TEXTAINER CAPITAL CORPORATION
650 California Street, 16th Floor
San Francisco, CA 94108
November 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 V,
L.P. (the "Company") the Company's Quarterly Report on Form 10-Q for the Third
Quarter ended September 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 September 30, 1997
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>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Quarterly Report on Form 10Q for the
Quarter Ended September 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Item 1. Financial Statements
Balance Sheets - September 30, 1997 (unaudited) and December 31, 1996............................ 3
Statements of Earnings for the nine and three months
ended September 30, 1997 and 1996 (unaudited).................................................... 4
Statements of Partners' Capital for the nine months
ended September 30, 1997 and 1996 (unaudited).................................................... 5
Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996 (unaudited).................................................... 6
Notes to Financial Statements (unaudited)........................................................ 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................ 12
Item 3. Qualitative and Quantitative Disclosures about Market Risk
Not Applicable
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Balance Sheets
September 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 $12,638 (1996: $9,118) $67,055 $69,985
Cash 600 943
Accounts receivable, net of allowance
for doubtful accounts of $351 (1996: $269) 3,126 2,829
Organization costs, net of accumulated
amortization of $162 (1996: $122) 100 140
Prepaid expenses 6 30
--------------- ------------
$70,887 $73,927
=============== ============
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued liabilities $528 $333
Accrued recovery costs (note 2) 44 54
Accrued damage protection plan costs (note 3) 330 361
Due to affiliates (note 5) 316 154
Deferred quarterly distribution 113 124
Equipment purchases payable 554 169
--------------- ------------
1,885 1,195
--------------- ------------
Partners' capital:
General partners 2 2
Limited partners 69,000 72,730
--------------- ------------
69,002 72,732
--------------- ------------
$70,887 $73,927
=============== ============
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Earnings
For nine and three months ended September
30, 1997 and 1996 (Dollar amounts in thousands
except for unit and per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
Ended Ended Ended Ended
Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
------------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Rental income $3,591 $3,343 $10,293 $10,030
------------------ ------------------- ------------------ ------------------
Costs and expenses:
Direct container expenses 744 686 2,230 1,885
Bad debt (benefit) expense (2) 31 116 94
Depreciation and amortization 1,203 1,189 3,607 3,515
Professional fees 11 10 32 41
Management fees to affiliates (note 5) 336 328 981 963
General administrative costs
to affiliates (note 5) 193 205 653 673
Other general and administrative costs 39 43 112 69
------------------ ------------------- ------------------ ------------------
2,524 2,492 7,731 7,240
------------------ ------------------- ------------------ ------------------
Income from operations 1,067 851 2,562 2,790
------------------ ------------------- ------------------ ------------------
Other income (expense):
Interest income (expense), net 13 28 31 (127)
Gain on sale of equipment 3 10 55 66
------------------ ------------------- ------------------ ------------------
16 38 86 (61)
------------------ ------------------- ------------------ ------------------
Net earnings $1,083 $889 $2,648 $2,729
================== =================== ================== ==================
Allocation of net earnings (note 5):
General Partners $21 $24 $67 $63
Limited Partners 1,062 865 2,581 2,666
------------------ ------------------- ------------------ ------------------
$1,083 $889 $2,648 $2,729
================== =================== ================== ==================
Limited partners' per unit share
of net earnings $0.24 $0.19 $0.58 $0.68
================== =================== ================== ==================
Limited partners' per unit share
of distributions $0.45 $0.50 $1.42 $1.51
================== =================== ================== ==================
Weighted average number of limited
partnership units outstanding 4,454,893 4,457,768 4,454,893 3,933,908
================== =================== ================== ==================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Partners' Capital
For the nine months ended September 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Partners' Capital
-------------------------------------------------------
General Limited Total
----------- --------------- --------------
<S> <C> <C> <C>
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 8) - (102) (102)
Net earnings 63 2,666 2,729
----------- --------------- --------------
Balances at September 30, 1996 $2 $73,926 $73,928
=========== =============== ==============
Balances at January 1, 1997 $2 $72,730 $72,732
