have not been
audited by an independent public accountant. However, all adjustments
(which were only normal and recurring adjustments) which are, in the
opinion of management, necessary to fairly present the financial position
of the Partnership as of June 30, 1996 and December 31, 1995, and the
results of its operations, changes in partners' capital and cash flows for
the six- and three-month periods ended June 30, 1996 and 1995, 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, 1995.
For purposes of the Statement of Cash Flows, the Partnership considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents.
Certain reclassifications of prior year amounts have been made in order to
conform with the 1996 financial statement presentation.
NOTE 2. DAMAGE PROTECTION PLAN
The Partnership offers a Damage Protection Plan (the Plan) to lessees of
its 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. At June 30, 1996 and December 31,
1995, this reserve was equal to $567 and $556, respectively.
NOTE 3. ACQUISITION OF EQUIPMENT
During the six-month periods ended June 30, 1996 and 1995, the Partnership
purchased Equipment with a cost of $1,672 and $4,763, respectively.
8
<PAGE> 9
TEXTAINER EQUIPMENT INCOME FUND IV, L.P
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
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.
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 $98 and $207 of equipment acquisition fees as part of
container costs during the six-month periods ended June 30, 1996 and 1995.
The Partnership incurred $302 and $151 of incentive management fees during
the six- and three-month periods ended June 30, 1996, respectively, and
$288 and $144 for the comparable periods ended June 30, 1995. No
equipment liquidation fees were incurred during either period.
The Equipment is managed by TEM. In its role as manager, TEM has
authority to acquire, hold, manager, lease, sell and dispose of the
Equipment. Additionally, TEM holds, for payment of direct operating
expenses, a reserve of cash that has been collected from Equipment
leasing operations; such cash is included in the amount due from
affiliates at June 30, 1996.
Subject to certain reductions, TEM receives a monthly Equipment management
fee equal to 7% of gross revenues attributable to operating leases and 2%
of gross revenues attributable to full payout net leases. For the six-
and three-month periods ended June 30, 1996, these fees totaled $849 and
$409, respectively, and $937 and $470 for the comparable periods ended
June 30, 1995. The 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 $655 and $325 for the six- and three-month periods
ended June 30, 1996, respectively, and $757 and $405 for the comparable
periods ended June 30, 1995.
TFS, in its capacity as managing general partner, also incurred general
and administrative costs of $89 and $15 for the six- and three- month
periods ended June 30, 1996, respectively, and $146 and $70 for the
comparable periods ended June 30, 1995, which were reimbursed by the
Partnership.
9
<PAGE> 10
TEXTAINER EQUIPMENT INCOME FUND IV, L.P
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
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.
At June 30, 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 . . . . . . . . . . . . . . . . . $ 305 -
=== ====
Due to affiliates:
Due to TFS . . . . . . . . . . . . . . . . . . $ 63 87
Due to TGH . . . . . . . . . . . . . . . . . . 1 1
Due to TAS . . . . . . . . . . . . . . . . . . 79 31
Due to TCC . . . . . . . . . . . . . . . . . . 14 16
Due to TEM . . . . . . . . . . . . . . . . . . - 795
Due to TL . . . . . . . . . . . . . . . . . . 20 11
---- ----
$ 177 941
=== ===
</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 six- and three-month periods ended June
30, 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 June 30, 1996:
Year ending June 30:
<TABLE>
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . $ 2,211
1998 . . . . . . . . . . . . . . . . . . . . 179
1999 . . . . . . . . . . . . . . . . . . . . 78
2000 . . . . . . . . . . . . . . . . . . . . 40
-------
Total minimum future rentals receivable . . . $ 2,508
=======
</TABLE>
10
<PAGE> 11
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 six-month period ended June 30, 1996:
<TABLE>
<CAPTION>
UNITS AVERAGE AMOUNT
REDEEMED REDEMPTION PRICE PAID
-------- ---------------- ------
<S> <C> <C> <C>
Balance at December 31, 1995. . . . 6,025 $ 15.70 $ 95
Quarter ended:
March 31, 1996 . . . . . . . . 2,068 $ 15.60 32
----- -----
Balance at June 30,1996 . . . . . . 8,093 $ 15.67 $ 127
===== =====
</TABLE>
The redemption price is fixed by formula and varies depending on the
length of time the units have been outstanding.
