<PAGE> 1
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 SEPTEMBER 30, 1996
COMMISSION FILE NUMBER 0-25946
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 93-1122553
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
650 CALIFORNIA STREET, 16TH FLOOR
SAN FRANCISCO, CALIFORNIA 94108
(Address of Principal Executive Offices) (ZIP Code)
(415) 434-0551
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
<PAGE> 2
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ITEM 1. FINANCIAL STATEMENTS.
Balance Sheets - September 30, 1996 (unaudited) and December 31, 1995...... 3
Statements of Earnings for the nine and three months
ended September 30, 1996 and 1995 (unaudited).............................. 4
Statements of Partners' Capital for the nine months
ended September 30, 1996 and 1995 (unaudited).............................. 5
Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 (unaudited).............................. 6
Notes to Financial Statements (unaudited).................................. 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS...................................................... 13
</TABLE>
2
<PAGE> 3
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
September 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 $7,946 (1995: $4,488) $71,596 65,926
Cash 479 1,372
Accounts receivable, net of allowance
for doubtful accounts of $237 (1995: $151) 2,716 3,043
Due from affiliates (note 4) 255 0
Organization costs, net of accumulated amortization
$109 (1995: $70) 153 192
Prepaid expenses 0 25
------- ------
$75,199 70,558
======= ======
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 402 226
Accrued liabilities 95 214
Deferred quarterly distribution 127 80
Accrued damage protection plan costs (note 2) 332 232
Due to affiliates (note 4) 134 629
Equipment purchases payable 181 1,168
Note payable to bank (note 6) 0 10,000
------- ------
Total liabilities 1,271 12,549
------- ------
Partners' capital:
General partners 2 2
Limited partners 73,926 58,007
------- ------
Total partners' capital 73,928 58,009
------- ------
Commitments (note 8)
$75,199 70,558
======= ======
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF EARNINGS
For the nine and three months ended September 30, 1996 and 1995
(Dollar amounts in thousands except for unit and per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS NINE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
SEPT. 30, 1996 SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Rental Income $ 10,030 3,343 6,978 3,147
---------- ---------- ---------- ----------
Costs and expenses:
Direct container expenses 1,885 686 951 385
Bad debt expense 94 31 79 43
Depreciation and amortization 3,515 1,189 2,110 1,050
Professional fees 41 10 44 7
Management fees to affiliates (note 4) 963 328 594 268
General administrative costs 673 205 514 229
to affiliates (note 4)
Other general and administrative costs 69 43 36 12
---------- ---------- ---------- ----------
7,240 2,492 4,328 1,994
---------- ---------- ---------- ----------
Income from operations 2,790 851 2,650 1,153
---------- ---------- ---------- ----------
Other (expense) income :
Interest income 28 28 133 42
Interest expense (155) -- (747) (266)
Gain on sales of containers 66 10 52 48
---------- ---------- ---------- ----------
(61) 38 (562) (176)
---------- ---------- ---------- ----------
Net earnings $ 2,729 889 2,088 977
========== ========== ========== ==========
Allocation of net earnings (note 4):
General partners $ 63 24 22 10
Limited partners 2,666 865 2,066 967
---------- ---------- ---------- ----------
$ 2,729 889 2,088 977
========== ========== ========== ==========
Limited partners' per unit share $ 0.68 $ 0.19 $ 1.30 $ 0.40
of net earnings
Limited partners' per unit share $ 1.51 $ 0.50 $ 1.38 $ 0.43
of distributions
Weighted average number of limited
partnership units outstanding 3,933,908 4,457,768 1,591,202 2,390,457
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
For the nine months ended September 30, 1996 and 1995
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
PARTNERS' CAPITAL
----------------------------------
GENERAL LIMITED TOTAL
------- ------- -----
<S> <C> <C> <C>
Balances at January 1, 1995 $ 2 16,062 16,064
Proceeds from sale of limited partnership units -- 34,870 34,870
Syndication and offering costs -- (4,774) (4,774)
Distributions (22) (2,195) (2,217)
Net earnings 22 2,066 2,088
---- ------ ------
Balances at September 30, 1995 $ 2 46,029 46,031
==== ====== ======
Balances at January 1, 1996 $ 2 58,007 58,009
Proceeds from sale of limited partnership units -- 21,848 21,848
Syndication and offering costs -- (2,553) (2,553)
Distributions (63) (5,940) (6,003)
Redemptions (note 7) -- (102) (102)
Net earnings 63 2,666 2,729
---- ------ ------
Balances at September 30, 1996 $ 2 73,926 73,928
==== ====== ======
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1996 and 1995
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,729 2,088