Distributions (67) (6,311) (6,378)
Net earnings 67 2,581 2,648
----------- --------------- --------------
Balances at September 30, 1997 $2 $69,000 $69,002
=========== =============== ==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(a California Limited Partnership)
Statements of Cash Flows
For the nine months ended September 30, 1997 and 1996
(Amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $2,648 $2,729
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 3,567 3,476
Increase in allowance for doubtful accounts 82 86
Amortization of organization costs 40 39
Gain on sale of equipment (55) (66)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (379) 5
Increase (decrease) in due to affiliates 187 (356)
Increase in accounts payable and accrued liabilities 195 17
(Decrease) increase in accrued recovery costs (10) 40
(Decrease) increase in accrued damage protection plan costs (31) 100
Decrease in prepaid expenses 24 25
---------------- ----------------
Net cash provided by operating activities 6,268 6,095
---------------- ----------------
Cash flows from investing activities:
Proceeds from sale of equipment 391 291
Equipment purchases (587) (10,695)
---------------- ----------------
Net cash used in investing activities (196) (10,404)
---------------- ----------------
Cash flows from financing activities:
Redemptions of limited partnership units - (102)
Proceeds from sale of limited partnership units - 22,084
Distributions to partners (6,415) (5,922)
Syndication and offering costs - (2,644)
Repayments under revolving credit line - (10,000)
---------------- ----------------
Net cash (used in) provided by financing activities (6,415) 3,416
---------------- ----------------
Net decrease in cash (343) (893)
Cash at beginning of period 943 1,372
---------------- ----------------
Cash at end of period $600 $479
================ ================
Interest paid during the period $0 $282
================ ================
See accompanying notes to financial statements
</TABLE>
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California Limited Partnership)
Statements of Cash Flows--Continued
For the nine months ended September 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, 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, 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 nine-month periods ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
Sept. 30 Dec. 31 Sept. 30 Dec. 31
1997 1996 1996 1995
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Equipment purchases included in:
Due to affiliates................................... $ - $ 4 $ 108 $ 453
Equipment purchases payable......................... 554 169 181 1,168
Distributions to partners included in:
Due to affiliates................................... 6 32 38 4
Deferred quarterly distribution..................... 113 124 127 80
Proceeds from sale of limited partnership units included in:
Due from affiliates................................. - - - 236
Syndication and offering costs included in:
Due to affiliates................................... - - - 91
Proceeds from sale of Equipment included in:
Due from affiliates................................. 53 58 45 53
</TABLE>
The following table summarizes the amounts of Equipment purchases, distributions
to partners, 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, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Equipment purchases recorded......................................................... $ 968 $ 9,363
Equipment purchases paid............................................................. 587 10,695
Distributions to partners declared................................................... 6,378 6,003
Distributions to partners paid....................................................... 6,415 5,922
Proceeds from sale of limited partnership units recorded............................. - 21,848
Proceeds from sale of limited partnership units received............................. - 22,084
Syndication and offering costs recorded.............................................. - 2,553
Syndication and offering costs paid.................................................. - 2,644
Proceeds from sale of Equipment recorded............................................. 386 283
Proceeds from sale of Equipment received............................................. 391 291
</TABLE>
See accompanying notes to financial statements
<PAGE>
TEXTAINER EQUIPMENT INCOME FUND V, L.P.
(A California Limited Partnership)
Notes to Financial Statements
September 30, 1997
(Dollar amounts in thousands except for 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 containers (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 September 30, 1997 and December 31,
1996, and the results of its operations, changes in partners' capital,
and cash flows for the nine-month periods ended September 30, 1997 and
1996, 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, 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. Recovery Costs
The Partnership accrues an estimate for recovery costs as a result of
defaults under its leases that it expects to incur, which are in excess
of estimated insurance proceeds. At September 30, 1997 and December 31,
1996, the amounts accrued were $44 and $54, respectively.