11
<PAGE> 12
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 six- and three- month
periods ended June 30, 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 the 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. The Partnership
redeemed 2,068 units for a total dollar amount of $32 during the six-month
period ended June 30, 1996. From the inception of the Partnership through June
30, 1996, the Partnership has redeemed a total of 8,093 units for $127,
representing an average redemption price of $15.67 per unit. The Partnership
has used cash flow from operations to pay for the redeemed units.
The Partnership invests working capital and cash flows from operations in
short-term, highly liquid investments prior to distribution or reinvestment in
additional Equipment. 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 June 30, 1996, the Partnership's cash
of $518 was primarily invested in a market-rate account.
During the six-month period ended June 30, 1996, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1995
through May 1996, in the amount of $7,180. These distributions represent a
return of 10.5% of original capital (measured on an annualized basis) on each
unit. On a GAAP basis $2,829 of these distributions was a return of capital and
the balance was from net earnings. On a cash basis all of these distributions
were from operations.
For the six-month period ended June 30, 1996, the Partnership had net cash
provided by operating activities of $7,554, compared with $10,293 for the same
period in 1995. This decrease was, in part, attributable to a decrease in
income from operations resulting from a decline in rental income of $1,162, or
9%, and an increase in direct operating expenses of $399, or 25%, partially
offset by a decrease in accounts receivable from operations. The average
collection period of accounts receivable from operations improved from 109 days
for the six-month period ended June 30, 1995 to 103 days for the comparable
period in 1996. Additionally, net cash from operations was impacted by an
increase in due from affiliates, which reflects timing differences in the
accrual and payment of net rental revenues, fees and other expenses to or from
TEM and affiliates.
The Partnership's principal lessees, shipping lines, are currently experiencing
over-capacity, in part, due to the delivery of new, large capacity ships. This
over-capacity has, in some instances, caused shipping lines to reduce freight
rates, which could affect the profitability of their business, resulting in the
possibility of delay in the remittance of rental payments, pressure on
Equipment rental rates, and, in extreme cases, bankruptcy of
12
<PAGE> 13
some shipping lines. As discussed more fully below under "Results of
Operations", utilization rates have reflected a lower demand for Equipment, and
this over-capacity could also further affect these rates.
Net cash used in investing activities for the six-month period ended June 30,
1996 was $1,111 compared to $3,579 for the same period in 1995. This
difference is primarily due to the fact that, on a cash basis, the Partnership
purchased less Equipment in 1996 than in the same period in 1995. The General
Partners believe that these differences reflect normal fluctuations in
equipment sales and purchases. In addition, the Partnership has 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, Equipment
depreciation, direct operating expenses, management fees, and reimbursement of
administrative expenses, were directly related to the size of the Equipment
fleet (inventory) during the six-month periods ended June 30, 1996 and 1995, as
well as certain other factors as discussed below. The following is a summary
of the Equipment (in units) available for lease during those periods:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Opening inventory 36,297 35,132
Closing inventory 36,188 36,130
Average 36,243 35,631
</TABLE>
The average container fleet increased by 1.7% from the six-month period ended
June 30, 1995 to the same period in 1996 primarily due to reinvestment of
proceeds from the sale of used Equipment.
Rental income and direct container expenses are affected by lease utilization
percentages for the Equipment, which were 85% and 93% on average during the
six-month period ended June 30, 1996 and 1995, respectively. In addition,
rental income is affected by daily rental rates.
The following is a comparative analysis of the results of operations for the
six-month periods ended June 30, 1996 and 1995.
