TEXTAINER FINANCIAL SERVICES CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
May 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 TCC Equipment Income Fund IV, L.P.
(the "Company") the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 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 March 31, 1997
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>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Quarterly Report on Form 10Q for the
Quarter Ended March 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Item 1. Financial Statements
<S> <C>
Balance Sheets - March 31, 1997 (unaudited) and December 31, 1996................................. 3
Statements of Earnings for the three months ended
March 31, 1997 and 1996 (unaudited)............................................................... 4
Statements of Partners' Capital for the three months
ended March 31, 1997 and 1996 (unaudited)......................................................... 5
Statements of Cash Flows for the three months
ended March 31, 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
March 31, 1997 and Decemeber 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
(unaudited)
<S> <C> <C>
Assets
Container rental equipment, net of accumulated
depreciation of $30,828 (1996: $29,128) $ 94,413 95,626
Cash 688 2,694
Accounts receivable, net of allowance
for doubtful accounts of $1,344 (1996: $1,391) 5,518 5,647
Due from affiliates (note 5) 366 -
Organization costs, net of accumulated
amortization of $232 (1996: $220) 4 16
Prepaid expenses 34 46
----------------- -----------------
$ 101,023 104,029
================= =================
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 612 629
Accrued liabilities 15 -
Accrued damage protection plan costs (note 2) 426 520
Warranty claims (note 3) 583 599
Due to affiliates (note 5) - 815
Deferred quarterly distribution 198 199
Equipment purchases payable 195 361
----------------- -----------------
Total liabilities 2,029 3,123
----------------- -----------------
Partners' capital:
General partners - -
Limited partners 98,994 100,906
----------------- -----------------
Total partners' capital 98,994 100,906
----------------- -----------------
Commitments (note 8)
$ 101,023 104,029
================= =================
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Statements of Earnings
For the three months ended March 31, 1997 and 1996
(Dollar amounts in thousands except for unit and per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
-------------- ---------------
<S> <C> <C>
Rental Income $ 5,173 6,355
-------------- ---------------
Costs and expenses:
Direct container expenses 992 981
Bad debt expense 5 6
Depreciation and amortization 1,874 1,892
Professional fees 8 10
Management fees to affiliates (note 5) 495 591
General and administrative costs to affiliates (note 5) 359 404
Other general and administrative costs 56 63
-------------- ---------------
3,789 3,947
-------------- ---------------
Income from operations 1,384 2,408
-------------- ---------------
Other income:
Interest income 24 29
Gain on sale of equipment 61 112
-------------- ---------------
85 141
-------------- ---------------
Net earnings $ 1,469 2,549
============== ===============
Allocation of net earnings (note 5):
General partners $ 34 38
Limited partners 1,435 2,511
-------------- ---------------
$ 1,469 2,549
============== ===============
Limited partners' per unit share
of net earnings $ 0.21 0.37
============== ===============
Limited partners' per unit share
of distributions $ 0.48 0.52
============== ===============
Weighted average number of limited
partnership units outstanding 6,827,168 6,837,810
============== ===============
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Statements of Partners' Capital
For the three months ended March 31, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Partners' Capital
------------------------------------------------------
General Limited Total
------------ ---------------- -----------------
<S> <C> <C> <C>
Balances at January 1, 1996 $ - 106,926 106,926
Distributions (38) (3,589) (3,627)
Redemptions (note 7) - (32) (32)
Net earnings 38 2,511 2,549
------------ ---------------- -----------------
Balances at March 31, 1996 $ - 105,816 105,816
============ ================ =================
Balances at January 1, 1997 $ - 100,906 100,906
Distributions (34) (3,243) (3,277)
Redemptions (note 7) - (104) (104)
Net earnings 34 1,435 1,469
------------ ---------------- -----------------
Balances at March 31, 1997 $ - 98,994 98,994
============ ================ =================
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Statements of Cash Flows
For the three months ended March 31, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,469 2,549
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation 1,862 1,880
Decrease in allowance for doubtful accounts (47) (76)
Amortization of organization costs 12 12
Gain on sale of equipment (61) (112)
Changes in assets and liabilities:
Decrease in accounts receivable 176 641
Decrease in due to affiliates, net (1,155) (1,072)
(Decrease) increase in accounts payable and accrued liabilities (2) 145
(Decrease) increase in accrued damage protection plan costs (94) 25
Decrease in warranty claims (16) (3)
Decrease in prepaid expenses 12 15
---------------- ----------------
Net cash provided by operating activities 2,156 4,004
---------------- ----------------
Cash flows from investing activities:
Proceeds from sale of equipment 326 439
Equipment purchases (1,099) (404)
---------------- ----------------
Net cash (used in) provided by investing activities (773) 35
---------------- ----------------
Cash flows from financing activities:
Redemptions of limited partnership units (104) (32)
Distributions to partners (3,285) (3,608)
---------------- ----------------
Net cash used in financing activities (3,389) (3,640)
---------------- ----------------
Net (decrease) increase in cash (2,006) 399
Cash at beginning of period 2,694 1,293
---------------- ----------------
Cash at end of period $ 688 1,692
================ ================
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Statements Of Cash Flows--Continued
For the three months ended March 31, 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 March 31, 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
three-month periods ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
Mar. 31 Dec. 31 Mar. 31 Dec. 31
1997 1996 1996 1995
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates.............................. $ 31 5 37 53
Equipment purchases payable.................... 195 361 1,307 349
Distributions to partners included in:
Due to affiliates.............................. 11 18 136 115
Deferred quarterly distribution................ 198 199 232 234
Proceeds from sale of Equipment included in:
Accounts receivable............................ - - 2 2
Due from affiliates............................ 406 361 274 360
</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
three-month periods ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Equipment purchases recorded...................................................... $ 959 1,346
Equipment purchases paid.......................................................... 1,099 404
Distributions to partners declared................................................ 3,277 3,627
Distributions to partners paid.................................................... 3,285 3,608
Proceeds from sale of Equipment recorded.......................................... 371 353
Proceeds from sale of Equipment received.......................................... 326 439
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND IV, L.P.
