.
TEXTAINER FINANCIAL SERVICES CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
August 13, 1997
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 IV,
L.P. (the "Company") the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997.
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 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 0-19145
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(Exact name of Registrant as specified in its charter)
California 94-3147432
(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>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Quarterly Report on Form 10Q for the
Quarter Ended June 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Item 1. Financial Statements
<S> <C>
Balance Sheets - June 30, 1997 (unaudited) and December 31, 1996.....................................3
Statements of Earnings for the six and three months
ended June 30, 1997 and 1996 (unaudited).............................................................4
Statements of Partners' Capital for the six months
ended June 30, 1997 and 1996 (unaudited).............................................................5
Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 (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>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Balance Sheets
June 30, 1997 and December 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $32,547 (1996: $29,128) $ 93,388 95,626
Cash 362 2,694
Accounts receivable, net of allowance
for doubtful accounts of $1,454 (1996: $1,391) 5,418 5,647
Due from affiliates (note 5) 117 -
Organization costs, net of accumulated
amortization of $236 (1996: $220) - 16
Prepaid expenses 21 46
----------------- -----------------
$ 99,306 104,029
================= =================
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 768 629
Accrued liabilities 168 -
Accrued damage protection plan costs (note 2) 392 520
Warranty claims (note 3) 568 599
Due to affiliates (note 5) 95 815
Deferred quarterly distribution 198 199
Equipment purchases payable 274 361
----------------- -----------------
Total liabilities 2,463 3,123
----------------- -----------------
Partners' capital:
General partners - -
Limited partners 96,843 100,906
----------------- -----------------
Total partners' capital 96,843 100,906
----------------- -----------------
Commitments (note 8)
$ 99,306 104,029
================= =================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements of Earnings
For the six and three months ended June 30, 1997 and 1996
(Dollar amounts in thousands except for unit and per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
Ended Ended Ended Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
----------------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C>
Rental income $ 10,339 5,166 12,216 5,861
----------------- ------------------ ----------------- -------------------
Costs and expenses:
Direct container expenses 2,211 1,219 2,000 1,019
Bad debt expense 167 162 115 109
Depreciation and amortization 3,738 1,864 3,806 1,913
Professional fees 17 9 17 8
Management fees to affiliates (note 5) 989 494 1,151 560
General and administrative costs
to affiliates (note 5) 707 348 744 340
Other general and administrative costs 110 54 164 101
----------------- ------------------ ----------------- -------------------
7,939 4,150 7,997 4,050
----------------- ------------------ ----------------- -------------------
Income from operations 2,400 1,016 4,219 1,811
----------------- ------------------ ----------------- -------------------
Other income:
Interest income 39 15 47 18
Gain on sale of equipment 156 95 161 49
----------------- ------------------ ----------------- -------------------
195 110 208 67
----------------- ------------------ ----------------- -------------------
Net earnings $ 2,595 1,126 4,427 1,878
================= ================== ================= ===================
Allocation of net earnings (note 5):
General partners $ 68 34 76 38
Limited partners 2,527 1,092 4,351 1,840
----------------- ------------------ ----------------- -------------------
$ 2,595 1,126 4,427 1,878
================= ================== ================= ===================
Limited partners' per unit share
of net earnings $ 0.37 0.16 0.64 0.27
================= ================== ================= ===================
Limited partners' per unit share
of distributions $ 0.95 0.47 1.05 0.53
================= ================== ================= ===================
Weighted average number of limited
partnership units outstanding 6,827,168 6,827,168 6,834,810 6,837,810
================= ================== ================= ===================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
For the six months ended June 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Partners' Capital
------------------------------------------------------
General Limited Total
------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Balances at January 1, 1996 $ - 106,926 106,926
Distributions (76) (7,180) (7,256)
Redemptions (note 7) - (32) (32)
Net earnings 76 4,351 4,427
------------ ---------------- -----------------
Balances at June 30, 1996 $ - 104,065 104,065
============ ================ =================
Balances at January 1, 1997 $ - 100,906 100,906