Note 3. Damage Protection Plan
The Partnership offers a Damage Protection Plan (DPP) to lessees of its
Equipment. Under the terms of DPP, 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 revenues when
earned and provide a reserve sufficient to cover the Partnership's
obligation for estimated future repair costs. At September 30, 1997 and
December 31, 1996, this reserve was equal to $330 and $361,
respectively.
Note 4. Acquisition of Equipment
During the nine-month periods ended September 30, 1997 and 1996, the
Partnership purchased Equipment with a cost of $968 and $9,363,
respectively.
Note 5. 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. 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 distributions
are generally allocated 1% to the general partners and 99% to the
limited partners. Gross income is specially 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.
Notwithstanding the above, the special allocation of gross income and
restoration of deficit general partner capital accounts was deferred by
Partnership Agreement amendment until the partnership's completed its
offering of limited partnership units which occurred during the year
ended December 31, 1996. 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, 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 $29 and $494 of equipment acquisition fees
as part of Equipment costs during the nine-month periods ended September
30, 1997 and 1996, respectively. The Partnership had incurred $263 and
$85 of incentive management fees during the nine- and three-month
periods ended September 30, 1997 and $261 and $94 for the comparable
periods in 1996. No equipment liquidation fees were incurred in either
period.
The Partnership's Equipment is managed by TEM. TEM has authority to
acquire, hold, manage, lease, sell and dispose of the Partnership's
Equipment. Additionally, TEM holds, for the payment of direct operating
expenses, a reserve of cash that has been collected from container
leasing operations; such cash is included in the amount due to
affiliates at September 30, 1997 and December 31, 1996.
Subject to certain reductions, TEM receives a monthly equipment
management fee equal to 7% of gross lease revenues attributable to
operating leases and 2% of gross lease revenues attributable to full
payout net leases. These fees totaled $718 and $251 for the nine- and
three-month periods ended September 30, 1997 and $702 and $234 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 are operating leases with limited terms and no
purchase option.
Certain 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 TCC and TEM. Total general and administrative costs allocated
to the Partnership were $653 and $193 for the nine- and three-month
periods ended September 30, 1997 of which $359 and $112, respectively,
were for salaries. For the nine- and three-month periods ended September
30, 1996, total general and administrative costs allocated to the
Partnership were $673 and $205, of which $343 and $120, respectively
were for salaries.
TEM allocates the general and administrative costs based on the ratio of
the Partnership's interest in the managed Equipment to the total
Equipment managed by TEM during the period. TCC allocates these costs
based on the ratio of the Partnership's Equipment to the total Equipment
of all limited partnerships managed by TCC. General and administrative
costs allocated to the Partnership by TEM were $573, $175, $586 and $179
for the nine- and three-month periods ended September 30, 1997 and 1996,
respectively. TCC allocated $80, $18, $87 and $26 of general and
administrative costs to the Partnership during the nine- and three-month
periods ended September 30, 1997 and 1996, respectively.
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 paid 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 paid commissions to independent participating broker/dealers
who participated in the offering. The amount of the managing sales agent
fee and the broker/dealers' commissions were determined by the volume of
Units sold to each investor by the broker/dealers. Additionally, the
General Partners and TSC were 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.
At September 30, 1997 and December 31, 1996, due to affiliates are
comprised of:
1997 1996
---- ----
Due to affiliates:
Due to TAS..................................... $ - $ 1
Due to TL...................................... 5 -
Due to TCC..................................... 12 28
Due to TEM..................................... 299 125
---- ----
$ 316 $154
===== ====
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 remittance of net rental revenues by
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 nine- and three-month periods
ended September 30, 1997 and 1996.