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 3,476 2,071
Provision for doubtful accounts 86 78
Gain on sales of container rental equipment (66) (52)
Amortization of organization costs 39 39
Changes in assets and liabilities:
Increase (decrease) in accounts receivable 5 (1,311)
Decrease in prepaid expenses 25 15
Increase in accounts payable and accrued liabilities 57 30
Increase in accrued damage protection plan costs 100 67
Decrease in due to affiliates, net (356) (25)
-------- -------
Net cash provided by operating activities 6,095 3,000
-------- -------
Cash flows from investing activities:
Proceeds from sales of container rental equipment 291 181
Equipment purchases (10,695) (34,901)
Cash collateral deposit -- 2,700
-------- -------
Net cash used in investing activities (10,404) (32,020)
-------- -------
Cash flows from financing activities:
Redemptions of limited partnership units (102) --
Proceeds from sales of limited partnership units 22,084 34,870
Syndication and offering costs (2,644) (4,756)
Distributions to partners (5,922) (2,182)
Repayments under revolving credit line (10,000) --
-------- -------
Net cash provided by financing activities 3,416 27,932
-------- -------
Net decrease in cash (893) (1,088)
Cash at beginning of period 1,372 3,767
-------- -------
Cash at end of period $ 479 2,679
======== =======
Interest paid during the period $ 282 914
======== =======
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 7
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS--CONTINUED
For the nine months ended September 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,
organizational costs, distributions to partners, proceeds from sale of limited
partnership units, syndication and offering costs and proceeds from sale of
Equipment which had not been paid or received by the Partnership as of September
30, 1996 and 1995, and December 31, 1995 and 1994, resulting in differences in
amounts recorded and amounts paid or received by the Partnership, as shown in
the Statements of Cash Flows for the nine-month periods ended September 30, 1996
and 1995.
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31, SEPT. 30, DEC. 31,
1996 1995 1995 1994
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates.............................. $108 453 1,240 145
Equipment purchases payable.................... 181 1,168 4,543 245
Organizational costs included in:
Due to affiliates.............................. -- -- -- 43
Distributions to partners included in:
Due to affiliates.............................. 38 4 4 13
Deferred quarterly distribution................ 127 80 59 15
Proceeds from sale of limited partnership units
included in:
Accounts receivable............................ -- 236 -- --
Syndication and offering costs included in:
Due to affiliates.............................. -- 91 98 80
Proceeds from sale of Equipment included in:
Due from affiliates............................ 45 53 79 17
</TABLE>
See accompanying notes to financial statements
7
<PAGE> 8
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS--CONTINUED
For the nine months ended September 30, 1996 and 1995
(Amounts in thousands)
(unaudited)
The following table summarizes the amounts of Equipment purchases,
organizational costs, distributions to partners, proceeds from sale of limited
partnership units, syndication and offering costs 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 nine-month periods ended September 30,
1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Equipment purchases recorded .............................. $ 9,363 40,294
Equipment purchases paid .................................. 10,695 34,901
Organizational costs recorded ............................. -- --
Organizational costs paid ................................. -- 43
Distributions to partners declared ........................ 6,003 2,217
Distributions to partners paid ......................... 5,922 2,182
Proceeds from sale of limited partnership units recorded .. 21,848 34,870
Proceeds from sale of limited partnership units received .. 22,084 34,870
Syndication and offering costs recorded ................... 2,553 4,774
Syndication and offering costs paid .................... 2,644 4,756
Proceeds from sale of Equipment recorded .................. 283 243
Proceeds from sale of Equipment received .................. 291 181
</TABLE>
See accompanying notes to financial statements
8
<PAGE> 9
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Dollar amounts in thousands except for unit and per unit amounts)
(unaudited)
NOTE 1. GENERAL
Textainer Equipment Income Fund V, L.P. (the Partnership) is a
California Limited Partnership formed in 1993. 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 Partnership as of September 30, 1996 and December 31, 1995,
and the results of its operations, changes in partners' capital, and
cash flows for the nine- and three-month periods ended September 30,
1996 and 1995, have been made.