Distributions (68) (6,486) (6,554)
Redemptions (note 7) - (104) (104)
Net earnings 68 2,527 2,595
------------ ---------------- -----------------
Balances at June 30, 1997 $ - 96,843 96,843
============ ================ =================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements of Cash Flows
For the six months ended June 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,595 4,427
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 3,722 3,782
Increase in allowance for doubtful accounts 63 19
Amortization of organization costs 16 24
Gain on sale of equipment (156) (161)
Changes in assets and liabilities:
Decrease in accounts receivable 169 673
Decrease in due to affiliates, net (878) (1,338)
Increase in accounts payable and accrued liabilities 307 92
(Decrease) increase in accrued damage protection plan costs (128) 11
Decrease in warranty claims (31) (5)
Decrease in prepaid expenses 25 30
---------------- ----------------
Net cash provided by operating activities 5,704 7,554
---------------- ----------------
Cash flows from investing activities:
Proceeds from sale of equipment 764 824
Equipment purchases (2,134) (1,935)
---------------- ----------------
Net cash used in investing activities (1,370) (1,111)
---------------- ----------------
Cash flows from financing activities:
Redemptions of limited partnership units (104) (32)
Distributions to partners (6,562) (7,186)
---------------- ----------------
Net cash used in financing activities (6,666) (7,218)
---------------- ----------------
Net decrease in cash (2,332) (775)
Cash at beginning of period 2,694 1,293
---------------- ----------------
Cash at end of period $ 362 518
================ ================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Statements Of Cash Flows--Continued
For the six months ended June 30, 1997 and 1996
(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, 1997 and 1996, and December 31, 1996 and 1995, 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, 1997 and 1996.
<TABLE>
<CAPTION>
June 30 Dec. 31 June 30 Dec. 31
1997 1996 1996 1995
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates.............................. $ 17 5 139 53
Equipment purchases payable.................... 274 361 - 349
Distributions to partners included in:
Due to affiliates.............................. 11 18 187 115
Deferred quarterly distribution................ 198 199 232 234
Proceeds from sale of Equipment included in:
Accounts receivable............................ - - - 2
Due from affiliates............................ 325 361 249 360
</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, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Equipment purchases recorded...................................................... $ 2,059 1,672
Equipment purchases paid.......................................................... 2,134 1,935
Distributions to partners declared................................................ 6,554 7,256
Distributions to partners paid.................................................... 6,562 7,186
Proceeds from sale of Equipment recorded.......................................... 728 711
Proceeds from sale of Equipment received.......................................... 764 824
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California Limited Partnership)
Notes To Financial Statements
June 30, 1997
(Dollar amounts in thousands except for unit and per unit amounts)
(Unaudited)
Note 1. General
Textainer Equipment Income Fund IV, L.P. (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, 1997 and December 31, 1996, and the
results of its operations, changes in partners' capital and cash flows for
the six- and three-month periods ended June 30, 1997 and 1996, 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, 1996.
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 of prior year amounts have been made in order to
conform with the 1997 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, 1997 and December 31,
1996, this reserve was equal to $392 and $520, respectively.
Note 3. Warranty Claims
During 1996 and 1995, the Partnership settled warranty claims against two
equipment manufacturers. The Partnership is amortizing the settlement
amount over the remaining estimated useful life of the Equipment (ten
years), reducing maintenance and repair costs over that time. At June 30,
1997 and December 31, 1996, the unamortized portion of the settlement
amount was $568 and $599, respectively.
Note 4. Acquisition of Equipment
During the six-month periods ended June 30, 1997 and 1996, the Partnership
purchased Equipment with a cost of $2,059 and $1,672, respectively.
Note 5. 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. 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,
TEM, TL and TAS are subsidiaries of Textainer Group Holdings Limited
(TGH). 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, and subject to the special
allocations described therein, net earnings or losses and partnership
distributions are generally 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 deficits
exceed the portion of syndication and offering costs allocated to them. On
termination of the Partnership, the General Partners shall be allocated
gross income equal to their allocations of syndication and offering costs.