Note 6. Rentals under Operating Leases
The following is a schedule by year of minimum future rentals receivable
on noncancelable operating leases at September 30, 1997:
Year ended September 30:
1998....................................................... $ 1,101
1999....................................................... 128
2000....................................................... 14
---
Total minimum future rentals receivable.................... $ 1,243
=====
Note 7. Revolving Credit Line
On October 12, 1993, the Partnership had a revolving credit line with an
available limit of $15,000 which was used for Equipment purchases. On
April 8, 1996 the credit line was paid in full and it expired on May 31,
1996.
Note 8. Redemptions
No redemption offerings were consummated during the nine-month period
ended September 30, 1997. The total number of units redeemed since
inception of the redemption program is 8,451, at a total cost of $152,
representing an average redemption price of $17.97 per unit. The
redemption price is fixed by formula and varies depending on the length
of time the units are outstanding.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Dollar amounts in thousands except for per unit amounts)
The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the nine- and three-month periods
ended September 30, 1997 and 1996. 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. On April 29, 1996 the offering of limited partnership
interests was closed at $89,305.
From time to time, the Partnership redeems units from limited partners 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 did not redeem units during the
nine-months ended September 30, 1997.
The Partnership invests working capital and cash flow from operations prior to
its distribution to the partners in short-term, liquid investments. The
Partnership's cash is affected by cash provided by or used in operating,
investing and financing activities. These activities are discussed in detail
below.
During the nine-month period ended September 30, 1997, the Partnership declared
cash distributions to limited partners pertaining to the period from December
1996 through August 1997 in the amount of $6,311. These distributions represent
a return of 10% of original capital (measured on an annualized basis) on each
unit for December 1996 through March 1997 and 9% of original capital (measured
on an annualized basis) on each unit for April 1997 through August 1997. On a
GAAP basis, $3,730 of these distributions were a return of capital and the
balance was from net earnings. On a cash basis $6,268 of these distributions
were from operations and the balance was from reserves.
For the nine-month periods ended September 30, 1997 and 1996, the Partnership
had net cash provided by operating activities of $6,268 and $6,095,
respectively. This increase in net cash provided by operating activities of
$173, or 3%, was primarily attributable to the increase in due to affiliates of
$187, offset by an increase in accounts receivable of $379. The increase in due
to affiliates was due to timing differences in the accrual and payment of
expenses and fees or in the accrual and remittance of net rental income.
Accounts receivable from operations increased due to an increase in rental
income and due to an increase in the average collection period from 81 days as
of September 30, 1996 to 92 days as of September 30, 1997.
Net cash used in investing activities (the purchase and sale of rental
equipment) for the nine-month period ended September 30, 1997 was $196, compared
to $10,404 for the comparable period in 1996. This difference reflects that, on
a cash basis, the Partnership purchased more Equipment in the nine-month period
ended September 30, 1996 than in the comparable period in 1997, primarily due to
cash available from on-going fund raising activity during January through April
of 1996. 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 units of
Equipment purchased may not, however, equal the number of units sold.
Results of Operations
The Partnership's operations, which consist of rental income, container
depreciation, direct container expenses, management fees to affiliates, and
reimbursement of administrative expenses were directly related to the size of
the container fleet ("inventory") during the nine-month periods ended September
30, 1997 and 1996, as well as certain other factors as discussed below. The
following is a summary of the size of the container fleet (in units) available
for lease during those periods:
1997 1996
---- ----
Opening inventory................... 23,952 21,345
Closing inventory................... 24,244 23,913
Average............................. 24,098 22,629
The 6% increase in the average container fleet was primarily due to the purchase
of new marine containers with proceeds from the sale of used Equipment, between
the nine month period ended September 30, 1996 and the comparable period in
1997.
Rental income and direct container expenses are also affected by the lease
utilization percentages and daily rental rates for the Equipment. Average lease
utilization percentages for the nine-month periods ended September 30, 1997 and
1996 remained fairly constant at 83% and 82% respectively, while daily rental
rates declined.
The following is a comparative analysis of the results of operations for the
nine-month periods ended September 30, 1997 and 1996.