The financial information presented herein should be read in conjunction
with the audited financial statements and the accompanying Notes
included in the Partnership's audited financial statements as of
December 31, 1995.
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 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 September 30,
1996 and December 31, 1995, this reserve was equal to $332 and $232,
respectively.
NOTE 3. ACQUISITION OF EQUIPMENT
During the nine-month periods ended September 30, 1996 and 1995, the
Partnership purchased Equipment with a cost of $9,363 and $40,294,
respectively.
NOTE 4. TRANSACTIONS WITH AFFILIATES
Textainer Capital Corporation (TCC) is the Managing General Partner, and
Textainer Equipment Management Limited (TEM) and Textainer Limited (TL)
are the Associate General Partners of the Partnership. The Managing
General Partner and Associate General Partners are collectively referred
to as the General Partners. The General Partners manage and control the
affairs of the Partnership. 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.
9
<PAGE> 10
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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, the net earnings or losses
and partnership distributions are allocated 99% to the Limited Partners
and 1% to the General 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, as well as reimburse the General Partners for certain
administrative costs. These fees are for various services provided in
connection with the administration and management of the Partnership.
The Partnership capitalized $494 and $1,714 of equipment acquisition
fees as a component of Equipment costs during the nine-month periods
ended September 30, 1996 and 1995, respectively. The Partnership
incurred $261 and $94 of incentive management fees during the nine- and
three-month periods ended September 30, 1996, respectively, and $105 and
$47 for the comparable periods ended September 30, 1995. No equipment
liquidation fees were incurred during either period of 1996 or 1995.
The Equipment of the Partnership is managed by TEM. TEM has authority to
acquire, hold, manage, lease, sell and dispose of the Equipment.
Additionally, TEM holds, for the 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
September 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 nine- and three-month periods ended September 30, 1996, these
fees totaled $702 and $234, respectively, and $489 and $221 for the
comparable periods ended September 30, 1995. The Equipment is leased by
TEM to third party lessees on operating master leases, spot leases and
term leases. The majority are 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 allocated to the Partnership based on the ratio of
the Partnership's interest in managed Equipment to the total equipment
managed by TEM for the period. Indirect general and administrative costs
allocated to the Partnership were $586 and $179 for the nine- and
three-month periods ended September 30, 1996, respectively, and $435 and
$194 for the comparable periods ended September 30, 1995.
TCC, in its capacity as managing general partner, also incurred general
and administrative costs of $87 and $26 for the nine- and three-month
periods ended September 30, 1996, respectively, and $79 and $35 for the
comparable periods ended September 30, 1995, which were reimbursed by
the Partnership.
The General Partners or TAS may acquire Equipment in their own name and
hold title on a temporary basis for the purpose of facilitating the
acquisition of such Equipment for the Partnership. The Equipment may
then be resold to the Partnership on an all-cash basis at a price equal
to the actual cost as defined in the Partnership Agreement. In addition,
the General Partners or TAS are entitled to an acquisition fee for any
Equipment resold to the Partnership.