The Partnership's income from operations for the six-month period ended June
30, 1996 was $4,219 on gross rental income of $12,216, compared to $5,459 on
gross rental income for $13,378 for the same period in 1995. The decrease in
rental income between periods was primarily attributable to income from
Equipment rentals, the major component of total rental income, which decreased
by $806, or 7%. Income from Equipment rentals is largely dependent upon three
factors: average on-hire (utilization) percentage, Equipment available for
lease (average inventory), and average daily rental rates. Average utilization
decreased by eight percentage points, and average daily rental rates decreased
by .1%; these decreases were tempered by an increase in average inventory of
1.7%.
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 and
second quarters of 1996. The General Partners believe that this softening in
demand has been due, in part, to a slow-down in activity in the Asia-North
America trade route as well as to seasonal factors. The General Partners have
seen recent evidence of some stabilization in utilization rates for certain
Equipment types; however, there can be no assurance regarding the trend for
utilization in the future. Additionally, as noted above, the Partnership's
principal lessees, shipping lines, are currently experiencing over-capacity,
which may adversely affect rental payments and/or rates and utilization.
13
<PAGE> 14
Rental rates have also been restrained by quantity rate discounts granted to
the Partnership's larger Equipment lessees.
Substantially all of the Partnership's rental income was generated from the
leasing of the Equipment under short-term operating leases.
The balance of rental income consists of other lease-related items, primarily
income from charges to the lessees for pick-up of Equipment from prime
locations less credits granted to lessees for leasing Equipment from less
desirable locations (location income), income for handling and returning
Equipment and income from charges to lessees for a damage protection plan. For
the six-month period ended June 30, 1996, the total of these other revenue
items was $1,026, a decrease of $356 compared to the equivalent period in 1995.
The primary component of this net decrease was a decline in location income of
$261. This decline is mainly due to an increase in credits given to lessees for
pick-up of Equipment from less desirable locations, which was largely driven by
decreased demand. Location income also declined 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, which did not re-occur in the same period in 1996.
Direct operating expenses, excluding bad debt expense, increased by $399, or
25%, from the six-month period ended June 30, 1995 to the same period in 1996.
The primary components of this increase were costs incurred for storage, which
increased by $341 between periods. This cost increased due to the decline in
utilization between periods. Additionally, expenses under the damage
protection plan increased by $111 between periods. This was due to an increase
in the average repair cost for units covered under the plan.
Bad debt expense decreased from $299 in the six-month period ended June 30,
1995 to $115 in the same period of 1996. The decrease was primarily due to a
reduction in reserve requirements for a specific lessee during the second
quarter 1996.
Depreciation and amortization expense increased by $119, or 3%, from the
six-month period ended June 30, 1995 to the same period in 1996, reflecting the
increase in the Partnership's average fleet size of 1.7% between periods.
Management fees to affiliates, which are based primarily on rental income, were
$74, or 6%, lower in the six-month period ended June 30, 1996 compared to the
same period of 1995. This decrease was due to a 9% decrease in rental income.
These fees were 9.4% and 9.2% of gross revenue for the six-month periods ended
June 30, 1996 and 1995, respectively. Base management fees were 7% of gross
revenue for both periods.
General and administrative costs to affiliates decreased by 18%, or $159, from
the six-month period ended June 30, 1995 to the same period in 1996. This
decrease was primarily the result of a decline in overhead costs allocated from
TEM.
Other income provided $208 of additional income for the six-month period ended
June 30, 1996, representing an increase of $36, or 21%, over the equivalent
period in 1995. The increase was attributable to a $21 increase in gains from
sales of Equipment and a $15 increase in interest income.
Net earnings per limited partnership unit decreased from $0.81 for the
six-month period ended June 30, 1995 to $0.64 for the six-month period ended
June 30, 1996, reflecting the decrease in net earnings from $5,631 for the
six-month period ended June 30, 1995 to $4,427 for the same period in 1996.
14
<PAGE> 15
The following is a comparative analysis of the results of operations for the
three-month periods ended June 30, 1996 and 1995.