As part of the operation of the Partnership, the Partnership is to pay to
the General Partners 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 equipment acquisition fees totaling $102 and $98 as a
component of Equipment costs during the six-month periods ended June 30,
1997 and 1996, respectively. The Partnership incurred $273 and $136 of
incentive management fees during the six- and three-month periods ended
June 30, 1997 and $302 and $151 of incentive management fees for the
comparable periods in 1996. No equipment liquidation fees were incurred
during either period.
The Equipment of the Partnership 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 Equipment leasing operations; such cash is included in the
amount due from affiliates at June 30, 1997 and December 31, 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. These fees
totaled $716 and $358 for the six- and three-month periods ended June 30,
1997 and $849 and $409 for the comparable periods in 1996. 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 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 borne by TFS and TEM. Costs allocated to the Partnership
for salaries were $376 and $191 for the six- and three-month periods ended
June 30, 1997 and $364 and $170 for the comparable periods in 1996. Other
general and administrative costs were $331 and $157 for the six- and
three-month periods ended June 30, 1997 and $380 and $170 for the
comparable periods in 1996. TEM allocates these costs based on the ratio
of the Partnership's interest in managed Equipment to the total Equipment
managed by TEM during the period. Indirect general and administrative
costs allocated to the Partnership by TEM were $614 and $298 for the six-
and three-month periods ended June 30, 1997 and $655 and $325 for the
comparable periods in 1996.
TFS allocates indirect general and administrative costs to the Partnership
based on the ratio of the Partnership's Equipment to the total Equipment
of all limited partnerships managed by TFS. TFS allocated indirect costs
of $93 and $50 to the Partnership for the six- and three-month periods
ended June 30, 1997 and $89 and $15 for the comparable periods in 1996.
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, 1997 and December 31, 1996, due from and to affiliates are
comprised of:
1997 1996
---- ----
Due from affiliates:
Due from TEM................................... $ 117 -
=== ====
Due to affiliates:
Due to TFS..................................... $ 64 50
Due to TAS..................................... 16 5
Due to TCC..................................... 14 36
Due to TEM..................................... - 723
Due to TL...................................... 1 1
---- -----
$ 95 815
=== ===
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 remittance 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 at a rate not greater than the General
Partners' or affiliates' own cost of funds. There was no interest charged
on intercompany balances for the six- and three-month periods ended June
30, 1997 or 1996.
Note 6. Rentals Under Operating Leases
The following is a schedule by year of minimum future rentals receivable
on noncancelable operating leases as of June 30, 1997:
Year ending June 30:
1998............................................. $ 1,458
1999............................................. 53
2000............................................. 7
-----------
Total minimum future rentals receivable.......... $ 1,518
=========
Note 7. Redemptions
The following redemption offerings were consummated by the Partnership
during the six-month period ended June 30, 1997:
<TABLE>
<CAPTION>
Units Average
Redeemed Redemption Price Amount Paid
<S> <C> <C> <C>
Balance at December 31, 1996 10,715 $15.49 $ 166
Quarter ended:
March 31, 1997.................... 8,020 $13.03 104
June 30, 1997..................... - - -
----------- ------
Partnership to date............... 18,735 $14.43 $ 270
====== ====
</TABLE>
The redemption price is fixed by formula and varies depending on the
length of time the units have been outstanding.
Note 8. Commitments
At June 30, 1997, the Partnership has committed to purchase 100 new
containers at an approximate total purchase price of $192 which includes
acquisition fees of $9. These commitments were made to TAS which, as the
contracting party, has in turn committed to purchase this Equipment on
behalf of the Partnership.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Dollar 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 for the six- and three-month periods
ended June 30, 1997 and 1996. 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 8,020 units for a total
dollar amount of $104 during the six-month period ended June 30, 1997. 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, 1997, the Partnership's cash of $362
was invested in a market-rate account.