The Partnership pays a managing sales agent fee to TSC of up to 9% of
the gross proceeds from the sale of limited partnership units, from
which TSC pays commissions to independent
10
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TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
participating broker/dealers who participate in the offering. The amount
of the managing sales agent fee and the broker/dealers' commissions are
determined by the volume of Units sold to each investor by the
broker/dealers. Additionally, the General Partners and TSC are entitled
to be reimbursed by the Partnership for certain organizational and
offering costs, incurred in connection with the organization of the
Partnership, up to a maximum of 6% of gross proceeds raised as allowed
by the Partnership Agreement.
As of September 30, 1996 and December 31, 1995, due to affiliates are
comprised of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Due from affiliates:
Due from TEM ......... $255 --
==== ===
Due to affiliates:
Due to TEM ........... $ -- 142
Due to TSC ........... -- 41
Due to TAS ........... 106 392
Due to TL ............ 6 15
Due to TCC ........... 22 39
---- ---
134 629
==== ===
</TABLE>
These amounts 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 the accrual and collection of net rental revenues by
TEM.
NOTE 5. RENTALS UNDER OPERATING LEASES
The following is a schedule by year of minimum future rentals receivable
on noncancelable operating leases as of September 30, 1996:
<TABLE>
<CAPTION>
Year ended September 30:
<S> <C>
1997........................................ $1,038
1998........................................ 237
1999........................................ 120
2000........................................ 16
-----
Total minimum future rentals receivable..... $1,411
=====
</TABLE>
NOTE 6. REVOLVING CREDIT LINE
The Partnership had a short-term revolving credit line with an available
limit of $15,000 which was used for Equipment purchases. Balances
borrowed under this credit facility bore interest at either the Prime
plus .25% or the London Interbank Offered Rate (LIBOR) plus 2.00%, and
the Partnership paid a commitment fee of 1/2% on the unused portion of
the credit facility. This credit line was paid in full on April 8, 1996
and expired on May 31, 1996.
11
<PAGE> 12
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 7. REDEMPTIONS
The following redemption offerings were consummated by the Partnership
during the nine-month period ended September 30, 1996:
<TABLE>
<CAPTION>
AVERAGE
UNITS REDEEMED REDEMPTION PRICE AMOUNT PAID
-------------- ---------------- -----------
<S> <C> <C> <C>
Quarter ended:
September 30,1996.......... 5,576 $18.18 $102
----- ----
Balance at September 30, 1996 ... 5,576 $18.18 $102
===== ====
</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 September 30, 1996, the Partnership has committed to purchase 100
containers at an approximate total purchase price of $239 which includes
acquisition fees of $11. These commitments were made to TAS, which, as
the contracting party, has in turn committed to purchase this Equipment
on behalf of the Partnership.
12
<PAGE> 13
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 nine- and three-month periods
ended September 30, 1996 and 1995. Please refer to the Financial Statements and
Notes thereto in connection with the following discussion.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership began its offering of limited partnership interests to the
public on May 1, 1994. The Partnership received its minimum subscription amount
of $5,000 on August 23, 1994 and closed its offering on April 29, 1996 at
$89,305.
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 5,576 units for a total
dollar amount of $102 during the nine-month period ended September 30, 1996,
representing an average redemption price of $18.18 per unit. The Partnership has
used cash flow from operations to pay for the redeemed units.
The Partnership invests working capital and cash flow from operations prior to
its distribution to the Partners or reinvestment in additional Equipment in
short-term, liquid investments. It is the policy of the Partnership to maintain
minimum working capital reserves in an amount which is the lesser of (i) 1% of
capital contributions, or (ii) $100. At September 30, 1996, the Partnership's
cash of $479 was invested in money market accounts.