(a California limited partnership)
Notes To Financial Statements
March 31, 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 March 31, 1997 and December 31, 1996, and the
results of its operations, changes in partners' capital and cash flows for
the three-month periods ended March 31, 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.
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 March 31, 1997 and December 31,
1996, this reserve was equal to $426 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 March 31,
1997 and December 31, 1996, the unamortized portion of the settlement
amount was $583 and $599, respectively.
Note 4. Acquisition of Equipment
During the three-month periods ended March 31, 1997 and 1996, the
Partnership purchased Equipment with a cost of $959 and $1,346,
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 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, 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 $54 and $19 as a component
of Equipment costs during the three-month periods ended March 31, 1997 and
1996, respectively. The Partnership incurred $137 and $151 of incentive
management fees during the three-month periods ended March 31, 1997 and
1996, respectively. 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 March 31, 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. For the
three-month periods ended March 31, 1997 and 1996, these fees totaled $358
and $440, 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 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. During the three-month periods ended
March 31, 1997 and 1996, costs allocated to the Partnership for salaries
were $184 and $197, respectively and other general and administrative
costs were $175 and $207, respectively. 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 $316 and
$330, for the three-month periods ended March 31, 1997 and 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 $43 and $74 of
these indirect costs to the Partnership during the three-month periods
ended March 31, 1997 and 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 March 31, 1997 and December 31, 1996, due from and to affiliates are
comprised of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Due from affiliates:
Due from TEM................................... $ 693 -
=== ===
Due to affiliates:
Due to TFS..................................... $ 278 50
Due to TGH..................................... 1 -
Due to TAS..................................... 29 5
Due to TCC..................................... 19 36
Due to TEM..................................... - 723
Due to TL...................................... - 1
--- ---
$ 327 815
=== ===
</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 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 three-month period ended March 31, 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 March 31, 1997:
Year ending March 31:
1998............................................. $ 967
1999............................................. 102
2000............................................. 8
-------
Total minimum future rentals receivable.......... $ 1,077
=======
Note 7. Redemptions
The following redemption offerings were consummated by the Partnership
during the three-month period ended March 31, 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
------ ----
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 March 31, 1997, the Partnership has committed to purchase 350 new
containers at an approximate total purchase price of $662 which includes
acquisition fees of $32. 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 three-month periods ended March
31, 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 three-month period ended March 31, 1997.
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 March 31, 1997, the Partnership's cash of $688
was invested in a market-rate account.
During the three-month period ended March 31, 1997, the Partnership declared
cash distributions to limited partners pertaining to the period from December
1996 through February 1997, in the amount of $3,243. These distributions
represent a return of 9.5% of original capital (measured on an annualized basis)
on each unit. On a GAAP basis $1,808 of these distributions was a return of
capital and the balance was from net earnings. On a cash basis $1,087 of these
distributions was from operations and the balance was from reserves.
At March 31, 1997, the Partnership had committed to purchase 350 new containers
at an approximate total purchase price of $662, which includes acquisition fees
of $32. At March 31, 1997, the Partnership had sufficient cash on hand to meet
these commitments. In the event that Partnership decides not to purchase the
Equipment, one of the General Partners or an affiliate of the General Partners
will retain the Equipment for its own account.