The Partnership's income from operations for the nine-month period ended
September 30, 1997 was $2,562 on gross rental income of $10,293, compared to
$2,790 on gross rental income for $10,030 for the same period in 1996. The
largest component of total rental income is income from container rentals, which
was $9,528 and $9,381 for the nine-month periods ended September 30, 1997 and
1996, respectively. 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 fleet
size increased 6%, average on-hire utilization remained constant and average
daily rental rates decreased 4%. These results have, however, been affected by
market conditions as discussed below.
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 and third quarters there was an improvement in utilization,
however lease rates declined and leasing incentives remained high due to high
levels of off-lease inventory in low demand locations. The General Partners do
not foresee material changes in current market conditions and caution that both
utilization and lease rates could decline further, and leasing incentives could
remain high, adversely affecting the Partnership's 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 for handling and returning containers, income from charges to lessees for
a damage protection plan (DPP), and income from charges to the lessees for
pick-up of containers from high demand locations less credits granted to lessees
for leasing containers from surplus locations (location income). For the
nine-month period ended September 30, 1997, the total of these other revenue
items was $765, an increase of $116 compared to the equivalent period in 1996.
The primary components of this increase were increases in handling and DPP
income of $121 and $60, respectively, offset by a decrease in location income of
$68. The increase in handling income is due to an increase in container
movement, the increase in the average container fleet, and higher average
handling charges to lessees. The increase in DPP is due to the increase in the
number of lessees under the plan offset by lower average charges to lessees. The
decline in location income is due to lower demand, which required an increase in
credits given to lessees for picking up units from surplus locations.
Direct container expenses, excluding bad debt expense, increased by $345, or
18%, from the nine-month period ended September 30, 1996 to the equivalent
period in 1997. The primary components of this increase were increases in
storage and repositioning expenses of $167 and $234, respectively, offset by a
decrease in DPP expense of $121 between periods. The increase in storage expense
was primarily due to the increase in average fleet size. Repositioning expense
increased due to a greater number of units being transported from surplus
locations to higher demand locations. The decrease in DPP expense was due to a
decrease in the average repair cost per container between the two periods.
Bad debt expense increased from $94 in the nine-month period ended September 30,
1996 to $116 in the same period in 1997. The increase is primarily due to
increased reserve requirements in the nine month period ending September 30,
1997 compared to the same period in 1996, resulting from the increase in average
fleet size.
Depreciation expense increased by $91, or 3%, from the nine-month period ended
September 30, 1996 to the same period in 1997, due to the increase in the
Partnership's average fleet size between the periods.
Management fees to affiliates increased by $18, or 2%, from the nine-month
period ended September 30, 1996 to the equivalent period in 1997, primarily due
to an increase in Equipment management fees which are based primarily on gross
revenue. These increased as a result of the increase in rental income and were
approximately 7% for both periods. Incentive management fees were comparable,
from the nine-month period ended September 30, 1996 the equivalent period in
1997, at $261 and $263, respectively.
General and administrative costs to affiliates decreased by 3%, or $20, from the
nine-month period ended September 30, 1996 to the same period in 1997, due to a
decrease in overhead costs allocable from TEM and TCC during these periods.
Other income (expense) was $86 for the nine-month period ended September 30,
1997, representing an increase of $147 over the equivalent period in 1996. The
increase was primarily attributable to a $158 decline in interest expense, which
was due to the repayment of the Partnership's credit facility in April, 1996.
Net earnings per limited partnership unit decreased from $0.68 for the
nine-month period ended September 30, 1996 to $0.58 for the nine-month period
ended September 30, 1997 reflecting the decrease in net earnings from $2,666 to
$2,581, respectively, and the increase in the average outstanding limited
partnership units.
The following is a comparative analysis of the results of operations for the
three-month periods ended September 30, 1997 and 1996.