During the nine-month period ended September 30, 1996, the Partnership declared
cash distributions to limited partners pertaining to the period from December
1995 through August 1996 in the amount of $5,940. These distributions represent
a return of 10% of original capital (measured on an annualized basis) on each
unit. On a GAAP basis $3,274 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 nine-month period ended September 30, 1996, the Partnership had net cash
provided by operating activities of $6,095 compared to $3,000 for the same
period in 1995. This increase was primarily attributable to increases in
depreciation expense, accounts receivable from operations and net earnings,
tempered by a decrease in net due to affiliates. The increases in depreciation
expense, accounts receivable from operations and net earnings were directly
related to fleet growth. The decrease in net due to affiliates reflects timing
differences in the accrual and payment of net rental revenues, fees and other
expenses to or from TEM and affiliates.
While it is expected that net cash from operating activities will continue to
improve during the initial purchase and lease-up phase of the Partnership, such
improvement may be tempered by current lower than average utilization and rental
rates for Equipment and by the fact that 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 caused shipping
lines to reduce freight rates and has affected the profitability of their
business, resulting in the need to reduce costs. This is producing downward
pressure on lease rates. Delays in the remittance of rental payments, and in
extreme cases, bankruptcy of some shipping lines may occur if profitability
continues to erode. As noted above and discussed more fully below under "Results
of Operations", utilization rates have reflected a lower demand for containers,
and this over-capacity could also further affect utilization.
13
<PAGE> 14
Net cash used in investing activities (primarily the purchase and sale of
Equipment) for the nine-month period ended September 30, 1996 was $10,404
compared with $32,020 for the same period in 1995. The Partnership purchased
more Equipment in the nine-month period ended September 30, 1995 than in the
comparable period in 1996, using more funds in 1996 to repay its credit
facility. Net cash used in investing activities for the period ended September
30, 1995, included the return of restricted funds previously held as collateral
for the revolving credit facility, which offset Equipment purchases.
The Partnership had a short-term revolving credit line with an available limit
of $15,000 which was used for Equipment purchases. On April 8, 1996, this credit
line was paid in full by the Partnership.
At September 30, 1996, the Partnership had committed to purchase 100 containers
at an approximate total price of $239 which includes acquisition fees of $11. At
September 30, 1996, the Partnership had cash on hand of $479 to meet these
commitments. In the event the Partnership decides not to purchase the Equipment,
one of the General Partners or its affiliates will purchase the Equipment for
its own account.
RESULTS OF OPERATIONS
Because the Partnership has only recently been formed, the results of its
operations for the nine-month periods ended September 30, 1996 and 1995 are not
representative of the expected results after the completion of the purchase and
lease-up of the initial portfolio of Equipment. The Partnership generated net
earnings of $2,729 and $2,088 for the nine months ended September 30, 1996 and
1995, respectively. The increase in total rental income of $3,052, or 44%,
between periods was primarily attributable to income from Equipment rentals, the
major component of total rental income, which increased by $3,218, or 52%, from
1995 to 1996.
The Partnership's income from operations, which consists of rental income,
Equipment depreciation, direct operating expenses, management fees, and
reimbursement of administrative expenses, was $2,790 and $2,650, respectively,
for the nine-month periods ended September 30, 1996 and 1995. Rental income for
the same periods was $10,030 and $6,978, respectively. These increases were
directly related to the size of the Equipment fleet. The following is a summary
of the size of the Equipment fleet (in units) available for lease during the
nine-month periods ended September 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Opening inventory........ 21,345 8,797
Closing inventory........ 23,913 19,599
Average.................. 22,629 14,198
</TABLE>
Rental income and direct operating expenses are also affected by the lease
utilization percentages for the Equipment which were 82% and 88%, on average,
during the nine months ended September 30, 1996 and 1995, respectively. In
addition, rental income is affected by daily rental rates which decreased as
discussed below.