During the six-month period ended June 30, 1997, the Partnership declared cash
distributions to limited partners pertaining to the period from December 1996
through May 1997, in the amount of $6,486. These distributions represent a
return of 9.5% of original capital (measured on an annualized basis) on each
unit. On a GAAP basis $3,959 of these distributions was a return of capital and
the balance was from net earnings. On a cash basis $5,600 of these distributions
was from operations and the balance was from reserves.
At June 30, 1997, the Partnership had committed to purchase 100 new containers
at an approximate total purchase price of $192 which includes acquisition fees
of $9. At June 30, 1997 the Partnership had sufficient cash on hand to meet
these commitments. In the event that the Partnership decides not to purchase the
Equipment, one of the General Partners of an affiliate of the General Partners
will acquire the Equipment for its own account.
For the six-month period ended June 30, 1997, the Partnership had net cash
provided by operating activities of $5,704, compared with $7,554 for the same
period in 1996. This decrease was primarily attributable to decreases in net
earnings of $1,832 and accounts receivable of $169 offset by an decrease in due
to affiliates of $878. The 41% decrease in net earnings from the six- month
period ended June 30, 1996 to the same period in 1997, was primarily due to a
decrease in rental revenues of $1,877, or 15%. The decrease in rental revenues
between periods was due to a decline in utilization, rental rates and fleet
size. These decreases are discussed more fully below under "Results of
Operations". Accounts receivable from operations decreased primarily due to the
decrease in rental income. Due to affiliates, net, decreased due to timing
differences in the accrual and payment of expenses and fees or in the accrual
and remittance of net rental revenues. As explained below under "Results of
Operations", demand for leased containers has declined compared to the prior
period, and this decline has affected the Partnership's financial condition.
Net cash used in investing activities (the purchase and sale of rental
equipment) for the six-month period ended June 30, 1997 was $1,370 and $1,111
for the same period in 1996. This difference is primarily due to the fact that,
on a cash basis, the Partnership purchased more Equipment in 1997 than in the
same period in 1996. The General Partners believe that these differences reflect
normal fluctuations in equipment sales and purchases. Moreover, 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 and the General Partners' determination that Equipment
can be profitably sold or bought at any time, the Partnership intends to
reinvest all or a significant amount of proceeds from future Equipment sales in
additional Equipment. Such additional Equipment purchases may not, however,
equal the number of units sold.
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, 1997 and 1996, 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:
1997 1996
Opening inventory....................... 35,931 36,297
Closing inventory....................... 36,345 36,188
Average................................. 36,138 36,243
The decline in the average container fleet from the six-months ended June 30,
1996 to the equivalent period in 1997 was primarily due to the sale of certain
Equipment. Although, sales proceeds were used to purchase new Equipment, fewer
units were bought than sold.
Rental income and direct container expenses are also affected by lease
utilization percentages for the Equipment, which were 77% and 85% on average
during the six-month period ended June 30, 1997 and 1996, respectively. In
addition, rental income is affected by daily rental rates, which have declined.
The following is a comparative analysis of the results of operations for the
six-month periods ended June 30, 1997 and 1996.
The Partnership's income from operations for the six-month period ended June 30,
1997 was $2,400 on gross rental income of $10,339, compared to $4,219 on gross
rental income for $12,216 for the same period in 1996. The largest component of
total rental income is income from container rentals, which decreased $1,758 or
16%, from 1996 to 1997. As noted above, income from container rentals is largely
dependent upon three factors: equipment available for lease (average inventory),
average on-hire (utilization) percentage and average daily rental rates. Average
utilization decreased 9%, and average daily rental rates decreased 6%, while
average inventory decreased less than 1%.