The Partnership's income from operations for the three-month period ended June
30, 1996 decreased by $1,056, or 37%, compared to the same period in 1995, on
rental income of $5,861 and $6,709, respectively. The decrease in total rental
income of $848, or 13%, between periods was primarily attributable to income
from Equipment rentals, the major component of total rental income, which
decreased by $650, or 11%, from 1995 to 1996. This decrease resulted from the
fact that average inventory decreased by 1.7%, utilization decreased by nine
percentage points, and average daily rental rates decreased by 1.3% from the
three-month period ended June 30, 1996 to the comparable period ended June 30,
1995.
The balance of rental income for the three months ended June 30, 1996 was $417
compared to $615 for the same period in 1995, a decrease of $198, or 32%. The
primary component of this net decrease was a decrease in location income of
$127 from the three-month period ended June 30,1995 to the same period in 1996.
The decrease in location income was due to an increase in credits given to
lessees for pick-up of Equipment from less desirable locations in the six-month
period ended June 30, 1996, which was largely driven by decreased demand.
Direct operating expenses, excluding bad debt expense, increased by $240, or
31%, from the three-month period ended June 30, 1995 to the equivalent period
in 1996. The primary component of this increase was costs incurred for
storage, which increased by $186 between periods. This cost increased due to
the decline in utilization between periods. Additionally, expenses under the
damage protection plan increased by $96 between periods, due to an increase in
the average repair cost for units covered under the plan.
Bad debt expense increased by $101 from the three-month period ended June 30,
1995 to the same period in 1996 due to a settlement of some amounts owed by
certain lessees for whom the Partnership had specifically identified and
reserved at December 31, 1994, resulting in the lower overall reserve for the
three-month period ended June 30, 1995.
Depreciation expense increased by $60 from the three-month period ended June
30, 1995 to the equivalent period in 1996. Management fees to affiliates were
lower by $54 in the three months ended June 30, 1996 than in the same period in
1995. General and administrative costs to affiliates decreased by $135, or
28%, from the three-month period ended June 30, 1995 to the same period in.
The decrease was primarily the result of a decline in overhead costs allocated
from TEM.
Other income includes a gain on sales of Equipment of $49 for the three-month
period ended June 30, 1996 compared to a gain of $40 for same period in 1995.
Net earnings decreased from $2,924 for the three-month period ended June 30,
1995 to $1,878 for the three-month period ended June 30, 1996 for the reasons
noted above.
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 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 Equipment is generally
operated on the international high seas rather than on the domestic waterways.
The Equipment is subject to the risk of war or other political, economic or
social occurrence where the Equipment is used, which may result in the loss of
Equipment, which, in turn, may have a material impact on the Partnership's
results of operations and financial condition. The General Partners are not
aware of any conditions as of June 30, 1996 which would result in such risk
materializing.
15
<PAGE> 16
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 Equipment, and the effect of world trade and/or general business and
economic cycles on the Partnership's operations.
16
<PAGE> 17
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 _______________________________
John R. Rhodes
Executive Vice President
Date: August 12, 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>
________________________ President (Principal Executive August 12, 1996
James E. Hoelter Officer) and Director
________________________ Executive Vice President, August 12, 1996
John R. Rhodes (Principal Financial and
Accounting Officer)
Secretary and Treasurer
</TABLE>
17
<PAGE> 18
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: August 12, 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 August 12, 1996
- ----------------------- Officer) and Director
James E. Hoelter
/s/John R. Rhodes Executive Vice President, August 12, 1996
- ------------------------- (Principal Financial and
John R. Rhodes Accounting Officer),
Secretary and Treasurer
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 518
<SECURITIES> 0
<RECEIVABLES> 7,189
<ALLOWANCES> 1,368
<INVENTORY> 0
<CURRENT-ASSETS> 55
<PP&E> 125,105
<DEPRECIATION> 25,637
<TOTAL-ASSETS> 105,862
<CURRENT-LIABILITIES> 1,797
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 104,065
<TOTAL-LIABILITY-AND-EQUITY> 105,862
<SALES> 0
<TOTAL-REVENUES> 12,216
<CGS> 0
<TOTAL-COSTS> 7,997
<OTHER-EXPENSES> (208)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,427
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,427
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