Utilization began to decrease in the last quarter of 1995 and has continued to
decline in the first three 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. 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 which is likely affecting rental rates. Rental
14
<PAGE> 15
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 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
as adjusted by credits granted to lessees for leasing Equipment for less
desirable locations (location income), income for handling and returning
Equipment and income from charges to lessees for a damage protection plan. For
the nine-month period ended September 30, 1996, the total of these other revenue
items was $649, a decrease of $165 over the equivalent period in 1995. The
primary component of this net decrease was a decline in location income of $339,
partly offset by an increase in damage protect plan income (DPP) of $115. The
decline in location income is mainly due to an increase in credits given to
lessees for pick-up of Equipment from less desirable locations, which is largely
driven by decreased demand. The increase in DPP income is primarily due to the
increase in the number of lessees with this coverage.
Direct operating expenses (excluding bad debt expense), which increased from
$951 during the nine months ended September 30, 1995, to $1,885 for the nine
months ended September 30, 1996, increased as a percentage of gross revenue from
14% to 19% during the respective periods. The increase was primarily
attributable to an increase in storage, repositioning and handling expenses,
which increased by $703 between periods. Additionally, expenses under the damage
protection plan increased by $152 between periods. The increase in these costs
as a percentage of gross revenue was attributable to the decrease in utilization
and the overall increase in fleet size.
Bad debt expense increased from $79 during the nine months ended September 30,
1995, to $94 for the comparable period in 1996. As a percentage of gross
revenue, bad debt expense decreased from 1.1% to .9% in 1996.
Depreciation and amortization expense increased by $1,405 from the nine-month
period ended September 30, 1995 to the same period in 1996, and was consistent
with the increase in fleet size between the two periods.
Management fees to affiliates were 9.6% and 8.5% of rental income for the
nine-month period ended September 30, 1996 and 1995, respectively. Incentive
management fees, which are based on the Partnership's limited and general
partner distribution percentage and capital raised, were 2.6% of gross revenue
in the nine months ended September 30, 1996 and 1.5% of gross revenue in the
comparative period in 1995. The increased percentage between periods reflects
the increase in capital subject to distributions. Equipment management fees were
7% of gross revenue for both periods.
General and administrative costs to affiliates increased by $159 in the
nine-month period ended September 30, 1996 compared to the same period in 1995.
These costs, which are primarily overhead costs allocated by TEM, are allocated
based on fleet size which has increased in the respective periods.
Other expense, net, decreased from $562 for the nine-month period ended
September 30, 1995, to $61 for the comparable period in 1996. This change was
made up of a decrease in net interest expense of $487 and an increase in the
gain on sales of Equipment of $14. Interest expense decreased due to the
repayment of the credit facility in April of 1996.
Net earnings per limited partnership unit decreased from $1.30 for the
nine-month period ended September 30, 1995 to $0.68 for the same period in 1996.
Despite the growth in net earnings, which increased from $2,088 during the
nine-month period ended September 30, 1995 to $2,729 in the same period of 1996,
the average outstanding units increased at a greater rate, resulting in a
decrease in earnings on a per unit basis.
15
<PAGE> 16
The following is a comparative analysis of the results of operations for the
three-month periods ended September 30, 1996 and 1995.
Because the Partnership has only recently been formed, the results of its
operations for the three-month periods ended September 30, 1996 and 1995 are not
representative of the expected results after the completion of the purchase and
lease-up of the initial portfolios of equipment. The Partnership generated net
earnings of $889 and $977 for the three months ended September 30, 1996 and
1995, respectively.
The Partnership's income from operations was $851 and $1,153, respectively, for
the three-month periods ended September 30, 1996, and 1995. The decrease in
income from operations was primarily due to an increase in direct operating
expenses tempered by an increase in rental income. Direct operating expenses
increased due to the decline in utilization of six percentage points and the
increase in fleet size between the two periods. Rental income for the same
periods increased from $3,147 for the three-month period ended September 30,
1995 to $3,343 for the same period in 1996. The increase in total rental income
of $196, or 6%, between periods was primarily attributable to income from
Equipment rentals, the major component of total rental income, which increased
by $312, or 11%, from 1995 to 1996. The increase in rental income was directly
related to the size of the Equipment fleet, but was restrained by a drop in
daily rental rates for the Partnership's Equipment.