For the three-month period ended March 31, 1997, the Partnership had net cash
provided by operating activities of $2,156, compared with $4,004 for the same
period in 1996. This decrease was primarily attributable to a decreases in net
earnings and due to affiliates, net of $1,080 and $1,155, respectively. The 42%
decrease in net earnings from the three months ended March 31, 1996 to the same
period in 1997, was primarily due to a decrease in rental revenues of $1,182, or
19%. 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". 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, 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 three-month period ended March 31, 1997 was $773 compared to
net cash provided by investing activities of $35 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 three-month periods ended March 31, 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....................... 36,079 36,373
Average................................. 36,005 36,335
The decline in the average container fleet from the three-months ended March 31,
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 86% on average
during the three-month period ended March 31, 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
three-month periods ended March 31, 1997 and 1996.
The Partnership's income from operations for the three-month period ended March
31, 1997 was $1,384 on gross rental income of $5,173, compared to $2,408 on
gross rental income for $6,355 for the same period in 1996. The largest
component of total rental income is income from container rentals, which
decreased by $993 or 17%, from 1996 to 1997. 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 by 10%, average daily rental rates
decreased by 5% and average inventory decreased 1%.
Container utilization began to decline in late 1995 and that decline persisted
throughout 1996 and into 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. For the near
term, the General Partners do not foresee any changes in current market
conditions and caution that both utilization and lease rates could continue to
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 less
desirable locations (location income), income for handling and returning
containers and income from charges to lessees for a damage protection plan
(DPP). For the three-month period ended March 31, 1997, the total of these other
revenue items was $419, a decrease of $189 compared to the equivalent period in
1996. The primary components of this net decrease were decreases in location
income and DPP of $128 and $68, respectively. This decline in location income is
mainly due to lower demand, which drove drop-off charges to lessees down and
increased credits given to lessees for picking up units from less desirable
locations. DPP revenue declined due to the decrease in return fees as a result
of fewer units being turned in during the period ended March 31, 1997 as
compared to the equivalent period in 1996.
Direct operating expenses, excluding bad debt expense, increased by $11, or 1%,
from the three-month period ended March 31, 1996, to the same period in 1997.
The primary component of this increase was an increase in storage expense which
increased by $218, offset by a decrease in DPP expense of $152 between periods.
The increase in storage expense was primarily due to the decline in utilization.
The decrease in DPP expense was primarily due to a decrease in the average
number of units requiring repairs from March 31, 1996 to the same period in
1997, coupled with a slight decrease in the average repair costs per unit
between the two periods.
Bad debt expense decreased from $6 in the three-month period ended March 31,
1996 to $5 in the same period of 1997.
Depreciation and amortization expense decreased by $18, or 1%, from the
three-month period ended March 31, 1996 to the same period in 1997, reflecting
the decrease in the Partnership's average fleet size between periods.
Management fees decreased by $96 or 16%, from the three months ended March 31,
1997 to the equivalent period in 1997 due to a decrease in equipment and
incentive management fees. Equipment management fees, which are based primarily
of gross revenue, decreased $81 or 18% 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 $15 or 10% primarily due to a decrease in the
distribution rate from 10.5% in the three-month period ended March 31, 1996 to
9.5% for the equivalent period in 1997.
General and administrative costs to affiliates decreased by 11%, or $45, from
the three-month period ended March 31, 1996 to the same period in 1997,
primarily due to a decline in overhead costs allocated from TEM and TFS during
these periods.
Other income provided $85 of additional income for the three-month period ended
March 31, 1997, representing a decrease of $56, or 40% over the equivalent
period in 1996. The decrease was attributable to a $51 decline in gain from
sales of Equipment and a $5 decrease in interest income.
Net earnings per limited partnership unit decreased from $0.37 for the
three-month period ended March 31, 1996 to $0.21 for the three-month period
ended March 31, 1997, reflecting the decrease in net earnings from $2,549 for
the three-month period ended March 31, 1996 to $1,469 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, 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 March 31, 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: May 13, 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, May 13, 1997
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
________________________ President (Principal Executive May 13, 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: May 13, 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, May 13, 1997
- ------------------------- (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/James E. Hoelter President (Principal Executive May 13, 1997
- ----------------------- Officer) and Director
James E. Hoelter
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Textainer Equipment Fund IV, LP
</LEGEND>
<CIK> 0000882288
<NAME> Textainer Equipment Income Fund IV, LP
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 688
<SECURITIES> 0
<RECEIVABLES> 7,228
<ALLOWANCES> 1,344
<INVENTORY> 0
<CURRENT-ASSETS> 38
<PP&E> 125,241
<DEPRECIATION> 30,828
<TOTAL-ASSETS> 101,023
<CURRENT-LIABILITIES> 2,029
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 98,994
<TOTAL-LIABILITY-AND-EQUITY> 101,023
<SALES> 0
<TOTAL-REVENUES> 5,173
<CGS> 0
<TOTAL-COSTS> 3,789
<OTHER-EXPENSES> (85)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,469
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,469
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