Container utilization began to decline in late 1995 and that decline persisted
throughout 1996 and into the first quarter of 1997. The General Partners believe
that this decrease in demand for leased containers is the result of adverse
changes in the business of its shipping line customers. These changes consist
principally of: (i) a general slowdown in the growth of world containerized
cargo trade, particularly in the Asia-North America and Asia-Europe trade
routes; (ii) over-capacity resulting from the 1996 and 1997 additions of new,
larger ships to the existing container ship fleet at a rate in excess of the
growth rate in containerized cargo trade; and (iii) shipping line alliances and
other operational consolidations that have allowed shipping lines to operate
with fewer containers, thereby decreasing the demand for leased containers. The
container ship over-capacity in particular led to lower shipping rates,
resulting in shipping lines' need to reduce operating costs. The drive to reduce
costs, coupled with the availability of inexpensive financing and lower
container prices, encouraged shipping lines to purchase, rather than lease, a
greater number of new containers in 1996 than in previous years. All of these
factors have led to downward pressure on container lease rates, a decline in
utilization of leased containers, and an increase in leasing incentives and
other discounts being granted to shipping lines by container lessors, further
eroding Partnership profitability. The decline in demand for leased containers
has been accompanied by a drop in the purchase price of new containers.
During the second quarter of 1997, there was a slight improvement in market
conditions as utilization improved and continues to improve into the third
quarter of 1997. Despite the improving utilization, for the near term, the
General Partners do not foresee material changes in current market conditions
and caution that both utilization and lease rates could decline, adversely
affecting the Partnership's operating results.
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 containers from prime
locations less credits granted to lessees for leasing containers from surplus
locations (location income), income for handling and returning containers and
income from charges to lessees for a damage protection plan (DPP). For the
six-month period ended June 30, 1997, the total of these other revenue items was
$893, a decrease of $119 compared to the equivalent period in 1996. The primary
components of this net decrease were decreases in location income and DPP of
$136 and $69, respectively. The decrease was offset by an increase in handling
income of $80. The decline in location income is primarily due to lower demand,
which increased credits given to lessees for picking up units from less
desirable locations. DPP revenue decreased due to a decreased number of units
participating in the plan. Increased container movement resulted in increased
handling revenue for the six-months ending June 30, 1997 as compared to the same
period in 1996.
Direct container expenses, excluding bad debt expense, increased by $211, or
11%, from the six-month period ended June 30, 1996, to the same period in 1997.
The primary components of this increase were increases in storage expense of
$379, and repositioning expense of $170, offset by a decrease in DPP expense of
$281 between periods. The increase in storage expense was primarily due to the
decline in utilization. Repositioning expense increased due a greater number of
units being transported to higher demand locations during the six-month period
ending June 30, 1997 than in the comparable period in 1996. The decrease in DPP
expense was primarily due to a decrease in the average per unit repairs cost
from June 30, 1996 to the same period in 1997.
Bad debt expense increased from $115 in the six-month period ended June 30, 1996
to $167 in the same period of 1997. This increase is due to an increase in
reserve requirements for specific lessees.
Depreciation and amortization expense decreased by $68, or 2%, from the
six-month period ended June 30, 1996 to the same period in 1997, reflecting the
decrease in the Partnership's average fleet size between periods.
Management fees decreased by $162 or 14%, for the six-month period ended June
30, 1997 compared to the equivalent period in 1996 due to a decrease in
equipment and incentive management fees. Equipment management fees, which are
based primarily of gross revenue, decreased $132 or 16% due to the decrease in
rental income and were 7% of gross revenue for both periods. Incentive
management fees, which are based on the Partnership's limited and general
partner distribution percentage and partners' capital, decreased $29 or 10%
primarily due to a decrease in the limited partners distribution percentage from
10.5% in the six-month period ended June 30, 1996 to 9.5% for the equivalent
period in 1997.
General and administrative costs to affiliates decreased by 5%, or $37, from the
six-month period ended June 30, 1996 to the same period in 1997, due to a
decline in overhead costs allocated from TEM and TFS during these periods.
Other income provided $195 of additional income for the six-month period ended
June 30, 1997, representing a decrease of $13, or 6% from the equivalent period
in 1996.