The balance of rental income for the three months ended September 30, 1996 was
$196 compared to $313 for the same period in 1995, a decrease of $117, or 37%.
The primary component of this net decrease was a decrease in location income of
$151 from the three-month period ended September 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 from Equipment for less desirable locations in the
three-month period ended September 30, 1996, which was largely driven by
decreased demand.
Direct operating expenses (excluding bad debt expense), which increased from
$385 during the three months ended September 30, 1995 to $686 for the same
period in 1996, increased as a percentage of gross revenue from 12% to 21%
during the respective periods. The relative increase in these costs as a
percentage of gross revenue was attributable to the decrease in utilization.
Bad debt expense was $31 during the three-month period ended September 30, 1996
and $43 for the comparable period in 1995. As a percentage of gross revenue, bad
debt expense decreased from 1.4% to .9% for the respective periods.
Depreciation and amortization expense increased by $139 from the three-month
period ended September 30, 1995 to the same period in 1996. This is consistent
with the increase in fleet size between the two periods.
Management fees to affiliates were 9.8% of gross revenue in the three-month
period ended September 30, 1996 and 8.5% of gross revenue for the equivalent
period in 1995. Incentive management fees were 2.8% and 1.5% of gross revenue in
the respective periods, reflecting the increase in capital subject to
distributions. Equipment management fees were 7% of gross revenue for both
periods.
General and administrative costs to affiliates decreased by $24 from the
three-month period ended September 30, 1995 compared to the same period in 1996.
This decrease was primarily the result of a decline in overhead costs allocated
from TEM.
Other income (expense), net, increased from an expense of $176 for the
three-month period ended September 30, 1995 to income of $38 for the comparable
period in 1996. This change was comprised of a decrease in net interest expense
of $252 and a decrease in the gain on sales of Equipment of $38. Interest
expense decreased due to the repayment of the credit facility in April of 1996.
16
<PAGE> 17
Net earnings per limited partnership unit decreased from $0.40 for the
three-month period ended September 30, 1995 to $0.19 for the same period in
1996, reflecting the decrease in net earnings from $977 to $889 and an increase
in the average outstanding units for the respective periods.
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 September 30, 1996 which would result in such risk
materializing.
Other risks of the Partnership's leasing operations include competition, the
cost of repositioning Equipment after it comes off-lease, the risk of an
uninsured loss, increases in maintenance expenses or other costs of operating
the Equipment, and the effect of world trade and/or general business and
economic cycles on the Partnership's operations.
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 V, L.P.
(A California Limited Partnership)
By Textainer Capital Corporation
The Managing General Partner
By /s/John R. Rhodes
------------------------
John R. Rhodes
Executive Vice President
Date: November 14, 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 Capital
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 November 14, 1996
- ---------------------- Officer) and Director
James E. Hoelter
/s/John R. Rhodes Executive Vice President, November 14, 1996
- ---------------------- (Principal Financial and
John R. Rhodes Accounting Officer)
Secretary and Treasurer
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 479
<SECURITIES> 0
<RECEIVABLES> 3,208
<ALLOWANCES> 237
<INVENTORY> 0
<CURRENT-ASSETS> 153
<PP&E> 79,542
<DEPRECIATION> 7,946
<TOTAL-ASSETS> 75,199
<CURRENT-LIABILITIES> 1,271
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 73,928
<TOTAL-LIABILITY-AND-EQUITY> 75,199
<SALES> 0
<TOTAL-REVENUES> 10,030
<CGS> 0
<TOTAL-COSTS> 7,240
<OTHER-EXPENSES> 61
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,729
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,729
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