The Partnership's income from operations for the three-month periods ended
September 30, 1997 and 1996 was $1,067 and $851, respectively, on rental income
of $3,591 and $3,343, respectively. Rental income, including income from
container rentals, increased by $248, or 7%, between periods. The increase was
primarily due to a 7% increase in average on-hire utilization, and was offset by
a decrease in average daily rental rates of 3% from the three-month period ended
September 30, 1996 to the comparable period in 1997.
The balance of other revenue items comprising total revenue for the three-month
period ending September 30, 1997 was $273, an increase of $77 compared to the
equivalent period in 1996. Other rental revenue increased primarily due to
increases in handling and DPP income of $38 and $22, respectively. An increase
in container movement compounded with a higher average handling charges to
lessees, resulted in increased handling income. DPP income increased due to an
increase in the number of lessees under DPP, offset by lower average charges to
lessees.
Direct container expenses increased $58, or 8%, from the three-month period
ended September 30, 1996 to the same period in 1997. The primary component of
this increase was an increase in repositioning expense of $113, offset by a
decrease in storage expenses of $55. The increase in repositioning expense was
due to an increase in the number of units transported from surplus locations to
higher demand locations. Storage costs decreased primarily due to higher
utilization rates in the three-month period ended September 30, 1997 compared to
the same period in 1996.
Bad debt expense decreased by $33 for the three-month period ended September 30,
1997 from the same period in 1996, primarily due to lower reserve requirements.
Depreciation expense increased by $14, or 1%, for the three-month period ended
September 30, 1997 from the same period 1996, reflecting the increase in fleet
size.
Management fees to affiliates increased by $8, or 2%, from the three-month
period ended September 30, 1996 to the equivalent period in 1997, due to an
increase in Equipment management fees offset by a decrease in incentive
management fees. Equipment management fees increased due to increased rental
revenue. The decrease in the incentive management fee was primarily due to the
decrease in the limited partners' distribution percentage, from 10% for the
three-month period ended September 30, 1996 to 9% for the equivalent period in
1997.
General and administrative costs to affiliates decreased by $12, or 6%, between
the three-month periods ending September 30, 1997 and 1996 due to a decrease in
overhead costs allocable from TEM and TCC during these periods.
Other income was $16 for the three-month period ended September 30, 1997,
representing a decrease of $22 from the equivalent period in 1996. The decrease
was attributable to a $15 decrease in interest income and a $7 decline in gain
on sale of equipment.
Net earnings per limited partnership unit increased from $0.19 to $0.24 from the
three-month period ended September 30, 1996 to the same period in 1997,
reflecting the increase in net earnings from $865 to $1,062 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 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
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, 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 V, L.P.
(A California Limited Partnership)
By Textainer Capital Corporation
The Managing General Partner
By________________________
John R. Rhodes
Executive Vice President
Date: November 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 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>
- --------------------------------------------- Executive Vice President, November 13, 1997
John R. Rhodes (Principal Financial and
Accounting Officer) and
Secretary
- --------------------------------------------- President (Principal Executive November 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 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 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 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/John R. Rhodes Executive Vice President, November 13, 1997
- ------------------------------------------- (Principal Financial and
John R. Rhodes Accounting Officer) and
Secretary
/s/James E. Hoelter President (Principal Executive November 13, 1997
James E. Hoelter Officer) and Director
- -------------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Textainer Equipment Income Fund V, LP
</LEGEND>
<CIK> 0000915194
<NAME> Textainer Equipment Income Fund V, LP
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 600
<SECURITIES> 0
<RECEIVABLES> 3,477
<ALLOWANCES> 351
<INVENTORY> 0
<CURRENT-ASSETS> 106
<PP&E> 79,693
<DEPRECIATION> 12,638
<TOTAL-ASSETS> 70,887
<CURRENT-LIABILITIES> 1,885
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 69,002
<TOTAL-LIABILITY-AND-EQUITY> 70,887
<SALES> 0
<TOTAL-REVENUES> 10,293
<CGS> 0
<TOTAL-COSTS> 7,731
<OTHER-EXPENSES> (86)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,648
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,648
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