Net earnings per limited partnership unit decreased to $0.37 for the six-month
period ended June 30, 1997 from $0.64 for the six-month period ended June 30,
1996, reflecting the decrease in net earnings from $4,351 for the six-month
period ended June 30, 1996 to $2,527 for the same period in 1997.
The following is a comparative analysis of the results of operations for the
three-month periods ended June 30, 1997 and 1996.
The Partnership's income from operations for the three-month period ended June
30, 1997 was $1,016 on gross rental income of $5,166, compared to $1,811 on
gross rental income for $5,861 for the same period in 1996. The largest
component of total rental income is income from container rentals, which
decreased by $759 or 14%, from 1996 to 1997. This decline was due to a decrease
in average utilization of 8% and a decrease in average daily rental rates of 6%.
The balance of rental income for the three-month period ended June 30, 1997 was
$475, an increase of $64 compared to the equivalent period in 1996. The primary
component of this increase was an increase in handling income of $68. Increased
container movement resulted in increased handling revenue for the three-months
ending June 30, 1997 as compared to the same period in 1996.
Direct container expenses, excluding bad debt expense, increased by $200, or
20%, from the three-month period ended June 30, 1996, to the same period in
1997. The primary components of this increase were increases in storage and
repositioning expenses, which increased due to lower utilization and an increase
in the number of units transported to higher demand locations.
Bad debt expense increased from $109 in the three-month period ended June 30,
1996 to $162 in the same period of 1997. This increase is due to an increase in
reserve requirements for specific lessees.
Depreciation and amortization expense decreased by $49, or 3%, from the
three-month period ended June 30, 1996 to the same period in 1997.
Management fees decreased by $66 or 12%, for the three-month periods ended June
30, 1997 from the equivalent period in 1996 due to a decrease in equipment and
incentive management fees. Equipment management fees decreased due to the
decrease in rental income and incentive management fees decreased primarily due
to a decrease in the limited partners distribution percentage.
General and administrative costs to affiliates increased by 2%, or $8, from the
three-month period ended June 30, 1996 to the same period in 1997, due to an
increase in overhead costs allocated from TFS during these periods.
Other income provided $110 of additional income for the three-month period ended
June 30, 1997 over the equivalent period in 1996. This represents an increase
of $43, or 64%,that was primarily due to a $46 increase in gain from sales of
Equipment.
Net earnings per limited partnership unit decreased from $0.27 for the
three-month period ended June 30, 1996 to $0.16 for the three-month period ended
June 30, 1997. This decrease reflects the delcline in net earnings from $1,840
for the three-month period ended June 30, 1996 to $1,092 for the same period in
1997.
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 at profitable rates, 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, 1997 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 Equipment, 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.
<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 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 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Financial
Services Corporation, the Managing General Partner of the Registrant, in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
________________________ Executive Vice President, August 14, 1997
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
________________________ President (Principal Executive August 14, 1997
James E. Hoelter Officer) and Director
</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 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 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Financial
Services Corporation, the Managing General Partner of the Registrant, in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/John R. Rhodes Executive Vice President, August 14, 1997
- -------------------------
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
/s/James E. Hoelter President (Principal Executive August 14, 1997
- -----------------------
James E. Hoelter Officer) and Director
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Textainer Equipment Income Fund IV, LP
</LEGEND>
<CIK> 0000882288
<NAME> Textainer Equipment Income Fund IV, LP
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 362
<SECURITIES> 0
<RECEIVABLES> 6,989
<ALLOWANCES> 1,454
<INVENTORY> 0
<CURRENT-ASSETS> 21
<PP&E> 125,935
<DEPRECIATION> 32,547
<TOTAL-ASSETS> 99,306
<CURRENT-LIABILITIES> 2,463
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 96,843
<TOTAL-LIABILITY-AND-EQUITY> 99,306
<SALES> 0
<TOTAL-REVENUES> 10,339
<CGS> 0
<TOTAL-COSTS> 7,939
<OTHER-EXPENSES> (195)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,595
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,595
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
